Signals v Causes: Poverty

From the Introduction of the William Easterly’s book, The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor:
:

The technical problems of the poor (and the absence of technical solutions for those problems) are a symptom of poverty, not a cause of poverty. This book argues that the cause of poverty is the absence of political and economic rights, the absence of a free political and economic system that would find the technical solutions to the poor’s problems. The dictator whom the experts expect will accomplish the technical fixes to the technical problems is not the solution; he is the problem.

Think of technical problems as problems like not having medicine, food or the internet and technical solutions as providing medicine, food and the internet.

I’m looking forward to reading the rest of the book. I heard about it from this EconTalk episode with William Easterly and that discussion is worth a listen.

Feedback Matters in Customer Service

This EconTalk podcast features a panel discussion on the future of work, featuring Andrew McAfee, Megan McArdle and Lee Ohanian.

Host, Russ Roberts, makes a good point about 29 minutes into the podcast. They are discussing how people differ from artificial intelligence. McArdle points out that there is value in charm. McAfee isn’t so sure. He says:

But think of your last 10 service interactions with another human being. How many of them left you with that warm, chamomile tea feeling?

McArdle say most of them. McAfee responds:

Oh, come on, did you walk through a sea of pleasant experiences in the airports on your way here? If so, I want to travel with you. [Or] When you call up Comcast, when you go–

Roberts points out that these are outliers:

You’ve picked the example of the places in America where there is very little competition due to regulation and government monopoly.

Good point. Not all customer service experiences are great, but certainly the ones from the companies that compete for your business are better than those that don’t. Everybody dreads going to the DMV. Most people are okay with heading to McDonald’s.

A very important fact, indeed

I agree with Yuval Levin, from his EconTalk podcast, about a simple point and an important fact:

I think Conservatives today don’t often enough make the simple point: that, when it comes to economics the market system that we are advocating has been the best thing that has ever happened to the poor in human history. And has dramatically reduced extreme poverty around the world and is still doing it right now; has been the way in which the needy and the vulnerable have been lifted up. It’s worked far better than anything else we’ve every tried, far better than anything the Left has tried to do economically. And that should matter. That’s a very important fact.

I hear this point made on occasion in left/right debates by the right. I find it interesting at how quickly it gets swept under the rug by the left. It’s usually with a red herring like, “but capitalism has its problems, too.” What I find interesting is how uninterested the left is in examining this important fact.

It goes back to the Levin quote in the previous post, “…the left takes for granted a thriving economy that just comes in the background…

This very important fact, in fact, was key in dislodging my liberal thinking. Before it was pointed out to me, I too, took the thriving economy for granted.

But, when it was pointed out to me, it was eye opening. Rather than sweeping it under the rug, I went silent and thought, if that’s right, how could I be against it? Isn’t it achieving the very thing that I say I want?

Levin went on to say:

Beyond that, the kind of society we are arguing for is a society that for very solid reasons we believe is grounded in a way of life that helps advance the moral good. A way of life that helps people build the sort of lives they want. That makes government more effective at solving problems that people confront. That gives people the room to build the lives they want and protects them from the worst risks that they might confront in modern life, rather than a society that says: This is the way, and you have to do it. Which, again and again, this is how the Left approaches the life of our society: centralize, consolidate, exercise authority to push people into the right grooves.

I couldn’t help to think of this quote when I read this Wall Street Journal op-ed on the politics around the federal nutrition standards for school cafeterias.

The nutrition mandates from 2010 First Lady bill centralizes nutritional choices for school lunches to “push people into the right grooves.”

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Bottom up links

In this Freakonomics podcast, Steven Levitt discusses his work with companies whose managers resist experimentation to test their beliefs.

In one example, he couldn’t convince a company to stop running newspaper ads in any market to see if that would have an effect on sales. But, they discovered that an intern neglected to buy ads in Pittsburgh one summer. It had no effect on sales. But, the company still buys ads.

In this EconTalk podcast, Yuval Levin made what I expected to be a dull conversation about Edmund Burke and Thomas Paine, very interesting. On this, especially, I agree:

I think that there’s a way in which the Left takes for granted a thriving economy that just comes in the background and the question is how to distribute the goods. We have to make the argument that that thriving economy–which makes possible the thriving life of this society–has to be sustained. And it’s a function of certain attitudes toward law and order, of certain kinds of rules, certain kinds of liberties that have to be defended, both because they are right and because they are good. Conservatives are nowhere near good enough at making that kind of case.

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The Great Participation Trophy Debate

The participation trophy debate was briefly mentioned in the EconTalk podcast linked to in the previous post.

Those for participation trophies think it’s good for self-esteem. Those against say it doesn’t prepare kids to deal with failure.

I have a third view to consider: We put too much emphasis on youth sports.

Why do we care so much about the life lessons of youth sports and not so much about life lessons learned from other childhood endeavors, like playing video games?

Has anyone ever argued that the high trial-and-error failure rate in video games hurts a child’s self-esteem? No. Has anyone argued that winning or losing a video game helps kids deal with failure? No.

Yet, we all instinctively know a simple truth about video games: The more a kid plays them, the better he will get.

Play your kid in her favorite video game and she’ll wipe the floor with you. That’s because she has more trial-and-error experience at it than you.

That experience came with no pressure and no stakes. She didn’t have coaches and parents calling out their every mistake from a sideline. If she lost a game, she just started over, tried a different approach and eventually learned what works.

Yet, we don’t translate that instinct to youth sports. Parents and coaches hope for mastery, without recognizing how little time the child has had to master it, especially in unstructured, low pressure, low stakes ways.

Youth sports in the U.S. use to be viewed by parents more like video games are now. In some countries, they still are. Guys I play soccer with, who came to the U.S. from South America and Europe, tell me they spent a great deal of time playing soccer in their home countries and their parents nagged them to do something more productive, just like how U.S. parents nag their kids to put down the video games.

When I was a kid, the way we learned sports was different than today. It was a lot more like how kids these days learn to play video games — lots of low pressure, low stakes play. Why? Because parents didn’t care as much about sports then.

We had much more unstructured play where we played with family and friends. We played more often with older and younger kids, the older ones taught us the tricks of the trade, then we passed those on to younger kids.

We got creative and made up our own games and rules, a lot of times to help compensate for imbalances of playing with different ages and abilities.

The ratio of time spent in low pressure, low stakes unstructured play to the high pressure, organized play was much higher than today.

I played a lot of driveway basketball, mainly because I got bored watching I Love Lucy reruns. I won no basketball scholarships, nor was I scouted by the NBA and I’m usually the last picked at just about any pickup game.

But, if I went to a country where they don’t grow up playing driveway basketball, the locals may be as amazed with my unconscious fade-away jumpers as I am with the soccer skills my friends from Europe and South America display.

Even when we played organized teams as kids, it wasn’t a major event. Every parent didn’t go to every game. Often, parents took turns carting the kids to the game. We often didn’t have large crowds to witness our losses and we didn’t get ear fulls on the ride home for the mistakes we made in the game. Nor do I remember getting snacks.

And, that was okay. Playing was more for us kids and less about pleasing parents and grandparents. They just wanted us to stay in school and out of trouble. We weren’t worried about college scholarships, going pro or being sports prodigies.

I think that’s the major thing that has changed. Now, sports is more about the parents. You know who I am talking about. Raise your hand if you or someone you know has mentioned to fellow adults that your kid plays a sport for a “competitive club”.

If you have a strong stance on the participation trophy debate, it may be a sign that you care about youth sports more than is healthy. Think about why you care more about that than you do your child’s video game or Lego building achievements.

Update: Mike M requested that I add the link to a previous discussion about what college athletes said their parents said to them. Here it is: Signals v causes in youth sports.

Post Note: Zemanta suggested the related article below about i9 Sports. I love this quote from the article:

Youth sports have become adult sports played by kids. Adults have sucked the fun out of youth sports, and our goal is to put fun back to the center.

 

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Megan McArdle on Failure

I agree with most of what Megan McArdle has to say about failure in this EconTalk podcast.

Why is failure valuable?

…because that’s how we get information.

What about the typical success story?

…when you see the cover of a business magazine, it’s always this genius with his folded arms staring at you and the piece goes through all these brilliant ideas. But in fact when you talk to entrepreneurs, that isn’t how they experienced it. Usually how they experienced it was: We had this great idea and then it turned out that didn’t work, so we did something else. Or it turned out: It didn’t work and we went out of business.

Where do we learn to start avoiding failure?

…having failed is an important skill that kids need to learn. And the right time for them to learn it is when they are kids. And when the consequences for that are actually pretty low.

One of the book talks that I gave, a 10th grade girl came up to me afterwards and she said, You know, I would really love to try to fail, but I’m in an AP (Advanced Placement) program; only 5% of the people who are in the program are going to get a 4.0; and I just can’t afford to take a class that I wouldn’t get an A in.

And I just thought: America, you are doing it wrong. It’s not that kids shouldn’t work hard in school. That’s not what I’m saying. But the idea that at the age of 15 you have to be so self-protective that you can’t take any risks at all is insane. Because when is going to be a better time? When she is looking for an assisted living facility?

I might rephrase that first part, though. Having failed isn’t the important skill. Learning to deal with failure is and learning to overcome the fear of failure is another important skill.

It seems like soon after we get past the trials and errors of learning to walk, run, talk and ride bikes, we forget that trial and error is how we learn and we tighten our tolerance for error.

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Signals vs Causes: Education

In this excellent EconTalk podcast, EconLogger Bryan Caplan discusses his upcoming book on education. He closes with this:

…the private return [of education] is high is really a very bad argument for pouring more money on.

Now, the other point, as we were saying, the return that you should be looking at in terms of this argument of not being able to borrow against your future earnings–what you are looking at is return for the marginal people who are just on the edge of going or not going. And as we’ve seen, the return for those people is actually… quite mediocre. And then finally if you adjust for ability and everything else, really I would say that once you appreciate signaling you realize that, so we have subsidized education way past the point of [?] returns. So by my calculations, actually, the social return to education is now quite negative.

And it would be a much better policy to drastically scale it back, so rather than encouraging more people to go, I think it’s better to discourage them from going or at least to encourage them less. So in fact–so, the biggest policy implication that’s going to come out of my book is we just have way too much education. I call this the white elephant in the room. There are way too many people going to school, maybe not from their own selfish point of view, but certainly from a social point of view to go and pour more money on this really is just throwing gasoline on the fire. And we need to do less of it.

I agree. Caplan’s argument is that we college education isn’t the cause of higher income, rather it’s just become the customary path that people with above average ambition and ability take and along the way we’ve mistaken it for the cause of that higher income.

It’s similar to the mistake ‘we’ made with housing. We thought owning a house made people responsible, so we made it easier to irresponsible people to own homes. We learned the hard way that owning a home was a marker of a responsible person, not a cause.

Now, we’re learning the same about college education as many kids graduate and find themselves deep in student loan debt and no higher income job to pay it off.

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Art and arguments

This week’s EconTalk podcast featured Jonathan Haidt. It was an interesting discussion. This part made me go hmmm…., cock my head a little to the side and squint my eyes a little:

Russ: …I think libertarians have handicapped themselves tremendously by failing to realize that most people aren’t like us. Guest: That’s right. I agree. Russ: Most people are groupish, most people are emotional. They don’t want an analytical argument. Most people don’t. They want an argument that appeals to the heart; and they want to feel part of something. So the libertarian–obviously there are many different strands of libertarianism, but I think the worst strand is the one that is totally individualistic and totally analytical; and that appeals powerfully to an analytical individualist. And then they can’t understand why no one wants to go with them. And the answer is because you’ve made it unattractive.

I think there’s more to it than an attractive emotional argument. The people who prefer them also seem prone to believe that attractive emotional arguments provide enough information to know the answer and not have to think about it any more.

Update: Adding to my last thought, it helps if the argument is emotionally attractive and easy to envision. More about that in the next post.

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Taleb on education

I’m currently reading Nassim Taleb’s Antifragility: Things That Gain From Disorder. I’m enjoying it and recommend it. There is much to discuss.

I ran into this today:

Authors theorize about some ancestry of my ideas, as if people read books then developed ideas, not wondering whether perhaps it is the other way around; people look for books that support their mental program.

Agreed. That sets up a section about education that ties in with a recent discussion about education on this blog. He introduces what he calls epiphenomenom, which is

…mistaking the merely associative for the causal; that is, if rich countries are educated, immediately inferring that education makes a country rich, without even checking.

He refers to work from Lant Pritchett (recent EconTalk guest) and Alison Wolf that supports that education is a marker of a wealthy country, not necessarily a cause (wealthy countries can afford education). I liked this story:

I once ran into Alison Wolf at a party (parties are great for optionality). As I got her to explain to other people her evidence about the lack of effectiveness of funding formal education, one person got frustrated with our skepticism. Wolf’s answer to him was “real education is this,” pointing at the room full of people chatting.

Taleb is clear in that he is not saying that education and knowledge are not important to an individual, it’s just oversold as a cause of a nation’s wealth. I also agree with this (emphasis mine):

…note that I am not saying that universities do not generate knowledge at all or do not help growth (outside, of course, of most standard economics and other superstitions that set us back); all I am saying is that their role is overly hyped-up and that their members seem to exploit some of our gullibility in establishing wrong causal links, mostly superficial expressions.

That puts into words something I’ve often thought about credentials. In so many areas credentials play on our gullibility and the folks with the credentials seem okay with that, which is a reason I have an inherent distrust for someone who rests on their credentials. You don’t often hear people qualify their credential and caution you to not put that much weight into it. They usually appeal to it.