Progressive skew underlies media stories and government actions

Public attention vs. media coverage of Vietnam war shows Progressive skew

Public attention vs. media coverage of Vietnam war [1]

Progressive skew didn’t win up through the 1890s

…crisis alone need not spawn Bigger Government. It does so only under favorable ideological conditions, and such conditions did not exist in the 1890s. Acting with substantial autonomy, governments even in a representative democracy may… refuse to accept or exercise powers that many citizens would thrust upon them.

American governments in the twentieth century, impelled by a more “progressive” ideology, readily accepted—indeed eagerly sought—expanded powers.[2]

Progressive skew starts with journalists’ worldviews

“Now the thing that God puts in a man that makes him a creative person makes him very sensitive to social nuances and that sort of thing. And overwhelmingly—not by a simple majority, but overwhelmingly—people with those tendencies tend to be on the liberal side of the spectrum. People on the conservative side of the political spectrum end up as vice presidents at General Motors.”

Individuals with strong political views will accept lower pay to do the type of reporting they believe in. Professionalism and peer review increase autonomy and independence in many fields.

…85 percent of Columbia Graduate School of Journalism students identified themselves as liberal, versus 11 percent conservative…

The journalists who voted for a major party candidate in presidential elections between 1964 and 1976 overwhelmingly went for Democrats: Lyndon Johnson 94 percent, Hubert Humphrey 87 percent, and George McGovern and Jimmy Carter 81 percent each.[3]

Progressive skew spins stories that show government people as heroes

Although people commonly suppose that news organizations report just the facts, journalists typically tell stories about current events. A report on a house fire, an earthquake, a factory closing, or a battle is actually a story about the event. It is no coincidence that we call news reports “stories.”

During times of foreign crisis and the early stages of a war, there is likely to be near-unanimous support for the war effort among the denizens of official Washington. The crucial expansion of government power can occur without the news media’s presenting the case against that expansion (for want of a prominent source).

…reporters place great reliance on government officials as sources. Members of the opposing party typically provide the “other” point of view, which limits the range of coverage.

Government… serves as a personalized hero, offering new policies to solve society’s problems. Thus, for example, a fiscal stimulus package to revive economic activity provides a happy ending to a story about a recession.[4]

Progressive skew tilts coverage towards government, and all the more during “crises”

…in this article media storms are operationalized as instances of a strong increase (≥150%) in attention to an issue/event that lasts at least 1 week and that attains a high share of the total agenda (≥20%) during at least that week.

New York Times front page story policy areas for 1996-2006 shows Progressive skew

New York Times front page story policy areas for 1996-2006:
Coverage is skewed, especially during media storms.[5]

Progressive skew of media “crises” is followed by disproportionally-large government actions

We first replicated the well-known and general linear effect of media attention on political attention: when media attention goes up, politics follows.

More importantly, we found that, once in media storm mode, media attention has a significantly stronger effect on congressional hearings than when not in storm mode. Our findings—which were the first results of an empirical, systematic examination of incoming information—support the notion that punctuated political attention is due to a nonlinear processing of incoming information.[6]

  1. Neuman, W. Russell. “The threshold of public attention.” Public Opinion Quarterly 54.2 (1990): 159-176.
  2. Higgs, Robert. Crisis and Leviathan: Critical episodes in the growth of American government. Oxford University Press, 1987, pp. 78-79.
  3. Sutter, Daniel. “Can the media be so liberal? The economics of media bias.” Cato Journal 20.3 (2001): 431-431.
  4. Sutter, Daniel. “News media incentives, coverage of government, and the growth of government.” The Independent Review 8.4 (2004): 549-567.
  5. Boydstun, Amber E., Anne Hardy, and Stefaan Walgrave. “Two faces of media attention: Media storm versus non-storm coverage.” Political Communication 31.4 (2014): 509-531.
  6. Walgrave, Stefaan, et al. “The nonlinear effect of information on political attention: media storms and US Congressional Hearings.” Political Communication (2017).

Sticky prices are responses to customer friction

Sticky prices illustrated

Sticky prices illustrated [1]

Sticky prices delay price jumps hoping customers will be happier

“We can’t change prices biannually, it is not the culture here.”

“We said we weren’t going to raise prices that year and I believe that once you say that, you should stick with it.”

…if the costs are stable, then doubling the frequency of price changes… invites customers to complain, to demand discounts and rebates, and to ask to renegotiate.

…price rigidity was perceived by the company’s customers to be a sign of “customer orientation” and therefore a good thing.

…many customers were more positively disposed to do business with companies who only changed their prices according to a predictable time schedule. Indeed, price rigidity was a source of pride within a company because it indicated that one’s relationship with customers was more important than the “bottom line.”

“We will take it in the pants rather than pass it on down to our customers.”

Sticky prices delay price drops that might jump up again

One member of the sales force aptly described cutting prices as “feeding the animal.” Such a decision sets up a dangerous cycle: cutting prices in order to get business this period leads to a response by a competitor with a still lower price. This lower price puts return pressure on the firm to lower its prices again.

…both the sales force and customers would sometimes argue against a price decrease because it would make a price increase in later years more expensive because of the need to convince customers that prices should go up again. Thus any price change that does not make sense for the customer can cause customer antagonism.

Sticky prices eventually jump, and effort with customers jumps up

…“every time you have one of those price changes you have to go in there and you are opening a Pandora’s box.”

“It is getting to be a running joke that every December and January I am coming in with some [price] change… They will say things like: ‘Where does that come from?… The direction is not consistent… You change discounts… dramatically, we don’t know if you are committed to us or not.’”

“Pricing season around here lasts longer than the NFL.”

“All of these costs depend on the size of the price change.”

During the pricing season we studied, a major customer called a senior vice president to negotiate a new discount level. The senior vice president and his staff flew to meet with the customer, which took two days. The team then returned to headquarters to gather additional data about the customer, similar customers, the firm’s competitors, and the effect of the customer’s purchases on the firm’s revenue. The pricing team recalculated the effect of their price changes on that customer and similar customers. They met, suggested additional analysis, met again, and decided on what they wanted to offer at the next round of meetings with the customer. Then they planned a presentation for the customer. The team then flew back with three corporate people, an area manager, and the account manager for another two days.

New large accounts require even more effort.

Although the company carries only about 8,000 products and it changes the list prices of almost all of them each year, the actual number of price changes it undertakes each year is many times higher because of the individually negotiated prices, discounts, and rebates. Therefore, the actual number of price changes undertaken is quite large, in the range of 10,000–54,000 each year.

Sticky prices speed up when overall prices move more, because people adapt

“There was… a period of some rapid inflation back in the Carter years where we would barely get a price sheet printed and you would have to start working on another one, every 6 months or so.”

“The [price] increases we experienced during that [inflationary] time were very much largely driven by cost and our average costs were going up and we were trying to recoup that… [During] high-inflation period you could get away with the high price increases. I think there was expectations in the market place; our customers are saying ‘I am able to in ate my prices to the end user so I shouldn’t be surprised when my vendor raises their prices…’ The distributors could pass on their prices a lot of easier than they can now.”[2]

  1. Koning, JP. “Are prices getting less sticky?” 14 Oct. 2015, Accessed 13 May 2017.
  2. Zbaracki, Mark J., et al. “Managerial and customer costs of price adjustment: direct evidence from industrial markets.” Review of Economics and statistics2 (2004): 514-533s.

Immigration surplus couldn’t be a world GDP increase of 60%, but could be 7%

Global gains from open borders shaded area shows immigration surplus

The immigration surplus made concrete, on paper:

  • North’s gain from Southern workers, trapezoid B, equals South’s loss, trapezoid C.
  • North’s total gain, trapezoid AB, is bigger than South’s loss, trapezoid C. The difference is the total immigration surplus: trapezoid AB‘s shaded portion, which is triangle A.
  • This is idealized with migration costless; and with poor Southern immigrants suddenly producing like rich Northern natives; and with migration continuing when Northern natives’ wages fall.

Immigration surplus has been called a world GDP increase of 60%

To get a better grasp of the issues at hand, it is best to begin with a description of the basic model.

As in the generic study in the literature, the removal of immigration restrictions (combined with the assumption of costless mobility) would lead to a huge increase in world GDP. Specifically… world GDP would increase by $40 trillion, almost a 60 percent increase. Moreover, these gains would accrue each year after the migration occurs, so that the present value of the gains nears one quadrillion dollars!

…if only countries would stop being countries.

Immigration surplus that big would take exodus of 95%, productivity leap, native wages down 40%

The simulation implies that 2.6 billion workers, or 95 percent of the workforce in the South, will move. If these workers bring along their families, the 95 percent mobility rate implies that nearly 5.6 billion persons would move from the South to the North.

For immigration to generate substantial global gains, it must be the case that billions of immigrants can move to the industrialized economies without importing the “bad” organizations, social models, and culture that led to poor economic conditions in the source countries in the first place.

The formation of social networks among migrants could substantially lower the costs of migration for the second or third billionth mover. But congestion costs in the receiving countries could also increase exponentially, making it harder to resettle that marginal migrant.

The earnings of the North’s native workforce fall by almost 40 percent, and the earnings of Southern workers increase by 143 percent.

A little humility about what we actually know would seem to be a prerequisite before anyone proposes a breathtaking rearrangement of the world order. …it seems likely that a particular [immigration] policy is chosen because that choice leads to the greatest benefits and/or smallest costs in that place and at that time.[1]

Immigration surplus could plausibly come from emigration of 12%, with productivity lag

In this paper, we quantify the effect of a complete liberalization of cross-border migration on the world GDP and its distribution across regions.

As for desired migration, we aggregate four waves of the Gallup World Poll survey… About 290,000 adults from 142 countries were questioned about their desired migration and preferred country of destination. These countries are representative of about 97 percent of the world population.

Data on potential migration reveal that the number of people in the world who have a desire to migrate is around 400 million. For the year 2000, we identify 274.5 million desiring migrants aged 25 and over. Adding them to the effective migrants gives a total stock of 386.1 million potential migrants (i.e., 12.1 percent of the population).

Most of these desiring migrants originate in poor countries and want to relocate to rich countries.

The main regions of origin are Asia (30 percent of the total, including China and India), sub-Saharan Africa (17 percent), Latin America (14 percent), and the Middle East and Northern Africa (8 percent).

In terms of destinations, a vast majority want to emigrate to an OECD, high-income country (27 percent to the United States, 26 percent to Europe, and 16 percent to Canada, Australia, and New Zealand). Other important destinations are Japan, Singapore, Saudi Arabia, and the United Arab Emirates.

It is widely documented that many immigrants with higher education tend to find jobs in occupations typically staffed by less-educated natives… Highly educated immigrants trained in developing countries, in particular, are likely to be less productive in high-skill jobs than natives with similar educational degrees.

Plausible immigration surplus in the first generation could be world GDP increase of 7%

…when total factor productivity (TFP) is an increasing function of the proportion of college graduates in the country’s labor force… in the medium term… (i.e., over one generation)… liberalizing migration increases the world GDP by… in the range of 7.0 percent…[2]

  1. Borjas, George J. “Immigration and globalization: A review essay.” Journal of Economic Literature 53.4 (2015): 961-974.
  2. Docquier, Frédéric, Joël Machado, and Khalid Sekkat. “Efficiency gains from liberalizing labor mobility.” The Scandinavian journal of economics 117.2 (2015): 303-346.

Profit option signals are generated by activity-based costing (ABC)

The hierarchy of factory operating expenses show profit option signals

The hierarchy of factory operating expenses

Profit option signals from allocating costs to where value is added

The gross numbers on corporate financial statements… represent the aggregation of thousands of small stories about bow the company designed, produced, and delivered its products, served customers, and developed and maintained brands.

  • Some activities like drilling a hole or machining a surface, are performed on individual units.
  • Others – setups, material movements, and first part inspections – allow batches of units to be processed.
  • Still others – engineering product specifications, process engineering, product enhancements, and engineering change notices – provide the overall capability that enables the company to produce the product.
  • And plant management, building and grounds maintenance, and heating and lighting sustain the manufacturing facility.

…managers need to distinguish the expenses of direct labor, direct materials, and electricity, which are consumed at the unit level, from the expenses of resources used to process batches or to support a product or a facility. Batch- and product-level expenses can be controlled only by modifying batch- and product-level activities.

Profit option signals from unit, batch, product, and facility costs

The example of a large equipment manufacturer with a machining shop containing dozens of numerically controlled machine tools shows the important distinction in emphasis between traditional cost systems and ABC analysis.

A detailed ABC analysis revealed that more than 40% of the department’s support resources were not used to produce individual product units. The company developed five new drivers of overhead resources:

  1. setup time,
  2. production runs,
  3. materials movements,
  4. active parts numbers maintenance, and
  5. facility management.

The first three related to how many batches were produced, the fourth to the number of different types of products produced, and the fifth to the facility as a whole rather than to individual products.

For a simple drive shaft, for example, the traditional system had allocated $13.38 of factory overhead to every 100 units. For the 8,000 units actually produced, the allocated overhead costs were $1,070. In contrast, the ABC system signaled that production of the shaft consumed about $1,700 of unit, batch, and product-sustaining support resources.

The heavy equipment manufacturer in our example recognized that its low-volume products were a drag on profits. To avoid outsourcing all of the low-volume products, the division opened a special low-value-added job shop.

It went from a single facility producing a broad mix of products to two focused facilities: one for high-volume products and the other for low-volume products.

Profit option signals guide repricing, resource saving, and resource management

Managers should take two types of actions after an ABC analysis.

First, they should attempt to reprice products: raise prices for products that make heavy demands on support resources and lower prices to more competitive levels for the high-volume products that had been subsidizing the others.

Second, and more important, managers should search for ways to reduce resource consumption. Reducing resource consumption gives managers an opportunity to boost profits.

…management can use the freed-up resources to increase output, which in tum generates more revenues. …management can eliminate or redeploy resources periodically to bring spending down to the new lower levels of resource consumption.

….management must take some action to capture the benefits from the signals ABC analysis sends.

  1. Cooper, Robin, and Robert S. Kaplan. “Profit Priorities from Activity-Based Costing.Harvard Business Review 69.3 (1991): 130-135.

Statistics bias and flaws are only human

Telephone tag dramatizes grow of statistics bias and flaws

  • Random findings can be misidentified as significant.
  • Methodological problems can be overlooked by reviewers.
  • And popular reporting can misrepresent or even exaggerate the original findings.
  • The dangers are especially present if the finding is suggestive and the study is underpowered for the job of resolving the correlations in the data.[1]

Statistics bias and flaws reflect strong incentives

Statistics are one of the standard types of evidence used by people in our society.

Activists trying to gain recognition for what they believe is a big problem will offer statistics that seem to prove that the problem is indeed a big one (and they may choose to downplay, ignore, or dispute any statistics that might make it seem smaller).

…experts… seem more important if their subject is a big, important problem.

The media favor disturbing statistics about big problems because big problems make more interesting, more compelling news…

Politicians use statistics to persuade us that they understand society’s problems and that they deserve our support.

Every statistic… is the product of choices—the choice between defining a category broadly or narrowly, the choice of one measurement over another, the choice of a sample. People choose definitions, measurements, and samples for all sorts of reasons: perhaps they want to emphasize some aspect of a problem; perhaps it is easier or cheaper to gather data in a particular way—many considerations can come into play.

Statistics bias and flaws can be checked out

The issue is whether a particular statistic’s flaws are severe enough to damage its usefulness.

It would be nice to have a checklist… potential problems with definitions, measurements, sampling, mutation, and so on.

  1. Who produced the number, and what interests might they have?
  2. What might be the sources for this number? How could one go about producing the figure?
  3. What are the different ways key terms might have been defined, and which definitions have been chosen? Is the definition so broad that it encompasses too many false positives (or so narrow that it excludes too many false negatives)? How would changing the definition alter the statistic?
  4. How might the phenomena be measured, and which measurement choices have been made?
  5. What sort of sample was gathered, and how might that sample affect the result?
  6. And how is the statistic used? Is it being interpreted appropriately, or has its meaning been mangled to create a mutant statistic?
  7. Are comparisons being made, and if so, are the comparisons appropriate? Are there competing statistics? If so, what stakes do the opponents have in the issue, and how are those stakes likely to affect their use of statistics? And is it possible to figure out why the statistics seem to disagree, what the differences are in the ways the competing sides are using figures?

In practice… the Critical need not investigate the origin of every statistic. When confronted with an interesting number, they may try to learn more, to evaluate, to weigh the figure’s strengths and weaknesses.

Statistics bias and flaws turn up in every kind of evidence

…this Critical approach… ought to apply to all the evidence we encounter when we scan a news report, or listen to a speech, whenever we learn about social problems.

Claims about social problems often feature dramatic, compelling examples; the Critical might ask whether an example is likely to be a typical case or an extreme, exceptional instance.

Claims about social problems often include quotations from different sources, and the Critical might wonder why those sources have spoken and why they have been quoted: Do they have particular expertise? Do they stand to benefit if they influence others?

Claims about social problems usually involve arguments about the problem’s causes and potential solutions. The Critical might ask whether these arguments are convincing. Are they logical? Does the proposed solution seem feasible and appropriate? And so on.

Being Critical—adopting a skeptical, analytical stance when confronted with claims—is an approach that goes far beyond simply dealing with statistics.[2]

  1. Gelman, Andrew, and David Weakliem. “Of beauty, sex and power: Too little attention has been paid to the statistical challenges in estimating small effects.” American Scientist 97.4 (2009): 310-316.
  2. Best, Joel. Damned Lies and Statistics: Untangling Numbers from the Media, Politicians, and Activists. Updated edition, University of California Press, 2012, Scribd pp. 32, 178-182.

Data collection, sharing, and use are keys at Google

Google meeting with laptops everywhere and video shared online, illustrating Google's data collection, sharing, and use.

Collecting data

“We need generalists… Lots of projects and companies grow without doing new things; they just get bigger teams. We want projects to end.”

Google… tackles most big projects in small, tightly focused teams, setting them up in an instant and breaking them down weeks later without remorse. “Their view is that there is much greater progress if you have many small teams going out at once.”

A typical task, from tweaking page designs to doing scientific research, involves six people. Hundreds of projects go on at the same time. Most teams throw out new software in six weeks or less and look at how users respond hours later.

With 82 million visitors and 2.3 billion searches in a month, Google can try a new user interface or some other wrinkle on just 0.1% of its users and get massive feedback, letting it decide a project’s fate in weeks. One success in ten tries is okay; one in five is superb.

Everyone from a failed venture moves to another urgent project. “If something is successful, you work it in, somehow… If it fails, you leave.”

Sharing data

Google… shares all the information it can with as many employees as possible…

It also pursues a rapid-fire food-fight strategy that throws out ideas as fast as possible, to see what sticks.

One key rule: You can’t call any idea “stupid.”

(Nor is most any idea too wild. On a recent day at the Google campus a bulletin board invited workers to a session on the dream of erecting a 200-mile-high elevator into space.)

Using data

One true god rules at Google: data. The more you collect, the more you know and the more certain your decisions can be, disciples believe…

“Often differences of opinion between smart people are differences of data…”

In some meetings people aren’t allowed to say “I think…” but instead must say “The data suggest…”

…the guy with the best data wins.[2]

  1. “Search Quality Meeting: Spelling for Long Queries (Annotated)” YouTube, 12 Mar. 2012, Accessed 24 Nov. 2016.
  2. Hardy, Quentin. “Google Thinks Small.” Forbes 176.10 (14 Nov. 2005): 198-202.

Better stories are personally significant and include relevant details

An older couple and a younger couple drinking coffee at the table, smiling because the older man has learned to tell better stories

Better stories are significant, and detailed

The tale is in the telling. …choosing a personally significant event, and recalling it in some detail results in high quality ratings.

…level of detail is an important predictor of global story quality. …individuals are judged as more confident, more persuasive, and more believable when they share specific details… Providing details not only gives credibility to the storyteller…, but provides the listener with a sense of re-experiencing the original event, allowing the listener to gain knowledge and information about the world without having to experience it directly… Transmission of experienced events may be the primary function of memory-sharing…

Another important predictor of quality was… Personal significance of the shared memory story… When people recall and choose to tell personally significant autobiographical memories, they talk longer and produce better stories…. …sharing personally significant memories increases rapport and caring…, intimacy with romantic partners…, and empathy, as well as serving other social functions…

Indirectly relevant off-target information may supplement the remembered event, providing the listener with additional contextual information, but does not actually improve overall global story quality.

Better stories, with more relevant details, are told by young women and men, and by older women

…young men and women, and older women, all tell equally good autobiographical memory stories… …older men’s stories lack quality…

Older adults tell less detailed autobiographical memory stories and fictional stories… …observed age differences in detail may be due to both communication style and communication goals… …older adults’ communication style is… focused on communicating meaning… …compared to younger adults’ literal style… …older adults prioritize telling the gist of a story over the details… …late life is a phase in which the goal of story-telling may be to communicate directive lessons… Older adults self-report sharing stories with the goal of teaching others through passing on experiences… …older adults’ communication style and goals are consistent with recalling stories without focusing on specific details.

…telling the gist of a story is generally adequate for conveying the message. Telling less detailed stories, however, may alter the social-sharing dynamic…[2]

  1. “Family Meeting.”, 26 Mar. 2015, Accessed 17 Nov. 2016.
  2. Baron, Jacqueline M., and Susan Bluck. “Autobiographical memory sharing in everyday life: Characteristics of a good story.International Journal of Behavioral Development 33.2 (2009): 105-117.