« March 2017 | Main | May 2017 »

April 2017 posts

Public Policy and Ethics

By Jonathan B. Wight

Two items of interest:

  1. One complaint about fuel economy standards is that it forced automakers to build lighter cars. And lighter cars (all other things the same) are relatively less safe—or so we thought.  Hence, anyone peddling a cleaner environment with CAFE standards was, in essence, killing people. Car crash

But maybe that isn’t so!  Maybe what also matters is the dispersion of auto weights (the share of lumbering SUVs versus tiny two seaters).  Having a smaller dispersion of weights makes the roads safer.  Antonio Bento, Kenneth Gillingham, and Kevin Roth in The Effect of Fuel Economy Standards on Vehicle Weight Dispersion and Accident Fatalities argue that, in fact, this is what happened between 1985 and 2005.

Environmentalists unite!  CAFE standards can clean the environment and save lives.  

  1. Tom Hanks is “fed up with NFL billionaires scamming taxpayers for stadiums. Hanks thinks billionaires should pay for their own stadiums. What a novel idea.”

Echo. Echo.

Redskin stadiumLikewise, the billionaires who run the current administration should be required, at minimum, to reveal how the proposed tax overhaul plan would line their own pockets. And that transparency should start at the top. 

Never has the aphorism been as true as today--the foxes are in charge of the hen house.

[Images: https://pixabay.com/en/photos/car%20crash/ and https://commons.wikimedia.org/wiki/File:RFK_Stadium_aerial_photo,_looking_towards_Capitol,_1988.jpg]

Ethics at Treasury

By Jonathan B. Wight

My parents both worked for the federal government (State) over three decades, and both exemplified the duty and virtue ethics approach to safe-guarding peoples’ interests from the politicians.  They were supremely patriotic and sacrificed a lot personally to advance U.S. interests.  This includes using their own funds to host public events overseas when the official budgets had run out, it includes working virtually every weekend and many nights without additional pay, it includes all the upheavals required to raise four kids while moving countries every 3-5 years.

This has affected my views of economics—for one, rejecting a simplistic account of people’s motives as only rapacious, as in a narrow reading of public choice economics. 

It also informs how I view public servants who are part of the civil service system.  They often earn good salaries, but raises may be rare compared to the private sector.  Most importantly, they are—and should be—insulated from the political process as much as possible.  In return, they owe us--the American people--their allegiance, their honor, and their ethical duty.

Economists who work in the Departments of Treasury, Commerce, Labor, Health, Agriculture, and similar posts in Congress or in the CIA, should be insulated from politics so that a careful and clear examination of the issues can be made. 

SummersLarry Summers, in a recent blog, laments the way professional economists at Treasury were blind-sided by Trump’s grandstanding move on tax cuts.  Coming out of nowhere, the President’s proposal undercuts the notion that there is truth, and that truth arises from analysis and debate.  Here is Summers:

“By all accounts the Treasury was on a path working with other agencies to come forth by June with a set of tax reform proposals.  Treasury officials were shocked when the President, speaking in the Treasury building, announced last Friday that the Administration would unveil its tax plan today.  There was no time for specification of a proposal, let alone consultation on its merits, estimates of its revenue impact, or evaluations of its economic impact. 

“Instead the Treasury Secretary was asked to lend his prestige and that of his Department to a one page document that would have been judged skimpy on detail if it were a campaign proposal.  I can only imagine how demoralized the Treasury tax staff-a group that rightly prides itself on its professionalism and analytic seriousness -  must be.”

Further, economists at the CBO and elsewhere are under attack from politicians like Paul Ryan and others to do “dynamic scoring”.  In case you’re wondering, “dynamic scoring” refers to imaged effects of policy changes on the dynamism of the economy, such as how fast it will grow and how hard people will work.  In other words, it’s hooey, made up wishful thinking to justify tax cuts.  No one can predict economic growth rates, and alleged supply side effects to boost growth have been unimpressive in the past, other than running up large budget deficits. 

The bottom line is: if you’re a professional economist in the civil service, will you have to do bad economics to keep your job or get promoted in the Trump administration?  I predict a brain-drain out of Washington, as sensible and honor-bound people seek employment elsewhere.  No genuine economist wants to live the life of a hack.  

[Image: https://www.flickr.com/photos/worldeconomicforum/374706082]

Toxic Masculinity?  Part II

By Jonathan B. Wight

The last post talked about toxic masculinity on Wall Street.

Qasim Rashid raises the issue of toxic masculinity more broadly, with another insightful article in the WaPo.  In it, he argues that in America we confound religious violence with straight old domestic male violence. He notes:

“The desire to blame religion detracts from the true root cause of these repeated acts of violence: toxic masculinity.

“Since the 2012 Sandy Hook Elementary School shooting…there have been about 1,100 mass shootings in the country; virtually every one committed by men. Of those, including the one Muhammad is accused of, Muslims have committed five.”

If these numbers are correct, religious terrorism has accounted for less than one-half of one percent of all mass attacks since 2012.  This information should bring balance to the hyper-outrage addressed at Muslims in America.  Realistically, it probably will not.

SexBack to the issue of gender rage.  I’m having my students read Hanna Rosin’s startling and provocative essay, “The End of Men” (The Atlantic July/Aug 2010).  It’s not hard to see why men are frustrated and some taking it out in violence—the male world has been turned upside down.  Worse, the future looks bleak because, as Rosin argues, women have the natural capabilities more in demand by the 21st century economy.

In particular, the claim is that women have the biological capability for social intelligence that will be in greater demand in business settings.

This is pretty depressing stuff if you’re male.  But here’s another view: Human behavior is not simply the expression of one’s genes.  Behavior is the interplay between genes and the environment. The environment includes nurturing and socialization. It may be true that men on average have more testosterone, and women on average have more oxytocin, but that just means men have to learn to compensate for that “toxic masculinity” (to use Rashid’s phrase). 

Adam Smith’s The Theory of Moral Sentiments explains how socialization can help make one into a more virtuous person, someone who exhibits social intelligence and self control.  There are plenty of males who have these fabulous traits. I reject the assumption of “The End of Men” that men cannot learn to fully adapt to the new economic environment.

Adaptation has everything to do with setting the right expectations.  If you are male and were taught that men are—and ought to be—the dominant sex because of greater physical strength and aggression, then you are suffering a clash between the evolving real world and your expectations about it. 

If your expectation is that the rise of women is a natural and long-overdue process, then the rise of women creates new opportunities for all to learn and grow, and room for the co-expression of both sexes.

[Image: https://en.wikipedia.org/wiki/Sex_differences_in_psychology]

Toxic Masculinity?  Part I

By Jonathan B. Wight

The now famous statue of the “Fearless Girl” confronting the Charging Bull on Wall Street is a wonderful juxtaposition of images.  But what does it mean? Fearless girl

The David vs. Goliath metaphor immediately comes to mind.  The young girl shows spunk and courage against the testosterone of powerful male traders – symbolizing the huge risks and huge collapses that occurred by male dominated financial firms leading up to 2008. 

And there is the further implication that if more women had been on Wall Street, the bubble either would not have happened or would have been more muted.  The implication is that testosterone is toxic.

A lot of experimental research is piling up to reinforce the idea that men are more competitive, and on average take more risks than women; men also have a wider latitude for ethical self-deception (that is to say, they can justify anything).  Here are some reads: 

  1. Laura Kray et al. (2012). “Male Pragmatism in Negotiators’ Ethical Reasoning,” Journal of Experimental Social Psychology.
  2. Catherine C. Eckel and Sascha C. Füllbrunn. 2015. "Thar SHE Blows? Gender, Competition, and Bubbles in Experimental Asset Markets." American Economic Review.
  3. Oliver Wyman, “Women in Financial Services” (2014). http://tinyurl.com/women-in-finance-pdf

The Eckel and Füllbrunn study finds that in experimental markets, men are more likely ... [continue after the break]

Continue reading "Toxic Masculinity?  Part I" »

Has Great Teaching Been Forgotten in School Reform?

By John Morton

The appointment of Betsy DeVos as Secretary of Education has intensified passions on both sides of the school-choice debate.  Lost in the politics of this debate is the idea that school reform ultimately depends on improving instruction.  I have taught for 50 years.  Sometimes when I wake up in the middle of the night, I think I’m teaching.  My experience tells me that academic and social advancement comes down to a teacher and a student in a classroom.  So what makes a great teacher?

Students-Girls-Classroom-Teacher-School-Boys-79612Twenty years ago, the National Commission on Teaching and America’s Future emphasized that better teaching was the core of its blueprint for reforming K-12 education.  Its three basic premises were:

  • What teachers know and can do is the most important influence on what students learn.
  • Recruiting, preparing, and retaining good teachers is the central strategy for improving our schools.
  • School reform cannot succeed unless it focuses on creating the conditions under which teachers can teach and teach well.

Nothing has changed since then.  We need to identify, recruit, and retain good teachers and encourage the bad ones to find another way to make a living.

How can we spot great teachers?  In a September 4, 2014, op-ed in The Wall Street Journal (available at wsj.com and danagoldstein.com), Dana Goldstein made at good start at describing the qualities that make a teacher great.  The next part of this essay will consist of her points followed by my thoughts on the issues.

  1. “Great teachers have intellectual lives outside the classroom. Economists have discovered that teachers with high SAT scores or perfect college GPAs are generally no better for their students than teachers with less impressive credentials.  But teachers with large vocabularies are better at their jobs because this trait is associated with being intelligent, well-read and curious.”

Great teachers love the subjects they teach and know how to communicate their subject matter in a way that students understand.  It always irks me to hear a teacher say, “I teach kids, not a subject.”

  1. “Great teachers believe intelligence is achievable, not inborn. Effective educators reject the idea that smarts are something that only some students have: they expect all children to perform at high levels, even those who are unruly, learning disabled or struggling with English.”

A great teacher views every student as a unique human being, not as a member of a race, ethnic group, or economic or social class.  Great teachers go way beyond offering students sympathy and do not use victimization as an excuse for lack of achievement.  Teachers who constantly complain about their students in the teachers’ lounge should look for another job.

  1. “Great teachers are data-driven. Effective teachers assess students at the beginning of new units to identify their strengths and weaknesses, then quiz students again when units end to determine whether concepts and skills have sunk in.”

I would go further.  Students should be assessed every week.  Students and their parents should know exactly how grades are determined, and the grading system should be quantified.  Students (and their parents) should know where they stand in relation to the class and in relation to their course grade.

  1. “Great teachers ask great questions. According to the scholar John Hattie, when teachers focus lessons on concepts that are broader than those on multiple-choice tests, children’s scores on higher-level assessments--like those that require writing--increase.”

Good questions test for conceptual understanding, not factual definitions.  For example, students learn little useful information if they can only identify that the equilibrium price and quantity are where supply equals demand.  Conceptual questions are why this happens and what forces might prevent this from happening?  Great teachers focus first on the facts but then put those facts in a conceptual framework.  Great teaching involves asking why several times during a class period and constantly asking students to back up their opinions.

In addition to Ms. Goldstein’s four attributes of a great teacher, I will offer two more.

  1. Great teachers use active-learning methods. Students in the class of a great teacher are actively engaged.  A teacher mumbling over 50 PowerPoint slides doesn’t cut it.  Activity-based learning challenges students to take responsibility for their learning.  The students are doing, not just hearing and seeing.  A great teacher uses simulations, group decision-making, problem-solving, classroom demonstrations, role-playing activities, and group presentations.
  1. Great teachers promote mutual respect and create a civil mini-society in their classroom. They show respect for their students by valuing their opinions, being knowledgeable about their subject, being prepared for class, refraining from comments that might demean students, and demanding that students respect other students and teachers.  Great teachers value freedom of speech and encourage debate of ideas.

Now that I’ve finished the rant I’ve wanted to write for several years, I must admit it comes with caveats.  Teachers and their unions have been among the worst enemies of educational reform.  They spend millions on lobbying to protect their members and prevent competition to public school monopolies.  Students become foils in this political game.  As Al Shanker, former president of the American Federation of Teachers, once said, “When schoolchildren start paying union dues, that’s when I’ll start representing the interests of schoolchildren.”  This discourages many fine teachers who deeply believe that teaching matters.  Today’s highly politicized educational environment has created Gresham’s Law of teaching: “Bad teachers drive out good teachers.”

[John Morton has a long and distinguished career teaching economics and training teachers how to teach economics.  If John says it, it is probably true! --JW ]

Mental misconceptions are more crippling than physical disabilities

By Jonathan B. Wight

Cindy Edson, and her husband Mike, have spend 20+ years as volunteers in service in Uzbekistan.  They’ve fought a hard battle to gain acceptance from the government and society for young people with disabilities.

During these decades they came to learn more about themselves than anything else.

One insight is that our own misconceptions about other people—particularly those with disabilities—cripples our ability to help them. 

This TED talk is a fascinating account of their adventures.


United Airlines

By Jonathan B. Wight

[Update:  United Airlines has apparently agreed with the conclusion below, and has changed its policies so that once a passenger has taken their seat, they cannot be replaced by a United crew member needing a seat.  That still leaves lots of wiggle room.  United also says they will not use police unless a passenger is disruptive.  All this to the good.]

David Dao, the doctor dragged from a United Airlines flight this week suffered a concussion, a broken nose, two broken front teeth, and certainly a trauma that is worthy of PTSD.   

So, let’s play a little game of ethics-in-economics thinking.

First, presumably the airline thought it was within its rights to evict the passenger, even though he was already in his seat waiting for take-off. 

Second, the airline thought that the benefits of kicking him off were worth the costs, namely, they would get a flight crew of four to Louisville in time for the next flight to Newark to take off. 

Let’s suppose the second flight serviced a plane of 100 passengers. Using standard utilitarian calculus, the inconvenience of one passenger would not justify inconveniencing 100 other passengers on that second flight. Kicking off David Dao makes perfect sense when you use economic and utilitarian logic.

Of course, specifics matter to a utilitarian calculus.  The passenger evicted was a doctor.  Perhaps he was needed in Louisville to perform life-saving surgery, in which case the doctor’s situation was far more than an inconvenience. 

Luckily for us, most airlines solve the overbooking problem by using the price system, giving a bonus to those who voluntarily inconvenience themselves, creating a win-win situation.  This time, no one took the bonus bait, even though the reward got up $800. 

*      *      *      *

The airline then simply chose some passengers to evict (not sure by what allocation system).  They compounded that by using force.  Herein lies the ethical problem behind utilitarian and economic calculus:  there is no respect for human rights—at all. 

The airline’s approach was unethical on several grounds.  First, considering the lawsuit that will happen, the horrible bad press, and so on, the cost-benefit calculation the airline made was way off base.  Even if the airline had to raise its bonus to $2,000 to find a willing passenger, wouldn’t that be far less costly than even one hour of a major law firm’s time to defend them in the coming lawsuit, not to mention the lost revenue from angry customers flying on other airlines?

But more importantly, by treating Dr. Dao as a piece of meat, and forcibly dragging him from the plane, the airline failed to treat Dr. Dao with a modicum of respect that would be expected under Kantian ethics. 

What makes it far worse (to my mind) is that Dr. Dao was already on the plane and in his seat.  He paid for it using legal tender, he received a valid boarding pass with seat assignment, the boarding passed was scanned and validated by the gate attendant, he went down the walkway and down the aisle to his seat.  He had rented that seat!  It is very late in the process to say he can’t rent the seat after all. 

The endowment effect in behavioral economics tells us that once someone possesses something they are far less willing to give it up.  If the airline had told him he would have to give up his plane seat while he was waiting at the gate, he would likely not have had the same visceral reaction of ownership and of refusing to give it up. 

Persnickety lawyers will say the fine print gave the airline the right to evict under either circumstance, but what is legal and what is ethical here differ.  Moral sentiments say the airline erred badly. 

Fed Independence

By Jonathan B. Wight

Robert Rubin was never my favorite Wall Street-White House insider, since he and others like him tore apart the financial regulations that eventually contributed to the severity of the 2008 crash.  So, yes, I blame him for using his position as Treasury Secretary to push through excessive deregulation, damn the risks.

But Rubin does make a good point in the Times yesterday about Fed independence, “Don’t Politicize the Fed.”

A quick reminder—in recent decades Presidents treated the Fed with respect:

President Reagan reappointed Volcker, first appointed by Democratic President Carter;

President Clinton reappointed Greenspan, first appointed by Republican Reagan;

President Obama reappointed Bernanke, first appointed by Republican Bush.

*         *       *    

YellenBut in the last election, Trump has said he would not reappoint Fed Chairwoman Janet Yellen simply because she is … not Republican.  Yesterday, in a Wall Street Journal interview, he changed his mind saying he would now consider it.  That is a relief if it were believable—a relief in the sense that Fed independence is an admirable goal (not always achieved in practice). 

The Fed was not always independent.  That came about only after hard-fought battles.  Used to be, when the Treasury had lots of debt to sell, the Fed was “obliged” to buy it up, at least at first, to ease the new issue into circulation.  But this meant the Fed had no ability to conduct an independent monetary policy.

In an historic Accord in 1951, the Fed finally broke free from the manacles of debt servicing.  This is the start of Fed independence.

But I can imagine a scenario in which, with three Board of Governor positions open in Washington, Trump could throw a political bomb into the institution by appointing party hacks to the vacancies.

Given Trump’s propensity to see everyone as either with him or against him, a friend or a foe, wouldn’t he also perceive the Fed in the same light?  If so, he might think that its goals should align with his goals.  To achieve Trump’s heroic growth targets in the midst of rising fiscal deficits and rising interest rates, this could mean strong-arming the Fed to lower interest rates in the short run, even though this would jeopardize inflation and the Fed's long-term credibility. 

Frankly, this worries me more than the threat of North Korea, but I haven’t seen today’s CIA briefing….

[Image: https://www.flickr.com/photos/imfphoto/8655581031]

This Earth of Mankind -- Inside Colonialism

By Jonathan B. Wight

Pramoedya Ananta Toer (1925-2006) was a Javanese writer and activist, who grew up when his land was colonized as the Dutch East Indies. 

Pramoedya ended up in Dutch prison during the revolutionary years (1947-49) and later in Suharto dictatorship prison from 1965-79, and later still under house arrest until 1992.

EarthWhile imprisoned at the Buru Island penal colony, Pramoedya wrote the first book of what became a quartet, This Earth of Mankind.

Actually, it wasn’t “written” because it was illegal for prisoners to have any reading or writing materials.  The story was told orally, and only later put to paper.

The book forcefully exposes the underbelly of imperialism and its vicious contradictions. Naturally, the book was banned in Indonesia because it rebels against unjust authority.

The book intricately deals with a coming of age story of a “native” Javanese boy in 1898, privileged to attend a Dutch school, so he has the language, manners, and intellect of the brightest European. 

Hierarchy, racism, sexism, and colonialism conspire to make a plot that will keep you awake turning the pages.  There is also lots of economics about trade and production.

Those from the developed world like to think that at least we make the world a better place through introducing the “rule of law.” Think again, after reading this. 

This is a heart-wrenching book that is well worth every spin of the moral imagination.  The writing is exquisite.


By Jonathan B. Wight

Krugman today seems to capture a part of what is happening in the American zeitgeist:

“Mr. Trump isn’t an honest man or a stand-up guy, but he is, arguably, less hypocritical about the darker motives underlying his worldview than conventional politicians are.

“Hence the affinity for Mr. O’Reilly [revealed in additional sexual harassment lawsuits]…. 

“One way to think about Fox News in general, and Mr. O’Reilly in particular, is that they provide a safe space for people who want an affirmation that their uglier impulses are, in fact, justified and perfectly O.K. And one way to think about the Trump White House is that it’s attempting to expand that safe space to include the nation as a whole” (emphasis added).

This nails one part of the story.

The other part is that there are sensible, nonracist, nonsexist, and otherwise positive people who simply voted for Trump as a protest against politics as usual. They wanted to send a clear message of disgust towards the status quo in Washington.

Will these folks be disappointed?  I think so, and given Trump’s performance to date, many are likely horrified. 

If you want to fix Washington, get rid of gerrymandering, which is the root of Congressional monopoly. 

Sam dogAs for ugliness, it is in everone’s heart—true?  Learning self-control, the premier virtue, involves moving away from seeing ourselves as the center of the universe, and rather seeing ourselves in orbit with others who also have rights and are struggling to overcome their own deficits. 

Seeing ourselves as we truly are—warts and all—means seeing others as they truly are—less ugly than our selfish minds perceive them to be.

Such perspective is at the heart of being less judgmental and more open to acceptance and even love of neighbor.  The perniciousness of Trump’s message is that vitriolic judgment and hatred are extolled, rather than seen as evils to be overcome. 

[Image:  Sam, world's ugliest dog: https://www.flickr.com/photos/spierzchala/66232046]