Friday, November 4, 2011

The supply side occupation

On Wednesday Occupy Oakland protesters temporarily shut down the Port of Oakland in an effort "to halt 'the flow of capital' at the port, a major point of entry for Chinese exports to the U.S." Protesters shouted, "Take the Port! We got sold out!"

Sold out? Possibly. But by whom?

As a business owner who imports cheap Chinese products (wood flooring) through our West Coast ports I feel I have some light to shed on this issue for the protesters. You see, I import cheap Chinese wood because my customers want me to, not because I want to.

What the Occupiers fail to understand is basic economics. The fact is, I don't dictate to the market what to buy – rather the market dictates to me what to sell. And right now the market wants cheap, but quality, hardwood floors.

My company carries domestically made hardwood flooring too, and it is great product – higher quality than a lot of the Chinese imports I carry. But due to the fact that producing hardwood flooring is a very labor intensive process, low labor rates overseas generally ensure that overseas suppliers can produce the same quality at a lower cost than we can domestically. And when consumers go out shopping and are presented with similar quality products at two different price points, which price point do you suppose they most often choose? Bingo.

What most surprises me about the Occupy Oakland port blockade is that a group of individuals who would normally rail against supply-side economics is so quick to resort to, well, supply-side tactics. Supply-side economics is the economic school of thought that argues that economic growth can best be maximized by lowering barriers for people to produce and supply goods and services. Opponents of supply-side economics argue that focusing on demand creation is a better strategy for creating economic growth. And the Occupy Oaklanders would fall securely into that latter camp.

Which makes it all the more amusing that they are resorting to their own form of supply-side economics in order to achieve their goal of increasing domestic production. Rather than persuading consumers to purchase higher-cost American goods (focusing on demand), they are instead focusing on supply in forcibly shutting down the supply of low-cost Chinese goods into our country, effectively forcing American consumers to buy American.

If there is one thing that bothers me more than any other when it comes the political realm, it is the use of force to achieve desired ends, whether that force is being imposed by the left, the right, or the center. And it is the use of force that each side (left and right) decries when the other uses it, but justifies in their own use. Both are wrong.

So where does this leave us? As a business owner, I would much rather purchase and sell mostly American made goods. Frankly they are easier to manage, quicker to get, and (contrary to what the Occupiers might believe) give me a better return on investment. But again, I don't dictate to the market, the market dictates to me. It would not do my customers or my employees any good if I chose to supply goods based on emotion that not enough consumers would buy, rather than based on what the market wants.

If the Occupiers want to change the world, the best thing they could do is stop using force to achieve their ends, and instead take a page from one my domestic suppliers and start peacefully persuading and educating their fellow Americans to change their purchasing habits. Until they realize that they will continue to alienate a large swath of the American public, hurting their own cause.

Tuesday, March 29, 2011

The Milwaukee Parental Choice Program: The importance of comparing apples to apples

As a long-time supporter of choice in education, whether it be in the form of public charter schools, vouchers, or tuition tax credits, I feel the need to respond to the recently released test results showing that Milwaukee's voucher students are performing worse than other Milwaukee public school students. Certainly such results are not good news for those on the side of choice. We of course would prefer to see those results reversed. But as John Witte pointed out in the article, one year of state test results "isn't going to be the death knell of vouchers." A closer look at the data, and the conclusions that can and can't be drawn from it, is warranted.

First, an admission. It is my understanding that there are some terrible choice schools in the MPCP. This is unfortunate, and it is my hope that parents who chose those schools realize that their chosen school is not cutting it and pull their children out. This is, after all, the way choice is supposed to work, penalizing those schools that aren't performing, while rewarding those that are. Time will tell on this, but it bears watching.

Second, it's important to remember the nature of statistics. As one of my favorite books shows, you can frequently utilize statistical data to show support for whichever side you want on almost any issue. What is mentioned in this article is that choice students are performing worse on state standardized tests than other MPS students. There is no disputing that data. However, one may dispute the conclusions that might be drawn from that data. And the most obvious conclusion that one might draw is that choice doesn't work. So allow me to challenge that.

As Witte explained in the article, "In order to study achievement growth and gain, you have to study individual students over time." Data of one single year of test scores does not do that, underscoring what we really should be measuring, which is in fact how much did a choice student improve over time in their chosen school vs. similar MPS students who are not part of the choice program? The current data doesn't measure achievement growth, and it compares voucher students to all other MPS students – or, more appropriately, all other low-income MPS students. Yet the voucher students still perform worse, even when more appropriately comparing them to this latter category. This is not what choice proponents would expect. So what is going on here?

It is vitally important to note that we are looking at global data here. Rather than comparing a voucher student's performance to all other (or all other low income) MPS students, it would seem more appropriate to compare a voucher student's achievement gains to the achievement gains of all other similar students in the school that the voucher student originally transferred from. This would certainly tell us if choice works or not.

Why is this a critical point? It is critical because not all MPS schools are failing. Those that are not failing raise the average test scores. But where do you think most voucher students come from: The successful schools, or the failing schools? Exactly. Yet the data does not permit us to make this comparison, because it is too broad, and can't be fine-tuned enough to do this.

Consider this hypothetical example: Sally is in an underperforming MPS school, and Sally's reading scores on a standardized test are 45, while her school's average is 47. Sally enters the voucher program and moves to a private school. After a few years her score improves to 53 while the average from her old school improves to 49. Sally increased her score by 8 points in her new school, while those in her old school only improved by 2 points over the same time period. One could make the reasonable conclusion that the choice program benefitted Sally.

But now consider if the overall average test scores for all MPS students increased from 55 to 56 over that same time period. If we compare Sally's recent final test score of 53 to the new MPS average of 56, we would conclude that choice did not benefit Sally, because her score in her choice school is lower than the MPS average.

From this you can clearly see the importance of making sure we are comparing apples to apples. Comparing students who are prone to come from schools with particular characteristics (ie, they are failing) to students from the entire system, which includes both failing and non-failing schools, can lead to erroneous conclusions. Studying individual student gains over time, rather than at a single point in time, is also critical, as is looking at other factors that do not show up on standardized tests such as graduation rates and safety.

Now, I must admit, none of what I have laid out here proves that the Milwaukee choice program is successful. What I am pointing out is that the data presented in the article is not sufficient for drawing a firm conclusion regarding the success or failure of the program either way, and it's important we do not draw conclusions or base policy on data that doesn't compare apples to apples.

In addition, when evaluating the results of choice it is important to look at the preponderance of the available evidence, rather than just at one particular study or program. For further research on that I would recommend this book, which covers numerous rigorous studies on choice and charter schools over the past decade. The overwhelming majority of these studies do indeed support that notion that choice works.

As for the Milwaukee voucher program, I believe the verdict is still out on that, with mixed results from the various studies that have been done to date. There have been some positive results reported in terms of graduation rates, and in terms of competition-induced improvement to existing public schools, as well as negative results such as what we see in the test score data today. It all bears watching as more data comes in.

Tuesday, October 26, 2010

Economics trumps rhetoric … always

Lately I have been reading a lot about the proposed "high speed" rail line from Milwaukee to Madison. What has concerned me about the debate on this issue is that I have found many arguments against the train that use facts (as best as we can ascertain), data, economics, and cost-benefit analysis, while most of those arguing for the train have resorted to name calling, rhetoric, and feel-good arguments – completely ignoring any economic rationalization.

One of the main lines of argument from the pro-train crowd I have come across lately is that those of us who are against the train would have been against construction of the $114 billion (almost $500 billion in today's dollars) interstate highway system when construction began nearly sixty years ago. But would we have?

The interstate highway system was constructed without a dime of subsidy, being funded entirely with gas taxes and other highway-user fees. And therein lies the difference: The proposed train is going to require huge subsidies per passenger, with some estimates over $100 per rider. Were I to be convinced that the Madison to Milwaukee train could be financed through fares and user fees, or even mostly through fares and user fees (allowing a small subsidy commensurate with other forms of transporation), I could support it.

But until I see the data that confirms that, I cannot support this endeavor. If those in favor of the train could provide a sound economic analysis in support of it, they would find a very open set of ears and mind in this person. But until then, please stop referring to us as pro-Republican "anti-rail ranters" who would have foolishly been against the building of the interstate highway system sixty years ago. I for one am simply an independent citizen looking for the best ways to invest a finite amount of scarce taxpayer dollars. Period.

Friday, September 17, 2010

Lies, damn lies, and statistics

Mark Twain once said, "There are three kinds of lies: Lies, damn lies, and statistics." Twain was ahead of his time – the development of statistics, and our ability to aggregate and analyze data, have come a long way over the past hundred-plus years.

One of my favorite books of all time is "How to Lie With Statistics" by Darrell Huff – a classic first published in 1954. In it Huff clearly explains all the different ways one can lie, or at least mislead, with statistics. It is a must read for anyone involved in politics, where statistics are thrown out on just about every issue to justify one position or another.

I am a big fan of charts and find them to be a great way to display data. However, I was recently reminded of one of the main methods of misleading with statistics when I came across this chart just the other day:

This chart, which appeared on the site Downsizing the Federal Government, clearly shows a huge increase in the number of Federal Subsidy programs over the past forty years. Or does it?

The answer is yes, and no. This chart is a perfect example of how to mislead with statistics.

A first glance at this chart would lead one to believe that the number of federal subsidy programs has increased by about a factor of ten over the past forty years. But a closer look shows where the misrepresentation comes from. Take a look at the Y-axis scale. The Y-axis crosses the X-axis at a value of 900. Simply increasing or decreasing that value leads to completely different representations of the data. Consider what happens when we change the value so that the Y-axis crosses at a value of zero, which is more typical:

Same data, but very different visual conclusions. Yes, the chart still clearly and effectively shows that the number of federal subsidies has in fact roughly doubled over forty years (still a great concern), but it no longer appears to show a ten-fold increase, as the previous chart did.

But let's play with the chart a little more. Let's keep the Y-axis crossing at zero, but increase the upper limit from 2500 to 5000. That yields the following chart:

The higher limit smoothes out the increase over time so that it doesn't appear as dramatic. In fact, a first glance at this chart would make one think that, yes, federal subsidy programs have increased over time, but the increase has been fairly slow and gradual – nothing of great concern.

I think these three examples really highlight how simple it is to visually depict different "pictures" of the same data. But just because it is easy to do this doesn't mean you have to mistrust every chart or piece of data you see. For example, I came across the following chart this morning that I think does a fair job of representing the data and the problem without misleading:

This chart clearly shows how public school employment has drastically outpaced enrollment over the past forty years. There has been no monkeying with the axis limits or other portions of the chart to create a misleading pictorial and conclusion about the changes that have occurred over time. The conclusion that one might draw from this chart, which I find valid, is that part of our funding problem in education is that we've drastically grown the size of the employee to student ratio over time. This growth could actually be justified had student achievement also significantly increased over that time period, but unfortunately it has not. And even then, there are more factors at play to consider, such as the make-up of the student body, and other factors affecting outcomes that may have changed over time.

It's wise to always keep these issues in mind when studying policy and looking at statistics. In short, don't believe everything you see, and always take a second look at data and charts to make sure your initial conclusions are valid.

Public policy debates would be much more cordial and trustworthy if those involved would simply remember this: While you can sometimes make a more dramatic statement by tweaking the numbers, the most convincing arguments have always been and always will be those that play it fair. If your case is strong enough, you shouldn't need to create any illusions.

Tuesday, September 14, 2010

Agreeing with Michelle Obama

Now I just knew that would get your attention! How can a man who so persistently communicates his disagreement towards the President's policies be complimenting Michelle Obama all of a sudden? Well, I'll tell you how.

First and foremost, it's because I don't get personal over politics. I don't "hate" those who typically disagree with me, although I might tremendously disagree with their policy proposals. I don't instinctively attack every statement by my political adversaries simply because they are my adversaries. And when I agree with what someone says, or how they say it, I'm not afraid to endorse that regardless of who said it.

Therefore, when Michelle Obama recently gave a speech asking restaurants to serve healthier foods, my blood pressure didn't boil over as it apparently did for so many other non-Democrats (based on comments I've seen about the story). It appears the first natural reaction of many of those opposed to the President's policies is to attack anything and everything he or his wife say – which to be sure, is sometimes warranted and very easy to do. But not always.

What seems to be lost in the kerfuffle over this issue with her detractors is the following: Michelle Obama asked restaurants to voluntarily change their menu to serve healthier foods. Would that more politicians chose voluntary persuasion over government coercion, the world would be a much better place to live.

At a time when so many of our choices and decisions actually are increasingly being limited via government coercion, it is a breath of fresh air every time I see a key figure using the power of persuasion over the power of coercion in order to achieve a specified end result. So whether you agree with the First Lady's goal or not (and I do), it only seems logical to me to at least approve of her methods in this case. After all, she was just asking restaurants to change their ways, rather than proposing policy to actually force them to do so (which of course has already been known to happen.) The moment she does advocate government policy prescriptions, you will find me first in line to denounce it.

The reason I highlight this story specifically right now is because the use of persuasion over coercion is one of the central tenets of my political philosophy, and thusly I will highlight it and promote it whenever I see it being applied, by friend or foe. It lies at the heart of how I approach all public policy issues.

Therefore, I did not support the state-wide smoking ban that recently went into effect, while I do support persuading smokers to voluntarily quit smoking and persuading restaurant owners to voluntarily disallow smoking by their own choosing.

And while I don't support government dictating what food should be available for us to eat, I do support voluntarily donating a dollar each time I shop at Whole Foods to support their private efforts to get healthy salad bars into school lunch rooms.

While I don't support a state government ban on raw milk sales, I fully support individual and group efforts that try to spread information regarding the risks, or non-risks, of partaking in such activities.

And on the most divisive issue of all, abortion, I have preferred to expend all of my efforts aiding private charities that take in women with unwanted pregnancies, rather than focusing on governmental coercion that is highly unlikely and would have serious unintended consequences if it happened without a necessary change of attitudes and values.

In short, I tend to support voluntary efforts to achieve social goals over government mandated coercion.

In today's society it is frequently not a difference of opinion about the ends to be achieved that creates so much disagreement amongst individuals, but rather the methods used to achieve those ends. Therefore, when a restaurant decides it will no longer use trans-fats in its cooking, no one gets upset. Those who don't like the decision won't eat there anymore. But when the government dictates it to all restaurants through coercion… well, you can be guaranteed there's going to be some angry citizens.

In his essay "Persuasion vs. Force," Mark Skousen states that a "vision of civilized society as the triumph of persuasion over force should become paramount in the mind of all civic-minded individuals and government leaders. It should serve as the guideline for the political ideal." I agree with that philosophy.

Skousen laments politicians who are "too quick to pass another statute or regulation in an effort to suppress the effects of a deep-rooted problem in society rather than seeking to recognize and deal with the real cause of the problem, which may require parents, teachers, pastors, and community leaders to convince people to change their ways." [Italics mine]

Yet it is all too easy to resort to the power of coercion, applied by the only entity with a legal monopoly on the use of physical force: Government. The fact that this coercion rarely solves the root of problems, often leads to unintended consequences, and inevitably fans the flames of division is ignored at our own peril.

I'll conclude with this closing advice from Skousen, which most people likely agree with, but too few actually heed: "You want to persuade people to do the right thing not because they have to, but because they want to … Character and responsibility are built when people voluntarily choose right over wrong, not when they are forced to do so."

This all may seem quite idealistic, and if so, charge me as such. But I find it no more idealistic than the notion that we can somehow achieve the society we want, and the society we long for via laws, regulations, and government coercion. And if you disagree, just try and persuade me otherwise.

Friday, September 3, 2010

Closing the achievement gap (pt. 2)

A friend recently passed a news story my way about a promising new charter school in Madison that hopes to help close the black-white achievement gap in our state. It is exciting to see things like this given that our state currently graduates whites at an 86% clip, but blacks a meager 44% rate (as I reported on last spring). But my excitement is necessarily tempered a bit by the finer points embedded in the article.

Consider this:

"[Cole] and other [school] board members are keenly aware that there's little money these days for much experimentation."

Uh-huh. Might this be because we're spending so much money on the failed status-quo? With a 44% black graduation rate, we've been doing so well under the current system, we've got to be careful about diverting funds from it to newer, fresher, and promising ideas, right? Wrong – it's exactly what's needed.

And here's the real kicker for me:

"Another unknown at this stage of the game is how ... Madison Teachers Inc. would work through what could be thorny issues regarding the flexible, demanding teaching hours that Caire sees as critical to the school's success."

Seriously? At what point do we begin viewing our education system as an education system for children, rather than as a jobs program for teachers? I would say that point is the point at which we realize our current system is leaving 56% of minority students behind. MTI of course will feel differently, and blame everything on lack of funding, even though we're spending twice as much per pupil in real inflation adjusted dollars now as we did in 1970, with no measurable increase in student achievement.

We have great teachers throughout the state, and surely a large part of our educational woes can be attributed to uninvolved parents, but allowing the teacher unions to dictate the structure of the system as it works best for them, rather than how it works best for children, is a grave injustice to the students and parents who ultimately fund our schools. MTI should have no say in whether this school gets up and running or not. The fact that they do have a say, or at least influence, is indicative of the structural problems hampering our current system, preventing us from fully exploring any and all possibilities for improving achievement.

Madison Prep may ultimately be approved, and I hope so. But a look at the bureaucratic obstacles that still stand in the way of such promising endeavors shows how far we have yet to go to improve our system. Most parents want our education system to be flexible, innovative, and responsive. Operating the system as a bureaucratic government run monopoly is the absolute worst way to try and achieve that.

Monday, July 19, 2010

Mayor Dave is wrong on the facts

Madison Mayor Dave Cieslewicz argued recently in his blog for more federal stimulus spending. According to the Mayor, "We risk a plunge back into deep recession or worse if our federal government doesn't inject another shot of stimulus into our still anemic economic body."

He goes on further to state that "Most economists seem to be on the side of more stimulus spending," and that "I side with the economists."

The Mayor doesn't cite his source for the claim that "most economists" support more stimulus spending. Surely the source wasn't CNN which ran this headline in April: "Economists: The stimulus didn't help." That article claims that 73% of private sector economists surveyed said that the $787 billion American Recovery and Reinvestment Act had "no impact" on employment at their companies.

And certainly it wasn't MSNBC which ran the headline last December declaring "Economists see no need for more stimulus," according to "the majority of economists surveyed."

It couldn't have been the Wall Street Journal, which over a year ago was already running headlines such as this: "Few economists favor more stimulus." Forty-three out of fifty-one economists in that survey were against another stimulus package.

And it couldn't have been based on this anti-stimulus ad which ran in newspapers early last year, and to which 250 economists signed onto (including four Nobel laureates).

Which begs the question: Where is the Mayor getting his data from? The mayor claims that it is "only political types" who are arguing against more stimulus, while most economists support increased stimulus. In fact the Mayor has it exactly backwards, and he himself is a case in point: It is the "political types" who are arguing for more stimulus, with the majority of economists holding the opposing viewpoint. This irony would be humorous were not the ramifications so serious.

But the Mayor is very clear about the real reason he supports more stimulus: Because "it is good for local governments" and "will help us do even more infrastructure projects." Bingo.

Don't get me wrong – I am all for government investing in necessary and smart infrastructure projects. But government also needs to prioritize, spend wisely and within its means, and make changes to non-essential budgets to free up money for essential services. The Mayor, it seems, simply wants a federal bailout for local government to preclude the need for making tough necessary decisions – the same decisions that most families and businesses have had to make throughout this recession.

Mayor Dave believes the federal bailout is "good for taxpayers" because it will help keep property taxes down. But is anyone really buying the Mayor's free-lunch theory? Where does the Mayor think federal money comes from, or who will need to pay it back after it is borrowed? The taxpayers of course! But it sure does make the Mayor look better if he can keep property taxes unchanged here, and instead have taxpayers pay the federal government for local government services. The Mayor hopes that such a delinking of service provision from payment will keep taxpayers from noticing that they are still ultimately paying the bill.

Will Madison voters be buying the Mayor's un-cited claims and free-lunch theories when he comes up for re-election next year? I'm not sure, but I'll bet you one thing: The majority of economists won't be.