The False Lure of Professionalism

A few days ago, I had a conversation with a bright young woman, a recently minted teacher. I shared with her something I had learned about recently: the $1 per day schools popping up in some of the poorest places in world. See The Economist or listen to the EconTalk podcast, both articles demonstrate that these schools provide student outcomes far above what they would otherwise have seen in the state schools.  To a strong believer in free markets this exemplifies the power of markets to respond to what people need.

In my conversation, I asked this young woman (let's call her Vickie) what her take was on these schools. To my dismay (but not too much surprise) she--contrary to endorsing the efforts of these schools--treated me to a lecture on the need for more professionalism in teaching, a quality that these pop-up schools (and to a lesser extent, charter schools in the US) clearly lack. Furthermore, she went on to site the necessity of teacher training, and went farther to speculate that there is a need to make entry to the teaching profession more restrictive, all in the name of "professionalism".

All this led me to wonder; what is professional? In sport or art, you are professional if you get paid for your work. I hardly think this is what she means. In truth I am not sure what she means, as I didn't get the chance to ask, but I think she meant something like  "formally certified by a professional body of belonging to a specific profession by virtue of having completed a required course of studies and/or practice and whose competence can usually be measured against an established set of standards". (Definition courtesy of the business dictionary).  This definition of "professional" may seem a strawman to you, but of all the things Vickie mentioned, these are the points she made over and over again.

There is one aspect to this definition that is painfully absent--just as it was from our discussion. Perhaps you have spotted it, but in case you haven't, there was no mention of outcomes. As a professional, one must be focused on the outcomes. One must pay attention to her customers. If not, if our teachers only pay attention to their "professionalism" to the neglect of the students, the neglect of the outcomes, they will be replaced, just as surely as quality cars, appliances, clothes and restaurants drive out competitors of lower quality.

How does this happen? How can it happen with our schools?

It already is happening! Between 1999 and 2011, the number of homeschoolers doubled from 850,000 to 1,770,000. Similarly, the number of charter schools has quadrupled over a similar time period from about 1,500 to slightly more than 6,000. At the same time, Kahn Academy is serving more than 45 million per year world-wide.

I have great respect for Vickie; she is a vivacious, highly intelligent, caring woman. I have little doubt that much of what she was telling me is what she was taught at her teachers' college. This is the part that I find so very upsetting. Why are we filling our teachers' heads with such gobbledygook as this? Why don't we tell them the truth, that their profession (to use the word again) is to educate students? To be accountable to their parents? Instead they get puffed up with professionalism and certification--not with the fire of competing on outcomes.

If my children get educated well, I care not one whit about whether their teachers were certified or not, whether they had a master's degree or even a bachelor's, or, really, any degree at all. I care about the outcome. If these caring and hard-working men and women want to be looked at as professional, it is time to face the mirror, not time to chastise those with better outcomes for lack of "professionalism".

Bernie Sanders is Smart, and That's Dumb

Dear Jeff Spross,

Thanks for the softball!

No really, I mean it.

I don't mean to say that I disagree with you when you say that it is a tragedy when anyone goes to bed hungry, especially a child, but I do mean to say that you miss the boat with your example.

You begin by setting us a strawman: a fictional two-party negotiation between a deodorant spray magnate and a deodorant spray prole. Then give me three variations on the theme: one where there are conditions specified and the two parties agree on a price "in the middle". The next where there's a "bad recession" and the worker has to settle for $30,000 and a final one where the worker haggles into $60,000. You then go on to say it's all about balances of power.

Bah!

I say again, Bah!

The first problem I have with this scenario is that it is as far from a realistic scenario as if a football coach told his quarterback to imagine that there are no defenders. Rediculous.  First of all, unless you work in the Soviet Union, North Korea, or Cuba, there are other options--for both the employer and for the employee, and for the consumer. Why does this matter? OK, call it "balance of power" if you like, but it is about choice; just like a free economy.  But is it balance of power when I choose Right Guard over Old Spice? No, it's about other things, including cost, quality, advertising, packaging, and let's not forget about scent!

The same is true in hiring. Do I hire the first person who walks in the door? Sure I might get lucky, but really, I'd be a fool to think that she is the best candidate and stop there. There are so many factors that go into making a hire, including cost, quality, advertising, packaging (although it's not supposed to be a factor), and scent (again, not supposed to be a factor).

And this is the problem with the idea that any one entity can make decisions better than a market. You just can't. The market is not like a computer, it's very, very different from a computer. Unlike a computer which only has the inputs that you define (i.e. "they only know what you tell them") markets take all information. Perfectly? Of course not; this is what causes all sorts of distortions, from the tank of gas for sale at the car rental agency to bias realtors have to move your house as quickly as they can.

But on the whole, markets do a phenomenal job.

I will concede that I really don't need 25 varieties of Old Spice Deodorant (yes, 25, I counted), but someone has discovered a demand for scents like "Matterhorn", "Livewire" and "Komodo", and by golly, they are fulfilling that demand.

As for the human beings who want to work in a deodorant factory, the question is not how valuable is the work they can do. The question is what choices do I, the employer, have? Can I get someone better or cheaper or both? If I can, why wouldn't I? What this candidate "needs" has as much to do with my decision as the date of the next lunar eclipse.

Yes, there is tension between all those brands and starving kids; yet it would still be there if there were only one brand, because the decision to divert money from starving kids comes, not when we create a second or third (or twenty-fifth) brand, it comes when we have just one. Unless you have more armpits than a Jatravartid, you only need one variety at a time. More to the point, having 25 scents of Old Spice probably decreases the number of hungry kids, because now you've got to hire the chemists to create the scent, marketers to sell it, and workers to make it.

Are markets dumb? No. Are they intelligent? Well, I have no idea what "intelligent" means, but markets probably not whatever it is. What they are, however, is an example of emergent order. To say that it has analytical power is just wrong. There is no more analysis in that than in the ways that the orbits of the planets interact with each other, than the ways that galaxies organize, birds fly, sand dunes form, or termites build their mounds.

I will give you credit for getting something right, however, policies do impact markets, and more often than not in ways that we cannot predict. For example, price controls seemed like a good idea, right? Next time you're in the 1973 or 1979 take a look at the lines for gas (the same thing happened as a result of the anti-gouging laws in NY after Hurricane Sandy).

OK you're not talking about having "bureaucrats direct the flow of every last resource in the economy. It is a matter of the inescapable social, political and policy choices that shape the balances that exist prior to market dynamics, and that profoundly shape how those dynamics ultimately hash out." Then what, exactly are you talking about? I caution you, tread lightly, very lightly. History is littered with pundits, politicians and policy wonks who were smart.

The problem is that being smart...is dumb.

...Then Why Do It?

There's a bumper sticker that I associate with Ben & Jerry's, it goes like this: "If it's not fun, why do it?"  I need to appropriate that format and apply it to politics (of course!).  My new question is "If you can't measure it, why do it?"

Today, while scanning the news on Yahoo, I came across this headline: "Under fire over high gas prices, Obama calls for tighter curbs on oil market manipulation." Because I'm a free-market kind of guy, I was on guard right away.  "Looks like pandering," I thought.  But perhaps it will have some statistics in it, something that I can think about.  Heck, maybe it would even get me to change my mind.

Then I get to this gem:

"You won't find the administration making projections about the particular impact, or the particular price impact, of any particular policy," one official told reporters on condition of anonymity.  "We would leave that to outside analysts to disentangle."

Wait, what?  You mean that the President is advocating a policy when he doesn't  even have a prediction of it's impact?

If the press release were honest, this is what it would say: "Gas prices are high, and despite clear evidence supporting this, we think people and corporations are manipulating the market.  Therefore, we're going to increase the regulation on their business, but no one has any idea as to whether it will help lower gas prices or not."

This kind of non-rigorous thinking is not exclusive to any one party.  Heck, it's not even exclusive to politicians.  However, given that the person making this claim is the person in charge, and his words and actions have ramifications that can be felt for years, possibly generations, I think that he owes it to us to be specific.

Instead of not "...making projections about the particular impact...of any particular policy..."I would like to see our policy makers (and the policy wonks who support them) say things like: "This policy will have the effect of lowering the price of gas to under $3 within a month.  If however, we do not see this effect, we will repeal this policy."  While the specific numbers don't really matter, the important thing is that they draw a line in the sand so we can tell if their policy succeeds or falls flat on its face.

And that would be fun!

Joe Middle Class Republican

My wife came across this and forwarded it to me with the comment: "I dunno what you're going to think of this one, but I'm curious.  Not sure if you'll resent it, or come up with a good counterargument, or what."  Yes, my wife and I are on different sides of the middle.

So, I thought I'd take a moment and talk about what is wrong with this post.

http://videocafe.crooksandliars.com/heather/thom-hartmann-day-life-joe-middle-class-re


I am fully prepared to acknowledge that there are some awfully nice things that came from liberal minds, and would ask for the same consideration for conservatives.

First point is that liberals are taking credit for an awful lot of stuff.  The second point is that anything he disagrees with is automatically conservative.  He might as well say that everything that he likes is good and vice-versa.  Let's hear it for straw men!  Thirdly, he doesn't make clear what is conservative and what is liberal.  So, for the sake of this rebuttal, I'll take Republicans and business owners/CEOs as meaning "conservative" and allow Democrats and activists to mean "Liberal."

Would it be too easy to bring up slavery as a liberal/conservative argument?

The next thing is that he's co-opted everyone who ever agreed with him into his liberal point of view while ignoring other factors.  For example "public" transportation was not a liberal position when it was created--it has only recently become one...sort of.  Public transport is as much a tool for the "conservatives" as it is for liberals, and go back more than 50-60 years and you'll have both sides fighting for it.

Meanwhile he talks about taking his daily medication which is safe...wait, wait, where did his medication come from?  Who researched it?  Who funded the research for it?  For that matter, where did he get the coffee that he didn't pay $20.00 for?  Just a couple of examples

Employers paying for health insurance is not a liberal position at all.  It is as a result of WWII when there was a major fear of inflation, and corporations just couldn't (legally) increase wages.  Just to make that part clear, FDR's administration forbad wage increases.  To compensate, companies offered benefits to attract employees.  Somewhere in the 50's, in a Republican (Eisenhower) administration, it became encoded into law that corporate sponsored health care would be an untaxed benefit.  Therefore companies could pay $x for insurance, while delivering $1.2x (or whatever the multiplier was) in value to the employee.
Other things:

Yes meat is regulated...he doesn't point out the cost of regulation.  For example, look at Michael Polen's book, The Omnivore's Dilemma and you'll see how that regulation has made meat safer (arguably) while at the same time, making it impossible for small farmers to compete.

With regard to Fannie Mae...obviously this was written pre 2008.  Still want to take credit for that liberals? Furthermore, we see that his dad is retired and still living on a farm collecting Social Security and a union pension.   So...which was he, a farmer or a union laborer?  (Please note, I am not aware of farm owners being part of a union.  If there is such a union, I welcome the education!)  Furthermore, if he is retired, who is working the farm?  It's all well and good that he should be able to keep the farm, but if it's not being worked, then why does he still need it?  Shouldn't he sell it to someone who can actually oh, I don't know...farm it?  Does he think those crops are going to plant themselves?

And while we're talking about Social Security he could do as well or better if he just kept his money in the bank.  Playing with Social Security calculators, I found that the best he could do was about 3.44%, and then, only if he had an average annual lifetime income of about $25,000.  This is, of course, assuming he lives the expected lifespan of a US male.  Of course, if he lives longer, his investment becomes better.  But if he dies...all the money he paid into the system goes to the government.

And speaking of death...what happens to his house after his long and good life?  If liberals were to have their way, depending on its value, it would be taxed!  Because clearly he didn't pay enough taxes on it when he was alive.  Now he has to "give something back."  Didn't he give enough when he was alive?  (If I refuse to pay the death tax, does that mean I can't die?)

When he turns on the radio that night, and hears Limbaughs complaining about how bad liberals are and how good conservatives are, I also hope he'll turn them off.  They're clearly blow-hards who enjoy throwing bombs and not coming up with alternatives.  Just like I hope he'll turn off our good Thom Hartman, who wrote the original piece.

Boston Mayor Thinks New Laws the Solution to a 20-Cent-per-Day Increase

I heard this on NPR this morning, then read it this evening on the consumerist this evening.

http://consumerist.com/2011/05/sick-of-rate-hikes-boston-mayor-asks-fcc-to-let-city-regulate-cable-prices.html

The basic facts are that over the past 3 years, the price of basic cable has soared 60% over the past 3 years.

Don't get me wrong, 60% is a lot, it means that if you were paying $10, you're now paying $16 per month, which works out to an annual increase of $72.

But let's put this in perspective, a $6 per month increase is...$0.20 per day.

Again, I don't want to paint Comcast as anything other than a money grubbing corporation ('cuz that's probably what they are) but if we're going to get all angry about something, shouldn't we have a solid understanding about the magnitude of the thing that's making us angry?

Said another way, would anyone have gotten angry if the consumerist led with this paragraph:

In the city of Boston, where most residents only have access to Comcast service, the price of basic cable has soared over the last three years by 20 cents per day. So the city's mayor, Thomas Menino, has asked the Federal Communications Commission to let the city regulate the cost of cable.

It's pretty hard to get all worked up about 20 cents per day, isn't it? Now Thomas Menino wants to create more work for the city...does Boston have a labor surplus?

From the opposite point of view, if the Cable isn't worth $72 per year more...don't buy it! I find it interesting that in this age of obesity that we want a government body to regulate an industry that enables inactivity.

Well, that's my 60% for tonight. Sorry for the poor writing!

5

Bang! (Does a bullet make you dead-er than a car-crash?)

I'd like to begin this post by unequivocally stating that I am staunchly against violence. Furthermore I can think of nothing worse than losing a child--to any cause. That having been said, I would like to address a story heard on NPR recently with regard to violent gun deaths.

For those who have never taken the Mass Pike into Boston, there is a billboard, 250 feet long by 20 feet tall that has been owned by the organization, Stop Handgun Violence. While their goal is laudable, I wonder at their numbers. Not that they are wrong, only that they are somewhat subjective.

On May 24 of this year, a new billboard was revealed with a counter that shows the number of kids killed by guns since the 2010 elections. As of May 26 (according to a Google images search, anyway) 1,624 kids had been killed by guns. Annualized, this says that 2,892 kids will be killed by November 2, 2011 (one year from the elections).

There are two glaring problems with this statistic: first the time frame is arbitrary and second, the term "kid" is not well defined.

Let's begin with the arbitrariness of the time-frame. I see three problems with it: First, while it is generally accepted that Republicans are more progressive with regard to gun control (and I am prepared to stipulate that point), it is irrelevant. Unless Stop Handgun Violence is suggesting a causal relationship between the election of a Republican majority in one house of the national legislature, and handgun deaths, this is a meaningless date. Second, rather than reaching out to partner with Republicans to find some way to reduce handgun violence (or even stop it), they alienate that portion of the electorate who have the most credibility with firearms owners. Finally, it's just a difficult time-frame to work with. Quick, how many days has it been since the elections? How many months? Or what portion of a year? See my point? This is why we want to pick clear dates that are easy to work with. This is especially true when you have someone's attention for all of about 8 seconds as they zoom by the billboard.

The second glaring problem is that the term "kid" is not well defined. Is it everyone under 18? 17? 13? I would assume 18, but I could have chosen age 12 as the cutoff, with the justification that after 12 you are a teen and no longer a "kid." Similarly if I were 60, I could have chosen anyone under 40. Finally, if I were a villain on Scooby-Doo, anyone who interferes with my nefarious plot is a kid, regardless of age or species, (the Scooby-Doo definition is equally ill-defined and contains the confounding adjective"rotten", which may alter their predisposition to firearm violence).

Now you could legitimately argue that this is splitting hairs, but I would argue that it is not. Look at this graph, showing the number of deaths by guns by age for the years 1999 - 2007:

As you can see, up to age 12 or 13, your chance of being killed by a gun, either accidentally or intentionally is almost nothing. But around age 13, your likelihood of being murdered skyrockets. Despite the fact that about 3,000 17-year-olds were killed between 1999 and 2007, you should remember that there were about 34,500,000 17-year-olds during that time. This makes the odds of a 17-year-old getting shot about 1 in 11,500, or 0.0087%. A fatal car crash is almost three times as likely, about 1 in 3,500, 0r 0.0284%.

There are a large number questions I didn't answer here, such as the effect of gender, ethnicity, socio-economic status and geography on the probability of gun violence. These are all questions that, if answered, might give a more meaningful insight into how to stop gun violence. For example, if we find that a disproportionate percent of shootings are on rural farms at the end of winter, we would want to address the problem very differently from if almost all of them occurred in ballet classes among girls jealous of the prima ballerina.

Now, before I go, I want to put my money where my mouth is. I am all for stopping gun violence and want to help in some way. Therefore, all advertising money made on this site between now and September 1, 2011 will go to Stop Handgun Violence. And who knows? Maybe they'll use that money to give some better statistics!

Finally, speaking of statistics, my source for information was the CDC's excellent database, which you can check out here: http://webappa.cdc.gov/sasweb/ncipc/leadcaus10.html, as well as the infoplease web site: http://www.infoplease.com/ipa/A0005067.html.

OK, I'm done shooting my mouth off.

Big Oil Has Record Costs for Last 2 Quarters

Congress talks about new subsidies

People—and by “people” I mean politicians and journalists, primarily—like to use numbers to tell a story. Frequently the story is a fiction informed by fact, and the numbers are thrown in there to make the fiction seem, well “non.” The story du jour is about Big Oil’s record profits, and what the government should “do about it.” While it is true that profits are up, the cost of doing business is also up, and no one is talking about that. It’s important to bear all this in mind while our politicians send hate mail to these corporate executives.

In the last quarter, Exxon-Mobil’s profits (for example) were up $2.6 Billion or about 6% compared to the quarter before. Meanwhile costs were up by about $6 Billion, which is approximately a 10% increase in expenses. This has occurred for each of the last two quarters.

I certainly don’t want to make the point that XOM or any other major corporation (oil producing or otherwise) is a paragon of virtue, but I want to make the point that just throwing around a company’s profits is not a good basis for making a decision or for railing against their “windfall profits.”

Let me explain. Say I come to you with a business plan that could earn you $102, and all you have to do is invest $100. You’d never do it! Even without discussing the risk involved, it’s not worth it to give up your $100 just to get an extra $2. On the other hand, if I promised you a $3 payout for investing $1, you’d sign up every day and twice on Sundays. What’s the difference? In both cases you make a $2 profit, right?

The difference is the risk and opportunity cost you take on. Risk is pretty easy to understand, but opportunity cost is a little less. Basically what opportunity cost means is what else could that money have been doing for you. If you could have had it in a bank account where it would have earned you more interest, clearly that would have been better. Even if it hadn’t earned you as much interest (as most banks don’t pay much these days), you might still choose the bank option because it’s less risky.

The question that you, as the owner of some money, need to answer is “how much do I need to get paid to be willing to invest my money with you?”

What about Exxon-Mobil and their ilk? Their bean-counters have figured out approximately what the risks are, and given those risks, decided that XOM needs to be about 39% profitable, before taxes and operational costs are taken out. This means that for every dollar invested, they need to get back $1.39. This figure is much more than just a finger-in-the-air exercise, it takes into account the worst-case scenario, the most likely scenario and many others as well. It baked these all together with some very complex mathematics and came up with a profit margin that will cover them in almost all circumstances, yet without pricing their oil so high that no one will buy it.

Am I saying that we should be more sympathetic to Big Oil? No, I only say that any changes to US policies should be based on a sound argument, not one that makes for a good sound byte.

That's my $43 billion.