Signals v Causes: Poverty





Feedback Matters in Customer Service




McArdle say most of them. McAfee responds:


Roberts points out that these are outliers:



Failing sucks, get over it


Here are a couple prescient lessons.

Get over failing:















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Don’t get caught in the justice trap


Henderson quotes good advice from Jeffrey Tucker:






Megan McArdle on Failure


Why is failure valuable?

…because that’s how we get information.

What about the typical success story?


Where do we learn to start avoiding failure?






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Who deserves some help?

I’m looking forward to reading Bryan Caplan’s follow-up to his post, Poverty: The Stages of Blame. In the follow-up, he plans to explore what that implies about government and personal behavior.

This topic baffles me. When kept in the abstract, people seem to default to an attitude that ‘something must be done to help’ because people are poor ‘through no fault of their own.’

But, when you start talking about specific people, Caplan’s logic tends to override that abstract reasoning.

But, few people backtrack and wonder how many people really fall into that abstract “through no fault of their own.”

Update: Here’s Bryan’s follow-up post, Poverty: The Stages of Blame Applied. He makes good points.

The spider and the starfish


starfish = bottoms-up (Photo credit: kevinzim)

I enjoyed listening to this EconTalk podcast with guest Lant Pritchett about education, specifically in poorer countries. I recommend it.

He begins with a nice discussion about bottom-up and top-down systems using metaphors (emphasis added):

…the basic distinction is between a top down organization where the metaphor of a spider is, all of the resources of the spider web, however spread out they are, merely serve to transmit information to one spider, who synthesizes that information and responds with the resources of the system. So, if there is a bug, the spider crawls out and gets it. But kind of all the web is kind of an ancillary to the brains of the top. The starfish is a creature that actually has no brain. It’s neurally connected, but a starfish moves because the individual units of the starfish sense something and if they sense more food they try and pull that way. And if the other side isn’t pulling as hard, the starfish moves. So it’s really a metaphor of a decentralized system, where individual units responding to local conditions create the properties of the system. And the beauty of a starfish is if you cut a starfish up into 5 bits, you get 5 starfish. The danger of a spider is that when the spider dies, it’s dead. The whole system therefore falls into dysfunction [single point of failure].

Later, he proposes why bad school systems may persist:

…one of the conjectures I put in the book is that it persists partly by camouflage. It pretends to be something it’s not and then can project enough of the camouflage that it maintains its legitimacy. So, sociologists of organization have a term called ‘isomorphic mimicry’, which is adapted from evolution where some species of snakes look poisonous but aren’t, but get the survival value of looking poisonous. So, one of the things that’s happened is by this pressure to expand schooling and by the governments’ desire to control that socialization process, they have created all the appearances of schools that provide education but without actually doing it. But have at the same time not produced the information that would make it clear that they weren’t doing it. So they produce enrollment statistics, numbers of buildings, numbers of toilets, numbers of textbooks, numbers of everything. But have, you know, all of which can project the image that there’s a functional system and providing real learning there. But they don’tprovide metrics of learning or incentives for learning or feedback on learning or accountability for learning at all.

There’s much more good discussion throughout, but I’m fond of something Pritchett said near the end:

You know, the United States has always been much more of a starfish system. And the starfish system has enormous strengths, and I think those enormous strengths have led America to be a leader in education in many ways. And one of the examples I use in my book is, if there’s a scaled example of a starfish education system, it’s American universities. And it’s just unbelievable from the data the extent to which America dominates quality universities. It’s just unbelievable compared to Europe, which always took the same approach to universities that other countries want to take to their basic education. And you see the consequences of it. America’s universities–in the book I have numbers of the top 200 universities in the world, what fraction of them are in Anglo countries, and it’s just way disproportional to the population size. And even wealth. Because Europe, which is equally sized and equally wealthy, continental Europe, just has nowhere near. And it’s the result of a starfish system, in my view.

I’ve made the same point several times on this blog. Here and here are a couple of examples.

I do appreciate the spider and starfish metaphors. Those roll-off the tongue better than top-down and bottom-up.

“I like freedom…as long as everyone makes the right [my] choice”

From Walter Williams recent column:




There is an important distinction to be made between “rights” that do and do not force obligations on others.

Recognizing this distinction was a critical step on my path away from neo-liberal. It sounded good to say things like, “Everybody has a right to food or medical care”, while never fully considering the invisible clause attached to that, “so that means that someone be forced to provide it.”

But, sometimes I did say it. In discussions some folks asked, “Can’t we handle that through charity?”

I made the invisible clause visible, “Charity isn’t good enough.” But, I still hadn’t made the connection that I was saying that others be forced to provide my priority. Government provides a shroud for that.

I heard an example of this on a radio talk show this week. The Host and a Caller were discussing the differences in their values. The Caller said he agreed with Obamacare, but claimed that his values were shared with the Host’s (who did not support Obamacare).

The Host said that the Caller’s values requires everyone do what the Caller says, whether they want to or not. The Host’s values do not. He was talking about positive and negative liberty.

It was obvious the Caller had not considered that before, because he immediately tried to change the subject.

I recall the feeling I had the first time I pulled back the shroud of government and realized that my support for positive rights meant trampling the freedom of others. It dawned on me, what right do I have to force everyone to do it my way?

Like many others, I viewed politics as the place to earn that right. It seemed like a sport where winning earned your team the right to force everyone to do it your way.

But several things made me consider differently.

1. Double standard. There are times when I disagreed with what others were forcing on me through government and I thought my reasons for disagreement were more than valid. These weren’t situations of necessarily being ‘right or wrong’, but just seeing things differently.

It seemed inconsistent for me to want to force my priorities on others who may see things differently than I did.

Perhaps it wouldn’t result in as many dollars for my priority, but I realized that persuading others to join forces could work and didn’t require the double standard of wanting to force things on others, while resisting that they force things on me.

2. Bad rationale. No matter how good the rationale to force sounds, it could be wrong, and often is. It could have unintended consequences that more than offset the intended benefits. It may never even come close to achieving the intended benefit.

3. Bad feedbacks of government. Markets are results-based. People reward things that actually produce value. Those that don’t go away.

Politics is more intention-based, rather than results-based.  Politicians are rewarded if their nice-sounding legislation gets signed into law. They are rarely punished when it fails or causes more damage. We hear people excuse the failure, “but, at least it was the right thought.” And, rather than getting rid of the failed legislation, other politicians try to fix it, with even more legislation and money.

When you combine 2 & 3, you get a recipe for growth disasters, while in markets you have a recipe for growth.

The Wussification of America

Regular commenter Mike M requested that I start a thread on this topic.

How about the mutual fund industry’s decades-long guilt trip on parents to convince them that it is their duty to save for their children’s college education? Now many parents accept that duty as a given without question.

If college is one of the best investments, there should be no problem finding funds for that investment.

In fact, it would be quite the lesson in investing if students approached college as such rather than a free 4-years at the resort (as a visit to any college campus will reveal that they are now competing for kids not on academic credentials but on the amenities offered and sports affiliations).

It also may not hurt kids to have to work some while earning their degree.

Also, what’s up with bullying? What happened to the old saying, ‘sticks and stone may break my bones, but words can never hurt me.’ I found that to be quite an effective antidote to bullying and hazing.

Add what you like.

The marginal utility trap

I think the idea of marginal utility of income is misused to inappropriately ignore property rights.

Using the Golden Rule, if you are concerned about someone taking dollars from you to give to those they believe have higher utility, then you should not advocate that it be done to others.

That should be enough to stop this bad idea from becoming policy and corrupting the incentives and feedbacks that happen to produce improving standards of living for everyone.

But it’s also worth knowing how it corrupts those incentives and feedbacks.

What marginal utility a third-party thinks another person has with one extra dollar isn’t nearly as important as what that person does to get the dollar.

If the person does nothing to get the dollar, their incentive to do something of value to earn it is subverted.

On occasion, the person’s dignity overrides and they refuse the handout. The typical response, it’s okay. You don’t understand. You see, I’m educated. Let me explain this to you. We’re not giving you the dollar just for you, Silly. See, you help the economy simply by spending that dollar. So, have at it.

Now dignity and shame are removed from the feedbacks that would typically encourage folks to want to do something in return. Now, good luck even getting a thank you card. Wouldn’t that be interesting? Require recipients of taxpayer money to write thank you cards to their fellow citizens.

I just read an article in Bicycling magazine about mountain bike racer, Heidi Swift’s, experience in a race in Haiti (I’ll post a link when it becomes available). Tired and pushing a bike up a steep road with big boulders as pavement (very tough to negotiate in cycling shoes), the author meets an 11-year-old boy who was eager to push for her. He dutifully sticks by her side until he’s sure she can handle it.

For his efforts he scores a Clif bar, a chocolate bar and some cash. Here’s here final words:

He turns to go, and as he does, he smiles at me again. It’s probably nothing more than a polite thanks for cash, and admittedly I am exhausted, but this smile seems to exist outside the bound of our transaction: proud, approving, satisfied and reliable — just kind of thing that could help a girl get to the top of an unclimbable mountain.

Yes. That’s the dignity and pride of someone who earned his keep by producing value. Many in our society have shamed ‘the transaction’ because they view it as a manifestation of greed. They forget the part where value was created for someone else and pride and dignity were also earned in doing the job well.

Contrast her experience in Haiti with the creep in this Judge Judy video that demonstrates that greed exists outside the bounds of mutually beneficial transactions (thanks to Mike M for the video):

We could use more of the ‘proud, approving, satisfied and reliable’ smile from someone who earns his keep and less of the snickering, entitled, disingenuous, scamming attitude that smart people think are helping the economy by spending other people’s money.