Tuesday, January 31, 2017

All Together Now

If they have the chicken pox
Putting people in a box
Once okay given by docs
Keeps the illness under locks.

Otherwise it isn't cool
A restrictive club, an elite school
Only helps to division fuel
And violates the golden rule. 

Monday, January 30, 2017

Soft Skills Revisited

It is a delight to write on learning in college stuff instead of you know what.

This piece from Inside Higher Ed caught my eye. Soft skills are very important, no doubt. Mid career executives learn these skills in the process of doing their jobs over a very long period of time, perhaps a decade or more. In contrast, this is the description of what Reinhardt is doing.

"Reinhardt’s program, the Strategic Career Advantage Platform (S-CAP), was launched in fall 2016. Each month, the college offers a Saturday session focused on a different topic -- for example, one four-hour January session focused on emotional intelligence. Others so far have covered impression management, listening and mediation.

At the end of the session, the students are not tested on the material. Instead, they write and reflect on what they learned and how they could realistically communicate that to an employer, said Reinhardt President Kina Mallard. The idea is for students to recognize real-life scenarios in which they have used those soft skills -- such as conflict resolution, mediation and listening -- and to then highlight that on their résumés or in job interviews."

I would call this soft-skills lite or perhaps the more pejorative, soft-skills appreciation.

Ten years ago I wrote a piece called Soft Skills Are Hard that was reacting to a piece from the Chronicle about discord in MBA education. The employers wanted soft skills. The students, however, wanted to focus on technical proficiency, because the latter was much easier to demonstrate while the former was more difficult to acquire. It should be noted that most MBA students have substantial work experience before returning for the MBA.  So they are different from undergraduates, who may have done an internship or two but are still pretty green in regard to work. 

Beyond those issues there are other concerns, perhaps more fundamental, such as what Sherry Turkle has pointed out.  Students need to engage in face-to-face conversations with peers, quite a lot of it, to learn empathy for others, how to schmooze, and to develop a taste for discussions of this sort.  If you don't try to certify this, college offers a great opportunity for it to happen on its own, through bull sessions with housemates.  

If these sort of sessions were happening would the the more formal approach that Reinhardt is taking be useful in addition?  I don't know.  Perhaps it would.  If those sessions are not happening, however, my guess is that what Reinhardt is doing is largely a waste of time.  In that case the students wouldn't be bringing enough to the table ahead of time.  

The holy grail, then, is getting students to engage in lots of one-on-one or small group conversation, where they can be comfortable, open up, feel a sense of vulnerability, and then engage in exploration of ideas with peers.  This is what college should be about rather than what it seems to be about now, grades and certifications.  

Perhaps Reinhardt will find its way to this by starting down the path it is headed in.  I wish them good luck on it.  For the rest of us, how do we get there?

Sunday, January 29, 2017

How much is lying part of our ordinary lives?

This post is prompted by something odd that happened to me yesterday.  Sometimes after reading a piece published in a popular outlet and written by an author with an academic pedigree, I will write to that person by email, giving some reaction to the piece.  I don't do this very often, probably less than a dozen times in total.  I did so yesterday, and got an almost immediate response from the author, somebody I had a previous exchange with a couple of years earlier.

The issue is that the title of the piece (which was about facts) suggested some tie in to the current political controversy, while the piece itself had no such connection.  The author, in his response, expressed disappointment at the title of the piece, which he did not choose.  It was imposed, apparently, by an editor/marketer whose job it is to get more eyeballs to look at the content that this periodical distributes.  My complaint should have been directed toward that person.  But that person was entirely invisible to me.  The author, who gave me a brief explanation of what had happened, mildly scolded me at the end of his message for being duped by the title.  I should know better.

I actually wasn't duped, as I've had this experience before, though the first time without the other author scolding me.  The irony, of course, is that periodicals like this one are taking Trump and his administration to task for all the lying, while they are under assault from this administration for performing hatchet jobs in their coverage.  And then there is the question of how this is supposed to work with readers like me.  If I feel disrespected by the way that title misrepresented the contents of the piece, what will that do to my relationship with the periodical and whether I continue to read stuff they produce?

It occurred to me to think this through from the point of view of the editor/marketer who made the decision.  Did this person perceive the act simply as doing the job, with little to no duplicity in the process?  It also occurred to me to ask whether this person is one and the same as the person who chose to make this piece featured in the online offerings of this periodical, which is a general interest journal.  If an appropriate title for the piece had been chosen, did the piece merit interest from a reader like me?  If not, and if many other readers would react similarly, was this piece appropriate for the intended audience?

In considering my own behavior, I definitely do not adhere to all the rules that are imposed on me.  Speeding is the quintessential example.  I asked myself whether speeding is tantamount to lying. After a while, I concluded that it is not.  The last time I recall being stopped on the road, which was on I-80 in Indiana while returning from a trip to Ann Arbor to visit my brother's family, the highway patrol officer asked me how fast I was going.  I told him.  He thanked me for being honest, cautioned me to drive slower, and did not give me a ticket.  I did drive slower for the remainder of that trip.  Although I still have memory of that incident, it doesn't seem to have any impact on my current driving.

There is also the issue of expedience as the prime determinant of behavior.  When I go to the liquor store the person at the checkout will invariably ask, did you find everything okay?  Sometimes the answer is no, but I don't say that. At this point I want to complete my transaction and leave.  Saying that I didn't find something would prolong matters.  Why bother?

People who are in a sales or marketing job may view their work the same way I view driving or talking with the guy at the checkout.  A little breaking of the rules is to be expected, isn't it?  What's the big deal?  And yet it seems that more and more of our lives as taken up with people who are trying to sell us something.  (Here I include trying to capture our attention, even if we don't directly pay for that.)  In turn, we spend more of our own time marketing ourselves.  Sometimes we do this, I believe, entirely unaware that we're engaging in self-promotion.  The lack of awareness, however, encourages mild forms of misrepresentation.

Earlier this week I became captivated by this promo from Forbes, Ten Guaranteed Ways To Appear Smarter Than You Are.  It is both humorous and frightening.  The piece is offered up earnestly, without any hint at it being ethically challenged or, for that matter, without any consideration of why the behavior it recommends will or will not be effective.  (My interpretation is that it is really about conforming to workplace norms and expectations, so is about confirmation bias in others at work.  Therefore, it might work, but it might be better for all if it didn't.)

A few years ago I wrote a post called Gaming The System Versus Designing It.  It started out that we've all gotten more proficient in manipulating the system to our own advantage.  One of the examples given was commercial standardized test preparation, such as training offered by Stanley Kaplan.  At root, is there any real difference between taking an SAT prep class and following the suggestions given in the Forbes promo linked above?

There is also the famous Lord Acton line:

“Power tends to corrupt and absolute power corrupts absolutely. Great men are almost always bad men, even when they exercise influence and not authority; still more when you superadd the tendency of the certainty of corruption by authority.”

Lying may have become more normalized as elites distanced themselves from the rest of the population.  It's hard to know this.  The Gulf of Tonkin incident happened in 1964.  Nixon became President in 1968.  Did that mark a departure from the Eisenhower years or not?

Even Leave It to Beaver had Eddie Haskell.  But Eddie Haskell was such an indelible part of the show because he stood in contrast to the Wally and the Beaver, who were much more earnest.   Now, has each of us turned into Eddie Haskell?

Thursday, January 26, 2017

Musings about Macroeconomics

I was a reasonably good theorist in microeconomics when I did economic research for real (until 1995 after which I switched to learning technology).  I never did numbers at a research level and I never felt I understood macroeconomics at the same level of depth as I understood microeconomics.

Now, considering the future economic situation of my family, where I've done a little looking at our finances recently, and as a concerned citizen, where we know that there is a pretty strong correlation between macroeconomic performance and our national politics, I thought I'd go through several little exercises here so others reading this, who have less economics training, can consider the same issues from their own perspective.

Given my background, I'm going to go through a micro foundations set of considerations first.  Then I will consider macro policy.  In total I hope this might be a useful primer for some.

Your Income and Your Savings Rate

Since tax time is approaching, you might want to leverage the time spent assembling the information needed to complete the forms by also doing some tracking about your personal finances.  I'm going to talk it through here based on my situation.  Somebody else might build a generalized spreadsheet that you could use to make such calculations.

Leslie and I each get a W2 form.  I also get a 1099R form for my pension.  The IRS might consider the pension income unearned, but I like to consider it together with wages so as to make comparisons with earning pre and post retirement.   University employees can participate in a 403B plan, which is like a 401K plan for others.  That is one obvious place where people save financially.  In Leslie's case, the size of the contribution to the 403B plan was determined at the time of enrolling in the program.  Thereafter monthly contributions have been deducted from her paycheck.  Thus this sort of saving decision is quite passive.  Serious thought about it occurred once.  Thereafter, it is pretty much out of mind.

Another one that is like this happens if you have a mortgage.  We have a 15 year fixed rate mortgage.  So our payments are the same each month.  It is therefore quite easy to determine the annual payment.  The bank where we have our mortgage tells us how much of that payment is interest.  In a month or two they will send a statement with that to us.  In the meantime, I note that my online banking reports this.  The difference between the annual payment and the interest paid is equity built up in your home and should be considered savings.  It is another significant way that ordinary people who are homeowners save. Again, the decision to do this is quite passive.  Our mortgage payments are deducted automatically out of our checking account.

We do have some investment accounts where at our stage in life for the most part the money just sits there, for later use when the need arises.  These earn some return.  (In contrast, money in a checking or savings account now earns essentially nothing because the interest rates there are so low.)  The return is reinvested.  That is an additional form of savings.  Then you can look at checking and savings accounts and compare end of year balances between 2016 and 2015.  If the balances are higher in 2016, the difference represents the amount saved.  If is the other way around the difference will be negative and the absolute value gives the amount dissaved.

Some people have income from other sources (for example, they hold real estate or they are part owners in a small business).   In principle, there is no difficulty in handling these alternative sources of income.  In practice, particularly when there are capital gains or loses which are accrued but not realized (the capital gain is realized when the asset is sold, until then it is accrued), accounting for those can be more art than science, so I'm simply going to ignore such income in this discussion.  Likewise, when you purchase a consumer durable - a car, a major appliance, a piece of artwork or some furniture, etc., conceptually these things have resale value, so the consumption on the good is only the purchase price less the resale price after a year. The part that isn't consumption in the purchase price is then also savings, though in kind rather than financial.   If you are more anal than I am, you can do some tracking and calculations to figure out how much value is in your real property.  That's just too hard for me.  So I'm ignoring it here.

With the data we have so far you can compute a rough household savings rate.  I did that for my family yesterday.  I got around 25%.

How Savings Rates Vary

There are several factors to consider that matter a lot for determining the personal savings rate.   One is obviously income.   Low income households save very little if anything.   If low income persists for many years, such households may have little to no net worth.

Another factor is the age of household members.  When our kids where young, it seemed that there was nothing left at the end of the month to put into a savings account or into an investment account.  Spending directly on the kids, on family travel, and on the household took up pretty much all the take home pay.

Another factor is current indebtedness/current wealth.  Much has been made about incurring debt in college.  Those carrying substantial debt no doubt have that strongly influence their consumption choices,  keeping their current spending more modest so they can pay off their loans.  Conversely, those who have accumulated wealth, perhaps as a consequence of a bequest from parents, have that as assurance and likely spend a greater fraction of their current income.

Still an additional factor is how expected future income compares with current income.   Normally people just starting out in the labor market expect to climb the job ladder some and with that see their earnings rise.  Conversely, most people at or near retirement expect to see earnings drop in the future.  Future prospects impact the current decision to save.

Let me add one more factor here, irrational exuberance or its opposite, irrational pessimism.  From around 1999 till when the housing bubble burst, savings rates in aggregate for the U.S. economy were very low and I believe turned negative around 2004 or 2005.  Those who owned homes saw their home values appreciate and seemingly acted on the belief that those values would keep rising.  If you have capital gains income that is substantial, why save in other ways?  Of course, when the bubble burst such people found themselves in trouble.  Many ended up losing their homes.  The flip side of this (excessive pessimism) is taking savings and putting the money under the mattress for fear that if putting it into an uninsured investment it will not be possible to get the money back out when it is needed or to not trust that insurance will pay off when the investment fails even in an insured investment.  The flip side can create its own panic scenario - a run on a bank.

Marginal Propensity to Save/Consume

If you get an additional dollar of income, you either spend it or you save it or you divide it between the two uses.  The marginal propensity to consume is how much you spend out of that additional dollar.  The marginal propensity to save is how much you save out of the additional dollar.  The two taken together must satisfy the identity MPC + MPS = 1.  So if you say something about the marginal propensity to save, you are implicitly saying the reverse about the marginal propensity to consume.

One of the issues impacting the MPS is whether the person views the additional dollar as coming with strings attached or not. A loan of a dollar that must be repaid is quite different from a gift of dollar that implies no obligation of a return gift.  Another issue impacting the MPS is whether the additional dollar impacts the prediction of future income, in Milton Friedman's terminology it increases permanent income, or if it has no impact on the future, again in Milton Friedman's terminology it is an increase in transitory income.   The difference in the two notions is exemplified for the former by getting a pay increase at work while for the latter the income arises from winning at bingo at the church social.

A different factor that impacts the MPS is whether people are liquidity constrained or not.  Liquidity constrained people would like to borrow more (dissave) but can't because potential lenders view them as default risks, so won't lend to them.  The MPS of a liquidity constrained person is often zero and possibly negative. (The way it could be negative is if a lender trusts the person for a loan after the income increase where the person wasn't deemed trustworthy beforehand.)

For non liquidity constrained people, does the MPS vary with wealth?  This may be more of a contentious point.  My own belief is yes.  Uber rich people like Bill Gates or Mark Zuckerberg have MPS equal to 1.  They can afford to buy whatever they want.  If they don't buy something it's because they don't want it.  The affordability of something desired simply isn't an issue for them.  No doubt, there is more than a little hand waving in what I say next.  If liquidity constrained people have an MPS of 0 and the uber rich have an MPS of 1, it is not a bad assumption that the MPS of people rises continuously with wealth, once the liquidity constraint is no longer binding.

The point is that if you did income redistribution under this assumption and played Robin Hood, by taking a dollar of income from the rich and giving that dollar to somebody who is poor, aggregate consumption would rise (savings would fall).  Income distribution in the opposite direction would then have the opposite effect.

So Much for Households, What About Businesses?  

I'm going to say less about business because, frankly, I don't have the same ordinary experience as I do as a head of household.  I've never run my own business.  Nonetheless, I think I can get the fundamentals out so the discussion is balanced.

The operative decisions are:  How many people does the business employ? What wages are paid? How much investment in human capital (skill development of the staff) is made?  What about investment in physical capital (plant and equipment)?  Those are the input choices.  On the output side there are similar questions.  How is the product or service priced?  When is new product brought to market?  When is an old product retired?   Surely there are further questions to consider, like how should expansion into new markets geographically occur, how should the product be marketed so how much should sales be integrated with production, and how should the firm face emerging competition from other firms that are new to the industry?

For the sake of this discussion, the key way to think of these questions is to consider expectations about the future, near term and longer term, and how those compare with the situation at present.  If demand for product is expected to grow that is a reason to invest in human capital, physical capital, and increase the size of the work force.  If current profit margins are already low and competition is expected to heat up more, that is a reason to consider getting out of the business.

For those firms who want to invest and/or expand the size of their work force, we can think of them in three different categories.  The first have sufficient cash on hand from retained earnings to entirely finance the investment themselves.  The second may not have that much cash but they are viewed as safe investments so can borrow as much as they want at market interest rates to finance the investments they plan to make.  The third are viewed as riskier than that.  These firms either have to pay a premium to secure a loan, an admission that default risk is present, or they can't raise capital at all and in that sense are like the liquidity constrained buyers out there.  They may perceive an investment opportunity but it dies on the vine and never turns into wine because they can't raise the financing.

Looking at some Macroeconomic Variables and their Values at Present

Given the recent to do about "alternate facts" let me make two observations that may trouble some readers.  First, there are many potential variables to consider.  Which ones to bring to people's attention and which ones remain in the background is something of an art form.  Second, people trained in the discipline agree much more on the microeconomics (what I said above) than on the macroeconomics and the efficacy of policy (or not).  Chicago School (free market) economists will come to quite different conclusions than Keynesians.  I am a Keynesian in my orientation/training.  I'll try to make my personal biases apparent at the appropriate time.

Three variables that are normally considered in macroeconomic performance are: the unemployment rate, GDP growth rate, and the inflation rate.  Better performance of the economy as a whole is identified with low unemployment, high GDP growth, and low inflation.

For the U.S. you can find data on these variables at various sources.  Here's a bit of a look:

Inflation Rates U.S. - There are some graphs at the link.  Inflation last year was quite low, below 1% much of the time.  It is beginning to heat up a little now and is currently at 2.1%.  If we could sustain that, it would be fine.  When it rises much above 2%, however, the economy begins to under perform because of inflation.

GDP Growth U.S. -  There are three components to GDP growth.  One is inflation.   Because of that, GDP graphs and inflation graphs will correlate positively.  Sometimes the inflation effect is netted out and what is reported is GDP in constant dollars relative to some base year.  That is not done in the graph which is linked.  The next component is population growth.  The final component is productivity growth. In the third quarter of 2016 GDP growth was 3.5% and much higher than earlier in the year, where it was less than 1%.

Unemployment Rate U.S. -  The unemployment rate varies through the business cycle. It is very high during a recession.  It is much lower when there has been high GDP growth for a sustained period of time.  That growth implies greater aggregate demand and gives a reason for firms to hire additional people.  There is some debate about whether the unemployment rate and the inflation rate are negatively correlated or not.  The Keynesians tend to believe there is such a correlation though it may be only operational at or near full employment.  When I was in graduate school in the late 1970s we went through a period of stagflation where this correlation was apparently severed.  History may matter on this.  There was a sustained inflation in the 1970s that preceded the stagflation.  We've had relatively modest inflation for quite some time, more than a decade, but we've also been below full employment for most if not all of that time.  The current unemployment rate is 4.6%.

There are some other variables that have gotten attention lately, consideration of which make the conversation richer, but also more complex.   The first one is the real wage, the wage adjusted for inflation.  A Keynesian view of the labor market would say that when below full employment real wages will be flat and changes in the demand for labor will be met by changes in the unemployment rate.   In fact, that seems to be the history for unskilled and semi-skilled workers, though not at all for highly educated workers.

Real Wages - Some other factors should be mentioned here to explain this history.  One is the decline in unions.  Another is increased mobility of plant location, so firms can credibly threaten relocation and get wages concessions even when there is a union present.  Likewise, the possibility of automating work acts as a break on wage demand.

The second variable is the labor force participation rate.  In the simplest conception, you look at total labor supply, total employment, difference those, and divide the difference by the total labor supply to get the unemployment rate.  But the Bureau of Labor Statistics takes a more nuanced approach.  A person who is not working is part of the labor supply only if the person has been actively looking for work.  People who are not actively looking are then deemed out of the market.

A rich person who is able in body and mind may be out of the labor market because the person doesn't need the income from working.  Such people definitely exist but they are few in number compared to the size of the economy as a whole.  Other people who are out of the labor market, people who are not rich, don't seek employment either because they are disabled in some way or because they are discouraged and have given up looking for work.  ADA is supposed to come to the aid of people in the first category.  I am not expert on how effective ADA is in achieving its goals.  But because it is present I'm simply going to lump those who are disabled but who can't find work into the second category.

Labor Force Participation Rates -  I am not sure what a healthy number is here, but if you think it should be at or above 90% and you see it is in the low 60s% and has been declining for a while, that is disconcerting.  It also explains, perhaps, some of Donald Trump's comments about the true unemployment rate, in his mind the one where the discouraged people are counted as unemployed rather than out of the market.

This document takes a longer view and disaggregates the information in a way to see more of what is going on.  Take a look at Table 1 on page 2.  There are participation rates by age and by gender.  Teen and young adult participation rates are lower as are participation rates of senior citizens.  This sort of difference allows the aggregate rate to be influenced by composition effects.  If there are more people overall in those age categories with low participation rates, the aggregate will fall.  If you look at the rates for males from 55 to 64 over time, that paints a picture that explains the disaffection in older males, particular if you couple it with doing the same type of comparison with the female participation rates for that age bracket and the next younger bracket.

The last of these sort of variables to consider is life expectancy.  Much of a to-do has been made about the recent decline in life expectancy among whites along with the associated increase in opioid use, assumed to be an indication of desperation rather than merely a recreational habit.  Given improvements in medical science, this sort of decrease is unexpected, and a warning sign that some things are not right.

Up till now I have focused on the U.S. only.  Now I want to turn to an international look.  There are two types of variables one might consider.  One type is exchange rates and how the currency of one nation appreciates or depreciates relative to another.  I'm going to ignore that here.  The other type is interest rates.  While there are many possible rates to look at, one way to compare countries is to look at the rate that the Central Monetary Authority charges member banks.  These are on short term loans, I believe one month, with the effective rate then annualized. 

Global Interest Rates Charged by Central Banks - In many countries this rate is quite low.  In Canada it is 0.5%.  In both Europe and Japan it is 0.0%.  In the U.S. the Fed currently has the rate at 0.75%.  Real rates of interest are the nominal rate less the inflation rate on that particular currency.  While I haven't verified this, the countries that have higher interest rates in the table also likely have higher inflation rates, though countries that are experiencing substantial real GDP growth and are already at full employment will have high real interest rates.  So, my interpretation of the low real rates is that the global economy is not growing much if at all beyond population growth, and may not even be keeping up with that.

Closed Economy or Open Economy

Here is an imperfect metaphor by which to consider the issue, but before I get to that I want to note that this is the section intended to bridge the gap from describing the macroeconomy to asking what is good macroeconomic policy.  The metaphor I have in mind is to look at states within the U.S.   If you live in Illinois as I do, should you focus on the economy of Illinois only (closed economy) or focus on the economy of the U.S. overall (open economy)?  When considering policy, which focus is appropriate if you are in state government and thus making that policy? 

Paul Krugman, a noted Keynesian and a vocal Liberal, has been recently making closed economy arguments about the U.S. economy as a whole.  He argues that we are at or near full employment, where we weren't there until quite recently.  Krugman is also dead against Trump.  The arguments Krugman has been making serve as a way to bash Trump.  So those arguments may be made for that reason instead of because they provide the right way to frame the question.

However, a friend who is an economist and is far less politically animated points out that longer term interest rates are rising in the U.S.  As I've already indicated above, there has been a recent blip up in inflation.   This is happening even while global interest rates are very low.  So maybe a closed economy view for the U.S. has some merit now, because full employment has been attained.

Let's make one further observation here.  In the U.S., states don't correlate their fiscal policy.  But, for example, economic activity in Illinois will be influenced by fiscal policy in border states, and vice versa.  And it may be that a policy meant to benefit residents in one state ends up benefiting residents in a neighboring state, while harming residents in the state of origin.   A closed economy focus will ignore those external effects.

Restoring Fiscal Policy as an Option

Immediately after Obama took office, in January 2009, there was a large stimulus package passed by Congress.  During the lame duck session of 2010, before the Tea Party would shift the House majority to the Republicans, there was a second stimulus package passed.  Some have also argued that ACA would have a substantial impact to stimulate employment, by holding down the costs of health care and therefore controlling the costs of hiring additional employees.

There is debate about whether these stimulus packages worked.  In the popular conception, there was also some confounding between the initial stimulus and TARP, which was passed while Bush was still President.  TARP was enormously unpopular, in large part because it seemed to benefit the bankers and financiers who caused the crisis.  The view of the initial stimulus has been similarly tarnished.  But most Keynesian economists think the opposite.  The stimulus prevented a second Great Depression.  An even larger stimulus, and one that didn't include so much in tax cuts for wealthy people, would have done even better.

Since 2011, the Republicans have controlled at least one branch of Congress and in 2011 there was the Debt Ceiling Crisis.  Fiscal policy at the Federal level has been much more contained since.  Republicans have taken control of many state legislatures and governorships as well.  Consequently, fiscal policy has been more contained there.

The consequences have been perplexing.  I will illustrate by going back to a microeconomics look at the situation where I live.  Our house is right across the street from a park.  The park is popular with residents and with non-residents who have little kids.  Often, cars will be parked outside my front door and I see parents taking there kids to the playground where there is a sliding pond and a swing and a sandbox.  The playground is on the west side of the park.  On the east side there is a flower garden that is quite attractive in the spring and summer.  The flower garden is visible to everyone who drives  into the development from the entrance on Duncan Road.   It makes an immediate good impression of the neighborhood.

The park in one of many parks that are part of the Champaign Park District.  They maintain it and do a good job with the upkeep.  The commons areas that surround the walkways in our community are also maintained by the Park District, and that is kept up quite nicely as well.  I believe the entire funding for the Park District comes out of the local property taxes that we pay.

In contrast, many of the roads in the area, including Windsor Road, which is a main drag and heavily utilized, are in a horrible state of disrepair and have been this way for many years.  Some roads, such as Curtis Road, have recently been redone and are in much better shape.  The repaving of Curtis Road was done as an adjunct project to them putting in a new Curtis Road exit on Interstate 57.  So it isn't as if it is impossible to redo the roads.  The issue for why it doesn't happen more broadly is lack of funding.  And here I'm guessing that such funding comes from overlapping jurisdictions - perhaps some Federal funding, certainly some State of Illinois funding, and then perhaps some local Champaign funding as well.  You only have to drive down Windsor Road once to know that it should be redone.  But the politics of getting that to happen now seems will nigh impossible.

During the last campaign there seemed some growing consensus about doing a major infrastructure  package at the Federal level.  We'll see if it comes to pass.  Even if it happens, my guess is that it will be too small and not sustained for long enough.

The construction work that one associates with infrastructure investment generates income for those people doing the work on the project.  Thus, legislation that calls for infrastructure investment is often described as a jobs bill.  If done sufficiently intensively, it can be used as policy to address both low labor force participation and to raise the real wages of unskilled and semi-skilled workers.

Paying for that type of investment requires raising taxes.  If the taxes are put disproportionately on the very wealthy, they will no doubt object to that.  But the macroeconomic consequence should be like the Robin Hood sort of income redistribution discussed earlier.  That is the Keynesian view. 

Wrap Up

My motivation in writing this piece is to consider professionals like myself (doctors, lawyers, accountants, university professors, etc.),who have done quite well in the income distribution, even if we don't consider ourselves rich.  We are much better off than the median household.   We should be paying more in taxes, not for our own private benefit, but for the good of the order.  Further, as there are many more such professionals than there are those who are uber rich, our paying more in taxes sets an ethical tone that the uber rich should pay more in taxes too.  Indeed, they should pay a lot more.

The Republicans as they are currently structured are an anti-tax party.  So the argument I just made will not fly with them.  The question is whether it can fly with upscale Democrats.   It seems to me that if it can the Democrats can get past the critique that the elites don't care about ordinary people.  In contrast, if upscale Democrats appear like Republicans on taxation, I'm afraid they'll fail to put together a winning coalition, even as the country flounders now.

Monday, January 23, 2017

Socialism Reconsidered - Part 1

Here are a bunch of separate threads that have been occurring to me over the last few weeks and now accumulated in one place.  At the end of the piece I will try to unify them into a whole, though my main intention is to get each thread out there for contemplation in its own right.  I should point out that none of this is about the immediate future.  I can't write in a constructive way about that.  This is all about the longer term.

1.  The business guru Peter Drucker argues that each of us should have two careers/jobs.  The first one is for pay and what we normally think of as work.  The second one is meant to be done volunteering and is there to satisfy our social conscience.  It's been a while since I read Drucker on this, but I don't believe he says much about the proportion of our time devoted to each career.  That is something to consider and keep in mind.

2.  A good introduction to the great economic thinkers is Robert Heilbroner's The Worldly Philosophers.  Chapter 4 deals with David Ricardo and Thomas Robert Malthus.  Of the two, Ricardo was the more optimistic regarding economic possibilities.  Yet Ricardo saw a potential restraint on economic growth.  The landed gentry obtained "economic rents" (Ricardo is the one who coined this concept) from those farmers who worked the land but who didn't own the land.  There was no upper limit on the size of what those rents might be.  Ricardo feared they could suck most of the resources out of the economy and incorrectly reward an entirely passive activity, land ownership, and thus not sufficiently reward merchants and labor.  Reading about Ricardo, one sees the seeds of much of our current economic predicament.

Rent seeking and, more importantly, the preservation of rents through thwarting of potential competition, are on the rise.  Think about Private Equity Firms and, in particular, the out-of-this-world compensation for their CEOs.  Or consider how highly concentrated high tech has become and the resulting move to the right by the CEOs in that industry.  Or consider the tragedy of the EpiPen.  These are just a few examples.  Many more could be readily provided.

3.  This one is my bread and butter issue and why my blog is called Lanny on Learning.  College education for upper middle class kids, think of kids who went to New Trier High School, is getting worse and worse while the kids are becoming more and more credentialed.  There is dysfunction in the system that is quite apparent to me but hardly gets discussed.  That tuition has been on the rise gets almost all the press.  That learning is on the downs gets much less consideration in public discussion.  (And if learning is on the downs for the affluent kids, where is it for everyone else?)

There are many and varied causes of this.  One might be tempted to focus on more recent causes (e.g., the kids have their heads in their laptops or their phones round the clock) but here I will focus on a cause that's been around for quite a long time, the degree as a passport to a good job.  The link is to a thread about a commercial that I saw on TV when I was in high school.

At one level there is no problem with arguing that an education produces human capital that has value in the labor market down the road.  That is good and sensible. The problem comes from focusing on the prize only and then viewing the education entirely as an instrument for getting the prize.  This makes the students themselves overly concerned about grades and quite willing to surrender their own learning to that.  An outsider might think doing the one would contribute positively to achieving the other, but in fact they are somewhat opposed, especially in the development of critical thinking skills.  Students implicitly understand this and become increasingly alienated about their education as a result in their latter years in college.

If things are to improve, the importance of the degree as passport must lessen or disappear entirely.  Education would still be important to produce thoughtful, caring, and well functioning citizens and to help people realize their full potential.

4.   As a kid I heard the Allan Sherman song, Automation, which was my first exposure to the idea that machines can and will replace people in the workplace.  Sometime later I became aware of something much earlier, Charlie Chaplain's classic Modern Times.  The vision there was something different - work itself was regimented so it fit with what the machines can do.  We now romanticize about manufacturing work because of the wages it paid.  We don't talk about the nature of the work itself and what that did to people.  There may have been pride in laboring hard to make a contribution.  But the process was brutalizing.

Now we live in an age of robots, drones, and artificial intelligence.  White collar work is being automated away.  What work will survive into the future?  Thomas Friedman had a recent column about this that I thought interesting.  It's called from From Hands to Heads to Hearts.   Hands at work is history, the factory jobs that are no longer there.  Heads at work may be the present but for how much longer?  If AI can perform better than people in much work that used to be done by humans, those jobs will also disappear.  A while back I wrote a little bit of science fiction on this called, The Economy as One Big Brain, where I concocted software called The Virtual CEO.  Let AI perform the executive function and people do best what people till can do.  For Friedman that is working from the heart.  That makes sense to me in a world where very smart machines enable us to do just that.

5.  Truman integrated the Armed Forces in 1948.  Until the military draft ended, in 1973, this was a mechanism to bring tolerance and understanding of fellow Americans who were from different backgrounds.  But I never experienced that.  I only know it from reading what others have said, such as this recent Op-Ed.

I did experience integration in the schools via busing, though as I will argue the integration was limited.  I started junior high school in 1966, which was pretty soon after the Civil Rights Act.  I believe busing started in NYC schools under court order around then, though maybe it was going on before that as well.  I don't remember.  The integration was partial because of tracking.  The SP classes in junior high and the honors classes in high school were not integrated much at all.  If memory serves, of the about 200 students in Arista in high school (these are the kids who would take those honors classes, it was a large high school with more than 1150 students in my graduating class) there was one black kid among them and one emigre from Cuba.  So while gym class was integrated (and, ironically, economics was too since there wasn't an honors version of it) the bulk of the classes I took were not.  The TV show Room 222 overlapped my time in high school.  It gave the gloss version of what an integrated classroom was supposed to be like.  In retrospect, I would have liked to experience the real thing, to have a more informed opinion on how it might work.  Let me illustrate what I have in mind.

In eighth grade in French class, after our first exam our teacher reseated us based on how we performed on the test.  Mauri R. was the highest scorer and he got the front left seat when facing the teacher.  I got the second highest score and sat behind Mauri.  Sitting to Mauri's right was the student who scored lowest on the test.  Sitting to my right was the next lowest scorer.  This is the only time in my memory where a teacher made a deliberate attempt to have the better students help those who were struggling.  I have no recollection of whether it mattered, but it certainly seems like an interesting practice to try.  That French class was all white students.  So it is certainly possible to consider the general issue of whether mixing stronger and weaker students is good for learning without bringing race into the equation.  That there was tracking tended to limit this possibility from being tested when I was in school, though there was definitely variation in student proficiency even within the classes intended for gifted students.

The enthusiasm for busing ended with Reagan and anyone who has read Kozol's The Shame of the Nation knows that schools are highly segregated.  But in large part that is because housing patterns are highly segregated.  This essay, The Case for Reparations, will challenge the reader.  And you might not agree with its conclusions.  But it is hard to disagree with the history described, much of which is otherwise out of view for white readers.

It seems evident to me that if we are to experience integrated housing patterns that produce integrated schools it will be because the solution was imposed, in the way that Truman integrated the Armed Forces.  The "free market" won't produce this outcome on its own accord.  Our history since the 1960s suggests that it won't.  I should add something here about integration by class as much as integration by race.  Growing up in Bayside there were working class people in the neighborhood.  Jerry M. was a fixit man who lived across the street and came over to the house fairly regularly when my dad was out of his element on home repair.  Alex H., who lived diagonally across the street from us, was a fireman.   My dad was a lawyer.   This sort of integration grounds people.   So I believe that both need to happen.  There is the old New England joke about Which Way to Millinocket?  The punchline is - you can't get there from here.  Maybe you can't.  But we won't know unless we try.

6.  When I was in college I spent a lot of time staring at the ceiling while lying on my waterbed, thinking about the meaning of life questions.  How could I be comfortable living inside my own skin?  It would be more than 20 years later before I became aware of Maslow, yet somehow I was able to piece through to a sense that self-actualization was the proper goal for me.  In this I was aided by going through bouts of depression, first in high school, then again in college before I transferred to Cornell.  I knew I couldn't subvert myself to a more mercenary end.  Not that I wanted to be poor, but I couldn't see making money as other than a byproduct.  As an end to itself it would just bring on the depression again.  Fortunately, I found a fit for my talents where my true goals could be realized.  In retrospect, I was cut out to be an academic pretty early on.   I'm glad I was able to stumble into that.

But I was also a nice guy and I could see being of service to others as a worthy goal, even if in practice when it happened it was more with people I already knew.  Elsewhere I've written some idle speculation about joining the Peace Corps after college, but I doubt it was a realistic alternative for me.  Indeed, through much of my career that part of the persona would manifest less strategically.  In a pinch, I might help somebody out who wasn't expecting it ahead of time. I didn't always do this when the opportunity arose and sometimes the pinch wouldn't be there, so I can't say there was an ongoing stream of selfless acts in addition to doing my day job.   I am aware that there's been a bit more of it since I've retired and am more time abundant.  Some of it happens in teaching, helping out a student who is struggling. 

In one of my volunteer activities now, I'm finding there is a way to blend self-actualization and selflessness.  I don't think I could have done this in my early 20s.  But with many years as an administrator under my belt and quite a lot of writing, particularly of blog posts like this one, I'm finding the mentoring and support role I play are clearly beneficial to others yet are also acts of self-expression.   This would seem close to the ideal.

I've been scratching my head on the question whether I'm unique this way or if many other people who have had a similar career trajectory might be able to do something like this later in their careers.  Since much of this volunteer work for me is done online rather than face to face, it occurred to me that my former colleagues who work in online learning would be well positioned to do something similar, though fewer of them write as much as I do.  Many, however, are much more accomplished at running an effective organization, skills that would be quite valued in this type of volunteer work.

7.     Two sorts of beliefs seem to permeate the worldview of high income earners (think Silicon Valley types).   One of these is that ability can be distinguished along a vertical dimension (so some people have high ability and others have low ability) and that people should be rewarded for their ability.  This is in contrast with the Socialist view that Marx popularized:

From each according to his ability to each according to his needs.

The other belief is the just-world hypothesis, according to which if somebody observes another person getting low reward, then the observer comes to believe that the other person is deserving of that outcome.  To this I add my own observation that the reward distribution itself has become more skewed, but this increased skewness is not necessary for high ability people to be rewarded or for there to be a just world.  Compressing the reward distribution, as I wrote about here, is feasible, at least at a conceptual level.

* * * * *

This is the part where I promised to briefly connect these various strands.  I want to do so here not by coming up with a grand policy solution, which is beyond me now, but rather by asking, can people who consider themselves liberal articulate their own like strands of economic issues that matter to them?  Politics often offers up answers - raise the minimum wage, make college education tuition free - without exploring sufficiently the economic issues that the policies are aimed at addressing.  To the non social scientist, it may seem obvious what the problem is.  Yet there tend to be unanticipated consequences to policy.  For example, those who believe in public schools, such as Diane Ravitch,  probably don't anticipate Kozol.  So it is helpful to parse what we want at an issues level from what we want as policy.  One point of my piece was to get issue candidates out there for people to chew on.

Another point, a bit more indirect, is to ask whether up-scale liberals can get out of the mindset of voting their pocketbook and instead take more of a perspective based on Rawls' Veil of Ignorance when determining what they want economic issue-wise.  I would call this shifting to a Rawlsian perspective being socially responsible.  Socialism, as I meant it in the title of this post, is an approach that takes a shared responsibility for every member of society.

As I'm finishing up this piece, it is a couple of  days after the Women's March on Washington and elsewhere around the globe.  Judged by turnout, it was an enormously successful event.  Obviously, many people have had their passions raised and wanted to participate.  It is unclear to me about whether that is mainly a negative reaction to Trump or if it is an affirmation of what the march was about.  The Mission Statement for the march is fundamentally about human rights. 

Human rights are necessary.  I certainly don't doubt that.  Yet I fear for the Democrats and their vision for 2018 and 2020 elections, that many will regard human rights as sufficient, where to me that is clearly not the case.  Economic issues matter a great deal too and it may be harder to articulate a shared vision on the economic issues because different members of the coalition are located quite differently in the income distribution.

There is also whether one can come up with a coherent narrative about the economic issues that is robust in a changing economic environment.  Alas, we tend to have soundbites only, not a full narrative.  Ross Perot's Giant sucking sound comes to mind as an example of the latter.    I haven't produced a coherent narrative here, but the threads above could provide some elements for that.  Admittedly, much of that is from the perspective of my own personal view of work.  It therefore abstracts entirely from work done by the hand.  However, I have previously produced an essay that talks about those issues, called Hard Hats That Are Green.  Put the two together and maybe you begin to get at a complete picture.  It's the complete picture that we should be after.

Wednesday, January 04, 2017

Burnout Revisited

The lead essay in the second round of David Brooks' Sidney Awards is this piece by Andrew Sulllivan called I Used to Be A Human Being.  Sullivan is a former blogger extraordinaire who ultimately did serious damage to his health as a result of being an addict of always online.  Then he went through a process of self-reclamation which seemed to work, only to find that he was eventually succumbing to his old ways.  If you haven't read Sullivan's piece yet, I encourage you to do so.  It is revealing and may shed some light on our own online behaviors.  Not coincidentally, I too did such a reflection recently in my piece Putting My Brain In Mothballs.  So I may have been primed for Sullivan's piece, but I originally thought it was just going to be recycled Sherry Turkle, and I didn't want that.  (She gets ample mention in Sullivan's essay.)  I put off reading Sullivan's piece for that reason.  I was pleasantly surprised by it, for its personal perspective into the issue and also for the necessity that he argues for about having an extreme cure.  This is addiction we're talking about.  It is not merely a minor bad habit to overcome. A drastic problem requires a drastic solution.

Somewhere in the middle of reading Sullivan's piece, a memory was triggered that I wrote something on this subject a long time ago, March 2006.  That post, in turn, was triggered by something of a big event in the edu-blog universe.  Stephen Downes, who publishes the newsletter OLDaily, had announced that he was stepping away from the work for an indefinite period.  This occasioned many of the people doing edu-blogging to reflect about their own circumstance.  D'Arcy Norman was one of those folks and he picked up on my post in his own reflection.  (I changed the host of my blog since writing that post.  My post can now be found here.)  The comment thread on D'Arcy's site is interesting, both in describing why the online communication is so compelling and in the pitfalls of getting too immersed in it.

The thing is, that was more than 10 years ago, which seems like eons in Internet time.  At the time of writing that post I wouldn't get onto Facebook for another 2 and a half years.  I didn't get my first smartphone till the following fall.  And this was well before the burst of the housing market bubble, so from a macroeconomic perspective things were reasonably optimistic.  The burnout I was feeling when I wrote the post was really much more of the old fashioned kind - getting beat up from the job. Indeed, I changed jobs latter that year, moving from the campus IT organization to the College of Business.  Nevertheless, that the technology had a narcotic effect was clearly evident then.  There should be no mistake about that.

Since then, to steal a metaphor from when I was a teenager, we've moved onto harder drugs.  The lags between producing online content and getting feedback on it have come down dramatically.  The "like" button creates an anticipation that feedback will be coming.  And further, while I was pretty adamant about producing long and ponderous blog posts, and still cling to that conviction, I now generate a lot more short-length content.  Many people do.  On the one hand, the short posts seems to please some of my friends, who clearly find that content more accessible.  On the other hand, it feeds the beast.  Shorter-length content can be generated at greater frequency.  I should add here that with much of my day not scheduled, in contrast to how things were when I was working full time, I've got that much more time to be online and noodle around.  That discretionary time is both a blessing and a curse.

While most of what Sullivan writes I found myself agreeing with, on one or two things his experience differed from mine.  One of these is about reading books.  I too struggled right after the semester ended to read the novel I had planned to immerse myself in as escapist fiction.  I soon wanted to click away to check email and Facebook.  So that much is the same.  But I found that if you keep trying it for a few days then its easier to get into the story and the attention span for reading the fiction improves.  I won't say that I reached the point where I was as absorbed as I used to be as a teen reading fiction.  But I was improving in my concentration.  So I'm not sure that reading should be ruled out in favor of meditation.  In my view, the big thing is to have some ongoing regime where the stimulus is from one source only and that is not interrupted by electronic communications with friends or colleagues.  I'm guessing that the brain will heal itself in that circumstance, though it might take quite a while.  No doubt, there is also great temptation to end the regime prematurely and return to previous behaviors.

The other thing, and Sullivan does mention the election, is that it is such a big deal this time, partly because so many people are bent out of shape about it (and I am one of them).  The regime of leaving the computer screen for an extended period of time to be offline and therefore disconnected, while perhaps quite appropriate for restoring one's mental health, seems at odds with doing something (what, I'm not sure) either to resist the Trump regime or to make the world a better place in spite of it.  Further, venting is usually a healthy early expression that leads to subsequent action.  That many people are venting now is entirely understandable.   But it makes being online compelling in a macabre kind of way, seeing all these people express their intense irritation. 

So I think you can have one or the other, but not both.  And until you decide which one it will be, you're apt to bounce between the two.  That's the way it has been for me since the fall semester concluded.

Monday, January 02, 2017

Divided We Fall

Like many others I spent a good chunk of the holidays reading various analyses and post mortems on our national politics and the recent Presidential election.  I am not going to chime in with my two cents on this, which is unusual for me, but my feelings are still too raw and I'm trying to avoid inflicting pain on myself.  Instead I will be taking on what is a safer topic, in the sense that I have little emotional stake in it, but it is still a worry, no doubt.  But I did have a reason to mention those analyses, such as this one by Jonathan Rauch, How American Politics Went Insane.  Some general points from them that I will try to apply in this piece are: (1) we don't know a good thing when we have it; we only can tell in retrospect, (2) in the process of trying to make things better we may very well make things worse, and (3) whatever system we have people will game it and expose weak points that may not be obvious to the developers and the reformers ahead of time.

I want to talk about voice activated virtual assistants.  My wife is now a big fan of Alexa.  She is definitely not the only one.  She learned about it from family friends.  Here is a piece that compares features of the leading competitors, the others being Apple's Siri, Microsoft's Cortana, and Google Assistant.  The piece implicitly is being a cheerleader for use of the technology.  It doesn't say anything about the unanticipated and quite possibly pernicious consequences that might result from use of the technology.

In the process of composing the previous paragraph I received an email from LinkedIn where the featured piece is entitled Just How Dangerous Is Alexa?  The timing of this is almost too much for me.  Clearly, others are worried about the same issue.  And some of those others know a lot more about the technology and security matters than I do.  So I will leave that to them and here do some wild speculation, imagery really, about what might go wrong if other parties have voice recordings of us.  I will borrow from TV and the movies in providing examples.

The show 24 was compelling to watch and I was a big fan.  Part of the attraction is how it was able to inject a dystopian vision of technology and make it an integral part of the story line.  In Day 1, there was an episode where surveillance cameras seem to track Jack Bauer wherever he went, so his remote tormentor, Gaines, could order Jack to do as commanded and succumb to blackmail, with Gaines knowing immediately if his orders had been obeyed.  This type of intensive monitoring is very frightening while at the same time makes for captivating viewing by the 24 audience.

In Day 2 there was an episode which is more relevant to the topic at hand.  In episode 23, a hacker named Max had built this incredible machine to manipulate voices.   All it needed as input was a short sample of the speaker's voice.  Then, as output, it could produce new sentences spoken by that same voice, in such a reliable way that the intelligence services would be convinced that the voice was authentic and not a fake.  If a capability of this sort is even remotely possible, imagine the havoc that it might create should your own voice recordings fall into the wrong hands.

Let's turn to a different movie, The Matrix, and particularly this image, which I think serves as a good metaphor for our relationship with technology companies.

This is meant for us to ask, do the technology companies have our own interests at heart?  A rule of thumb from when I used to do voice recordings at work is that 1 minute of voice takes up about one MB of disk.  That's about 8 year's old information.  Compression is surely better now but maybe the voice recordings are richer as well to offset that.  Does the Cloud storage of voice recordings that the technology company's employ have the right security for it?  Or do the technology companies not get cost effectiveness when they add security layers?  More importantly for this post, how would any of us who reside in one of these pods know the answers to those questions?

The last movie I will use here is from long ago, 1974, the Francis Ford Coppola film called The Conversation, which appeared in the wake of Watergate.  With ordinary technology now (SnagIt) I can record any call I'm part of when done on my computer.  I actually do this with some frequency so that others who are interested in the call but can't make it at the time can view/listen later.  How hard would it be for third parties to make recordings of calls on our smartphones?  I'm guessing, not very.  How would we know if this is happening or not?   We have Joseph Heller to thank for this line from Catch-22: "Just because you're paranoid doesn't mean they aren't after you."  Yes, indeed.

It seems to me we who live in virtual pods have our interests aligned on these issues.  What to do about it, I'm not sure, so maybe we can't yet agree on how to manage things.   But I hope we can agree now that simply waiting for such audio content to get hacked is not the right way to play our cards.