Undorsements

It seems the Concord, NH paper has started an interesting trend. Many people have not decided who to vote for yet, but it is an interesting exercise to talk about those you have definitely crossed off your list. In fact, this may be a more important first step, as anyone familiar with instant runoff systems can tell you.

So here are my "undorsements" and the reasons for them.

On the GOP side, I undorse Guiliani. I think he has zero experience in the areas I care about - international economics/trade, foreign policy. And his reputation for being a strong leader is based on standing tall after 9/11. I am more shocked that there were politicos who didn't. Standing tall doesn't indicate any insight, just a presence. Personally, I want a president with talent as well. And his rep for crimefighting came with a lot of negative tradeoffs. For the same reasons I am against the most of the Patriot Act, I don't give Guiliani much credit for NYC's crime reduction. And running a major metro area is nothing like running a country, no matter how many people it has or the size of its economy.

On the dem side, I undorse Edwards. His fear mongering populism is the worst thing we can do now. He can claim to be for the middle class, working man/woman, etc, but the policies he proposes would not be good for them, let alone the wealthy or very poor. It is one thing for a candidate to intelligently pursue an agenda that I don't agree with. At least I can respect and understand that. But someone who just has no clue, or is being dishonest to attract voters, is much worse. If he is clueless, then he will easily be swayed by advisors who are either equally clueless or with a hidden agenda (i.e. Cheney). If he is dishonest, then we have no idea what he will really do, and thus can't afford to take a random leap of faith. Nor is dishonesty a trait I would like to see in the most powerful person in the world.

subtly framing the story

I am going to cross post with my human factors blog a bit today. I just posted this comment over there:

I heard a great comment on NPR this morning by host Scott Simon. He was discussing former Illinois Governor George Ryan, who has many good and bad events in his history. He was nominated for a Nobel Prize for his suspension of the death penalty in his state because of uncertainties and unfairness in how it was applied. He also was the manager of a corrupt government that accepted bribes, one of which led to a horrible accident where several children were killed.

What makes this story relevant to human factors is that Scott Simon remarked that if you tell the story beginning from the traffic accident, Ryan comes across as a terrible person. Listeners may cynically discount the death penalty suspension as an attempt by Ryan to make friends in the prison system, knowing that he may end up there soon. On the other hand, if you tell the story beginning from the Nobel Prize nomination, listeners may sadly wonder how a principled man could be tempted by the power and influence of politics.

It is amazing how much power the media has in the way it presents stories. A little bit of knowledge about anchoring bias, confirmation bias, representativeness bias, and others can make a newspaper or TV news editor incredibly influential. You could craft a series of stories, without doing anything deceptive, unethical, or improper, that significantly skew public opinion one way or the other.

And it can be done so subtly that no one would really know the difference. It would not be like Chavez, Putin or Musharraf intimidating the opposition media.


Political parties can do this too. There is a great book called "Framing the Debate" that covers some of this. It is truly amazing how much influence a smart politician (or more likely his/her speech writers and media advisors) can have if they understand these subtle influencers.

free speech and private organizations

This is really a rant today because I am getting very frustrated by so many groups criticizing private organizations for exercising free speech, or allowing others to exercise free speech on their premises. Conservatives complain about Ahmedinejad, liberals complain about Ann Coulter's comments on Jews, womens groups complain about Larry Summers speaking at Stanford, and on and on.

Guess what? Its called free speech for a reason!!! If Stanford wants to hear Larry Summers or Columbia wants to hear Ahmedinejad, that is their absolute right. If I disagree with their views, I can choose not to attend. I can even choose not to do business with the people who sponsor the event. I can picket outside to promote an alternative view. All of these things are the exercise of my right to free speech to contrast someone else's. This is what makes the US a great country, a model of freedom for the world.

But if you tell Stanford that they should not allow Larry Summers to speak, even if they want to, that goes against everything this country was founded on. If conservative talk radio want to allow Ann Coulter to make stupid remarks about Jews, that is their right. And it is your right to boycott the station if you want. But please, please, please, don't tell them that they can't allow these people to speak. Lets not create an environment where venues become too intimidated by the threat of boycotts to allow any controversial speakers to speak.

There is a strong body of research on decision making - coming from Human Factors, economics, psychology, political science, management, and many other fields that one of the major factors that makes people poor decision makers is our unwillingness to listen to alternative viewpoints and our cognitive and emotional inability to incorporate alternate viewpoints into our own. From Infotopia to The Myth of the Rational Voter, there are some great examples of this that should make us stop and think about this backlash against free speech.

But only if you are willing to listen to my alternate viewpoint.

loss aversion

Here is a nice link between my human factors blog and public policy. The idea of loss aversion says that people prefer (generally with a large subconscious component) to make worse decisions if it means avoiding an overt loss. For example, many people will hold onto a bad stock because they refuse to sell it at a loss. They will wait for it to at least come back to their original purchase price (which most eventually do just because of inflation) and then sell it. Gamblers do the same thing - they keep playing until the are even (or broke). Homeowners have been doing it for the past year, refusing to sell their houses for anything less than they paid for it.

These are poor choices because they take into account "sunk costs" which should be irrelevant if the decision was just economic. But any major decision is not just economic, it is also psychological. Which is where effects like loss aversion comes into play.

So what does this have to do with public policy? I can't say it any better than this. (warning, there is no permalink yet. So if you read this after Oct 5, you will need to find the Sept 30 comic).

statistics and Iraq

I haven't watched the hearings of General Petraeus and Ambassador Crocker very closely, in general because they have so much more information than the rest of us that they can present any conclusions they want and there is no way to really know how "real" a picture they are presenting. Most people know the saying "there are liars, damned liars, and statisticians" and there is a reason for that. The reduction in violence being presented could be the usual seasonal lull in the summer. It could also be temporary because of the surge but ready to come back when the US troop levels return to 130,000. Or it could be that the general and ambassador are cherry picking the stats that look good while ignoring others that don't (an alpha error). Or it could be that fundamental improvements are really occurring (you can stop laughing now).


I fool myself with statistics when my favorite sports teams are failing and I need a reason to keep cheering for them. But to do this with thousands of lives and billions of dollars at stake is really foolish. But as a libertarian, maybe I should be happy that both houses of Congress and all the 24 hour news shows are busy with this and not messing around with the economy. But then again, the Fed meets next week . . .

patents and piracy

The debate over how harmful China's rampant piracy of US technology continues to rage. On one extreme, US tech companies are losing billions of dollars a year when Chinese consumers purchase pirated copies of MS Windows off the streets for $1.50 or when Chinese companies buy fake Cisco routers for half price. If you simply multiply the number of pirated units by the normal retail price of the official versions, the numbers are truly astronomical.

But on the other side of the scale, there are two reasons why the total is not really this high. First, many Chinese consumers couldn't or wouldn't pay for the official versions. So the total lost revenue is much lower. Second, there is some evidence (or at least theories) that when China finally does start enforcing patents and copyrights (more likely because its own companies are developing intellectual property rather than the cajoling of the US trade missions), there will then be a huge base of consumers used to the US style products (and more able to purchase them). The current piracy is sort of like a loss leader where the company loses money now to make more later. Of course, this second reason is not really fair to the US companies, as it should be their choice whether to use a loss leader strategy, not the Chinese government, consumer, or pirates. Stealing can't be justified by saying that it helps in the long run.

But what does matter is how much time, effort, and political capital the US government should use on this issue. Would it be better to work on the currency misalignment? Or China's growing relationship with dictators around the world - helping them economically and enabling them to continue repressive policies? There is no easy answer, but it is worth thinking about.

Primaries v elections

I am not sure what is going in the Democratic and Republican primary races, but it has me worried.

First the dems. When the race started, I thought most of the candidates were pretty moderate. I especially like Bill Richardson - with all that experience and his history of mainstream policy. But after the latest debates and forums, I have no idea what to think. All of the dems now seem to be playing to the extreme. I don't talk in terms of left and right, but rather good policy and bad policy. Readers of this blog know it is because there are good policy ideas from all parts of the spectrum. All of the dems, not just the leaders, seem to be promising all things to all people. To appear strong on defense, Obama is bombing Pakistan. They are all going protectionist - against the free trade agreements with Latin America. They are also going beyond reality in health care - promising that we can have great quality health care at low cost and cover the uninsured simply by browbeating and jawboning the market. They are correct that there is enough waste in the system that we can have our cake and eat it too, but not in my lifetime. The politics, legal and psychosocial context, and complexity of the health care system makes it very hard to streamline and none of these candidates have a clue about industrial engineering, lean process design, etc. I think that they are just promising x, y, and z to get elected. That is the worst thing a pol can do. It just gets expectations up, leads to disappointment among the electorate, and nothing ever gets done because they don't really have a plan.

Now the GOP. They aren't even talking about policy. I am not even sure what any of them stand for. I respect Guiliani for sticking to his pro-choice position, not because I agree with it (although I do), but because it is unusual for reps to go against the base in the primary phase. But each one of these candidates has so many bad qualities. Guiliani has no cred whatsoever. All he did was look tough after 9/11. He didn't actually DO anything. Romney has a great financial background so I have the highest hopes for him. And he was an effective governor in a state with a huge majority of the legislature in the opposite party. That is impressive. But what does he think about foreign policy, industrial policy, etc? It never comes up. Fred Thompson, if he runs, will be running on image rather than policy. Can't blame him for that, but it wouldn't make me support him. And poor McCain - what happened there?!? Maybe he really is just too old and he ran out of steam. Hopefully, some new people will enter. Maybe Chuck Hagel. I even have some new respect for Newt Gingrich. Even though I disagree with some of his policy positions, at least that is what he focuses on. Often, its better to have a bad policy than no policy at all.

Any - that's my rant for the day.

Public Policy and workforce productivity

My Performance Management course is having its last class Thursday and we are covering how public policy can have an impact on workforce performance. As an instinctive libertarian, I hesitate to recommend that government get involved in the inner activities of a company. But there are definitely places where it can make sense if the government does it correctly and minimalistically (a big and often failing assumption).

One is training credits. I don't want the government deciding what to train former manufacturing workers in when their jobs migrate overseas. But training credits can work. Companies can develop their workforce in skills that will remain in the US. And perhaps research funding can be allocated towards new training models and economy-wide resources. Especially for workers who are already employed, independent training sources can also be supported, although again I would like to see it be private organizations (perhaps professional societies) with some government financial support. I would rather spend government money on retraining than long term unemployment.

There has been research that workers who are afraid to take risks tend to stay in dead end jobs out of fear (of losing health care, pension benefits, etc). They are more afraid to take risks when there is no safety net. Companies don't want employees to stay in these dead end jobs either because the employee is usually not the most productive at that position, but maybe not bad enough to warrant firing.

What we want is to create a balance between stability and mobility. Lets find a way to get workers moving around more and always moving up the skills-ladder. We can then encourage sending lower skilled jobs overseas and bringing in immigrants to do the ones that can't move overseas. All we need is a reliable mechanism to retrain workers in the new industries that the US has been so good at developing. And with an ingrained process to do this, maybe we won't be so afraid of losing our global economic influence and success.

Then on top of this, we can fund a few great futurists to predict the 20-50 year future industries and we can start the basic research and maybe even adjust K-12 education to get our future workforce ready for it. Get rid of the standardized tests in the No Child Left Behind model and start teaching creativity, critical thinking, information literacy etc.

Maybe this is just a pipe dream, but it is MY pipe dream ;-D.

At what cost growth?

There has been some debate on my favorite economics blogs (Mankiw, econlog), about the old saw that the best way to reduce poverty is to grow the economy as fast as possible and let the rising tide lift all boats. A recent paper by Larry Summers suggests that the calculus may have changed. Lately, the benefits of the rising economy have gone disproportionately to those in the upper income brackets and those in the lower ones have stagnated or even fell.

So here is the policy issue. Conservatives/libertarians want to stick with the rising tide theory and focus only on maximizing growth. Unfortunately, without smart social policy, there are a lot of starving poor people out there who are drowning in the rising tide. Liberals are willing to sacrifice a bit of growth to protect these poor people. Unfortunately, they seem to have a knack for screwing it up and so they hurt growth more than expected and don't help as many poor people as intended.

What we need is a smart combination of economic/social policy that minimizes the limit on growth the get the maximum protection for those truly in need. The public emergency safety net needs to be efficient and effective (get some Industrial Engineers with expertise in Lean Six Sigma to implement it) and focused on those with no reasonable other options. Then put the bulk of the safety net into "teach them to fish" rather than "give them a fish" kinds of programs. Vocational training, child care subsidy, earned income tax credit, etc. And encourage the private sector to support microfinance and other programs that require selecting winners.

While I am on the subject, these are also my prescriptions for saving the health care mess, protecting the environment, and just about every other domestic policy.

government response to high gas prices

This article in Business Week really pissed me off. It lists five proposals that the US government is considering to address the high retail price of gas. They are all ridiculously naive about macroeconomics. What is wrong with our government these days? Are they really that ignorant, or are they pandering for votes - counting on the US population being ignorant? The problem with both of these, is that it encourages voters to remain ignorant, for the reasons described in earlier posts and in other places on the irrational voter.

There was also an article on North Korea that also showed the ignorance of US policy. With North Korea, there are justifiable competing objectives. We want to help their economy to prevent starvation and to encourage them to pursue an open economy. But we also don't want the hard currency to go to Kim Jong Il's nuclear weapons program or to his Swiss bank account. But the article says that South Korea has grown the Kaesong special economic development zone to provide jobs to 15000 N Korean workers but under the control of S Korean companies. This seems like a pretty good way to balance the objectives. But the US government places a 90% tariff and strict quotas on the products coming out.

immigration

The new immigration policy has many good topics for conversation. The one I want to address today is the scoring system for allowing in new people based on specific skills. This is a great idea if done correctly (i.e. without politics mucking it up). The US needs a steady influx of specialists to stay competitive. There are two good reasons for that.

1. We need the expertise. US education in science, math, engineering is falling behind. It is not that the professors are providing quality education, it is that the best students don't find these fields exciting enough. They go into law and business. Not that law and business aren't good too, but the development of new industries for lawyers and businesses to support requires new technologies.

2. We need to compete. If these experts are not coming here, they are still going to create new technologies elsewhere. The US has always drawn the best and brightest (causing "brain drains" elsewhere). After 9/11 we made it harder and tech development started growing faster elsewhere. It is a shame that not only did we lose the growth, but we gave it to our competitors. I am not a protectionist by any stretch. But all other things being equal, I would rather see great new innovations emerge here and support our own workforce and economy.

So I hope that the final immigration law that passes has strong support for bringing in those with the skills and talents to innovate. That should be a no brainer, no matter what else is in it. It is great that some of my favorite econ blogs agree with me (Becker, Mankiw, Kling).

bad bets in health care

I hope this link stays active long enough for anyone interested to read it. It makes an interesting point about public policies that are "bad bets." I just posted something about it in my human factors blog, but it also is an important public policy issue. Here is the example for those of you who don't want to navigate to the other blog:

Consider this example: There are two people who are very sick and require medical care that costs $25,000 to treat. Person A has a 50% chance of getting better with treatment. Person B has a 5% chance of getting better with treatment. You can either:
1) give Person B the treatment
2) give Person A the treatment
3) split the money and half treat them both, which reduces their chance of improving by 90% (so it would be 5% and 0.5% respectively.

Most people would select option 2. It gives the best bang for the buck. But what if there is no Person A. We can either:
1) treat person B and have a 5% chance of having an effect
2) distribute the $25,000 in medical care to other people in general, who have an average chance of improving of 50%.
3) distribute the $25,000 to the entire population to spend however they want.

Now which one should we do? Option 2) in the second situation is identical to option 2) in the first example in its effect. So if you preferred option 2) in the first example, you can't choose option 1) in the second. But the problem faced in our health care system is that when we are faced with a real Person B on one hand and a vague, unseen population on the other, we find it very hard not to treat person B and hope for the best. And the when we have a lucky 5%-er, it makes the news and makes it even harder to choose option 2) the next time.

This is why our health care system is so wasteful. We keep funding the bad bets because we can't look at a sick person and say no.

So from a public policy point of view, what is the solution? "Rationing" health care has such a bad connotation that it can make any intelligent policy a non-starter. But in fact, there is a limited number of dollars at any given time to spread around. Whatever we choose as a society to spend on health care has to distributed somehow. So rationing health care is a reality whether we call it that or not. Treating the inoperable cancer patient in a 1 in a million effort is rationing care because that is money that now can't be spent on other patients. So intelligent policy has to bite the bullet of "rationing" sound bites and create a system that efficiently and effectively allocates spending (public money as well as insurance incentives) where it has the most effect. If someone wants to spend his/her own money on the one in a million treatment, that is the great thing about a free market. But don't use my tax money or cause my risk-pooled insurance rates to go up to pay for your inefficient health care needs.

2008 Presidential Candidates

I usually rant about policies rather than people on this blog but I am going to make a brief exception today. In looking at the qualifications of the candidates from both parties, there is one that stands out as having a wide variety of offices and experiences that puts him head and shoulders above the rest. Even if you don't agree with his policies, you have to respect his expertise. And the fact that he is a moderate, with a reasonable approach to the issues, is a huge bonus.

Who is this rare individual? Bill Richardson. He has been in Congress so he knows how to work legislation. He was Secretary of Energy, so he understands one of the most influential domains in geopolitics, economics and the environment. He was US Ambassador to the UN, so he understands foreign policy and diplomacy. And now he is Governor, so he has experience as a political chief executive. The fact that he is also a Jumbo (graduate of Tufts University) is just icing on the cake (disclosure, that is where I went to school as well).

Democracy of Fools

Sorry I have been gone for several weeks, but I was swamped writing papers for the HFES conference. Anyway, I am back.

Thanks to Bryan Caplan for this post on his econlog blog. He reports (and links to evidence) that the main premise of his research is that "democracies adopt bad policies because most people are irrationally committed to systematically mistaken economic (and other) beliefs, and politicians have to heed public opinion to get elected." I am not at all surprised. What we need to do is elect politicians based on their core values rather than specific policies and then reward them when they surround themselves with brilliant experts from all perspectives to argue the positives and negatives of different policy choices and then the politician weighs these and picks the (hopefully) best one.

How can we make this happen?

State of the Union response

I am sure that you will read lots of blogs on the speech, so I am going to blog on the response. It is amazing that one group of reasonably intelligent people (democrats) can interpret the speech as mostly (with some exceptions):
1. same old same old
2. it will never work
3. an example of Republican failed ideas

And another group of reasonably intelligent people (republicans)can interpret the speech as mostly (with some exceptions):
1. innovative policy
2. a new vision for America
3. an example of Republican innovation

Either there are so many decision making biases affecting their interpretations (see my human factors blog for more info on that), they are intentionally biasing their comments for political purposes, or the speech was so vague that it could be interpreted however you want. I suspect it was a little of each.

effectiveness v social responsibility

Newsweek received several criticisms when it published an article in which they referred to Hillary Clinton as "Hillary" and Barack Obama as "Obama." The critics felt that using Hillary's first name, but Obama's last name shows more respect for Obama than for Hillary. But there are many famous Clintons. Former president Bill and musician George to name two. So it is actually somewhat easier for readers to use "Hillary." But there are no other famous Obamas, so that is simple. So to use last names for both would be harder for readers to process. When is it better to reduce effectiveness to increase social responsibility?

The same thing can be said for racial profiling. While there is a debate over whether using race is effective, there are many instances in which using race as one of several parameters can be used to increase the effectiveness of a data mining algorithm. But if we believe that it is better for social responsibility NOT to use it, should be sacrifice effectiveness to achieve this goal?

The same thing could be said for minority set asides, affirmative action, and many others.

Which is more important, and how should we resolve tradeoffs when they compete?

lack of ethics v good policy

It seems like it doesn't really matter how much time and effort policymakers put into crafting the best policies. Some unethical SOB out there, whether it is a company or an individual or a special interest, will find an unintentional loophole (or lobby a policymaker into inserting an intentional loophole) that ruins the whole thing. Despite the potential that a policy may actually be good for the country, the people, the economy, the environment, our children, or whatever, this SOB will warp it to his or her own benefit and the expense of whoever.

The inability of the FDA to regulate nutritional supplements, reported in last week's Business Week, is a great example. First, the industry lobbied several administrations over the course of many years to eliminate any vestige of legitimate regulation. And then, even when something helpful comes through the court system, they again find loopholes. For example, Broncho-Dose Ltd was forced to put a disclaimer on its web site stating that its product is not the same as Astra-Zeneca's, nor has it been proven to have the same effect. So what did they do? They wrote it in English on their Spanish web site. Now of course, they know this violates the spirit of the ruling. The whole point of disclosures is to provide potential customers with some information that the court determined they need. But the ruling did not officially state it had to be in any particular language. So they could get around disclosing this information. I am surprised they didn't just go with Maori (or how about Klingon) on all of their web sites. Pathetic!!!

What does the public think they want???

In a survey conducted by Greenberg, Quinian, and Rosner, most Americans don't want government handouts. But they do think the government's role is to level the playing field between the average worker and the greedy, powerful, corporate titans. What does this mean exactly? And quite frankly, does the average worker really have a clue what is best for them? I don't mean that we need to be paternalistic in our attitude towards workers. I just think that they don't know enough about macroeconomics to really know what is best for themselves, let along for the country as an aggregate.

But it is easy for the eco-novice to view all global outsourcing and cheap labor immigration to be direct competition and a drag on their wages. But can they see the complexity of the macroeconomic benefits of global competition and comparative advantage? Probably not.

So ironically, we don't want to set policy based on what the electorate wants. What we need to do is establish a set of core values that the electorate believes in, and then set policy based on the ability of experts to develop programs that maximizes these values, regardless of whether the electorate understands/agrees with the specifics of the program. But while this makes for good policy, it makes for bad politics. There are no soundbites that can overcome the Lou Dobbs rants on CNN every night.

Primary scheduling

There has been a lot of discussion recently about states moving up their primaries to increase their influence on the eventual presidential candidates. Iowa and NH have been at the front for years because there was conventional wisdom that the person who attracts the dems (or repubs) in those states (purple) have a better chance in a country-wide general election than someone who wins a primary in a strongly red or blue state. And since they are relatively small, it is easy to focus on them than say Pennsylvania.

But if you read the fantastic summary Cass Sunstein gives of the research on information and reputation cascades in his 2006 book Infotopia (don't worry, it is a much easier read than the title suggests), you will see how wrong this can be. If the first primary/caucus causes a small error in the second one and they combine to cause slightly larger error in the third one, etc., then you could have a completely non-viable candidate by the time you get to Super Tuesday. The money, support, and good consultants all switch to the winners of these early primaries.

Please read the book. Not only will you get some great insights on this potential problem, but lots of others too. I used up an entire highlighter and a pen writing the margins.

Bush promise to eliminate deficit by 2012

This is a great idea. Make a promise to do something everyone (almost) recognizes as important without discussing the tradeoffs/consequences, how you would achieve it, and using a time table (4 years after his term of office ends) that he will have no responsibility or accountability for.

The funny thing is that from what we know about human decision making (check out my other blog at humanfactors.blogspot.com to learn more) this actually works. Most people support candidates based on their values, not the details of how they will implement specific policies they have "soundbited" (my word).

So in the end, we elect people that either have intentionally misled us or have their heads in the clouds that they can achieve the impossible. Either way, I would prefer to elect someone else and I think we would all be better off that way in the end (and even in the beginning). That is why Social Security, Medicare, global warming, etc will never be dealt with until they truly become emergencies, at which time it will be 10 times as expensive to fix.

Anyone have ideas on how to solve this conundrum?