Hundred Pockets

After reading The Million’s wonderful list of the best novels of the millennium so far (thank-you Tyler), I felt frankly rather shamed at not having read half of them. My self-image as a cultured human being under serious threat, I duly pitched down to Waterstone’s after work to buy Jonathan Franzen’s The Corrections.

The thing is, The Corrections is a fairly hefty book – and my bag’s already filled with my none-too-light laptop. I’m dreading the Tube ride home with all this weight. But as I’m entering the PIN number for my debit card at the Waterstone’s counter, it suddenly occurs to me – I can buy the book on my iPhone. It will be cheaper than the physical book. It will weigh nothing whatsoever. What on earth am I doing buying a physical lump of pages?

As this thought staggered into my brain, I yanked my card out of the chip-and-pin device, mumbled ‘Oh, wait, sorry, I’ve just remembered, I don’t need this book’ (while the checkout guy looked at me like I was mentally disturbed), and meekly replaced the book on the shelf.

Standing outside Waterstone’s, I had The Corrections on my phone inside of five minutes. And I can’t help feeling that this moment – yanking my card out the chip-and-pin – has shifted something in my life irrevocably.

You see, I love books. Like adore them. My reading habits as a child were ferocious, and when I got a job in Waterstone’s as a teenager, it was like the Mother Ship was calling me home. Staff got a 30% discount on books, and I must have spent around half my wages in the store (employing a compulsive reader as a bookseller is pretty much an investment). It’s like being paid to constantly browse the shelves. My personal library will not fit in my London flat – the majority of my overstuffed bookshelves remain at my parents’ house, waiting to rejoin their kin when I can afford a bigger place.

Bookshops feel like home to me, and always have. When I arrive in a strange city, if I’m feeling a bit off-balance in that culture shock sort of way, I’ll find a bookshop, and spend an hour or two browsing. Never fails to calm my nerves.

And yet. Reading books on my phone is nothing short of wonderful. The books are always with me (a benefit I cannot overstate), they’re weightless, and – best of all – I can read while I’m walking, even when it’s dark. That probably sounds slightly unhinged, but I’ve always been a read-and-walk-er (a habit which will doubtless kill me one day when I step into traffic). Time spent walking from one place to another has always seemed like dead time – all that spare brain capacity, while your mind is basically going ‘left-leg-right-leg-repeat’… A backlit it screen is a technological quantum leap for read-and-walk-ers everywhere.  An advance as profound as sliced bread, or refrigerated food – simple, brilliant, and life-changing.

So as of now, I’m an e-reader. I’m sure I’ll still buy physical books when, you know, I want the pictures. Or I’m going somewhere without electricity. Or they’re a present. But for my own day to day reading (and walking) – the e-book is the future.  Vive la revolution…

Gordon Brown wants to cut public spending without affecting “the vital frontline services on which people depend.”

So here’s an easy way to cut the NHS budget: fire every single manager, administrator and accountant from the health service. Only keep the doctors, nurses and technicians. And then the health service will operate as follows – everyone runs around the country, trying to find someone to treat them. If you can find a doctor, grab him and hold on, then he has to treat you. A sort of anarchic state of nature, but with health professionals. Sorted.

We could also fire all military personnel above the rank of General. Keep the vital frontline soldiers – the ones with actual tanks and guns and stuff – but do away with the red tape and bureaucracy of senior staff who, you know, tell them what to shoot at.

It sounds absurd, of course. So now let’s discuss Ed Balls’ dazzling plan to make savings in education by getting rid of head teachers…

While I’m doing musical/economic mash-ups (see previous post), let me re-post an old favourite: Psikotic’s rap about the Economist, which you can hear here.

He reads the Economist and is a cautious optimist,

Important event, yeah, they’re on top of this,

Almost everywhere that matters, they got a journalist,

Local and in depth at a flick of the wrist,

Supplemented with almost too many graphs

Of output, opinion, and number of staff,

Or number of terrorist insurgent attacks

In Iraq, Afghanistan, compare and contrast…

I think I first read about this here.

Don’t some taxes just make you want to… sing? Apparently in Belize they do. When the government introduced a sales tax (GST) in 2007, they wanted to explain the tax to their people. Should they make a leaflet? Put up posters?

No – much better. They created a song. (Click the link and scroll down for the music video.)

GST! Fulfill yu duty

GST! Fi yu and fi me

GST! We building we country

We on the road to prosperity

This song is a work of godlike genius. All must see it.

… for the week without posts. A writing deadline that got way out of hand…

Allow me to propose a new rule of political discourse: whenever Megan McArdle and Matt Yglesias agree about something, then that thing should become law. Immediately.

Today’s outbreak of McArdle-Yglesias harmony regards reforming teacher pay, so that it’s more strongly linked with being a good teacher, and less strongly linked with, um, being older. And having pointless degrees which don’t improve teaching.

Here’s Matt:

[T]he implication that the idea that pay should be differentiated based on effectiveness constitutes “teacher-bashing” is bizarre.

… once we’ve hit upon a given pot of money to spend on teacher compensation, a question arises of how it should be divided up. One way to divide it up would be evenly—each teacher could make the same salary. That would, however, be a bit weird and we don’t do it that way. Instead, we pay teachers more the more experience they have, and we also pay them more when the acquire master’s degrees.

The point of paying higher salaries to people with advanced degrees has to be the belief that teachers with advanced degrees are more effective than teachers without advanced degree. It turns out to be the case, however, that research says this is wrong. I don’t think it’s “pro-teacher” to be giving teachers financial incentives to essentially waste their time acquiring advanced degrees that don’t help them. This is simply an irrational way of divvying up the compensation pot.

Paying more for more experienced teachers makes sense, but currently we seem to be giving more weight to seniority than it deserves. Paying more for extra degrees makes no sense. Paying more for people with in-demand technical skills makes sense. Paying more for people who take on more challenging assignments in high-poverty classrooms makes sense. And trying harder to directly measure and reward effectiveness also makes sense. But if I’m “bashing” anyone it’s purveyors of useless M. Ed. degrees.

Now here’s Megan:

This is one of those odd areas where Matt and I are in total agreement.  We should pay teachers much more than we do.  Right now, they take a substantial portion of their “pay” in the form of near-total job security.  People like this benefit.  But in most cases, they shouldn’t have it, because it has predictible effects on performance–particularly when it is coupled with a pay scale that relies on measurable but not very useful traits like advanced degrees (totally useless) and seniority (the benefits of experience eventually level off).  The only thing teachers have a financial incentive to do under this system is keep their butts in the teacher’s chair, and acquire useless degrees from programs that mostly teach students how to sit through long and pointless classes.

The obvious thing to do is to strip the protections and up the pay, while using merit metrics to determine how that pay is allocated.

England had a crack at introducing ‘Performance Related Pay’ for teachers in the late 1990’s. Experienced teachers could apply to cross a ‘performance threshold’, graduating to a new (higher) pay scale if they succeeded, plus a £2,000 annual bonus. Teachers wishing to ‘cross the threshold’ had to fill in a form, and have their application assessed by their head teacher and an external auditor.

Here’s the catch: Nearly 90% of eligible teachers applied for the performance bonus. 97% were awarded it. Head teachers weren’t picky when it came to dishing out the bonuses. The scheme turned into a pay rise for virtually all teachers.

So what should be done? How can teacher pay be reformed in a way that attracts and retains high fliers, without simply hurling money at all teachers?

One interesting suggestion I heard at a recent conference (it may have been from Simon Burgess of Bristol’s CMPO) was to make teachers’ pay more like lawyers’ pay. That is, offer big rewards to those who ‘make the grade’ after the first few years, but without the expectation that everyone who joins the profession will succeed. The first three years (say) of a teachers’ career would be a sort of whittling process, with low-ish pay (as now) but the promise of a significant pay jump for those who prove themselves in the classroom.

Teachers’ unions have long expressed the wish for teaching to be considered a ‘profession’, like law or medicine. But those are high risk professions compared with teaching – your first few years in the job are ‘make or break’. If teachers are to be treated like professionals, perhaps they should be paid like professionals – for better (more money) and for worse (accepting higher risk)…

The recession, that is – or so says the National Institute for Economic and Social Research.

Britain’s economy grew for the first time over a three-month period since May last year, the National Institute of Economic and Social Research (NIESR) said today but warned that the end of recession could turn to a period of stagnation.

NIESR’s monthly estimate of economic growth suggests that gross domestic product (GDP) grew 0.2 per cent between June and August, after a 0.3 per cent fall in the three months to the end of July.

However, NIESR added: “There may well be a period of stagnation now, with output rising in some months and falling in others; the end of the recession should not be confused with a return to normal economic conditions.”

Other positive news comes from a survey of recruitment agencies:

The research, produced by Markit Economics, finds “marginal increases” in both permanent and temporary appointments in August.

For permanent staff, this is the first increase since early 2007.

“This is first time we have seen really positive news for the UK jobs market in 17 months,” said Bernard Brown from KPMG, co-sponsor of the survey.

Still, plenty of cause for pessimism, however. Our banking system remains, to a first approximation, a shambles. Households remain heavily in debt. Unemployment (a lagging indicator, admittedly) is as high as it’s been in over a decade. We’re not out of this yet…

Interesting announcement from the government today: the Academies programme is being accelerated:

The government is to make it easier for private sponsors to take over and run English state schools, in a bid to speed up its academies programme.

Instead of providing up-front funds of £2m, potential backers will now simply have to prove “the necessary skills and leadership” to run an academy.

The Academies model works something like this:

• Take a school which has been failing for years
• Close it
• Fire the head
• Demolish the buildings
• Remove the school from the control of the local authority
• Build shiny new classrooms
• Find a new head
• Find someone Great and Good to act as a ’sponsor’ for the new school
• Reopen the school as an ‘Academy’

Interesting to note a missing step here: while the head teacher is fired when a failing school is turned into an Academy, the other teachers are not. They must all be rehired, under the same terms and conditions as their previous contracts, when the school reopens as an Academy. If you believe (as many economists do) that teachers are one of the most important determinants of a school’s effectiveness, it’s pretty stunning that all teachers from the old (failed) school must be rehired. But I digress…

Academies have been kicked around by Blairites and Brownites like the proverbial political football. Blair was extremely gung-ho on Academies, despite teachers’ unions largely hating them:

NUT general secretary Christine Blower said: “We don’t believe that taking schools out of their local authorities and having them run by people who have no experience of running schools… is a way of doing school improvement.”

Gordon Brown’s administration has been far more in tune with the teachers’ unions, spending much of its first 18 months in office ‘reigning in’ the Academies. Ed Balls, the Children’s Secretary (and long considered Brown’s right hand man) won the praise of teachers unions by announcing greater local authority oversight of Academies, much to the dismay of Academies themselves. The leaders of the Academies programme within government were also ousted.

But suddenly Mr. Balls has discovered his inner Academy-lover:

The Academy programme is going from strength to strength. It has proved to be a genuine revolution in how secondary state education is delivered for those areas and pupils that need it most. GCSE results are rising faster than the national average giving outstanding opportunities for areas let down educationally for generations.

So what’s going on? Why is the government risking a fight with the teachers’ unions just before a general election?

My suspicion is: fear. Some of the Conservatives boldest policies (critics might say their only policies) relate to the supply side of the education system. The Tories have recruited some of the brightest right-of-centre education thinkers – notably James O’Shaughnessy and Sam Freedman, both previously at Policy Exchange. They’ve announced radical plans to open up the supply side of the education system, with parents, charities and co-operatives encouraged to open new schools in their area, regardless of how many school places already exist.

Labour’s response has been somewhat muted. On the one hand, they point to their own Academies as evidence that they, too, are shaking up the supply side. On the other hand, they accuse the Conservatives of going too far:

Schools minister Jim Knight… [said that Tory plans] would put at risk hundreds of school building projects. “As people study the detail they will want to know which areas and which schools the axe will fall on,” he said.

“Stripping local authorities of their role in coordinating education means that the Tories are attacking their own local councils, who would find it very difficult under these proposals to plan the improvement of their schools in a coherent way.”

This looks likely to be a key battle ground in the general election. Balls’ sudden embrace of Academies suggests Labour are shifting their position – actually conceding some ground – in anticipation of the coming battle…

As usual, the debate at Felix Salmon’s blog has thrown up some interesting comments. Marc takes issue with the idea that university students can be better off incurring debt now, in exchange for higher wages later:

@ Pockets
The argument you make for student loans (you start with more debt, but you’ll come out ahead because you’re going to earn more) is perfectly true on an individual level with everything else staying the same. In aggregate though, it doesn’t work. If half the people go to university an get a degree there is no chance that they will earn collectively substantially more than they would have if only few people got a degree. It’s a law of supply & demand. If more people with a degree are available, the difference the degree makes in the salary they can command is going to be much less significant than if only 10% of the people graduate.

Marc is of course entirely right that increasing the supply of something (like graduates) should reduce its price. But in the 1980s and 1990s, something kind of amazing happened in both the US and the UK…

First, the supply of graduates definitely did increase massively during the 80s and 90s. Here’s a chart showing British higher education participation since 1970:

The proportion of kids attending university more than doubled. So we know what should have happened to graduate wages, compared to non-graduates, right? Increased supply means a lower price, so the graduate wage premium should fall. But here’s what actually happened:

Yup, the wages of graduates went up compared with those of non-graduates. So we had both higher supply and a higher price. Which breaks all laws of supply and demand, surely…?

Actually, no. It just means that the demand for graduates wasn’t constant. Instead, demand must have gone up even faster than the increasing supply. That is, even though universities were churning out graduates, companies wanted to snap them up faster than they could earn their degrees.

Why? Probably something to do with the I.T. revolution. Computers have massively increased the productivity of highly educated workers, but have done basically nothing for the productivity of shelf-stackers and street sweepers. So even as the supply of graduates ramped up hugely in the 80s and 90s, their wages were being bid ever higher by employers. Increased supply and increased price, all at once.

The story I just told may sound simple – economists call it ’skills-biased technological change’ – but it’s one of the major achievements of modern labour economics. It’s the basis of Claudia Goldin and Lawrence Katz’s book  The Race Between Education and Technology. Their story is that for the first 80 years of the 20th Century, the supply of educated workers outstripped demand (education was ‘winning’ the race). But since 1980, technology has ‘overtaken’ education – meaning the growth in student numbers hasn’t been anything like fast enough to bid down graduate wages, which are being pushed ever higher by technological innovations which favour skilled/educated workers.

In fact, despite the explosion in higher education in recent years, the graduate wage premium has never gone back down to its pre-1980 level. It’s stopped racing upwards so fast, but it isn’t falling.

Of course, this really sucks for non-graduates – their wages were lower than graduates’ to start with, and have fallen ever further behind. It’s one of the leading explanations for growing income inequality in the US and UK over the past few decades.

But that’s all the more reason to help as many young people as possible into university/college. For now at least, our economies can’t get enough of them…

Felix kicks off a debate about student debts, based on an alarming (alarmist?) Wall Street Journal article.

Students are borrowing dramatically more to pay for college, accelerating a trend that has wide-ranging implications for a generation of young people…

The ripple effects for today’s heavily indebted young people are becoming palpable. A growing body of research suggests that tough loan payments are affecting major life decisions by recent graduates, forcing them to put off traditional milestones—from buying a first home to even marriage and having children.

This may sound insane, but I tend to see student debt among young people as a sign of progress, rather than a sign of dire social calamity. I know, I know, outraged politicians trot out statistics about how 22 year olds today have an average of £25,000 of debt, when their parents had no debt at all, so ‘proving’ that we’re treating the next generation terribly [etc. etc.].

Are they right? Isn’t it obvious that someone with £25,000 of debt is worse off than someone with no debt at all?

It may be obvious, but in this case it’s also wrong. In 1965 only 9% of British young people went to university. There were very few places, and only upper classes could afford it. By 2001 more than 35% of young people were in higher education, and it keeps climbing.

What does this have to do with debt? Well back in 1965 it was also almost impossible for a young person to ‘borrow’ against their expected future earnings. Either your parents supported you at Uni, in which case you went, or they couldn’t afford to, in which case you didn’t. Banks wouldn’t touch you, because you had nothing to act as ’security’ on a loan (on a mortgage they can repossess your house, but on a university loan? You can’t offer to become an indentured slave to the bank if you failed to meet repayments).

In other words, the vast majority of potential university students were massively ‘credit constrained’. There was a profitable trade to be made between you and the  bank – ‘You lend me money to study, I’ll earn more in future and pay back the loan’ – but the risk was too high.

That made it easier to start saving for a house – because you had no debts, and started in the labour market at a younger age. But it made it a damn sight harder to finish saving for a house – because you were earning peanuts.

Today, in contrast, we have a generous system of student loans, accompanying the massive rise in participation. You only repay your loan after you graduate, and only when you start earning above £15,000 (so if you don’t get that higher paying job right away, that’s OK). All remaining debt is forgiven after 25 years (so if you never get that higher paying job, that’s OK too).

The upshot of all this is that young people are in much more debt than they used to be. But that’s overwhelmingly a good thing. Because more of them are going to be graduates, they’re going to land (and create) higher paying jobs, in higher value industries, boosting GDP and taxes.

So when politicians (or outraged journalists) tell you that our kids are in more debt than we were, remember: that may well be their gain, and our loss…

… and receive an answer (courtesy of the FT). In my previous post I wondered why the government was announcing that it wouldn’t cut jobs in the NHS. Now I know:

The analysis [which cutting 10% of the workforce], undertaken by McKinsey for the Department [of Health] in March, has been leaked to the Health Service Journal, bringing a panicked reaction on Wednesday from health ministers.

So that’s number (3) on my list of possible explanations. Good to know I was right to be baffled…

This story confuses me.

The government says it has rejected advice from management consultants to cut the NHS workforce in England by 10% over the next five years.

The plans to close 137,000 clinical and admin posts were proposed by McKinsey and Company to save £20bn by 2014.

Why announce that you’re not making cuts? Why announce that a huge and respected management consultancy believe that you need to make cuts, but that you’re rejecting this advice – which you paid for…?

The very word ‘cuts’ is demotivating to staff. I’ve worked in companies when the management said: “We’re doing everything we can to avoid cutbacks.” The only word that people hear in that sentence is ‘cutbacks’.

So what is the government doing ‘announcing’ this? Some possibilities:

1. It’s all about the political narrative for the election. Labour standing firm in the face of proposed cuts – even when those cuts are proposed by people the government is paying.
2. It’s softening up the workforce, and the public. When companies say “We’re fighting to avoid job cuts”, what follows soon enough is: job cuts. (At least that was my experience…)
3. The McKinsey report was leaked, or was going to be leaked, so the government had to respond forcefully. Even though they’d rather the whole thing had remained private.

I can’t choose between these. All three, perhaps?

… but in Azerbaijan, it’s a donkey.

… or so says the OECD in their ‘Doing Better for Children‘ report. The UK spends more on its children than most OECD countries, and has strongly embraced the ‘early years’ agenda pushed by economists like Jim Heckman (the idea that you get most ‘bang for your buck’ by spending more money on very young children during their critical early development, and proportionately less as they get older).

Nonetheless, our school results are mediocre and on several social measures we’re among the worst in the OECD:

[T]he proportion of youth not in school, training or in jobs in the UK remains high, at more than one in ten 15 to 19 year-olds. This is the fourth highest rate in the OECD, ahead of Italy, Turkey and Mexico.

Education results are also low relative to spending levels. The UK comes out in the middle of OECD comparisons of how well 15 year olds do at school and in terms of the gaps between well and poorly performing pupils.

Underage drinking and teenage pregnancy rates are high. Drunkenness is the highest in the OECD, with one in three 13 and 15 year olds having been drunk at least twice. The UK also reports the fourth highest teen pregnancy rate after Mexico, Turkey and the United States.

On the plus side, at least we’re not bullies:

In other areas, the UK performs well. Children in the United Kingdom are materially fairly well-off. Average family income is higher and child poverty is lower than OECD averages.

Children in the United Kingdom also enjoy a high quality of school life. The United Kingdom ranks 4th out of 25 countries for children’s school satisfaction. Rates of bullying are also relatively low.

It’s worth noting, of course, that those drunk/pregnant problem teenagers were born before the big push towards high early years spending. So the jury is still out on whether the early years money is being well spent. I’m also not convinced that ‘having been drunk twice’ by the age of 15 (the OECD’s drunkeness measure) is necessarily a mark of anarchy and social decline. But perhaps that’s because I am myself a decadent young(ish) Briton, inured to such things…

• Todd S. Purdum on Hank Paulson in Vanity Fair
• Ryan Avent on the plight of the modern newspaper
• Stephanie Flanders on the end of British (private) borrowing. For now…
• Matt Taibbi on the supposed profits taxpayers have been making on their bailout investments
• Disney/Marvel mash-ups at Superpunch (ht Boing Boing)

You decide, after days of agonising about it, that your blog should be anonymous if you’re going to hang on to your job. And then someone on the other side of the world casually reveals your true identity:

PS – I was somewhat surprised to realize that my dog Pockets maintains a blog. But I was very pleased to realize that while I’m away, she [sic] apparently reads my econ books and blogs out of the UK.

Thanks, Andrew. And, um, woof.

You may have heard about the campaign to secure a posthumous government apology for Alan Turing, one of the most brilliant Britons of the 20th century.

In 1952 Turing was prosecuted for gross indecency after admitting a sexual relationship with a man. Two years later he killed himself…

Alan Turing was given experimental chemical castration as a “treatment” and his security privileges were removed, meaning he could not continue work for the UK Government Communications Headquarters (GCHQ).

“This added insult and humiliation ultimately drove him to suicide,” said gay-rights campaigner Peter Tatchell, who also backs the campaign. “With Turing’s death, Britain and the world lost one of its finest intellectual minds. A government apology and posthumous pardon are long overdue.”

Turing served his country dazzlingly, as a key member of the team which cracked the Nazi’s Enigma code, and he received forced injections of estrogen in return. A reminder of the staggering homophobia of the British legal system which persisted until very, very recently.

As a mark of how far things have changed, consider Evan Davis’ interview of Peter Mandelson on the Today programme last month. The topic was unemployment, of course, not homophobia – and perhaps it’s beyond crass to note this at all – but here we have one of the BBC’s top presenters, on its flagship current affairs programme, interviewing the man who was (at the time) more or less running the country. Both are openly gay. And the British public don’t appear to give a damn.

The interview itself wasn’t particularly edifying (Mandelson was hellbent on bashing the Tories, Davis struggled valiantly to drag him back to Labour’s own policies) but its very existence tells us something about the retreat of British homophobia.

Andrew Sullivan, from across the Atlantic, also noted Britain’s huge strides, while lamenting America’s lack of similar progress:

When I came to America from Britain, the gay rights movement was way ahead here of the old country. No longer. Here is a list of the most powerful openly gay people in Britain. The whole list is a staggering contrast with the US.

It’s easy to sneer at the mores of previous generations – tougher to fight the injustices in our own. But Britain has made progress, and we should be proud of it.

As for apologising to Turing (the petition is here) – well, yes, by all means. But apologise to every other victim of these vile laws as well – war heroes or not. Wrong is wrong, whoever the victim.