If there is one thing that is painfully obvious these days, it is that the grand economic models that have won some economists fame, fortune, and even Nobel Prizes, are shams. All those fancy models didn't accurately model the risks in the derivatives market. All those fancy models didn't forecast the current global financial crisis. The stimulus steps those models predicted would stem the recession and limit unemployment well below 8% have failed, and failed miserably. Economists are quick to explain away these failings in all sorts of ways, but the test of a scientific principle is that it works, and their models clearly don't work.
Of course there have been people telling us all along that the emperor had no clothes, among them Nassim Taleb (author of The White Swan), Warren Buffet (the immensely successful investment manager) and economist Nouriel Roubini (known as "Dr Doom" before his predictions of imminent market failure all turned out to be highly accurate). But the academic economists and their highly-paid brethren in the financial industry ignored these voices, naively content that their elaborate models accurately modeled the world.
Oxford mathematician David Orrell argues in his book Economyths: Ten Ways That Economics Gets it Wrong (2010) that the fundamental assumptions underlying current economic dogma (or ideology, as he terms it) are false, and explores the roots of these myths in the history of civilization. This is a serious book, despite being only a 250 page paperback (proof that size, cost, and abstruseness of an economics book is no reliable indicator of its worth). This book is well worth reading, and a good follow-on to my previous recommendation, Economics Without Illusions.
Sunday, September 4, 2011
Friday, September 2, 2011
On choosing colleges
I have been involved a great deal lately in helping to find colleges for my grandchildren. In the course of this I have done a good bit of research and a lot of thinking. The results of this research and thinking will not please – and indeed may well offend – those who work in colleges, but I offer it for consideration by others facing the same daunting task.
College is certainly an important part of growing up middle- or upper-class in America, though of course for 7 out of 10 American youngsters college isn't even an option they are interested in. But let’s put some realistic perspective on it.
1. College is not highly correlated with success in life. For example, a number of billionaires, beginning with Bill Gates (who created Microsoft), and including Steve Jobs (who created Apple computing) and Steven Spielberg (who doesn’t know who he is?), never finished college and many more successful people never even started college. But of course, a lot of hamburger-flippers are also college dropouts, so dropping out isn't a predictor of high wealth either!
2. Colleges, for obvious marketing reasons, like to quote the correlation between college education and higher earnings through life. The correlation is real, and substantial, but it does not logically follow that college is the cause of those higher earnings. People who go to college in the first place are (a) brighter than average, (b) more motivated than average, (c) more disciplined than average, (d) usually come from a more intellectual home than average, (e) and generally come from relatively well-off families who start them off with more financial support, better education, and better health. Those factors alone would correlate highly with more work success and higher earnings, even absent college.
3. Nonetheless, it is true that having a college degree substantially increases job opportunities, and is a pre-requisite for many jobs. But only in a very few fields does it matter what college granted the undergraduate degree, or even what one’s major field was. That is even true for those going on to graduate school. While it is true that colleges offer specialized undergraduate preparation for some fields, like pre-med or pre-engineering, in fact I have known a number of people who went on to graduate school in fields completely unrelated to their undergraduate major, and did just fine.
4. College does not really educate people (yes, I know this will be a controversial claim) . Most of what they will teach (though perhaps less so in math and some sciences) is, if not outright wrong, at least heavily biased by the narrow academic outlook and/or oversimplifed and dumbed-down to the level of the mediocre student -- after all, professors who flunked almost all their students wouldn't last long.
Unlike trade schools, where electricians learn to do real wiring and welders learn to actually weld and accountants learn to actually keep real books and doctors learn to actually treat real sick people (yes, medical school is a trade school too), undergraduate college teaches very few practical skills of use in the job market. Good expository writing may be one of the few exceptions here, and since the majority of graduates don't even learn that very well, colleges can hardly take much credit. In general, companies train their new employees in what they need to know, because their college degree didn't teach them that.
5. College these days is exorbitantly expensive for what one gets from it. As one parent put it, “putting your child through college is like driving a brand new $60,000 Maserati luxury sports car to the college every year, leaving it parked unlocked with the keys in it, and taking a bus back home”. College prices have gone up much faster than inflation for years now, as colleges grew from modest educational institutions into big businesses. But is college really worth that much?
Bright Asian students all over India and China are training themselves to be top-flight engineers and scientists and programmers and entrepreneurs for free over the internet and from used, dog-eared textbooks without spending $200,000 for an undergraduate degree. It is true they don't by this method get exposure to an anal-retentive analysis of American short stories, an abbreviated and biased survey of European history, or the economic fallacies and useless oversimplifications taught in Economics 101, but one would be hard pressed to argue that is worth hundreds of thousands of dollars to anyone except the college faculty members who teach these courses.
6. College rankings are largely meaningless. Read Malcolm Gladwell’s New Yorker article The Order of Things. Of course, if status is important, than going to a “high-status” school does matter, whatever it costs.
7. The average college curriculum, and for that matter the college entrance requirements as well, have emerged from a complex mix of historical precedence (the so-called "liberal" education of 19th century rich and privileged young men), marketing requirements (to keep up with other colleges), and bitter faculty infighting (about the amount of funding for each department). It has very little to do with what students really require to prepare them for today's world or today's job market.
8. In that regard, it is worth noting that European universities, following the Bologna Process, which aims to standardize university-level education across Europe, offer undergraduate programs that last only three years (6 semesters of 13 weeks each). And students can complete their undergraduate studies in two years if they participate in two intensive summer semesters. American undergraduate schools bulk that out to 4 years or more with “distribution” requirements to force students to take courses in fields that don’t even interest them. This is rationalized as “broadening their education”, but in reality has more to do with assuring that every academic department gets enough enrollments to survive and prosper. Of course it also costs students and their parents 25-30% more in money and time.
The objective, I have decided, is to find a college where one’s children or grandchildren can earn an undergraduate degree without (a) bankrupting the family or (b) leaving the child with a massive student loan debt at the end of college, and where (c) they can get some reasonable contact with good teachers. There are colleges that fit these requirements, but one has to look
College is important in today's America, but it is not all-important, whatever college recruiting materials like to say.
College is certainly an important part of growing up middle- or upper-class in America, though of course for 7 out of 10 American youngsters college isn't even an option they are interested in. But let’s put some realistic perspective on it.
1. College is not highly correlated with success in life. For example, a number of billionaires, beginning with Bill Gates (who created Microsoft), and including Steve Jobs (who created Apple computing) and Steven Spielberg (who doesn’t know who he is?), never finished college and many more successful people never even started college. But of course, a lot of hamburger-flippers are also college dropouts, so dropping out isn't a predictor of high wealth either!
2. Colleges, for obvious marketing reasons, like to quote the correlation between college education and higher earnings through life. The correlation is real, and substantial, but it does not logically follow that college is the cause of those higher earnings. People who go to college in the first place are (a) brighter than average, (b) more motivated than average, (c) more disciplined than average, (d) usually come from a more intellectual home than average, (e) and generally come from relatively well-off families who start them off with more financial support, better education, and better health. Those factors alone would correlate highly with more work success and higher earnings, even absent college.
3. Nonetheless, it is true that having a college degree substantially increases job opportunities, and is a pre-requisite for many jobs. But only in a very few fields does it matter what college granted the undergraduate degree, or even what one’s major field was. That is even true for those going on to graduate school. While it is true that colleges offer specialized undergraduate preparation for some fields, like pre-med or pre-engineering, in fact I have known a number of people who went on to graduate school in fields completely unrelated to their undergraduate major, and did just fine.
4. College does not really educate people (yes, I know this will be a controversial claim) . Most of what they will teach (though perhaps less so in math and some sciences) is, if not outright wrong, at least heavily biased by the narrow academic outlook and/or oversimplifed and dumbed-down to the level of the mediocre student -- after all, professors who flunked almost all their students wouldn't last long.
Unlike trade schools, where electricians learn to do real wiring and welders learn to actually weld and accountants learn to actually keep real books and doctors learn to actually treat real sick people (yes, medical school is a trade school too), undergraduate college teaches very few practical skills of use in the job market. Good expository writing may be one of the few exceptions here, and since the majority of graduates don't even learn that very well, colleges can hardly take much credit. In general, companies train their new employees in what they need to know, because their college degree didn't teach them that.
5. College these days is exorbitantly expensive for what one gets from it. As one parent put it, “putting your child through college is like driving a brand new $60,000 Maserati luxury sports car to the college every year, leaving it parked unlocked with the keys in it, and taking a bus back home”. College prices have gone up much faster than inflation for years now, as colleges grew from modest educational institutions into big businesses. But is college really worth that much?
Bright Asian students all over India and China are training themselves to be top-flight engineers and scientists and programmers and entrepreneurs for free over the internet and from used, dog-eared textbooks without spending $200,000 for an undergraduate degree. It is true they don't by this method get exposure to an anal-retentive analysis of American short stories, an abbreviated and biased survey of European history, or the economic fallacies and useless oversimplifications taught in Economics 101, but one would be hard pressed to argue that is worth hundreds of thousands of dollars to anyone except the college faculty members who teach these courses.
6. College rankings are largely meaningless. Read Malcolm Gladwell’s New Yorker article The Order of Things. Of course, if status is important, than going to a “high-status” school does matter, whatever it costs.
7. The average college curriculum, and for that matter the college entrance requirements as well, have emerged from a complex mix of historical precedence (the so-called "liberal" education of 19th century rich and privileged young men), marketing requirements (to keep up with other colleges), and bitter faculty infighting (about the amount of funding for each department). It has very little to do with what students really require to prepare them for today's world or today's job market.
8. In that regard, it is worth noting that European universities, following the Bologna Process, which aims to standardize university-level education across Europe, offer undergraduate programs that last only three years (6 semesters of 13 weeks each). And students can complete their undergraduate studies in two years if they participate in two intensive summer semesters. American undergraduate schools bulk that out to 4 years or more with “distribution” requirements to force students to take courses in fields that don’t even interest them. This is rationalized as “broadening their education”, but in reality has more to do with assuring that every academic department gets enough enrollments to survive and prosper. Of course it also costs students and their parents 25-30% more in money and time.
The objective, I have decided, is to find a college where one’s children or grandchildren can earn an undergraduate degree without (a) bankrupting the family or (b) leaving the child with a massive student loan debt at the end of college, and where (c) they can get some reasonable contact with good teachers. There are colleges that fit these requirements, but one has to look
College is important in today's America, but it is not all-important, whatever college recruiting materials like to say.
Wisdom
I have decided that true wisdom is an acute awareness of how much one doesn't know, together with an intense suspicion of the validity of everything one thinks one does know.
I have attained that state.
While reading Heath's provocative book Economics Without Illusions, cited in my last post below (and listed in my book list in the sidebar) I realized that I subscribed firmly to two or three each of the economic fallacies of the left and of the right (I am politically a moderate in the center, so can be deluded equally by either side). I am now having to rethink those positions as a result of Heath's arguments. I can take some comfort in the fact that many prominent economists, politicians, and even a few Nobel prize winners have been and still are deluded by the same logical fallacies, and since I have no political or academic reputation to defend in the field, I have the luxury of simply admitting I was wrong and changing my views.
I have attained that state.
While reading Heath's provocative book Economics Without Illusions, cited in my last post below (and listed in my book list in the sidebar) I realized that I subscribed firmly to two or three each of the economic fallacies of the left and of the right (I am politically a moderate in the center, so can be deluded equally by either side). I am now having to rethink those positions as a result of Heath's arguments. I can take some comfort in the fact that many prominent economists, politicians, and even a few Nobel prize winners have been and still are deluded by the same logical fallacies, and since I have no political or academic reputation to defend in the field, I have the luxury of simply admitting I was wrong and changing my views.
Monday, August 29, 2011
Recommended: Economics Without Illusions: Debunking the Myths of Modern Capitalism
Joseph Heath, author of Economics Without Illusions, is not an economist, as he readily admits. He is a philosophy professor at the University of Toronto. He approaches economics from the point of view of understanding whether the common arguments made by economists and those who supposedly interpret economists (like politicians and journalists) are logically valid or sustainable. Heath is an equal-opportunity critic. The book is divided into two parts of about equal length: the fallacies of the right and the fallacies of the left. And there are a lot of each. This is an important book to read, because a lot of these fallacies are driving the agendas of the conservatives and liberals today, to the great detriment of the nation.
Wednesday, August 24, 2011
Recommended: Special Providence
I just read and highly recommend Walter Russell Mead's 2001 book Special Providence: American Foreign Policy and How it Changed the World
Mead’s central argument in this book, well supported by his historical review, is that despite the conventional wisdom that America didn’t even have a foreign policy until World War II, and has been largely inept ever since, actually America has had an active foreign policy since its inception, and in general our foreign policy has been far wiser and far more effective that most other nations, from following our “Manifest Destiny” to sweep across the continent and unite the whole land into one nation (think how much less powerful we would be if what is now America were still divided up into separate Spanish and French and English and American nations) to our maneuvering in World War II that left us a superpower. As Mead argues, America’s foreign policy has shaped today’s world, and in general it has shaped it better than competing nations would have shaped it.
Mead’s central argument in this book, well supported by his historical review, is that despite the conventional wisdom that America didn’t even have a foreign policy until World War II, and has been largely inept ever since, actually America has had an active foreign policy since its inception, and in general our foreign policy has been far wiser and far more effective that most other nations, from following our “Manifest Destiny” to sweep across the continent and unite the whole land into one nation (think how much less powerful we would be if what is now America were still divided up into separate Spanish and French and English and American nations) to our maneuvering in World War II that left us a superpower. As Mead argues, America’s foreign policy has shaped today’s world, and in general it has shaped it better than competing nations would have shaped it.
Friday, August 19, 2011
Recommended: Jobs Program? Here Are 3 Essential Ingredients
Jonathan Cohn in The New Republic has a piece Jobs Program? Here Are 3 Essential Ingredients that is worth reading. His three points -- make it big enough, do it soon enough, and be smart about how we do it -- make sense to me. Whether our polarized, ideology-driven (both Republican and Democrat) political machine in Washington can manage to do any of those three things is a real question, though.
Thursday, August 18, 2011
A naïve administration
We are now in the fifth month of supporting the rebels in Libya, and the fighting and bombing continues with no end in sight. Recall that on March 18 President Obama assured Congress that American involvement in Libya would be a matter of "days, not weeks", yet five months later we are still supplying substantial and expensive support (fuel, munitions, logistics, intelligence, air refueling, etc) to NATO forces.
Recall also that then-Secretary Gates and several of his top generals warned the administration in public that this would not be so easy, but were pointedly ignored by the White House. That "days, not weeks" estimate by Obama looks pretty naïve now.
Recall also that then-Secretary Gates and several of his top generals warned the administration in public that this would not be so easy, but were pointedly ignored by the White House. That "days, not weeks" estimate by Obama looks pretty naïve now.
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