Category Archives: Policy

Policy in the Margins

Jim Wooten notes that projects funded in tough times should be “marginally useful”:

Times are tough. People are out of work. Don’t take their money and buy them toys, and don’t take it to spend on programs that are marginally useful.

So, do marginally useful policies succeed?  If not, why do we support iterative policy adjustments when they do not succeed?  Do marginally useful policies represent a border area between public success and public failure?

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Evolution of an Institution

Stanley Fish’s column finds a rather terse description of the public expectations of higher education:

In this latter model , the mode of delivery – a disc, a computer screen, a video hook-up – doesn’t matter so long as delivery occurs. Insofar as there are real-life faculty in the picture, their credentials and publications (if they have any) are beside the point, for they are just “delivery people.”

So, if college faculty are to be reduced to the identical functional role that k12 teachers now find themselves, who will determine the curricula that they will teach?  And, who will lead the discoveries of knowledge and technologies yet to come?  The first question will undoubtedly be answered by corporations who define the skillsets their workforce requires.  As to the second, corporations have largely abandoned the costs of basic research as a long term expense that makes no sense in a world that values assets on a short term basis.

The power of the written and spoken word has been reflected in education since the time of the Greek empire.  Curiously, another article in todays NYT discusses the differences in approach to literature in language found in comparison of President Bush and President-elect Obama.  To the point, the author states the impact of Obama’s literature upon the development of Obama’s political skills:

But his appreciation of the magic of language and his ardent love of reading have not only endowed him with a rare ability to communicate his ideas to millions of Americans while contextualizing complex ideas about race and religion, they have also shaped his sense of who he is and his apprehension of the world.

So, should education devolve into a means of training workers for tasks that require little appreciation for communication skills?  If not, how should these skills be taught to be appreciated?  Rhetoric and composition in a for-profit school are taught with different intended outcomes than similar courses in public and private non-profit colleges.

From the essay on Obama’s love of books:

The incandescent power of Lincoln’s language, its resonance and rhythmic cadences, as well as his ability to shift gears between the magisterial and the down-to-earth, has been a model for Mr. Obama — who has said he frequently rereads Lincoln for inspiration — and so, too, have been the uses to which Lincoln put his superior language skills: to goad Americans to complete the unfinished work of the founders, and to galvanize a nation reeling from hard times with a new vision of reconciliation and hope.

What do we lose if we adopt the for-profit approach to short term goals?

We may lose those who find inspiration in history, literature and art whom we, today, find attractive as leaders.   Think about this — do you want to decide whom to elect based upon rhetoric and vision or based upon a stack of 30 powerpoint slides?

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Madoff – Public Value Failure and Market Failure

Markets depend upon information to be efficient.  This NYT story on Madoff indicates that information was in short supply, and a disaster ensured.

The outsize impact on the industry may have resulted largely because Mr. Madoff (pronounced MAY-doff) managed his funds much the way that real estate leaders have operated successfully for decades: He provided little information and demanded a lot of trust.

So, where were the government regulators, those charged with ensuring that the market provide the necessary disclosures so that investors can rationally make their “risk” decisions?  Absent, according to a Washington Post op/ed:

Those who support regulation also say that hedge funds should disclose more of what they do. Well, Madoff did make some disclosures; it’s just that they weren’t true. As SEC Chairman Chris Cox has all but admitted, the scandal doesn’t show that his agency lacked the power to regulate; it shows that it failed to exercise it. Responding to this scandal with more regulation would be like thrusting more pills on a patient who refuses medication.

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Filed under Market Failure, public failure, public values

Just because you model it wrong, doesn’t mean it failed

Do markets really fail, if the failure is really in the fact that the financial system had the wrong belief?  In other words, the market does note suffer a failure simply because the model you use to predict market performance is wrong.

Interesting essay in the NYT magazine today, which leads with:

Among the most astonishing statements to be made by any policymaker in recent years was Alan Greenspan’s admission this autumn that the regime of deregulation he oversaw as chairman of the Federal Reserve was based on a “flaw”: he had overestimated the ability of a free market to self-correct and had missed the self-destructive power of deregulated mortgage lending. The “whole intellectual edifice,” he said, “collapsed in the summer of last year.”

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Market Failure, Public Value Failure

When the two failures occur simulatanously, you have a serious problem.  See What you don’t know about a drug can hurt you in the WSJ.

“What’s happening in oncology is happening in all other fields of medicine,” says study co-author health economist Scott Ramsey at the Fred Hutchinson Cancer Research Center in Seattle, who checked more than 2,000 chemotherapy trials recorded in the federal registry. “You may not get a full picture of whether a drug is effective or not. With the stakes being what they are in terms of money and human lives, this is a big problem in my view.”

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Cybersecurity – Market Failure or Public Values Failure or both?

The Center for Strategic and International Studies is delivering a report, “Securing CyberSpace for the 44th President,” which notes, among other things, :

“We believe that cyberspace cannot be secured without regulation,”

The report, which offers guidance to the Obama administration, is a strong indictment of government and private industry efforts to secure cyberspace to date. “The laissez-faire approach to cyber-security has failed,” Mr. Kellermann said.

So, the commission concludes the market has failed to secure cyberspace.  And, it has also concluded that current government policy has failed to secure cyberspace.

In the intro, the report reads:

We advocate a new approach to regulature that avoids both prescriptive mandates, which could add unnecessary costs and stifle innovation, and overreliance on market forces, which are ill-equipped to meet public safety and national security requirements.

So, we have reasons why the market fails with regards to cybersecurity.

Not surprisingly, DHS is defending itself against the Commissions’ criticism of how cybersecurity has been managed.

“To be fair, we are undertaking something not unlike the Manhattan Project,” Keehner said. “Billions of dollars are going into this effort. We’re the first to admit there is more work to be done, but the progress that we have made should not be discounted.”

For further reading — see presentations made at CSIS event called

Improving Cybersecurity : Recommendations from Private Sector Experts

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Filed under cybersecurity, Market Failure, Policy

Information Asymmetry – the Disease

Or more of what you don’t know will hurt you.

Seems we will have even less science journalism:

CNN is eliminating its seven-person unit covering science, the environment, and technology, saying its “Planet in Peril” programs do the trick. Curtis Brainard, who assesses environmental coverage for the Columbia Journalism Review online, in a comprehensive piece on the move, said: “[T]he decision to eliminate the positions seems particularly misguided at a time when world events would seem to warrant expanding science and environmental staff.

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Information Asymmetry – A case of what you don’t know will hurt you

This blog entry describes how and why opaqueness is a must on Wall Street and notes the obvious — that a drive to maintain informational advantage frustrated attempts to regulate (and continues to do so) dangerous practices of asymmetry.

Transparency is the enemy of information advantages, and opacity is the friend of high margin investment products.  In the wake of unprecedented regulation after the dot-com bubble and the Worldcom and Enron scandals, Wall Street turned transparency and disclosure on its head by layering so many documents onto each other, few people ever bothered to read them.  This obfuscation of otherwise transparent information recreated new informational asymmetries leading to new high margin businesses.  Informational advantages are what drive Wall Street profits.

A drive to maximize informational advantage defeats market mechanisms and public regulatory efforts leading to both market and public value failure.

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Is technology a solution to information asymmetry?

While the author of this article is focusing on the “privacy” issues arising from research (Reality mining) using data found with new technologies, I think he highlights a means to battle information asymmetries (IA).  IA leads to situations including moral hazards and I think act like a cancer on markets — and can lead to market failures.  So, can technologies that defeat IA be a good (thing)?

And, so far as privacy is concerned, perhaps we should remember the not too distant past:

“The new information tools symbolized by the Internet are radically changing the possibility of how we can organize large-scale human efforts,” said Thomas W. Malone, director of the M.I.T. Center for Collective Intelligence.

“For most of human history, people have lived in small tribes where everything they did was known by everyone they knew,” Dr. Malone said. “In some sense we’re becoming a global village. Privacy may turn out to have become an anomaly.”

Some links to follow:

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Filed under Economies, Market Failure

Failure – Market, Public, and Ethics

Friedman thinks we hit the trifecta of failures with regards to the financial crisis.

This financial meltdown involved a broad national breakdown in personal responsibility, government regulation and financial ethics.

No time to do it now – -but need to find the Michael Lewis piece he mentions.

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