Month: November 2018

The long-run impacts of same-race teachers

From Seth Gershenson, Cassandra M.D. Hart, Joshua Hyman, Constance Lindsay and Nicholas W. Papageorge:

We examine the impact of having a same-race teacher on students’ long-run educational attainment. Leveraging random student-teacher pairings in the Tennessee STAR class-size experiment, we find that black students randomly assigned to a black teacher in grades K-3 are 5 percentage points (7%) more likely to graduate from high school and 4 percentage points (13%) more likely to enroll in college than their peers in the same school who are not assigned a black teacher. We document similar patterns using quasi-experimental methods and statewide administrative data from North Carolina. To examine possible mechanisms, we provide a theoretical model that formalizes the notion of “role model effects” as distinct from teacher effectiveness. We envision role model effects as information provision: black teachers provide a crucial signal that leads black students to update their beliefs about the returns to effort and what educational outcomes are possible. Using testable implications generated by the theory, we provide suggestive evidence that role model effects help to explain why black teachers increase the educational attainment of black students.

I would describe the strength of this effect as one of the main and most important things economists have taught us over the last five years.

The culture that is Taiwan (Britain)

When the popular BBC TV program The Travel Show introduced Taiwan to its viewers, it failed to mention the island’s food, the Liberty Times noted Thursday.

The show visited the Anping Fort in Tainan, the brand new Weiwuying arts center in Kaohsiung, the sunrise and the tea plantations near Alishan, and the lanterns of Pingxi, but the presenters did not mention a word about Taiwanese food or even the night markets, according to the Liberty Times.

That is from a Taiwanese news site, via Salar al Khafaji.

Hedge fund and tech questions that are rarely asked

COWEN: Given all the data that search companies and some of the other major tech companies have, why aren’t they bundled with hedge funds?

SCHMIDT: What do you mean by bundled?

COWEN: Well, literally in the same company. You’d have a tech company and a hedge fund, and there would be a synergy because the hedge fund would use the data generated by the tech company for investment. So the hedge fund would have that data first. We don’t see that in the market.


COWEN: The major tech companies have done very well, of course, but if we imagine some world in the future where some tech companies are at or near insolvency, and if we think maybe they have a fiduciary responsibility to sell off the information they hold on people, is that a regulatory problem we will need to address?

Obviously, a successful tech company is not going to do that. They would wreck their franchise.

SCHMIDT: Yeah, so the problem that you’re posing is, we have a company that has a great deal of useful information that’s also bankrupt.

COWEN: Right.

Those were my questions to Eric Schmidt.

*Where Economics Went Wrong: Chicago’s Abandonment of Classical Liberalism*

That is the new book by David Colander and Craig Freedman, here is one short bit:

The best way of conveying our conception of what is at least suggestive of a Classical Liberal stance is to present a handful of economists who, in our view, reflect this attitude.  We have chosen six economists: Edward Leamer, Ariel Rubinstein, Alvin Roth, Paul Romer, Amartya Sen, and Dani Rodrik.  Each have, in our view, displayed a Classical Liberal attitude to methodology in important aspects of their work.

I am very much in favor of what the authors propose here, although I might reserve the term classical liberal for the more traditional political distinction.

Why We Can’t Have Nice Things–Elon Musk and the Subways

In New York it costs billions of dollar per mile to build new subways, a price far higher than anywhere else in the world. That’s one reason why Elon Musk’s The Boring Company has been anything but. Even if hyperloop technology doesn’t pan out, Musk’s goal of reducing tunneling costs by a factor of ten is laudable. The Boring Company purchased a tunnel boring machine in April of 2017 and incredibly has already completed a two-mile test-tunnel underneath Hawthorne, LA! Awesome, right? Well, some people just can’t be happy.

“[I]nvaders are coming from underground” proclaims Alana Semuels in a big story in The Atlantic. The title and splash page indicate the theme:

When Elon Musk Tunnels Under Your Home

The billionaire is drilling for futuristic transit under Los Angeles. He didn’t have to ask the neighbors first.

Billionaires are undermining your home. And democracy! Grab your pitchforks! Yet dig a little deeper underneath the lurid headline and the actual complaints are–dare I say it–boring.

I talked to a dozen people who live along the tunnel’s route, and most said they hadn’t witnessed any extra noise or traffic. But none had been informed ahead of time that a private company would be digging a tunnel beneath the street.

But what about all the displaced people?

As the tunnel neared completion, disruptions to the community increased. The company bought another building, this one on the corner of 120th Street and Prairie Avenue, for $2 million, according to public records, to allow for the extraction of tunneling equipment. Adrian Vega had run a cabinet business in that building for 18 years. When his landlord sold the building, the Boring Company came in and offered Vega’s company, Los Vegas Kitchen Cabinets and Doors, extra cash to get out in three months. Vega took the money, and asked for even more time from the Boring Company, which he was granted. But he couldn’t find another space; since moving in August, his business has been closed and his customers don’t know that he’s moved, he told me.

…Shunyaa Turner lives in a small house on 119th Place with his wife and two kids. He said that in the past year, they’ve had to battle more pests, such as raccoons, mice, skunks, and opossums, which they’ve never seen before. He isn’t sure if this is related to the digging; the Hawthorne airport has also been doing more construction as it gets busier, so the animals could have fled from there. He and his wife said they’ve also noticed more cracks in their impeccably maintained walkway.

…The initial document also claimed that the test tunnel would not involve digging under private property, but that, too, has changed—though the company has now bought all the private property it is tunneling underneath. The company has also closed a lane of Jack Northrop Avenue, a street on the other side of SpaceX headquarters

In the author’s own words:

Meanwhile, in Hawthorne, the company that promised its transit test projects would be completely unnoticeable by the community has since uprooted a small business, purchased a house, and closed a lane of traffic indefinitely.

The horror.

The whole framing of the piece is ass-backwards. Semuels is correct that:

[this] would have been unimaginable in a higher-income neighborhood. Indeed, when Musk tried to build another underground tunnel in a wealthier neighborhood in West L.A., residents quickly sued. The project got tied up in court, and [died].

In comparision:

The CEQA allows residents 35 days to push back against granted exemptions…in Hawthorne, the 35-day window passed with little fanfare.

But unfortunately Semuels takes the posh, lawsuit-loving, NIMBY crowd as the appropriate normative standard and any deviations from that as suspect and indicative of the power of billionaires to run roughshod over other people’s rights. Instead, the Boring Company, the Hawthorne city government, and the people of Hawthorne should be applauded for their sensible, forward-thinking, and optimistic approach to new ideas. Bravo to Hawthorne! Hawthorne: Where the future is being made!

I do give Semuels credit, however. She writes honestly so that one can see the real story behind the false frame and she even tips the audience to the correct (Straussian?) reading in her final clever paragraph.

Vega [the owner of the cabinet business who was paid to vacate] has nothing negative to say about the Boring Company—he just blames himself for agreeing to be out so quickly. Nothing like this had ever happened to him before, so he didn’t know what was fair. Nor did he know how hard it would be to set up a new store—the process of getting new city permits, he said, is a lengthy one, and he can’t find a way to cut through the red tape.

Stubborn predictions

Bayesian theories of perception have traditionally cast the brain as an idealised scientist, refining predictions about the outside world based on evidence sampled by the senses. However, recent predictive coding models include predictions that are resistant to change, and these stubborn predictions can be usefully incorporated into cognitive models.

That is the abstract to a new article by Yon, de Lange, and Press, via Michelle Dawson.

Procurement and compliance costs (from the comments)

From my time in both the military and healthcare I can say that the biggest problem are the compliance costs.

For example, I have a phone app that allows me to send texts. We pay very good money to have said app. It does nothing that my phone cannot innately do – except be HIPAA compliant. EMR software is clunky, an active time suck, and adds little or no value … but we are required by law to use it. In each case there are scads of less specific programs out there which are insanely cheaper and more functional, but those programs cannot justify the costs of becoming compliant for a small niche of their business.

In the military we had similar difficulties. If you want systems to be secure, you need to pay extra as the marketplace does not do real security for consumer goods. Likewise, if you worry about logistical tails, building in assured access drastically increases costs.

And I fully suspect that prices will continue to diverge. As ever more of the internet ends up in a giant interconnected mess there will be fewer people able to code in a secure fashion. There will be fewer parts of the ecosystem that can be used by security conscious actors.

Then we get to actual procurement itself. People worry that arcane institutions will somehow make off with lots of money and spend it either poorly or nefariously. Absent easily observed price and cost data in both sectors we began developing rules. These rules drive firms out of the market (e.g. we needed some light interior remodeling to comply with a regulation that specified inches between things, the contractor who has been most affordable and highest quality refused to bid because the hassle on his side was too great). Eventually the rules become too complicated and you start needing specialists to interpret them. Costs skyrocket and firms abuse rules to pad profits. Then the lawyers get involved and things get more expensive. Again, medical and military consumers become a captive market facing greater monopoly as fewer firms can navigate the thicket of rules to even try to make money.

Then we have the problem that people look at these sectors and say that it is public money. All public money should help with goal X (e.g. going “green”, affirmative action, boycotting South Africa/Israel, patriotism, “America first”) and then we become even more overly constrained. Find vendors who meet one hurdle is hard, finding ones that meet 30 is nigh unto impossible unless the vendor is engineering the firm to market solely to this niche – and charging monopoly rates as his reward.

Any single thing would not be too bad for prices, but the marketplace in general is diverging from military and healthcare. Even education is diverging with mandates in FERPA and political business constraints. We have pretty effectively restricted supply, why exactly would we not expect an increase in cost?

That is from “Sure.”

China five surveys of the day

Chinese leaders often invoke the feelings of the Chinese people in denouncing foreign actions in international confrontations. But most survey research on Chinese public opinion on international affairs has looked at measures of nationalist identity rather than beliefs about foreign policy and evaluations of the government’s performance. Five surveys of Chinese citizens, netizens, and elites help illuminate the public attitudes that the Chinese government grapples with in managing international security policy. The results show that Chinese attitudes are more hawkish than dovish and that younger Chinese, while perhaps not more nationalist in identity, may be more hawkish in their foreign policy beliefs than older generations. Netizens and elites are even more inclined to call on the Chinese government to invest and rely more on military strength.

That is by Jessica Chen Weiss, via the excellent Kevin Lewis.

Saving regret

We define saving regret as the wish in hindsight to have saved more earlier in life. We measured saving regret and possible determinants in a survey of a probability sample of those aged 60-79. We investigate two main causes of saving regret: procrastination along with other psychological traits, and the role of shocks, both positive and negative. We find high levels of saving regret but relatively little of the variation is explained by procrastination and psychological factors. Shocks such as unemployment, health and divorce explain much more of the variation. The results have important implications for retirement saving policies.

That is from Axel H. Börsch-Supan, Tabea Bucher-Koenen, Michael D. Hurd, and Susann Rohwedder, in the NBER working paper series.

*Aquinas and the Market: Toward a Humane Economy*

By Mary L. Hirschfeld, here is the opening passage from the Preface:

My rather peculiar intellectual journey began with my pursuit of a Ph.D. in economics at Harvard University, granted in 1989, and culminated in a second Ph.D. in theology, from the University of Notre Dame in 2013.  Economics and theology are two very different sets of discourses, and this book is the result of my effort to sort out the resulting cacophony in my own head.  When I began my career, I would never have imagined writing such a book.  For starters, I was an ordinary somewhat spiritually inclined but definitely not religious type when I began my academic career at Harvard in the fall of 1983.

Definitely recommended, and not just for Ross Douthat.  It is exquisitely written as well.  I enjoyed this sentence in the acknowledgements:

It is because of Tyler that I am a convinced Thomist, though that outcome would undoubtedly horrify him.

I am not easily horrified these days!  Thus there are doubts, always doubts.

Buy the book here.

All Hail Dalton Conley

Conley describes his early academic work as “lefty sociology.” His Ph.D. thesis was on the black-white wealth gap and he dedicated his early career to studying the transmission of health and wealth between parents and children.

At N.Y.U., Conley kept getting into disagreements with geneticists, arguing that their methods were dangerously naïve. It seemed to him implausible that studying only twins — the gold standard of genetics research — was enough to teach us the difference between nature and nurture. But over time, he decided that it wasn’t enough to just argue. Conley is an academic, and even within that tortured group he is something of a masochist. At that time he was a tenured professor, the kind of gig most people see as the endgame of an academic career, and yet he decided to go back and grind out another Ph.D., this time in genetics. He went into his program believing that our social environment is largely the cause of our outcomes, and that biology is usually the dependent variable. By the end of his time, he says, the causal arrow in his mind had pretty much flipped the other way: “I tried to show for a range of outcomes that the genetic models were overstating the impact of genetics because of their crazy assumptions.” He sighs. “But I ended up showing that they’re right.”

From the New York Times piece on Geno-Economics (Tyler linked to it yesterday also).