RCT’s as Slow Learning

Ricardo Hausmann writes,

Consider the following thought experiment: We include some mechanism in the tablet to inform the teacher in real time about how well his or her pupils are absorbing the material being taught. We free all teachers to experiment with different software, different strategies, and different ways of using the new tool. The rapid feedback loop will make teachers adjust their strategies to maximize performance.

Over time, we will observe some teachers who have stumbled onto highly effective strategies. We then share what they have done with other teachers.

Notice how radically different this method is. Instead of testing the validity of one design by having 150 out of 300 schools implement the identical program, this method is “crawling” the design space by having each teacher search for results. Instead of having a baseline survey and then a final survey, it is constantly providing feedback about performance. Instead of having an econometrician do the learning in a centralized manner and inform everybody about the results of the experiment, it is the teachers who are doing the learning in a decentralized manner and informing the center of what they found.

Pointer from Mark Thoma. Emphasis added.

Read the whole thing. I had never before thought of randomized controlled trials as embedded in a top-down approach to learning. He is suggesting the decentralized learning could be faster. Might the same be true in medicine? And is this also a case against MOOCs?

Praise for the Council of Economic Advisers

1. Timothy Taylor writes,

When you read a CEA report, there is always a certain admixture of politics, and at some points over the roughly 40 years I’ve been reading these resorts, the partisanship has been severe enough to make me wince. But it’s also true that one can read just about any report looking for ways to discredit it. My own approach is instead to search for nuggets of fact and insight, and over the years, CEA reports have typically offered plenty.

2. Robert J. Samuelson writes,

Thumbing through the annual report of the White House’s Council of Economic Advisers (CEA) is always an education. This year’s 430-page edition is no exception. Crammed with tables and charts, it brims with useful facts and insights.

●On page 62, we learn that the growth of state and local government spending on services (schools, police, parks) has been the slowest of any recovery since World War II. One reason: Payments into underfunded pensions are draining money from services. . .

Probably a useful corrective to my typical focus on what I didn’t like about the CEA report.

The Contemporary Campus

I watched this panel with Charles Kesler and Peter Wood live. I thought it was well worthwhile, and I recommend viewing it, all the way through the Q&A.

At one point in his presentation, Kesler waxes nostalgic for the New Left of the 1960s. Wood later challenges him on this point. However, I agree with Kesler that what student demonstrators of the 1960s wanted was to be treated as grown-ups and to be free to take risks. Today’s radical students seek protection. It seems to make today’s students place a lower value on freedom than did the New Left of the 1960s.

Another interesting idea was that there is a “presentism” among today’s students. TColleges cater to this by not assigning books written before the students were born.

Maybe I’m guilty of “pastism” at my age. But with my high school students, I find myself frequently wanting to talk about history. The second World War, Vietnam, the Nixon Administration, the Arab oil embargo, etc.

Grumpy Monetary Theory

John Cochrane writes,

The value of money is set by how much there is vs how much people expect the government to soak up via taxes — or bond sales, backed by credible promises of future taxes.

If the government drops $100 in every voter’s pocket but simultaneously announces “austerity” that taxes are going up $100 tomorrow, even helicopter drops would have no effect.

Read the whole thing. My preferred view is that money is a consensual hallucination. But Cochrane’s views are also worth considering.

The Secular Decline in Real Interest Rates

Lukasz Rachel and Thomas D. Smith write,

Our analysis suggests the desired savings schedule has shifted out materially due to demographic forces (90bps of the fall in real rates), higher inequality within countries (45bps) and a preference shift towards higher saving by emerging market governments following the Asian crisis (25bps). If this had been the whole story, we would have expected to see a steady rise in actual saving rates globally. But global saving and investment ratios have been remarkably stable over the past thirty years suggesting desired investment levels must have also fallen. We pin this decline in desired investment on a fall in the relative price of capital goods (accounting for 50bps of the fall in real rates) and a preference shift away from public investment projects (20bps). Also, we note that the rate of return on capital has not fallen by as much as risk free rates. The rising spread between these two rates has further reduced desired investment and risk free rates down (by 70bps). Together these effects can account for 300bps of the fall in global real rates.

Pointer from Timothy Taylor. Rachel and Smith expect that the forces driving down real interest rates will continue to operate. However, Taylor also cites and e-book on real interest rates in which the authors foresee a shift in the underlying fundamentals.

I believe that the outlook for real interest rates is most important for governments around the world, which have run up high debts. A rise in real interest rates could accelerate sovereign debt crises.

Some Global Demographic Analysis

The IMF’s David E. Bloom writes,

Ninety-nine percent of projected growth over the next four decades will occur in countries that are classified as less developed—Africa, Asia (excluding Japan), Latin America and the Caribbean, Melanesia, Micronesia, and Polynesia. Africa is currently home to one-sixth of the world’s population, but between now and 2050, it will account for 54 percent of global population growth. Africa’s population is projected to catch up to that of the more-developed regions (Australia, Europe, Japan, New Zealand, and northern America—mainly Canada and the United States) by 2018; by 2050, it will be nearly double their size.

Read the whole thing,

A Handle Comment

He writes,

1. My vision of the future is indeed that the political parties will divide up the middle class into two groups of ‘beggars’ fighting each other for a bigger slice of the pie. And I agree that government interventions in the big three sectors have made things worse than they would otherwise be, but that the trend of prices increasing faster than wages would still be happening had those policies remained static, or even without them. And it’s the policy-indifferent trend, and the forces behind it, that matters.

Remember, prices of real estate are reaching for the sky in the central economic or political hubs of almost every country in the world, regardless of the huge variety of local zoning and development rules. . .

2. I think that those ‘cultural reasons’ will fade in importance, and, if anything, become mere badges and ways to signal tribal membership but without any genuine political significance. The culture war is over and the progressives won a decisive victory against traditionalist social conservatives, and we are presently observing the mopping-up operations. You may be pleased or saddened by that result depending on your perspective – and might does not make right – but it’s a fact. A lot of people are in denial about this. The once mighty force of religion in American politics was reduced to impotence and must now try to survive an era of increasingly overt persecution.

…progressivism is unique and has a special competitive advantage because of its emphasis on equality of results and willingness to use the government to intervene to achieve it.

It can claim to be a transcendent ideology and at the same time tell its ethnic and identity-group clients that disparities in life outcomes are caused by oppression and that correcting these unfair evils requires leveling which just so happens to take the form of government payments and preferences that disproportionately benefit these groups. That is, it can rationalize treating citizens differently in order to achieve social justice. The other ideologies can’t do that, they claim neutrality and prize uniform treatment and non-intervention.

Unfortunately that probably means a much more racially-conscious politics in our future on all sides.

It would be interesting to see a dialogue between these views and those of Yuval Levin in his forthcoming The Fractured Republic.

The Case Against Occupational Licensing

Edward Rodrigue and Richard V. Reeves write

Since state licensing laws vary widely, a license earned in one state may not be honored in another. In South Carolina, only 12 percent of the workforce is licensed, versus 33 percent in Iowa. In Iowa, it takes 16 months of education to become a cosmetologist, but just half that long in New York. This licensing patchwork might explain why those working in licensed professions are much less likely to move, especially across state lines: [next they have a chart showing the lower rate of mobility for licensed professionals]

Pointer from Mark Thoma. The article points out several other adverse effects of overly restrictive occupational licensing.

It seems to me that in the interest of regulating interstate commerce, Congress could do pass a law saying that someone licensed in state X is entitled to work in that same occupation in state Y unless state Y can give a compelling reason unless state Y can provide a compelling reason otherwise. As its stands, variations in licensing requirements work like interstate tariff barriers, which our Constitution was designed to eliminate.

The Agony of the GOP, 2016

My take on the Barry Goldwater debacle is derived from a book I read 50 years ago by Robert Novak, called The Agony of the GOP, 1964. The book was to tap the market that Theodore White found with “The Making of President, 1960” and subsequent works. I don’t think that Novak’s book did nearly as well. I read it only because my father was sent a review copy, and he was not interested.

What I remember from the book was all of the idiosyncratic factors that went into the 1964 election. For example, George Romney (Mitt’s father) gaffed himself out of the race by saying that a briefing he had received on Vietnam consisted of “brainwashing.” In hindsight, that remark seems like a nugget of insight, but it offended Republicans who were staunchly anti-Communist and saw Romney as giving aid and comfort to the enemy by accusing our side of brainwashing. [UPDATE: that gaffe came after 1964. I was a bit worried about my memory when I put up this post. I should have checked. By the way, I don’t still have a copy of Novak’s book. I with I could have remembered more of the idiosyncratic factors that were actually in it.]

Another random event that effected 1964 was Nelson Rockefeller’s remarriage. Having survived politically after a divorce, he figured that getting remarried would not be a problem. But he married the woman who had broken up his first marriage, an in those days that offended people, particularly married women. Down went Rockefeller.

Think of the events that are conspiring to make Donald Trump a possible (likely?) nominee. The primary schedule, with the largest early voice going to small states and southern states. The large field, which allows a candidate to appear to be a big winner with less than 50 percent of the vote. The strange “debates” in which the issues take a back seat to the dynamic between the media personalities and the candidates.

Unless Hillary Clinton is indicted I (and perhaps even if she is), I think that a Trump nomination will lead to a Republican debacle comparable to 1964. In a sense it will be worse, because the best the Republicans could have hoped for in 1964 was a respectable defeat. This year, they would be throwing away a reasonable chance of winning.

All Interventions Work?

This year’s Economic Report of the President has a chapter on improving outcomes for disadvantaged children. It surveys the literature and finds that, in short, everything works. There is not a single program identified as not providing significant benefits. There is not a single study cited showing anything other than benefits.

I know that as biased as journals are against “null-effect” results, there have been published studies that are not as optimistic as what the ERP reports. My perhaps uncharitable view is that this chapter in the ERP does not qualify as a survey of the literature. It is only a survey of every published finding that appears to support existing government interventions.

I believe that if economists are going to play a constructive role in policy analysis, they have to be free to report objectively. It seems to me that for many years now, particularly under this President, the Council of Economic Advisers has not been allowed to be objective.