Preferences for avoiding death

30/04/2013 § 7 Comments

Slate blogger Matthew Yglesias has been getting flak for his post that appeared quickly after news of the factory collapse in Bangladesh. In it, he explained that economics was all about diff’rent strokes for diff’rent folks:

Bangladesh may or may not need tougher workplace safety rules, but it’s entirely appropriate for Bangladesh to have different—and, indeed, lower—workplace safety standards than the United States.

Reactions in Western corners of the internet have been fierce and occasionally funny:

Corey Robinson questions whether Yglesias is right about the collective preferences of Bangladeshis:

‘Hundreds of thousands of garment workers walked out of their factories in Bangladesh Thursday, police said, to protest the deaths of 200 people in a building collapse, in the latest tragedy to hit the sector.’

Would it not be easier for Matt Yglesias to dissolve the Bangladeshi people and elect another?

Justin Zachary at Daily Kos points out that the factory was in fact in violation of local safety laws:
What happened in Bangladesh was the result of the safety standards that are currently in place not being enforced. As Kalpona Akter, executive director of the Bangladesh Center for Worker Solidarity, told Democracy Now!, Bangladesh “already has some rules and regulations for safety,” with which some politically powerful owners are not complying.
Maha Rafi Atal at the (UK) Guardian tries to walk a middle ground of increased safety but continued employment for Bangladeshi workers:

that should be about making a distinction between wages, which do not have to be the same everywhere, and workers’ rights, which should.

It may look on the surface like Yglesias is being all ‘realist’ and ‘sensible’, but in fact he gets the economics wrong. He forgets three things:
  • preferences are only half the story. The other half is the choice space in which preference can be expressed. It is the combination of preferences and available options that lead to the choices made. Ascribing the choices to preferences alone gets the theory wrong; one can just as legitimately point to the limited options
  • the market theory that Yglesias uses to underpin his ideas — that there are market transactions deciding the prices of garments and safety — assumes freely available and perfect information. A large economic literature then explores the impact of relaxing that assumption. But that’s the post-grad course, and Yglesias is stuck in 101. Here’s the thing: we could make it perfectly obvious to Western consumers how their garments were made, what the working conditions were. Then we could talk about a market solution. Let me put it another way: is Burger King going to launch a horse-burger because people were buying them before they found out what was in them?
  • supply and demand do not exist outside the institutions that help shape the economy. An analysis that doesn’t account for politicians who can override police edicts and flout safety regulations is incomplete. We should recognise that, for example, agreements and regulations help set the conditions in which the market is operating. So, there are trade agreements around clothing that promote its production in poor countries, but much less international recognition of professional qualifications for doctors, lawyers, accountants, etc. (On that front, economics is like the Wild West — anyone can hang out a shingle.) It is at best disingenuous to throw your hands up and say

in a free society it’s good that different people are able to make different choices on the risk–reward spectrum.

In a free society, it’s also good that people can express different opinions. Even when they haven’t got a clue what they’re talking about.

Whatcha gonna do about it?

23/04/2013 § 6 Comments

The US is a confrontational place. I was going to say ‘violent’, but that’s not the right word. ‘Confrontational’ is better. The jostling, the up-in-your-grill-ness, the staking a claim — it comes through all the time.

How many times have I heard, ‘whatcha gonna do about it?’ Hey, that’s my seat! Wait a minute, I was parking there! There’s a line waiting here! Oh yeah, whatcha gonna do about it!?

There’s the other way of saying it, too, the resigned sigh. The DMV closed early but didn’t let anyone know. The bank put my deposit in the wrong account and charged me for an overdraft. The insurance company is denying my claim after they pre-approved it. Oh yeah [sigh], whatcha gonna do about it?

I remember being 19, and 22, and 26, like the Tsarnaev brothers. I remember the anger and frustration. First, dealing with other guys who were willing to challenge you over a comment or a girl or a beer or a driving manoeuvre. And then there were the institutions with their bureaucratic procedures: fill out these forms and take them to that office and have them signed by that person and I-don’t-care-that’s-how-it’s-done.

It wasn’t any better being middle class and in elite universities. In some ways, it’s worse. They existed long before you and will continue long after you’re gone. They don’t care and they don’t need to. If you don’t like it, someone else will happily take your spot.

What to do? To deal with the individuals, you learn to ‘handle yourself’ in those situations. Confront or defuse, fight or flight, save face regardless. Ironic, isn’t it, that dealing with other people is called ‘handling yourself’.

With the institutions, well, it’s really suck up and deal. Choose the hill you want to die on, as a friend used to say.

But what if there’s not enough upside? What if there isn’t enough money or prestige or security on the line? What if all the promises of some future with a job and wife and house and car and all the books and booze you can manage — what if they start looking hollow? And you start thinking you’re never going to make it, it’s never going to stop being a fight, you’re always going to be pushed around by incidental bullies and petty tyrants.

Whatcha gonna do about it?

The dreaded spreadsheet error

22/04/2013 § 2 Comments

I posted flippantly last week about the Reinhart and Rogoff (R&R) re-assessment by Herndon, Ash, and Pollin. There’s been more bytes spilled since then. The Economist says it’s not such a big deal, because  ‘Ms Reinhart and Mr Rogoff acknowledge in their academic work that this conundrum “has not been fully resolved”, but have sometimes been less careful in media articles.’ Paul Krugman counters that, yes, it is a big deal and provides some links. Matt Nolan at TVHE provides more links and more perspective:

it has been used as an inconsistent marketing tool by people for selling their own unrelated ideological policies….

I’m going to be careful here. Media interviews are not the same as academic writing. Keeping my thoughts straight while listening to someone else’s questions, and then controlling the random thoughts that spring to mind whenever (ask my poor students — I don’t censor digressions quite the same way in lectures) while not babbling — hey, it’s fun and energising but only approximately accurate. So, I’m not going to pile on.

I’m fascinated that it was a spreadsheet error, at least in part. Most economists I know proudly and loudly avoid Excel for anything analytical. Grunty programmes like Stata, sure, and nerdy open-source stuff like R (thanks, Auckland!), absolutely. I mean, these are guys (yes, guys) who sneer at SPSS. To find out that R&R were relying on Excel is like, I don’t know, seeing a celebrity chef eating at Burger King.

There’s a lesson for consultants here. Excel is the sort of programme that gave rise to this:

To err is human, but to really foul things up requires a computer.

Nevertheless, I like Excel a lot. Despite all the stupid and paranoid security controls that Microsoft has added, it is still a portable way to give clients the analytical details of what I’ve done. It also allows me to build dynamic tools to help clients tweak the analysis for their own questions. And, I can show them exactly which number is multiplied by which other number, and then transform it all into pretty pictures clearly and transparently. Throw in some macros and buttons, and it’s really powerful.

The best advice I’ve heard about building those sorts of files is to treat them like programming tasks. You are essentially programming a new bit of software. There are established protocols for tracking versions and checking code — that’s a place to get some tips on good design processes.

It’s the best advice, but I’ve generally ignored it (like a lot of good advice). It’s just too hard. So, let me offer my own advice:

  • do it differently — there are always multiple ways to make calculations. I like to make calculations two different ways, and then check whether they have the same values (‘=A3=B3’ will give a TRUE or FALSE; or, use an IF statement)
  • back-of-the-envelope — just the other day, we were looking at a spreadsheet model (again, portability is important), and we did some back-of-the-envelope calculations to check whether they were sensible. It’s similar to the idea of an elevator pitch — can I explain in simple language and logic why we get these results?
  • have someone check — give it to someone else. Let them see everything, get them to check everything. Make sure they have the chops, too, to do it right. Now, that can be expensive, several hours of work. So ask yourself, do I feel lucky today is it worth it for the job or the client? I mean, if I’m going to recommend unemployment for a few million people, I want to make sure my cell references are right. But not all clients warrant that level of scrutiny.

After all that, though, mistakes will happen. The best thing to do is be a mensch — I’m not sure what the New Zild translation is. Own up, walk the client through the impacts, and do as much work as you need to do with the client to restore some credibility.

And then, add it to your bag of tricks. You’ve just learned an expensive lesson.

What’s the point of academic research?

19/04/2013 § 9 Comments

I’m still thinking about MOOCs. A university is supposed to be involved in research and teaching, and MOOCs potentially cut into the teaching side of the business. Even if they aren’t as good, they may still take a big chunk of market share. One can buy hand-sewn shirts, but mass-produced shirts are much more common.

So that leaves the research side of the university. What’s the point? Is it to be ‘critic and conscience of society’, which is the New Zealand job description for an academic? Is it to advance knowledge and understanding?

What got me thinking about the topic was this profile of Noam Chomsky by Glen Greenwald. Greenwald, a journalist, has been a relentless critic of the security state that the US has put in place over the last two presidencies. Chomsky, an academic, has been a critic of American hegemony for decades. It is likely that academic tenure has helped Chomsky speak his mind. That is, the economic security of his job allowed him to have ‘a room of one’s own’ (Virginia Woolf) and be a critic of society.

University research, then, might be about providing an environment in which individuals and teams can pursue research, whether that research is criticising society or supporting it. The university buffers researchers from that same society — providing them time for the research to come to fruition, shielding them from reactions when their opinions or findings are unpopular. The uneasy bargain is that society pledges resources to the university — even when it bites the hand that feeds it — because of a belief that ultimately it will be for the social good.

But is it? Or, more precisely, is it at the margin?

And that question takes me to findings like those discussed here:

Consider this tally from Science two decades ago: Only 45 percent of the articles published in the 4,500 top scientific journals were cited within the first five years after publication. In recent years, the figure seems to have dropped further. In a 2009 article in Online Information Review, Péter Jacsó found that 40.6 percent of the articles published in the top science and social-science journals (the figures do not include the humanities) were cited in the period 2002 to 2006.

So it seems that much university research isn’t even of value to researchers themselves.

There is also discussion of the ‘need’ for academics to contribute more, be more engaged with society, adopt more of a public intellectual stance. Those discussions suggest that society — government, business, the chatterati — might feel that academics aren’t pulling their weight.

Where I’m getting to is this: if MOOCs call into question the near-monopoly of universities for delivering advanced education, then universities will have to lean more heavily on the research function to justify their existence. But, the research side seems anemic, at least at the margin. The additional contribution of the extra dollar of spend seems to deliver little in the way of engagement or criticism. Oddly, the crisis in teaching raises the title question: what’s the point of research?

The source of the world’s ills

17/04/2013 § 1 Comment

A colleague, a fellow economist and Lincoln grad, has this morning sent through an article by Dean Baker (also an economist but not a Lincoln grad). He points to a fascinating dispute:

The basic [Reinhart and Rogoff (R&R)] story was simply the result of them getting their own numbers wrong.

After being unable to reproduce R&R’s results with publicly available data, [Herndon, Ash, and Pollin] were able to get the spreadsheets … that R&R had used for their calculations. It turns out that the initial results were driven by simple computational and transcription errors. The most important of these errors was excluding four years of growth data from New Zealand in which it was above the 90% debt-to-GDP threshold.

So, to summarise: the problems with the R&R analysis were caused by:

  • spreadsheets
  • New Zealand
  • economists.

You have been warned.

He’s got a little list

17/04/2013 § 1 Comment

Nothing to say this morning and no time to say it. Instead, here’s some light entertainment opera to help you through your Hump Day. Gilbert and Sullivan, updated and Down Under.

Oh, and it probably needs a hashtag: #firstworldproblems.

One from the archives

15/04/2013 § 4 Comments

Publishing academic articles is complicated. You have an idea, you do the research, you turn it into a paper. Then what?

Well, unpublished papers represent your resources, which you have to turn into products/commodities. It’s a bit like exporting. You could ship off raw logs to whomever will take them — there’s always some obscure journal that will take your paper. Or, you can fashion the logs into high-end furniture and try to find a market. Those markets are more difficult. There are fashions to follow and a certain amount of protectionism from established interests, but the returns are much greater if you are successful.

It comes down to four rules:

  • chunking — some people advocate figuring out the least publishable unit so you create the greatest number of products from your raw resources. I must admit that I don’t worry about this, because time is more a limiting factor than ideas. Getting time to turn ideas into polished papers is much more of a problem, so having more than the minimum in each paper is a better strategy for me
  • aim high — a good piece of research, once published, has been sold. The higher the price you get for that research, the better your return on the investment. You want to get it into the most exclusive journal you can, given the quality of the research and the time you have for working through the publishing process. That’s why I tend to aim just above where I think a paper could be published, and then settle for whomever finally accepts it
  • diversify — research, even your amazing research, is of variable quality. Journals, too, have great diversity in the speed of review and publishing. I’ve always advocated a portfolio approach to publishing: try to have one or two winners, some middling articles for profile, and some pieces in lower-ranked journals to keep the numbers up
  • know your limits — my limiting factor is always time. There is never enough time to write up results, submit, resubmit, chase stuff up, etc. I’m better off shoveling stuff out the door and getting it through the process with minimum fuss. But that’s me. You’ll be different — different objective function, different constraints. Figure out what your limiting factor is and work around it or relax it — that’s the key to shifting your production possibility frontier

Going through some files on the weekend, I came across an old paper. I rather like this paper — I think it’s one of my better ones. Unfortunately, my publishing strategies rather failed with this one. I aimed high and started through a painful revise and resubmit process, then ran out of time, and then the topic was stale and I gave up. The lesson? Well, I’m not sure there is one. In a diversified portfolio, some projects/investments/papers will fail. It’s the value of the portfolio that counts, and focusing only on a specific failure may lead to the wrong conclusions.

This paper also failed because it hit a specific confluence of difficulties. It is a paper on choice modelling of genetically modified food. Both the method and subject matter were controversial, and putting the two together was just too much:

  • on the choice modelling side, I was dinged because I used the wrong equations. Not, the reviewer noted, that the equations were wrong, just that they belonged to That Tribe Over There*, whereas This Tribe Here had better notation
  • the reviewer cried for ‘more maths!’ I have come to realise that this is the economics equivalent of ‘more cowbell!
  • GM articles in the ag and food literature can be divided into ‘pro’ and ‘other’. My experience was that the burden of proof for ‘other’ submissions was greater than that for many published ‘pro’ articles.

Since this raw log has just been sitting in the yard for years, I’m posting it here. Not much of a publishing strategy, I admit, but it’s the best I can do with limited resources.

Kaye-Blake 2007 Mixed logit as data torture

*who eat taboo food and have sex with their relatives.

Mass-produced education

12/04/2013 § 2 Comments

MOOCs — Massive open online courses — are the latest Next Big Thing in education. Technology has made it cheap to reproduce and transmit information. The hope is that it can spread education far and wide.

The discussion of MOOCs reminds me of other technology discussions. Back in the early days of Web commercialisation, there was a lot of jostling and experimentation to try to figure out how to use the Web and make money from it. Some models boomed, some failed, and some limped. MOOCs look like the same sort of process — trying to figure out how to make a profitable mass education business model.

They also remind me of MP3. The analogue proponents say that compressed digital music doesn’t provide the quality that vinyl can. Listening to poor-quality songs from my smartphone, I know they are right. But then, I can’t carry around 1,568 songs on vinyl in my pocket. The criticism that MOOCs are providing poorer quality education — which is likely to be accurate — ignores that there are other considerations. Some people in some situations are willing to trade quality for convenience.

The criticisms of MOOCs seem to revolve around their commercial focus, which is just the latest fight over commercialisation of universities. This Lawyers Guns and Money post on US and UK universities discusses MOOCs  as part of a larger discussion of

the commercialisation of academia and the erosion of academic freedom [which] are tightly interwoven.

In particular, critics are concerned about profiteering by the course providers and the rise of superprofessors —  seeing MOOCs as ways to stroke the egos of people who are already successful while creating profits only for the companies involved.

These courses are revealing an important split in the role of universities — the production of new knowledge, which is expensive and time-consuming, and the dissemination of knowledge, which needn’t be. And that suggests the possibility of greater division of labour, which has historically made things less expensive and more available. These changes don’t tend to be (are never?) unequivocally good (or Pareto improving). This was Rousseau’s critique, as it was Marcuse’s, but people continue to buy the newer, cheaper stuff.

I am in the middle of some lecturing. I have two sections of about 250-300 students each. I pace about at the front of the lecture halls — purpose-built to have that many students — and talk them through basic statistics. I get the occasional comment or chuckle as feedback, but I’m not interacting with the students in any meaningful way. I could be performing in front of 300 or 3,000. They could be watching me in person or on-line.

These large lecture halls show that universities already recognise the efficiencies to be had in transmitting information. Universities are already mass-producing education, and students’ experiences are already inferior to mine of 25 years ago. MOOCs are not just a new technology that breaks with the past; they are also a continuation of it.

Allocating your time as a consultant

10/04/2013 Comments Off on Allocating your time as a consultant

In my last post, I pointed out that charge-out rates and productivity percentages are closely related. You can’t decide on a charge-out rate (or rates) without thinking about how you spend your time. So, how should you allocate your time as a consultant?

There are several broad categories of activities:

  • consulting — the stuff people actually pay for. Whether it’s research or reviewing or advising, this is the billable time
  • marketing — how you bring the work in. It might be schmoozing or networking or writing proposals or going to sales events or whatever works for you and your business. It’s a balance: too much fun networking, and you’re out of time for paid hours; too much reading interesting papers, and there’s no work in the pipeline
  • investment — the ‘working on the business’ part. It might be improving your own skills, or focusing the business on growth areas, or re-organising processes to make them more efficient
  • administrative — keeping the day-to-day ticking over. Invoices need sending out, bills need paying, papers need filing, etc. Too much, and you’re just moving paper around the office to no good effect. Not enough, and things fall apart; the centre cannot hold.

You want to aim for 70% to 80% of your time on billable work, assuming you’re a lone consultant or in a small group. A large group can take advantage of division of labour, so seniors might do more marketing and juniors do more billable work. Marketing, well, the rule of thumb is about a quarter of your time, so figure 20% to 25%. Investment, let’s give that 10% to 15%. Administrative work is probably going to take 10% (an hour a day or a day a fortnight).

Wait, what? Even doing the minimum, that’s 110% of your time. Do more and you could be looking at 130% of your time or more. Yeah, well, that’s the problem — no one said it was easy. If you do each activity to the point that it feels like you’ve ‘done enough’ or ‘sorted it out’, you could be there all night. There’s too much to do and not enough time, or, as a friend of mine used to say, it’s like putting 10 pounds of stuff in a 5-pound bag.

How do you make it work? First, avoid the easy temptations. Short-change the investment activities, and your skills get rusty or you miss opportunities. Get behind on administration, and suddenly people owe you for three months of work. Cash-flow problems kill more small businesses than anything else. Marketing is a funny one. In my area, economic research, we are mostly introverted, so anything to do with other people is a chore. It’s easy, then, to skimp on marketing until you absolutely have to do it. Then the work dries up and you have to scratch around for the next project.

The second way to make it work is synergies, which is just a fancy way of saying ‘kill two birds with one stone’. Each project (billable work) is an opportunity for marketing. Don’t just email a report — meet with the client, meet with their bosses and stakeholders. Administration should be part of the everyday work — file papers when you’re done; take five minutes to run an invoice when you send off a deliverable. Investment and marketing can be combined — a conference or workshop is a chance to learn new things and meet new people. Introduce yourself, tell them what you do, take business cards or brochures.

The third trick is the hardest: figure out how much is enough. Gold-plating every output — a old boss used to call it ‘gilding the lily’ — is a waste of time and money. Most clients don’t want it so they won’t pay for it. If that’s the case, then you’re just doing it for yourself. Is this really how you want to spend your leisure time?

Back to the question, how does a consultant allocate time? ‘With difficulty’ is the honest answer. There’s a bit of Zen involved, actually. Be mindful of what you are doing, of how you spend your time. Then, decide whether it’s helping you make progress. If it isn’t, do something that will.

Bleg — economics tutor

09/04/2013 § 3 Comments

I’ve been approached by a dad wanting an economics tutor for a Year 13 student in Wellington. Anyone interested? Suggestions?

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