Thursday, October 31, 2013

My love affair with Excel for teaching economics is taking some knocks

For the last several years I have been using Excel as a homework tool for the math modeling part of my course.  (And I use blogging for the narrative part.)  Students answer questions, some of which require them to do algebra based on cell references, and they get immediate feedback on whether their answer is correct or not.  This is done via Excel's IF command.  I use nested IFs that are of the form:

If the cell is blank don't give any feedback.
If the cell has the right answer say it is Correct.
Otherwise say it is Incorrect.

There is conditional formatting as well.  The Correct response is in green and bold.  The Incorrect response is in red and Italic.

Then I use IF in plotting my graphs.  This allows a graph to be built up from scratch as students answer questions that pertain to the information in the graph.

These two features in conjunction, plus that Excel can be used to display text in a readable way, particularly if you fill the cells with a white background, allows the homework to be a mixture of presentation of ideas and assessment of understanding those ideas, in one coherent whole.  All of this makes sense to me and I've viewed this as far superior to what can be done with an LMS quiz tool.

Further my approach is for them to do it till they get all the questions right - no partial credit.  At the end of the last worksheet a code is generated if all questions are done correctly.  They are to copy the code and paste into a linked Google form.   In the Google form they also enter their assigned course alias as a second check, so I can identify who they are and give them credit for completing the assignment.  There is also a paragraph box so they can enter comments on the homework.  I find that particularly useful, as I can react to the comments when we go over the homework in class.

The workbook asks them to choose their alias and enter their NetId up front.  Part of this is to give individualized values to the parameters in the homework.  The other part is to use in generating the code.  Here is an example of what that looks like.  I entered netid into the cell that asks for that information.  This is for a homework on bargaining.  neti is the first four letter of the NetID. 5 is a number that indexes the alias chosen.


Now for the issues.  Here are a couple of comments from the homework due last night. 

I posted it twice, because it always says to copy and paste. However, the excel file never allows me to copy the key so I just type it in instead. The double entry just provides a peace of mind that I put it in right.

I had problems with one of the entries. It kept converting my answers to dates for some reason. 

I don't know how to troubleshoot these, as I can't replicate the problems on my machine at home. Then, yesterday, I had an eager beaver student who was already working on the homework due next week.  He was having some trouble with it in that the feedback didn't seem to be working properly for him.  After some back and forth in email I asked him to send me a copy of the file he had completed. 

I don't know how this happened, but the file had lost its xlsx extension.  Some of the feedback IF commands had lost the cell references to be used and likewise the graphs were screwed up too. 

I didn't say this above but my worksheets are password protected and the cells with the feedback are locked, so students shouldn't be able to get into them or see the formulas.  They should only see the output from those formulas.  This instability manifested in spite of the precautions I had taken. 

I don't know what I will do if problems of this sort persist.  I feel quite out on a limb, as there is no community of like-minded instructors doing similar things with Excel.  Microsoft has a page aimed at troubleshooting formulas in Excel.  It is insufficient to address my issues.  I know how to troubleshoot my own formulas as I create them.  The Microsoft page is really about that.  What I can't figure out is what happens on the student's computer to break a formula that works on mine. 

If this were all Mac versus PC issues, at least I'd have an explanation.  I think some of these problems are happening when the student uses a PC as I was helping one student outside of class and she had some of this instability on her laptop.  (I create these at home on my Sony Vaio in Windows 7, Excel 2010.)  Possibly the version of Excel matters here.  Some students may be using Excel 2013.  I have that on my new Vaio ultrabook.  Maybe I should try to complete my homework on it, to see if there are difficulties.  But doing that sort of thing is a stab in the dark. 

I will say my prayers and bow to the computer gods.  I'm not sure what else to do. 

Monday, October 28, 2013

The Kennedys - A TV Miniseries

I was eight and in fourth grade when JFK was shot.  You're supposed to remember what you were doing when you heard the news.  Unfortunately, I don't.  What I remember came earlier.  We had the album The First Family and played it fairly often.  At the time, I knew many of the joke lines.  One was about ordering lunch at the White House during some diplomatic negotiation.  They go around the table with the orders from the deli, the last being Krushchev.  He says something like, "I'll just have a little bit from everybody else's plate."  The other thing I remember is watching JFK on TV.  I don't recall anything about the substance of what he said.  But I do remember the bags under his eyes.  He aged visibly while he was President.  It seemed like the weight of the world was on his shoulders.  Maybe it was.

In my never ending search for finding TV shows in the vein of The West Wing, I stumbled onto The Kennedys in Amazon Prime.  The Wikipedia entry says it premiered in the US on the Reelz network in April 2011.  I never heard of that network before and now wonder whether it is included in our package on Dish.  It explains why I missed this when it originally aired.  Apparently there is some dispute about its historical accuracy.  That mattered not so much to me.  I was more interested to see if I could reconcile the show with my memories.

The show is compelling in part because the actor who plays JFK, Greg Kinnear, has a physical likeness to the man he is playing, so much so that you can believe they are one and the same.  This in contrast to the actor who plays Bobby, Barry Pepper, who may have had the voice down very well, but simply didn't look like how I remembered RFK, though there clearly was an attempt in his character to try to physically resemble the President's younger brother and right hand man.  The best episode, by far, is the sixth one on the Cuban Missile Crisis.  There is a brief moment where you see the bags under the President's eyes, the only time in the entire miniseries where he appears this way.  In this instance the cause is the strain of the moment.

The President is at the top of his game here.  He plays every card in his hand perfectly, even while he gets conflicting advice about what to do.  He understands fully that Kruschev is testing him, but otherwise doesn't want a military escalation.  The blockade of Russian ships in the Atlantic, headed for Cuba, is the main mechanism for showing JFK's stern resolve.  But then a US pilot gets shot down over Cuba.  The military advisers say this demands retaliation.  Yet Krushchev had sent a conciliatory message via Dobrynin.  The decision was made to ignore the news about the pilot and respond to the message.  The Russian ships turned around.  The escalation was averted.

The buildup to this in the earlier episodes shows a more immature JFK, in his job as President (the Bay of Pigs fiasco is depicted as a none-to-strong JFK capitulating to the pressure put on him by the military), in his dealings with his father (Joe Kennedy is depicted as pulling the strings until he is dealt out by Jack an Bobby because of mob connections), and because of his philandering ways that prove an embarrassment to Jackie.  He offers a line of self-criticism that marks a turning point, "I'm not a kid anymore, but I'm still acting like one."

In all episodes after he returns from WW II, he is depicted as in constant physical agony with back pain.  To manage that he is on a cocktail of medications aimed at relieving the pain and allowing him to function.  These don't seem to impair mental function, but they perhaps explain his early indiscretions (the philandering seems to be something he inherited from his father) and misjudgments in office.

Another possible explanation is offered in the earlier history and his relationship with his older brother Joe Jr.  It was Joe Jr. whom the dad was grooming for the White House.  JFK's role was not spelled out and he thus pursued his own interests wherever they led.  He became the stand in when Joe Jr.'s plane was shot down in WW II, but he wasn't ready to play the role.  In the first year plus in the White House, he is still getting ready.

The penultimate episode, which is about the assassination, shows a President who has reconciled with his wife, where there is now affection and mutual respect.  Paradise found becomes a horror movie when the unthinkable happens.

There is much missing that we associate with JFK.  There is no mention of Teddy whatsoever.  There is nothing about putting a man on the moon.  He isn't shown delivering the inaugural.  Yet for all of that, the series captures the sense that JFK was the President we wanted, with the vision and the sensibility to elevate the nation.

George Will had a column, When Liberals Become Scolds, that I read just before starting to watch The Kennedys.  The column bothered me.  It takes the assassination as the turning point for Liberalism.  This seems wrong to me, in spite of the quotes of Scotty Reston regarding a piece written in the aftermath of the assassination and an editorial in the Times a few days later.  JFK had appealed to our aspirations and better angels.  LBJ was able to ram home the legislation that this vision implied.  Liberalism was still surging in 1964 and 1965.  It was the Gulf of Tonkin resolution that marked the turning point.  Had we a Civil Rights Movement without the Vietnam War, the country may have healed its inner wounds by now.  As it is, we clearly haven't done that yet.

But it is both soothing and energizing to hark back to a time when there was so much promise of doing better.  This is the appeal of The Kennedys, whether it has all the facts right or not.  

Friday, October 25, 2013

The Arithmetic of GDP and Debt

Below are links to an Excel workbook with two worksheets that have models to explain the relationship between GDP growth and growth in the National Debt, regarding only the arithmetic in relating the two.  There are no policy implications in this exercise as the models are far too simple to derive any policy implications from them.  The purpose of each model is purely educational, to get people to appreciate this arithmetic.  So much of what you hear in the news - pronouncements by lawmakers and pundits alike - seems ill considered or simply uninformed by knowledge of this sort of arithmetic.  So you might consider this demonstration as a prelude to a policy discussion, to bring the latter to a higher level. 

There are two videos as well - voice over of screen captures where each model is explained and manipulated.  The videos are meant as encouragement for people to play with the model themselves.  The videos are probably best watched at full screen, so the viewer gets a better sense of what working in Excel is like.

This play is done by pressing the various spin buttons and thereby changing the associated parameter values and then eyeballing the impact of the changes in the graphs.  The hope is that one can get a reasonable feel of what is going on by exploring each model in this way.  The user is not taxed in doing paper and pencil calculations to understand this, so the entry level requirement of making sense of what is going on here is pretty low. 

For those who do want to see the math - there is a text based explication of the model to the right and the various series that are plotted in the graphs are given below the controls, so one can learn how those series are generated by simply selecting a cell within a particular series and seeing the formula in the formula bar that is associated with that cell.  The entire workbook can be re-engineered in this way. 

Excel Workbook

First Video on the Simple Model

Second Video on the Model with Business Cycles

Sunday, October 20, 2013

Is Maureen Dowd getting it wrong here?

The question at hand is whether Bill-Clinton-like-schmoozing is the appropriate behavior for President Obama now in his interactions with Congress, as Dowd suggests, or if instead the real game is to orchestrate a way for Democrats to retake the House in 2014.

Charles Blow argued for the alternative yesterday and suggested the game is to box the Republicans into uncomfortable positions. 

Also, in Dowd's column the Panetta quote seems to me taken out of context.  It was offered before the deal on the Debt Ceiling was struck.  In retrospect, it seems Panetta was wrong here.  Obama played his cards right, at least until the crisis was over. 

There is something to be said about having the victor behave in a magnanimous fashion.  But that is when the war is over.   If this is just one battle and there are still many more to be fought with the current Congress, slapping backs and having Congressmen over to watch a movie at the White House seems like a wrong approach to me.  Dowd's approach would make more sense if non-Tea-Party Republicans made a break with their Caucus. 

Until then, game on.

Saturday, October 19, 2013

For A More Compassionate And Saner America

Some time ago I started an open Facebook Group called For A More Compassionate And Saner America.  I let it go idle when the Occupy movement started to capture media attention.  But now it seems to for it to resumes activity.  If you have a Facebook account, take a look.  And if you are interested in joining please request to do so.  Below is the message I posted earlier to day to the group site about the reasons to resume activity.

- - - - -
Perhaps it is time to resume this group in earnest. When "Occupy" got up a head of steam, I more or less shut it down because it was clear that Occupy had captured media attention. Given the recent national politics, now seems like a good time to resume, with an eye toward the midterm election next fall.

Just to remind members, the core founding idea of the group (there is a Group Purpose document in the Files area) was to restore marginal income tax rates to their levels when Bill Clinton was President, for taxable income in excess of $100,000.

You'll recall that President Obama had a similar recommendation, but his floor income level was $250,000. So the proposal by our group is to broaden the base who bear responsibility for paying more in taxes.

There are many more people with taxable income between $100K and $250K than there are with incomes above $250K. For lack of a better term, you might call this group "the professional class." So the idea is that if the professional class, in numbers, can express this same view it will give cover for "reasonable elected officials" of both parties to support the idea as well. If the idea made some headway, conceivably there could be real revenue enhancement to the Federal budget in 2015. In today's NY Times, David Firestone has a piece that says not to expect much at all from the current budget negotiation.

Three other points that I suggest the group embrace are:
i) A call to immediately end the sequester.
ii) Support of a Martin Feldstein proposal to cap itemized deductions, with the caveat that Feldstein wanted to do this in the absence of raising rates. Our group should want both.
iii) A return of the capital gains tax rate to its level under Clinton.

These suggestions, if implemented, will hurt in the pocketbook. They are made to share responsibility for revenue enhancement more widely and as a partial pushback against the rising income inequality in society. They are also meant to counter the position of many of the non-Warren-Buffet uber rich on taxation. If the professional class will bear their share, then the uber rich must do so as well.

Now a brief thought on the politics and the timing. Many people, Independents included, are scared about the size of the National Debt. The Far Right has leveraged this fear into their shrink government stance. The recent events have affirmed the essential role that government plays. But the fear about the National Debt remains. The no-new-taxes position is disingenuous in light of this fear. The people who have been maintaining that position now appear like kooks, whereas in 2010 they may have been seen (especially by Independents) as having some interesting ideas. A theme that affirms the role of government but wants to see shrinkage of the National Debt might win in 2014. We have heard so much about gerrymandering and safe districts. But midterm turnout is traditionally low. If it can be boosted substantially, because Independents see there is substance in exercising their right to vote, perhaps the House can be retaken and sanity can be restored.

These are the reasons why it is time for our group to resume.

Wednesday, October 16, 2013

Apocalypse or Keystone Kops?

Today is either the beginning or the end.  It's hard to tell which will happen.  There will be no forecasts from me.  I gave my analysis a week and a half ago, with the only possible equilibrium outcome that John Boehner falls on his sword.  Nothing else is consistent with rationality.  But I've already been wrong about when (or if) this crisis will end.  My forecast in that post was for it to end last Friday.  The error light was lit with that one.

Since then I've read several apocalyptic visions.  One was by Gary Wills, who argued that we had secession in all but name before the Civil War, with the South over represented in Congress since 5 slaves counted as one person for apportioning representatives, and that the real deal happened only when new western states were admitted to the Union that would tip the balance the other way.  He then goes onto argue that in a replay of history, we've already had secession in all but name from the Tea Party reactionaries, who violate the law with impunity.  Even if the default debacle is somehow avoided, Wills analysis makes it seem as if we are steadily marching toward another great cataclysm.

Another was  by Elizabeth Drew, who points out the hidden culprit in the rise of the Tea Party - the apathy of the rest of the electorate.   She brings to light that voter turnout in midterm elections is very low, hovering above 40% of the electorate.  And here she is talking about what happens on election day.  She doesn't mention the primaries, but one has got to believe it is worse there.  When ordinary folks who are not so excited by the current regime stay away, in effect that is inviting the crazies to the party.  The gerrymandering may exacerbate the problem, but the first and foremost issue is that apart from the election of the President most people choose not to exercise the franchise.  If normalcy is to be restored, that must change.  The next midterms are a year off.  It will provide a good test case to see if the corner is turned.

There are many pieces today on the Keystone Kops interpretation of what happened yesterday, such as this one by Dana Milbank.  I'm hoping that John Boehner is smarter than he looks.  In this interpretation, he needed yesterday to set up today, and bring to the House floor whatever the Senate delivers, without getting a massive revolt on his right flank about his own leadership in response.  Now out of time, there is no other play left that makes sense.

But, of course, we could still end up going over a tremendously high cliff. 

Monday, October 14, 2013


I got notified last night that Leon Moses passed away.  There was information about a memorial service and an academic biography.  He was almost 89 and his wife had passed away earlier this year.  I suspect he led a full life, though we stopped corresponding after the 1980s, so I'm unaware of the specifics of what he did later.

My first published paper was with Leon and it got into the AER; so that was plum.  And it was a good thing too since the papers I had carved out of my dissertation were going nowhere and I spent about three years pushing them before moving onto other research.

I was surprised to see that my adviser, John Ledyard, also had a piece with Leon.  I had thought my collaboration with Leon a bit odd, but seeing the paper with Ledyard maybe it wasn't so unusual.  Here's the story behind it. 

Leon had been the full time director of the Transportation Center, an administrative position, but he stepped down from that to return to being a regular member of the faculty.  He was to teach an intermediate microeconomics class.  To manage the reentry issue, he negotiated for having a student well trained in microeconomics to serve as his grader.  I was selected for this task.  I can't remember which quarter it was, but it was definitely during my third year in grad school, 1978-79.  While I'm not 100% sure of this now, I think the grading thing was really more an internship role.  What Leon actually wanted was a young guy who was current in then modern to technique to help formalize his intuitive ideas.

Somebody had to pull strings to make the grader job happen.  I was on fellowship and that carried a stipulation about not doing work for pay.   So a waiver needed to be granted.  I believe I got paid $500 for being the grader, which was on top of what the fellowship paid as a stipend.

Northwestern quarters are quite short - nine weeks of class and a week for final exams.  The first several weeks Leon and I were all about his class and how the students performed on the homework.  Then, sometime in the middle of the quarter, he initiated a conversation about an idea he had on inventory investment, as a way for a firm to take advantage of scale economies.  He wanted feedback from me on how to model the joint production and product pricing decisions.  That first discussion is what eventually led to the paper. We eventually had many more such discussions.  Both of us enjoyed arguing about the model we developed.

We continued to have these conversations well after the grading work had been completed.  Eventually, I came up with a model that utilized optimal control techniques, something I had learned in a class taught by Kamien and Schwartz, using notes that would eventually become their book.  This means that time is modeled as continuous and one solves differential equations to get at a solution to the model.  In retrospect, it would have been better to model this in discrete time, as we (really it was only me) made an error in the formulation and later had to publish an erratum.  The error would not have occurred in a discrete time model, where Leon's simple insight was that batch production and then selling off the product for many periods before the next batch is run is the best way to manage the economies of scale in production.  In continuous time, however, a u-shaped average cost curve in flow production is really not a way to get at economies of scale, because a rapid on-off-on-off sequence approximates constant returns with little or no storage cost incurred.  In the continuous time approach you need economies of scale in the stock production.  That gives a rationale for producing in batches. 

That paper was essentially completed while I was still a grad student at Northwestern.  Yet my collaboration with Leon didn't end after I began work at Illinois.  We talked a bit about mode choice in transportation to and from work (bus, train, walk, drive, etc.).  Leon wanted to develop a model where mixed mode was an equilibrium outcome.  I can no longer remember why this was of interest to him, but I wasn't very tooled up on categorical choice models, which may have been more interesting to the empiricist than to the theorist.  Ultimately we did not write anything in this area. 

We did write another paper that extended the earlier model to include plant location for a multi-plant firm.  It is perhaps more interesting for how that got done and what it lead to, then for the model itself.  I don't really remember this, but probably most of our conversations happened on the phone.  I do remember that we met at least once, and maybe twice, in south Florida when I was visiting my parents and Leon was on vacation with his family.  If you are a real scholar, even vacation is a time for work.  And then somehow Leon got us invited to go to Umeå for a conference on location choice, where we gave an early version of the second paper.  It was an exotic trip, my first time visiting Europe.

Umeå is about 500 miles north of Stockholm.  We had to go from the international airport to a regional airport to catch a connecting flight.  We were already zombie-like from the jet lag when we took a cab or a limo to the regional airport.  I don't think we figured out that the speedometer was in kilometers/hour instead of miles/hour so we thought we were really speeding.  That marked the first of many strange but interesting things on that trip.  It was early summer and it never got really dark in Umeå.  You could read a book outside even at midnight.  The bathrooms were in the Scandinavian style, with the toilet on the same level as the shower and a drain somewhere in the middle of the room, where you could sweep standing water after taking a shower.  Breakfasts were also exotic, with a wide variety of cheeses I hadn't had before served on those thick and heavy crackers and something like grits, but served with sour milk.  While we stayed in a dorm during the conference, our hosts treated us very well.   I do recall meeting another American there, a woman who was living in Sweden, but I believe we were the only ones who came to the conference from the U.S., so Leon and I were treated like dignitaries.  It made for a very enjoyable time.

The collaboration with Leon had indirect effects on me as well.  I wrote a couple of other papers on my own that amounted to derivative work on our first paper.  One was a short piece to make the model more symmetric in its assumptions.  If the firm was going to solve an inter-temporal optimization to come up with its inventory investment and pricing decisions, consumers too should solve a dynamic optimization to come up with their choices of how much to consume over time.  It was a harder model to solve, but I showed the core insight of the original paper remained intact when consumers are more sophisticated in their purchasing behavior.

The other paper marked my switch from the dissertation research to study of oligopoly models, where I had more success.  One of these was a paper on dynamic duopoly with inventory.  I'm rather proud of this paper, as it made a fundamental point that wasn't in the rest of the literature.  Heretofore people who worked in this area assumed that asymmetric outcomes (one firm is the market leader, the other is a follower) were a consequence of some asymmetry in the initial conditions (the leader got there first and leveraged that for strategic advantage).  My examples showed that you could have symmetric starting conditions but still get asymmetric outcomes and, indeed, that is to be expected in these sorts of models. Google Scholar says the paper got  32 citations, which is second highest among the pieces I've written.  I would never had thought to write on this topic at all if it had not been for the earlier work with Leon.

I've not otherwise written with somebody who was a near contemporary of my parents, where there is such an obvious age differential between the authors.  Looking back on this, I wish I had done more of it, with Leon and perhaps with other senior scholars.  It would have been a way for me to touch research issues that mattered to others and to ground my intrinsic interest in theory with practical questions which were posed to me rather than by me.

I now find myself at approximately the same age as  Leon was when he and I started to work together.  Perhaps I should be looking for some junior people to co-author on pieces, as a way to invigorate my thinking and possibly to pass on some nuggets to the next generation.  It's an interesting thought to ponder.

Sunday, October 13, 2013

Do I have to consume conservative media to consider myself thoughtful?

On Friday I found this piece in the Times: It’s Not Just Political Districts. Our News Is Gerrymandered, Too.  I felt challenged by it and wanted to think through a response.  There seems to be two different issues.  One is not seeing the full picture.  The other is that much of the news these days is delivered in a shrill manner.  Certitude has replaced reasoning based on evidence.  Listeners/viewers/readers start to imitate the pundits they follow.  Have I fallen into the trap on both counts, at least as far as thinking about our national politics? 

I tend to read a lot of opinion pieces, much less straight news.  I want analysis more than I want facts.  I produce my own analysis, quite frequently.  It is what I do, who I am.  I need fodder for that.  The analysis of others provides a point of departure.  So let's note that while the Washington Post in the linked piece is characterized as overly liberal (by Antonin Scalia), they do have George Will, Michael Gerson, Charles Krauthammer, and other conservative columnists.  Likewise, the Times has Ross Douthat and David Brooks, though Brooks is on book leave now.

Way back when I used to read the Sunday Times in paper form for hours - before, during, and after brunch, usually at the pancake house.  I'd give the daily paper a decent read as well (not counting the crossword puzzle, but I'm harking back to when Maleska did that since at the time I did that too).   I would dutifully read William Safire, not liking his regular columns, sometimes liking his On Language pieces, but reading through to the conclusion in any event. I had more patience then or was more willing to surrender my own thoughts to those of the writer. 

It is different now.  I am unsure of the causes.  I read the paper online at my computer.  That is one factor.  I am less in awe of the pundits now, viewing them more as peers than as superior life forms.  With my own regular blogging, I compare my writing to theirs.  They obviously are exposed to a lot of information that I don't have.  But on the analysis front, I can hold my own.  Indeed, it often seems that polemic substitutes for analysis.  (To be fair, this is also true with liberal pundits, Tom Friedman in particular.)  It is why about a year ago I announced I was Taking a Sabbatical from David Brooks.  Who needs the aggravation?  And then it is the news itself, that it seems so depressing or idiotic.  We appear hell bent on shooting ourselves in the foot.  In desperate times, that can be a rational act.  When it is the shooting ourselves in the foot which is the cause of the desperation, however, there is no apparent rationality.  In the presence of madness, analysis is not helpful.   It is replaced by a macabre fascination with the latest on the Debt Ceiling standoff.  It's like watching Rollerball.

I have been tuning out more.  I used to be a regular with the NewsHour.  Now I hardly watch it.  During the last election season, when they would have a Tea Party spokesman on the show, they would let that person give a canned response that didn't address the questions the interviewer asked.  I stopped being able to listen to it.  And between the aftermath of of the Sandy Hook Elementary School shooting, the gridlock between Israel and the Palestinians, and the chaos and horror in Syria, ignorance may not be bliss but being informed is definitely demoralizing.  So the sense I used to have of needing to understand things in a balanced way has been gradually eroding. 

I have come to greatly respect the writing and analysis of Thomas Edsall.  He is the one commentator I know who is interested in depth of analysis by soliciting multiple perspectives on issues, submerging his own voice perhaps in an attempt to let others speak their views.  He sets a very high bar, one I'm afraid I can't get over myself.  I do want to note that he writes only one (rather lengthy) column a week.  Perhaps there is a lesson in that.  If there is a need for more thoughtfulness in opinion writing, and to distance it more from the twenty four hour news cycle, maybe other columnists should also be asked to write less frequently. 

There is then the question whether I need to go outside the umbrella of the Washington Post and the New York Times and see what conservative pundits write when on their own turf.  Immediately after reading It's Not Just Political Districts...., the guilt feelings start to escalate so I do some Google searches on names I am familiar with.  From this I learned that William Kristol was fired from the Times (at the time I assumed he had simply had enough of writing for a non-conservative audience), with the cause not his extreme views but that he didn't do his homework in writing his columns.  I next searched for Yuval Levin, but was disappointed to discover that his most recent pieces for National Affairs dates back to 2011.  So I went to the National Affairs main page and found a piece Conservative Health-Care Reform: A Reality Check.  I start to read it.  Very soon, it begins to discuss market based reforms.  I stop right there.  The health-care market is characterized by market failure.  Robert Frank has a nice column from last summer that explains why.  I can't read through stuff that seems fundamentally flawed at the outset.  Then I do a search on Rich Lowry.  His posts seem like a hatchet job.  If he were simply a columnist for the National Review (I learned he is a columnist for Politico) then this would be fair game.  Paul Krugman's posts are often hatchet jobs.  But Krugman is not the editor of the New York Times.  Lowry is the editor of National Review.   When the editor does hatchet jobs, what can you expect from the rest of the periodical?

So I stopped.  The guilt feelings had subsided.  I came to the realization that yes, I may be narrowing my perspective and becoming less thoughtful about national politics. But preserving my personal equilibrium is more important.  If sanity is ever restored to our national discourse, I will resume where I left off. 

Wednesday, October 09, 2013

Bluster's Last Stand

The melting pot
Is left to rot
Tolerance not
In time forgot.

Saturday, October 05, 2013

MAD and Going All-In with Bad Cards

I learned some game theory while I was a graduate student.  At the time it seemed like the answer.  It took strategic thinking seriously and appeared to make sharp predictions about equilibrium outcomes.  Deterrence in the nuclear arena may have been its crowning achievement.  MAD worked.

I started to become disenchanted with game theory ten to fifteen years later, after learning about the Folk Theorem of infinitely repeated games which says, more or less, that any individually rational outcome can be an equilibrium - so much for sharp predictions.  Like general equilibrium theory before it, which produced similar results about what could be an equilibrium outcome, game theory itself had little to say about what we might observe, especially if we wanted to otherwise be general in the formulation.  The sharp predictions were a consequence of ad hoc assumptions made about the structural form of the game.

The last decade or so there seems to be a new phenomenon to upset the strategic apple cart, though I'd be happy to be corrected by folks who better understand history than I do that it is more a rehash of the megalomania of the fascists from the 1930s coupled with the utter paranoia of the Joe McCarthy years. This is the rejection of rationality itself, at least in public posture, by leaders who claim to be on a divine mission.

The first instance of this that we observed could be found in the utterances of President Mahmoud Ahmadinejad of Iran on the topics of Israel, The Holocaust, and Iran's plans for developing a nuclear capability.  The guy may have been rational in fact, but he came across to many people, myself included, as completely crazy - what he was doing didn't seem to be in Iran's own interest, even if you take the point of view of the iron-handed leadership of that country.  His successor is demonstrating that now by backing away from those positions.

Before I get to talking about the current situation with the Tea Party, let me talk a little about what economic theory should be good for, which is to think forward strategically, figure out what equilibrium looks like in the future, and then reason by backward induction about how that should impact present thinking and action.  So, with the debt ceiling debacle we are currently in, we might consider what the world will look like one month from now, which happens to be Election Day, though it is an off year for elections for national office.

In this simple analysis there are three possible states that might be reached:  (1) there is no agreement on the debt ceiling and the country ends up in default, (2) there is an agreement where a clean CR is passed, and (3) there is an agreement with some concessions about spending cuts added in.   It is important to note, if you are doing a game theory analysis, that we are already in the subgame where it was possible to avoid government shutdown by the passing of a clean CR, but that alternative was scrapped.

Alternative (1) is not just that all players lose, it is an unmitigated disaster that might very well cause a world-wide depression.  Alternative (2) would be a reasonable outcome economically, but it clearly would reduce the cachet of the Tea Party radicals in the House and/or it would result in John Boehner's ouster as Speaker, and it would result in a divided Republican party in the House.  It is therefore not a situation that rational Republican players would have desired at the outset.  If a clean CR had been passed before the shutdown, there would not have been the loss of cachet for the Tea Party.  Alternative (3) would be worse economically than alternative (2) but certainly better than alternative (1), but it would be horrible for the Democrats and President Obama, because it would reward hostage taking as a strategy by the Tea Party Republicans. 

Now add to this that Speaker Boehner has said publicly that he won't allow the country to default and all he has to do is bring the Senate Bill to the House floor for a vote to achieve outcome (2).  That now appears to be the likely equilibrium, with Speaker Boehner falling on his sword.  But if that's right, it makes what the Tea Party radicals have done seem irrational.  They will have played out the hand and lost, when they could have folded earlier and kept their stash.  If this outcome does indeed happen, and several days before the date when default would occur, it will make it appear that the Tea Party types severely miscalculated.  Rational players don't do that.

Let's turn to the decision making from Speaker Boehner's position.  He may still wish to hold onto his position as Speaker, so could delay his bringing the Senate Bill to the House floor, in the hope of getting both Harry Reid and President Obama to bargain, where neither has indicated any willingness to do so to date.  But, it would seem, eventually the Speaker must bring the Senate Bill to the floor if he doesn't otherwise extract concessions.  Understanding that, neither Harry Reid nor President Obama have incentive to compromise one inch.  Thus, in any equilibrium situation Speaker Boehner brings the Senate Bill to the House floor.  The only question is when.  And if even in delay he gets voted out as Speaker because outcome (2) was produced, then his incentive for delay is weak.

So we seem to be on a branch of the game tree that we should not have reached and having gotten this far, it would still seem that outcome (2) is the only possible equilibrium play.  That the Tea Party members of Congress appear to believe otherwise makes this seem more like a rehash of the Three Little Pigs, with them in the role of the Big Bad Wolf, yet hoping for a rewrite of the story's ending.

Public posture that seems irrational may make perfect sense as a tactical ploy, but interpreting what the Tea Party radicals in the House are doing as rational makes sense only if the threat of (1) happening becomes real for the Democratic Leadership.  That is reliance on an out-of-equilibrium threat to win the day.  It is a strange way to play the game.

If outcome (2) does happen then one might ask: what is the impact on future elections as a consequence?    It is hard to see this persuading Independents to vote Republican. 

There is perhaps a different way to make sense of what is happening from the Tea Party side of the equation - using an analogy with a wounded predator.  Such a predator fights very aggressively because survival is threatened.  Many commentators have written that the demographics are all wrong for the Republicans in the future, unless they significantly change their message.  In other words, if the options are either a slow death or a rapid one, then continuing the fight to the bitter end can make sense.  But that in itself doesn't produce concessions from the Democratic leadership. Indeed, it might very well have the reverse effect than intended and strengthen the Democratic hand.

In reading the news about the issues, it is very hard to trust what people are quoted as saying, not the words themselves but whether the words represent what they actually think.

Given the above analysis, my prediction is that there is a clean CR brought to the House floor by this Friday.  It will pass.  Then all hell breaks loose among the Republicans in Congress.  That's what happens when you you overplay your cards.

Friday, October 04, 2013

The Liberal View of Capitalism

One wonders how much of the conservative - liberal argument as it applies to economic issues hinges on the conservatives believing that everyone should turn into a Type A personality and liberals countering that the majority of the population is Type B and would prefer a world where Type B's can be productive.  What does such a world look like?  Most liberals are familiar with the macroeconomics of Keynes and associate it with the fiscal policies of The New Deal.  Is there a complementary microeconomic view that can be articulated at the level of the theory of the firm?

There is, though I believe it to be much less familiar to most liberals who are not economists.  The hero of this vision is not Keynes.  It is George Akerlof (and before Akerlof Arthur Okun).  If Janet Yellen becomes the next Fed Chair, as now seems likely, Akerlof may come to be widely known as her significant other.  But he is a first-rate economist in his own right.  Indeed, he is a Nobel Prize winner.

Akerlof's theory is rather simple to articulate, as is the debate between conservatives and liberals on this point.  The quintessential issue is whether pay should be performance based and hence vary from individual to individual who hold the same job (the conservative view) or if instead pay should be position based and not feature such idiosyncratic variation, except perhaps on a seniority basis (the liberal alternative).   Of course, liberals don't deny that performance matters.  Where they differ with conservatives is on how it should be rewarded.  Promotion should be the primary reward for exceptional performance.  Within a job classification, the workers need to be managed fairly, which provides the basis for equal treatment.  This is the essence of the liberal view.  

The vision for why the liberal view produces superior performance was supplied by Dumas père in The Three Musketeers.  It is embedded in the relationship between Athos, Porthos, and Aramis (the workers doing the same job) and D'Artagnan (their manager) and is captured in the phrase, "All for one and one for all."  Akerlof crafts that vision and related ideas from sociology to make an economic model of it.  For the non-economist, it might be framed as collegiality-driven productivity.  Here are the model's basic elements.

There is a minimal performance standard below which the employee will get fired.  There is a performance norm, substantially above the minimal standard, that typifies what workers produce.  The difference between the minimal standard and the higher norm constitutes a gift that workers give to the firm.  Likewise, there is a minimal wage below which workers would quit and find work elsewhere and there is an actual wage above that minimum that the firm pays to workers.  The difference is a gift that the firm gives to its employees.  Gift giving demands reciprocation for it to be sustained.  When that happens all involved feel good about the place of work and productivity is high as a consequence.

There is one more piece to the puzzle.  This regards how productivity is observed and what explains variation in productivity from one worker to the next and for one worker over time.  From the worker's own perspective, this is mainly due to random factors - circumstances beyond the employee's control.  Or, in the case where there is clearly a drop off in a particular employee's performance, it can be attributed to outside of work stresses (e.g., a sick child at home) that are apt to be temporary in nature.  The correct response in this case is not to punish the employee but rather for co-workers to chip in and pick up the slack.  Sometime in the future, the employee who received such help will lend a hand when another co-worker has a similar problem.

A conservative with an open mind might grant that collegiality-driven productivity can be a good thing, as long as the fire burns within all the workers, but will argue that eventually a worker burns out and turns into dead wood.  That is not temporary.  It is a permanent change.  Conservatives will argue that the liberal vision sustains the dead wood, who act as a drag on the entire system.  One needs, instead, a time-consistent way to purge the system of the dead wood.  Performance based pay does that.

Akerlof's model does not address that critique.  Before I provide my own answer, let me take a slight detour.  The Akerlof gift exchange model is essentially social in nature.  There is a different reason to depart from performance based pay that is intellectual in nature and is particular to knowledge work.  This other view is articulated by Daniel Pink in this RSA Animiate video and focuses on psychological explanations for productivity.  There can be performance anxiety or, if you prefer, writer's block. High performance is achieved when intrinsic motivation is strong and the individual becomes so involved in the work as to entirely lose a sense of self.  Making extrinsic rewards overt moves the individual's focus away from the intrinsic motivation and thereby lessons productivity.  Better to have the economic rewards provided up front so that one can put them out of mind when the real work commences.  While I have critiqued this video on how it represents the economics, I concur with its representation of the importance of intrinsic motivation. 

Burnout then can be thought of as the disappearance of intrinsic motivation.  The liberal response to the conservative critique is to look at the causes for why intrinsic motivation should disappear.  One possible cause is a sense of plateauing in the work.  There is little left to learn, no inherently new challenges.  For the most part it is a rehash of what's come before - been there, done that.  This cause is consistent with the conservative view.  When it happens, it would seem to make sense that the worker should move onto a new challenge; do something else.  There is, however, a different cause that is also possible.  It is that the individual confronts organizational barriers that seem arbitrary and anti-productive and those barriers repeatedly thwart the individual's creative efforts.  Eventually, the individual wears down from not seeming able to accomplish sensible change.  Gallows humor becomes part of the routine as the individual loses the desire to fight the system.  This second cause might reasonably dictate that more fundamental organizational change is necessary.  The burden shouldn't be placed on the individual to accommodate organizational inertia.

It is this second cause that forms the basis of the liberal response.  The Akerlof gift exchange approach must happen within a dynamic organization that makes organizational learning paramount.  (See Senge's The Fifth Discipline.)  Employee burnout might still happen in such organizations, but it would be far rarer.  When it does happen the appropriate organizational response should be job reassignment rather than immediate severance, this in accord with the gift exchange view.  Collegiality, in tone and actual practice, then characterizes good jobs and is at the heart of how the organization remains productive.

In my years working in learning technology, everyone I've encountered knows this implicitly, though I expect that the vast majority of them were not acquainted with Akerlof's gift exchange model.  Readers of this post now have those fundamentals.  I wonder if some of them might start arguing for movement away from performance-based approaches and toward collegiality-based alternatives, in education and elsewhere.  It would be good to match those implicit beliefs with some explicit rhetoric on the point and see others make this sort of argument. 

Quick Update on Replacing iGoogle

This won't work for everybody, but what I've decided to do is to use my dashboard for Lanny on Learning Technology as my homepage.  I've caved in and now use my Google+ profile for identifying myself in this blog.  (I have a different account, prof.arvan, where I continue to use my Blogger profile.)  With the Google+ profile, there is a black bar above the dashboard with all the useful Google links.  And then in the browser I have the bookmarks toolbar enabled and it has all other links I go to regularly. 

This puts most of what I need regularly one click away.  I would prefer to have previews, particularly for Gmail, Google Calendar, The New York Times, ESPN, and the Quotes of the Day.  In other words, I'd prefer that iGoogle stick around.  But I've not been especially impressed with the various NetVibes clones (including the original).  They'd make me still need to use the bookmarks toolbar and if you have more bookmarks than can fit on the screen at any one time, that is a pain.  This approach avoids that particular problem.