The spider and the starfish

starfish = bottoms-up (Photo credit: kevinzim)

I enjoyed listening to this EconTalk podcast with guest Lant Pritchett about education, specifically in poorer countries. I recommend it.

He begins with a nice discussion about bottom-up and top-down systems using metaphors (emphasis added):

…the basic distinction is between a top down organization where the metaphor of a spider is, all of the resources of the spider web, however spread out they are, merely serve to transmit information to one spider, who synthesizes that information and responds with the resources of the system. So, if there is a bug, the spider crawls out and gets it. But kind of all the web is kind of an ancillary to the brains of the top. The starfish is a creature that actually has no brain. It’s neurally connected, but a starfish moves because the individual units of the starfish sense something and if they sense more food they try and pull that way. And if the other side isn’t pulling as hard, the starfish moves. So it’s really a metaphor of a decentralized system, where individual units responding to local conditions create the properties of the system. And the beauty of a starfish is if you cut a starfish up into 5 bits, you get 5 starfish. The danger of a spider is that when the spider dies, it’s dead. The whole system therefore falls into dysfunction [single point of failure].

Later, he proposes why bad school systems may persist:

…one of the conjectures I put in the book is that it persists partly by camouflage. It pretends to be something it’s not and then can project enough of the camouflage that it maintains its legitimacy. So, sociologists of organization have a term called ‘isomorphic mimicry’, which is adapted from evolution where some species of snakes look poisonous but aren’t, but get the survival value of looking poisonous. So, one of the things that’s happened is by this pressure to expand schooling and by the governments’ desire to control that socialization process, they have created all the appearances of schools that provide education but without actually doing it. But have at the same time not produced the information that would make it clear that they weren’t doing it. So they produce enrollment statistics, numbers of buildings, numbers of toilets, numbers of textbooks, numbers of everything. But have, you know, all of which can project the image that there’s a functional system and providing real learning there. But they don’tprovide metrics of learning or incentives for learning or feedback on learning or accountability for learning at all.

There’s much more good discussion throughout, but I’m fond of something Pritchett said near the end:

You know, the United States has always been much more of a starfish system. And the starfish system has enormous strengths, and I think those enormous strengths have led America to be a leader in education in many ways. And one of the examples I use in my book is, if there’s a scaled example of a starfish education system, it’s American universities. And it’s just unbelievable from the data the extent to which America dominates quality universities. It’s just unbelievable compared to Europe, which always took the same approach to universities that other countries want to take to their basic education. And you see the consequences of it. America’s universities–in the book I have numbers of the top 200 universities in the world, what fraction of them are in Anglo countries, and it’s just way disproportional to the population size. And even wealth. Because Europe, which is equally sized and equally wealthy, continental Europe, just has nowhere near. And it’s the result of a starfish system, in my view.

I’ve made the same point several times on this blog. Here and here are a couple of examples.

I do appreciate the spider and starfish metaphors. Those roll-off the tongue better than top-down and bottom-up.

Bottom-up vs. Top-down

Forget comparisons like ‘government vs. free market’ or ‘public vs. private’. We can all pull out examples from each realm that works and doesn’t work.

I think a better distinction of human interaction systems can be drawn between ‘bottom-up vs. top-down’. Bottom-up systems tend to be driven by decisions and interactions very close to the individual. Top-down systems are driven by decisions made by a few individuals at the top of the hierarchy.

I often hear proponents of a central government — a top-down system — cite bottom-up examples to support their view, demonstrating that they don’t understand the top-down/bottom-up distinction.

Fire departments, police departments and roads are prominent examples of this and sound like, “These things are run by government and they work pretty well, let’s expand Federal government.”

Yes. These are usually run by government entities. But local government is not equivalent to Federal government. Local government is more bottom-up than top-down.

I think it’s helpful for discussion and policy-making to be able to recognize the two different systems. Here are a couple of thoughts.

• To what degree do individuals have the ‘power of voice’?
• To what degree do individuals have the ‘power of exit’?

Power of voice is an individual’s vote, purchasing decision or the ability to have the decision-makers hear your voice. Votes carry more weight in local elections than national elections. It’s easier to get in touch with city councilmen or the mayor than it is the Congressman or President. A purchase is a vote indicating that the individual values the product at that price.

Power of exit is the individual’s ability to leave or not choose a certain product. If I choose not to buy a product, I’m signaling that it’s not worth it. If I don’t think the city council is steering my city in the right direction, I can move a couple of miles to the next city over. Same if I’m looking for a better a school district.

Power of exit is a function of how many choices are available to me and the dynamics of competition among those choices.

I have lots of choices of products. Competition among those products is generally high. I can incur little cost for choosing one store over another or one product within a store over another.

In my area, I have lots of choices on cities, townships and counties that I can live in. Not as many choices as I have for different types of beer, but still quite a few. Since I do have a fair amount of choice, competition is relatively high and these cities and townships try to do things to voluntarily attract residents — like providing good fire departments, police departments, schools and roads. The cost to move is higher than the cost of choosing one product over another, but still not terribly high if things get really bad (this is why suburbs suck the life out of mismanaged urban areas).

I have 50 states to choose from, but the costs to move between states is relatively high. I have many countries to choose from, but the costs to change countries is even higher. So, competition goes down as these costs increase and so does my power of exit. I still have it, no doubt, but things have to get really bad before exercising that power.

I think there are a couple other elements of the bottom-up vs. top-down systems that are worth mentioning. I don’t think they are as useful in helping us recognize these systems, but I think they explain why bottom-up system work better than top-down.

1. Lots of independent trials/experiments. It’s hard to tell what will work and what won’t, so it’s best to try a lot of stuff.

2. No single point of failure. Since it’s hard to tell what will work, it’s best not to have a single point of failure, which top-down systems have.

3. How far apart are the benefits and the costs? Or, another way to think about it, how far removed are the decision-makers from the consequences of their decisions? This gets down to, how much skin-in-the-game do decision-makers have?

I will discuss more about these last three in future posts.

An intense observation

It’s amazing how you can do something most of your life and never consider the consequences of it until someone else points it out.

I recommend Arthur De Vany’s book, The New Evolution Diet.  I don’t often read books twice, but I’m about half way through my third reading of it.

De Vany, an economist by trade, came to realize that our bodies are complex, dynamic systems, much like the economy.  That perspective has allowed him to develop an interesting approach to diet and exercise.  I’m experimenting with some of his advice now.

I first heard of De Vany when he was a guest on one of my favorite podcasts, EconTalk.  In fact, I was listening to that podcast while I was jogging.  In it, De Vany explained why jogging could be unhealthy.  I was immediately skeptical.

I never had to worry about weight, until a few years after college when the weight started piling on.

After several years of trying to figure how to reverse the trend, I read Barry Sears’ book, A Week in the Zone.  He provided advice on weight based on hormones, specifically insulin, that seemed logical.  Based on his advice, I changed my diet from a low-fat, high carb diet to be more balanced with fat and protein and started seeing immediate results and have had good results since then.

But after reading De Vany’s book I’m reconsidering how I achieved those good results.  I thought my success was primarily due to my diet and my consistent exercise routine.

The diet part, I might have right.  As the name of his book suggests, De Vany’s diet recommendations are similar to the Paleo diet, which are also similar to other popular diets like the South Beach Diet, the Atkins Diet, the Zone diet and William Banting’s diet that he wrote about in 16 pages in 1863.  Low carb.  Specifically low in refined sugars and grains.

The reasoning De Vany gives for this diet is similar to the Paleo diet, that is the type of diet our bodies had evolved to accept and the refined sugars and carbs wreak havoc on our hormones and cause weight gain, high blood pressure, diabetes, heart disease and cancer.

De Vany’s rendition on the low carb diet is worth the read.  You will learn a lot.

But, it’s his advice on exercise that has really got me thinking.  He believes that our bodies are not optimized for the daily, moderate intensity activity that we call exercise, like jogging or riding stationary equipment.  Rather, again based on our ancestors and how they evolved for the conditions of about 40,000 years ago, our bodies require some high intensity activity and lots of rest.

The Afterword of De Vany’s book was written by Nassim Taleb, author of The Black Swan.  It was something Taleb wrote that has me deeply reconsidering my exercise routine.

Taleb: "Ride your bike up hills"routine.

Taleb wrote that when he had an office in the burbs he commuted to it by bicycle.  He then moved his office to the city and joined a gym to replace the physical activity he lost by giving up his bike commute.  Even though he felt he was putting the same time into exercise at the gym as he did on his bike commute, he gained weight over the course of three years.

It was De Vany’s thoughts on exercise that made Taleb realize that it wasn’t the hours of bicycling he did every week that kept the fat off.  Rather, it was the two or three “grueling hills” that pushed his heartbeat “past 210” beats per minute that made the difference.  When he switched to the gym, he kept his workouts steady, not realizing it was the effort he put out riding his bike up those hills that made the difference in how his body stored fat.

Hmmm…

De Vany contends that activity that has you put out short bursts of high intensity effort helps keep your hormones in line to keep the fat off the body and keep your body a lean, mean rabbit-hunting machine.  He recommends sports like basketball and soccer because of the natural sprinting that takes place.

After reading De Vany’s and Taleb’s words I realized that whenever I have had high intensity activity in my routine, I haven’t had a problem with weight.

In addition to playing all kinds of sports with my friends as a young man (basketball, soccer, frisbee, hiking, etc.) I also raced bicycles and rode up plenty of hills.

When I started picking up weight, those few years after college, I had been off the bike and replaced my physical activity that use to include high intensity efforts with the rhythmic, moderate drudgery of jogging and riding stationary equipment.

It just so happened that at the time I started eating a lower carb diet, I also started bike riding up again.  My cycling coach from my youth was right.  He called hills, “nature’s interval training”.  No matter what shape you are in, hills test you and put you to your limit — even if you try to take it easy.

So, I happened to have integrated high intensity hill riding into my activity regimen right at the time I changed my diet.  And, now when I think back over the years, when I have packed on a few extra pounds, it always seemed to be when I reduced my bike riding and didn’t have any other intense activity to replace those hills.

So, amazingly, all of those years one correlation I had not drawn in my life was the correlation between my weight and high intensity activity, not until De Vany and Taleb pointed it out.  It fits.  That’s the “intense observation.”

I’m experimenting now, by lowering the amount of the moderate intensity workouts, making sure I keep the high intensity efforts and resting more.  Psychologically it’s tough.  It’s hard to give up some of those exercise habits.

I’m just a few weeks in and so far, so good.  I’ll report more results in the future.

School Choice Reduces Crime

That’s according to this study from David J. Deming of Harvard. (Thanks to Don Boudreaux of Cafe Hayek and Andrew Coulson at Cato for the pointer).

I’m always skeptical of statistical studies, even those that confirm my biases.  Reading over the design of the study, my main concern is that there is a selection bias.

That means the kids who attended the school of their choice are likely to be the ones who care more about education and their future anyway.  So, it’s not necessarily the school choice that caused the lower crime, rather the school choice process just weeded out the kids who are less likely to commit crimes anyway.

After reading over the study design, I think that is possibly the case here.  My main beef here is that parents could request up to three schools, not including their neighborhood school.  I think what is important here is how many schools the parents requested.

But, even so, I’m not going to nitpick too much.  Even if there is selection bias in the study, I think it is safe to conclude that giving students and parents a choice, worst case, doesn’t cause more crime.

Do you need another can of green beans in your pantry?

"Creating" Demand

I enjoyed Arnold Kling’s column (econblogger at EconLog), Government Cannot Create Sustainable Jobs, published in the European edition of The Wall Street Journal.

I think the following two paragraphs contain the most concise and understandable contrast of two competing visions on how the economy works (emphasis mine):

For Keynesians, job creation is simple. Entrepreneurs have knowledge of how and what to produce. All that is required is more demand, in order to induce them to undertake more hiring.

n contrast, in our [Adam] Smith-Ricardo story, the knowledge of how and what to produce has to be discovered. Entrepreneurs have to figure out ways to utilize resources that satisfy wants in an efficient way. The market mechanism first must undertake trial and error to create production processes that exploit comparative advantage. Until these new patterns of sustainable specialization and trade are discovered, there are no job slots.

I bolded the key phrases.  Do you believe that progress comes from stimulating evermore demand or from trial and error experimentation?

I believe the latter.  Progress, wealth, improvements in the standard of living, GDP per capita growth — whatever you call it — comes from experimentation and trial and error and a process that allows the valued to survive and multiply and the least valued to die off (i.e. evolution).  This trial-and-error market process is driven by the ultimate democracy of individuals voting with their own value store on the the things they value and vote against those things they don’t value.

The problem for me with the former explanation, creating more demand, is where this new demand comes from.

The theory says that more government spending will put more money into some folks pockets, which they then spend.  So, then the businesses that benefit from that extra spending will spend more too.  And so on.  This is a chained spending effect.  By the time the that extra dollar of government spending has worked its way through the economy, it’s spawned more than a dollar of economic activity.

This seems reasonable on the surface.  But pry deeper.  Where did that extra dollar of government spending come in from in the first place?  It either came from current or future spending.

If it came from current spending, then all we’ve done is take a dollar from someone to get the spending chain started.  That someone may have started their own chain by spending it themselves.

Defenders of this theory will say, yes, but that someone wasn’t going to spend it any time soon so it’s best for everyone that the government took it and spent it.

I believe the miss in this line of thinking is that someone was waiting to discover something of value to spend it on, while spending it now does not help him find that value.

What’s really happened is that demand was pulled forward from the future and we’ve spent it on something that doesn’t add value.

Companies see this when they run ineffective limited time promotion.  The sale will produce a sales spike during the offer period and a lull afterwards.  The sale encouraged people who were going to buy the product anyway to buy it sooner, and buy less later.

But, in the case of the government pulling forward demand, it makes things worse.

That someone with the original dollar was waiting to spend that dollar on something he valued — maybe a new pill that will reduce his sick days and make him more productive.

Instead, the government takes it and spends it on another can of green beans.  So, instead of having four cans of green beans in the pantry (that he’s never going to eat), he has five now — something that doesn’t bring as much value as that new pill.  But, hey, the green bean growers and canners are better off.  Except, we find that since there’s a glut of canned green beans now, green bean makers will sell fewer cans in the coming months.

So, creating demand through government spending is a myth.  There is no creation.  Just moving demand from one place to another or from the future to now — and in either case, we replace careful spending with careless.

Related articles

• The value of a college education (ourdinnertable.wordpress.com)
• Grandpa’s Lament (ourdinnertable.wordpress.com)

The productive and dependent “tribes”

David Brooks takes a leap in this New York Times column.  Brooks writes about the  disparities Charles Murray explores in his book, Coming Apart, between what I’ll call the productive class and the dependent class.  For example:

Today, Murray demonstrates, there is an archipelago of affluent enclaves clustered around the coastal cities, Chicago, Dallas and so on. If you’re born into one of them, you will probably go to college with people from one of the enclaves; you’ll marry someone from one of the enclaves; you’ll go off and live in one of the enclaves.

Roughly 7 percent of the white kids in the upper tribe are born out of wedlock, compared with roughly 45 percent of the kids in the lower tribe. In the upper tribe, nearly every man aged 30 to 49 is in the labor force. In the lower tribe, men in their prime working ages have been steadily dropping out of the labor force, in good times and bad.

People in the lower tribe are much less likely to get married, less likely to go to church, less likely to be active in their communities, more likely to watch TV excessively, more likely to be obese.

And then Brooks makes his leap by recommending…

…a program that would force members of the upper tribe and the lower tribe to live together, if only for a few years. We need a program in which people from both tribes work together to spread out the values, practices and institutions that lead to achievement.

Stuart Anderson, writing on Forbes.com, suggests that Brooks and his New York Times elites…

…give up their jobs for two years and invite members of the “lower tribe” to live in their homes “if only for a few years”…

Nice suggestion, Stuart.  I have more.

There are number of problems with Brooks’ suggestion.

For starters, we already tried an experiment of forcing the two “tribes” together so the values of the productive class could rub off on the dependent class.  It’s called public education.  It hasn’t worked out so well.   In fact, the public education experiment has had the opposite effect.  It has reinforced the enclaves that Murray writes about by encouraging folks with similar values to cluster geographically into public school districts.  The school districts serving the productive class seem to be doing fine.  The districts serving the dependent class are miserable.

It doesn’t take much imagination to believe that something similar would happen with Brooks’ National Service program.

Next, a reminder to Brooks: This is a free country.  That’s sort of a basic principle.

By the way, Brooks, have you considered that the previous slapdash social engineering projects have contributed to the formation of the productive and dependent tribes?

If not, I would like to introduce you to a new subject.  It’s called systems thinking, but some also refer to it as economics.  In systems thinking, you consider that many things, such as behavior, are shaped by feedback.

Try this experiment: intentionally fart in a business meeting.  I’m sure you’d expect your co-workers to give you stares of indignity.  Those stares are feedback that shapes your behavior and cause you to try to refrain from rudely farting again.

But, sometimes problems develop in the feedback that may cause you to continue the rude farting.

One problem might be that you’re the boss, and a mean one at that, and your subordinates restrain themselves from giving you honest feedback.

Another problem in the feedback might be that you have social elites who believe you have the right to fart.  They reason, studies show it’s healthy to pass gas rather than restrain it.  After all, it’s a natural body function.

This is the first interference with the feedback.  The social elites convince you that you should be able to fart whenever and you do.  A group forms who buy into the social elites’ B.S. and they fart whenever.  After all, the smart social elite got good grades, didn’t they?

But the polite farters remain unconvinced.  They were raised not to fart in professional settings, they think excusing yourself when you need to fart is easy enough and they really don’t like the noisy and odorous distractions of the newly empowered farters, so what do you think happens?

The polite farters begin to segregate themselves from the rude farters.  The rude farters are first left out of meetings, then passed over for promotions and then not even hired in the first place.  Rude farters obviously give themselves away in interviews, after all.

What are the rude farters to do?  They can’t get jobs or keep spouses.

The social elites, never backing down from engineering a social problem (even ones they helped create) come to the rescue.  Well, if rude farters can’t get jobs, we will just tax the polite farters and give the proceeds to the rude farters, after taking our cut, of course.  That way, rude farters can continue their farting practices indefinitely without having to adhere to the unenlightened values of the polite farters.

This is the second interference with the feedback.  Rude farters were starting to get a valuable signal: to be productive they needed to be able to work with others without intentionally farting, despite what the social elite said.

But, the social elites interrupted that feedback signal and made it possible for the rude farters to continue their socially unacceptable behavior.  They no longer needed to be productive to get by.  They could just be dependent on others and continue farting whenever.

Now, decades later a new crop of social elites come along.  One writes a book about how the rude and polite farters don’t mix much and that the polite farters appear to be productive and proficient, while the rude farters are dependent.

Then another social elite columnist comes along, reads his book and suggests that maybe if we just forced members of the rude and polite farting tribes together for a few years in a National Service, maybe, just maybe, the values (although the social elite has a problem identifying exactly what those values are) of the polite farters will rub off on the rude farters — as long, of course, as the rude farters don’t have to stop farting rudely.

The smart social elite never realize:

• that farting politely is THE value that distinguishes the two groups.
• they they interfered with the feedback signals that would have minimized that anti-social behavior.
• that their initial feedback interference caused the formation of the two groups.
• that their second feedback interference insulated the rude farters from having to modify their behavior to get by.
• that all they should do is stop interfering with these feedback signals and tell the rude farters that, perhaps, politely excusing yourself when you need to stink it up is okay after all and that whatever is gained by being rude isn’t worth the social costs you impose on yourself.

And, unfortunately, the smart social elite write about the poor rude farters as if they are incapable sad sacks that have no bearing on their position in life, even though generations of immigrants have demonstrated that you can come to this country, start on the lower rungs and work yourself up the ladder rather quickly by adopting productive behaviors and social norms, like not farting in meetings.

(Thanks to Don Boudreaux of Cafe Hayek for the link to Stuart Anderson’s article.)

Four broken feedbacks in public K-12 education

I believe that most problems are caused by broken feedback loops.  In 2009, I listed four broken feedback loops hurting quality in the public K-12 education system.   These include parent choice, teacher quality, grading and student discipline.

This weekend, the Wall Street Journal features basketball star Jalen Rose’s efforts to make a difference in education with his Leadership Academy charter school in Detroit.  Jalen addresses these feedback loops.

Parent choice:

“We didn’t cherry pick these kids,” says Mr. Rose. “They chose us,” he notes…

“There should be parental choice,” he says clearly. “Schools should be open. If it’s a public education, and the school in your district is poor-performing, you should be able to put your student or kid wherever you want.”

Choice could be relatively easily implemented, he says. “I’m a taxpaying citizen, right? So if I’m paying $4,000 worth of taxes and I don’t want my kid to go to this school, why can’t they give me my $4,000 and allow me to pick where I want to put my kids?”

Teacher quality:

His school also doesn’t have tenure for teachers. “I hate tenure. Tenure allows teachers to put their feet up on the desk and possibly have a job forever. That’s why I got turned on to charter schools. It’s a business model. Every employee and every teacher will be monitored by performance.”

Grading:

“This is college prep. We expect 90% to 100% to go on to college”

Student discipline:

Kids too: “We have a code of conduct here. If they act up, they’re suspended. They come back with a better attitude.”

 

‘Hooked on Pain Killers’ is popular

Interesting.  This post of mine from 2009 has become the most popular post on this blog within the last day.

I wonder why.

The my-s**t-don’t-stink crisis

In his book, The Secret Knowledge, David Mamet gives a brief and apt explanation of the economic term moral hazard, which played a key role in causing the financial crisis.

This is from a footnote on page 187 (emphasis added):

Is it not evident that any organization believing itself to be “too big to fail,” will more likely, indeed, inevitably make disastrous decisions? Why should it not–it is Too Big to Fail.

We all know people who (and perhaps have experienced this of ourselves), at one time or another, began to believe that their own s**t did not stink.  And we all know how that story ended.  Not well.

Our last financial crises could be called the my-s**t-don’t-stink crisis.

Also, we should remember how those stories end whenever our “experts”, politicians and economists tell us that such-and-such an industry or company is too important and cannot be allowed to fail (though it usually already has, and few people recognize it yet).

Recipe for riots and flash mobs

High minimum wage + Coddled kids + Facebook/smartphones + Cheap public transit + Coddled parents = Flash mobs

A. A minimum wage set higher than the market wage rate for unskilled, entry-level teenagers causes high unemployment among this group, producing large numbers of teenagers that don’t have jobs to occupy their time and develop their sense of cooperative and mutually beneficial behavior.

B. An education system that passes troublemakers, fails to teach kids to think critically and accept responsibility for their behavior and teaches that external societal forces are somehow responsible for so much wrong and at the same time owes them something brews much discontent, especially when not tempered with on-the-job experience of having to serve others in order to serve yourself.

C. Amazing and cheap technology (which is not recognized as amazing by any of the folks in B) that enables kids to instantaneously communicate with hundreds of their friends.

D. Cheap public transit that allows these networked, privileged and idle kids to meet after receiving these instant messages.  Or, parents wealthy enough to provide transportation for their kids (also lost on folks in B).

E. An ‘it takes a village‘ mentality about raising kids and lenient penalties for misbehavior creates a moral hazard so parents are not that concerned with their kids’ behavior (and perhaps some of the parents believe in what they learned B).