SPSS Guru embraces the freeware, R

From Forbes:

Power in the Numbers
Quentin Hardy, 05.24.10, 12:00 AM ET

We clock up more new data every couple of weeks than humanity made from its start until the year 2000. This mass of data promises freedom, efficiency and power to the societies that know how to manipulate it. Norman Nie taught us how to manipulate data.

While a newly minted political science Ph.D. in 1968, Nie co-invented the Statistical Package for Social Sciences. Along with innovations from a few other pioneers like the SAS Institute, it marked the birth of analytic and predictive statistical software, stuff that tells corporations how to make, price and sell things. Now 67, Nie is championing a new style of fast and cheap prediction analytics that will give statistical tools to laymen, just as word processors made us all publishers and YouTube made us all film producers.

"We are at the beginning of a process that will change the nation-state," he says. "People will look at reactions to a product or a policy in ways never before known. It could mean highly empowered individuals or better manipulation and control." Either way, he figures, we need to get smart about it.

Statistics is a science of comparatively recent invention, beginning in the 17th century with analysis of gamblers' odds and flowering in the early 20th with tools for averaging, weighing and guessing. The human brain is a statistical manipulator in that it detects patterns and likelihoods from a large collection of observations. You might decide whether to eat at a new restaurant by judging factors like how crowded it is, whether there is a maitre d', whether you've liked that type of food before. What our brains do with a hunch, computers do by looking at data points, sometimes trillions of them.

Nie's SPSS started out as an academic exercise and soon became a serious business (one that IBM bought for $1.2 billion last summer, two years after Nie left). It's a collection of software programs that let experts quickly detect patterns and thus make predictions, whether of how pricing affects Mother's Day Internet flower sales or how demographic changes determine the number of prisons needed.

Combine that commercial success with the open-source software movement and you have a new company, Revolution Analytics. The firm, which was founded in 2007 in Palo Alto, Calif., now has around 30 employees.

Revolution takes as its starting point the statistical programming language R, a freebie invented in 1993 by some academics in New Zealand and since then enriched by many volunteers. The public-domain library of R software numbers 2,500 routines.

Using an R package originally for ecological science, a human rights group called Benetech was able to establish a pattern of genocide in Guatemala. A baseball fan in West Virginia used another R package to predict when pitchers would get tired, winning himself a job with the Tampa Bay Rays. An R promoter in San Francisco, Michael Driscoll, used it to prove that you are seven times as likely to change cellphone providers the month after a friend does. Now he uses it for the pricing and placement of Internet ads, looking at 100,000 variables a second.

R is a powerful tool but difficult for novices to use. Nie's Revolution Analytics aims to make it more accessible with a better-organized library, capabilities for bigger jobs and a user interface that lets users drag and drop statistical analyses into place, outputting easily read charts. Revolution offers a free stripped-down version for academia and a deluxe version for business, which Nie says will undercut SPSS' and SAS' prices by 80%. Revolution has won customers like Pfizer, Yale Cancer Center, Bank of America and Motorola.

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Nie may even hope to do some good. He got rich from SPSS but remained an academic at both the University of Chicago and Stanford. An early book, The Changing American Voter, used statistical analysis to display a growing sophistication and tolerance among the electorate. A later volume, Education and Democratic Citizenship in America, charted how our more educated population was more tolerant of difference but not more participatory in government.

Nie thinks his own creation has played a role in a current problem in America, the rise of extremes in political parties. These days, he says, cheaper publishing technologies and, yes, sharper statistical analysis have given us a more riven politics.

"Polling has been a blessing because you can find out what people really want," he says, "but you change the standard deviation around the middle when you can slice and dice more and more. ... Technologies are more efficient, but they seem to pull apart society, identifying the most ideologically active."

The primary system was supposed to take power from the special interests in smoky rooms but created low-participation polls that attracted zealots on both sides of the aisle who could be found using social science statistics. They elected candidates as extreme as themselves. Between those two factors, says Nie, "we are in deep trouble."

His answer: Change politics further with R-powered statistics. Nie posits that statisticians can act as watchdogs for the common man, helping people find new ways to unite and escape top-down manipulation from governments, media or big business.

"Everyone can, with open-source R, afford to know exactly the value of their house, their automobile, their spouse and their children--negative and positive," he says, presumably joking about the last bits. "It's a great power equalizer, a Magna Carta for the devolution of analytic rights."

He is also a realist and says the opposite could also happen, particularly as more and more of what we do and say is captured as statistical phenomena. "The customer pressure on business has never been better, but knowledge of manipulation and control has never been better, either," he says.

Predictably, both SAS and IBM have taken steps to accommodate R and posit themselves in the middle of the predictive analytics revolution. IBM says that algorithms written in R will be accessible in their system, and SAS is making room for R results to be displayed in its technology. "The more perspectives you have on analysis, the better," says Anne Milley, a senior director at SAS. "Science used to be considered deterministic, but we live in a probabilistic world."

Nie may also take flak from R's open-source community, which includes plenty of fanatics who think software wants to be free. Says R co-inventor Robert Gentleman, who sits on the Revolution Analytics board: "If he comes out saying that he's better and faster, he's just going to annoy people."

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Nie grew up in St. Louis, dropping out of high school to go to Mexico, where he became a published fiction writer while in his teens. He came home to take a degree in sociology and political science at Washington University in St. Louis. His Ph.D. dissertation at Stanford involved heterogeneous data from seven different countries.

"There was no way I could get through all of that by hand," Nie says. "I had to figure out a way to program for statistical procedures." Working with Hadlai (Tex) Hull, a recent M.B.A., and Dale H. Bent, a doctoral candidate in operations research, he developed SPSS as a shortcut to crunching different types of data. SPSS quickly caught on, and people began asking if they could use it on their university's computers. The developers figured they could sell tapes of the code for $400, about what a junior professor could pay without departmental permission.

Nie went to the University of Chicago in 1969 and continued working with Hull on developing SPSS. In 1973 the Internal Revenue Service told Chicago it had a profitmaking company inside the school, and Nie was advised to take a year off to develop his project. SPSS was incorporated in 1975, with no venture capital or financial backing but strong ties to academic buyers. Nie and Hull shared ownership after buying out Bent, who returned to Canada.

It is all in the rearview mirror. "R is an absolutely massive advancement on the kind of analytics I invented," he says. "It's an opportunity to change the game in the fastest-growing field in software."

Nie is working on a new book about great disruptive technologies in history: the printing press, the cotton gin, birth control pills, the Internet. Analysis software, he feels, will change the world again, likely in ways we still do not understand.

Across the street from Revolution's office, Stanford offers a graduate course titled "The Elements of Statistical Learning," whose 700-page textbook is dominated by R functions. Many of its graduates are building social sites like Facebook and Twitter.

"Large corporations creating data, people in international social groups, Internet translation of languages--it erodes national boundaries," Nie says. "What's all this mean--highly empowered individuals or better control? It does possibly create a more anarchical and unethical world. Maybe business can't be observed as much, but maybe it can be observed better. All technologies are two-edged blades."

Valuations: Are These PRPS Jeans Worth $1,000? - Scene Asia - WSJ

Consumed ...
"Good news for those who love designer jeans but wish there was a way to spend even more money on them. PRPS, a U.S. company that weaves its denim on antique looms in Japan, has a pair of the ubiquitous denims that surpasses the $1,000 threshold."

Valuations: Are These PRPS Jeans Worth $1,000? - Scene Asia - WSJ

Prince Rupert, always a day sooner

Prince Rupert, Canada’s third largest deep seaport is unique in North America for offering the shortest freight commute to Asian ports. Canadian National Railways offer the following transit times to Asia:

Vessel transit times:

Prince Rupert to Tianjin	15 days
Prince Rupert to Shanghai	14 days
Prince Rupert to Qingdao	14 days
Prince Rupert to Guangzhou	17 days
Prince Rupert to Hong Kong	16 days
Vancouver to Tianjin	16 days
Vancouver to Shanghai	16 days
Vancouver to Qingdao	16 days
Vancouver to Guangzhou	18 days
Vancouver to Hong Kong	18 days

http://www.cn.ca/en/shipping-china-asia-north-america-grain.htm

The trade deficit and logistics imbalances

By Clyde Prestowitz

The FT's Martin Wolf managed to find some encouragement in the final communiqué from the Seoul G-20 meeting. In a column earlier this week, he said that language describing the use of various measures of global imbalances and suggesting the need for action to rebalance chronic current account surpluses and deficits suggested that, under the radar, the U.S. and China are moving toward consensus on a way out of the apparent impasse reached in Seoul.

I told him that I marvel at his optimism. But let's say, for the sake of argument, that he's right and that the U.S. will move toward trying to produce more of what it consumes and exporting more of what it produces while China does the opposite. I think there remains the major question of whether either side can actually, physically do what is necessary to achieve rebalancing.

This question occurred to me last night after a chat with a friend from FedEx who mentioned that while his planes fly fully loaded from Asia to America, they return to Asia almost empty. Well, of course, that makes a lot of sense because we don't make much here in the United States that FedEx can take back. Of course, we do export to China, but in recent years our biggest or second biggest China bound export items have been waste paper and scrap metal, and those items go by ship. In the high-value, low-volume, high-tech category of goods that fly well, the United States, despite its self-image as the  world's high tech leader,  has a trade deficit that will likely exceed $150 billion this year.

Let's take a few major products to see how things might work. Steel, for example, is a key product for any industrial economy. The United States imports about 30 percent of the steel it uses while China has more steel making capacity than the rest of the world combined. So, in a rebalancing scenario, Washington would try to find ways to encourage U.S.  companies to buy more of their steel from American producers. But the government would run into the problem that there may not be enough actual production capacity left in the United States to allow a substantial reduction in imports.

Of course, more production capacity can be built, but not in any short period of time. Construction of a new steel mill, even if anyone would have the courage to build one in the United States knowing that China's producers could at any moment unleash a flood of cheap exports into the market,  would take one to two years.

At the same time, China already produces virtually all of the steel it uses and has enough production capacity to fulfill domestic demand many times over for a long time to come, even without increasing production capacity. So China's steel industry really can't rebalance. It can't sell a lot more than it already does at home, and if for some reason it stopped its overseas shipments it would be left with massive excess production capacity that could easily bankrupt its companies.

As another example, take the Apple iPad. Apple is an American based company to be sure, but virtually nothing in the iPad is made in America. Of course, the product is conceived, designed, marketed, and sold in the United States, but the components are mostly made in Japan, South Korea, Taiwan, and Singapore, and the assembly takes place in China. So rebalancing implies that maybe some iPad production would be switched to America.

In principle, there is no reason why the semiconductor chips, displays, and other key components of the iPad couldn't be made competitively in the United States and inexpensive assembly could, perhaps, be done in Mexico or elsewhere in Latin America. But that would mean that the major factories and investments that have been made in iPad production in Asia would have to be at least partly abandoned. That would result  huge financial and job losses to which Asian governments would object.

I sometimes wonder if economists consider these structural, nuts and bolts issues when they talk blithely of rebalancing. These are not things that can be turned on and off like a spigot. It takes a couple of years to build a new semiconductor plant and costs $5-8 billion. Once that investment is made, it is not quickly abandoned unless there is some major change in circumstances.

In his column, Wolf insisted that the U.S. and China must achieve rebalancing fairly quickly in order to avoid protectionism. But is it possible that the action actually runs in the opposite direction -- that some degree of protection might be necessary in order to create the change in circumstances necessary to achieve big shifts in the location of production and thereby also achieve the holy grail of rebalancing?

Clyde Prestowitz is president of the Economic Strategy Institute and author of The Betrayal of American Prosperity.

The Debtor of the Western World - NYTimes.com

Op-Ed Contributor

The Debtor of the Western World

By JOHN BANVILLE

Will action by the European Union keep the debt contagion from spreading — and dispel doubts about the stability of the euro?


THIS year there were no fireworks. Throughout most of the past decade, for weeks before and after Halloween, the night skies over Ireland were filled with the crack and crash of bursting rockets and fountains of multicolored flame. Since fireworks are illegal here they had to be bought in Northern Ireland and smuggled across the border — quite a turnabout from the days when the I.R.A. smuggled tons of explosives the other direction, during the Thirty Years’ War it waged on the Protestants and the British Army garrison in the North from the 1960s to the 1990s.

Throughout the 2000s there was a lot of cross-border shopping, almost all of it one-way, since usually in those years the euro was strong and the British pound weak. Newly rich middle-class couples from the Republic, riding the broad back of the Celtic Tiger, would travel north on Saturday mornings, have a leisurely lunch at one of Belfast’s fine new restaurants, spend the afternoon in the supermarkets and return at evening happy as Visigoths with their booty — liquor, cigarettes, electrical goods, designer-label clothes and, as the autumn set in, boxes and boxes of fireworks. Those were the sparkling years.

Now, with the Tiger dead and buried under a mound of ever-increasing debt, a silence is falling over the land. This year, the eve of All Saints passed in a deathly hush, save for a few damp squibs. There seemed little left to celebrate, with nothing to be seen in the skies save, in the murky distance but approaching ever nearer, the Four Horsemen of our particular Apocalypse: the International Monetary Fund, the European Commission, Brussels and the Iron Chancellor, Angela Merkel. The shopping trips of yesteryear are gone with the snows; indeed, many of the S.U.V.’s that carried the merry marauders northward have been sold off at a loss, or repossessed.

The wildest urban legends are readily believed. There is said to be a two-month backlog at the abattoirs, as families abandon the expensive pets, including Thoroughbred racehorses, that they bought in the fat years and now can no longer afford to feed. One hears stories of the return of bartering: a yacht swapped for a mobile phone, a Harley-Davidson exchanged for a bicycle. There are moments of giddiness and breathless panic when it feels as it must have in the last days of the Weimar Republic.

At first, when the poor beast began to sicken, we Tiger cubs set up a great roaring and ranting. Who is to blame for our sudden travails? we demanded — somebody must be to blame. The bankers? Them, certainly. The politicians? Well, the politicians are always to blame, so nothing new there. The markets, those shadowy entities that seem to operate by whim? Ourselves, perhaps? — now, there was a sobering possibility.

Pundits in those early days used to urge us to think of the country as being at war and to fire ourselves up with the same plucky spirit that saved civilization when it was threatened by German and Japanese warmongers. But how is it possible to be at war when the enemy cannot be identified, and when those who raided our coffers and beggared us are by now beggars themselves? One Irish building firm, owned by a decent and well-meaning man, is said to have debts of a billion and a half euros, about $2.1 billion. Imagine that poor fellow’s nights.

It is the figures, mainly, that cow us into silence. It is estimated that the banking debt of this nation, which has a population of only 4.6 million, may be substantially more than 100 billion euros. That is 100,000 millions and rising. When we were at school it amused our science teachers to dazzle us with astronomical statistics — so many myriads of light years, so many zillions of stars — but the numbers that we are being forced to count on our too-few fingers now have nothing to do with the fanciful dimensions of outer space. They represent precisely the breadth and depth of the financial hole into which we have toppled headlong.

In the months after September 2008, when the Irish government, after a night-long crisis meeting, was forced to give a guarantee of some 400 billion euros — money we had no hope of ever having — to save the Irish banks from collapse, we used to say that it would fall to our children to pay for our financial folly. Now we know that it will be our children and our children’s children and our children’s children’s children, unto the nth generation, who will bear the burden of our debts, including the “substantial loan” from international lenders that officials now acknowledge is necessary.

There used to be a nice acronym that neatly expressed how the Irish people conceive of themselves: MOPE, that is, Most Oppressed People Ever. For a decade or so, when the Tiger was at its fiercest, we threw off the mantle of oppression, as once we had thrown off what used to be called “the yoke of British rule.” On Wednesday, the British chancellor of the Exchequer, George Osborne, announced in Brussels that his government stood ready to help Ireland in its hour of need. Oh, bitter day.

All the same, life goes on, somehow. We are learning a new resilience. Humbled as we are, we might even begin to learn social responsibility, a quality in which we have been singularly lacking up to now. Who knows, we may at last recognize the irreplaceable value of public and private honesty. But let us not light the firecrackers just yet.

John Banville is the author of “The Sea,” and most recently, “The Infinities.”

The Debtor of the Western World - NYTimes.com

Google Fashion Shopping Site Makes Debut - NYTimes.com

Google all the way to Gucci ...

November 17, 2010
By CATHY HORYN

YOU know how remote and strange the fashion world is when you go to Google’s headquarters in Mountain View, Calif. For one thing, employees are zipping around the sprawling campus on scooters and bicycles, so that pretty much eliminates platform shoes and minis. And for another, there are way too many snack stations at Google. Fashionistas are funny about food.

But go a couple of blocks from the main building, and the mood and the desk décor are conspicuously more invested in style. One employee, Abigail Holtz, has on an ivory silk mini dress with a plunging neckline and a pair of high heels. A colleague, Marissa Goodman, is more casual — but no less savvy. She used to design women’s clothes for Old Navy and Esprit.

In a deliberate collision between nerds and fashion mavens, Google has created a new e-commerce site that significantly improves how fashion is presented and sold online. The site, Boutiques.com, which went live on Wednesday morning, may also change how people shop for clothes.

Boutiques.com has so many capabilities and components that even Google engineers have a hard time qualifying it. It is a collection of hundreds of virtual boutiques merchandised — or, in the new parlance, “curated” — by designers, retailers, bloggers, celebrities and regular folks. You can shop in the style of, say, the actresses Carey Mulligan or Mary-Kate and Ashley Olsen — among the celebrities who signed up — or you can build your own boutique and amass followers who can comment on your taste.

It is a place, then, to show off your fashion acumen, much as millions of Polyvore users already do in their picture collages.

It is also a source of inspiration. In every boutique on the site, there are dozens of additional choices inspired by a designer’s or celebrity’s style — generated by algorithms — with product photos that are much larger and sharper than on other shopping sites.

And if you don’t know how to wear the leopard pumps you just bought, there’s a panel of street-style photos on the right side of the site that visualizes the shoes in more expressive modes. Indeed, whatever style preference you indicate — classic, romantic, casual — the inspiration panel automatically adjusts for them, like a support group that can read your mind with surprising precision.

That may be Boutiques.com’s ultimate game-changer: how precisely it analyzes your preferences to give you what you requested. As many online shoppers know, search engines tend to give you stuff you don’t really want. A request for fern-colored shoes might yield fern shoes, plus fern-print blouses.

But, as two experienced online shoppers found when they tested the site earlier this week at Google’s New York office, if you ask for cobalt blue shoes, you get them. And if you refine your preferences with a click or two, you get even more specific styles.

The process at Boutiques.com is accomplished through visual search technology, and what style experts like Ms. Goodman and Ms. Holtz conveyed to Google code writers about the nuances of fashion — from color and pattern to silhouette and what looks good together and what does not.

The technology was actually developed by Like.com, a Silicon Valley company that was co-founded by Munjal Shah, which Google acquired last summer for a reported $100 million. Before the purchase, Like.com had created a number of fashion e-commerce sites, including Covet.com and the styling tool Couturious.com.

“I’ve always been impressed with Like.com,” said Sucharita Mulpuru, who is a vice president and retail analyst at Forrester Research and is familiar with the work on Boutiques.com. “I was just floored by the technology back then, and it’s evolved since. They’ve just honed the algorithm.”

Fueled in part by new gadgets like the iPad and more dollars spent by retailers on technology, online sales have generally outpaced brick-and-mortar sales. “I feel e-commerce in the last 12 months has caught a second wind,” Ms. Mulpuru said. According to Forrester, Internet sales of apparel and accessories this year will account for 14 percent, or $25 billion, of the $173 billion that Americans will spend online.

Mr. Shah is the team leader for Boutiques.com, with a left brain-right brain group of technicians and tastemakers. As he said in interviews conducted over the last week: “Online fashion shopping has to be universal and curatorial at the same time. This is an answer.”

A number of big companies, most notably Amazon and eBay, have been trying to get a bigger slice of the online apparel pie. But while they have improved the stylishness of their fashion pages, they may be ultimately constrained by their somewhat static platforms. It’s hard to mix DVD players and $900 Christian Louboutin peep-toe pumps.

Meanwhile, dedicated fashion sites like Shopstyle.com have gathered fans.

“Shopstyle’s done one of the best jobs in my opinion of creating the right high fashion experience,” Mr. Shah said. “But we think of it as Layer 1. It’s kind of broken things down, but they didn’t go for a detailed categorization and they didn’t personalize.”

At the time that Mr. Shah and his team at Like.com created Covet.com, a fashion personalization site, they didn’t really have the full picture of all that was possible on the Web. “We captured your preferences, but we couldn’t analyze the items to see if they met your preferences,” he said. “We did one half, but you need both halves. We achieved the other half only by rebuilding the technology with a whole new way of analyzing patterns and silhouettes.”

In simple terms, what the style experts did was come up with about 500 words for color, shape and pattern — robin’s-egg blue, for instance, and gingham — and then the engineers trained the algorithm to know what each was. They would have pictures of what gingham was and what gingham wasn’t. “We did that word by word by word,” Mr. Shah said. A lot of sites don’t have, or use, vision technology. They end up stuffing in a bunch of key words, and the search engine gets confused. So you get fern-print blouses when what you really want are fern-colored pumps.

Despite the number of products a search on Boutiques.com kicks out, the download time is very fast, and choices appear on extra-long pages so you don’t have to keep clicking. Virtually every kind of information is analyzed — price, brand, color and so on. The site also includes a system called “Complete the Look,” for which Ms. Goodman wrote “a ton of rules,” Mr. Shah said, “and our computer vision and machine learning guys implemented them.”

Additionally, there is a good sense of discovery on the site; items come to your attention — almost as they do in stores — that you didn’t necessarily plan to buy. Seasonal trends, like fall’s military looks, can be boosted on the site. Again, to Ms. Mulpuru, “that’s where Munjal gets it — fashion is about discovery.”

Users of the site will have the option to take a personal style quiz, which ranks a broad spectrum of loves and hates, but Mr. Shah is convinced that most people will prefer to find their “style twin” and shop in that individual’s boutique. For now, the site has only women’s fashion, but Mr. Shah wants to expand to men’s wear and, maybe one day, home furnishings.

Among the designers who signed up are Tory Burch, Oscar de la Renta and Isaac Mizrahi, who plans to offer signature pieces like a plaid cocktail dress and a military coat.

Bloggers include Bryan Boy and Rumi Neely of Fashiontoast. Other celebrities, whom Google said it has paid to host boutiques, are Claire Danes, Ashlee Simpson and Nicole Richie. (By the way, Google authenticates the celebrity boutiques, so imposters be warned.) Retailers include Neiman Marcus, Barneys New York, Shopbop, Net-a-Porter and Scoop NYC. Potentially, fashion magazines could have boutiques. So could a character from a television show.

“Somebody may come in and build 20 goth boutiques in the first day,” Mr. Shah said.

On Monday, Simone S. Oliver, a Web producer for The New York Times, and Jane Son, a publicist, gave the site a test drive for this article. As the two women, both avid online shoppers, slowly became used to the site, which they later admitted could be overwhelming, Ms. Oliver said, glancing at the product categories, “I’m curious why you put shoes first.”

Ms. Goodman replied, “Shoes are always one of the most popular categories.”

Ms. Oliver laughed. “Good answer.”

As Ms. Son typed in “duck boots” on her laptop, yielding a bunch of choices, Ms. Oliver searched for cobalt platform pumps and a black leather shift dress, quickly finding things she liked. She skipped over the celebrity boutiques, preferring the blogger and trend boutiques. “I get more inspiration from girls on the street than celebrities,” she said.

But, she added: “I think the celebrity choices are useful for body shape. There are some people in the limelight that have a similar body shape to mine, and a certain silhouette would look good on me. And shades of skin tones.”

Mr. Shah nodded. “We could add skin tones to the preferences.”

Both women liked the inspiration panel, and also how refined the search was. “On other sites, you can’t edit your choices as much,” Ms. Son said. “And I need an edited selection.” Ms. Oliver rated the sense of discovery “A-plus,” adding: “I just found out about a shoe brand that I had never heard of — Velvet Angels. They’re more in my price range than, say, Yves Saint Laurent. That was fun. I was looking for something else, and it popped up.”

She said to members of the team, “I love that you guys have so many options but you also have the options that make sense.”

Yet, after the meeting, both women identified an obvious shortcoming of Boutiques.com: As curated as it is, a lot still comes up in a search. Suggesting that too much information may be a turnoff to inexperienced Web shoppers, Ms. Son said, “It’s going to take some getting used to, that’s for sure.”

Nodding, Ms. Oliver said: “I feel it’s an amazing site, but there are a few aspects that are not very intuitive. Some people might go back to the regular Google search and look for their boots.”

Fortunately for them, the site has that option, too.

Google Fashion Shopping Site Makes Debut - NYTimes.com

The Two Cultures - NYTimes.com

November 15, 2010

By DAVID BROOKS

Many of the psychologists, artists and moral philosophers I know are liberal, so it seems strange that American liberalism should adopt an economic philosophy that excludes psychology, emotion and morality.

Yet that is what has happened. The economic approach embraced by the most prominent liberals over the past few years is mostly mechanical. The economy is treated like a big machine; the people in it like rational, utility maximizing cogs. The performance of the economic machine can be predicted with quantitative macroeconomic models.

These models can be used to make highly specific projections. If the government borrows $1 and then spends it, it will produce $1.50 worth of economic activity. If the government spends $800 billion on a stimulus package, that will produce 3.5 million in new jobs.

Everything is rigorous. Everything is science.

Conservatives, who are usually stereotyped as narrow-eyed business-school types, have gone all Oprah-esque in trying to argue against these liberals. If the government borrows trillions of dollars, this will increase public anxiety and uncertainty, the conservatives worry. The liberal technicians brush aside this soft-headed mush. These psychological concerns are mythological, they say. That’s gaseous blathering from those who lack quantitative rigor.

Other people get moralistic. This country is already too profligate, they cry. It already shops too much and borrows too much. How can we solve our problems by borrowing and spending more? The liberal technicians brush this away, too. Economics is a rational activity detached from morality. Hardheaded policy makers have to have the courage to flout conventional morality — to borrow even when the country is sick of borrowing.

The liberal technicians have an impressive certainty about them. They have amputated those things that can’t be contained in models, like emotional contagions, cultural particularities and webs of relationships. As a result, everything is explainable and predictable. They can stand on the platform of science and dismiss the poor souls down below.

Yet over the past 21 months, it has been harder to groove to their certainty. To start with, the economy has not responded as the modelers projected, either in the months after the stimulus was passed or this summer, when it was supposed to be producing hundreds of thousands of jobs. It has become harder to define how much good the stimulus package is doing. An $800 billion measure must leave a large footprint, but it is hard to find in a $70 trillion global economy.

Moreover, it has been harder to accept that psychological factors like uncertainty and anxiety really are a mirage. The first time a business leader tells you she is holding off on investing because she is scared about the future, you dismiss it as anecdote. But over the past few years, I’ve had hundreds of such conversations.

It’s been harder to dismiss morality as a phantom concern, too. Maybe in a nation of robots the government can run a policy that offends the morality of the citizenry, but not in a nation of human beings, as the recent elections showed.

Nor has the world come to look simpler and easier to manipulate since the stimulus passed. It now looks more complicated. It’s one thing to hatch an ideal policy in an academic lab, but in the real world, context is everything.

Ethan Ilzetzki of the London School of Economics and Enrique G. Mendoza and Carlos A. Vegh of the University of Maryland examined stimulus efforts in 44 countries. In a recent National Bureau of Economic Research paper, they argued that fiscal stimulus can be quite effective in low-debt countries with fixed exchange rates and closed economies.

Stimulus measures are generally not as effective, on the other hand, in countries like the U.S. with high debt and floating exchange rates. The authors of the paper pointed to a series of specific circumstances that complicate, to say the least, the effectiveness of increasing public spending: How much stimulus money ends up flowing abroad? What is the relationship between fiscal policy and monetary policy? How do investors respond to fear of future interest rate increases?

One could go on. It’s become harder to have confidence that legislators can successfully enact the brilliant policies that liberal technicians come up with. Far from entering the age of macroeconomic mastery and social science triumph, we seem to be entering an age in which statecraft is, once again, an art, not a science. When you look around the world at the countries that have come through the recession best, it’s not the countries with the brilliant and aggressive stimulus models. It’s the ones like Germany that had the best economic fundamentals beforehand.

It all makes one doubt the wizardry of the economic surgeons and appreciate the old wisdom of common sense: simple regulations, low debt, high savings, hard work, few distortions. You don’t have to be a genius to come up with an economic policy like that.
The Two Cultures - NYTimes.com

There is No College Cost Crisis - NYTimes.com

November 15, 2010, 9:00 pm

By STANLEY FISH

Stanley Fish on education, law and society.

There is no college cost crisis. That at least is the conclusion reached by the economists Robert B. Archibald and David H. Feldman in their new book, “Why Does College Cost So Much?” The title question is a teaser, for the book’s message is that it doesn’t. In fact, say the authors, “for most families higher education is more affordable than it was in the past.”

Archibald and Feldman build their analysis of college costs in opposition to what they call the “new orthodoxy” or the “dysfunctionality narrative.” In that narrative, repeated almost religiously by critics and politicians, colleges and universities have “drifted away from their social mission,” surrendered to the false god of research, and engaged in an “arms race” for more prestigious scholars and ever-glitzier student unions. As a result, “their costs have sprawled out of control” and “the college degree, an essential entry ticket to the modern economy” has become “increasingly out of reach for families with middle-class incomes.”

In short the conditions everyone ritually complains about have an internal cause: if colleges and universities find themselves in a bad financial place, they have only themselves and their irresponsible practices to blame.

That’s just wrong, declare Archibald and Feldman. The causes of the increase in college costs (an increase that has not, they contend, put college “out of reach”) are external; colleges are responding, as they must, to changes they cannot ignore and still provide a quality product. Chief among these is the change in the sophistication and cost of the technology that has at once transformed the setting of higher education and become one of the areas of knowledge higher education must impart to students. Students expect to be instructed in the new technologies, and that instruction requires their installation, and then as new refinements emerge, their re-installation. “[A] modern university must provide students with an up-to-date education that familiarizes students with the techniques and associated machinery that are used in the workplace the students must enter.”

Were colleges and universities to strike a Luddite stance and hold out for pencil, paper and blackboard instruction, they would “in effect be guilty of educational malpractice.” When it comes to incurring these new expenses, they “do not have a real choice.” In no sense, then, are changes in price “driven by any pathology in the higher education industry.

But shouldn’t the introduction of technology reduce costs by creating greater efficiencies?

Yes, answer Archibald and Feldman, if the industry in question produces durable goods on an assembly-line model or offers services that can be delivered by relatively unskilled labor aided by new devices. But in industries like education, medicine and the law, where advances in technology lead to a demand for ever-more-highly-educated personnel and mechanization is frowned upon because of a concern with quality, technological advances will raise costs rather than reduce them. If you understand the “increase in the intensity of equipment use and in the skill requirements for those who work” in the academy, you will also understand why “these changes have increased higher education costs more than the cost of most [but not all] goods and services.”

Not, however, to the point of making the product unavailable to middle-class buyers. This is the second prong of the “dysfunctionality narrative” Archibald and Feldman are at pains to debunk. Here their target is a way of framing the issue. Usually the question asked is, “What percentage of a family’s income goes to the cost of higher education?” Archibald and Feldman prefer to “ask instead whether the amount left over after subtracting the cost of college is rising or falling over time.” The answer they give (buttressed by statistical tables) is “rising”: what their data show is that “over long stretches of time, college costs have been rising at a faster pace than income per worker, yet the average worker’s actual dollar income has gone up by more than the costs, leaving more resources on the family to spend on other things.”

In the story the “new orthodoxy” tells, “prestige competition and gold plating needlessly push up costs . . . which then cuts off access to higher education.” “We think,” Archibald and Feldman conclude, “this story is about as wrong as it is possible to be.” If the important figure is “the difference between income and the cost of college” then “by that criterion there is no national affordability problem” and “talk of a college cost crisis is unnecessarily alarmist.”

In the spirit of full disclosure, let me say that my enthusiasm for Archibald’s and Feldman’s analysis is in one respect personal. In 2003 I wrote three columns (one in this newspaper and two in The Chronicle of Higher Education) attacking, not to say excoriating, a report written, or at least signed, by Republican congressmen John Boehner (then a mere foot-soldier) and Howard McKeon, titled “The College Cost Crisis.”

What Boehner and McKeon offer is the “dysfunctionality narrative,” and every once in a while Archibald and Feldman put up a quotation from their report to use as a piñata. My criticism was a proto version of theirs, absent the massive data and the economic sophistication. Boehner and McKeon, I said, take no account of “changes in the real costs of doing business — changes the universities did not impose, but changes they must live with.”

As a result, I concluded, “the statistics they invoke with such a flourish are meaningless, or, rather, are meaningful only within the bizarre and ignorant assumption that everything in the world of higher education is the same as it was in 1970,” when “student registration was still being done manually in the gym.” As a dean who encountered the rising costs of personnel, laboratory equipment, security, compliance demands, information systems and much more every day, I knew I had it basically right, but I am happy to ride (belatedly) on the coattails of people who really know what they’re talking about.

That does not mean of course that all’s right with the educational world. Archibald and Feldman say little about the other concerns — the growing army of adjuncts, the effects of tenure in a world without mandatory retirement, the widening disparity between public and private institutions, the increasing corporatization of the academy — that are taken up in the books I discussed last week.

But by giving the lie to the “dysfunctionality narrative,” they arm every college president with a ready reply to the next legislator who, following the lead of Boehner and McKeon (and indeed of every politician since Ronald Reagan), demands that colleges and universities reform themselves from within. By taking what they call the “aerial view” — looking to “economy wide” factors — and rejecting the “close up view” of the university imagined “in a vacuum,” Archibald and Feldman allow us to say that at least in the area of costs the fault lies not in ourselves, but in the stars.

There is No College Cost Crisis - NYTimes.com

In Delhi, a Safer Bus Line? - NYTimes.com

In Delhi, a Safer Bus Line? - NYTimes.com
November 15, 2010, 2:00 pm

In Delhi, a Safer Bus Line?

By FREAKONOMICS

Delhi’s Blueline buses are notoriously deadly, perhaps due to a perverse incentive system that rewarded drivers for speedy progress and discouraged investments in the vehicles. Dave Prager, who investigated the buses last year, has an update: Delhi has recently reformed its bus system, phasing out the Blueline buses and replacing them with shiny new buses. More importantly, the payment model has changed: “The Delhi government will provide the companies Rs.27-42 as earning per kilometre even when the service runs into losses, but it will take the ticketing amount.” “[F]rom the broader perspective of making the city safer and the commute more reliable, this framework is a huge improvement,” writes Prager. “Especially when one learns that the drivers themselves will be city employees, and the buses will be monitored by GPS.”

David Rosenberg is worried about the US retailers

Here are his three reasons:

Notice the very high increase in clothing inventories. The December shopping season must lower the clothing inventories or else January will be a very cold month for clothing retailers.

Food prices on the rise

The study increase since mid-2008 in the food and livestock prices may not bode well for the very poor in the developing countries. The food-related inflation though is also seen as a sign of recovery in the developed economies.

The following link presents the graph from Haver.com on food price dynamics:

http://www.haver.com/comment/101112c_big.png

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