You Have to Wait on the Corner to Get On the Bus

The aphorism in the title means that if one wants to have a chance at success one must go to where the bus to that end stops in hopes of getting on it, it will never come to your front door, no less your bed room.

The deeper meaning can be seen in scattering problems. Sorry for the technical digression but in say a nuclear explosion one seeks certain fissionable materials that have a maximum scattering cross section, the get a better chance or probability of a collision and thus an explosion.

Then onto an exceptionally prescient piece by Mankiw, where he is looking at education and the top 1%. He states:

But it may be better to think of the return to education as stochastic.  Education not only increases the average income a person will earn, but it also changes the entire distribution of possible life outcomes.  It does not guarantee that a person will end up in the top 1 percent, but it increases the likelihood.  I have not seen any data on this, but I am willing to bet that the top 1 percent are more educated than the average American; while their education did not ensure their economic success, it played a role.

I would argue that the top 1% are not just well educated but were on the corner if you will or were where the scattering cross section was the greatest. Say Harvard. When at Harvard you are exposed to people who are brighter, well connected and who in life are most likely to build on that. You have thus put yourself in the best spot for that bus to stop.

Going to say Rutgers may not put you there, there are exceptions, but the scattering cross section would be much smaller. Going to MIT may not put you in the Harvard cross section but would most likely put you in another favorable cross section, the entrepreneurial one, where again you may have a chance at the 1%, if that is your goal, or a Nobel prize if that is a goal. In contrast the MIT education may actually be a negative for becoming a large corporate CEO due mainly to the development of independence and lack of group political finesse, yet that very cultural milieu may be ideal for a start up, as one would expect.

Mankiw continues:

I am inclined to think that education is important here in part because the large increase in the share of the top 1 percent from the 1970s to the present occurred together with the increase in the rate of return to education during this period documented by labor economists.  It is possible, of course, that the the two phenomena just happened to occur simultaneously.  But the timing suggests that the two trends--the increasing value of education and the rising share of the top 1 percent--may be related

Education qua learning "stuff" is important but is not the sine qua non. Getting a PhD from say MIT in EECS will not in and of itself assure you of say entrepreneurial success.  Thus possibly the stochastic element of Mankiw. However the culture combined with the contacts, fellow entrepreneurs, may establish a critical mass, a larger scattering cross section if you will, to get to that point.

I think Mankiw has hit onto something, a complex systems view of the process. Why work to get into MIT, why not default to say some other place, again Rutgers, I am picking that solely because it is down the road a piece and near Princeton. I really have no other reason, but say Rutgers. Most people there will seek jobs in well established firms most likely. Why, the scattering cross section for other options is small and thus the probability for such interaction is low, they are waiting on the wrong corner.

So is education a guarantee, not really, is going to Harvard one, not necessarily, it is an amalgam, but good schools raise the probability. One may be exposed to options and opportunities, as well as style and modus vivendi that may not have been known to the individual.

The Mankiw idea has some substantial merit, perhaps someone may pursue it further.

Engineering and Science

There is an interesting piece in the NY Times about Engineering and Science education. What is most interesting is that it is reflective of today's society rather than the facts.

First, they use the acronym, STEM, for science, technology, engineering and math, and I really do not get that. We always had math in the sciences and I have no idea what technology is. The world is divided into science and engineering. Science looks at primal stuff like chemistry, biology and even math, and engineering uses that stuff to make things. A chemist creates a process and a chem E makes it into a production engine. Simple, clear, direct. This STEM thing must be some Washington type who is trying to sweep every type into a pool. Frankly it is nonsense.

Second, the article states:

“We’re losing an alarming proportion of our nation’s science talent once the students get to college,” says Mitchell J. Chang, an education professor at U.C.L.A. who has studied the matter. “It’s not just a K-12 preparation issue.” ....

The bulk of attrition comes in engineering and among pre-med majors, who typically leave STEM fields if their hopes for medical school fade. There is no doubt that the main majors are difficult and growing more complex. Some students still lack math preparation or aren’t willing to work hard enough. 

Other deterrents are the tough freshman classes, typically followed by two years of fairly abstract courses leading to a senior research or design project. “It’s dry and hard to get through, so if you can create an oasis in there, it would be a good thing,” ...

Now let me give some current personal interjections.  I wanted to get back some of the Organic Chem I took 50 years ago, yes 50, and so I enrolled in the local Community College, and am taking the course. Yes, it is worse than 50 years ago, we just learn tons of facts, and for me it is not hard since I had all the courses that followed and am doing my own advanced work beyond that level. I just wanted to refresh some ideas. The poor students seem stunned by the collection of facts and the constant harangue from the instructor as to how hard they must work. That was not MIT despite the reputation. There the instructor distilled the facts into a coherent whole, just look at the MIT Open Classroom videos on Freshman Chemistry, no memorization, understanding and applying concepts.

The article continues:

...bailed out of engineering at Notre Dame in the fall of his sophomore year. He had been the kind of recruit most engineering departments dream about. He had scored an 800 in math on the SAT and in the 700s in both reading and writing. He also had taken Calculus BC and five other Advanced Placement courses at a prep school in Washington, D.C., and had long planned to major in engineering. 

But as ... sat in his mechanics class in 2009, he realized he had already had enough. “I was trying to memorize equations, and engineering’s all about the application, which they really didn’t teach too well,” he says. “It was just like, ‘Do these practice problems, then you’re on your own.’ ” And as he looked ahead at the curriculum, he did not see much relief on the horizon. 

So ..., a 21-year-old who likes poetry and had enjoyed introductory psychology, switched to a double major in psychology and English, where the classes are “a lot more discussion based.” He will graduate in May and plans to be a clinical psychologist. Of his four freshman buddies at Notre Dame, one switched to business, another to music. One of the two who is still in engineering plans to work in finance after graduation. 

 This is the problem. First I took the same course almost 50 years ago also. Mechanics does not require memorizing a single thing! You got all the theory in high school. It is applying the ideas to different geometries, moving parts, and just thinking. That is engineering, the difference between science and engineering. If memorizing was required it was either taught improperly or the student perhaps was never meant for engineering in the first place.

How about looking at the excess pampering of students, the telling them that they are all perfect. They are NOT, some are just lazy, even dumb. But when one looks at percentages from now and back 50 years one sees that we were much more productive then, was it the draft, the fact that without an education we would at best pick up trash, or worse work on Madison Avenue! That was before Wall Street for the young folks.

The article continues:

“They learn how to work with their hands, how to program the robot and how to work with design constraints,” he says. But he also says it’s inevitable that students will be lost. Some new students do not have a good feel for how deeply technical engineering is. Other bright students may have breezed through high school without developing disciplined habits. By contrast, students in China and India focus relentlessly on math and science from an early age. 

 I have had many of those recent Chinese students at MIT. They are all back somewhere else, never stayed here thanks to our Government, but they had the basics and we then applied it. It seems that the approach is to "play" without principles. I do not believe that such an approach works, especially based upon experience. Engineers also look at large systems, and as such they must be able to abstract reality while retaining all of its key elements. Then reconstruct it and tell how it works and how to control it. That requires an ability to deal with a broad set of fields and at two levels, levels of significant sophistication such as stochastic systems and then at levels of conveying that to people whose concurrence you may need, such as MBAs who have no idea what you may be talking about in reality. Thus the challenge for the engineer is dealing with the facts properly and then converting that reality into a consistent and truthful yet understandable simplicity.

Thus the attempt to make the Freshman year one of fun and games is in my view a fatal error. A good college is not a High  School. MIT understands that and has for decades. Thus Pass/Fail. At MIT there is very few places to hide, there are however many places to explore and find that resonance that makes for an enjoyable and productive career. It often is the mentoring of people who are mid or later career that helps the student, seeing where they may be going.

I am reminded of one of my student dinners, we had an MIT grad, about ten years out, CEO of his own start up. The students after the dinner said as we walked back to Campus:

"We did not know an engineer could run his own company? We thought you had to get some MBA person."

I turned somewhat miffed and said to the Chinese mostly students in my oft times abrupt New York manner:

"What do I look like, chopped liver. Besides look who runs your country, all engineers, they are not chopped liver either!"

Try and translate that into Mandarin!

The Harvard Walkout

At Harvard today a group in line apparently with the Occupy crowd staged a walkout of Prof Makiw's Economics Class. The letter stated their reasons as follows:

A legitimate academic study of economics must include a critical discussion of both the benefits and flaws of different economic simplifying models. As your class does not include primary sources and rarely features articles from academic journals, we have very little access to alternative approaches to economics. There is no justification for presenting Adam Smith’s economic theories as more fundamental or basic than, for example, Keynesian theory. 

Care in presenting an unbiased perspective on economics is particularly important for an introductory course of 700 students that nominally provides a sound foundation for further study in economics. Many Harvard students do not have the ability to opt out of Economics 10. This class is required for Economics and Environmental Science and Public Policy concentrators, while Social Studies concentrators must take an introductory economics course—and the only other eligible class, Professor Steven Margolin’s class Critical Perspectives on Economics, is only offered every other year (and not this year).  Many other students simply desire an analytic understanding of economics as part of a quality liberal arts education. Furthermore, Economics 10 makes it difficult for subsequent economics courses to teach effectively as it offers only one heavily skewed perspective rather than a solid grounding on which other courses can expand. Students should not be expected to avoid this class—or the whole discipline of economics—as a method of expressing discontent.

Harvard graduates play major roles in the financial institutions and in shaping public policy around the world. If Harvard fails to equip its students with a broad and critical understanding of economics, their actions are likely to harm the global financial system. The last five years of economic turmoil have been proof enough of this.

 Now there have been times when I have take a different position with Mankiw, such as on Pigou and his opposition to a control of sugars. Economists who lack knowledge of the human body and medicine should frankly stay on the hog and corn cycle at best. But that not withstanding, Mankiw is a highly respected and generally quite thoughtful a thinker in the field.

He is often a voice of well founded reason and often with understatement as compared to some of the left wing ranters we all see. Thus it is almost absurd that this group should select him amongst all the players out there.

Why not pick on Romer, she was the one with the January 11, 2009 memo which predicted nothing that ever happened, or perhaps any one of the others of her ilk. But Mankiw, I think not.

But this does bring back the days of the 60s when students protested everything. I gave an Electronics Final in the Armory in June 1970, I got a bomb threat, and it was up to me to decide to stay or leave. I informed the students of the threat, told them that I and the exam would remain but that had the option of leaving and getting graded accordingly, and then I walked the floor for the next two hours. No bomb, and no one ever tried that again, at least on me. I would not do that In Iraq however.

But this rather ill focused Luther like letter, well it really misses the point. If you have other ideas, no one stops you from reading, and in turn talking. In addition I am certain that Harvard can be creative in its curriculum, Mankiw's "favorite book" sales will not suffer that much.

The problem here is that this protest lacks the elan of the 60s. The protesters look like schlubs, no style, and what they are protesting is so vague, not the War in Vietnam, and they seem to miss the target of the issue, unlike Johnson.

Yet I still remember Kent State. That was the first time I remember that US troops executed unarmed citizens. Hopefully never to be repeated.

Coase, Pigou and Power Outages

During the October Blizzard here in New Jersey I had the opportunity to look at the world from the eyes of Coase and Pigou. I also saw externalities in a real fashion.

Let me explain. You see, as predicted, sometime mid Saturday, October 30, 2011, we lost all power. The proximate cause, falling trees. The real cause was multifold. First the town has a tree loving policy, Namely there is a strong group of folks, the Mayor appears to be at the core, who believe every tree and each of its parts are sacred, at least that is my opinion having attended the town meeting where the decision was made.

Now I like trees, I grow them, hundreds, and give them away. Yet having gotten my degrees in Botany and Horticulture from the school at the New York Botanical Garden, I know something of trees. The locals in town are fans of “native” trees, maples and ash. Now anyone who knows where we live it is the remnants of Lake Passaic, from the last ice age. It is then end of the ice flow from the north, the last of what we know as the New England terrain. Twenty miles south we have sand, here we have rocks and clay, dragged a thousand miles or more from the north by sheets of glaciers. Now the native trees are really grown up weeds.

Ash have invasive roots and maples break is a stiff wind, and with snow the come crashing down. The tree decision has allowed the growth of trees over, under and through all the power lines. Thus the falling trees, thousands, really. Totally predictable, and it happens every other month, not thousands of course but a dozen or so!

Thus the proximate cause is really a result of the decision by the town to allow this to happen. If it were like the adjacent towns we would have trimmed them or eliminated them. The costs to repair is orders of magnitude more than the cost to fix the tree problem. In classic Tort law, the owner of the property upon which the tree was growing would be liable for any direct and consequential damages. However, this may be mitigated by the actions of the town by abrogating the ability of an owner to remove a tree. However a town does not have a sovereign immunity as does the State or Federal Government, it is collectively liable. Thus one ends up litigating against one's self. Perhaps Coase never thought of that.

That leads to externalities. You see people want a town covered in trees. However the choice of having this lovely coverage is loss of power, frequently. The costs of loss of power is substantial. I had to move my company from New Jersey to Prague, could not rely on the power. In my office here I had to get motor generators, an even then we lost Internet access and thus business. Thus it cost me and others for the ability of some to have trees overhanging streets.

The solution is simple, cut the trees. Or if you were Coase, sue those who have trees and lead to loss of power. It is like the railroad and farmer familiar to Coasean arguments. You want trees, and I am harmed, the you pay me for the harm.

Now to Pigou. Let us assume we do not follow Coase, that we follow Pigou. Namely there is a cost to the externalities but there is a cost to remedies. Pre-emptive remedies are always best, namely prevention. That means cutting the trees. Let us put the tree huggers aside. I really hate ash trees, the roots are invaders of all surface areas and basements.

But my personal likes aside, I like metasequoias, but let us assume we cut and or remove the trees overhanging the roads and wires. Who then pays for it, directly and indirectly? Let me make three arguments.

1. The Power Company: We tell JCPL to get rid of all the tree problems. That in the long run saves them money but as a Public Service Commission controlled entity they will but it goes into the rate base calculation. Plus a mark-up. Thus we all get to pay whether they are our trees or not. I get the benefit of better power but at a cost for which I bear no liability. You see power lines are buried in my area and I have chosen trees that are much more durable. Thus I am being “taxed”.

What actually happens is JCPL must love this. It is not their "fault" and the costs become part of the rate base and as such increase rates. Even a one in a hundred year event raises the rates for the remaining 99 years!  Towns are filled with managers who have no idea of unintended consequences, yes they are lawyers. They oft times make their living on these results.

2. The Town: The Town takes the responsibility to remove the trees. They do this by raising the property taxes and hiring more people. Towns never outsource, they just get more people, more trucks, and exploding benefits. Again I get hit with the costs but now for an amount proportional to my property value not my electricity usage. I may be very prudent in electricity, which I am, but this approach will not reflect that point.

3. The Owner: Namely we tell the owner of the property what the standard is and they have the duty to remedy the problem. This allocates the costs to the source. The problem is that it may be a sudden increase in costs but that could be remedied. The picture below is a prime example. The cable and telco brought the lines between this dead tree! Yes a dead tree, which sooner or later will collapse. Is this negligent on their part. Is the owner liable for the damage subsequently caused. Cane we have a class action suit?

Thus the Pigou approach is to tax and cut, trees that is, but the Coasean approach would be either to sue or frankly place the duty where the problem is, and if not compliant and damage occurs then fine or sue. A fine is a zero transaction cost remedy, so that may be the best Coasean approach.

Just a thought.

Unintended Consequences

The drug shortage, especially for chemotherapy, has a strange but predictable source, namely unintended consequences. As NEJM reports:

Before 2003, Medicare reimbursed 95% of the average wholesale price — an unregulated price set by manufacturers — whereas oncologists paid 66 to 88% of that price and thus received $1.6 billion annually in overpayments. To blunt unsustainable cost increases, the Medicare Modernization Act mandated that the Centers for Medicare and Medicaid Services (CMS) set reimbursement at the average sales price plus a 6% markup to cover practice costs. This policy has reduced not only drug payments but also demand for generics. In some cases, the reimbursement is less than the cost of administration. For instance, the price of a vial of carboplatin has fallen from $125 to $3.50, making the 6% payment trivial. So some oncologists switched to higher-margin brand-name drugs. Why use paclitaxel (and receive 6% of $312) when you can use Abraxane (for 6% of $5,824)?

This is abut a small real example of what a failure to think through the process results in. As one of the left wing politicians said when trying to get the recent health care bill passed, she said, "You have to pass it to see what it says." Pass it they did, and if one thinks the current shortage is anything just wait.

China and Space

China Daily and the BBC report on the launch of China's unmanned spacecraft for the ultimate goal of establishing a space station. As China Daily states:

The main tasks of the Shenzhou VIII is to test docking technology and functions of the modified space vessel and rocket, and carry out scientific experiments, Wu said. The unmanned spacecraft is equipped with devices for recording real images and mechanical parameters during its flight, to test the space docking before a manned attempt. Once China has mastered the technologies of rendezvous and docking, it will be equipped with the basic technologies and capacity required for the building of a space station, said Zhou Jianping, chief designer of China's manned space program. "It will make it possible for China to carry out space exploration of larger scale," he said. For this mission, Chinese and German scientists will also conduct 17 space life science experiments on Shenzhou VIII. Among the research programs, 10 will be controlled by China, six by Germany, and one by joint efforts, Wu said.

The BBC states:

It is a learning curve China hopes will eventually lead to the construction of a space station, starting at the end of the decade. At about 60 tonnes in mass, this future station would be considerably smaller than the 400-tonne international platform operated by the US, Russia, Europe, Canada and Japan, but its mere presence in the sky would nonetheless represent a remarkable achievement.

The emergence of China as a player in space has interesting elements. Clearly they see this as an element of national pride. Also they see this as a strategic element of their development as a significant international/global power.

In a way the US and its fumbling NASA programs have changed the attitude of the public to the "show off" space missions, the 1960s type banter from the space platforms, almost Kindergarten in nature.

If space is a strategic element then it should be run that way, and in fact that is what DoD is doing despite the follies of NASA.