Saturday, January 30, 2016

My Article in Econ Journal Watch

Econ Journal Watch just published my study of 920 industrial relations (IR) researchers.  Mine is one of the first times an association has been shown between (a) Democratic registration and political contributions and (b) the ideological orientation of a field’s published research.   I found that when I scored papers in the leading IR journals for ideological orientation without knowing the authors’ information and then looked up the authors’ information in a party registration data base there is a statistically significant association between the ideological orientation expressed in the articles and the authors’ political registration or contributions.  In other words, the exclusion of scholars with alternative views mirrors the balance of views expressed in the published research in the leading IR journals.  Nevertheless, none of the journals states that they advocate an ideological orientation.
 
As well, I found that the exclusion of non-leftists becomes more intense as one moves up the academic hierarchy.  While individual academics associated with the IR field have a D:R ratio of 8 to 1 (mainstream economists have a D:R ratio of 3 to 1), those who contribute twice or more (e.g., publish two papers over five years or are both an editor and an article author) have a D:R ratio of 11 to 1. Editors at the two leading IR journals, Industrial and Labor Relations Review and Industrial Relations, have a D:R ratio of 43 to 1.  Thus, in the study I emphasize person roles rather than individuals. (That is, if someone is both an editor and an author they count twice.)  The overall D:R ratio for academic person-roles is 10 to 1, but that includes the Journal of Labor Research, which the Olin Foundation specifically funded to permit alternative views in the IR field.  Without JLR, the registration ratio is 13 to 1. The political contributions ratios are even more extreme.
 
The article appears here:
 
http://econjwatch.org/issues/volume-13-issue-1-january-2016http://econjwatch.org/issues/volume-13-issue-1-january-2016
 
The summary is as follows.

I show that the field known as industrial relations (IR) leans overwhelmingly to the political left. I investigate the voter registration and political contributions of IR researchers, showing overwhelming Democratic Party favor. I construct a data set of participants in the IR field, which contains 920 U.S.-based person-roles (deriving from 709 actual persons). Included are the authors of the 539 research articles published in four periodicals 2009–2013: (1) the annual meeting proceedings volume of the Labor and Employment Relations Association (LERA), (2) Industrial and Labor Relations Review, (3) Industrial Relations: A Journal of Economy and Society, and (4) the Journal of Labor Research. I also include the editors of the periodicals, the officers of LERA, and a sample of LERA’s ordinary members. The data suggests that the ratio of Democratic-to-Republican voter registration among participants in IR is roughly 10 to one. I find a similar ratio when looking at those who have made contributions to Democratic and Republican candidates for office. I also show that Democratic lopsidedness at the three mainstream IR journals becomes more extreme at the higher stations (officers and editors, as opposed to ordinary members and authors). Also, I analyze the content of the 539 articles for union support and regulation support; the mainstream IR journals are overwhelmingly pro-union and pro-regulation.
 
 

Sunday, January 24, 2016

Alfie Kohn's Authoritarian, No-Bathroom Theory

I am reading Alfie Kohn's book Punished by Rewards, which assaults incentive systems, bonuses, pay for merit, praising children, and any other extrinsic reward. Rewards are extrinsic when they arise outside a task. If I blog because I enjoy it, then the reward is intrinsic, but if I blog because of the great fame it brings me, then the reward is extrinsic.

Kohn's is a no-bathroom theory.  That is, if I hire a contractor to build me a bathroom, and I tell him that his reward will be intrinsic rather than extrinsic, then I will get no bathroom.  A more primitive example is a cave dweller who works harder than his neighbor to bag two mammoths instead of one.  The second mammoth is his reward.  He is not punished by the reward, for his family is better fed and may live longer. His hungry neighbor may spend his time on intrinsically rewarding tasks like drawing on cave walls, but the neighbor's family goes hungry.  The industrious cave dweller is rewarded, and the reward is natural.

Mark Twain's Tom Sawyer convinced his friends to whitewash a picket fence because it was fun. Most of the time, though, my offering merely intrinsic rewards to contractors will not result in a contract. Modern economies are based on contracts, hence they are based on rewards, incentives, and bonuses. 

I do not doubt the gist of Kohn's book: Experimental evidence developed by social psychologists in laboratory conditions shows that interest in tasks wanes when rewards are introduced.  Nevertheless, the real world differs from laboratory conditions.  No one goes to work without an incentive, namely, a paycheck. "If any would not work, neither should he eat," (2 Thessalonians, 3:10).

The phenomenon of incentives' causing declining interest in a task is related to the theory of cognitive dissonance.  Absent a reason for doing something, the mind invents a reason: I am doing it because I believe in it or because it's interesting. If we are doing something because we have decided that we believe in it, we will tend to be better at it because we believe in it.  Pay introduces dissonance: We do not believe in what we are doing; rather, we are doing it because of pay. That may make us less attentive because the pay rather than the task is our reward. 

However, without pay and without rewards many tasks will not be done because the reality, absent psychological manipulation, is that we do not care enough to do most work. The cave man did not invent the automobile not because he would not have benefited from the automobile but because he could not imagine it. We imagine not only because of intrinsic interest but also because of rewards. We would not have most of today's conveniences--cars, electronics, and the like--without the financial and social incentives that benefited the inventors. That can be seen in the lack of invention in societies in which rewards are absent--India and the USSR, for example.  They have not been innovative because of their socialistic systems.  America became increasingly socialistic after 1900, so innovation has gradually slowed from the 19th century rate.

Kohn attempts to deflect these points by differentiating between objectively determined rewards and those dependent on others' will--a distinction he mostly avoids when talking about gainsharing plans and stock options.  On page 183 Kohn writes this passage, which is among the most realistic in his book:

When someone contacts me about giving a lecture or writing an article, I ask how much is involved and often negotiate for the maximum amount that seems to be fair and that the organization can afford to pay. Then, assuming we have come to an agreement, I do my best not to think about the money again.  I do this because I fear the consequences of construing what I am doing in terms of what I am being paid: eventually I might find myself thinking, "A is paying me twice as B, so I'd better do twice as good a job for A. If I ever reach that point, my integrity will be gone, and my intrinsic motivation will have fled along with it. 

What I attempt to do, in other words, is decouple the task from the compensation.  Since I am self-employed, this is largely a matter of how I think about my work--what I attend to, and when, and how. But for people who do not work for themselves, it is imperative that the act of decoupling be facilitated by the organization. This is done mostly by avoiding certain practices--specifically, anything that encourages people to become preoccupied with what they will get for what they are doing. 

In other words, Kohn finds financial incentives amenable when he receives them because he believes that he is intelligent enough to decouple the reward from the task, but he has no such faith in workers, whom he sees as lacking his ability to put things in perspective because they need employers to do their thinking for them. Kohn applies similar elitist reasoning to students. He claims that students study for grades because the system has inculcated in them a belief in incentives. He does not believe that students can think for themselves, as he believes he can, and develop interest in a subject.

Kohn's lack of faith in students' ability to think for themselves falls apart with respect to their cheating. Despite being told over and over that cheating is wrong, many students still cheat. Kohn seems to think that it is impossible for students to think for themselves and develop interest in a subject because schools give rewards for study, but it is possible for students to think for themselves and cheat even though schools give punishment for cheating.  Why is developing an intrinsic interest in the face of rewards more difficult than cheating in the face of punishment? Both are subject to external incentives. 

Kohn's elitism is familiar to those who have thought about professionals' privileged roles in America's authoritarian economic system.  Kohn himself has garnered rewards such as consulting contracts with major corporations, writing for the Harvard Business Review, and appearing on CNN.  Why would such capitalist institutions be  interested in supporting a radical, which Kohn claims he is? 

Although Kohn claims to be opposed to rewards because they are, in his view, authoritarian, Kohn's solution set is authoritarian--and in many ways to the liking of authoritarian corporate bailout recipients.  He sees no problem in using authoritarian, violent methods to ban products that do not match his personal tastes (p. 192):

But what interests me are the unpleasant jobs that do not have to be done in order for society to function, those whose existence reflects the premise of our economic system that if something sells, it has value by definition and should be produced.  Should convenience foods or luxury appliances be made available if the human costs of preparing or assembling them are severe? Our answer may be yes, but the question needs to be asked. If the issue is rarely addressed, it is partly because many people are forced to choose between working at such jobs and not working at all--a choice framed not by "life" but by our economic system.  These people are expected to be grateful that any employment is available, regardless of the psychic and physical toll of doing such work.

In other words, if Kohn feels that convenience foods are unnecessary, then Washington should send federal agents to force the producers to stop making those foods in the name of the producers' supposed authoritarianism in rewarding their employees.Violent federal agents are presumably not authoritarian in Kohn's world.

In fact, few workers earn an adequate wage.  Incentives are a way for workers to improve their wage. Such improvement is possible on large scale only in a free economy. It exists nowhere else in the world other than in free market economies (including Sweden's relatively free one).  It exists to a greater degree in countries that have freer economies than the US, such as Singapore, Hong Kong, and Switzerland, and it does not exist in countries where there are no incentives like North Korea and Cuba.  

Why is Kohn popular among big business-related interests like CNN and the Harvard Business School?   This point has been addressed by historians, such as Martin Sklar, who have studied the Progressive era.   Big business has a lot to gain from not paying incentives to workers and from centralizing authoritarian control, where it can illegalize any business that it and Kohn find  offensive.  By avoiding incentive pay, corporations can save lots of money. Plus, they can put their competitors out of business by using government controls to shut down those that do.  

 

Wednesday, January 6, 2016

Chinese Stock Market Torture

The Wall Street Journal reports that despite a sharp correction Chinese shares still sell at a premium to Hong Kong shares.  As a result of the market declines, Beijing has printed paper money and has threatened to continue a ban on selling by 5% owners. Alex Frangos at the Journal recommends that the Chinese allow its stock market to find a natural bottom--duh.

As I commented on the Journal's website, the Chinese have based two decades of policies on the same belief of Greenspan, Bernanke, and Yellen: Subsidizing interest rates can bring real gains.  In fact, subsidized interest rates boost the stock market temporarily but misallocate wealth so that privileged industries flourish.  In China, as in the US, banks prefer real estate investments to more innovative businesses, so the Chinese have built ghost cities just as the Japanese have built roads to nowhere and the Americans have built subprime-loan-financed homes.

The supposed Chinese miracle is one more application of government incompetence, and although I have no doubt that the private investment in China will lead to their increased military power and ability to murder large numbers of people, much like the Democratic and Republican Parties in America, we can be assured that 19th-and-early-20th-century levels of innovation will be unknown in the 21st century because of bank-and-stock-market-centered economic policies.

On my personal investment front, my short position in oil has paid off, but I am in the red on my short position in gold. The reason, of course, is that the sharp stock market declines of the past few days have boosted the gold price.  I had sold off some of my stocks in December so that I've been about 45% in stocks.  I sold some of the higher-flying stocks and kept low-valued ones like Toyota and other car companies.  I've been holding on to several nursing home stocks (HCN, SNR, VTR), but  I've also reduced my TIAA real estate investment account, which hasn't gone down.

There is a good chance that markets will continue to decline, and I don't see anything wrong with a mostly cash position right now.  If the Fed decides to continue the soft money policies of the past decade, we can see the market turn around.  I would like to see a Shiller P-E ratio below 15 before I get excited about the stock market.  It is currently about 25

Monday, January 4, 2016

The Liberal Arts Can't Fix Higher Education

My essay "The Liberal Arts Can't Fix Higher Education" appeared at Minding the Campus on December 28, 2015. What can fix higher education? Better attention to basic skills, including memorization of the multiplication tables, reading-and-writing practice, writing correction, math correction, and grammatical skills are a start.  These need to occur at the K-12 level, but they also need to occur at the college level when they are needed. Liberal arts is problematic because it's not done well.  The liberal arts tradition was rooted in Latin, Greek, and Hebrew, but today's college students often cannot write English.

Indeed, the claim of today's colleges that they encourage diversity is belied by many students' (also here) getting no exposure to a language.  Indeed, I very much doubt that most faculties can teach from diverse perspectives because they are trained in narrow specialties and mostly do not have broad education. As well, few are interested in improving the skills needed to study liberal arts, including writing.