How a small company acquisition works

I've been around enough acquisition pieces to recognize that this is an excellent summary of a business acquisition.  M&A Case Studies: WhatCounts Sale Process. Keep a copy handy just in case you need it some day.

8 banks with low fees - per CNN

CNN Money's list of the 8 least evil banks. They seem largely next-generation banks; they're least good at what we use a bank for - managing and depositing checks.

• Ally Bank
• ING Direct (2)
• USAA (3) (mostly military)
• Capital One (4)
• Alliant Credit Union (5)
• PNC (6)
• The Incredible Bank (7)
• Charles Schwab (8)

The problem with "Everyday Mathematics"

We've lived with Everyday Mathematics through the last six years of my son's primary school education.

It's a lousy way to teach arithmetic and basic symbol manipulation to the non-mathematically gifted. This means it's a lousy way to teach, since the mathematically gifted would be better off playing with Mathematica.

The interesting question is what makes it lousy. I've wondered about that intermittently, and I think I've got the answer.

The problem with Everyday Math is that it asks too much of the math teacher. Most math teachers are just a bit about average (yes, I'm mathematically gifted); Everyday Math requires a 75th percentile teacher to really work. So it fails.

Egypt

I haven't had anything novel to say about the Egyptian Revolution of 2011...

The 2011 Egyptian revolution was a series of street demonstrations, marches, rallies, acts of civil disobedience, riots, labour strikes, and violent clashes that began in Egypt on 25 January 2011, a day selected to coincide with the National Police Day. The protests were largest in Cairo and Alexandria, with significant activities in other cities of Egypt ... On 11 February, Mubarak resigned from office as a result of determined popular protest...

My one connection to this revolution is I've been reading the Facebook posts of a high school friend. She's been visiting Tahrir square. I hope she stays safe. Egypt has surprised the world, but of course their journey is far from over. They need many more miracles to follow Turkey's path. It is possible; the Berlin Wall proved that humans can exceed expectations.

Surprisingly, I have a remote connection to another Egyptian Revolution -- one from 1919 and the Russian-Ottoman war [1] ...

The Egyptian Revolution of 1919 was a countrywide revolution against the British occupation of Egypt and Sudan. It was carried out by Egyptians and Sudanese from different walks of life in the wake of the British-ordered exile of revolutionary leader Saad Zaghlul and other members of the Wafd Party in 1919. The event led to Britain's unilateral grant of independence to Egypt in 1922, and the implementation of a new constitution in 1923...

... Although the Ottoman Empire retained nominal sovereignty over Egypt, the political connection between the two countries was severed by the British occupation of Egypt in 1882. From 1883 to 1914, actual power in Egypt was exercised by the British Consul-General through the Khedive and his council of ministers. When war broke out between the Russian and Ottoman Empires, Britain declared martial law in Egypt and announced that it would shoulder the entire burden of the war. On December 14, 1914, Egypt became a separate sultanate and was declared a British protectorate, thus completely detaching the country from the Ottoman Empire ..

... Over the course of the war ... dissatisfaction with British rule spread amongst all classes of the population. This was the result of Egypt’s increasing involvement in the war, despite Britain's promise to shoulder the entire burden of the war. During the war, the British poured masses of foreign troops into Egypt, conscripted over one and a half million Egyptians into the Labour Corps, and requisitioned buildings, crops, and animals for the use of the army...

I learned of my connection when discussing Mubarak's fall with my 80 yo mother. She referred to my "Egyptian relatives". Her maternal grandmother's sister, Catherine (Kitty) Maxfield of Manchester England, married an Egyptian around 1909 and moved first to Cairo and then to Alexandria.

I thought I'd never learn more, but when I shared this story on Facebook Emily's sister, Martha, provided some context ...

In those days it was not uncommon yet still very controversial, for Egyptian men to take English brides. It led to a trumped-up "marriage crisis" because the state was worried about how to take care of unmarried Egyptian women ... [and] ....  worried about men not setting up "proper" Egyptian families ...

Basically it was a Nationalism problem.

This is detailed in a journal article "Stolen Husbands, Foreign Wives: Mixed Marriage, Identity Formation, and Gender in Colonial Egypt, 1909-1923" by Hanan Kholoussy. There is also a book by the same author, "For Better, For Worse: The Marriage Crisis that Made Modern Egypt" (Stanford U Press, 2010). [Google Preview]

Kitty may have lived through the Egyptian Revolution of 1919. She had two children, so it's possible that their grandchildren were in Tahrir square.

It's a complicated world.

[1] No, I'd never heard of this either. I added a link from the 1919 article to the Caucasus Campaign article.

North Korea

Netflix streaming to the Wii attached to our ancient CRT used to require a physical disk. It has recently switched to using Wii internal storage [1]. I did the update today and looked for a documentary to test with [3]. I hoped for the BBC, but had to settle for National Geographic [2]. Since I have some Korea connections, I chose Inside North Korea (2007, 52 min).

It's a remarkable video. There was nothing there I haven't read, but video communicates a rich awfulness even photographs can't manage. In a history full of astounding cruelty and evil, Kim Jong Il's North Korea stands tall with Stalin's Russia, Pol Pot's Cambodia, Mao's China, Hitler's Germany and the Congo's Congo.

On the other hand, Nat Geog is no BBC. There's room for a more complex documentary about what they omitted. The family members of the team's minders, in particular, have probably spent the last four years dying in an NK concentration camp for their failure to stop covert filming. It's never explained why the remarkable team of Nepalese surgeons agreed to the undercover journalism. They may exaggerate the isolation and control of NK.

I was reminded of the Maoist era documentaries of China I saw as a child. The control of the party seemed complete, the population genuinely brainwashed. This was a time when millions were dying of Mao's famine, but that was not well known at the time. The brainwashing turned out to be mostly illusions born of fear and terror, and, for most, readily reversible.

There's a good chance that NK's government will collapse sometime in the next ten years. I hope then that someone will then be able to safely interview some of the people from this documentary, and ask them what they were really thinking when they wept tears in praise of one of humanity's great bastards.

[1] The install required a firmware update and is mildly geeky, but the streaming works remarkably well. Even with our feeble DSL service, and an AirPort router 2 floors above the Wii, the video quality was excellent. Of course our low res TV isn't very demanding ...
[2] BBC licensing discussions must be hellish.
[3] The Netflix-Wii UI is atrocious. I recommend locating streamable movies on computer, then searching them on the Wii.

A guide to better websites in two comics

Most organizational and commercial websites truly suck.

It's Bizarre. It's really not that hard.

Between XKCD and The Oatmeal, here's how do it well in two comics.

• What I want from a restaurant website - The Oatmeal
• xkcd: University Website

Adjust these examples to your site, and the world will reward you.

PS. Nobody does $&!# parking info.

Dementia prevention: reason enough for road tolls and public transit

I was a persistent skeptic. I didn't believe that exercise slowed the inevitable [1] onset of age related cognitive decline.

The animal models broke my resistance. Now we're exploring mechanisms (emphases mine) ...

Observations: Aerobic exercise bulks up hippocampus, improving memory in older adults

... adults aged 55 to 80 years who walked around a track for 40 minutes on three days a week for a year increased the volume of their hippocampus, the brain region that is implicated in memory and spatial reasoning. Older adults assigned to a stretching routine showed no hippocampal growth. The 120 previously sedentary older adults recruited for the study did not yet have diagnosable dementia but were experiencing typical age-related reduction of the hippocampus, according to pre-study MRIs. "We think of the atrophy of the hippocampus in later life as almost inevitable," ...

The growth of the hippocampus was modest, increasing 2.12 percent in the left hippocampus and 1.97 percent in the right hippocampus, which effectively turns back the clock one to two years in terms of volume. The stretching group, on the other hand, experienced continued reduction in pace with expected age-related losses, losing on average 1.40 percent and 1.43 percent in the volume of their left and right hippocampus, respectively...

In addition to the increased size of the hippocampus, the aerobic exercise group also tended to have a higher level of brain-derived neurotrophic factor (BDNF), a compound that is associated with having a larger hippocampus and better memory. The researchers did not see any changes in the thalamus or caudate nucleus, two other parts of the brain that are involved with spatial sense and memory, respectively. Because only the hippocampus seemed to be affected by the aerobic exercise regime, the researchers reasoned that the activity might be acting specifically on certain molecular pathways to prompt "cell proliferation or dendritic branching," they noted...

This was a randomized (non-blinded of course) therapeutic trial and it's backed up by persuasive animal model studies. I think this is real.

I would not call the effects "modest". Over one year there was a 3.4% difference in hippocampal volume between the control and experimental groups. This corresponds to a 2-4 year age gap. There is no reason to assume the groups would not continue to diverge for additional time.

This is a big enough difference that ethics panels may not approve further experimental studies of this sort. Future control groups will have to include significant exercise (I would not call 40 minutes 3 times a week modest.)

So now we have a few known ways for individuals to reduce their personal risk of cognitive disability:

1. Don't hit your head. That means no football for your kids (and, worse, maybe no hockey).
2. Exercise (without hurting your head) a lot.
3. Don't smoke, drink to excess, eat too much, etc.

We know things that don't work at all ...

1. Playing bridge, cognitive work, crosswords, etc.
2. Nutritional supplements

And we're waiting to find out if sleeping 7-8 hours a night will matter. I have a hunch sleep duration will be found to be a key to amyloid turnover ...

Insights Give Hope for New Attack on Alzheimer’s - Gina Kolata - NYTimes.com

...  Dr. Bateman was his own first subject. He then did the test on people in their 30s and 40s, as well as healthy older people and people with Alzheimer’s...

The problem in Alzheimer’s, he found, is disposal. Beta amyloid, he found, normally is disposed of extremely quickly — within eight hours, half the beta amyloid in the brain has been washed away, replaced by new beta amyloid.

With Alzheimer’s disease, Dr. Bateman discovered, beta amyloid is made at a normal rate, but it hangs around, draining at a rate that is 30 percent slower than in healthy people the same age. And healthy older people, in turn, clear the substance from their brains more slowly than healthy younger people.

... “What we think may be happening is that a clearance mechanism is broken first,” Dr. Bateman says. Slowly, as years go by, beta amyloid starts to accumulate in the brain. If that clearance can be fixed, or enhanced, the buildup might never occur...

Of course exercise helps regulate sleep as well ...

We know enough to make some policy decisions. The economic payoff to delaying cognitive disability across the US population is enormous. It's enough of a savings, for example, to justify a shift to public transit, which leads to higher levels of ambulation. A carbon tax, which makes sense in many other ways, can pay for public transit, reduce automobile use, and reduce dementia rates.

Science is stuck in a rut. What now?

I was surprised when I did my 2008 family medicine board exams...

Gordon's Notes 2008: Challenges to medicine and science – medication invention hits a brick wall

... To put it delicately, progress has sucked. If you put a good physician to sleep 7 years ago, and woke her up today, she’d be reasonable competent on day one. A week later she’d be fully up to speed ...

Sure, there were lots of new drugs, but they were mostly incremental improvements. Medicine got stuck around 1984. Smolin claims physics is just as bad. Now people are writing books about the "Great Stagnation".

This is good. The first step to getting out a rut is to stop spinning wheels. Even better, scientists are doing meta-science on this problem ...

Biologists Ignoring Low-Hanging Fruit, Says Drug Discovery Study  - Technology Review

The entire set of kinases in a given organism is called its kinome. The human kinome consists of 518 kinases. Unsurprisingly, biologists and pharmaceutical companies are intensely interested in understanding how these enzymes work and developing drugs that control their behaviour.

So it may come as a surprise to find that three quarters of the research in this area focuses on just 10 per cent of these enzymes, as measured by the number of times the kinases are cited in research papers. By contrast, 60 per cent of the kinome, some 300 kinases, is virtually ignored by the community and mentioned in only 5 per cent of the work.

This is known as the Harlow-Knapp effect after the researchers that discovered it a couple of years ago. The question it raises is why biologists ignore most of the kinome when there is good reason to think that careful study should pay off in silver dollars

Today, Ruth Isserlin at the University of Toronto in Canada and a few buddies take a more detailed look at the effect. They say it is more widespread than previously thought and also affects the study of other biological molecules too....

... One common idea is the Matthew effect--from the biblical reference that the rich get richer and poor get poorer. For example, it is common for well-known scientists to be awarded prizes, making them more famous, even if all the work was done by a graduate student who is ignored.

At first glance, it's easy to imagine that the Harlow Knapp effect is good example of this. Isserlin and co point out that current molecular biology is so rich that it is possible to ask important questions even of the most well-studied systems. And since its easier to get grants, to do good science and to get published in higher impact journals by sticking to well known systems, that's exactly what scientists do. So the best known systems become better studied.

That alone might explain this distribution. But there is something else going on too, say Isserlin and co. Biologists commonly screen the entire genome of an organism looking for interesting proteins. But when they find one, the amount of work they can do with it depends on the chemical tools available to interact with it.

In many cases, these tools are not available. And when that happens, the proteins are ignored. This, say Isserlin and co, is one of the important underlying reasons why so many kinases and other interesting biomolecules are so poorly studied...

Some good clues there, but we should look also into other domains of historic stasis. Music and art have gone through periods of stagnation and renaissance. So has religion ...

... Around the Godde there forms a Shelle of prayers and Ceremonies and Buildings and Priestes and Authority, until at Last the Godde Dies. Ande this maye notte be noticed... [1]

"Priestes and Authority"? Sounds like the NIH.

So we've recognized the problem. How do we get out? It might be we'll get unstuck any minute now, but this is a good time to rethink how we fund and reward scientific endeavor. Should we be doing more prizes for discoveries instead of grants for research? Should we declare certain domains "boring" and off limits for NIH funding? Should we accelerate the demise of tenure?

I expect we're going to hear some interesting ideas over the next couple of years.

[1] Terry Pratchett, Small Gods.  Famous scholarly work. In some circles anyway. Ok, so I just like the book.

Bayes and the infinite universe

I used to teach Bayesian reasoning to informatics students. I couldn't justify to them why such simple math felt both spooky and profound. I still can't, but this story fits.

Cosmologists tell us that, comparing a subset of models to available data using Bayesian methods, the 14 billion year old universe is somewhere between 3,500,000,000,000 and an infinite number of light years across (emphases mine) ....

Cosmos At Least 250x Bigger Than Visible Universe - Technology Review

... the photons in the cosmic microwave background have travelled ... 45 billion light years to get here. That makes the visible universe some 90 billion light years across.

... one line of thinking is that if the universe expanded at the speed of light during inflation, then it ought to be 10^23 times bigger than the visible universe... .... Other estimates depend on a number factors and in particular on the curvature of the Universe: whether it is closed, like a sphere, flat or open. In the latter two cases, the Universe must be infinite.

... in recent years, astronomers have various ingenious ways of measuring the curvature of the Universe. One is to search for a distant object of known size and measure how big it looks. If it's bigger than it ought to be, the Universe is closed; if it's the right size, the universe is flat and if it's smaller, the Universe is open.

Astronomers know of one type of object that fits the bill: waves in the early universe that became frozen in the cosmic microwave background. They can measure the size of these waves, called baryonic acoustic oscillations, using space observatories such as WMAP.

There are also other indicators, such as the luminosity of type 1A supernovas in distant galaxies.

But when cosmologists examine all this data, different models of the Universe give different answers to the question of its curvature and size. Which to choose?

The breakthrough that Vardanyan and pals have made is to find a way to average the results of all the data in the simplest possible way. The technique they use is called Bayesian model averaging ...

... Instead of asking how well the model fits the data, its asks a different question: given the data, how likely is the model to be correct. This approach is automatically biased against complex models--it's a kind of statistical Occam's razor.

In applying it to various cosmological models of the universe, Vardanyan and co are able to place important constraints on the curvature and size of the Universe. In fact, it turns out that their constraints are much stricter than is possible with other approaches.

They say that the curvature of the Universe is tightly constrained around 0. In other words, the most likely model is that the Universe is flat. A flat Universe would also be infinite and their calculations are consistent with this too. These show that the Universe is at least 250 times bigger than the Hubble volume. (The Hubble volume is similar to the size of the observable universe.) ...

This is Occam's razor statistics - "... we should tend towards simpler theories .... until we can trade some simplicity for increased explanatory power".

Given the available information, the universe is most likely infinite, but it could be as "small" as 3,500,000,000,000 light years across. Big enough for one human like civilization for every human that has ever lived.

Probably though, much bigger than that.

It is a bit much. Surely, there is a simpler, less extravagant explanation. I'd like to see the authors rerun their analysis with a broader range of explanatory models. I think I know what the answer would be [1] ...

See also (Gordon's Notes unless otherwise noted)

• Earth: the measure of all things (3/2007): Back then we thought the universe might be "only" 140 light years across. So Earth was midway between the Planck length (quantum foam scale) and the universe.
• Bayes theorem: binding reasoning to the physical universe (5/2007)
• Boltzmann's brain hits the big Times (1/2008): We are the dreams of a desperate god in a terrible universe. It is the simplest explanation ...
• Reality, perception, Hume, the red pill - and John Tierney (8/2007): If you're going to be crazy like me, it helps to have David Humen for company.
• CV is hurting my head again: The anthropic principle and our peculiar relation to the arrow of time ... (8/2007): Too many coincidences
• The Algebraist and the religion of the eternal simulation (1/2008): Iain Banks is a fabulous writer.
• Ten cosmologies and Theory 10 (8/2006): The original page is gone. You can guess what theory 10 is.
• SETI, the Fermi Paradox and The Singularity: Why our search for extraterrestial intelligence has failed (footnote 9) (@2003) Before I did blogging, I stuck these things in web pages. "... Vernor Vinge wrote a very short story for one of the millenial year issues of either Nature or Science where he explores exactly this premise ... It's interesting to think about how one would "detect" a simulation ... Vinge explored this in a 2004? short story about a woman who realizes she's been trapped in a simulation ... the simulation would be imperfect, that it would generate "artifacts" in the same sense that JPEG lossy compression of a stripped image will product artifacts. One might, for example, look for physical phenomena consistent with techniques that would reduce the computational demands of the simulation. Or one might attempt to expose flaws (bugs) in the simulation -- or even "crash" it (risky!) ... identify physical phenomena that are inexplicable except in the context of a "simulation" (such as "connectedness" in theoretically disconnected parts of the universe).
• Gordon's Notes: Are You Living in a Computer Simulation? (11/04 - one of my earliest posts in this particular thread)

- fn --

[1] An omniscient universe-creating deity is equivalent to the "Boltzmann's Brain" explanation, so creationists are in good company. Alas, this "deity" is not the one they're looking for.

Economics of POW Camp - whatever happened to R. A. Radford?

The conclusion of an essay beloved to Krugman and many other economists ...

Economics of POW Camp, R.A. Radford 1945
.... In January, 1945, supplies of Red Cross cigarettes ran out: and prices slumped still further: in February the supplies of food parcels were exhausted and the depression became a blizzard. Food, itself scarce, was almost given away in order to meet the non-monetary demand for cigarettes. Laundries ceased to operate, or worked for £s or RMk.s: food and cigarettes sold for fancy prices in £s, hitherto unheard of. The Restaurant was a memory and the BMk. a joke. The Shop was empty and the Exchange and Mart notices were full of unaccepted offers for cigarettes. Barter increased in volume, becoming a larger proportion of a smaller volume of trade. Thus, the first serious and prolonged food shortage in the writer's experience, caused the price structure to change again, partly because German rations were not easily divisible. A margarine ration gradually sank in value until it exchanged directly for a treacle ration. Sugar slumped sadly. Only bread retained its value. Several thousand cigarettes, the capital of the Shop, were distributed without any noticeable effect. A few fractional parcel and cigarette issues, such as one-sixth of a parcel and twelve cigarettes each, led to monetary price recoveries and feverish trade, especially when they coincided with good news from the Western Front, but the general position remained unaltered.

By April, 1945, chaos had replaced order in the economic sphere: sales were difficult, prices lacked stability. Economics has been defined as the science of distributing limited means among unlimited and competing ends. On 12th April, with the arrival of elements of the 30th U.S. Infantry Division, the ushering in of an age of plenty demonstrated the hypothesis that with infinite means economic organization and activity would be redundant, as every want could be satisfied without effort.

The essay has a very English style. Radford's upper lip was rock solid.
A Caracas Chronicles 2002 post has a bit of background and some analysis of the article ...

In 1941, a British officer by the name of R.A. Radford was captured by the Nazis and confined to a POW camp. At the camp, Radford and 2400 other inmates were forced to live on meager rations delivered by the Red Cross. The rations issued to each prisoner contained a bit of bread, some sugar, biscuits, jam, margarine, tea and chocolate bars, with small rations of canned meat sporadically made available. They also included 25 cigarettes per prisoner per week. Radford, who had been trained in economics before the war, noticed how even in the extreme conditions of a Nazi prison camp, a rudimentary market system developed as prisoners traded with one another to maximize their satisfaction. The British army's Gurkahs, for instance were eager to trade their meat for other foods, since as Hindus they were strict vegetarians. Prisoners who didn’t smoke were eager to trade their cigarettes for food. At first, each of these trades was a simple barter. But soon enough, the inmates realized the need for a more sophisticated system of exchange. Lacking money, they started using cigarrettes as prison currency. A ration of margarine might be bought for seven cigarrettes, which could then be used to buy one and a half chocolate bars, and so on.
Soon after his release, Radford described the system that developed in a classic paper entitled “The Economic Organization of a POW Camp,” a write-up that's much appreciated by undergraduates everywhere for its skill at explaining the mysteries of monetary systems. What interested Radford the most was the way that cigarrettes, as a means of exchange, were subject to all of the fluctuations of normal currency. So long as there was a roughly steady relationship between the number of cigarettes in circulation and the goods those cigarettes could be traded for, “prices” in terms of cigarettes remained more or less stable. But when a shipment of cigarrettes unexpectedly arrived, an inflationary spiral was set in motion. With the camp suddenly awash in “unbacked cigarettes” (additional cigarettes that circulated without a corresponding increase in the amount of other goods they could buy) prisoners would demand more and more of them in exchange for other goods. Alternatively, when cigarettes failed to arrive for one reason or another (an allied bombing raid, for instance,) a liquidity crunch took hold of the camp. These currency shortfalls would actually lead to recessions at the camp: with inmates eager to hang on to their scarce cigarettes, it became more and more difficult to find people to trade with.

So what happened to Radford after the war? There's no Wikipedia entry for him, and I couldn't find a biography or a reference to anything but his 1945 publication. I couldn't even find out what the initials "R.A." stood for.

It is a mystery.

Update 10/21/2011: Mystery solved in a comment on this post. R stood for Richard, he moved to the US to work for the IMF. See: http://faculty.csusb.edu/urmann/POW_Article.pdf

Google Art Project

Google Art Project hosts seventeen museums worth of paintings with gigapixel imaging - including Rembrandt's Night Watch...

Yes, it's Flash based. More's the pity. Churlish to complain though.

This is a glorious marvel. Most of these paintings can be seen only at a distance. Now you can put your eye next to them.

Google moves into positive Kharma territory with this one.

From the FAQ ...

Why is there a difference between the museums in terms of the number of galleries, artworks and related information?

Google approached the museum partners without any curatorial direction, and each museum was able to chose the number of galleries, artwork and information they wanted to include, based on reasons specific to them. All content in the information panel pertaining to individual artworks was also provided by the museums.

Why are some areas or specific paintings in the museum Street View imagery blurred?

Some of the paintings and features captured with Street View were required to be blurred by the museums for reasons pertaining to copyrights.

Are the images on the Art Project site copyright protected?

Yes. The high resolution imagery of artworks featured on the art project site are owned by the museums, and these images are protected by copyright laws around the world. The Street View imagery is owned by Google. All of the imagery on this site is provided for the sole purpose of enabling you to use and enjoy the benefit of the art project site, in the manner permitted by Google’s Terms of Service.

Update: Unsurprisingly, given the use of Flash, it's buggy on a Mac. I had more luck using Chrome for OS X than using Safari. I created a shareable collection but it took a few tries to get it saved. Doubtless a part of Google Social to be. Did I mention Flash sucks?

Unemployment and the great stagnation

In the past week or so I wrote a summary post on how the people I read think about unemployment and the new American economy.

I also wrote a related post on how little medicine has progressed over the past 27 years. That lack of progress has a lot to do with why health care costs have risen faster than GDP. In the absence of substantial innovation the only way to improve outcomes is to spend more.

These memes are in the air. Two days ago Paul Krugman claimed that the large surge in US productivity from 1995 to 2004 was largely due to Walmart-style retail innovation (which, of course, required advanced IT support).

Yesterday Sewell Chan tagged the financialization [1] of the US economy as big contributor to the (second)  great crash of '09 (emphases mine) ...

Looking for a Legacy of the Financial Crisis Inquiry - NYTimes.com

... Greta R. Krippner, a University of Michigan sociologist whose book “Capitalizing on Crisis: The Political Origins of the Rise of Finance” (Harvard University Press) comes out next month.

“The report reinforces the view that financial activities should serve the nonfinancial economy, rather than the other way around, as has been the case in the U.S. economy over the last several decades,” she said.

That orientation toward finance — rather than the deregulation and avarice — is the real source of instability, according to Judith Stein, a historian at the City University of New York Graduate Center and the author of “Pivotal Decade: How the United States Traded Factories for Finance in the ’70s,” published last year by Yale University Press.

“Low wages, low interest rates to encourage consumption, and too much investment in housing and financial services because of the decline in manufacturing and other tradable goods – those are the underlying causes.”

That same day Tyler Cowen tied some threads, while plugging his Great Stagnation book in the NYT (emphases mine) ...

Incomes Are Stuck on Technology’s Plateau - Tyler Cown NYTimes.com

... From 1947 to 1973 — a period of just 26 years — inflation-adjusted median income in the United States more than doubled. But in the 31 years from 1973 to 2004, it rose only 22 percent. And, over the last decade, it actually declined.

Most well-off countries have experienced income growth slowdowns since the early 1970s, so it would seem that a single cause is transcending national borders: the reaching of a technological plateau. The numbers suggest that for almost 40 years, we’ve had near-universal dissemination of the major innovations stemming from the Industrial Revolution, many of which combined efficient machines with potent fossil fuels. Today, no huge improvement for the automobile or airplane is in sight, and the major struggle is to limit their pollution, not to vastly improve their capabilities.

Although America produces plenty of innovations, most are not geared toward significantly raising the average standard of living. It seems that we are coming up with ideas that benefit relatively small numbers of people, compared with the broad-based advances of earlier decades, when the modern world was put into place. If pre-1973 growth rates had continued, for example, median family income in the United States would now be more than $90,000, as opposed to its current range of around $50,000.

... there have certainly been gains in medical treatment, we may be overvaluing them. In education, we are spending more each year, but test scores have stagnated for decades, graduation rates are down and America’s worst schools are disasters.

There is an even broader problem. When it comes to measuring national income, we’re generally valuing expenditures at cost, rather than tracking productivity in terms of results. In other words, our statistics may be deceiving us — by accepting, say, our health care and educational expenditures at face value. This theme has been emphasized by the PayPal co-founder Peter Thiel in his public talks and by the economist Michael Mandel in his writings. And I’ve stressed it in a recent e-book, “The Great Stagnation.”

Sooner or later, new technological revolutions will occur, perhaps in the biosciences, through genome sequencing, or in energy production, through viable solar power, for example. But these transformations won’t come overnight, and we’ll have to make do in the meantime. Instead of facing up to this scarcity, politicians promote tax cuts and income redistribution policies to benefit favored constituencies. Yet these are one-off adjustments and, over time, they cannot undo the slower rate of growth in average living standards...

Cowen is infected with the Marketarian meme [3]. Since the Market is divine, the failure must be in innovation. Even so, I think he has some important things right.

He is too tentative though when he questions how much progress medicine has really made over the pasts quarter century. If we went back in time, and told doctors of 1984 what medicine  in 2011 was like, they would weep. "Surely", they would protest, "we must at least have beaten something like Rheumatoid arthritis or Multiple sclerosis".

On the other hand, I think Cowen (and, for that matter, Krugman), are missing the enormous impacts of IT innovation. Our Finance innovations were IT enabled, and our disastrous inability to measure and manage them arose in part from our inability to understand the systems we'd created.

So we've had three new additions to my summary article in one week. I think we're closing in on what whacked America between 1999 and 2011. Congress may again need four tries to get it right [2], but we are making progress. Once we understand what the heck happened, we have a start at recovering.

- fn --

[1] I point to the "virtual economy", more in my summary post. The rise of Finance was driven by both IT innovations and the rise of the vast manufacturing powers of China, Brazil and India.

[2] Washington’s Financial Disaster - Frank Portnoy - NYTimes.com - "Few people remember that the early investigations of the 1929 crash also failed due to political battles and ambiguous missions. Ferdinand Pecora was Congress’s fourth chief counsel, not its first, and he did not complete his work until five years after the crisis. Congress should try again."

[3] He is in denial about the extent of income skew vs. income growth. For example.

See also

• Japan Blocks the Young, Stifling the Economy: Another example of asymmetric distribution of employment. In the US we bias to the Finance industry, in the Japan it is biased against young workers. Same problems, different biases.
• Unemployment and the new American economy - with some fixes 1/22/11
• The Great Stagnation – Medicine or Who Ate My Prosperity «  Modeled Behavior: Smith agrees with me about medicine
• Krugman agrees with Tyler on the failure of technological innovation. As noted above, I think he's off about IT. Problem is IT is an enabling technology, not an end in itself.

Dilbert shout out

Dilbert 1/30/11 - "Option two: I could lie, and tell you that everything is perfect". Perfect.

Scott Adams has been at this for 22 years. Some years he does better than others, but in the past six months he's hit the spot more often than not. Nice to see a veteran in good form.

Teaching science - how to improve

I have children in public schools in grades 3 through 8. This isn't surprising ...

Minn. science proficiency results called a shock | StarTribune.com

... national tests given in 2009, showed that 40 percent of Minnesota eighth-graders and 43 percent of fourth-graders were either 'proficient' or 'advanced' in science."...

In other words, 60% failed.

I'm not concerned about science teaching in grades 1 to 4. Maybe someday, but not today. We do have a problem with teaching science in Minnesota's public schools between grades 5 and 8.

So what should we do about it?

We need old, cynical, hard bitten teachers nearing retirement to tell us what needs to change. I can only suggest a solution based on what I know about doctors. Since doctors and teachers have a lot in common, this may be relevant.

I was a real family doc once. I switched careers about fifteen years ago, but my wife still sees patients. There are a lot of superb family physicians, particularly in rural America but also in urban settings. On the other hand, radiologists make far more money for less work. The gap has grown over the past decades. Since most radiologists would be lousy family physicians, and most family physicians would die of boredom doing radiology, the impact isn't as large as it might be. Still, it's real. If you want to get more quality family physicians (or pediatricians, internists, etc), the cheapest solution is to pay radiologists less [1].

I suspect the same is true in teaching. Science teachers and reading teachers draw from somewhat similar candidate pools. The quality of science teaching will depend on the relative prestige and rewards between one domain and the other. If we want better science teaching in America, we need to make teaching science relatively more attractive than the alternatives.

Any comments from those who teach young students?

[1] You'll know you're paying too little when it becomes hard to read MRIs or get an interventional procedure performed. I suspect that would take a vast reduction in income.

Administrivia: return of the captcha

Google's spam comment detection isn't good enough. After a one month test I've given up and restored a captcha function (yech) for Gordon's Notes comments.

Sorry.