Kevin Drum - July 2012

Merit Pay Works Better if You Fear a Loss Rather Than Anticipate a Gain

| Mon Jul. 23, 2012 11:30 AM EDT

Dylan Matthews describes a recent field test in paying teachers if they get higher-than-average test score improvements from their students:

The authors split teachers in the study into a control group, who were not offered any rewards, a “gain” group, which was promised rewards of up to $8,000 at the end of the school year, and a “loss” group, which was given $4,000 upfront and asked to pay back any rewards they did not earn....Additionally, the gain and loss groups were split, with a “team” group being rewarded on the basis of theirs and fellow teachers’ test scores, and the “individual” group being reward only on the basis of their own scores. The conclusion: it worked, and it worked almost twice as well when the money was given at the start and then taken away.

This is a fascinating piece of confirmation that loss aversion is very real as a motivating factor. People respond far more strongly to the threat of loss than they do to the prospect of gain. In this case, teachers in the loss group did twice as well even though their reward per point of improvement was half as big. On the other hand, there was very little difference between team motivation and individual motivation.

Beyond that, though, I'd take this study as suggestive, but not conclusive. The gain group showed very tiny overall improvements in student performance, and none of the improvements were statistically significant. The loss group did better, showing gains of about seven percentile points.

But I'm still a bit puzzled. If I'm reading the results correctly, teachers in the gain group could expect $4,000 if their students produced average results, and $80 per percentile point extra if they did better than average. In the end, they produced results two percentile points better than average. Teachers in the loss group were paid $4,000 at the beginning of the year, and had to pay back $40 per percentile point if their kids did worse than average. They ended up producing gains of about seven points. (See Table 3 in the study here.)

This means that on average, teachers in the gain group earned $160 extra ($80 x 2) while teachers in the loss group gained $280 ($40 x 7). But the teachers must have known beforehand that their rewards were likely to be very small compared to the $4,000 baseline: In theory, they could earn thousands of extra dollars, but only by being supermen. The authors don't say how well the very best teacher did, but based on their summary results the top teacher probably generated an improvement of about 15 percentile points compared to average. That's a reward of $600 above the baseline. And that's the best result. This kind of money seems like it's far too small to produce any kind of serious impact.

So something about this doesn't really add up. Maybe I'm interpreting their results wrong, but I simply don't see how expected rewards this small could generate such significant improvements. Somehow, the baseline extra pay of $4,000 must have played a role here. right?

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Persuasion vs. Suppression: Yes, There's a Difference

| Mon Jul. 23, 2012 9:34 AM EDT

Thomas Edsall says that President Obama is trying to boost turnout among liberals this November, and at the same time trying to "suppress turnout" among groups less likely to support him. Ed Kilgore slaps down this choice of words:

Even if you buy Edsall's assumption that the Obama campaign's anti-Romney ads are designed to convince non-college educated white voters who won't support the incumbent to give Romney a pass as well, it is fundamentally wrong to treat such efforts as equivalent to utilizing the power of government to bar voters from the polls altogether. Voters hypothetically convinced by the Obama ads to "stay home" in the presidential contest are perfectly free to skip that ballot line and vote their preferences for other offices, just as they are perfectly free to ignore both presidential campaigns' attack ads and make a "hard choice" between two candidates they aren't crazy about. Lumping negative ads together with voter disenfrancisement under the rubric of "vote suppression" legitimizes the latter as a campaign tactic rather than what it actually is: an assault on the exercise of fundamental democratic rights.

Hoo boy. Rarely have I agreed more with somebody. Running a campaign of persuasion, whether to vote for you or to not bother voting for the other guy, is just that: a campaign. It's what politicians do. In no way is this voter suppression or anything close to it.

Maybe this was just a poor choice of words on Edsall's part. But the Republican voter ID assault, which is pretty plainly meant not to persuade, but to prevent the usual level of turnout among traditionally liberal-leaning voters, is a whole different animal. That's voter suppression.

A Quick Peek Inside the Latest From the Nutball Right

| Sun Jul. 22, 2012 1:40 PM EDT

It's unfair to spend too much time highlighting the ravings of unhinged cranks, especially if it's done with the unstated implication that they speak for a broader political movement. But then again, sometimes it's worthwhile to let people know just how demented things are getting out there. Here's a small excerpt from a fundraising email sent out by the crackpots at highlighting a new video from Jerome Corsi, one of the masterminds behind the 2004 swiftboating of John Kerry:

Wasn't that the plot of Salt? Angelina Jolie really kicked some ass in that movie. I guess Corsi and the folks thought it was a documentary.

Elsewhere, Steven Taylor passes along the news that certified nutcase Alex Jones doesn't believe the mass shooting in Aurora was the act of a demented maniac, but was "planned by the Obama administration (along with Fast and Furious and the Gabrielle Giffords shooting) as a plot to let the UN take our guns away." Perhaps Jones will ask Ron Paul what he thinks of that the next time he appears on the show.

I wish it were hard to see where this stuff comes from, but Corsi's lunacy is only a few ticks away from birtherism and Jones's lunacy is only a few ticks away from the idea that Fast & Furious was designed from the start to help make the case for more restrictive gun laws. Both of these are fairly widely held beliefs on the right, which makes it pretty easy to see how Corsi and Jones got where they did.

The Surprisingly Monkish Life of 1950s Executives

| Sat Jul. 21, 2012 11:32 AM EDT

Counterparties put up a link yesterday to a recent reprint of a 1955 Fortune article that profiled the lifestyles of Eisenhower-era top executives. There's all sorts of great stuff there, most prominently the surprisingly low incomes (by current standards) of the very top of the top back then. Adjusted for inflation, they figure the top 30,000 execs earned $400,000 and up in 1955 — a sadly reduced income compared to past glory days, which meant they had to buy much smaller yachts and make do with only two servants. (I'm not making that up. Read the story!) Today, the same slice of top execs probably earns more like $3-4 million and up. (Way up.)

But that's old news. This was my favorite paragraph:

[The successful American executive] spends almost no time on politics. He entertains often because he must (i.e., for business reasons or on account of his wife) and, under much the same compulsion, he attends cultural events. He does little reading outside of newspapers, newsmagazines, reports, and trade papers....He drinks, if he drinks at all, moderately and on a schedule. Alcoholism, it is clear, does not go with success and is to be found only among some executives' bored wives. Extramarital relations in the top American business world are not important enough to discuss.

Got that? American executives of the 50s were apolitical, hardly drank at all, and never fooled around. Thus spake Fortune magazine. Methinks they didn't have their fingers on the pulse of the executive suite quite as closely as they thought they did.

Also, be sure to check out the casual sexism that marinates the entire piece. There's nothing surprising in it, but it's still a sight to behold.

Friday Cat Blogging - 20 July 2012

| Fri Jul. 20, 2012 1:53 PM EDT

On the left, this has been Domino's favorite new snoozing spot for the past couple of weeks. I don't get it. What's so special about that exact patch of carpet in front of the sofa? And it's a pain in the ass, too. We have to be mighty careful these days not to step on a cat that's quietly taken up residence in front of the sofa while we're engrossed in NCIS or Restaurant Impossible.

On the right, Inkblot hasn't changed his snoozing habits a bit. He's plonked out on the bed upstairs, rolling upside down and looking adorable when the camera approaches. There's never any danger of stepping on him.

Time for Brian Ross to Find a New Job

| Fri Jul. 20, 2012 1:25 PM EDT



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Is Science the Answer to Global Warming?

| Fri Jul. 20, 2012 12:45 PM EDT

Like me, Ryan Avent is pretty discouraged about the likelihood that we'll do anything about global warming in time to prevent the earth from becoming an "alien place." This is because climate change has always been the public policy problem from hell, the kind of thing a graduate seminar would come up with if they were challenged to invent a problem that was virtually impossible to solve. Global? Check. Slow moving? Check. Invisible? Check. Costly to address? Check. Lots of well-heeled interest groups opposed? Requires international cooperation? Demands irksome lifestyle changes? Check, check, and check.

So maybe science is the answer?

The temptation upon considering needs like those above is to call for a "Manhattan project" approach, throwing massive government resources at the problem. Maybe that would work, and maybe it would generate knowledge spillovers large enough to justify the cost. Again, however economically problematic it may prove, the political realities (in America, anyway) suggest that an effort is unlikely to materialise. It's more likely that funds will be diverted from existing research programmes to pay for social spending or tax cuts.

I wonder why there hasn't been more philanthropical focus on prizes. Prizes have proven effective in generating innovation, perhaps most notably in kickstarting private space flight and research into autonomous vehicles....Perhaps prizes for new energy sources couldn't be expected to do much good; after all, there's already lots of money to be made from such innovations. But for technologies that would safely turn greenhouse gases in the air into something inert? There's little market for that at the moment, and a prize could make a great deal of difference.

Maybe. The problem with the Manhattan Project approach is that we're already doing it. The original Manhattan Project cost about $2 billion over five years, which amounted to roughly 0.2% of GDP over the same period. That's equivalent to $30 billion per year today. It's true that we don't spend that much on federal research alone, but public and private investment combined is probably close to that figure already.

As for prizes, I've never been able to get as excited about them as the geekosphere in general. Autonomous cars are getting close to reality because the technology has finally reached a critical level. I doubt that the various prize programs really had that much to do with it. And space flight? The prizes worked great — but only after the federal government had spent 50 years and hundreds of billions of dollars developing all the basic technology.

But I'll confess that these still seem like the best bets we have. The problem is that they'd have to be big. If the feds implemented a big carbon tax, say $100 billion per year, and then used the money to intensively fund a wide variety of climate-oriented research programs, with $20 or $30 billion of that dedicated to prizes, it might work. It also might just be a boondoggle, but at least it has a chance. Conversely, as near as I can tell, relying on talking shops and international regulation has about no chance at all.

Why Pot Is Still Illegal Everywhere in the World, Part 2

| Fri Jul. 20, 2012 11:23 AM EDT





That gibes with my understanding of the situation, which is a relief since my understanding mostly came from Mark a few years ago. Basically, to fully legalize pot we'd need to withdraw from the relevant treaties, which I continue to think isn't in the cards anytime soon — though Mark appears to think it's not quite as out-of-the-question as I do. (My guess: it might get ten votes in the Senate. Maybe.) Failing that, we can get close if the feds simply decide not to enforce the law. Right now, that's probably our most promising option.

Microsoft Finally Admits Defeat

| Fri Jul. 20, 2012 10:58 AM EDT

Matt Yglesias notes that investors are shrugging their collective shoulders at Microsoft's news that it lost money last quarter for the first time in its history:

Interestingly, markets aren't freaking out and Microsoft's stock isn't tanking. That's because investors seem happy to accept Microsoft's view that this is basically all just a matter of accounting gimmicks ("the previously announced non-cash, non-tax-deductible income statement charge of $6.19 billion for the impairment of goodwill and the deferral of $540 million of revenue related to the Windows Upgrade Offer") and the company offered a parallel non-GAAP earnings measure showing very solid 7% revenue increase and 12% operating income increase.

I'm not actually sure how reassuring I would find any of that. If you look at the statement, the basic structure of Microsoft continues to be that it has highly profitable franchises selling Windows and Office and enterprise server software yoked to a staggeringly unsuccessful online services division.

This is no surprise. Especially in the high-tech world, investors have long since concluded that official GAAP earnings are indeed basically a collection of accounting gimmicks and that a simpler look at earnings probably provides a better snapshot of a company's health. So they're happily accepting Microsoft's view because it's the view that's been conventional wisdom for a long time.

The second paragraph is more interesting, and it's the real reason no one freaked out over this news: the market gave up on Microsoft's online business and priced that failure into Microsoft's market cap long ago. At this point, investors are probably just relieved that Microsoft has finally admitted the obvious, which might mean that it's ready to try something different.

Quote of the Day: Romney's Small Business Problem

| Fri Jul. 20, 2012 10:38 AM EDT

From Brian Maloney, owner of a trucking company that Mitt Romney visited yesterday, explaining how he built his business:

The government didn’t help — at all. No tax breaks. No “Good guy, Brian.” Just hard work did that and a few other dedicated people that came along with me.

I probably don't need to finish this story, do I? In the same way that Joe the Plumber wasn't named Joe and wasn't really a plumber, it turns out that Maloney once took advantage of an industrial revenue bond to move his business to Roxbury, and much of his early success was due to a contract to overhaul city buses.

None of this is a big deal. I imagine Maloney worked his ass off to build his company. Mainly it's just a warning to Romney: when he flits around the country embracing folks who have never relied on the government for a single dime, his team better do a good job of vetting them. Because most likely, all he's going to do is provide the librul media with a lovely, prepackaged set of stories that demonstrate how virtually every small business in America benefits from government programs in one way or another. And that includes one particular small business called Bain Capital. I'll bet someone is working on that story already.