Saturday, October 29, 2011

Open Educational Video Content Viewing

I taught an intermediate microeconomics course last spring for which I developed (and am continuing to develop) online content.  All of the content, with the exception of assessments delivered in Moodle quizzes, can be found on the Economics Metaphor blog.  Much  of that content are videos done in short modules.  These are screen captures of Excel simulations with my voice over and then that is captioned.  The YouTube channel for those videos shows snips of each video with title and link,  a modest number of subscribers, and the the number of views per video.  Since I don't typically track this stuff I don't know if any past subscribers have since unsubscribed, or if subscribers come to the content they watch via their subscription or other ways.  In any event, the info shown on the channel page is for the entire history and therefore doesn't tell you that much.

I'm not sure what possessed me to do the following, but this morning I started to look at the stats YouTube generates for content creators, where there is some control of time interval for which data is being reported.  A creator can look at such data on a video by video basis or for all videos together.  Below I will report about data from the second week in August till yesterday, for all videos.   My students from the spring have little to no reason for watching the videos during this period.  So I'm pretty confident that this represents other viewing. 

There were not quite 21,000 views in total since I started posting and about 7,500 views in the two and a half months that we're focusing on.  None of the videos have gone viral.  But there is enough information to draw some conclusions.  There are 53 videos in the channel.  Of those, 5 are not economics content related and thus unlikely to generate traffic.  (A couple give instructions on how to navigate the Excel simulations.  One is an example of voodoo in the technology - the Jing screen capture distorted the image terribly.)  So there are 48 videos that might have generated the views.

Here are some screen shots of the reports YouTube generates.  This first one shows very low traffic prior to my course last spring, then a drop off in the summer after the course had concluded, then an upswing this fall with a usage rate seeming higher than in the spring.  It also shows how the viewers are finding the videos - mainly via search.  I found it interesting that the general Google search didn't generate that much traffic.  The bulk of the views come from within YouTube, either via YouTube search or from related videos. 

This second one shows the geographic distribution of the viewers.  About 45% come from the U.S. and then no other country has even 10%.  Though the captions in the videos can be translated,  my guess is that very few of the viewers can't understand English, based on this geographical pattern.  The second also shows the top 10 traffic producers from among the videos in the channel.   The top 5 videos generate a bit more than 50% of the traffic.  From this I conclude that the viewers are mainly students.  They are looking for videos on specific topics.  They are not looking to this content as a full course offering.  These videos must be complementing or substituting for specific content from the intermediate micro course they are taking, perhaps because they find the topic particularly hard to understand. 

I'm not sure what to make of this third one, which shows the age distribution and gender of those viewing the content.   Where does that info come from?  The profiles in YouTube of these viewers?  If so, we should ask whether people enter correct profile information.  So, with a skeptical eye, I will say these results are quite surprising.  The viewers are overwhelmingly male and the bulk are middle aged.  There are comparatively few who are traditional students as measured by age.  If these data are accurate, then I have to reconsider my conclusion that most viewers are students.  This info is more consistent with the viewers being economics instructors. But I would have thought that instructor wouldn't want to see individual modules but rather a cluster of modules that build to an understanding of a topic, which is how videos were put together for the spring class. 

Let me wrap up.  We are talking about video content that people are actively looking for.  Most don't stumble on this completely out of the blue.   Some "tests" of how much they value what they find potentially could be available from looking at how their subsequent search behavior for video content is impacted by having found a particular video.  A very rough test is whether they make subsequent searches at all at later dates.  In other words, having done this in this past, are they more likely to do a similar sort of looking in the future?  A more refined test is what search terms are used in the subsequent searches.  Do they start to search by creator or creator concatenated with a specific topic?  Since related videos (many by other creators) provide a significant referral function, the way YouTube offers up those related videos in the right sidebar must impact which videos get watched.  

Is this type of demand for content something that should engage creators or others on the campuses where the creators work?   I don't know, but possibly the answer is a strong affirmative.  With online learning, so much of the thinking has been about entire courses and quite frequently with those the content resides in an LMS or campus hosted content server, which may entirely preclude this sort of external discovery or, if not that, then not actively encourage it.  Particularly for those campuses that have a strong outreach mission, perhaps there is a big opportunity loss in taking that approach. 

Friday, October 28, 2011

Trauma Drama

The last few days I've learned that several of my Facebook friends are diehard Cardinals fans. As a firm believer in "the jinx" I don't quite understand posting about the game while it is still being played. It's not something I would do if the Yankees were in the World Series. Afterward, sure, but during you're tempting fate. Perhaps one lure of sports fandom is that you can blaspheme horribly without the guilty feeling. Surely another lure is that there is a possibility of witnessing a seeming miracle. Last night's game provides a case in point.

I'm really posting here, because of the comparison in the piece linked below between the game yesterday and the Game 6 of the 1975 World Series, which though my Yankees weren't in it was the best World Series I've seen as a fan. People tend to remember the wrong things. The way the game ended is forever in our consciousness, so we get to see replay after replay of the Pudge Fisk home run. The drama is created, however, by what leads up to the ending.

In 1975 the Big Red Machine was clearly the best team in baseball. Their lineup was loaded with talent. Measured by the position players only, they were much better than the Red Sox. But the Red Sox had El Tiante, the dragonslayer. He pitched with bravado. He pitched with guile. In games one and four he was able to slay the dragon, with complete game victories. Because of bad weather game six was delayed enough so that Tiant started that game too.  He pitched into the eighth inning, keeping it close.  The drama of Fisk's home run was created because the Red Sox hung in there without Tiant in the game.

Nothing comparable is going on this time around.   From my vantage, the teams are pretty even.   There is no David and Goliath story here.  Some of the play was sloppy last night.  My impression is that result is because both teams are worn down,  The post season is too long (or the regular season is too long).  While we've seen the players rise to the occasion in some instances, we've also seen them not perform adequately in other cases.  The biggest question is whether the pitching will hold up.   In last night's game, it didn't.  

The back and forth last night made the game a thriller.  And I will watch tonight before drawing a firm conclusion about this series.  I hope to see a well played game, the stakes motivating the players to produce their top-level performance.  But I won't be surprised if it looks more like keystone cops, because both teams have run out of bullets.

Thursday, October 27, 2011


I have a station on Pandora Internet Radio entitled "Gershwin."  I've been listening to it for the last few days.  Apart from enjoying the music very much, which I do, it offered up a puzzle to me.  I wonder if anyone else has asked this, listening to their favorites on Pandora.

This particular station is only instrumental music, mostly symphonic, some piano only.  There's nobody singing Gershwin popular tunes - I've Got Rhythm, Somebody To Watch Over Me, Summertime, the ones we're all familiar with and that have been recorded by many different artists.  The more interesting question though, at least for me, is this.  What determines which music does get included, the bulk of which is not Gershwin?

Lacking a better name, I'd call this, "popular classical music," the sort I learned about when I was a kid through Leonard Bernstein's Young People's Concerts, which I watched on TV along with the rest of the family.  My sister, older than I am, may have attended one of these in person.  I don't believe I did, but I did attend several concerts at Queens College's Colden Auditorium, which were done in the same spirit.  It must have left a strong impression on me.  Some time later I got a present from a great aunt who visited us from Australia - a 10 record set of many of these selections (though not recorded at a young people's concert).  I don't remember all of the music, but a partial list included Mussorsgky's Night on Bald Mountain, Dvorak's New World Symphony, Prokofiev's March from the Love of the Three Oranges, a couple of Beethoven Symphonies, Debussy's La Mer, Tchaikovsky's 1812 Overture, and a bunch of others in that vein.  As I'm writing this, I recall that at a summer program at Hampshire College we did a trip to the Tanglewood Music Festival and heard the Tchaikovsky performed with canon. These pieces became familiar to me - an entry into a broader class of music.

I did expand the repertoire, but not very far.   For the most part I stopped pushing myself to experience classical music after graduate school, with only occasional experiences otherwise.

The Gershwin channel has a bunch of pieces by Aaron Copeland, some conducted by Leonard Bernstein.  These I knew.   Copeland became familiar, but probably that happened after college.  Before long as the Gershwin channel winds through its playlist, it gets to a very haunting piece, one I should have known but didn't, the Dance of the Knights from Prokofiev's Romeo and Juliet.  How I missed this growing up, I don't know.  It does seem to fit right in with the other pieces, which have a sense of the experimental and exploratory, yet are not threatening to the sensibilities.  A couple of nights ago I did wake up from a dream with the Prokofiev going on in my head, so the music did touch my spirit, which is part of the music's power.   Yet with that piece and certainly with the familiar pieces on the channel I don't feel assaulted when making a personal connection to the music, as I sometimes do when my son plays rap, which I react to much like my parents reacted to rock and roll.

I started to get enchanted with the idea of channels of favorites yet with new pieces too, using the familiar as a way to expand the personal knowledge base.  And then I started to ask myself whether this could be done not just with music, but with written work as well.  Could our Library do something like this?  What I have in mind is that if you take all the reading lists for undergraduate courses in social science, let's say, over the past 10 years and you cull articles from these lists can you find pieces that are (a) commonly read, and (b) are connected in some way.  For example, with Daniel Kahneman's new book out, Thinking Fast and Slow, there have been essay's about Kahneman (and Tversky) in popular outlets, such as this Op-Ed by David Brooks, and this Book Bench blog post by Jonah Lehrer.  Suppose on seeing one of those a student wanted to make a Kahneman channel, with both scholarly pieces and pieces from well written but popular periodicals, accessible intellectually to a bright undergraduate with not a huge background in the subject, and connected to each other in some way, though perhaps not totally transparently.  One of my favorite pieces by Stephen Jay Gould, The Streak of Streaks, on the question whether in sports a player gets "hot" or if this is merely a rationalization we fans make, would fit right in. The channel might include video material as well as print.  For example, George Akerlof's Nobel Prize lecture, which was video recorded, might be perfectly suitable material as part of a Kahneman channel.

I don't know if this is possible.  For the Gershwin channel the affinities are somewhat intuitive to me and with Kahneman I can see the connections.  Could there be an automated way to generate them?  If there were such a way, students would be be able to learn about a subject without relying on a textbook or  a professor to provide a reading list for a course.  Sometimes we want to learn something without taking a course on it.  And sometimes I, as instructor, wish that students would explore beyond the readings I assign.  A novel concept, isn't it?  When I queried students about that as we did a debrief for my class last spring, I asked them whether any of them did read largely in this way.  Many of them looked at me like I was from the moon. 

Maybe I am.  I've got this odd belief that if you can enjoy music this way, you should be able to enjoy reading in this manner as well.   Even if the kids didn't use it, I would.

Wednesday, October 26, 2011

Misguided Fiscal Policies?

This is an interesting and provocative piece, with the core thesis that our economy is fundamentally (personal) consumption driven rather than led by (business) investment.  It's kind of a dynamic version of the "paradox of thrift."  If we save more in aggregate, the economy will be smaller because there aren't the investment opportunities to suck up those savings.  I agree with the suggestion that we should be shifting incomes policy toward labor income and away from capital income.  So our tax system has that backwards.   This is the argument the left needs to change the policy direction.

I would like to see a life-cycle version of this argument, however.  I don't fully get at the individual level how one saves less over the life cycle and yet still has a tolerable wealth during the retirement years.

I should also note that the argument is subject to a "Moore's Law" critique, since everything is measured in value (dollar) units as opposed to physical output units, e.g., my home computer now is more powerful than the super computers of the 1980s.  So we've endowed most people know with super computer capabilities, if seen from a 1980s perspective, which seems like Herculean investment.  But in dollar terms it's not that big a deal.  To the extent that information technology pervades our lives, this is a significant measurement error.  But not all capital follows Moore's Law and the the non-IT capital investment in the economy hasn't grown proportionally with GDP is a big deal issue.  It's as if IT is substituting for non-IT wherever possible and the consequence is perhaps productivity growth in some sense but not GDP growth.

Tuesday, October 25, 2011

Confusing Correlation and Causation

David Brooks has been on a kick lately about where the country mindset is and based on what he "knows" he is very much against the Occupy Wall Street protests, since in his view they are so far out of the mainstream.  But, I believe, he is using the wrong sort of evidence to support his conclusions, as I will try to illustrate below.

If you asked dyed-in-the-wool Democrats whether they trust their government and did so after certain junctures in recent history (I'll list some immediately following this question) how would they respond?
a) During the height of the Vietnam War.
b) After Watergate came to light.
c) When it was learned there were no WMD.
d) After Hurricane Katrina.
e) After the Gulf oil spill.
f)  After the Debt Ceiling debacle.

I don't know the general answer to this.  I know my own answer.  That answer is no, in each instance.  In providing this answer, I'm rendering a verdict on past events.  In each of these instances, government responded poorly.  Some people, I assume most of them are anti-government types, take evidence of this sort and conclude government necessarily acts poorly.  Several of the students I taught last spring were in this category.

But it is quite possible to render quite a different verdict.  Government can be viewed as fundamentally a good thing but is capable of behaving quite poorly, when the President exercises poor judgment and therefore poor leadership (Johnson regarding the escalation of the War in Vietnam), is fundamentally paranoid (Nixon regarding Watergate), or is so anti-government in philosophy that the government agencies acting in his charge don't do their jobs effectively (Reagan and Bush II).  In this case the view is that government needs to be reformed to be effective.  One can not trust government because of past misdeeds and yet be quite hopeful that government can perform admirably in the not too distant future, if there is suitable leadership put in place.

It is, of course, not only the President who exercises leadership.  Congress has a role to play too.   Recently the view has become almost universal that they are obstructionist, which is why their approval rating is so low.  But it doesn't have to be this way.  Read Evan Bayh's Op-Ed about why he is leaving the Senate, written in February 2010. He describes all the problems.  But then he proposes potential solutions that seem sensible to this reader.  If you asked him, do you trust Congress, he'd be forced to say no.  But if you also asked, do you want to trust Congress, you'd get a resounding yes.

This distinction is particularly important when it comes to thinking about regulation, for example, the relationship between the SEC and the financial services industry or perhaps even more evidently, the role of Elizabeth Warren and the Consumer Financial Protection Bureau.  In my view she exemplified what effective government looks like and her leadership of the Bureau was blocked by Senate Republicans specifically for that reason.  So I maintain that effective government is possible but that it didn't emerge in this instance.

There is a further question here that needs to be asked.  If government was effective and most voters did trust government, does that imply government would have an adversarial relationship with business?  And, if so, is that sustainable?  These, I think, rather than the issue of effective government per se, are the questions Democrats need to work through. 

I don't have a fully worked through answer on this, but my partial way of thinking about it is that some business operates with a seeming P.T. Barnum philosophy (there's a sucker born every minute) and for such business an adversarial approach is fitting and proper.  For other businesses, however, they are trying hard to produce a decent product, one that consumers like and want.  Environmental and safety regulation do impose costs on these business, some of which should be borne for the greater good but some of which should be discarded because they are too onerous.  We need an ongoing dialog to find out which is which and where the happy middle is.  We currently don't seem to have a way to get that dialog.  I'm hopeful it will be possible in the future. 

Monday, October 24, 2011

Vendor Bender

The lead article in today's Inside Higher Ed is about the Educause national conference held last week in Philadelphia.  The piece focused on the tension between campus CIOs and the IT industry that services Higher Ed.  I will comment on that in a bit, by doing a stylized economic analysis.  First, let me say a little about the event itself. 

I haven't attended for  a couple of years and having retired last year I don't see myself attending in the near future unless new work makes it practical to do so.   I can't say that I miss going to the conference.   I've never been a good traveler, so there's that.   The venue for the conference is usually a large convention center.  Many of the rooms have no external lighting, so if you're meeting in one of them, after a while you feel as if you're in a cave.  I would usually wear down in the afternoon as a result.  I do enjoy meeting folks from other campuses that I haven't met before.  That's a plus.  But then there is the weirdness that the tone is collegial yet in many cases much of the business would be with vendors, who indirectly would either be trying to sell you something or, if you were already buying from them, then to do things to keep you as a happy customer.  It meant the experience was different and not as much fun if there were only colleagues from other campuses present.  I do miss seeing friends and colleagues.

Let's push on to the analysis.  As an economist who has written a bit and taught in the area of Industrial Organization (a long time ago) I'm going to state some economic "facts" that in themselves should not be controversial at all.  It's in their application that the fun begins.

1)  Horizontal merger typically happens when an industry has reached a mature phase where demand growth is modest.  In the case where demand is actually declining, you then have a "war of attrition," in which case the merger or acquisition is a way for the acquired entity to exit the industry.  Industry behavior therefore is quite different when the industry is young, demand is growing briskly, and new entrants may appear on the scene. 

2) In bargaining, the power a party has in striking a good deal depends first and foremost on their ability to walk away from the deal.  Add to that how patient the party is to wait for a good deal and how risk averse the party is to negotiations breaking down.  If you know the payoff to the parties from walking away (called the threat point in game theory)  you can then predict that the gains in the bargain will be split relative to that.

3) Markets for a broad constituency tend to have several competitors.  Markets for a more narrow constituency tend to have fewer competitors.  The real test is how large a seller must be to fully exhaust economies of scale and scope and the relationship between that size and the size of the market.

Applying the above to Higher Ed and the enterprise systems that are the object of the Inside Higher Ed story, most campuses have been in these markets for 10 to 15 years.  ERP systems got a big boost in demand because of Y2K fears and the LMS as an environment took off in the late 1990s.  I think it fair to saw we're in a mature phase now, with the market fairly saturated.  Further budget issues that the campuses face because of the economic downturn mean that an increased intensity of demand on a particular campus is unlikely to manifest.  So there shouldn't be much demand growth from that source.  Merger or acquisition in the industry, then, should not be surprising. 

I suspect most campuses feel locked into these systems.  Even in the presence of multiple vendors, switching costs are high.  In choosing an enterprise system, most campuses do so for the long haul (in my estimation at least 5 years and perhaps upward of 10 years).  The threat of switching may have some impact on the bargaining power, but in game theory the question would immediately come up - is the threat credible?  Incredible threats don't have impact.  The threat is credible when a campus is in a system that is reaching end of life.  Then switching must occur. 

The article talks a lot about information sharing regarding price (really the full package) across campuses.  Absent that information sharing, there can be idiosyncratic variation in the packages campuses get.  But ask yourself whether information sharing has any impact on bargaining power.  I don't see why it should.  If you're locked in without information sharing, getting the additional information about what other campuses have done doesn't change your degree of lock in.   I can understand why CIOs want the information sharing - they bear that idiosyncratic price risk and they'd like to shed it.  But doing so should not lower the average transaction price.  Indeed, information sharing might have the same effect as "retail price maintenance" where the customers end up being the police to enforce the cartel price.

Here are some observations based on this analysis.

a)  Where Higher Ed might go with systems that are used in other verticals as an alternative to having the systems customized for Higher Ed, some rethinking should be done regarding the costs of the latter.  Those costs shouldn't be measured when the market for that system is immature.  That doesn't measure full cost.  Put another way, demanding customized solutions is like asking to be held up by the vendor(s), not immediately, but down the road.  This needs to be understood. 

b) If Higher Ed IT have become data custodians for their institutions then the cost and quality of protection depends on the extent that information is regulated by the government.   More stringent regulations translate into higher IT costs.  If you think of it this way, then from the student perspective (or the perspective of their families) they may face the choice of higher tuition and higher privacy guarantees or lower tuition but then less privacy guarantees.  The government makes these regulations with a desirable end in mind - guaranteeing student privacy - but without a firm notion of the cost to enforce the regulation.  If as in a particular service area, the sense of what that costs becomes clearer, then the tradeoff perhaps can be articulated with some degree of precision.  At that point, it should make sense to bring the discussion back into the public policy arena.  Can a sensible middle be found?  That might lesson the feeling of lock in that many CIOs seem to be feeling now. 

c)  The article also discussed forming some buyer consortium across campuses, to match the size (and therefore the power) of the vendor.  Thinking this way, one might consider what is happening now with the NBA, where the current season looks to be in jeopardy.  If bargaining power is exercised, it can lead to no transaction for a considerable period of time.  Ask, whether that, even as a veiled threat, is a possibility in this instance.  If not, it is unclear how such a consortium improves the bargaining power.  It is possible that the campuses god get better deals anyway, because dealing with the consortium lowers the vendor costs in an appreciable way - less of a sales force, easier to keep track of contracts, etc.  But, of course, there are real costs in coordinating across campuses to determine something like a consortial preference.  The potential cost saving may not be worth the real pain of coordinating. 

It may not make anyone feel better that what we are observing with the provision of these enterprise IT systems is fairly predictable, given the relevant economic theory.  But perhaps, if the CIOs together thought more about the economics, they'd get a better sense of what their alternatives really are over time.  A while ago I wrote a piece on Dis-Integrating the LMS, where the main argument for disintegration was given along pedagogical lines.  Perhaps disintegration is an approach that should be tried with other other enterprise systems, simply as defense against vendor expropriation.  It's worth thinking that through. 

Friday, October 21, 2011

Rooting for the American League

Hats off to the Rangers keystone combo,
On hard hit ground balls they dance the mambo,
Down to licks that are last,
On the basepath running fast,
Shooting at the Redbirds sans arrow and bow.

Thursday, October 20, 2011

Technology and its Discontents

Last night I wanted to watch the World Series.  We get our TV via satellite dish.  Between the wind and the rain, however, the signal kept on getting dropped, to the point where it wasn't any fun to watch. I wonder how many other viewers were in the same boat.

* * * * *

One of my favorite features of the New York Times online is the word look up function. Select the word by dragging across it with the mouse and a question mark pops up that you can click to get a dictionary definition.  Well done!  Alas, the technology is not enabled for the Times blogs, such as this Linda Greenhouse Opinionator column.  She challenges my feeble vocabulary with words like "protean."  I duly go through the routine, but then nada. 

So my request for the Times is first, enable the look up technology for the entire Web site, or if that is not possible then second, make Greenhouse an Op-Ed columnist.  She deserves it and what she is writing about is incredibly important.

* * * * *

It's hard for me to tell sometimes what is a virus, spyware, or simply an annoying program.  Over the last two or three weeks, with some regularity, a dialog screen pops up that looks like some sort of music playing software, and it wants me to select a language to install.  It doesn't say the name of the software or why I should do this.  It is as if this is step two or step three in an install process, but I don't recall it ever going through step one.  I click cancel and get a temporary fix, but it is not a solution.  I don't know how to go about finding a real solution. 

* * * * *

I have a Sony Vaio flatscreen with the processor in the monitor as my home computer.  Mostly it works reasonably well, but on occasion it temporarily loses association with the wireless mouse.  The first  couple of times this happened I panicked.  But now I've gotten used to it and if you wait a bit, the association is restored.  I've gone through the routine of replacing the batteries more than once, finally concluding the problem isn't with the mouse, but either some hardware or software issue with the Vaio itself.  Live by the sword...

* * * * *

The campus VPN software is very important.  For example, when I'm surfing and find a published article I'm interesting in looking at, if I'm logged into the VPN and the campus Library has a subscription to the database where the Library is located, I automatically get access.  That is wunderbar!  However, sometimes even when I'm connected to the Internet but not yet using the VPN, when I try to establish a VPN connection there is a little red X and a message that says you need an active connection to the Internet.  This is discouraging.  You can access the Library content via a different form of authentication, but then you have to go find the article through their online catalog/interface.  Sometimes that's only a couple of more steps and then is not a big deal.  Other times it takes longer and when that happens sometimes I give up before getting the article I want to access.

* * * * *

For certain programming on TV, like baseball, I like to have my iPad with me while I'm watching.  Sometimes I do Web surfing that is related to the game.  Other times, I'm doing my digital immigrant version of multi-processing.  I recently changed my ATT subscription for the iPad.  I had the unlimited and reduced that to a quota, cutting the monthly fee in half.  It seemed to me mostly I was using it on Wifi, so why pay in addition?  When I'm in our sitting area/living room reading on the iPad, the wireless network in the house works great.  The TV room is adjacent and the house isn't that big to where this is a long distance from the router.  But in the TV room sometimes the wireless signal gets dropped.   Other times it works fine. 

* * * * *

Every one in the family now uses the exercise room we have in the basement to do the treadmill and lift light weights.  We've got a TV in there hooked to the satellite dish and also connected to a DVD player.  Mostly, I watch DVDs, the distraction keeps me at the activity for a while.  The treadmill, however, makes a fair amount of noise.  So my son has taken to having the caption play on the DVD.  I didn't really want that, but I couldn't figure out how to turn them off.   He's not around when I exercise.  So I watch with them on.

* * * * *

We think of technology as empowering.  And it is.  But it also presents a variety of little obstacles that each of us must deal with in our own way.  For me, it's a lesson in humility, accepting what is doled out.   Having not that long ago held the title, CIO, it should be that I am the captain of my fate.  Alas, it's more like I'm a buck private, awaiting new marching orders.

Wednesday, October 19, 2011

Comments on Inside Job

The film is a documentary, narrated by Matt Damon, about the cause of the financial crisis, which it puts squarely at the hands of the financial services industry and its cozy ties with the Federal government.  On the question, What happened?, including what temporally preceded the actual meltdown, I think the film is quite good.

Most of that is a matter of record.  I didn't know about some of the personal indiscretions of players on Wall Street.  That was new to me.  As I'm writing this during the week of the Educause national conference in Philadelphia, I should point out that most of the folks I knew professionally in Information Technology, though milder than the "type A" personalities depicted in the film, behave differently when at the conference, where the vendors want to wine and dine them, than they do when they are back on their campuses, when everything is paid for with their own nickel.  That dealing-with-vendors environment is omnipresent for folks who work on Wall Street.  So I found that less surprising.  That the behavior is financed by the investments of folks like you and me, surely that is infuriating, the entire film is meant to stroke our ire.  I used to rationalize some of the wining and dining as a way for the vendors and us to better understand each other, and there was some truth to that.  I suspect that if you did more investigation of the Wall Street types and asked them to defend some of these practices, they'd defend the practices similarly, even if some of the behavior is morally reprehensible.  In any event, that is symptom not cause, so I will push on.

On the question, Why did this happen?, I think the film is less good.  In a couple of places there were factual errors presented.  The film clearly had an agenda and therefore didn't spend nearly as much time as it might on presenting alternative views.  But mostly, I believe the problem is that it omitted events and practices that were relevant, in my view, and so the context for considering what happened is not set properly.  More on all of this below.

Deregulation (of natural monopoly) actually started under Carter, not Reagan, as it is stated in the film.  The first industry to be deregulated was the airlines, with the effort led by Alfred Kahn.  Had Carter won the election in 1980, surely telecommunications would have been next.  ATT eventually was split up, in 1984.  Given the state of air travel now, it is hard to offer a definitive conclusion that deregulation was a good thing.  But on telecommunications, that seems to me a no-brainer, in spite of issues that have emerged.

When Reagan became President the fervor for deregulation swept across the board. It wasn't just natural monopoly to be deregulated.   Environmental and safety regulations (regulation of externalties) were also taken to task.  Anyone who remembers Reagan's first Secretary of the Interior, James Watt, will understand the point implicitly.  An unfortunate rhetorical problem, in my view, is that the word "regulation" applies both to the natural monopoly case and the externality case.  That they might be different, both in kind and in degree, doesn't get discussed in typical media or political outlets.  So one doesn't usually hear that you can be for some regulation and against others.  That is too subtle for our discourse.  Instead, only the straw man argument is made - for or against regulation, in toto.  This puts the Democrats in the "for" camp and the Republicans in the "against" camp.

There is then the issue of regulation for financial services.  Is it a question of natural monopoly or externalities, or is it neither?  I note that with pollution, for example, you can measure the externality at the source.  With systematic financial risk, however, you can only measure that by looking at all sources simultaneously.  The exact same behavior can be of no consequence, in one instance, and of dreaded consequence, in another instance depending on what is going on elsewhere.  This makes it difficult to think of financial regulation as entirely within the externality family.  So I believe it should be its own separate category, in large part because Government will come to the rescue when there is a cataclysm.  An obvious question to ask then is whether the industry can be self-regulating, as Alan Greenspan believed it was before the meltdown.  It seems clear the industry was not.  Less clear is why.

The film does go as far as pointing out that there weren't deductibles, for example with mortgage loan origination.  Were there steep deductibles perhaps many of the excesses could have been avoided.

To me, much of the answer to that can be found in the leveraged buyout craze of the 1980s, which gets no mention in the movie whatsoever.  I believe that is a mistake in setting context.  As a defensive strategy against leveraged buyouts, CEOs and other high level executives got "golden parachutes."  The practice lingers although the problem it was aimed to address may no longer be an issue.  More important, however, is the following.  The film makes the point that outsiders: SEC regulators, the ratings agencies, and the accounting firms, have a tough time interpreting information that is on the firm's balance sheet.  (Sometimes this is fraud, but I believe much of this is simply not understanding the picture from the data they do observe, perhaps because the books are cooked to mask the problem, but also simply because of complexity.)  The film doesn't point out, however, that corporate boards are in the same boat.  Therefore it is extraordinarily difficult to measure how the firm is positioned for the long haul, whether its hand is strong or weak.  Consequently, current earnings are king.  This makes the firm myopic in its objectives.  That has always been a problem.  The corporate takeovers made it much worse.  In case its not obvious, deductibles might have improved the balance sheet long term.  But immediately, they make earnings worse.

The other thing, I believe, that the LBOs did was to create a hunger in the financial houses, to get more of the pie from financial transactions.  Why leave the spoils for Michael Milken and Carl Icahn?  So I don't see it as such a great leap to go from the Junk Bonds of 1980s to the subprime loans and the slicing and dicing of mortgages of the 2000s.

Another piece of history that is omitted in the film is the Asian Debt crisis of the late 1990s.   It is tempting to view the U.S. meltdown as an it-happened-here-first phenomenon.  But it may be more appropriate to consider it part of an ongoing cycle that started earlier.  The fundamental issue then is that cheap credit leads to high leverage, which in turn can lead to default if circumstances change for the worse.   Much of this is bubble driven.   When asset values appreciate rapidly, why be cautious?  Note that in the U.S. the personal saving rate declined precipitously in 1999 (and then stayed low).  Ours certainly was a larger scale crisis.  But that doesn't mean the root cause was of our making alone.

Let me turn next to the issue of creating securities to provide insurance - derivatives if you will.  The word itself is toxic now.  But the concept shouldn't be.  This is a straight economies of scale argument.  Insurance makes sense from the provider point of view if there are a large number of independent risks, so the provider can properly diversify.  This makes natural disaster insurance somewhat problematic, because the risks are correlated.  However, the risk correlation is local.  Globally, a bunch of local risks starts to look independent. Global financial markets are the proper place to bring such risks.  Local insurers, even with reinsurance markets, don't have enough scale to get the right diversification.  This argument is made in a piece by Michael Lewis, written a year before the financial crisis, in Nature's Casino.  It makes for an interesting read, one that provides an argument for securitization.  That argument is not in the film.

Of course, insurance does create moral hazard for the insured regarding inadequate precaution.  Where to site a home, when natural disaster risk is present, is from this point of view the same issue as how big a home to buy, in the presence of default risk.  The moral hazard issue gets nary a mention in the film.  The predatory lenders get all the blame, instead of sharing it.  This is where I have issues with the Occupy Wall Street protests.  They point the finger at the 1%, but don't talk about the responsibility of the 99%.

Finally, let me turn to the last part of the film, where some important economists are depicted either as clueless (like the regulators, Rick Mishkin is cast in a terrible light) or as having completely sold their souls to the devil, getting big-time fees for serving on Bank boards, etc. (so doing the bidding of the financial services industry).  In considering this, let me set Larry Summers aside for a minute on that and talk about the others.

I believe the movie has cause and effect reversed here.  Glenn Hubbard, Chairman of the Council of Economic Advisors under Bush II and current Dean of the Business School at Columbia, is a good case in point.  His views about the relationship between taxation and economic growth, which I disagree with strongly, are what came first.  He's a supply sider and one of the authors of the Bush Tax Cuts.  This makes him kind of a superstar in some circles.  His reputation followed from his academic beliefs.  Here it needs to be pointed out that Economics at the macro level is not science - no controlled experiments are possible.  Cause is imputed from the historical record.  So economists can disagree about cause.  But those disagreements are based on a prior intellectual orientation.  Ditto for Martin Feldstein, also shown in the film, who chaired the Council in the Reagan era.  I believe questioning their integrity was, hitting below the belt.  It is enough to question their views about policy.

I do think Larry Summers is a different animal, in part because some of his academic writings are Keynesian in spirit and in part because quite recently he has been pro stimulus, particularly for relief on the payroll tax.  In the 1990s, however, in his various government roles he was very much a free trader and for deregulation of financial services.  So, how does one square that?  Here is one conjecture and one observation. Not all economists are attracted by political power, but some are and I believe Summers was.  He had conquered the world of academic publishing and was looking for a different game to play.  In the new world, with Robert Rubin his mentor, both free trade (which most economists would ascribe to at first pass) and deregulation in financial services part of the mantra, and the U.S. in high growth mode, forebodings about the impact on future downturns were absent.  These were policies for the present.

This gets me to the observation.  Human nature being what it is, there is a tendency to want to regulate when the economy slumps, to rule out that past indiscretions will repeat, and to deregulate at the start of a boom, to get rid of impediments that might hamper growth.  Alas, having an entirely time consistent view is difficult, particularly if at heart you are a pragmatist.  Ideologues may have it easier on this score, but they have the issue that their ideology may seem out of sync with current reality.  The problem is more severe in that there can be substantial lag between policy implementation and economic consequence.  Further, when living in the present we may not understand the causes of current events.  In the late 1990s there was genuine confusion about whether the Internet had changed the economy unalterably, or if it was a bubble.  The evidence was provided with many companies that had huge growth in usage but had negative earnings.   Would Summers have argued the way he did in the 1990s had he known how the 2000s would turn out?  I don't know.

Let me wrap up.  The film cast the Wall Street Insiders as perpetrators of a crime.  That is probably a good thing.  It implicitly makes us viewers victims of that crime.  That is not a good thing because, apart from punishing the perpetrators, it doesn't tell us what we should want next.  So it missed an opportunity for the audience to learn.  It is still not too late to be asking that question.

Saturday, October 15, 2011

Lack of CLASS...

... or They Shoot Horses, Don't They

I'm not sure what the social contract should say about long term health care.  If it is an individual responsibility, surely it will lead to bankruptcy, for the individual or the insurance provider, or the person does without.  Is there another alternative aside from Kevorkian?

Friday, October 14, 2011

Not a fan, but watching the contest

Yesterday, I did some unusual viewing for me.  I had previously recorded The Best Man, a 1964 movie from the play by Gore Vidal, written in 1960.  I watched it last night.  I've always liked the political drama, and was happy to find on TCM a film I don't recall ever seeing before.  It was also interesting to see for itself and for looking at it as a commentary on current politics.

It is about a race race for the Presidential nomination.  Without a mention, this appears to be the Democratic Party, since there is a Southern state Governor who is a candidate, one who is opposed to integrated schools, nonetheless wanting the mantle of "Progressive." There are two front runners.  One is an egghead, the current Secretary of State, played by Henry Fonda, whose political vice is that he is on occasion indecisive, or at least appears to be so to others not quite so intellectual, looking for the perfect solution, or at least a solution better than those that immediately present themselves.  His marriage is in trouble.  To insiders, that is not a political flaw, but it is a liability with the voters, so it needs to be concealed.  The wife cooperates.  She has her own aspirations to be First Lady.  The actress who plays her is Margaret Leighton and she has a very distinctive, somewhat hoarse speaking voice.  I thought I had heard that before and then I started to play my game, where?  After being vexed for a while I thought I figured it out.  Somehow I convinced myself that it was the same voice as the wife of the deceased President Lassiter from the West Wing Episode, The Stormy Present.  This proved completely wrong.  Margaret Leighton passed away in 1976, while that West Wing episode is from 2004.

The interesting part of the Fonda character is that there is a strong ethical streak and there is more spine to the character than one might initially expect.  So it is not quite a stereotype, which I suppose is why Fonda played the character, since he always seemed to play that sort of individual.  This character contrasts with the character of the other front runner, a Senator with a prosecutorial style in the manner of Joe McCarthy.  This character is played, quite convincingly, by Cliff Robertson, a self-made man who claimed to understand the voice of the people because he was one of them.  Yet with a tin ear, he couldn't read the nuance of a particular situation and of the true character of his political allies and enemies.  That proved to be his political undoing.  

Both of the front runners are vying for the endorsement of a former President, who it turns out is dying from cancer, though that is closely held information.  This endorsement will presumably determine which candidate gets the nomination.  The drama unfolds as the former President has private meetings with each candidate and where it unfolds that each candidate has some dirt on the rival that might be used as a lever to get the other to drop out.  How the dirt is used (or not) is the way we learn about the candidate's true character.

The flavor or the story seems quite realistic.  Looking at the Wikipedia entry for the film afterward, I learned that each character had been based on actual Presidents or Presidential candidates.  In that way the author gets to leverage our own mental images of these characters and doesn't have to elaborate on their descriptions.  One telling scene will do.  Of course I'm watching the film almost 50 years after the fact (and more than 50 years for the original play).  I know who Adlai Stevenson is but have no memory of him as a candidate and only a vague memory of him as a representative to the U.N.  I didn't put two and two together that he was the model for the Fonda character.   But the story seemed realistic to me anyway, even though some of the environs and the seeming lack of Secret Service personnel anywhere plus that the film is in black and white make it look dated.   One particular realism, used to set the stage at a formal dinner for the candidates the night before the Convention started, was entertainment provided by Mahalia Jackson singing Down By The Riverside.   They didn't show the whole song, but what they did show was quite moving.

Let met draw a couple of take aways as they relate to the present.  I believe it has been under commented on how party elders used to influence current elections, but no longer appear to be doing so.  In the current Republican race, the ghost of Ronald Reagan is clearly present, but the specter of the still living Bush Presidents is nowhere to be seen.  I recall a column by Maureen Dowd written still early in the Bush II Presidency, that ultimately the father would be remembered as the true conservative.  So far that doesn't seem to have happened, though outside the current campaign his reputation appears to be rising, precisely because he compromised and did raise taxes in a way that everyone is aware of that.  (There has been much said recently about tax increases under Reagan, but his reputation doesn't appear to have been besmirched by these realities.)  The absence of influence from former Presidents allows for greater instability and fewer ties with the past. 

The other point, worth reflecting on further, is that as a culture we seem suspicious of high intelligence and are more trusting of the ordinary guy.  One principal fallibility of Bush II, going with what his gut tells him, is something prized in the movie, even if it leads to undeniably flawed conclusions.  The character associated with being "a fighter" is valued more than any possible conclusion derived from an in depth reasoning through on the issues.  The seeming know-nothing-ism of today has deep roots, a point I became aware of from quite a different source.  Super smart guys as counselors may be okay, but having such a smart guy as leader poses serious issues, because intelligence is perceived to conflict with pragmatic solutions, particularly if that intelligence has been accommodated with intense schooling.  (Steve Jobs, for example, might be exempt from this particular prejudice because as a drop out his adult learning happened in the business world and his decisions were validated by the success of the products Apple produced.)  As we look to reinvigorate our economy, perhaps we should look at cultural liabilities that hold us back from further progress.

* * * * *

Earlier in the day, I watched the baseball playoff game between the Rangers and the Tigers.  It being a potential elimination game for the Tigers and their relief pitching deleted from prior over use, there was some extra drama in the game as the star pitcher, Justin Verlander, was asked to go a long way to secure a victory.  Ultimately his pitch count got to 132, more pitches than he had made in any other game over his entire career.  Apparently before the game the manager Jim Leyland had  announced not just that he wasn't going to use his closer or setup man, but also that he'd limit Verlander to 125 pitches or so, unless circumstances dictated otherwise.  As it turned out, Leyland got two out of three and on Verlander he perhaps should have stuck with his original decision, because while Verlander still seemed to be in command in the eighth inning, the last pitch he threw was a two-run homer by Nelson Cruz. 

I have been thinking the last week or two how in baseball they are now so sensitive about overwork for a starting pitcher possibly ruining his career.   Sandy Koufax is the pitcher everyone thinks about in regard to this hypothesis, though you have to rely in innings pitched as the over use measure, because they don't have pitch count statistics.  Nolan Ryan had high innings pitched in his early years with the Angels, but the innings pitched came down after that.   Back to my thought, there is no comparable idea of overwork for everyday players.   But it sure seems like many of them are injured, and in ways that materially impact the outcome of the game.  This is particularly true for the catchers, but also for several outfielders.  I don't know what the solution is, but I do wonder why there isn't more precaution taken about the health of the everyday ball player.

The game itself seemed to have divine grace.  The Tigers immediately feel behind and in a bunch of small ways they appeared to be wilting under the pressure.  Then in the sixth inning with a runner on first base, there was a play I hadn't seen before.  Cabrera, the best Tiger hitter, sends a ground ball with some bounce to it down the third base line.  The ball hits the bag and then bounces over the third baseman's head.  Earlier in the game the third baseman, Adrian Beltre, had made a beautiful back handed stop of a hard hit ball.  So off the bat this looked like a repeat, one that would turn a double play.  Instead it became a double.  Following that the Tiger hit a triple, then a home run.  It was the first time in the history of the playoffs that a team had "hit for the cycle" and in order.  The tide had turned.

I don't know if I will watch the next game (tomorrow evening).  I've got the feeling that they've used up all the good karma, the way Butler seemed to in the NCAA Men's Basketball tournament.  The final game was an anticlimax.  But maybe there will still be some left, because this will only be game six.  If there is drama you can watch the game without being a fan.  Without the drama, there are other distractions that are more compelling.

Thursday, October 13, 2011

Absorbing Mortgage Debt

Martin Feldstein puts forward a proposal to have the Government and the Banks absorb excess mortgage debt, so the economy can "get on with it."  In principal, this seems like a good idea.  In the details of the proposal, I don't get it, as I will illustrate.  It seems to me an even more radical solution is necessary.

How many of us know the current "value" of our homes?   Here, I would define value as what one could get in resale now if one put the house on the market.  Most of us know what we paid for the house initially, and certainly we know the value of our mortgages, but the banks tell us that.  I know that when we last refinanced, less than a year ago if I recall correctly, we did not require an appraisal.  It was the first time I can remember getting a mortgage without one.  My point here on this is nobody wants to know the value of the home, for fear it is lower than what we hope it is.   Literally, no news is good news.

Let me abstract from that issue in what I say below, but I do want to note that there can be substantial moral hazard in the proposal given this uncertainty about home values.  Borrowers who might be able to reduce the principal on their mortgage have incentive to understate the value.  Banks, in contrast, have incentive to overstate home value, so they don't have to absorb debt.

In my lifetime I've purchased 3 homes - a condo I had when I was single, our renovated Victorian house on Old Church Road that we sold about seven years ago, and the one we live in now.  Each time the mortgage was 80% of the purchase price.  For the Old Church Road house, for a time we did have a home equity line, justified in my head by taking advantage of the mortgage interest deduction (and perhaps on the capital gain we took as we did put a fair amount of bucks into the house and when we resold it, there was a significant capital gain).  But we really never leveraged ourselves beyond the 80%.

In Feldstein's proposal he wants to reduce the mortgage principal to 110% of value. I don't understand that.  In the piece Feldstein distinguishes between a nonrecourse loan - if the borrower defaults the lender can repossess the house but is not entitled to other assets of the borrower, most mortgages are in this category - and a recourse loan which he suggests is what the converted mortgages should be.  Perhaps this makes sense if you assume the borrowers will find a decent job soon thereafter and the value of the home will rise, both as a consequence of the program.  But if the economy continues to tank for a while, Feldstein's program notwithstanding, you can have these borrowers now with recourse loans, therefore less incentive to look for work, and the loan even after it has adjusted, might still exceed 110% of value, if housing prices fall further because the program is perceived as inadequate and the market treats the program as the last straw.

It seems to me you need to keep the mortgages as nonrecourse and reduce principal on them to less than 100%, say 90%.  This makes the pill to swallow much bigger for the banks and the tax payers.  But it seems to me it also makes it much more likely that such a program would be effective. 

Wednesday, October 12, 2011

Nelson's Ghost

Doesn't it seem ironic that Mitt Romney has returned to front runner status? The Tea Party seeming in ascendency, yet the Republican Presidential candidate appears far more moderate, and now aggressively so.  Reading the first few paragraphs of the piece excerpted below, I thought of Rockefeller, who was Governor of NY when I was a kid.  Of course no primaries or caucuses have yet to be run.  Surely it is a mistake to pick the winner of the race before it has started.  Nonetheless, it is interesting to speculate about it.  Somebody should write a faux U.S. history, based on the counter factual that in 1964 Goldwater didn't get the Republican nomination.  Perhaps that's in store for us next. 

Tuesday, October 11, 2011

Anger or Enlightenment?

When I was in the tenth grade there was the National Moratorium Against the War in Vietnam.  I had recalled it being in May 1970, but I looked it up and it was a day in November 1969.  I mention this as an alert to anyone reading the piece who might have similar memories.  Mine are very likely off, and not just a little.  Now, back to the story.

By fall 1969, everyone I knew was against the War.  Ending it was a no brainer, though it would take more than three years for that to really happen.  But a few years earlier, when I first learned about the War in Junior High School, and seeing some of my classmates against it, I recall that being surprising.  My initial reaction was to support my country and therefore to support the War.  My feelings weren't America - Love It Or Leave It.  I don't know that I was reading a newspaper yet when I learned about the War, or if I was reading a newspaper then I had only recently started, so it wasn't that.  It was more that if you do the Pledge of Allegiance in class every day then when you hear about your country at war, your instinct is to be for your country.  It would take a while to come to the point of view that you could be for your country but against the War.

On the day of the Moratorium when I got to school, like everyone else, I found that somehow school was closed for the day.  I should add here that my school was on split session.  My first class was at something like 11:40 AM.  So school may very well have been open at 8 AM but closed down by the time I arrived.  Whether school was open earlier I don't know.  At the usual arrival time we were all hanging around outside the school and word spread that there was going to be a protest rally that afternoon in Bryant Park, behind the NYC Public Library Building.  One or two of my friends decided to go.  I believe that was James and possibly Henry.  There's that memory thing again; I'm not sure.  It was both a bus and a subway ride to get there, an hour or more in each direction, so going meant it would be for the rest of the day.  But school was closed so why not?

When we got just outside the park it was jammed pack and hard to get it in. I recall a few of those that were already in pulling up others who wanted to get in over a concrete railing, because the regular entrance was just impossible at that point.  I was a pretty big guy and unsure they could get me over the railing, but somehow they did and we were in.  We found a place to sit and pretty much hung out there the rest of the afternoon.  There were speeches from some luminaries - Mayor Lindsay, Representative Shirley Chisholm, and a few others I don't recall.  They were inspirational.  You felt as if you were part of something big and important and that being there mattered.  I was told later that I made it onto the evening news.  This wasn't for doing anything special.  My leg fell asleep from sitting cross legged for a long time.  I stood up to get some circulation in going.  The camera panned the crowd then and there I was, the only one standing.

The point I want to draw from this recollection is that protest then was an act of solidarity, organized in a way where some of the political establishment were leaders of the protest.  Yet with all the feel good that the protest engendered, the motive was nonetheless anger.  The War was unjust.  We as a country should never have escalated the conflict.  Having done so, we should stop it ASAP.  This was a simple message with a simple solution, both of those unifying.  Nevertheless, it is hard to see looking backward that the protest had much consequence. given how events unfolded afterward.

It just occurred to me as I was writing this that May 1970 was when the shootings at Kent State occurred.  I wonder why I conflated the two events.  

* * * * *

I want to turn now to the Occupy Wall Street movement and a piece in Today's New York Times by David Brooks that bothered me, a lot.   Brooks seems to be fed up with anger from the left, though I don't understand why.  He is six and a half years younger than I am so he missed being a teenager during the anti Vietnam War period.  He seems to only want wonkish solutions to America's problems.  Simple expressions of anger will not do.  He hasn't figured out that solidarity must precede any solution and the basis of solidarity, especially now, has to be anger with the system, which is totally screwed up and rigged to benefit those at the top.  We've seen this from The Right already, though as many have pointed out that movement had rich financiers feeding it support.  There hasn't been an organized expression of anger from The Left up to this point.  Why not have such a grass roots expression?

Having myself written a variety of pieces that fall into the wonkish solution category and seeing them go nowhere, while now seeing a fair amount of attention in the mainstream media focused on Occupy Wall Street, I've got to admire their stick-to-it-ness and good sense (from a marketing point of view) of not going down the policy path too early.  It is much easier to know what you are against - that's what drives the anger - than to know what you are for.  Hendrik Hertzberg in the New Yorker has a piece, A Walk in the Park, that seems much more descriptive of what Occupy Wall Street actually is.  Near the end he writes (note OWES is Hertzberg's own acronym for the movement):

What OWES doesn’t have—and is under some pressure, internal and external, to formulate—is a traditional agenda: a list of “demands,” a set of legislative recommendations, a five-point program. For many of its participants, this lack is an essential part of the attraction. They’re making it up on the fly. They don’t really know where it will take them, and they like it that way. Occupy Wall Street is a political project, but it is equally a cri de coeur, an exercise in constructive group dynamics, a release from isolation, resignation, and futility. The process, not the platform, is the point. Anyway, OWES is not the Brookings Institution.

Following this Hertzberg concludes on a hopeful note because what OWES should be doing is not solving all the problems, but rather kindling a spirit of trying to solve them in a much larger sympathetic community, and that seems possible, though at this juncture still improbable.  

This gets me back to Brooks.  The question to ask is do we really not have a road map of what should be down to put America again on sound footing?  Or is it that like peace between the Israelis and Palestinians, everyone knows the elements of what a solution looks like.  That's not the problem.  The problem is that there isn't the political will to get there.   Last year, their was a longish piece in the New Yorker about Chuck Schumer and Wall Street.  That piece illustrated the problem.  Why doesn't Brooks write about it?

Monday, October 10, 2011

Noble Nobel

I like the second paragraph in this blurb about economic analysis really being a careful reading of history.  At this late juncture in my career I regret not having more training in that regard, so I spent a disproportionate time theorizing and not enough time on the available evidence.   Sargent (in his early paper with Neil Wallace) vexed us in first year macro in grad school.  It's good to see he's come around from the thinking in that paper.   At a seminar he gave at Illinois some years back I flummoxed him unintentionally, by asking him whether he knew if the equilibrium of his model was unique.   He had assumed that, but hadn't proved it.  I was too shy to chat with him about it after the talk.  It probably won't ever happen, but if the opportunity were to avail itself, I'd like to chat with him now.  I particularly would want to know whether his political views have changed along with his economics.

Wednesday, October 05, 2011

Learning Technology in TV Sports Viewing

Over the years I've written from time to time a critique, or a how to, or an illustrative use post about learning technology. All of these posts come from my own explorations with the technology, what I've uncovered based on that, and a reflection about potential future use. A handful of the posts still get a fair amount of hits for which I'm grateful, since it shows others do get some use value out of what I've written and that provides some sort of validation for the activity in the first place. Of course I realize that many of the hits are driven by how Google prioritizes its searches and where my post fits in on the topic in question. I view Google as a de facto dictator in this respect, but largely of the benevolent kind.

I'm going to try to make the same sort of posting based on my experience as a sports fan watching on TV. I will focus on golf, tennis, football, and baseball, simply because that's what I've watched the most as of late. It's pretty obvious that other than reviewing a particular segment of an event via the DVR, as a fan there aren't experiments to be performed this way, so my learning about the technology is not quite the same as the learning I've had with ed tech. Also let me note at the something else pretty obvious. The technology in sports viewing can be used in two different ways. First, it can be there merely to help the fan visualize what is going on. In this respect the technology has no impact on the play itself. Second, the technology can be brought in as an additional referee, presumably an entirely objective one, to help in making close calls or in reviewing calls made by human referees that are contentious.

One example of the first use come from football, where it is now standard to have virtual markers on the screen for the line of scrimmage and the first down marker. The camera angle is not perpendicular to the field, so it helps the viewer to keep those yardage markers fixed on the screen. Further the announcers are not particularly reliable in determining whether on a close play a first down has been achieved or not. The announcers suffer from the same issue of parallax as does every other viewer of the game.  The virtual lines help the viewers make their own judgments about the success of a particular play and they also make it clear what the immediate goals are for the offense.  The humans who referee the game retain discretion regarding where to "spot" the ball, but given the spot whether a first down has been achieved or not is immediately evident to the viewer.  So this particular technology is very helpful and I give it high marks for improving the fan experience.

Another example of  this type of technology use comes from golf, where Protracer now seems ubiquitous (although maybe that is because I watch the major tournaments but not much other golf).  The camera has a tough time picking up the flight of the ball and/or while in flight the ball is only slightly bigger than a speck on the screen, which makes it very hard to view.  (In contrast, the camera is excellent at showing the player's swing, which is in full.)  The new technology, by illustrating the entire path of the ball, gives much more sense of the flight of the ball, the spin that was put on the ball, and whether the player hit a good shot or made a miscue.  Like the football example, this technology enhances the viewing experience and I appreciate it as part of what is shown.

Now let me turn to an example from baseball, where I believe the technology use is less beneficial, possibly even pernicious.  The technology use reminds me of when I used to play stickball at then JHS 74, in the school yard there.  We would draw a rectangle on the concrete wall behind our imagined home plate.  The rectangle would serve as the strike zone.  We'd color the rectangle in with chalk, with the thought that if the ball hit the rectangle some chalk would get on the ball and that way we could tell if it were a strike or not, should we dispute the call.  The technology today seems to do something similar.  A rectangle is shown on the screen to represent the strike zone and an image of the ball is positioned on the screen.  Balls in the rectangle are supposed to be strikes.  Those outside the rectangle are balls.

There are two different problems with this sort of rendering.  The first issue is that the method is inconsistent with the rules of the game.   While the width of the strikes zone is given by the width of home plate and that is invariant, according to the rules the height of the strike zone is from the knees to the letters (armpits) when the player is in his usual stance.  That height is therefore idiosyncratic from player to player.  The strike zone is not a fixed entity but rather something that varies with the batter.  A pitch that is high for one player can properly be a strike for another player, and likewise for low pitches. The technology, however, treats the strike zone as fixed, not flexible. 

The second issue is that the strike zone should be conceived of as a three dimensional object, with the third dimension the depth of plate.  At issue then is whether the trajectory of the ball crosses through that three dimensional object or instead remains entirely outside it.  For a pitch with a substantial curve or sink, this can be a big deal.  The right answer depends not on where the catcher ends up catching the ball, but rather where the ball crossed the plate.  A two-dimensional representation entirely obscures this distinction.

These points would seem theoretical only except that with a fair degree of regularity the fan sees both what should be strikes as they are represented on the screen be called balls by the umpire and what should be balls as represented on the screen be called strikes by the umpire.  The consequence is for the fans to consider each umpire as highly idiosyncratic himself and possibly unfair to one team or the other.   Fans may very well have that impression anyway, but here the technology makes things worse, in my view.

Given the progress with the technology in the other sports and how much money is tied up into baseball viewing, I've got to wonder whether this situation can be improved.  The view of the pitch is from centerfield looking toward the plate.  Imagine a different view (one that is not shown on TV at present) perpendicular to the standard view that shows the player standing at the plate and in ultra slow motion shows the pitch as it crosses the plate, in particular it's vertical trajectory.  I don't know whether such a view is really possible to obtain.  The time lapse is a very small fraction of a second only.  But if we had that view, it would really help inform whether the ball is in the strike zone or not.  Absent that view, however, I'm wondering whether what is shown is helpful or misleading.

Let me turn to the case where technology is used as referee.  The best example, I believe, comes from tennis where the Hawk-Eye ball tracker is now used to determine whether a shot is in or not.  As in other instances of using technology as an objective referee, this is done only when review of the play is requested.  It isn't performed otherwise, because it is time consuming to review.  One player challenges the call and there is a quota on the number of challenges per set, so a player simply can't slow things down with bad challenges.  The incentives are there to use challenges to get the calls right.  But the technology is different in Tennis than it is in Football, because the evidence that is reviewed in tennis is a snapshot of the ball hitting the ground.  The question of camera angle doesn't come up with that.  (Though I'm not sure why not and nor am I sure why the technology seems so accurate.)  In contrast, with Football review the video is watched by the human referees and whether the video provides a good view of the play can be hit or miss.  In part this difference emerges because in football there are many potential variables to be determined - fumble, movement on the line,  the position of the ball when the knees touched down, time on the clock, etc.  In tennis, the review is used only for in or out calls.  With this more limited scope the review can be good at providing that particular determination.

I would like to see something similar used in baseball, but not for balls and strikes.  Checked swings are a better candidate, one where regularly the home plate umpire surrenders judgement either to the first base or third base umpire (depending on whether the batter is left handed or right handed).  There is a parallax problem in determining whether the bat crosses the vertical plane defined by the front of the plate.  Wouldn't technology devoted to just that question be used as Hawk-Eye is used in tennis be an improvement on what we have now?  (My impression is that the vast majority of the time the player does "go around" but it is called less frequently than that.) 

I wonder if other sports fans would agree with my assessment.  I also wonder if baseball broadcasters, in particular, might experiment with alternative technologies for judging balls and strikes.  The announcing has gotten better in the way it discusses the mindset of the players from one situation to the next (and with pitchers in the booth then suggesting what the next pitch selection should be).  The technology is supposed to provide the fan with more objective information.  It would be good for there to be some critique done (other than my post) on whether the technology actually achieves that end.