Monthly Archives: January 2018

The case against education

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Made by Ben Wilterdink.

unsurprisingly, one of the best ways to develop the soft skills necessary for labor market success comes in the form of entry level employment. A 2015 report from USAID concludes, “Theoretical literature suggests that adolescence and young adulthood are optimal times to develop and reinforce these skills.” Additionally, a growing body of evidence suggests that actually working, or at least being in a workplace environment, is a key indicator of successful soft skill development.

Read the whole thing. One implication is that young people probably would learn more if they spent less time in school and more time working at jobs.

Surprising Sentences

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From Alex Tabarrok,

More police on the street is one cause, among many, of lower crime. It’s important in the debate over better policing that we not lose sight of the value of policing. Given the benefits of reduced crime and the cost of police, it’s clear that U.S. cities are under policed (e.g. here and here). We need better policing–including changes in laws–so that we can all be comfortable with more policing.

You can lose your libertarian membership card for saying things like that. I’d be curious to see whether his commenters tried to stomp on him.

This is a topic where conservatives may have it right, and progressives and libertarians may have it wrong.

My essay on the CBO for the Yale Law and Policy Review

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I write,

The demand for pseudoscience leads to unwise policy choices. Although the CBO is nonpartisan, the presentation of its model results serves to focus attention on scenarios that are favorable to intervention and to deficit spending. But the policy discussion does not include scenarios in which intervention fails to accomplish intended results or where economic shocks make a large government debt problematic. This Essay recommends ways for Congress to redirect the CBO, resulting in analysis and reporting that would provide better support for public policy.

This is one of my favorite essays, because I believe it is both original and correct.

There is a sort of Murphy’s Law at work in the way that policy makers use the CBO. They pay attention to its “scoring” when it is least appropriate to do so, and they ignore the CBO when it is most appropriate to pay attention, namely its analysis showing that the long-term budget outlook is not sustainable.

It should be very clear that I blame the press and policy makers for how they mis-use the CBO. I do not blame the CBO itself.

Megan McArdle on the CBO

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She writes,

Now imagine a world with open CBO models. Every bill would still have a score, yes — that’s mandated by law — but then every score would have a dozen think-tanks slinging mud at the assumptions, and proclaiming that their iteration of the CBO model was producing the true results.

She says this as if it would be a bad thing. My own view is that there should not be a definitive CBO score. The CBO does not own Truth. The most important truth about policy is that there is no Truth. Economic theories are contestable. Treating one model as Truth biases policy makers toward intervention, because they are over-confident in the results.

I make this point in a forthcoming essay. Not sure when the essay will appear.

The case against policy analysts

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Robin Hanson writes,

On the other side, however, are most experts in concrete policy analysis. They spend their time studying ways that schools could help people to learn more material, hospitals could help people get healthier, charities could better assist people in need, and so on. They thus implicitly accept the usual claims people make about what they are trying to achieve via schools, hospitals, charities, etc. And so the practice of policy experts disagrees a lot with our claims that people actually care more about other ends, and that this is why most people show so little interest in reforms proposed by policy experts. (The world shows great interest in new kinds of physical devices and software, but far less interest in most proposed social reforms.)

Tyler Cowen adds,

Policy analysis, while it often incorporates behavioral considerations, when studying say health care, education, and political economy, very much neglects the fact that often both the producers and consumers in these areas have hypocritical motives. For that reason, what appears to be a social benefit is often merely a private benefit in disguise, and sometimes it is not even a private benefit.

Some comments of my own.

1. This is where George Mason has a very distinctive point of view. Bryan Caplan’s The Case Against Education will be out soon. There is Hansonian medicine. And of course The Elephant in the Brain.

2. My minor contribution is to say that whatever the policy analyst inputs to the policy process, the output is usually policies that subsidize demand and restrict supply. See my book Specialization and Trade.

3. And of course there is the whole Hayekian theme that about what policy analysts do not know about complex problems.

It is too bad that there is so much resistance to these ideas, all of which seem persuasive to me.

Jeffrey Friedman on expertise in public policy

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The abstract says,

How can political actors identify which putative expert is truly expert, given that any putative expert may be wrong about a given policy question; given that experts may therefore disagree with one another; and given that other members of the polity, being non-expert, can neither reliably adjudicate inter-expert disagreement nor detect when a consensus of experts is misguided? This would not be an important question if the problems dealt with by politics were usually simple ones, in the sense that the answer to them is self-evident. But to the extent that political problems are complex, expertise is required to answer them—although if such expertise exists, we are unlikely to know who has it.

Disaggregating the economy: online prices

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At the AEA session on measuring well-being, Austan Goolsbee and Pete Klenow write in an abstract,

We use transactions-level data from Adobe Analytics to analyze inflation online vs. offline. Online inflation from 2014-2017 period averaged about 100 basis points lower than inflation in the CPI for the same categories. Entry and exit of new product varieties is extremely important in most online categories (but less so in food and grocery). Data on quantities is particularly important because the entry and exit rates vary with product sales. The increased variety of products sold online implies an additional 100 basis points of lower inflation than in the matched model/CPI style indices.

In my view “the” inflation rate is an increasingly dubious concept. People can argue forever about whether true inflation is really much lower or much higher than what the CPI indicates.

Because we do not know the true inflation rate, we do not know the true real interest rate or the true growth rate of real wages. Not to mention the fact that there is no such thing as “the” wage rate, given the divergence in wage behavior across different categories of workers.

Consumers’ Surplus and well-being

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Another paper from the AEA session on measuring well-being. The abstract of the paper by Erik Brynjolfsson, Felix Eggers, and Avinash Gannamaneni says,

In principle, changes in consumer surplus (compensating expenditure) provide a superior measure of changes in consumer well-being than GDP and metrics derived from it, like productivity, especially for digital goods. In practice, consumer surplus has been difficult to measure. We demonstrate the potential of massively scalable online Single Binary Discrete Choice experiments for addressing this issue. These experiments provide a measure of consumers’ willingness to accept compensation for losing access to various digital goods and thereby estimate the changes in consumer surplus from these goods. Drawing on several hundred thousand online experiments, our results indicate that digital goods have created substantial gains in well-being which are largely missed by conventional measure of GDP and productivity, and suggest that our approach can be scaled up to a broader set of goods and services. Two limitations of our methods are that they are much less precise than changes in GDP and they suffer from hypothetical bias. We show how much of an improvement in precision can be achieved with larger sample sizes and demographic controls and we document the direction and magnitude of hypothetical bias by conducting incentive compatible experiments with a smaller group of subjects. By periodically querying a large, representative sample of goods and services, including those which are not priced in existing markets, changes in consumer surplus and other new measures of well-being derived from these online choice experiments have the potential for providing cost-effective supplements to existing national income and product accounts.

A Social Progress Index

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At this year’s AEA meetings, there apparently was an interesting session on measuring well-being.

One paper, by Daniel Fehder, Scott Stern, and Michael E. Porter, says

we describe the construction of a synthetic measure of non-economic performance, the Social Progress Index (SPI). Building on a wide range of prior literature, it incorporates more than 50 indicators into 12 components that are then aggregated into three primary dimensions of non-economic societal performance: Basic Human Needs, Foundations of Wellbeing, and Opportunity.

…
overall social progress is decomposed into three distinct dimensions, Basic Human Needs (“Does a country provide for its people’s most essential needs?), Foundations of Well-Being (“Are the building blocks in place for individuals and communities to enhance and sustain wellbeing?), and Opportunity (“Is there opportunity for all individuals to reach their full potential?”). Whereas Basic Human Needs centers on non-economic conditions that a society provides (e.g., achieving a low child mortality rate and a high level of sanitation, shelter, and personal safety), Foundations of Wellbeing focuses on whether a society offers individual an opportunity to invest in themselves and their communities to advance their wellbeing (e.g., allowing individuals to achieve a basic level of education, gain access to information, and maintain strong lifelong health and local environmental quality). Finally, Opportunity focuses on those components of social progress that concern the ability of individuals to achieve their own personal objectives, including their degree of personal rights and freedom in the context of an inclusive and educated society.

I like the idea of diversifying the portfolio of economic and social indicators. Recall my recent essay proposing to measure occupational satisfaction.

The back-sleep ideologues

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This story says,

The American Academy of Pediatrics, or AAP, recommends that babies always be placed on their backs to sleep, even for just a nap.

I think this is worst advice ever. I don’t find convincing the evidence that this reduces death of infants. I am convinced instead that it leads to widespread sleep problems among babies at least until age four, it slows their motor development and probably their cognitive development, and leads to many children wearing helmets to reshape their heads.. A friend of mine quoted a pediatric physical therapist as saying, “The back-sleepers keep me in business.”

Of course, it is not typically rational for a non-expert to challenge orthodoxy. So call me crazy.