Saturday, September 26, 2009

Not All Yale Students Are Hippies

Tanya and I are at some coffee shop in New Haven and I noticed on patron has a quote attributed to John Maynard Keynes on her laptop:
Capitalism is the extraordinary belief that the nastiest of men, for the nastiest of reasons, will somehow work for the benefit of all.
Apparently, this quote isn't from Keynes, but it's a good sentence nonetheless and reminds me of this quote from F.A. Hayek's The Fatal Conceit:
The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.
(It occurs to me this person might think the quote is sarcastic but I hope not. That would ruin my title.)

Friday, September 18, 2009

Incentives to Inquire

Students don't like asking questions. For a while, I thought it was simply because they are shy and need to be enticed out of their shell (I still believe this, but less so now) so I require participation for the grade. An undergraduate friend of mine told me of another reason:
We know the professor only has so much material planned for a lecture. If we get it all done before time is up, they have to let us out early. But whenever anyone asks a question or asks to elaborate, that pushes the time we get to leave, back.
This is a problem. Most students don't understand the first time around or will forget if they don't talk about the subject matter. And there's a lost life lesson in the importance of speaking up. The reality is doubly a problem for my style since I make the lecture notes available online before each class.

It's tempting to solve this issue by just over-booking each lecture, but it makes you look disorganized. It also creates the risk of having material constantly spilling over to the next lecture until you get backed up at the end of the semester and your homework and exam assignments get out of whack.

So my solution I will be trying out in the future is to create one or two five-minute "widgets" at the end of each lecture. Short extensions on the topic we covered, but small enough that if we don't cover them I don't feel a big loss. When the semester begins, I let them know the rules: if we finish before we get the widgets, then I assume they have mastered the nuances of this lecture and we can further their understanding with applications (which will be now be on the exam). If we don't get to them, they won't be tested over them. Therefore, students are incentivized to ask questions, filling in the time by furthering their understanding of the material in order to avoid a larger exam. Since I have the power to veto questions, I can't imagine I'll be bogged down with filler inquiries in an attempt to game the system. I hope there aren't any unintended consequences I haven't thought of.

Tuesday, September 08, 2009

On Racism and Income In America

During a heated discussion with my girlfriend the other day, I brought up the graph below from a post I saw on Marginal Revolution. It's summary data from an adoption study when primarily Korean children were adopted by American families of various incomes between 1970 and 1980. Now in their 20s and 30s, the graph summarizes their parents income (presumably at the time of adoption, hopefully adjusted for inflation) along the x-axis and the child's average income along the y-axis.

This, I said, is a very interesting study: adopted kids did about the same (on average) regardless of who brought them up. But when they are the natural kids of the parents, they do better on average. Since it's reasonable to say other effects are constant across incomes (such as how parents treat an adopted child), the data suggests that genetics play a critical role in determining income and that the wealthy are not wealthy simply because their parents were. (Note there is still a high level of income mobility in the data: 10K a year parents averaged almost 40K a year kids; 200K a year parents averaged only about 78K a year kids...though the latter point could be argued by wealthier kids opting for jobs with fewer financial awards and more non-pecuniary benefits.)

Tanya didn't agree on a few levels, for one arguing that it suggests low black incomes are low because blacks are stupid. But the study doesn't say that environmental factors don't influence future prospects (though I am admittedly surprised to see how uncorrelated adopted incomes were with their parents) nor was it a perfect study. Since adoption agencies are ethically bound to make sure the couple could provide for the child before adoption, the selection bias would overestimate the success at the lower levels of income.

Tanya was also concerned about effects embedded in the adoption. Since the kids were Korean, they were clearly adopted. Thus, she argues, issues of racism and the stigma of being adopted washed out and overshadowed any advantage wealthier kids had. Sure, this exists, but I'm not convinced these factors are so strong it would wash away all environmental advantages. Yes, the children grew up in the 70s and 80s, where racial tension was likely stronger compared to now, but such tension tends to lean toward the Afro-American and (to a lesser degree) Hispanic populations, not Southeast Asians.

Really, I have don't know how much racism is in America. Most people don't know. Of course, it still exists and minorities will have first hand experience with it. But that doesn't mean it's common. Similarly, most white people I know (myself included), are good people and most scared of a misunderstanding being mistaken for racism. That does not mean most white are not racists. And surveys done on the issue are going to have major credibility issues about the honesty of people's responses. I can say with confidence that black incomes are rising, interracial couples are more common, and companies are very concerned with being thought of as inclusive; at least things seem to be getting better.

Wednesday, September 02, 2009

The Burden of the Pre-existing Condition

If you were born with Asperger syndrome, should people be forced to date you? Most of you would probably say "no." It's a good answer: why should people be punished for something that isn't their fault? So why do so many believe health insurance companies should be required to accept applicants with pre-existing conditions? (Before you respond with "I don't want to date someone who doesn't want to date me," remember Asperger syndrome severely limits your ability to read social cues; you won't be able to tell they are with you only by force.)

It's not even that insurance companies won't cover pre-existing conditions. It's that they won't cover them at a particular price: a low price. In the end there are those randomly burdened with a condition that's expensive to care for and they don't want to pay for it (at least all of it). But that does not translate into forcing someone else to cover the costs.

And no, insurance companies are not sitting on lots of excess cash. Record profits are not the same thing as high profits (and even if they were, proposing a permanent change based on temporary conditions is very reckless way to make policy). Because they are barely profitable, forcing their costs up with such reforms will force prices up and making it too expensive for someone who could otherwise get it. Now we are forcing our neighbor to carry the burden of our condition. Where's the justice in that?