Null hypothesis watch

Kevin Mahnken reports,

Thirteen-year-olds saw unprecedented declines in both reading and math between 2012 and 2020, according to scores released this morning from the National Assessment of Educational Progress (NAEP). Consistent with several years of previous data, the results point to a clear and widening cleavage between America’s highest- and lowest-performing students and raise urgent questions about how to reverse prolonged academic stagnation.

…NCES Commissioner Peggy Carr told reporters that 13-year-olds had never before seen declines on the assessment, and the results were so startling that she had her staff double-check the results.

…when average scores for most students were stagnant, scores for the lowest-performing students were down; when scores for most students were down, scores for the lowest-performing plummeted.

Read the whole thing. Pointer from Tyler Cowen, who points out that the results are from before the virus closed schools.

The fact that the United States has much higher health care spending than other countries but no higher life expectancy is frequently talked about in left-wing circles. But the fact that the more we spend on K-12 education the less we get in terms of better test scores is never mentioned. Conventional wisdom is that we need to spend less on (private-sector providers of) health care and more on (government-run) schools. Even the Niskanen Center paper on “cost-disease socialism,” while it has an entire 5-page section decrying the bloated expense of higher education, only mentions K-12 education in a couple of relatively innocuous paragraphs.

Perhaps the strongest indictment of K-12 education is the movement to get rid of SAT scores as a requirement for college applications. Would this idea have gotten anywhere if test scores for minorities were improving rather than getting worse?

The Null Hypothesis says that we cannot get better results by increasing spending. But it also says that we could spend less and get the same results.

Defining the term culture

From a paper by Gary Gorton and others.

A sensible list of elements in that package, though neither nearly exhaustive nor likely satisfactory to all, is as follows, adapted from a variety of such lists in the literature:
• unwritten codes, implicit rules, and regularities in interactions;
• identities, self-image, and guiding purpose;
• espoused values and evolving norms of behavior;
• conventions, customs, and traditions;
• symbols, signs, rituals, and group celebrations;
• knowledge, discourse, emergent understanding, doctrine, ideology;
• memes, jokes, style, and shared meaning;
• shared mental models, expectations, and linguistic paradigms.

Pointer from Tyler Cowen.

The paper goes down hill from there, ending up with a mathematical model. I think that the best way to approach the issue of corporate culture is to ask what problems various practices are supposed to solve. I think that in general there are three types of problems, all of which plague the process of central planning in general:

1. Coordination/resource allocation. Without a price system, how do you allocate resources efficiently? For example, the corporate organization chart is supposed to help with coordination. Also supposed to address the coordination problem is that bane of every white-collar worker, the business meeting.

2. Incentives/principal-agent problems. How do you implement systems that are not gamed to the advantage of individuals within the firm but to the disadvantage of the owners of the firm?

There are many problems of this type. And there are various errors that could be made in either direction, e.g. giving middle managers too much incentive to take risks or too much incentive to be risk-averse.

3. Playing the game of evolution: stick with the status quo; copy another player; or innovate. Each alternative has its pros and cons, depending on market conditions and internal capabilities. If your business plays the game well, you coalesce around making the right moves. If you don’t, you make too many mistakes and you lose.

Hiring practices are important here. If you always promote from within, that will bias you toward playing “status quo.” If you hire a lot of senior management from other firms, that will bias you toward “copy.” If you hire junior people and advance them quickly, that will help you play “innovate.”

Another FITs update

Should keep you busy.

On Wednesday, Tyler Cowen’s Assorted Links post was one of his best ever. Each was worth following, but I take particular note of J. Stone on The Great Feminization. This includes, for example

Less affinity for traditional, constitutionally protected forms of confrontation in the legal and political spheres, i.e., less support for open debate, free-speech rights, and “due process of law.”

There is some overlap between Stone’s post and my own on Warriors/Worriers. I think that these speculations align with the “mean girls” observation in the Bari Weiss podcast with Jaron Lanier.

Links omitted, click on the link above to see them.

Use your economics!

I write,

If you use your economics, then no matter how complex the supply-chain problems might appear, they can be solved using the price system. The price system may or may not be able to call forth more supply, but it certainly can ration demand, and it can do so more efficiently than is being done at present. Everywhere the supply chain is “broken,” higher prices can ensure that scarce goods are allocated to the highest-priority uses.

The permanent government

Dominic Cummings writes,

You don’t control the government unless you can shut down parts of the ‘permanent’ bureaucracy and you can’t legally do this in the current regime without grabbing control of a party. It’s hard to imagine sane politics over the next 50 years without somehow closing (or at very least ‘changing beyond recognition’) the GOP, Democrats, Tories, Labour.

The post is endorsed by Tyler Cowen, and I think it says some things that Tyler would not say out loud.

Speaking for myself, I strongly agree with Cummings on this:

Whether Trump wins or loses [in 2024] his candidacy will be terrible for everybody. He demonstrated no interest in actually controlling the government. He didn’t drain even a corner of the swamp, he just annoyed it.

Where you want to repress markets

Vitalik Buterin writes,

The only reason why political and legal systems work is that a lot of hard thinking and work has gone on behind the scenes to insulate the decision-makers from extrinsic incentives, and punish them explicitly if they are discovered to be accepting incentives from the outside. The lack of extrinsic motivation allows the intrinsic motivation to shine through. Furthermore, the lack of transferability allows governance power to be given to specific actors whose intrinsic motivations we trust, avoiding governance power always flowing to “the highest bidder”.

You don’t want the verdict in a trial to go to the highest bidder. You don’t want regulatory policy determined by the highest bidder.

Pointer from Tyler Cowen. I do not claim to understand Buterin’s whole post.

More FITs news

I have three new updates. Each includes several links.
1. Keeping up the FITs, No. 11

[Emily Oster] says that she would vaccinate her own children.

I do not want them to get COVID. I am worried about their immune-compromised grandparent. I would like to avoid quarantine and keep them in school. I’m confident in the vaccines and the FDA process.

I would arrive at a different decision. The benefit seems small, almost negligible in the grand scheme of things. Although it is likely that the long-term risks of the vaccine are small, we do not know this. I say leave the kids alone.

2. And No. 12

I discount nearly all claims about aggregate productivity trends. You would not pay attention to “trends” in a poll for a political contest if the differences over time are smaller in magnitude than the margin of error. But economists commit that sin all the time with productivity data.

3. And No. 13.

Tyler Cowen looks at the coverage of President Biden’s economic proposals.

given all the stuff about Biden’s agenda on the internet, there has been remarkably little policy debate about it, and remarkably little attempt to persuade the American public that this spending is a good idea.

…My colleague Arnold Kling put it well: “With the reconciliation bill, there is no attempt to convince the public that it is desirable to enact an enormous child tax credit or to mandate ending use of fossil fuels in a decade. Instead, what we read is that if you’re on the blue team you want the number to be 3.5, but a few Democrats are holding out for something lower.”

Self-recommending, as Tyler would say.

Curating talent

Dwarkesh Patel writes,

if talent, not capital, is the bottleneck to growth, we should use our excess capital to empower the world’s underleveraged talent.

The question is, why aren’t more people trying to curate talent, whether for philanthropic reasons or simply for their own benefit?

But they are. Today, every business that isn’t in its death throes is trying to figure out how to acquire the best talent. But the significance of talent is easier to appreciate in the 21st century than it was previously.

In 1998, I wrote

In an agricultural economy, land is the scarce resource. In an industrial economy, capital is a scarce resource. The institutions that evolved in an industrial economy differ from those in an agricultural economy. This raises the question: what is the economic problem today, and how might institutions evolve in order to address it?

…To me, it is easier to understand the economic challenge today as one of allocating talent to solving problems. Furthermore, when we consider the nature of software as a quasi-public good, the problem is one of allocating talent to producing quasi-public goods.

Fusion power in my lifetime?

Matt Ridley writes,

We are probably less than 15 years away from seeing a fusion power station begin to contribute to the grid.

Also, Tyler Cowen points to an MIT news article.

Developing the new magnet is seen as the greatest technological hurdle to making that happen; its successful operation now opens the door to demonstrating fusion in a lab on Earth, which has been pursued for decades with limited progress. With the magnet technology now successfully demonstrated, the MIT-CFS collaboration is on track to build the world’s first fusion device that can create and confine a plasma that produces more energy than it consumes. That demonstration device, called SPARC, is targeted for completion in 2025.

In the informal Zoom meetup I had with readers about ten days ago, I asked what they were optimistic about. One of them mentioned that machine learning was helping to solve problems in engineering that were nearly impossible to solve without it. One example he gave was fusion power. Fusion power is not practical now, because the amount of energy needed to generate fusion power currently exceeds the power that can be usefully extracted from it. But scientists and engineers are gradually improving the ratio of energy output to energy input.

Tyler’s tests for talent

Tyler Cowen writes,

Now if someone can pass the chess test, the art test, and the success test with flying colors…there are such people!

When I played tournament Othello, I might have been considered the top analyst, even though I was never the top player. But the best players in the world were Japanese, and they might not have passed Tyler’s chess test. Their “analysis” was often of the form “Ishii plays this square, but Tanida plays that square.” The idea was that you got to be good by copying great players and learning to intuitively mimic their styles. They did not employ the elaborate explanations of “why” that non-Japanese players used (“this takes away a quiet move to c3 and forces Black to be the first to break the double-wall pattern.”) The Japanese approach turns out to be good preparation for learning from computers, because the computer Othello program will not explain why it makes the move it does. The best you can hope is to learn to imitate its style.

For the art test, could I use folk dancing? I can appreciate good posture in good dancers. They carry their backs straight, their heads high and their shoulders wide. My own posture is graceless and hunched over, and when I try to copy dancers with good posture my wife cringes and tells me to stop looking like a [not nice word signifying homosexual].

As for the success test, I think that an intense desire for success can indeed be motivating, especially to continue to take big risks when another person would say “I’ll quit while I’m ahead.” I am definitely in the “quit while I’m ahead” camp.