Sunday, November 20, 2011
Friday, November 18, 2011
How To Offend a Microeconomist
Interview with Daniel Hamermesh:
Here is one of the questions I wanted to ask you, with regards to Heilbroner’s book. With the economics profession, in the aftermath of the financial crisis, being somewhat in disrepute…
Stop! Stop, stop, stop. The economics profession is not in disrepute. Macroeconomics is in disrepute. The micro stuff that people like myself and most of us do has contributed tremendously and continues to contribute. Our thoughts have had enormous influence. It just happens that macroeconomics, firstly, has been done terribly and, secondly, in terms of academic macroeconomics, these guys are absolutely useless, most of them. Ask your brother-in-law. I’m sure he thinks, as do 90% of us, that most of what the macro guys do in academia is just worthless rubbish. Worthless, useless, uninteresting rubbish, catering to a very few people in their own little cliques.
Thursday, November 17, 2011
"Objective" News Stories
Even the most casual observers of the media realize the entire concept of an "objective" news story is bunk. Reporters don't practice objectivity; they practice neutrality. Side A says X, Side B says Y, and we leave it to you to decide. This creates the illusion of arguments with equal merit when any "objective" person could conclude one is clearly stronger than the other.
An equally pernicious distortion of the news lurks behind the scenes--reporters and editors have tremendous power to shift the public narrative in the subtle ways they can frame a story. Although reporters will often cling to their Journalism 101 ethics manuals and disclaim all responsibility for their stories when they're writing "just the facts", one shouldn't overlook how they can easily express a particular view without taking any explicit views in a story at all.
Here's an example. City council passes an ordinance banning residents from wearing green pants on Mondays. Local newspaper has the resources to write only one story about it. Among the potential angles are:
Story 1: Just-the-facts story on tickets given to people wearing green pants.
Story 2: Just-the-facts story on people the reporter personally found violating the law by wearing green pants.
Story 3: Just-the-facts story about police giving tickets to some people wearing green pants but not others (essentially a combination of stories 1 and 2).
Story 4: Story about the merits of the green pants law, quoting the mayor saying the green pants are a blight on society, and a concerned citizen worried about his free speech rights being abridged, even though not one person other than the mayor supports the law.
Story 5: Story about the merits of the green pants law, quoting the mayor saying blue pants are blight on society, and nine concerned citizens worried about free speech rights being abridge, because not one person other than the mayor supports the law.
Story 6: Story about how the mayor's third cousin runs the biggest blue pants factory in town.
Story 7: Story about how the mayor was emotionally wounded as a child because of the Monday in elementary school when he was harassed because his parents sent him in green pants.
Most people would agree that (with the exception of perhaps Story 5) all of these would meet the classic definition of "objective" reporting. But isn't it also quite clear that decision to publish a story on this law (or none, or 12) makes a pretty big statement, and how the newspaper frames it makes an even bigger one? The idea that just writing an descriptive story somehow divorces the newspaper from taking a view is absurd.
Do I think most journalists are knowingly skew stories toward their own policy preferences? In most cases, no*. But even if they're making story choices based solely on what they believe is "newsworthy" it will endorse a particular worldview (even if the reporter doesn't realize he's doing it). Implicit stories in stories like 1 and 2 is the reporter's disapproval of the conduct the law punishes; implicit in stories like 3 is the reporter's belief that the police are acting improperly (even though journalists could write this about almost any law, because 100% enforcement is rare). Even within the stories themselves tone could matter--A reporter could portray the mayor in Story 7 as megalomaniac bent on destroying people's rights, or as a sympathetic character still recovering from a traumatic incident.
This isn't to say the descriptive stories are all bad. Certainly there is a role for reporters that expose the facts in any given situation so that other people can form opinions on them. But it also suggests reporters need to take more care in how they frame their stories. And also be more honest with readers about how they do it.
* Trust me, most reporters aren't thinking hard enough to do that.
An equally pernicious distortion of the news lurks behind the scenes--reporters and editors have tremendous power to shift the public narrative in the subtle ways they can frame a story. Although reporters will often cling to their Journalism 101 ethics manuals and disclaim all responsibility for their stories when they're writing "just the facts", one shouldn't overlook how they can easily express a particular view without taking any explicit views in a story at all.
Here's an example. City council passes an ordinance banning residents from wearing green pants on Mondays. Local newspaper has the resources to write only one story about it. Among the potential angles are:
Story 1: Just-the-facts story on tickets given to people wearing green pants.
Story 2: Just-the-facts story on people the reporter personally found violating the law by wearing green pants.
Story 3: Just-the-facts story about police giving tickets to some people wearing green pants but not others (essentially a combination of stories 1 and 2).
Story 4: Story about the merits of the green pants law, quoting the mayor saying the green pants are a blight on society, and a concerned citizen worried about his free speech rights being abridged, even though not one person other than the mayor supports the law.
Story 5: Story about the merits of the green pants law, quoting the mayor saying blue pants are blight on society, and nine concerned citizens worried about free speech rights being abridge, because not one person other than the mayor supports the law.
Story 6: Story about how the mayor's third cousin runs the biggest blue pants factory in town.
Story 7: Story about how the mayor was emotionally wounded as a child because of the Monday in elementary school when he was harassed because his parents sent him in green pants.
Most people would agree that (with the exception of perhaps Story 5) all of these would meet the classic definition of "objective" reporting. But isn't it also quite clear that decision to publish a story on this law (or none, or 12) makes a pretty big statement, and how the newspaper frames it makes an even bigger one? The idea that just writing an descriptive story somehow divorces the newspaper from taking a view is absurd.
Do I think most journalists are knowingly skew stories toward their own policy preferences? In most cases, no*. But even if they're making story choices based solely on what they believe is "newsworthy" it will endorse a particular worldview (even if the reporter doesn't realize he's doing it). Implicit stories in stories like 1 and 2 is the reporter's disapproval of the conduct the law punishes; implicit in stories like 3 is the reporter's belief that the police are acting improperly (even though journalists could write this about almost any law, because 100% enforcement is rare). Even within the stories themselves tone could matter--A reporter could portray the mayor in Story 7 as megalomaniac bent on destroying people's rights, or as a sympathetic character still recovering from a traumatic incident.
This isn't to say the descriptive stories are all bad. Certainly there is a role for reporters that expose the facts in any given situation so that other people can form opinions on them. But it also suggests reporters need to take more care in how they frame their stories. And also be more honest with readers about how they do it.
* Trust me, most reporters aren't thinking hard enough to do that.
Tuesday, November 15, 2011
Meritocracy
But in a sense the James Murdochs of the world are more common than we might think. In fact the most popular way to find a job is through family and friends. That holds true for all of us, but it is immensely more likely for the kids of the very rich. Look at this picture from a research paper that a colleague and I published in the Journal of Labor Economics (available here if you really want all the details).Link
The bottom line is that about 40% of us have at some point worked for exactly the same firm that at some point also employed our fathers. But if dad’s earnings put him in the top 25% these chances are above average, they start taking off if dad was in the top 5%, and reach the stratosphere for top earners. Almost 7 out of 10 sons of top earning dads had a job with his employer.
Monday, November 14, 2011
The Dude
Why'd Michigan push this guy out? I like what he has to say. Although I'm guessing this isn't a popular view at Board of Regents meetings.
“College football and men’s basketball has drifted so far away from the educational purpose of the university,” James Duderstadt, a former president of the University of Michigan, told me recently. “They exploit young people and prevent them from getting a legitimate college education. They place the athlete’s health at enormous risk, which becomes apparent later in life. We are supposed to be developing human potential, not making money on their backs. Football strikes at the core values of a university.”
Sunday, November 13, 2011
Tradeoffs and Criminal Law
Early in the term, the Supreme Court has already heard arguments in two cases related to issues of great importance in criminal law: the use of eyewitness testimony and the use GPS without a warrant. Evaluating these issues individually, the answers, from a policy perspective at least, seem pretty simple. If eyewitness testimony isn't reliable we shouldn't use it; and our privacy interests should trump such 1984-style investigations by the police*. But once we start evaluating these positions as companions, it reveals in an interesting tension.
The more we learn about eyewitness testimony, the less reliable we find it. Indeed, Prof. Garrett's study of the first 250 wrongfully-convicted people exonerated with DNA evidence found that 190 of 250 cases involved faulted eyewitness testimony. Not surprisingly, pressure against using it has increased--the New Jersey Supreme Court, for instance, just mandated a number of procedural safeguards it will now require when its used in criminal trials.
If we start discounting the value of eyewitness testimony, though, we have no reason not apply similar scrutiny to other forms of evidence. And once we do that, we'll probably find out much of it is also unreliable. The could easily dismantle the entire facade of the litigation process.
Without the use of traditional forms of evidence, police will push for the ability to use technology that lets them access quite reliable forms of it. They can, for instance, monitor e-mails or use a GPS to track our every move. But clearly this raises privacy concerns.
Taken to its conclusion, then, this puts the legal system in a rather perilous position. If we want privacy, we lose reliability. If we want reliability, we lose privacy. And if we want reliability and privacy, we lose a functioning legal system.**
* I suppose one could have a reasonable debate about this point, but I'd imagine most liberals would err on the side of protecting privacy. Even if the justices don't necessarily agree the Constitution protects against these police actions, they all seemed troubled by the idea of extended periods of round-the-clock surveillance by GPS.
** Again, this sort of depends on your view underlying views of a legal system. This would essentially prevent the government from every depriving citizens of rights at the cost of losing its ability to protect the rights of citizens from being deprived by other citizens.
The more we learn about eyewitness testimony, the less reliable we find it. Indeed, Prof. Garrett's study of the first 250 wrongfully-convicted people exonerated with DNA evidence found that 190 of 250 cases involved faulted eyewitness testimony. Not surprisingly, pressure against using it has increased--the New Jersey Supreme Court, for instance, just mandated a number of procedural safeguards it will now require when its used in criminal trials.
If we start discounting the value of eyewitness testimony, though, we have no reason not apply similar scrutiny to other forms of evidence. And once we do that, we'll probably find out much of it is also unreliable. The could easily dismantle the entire facade of the litigation process.
Without the use of traditional forms of evidence, police will push for the ability to use technology that lets them access quite reliable forms of it. They can, for instance, monitor e-mails or use a GPS to track our every move. But clearly this raises privacy concerns.
Taken to its conclusion, then, this puts the legal system in a rather perilous position. If we want privacy, we lose reliability. If we want reliability, we lose privacy. And if we want reliability and privacy, we lose a functioning legal system.**
* I suppose one could have a reasonable debate about this point, but I'd imagine most liberals would err on the side of protecting privacy. Even if the justices don't necessarily agree the Constitution protects against these police actions, they all seemed troubled by the idea of extended periods of round-the-clock surveillance by GPS.
** Again, this sort of depends on your view underlying views of a legal system. This would essentially prevent the government from every depriving citizens of rights at the cost of losing its ability to protect the rights of citizens from being deprived by other citizens.
Satire?
Tyler Cowen in this morning's NYT: The problem isn't that we have poor people, it's that people aren't poor enough. All we need to do is increase inequality to get people working a bit harder.
In the future, complaints about income inequality are likely to grow and conservatives and libertarians won’t have all the answers. Nonetheless, higher income inequality will increase the appeal of traditional mores — of discipline and hard work — because they bolster one’s chances of advancing economically. That means more people and especially more parents will yearn for a tough, pro-discipline and pro-wealth cultural revolution. And so they should.
Monday, November 7, 2011
Deeply Disturbing
First this happened. Then she wrote this, which shares a number of similarities with this. Troubling development.
Sunday, November 6, 2011
The Destruction of the Free Market
Thanks to government intervention, we have a tremendous distortion of the free market that impacts us everyday. This invidious government policy encourages centralized planning instead of market-based pricing. It lets gigantic entities roam the country breaching contracts and committing torts, while ex ante capping their liability.
This policy, if it wasn't clear, is the government's decision to allow people to form corporations. Certainly seems like one of the greatest "restraints" of free markets I can think of. Funny, though, that when conservatives scream about how government regulations destroy markets, they often fail to mention this one government intervention they're most certainly fond of.
The vast majority of people, of course, realize that this policy makes some sense. Corporations, for instance, do encourage central planning--firms don't allocate goods to internal departments based on price--but they also lower transactions costs by limiting the need to sign a contract for everything (Imagine if you had to sign a contract every time you wanted to print at your law firm). Most people would agree the trade-off is worth it.
One would hope, then, that rather than viewing any given policy proposal under the heuristic that any government regulation is per se bad, we could evaluate each individually on its merits. Especially given that many, if not most, "regulations" endorsed by liberals are designed to facilitate more efficient markets (for instance, by making people pay for their externalities). But, big surprise, politicians captured by forces attempting to prevent the freedom of markets have filled the public with dumbed-down rhetoric about the evils of government that have prevented any more nuanced debate from emerging. And the other side has, unfortunately, done almost nothing about it.
If anyone has ideas, I'm all ears.
This policy, if it wasn't clear, is the government's decision to allow people to form corporations. Certainly seems like one of the greatest "restraints" of free markets I can think of. Funny, though, that when conservatives scream about how government regulations destroy markets, they often fail to mention this one government intervention they're most certainly fond of.
The vast majority of people, of course, realize that this policy makes some sense. Corporations, for instance, do encourage central planning--firms don't allocate goods to internal departments based on price--but they also lower transactions costs by limiting the need to sign a contract for everything (Imagine if you had to sign a contract every time you wanted to print at your law firm). Most people would agree the trade-off is worth it.
One would hope, then, that rather than viewing any given policy proposal under the heuristic that any government regulation is per se bad, we could evaluate each individually on its merits. Especially given that many, if not most, "regulations" endorsed by liberals are designed to facilitate more efficient markets (for instance, by making people pay for their externalities). But, big surprise, politicians captured by forces attempting to prevent the freedom of markets have filled the public with dumbed-down rhetoric about the evils of government that have prevented any more nuanced debate from emerging. And the other side has, unfortunately, done almost nothing about it.
If anyone has ideas, I'm all ears.
Saturday, November 5, 2011
The Price of Admission
Greg Mankiw--the man responsible for indoctrin...I mean teaching all the malleable young minds that go to school "in Cambridge"--today argued that Paul Krugman is wrong for for attributing rising inequality to the "growing influence of oligarchs" as opposed to education:
This explanation strikes me as a bit too cursory (shocking for an Ec 101 professor, I know). Yes, education probably explains a lot of this. But a better question might be why education has become more important.
Increasingly, people in control of large institutions--corporations, Congress, etc.--have exploited agency and collective action problems to extract greater and greater benefits for themselves at the expense of society. And, like any good monopolists, they've tried to erect barriers of entry to protect those rents--the price of admission to the club.
To work at an investment bank, it helps to go to a good college. To go to a good college, it helps to go to a good high school. To go to a good high school, it helps to go to a K-8 school. To go to a good K-8 school, it helps to go to a good preschool. To go to a good preschool, it helps to go to a good OB/GYN. And so on. Even as each of these institutions has tried to democratize their student body--Mankiw certainly teaches a more diverse group of students than he would have 50 years ago--the elites actively try to frustrate these processes by raising the bar for admission (see, e.g., unpaid internships, SAT prep course, summer vacations spent teaching poor Eskimos how to play cello).
Essentially, then, education has become a more palatable way for the elites to practice their exclusionary policies than the old days, when they used people's last names and religion. They wrap this in the guise of "meritocracy"--even though it's certainly a lot easier to demonstrate your "merit" when your parents are rich. Sure, it's fine if some commoners benefit along the way by being good test-takers--as long as it doesn't come at the expense of the elite's own kids. All the better for them, really, because the presence of some non-elites serves as proof it's a "meritocracy" (or, less cynically, convinces the elites that the system really is fair).
Plus, as the rich compete for a limited number elite educational opportunities for their kids, it pushes the cost of tuition up. For those that can't afford it, that means loans. Stuck with debt, students are forced to take high-paying jobs working for the elite (buying out the potential competition), who can now convince them they truly deserve the six figure salary they're receiving. After all, they "earned" it, just like the elites themselves.
So Mankiw is probably right to point out the correlation between the rise of education and the rise of inequality. But I think he has causation wrong. Education hasn't become more important because it's become intrinsically more valuable, but because the oligarchs have made it so.
But it may be better to think of the return to education as stochastic. Education not only increases the average income a person will earn, but it also changes the entire distribution of possible life outcomes. It does not guarantee that a person will end up in the top 1 percent, but it increases the likelihood. I have not seen any data on this, but I am willing to bet that the top 1 percent are more educated than the average American; while their education did not ensure their economic success, it played a role.
Let me give you a couple examples. I am comfortably in the top 1 percent. I believe that Paul, with his Princeton professorship, regular Times column, speaking fees, and moderately successful textbook, is there as well. I suspect (although cannot prove) that if he and I had stopped our educations after finishing high school, we would not have been anywhere near where we are in the income distribution. If that is correct, might it be better to think of education as the key rather than focusing on the growing influence of oligarchs?
I am inclined to think that education is important here in part because the large increase in the share of the top 1 percent from the 1970s to the present occurred together with the increase in the rate of return to education during this period documented by labor economists. It is possible, of course, that the the two phenomena just happened to occur simultaneously. But the timing suggests that the two trends--the increasing value of education and the rising share of the top 1 percent--may be related.
This explanation strikes me as a bit too cursory (shocking for an Ec 101 professor, I know). Yes, education probably explains a lot of this. But a better question might be why education has become more important.
Increasingly, people in control of large institutions--corporations, Congress, etc.--have exploited agency and collective action problems to extract greater and greater benefits for themselves at the expense of society. And, like any good monopolists, they've tried to erect barriers of entry to protect those rents--the price of admission to the club.
To work at an investment bank, it helps to go to a good college. To go to a good college, it helps to go to a good high school. To go to a good high school, it helps to go to a K-8 school. To go to a good K-8 school, it helps to go to a good preschool. To go to a good preschool, it helps to go to a good OB/GYN. And so on. Even as each of these institutions has tried to democratize their student body--Mankiw certainly teaches a more diverse group of students than he would have 50 years ago--the elites actively try to frustrate these processes by raising the bar for admission (see, e.g., unpaid internships, SAT prep course, summer vacations spent teaching poor Eskimos how to play cello).
Essentially, then, education has become a more palatable way for the elites to practice their exclusionary policies than the old days, when they used people's last names and religion. They wrap this in the guise of "meritocracy"--even though it's certainly a lot easier to demonstrate your "merit" when your parents are rich. Sure, it's fine if some commoners benefit along the way by being good test-takers--as long as it doesn't come at the expense of the elite's own kids. All the better for them, really, because the presence of some non-elites serves as proof it's a "meritocracy" (or, less cynically, convinces the elites that the system really is fair).
Plus, as the rich compete for a limited number elite educational opportunities for their kids, it pushes the cost of tuition up. For those that can't afford it, that means loans. Stuck with debt, students are forced to take high-paying jobs working for the elite (buying out the potential competition), who can now convince them they truly deserve the six figure salary they're receiving. After all, they "earned" it, just like the elites themselves.
So Mankiw is probably right to point out the correlation between the rise of education and the rise of inequality. But I think he has causation wrong. Education hasn't become more important because it's become intrinsically more valuable, but because the oligarchs have made it so.
Thursday, November 3, 2011
Justice Stevens on the "Value" of an MBA
From his excellent new book:
These distributors seemed to share certain qualities that set them apart from the senior executives of the major companies with which they did business. They were hard workers who devoted long hours to their businesses. A friendly outlook on life rather than punctilious adherence to rules of etiquette enabled them to get along well with their employees, their customers, and members of the general public. I don’t remember any who had a college education, but they were uniformly intelligent—more so, in my judgment, than most executives in the corporate world who had earned graduate degrees in business administration.
The Invisible Hand
I wonder how many Econ 101 profs have actually read the book:
Without going on with details, what’s being played out for the last 30 years is actually a kind of a nightmare that was anticipated by the classical economists. If you take an Adam Smith, and bother to read Wealth of Nations, you see that he considered the possibility that the merchants and manufacturers in England might decide to do their business abroad, invest abroad and import from abroad. He said they would profit but England would be harmed. He went on to say that the merchants and manufacturers would prefer to operate in their own country, what’s sometimes called a “home bias.” So, as if by an invisible hand, England would be saved the ravage of what’s called “neoliberal globalization.”
That’s a pretty hard passage to miss. In his classic Wealth of Nations, that’s the only occurrence of the phrase “invisible hand.” Maybe England would be saved from neoliberal globalization by an invisible hand. The other great classical economist David Ricardo recognized the same thing and hoped it wouldn’t happen. Kind of a sentimental hope. It didn’t happen for a long time, but it’s happening now. Over the last 30 years that’s exactly what’s underway. For the general population -- the 99 percent in the imagery of the Occupy movement --it’s really harsh and it could get worse. This could be a period of irreversible decline. For the 1 percent, or furthermore 1/10th of 1 percent, it’s just fine. They’re at the top, richer and more powerful than ever in controlling the political system and disregarding the public, and if it can continue, then sure why not? This is just what Smith and Ricardo warned about.
Wednesday, November 2, 2011
How Do the Even Have a Functioning Society?
The second-highest paid person in Finland made a mere $4.96 million last year (A lawyer!). I'm shocked the country still exists with executives making such paltry sums. Why haven't all its brilliant leaders departed for a country that will reward their "talent" with at least the 10-digit salaries they're entitled to?
Tuesday, November 1, 2011
Subscribe to:
Posts (Atom)
Posts
