Category: Labor Economics

No Increase in Public’s Concern with Income Inequality Since 1978

(p. 4A) DENVER (AP) — Income inequality is all the rage in public debate nowadays. Political figures from Sen. Elizabeth Warren on the left to Republican presidential prospect Jeb Bush on the right are denouncing the widening gap between the wealthy and everyone else.
But ordinary Americans don’t seem as fascinated by the issue as their would-be leaders. The public’s expressed interest in income inequality has remained stagnant over the past 36 years, according to the General Social Survey, which measures trends in public opinion.
In 2014 polling, Republicans’ support for the government doing something to narrow the rich-poor gap reached an all-time low. Even Democrats were slightly less interested in government action on the issue than they were two years ago.
The survey is conducted by the independent research organization NORC at the University of Chicago. Because of its long-running and comprehensive questions, it is a highly regarded source on social trends.
In the latest survey, made public last week, less than half of Americans — 46 percent — said the government ought to reduce income differences between the rich and the poor. That level has held fairly steady since 1978. Thirty-seven percent said the government shouldn’t concern itself with income differences, and the rest didn’t feel strongly either way.

For the full story, see:
AP. “Income Inequality? Pols Want to Talk about It; Public Yawns.” Omaha World-Herald (Monday, March 23, 2015): 4A.

For more details on the National Opinion Research Center (NORC) General Social Survey (GSS) results through 2014, see:
Inequality: Trends in Americans’ Attitudes URL: http://www.apnorc.org/projects/Pages/HTML%20Reports/inequality-trends-in-americans-attitudes0317-6562.aspx#study

More Tech Stars Skip College, at Least for a While

(p. B1) The college dropout-turned-entrepreneur is a staple of Silicon Valley mythology. Steve Jobs, Bill Gates and Mark Zuckerberg all left college.
In their day, those founders were very unusual. But a lot has changed since 2005, when Mr. Zuckerberg left Harvard. The new crop of dropouts has grown up with the Internet and smartphones. The tools to create new technology are more accessible. The cost to start a company has plunged, while the options for raising money have multiplied.
Moreover, the path isn’t as lonely.
. . .
Not long ago, dropping out of school to start a company was considered risky. For this generation, it is a badge of honor, evidence of ambition and focus. Very few dropouts become tycoons, but “failure” today often means going back to school or taking a six-figure job at a big tech company.
. . .
(p. B5) There are no hard numbers on the dropout trend, but applicants for the Thiel Fellowship tripled in the most recent year; the fellowship won’t disclose numbers.
. . .
It has tapped 82 fellows in the past five years.
“I don’t think college is always bad, but our society seems to think college is always good, for everyone, at any cost–and that is what we have to question,” says Mr. Thiel, a co-founder of PayPal and an early investor in Facebook.
Of the 43 fellows in the initial classes of 2011 and 2012, 26 didn’t return to school and continued to work on startups or independent projects. Five went to work for large tech firms, including a few through acquisitions. The remaining 12 went back to school.
Mr. Thiel says companies started by the fellows have raised $73 million, a record that he says has attracted additional applicants. He says fellows “learned far more than they would have in college.”

For the full story, see:
DAISUKE WAKABAYASHI. “College Dropouts Thrive in Tech.” The Wall Street Journal (Thurs., June 4, 2015): B1 & B10.
(Note: ellipses added. The phrase “the fellowship won’t disclose numbers” was in the online, but not the print, version of the article.)
(Note: the online version of the article has the date June 3, 2015, and has the title “College Dropouts Thrive in Tech.”)

The Complementarity of Humans and Robots in Education

(p. 6) Computers and robots are already replacing many workers. What can young people learn now that won’t be superseded within their lifetimes by these devices and that will secure them good jobs and solid income over the next 20, 30 or 50 years? In the universities, we are struggling to answer that question.
. . .
Some scholars are trying to discern what kinds of learning have survived technological replacement better than others. Richard J. Murnane and Frank Levy in their book “The New Division of Labor” (Princeton, 2004) studied occupations that expanded during the information revolution of the recent past. They included jobs like service manager at an auto dealership, as opposed to jobs that have declined, like telephone operator.
The successful occupations, by this measure, shared certain characteristics: People who practiced them needed complex communication skills and expert knowledge. Such skills included an ability to convey “not just information but a particular interpretation of information.” They said that expert knowledge was broad, deep and practical, allowing the solution of “uncharted problems.”
. . .
When I arrived at Yale in 1982, there were no undergraduate courses in finance. I started one in the fall of 1985, and it continues today. Increasingly, I’ve tried to connect mathematical theory to actual applications in finance.
Since its beginnings, the course has gradually become more robotic: It resembles a real, dynamic, teaching experience, but in execution, much of it is prerecorded, and exercises and examinations are computerized. Students can take it without need of my physical presence. Yale made my course available to the broader public on free online sites: AllLearn in 2002, Open Yale in 2008 and 2011, and now on Coursera.
The process of tweaking and improving the course to fit better in a digital framework has given me time to reflect about what I am doing for my students. I could just retire now and let them watch my lectures and use the rest of the digitized material. But I find myself thinking that I should be doing something more for them.
So I continue to update the course, thinking about how I can integrate its lessons into an “art of living in the world.” I have tried to enhance my students’ sense that finance should be the art of financing important human activities, of getting people (and robots someday) working together to accomplish things that we really want done.

For the full commentary, see:
ROBERT J. SHILLER. “Economic View; What to Learn in College to Stay One Step Ahead of Computers.” The New York Times, SundayBusiness Section (Sun., MAY 24, 2015): 6.
(Note: ellipses added.)
(Note: the online version of the commentary has the date MAY 22, 2015, and has the title “Economic View; What to Learn in College to Stay One Step Ahead of Computers.”)

The Levy and Murnane book mentioned above, is:
Levy, Frank, and Richard J. Murnane. The New Division of Labor: How Computers Are Creating the Next Job Market. Princeton, NJ: Princeton University Press, 2004.
Some of the core of the Levy and Murnane book can be found in:
Levy, Frank, and Richard Murnane. “Book Excerpt: The New Division of Labor.” Milken Institute Review 6, no. 4 (Dec. 2004): 61-82.

Spread of Robots Creates New and Better Human Jobs

(p. A11) The issues at the heart of “Learning by Doing” come into sharp relief when James Bessen visits a retail distribution center near Boston that was featured on “60 Minutes” two years ago. The TV segment, titled “Are Robots Hurting Job Growth?,” combined gotcha reporting with vintage movie clips–scary-looking Hollywood robots–to tell a chilling tale of human displacement and runaway job loss.
Mr. Bessen isn’t buying it. Although robots at the distribution center have eliminated some jobs, he says, they have created others–for production workers, technicians and managers. The problem at automated workplaces isn’t the robots. It’s the lack of qualified workers. New jobs “require specialized skills,” Mr. Bessen writes, but workers with these skills “are in short supply.”
It is a deeply contrarian view. The conventional wisdom about robots and other new workplace technology is that they do more harm than good, destroying jobs and hollowing out the middle class. MIT economists Erik Brynjolfsson and Andrew McAfee made the case in their best-selling 2014 book, “The Second Machine Age.” They describe a future in which software-driven machines will take over not just routine jobs–replacing clerks, cashiers and warehouse workers–but also tasks done by nurses, doctors, lawyers and stock traders. Mr. Bessen sets out to refute the arguments of such techno-pessimists, relying on economic analysis and on a fresh reading of history.

For the full review, see:
TAMAR JACOBY. “BOOKSHELF; Technology Isn’t a Job Killer; Many predicted ATMs would eliminate bank tellers, but the number of tellers in the U.S. has risen since the machines were introduced.” The Wall Street Journal (Thurs., May 21, 2015): A11.
(Note: the online version of the review has the date May 20, 2015.)

The book under review, is:
Bessen, James. Learning by Doing: The Real Connection between Innovation, Wages, and Wealth. New Haven, CT: Yale University Press, 2015.

Computer Programs “Lack the Flexibility of Human Thinking”

(p. A11) . . . let’s not panic. “Superintelligent” machines won’t be arriving soon. Computers today are good at narrow tasks carefully engineered by programmers, like balancing checkbooks and landing airplanes, but after five decades of research, they are still weak at anything that looks remotely like genuine human intelligence.
. . .
Even the best computer programs out there lack the flexibility of human thinking. A teenager can pick up a new videogame in an hour; your average computer program still can only do just the single task for which it was designed. (Some new technologies do slightly better, but they still struggle with any task that requires long-term planning.)

For the full commentary, see:
GARY MARCUS. “Artificial Intelligence Isn’t a Threat–Yet; Superintelligent machines are still a long way off, but we need to prepare for their future rise.” The Wall Street Journal (Sat., Dec. 13, 2014): A11.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date Dec. 11, 2014.)

Cultural and Institutional Differences Between Europe and U.S. Keep Europe from Having a Silicon Valley

(p. B7) “They all want a Silicon Valley,” Jacob Kirkegaard, a Danish economist and senior fellow at the Peterson Institute for International Economics, told me this week. “But none of them can match the scale and focus on the new and truly innovative technologies you have in the United States. Europe and the rest of the world are playing catch-up, to the great frustration of policy makers there.”
Petra Moser, assistant professor of economics at Stanford and its Europe Center, who was born in Germany, agreed that “Europeans are worried.”
“They’re trying to recreate Silicon Valley in places like Munich, so far with little success,” she said. “The institutional and cultural differences are still too great.”
. . .
There is . . . little or no stigma in Silicon Valley to being fired; Steve Jobs himself was forced out of Apple. “American companies allow their employees to leave and try something else,” Professor Moser said. “Then, if it works, great, the mother company acquires the start-up. If it doesn’t, they hire them back. It’s a great system. It allows people to experiment and try things. In Germany, you can’t do that. People would hold it against you. They’d see it as disloyal. It’s a very different ethic.”
Europeans are also much less receptive to the kind of truly disruptive innovation represented by a Google or a Facebook, Mr. Kirkegaard said.
He cited the example of Uber, the ride-hailing service that despite its German-sounding name is a thoroughly American upstart. Uber has been greeted in Europe like the arrival of a virus, and its reception says a lot about the power of incumbent taxi operators.
“But it goes deeper than that,” Mr. Kirkegaard said. “New Yorkers don’t get all nostalgic about yellow cabs. In London, the black cab is seen as something that makes London what it is. People like it that way. Americans tend to act in a more rational and less emotional way about the goods and services they consume, because it’s not tied up with their national and regional identities.”
. . .
With its emphasis on early testing and sorting, the educational system in Europe tends to be very rigid. “If you don’t do well at age 18, you’re out,” Professor Moser said. “That cuts out a lot of people who could do better but never get the chance. The person who does best at a test of rote memorization at age 17 may not be innovative at 23.” She added that many of Europe’s most enterprising students go to the United States to study and end up staying.
She is currently doing research into creativity. “The American education system is much more forgiving,” Professor Moser said. “Students can catch up and go on to excel.”
Even the vaunted European child-rearing, she believes, is too prescriptive. While she concedes there is as yet no hard scientific evidence to support her thesis, “European children may be better behaved, but American children may end up being more free to explore new things.”

For the full story, see:
JAMES B. STEWART. “Common Sense; A Fearless Culture Fuels Tech.” The New York Times (Fri., JUNE 19, 2015): B1 & B7.
(Note: ellipses added.)
(Note: the online version of the story has the date JUNE 18, 2015, and has the title “Common Sense; A Fearless Culture Fuels U.S. Tech Giants.”)

Little Progress Toward Complex Autonomous Robots

(p. A8) [In June 2015] . . . , the Defense Advanced Research Projects Agency, a Pentagon research arm, . . . [held] the final competition in its Robotics Challenge in Pomona, Calif. With $2 million in prize money for the robot that performs best in a series of rescue-oriented tasks in under an hour, the event . . . offer[ed] what engineers refer to as the “ground truth” — a reality check on the state of the art in the field of mobile robotics.

A preview of their work suggests that nobody needs to worry about a Terminator creating havoc anytime soon. Given a year and a half to improve their machines, the roboticists, who shared details about their work in interviews before the contest in June, appear to have made limited progress.
. . .
“The extraordinary thing that has happened in the last five years is that we have seemed to make extraordininary progress in machine perception,” said Gill Pratt, the Darpa program manager in charge of the Robotics Challenge.
Pattern recognition hardware and software has made it possible for computers to make dramatic progress in computer vision and speech understanding. In contrast, Dr. Pratt said, little headway has been made in “cognition,” the higher-level humanlike processes required for robot planning and true autonomy. As a result, both in the Darpa contest and in the field of robotics more broadly, there has been a re-emphasis on the idea of human-machine partnerships.
“It is extremely important to remember that the Darpa Robotics Challenge is about a team of humans and machines working together,” he said. “Without the person, these machines could hardly do anything at all.”
In fact, the steep challenge in making progress toward mobile robots that can mimic human capabilities is causing robotics researchers worldwide to rethink their goals. Now, instead of trying to build completely autonomous robots, many researchers have begun to think instead of creating ensembles of humans and robots, an approach they describe as co-robots or “cloud robotics.”
Ken Goldberg, a University of California, Berkeley, roboticist, has called on the computing world to drop its obsession with singularity, the much-ballyhooed time when computers are predicted to surpass their human designers. Rather, he has proposed a concept he calls “multiplicity,” with diverse groups of humans and machines solving problems through collaboration.
For decades, artificial-intelligence researchers have noted that the simplest tasks for humans, such as reaching into a pocket to retrieve a quarter, are the most challenging for machines.
“The intuitive idea is that the more money you spend on a robot, the more autonomy you will be able to design into it,” said Rodney Brooks, an M.I.T. roboticist and co-founder two early companies, iRobot and Rethink Robotics. “The fact is actually the opposite is true: The cheaper the robot, the more autonomy it has.”
For example, iRobot’s Roomba robot is autonomous, but the vacuuming task it performs by wandering around rooms is extremely simple. By contrast, the company’s Packbot is more expensive, designed for defusing bombs, and must be teleoperated or controlled wirelessly by people.

For the full story, see:
JOHN MARKOFF. “A Reality Check for A.I.” The New York Times (Tues., MAY 26, 2015): D2.
(Note: ellipses, and bracketed expressions, added. I corrected a misspelling of “extraordinary.”)
(Note: the date of the online version of the story is MAY 25, 2015, and has the title “Relax, the Terminator Is Far Away.”)

Institutional Improvements Can Sometimes Be Designed, Rather than Only Spontaneous

A distinguished school of libertarian and neo-Austrian economic thought argues, following F.A. Hayek, that institutional improvements only arise from spontaneous order, and never from conscious design. There is something to their argument, but the designs of Alvin Roth provide counter-examples.

(p. A13) Mr. Roth’s work has been to discover the most efficient and equitable methods of matching and implement them in the world. He writes with verve and style, describing many market malfunctions–from aboriginal tribes in Australia arranging marriages for children not yet born to judges bending every rule in the book to hire law clerks years before they have graduated from law school–and how we ought to think about them.

Mr. Roth’s approach contrasts with standard debates over free markets versus government regulation. We want markets to be thick, quick, timely and trustworthy, but without careful design markets can become thin, slow, ill-timed and dangerous for the honest. The solution to these problems is unlikely to be regulation legislated from on high. Instead what Mr. Roth practices is nuanced market design created mostly by market participants. Mr. Roth found, for example, that even though the problems in the market for gastroenterologists and law clerks looked the same (hiring started years before schooling ended), the solutions had to be subtly different because of differences in culture, history and norms.

For the full review, see:
ALEX TABARROK. “BOOKSHELF; The Designer of Markets; In some markets, price isn’t the determining factor. You can choose to go to Harvard, but Harvard has to choose to accept you first.” The Wall Street Journal (Tues., JUNE 16, 2015): A13.
(Note: ellipses added.)
(Note: the online version of the review has the date JUNE 15, 2015, and has the title “BOOKSHELF; Matchmaker, Make Me a Market; In some markets, price isn’t the determining factor. You can choose to go to Harvard, but Harvard has to choose to accept you first.”)

The book under review is:
Roth, Alvin E. Who Gets What — and Why: The New Economics of Matchmaking and Market Design. New York: Houghton Mifflin Harcourt Publishing Co., 2015.

How Home Solar Panel Subsidies Increase Inequality

(p. A13) Well-meaning–but ill-conceived–federal, state and local tax incentives for rooftop solar give back between 30% and 40% of the installation costs to the owner as a tax credit. But more problematic are hidden rate subsidies, the most significant of which is called net metering, which is available in 44 states. Net metering allows solar-system owners to offset on a one-for-one basis the energy they receive from the electric grid with the solar power they generate on their roof.
While this might sound logical, it isn’t. An average California resident with solar, for example, generally pays about 17 cents per kilowatt-hour for electric service when the home’s solar panels aren’t operating. When they are operating, however, net metering requires the utility to pay that solar customer the same 17 cents per kilowatt-hour. But the solar customer still needs the grid to back up his intermittent solar panels, and the utility could have purchased that same solar power from a utility-scale solar power plant for about five cents per kilowatt-hour.
This 12-cents-per-kwh cost difference amounts to a wealth transfer from average electric customers to customers with rooftop solar systems (who also often have higher incomes). This is because utilities collect much of their fixed costs–the unavoidable costs of power plants, transmission lines, etc.–from residential customers through variable-use charges, in other words, charges based on how much energy they use. When a customer with rooftop solar purchases less electricity from the utility, he pays fewer variable-use charges and avoids contributing revenue to cover the utility’s fixed costs. The result is that all of the other customers have to pick up the difference.

For the full commentary, see:
BRIAN H. POTTS . “The Hole in the Rooftop Solar-Panel Craze; Large-scale plants make sense, but panels for houses simply transfer wealth from average electric customers.” The Wall Street Journal (Mon., May 18, 2015): A13.
(Note: ellipses added.)
(Note: the online version of the commentary has the date May 17, 2015.)

“Secure in the Knowledge that She Has Other Opportunities”

(p. A11) . . . , Professor Higgins notes that it is Eliza’s “curbstone English that will keep her in the gutter to the end of her days.” He boasts that with a few months under his instruction, she could get a job “as a lady’s maid or a shop’s assistant.”
The next morning, Eliza appears at Professor Higgins’s doorstep to hire him to teach her English because she wants to be “a lady in a flow’r shop, ‘stead of sellin’ at the corner of Tottenham Court Road.” He accepts.
Note the assumptions. Eliza didn’t place her hope in new regulations for street-side flower mongering. For Eliza, upward mobility was about acquiring the skills she needed to get ahead, in this case proper English and the manners that went with it.
. . .
In the end, the only real leverage a worker has over a boss is her ability to tell him where to get off–secure in the knowledge that she has other opportunities. Which is exactly what Eliza Doolittle does at the end, when she’s acquired the English and manners that mean she no longer has to put up with the bullying of Professor Henry Higgins.

For the full commentary, see:
WILLIAM MCGURN. “MAIN STREET; Audrey Hepburn Teaches Economics; Progressives rushing to help New York nail-salon workers should rent a copy of ‘My Fair Lady’.” The Wall Street Journal (Tues., May 26, 2015): A11.
(Note: ellipses added.)
(Note: the online version of the commentary has the date May 25, 2015.)

More Detailed Rules Reduce Ability to Improvise, and Result in More Deaths

(p. 41) How do wildland firefighters make decisions in life-threatening situations when, for instance, a fire explodes and threatens to engulf the crew? They are confronted with endless variables, the most intense, high-stakes atmosphere imaginable, and the need to make instant decisions. Psychologist Karl Weick found that traditionally, successful firefighters kept four simple survival guidelines in mind:
1. Build a backfire if you have time.
2. Get to the top of the ridge where the fuel is thinner, where there are stretches of rock and shale, and where winds usually fluctuate.
3. Turn into the fire and try to work through it by piecing together burned-out stretches.
4. Do not allow the fire to pick the spot where it hits you, because it will hit you where it is burning fiercest and fastest.
But starting in the mid-1950s, this short list of survival rules was gradually replaced by much longer and more detailed ones. The current lists, which came to exceed forty-eight items, were designed to specify in greater detail what to do to survive in each particular circumstance (e.g., fires at the urban-wildland interface).
Weick reports that teaching the firefighters these detailed lists was a factor in decreasing the survival rates. The original short list was a general guide. The firefighters could easily remember it, but they knew it needed to be interpreted, modified, and embellished based on (p. 42) circumstance. And they knew that experience would teach them how to do the modifying and embellishing. As a result, they were open to being taught by experience. The very shortness of the list gave the firefighters tacit permission– even encouragement– to improvise in the face of unexpected events. Weick found that the longer the checklists for the wildland firefighters became, the more improvisation was shut down. Rules are aids, allies, guides, and checks. But too much reliance on rules can squeeze out the judgment that is necessary to do our work well. When general principles morph into detailed instructions, formulas, unbending commands– wisdom substitutes– the important nuances of context are squeezed out. Better to minimize the number of rules, give up trying to cover every particular circumstance, and instead do more training to encourage skill at practical reasoning and intuition.

Source:
Schwartz, Barry, and Kenneth Sharpe. Practical Wisdom: The Right Way to Do the Right Thing. New York: Riverhead Books, 2010.