For a rich trove of examples, I read a few articles from Model Minority. It didn’t take long to find this article about the costs of being poor, which includes these verifiable statements:

Look at it like this, if you are working at Target, making $7 an hour, Target is making arguably $100 to $200 dollars an hour off of you. You are taking the short, and the corporation is keeping the rest. What if you were able to keep more of the money you earned for them? Life would be different. On top of that, most of the items that we get from stores are from factories in China, Mexico, Haiti and the Phillipines where women work earning $2 per day. Again, those women are taking the short.

It took me only 30 seconds to find basic financial information about Target and compute relevant stats. In 2010, Target had about $69B in revenue and $3B in earnings. With 355K employees, Target’s revenues are about $94 per hour per employee if the employees work full time, and about $200/hour if they work on average half time. So, the author is right, but only if “making” means “revenues.” However, when she says “keeping the rest” she clearly means earnings. In that case, Target’s earnings per employee are from $4/hour to $8/hour. In that case, the writer is off by a factor of 25x, not a small error. So, she either doesn’t know the difference between revenue and earnings, or she’s really bad at math, or she doesn’t care if she spouts nonsense, as long as the nonsense fits her biases.

The second verifiable fact is that workers in China, Mexico and other places are making $2/day. Bloomberg reports that manufacturing workers in China and Mexico make about $2 per hour. I’d guess that a 10 hour day is more typical there, so for this statistic, the author is off by a factor of 10x, an improvement but still not even in the ballpark.

I certainly would not dispute the author’s theme that prices are higher in poor neighborhoods, or more generally, that life in poverty is abysmal. However, these points can be argued without fabricating statistics, and a decent respect for facts and figures, across the political spectrum, would help moderate the rancor of our debates and bring us closer to agreement.

[The KIPP Performance gains do] not appear to be attributable to a selective admissions process. KIPP serves minority and high-need students, many of whom performed poorly before they entered the schools. Some unobservable biases may be present in student motivation and support, but except for a tendency to attract more girls than boys, there is as yet no strong observable evidence of a systematic selection bias.

Where it has been monitored, student attrition is high and seemingly selective. Those who leave KIPP tend to have been performing less well than those who stay, and at least one study suggests that those who leave were lowerperforming when they entered. Such attrition, if it were taken into consideration, would reduce the size of gains in reports that simply compare KIPP eighth graders with those in their host districts. However, the evidence does not go so far as to suggest that attrition fully accounts for the observed KIPP advantage.

So, there is no bias on which students enter the program, but there is a bias on which students leave. Which of course means that there is a bias in the students that were evaluated to assess the gains in performance. It hardly matters if the poorer performing students didn’t get in, or if they dropped out; it is only important they the were not part of the assessment.

On 60 Minutes a few weekends ago, it was mentioned that the Bill and Melinda Gates Foundation would like 80% of American youth to attend and graduate from college. It is a nice thought in many ways. As a teacher and professor, intellectually I am all for it (if the university experience is a serious one, which these days, I don’t know).

But students’ expectations in attending college are not just intellectual; they are careerist (probably far more so). As it happens, I am now living and teaching in a country, South Korea, that meets the Gates’ standards. Right now, about 75-80% of Korean high school students enter a university. The 20% of Korean youth who do not attend university are mainly poor rural youth. Given the Koreans’ diligence, it is not surprising that the vast majority of university attendees also graduate, many with majors in scientific and engineering disciplines (“soft” degrees like marketing are not as popular here). This is a dedicated country.

But you know what? They can’t find jobs. It was reported in the Korean media a few weeks ago that according to the latest government figures, only half of recent Korean university graduates have found full-time work. Even the country’s best university, Seoul National, only has a 70% placement rate.

Now, Korea is experiencing an economic downturn, but not as bad as America’s. This employment issue has more to do with levels of training and subsequent levels of expectation. When a Korean student emerges from 20 years of intense study with a university degree, he or she reasonably expects a “good” job — which is to say, a well-paying professional or managerial job with good forward prospects. But here’s the problem. There does not exist, nor will there ever exist, a society in which 80% of the available jobs are professional, managerial, comfortable, and well-paid. No way. Korea has a number of other jobs, but some are low-paid service work, and many others — in factories, farming, fishing — are scorned as 3-D jobs (difficult, dirty, and dangerous). Educated Koreans don’t want them. So the country is importing labor in droves — from China, Vietnam, Cambodia, the Philippines, even Uzbekistan. In the countryside, rural Korean men are having such a difficult time finding prospective wives to share their agricultural lifestyle that fully 40% of rural marriages are to poor women from those other Asian countries, who are brought in by match-makers and marriage brokers.

Since young Koreans almost invariably live at home until marriage, whether they are working or not, it is routine for the young unemployed to do so. Their parents, who have a lot invested in their children’s successful outcomes, discourage them from taking low-level, part-time, or contract work, even just to get a start in life. As is usually the case, the only way they can see of improving their lot is not by lowering their expectations, but by improving their qualifications: by scoring well on English tests, getting additional certificates, and so on. But everyone else is doing this, too, so the competitive field remains the same. What will happen to these youths? The more years they don’t work, the less chance there is that they ever will. They become tainted, and possibly a permanently disenfranchised minority.

Could an extinct form of near-humans have interbred with us? Not only don’t we know, but we cannot know. Things we cannot know are outside the domain of science.

Strong work, that “cannot.” Unfortunately, Marks wrote this only 3 years before the Neandertal genome was sequenced, and 7 years before humans and Neandertals were proven to have interbred. From a summary of the findings:

• A newly mapped Neanderthal genome provides strong evidence that humans and Neanderthals interbred.
• Between 1-4 percent of the DNA of many humans living today likely came from Neanderthals.
• People of European and Asian heritage are most likely to carry the Neanderthal genes.

There is no shame in being wrong, but in Science, you should be circumspect about making absolute statements, and for Marks, this level of unreasonable certainty is troublesome. Marks frequently makes statements that lack scientific and logical rigor, and the critique of those statements is for another post.

I’d hope that someone writing a book about genetics would be able to imagine the possibility of finding similar genetic markers between two separate lineages of humanity, but Marks is only able to conceive of actual, present-day observations of productive mating as the  proof that Humans and Neandertals could interbreed. But honestly, I no longer expect that sort of intelectual expression from anthropologists.

Such comparisons are an abuse of statistics; the US and Norway are incomparable because of the vast differences in size, social structure, demographics and natural resources.

The first, and most glaring problem of comparison is the size of the countries. The US population is 64 times bigger. Norway is about the same population as Alabama, with a smaller population than 22 US states, and  its GDP is smaller than 13 US states.  If you dropped Norway into California, we’d refer to it as a suburb.

The difference in size is important because of the other big difference, diversity. Norway is very homogeneous, which is possible because it is so small. The US is one of the most diverse countries in the world — just the US Black population is 9 times larger than the whole country of Norway. High diversity has the statistical effect of pushing the country closer to world averages, while the very small Norway can be a statistical outlier.

A much more correct comparison would be to compare Norway to individual US states. Top US states rank very well relative to Norway, and on the TIMSS test of science and math, the two us states that participated, Massachusetts and Minnesota, outranked Norway by more than 20%.  Social programs that work well with a cohesive set of Scandinavians would probably work in Minnesota, but fail completely among the clannish descendants of the Ulster-Scots of the US south. Culture matters, and where Norway has one predominant culture, the US has dozens.

( As a data point on the power of culture and ethnicity, note that the states that compare best to Norway, like Minnesota, are also the states with the most northern Europeans. )

The high taxes and generous social programs in Norway are possible in part because of the country’s  oil revenue — Norway is the world’s third largest oil exporter.  Oil added about $14B to the state’s revenues in 2004, a nice cushion for their social programs. Oil doesn’t explain all of Norway’s success of course, but it is a part of it that few other countries in the world have.

The downside of the high taxes is that is has crushed innovation. Have a look at the list of Norway’s largest companies and follow the links through to see the date the companies were founded. For all of the links I followed, the company was either founded before 1940, or was created by a merger of companies that were founded before 1940. As far as I can tell, Norway ( and Scandinavia in general )  has no Microsofts, no Googles, no Silicon valley. Tandberg, the “Silicon Valley company of Norway” was founded in 1933. A lot of the companies were founded before 1900. The landscape of the Norwegian economy does not show any evidence of the “creative destruction” that characterizes the US economy.

Doubtlessly, Norway is a wonderful place to live, if the character of Norway fits your personality.  But regardless of its success and charm, there few lessons to be learned from the completely inappropriate comparison of the US to Norway.

Or at least they would never do it on a private list, like JournoList. No, when they manipulate the media, they do it in the open, in DailyKos blog articles about Google Bombing the Election.  Same play, different actors.

I find this sort of sniping exhausting. For every Vast Conspiracy on one side, there is an equivalent Vast Conspiracy on the other side. People are hypocritical. They forgive in their friends what they condemn in their enemies. They are tribal. They  easily deluded by confirmation bias. These issues have nothing to do with Right or Left; they are entirely artifacts of  humanity.

But at the same time, I think most people, or at least the people I am exposed to, politically active Americans, have a genuine concern for our country and our quality of life. We all want to make our world a better place, but we don’t agree on how to do it. I think a lot of our political turmoil would be eliminated if we all ignored both wings, accepted that the other guy wants a better world just as much as I do, and quit with the name calling.

Cynics beware, I am romantic about the National Health Service; I love it. All I need to do to rediscover the romance is to look at health care in my own country

If we can expect Mr. Berwick to model US Medicare and Medicaid on the NHS, we might check in on the NHS for a glimpse of where US healthcare is headed. From the Telegraph,

Axe falls on NHS services

NHS bosses have drawn up secret plans for sweeping cuts to services, with restrictions on the most basic treatments for the sick and injured.

Since our new direction in healthcare is even more financially unsustainable than the old one, the US is likely to face similar problems, except that instead of the poor not being able to get health insurance, they won’t be able to get health care.

• Harlem Children’s Zone
• Milwaukee Project
• Abecedarian Project
• Perry Preschool

The most complete summaries of these programs, including extensive bibliographies, come from the Coalition for Evidence-Based Policy, such as:

• Do Early Childhood Intervention Programs Really Work?
• Social Programs That Work

While the programs do report success in improving social outcomes, they don’t seems to do much with IQ over the long term, and even the social improvements appear to be moving the participants from the very lowest rung to the next highest rung, certainly not into the stable middle class. For instance, the improvements over the control group for the Perry Preschool Project include:

• 28% served prison time
• 57% out-of-wedlock births
• $1,856 median monthly income at age 40 ( 2006 or so )
• 65% graduated from high school

Yes, those are the stats for the improved group. The project reports that the intervention was a worthwhile expense for the reduction of social problems, but it also sets lower expectations for what interventionist compensatory education can reasonably achieve.

The result of sky-high marginal rates, this anecdote was supposed to prove, was declining productivity and economic growth. Is this true? Let’s look at a graph of the nominal top marginal tax rate in any given year and GDP growth in that year.

Then Spitzer shows the pretty graph, two squiggly lines that don’t seem to have much relationship to each other. Obviously, when two lines squiggle, each with apparent disregard for the squigglings of the other, there is no connection between the things the lines are purported to represent.

A caveat—obvious but critical—is in order. Simultaneity does not equal causation. Annual growth rates are a consequence of many factors, macro and micro, and the isolated impact of marginal tax rates on growth is hard, if not impossible, to discern from these numbers alone.
That said, it’s obvious that there is no correlation between higher marginal tax rates and slowing economic activity.

Let me translate that last paragraph: “Even though this analysis is completely invalid, I’m going to use it anyway.” Spitzer is making an economic argument based on (relatively) complex statistical analysis that he does, apparently, in his head. Economists have to use computers to do what comes so naturally to Spitzer (the numbskulls). He doesn’t actually have to compute the correlation, because it is obvious. He also doesn’t have to do any more detailed study on the issue because it was so obvious. But he does provide academic support for his conclusion:

More sophisticated efforts to analyze this relationship also produce decidedly murky results. An excellent review of this in the Yale Law Journal, “Why Tax the Rich? Efficiency, Equity, and Progressive Taxation,” concludes that there is scant, if any, legitimate academic support for the proposition that moderate, as opposed to dramatic, increases in marginal rates have any impact on the willingness of the wealthy to participate in the economy.

So a lawyer has referred to other lawyers for support for his position on an issue in economics. Furthermore, the referenced article is a book review, not, for instance, a scholarly review of the economics literature. The book, Does Atlas Strug? is a collection of papers, concerned entirely with taxing the rich. If the “rich” are the top 1% of us taxpayers by income, the rich have about a 14% share of US income. So, what Spitzer is telling us is that changing the tax rates by, say +/- 5% on the people who contribute 14% of US GDP, and who don’t really need to work anyway, doesn’t change GDP much. What an amazing insight! What that does not answer is what is the effect of  high marginal tax rates on the other 86% of the economy.

Maybe someone should ask the economists? These days, asking scholars is really easy, using Google Scholar.

Well, Alan Reynolds, an economist, says “Lower Tax Rates Mean Faster Economic Growth”. Reynolds is from CATO, so maybe you’ll want to discount him, but Engen and Skinner also report that lower taxes result in higher growth, although the effect is modest.

The issue of the relationship between tax rates and GDP doesn’t seem to have gotten as much study as the relationship between tax rates and hours worked, a supporting topic in Spitzer’s article. Spitzer notes that “Central to the intellectual debate about marginal tax rates has been the question of whether higher rates discourage people from working.” Let’s see what economists have to say on this topic.

In “Does It Pay to Work?”  and “Does It Pay to Work And Save?” Gokhale  Kotlikoff, and Sluchynsky (economists, not lawyers) write:

First, thanks to the incredible complexity of the U.S. fiscal system, it’s impossible for anyone to understand her incentive to work, save, or contribute to retirement accounts absent highly advanced computer technology and software. Second, the U.S. fiscal system provides most households with very strong reasons to limit their labor supply and saving. Third, the system offers very high-income young and middle aged households as well as most older households tremendous opportunities to arbitrage the tax system by contributing to retirement accounts. Fourth, the patterns by age and income of marginal net tax rates on earnings, marginal net tax rates on saving, and tax-arbitrage opportunities can be summarized with one word – bizarre.

In “Why Do Americans Work So Much More than Europeans?”, Edward Prescott (an economist at the Minneapolis Fed, not a lawyer) notes:

The surprising finding is that this marginal tax rate accounts for the predominance of differences at points in time and the large change in relative labor supply over time.

A study of “Taxes and entrepreneurial risk-taking” reports:

We first show theoretically that taxes can affect the incentives to be an entrepreneur due simply to differences in tax rates on business vs. wage and salary income, due to differences in the tax treatment of losses vs. profits through a progressive rate structure and through the option to incorporate, and due to risk-sharing with the government. We then provide empirical evidence using U.S. individual tax return data that these aspects of the tax law have had large effects on actual behavior.

In “The Effect of Taxation on Human Capital”, Alan Reynolds, (an economist, not a lawyer) says:

This study finds a significant negative effect of proportional income taxation on human capital. Of the few earlier studies to address this issue, most suggested a negligible effect of taxation on investment on human capital. This earlier conclusion is shown to be incorrect by using a model that is more general in several respects than the models used previously.

In “Workforce 2005: The Future of Jobs in the United States and Europe.” Reynolds (still not a lawyer) writes:

In many European countries, as the OECD Observer article quoted above points out, “additional work effort leads to little or no increase in net (after-tax) income because incremental gross earnings are largely, or even fully, offset by marginal income taxes and the reduction, or complete loss, of benefit payments” (OECD Observer, 1993).

The Showalter and  Thurston (both economists !)  study “Taxes and labor supply of high-income physicians” found that high taxes are disincentives for the most entrepreneurial doctors:

We use the 1983–1985 Physicians’ Practice Costs and Income Survey, supplemented with federal and state tax rates, to estimate the effect of variation in marginal tax rates on work hours for high-income physicians. We find that self-employed physicians are much more sensitive to the marginal tax rate than would be suggested by previous labor-supply studies, while those who are employees have no discernible sensitivity to marginal tax rates.

In their study of the 1998 tax flattening in Canada, Sillamaa and Veall (an economist and a statistician) write:

…Navratil (1995) finds evidence that tax-price responses are higher for high income individuals for both episodes of United States tax reform he studies….

…However our results are consistent with a tax price response by the self-employed and those with high incomes that is much larger than the overall response….

…Using that approximation, these estimates suggest that for a population of these higher income individuals, revenue would be maximized by a marginal tax rate of about 45% for the working age population, which is slightly less than the top marginal rate at the time….

So, in less than an hour, I’ve found 7 papers, written by actual economists, that disagree with Spitzer on the relationship between taxes and incentives to work.

Of course, on any complex subject, there is disagreement, and it is reasonable to supposed that I have preferred to include only the papers that support my conclusion. (I’ll let you guess what that conclusion is.) But I didn’t find much research that  indicated that tax rates don’t have an effect on hours worked.  The authors of Taxation, Human Capital, and Uncertainty suggest that tax policy has little effect on the number of hours worked by middle-aged male workers and  the blog Angry Bear would support Spitzer’s argument.

My impression is that there is substantial debate on the relationship between taxes and growth, with researchers finding everything from no relationship to a substantial relationship. This isn’t too surprising: GDP is a nation-wide measure that encapsulates all of the things going on in the entire economy, so it should be hard to pick out any one correlation. But economists generally support the statement that increased taxes are a disincentive to work, contradicting Spitzer.

Supporters of  Darwin’s theories or Anthropogenic Global Warning base the bulk of their arguments on the scientific consensus, the preponderance of scientists that support these theories. But the same people (well, people in the same ideological camp) have a complete disregard for any consensus in economics about how people respond to incentives, preferring to take their lessons in economics from lawyers rather than  economists.

(The portrait image is of Frédéric Bastiat, the author of  an insightful and entertaining refutation of protectionism, Economic Sophistries, in 1845. )