Been ruminating on this subject for some time and have some thoughts to share with.... well lets be honest pretty much nobody at this point but nevertheless, I will share. A discussion of America's pure obsession with privacy rights needs to happen eventually, but in this case I only wish to briefly question why grades are a holy grail in America, never to be touched or seen by anyone else but the student
Anyhow, it is well known that social pressure is an extremely powerful force in children, teens, and adults. Socialization affects nearly everything. The way we dress, act, eat, talk is all guided by our socialization. This is why people dress up for big events or interviews; it is why people are professional at work. It enhances customer service and stifles rude and inappropriate behavior. Sure the rules change as society changes, but that is good too, it's dynamic like that. I bring this up because the same should be with grades. Grades should be public domain. At least in public school, one could argue the state, not the student, should own grades anyhow. But that is a boring argument. Grades should be made public for much better reasons. Before your brain takes a test, it ought to "dress up" by studying the material because everyone else is going to see the results just as they would see your attire in an interview or behavior at work. The social pressure of having grades public would no doubt persuade students to study more and pay attention in class. Don't take my word for it, check out this article and read the comments --- make up your own mind: Posting Grades. Something even a bit more crazy than what I'm talking about but in the same vein: Bad Grades = Punishment. If you are still skeptical, I invite you to think of some examples that could serve as proxies for posting grades and analyze the outcome. For example, art and music classes clearly involve a large degree of public scrutiny in the form of galleries and recitals. A neat study comparing achievement in art/music and other presentational subjects with traditionally private ones such as math, history, most basic science, geography, wellness, etc would be interesting. You would have to control for the varying degree of subject difficulty (and subject popularity) to isolate the effect of having one's work public on grades. Anecdotal evidence is abound, however. On average, the time students spend on art projects, practicing for recitals, or even for business class presentations greatly outweighs time spent on the private matter of a test, at least in my experience.
Thursday, August 19, 2010
Monday, May 10, 2010
Sorting Out Goldman
Politicians are hoping they get a vote every time they are filmed lashing Goldman Sachs for betting against the market. It is just a political parade. I don't want to deal with the politics, however, I want to talk about the REAL issue and of course harp and complain about the professional idiots covering this story. Basically, this whole deal revolves around one issue and it is: Did Goldman have a duty to inform its clients that it was betting against them? That is an interesting argument involving conflicts of interest, corporate freedom and ethics, personal responsibility, and many more twisted and tangled web-like concepts. Yet Michelle Norris from NPR and virtually every other talking head thinks this is all about how much money Goldman made when the economy was down. Now I'm sure this isn't a direct quote but Norris says in some political punditry pageant akin to an NBA half time report that "What Goldman did was good for Goldman, but was it good for the economy?" Hey honey I'm going to go to the store to get some milk --- Oh wait I need to ask Michelle Norris if that is good for the economy first.
First of all the entire premise of her argument is wrong. This should be a whole other post, maybe a book, but let me just vent it all out. Adam Smith correctly argued (with a few flaws, but John Nash covered most of them) that the culmination of everybody's individual wants and desires will always result in the best possible social good. When people vote with their money, successful businesses must be producing what the people want in the quantities they want at the quality they want. This is basic stuff. Real life gets more complicated with monopolies, patent law, health care, etc. But in general, individual consumption and competition by businesses results in the best possible social good. Trying to dictate what is good and what is bad is like driving a freight train into a wall. That wall is called subjective value. Nothing, nothing, nothing in the universe has intrinsic value. All value is subjective. How much is a car worth? How much are trees worth? Air? Heated or cooled air? Filtered water? Health care? Police? Teachers? No one can answer those questions because everyone has a different idea of what each is worth. The market is where we bid for these goods and services. Only in a free market is the true social value of something determined. Yes it is true that consumers are myopic and stupid, caring only about immediate wants. And it could be a function of government to make sure long term needs have a market, but that is another post and must be argued for each function of government, not in general.
In the case of Goldman, they bet against the market. They were the smartest guys in the room. They helped pop the bubble! Oh wait, what's best for the economy is to keep the punch bowl filled. Yeah you're Norris right we should just all buy crappy mortgage backed securities and lower interest rates to SAVE THE ECONOMY! It sounds like a bad, sick joke. Look, we needed Goldman to act even earlier and more banks to do the same thing! I mean, just because they were right and made money while others lost it doesn't make their actions illegal or even immoral. What are we still in kindergarten believing that everyone is a winner? Like David Brooks said, if the tides were turned and Goldman bet for the economy while everyone else bet against it and Goldman won the bet would we all hate Goldman? No! It would be a freaking wall street epic drama movie starring Gerard Butler as Lloyd Blankfein. Congress grills Goldman to win political points it is that simple. Now the REAL issue: whether or not Goldman should have disclosed its positions to its consumers...that is interesting. I am always a fan of full disclosure but I am looking forward to seeing how that all plays out. And if we don't get to see the whole drama play out, do not fear, for you can be rest assured that this will all happen again. News agencies should hold on to their stories so they can just change the names for re-print --- courtesy of moral hazard.
First of all the entire premise of her argument is wrong. This should be a whole other post, maybe a book, but let me just vent it all out. Adam Smith correctly argued (with a few flaws, but John Nash covered most of them) that the culmination of everybody's individual wants and desires will always result in the best possible social good. When people vote with their money, successful businesses must be producing what the people want in the quantities they want at the quality they want. This is basic stuff. Real life gets more complicated with monopolies, patent law, health care, etc. But in general, individual consumption and competition by businesses results in the best possible social good. Trying to dictate what is good and what is bad is like driving a freight train into a wall. That wall is called subjective value. Nothing, nothing, nothing in the universe has intrinsic value. All value is subjective. How much is a car worth? How much are trees worth? Air? Heated or cooled air? Filtered water? Health care? Police? Teachers? No one can answer those questions because everyone has a different idea of what each is worth. The market is where we bid for these goods and services. Only in a free market is the true social value of something determined. Yes it is true that consumers are myopic and stupid, caring only about immediate wants. And it could be a function of government to make sure long term needs have a market, but that is another post and must be argued for each function of government, not in general.
In the case of Goldman, they bet against the market. They were the smartest guys in the room. They helped pop the bubble! Oh wait, what's best for the economy is to keep the punch bowl filled. Yeah you're Norris right we should just all buy crappy mortgage backed securities and lower interest rates to SAVE THE ECONOMY! It sounds like a bad, sick joke. Look, we needed Goldman to act even earlier and more banks to do the same thing! I mean, just because they were right and made money while others lost it doesn't make their actions illegal or even immoral. What are we still in kindergarten believing that everyone is a winner? Like David Brooks said, if the tides were turned and Goldman bet for the economy while everyone else bet against it and Goldman won the bet would we all hate Goldman? No! It would be a freaking wall street epic drama movie starring Gerard Butler as Lloyd Blankfein. Congress grills Goldman to win political points it is that simple. Now the REAL issue: whether or not Goldman should have disclosed its positions to its consumers...that is interesting. I am always a fan of full disclosure but I am looking forward to seeing how that all plays out. And if we don't get to see the whole drama play out, do not fear, for you can be rest assured that this will all happen again. News agencies should hold on to their stories so they can just change the names for re-print --- courtesy of moral hazard.
Monday, February 22, 2010
How To Decrease Unemployment
Unemployment happens for many reasons, as we all know. Frictional, structural, "classical", etc. Right now we have unemployment because the economy has shrank and output has fallen. Naturally, jobs were lost. What is the solution? Well the stimulus has not done much. I know a bunch of DC economists whose reputations were wrapped up in the stimulus are coming out and praising the amount of jobs it has saved. Big surprise there. Look, I am not an ideologue. I am a pragmatist. Unemployment peaked at 10.1% in October of 2009 and is now around 9.7%. So we are yet to see any large benefits, however the stimulus could have prevented large increases in unemployment. That is unlikely as most of the areas where stimulus money went will take years and years to actually have an effect. Read on to see why.
Taking a look at the raw rate is not enough. Who exactly is suffering the most? Unemployment for people without a high school diploma and aged 25+ has almost doubled from its regular average to 15.2%. For those with only a high school diploma, almost doubled to 10.1%. People with some college or an associate's degree: more than doubled to 8.5%. Bachelor's degree or higher: about a 40% increase to a whopping 4.9% (about a 2% difference from the average rate from 2000-2007). The obvious trend here is that people with less education are experiencing far more unemployment than highly educated people. No surprise there. But it is surprising just how low the bachelor's or higher rate is. Keep in mind that these rates are for people aged 25+ so there is no "high school-er" effect going on here. The simple fact is that our labor force is split between skilled and unskilled labor. I am convinced that most of the "skilled" labor is not really skilled at all but is actually just protected by certification and licensing laws, which is why our unemployment figures are skewed. Of course licensing laws are always created in the interests of powerful industry lobbies, not consumers.
Skilled labor can compete with unskilled but not the other way around. Unskilled labor faces barriers to entry, creating income gaps and more unemployment in the unskilled sector. Furthermore, job mobility is significantly decreased by certification / licensing requirements in both sectors. Increasingly, we are seeing more and more specialization to the point where choosing a career precludes the possibility of ever changing careers. I know that specialization is good for the economy (division of labor and competitive advantage) but we cannot force specialization. For example, a math teacher could probably teach English, a surgeon could be a general practitioner, the discipline and rule oriented nature of a marine could well be applied to a programming or accounting environment, or even a legal environment, a mechanic could probably pick up electric wiring or plumbing, practically anyone can be an office worker, you get the idea. We can specialize but that does not mean that some skills are nontransferable. When I say we "force" specialization I mean that we make it straight up illegal to simply shift from one career into a different but tangential career without acquiring the appropriate licenses.
Quite frankly this results in unhappiness. We become stuck in jobs in which we are bored. It stifles our potential. About 1/5 of the economy is affected by occupational licensing. Of course it is argued that licensing protects consumers from fraud and because holding a license in a lot of professions means having insurance it gives consumers a safety net. First of all, fraudulent behavior is MORE lucrative because of licensing, which increases the wages of license holders by restricting the supply of labor. Furthermore, fraud is illegal with or without licensing. It is the number one job of government to find, prosecute, and deter crime. Fraud is a crime and when licensing makes a service or product cost more, then crime pays. The only way to prevent crime is to match it with punishment. Let the courts sort that out. Moreover, licensing boards are often the fraudulent ones! Studies have shown that CPA exams have magically gotten more difficult in times of high unemployment. They have also shown that licensing boards are less likely to punish their own members, which allows real fraud to persist within a seemingly legitimate environment. Don't take my word for it, read this article. One also has to wonder, if these licensing laws protect consumers, why weren't consumers the ones pressuring law makers for them, as was the case with the recent consumer protection laws involving credit card companies? Are we to believe that the same people who run an industry have our well-being at heart when they literally write laws? I'm not convinced. If we are to have consumer protection laws, they should at least come from an overwhelming desire for them within the general public, not interest groups --- I think that is the whole idea behind democracy...
Now it may or may not be true that licensing protects us from bad services or products. I am sure that for some people, getting that license made them better at what they do, but for others who are "naturals", it was just another hoop to jump through. Well we can have the best of both worlds. Keep the licensing infrastructure (provided that it is self-sufficient, dues cover costs, etc) but make it OPTIONAL. Then, make it an absolute law that FULL disclosure is MANDATORY. Businesses and people MUST tell consumers right when they meet them whether or not they are licensed, what licenses they hold, if they are insured etc. OK so now consumers know who is licensed and insured and can make an informed choice. If they want to roll the dice, so be it. They are doing so while being completely informed. Furthermore, fraud will DECREASE because the increased competition in traditional licensed professions will decrease the return to fraudulent activity. Unemployment will also DECREASE because unskilled and skilled workers alike will be able to shift into ANY sector of the economy if they so desire or even start their own company. A lot of unemployment happens because capital markets move at light speed. So the capital economy can shift in a new direction in the blink of an eye. Labor takes time to follow and in the meantime, jobs are lost, people get marginalized, things get bad. Speeding up labor will make unemployment spells shorter. It will make sure that willing and able people can find a new job in the most productive sectors of the economy, just as capital does. Overall, this should bring the economy closer to its maximum productive capacity. Speeding up labor will greatly enhance economic efficiency by allowing workers to shift with capital into any sector of the economy. Of course a bus driver will not become a surgeon as no one in their right mind would pay for a surgery from anyone except a qualified doctor. But bus drivers could become taxi drivers when they get off work (taxiing is illegal in New York without a license). The market will decide what a license really means.
So if someone is cheating consumers by offering teaser prices and then shorting the consumer on quality --- sounds like consumers should sue and/or a criminal investigation should take place. This happens everyday in our world and we have systems in place to deal with it. It wouldn't crowd the courts either because most people do their due diligence when buying a product/service with sites like Yelp or Google or Consumer Reports. Also, we can just increase the punishment for fraud until it deters it back to "normal" levels if need be. Most importantly, we would be a happier society because our options would be wide open. The heavy choices in our lives --- what we're going to do, who we are going to be --- will get a little lighter with the knowledge that we can always change ourselves; that we are only limited by our ability, determination, and integrity --- NOT by the pieces of paper on our wall.
Taking a look at the raw rate is not enough. Who exactly is suffering the most? Unemployment for people without a high school diploma and aged 25+ has almost doubled from its regular average to 15.2%. For those with only a high school diploma, almost doubled to 10.1%. People with some college or an associate's degree: more than doubled to 8.5%. Bachelor's degree or higher: about a 40% increase to a whopping 4.9% (about a 2% difference from the average rate from 2000-2007). The obvious trend here is that people with less education are experiencing far more unemployment than highly educated people. No surprise there. But it is surprising just how low the bachelor's or higher rate is. Keep in mind that these rates are for people aged 25+ so there is no "high school-er" effect going on here. The simple fact is that our labor force is split between skilled and unskilled labor. I am convinced that most of the "skilled" labor is not really skilled at all but is actually just protected by certification and licensing laws, which is why our unemployment figures are skewed. Of course licensing laws are always created in the interests of powerful industry lobbies, not consumers.
Skilled labor can compete with unskilled but not the other way around. Unskilled labor faces barriers to entry, creating income gaps and more unemployment in the unskilled sector. Furthermore, job mobility is significantly decreased by certification / licensing requirements in both sectors. Increasingly, we are seeing more and more specialization to the point where choosing a career precludes the possibility of ever changing careers. I know that specialization is good for the economy (division of labor and competitive advantage) but we cannot force specialization. For example, a math teacher could probably teach English, a surgeon could be a general practitioner, the discipline and rule oriented nature of a marine could well be applied to a programming or accounting environment, or even a legal environment, a mechanic could probably pick up electric wiring or plumbing, practically anyone can be an office worker, you get the idea. We can specialize but that does not mean that some skills are nontransferable. When I say we "force" specialization I mean that we make it straight up illegal to simply shift from one career into a different but tangential career without acquiring the appropriate licenses.
Quite frankly this results in unhappiness. We become stuck in jobs in which we are bored. It stifles our potential. About 1/5 of the economy is affected by occupational licensing. Of course it is argued that licensing protects consumers from fraud and because holding a license in a lot of professions means having insurance it gives consumers a safety net. First of all, fraudulent behavior is MORE lucrative because of licensing, which increases the wages of license holders by restricting the supply of labor. Furthermore, fraud is illegal with or without licensing. It is the number one job of government to find, prosecute, and deter crime. Fraud is a crime and when licensing makes a service or product cost more, then crime pays. The only way to prevent crime is to match it with punishment. Let the courts sort that out. Moreover, licensing boards are often the fraudulent ones! Studies have shown that CPA exams have magically gotten more difficult in times of high unemployment. They have also shown that licensing boards are less likely to punish their own members, which allows real fraud to persist within a seemingly legitimate environment. Don't take my word for it, read this article. One also has to wonder, if these licensing laws protect consumers, why weren't consumers the ones pressuring law makers for them, as was the case with the recent consumer protection laws involving credit card companies? Are we to believe that the same people who run an industry have our well-being at heart when they literally write laws? I'm not convinced. If we are to have consumer protection laws, they should at least come from an overwhelming desire for them within the general public, not interest groups --- I think that is the whole idea behind democracy...
Now it may or may not be true that licensing protects us from bad services or products. I am sure that for some people, getting that license made them better at what they do, but for others who are "naturals", it was just another hoop to jump through. Well we can have the best of both worlds. Keep the licensing infrastructure (provided that it is self-sufficient, dues cover costs, etc) but make it OPTIONAL. Then, make it an absolute law that FULL disclosure is MANDATORY. Businesses and people MUST tell consumers right when they meet them whether or not they are licensed, what licenses they hold, if they are insured etc. OK so now consumers know who is licensed and insured and can make an informed choice. If they want to roll the dice, so be it. They are doing so while being completely informed. Furthermore, fraud will DECREASE because the increased competition in traditional licensed professions will decrease the return to fraudulent activity. Unemployment will also DECREASE because unskilled and skilled workers alike will be able to shift into ANY sector of the economy if they so desire or even start their own company. A lot of unemployment happens because capital markets move at light speed. So the capital economy can shift in a new direction in the blink of an eye. Labor takes time to follow and in the meantime, jobs are lost, people get marginalized, things get bad. Speeding up labor will make unemployment spells shorter. It will make sure that willing and able people can find a new job in the most productive sectors of the economy, just as capital does. Overall, this should bring the economy closer to its maximum productive capacity. Speeding up labor will greatly enhance economic efficiency by allowing workers to shift with capital into any sector of the economy. Of course a bus driver will not become a surgeon as no one in their right mind would pay for a surgery from anyone except a qualified doctor. But bus drivers could become taxi drivers when they get off work (taxiing is illegal in New York without a license). The market will decide what a license really means.
So if someone is cheating consumers by offering teaser prices and then shorting the consumer on quality --- sounds like consumers should sue and/or a criminal investigation should take place. This happens everyday in our world and we have systems in place to deal with it. It wouldn't crowd the courts either because most people do their due diligence when buying a product/service with sites like Yelp or Google or Consumer Reports. Also, we can just increase the punishment for fraud until it deters it back to "normal" levels if need be. Most importantly, we would be a happier society because our options would be wide open. The heavy choices in our lives --- what we're going to do, who we are going to be --- will get a little lighter with the knowledge that we can always change ourselves; that we are only limited by our ability, determination, and integrity --- NOT by the pieces of paper on our wall.
Subscribe to:
Posts (Atom)