post hoc, ergo time to talk

Freedom isn't free

2011-12-23T16:47:00.000-05:00

My favorite caricature of a conservative columnist from the Cleveland Plain Dealer is at it again. Yesterday, Kevin O'Brien published a column complaining about the government's micromanagement of the lives of its citizens. On the surface, it was actually one of his less objectionable efforts (which isn't to say that it's good, just that it's less bad than usual).

It's important, however, not to let O'Brien's quasi-reasonable points obscure his troubling theme.

O'Brien's true complaint isn't about attempts to ban texting while driving or the relocation of fat kids. He thinks actions like these are taking away his "liberty," but his real problem is that he doesn't think people should have to pay the full costs associated with the choices they make.

O'Brien sees the situation like this: Sometimes, people do things that impose costs on other people without their consent. In some cases, these actions impose costs on the government. In response, the government takes actions or makes laws to address the costs it bears. These government actions make people less free.

His plan to restore this lost liberty goes something like this:

Eliminate government.
???
Utopia!

The problem here should be pretty obvious. Eliminating the government doesn't do anything to fix the behavior of the people whose actions were imposing costs on it. In fact, doing so would probably exacerbate the situation. But let's suppose there were no government. Who bears those costs?

In the absence of government, the burden shifts from those taking the actions that impose the costs to those who have the misfortune of being in their way. O'Brien seems to think that he is entitled not only to live free but also to live for free. Unfortunately, this sentiment seems to be widespread, especially among conservatives.

It's understandable not to want to pay for costly actions. Who doesn't love free stuff? I don't understand, however, how a situation like that get's confused with liberty. What about the people on the receiving end of the costs? How free are they? The people who complain about lost liberty are the same ones who are supposedly all for personal responsibility. Isn't paying the full costs of your actions the responsible thing to do?

Introductory economics classes must cover broader base

2011-12-21T14:18:00.001-05:00

Does the content of an Introduction to Microeconomics class matter more for an economics major or and English major? The economics major will probably take more away from the class and find its lessons more applicable to the remainder of his or her academic career, but those are answers to different questions.

Last week, the New York Times ran an op-ed by stand-up economist Yoram Bauman. In it, he writes about some of his research on the effects of education in economics on contributions to public goods. Bauman and his co-author gave students at the University of Washington opportunities to contribute small amounts of money to two interest groups when they registered for classes, and then they examined the relationship between students' courses of study and the contributions they made.

The study finds that students who were or would go on to become economics majors contributed less to the interest groups. I don't know if this means economists are selfish, and I don't want to ascribe motives to the students who didn't contribute, but it is interesting that the effect the authors find is not related to the number of economics classes students had already taken when the contributions were solicited.

To me, though, the study's more significant finding is that students who did not major in economics saw their contributions decrease with exposure to economics classes. This result suggests that we might want to keep the English majors in mind when designing our introductory economics classes.

Most students who take introductory courses in economics won't major in the subject. Even among majors, very few will pursue academic research. While lower level courses must prepare students who choose to major in economics for the work they will do at the intermediate level, such courses also need to enable non-majors to use economic reasoning outside the classroom. Bauman sums up the issue well at the end of his article:

Our research suggests that economics education could do a better job of providing balance. Learning about the shortcomings as well as the successes of free markets is at the heart of any good economics education, and students — especially those who are not destined to major in the field — deserve to hear both sides of the story.

The fact that any person who has ever been stuck in a traffic jam can still think that free markets can solve all of society's problems is an indictment of economics education. Topics like externalities, public goods, market failures, and missing markets should appear on introductory syllabi to an extent commensurate with their importance to modern economics, not just as part of one class. Even informal treatments or lessons by example would be great. Students who need or want the formal treatment will surely receive it later.

Students who don't major in economics still need to know that there is more to the field than weighing private costs and benefits. Some of the most interesting research topics and most difficult policy problems arise from situations in which people behave as though only their private considerations matter. Making casual students and observers more aware of these issues could help solve some of our problems.

Bowl games made me dumber? I'm not convinced (yet)

2011-12-20T14:28:00.000-05:00

I love college football. The tailgating, the bands (and one band in particular), and of course the games themselves are the highlights of my fall Saturdays. I especially enjoy watching Wildcat wins. But was all the winning I was witnessing in college making me dumber?

Three University of Oregon economists put out an NBER working paper (gated paper, popular press mention) earlier this month examining the relationship between success on the gridiron and success in the classroom.

Using nine fall quarters' worth of data straight from the transcripts of non-athlete students at the University of Oregon, they find that more successful football teams decrease the GPAs of male undergrads. They suggest that a 25 percentage point increase in a school's football team's winning percentage (three additional wins) leads to a decrease of about 0.02 in men's GPAs on average. The authors suspect that winning actually affects academic performance for both men and women, but since students are often graded on a curve, the effect only shows up for men. The magnitude of this effect doesn't seem like much at first glance, but it corresponds to about nine percent of the gap the researchers observe between male and female GPAs.

If we take this result seriously, it could be fairly troubling. Since universities are supposed to be for learning, we might be shooting ourselves in the foot by spending so much time and money on college football. To me, a demonstration of negative effects on academic performance would be more convincing evidence of misplaced priorities than the commonplace complaints about coaches' salaries.

The authors believe the effects they find are driven by changes in students' use of time. In response to wins on the football field, students spend their time drinking and partying instead of studying. This sounds like a pretty plausible story, and data from a survey of students enrolled in economics classes conducted by the authors support it.

But does the behavior of students at the University of Oregon tell us anything about the behavior of students at other schools? In other words, does this study have much external validity? The fact that the authors use transcript data rather than relying on grade information elicited on surveys certainly helps their case for internal validity, and the estimation techniques they use seem appropriate for evaluating the effects of winning football games on the academic performance of students at the University of Oregon. It's important to ask, though, how students end up becoming Ducks.

People choose what college or university to attend based on a wide variety of factors. Academics often figure prominently in this decision, but so do recreational opportunities. Football success and chances to party could plausibly help determine people's college choices. Maybe some students choose the University of Oregon because it's a good place to party after (or before, or during) football games.

The econometric issue this possibility presents is selection bias. If, for some unobserved reason, Oregon students are more willing to adjust their study habits in response to the performance of their football team than college students are in general, the estimates in this study will overstate the true average effect of winning football games on students' academic performance.

Econometrically, selection bias is bad news for a study. In this case, similar studies conducted at other schools could help resolve the question about this study's external validity. College football fans, though, can take comfort in the absence of conclusive evidence that their devotion to their teams cost their GPAs. This study also implies that there might be a way to avoid any negative academic effects of winning: party, win or lose.

Somebody is making robocalls on behalf of Hillary Clinton's nonexistent 2012 presidential campaign

2011-12-19T15:10:00.000-05:00

And whoever it is seems to think she has magic powers.

A financial transactions tax would be a good first goal for Occupy Wall Street

2011-10-18T22:45:00.000-04:00

Over the last couple weeks, a few different people have asked me what I think about the Occupy Wall Street protests. I hadn't followed them too closely, and these questions kind of got me thinking that I should have some actual thoughts about what's going on.

I think Nate Silver summed up the sentiments of OWS protestors pretty well in a tweet today:

I (and probably many, many other people) agree with those sentiments. I think the fact that they have populist appeal is what gives OWS its potential, to the extent that it has some. (Before today, I didn't really think it had much, but now that I see that Eric Cantor is making a speech about income disparity, I feel like maybe it does. Although I'm still a little suspicious that Cantor is just going to come out in favor of it.)

The primary weakness of OWS, however, is that while its basic position is popular, its next logical step seems like it should be calling for some positive action to address its concerns, but its message doesn't come with any policy proposals attached. While it could be the case that this lack of specifics is contributing to its popularity, it seems like it will also prevent the movement from accomplishing much.

As an aside, I think these are two key differences between OWS and the Tea Party. The Tea Party's goals have always been negative - to remove, eliminate, destroy, etc. things it sees as limitations on liberty. It seems like any change OWS would want would have to be positive - enacting, increasing, constructing, enabling, building, etc. something to address its issues.

Also, although both OWS and the Tea Party seem to have been expressions of dissatisfaction with the status quo, the Tea Party had at least a basic understanding of the types of actions it wanted to take. There are certainly different factions within the Tea Party with different emphases, but overall, the Tea Party doesn't like the government, especially the federal government. When they see the government doing something, they want to stop it, almost regardless of what that something is. While that isn't a feasible or even well-thought-out plan, at least it's concisely effable, and has been since early in the Tea Party movement. It's given members time to come up with more specific (but equally ill-conceived) proposals.

Tea Party comparisons aside, though, if OWS is going to accomplish anything, it's going to have to pick something to accomplish. One policy I think would make sense for them to pursue is imposing a tax on financial transactions.

About 56% of all stock market trades are conducted by computers making decision based on algorithms. People and firms with access to large amounts of money put their computers to work looking for arbitrage opportunities, trading huge quantities of stock at high speeds trying to pull money out of thin air by taking advantage of minuscule price fluctuations that often last for only seconds. Profit margins are incredibly thin, but the trade volumes are so high that the practice generated about $2 billion in profits in 2010.

High speed trading is not illegal, but it is a perfect example of the type of situation OWS protestors object to. Wealthy, big-time players are able to take advantage of opportunities not available to ordinary investors to enrich themselves even further, while people who buy stock to save for retirement or a child or grandchild's education are left to deal with the increased volatility created by so much money moving around so quickly. There's a fundamental inequality in the practice that favors the rich at the expense of everyone else. People with access have taken the stock market, which is supposed to be a way to efficiently allocate capital to enterprises in need of investors, and turned it into their own personal money tree.

The fact that profit margins are slim, however, makes this inequality an easy one to address. Imposing a tax as small as one cent per share traded could eliminate a large portion of the opportunities to profit from high speed trading. A tax of five or ten cents per share traded would almost certainly end the practice in its current form, and the vast majority of investors wouldn't even notice it. Most people who own stock don't trade millions of shares and don't trade thousands of times per day. If I'm buying stocks or mutual funds to save for my retirement, the few dollars I would pay in taxes on my financial transactions aren't going to affect by investment behavior or be the difference between retiring the way I want to and settling for something less. The stock market would become more stable and individual investors would be placed on slightly more equal footing with institutions.

If OWS is going to accomplish anything, it's going to need concrete goals. Advocating for a financial transactions tax fits the OWS narrative, is sound policy, and would begin to address the inequalities at the heart of the protests. It can't be the only thing OWS stands for, but it would be a good place to start.

Side note: I've actually written about financial transactions taxes before, and Dallas Mavericks owner Mark Cuban brought the idea up in relation to OWS on his blog last week. This is the second good idea I've heard from Mark Cuban lately. As much as I appreciate it, maybe beating LeBron James at basketball is the wrong business for him.

Lots of graphs (and not that much econo-speak) about how we should try to fix the economy

2011-08-12T23:34:00.000-04:00

Last Friday night, Standard & Poor's lowered America's credit rating from AAA to AA+. (Right after they, apparently, took too many shots. Looks like they think we maxed our credit cards.) The move caused a lot of commotion, and we've seen even more volatility than usual in the stock market this week.

Despite what one might see as an ominous sign, investors don't seem to be doubting the full faith and credit of the United States any more than they did two weeks ago. As stocks plummeted, they moved their money to freshly downgraded United States Treasury bonds, which are still seen as one of the safest investments in the world. The prices of credit default swaps on US sovereign debt, which function as insurance policies on our bonds, haven't changed much this week (they're actually down, slightly), indicating that investors don't think it has become any more likely that the US will default.

Although S&P's judgment doesn't seem to have cripple our economy, it is undoubtedly the case that the economy is not in great shape. Unemployment is still high, and some think we might soon be facing another, well, let's call it a "bagel." The question now is, "What's a country to do?" What steps should we take to improve the economy?

One major reason we care about the performance of the economy as a whole is because of what that performance means for the people who make up the economy. In general, people are better off when the economy is doing well than they are when it is doing poorly.

Unfortunately, we can't measure people's well being, but one easy way to describe it quantitatively is to look at income. Lots of empirical studies take this approach, even though misreporting is common, because there are lots of sources of income data. Also, generally speaking, the more money a person has, the more choices he has and the better off he is. I'm sure there are other reasons, too.

We might also use the amount of goods and services and individual consumes (in dollar terms) as an indicator of well-being. Consumption might even be a better indicator than income, especially among the poor, because it better reflects what economists call "permanent income," as well as assistance people might receive from government programs, family members, or other sources.

Income and consumption, however, are difficult to use as guideposts for policy making, because high quality data are gathered only once a year. Politicians, media, and other observers want to see results, so many turn to more readily available indicators, such as the performance of the stock market.

At first glance, it looks like the stock market does a decent job of reflecting individual well being. Let's take the Dow Jones Industrial Average (DJIA) as representative of the performance of the stock market and consumption as indicative of an individual's true well being. Here come the graphs.

Even though the DJIA is just a weighted average stock prices, it looks like it's followed individual consumption fairly closely over time. This consumption plot doesn't tell the whole story.

As it turns out, not only do the rich get richer, as the saying goes, but they also consume more over time. The poor, on the other hand, don't that much. The graph above depicts growth in consumption over time for the 1st income quintile (i.e. the poor, the bottom 20% of the income distribution) and the 5th quintile (i.e. the rich, the top 20% of the income distribution). The squiggly lines are kind of hard to look at, but you can see by comparing the green and yellow lines (and looking at the scales on the left and right) that consumption grows much faster for those at the top of the income distribution than it does for those at the bottom.

Given this, the next two graphs shouldn't be that surprising.

When consumption is broken down by income quintile, it's pretty clear that the performance of the DJIA has a much stronger relationship to the consumption of the rich than it does to that of the poor.

This should give pause to anyone considering using stock market performance as an indicator of general well being. While you may get a decent picture of life at the top of the income distribution, you'll have pretty much no idea how low-income people are doing.

But does this mean that the stock market is useless as an indicator of well being? What if, as economists often do, we look at growth rates of consumption and stock prices instead of levels? Policy interventions, after all, are generally designed to cause some change, and growth rates measure changes.

As you can see from looking at this graph, this question is difficult to answer graphically. Numbers provide a clearer picture.

Annual Growth Rate Correlations

	DJIA
Avg. Consumption	-0.0241
1st Quintile	-0.1022
2nd Quintile	0.0246
3rd Quintile	0.0844
4th Quintile	0.1256
5th Quintile	0.3897

The numbers show, much more clearly than the graph does, that growth in stock prices is really only correlated with growth in consumption for the richest 20% of Americans. As an overall indicator of consumption growth, however, it does pretty poorly.

Fortunately, the stock market isn't the only indicator we have. Consider the unemployment rate. It gets a lot of attention, too. In terms of indicating well being, though, it might actually deserve it.

Annual Growth Rate Correlations

	Unemployment Rate
Avg. Consumption	-0.3572
1st Quintile	-0.046
2nd Quintile	-0.3137
3rd Quintile	-0.3822
4th Quintile	-0.3176
5th Quintile	-0.3153

Although the unemployment rate doesn't track 1st quintile consumption well either, it does a lot better for the average consumption and for each of the other four quintiles individually. It does so much better that you can even kind of see it in the graph below.

When the unemployment rate is rising, consumption is generally declining. The relationship isn't exact, but it is much stronger than the one between the DJIA and consumption.

So, what does this all mean? What's a country to do? Well, we've considered two popular indicators of the overall health of the economy, the DJIA and the unemployment rate. We've seen that the unemployment rate has a stronger relationship with individual consumption than the performance of the DJIA does. If we take consumption as an indicator of individual well being, this has some policy implications. Assuming a policymaker's goal is to make people better off, he might be wise to direct his efforts toward lowering the unemployment rate rather than helping stock prices go up.

To put it simply, we need to create jobs. Let's have the government hire people to work on infrastructure projects. Let's give businesses incentives to hire people. If anyone else has ideas for putting people to work, let's hear them. Mark Cuban has an idea, and it sounds pretty interesting. The faster we create jobs, the faster the economy will recover. Let's get started.

Signing Bonuses: Path to a speedier recovery?

2011-06-13T22:34:00.002-04:00

A couple days ago, former George W. Bush economic advisor (and author of everyone's favorite supplemental Intro to Micro textbook, "New Ideas from Dead Economists") Todd Buchholz wrote an Op-Ed in the Washington Post suggesting significant reform to our unemployment insurance (UI) system aimed at reducing long-term unemployment. It's an interesting idea, despite having been suggested by a Republican. Check it out, and then come back.

First, some background. Provided certain requirements are met, unemployment insurance replaces some portion of a laid-off worker's wages (up to some weekly maximum benefit amount), typically for up to 26 weeks following the loss of his or her job. In times of particularly severe economic distress, this 26 week limit is often extended. The current limit is 99 weeks.

Buchholz seems to think 99 weeks is too many, and he suggests terminating benefits after a much shorter time. As workers approach the end of their eligibility, however, he would give them an extra incentive to accept employment.

Under Buchholz's plan, when an unemployed worker reached the end of his 26th week of eligibility for benefits, he would become eligible for a "signing bonus" equal to three months worth of UI benefits, which he would receive if he accepted a job. After 39 weeks of UI eligibility had passed, benefits would expire, but workers would remain eligible for a bonus equal to two months worth of benefits until 52 weeks had passed since the loss of the previous job. These bonuses would be paid out over time and subject to heavy taxation if recipients didn't keep the jobs that got them the bonuses.

Buchholz would only implement his plan until the national unemployment rate fell below 7.5% (from its current level of about 9.1%). Buchholz, however, is more specifically interested in reducing long-term unemployment, that is, instances of workers remaining unemployed for more than 26 weeks. He suggests that getting people out of long-term unemployment will put us on the road to a stronger recovery.

I think it's interesting to consider Buchholz's proposal within the context of a model of the labor market that includes search frictions, the topic that was the focus of research that won the 2010 Nobel Prize in Economics. Search frictions are basically structural things that prevent workers from encountering firms that want to hire them. They're interesting to consider, in part, because Buchholz quickly dismisses their significance. He acknowledges their existence, but doesn't seem to think search frictions are a big deal.

As it turns out, I think I know why he dismisses search frictions. It's because it is only in their absence that Buchholz's plan would have the desired effect.

First consider a world without search frictions. Many models of the labor market employ something called the reservation wage to determine when a worker accepts a job. Each worker has some minimum wage, his reservation wage, which he will accept if it is offered. The reservation wage depends on the resources available to the worker while unemployed, including any UI benefits and the value the worker assigns to being available to receive wage offers in the future.

Buchholz's plan basically supplements a wage offer from a firm with a transfer from the government. The cost to the firm of making the wage offer is unchanged, but the benefit to the worker of accepting it is increased during the period in which the "signing bonus" is offered. It is possible that this supplement could move a wage offer from just below a worker's reservation wage to just above it, causing the worker to accept the offer. Assuming workers receive wage offers from firms (with certainty), this should increase the number of people exiting unemployment after 27-52 weeks, but especially after 27-39 weeks, when the bonus is greatest.

(Note, however, that the availability of the "signing bonus" would increase workers' reservation wages as they approach 26 weeks of unemployment by increasing the value of being able to receive wage offers in the future. A worker who could accept a job in the 26th week and not receive the bonus or wait until the 27th week and receive the bonus would probably wait the extra week. So, on the margin, a plan that has the goal of reducing the number of unemployment spells of longer than 26 weeks would probably actually lead to more of them. It would, however, decrease the number of people remaining unemployed who had been so for more than 26 weeks.)

The key assumption here is that workers receive wage offers from firms. The signing bonus increases the value of wage offers received after 26 weeks of unemployment, but if there aren't any wage offers being received, the bonus has no effect. If search frictions are present, that is, if workers don't receive (as many) wage offers, the bonus would induce far fewer people to exit unemployment. Buchholz finds it implausible that search frictions could cost six millions Americans their jobs and be the driving force behind an unemployment rate that has doubled in four years. Given the intervening recession, this is a pretty obvious and silly assertion, but it brings us to another point about search models.

Another feature of some labor market models that include search frictions is that a worker's probability of receiving an offer depends on the number of vacancies posted by firms. Buchholz claims there are currently about three million job openings in America, citing data from the Bureau of Labor Statistics. He seems to think that's a lot. A closer look at the data, however, reveals that three million vacancies is not a lot. From 2005 until about mid-2008, before the recession began, there were generally about four million or more job openings each month. I'm not a mathematician or anything, but that makes the current number of job openings only about three quarters of the number that could have been considered typical before the recession. The fewer jobs there are, the harder it is for people to find them.

To his credit, the plan Buchholz puts forth is a solution to the problem he thinks America faces: people who lost their jobs during the recession are content to sit back and relax, waiting for a great job offer to come along. There are plenty of jobs out there for the taking, but overly generous unemployment benefits have destroyed the incentive to pursue them. The unemployed need a swift kick in the pants (or, short of that, a strong financial incentive) to get them off their butts and back to work.

Unfortunately, I don't think America actually faces the problem Buchholz sees. I don't think there really are plenty of jobs out there, and I think search frictions can and have played a significant role in slowing the return to work of those who lost their jobs during the recession. Under those circumstances, Buchholz's plan would mostly just leave lots of people unemployed and without any income for weeks 40-99.

America's Greatest University?

2011-03-03T20:11:00.000-05:00

This week, a variety of news outlets, running the gamut of respectability, have featured a story about a live sex toy demonstration that took place at Northwestern a couple weeks ago. The demonstration took place during an optional, after-class guest lecture associated with a class on human sexuality taught by J. Michael Bailey, who is no stranger to controversy. Bailey, who did not know beforehand that the demonstration would be part of the lecture, has explained his on-the-spot decision to allow it, citing its connection to topics covered in his course, including topics that had been discussed that day.

Unsurprisingly, Bailey and Northwestern have received a fair amount of criticism for the incident, from anonymous internet commenters and newspaper columnists alike (including some of the latter who, unfortunately, cite the former). To me, these criticisms are as uninteresting as they are predictable. Comments made by Northwestern University president Morton Shapiro, however, caught my attention.

"I have recently learned of the after-class activity associated with Prof. Michael Bailey's Human Sexuality class, and I am troubled and disappointed by what occurred," Shapiro said. "I simply do not believe this was appropriate, necessary, or in keeping with Northwestern University's academic mission."

I can understand Shapiro's point of view, right up until the part about Northwestern's academic mission. At that point I have to ask, what does he think Northwestern's academic mission is? Certainly neither he nor I would claim that the university's overriding objective is to expose students to sexually explicit material. But that's not really what happened. The demonstration followed a psychology class. Psychology is a science, and science, like many other pursuits, isn't always easy or comfortable. Exposure definitely happened here, and many probably consider the content of the demonstration "explicit," but if academics were guided by the judgments of the many, what good would universities be? Where would science be?

One of the most important lessons a person can learn in college is that not everyone is like you. People are different. There is incredible diversity in the world, there are consequences to that diversity, and you need to be able to deal with that. Even if this demonstration had had only a tangential connection to course material (a standard which, according to Bailey's explanation, it seems to have exceeded), it probably would have gotten at that lesson.

I want my alma mater to continue to be a place where students and faculty have opportunities to develop intellectually and culturally as individuals and to pursue their academic interests within the rules and ethics of their disciplines and free from other constraints. The provision of such opportunities should be the academic mission of every university. I though Northwestern spokesman Alan Cubbage's initial statement on the matter was exactly on target:

"Northwestern University faculty members engage in teaching and research on a wide variety of topics, some of them controversial and at the leading edge of their respective disciplines. The university supports the efforts of its faculty to further the advancement of knowledge."

I understand that, as president, Shapiro is responsible for the university's image, and I'm sure he's not loving the press reaction to this story. But in the same week that Brigham Young University stood up for its institutional values by suspending a men's basketball player who violated the its honor code by having sex with his girlfriend, I would have liked to see Shapiro, himself an academic economist, stand up for academic freedom, which should absolutely be an institutional value at one of the world's top research universities.

Note: I took Bailey's class last winter. Good times.

'Cats to give Fitz tenure?

2011-01-13T12:06:00.001-05:00

Teddy Greenstein reported last night that Northwestern is working on a contract extension for head football coach Pat Fitzgerald that it hopes would make him a "Northwestern lifer."

Before I say anything else, let me say that I love this. Fitz is the man, and he is the ideal coach for Northwestern football. I hope he coaches until he's 146. If he dies, which I'm not convinced is even possible, I would give serious consideration to hiring Vladimir-Lenin-style embalmed Fitz. I can't imagine anyone else coaching the 'Cats.

But Greenstein's article made me wonder what exactly Northwestern means by "lifer." Does it intend to offer Fitz a contract that will literally span his entire life/coaching career? Or does it merely want to sign him to a very long contract? Also, what reason does each side have to agree to such a contract?

"Lifetime contracts" are talked about a lot but only rarely agreed to. Google helped me find only a few examples of coaches with such deals, which generally lock the coach in until he turns 65 and include some provision for periodic renewal after that point. Basketball coaches Bob Huggins at West Virginia and Mike Krzyzewski at Duke have lifetime deals. Lou Holtz had one at Notre Dame, and so did Bobby Bowden at Florida State.

All of these men were at least in their 50s when they signed their lifetime contracts, and Bowden was 60. Fitz is 36, so this type of contract would be at least 29 years for him.

But in college sports today, contracts have little relationship to how long a coach stays at a school (that's where buyouts come in), and the number of years remaining on a contract is treated more as a signal to recruits than as the coach's expected tenure at his university. It's rarely a problem for a coach who is doing even a passable job to get a few more years tacked onto his contract (see the other recently reported contract extension received by a Northwestern coach).

So why a lifetime contract for Fitz? Both sides face risks and rewards, but Northwestern's motivation seems pretty clear. Fitz is young, energetic, an outstanding representative for the university, and has the potential to take the football program to heights never before reached. He graduates all his players and never hesitates to highlight their academic accomplishments. He is the perfect coach for Northwestern. But other schools see his potential, too. Over the last two off-seasons, he has drawn overtures from traditionally powerful programs Notre Dame and Michigan. Northwestern wants as strong a hold on Fitz as it can get.

A lifetime offer would be bold and a strong signal of dedication to the coach and the program, something that hasn't always been present at Northwestern. Northwestern might also hope that the job security that accompanies such a long offer would help induce Fitz to agree to a large buyout, which could help deter other schools from pursuing him. One downside to such a deal for the school is the moral hazard effect it could have, that a coach with a lifetime contract could easily become complacent and not perform up to expectations. There doesn't seem to be much reason to worry about this with Fitz, though.

Setting aside his obvious love for and loyalty to his alma mater for a moment, though, it's harder to figure out why Fitz would want to sign such a contract. He really has no need for more job security. Given how well he fits with the school, his might be one of the most secure jobs in America right now. I can't see Northwestern ever firing him. Maybe if he, I don't know, killed someone, they might consider letting him go. The point is, Fitz's job is safe. A lifetime deal might help him recruit, but mostly by demonstrating his commitment to the school, since the school's commitment to him is pretty clear already.

By signing a lifetime contract, Fitz would sacrifice a lot of bargaining power in return for something he basically already has. Even if he doesn't intend to leave Northwestern in the future, that bargaining power could be useful in dealing with future athletic directors or university presidents who might not see things the same way Jim Phillips and Morty Shapiro do. Fitz would seem to be taking the riskier side of the bargain, and I would have a hard time blaming him for seeking something less than a lifetime deal.

But this contract obviously won't be signed in a vacuum, and Fitz's personal ties to the school and the region are important. He seems to very much enjoy coaching at Northwestern, and a lifetime deal would let him keep doing what he loves for basically as long as he wants. I hope the deal works out and I really do end up watching Fitz on the sidelines for the next 29+ years. As great a credit as it was to Fitz that he rejected his previous suiters right off the bat, it would be an even greater credit to him should he forego other opportunities and sign up to be a Wildcat for life.

It's not (entirely) about the money

2010-12-29T00:58:00.000-05:00

This winter, the Boston Red Sox signed Carl Crawford to a seven year, $142 million contract. The Philadelphia Phillies gave Cliff Lee $120 million over five years. Jayson Werth got $126 million and seven years from the Washington Nationals. Good players help win games, and they also command high salaries. Teams that want the best players must pay a lot of money.

But is that the only way to win? Consider two major league baseball teams. Let's call them Team A and Team B. Team A spent nearly $147 million on payroll last year, more than all but two other teams. Team B spent just over $55 million on payroll, more than only three other teams. Which team do you think won more games?

Turns out, Team A is the Chicago Cubs, the most lovable losers in sports, whose 75 wins left them in 5th place in the NL central. Team B is the Texas Rangers, who played in the World Series after winning 90 games, nine more than their closest competitor in the AL West, the largest margin in Major League Baseball last season.

Of course, some team will surprise every year, but others seem to perform pretty consistently in line with the relative quality of player one might expect them to employ based on their payrolls. The Pirates don't spend much, and they don't win much. The Yankees spend more than anyone else and regularly find themselves in postseason play. Apart from teams like the 2010 Rangers, then, one might expect to be able to predict success using payroll.

Using payroll data collected by my favorite current-events picture book, USA Today, and final MLB standings for 1988-2010, I used a couple regression techniques to model wins as a function of spending on payroll. I also allowed for the possibility that a team's performance and payroll from the preceding year might affect its performance in the current year, some easy controls that didn't require finding more data. After messing around a little bit, I had a model in which this year's wins depend on payroll, last year's payroll, last year's wins, and whether the team appeared in the playoffs last year.

If I knew of an easy way to post Stata output, I would just throw some in here, since talking about that kind of stuff is boring and hard to follow. Since I don't, I'll just get to the point. If you actually want to see what I did, let me know and I'll show you.

The model I estimated was informative in both what it did explain and what it did not. First, the analysis indicates that payroll does help explain winning - payroll and wins are indeed positively related. This relationship, however, is not quite as strong as one might expect; ceteris paribus, one more win costs more than $10 million. Also, the preceding year's payroll is negatively related to the current year's wins. While this may initially seem counterintuitive, I take it as an indication that with every spending decision there is a tradeoff. Any money a team choses to spend in a given year will not be available to it in subsequent years. This further limits a team's ability to spend its way to success.

On the other hand, my model does a terrible job predicting "surprise" seasons, that is, teams that do much better or worse in a given season than people generally expect them to do. Pick a team whose performance surprised you, and the predicted number of wins for that team for that season is probably way off.

You might think, then, "Of course the model doesn't too so well in this area, it's barely using any information about the team." That, actually, is the point. The model relies almost exclusively on payroll information. Since it can't really predict success in any useful way, I think it's safe to conclude that there is much more to winning than spending lots of money. You can't just spend big, you have to spend smart.

Note: This might be a little bit "inside baseball" (I've always wanted to describe something that way). The above might sound like an argument agains't implementing a salary cap, but I don't think it is. Sometimes big and smart are the same thing, and the current system precludes most teams from pursuing players it makes a lot of sense for them to pursue. Also, not only can big-market teams outspend their smaller-market competitors for players, but they can also bury their mistakes under bigger and bigger piles of money. If someone the Yankees sign ends up being a bust, they sign someone else. If the Royals make the same mistake, they're screwed. A salary cap would tie success more closely to smart management.

Ohio State suspensions give schools incentive to play dumb

2010-12-23T20:14:00.000-05:00

The NCAA suspended five Ohio State football players today for the first five games of the 2011 season fore receiving improper benefits. The players, including the teams quarterback, leading rusher, and second-leading receiver, sold Big Ten championship rings and other awards they earned as members of the Buckeyes for between $1000 and $2500. All five players remain eligible for the team's appearance in the Sugar Bowl January 4 against Arkansas.

Regardless of whether you think the suspensions are deserved or not, the fact that the players in question will be able to participate in their bowl game highlights the issue of how the NCAA induces its member institutions to abide by its rules.

One of the reasons the NCAA gave for deferring the players' suspensions until next season was that the players in question had not received adequate education regarding the rules governing this type of conduct. If this is sufficient to reduce the severity of players' punishments, why should a school provide adequate rules education?

Given the number and tenor of rules governing the conduct of student-athletes, the gist of which are that student-athletes may not benefit financially from their status as such, it seems like there would be little to no chance that a player wouldn't know that doing something like selling awards earned on the playing field was a dangerous thing to do, even if nobody sat them down and specifically told them so. Schools might then reasonably expect few of their athletes to do violate this rule. They could be more certain that students would not break the rule if they did explicitly tell them about it, but the reward for doing so would be small, since it was probably the case that no one was going to break the rule even without being told not too.

Deferring these suspension makes the reward for educating students about the rules even smaller. Since these players did not know the rules, they have been spared the most severe punishment they could have received, which would have been long suspensions that included the Sugar Bowl, a much more significant game for them as players and for the team and program than the games against minor opponents they may miss early next season. These particular players cited necessity and a desire to help their families to explain their behavior, so it seems like they may well have violated the rule even if they had been fully informed. The implication of the NCAA's reasoning is that the players would have faced more severe punishments had they knowingly violated the rules. Had the university adequately educated its players, then, the players would be worse off, since they would miss the bowl game, and the team/program/school would be worse off, since it would stand little chance of winning the Sugar Bowl without the suspended players.

If schools can lessen the severity of punishments their students receive for violating rules everyone already knows about by not explicitly describing the rules to the students, I would expect rules education to remain inadequate. The NCAA needs to consider the effect its decisions will have on its future ability to enforce its rules. The fairness of those rules is another question entirely.

It's not easy, it's quantitative

2010-11-08T21:21:00.002-05:00

I'm not exactly sure why I'm so fascinated by this, but Sarah Palin was supposed to give a speech about monetary policy today. I say "supposed to" not because I doubt that she did, but because I can't find any news stories about the speech actually occurring, only stories about what she planned to say.

Speaking of what she planned to say, it looks like Palin isn't a huge fan of quantitative easing. This is what initially caught my eye in the headlines, since I'd be surprised if she could spell "quantitative easing," let alone understand both what it is and whether or not she is in favor of it.

I don't just say that I doubt Palin understands quantitative easing because I think she's pretty stupid, although I do, but also because it's pretty complicated.

In simple terms, here's how I understand it: the Federal Reserve (technically the Federal Open Market Committee) typically conducts monetary policy by manipulating interest rates (mainly the federal funds rate, the rate at which banks make overnight loans to each other). It does so by engaging in open market operations, which typically consist of buying or selling bonds issued by the United States government (buying bonds lowers interest rates, selling bonds raises them).

In extreme circumstances (like the ones we've faced for the last couple years), the federal funds rate can be driven down to basically zero (like it has been since the beginning of 2009). Once it's at zero, it obviously can't be reduced further. At this point, the Fed has the option of engaging in quantitative easing, or, purchasing more bonds (or other assets) than necessary to keep the federal funds rate at zero. These extra purchases don't affect the interest rate, but they do supply more cash to the economy, providing liquidity and perhaps stimulating inflation. This is supposed to get people who wanted to spend but couldn't get a loan (liquidity) and people who had a bunch of cash sitting around but weren't doing anything with it (inflation) to start spending again. Complicated.

Actually, all of monetary policy is pretty complicated, which I think is why this story struck me. I thought running for Vice President was a pretty poorly conceived, dangerous, and even insulting thing for Palin to do. But I can't help thinking today that sticking her nose into monetary policy is an even bigger act of hubris. After all, how many Vice Presidents would you trust to run the Fed? Chairman Biden? No, thanks.

But this isn't just about Palin flailing around in the deep end of another policy pool; it highlights the thing that most concerns me about last week's midterm elections. We just sent a group of Republican legislators to Congress that is willing (and often eager) to ignore expert advice on a variety of topics and seems to think it can bend the facts to fit its dogma. There has always been a lot of oversimplification in politics, but this time, it seems like they think that if they say something enough times, it'll become true.

Getting facts to figure prominently in public discourse has long been a struggle, but I feel like this election has made that task more difficult in a real way. Hopefully, we'll find our way back to reason soon. Otherwise, I'm not sure what good this Ph.D. is going to do me.

Two years later...

2010-11-04T23:33:00.004-04:00

Two years ago tonight, almost to this very hour, I was in Grant Park listening to Barack Obama deliver his victory speech. It was a night I'll never forget.

Poised and confident, Obama spoke like a leader. While exuding unshakeable faith in the promise of America, he did not discount the challenges before him and the country.

Two years later, progress has been made. Not in all areas, but in many. As he promised the hundreds of thousands of people gathered in Chicago that night, Obama has done what's been necessary, even when it hasn't been overwhelmingly popular. As we saw this week, he and his party have paid a price for that.

Obviously, lots of things could have gone better for Obama, Democrats, and the country. But lots of things did go well. Governing will get tougher for Obama when the impenetrable wall of opposition he has faced for the last two years gets taller and thicker in January. I'm confident that Obama can make the best of it. I doubt Republicans will be interested in helping out, but there's always hope.

Some say politicians campaign in poetry and govern in prose. In some respects, Obama may be suffering from having been too good a poet. Down the line, however, I think we'll probably look back at these two years and realize his prose isn't half bad either.

Math is not interesting to write about

2010-09-17T22:27:00.000-04:00

I haven't written about anything interesting I've learned in grad school yet because it's all been math. Even if I had time to write regularly, which I don't, I wouldn't write about math. Second order necessary (but not sufficient!) conditions and positive semi-definite bordered Hessians don't really make for inspired prose. Maybe I'll have something to say once we start studying economics in my economics classes.

I did kind of have an actual academic economic experience today, although I its academic value was kind of secondary for me. I attended a presentation of a paper by Harvard's Ed Glaeser. The paper was about causes of recent fluctuations in housing prices, which was fine, I guess. The aspects of the presentation that I found funny were related to the lawyers/law students in the room (Prof. Glaeser's presentation was part of an event put on by Notre Dame's law school).

When we got to the question and answer session after the paper was presented and a couple other professors gave comments, a law student two seats over from me raised his hand and asked a question about where the American Worker would find the will to go on and whether his productivity would suffer if the elimination of tax benefits designed to encourage home ownership denied him his American Dream. It was a really dumb question. I'm pretty sure everyone thought so. It was pretty clear that Glaeser thought so, but he managed to give a reply that didn't include calling the guy an idiot and did included a point about the effects of the tax policies in question on individual savings behavior. His restraint and ability to make something out of nothing were impressive.

I don't want to extrapolate too much here, especially from such a small sample, but judging by this presentation, there could be a relationship between academic discipline and sense of humor. When there was laughter, the seating arrangements in the lecture hall made it clear from which department it came. The differences in humor are best illustrated with an example.

Lawyers found funny: Declaring Alan Greenspan "not guilty" of causing the recent housing bubble.
Economists found funny: Someone said something like, "Well I would hope FICO scores would have predictive power since we spent 40 years developing them for that purpose."

I know, these guys are hilarious. Grad school is a laugh-riot.

Untitled graduate school post number one

2010-08-24T21:30:00.000-04:00

Indiana is different. At least one or two radio stations here play California Gurls by Katy Perry, but omit Snoop Dogg's portion. I don't get it. Snoop's part is pretty innocuous, as far as rap interludes go. I'm pretty sure it doesn't even contain any words you aren't allowed to say on the radio. And omitting it by just playing the background track is just awkward. So is cutting straight from the beginning of the rap portion to the end. I question both the merits and the methods of these alterations.

Oh yeah, grad school. I get the impression that it's going to be different, too. And by "different," I mostly mean "a lot more work than college." I can't really say anything about it for sure, though, since I've been to exactly one class. Maybe I'll just do some first-week-at-Notre-Dame quick hits.

I'm glad I never spent money on Mathematica or Windows or anything like that. Grad school comes with free/cheap and legal software.
Grad students love free food at least as much as, if not more than, DC summer interns.
It seems like it will be a good idea to treat grad school like a job rather than like more college.
If the Law of Large Numbers applies to pieces of advice, I can say with absolute certainty that the key to success in the first year of an economics Ph.D. program is to work in groups and ask a lot of questions.
No matter what U.S. News and World Report says, Notre Dame's campus is not urban.

Finally, on another grad-school-related note, I have no idea how frequently new material will appear here in the short run (or the long run, for that matter). On the one hand, I expect to be very busy, which I would expect to decrease the frequency of posts. On the other hand, becoming able to explain something clearly is an excellent way to learn it, which could increase the frequency (although not necessarily the quality, at least in terms of being interesting to people other than me) of posts. At this point, like a good little potential economist, I'll just say that theory doesn't resolve the issue, it's an empirical question, and we'll just have to wait and see.

Can we pretend that airplanes in the night sky are like shooting stars? Because I wish John Boehner would go away.

2010-08-13T18:59:00.000-04:00

I'm pretty sick of John Boehner. I wish he would go away. His tweets annoy me. Unfortunately, there's no way he's going to lose his seat (his district, OH-8, is R+14). If Republicans take control of the House in November, Boehner will almost certainly become Speaker again, which would be the opposite of going away. So the only way I get my wish is if Democrats keep the House and Republicans choose a new Minority Leader.

But is that at all likely to happen? Would Republicans punish their leader for losing an uphill battle for control of the House? Much to my dismay, the answer is no.

Since Minority Leader became a formally established position in 1899, there have been 21 Minority Leaders, meaning that there have been 20 changes in minority leadership. Of these, nine occurred because the minority party changed. Five more occurred because the previous Minority Leader left Congress, either through death, retirement, or, in Gerald Ford's case, to become Vice President. One additional change occurred in the middle of a term. So, in 110 years, the minority party has only changed its leader five times at the beginning of a new Congress.

Democrats changed leaders at the beginning of the 58th Congress after gaining 25 seats but remaining in the minority. This was the first-ever change in minority leadership.
Republicans changed leaders at the beginning of the 86th Congress after losing 48 seats and falling further into the minority.
Republicans changed leaders again at the beginning of the 89th Congress after losing 36 seats, more than wiping out the 23 seats they had gained since their previous leadership change.
Republicans changed leaders at the beginning of the 97th Congress, in which they again found themselves in the minority despite picking up 34 seats.
Democrats changed leaders at the beginning of the 108th Congress after losing 7 seats.

So. Only two minority leaders have ever been replaced after their parties picked up seats. One, James D. Richardson, was the first Minority Leader. Although he served only two terms in that position, Democrats had been in the minority for eight years when he was replaced. The other, John Rhodes, was replaced by Republicans after his four terms as Minority Leader brought them to 26 consecutive years in the minority.

Given the Republicans' certain electoral gains this November and the fact that they've only been in the minority for four years, replacing Boehner would be unprecedented. Also, Republicans seem to be happy with his performance. Looks like the best case scenario is that I'll be stuck with at least two more years of Boehner's self-righteous, fluorescent obstructionism.

Three reasons I think Prop 8 will remain unconstitutional

2010-08-08T19:16:00.000-04:00

The biggest news of last week was probably the ruling from the United States District Court for the Northern District of California in Perry v. Schwarzenegger rendering California's Proposition 8 unconstitutional on the basis of violations of the due process and equal protection clauses of the 14th Amendment.

The ruling is far from the definitive word on gay marriage, but it rather significantly increases the likelihood that the issue will end up before the Supreme Court in a few years. I am not and will never be an attorney, but there are three reasons why I think that, if Perry is sustained through appeal and makes it to the Supreme Court, the district court ruling will be upheld and bans on gay marriage will be struck down across the nation on the basis of 14th Amendment violations.

Reason 1: Judge Vaughn Walker. Walker, a Reagan and Bush 41 appointee to the federal bench, is the judge who heard the case. I'm still not an attorney, but I am familiar with logic, and I know how to read, and his ruling in the case looks pretty solid to me. Two things about it make me confident in its staying power.

First, Walker thoroughly established the facts of the case. Fifty-five pages of the final decision are devoted to findings of fact. These findings are plainly stated, and none is particularly controversial. Establishing facts is important because appellate courts assume the facts established in district courts. The Ninth Circuit Court of Appeals, which will be the next stop for this case, would need a pretty extraordinary reason to ignore Walker's findings of fact. He has, in effect, had the final say regarding the basis and effects of Proposition 8, and that say looks pretty good for supporters of marriage equality.

Second, Walker based his decision directly on the facts of the case and the United States constitution. He didn't rely on any legal gymnastics to support his ruling. He didn't subject Prop 8 to an unjustifiably high level of scrutiny. He didn't find the law in violation of some obscure technicality. In a very direct and unambiguous way, Walker found that Proposition 8 discriminates against gays and lesbians and is in violation of the due process and equal protection clauses of the 14th amendment. I really don't see how anyone could come to another conclusion given the facts Walker established.

Reason 2: Justice Anthony Kennedy. Kennedy has been the swing vote in many of the controversial cases that have come before the Supreme Court in recent years. If there was a 5-4 decision, it's a reasonably safe bet that he was No. 5. By no means am I guaranteeing this will be a close call if it makes it to the Court, but if it is, I like the odds of Kennedy ending up on Team Sustain, and without him, Team Reverse doesn't have much of a shot. Again, I have two reasons.

My first reason is political and has already been articulated elsewhere. From my favorite site on the internet, FiveThirtyEight:

Although I'm not qualified to analyze the merits of Perry v. Schwarzenneger from a legal positivist point of view, I will deign to take a crack at it from a legal realist frame. It seems to me that most of the "intangibles" bear upon Justice Kennedy in ways that favor his finding Constitutional protection for same-sex marriage. For one thing, he'll be 75 or 76 by the time the SCOTUS hears this case, and will probably be thinking about his legacy. Given that, in 50 years' time, American society will almost certainly regard the plaintiff's position (the Constitution does not permit discrimination in marriage on the basis of sexual orientation) as the right one, that legacy would be better served by casting the decisive vote in favor of the plaintiffs.

Just because The Supremes aren't elected doesn't mean they are above political or historical influence.

My second, more substantial reason comes from Kennedy's majority opinion in Lawrence v. Texas, the case that might be most closely related to this one. In Lawrence, the Court found that Texas's anti-sodomy law was unconstitutional because it violated the due process clause of the 14th amendment. In his opinion, Kennedy wrote the following:

It must be acknowledged, of course, that the Court in Bowers was making the broader point that for centuries there have been powerful voices to condemn homosexual conduct as immoral. The condemnation has been shaped by religious beliefs, conceptions of right and acceptable behavior, and respect for the traditional family. For many persons these are not trivial concerns but profound and deep convictions accepted as ethical and moral principles to which they aspire and which thus determine the course of their lives. These considerations do not answer the question before us, however. The issue is whether the majority may use the power of the State to enforce these views on the whole society through operation of the criminal law. "Our obligation is to define the liberty of all, not to mandate our own moral code." Planned Parenthood of Southeastern Pa. v. Casey, 505 U. S. 833, 850 (1992).

Emphasis added. Of course, Lawrence was a case about criminal law, while Perry deals with a civil institution, but Kennedy's Lawrence opinion gives an indication of how he thinks individual moral opinions should play into law in situations like this (they shouldn't), and, given his finding in Lawrence, suggests to me that he'll end up affirming Judge Walker's ruling if given the opportnity. I'm also encouraged by the fact that Kennedy also relied on the due process clause and skipped equal protection only in order to avoid sending mixed signals to states.

Reason 3: ProtectMarriage.com. Perry v. Schwarzenegger is really a misnomer. Plaintiffs in this case sued everyone responsible for enforcing Proposition 8, as well as those who were responsible for promoting its passage. Upon being sued, Schwarzenegger and the other defendants associated with the state of California basically said, "Oh no, we don't want a piece of this," and refused to present any defense at trial. In fact, with the case having been ruled upon, Schwarzenegger has asked Walker to immediately implement his ruling and allow the state to issued marriage licenses to same-sex couples.

The real defendants (now appellants), then, are the people behind the Yes on Prop 8 campaign, who set up the website protectmarriage.com during that campaign, and they don't exactly have it together. Prop 8 proponents called only two witnesses at trial, despite claiming to have prepared many more. The witnesses they called failed to answer many of the court's questions, and Walker ultimately found that their testimony should receive little to no weight.

Additionally, one of the arguments advanced by proponents was that marriage did have a special, different meaning compared to civil unions, and for that reason should be withheld from homosexual couples. Because they're inferior. In a case that one could pretty easily see being decided on equal protection grounds. What? Not exactly a confidence-inspiring performance.

Obviously, there's a long way to go in this case, and I don't have a crystal ball or anything, but, for these three reasons, I think we're heading toward marriage equality.

I don't like it when people say that the Missouri Proposition C vote means something. It doesn't. I promise.

2010-08-05T17:29:00.001-04:00

One of my (least) favorite things about being home in Cleveland is that I am occasionally (repeatedly) exposed (subjected) to the editorial wisdom (ramblings) of the Plain Dealer's Kevin O'Brien. For those who aren't familiar with his work, which is hopefully everyone, O'Brien is Cleveland's token reliably conservative columnist. Unfortunately, he reliably parrots the Republican party line whenever he delves into national issues, eliminating any potential benefits that could have come from diversity on the editorial pages.

Today, Mr. O'Brien's column focused on Tuesday's vote in Missouri on Proposition C, which rejected the federal mandate for individuals to purchase health insurance. The proposition passed by about a 70-30 margin, but it will have no force or effect, and there was no organized opposition to the proposition's passage. Nonetheless, Mr. O'Brien says that the vote demonstrates the "overwhelmingly expressed will of the people" in opposition to health care reform and represents "open rebellion" against President Obama's health care policies.

Someone who writes about politics as much as Mr. O'Brien does, however, should know that the facts of the vote do not support such conclusions. Proposition C was put to voters alongside both parties' primary elections, which are notoriously low-turnout affairs. Those that do vote in primaries, especially primaries in which no Presidential candidates appear on the ballot, are generally much more invested in partisan ideologies and positions than the population at large.

Missouri has roughly six million residents, of which approximately 4.2 million were registered to vote as of 2008. Only 940,152 voters cast ballots on Proposition C. That's not even one third of the number that cast ballots for President in 2008. Based on vote totals for Missouri's two United States Senate primaries also held on Tuesday, nearly two thirds of participants in the election were Republicans (the Cook Partisan Voting Index for Missouri is only R+3).

So Mr. O'Brien thinks that a hyper-partisan election in which the electorate was not representative of the state's true political composition, less than a quarter of eligible voters participated, and only about one tenth of the state's population indicated opposition to health care reform represents open rebellion against the President's policy? Unfortunately, he's probably not the only one. But the reality of the situation is that this vote in Missouri isn't even close to an acceptable indicator of even local, let alone national, attitudes toward health care reform. Mr. O'Brien is extrapolating from a single, highly suspect data point, which anyone who's ever taken statistics of any kind will tell you is a no-no. It's also something I would hope journalists would refrain from doing. Presenting the Missouri results as Mr. O'Brien did is irresponsible at best and downright dishonest at worst.

Update, 8/8: A kinder, gentler, shorter version of this post appears in today's print edition of the Cleveland Plain Dealer as a letter to the editor.

My thesis, in layman's terms (Part II)

2010-08-02T17:19:00.000-04:00

To recap from yesterday's post: Unemployment insurance (UI) helps people. The rules governing UI influence the degree to which it helps people. Rules governing eligibility for benefits could influence job search outcomes in much the same way as rules governing benefit duration and weekly benefit amount.

To test my hypothesis about UI eligibility for workers seeking only part-time jobs, I used data from the National Longitudinal Survey of Youth, which follows approximately 9,000 Americans and asks them annual questions on a wide variety of topics, including employment status and wages. In order to focus my study on the effects of the unemployment insurance system, I restricted my data to jobs people found after having been unemployed, that is, I excluded jobs accepted directly from employment at another job.

In order to isolate the effects of eligibility rules on post-unemployment wages (the one particular outcome I decided to study), I extracted data to control for other factors that might influence wages. These factors include age, gender, race, marital status, educational attainment, union membership, unemployment rate, whether respondents lived in urban or rural areas, and the maximum benefit amounts and durations respondents faced when they found their jobs.

Using my magic statistics box (aka Stata) I try a few different models using different combinations of controls. You can see a table summarizing my results on page 17 (the 21st page of the PDF) of my thesis. The bottom line, though, was that my data showed a statistically significant correlation between more inclusive UI eligibility rules and higher post-unemployment wages.

One of the hardest parts about any kind of social science research is recognizing the difference between correlation and causation. Since controlled, random experimentation is often impossible, especially in economics, every study has caveats, and causation can be very difficult to establish. The particular caveats that apply specifically to my study are discussed in Section V.

Even though I ran a few econometric tests on the validity of my models, and my intuition tells me that my results could be indicative of a causal relationship, the only thing my study showed was a correlation. I can't claim that adopting more inclusive UI eligibility rules in some state will definitely increase wages. This, however, doesn't mean my project is meaningless or a waste of time or anything like that. There is still value to my results.

While my point estimates of the effects of more inclusive eligibility rules on post-unemployment wages may not be particularly meaningful, it is important to note that the signs of those estimates agree with my hypothesis. It looks like wages might be related to differences in UI eligibility in the same or similar ways as they are related to differences in UI benefit duration and amount. That is, higher wages appear to be correlated with greater weekly benefit amounts, longer benefit durations, and now more-inclusive eligibility rules.

I think my findings have a couple of implications. First, more people should study this topic. My study is fairly limited and obviously not perfect. I'd be happy to take another swing at it once I've done a bit more learning, which I'll get to work on in two weeks(!).

More significantly, however, my findings indicate that policymakers might have another tool at their disposal to address issues related to unemployment. To date, benefit amounts and benefit durations have been the levers on which legislators have pushed and pulled to try to influence job search outcomes. If UI eligibility actually does influence those outcomes as well, they have another degree of freedom to manipulate the system toward their goals.

My thesis, in layman's terms (Part I)

2010-08-01T21:26:00.000-04:00

A couple months ago, I posted my senior thesis on this site (it's here, or up at the top under the link that says "Thesis") and promised that I would write more about it. Now my summer is almost over, and I haven't done it yet. So, here it is, in less technical terms, maybe with some thoughts about broader significance.

Unless you've been living under a rock, you probably know that the economy's not doing so hot. Even though our GDP has been growing for more than a year, according to the Bureau of Economic Analysis, 62% of respondents in a recent poll not only believe that the recession is not over but also that it will last at least the rest of this year. A lot of that probably has to do with the fact that the unemployment rate is hovering around 10% and is expected to stay there for a while.

With the unemployment situation so serious, unemployment insurance (UI) has played prominently in the news recently. Congress has extended UI benefits multiple this year over Republican filibusters. That statement is actually a bit misleading; Congress has actually provided additional funds to the states so that, given the emergency circumstances job-seekers face, they can continue to pay UI benefits for longer than 26 weeks from job separation, the typical limit.

But are there other ways to manipulate UI rules to help job seekers? Actually, first we should ask what it means to help job seekers. In an immediate sense, UI helps recipients by enabling them to buy food, pay rent, get their cars fixed, take their kids to the doctor, etc. While this is certainly good for those who receive benefits, economically, these benefit payments are simply transfers and do not create any actual value. If effects like those I listed above are the only ones UI has on society, one might have grounds to question the value of the program.

Fortunately, research indicates that UI helps people in other ways. When economists think about this question, they often use post-unemployment wages and post-unemployment job tenure to measure how much UI has helped people (to measure job match quality). A job is better if it pays more or if an employee remains employed at it for longer. Studies of UI examine the effects of variations in certain rules on these two measures of goodness.

Two types of UI rules that have been studied in the past are those governing the maximum amount of time for which people can receive benefits and the maximum dollar amount in which weekly benefits can be paid. There is reason to believe that increasing either of these two maxima should lead to greater job match quality. The theory is that receiving UI benefits allows job seekers to focus their time and attention on their searches for employment without having to worry about things like paying for rent or groceries. The more help people receive through UI, the more devoted they can be to their job searches. The more intense a job search is, the better its results will be (assuming jobs are search goods).

The research on this question backs up the theory. Studies have found that increases in both maximum benefit duration and maximum weekly benefit amount lead to small but statistically significant increases in job match quality (see Section II of my thesis for more specific discussion of these results).

But are there other rules that could be manipulated to influence the outcomes of job searches? I think so. Eligibility for benefits, for instance, has some potential in this regard. My guess is that extending eligibility to people who previously lacked it could lead to improvements in job match quality for them, and possibly for everyone. Although benefit eligibility requirements vary from state to state, generally one must have lost his job through no fault of his own; he must have been working at it for some minimum period of time or have earned some minimum amount of money working there; and he must be actively seeking suitable work. This list is not all-inlcusive.

The "suitable work" requirement is the most ambiguous of these. What does "suitable" mean? Does a job have to pay a certain amount in order to be suitable? Does it have to be in a particular field? Does it have to be full-time? Not every state uses this language, but many do, and those that don't kind of establish the same effective standard in other ways.

The full-time question was most interesting to me because there is not a consensus on its answer. About half of the states require job seekers to pursue full-time work in order to be eligible for any UI benefits. In the other half of the states, there are some circumstances under which a job seeker could be eligible for benefits while pursuing exclusively part-time employment.

For my senior thesis, I decided to explore whether establishing more inclusive eligibility requirements (i.e. those that allowed payment of benefits to job-seekers pursuing exclusively part-time work under some circumstances) might have some effects on job match quality. In my next post, I'll talk about how I did that, what I found, and why I think it matters.

The times, they are a-changin'?

2010-07-25T21:51:00.000-04:00

Today I encountered a passage I found interesting at the end of the author's not preceding The Making of the President 1960, by Theodore White. The book was published in 1961, and I think it was assigned to me a couple years ago as reading for a class about political parties and elections (I'm just reading it now - oops). The passage read:

"Beyond that, I owe two general acknowledgements:

First, to the politicians of America - men whom I have found over the long years the pleasantest, shrewdest and generally the most honorable of companions. Their counsel, Republican and Democrat alike in state after state, has shaped every page of this book.

Second, I must thank my comrades of the press - whose reporting at every level of American politics purifies, protects and refreshes our system from year to year. Without their shared confidences and magnificent public dispatches the writing of this book would have been entirely impossible."

White's acknowledgements struck me, especially in light of last week's controversy surrounding the firing of Shirley Sherrod, because he singled out for high praise two groups of people that many treat with disdain today.

Is the passage of 50 years and all the social, cultural, technological, professional, and ethical developments those years saw enough to explain the divergence of opinion between White and today's observers? Or have politicians actually become worse people and journalists less noble or less effective, making them deserving of the lower esteem in which they are now held?

Maybe White's view of politicians and the press was unduly rosy, and maybe ours today treats them too harshly, but I think the difference here is interesting to consider because it is so stark. I don't have an explanation for why our opinions change the way they do, but it's kind of fun to think about.

"post hoc" enters the dot com era

2010-07-22T00:54:00.000-04:00

I just got a real live domain name for this blog! It's really just the same URL it's had all along, but with www. in front and without the .blogspot in the middle. That's right, for at least the next year, this blog can be found at www.heshallfromtimetotime.com. Go ahead. Open a new tab and type it in. Isn't that cool?!

Also, I just realized this is the 101st post I've made to this blog over the course of almost three and a half years. Huh...

On LeBron

2010-07-09T12:13:00.000-04:00

This one hurts the city of Cleveland, not gonna lie. Psychically, athletically, economically. Personally. It hurts.

It hurts because he chose someone else. No one likes to be the one that doesn't get the girl. LeBron led us on, said we had the edge, and then he bolted. But he didn't let us down easy. He did it on national television. And then he talked about how good he had been to us.

But more than that, it hurts because of what he said while he was here about home and family. The old, pre-Twitter LeBron talked about loyalty, about putting Akron on the map. Home was part of his image. It's what made him different from other NBA superstars and from other Cleveland stars across sports who paid lip service to the city before heading for greener pastures.

But the thing that makes LeBron's defection hurt the most is the fact that he did exactly what Cleveland sports fans have been begging superstar players to do for years: he took less money to join a team with a chance to win a championship. Except that team wasn't the Cavaliers.

Maybe he will win a championship with Miami. Maybe he'll win two or three or six. I can't really say his choice was wrong from a basketball perspective. LeBron knows basketball, and he played on Team USA with Wade and Bosh. He should be the one best equipped to decide where he can win. One thing he won't be able to win back, though, is his reputation, at least not in Cleveland. LeBron's free agency and the decision that ended it exposed his true self. Despite anything he might have said, it's all about him.

I can't call LeBron selfish, though. Narcissistic and ego-maniacal, sure, but not selfish. He took less money and probably a somewhat decreased role on the team in order to win. But in so doing, he sacrificed a chance, and a pretty good one at that, to be a hero, a legend, in Cleveland. Dan Gilbert and the Cavaliers had done and would have continued to do everything they could to win a championship, and LeBron would have become even more exalted than he already was had they succeeded.

As Byron Scott surely told LeBron, there's nothing like winning at home. But no matter where he goes from here on out, LeBron will never know what that's like. Winning always comes at a cost, and whether he knows it now or not, taking this chance to win has cost LeBron his home. As bad as it feels right now, Cleveland and its fans will move on together. And LeBron, even with Wade and Bosh by his side, will have to go it alone.

How I learned to stop worrying and love the 'Cats

2010-07-06T22:00:00.000-04:00

Yesterday, Northwestern sports blog Sippin' On Purple, from which I'm expecting some kind of JaMarcus Russell/codeine syrup joke any day now, featured a post about the origins of the author's Northwestern fan-dom. It was a pretty cool post. I think it's really interesting to hear about how other people came to love the 'Cats as much as I do, so I thought I'd share my story here. (I guess it ended up being kinda long and not entirely focused on football, but hey, it's my story and this is my blog, so I'll tell it the way I want.)

My relationship with Northwestern began in sixth grade. I was one of those kids that take college entrance exams in their spare time just for fun, and in sixth grade, I did well enough to score an invite to Evanston to receive a certificate or a medal or something. So I went. The only things I remember about that visit are eating lunch at Norris one day and that the ceremony thing I went there for was pretty long and boring.

After that, Northwestern largely fell out of my mind. It hadn't instantly become my college of choice or anything. As I moved on into high school and people started asking where I wanted to go to college, I usually said I didn't know, but, if pressed, I would say Boston College. At the same time, I was starting to become a college football fan. Ohio State beat the University of Miami for the National Championship when I was a freshman in high school, and, being from Ohio, I followed that run pretty closely. I wasn't a huge college football fan at that point, and I hadn't sold my soul to Ohio State, but I liked college football and I liked the Buckeyes.

Northwestern got back on my radar after my junior year of high school, when I had to start actually thinking about college. I took a college-touring swing through the Midwest, stopping at NU, among other schools. I thought it was a nice place, and I liked it enough to apply there.

I also liked it enough to start paying more attention to its football team. If the 'Cats were on TV that year, I would try to watch them, and I liked what I saw. Brett Basanez threw the ball all over the place, and Tyrell Sutton, against whom my high school had played a couple times while I was there, was lighting up the Big Ten en route to a Sun Bowl bid. Pretty much every Northwestern game I saw was exciting, and while the 'Cats hadn't yet stolen my primary allegiance away from the Buckeyes, they had definitely shown me that I wouldn't have to go to a school like Ohio State if I wanted to football to be part of my college experience.

Toward the end of my senior year, I hadn't decided exactly where I wanted to go to school, but I had decided that I wanted my school to have a strong academic reputation, and I wanted there to be football. I was in my high school's marching band for four years, and I had been a part of some pretty successful seasons that way. I wanted to go to a school where I could both keep marching and keep cheering for a winning team.

The last three schools in the mix were Northwestern, Ohio State, and Carnegie Mellon. Ohio State has a decent academic reputation and a history of winning football, but, as an alto saxophone player, I wouldn't be able to march in their all-brass band. Carnegie Mellon had the academic reputation I was looking for and a marching band, but their football team plays D-III ball, and not all that well. Also, the band wears kilts.

Northwestern, on the other hand, offered the best of both worlds. It had the best academic reputation of the three, and I knew from watching all season that the Cardiac 'Cats played exciting football. Best of all, Northwestern had a marching band I could be in without having to audition. In the end, the combination was too much to pass up, and I decided to head on over to Evanston for college. In retrospect, I don't think this was really when I decided I wanted to go to Northwestern as it was when I realized I had wanted to go there all along.

From the day I showed up at band camp in September 2006, it was inevitable that I would become a diehard Wildcats fan. It's just the nature of the band to create passionate, purple-clad 'Cats fans, even out of kids who have never been to a football game before, but that's another story. The beginning of the road was a little rocky, though. Randy Walker had died that summer, throwing the program into a bit of disarray. My first game with the band was an embarrassing loss to I-AA New Hampshire. Fortunately, I didn't fully comprehend the embarrassment at the time. My second game was an unimpressive win over a weak Eastern Michigan squad. At Homecoming that year, we would suffer the largest blown lead in NCAA Division I-A football history. That whole winning football thing wasn't off to such a great start.

Before those rough couple games, though, I had an experience that probably cemented my fan-hood and that of many of the other new band members. One night during band camp, after a long day of rehearsal, Pat Fitzgerald, the newly-minted youngest head football coach in college football, stopped by to visit the band. It wasn't just sticking his head in to say "hi," either. Fitz talked for a little while about how the team had been working hard, about how they were looking forward to playing at home in front of us and the other fans, and about what the band meant to the team. He talked about starting new traditions like Walk With Us and having the team sing the fight song with the band after each win. Then he stuck around to answer our questions. Before he would answer, though, he wanted to know his inquisitor's name and hometown. He must have been up there for more than half an hour.

This was a tough time for Wildcat football, but Fitz gave me confidence that, whatever happened, the team was going to be alright. His attitude and school spirit are infectious. His visit made all of us feel valued, like we could make a real contribution through our efforts with the band. I'm sure there were lots of things Fitz could have done with the time he spent with us, but he chose to come out and make us feel like part of the family. I don't know how anyone could listen to Fitz talk about Northwestern like he did that night and not end up a Wildcats fan.

My faith in Fitz would be rewarded that November at Kinnick Stadium. The band takes a trip to perform at one Big Ten road game each year, and that year we went to Iowa. As a two-win visitor, we were the underdogs, of course, but the 'Cats clawed their way to an upset win, Fitz's first in Big Ten play. After the final whistle in a stadium dominated by gold and black, Fitz led the team over to the band to sing the fight song, just like he said he would. It was, quite simply, awesome.

From that point on, I knew I would be a 'Cats fan for life. I feel like that was the game when the program found itself again, and things have been getting better ever since. I've seen some amazing comeback victories and some heartbreaking defeats, and I wouldn't have it any other way. The 'Cats have character, and they do things the right way. I'm going to miss the games and team a lot this season, but I'll be sure to catch up with them in Pasadena on New Year's Day.

Happy Independence Day!

2010-07-04T12:45:00.000-04:00