Incentives matter, even in education

A Facebook friend shared a link to this “letter” to the President from Patrick J. Kearney regarding Patrick’s disapproval for school choice.

In this post from 2011, I explained why I think those against school choice usually don’t realize that they are against giving poor families the same educational freedom that middle and upper income families already have.

I agree with Patrick that there are good quality public schools in our country. I believe they are good because they tend to serve middle and upper income families that are better able to afford education choices. So, they have to stay good so enough families choose them over their other options.

When I was young, my parents made this choice by moving my family from a school district they felt was not putting education first to one that was. They could have tried to change things by voting for different school board members and speaking up at school board meetings, but they inherently knew their power of exit was much stronger for their (and my) immediate needs than their power of voice.

Looking back, I agree and am thankful for the choice they made and I’m thankful they had the power to make that choice.

So while there are good public schools, there are bad public schools, too. And, they aren’t bad because of under funding (most poor performing districts spend the same or more per student than the best schools) or for lack of people who want to do the right thing (there are plenty, but they’re power of voice is muted by vested interests).

They’re bad because of the incentive structure. As Terry Moe explained in a recent EconTalk podcast on the rebuilding of the New Orleans School District after Hurricane Katrina: “Vested interests are universal.” And these vested interests “will invest in political power to resist reform when the institutions they benefit from are performing very badly.”

School choice gives more families the freedom to exercise their power of exit to circumvent these vested interests.

Competition and monopolies in soccer

I thought the following dialogue about monopoly and competition from this 3Four3 podcast, with guest Ciara McCormack, was well said (around the 36 minute mark, emphasis added):

Host John Pranjic: The lack of competition, the lack of ideas being thrown into an arena, to let it fight it out and see which is best, that is what Canada lacks, that is what United States lacks, that is what Australia lacks, when it comes to soccer.

You get this one-size-fits-all attitude, from the top-down, that mindset alone is what kills the soccer environments in those three countries

Guest McCormack: There’s a reason in our societies, economically, that monopolies are frowned upon. It’s exactly the thing you are talking about. The lack of creativity.

I always liken it to, if I step on the field and I know I’m in the starting eleven every week — I can be good, I can be bad, I can sit and pick flowers the whole game and line [something] — and I know that I’m starting every week.

I’m not becoming better. People around me aren’t becoming better. They become stagnant.

Growing up in Canada, I’ll use my White Caps experience as an example. That was the only club team you could play for if you wanted a shot with the Canadian team.

The amount of power that gives the people in charge to treat the players what ever way they want, it just creates this awful culture.

When I was in Denmark, that would never have happened. You’re at a club and things aren’t going really good, then you go to another club.

Then another club starts with revolutionary ideas, that club rises to the top…

Exactly.

As I’ve mentioned before, we all have two powers: the power of voice and exit.

Pranjic and McCormack here describes negative consequences of not having a strong enough competition, or low power of exit, in a soccer federation.

These principles of voice and exit are true for all organizations from governments, private enterprises, schools, soccer federations and, as McCormack points out, teams.

It would be interesting to go deeper into how soccer federations are organized in other countries to compare to the U.S., Canada and Australia.

From my uneducated point of view, many seem to see their role more about fostering competition at all levels, rather than being in charge of competitions at levels.

For example, while U.S. Soccer seems focused on dictating the how many seats must be in stadiums and the minimum population sizes of team markets, England’s FA is more about ensuring that any team playing good soccer has a chance — no matter the size of their stadium or city.

I believe those in U.S. Soccer prioritize stability. That’s why they focus on stadium and market size. They think that will keep teams around, even when their results aren’t great.

I believe those in England’s FA prioritize the quality of soccer. It’s not that they don’t care about stability, but they believe stability comes from good soccer, not from the number of seats in the stadium.

A good Thanksgiving podcast & book

I highly recommend listening to this week’s EconTalk podcast with guest A.J. Jacobs.

He and host, Russ Roberts, discuss Jacobs’ new book, Thanks a Thousand: A Gratitude Journey.

The book is about Jacobs’ experiences in attempting to thank all the folks who make his morning cup of coffee possible.

He starts at his favorite coffee shop and works back to thank the folks who deliver the coffee to the store, roast it, keep the store pest free, grow the coffee and even the folks that create the safe drinking water that makes up over 98% of his morning joe, to name a few.

The book is another take on the economic classic essay, I, Pencil, which explores the amazing coordination among large numbers of people who make something as mundane as pencils.

At the end of the podcast, Jacobs recommends being as creative as possible this Thanksgiving when considering what you are grateful for.

I, for one, am thankful for the price system, which enables the coordination among billions of folks and encourages them to make things that improve my life, like pencils and coffee.

Another good bit of advice that Roberts and Jacobs discuss is looking for the good. Russ recalled a bumper sticker, “Wag more. Bark less.”

Jacobs said he finds he has an inner Larry David and inner Mr. Rogers. Larry David looks for things to be annoyed about it. Mr. Rogers looks for things to be happy about and grateful for. He tries to encourage the inner Mr. Rogers more and good things happen.

Don’t encourage the un-encouragable

Alex Tabarrok of Marginal Revolution shares his favorite of Morgan Housel’s Motley Fool article, 122 Things Everyone Should Know About Investing And The Economy.

I especially agree with this one:

For many, a house is a large liability masquerading as a safe asset.

This is important to understand and relates to my previous post.

In the U.S. we (especially politicians) have rose-colored glasses when it comes to home ownership. We think it’s good, always. We think, the more the better, always. We have this same affliction with education.

So, you start to see politicians do things to make it easier to become a home owner, like lowering down payment standards.

Home ownership can be good, but as with all good things, it isn’t good for every situation. And, there is a law of diminishing returns that limits the more is better, always.

Back in 2010, the Wall Street Journal interviewed Canada’s Finance Minister, Jim Flaherty. I wrote about that here. Canada did not have a banking crisis in 2008. Part of the reason why is that they do not see home ownership with rose-colored glasses like we do. This prevents them from doing unwise things like getting people into home ownership when renting is likely the best option for them.

He said:

“They [Canada’s version of Fannie and Freddie] are supposed to have a certain part of the market but they are not supposed to be a dominant player in the market. They do make sure that lower income earners have access to a roof over their heads, but that can mean rental housing.

There’s no stigma to renting there. That kept Canada’s government, mortgage lenders and borrowers from doing things that encouraged risky home ownership.

In the interview, Flaherty points out some of these things

  • Canada’s lenders didn’t securitize (sell off) mortgages, or off load risks of bad mortgages, to others. They lent and held the mortgage, so it was in their best interest to make good loans.
  • Borrowers couldn’t just walk away from a home with a mortgage. “They remained personally liable.” That encourages borrowers to be more prudent about becoming a home owner. If you can’t rid yourself of the debt by simply stopping paying your mortgage and walking way from the house if things go south, then maybe you don’t buy a home or you buy one that better fits your budget.
  • Canada’s tax code also doesn’t treat mortgage interest as a deduction. This policy also tips the scales toward home ownership in the U.S.

Signals v Causes: The American Nightmare?

An effective political and election strategy has been to identify the signal of the American dream (e.g. home ownership, college education, preschool) as a cause of the American dream — or the American dream itself, and then promise to make it easier for people to achieve it.

Hopefully, we are learning that this actually undermines the incentives and feedbacks that made those things signals of the American dream in the first place, turning them into nightmares.

It turns out that getting a college degree doesn’t cause the American dream. Rather, all the hard work and gumption that use to go into getting the relatively more scarce and useful college degrees of the past was truly what set those kids apart and put them on the path to prosperity and independence.

Change the college degree from a sorting out mechanism to an easy path and the college degree no longer is a reliable signal of those hard workers to employers. Then the nightmare ensues.

As this Wall Street Journal editorial describes:

A lot of these borrowers can’t generate the income to service this debt, especially when so many of them can’t get decent jobs. The left-leaning Center for Economic and Policy Research recently noted that among recent college graduates age 22-27, a full 45% were underemployed in 2013, meaning they were either unemployed or doing jobs that typically don’t require a four-year college degree.

Of course, it doesn’t help that politicians have also mucked with the incentives of the innovation economy, reducing its capacity to create job opportunities for these folks.

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Failing sucks, get over it

The Wall Street Journal published an adaptation of Admiral William McRaven’s commencement address to the University of Texas about life lessons learned at Navy SEAL Training that is worth a read.

Here are a couple prescient lessons.

Get over failing:

Several times a week, the instructors would line up the class and do a uniform inspection. It was exceptionally thorough. Your hat had to be perfectly starched, your uniform immaculately pressed and your belt buckle shiny and void of any smudges.

But it seemed that no matter how much effort you put into starching your hat, or pressing your uniform or polishing your belt buckle, it just wasn’t good enough. The instructors would find “something” wrong.

For failing the uniform inspection, the student had to run, fully clothed, into the surfzone and then, wet from head to toe, roll around on the beach until every part of your body was covered with sand. The effect was known as a “sugar cookie.” You stayed in that uniform the rest of the day—cold, wet and sandy.

There were many students who just couldn’t accept the fact that all their effort was in vain. That no matter how hard they tried to get the uniform right, it was unappreciated.

Those students didn’t make it through training. Those students didn’t understand the purpose of the drill. You were never going to succeed. You were never going to have a perfect uniform.

Sometimes, no matter how well you prepare or how well you perform, you still end up as a sugar cookie. It’s just the way life is sometimes.

If you want to change the world, get over being a sugar cookie and keep moving forward.

More on failing, don’t afraid of “the circus”, in fact it’s how you respond to failure that may build your success in the future:

Every day during training you were challenged with multiple physical events. Long runs, long swims, obstacle courses, hours of calisthenics—something designed to test your mettle.

Every event had standards, times that you had to meet. If you failed to meet those standards, your name was posted on a list and at the end of the day those on the list were invited to a “circus.”

A circus was two hours of additional calisthenics designed to wear you down, to break your spirit, to force you to quit. No one wanted a circus. A circus meant that for that day you didn’t measure up. A circus meant more fatigue, and more fatigue meant that the following day would be more difficult—and more circuses were likely.

But at some time during SEAL training, everyone—everyone—made the circus list. Yet an interesting thing happened to those who were constantly on the list. Over time those students, who did two hours of extra calisthenics, got stronger and stronger. The pain of the circuses built inner strength—built physical resiliency.

Life is filled with circuses. You will fail. You will likely fail often. It will be painful. It will be discouraging. At times it will test you to your very core.

But if you want to change the world, don’t be afraid of the circuses.

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Equal play time in youth sports?

Do young rec players play chaotically because they are kids or because of equal play time rules?

I “herded cats” while coaching in a rec league with equal play time rules. Rec ball is known for sloppy play. Like most, I chalked it up to the kids being young and beginners.

But, I hadn’t considered that equal play time may be a bigger part of it.

When we moved to competitive soccer, I began subbing players out who weren’t working on the fundamentals and team tactics we were teaching them in practice. I’d let them know what I saw, remind them what they should be doing instead and then put them back in at the next chance. That seemed like a competitive coachy thing to do.

I didn’t intend it as reward and punishment. I just thought it would be better than yelingl across the field, which rarely seemed to work. I figured they couldn’t hear me.

It didn’t take long and the players were telling me why I subbed them before I could say anything. “I was just kicking the ball, wasn’t I?” I thought that was awesome. I have never seen anything else get young kids to become aware of how they were playing like that.

But, I truly didn’t realize how effective this was until after a parent’s misunderstanding about how I subbed caused me to go back to equal play time to keep the peace. He thought I was punishing his child and thought they were too young to be punished.

Over the next few games the team devolved from playing their best. A parent asked, What’s happening they looked like 6 year olds in rec again?

Indeed.

That got me to thinking. What had changed? Equal play time.

What incentive do they have to work on what we taught if they got all the play time they wanted?

I went back to my subbing routine and they were playing well again within a couple games.

When game time became an entitlement, rather than doing what was best for the team, they became glory hounds or reverted back to their impulse just to kick the ball randomly.

I’ll add that over the years I coached I tried dozens of things to motivate the kids and that’s the only thing that did. 

This experience made me wonder if equal play time is a bigger cause for why rec ball is so sloppy.

Now, I’m not saying this is THE answer. This is a sample size of one, so it may not be repeatable. But, if you find yourself herding cats, give it a try and see if it works. But, also, make sure the parents buy off. I thought mine had, but when push came to shove a couple of them were bothered to see their kid being subbed out and didn’t bother to notice how quickly they were improving.

A few other things I’ll say about this…

I never sensed from the kids that it bothered them. The feedback I’d give them was low-key and calm. “Remember, I said I wanted you to try to control the ball and do something with it, like dribble to space or find a pass, right? What were you doing?” “I was just kicking it.” “Okay. Now get back in there and work on controlling the ball.”

When I think back on it, I could think of a few reasons why it worked well.

Kids love play time. Even the kids who aren’t that into soccer love to be in the game. So, it makes sense that was such a strong motivator.

The feedback was immediate. It didn’t wait until half-time, post game or the next practice when the message could get lost in translation. The players were receiving a consequence and feedback tied directly to their actions in real- time and they had full control of it. 

The kids who did what we were working on naturally got more play time because they didn’t need to be subbed off and they seemed to dig that.

This wasn’t about performance and winning. In fact, the strongest players were often the ones being subbed off more because they were the ones more likely to go off script.

I was always clear about what I was looking for in the game and when I would sub them, so it wouldn’t leave the kids guessing.

I was also clear that if they were working on these things, even if they weren’t doing them well, I wouldn’t sub them out. I’d rather lose by working on things that will make us a better than win by doing things that won’t.

The only downside was when they were all doing well, I still had to sub sometimes to get all the players in, so they did come off the field asking why they had been subbed. I was honest: “You were doing great! But, I do need to get everyone in the game.” Or, “Looks like you just need to catch your breath.”

Here’s about 90% of what I subbed players off for:

Just kicking the ball, rather than controlling it and trying to set up a good ball for the team with a purposeful dribble or pass. This one I thought was important to transition them from chasing and random kicking to feeling comfortable with the ball at their feet under pressure.

Diving in on the tackle, instead of slowing the attacker down first and then going for the ball with the full body.

Not marking the other team’s most dangerous scoring threat. This was responsible for another 20-30% of the goals against.

Good links

A short, but insightful graduation speech.

A longer and insightful discussion of wealth and how different views of where it comes from can affect the words we use.

From the first:

4. Everyone responds to incentives, including people you want to help. That is why social safety nets don’t always end up working as intended.

From the second:

Europeans and Americans “claimed” a higher portion of global output only because they produced a higher portion of global output!  What these Europeans and Americans “claimed” simply would not have existed had they not produced it.

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Taxpayer-subsidized grins

Tyler Cowen, of Marginal Revolution, links to a piece about the increase in spending on college athletics.

Anyone involved in youth sports in the last decade might have noticed the emergence of large, multi-level sports clubs, playing in multi-million dollar sports complexes all designed to host large quantities of organized competition for young players to become seasoned masters in their sport and attract the attention of college recruiters.

Having your kid get “signed’ to a college team — no matter how small the college, or how un-followed the sport — is the new crowning achievement of childhood that brings ear-to-ear grins to the faces of parents.

Take away taxpayer-provided college athletic subsidies and that crowning achievement of childhood and the industry that has sprouted to help parents achieve that ear-to-ear grin goes away.

Arnold Kling also comments on college athletic spending.

Parasites, yep

From Charles Krauthammer’s column, Obamacare’s War on Jobs:

In the traditional opportunity society, government provides the tools — education, training and various incentives — to achieve the dignity of work and its promise of self-improvement and social mobility. In the new opportunity society, you are given the opportunity for idleness while living parasitically off everyone else.

Reagan had a similar radio address once. A vampire once demonstrated his wisdom by recognizing he was a parasite and it didn’t make much sense killing his host. And Lady Thatcher once pinpointed the problem with parasites that don’t realize they are parasites. They eventually kill the host and die (though she didn’t quite say it like that).