Fact-checking Blogger Economics

The Internet should be a transformative technology for political debates; in a matter of seconds you can verify or reject nearly any conjecture, relieving bloggers from the embarrassment of posting complete nonsense. Unfortunately, few ideological adherents avail themselves of this tool, preferring to stick with unsupportable conjecture, something I always enjoy pointing out.

For a rich trove of examples, I read a few articles from Model Minority. It didn’t take long to find this article about the costs of being poor, which includes these verifiable statements:

Look at it like this, if you are working at Target, making $7 an hour, Target is making arguably $100 to $200 dollars an hour off of you. You are taking the short, and the corporation is keeping the rest. What if you were able to keep more of the money you earned for them? Life would be different. On top of that, most of the items that we get from stores are from factories in China, Mexico, Haiti and the Phillipines where women work earning $2 per day. Again, those women are taking the short.

It took me only 30 seconds to find basic financial information about Target and compute relevant stats. In 2010, Target had about $69B in revenue and $3B in earnings. With 355K employees, Target’s revenues are about $94 per hour per employee if the employees work full time, and about $200/hour if they work on average half time. So, the author is right, but only if “making” means “revenues.” However, when she says “keeping the rest” she clearly means earnings. In that case, Target’s earnings per employee are from $4/hour to $8/hour. In that case, the writer is off by a factor of 25x, not a small error. So, she either doesn’t know the difference between revenue and earnings, or she’s really bad at math, or she doesn’t care if she spouts nonsense, as long as the nonsense fits her biases.

The second verifiable fact is that workers in China, Mexico and other places are making $2/day. Bloomberg reports that manufacturing workers in China and Mexico make about $2 per hour. I’d guess that a 10 hour day is more typical there, so for this statistic, the author is off by a factor of 10x, an improvement but still not even in the ballpark.

I certainly would not dispute the author’s theme that prices are higher in poor neighborhoods, or more generally, that life in poverty is abysmal. However, these points can be argued without fabricating statistics, and a decent respect for facts and figures, across the political spectrum, would help moderate the rancor of our debates and bring us closer to agreement.

Testosterone and Cognitive Function

Finding one article on pre-natal exposure to testosterone and giftedness, I figured that this was probably only one paper showing a tentative connection. Then I found all of the other papers.

No connection with Testosterone: http://tc.engr.wisc.edu/steuber/SophJrSr/papers/2008/HonorableLohrentz.pdf

Related to the co-twin study: JAMA and Archives Journals (2007, December 4). Males With A Female Twin May Be At Higher Risk For Anorexia Nervosa.

Just What Is Selection Bias?

While reading a bit about KIPP schools, a compensatory education program for minority students, I found a report that has some interesting, adjacent paragraphs:

[The KIPP Performance gains do] not appear to be attributable to a selective admissions process. KIPP serves minority and high-need students, many of whom performed poorly before they entered the schools. Some unobservable biases may be present in student motivation and support, but except for a tendency to attract more girls than boys, there is as yet no strong observable evidence of a systematic selection bias.

Where it has been monitored, student attrition is high and seemingly selective. Those who leave KIPP tend to have been performing less well than those who stay, and at least one study suggests that those who leave were lowerperforming when they entered. Such attrition, if it were taken into consideration, would reduce the size of gains in reports that simply compare KIPP eighth graders with those in their host districts. However, the evidence does not go so far as to suggest that attrition fully accounts for the observed KIPP advantage.

So, there is no bias on which students enter the program, but there is a bias on which students leave. Which of course means that there is a bias in the students that were evaluated to assess the gains in performance. It hardly matters if the poorer performing students didn’t get in, or if they dropped out; it is only important they the were not part of the assessment.

Economic Notes On Manufacturing

The US has been shedding manufacturing jobs since about 2000. ( Not 1970 as many people believe . ) 


But, a capital spending report for the same period shows that capital spending has not dropped:


Furthermore, manufacturing revenue has been climbing over the period, but income after tax has stayed fairly flat. 

So, if the manufacturing companies are spending less on people, the same amount on machines but not getting more income, where is the additional expense? They could be spending more on raw materials, but the other possibility is that they are spending more on services, in the form of outsourced labor. For instance, instead of hiring janitors directly, they hire a janitorial services firm. In this case, the same number of people are being hired, but the job is shifted from “manufacturing” to “services.” I’m not sure about the details of this effect, but it does mean that the decline in manufacturing jobs may not be as great as it appears. 

Posted via email from Eric’s posterous

Educated Into A Corner

Here is an excellent comment to an article in the Chronicle of Higher Education. The commenter, mark_r_harris,  is a teacher in South Korea who explains what happens when, as the Obama administration would like, every student in a country graduates from college.

On 60 Minutes a few weekends ago, it was mentioned that the Bill and Melinda Gates Foundation would like 80% of American youth to attend and graduate from college. It is a nice thought in many ways. As a teacher and professor, intellectually I am all for it (if the university experience is a serious one, which these days, I don’t know).

But students’ expectations in attending college are not just intellectual; they are careerist (probably far more so). As it happens, I am now living and teaching in a country, South Korea, that meets the Gates’ standards. Right now, about 75-80% of Korean high school students enter a university. The 20% of Korean youth who do not attend university are mainly poor rural youth. Given the Koreans’ diligence, it is not surprising that the vast majority of university attendees also graduate, many with majors in scientific and engineering disciplines (“soft” degrees like marketing are not as popular here). This is a dedicated country.

But you know what? They can’t find jobs. It was reported in the Korean media a few weeks ago that according to the latest government figures, only half of recent Korean university graduates have found full-time work. Even the country’s best university, Seoul National, only has a 70% placement rate.

Now, Korea is experiencing an economic downturn, but not as bad as America’s. This employment issue has more to do with levels of training and subsequent levels of expectation. When a Korean student emerges from 20 years of intense study with a university degree, he or she reasonably expects a “good” job — which is to say, a well-paying professional or managerial job with good forward prospects. But here’s the problem. There does not exist, nor will there ever exist, a society in which 80% of the available jobs are professional, managerial, comfortable, and well-paid. No way. Korea has a number of other jobs, but some are low-paid service work, and many others — in factories, farming, fishing — are scorned as 3-D jobs (difficult, dirty, and dangerous). Educated Koreans don’t want them. So the country is importing labor in droves — from China, Vietnam, Cambodia, the Philippines, even Uzbekistan. In the countryside, rural Korean men are having such a difficult time finding prospective wives to share their agricultural lifestyle that fully 40% of rural marriages are to poor women from those other Asian countries, who are brought in by match-makers and marriage brokers.

Since young Koreans almost invariably live at home until marriage, whether they are working or not, it is routine for the young unemployed to do so. Their parents, who have a lot invested in their children’s successful outcomes, discourage them from taking low-level, part-time, or contract work, even just to get a start in life. As is usually the case, the only way they can see of improving their lot is not by lowering their expectations, but by improving their qualifications: by scoring well on English tests, getting additional certificates, and so on. But everyone else is doing this, too, so the competitive field remains the same. What will happen to these youths? The more years they don’t work, the less chance there is that they ever will. They become tainted, and possibly a permanently disenfranchised minority.

The Unknowable Becomes Known

There are certain dangers of speculating on the limits of science. From  What it Means to be 98% Chimpanzee, by  Jonathan Marks, referring to the possibility of humans inbreeding with Neandertals:

Could an extinct form of near-humans have interbred with us? Not only don’t we know, but we cannot know. Things we cannot know are outside the domain of science.

Strong word, that “cannot.” Unfortunately, Marks wrote this only 3 years before the Neandertal genome was sequenced, and 7 years before humans and Neandertals were proven to have interbred. From a summary of the findings:

  • A newly mapped Neanderthal genome provides strong evidence that humans and Neanderthals interbred.
  • Between 1-4 percent of the DNA of many humans living today likely came from Neanderthals.
  • People of European and Asian heritage are most likely to carry the Neanderthal genes.

There is no shame in being wrong, but in Science, you should be circumspect about making absolute statements, and for Marks, this level of unreasonable certainty is troublesome. Marks frequently makes statements that lack scientific and logical rigor, and the critique of those statements is for another post.

I’d hope that someone writing a book about genetics would be able to imagine the possibility of finding similar genetic markers between two separate lineages of humanity, but Marks is only able to conceive of actual, present-day observations of productive mating as the  proof that Humans and Neandertals could interbreed. But honestly, I no longer expect that sort of intelectual expression from anthropologists.

The Suburb Versus the Nation

The United Nations recently released its 2010 Human Development Report, ranking Norway as the most developed country in the world, and inviting a week of comparisons between the enlightened Norway and the dysmal, fourth-ranked United States.

Such comparisons are an abuse of statistics; the US and Norway are incomparable because of the vast differences in size, social structure, demographics and natural resources.

The first, and most glaring problem of comparison is the size of the countries. The US population is 64 times bigger. Norway is about the same population as Alabama, with a smaller population than 22 US states, and  its GDP is smaller than 13 US states.  If you dropped Norway into California, we’d refer to it as a suburb.

The difference in size is important because of the other big difference, diversity. Norway is very homogeneous, which is possible because it is so small. The US is one of the most diverse countries in the world — just the US Black population is 9 times larger than the whole country of Norway. High diversity has the statistical effect of pushing the country closer to world averages, while the very small Norway can be a statistical outlier.

A much more correct comparison would be to compare Norway to individual US states. Top US states rank very well relative to Norway, and on the TIMSS test of science and math, the two us states that participated, Massachusetts and Minnesota, outranked Norway by more than 20%.  Social programs that work well with a cohesive set of Scandinavians would probably work in Minnesota, but fail completely among the clannish descendants of the Ulster-Scots of the US south. Culture matters, and where Norway has one predominant culture, the US has dozens.

( As a data point on the power of culture and ethnicity, note that the states that compare best to Norway, like Minnesota, are also the states with the most northern Europeans. )

The high taxes and generous social programs in Norway are possible in part because of the country’s  oil revenue — Norway is the world’s third largest oil exporter.  Oil added about $14B to the state’s revenues in 2004, a nice cushion for their social programs. Oil doesn’t explain all of Norway’s success of course, but it is a part of it that few other countries in the world have.

The downside of the high taxes is that is has crushed innovation. Have a look at the list of Norway’s largest companies and follow the links through to see the date the companies were founded. For all of the links I followed, the company was either founded before 1940, or was created by a merger of companies that were founded before 1940. As far as I can tell, Norway ( and Scandinavia in general )  has no Microsofts, no Googles, no Silicon valley. Tandberg, the “Silicon Valley company of Norway” was founded in 1933. A lot of the companies were founded before 1900. The landscape of the Norwegian economy does not show any evidence of the “creative destruction” that characterizes the US economy.

Doubtlessly, Norway is a wonderful place to live, if the character of Norway fits your personality.  But regardless of its success and charm, there few lessons to be learned from the completely inappropriate comparison of the US to Norway.