Club Troppo

Lang, Kevin. 2010. “Measurement Matters: Perspectives on Education Policy from an Economist and School Board Member.” Journal of Economic Perspectives, 24(3): 167–82.

DOI:10.1257/jep.24.3.167

Abstract
One of the potential strengths of the No Child Left Behind (NCLB) Act enacted in 2002 is that the law requires the production of an enormous amount of data, particularly from tests, which, if used properly, might help us improve education. As an economist and as someone who served 13 years on the School Committee in Brookline Massachusetts, until May 2009, I have been appalled by the limited ability of districts to analyze these data; I have been equally appalled by the cavalier manner in which economists use test scores and related measures in their analyses. The summary data currently provided are very hard to interpret, and policymakers, who typically lack statistical sophistication, cannot easily use them to assess progress. In some domains, most notably the use of average test scores to evaluate teachers or schools, the education community is aware of the biases and has sought better measures. The economics and statistics communities have both responded to and created this demand by developing value-added measures that carry a scientific aura. However, economists have largely failed to recognize many of the problems with such measures. These problems are sufficiently important that they should preclude any automatic link between these measures and rewards or sanctions. They do, however, contain information and can be used as a catalyst for more careful evaluation of teachers and schools, and as a lever to induce principals and other administrators to act on their knowledge.

Web 2.0 is a great thing not least because we no longer have to rely on journalists for our reading about contemporary events. Particularly in the area of commentary, why read a journo when you can read a Nobel Prize winner in their field. This sentiment finds its apotheosis in Paul Krugman, uber economist, uber commentator, uber blogger, uber economic journalist. He even has time to casually wade through tomes about the decline and fall of Rome. His most recent column was a corker, making me wonder how Australian conservatives can possibly identify with the US Republicans.

It begins:

A note to Tea Party activists: This is not the movie you think it is. You probably imagine that you’re starring in “The Birth of a Nation,” but you’re actually just extras in a remake of “Citizen Kane.”

But that doesn’t mean all top line economists can write like that. Here’s Robert Shiller’s latest, which was reproduced in the AFR recently. He’s done some great work, though it’s often soggy and repetitive to read. This effort is a bit like a letter to his Mum talking inconclusively and not very insightfully or interestingly about a paper given at Jackson Hole and concluding that we might end up having seven or more years slow growth as punishment for our past excesses but that then again, maybe we won’t. Hard to argue with really.

Here’s a review essay I worked on in early 2009 which was published in the monthly. I’ve reproduced the review as filed rather than as printed as The Monthly needed to prune it back for reasons of space. The easiest way of doing so was to get rid of a great quote from Wolf, which you should read below.

These four short books are by Cassandras of the crisis who warned of doom, and hastened into print to join the collective puzzling and pontificating about our situation. The books neatly organise themselves into the Good (Krugman), the Bad (Soros) and the Ugly but thoroughly worthwhile (Wolf and Shiller). With the glorious exception of Krugman’s, these books are unsatisfying as books. All four authors have packaged up a range of ideas they’d articulated before the crisis and ‘re-purposed’ them with the crisis book trade in mind.

This is no insignificant detail when one considers that, as Berkley Professor and econoblogger Brad Delong has pointed out, this isn’t quite the crisis most doomsayers were expecting. The anticipated crisis was to be triggered by a plunging American dollar as the world woke up to the unsustainability of its borrowing and the international imbalances underlying it as discussed in Martin Wolf’s book. In fact the crisis erupted organically within the US financial markets – famously in the sub-prime residential mortgage market – and the resulting global crisis saw the US dollar rise as investors headed for (what they saw as) the safety of the international reserve currency. Old reflexes die hard.

Wolf has cobbled together a book by providing two introductory and two concluding chapters as bookends to a series of lectures he gave from 2005 in which he anatomises the growing foreign indebtedness of the Western – mostly English speaking – nations to Asian developing countries and oil exporters. As truly insightful as they are, with events moving as fast as they have been, the lectures – some of which are around four years old – sit uneasily next to the more contemporary chapters and frustrate the ardour of the reader’s search for explanations and answers to our current predicament.

Nevertheless Chapter Two – “The blessings and perils of liberal finance” – is as masterful an introduction and exposé of its subject as I’ve ever seen. Wolf expounds with regard to both the simplest first principles and the broad sweep of history, the profound significance of a financial system as a cultural, political and economic achievement. A financial system is a pyramid of promises. The trustworthiness of the state’s promises – in managing the monetary system and paying its debts – is the bedrock on which private promises can then, laboriously be built.

That’s why the take-off of modern finance dates to the late seventeenth century when Western sovereigns – in Holland and Britain – first became properly subject to the rule of law. The constraints this forced upon them rendered them creditworthy and so able to borrow vast amounts at modest interest. And, recent ideological enthusiasms notwithstanding, the central financial innovations of modernity were made by governments at around this time, most particularly bond markets, central banks and the legal infrastructure for joint stock companies. As Wolf explains, the resulting financial system “allows the creation of vast enterprises out of the combined capital, supplied at modest cost, of . . . millions of people; . . . it . . . reallocates risk; it allows people to time their spending . . . over their lifetimes; and it insures individuals against the big risks of life.”

Wolf counts US$145 trillion of financial promises held by the citizens of the world in 2005. And yet finance is beset by rottenness, indeed by all the failings and fragility of our species.

[T]he purchasers of promises will know that the sellers normally know much more than they do about their prospects. The name for this is “asymmetric information.” They will also know that those who have no intention of keeping their word will always make more attractive promises than those who do. This is “adverse selection.” They will know that even those who are inclined to be honest may be tempted . . . not to keep their promises. The source of this is “moral hazard.” The answer to adverse selection and moral hazard . . . is to collect more information. But this too has a drawback: “free-riding”. . . [T]hose who have made no investment in collecting [information] can benefit from the costly efforts of those who have . . . . That will, in turn, reduce the incentive to invest in such information, thereby making markets subject to the vagaries of “ra¬tional ignorance.” If the ignorant follow those they deem to be better informed, there will be “herding.” Finally, where uncertainty is pervasive and inescapable – who, for example, knows the chances of nuclear terrorism or the economic impact of the internet? – the herds are likely both to blow and ultimately to burst “bubbles.”

This brief tour de force continues with a new paragraph beginning “Finance is a jungle inhabited by wild beasts.” So there you have it. A pyramid of promises, a miracle of sophistication and progress somehow delivered to us (are you feeling lucky?) on the back of wild beasts. (Continued)

Envy and Altruism in Children
Date: 2010-09-17
By: Kirsten Häger (School of Economics and Business Administration, Friedrich Schiller University Jena)
URL: http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2010-063&r=exp

Envy and altruism have been studied extensively in adults. Here, we report data from an experiment studying envious and altruistic behavior in children. We study a sample of German school children aged seven to ten in a natural setting. We run two treatments. One treatment investigates envy, the other one studies altruism. Additionally, we collect data on the children’s cognitive and social skills, and on their socio-demographic background. Controlling for these factors, we find that older children are significantly more altruistic. Boys care more about their relative position than girls. Socio-demographic information have limited predictive power in both treatments.

I put off buying an iPad. It was cheap (good) but I was wary of the iPhone software. I expected some decent clones out in a few months of the Apple’s launch but got sick of waiting. It’s roughly what I expected.  Nice, natty and with some stupid things, like the absence of a USB port. I also believed Alan Kohler and others when they said that the iPad wasn’t efficient as an input device. But since I’d been waiting for years for a small tablet, and it was cheap, I went out and bought a Pad. I work on a laptop (with external keyboard and monitor) and so only use the iPad for ‘lean back’ reading. And it’s really pissing me off.

Here’s the thing. The browser is not Safari.  I prefer Chrome, but Safari is generally fine. Now I’m a ‘tabbed browsing’ kind of guy. I like to open tabs and leave them there and go and read them if I want to later. And at the end of the day I often find myself closing down a few tabs without having read them. The iPad allows you the equivalent of nine ‘tabs’ which are arrayed 3×3 on the screen.   A nice natty way to do it, though it’s not too good when the tabs run out.

But the real pain is the little things. Most tabbed browsers allow you to load something up while you’re on the page you’re on.   Its hard or impossible on the iPad. You have to ‘open in a new page’ and then close the page that then opens up and go back to where you were reading. But when you go to the page you opened, it may not have loaded up while you were reading. The alternative is to open and wait for the new tab to open up.  That’s annoying. Then you might read it and want to return to where you were. If more than about a minute has elapsed, the page you want to go back to will reload – and another few seconds tick by. Since the point of this device is to make browsing easier, it’s pretty infuriating.

The other thing, a truly amazing thing is that the browser does not reformat carriage returns as you zoom in on a page, so at some stage of zooming you find yourself having to make the text smaller again, or move the screen back and forward with each line you read.

Ladies and gentlemen this doesn’t happen on my somewhat clunkier Android Phone which has a lovely browser. Though it only has four tabs, they load in the background as the default and they resize and reformat text to one’s heart’s content. Those (dead obvious) features alone make up for its foibles.

Meanwhile I’ll wait for the avalanche of clones (I detect a mixed metaphor).  And though Android is fine, I’m thinking Windows 7 would be OK if they don’t charge too much for it – anyway, with my choice of browser it would be lots better than Apple’s iPad OS, or that Chrome OS might be just the go. Thing is, Apple will presumably fix all this when they have to, which is when the clones arrive. I hope I can just update my software.

A final thought. I wonder if this is arrogance, stupidity or chicanery by Apple. These problems are so easy to fix, that I figure that Apple is trying to push me into apps which they can then control.  Anyway, lots of people love their iPad so maybe it will work for Apple.  But it won’t work with me, not because of any ideological distaste for what they’re doing, but because it’s a pain in the arse and the sooner I can get something to do what I want it to do, the better.

And of course if anyone can tell me how to fix these problems I’d be very grateful (I haven’t been able to find anything useful from a wander around ‘settings’, but something may be there.)

Black to play C Lolli vs D Ercole Del Rio 18. …? See game for solution. about our puzzles

OK, so it’s not hard to work out the answer, but it’s cute, and it happened in Modena in 1755. Before Adam Smith finished The Theory of Moral Sentiments in 1759 there was, obviously enough, a fair bit of waiting around. So they played chess. Click through for the answer if you can’t work it out.

Yes folks as part of our relentless drive to leverage our world class infrastructure and skills to bring our readers to their personal delight point – and beyond, Subho Banerjee of PM&C emailed me (amongst others to tell me of the opportunities below). He assured me that anyone quoting the Troppo website and driving the Troppo Mercedes Sports to the job interview will be given priority for the job and free tickets to PM&C’s corporate box at the Commonwealth Games – flying First Class with Air India.

So, tell your friends that Troppo leveraged your delight point to optimise competitiveness in a globally competitive world.  Anyway, here’s the email/ad.

Folks, we are currently recruiting across APS4 to EL2 levels. I would strongly encourage you to think about people in your networks who might be interested in joining us, and forward application details as below. Please feel free to get back in touch with me or Michael Carnahan (cced above) if you want any further information. Apologies for any cross-posts. Thanks, Subho

***

The Strategic Policy and Implementation Group in the Department of the Prime Minister and Cabinet is looking for staff at all levels from APS-4 (just above regular APS graduate entry level) to EL-2 (our team leader/project manager level).

The Group undertakes strategic policy projects on some of the most complex public policy issues; and analyses progress of, and identifies ways to improve the implementation of Government priorities. In order to provide distinctive solutions to the highest priority challenges, our staff work in dedicated project teams using multi-disciplinary approaches that draw on current best practices in private and public sector strategy and management. People have the opportunity to develop strategic policy and program management expertise and apply that expertise to a range of issues. We work in small focused teams, which means that staff at all levels are directly involved in developing solutions, and our staff have the opportunity to learn from the expertise and experience of leading public policy practitioners. The Group works at the centre of government in an environment that values creativity and innovation – both in the way we work and the solutions we recommend.

More detail about the department can be found at the PM&C website:

http://www.dpmc.gov.au/about_pmc/index.cfm

and specific information about the positions can be found at:

http://dpmc.nga.net.au/cp/index.cfm?event=jobs.home

In terms of the application process, applications close at 11.30 (AEDT) on 10 October 2010. The selection process will involve a shortlisting, a written assessment (of an hour duration, undertaken online) and then an interview. If you are interested in working in PM&C more broadly then you should express this interest in the application. If your interest is in working only in SPIG, then you should also make this clear during the application process.

Dr Subho Banerjee

Vince Cable, Secretary for Business, UK. Liberal Democrat.

“On banks, I make no apology for attacking spivs and gamblers who did more harm to the British economy than Bob Crow could achieve in his wildest Trotskyite fantasies, while paying themselves outrageous bonuses underwritten by the taxpayer.’’

Looks like a technical detail but what it signifies is of huge consequence – the further development of the division of (intellectual) labour. May Amazon’s tail continue to thicken!

The Longer Tail: The Changing Shape of Amazon’s Sales Distribution Curve

Erik Brynjolfsson
Massachusetts Institute of Technology (MIT) – Sloan School of Management; National Bureau of Economic Research (NBER)

Yu Jeffrey Hu
Purdue University – Krannert School of Management

Michael D. Smith
Carnegie Mellon University – H. John Heinz III School of Public Policy and Management

September 20, 2010

Abstract:
Internet consumers derive significant surplus from increased product variety, and in particular, the “Long Tail” of niche products that can be found on the Internet at retailers like Amazon.com. In this paper we analyze how the shape of Amazon’s sales distribution curve has changed from 2000 to 2008, and how this impacts the resulting consumer surplus gains from increased product variety in the online book market. Specifically, in 2008 we collected sales and sales rank data on a broad sample of books sold through Amazon.com and compare it to similar data we gathered in 2000. We then develop a new methodology for fitting the relationship between sales and sales rank and apply it to our data. We find that the Long Tail has grown longer over time, with niche books accounting for a larger share of total sales. Our analyses suggest that by 2008, niche books account for 36.7% of Amazon’s sales and the consumer surplus generated by niche books has increased at least five fold from 2000 to 2008. We argue that this increase is consistent with the presence of “secondary” supply- and demand- side effects driving the growth of the Long Tail online. In addition, our new methodology finds that, while power laws are a good first approximation for the rank-sales relationship, the slope is not constant for all book ranks, becoming progressively steeper for more obscure books.