The strongest criticism of consumer-driven healthcare is that consumers lack the knowledge necessary to make informed decisions, especially given the complexity of the choices presented before them. There is something to this. Then again, people know relatively little about how the thousands of available computers or restaurants, but they are able to make relatively sound choices. Why?
We have Consumer Reports. We have expert advice. We have friends. We have the internet, with thousands of customer ratings and reviews.
With health care? Not so much.
Outcomes reporting is getting better, but still isn't particularly actionable for your average patient.
And while I'm not of the camp that believes it's impossible to assess the quality of physician care, hospital management, or health care plan, I will agree that adequate information is not currently available (thanks in large part to those vested in protecting their care monopolies). So while I'll continue to push for more information and health care results sharing at every level of the health care system, I am also interested in providing patients with more leverage in the mean time.
Arnold Kling has written about the need for a "single case manager" for "when a complex patient enters the healthcare delivery system."
I'd go a step further.
Currently, insured patients choose a general practitioner (also known as, primary care physician, etc.), who, in theory, manages their care; the doc will give you a physical, make sure you're blood pressure's at a decent level, etc.
Of course, most of these tasks are actually done by a nurse, with the GP popping in for a quick hello, write a prescription, or hand out a referral.
This dynamic is not only grossly inefficient, but it fails to deliver the expertise that would most improve a patient's health. I would like to see the GP hand over a lot of his/her clinical duties to the nurses (which means buy-in from the American Medical Assocation...), and take on managerial duties.
I envision patients choosing between different GP corporations who would advise patients on which insurance plan makes the most sense for them, which specialists delivers the best value, how to choose between a generic drug and a more expensive brand drug, and sets up appointments at local clinics (e.g., Wal-mart one-stop shops or more expensive, more typical practices).
It would be relatively inexpensive, as one GP could oversee the health management of hundreds of patients a year, with the assistance of health care professionals (you don't need to be a GP to gather information, or setup appointments, or chart blood pressure; just like you don't need a construction team of architects to build a house).
The GP would be a health advisor, similar to a financial advisor (tangentially, I think if you want to help poorer people, subsidizing financial management could improve outcomes substantially).
What do we lose in this system? Well, for those that can afford going to see a quality GP regularly, you might not get a physician with as much experience as your current GP giving you a checkup next time around. Not because you wouldn't be able to find an experienced GP to do so, but because you would also have the option to have a nurse provide the same service at a fraction of the cost, and you'd probably go with the cheaper option.
Why? Well, because your GP advisor would break down the costs and benefits associated with each of your health care decisions, and provide you with simple, straightforward choices. Have I completely worked out this system yet? No. But I think its the right direction.
Related posts: value-based health care, real chance for health care reform Read more!
Sunday, June 29, 2008
The strongest criticism of consumer-driven healthcare is that consumers lack the knowledge necessary to make informed decisions, especially given the complexity of the choices presented before them. There is something to this. Then again, people know relatively little about how the thousands of available computers or restaurants, but they are able to make relatively sound choices. Why?
Saturday, June 28, 2008
Ross Douthat and Reihan Salam's new book, "Grand New Party: How Republicans Can Win the Working Class and Save the American Dream," has built itself some politico buzz thanks to opportune timing and a novel perspective on how to revive an ailing Republican party. A few people forwarded me David Brook's review of the book, which is certainly worth a read.
Brooks' review is about more than this specific book, but about the greater movement of "young and unpredictable rightward-leaning writers.
"These writers came of age as official conservatism slipped into decrepitude. Most of them were dismayed by what the Republican Party had become under Tom DeLay and seemed put off by the shock-jock rhetorical style of Ann Coulter. As a result, most have the conviction — which was rare in earlier generations — that something is fundamentally wrong with the right, and it needs to be fixed."
Brooks points specifically to Megan McArdle and Will Wilkinson - two of my favorite bloggers - as examples of the "new" Republican archetype.
Brooks believes that these writers will fill the conservative "intellectual vacuum" that currently hampers the Republicans:
"Liberals have a way to address these inequalities — the creation of a Denmark-style welfare state. Conservatives have offered almost nothing. The G.O.P. has lost contact with its own working-class base. This is the intellectual vacuum that “Grand New Party” seeks to fill."
What will the basis of the the Grand New Party? Douthat and Salam write, "It's hard-work conservatism, which uses government to increase the odds that self-discipline and effort will pay off."
Sounds excellent to me, and I think this would be a good thing for Democrats as well (though elections would be harder to win...) Will it happen? I doubt we'll say a Republican revolution, but perhaps we'll see a change of face and leadership more in tune with this Grand New Party. Read more!
Monday, June 23, 2008
This post follows the utility of the nation-state in exploring the importance of properly defining fairness, a concept that weighs heavily in most discussions while rarely being explored on its own merits.
At some point, a nation ingrains a conception of fairness in the national fabric, most often in the constitution itself. I think many would refer to this as the "social compact." Europe emphasizes distributive justice among citizens, both increasing the possibilities for the worst off among their citizens and decreasing the opportunities for those branded outsiders.
Some of those outsiders headed to the New World looking for a type of fairness very different from that found in Europe at the time, or, for that matter, in modern Europe.
The Statue of Liberty stands a testament to that uniquely American ideal: "Give me your tired, your poor, Your huddled masses yearning to breathe free, The wretched refuse of your teeming shore. Send these, the homeless, tempest-tossed to me. I lift my lamp beside the golden door."
The American Dream was characterized not by distributive, but procedural justice. Each person would be given the same opportunity regardless of their ethnicity, religion, creed, etc. Talent and hard work would determine how far you'd go in life, not whether you were Catholic or Protestant or born from "proper stock" or any other determination of what was a "proper citizen."
What's happened since then?
Well, the frontier's been settled. The moment the Italian no longer considered himself an immigrant he spat upon on the 'Irish dogs, who, in turn, cast a wary eye and a perjorative slur at the Mexican.
Yet despite the natural human inclination to protect one's kin and consequent belief in the "defective moral quality of being a stranger," the American notion of procedural fairness has remained remarkably resilient.
Despite nativist attacks at nearly every stage in American development -- from the Know Nothing Party to Lou Dobbs -- immigrants continue to flock to the United States and power American development and innovation, from the atom bomb to Google.
The United States has ridden the creative powers and hard work of the "poor and huddled masses" to a level prosperity unmatched in the history of the world. The American social compact is to be credited.
Yet societies have remarkably short memories, and apparently a 305-foot high statue warmly welcoming the world's "wretched refuse" in the nation's richest city is not enough to remind Americans of how the US developed into an economic titan.
The trouble is that energetic, hard-working immigrants eventually have kids. Some of their kids will keep their parent's spirit, most will not. While the immigrants who venture to the US leave behind their lazier and less talented brothers and sisters, there is no self-selection mechanism for those born in the US.
While that may sound in bad taste, it's no different than the way we talk about being born into a rich family. While the original entrepreneur was likely hard-working, there's no reason to suspect the same of their children.
The American paradox is that we all want to be treated fairly as we grow up (procedural justice), and then we all want our children to receive the best treatment available even if they don't deserve it (distributive justice).
Well, who would have lost if the Know-Nothings successfully closed the door on Irish immigration, or if the racists in California had succesfully shut the door on Japanese immigration?
Clearly, the immigrants themselves would have lost dearly, as well as their children, and their children's children. In addition, the children and great grandchildren of the earlier Americans benefitted as well, as dynamic labor markets spurred on the creation of new industries and created new jobs and opportunities for all Americans. Yet in both cases loyal Americans tried to slam the door in the face of these immigrants in defense of what they perceived as the American interest.
The trouble is that it's only easy to see the benefit of immigration 100 years later, removed from the emotional tug that drags down most political discourse. It's hard to put much weight in the positive externalities of productive new immigrants if you think things could be better in your life at that moment ("My son lost his job + I see a lot more Mexicans around + They have jobs = they took his job.")
The changing economic dynamics of the 21st century once again raise the question, what kind of country should America be? Should it be a nation-state in the static European sense? An exclusive club that sets up barricades and pampers its few members? Is distributive justice the next step?
Clearly, I don't think so. I don't think it would be healthy for America in the long run to choke off her access to fresh ideas and hard work, and I don't think it's just.
The United States is not, and should not be static, like a France or Germany. It should be dynamic and everchanging, a whole composed of parts bound not by blood but belief in a fair shake. That's not to say we need be as superficial in our understanding of procedural justice as our ancestors. We can still admit we have a lot to learn from Scandinavia while staying loyal to procedural justice. How we can do so is a subject for another post. But our core strength lies in equal opportunity, and we'd be wise to focus discussions of justice within that paradigm, rather than the distributive justice of our country-club cousins in Europe. It's both in our interest and more helpful to the disparate. Read more!
Sunday, June 22, 2008
Fareed Zakaria doesn't seem well-suited for the role of television show host. He's stiff as a board, and he lacks the Jon Stewart wit so effective in livening up otherwise dry issues. Yet Zakaria has managed to create the best news show on TV in Global Public Square (or GPS). How?
First, Zakaria chooses great guests, carefully chosen for their unique takes on otherwise tired issues (e.g., Bjorn Lomborg); these aren't the standard news circuit hacks. Second, Zakaria avoids the standard pitfalls of tv hosts when questioning his guests. Nobody gets a free pass, but the questions are not designed to embarass or "nail" the guest, but rather force them to respond to the best counterarguments to their position. For example, he presses Condi Rice on why the US doesn't treat Iran the same way it treats North Korea. And when a guest, such as Ms. Rice provides a vague response, such as her explanation of the political situation in Iraq as a well-functioning Iraqi democratic government, Zakaria points out that the Sunnis are still largely excluded from the regime.
The show airs at 1 p.m. ET on Sunday, and as long as you can stomach the Lou Dobbs advertisements during breaks, I would highly suggest it.
No, Zakaria isn't a TV host at heart, but if you're looking for "good tv," GPS is a great place to start. Enjoy Stewart's light-hearted take after a hard day's work, and turn to Zakaria for your critical analysis of the world's most pressing issues. Read more!
Thursday, June 19, 2008
Good ol' election season/year/century/millenia. It's been awhile since I've had any election-related material, because there really hasn't been much to say. We are now starting to see a bit more on the policy end from McCain and Obama (and Barr?)
Most recently, both candidates managed to whip up some economic blog buzz -- response has been mixed. Barry Obama has demonstrated he has no problem spending money, promising $15 billion a year for 10 years on energy technology, $60 billion for high-speed railways and improved energy grids, increased spending on basic research, subsidized high-speed internet infrastructure, and $4,000 a year in tuition for students who later enter public services.
A lot of that makes sense in the abstract (except the last part; why, praytell, am I subsidizing a future DMV employee over someone who will be working harder in a more productive job that is almost definitely more useful to society?)
Then again, so did the Big Dig. The question is never simply about the proposed end (better transit, SURE!), but also about the means. To Barry's benefit, he does seem to understand that these programs need to work with Joe Market rather than slit his throat and steal his life.
He compares his energy investment program to venture capital, designed to support the "middle stage" between innovation and commercialization. "You have this point in time when things haven't quite taken off yet and still entail huge risks."
Megan McArdle isn't quite as impressed with Obama's "infrastructure plan which will undoubtedly do approximately nothing to increase the rate of economic growth (though it probably won't much harm it, either)." She does add that his economic plan includes "a cause near and dear to my heart: simplifying and lowering the corporate income tax."
So Dani Rodrik is in heaven, and McArdle thinks Obama "has the right sort of left-wing ideas; he wants to model America on Denmark, not Germany or Italy."
McArdle's probably not far off; Sweden's Prime Minister himself said that Obama's economic and tax policies were in step with his homeland.
Meanwhile, the Economist's heart is a patter after Obama said: "There are some who believe that we must try to turn back the clock on this new world; that the only chance to maintain our living standards is to build a fortress around America; to stop trading with other countries, shut down immigration, and rely on old industries. I disagree. Not only is it impossible to turn back the tide of globalization, but efforts to do so can make us worse off."
Why so much Obama and so little McCain in this economic discussion? Well, the Economist recalls McCain doing his best Hillary impression: "I trust the people and not the so-called economists to give the American people a little relief."
All that said, let us not deify Barry yet. Obama's decision to forgo public campaign funding makes sense given his war chest, but it also unequivocally violates the commitment he made to go the public funding path last year with McCain. Ain't no real way to sell this as anything more than political opportunism. Obamaniacs will surely shrug this off ("Everyone does it"), but, of course, Barry has built his fervent following by making an obscene amount of people believe that he will never sell out his values like the "Washington establishment."
In this case, Obama fought the Washington Establishment by making a pledge a year in advance to show to voters that he would defend the only hope for elections to stave off corruption and improper influence... and then got a glimpse of the promise land and grabbed the cash and ran.
Perhaps it's an exception -- certainly, not reason enough to not vote for him -- but reason enough to put an end to these ridiculous conceptions of Barry. Seeing very smart people giggling and swooning like 12-year old girls at an NSYNC concert is a bit troubling. Read more!
Wednesday, June 18, 2008
Meet Bob Bias. Bob is an insufferable know-it-all (no wonder, he assumes the worst about everyone) and truly believes that if he wills it, it will be done. He's statistically-incompetent, his memory is pretty bad, and yet he still thinks he is always right.
Unfortunately, we all have a little more Bob in us than we would like.
Bob, along with the rest of us, is simply a human being trying to find his way within an infinite flux of particles and processes with a human mind that is finite and cannot comprehend the infinite. Bob has to comprehend reality though thinking about simplified models of reality. For instance, Bob thinks of the infinite number referred to as Pi as 3.14 or as "Pi" as we can't really comprehend or describe its infiniteness.
These models work very well for most of our tasks. My mental representation of toothpaste is unbelievably superficial, but it captures the value that is important to me.
Our comprehension, however, isn't infinite, and it runs into some trouble in different areas. I've been checking out the cognitive bias work of Max Bazerman and incorporated his different biases into different traps that sabotage our decision-making.
Bob thinks his perception of a variable or process captures it in its entirety
Result: Bob thinks that his odds of winning a dice game have fundamentally changed since he has been "hot" recently
Bob thinks that all of his simple finite models are accurate representations
Result: Bob plays a dumb bet in the stock market based on a superficial analysis
Bob thinks that every process or variable can be controlled by his action
Result: When Bob rolls a pair of dice, he throws harder when he's going for high numbers, softer when he wants low numbers
Dealing with data
The human mind is good at registering extremes. You remember the feeling of fire burning your skin. This ability hurts our ability to compute large amounts of data. We aren't good at abstraction, dealing with big numbers. We have a hard time comprehending probabilities. We're also oversensitive to causal relationships; we see causes everywhere, from lucky hats to less ridiculous, but no more causal variables
Bob's ability to recall events and people is based on the vividness and recentness of the memory rather than their frequency
Result: Bob is more afraid of dying in a plane crash than a car crash or of heart failure
Bob is very bad at differentiating between correlation and causation
Result: Bob believes his team won the game because he wore his lucky hat
Bob is very bad at measuring statistically significant relationships and dealing with probabilities
Result 1: Bob estimates his travel time based on his last trip which was exceptionally quick, rather than his last 30 trips
Result 2: Bob thinks that three events with a 80% each of occurring are more likely to ALL occur than one event with a 25% chance
This should come as no surprise. The mind has a lot of information that has been validated internally, and it shouldn't be surprising that it tends to trump all else. I think of it this way; the signals from the self, the feelings, the motivations, etc. create a dynamic digital signal to the brain of what Bob enjoys, didn't enjoy, etc. Bob's mind has a hard time testing the voracity of what it thinks. This is common sense, it's hard to objective about what you think. As I said before, this leads to the never-wrong trap, but is also has added negatives when dealing with others.
Bob's brain registers the pain and pleasure of friends and others, but only through a relatively weak analog signal. This weak analog signal has to stack up against the dynamic digital input from Bob's mind, the same mind now tasked with measuring the value of Bob's digital signal v. the outsider analog input. The dice are clearly loaded.
Result 1: Bob thinks his cup is worth more than he would if it were not his cup
Result 2: Bob thinks that he cut off the guy because he had to, while that OTHER car cut him off because the driver is a jerk
Result 3: Bob hears that a person was killed in the town over, but that news causes him less anxiety than his migraine.
Result 4: Bob dismisses Frank because he sees that he is biased, but doesn't think about his own biases
This isn't an exhaustive list. Bryan Caplan has come up with a list of biases relevant to voters - "anti-market, anti-foreign, pessimism, and make-work" - but it's a good place to start.
Tuesday, June 17, 2008
Malcom Gladwell wrote the book Blink to celebrate the mind's ability to make very adept judgments in the blink of an eye. These judgments are based on our intuition (the "gut" or "heart") and allow the human mind to make millions of calculations and decisions very quickly.
Gladwell is critical of those who ‘overthink’ things and don’t respect the value of the ‘blink’ decision simply because we don’t know how to articulate what makes the hairs on our neck stand up. Gladwell’s first example sees an art gallery acquire an ancient statue despite many experts believing the statue was fake based just on their visceral first impression (it was indeed fake.) Gladwell hammers home that the experts didn’t know how they knew the statue was fake, they_just_did.
The author of The Tipping Point does admit later in his book that there are some problems with the ‘blink’ judgment. It’s highly sensitive to a person’s experiences. Gladwell mentions a race experiment, which measured his ‘blink’ reactions to questions of race and achievement, and he learned that his ‘blink’ judgments discriminated much more than he did when making conscious, deliberate decisions.
Since Gladwell is black, it appears safe to say that his ‘blink’ associations are unequivocally bad (and/or damaging, etc.) in this case, while his deliberate associations are significantly better (if not ‘good’). Furthermore, Gladwell explained that the race experiment results could be easily manipulated by showing the respondent negative or positive images of black people beforehand. 1 point for thinking, 0 for blinking, in this case.
This example underscores a tangential point made by Gladwell that I think is VERY important: our "unconscious attitudes may be utterly incompatible with our stated conscious values."
I think Gladwell is correct that ‘blink’ reactions are not necessarily wrong simply because we can’t articulate the reasoning behind them. I do think that even framing a discussion of the matter with the title “Blink” is giving deliberate decision-making short-shrift, and I don’t think the world really needed another anti-contemplation lobbyist.
Blink decisions are decision-making shortcuts that are undoubtedly necessary (who wants to carefully weigh the pros and cons of every decision with which they are presented?), but the focus should be on overcoming the cognitive failings that sabotage our stated conscious values both subconsciously and consciously.
The question isn't blink or think, but how can we ensure our blinking and thinking isn't sabotaged by "unconscious attitudes ... utterly incompatible with our stated conscious values."
Sunday, June 15, 2008
This post has taken me awhile, but I think it's worthwhile. Inherent in any discussion of a nation-state's policies, from societal safety nets to immigration, is an understanding of the nation-state and its proper role. This post argues that the "value-added" by the nation-state is declining, and in turn, the values of local governance and international institutions are growing. I argue that the historical experience of the nation-state has effectively "nationalized" popular understandings of fairness and self-interest, and that these understandings are increasingly inappropriate.
To begin, it's important to understand that the United States, like most nation-states, was created to respond to an external oppressor. The colonies integrated their governance only so far as absolutely necessary for defeating the British. The nation-state is built for this zero-sum militaristic competition. This zer- competition rewarded size, and the more resources that could be brought under the leadership of a singular decision-making body, the better the nation-state would do in the competition.
Zero-sum competition not only led to societies growing in size to the point of becoming the modern nation-state, but also brought about the creation of the market economy. As Robert Reich put it, the king wanted more silver to prosecute his wars, and allowed for greater economic freedom in a mercantilist trade system, which eventually created independent pillars of wealth and power, forcing the king to eventually allow greater political freedom, which, in turn, begat the free market system.
Mercantilism fit neatly within the zero-sum militaristic competition model, as trade was perceived as a weapon to accumulate a larger slice of the fixed economic pie that made up the world. But clearly, mercantilism has fallen out of fashion. It's come to be understood that trade can, and usually does, benefit all parties (to varying degrees), and that economic prosperity is not a zero-sum game; quite the contrary, trade is a non-zero-sum game, where each nation-state benefits from the economic success of other nation-states.
The market economy erodes the value of the nation-state because the market economy thrives on cooperation both internally and externally, i.e., trading with a guy from Ontario or Detroit depending on who is giving you the better deal. Meanwhile, the value of the nation-state depends on high internal cooperation, and low external cooperation. If you don't differentiate between dealing in Ontario or Detroit, then what's the purpose of having a different nation-state for each location?
The nation-state has historically convinced its citizens of its value by taking on an external enemy, such as the British, the Nazis, Soviet Union, etc. Within the perspective of zero-sum militaristic competition, the ideas of national interests and national fairness maintain a certain logical consistency. In a game of nation-state survival, your interests extend only so far as your borders, or at the most, the borders of your allies. Furthermore, fairness applies only to the citizens of the nation-state.
While that zero-sum competition still exists to some degree, I argue that it's been diluted by the increase of non-zero-sum cooperation, wherein those national notions of self-interest and fairness are NOT logically consistent. Outside of zero-sum nation-state competition, the foreigner is not an adversary for the citizen anymore than any of his fellow citizens -- the national border no longer divides the citizen's interests and sense of fairness.
Does this all mean that I think the nation-state has outlived its use? Not entirely. While the nation-state inhibits exchange across borders, it has facilitated exchange within the nation-state. Europe is just now catching up to the United States in picking apart the economic barriers, brick-by-brick, constructed in between the tiny nation-states. The nation-state has value in lowering transaction costs and promoting exchange (and, of course, providing for the common defense of the member states). I am calling into question the role of the nation-state as the de facto level for policy action to advance one's interest or sense of fairness.
Whereas the powerful nation-state best serves the interests of the citizen in the day of zero-sum competition, a dynamic federalism best serves the citizen in our world today. In addition, I have mentioned 'fairness' along with interests in this post for a purpose. Many of our policy debates, from welfare to healthcare to immigration to free trade, end with one side claiming that it is only fair to "fix" the economic system to provide jobs or services for relatively poor Americans, even if it comes at the expense of much poorer foreigners. This mindset is a remnant of historical zero-sum competition that has no place in a discussion of trade with poor and well-meaning foreigners. Justice should know no borders.
I'll end with an analogy. Let's say you're in charge of a business. The nation-state mindset would lead you to hire your family and friends, while the market mindset would prompt you to throw open your doors to the world, and higher whoever seemed like they would be most productive. Even though you share a kinship with your family and friends, you appreciate that it is not "fair" to pass over a hard-working, smart employee for your less talented, lazy cousin. Favoring your kin is neither fair nor in your self-interest, because your interests and sense of fairness are not "kin-based," nor tribal, nor ethnic, nor national.
In a post in the (hopefully) near future, I will spell out the implications of this non-zero-sum mindset with regards to policy. Specific attention will be paid to how policies can be crafted to advance citizens' self-interest without offending their sense of justice. I should also consider the alternative view of the nation-state put forth by Robert Reich and state where I believe he gets it wrong.
For a sneak peek, I agree wholeheartedly with Will Wilkinson's theory:
"For my part, I have a fairly radical ideal theory of a cosmopolitan liberal global order of trade, migration, and peace. I think the “nation state-as-primary-moral-community” assumption at bottom of most modern liberal arguments for the welfare state (and in many libertarianism-in-one-country arguments, for that matter) is morally backward." Read more!
It's rare that I buy more than one or two books at once, but once in a while I've accumulated such a long list of books that I want to read at that very moment that I end up buying a boatload. In case you were interested, here's what I'll be reading over the next while -- you'll likely some of these names on this site again...
- "Power, Sex, Suicide: Mitochondria and the Meaning of Life" Nick Lane; Paperback; $12.21
- "Network Power: The Social Dynamics of Globalization" David Singh Grewal; Hardcover; $19.80
- "Nudge: Improving Decisions About Health, Wealth, and Happiness" Richard H. Thaler; Hardcover; $17.16
- "Mirroring People: The New Science of How We Connect with Others" Marco Iacoboni; Hardcover; $16.50
- "A Dash of Style: The Art and Mastery of Punctuation" Noah Lukeman; Paperback; $11.16
- "The Happiness Hypothesis: Finding Modern Truth in Ancient Wisdom" Jonathan Haidt; Paperback; $10.85
- "Negotiation Genius: How to Overcome Obstacles and Achieve Brilliant Results at the Bargaining Table and Beyond" Deepak Malhotra; Hardcover; $17.16
- "Kluge: The Haphazard Construction of the Human Mind" Gary Marcus; Hardcover; $14.40
Thursday, June 12, 2008
How about those for buzz words?
Gentrification is an object of hatred on the left because it is viewed as a source of added suffering for those already poorly off. While I agree that the byproducts of gentrification are certainly unfortunate, I think the gentrification opponents are wrong in identifying gentrification as a source, rather than a symptom, of a deeper problem.(Related Jane Jacobs posts: the poverty trap, borders)
Gentrification, like city overcrowdedness in general, is a symptom of "the demand for lively and diversified city areas [being] too great for the supply." The problem isn't too much gentrification, it's too little city. I'll join Jacobs in stating, "The sheer supply of diversified, lively, economically viable city locations must be increased."
The immediate response to this proposition would rightly be skepticism -- why hasn't city supply grown with demand?
Hypothesis: well-intentioned (giving the benefit of the doubt...) government intervention has stunted city growth over the past fifty-odd years, creating a large "city deficit."
It's economically advantageous to live in large concentrations, which is why cities evolved in the first place. Yet the wealthy left... Why?
One of the myths is that the wealthy turn and ran of cities because of a fear of black people, or something similar; this is mistaking cause and effect, the wealthy left because a large carrot was dangled in the suburbs, housing prices were then depressed, and in move poorer folks, including a large population of minorities. Just look at two of the signals the government sent post 1950:
- Brand new interstate system: Made it cheaper to live further away from economic cores
- Juicy government-guaranteed home mortgages: Rent in New York or own at a bargain price in a suburb? (I think this is the key...)
The product of this sprawl has been a great deal of economically-depressed dead space. I won't complain about how the earlier government subsidies played out -- California, for all it's crazies, has been a huge economic advantage and while it took a questionable Mexican War to obtain continental integrity, we likely spared a couple more wars by preempting the possibility of a European/Asian presence on the left coast.
But the 20th century subsidies are much more questionable. Beyond the city crunch, the reason we drive cars so much is because we have to, because everything is so spread out in the US. Don't blame GM, blame the national sprawl.
Correcting deficits is never painless, and the dislocations brought on abrupt gentrification of city areas (UWS of Manhattan) and total city cleanup (is Newark a good example?) are the products of the market looking to correct what the government screwed up.
As Paul Krugman notes here, the fuel crunch is making our sprawl even more economically painful.To conclude, greater concentrations of people are more productive than sparsely populated areas. Rather than help our cities grow, government planners have systematically driven individuals away from our economic hubs, lowering economic productivity, and greatly increasing the difficulty of managing overcrowded cities. Finally, I'll add that before reading Jane Jacobs' book, I agreed with the "widespread belief that Americans hate cities" -- the dirtiness, poorly functioning transportation, etc. all bother me -- but I've come to agree I, like most Americans, really only "hate city failure." Presently, the city is like a company's first store, which is filled with customers who want to use the store, but can't even fit through the door. The problem isn't the store, it's that there isn't enough store. Read more!
Saturday, June 7, 2008
This post will examine the implications of the new economy (see previous post on what's changed here) on education, focusing on the insights of Robert Reich, from his book, The Work of Nations. The broad challenge for the educational system is to transform itself from an ineffectual vestige of the industrial age to meet the needs of the new economy. One of friends who teaches in a NY public school commented that the school system appears to simply exist as a measure of social control. While I don't think this design is deliberate, it does reflect the values - order, discipline, obedience - upon which the educational system is built.
As asserted previously, these values were handsomely rewarded by the old economy. Unfortunately, as the volume-based, assembly-line industrial jobs have disappeared, so has the demand for those values.
Reich identifies four skills that define the value of an individual's labor in the new economy, and thereby, wages: abstraction, system thinking, experimentation and collaboration.
Abstraction: Ability to reduce the infinite parts of reality into simplified mental models, and, in turn, recognize patterns and meanings
System thinking: Understand relationships between various phenomena and underlying processes (e.g., don't simply think about how to solve a problem directly, but why the problem arises and how it's linked to other problems)
Experimentation: Pretty straight forward, but yet poorly taught and understood -- the art of trying out hypothesis, failing/succeeding, analytically assessing results and process of experimentation
Collaboration: Ability to articulate, clarify, restate, critique, and respond to criticism
These skills allow the individual to find unexpected relationships and potential solutions by looking at broader system of processes, variables, and outcomes. Furthermore, these skills empower the individual to hold off his/her natural tendency to view life as static snapshots, which is unfortunately reinforced by compartmentalized subjects like biology, math, etc.
Reich notes that good schools don't ask students to memorize data, but rather present data, and then ask student to assess how/why this particular data is chosen, how it might be contradicted, and, more generally, to critically assess the validity and significance of information in various forms.
Unfortunately, Reich never presents a coherent vision for reforming education because he doesn't see education as the solution to increasing inequality, dismissing the possibility of teaching the children who would become routine producers or interpersonal servers (see past post for more) to become symbolic analysts as "daunting."
While I understand that not every kid can be Einstein, I do think education is *THE* way to improve individuals' abilities to attract higher wages. You can't extort high wages (well, you can, but not forever), and it's the only way to increase individual leverage in the long-term. Furthermore, I think modern-day education is so wildly inefficient and unproductive that we don't truly understand the potential impact of education.
We do know that creative thinking, and problem-solving, is like a muscle, and if it falls into disuse it will atrophy. I often felt that my middle school curriculum killed my creativity, lulling me into an intellectual comatose that I'm only now escaping, and there may be some truth to that.
I will avoid being seduced into an attempt at a holistic take on education reform, but I can't help but offer some brief reflections. First, I think schools are trying to do two different tasks at the same time, and their ability to either suffers because of it. Most straightforward is the desire to impart knowledge and mold young minds. Secondary (?) is the goal of acclimating individuals to interacting with others and building a social acumen. Of course, while we understand that kids will learn more with the guidance of an experienced elder, we somehow think that the best way to socially acclimate these same kids is to let them learn from equally immature and chemically-imbalanced youths.
I think the Ancients really had something with the tutor-pupil relationship afforded to the noble children (except the whole sex thing...). It was understood that learning how to think demanded intense interaction and focus. In addition, social interaction was learned not among emotionally-retarded peers, but with people of vastly different ages and experiences. The Ancients were taught how to be adults. Nowadays, children are taught to be children, and often are taught how to act BY children.
I don't think we can necessarily emulate this example, but I do think it suggests a different role for the teacher and a different dynamic to the classroom. One in which the teacher should be seen a human resources executive, in charge of the development of his/her students. This would include ensuring that top performers receive additional training as well as are given additional responsibility to work with lower performers -- they should be taught to be leaders. In addition, I think it probably doesn't make sense to separate classes by age, and that cross-grade interaction is a good thing for all involved. As a final note, as Reich noted, the breakdown of learning by discrete subjects, like biology or math, is entirely unhelpful for the modern student.
More effort should be placed on teaching students how to think critically, communicate and collaborate effectively, and how to "learn" more generally. The subject matter is secondary to the development of the skills that will allow them to succeed in whatever field they enter. Efforts to stimulate academic interest through "pointless" explorations of sports or popular music are entirely worthwhile if they develop these habits of thinking and learning.
And while I don't want to explore this subject at greater length, I will point my curious readers to this Economist article on education innovations in Finland and Sweden. Read more!
Friday, June 6, 2008
The American job market has changed dramatically over the past fifty years as the cost of transportation and communication has decreased and the capacities of other nations have grown. This transformation has been accompanied by a rise in overall wages, but growing inequality. This inequality has been attributed to everything from tax changes, destruction of unions, Reagan’s slashing of social programs, the proliferation of single-parents households, immigrants, and rent-seeking by the rich at the expense of the poor.
While these factors may play a secondary role, Robert Reich properly attributes the gap to a change in the returns on human capital. In the mid-latter half of the 20th century, the wage premium that a college degree commanded was much smaller than it is today. According to Reich’s aforementioned book, a high school graduate earned ~$32,000 (1987 dollars) in 1973, and $28,000 in 1987. Meanwhile, a college graduate earned 80% more than his high school counterpart in 1980, and nearly doubled that by 1990. Inequality is growing because the market for labor is changing. The assembly-line worker was paid X because his input was worth X, given the fact that these large corporations needed a great deal of simple human input – and it needed to be American – to produce and distribute their product at a high volume. Human labor wasn’t a commodity because the supply of labor was limited by geographic location. Technological developments have both directly (replacing men with machines) and indirectly (lowering the cost of doing business across oceans) rendered the high-school graduate a commodity. If all you can do (with your current training) is effectively follow orders, you will compete with both billions of other human beings and machines (either that currently exist or could be developed cheaply relative to your salary.) I don’t want to pigeon-hole this phenomenon as strictly a “high-school graduate” thing. It’s not about education, per se, it’s about the reproducibility of the work. From textiles to tech support to pathology, if the work is simply applying an existing solution to a straightforward problem, the value of the work is plummeting. This decrease in value is generally leading to a decrease in wages, though the workers are doing their best to secure wages that are higher than the value of their work. Reich divides the labor market into three types of jobs: The last group, symbolic analysts, is the “creative class” about which Richard Florida writes, though not all symbolic analysts are professionals, and not all professionals are symbolic analysts (this cannot be overstated). A secretary can be a symbolic analyst, and a manager can be a professional, but not a symbolic analyst. The old categorizations of types of work are no longer applicable. Reich labels this group symbolic analysts because they simplify reality into abstract symbols, which they then can manipulate, and translate back into reality. The return on this skillset has exploded because its value to enhancing productivity (however that is defined) is unparalleled. In the 20th century, mastery of knowledge, accumulated through experience or study carried a high value, as the supply of people with such knowledge was limited. Now, that supply is much less limited. Knowledge isn’t a commodity, but it’s value is falling as it becomes less scarce. Meanwhile, the value of understanding how to use knowledge to increase outputs has increased as the potential payoff becomes bigger. Knowing is cheap. Understanding is expensive. The premium is placed on brokering solutions by identifying and/or solving problems. Reich estimates that symbolic analysts made up 8% of jobs in 1950, and 20% in 1990. After the dot-com revolution, I can only imagine that number has grown. This shift in labor value has been jarring for many Americans, who are ill-prepared to compete for wages based on value-added by their labor, rather than simply time spent at work. Those Americans are seeing their wages stagnate, jobs disappear (mechanized/digitalized/out-sourced). The days of factories full of high-paying manufacturing jobs are gone forever. The question is how to respond to this change in economic dynamics. In a future post I will look at what Reich proposes, and where I think he goes astray.
Inequality is growing because the market for labor is changing. The assembly-line worker was paid X because his input was worth X, given the fact that these large corporations needed a great deal of simple human input – and it needed to be American – to produce and distribute their product at a high volume. Human labor wasn’t a commodity because the supply of labor was limited by geographic location.
Technological developments have both directly (replacing men with machines) and indirectly (lowering the cost of doing business across oceans) rendered the high-school graduate a commodity. If all you can do (with your current training) is effectively follow orders, you will compete with both billions of other human beings and machines (either that currently exist or could be developed cheaply relative to your salary.)
I don’t want to pigeon-hole this phenomenon as strictly a “high-school graduate” thing. It’s not about education, per se, it’s about the reproducibility of the work. From textiles to tech support to pathology, if the work is simply applying an existing solution to a straightforward problem, the value of the work is plummeting. This decrease in value is generally leading to a decrease in wages, though the workers are doing their best to secure wages that are higher than the value of their work.
Reich divides the labor market into three types of jobs:
The last group, symbolic analysts, is the “creative class” about which Richard Florida writes, though not all symbolic analysts are professionals, and not all professionals are symbolic analysts (this cannot be overstated). A secretary can be a symbolic analyst, and a manager can be a professional, but not a symbolic analyst. The old categorizations of types of work are no longer applicable.
Reich labels this group symbolic analysts because they simplify reality into abstract symbols, which they then can manipulate, and translate back into reality. The return on this skillset has exploded because its value to enhancing productivity (however that is defined) is unparalleled. In the 20th century, mastery of knowledge, accumulated through experience or study carried a high value, as the supply of people with such knowledge was limited. Now, that supply is much less limited.
Knowledge isn’t a commodity, but it’s value is falling as it becomes less scarce. Meanwhile, the value of understanding how to use knowledge to increase outputs has increased as the potential payoff becomes bigger.
Knowing is cheap. Understanding is expensive. The premium is placed on brokering solutions by identifying and/or solving problems.
Reich estimates that symbolic analysts made up 8% of jobs in 1950, and 20% in 1990. After the dot-com revolution, I can only imagine that number has grown.
This shift in labor value has been jarring for many Americans, who are ill-prepared to compete for wages based on value-added by their labor, rather than simply time spent at work. Those Americans are seeing their wages stagnate, jobs disappear (mechanized/digitalized/out-sourced). The days of factories full of high-paying manufacturing jobs are gone forever. The question is how to respond to this change in economic dynamics. In a future post I will look at what Reich proposes, and where I think he goes astray.Read more!
Tuesday, June 3, 2008
Alexander Hamilton is probably my favorite founder, not because he was necessarily the most brilliant (though he’s up there), or has the best life story (though he does…), but because he was right where nearly everyone was wrong. Outside of George Washington, you could take away any of the founders and reasonably expect their place to be taken by someone with similar views. Hamilton was an exception. History has borne out his belief that American survival and prosperity hinged upon a militarily and economically integrated United States. Hamilton’s actions provided the opportunity for the US to become the economic superpower of the mid-late 20th century.
Hamilton wasn’t a popular man. He was brash and direct to a fault, but more than his mannerisms, his ideas themselves engendered a political and, at times, personal revulsion. He told brilliant men that not only were their proposals not optimal, but that they were backwards, and that the direction they actively support traveling would bring about our destruction. Compromises would be famously hashed out, but there was no real middle ground to walk.
Nassim Taleb, author of The Black Swan: The Impact of the Highly Improbable, plays a similar role today. Taleb is telling governments and policy-makers that they have it all wrong. Whereas Hamilton demanded economic and military integration, Taleb asks only for economists, bankers, and civil servants to get a real job.
Taleb observes the brazen interventions of government and business leaders into complex systems as foolishly overconfident. I think 18th century physician (and American founder) Dr. Benjamin Rush is a prime example of this trend. Rush was a brilliant man and student of medicine, however, he he was overconfident about what he knew. Rush was a champion of bloodletting because he was not aware of how little he understood about how the human body worked.
The problem with knowledge is that the human mind will be more confident it is correct with more pieces of information, even if that additional information is not useful, "Give a bookie 10 pieces of information about a race and he’ll pick his horses. Give him 50 and his picks will be no better, but he will, fatally, be more confident."
Taleb sees "governments and policy makers" as the modern-day bloodletters, who "don't understand the world in which we live." Taleb isn't critical of the policy-makers ignorance, but he is critical of "their attempt to control the ecology, [when] they don’t understand that the link between action and consequences can be more vicious. Civil servants say they need to make forecasts, but it’s totally irresponsible to make people rely on you without telling them you’re incompetent."
Let me take a step back and explain the phenomenon with which Taleb is concerned. His book title references how it was assumed that all swans were white for quite some time, but all it took was "the sight of just one black swan" to destroy that theory. Taleb argues that "every theory we have about the human world and about the future is vulnerable to the black swan, the unexpected event. We sail in fragile vessels across a raging sea of uncertainty. “The world we live in is vastly different from the world we think we live in.”
Taleb is therefore very critical of policy-makers, economists, and most of all, bankers, because "they live in a fantasy world in which the future can be controlled by sophisticated mathematical models and elaborate risk-management systems."
Normally, I would be skeptical of this type of expert-bashing, as it's usually accompanied by some superficial pandering to the "common man" or some other abstraction. But Taleb can't be dismissed so easily.
He has an alternative, less ambitious, but he would argue more effective attitude towards progress, "Medicine improved exponentially when the tinkering barber surgeons took over from the high theorists. They just went with what worked, irrespective of why it worked. Our sense of the good tinker is not infallible, but it might be just enough to turn away from the apocalypse."
Taleb is pushing inductive over deductive reasoning, which resonates with what other smart people are saying with regards to economic development, and jives with the tendencies I (among others) have observed towards overconfidence.
Bill Easterly, author of The Elusive Quest of Growth, is similar to Taleb in in his damning indictment of economic development experts. Easterly argues that while we have seen tremendous economic growth over the past 100 years, it has been in spite of the advice of economic development experts, not because of it. He argues that "the end of the “development expert” paradigm does not mean the end of hope for development. Development is already gradually ending poverty (global poverty rates have fallen by more than half in the past three decades) – not be- cause of development experts such as those who wrote the World Bank Growth Commission report – but thanks to more freedom for more of the 6.7bn individual development experts alive today." (If "freedom" seems a little vague, worry not, I will have a post exploring this notion more fully in the future.)
Megan McArdle also had a recent post which adds a nuance to the aforementioned overconfidence cognitive failing -- a self-importance bias. McArdle is writing specifically about adoption officials and airport security guards, but the lessons are broadly applicable:
"A big part of the problem is that people have a natural tendency to over-estimate their own importance. Nobody takes a job he believes is a waste of time, and people self-select into professions they happen to think make a big difference in society. So TSA security screeners believe they're making air travel safer, even when the evidence says they're not. Patent attorneys believe they're promoting innovation, even in industries where the evidence says otherwise. And adoption officials naturally believe that they play a vital role in ensuring kids get placed in loving home."
The lesson I take from these stories is not that we are incapable of understanding anything, but that our fortunes will benefit from understanding that our minds are programmed to overestimate how much we know and how important we are to causes we care about. It is only when we are separated from the suffering brought on by our egoism that these delusions feel harmless or even pleasant.
I would rather join John Maynard Keynes' “brave army of heretics, who, following their intuitions, have preferred to see the truth obscurely and imperfectly rather than to maintain error, reached indeed with clearness and consistence and by easy logic but on hypotheses inappropriate to the facts.”
I haven't exactly reconciled Taleb's fierce criticism of economists, nor Easterly's dismissal of economic development experts, but I am inclined to believe that rather than shutting the door on "experts" the proper response is to cut the fat on what these experts are capable of understanding and sharing and what they are not. In the end, it equals gradualism over revolution, more tinkering, less forecasting, more experimentation, less paternalistic restraints and dictates, and perhaps most uncomfortably, reconciling the fact that we are resigned to be passengers in some processes that we simply cannot affect one way or another.
Taleb's warning is akin to a Greek tragedy. To act with the certainty of a paternalistic planner is to act hubristically; no man can understand the infinite amalgam of interrelated processes that make up the world around him, and if he acts as if he does, he will be punished by the force of his ignorance.
Self-awareness is the difference between a passenger who knows he is a passenger and a passenger who thinks he is a policy-maker and therefore makes the world a lot worse for him and everyone else through his floundering back and forth. Read more!
Monday, June 2, 2008
There are quite a few "big idea" posts in the pipeline that are currently gestating in different forms. It's helpful for me to organize thoughts beforehand into questions or topic areas, and I thought I would share what I'm thinking about. Any comment requests one way or another will affect what I get around to sooner rather than later:
1) Passenger or Policy-maker?
Rather than “Yes, We Can!” a more thoughtful response to a promising proposal would be, “Yes! Can we?” This post will explore how we have a tendency to be overconfident about what we know and we can do to bring about end results we desire. From individuals playing the stock market (such as myself) to high-powered execs in the banking world, there is good reason to believe we are living in a world very different from how we perceive it. The repercussions of this lack of understanding wouldn’t be so devastating if it wasn’t accompanied by an overconfidence that caused us to act brazenly despite the folly of running down a dark flight of stairs. This topic has direct and significant implications for business and political leaders, and by, extension, us, as the shareholders and citizens who support their leadership.
2) Hope for the Bottom Billion
There is reason to hope for the bottom billion people in the world, who have been excluded from the tremendous economic growth of the mid-late 20th century. This post will explore what is changing for them, why, and what we can learn from the process.
3) What is a nation-state?
In light of a book by Robert Reich, former Secretary of Labor, this post will examine the role of the nation-state, and how different modes of interpretation can change the nation-state’s perceived utility.
4) Work in the 21st century
In light of the same Reich book, this post will look at how the value of different types of work has been changing, and how these changes have affected both the spatial distribution of workers and the income potential of different types of workers.
5) Translating environmentalism into policy
Most people agree that it’s better to conserve the environment than to destroy it, especially if it will cause large-scale destruction in the not-so-distant future. Disagreement arises because of unclear costs and benefits. I’ve already posted before about the lack of clarity on the actual goals of many environmental plans (Why 30% reduction in X? Why not 40%? Or 20? Why not a reduction in Y?); this post will focus on the cost end of conservation plans (SPOILER ALERT: Al Gore’s plan is a little extravagant…)
6) What is Freedom?
Are you free from oppression, or free to do something? Is freedom a negative right or a positive right? This post will join the chorus that economic freedom is the key to personal and public prosperity, but with an understanding of freedom as a positive, not negative, right.
7) Learning from video games
If I had to define my computer supraliteracy period I would call it the “Pre-Second Life Age.” The 21st century has ushered in the creation of parallel virtual worlds, whose potential has not come close to being tapped. The Harvard Business Review recently had an article on the potential for leadership development in these massive multiplayer role-playing games, and adeptly notes that the current crop of games is especially well-suited for quick tactical decision-making often found in military action. I don’t know a ton about these games first-hand, but they appeal to me as incredible social science laboratories.
8) Reverse engineering the Swedish Kool-Aid
The Nordic states seem to have it all figured out. They eclipse the competitiveness of the US while providing the social net of Europe. How? Why? What can we learn from our blonde friends?
9) Gentrification, suburbia, and sprawl
In light of Alex’s comment on the Jane Jacobs book, an exploration of how the government has accidentally preconditioned cities for gentrification, scared up White Flight, promoted suburban sprawl, and created an incentive for people to arrange themselves spatially in an unproductive and inefficient pattern.
10) The problem of fairness
In light of Max Bazerman’s work on cognitive biases, a look at how we perceive fairness, and how sensitive our perception is to the presentation of data. Special attention paid to understanding how to develop a coherent conception of fairness.
11) Cognitive biases in business
Bazerman has laid out a ton of cognitive biases borne out in psychological studies. This post will briefly summarize them and connect them to current policy issues. Read more!