Health Care Costs

It seems everyone understands that when you buy a drink in a hotel bar there will be a huge markup. My students came up with that example in class without my prompt. The economic explanation is called “local monopoly.” Some patrons have decided they don’t want to leave the hotel and among those some want a drink. Those customers are captured, so sock it to them. The same economics explains how some hotels (in my experience, the more expensive ones) price Internet access. Airports used to do the same sort of thing. They’d offer up the food service concession to a single vendor. Food would be very pricey and of poor quality. At least the hotels don’t appear to have watered down the drinks.

Somewhere along the line municipalities seemed to figure out that making weary travelers experience mediocre food at high prices wasn’t the best way to market their town. Now virtually every airport of size has a variety of food vendors from familiar national chains. Their pricing and food quality is comparable to what you’d see from a non-airport location in the chain. I don’t really remember when this transition took place, but in my thinking as an economist the timing must have coincided more or less with airline deregulation and the rise of the hub and spoke system. Airports generate much of their income form the airlines in the form of gate fees. Airlines that dominate an entire airport (or an entire terminal at the airport) would prefer the food to be decent and priced reasonably. So airports could make more in gate fees if they altered the way they did their food franchise was done.

Let me get to a different sort of example before addressing the issues of this post. This is part of a scene from a West Wing Episode called Process Stories:

DONNA: Five hundred dollar screwdrivers is why you didn't vote for the President?

JACK: I work for the President, that's a lot.

DONNA: It's wasteful spending.

JACK: Not it's not.

DONNA: A four hundred dollar ashtray?

JACK: (sighs) (hits ashtray)

DONNA: What was that?

JACK: A four hundred dollar ashtray. It's off the USS Greeneville, a nuclear attack submarine and a likely target for a torpedo. And when you get hit with one you've got enough problems without glass flying into the eyes of the navigator and the Officer of the deck. The one's built to break into three dull pieces. We lead a slightly different life out there and it costs a little more money.

I confronted this issue when as a campus administrator the “smart classrooms” were under my purview. The particular issue was what type of combo vcr/dvd players to buy. The home versions of these units were relatively inexpensive. The industrial version much more pricey. But the industrial version wouldn’t break down nearly as much, and every technology person will tell you that you have to look at total cost of ownership, not simply purchase price, to determine which choice is really cost effective. With the staff time that provided support of the classrooms very scarce, buying the industrial versions made sense, even if it rubbed the wrong way outsiders who would look at this spending and see it as too expensive. They simply hadn’t thought through the total cost of ownership issue.

* * * * *

Everyone at Illinois has healthcare on their minds now. We are in the midst of the Benefits Choice Period and unlike in the past where no choice simply defaulted to the plan we had the previous year, now the plans that most of us had in the past will no longer be available. The State went through an RFP process, one for Health Maintenance Organization (HMO) provision, another for Open Access Provider (OAP) provision. My current provider is HealthAlliance HMO. It was one of the bidders in the RFP, but it was not selected. Blue Cross/Blue Shield won in the HMO category. Alas, they are not available in my geographic area. And even if they were, it is unclear that we could stay with our current doctors. So we must move to an OAP, and so must others at Illinois. Further, the OAPs that are available are Tier II, meaning they feature a 10% deductible on services rendered.

Let me spend a moment simply on the RFP process. Since I’ve been involved in procurement elsewhere that has been through an RFP (for the Campus learning management system) the purpose is to produce the “best package” by going through a competitive bidding process, under the belief that such competition elicits the best packages. But then an odd thing happened with this particular RFP. We still get a variety of providers to choose from rather than just one.

One therefore has to ask, why have an RFP at all? Why not, instead, simply announce a state contribution per member for each plan and have as many plans as would like sign up with pricing accordingly, which would let the providers decide how much to charge via premiums versus how much to charge via deductibles or co-pays. Friends of mine are miffed that Heath Alliance is not available. I’m miffed too. If it were available but at a substantially higher premium than the OAPs, how would that have played out? I don’t know. But if you look at the map of provision by Illinois counties, you see the choices are non-uniform across the state. (One plan, called Quality Care Health Plan is available to all members in the state. It is plainly more expensive, but it does provide coverage for non-networked providers which can be of value if you need to see a specialist out of the area or if you need health care while traveling.) So, to justify the RFP, either you have to argue that we in the counties with fewer choices are as well off as before though we have to move to the OAP plans or you have to argue that overall across the state we are better off in aggregate because those in counties with more choices will win more than others in counties with fewer choices will lose. The latter might be true. It would require some estimate to be made about the out-of-pocket expense members will experience under these various plans. Unfortunately, such a calculation doesn’t seem to have been made and it didn’t enter into the selection process. Only premiums were used to determine the winners in the RFP.

Now let me say a word about the politics around health care for State employees. The State had been running a huge deficit and health care costs for State employees count as a big expenditure item, so it is good and correct to try to reduce that expenditure. There are two possible ways of doing this – one is to have the insurance providers receive less, the other is for the employees to pay more. My eyeballing of the outcome is that we have some of both. But that leads to a further quandary. Is this one and done or is it likely to be ongoing this way with subsequent RFPs produce winning bidders that have relatively modest premiums but higher and higher deductibles? If I were betting, I’d put my money on the latter as to where we are heading.

Now let me try to connect this health care bit with what I wrote up front about pricing in hotel bars. When you are in an HMO, you are largely oblivious to pricing. You make co-pays that don’t depend on the prices charged. And for most doctor visits, for example I took my son to see the optometrist this week to see if he needed a new prescription for his glasses, you don’t see the price of the visit. You only see the co-pay. So the insured is literally ignorant of the price the insurance company pays the medical provider. The situation is different when a surgery is performed or a non-surgical procedure is done that warrants a bill being generated. Then you get pages and pages of charges, most of which you are inclined to ignore, just as you ignore the language of the license agreement as you install new software. You only look the bottom line – how big a check you must write. That’s determined by the HMO’s co-pay. So HMOs are bad on making patients aware of what the insurance company pays the health care provider.

Let’s hold in check for a minute whether that ignorance is itself a good or bad thing. Let’s first consider the OAP approach in Tier II, where there are deductibles that are a fraction (10%) of the billed expenditure. So the amount the insured pays now varies directly with what is billed. (There is a cap on this for the full year. Once the cap is reached there is no further deductible paid.) At least for recurrently consumed medical services, under this approach there is a way for the insured to learn about the transaction prices. Armed with such knowledge, what impact would that have on behavior? If there is price variation for the same type of service within the network, conceivably the insured could do comparison shopping. In towns like Champaign, however, much of the health care is provided by either Carle Clinic or Christie Clinic, and their associated hospitals. For most services price depends on the service but not on who provides it. So shopping for the best price is not going to happen. Shopping for a preferred doctor within the network, however, will happen. Sometimes, however, given the system capacity constraints this amounts to shopping for a doctor who is available.

The other possibility that knowledge of transaction price (and incurring some share of it) will produce is that the insured will on occasion refrain from getting the service. This possibility also exists in the co-pay model. Indeed it explains why the co-pay exists. And at least with our provider, Carle, the possibility is further encouraged by providing a phone number for the Patient Advisory Nurse, who gives ready counsel and offers home treatment suggestions when that appears a sufficient alternative. The principle at play seems to be if the situation is mild then treat it at home, but if it is serious enough then come in for an office visit. In my limited experience with this some wiggle room is left to account for how the patient assesses the situation and how nervous the patient seems in the circumstance. There is a walk-in clinic for those who feel the need and can’t wait for a scheduled visit, but don’t feel the situation is serious enough to go to the emergency room. To this already somewhat complex calculus, the OAP Tier II approach lets a variable price based on the nature of the transaction come into play.

Let’s agree, because basic economics tells us that it is true, that the demand for the service will be more elastic when the patient bears some of the cost than when all the cost is borne by the insurer. So, to the extent that health care pricing is like hotel bar pricing, with very high markups built in, making the insured bear part of the cost and thereby making the demand more elastic should have a good effect on the prices that are charged. In other words this is a cost containment measure in accord with standard economic analysis.

But the above discussion really focuses on out-patient services only. In-patients, once at the hospital, don’t really shop for services at all. The in-patient is under the care of an attending physician who makes recommendations for xyz tests and treatments, not all of which can or should be forecast in advanced. Having the patient bear some of the cost might affect the demand elasticity for certain types of “elective” procedures, but once having elected to do the procedure the consequence of the patient bearing a fraction of the cost is simply to lessen what the insurance company pays. Thus, if there is an issue of hotel bar pricing in the health care costs of in-patients, it is far from clear that addressing the patient “moral hazard” via deductibles will do much if anything to contain costs.

This gets to the other way of thinking about cost containment for healthcare, which focuses on the total-cost-of-ownership issue – prevention and early detection. With that, consider for example that dreaded procedure the colonoscopy. Here I will speak only for myself, not the entire population. I hate going to the doctor and doing these things. The recommendation, I believe, is to have a colonoscopy for the first time when you turn 50. I had mine when I was 55. Likewise, I eschewed regular physicals and for a long time really didn’t have a primary care physician. What changed this for me? The answer in a nutshell is pain. When it hurts enough, then you go to see the doctor. Relieving the pain trumps the aversion to the doctor visit. I self-diagnosed sciatica. It proved to be arthritis and bone spurs. In the process it was learned that my blood pressure was high. So now I’m on meds for that. The colonoscopy followed as part of the bargain.

The Affordable Care Act aims to encourage better prevention and early detection. For my last physical and on several recent renewals of my meds, there was no co-pay whatsoever. But I needed somebody else to inform me that was a consequence of the act, not a decision made independently by HealthAlliance. I wouldn’t have known otherwise. Pricing that you only discover as you complete the transaction can’t really serve to guide behavior.

I’d like to make two other observations and then close. That last physical I had was done by a nurse-practitioner not my primary care doctor, though apparently they consult with one another. Since I didn’t have any new problems, this seemed ok to me. A couple of nights ago on the News Hour they had a very interesting segment on nurses as complete substitutes for primary care doctors, in low income neighborhoods where there is a shortage of doctors. The argument is that nurses could do more than we typically allow them to do and where there aren’t enough doctors it makes sense to give the nurses more responsibility. Now translate the argument to the situation I’ve been discussing. Are we likely to see pricing alternatives where, given a particular health issue, for a lower price you can see a nurse and for a higher price you can see a doctor? Economists are normally in favor of this sort of price discrimination as it leads to efficiency in allocation. But differential health care based on willingness to pay makes me queasy. Indeed, if you look at how premiums are calculated for the State of Illinois plans (page 6 of the document, page 8 of the pdf) there is a modest amount of progressivity built in; premiums rise with salary until a certain threshold. If there is progressivity in the premiums, why undo that in terms of the care provided. Deductibles that are a share of the transaction price, as distinct from co-pays that don’t vary with the transaction price, provide an incentive toward such differential care.

At the moment, I’m exempt from Medicare. Having been part of the (underfunded) State of Illinois system for a sufficiently long period my withholdings have gone to the State, not to the Feds. As a result, my healthcare plan is the same one my children are on. (They are under the age of 26.) At present I pay about $800/year in premiums for their healthcare on a per child basis. They then have the same coverage as I do. If you look at the subsequent page of the document linked to in the previous paragraph, you can see the premiums for dependent care, which don’t feature any progressivity in them. Instead, what is obvious is that the incremental cost for the second dependent is lower than the cost for the first dependent and there is zero incremental cost for dependents beyond two. So there is some cross subsidy built into the pricing. In this case large families are receiving a subsidy. To my knowledge nobody is bent out of shape on this point.

This gets you to think about other cross-subsidies in the system. As a retiree, my premiums are zero (this is akin to how Medicare functions). But otherwise premiums don’t vary by age. Nor do they vary by prior healthcare expenditure or current diagnosis. People seem to like these type of cross subsidies. High deductibles can undo the cross subsidization.

We should think about that.

Visceral Reactions or Strategic Thinking

When is a decision a mistake? This piece argues that President Obama made an error by saying last week in his televised address that any peace agreement between the Palestinians and the Israelis would leave Israel with its 1967 borders. Prime Minister Netanyahu vehemently disagreed. Milbank writes of the Israeli exchange student who is living in his home, a middle of the roader who is not inclined to favor Netanyahu's Likud party, nonetheless cheering Netanyahu's speech to a joint session of Congress, where he affirmed that the original borders are not defensible. If President Obama's remarks drove this middle of the road Israeli to become a Netanyahu supporter, then Obama's remarks on that subject were a mistake, so says Milbank. Of course, it takes two sides to make a peace and the Palestinians panned Netanyahu's speech. It seemed, however, that Congress loved that speech. Doesn't that simply help to prolong the stalemate? If a year or two hence the situation seems riper for striking a peace, might Obama's speech have some positive benefit then? Why must we judge the effectiveness of a decision immediately after it is made and not let the fullness of time weigh in on the judgment?

Into Netanyahu’s arms - The Washington Post via kwout

Confidence and Creativity

Orwell didn't conceive Big Brother as Islamic. And Winston Smith, hero though he may have been, was terribly frightened. But I thought of Nineteen Eighty-Four reading Tom Friedman's column yesterday, where he writes about Syria, a country ruled with an iron fist yet in the midst of the Arab Spring. Friedman makes what would seem to be an audacious claim, though events appear to back him up.

I don’t see how Syria’s president, Bashar al-Assad, can last — not because of Facebook, which his regime would love to confiscate, if it could only find the darn thing — but because of something hiding in plain sight: Many, many Syrian people have lost their fear. On Friday alone, the regime killed at least 26 more of its people in protests across the country.

Of course, an outsider can never tell whether fear really has been abandoned or if instead people remain fearful yet no longer choose to cower, instead making a willful decision to act boldly in the face of danger. There is strength in numbers. One can be bold if one knows others will also be forthright.

America exports the tools that let the ordinary people in Syria communicate, with each other and with the outside world - Facebook, Twitter, YouTube. We don't find these exports significantly reducing the trade deficit - that's part of the business logic which is behind how these services are supported. But their value in helping to shape the future in the Middle East is inestimable. If democracy finds its way to Syria, that truly would be amazing. There's a lot of extrapolation left to reach that conclusion. But the opening is now there to where it no longer seems impossible. Even if the present regime is disposed of, however, there is no guarantee that democracy rather than factionalism will take its place. Steven Coll has a comment in the New Yorker today arguing that the middle class and the Christian minority have so far been sitting it out in Syria. Perhaps they are still afraid because they stand something to lose. Democracy only of the young and underemployed isn't democracy at all. Let's hope that the confidence bred in the Arab Spring persists so that it attracts those on the sidelines to join the game.

* * * * *

I have been thinking quite a bit about confidence recently, but of the individual sort, where one goes it alone. I have been reading Richard Ellmann's James Joyce. Yesterday afternoon I finished Part One - Dublin, which covers Joyce's childhood and young adulthood. The concluding milestones in that part are the death of Joyce's mother from cancer at age 44, and Joyce falling in love with Nora Barnacle, who was to be his wife soon thereafter. He was 22 at the time, still immature and adolescent in some of his behavior, yet remarkably far along in his intellectual development.

I am enjoying this reading quite a bit, but that would not have been the case had I not read some of Joyce's early work beforehand. Last year I was involved in an online group that read Dubliners, where our various postings and comments about the individual various chapters gave some speculation and occasional insight for us to reflect upon about what was going on in Joyce's writing and his mind while producing that. A few years earlier I had read A Portrait of the Artist as a Young Man. And many years before that I made a halfhearted attempt to read Ulysses. I may try that once again in the near future. (And if successful, might even give Gravity's Rainbow one more go, but now I'm getting way ahead of myself.)

One fascination with Ellmann's biography is what we learn about the writing. All of Joyce's fiction is a combination of autobiography, commentary on that, and narrative that in form stems from Joyce's early writings, much of which were not preserved. The characters in his stories, often with their names changed in the fiction version but sometimes not, have real life counterparts. Often, so do the various incidents around which Joyce builds his narrative. Ellmann helps the reader connect the dots. Doing so offers a great deal of insight toward understanding Joyce's young mind at work.

Joyce was the oldest child in a large Catholic family. His father, John Joyce, was a creative guy but couldn't or wouldn't support his family adequately. He had a minor inheritance and used that to purchase property, which he continued to mortgage as a way to generate income. He had been involved in politics for a time and that did generate a pension eventually, but it was inadequate for the family to live on. They moved quite a pit, to steer clear of their creditors. Ultimately he became a drunk and abusive to his family. Indirectly, this seems to be the cause of James' mother's death. She lived a hard life.

Joyce was a precocious youth and was sent to boarding school run by Jesuits (Clongowes) when he was only six. Even with Ellmann's gentle guidance I couldn't understand whether the primary motivation of doing this at such an early age was to get young Jim the appropriate schooling or if instead to sever him from the family situation. (He did return home on holidays and in the summer.) By late adolescence Joyce had become quite taken with himself. Whether this was the taking on of a hard shell to protect himself from life's cruelties or was something quite different, as a result of extensive comparisons with his schoolmates (who were intellectually inferior) or his teachers (where perhaps the same can be said as well) and the winning of a variety of prizes at an early age, I am not sure. Perhaps some of both were at play.

Joyce had a need for intellectual heroes. As Ellmann explains, this was neither to become them or them to become him, but to achieve some fusion of a sort between the personalities. One of those heroes was Ibsen. Joyce had written a review of an Ibsen play when Joyce was only 18, his first formal publication. A correspondence between the two ensued thereafter. It's very cool for a teenager to be able directly exchange with his intellectual hero, especially when that doesn't happen at a university by taking a class from the great man.

I don't know if it was this discussion about intellectual heroes that triggered the following thoughts or if it was something else, but I started to see more than a passing resemblance between the young Jim and the young Lanny. Here are a variety of perhaps superficial connections. Both of us grew up in a family that had its playful side with activities like "charades" and singing around the piano. Both developed an irrational fear of dogs. Both were myopic and wore glasses at a young age. Both though gregarious with our mates were awkward and shy around girls. Both were notably good in school. Both had talents that were evident in more than one dimension.

But there the similarity ends, at least if you hold age constant. For some of the things that Joyce did as an adolescent I've done similar things over the past five to ten years. I'll get to that in a bit. Joyce had extreme confidence in his abilities even at that age. Some of this, of course, is because he was extraordinarily talented. I don't want to compare my talent to his. It would be pretentious of me to do that. But I do want to note that at his young age while my talent was evident I lacked confidence in it. So it is not obvious to me that Joyce should have been so confident in himself. I have an explanation for this difference, but I'll hold it till near the end of the piece, where I can make the argument better.

Joyce was full of the the meaning of life questions. Whom should we value and whom should we despair? What principles should guide these decisions? What is so interesting to me is that apart from his rejection of the Catholic Church, which pertained to issues that lie outside my universe, most of Joyce's conclusions are mine as well. He puts an enormous stock in friendship and good conversation. He values the ordinary and humdrum, it provides the necessary fodder for the extraordinary acts of creativity. And our purpose is always about becoming, never about being. Ellmann puts it this way:

The tone of this first draft (A Portrait of the Artist) is belligerent. Joyce begins by insisting on the psychological theory that 'the features of infancy' belong to a portrait as much as the features of adolescence. The past has no 'iron memorial aspect,' but implies 'a fluid succession of presents.' What we are to look for is not a fixed character but an 'individuating rhythm,' not 'an identificative paper but rather the curve of an emotion.' This conception of personality as river rather than as statue is premonitory of Joyce's later view of consciousness.
(page 144, paperback edition)

Joyce, when he is at play and not producing serious verse or prose wrote limericks. (I've been known to do something similar though my inspiration recently has been Ogden Nash rather than Edward Lear.) So there was an impish aspect to him. But he did have a remarkable discipline to his work as well. Early on he came to a notion he called epiphany, by which he does not mean a god-like vision, but rather a moment when an important idea crystallizes. He felt it the job of the artist to magnify and reflect on the epiphany, draw it out and thereby make it a permanent realization rather than a fleeting moment of brilliance. He was to write many of these, 71 I believe. It's funny, in my blogging, at least the blogging that is not about the technology per se, that is just what I'm trying to do. I don't have Joyce's mastery of the language so my method is different, to connect seemingly unrelated ideas and not worry too much about the prose constructed in so doing, but my purpose is almost identical to Joyce's. And I've been doing it for some time now, so in seeing my behavior as an adult blogger I'm now ready to comment about the confidence (or lack) of the talented adolescent.

One of the big decisions that young adults must make as a matter of practice is whether, first and foremost, to trust the judgment of elders who are more experienced or instead trust one's own judgment. This must be done with an empirical eye, examining the consequence of the judgment and whether those consequences were good or bad, or if that becomes too hard a determination then judging simply whether the outcome is tolerable or not. Children are told to respect their elders. But a precocious intellectual won't simply accept that pronouncement. The evidence will be examined to verify its validity. At a certain point we stop relying on the judgment of our parents. At a different time we we similarly stop depending on the judgments of our teachers, at still another time we choose to lean less heavy on our senior colleagues. This doesn't mean we don't consult nor value the opinions of these people. It only means that eventually after the discussions are over, we make the decisions. This, I take it, is the real meaning of becoming an adult.

Adults are confident, in the sense that they are willing to make decisions and they understand the preparations which are necessary for doing that well. Intellectually, I was not an adult at 22, talented as I might have been. I also knew I was massively ignorant on a wide variety of topics and I couldn't reconcile the ignorance with the talent. So I would have relied on a teacher or an experienced elder at that juncture in my life, had one of them made an appearance. I wouldn't become an adult in this manner until my early 40s, after my second child had been born and I made the career switch to learning technology. Joyce was an adult intellectually when he was 18.

Precocious talent either creates such a burden that the person bursts under it or, if not, lets the person reach higher plateaus than the rest of us have visited.

An epiphany.

Orange you glad

I spruced up the site a bit, applying one of the new templates, cleaning up the header, and generally making the site look more up to date. The hyperlinks color is a bit jazzy for me, but otherwise I find it interesting that color does seem to improve readability (at least for me) rather than simply having black text on a white background. This blog is at maximum width (1000 pixels). In Firefox, the description (Musings....) renders in white font. In Chrome, it's in black font. I've got no clue why, but I'm not going to worry about it.

I didn't say banana.

The Arab Spring and American Pessimism

David Sanger had an interesting analysis of U.S. foreign policy in the Middle East and North Africa, one that hadn't occurred to me previously but seems obvious in retrospect. We want democracy to emerge in the region and, I assume, with that a concomitant economic growth that is not based fundamentally in oil exports. However, we are bringing very little cash to bear to achieve this outcome. Little in this sense means small relative to the scale needed to do the job. The Iraq and Afghanistan wars together have cost on the order of $1 trillion dollars. Envision that much spending, but rather than using it for military purposes think of it as allocated to help build democratic institutions in the region.

Of course, that idea isn't on the table now. If there is to be a building of such democratic institutions it will have to occur mainly with funds that are already in those countries. Those funds are held, by and large, by the present cohort of despots who rule against the will of the people. Is it reasonable to expect that somehow those funds will be voluntarily relinquished by these rulers and then be invested in new institutions that will unseat them?

Rather than play the role of bystander and follower the U.S., as the supposed only remaining superpower, could both expedite the transition and make it far less bloody, but it would have to spend significant resources to do that. Who in government is advocating for that approach?

I don't know how strong the parallel is (it seems strong to me, but if I heard an alternative argument I might be convinced otherwise) but look back at the Truman Doctrine and the Marshall Plan. The existential threat perceived at the time was the potential spread of communism. The general level of poverty in Europe, as a consequence of the huge destruction caused by World War II, presumably made the region susceptible to going communist. Our policy abandoned the country's historic isolationism in favor of containment.

Is there an existential threat implicit to the U.S. in the Arab Spring? The answer to that seems obvious. I wonder if Leon Panetta or David Petraeus or Hillary Clinton are capable of becoming the next George Marshall. And even if that were possible, in the current political climate where Congress seems incapable of advocating for any new forms of spending even if that is to build a better tomorrow, could one get the spending bill through?

I should note that the Debt to GDP ratio was similar then to now, but then we had been the victor in the War and emerged from it with our economy unscathed and primed to grow rapidly. Now we seem primed to shrink or so it seems to this observer.

The Failure of American Schools

Joel Klein has a piece in The Atlantic that will ruffle some feathers, mine included. Some of his points are undoubtedly well taken - the schools are used for political patronage to the detriment of the students, for example. But after all this time and debate on the issues, some of the core matters still don't get a good enough analysis. Below is my little critique.

The big deal issue for Klein is that the payment structure, including pensions, is heavily seniority based. Percentage salary increases are awarded across the board which, given the seniority structure, means the big absolute pay increases are given to the very senior teachers. Pension payments are also heavily skewed to seniority with a big step up in benefits after the 24th year of service. The system as a whole has over promised benefits (this is a point where I do agree and it is true for all government employees, not just school teachers).

As a consequence of the pay and pension structure, teachers who are in mid career (say with 10+ years in the system) become locked in. Such lock in is to the employers' advantage if the employees are highly productive, because then it reduces costly turnover. But such lock in is expensive to the employers if the employees have low productivity and yet have tenure. Klein argues that this is the case for a significant number of teachers because they have "burned out." Klein would like to see a different system where the employees are rewarded for their productivity and where separation occurs when that productivity has waned sufficiently. On the surface, that sounds appealing. I will drill down further on these points, because I believe the arguments don't survive that scrutiny.

Look at the entire teacher life-cycle

We know, as is, that many new teachers wash out early. Let's focus on those who don't wash out early. Do we want a system that encourages those teachers to separate when they start to burn out? Or do we want a system that encourages the teachers to make teaching a lifetime career? If somebody has been a teacher starting in their mid to late twenties and done that for 15 years but becomes washed up in that job, now in their early forties what other employer wants to hire this person? If it is realistic to assume that the person will have a tough time on the job market after leaving teaching, which seems to me to be the case, and if washout in teaching has a reasonable likelihood, as Klein himself argues, then going into teaching would seem like a big crap shoot. Why is it an attractive career in this case even if the up front wages are reasonable?

This argument is essentially unaddressed by those who argue for market based reforms in the schools. The argument would fail if teaching were viewed as good preparation for other work or if it signaled productive qualities in the individual teacher that would translate into being a valuable employee elsewhere. So Teach for America teachers might do well after they leave teaching. But there initial commitment was short term and they don't leave teaching because they are burned out. They leave because it is time to do something else. It is hard to imagine that either of these factors would be at work for long-time teachers who have burned out.

In other words, either you have to design the system so the vast majority of teachers make it a lifetime career or you have to expect that many who become teachers do so fully expecting to leave the system early for non-work related reasons. In the latter case teacher experience will be in short supply and churn will be the rule, not the exception. If those really are the two alternatives, and I think they are, let's compare them for their desirability. Let's not envision we can have it both ways, which is what I believe the market reformers insinuate.

Why do teachers burn out?

I haven't taught in an inner city school so I can't comment on the particulars. But I was part of a large IT organization on Campus where many of the staff had burned out. So on the general issue, I certainly can offer an opinion. I believe there are several causes that work in concert.

• Having previously put in a lot of energy into the work without seeing a commensurate reward, not in personal recognition but in delivery of product, which depends on the entire machine where the individual is but one small part.
• Having taken initiative and subsequently experiencing blame for bad outcomes.
• Having a disconnect with leadership who seem remote and uncaring.
• Lacking sufficient discretion with respect to one's own work.
• There is little to no learning in the work being done. It becomes repetitive and is itself not sustaining.

I'm sure others could add to this list. It suffices for my purposes. I want to make a different point here. If the vast majority of experienced workers do not burn out but a handful do, then rightfully that can be treated as an issue with the employee. However, if a significant number do burn out, that is a management problem. We should be asking what management can do to keep the employees engaged and productive. That question also doesn't seem to arise with market reformers.

Applying these issues to school teaching, one should ask (thought it is rarely if ever done) whether the measuring performance via standardized tests is neutral in regard to teacher burnout or if it might be a contributing factor. Klein argues in his piece for accountability. What about individual teacher discretion in the classroom? Is promoting that important? How does one encourage it?

Are good teachers born or made?

My sense is that it is a bit of both. The born part is that you have to want to be a teacher. The wanting part has to come from somewhere and it is has to logically be prior to teaching or even prior to teacher training. Wanting it, however, is not sufficient. One needs an empirically informed sense of what good teaching is like. That takes a repeated cycle of training, classroom experience, and reflection. It also takes high personal commitment.

I also believe that a culture of good teaching in a school can help all teachers be better. The question then is what does a culture of good teaching look like and how does one go about instilling such a culture? The discussion on market reform, however, doesn't really ask this question. It assumes it as an outcome, something competition will produce, but doesn't explain why to expect it.

Cherry picking and whether good reforms will scale

In the diffusion of innovation literature, we use the language coined by Everett Rogers, and distinguish between innovators, early adopters, and majority users. As someone himself who was and perhaps still is an early adopter with regard to learning technology in teaching, it has been a constant source of frustration for me over the years that majority users (my fellow faculty at the University of Illinois and non-tenure track instructors) tend to implement technology in a dull way, typically as a means to reinforce traditional practice rather than to make new practice. In the later 1990s and early 2000s, as an example, we naively but earnestly felt that the introduction of technology itself would create significant improvements with teaching and learning. So all the campuses across the country that I am aware of put time and energy into implementing a learning management system and supporting it well. But the benefits have been second order - mostly in terms of convenience for the participants - not fundamental in changing how learning occurs. The fundamental change that we hoped for might happen if teaching itself became an experimental practice as the norm. That is what early adopters do in their teaching. But it isn't what most instructors do, at least not without strong prodding from the institution, prodding that isn't present.

I use this to make an analogous argument for the reforms bundled under the label "charter school." Some very good things may happen for student learning at some charter schools. This could be because the students are themselves within a highly motivated minority, it could be because the teachers themselves are in the upper tail of the teaching distribution, or it could be that simply a different method for organizing teaching and learning has been found that would work at all schools.

Ask yourself what type of outcomes you might observe depending on which of these explanations is right. Klein is harsh on Diane Ravitch in this piece; I believe unfairly so. He points to the fact that some charter schools do quite well to argue that there is a scalable way to reproduce their results. The conclusion doesn't follow from the premise. Unfortunately, we don't know whether the conclusion is right or not.

Further one needs to ask whether the competition that Klein wants is capable of producing diploma mills, as seems to have been the case with for-profit higher education. If diploma mills are possible, then he needs to argue that they aren't likely and won't crowd out the more earnest performers. He makes no case of that sort at all.

Conclusion

I went to decent NYC Public Schools, graduating from Benjamin Carodozo H.S. back in 1972. That school was in a middle class neighborhood and had a significant number of students bused in. I believe the school did reasonably well by the middle class kids, less well for the kids who were bused in. There was a tracking system in place. Virtually all my classes were honors classes. My graduating class had almost 1200 students but the Arista students were a much smaller subset, perhaps 200 in total, a school within a school so to speak. There were also different types of diplomas then - Academic, Commercial, and General. So there may have been several schools within the school.

Klein argues that public schools actually work for middle class kids. The problem then isn't public schools per se. The problem is public schools in poor neighborhoods with no middle class kids. Somehow "choice" is the magic elixir that will fix the problem.

We should stop believing in magic. Tough nuts may be cracked, but let's not assume it will happen. There was some regular amount of violence at Cardozo back then. The threat of violence has to be much higher in and around the poorer neighborhood schools. I haven't lived in New York for a long time. One of the reasons why I live in a small college town now is that I didn't like growing up in an environment where violence seemed always a possibility. Klein doesn't mention it because he doesn't want to have an excuse for not educating the inner city kids. Not wanting an excuse is laudable. Denying reality is not. This discussion needs to become much more nuanced to achieve that end. I hope we will get there eventually but I'm not sure we will.

Non Leadership Rhyme

People in high places,
Pander to greed disgraces,
Off-shore drilling displaces,
A real energy policy,
The day of which it is.

Senate Blocks Bill to Eliminate Tax Breaks for Oil Companies - NYTimes.com via kwout

Learning to the Test and Haggling about Grades Afterward

I just finished getting my course grades submitted to Banner and am now "done." I've held off writing this post till I reached this milestone. Evaluating student written work is laborious and I had a good chunk of that to do. It took me several days to get through it all. My entire adult work life has been peaks and valleys - bursts of productivity interspersed with seemingly longer lulls in which Lanny is a dull boy. The grading itself was like that. I used the clerical/administrative work in managing scores in Excel as a way to provide some time for the lulls. But I also procrastinated with more leisurely activities, hoping to grab a bit of inspiration and thus return to reading the student work. I normally like writing blog posts, but they can be open ended regarding time commitment. So I put this one off till I was no longer time constrained.

Last week here was final exams week. In the one class where I gave a final exam (the other had a term paper) the exam was Wednesday at 7 PM. There were some unusual events for me before, during, and after.

On the Monday, Tuesday and through early Wednesday afternoon, I offered extended office hours to any student who contacted me and wanted to arrange a session. I don't actually have an office on campus anymore, so during the semester I met students in the Commons area on the first floor of the Business Instructional Facility. During finals the space was lightly occupied and a good place to meet with students.

Only a handful of students tried to have office hours with me during the semester. One of them was the top scorer on exams in the class. The others in this group were also reasonably good students. Perhaps before the first midterm many of the students couldn't gauge what they didn't know and I wasn't able to provide them with a practice exam in advance to study from, since I taught the first third of the course in a manner unlike how I used to teach the course. With the building of online course content during the semester and the reading and commenting on their blog postings, it was all I could to just to produce an actual midterm. The students found that exam quite tough and I believe some, perhaps most of the class, were discouraged by it. Rationally, those who performed less well on that first midterm should have sought out my help then and there, but it didn't happen that way.

My second midterm, for which I did produce a practice exam given the results on the first midterm, I wanted the diligent students in the class to be prepared, ended up with even lower scores than the first midterm. The topic was consumer theory, income and substitution effects and the like, a subject many students struggle with. Even armed with the practice exam and going over that in full the week before in the lecture, many students still did not understand the reasoning in working through the problems.

Not too long ago I saw Salman Kahn on Charlie Rose and Kahn reported that traditional schools often fail teaching technical subjects because the process is to cover a topic and then, irrespective of whether the students understand that topic, move on to the next topic when the previous one is completed. So many students get a very shaky foundation and it becomes increasingly difficult to learn on top of that. It certainly appeared that I had fallen into this trap in my class, one I didn't know how to extricate myself from.

I had decided before the semester started to grade on a point scheme rather than on a curve. I don't like the idea that students compete for grades. There is a large chance that such competition creates low self-esteem in many students. I believe students should focus on their own performance and not worry about the performance of their peers. But given how tough my midterms proved to be I needed a way to make my final exam more approachable. So I took 50% of the final questions, suitably tweaked, from the earlier exams, with the remainder of the test on material that hadn't previously been tested. And I wrote a practice exam in this manner for students to prepare.

Whether for this reason or because students had larger chunks of free time during finals week or for some other reason, many more students came to office hours than previously had and among those were several students who had not done well on the midterms at all. Those students were at risk of failing. So they had a clear extrinsic motivation to come to office hours. But rather than this motivation constricting them and their trying to be very formulaic in working the problems in these office hours, they seemed genuinely motivated to understand what was going on. We'd discuss each problem from the practice test. If they didn't see how to do one I'd give them a bit of explanation about what was going on. I'd also give them some coaching to try to understand the information provided in the setup of the problems.

The students were open, about their own lack of understanding and what they got from my explanation. They would ask me further questions for clarification and sometimes to verify their own understanding. And occasionally I would ask them questions, a bit of a drill to check whether they were getting it. When they did it was as if you could see the light bulb go off. Each of these students did better on the final than they had on the midterms, some dramatically so. And during the sessions I know I had the feeling that I was teaching, a feeling I had lost during the semester. Lectures can feel like teaching if students ask questions frequently and if it is several students who are offering up the questions. It feels much less so when it is the instructor playing Socrates and the students either reluctantly or not at all offering up a response.

I am puzzling now about whether it is necessary to go through an entire semester of flailing before one can get to such a productive office hours session. Does failure in the course need to be imminent to spur the students into responsible action? Better late than never, but still better would be to do it early. I'm also puzzling about how I might introduce some elements of these office hours into the regular class sessions, where there was fixed seating and thus where it would be hard for students to work in small groups, though possibly they could work in pairs.

And I'm wondering if somehow there were mandatory hours if that would work as well. For that to scale to the entire class, it couldn't always or even mostly be with me. It's why I've favored relying on undergraduate peer mentors for the last several years. But I wonder if some of those should be with me. After the final was over and the scores on that were posted I got a thank you email from one of those students who had been on the borderline but came to office hours. It wasn't just that he got help from a tutor. It was that he got help from the professor in the course. I believe that commitment matters in bringing out the students own commitment. For those near the borderline they need to make an active choice not to fail. We have to help them come to that choice.

* * * * *

A different sort of thing happened during the exam. One of the students, an engineering major who had to take the course as a distribution requirement, shook my hand as he turned in his exam. I can't recall that ever happening before. He was graduating this term, so I probably won't ever see him again. The handshake was an act of appreciation. Our class offered a non-standard approach to the subject matter, one of my own creation. In many ways I didn't think it worked. But it was different than other courses, with a dual track, one narrative-based where the students blogged about the readings that we later discussed in class and the other modeling-based where the students did homework and where the exams tested on the models only. I suspect he hasn't had any other class like that. So whether it's the correct interpretation or not, I took the handshake as support for having tried the approach.

Then I began to notice that as other students handed me their exams they said thank you, a polite gesture. Politeness is something that doesn't first come to mind when considering their generation, but this was a class of polite kids. That itself has made an impression on me. Whether the thank yous were simply an expression of politeness or a milder form of the handshake, I don't know. I am very curious now to read their course evaluations and see if any of what I'm inferring here also appears there. I should get those in the next week or so and then might write a bit of follow up on this issue.

* * * * *

For many of the students grades are currency, one they try to accumulate. And though I tried to diminish the impact in my class, these students are used to competing for grades. Alas, one aspect of that is the post final exam negotiation with the instructor to try to guilt the instructor into raising the course grade. If as an instructor you otherwise try to make yourself available to the students, you then inadvertently open yourself up to this sort of negotiation. I had a bit of that, with a couple of students I liked. I wish there were social norms that proscribe this sort of negotiation and that the students perceive it so proscribed. But electronic communication is terribly easy. It would take a rather large taboo to block the negotiation when the electronic pathway is available.

In one of these the question was raised, from a normative perspective what should the grade represent? Is it, first and foremost, a signifier of effort? The student who posed that question was a very hard worker. When he didn't get the top grade after putting in maximal effort, he was disappointed. How does one respond to such a student? My point scheme counted the early performance on the midterms in significant measure. Like much of the class, this student's performance on those exams was mixed. Does catching on at the end of the semester nullify the early performance? I was sympathetic with the student's argument. But an instructor can't change the grading procedure as it is described in syllabus, once the course is near completion.

Learning is about failing. But grading doesn't seem to allow failure as part of the process. How do we rectify that? I wish I knew or even had some clue as to what to try. We fail the students by not more fundamentally accommodating their expected failures into the process.

Pushing on a String and the Old Crowding Out Hypothesis

David Brooks has a provocative column yesterday, The Missing Fifth, about males ages 25 to 54 who are not employed. The lower bound of that range is presumably to allow traditional college students to fully matriculate, though those going for advanced degrees might still be in school at age 25 or, alternatively, to complete a tour of military service or perhaps to sow enough wild oats to figure out which way is up. The upper bound of the range signifies the end of the most productive years of our lives. Thereafter, we're on the down slope. I'm now 56. Thanks for the reminder. In the year before I was born, about 96 per cent of all males in this age category were employed. Now it is closer to 80 per cent. (Black unemployment, which Brooks' colleague at the Times, Bob Herbert, rails about frequently, has been horrific for as long as I can remember. I wasn't around in 1954, the year when the overall male employment rate was 96 per cent. I wonder what the Black unemployment rate was then.)

Brooks opts to focus on the disabled in his piece and argues that the incentives are all wrong to get people who suffer a workplace disability to later reenter the labor market and resume a productive life. That point is almost certainly true. On my campus we have many very strong advocates for equal education of people with disabilities (which is the law) so these people can be fully productive after they graduate and so they can be treated with decency while they are students. But the advocates meet resistance from otherwise liberal thinking faculty and administrators (and sometimes I've been in one of these roles) because making an accommodation in advance of the need seems too costly. This semester I've taken to caption the videos I produced for my intermediate microeconomics class, in part just to know whether it is do-able. If you stretch the meaning a bit it is, but it is also very time consuming. It is very hard to imagine other instructors producing videos who would likewise willingly caption them. These instructors would demand that the captioning activity be outsourced, on somebody else's nickel. That can work if not too much such video is produced overall. Otherwise, it will break the bank. This, I take, serves as a metaphor for other workplace accommodations that should be made. We should be doing these things. But at scale it won't happen unless there is a big push from government. Unfortunately, ADA is not in itself sufficient.

Brooks doesn't spend much time on the physically able but socially maladjusted males who don't find regular work. He has a few bromides in the piece about government programs that might help address the problem. I don't think he is convincing on that, however. How do such people survive? I can come up with some answers, but none of them are any good - selling drugs, pan handling, mooching off of other family members, etc. It is now a vogue to indicate that marriage is increasingly scarce among lower income adults. The males who are unemployed in this age category may very well be parents, but they likely don't live with their children. The sense of obligation that emerges from responsibility is likely missing. Government programs probably can't instill that sense of obligation. On that point, I'm probably more Republican than Brooks. But it also can't happen if when trying to be responsible these people see no upside whatsoever from making an effort. Perhaps government programs can help create such an upside, though contrary to what Brooks argues, that likely is near impossible as long as the overall unemployment rate remains distressingly high.

Near the end of the piece Brooks segues into talking about health care spending, and argues that in the Federal budget it is crowding out discretionary spending (the type that might be used to address the missing fifth problem). This argument is surely true, if the percentage of Federal spending in GDP is capped. Then as more is spent on health care for the elderly less must be spent on everything else. But capping Federal spending in this way is entirely artificial. If we have a fundamental structural change in our society due to extending length of life and the concomitant aging of the population, why shouldn't we adjust the Federal share of spending to reflect that change?

And then, if we do start thinking of using discretionary spending to reshape the future productive capacity of the male population, while money would be well spent in efforts to raise the productivity of the missing fifth, let's not ignore those older males who are on the down slope. The goal would be to flatten out the decline and extend that part of life where these people can contribute productively. We can endlessly debate how much health care should be consumed by those seniors who have gone over the cliff. But surely one way to keep that spending in check is for these people to defer hanging up the uniform.

Putt's Law

I liked this one (found here).

Technology is dominated by two types of people: those who understand what they do not manage, and those who manage what they do not understand.

I've been on both sides of that fence.

Solving the Wrong Problem

On Wednesday during our last class session for the semester, we did a debrief in my behavioral economics class. I had written a longish post on the class blog that tied the last readings we would do, on Akerlof's Gift Exchange paper and on the Ericsson, et. al., paper about becoming an expert, into my reflections of how the course had gone. The students who came to that last session were for the most part members of a solid core, less than half the class in total, who attended regularly. The rest of the class showed much lower participation.

They had expected me to lecture. They had wanted a fairly rigorous reading list. And they wanted me to stick with the required readings, rather than include a lot of optional pieces that they might branch out to if they were so inclined. On the blogging that they were to do, which had them posting about the readings before the class session where the readings were discussed, many said they couldn't provide good connections to the ideas they were reading about, because the ideas were new to them. They would have preferred after the fact reflections. Ironically, we did this approach because in my prior effort teaching with blogs, where I had the students writing such reflections, they complained that they weren't preparing sufficiently for the subsequent class sessions.

One student, whom I met with privately, suggested I needed to hold the students more accountable for showing up. The way we do this nowadays is with clickers. I opted not to use clickers because I wanted class discussion. But that was entirely normative in conception. Based on where the students are at present, what we didn't address the student needs. More accountability would have.

I wrote about this some time ago with regard to students' learning habits. I think those need to change in a fundamental way for a majority of the students. But wishing doesn't make it so. So the question becomes, what should we do about it?

In my other class, intermediate microeconomics, I've suddenly become a popular guy, meaning students want to schedule appointment with me. Our final exam is this coming Wednesday evening. Students have found my midterms difficult. So the one's wanting appointments are looking to prepare better for the final.

I gave them a practice final exam, which had some questions about the market for insurance, including consideration of the adverse selection problem first discussed in Akerlof's The Market for Lemons. Perhaps at this late hour students will be able to figure out how to answer the exam questions. Will that ability help them to understand why the unemployed find health insurance so costly? Absent making that sort of connection, why have the students jump through these hoops? Yet jumping through hoops is how the students see my course. Recognizing that's their motivation in the main, I've caved into it in this course. They are overwhelmingly non-majors and are taking the course because it is required.

I am coming to conclude that as an individual instructor I'm probably best off conforming with the system. Perhaps some modest tweaks can be made be made on the margin, but otherwise the changes will be too outside the students' realm of experience that they will be uncomfortable with the approach and might tire from it quickly.

I do continue to believe that they system itself must change as a whole. But individual teaching efforts in that direction won't get the job done.

Dandelions

The park across the street is full of the weeds. They've reached the stage where they spread their seed. My nose itches and my eyes tear, a physical reminder of their power. I suppose we should admire them, their heartiness, how rapidly they can spread, that they require no tending. If only that were the case for things we value more. My wife loves her garden. The rabbits have been biting the heads off the flowers. And the dandelions invade our lawn. Perhaps if there were a bed just of the weeds that might be beautiful. Interspersed in the grass and other growth, they seem ugly to me.

Yesterday in class we discussed Akerlof's Gift Exchange paper. Employees produce more than is required, the increment a gift to the employer. That employer pays more than it must and treats the workers fairly, a gift back to the employees, yet a quid pro quo. After our brief discussion of this in the labor market I talked about economic exchange on Campus, how much of it seemed like an unending sequence of favors, with no quid pro quo. The donors are "good citizens." They want a collegial environment. Their efforts aim to promote that, rather than to necessarily receive equally in return. I argued that quid pro quos can be too limited because they require a double coincidence of wants. Often that may be lacking. The contrivance of money solves the double coincidence of wants problem in the case of exchange goods. I argued that collegiality plays the analogous role when what is being exchange is gifts. It is an elegant argument, likely too elegant.

I made sure to point out that many do want to be good citizens, but not everyone does. The point must have been obvious to the students in attendance. Their classmates who were no-shows outnumbered them. It's not truancy, for attendance isn't mandatory. But for those who've missed regularly during the semester their absence conveys a lack of collegiality. And for those who've mainly come but are missing now to finish up work in other classes or write the paper due in mine, it is a reminder that maybe we are not too collegial to them forcing them to cram and pull all nighters as the semester closes. The lack of collegiality grows like weeds. The world inhabited by good citizens seems increasingly fragile.

My reflection on this semester that has not yet completed but is winding down indicate to me that individual efforts can't stop the weeds from spreading. But maybe a determined group can, at least in their little patch that they choose to maintain. My next hope is to find such a group and be part of it. I do not want the dandelion to become the de facto state flower.