The Great Waste: Cyclical, Structural, or Both?

Structural unemployment occurs when the skills and culture of the workforce are a bad match for the demands of the market. For Marketarians there can only be two kinds of unemployment - structural and voluntary [1]. This follows because the Market is all wise, and the Market saith "Thou Shalt not Waste Inputs".

Since we obviously have substantial involuntary unemployment and underemployment, a Marketarian must believe this Great Waste is structural. If it is structural, there is nothing to do [2].

Despite some childhood flirtations I an not a Marketarian. Still, I'm sympathetic to the notion of structural unemployment. I've been expecting it for over 10 years. Between globalization, the rise of the machine and the whitewater world I find it easy to imagine that we are facing a structural employment problem. Krugman seemed to agree 3 years ago. Robert Reich is a structuralist today.

Unsurprisingly, The Economist, the modern bible of Marketarians [3], thinks US unemployment is structural too. They point to IT changes...

... In the 1970s and 1980s employment in quintessentially middle-skilled, middle-income occupations—salespeople, bank clerks, secretaries, machine operators and factory supervisors—grew faster than that in lower-skilled jobs. But around the early 1990s, something changed. Labour markets across the rich countries shifted from a world where people’s job and wage prospects were directly related to their skill levels. Instead, with only a few exceptions, employment in middle-class jobs began to decline as a share of the total while the share of both low- and high-skilled jobs rose (see chart)...

The development of information technology (IT) is the leading candidate. Computers do not directly compete with the abstract, analytical tasks that many high-skilled workers do, but aid their productivity by speeding up the more routine bits of their jobs. But they do directly affect the need for people like assembly-line workers or those doing certain clerical tasks..

... the economists find that industries that adopted IT at faster rates (as measured by their IT spending, as well as their spending on research and development) also saw the fastest growth in demand for the most educated workers, and the sharpest declines in demand for people with intermediate levels of education...

In recent writings, however, DeLong and Krugman tell us today's unemployment is not primarily structural (see also). The patterns of widespread unemployment (no labor mismatch) and concomitant deflation don't fit the structural story.

I am largely persuaded by their arguments, but I wonder if we might have both. Perhaps  demand driven unemployment might mask a structural problem?

That occurred to me yesterday. Fortunately Krugman monitors my thoughts so he's already responded ...

... Is it possible that there has been some rise in structural unemployment that’s swamped by a much larger rise in cyclical unemployment? Yes, conceivably...

Aha! Trust me on this -- I run Krugman in an internal simulation. I know what he's thinking. Krugman secretly believes that we do have a serious structural unemployment problem, but atop that we also have a cyclical unemployment problem. (FWIW, My DeLong simulation holds the same secret suspicion.)

Rationally, we should tackle both the cyclical and structural causes of the Great Waste.

Alas, we're not so good at rational these days.

[1] They would further claim that significant structural unemployment is primarily a result of government distorting the (perfect) market.
[2] I can imagine quite a few ways to approach structural unemployment, but that's a cardinal sin for a Marketarian -- akin to planning the overthrow of heaven.
[3] It wasn't always so bad. In the late 80s to early 90s The Economist was a great newspaper.

See also (mostly mine):

• Mass disability and Great Depression 2.0 - 3/2008
• Employment in the Great Stagnation - 8/2010
• Post-industrial employment: adjusting to a new world - 5/2010
• Economics focus: Automatic reaction | The Economist (9/10 - IT spending has hollowed out labor markets)
• Causes of the Great Recession: China, GPSII and RCIIIT. Now for Act III 4/2010
• Neo-Feudalism: Return of the Trades - 2/2004
• Jared Bernstein & Brad DeLong on "Outsourcing": a dialog with interesting discussions 3/2004
• Krugman on globalization: how to manage the losers 12/2007
• Robert Reich's Reason : A Terse Review 5/2004
• Andy Grove on the Need for US Job Creation and Industrial Policy « naked capitalism 7/2010
• The Speculist: What if the Jobs Are Never Coming Back? 4/2010
• Robotic Nation, by Marshall Brain 7/2003

Update 9/29/10: My Krugman simulation is robust. Just as I suspected.

Why it hurts to read the right

This is not painful to read ...

John Gordon is not of my tribe. My God says all who are not of my tribe should be enslaved. John Gordon must serve me.

It's not painful because it's all consistent. Fact (not of my tribe), Value (follow my religious doctrine) and Goals (enslave John). I appreciate the logic, even if I don't like the implications.

So why are Limbaugh and Beck so hard for me to listen to?

Of course I don't agree with their goals, but that's not what causes me pain. It's the disconnect between their Facts, Values and Goals that makes for nails on the blackboard [1]. Their "Facts" are often trivially disprovable and their stated Values are often inconsistent with their Goals and Facts.

Beck and right wing bloggers like "level_head" would be easier to read if they simply said "Crush the weak, save those I love, because they are weak and I care only for the strong". I would not agree with them, but at least they'd be logical.

[1] Of course blackboards are gone, aren't they? We need a new simile.

Race and ethnicity: Minneapolis and St. Paul

Race and ethnicity: Minneapolis and St. Paul.

It's part of a Flickr set by Eric Fisher inspired by Bill Rankin's Chicago map. (Via Fast Company).

Where I live is very red dot (white), though my household is 40% sunburn resistant. The Chicago map is much more dramatic and interesting.

Emergent fraud: Anthem and automatic payment denials

Anthem, so someone wrote, puts the Hell in Health Care. Today's particular slice of Hades is a lovely example of how fraud evolves when natural selection meets entropy. Nobody has to plan this kind of scam, it just happens when you add incentives to markets.

I uncovered this example when I phoned to double/triple/quadruple check that a costly (age sucks) preventive medicine procedure was covered by my consumer driven health care plan.

Indeed, I was told, it is. I didn't hang up though. I'm too paranoid experienced. I pressed a bit more. The pleasant representative let slip that there was one catch.

When she said this, I swear I heard her pray that the call recording would go unheard, lest her children go unfed. Imagination, I'm sure.

The catch is that the claim will always be initially denied. It will, however, be promptly paid after a customer calls to "Appeal". If a customer doesn't appeal, however, they will have to pay the claim themselves.

I am pretty sure I know how this scam came to be.

The plan I'm in was, I believe, once part of a small consumer-driven healthcare plan startup that was acquired by a larger company. The two companies would have had different IT systems. The larger company probably outsourced IT integration, but, as often happens, I expect that didn't go well.

If I'm right then Anthem still doesn't have the right software to manage our kind of plan. When Anthem receives a claim, the software must choose between paying for claims that should be denied, or denying claims that should be paid.

You can imagine how long it took to make that decision, and how different the outcome would be with different incentives.

Since they really aren't crooks, just regular people in a hard job, they wrote Appeals process documentation so their agents would pay on Appeal. Probably 95% of their customers do appeal.

Five percent or so, however, probably don't appeal. They pay, or go bankrupt, or whatever. That five percent is pure margin. That margin probably made someone a VP.

Fixing the problem would unmake a VP. There's no money for IT anyway.

And so it goes.

It's a scam, but there's no intelligent designer. Just evolution in action. Health insurance companies can't help but be evil. It's in their incentives.

related stuff from me:

• Emergence: how entropy and incentives create scams
• Anthem - Putting the Hell in Health Insurance - emergent fraud and the Anthem web site
• Mobile phone fraud - The accidental data charge and other scams
• Memphis mortgages, complexity attacks and long term consequences
• How to use Amazon reviews (and how the system encourages fraud)
• Health insurance: we're defeated by a complexity attack
• Causes of the crash of '08 - how much fraud?
• 21st century deception and the evolution of the emergent mind

--
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Visiting hotels in the bedbug era

I've been wondering what bedbug experts do when they travel. This NYT article gave some hints ....

Step Right Up for Pest Control at Bedbug Meeting - NYTimes.com

.... Nearly everyone said they had done as much when they arrived at the host hotel, and the maids may find more than a few headboards askew from their search. Many people said they started out by putting luggage on the bathroom floor, the better to see any scurrying, before investigating hiding spots in the rest of the room. One man put his luggage inside a bedbug-proof bag and kept all his clothes on a non-fabric chair throughout his stay, though his initial survey found nothing...

Sounds like the process is:

1. Put luggage in a relatively safe place -- the bathroom (because it's easy to search).
2. Carry a bedbug luggage bag?
3. Search room esp. behind the headboard. If you see bedbugs, leave for the front desk and request a new room? (And if they have none? Sleep in the street? Do you want to know?)
4. If you don't see bedbugs avoid fabric and drawers (hang in bathroom rail?)

Maybe furniture and car seats will return to being wood, vinyl and plastic?

How I know Google's Blogger is dying

Nobody but me screams about how bad the new text editor is.

Try this experiment with Safari/Mac and the editor:

1. Write a post in the rich text editor with paragraphs.
2. Copy from the HTML view.
3. Paste into a different post HTML view.
4. View in Compose (rich text). Note the absence of paragraphs.

That's just the tip of the iceberg.

So what do I do with this blog?

If I were rational, I'd vote GOP

I consider myself relatively rational.

I believe the GOP is the anti-civilization party. A vote for the GOP is a vote for the collapse of our technocentric science-dependent society.

I also believe the greatest threat to human survival is artificial sentience, and I think it will happen with 100 years. It might happen within the lifespan of my children.

Unless civilization collapses.

How rational am I?

Dentistry

What's the chance that our dentistry practices are optimal?

Think about it.

Many of the practices of 1980 medicine have been found ineffective or even misguided.

Remember estrogen therapy?  If you're a physician of a certain age, that question should make you shudder.

But we still brush and floss much as we did in 1980?

Do you really think we got it right the first time?

Or is that we really don't do dental prevention research?

Imagine the cost if we've got it wrong.

Google's two factor authentication and why you need four OpenID accounts

My Google account was hacked two weeks ago, so today Google is deploying two factor authentication to (paid) Google Apps.

What, you think that's coincidental? You underestimate my power (cue mad laughter).

This is a good thing, but it won't prevent a keystroke logger from pinching your password if you use an insecure (ex: XP) machine. On the other hand, maybe I'll switch to a trivial password and just rely on the more robust 2nd factor.

Which brings me to OpenID and OAuth. In my latest post-hack "what am I doing" post I warned against OpenID. The only thing worse than losing a critical password to keystroke logging is losing a critical OpenID password.

Since then I've been thinking about where we're going, and I think there's a place for OpenID/OAuth and two factor authentication.  More specifically, there's a role for multiple OAuth (I'll drop the /OpenID for now) accounts - one for each of the five credential classes.

What's a credential class? Think  in terms of how you'd feel about someone taking your credentials ...

I: You want it? Take it.

II: I'd rather you didn't.

III: Help!! Help!! 

IV: I'll fight you for it.

V: Kreegah bundolo! Kill!! 

We need a master account with Category V security. The One Ring account has two factor authentication and a robust reset procedure that might involving banks and other identity authentication services. It may be tied to a strong identity as well, but that's another post. You only enter these Category V credentials on a secure machine and an encrypted connection. The Master Account can be used to override and change the passwords on lesser accounts.

From the master account we have four other credentials (un/pw combinations), each with OpenID/OAuth services.

The Class IV credential service is what we use with Gmail and a range of high-end OpenID/OAuth services like banks. We enter these credentials only on a secure machine - but there's a degree of comfort from having a Class V account that can change passwords. On less secure machines maybe we use two factor authentication.

The Class III credentials are what we use anywhere that has credit card capabilities. Use these for Amazon and iTunes.

Class II credentials are for your spam only Yahoo email and the New York Times.

Class I credentials are for the Minneapolis Star Tribune.

In a world of widespread OAuth/OpenID type services and this type of master account we really need to know five passwords, and only three of them have to be decent passwords. We can manage that.

This is where we will go.

We can do it now of course, by setting up five Google accounts. It will probably get a lot easier when Google Apps start providing full Google account services for each user, with optional two factor authentication.

In fact, this is so simple I'm surprised MyOpenID doesn't do it already.

Maybe in two weeks.

Bayes theorem - in a nutshell

xkcd: Conditional Risk. Beautiful. Should be the first graphic in any lecture on Bayesian statistics.

Yes, you're living at the end time - emulating the 6502 chip

jwz - Visual Transistor-level Simulation of the 6502 - in Javascript. This team use photographs of the 6502 chip to create a model of the circuits and their interactions, allowing the physical chip to be modeled ...

Visual 6502 FAQ

.... There are many excellent emulators available, but emulation is approximation. It can be extremely difficult to create an accurate emulator, because the typical approach to writing an emulator is to glean information from chip specification documents or more rarely from any chip schematics that happen to be available. This information is always incomplete and even the original chip logic schematics (also Verilog and VHDL code) can differ from what was actually built in silicon (see ECO). A disciplined emulator will capture and use traces of actual chip behavior, but it's near impossible to capture the billions of sequences of bits that a real chip gives rise to. Instead, we build a virtual chip by modeling and simulating the actual microscopic parts of a physical chip. We're interested in accurately preserving historic designs. It's archaeology for microchips.

While a multitude of people understand the instruction set for the 6502, almost no one, apart from the original designers, understands how the physical chip achieves this instruction set. The design is as elegant and sophisticated as any program written for the 6502. As digital archaeologists, we invite the current generation of hardware and software engineers to appreciate the work of the small number of designers who created the basis of everything we do today...

GV Mobile is back. What's next?

This pusilanimous Apple web site document justifies a reasonable amount of Apple hatred. It was written after Apple declared war on Google in July of 2009 ...

Apple Answers the FCC’s Questions 

Contrary to published reports, Apple has not rejected the Google Voice application, and continues to study it....

The following applications also fall into this category.

• 
  

  Name: GVDialer / GVDialer Lite... 

  Name: VoiceCentral.. 

  Name: GV Mobile / GV Mobile Free...

One of the most wretched things about this press release is that none of the complaints Apple had with Google's application (some legitimate) actually applied to GV Mobile and its competitors. Banning them, along with Google Apps like Latitude, was proof that Apple wasn't protecting the user experience, they were in a commerce war with Google.

Since then the FTC has been squeezing Apple, and GV Mobile is back (bit of a botched debut though). I wonder if they pointed out that while Apple might get away with blocking Google Voice, they had gone too far when they blocked GV Mobile. If that's true, I wonder if we'll see other Google related apps appear, like a Google Latitude client that actually works (sorry Latitudie).


PS. Yes, I know the formatting of this post is a mess. Google has outsourced their Blogger rich text editor to Microsoft Adobe. You have a better explanation? (I wrote Microsoft, but, really, this stuff they do well.)

Muslim world - I'm sorry too

Nicholas Kristof apologizes for his fellow Americans ...

Nicholas Kristof - Message to Muslims - I’m Sorry - NYTimes.com

Many Americans have suggested that more moderate Muslims should stand up to extremists, speak out for tolerance, and apologize for sins committed by their brethren.

That’s reasonable advice, and as a moderate myself, I’m going to take it. (Throat clearing.) I hereby apologize to Muslims for the wave of bigotry and simple nuttiness that has lately been directed at you. The venom on the airwaves, equating Muslims with terrorists, should embarrass us more than you. Muslims are one of the last minorities in the United States that it is still possible to demean openly, and I apologize for the slurs.

I don't agree that moderate Muslims should apologize for their brethren's sin. Otherwise, I liked the essay.

Even though I don't believe in the cultural or tribal inheritance of sin, I'm personally ok with apologizing for American whackos. Sorry everyone, we have more than our share of frightened people living in a world they can't understand. We also have Newt Gingrich, but he's just a psychopath.

Technological regressions: two examples

Two examples of technological regressions.

1. Typing. I'm filling out hockey forms. By printing with a pen. Once upon a time I might have typed them. I was a fast typist.
2. Reliable phone calls. Switched circuit calling was inefficient, but the quality was excellent. Now we have layers of VOIP everywhere -- and it's nowhere near as good as switched circuit. When you add mobile delays to VOIP home phones to VOIP teleconferencing systems you get voice quality from 1940s long distance.

I'm sure there are others ...

RIP Bloglines. So is the feed next?

Bloglines is closing - at last.

It was a mercy killing. I started out with NetNewsWire on OS X, but Bloglines is what I remember -- starting in 2004. They were good then. When Reader first appeared in October 2005 Bloglines was clearly superior.

In 2006 Bloglies was acquired by Ask.com, and they rolled out a nice constrained search feature.

That was the high water mark. After the acquisition Bloglines was put in the freezer, but Reader kept getting better. I started playing with Reader in late 2006, but I was still a Bloglines guy in July 2007. I did note, however, that the feeds were updating erratically.

That was a bad sign, but not as bad a sign as the failure to develop a mobile version of Bloglines. My iPhone made me switch to Reader for good in August of 2008. By September of 2008 there was no comparison - Google Reader was clearly better.

In retrospect Bloglines died in July 2007 -- more than three years ago. I assume Ask.com kept it around while they looked for a buyer who'd sell it into the corporate marketplace. (I tried to persuade Ask.com that this was a good idea). Maybe Bloglines had some secret revenue somehow.

Even though Bloglines was well past its due date, the formal expiration has produced the usual comments about the death of the Feed Reader. I am sure none of those commentators actually used Bloglines in the past year or two.

Even if we disregard the uninformed, however, it is true that Onfolio (Win), Omea Pro, and Newsgator Inbox all expired alongside Bloglines. They were done in by the combination of Outlook 2007 (abysmal reader - like OS X Mail.app, but workflow is good) and Google Reader. On the other hand, iOS and Android have produced a new crop of very useful clients (albeit all Reader clients!) and OS X has Safari (fair) and NetNewsWire (still!).

Between Outlook 2007, Google Reader, and OS X/iOS/Android readers we're probably neutral to positive across the Feed Reader landscape over the past four years. What about use of feeds then? Google has some numbers ...

Official Google Reader Blog: A welcome and a look back 

... Since Reader's fifth anniversary is also approaching (though it feels like yesterday, Reader was launched on October 7, 2005), we thought it might be a good time to reflect on how Reader has grown over the past few years.... Here's a graph of Reader users over time (where 'user' is defined as someone who has used Reader at least once a week)...

And as we found out this past April, Reader users sure do like to read lots of items. Here's another graph, this time of the number of items read per day...

The graphs would be more interesting if the y axis were (cough) labeled, but there's pretty respectable growth -- albeit with a 2010 plateau that's only now turned upwards again.

As a consumer of feeds I can report the quality remains excellent. Some of my favorite writers have slowed down, but many of them do return over time.  I particularly appreciate the combination of direct feeds and shared items from the Readers I follow. The Notes/Comments muckup makes my teeth ache, but Reader remains one of Google's best products.

Readers aren't for everyone (though they should be), but for infovores they are red hot data joy. It's a big world, and the infovore community is big enough, and geek-powerful enough, that feeds and readers have years to go.

After all, Google is clearly a fan.