Archive for the 'Systems thinking' Category

Walter Williams on Education

December 23, 2009

In his column today, Black Education, Walter Williams touches on some of the same things I touched on last April in my post on how to save education.

They have parents with little interest in their education. These students not only sabotage the education process, but make schools unsafe as well. These students should not be permitted to destroy the education chances of others.

I agree for any student that is disrupting others.  Education is expensive.  We pay $10,000 – $15,000 per student per year of K-12 education.  In return for spending this money, we should expect students to be on their best behavior and problem kids need to be removed from the population so other can learn.

Another issue deemed too delicate to discuss is the overall quality of people teaching our children. Students who have chosen education as their major have the lowest SAT scores of any other major. Students who have an education degree earn lower scores than any other major on graduate school admission tests such as the GRE, MCAT or LSAT. Schools of education, either graduate or undergraduate, represent the academic slums of most any university. They are home to the least able students and professors. Schools of education should be shut down.

This goes along with my belief that we need to remove bad teachers and reward good ones.  Teachers seem to hate the idea of performance measurement.  It’s not hard to see why based on Williams’ paragraph above, they aren’t that good.  Teaching is not an entitlement.

Yet another issue is the academic fraud committed by teachers and administrators. After all, what is it when a student is granted a diploma certifying a 12th grade level of achievement when in fact he can’t perform at the sixth- or seventh-grade level?

Agreed.  In my post, I wrote that teachers need to assess accurate grades that truly reflect the students’ proficiency of the subject matter.  There should be no other criteria when giving a grade.

In summary, public education is not good because it has stifled or simply has wrong-headed ideas on several important levels of feedback.

  1. Student grades.
  2. Student behavior.
  3. Management of teacher quality.
  4. Ultimately, the most important level of feedback that is stifled is funding.  Public education receives funds no matter what.   #4 enables #1 – 3.

Michael Medved on the Dennis Miller Show

December 20, 2009

After Lane Meyer turned me back onto the Dennis Miller Show, I went to iTunes and grabbed a bunch of a recent interviews from the Dennis Miller show.

Miller gives a great interview.

One of the interviews happened to be with another radio show host, columnist and author, Michael Medved.  Medved was plugging his new book, the Five Big Lies About American Business.

Medved hit on a concept that Miller didn’t even seem to understand and I’m not sure he understood after Medved explained about two and half times.

Medved said that many people view business people as greedy and not giving back in the way charity to communities.  But, these business people do contribute to society.  They produce goods that other people value enough to voluntarily buy.

That’s very important.

At the root of capitalism is the idea of voluntary, mutual beneficial exchange.  Mutually beneficial means both sides come out ahead.  Win-win.

By providing one side of those transactions – goods and services that people value enough to buy – they are contributing to society.  They are adding value to society.

I’ve said before that in all of the trade that has taken place between myself and Bill Gates, Bill Gates really got the short end of the stick.  Now, I don’t feel sorry for him in anyway, but the point is to recognize that he has added a great deal of value to my life.  Much of my the livelihood I’ve earned over the past couple decades were based on Bill’s products.

Medved’s point is one that we each experience every day, but very few ever recognize it.  On your next purchase, ask yourself why you purchased it.  Was it voluntary?  Why were you willing to give up some of your hard earned money for it?  What value did it bring to your life?  How much would you have willing paid for it?  How much more of it would you buy if it were cheaper?

Miller heard Medved, but he took Medved’s point to mean that the businessperson contributes to society only by providing jobs.  That’s important too.  But, the value the businessperson provides in his or her products or services was Medved’s point and it’s invisible to most people.

It shouldn’t be.

George Schultz on PBS

December 17, 2009

Frustrated with Tiger Woods banality on the major networks last night, I switched on PBS and caught a segment on the Lehrer News Hour with George Schultz discussing his belief that the financial crisis was due to the government creating a moral hazard with it’s ‘too big to fail’ bail-out nonsense.  He asks, if they’re too big to fail, why not make them smaller?  Great question.

I highly recommend watching the video.  Click here and it should be the first video listed on the left of the screen.

I nearly fell out of my chair.  Finally, some reason in media.  Good job Lehrer.  Getting warmer.

Moral hazard is the unintuitive lingo economists use to describe the idea that if someone or something is there to bail you out, you do things differently than you would if you didn’t have that backup.

If somebody knows they’ll be bailed out, they take excessive risks because they do it [take risks] on the taxpayers dollar.  The whole system is badly damaged when bailouts occur because it takes accountability out of the system and the market system depends on accountability, so we have to design a system so that anybody in it can fail.

The interviewer, who I hope was playing dumb for his audience (I think he was), asks Shultz if this is something he’s seen in the past or “is this a new phenomenon?”   This isn’t new.

This is everyday human behavior  that’s been around since the dawn of mankind.  If someone tells you they’ll pay for your retirement, you don’t save as much.  If you parents got you out of trouble when you were a kid, you got into more trouble.

Schultz explained two examples from the past to illustrate moral hazard.

First was a strike the longshoreman in 1968.  President Johnson enjoined the strike to prevent national emergency.  When Nixon took office and Schultz became his Secretary of Labor, another strike fired up, why not?  The President is going to help them get what we want to avoid a national emergency.

Schultz said Johnson was wrong and Nixon should stay out of it.  It would teach them “they have to take responsibility for their own actions,” kind of like the parent who finally learns they aren’t helping matters by soothing the temporary pain for the child who made a bad decision.  Nixon listened and the strikes died down.

Another example was with the failure Penn Central railroad.  The railroad grossly managed their affairs.  The Federal Reserve Chairman, Arthur Burns, wanted to give Penn Central a bailout to prevent a massive failure of the financial system.  Sound familiar?

In the end, he didn’t bail them out because they had retained Burns’ former law firm and a bailout would look too suspicious.  Penn Central failed.  There was no ripple effect.  The economy kept chugging.

While Schultz said a lot of good things in the interview, that wasn’t the part that fascinated me.  What fascinated me was that there was no yelling.  He wasn’t chastised for challenging today’s conventional wisdom that markets failed.  He was allowed to state his case and rationale in a calm manner and the interviewer tried to understand his points, rather than stuff him in the face with populist lay-ups.

I could imagine Matt Lauer conducting the same interview.  When Schultz said that staying out of the strikes would teach them they they need to take responsibility for their actions, I could envision Lauer cutting him off and asking him in his condescending tone something like, “but don’t you think the longshoremen need the muscle of the government behind them, because the companies have all the bargaining power?”  Or, “shouldn’t we have bailed out Penn Central?  X thousands lost their jobs.”

Then Lauer wouldn’t have given Schutlz a chance to explain that the end result of the actions that weren’t taken were far away better than what would have happened after the temporary soothing of the government action, much like the parent who finally decides its time for their kids to learn a lesson.

Get Around It

December 4, 2009

In this column, Larry Elder writes about NPR’s treatment of the climategate story.  I enjoyed the column.  I especially enjoyed these two sentences:

One crosses the line from scientist to advocate when, if faced with conflicting or unexpected data, the scientist tries to get around it rather than to understand it. If data causes a re-examination of previously held assumptions, so be it.

Very well said.  We all need someone to keep us honest, even scientists.  Groupthink is a feedback problem that hides the truth.  The problems that led up to the deadly explosion of the space shuttle Challenger in 1986 was a result of groupthink among NASA scientists and engineers.   Hmmm…

Bah Humbug

November 29, 2009

In Scroogenomics, George Will and Joel Waldfogel, author of a book by the same name, sides with me on a long running Christmas time debate. 

Gifts that people buy for other people are usually poorly matched to the recipients’ preferences. What the recipients would willingly pay for gifts is usually less than what the givers paid. The measure of the inefficiency of allocating value by gift-giving is the difference between the yield of satisfaction per dollar spent on gifts and the yield per dollar spent on recipients’ own purchases.

Christmas etiquette involves composing one’s face to feign pleasure when unwrapping an unwelcome windfall — say, a sweater of an appalling color and a style that went out of style in the 1940s — and murmuring “Oh, you shouldn’t have” without revealing that you mean exactly that. Price of the sweater: $50. Value to recipient: $0. Actually, less than zero, considering the psychological cost of the forced smile.

I was disappointed that Will did not mention Milton and Rose Friedman’s Four Ways to Spend Money in his column.  The value destruction of gift was covered by the Friedmans long ago as Category II spending. 

The value created with the purchase of the gift isn’t the value perceived by the gift recipient.  Rather, it’s the psychological value gained by the gift giver for satisfying “its-the-thought-that counts.”  Which, is usually unfortunate for the gift recipient.

One of my long held theories is that most problems can be traced back to a breakdown in a feedback mechanism.  With gift giving, we rarely get true feedback from the recipients as to the value of the gift.  We get polite “thank you’s”.  The truth comes later when the recipient doesn’t use the gift, returns or exchanges the gift, sells the gift in a garage sale, donates it to charity, re-gifts it or simply gives it to someone else.  But, the truth rarely makes it back to the giver.

One way to fix the feedback loop is to establish a ground rule before the gift exchange that the gift recipients give honest opinions about the the gifts.  Another ground rule could be that the gift giver would have to take back the gifts that the recipients didn’t like.  I believe these two adjustments to feedback would very quickly convert most gift exchanges to exchanges of money, gift cards or gifts that have more value to the recipients.

Whenever I’ve had this discussion with my family, I start hearing Bah-Humbugs.  They mistake my desire for a better gift exchange, where recipients get more value out of the process (which I thought was the point), for lack of generosity. 

There are times when I think gift giving can provide more value to the recipient than even the cost of the gift.  I’ll write about those in the future.

Sensitivity

November 20, 2009

I listened to some sports talk radio while stuck in a traffic jam this evening.  The topic of discussion was the University of Kansas head football coach Mark Mangino and the complaints from his players about some comments he made.

Disclosure: I have no clue how Mangino treats his players.  I don’t care much.  He might have said some really bad things.  I don’t know.  But, the quotes I’ve heard so far don’t warrant the attention this is getting.

The show hosts were up-in-arms as they repeated the quotes on the air.  One rule of thumb I have is that if the quotes are repeatable under FCC rules, then it might not be terribly offensive.

Two callers in a row agreed with me.  The callers’ advice to the college football players – toughen up and get over it.  The show hosts thought the callers were way off base.  I tend to agree with the callers.   I strive to treat others with respect.  I think it’s a worthwhile goal.  I don’t see the upside to meanness.

However, I’ve also had a lot of rotten things said to me in my life.  My Mom taught me a very valuable lesson.  Sticks and stones.

The toughest part is that many times, buried in those rotten things was some truth.  That’s when it hurts the most, especially if you are not prepared to hear the truth.  But, I needed to hear it.  I benefited from listening.

The point the callers were trying to make is that with all of the attention given to the sensitivity of how someone says something, we forget that what they are saying might be right.   And sometimes, missing that truth in the message can be costly.

 

Great Write-Up of Elinor Ostrom’s Work

October 28, 2009

John Stossel provides the best write-up for lay people of Elinor Ostrom’s work that I’ve read so far in his column today, Self Governance Works.  Elinor shared the Nobel Prize in Economics this year.

If I take fish from a common fishing area, I benefit completely from those fish. But if I make an investment to increase the future number of fish, others benefit, too. So why should I risk making the investment? I’ll wait for others to do it. But everyone else faces the same free-rider incentive. So we end up with a depleted resource and what Garrett Harden called “the tragedy of the commons.”

Except, says Ostrom, we often don’t. There is also an “opportunity of the commons.” While most politicians conclude that, depending on the resource, efficient management requires either privatization or government ownership, Ostrom finds examples of a third way: “self-organizing forms of collective action,” as she put it in an interview a few years ago. Her message is to be wary of government promises.

She has studied, for example, self-governing irrigation systems in Nepal and found successes never anticipated in the textbooks. “Irrigation systems built and governed by the farmers themselves are on average in better repair, deliver more water, and have higher agricultural productivity than those provided and managed by a government agency. … (F)armers craft their own rules, which frequently offset the perverse incentives they face in their particular physical and cultural settings. These rules may be almost invisible to outsiders. …”

“These rules may be almost invisible to outsiders…” reminds me of Adam Smith’s Invisible Hand.  The Invisible Hand is why we do what we do.  Smith wrote more about this subject in his Theory of Moral Sentiments.  In addition to economic incentives, our actions are influenced by prudence, propriety, benevolence and justice.   These four governors of behavior are under appreciated.  I consider economic incentives along with prudence, propriety, benevolence and justice to be the five fingers of the invisible hand.

Government intervention can screw up economic incentives and it can also screw up the other four fingers.  Something a German lady told me comes to mind.  She said that while East Germany was freed 20 years ago, the culture of a heavy handed slave master statist government is still there.  The people are rude.  They live to meet the codified rules and not much else.  The government rules replaced a person’s sense of prudence, propriety, benevolence and justice.  DMV anyone?

I also love this passage: “While most politicians conclude that, depending on the resource, efficient management requires either privatization or government ownership, Ostrom finds examples of a third way.”

By examples, he means real world examples.  Real world examples are all around us, yet I find that those examples are often under appreciated by people who box themselves into theoretical confines.   I’m the Elinor Ostrom of my workplace.  Whenever we have a grand new idea, I look for real world examples that are similar.  It is darned difficult to get people to accept those real world examples.  It’s also darned difficult to get those people to admit that they should have more carefully considered those real world examples when they get similar results.

Source of Most Problems: Feedback Loops

October 14, 2009

In today’s column, A Minority View: Academic Dishonesty, Walter Williams discusses one of the four feedback loops in our schools that could be fixed to improve the quality of education in our country.

Several times on this blog I’ve advocated that most problems can be traced back to a broken feedback mechanism or loops.  A feedback loop is simply information that we use to course correct.

For example, the sights and sounds we use when driving a car are feedback.  Our brain processes those and pipes physical adjustments to our hands and feet to keep the car on the road, in the lane, operating safely and moving toward our intended destination.

Car accidents often occur because of problems in the feedback or processing of feedback.  Obstructed views, misinterpretation of traffic signals and so forth are common causes of accidents.

I’ve used this idea to explain the problems we see in education result from four limited feedback loops.

  1. Parent choice is limited by the way we fund school districts.
  2. Teacher quality is muted by the rules the teachers’ union have put in place to provide them with job security and protect teachers from arbitrary administrators.
  3. Student grades are muted by several things, some of which are the topic of Walter Williams’ column today.
  4. Student discipline is the limited ability schools have to remove problem children from the classroom.

One Two Punch: Mortgage Crisis

October 13, 2009

Thomas Sowell puts on his boxing gloves this morning and lands some quality blows:

Our current economic meltdown results from the federal government, under both Democrats and Republicans, declaring home ownership to be a “good thing” and treating the percentage of families who own their own home as if it was some sort of magic number that had to be kept growing– without regard to the repercussions on other things.

We are now living with those repercussions, which include the worst unemployment in decades. That is the price we are paying for increasing home ownership from 64 percent to 69 percent.

And…

Politicians may not know much– or care much– about economics, but they know politics and they care a lot about keeping their jobs. So a great distracting hue and cry has gone up that all this was due to the market not being regulated enough by the government. In reality, it was precisely the government regulators who forced the banks to lower their lending standards.

Mighty blow…

The other big lie is that this was a failure of economists and others to foresee that the housing boom would turn to bust and set off financial repercussions across the economy.

In reality, everybody and his brother saw it coming and said so– including yours truly in the Wall Street Journal of May 26, 2005.

Milton and Rose Friedman on Adam Smith’s Key Insight

September 29, 2009

From the Introduction of Free to Choose:

One set of ideas was embodied in The Wealth of Nations, the masterpiece that established the Scotsman Adam Smith as the father of modern economics.  It analyzed the way in which a market system could combine the freedom of individuals to pursue their own objectives with the extensive cooperation and collaboration needed in the economic field to produce our food, our clothing, our housing.  Adam Smith’s key insight was that both parties to an exchange can benefit and that, so long as cooperation is strictly voluntary, no exchange will take place unless both parties do benefit.  No external force, no coercion, no violation of freedom is necessary to produce cooperation among individuals all of whom can benefit.

And from  Chapter 1:

The key insight of Adam Smith’s Wealth of Nations is misleadingly simple: if an exchange between two parties is voluntary, it will not take place unless both believe they will benefit from it.  Most economic fallacies derive from the neglect of this simple insight, from the tendency to assume that there is a fixed pie, that one party can gain only at the expense of another.