Bloggers all the way down

27/06/2012 § 1 Comment

Posting will be light this week. We shifted house yesterday, and the NZAE conference is Wednesday through Friday. Ironically, I won’t be blogging so I can be on a blogger panel. Also appearing: Eric Crampton, Sam Richardson, Seamus Hogan, Matt Nolan, and James Zuccollo.

We were also originally going to use the work on the impacts of economics blogging by Berk Ozler as a bit of a touchstone — not sure where that idea has gone.

Anyway, we should all end up blogging about blogging about….

Science iz 4 QTs! lol!!!

26/06/2012 § 2 Comments

Education — particularly maths and science education — is a topic that will get me on my soapbox. And yes, I’m prone to the ‘they’re all doing it wrong!’ school of curmudgeonry. Nevertheless, I can still be surprised, because the stupid never sleeps.

It seems that the EU — like all the other governments — has decided We Need More Scientists. One solution is to have more women in science jobs. After all, women are more than half the species. They need to pull their weight in the sciences! Or something like that.

Somebody ginned up a publicity video to get girls interested. Yay! [smilely face]! Only, well, it’s more lipstick than lab coat. Cause, yeah, y’know, the women scientists I’ve known were all about the bling.

I can’t link you to the YouTube video, because it has now been made private. There is still shame in the world. Or, at least, bad press. So let me send you to Martha Gill’s blog for the full story and some snippets of the original video.

Here’s a thought: how about actually teaching them all the interesting things about maths and science while they still want to learn them? I know, that’s just crazy talk.

200 economists walk into a bar…

22/06/2012 § 2 Comments

…but called it a conference so they could expense the drinks.

The classical economists said the drunkenness was the fault of the bar owner, because his supply had created their demand.

The Keynesians were depressed, and argued that the bar should offer free drinks in order to stimulate their consumption.

The Austrians declared that those still standing clearly had better drinking techniques than those who had fallen over.

The behaviouralists observed that people were using an unknown heuristic to link ‘bars’ with ‘drinking’ (and that it required further research).

The libertarians independently decided the optimal approach was to internalise as many externalities as their budget constraints allowed.

And Ben Bernanke told those assembled that a punch bowl may have been appropriate in a sake bar, but he certainly couldn’t provide one in the current circumstances.

The New Zealand Association of Economists is meeting 27-29 June in Palmerston North. I hope to see you there. If not, please check out the conference website and the papers deposited there.

Virginia’s fight over higher education

22/06/2012 § 2 Comments

The resignation of the president of the University of Virginia has been making the news. She was only half-way through her term when she tendered her resignation, and politics and pressure from the governing board appear to have played a part.

For a wag’s view, click on over to Crooked Timber. Kieran Healy has written a new Declaration of Independence, expressing the board’s opinion of the president (you’ll recall that UVa was founded by Thomas Jefferson, who wrote the American colonies’ Declaration).

Expect to see more of this. First of all, boards and presidents don’t necessarily get along. The College of William and Mary (on the other side of Virginia) had a similar but not so rancorous or public episode a few years ago, when the board declined to renew President Nichol’s contract. His Wikipedia entry tactfully notes that Nichol had ‘the shortest tenure for a William & Mary president since the Civil War’.

Three disputes in higher education are creating turmoil, with President Sullivan an unlucky casualty:

  • who should pay?William and Mary reported in 2011 that ‘Over the last generation, state support for William & Mary’s operating budget has gone from over 43% to under 13%.’ Public funding of tertiary education in the US is declining. One push is shrinking state budgets, but there is also a sense that individuals benefit greatly from tertiary degrees. Therefore, they should bear the costs individually. New Zealand is also heading down this track, too.
  • what should students study? — There is a perennial argument that pits a broad liberal arts education against skills training for employment. I won’t re-hash the argument here. However, as student debt increases, the requirement to pay off the debt tends to push students into skills training. It also increases the pressure on universities to demonstrate value-for-money in the short term. They need to show that their graduates are relevant and employed. That pressure means universities need to be more responsive to short-term business trends (well, fads).
  • how should education be delivered? — This is apparently the reef on which President Sullivan foundered. Technology — that is, the internet — makes information search and transfer easy, cheaper, and faster. If education is transferring information, then the internet should make it cheaper, too. Universities are trying to figure this out. So now, we have MIT online courses and the joint project Coursera. But it isn’t as easy as posting lectures online and charging remote students to access them. The notion that education is lighting a fire, not filling a bucket*, applies here.

These are all disputes in progress, and they are bound up in larger social and political currents. They go to contested questions like, ‘what should society provide me, and what should I provide myself?’, and ‘if it is funded with public money, how much control should taxpayers have over recipients’ choices?’ The situation at UVa is a public struggle over the answers to those questions.

*Apparently, from Plutarch: ‘For the mind does not require filling like a bottle, but rather, like wood, it only requires kindling to create in it an impulse to think independently and an ardent desire for the truth.’

The eurocrisis is dead. Long live the eurocrisis!

20/06/2012 § 1 Comment

So, Greece.

They had the election, and the scary party didn’t win. Yay! Now we can all go back to…to what?

Just to recap:

Greece’s conservatives and socialists are edging towards a deal on a new government….

Who are these conservatives and socialists who saved Greece, Europe, and the world from Syriza, the radicals who would have torn up the existing bailout agreements and pushed for a better deal? Why, they are

arch rival parties which alternated in office from the fall of military rule in 1974 until last year, when Greece’s economic crisis forced them to share power in a short-lived national unity government.

Let’s say you’re the kind of person who thinks that the Greeks brought this all on themselves, that this is a sort of Greek tragedy in which moral laxity in Act I sets off a chain of events leading to punishment in Act III. They overspent, they didn’t pay their taxes, and now they can’t pay their debts. Who, exactly, was in charge in Act I? Actually, it seems that the same people who were in charge then just won the election. If the actors are still on stage, the play isn’t over. There’s still plenty of time for the gods to punish the mortals’ hubris.

Let’s say, alternatively, that you’re the kind of person who thinks this is structural. The euro is a monetary union without a fiscal union, so it has insufficient automatic stabilisers to contend with the regional economic heterogeneity in Europe. Money flowed into Greece when investors thought it was a safe as Germany. In fact, it wasn’t, and now those debts cannot be paid. Who, exactly, is going to negotiate the lower debt payments and/or higher inflation that might allow Greece to trade through? The same political parties who have been playing catch-up for the last couple of years?

There are now reports that the election may have shaken things loose a little. Creditors are signalling that they may be willing to renegotiate. Maybe the threat of competition — the success of Syriza — was enough to push the political duopoly towards a better equilibrium.

With that exception, the Greek election has merely moved us back to the status quo ante. As I recall, it wasn’t all that flash.

Good news for Christchurch renters

19/06/2012 § 1 Comment

Some good news out of Christchurch:

An investigation into overcrowding, homelessness and unsuitable living conditions in Christchurch has been kick-started by a government department.

There have been some dire stories coming out of Christchurch — families living in caravans and garages, people still using port-a-loos, rental inflation, etc. It hasn’t been clear how bad the problem is, since stories aren’t necessarily data.

Eric Crampton has some good thoughts on the issue, and not for the first time. The key is to overcome the supply-side constraint. That will take some novel solutions in a difficult situation. Of course, the whole raison d’etre of bureaucracy is routinisation — the opposite of novelty.

It’s not all good news, however.

This particular study won’t be easy to do. It sounds like they have one staffer looking into the problem:

A staff member was seconded into the role two weeks ago and would compile a report to help the department “identify the appropriate policy response”, a spokeswoman said.

Yikes! How much is this person going to be able to do?

Let’s think about the problem this way: there are primary data and secondary data. Primary data are new pieces of information that you go out and collect; secondary data are someone else’s information that you bend to your purpose. If you want to do something quickly, secondary data are the way to go. A big chunk of work is done, someone else has verified and tested the information, and you can point to other sources to buttress the validity of your arguments.

For example, one complaint is that the rent is too high. Eric’s idea of looking at the tenancy bond database is a good one — it’s been done before. Of course, once you have the data, there are all sorts of ways to torture them. It sounds like the biggest problems are concentrated, so simple averages may mask the extent of the problem for specific groups of people. Secondary data may be able to help understand this issue.

Other complaints, though, are about housing conditions. A study of the bond database doesn’t seem like it would help assess those complaints.

The key here is that the Christchurch situation is new and different. Primary data may be required to assess it. People with housing insecurity are difficult to study. How do you sample them? How do you contact them? What is the base population to whom they should be compared? What is ‘substandard’ housing given the earthquakes?

I look forward to the report, and I hope they choose a method that actually helps them understand the problems.

Standing in Harvard Square with leaflets and a big sign

15/06/2012 § 6 Comments

There was, floating around the Web recently, an analysis of the current economic risks. It had probabilities of each major economic area pulling through without collapse, 80% for the US, 70% for the EU, etc. The two points seemed to be that each area still had a good chance of being fine, but the probability that nothing would happen was fairly low.

What struck me was that the analysis treated the risks as independent. Of course, they aren’t. If the eurozone were to collapse, to whom would the US and China (and NZ) sell their exports? Those economies would suffer, too. The joint probabilities are key.

Dani Rodrik tells a story about what could happen, the joint probabilities presented in prose. Entitled ‘The End of the World as We Know It’, it is a tale of worry and woe that ends thus:

A remote scenario? Perhaps, but not remote enough.

I’ll leave you to follow the link.

The dreaded ‘networking’

14/06/2012 Comments Off on The dreaded ‘networking’

One of the most misunderstood consulting skills is networking. It doesn’t help that the term is ugly and misguided, so it automatically gets people off on the wrong foot. The two problems are these:

  • it separates ‘networking’ time from other time and ‘networking’ activities from other activities. That encourages people to act differently and then the whole effort becomes artificial and strange
  • it contains the word ‘working’, so people think you have to work at it and make it difficult. Then the whole effort becomes tedious and contrived.

We can all recognise bad networking. This article gives a selection of the worst types: card-thrusters, cling-ons, mercenaries. Its sage advice is:

be genuine, be authentic and information sharing, be yourself.

That is, be the opposite of different, strange, contrived, and artificial.

The best networking is imperceptible. It appears like a natural progression, an organic process. That’s because in large part it is. Just to continue the metaphor — in vegetable gardening, you let the plants do most of the work. They get their own nutrients from the soil, they convert the sunlight. Even in the artificial environment of a garden, it is recognisably a natural, organic process. The gardener’s job is to give the plants the right conditions — fertile soil, enough water, the right amount of sun, shelter from wind — so that they grow well.

Let me beat you to the punch: gardening, like networking, does not require large amounts of manure. Raw, smelly manure is the worst thing for your garden and it will mess up your networking, too. It’s too obvious, it has all the wrong properties, and no one wants it around.

The focus of networking is making connections. Connections aren’t just finding out someone’s name and handing them your card. You need to find out about the other person — what do they do, where are they from, what are they thinking about? Then, you need to leave them with a little bit of yourself — why you do what you do, what your favourite project has been, how you spend your Sundays.

Consulting depends on personal relationships. Other people have to feel comfortable that you understand their problem and can help them. That’s why ‘networking’ isn’t one of the 7 skills of successful consulting. The real things you need are People Skills and Social Skills. You create connections by fostering personal relationships in socially appropriate ways.

The term ‘networking’ lets us down. It’s mechanical, electrical. But you can’t machine a relationship; you have to grow it. That takes time and effort, and it doesn’t require a business card.

Retirement savings — who’s right?

13/06/2012 § 2 Comments

ANZ is getting some press for the results of its new Retirement Savings Confidence Barometer. They have found that Kiwis aren’t saving ‘enough’ for retirement. The headline findings were:

[M]ost want at least an extra $100 a week above NZ Superannuation to live on, but about half of savers were not confident they could get there.

I’m a little leery of the research to begin with. Let’s see, a bank has done some research finding that people need to buy more of its services. Nope, nothing suspicious here. In other news, shampoo companies say that two-thirds of Kiwis have dirty hair.

Then there’s the strange logic underlying the research. On the one hand, we are supposed to believe that people are not clever enough to plan for their retirement. On the other hand, we take at face value these same people’s estimates of how much money they are going to need in 30 or 40 years. Yeah, okay, the research is all couched in terms of how ‘confident’ people are that they are saving enough. It seems to me that there are two ways to solve this problem. The bank’s solution is to have people save more money. Another solution is to shore up people’s confidence.

Why would we want to do that? It turns out that most people are saving ‘adequately’ for retirement. At least, that’s what Treasury thinks.

In this 2007 paper, Treasury used a life cycle model and the SOFIE dataset to model savings adequacy. They do note that ‘adequacy’ is a matter of opinion:

Reasonable people may hold a range of views on both matters – there is no single ‘right’ answer.

They nevertheless go on to make some estimates based on pre-retirement income and the principle of consumption smoothing. The key results are in Table 3, Proportions of the population who appear to be saving inadequately for retirement (p. 12). From the text:

Our baseline estimates suggest that around one third of the population are not saving enough for retirement (see Table 3). In the variation case (described in Section 4.2) the proportion of ‘problem savers’ falls to below 20%. For the group approaching retirement, only 9% of non-partnered individuals and 13% of couples need to increase their saving rates in order to smooth out consumption between now and retirement. This finding is well in line with international evidence. For example, Scholz et al (2006), who use more sophisticated methods, also find that over 80% of Americans are preparing sufficiently for retirement.

What, wait, the vast majority of people are saving adequately? People are being sensible? And this is ‘well in line with international evidence’? Maybe that little tidbit should be included in the next article on savings adequacy and retirement anxiety.

Treasury research — better than Xanax.

The return of society

12/06/2012 § 1 Comment

One of the cornerstones of psychoanalysis — and it extends into social theory based on psychoanalytical theory — is the return of the repressed. That which is repressed doesn’t go away. It reappears in some other form, such as the famous ‘Freudian slip’.

It used to be we had something called ‘society’. There were arguments about its role and importance, memorably set to music in ‘Gee, Officer Krupke’ from West Side Story. Even as late as 1975, Dr Scott’s line in The Rocky Horror Picture Show (all hail Richard O’Brien) still made sense: ‘Society must be protected!’

Things changed. Thatcher could claim, with a straight face, ‘There is no such thing as society.’ There were individuals, and families, and neighbours — but there was no society. There is truly nothing like a Dame.

The problem, of course, was that saying it doesn’t make it so. This attempt to repress the idea of society didn’t make it go away.

We are now seeing the resurgence of the idea that we are connected to each other. We are taking to heart the idea that what I do affects you and what you do affects me. However, this return of the repressed fits the new ethos of individuality. Instead of ‘society’, we have ‘externalities’. ‘Society’ contains an idea of connection. Even when society is in strife and riven by internal factions, it is still a collective noun. ‘Externality’ is combative, each individual for the self. It tallies and totes up.

The debate over raising the superannuation age in New Zealand is formulated as the burden that retirees are imposing on the rest of us. The fight over other people’s diets — their fat and sugar intake — is couched in terms of how much it will cost taxpayers. Stricter smoking and alcohol laws are defended because of the costs we all bear for these vices.

So what has really changed? We still recognise that ‘No man is an island,/Entire of itself./Each is a piece of the continent,/A part of the main.’ We are just recognising it differently. Now, we are simply trying to keep everyone else off our lawns.

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