Tag Archives: Reihan Salam

We’re Talking About Money, Honey

Felix Salmon:

Individuals are doing it, banks are doing it — faced with the horrific news and pictures from Japan, everybody wants to do something, and the obvious thing to do is to donate money to some relief fund or other.

Please don’t.

We went through this after the Haiti earthquake, and all of the arguments which applied there apply to Japan as well. Earmarking funds is a really good way of hobbling relief organizations and ensuring that they have to leave large piles of money unspent in one place while facing urgent needs in other places. And as Matthew Bishop and Michael Green said last year, we are all better at responding to human suffering caused by dramatic, telegenic emergencies than to the much greater loss of life from ongoing hunger, disease and conflict. That often results in a mess of uncoordinated NGOs parachuting in to emergency areas with lots of good intentions, where a strategic official sector response would be much more effective. Meanwhile, the smaller and less visible emergencies where NGOs can do the most good are left unfunded.

In the specific case of Japan, there’s all the more reason not to donate money. Japan is a wealthy country which is responding to the disaster, among other things, by printing hundreds of billions of dollars’ worth of new money. Money is not the bottleneck here: if money is needed, Japan can raise it. On top of that, it’s still extremely unclear how or where organizations like globalgiving intend on spending the money that they’re currently raising for Japan — so far we’re just told that the money “will help survivors and victims get necessary services,” which is basically code for “we have no idea what we’re going to do with the money, but we’ll probably think of something.”

Tyler Cowen:

For reasons which you can find outlined in my Discover Your Inner Economist, I am generally in sympathy with arguments like Felix’s, but not in this case.  I see a three special factors operating here:

1. The chance that your aid will be usefully deployed, and not lost to corruption, is much higher than average.

2. I believe this crisis will bring fundamental regime change to Japan (currently an underreported issue), rather than just altering the outcome of the next election.  America needs to signal its partnership with one of its most important allies.  You can help us do that.

3. Maybe you should give to a poorer country instead, but you probably won’t.  Odds are this will be an extra donation at the relevant margin.  Sorry to say, this disaster has no “close substitute.”

It may be out of date, but the starting point for any study of Japan is still Karel von Wolferen’s The Enigma of Japanese Power.   Definitely recommended.

Adam Ozimek at Modeled Behavior

John Carney at CNBC:

The fact that Charlie Sheen has decided donate a portion of the money from his live stage shows to help people affected by earthquake in Japan should be all you need to know that donating money to Japan is a bad idea.

Earthquakes, hurricanes, floods, tsunamis, volcanoes and even chemical or nuclear disasters can provoke a strong urge on the part of people to want to provide disaster relief in the form of charitable donations directed at those afflicted by the most recent disaster. This is almost always a mistake.

Almost all international disaster relief is ineffective. Part of the reason for this is that relief groups rarely know who is suffering most, or how aid can be most effectively directed.

Reihan Salam

Annie Lowrey at Slate:

Concern and generosity are entirely human—and entirely admirable!—responses to the disaster and tragedy in Japan. But if you really want to be helpful, as Felix Salmon and others have noted, there might be better ways to donate your money than just sending it to Japan. There are two basic rules for being useful: First, give to organizations with long track records of helping overseas. Second, leave it up to the experts to decide how to distribute the aid.

The first suggestion is simple: Avoid getting scammed by choosing an internationally known and vetted group. Big, long-standing organizations like Doctors without Borders and the International Committee of the Red Cross are good choices. If choosing a smaller or local group, try checking with aid groups, Guidestar, or the Better Business Bureau before submitting funds.

The second suggestion is more important. Right now, thousands of well-intentioned donors are sending money to Japan to help it rebuild. But some portion of the donated funds will be earmarked, restricted to a certain project or goal, and therefore might not do the Japanese much good in the end. Moreover, given Japan’s extraordinary wealth and development, there is a good chance that aid organizations will end up with leftover funds they will have no choice but to spend in country—though the citizens of other nations wracked by other disasters, natural or man-made, might need it more. Aid organizations can do more good when they decide how best to use the money they receive.

Taylor Marsh:

As for giving to Japan, don’t and here’s why, unless you want to give specifically to an organization like Doctors Without Borders.

Mahablog:

Felix Salmon wrote a column for Reuters warning people “don’t donate money to Japan.” His argument is that donations earmarked for a particular disaster often “leave large piles of money unspent in one place while facing urgent needs in other places.”

Commenters pointed out that many relief organizations accept donations with a disclaimer that surplus funds may be applied elsewhere. And other relief organizations don’t allow for earmarking of donations at all, but that doesn’t mean they can’t use a burst of cash during an extraordinary crisis.

Salmon also wrote, “we are all better at responding to human suffering caused by dramatic, telegenic emergencies than to the much greater loss of life from ongoing hunger, disease and conflict. That often results in a mess of uncoordinated NGOs parachuting in to emergency areas with lots of good intentions, where a strategic official sector response would be much more effective.”

That last probably is true. I also have no doubt that various evangelical groups already are planning their crusades to Japan to rescue the simple indigenous people for Christ in their time of need. (Update: Yep.)

So if you do want to donate money, I suggest giving to the excellent Tzu Chi, a Buddhist relief organization headquartered in Taiwan. Relief efforts in Japan are being coordinated through long-established Tzu Chi offices and volunteer groups in Japan, not by random do-gooders parachuting in from elsewhere. Tzu Chi does a lot of good work around the globe, so your money will be put to good use somewhere.

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Filed under Foreign Affairs, Natural Disasters

All Your Best Blog Posts On That Economic Policy Institute’s Study

Ezra Klein:

“Republicans say that public-sector employees have become a privileged class that overburdened taxpayers,” write Karen Tumulty and Brady Dennis. The question, of course, is whether it’s true. Consider this analysis the Economic Policy Institute conducted comparing total compensation — that is to say, wages and health-care benefits and pensions — among public and private workers in Wisconsin. To get an apples-to-apples comparison, the study’s author controlled for experience, organizational size, gender, race, ethnicity, citizenship and disability, and then sorted the results by education

[…]

If you prefer it in non-graph form: “Wisconsin public-sector workers face an annual compensation penalty of 11%. Adjusting for the slightly fewer hours worked per week on average, these public workers still face a compensation penalty of 5% for choosing to work in the public sector.”

Jim Manzi at The American Scene:

Klein links to an executive summary to support his claim, but reading the actual paper by Jeffrey H. Keefe is instructive. Keefe took a representative sample of Wisconsin workers, and built a regression model that relates “fundamental personal characteristics and labor market skills” to compensation, and then compared public to private sector employees, after “controlling” for these factors. As far as I can see, the factors adjusted for were: years of education; years of experience; gender; race; ethnicity; disability; size of organization where the employee works; and, hours worked per year. Stripped of jargon, what Keefe asserts is that, on average, any two individuals with identical scores on each of these listed characteristics “should” be paid the same amount.

But consider Bob and Joe, two hypothetical non-disabled white males, each of whom went to work at Kohl’s Wisconsin headquarters in the summer of 2000, immediately after graduating from the University of Wisconsin. They have both remained there ever since, and each works about 50 hours per week. Bob makes $65,000 per year, and Joe makes $62,000 per year. Could you conclude that Joe is undercompensated versus Bob? Do you have enough information to know the “fundamental personal characteristics and labor market skills” of each to that degree of precision? Suppose I told you that Bob is an accountant, and Joe is a merchandise buyer.

Even if Bob and Joe are illustrative stand-ins for large groups of employees for whom idiosyncratic differences should average out, if there are systematic differences in the market realities of the skills, talents, work orientation and the like demanded by accountants as compared to buyers, then I can’t assert that either group is underpaid or overpaid because the average salary is 5% different between these two groups.

And this hypothetical example considers people with a degree from the same school working in the same industry at the same company in the same town, just in different job classifications. Keefe is considering almost any full-time employee in Wisconsin with the identical years of education, race, gender, etc. as providing labor of equivalent market value, whether they are theoretical physicists, police officers, retail store managers, accountants, salespeople, or anything else. Whether they work in Milwaukee, Madison, or a small town with a much lower cost of living. Whether their job is high-stress or low-stress. Whether they face a constant, realistic risk of being laid off any given year, or close to lifetime employment. Whether their years of education for the job are in molecular biology, or the sociology of dance. Whether they do unpredictable shift work in a factory, or 9 – 5 desk work in an office with the option to telecommute one day per week.

Keefe claims – without adjusting for an all-but infinite number of such relevant potential differences between the weight-average public sector worker and the weight-average private sector worker – that his analysis is precise enough to ascribe a 5% difference in compensation to a public sector compensation “penalty.”

And his use of the statistical tests that he claims show that the total public-private compensation gap is “statistically significant” are worse than useless; they are misleading. The whole question – as is obvious even to untrained observers – is whether or not there are material systematic differences between the public and private employee that are not captured by the list of coefficients in his regression model. His statistical tests simply assume that there are not.

I don’t know if Wisconsin’s public employees are underpaid, overpaid, or paid just right. But this study sure doesn’t answer the question.

Jason Richwine at Heritage:

Manzi is referring to “the human capital model,” which holds that workers are paid according to their skills and personal characteristics, like education and experience. Most scholars—including Andrew, myself, and Heritage’s James Sherk—use it to compare the wages of the public and private sectors. If the public sector still earns more than the private after controlling for a variety of factors, then it is said to be “overpaid” in wages. But because we cannot control for everything, Manzi is saying, the technique is not very useful.

His critique is reasonable enough, but overwrought. The human capital model has been around for three decades, and it is unlikely that economists have failed to uncover important variables that would drastically change its results. Nevertheless, there are other techniques that address most of Manzi’s concerns. An upcoming Heritage Foundation report uses a “fixed effects” approach, which follows the same people over time as they switch between the private and federal sectors. By looking at how the same person’s wage changes when he moves between sectors, a lot of unobservable traits—intelligence, extroversion, etc.—are accounted for.

In order to capture fringe benefits as well as wages, economists have also used quit rates and job queues. If public workers quit less often than private workers, we can infer (with some qualifications, of course) that there are not better options available to them. Similarly, if many more applicants apply for government jobs than there are positions—creating a “queue”—then we know that government jobs are highly desirable. Of course no methodology is perfect, but the scholarly literature can tell us a lot about pay comparisons. Andrew and I discussed this work in detail in a recent Weekly Standard article.

John Sides:

From one perspective, sure, I agree that a statistical analysis of the sort described above based on observational data can never be a true direct comparison. (Not to mention the difficulty of classifying people like me who work in the quasi-public sector.) But if you take things from the other direction, this sort of study can be valuable.

What do I mean by “the other direction,” you might ask? I mean, suppose you start, as people do, with raw numbers: Salary plus benefits = X% of the state budget. The state has Y number of employees. Average income of all Wisconsinites is Z. Then you start adjusting for hours worked, ages of the employees, etc etc, and . . . you end up with Keefe’s analysis.

My point is, people are going to make some comparisons. Comparisons aren’t so dumb as long as you realize their limitations. And once you start to compare, it makes sense to try to compare comparable cases. Taking Manzi’s criticism too strongly would leave us in the position of allowing raw numbers, and allowing pure unblemished randomized experiments, but nothing in between.

In summary:

1. Manzi’s right to emphasize that a simplistic interpretation of regression results can be misleading.

2. Regressions of observational data can be a good way of going beyond raw comparisons and averages.

Some of this discussion reminds me of the literature on the wage premium for risk, where people run regressions on salaries for comparable jobs in order to estimate how much people need to be paid to risk death or injury.. Based on my reading is that these studies can’t be trusted: if you’re not careful, you can easily estimate the value of life to be negative–after all, the riskiest jobs (lumberjack, etc.) tend to pay poorly, while the best-paying jobs (being Bill Gates, etc.) are pretty safe gigs. With care, you can get those regressions to give reasonable coefficients in the range of $1 million per life, but I don’t really see these numbers as meaning anything at all; they’re just the results of fiddling with the models until something reasonable comes out. I’m not saying that the people who do these analyses are cheating, just that they want reasonable results but the models seem too open-ended to be a good measure of risk premiums.

Jonathan Cohn at TNR:

Am I certain Keefe is right? No. Having spent some time reporting on public and private sector compensation before, I can tell you that there is a lot of disagreement over the proper way to adjust the raw compensation figures to account for variables like age, education, and so on. (The debate is as much philosophical as methodological: Some conservatives argue that public employers put an artificial premium on graduate education, effectively paying more for degrees that don’t make workers better qualified.) I haven’t seen a specific refutation of Keefe’s report on Wisconsin, but if you want to read an analysis that suggests public workers, in general, are over-compensated, Andrew Biggs of the American Enterprise Institute has done work along those lines–and has a new article in the Weekly Standard summarizing his views.

But I wonder if this whole debate misses the point. Suppose public workers really do make more than private sector workers. Who’s to say that the problem is public workers making too much, rather than private sector workers making too little?

Andrew Biggs at AEI:

While we’ll have a longer piece out on Wisconsin pay soon, I figured that in response to Cohn’s post I’d raise a couple issues regarding EPI’s report.

First, we’ve found a lower salary penalty for Wisconsin public employees than EPI did (around -5 percent versus -11 percent in EPI’s study). It’s not clear what’s driving the difference, since we’re using the same data, but that’s something to track down. It’s also worth noting that both our calculations and EPI’s control for firm size; this means that essentially we’re comparing Wisconsin public employees not to all private workers, but to employees at the very largest Wisconsin firms, who tend to pay more generous salaries and benefits. Whether to control for firm size is an open question, since if a given public employee didn’t work for the government there’s a good chance he wouldn’t work at a large private firm. But readers at least should be aware of the issue.

Second, the benefits shown in the EPI report aren’t actually for Wisconsin alone. They’re an average for the “East North Central Census Division,” which comprises Illinois, Indiana, Michigan, Ohio, and Wisconsin. Because the Bureau of Labor Statistics doesn’t publish compensation data at the state level (due to small sample sizes) regional figures are the best we’ve got. The problem is, if Wisconsin government workers get relatively better benefits than public employees in other states—which seems to be part of the argument that Governor Walker is making—then these figures will understate true compensation. For instance, in practice Wisconsin public employees make essentially no contribution toward their pensions (formally they must contribute around 5 percent of pay, but their employers almost always cover it). Nationally, public employees contribute an average of around 5.7 percent of pay to their pensions.

Third, the benefit measures in the EPI study are based on what employers pay, not what employees actually receive. This matters for public-sector defined-benefit pensions, which use much more optimistic investment return assumptions than private pensions (a 7.8 percent assumed return in the Wisconsin Retirement System, versus around a 4 percent riskless return in U.S. Treasury securities) and fund their benefits accordingly. Most economists think public pensions are wrong to make these assumptions, but what matters is that employees effectively receive those higher returns whether the investments pan out or not. Adjusting for the differences in implicit returns to pensions would increase total Wisconsin compensation by around 4 percent.

Fourth, and related, is that the EPI study omits the value of retiree health benefits, which most public workers receive but most private employees don’t. (Some very large firms still offer retiree health benefits, but they’re increasingly rare and increasingly stingy.) The value of retiree healthcare can vary significantly. For instance, most run-of-the-mill Wisconsin state retirees are offered the right to buy into the employee plan. This provides an implicit subsidy, since they’re buying at rates calculated for the working-age population rather than their own health risk. The value of this is equal to a percent or so of extra pay every year. Other employees, such as Milwaukee teachers, have almost all their premiums paid for them. Actuarial reports list these protections as costing over 17 percent of salaries, meaning that for these workers EPI’s approach would miss a lot of benefit income. In addition, even these actuarial studies value retiree health coverage at employer cost, not the benefit to the employee. A retired 60-year-old purchasing coverage in the individual market would pay significantly more than the reported cost of his public-sector retiree health plan, because individual coverage costs more than group coverage. Some studies place the cost differential at around 25 percent; the Congressional Budget Office’s health insurance model appears to assume something larger: they say that “once differences in the characteristics of nongroup versus ESI [employer sponsored insurance] policyholders are considered and different loading costs are considered, a typical nongroup policy has roughly 60 percent of the relative plan value of an average ESI policy. That finding is supported by a recent survey of nongroup and ESI premiums and relative plan values in California.” So we know something is being missed and we have good reason to believe that even when we find actuarial reports calculating the cost of retiree health coverage, it’s still an underestimate. Unfortunately, there’s no central data source for retiree health benefits, meaning there’s a lot of digging to get a correct answer.

Fifth, the EPI report doesn’t calculate the value of public-sector job security. In a given year, a state/local worker has less than one-third the chance of being fired or laid off as a private worker. There’s a long history in economics (back to Adam Smith, actually) of thinking in terms of “compensating wage differentials,” although it’s only in the last 20 years or so that there’s been much progress in measuring them. We took a somewhat different approach, of using financial tools to calculate the price of an insurance policy that would protect against job loss and counting the value of that insurance toward public-sector pay. In theory each should produce the same answer, but as always things are messy. There may be a way of using CPS data to get on top of this, though.

At the end of the day, I just don’t think we can make any final conclusions on state/local pay because so much of the data, particularly on the benefits end, is still too loosey-goosey. There’s just more work to be done. (At the federal level, though, the measured overpayment is so large that I’m willing to say I’m convinced.)

Ezra Klein, responding to Manzi:

Jim Manzi has posted a critique of the Economic Policy Institute’s study (PDF) suggesting that Wisconsin’s public-sector workers are underpaid relative to their private-sector counterparts. It basically boils down to the argument that this sort of thing is hard to measure. The study controls for most every observable worker characteristic that we can imagine controlling for. But there are, Manzi says, an “all-but-infinite” number of differences beyond that. Perhaps going into the public sector says something about a person’s level of ambition, or ability to take risks and tolerate stress, or tendency to innovate — something that, in turn, makes the private-sector worker worth more or less to the economy.

And fair enough. Maybe there is some systemic difference between Hispanic women with bachelor’s degrees and 20 years of work experience who put in 52-hour weeks in the public sector and Hispanic women with bachelor’s degrees and 20 years of work experience who put in 52-hour weeks in the private sector. If anyone has some evidence for that, I’m open to hearing it. But the EPI study is aimed at a very specific and very influential claim: that Wisconsin’s state and local employees are clearly overpaid. It blows that claim up. Even in Manzi’s critique, there’s nothing left of it. So at this point, the burden of proof is on those who say Wisconsin’s public employees make too much money.

Reihan Salam on Klein’s response:

I was struck by this sentence: “Even in Manzi’s critique, there’s nothing left of it.” I’ve known Jim for many years and I’ve read just about everything he’s written, including a few things that haven’t been published. I have never seen Jim write that Wisconsin’s state and local employees are clearly overpaid, or indeed that any employees are clearly overpaid. There are many right-wingers who’ve said that, but it’s not the way Jim has ever thought about the issue as far as I know.

I don’t want to put words in Jim’s mouth, here’s what I consider a slightly more Manzian take: the problem with public sector compensation is that there is often very little clarity in terms of whether or not taxpayers are getting a good deal. One of the big reasons right-wingers are so hot for merit pay, based on my limited experience, is that they’re generally pretty comfortable with the idea of at least some public workers making much more than they are making now, provided other workers who’d be willing to work for less because they’re not likely to attract better offers are either paid less or fired.

Let me underline this point: Some public workers, like really great federal procurement officers, might very well be “underpaid,” in that they’re always on the verge of jumping ship to better opportunities, they’re stressed about money all the time when they could be using their awesome Jedi procurement skills to save taxpayers money, and we could attract other awesome people to do this job if only we weren’t such tightwads. Others might be “overpaid,” in that there are people who really like the stability of working for a “firm” that will, short of invasion and military conquest, probably exist for at least another ten years and would be open to working for a bit less money if they had no choice in the matter. Do you think we have more of the former than the latter? That’s where analyses like Keefe’s come in, to offer a rough guide to the conversation.

I would love for conservatives to do a better job of talking about public sector compensation. The basic conflict is whether we think of creating more jobs, work effort, etc., as our goal, or if our goal is to deliver a service. If the latter is our goal, we presumably want to do it in the most cost-effective way, so that we can devote our time, money, and energy to other things we like doing more. By extension, this suggests that we really do want to pay people as little as we can to get the things that we want. Or:

Reihan Salam says:

We really do want to pay people as little as we can to get the things that we want.

What a bozo!

This relentless process of delivering services and goods for less money really does destroy jobs, but, in theory at least, it allows us to create new ones. We happen to be living in a historical moment when there’s not a lot of faith in that idea, partly because we’ve seen a steady decline in labor force participation rates due to tangle of implicit marginal tax rates, an incarceration crisis, interrelated social pathologies, and much else. I’m biased in favor of believing that we will create new job opportunities because almost everyone I’m close to works in jobs that they could not have done in the way they do them now even ten years ago. The goal is to use good public policy to bridge over transitional periods, and, by the way, a dynamic market economy is always in a transitional period.

Manzi responds to Klein:

Klein is correct to say that my post “basically boils down to the argument that this sort of thing is hard to measure.” But he then argues that the purpose of the original study was not to demonstrate that public sector workers are underpaid, but rather to rebut the claim that they are overpaid:

[T]he EPI study is aimed at a very specific and very influential claim: that Wisconsin’s state and local employees are clearly overpaid. It blows that claim up.

That may have been the author’s motivation, but here is the final conclusion of the executive summary of the report:

[P]ublic sector workers in Wisconsin earn less in annual or hourly compensation than they would earn in the private sector.

The report makes a positive claim that it has determined a compensation “penalty” for working in the public sector, and repeats it many times. My argument was that this report does not establish whether or not this claim is true.

By the same logic, it also fails to “blow up” the claim that Wisconsin’s public workers are overpaid. The methodology is inadequate to the task of establishing whether these workers are overpaid, underpaid, or paid perfectly. As the last paragraph of my post put it:

I don’t know if Wisconsin’s public employees are underpaid, overpaid, or paid just right. But this study sure doesn’t answer the question.

Statistician and political scientist Andrew Gelman has a very interesting response to my post, in which he agrees that this conclusion “sounds about right,” but cautions that the study is not “completely useless either” because this kind of adjusted comparison is better than simply comparing raw averages between public and private sector workers. I agree with that entirely. But that is, of course, a very different thing than saying that these adjustments create sufficient precision to support the bald statement, made in the report, that the author has analytically established that there is a “penalty” for working in the public sector.

Megan McArdle:

It’s obvious that this study doesn’t control for everything we can imagine, because it doesn’t even control for the matters that are of central dispute in Wisconsin: protection from being fired.  This is, as people on both sides keep noting, so extraordinarily valuable that workers are willing to give up quite a lot to get it.  And of course, a job that offers this sort of protection is likely to attract workers who especially value it.  All government jobs offer this perk, which is valuable to the workers and costly to the employers; ceteris paribus, I’d expect that other compensation would be lower to compensate.

Obviously, it also doesn’t control in any way for other job or worker characteristics that effect compensation; jobs working for state and local government are systematically different from other sorts of jobs, because so much of what the government does isn’t done by anyone else.  Though, oddly, for the teachers at the heart of this dispute, we do have a good comparison: private school teachers. And as I understand it, public school teachers have higher wages, and much better benefits, than private school teachers.
To which I expect the union’s boosters will say, “But jobs in private school are much more enjoyable–they don’t have to teach the difficult kids!”  Indeed, they’re right.  Which is exactly the point: there’s huge unobserved variable bias here.
There’s also the fact that the EPI study seems to be looking at means, which are going to be dragged upwards by a small number of highly compensated workers, particularly in the educated group.  But state and local wages are capped.  Meanwhile, some of the highest paid jobs in the private sector are in areas like commission sales, which have no counterpart in government. That means that the median worker is probably making much more than the median worker in the private sector.  This may not be true in some lucrative fields such as law and medicine–but even there, we tend to compare government lawyers to the highly paid people at white shoe firms or corporations, not the legions of struggling will-drafters and ambulance-chasers.
You can argue, of course, that this is an ideologically much more attractive income distribution.  Which highlights, I think, the core difference between the way people like Manzi and I look at this, and the way that progressives do.  I don’t think of state employment as a way to create, in miniature, my ideal labor utopia.  I think of it as a way to procure services.  I define people as being “overpaid” not if they are paid more than someone with a similar level of education, but if they are paid more than I need to entice to pay to attract adequate workers.  To analyze that, looking at medians is probably somewhat more instructive than looking at means.
Of course I agree with Manzi that this still doesn’t really tell us whether state workers are overpaid, underpaid, or just-right-paid.  I suspect that the answer is probably “both”–adjusting for worker quality, the median government worker is probably overpaid, while in skilled specialties, salaries are probably not attracting as much of the top-flight talent as we’d ideally like.  (This is why I have been advocating, futilely, that we make it possible to pay SEC employees multiples of what the President of the United States makes.)  But as Manzi, who does this stuff for a living, will undoubtedly tell you, setting compensation is a really hard problem that no one’s got a very good handle on.  So that’s just a suspicion, based on my experience of state bureaucracies, and my best guess at the incentive effects of the current structure.  I don’t have enough data to back me up.  And neither does EPI.
More Manzi:

Have I then set up a nihilistic position that we can never know anything tolerably well because I can just keep raising these points that might matter, but are not included in the model? In effect, have I put any analyst in the impossible position of proving a negative? Not really. Here’s how you measure the accuracy of a model like this without accepting its internal assumptions: use it to make predictions for future real world experiments, and then see if its predictions are right or not. The formal name for this is falsification testing. This is what’s lacking in all of the referenced arguments in support of these models.

Human capital models, fixed effects models, and other various pattern-finding analyses are useful to help build theories, but a metaphysical debate about the “worth” of various public versus private sector jobs based upon them is fundamentally unproductive. For one thing, it won’t ever end. And as Megan McArdle correctly put it, the practical question in front of us is whether we the taxpayers can procure the public work that we want at a lower cost (or more generally, though less euphoniously, whether we are at the practical optimum on the cost-quality trade-off). If you want an analytical answer to this question, here is what I would do: randomly select some jurisdictions, job classifications or other subsets of public workers, cut their compensation, and then see if we can observe a material reduction in net value of output in these areas versus the control areas. If not, cut deeper. And keep cutting deeper, until we find our indifference point.

There would be obvious limitations to this approach. First, generalizing the results of initial experiments is not straightforward. Second evaluating output is not straightforward for many areas of government. But at a minimum, and unlike the world of endlessly dueling regressions, this would at least let us see the real-world effects of various public compensation levels first-hand, and allow the public to make an informed decision about whether they prefer the net effect of a change to public sector compensation or not.

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Filed under Education, Go Meta

Talkin’ About Adding The Value

Grace Snodgrass at Huffington Post:

One day soon, my name and performance evaluation could be printed in your morning newspaper. It will tell you that I’m a teacher who has clear strengths and weaknesses in helping my students advance academically.

But as valuable as my so-called “Teacher Data Report” is in helping me identify these areas, it really doesn’t say much about the overall quality of my teaching. And printing the results — as an NYC judge just gave the city the right to do — will do little to make me, or any of my colleagues, better teachers. At least, not right away. What will help is the Department of Education and the teachers’ union putting aside their differences and improving these reports so that teachers like me receive good information about our performance and clear steps towards achieving our classroom goals.

As an educator, I want to be evaluated. I know that my students’ success hinges on the quality of my teaching. The Department of Education is actually on the right track with the “value-added” method it uses to calculate the impact teachers have on their students’ academic growth. Value-added compares a student’s predicted performance on standardized assessments with how he or she actually performs.

Dana Goldstein and Megan McArdle on Bloggingheads

Jim Manzi at The Corner:

Recently, Megan McArdle and Dana Goldstein had a very interesting Bloggingheads discussion that was mostly about teacher evaluations. They referenced some widely discussed attempts to evaluate teacher performance using what is called “value-added.” This is a very hot topic in education right now. Roughly speaking, it refers to evaluating teacher performance by measuring the average change in standardized test scores for the students in a given teacher’s class from the beginning of the year to the end of the year, rather than simply measuring their scores. The rationale is that this is an effective way to adjust for different teachers being confronted with students of differing abilities and environments.

This seems like a broadly sensible idea as far as it goes, but consider that the real formula for calculating such a score in a typical teacher value-added evaluation system is not “Average math + reading score at end of year – average math reading score at beginning of year,” but rather a very involved regression equation. What this reflects is real complexity, which has a number of sources. First, at the most basic level, teaching is an inherently complex activity. Second, differences between students are not unvarying across time and subject matter. How do we know that Johnny, who was 20 percent better at learning math than Betty in 3rd grade is not relatively more or less advantaged in learning reading in fourth grade? Third, an individual person-year of classroom education is executed as part of a collective enterprise with shared contributions. Teacher X had special needs assistant 1 work with her class, and teacher Y had special needs assistant 2 working with his class — how do we disentangle the effects of the teacher versus the special ed assistant? Fourth, teaching has effects that continue beyond that school year. For example, how do we know if teacher X got a great gain in scores for students in third grade by using techniques that made them less prepared for fourth grade, or vice versa for teacher Y? The argument behind complicated evaluation scoring systems is that they untangle this complexity sufficiently to measure teacher performance with imperfect but tolerable accuracy.

Any successful company that I have ever seen employs some kind of a serious system for evaluating and rewarding / punishing employee performance. But if we think of teaching in these terms — as a job like many others, rather than some sui generis activity — then I think that the hopes put forward for such a system by its advocates are somewhat overblown.

There are some job categories that have a set of characteristics that lend themselves to these kinds of quantitative “value added” evaluations. Typically, they have hundreds or thousands of employees in a common job classification operating in separated local environments without moment-to-moment supervision; the differences in these environments make simple output comparisons unfair; the job is reasonably complex; and, often the performance of any one person will have some indirect, but material, influence on the performance of others over time. Think of trying to manage an industrial sales force of 2,000 salespeople, or the store managers for a chain of 1,000 retail outlets. There is a natural tendency in such situations for analytical headquarters types to say “Look, we need some way to measure performance in each store / territory / office, so let’s build a model that adjusts for inherent differences, and then do evaluations on these adjusted scores.”

I’ve seen a number of such analytically-driven evaluation efforts up close. They usually fail. By far the most common result that I have seen is that operational managers muscle through use of this tool in the first year of evaluations, and then give up on it by year two in the face of open revolt by the evaluated employees. This revolt is based partially on veiled self-interest (no matter what they say in response to surveys, most people resist being held objectively accountable for results), but is also partially based on the inability of the system designers to meet the legitimate challenges raised by the employees.

Noah Millman at The American Scene:

I do want to add a few additional points of my own:

1. Evaluations establish the principle that there is such a thing as performance in the first place. A great deal of discussion nowadays in education revolves around the idea that what we need to “fix the schools” is great teachers. But if that’s what we need, we’ll never do it. What we need, instead, are mechanisms for getting marginally better performance, year after year, from a teaching pool that remains merely adequate.

One bit of low-hanging fruit for achieving that goal, meanwhile, is the ability to dismiss the bottom 5% of teachers in terms of performance. Not only are these teachers failing comprehensively in their own classrooms, but their mere presence has a corrosive effect on an entire organization – on the teachers, on the students, on the management of the school. But right now, firing these teachers is essentially impossible. For all the difficulty of doing a rigorous evaluation in order to improve teaching performance across the board, I suspect it is a whole lot easier to identify the worst teachers in the school. If that could be done, the pressure to be able to terminate them would be significant, and that could do a lot to improve school performance right there.

2. Value-added metrics wind up punishing perfectly good but not spectacular schools with above-average student bodies. It may be that these schools should suffer reputationally, because the staff is not actually delivering as much value as they should. But high-stakes standardized testing actually pushes these schools to destroy themselves, wiping out the programs that actually do deliver value to these high-aptitude students and instead focusing on teaching to the tests.

That’s not an argument against using value-added metrics as such. It’s an argument that they need to be used intelligently, with some understanding of what “value-added” means at different points on the performance spectrum. But that, in turn, would require admitting that different standards are needed for students with different aptitude, which, in turn, is extremely difficult for our education system to admit. (And, admittedly, it’s a problem in corporate cultures that cross widely different customer bases as well. How well would Wal-Mart manage Tiffany?)

3. Nobody goes into teaching “for the money” – that is to say, teachers in aggregate make significantly less than people with their educational credentials and academic aptitude could make in other professions. So monetary rewards are useful primarily going to prove useful as signaling devices. There’s a lot of evidence coming in from high-performance charter schools suggesting that a monetary reward system tied too closely to evaluations actually degrades performance, because it gets teachers focused on the evaluations rather than on the performance. The evaluations should primarily be used as a diagnostic, to identify correctable deficiencies in teacher performance so they can be corrected through staff development, and to identify gross deficiencies in teacher performance so the teachers in question can be dismissed.

4. Similarly, across a system, what evaluations are useful is for research purposes and to drive market discipline. Evaluations of a school should be very useful to parents seeking to select a school for their child. Schools that consistently achieve high valuations (particularly for value-added metrics) should be objects of study by administrators and others looking to replicate that performance in lower-performing but still basically well-run schools. The least-important use of the evaluation is to directly “reward” or “punish” a school bureaucratically – and, indeed, if that becomes the primary use then the school is likely to start focusing overwhelmingly on the evaluation process and lose sight of actual performance. I’ve seen this happen over and over in New York City schools; it’s not a theoretical question.

Conor Friedersdorf at Sullivan’s place:

And it helps explain the inherent tension between teachers unions and the rest of us. Unions exist to protect the interests of their members. Even in the best case scenario, that means lobbying for an evaluation system that maximizes fairness to the people being evaluated. As citizens, our primary goal should be creating the best education system possible, even if doing so sometimes means (for example) that the teacher most desserving of a bonus doesn’t get one. Saying that there is a conflict between the common good and the ends of teachers unions isn’t a condemnation of the latter. It’s just a fact. And everyone seems to understand the basic concept if you talk about prison guard unions.

Reihan Salam:

Part of what makes me nervous is that productivity varies dramatically within industries. It is very common for comparable factories at the 90th percentile produce four times as much as factories at the 10th percentile. Moreover, the scorecards and shortcuts used by factories at the 90th percentile wouldn’t necessarily work for those at the 10th percentile. Managerial insights are usually embedded in a complex tangle on personalities and practices that can’t easily be replicated. This is natural, and I’d say that I’d much rather see a few firms race ahead than allow all firms to remain mired at the low end of the productivity spectrum.  Suffice it to say, this is not the ethic that governs how we generally think about public schools.

In a time when at least half of the political spectrum is deeply troubled by inequality, i.e., by the fact that some firms, individuals, and households are racing far ahead of others, what at least some education reformers are saying is that we want to unleash a few inventive, well-managed schools to start deploying the same per pupil resources to much greater effect. That is, we want to, in the short run at least, make the K-12 educational landscape more unequal, in the hope that leading schools will identify instructional methods, e.g., effective virtual instruction, that will prove scalable.

Much depends on how one interprets the fact that some firms, individuals, and households are racing ahead of the others. I take what I think of as a nuanced view. Generally speaking, some firms, individuals, and households race ahead of others due to a combination of luck, opportunity, and smart investments in organizational capital. In some cases, we see rent-seeking, tax and regulatory arbitrage, etc. But whereas Simon Johnson and many of my friends on the left see this as the dominant narrative, I see it as a significant but nevertheless relatively small part of the wage dispersion story.

Nicholas Bloom and John Van Reenen have written a neat essay in the Journal of Economic Perspectives on how effective management practices spread. I was struck by many of their observations, including some that will be familiar to those of you who see organizational capital as very important (“firms that more intensively use human capital, as measured by more educated workers, tend to have much better management practices”).

The United States has a commanding lead in terms of the quality of management in firms. This is very interesting considering our relative weakness in terms of educational attainment at the median in the prime-age cohorts. And I suspect that this feeds back into wage dispersion as well as assortative mating, family breakdown, and other sources of “stickiness” at the low end of the income distribution. For a variety of reasons, our economy is rewarding people with managerial skills, and, in a crude sense, one might be able to extrapolate the ability to manage a wide range of tasks in the workplace to the ability to maintain constructive relationships in other domains. The obvious objection is that many hard-charging executives neglect their families and personal lives, etc. But it could also be true that the that neglect of parental responsibilities is somewhat more common among those marginally attached to the labor force, due to the greater prevalence of substance abuse and other risky behaviors.

Jonathan Chait at TNR on Manzi:

That’s an interesting insight into the general problem with quantitative measures. Here are a few points in response:

1. You need some system for deciding how to compensate teachers. Merit pay may not be perfect, but tenure plus single-track longevity-based pay is really, really imperfect. Manzi doesn’t say that better systems for measuring teachers are futile, but he’s a little too fatalistic about their potential to improve upon a very badly designed status quo.

2. Manzi’s description…

evaluating teacher performance by measuring the average change in standardized test scores for the students in a given teacher’s class from the beginning of the year to the end of the year, rather than simply measuring their scores. The rationale is that this is an effective way to adjust for different teachers being confronted with students of differing abilities and environments.

..implies that quantitative measures are being used as the entire system to evaluate teachers. In fact, no state uses such measures for any more than half of the evaluation. The other half involves subjective human evaluations.

3. In general, he’s fitting this issue into his “progressives are too optimistic about the potential to rationalize policy” frame. I think that frame is useful — indeed, of all the conservative perspectives on public policy, it’s probably the one liberals should take most seriously. But when you combine the fact that the status quo system is demonstrably terrible, that nobody is trying to devise a formula to control the entire teacher evaluation process, and that nobody is promising the “silver bullet” he assures us doesn’t exist, his argument has a bit of a straw man quality.

Manzi responds to Chait:

My post wasn’t about if we should use quantitative measures of improvement in their students’ standardized test scores as an element of how we evaluate, compensate, manage and retain teachers, but rather about how to do this.

Two of the key points that I tried to make are that the metrics themselves should likely be much simpler than those currently developed by economics PhDs, and that such an evaluation system is only likely to work if embedded within a program of management reform for schools and school systems. The bulk of the post was trying to explain why I believe these assertions to be true.

An additional point that I mentioned in passing is my skepticism that such management reform will really happen in the absence of market pressures on schools. Continuous management reform, sustained over decades, that gets organizations to take difficult and unpleasant actions with employees is very hard to achieve without them. There’s nothing magic about teachers or schools. The same problems with evaluation and other management issues that plague them arise in big companies all the time. It’s only the ugly reality of market discipline that keeps them in check.

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Galt Has A Moment And A Movement

Christopher Beam in New York Magazine:

Just before Thanksgiving, in an impassioned speech on the floor of the House of Representatives, Ron Paul called for Congress to be groped. The Transportation Security Administration, having rolled out its new airport body scanners, had decreed anyone who opted out could be subjected to the now-infamous enhanced pat-down. “Let’s make sure that every member of Congress goes through this,” Representative Paul said, waving his finger in the air. “Get the X-ray, make them look at the pictures, and then go through one of those groping pat-downs.” Perhaps this would put Congress in touch (quite literally) with real Americans.

Paul, the 75-year-old Texas libertarian and quixotic 2008 Republican candidate best known for his quest to abolish the Federal Reserve, is used to fighting lonely battles. But this time, he had company. Fox News went wall-to-wall on the (nonexistent) health hazards of body scans, naked outlines of passengers, and pat-down paranoia. “If you touch my junk, I’m going to have you arrested,” said newfound freedom fighter John Tyner to a TSA agent in a video that went viral. The left backed Paul too. Salon blogger Glenn Greenwald argued that the screenings had “all the ingredients of the last decade’s worth of Terrorism exploitation.” Blogger Jane Hamsher of Firedoglake called the X-ray devices “porno-scanners.” For one beautiful moment, the whole political spectrum—well, at least both vocal ends of it—seemed to agree: Too much government is too much government.

Maybe it was inevitable that the National Opt-Out Day, when travelers were going to refuse body scans en masse, failed to become the next Woolworth’s sit-in (how do you organize a movement that abhors organization?). It turned out most Americans actually supported the body scanners. But the moment was a reminder of just how strong, not to mention loud, the libertarian streak is in American politics.

No one exemplifies that streak more than Ron Paul—unless you count his son Rand. When Rand Paul strolled onstage in May 2010, the newly declared Republican nominee for Kentucky’s U.S. Senate seat, he entered to the strains of Rush, the boomer rock band famous for its allegiance to libertarianism and Ayn Rand. It was a dog whistle—a wink to free-marketers and classic-rock fans savvy enough to get the reference, but likely to sail over the heads of most Republicans. Paul’s campaign was full of such goodies. He name-dropped Austrian economist Friedrich Hayek’s seminal TheRoad to Serfdom. He cut a YouTube video denying that he was named after Ayn Rand but professing to have read all of her novels. He spoke in the stark black-and-white terms of libertarian purism. “Do we believe in the individual, or do we believe in the state?” he asked the crowd in Bowling Green, Kentucky, on Election Night.

It’s clear why he played coy. For all the talk about casting off government shackles, libertarianism is still considered the crazy uncle of American politics: loud and cocky and occasionally profound but always a bit unhinged. And Rand Paul’s dad is the craziest uncle of all. Ron Paul wants to “end the Fed,” as the title of his book proclaims, and return the country to the gold standard—stances that have made him a tea-party icon. Now, as incoming chairman of the subcommittee that oversees the Fed, he’ll have an even bigger platform. Paul Sr. says there’s not much daylight between him and his son. “I can’t think of anything we grossly disagree on,” he says.

There’s never been a better time to be a libertarian than now. The right is still railing against interventionist policies like TARP, the stimulus package, and health-care reform. Citizens of all political stripes recoil against the nanny state, which is nannier than ever, passing anti-smoking laws, banning trans fats, posting calorie counts, prohibiting flavored cigarettes, cracking down on Four Loko, and considering a soda tax in New York. All that, plus some TSA agent wants to handle your baggage.

Libertarianism has adherents on the left, too—they just organize around different issues. Whereas righty libertarians stew over taxes and bailouts, lefty libertarians despise de facto suspensions of habeas corpus, surveillance, and restrictions on whom you can marry. It’s not surprising that the biggest victories of the right and the left in the last weeks of this lame-duck session of Congress were about stripping down government—tax cuts and releasing the shackles of “don’t ask, don’t tell.”

Much of Americans’ vaunted anger now comes from a sense of betrayal over libertariansim shrugged. Right-wing libertarians charge that the Bush presidency gave the lie to small-government cant by pushing Medicare Part D, No Child Left Behind, and a $3 trillion war. Left-wing libertarians are furious that Obama talked a big game on civil liberties but has caved on everything from FISA to DOMA to Gitmo. Meanwhile, the country faces a massive and growing deficit (too much government!) that neither party has the power or the inclination to fix. If there were ever a time to harness libertarian energy—on left and right—it’s now.

Erik Hayden at The Atlantic with the round-up

Beam and Julian Sanchez at Bloggingheads

Matt Welch at Reason:

Beam’s piece ends on an extended Big But, in which we hear warnings about doctrinal purity, extreme Randian selfishness, Brink Lindsey leaving Cato, and minarchy being “an elegant idea in the abstract.” In the real world, not bailing out banks “would have unfairly punished a much greater number” of homeowners, and so on. Plus, that one Tennessee house burned down, and: Somalia! He ends the piece like this:

It took 35 years for Ron Paul to reach the center of American politics. And it could take another 35 before he or someone like him is back. It’s certainly a libertarian moment—but it’s not liable to last too long. Libertarianism and power are like matter and anti-matter. They cancel each other out.

Radley Balko at Reason:

The first two-thirds of the article are a sort of tour guide of libertarian personalities, factions, and general philosophy. It comes off a bit like Beam describing to Manhattanites some exotic new species discovered in Madagascar, but I suppose that probably is how libertarians come off to people outside the politics/policy/media bubble. This portion of the article is mostly fair, though are still some revealing word and phrase choices. (For example, the Koch brothers are only “infamous” if you don’t happen to agree with them. Just like George Soros is only infamous if you’re opposed to the causes he funds.)

Still, the first two-thirds of the article is mostly a quick and dirty introduction to or primer on libertarianism and the movement surrounding it, with Beam largely playing a neutral storyteller, interviewer, and interpreter.

It’s in the last third of the article there’s a noticeable and disruptive shift in tone. After establishing a certain trust with the reader that casts himself in the role of a mostly neutral observer and chronicler of this libertarian uprising, Beam then stops describing libertarianism, and starts critiquing it himself. The critiques are selective. He picks a few issues, broadly (and sometimes inaccurately, or without appropriate detail) describes the libertarian position, then describes why libertarianism fails on that particular issue. Taken as a whole, these critiques are supposed to support his thesis for the latter third of the article, which is that libertarianism is utopian and impractical. (He neglects to explain how the current system has produced better results, but that’s a different discussion.) I don’t think much of Beam’s critiques, but then I’m also a libertarian.

But it’s not the critiques themselves that I found off-putting. If this had been a straight Jacob Weisberg-style trashing of libertarianism, we could evaluate it on those terms. But this is more subtle and, I think, in some ways more pernicious. This was a thrashing disguised as a primer. That Beam makes these critiques himself comes off as abrupt and, frankly, condescending. There’s an aesthetic I’ve noticed among some journalists that libertarianism is so crazy and off the rails that it’s okay to step outside the boundaries of decorum and fairness to make sure everyone knows how nuts libertarians really are. (A couple years ago, I emailed a prominent journalist to compliment him on a book he had written. His strange response: He thanked me for the compliment, and then ran off several sentences about how dangerous and evil he thought my politics were.)

Reihan Salam:

Radley Balko has written a characteristically astute critique of Chris Beam’s New York magazine article on libertarianism. I think Radley says all that needs to be said on the subject.

Instead, I’d like to throw out a few other approaches to the subject that might have worked better:

(1) While talking to a good friend, we came to the conclusion that while cultural conservatism’s influence has been fading (something we both lament, albeit in different degrees) and while social democratic thinking is moribund, certain kinds of libertarian incrementalism (think Ed Glaeser and Tyler Cowen), not just resigned but comfortable with the idea of a social safety net in an affluent society, have grown more influential. Libertarian purists hate it. But they’ve grown less relevant. This piece might have focused on criminal sentencing, the war on drugs, etc., with a “we’re all libertarians now” coda. The trouble with this piece is that it might be really boring. But it would make sense. And it would avoid a lengthy discussion of minarchism.

(2) A much more fun piece, attuned to a New York audience, would open with the Tea Party’s libertarianism and make a strong case for its hypocrisy: they call themselves libertarians, but here are the subsidies they love, the un-libertarian restrictions they champion, etc. This section would be tendentious and unfair, but that’s the fun of it. And then the piece would argue that modern-day New York city, for all its taxes and regulations, is the real home of liberty: look to the cultural freedom, and also to the entrepreneurial energy of Silicon Alley, etc. Bracketing whether or not this is fair, it would be a provocative piece about who really owns liberty.

(3) Drawing on Amar Bhidé and Tim Wu and Tyler, one could also write a straightforward piece on how Tea Party libertarians and minarchists are misguided because more freedom and more affluence and more government tend to go hand in hand. We get more free and less free at the same time, along different dimensions. Again, this piece might be boring, but not necessarily.

David Weigel:

Beam’s history and etymology are going to be useful to outsiders, who don’t pay attention to this stuff. It’s a better case against libertarian policy, if you want that, than a shouty “investigative” blog post at some liberal site that connects a congressman’s staff to the Koch family with the assumption that evil has just been uncovered. But no case against libertarianism sounds very compelling right now, because any alternative to the managed economy sounds great to a country with 9.9 percent unemployment.

Do libertarians promise utopia? Sure. So do the socialists who came up with the ideas that motivate Democratic politicians. Voters don’t care much about where ideas come from as long as they have jobs. Now, the real test for libertarians will come if a year of Republican austerity budgeting is followed by economic growth. In the 1990s, the new, libertarian-minded Republican congressmen and governors discovered that fast growth allowed them to cut taxes and grow budgets for services that voters liked. In the 2010s, if unemployment falls, will the libertarian Republicans keep cutting budgets and reducing services? It doesn’t sound impossible right now.

E.D. Kain at The League:

In any case, I suspect the many reactions to Beam’s article are not because of any of its insights but rather because it is long and in a prestigious publication, and because it is written in such accessible language. It may not do anything but scratch a few surfaces and regurgitate a number of old anti-libertarian tropes, but that’s to be expected. Look, here I am commenting on it myself, largely because it is long and because so many other people are commenting on it and because I’m surprised at how little it really says about the Libertarian Moment in question.

Matthew Yglesias:

I liked Chris Beam’s NY Mag article on libertarians, but I want to quibble with this:

Yet libertarianism is more internally consistent than the Democratic or Republican platforms. There’s no inherent reason that free-marketers and social conservatives should be allied under the Republican umbrella, except that it makes for a powerful coalition.

People, especially people who are libertarians, say this all the time. But we should consider the possibility that the market in political ideas works is that there’s a reason you typically find conservative and progressive political coalitions aligned in this particular way. And if you look at American history, you see that in 1964 when we had a libertarian presidential candidate the main constituency for his views turned out to be white supremacists in the deep south. Libertarian principles, as Rand Paul had occasion to remind us during the 2010 midterm campaign, prohibit the Civil Rights Act as an infringement on the liberty of racist business proprietors. Similarly, libertarians and social conservatives are united in opposition to an Employment Non-Discrimination Act for gays and lesbians and to measures like the Lilly Ledbetter Fair Pay Act that seek to curb discrimination against women.

Jonathan Chait at TNR:

Let me refine the point a bit. The left-right division tends to center around the distribution of power. In both the economic and the social spheres, power is distributed unequally. Liberalism is about distributing that power more equally, and conservatism represents the opposite. I don’t mean to create a definition that stacks the deck. It’s certainly possible to carry the spirit of egalitarianism too far in either sphere. An economic policy that imposed a 100% tax on all six-figure incomes, or a social policy that imposed strict race and gender quotas on every university or profession, would be far too egalitarian for my taste. Soviet Russia or Communist China are handy historical cases of social and economic leveling run amok.

But in any case, there’s a coherence between the two spheres. Liberals see a health care system in which tens millions of people can’t afford regular medical care, or a social system in which gays face an array of discrimination, and seek to level the playing field. The inequality may be between management and labor, or rich and poor, or corporations versus consumers, or white versus black. In almost every instance, the liberal position is for reducing inequalities of power — be it by ending Jim Crow or providing food stamps to poor families — while the conservative position is for maintaining those inequalities of power.

Economic liberalism usually (but not always) takes the form of advocating more government intervention, while social liberalism usually (but not always) takes the form of advocating less government intervention. If your only ideological interpretation metric is more versus less government, then that would appear incoherent. But I don’t see why more versus less government must be the only metric.

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Giovanni Peri Does A Study (And Pedro Should Buy A House)

Nathaniel Cahners Hindman at The Huffington Post:

Champions of strict immigration reform, be warned: there may be an economic consequence to tightening America’s borders.

Immigration is actually good for employment, wages and productivity, according to a new study from the San Francisco Fed.

States that have had a large influx of immigrants tended to produce more, hire more and pay workers more than states that have few new foreign-born workers, the study shows. For every one percent increase in employment from immigration, the study finds, a state will see a .4 to .5 percent increase in income per worker.

In conducting the study, Giovanni Peri, an associate professor at University of California, Davis, compared output per worker and employment in states that have had large immigrant inflows with data from states that have few immigrant inflows. Peri found no evidence that immigrants “crowd-out” employment for American citizens.

Peri concludes that immigration boosted states’ output, income and employment because the economies “[absorbed] immigrants by expanding job opportunities rather than by displacing workers born in the United States.” Further, the results of the study support the theory that U.S.-born workers and immigrants tend to take different occupations, says Peri.

Felix Salmon:

Never mind the stimulus vs austerity debate: here’s something that both sides should be able to get behind. It’s a simple legislative fix which increases tax revenues without raising taxes; which increases the demand for housing; which increases the economy’s productive capacity; and which boosts wages for American workers. It’s about as Pareto-optimal as legislation gets. So let’s open the borders, and encourage much more immigration into the US!

The SF Fed’s Giovanni Peri has the latest research on the subject:

Statistical analysis of state-level data shows that immigrants expand the economy’s productive capacity by stimulating investment and promoting specialization. This produces efficiency gains and boosts income per worker. At the same time, evidence is scant that immigrants diminish the employment opportunities of U.S.-born workers.

The effects of immigration on US wages are large, positive, and significant:

Over the long run, a net inflow of immigrants equal to 1% of employment increases income per worker by 0.6% to 0.9%. This implies that total immigration to the United States from 1990 to 2007 was associated with a 6.6% to 9.9% increase in real income per worker. That equals an increase of about $5,100 in the yearly income of the average U.S. worker in constant 2005 dollars. Such a gain equals 20% to 25% of the total real increase in average yearly income per worker registered in the United States between 1990 and 2007.

It’ll be interesting to see how much debate this paper receives. Anti-immigration forces are more likely to ignore it than attack it, I think, if they don’t like what it says. And George Borjas seems to have stopped blogging over a year ago, which is a shame, because he would be the perfect foil for Peri.

Kevin Drum:

What’s really striking about this is that the very mechanism that provides the productivity boost — the fact that immigrants don’t speak English well and therefore push native workers out of manual labor and into higher-paying jobs — is precisely the thing that most provokes the immigrant skeptics. They all want immigrants to assimilate faster and speak English better, but if they did then they’d just start competing for the higher paying jobs that natives now monopolize.

The usual caveats apply here. This is only one study. (Well, two actually, but still.) And in order to generate useful results the authors have to control for a whole menagerie of variables that can muck things up. There’s always a chance that some important variable got missed or that another one got controlled for incorrectly. So don’t take this as the last word. It does, however, join a growing literature that suggests immigration has no negative effect on wages and might actually have a positive effect. Interesting stuff.

Matthew Yglesias:

Think of some classic “bad” jobs that we find a lot of immigrants doing—basically the tidying-up industries. Now imagine that tomorrow 75% of the maids, the janitors, the dishwashers, the gardeners, the people who make the beds at hotels, etc. are all teleported to Mexico. This is a class of low-income people that’s vanished, so it’s possible that their teleportation will make certain statistical sets look better. But what’s going to be the impact on the living standards of those of us Left Behind in the United States of America?

Well there are really only two things that can happen here. One is that to an extent things can just be allowed to be dirtier and the other is that to an extent people can spend less time doing things that aren’t cleaning and more time cleaning. Down the first pathway, overall living standards decline because of the increase in the overall level of filth. Down the second pathway, overall living standards decline because of the decrease in the production of other goods and services. It’s true that amidst this overall decline in living standards some specific individuals would probably benefit (the remaining 25% of cleaners, for example) which is why there’s room for empirical research like the SF Fed paper linked above, but it’s easy to see that on the whole immigration boosts living standards even before you consider the positive impact on the immigrants.

At issue is the fact that here in the developed world we’re not peasant farmers fighting to support ourselves on a fixed quantity of viable agricultural land. When new workers come onto the scene and do jobs, they create more surplus. To get the kind of zero-sum effect that people think occurs when you get rid of immigrants, what you would actually need to do is send retirees to the Death Panels and turn them into Soylent Green. But of course even there we note that the interests of elderly people matter, morally speaking, and it would be grossly wrong to simply write them off in the interests of efficiency.

Adam Ozimek at Modeled Behavior:

Calculated Risk tells us the key to fixing the housing market:

The key to the housing market is to absorb the excess inventory. That means more households and fewer new housing units. Luckily housing starts are very low right now, but unfortunately there is very little job growth (and therefore little new household formation).

But job growth is not the only way to get new household formation, as I’ve argued again and again, we have immigration at our disposal. Of course, there are the usual complaints about jobs. But the weakness of this argument can be seen in a new paper Felix Salmon directs us to:

Statistical analysis of state-level data shows that immigrants expand the economy’s productive capacity by stimulating investment and promoting specialization. This produces efficiency gains and boosts income per worker. At the same time, evidence is scant that immigrants diminish the employment opportunities of U.S.-born workers.

It is well understood that the removing capital tariffs and protectionism would increase overall efficiency and incomes. Since immigration restrictions are labor market protectionism we shouldn’t be surprised to see that is has similar positive effects.

Unfortunately, journalists and pundits don’t seem to oppose labor protectionism nearly as much as they oppose capital protectionism. We would see an outcry among op-eds and pundits if we were seeing a worldwide rise in capital protectionism, because they recognize that beggar-thy-neighbor policies make everyone worse off. But no similar reaction has come from the rise in global labor protectionism

More Yglesias:

[…] Something that certainly shouldn’t be controversial is the fairly obvious point that if we allowed more immigrants to come to the United States this would bolster home price values in a clearer and more sustainable way than any kind of crazy patchwork of tax breaks. Right now we have more houses than households, if we had more immigrants we’d have more households. We’d work off the excess inventory more quickly, and be closer to the day when home construction returns as a viable economic sector.

Adam Ozimek offers up some quantitative research on the scale of the effect citing research from Albert Saiz (PDF) indicating that “[i]mmigration inflows equal to 1% of a city’s population were associated with increases in average or median housing rents and prices of about 1%.”

One way to especially take advantage of this effect and politically frame it as housing stabilization policy would be to create a special new class of visa specifically for people who purchase homes in the United States.

Patrick Appel at Sullivan’s place

Reihan Salam:

Well, I wouldn’t describe myself as belonging to the “anti-immigration forces.” But I will say that the study’s findings are hardly surprising. We’ve known for a pretty long time that immigration tends to increase wage dispersion by raising effective incomes at the top and depressing them at the bottom. And Peri’s findings regarding the impact on average income doesn’t tell us much about the distribution of gains. Felix excerpts the following from Peri:

Over the long run, a net inflow of immigrants equal to 1% of employment increases income per worker by 0.6% to 0.9%. This implies that total immigration to the United States from 1990 to 2007 was associated with a 6.6% to 9.9% increase in real income per worker. That equals an increase of about $5,100 in the yearly income of the average U.S. worker in constant 2005 dollars. Such a gain equals 20% to 25% of the total real increase in average yearly income per worker registered in the United States between 1990 and 2007. [Emphasis added.]

But how does immigration impact the median worker rather than the average worker? And how does it impact wages of workers at, for example, the 10th percentile?

In 2006, Peri co-authored a paper with Gianmarco I.P. Ottaviano of the Universita’ di Bologna that added an important wrinkle [PDF]:

Using our general equilibrium approach we estimate that physical capital adjsust promptly and fully to immigration (already within one year) and that immigrants are imperfect substitutes for US-born workers within the same education and experience group (because they choose different occupations and have different skills). These two facts, overlooked by the previous literature, imply a positive and significant effect ofimmigration on the average wage of U.S.- born workers, already in the short run. They also imply a small negative effect of immigration on wages of uneducated US born workers and a positive wage effect on all other US-born workers. Hence only a very small fraction of the increase in College/High School Dropout wage gap during the 1990-2004 period can be attributed to immigration.

A central question is how we weight the impact of immigration on “uneducated” US born workers. I tend to think the U.S. can accommodate a relatively large immigrant influx — I’d like to see an influx only slightly smaller than what we have now when we combine authorized and unauthorized immigrants, but with authorized and skilled immigrants much closer to 100 percent of the total than is presently the case. But that’s because I’m less concerned about wage dispersion than my left-of-center counterparts.

I wonder if my interlocutors would accept that we should only pay attention to the average effect of, say, changes to tax policy and ignore the impact on the median household. I doubt it.

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He Ain’t Heavy, He’s My Brother

Jane Mayer in The New Yorker:

With his brother Charles, who is seventy-four, David Koch owns virtually all of Koch Industries, a conglomerate, headquartered in Wichita, Kansas, whose annual revenues are estimated to be a hundred billion dollars. The company has grown spectacularly since their father, Fred, died, in 1967, and the brothers took charge. The Kochs operate oil refineries in Alaska, Texas, and Minnesota, and control some four thousand miles of pipeline. Koch Industries owns Brawny paper towels, Dixie cups, Georgia-Pacific lumber, Stainmaster carpet, and Lycra, among other products. Forbes ranks it as the second-largest private company in the country, after Cargill, and its consistent profitability has made David and Charles Koch—who, years ago, bought out two other brothers—among the richest men in America. Their combined fortune of thirty-five billion dollars is exceeded only by those of Bill Gates and Warren Buffett.

The Kochs are longtime libertarians who believe in drastically lower personal and corporate taxes, minimal social services for the needy, and much less oversight of industry—especially environmental regulation. These views dovetail with the brothers’ corporate interests. In a study released this spring, the University of Massachusetts at Amherst’s Political Economy Research Institute named Koch Industries one of the top ten air polluters in the United States. And Greenpeace issued a report identifying the company as a “kingpin of climate science denial.” The report showed that, from 2005 to 2008, the Kochs vastly outdid ExxonMobil in giving money to organizations fighting legislation related to climate change, underwriting a huge network of foundations, think tanks, and political front groups. Indeed, the brothers have funded opposition campaigns against so many Obama Administration policies—from health-care reform to the economic-stimulus program—that, in political circles, their ideological network is known as the Kochtopus.

In a statement, Koch Industries said that the Greenpeace report “distorts the environmental record of our companies.” And David Koch, in a recent, admiring article about him in New York, protested that the “radical press” had turned his family into “whipping boys,” and had exaggerated its influence on American politics. But Charles Lewis, the founder of the Center for Public Integrity, a nonpartisan watchdog group, said, “The Kochs are on a whole different level. There’s no one else who has spent this much money. The sheer dimension of it is what sets them apart. They have a pattern of lawbreaking, political manipulation, and obfuscation. I’ve been in Washington since Watergate, and I’ve never seen anything like it. They are the Standard Oil of our times.”

A few weeks after the Lincoln Center gala, the advocacy wing of the Americans for Prosperity Foundation—an organization that David Koch started, in 2004—held a different kind of gathering. Over the July 4th weekend, a summit called Texas Defending the American Dream took place in a chilly hotel ballroom in Austin. Though Koch freely promotes his philanthropic ventures, he did not attend the summit, and his name was not in evidence. And on this occasion the audience was roused not by a dance performance but by a series of speakers denouncing President Barack Obama. Peggy Venable, the organizer of the summit, warned that Administration officials “have a socialist vision for this country.”

Five hundred people attended the summit, which served, in part, as a training session for Tea Party activists in Texas. An advertisement cast the event as a populist uprising against vested corporate power. “Today, the voices of average Americans are being drowned out by lobbyists and special interests,” it said. “But you can do something about it.” The pitch made no mention of its corporate funders. The White House has expressed frustration that such sponsors have largely eluded public notice. David Axelrod, Obama’s senior adviser, said, “What they don’t say is that, in part, this is a grassroots citizens’ movement brought to you by a bunch of oil billionaires.”

Erick Erickson at Redstate:

Obama’s coordinated character assassination campaign against anyone who disagrees with him strikes of Soviet style politics. Saul Allinsky would be proud.

For perspective, the Koch brothers have been funding right-of-center and largely libertarian causes since the 1970’s. David Koch was the Libertarian Vice Presidential nominee in 1980. That’s right — against Reagan. This is nothing new for the Koch family. Through Carter, Reagan, Bush, Clinton, and Bush the Koch’s have been politically engaged, sometimes even against Republican Presidents.

But Barack Obama is so used to demagoguing and is the first Democratic President to really believe the rich are evil, and not just preach it for the base, he needs an enemy. The Koch family will be that enemy.

The New Yorker has an eleven page, 6,000 word article on David and Charles Koch, who own Koch Industries. The article, “Covert Operations,” appears in the August 30, 2010 copy of the magazine. In other words, this article was being manufactured well before Mr. Obama launched the opening salvo on August 9, 2010.

Writing in yesterday’s Playbook, Mike Allen referenced the article, highlighting a passage that David Axelrod, Mr. Obama’s advisor, is concerned about the Koch brothers. Mike Allen has more today.

Most troubling, the New Yorker cites as objective sources both the Center for American Progress and Media Matters without ever bothering to mention they are left-wing sources with biases and competing interests against those of the Koch brothers.

As the same time, Mother Jones is attacking the Smithsonian for taking Koch money, the Center for American Progress that the New Yorker relied on as an objective source, is attacking the Kochs in the Boston Globe, they are also attacking David Koch directly, and even Greenpeace is getting in on the act.

This is a coordinated character assassination against Koch Industries and the Koch brothers for daring to use their money to prevent the destruction of the American economy at the hand of a bunch of effete socialists in the White House.

Joseph Lawler at The American Spectator:

I’m not sure about Erickson’s speculation, but it’s hard not to notice that Mayer’s article paints an grim portrait of the Koch brothers without actually reporting anything objectionable that they might have done. For instance, here is how the article (headline: “Covert Operations: The billionaire brothers who are waging a war against Obama”) describes the Kochs’ efforts to promote libertarianism:

In Washington, [David H.] Koch is best known as part of a family that has repeatedly funded stealth attacks on the federal government, and on the Obama Administration in particular.

If that is how you describe peaceful, lawful activism, then what words are left to describe, for instance, the actions of al Qaeda, which funded an actual stealth attack on the federal government?

Later in the article, Mayer writes that “the Mercatus Center released a report claiming that stimulus funds had been directed disproportionately toward Democratic districts; eventually, the author was forced to correct the report, but not before Rush Limbaugh, citing the paper, had labelled Obama’s program ‘a slush fund…'”

Mayer is referring to Veronique de Rugy’s working paper. It is not accurate to claim that de Rugy was “forced to correct” the paper. A better description would be that she “voluntarily, in the spirit of transparency, improved the paper and found that her initial results still obtained.” You can read a less tendentious account of that episode here or de Rugy’s own explanation here.

Matt Welch at Reason:

I am a big admirer of Jane Mayer, and her article is worth reading for anyone who’s interested in the topic, but is seems a clear case of describing two apples with different adjectives because one smells funny (the George Soros paragraph in the article is a classic of the form). Whether the piece amounts to a kind of opening White House legal salvo against some of its biggest critics is something worth monitoring closely over the next two-plus months (and two-plus years). Given President Obama’s increasingly hysterical (and hypocritical) attacks against “the influence wielded by corporations and foreign entities,” it’s clear that the campaign will have rhetorical legs at the least.

Nick Gillespie at Reason:

Exactly how are the Koch brothers under the radar or underground? They show up every year in the Forbes super-rich lists. Charles Koch wrote a best-selling business book a year or two ago and makes no secret of his belief in free markets and limited government. David Koch ran for vice president of these United States on the Libertarian Party ticket in 1980 (where he helped Ed Clark pull over 900,000 votes, by far the highest total gained by the LP). Both are known for a wide range of philanthropic giving, whether to arts and medical outfits or think tanks or political action groups.

Full disclosure: David Koch has been on the board of trustees of Reason Foundation, the publisher of this website, for decades, and his name appears in the masthead of Reason magazine; I have also taught at various programs for the Institute for Humane Studies, which the Kochs fund, and will speak at an Americans for Prosperity event later this week. While I have never had more than brief interaction with either brother, I am perhaps overdue in thanking them on this blog for supporting my career at Reason, where I have argued in favor of gay marriage, drug legalization, non-interventionist foreign policy, open borders, sales in human organs, an end to corporate welfare, and a wide variety of other shamelessly libertarian policies.

While the Kochs are not publicity hounds, they certainly don’t hide their giving or their political agenda under a bushel basket. They are consistently in favor of smaller government (even if Koch Industries gave 15 percent of its political donations to Democrats in the 2008 election cycle). They may in fact be “out to destroy progessivism” but they are hardly using secret means to combat the growth and reach of government. You can argue whether The New Yorker story is “shameful,” but there’s no question that it is a great example of the demonization of opposing points of view (this happens on the right, too, where way too many liberals are labeled socialists or communists or whatever). It’s not enough that opponents believe different things, they must be cast as underhanded and duplicitous, acting out of only the most vulgar or awful of motives.

Frank Rich at The New York Times:

There’s just one element missing from these snapshots of America’s ostensibly spontaneous and leaderless populist uprising: the sugar daddies who are bankrolling it, and have been doing so since well before the “death panel” warm-up acts of last summer. Three heavy hitters rule. You’ve heard of one of them, Rupert Murdoch. The other two, the brothers David and Charles Koch, are even richer, with a combined wealth exceeded only by that of Bill Gates and Warren Buffett among Americans. But even those carrying the Kochs’ banner may not know who these brothers are.

Their self-interested and at times radical agendas, like Murdoch’s, go well beyond, and sometimes counter to, the interests of those who serve as spear carriers in the political pageants hawked on Fox News. The country will be in for quite a ride should these potentates gain power, and given the recession-battered electorate’s unchecked anger and the Obama White House’s unfocused political strategy, they might.

All three tycoons are the latest incarnation of what the historian Kim Phillips-Fein labeled “Invisible Hands” in her prescient 2009 book of that title: those corporate players who have financed the far right ever since the du Pont brothers spawned the American Liberty League in 1934 to bring down F.D.R. You can draw a straight line from the Liberty League’s crusade against the New Deal “socialism” of Social Security, the Securities and Exchange Commission and child labor laws to the John Birch Society-Barry Goldwater assault on J.F.K. and Medicare to the Koch-Murdoch-backed juggernaut against our “socialist” president.

Only the fat cats change — not their methods and not their pet bugaboos (taxes, corporate regulation, organized labor, and government “handouts” to the poor, unemployed, ill and elderly). Even the sources of their fortunes remain fairly constant. Koch Industries began with oil in the 1930s and now also spews an array of industrial products, from Dixie cups to Lycra, not unlike DuPont’s portfolio of paint and plastics. Sometimes the biological DNA persists as well. The Koch brothers’ father, Fred, was among the select group chosen to serve on the Birch Society’s top governing body. In a recorded 1963 speech that survives in a University of Michigan archive, he can be heard warning of “a takeover” of America in which Communists would “infiltrate the highest offices of government in the U.S. until the president is a Communist, unknown to the rest of us.” That rant could be delivered as is at any Tea Party rally today.

Last week the Kochs were shoved unwillingly into the spotlight by the most comprehensive journalistic portrait of them yet, written by Jane Mayer of The New Yorker. Her article caused a stir among those in Manhattan’s liberal elite who didn’t know that David Koch, widely celebrated for his cultural philanthropy, is not merely another rich conservative Republican but the founder of the Americans for Prosperity Foundation, which, as Mayer writes with some understatement, “has worked closely with the Tea Party since the movement’s inception.” To New Yorkers who associate the David H. Koch Theater at Lincoln Center with the New York City Ballet, it’s startling to learn that the Texas branch of that foundation’s political arm, known simply as Americans for Prosperity, gave its Blogger of the Year Award to an activist who had called President Obama “cokehead in chief.”

Warner Todd Huston at Big Government:

First of all most of what Rich wrote was but rehashed words from Jane Mayer’s slam against the Koch Brothers of New York. Three quarters of what Rich penned really came from Mayer’s New Yorker piece on the philanthropists. So, big demerits for Frank Rich for simply appropriating Mayer’s piece.

But the real point of Rich’s piece was to pile onto Mayer’s slanted attack piece with some echoed slams against the Tea Party movement in order to discredit it all. Rich is desperate to make the movement seem like a marionette show with rich “sugar daddies” funding it and controlling it from the top.

“There’s just one element missing from these snapshots of America’s ostensibly spontaneous and leaderless populist uprising,” Rich says of the Tea Party events, “the sugar daddies who are bankrolling it, and have been doing so since well before the ‘death panel’ warm-up acts of last summer.”

Rich then rehashes Mayer’s examples of where the Koch brothers put their money in the form of Americans For Prosperity and Freedom Works, two nationwide, very active, and successful conservative advocacy groups.

Now, it is absolutely true that both AFP and Freedom Works have had the cash to put on large events in Washington D.C. and other cities. But it is not true that either of these groups controls and runs “the Tea Party” movement from above.

In fact, both AFP and Freedom Works were sort of caught unawares when the Tea Parties started forming spontaneously all across the nation in early 2009. Both had to rush to try and tap into that passion. Neither was initially prepared for the amazing energy that the Tea Party has unleashed.

Yes, these two organizations have held many events. But the number of evens that they have held, funded and had a hand in operating are but a small number compared to the hundreds if not thousands of Tea Party groups that started up all on their own, all with their own funding and members, all without the bankrolling of a “sugar daddy” named Koch.

To say that the Koch brothers, or Dick Armey, or Americans for Prosperity’s Tim Phillips control the Tea Party movement is simply a lie. In fact, these advocacy groups are like the 80-pound child taking his 200-pound dog for a walk. The kid may seem like the owner, but it is the big dog in control of where the walk ends up heading! The Tea Party is the 200-pound dog that neither AFP, nor Freedom Woks can control. These groups are the 80-pound kid holding on for dear life, trying to stay relevant in the minds of the Tea Party movement.

And Rich makes a second mistake — or calculation — in addressing the Tea Party movement. He keeps saying “the Tea Party” as if it is a single entity. It is not. I have been interacting with, writing about, and attending rallies with various Tea Party groups since the first days of the movement. There is one thing that holds true throughout. They are not connected one to the other in any meaningful way.

But you see, if Rich and his anti-traditional American ideologues can make it appear as if “the Tea Party” is run from the back pocket of the Koch brothers, it is easier to discredit as a false front set up by secretive, shadowy forces. If it were all a Koch enterprise, now that is a strawman that Frank Rich could knock down. But if the Tea Party is understood as millions of individual Americans following their patriotic hearts, that is an impossible image to discredit.

So you can see why Rich and his cohorts are desperate to make it “the Tea Party” instead of revealing the truth.

David Weigel:

Here’s more on the story I published this morning — a letter that the Charles G. Koch Charitable Foundation is sending around arguing that Jane Mayer’s New Yorker profile treated the Kochs unfairly.

“The New Yorker article, and those pieces that have echoed it, rely heavily on innuendo and unsubstantiated assertions,” writes foundation president Richard Fink, who is the public face of the brothers’ ideological work. “Unnamed sources and those with a strong philosophical opposition to the Kochs – many of whom have no current or first-hand knowledge of Koch Industries, Koch Family Foundations, Charles Koch or David Koch – go unchallenged. Supporters of the Kochs are largely ignored (as evidenced by the fact that the reporter chose not to include the vast majority of supportive comments made by a number of people familiar with the Kochs and the organizations they support). On the other hand, those who reinforce the reporter’s preconceptions are given a free pass.”

Fink argues that Mayer treated the Kochs unfairly despite the access she received, but Mayer reports that she didn’t get face time with David or Charles. That’s the point I’m making — these attempts to keep the brothers out of the political fray just don’t work anymore.

Reihan Salam:

All this is to say that I’m very comfortable with critiques of the rise of the right, including left-of-center critiques. Let’s just say I don’t think Rich is an authority on this subject. That said, I would never question his knowledge of the history of Broadway, Vaudeville, or theater more broadly.

I don’t doubt that a talented reporter could illuminate the worldview of the Kochs and the extent of their reach. But Mayer might be the most talented reporter writing today, and she’s written a piece that relies heavily on Gus diZerega, incendiary quotes from a wide range of scrupulously non-partisan but decidedly left-of-center think tanks, a credulous statement from a Soros spokesperson, a conversation with Matt Kibbe of FreedomWorks, references to Andrew Goldman’s article in New York and Brian Doherty’s Radicals for Capitalism, and something else I’m sure I’m missing. One possibility is that Mayer’s editors pressed for early publication of the Koch story, spurred by the fact that New York had published its piece in late July and the prospect of more articles on the Kochs in other magazines. If that is indeed the case, I think Mayer’s editors have done her a disservice.

As someone who has benefited from left-of-center and right-of-center foundations, I definitely have a bias here: I don’t think it’s a bad thing for rich people to devote some of their money to spreading ideas, including bad ideas. The U.S. economy is vast enough that I can’t imagine even the largest fortunes holding undue sway over our national political life, which could be Pollyannaish on my part. I’m not even all that threatened by the influence of the Ford Foundation, which, as David Bernstein observes, is considerable:

According to Mayer, the Kochs have spent “more than a hundred million dollars” on “right-wing” foundations since 1980. Let’s be aggressive, and assume arguendo the figure, adjusted for inflation, is four hundred million dollars. That’s a whole $13 million or so a year since 1980. By contrast, the Ford Foundation, one of many well-endowed “mainstream” liberal foundations, spends over $500 million a year, a decent fraction of which goes to left-wing organizations and causes. Any given major American university employs far more liberal academics in the social sciences annually than can possibly be employed on a $13 million budget. Soros’ Open Society Institute annually spends over $150 million to “support individuals and organizations advancing a more open, just, and equal society in the United States.”

I am definitely open to strong arguments that suggest the Ford Foundation or the Kochs are a danger to our democratic freedoms. I’m still waiting for them.

UPDATE: Matthew Yglesias and Matt Welch on Bloggingheads

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A Pretty Map To Tell You Where The Green Is At

Dylan Matthews:

The Census Bureau helpfully puts out data (see 690) on household income distribution by state, but unfortunately the highest category they include is households making over $200,000 a year. However, this is the group that will face higher rates if Obama’s tax proposal succeeds, so it’s worth examining.

About 3.96 percent of American households make over $200,000 a year. Thirty-eight states have lower percentages than that, and twelve and the District of Columbia have higher ones. Seven states have a percentage of less than 2 percent (West Virginia is lowest with 1.36 percent), 21 have a percentage between 2 and 3 percent, 11 have one between 3 and 4 percent, and four have one between 4 and 5 percent. New York and Virginia are both at about 5.6 percent, and California and Massachusetts are around 6.2 percent. Maryland is at 6.8 percent, New Jersey at 7.46 percent, Connecticut at 7.95 percent, and D.C. tops the list with 8.37 percent

[…]

The states with the highest proportion of wealthy households tend to be large (New York, California) or suburban (Virginia, Maryland, New Jersey, Connecticut) while large plains states and most of the South fall on the very low end; both of the Dakotas and Montana are under 2 percent, as is Mississippi, with Alabama just over. Perhaps surprisingly, only two Republicans — Judd Gregg and Scott Brown — were elected from the 12 states above the national average, which would benefit the most from GOP-backed efforts to extend the Bush tax cuts in their entirety.

Reihan Salam:

One thing that is crucially important for people to understand is the importance of the changing demographic composition in households in increasing household income dispersion. As Scott Hodge of The Tax Foundation observed in a 2007 report, the rise in the number of single taxpayers has had a predictable effect:

(1) There are vastly more single taxpayers than ever before and they comprise the majority of the populations of the first three quintiles.

(2) Because of the rise in dual-earner families, married couples are mostly found in the two highest quintiles.

(3) A greater percentage of taxpayers in the top two quintiles are married couples without dependents; no doubt many are “empty-nest” Baby Boomers nearing their peak earning years.

The landscape Hodge describes is the impetus for Rob Stein’s family-friendly reform of the income tax, which promises to dramatically reduce the tax burden on households with dependent children.

The $200,000 plus set is disproportionately composed of dual-earner families living in high cost metropolitan areas.Assortative mating plays a crucial role as well: in the age of consumption complementarity, high-earners are more likely to marry other high-earners.

Check out this wonderful map from CNNMoney, which I found via a Gothamist post by Jen Carlson. The lifestyle that would cost $250,000 in Salt Lake City would cost $545,000 in Manhattan, $261,750 in Miami-Dade, and $405,250 in San Francisco.

To be sure, there is a reason that Manhattanites aren’t moving in Utah. They are consuming what they consider to be a valuable amenity. Yet when we’re talking about upper-middle-class taxpayers, it is important to have a sense of what headline income numbers actually mean. I’d submit that there is a tremendous value to having economic agglomerations of talented workers, and that we want people to choose cities and neighborhoods on the basis of their preferences and needs, not tax arbitrage. This is a big reason why I’m opposed to beggar-thy-neighbor state industrial policies.

Jen Carlson at Gothamist:

Those buzzkills at CNNMoney created a Google Map that shows what it really means to have $250K/year—which the White House says is a mark that someone is wealthy. Since cost of living is different in various cities, however, that is a sweeping generalization. In some parts of Texas and Florida it may be accurate, but here in New York City (and more specifically, in Manhattan) the local equivalent is $545K. Meaning that is how much you’d have to make to maintain the same lifestyle as someone living in, say, Missoula, Montana. On the upside, you don’t live in Missoula; their fresh air is so overrated anyway.

James Joyner:

Regardless, all of this shows how complicated gauging relative wealth is when dealing with a diverse, continental country.  We have not only very different costs of living and rates of taxation but also very different economies and cultures.   And compounding this by looking at “households,” and thus comparing dual earners with single earners, only further obscures the issue.

Patrick Appel:

Dylan Matthews looks at the distribution of high earners across the country, which prompts Reihan to sound off on dual-earner families. I’m with Joyner

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