Wednesday, September 28, 2011

New format

Doesn't this look dark and mysterious? Comments?

Tuesday, September 20, 2011

Netflix and the Post Office: Creative destruction at work

If you are a Netflix subscriber you got CEO Reed Hasting's insulting apology yesterday, telling you that they were going to split into 2 services. I saw this letter as saying "We are sorry for buggering you. Now, how about another good buggering", as now we find out that not only has the price gone up 60%, but we will now have to deal with 2 web sites if we have both streaming and DVD's. The WSJ reports that Netflix had received 16k angry emails by noon.

It is clear that the future of this service is in streaming video, a far superior way to deliver video than waiting a few days for the post office to bring a dvd to you. The WSJ story also noted that Netflix expects dvd by mail to be gone in 15 years. I'm thinking it won't last that long.

So the question now is "Once Netflix (or Qwickster) is no longer shipping dvd's by mail, why do we need the post office?". Think about it. What does the USPS bring you that you want or need? Most days whatever I pull from the mailbox gets tossed in the recycling box right away. I still get Sports Illustrated and The Economist by mail, but I could read those on line. In fact, in recent months the post office had taken to delivering my magazines 2 days later than before, making it more likely that I will begin reading on line. They must have hired consultants from the newspaper industry: when demand for your product declines, decrease it's quality and hasten your demise.

Both Netflix and the USPS are examples of what economists call "Creative Destruction". New, better ideas replace the old. The post office has been sheltered from this somewhat, in that it has a government granted monopoly to deliver the mail. This is a situation that makes no sense whatsoever, particularly today.

If the Post Office were really a private company, as it is sort of supposed to be, it would have been finding other technologies and products as it saw that the growth of the internet meant a decrease in it's traditional business. It would also have already closed the thousands of post offices that they now say they need to close. Unfortunately, they are still controlled by politicians, who control their pricing and operation. You can be pretty sure that Congress will not let them close those PO's. Would you want to hand a potential election opponent the attack slogan "He closed your post office"? I am betting that even those government-hating Teabaggers will not allow their own local PO to close.

Here's what we ought to do: get out of the postal business. Sell the post office in an IPO and let it be run as a real business. Let competitors compete with it, thus improving service and lowering costs. I am guessing that in a competitive business, the postal workers wouldn't take their lunch break at noon, just when the few customers they still have come in to use the post office.

Protecting the post office makes no more sense than protecting the typewriter business would have 25 years ago. Or, protecting the DVD business does today.

Isn't it interesting that the government dictates that everyone gets postal service, which we could certainly live without, but not medical care, for which our need is far more important!

Monday, September 12, 2011

Some people never learn!

The Boulder History Museum has asked me to be the MC for their fundraiser again this year. Since it is only 2 weeks away I can only assume they spent the last 50 weeks trying to find someone better, but were unsuccessful. If you live in or around Boulder, please think about going. They have a history scavenger hunt, and it is great fun. You can get details HERE.

And while I'm pluggin my gigs, I'll be doing murder mysteries at the Boulderado again this fall. Murder is set in 1959, and I get to play a director of bad of them was called "The Ticklish Economist". You get amused, fed, and even get valet parking for $68. Might even have someone die in your lap. Details are HERE

Thursday, September 8, 2011

A Bit About Game Theory

While I'm watching the first NFL game of the season, I have also had time to read this story in the Economist about game theory. Has nothing to do with the football game, but the new NFL kickoff rule, which now leads to about 6 straight minutes of no action, sure does give a fellow time to catch up on his reading. And remember, the ball is only in play for about 11 minutes during the 3+ hours the game is on.

I don't know much about Game Theory, but I am fascinated by it. It is soundly based on one of the few things economists know for sure, which is that incentives matter. Reading Bruce Bueno de Mesquita's (if his nickname isn't "Skeeter", then he has not hung out with the right people) book "The Predictioneer's Handbook" was a real eye-opener about how looking at incentives will tell you how something will turn out.

Game Theory models are being used in all sorts of places now give people an edge in negotiations, or just make them work more smoothly. Let's hope Obama hires one of these consultants before he allows the GOP to kick his ass again and lets the country get destroyed by the Tea Party!

Thursday, September 1, 2011

The Education Industry Needs a Bill James!

With school starting, there seems to be a lot of chatter about how to fix our public schools. Of course, if there were a simple magic bullet for this, we'd have already shot it. Based on the stuff I have read and heard over the years, including this very interesting conversation on Econtalk, there are a few things we know for sure, and a few big hurdles to fixing things.

Here's what we know for sure
1) The value of good teachers to society is enormous!!
2) The negative effect of bad teachers is also enormous!!
3) Incentives matter, which is of course something we know about the world in general, and one of the few things you would find economists agreeing on.

That's about it for the knowable. Here's what we don't know:
1) How to "make" a good teacher.
2) How to accurately measure teachers to determine which ones are good and which should be selling Lady Kenmores.
3) How to get people who would be good teachers to teach, and keep them from burning out.

Of course, we do get a lot of bullshit from politicians about easy fixes. Conservatives say that the unions are to blame, and if we just got rid of them we could fire all the bad teachers, make schools compete and problem solved. And certainly they are right that unions have stood in the way of changes that would allow bad teachers to be fired, and incentive programs put in place to reward good performance. But, if you look at my list of "don't knows", well that won't fix it.

Even if there were no unions and we could fire all the bad teachers, we still need to replace them with good ones. And it is unlikely that any school district could afford the type of teacher pay that would attract good teachers and get them to stay. If fact, lack of unions would probably mean teachers in general were earning less, and getting fewer benefits and that would deter talented people from taking up the profession. And the competition argument is unproven. Some charter schools outperform regular schools, but that data I have seen does not show conclusive evidence that the existence of charters, or competition with private schools is definitely beneficial. Also, some "choice" programs, like the one in Jefferson County here in Colorado, seek to send money religious schools, which is both unconstitutional and not a good idea.

Liberals of course say we have to spend more money. While this is probably true in poorer districts, the data I have seen do not support the idea that money alone will fix the problem. The Economist published a study a few years ago comparing results among countries, and the countries that get the best results do not spend more than we do.

And everyone liked the idea of more testing, but that just gives schools an incentive to teach kids to do well on the test, no necessarily learn what they should. In the worst case, it gives the schools incentives to cheat, as has happened in Georgia.

So, what do we do? I wish I had an answer, because I think the problem is cultural, which is hard to overcome. And certainly, changing the work rules in schools would be a great first step. But then what?

First, we need a Bill James of Education, someone to come in and look at the data and get to the heart of how to measure success on the school and teacher level. The Econotalk I linked to above talks about some progress in this regard, and some problems.

But here is the really hard part. We need to identify young, enthusiastic, hard-working, talented people who would be good and teaching, and get them to become teachers. Then we have to pay them enough to keep at it, and make sure they don't burn out on it. Getting rid of the bad teachers won't help us much unless we can find better ones to replace them.

The problem is, in our society, teaching is not a high status profession. The Economist study mentioned earlier determined that in the countries that do the best job of education, it IS a high status profession. Teachers are chosen only from the top of their college classes, and becoming a teacher is considered a major achievement. This is a cultural issue, and culture is very hard to change. I fear that our since we consider teaching to be more of a mid-level achievement, that we will have a hard time making huge gains in improving our education.

Ok, so there it is. More depressing news from the Economics teacher. I promise in the next week that I will write here the story of Mr. Lynch, the one teacher I had in high school who had no business teaching. It is a hilarious story, but depressing none the less.