Incentives – Page 4 – artdiamondblog.com

Should Students Read to Learn, or to Get Gold Stars?

(p. 181) When a consultant tells teachers to concentrate on the bubble kids and ignore the kids who are most in need of help, something has gone wrong. And if gold stars turn reading from an adventure into a job, something has gone wrong. But what? The typical response to examples like these is not to blame incentives but to blame “dumb” incentives. The presumption is that “smart” incentives, or at least “smarter” incentives, will do the job.
This is a mistake. In many situations, for many activities, no incentives are smart enough. Teachers like Deborah Ball and Mrs. Dewey spend their day figuring out how much time to spend with each student and how to tailor what they teach to each student’s particular strengths and weaknesses. They are continually balancing conflicting aims– to treat all students equally, to give the struggling students more time, to energize and inspire the gifted students. Along comes the incentive to bring up the school’s test scores, and all the nuance and subtlety of Mrs. Dewey’s moment-by-moment decisions go out the window. And what “smarter” incentive is going to replace judgment in making sensitive choices in a complex and changing context like a classroom?
Or what, exactly, would you incentivize to encourage hospital custodian Luke to seek the kind and empathetic response to the distraught father who wanted his son’s room cleaned? Incentives are always based on meeting some specific, measurable criterion: read more books; raise more test scores; wash more floors. Left to his own devices, Luke asks himself, “What can I do to be caring?” and because he has moral skill, he comes up with a good answer. With “caring” incentivized, Luke (p. 182) might ask, “What do I have to do to get a raise or a bonus?” “Reclean the room” might be a right answer. “Look sympathetic” might be a right answer. “Be caring” surely is not. Aristotle thought that good
people do the right thing because it is the right thing. Doing the right thing because it’s the right thing unleashes the nuance, flexibility, and improvisation that moral challenges demand and moral skill enables. Doing the right thing for pay shuts down the nuance and flexibility.

Source:
Schwartz, Barry, and Kenneth Sharpe. Practical Wisdom: The Right Way to Do the Right Thing. New York: Riverhead Books, 2010.
(Note: italics in original.)

Under Perverse Institutions, It Takes “Canny Outlaws” to Do What Is Right

Practical Wisdom is a hard book to categorize. It is part philosophy, and one of the co-authors is an academic philosopher. But most of the book consists of often fascinating, concrete examples. The examples are usually of perverse institutions and policies that create incentives and constraints that reward those who do bad and punish those who do good. The authors’ main lesson is that we all should become stoical “canny outlaws” by finding crafty ways to do what is right, while trying to avoid or survive the perverse incentives and constraints.
Maybe–for me the main lesson is that we all should get busy reforming the institutions and policies. But whether their lesson or my lesson is the best lesson, their book is still filled with many great examples that are worth pondering.
In the next few weeks, I will be quoting several of the more useful, or thought-provoking passages.

The book discussed, is:
Schwartz, Barry, and Kenneth Sharpe. Practical Wisdom: The Right Way to Do the Right Thing. New York: Riverhead Books, 2010.

Innovation and Jobs Destroyed by Tax

(p. 7A) I was humbled to receive in November the National Medal of Technology and Innovation at the White House for the development of life-changing medical devices. Traveling to our nation’s capital, I couldn’t help but think: There is no way I could have had the same impact if the tax on medical devices was in place when I got started over 50 years ago.
Simply put, the medical device tax is destroying job creation and innovation, and as a result, patient care is suffering.
. . .
Every day, I see firsthand the difficult choices innovators must make as a result of this ill-conceived tax. Perhaps worst of all, the medical device tax is helping cause a steep drop of investments in promising therapies.
. . .
It’s time to put an end to this disastrous policy so that medical device entrepreneurs can do what America does best — innovate.

For the full commentary, see:
Tom Fogarty. “Opposing View: Tax Destroys Jobs and Innovation.” USA Today (Mon., January 5, 2015): 7A.
(Note: ellipses added.)
(Note: the online version of the commentary has the date January 4, 2015, and has the title “Tax Destroys Jobs and Innovation: Opposing View.”)

Affordable Care Act Reduces GDP, Employment and Labor Income

(p. A17) Whether the Affordable Care Act lives up to its name depends on how, or whether, you consider its consequences for the wider economy.
. . .
I estimate that the ACA’s long-term impact will include about 3% less weekly employment, 3% fewer aggregate work hours, 2% less GDP and 2% less labor income. These effects will be visible and obvious by 2017, if not before. The employment and hours estimates are based on the combined amount of the law’s new taxes and disincentives and on historical research on the aggregate effects of each dollar of taxation. The GDP and income estimates reflect lower amounts of labor as well as the law’s effects on the productivity of each hour of labor.
. . .
The Affordable Care Act is weakening the economy. And for the large number of families and individuals who continue to pay for their own health care, health care is now less affordable.

For the full commentary, see:
CASEY B. MULLIGAN. “OPINION; The Myth of ObamaCare’s Affordability; The law’s perverse incentives will have the nation working fewer hours, and working those hours less productively.” The Wall Street Journal (Tues., SEPTEMBER 9, 2014): A17.
(Note: ellipses added.)
(Note: the online version of the commentary has the date SEPTEMBER 8, 2014.)

Mulligan’s research on the effects of Obamacare is detailed in his Kindle e-book:
Mulligan, Casey B. Side Effects: The Economic Consequences of the Health Reform. Flossmoor, IL: JMJ Economics, 2014.

Shellshock Bug Shows Low Quality of Open Source Software

(p. B1) Long before the commercial success of the Internet, Brian J. Fox invented one of its most widely used tools.
In 1987, Mr. Fox, then a young programmer, wrote Bash, short for Bourne-Again Shell, a free piece of software that is now built into more than 70 percent of the machines that connect to the Internet. That includes servers, computers, routers, some mobile phones and even everyday items like refrigerators and cameras.
On Thursday [Sept. 25, 2014], security experts warned that Bash contained a particularly alarming software bug that could be used to take control of hundreds of millions of machines around the world, potentially including Macintosh computers and smartphones that use the Android operating system.
The bug, named “Shellshock,” drew comparisons to the Heartbleed bug that was discovered in a crucial piece of software last spring.
But Shellshock could be a bigger threat. While Heartbleed could be used to do things like steal passwords from a server, Shellshock can be used to take over the entire machine. And Heartbleed went unnoticed for two years and affected an estimated 500,000 machines, but Shellshock was not discovered for 22 years.
. . .
Mr. Fox maintained Bash — which serves as a sort of software interpreter for different commands from a user — for five years before handing over the reins to Chet Ramey, a 49-year-old programmer who, for the last 22 years, has maintained the software as an unpaid hobby. That is, when he is not working at his day job as a senior technology architect at Case Western Reserve University in Ohio.
. . .
(p. B2) The mantra of open source was perhaps best articulated by Eric S. Raymond, one of the elders of the open-source movement, who wrote in 1997 that “given enough eyeballs, all bugs are shallow.” But, in this case, Steven M. Bellovin, a computer science professor at Columbia University, said, those eyeballs are more consumed with new features than quality. “Quality takes work, design, review and testing and those are not nearly as much fun as coding,” Mr. Bellovin said. “If the open-source community does not develop those skills, it’s going to fall further behind in the quality race.”

For the full story, see:
NICOLE PERLROTH. “Flaw in Code Puts Millions At Big Risk.” The New York Times (Fri., SEPT. 26, 2014): B1-B2.
(Note: ellipses, and bracketed date, added.)
(Note: the online version of the story has the date SEPT. 25, 2014, and has the title “Security Experts Expect ‘Shellshock’ Software Bug in Bash to Be Significant.”)

Incentives Limit Collusion

(p. 476) Carnegie’s business strategy was the one he had followed twenty years earlier: keep production steady by accepting orders at any price. In early (p. 477) October, he notified Frick that the time had come to leave the rail pool. “I confess I can see nothing so good for us as a ‘free hand'” in setting prices. He was willing to lower his prices and profit margin on rails if that was the only way to get the orders he needed to keep his works running. “By this policy we shall keep our men at work.” Carnegie had never been entirely happy as a member of the rail pool, especially after Illinois Steel was allocated a greater share than Carnegie Steel. “For my part,” he now declared, “I do not wish to play second fiddle in the rail business any longer. I get no sweet dividend out of second fiddle business, and I do know that the way to make more money dividends is to lead…. I am sure that The Carnegie Steel Co. can make more dollars, even next year, and certainly in future years, by managing its own business in its own way, free from all understandings with competitors, than by continuing in any combination that possibly can be formed. Now having made my speech, which I trust you will read to all my partners, I take my seat and imagine the loud applause with which my sentiments are greeted.”

Source:
Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.
(Note: underlines and ellipsis in original.)
(Note: the pagination of the hardback and paperback editions of Nasaw’s book are the same.)

Carnegie’s Uncle Aitkin Expected to Make a Good Profit Starting a Private Lending Library

Shortly after arriving in Allegheny City (near Pittsburgh) Andrew Carnegie’s Uncle Aitkin had complained in a letter:

(p. 42) “There is no possibility of getting papers or periodicals to read here for a small sum–most of the people being in the habit of purchasing them for their own use. This has been to me a great deprivation. I really find that books here are as dear as in the old country everything considered.”

Uncle Aitkin hoped to remedy this flaw in American cultural life–and make a profit at it–by starting up his own lending library. “I am now convinced that for any one to keep a library and to give works out at a cheaper rate would pay very well & I think I will be engaged in this business in a short time,–after I make a little money by lecturing etc.” Regrettably–for Uncle Aitkin and for Allegheny City’s starved readers–he never got around to setting up his business.

Source:
Nasaw, David. Andrew Carnegie. New York: Penguin Press, 2006.
(Note: the pagination of the hardback and paperback editions of Nasaw’s book are the same.)

Creating Parking Spaces by Variable Meter Pricing Saves Time and Reduces Air Pollution and Double-Parking

“San Francisco is a city chronically plagued with a shortage of street parking. On a recent night in the North Beach neighborhood, the slow chase for a parking space was well under way.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A1) SAN FRANCISCO — The maddening quest for street parking is not just a tribulation for drivers, but a trial for cities. As much as a third of the traffic in some areas has been attributed to drivers circling as they hunt for spaces. The wearying tradition takes a toll in lost time, polluted air and, when drivers despair, double-parked cars that clog traffic even more.

But San Francisco is trying to shorten the hunt with an ambitious experiment that aims to make sure that there is always at least one empty parking spot available on every block that has meters. The program, which uses new technology and the law of supply and demand, raises the price of parking on the city’s most crowded blocks and lowers it on its emptiest blocks. While the new prices are still being phased in — the most expensive spots have risen to $4.50 an hour, but could reach $6 — preliminary data suggests that the change may be having a positive effect in some areas.

For the full commentary, see:
MICHAEL COOPER and JO CRAVEN McGINTY. “A Meter So Expensive, It Creates Parking Spots.” The New York Times (Fri., March 16, 2012): A1 & A3.
(Note: ellipsis added.)
(Note: the online version of the commentary has the date March 15, 2012.)

“San Francisco has installed sensors and new meters on some blocks to track where cars are parked and set prices accordingly.” Source of caption and photo: online version of the NYT article quoted and cited above.

Patents Turned Steam from Toy to Engine

Source of book image: http://img2.imagesbn.com/p/9781400067053_p0_v1_s260x420.JPG

(p. 20) The obvious audience for Rosen’s book consists of those who hunger to know what it took to go from Heron of Alexandria’s toy engine, created in the first century A.D., to practical and brawny beasts like George and Robert Stephenson’s Rocket, which kicked off the age of steam locomotion in 1829. But Rosen is aiming for more than a fan club of steam geeks. The “most powerful idea” of his title is not an early locomotive: “The Industrial Revolution was, first and foremost, a revolution in invention,” he writes, “a radical transformation in the process of invention itself.” The road to Rocket was built with hundreds of innovations large and small that helped drain the mines, run the mills, and move coal and then people over rails.
. . .
Underlying it all, Rosen argues, was the recognition that ideas themselves have economic value, which is to say, this book isn’t just gearhead wonkery, it’s legal wonkery too. Abraham Lincoln, wondering why Heron’s steam engine languished, claimed that the patent system “added the fuel of interest to the fire of genius.” Rosen agrees, offering a forceful argument in the debate, which has gone on for centuries, over whether patents promote innovation or retard it.
Those who believe passionately, as Thomas Jefferson did, that inventions “cannot, in nature, be a subject of property,” are unlikely to be convinced. Those who agree with the inventors James Watt and Richard Arkwright, who wrote in a manuscript that “an engineer’s life without patent is not worthwhile,” will cheer. Either way, Rosen’s presentation of this highly intellectual debate will reward even those readers who never wondered how the up-and-down chugging of a piston is converted into consistent rotary motion.

For the full review, see:
JOHN SCHWARTZ. “Steam-Driven Dreams.” The New York Times (Sun., August 29, 2010): 20.
(Note: ellipsis added; italicized words in original.)
(Note: the online version of the review has the date August 26, 2010.)

The book under review, is:
Rosen, William. The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention. New York: Random House, 2010.

After Failing to Enslave Indians, Starving Jamestown Colonists Ate 14-Year-Old Girl

“A facial reconstruction of a 14-year-old girl whose skull shows signs that her remains were used for food after her death and burial.” Source of caption and image: online version of the NYT article quoted and cited below.

Acemoglu and Robinson in the long, but thought-provoking, opening chapter of their Why Nations Fail book, discuss starvation at the Jamestown colony. Only they don’t mainly attribute it to a harsh winter or a slow rescue from England, as does the article quoted below (it is from the New York Times, after all).
Economists Acemoglu and Robinson (p. 23) instead criticize the colony’s initial plan to thrive by enslaving natives to bring them gold and food. Eventually John Smith made the bold suggestion that the colonists should try to work to produce something to eat or to trade. The rulers of the colony ignored Smith, resulting in starvation and cannibalism.

(p. A11) Archaeologists excavating a trash pit at the Jamestown colony site in Virginia have found the first physical evidence of cannibalism among the desperate population, corroborating written accounts left behind by witnesses. Cut marks on the skull and skeleton of a 14-year-old girl show that her flesh and brain were removed, presumably to be eaten by the starving colonists during the harsh winter of 1609.

The remains were excavated by archaeologists led by William Kelso of Preservation Virginia, a private nonprofit group, and analyzed by Douglas Owsley, a physical anthropologist at the National Museum of Natural History in Washington. The skull bears tentative cuts to the forehead, followed by four strikes to the back of the head, one of which split the skull open, according to an article in Smithsonian magazine, where the find was reported Wednesday.
It is unclear how the girl died, but she was almost certainly dead and buried before her remains were butchered. According to a letter written in 1625 by George Percy, president of Jamestown during the starvation period, the famine was so intense “thatt notheinge was Spared to mainteyne Lyfe and to doe those things which seame incredible, as to digge upp deade corpes outt of graves and to eate them.”

For the full story, see:
NICHOLAS WADE. “Girl’s Bones Bear Signs of Cannibalism by Starving Virginia Colonists.” The New York Times (Thurs., May 2, 2013): A11.
(Note: ellipsis added.)
(Note: the online version of the story has the date May 1, 2013.)

The Acemoglu book mentioned above is:
Acemoglu, Daron, and James Robinson. Why Nations Fail: The Origins of Power, Prosperity, and Poverty. New York: Crown Business, 2012.

“Human remains from the Jamestown colony site in Virginia bearing evidence of cannibalism.” Source of caption and photo: online version of the NYT article quoted and cited above.