Words of Wisdom

I just finished Stiglitz's book Freefall today. It excites me because he mentions many things I have been thinking about like contradictions and questions. In the concluding chapter he talks about how the economic system reflects and maybe even defines our moral values, and how we should think about what kind of moral values we want and to take a more active role in designing the system so that it reflects those values.

I really like this line.

There was individualism but no individual responsibility.

Society cannot function well if people do not take responsibility for the consequences of their actions. "I was just doing my job" cannot be a defense."

If people are serious about wanting less regulation then they need to take more personal responsibility rather than taking refuge in the fact that their actions are technically legal and thus must be "good".

Higher Standards

Scrutiny of China's factories after FoxConn suicides

One Labtop Per Child Left Behind

There have been some studies done showing that having a computer (at least temporarily) widens the achievement gap for low-income middle school students.

I have some solutions, though. My theory is that the reason why the nerds got so much out of having computers up until now is because computers used to be way harder to use (Linux and MS-DOS) and Windows had all these bugs and would crash all the time (blue screen of death!). Maybe the kids should be given Linux boxes or just a computer with no GUI. Alternatively, they could just give them broken computers so they'd have to fix them in order to use them. But then that would just a one-time lesson, after which they would just slack off. Another option is to write and infect the computers with an education virus, which makes you solve problems or answer questions in order to gain access to things like the internet, games, or checking email.

Stiglitz and Deming on Perverse Incentives

In Freefall, Stiglitz argues that the crash of the financial system was caused by a "systemic" problem, which means something more specific than a likely or common problem. It means the structure of the system has a tendency to do things (like fail) other than its original function such as providing banking services. Stiglitz elaborates that the business models of the banks and other financial institutions had incentives that caused actors in the system to increase the likelihood that it would fail in this way.

One major problem was that many executives had an incentive to maximize the stock prices because they get paid in stock options. Also, bonus pay depends on the income generated, and in the financial sector, income is generated most easily with fees. However, when the company has losses, executives get paid "retention bonuses," which should actually mitigate the incentive to ruthlessly maximize the share prices. Stiglitz wants to discredit the argument that bonuses give incentives to executives to work harder, but also argues that, to the extent that they work harder, the executives work harder only to maximize the stock price and the profits. Deming claims that any measure of performance will always have this problem since people will always find ways to fudge the numbers in their favor. He strongly cautions against using quantitative metrics to measure performance because maximizing one number (short-term profit) may end up minimizing another number (long-term profit) somewhere else in the system. Another way it comes up that I have experienced at my company is that saving time for one group may end up taking up more of another group's time so there is a need to think of the whole system when setting the agenda for everybody.

Stiglitz then goes on to describe the problems with corporate governance, where management typically appoints most of the board, and the board sets the executive pay.

Green Food

Lynn wrote an article on Food Security and the Green Revolution in response to Attention Whole Foods Shoppers by Robert Paarlberg

Bonobo

I really like this song by Bonobo. Actually it's just the Prelude for the CD, which is more electronica. Sounds Asian. I wonder if the melody is from some other song.

Organizational Economy

In Freefall, Stiglitz mentions the research of Herbert Simon arguing that there is no reason for profit enterprises should be any more efficient than non-profit or government organizations given neo-classical assumptions. This is because most people are employees no matter what the organization is, and so there is no difference in motivation. Furthermore, in public companies, the owners are the shareholders, who are very removed from management.

Quarter Century

Now I am 25, and it seems like some kind of milestone, but I can't think of any good reason why 25 years is a milestone. There's nothing really symbolic that happens every 25 years. Maybe there's a 25 year flower or something. At any rate, it's definitely moving on from being in my early 20's.

Wet Wipe Foresight

the other day i went to dinner at an ethiopian place, and everyone was like, oh no my hands are all messy now, and i'm like 'oh but i have a wet wipe that i saved from some other place a long as time ago,' but then it was completely dry. the end.

No Good Workers

NYT article about how manufacturing companies seeking to expand in the US are having a a hard time finding qualified workers. It really highlights the problem with the public education system and also how difficult it is to "create jobs." The fact is that there are jobs but not enough people with basic skills as well as specialized skills. My company is also having trouble hiring manufacturing people, especially people with soldering skills. Besides soldering, workers need to have enough aptitude to learn how to use the computer program. That kind of aptitude is not something that can be remedied with a training program, but instead needs to be addressed in grade school. The article said that the labor shortage is because many manufacturers have replaced assembly lines with more automated systems so they need more skilled workers to operate computerized machinery. Similarly, the promise of "green jobs" has not materialized. When I interviewed at Synapse, I mentioned my concern about the logistics of transitioning the labor force to green jobs. It seems to me that it's hard to build public support for green projects at the expense of other businesses like coal unless the green jobs made available are explicitly for the people who will be put out of work.