Clinton defenders advance an unpersuasive argument

Some of Hillary Clinton’s defenders have taken to saying that voters shouldn’t pay attention to the latest Clinton scandals — the gushing of often undisclosed millions to the Clintons and their organizations by characters seeking official favors — because the charges are just one more in a long series: Whitewater, the Rose law firm billing records, the Buddhist temple fundraising, the Lippo Group.

So, the theory goes, because the Clintons have been accused of so many scandalous doings before, people shouldn’t be concerned now about Secretary Clinton’s actions that helped certain donors turn over 20 percent of U.S. uranium reserves to a state-run Russian company.

Common sense might tend to make you more suspicious of those who attract many accusations. But the Clintons’ defenders expect and hope in their case that you will instead be suspicious of those who make so many accusations. After all, they’re always saying nasty things! In this view, even charges advanced and amplified by the New York Times may be summarily dismissed as the products of a vast right-wing conspiracy.

Of course, for some voters the just-one-more-scandal argument may cut the other way. They may decide that they’ve endured enough Clinton scandals.

Still, Clinton defenders have some basis for thinking that the just-one-more-scandal argument has worked for the Clintons before. Bill Clinton may have been interrogated and impeached, but he wasn’t removed from office. Instead Newt Gingrich was knocked off the speaker’s chair days after Republicans lost seats in the midterm election.

But there’s a big difference between then and now. Bill Clinton was the incumbent president when he was impeached. Hillary Clinton is a private citizen who is running for president.

Most voters wanted Clinton to remain in office. He was re-elected in 1996 by an eight-point margin over Bob Dole. Before the Monica Lewinsky scandal broke, his job approval was in the high 50s. Once he was threatened with removal, that bounced up to 70 percent.

In effect, a crucial number of Americans were saying, don’t boot him from office. He’s been elected to two terms, he’s been performing tolerably well — so what if he lies under oath about conduct that is personal and outside his official duties?

(That doesn’t mean that Clinton’s conduct didn’t have political consequences. The Lewinsky revelations put an end to negotiations between Clinton and Gingrich on serious entitlement reforms. They’ve been delayed now going on 20 years.)

But that doesn’t mean voters were necessarily buying the Clintons’ defenses. Even as his job approval rose, Clinton’s favorable/unfavorable ratings declined. People thought less of him personally, but they also couldn’t accept the idea of pushing him aside.

Hillary Clinton is in a different position. She is a candidate, not an incumbent. Candidates are easily dispensed with, as former Sen. Gary Hart learned when the photos of him sailing on the “Monkey Business” appeared in May 1987 when he was seeking the Democratic nomination for president. His staffers vowed he would hold onto his support, but it wasn’t his to hold on to. He quickly withdrew and faded from view.

Hart’s position in 1987 was weaker than Clinton’s position today. His lead in Democratic primary polls was not overwhelming, and there were other serious active or potential candidates in the field or just over the horizon. That’s because even in Ronald Reagan’s 1980s, Democrats of varying ideological stripes were winning major offices around the country. Democrats had reason to think they had a good chance of nominating a strong ticket without Hart.

Today’s Democrats fear they are not in this comfortable position. They’ve been losing most elections lately in constituencies beyond those where their core constituencies — blacks, some Hispanics, gentry liberals — are clustered. They don’t have many prominent plausible alternative candidates.

Absent Hillary Clinton, they would be faced with a choice of tax-raiser Martin O’Malley, socialist Bernie Sanders, Reagan appointee Jim Webb, former Republican scion Lincoln Chafee, or the gaffe-prone Joe Biden. None run as well as Clinton in general election polls.

But how strong is Clinton? Her numbers have been declining and she runs under 50 percent against lesser-known Republicans in most national and target-state polls. All voters know her and most don’t favor her. She runs stronger in polls of all adults, not just registered voters. That gap suggests she could have a hard time inspiring maximizing turnout.

The argument that the Clintons have always faced scandal charges is intended to shore up her support. But it may have the opposite effect.

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Discussing Shinzo Abe’s visit to Washington: Auslin on WSJ’s ‘Opinion Journal’

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The story of the most amazing economic chart in Western civilization

I have referred to the above chart as “The most important economic chart in Western civilization.” How did that amazing growth trajectory happen? As Deirdre McCloskey suggests, the West became a business-admiring civilization and that changed everything. We started respecting and rewarding innovators — and the creative destruction they unleash. But as James Bessen explains in Harvard Business Review, it took awhile for workers to benefit:

Too often, when people think about technology, they only think about the initial invention … Yet most major technologies develop over decades, as large numbers of people learn how to apply, adapt, and improve the initial invention. The initial power loom—one of the transformative technologies of the Industrial Revolution—automated weaving tasks, allowing a weaver to produce twice as much cloth per hour. But over the next century, weavers improved their skills and mechanics and managers made adaptations and improvements, generating a twenty-fold increase in output per hour. Most of the gains from this technology took a long time to realize, and involved the skills and knowledge of many people. …

During the 1830s, the textile mills mainly hired workers who had no prior experience. Experience acquired at one mill was not necessarily valuable at another because mills used different versions of the technology and organized work in different ways. But without a robust labor market, textile workers could not look forward to a long career at different workplaces and so they had little reason to invest in learning. After the Civil War, the market for skilled textile workers became very active. Only then did wages begin to grow vigorously. Weavers’ hourly pay in Lowell changed little between 1830 and 1860, but by 1910 it had tripled. It took decades for the training institutions, business models, and labor markets to emerge that unlocked the benefits of technology for ordinary workers.

Of course, technology and skills were not the only factors that helped boost wages. Growing capital investments made the workers more productive, and growing opportunities for women workers helped increase their pay. Unions also played a role, especially during the 20^th century. But consider the magnitude of these changes: studies have shown that unionized workers earn about 15% more than comparable nonunionized workers. That’s a meaningful difference, but it looks small compared to the weavers’ three-fold increase in wages. Ultimately, the biggest factor in that wage growth was technology, the productivity growth it unlocked, and the development of mature labor markets that valued the weavers’ skills.

As Beseen also notes, similarly slow progress was seen with other key technologies such as steam engines and factory electrification. Not only does the labor market need to adjust, companies need to figure out how to best use these technologies. Along the same lines in “The Second Machine Age,” MIT economists Eric Brynjolfsson and Andrew McAfee relate how electric motors initially failed to increase productivity much over their steam predecessors (suggesting we are still figuring out the IT revolution):

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China’s demographics in the One Child Policy era: Answered and unanswered questions

Read the PDF.

Members of Congress, Distinguished Co-Panelists, Esteemed Guests:

It is a pleasure and a privilege to be invited here today to testify on China’s demographic evolution in the era of the One Child Policy.

The general dimensions of what I have called “the global war against baby girls”[1] will, I am afraid, already be all too familiar to most of you, as will the general nature of that war as it has unfolded in China over the past three and a half decades.

My testimony this afternoon will therefore simply attempt to provide a few updates on contemporary China’s biologically un-natural sex ratio at birth, and some of the prospective questions arising from this artificially induced gender imbalance. My testimony will rely upon the graphs and tables that accompany this written statement.

I wish to make four basic points in this statement:

First: modern China’s un-naturally high sex ratio at birth (SRB) can be understood as a social collision between three powerful forces—ruthless and enduring son-preference; sub-replacement fertility, which perforce freights the gender of each birth with additional import for parents; and inexpensive, universally available prenatal gender determination technology in the context of an unconditional abortion policy.

Ms. Anne Morse of the Population Research Institute has used US Census Bureau estimates of China’s fertility levels and gender imbalances to illustrate vividly the strong correspondence between lower fertility levels and higher SRBs in China over the past generation. [SEE FIGURE 1] Of course this gender imbalance is effectuated through mass sex-selective abortion, which presupposes widely available and reliable information on the gender of every fetus. When the One Child Policy commenced in the early 1980s, sonography or ultrasound machines were only found in a tiny minority of China’s nearly 3000 counties—mostly of course in urban areas. But by 1988, over 90 percent of China’s counties possessed ultrasound machines. [SEE FIGURE 2] Thus by the time of China’s 1990 census, all-China second births, third births, and all higher order births were reporting sex ratios of 120 or more [SEE FIGURE 3]—in contrast to the “normal” ratio of 103-105 typical of large established human populations, so far as we can tell, all around the world today and all throughout history.

Its name notwithstanding, China’s One Child Policy has never actually managed to enforce a one-child-only regimen over China as a whole: in recent years, by the estimates and projections of the US Census Bureau’s International Data Base, China’s total fertility rate has ranged between 1.5 and 1.6 births per woman per lifetime. In the 1990s and early 2000s, to judge by officially reported census figures, sex-selective abortion was not common for first pregnancies in China: instead, parents intervened massively across the country with female infanticide at higher-order parities. According to the 2010 census, however, the SRB for first births had risen sharply: to almost 114 boys for every 100 girls. This, even as SRBs for some higher-births appear to have been significantly declining. In effect, sex-selective feticide in China appears to have been increasingly “front-loaded” with respect to birth parity in recent years: fewer first-time parents than in the past are apparently willing nowadays (2010) to take their chances with biologically-determined gender outcomes for their firstborn child.

Please note that China’s involuntary population control policy is neither a necessary nor a sufficient condition for biologically abnormal distortions of a modern society’s sex ratio at birth. Un-naturally high SRBs today are witnessed in culturally Chinese settings like Hong Kong and Taiwan; in parts of India and Pakistan; and in West Asian countries such as Georgia and Armenia. None of those societies maintains a forcible birth control policy. To the extent that China’s One Child Policy successfully coerces parents into having fewer children than they would otherwise desire, however, we would expect such pressures to result in higher SRBs than would otherwise occur. In 2007 Professor Zeng Yi, one of China’s leading demographers, offered his judgment that approximately half of China’s surfeit of baby boys at that time was due to the One Child Policy.[2] He did not, however, explain how he derived that approximation. Exactly how much the One Child Policy contributes to China’s SRB imbalance is a complex question to answer—and one that requires further scholarly investigation.

Second: there is broad agreement among researchers of China’s population trends that China’s overall sex ratio at birth is no longer rising, and may indeed have begun to decline in recent years—but there remains some disagreement in expert circles about the actual levels and trends here, and these differences are for the moment essentially irresolvable given the non-trivial uncertainties and discrepancies contained in China’s official demographic data.

The two leading institutions that produce worldwide demographic estimates and projections at a national level are quite arguably the US Census Bureau, with its aforementioned continuously updated International Data Base, and the UN Population Division, with its biennially-revised “World Population Prospects” series. One can compare their estimates for China’s sex ratio at birth for the One Child Policy Era. [SEE FIGURE 4] The Census Bureau and the UNPD present their data slightly differently: UNPD offers five year averages whereas Census gives year-by-year estimates or projections, and Census Bureau estimates only start with the year 1990 while UNPD series trace all the way back to 1950. (UNPD also includes Taiwan in its calculations for China, unlike Census Bureau IDB.) Nevertheless, it is apparent from Figure 4 that while UNPD and Census Bureau evaluations of levels in trends in SRB for China over the past generation are generally quite close, they are not identical. Their differences are most pronounced for the most recent years (2010-2015): by UNPD’s projections, China’s SRB for those years would have averaged 116, but Census’ projections for that same period averaged about 112.

Some of this difference may be explained by the fact that the Census Bureau’s projections are more recent than UNPD’s and therefore utilize more up-to-date information.[3] But it is also true that the official Chinese demographic data that independent analysts must contend with can afford no certainty concerning sex ratios for those born throughout the One Child Policy Era—least so for small children.

The plain fact is that contemporary China does not yet have a vital registration system that provides accurate and comprehensive national data on annual births and deaths. Further, as Dr. Daniel M. Goodkind of the US Census Bureau has pointed out, there are discrepancies in demographic data from different official Chinese sources: census counts versus hospital records versus primary school enrollment records (primary schooling in theory being universal these days for children 7 years of age). [SEE FIGURE 5] For example: where school enrollment data would have suggested a sex ratio at age 7 of about 110 for boys and girls born in 1993, China’s 1995 “mini-census” placed their sex ratio at about 120. These are big differences.

But even if we limit our gaze to official censuses and “mini-censuses” (1% inter-censal sample surveys of the Chinese population) we see major discrepancies. [SEE FIGURE 6] The 2005 “mini-census” tells us that the sex ratio for two-year-old children was 125, but the 2010 census says it was 119 for seven-year-old kids in 2010—even though the two year olds and seven year olds in question were all born in 1993. By the same token, the 2000 census places the sex ratio for children born in 1999 at nearly 123, while the 2010 census puts it at about 117. Clearly all these ratios are abnormally high—but such differences raise considerable questions about what the true underlying levels and trends in gender imbalance for China may be. Differential childhood mortality cannot account for such discrepancies.

Part of the trouble here seems to be a varying undercount from one census to the next for China’s children and youth. [SEE FIGURES 7 THROUGH 9] For males and females born from the mid-1980s onward, China’s successive censuses provide significantly different headcounts for any given birth year. The 2010 census, for example, offers a substantially higher headcount for population born in every year of the 1990s than does the 2000 census. Notably, it is not only girls who seem to have been undercounted in the 2000 census—at least in light of the 2010 census: boys also appear to have been undercounted. Such undercounts speak, among other things, to the incentives for parents to “conceal” non-quota births when reporting those births might risk strictures or other penalties, including financial penalties. We may suspect that such strategic under-reporting of births has continued in recent years, insofar as the One Child Policy itself has continued. But trends and differentials in sex-specific under-reporting today remain a major unknown—and how experts treat this unknown necessarily have implications for calculated estimates and projections regarding current and future trends in gender imbalance in China.

Third: China’s imbalanced sex ratios at birth over the past generation already portend a virtually unavoidable “marriage squeeze” for the generation to come; but that “squeeze” may be even more severe than previously anticipated owing to a new trend just now beginning to emerge on the Mainland: a “flight from marriage” by young women.

Today as in the past, China has embraced what might be called a “universal marriage norm”—and in recent decades, it has actually also achieved something close to universal marriage in practice. According to the 2000 China census, for example, just 3.8 % of men and a mere 0.2% of women in their early forties had never been married.[4] But these were children of the pre-population control era. With rising SRBs and continuing sub-replacement fertility, any society with a “universal marriage norm” must perforce be consigned to the prospect of substantial numbers of “surplus grooms” or effectively unmarriageable young men.

Professor Zeng Yi and his colleagues are among the demographers who have projected the prospective dimensions of this marriage squeeze for China in the decades immediately ahead. [SEE FIGURE 10] In a study from 2008, their work suggested that about 25% of Chinese men in their late thirties, and over 20% of those in their early forties, would be never-married by the year 2030. The growing army of unmarriageable males envisioned in their projections, it is important to note, was still predicated on the assumption of near-universal marriage for Chinese women.

But that assumption is now being challenged by facts on the ground.

Throughout the rest of East Asia, what has been dubbed a “flight from marriage” by women (and also men) has been underway for more than two decades. In both Japan and South Korea—but also in such quintessentially Chinese settings as Hong Kong, Macau, and Taiwan—demographic data have been recording a pronounced and still-continuing tendency for women to postpone marriage to ever later ages—and, increasingly, to forgo marriage altogether. In all the societies so affected, the “flight from marriage” begins as an elite phenomenon, starting in large urban areas and in the strata with the highest educational attainment—then, gradually or not-so-gradually, that elite fashion becomes a mass norm.[5] In Japan and Hong Kong, for example, about 23% of women in their late 30s were still single according to recent census counts (2010 and 2006 respectively), and about 17% of those in their early forties were likewise reportedly never-married. [SEE FIGURES 11 and 12]

As may be seen in Figures 11 and 12, Mainland China is a latecomer the East Asia’s “female flight from marriage” party. Contemporary China’s “female flight from marriage” has thus far been more hesitant than those of other postwar East Asian locales even after controlling for income: as may be seen, the proportions of still single women in their late thirties and early forties for China in 2010 were notably lower than for Singapore, Taiwan and Hong Kong when those societies had levels of GDP per capita comparable to China 2010. [SEE FIGURES 12 AND 13] But incipient signs of a “flight from marriage” by women are now evident in China, the country’s impending “marriage squeeze” notwithstanding.

Figures 15 through 17 document the first hints of such trends. [SEE FIGURES 15 THROUGH 17] The tendency for Chinese women to postpone, or forgo, marriage is only just becoming visible at a national level: less than 2% of women in their late thirties were never married as of the 2010 census. But that fraction is decidedly higher than in previous decades. And just as in the rest of East Asia, the tendency for women to postpone marriage, or avoid it altogether, is emerging first in the China’s major metropolitan center and in the most educated segments of Mainland society. Although the national average share of never married women ages 35-39 in China in the 2010 census was reported at 1.8%, it was 5.1% in Beijing—still low by current East Asian standards, but nevertheless roughly three times the national average. Within Beijing, furthermore, nearly 9% of women in their late thirties with some college or post-secondary education were never married as of 2010—as were roughly 18% of those women in their early thirties. This is precisely what an East Asian “flight from marriage” by women would look like in its early stages.

At this juncture we cannot tell how fast, or how far, the tendency to postpone marriage, or forgo it altogether, will progress in Mainland China. But such a trend is already definitely evident. And to the extent that this trend unfolds further, the magnitude of the “unmarriageable male” problem can be expected correspondingly to intensify over the coming generation.

Fourth: while the human rights implications of China’s One Child Policy are well known and widely documented, the question of the program’s actual demographic impact is rather less straightforward. Exactly how much has involuntary population control shaped (or warped) contemporary China’s population structure? There is no immediate, easy answer here because history does not allow re-runs: we do not know what China would look like today if Beijing had never enacted that terrible social experiment.

It may suffice here to note, however, that the East Asian rim today exhibits some of the world’s very lowest fertility levels—all in places that have never toyed with compulsory birth control. In recent years, Japan has reported “snapshot” (i.e., period) total fertility rates below 1.3 births per woman; South Korea’s at times has dropped below 1.2; and in some years Hong Kong, Macau and Taiwan have all reported TFRs of less than one birth per woman. In this context, fertility levels for contemporary China—or even just for contemporary urban China—do not look extraordinarily low.

So we may reasonably ask: Has forcible population control accelerated modern China’s fertility decline? Would fertility levels really be higher today without the program? Is it possible they would have been even lower? The simple truth of the matter is: we cannot really address these immense issues with any great confidence as of yet. From a methodological perspective, estimating the net demographic impact of China’s police state population policy presents an exceedingly difficult analytical challenge. There are of course a number of approaches that could be pursued—but none is without its limitations. Such a project, however, in my view strongly merits active pursuit—not least so we may have some sense in advance of the magnitude of demographic responses that will be elicited when the One Child Policy is finally scrapped.

 

[1] Nicholas Eberstadt, “The Global War Against Baby Girls”, The New Atlantis, Fall 2011, available electronically at http://ift.tt/SlxDbn .
[2] Zeng Yi, “Options for Fertility Policy Transition in China”, Population and Development Review, Volume 33, Issue 2 (June 2007), pp. 215-246.
[3] These UNPD estimates and projections are from the “2012” revision (released June 2013) for the “World Population Prospects series; the “2014” revisions are expected later this year.
[4] UN Population Division, “World Marriage Data 2012”, available electronically at http://ift.tt/1QPCYGt .
[5] Cf. for example Richard Leete, “The Continuing Flight from Marriage and Parenthood Among the Overseas Chinese in East and Southeast Asia: Dimensions and Implications”, Population and Development Review, Volume 20, Issue 4 (December 1994), pp. 811-829; and Gavin W. Jones, “The “Flight from Marriage” in South-East and East Asia,” Asian Metacentre Research Paper Series, No. 11 (National University Of Singapore, 2003) available electronically at http://ift.tt/1JV7olh.

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John Bolton talks energy and the election

AEI’s John R. Bolton discusses the issue of Iranian oil in the export market and the coming 2016 election with T. Boone Pickens.

listen to ‘Episode 2: John Bolton talks energy and the election’ on audioBoom

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On the pluses and minuses of trade

Bill Galston give a nice summary of recent research on trade:

In a 2013 study published in the American Economic Review, respected labor economists David Autor, David Dorn, and Gordon Hanson found that competition from Chinese imports was responsible for one quarter of the decline in U.S. manufacturing employment between 1990 and 2007. This competition depressed wages, labor-force participation and household earnings while increasing expenses for state and federal transfer programs.

Two 2014 papers flesh out these conclusions. In the Review of Economics and Statistics,Avraham Ebenstein,Ann Harrison,Margaret McMillan and Shannon Phillips reported that between 1983 and 2002, globalization put downward pressure on wages by forcing American workers out of manufacturing into lower-paying jobs in other sectors, leading to real wage losses of 12% to 17%. In a second paper extending the analysis to 2008, these economists found that offshoring and the threat of offshoring independently reduce wages in the affected occupations.

None of this new research represents an argument against high-quality trade treaties. But it does underscore the common-sense proposition that the United States’ increasing exposure to the global economy since the late 1970s has created losers as well as winners.

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Why those ‘Reagan Recovery’ vs. ‘Obama Recovery’ comparisons don’t tell us much

The Drudge Report links (“OBAMA VS. REAGAN ON GROWTH — NOT EVEN CLOSE”) to a Gateway Pundit blog post featuring the above jobs chart, which was first posted at IJ Review. (Don’t worry, I think everyone here is getting a Drudge deluge of traffic.) Now it is hardly the only or first chart to highlight the economic recovery after the 1981-82 recession was stronger than the recovery we’ve seen after the 2007-2009 recession. I’ve done a few of them myself.  I mean, it’s not a difficult point to argue when economic growth was so much faster in the 1980s. In the 23 quarters since the end of the Great Recession, real GDP is up 14% vs 30% after Really Bad Recession.  Or to put it another way, the “Reagan Recovery” was twice as strong as the “Obama Recovery.” The Four Percent Recovery vs. the Two Percent Recovery.

But what conclusions should we draw from that comparison? And how should those conclusions inform both economic policy going forward and responses to future downturns? Now I am not about to write the definite blog post that answers those questions. Instead, I will ask even more questions: Were the two recessions of a similar kind? And if they weren’t — maybe one was driven by the Federal Reserve, the other by debt-laden balance sheets and financial collapse — does that make a difference in the depth and strength of the subsequent recovery?

For instance, economists Carmen Reinhart and Kenneth Rogoff find “the aftermath of the US financial crisis has been quite typical of post-war systemic financial crises around the globe.” Or maybe downturns after financial shocks in advanced economies are “on average only moderate, and often temporary,” as Christina and David Romer argue. Hmm. Then again, Michael Bordo finds it was less the financial crisis than the housing collapse that accompanied the banking shock. Along the same lines, Atif Mian and Amir Sufi argue a “debt-fueled housing boom artificially boosted household spending from 2000 to 2006, and then the collapse in house prices forced a sharp pull-back because indebted households bore the brunt of the shock.”

But maybe the real problem is less the nature of the downturns than the nature of government responses, or perhaps both share the blame. Perhaps the Great Depression, Really Bad Recession, and Great Recession were all just different flavors of downturn caused by Fed tightening (with the two Greats a case of the Fed unintentionally taking an existing downturn and making it much, much worse.) On the fiscal side,  Romer and Romer theorize that the “tighter fiscal policy that began in …  the United States in 2011 cannot explain the severity of the downturn, but … may have been important to the slow recovery.” Indeed, as Michael Darda has repeatedly pointed out, we’ve seen “the most intense fiscal consolidation since the Korean War demobilization,” including tax hikes. Sufi and Mann say their research suggests $700 billion in principal forgiveness of underwater mortgage debt in 2009 would have produced a $126 billion spending boost and “also have had the indirect positive effect of drastically reducing foreclosures and the associated negative effects of foreclosures on the economy.” Similary, Rogoff recently wrote, “Policymakers should have more vigorously pursued debt write-downs (e.g. subprime debt in the US and periphery-country debt in Europe), accompanied by bank restructuring and recapitalisation.” A more aggressive Fed would have been helpful, too, he adds. Casey Mulligan makes the case that it is government programs — such as food stamps and extended unemployment benefits — which are to blame by “reducing incentives for people to work and for businesses to hire.” Few would argue that policy responses have been optimal.

As for the 1980s, you had the Reagan tax cuts, of course. But also monetary easing starting in 1982. At the same time, the economy was shifting from one of high inflation to low inflation. And Corporate America was undergoing sweeping restructuring as it finally responded to increased global competition.

Finally, you have the various “secular stagnation” arguments where the slow recovery is part of a longer-term downshift in growth. Maybe that’s because of a chronic lack of demand, maybe that reflects supply-side constraints including demographics and innovation. It’s worth noting that from the end of World War II through the 1980s, it took an average of only 6 months to return to pre-recession job levels. But normalization took 15 months after the 1990–91 recession and 39 months after the 2001 recession. And we know how the job market has slowly recovered this time around. Are trade and automation affecting labor markets in a way they weren’t in the 1980s?

So, yeah, a complicated macroeconomic picture with lots of moving policy pieces. Comparing GDP and jobs gains during the “Reagan Recovery” and the “Obama Recovery” can start an interesting economic conversation — but not much more than that. Then the real data-driven analysis can begin.

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Creative destruction: Newspaper ad revenue continued its precipitous free fall in 2014, and it’s likely to continue

For the last several years, I’ve been regularly posting charts like the one above showing the history of US newspaper advertising revenue back to 1950, based on data from the Newspaper Association of America. Those charts have been noteworthy for several reasons.

First, more than any of the hundreds of charts and graphs that I’ve created and posted on Carpe Diem over the last seven years, the newspaper ad revenue charts have received the most attention by far. Those charts have been featured on so many other blogs and websites that a recent Reuters article referred to a recent version as a “much-reproduced chart.” If you do a Google image search for “newspaper ad revenue,” you’ll see many versions of the CD chart above. I hope this is a testament to how powerful and compelling the graphical representation of data can be!

Second, it’s possible that the attention the ad revenue charts were generating on the Internet may have contributed to the decision by the Newspaper Association of America (NAA) in 2013 to suddenly stop its long-standing practice of reporting quarterly advertising revenue data, and switch to releasing only annual data (not yet available from NAA for 2014, but available here from BIA/Kelsey). In a 2013 interview, NAA CEO Caroline Little was quoted as saying that she and the organization’s board decided it was “time to stop beating themselves up four times a year with the negative numbers.”

The updated chart above shows annual data from 1950 to 2014 in inflation-adjusted (2014) dollars. The blue line represents total annual print newspaper advertising revenue (for the three categories national, retail, and classified), and appear in the chart as billions of constant 2014 dollars. Newspaper print advertising revenues of just $16.4 billion in 2014 fell to the lowest level of print advertising since the NAA started tracking industry data in 1950. In constant 2014 dollars, advertising revenues last year were $3.6 billion (and 18%) below the $20 billion spent in 1950, 62 years ago. In fact, inflation-adjusted print advertising revenues have been below the 1950 level for the last three years: 2012 ($19.5 billion), 2013 ($17.6 billion) and 2014 ($19.5 billion).

The decline in print newspaper advertising to a 64-year low in 2014 is pretty amazing by itself, but the sharp decline in recent years is stunning. Newspaper print advertising revenues decreased more than 57% in just the last six years, from $38.15 billion in 2008 to only $16.4 billion last year; and by more than 75% from the $67 billion peak in 2000 (see chart).

Here’s another perspective: It took a half century for annual newspaper print ad revenue to gradually increase from $20 billion in 1950 (adjusted for inflation in 2014 dollars) to $67 billion in 2000, and then it took only 12 years to go from $65.8 billion in ad revenues back to less than $20 billion in 2012, before falling even further in 2013 and 2014.

Even when revenues from digital advertising are added to print ad revenue (see red line in chart), the combined revenues for print and digital advertising last year were still only $19.9 billion, which was 2.5% below the 1950 level of $20.4 billion. Last year was noteworthy because it marked the first year in history that total newspaper revenue (print + digital) fell below the 1950 level in inflation-adjusted dollars.

Economic Lesson: The dramatic decline in newspaper ad revenues since 2000 has to be one of the most significant and profound Schumpeterian gales of creative destruction in the last decade, maybe in a generation. And it’s not even close to being over. A 2011 IBISWorld report on “Dying Industries” identified newspaper publishing as one of ten industries that may be on the verge of extinction in the United States.

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Why raising minimum wages is riskier than expanding the EITC

The “Fight For 15” is a nationwide protest by fast-food workers for raising the minimum wage to $15 from its current level of $7.25. In these tough economic times, it is not hard to understand why workers would take to the streets to ask for higher wages. As per the latest employment release from the Bureau of Labor Statistics, the labor market recovery remains weak. There are nearly 738,000 workers who are too discouraged to look for jobs, 2.6 million workers who remain long-term unemployed and another 6.7 million who are employed part-time only because they cannot find full-time jobs. Wage growth over the last year has averaged a meager 2 percent. A separate survey from the BLS shows that nearly 3 million workers earn wages at or below the federal minimum. If these workers work full-time year-round, their annual earnings would average $15,000. We need to think of ways to help low-income households dependent on these minimum wage jobs to supplement and increase their incomes. Unfortunately, hiking minimum wages may prove to be a risky strategy.

The reason minimum wages may not boost incomes at the bottom is because there is a significant probability that higher minimum wages could result in fewer jobs. Increases in the minimum wage mean an increase in costs for employers. Some employers may be able to absorb these costs, perhaps by passing them on in the form of higher prices for consumers. However, other employers may respond by reducing hours or eliminating entire positions. To use economists’ terms, the labor demand curve is downward sloping, so when the cost of a worker goes up, firms will hire fewer of them.

Minimum Wage Impacts

New research finds that the effect of increases in the minimum wage between 2007 and 2009 was to significantly reduce employment of low-skilled workers. Further, minimum wage hikes increased the likelihood that low-skilled individuals would work without pay, and this was true even for workers with some college education. Finally, this new research tracked workers over time and found that increases in minimum wages had negative medium-run effects on the ability of low-skilled workers to rise up the income ladder. The paper finds that during the late 2000s, effective minimum wages rose by nearly 30 percent and estimates these increases reduced the employment-to-population ratio of working age adults by 0.7 percentage points.

This is far from a one-off finding even though some earlier research finds no impact on employment. The fact that we need to account for negative employment effects shows up in a careful analysis done by the Congressional Budget Office last year on President Obama’s proposed minimum wage hike to $9 or $10.10. The CBO estimated that in the aggregate, employment losses could be as high as 500,000 or 1 million as a result of the hike in the minimum wage to $10.10.

It is true that our understanding of the employment effects of minimum wage hikes lacks consensus. However, what it does suggest is that following a hike, there is some significant probability that workers will lose jobs and face losses in income. The workers who retain jobs will be unambiguously better off than before but those who lose their jobs will be much worse off. This is a risky strategy.

Earned Income Tax Credit

To my mind, a risk-free strategy to boost incomes for minimum wage workers is to expand the Earned Income Tax Credit program. The federal EITC program is now the largest anti-poverty program for non-elderly workers in the United States. It does so by encouraging work and increasing the after-tax wage for those with low earnings. Since it is a refundable tax credit, it is available as a cash payment to those without a tax liability. As per a recent estimate, almost 28 million people received over $66 billion in EITC payments for tax year 2013. The EITC has lifted an estimated 6.5 million people above the poverty line including 3.3 million children. There are other programs that help low-income households as well, such as SNAP (food stamp program) and Temporary Assistance for Needy Families (TANF). However, these are not as effective as the EITC in helping people move out of poverty.

As opposed to minimum wage hikes which are potentially associated with losses in employment and less income mobility for low-skilled workers, a vast literature shows that the EITC increases employment of low-skilled adults while supplementing incomes. Studies suggest that the EITC was responsible for 60 percent of the 8.7 percentage point increase in labor force participation of single mothers between 1984 and 1996. The EITC is also associated with better health outcomes for children and mothers in households that receive EITC support.

The Less Risky Strategy

Under the current system, both minimum wages and the EITC help low-income workers. A worker on minimum wages of $7.25 would earn a full-time year round income of approximately $15,000. This obviously affords him a low standard of living by any measure. However, the participation in the labor force allows the worker to earn a tax credit through the EITC. For a worker with children earning approximately $15,000, the benefit of the EITC could vary from $3,300 to $6,143. Thus, in order to supplement incomes at the bottom, we have at least two instruments, the EITC and the minimum wage. However, the minimum wage is the more risky strategy since it could potentially have dis-employment effects. If a worker loses his job, he not only loses the minimum wage income from the job but also income from the EITC, and other government benefits that may have a work requirement. On the other hand, if we expand the EITC benefit levels and extend them to childless adults, the worker keeps his job, earns higher incomes, gains work experience and has the potential to continue to move up the income ladder, while providing for his family.

The choice seems pretty clear to me.

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Should Australia share intelligence with Iran? Pletka on Radio National’s ‘Between The Lines’

What matters to parents in picking their child’s school?

School choice’s worst critics have been clear that they see a foul game afoot:

• Step One: An ill-intentioned charter or voucher school sets up shop
• Step Two: The school makes a pitch to the community, luring in poor parents and students who don’t know how to make heads or tails of picking a school
• Step Three: Profit

“Socioeconomically disadvantaged children and their families are easier to manipulate,” an education blogger and teacher from Philadelphia wrote. “Many urban poor are not in a position to access research on charter school performance, so they simply believe what they hear or are told.”

One clear problem with the author’s argument is that it is condescending and wildly overstated, we shouldn’t lose sight of that. The vast majority of school operators have the best interests on children at heart. If they wanted to unscrupulously profit, there are many other industries with wider margins.

But the critique is also too targeted. It’s not just the urban poor that have a hard time understanding options and picking a school – it’s something that’s hard for any family, poor or rich. The limited information that we do have on school performance is often very hard to access and is usually presented in a convoluted way that can be challenging for even the most savvy helicopter parents to sort through. For families that have limited time or are disconnected from social networks, determining what a school offers and how well it performs academically can be exceedingly difficult. This causes families to have to pick schools blindly, or based on indicators that might not be correlated with outcomes they actually care about.

There has been a movement, championed by organizations like GreatSchools and the Foundation for Excellence in Education, to try and make data on school performance easier for parents to access. In my new paper, “Balancing the Equation: Supply and Demand in Tomorrow’s School Choice Marketplace,” I dig into some of the fascinating work researchers are doing to better understand how parents make decisions about where to send their children to school.

1. Presentation matters

Rebecca Jacobsen, Andy Saultz, and Jeff Snyder completed a randomized experiment with more than 1,100 participants that presented the exact same data on school performance in different ways and judged how parents reacted. Even though schools rated as an “A,” “90% percent proficient” and “advanced” meant the same thing, respondents routinely ranked schools that received an “A” higher than schools whose results were reported in the other ways. The same was true on the other end of the spectrum. Schools given a “C” were seen as much worse as those rated “basic” even though the classifications again meant the same thing.

How data is presented matters and those looking to inform parents need to realize that seemingly subtle distinctions can magnify what parents think about schools.

2. Who is offering the information matters

Jon Valant found that parents were more likely to trust school performance data from independent non-profit organizations than state governments.  Of the people he surveyed, 77% rated their trust in the school performance data presented by non-profits as a 3 or better (on a scale of 1 to 5), whereas only 60% gave the same score to state governments.

Who is offering the information matters, and it looks like there is potential for greater influence from third party organizations disseminating state data than from the state acting as a one-stop shop for both data collection and dissemination.

3. What is offered matters

Even more than non-governmental organizations, Valant found that parents trust other parents when it comes to gauging the quality of a school.  In an experiment where families were given different information about schools and asked to rate them, he found that seeing two positive comments about a school from another parent as opposed to two negative comments led to a jump of 2/3^rd of one letter grade (from a C+ to a B). Even though the comments were “brief, appeared alongside formal academic ratings, came from unidentified sources on the internet, and described schools that many respondents knew well,” they “fundamentally reshaped the way parents and other adults evaluated school policy.”

Websites like Yelp that allow people to leave reviews have revolutionized the way consumers get information.  Giving parents a platform to share information about schools could go a long way in helping them make a more informed choice.

No matter where you stand on the question of school choice, it is hard to argue that giving parents better information about their child’s school is a bad thing. Using the latest knowledge on parental decision-making can help better inform the marketplace and prevent parents from being taken advantage of.

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What AMC’s Mad Men tells us about health care

One of the striking features of the early episodes of AMC’s hit television show Mad Men is the similarities in the lifestyle enjoyed by the lowest paid members of Don Draper’s advertising company and its wealthy partners. In the show’s 1960s setting, regardless of class, these folks largely lived in similar homes, went to the same schools, and summered in the same locales.

These parallels fade in the show’s later episodes, set in the early 1970s, as the economic, cultural, and most of all social lives of differently situated Americans begin to separate. It’s a point made by my American Enterprise Institute colleague and famed cultural observer Charles Murray in describing the widening divide between the growing urbanity of affluent Americans, and the economic struggles (and cultural isolation) experienced by a working class and middle class that is increasingly falling behind.

This growing economic and cultural gap – between the working class, and the increasingly cloistered rich – is animating political sentiments in both major parties. It also provides a powerful framework to understand what’s happening in American healthcare as a result of the Affordable Care Act.

For decades, even as other aspects of peoples’ lives started to drift apart based on income, for most middle and working class Americans, their health benefits remained within reach of their much wealthier counterparts. Employer sponsored insurance was a big part of that. The ability of working class Americans to bargain for health coverage at work gave them access to the same basic packages of benefits as executive management teams. For the most part, middle class Americans could show up in the same doctors’ offices and access the same treatments as their much wealthier counterparts. Now, Obamacare is deliberately eroding this last vestige of proportional egalitarianism.

That’s because at the very same time that Obamacare expands access to coverage outside the workplace, the same scheme deliberately degrades the quality of the coverage that employers can offer to their workers. The end result is that, over a short period of time, the middle and working class will end up in the same high deductible, narrow network, HMO style plans sold in the Obamacare exchanges — replete with closed drug formularies and tight restrictions on technology.

The very rich and merely affluent have already found ways to buy themselves out of these schemes. This is evidenced, for example, by the growing popularity of concierge and subscription based practices. It’s also seen in the movement of self-insured plans toward high deductible health savings accounts coupled to preferred provider organizations. The movement toward high-end, on-site medical clinics at services firms like those found in Silicon Valley will also help insulate wealthy, services workers from Obamacare. All of these structures will let firms and employees who are able to spend up for better care retain choice and flexibility in their treatments and doctors.

One element of Obamacare that’s driving this growing division is a furtive tax that whacks the health benefits that people get through their workplace. Outside of healthcare benefit managers, few people are focused on the “Cadillac Tax,” a provision tucked into Obamacare as a way to help raise money, and to limit the richness of the coverage that businesses can offer at work. In the next decade, it will take out a total of $100 billion from the health benefits people get at work.

Experts now say that the true price for the 40 percent “Cadillac Tax” on higher cost health plans will be closer to a 61 percent levy, once the tax goes into effect in 2018. That’s because the tax will first be levied on insurers who will then have to collect it from employers and their workers, adding costs to how much eventually gets charged to consumers. It won’t just hit the gold plated health plans, either, which was how it was first billed. By the year 2031, the tax hits half of all health plans.

Nor will the tax hit everyone equally. Higher wage services job may choose to pay some of the tax, and more likely they will be able to buy their way out of it with cost-sharing adjustments. Think law firms and investment banks. There’s already a trend toward more small, higher-wage services businesses seeking to self-insure, in part to avoid some of the new costs being imposed on fully insured plans. For everyone else with middle wage incomes that nonetheless enjoyed comprehensive workplace coverage, many of them are likely to end up in Obamacare. This is the new egalitarianism.

Like the Independent Payment Advisory Board, whose underlying function was to cap the rate of growth in Medicare spending, the “Cadillac Tax” will set an upper boundary on the value of the health benefits that employers can offer at the workplace. But there is an important twist. From the fiscal years 2015 through 2019, IPAB pegged its maximum rate of growth in Medicare spending to inflation gauges. Starting in 2020, the target for the “Cadillac Tax” is based on the growth of the gross domestic product plus one percentage point. The problem of course is that the rate of growth in healthcare costs has been much faster than the overall rate of GDP growth. The spending per person for private healthcare coverage is projected to grow an average of 5.6 percent annually, while GDP will increase only two percent according to the Congressional Budget Office.

The “Cadillac Tax” is really an excise tax that applies to plans with “pre-cost sharing costs” above $10,200 for individuals and $27,500 for families. So if a family’s benefits were valued at $30,000, then they would pay a tax on the extra $2,500 in value. The calculation of those costs is based on the total cost of premiums, rather than by what the insurance plan covers. This includes both the employer and employee contributions. So employers can’t lower the liability by increasing the worker portion of the premium costs. The tax also applies to contributions made to HSAs and FSAs, as well as supplemental insurance. Businesses can reduce plan values, and skirt the tax, by cheapening the coverage (by offering narrow networks or closed drug formularies, for example) or increasing cost sharing. The idea is to obligate everyone to the same low end Obamacare plan.

Employers with a lot of working class employees will hollow out the benefit or just move their employees into Obamacare where at least workers get access to the government subsidies. Higher wage service employers (whose workers who earn too much to qualify for subsidies) will design plans that skirt the tax. Think law firms and investment banks. They will use cost sharing to stay out of the tax, because their workers will be able to afford the out of pocket spend. They will still be able to maintain better access to doctors and drugs than what people will get under Obamacare. The gap between those with good and those with average health insurance will grow much wider.

It’s worth noting that the tax is highly regressive. The flat 40 percent levy hits everyone regardless of their income. In the end, rather than making the market more egalitarian, the “Cadillac Tax” will exacerbate the gap between those with good health coverage that they get at work, and those with barer bones, Obamacare plans. Many working class union members, for example, bargained for years to obtain rich health benefits that were better than they might have otherwise afforded on their own. That helped a whole generation of Americans build some upper middle class comforts.

Now, the “Cadillac Tax” will take that away. It will replace the current employer coverage with the same sort of cheapened, skinny plan that they can buy on Obamacare. Goldman Sachs estimated in a recent analysis that the “Cadillac Tax” could reduce employer-based health spending by $100 billion by 2025. This represents a reduction of close to 10 percent of employer health spending.

It should be little surprise that the unions are now some of the sharpest critics of the tax. Estimates show about one-third of employers will be hit by the tax in 2018 if employers do nothing to cheapen their plans, according to a survey by Mercer. By 2022, almost 60 percent will be facing the tax.

President Obama’s healthcare adviser Jonathan Gruber, in one of the infamous videos that surfaced late last year, said that rising healthcare inflation will mean that the “Cadillac Tax” will effectively eliminate the tax deductibility of health insurance bought at work. For many in Congress, that’s just fine. The tax exclusion has long been a source of criticism from those who argue that it causes workers to over consume health benefits, contributing to rising medical costs.

The problem is that the alternative to the tax deductibility of health benefits bought at work will be the Obamacare exchanges. Without the benefits of the tax exclusion, it will make even more sense for businesses to move their workers into the exchanges, where at least they will benefit from the Obamacare subsidies. This is a back door, surreptitious death spiral for employer provided insurance, and a nod toward Obamacare, at least for the middle and working classes.

For generations of Americans — even while other aspects of the daily lives between the rich and working classes pulled further away — healthcare was a place where people of different economic classes often shared prospects. The well-employed middle class enjoyed largely the same benefits as their wealthier peers. Some will argue a reckoning was inevitable; that those workplace benefits were already being eroded. But Obamacare sealed the deal. It left no doubt about that end game.

In the late episodes of Mad Men, by the early 1970s, Don Draper moves out of his suburban home and into a city penthouse. It’s one sign of a widening cultural gap between the economic classes. It’s a migration that has accelerated in our time, but until Obamacare, didn’t fully transform healthcare.

Before Obamacare, many working class Americans had an upper middle class healthcare benefit that they got at work. Now they’ll be put on a plan benchmarked to Obamacare — one that looks a lot like Medicaid. Only the wealthier services firms, and their upper income employees, will be able to buy their way up, and out of this scheme. That’s progressive egalitarianism under Obamacare.

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Three months after its launch, Snapchat Discover traffic is dropping

You might have heard: By hiring CNN political reporter Peter Hamby, Snapchat is betting its future on partnerships with media outlets, like the ones it has with CNN and Vice for its Discover feature

But did you know: Since Snapchat Discover was launched on Jan. 27, some publishers have seen their average traffic drop as much as 50 percent. While Snapchat doesn’t offer any specific metrics on Discover, traffic to Discover was significant immediately following its launch, but publishers have had an average drop in traffic of 30 to 50 percent since then. Some of Discover’s partnerships are set to expire in June, giving Snapchat an opportunity to alter Discover’s content and features.

The post Three months after its launch, Snapchat Discover traffic is dropping appeared first on American Press Institute.

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Why every journalist needs to learn basic data skills and how you can get started

Numbers are driving more and more stories on a variety of beats today, but data-heavy projects don’t have to be left to powerhouses like FiveThirtyEight and Vox. To get started working with data, pick a small subject. Tableau editorial manager Martha Kang recommends working with a list of names and familiarizing yourself with the tools available for data visualization, keeping in mind that the first data project you work on doesn’t have to be something you publish.

+ Earlier: How to become a numbers person in journalism and more insights on data reporting and visualization

The post Why every journalist needs to learn basic data skills and how you can get started appeared first on American Press Institute.

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Report find press freedom is at a 10-year low

In its 35th annual Freedom of the Press Report, Freedom House found that press freedom has declined over the past decade to its lowest point in more than 10 years. The report found that only 14 percent of the world lives in a country with a free press, meaning 1 in 7 people live somewhere where state meddling in media matters is minor and legal pressures on the press are slight. Freedom House attributes the decline in press freedom to the passage and usage of restrictive laws against the press, often on grounds of national security, and the inability of journalists to report freely from some countries, including areas of conflict and protest.

The post Report find press freedom is at a 10-year low appeared first on American Press Institute.

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GE chief learning officer: Knowledge becomes out of date, so constantly invest in skills

Raghu Krishnamoorthy, GE’s chief learning officer, says in today’s market knowledge quickly becomes obsolete. Rather than a one-time investment in people’s knowledge, Krishnamoorthy says companies should invest in helping staff continually learn new skills. Continual training in skills can also be a good recruiting tool for potential employees, Krishnamoorthy says, because people want to work in a company that allows them to grow.

The post GE chief learning officer: Knowledge becomes out of date, so constantly invest in skills appeared first on American Press Institute.

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Emily Bell: Google and Facebook are publishers’ ‘frenemies’

As more publishers partner with platforms, Emily Bell says the future of news and information companies will be formed out of a hybrid of social media and publishers. At one point, platforms like Facebook and Google would have argued that they are not publishers, but their partnerships offer publishers a chance to grow, with some risks. Bell questions how accountability can be applied to these partnerships: “Who bears the publishing risk in this new world? … Who bears responsibility for defending and protecting the journalism?”

The post Emily Bell: Google and Facebook are publishers’ ‘frenemies’ appeared first on American Press Institute.

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How Thomson Reuters approaches mobile products: How will it fit into a user’s day?

When Thomson Reuters starts to think about new products, head of advanced product innovation Robert Schukai says they consider how a product fits in with the “dayflow,” rather than the workflow, of users. Reuters’ idea is that people are looking for different information based on their context and location. Schukai: “We’re thinking about what happens from the time our customers wake up to the time they go to bed.”

+ Earlier: We now live in an age when everyone has their own Personal News Cycle

The post How Thomson Reuters approaches mobile products: How will it fit into a user’s day? appeared first on American Press Institute.

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Need to Know: April 30, 2015

Fresh useful insights for people advancing quality, innovative and sustainable journalism

OFF THE TOP

You might have heard: By hiring CNN political reporter Peter Hamby, Snapchat is betting its future on partnerships with media outlets, like the ones it has with CNN and Vice for its Discover feature

But did you know: Three months after its launch, Snapchat Discover traffic is dropping (The Information)
Since Snapchat Discover was launched on Jan. 27, some publishers have seen their average traffic drop as much as 50 percent. While Snapchat doesn’t offer any specific metrics on Discover, traffic to Discover was significant immediately following its launch, but publishers have had an average drop in traffic of 30 to 50 percent since then. Some of Discover’s partnerships are set to expire in June, giving Snapchat an opportunity to alter Discover’s content and features.

The smart way to start your day

Each morning we scour the web for fresh useful insights in our Need to Know newsletter. Sign up below.

+ Noted: Tech site The Memo launches, aiming to be a cross between Wired and The Economist (Talking New Media); NPR makes more than 800,000 pieces of its audio embeddable (NPR); Anonymous social networking app Secret is shutting down (BuzzFeed); New Yorker and WNYC will produce a national radio show and podcast (Capital New York); Instagram launches its first category-specific vertical with @Music (BuzzFeed)

TRY THIS AT HOME

Why every journalist needs to learn basic data skills and how you can get started (PBS MediaShift)
Numbers are driving more and more stories on a variety of beats today, but data-heavy projects don’t have to be left to powerhouses like FiveThirtyEight and Vox. To get started working with data, pick a small subject. Tableau editorial manager Martha Kang recommends working with a list of names and familiarizing yourself with the tools available for data visualization, keeping in mind that the first data project you work on doesn’t have to be something you publish.

+ Earlier: How to become a numbers person in journalism and more insights on data reporting and visualization

OFFSHORE

Report find press freedom is at a 10-year low (Business Insider)
In its 35th annual Freedom of the Press Report, Freedom House found that press freedom has declined over the past decade to its lowest point in more than 10 years. The report found that only 14 percent of the world lives in a country with a free press, meaning 1 in 7 people live somewhere where state meddling in media matters is minor and legal pressures on the press are slight. Freedom House attributes the decline in press freedom to the passage and usage of restrictive laws against the press, often on grounds of national security, and the inability of journalists to report freely from some countries, including areas of conflict and protest.

+ How news organizations are covering the Nepal earthquake: BBC is using the messaging app Viber to share information and safety tips (Nieman Lab) and local media is “scrambling, and doing well” while breaking stories on death tolls and recovery efforts (Poynter)

OFFBEAT

GE chief learning officer: Knowledge becomes out of date, so constantly invest in skills (Economist Group)
Raghu Krishnamoorthy, GE’s chief learning officer, says in today’s market knowledge quickly becomes obsolete. Rather than a one-time investment in people’s knowledge, Krishnamoorthy says companies should invest in helping staff continually learn new skills. Continual training in skills can also be a good recruiting tool for potential employees, Krishnamoorthy says, because people want to work in a company that allows them to grow.

UP FOR DEBATE

Emily Bell: Google and Facebook are publishers’ ‘frenemies’ (Columbia Journalism Review)
As more publishers partner with platforms, Emily Bell says the future of news and information companies will be formed out of a hybrid of social media and publishers. At one point, platforms like Facebook and Google would have argued that they are not publishers, but their partnerships offer publishers a chance to grow, with some risks. Bell questions how accountability can be applied to these partnerships: “Who bears the publishing risk in this new world? … Who bears responsibility for defending and protecting the journalism?”

SHAREABLE

How Thomson Reuters approaches mobile products: How will it fit into a user’s day? (Digiday)
When Thomson Reuters starts to think about new products, head of advanced product innovation Robert Schukai says they consider how a product fits in with the “dayflow,” rather than the workflow, of users. Reuters’ idea is that people are looking for different information based on their context and location. Schukai: “We’re thinking about what happens from the time our customers wake up to the time they go to bed.”

+ Earlier: We now live in an age when everyone has their own Personal News Cycle

+ The secret to a great publication, from America’s Test Kitchen: “The more stubborn the editors, the better it is” (Adweek)

 

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Overreaction syndrome

Should police be more aggressive or less aggressive in dealing with minor crime? Should suspected terrorists at Guantanamo Bay be released or held? Should mortgage lenders be urged to tighten underwriting standards or loosen them? Should subsidies for attending college be increased or decreased? Should health insurance companies increase or decrease efforts at preventing fraud?

These sorts of public policy issues can give rise to mistakes in either one of two directions — in the terminology of statistical decision theory, they can lead to Type I and Type II errors. If you choose to reduce the chances of making one type of error, then you increase the chances of making another.

Unfortunately, the political process tends to focus on only one error at a time. This causes policymakers to overreact to the most recent error, leading to an even larger error of the opposite sort.

For example, when house prices were booming prior to 2007, politicians thought lenders were making a mistake in turning down potential borrowers. They urged lenders to increase their willingness to work with subprime borrowers. Instead, when the housing bubble popped, it became clear that lenders had been making the mistake of approving too many borrowers. Politicians shifted focus to this type of error, so that in 2009, when the housing market most needed help from lenders, the political pressure on lenders was to tighten credit.

Today’s short news cycle tends to steer people away from thinking carefully about trade-offs. When the media is focused on crime, aggressive action against minor crime is termed “broken-windows policing” and earns praise. When a suspect is killed while being arrested for a minor crime, aggressive police action becomes “harassment” and draws accusations of racism.

Demagoguery by politicians plays a role. When a politician advocates a policy, he or she will emphasize the need to reduce one type of error, while never admitting that the proposal being offered will increase another type of error.

When I teach basic statistics, the example I use to explain the concepts of Type I error and Type II error is a murder trial. If the jury votes to convict an innocent suspect, that is a Type I error. If the jury votes to acquit a guilty suspect, that is a Type II error.

In a trial, a juror is instructed to vote to convict if the defendant appears to be guilty “beyond a reasonable doubt.” This does not mean beyond all doubt, but it does suggest that jurors should be particularly careful about avoiding the Type I error of convicting a suspect who may be innocent. Thus, in situations where there is conflicting evidence, juries will not convict. In the notorious recent case in Ferguson, Missouri, where some witnesses said that Michael Brown charged at the officer who shot him and other witnesses gave conflicting testimony, it therefore seems unlikely that a jury would have voted to convict the policeman had he been indicted.

Here are some more examples of decisions, described in this framework. In each case, if you say “yes” to the question, you increase the chance of a Type I error but you reduce the chance of a Type II error.

 

Many policies that reduce Type I errors will increase Type II errors, and vice versa. However, there is a way to reduce both types of errors, by obtaining and using information. For example, rather than provide universal aid for community college, policymakers could try to identify the characteristics of students who are likely to benefit from such aid. A statistical analysis of past performance might show whether grades in high school, standardized test scores, or other information are more useful in predicting long-term success from attending community college. Of course, it costs something to obtain and use information, and those costs have to be netted against the benefits.

We go back and forth between mortgage underwriting standards that are too loose and underwriting standards that are too tight.

Unfortunately, the policy process seems to go back and forth between the two types of errors. First, a media frenzy will make salient one type of error, say, Type I. Next, demagogic politicians will demand the elimination of the Type I error. The new policy will cause an increase in Type II errors. Once the Type II errors become salient, a media frenzy will cause that type of error to be in focus, and the policy process goes into reverse. The cycle is endless.

For example, we go back and forth between mortgage underwriting standards that are too loose and underwriting standards that are too tight. Typically, we loosen near the end of a boom and tighten at the bottom of a crash.

These back-and-forth swings take place in all of the policy realms in which Type I and Type II errors exist. One year, the priority is punishing health insurance companies who deny coverage for expensive medical procedures. Another year, the priority is reducing health care spending. One year, we worry that college subsidies simply inflate tuitions and reward colleges with low graduation rates. Another year, we worry that not enough students are going to college.

To me, what elementary statistical decision theory can tell us is that we need to keep in mind both types of errors. Otherwise, if we think of only one error at a time, then all we get is a cycle in which we amplify the opposite error until it becomes salient, and then repeat the cycle.

Arnold Kling is an adjunct scholar with the Cato Institute. The views expressed here are his own.

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Wednesday evening links

1. Chart of the Day. From the IBD editorial “The Other Clinton Foundation Scandal“:

A closer look at the [Clinton Foundation] numbers shows a mere 13% of program expenses — and just 10% of total spending — went for grants and aid (see chart above). And despite its global pretensions, most of the aid stayed in the U.S. The rest went to salaries, conferences, travel and other overhead costs. In fact, the Clinton Foundation was more generous to conference organizers than the poor. The IRS filing shows it spent $9 million on conferences, conventions and meetings, compared to $8.9 million in aid.

Compare profligate the Clinton Foundation profligacy to spending by other large, globally focused charities. Doctors Without Borders devoted 90.4% of program expenses to grants and aid in 2013, almost all directed outside the U.S. (see chart above). Ditto World Vision, which while spending $729 million on grants in 2013 somehow managed to get by on $593,000 on conferences and meetings.

2. Who-d a-Thunk It I? Owner of Seattle pizza shop says city’s new minimum wage law is forcing her to close her doors and put 12 employees out of work because she can’t afford the higher labor costs? Source.

3. Who-d a-Thunk It II? Despite having the world’s largest reserves of oil, Venezuela’s socialist government announced a nationwide electricity rationing plan to tackle a surge in demand caused by rising temperatures? Source.

4. Markets in Everything I. A Smartphone Eye Exam Service Launches in New York.

5. Markets in Everything II: UberEATS, an on-demand meal delivery service that piloted in LA and Barcelona now launches in Chicago and NYC.

6. Markets in Everything III: Admitted to Your Bedroom — Some Hospitals Try Treating Patients at Home. (Ht/Don Boudreaux)

7. 12 Things You Can Replace With a $38 Tablet

8. Why Do CEOs Make So Much Money? A CEO provides one good reason, via Charles Murray.

9. Quotation of the Day, from The Onion:

Saying that such a dialogue was essential to the college’s academic mission, Trescott University president Kevin Abrams confirmed today that the school encourages a lively exchange of one idea. “As an institution of higher learning, we recognize that it’s inevitable that certain contentious topics will come up from time to time, and when they do, we want to create an atmosphere where both students and faculty feel comfortable voicing a single homogeneous opinion,” said Abrams, adding that no matter the subject, anyone on campus is always welcome to add their support to the accepted consensus. “Whether it’s a discussion of a national political issue or a concern here on campus, an open forum in which one argument is uniformly reinforced is crucial for maintaining the exceptional learning environment we have cultivated here.” Abrams told reporters that counseling resources were available for any student made uncomfortable by the viewpoint.

10. Quotation of the Day II, from Kevin Williamson’s National Review article “Riot-Plagued Baltimore Is a Catastrophe Entirely of the Democratic Party’s Own Making“:

American cities are by and large Democratic-party monopolies, monopolies generally dominated by the so-called progressive wing of the party. The results have been catastrophic.

The evidence suggests very strongly that the left-wing, Democratic claques that run a great many American cities — particularly the poor and black cities — are not capable of running a school system or a police department. They are incompetent, they are corrupt, and they are breathtakingly arrogant. Cleveland, Philadelphia, Detroit, Baltimore — this is what Democrats do.

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The neglected majority, part 2: High costs, uncertain benefits

Yesterday I profiled two big lessons from the AEI survey of adults without a college degree (for more, see my paper High Costs, Uncertain Benefits). To summarize: most see education after high school as necessary to get a job “these days,” but they think it’s too expensive and not flexible enough. Also, somewhat surprisingly, a substantial number of respondents did not aspire to a degree or certificate.

Today I examine one potential explanation for the second finding: that adults may not have a clear sense of the costs and benefits of further education. The survey asked respondents to estimate tuition and fees at local community colleges and for-profit colleges, the median wage among different types of graduates, and how much they thought earning a degree or certificate might affect their earnings.

First, a disclaimer: ideally, education is about more than just increased earnings. And, as alluded to yesterday, evidence suggests that it is. College graduates are healthier, more civically active, and more likely to trust others.

But nearly 90 percent of beginning college students say they’re enrolling in college in order to get a better job. (And this probably underestimates the proportion because it excludes many adults who are not first-time students). Put another way: most of those who enroll believe the cost-benefit of going or returning to college is positive. (How positive is an interesting question that others have asked).

But what we don’t know is how adults without a degree see the costs and benefits of further education. Our new survey sheds light on both pieces of the value proposition.

1. Most adults were unable to provide an accurate estimate of tuition and fees, and many overestimate the cost of tuition at community colleges.

The survey asked respondents to first name their local public community college. Nearly two-thirds (63 percent) were able to name a two-year college in their state, and five percent named an institution that was not a public two-year school. Thirty percent said they did not know or skipped the question.

When it came time to estimate tuition and fees for a year of full-time enrollment at local community colleges, respondents were given a ‘slider’ running from $2,000 to $20,000 (with additional options to choose “less than $2,000” or “more than $20,000” or “don’t know”). We then compared their answers to the average two-year tuition and fees in each state reported by the College Board to get a sense of their accuracy. I considered estimates within $1,000 of the state average to be accurate.

Just 14 percent provided an estimate within $1,000. Over half of the respondents overestimated the cost of tuition and fees at community colleges. More than 40 percent overestimated by $2,500 or more. An additional 27 percent said they didn’t know what tuition cost.  The survey also asked them what they thought they would pay, after accounting for any grants and scholarships they might be eligible for. About 55 percent thought they would pay less than their estimate of the sticker price, but many of these estimates were still far too high: nearly one-third of respondents thought they’d pay a net price of more than $5,000. (These findings are in line with other research on families of traditional-age students).

We also asked them how much they thought community college should cost, and gave them the option to answer “it should be free to anyone with a high school diploma” (mirroring President Obama’s recent proposal to make community college tuition-free). Interestingly, just over one-quarter thought it should be free. If we look only at those who provided an answer other than “don’t know,” 63 percent thought that it should be either free or less than $2,000. In other words, most adults thought people should pay some tuition to attend community college.

To summarize: adults are likely to overestimate the cost of attending local community colleges, often dramatically. These faulty beliefs likely lead to a faulty cost-benefit calculation for many who might benefit from enrolling.

2. Adults were uncertain about the returns to different postsecondary programs, especially when it came to how a degree or certificate might affect their own earning power.

The survey asked respondents what they thought the median worker who had completed different postsecondary programs earned in a year, as well as how much they thought they would earn if they went back to earn particular degrees or certificates. We first explained the concept of the median wage using a simple prompt, and told them what the median high school graduate in their region earned in 2013 (taken from the American Community Survey) to help anchor estimates.

We asked respondents about workers who completed an apprenticeship; a certificate; an associate degree in liberal arts, nursing, or manufacturing technology; or a bachelor’s degree. The sliders ran from $20,000 to $70,000 (with an option of “more than $70,000”), with a peg for the median high school wage. Respondents were asked to provide their “best guess.” In other words, if respondents thought that there was a positive return to a postsecondary credential, all they had to do was move the slider above the high school anchor.

Among those who did answer, a reasonable rank-ordering emerged—bachelor’s degrees on top—though respondents seemed to under-value apprenticeships and technical associate degrees. While respondents saw associates in manufacturing technology and nursing as being between $5,000 and $6,000 more valuable in the labor market than one in liberal arts, the differences are actually much larger in reality (in Texas, for instance, the median graduate with an associate in registered nursing earned nearly $70,000, compared to $19,900 for the typical worker with a liberal arts degree).Despite this, between one-third and 46 percent of respondents said they didn’t know what the median wage was among these different groups. Uncertainty was lowest when asked about a bachelor’s degree, and highest when asked about the apprenticeships and the different associate degree programs.

Perhaps the most surprising finding came when we asked adults how they thought going back to school for a degree or certificate would affect their earnings. A sizable minority believed that earning a certificate or an associate degree would have no effect on their earnings. Forty-four percent said they’d earn “less than I do now” or “about the same as I do now” when asked about earning a certificate; almost 40 percent said the same about a technical or academic associate degree. Just over one-quarter thought that a bachelor’s degree wasn’t a surefire path to higher earnings.

In short, a substantial proportion of adults were awfully bearish on the returns to further education.

Overall, then: half of adults overestimate the cost of tuition at community colleges, and somewhere around 40 percent believe that earning a certificate or associate degree wouldn’t significantly improve their earning power. In short, for a sizable proportion of adults, further education does not pass the cost-benefit test. And for others, only a bachelor’s degree seems to get over the bar.

Though it will pain the “college for all” crowd to hear, some of them are likely right, given the opportunity cost of working fewer hours, the low probability of completion at many community colleges, and the inconvenience of having to balance school with other commitments. But there are shorter-term training options and those that blend work and school (apprenticeships) that could be a worthwhile option for many who currently see little value in further education.

To the extent adults are foregoing college because they don’t recognize the costs and the benefits of these other options, it represents a lost opportunity for both individuals and for the economy. Could better information on costs and benefits nudge some in the neglected majority to invest in human capital? Stay tuned…

 

 

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The limits of school choice & how to do it better

School choice advocates have successfully pushed for voucher programs across the country. However, it’s increasingly clear that the promise of choice has not been fulfilled. To learn more, read “Balancing the Equation: Supply and Demand in Tomorrow’s School Choice Marketplaces.”

 

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Balancing the equation: Supply and demand in tomorrow’s school choice marketplaces

Key Points

• School choice programs will succeed in improving options for children only insofar as they are able to create a functioning marketplace.
• Policymakers and educators must overcome supply-side hurdles to allow schools to access the financial and human capital necessary to grow and thrive.
• Families need better information on the schools they are trying to choose among so that they can advocate for the best education for their children.

Read the PDF.

Executive Summary

School choice is an education reform premised on a simple proposition: give families more choices, and they will find schools that best fit their children’s needs. In short, school choice aims to create a marketplace of schooling options. School choice programs will succeed or fail based on how well they are able to create this marketplace and how deftly they can overcome issues on both the supply (schools) and demand (parents) sides of the school choice equation.

Over the past several years, we at the American Enterprise Institute (AEI) have been working to come to a more sophisticated understanding of both the demand and supply sides of school choice marketplaces. This report is a summary of what we have learned and a road map for those hoping to improve the design and efficacy of school choice programs in America.

Improving the demand side means collecting and disseminating better information for parents. This paper offers several lessons to keep in mind:

• Parents tend to follow Maslow’s hierarchy of needs when selecting a school. They first want to know if it is safe, then about academic performance, then about all of the other things that the school offers to help make their child a more well-rounded individual. Test scores can tell us one important part of what parents are looking for, but parents need more and wider information to make an informed decision about their child’s school.
• School report cards are useful, but parents greatly value the opinions of other parents. Finding ways to include the thoughts of parents, by allowing for star ratings, comment sections, or easy sharing via social media can help ensure information is put to use.
• Parents need help advocating for programs that help their children. Many school choice programs are designed specifically to help low-income families, a demographic group that is often disenfranchised from the political process. Organizations that want to help parents select schools should also think about how they can help connect parents with the political process to ensure that school choice programs are able to continue.

Improving the supply side means creating the conditions that help new schools open and good schools scale. Three key forces shape the supply-side response of schools to school choice programs:

• Financial capital. Schools need access to financial and human capital. At current funding levels, voucher and tax credit scholarship programs do not provide enough money to finance new buildings, substantial technology purchases, or any of the other upfront costs that come with starting or expanding a school. Designated line items in state budgets, traditional bond-granting authority, and social impact bonds can help cover the high upfront capital costs associated with starting or expanding a school.
• Human capital. New schools need new teachers and leaders. The skill set that will lead to success in a school participating in a school choice program is not necessarily the same skill set that would lead to success of a traditional public or private school. New programs must emerge to help cultivate the unique skill set needed to lead and work in schools of choice.
• Regulation. Regulations for school choice programs must be designed with the understanding that they are regulating a marketplace, not a monopoly. A modified British inspectorate model, “chartering” private schools, or integrated accreditors are all market-friendly regulatory models that could help ensure that children are protected without stifling innovation.

Understanding how to balance the school choice equation dramatically increases the likelihood that school choice markets will grow, thrive, and help more children access a high-quality education.

Read the full report.

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