“There Is More Uncertainty, and Everybody Is Afraid”

Robert Shiller is often a shrewd diagnostician, but less often a wise therapist. For instance he is right in thinking that uncertainty is part of our problem, but wrong in his usual view that more government spending is the solution.
A better way to reduce uncertainty is for the government to act more predictably, following some reasonable rules. I heard such a view articulately defended in a lunch speech at the American Economic Association meetings in January by Stanford economist John Taylor. His speech has been polished and published in National Affairs (see citation way below).
Here are some interesting observations by Shiller (via Bewley):

(p, 7) Factors of production like wheat or trucks or pumps don’t have morale issues. Human beings do.

How these issues affect the labor market is a major focus of the research of Professor Bewley, who is a colleague of mine at Yale. He has developed an idiosyncratic approach, interviewing hundreds of corporate managers at length about the driving forces for their actions. The managers consistently told him that they are concerned about the emotional state of their core employees. They said that their companies’ continued success depends on the positive feelings and loyalty of these workers — and lamented the hard choices that would need to be made in a severe downturn.
. . .
Lower-level managers won’t ask for scarce resources . . . , because those items look like luxuries to fellow employees, who worry that there won’t be enough in the company budget for them to keep their jobs.
One top manager told Professor Bewley that he had to compensate for the reticence of lower-level managers, who won’t ask for anything. “I tell them to put in a few dreams for equipment they would like, because if they don’t try, they’ll never get what they want,” this manager said.
Of course, while that reticence may preserve jobs in one’s own company, it works against job growth elsewhere. A result is a loss of vigor in the aggregate economy, and the sapping of the very kind of creativity that might spur a recovery.
Professor Bewley shared with me a passage from an interview in July with a manager of a large manufacturing company. “There is more uncertainty, and everybody is afraid,” this manager told him. “Do your job. Keep employed. Don’t come up with a new idea.” In his own company, the manager said, “Everybody is doing the same thing.”

For the full commentary, see:
ROBERT J. SHILLER. “ECONOMIC VIEW; The Survival of the Safest.” The New York Times, SundayBusiness Section (Sun., October 3, 2010): 7.
(Note: ellipses added.)
(Note: the online version of the commentary is dated October 2, 2010.)

Here is the Taylor reference:
Taylor, John B. “The Cycle of Rules and Discretion in Economic Policy.” National Affairs, no. 7 (Spring 2011): 55-65.

Chinese College Graduates Are Underemployed “Ant Tribe” in Big Cities

(p. A1) BEIJING — Liu Yang, a coal miner’s daughter, arrived in the capital this past summer with a freshly printed diploma from Datong University, $140 in her wallet and an air of invincibility.

Her first taste of reality came later the same day, as she lugged her bags through a ramshackle neighborhood, not far from the Olympic Village, where tens of thousands of other young strivers cram four to a room.
Unable to find a bed and unimpressed by the rabbit warren of slapdash buildings, Ms. Liu scowled as the smell of trash wafted up around her. “Beijing isn’t like this in the movies,” she said.
Often the first from their families to finish even high school, ambitious graduates like Ms. Liu are part of an unprecedented wave of young people all around China who were supposed to move the country’s labor-dependent economy toward a white-collar future. In 1998, when Jiang Zemin, then the president, announced plans to bolster higher education, Chinese universities and colleges produced (p. A12) 830,000 graduates a year. Last May, that number was more than six million and rising.
It is a remarkable achievement, yet for a government fixated on stability such figures are also a cause for concern. The economy, despite its robust growth, does not generate enough good professional jobs to absorb the influx of highly educated young adults. And many of them bear the inflated expectations of their parents, who emptied their bank accounts to buy them the good life that a higher education is presumed to guarantee.
“College essentially provided them with nothing,” said Zhang Ming, a political scientist and vocal critic of China’s education system. “For many young graduates, it’s all about survival. If there was ever an economic crisis, they could be a source of instability.”
. . .
Chinese sociologists have come up with a new term for educated young people who move in search of work like Ms. Liu: the ant tribe. It is a reference to their immense numbers — at least 100,000 in Beijing alone — and to the fact that they often settle into crowded neighborhoods, toiling for wages that would give even low-paid factory workers pause.
“Like ants, they gather in colonies, sometimes underground in basements, and work long and hard,” said Zhou Xiaozheng, a sociology professor at Renmin University in Beijing.
. . .
A fellow Datong University graduate, Yuan Lei, threw the first wet blanket over the exuberance of Ms. Liu, Mr. Li and three friends not long after their July arrival in Beijing. Mr. Yuan had arrived several months earlier for an internship but was still jobless.
“If you’re not the son of an official or you don’t come from money, life is going to be bitter,” he told them over bowls of 90-cent noodles, their first meal in the capital.
. . .
In the end, Mr. Li and his friends settled for sales jobs with an instant noodle company. The starting salary, a low $180 a month, turned out to be partly contingent on meeting ambitious sales figures. Wearing purple golf shirts with the words “Lao Yun Pickled Vegetable Beef Noodles,” they worked 12-hour days, returning home after dark to a meal of instant noodles.
. . .
Mr. Li worried aloud whether he would be able to marry his high school sweetheart, who had accompanied him here, if he could not earn enough money to buy a home. Such concerns are rampant among young Chinese men, who have been squeezed by skyrocketing real estate prices and a culture that demands that a groom provide an apartment for his bride. “I’m giving myself two years,” he said, his voice trailing off.
By November, the pressure had taken its toll on two of the others, including the irrepressible Liu Yang. After quitting the noodle company and finding no other job, she gave up and returned home.

For the full story, see:
ANDREW JACOBS. “China’s Army of Graduates Is Struggling.” The New York Times, First Section (Sun., December 12, 2010): A1 & A12.
(Note: ellipses added.)
(Note: the online version of the story is dated December 11, 2010 and has the title “China’s Army of Graduates Struggles for Jobs.”)

“Big Money Is Dumb Money”

“Other People’s Money” is a short story that appears in Cory Doctorow’s short story collection With a Little Help.

(p. C7) Venture capitalists? Forget them, says “Other People’s Money.” Big money is dumb money. Much easier, says one old-lady manufacturer to a smart young gigafund manager, for her to make and market her own product, and keep the money (just like Mr. Doctorow), than for him to find and fund a hundred products and take a rake-off. He only deals in six-figure multiples, and that’s no good: not nimble enough. And he has to get a return on all those billions, poor outdated soul.

For the full review, see:
TOM SHIPPEY. “The Author as Agent of Change; Cory Doctorow has big ideas about the future of technology–and how it can empower writers.” The New York Times (Sat., MAY 21, 2011): C7.

The book of short stories is:
Doctorow, Cory. With a Little Help.

Neanderthals and Cro-Magnons Did Not Much Overlap: Evidence Against an Early Human Golden Age

In 2010 archeologist Brian Fagan published a book that used his read of the evidence to imagine the interactions between Cro-Magnon (us) and Neanderthal humans. He mostly portrayed the interaction as one of wary, but mainly benign mutual neglect. His broader portrayal of the lives of the hunter-gatherer Cro-Magnons did not completely place them in a Golden Age, but did much to praise many aspects of their lives.
Also in 2010, Matt Ridley published a book that discussed and dismissed the view that the hunter-gatherers were to be admired. He mainly pointed to the evidence of how common violent death was among hunter-gatherers, and hence how precarious and fearful their lives must have been.
Now there is additional relevant evidence. Apparently the period of overlap between Cro-Magnons and Neanderthals was much briefer than had been previously believed. This implies (see below) that rather than benign mutual neglect, it is much more likely that the Cro-Magnons violently wiped out the Neanderthals.
Hobbes may not have been entirely wrong when he described early human life as “nasty, poor, brutish and short.”

(p. D4) An improvement in the dating of fossils suggests that the Neanderthals, a heavily muscled, thick-boned human species adapted to living in ice age Europe, perished almost immediately on contact with the modern humans who started to enter Europe from the Near East about 44,000 years ago. Until now bones from several Neanderthal sites have been dated to as young as 29,000 years ago, suggesting there was extensive overlap between the two human species. This raised the question of whether there had been interbreeding between humans and Neanderthals, an issue that is still not resolved.
. . .
Reviewing . . . Neanderthal dates ascertained with the new ultrafiltration method, Dr. Higham sees an emerging pattern that no European Neanderthal site can reliably be dated to less than 39,000 years ago. “It’s only with reliable techniques that we can interpret the archaeological past,” he said.
He is re-dating Neanderthal sites across Europe and so far sees no evidence for any extensive overlap between Neanderthals and modern humans. “There was a degree of contemporaneity, but it may not have been very long,” he said. A short period of contact would point to the extinction of the Neanderthals at the hands of modern humans.
“It’s very unlikely for Neanderthals to go extinct without some agency from modern humans,” Dr. Higham said.
Paul Mellars, an expert on Neanderthals at Cambridge University in England, said that the quality of the dates from Dr. Higham’s laboratory was superb and that samples of bone re-dated by the lab’s method were almost always found to be several thousand years older than previously measured. The picture supported by the new dates is that the interaction between modern humans and Neanderthals in Europe was brief in each region, lasting perhaps a few hundred years, Dr. Mellars said, until the modern humans overwhelmed their competitors through better technology and greater numbers.

For the full story, see:
NICHOLAS WADE. “Neanderthals and Early Humans May Not Have Mingled Much.” The New York Times (Tues., May 10, 2011): D4.
(Note: ellipsis added.)
(Note: the online version of the article is dated May 9, 2011.)

The Fagan book is:
Fagan, Brian. Cro-Magnon: How the Ice Age Gave Birth to the First Modern Humans. New York: Bloomsbury Press, 2010.

The Ridley book is:
Ridley, Matt. The Rational Optimist: How Prosperity Evolves. New York: Harper, 2010.

Salem Issues Psychic Licenses to Protect Public from the Untrained

StathopoulosLoreleiSupportsFewerLicences2011-06-02.jpg “Lorelei Stathopoulos is concerned Salem will lose its “quaint reputation.”” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A11) SALEM, Mass. — Like any good psychic, Barbara Szafranski claims she foresaw the problems coming.

Her prophecy came in 2007, as the City Council was easing its restrictions on the number of psychics allowed to practice in this seaside city, where self-proclaimed witches, angels, clairvoyants and healers still flock 319 years after the notorious Salem witch trials. Some hoped for added revenues from extra licenses and tourists. Others just wanted to bring underground psychics into the light.
Just as Ms. Szafranski predicted, the number of psychic licenses has drastically increased, to 75 today, up from a mere handful in 2007. And now Ms. Szafranski, some fellow psychics and city officials worry the city is on psychic overload.
. . .
“Many of them are not trained,” she said of her rivals. “They don’t understand that when you do a reading you hold a person’s life in your hands.”
Christian Day, a warlock who calls himself the “Kathy Griffin of witchcraft,” thinks the competition is good for Salem.
“I want Salem to be the Las Vegas of psychics,” said Mr. Day, who used to work in advertising and helped draft the 2007 regulations. Since they went into effect, he has opened two stores, Hex and Omen.
. . .
Now, talk has started about new regulations that would include a cap on the number of psychic businesses, but the grumbling has in no way reached the level of viciousness that occurred in 2007, when someone left the mutilated body of a raccoon outside Ms. Szafranski’s shop and Mr. Day and Ms. Stathopoulos got into a fight.

For the full story, see:
KATIE ZEZIMA. “Witchy Town’s Worry: Do Too Many Psychics Spoil the Brew?” The New York Times (Fri., May 27, 2011): A11.
(Note: ellipses added.)
(Note: the online version of the story is dated May 26, 2011.)

DayChristianSupportsCompetition2011-06-02.jpg “Christian Day, who owns two shops, thinks competition is a good thing.” Source of caption and photo: online version of the NYT article quoted and cited above.

To Burst Higher Ed Bubble, Peter Thiel Pays Students to Drop Out

ThielPeterPayPal2011-06-02.jpg

“Peter Thiel.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. B4) Parents, do you hope that your children have the chance to become like Peter Thiel, the PayPal co-founder, Facebook investor and hedge fund manager? If so, Mr. Thiel suggests that you encourage them to drop out of school. In fact, he will help by paying them to do it.

On Wednesday, the Thiel Foundation, funded by Mr. Thiel, announced the first group of Thiel Fellows, 24 people under 20 who have agreed to drop out of school in exchange for a $100,000 grant and mentorship to start a tech company.
More than 400 people applied. The winners include Laura Deming, 17, who is developing antiaging therapies; Faheem Zaman, 18, who is building mobile payment systems for developing countries; and John Burnham, 18, who is working on extracting minerals from asteroids and comets.
. . .
Mr. Thiel, a contrarian investor and libertarian known for his controversial views, knows that suggesting that education is not always worth it strikes at the core of many Americans’ beliefs. But that is exactly why is he doing it.
“We’re not saying that everybody should drop out of college,” he said. The fellows agree to stop getting a formal education for two years but can always go back to school. The problem, he said, is that “in our society the default assumption is that everybody has to go to college.”
“I believe you have a bubble whenever you have something that’s overvalued and intensely believed,” Mr. Thiel said. “In education, you have this clear price escalation without incredible improvement in the product. At the same time you have this incredible intensity of belief that this is what people have to do. In that way it seems very similar in some ways to the housing bubble and the tech bubble.”
. . .
“What I really liked about this program is it’s giving a lot of people who maybe wouldn’t get into Harvard an opportunity to participate in something just as selective and just as valuable and just as educational,” Mr. Burnham said. “It’s giving them that opportunity even though their personalities and characters don’t quite fit the academic mold.”
His father, Stephen Burnham, said the decision for his son to skip college, at least for now, was uncontroversial.
“There’s a lot of other stuff that you get in college and I would say that would be useful for John,” he said. “But I would say in four years there’s a big opportunity cost there if you could be out starting your career doing something that could change the world.”

For the full story, see:
CLAIRE CAIN MILLER. “Changing the World by Dropping Out.” The New York Times (Mon., May 30, 2011): B4.
(Note: ellipses added.)
(Note: the online version of the story is dated May 25 (sic), 2011, has the title “Want Success in Silicon Valley? Drop Out of School,” and is longer than the published version. Most of what is quoted above appears in both the published and online versions, but some (most notably the paragraph on the education bubble and the quotes from Stephen Burnham) appear only in the online verison.)

“Surprisingly Weak Correlation” Between Measures of Maximum Performance and Typical Performance

(p. C12) In the early 1980s, Paul Sackett, a psychologist at the University of Minnesota, began measuring the speed of cashiers at supermarkets. Workers were told to scan a few dozen items as quickly as possible while a scientist timed them. Not surprisingly, some cashiers were much faster than others.

But Mr. Sackett realized that this assessment, which lasted just a few minutes, wasn’t the only way to measure cashier performance. Electronic scanners, then new in supermarkets, could automatically record the pace of cashiers for long stretches of time. After analyzing this data, it once again became clear that levels of productivity varied greatly.
Mr. Sackett had assumed that these separate measurements would generate similar rankings. Those cashiers who were fastest in the short test should also be the fastest over the long term. But instead he found a surprisingly weak correlation between the rankings, leading him to distinguish between two types of personal assessment. One measures “maximum performance”: People who know they’re being tested are highly motivated and focused, just like those cashiers scanning a few items while being timed.
The other type measures “typical performance”–measured over long periods of time, as when Mr. Sackett recorded the speed of cashiers who didn’t know they were being watched. In this sort of test, character traits that have nothing to do with maximum performance begin to influence the outcome. Cashiers with speedy hands won’t have fast overall times if they take lots of breaks.
. . .
The problem, of course, is that students don’t reveal their levels of grit while taking a brief test. Grit can only be assessed by tracking typical performance for an extended period. Do people persevere, even in the face of difficulty? How do they act when no one else is watching? Such traits often matter more than raw talent. We hear about them in letters of recommendation, but hard numbers take priority.
The larger lesson is that we’ve built our society around tests of performance that fail to predict what really matters: what happens once the test is over.

For the full commentary, see:
JONAH LEHRER. “Measurements That Mislead; From the SAT to the NFL, the problem with short-term tests.” The Wall Street Journal (Sat., APRIL 2, 2011): C12.
(Note: ellipsis added.)

The classic article correlating maximum and typical performance, is:
Sackett, Paul R., Sheldon Zedeck, and Larry Fogli. “Relationships between Measures of Typical and Maximum Performance.” Journal of Applied Psychology 73 (1988): 482-86.

“Progress Depended on the Empirical Habit of Thought”

In the passage below from 1984 Orwell presents an underground rebel’s account of why the authoritarian socialist dystopia cannot advance in science and technology.

(p. 155) The world of today is a bare, hungry, dilapidated place compared with the world that existed before 1914, and still more so if compared with the imaginary future to which the people of that period looked forward. In the early twentieth century, the vision of a future society unbelievably rich, leisured, orderly, and efficient–a glittering (p. 156) antiseptic world of glass and steel and snow-white concrete–was part of the consciousness of nearly every literate person. Science and technology were developing at a prodigious speed, and it seemed natural to assume that they would go on developing. This failed to happen, partly because of the impoverishment caused by a long series of wars and revolutions, partly because scientific and technical progress depended on the empirical habit of thought, which could not survive in a strictly regimented society.

Source:
Orwell, George. Nineteen Eighty-Four. New York: The New American Library, 1961 [1949].

By Canadian law, 1984 is no longer under copyright. The text has been posted on the following Canadian web site: http://wikilivres.info/wiki/Nineteen_Eighty-Four

Home Decorators Are Stockpiling Incandescent Bulbs to Thwart Feds’ Edict

BrooksDavidJustBulbs2011-06-02.jpg

“David Brooks, of Just Bulbs in Manhattan, has a customer who is secretly ordering thousands of incandescent bulbs. “She doesn’t want her husband to know,” he said.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. D1) BUNNY WILLIAMS, the no-nonsense decorator known for her lush English-style rooms, is laying in light bulbs like canned goods. Incandescent bulbs, that is — 60 and 75 watters — because she likes a double-cluster lamp with a high- and a low-watt bulb, one for reading, one for mood.

“Every time I go to Costco, I buy more wattage,” Ms. Williams said the other day. She is as green as anybody, she added, but she can’t abide the sickly hue of a twisty compact fluorescent bulb, though she’s tried warming it up with shade liners in creams and pinks. Nor does she care for the cool blue of an LED.
It should be noted that, like most decorators, Ms. Williams is extremely precise about light. The other day, she reported, she spent six hours fine-tuning the lighting plan of a project, tweaking the mix of ambient, directional and overhead light she had designed, and returning to the house after dusk to add wattage and switch out lamps like a chef adjusting the flavors in a complicated bouillabaisse.
She is aware that there is legislation that is going to affect the manufacture of incandescent bulbs, but she’s not clear on the details, and she wants to make sure she has what she needs when she needs it.
. . .
(p. D7) Other hoarders are hiding their behavior. David Brooks, who owns Just Bulbs on East 60th Street, said he has a customer in Tennessee who is buying up 60- and 100-watt soft-pink incandescent bulbs from G.E. and Sylvania for her three houses. Initially, she ordered 432 bulbs for each house, he said. Then she ordered another 1,000.
Mr. Brooks said the customer doesn’t want her husband to find out, and wouldn’t agree to speak to this reporter. The last order is destined, he said, “for a friend’s house that she is helping to redecorate in Alabama. She doesn’t want anyone to know her source.”

For the full story, see:
PENELOPE GREEN. “Light Bulb Saving Time.” The New York Times (Thurs., May 26, 2011): D1 & D7.
(Note: ellipsis added.)
(Note: the online version of the story is dated May 25, 2011.)

Government Administrators Steal Money, Food and Benefits from Poor in India

(p. A8) NEW DELHI — India spends more on programs for the poor than most developing countries, but it has failed to eradicate poverty because of widespread corruption and faulty government administration, the World Bank said Wednesday.
. . .
One of the primary problems, the World Bank said, was “leakages” — an often-used term in development circles that refers to government administrators and middle men stealing money, food and benefits. The bank said that 59 percent of the grain allotted for public distribution to the poor does not reach those households.

For the full story, see:
“India’s Anti-Poverty Programs Are Big but Troubled.” The New York Times (Thurs., May 19, 2011): A8.
(Note: ellipsis added.)
(Note: the online version of the story is dated May 18, 2011, has the title “India’s Anti-Poverty Programs Are Big but Troubled,” is attributed to Heather Timmons, and is considerably more detailed than the published version.)