Russell Roberts's Blog, page 1460

Bottom up vs. top down

I happened to cross paths recently with the head of a charter school. One thing we talked about was standards. He argued that a national standard would be a huge improvement over the patchwork of state standards. Why were national standards a good idea? Then schools could share best practices and best curricula. They wouldn't have to create a customized set of materials for everything they wanted to achieve. They could learn from each other and save all the time it takes to do a good job and to comply with the separate standards.

That is the upside of top-down centralized standards. He was right. It can be great to have a single standard.

My response was that I don't know a lot about curriculum and standards. I know a little. My wife is a math teacher and we talk a lot about the challenge of what is best for kids to learn and how to teach them or help them learn those lessons. I know a little bit more about market forces. And my main response to the head of the charter school was that when you have national standards there is an immense incentive to steer those incentives via political pressure to benefit special interests who can profit from the particular standards that get chosen. My best example is the Basel Accords. Yes, when banks operate internationally, it's a good idea to have international capital standards and regulations. That lowers costs dramatically. But who will write the standards. The people with the expertise. Won't they have an incentive to write standards that benefit them, rather than are good for the world? Yes, they will. And the more complicated and complex is the field, the more they will be able to steer things in ways that are opaque and that benefit them rather than you and me.

That's how my conversation ended with the head of the charter school. If we'd had more time, he might have responded that come on, what kind of politics and special interests dominate the design of math standards? There are basic skills that are good to know. Yes, it might be hard to test for some of the less tangible skills, so that means the standards have to be carefully written. But these are kids we're talking about. People's children. Don't we all want the same for our kids. Excellence. Mastery. And while there may be disagreement or uncertainty about how to get there from here, the standards are pretty straightforward.

I was thinking about that conversation of the other day when I read this story in the Washington Post.

With its intricate mysteries of quadratics, logarithms and imaginary numbers, Algebra II often provokes a lament from high-schoolers.

What exactly does this have to do with real life?

The answer: maybe more than anyone could have guessed.

Of all of the classes offered in high school, Algebra II is the leading predictor of college and work success, according to research that has launched a growing national movement to require it of graduates.

In recent years, 20 states and the District have moved to raise graduation requirements to include Algebra II, and its complexities are being demanded of more and more students.

Now this is a bad idea. Not in and of itself. It's better to take Algebra II than not to. But taking Algebra II comes at a cost of other stuff you now won't have time to study. Requiring everyone to take Algebra II doesn't strike me as a particularly good idea. Requiring everyone to take Algebra II because it is the leading predictor of college and work success is a horrible idea. It is to misunderstand cause and effect in a rather embarrassing way. (Not as embarrassing as this, but it's close). The reporter, Peter Whoriskey, is a smart guy and understands this. The story continues:

The effort has been led by Achieve, a group organized by governors and business leaders and funded by corporations and their foundations, to improve the skills of the workforce. Although U.S. economic strength has been attributed in part to high levels of education, the workforce is lagging in the percentage of younger workers with college degrees, according to the Organization of Economic Cooperation and Development.

But exactly how to raise the education levels of the U.S. workforce is a matter of debate. And whether learning Algebra II causes students to fare better in life, or whether it is merely correlated with them doing better — because smart, motivated kids take Algebra II — isn't clear. Meanwhile, some worry that Algebra II requirements are leading some young people to quit school.

And later he quotes the slightly alarmed author of the study that found the relationship between Algebra II and success:

One of the key studies supporting the Algebra II focus was conducted by Anthony Carnevale and Alice Desrochers, then both at the Educational Testing Service. They used a data set that followed a group of students from 1988 to 2000, from eighth grade to a time when most were working.

The study showed that of those who held top-tier jobs, 84 percent had taken Algebra II or a higher class as their last high school math course. Only 50 percent of employees in the bottom tier had taken Algebra II.

"Algebra II does increase the likelihood of being employed in a good job," they reported, although warning that many factors come into play.

To check the Algebra II findings against the "real world," the Achieve researchers then asked college professors and employers to identify which skills are necessary to succeed.

Somewhat to their surprise, they found that whether students were going into work or college, they needed the skills taught in Algebra II. Other independent studies backed them up. One conducted by U.S. Department of Education researcher Clifford Adelman found that students who took Algebra II and at least one more math course attained "momentum" toward receiving a bachelor's degree.

"There was a fair amount of judgment that went into this," said Michael Cohen, president of Achieve and a former assistant secretary of education in the Clinton administration. But "it turns out to get the skills needed, students had to reach Algebra II."

The push for Algebra II had begun, and it was embraced by many states.

But not everyone is convinced that Algebra II is the answer.

Among the skeptics is Carnevale, one of the researchers who reported the link between Algebra II and good jobs. He warns against thinking of Algebra II as a cause of students getting good jobs merely because it is correlated with success.

"The causal relationship is very, very weak," he said. "Most people don't use Algebra II in college, let alone in real life. The state governments need to be careful with this."

The danger, he said, is leaving some kids behind by "getting locked into a one-size-fits-all curriculum."

One-size-fits-all is efficient. But it comes at a cost. It doesn't fit everyone. And there are fads in math education and the rest of education that are bad ideas. Do we really want those fads to take over. Or do we want competition?

But worse than that, there's so much at stake to be the one size that's chosen when there's one size required to fit all. What's at stake here in the Algebra II fad? I'd look at the textbook companies. Whoever sells Algebra II textbooks has a big stake in this debate. Maybe there are others. I'd look into that group Achieve and see who's running it day-to-day and who that person talks to. But the bottom line is remember the virtues of bottom up decentralized inefficient policies. They are often better than those top-down centralized efficient policies.

BitCoin

The latest EconTalk is Gavin Andresen talking about BitCoin. BitCoin is an electronic currency with a very clever way to increase the amount of BitCoins in circulation but not by too much and in a transparent way. Enjoy.

Krugman and Expectations

Here's a short clip of Paul Krugman asserting that the only reason businesses today aren't investing more than they are is because businesses have "tons and tons of excess capacity."  (HT W.E. Heasley)

Krugman's assertion is not implausible.  But nor is the assertion to which Krugman replies – and pooh-poohs – an implausible one.  The previous speaker, without mentioning the term, suggested that what Robert Higgs calls "regime uncertainty" is a chief reason why business investment today is so lame.  Krugman dismisses that possibility summarily and with disdain.

Why?

Why are expectations and uncertainties about future consumer demand so obviously relevant while expectations and uncertainties about future government policies so obviously irrelevant?  I know of no reason – not even one in Keynesian economics – for Krugman's apparent conclusion along these lines.

More generally, why are "animal spirits" so cockeyed?  If animal spirits can cause sudden, economy-screeching-to-a-halt pessimism among investors – pessimism explainable by no phenomena more observable than animal spirits – why cannot the spirits of animals (1) be spooked by what these spirits, correctly or not, predict to be unpredictable or enterprise-quenching government policies; and (2) just as mysteriously as they become pessimistic about the future for no apparent reason, also become optimistic about the future in the absence of any observable reason for optimism?

Two Videos

Reason's Nick Gillespie interviews my courageous, myth-slaying colleague Walter Williams (who just a few days ago celebrated his 75th birthday – Happy Birthday, Walter!  Please hang around for at least another 75 more.)

A couple of weeks ago, Dan Ikenson, Scott Lincicome, and I each delivered some brief remarks on trade and the trade deficit at a Cato Institute event on Capitol Hill.

As Compared to What?

Here's a letter to the New York Times:

You lament the practice of members of Congress staffing their offices with former lobbyists ("Cutting Out the Middleman," April 3).  Your justified concern, however, raises this question: given that politicians are incurably addicted to such cronyism, why do you so often support expansions of government's size, scope, and power?

Although the free market would work better in practice than you suppose, a large part of the case for the free market is not that it's perfect – it assuredly is not – but that the alternative is worse.  Being decentralized and voluntary, the free market is much less likely than is government to foist the consequences of unethical or incompetent actions on everyone collectively.  And because Uncle Sam faces virtually no competition (it is the only national government permitted to operate in these United States) its mistakes and malfeasances take longer to be exposed and remedied than do mistakes and malfeasances committed in private, competitive markets – a fact that means that mistakes and malfeasances are likely to be committed more frequently by government officials than by participants in private markets.

Sincerely,

Donald J. Boudreaux

Some Links

Mark Perry documents evidence of a giant sucking sound – a giant sucking sound of massive amounts of capital flowing into the United States over the past 50 years (and with the pace accelerating twice: first in the mid-1980s and again in the mid-1990s) as investments in private enterprises in America.  Yes, yes, yes – all this investment in American companies and in companies launched in America increases America's trade 'deficit.'  Can someone articulate a compelling reason why this investment harms Americans or how it signals the decline of our economy's vigor and productivity – a compelling reason that is consistent with the fact that the world's stock of capital is not fixed?

Cato's Jim Dorn understands what will (and will not) reinvigorate Japan's economy.

George Will laments that it is a sign of left-"liberalism" that government officials increasingly believe that individuals must justify their liberties, rather than government justify its denial of those liberties.  And he speaks a foundational truth about government, a truth too-often ignored: "Many people go into it because they enjoy bossing people around."

Ralph Benko's overture for a retrospective – and, hopefully, prospective – on supply-side economics.

Years ago I regularly wrote book reviews and posted them at Amazon.com.  A kind soul at the blog Studio Hayek has gathered these reviews into one place.

Energetic Protectionism

University of Chicago economist Allen Sanderson offers this proposal both to reduce Americans' dependency on foreign-produced energy and to revitalize Detroit.  (HT Dan Polsby)

If It Reasons Like a Duck….

Here's a letter to the Christian Science Monitor:

Ian Fletcher mixes economic ignorance with poor reasoning to peddle a horrible protectionist hash ("Cost of US 'free' trade: collapse of two centuries of broadly shared prosperity," April 1).

No one should be taken seriously who writes, as Mr. Fletcher does for example, that the U.S. trade deficit "causes a huge slice of domestic demand to flow not into domestic jobs but foreign wages.  Our trade deficit helps Guangdong, Seoul, Yokohama, even Munich – but not Gary, Indiana, Fontana, California, and the other badlands of America's industrial decline."

Such a claim reveals its author to be unaware that another name for "U.S. trade deficit" is "U.S. capital-account surplus" – that is, inflows of investment funds into America that supply (directly or indirectly) financing for more capital creation in America.

Consider Ikea, a Swedish company.  When Ikea builds its stores in the U.S. it spends dollars.  Almost every dollar that Ikea spends building and operating its stores in America is a dollar added to America's "trade deficit."  But are the carpenters and electricians hired to build Ikea stores in America not employed domestically?  Are the managers and clerks in each Ikea store in the U.S. not employed domestically?

Mr. Fletcher's claim about the trade deficit is akin to an assertion by a self-proclaimed medical doctor that the liver pumps blood.  Sensible people ignore such quacks.

Sincerely,

Donald J. Boudreaux

Serial Obstructionism

Here's a letter to the Wall Street Journal:

You rightly call out Microsoft and Google for their hypocrisy in prodding antitrust authorities to investigate each other for alleged anticompetitive activities ("Microsoft's Antitrust Turnabout," April 2).  As detestable as these actions are, antitrust can be understood only if it is recognized for what it really is: a tool for bludgeoning innovative firms that make markets more competitive and consumer-friendly.

It has always been so. A revealing instance of how ridiculous antitrust investigations can be is the F.T.C.'s successful persecution, in the 1970s, of Borden for that firm's audacity at reducing the price of its reconstituted-lemon-juice product, ReaLemon, when other firms introduced competing products.  Or recall the F.T.C.'s ready-to-eat breakfast-cereals investigation that forced Kellogg's, General Foods, General Mills, and Quaker for years to defend themselves against the charge of – wait for it! – "brand proliferation."  These firms were accused of offering such a full range of types of breakfast cereals that each and every consumer demand for cereal was met – from demands by the health-conscious for unsweetened Corn Flakes to demands by children for sugary Cocoa Puffs.  These firms' success at satisfying consumer demands, noted the F.T.C., made entry by upstart cereal producers more difficult.  So the F.T.C. naturally accused Kellogg's and other established firms of monopolizing the market.

Cuckoo.

Sincerely,

Donald J. Boudreaux

Go Arianna!

Here's a letter to the Los Angeles Times:

I'm in the odd position of agreeing with the Huffington Post.  Michael Walker criticizes that popular on-line publication for its policy of not paying $$$ to its contributors ("Why should writers work for no pay?" April 1).  Arianna Huffington replies that the abundant exposure that the site she founded (and now owned by AOL) provides to aspiring pundits is itself sufficient compensation.

Ms. Huffington is unquestionably correct.  Because her site is only one of thousands of venues to which pundits can peddle their prose, and because many lesser-known pundits continue to eagerly write for the HP without expecting money from the HP, the HP clearly provides ample value to its contributing writers. Tit for tat.  Voluntary trade with mutual benefits.  All parties to the transactions gain and no one loses.  Works out nicely; it truly does.

A lesson here that I hope Ms. Huffington and her colleagues will take to heart is that third parties, even when well-intentioned, are poorly positioned to assess the merits of – and to second-guess the detailed terms of -  capitalist acts among consenting adults.

Sincerely,

Donald J. Boudreaux