Mankiwniversity

Harvard econ professor, econ textbook author and sometimes New York Times columnist, Greg Mankiw points out that his Intro to Econ course, or Econ 10, is the largest course at Harvard.  Story here.

I wonder if Mankiw has given any thought to following in the footsteps of Sebastian Thrun and Peter Norvig, who taught their Stanford intro to computer science course online to 165,000 worldwide students.  Given the demand, Thrun gave up his tenure to start his own online university, Udacity, with novel goal of teaching people who want to learn how to program.

There are a few people who could stand to learn basic economics.  Perhaps Thrun has a spot for Mankiw on his faculty.

Advertisements

What do you mean?

I enjoyed this Harvard Business Review Ideacast (podcast) that was based on the guest, Don Pollotta’s, HBR blog post, I don’t understand what anybody is saying anymore.

I recommend both.  Based on the number of comments to both, others did too.

I always like when someone calls BS on puffed-up language.  Business, politics, journalism and academics are full of it (pun intended).

I love the example he gives about a discussion he had about a “new media company around children in the preschool space.”

He said:  What do you mean?

You know, children in the preschool arena.

He said:  You mean preschoolers?

I’ve had similar experiences with business consultants.  Here’s one experience that sticks in my memory.  The consultant said, “We need to evaluate the efficacy of this action.”  I asked, “What do you mean?”  He said, “You know, the effectiveness of the project.”  I said, “ah, you want to see if it works?”  Yes.

My favorite part of the podcast (about 9 minutes in) Pollotta discusses having the courage to say what you mean. He gives the example of the 50 minute customer service queue where the message “your call is important to us” replays every couple of minutes.  As Pollotta says, “It obviously is not.”  Be authentic.  Have the courage to say, “we don’t have enough resources to handle the call volume and you’re going to have to wait 50 minutes.”  He believes folks will appreciate that.  I agree.

In my line of work, I have to communicate unpopular things sometimes.  I’ve learned that being straightforward works.  They may not like what you have to say, but they usually do appreciate that you didn’t try to “blow smoke up their” you-know-what.  They usually find the honesty refreshing.

I think another purpose of puffed-up language is to hedge what you really mean so that you won’t be pinned down for being wrong.

In my normal course of blog-reading, I come across discussions about New York Times columnist and Nobel economist Paul Krugman’s writings.  Waaaay too much of the discussion is about what Paul Krugman actually meant.  It’s like trying to find Waldo.

If I have to spend that much time trying to figure out what someone actually means, it’s not worth it.  And, I find it an absolute shame that society has bestowed such honors as a Nobel Prize and a New York Times column for writing so unclear that my junior high English teachers would not find it acceptable to even grade.

More debates like this, please

My family and friends are surprised to find out that I’m not a fan of TV-based political debates.   They figure that since I have an above average interest in politics, television debates must be like my Super Bowl, or something.

I prefer debates like How Much Government is Good Government? between New York Times columnist David Brooks and Representative Paul Ryan.   It’s written.  You can download it and read it on your iPad, Kindle or any device that supports .pdf.

I think TV debates don’t give a true picture of the candidate.  Its like trying to pick a wife while watching ladies perform in a roller derby.

There’s more opportunity in the written format to filter out the shenanigans and articulate a more complete representation of your positions and your criticisms of your opponents’ positions.

I downloaded the Brooks/Ryan debate for my Kindle iPhone app and read about 60% so far.  I’ll have more to say about it soon.

I do recommend it.   If you’re the least bit interested in politics, you will find it easy reading and interesting.

We have high tolerance for disatrous gambles

In his column this week, Walter Williams discusses a Ron Paul/Wolf Blitzer debate moment and NY Times columnist Paul Krugman’s reaction to it.

He [Krugman] was referring to a GOP presidential debate in which Rep. Ron Paul was asked what should be done if a 30-year-old man who chose not to purchase health insurance found himself in need of six months of intensive care. Paul correctly, but politically incorrectly, replied, “That’s what freedom is all about — taking your own risks.” CNN moderator Wolf Blitzer pressed his question further, asking whether “society should just let him die.” The crowd erupted with cheers and shouts of “Yeah!”, which led Krugman to conclude that “American politics is fundamentally about different moral visions.”

This is a good example of why I don’t care to watch election debates.  This topic deserves more in depth exploration, but the debate format only allows for sound bite responses.

I agree with Williams and Ron Paul.  But, I doubt those answers will do much for people who disagree with us. I’m not sure if my responses will either, but here are some other things to consider.

First, I’d like Wolf to clarify what he means by “society.”  Members of society are free to do what they like for this hypothetical 30-year-old.  Who’s stopping them?  Why do they need to be forced through government?

Medical practitioners could donate their time for his benefit.  Individuals can choose to donate their money to cover his costs.  People can form organizations that raise funds to help folks like him.

But, I think what Wolf really means by “society” is “government”.

It’s a pet peeve of mine when folks use “society” in place of “government”.  The underlying assumption is that there are only two options — either the 30-year-old buys insurance or the government comes to the rescue.  When you say “society” and really mean “government”, just say “government.”

Second, I’d ask why the 30-year-old decided to not buy insurance?  This is rarely discussed, but the answer is important.

Certainly, we could just say the 30-year-old made a bad gamble, but that doesn’t give the root cause.  It’s not only a bad gamble, it’s a disastrous gamble. Why he would make such a disastrous gamble?   Running red lights is a disastrous gamble also and very few people intentionally make this gamble.  Why not?

What if he made his health insurance gamble because he knew government would back him up?  That’s called a moral hazard and we find ourselves in a bad position when what is believed to be compassionate government policy actually causes more people to make disastrous gambles.  That also drives up the cost of insurance, medical care and government for everyone, as they are left paying for those disastrous gambles (which is exactly one of the key underlying problems driving medical costs in the U.S.).

Third, I’d ask for more information about this 30-year-old.  What’s his income?  What kind of car does he drive?  What phone plan does he have?  Where does he live?  How much did his TV cost?  Which TV service does he have?  How much would a catastrophic insurance policy cost him?  Enter your zip code on this website to find out.  In my zip code, a $5,000 deductible policy for a 30-year-old single male with Blue Cross Blue Shield is quoted at $53 per month.

I wonder, if “society” would have less compassion for him if it found out that he could afford the $50 / month insurance insurance policy, but chose not to buy it so he could have the best data plan for his smartphone.

Apparently, “society” didn’t think much of this woman’s efforts to raise money for her cancer treatments with yard sales, since the local government shut her down.  But, it appears that individuals in society have privately and voluntarily taken it upon themselves to help her out.  Good for them.

Third, I might ask why “society” should value the 30-year-old’s life more than he valued it himself, as demonstrated by his own unwillingness to insure himself?

I can’t imagine “society” having much sympathy for a driver who died in a car accident because he recklessly chose to run red lights.

This is just another example of where we let poor logic lead us to make bad decisions.

Poor logic: That guy made a disastrous gamble, let’s help him.

Better logic:  Let’s encourage that guy to not make disastrous gambles and let’s, through our private actions, help the truly needy.

So, I can well imagine someone like Blitzer saying, “so what do we do when we have a 30-year-old male dying who didn’t buy insurance?”

First, “we” do like the people did for the lady having yard sales.  We take private actions to help him, because we are good people.

Then, if he recovers, we take him by the ear and let him know that he should be ashamed of himself for making such poor choices that others had to come to his aid and take away resources for the truly needy.

We let him know that he will be expected to make responsible choices, because next time there are no guarantees of help.  He played us for fools once.

Maybe he goes on a speaking tour or gets interviewed by the local news and sends the message to other able-bodied and able-minded folks to not take disastrous gambles because it’s selfish and not worth it.

And, maybe one day he will come across someone who took a disastrous gamble and lost and will do the same for her that others did for him.

Maybe, in the process, he picks up some dignity and reinforces it others.

Someone listened for once

I was impressed by the New York Times column, Some of Sarah Palin’s Ideas Cross the Political Divide by Anand Giriharadas.

After taking some requisite lefty swipes at Palin, Anand tentatively praises her for the substantive part of her speech:

She made three interlocking points. First, that the United States is now governed by a “permanent political class,” drawn from both parties, that is increasingly cut off from the concerns of regular people. Second, that these Republicans and Democrats have allied with big business to mutual advantage to create what she called “corporate crony capitalism.” Third, that the real political divide in the United States may no longer be between friends and foes of Big Government, but between friends and foes of vast, remote, unaccountable institutions (both public and private).

In supporting her first point, about the permanent political class, she attacked both parties’ tendency to talk of spending cuts while spending more and more; to stoke public anxiety about a credit downgrade, but take a vacation anyway; to arrive in Washington of modest means and then somehow ride the gravy train to fabulous wealth. She observed that 7 of the 10 wealthiest counties in the United States happen to be suburbs of the nation’s capital.

Her second point, about money in politics, helped to explain the first. The permanent class stays in power because it positions itself between two deep troughs: the money spent by the government and the money spent by big companies to secure decisions from government that help them make more money.

“Do you want to know why nothing ever really gets done?” she said, referring to politicians. “It’s because there’s nothing in it for them. They’ve got a lot of mouths to feed — a lot of corporate lobbyists and a lot of special interests that are counting on them to keep the good times and the money rolling along.”

It took nearly three years, but someone on the left appears to have finally discovered the main driver of the tea party/libertarian movement (though I’m not certain that Anand realizes that yet).   Anand got past the fallacious name calling and inaccurate characterizations and liked what he heard.

And it’s something that Milton Friedman told us about long ago.  At the 2:40 mark of this video, as a matter of fact, he tells us how special interests get the political power to use government to bend the rules in their favor:

What he says about government regulation:

There are always…two groups of sponsors.  There are the well-meaning sponsors and there are the special interests who use the well-meaning sponsors as front men.  Who, almost always, when you have bad programs, have an unholy coalition with the do-gooders on the one hand and the special interests on the other.

There’s an old saying in poker.  If you don’t know who the patsy is, then you are the patsy.  If Anand keeps poking along at these thoughts, he (or she?) might discover that the well-meaning folks on the left and right, have been played as the patsies for the special interests seeking control over government influence.

Good points for Buffett to consider

Thanks to W.E. Heasley of The Last Embassy for providing a link to this article from the American Enterprise Institute’s magazine, The American.  The article is titled, Obama’s Folly: Why Taxing the Rich is No Solution.

I enjoyed this article because it’s a good example of a well-argued position.  The authors do a fine job of properly characterizing their opponents’ argument that the wealthy should pay more taxes. They don’t resort to inaccurate straw men.  We could make much progress with debate in this country if more people could do this. That would be a great course to add to our public education curriculum–how to accurately characterize your opponent’s position.

The authors also provide many valid points for their opposition to consider and none of it is about coddling the rich.

Their examination of the numbers should be sobering to the tax the rich folks:

According to the New York Times, the president’s plan to abolish the Bush tax cuts for those making more than $250,000 is expected to bring in merely $0.7 trillion over the next decade, or about 0.4 percent of Gross Domestic Product per year. As a comparison, the Congressional Budget Office estimates that the deficit over the same period is going to be $13 trillion, more than 6 percent of GDP per year.

If this is accurate, then it alone should end the debate.  Focusing so much attention on taxing the rich brings to mind the old saying to be penny wise but pound foolish.

Next, the authors address what has become a popular argument put forth by a member of President Obama’s advisory board, Laura Tyson, and published in The New York Times:

The most common fallacy repeated by Tyson is that taxes do not matter because the economy was booming during the Clinton years even though taxes went up.

They go on to point out that the 90s had other economic events as well — NAFTA, welfare reform and the Internet boom — to name a few.

I’ll add that in 1997 significant reductions were made in the capital gains tax rates for assets held more than one year (source), so not all tax rates for the wealthy increased.  I’ll also add that much of the increase in tax revenue in the last part of the 90s came from capital gains taxes.

The authors correctly point out:

Instead of picking one historic event that happens to fit your preferred theory, a more reasonable approach is to investigate all historical periods where taxes increased or decreased.

This has been done by former Obama advisor Christina Romer and her husband David Romer. They also take into account the causes of tax increases.1 They find that tax increases tend to reduce economic growth, stating that “tax increases appear to have a very large, sustained, and highly significant negative impact on output,” as “an exogenous tax increase of one percent of GDP lowers real GDP by almost three percent.” Similar results have been obtained by Harvard economist Alberto Alesina using a different methodology.2

I don’t trust studies like that of the Romers.  However, their finding is not surprising.  It’s called incentive effects and believe it or not, they exist.  Believe it or not, you respond to them everyday of your life, whether you realize it or not.

But other people put more stock into statistical studies.  Many of those people also think we should raise taxes on the rich.  So, the Romers’ studies and the other economic events of the 90s should at least give those people something to consider.

I also appreciate the authors’ encouragement to look at more than one data point on which to draw our conclusions. That’s great advice.  When someone does that, or when you do it yourself, your skepticism should rise.

Here’s why.  Do you think it would be tough to find one data that says the opposite?  I doubt it.

I appreciate actual experience over conjecture.  But to focus on a single time period and neglect other important factors (like the reduction in capital gains tax rates) is not good practice.

A good way to start a productive discussion

Well respected Harvard econ professor and sometimes political economic adviser, Greg Mankiw, was surprised with the attention his latest New York column attracted.  On his blog he wrote:

I did not expect such as reaction, as the point of the column–an explanation of Republican economic philosophy–did not strike me as particularly novel or controversial.

I’m not surprised.  But I am glad that Professor Mankiw wrote his column.  We need more plain language explanations of what all sides fundamentally believe.  We need to dispel with the straw men (e.g. “tax cuts for the rich”) and ad hominems (e.g. “they’re soulless creeps, so of course they’re wrong) and get to why we think our way is better so more people can make reasoned judgments rather than be confused by sound bites designed to tug on emotion.

I urge anyone who scratches their head about conservative or Republican economic philosophy to read Mankiw’s column.  And here’s some great advice from Mankiw’s column (second emphasis added):

DON’T MAKE THE OPPOSITION YOUR ENEMY Last month, when you struck your tax deal with Republican leaders, you said you were negotiating with “hostage takers.” In the future, please choose your metaphors more carefully.

Republicans are not terrorists. They are not the enemy. Like you, they love their country, and they want what is best for the American people. They just have a different judgment about what that is.

One of the great disappointments of my adult life has been our nation’s childlike inability to have productive discussions.  It reminds me of my brother and I when we were kids.  “Yes you did!”  “No I didn’t!”

Both sides are guilty.  We’re busy and have little time to think about everything deeply.  But, Mankiw’s advice is a good place to start.  Don’t assume your opposition has bad intentions.  Assume they have good intentions.

Better yet, assume that you both have nearly the same end goal in mind.  Then ask your opposition to explain why they think their way is better to achieve that goal.

Don’t expect they’ll be able to articulate why very well.  It’s likely nobody has asked them to explain it before, so they haven’t had much practice.  They may even be surprised, just like Professor Mankiw about the interest his column generated. They are use to be called names.  When they stumble, resist going in for the kill.  Instead, ask questions and give feedback about whether you understand or not.