In this process, there are 4 main steps to thinking through the economic impacts of any government or market-based policy. You can get more detailed than this, of course, but I think this does the job just fine.

1. What is the goal of the policy? What specifically is it trying to accomplish?
2. What are the effects on the market in question, and what secondary effects might we expect in other markets?
3. Who benefits and who loses as a result of the policy?
4. Is the policy successful in accomplishing its stated goals? If not, how can we alter the policy to improve the outcome and how does this affect questions #2 and 3? (Note to Washington: this does not mean always throwing more money at the program.)

The goal in my introductory economics classes is to teach positive economics: what are the facts? Normative judgments about a policy can be made at any of these four levels.

For example, the goal of taxes is either to raise revenues or to discourage behavior. If demand is elastic, you’ll change people’s behavior when you raise prices. If demand is inelastic, you won’t discourage much behavior but you’ve got a great revenue source. Sen. Daniel Patrick Moynihan’s proposed 10,000% tax on hollow-point bullets was not designed to raise money, but cigarette taxes are – if they really wanted people to quit smoking, they could make the tax bigger and really get people to quit.

For example, let’s examine the health care reform debate in this context.

1. What is the goal? It was supposed to be to provide universal health care for everyone and reduce costs.
2. The CBO and other entities have determined that the Senate bill would increase overall costs (the deficit goes down because taxes go up by more than spending), shift some people from private plans to public plans, and leave many millions of people still without health care.
3. Depending on the bill, either the rich pay more taxes or people with good health care packages pay more. Some people will see their doctor stop carrying their insurance provider and may have to switch doctors. The effects are myriad and complicated.
4. It doesn’t seem to accomplish either the goal of reducing costs or covering everyone. Somehow the Democrats switched the first goal to “reducing the deficit” instead of reducing costs, but that wasn’t the stated goal initially.

Now, you can debate the health care reform bill on any of these four levels and come to a normative judgment that you don’t like teh bill.

1. You may think that there isn’t a fundamental problem in health care. True, some people don’t have it, but many of those that don’t actually quality for government programs but are just not signed up, and others could afford it but would rather spend their money on other things.
2. You may think that the effects on the market do not justify taking this action. As some have said: why change the health care system for the 90% of Americans who have it just to give it to the other 10%. Isn’t there a better way?
3. You may already have a great health care plan and expect to lose. Unions have sometimes given up pay increases to get nicer health care packages and now they might lose those plans.
4. You may feel that there actually is a problem with health care but that this bill just doesn’t fix the problem. Some on the left don’t like it because it doesn’t cover everybody, while some on the right think the fact that it doesn’t lower costs means we should start over.

So I’ve been using this 4-step approach in my principles classes this semester and I think it’s a great way to think about an issue. It helps to figure out exactly what you believe and specify you disagree with people.

Let’s take the stimulus bill. Last week it turned 1 year old and the Obama administration touted it as one of the most effective government programs ever, while some Republicans say it hasn’t created a single job. Both of those are major hyperboles, so let’s look at the stimulus using this 4-step approach.

1. What was the goal of the stimulus? To prevent a depression and to keep unemployment from rising above 8%. Now, I have to clarify the difference between a prediction and a goal. The goal was to stimulate the economy, while the prediction of how effective it would be (keeping unemployment below 8% instead of the dreaded 9% predicted without the stimulus) depends not just on the policy itself, but also onthe changing economy it was put into. It was predicted to “create or save” 3.5-4 million jobs, most of those in the private sector.
2. What effects on the market would this have? The goal was to boost aggregate demand for output and keep output high. Our economy has started to recover, with 6% GDP growth in the last quarter. Is this because of the stimulus or because every economy at some time recovers anyway? Those who passed the bill will take credit for an increase in GDP whenever it occurs. Joe Biden said the effects would be seen immediately. Then the administration backtracked: it was supposed to happen in summer, then fall, and now when it finally happens in winter they clame success. When they don’t get what they predicted when they predicted it, they push back the prediction – but they’ll never say the program didn’t work, just that it didn’t work as fast as they had hoped. It’s like Paul Krugram predicting a recession almost every year during the Bush administration. He finally got his recession in the last year and claimed he had been right all along. But what about every year his prediction was wrong? If he’s going to take credit for being right one year, he has to take blame for being wrong 5 other years. But I digress – the goal was to keep unemployment below 8% and that clearly didn’t happen. 9% was supposed to be a depression and this stimulus was supposed to save us from that. Now we’re at 9.7% so that must be even worse than a depression, right? No, apparently the stimulus saved us from a depression. (I’m just as confused as you are about how 9% is a depression if we do nothing, but when it hits 9.7% after we act we’re supposed to give them credit for saving us from a depression.)
3. Who benefits and who loses? If your job was saved, you benefit. Much of the benefit has been to state employees, a group to which I admittedly belong. Some businesses have been helped by the green initiatives. Most people got a tax cut – granted, it was only $30/month so you might not have really noticed it, especially when the increase in gas prices since last year has eaten up that entire $30. (Gas prices have increased by $.60 since the stimulus was passed; if you drive at least 10 miles a week, your stimulus rebate is going to gas.) Our children lose because we’re borrowing most of this money and will have to pay it back. Previous generations have been able to pass debt onto their kids and they’d pass it onto their kids, but now the debt/GDP ratio is starting to fall into very dangerous territory. Future generations, perhaps even this current generation, won’t have that option and will have to make cuts.
4. Did the program accomplish its goals? If the goal was to reduce the severity of the recession, I think it’s done that. I think the people who say the stimulus hasn’t created a single job because we’ve lost 4 million jobs are either stupid or deceitful. We would have lost more jobs without the stimulus.

So when a Republican goes on a Sunday talk show saying he opposed the stimulus but was found at a ribbon-cutting ceremony for a project funded by stimulus money, he’s in a bit of a pickle. They ask him if things would have been better without the stimulus. He wavers and stammers and can’t answer the question. But there’s an easy answer to that question: tell the truth. No, things would not have been better without the stimulus.

But as an economist and not a politician, I don’t think that’s the relevant question. The question is: was the specific stimulus policy passed the best thing to do? I don’t think it was. The Republicans had a plan too. According to the econometric model used by Dr. Christina Romer, the Chair of the President’s Council of Economic Advisors, it would have created even more jobs at almost half the cost.

Yesterday, Governor Ed Rendell (D-PA) was on This Week touting the stimulus bill. To rebut all those people who say the stimulus hasn’t created a single job, he cited his own state’s statistics. He said that $3 billion of his state’s budget was coming from the stimulus, and if he didn’t get that money he would have to lay off 37,000 people. So yes, the stimulus saved some jobs. Without that money, either those people lose their jobs or taxes go up and other people lose jobs because consumers don’t have as much disposable income.

But when I heard that, I got my calculator. Each job Gov. Rendell is saving costs an average of $81,000 – twice the average private-sector job. The average private-sector job pays $40K while the average government job pays $71K.

Much of the angst and protest by Tea Party members is about the size of government. They feel it is too bloated and too big, intruding on our lives too much, especially if the health care bill passes. They look at the difference between the cost of government jobs and private jobs as a sign of bloated government. If you favor bigger government, do you really favor spending twice what you would in a private sector job? I’m all for saving jobs; I’m just for doing it as efficiently as possible.

Did the stimulus work? Is the economy better off in the short run than it was before? Yeah, it is. It didn’t keep unemployment below 9%, and it hasn’t created even half of the private-sector jobs that it was supposed to. For it to reach its private-sector employment job, virtually every job created from this point forward must be a private-sector job, and that’s simply not going to happen. Whether that’s because the bill was flawed, the economy was worse than expected, or people reacted to the stimulus by changing their behavior (saving more, for example, in anticipation of future tax increases to pay for all this additional debt), is a question that keep econometricians busy for the next few decades.

President Obama said a while back that he didn’t take this job to bail out “fatcat bankers,” and seems to have had no problem assigning blame to them. But now it seems he’s reversed himself a bit. A Bloomberg article reporting that some CEOs of large banks took home over $10 million in bonuses includes this:

The president, speaking in an interview, said in response to a question that while $17 million is “an extraordinary amount of money” for Main Street, “there are some baseball players who are making more than that and don’t get to the World Series either, so I’m shocked by that as well.”

“I know both those guys; they are very savvy businessmen,” Obama said in the interview yesterday in the Oval Office with Bloomberg BusinessWeek, which will appear on newsstands Friday. “I, like most of the American people, don’t begrudge people success or wealth. That is part of the free- market system.”

I’m shocked that Obama is shocked that some athletes are paid well but don’t perform up to his expectations. (Does he really want to talk about people not meeting up to the expectations people have of them? Really?) Is he shocked when some athletes who are paid relatively little have a great year? His shock shows a complete lack of knowledge of contracts, which perhaps should be expected given the penchant he has for ignoring them and his faux outrage over the AIG bonuses. These bonuses were specifically allowed in the stimulus bill, and have come about over time largely because of the different way that regular compensation and bonus compensation have been treated by income tax laws. So people on Wall Street take lower pay and expect higher bonuses, whether they performed well or not. In fact, they shouldn’t even be called “bonuses” because that’s not really what they are. They are a different form of compensation designed to reduce tax exposure. Most of us don’t understand the complexity of it so when people get ”bonuses” even when their businesses did poorly, it seems shady. But that’s not what it is at all.

For example, let’s compare the salary structures of NBA and NFL players. NBA players have guaranteed contracts, so if a player blows out a knee and can’t play again, the team is on the hook for the entire contrat. NFL players don’t — and the NFL Players Association is trying to get that changed. But until it gets changed, how do NFL players hedge that risk? They get large signing bonuses. True, some of these players won’t be good in a year or two. Obama would look at that situation and either say that the team’s owner was stupid for giving that player the money, or that the player was greedy and didn’t deserve the money. The fact that all of them get these signing bonuses would slip right past him. The fact that they’re not really bonuses at all — just a different way of structuring compensation – would be lost on him.

Apparently, President Obama thinks that only if you make it to the World Series should you earn a lot of money. That only if effort and luck all coincide to translate into the ultimate pinnacle of success should you be paid a lot of money. His shock displays not only a lack of understanding of contracts and their limitations, but also a complete lack of knowledge about uncertainty. If contracts were rewritten for all athletes so that players were only paid large salaries if their teams were successful, what would happen? They’d get bigger signing bonuses instead that were guaranteed, and the amount of pay they received would be largely unaffected. Players on a team cannot determine the fate of the entire team unless it’s in a sport that only has 5 people playing (the NBA) and you’re so dominant that you can carry your entire team, like Magic, Larry, Michael and Kobe have shown they can do. Players understand this. Owners understand this. They would make some alternate arrangement to get around it. But the smartest president we’ve ever had either can’t understand it or can’t appreciate it.

I find it hard to believe that this is the same man who loves unions so much and admitted to running all his important decisions by Andy Stern of SEIU (who for a while was the most frequent visitor to the White House until that information was made public). The effect of a union is that your salary is largely pre-determined and does not depend whatsoever on how well you actually perform. My salary at SCSU for the rest of my life is determined entirely by the union’s negotiations, whether I’m the best teacher here or one of the worst. When MnSCU decided a few years ago that it wanted to hand out a dozen or so Professor of the Year awards (along with $5,000 prizes), to reward hard-working professors who put extra effort into helping their students, what was the reaction? The SCSU Faculty Association Senate voted it down almost unanimously because they didn’t like the idea that having some people singled out for their exceptional performance would imply that these professors are actually better than others. Parish the thought!

The only thing certain in this life is uncertainty. President Obama needs to understand this and accept it, not try to fight it. Fighting it leads to micromanagement, where his Pay Czar will have to determine whether a $17 million bonus was “properly earned” because of a CEO’s ”savvy” business decisions, or whether it was “corporate greed.” And where his Secretary of Health and Human Services will send letters to health insurance companies who raise rates because their healthiest customers drop their policies due to the recession, raising the average cost of the remaining customers. These companies will have to justify every action they make so that some government official can determine whether this is a “justifiable” business practice or just an unhealthy quest for that ultimate evil: profit. So instead of markets and stockholders deciding issues of prices and pay, all of this will be determined by one person or one small government committee, who will no doubt reward those who contribute to them and punish those who disagree with them. They’ll give contracts worth millions of dollars to their spouses and friends, all the while telling us that they’re making better decisions than we could make for ourselves.

I guess it should come as no surprise that the most “intellectual” president we have ever had, with a cabinet with the least amount of actual business experience, would think that he can know everything perfectly and determine how businesses should make decisions better than they can. I wish he were a little less confident in his ability to make decisions and left more of those decisions to the little people who have been making them for centuries. If President Obama wants to tie people’s salaries and bonuses to their performance, I say we start by tying the pay of the president and Congress to their approval ratings. For every point under 50%, you lose 2% of your pay. 0% approval = no pay. It would certainly help reduce our budget deficit.

Some accounts put the cost of each of these jobs “saved or created” at over a half million dollars. The problem with that is that it treats all money as going to jobs, when some of it is being spent on infrastructure and capital equipment, which will provide benefits long after the stimulus is over.

Bottom line: it’s impossible to know how many jobs were saved or created. And touting a number, any number, when we’ve lost 7 million jobs in the recession just doesn’t hit home with people. That’s like me getting pulled over for going 30 mph over the speed limit in a school zone with kids everywhere and telling the cop, “At least I wasn’t going 40 mph over the limit! And I’m not even drinking either!” While it might be true, it probably won’t go far in convincing the cop to let me off.

Maybe I’m just being too skeptical. Maybe it really is easy to determine exactly how many jobs were “saved or created.” Or maybe not. This story from the Politico highlights the fact that three different Obama administration officials, on the same day, gave three different numbers for the number of jobs “saved or created” as a result of the stimulus bill:

Valerie Jarrett had the most conservative count, saying “the Recovery Act saved thousands and thousands of jobs,” while David Axelrod gave the bill the most credit, saying it has “created more than – or saved more than 2 million jobs.” Press Secretary Robert Gibbs came in between them, saying the plan had “saved or created 1.5 million jobs.”

(Good catch by Axelrod.) Any number they pick can never be proven and is based on a wealth of assumptions, but even still you’d think the least they could do is get together and come up with one number. Then maybe we’d believe them.

Today in his speech about the middle class, Obama claimed that the stimulus had ”saved or created” 2 million jobs, so that’s the number he’s going with. (Wise up, Gibbs!) Then he added that “economists agree,” even “conservative economists.” I find it fascinating that his own administration can’t agree on a number, but he is going to claim that economists of all stripes agree with the one specific number he gave today. Hogwash.

[On a side note, less than three months ago, at the end of December, the administration was saying that the stimulus bill had saved or created 1 million jobs. So for the last three months, when unemployment has been the highest in this recession, at 10%, and when we lost jobs every month but November, we've "saved or created" 1 million jobs -- as many as were "saved or created" in the previous 8 months. Do you believe that? Didn't think so.]

To me, the saddest part in all of this is that the “2 million” jobs “saved or created” is used as a defense that the stimulus worked. Tell that to the 7 million people who have lost jobs. The administration used to agree that “less bad” is not success:

“The first quarter of this year, we were losing jobs at an average of 700,000 jobs per month, month after month,” he said. “In the quarter that ended this week, the loss was 250,000 jobs per month, two-thirds less.”

Still, he said, “those facts and those realities aren’t good enough for President Obama, and they aren’t good enough for me.”

“We don’t think that ‘less bad’ is good,” Biden said. “‘Less bad’ is not our measure of success. One job lost is one job too many, and it’s still too much pain.”

If less bad is not your measure of success, why is it the first thing that comes out of the mouth of anyone from your administration whenever they are asked about the economy?

Using numbers from hypothetical situations is difficult, heavily dependent on assumptions that may never be proven, but the context in which you use these numbers is everything. Consider the following two scenarios:

a) You run a hospital that has had 1,000 staph infections in the previous year, so you institute a new protocol for hand-washing and this year you only have 200 staph infections. It’s pretty clear that the program is a success. And yes, even 1 staph infection is one too many, but you’ve made improvement and you can make a decent claim that your program made things better.

b) You run a hospital that had 1,000 staph infections the previous year, so you institute a new protocol and at the end of the year had 2,500 staph infections. Suppose you came out and said, “Yeah, staph infections were up this year, but we were hit by an epidemic and it would have been much worse without the measures we took. Without our protocol we would have had 4,000 staph infections.” Would people believe you? What if other reputable doctors were saying that the protocal wouldn’t have any impact (as some economists have said about the stimulus bill) and point to the increase in staph infections as proof that the protocol didn’t work?

Both of these examples rely on counterfactuals that can never be proven. But if you’re taking credit for something that cannot be proven at a time when the thing about which you are claiming success  is going in the opposite direction, you’re probably going to have a hard time convincing people.

Footnote: This piece talks about how the task is so impossible that the administration is now not releasing employment updates because they can’t crunch the numbers. Even OMB director Peter Orszag has stopped using the phrase “saved or created” in favor of the more provable “funded by stimulus dollars” term. It’s going to make the number of jobs smaller, but at least this one is verifiable (assuming of course they can fix all the problems they have collecting the data).

Those that study how earthquakes affect physical structures have a saying: earthquakes don’t kill people, buildings do. The devastation in Haiti is a result of two things: lack of economic development and hurricanes. Hurricanes wreak havoc on Haiti frequently, so structures are made with very heavy roofs. Lack of economic development means that Haiti’s brick structures, including walls, are made without reinforcing steel bars (rebar). They are made with more sand and less concrete. A earthquake that would just crack an American wall will take down a Haitian one. That’s not jingoism — it’s science. Heavy roofs + weak walls + earthquakes = disaster.

The Obama administration has pledged $100 million to Haiti. This is a paltry sum — the NBC late night disaster was recently reported to cost NBC about $200 million — but it’s still $100 million too much. It is not the federal goverment’s responsibility to provide money to people in other countries. Our founders had a problem even with using federal resources to help individual states, let alone other countries. That’s the U.N.’s job.

Our government has the ability to help in many ways and marshall many assets that the private sector simply cannot: coast guard ships and helicopters, for example. But giving money is not their job. It is the responsibility of every citizen across this great country to give what they can. Most of the funds to help the people of Haiti will come from charity — private citizens and firms, as it used to be done. As it was done after the great fire in Chicago. As it was done after the 1906 earthquake in San Francisco. But when you set the precedent that after every natural disaster the federal government will provide not just emergency disaster relief but long-term financial relief, it’s hard to draw the line.

Watching football this weekend, I was impressed at the speed with which we have set up campaigns to help the Haitian people. I am also impressed by our ability to use technology for this – text the word “Haiti” to 90999 and a charitable donation of $10 will be made to the Red Cross and you can pay for it on your next mobile phone bill. Amazing. I’m confident that the Red Cross will raise more for Haiti than was raised for tsunami relief a few years ago, but I wonder how much will be a result of the devastation itself or the proximity of Haiti to the US, and how much will be because it’s just so much easier for people to donate this time around.

I encourage you to do what I’m going to do and cut back on some spending this next week or two and make a little donation to the Red Cross. You can bring lunch to school instead of buying it, or buy regular coffee instead of a fancy mocha. A lot of us have already started doing those things because of the recession, but there are still other ways we can all save money if we need to.

We are the greatest, most generous country on the planet. People in other countries call us empirialistic, hegemonic, warmongering, rude Americans…and then tragedy strikes and they desperately plead for us to help them. Let us not let those pleas go unheard. Let’s show that the American people and the American government are not the same thing. Let’s show that we do not need the government to provide everything for us, and that private charities can do a much better job of raising funds and delivering help to people who need it than some bureaucrat in Washington ever could.

The first lesson of economics is scarcity: There is never enough of anything to satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.

I couldn’t help but think of that quote when I watched yesterday’s episode of 60 Minutes. California Governor Arnold Schwarzenegger was talking about the state’s water shortages. Partially because of drought and partially because of environmental restrictions because of the Delta Smelt, California’s farmers are having to leave large swaths of their land barren. Almond trees that took 20 years to grow are being mulched because there simply is not enough water to go around.

Schwarzenegger seems to think that the way to fix the problem is to borrow $11 billion  to renovate dams (to increase water storage capacity) and many more billions to build a new canal to route water around the delta, saving the Delta Smelt. Nevermind that the new canal would be a larger project than the Panama Canal. In Schwarzenegger’s words: “I love cranes.” I can just picture the governor now playing with Tonka trucks in his sandbox. 60 Minutes correspondent Leslie Stahl asked the governor about the trade-offs that need to be made here between water for drinking and water for farming.

Leslie Stahl: There are people who say the southern part of the state is thirsty. They say that some of these farms should just go out of business, that they take too much water and people need that water.

Gov. Schwarzenegger: Yes, you know, of course, I, I, I totally understand that. But I look at the whole picture again. I tell you, I want it all! I love our farms!

Leslie Stahl: Yes, but is that realistic?

Gov. Schwarzenegger: Yes, it is realistic. Anything is realistic! It doesn’t mean that because it’s a desert that we cannot go and bring water in here and start growing things. All we have to do is deliver water and then we can grow anything we want!

Leslie Stahl: So much for the idea that the state is entering an age of scarcity.

The tone in Stahl’s voice as she delivers that last line is dripping with sarcasm. Good for her pointing out the obvious.

I guess it’s perfectly reasonable for a man whose career was made starring in movies with computerized special effects can think that anything is possible. As Avatar has now shown, anything is possible in movies these days. I mean, if  they can make us believe that the bus in Speed could actually jump a 100-foot gap in a freeway (Mythbusters test: not even close) and convince us that Maggie Gyllenhaal is anywhere close to attractive enough to substitute for Katie Holmes in The Dark Knight without us noticing, then what can’t those guys at Industrial Light and Magic do? Maybe Schwarzenegger has been around Hollywood so much that he can’t distinguish reality from CG fantasy.

I would like to think that Schwarzenegger’s proximity to Hollywood is the cause of his behavior. But, sadly, almost all politicians do this very thing. Pointing out that we cannot do everything for everyone without borrowing from someone else or sacrificing something is considered anti-American, unpatriotic nay-saying. We’re the greatest country in the world and we can do everything! USA! USA!

Since we can’t handle the truth, politicians don’t tell it to us straight. Because we don’t want to make sacrifices, the government gives us their only solution: spending more money. Nevermind where that money comes from or the long-term costs of borrowing money or the effect on jobs from raising taxes. Why, I’m sure we’ll just get the rich people to pay for it anyway. God forbid we try letting the market work, allowing the tighter supplies of food and water to cause consumers to conserve resources more so that there is more water to go around to its most valued use. Just give the government more money and they’ll fix all your problems.

Listening to Schwarzenegger talk and the enthusiasm with which he wants to borrow and spend so much money, you would never know the state is almost $50 billion in debt with a $21 billion annual budget deficit and the worst credit rating of any state in the nation. And you would also never know he has a degree in Business and International Economics from the University of Wisconsin–Superior.

It looks like Sowell was right.

P.S. Whether Schwarzenegger realizes it or not, there is always a sacrifice. The cost of the previous over-spending is the MC Hammer-like credit rating the state now has and the higher interest payments that result from it; as well as the lost tax revenues from people who have fled the state because it has the highest sales and income tax rates of any state in the nation. You can’t avoid the first rule of economics no matter how hard you try.

P.P.S. (For Benjamin’s comment): One’s cute, the other…not so much.

I bring this up because I just got a new rating on my Ratemyprofessors.com page. It’s for my Econ 201 class and it’s not good:

I can see why some people might like him but if you get on his bad side your done for in the class. And like others said he is pretty full of himself.

(As Ross from Friends would say: “Y-O-U-’-R-E means “you are.” Y-O-U-R means “your.”)

I’m not going to argue the personality criticism because there’s no point. If you don’t like the way I come across, I can’t help that. If you take my statement of facts and theory with assertion as arrogance, that’s your problem. The person I make fun of the most in my classes is myself, yet somehow I’m arrogant.

But what really irks me is the claim that I would give people anything other than the grade they deserve. (Quick question: does using the word “irks” make me arrogant?) That is an attack on my integrity as a professor and I thought I had to say something somewhere to defend myself. (Good thing I have this blog!) This student got a bad grade and assumes that it’s because I don’t like him/her. To be honest, I can’t think of one student in that class who was on my “bad side.” I have no idea who could have written this because I actually really enjoyed that class — the students in it asked great questions and we had good interactions. To be honest, the only students that I don’t like in any class are the ones who don’t come to class, don’t do assignments, and show me through their lack of effort that they don’t really care about the class. But even then, they don’t get on my bad side — they get on my indifferent side.

All of my grading in that class is blind. I grade all the in-class exercises without looking at names. All the exams are graded blind: I flip over the cover page and grade all the question #1’s, then I move on and grade all the #2’s, etc. I have no idea who anybody is until after I’m done and I’m adding up the scores on the individual questions. All the online work is up to the students — I have no control over that. If anyone gets a bad grade in that class, it is because they did not do the work or did not learn the material, plain and simple. Blaming it on getting on my bad side is a weak excuse.

Part of me wishes I didn’t care so much. My colleagues with more experience tell me that you can’t worry about students like this — you can’t please everyone anyway so you should just shrug off the criticism. I guess I’m not cynical enough to think that way yet. (Maybe once I get tenure — just kidding!) I hope there’s a way to become less sensitive to the criticism while still retaining the desire to do my best to reach every student, but I’m not sure there is.

Okay, it’s been a long semester and I have two weeks to get a bunch of online videos done to prepare for the next semester. Enjoy the rest of your break if you have one.

The article brings up several great points. The federal government bailed out many of these banks through the TARP program when they suddenly found themselves with housing assets that weren’t worth nearly as much as they thought they were worth a year before. So to remain solvent, they borrowed the cash from the government. The government did not put many strings on what the banks could do with the money — and some of them responded by buying up other banks. The federal government even forced its way into a few banks, telling their CEOs that if they did not take some of the money they would be audited.

[If you wonder why I'm skeptical of federal government power, this is a prime example. What lessons do we learn from TARP? If you give people money without conditions, they'll take it and do things they think are most appropriate. If you put conditions on the money, they may not want to take it. Only the federal government thinks that their goal should be to design a way to force banks to take money with conditions on it so that they then have control over them and can make private companies do the government's bidding. Hmm...I wonder if that will happen with health care.]

I remember when President Bush and Congress were trying to justify passing TARP. They knew that a Wall Street bailout would be unpopular, so they told us that the world would basically collapse if we did not pass it, and they also told us to look on the bright side: if this works like other bailouts (Chrysler, for example), we’ll get all the money back with interest and John Q. Taxpayer could even make some money on the deal. Cha-ching! I mean, how can you not pass such an obvious money-maker for the people, right?

As it turns out, that seems to be exactly what’s happening. The banks have already paid back $71b of the $205b that was loaned out, plus another $7b in dividends. That’s supposed to be good news, right? Now taxpayers aren’t on the hook for these toxic assets any more. But it doesn’t seem like that’s what the people in charge of our financial institutions want. Obama and Geithner are not happy about this. They don’t want the banks to pay the money back because, once they do, the government no longer has any control over them. Although that may change if Congress passes the House’s Banking Reform Act — then they can decide that any private insitutition they deem too dangerous to fail can be taken over by the government. Yay for government! But until it passes (and it will, since any bill increasing Congressional power seems to pass pretty easily), Obama has very little power today to force these bankers to do anything. He wants them to start making more loans to small businesses, but the banks don’t want to loan the money. We know credit is tight these days, but has anybody stopped to ask why banks are not making these loans? After all, if loans were profitable, banks would make them and earn profits on them. So why aren’t banks making small business loans? Because these loans right now are not a great risk for the banks. (Remember when banks were the bad guys for taking on too much risk? It seems so long ago…) Back in February, the Small Business Administration’s (SBA) default rate on its loans soared to 12%. If it were your money on the line, would you make a loan if there were a 12% chance that you would lose the principle and get absolutely nothing in return? Didn’t think so. The last time we tried to get banks to make loans to people who had a high risk of default, it was called the Community Reinvestment Act and it helped lead to the subprime mortgage crisis that caused the current recession (or is it former recession? I’m not sure – if you ask Christina Romer and Larry Summers, whose offices are adjacent to each other in the West Wing, they’ll give you two completely different answers.)

(Update: This article explains that a study of business bankruptcies found that 50% of them were current with their lenders when they suddenly declared bankruptcy — the lenders never saw it coming. Yet another reason why lenders might be reluctant to loan to small businesses in today’s economic climate.)

As proof that the banks are not lending enough, you can look at statistics showing that the amount of lending has fallen. But we also know that individuals have become more conservative with their finances and do not want to borrow as much. The current saving rate is the highest it’s been in decades — a great sign that people are finally being financially responsible after so much excessive consumption. Obama says credit supply has fallen; bankers say credit demand has fallen. And as all my students in principles of microeconomics should know: if all you know is that the quantity of a good is down, you cannot determine whether demand or supply fell (or both) without knowing what happened to the price. Unfortunately, price data is difficult to come by. I spent a good deal of time searching for small business loan interest rates this morning and could find no historical data — let me know if you find any. For now, let’s just say that both are possible explanations. But even if supply has fallen, there is a perfectly rational explanation for it: small business loans in today’s climate are extremely risky.

Sure, it’s easy to put the blame on the “fatcat” bankers — everyone in Washington loves to do that. Politicians would have you believe that large salaries and bonuses for CEOs and bankers is the source of all problems, but they’re insignificant in the relation to the entire economy. All a bunch of sound and fury signifying nothing. But let’s deal with the facts. If I discovered that a company I owned stock in were loaning money out and getting none of it back 12% of the time, I would sell my stock in that company.

If you want banks to make more loans to small businesses, you need to bring some certainty back into the economy. Small businesses don’t know what will happen with cap and trade regulation and they don’t know how much a worker will cost them if health care reform passes — so they’re sitting on their hands while unemployment passes 10%. There are plenty of good workers out there to be hired, and firms would love to hire them, but without knowing the long-term cost of those workers, it’s not worth the risk. If you want the unemployment rate to fall, reduce small business income taxes and capital gains taxes, make it clear how much health care will cost or abandon the effort, and reduce business regulations. Then you’ll see small businesses succeed and banks extending more credit.

Or you can just blame the bankers.

Gadell made another point — I’m not sure I agree with him but I hope I do. He said that he thinks 90% of us agree on 80% of the issues. There are only 10% of us who are extreme, either left or right, and the rest of us basically think the same about most issues. It is a travesty that a nation where so many people fundamentally believe the same thing is divided so sharply along party lines. The political parties use small, divisive issues (abortion, gay marriage, illegal immigration) and buzzwords (socialism, unpatriotic, government takeover) to make it an “us vs. them” situation so they can get political contributions, further their own narrow agendas, and gain power.

Howard Dean recently said in a speech in France that the war between capitalism and socialism has already been fought and the outcome has been determined: we will have a mix of both; the only question is the extent to which we have one or the other. He elaborates on this, saying that capitalism is important because it appeals to part of human nature: the drive to be free, to be creative, and to make things. Socialism appeals to another part of human nature: to be part of a community and to support each other. (Some would argue that we don’t need the government do to that — that charities can do that — but I’ll accept his argument here.) So if we can get past this “capitalism vs. socialism” argument, get past thinking that it has to be all one or the other (when in reality it never will be), then perhaps we can start having a more logical discussion about the implications of sliding more to one side than the other.

My hope is that some day soon, we will all wake up and realize that political parties are using us to further their own ends. They have to divide us, to get us to choose a side. They want you to think that people on the other side are either a) wrong, b) stupid, or c) just plain evil. Your neighbors, your co-workers, and your friends are likely a mix of conservative and liberal, Republican and Democrat. Do you think the people you love who disagree with you are mean-spirited, evil or stupid? I hope not. Don’t play their game. Sure, you have to choose one person come election time. But don’t fall prey to the “us vs. them” mindset. It will make you bitter and angry — I have found that the more I become interested in political issues, the more upset I become. That’s why I haven’t written much on this blog about politics lately. Instead, I’m trying to focus on the common bonds we all share instead.

United we stand, divided we fall. It’s unfortunate that the two major political parties can only survive by dividing us. Don’t let them.

Then something strange happened — the facts came out. Initially, George did a horrible job as a moderator. Facts were brought up that wiped out a Democrat’s argument, the Democrat chalked it up to simply a difference of opinion, and George just left it at that. Hopefully people are smart enough to see through this kind of dishonest debate.

Here’s a great two-fer example of this. When confronted with the fact that the Congressional Budget Office (CBO) said that both bills of the bills would actually increase health insurance premiums, despite the insistence of Democrats that the whole purpose of health care reform is to decrease costs for households, Rep. Debbie Wasserman-Schultz (D-FL) said this: “Well, there are differences of opinion as to whether or not the Congressional budget analysis is correct on the increase in premiums, but the important thing here is that I hope we can all agree that we have to get rid of the profit-driven, insurance company-drive health insurance system that we have, where it’s insurance company bureaucrats, Senator Coburn, that are getting in between patients and their doctors. To suggest that this bill will put government in between patients and their doctors is really disingenuous.”

Did you catch that? Nevermind the facts. Who cares what the CBO says? It’s just an opinion anyway. Now let’s change the issue to those evil insurance companies.

When the CBO scores a Democrat bill in their favor, they tout the CBO as the “gold standard” which must be respected and believed as the gospel truth. But when the CBO says something the Democrats don’t like, they say “well, there are differences of opinion on that.” I call shenanigans.

In response to her, Sen. Coburn goes on to cite the fact  that the percentage of claims denied by government-run Medicare (6.5%) is almost twice the national insurance company average of 3.5%. In response to the Republican concern that government will ration care, the typical Democrat argument is basically that rationing is going to exist under any health care system (100% true, by the way), but rationing already exists and it’s done by those evil insurance companies. Yet Coburn cites the fact that government rations more than insurance companies. I think that’s a pretty important fact to consider. (Note: see the comments on this post for more on the other side of this issue.)

Another great example happened when Rep. Marsha Blackburn (R-TN) actually read from the bill itself. She started by discussing the controversial announcement this week by the Preventive Services Task Force saying that women should not get mammograms until age 50, replacing the current guidelines which say they should start at age 40; and instead of getting them every year, they should get them every two years. Republicans have been skeptical of this, arguing that this is exactly the kind of government rationing they have been worried about.. They argue that not just a coincidence that as the Democrats are looking to expand the government’s role in health care, the federal government is releasing guidelines telling women to not get as much preventive care. The American Cancer Society rejected these new guidelines.

(Note: The PSTF also said that self-examination does more harm than good, as it gets women thinking they might have cancer when they don’t and then we waste money looking for it. You hear that, women? After decades of saying that you should check yourself for lumps because early detection is the key to beating breast cancer, now the government is saying to stop looking for cancer — because, you know, if you find it, you’ll need to be treated for it. And we wouldn’t want that to happen when the government is going to have to pay for it. Democrats always say we have a horrible health care system, but the one thing that they cannot dispute is that our rate of cancer detection and survival is higher than every other country in the world. If we go down this route towards government-run health care, expect those rates to fall in line with the rest of the world; i.e. more people will die from cancer just at the point where cancer rates in the U.S. are falling because we are so successful at beating it. But the government will save money, so yay for that! As Dr. Bernadine Healy, former Director of the National Institutes of Health, said about the new guidelines: “This will increase the number of women dying of breast cancer. Women in their forties have a very aggressive kind of breast cancer. They tend to progress fast. And to not screen women in that age group is astounding to me and it goes against the bulk of individuals who are actually caring for patients. You may save some money, but you’re not going to save lives.”)

OK, back to the show. Blackburn read verbatim from the bill. Citing titles, sections and pages, she explained how the bill renames the Preventive Services Task Force to the Clinical Preventive Services Task Force. Then she explained how the bill assigns the CPSTF the task of rating all preventive services with a grade of A, B, C, D, or I. At this point, Stephanopolous seemed shocked (shocked!) that the representative had actually read the bill, even perhaps a little annoyed by it. But Blackburn pressed on, explaining that the bill says that only services rated A or B actually must be paid for by health insurance. And the preventive cancer treatments between ages 40 and 50, which the PSTF just announced are unnecessary, were given a rating of C. So the fact is that if women want to continue to get screenings at age 40, they will not be paid for by insurance or the government. You can still argue that we might find more breast cancer in one respect: women over 50 without health insurance will now get free mammograms under their health insurance or government option. But you can’t deny the fact that women 40-50 will either get fewer mammograms or have to pay for them out of pocket. Or can you?

Wasserman-Schultz, who suffered from breast cancer herself just a while back, then accused Republians of playing politics with breast cancer. She flat out denied what Blackburn had just said. Her response to the assertion that the CPSTF’s guidelines would essentially become law: ”No, they would not be.”

At this point I give Stephanopolous some credit. He actually put the language of the bill right up on the screen so we could all see that what Blackburn had said was 100% true. Wasserman-Schultz’s answer: “This task force’s recommendations are simply recommendations. They aren’t controlling, they aren’t going to be binding.” Again, shenanigans. Sure, nobody is saying that a 40-year old woman can’t get a mammogram, but she’s going to have to pay for it herself because no insurance company, especially the government option, will pay for it. I don’t know how this woman can lie to the American public with a straight face, but she did. And to his credit, Stephanopolous called her out on it.

Health care reform (a.k.a. health insurance reform, because it sounds less controversial) is a difficult thing to do, no question about it. There are going to have to be some sacrifices made no matter what we do – if you want to cut costs, you have to improve efficiency or reduce services; it’s that simple. When politicians, of either side of the aisle, exaggerate claims, dismiss facts, or flat-out lie about what is in the bill, they need to be called out. I’m glad that George Stephanopolous finally did that today, and I hope he’ll continue to do it in the future.

Let’s start with the Republicans. The CBO’s estimate of the effects of the bill are that the cost for the government option health insurance plan will likely be higher than private plans. On Fox News, Carl Cameron reported that this confirmed what Republicans have been saying for months — that government-run health care will be more expensive. Really? That’s not how I remember it at all. I remember Lindsay Graham (R-SC) saying that the government option would be cheaper than private plans. And because it is cheaper, companies will ditch their private health insurance plans. Private health insurance companies won’t be able to compete and they’ll be driven from the market. the government option was supposed to destroy private health insurance. Now we discover that it won’t, and that’s somehow bad too? Republicans are trying to take both sides of this issue. If the government option is less expensive, it will ruin private industry. If it’s more expensive, it’s a sign that the government is inefficient and can’t do anything right. You can’t have it both ways, guys.

Speaking of having it both ways, let’s move on to the Democrats. In trying to keep this bill deficit-neutral, they are forced to raise about a half trillion dollars in taxes. $28 billion of this is taxes is expected to come from employers that do not provide government-approved health insurance plans for their employees, so they get fined. So what happens if these companies shape up and put their employees on the government option? The government now has to pay for the health care of these individuals, and the government does not collect the tax revenue. Seems to me the Democrats are counting on money that, if their bill is successful, they won’t get. It’s just like the SCHIP bill passed a few years ago. In order to help pay for an expansion in the State Childrens Health Insurance Program, the Democrats in Congress increased cigarette taxes. If people stop smoking (as we want them to do), the government doesn’t get its money and the kids don’t get health care. As I tell my students, next time you’re smoking, just tell yourself, “I’m doing it for the kids.”

The Democrats say the bill costs $848 billion and will reduce the deficit by $130 billion. That means they’re increasing revenues by 848+130 = $978 billion. Some of this is assuming new efficiencies in Medicare that the CBO says are questionable. And the rest of it is on taxes. The goal wasn’t to reduce the deficit by increasing taxes (especially in a recession) — it was to provide affordable health care for all. If you only need $848 billion, why not increase taxes enough so that you get $848 billion in revenue. If you ask me, this extra $130 billion is because they know those Medicare cuts won’t happen.

And last but not least is the difference in timeline between costs and revenues. The Democrats start collecting taxes next year, so the $978 billion in revenues comes over 10 years. But the benefits people get in the health care bill don’t start for 5 years. So they’re actually saying that we’ll collect money for 10 years and only pay it out for 5, and somehow this is a deficit reduction. That’s like me saying that I’m only going to pay half of my bills this year and then, at the end of the year being proud of all of the cash that I have in my checking account. It’s ridiculous. And the CBO says that in the second 10-year period of the bill (2019-2029), health care costs will TRIPLE.

And politians wonder why we’re sick of their games and want to throw them out of office. They can’t be honest about the numbers. They play a shell game with our money. And they talk out of both sides of their mouths. My suggestion for 2010: vote out every single incumbent. Maybe they’ll get the message.

When my colleagues have a question about D2L (our course management system, similar to WebCT or Blackboard), they ask me. When a colleague gets a new iPhone, he asks me how to set up his mail. When I visit my parents every year, they have a list of things I need to show them how to do (and write instructions they can refer to after I’m gone) — how do I rip a CD into iTunes and then burn a copy of it? How do I format something in Excel. How do I set up the wireless network? Usually I feel like I have a good idea of what’s going on, know what questions to ask and know where to find the answers.

Then I started working on my online courses. The goal originally was to have everything in D2L. Each week’s material (a “module”) would be a folder in the Content area and students would click on their different assignments. A Word document with an introduction to the chapter and a set of learning objectives. A link to a lecture presentation or two on video. All of these things would be housed on a media server at SCSU (since taking up space on D2L is, shall we say, frowned upon).

At first I just used PowerPoint and recorded audio. That file would be sent to the tech people on campus and they would convert it using Adobe Presenter into a flash video that students could watch in a web browser. It looked great and worked well. The problem was that it was just me reading a slide. It couldn’t do screen capture. I have colleagues at other schools that have used a software called Camtasia. It captures what’s on your screen so that when you’re talking through your presentation, students can see your cursor. You can highlight things and draw graphs on the screen in real time. And you can open up a web browser to show them an article, or where to go to get a piece of data. It looked cool. Of course, it costs money — $180 or so for educational purposes.

I then learned about Camstudio — a free version that has most of the same features. The only problem is that the flash conversion done by Camstudio has an interface that does not include FF or RW buttons on it. The whole upside to video is that students can rewind a section if they don’t understand it and watch it again.

So I learned about something called Flowplayer, which has a nicer interface — basically, you watch videos in much the same way you would watch a YouTube clip someone put on a blog. You can rewind, fast forward, go to specific points in the video using the slider bar, and expand to full screen. But then I need another software to convert the Camtasia AVI output file into FLV format. Okay, I got that. I also got a video editing program so I can clip out the beginning and ending parts of a presentation if they’re rocky, and I can split up a long video or splice together short ones. And now I don’t have to send every video (which is too big to send in e-mail of course) to the tech people to have them converted to a Flash file.

The question is then: how the heck do I get my students to watch this? I spend hours playing around with some HTML code that would enable Flowplayer but it wouldn’t work. The tech people gave me a workaround but the flash video they created did not include the ability to make the video full-screen, which will be crucial for my students to look at all the graphs.

Then yesterday I finally realized the best solution to my problem. I decided to put the online courses up as two new blogs hosted on my own personal web site. (You’ll see them as the top two links on the right side of the page.) I don’t know how anybody would do what I’m doing using the school’s resources. It’s just too complicated — too many moving parts going on and what ends up getting sacrificed is the experience for students. So instead I’ll have a blog and each post will be a module. I’ll add all the text I need, include video clips they can watch full-screen, and include links to other articles. All in all, I think it’s a great solution. I can password-protect each post and give students the password each week, and other people can’t steal my content. It also means I can give the password to colleagues from other universities who want to see what I’ve done — something I can’t do if the course is all on D2L. In the end, I found a great solution that meets all of my needs and will hopefully provide a quality educational experience to my students.

But I think it’s a little sad that the only way to have an online course set up the way I need it to be set up, so my students can learn what I need them to learn in the way that I think is most effective — and in a way that is not that technologically fancy at all — is to completely bypass the university technology system that is supposed to make everything happen for us. I honestly don’t blame the tech people — I think they’re doing the best they can. They were extremely helpful in helping me realize what exactly it was that I wanted to be able to do in the online course, providing a headset and microphone so I could make my recordings, and answering all my questions in a way that was understandable. I know they’re dealing with restrictions imposed on them by others, security issues, licensing issues, etc. I post this not to complain about the work they have done (because, frankly, without them I would have been even more lost), but to point out that right now we have a system where technology dictates pedagogy. You are told what is possible and you try to mold your course around that — and if you don’t like it, you have to find a way to work around the system. That’s not right. Pedagogy should drive technology, not the other way around

Susie Shepherd, the principal, said a parent advisory council came up with the idea, and she endorsed it. She said the council was looking for a new way to raise money.

“Last year they did chocolates, and it didn’t generate anything,” Shepherd said.

Shepherd rejected the suggestion that the school is selling grades. Extra points on two tests won’t make a difference in a student’s final grade, she said.

What Ms. Shepherd is saying is two things: a) Parents should spend $20 to buy their kids extra credit so that the school can raise money, and b) it will not have any impact on their grade. I don’t know how many tests there are every semester, but a 10% increase on two tests has to have some impact on a student’s grade, doesn’t it? And if there are so many tests that it doesn’t matter, than the PAC is basically stealing the parents’ money, selling them something that is worthless. Either Ms. Shepherd thinks the parents of the children in her school are stupid or she thinks people reading the story are stupid. I’m not sure which.

I’ve flirted with some controversial things with grades in the past, and I’ve often had to ask my colleagues what they thought of it, and have backed away from a few proposals. In my Industrial Organization class at Northern Michigan University, I ran a simulation game based on Severin Borenstein’s Competitive Strategy Game. I’ve used the game, or a variation thereof, all three times I have taught I.O. in my career and the students love it. It applies principles from throughout the course, forces them to use Excel to run simulations and calculate different scenarios, and helps them visualize what they are learning. I can’t get Dr. Borenstein’s software to work any more for some reason so I use an Excel file to run the simulations and that allows me to tweak things and create new markets. It’s more work for me but the result is better and I’m much more in tune with the decisions students are making.

The game accounts for about a quarter of each student’s final grade. It’s a semester-long project with an assignment every week or two (it varies by semester). It can be a lot of work or students can half-ass it and hope to get lucky.  The first time I taught the course, I was not sure how motivated students would be. So to encourage them to really take it seriously, I stated in the syllabus that members of the team that finished in first place would each received one grade shade bump on their final grade; if they had an A-, I would bump them up to an A. But I realized something: the good students are probably going to take the game more seriously, and they’re probably going to get an A anyway. NMU did not allow me to give out A+’s, so a grade bump for these students was worthless. So I decided to give it to them as a property right — they could give it away to a friend or even sell it to another student if they wanted. I would set up an auction for them.

I loved the idea at first, and so did they. Students often consider their grades as their property, but they do not have the right to sell or trade that right. I thought I would experiment with that. But at the end of the semester, I started hearing complaints from some of the other students. They thought it was unfair that someone who did poorly all semester could buy a grade bump from another student. I mentioned that there would be an auction for the grade bumps (two of the three students in the winning group already had an A and therefore did not need theirs) and everybody had an equal opportunity to put in a sealed bid on one of them. Naturally, some complained that this meant the wealthier students would get the grade bump — the same thing complained about in the story linked above.

I did not want to cause a controversy with this, so I did not collect any money from the students who put in the highest bids, and I did not give them the grade bump. I took the two highest bids, averaged them, and gave the two students that owned the grade bumps cash from my own pocket. I thought that was the fairest thing to do — why should they suffer a loss of income because I changed the rules on them? If I remember correctly, it was only $25 or so each. Nobody bought a grade, and the students that earned the grade bump and did not need it received the cash equivalent value.

But there have been other times when I have thought of doing something similar. As it turns out, I’m not the only one considering it. In fact, Michael Baye, the author of the book I use in Managerial Economics, gave an online web conference a few months ago where he talked about something he does in his classes that could easily be construed as grade-selling. He includes class participation in his grades. He also auctions off a few shirts at the beginning of the semester and any student wearing one of the shirts when his or her name is called is automatically immune from questioning and gets 100% that day. Some students keep the shirt in their backpack and put it on before every class. These students have essentially bought a percentage of their grade. He does it so that when he asks students how much they are willing to pay for a good at the beginning of the semester, it’s not just a thought experiment; it’s something tangible, something that has real value to them. He uses the numbers he gets from this experiment to create a demand curve. He uses the numbers to run regressions, to calculate consumer surplus, the profit-maximizing price for a monopolist, and a variety of other things. It’s a running theme throughout the whole course based on an actual tangible good. But still…is he selling grades? Does the fact that he’s selling a shirt make it not so straight-forward?

I have thought of doing something similar in my Managerial Economics class in the future. I don’t grade attendance so the magic shirt idea wouldn’t work. Instead, I thought that students would bid on one of several homework passes. Each homework assignment is usually worth between 5-7% of their final grade and there are 3-4 of them. It’s not hard to get a good grade on homework assignments and most students get at least 80% on them. But if they bought one of these passes, a student would have one freebie and receive 100%. In my mind, I justify it by saying that if a student decides to just not learn the material and use the homework pass, their grade will likely suffer on the next exam, which usually takes place the following week. And I can do the same analysis on the data that Baye does — I’ve seen the Excel sheets he has created with it and he applies the data to almost every concept students learn the entire semester.  It really is a valuable teaching tool. But is it buying a grade? And if it is, is it worth any potential controversy if it has pedagogical value? If I sold magic homework shirts instead, would it be any different?

I’m interested in comments from students and educators.

The proposed law would require that when an employer tells a sick employee to stay home, they pay the employee for up to 5 days of sick leave. Currently there is no law forcing employers to offer any paid sick leave. But with H1N1 waking people up to the possibility of a pandemic, lawmakers are starting to reconsider this. The Center for Disease Control (CDC) has been advising employers to encourage their sick employees to stay home. My school did the same thing for faculty, staff and student. But faculty have paid sick leave and, worst case scenario, students get the day off. We don’t usually hear complaints from them about that.

For millions of people, especially hourly workers, staying home for the good of the firm means less money in their pockets, a difficult decision for people to make, especially in a soft economy. They don’t want to infect their co-workers, but they can hardly afford to stay home. The CDC is spinning this as a good thing for employers: if your sick employee stays home, she won’t infect her co-workers and the amount of sick time taken overall will decrease. Paying for sick leave encourages her to make a decision that is in the best interest of the firm. Overall productivity will stay high and the few days of paid sick leave the firm has to pay is small relative to the potential loss in profits from a firm-wide outbreak.

(A quick market-based analysis: if the CDC is correct, profit-maximizing firms would have been voluntarily doing this all along — especially evil corporations who only care about profits. If the CDC is correct, you don’t need to force firms to pay for sick leave. So if they’re not choosing to do this, they must have concluded that they would rather have less-than-full productivity out of a more sick work force than have some people stay home sick and have to pay them for it.)

One problem I have with the article: no mention of any statistics. The CDC seems to just assume that when an employee goes to work sick, she will infect other people and they will infect others. While that’s certainly possible in theory, there is also the other side of the argument: many employees work while sick and maintain their productivity and don’t infect anyone. It depends on individual behavior, how communicable the disease is, and how long it lasts. I’m not sure how you would gather statistics on this to do a cost-benefit analysis here, but it seems that nothing like this has been attempted. But Congress can’t afford to worry about that — they’ll pass a law anyway.

Next thing you know, we’ll be passing mandated flu shots. Actually, that would no doubt be stricken down as unconstitutional. (Actually, I’m not sure that word means anything any more.) Instead, the government will just impose fines or taxes on firms that do not offer free flu shots to their employees. And they’ll tell firms: it’s for your own good. And it might be. It very well may end up costing less for the firm to pay for all its employees’ flu shots than endure a loss of productivity as people take sick leave. But without any data or analysis behind it, I’m skeptical.

In 1912, you had an America and Western Europe that was going through amazing technological progress. The sheer size of the ship was massive: it took over 3 million rivets to assemble the outer hull, and it burned 40 pounds of coal per second. Titanic was a symbol of the times, a ship that was presumed indestructable, offering both unsurpassed luxury for the wealthy and affordability for the working class – a third-class (“steerage”) room cost the equivalent of $650 today, far less than many from Mexico and South America pay people to get them to our country. Its three-turbine propulsion system was an engineering marvel.  Titanic was divided into a dozen or so watertight chambers so that if one or two of them were breached, the boat would still float. The iceberg took down 6 of them, if I remember correctly.

One fact stuck in my head: of all the women that were on Titanic, only three had husbands who survived the disaster. Only 20% of the men on board survived – but of men who had wives, only three men survived. (Here for more on survival rates.) That tells me that the men whose families were on the ship had one foremost priority: get their families off safely. The men whose families were not on board had no such higher motive, and did not cede room in the lifeboats for others’ women and children. As they say, tragedy often reveals both the best and worst in people.

[Quick note: the Titanic had more than enough lifeboats for all of its passengers. Most of them launched prematurely, with husbands worrying about the safety of their families, wanting to make sure the lifeboat was not so crowded that it might sink. If I remember correctly, the first third or so of all lifeboats launched were filled with less than a third of their potential passengers. There were life preservers for everyone (white vests filled with blocks of cork for bouyancy), but the water was below freezing and hypothermia set in within a half hour.]

As you make your way through the exhibit, you cross an amazing collection of personal materials. Teapots from the dining room that somehow survived in perfect condition. Personal items of passengers. A wide assortment of money. Playing cards that look remarkably similar to what we use almost a century later. This is where the exhibit hits home, and Titanic becomes not just a boat that hit an iceberg, but a collection of people. People from the highest social standing to the lowest. Some making their way back to America to resume their businesses, some headed there to start a new life, filled with hope and aspirations. These were real people, and seeing their combs, luggage, and postcards is what reminds you of that.

On a wall at the end of the exhibit is a quote by an Irish poet named Jack Foster: “We are all passengers on the Titanic.” Sound familiar? After 9/11, we were all New Yorkers. We all understood the horror of the tragedy that occurred and felt it could have happened to us. As a country, we banded together to give assistance however we could to the families who lost loved ones. The children who survived the Titanic were assisted through massive charitable giving, even putting some through college. It is sad that it takes a disaster on a scale like this to unite people, but apparently not much has changed in a century.

There are many lessons to be drawn from the Titanic. In an effort to make its planned departure date, much was rushed. The ship ended up sailing without one pair of binoculars on board, a simple detail that may have prevented the disaster. The iceberg field that the Titanic passed through was also navigated by a half dozen other ships that night and the following day, including the Carpathia that rescued its survivors. None of these ships was hit because they were able to steer around the icebergs. They had binoculars to see them, and they weren’t so big that they could not maneuver easily. Rushing through a giant venture and overlooking important details because you are trying to meet some arbitrary date can have major adverse consequences. (Are you listening, Nancy Pelosi?)

You know I’m a supporter of free markets, but there is room for some government guidelines in many industries. People have to know what the rules are in order to compete, and part of the government’s role is to define basic rules of the game. After the Titanic sank, the U.S. and other countries agreed on a variety of new changes. They restricted some radio frequencies from personal use and designated which frequencies would be used by ships, making it easier for them to communicate quickly when they are in trouble. They imposed restrictions on how far north a shipping vessel could navigate, to avoid the kind of waters Titanic found. The result of these actions: since the Titanic, no other such ship has sunk because it hit an iceberg.

If you are down in the St. Paul area, I encourage you to check out the exhibit. It’s $23 for admission to the museum and the exhibit, but it was definitely well worth the money.

Netflix recently announced it would stream movies to it’s customers via the PS3 starting next month. Currently, Xbox360 users have the option. Sounds great but PS3 users can already stream by using the web browser built into the PS3. I use it to watch shows on Hulu (which apparently is going to start charging for their service soon, much to my disappointment. No free lunch indeed.) It is not easy to navigate or type in URLs with the controller but for something simple like watching a video, it works okay.

Apparently this will be a little better quality (the system is supposed to vary the quality of the video based on the speed of your internet connection, and will provide DVD quality if you have a fast internet connection) but the number of titles is still limited to what it is now when streaming online with a computer or the PS3 browser. No major new releases are available to be streamed. Only 1 of the 20 movies in my Netflix queue has the streaming option available.

And for at least a few months, PS3 users will have to insert a disc to enable the streaming function. (This does not count as one of the discs you can have out — it’s a freebie.) Sure, it is probably easier than the built-in web browser but it will be annoying to have to switch out discs when you want to watch a movie. Next year, Netflix plans on having the software built into a PS3 firmware update. If you have a PS3 and Netflix and want to explore the streaming option, go to Netflix, click on the streaming video, then explore the different player options — click the PS3 and you should be able to find the option to put yourself on the list to have a streaming disc shipped to you when they are available in a few weeks.

When I first heard about the option I was excited. But the more I learn about it, the more I think this is just a minor improvent over the status quo — the only real difference is better picture quality and hopefully a more navigable interface. But I guess if it were a really significant improvement, like expanding the list of streamable movies, they would start raising prices. And the last time they did that, for Blu-ray, I had to cut back my purchases.