The new Robert Putnam Book

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I got it as soon as it was released and finished it in a few hours.

I like his top third/bottom third way to approach inequality. Of the four forces, he emphasizes what I have been calling demographic disparity and what he calls, more descriptively, bifurcated family patterns; he mentions, using different terms, factor-price equalization and Moore’s Law, but does little with them. Nothing on the New Commanding Heights.

He is inexcusably shabby toward Charles Murray. He does not say he owes a debt to Murray. He does not summarize Coming Apart. He just gives it one brief, dismissive footnote.

Putnam plays very fast and loose with correlation and causality. At one point, he even admits this.

He never once mentions genetics as a factor in inequality. This biases the analysis much more in favor of policy remedies than is reasonable.

Overall, I came away with some new data points, but no new insights, and some anger and frustration with the flaws.

Some of the data and some of the analysis goes against his lefty readers’ biases, although he makes it easy for them to stumble over these truths, pick themselves up, and move on as if nothing happened. (Churchill’s phrase)

Null Hypothesis Watch

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Melissa A. Clark and others report,

In 2010, Teach For America (TFA) launched a major expansion effort, funded in part by a five-year Investing in Innovation (i3) scale-up grant of $50 million from the U.S. Department of Education. This study examines the effectiveness of TFA elementary school teachers in the second year of the scaleup, relative to other teachers in the same grades and schools. The study found that, on average, TFA corps members hired in the first two years of the scale-up period were as effective as other teachers in the same high-poverty schools in both reading and math. Although TFA teachers in lower elementary grades (prekindergarten through grade 2) had a positive, statistically significant effect on students’ reading achievement relative to other teachers in the same schools, this was not true for TFA teachers in upper elementary grades (3 through 5) in reading, or for any grade level in math.

Pointer from Jason Richwine, who notes

On the bright side, TFA teachers appear to be at least as effective as regular teachers when it comes to teaching reading and math to elementary students. The fact that TFA requires only a five-week crash course in pedagogy — rather than traditional teacher certification — is another reason to question the value of an education degree.

Of course, this is consistent with the Null Hypothesis, as applied to teacher education. Actually, if you believe the Null Hypothesis only applies to teacher education, then you would expect the TFA teachers, who presumably have higher native ability, to perform better than typical teachers. However, then you run into the Null Hypothesis for education in general.

My Problem with Search Theories of Unemployment

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Nick Rowe steps into a debate.

The better the job you want to get, the longer you expect to search (or wait) before you get it. ..

Now suppose the economy enters a recession. The trade-off worsens … You choose a new point. You will probably choose a point as drawn, expecting to search or wait longer and get a worse quality job.

He illustrates with a nice diagram.

It’s a neat theory, and I like it better than models that do not use job search. But I don’t really buy it.

From a PSST perspective, the searching that is important is the search for new patterns of sustainable specialization and trade. It’s not like a marriage market in which a suitable match exists and you just have to find it.

The Age of Creative Ambiguity

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Tyler Cowen writes,

File under “The End of Creative Ambiguity.” That file is growing larger all the time.

What is Creative Ambiguity? I would define it as the attempt by policy makers to ignore trade-offs and to deny the need to make hard choices. Consider the Fed’s balance sheet. One hard choice might be to sell its gigantic portfolio of bonds and mortgage-backed securities. That would depress the prices of those assets and make it harder for the government to borrow and to provide mortgage loans. The other hard choice might be to provide whatever support is necessary to enable the government to borrow and to provide mortgage loans, even if it means printing enough money to risk hyperinflation. Creative ambiguity means convincing investors that neither hard choice will be necessary. Perhaps that is even true.

However, if the Fed’s hard choices are to be avoided, then at some point the government must get its fiscal house in order. That is where the real creative ambiguity comes in. See Lenders and Spenders.

How Students Really Consume Online Education

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Sam Gerstenzang wrote,

What works about on demand knowledge is that it is pull based (the knowledge you need, when you need it) and comes in digestible chunks. Unlike MOOCs, which are consumed far in advance of the knowledge being applied, Wikipedia and StackOverflow are the knowledge you need, now. Humans are lazy and working ahead requires discipline and foresight, which makes on demand knowledge far more appealing to most.

You may need to read the whole post. I thank Ben Casnocha for the pointer.

It has struck me that the the traditional notion of a course and the medium of online learning may be misaligned. Try to imagine what would happen if you got rid of courses. What would you do instead in order to provide students with direction in their learning?

David Brooks on Redistribution vs. Education

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He writes,

No redistributionist measure will have the same long-term effect as good early-childhood education and better community colleges, or increasing the share of men capable of joining the labor force.

Pointer from Tyler Cowen.

A cynical believer in the Null Hypothesis would argue that putting money into education is an exercise in redistribution. It will redistribute income toward teachers’ unions members, college professors, and administrators.

Also, what is the probability that Brooks is simply trolling Bryan Caplan?

Sentences I Might Have Written

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from Megan McArdle:

1950s health care isn’t expensive; this same regimen would be a bargain at today’s prices. What’s expensive is things that didn’t exist in 1950. You can say that “health care” has gotten more expensive—or you can say that the declining cost of other things has allowed us to pour a lot more resources into exciting new health products that give us both longer and healthier lives.

In Crisis of Abundance, I wrote,

The American middle class can still afford the wonderful health care that was available in 1975–easily. . .as a thought experiment, a return to 1975 health care standards would completely resolve what is commonly described as America’s health care crisis.

You know, that book was written 10 years ago (it came out in 2006), and at the time I said it would have a shelf life of ten years, meaning that I thought that it would still accurately describe the issues for another decade. In fact, it is looking like it will be valid for another ten years. I would say that the majority of popular books on politics and economics expire much more quickly.

Four forces watch: In addition to the New Commanding Heights, McArdle’s essay also touches on the Demographic Divide.

while the college educated class seems to have found a new equilibrium of stable and happy later marriages, marriage is collapsing among the majority who do not have a college degree, leaving millions of children in unstable family situations where fathers are often absent from the home, and their attention and financial resources are divided between multiple children with multiple women.

Other sentences are reminiscent of The Reality of the Real Wage. There, I recycled a bit from my book.

My guess is that if you could find a health insurance policy today that only covered diagnostic procedures and treatments that were available in 1958, the cost of that policy would not be much higher than it was then. Much of the additional spending goes for MRIs and other advanced medical equipment, as well as for health care professionals with more extensive specialization and training than what was available 50 years ago.

I recommend McArdle’s entire essay. Brink Lindsey adds more statistics, such as

In 2011, 87 percent of kids who had at least one parent with a college degree were living with both their parents. For the children of high school dropouts and high school grads, the corresponding figures were 53 and 47 percent, respectively.

Finally, on this same topic, a reviewer (Francis Fukuyama) of an about-to-be-released Robert Putnam book writes,

One of the most sobering graphs in Our Kids shows that while the proportion of young children from college-educated backgrounds living in single-parent families has declined to well under 10 per cent, the number has risen steadily for the working class and now stands at close to 70 per cent.

Pointer from Tyler Cowen.

Lifted from the Comments

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1. On medical innovation.

The third party payment system seriously distorts the incentives. I worked as both a consultant and then an investment banker in the healthcare sector for 12 years, and this element of the business drove me bonkers. In my experience, the companies that succeeded are the ones who successfully gamed Medicare, Medicaid and other third party payors. True innovation had little to do with their success. The exception were those sectors of the healthcare that were dominated by private payors (e.g., cosmetic surgery, dentistry, etc.).

There are four major stakeholders: patients, providers (clinicians), facilities (hospitals), and payers. They have different objectives, criteria, and decision processes. Getting material innovations imbedded requires concurrence from at least a couple and often three or four of the stakeholders. Coming up with innovations that (1) work, (2) have evidence of the type that the different stakeholders respond to, (3) have an economic model that keeps all stakeholders at least whole if not better off is really hard.

Complicating factors include:
* Key parts are highly local & fragmented (providers and facilities)
* Heavy regulatory overhang (FDA is one of many constraints)
* Low margins in some sectors means higher barriers to change (don’t rock the boat, esp given the high % of stable-ish gov’t payers)
* Little data to measure & compare real functional outcomes (vs. process outcomes like infection or readmission)
* The science is hard. Cancer is a hundred little diseases depending on what processes break, even within a disease site (e.g., breast). ‘Curing’ one doesn’t touch the other 99. (And it’s hard to prove that you ‘cured’ that one)

In a fully open market environment, we might make progress on some of these issues. In the current one? It’ll be slow.

2. On how to study

I think I’ve mentioned this book here before, but a few years ago, I stumbled across ‘How to Study and Teaching How to Study’ by F.M. McMurry (1909). I certainly wish I’d been taught or found this book when I was student. To me, his 8 factors of studying are very useful in having a formula to punch through material that doesn’t come easy…One thing is for sure, McMurry’s opening paragraphs on the various study techniques of his fellow students when he was a boy could have been written yesterday about high school or even college students today.

On the topic of motivation, McMurry says that people will study intensively when they really need to learn something. His example is an Eskimo who needs to learn how to build an igloo in order to have shelter.

Lee and Rubio on Tax Reform

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They write,

by consolidating the corporate tax system into a single layer and lowering the maximum rate to 25% on both corporate and pass-through entities, our plan eliminates double taxation of capital gains and dividends, and establishes parity among large and small businesses. And under our proposal, firms with overseas operations will no longer be taxed twice (once abroad and again at home), but only in the country where income is actually earned.

They would also allow corporations to expense investment, rather than having to use depreciation schedules.

Danny Vinik adds,

They would eliminate just about every tax deduction, with the exception of the deduction for charitable giving and a reformed mortgage interest deduction (although they don’t say how it’s reformed). In return for eliminating the standard deduction, they would create a new $2,000 personal tax credit ($4,000 for joint filers).

Vinik notes that Lee and Rubio’s reforms on net would reduce revenue, thereby enlarging the deficit. Maybe you could offset that by abolishing some government departments and agencies.

Differences in College Completion Rates

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Timothy Taylor writes,

It turns out that if are someone from a family in the top-quarter of the income distribution who enters college, you are extremely likely to complete a bachelor’s degree by age 24; if you are in the bottom of the income distribution, you only have about a 22% chance of having a bachelor’s degree by age 24.

Read the whole thing. As he does so well, Taylor manages to locate an interesting report and extract fascinating material from it.

In terms of the Demographic Divide (one of the Four Forces), I think that the high-income college entrants are likely to have several advantages. First, they are more likely to have inherited high IQ and high conscientiousness. Second, their parents are more likely to have had their children after they were married and to have remained married after they had children. Third, the parents are likely to have better skills for identifying and dealing with their children’s needs. Finally, the parents have more financial resources to support the child. The report seems to emphasize only the last of these.