Economics – Page 200 – artdiamondblog.com

“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

“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.)

Chinese Government Created Real Estate Bubble in a Dozen Ghost Towns Like Kangbashi Area of Ordos

“As China’s roaring economy fuels a wild construction boom around the country, critics cite places like Kangbashi as proof of a speculative real estate bubble they warn will eventually burst.” Source of photo: online version of the NYT article quoted and cited below. Source of caption: online version of the NYT slideshow that accompanied the online article quoted and cited below.

The October 19, 2010 New York Times front page story (quoted below) on the Ordos ghost town in China, was finally picked up by the TV media on May 30 in a nice NBC Today Show report.
It should be clear that the Chinese real estate bubble will burst, just as real estate bubbles eventually burst in places like Japan and the United States. What is not clear is what the effects will be on the Chinese and world economies.

(p. A1) Ordos proper has 1.5 million residents. But the tomorrowland version of Ordos — built from scratch on a huge plot of empty land 15 miles south of the old city — is all but deserted.

Broad boulevards are unimpeded by traffic in the new district, called Kangbashi New Area. Office buildings stand vacant. Pedestrians are in short supply. And weeds are beginning to sprout up in luxury villa developments that are devoid of residents.
. . .
(p. A4) As China’s roaring economy fuels a wild construction boom around the country, critics cite places like Kangbashi as proof of a speculative real estate bubble they warn will eventually pop — sending shock waves through the banking system of a country that for the last two years has been the prime engine of global growth.
. . .
Analysts estimate there could be as many as a dozen other Chinese cities just like Ordos, with sprawling ghost town annexes. In the southern city of Kunming, for example, a nearly 40-square-mile area called Chenggong has raised alarms because of similarly deserted roads, high-rises and government offices. And in Tianjin, in the northeast, the city spent lavishly on a huge district festooned with golf courses, hot springs and thousands of villas that are still empty five years after completion.
. . .
In 2004, with Ordos tax coffers bulging with coal money, city officials drew up a bold expansion plan to create Kangbashi, a 30-minute drive south of the old city center on land adjacent to one of the region’s few reservoirs. . . .
In the ensuing building spree, home buyers could not get enough of Kangbashi and its residential developments with names like Exquisite Silk Village, Kanghe Elysees and Imperial Academic Gardens.
Some buyers were like Zhang Ting, a 26-year-old entrepreneur who is a rare actual resident of Kangbashi, having moved to Ordos this year on an entrepreneurial impulse.
“I bought two places in Kangbashi, one for my own use and one as an investment,” said Mr. Zhang, who paid about $125,000 for his 2,000-square-foot investment apartment. “I bought it because housing prices will definitely go up in such a new town. There is no reason to doubt it. The government has already moved in.”
Asked whether he worried about the lack of other residents, Mr. Zhang shrugged off the question.
“I know people say it’s an empty city, but I don’t find any inconveniences living by myself,” said Mr. Zhang, who borrowed to finance his purchases. . . .

For the full story, see:
DAVID BARBOZA. “A City Born of China’s Boom, Still Unpeopled.” The New York Times (Weds., October 19, 2010): A1 & A4.
(Note: ellipses added.)
(Note: the online version of the commentary is dated October 19, 2010 and has the title “Chinese City Has Many Buildings, but Few People.”)

Source of graph: online version of the NYT article quoted and cited above.

“If You Could Choose, Would You Prefer to Live Then or Now?”

(p. 78) ‘Perhaps I have not made myself clear,’ he said. ‘What I’m trying to say is this. You have been alive a very long time; you lived half your life before the Revolution. In 1925, for instance, you were already grown up. Would you say from what you can remember, that life in 1925 was better than it is now, or worse? If you could choose, would you prefer to live then or now?’

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

China’s Speculative Real Estate Bubble

Visit msnbc.com for breaking news, world news, and news about the economy

In a front page article on October 20, 2010, the New York Times reported on how the Chinese government encouraged a real estate investment binge that has resulted in a growing number of empty, speculatively built ghost cities. Now the video media has picked up the story in the well-done story linked to above and cited below.

Williams, Ian, reporter. “The Roads Not Taken: Visiting China’s Ghost Cities.” Broadcast on the Today Show, Sunday morning, May 30, 2011.

Corruption, Inefficiency, Inflation and Bad Policies Lead to Decline in Foreign Investment in India

Source of graph: online version of the NYT article quoted and cited below.

(p. B1) While inefficiency and bureaucracy are nothing new in India, analysts and executives say foreign investors have lately been spooked by a highly publicized government corruption scandal over the awarding of wireless communications licenses. Another reason for thinking twice is a corporate tax battle between Indian officials and the British company Vodafone now before India’s Supreme Court.

Meanwhile, the inflation rate — 8.2 percent and rising — seems beyond the control of India’s central bank and has done nothing to reassure foreign investors.

And multinationals initially lured by India’s growth narrative may find that the realities of the Indian marketplace tell a more vexing story. Some companies, including the insurer MetLife and the retailing giant Wal-Mart, for example, are eager to invest and expand here but have been waiting years for policy makers to let them.

For the full story, see:
VIKAS BAJAJ. “Foreign Investment Ebbs in India.” The New York Times (Fri., February 25, 2011): B1 & B6.

(Note: the online version of the article is dated February 24, 2011.)

Garbage Landfill Is Home to 80,000 in Payatas

(p. 281) Perhaps you’ve heard of Smoky Mountain, the town-sized garbage landfill in Payatas, outside Manila in the Philippines, that is home to an estimated eighty thousand desperately poor Filipinos who eke out a miserable existence scavenging what others throw away. Eighty thousand people is more than the population of Utica, New York. Entire families have been born at the Smoky Mountain landfill and lived their lives there, amidst squalor, stench, and constant smoke of smoldering trash. In July 2000, about two hundred residents of the Payatas landfill died when a large hill of trash collapsed, burying them under a garbage avalanche.

Source:
Easterbrook, Gregg. The Progress Paradox: How Life Gets Better While People Feel Worse. Paperback ed. New York: Random House, 2004.

Entrepreneur Ken Olsen Was First Lionized and Then Chastised

“Ken Olsen, the pioneering founder of DEC, in 1996.” Source of caption and photo: online version of the NYT article quoted and cited below.

I believe in The Road Ahead, Bill Gates describes Ken Olsen as one of his boyhood heroes for having created a computer that could compete with the IBM mainframe. His hero failed to prosper when the next big thing came along, the PC. Gates was determined that he would avoid his hero’s fate, and so he threw his efforts toward the internet when the internet became the next big thing.
Christensen sometimes uses the fall of minicomputers, like Olsen’s Dec, to PCs as a prime example of disruptive innovation, e.g., in his lectures on disruptive innovation available online through Harvard. A nice intro lecture is viewable (but only using Internet Explorer) at: http://gsb.hbs.edu/fss/previews/christensen/start.html

(p. A22) Ken Olsen, who helped reshape the computer industry as a founder of the Digital Equipment Corporation, at one time the world’s second-largest computer company, died on Sunday. He was 84.

. . .
Mr. Olsen, who was proclaimed “America’s most successful entrepreneur” by Fortune magazine in 1986, built Digital on $70,000 in seed money, founding it with a partner in 1957 in the small Boston suburb of Maynard, Mass. With Mr. Olsen as its chief executive, it grew to employ more than 120,000 people at operations in more than 95 countries, surpassed in size only by I.B.M.
At its peak, in the late 1980s, Digital had $14 billion in sales and ranked among the most profitable companies in the nation.
But its fortunes soon declined after Digital began missing out on some critical market shifts, particularly toward the personal computer. Mr. Olsen was criticized as autocratic and resistant to new trends. “The personal computer will fall flat on its face in business,” he said at one point. And in July 1992, the company’s board forced him to resign.

For the full obituary, see:
GLENN RIFKIN. “Ken Olsen, Founder of the Digital Equipment Corporation, Dies at 84.” The New York Times (Tues., February 8, 2011): A22.
(Note: ellipsis added.)
(Note: the online version of the story is dated February 7, 2011 and has the title “Ken Olsen, Who Built DEC Into a Power, Dies at 84.”)

Gates writes in autobiographical mode in the first few chapters of:
Gates, Bill. The Road Ahead. New York: Viking Penguin, 1995.

Christensen’s mature account of disruptive innovation is best elaborated in:
Christensen, Clayton M., and Michael E. Raynor. The Innovator’s Solution: Creating and Sustaining Successful Growth. Boston, MA: Harvard Business School Press, 2003.

“For the First 40 Years of Indian Independence, Entrepreneurs . . . Were Looked Down Upon”

(p. 8) Saurabh Srivastava, co-founder of the National Association of Software and Service Companies in India, explained that for the first 40 years of Indian independence, entrepreneurs here were looked down upon. India had lost confidence in its ability to compete, so it opted for protectionism. But when the ’90s rolled around, and India’s government was almost bankrupt, India’s technology industry was able to get the government to open up the economy, in part by citing the example of America and Silicon Valley. India has flourished ever since.

“America,” said Srivastava, “was the one who said to us: ‘You have to go for meritocracy. You don’t have to produce everything yourselves. Go for free trade and open markets.’ This has been the American national anthem, and we pushed our government to tune in to it. And just when they’re beginning to learn how to hum it, you’re changing the anthem. … Our industry was the one pushing our government to open our markets for American imports, 100 percent foreign ownership of companies and tough copyright laws when it wasn’t fashionable.”

If America turns away from these values, he added, the socialist/protectionists among India’s bureaucrats will use it to slow down any further opening of the Indian markets to U.S. exporters.

For the full commentary, see:
THOMAS L. FRIEDMAN. “It’s Morning in India.” The New York Times, Week in Review Section (Sun., October 31, 2010): 8.
(Note: the online version of the story is dated October 30, 2010.)