Results for “from the comments” 1664 found
The benefits of outsourcing
Virginia Postrel has been blogging up a storm on outsourcing, click here for a sterling post. In addition Her latest NYT column offers an excellent historical tale of outsourcing:
In the late 1980’s, Asian manufacturers began turning out basic memory chips, undercutting American chip makers’ prices and inciting a fierce policy debate. Many industry leaders argued that the United States would lose its technological edge unless the government intervened to protect chip makers.
In a famous 1988 Harvard Business Review article, Charles Ferguson, then a postdoctoral associate at the Center for Technology Policy and Industrial Development at M.I.T., summed up the conventional wisdom: “Most experts believe that without deep changes in both industry behavior and government policy, U.S. microelectronics will be reduced to permanent, decisive inferiority within 10 years.”
He denounced the “fragmented, chronically entrepreneurial industry” of Silicon Valley, which was losing market share to government-aided Asian businesses. “Only economists moved by the invisible hand,” he wrote, “have failed to apprehend the problem.”
Those optimistic economists were right. The dire predictions were wrong. American semiconductor makers shifted to higher-value microprocessors. Computer companies bought commodity memory chips and other components, from keyboards to disk drives, abroad. Businesses and consumers enjoyed cheaper and cheaper prices.
Far from an economic disaster, the result was a productivity boom. As global manufacturing helped to reduce the price of information technology sharply, all sorts of businesses, from banks to retailers, found new, more productive ways to use the technology.
“Globalized production and international trade made I.T. hardware some 10 to 30 percent less expensive than it otherwise would have been,” Dr. Mann estimates in an institute policy brief. (Her paper, “Globalization of I.T. Services and White-Collar Jobs: The Next Wave of Productivity Growth,” can be downloaded at iie.com.)
As a result, she estimates, gross domestic product grew about 0.3 percentage point a year faster than it would have otherwise, adding up to $230 billion over the seven years from 1995 to 2002. “That’s real money,” she said in an interview.
By building the components for new integrated software systems inexpensively, offshore programmers could make information technology affordable to business sectors that haven’t yet joined the productivity boom: small and medium-size businesses, health care and construction.
I link to Doug Irwin’s excellent outsourcing piece at The Volokh Conspiracy. Daniel Drezner covers the debate in his usual quality fashion. Arnold Kling offers good comments as well. Here’s hoping that this swell of intellectual support for free trade continues. Here is a more ambivalent Glenn Reynolds.
Empire and Capital Flows
Brad DeLong laments that international capital in the late twentieth century did not flow to poorer countries the way it did in the late 19th century. Tyler comments here.
The key point that I think Brad and Tyler both miss is that in the late 19th century a lot of the capital was flowing within the structure of the British Empire. Whatever its faults (and there were many), the Empire did provide investors with the rational expectation that their property would not be expropriated. More broadly, the capital flows of the 19th century were accompanied by flows of intellectual capital – in the form of the rule of law and similar institutions. Japan and the East Asian tigers show that it is possible for a country to adopt these institutions without the imposition of Empire but it is not easy.
Productivity and unemployment
I am growing increasingly annoyed with people who argue that the dark side of productivity growth is unemployment. The Economist, which ought to know better, says we are overproductive. CNN Money discusses the problem of productivity, the President blames productivity growth for unemployment. Even someone as sophisticated as Brad DeLong writes “with productivity surging, it’s hard to be pessimistic about GDP growth, but it’s easy to be pessimistic about unemployment” which seems to suggest that if only productivity growth were lower, employment would be higher.
And yet the “dark side” of productivity is merely another form of the Luddite fallacy – the idea that new technology destroys jobs. If the Luddite fallacy were true we would all be out of work because productivity has been increasing for two centuries. Sure, some say, that may be true in the long run but what about the short run? Even in the short run there is no necessary connection between productivity growth and job loss. In the computer industry, for example, productivity growth has led to falling prices and a bigger not smaller industry. If demand is inelastic then productivity growth can create short-term unemployment, especially at the level of the industry experiencing the growth – less likely but not impossible is that productivity growth leads to short-term economy-wide unemployment.
The more typical case, however, is that productivity growth leads to higher real wages and lower unemployment. Indeed, in the now fairly standard real business cycle models a boom is caused by a positive productivity shock and a recession by a negative shock. Empirical evidence supports the idea that positive productivity shocks lead to lower unemployment.
Why then do we see in very recent data a correlation between productivity growth and unemployment? One reason may be reverse causation. When firms fire workers they tend to fire the least productive first leading to an increase in average productivity. Workers may also work harder when unemployment threatens (an efficiency wage explanation). Thus, an increase in unemployment can cause an increase in productivity per hour. But in such a situation diminished productivity would certainly not lead to higher employment!
Bottom line in my opinion is this: productivity growth and unemployment are mostly unrelated. If productivity growth were currently lower we would have lower real wages and unemployment would be just as high. As a rule – and as a rule to follow – productivity growth is an unalloyed blessing.
Why not more price discrimination for medicine?
Physicians and hospitals can not waive or significantly reduce their fees they charge to uninsured patients even if they want to because they would technically be committing Medicare fraud! Ant’ mindless and impersonal government bureaucracy great?!
Read more from Dr. Rangel. And don’t neglect to peruse his further comments on national health insurance, and yet more is here. These are some of the most accurate and pungent observations on the topic I have seen.
Letters of recommendation
Students ask professors to write letters of recommendation for them. Today’s professors frequently respond by asking the student to write a first draft of the letter. Henry Farrell at CrookedTimber comments on this practice. Obviously the ethics of such a request are questionable. Furthermore it puts the student in a very difficult position. How great can you claim to be and keep a straight face, not to mention a reputation for probity?
That being said, I am not very worried about the practical repercussions. Most people, especially undergraduates, do not know how to write a very good recommendation letter. They fail to realize that such letters, to be effective, should offer very specific and pointed comparisons. Those few students who understand this fact are probably too shy to call themselves “comparable to Greg Mankiw as an undergraduate.” Nor will they write “comparable to your Professor Mediocre [fill in the name yourself!] as an undergraduate.” So if a professor asks the student to write the letter, the professor does not care about the letter or student very much. The resulting letter is likely to be very generic and thus not very effective. In addition, the professor probably has a hard time saying much about the student. This again suggests the letter will be less than overwhelming, no matter who writes it.
The really good candidates still will be able to produce credible signals of quality. They will find some professors able to make coherent and specific claims on their behalf. In fact, if professors ask the lesser students to write their own letters, the relative advantage of the very best students may rise.
Evolution
Often I love the idea of science fiction more than science fiction itself. I’ve read most of the classics, and I am left with junk at the relevant margin. But lately I’ve been wrapped up in Stephen Baxter’s Evolution, published earlier this year. The book, spanning almost six hundred pages, tells the story of evolution from the point of view of our genes. To be sure, the book would be easy to satirize. It has no central characters, covers 65 million years of history, and frequently presents how different animals think [sic] about copulation. OK, that doesn’t sound like an obvious recipe for success but Baxter pulls it off to a surprising degree. The treatment is reminiscent of H.G. Wells or Olaf Stapledon, a particular favorite of mine. If you, like me, are desperate for science fiction that is actually intellectually stimulating, give this book a try. We are told, by the way, that the capacity to believe contradictory ideas is what makes human beings special.
Baxter pushes the Stephen Jay Gould line that the results of evolution are highly dependent on small accidents. For a contrasting point of view, from a more scientific front, see Life’s Solution: Inevitable Humans in a Lonely Universe. The author Simon Conway Morris argues that the path of evolution is much less contingent than is commonly believed. He points to numerous biological structures, such as the eye, that have evolved repeatedly under different guises. Here is one brief summary, here is a longer and more critical presentation. Life’s Solution, which occasionally verges on theology, should be read with a critical eye. Nonetheless if you feel you have read all the good popular books on evolutionary biology, here is a text with something new and provocative.
More on obsolete professors
A number of people wrote both in support and challenging my comments on obsolete professors. Fabio Rojas wrote:
My reading of university history is that academia has always been a superstar market, except for the three decades or so after WWII…Medieval universities were run by a small group of well paid elites, while much of the grunt work was done by low status lecturers. The German research universities of the 19th century were known for giving comfy chairs to a few stars, while privatdozents slaved away at abysmal wages. The only exception to this trend is post-WWII American higher ed. The simultaneous explosion of student enrollments and Cold War money meant that universities could afford lots of research scholars who could teach. Of course, that model is hard to sustain – already a lot of work is being shifted back to part time workers.
My hunch is that in 50 years, maybe less, the higher ed system will be very different. There will still be a core of elite research universities and liberal arts colleges, where people will pay to study with famous scholars, writers and artists. The rest of the educational system will move toward a University of Phoenix model – an elite core of administrators managing an army of part timers, distance learners, on-line learning, adult ed, etc. The traditional universities can probably maintain their monopoly on occupational certification, but the rest of the system will radically change.
Similarly, Roger Meiners wrote “I think you are correct about professors being nearly obsolete. My guess is that large state universities are the institutions due for the largest restructuring. The private schools, as inefficient as they are, still generally stick to their mission better.”
But my colleagues Robin Hanson and Bryan Caplan as well as Stephen Brown from the Dallas Fed all asked, If teaching by DVD is so great why haven’t we seen it already? After all, VCRs not to mention movie projectors have been around for a long time. Perhaps, they argue, there are efficiency reasons for the structure that exists today. Stephen writes:
Professors working collaboratively, but in decentralized manner may have substantial advantages in providing certifications (degrees) when compared against a system in which students watch pre-recorded lectures by the great teachers and then are tested for mastery by an administrator through exams–particularly if mastery cannot be well demonstrated by machine-graded, multiple-choice exams.
Robin and Bryan pointed to professors as a disciplinary device. The option of self-learning may in fact be self-defeating. (See also Amy Lamboley’s comment at Crescat Sententia). Moreover, if students attend universities to find mates then big lecture classes may not be such a cost after all.
Universities have been around a long time so caution is justified but it has to make a difference in the provision of education that I can today download to my hard drive 10,000 books from Project Gutenberg or search over 100,000 books at Amazon (another 60,000 are available from Google). Innovations often seem impossible or impractical until someone demonstrates the concept and then they take off. Yes, the last is a trendy reference to the Wright brothers – note that just days before they flew, Samuel P. Langley, Director of the Smithsonian Institution and head of a well-funded government project to invent the airplane, proclaimed the goal years if not decades away.
The economics of cheese
Free trade is not only good for prosperity, it is also good for fine food shopping. Here are some pithy comments on a recent book on the history of Camembert cheese:
Fifty years ago, or even twenty-five, it was very hard, if not impossible, to get cru Camembert – or gold seal balsamic vinegar, or single-estate Tuscan extra virgin olive oil, or jambon de Bayonne, or Ortiz salt-packed Spanish anchovies, or Niçoise olives – if you didn’t live in a world metropolis or in the regions near where they were produced. Now they are all widely available. Thanks to the Internet, Fedex, the food-writers (and their globalised publishing firms), the once-local has become global.
Nor is it just the distant local that has a place in the markets; preferences for the local local are now better catered for than at any time in the recent past: farmers’ markets flourish as never before in both Britain and America; the role of the “forager” – searching out the quality produce of local farmers for top restaurants – has become institutionalised; the formerly resistant Californian wine industry is rediscovering the power of place as against the manipulations of the scientific winemaker; the cheese plates at better American eateries feature increasingly convincing Sonoma County goat cheeses and one of the finest semi-soft goat cheeses in the world, the Cypress Grove Humboldt Fog; the Slow Food movement gathers strength throughout the world and reinforces the revival of the local and the seasonal.
Here is the full book review, from The London Review of Books, the piece is interesting throughout. Here is an earlier post on the corporate origins of Maytag cheese in the United States. Here is a post on using radar to improve the quality of wine.
The bottom line: When I first started going to Europe, in the early 1980s, I was amazed at the quality of the foodstuffs, but America is catching up rapidly. The next steps: lower price supports for dairy products, lower duties on foreign cheese, and free importation of non-pasteurized cheeses, the opposite of what Hillary Clinton wants.
The Effect of Police on Crime
Estimating the effect of police on crime is more difficult than it sounds because places with a lot of crime tend to have a lot of police and vice-versa. As a result, naive analyses tend to find that police cause crime! Jon Klick and I, following the amazing Steve Levitt, have what we think is a pretty clever solution. We look at what happens to crime in Washington DC when the terror alert level rises from elevated to high. During a high-alert period the police put on extra shifts, monitor closed circuit cameras on the National Mall and in general step-up policing. We find that crime falls a lot during these high-alert periods. Our new paper is, Using Terror Alert Levels To Estimate the Effect of Police on Crime. Comments welcome.
Here is the abstract:
We argue that changes in the terror alert level set by the Department of Homeland Security provide a shock to police presence in the Mall area of Washington, D.C. Using daily crime data during the period the terror alert system has been in place, we show that crime drops significantly, both statistically and economically, in the Mall area relative to the other areas of Washington DC. This provides strong evidence of the causal effect of police on crime and suggests a research strategy that can be used in other cities.
Cream Skimming
Glen Whitman at Agoraphilia has some comments on my debate with Tyler on vouchers. He notes that the public school system separates students according to ability with honors classes, AP classes, magnet schools and so forth. Yet, few people call this “cream skimming.” I think Glen’s point blows the peer-effects argument against school choice out of the water.
More generally, the argument in the peer-effects literature is that we shouldn’t let smart kids escape the public school system because their presence gives dumb kids a positive externality. I detest this argument. Children are not pawns to be moved about to satisfy the desires of some grand master. A decent school system treats children as ends in themselves. (In preparation, one might add, for life in a society that treats every individual as an end in themself.)
More on student evaluations
Yes, the beautiful do get better student evaluations, the research of Daniel Hamermesh confirms this, the link is through Instapundit.
And get this bit, taken from the link within the link:
According to their data, the effect of beauty (or lack thereof) on teaching evaluations for men was three times as great as it was for women.
How about this?:
A glance at Web sites such as ProfessorPerformance.com and RateMyProfessors.com — where students rate their instructors on criteria such as coolness, clarity, easiness, helpfulness, and hotness (on RateMyProfessors.com, hot professors get chili peppers beside their names) — leaves little doubt about the viciousness of some students. Petty comments abound: “Someone fire this fat bastard” and “Looks like a hobbit, is not a nice person!”
Harold Glasser has been a victim of such comments. One of his students posted the following remarks on ProfessorPerformance.com: “Glasser where’s (sic) the same blue fleece sweatercoat thing, and this awful matching blue fleece hat that looks like the one Elmer Fudd wore. If this wasn’t enough, he has some of the same mannerisms as Dr. Evil,” from the Austin Powers movies.
There is no chili pepper next to my name, but given all this, my opinion of my looks has gone up.
Addendum: Here is link to the paper, thanks to John Charles for the pointer.
How Word of Mouth Works
Here is Virginia Postrel (NYT registration required), telling us that TV shows need dispersed word of mouth to succeed:
Another factor did, however, predict whether a show’s audience would build over time: dispersion, or “entropy.” This technical measure essentially picks up how widespread the discussion is. Are comments concentrated in a few specialized groups, or does the show interest people in many different groups? Word of mouth spreads more quickly when it begins in different places or among people with different interests.
“It’s not enough to say that we got 10 mentions for our product or 10 people are talking about my research,” Professor Godes says. “To understand the impact that word of mouth is going to have, you have to understand how different those 10 people are.”
To take an academic example, he says: “Ten people sitting at Harvard talking about my research all talk to each other. I’d rather have one person at Harvard, one person at M.I.T. and one person at U.C.L.A. talking about my research. That’s really how the word will spread.”
Here is an interview with the original authors of the research. Here is a link to the working paper. The authors should be pleased to know that their hypothesis is making its way around the blogosphere.
Prediction Markets
I’m in NYC today talking about prediction/information markets, of which the Pentagon’s recently canceled Policy Analysis Market is the most infamous example. Our colleague, Robin Hanson, was one of the architects behind the PAM. Red Herring, the hi-tech magazine is now back in business in an online form and they have a precis of my comments for those who are interested.
Class size doesn’t matter much
A new OECD study suggests that smaller classes contribute little to learning, education blogger Joanne Jacobs offers her comments. The study, led by J. Douglas Willms looked at a dozen countries, and confirmed earlier results that class size was not a significant variable, see also this survey and this short note. My suspicion, in the American context, is that pushing for smaller classes will involve hiring inferior teachers, a classic example of unintended secondary consequences.
If we want to improve education, more effective factors include:
…improving relations between teachers and students, hiring literacy specialists, intervening earlier than Grade 2 when a child is having trouble learning to read, teaching educators better classroom management, encouraging parents to read to their children in the evenings, and offering early childhood education programs.
Jacobs suggests that small classes are most important for kindergarten and first grade, especially for disadvantaged students.