I played (you can play here), and I got Steven Kaplan. His field is not one that interests me that much, he is not a familiar figure to me. But coincidentally, James Pethokoukis recently interviewed him. I agree with much of what Kaplan says in the interview, but I have my doubts about what he says near the end:
you have an increased regulatory burden on small businesses that everybody talks about – I think is real. And that would be my guess why you see fewer of the kind of mom-and-pop type startups. And you see – but you see no diminution on the high potential startups because they’re high potential enough that regulation doesn’t actually matter.
My guess is that the mom-and-pops are suffering more from competition than from regulation. I think of the challenge of opening up an independent retail store when there are so many advantages held by large chains and by Amazon and Wal-Mart. I think of the challenge of opening an “average” restaurant when there are now chains in every niche, where 30 years ago the only ones not in fast-food hamburgers were KFC, Taco Bell, and Pizza Hut. I think of individual medical practices giving way to large organizations–some of that is driven by health care policy, but I think that some of it is natural evolution, as the share of medical care that is produced by factors other than doctor-labor-time increases. I think of small retail financial firms (brokers, local banks) giving way to much larger institutions. There, too, regulatory influences are pervasive, and you have to attribute some of the concentration to Too Big to Fail. But on the other hand, big banks were over-regulated as of 1975, and I would attribute most of the consolidation that has taken place over the past 40 or 50 years to natural market forces operating in a regulatory environment that allowed more competition.
If you put it all together, I think that it takes a lot more brainpower to start a successful company of any type today than it did 50 years ago. Meanwhile, the large enterprises can afford to acquire lots of brainpower, so there is not a whole lot of it sitting around to start mom-and-pops.
Going back to the IGM survey, my most outlandish opinions relative to the IGM panel of experts were:
–I disagree that health insurance subsidies will produce benefits that exceeds the costs
–I strongly disagree that performance of a teacher’s students on standardized test scores can predict how well the teacher does at improving future outcomes of students.
I think the evidence on health spending is that at the margin it has no effect on outcomes.
I think that the studies that purport to show that teachers make a difference are a suspect molehill next to the mountain of evidence for the null hypothesis. And even if they do make a difference, test scores are too noisy an indicator to rely on.
Emanuel Saez.
I am not sure what counts as small these days, spending, revenue, employment. Industries of tomorrow, biotech, drones, solar, craft beer, are as likely to be taken over by large companies as develop as small businesses, and I don’t know of any that want to stay small or view small as safe to be. Small businesses that stay small have, in some sense, failed or will fail, or are small only in some other sense than profitability.
Barry Eichengreen.
I disagreed with the experts about Greece, vaccines?!, and standardized test scores.
I thought there was a fairly substantial amount of evidence that although many interventions raise test scores in the short run, virtually none of those increases persist for very long, let alone translate into improved labor market outcomes decades later.
I answered “neutral” to a lot of questions because I don’t think the evidence is strong enough to justify a firm conclusion one way or the other.
As long as new large companies are still minted (by start-up, not only merger), we should be dismayed by their competitive (non-monopolist) dominance. That said, it seems once niches are filled by effective large orgs, it’s unlikely any new entrant can thrive – the incumbents can shape up exactly as needed to win, then get fat+lazy again.
Re: noisy test score measurement of teacher contribution, true, but what else do you propose to use? The world where mere seniority and “ongoing education” hours isn’t the main driver of public school teacher pay is, I dream, a world with better education. If consumers (parents) were paying then teachers would advertise instructional/daycare features that are attractive, with no need to refer to test scores, and yet even a noisy view of the ground truth seems valuable – perhaps more sound than parents’ judgment of surface gloss. Cheating, not noise, is by far the biggest problem with tying teacher comp to student test performance. Proctoring is never perfect. To mitigate the harm to the 6th grade teacher from a cheating-on-exit-exam 5th grade, you’d then need an exam at the start of the school year and of the end. The now-visible summer-forgetting gap could be used to advocate for a series of smaller 2-4 week breaks (like 1-week easter and 2-week xmas)
I do think *observation* of classrooms (always on camera feed that parents can view) is potentially far superior to a “teacher test score delta over the past X years was”. Professional accreditors/observers famously get a Potemkin view of the classroom environment and their evaluations are defanged by teachers’ unions.
Should *not* be dismayed. “Larger companies are relatively happier with expensive compliance in their niche” is compelling but not the whole story. Can consumers substitute consumption (or avoid it) or is it more or less obligatory, like banking, medicine, and home mortgages?
“…but what else do you propose to use?”
What many parents already use: Recommendations of other parents. That’s how we our service providers like doctors, plumbers and so forth? It’s not perfect, but it works pretty well.
Even in the world of ‘test score accountability’ parents still heavily rely on other parent recommendations, especially parents who they believe they share the similar values with.
I also think many parents implicitly buy into Kling’s null hypothesis, so they don’t get too out of sorts when their kid gets stuck with what is perceived as a sub par teacher.
And yet in the most vibrant restaurant market in the country (Manhattan) there are virtually no chain restaurants. This is a complicated issue.
This makes sense. Chains offer predictably decent. That is probably not what New Yorkers or tourists want from New York cuisine. Also, I bet word travels fast in NYC. So, in a place where mediocre and sub-par can’t survive long, chains would be pretty irrelevant.
I think it is interesting and illustrative that they don’t consider purchasing vaccines to confer positive externalities.
I’m not an economist, got Richard Thaler consistently. Who is he? Wrong question. I looked him up. What does that mean?
“noisy test score measurement of teacher contribution, true, but what else do you propose to use?”
Probably nothing other than what we use now–seniority and education. That’s how most government workers are paid. Education has no relationship to outcomes, I agree, but then teachers aren’t allowed to work overtime, so if they don’t want to go into management (where there are far fewer jobs than for cops), they have no other means of increasing their income.
“The world where mere seniority and “ongoing education” hours isn’t the main driver of public school teacher pay is, I dream, a world with better education. ”
It’s not. Education is driven almost entirely by student cognitive ability. When we start realizing that and set reasonable goals, then maybe we can start looking at teacher influence on outcomes. Maybe. But getting people to realize this is another dream.
My wife and I had a good chuckle over the first and only time we got an e-mail telling us to make sure our kid had a good night sleep and good breakfast and later on finding out that the kids got cookies and a pizza party.
This was, of course, the value-added standardized test day.
Oh, and of course, it was precisely NOT the first, baseline test.
Robert Hall.
I was neutral on lower oil prices promoting higher GDP. I wasn’t certain about the net impact of lower oil prices given the significant increase in local production that might not be sustainable at a low price. There certainly does not seem to have been a noticeable uptick in GDP growth since oil started crashing in the second half of 2014, and industrial production is actually down over the past year.
I disagreed that the social benefit of mandatory immunizations necessarily exceeded the costs. I suspect that most of the herd immunity benefits can be achieved without mandating immunization, and the social cost of such mandates in terms of lost choice is not measurable and, for me subjectively, high.
I disagreed that expanded health insurance subsidies will have gains that exceed the costs, strongly disagreed that student gains on standardized tests allows us to predict teacher impact on long-term student outcomes and disagreed that annual vs. quarterly reporting really matters.