The Great Gatsby Curve: A Brookings Conversation

“Every so often,” announces the Brookings Institution, “an academic finding gets into the political bloodstream. A leading example is “The Great Gatsby Curve,” describing an inverse relationship between income inequality and intergenerational mobility. Born in 2011, the Curve has attracted plaudits and opprobrium in almost equal measure. Social Mobility Memos is taking a look at opinions from both sides of the argument.”

Thus far, there are posts by:

Check out the series.

Globalization Leads to Mass Human Flourishing

That’s what Ronald Bailey argues in the June issue of Reason. What are his reasons? Globalization–which he defines as “the open exchange of goods”–produces:

  • Longer, Healthier Lives
  • Women’s Liberation
  • Less Child Labor
  • Faster Economic Growth
  • Higher Incomes
  • Less Poverty
  • More Trees
  • Peace
  • More Productive Workers
  • Better Job Prospects

Each section has a number of studies to bolster his claim. Check it out.

What I Saw of Shiloh: Honoring Memorial Day

Memorial Day originally commemorated the fallen of the American Civil War. While it was later expand to include all of the wars fought by the USA, it is good never to forget its roots. Ambrose Bierce is one of my favorite authors. He combined absolute mastery of the English language with dark, sardonic, and witty insights into human nature. Some of his finest work draws upon his experiences in the Civil War. Bierce fought through most of it, and it would be an understatement to say that the death, horror, courage, stupidity, and uselessness he saw deeply impacted him for the rest of his life. Nothing quite captures the horror of being trapped and isolated like his story, One of the Missing. Read it, and it will send chills down your spine. Even this doesn’t compare to the powerfully understated recollections he wrote of leading men into battle. Take a little time today to read What I Saw of Shiloh, I promise it will deeply move you and lend a little more meaning to this day.

Feeding the World With GMOs

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Golden rice was possible only with genetic engineering. The crop was stalled for more than ten years by the working conditions and requirements demanded by regulations…For example, we lost more than two years for the permission to test golden rice in the field and more than four years in collecting data for a regulatory dossier that would satisfy any national biosafety authority. I therefore hold the regulation of genetic engineering responsible for the death and blindness of thousands of children and young mothers.

This comes from Ingo Potrykus’ rather famous article in a July 2010 issue of Nature and is a written slap in the face to anti-GMO activists and the politicians who embrace them. This opposition has been described as partisan, though the anti-science stances of various parties are much closer than we often assume. I was reminded of the above quote after reading an article in Newsweek discussing new biotechnology and its opposition:

In 2012, a new tool was invented that revolutionizes how scientists can examine—and manipulate—plant genetic processes. It’s called CRISPR-Cas9, and unlike its predecessors in the world of genetic modification, it is highly specific, allowing scientists to zero in on a single gene and turn it on or off, remove it or exchange it for a different gene. Early signs suggest this tool will be an F-16 jet fighter compared with the Stone Age spear of grafting, the traditional, painstaking means of breeding a new plant hybrid. Biologists and geneticists are confident it can help them build a second Green Revolution—if we’ll let them.

…The process can easily modify plant DNA without changing the plant’s essence—except to make it tastier, more nutritious, quicker to market, easier to ship, machine-pickable, less needy of water and/or able to flourish in a heat wave. And we can do it for big companies and small, the world at large and isolated communitiesIn the old days, relying on hit-or-miss natural processes to breed plants took many years. Norman Borlaug, father of the first Green Revolution—a hugely successful effort to improve food-crop productivity in poor countries that began in the 1940s and eventually doubled or even quadrupled what many plants could produce—needed almost two decades to create a better wheat variety. With CRISPR-Cas9, we can compress that development cycle to a few days or weeks.

And yet, the activists continue to protest:

  • “Mexico, where maize was first domesticated, must now import it to meet local demand because activists there will not allow genetically modified organism hybrids. Mexico’s maize growers get yields 38 percent lower than the world average and three times below the U.S., where 90 percent of the maize crop is an insect-resistant GMO hybrid. Mexico’s fields are beset by such crop ravishers as the corn earworm, black cutworm and fall armyworm, which cost the country up to half its crops and incite farmers to spray their land with thousands of tons of chemical insecticides.”
  • “The European Union has approved just one genetically modified crop, a type of maize used for animal feed. The reasons are political and bureaucratic: A majority of member countries must approve a biotech plant, and anti-GMO sentiment runs strong in places where phrases like naturel and natürliche are more about what’s been done for centuries than what it actually means for something to exist in or be caused by nature.”
  • “The notion of GMOs has spooked environmental groups such as Greenpeace, which has resisted GMOs with violent action, including destroying an experimental Golden Rice field last year in the Philippines. This despite the fact that Golden Rice is being offered to the world by a nonprofit, with no commercial stipulations, and is likely to save many lives.”
  • ““No GMO” is now being embraced by consumer brands; the ascendant “fast-casual” chain Chipotle posts just such a sign in its restaurants. It makes sense: If over two-thirds of Americans think GMOs are unhealthy, declaring yourself GMO-free is a lucrative proposition. Local governments are also weighing in. Vermont now demands that all GMO foods sold there be labeled as such. Two rural counties in Oregon have banned GMO crops within their borders.”

The article ends with a quote from Gengyun Zhang, head of life sciences for BGI (China’s giant state-sponsored genetic engineering center): “With today’s technology, I have no doubt that we can feed the world.” Considering that the number of scientists who think GMOs are safe is slightly higher than those who think climate change is mostly due to human activity, perhaps we should give science a chance and activists the cold shoulder.

The Real Gap Between Worker and CEO Pay

You’ve probably heard a lot about the growing gap between average worker pay and CEO pay. This seems like a legitimate concern, but I’ve had some questions about the data and the assumptions ever since I first started hearing the statistics. I would kind of expect, for example, that CEOs of larger companies would probably get paid more. So if you had two companies with 1,000 employees each and they merged and you ended up with one CEO of a company that had 2,000 employees, do you think he’d get a raise? So consolidation (which might be a bad thing for other reasons) might inflate the average worker to CEO salary ratio in ways that aren’t necessarily that bad.

In any case, the American Enterprise Institute has a related critique of those figures. It turns out that most of them are based on a very small sample size (the WSJ looked at only 300 CEOs, the AP looked at only 337, and the AFL-CIO looked at 350). Not only are these samples small, but they’re also heavily skewed towards the biggest companies. And so, as the AEI points out, “Although these samples of 300-350 CEOs are representative of large, publicly-traded, multinational US companies, they certainly aren’t very representative of the average US company or the average US CEO.” Turns out, there are more than a quarter million CEOs in the country. Comparing average worker salary to the 350 or so from the biggest companies is like comparing average worker salary to the top 0.1% of CEO salaries.

If you do compare average worker salary to average CEO salary (which can be done, the data is available), then the gap drops from 331:1 to 3.8:1 and the apparent growth over the last 13 years disappears.

897 - Average Worker to CEO Pay

I think a realistic assessment of the statistics is important, but I’m not willing to go quite so far as the AEI: “We should applaud the richest 300-350 CEOs as a group of the most successful American business professionals.” I think there are real questions about whether CEO pay is really an accurate reflection of their contribution to the economy, and there are also serious questions about how compensation structure can create perverse incentives where high-paid executives take risky strategies that end up rewarding them when they win and penalizing the rest of us (via bailouts and economic downturns) when they lose. And do the top 0.1% of CEOs really need our applause? Aren’t their salaries enough?



In Which: People Respond to Incentives (and Patients Die) [RETRACTED]

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UPDATE: Commenter JohnM points out that the source for this story is a satirical website. I checked, and sure enough it even says “Earth’s Finest Medical Satire News Website” right at the top of the page.

896 - Satire

Obviously, I’m incredibly embarrassed. I put a lot of thought and effort into a story that is 100% fake. I’ve been tricked on the Internet before (who hasn’t?) but never so thoroughly. I was strongly tempted to delete this post and pretend it had never happened, but in the interests of transparency, I’ve decided to just add this note but otherwise leave it up in all its humiliating glory.

The discipline of economics has lost a lot of prestige since the start of the Great Recession, and there’s some validity to that. In addition, everyone writing about cognitive biases and irrational behavior likes to pound on economists for their assumption that humans are fundamentally rational agents. There’s even a snarky term for it: Homo economicus. Sneering at economists and their silly, unrealistic models of human behavior can be taken too far, however. The reality is that economists and their assumptions of human rationality actually do provide some pretty useful insights into human nature. Far and away the most useful of these can  be distilled into a simple mantra: people respond to incentives.

This is one of those things that seems obvious right up until you realize that it isn’t. Or, rather, that people (other than economists in particular) are really, really bad at keeping it in mind. Ergo, you get absolutely crazy ideas like paying doctors based on patient satisfaction. Now, if you’d asked an economist about that plan, they could have told you pretty quickly that it was a Bad Idea. But, since nobody bothered to ask an economist, the study went right on ahead until someone looked at the preliminary data and realized that it had more than doubled patient mortality. Yes: this policy increased deaths by 238%. Oops.

Why? Because people respond to incentives. And so if you pay doctors for, in effect, how happy they make their patients than doctors will alter their behavior to make patients happier. Which, as it turns out, might not make them healthier. Or, you know, alive at all. Some examples:

The problem with linking reimbursement to patient satisfaction is completely flawed from the start.  Here’s an example.  A patient that weighs 340 pounds comes into your clinic.  We all know the healthiest intervention for this patient is weight loss.  However, if a doctor mentions weight loss to the patient and they get upset, guess what? Negative patient satisfaction survey, which could mean decreased reimbursement.  A doctor looking for increased reimbursement will possibly tell the patient that everything looks great and just keep doing what you are doing in eating those cheeseburgers.  Guess what, excellent patient satisfaction survey.

Here’s how non-economists react to this kind of thing. First, if you predict it ahead of time, they frown at you for your cynical, reductive view of human nature. Second, when it actually happens, they get frustrated with how callous and immoral people are. As a general rule, non-economists therefore tend to (1) vastly over-estimate the morality of human actors when confronted with perverse incentives and (2) attribute the consequences of perverse incentives to moral defects in certain classes of people. This explains Marxism’s ongoing popular appeal, by the way. It incorporates both the naive faith in centralized planning and communal ownership and also retroactive anger at the behavior of those at the top of the pyramid. The reality of the former (centralized planning and communal ownership) is that they don’t work. The reality of the latter (the evils of the capitalist class) is that rich people don’t become rich because their immorality lets them profit from exploitation. Rather, rich people tend to become exploitative because they are responding in predictable ways to their economic interests. In other words: people respond to incentives.

Now, don’t get me wrong. I’m not saying that incentives excuse bad behavior. I’m just saying that we should avoid conflating moral judgment (where the character of the individual means everything) with policy design (which is and ought to be one-size fits all). In terms of morality, you can get mad that people respond to incentives and wish they wouldn’t. You can even work hard to help people resist and behave in deliberate, rational, self-aware altruism. But please, please don’t design policy that depends on that! Because, as economists will tell you, people respond to incentives. And they’re very, very good at it.

Cherry picking healthy patients and avoiding sicker patients was clearly evident in the study.  “One physician told a dialysis patient that it was OK to skip a week of dialysis so that the patient could head down to Disneyland,” said an undercover internal medicine physician.

He had the patient fill out a glowing survey before leaving the clinic.  A week later when the patient returned with chest pain and peaked T waves, the physician forced his junior partner to see the patient, so that he could see teenager sports physicals.  For the physicals he just signed on the bottom line and had all patients in and out in 5 minutes.  He received glowing satisfaction surveys from parents due to the quickness of his exams, without ever laying a stethoscope on them.

You can sputter in rage about this kind of hypocritical profiteering all you want. I’m sure the designers of the study were angry as well as dismayed. But they still stopped the study. Better still? The should never have concocted such an absurd policy to test out in the first place. Here’s one more unintended consequence, by the way:

The study also showed an 858% increase in antibiotic prescriptions to patients with viral like symptoms in the survey group. Those patients developed more antibiotic resistant infections and C. diff than over the placebo group. ER physician, Dr. Rachel Kenners said, “If we don’t give antibiotics to patients who come to the ER for their runny nose and cough, than we are almost guaranteed a negative survey. To get paid and to keep our jobs, we have to prescribe antibiotics even though they aren’t warranted.”


Couple of final observations.

First, this particular study could have been improved vastly by changing the time at which patient satisfaction is measured. A lot of the problems were about short-run vs. long-term consequences. Tell somebody who is morbidly obese that everything is fine and they might be happy in the moment, but come back in a year and ask them then.

Second, I’m not saying that economists could have perfectly predicted the exact consequences of this policy. I do think that they would have been far more skeptical, but human beings are very innovative hackers. That’s part of our nature. And the doctors who actually lived in this system had a much greater incentive to figure out ways to game it than the scholars who came up with it. So, since people respond to incentives, you could hardly expect policy makers in general to be as clever at breaking the system as the people it will be applied to. But that itself is a lesson: be careful about trying to manipulate people with cleverly designed policies.


Secret to More Income or Marriage: Location

Where you live affects both your income and your chance of getting married according to recent research by economist Raj Chetty and others at the Equality of Opportunity Project. Both studies were covered in a couple interactive articles in The New York Times. On location and income, the NYT reads,

Location matters – enormously. If you’re poor and live in the Dallas area, it’s better to be in Cooke County than in Kaufman County or Dallas County. Not only that, the younger you are when you move to Cooke, the better you will do on average. Children who move at earlier ages are less likely to become single parents, more likely to go to college and more likely to earn more. Every year a poor child spends in Cooke County adds about $210 to his or her annual household income at age 26, compared with a childhood spent in the average American county. Over the course of a full childhood, which is up to age 20 for the purposes of this analysis, the difference adds up to about $4,100, or 16 percent, more in average income as a young adultThese findings, particularly those that show how much each additional year matters, are from a new study by Raj Chetty and Nathaniel Hendren that has huge consequences on how we think about poverty and mobility in the United States. The pair, economists at Harvard, have long been known for their work on income mobility, but the latest findings go further. Now, the researchers are no longer confined to talking about which counties merely correlate well with income mobility; new data suggests some places actually cause it“The broader lesson of our analysis,” Mr. Chetty and Mr. Hendren write, “is that social mobility should be tackled at a local level.”

You can actually check to see how your county stacks against others. Mine (Denton County, TX) is “about average in helping poor children up the income ladder. It ranks 1,171st out of 2,478 counties, better than about 47 percent of counties.”

But where you live doesn’t just affect income, but the odds of marriage:

The most striking geographical pattern on marriage, as with so many other issues today, is the partisan divide. Spending childhood nearly anywhere in blue America — especially liberal bastions like New York, San Francisco, Chicago, Boston and Washington — makes people about 10 percentage points less likely to marry relative to the rest of the country. And no place encourages marriage quite like the conservative Mountain West, especially the heavily Mormon areas of Utah, southern Idaho and parts of Colorado. These conclusions — based on an Upshot analysis of data compiled by a team of Harvard economists studying upward mobility, housing and tax policy — are not simply observations about correlation. The economists instead believe that they have identified a causal role that geography plays in people’s lives. The data, which covers more than five million people who moved as children in the 1980s and 1990s, suggests that children who move from, say, Idaho to Chicago really do become less likely to marry, even if the numbers can’t explain exactly why these patterns exist.

Political ideology isn’t the only thing that may encourage or discourage marriage. The Deep South encourages affluent children to marry, while discouraging low-income children of all races. Small towns (or low population density) also encourage marriage.

While this isn’t addressed in the articles, I’m curious if the influence on income and marriage are linked. Either way, Chetty’s work is very exciting. I’m watching him with growing interest.

Good, Evil, and Confusion Between the Two

Last week I wrote about some philosophers who were concerned with the unfair advantage enjoyed by children in loving families. What I didn’t mention at the time was that once, when I was on a messageboard back in the late 1990s, I was subject to an insult that has stuck with me for the rest of my life because of it’s incredible oddness. I was accused of being “emotionally spoiled.” As far as I can tell, this is an innovative way to call someone well-adjusted when you’re angry at them.

In any case, it reminded me of this amusing post from Jr. Ganymede:

I have this friend who is always exercising and carefully watching what she eats.  She won’t even go into a McDonald’s, because she says its just not the right environment for what she’s trying to do.  So restrictive!

Yeah, she’s fit, superficially.  But it’s not true fitness.  It’s naive fitness.  It’s sheltered fitness.  True fitness is when you stop living in some “exercise and nutrition” bubble and you go pork out on your couch in the real world.

Or, if you prefer the classics, there’s C. S. Lewis:

A silly idea is current that good people do not know what temptation means. This is an obvious lie. Only those who try to resist temptation know how strong it is. … You find out the strength of a wind by trying to walk against it, not by lying down.

Of course these two ideas–growing up in a good family and thus being “emotionally spoiled” on the one hand and avoiding temptation on the other–are very different. I get no credit for the circumstances of my home life and I’m not claiming to be a good person. But there is an important similarity: and that is that the world has ways of sneering at things that are beautiful and trying to make you feel ashamed for liking them. You grew up in a good family? Then you’re the beneficiary or privilege and unfair advantage. You’re basically cheating at life. You’re trying hard to avoid temptation and follow rules? Then you’re shallow and superficial.

Don’t let the world confuse you.

Don’t let them get you to trade your heroes for ghosts. Don’t give up trees for hot ashes. Don’t exchange your walk on part in a war for the lead role in a cage.

Don’t let anyone tell you that darkness is light and that light is darkness. Don’t forget the difference between the bitter and the sweet.

Never forget, there are four lights.

But sometimes we do forget. Sometimes we make the trade.

When that happens, try to remember one more thing about bad deals: “Ye have sold yourselves for naught, and ye shall be redeemed without money.”

Georgetown University Panel: Obama, Putnam, and Brooks on Poverty

The President joined Harvard’s Robert Putnam and AEI’s Arthur Brooks on a panel at Georgetown University on the problem of poverty. It’s an interesting discussion that displays not only how liberals and conservatives view and approach the problem of poverty, but how they believe each other approaches it. It’s an enlightening and somewhat irritating thing to behold, but worth the watch.

Check it out below.

The New Atheism As Religion

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Yes, yes. I’m well aware that seeking to sound clever with oxymoronic titles is tiresome, but–as John Gray argues in What Scares the New Atheists–religion and atheism are not actually contradictory. Not necessarily, in any case. The argument, which is worth reading in full, begins with the simple observation that atheism has historically reflected the morality of the times, just as religion often does, and Gray begins with a particularly embarrassing list of examples of atheists who provided the “scientific” basis of racism prior to World War II.

Now, this isn’t a case of someone just blaming the Nazi’s on atheism, which would be silly, and now is as good a time as any to point out that Gray is himself an atheist. His point isn’t that morality is impossible for an atheist or that atheism tends irreversibly towards moral oblivion and solipsism. Instead, his first point was simply that “none of the divergent values that atheists have from time to time promoted has any essential connection with atheism, or with science.” Got it? No necessary connection between liberal morality and atheism.

What’s more, Gray argues that liberal morality is itself a kind of derivative of traditional Jewish and Christian religious beliefs:

The trouble is that it’s hard to make any sense of the idea of a universal morality without invoking an understanding of what it is to be human that has been borrowed from theism. The belief that the human species is a moral agent struggling to realise its inherent possibilities – the narrative of redemption that sustains secular humanists everywhere – is a hollowed-out version of a theistic myth.

He also points out that while it’s not very difficult to come up with universal values (e.g. based on self-interest, reciprocity, and so forth), “Universal values don’t add up to a universal morality.” This is one of the most astute observations in the piece. As Gray points out, once you have a bunch of universal values, you still have to deal with the fact that “such values are very often conflicting, and different societies resolve these conflicts in divergent ways.”

Gray also dispatches with the idea that religion is some kind of unique source of evil in the human experience. While conceding that various religions are flawed in various ways, he writes that

The fault is not with religion, any more than science is to blame for the proliferation of weapons of mass destruction or medicine and psychology for the refinement of techniques of torture. The fault is in the intractable human animal. Like religion at its worst, contemporary atheism feeds the fantasy that human life can be remade by a conversion experience – in this case, conversion to unbelief.

So, what’s the point? Gray’s central thesis is that the New Atheism is basically a fearful reaction to the awareness that the secularization hypothesis isn’t going to fly. The world is not abandoning religion and, in fact, there’s no good reason to believe that it ever will. Gray cites Stuart Hampshire:

It is not only possible, but, on present evidence, probable that most conceptions of the good, and most ways of life, which are typical of commercial, liberal, industrialised societies will often seem altogether hateful to substantial minorities within these societies and even more hateful to most of the populations within traditional societies … As a liberal by philosophical conviction, I think I ought to expect to be hated, and to be found superficial and contemptible, by a large part of mankind.

Well, the New Atheists don’t want to face that. They don’t like the idea that their cherished liberal views (which, mind you, are not actually in any way logically linked to atheism) are not going to be universally accepted. And so they embrace a radical, doctrinaire form of atheism that involves an awful lot of pseudo-religious mechanisms: from evangelizing to witnessing to conversion narratives. In the end, Gray writes that “What today’s freethinkers want is freedom from doubt, and the prevailing version of atheism is well suited to give it to them.”

The final irony is that fear is driving the New Atheists to become in every way the mirror image of the doctrinaire, blind-faith religions they claim to despise.