Zackonomics

The Patently Worthless Patent System

2013-03-07T20:44:00.004-06:00

Anyone who is interested in American innovation should read The Case Against Patents by Michael Boldrin and David Levine in the latest JEP. This article resonates with me because I have had my doubts about the patent system for some time. I would like to hear a strong case from anyone who believes that a patent should last for twenty years, which is the current U.S. law. I fully grasp the theory that patents give firms an incentive to innovate by allowing them to capture profits related to their innovations, I'm just in the camp that believes competition is a more effective mechanism at achieving innovation than granting 20 year monopolies will ever be.

This is something that Congress needs to take a serious look at.

Check out my "Prosperity Watch" Post

2012-06-28T15:00:00.000-05:00

This summer I am working for the North Carolina Justice Center, an non-profit group that advocates for low-income and moderate income working families in the state. I am working for their in-house research group called The Budget and Tax Center (woot woot!) that publishes reports and briefs on state fiscal issues such as the budget, the personal income tax, the EITC, and many other topics related to state fiscal policy. We are essentially the data and Excel junkies of the office that love a good chart or graph.

I wrote a short post on the status of the jobs recovery in NC in a section of the Justice Center's website called "Prosperity Watch," so please check it out. It is Issue 14, No. 4 at the very top.

Free JEP Full Text Issue for Kindle

2012-04-03T20:32:00.000-05:00

The American Economic Institute has a free download of the Journal of Economic Perspectives Winter 2012 issue. There are multiple formats including the Kindle format and a pdf version. It's not clear whether this is a promotional, one-time thing or if they will be doing this for subsequent issues.

Some history of my alma mater

2012-03-29T14:51:00.000-05:00

This video explains the architectural history of Boston University. If you have ever been on campus, this is fascinating.

Watch this video on YouTube
For more, check out the article and interactive pictures.

Polarized

2012-03-07T10:24:00.001-06:00

I don't believe if I have ever seen Amazon book reviews that are this polarized!

Amazon.com reviews

The e-book The Rent is Too Damn High by blogger Matt Yglesias is currently selling for less than five bucks on Amazon. My goal is to read it this weekend and see where I fall in the distribution, although it's likely in one tail or the other.

Quote of the Day

2012-02-28T12:03:00.003-06:00

From a Bill James piece on Grantland.

The difference between an average team and a championship team, in a season, is only about 150 runs. Saying that the fielding difference between two right fielders is 25 runs is a little like saying that a 150-pound woman gave birth to a 25-pound baby. I'm not saying it's not possible; it's just hard to believe.

Later this week, I'll be listening to father of sabermetrics speak on a panel about Baseball Analytics at the Sloan Sports Conference. Looking forward to more analogies like this one.

Weblining and Online Privacy

2012-02-06T10:00:00.000-06:00

Via the NY Times:

In the 1970s, a professor of communication studies at Northwestern University named John McKnight popularized the term “redlining” to describe the failure of banks, insurers and other institutions to offer their services to inner city neighborhoods. The term came from the practice of bank officials who drew a red line on a map to indicate where they wouldn’t invest. But use of the term expanded to cover a wide array of racially discriminatory practices, such as not offering home loans to African-Americans, even those who were wealthy or middle class.

Now the map used in redlining is not a geographic map, but the map of your travels across the Web. The term Weblining describes the practice of denying people opportunities based on their digital selves. You might be refused health insurance based on a Google search you did about a medical condition. You might be shown a credit card with a lower credit limit, not because of your credit history, but because of your race, sex or ZIP code or the types of Web sites you visit.

More social surplus will inevitably be captured by producers if this trend continues (assuming the information allows them to more appropriately price their products and potentially engage in price discrimination). Is that a bad thing for society? Many consumers will certainly lose out, but what about society as a whole?

For a more upbeat perspective about online data issues, read this Nick Schulz piece about Facebook's decision to go public and how it could actually be a good thing for its users.

Political Faux Pas

2012-02-05T17:00:00.000-06:00

Mitt Romney's comments about the very poor have gotten a lot of attention over the last week. One of my professors, who blogs over at Applied Rationality, wrote this in response to Romney's comments.

With respect to the Governor's 90-95 percent figure, he might be surprised (if he cared) to discover that 46.2 million Americans, 15.1 percent of our population, were officially poor in 2010. One third of Americans--more than 100 million people--lived in households with incomes below 200 percent of the poverty line and were considered poor or near poor. 6.7 percent of American were in deep poverty, meaning that they were living in households with incomes that were less than half of the poverty threshold. Those are sizable groups that Governor Romney is tagging as un-American and unworthy of his concern.

Well said.

Internet Freedom and Blackout Wednesday

2012-01-18T09:26:00.001-06:00

This via Wikipedia today:

SOPA and PIPA would put the burden on website owners to police user-contributed material and call for the unnecessary blocking of entire sites. Small sites won't have sufficient resources to defend themselves. Big media companies may seek to cut off funding sources for their foreign competitors, even if copyright isn't being infringed. Foreign sites will be blacklisted, which means they won't show up in major search engines. SOPA and PIPA would build a framework for future restrictions and suppression.

In a world in which politicians regulate the Internet based on the influence of big money, Wikipedia — and sites like it — cannot survive.

Congress says it's trying to protect the rights of copyright owners, but the "cure" that SOPA and PIPA represent is worse than the disease. SOPA and PIPA are not the answer: they would fatally damage the free and open Internet.

As noted above, SOPA and PIPA would impose large cost on existing firms that could some companies out of the market. In addition, these laws could act as a barrier to entry for new firms in the user-content realm. Is this a good or bad thing? It comes down to one's beliefs on the following question? Does the freedom currently enjoyed on the internet in the United States have a net positive or negative externality for society?

The Market for Twitter Followers

2012-01-03T16:17:00.000-06:00

A man is being sued for keeping Twitter followers that he attracted while working for a US mobile news website.

How much are these online followers worth?

The company is now seeking damages of $2.50 (£1.60) per user, per month - a total of $370,000.

The original article is here. Although $2.50 per user likely overstates the value of the users to the company, the claimed value is nonetheless substantial. It would be more informative to know how much the company would be willing to pay the former employee for the Twitter followers if their lawsuit were to fail... $2.50 per user seems high.

This site actually claims to sell Twitter followers (for much less per user), although it's not clear how the transaction works, or if it is a complete scam or not.

Death to Pennies Video

2011-12-04T17:59:00.001-06:00

This video has been posted on several other economics blogs, but in case you missed it...

For more creative videos, check out Grey's Blog.

Unemployment Paranoia: Job Market Report

2011-12-02T09:19:00.000-06:00

When I was a senior at BU preparing to graduate in 2009 (arguably one of the worst years to graduate from college in the last few decades), for some strange reason I was not very worried about getting a job, at least that's how I remember it. I was either too optimistic, too confident, or I just didn't pay much attention to the doomsday headlines at the time.

Now that I am a few years older (and presumably wiser?), the job market is actually starting to worry me some. With student loan interest from undergrad accumulating on me while I am in graduate, I can hear the clock ticking on me.

I've heard a variety of things about current job market conditions, but it seems to me the underlying feeling that most people have is that the job market is tougher than ever and options are slimmer than ever. People are taking second tier or part-time jobs until better positions open up elsewhere. Throngs of recent college grads are moving in with their parents. Here are some more doom and gloom unemployment stories if you really want to get depressed.

Is my new-found paranoia about unemployment rational? Let's take a look at the data. The graph below, and several others I have posted in the past (here and here), are quite worrisome.

Although the outlook is pretty bad for a lot of people right now, there are small signs of life in the labor market. The unemployment rate has been slowly ticking down since early the late 2009 / early 2010.

Job quits are also continuing to rise. Yes, more people quitting their jobs is actually a good thing. Rising job quits are typically associated with recoveries. People leaving a job may have done so because they feel confident about their other job options. This can be thought of as a signal that people are expecting more hiring in the labor market. Obviously high turnover can be bad for a particular company or organization, but in an economy, some amount of turnover is necessary so that labor markets can effectively match people with jobs that best use their skills.

The best news of all, it is well established that, on average, people with a college education or higher fare better in the labor market than those with less education. Although unemployment rates are up across the board, the unemployment rate for people with a bachelor's degree and higher is about 4% compared to 14% for people without a high school diploma. This is a always reassuring, even if the relationship isn't completely causal.

*2011 unemployment rate through November 10th, 2011

For more positive news about the most recent jobs numbers, I just found this jobs report from CNN. Things are looking up.

Cyber Espionage

2011-12-01T11:30:00.000-06:00

Cyber security precautions for a senior fellow at the Brookings Institution on his trips to China:

"I first of all get a loaner laptop. And the USB that I bring, I clean digitally before I bring it, so it's totally blank," Lieberthal says.

Lieberthal then disconnects the Wi-Fi and Bluetooth functions, sets email filters and a virtual private network, or VPN. That's all before the trip. While in China, he never lets his Blackberry leave his side, never uses a wireless Internet connection while he has his USB drive plugged in, and he also physically hides his fingers when typing passwords.

When he gets home, everything gets digitally wiped and cleaned.

Why take all this precaution? Espionage. More specifically, cyber-espionage.

At first I thought this was overkill, until I looked up Lieberthal, who is an expert on US-China foreign policy. Interesting story throughout. Government and private sector snooping is probably more pervasive than most of us realize.

Charter School Growth

2011-11-30T09:11:00.000-06:00

Yesterday, I wrote about some key questions facing the charter school movement. I starting thinking about how important these questions are in terms of the structure of our public education system. Here is what I dug up.

Data for 2009-2010 and 2010-2011 were unavailable. The percentage of total schools that are classified as charter schools is increasing by about .29% per year. This means that in 2011-2012, charters are projected to be about 5.63% of all operational schools (assuming a linear trend). This is a relatively small proportion of the total, but certainly more than just a drop in the bucket. And this proportion is growing larger each year.

In fact, charter schools have more than doubled since 2000, whereas the total number of operational schools has grown by about 10% over the same time frame. This impressive growth shows that charter schools have gained traction. Serious work needs to be done to analyze the charter model and how it can successfully be scaled up.

Data sources:
*Source: Table 100. Number and enrollment of public elementary and secondary schools, by school type, level, and charter and magnet status: Selected years, 1990-91 through 2008-09
http://nces.ed.gov/programs/digest/d10/tables/dt10_100.asp

**Source: NCES Common Core of Data (CCD), "Public Elementary/Secondary School Universe Survey"
http://nces.ed.gov/ccd/bat/

Questions about Charter Schools

2011-11-29T07:00:00.000-06:00

A teacher friend recently sent me an Economist piece from 2009 about charter schools. Several extremely successful charters such as KIPP and Uncommon Schools have received a lot of press. However, the jury is still out on charter schools as a whole as much of the research is mixed about their overall impact. Below are two particularly relevant questions about charter schools that I believe are still unanswered today.

If charter schools are teaching a narrow curriculum and focusing on test preparation, that should become clear when data are gathered on high-school completion rates and college destinations. If they are excluding lots of pupils, that will be obvious too. And if the state education department co-operates by giving researchers access to data on its own pupils, it will be possible to tell whether charter schools are leaching talent from state schools—or whether the challenge they pose to incumbents improves performance across the board.

[...] The final charge against schools such as those run by KIPP is that their longer hours and the demands those place on teachers make them impossible to sustain, let alone replicate.

I am not proposing that I know the answers to these questions. I am simply recognizing that the area needs more research along with more time to follow the outcomes of the growing cohorts of "charter students".

2 Free MP3s from Amazon (Students Only)

2011-11-27T18:40:00.001-06:00

Amazon is currently offering 2 free MP3 downloads for students. Worth checking out as they have a large selection second only to iTunes. Also worth checking out is this comparison of Google Music, iTunes, and Amazon Cloud player. The legal online music space is finally getting crowded. Will iTunes' prices eventually fall with the increased competition or are there substantial switching costs involved?

Tennessee Teachers Get to Play the Odds in the Evaluation Game

2011-11-16T07:00:00.000-06:00

I will preface this post for anyone that is not aware. I taught high school math in Nashville, Tennessee for the last two years in the public school system.

Tennessee is implementing a new teacher evaluation system this year. A NY Times article titled In Tennessee, Following the Rules for Evaluations Off a Cliff discusses the shortfalls of the new teacher evaluation system. I am aware of the challenge of measuring student achievement in classes like art, band, dance, and other subjects that don't have state tests, but this part surprised me:

For 15 percent of their testing evaluation, teachers without [test] scores are permitted to choose which subject test they want to be judged on. Few pick something related to their expertise; instead, they try to anticipate the subject that their school is likely to score well on in the state exams next spring.

And more...

It’s a bit like Vegas, and if you pick the wrong academic subject, you lose and get a bad evaluation. While this may have nothing to do with academic performance, it does measure a teacher’s ability to play the odds.

Although a learning curve is to be expected for states implementing new evaluation systems, allowing teachers of non-tested subjects choose which subject test they will be judged on is just a horrible idea. This blatantly bad policy needs to be scrapped, and the state department needs to go back to the drawing board. Why evaluate teachers on how their students do in ANOTHER subject? They have less incentive to teach THEIR subject well.

Sidenote: I am glad I'm not teaching right now in TN.

HT M.S.

Where did all the jobs go...and when are they coming back?

2011-11-16T01:11:00.001-06:00

More evidence that the most recent recession/recovery is a of a different nature than most. This graph shows the percent decline in employment levels over time for each recession since 1948. Not only has the 2008 recession had the greatest percentage decline, but it also appears that we will not return to the prerecession peak for some time. Notice the shape of the 2001 and 2008 trends vs the rest of the recessions shown. 2001 was not nearly as deep as some of the others, but it took a lot of time to get back to the previous peak. It looks like the Great Recession got the worst of both worlds.

Here is the original graph from McKinsey. They suggest an alarming trend, but I am waiting to see what happens in the next recession (although I'm hoping that isn't for at least another 10 years. If it is also followed by a jobless recovery, then I'll agree we are in serious trouble.

See my previous posts about the jobless recovery here and here. I'm not actively in the job market right now, but is anyone seeing signs of life out there?

HT D.O

Quote of the Day

2011-11-02T18:18:00.000-05:00

"All models are wrong, some are useful."

- George E.P. Box, Industrial Statistician

Forgiving Student Loan Debt - A Good Or Bad Idea?

2011-10-28T10:29:00.001-05:00

This idea has been floating around the internet for a couple of months. My thoughts? One of the worst ideas ever. Although I have a pile of student loans myself, and I would benefit greatly from a policy like this, I can see how inane this idea actually is. Here is Justin Wolfers on why this idea sucks.

Addendum: I found this piece from the Economist discussing student loan forgiveness.

Many of the anti-Wall Street protesters push the idea of blanket debt forgiveness as a solution. But that is the wrong answer. Higher education is not a guarantee of employment, but it improves the odds immensely. Unemployment rates among university graduates stood at 4.4% on average across OECD countries in 2009. People who did not complete secondary school faced unemployment rates of 11.5%. Much of the debt that students are taking on is provided or guaranteed by the government. Imposing write-offs on all taxpayers to benefit those with the best job prospects is unfair; and ripping up contracts between borrowers and private lenders is usually a bad idea.

I could not agree more. The article goes on to discuss why student loan laws need to be changed in order to ease the burden of student loans in times of economic crisis.

It's All Relative - The 2009 Recovery

2011-10-26T07:00:00.000-05:00

Here is an informative graphic from the WSJ comparing the recent recovery to all other recoveries since WWII. (Click the picture to enlarge.)

There are several striking things about the recovery that started in June 2009. It is a jobless recovery, bank lending is abnormally low, home prices have tanked (and are continuing to decline on average), and disposable personal income is recovering more slowly than in all previous post-WWII recoveries. I know the graphic is from several months ago, but I believe that most of these general trends have not changed much since then.

HT Dr. Snowden for sharing these graphs to motivate discussion of business cycle theory.

College Football Predictions

2011-10-25T21:09:00.000-05:00

The Harvard College Sports Analysis Collective (HSAC) released predictions on Sunday for what they thought the A P Poll would look like when released on Monday morning. And their prediction model did fairly well:

Our predictions did well, accurately predicting the exact ranking of 11 teams. That is not counting minor mis-orderings, like the Wisconsin-Kansas State-Oklahoma triad. We struggled a bit at the bottom of the poll, as we suspected.

Finally, the correlation between the predicted points for each team and the actual points was an amazing 0.985.

These are pretty impressive results given that the AP Poll is based on somewhat subjective human voting behavior. Since this is just one random week taken from the "population," I would be even more interested to see how well HSAC's predictions hold up over an entire season. I've commented on their post with this question, and am currently waiting for a response.

My intuition is that their predictions would be less accurate the first half of the season as the best teams start to have not yet proven themselves in voters' minds (voters being sportswriters and coaches). Toward the end of the season, I would guess that these predictions would have greater precision as teams have largely sorted themselves by that point and voters have more data (wins, loses, points per game, opponent points per game, etc.) to base their rankings on. This is simply a hypothesis, but worth looking into.

HT John M. for sharing this post

MIT Sloan Sports Analytics Conference

2011-10-21T10:17:00.000-05:00

Source: http://www.sloansportsconference.com

I just bought my ticket to the MIT Sloan Sports Analytics Conference in Boston on March 2-3. Student tickets are $150 right now for a limited time period, and then they will go up to $175 after that. Non-student tickets will put you back $350 right now. If you can't make it, they also have some great content online from past years.

Once again, they have an all-star lineup of guest speakers including Bill Simmons (The Sports Guy), Eric Mangini, Jeff Van Gundy, Mark Cuban, Michael Wilbon, and many others.

My goals for the conference include learning more about sports analytics, finding out what career opportunities exist for economists who want to work in sports, and networking with people in the business and with other students like myself. I also hope to make some time to return to my stomping grounds at Boston University. If there is enough time after all of that, I'll squeeze in a blog post or two with updates and reflections.

This year should be especially interesting with the NBA season currently at risk and lots of discussion of the NCAA.

Update: There is a tentative NCAA panel that the SSAC is working on putting together.

Second Update: The Father of "Sabermetrics," Bill James, will be speaking.

The State of India's Educational Attainment

2011-10-13T12:00:00.000-05:00

The excerpts below are from a paper by economists Barry Bosworth and Susan Collins when they were both research fellows at the Brookings Institution a few years ago (Bosworth is still there).

[...] 98 percent of China’s primary school enrollees reach the fifth grade, compared to 60 percent for India. Despite an external reputation for having a large pool of highly educated persons, India faces serious deficiencies in the education of the bulk of its youth population (p. 63).

Before reading this article, my perceptions of India matched the "external reputation" described above. However, the data do not lie. The following table from the paper (p.52) compares India to their "peer group."

India clearly started the race a few strides back in 1960, and they still have a lot of ground to make up moving forward. While average years of schooling increased, and the share of their population without schooling decreased significantly, India still had almost 3 times as much of their population with no schooling relative to China. The authors also cite a literacy rate of just 76% among youth aged 15-24 in India compared to a 99% literacy rate for China (p.52).

Taking the state of India's education as given, the authors suggest the following.

Ultimately, India will need to redress its inadequate infrastructure and to broaden its trade beyond the current emphasis on services. Only an expansion of goods production and trade can provide employment opportunities for its current pool of underemployed and undereducated workers (p. 64).

The moral of the story? India needs to utilize it's workforce better in the short to medium run given where they currently stand. They can do this by ramping up industrial production and trade, a traditional source of growth for developing nations.

Over the long run, education is key. In the race to educate, India still has some catching up to do. If they can accelerate the rate of progress they have made in education over the last 40 years, then economic growth will be sustainable for years to come.

Koomey's Law vs. Moore's Law

2011-10-12T09:30:00.000-05:00

For some time I've been fascinated by laws that scientists, economists, and other social scientists come up with that accurately describe relationships that occur in the world around us. Moore's law is one of those laws that has had exciting implications in the field of technology. Most people have heard of Moore's Law, but in case you haven't, here's what Investopedia has to say about it:

An observation made by Intel co-founder Gordon Moore in 1965. He noticed that the number of transistors per square inch on integrated circuits had doubled every year since their invention. Moore’s law predicts that this trend will continue into the foreseeable future.

Although the pace has slowed, the number of transistors per square inch has since doubled approximately every 18 months. This is used as the current definition of Moore's law.

While Moore's law has been amazingly accurate in describing the doubling of computing power over time (and has even become part of the planning process for technology companies), it may start fading away as physical limitations start to come into play. Opinions are mixed.

A new finding by Stanford professor Jonathan Koomey could become the new Moore's Law. The gist of the Koomey's law is that the energy efficiency of computers doubles every 1.5 years. This is an important finding! The chart below illustrates how historically strong the relationship is.

Source: The Economist Daily Chart

Ceteris paribus, Koomey's law means that that our laptops and devices will keep getting lighter and lighter as battery sizes will shrink... but will all else be equal? Probably not. Programs and data types are constantly requiring greater amounts of computing power, and thus more energy. Thus, batteries will likely shrink, but at a much slower rate than predicted by Koomey's law because of the demand for increases in computing power. Still exciting stuff though!

*Note, I'm aware that Koomey's finding is not officially a law yet. But, it's much easier to call it Koomey's law than Koomey's finding. When does a finding actually become a "law" anyway?

**Eric Brynjolfsson, an MIT professor who blogs over at Economics of Information has a similar post on the topic.