an age of trades

by lewis500 on August 18, 2013, no comments

I have a theory about Booker T. Washington. He is most often remembered as an orator, educator, or sellout, but what no one appreciates about Washington is that he distinguished the two models of education–signalling and human capital formation–well before there existed the intellectual vocabulary to express his opinions succinctly. Like Bryan Caplan today, it’s clear he thought the former was privately beneficial but socially useless.

During the whole of the Reconstruction period two ideas were constantly agitating the minds of the coloured people, or, at least, the minds of a large part of the race. One of these was the craze for Greek and Latin learning…The idea, however, was too prevalent that, as soon as one secured a little education, in some unexplainable way he would be free from most of the hardships of the world, and, at any rate, could live without manual labour. There was a further feeling that a knowledge, however little, of the Greek and Latin languages would make one a very superior human being, something bordering almost on the supernatural.

Above Washington is speaking to a general delusion more than the signalling model, but he later lays into a school (I assume Howard) that stressed the liberal arts.

At this school I found the students, in most cases, had more money, were better dressed, wore the latest style of all manner of clothing, and in some cases were more brilliant mentally.  They knew more about Latin and Greek when they left school, but they seemed to know less about life and its conditions as they would meet it at their homes. Having lived for a number of years in the midst of comfortable surroundings, they were not as much inclined as the Hampton students to go into the country districts of the South, where there was little of comfort, to take up work for our people, and they were more inclined to yield to the temptation to become hotel waiters and Pullman-car porters as their life-work.

This goes on throughout Washington’s writing. He was a workaholic singularly obsessed with one idea: that a human could become more productive by learning a trade. Political office, literature, artistic praise, theoretical science…they all seemed totally frivolous. Consider his opinion of fiction:

Newspapers are to me a constant source of delight and recreation. The only trouble is that I read too many of them. Fiction I care little for. Frequently I have to almost force myself to read a novel that is on every one’s lips. The kind of reading that I have the greatest fondness for is biography. I like to be sure that I am reading about a real man or a real thing. I think I do not go too far when I say that I have read nearly every book and magazine article that has been written about Abraham Lincoln. In literature he is my patron saint.

He is famous for saying, “The opportunity to earn a dollar in a factory just now is worth infinitely more than the opportunity to spend a dollar in an opera house.” Of course, this says something about his character, but critics have underrated what it says about his tastes. He didn’t care about opera.

Why was Booker T. so obsessed with industrial education, but later Black intellectuals mostly ignored or even despised the idea? Because Booker T. lived in what you might call a great Age of Trades. The turn of the century was a time when theory and toolmaking had so far outpaced practice that there were free lunches for the common man around every corner, if he could only acquire a little training.

For example, Washington funded Tuskegee at the start by building a big brick furnace and selling the bricks. It says something about the state of the brick industry that an amateur could read how to start a furnace, build one with unpaid student labor, and still turn a profit. George Washington Carver is famous as a scientist, but his most important role was as an advocate for all kinds of fairly straightforward farm improvements. Small farmers were running their farms in demonstrably inferior ways…exhausting their soil, ignoring nutrient and pest technologies, neglecting changes in supply and demand, toiling in the same monoculture traditions. By teaching them something, even without changing their social status, one could massively improve their well-being and contribution to society.

How is this relevant today? For the past 8 months I’ve spent all of my time learning computer programming, and I’m convinced that, in the Bay Area and a few other places, we are again experiencing an Age of Trades akin to the Turn of the Century when Washington’s ideas abounded.

I first started to realize something big was happening when my college roommate, with no prior knowledge of coding, started teaching himself and, within a year, had a near 6-figure job at the New York Times. Meanwhile, my friends in law school were despairing, my friends in journalism were despaired, and my own field, academia, certainly looked ripe for some kind of despair wave in the near future.

Moreover, just as in Washington’s era, the skills in demand are also easy to learn. I have taught myself programming to the point that I get job offers in my LinkedIn inbox randomly, merely through websites like CodeAcademy, EdX, and Udacity. It turns out one of the things that programmers take the most pleasure in is making free tutorials and applications like Sublime Text plugins that make programming absurdly straightforward. My roommate, who is a great coder,  once watched me finish off a Code Academy course and said, “It makes me jealous that it took me months of excruciating copying from a Dummies book to learn what you have in a week.” It’s taken a lot of time that I’d rather spend blogging or researching, but by Christmas (the end of the year I decided to dedicate to learning to code), I am going to be a rare expert at combining the d3.js data visualization framework with the AngularJS app framework. That’s not really a claim about my abilities…it’s a claim about how many free lunches are sitting around.

To prove my point, Here is a list of “Hacker Schools” or “Bootcamps,” which provide modern-day industrial educations. My roommate is a teacher at one of these, and they are amazing. Generally you pay about $15-20k, take 8-15 weeks of all-day programming courses, and wind up with a $65k-95k/year job. The placement rates are over 95%, and many schools won’t charge you if you don’t get a job. San Francisco is the only place I’ve ever been where billboards and taxi placards advertise places to work rather than things to buy, and many of the programmer meetups here in the Bay are infiltrated by undercover recruiters, who earn $10k bounties for placing engineers with tech firms.

The pay is great, and you get to take pride in your work…building companies like SpoonRocket, which provides $6 gourmet meals with 5 minute delivery times. This summer I interned in an incubator for Berkeley startups, and it’s just like Tuskegee’s brick furnace: a lot of people with minimal special training are turning big profits.

Contrast tech with careers on Wall Street, where generations of technical and management talent have been squandered on zero-sum (perhaps negative sum?) competitions like high frequency trading or, worse, exploited humans’ naturally poor understanding of causation to delude investors into financial “products” that add no value beyond rationalizing randomness (see Kahneman on the Illusion of Skill), or even worse, given credulous people and governments the confidence to make truly awful choices that their untutored common sense would have precluded (see the story of how my home county Fell Off the Bankruptcy Cliff with help from middling bankers). The medical industry is just as bad, if not worse, than Wall Street when it comes to selling people things they don’t want at undisclosed prices (see TAL’s More Is Less) and using a cartel to stifle competition (see Bryan Caplan on men’s seeming retreat from the profession). Law is most obviously zero-sum or even negative sum given the prospects of new, debt-laden law grads.

On the ground, I see the Age of Trades cultivating mildly conservative values. People in SF look much less to Washington or even Sacramento when it comes to solving social problems. The impulse here is to start a business more than change a law. There is not much respect for the signals given by large institutions: Google is hiring more programmers without degrees even as the older parts of the economy move in the opposite direction.

It’s possible to exaggerate the era. It’s an exciting time to be a young person with free time and innate math skills in a major metro, just as Washington’s Age of Trades was really only good to able-bodied young men with free time in underindustrialized areas. Eventually the low-hanging fruit will all be eaten, the coming wave of great coders will drive down wages, and unless something is done soon the profits will all flow to patent holders who preside like feudal baron’s over swaths of the industry or firms will move to small countries that neglect patent law. But it’s awesome nonetheless, while it lasts.

a huge transportation problem no one knows about

by lewis500 on July 31, 2013, no comments

It’s silly how news compares entities without any weighting system for population. For example, Scott Sumner says that the most important news story of 2013 is China’s pro-market reform.  With China this is somewhat excusable as their language and culture are vastly different, but India is a Commonwealth country where everything is printed in English and run along more-or-less democratic lines.

Today I found out that government subsidy of diesel fuel (~$0.15/litre subsidy on diesel vs. ~$0.25/litre excise tax on gasoline) has helped to raise the diesel share of new auto sales in India from 17% to 40% (!).  India has lower particulate standards than the US or Europe, and its people often live in surrounded by heavy gridlock. It’s a disaster for public health and a small win for fuel economy, since diesel gets about 15% more miles per gallon than gasoline on equivalent vehicles. Here are some interesting links: Centre for Science and the Environment, International Council for Clean Transportation, University of Maryland (this last link indicates a market share of just 32%…not sure what the stats are specifically.)

This also brings home another point: the really big social gains lay in policy changes that experts all agree about. America subsidizes corn syrup and wheat amid an obesity epidemic brought on by processed carbohydrates that our bodies never evolved to metabolize. Zoning makes nice places with good income mobility absurdly expensive. Streetcars are less cost-effective than buses.

The forefront of research is often about optimizing. If you’re a discrete choice modeler, you might build your career on refining methods that would predict ridership on a streetcar or the elasticity of diesel demand. But I believe your real function in society is to continually be there, in case anyone asks, to make it clear that certain policies are unarguably stupid…that fewer people will ride the streetcar than buses of equivalent cost while any economic development gains in its area are just relocated from nearby neighborhoods…that however much demand will change in response to a subsidy cut it is simply absurd to spend money on diesel in a country where many of the poor are functional illiterate or vulnerable to gang rape.

In all the important cases, experts typically use reasoning far simpler than what they spend their professional lives working on, but the conclusions are still counter-intuitive to a busy voter. There should be more of an effort to produce interesting policy briefs and educational materials for public consumption wherever there is total consensus. To date, the think tank system has failed in this capacity, with the exception maybe of the Reason Foundation’s efforts. Their work has largely served to spark conversations among people in the halls of power…not to change the intuitions of lay people. Given the fury of the lobbying industry, it might not make any difference to actually convince politicos what is a good idea and what isn’t, and I hope that more think tanks start to focus on convincing the everyman.

Pittsburgh and Detroit

by lewis500 on July 23, 2013, no comments

Paul Krugman has a post on Pittsburgh, where I once lived for six years and hope to live again:

It’s hard to avoid the sense that greater Pittsburgh, by taking better care of its core, also improved its ability to adapt to changing circumstances. In that sense, Detroit’s disaster isn’t just about industrial decline; it’s about urban decline, which isn’t the same thing. If you like, sprawl killed Detroit, by depriving it of the kind of environment that could incubate new sources of prosperity.

Pittsburghers love this type of comparison. Pittsburgh really is pretty miraculous, but I cringe when people compare Pittsburgh to Detroit, and I want to hide under a blanket from shame when someone says that (insert cause here) is the big difference between the two cities.

Why? Most bluntly, Krugman is doing n=2 econometrics.

More subtly, imagine a world in which crime explained 100% of Detroit’s decline–where sprawl did not prevent job growth or new industries from forming…only an endless crime wave. (Note: I am not saying we live in that world at all.) We would observe a reality very similar to the current one: lots of sprawl as residents made a run for it. Would econometricians in that world be able to tell that 100% of the decline was caused by crime? They would have a very hard time not overestimating the effect of sprawl, especially since, due to aesthetic reasons and sheer logic, it strikes me as very intuitive that sprawl would prevent job growth. 

And if you want to delve into some of the more mathletic realms of urban research, perhaps cities possess some features of complex systems with non-linear dynamics. In this case, the whole idea of identifiable causation becomes kind of murky. Even if there were no large social changes at all, we would see cities rise and fall over the course of decades because of a scandal at one high school or a single salient serial killer. I’ve read about climate models that predict stability for eons (absent humans influence) and then sudden ice ages…even without biological or solar reasons for climate change.

Finally, because we treat cities as chunked cognitive units, we overcompare them as such. The demographics of Detroit are similar to those of Pittsburgh’s ghettos, but no one ever asks, “Why is California-Kirkbride growing so much more slowly than the rest of Pittsburgh?” or “Did sprawl kill The Hill District?”

I will stick my neck out to speculate a little, though:

(a) Pittsburgh has an enormous number of universities and is very dense. The steelpocalypse meant working class people left and were replaced by a large student population. The cohort effect left Pittsburgh an extremely cheap, well-connected city (empty houses everywhere) that’s easy to get around ans has relatively little crime or corruption and high education. Note I agree that density was important; it’s just that I’m not so sure. Maybe it’s just the universities.

(b) Pittsburghers are obsessed with saving Pittsburgh and strangely insulated from the rest of the world. The only city I have seen with a comparable level of boosterism and local culture is New Orleans. Even among Pittsburghers, Pittsburgh is a perennial topic of discussion…like fish talking about water. It’s understandable, to some degree: the city is outstanding among US cities in its geography and architecture. But there’s a thick accent, endless inside jokes, and a general feeling that literally everyone plays for the Steelers. For example, here is a site called Leaving Pittsburgh. Here is a popular web series called Pittsburgh Dad that skewers working class whites from Pittsburgh, called ‘yinzers’:

winning upzoning in the Bay

by lewis500 on July 6, 2013, no comments

In A Denser San Francisco, Reihan Salam notes the Bay’s paradox:

Despite San Francisco’s reputation as a hotbed of progressivism, the city is in many respects very “conservative,” which is to say resistant to change. Many San Franciscans are adamant that the look of the city remains frozen in its midcentury state.

I used to think this was a paradox, too, until my experience at a Berkeley City Council meeting. I now believe that California is not especially resistant to change, but rather that we’re seeing the tragedy of the commons that results when unified housing market is divided into dozens of cities. In short: when each city constitutes a tiny fraction of the habitable part of the metro area, no city can individually change housing prices much by allowing more development, but it can control the crowding within its borders.

Last Tuesday night I attended a meeting of the Berkeley city council to voice my support for a new apartment building in my neighborhood. Everyone should speak at a city council meeting at least once in his or her life. It’s like grad school: you accomplish nothing, but you learn a lot.

The issue: A developer received a variance to build a 6-story apartment building, intended to house about 200 students, next to a 6-story affordable housing complex for senior citizens. The seniors have successfully pushed for a very large setback to protect their sunlight but still oppose the final draft of the building, because they worried the students will be noisy, and because the building will still block direct sunlight to a handful of units in the early morning.

Prospect theory is true: it is losses and gains, not levels, that matter for decision-making. The seniors, and even council members, were so worried about the loss of a few hours of direct sunlight that one council member, a strong-looking man, was moved to tears. He printed out a study from Warwick University saying that seniors need sunlight in order to prevent depression and keep their bones strong; that their lives were at stake; that we were throwing them under the bus by not giving them the sunlight they needed. However, no one wondered how seniors survive in the 90% of America with less sunlight than Berkeley, California. If a few hours of morning sunlight in Berkeley declares the margin of habitability, thousand-mile swaths of the Midwest and Appalachians would be a holocaust of the elderly…depressed seniors leaping from bridges in Pittsburgh every day. To say nothing of central and eastern Europe.

My talk: I was the only one to voice support for the building besides the developer himself and a lady from a business coalition.  I stood up and said: “What you see is this big building crowding up my neighborhood, and it’s not affordable housing. What you don’t see is that 200 people housed in this building means 200 fewer people competing with the rest of us in the rental market, and I can’t afford to outbid a programmer for my apartment. Berkeley should prioritize affordability over sunlight and parking.”

My revelation: As soon as I said this, I realized it wasn’t true in any practical sense. There are around 8 million people in the Bay Area and only 113,000 in Berkeley. Moreover, there are millions of people who’d love to live in the Bay but can’t at current prices. Therefore, Berkeley’s housing demand curve is horizontal.  The Bay’s demand curve is steeper, of course, but here’s the proposition for Berkeley’s residents: “Please quadruple your population to make the greater Bay Area 5% cheaper.” We don’t have to think of Berkeley as extraordinarily reactionary if they decline this sacrifice. Moreover, even if we accept that Berkeleyans are altruistic, we have to posit they are also attentive to small-but-widely-dispersed welfare gains…something that any behavioral economist would laugh at.

Plan Bay Area: This dovetails with something that might seem strange in other parts of the country: Plan Bay Area. The plan designates specific quantities and types of housing to be built over the next few decades in every community in the Bay. That might seem like Hayek’s worst nightmare, until you see it for what it is: coordinated deregulation, similar to the World Trade Organization. The allocations are actually pushing against the upper bound in every place, so an infinite allocation would be the lack of planning. It’s a domain where the traditional signs of government itnervention are reversed.

You can see this in the propaganda from opponents of Plan Bay Area. In the following animation, opponents are lampooning the social engineers who want to turn the Bay into a Smart Growth utopia. But what you see is that the makers have their own social agenda of a Bay filled with single-family houses.

Solutions: Maybe the best dollar-for-dollar policy initiative of our time was Race to the Top. For $5 billion, the Obama administration bribed hundreds of thousands of charter-school students into existence. Race to the Top gave a lot of firepower to charter school proponents, allowing them to accuse teachers of turning down money for students…reversing the normal debate in which charter schools are accused of sapping money from traditional public schools.

The best way to deregulate cities would be to bribe key constituencies in a way that gives easy fodder for debate. I propose the following: California should triple the solar tax credit for seniors in communities that substantially ease zoning regulations. Any deregulation policy has to neutralize the most ardent opponents of development: seniors and environmentalists. This one would not funnel money through bureaucrats and would show up in anyone’s pocketbook as soon as they asked for the solar panels.

In the long-run, there should be a legal precedent for what counts as immigration policy. When cities block development so much that rents rise substantially above the marginal cost of a square foot of housing, we can say that the city is conducting immigration policy through the backdoor, and municipalities should not be constitutionally allowed to restrict the size of their legal resident populations. Such a precedent would be self-enforcing in California, because municipalities would be eager to sue one another to sop up extra residents at the city gates.

can we accommodate the immigrants?

by lewis500 on June 24, 2013, no comments

Dr. Eric Rasumsen at U. of Indiana has a great informal paper: How Immigration Can Hurt a Country. To me this work is what makes me optimistic about academia in the Internet age: professors can ship product directly once they get tenure and still create quite a buzz. Also, because informal publication does not have to especially impress anyone with math gymnastics, they can crank fairly simple models in response to current events.

Rasumen’s point is neat: if there are disconomies of scale in major industries, then doubling labor will not double output. Since immigrants (under doubling) would receive half of labor’s share of income, the sum of domestic labor and capital profits together will be less than without immigration.

I don’t think it’s relevant. How many industries have diseconomies? Anyway, I think it clouds the water on thinking about immigration. What we should really do is make some back-of-the-envelope calculations about the real goods and services that immigrants will demand, then check if they’re constrained. My hypothesis is that all of the most expensive things that immigrants need are only expensive because of our own bad policy choices, while some of the expensive things immigrants need are precisely those things which Hispanics (who make up the vast majority of the coming legal resident wave) have proven themselves to have a comparative advantage at producing.

Housing: Nearly all of America is empty, and one thing Hispanics certainly know how to do is build houses. Thus we have all the land and labor we need to supply the immigrants with decent housing. Housing is really expensive, of course, but that’s only because cities and counties don’t allow tall apartment buildings or development in greenbelts. Here, the argument that immigrants will take the housing stock is really only true if Americans, on their own, decide that aesthetics is more important than affordability.

Of course, cities will not sufficiently deregulate on their own, but if we had a Race to the Top-style initiative that bribed well-organized local constituencies (tax credits for union-built solar panels in cities that deregulate) we could easily build another million dwelling units per year.

Food: Food, like housing, is an arena where Hispanics far surpass domestic labor on a per-hour basis. Food is also extremely cheap, and healthy foods could be cheaper if the government didn’t pay farmers to waste so much land on starches, cotton and other crops not profit-making at market-decided margins.

Infrastructure: All problems of congestion could be solved by pricing and might anyway be solved in the long run by autonomous vehicles. Since immigrants will earn less than domestics, they would not outcompete us in the congestion pricing market.

Health care: This is where there is most cause for concern, especially given that Mexico is one of the most obese countries in the world (although not as obese as America) and smoking rates among Latin Americans are much higher than among North Americans. But consider: the most expensive health care we provide right now is based on magical thinking, bad statistics, the desire to show we care about family members, and false advertising by drug companies. This is not my conspiracy theory but rather the result of lots of medical economics research. Whether our government buys the immigrants useless surgeries and drugs is a policy decision domestics will make. It doesn’t make sense to talk about transfers in this arena as though they’re an inevitable consequence of immigration when the true problem is that we haven’t embraced realities about medical efficacy.

Moreover, the constrained supply of doctor hours is a problem of our own choosing. Medical schools have not been graduating enough pupils even as our population rises. There are also many pointless licensing and doctor-enriching regulations, like the ban on unlicensed tooth whitening and barriers to medical outsourcing, that keep us from enjoying factory economies in health care and fill up doctor’s schedules with tasks either nurses or doctors in foreign countries could do. This hero in India is building enormous, factory-style hospitals that do a fine and safe job, but they’re not allowed here because they don’t make the doctors feel autonomous like Dr. House. I’m taking the radical stance that policy should not hinge on whether a profession feels good about itself.

Education: Immigrants do use up a lot of education resources and tend to have worse results even after several generations. This is a strong point against my argument.

In summary: Immigrants might make domestic Americans worse off, but it’s primarily because policy will not free up the resources needed to sustain the immigrants and domestics together. With targeted deregulation, the main thing Americans stand to lose from immigration is quaintness.

tesla as revealed preference experiment

by lewis500 on June 18, 2013, no comments

Tesla Motors is trying to sell cars directly to customers in its own stores and online, much the way Apple does. Unfortunately, states have laws designed to increase the profits of dealers at the expense of customers. Interestingly, Tesla is having the most trouble in blood red Republican states (WSJ India ungated link)

Some states, like North Carolina and Texas, require manufacturers use independent dealers. In some states, including North Carolina, dealers are pushing lawmakers to strengthen prohibitions against any form of direct-to-consumer selling by auto makers.

North Carolina is a state with a Republican governor, house and senate. The situation in Texas is the same. Because there are no Democrats of power in these states, these moves counts as a more-or-less pure “revealed preference” experiment. We can use the revealed preferences to make inferences about the party’s “latent class” of ideology, and the Republican Party actions are most probable if we condition our expectations on the party being a social justice movement for highly-taxed business owner. Sometimes they will support deregulation, as with environmental and labor standards, but  they are not especially interested in delicensing professions, reducing protectionism or making it easier to build housing in nice areas…because deregulation is merely a means to the end of unburdening a certain type of person. I can’t find the link off the cuff, but I remember also reading research to the effect that many Tea Party members are also enthusiastic supporters of Social Security and Medicare, and their biggest gripes are with the idea that people who don’t work might get benefits.

Likewise, in my home state of Alabama, which is also Republican-controlled, the Supreme Court has made it illegal to put tooth whitener on another person unless you’re a licensed dentist (link):

In 2009, the State Supreme Court ruled that a dental service is any “helpful act or useful labor of or relating to the teeth,” and by this rather basic definition, teeth whitening is dentistry. Soon after, the Legislature passed explicit language to that effect. A nondentist administering teeth whitening could now face a misdemeanor punishable by up to a year in jail and a $5,000 fine.

Meanwhile, the deregulatory legislation allowing Texans to buy from Tesla was authored by a Democrat, and the journalist notes Tesla has fared better in bluer states:

Franchise laws don’t apply to Tesla, Mr. Musk has said, because the company has never had franchised dealers. This argument has been a winner for Tesla in court skirmishes with dealers in New York and Massachusetts.

I don’t know what this says about Democratic places. Perhaps nothing.

i was right about china

by lewis500 on June 15, 2013, no comments

A few weeks ago I wrote that China’s urbaniztion policy was driven by the state’s desire to make households less self-sufficient, to get people trading their labor for goods and services, because the state reaps a share of formal transactions but not household production. I noted this answer was more likely than Dr. Karl Smith’s theory, which was that policy targeted the productivity gains of agglomeration (job matching, idea flow), because it did not require much high-level understanding on the part of bureaucrats and served the state’s interests.

Consider a household with a husband farmer and housewife in a rural area. The housewife turns some of the farm’s output into three meals per day and cares for their child. Now suppose the couple moves into the city, where the husband earns a wage equivalent to his farm output. The wife gets a full-time job and uses her earnings to buy three meals per day and to put the kid in daycare. Now the couple is about as [materially] well off as before, but the household’s GDP has risen enormously…

The wife’s move from household to market production has afforded the state an opportunity to claim some cut of the family’s consumption. She works and spends, and the government may tax her paycheck, employer’s profits, and purchases. If the family is taxed exactly the average rate of all Chinese households, government revenues as a share of  GDP is flat. But state revenues have expanded in absolute terms.

It turns out I was right. China has announced they want to move 250 million peasants into cities. Why?

Chinese economists say that the cost does not have to be completely borne by the government — because once farmers start working in city jobs, they will start paying taxes and contributing to social welfare programs.

“Urbanization can launch a process of value creation,” said Xiang Songzuo, chief economist with the Agricultural Bank of China and a deputy director of the International Monetary Institute at Renmin University. “It should start a huge flow of revenues.”

central limit theorem

by lewis500 on June 3, 2013, no comments

My roommate Victor Powell has made an illustration of the Central Limit Theorem that is getting a lot of attention online. It’s made in d3.js which is what we’re using at the Visualizing Urban Data ideaLab. We are making one right now about fat-tailed distributions a la Taleb. Here is the CLT: