A Muslim Middle Eastern country ....

What can you say about a country full of religious fanatics who believe they have the right to force their peculiar religious beliefs on everyone in the country, and indeed everyone in the world? Who want their government to enforce their own religious laws?

What can you say about a country whose citizens are so ill-educated that half of them couldn’t even find their own country on a world map. About a country who believe the most imbecilic statements by their political leaders, statements that they accept as true even though ten minutes of research in a library or on the net would prove them untrue?

What can you say about a country so poorly run that it is in financial chaos, with politicians who are routinely bought by powerful interests?

What can you say about a country so xenophobic that they have been clamping down on immigration for years, even though they need foreign workers? About a country openly hostile to religions other than their own?

Oh, did you think I was talking about one of the Muslim Middle Eastern nations? Yes, the description would fit those countries as well, but in fact I’m talking about America these days. Do these charges sound extreme? Think about it.

The Christian right has been trying for decades to emplace federal laws to enforce their own religious views on things like abortion and gay marriage and evolution. And they spend their time proselytizing all over the world, trying to convert everyone to their own religion.

Yes, according to the Pew polls about half of high school graduates can’t find America on a world map. As for the imbecilic statements, just listen to the political ads these days from both parties, full of misinformation that ten minutes of research would disprove, yet lots of people, perhaps even a majority, will believe them and vote on the basis of such fanciful claims.

With a debt past 100% of GDP, a federal deficit of over a trillion dollars a year, and no plan whatsoever from either party to reverse the trend, we are certainly in financial chaos. And our politicians are certainly bought. Oh, few take outright bribes in brown paper bags (or so it seems), but almost all get huge campaign donations when they run, and cushy lobbying jobs or board memberships on retirement from groups they have helped while in office. It is being bought, even if it is a more genteel form of bribery.

Here we are at a time when we desperately need more high-skill immigration for our technology companies (because, stupidly, we aren’t training enough natives to fill all these jobs), and more low-skill immigration to help pick California crops, and yet we are making it increasingly difficult for people to immigrate.

And we like to think we believe in religious plurality, but we really don’t. Look at all the anti-Muslim feeling in the nation. Look at all the anti-Semitism still around. Look at the degree to which people are trying to force everyone into the Christian mold (or at least, their own version of the Christian mold).  Could a Muslim get elected president in this nation?  Could an agnostic or atheist get elected President?  I don't think so.  Even a Jew would probably have trouble getting elected. And maybe even a Mormon would have trouble.

Next time you get exasperated with some primitive Middle Eastern nation, look around first.

From The Economist

Here is an extensive extract from an article in the business section of the latest issue (Sept 29- Oct 5, pg 72) of The Economist about the new book "Better Capitalism" by Robert Litan and Carl Schramm:

The United States once boasted the world’s most business-friendly capital markets. But in recent years the boast has rung hollow, as Robert Litan and Carl Schramm point out in a new book, “Better Capitalism”. Venture capitalists have slashed their spending, dumping more adventurous companies in the process, not least because around 90% of them failed to produce a positive return. The number of initial public offerings is down from an average of 547 a year in the 1990s to 192 since then. This has dramatically cut the supply of new, high-growth companies. Given that companies less than five years old may have provided almost all the 40m net jobs the American economy added between 1980 and the financial crisis, that is dismal news for the unemployed.

America also used to have one of the most business-friendly immigration policies. Fully 18% of the Fortune 500 list as of 2010 were founded by immigrants (among them AT&T, DuPont, eBay, Google, Kraft, Heinz and Procter & Gamble). Include the children of immigrants and the figure is 40%. Immigrants founded a quarter of successful high-tech and engineering companies between 1995 and 2005. They obtain patents at twice the rate of American-born people with the same educational credentials. But America’s immigration policies have tightened dramatically over the past decade, a period in which some other rich countries, such as Canada, have continued to woo skilled immigrants, while fabulous new opportunities have opened up in emerging markets like China and India. Why endure America’s visa obstacle course when other countries are laying out the red carpet?

Finally, America has long boasted the world’s most business-friendly universities. One-fifth of American start-ups are linked to universities, and great institutions like Stanford and MIT spawn businesses by the thousand. But the university-business boom seems to be fading. Federal spending on health-related research increased from $20 billion in 1993 to $30 billion in 2008, for example, but the number of new drugs approved by the Food and Drug Administration fell from a peak of 50 in 1996 to just 15 in 2008. University technology offices, which legally have first dibs at commercialising the faculty’s ideas, have evolved into clumsy bureaucracies. The average age of researchers given grants by the National Institutes of Health is 50 and rising.

I have this book on order at my local library, and will review it when I have read it.  But it does point up some of the critical policy problems we face today.

Recommended: Waiting for Superman

If Director Davis Guggenheim's film Waiting for Superman doesn't make you fighting mad about the state of education in this country, you have no heart.

I have argued repeatedly in this blog (as recently as yesterday, in fact) that America needs to wake up and fix it's K-12 school systems. It needs to scrap the teacher's union contracts, pay the great teachers 6-figure salaries and fire the poor teachers however much seniority they have, prune the local, state and federal educational bureaucracies to a tenth their size or less and shift all that money into the schools, dump the stupid courses in "Teacher Degree Courses" and make the education of teachers much more demanding, and DEMAND better performance from the school systems.

It ought to be HARD to get through teacher's college, and HARD to earn a teaching position, and HARD to keep it. Only the best ought to be able to manage it, but for those who manage it we ought to pay very, very good wages. After all, they quite literally hold the future of the nation in their hands -- far more than any politician.

This will be hard. There are lots of people who will lose their jobs, and they clearly care more about holding onto their jobs than about the quality of education kids are getting, whatever they may say in public. And there are lots of politicians who are in the pockets of the unions. And there are lots of people in the bloated educational bureaucracy who might have to go find useful work for a change.

But it's not rocket science. There are plenty of successful models to follow. Finland has an outstanding school system, at half the cost per pupil than the American average. South Korea, Canada, Japan, New Zealand.... there are lots of good models. In fact, we have good models even here in America, among some charter schools, magnet schools and private schools.

Nor is this hidden knowledge. There have been endless articles in Time and The New Yorker, and many other magazines, any number of documentaries about it, any number of people like Bill Gates testifying to Congress about it. Any number of academic studies have shown what works and what doesn't work. The message is simple:

Good education comes from having great teachers. Not average teachers. Not good teachers. GREAT teachers. They are as rare as any other high skill resource. To have a great educational system, one needs to attract great teachers, train them well, pay them enough to keep them, and get out of their way -- meaning not have a mass of local, state and federal bureaucrats micromanaging them.

So it's clear what needs to be done. And it is clear it won't happen until enough American parents rise up in fury at what is being done to their children. So if we parents and grandparents and great grandparents won't stand up against the unions and politicians and special interests for the welfare of the children of this nation, we deserve what we get, and we will get it good and hard (to paraphrase H.L. Mencken).

Pareto’s Principle and the Economy

In the early 1900’s the Italian economist Vilfredo Pareto proposed what is sometimes called the 80-20 rule. It turns out to (roughly) approximate many effects in the world: 20% of software code will produce 80% of the errors, 20% of the people in the world own 80% of the wealth, 20% of your customers in a business will generate 80% of the complaints, etc, etc, etc.

Now here is a sobering thought: in today’s American economy, 20% of workers produce 80% of GDP. (and the top 10% produce 40-50%, and the top 1% produce about 20% of GDP).   Who are these workers? They are mostly the very high-skilled, innovative, highly productive workers in technically-demanding fields, the STEM fields (Science, Technology, Engineering, Mathematics).

What are the implications of this? I see three:

(1) Although politicians, especially Democrats, worry mostly about keeping the lower 80% employed when they worry about unions and manufacturing jobs, it is really the top 20% they ought to be worrying more about – if that innovative top 20% disappears, so does 80% of GDP. If 80% of GDP disappears, so do the union and manufacturing jobs of most of the lower 80% of workers.

(2) That highly-productive, innovative top 20% of workers is a very, very scarce resource in the world (which is why they can command such high pay). America is as wealthy as it is because we currently own the largest supply of that scarce resource. But that is rapidly changing. Even as our K-12 education system continues to fail, countries like China are striving as hard as they can to increase their supply of this scarce resource. The US graduated about 150,000 science and engineering students last year, about a third of them foreign students who will now have to return home. China graduated something like 500,000. The percent of college degrees in STEM fields is only 13% in the US, but 40% in China, 26% in India, and 18% in Japan.

(3) It is not the shift of low-skill, low-wage American jobs to offshore factories that ought to be worrying us. It is the shift of high-skill, high-wage jobs to nations like India and China and South Korea that really ought to worry us. So far that isn’t happening much, but if we penalize success (by, for example, heavily taxing high pay), or if we cease to produce many of these workers ourselves (by, for example, failing to reform our educational system), that shift in this scarce resource will occur, and we will soon be eclipsed economically by other nations.

Recommended: Tubes

Andrew Blum's new book Tubes: A Journey to the Center of the Internet is a delightful read. Have you ever wondered what physically happens to the bits that make up your last e-mail message when it goes out of your own modem? Blum takes us through the "tubes" (wires, fiberoptic cables, undersea cables, etc) and interchanges that route our message to its destination, but he takes us there not as a techi but as a writer, exploring the places and people involved with a writer's eye.

Class exercise

I was helping one of my granddaughters yesterday to collect information for a paper she needs to write – which of the two presidential candidates would be best for the economy and why.  It’s not an easy task, since Romney has been deliberately vague about what he would do (perhaps a wise strategic move – we will see), and President Obama has been pretty diffuse in what he has proposed, more focused on populist “sound bites” like increasing taxes on the rich or supporting unions than on any credible or comprehensive plan to improve the economy.

My own conclusions from this exercise are:

(a) In the long run, returning to a strong economy is the only thing that really matters.  Without a strong economy, there is not enough federal revenue to pay for either the Democrat’s social and entitlement programs or the Republican’s military spending, nor to reduce the deficit or begin to pay down the debt. Everything politicians want to do, and that their constituents want them to do, depends on having a strong economy to pay for it. Remaining a leading military and political force in the world depends on having a strong economy. Keeping American’s standard of living high depends on having a strong economy.  Everything, in the end, depends on the strength of the economy.

(b) In the long run, America’s economy will only be strong if we encourage risk-taking and innovation among entrepreneurs and corporations. Risk taking – trying to start up a new business or launch a new product – is a risky business.  Most such attempts fail.  So the potential rewards have to be great enough to encourage people to take the risk despite the high failure rates. Great enough to encourage bright people to leave a safe corporate job and risk a new startup, even though a failure of the startup may set them back years in their careers.  Anything which penalizes success reduces the incentives to take risks, and therefore hurts the economy in the long run.

(c) In the long run, America’s economy will only be strong if we have a workforce trained for the high-tech jobs of today’s world. Low-skill manufacturing jobs are not going to come back to America – it just isn’t going to happen in the face of automation and lower-wage labor markets elsewhere in the world, whatever politicians promise. It is increasingly difficult to make a living wage in America with a lifetime union job installing one part on an assembly line. The jobs that remain for Americans are the high-pay, high-skill jobs, which are the jobs we want in any case.  But to take those jobs, we need our workforce better educated than it is now. And throwing more money at education won’t help.  We already spend more per pupil on K-12 education than all but one nation (Switzerland), and yet our high school students rank toward the bottom of developed nations in reading, math and science .  Our K-12 educational system needs a complete overhaul if it is to produce the workforce we need to keep the economy strong.

(d) Neither candidate, and neither party, has proposed anything credible to address these issues. Oh, there are lots of nice-sounding sound bites about these issues from both candidates, but no concrete policies that look like they might make a real difference. 

The double standard

Interesting how Middle Eastern Muslims are outraged enough at a single low-budget movie clip in bad taste to kill ambassadors, burn embassies, trash American businesses and riot in the streets, and demand apologies from our president -- YET Muslim imams all across the Middle East fill the airwaves and the internet daily with the vilest language about Christians, Jews, and even their own brethren (Sunni vs Shia vs Sufi vs......).  See Thomas Freidman's New York Times article yesterday Look in Your Mirror for some examples.

Of course none of those societies understand the concept of free speech - the concept that freedom entails the right to speak one's mind, even if it is in bad taste or offends others. Pakistan is in the process even now of condemning to death several people for "blasphemy" against the Prophet.  Hardly a society that tolerates free speech.

There are those who point out, correctly, that these extreme Muslim elements don't represent the vast majority of Muslims.  That would be a more convincing argument if we ever heard the voice of that vast Muslim majority condemning their own extremists. The few Muslim voices of protest that do appear are often quickly suppressed.

How does a free democratic society like ours deal with this sort of harsh, primitive authoritarian culture?

Inquisitiveness

I love to ask people about their work. I am fascinated with the technical and economic aspects of people’s work. I met an art appraiser yesterday and asked her how she manages to estimate a value for a piece of art. I got a wonderful introduction to the mechanics of the art world. A few days ago I asked a physicist friend of mine how his project to develop a new kind of nuclear reactor was coming, and I got a fascinating discussion on the economics of electric power generation. I love to learn these things, and to get a look inside other people’s fields and occupations.

But what also fascinates me is how few people ask me about my work. Almost all the people I question are more than happy to tell me in detail about their work and field of interest, though I did meet some understandable reticence when I once asked a Secret Service agent about the mechanics of his job.

Yet perhaps no more than 1 in 20 ask me about my work, and of those, perhaps only 1 in 50 show any real interest beyond simple politeness. That got me to watching other people, and I realized this is true generally. People in general are delighted to talk about themselves, but relatively uninterested in other people’s lives unless they happen to share an interest. Adults in general are not very inquisitive.

Now children are endlessly inquisitively. I happen to have the privilege of having several very bright grandchildren and meta-grandchildren (not blood relations, but we treat them as if they were), and they are endlessly inquisitive. I suspect most of those adults who are not inquisitive now were very inquisitive when they were children. Where and how did we beat it out of them? And why?

The Chicago teacher’s strike

There is no question that in their early years unions were a potent force for worker’s rights and reasonable pay.  Nor is there any question that by now many have become one of the biggest obstacles to progress. The Chicago teacher’s strike is a case in point.

   

The Chicago schools have some of the highest dropout rates in the nation (nearly 40% in 2011), and in 2011 only 44.6% of Chicago school students met the Illinois state learning standards. 11th Graders College Readiness Benchmarks for Chicago school students are 21% in Reading, 19% in Math, 11% in Science, 38% in English

Clearly something is failing in the school system. It is true that some 80% of the students are “poor” by official American government standards (which, by the way, is pretty well off by the standards of much of the world), and so that will certainly account for some of the difficulties.

To make things even worse, the Chicago school system faces a $667 million ANNUAL deficit this year, projected to pass $1 billion ANNUALLY by 2014 when the school system resumes making full pension payments. Chicago spends, as of 2011, $21,024 per student per year. The US average is about $7,742

Chicago politics have always been a bit “murky”, to put it mildly. The teacher’s unions have cut sweetheart deals with politicians for decades, in return for faithfully supporting them in elections.  As a result the average teacher in Chicago makes $71,236 a year for a nine-month working year, although with pension and benefits added in, it is closer to $150,000 per year for nine months work, and about $200,000 per year for 12-month assignments.  And it is almost impossible to fire a teacher even if they are incompetent. A Chicago teacher who retired in 2011 after 30 or more years of service time could expect an annual pension of $77,496 per year. By contrast the average Social Security benefit—which requires a much higher employee contribution into the system—would be about $25,000 to $30,000 per year for a worker with a similar salary history.

Now frankly I think a GOOD teacher ought to be paid that kind of money, or even more. It would attract our best and brightest back into the teaching field and immeasurably improve our educational system. But that level of pay for the average teacher in a failing school system, which is also financially bankrupt, clearly doesn’t make sense.

So the union was asked to accept JUST a 16% pay increase over the next four years, accept some teacher evaluation based in improvements in student test scores, and give principles a little more control over what teachers they hire – not unreasonable given the huge deficit and poor performance.  But that was unacceptable, so the union went on strike.

We will see shortly what settlement they finally reach, but it is clear, despite all the union rhetoric about the importance of students, that the Chicago teacher’s union is really all about maintaining their member’s extraordinary pay and benefits irrespective of how well they are teaching the children. That is why unions like this are now an obstacle to progress. I can't conceive of any private enterprise that could survive a month in the marketplace with such a dysfunctional employment policy..

Why is Romney trailing?

Given the lackluster economic news, the ballooning federal debt and the high unemployment rate over the past few years, the Republicans ought to have no trouble at all defeating President Obama. But in fact the race is close, and at present favoring the Democrats by a few points in most of the key "swing states". InTrade odds currently favor Obama winning re-election, as do most of the election models.

Romney, while not charismatic or an especially good speaker, has the kind of successful, hard-headed business background that ought to recommend him for the job in the current economic conditions.  So why is he not leading by a healthy margin?

My own interpretation is that the Republicans have made a very serious tactical error over the past decade or so by allowing the religious right to introduce contentious social issues into the mainstream Republican positions, and have exacerbated that error by purging the party of any who don't meet the religious right's "litmus tests" on these position.  Of course Republicans count on the religious right as a key part of their base, just as Democrats count on unions as part of their base.  But in fact, who were the religious right going to vote for if Republicans didn't champion their social programs?  -- not liberal Democrats certainly.

Republicans would have been far wiser to simply stay mute on contentious social issues like abortion and gay marriage, and keep their focus on economic policies. That would have earned them a solid block of independent voters who are concerned with the Obama administration's current policies. Instead they have thoroughly alienated much of the independent vote with their religious emphasis, and will probably lose this election as a result.

The question is, will the Republicans learn anything from this (probable) defeat? Or has the party by now been so purged of all but the right-wing "true believers" that they are unable to change their direction and move back to the center?  If that is the case, it is not good for the nation. Our political system needs both parties to be vital and competitive - that competition is what keeps the parties honest and pushed toward the center.  If one party becomes so extreme that it is seriously weakened, that removes critical restraints from the other party.

Given that we have serious national problems, at this time especially we need both parties to be strong because we need to have serious national debates about how to restructure our government, reduce our debt, rethink our unsustainable entitlement programs, improve our educational system, and a dozen other critical issues. If one party is completely dominant we will simply get their version of the solutions, without a good national debate, and that will not be good for us.

Recommended: The Undercover Economist

The full title of Tim Harford's book is "The Undercover Economist: Exposing Why the Rich Are Rich, the Poor Are Poor - and Why You Can Never Buy a Decent Used Car!" There is a new revised and expanded 2012 version of this book out now. The original version was published in 2005.

 It is a wonderfully clear book, quite readable for those without a background in economics, and it makes clear why many things in the economy work as they do. Political economic policy is often based on a fantasy world divorced from the real world we all live in, which is why political solutions so often fail to achieve their stated objectives (not to mention that their stated objectives are often not the real objectives of those who propose them!). For anyone trying to figure out what the nation ought to be doing right now, and trying to evaluate the proposals of both parties, this book is a good starting point

Recommended: The New Reactionaries

It is easy to castigate the Republicans as reactionaries, wedding to keeping their fat cat supporters happy with lower taxes.  But Victor Davis Hanson argues that the liberals are also reactionaries in his September 7 National Review Online piece The New Reactionaries.And he makes a plausible case for his position.  This piece is worth thinking about.

Recommended: Historical Jesus

Historical Jesus is one of the Teaching Company's wonderful recorded college-level lecture series.  Prof Ehrman, the lecturer, is the James A. Gray Distinguished Professor at the Univ. of North Carolina at Chapel Hill, and author of  a number of books and articles on this subject. 

Christianity, founded on the teachings of a first-century itinerant Jewish rabbi named Jesus of Nazareth, has had a profound impact over the past two centuries on the civilizations of the world.  And of course an enormous amount of theological material has been written about him, and in his name.  But what really do we know about Jesus?  No contemporary Roman or Jewish records of him have been found. The first extant written record mentioning him is the gospel of Mark, apparently written by an anonymous author in Greek some 30-40 years after his death based on oral traditions.  And we don't even have the original of that document, but only copies that have passed through the hands of an indeterminate number of copiests who may have introduced errors and/or "clarifications" of their own.

And we know that the scriptures have been tinkered with extensively over the centuries, especially in the 4th and 5th centuries and in medieval times, to make them conform to political or religious dogmas that were important at the time (like the divine right of kings).  So what can a true academic historian (as opposed to a committed believer) tease out as likely to be accurate characteristics and sayings of Jesus?  I found the historical approach he describes and uses to be fascinating, and the results to be interesting.   

Prof. Ehrman is particularly good because although he argues for a particular interpretation of the historical evidence, he is at pains to point out many of the alternate and conflicting interpretations and academic debates. Well worth listening to, as are his two companion Teaching Company courses From Jesus to Constantine: A History of Early Christianity and Lost Christianities: Christian Scriptures and the Battles over Authentication

Recommended: The Accidental Theorist

Paul Krugman, 2008 winner of the Nobel Prize in economics, is a very smart guy, and an ardent apologist for the liberal views of economic policies..  His book The Accidental Theorist and Other Dispatches from the Dismal Science is a collection of some of his best articles in the New York Times and elsewhere.  I have to say that I often don't agree with his views, but that is all the more reason to try to understand them, and to understand the underlying assumptions that drive his views.  

His views are important (a) because he represents the liberal position on many economic issues, and makes good cases for them and (b) because he may well be right and I may be wrong, and one needs to constantly question and challenge one's views if one is more interested in gaining understanding and approaching truth than in just being comfortable.

Recommended: Unintended Consequences

Edward Conard is not an academic economist; he is a highly successful capital manager, a onetime head of Bain Capital's New York office. (ie - he walks the talk and shows results). His new book Unintended Consequences: Why Everything You've Been Told About the Economy is Wrong is an important book because it questions the very foundations of today's popular political policy making. This is not an easy book to read, with simple, intuitively plausible ideas.  It is not that it is too technical, too full of arcane economic terminology and impressive equations, as are some economics books.  It is hard because it requires looking at the whole economic system from the top down, as a complex interacting system, which is not the way it is usually explained to us. Nor is it biased to the liberals or the conservatives - he gives short shrift to the popular delusions of both sides.

I have had to reread sections a number of times to get my head around some of his arguments, but once understood they make a good case for his views, which are basically that what has made the American economy forge ahead of the rest of the world (and he shows it has, despite the current recession) is our appetite for innovation and risk taking. Policies which inhibit that risk-taking will inevitably harm and slow the economy.  A number of his ideas are contrarian - example: outsourcing low-skill low-wage manufacturing jobs to other nations is a GOOD thing for us (that frees capital and labor in this country for more productive, higher value-add work) and for them (labor wages may be low by our  standards, but they are a substantial improvement over the agrarian work alternatives they have).  It takes some work to absorb his arguments, but if he is right (and I am slowly coming around to his views on many of these points), then neither the Democrats nor the Republicans have viable plans to restore this nation's economy.

This book is well worth the (considerable) investment it will take to fully understand his ideas.

Household hint

Like many people, we started years ago replacing high wattage incandescent light bulbs around the house with compact fluorescent bulbs, to save electricity and lower our electric bill. They work just fine, but what we didn't realize is that they put out a lot of ultraviolet radiation -- not enough to be a health hazard of course, but still quite a bit.  We had a pair of lamps in our living room with these bulbs, and after some years the lamp shades just fell apart. You could put your finger right through the fabric.  The ultraviolet radiation had simply weakened them until they were like tissue paper.

The lesson is, if you have lights with lampshades, use the new led lights instead of compact fluorescent bulbs and save your lampshades.  They don't put out much, if any, ultraviolet radiation.

The new Philips Ambient LED lights work wonderfully (don't be put off by the bright yellow glass when they are off - they are a perfect match to a warm white incandescent lamp when on). We are using the 17 watt ones (equivalent to a 75 watt bulb), but Philips has announced that 100-watt equivalent bulbs will also be available this fall.  The initial cost is high, of course (near $35 per lamp), but is more than recovered over the very, very long life of the lamp.  But of course replacement lampshades can be very expensive, so it is worth it.