Monthly Archives: February 2018

Mis-measurement and Mis-leadership

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My latest Medium essay, called Mis-Leadership and Metrics. An excerpt:

Instead of holding teachers accountable to a centralized statistical office, I believe that teacher evaluation should be undertaken by peers, principals, and parents. Test scores can be unreliable indicators for many reasons. Parents can readily assess whether a teacher is working conscientiously and effectively.

I have only started reading Nassim Taleb’s latest book, Skin in the Game. But I gather that he would make the point that when it comes to children’s education, parents have real skin in the game. If I allow my child to try to learn from a bad teacher, I suffer from that. If a bureaucratic system fails to remove a bad teacher, the designer of the system does not suffer consequences.

And of course I mention Jerry Muller’s book.

Nassim Taleb’s latest

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I have just started reading Skin in the Game. Not far enough into it to have much to say.

A couple years ago, I had lunch with a friend, and somehow the subject came up of what I thought were my weaknesses. I think that I am not good at what people call “networking,” or cultivating useful contacts and taking advantage of them. I said that the one period in my life I did that well was when I started my Internet business. My friend asked why I was able to do it then.

I replied that I was motivated. In Taleb’s terms, I had skin in the game. It wasn’t just money. I had something to prove to former colleagues who said, “Kling has ideas, but he doesn’t know how to implement.”

I made a conscious decision to network. But I did not say to myself, “You are bad at networking. You need to work on it.” I just knew that it was something I had to do, so I just went ahead and did it as if it were a natural skill.

Both before and since, networking has not been a necessity in my life, and I have not done it. I can see now that some of the things that I tell myself I want, such as more speaking opportunities or wider influence, would be enhanced if I did more networking. But I am not sufficiently motivated to really change.

Beyond ideology

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Nat Eliason wrote this essay. If you are a Medium subscriber, you can applaud for it here. A random excerpt:

You might say “but I don’t want to read political philosophy.” That’s fine, but then don’t pretend that you’re interested in politics. If you want to watch the news but you don’t want to read some John Rawls, then you don’t actually care about politics: you just like feeling outraged and talking to your friends about how stupid/brilliant Trump is.

Another random excerpt:

Emotional reactions to an idea indicate that you have a Level 1 or Level 2 ideology around that idea. If you feel any emotional pull to defend Democrats / Republicans / College / Christianity / Bitcoin / Crossfit / New Gender Pronouns / Income Inequality in the face of new information, that’s a sign that you’re at Level 1 or Level 2 thinking.

I had a positive emotional reaction to the essay. So perhaps I have not reached Level 3 in thinking about it.

Aggregation, not paywall AI, is the answer

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Shan Wang writes,

The [Wall Street] Journal has found that these non-subscribed visitors fall into groups that can be roughly defined as hot, warm, or cold, according to Wells. Those with high scores above a certain threshold — indicating a high likelihood of subscribing — will hit a hard paywall. Those who score lower might get to browse stories for free in one session — and then hit the paywall. Or they may be offered guest passes to the site, in various time increments, in exchange for providing an email address (thus giving the Journal more signals to analyze). The passes are also offered based on a visitor’s score, aimed at people whose scores indicate they could be nudged into subscribing if tantalized with just a little bit more Journal content.

Pointer from Tyler Cowen.

I think that the future of paywalls is aggregation, not artificial intelligence. Spotify is an aggregator. It works better than having individual recording companies set up and manage their own paywalls. Maybe Amazon Prime will become a news aggregator. It already has access to the WaPo (gee, I wonder how it got that?). Facebook is a news aggregator.

The WSJ should get together with the NYT and other major publications to create a news aggregator. I have been saying that for twenty years, but the legacy media won’t do it. Pretty soon they won’t have much choice. Aggregate or be aggregated.

The Economics of the Peter Principle

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Alan Benson, Danielle Li, and Kelly Shue write,

Using detailed microdata on sales workers in US firms, we provide the fi rst large-scale empirical evidence showing that fi rms prioritize current performance in promotion decisions at the expense of promoting the best potential managers. Our fi ndings are consistent with the “Peter Principle,” which, in its extreme form, states that fi rms promote competent workers until they become incompetent managers (Peter and Hull 1969). In particular, we show that high-performing sales workers are more likely to be promoted, but that prior sales performance negatively predicts managerial performance, even after accounting for selection into the sample of promoted workers. These results suggest either that fi rms make mistakes in their promotion decisions or that the incentive befine ts of promoting based on sales performance justify the costs of promoting workers with lower managerial potential. We provide supportive evidence for the latter possibility by showing that fi rms appear to actively manage the trade-off between providing incentives and promoting the best potential managers: fi rms place less emphasis on sales performance in promotions where managerial roles entail greater responsibility and where sales performance is also rewarded by relatively strong pay-for-performance.

The latter paragraph suggests that there is a sort of a Peter Antidote. That is, give meaningless promotions as a reward for performance, but not when you are really counting on someone to be a good manager.

Keep in mind that putting people into positions where they will fail is going to hurt profits. Sooner or later, firms that put the right people into management positions will out-compete those that don’t.

Thanks to a reader for the pointer.

Off-topic: Laura Lippman’s latest novel

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It is called Sunburn. I got to it because it was praised in reviews and because its setting is a town on the way to the beach where we vacation every summer. She calls the town Belleville, but I assume it is Bridgeville, which we have occasionally driven through but more often bypassed. I am less than half way through.

I would describe the novel as a literary strip-tease. Each chapter is short, and you learn new aspects of the characters bit by bit, chapter by chapter. It turns out that the main characters are shady, wanton, violent, and deceptive.

For me, the trouble is that nothing about the characters is alluring, so that I am not captivated by the strip-tease. My guess is that I am going to bail out before the show is over.

Road to Sociology Watch

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From The Economist

A similar study of American economists by Ms May and others also found men more sceptical of government regulation, more comfortable with drilling in the Arctic National Wildlife Refuge, and more likely to believe that a higher minimum wage would cause unemployment. Women were 14 percentage points less likely to agree that Walmart generates net benefits, and 30 points more likely to agree that American openness to trade should be tied to higher labour standards abroad.

Pointer from Tyler Cowen. One of the factors that will cause economics to move left will be efforts to bring more women into the profession. This development will be praised in most quarters.

My health care essay: condensed version

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The Myths Surrounding Health Care Policy. A random excerpt:

But in practice, it is not so easy for statisticians and economists to over-ride the judgment of doctors. As anyone who has ever tried to set up a bonus system for salespeople can tell you, all compensation systems can be “gamed.” It is easy for doctors to change how they report what they do, without having much effect on their actual decisions. In fact, this was what happened in the largest experiment with “pay for quality” to date, which was conducted in the UK.

Finished my assignment: a 20-page essay on health care

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It’s actually more like 12 pages, single-spaced. About 6000 words.

I am not sure what to do with it. Here is the conclusion:

As individuals, we would like unlimited access to medical services without having to pay for them. Collectively, this leads to high spending on health care. High spending on health care is the main problem of the U.S. health care system. As we have seen, it is unlikely that this problem can be solved by changing the way health care providers are paid or by government experts devising a more efficient system.

From a health outcomes standpoint, the United States might do better to spend less on medical services and instead spend more on efforts to reduce homicides, automobile accidents, obesity, and substance abuse. There is a lot of leverage that can be obtained if improvements in those areas can be achieved.

There are two directions that the United States could go in order to reduce health care spending. The “left turn” would move in the direction of Canada. The “right turn” would move in the direction of Singapore.

The “left turn” would be to introduce government rationing of medical services. This might come about if the share of health care spending financed by taxpayers continues to rise and the consequent strain on government budgets forces government programs to restrict access to services.

The “right turn” would be to increase household’s exposure to the costs of health care and health insurance. For example, the government could eliminate the tax subsidy for employer-provided health insurance, steering more households into the individual market. The government could set up a combination of catastrophic insurance, health savings accounts, and subsidies for the poor similar to those in Singapore.

With either a “left turn” or a “right turn,” we are likely to see a two-tier health care system. With a “left turn,” the government will hold down its spending by limiting access to expensive services that are not clearly highly beneficial. But wealthy people will still be able to afford those services by paying for them privately.

With a “right turn,” people will have to self-ration their use of medical services. Poor people will be limited in what they can obtain by the nature of the subsidies that they receive. They will consume the medical services that are covered by government subsidies. Wealthy people will have ample savings accounts to obtain whatever medical services they desire.

As of now, I do not see any strong momentum either toward the left or the right. For the near future, the United States is likely to continue along its current high-spending path.

So-called experts on U.S. vs. Europe in health care spending

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The European IGM Experts Panel was polled on the following proposition:

Higher quality-adjusted US healthcare prices contribute relatively more to the extra US spending than does the combination of higher quantity and quality of US care (interpreting quantity and quality to reflect both greater American healthcare needs due to underlying population health and the delivery of more or better healthcare services to Americans).

Of those voicing an opinion, those who agree outnumber those who disagree by almost 5 to 1.

They are wrong. The amazing blogger at Random Critical Analysis (who is this person? I am dying to know) takes down the “it’s the prices, stupid” claim. Just one of the many statistics the blogger cites is

The human health share of total employment also explains a fair amount of the variance in the HCE [Health Care Expenditure] share of GDP and the US, unsurprisingly, has a proportionally larger health workforce.

In other words, using the size of the workforce in the health care sector as a measure, or at least an indicator, of the amount of real resources devoted to health care, then if you want to explain what makes the U.S. an outlier, it’s the quantities, stupid.