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.