Friday, May 22, 2015

Why Swedish College Students Are Happily in Debt

The Scandinavian nations have chosen to implement highly sophisticated social support structures.  Their societies are often labeled as “welfare states,” but that is a quite misleading label.  Yes, they do provide generous social security nets to take care of people in need, but they also use their high tax rates to invest in services that are available to all rather than depend on individuals possessing enough income to purchase the benefits themselves.  These services include education, healthcare, pensions, and childcare.  Unequal access to these services is a characteristic of social policy in a country like the United States.

Since Scandinavia and the US are heading in opposite directions in terms of social evolution, it is reasonable to assume that both cannot be doing the correct thing and one is headed towards a tragedy.  One can also view the implementations of the two social concepts as a grand social experiment and try to conclude which model works best and why.  In that spirit let’s look at how Sweden and the US have chosen to make college education available to their populations.

Matt Phillips has produced an interesting article in The Atlantic titled The High Price of a Free College Education in Sweden.  He begins with this lede:

“Here's why Swedish college students still graduate with a ton of debt.”

The first question to be answered is why Swedish students pay no tuition yet still end up accumulating debt as they acquire their education.  The second question that arises is whether the Swedish approach is better than that available in the US.

Phillips provides this chart.

The vertical axis provides the average tuition fees for public colleges in a given nation.  The horizontal axis provides the percentage of students in a nation who receive public assistance, usually in the form of loans.  As expected, the cost of education is highest in the US and the majority of the students finance their education by taking out loans and accumulating debt.  Consider the Scandinavian nations and Sweden in particular.  All provide public education with zero tuition and all have significant numbers of students who go into debt in order to finance their schooling.  In Sweden it is essentially 100% of students who borrow money to obtain a “free” education.  What is going on here?

Sweden has a particular view of the importance of individual autonomy.  In Sweden’s Collective Individualism it was pointed out that in the US liberty is usually thought of as a license to do something, whereas in Sweden liberty is viewed as the ability to be something.  Sweden has the acknowledged goal of making their children independent at the age of eighteen.  Providing zero tuition schooling is part of the implementation of that policy.  Being dependent on parents for school funding is considered an intolerable constraint.  Parents can limit their child’s independence by demanding a particular course of study be followed, or a particular school be attended, or, perhaps worst of all, demanding that the child live at home in order to save money.

For an eighteen-year-old to be completely autonomous, she must have resources to cover living expenses while in school.  That is the reason Swedish students accumulate debt.  The government makes funds available in an amount that depends on the student’s income not that of her parents.  The funds are available with low cost, minimal payment loans in order to encourage students to follow this path.  As the chart indicates, they all do.

Phillips provides this insight.

“While Swedish students end up with relatively high levels of debt, the monthly costs of carrying that debt are pretty cheap. (It's about 3.8% of estimated average monthly income of new graduates, according to one study.) Interest rates are low. They're set by the government and maintained through subsidies. And the length of repayment is long: 25 years or until the student turns 60. In other words, the Swedish system of student debt is financially manageable and sets students up to begin their lives as viable adults separate from their parents.”

In other words, the price Swedish young adults pay for the freedom to go to school wherever they want, and study whatever they want, and to provide no burden on their parents, and to not be constrained by dependence on anyone is the equivalent of a tax on their income of 3-4%.

In the US, parents, unless they are exceptionally wealthy, spend their entire working lives worrying about saving money for college expenses, saving money for retirement income, and worrying about being financially devastated by illness.  Most are unable to assist their children at all except perhaps by helping them get loans to finance their schooling.

What are the benefits to the students and to society in general from the two approaches? 

In Sweden, students are much more mobile.  Since they are responsible for their living expenses they can choose to move from an area where jobs are scarce to one where jobs are more plentiful for their education.  They can choose to pursue a career that is personally satisfying but not lucrative, such as public service occupations or the arts, because they know they will never be overburdened by their school debt.  Perhaps of most importance is the fact that all prospective students have the same opportunity to pursue an education.  Once schooling is completed they become full-fledged participants in the economy.  They can manage their school debt easily and still purchase cars and homes, and they can establish relationships and have children.

In the US the situation seems to be the exact opposite.  The debt burden will frighten away many potential students.  Students who choose to proceed, and often their parents as well, are burdened by debt that is difficult to manage.  The size of the potential debt limits schools and the locations of the schools that might be attended, and also places constraints on careers that students might consider.  Why acquire a large debt burden in order to work in a profession where income is low?  The debt burden after graduation can be large enough to minimize purchases and eliminate the possibility of starting a family.

The US seems to have conceded on this point and is heading for a student debt solution where monthly payment requirements as a percentage of income are being lowered and the length of time over which the student must make payments is being decreased, essentially replacing a debt with a tax on income.  It is choosing to do this for new federal loans, so not many people have the newer terms available yet, but eventually more will be able to participate in this way.  This is a step in the right direction, but the terms are still more onerous than those provided by Sweden.

The Swedish system requires higher levels of taxation to support, but it also provides economic advantages that will somewhat compensate.  The increased equality of opportunity is a benefit difficult to quantify, but it is a substantial benefit to society.  One has to suspect that US parents with children to educate might be willing to pay a few more percent in taxes in order to be relieved of the burden of trying to pay college expenses.

Score: Sweden 1, US 0.

Monday, May 18, 2015

The Disturbing Origins of the SAT (Scholastic Aptitude Test)

Taking the SAT test has long been a critical part of the college admission process.  Great weight is put on a person’s scores in considering acceptability for admission in the majority of the most desirable schools.  Parents may spend many thousands of dollars and their child’s lifetime preparing for this test.  Lani Guinier is no fan of the test and is appalled by the significance accorded it.  In her book, The Tyranny of the Meritocracy:Democratizing Higher Education in America, she rips into it, claiming it does nothing to identify those who would merit recognition as potential contributors to the health and well-being of society.  Rather, it has become a tool for propagating an aristocracy and establishing a plutocracy.

The SAT is now known simply as the SAT.  Its original name, and the name under which it was marketed to the nation, was the Scholastic Aptitude Test.  As the name suggests, it claimed to be able to separate the high academic performers from the low academic performers thus allowing college admissions committees to better select the students in which they were interested.  Guinier tells her readers that several studies have concluded that the performance of college students is only very weakly correlated with SAT scores.  A much stronger correlation exists between high school grade point averages and college performance.

“So if the SAT does not measure aptitude—and if it doesn’t even pretend to measure achievement—then what does it measure?”

“The SAT’s most reliable value is its proxy for wealth.  It is normed to white, upper-middle-class performance, as numerous studies have shown when the test is viewed through the lenses of race and class.”

Guinier presents in tabular form the average SAT score as a function of family income to support her contention.  Here we will produce the equivalent result from The Reproduction of Privilege, an article by Thomas B. Edsall in the New York Times.

The elite universities have always had high school performance as an indicator of potential college performance but decided against depending on it.  At first glance, that seems like a reasonable thing to do.  Different school systems and different regions possess a range of academic rigor, why depend on being able to sort all that out?  However, further consideration suggests that the decision has its basis in some outmoded conclusions related to what is responsible for exceptional performance.  High school grades are indicative of both basic intelligence and the hard work of the student.  Both attributes are important for future performance.  The SAT came into prominence in an era when academic performance was more likely to be viewed as a result of a fixed and innate degree of intelligence.  This was the era when it was thought that testing could determine intelligence and identify those who could be depended upon to be high performers.  It was also the era when eugenics was respected as a science in this country.

The notion of the SAT originated in the decision by the United States military to allow university professors to test soldiers entering service for World War I.  Guinier provides some suggestive comments. 

“….Harvard professor and IQ-test advocate Robert Yerkes convinced army brass to allow him to evaluate nearly two million soldiers to identify top talent who could be promoted to the rank of officer.  The results were striking according to Yerkes, ‘The native-born scored higher than the foreign-born, less recent immigrants scored higher than more recent immigrants, and whites scored higher than Negroes.’  In 1923, Carl C. Brigham, a Princeton psychology professor and leading figure in the growing anti-immigration movement of the time, authored a treatise titled A Study of American Intelligence, in which he relied heavily on Yerkes’s findings to conclude that ‘American intelligence is declining, and will proceed with an accelerating rate as the racial admixture becomes more and more extensive’.”

Brigham would be selected to produce the first version of the SAT  (called the Scholastic Aptitude Test) which became available in 1926.  It would be a based on a modification of the IQ test produced by Yerkes.  Already, the separate concepts of intelligence and academic potential were being conflated.

The most serious concern is that an IQ test constructed by people who believed that intelligence was mostly genetically defined and a function of race would almost have to be designed so that it reproduced the beliefs of the designers.  At the time there was no data to match and the belief in intelligence as a measurable quantity was strong—how else to design such a test than to make it agree with preconceptions of who was intelligent?

Is it possible that the SAT was born under suspicious circumstances?  On that topic here is a comment by Nicholas Lemann in an article from The Atlantic The Great Sorting.

“The overall results of intelligence tests have always produced a kind of photograph of the existing class structure, in which the better-off economic and ethnic groups are found to be more intelligent and the worse-off are found to be less so.  In his book analyzing the results of the intelligence tests that the Army had given recruits during the First World War, for example, Carl Brigham, an early psychometrician and the father of ETS's leading test, the Scholastic Aptitude Test, reported that the highest-scoring identifiable group was Princeton students -- this at a time when, by today's standards, Princeton was a den of carousing rich boys.”

“IQ tests have always heavily stressed reading comprehension and vocabulary items like analogies and antonyms, and so does the verbal section of the SAT. Back in the early days Carl Brigham published a scale for converting intelligence-test scores to SAT scores.”

A quick search finds those who hold the SAT in even less regard than Lani Guinier.  Consider this from Rich Gibson, a professor at San Diego State University: The Fascist Origins of the SAT Test.

“The genealogy of the SAT is far more authentic than the importance attached to the test's scores. The SAT was born from the initial IQ tests, written by French psychologist Alfred Binet. In the US, Lewis Terman and Robert Yerkes promoted the IQ test and made it a popular instrument to determine who should be an officer, in a segregated military, during WWI. Their IQ test was designed to prove the genetic advantage of races they had already identified as superior. Terman and Yerkes were executives in the American Eugenics Society…..”

“The AES encouraged the linkage of scientifically quantified intelligence test scores, race, and ‘race hygiene,’ to purify the ‘race’ of ‘low grade’ and ‘degenerate’ groups. In other words, Terman, Yerkes, and many influential scientists in the US, believed they could define exactly what intelligence is. They thought that intelligence is race-based and can be tracked by genes, that intelligence is biologically determined. They believed that to allow those identified as having bad genes to propagate would be to threaten the entire society. Terman and Yerkes believed some people are born superior, and the inferior are a threat to the general welfare…..”

And then there is the story of the “father” of the SAT renouncing his own offspring.

“Carl C. Brigham worked with Yerkes on the Army IQ tests. Brigham wrote a book, ‘A Study of American Intelligence,’ clearly stating his belief in the biological relationship of race and intelligence, concluding that ‘race mixture,’ would pollute the gene bank, making the society dumber and weaker. Brigham then made a few inconsequential changes to the IQ test and called it the Scholastic Aptitude Test. Later, he renounced his own book, and the use of the SAT as a sorting tool for college admissions.”

Gibson is particularly irate about the use of what was perceived as an intelligence test to decide who should be condemned to fight and perhaps die in war, and who was too valuable to be placed at risk.

“….the SAT became a deadly weapon. The rationale of racism, sexism, and class privilege built into the test necessarily means, at its end, not just sterilization, but death. The SAT was used to secure draft deferments during the Korean and Vietnam wars, ensuring the wars were fought by working class youth, especially black youth. Notably, people who might not have done well on the SAT, the Vietnamese, defeated a power led by test-successes, educated at West Pointe.”

Nicholas Lemann provides a detailed history of how the SAT evolved from the first testing performed by Yerkes and others and evolved into the universal tool we have today in The Great Sorting.  The event that cemented the SAT’s role in our society was again provided by the US military.  During the cold war there was much concern that the Soviets were assiduously sweeping up their brightest children and providing them the best education and the best opportunities to contribute to Soviet objectives.  There was a widespread belief that we should be doing the same thing. 

In 1950 the Korean War began.  Truman, an initial believer in universal service, gave in to the pressure and on March 31, 1951 signed an executive order authorizing a test of college students that would grant deferments to those who received a high enough grade.  The SAT would be that test.  The notion of deciding who might live and who might die based on a measure of intelligence via an IQ test was definitely controversial, but the military, who thought of the SAT as an IQ test, was firmly in support.  The marketers of the SAT for such consumption were put in a delicate position and then, as now, always described the test as one of scholastic aptitude.

Lemann provides this summary on the issue.

“What is remarkable is how completely Hershey [head of Selective Service] believed that in the atomic age there was a need to keep potential scientists out of the line of fire -- a need so pressing that it necessitated abandoning all previous American ideas about who should bear the burden of service in wartime. Once a principle is established, it quickly takes on the trappings of tradition, and also generates a constituency -- in this case consisting of universities and the broad upper-middle class from which most of their students came. That may help explain why there was barely any controversy during the Vietnam War over the deferment of college students and graduate students -- even though, unlike 1951, it was a time of dissent -- or later over the abolition of the draft in favor of a voluntary military, which meant that for the college-going class there would be no obligation to serve at all.”

The SAT can’t be measuring intelligence as a fixed attribute of an individual because a student can take a class providing guidance on how to do better on the test.  Does that mean the preparatory work raised the student’s intelligence?  Intelligence must then be a variable which means a snapshot from a single test makes no sense.  If noncognitive factors, such as advice on test-taking strategies, can make a change in test score, then how can the test itself be considered a measure of scholastic aptitude?

So now we have ended up in a situation where the SAT may or may not measure intelligence, and it may or may not measure scholastic aptitude, but if you want to get into an elite school you better spend your life preparing to get a good grade on it.

Let us return to Lani Guinier.  She admits that the initial interest in testing had a decent social motive.  Harvard initially expressed interest in a test that would only be used to identify promising students from less-wealthy environments who would be eligible for scholarships that would allow them to flourish at Harvard and enrich it as an institution. 

“A battle that had begun with idealistic rhetoric succumbed to a Trojan horse: the SAT and a budding testocracy confirmed the existing order as inevitable, because the tests demonstrated that the elite possessed unassailable merit.”

The SAT is known to be an imperfect tool for predicting who will be the “best” college students, but it serves a more important purpose.  It provides the elite schools cover to go after the students they really prefer: students from rich white families.  The elite universities such as Harvard, Yale, and Princeton are really large corporations with a business model that demands income from wealthy alumni.  The best way to create wealthy alumni is to coddle the children of wealthy people.  These schools set the standard and other schools must follow.

To repeat: the SAT is a tool used to propagate an aristocracy and to establish a plutocracy.

Tuesday, May 12, 2015

Paying the Price for Police Misconduct

The interactions of police with blacks, other minorities, and poor people in general have long been contentious.  Police fear an act of violence from someone who might be a dangerous criminal; people who are stopped for any reason by police fear being arrested, perhaps forcibly, for minor or nonexistent violations.  Somehow this level of distrust must be scaled down.

A recent article in The Economist, Wanted: cops with people skills, pointed out that the nature of police work is much tamer than one would believe from reading newspapers and watching TV shows.  The use of force is rarely necessary and would be even less necessary if more time was spent training officers in social skills than in techniques for applying force to subdue an individual.  The article also suggests that police forces might be attracting the wrong sort of people by emphasizing the violent side of police work.

“To the sound of electric guitars, heavily armed police officers fire assault rifles, drive squad cars fast and pull their guns on fleeing crooks. ‘Are you qualified to join the thin blue line?’ asks a narrator, in the sort of breathless voice you might expect in a trailer for ‘Fast & Furious 7’. The advert’s aim is not to sell movie tickets, however, but to recruit police officers in Gainesville, a city of 127,000 in Florida.”

This sounds more like a recruiting video for mercenaries willing to kill for pay in far off lands.  Perhaps Gainesville would be better off avoiding people who might be excited by the prospect of firing guns at other humans.

In any event, interactions between police and citizens often produce violence.  What is of interest here is the fact that the violence determined in courts of law to be the fault of the police has become quite expensive.  One would think that police departments would spend more time winnowing out bad actors; bad actors are expensive to maintain.

The city of Baltimore has been in the news of late because of the case of Freddie Gray who managed to acquire a broken neck that proved fatal while in police custody.  An article produced by Fox News provided some background on the situation in that city.

“Thousands of people arrested by Baltimore police over the past three years have been turned away from the city's jail because their injuries are too severe, according to a new report.”

“The Baltimore Sun, citing records dating back to June 2012, reported Sunday that corrections officers refused to admit over 2,600 detainees to the state-run Baltimore City Detention Center. The records showed that 123 of the detainees who weren't admitted to jail had visible head injuries, the third-most common ailment cited by jail officials. Others had broken bones, facial trauma and high blood pressure.”

It seems the police in Baltimore spend a lot of time arresting people who are in need of medical care.  Or could it be that people who have been recently beaten have a strong motivation to go out and commit a crime?

The Baltimore Sun also produced an investigatory article, Undue Force, cataloguing the large number of complaints by citizens concerning violence committed by police in which a court ruled in favor of the victims.  Having police officers accused of crimes is bad enough, but the cost of arguing these cases in court and losing is downright painful.

“Over the past four years, more than 100 people have won court judgments or settlements related to allegations of brutality and civil rights violations. Victims include a 15-year-old boy riding a dirt bike, a 26-year-old pregnant accountant who had witnessed a beating, a 50-year-old woman selling church raffle tickets, a 65-year-old church deacon rolling a cigarette and an 87-year-old grandmother aiding her wounded grandson.”

“Those cases detail a frightful human toll. Officers have battered dozens of residents who suffered broken bones — jaws, noses, arms, legs, ankles — head trauma, organ failure, and even death, coming during questionable arrests. Some residents were beaten while handcuffed; others were thrown to the pavement.”

“And in almost every case, prosecutors or judges dismissed the charges against the victims — if charges were filed at all.”

And there are financial costs to add to the moral costs.

“Such beatings, in which the victims are most often African-Americans, carry a hefty cost. They can poison relationships between police and the community, limiting cooperation in the fight against crime, the mayor and police officials say. They also divert money in the city budget — the $5.7 million in taxpayer funds paid out since January 2011 would cover the price of a state-of-the-art rec center or renovations at more than 30 playgrounds. And that doesn’t count the $5.8 million spent by the city on legal fees to defend these claims brought against police.”

“The Sun’s findings include only lawsuits that have been settled or decided in court; dozens of similar cases are still pending. The city has faced 317 lawsuits over police conduct since 2011 — and recently budgeted an additional $4.2 million for legal fees, judgments and lawsuits, a $2.5 million increase from fiscal 2014.”

This behavior appears to be common in our cities.  Baltimore was actually lucky because a state law limits damage claims against a local government to $200,000.

“Taxpayers in other cities aren’t as lucky. Cleveland and Dallas have paid between $500,000 and more than $1 million to settle individual police misconduct cases.”

The unluckiest city of all must be Chicago.  Having the most notorious police force comes with a high price.  A related article in The Economist, Police brutality in Chicago:Dark days, provides an update on the state-of-affairs there.

“….Rahm Emanuel, Chicago’s mayor, on April 14th….announced a $5.5m reparations package for (mostly black) suspects who were tortured by police in the 1970s and 1980s.”

“The next day the city council revealed that it is paying the family of Laquan McDonald, a black teenager fatally shot by a cop last autumn, as much as $5m to dissuade them from suing. The police refuse to release a video of the shooting, saying the investigation is still going on.”

Part of the problem may be that the Chicago police have been quite aggressive in pursuing “stop and frisk” policies.

“In March the American Civil Liberties Union (ACLU) published a study of a four-month period last year in which black Chicagoans were subjected to 72% of all stop-and-frisk searches. The police stopped 93.6 per 1,000 residents, according to the ACLU, far more than the 22.9 per 1,000 stopped in New York when stop-and-frisk was at its peak in 2011.”

That is an incredible statistic: almost one in ten residents stopped and treated like a criminal—and that is every four months as well.  It means if your are black and growing up in Chicago you will be stopped by the police many, many times.  That cannot end well.

What is the price Chicago must pay for its aggressive police force?  This chart was provided:

“Chicago paid a whopping $500m in claims related to police misdeeds between 2004 and 2014, according to the Better Government Association, a watchdog….For a city in dire financial straits, which has closed mental-health clinics and public schools, all this adds up.”

Doesn’t anyone there know how to do psychological profiling?  Can’t the city find more people who think helping an old lady across the street makes for a good day, and fewer who like to carry guns and exercise power?

This disheartening summary was provided by The Economist.

“Sadly, as the Gainesville video shows….if you try to recruit cops by telling them they are social workers, fewer may apply. At least part of the glamour of the job is the promise that you get the chance to use violence against bad people in a way that ordinary civilians never can, except in video games.”

Thursday, May 7, 2015

Putting Climate Change in Perspective

For reasons that have little or no relation to science the topic of global warming induced by production of greenhouse gases has become a political issue.  Most of the greenhouse gases are derived from burning of fossil fuels and the emission of carbon dioxide into the atmosphere.  Measures that can be taken to limit fossil fuel consumption produce disruptive effects in our current economic system.  Those who would prefer to not endure such disruptions often point to climate changes that have occurred in the past—without human activity as a driver—as evidence that the rise in temperatures being observed can be explained as a natural phenomenon.  They may be victims of wishful thinking.  Most scientists attribute the current global warming to human-produced greenhouse gases.  Many have been calculating global effects and making predictions of how the earth will respond if emissions continue.  They may also be victims of wishful thinking.  It is useful to review the history of global climate change in order to evaluate the hopes of the deniers and the confidence one should put in calculations of future effects.

An article from Wikipedia provides some data on what scientists conclude has happened in recent decades and what they predict for the future.

“Global mean surface temperature change from 1880 to 2014, relative to the 1951–1980 mean. The black line is the annual mean and the red line is the 5-year running mean. The green bars show uncertainty estimates.”

The change in global temperature is taken to be about 0.6 ˚C since 1980.  Predictions of additional temperature rise by the end of this century based on various emission scenarios vary from 0.3 ˚C to 4.6 ˚C. (from 0.5 ˚F to 8.6 ˚F)  Some have predicted that a net temperature rise of 4 ˚C would mean the end of civilization as we know it.  The nations of the world have adopted a net rise of 2 ˚C as the value not to be exceeded as they attempt to control emissions.

Let’s put some of these temperature changes in perspective.  This source provides a look at how temperature is believed to have changed over geologic time.

The term “ice age” refers only to the five periods indicated in the chart.  We are currently worrying about an overheated planet while we are technically living in an ice age.  The temperature swings associated with entering and leaving an ice age are rather extreme compared to what is anticipated by the end of the current century, but our temperature rise is taking place at a much faster rate.

It is interesting to note that there are also believed to have been five major mass extinctions.  These are times when a significant fraction of plant and animal species have disappeared.  This source provides the estimated dates at which these extinction events occurred: 66, 201.3, 252, 375-360, and 450-440 million years ago.  The third on the list was the worst and is referred to as “The Great Dying.”

“Earth's largest extinction killed 57% of all families, 83% of all genera and 90% to 96% of all species.”

Note how these extinctions seem to correlate with periods when the earth’s temperature underwent large changes.  Perhaps changing the earth’s temperature is a risky business.

What are often referred to as “ice ages” are more properly referred to as glacial cycles which occur much more frequently.

This chart provides temperatures based on studies of ice core measurements.  Consequently the temperature scale is consistent with the local temperature at which the ice was formed rather than that of the global average.  Note how stable the temperature has been over recent millennia. This is a highly unusual period in history and has been critical in allowing human civilization to develop.

“Currently, we are in a warm interglacial that began about 11,000 years ago. The last period of glaciation, which is often informally called the ‘Ice Age,’ peaked about 20,000 years ago. At that time, the world was on average probably about 10°F (5°C) colder than today, and locally as much as 40°F (22°C) colder.”

What is most astonishing is the evidence that large global temperature changes can occur quite rapidly—within a human lifetime.

“On a shorter time scale, global temperatures fluctuate often and rapidly. Various records reveal numerous large, widespread, abrupt climate changes over the past 100,000 years. One of the more recent intriguing findings is the remarkable speed of these changes. Within the incredibly short time span (by geologic standards) of only a few decades or even a few years, global temperatures have fluctuated by as much as 15°F (8°C) or more.”

“For example, as Earth was emerging out of the last glacial cycle, the warming trend was interrupted 12,800 years ago when temperatures dropped dramatically in only several decades. A mere 1,300 years later, temperatures locally spiked as much as 20°F (11°C) within just several years. Sudden changes like this occurred at least 24 times during the past 100,000 years. In a relative sense, we are in a time of unusually stable temperatures today—how long will it last?”

An excellent description of how scientists have gradually changed their views of the earth from one of an essentially constant temperature model to one in which temperature changes can occur incredibly rapidly can be found in an article provided by the American Institute of Physics: Rapid Climate Change.  It describes how the local variations in temperature obtained from ice core data have been correlated with similar observations around the world to verify that it was a global temperature change that had occurred.  This article also tells us that when scientists realized these rapid temperature changes were real (in the 1990s) they were able to conjure up a significant number of possible explanations for how this might have occurred.  What was scary was the realization that it was unlikely that such rapid changes could have been predicted by the existing climate models.

During the last glacial cycle the earth’s surface temperature dropped and sent glaciers spreading across much of what is now densely populated terrain.  Cities and entire nations would have been destroyed.  At the height of this period of glacial growth the global temperature was 5 ˚C lower than today.   One can only guess what temperature change it took to trigger this glacial period.  Scientists are now telling us that we could be on track to raise the global temperature by 5 ˚C by the end of this century.  Is it any wonder that they fear the consequences of such an occurrence?

The scientific data tells us that we have raised the earth’s temperature by about 0.6 ˚C since 1980.  We have, in recorded history, an event in which a similar sized fall in temperature occurred, presumably due to natural effects.  We know of it as the Little Ice Age.  Its major effect hit in the 17th century, but scientists view it as extending from 1300 to 1800.  This source provides this temperature profile:

The various estimates of minimum temperature place it at a drop of less than 1 ˚C.  This is not far in magnitude from where we have pushed the temperature in the opposite direction, and it is a magnitude of change that we seem destined to reach no matter what we do in the future.

What were the consequences observed in the Little Ice Age?  David Parrott addresses that question in an article in The London Review of Books: Sad Century.  Parrott is reviewing a recent book by Geoffrey Parker: Global Crisis: War, Climate Change and Catastrophe in the SeventeenthCentury
.  Parrott leads with this:

“Contemporary accounts leave little ambiguity about the character of the 17th century. Natural disasters, warfare, political unrest and rebellion combined to bring about levels of mortality, destruction and collective trauma unmatched until the mid-20th century.”

Parker is careful to avoid claiming that the effects of climate change automatically lead to wars and other conflicts, but it is clear that the climatic and political events cannot be unrelated.  Climate change exacerbates conflicts and war worsens the effects of climate change.

“These were wars fought on an unprecedented scale and at an unprecedented cost. In France more than a million people died of starvation, cold and disease between 1691 and 1701, and a further 600,000 in the winter of 1708-9. Yet the cold, shortages and crushing fiscal burdens brought despair and hopeless compliance rather than revolt and resistance.”

Parker’s book provides a valuable insight into the effects of climate change.

“As Parker points out, the almost universal population increases of the 16th century had led to a volatile situation in which any reduction or disruption of food supplies, any decline in the availability of marginal employment, any fall in wage levels or increase in rents, pushed large groups into destitution and starvation.”

Rapid population growth left the seventeenth century struggling to gain the economic tools and technologies to provide a stable society with adequate food supplies, shelter, and a source of income.  The disruption of climate change was disastrous.  In our era we have well-developed technologies and economic tools to provide enough food for the world.  However, we have also developed a globalized system of supply and demand that leaves us incredibly vulnerable to disruptions.  For example, if higher temperatures lead to lower food production—and eventually they will—we know that food scarcity will lead to food export embargoes by the supplier countries and those who have grown dependent on the global market will suffer.  Conflicts of some sort will be inevitable.  Parker provides us with this observation:

“….his harsh argument that in many areas the Global Crisis eliminated surplus population and so restored the balance between food supply and mouths to feed. It was this which made it possible for some to survive the continuing depredations of global cooling….”

That is not an outcome that could be considered desirable.

Parrott reminds us that this period of global cooling is most likely to be recalled by global warming deniers who would like to claim that since global cooling came and went global warming is likely to do the same.  Parker’s book was intended to counter such claims and serve as a warning that climate change should not be taken lightly because there will be a price to pay.

“Parker’s new book, Global Crisis, responds directly to this type of argument, asserting that humanity survived only at a terrible cost. His epilogue is a plea that the lessons of climate change in the 17th century should not be ignored or misinterpreted. We should be in no doubt that decisions taken now will have an effect on the future impact of natural catastrophes, the resilience of agriculture and the competition for material resources.”

We tend to think of the earth in terms of a “mother nature” that is intrinsically benign and would treat us nicely as long as we behaved.  A more appropriate symbol might be a mighty stallion that is frequently angered by the life forms that dare take up residence on its back and periodically tries to destroy them all.  We have been incredibly lucky to have enjoyed an exceptionally long period of relatively stable global temperatures.  History tells us that could change at any time even without the effects of our activities.  Why be stupid enough to dare upsetting the equilibrium that has made our civilization possible.

Let sleeping stallions lie.

Friday, May 1, 2015

The Economic and Social Costs of Distrust

The Scandinavian countries are known for being unique in a number of ways.  Surveys of positive characteristics (happiness, gender equality, trust) tend to find these countries leading the list.  These tallies can lead to the assumption that these countries have somehow learned how to do things right.  Michael Booth is an Englishman married to a Dane and living in Copenhagen.  He takes his readers on a tour of Sweden, Norway, Denmark, Finland and Iceland in his book The Almost Nearly Perfect People: Behind the Myth of the Scandinavian Utopia.  From the title one might conclude that Booth is going take the cover off a lot of ugly goings that have been hidden from the rest of the world.  What is actually provided is an interesting and often humorous account of the foibles and idiosyncracies of countries that have had quite different histories than the other European nations, and in many ways have been much more successful.

One of the interesting topics Booth discusses is the issues of trust and trustworthiness and the Danes belief that trust is an important contributor to the strength of their economy.

“All of the Nordic countries have high levels of trust, but the Danes are the most trusting people on the planet.  In a 2011 survey by the OECD, 88.3 percent of Danes expressed a high level of trust in others, more than any other nationality (the next places on the list were filled by Norway, Finland, and Sweden, respectively, and the United States was way down in twenty-first place out of thirty countries surveyed).”

“Other surveys show that Denmark is one of the very few countries in which trust levels have maintained an unbroken upward trajectory for the last half century.  And Transparency International’s annual corruption perception index currently ranks Denmark and Finland as the least corrupt countries in the world, with Sweden and Norway following close behind (the United States is in nineteenth place).”

Booth provides a few examples of exceptional trust that will seem extreme to easily panicked parents in other societies.

“….people do leave their kids sleeping in strollers outside caf├ęs and shops, even in the cities, and they let their children commute to school alone, often by bicycle, from as young as six or seven years old.”

Any parent who might be appalled by this behavior should also note that the school days in the northern countries are generally cold and dark.

And then there is the compelling example of the returned wallets recounted by one of the Booth’s Danish sources.

“Back in the nineties there was an experiment done [1996, by Readers Digest] where wallets were left around in various cities and they counted how many were returned.  And the cool thing is that in the places where more people say they can trust others, the more wallets were returned.  I think they did an experiment with about forty wallets and the only two countries where all forty were returned were Norway and Denmark.”

It would seem to follow that people in a society who are trusting are also trustworthy

What is of interest here is the claim the Danes make about how all that trust contributes to their economic efficiency.  Booth provides these estimates of Danish specialists.

“Danish trust saves the justice system 15,000 kroner ($2,700) per person per year, for instance; others believe that as much as 25 percent of the economy can be accounted for by social capital.”

“The theory goes that, if there is trust in a society, then its bureaucracies will be more straightforward and effective—the cost and time of transactions between companies will be reduced and less time will be spent paying lawyers to draw up costly contracts, and in litigation.  A handshake is free.  Anyone who has tried to conduct business in France will have quickly become aware of the massive inconveniences involved with living in a society where the default setting is to assume the other person is trying to pull your trousers down.”

The more complex the work involved, the more important it is to have workers who can be trusted to carry out their tasks diligently.

“….the more skilled a job is, the more difficult it is to check up on whether an employee is carrying out his or her duties as they should be, and so trust becomes that much more important.  It is tricky and costly to check that high-level consultants, architects, IT technicians, or chemical engineers are working as they should, so trust becomes that much more important, which is one reason why high-trust societies such as Denmark, Finland, and Sweden excel in advanced industries like pharmaceuticals and electronics and attract foreign companies operating in these fields.”

Are these claims about trust and its economic impact being overstated?  Probably not.  Consider this OECD article by Diane Coyle: The Cost of Mistrust

“In today’s advanced economies, though, the degree of trust involved is extraordinary. Manufactured items typically involve complex supply chains of many links that extend over continents, with demanding requirements for quality or timeliness. Globalisation has linked many more people than ever before, from different legal frameworks and different cultures. Digital technologies have brought together new communities of people participating in all kinds of social and economic innovations, often inspired by a remarkable idealism.”

“Perhaps even more demanding in terms of trust is that more than two-thirds of economic activity in OECD countries consists of services, the quality of which is often unknowable until purchased and consumed. In contrast to the 1960s assembly-line economy of standardised products, it has become difficult in the modern economy to monitor the effort of individual workers or the quality of their work. For example, the manager of computer programmers will not know how good their software code is until the project is finished and the software either functions or not. The manager of care workers cannot monitor how well they look after the pensioners in their charge, or how kind they are to the people in their care, short of doing the job alongside them.”

Coyle is concerned that surveys of trust in institutions show that it has been declining in most countries for many years.

“….the evaporation of trust in some key institutions is directly damaging for economic growth. The general distrust of business, not only banks but also spreading to energy companies, e-retailers, food producers and others, will tend to encourage unnecessary (as well as necessary) regulation and contribute to the climate of uncertainty holding back investment.”

An article in The Economist provides a good example of the costs associated with being untrustworthy.

“To ensure that it meets the 750 new rules on capital imposed in the aftermath of the financial crisis, JPMorgan Chase employs over 950 people. A further 400 or so try to follow around 500 regulations on the liquidity of its assets, designed to stop the bank toppling over if markets seize up. A team of 300 is needed to monitor compliance with the Volcker rule, which in almost 1,000 pages restricts banks from trading on their own account.”

An article by Arturo Franco provides Mexico as an example of a country suffering from rampant distrust in Mexico: The Unbearable Cost of Distrust.

“Trust is at the heart of Mexico’s challenges today. The lubricant of the economic engine, trust enables market exchanges, reduces transaction costs for business, upholds security and peace, and makes institutions and the political system work. Distrust, in turn, creates unnecessary costs, incentivizes negative behaviors, and can become a huge burden for productivity and for growth.”

“Mexicans’ reported levels of trust and confidence in a wide range of institutions have been declining for many years. Between 2013 and 2014, virtually every institution, from the police to the church, from television stations and universities, to political parties, Congress and the president, have suffered from rising public distrust. What is worse, perhaps, is that investor confidence has also eroded.”

Tax collection is one of the first functions to suffer from distrust.  Besides a lack of enthusiasm for shipping money to a system in which one has little faith, no one wants to be the last honest tax payer.

“A 2012 report by Global Financial Integrity estimated that, between 1970 and 2010, more than $800 billion was lost in Mexico to tax evaders using myriad schemes to avoid contributing to the country’s coffers.”

Lynn Stout provides an interesting discussion of how trust and distrust can increase or decrease the efficiency of social and economic interactions in her book Cultivating Conscience: How Good Laws Make Good People.  She points out that people will tend toward prosocial behavior unless conditions are present that indicate such behavior would not be reciprocated in a transaction.  In other words, people will be trusting or trustworthy if they expect to see the same behavior in others.  There are a few exceptions to this rule in that some people are actually the self-interested actors beloved by economic theorists.  She likes to refer to them as psychopaths.

The element of trust is critical in establishing social and commercial transactions.  The latter are generally defined by a signed contract which defines the major components of the transaction.  In practice, these contracts are preferably left “incomplete.”

“A formal contract that addressed each and every possible contingency would be prohibitively expensive and time consuming to draft, and probably too heavy to carry.  Rather than try to draft a complete contract, the parties might reasonably content themselves with a short, incomplete contract that addresses only the most important and obvious aspects of their proposed exchange and leaves other matters to be dealt with in the future should they arise.”

Both parties are forced, for efficiency’s sake, to assume the other is trustworthy.  When the element of trust is not there and one party believes that contingencies must be formally dealt with in a contract, the dynamic of the interaction can be drastically altered.  By signaling a lack of trust in a partner in an interaction one actually encourages that person to behave in a more self-interested or selfish manner.

“This ‘signaling’ problem has long been understood by family lawyers, who find that couples planning to marry often avoid prenuptial agreements not because they are confident that they won’t divorce, but because they feel that asking for a prenuptial agreement shows a lack of trust that could poison the marriage.  Experimental gaming supports these couples’ reluctance.”

“This possibility is an example of the phenomenon social scientists call ‘crowding out’ or ‘motivational crowding.’  The basic idea is that if we treat a contract partner as purely self-interested, we signal that we believe the social context is one where selfishness is appropriate and expected.  This signal raises the odds our partner will in fact behave self-interestedly.”

Stout provides a good example of how an expression of distrust can quickly degrade an interaction.  Consider after-school day care where children are supervised by teachers until a parent can pick them up after work.  There is a time assigned for latest pickup so that the teachers can get to their own homes at a convenient time.  As might be expected, occasionally parents would be late in arriving and the teachers were inconvenienced.  Researchers convinced six of these after-school programs to institute a policy of fining the parents who were late.  In each case, the number of late-arriving parents increased significantly.

“From an economic perspective, these results seem bizarre.  How can raising the cost of an activity prompt people to ‘buy’ more of it?  The answer, according to crowding out theory, is that by changing the social context to look more like a market, fining parents who arrived late decreased the ‘psychic cost’ of arriving late, signaling that lateness was not a selfish social faux pas but a market decision parents were free to make without worrying about the teachers’ welfare.  By emphasizing external material incentives, the day-care centers crowded out ‘internal’ incentives like guilt and empathy.”

In other words, the “contract” worked more efficiently when it was based on trust and trustworthiness than when trust was eliminated from the interaction.

It seems possible that the Denmark’s claim that its economy benefits greatly from the efficiencies associated with a trusting and trustworthy society is true.  If that is the case then it is important to try to understand what is it about Danish, and Scandinavian societies in general, that leads to such high levels of trust.

Booth raised this question with the Danes and was provided with two possible explanations.  Interestingly, the assumptions about the source align nicely with political assumptions that would be familiar to all in the United States today. 

From the right side of the political spectrum are those

“…who argue that the Danes have always had high levels of trust and social cohesion, and that these date back to long before the advent of the welfare state.  Top of this camp’s agenda is the downscaling of Denmark’s welfare state, which they feel has become unsustainable, and the reduction of Denmark’s taxes; they place less emphasis on economic equality and more on motivating society’s wealth-generators to improve Denmark’s poor productivity growth.”

From the political left we have those who point to the welfare state itself as the source of the high level of trust.  A respected Danish professor provides that point of view.

“….it is because of the equality and our tax rates and the welfare state.  The trust is based, on my understanding, on the welfare state period.  You trust your neighbor because you know that your neighbor is paying tax just like you are, and when that neighbor gets sick, they get the same treatment as you, they go to the same school.  That is trust: that you know that, regardless of age, sex, fortune, family background or religion, that you have the same opportunities and safety net.  You don’t have to compete with your neighbor, or be envious of your neighbor.  You don’t have to cheat your neighbor.”

From the perspective of those living in a society where trust is difficult to find and depending on the “wealth-generators” to improve society has been a dismal failure, the argument from the left must appear enticing.

The Scandinavian nations are conducting the most definitive social experiments yet.  Political scientists, economists, and social scientists should all be flocking there to figure out what has happened, what is happening, and what is going to happen.

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