More of this

I wish there were more Anthony Weiners in Congress.  This is simply awesome:

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Chart of the day

Via Ezra:

taxcutscbpp.jpg

I like his take, too:

At the moment, I’d put my money on a two-year extension of all the tax cuts, including those for the rich. But either way, we’re talking about adding $3+ trillion onto the debt, and the Republican position is that we should add even more than that. Meanwhile, we’re cutting food stamps to pay for Medicaid.

The Ownership society

Much to my dismay, WordPress does not allow you to embed Daily Show or Colbert videos.  Urgh.  It’s with your time to click through, though, to watch Colbert take down supply-side economics as only he can.

The $320K/year Kindergarten teacher

Fascinating Dave Leonhardt column (and here’s a blog post) on the apparent life-long effects of having a good vs. bad Kindergarten teacher.

How much do your kindergarten teacher and classmates affect the rest of your life?

Economists have generally thought that the answer was not much. Great teachers and early childhood programs can have a big short-term effect. But the impact tends to fade. By junior high and high school, children who had excellent early schooling do little better on tests than similar children who did not — which raises the demoralizing question of how much of a difference schools and teachers can make…

Just as in other studies, the Tennessee experiment found that some teachers were able to help students learn vastly more than other teachers. And just as in other studies, the effect largely disappeared by junior high, based on test scores. Yet when Mr. Chetty and his colleagues took another look at the students in adulthood, they discovered that the legacy of kindergarten had re-emerged.

Students who had learned much more in kindergarten were more likely to go to college than students with otherwise similar backgrounds. Students who learned more were also less likely to become single parents. As adults, they were more likely to be saving for retirement. Perhaps most striking, they were earning more.

Short version: kindergarten teachers are really important (not to suggest others aren’t too, but there’s probably something about shaping a child’s first classroom educational experience) and we ought to take this more seriously:

Mr. Chetty and his colleagues — one of whom, Emmanuel Saez, recently won the prize for the top research economist under the age of 40 — estimate that a standout kindergarten teacher is worth about $320,000 a year. That’s the present value of the additional money that a full class of students can expect to earn over their careers. This estimate doesn’t take into account social gains, like better health and less crime.

We need to treat teachers like professionals, pay them like professionals, and have expectations like professionals.  We don’t really do this.  Part of me cannot help wondering how much of this is because elementary and secondary education is a field traditionally dominated by women.   Here’s also a good opportunity to plug perhaps my favorite Gladwell article ever on teacher quality.  You really should read it.

Friday Book Post: the Big Short

So, finished reading The Big Short at the beach last week (I was way over-optimistic on my beach reading— only finished this and got a little under way on The Poisoner’s Handbook). As expected, really great book on the financial crisis– highly recommended.  It was pretty technical at times, but it kind of had to be to really tell the story.  Anyway, I could write a huge post on this, but just a few points that really struck me that I’m going to restrict myself to.

1) Bond rating agencies were really dumb.  I already knew that, of course, but I just did not realize how jaw-droppingly stupid the people rating the toxic assets were.  I did know that this whole mess would’ve never happened without the ratings agencies giving AAA ratings (as solid as US T-bills) to absolute crap, but I was shocked to find out how moronic (I’m running out of words on this point) they were.  Here’s what really killed me.  Apparently, a person with a credit (FICO) score of 615 and above is quite unlikely, historically-speaking, to default on a loan.   Thus, Moody’s and Standard & Poor’s required that the average, i.e., mean, FICO score for a CDO (a slice of a collection of mortgages be 615.  They did not look at the individual mortgages at all.  Thus the Wall Street wizzes very quickly gamed the system.  Load up CDO’s with a bunch of awful mortgages to people with FICO scores of 450 and just make sure you balance them off with an equal number of people with 780– thus, your mean of 615.  Problem is, a mortgage to someone with a FICO score is pretty much doomed to fail, and these were a huge portion of the CDO.  Yet, these financial instruments got AAA ratings– again, suggesting they are basically no-risk investments.  Nuts!!!!   Bill Gates walks into a bar, the average patron in the bar is now a millionaire.  Rocket science, this ain’t.

2) Investors are over-privileged and stupid.  One of the heroes of the book is an investor, Mike Burry, who saw this coming and made huge returns for himself and his investors.  This guy was pulling in amazing profits for his investors, but once he started lagging the market for just a little while they were all ready to bail.  Do they really think they should always be having great returns?  Apparently so.  A lot of investors missed out on a lot of money because they were not patient with Burry when it was quite clear he was seeing things other people were not.

3) Incentives matter.  Again, not exactly a new point, but critical to this big mess is that the giant Wall Street Firms incentivized short-term profit, rather than long-term gain, at almost every step.    In fact, many of the people who basically destroyed our economy walked away multi-multi millionaires.  I think financial reform may have tried to address this to a degree, but I suspect not nearly enough.  Far too much of Wall Street is incentivized for what is truly little more than short-term gambling with no larger social benefit.  That sucks.

4) Read it.

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