‘The metre’ is a verb

30/11/2012 § Leave a comment

The Asia Pacific Metrology Programme has been meeting (pdf) in Wellington this week. They had a symposium on Wednesday about ‘Measuring the Measurers’. I was invited along to present an economics perspective. The presentations are supposed to be posted on the Web at some point, perhaps on the APMP or Industrial Research Limited websites.

For background, here is a description of the APMP:

The APMP is a regional scientific organisation with 43 member laboratories, including MSL (seehttp://www.apmpweb.org/ ), and is committed to improving measurement capability within the region and gaining international recognition of its members’ capabilities.  It achieves this through activities such as inter-laboratory measurement comparisons, science workshops and being one of the APEC specialist regional bodies.

The various metrology groups are facing funding problems. In many ways, they have problems in common with other areas of fundamental science. The value of fundamental science is embedded in technology and products, so it can be difficult to understand its value. Also, fundamental science takes time to show an economic result. In times of tight public budgets, cutting science programmes, including metrology, is easy.

I was asked what government departments were thinking when they cut these budgets. There is economic research (believable research) demonstrating positive benefits and good benefit-cost ratios. Why cut funding that is creating growth?

My answer was that short-term pressures made it easier to cut programmes with longer-term impacts. If we reduce the metrology budget, the metre and the kilogram will still be there.

Another speaker pointed out that — regardless of the government’s view — it isn’t about whether the metre will still be there. It is about the ability to measure a metre and the ability to calibrate instruments that can reliably measure metres (and to calibrate the calibration instruments). Maintaining that ability requires resources.

The metre doesn’t really exist outside our ability to measure it and agree on its measurement. The metre isn’t a noun — it’s a verb.

The Year of the Quants

27/11/2012 § Leave a comment

I’m a bit late getting to this, but the wonderful people at StatsChat are spreading the word about the Year of the Quants:

2013 is the International Year of Maths of Planet Earth and the International Year of Statistics. This is a once in a decade PR opportunity for the our discipline, AMSI is coordinating the national program for the year. We are looking for guest bloggers…

One of the events that caught my eye was ‘Optimization of Planet Earth Afternoon‘. Ironic that we are celebrating optimisation in ‘science, engineering, medicine, industry and elsewhere’ at the same time that non-optimisation methods in economics are gaining some column-inches. One does wonder about the ‘afternoon’ part — are we optimising only part of the day?

Celebrating maths and statistics is timely, given the performance of quantitative methods in the recent US general election. Doonesbury imagines the parade that should have been:

The International Year of Stats is here, and the Maths of Planet Earth (Australia) is here.


Jobs and wages in manufacturing

26/11/2012 § Leave a comment

The New York Times Magazine had a short article on jobs and wages in manufacturing in the United States. The description of the situation was interesting. Businesses are trying to keep costs down. They are therefore finding it hard to hire workers — one CEO found 10 suitable employees from over 1,000 applications. Potential job candidates, meanwhile, are looking at the options available and choosing other work. Technology is also changing, so employees need to be better skilled:

Running these machines requires a basic understanding of metallurgy, physics, chemistry, pneumatics, electrical wiring and computer code.

Somewhere in the middle was this:

Manufacturers, who face increasing competition from low-wage countries, feel they can’t afford to pay higher wages. Potential workers choose more promising career paths. “It’s individually rational,” says Howard Wial, an economist at the Brookings Institution who specializes in manufacturing employment. “But it’s not socially optimal.”

I’m struggling with this. The businesses and workers are weighing up the options and making the best decisions they can — optimising their private welfare. Wial maintains that this is not socially optimal. What would cause this gap between private and social welfare?

One possibility is that some third party is being hurt. Who could they be? Other employers aren’t being hurt. It’s not like a subsidy story, in which subsidies for manufacturing jobs create costs for others. Other employees aren’t being hurt. There are still job openings and wages aren’t collapsing. A worker can invest in training and ‘will probably have a job for as long as he or she wants one’. Consumers aren’t being hurt. Prices of manufactured goods are falling, which is creating the problems. It doesn’t look like there’s any significant externality.

A second possibility is that poor information and uncertainty are creating extra costs. Poor information could cause businesses to miss out on work or cause candidates to avoid manufacturing jobs. Uncertainty around technological change and international trade could cause the industry to hold back — to limit investment in machinery and skills to limit exposure to risk. These things do create costs. But these costs have associated benefits: more certainty and less stress, and people keeping their options open for future opportunities. In addition, there’s no indication that manufacturing is any different from other industries.

Just because people aren’t satisfied with the situation doesn’t mean it isn’t socially optimal. An employer would love to have a smart, capable person willing to work cheaply. The problem is that smart, capable people tend to have other options. A worker might find a manufacturing job interesting, but as a society we place more value on being manager at a fast-food outlet.

Why have I spent so much time on this? For two reasons:

  • In New Zealand, we must accept that prices — wages and final prices — are telling us something about what’s valuable and what isn’t. Saying that we ‘should have’ a certain number of jobs in manufacturing or that wages ‘should be’ at a certain level requires a solid, sensible explanation.
  • This article quotes an economist from a well-known organisation saying something that sounds sciency and authoritative, but is really just a feeling dressed up in jargon. Maybe it was a throw-away line to him, but the rest of us economists now have to be janitors, cleaning up behind him.

Organising some thoughts on process and goals

22/11/2012 § 1 Comment

There is, in Wellington and elsewhere, a push to make government more innovative. The idea is that the private sector succeeds through innovation, so the public sector should follow suit.

Sometimes, the focus is on getting good feedback loops. If each policy initiative is viewed as an experiment of sorts, then bureaucrats should be collecting data from each experiment to determine what works. This is one of the messages of Adapt.

Sometimes, the focus is on being innovative for the sake of innovation, on challenging the status quo because it needs to be shaken up. Thus, I’ve heard that some Ministers have challenged their Ministries to ‘scare me’ or ‘surprise me’. Or, to rely on a cliche, to think outside the square.

Here’s a 2×2 matrix that’s helping me organise my thinking:

Private businesses have pretty clear goals. Mainly, they make money. They might also provide some intangible benefits — being master of your own destiny, steward of the land, conqueror of markets, etc. But mostly, the goal is pretty clear.

How they achieve that goal is wide open. They try stuff out, make big changes and incremental changes, keep what works and discard the rest. Once they figure out what works, that might get turned into codified knowledge. Businesses produce standard operating procedures and policy manuals of all sorts. Franchises are an example of making business processes regular and predictable.

Government, on the other hand, doesn’t necessarily have clear goals. It’s a bit about keeping people happy, keeping things ticking over, improving the living standards of some people while not harming others too much, responding to pressures from all sides. The goals are fuzzy and changing. The bureaucracy compensates by creating clear processes. When things go wrong, bureaucracies often defend their actions by saying, ‘we followed the correct procedures.’

The push for innovation puts government in a new quadrant. Now, bureaucrats are asked to challenge their own processes, to think continuously about how they can do better. The goals are still fuzzy — that’s the nature of governing — but now the process is, too. This quadrant creates a quandary: how are they to know what ‘better’ is?

Framing the problem with the 2×2 matrix leads me to three thoughts:

  • experimenting with governance is hard, as hard as research is to do well. Researchers are highly skilled, highly qualified, and relatively well paid. If we want good experimental governance, then we have to provide the necessary resources. Otherwise, it will be like research done by people without training or skills — think term papers written by undergraduates
  • to help staff, the senior managers should try to provide clear interim goals. This will allow staff to focus on experimenting with processes. Otherwise, staff will be experimenting with both goals and processes, which is a recipe for chaos
  • alternatively, setting up clear measuring and monitoring processes can allow experimenting around goals.

Graphically, I’m suggesting that Ministries shouldn’t stay in the upper left quadrant if they can help it. It’s difficult and expensive. Instead, they should create some clarity around either goals or processes (move right or down), and then experiment around whatever is left.

Making the waka go faster

21/11/2012 § 2 Comments

Monday saw the launch of He kai kei aku ringa, the Crown-Maori Economic Growth Partnership. I went along to the launch event. It was a nice affair — lots of people trying to good things for Maori and the whole country, lots of energy and support for the new plan.

Here are some good things about the plan:

  • There is an actual plan (pdf). This isn’t just hand-wringing (ringa-wringing?) about the state of Maori. There are actual things that are planned to be done. Oh, and people who are supposed to do them.
  • There are goals, relatively SMART goals. The Action Plan takes each of the specific goals, explains why they are important, and then provides a way to measure success. Not always, and things will get fudged, etc. But still, goals like ‘Higher completion rate for Maori students studying for tertiary qualifications’ and ‘Higher retention rates for Maori students in tertiary education’ can be measured and success ascertained.
  • The plan has a sensible structure. It has six strategic goals, and then 20-odd specific goals. People can remember six goals (the rule of thumb is 7 plus-or-minus 2). They can get behind six goals — they know the bigger picture. Big laundry lists aren’t suitable for this purpose, not without structure. This way, everybody knows which way the waka is headed.
  • Education is goal #1. The gap between those with tertiary qualifications and those without is growing. We can argue the why and the equity, but it has happened and does continue. Also, getting a tertiary qualification pays for itself and then some. It’s a worthwhile investment. The relatively poor performance of Maori pupils and students has to be turned around if they want economic success.
  • There appears to be actual funding involved. These initiatives cannot happen without money.

So, I’m hopeful. The plan a good first step. Now for the hard work of doing it.

To finish this off, three things:

  1. Declaration of interests: I am not disinterested in Maori development, having a wife and children who are Ngai Tahu/Kai Tahu.
  2. When the working group presented the report to the Minister, they sang a waiata. It was lovely. I have to see how I can get that added to my research contracts.
  3. The report uses the saying, Ka tangi te kākā. And here, spotted in our yard yesterday, is a kaka (the bands are from the local wildlife sanctuary):

NZ’s environmental street cred

20/11/2012 § 2 Comments

The last post considered the fetish of hand-crafted goods. Pondering this more yesterday, I wondered how this idea mapped onto environmental values. New Zealand trades on and worries about its environmental ‘brand’, and there seems to be a conflict between pretty green hills and contaminated streams.

Then I saw the news reports about Dr Mike Joy from Massey University:

Just nine days before Wellington’s world premiere of The Hobbit film, an environmentalist has launched a scathing attack on a tourism campaign depicting New Zealand as ’100% Pure’.

Senior Lecturer in Environmental Science at Massey University Mike Joy told The New York Times that New Zealand’s image as a clean, green nation is as “fantastical as dragons and wizards.”

“There are almost two worlds in New Zealand… there is the picture-postcard world, and then there is the reality,” Joy told America’s most well-read daily newspaper.

I can see how he has set this up. On the one had, we have reality — that which is really happening and we can show and demonstrate and measure. The rivers have X amount of nitrogen and Y faecal count. The greenhouse gas inventory is up to Z. On the other hand, we have the story we tell the world, the picture-postcards we send through blockbuster films and the post.

This description doesn’t account for the power of the New Zealand environmental brand. It doesn’t account for why we believe it. To do that, we have to understand how and why the brand functions. I really do think that the fetish provides a way to understand it.

We have imbued ’100% Pure’ with both the utopia of our one-ness — a time before the fall, before language, when we could live at peace with the world. If only we could be 100% Pure, we would be living rightly. We have also imbued it with the power of the destroyer — Shiva, or Yahweh who brought the flood. If we are forced to be 100% Pure, the our economy will be ruined.

But at the same time as we do not actually live it — and know that we do not — we also act as if it contains an essential truth about New Zealand. The rest of the world does, too. This isn’t a New Zealand fetish; it is a global fetish. The whole world wants New Zealand to be 100% Pure, or should I say ’100% Pure’. That fetish allows the industrialised world to recognise the power of industrialisation and mass production, while at the same time providing a place (an English-speaking place in a temperate climate) where we imagine it has not already happened.

As I am trying to describe this, it starts to sound like the logic of the feminine in Lacan’s Seminar XX/Encore: not all countries are subject to industrialisation, even while we know that there does not exist a country that is not subject to industrialisation.

’100% Pure’ is thus a fetish that resolves an economic hysteria. We ask the question, are we an industrial nation or not? The fetish allows us to answer, we are both and neither.

Fetishisation of the hand-crafted

19/11/2012 § 1 Comment

Last night, while ironing my work shirts, myself, by hand, I caught TVNZ’s programme The New Old and its episode ‘The Artisan’. The blurb:

Presenter Wallace Chapman looks at the trend against mass-produced goods and the growing market for handcrafted objects.

Chapman interviewed several people who were somehow involved with hand-crafting. One couple were rescuing old bits of machinery, one woman effused about her hand-made leather couch, another woman talked about how she hand-designed embroidery patterns and then digitised them for mass production.

The show was clearly trying to position the narrative as the counter-argument to mass production. Hand-crafted items were superior because they lasted longer, showed the personality of the producer, or gave you a personal relationship with the artisan. But this narrative is false.

Economically, there is no outside of mass production. We live in an industrial world in which mass production provides. There are many examples that make this point: I, Pencil; The Toaster Project (via Tim Harford); Rivoli’s T-shirt. The examples provided in ‘The Artisan’ paper over the contribution of mass production and industrialisation in each example. The couch, for example, may have been assembled by hand. Where did the leather, wood, and filling come from? How were the hides stripped from the carcasses, tanned, dyed, and shipped? The machines that sewed the leather, where did their parts come from? The steel for the needles?

The economic value of the hand-crafted component is minor. If you toted up each person’s spending, the amount they spend on artisanal goods is minimal. Most spending, like most production, is on mass-produced products.

Hand-crafted goods are not economically important; they are psychologically important. They are fetishes. First, it is important to realise that they do not exist by themselves. They exist only in opposition to mass-produced goods. Each time we point to them — name them — we are singling out that important characteristic of them: they are the not-mass-produced goods. When we refer to them, we are also referring to their opposite. They therefore safely contain all the power of mass production.

Hand-crafted goods also keep a little distance between us and mass production. This is the other function of fetishes — providing some distance from the Real to provide a space for jouissance. These goods provide a little opening that mass production has not already filled (even though it has, because these specific hand-crafted goods could not exist without mass production).

The fetishisation of the hand-crafted is a way to live with mass production, to enjoy it while maintaining a psychological distance. If only I could convince myself that ironing shirts provided the same benefits.

Election lessons for consultants

16/11/2012 § 4 Comments

One of the curious stories out of the US presidential election is about the consultants on the Romney campaign. Apparently, they made a lot of money:

Much of Romney’s operation, for example, appears to revolve around a close-knit
group of insiders at American Rambler Productions, which took in more than $160
million through mid-October, records show.

That’s some gravy.

And what did the campaign get for this money? Here’s one thing they got:

If you spend your time watching politics and haven’t been hiding in a deep depression since Tuesday, you’ve probably been hearing a lot about “ORCA.”  According to the Washington Post, ORCA “was designed as a first-of-its-kind tool to employ smartphones to mobilize voters, allowing them to microtarget which of their supporters had gone to the polls.”

There is now widespread condemnation of the program as being sloppy and poorly deployed.

They say that the truth is the consultants essentially used the Romney campaign as a money making scheme, forcing employees to spin false data as truth in order to paint a rosy picture of a successful campaign as a form of job security.

The last paragraph spreads the blame around — consultants and employees. Clearly, though, there is some consternation about having paid for all these consulting services and not getting a working product.

Hey, consulting isn’t all rainbows and unicorns. Most projects work but some don’t. It isn’t unusual for clients to be a bit unsure about what they want. They may not figure it out until you deliver to them the wrong report. Then you have the clients who do know what they want, but it doesn’t accord with, um, reality.

What’s a consultant to do? I figure there are three strategies.

  • One strategy is to give the people what they want. You figure out what the client really wants, and then deliver it. People know what they are getting when they hire you. This approach keeps people happy — short term. There are two weaknesses to this approach. First, you aren’t really helping the clients. The answer they want may not be the right answer, so they end up with the wrong information and eventually that will have consequences. Secondly, third parties also know what you deliver. Whatever your advice, right or wrong, it’ll be suspect.
  • The second way is even more cynical. You promise what you know the client wants, and deliver the cheapest result you can get away with. An election is an interesting consulting problem. From the consultant’s point of view, the client is transient — it disappears the day of the election — so you have to get payment beforehand. From the client’s point of view, the consultant is only as good as the results, which are apparent only on election day. It’s easy to see how the ORCA debacle can happen, how a client could pay for a shoddy project.
  • The third strategy is to play it straight. You work on understanding what clients want. You tailor your research to their needs. But you also do the work as best you can, honestly, with (in the case of economic research) one eye on theory and the other on the data. Some projects won’t work out; some clients will have a different view of the world and won’t like yours. Those projects you have to take on the chin. Most projects, though, should go well, and most clients will be happy, and you’ll get a reputation for quality and consistency.

I prefer the third approach. It suits my personality and it seems to work for me. The first two sound like far too much hassle, trying to keep people happy and stay one step ahead of expectations.

But let’s not be naive. Some consultants will work the first two strategies. With $160 million up for grabs and accountability disappearing on election day, it shouldn’t be a surprise that the Romney campaign ended up landing an ORCA.

Another green growth report

15/11/2012 § 4 Comments

The industry advocacy group Pure Advantage has released another report. When I tried to download the report or the executive summary, it insisted on an email address. This seemed a bit strange, a bit controlling, frankly.

The report runs to about 300 pages. I have not read it, and doubt that I will. Long reports are generally silly wastes of time. Very few people read them, the key messages get lost in verbiage, and they are difficult to make consistent.

I am, however, a little jealous. My rule of thumb is that it costs $800 to $1,000 per page to do a piece of research. A $40,000 project typically results in a 40-ish-page final report. A 300-page report? You do the math. And who got the assignment? Vivid Economics, a London-based consultancy. Sigh.

I did, however, read the executive summary. Here are a few observations, in no particular order and with no real coherence:

  • They recommend that New Zealand increase its science spending. This has been recommended for years. What isn’t in the exec summ is that the government is basically contributing near the OECD average. The real weakness is business expenditure on R&D (BERD). The businesspeople who are trustees of Pure Advantage should look to the private sector first, rather than lobbying the government for more money.
  • The recommendations for agriculture aren’t all that novel. The CRIs are, in fact, working on the issues of greenhouse gases, energy efficiency, and water efficiency. These are difficult problems. More money would help, yes, but that’s true about everything.
  • The recommendation for aquaculture is similarly too little and too late. The Government is already working on it, and getting assistance from the research sector. The problem — as vividly shown in the NZ King Salmon hearing, in which I was involved — is that economic growth is in conflict with other values. Some people want to live in a tranquil, waterfront property without an aquaculture farm nearby. Should they? What’s it worth to them? What’s it worth to the rest of us? These trade-offs need to be discussed and resolved.
  • They suggest that green growth can be good for the environment and good for business. That argument always takes me to the question, ‘why hasn’t it happened already?’
  • Overall, the idea of the clean, green image (CGI) for New Zealand is highly contested. Opinions differ on whether it is really valuable, how fragile it is, and whether it represents anything ‘true’. When we talk about CGI, we are entering the realm of the symbolic, of semiotics and language, and how it relates to economic decisions. I would love — LOVE — to do that research. Wait, no, I have been trying to get that sort of research funded in New Zealand for close to ten years.

Bottom line: the report seems to be a re-tread of well-known issues with a recommendation to spend more public money to help private businesses. When it comes to really difficult issues — what trade-offs are we willing to make? how do consumers symbolise environmental values through economic transactions? — it seem to fall silent. Maybe somewhere in those 300 pages they grapple with the hard stuff. If so, Pure Advantage will have gotten its money’s worth.

Fun with carbon accounting

13/11/2012 § Leave a comment

It’s a provocative headline: ‘Carbon-footprint study examines solo mums‘. It’s not exactly right — the study looked at men and women, married and not. And who’s to blame? Why, those pesky women, of course:

At 22 kilograms of CO 2 emitted on an average day, a British woman’s carbon footprint is slightly higher than a man’s – at 20kg a day – because women spend more time doing non-paid work, eating up the clock with carbon-intensive chores such as cooking, cleaning, shopping and laundry, the study finds.

This is elementary carbon-accounting stupidity. It is the same problem that New Zealand has faced since Kyoto. Who has the responsibility for greenhouse gases, the producer or the consumer? From the producer side, New Zealand is a bad, bad country — all those methane-producing ruminants. From the consumer side, though, the responsibility lies with the overseas consumers who like the meat and milk those animals produce. Y’know, the consumers who buy 90-odd% of the pastoral production of New Zealand.

So, what, those women are cooking and cleaning for the sheer joy of it? And the men and children aren’t enjoying the home-cooked meals and benefiting from the clean kitchens and bathrooms?

This is the point of creating a price on carbon, either through an actual price or some kind of cap-and-trade system. It creates something like a tax wedge so that producers and consumers can arrive at a mutually agreed solution — how to use the carbon sink capacity of the environment efficiently. Both sides are ‘responsible’, if we have to point fingers. And both sides should bear the cost of adjustments.

I haven’t had a chance to read the actual study (it’s behind a paywall), just the news report. Hopefully, the authors say something intelligent on these points.

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