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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Signals v Causes: Rome

This gave me a chuckle, from this week’s EconTalk with Charles Marhon about what makes a strong town:

I like to point out that Rome didn’t get the Colosseum and then build Rome. The Colosseum was the byproduct of centuries of success. And you know, you can look and say Rome was successful because they had a Colosseum. And go out and build a Colosseum and then say, why isn’t Rome appearing here?

I recommend the podcast. Marohn makes a lot points that I am sympathetic to.

He thinks we’ve gone overboard on infrastructure due to the belief that more is always better for growth.

Because of that thinking (similar to thinking on housing and education) and distorted incentives (we don’t directly pay for all that infrastructure) we’ve pushed into the diminishing returns part of the curve and cities that have built infrastructure to try to stimulate growth (rather than build to keep up with growth) are getting to the point where they may not be able to pay their bills.

Nature vs nurture, signals v causes

Criticism of Gladwell’s 10,000 hour rule. From it:

…a study published last May in the journal of Intelligence by Hambrick and colleagues suggested that practice explains only about a third of success among musician and chess masters.

No duh. I have a couple thoughts. First, these studies are usually based on backward-looking estimates of time spent in ‘deliberate’ practice, which may not be accurate.

Second, what’s ‘deliberate’ practice? Seems like that could mean a lot of things and one person’s ‘deliberate’ practice may look much different from someone else’s.

Of course, other factors come into play also. After reading about the 10,000 hour rule, I didn’t think I could become Bill Gates or Michael Jordan simply by putting in my 10,000 hours, but it certainly put a different perspective on their success.

A study linked in the above article claims that we should look at factors other than amount of deliberate practice to explain the difference between professional and non-professional soccer players, like the amount of good coaching they received at a young age.

No duh. For the signal vs. causes tag, it seems like the amount of good coaching they received at a young age could be function of the ability the players were showing at that age.

In my experience, even with players at young ages, coaches interested in winning records recruit the best players, so it’s no surprise that they received what appears to be good coaching at a young age, but I’m not convinced that’s the true difference maker.

Certainly, I think good coaches can have an effect, but when you are already a good player and you get on a team with good players, you’re going to have a lot more good deliberate practice and experience on your side.

Signals v causes in youth sports

A Facebook friend liked this article about youth sports and what parents should say to kids when they play. I found that article, the article it references and the discussion in the comments interesting — especially because I’ve been coaching a youth sports team for a few years.

I find the youth sports scene interesting for a number of reasons. One reason is that cause and effect of success and failure is hard to determine, but that doesn’t stop people from trying. The articles above are good examples.

They say college athletes said their parents just told them that they like watching them play. 

Is that a signal or a cause? The articles make it sound like a cause.

But, it’s likely that most college athletes were excelling in their sport from an early age due to natural physical advantages, above average interest in learning the sport, some competitive grit and/or environmental factors that may have provided them with multiple times more exposure to the sport than the average kid.

It’s easier to say “I just like to watch you play” to someone who is in the top 5% of their age group than to somebody who is in the middle or bottom.

Also, I’m sure many parents whose kids didn’t make a college or high school team said that, too. I’d guess that for every set of parents of a college athlete who said that, there are ten sets of parents of non-college athletes who said the same. Why didn’t it work for them?

My parents usually said something like that. They’d usually ask if I had fun and tried my best. I didn’t play high school or college athletics. And, I’m doing okay. As near as I can tell, I’m doing about as okay as many who did play high school and college sports.

Signals vs. Causes: Reynolds’ Law

I hadn’t realized that someone had dubbed confusing signals with causes, Reynolds’ Law. Glenn Reynolds does a nice job of summing up the disease:

The government decides to try to increase the middle class by subsidizing things that middle class people have: If middle-class people go to college and own homes, then surely if more people go to college and own homes, we’ll have more middle-class people. But homeownership and college aren’t causes of middle-class status, they’re markers for possessing the kinds of traits — self-discipline, the ability to defer gratification, etc. — that let you enter, and stay, in the middle class. Subsidizing the markers doesn’t produce the traits; if anything, it undermines them.

Yes. And by undermine, I believe he means changes.

Home ownership, for example, was once a reward for making tough choices to live beneath your means, save for a down payment and protect the value of your equity stake in your home by keeping it up.

By bending the rules to make ‘home ownership’ a participation trophy that anybody could get by signing theirs’ (or their dog’s) name on the dotted line, it changed what home ownership meant. As someone (can’t remember who) correctly put it, someone with no equity in their home is a renter with a mortgage, not a home owner.

Signals v Causes: High School Graduate

I often hear folks say that people with a high school diploma today cannot expect to do as well as folks did with high school diplomas in previous generations.

One cause offered to explain this is less opportunity because good manufacturing jobs have gone to machines and foreign competition.

More likely, K-12 education hasn’t evolved to teach students skills that are valued in today’s economy. I got this idea from Jeffrey Sachs, this week’s guest on EconTalk. I didn’t agree with everything Sachs had to say, but I did agree with this and recommend listening to the podcast.

Also, maybe education has evolved away from teaching such skills as curriculum designers have included things thought to enrich and broaden the students lives, but really just serve the personal preferences of those designers.

When I was truly on my own for the first time, I remember thinking how ill-equipped I was to determine something as practical as how much house I could afford, even though I did know what Keynesian multipliers were. Luckily, I educated myself by turning to personal finance magazine and books and asking friends and family. I wasn’t surprised later when it became clear with the housing crisis that many others also did not have this practical knowledge, either.

I was also annoyed that I learned in school how important it was for me to exercise my right to vote, but there was no mention about doing my homework on the issues and carefully considering who I voted for.

It is also more likely that a high school diploma, once viewed as a reliable indicator of demonstrated mastery in skills, knowledge and behaviors that were of some value to employers, is now viewed as a participation trophy — a mere bauble to add to the recipient’s trophy case — as standards have slipped and the purpose of a high school diploma have changed. 

I believe the purpose of the high school diploma was to reward the folks who tried. Somewhere along they way, however, that got too hard. We didn’t want to tell someone they didn’t deserve something because they didn’t put in the effort or meet the standard. Rather than expect them to rise up to the standard, we lowered it for them.

Signals v Causes: Preschool

Harry Jackson Jr. agrees with me that supporters of universal preschool may be mistaking signals for causes.

Perhaps creators of programs like Head Start did not consider another possible explanation for the reason elementary school performance so accurately predicts later academic achievement. What if children who typically do well in elementary school tend to have attentive parents who read to them, serve them nutritious meals, and limit their time in front of the television? What if these parents also tend to ensure their children get enough sleep, fresh air and exercise?

I also like this H.L. Menken quote that Jackson provides in his piece:

For every complex problem there is an answer that is clear, simple, and wrong.

So true.

The universal preschool discussion also reminds me of my government begets more government thread.

Previous government interventions have discouraged family formation and responsible parenting for a portion of the population. That is what is causing under achievement in that portion. Instead of reversing the maligned incentives discouraging good parenting, let’s fix it with the clear, simple and wrong answer: more government in the form of universal preschool.