December 23, 1913: The Federal Reserve

December 23, 2007

Now, here’s an anniversary you won’t find many people celebrating — and that’s really a shame. The U.S. Federal Reserve System is a great idea, copied by most other free market nations, at least in part.

You almost get the idea Americans either don’t understand the Federal Reserve, or actually oppose it.

The Federal Reserve System

Federal Reserve Building
Federal Reserve Building, Washington, D.C.
Theodor Horydczak, photographer, circa 1920-1950.
Washington as It Was, 1923-1959

On December 23, 1913, President Woodrow Wilson signed the Owen-Glass Act, creating the Federal Reserve System.

Text from the Library of Congress’s “Today in History” site.

The Federal Reserve followed the Panic of 1908. Legislators hoped the Federal Reserve Board would be able to prevent future recessions. Clearly, considering the Stock Market Crash of 1929, and the Great Depression, it didn’t work as well as hoped.

Modifications in 1933 gave it even more power. The Federal Reserve today is regarded as a model for how a government’s central bank should be operated by many economists and most other nations.

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Economics books: Casting light on the dismal science

December 21, 2007

An economics columnist for the New York Times, David Leonhardt, opened the discussions on the best economics books of the year in his column.

His nominee? A book about medical care: Overtreated: Why too much medicine is making us sicker and poorer, by Shannon Brownlee.

Here’s the hook to the story, retold from Brownlee by Leonhardt, and the reason I think economics is so interesting when done well:

In 1967, Jack Wennberg, a young medical researcher at Johns Hopkins, moved his family to a farmhouse in northern Vermont.

Dr. Wennberg had been chosen to run a new center based at the University of Vermont that would examine medical care in the state. With a colleague, he traveled around Vermont, visiting its 16 hospitals and collecting data on how often they did various procedures.

The results turned out to be quite odd. Vermont has one of the most homogenous populations in the country — overwhelmingly white (especially in 1967), with relatively similar levels of poverty and education statewide. Yet medical practice across the state varied enormously, for all kinds of care. In Middlebury, for instance, only 7 percent of children had their tonsils removed. In Morrisville, 70 percent did.

Dr. Wennberg and some colleagues then did a survey, interviewing 4,000 people around the state, to see whether different patterns of illness could explain the variations in medical care. They couldn’t. The children of Morrisville weren’t suffering from an epidemic of tonsillitis. Instead, they happened to live in a place where a small group of doctors — just five of them — had decided to be aggressive about removing tonsils.

But here was the stunner: Vermonters who lived in towns with more aggressive care weren’t healthier. They were just getting more health care.

A good economics book has a story at its heart, making the economics easier to illustrate and much more memorable for students of economics — this story should echo every time a person enters a physician’s office or stops by a hospital for any reason.

Health care is often a clash between good science and economic policies expounded by hard-core fanatics of one hypothesis or another who don’t understand the science; of course, neither do the scientists speak the economics language. And so our health care crises continue, deepen, drain our pockets, defy efforts to solve them and threaten to ruin the nation.

Put this book on the list of every policy maker you buy for, eh?

(No, I haven’t read the book.)

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Test pressures hammer social studies instruction

December 19, 2007

He’s obviously a bright kid. He’s got good grades. It’s honors U.S. history, which is supposed to be rigorous, to prepare the kid for college studies.

But we’re drawing blanks from the kid on basic stuff: What’s the significance of 1776? Jamestown is in what state? Who was the commanding general of the American Revolution, George Washington or Abraham Lincoln? During the Civil War, on which side did Robert E. Lee fight? Or was he that dude from the Revolutionary War? Was the 1849 Gold Rush in Texas or California?

During the practice tests, he’s got all the skills: Two-colored markers to analyze the reading passages, circles and arrows to show which parts are important to consider. He can break the test question and reading down into all the “proper” parts, it’s a testing procedure he’s been practicing since third grade. After 8 years, he knows it well.

But he’s not sure whether the British fought in the American Civil War.

It’s a composite picture, but not composite enough for any of us to breathe the relief sigh. Too many students I get in class do not have the basic facts down that they need to make sense of anything else in the history course — or economics or geography course — that they struggle in now.

Many of these students have good test scores, too. The test doesn’t phase them, but their performance is not what it ought to be. Instead of acing the annual state exam, they take a couple of hours and complain that it’s a stupid exam with stupid questions.

We’ve taught them “tricks” to analyze the test questions, but they don’t have the background in the subject that they should have in order to quickly answer basic questions. The tricks get them through an exam, but it’s a poor substitute for knowing the material.

How does this happen?

Many schools across the nation have shorted social studies. Confronting pressure to raise average school test scores, basic social studies has been cut back in elementary and middle grades (kids know that stuff anyway, right?). Social studies is crowded out of the curriculum in favor of testing skills, or instruction in science and math.

I suspect much of the instruction in science and math is similarly shallow. Students learn how to analyze the test question, but they don’t know how to do the math required.

We know that students learn more when they spend more time on the learning tasks. Learning time is reduced for testing skills instruction.

Social studies take the hit particularly hard. According to a commentary by Judith Pace of the University of San Francisco, in Education Week this week (subscription may be required):

Surveys have reported reduced instructional time in various states, and organizations such as the National Council for the Social Studies have responded with letters and statements to Congress. Social studies educators have begun to lobby their lawmakers. But the apparent mainstream acceptance of drastic reductions in the amount of time and attention given to one of elementary education’s core academic subjects is shocking. We are in danger of losing a generation of citizens schooled in the foundations of democracy—and of producing high school graduates who are not broadly educated human beings.

In my own state of California, where history/social studies is not tested until 8th grade, this trend began with the state’s Public Schools Accountability Act of 1999, and has accelerated with the No Child Left Behind law. The social studies squeeze occurs disproportionately in low-performing schools with large minority and low-income populations that are under intense pressure to raise scores. And this, too, has alarming implications for educational opportunity and civic participation.

(More of Light’s commentary below the fold.)

One of the old saws of the quality movement in industry (now sadly abandoned in too many places) is “You get what you measure.” We measure average achievement. Consequently, we stifle outstanding achievement, and we don’t give most of the children the background they need to be good citizens.

I see it in students who just don’t know the basics. We should not need to spend time teaching that Abraham Lincoln was not at the Constitutional Convention, but was president during the Civil War.

Improving test scores may be hurting students’ core knowledge in essential areas.

What do we do about it? Comments are open, of course.

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More carnival: “Educational technology” is not oxymoronic

December 18, 2007

Here’s a new blog carnival you may find useful: The Educational Technology Carnival. The 6th running of that particular midway is posted at Global Citizenship in a Virtual World.

Which rather reminds me that I’ve added to my list of things I want in a technological adapted classroom: Movie lighting. I’ve lost count of the number of times I’ve been in a different classroom, and discovered that when the projector goes on, the lights must come down in order to see the image — and then discovered that when the lights go down, there’s not enough light to see to take notes, or to see for anything else.

I was filling in for a teacher who uses a lot of video (“Great!” I thought). Students picked up on the problem right away. “Another sleep lab today?” they asked.

But I digress.

I have fought in four districts to get filters off on sites that discuss evolution for biology students. In one district, it was easier to put filters on the creationism sites, IT told me, than get the filters off the sites that discussed the material the students needed. I discovered my own district now blocks this blog, which makes it difficult to refer students to specific material, at least from school. (Time to change districts?) So the discussion on who filters, and why, caught my eye. I’m not sure there is a good result.

This edition of the carnival also points to Rebecca Wallace-Segall’s Wall Street Journal opposite-editorial page piece on student competition in intellectual areas, a hot topic for me right now as I contemplate the Federal Reserve Board’s competition for economics students, the Fed Challenge.

So as you ponder why your school doesn’t give you lighting to view your projected material, why you don’t have adequate audio reproduction, where are you going to get a projector to show the PowerPoint presentation during 4th block, why can’t anyone make a non-boring, really dynamic PowerPoint, and whether your computer lab kids are downloading racy music videos to spike your bandwidth clogging problems, think that on your lunch hour you can take a look at blog carnival that at least empathizes — if it’s not blocked in your school.


The Story of Stuff

December 15, 2007

How many different lesson plans can you get from this video? How about from this video with the add-ons?

Vodpod videos no longer available. from www.willbrehm.com

posted with vodpod
You can see a higher quality version at Will Brehm’s “Story of Stuff” website.

The site offers a lot. E-mail updates on issues, cheap DVDs of the movie ($10.00 each for the first 10, $9.00 each for the next 10 . . . you may want to get a copy for each social studies classroom), background stories to the movie, story of Annie Leonard, background sheets, lists of organizations working on the issues and reading lists and more. I found no lesson plans, but you can surely cobble one together for an hour class, with 20 minutes taken up by the film. Plus you can download the movie, for free.

Go noodle around the site: There are lots of possibilities for student projects, student discussions, in-class exercises, homework, and fun.

This movie details, quickly and with good humor, the economics of recycling, the economics of waste disposal, and the economics of production. This provides a great gateway to talk about civics and government, and how to make things happen like garbage collection and recycling; a gateway to talk about economics, especially the various flows of money and goods; a gateway to talk about geography and how we have used our land and rivers to bury and carry waste; and how we use natural resources generally.

This would also be a good video for Boy Scout merit badge classes for the Citizenship in the Community and Citizenship in the Nation badges.

Contrasted with most of the industrial grade video I’ve seen for economics classes, this is fantastic. It’s better than any of the sometimes ambitious, but ultimately dull productions from the Federal Reserve Banks (are you listening, Richard Fisher? Hire Will Brehm’s group). (No offense, Osgood — yours is the best of that lot.)

Sen. Tom Coburn, R-Okla., probably has political objections to the movie, claiming it leans left, which indicates it’s in the mainstream. If you’re using any other supplemental material in your classes, this just balances it out.

Screen capture from the film, “Story of Stuff”

Why landlords don’t go green

December 2, 2007

I always have trouble explaining the value of environmentally-sound policies in non-AP economics. Especially as presented in the texts, environmentalism looks like an externally imposed cost. The possibility that conserving resources might also conserve money — or make money, as one corporation I advised did — doesn’t jump out of the supply-demand equations.

So I admire anyone who can explain these issues in serious economic terms.

Common Tragedies explains why landlords and tenants miss great opportunities to save money, in explaining why a third party sees an business opportunity in getting office and warehouse landlords to make their buildings greener. Basically, it is an asymmetry of information, or lack of information on the part of the owners and lessees.

Market failures:

The first paragraph indicates that there is a knowledge problem, or asymmetric information: building owners don’t have the same specialized knowledge that the energy auditors presumably do.

The second paragraph makes it sound like building owners don’t have as ready access to capital as the investors. Although it isn’t clear from the article whether this is the case here, many times in building management the use of energy is troubled by principal-agent problems. A classic example is a landlord and tenant: the landlord has access to capital but lacks a day-to-day incentive to save energy, while the tenant would like to save energy but lacks a long-term incentive to make capital investments to do so.

Common Tragedies looks like a good source for real-world examples of economic problems. Don’t miss the “Friday Beer Post,” ripe with warm-up exercise possiblities all it’s own ( “Assume 40 million U.S. families keep a second fridge in the garage . . .”)

( “Common Tragedies” is a play on the title of Garrett Hardin’s 1968 essay, “Tragedy of the Commons,” I suppose?)


Diogenes, call your office: Honest man returns $2 million

November 25, 2007

Over 100 million boys in the U.S. have repeated the Scout Law, “Trustworthy, Loyal, Helpful, Friendly, Courteous, Kind, Obedient, Cheerful, Thrifty, Brave, Clean, Reverent.”

Jerry Mika of Draper, Utah, lives it.

Jerry Mika, of Draper Utah, with $2 million check sent to him in error - Jeremy Harmon photo, SL Tribune

Mika returned a check for $2,245,342 that the State of Utah had sent him in error (see the Associated Press story in the Provo Daily Herald — photo, above, by Jeremy Harmon, Salt Lake Tribune).

Mika returned the check — a mistake that occurred when an employee entered a serial number, not an amount — to state finance offices Wednesday.

“Clearly we have an honest, honest citizen. I wish I could do something more than say thanks,” commerce department director Francine Giani said.

Can’t Utah grant him a kingdom — half of Millard County or something? A little duchy in Fillmore, Utah?

Mika, who runs the nonprofit Providence Foundation to help Nepalese sherpas, said he’s had great fun showing off the state’s mistake.

“Everybody looked at it, started giggling and asked why I wasn’t already in Switzerland,” he said.

He admits to being tempted to deposit the money and draw a bit interest before the state asked for its return.

“That money would have gone a long way,” he said.

When a company comptroller complained to me once that the $4 million in refunds to our company would mess up his quarterly bookkeeping because he expected the money in the next quarter, I volunteered to park the money in an account for him. He quickly came to his senses. At low, passbook interest rates, the $4 million would have paid $141/hour, 24 hours a day — more than $3,300 a day. A few weeks of that and you’re talkin’ big money.

Because the check was state-issued, cashing it would probably have been easy, despite the large amount, Giani said.

“It was a valid check,” said Rick Beckstead, the state accounting operation manager whose signature is stamped on the check.

How honest are you, Dear Reader? How much of a temptation would it have been to cash that check? (I’ll wager this man is a former Boy Scout; how much does that account for his actions?)

Perhaps you could reward Mr. Mika’s honesty with a contribution to the foundation he operates, The Providence Foundation.

Teachers: Can you see how to make this into a bell-ringer, warm-up exercise?

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Worried about plagiarism? You don’t know the half of it

November 24, 2007

 

Larry Lessig, speaking at TED, makes the case for kids who use stuff borrowed from others in their classroom presentations.

First, this speech should open your eyes to the danger of our only preaching against plagiarism to kids who borrow copyrighted stuff off the internet (see especially the last two minutes of his almost-19 minute presentation). What’s the alternative, you ask? See what Prof. Lessig says. What are the alternatives?

Second, Lessig shows how to use slides in a live presentation, to significantly increase the content delivered and the effectiveness of the delivery.

Wow.

Tip of the old scrub brush to Presentation Zen. Go there now and read Garr Reynolds’ take on Lessig’s presentation.

Who is Larry Lessig? You don’t know TED? See below the fold.

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“Evening at the Fed” Dallas registration deadline Nov. 22

November 21, 2007

Dallas-area economics, government and history teachers need to watch the deadline to register for the Dallas Federal Reserve Bank’s “Evening at the Fed,” scheduled for November 29, 2007.

Deadline to register is November 22.

Good dinner, continuing education credits (professional development), a few good ideas for your classroom. See my previous post, here.


Econ teachers: Have you registered?

November 7, 2007

Have you Texas, New Mexico and Louisiana economics teachers registered for Evening at the Fed?

Evening at the Fed
Dinner and Discussion for High School Teachers
Dallas, November 29, 2007
Houston, December 4, 2007
San Antonio, December 11, 2007
El Paso, December 13, 2007

Financial Markets: Innovations and Challenges

The 2007 Evening at the Fed series will feature Jeffery Gunther, assistant vice president and senior economist in the Dallas Fed’s Financial Industry Studies Department. Gunther will speak on factors leading up to the recent financial market turmoil, in particular the role of nontraditional financial instruments. He will address such questions as:

  • Are financial innovations, such as hedge funds, forever changing the financial landscape?
  • What happened in the U.S. sub prime real estate market?
  • What does the consumer need to understand about nontraditional financial instruments?
  • What impact do these new financial instruments have on the US economy?

Join us at a location convenient for you. The fee to attend is $15, which includes dinner and materials. Space is limited and the registration fee must be received by the cut-off date.

This would probably be a good session for government and U.S. history teachers, too.

Registration details after the fold.

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Accuracy in quoting: Hotheads after Kennedy again

November 5, 2007

Historian David Kennedy of Stanford University attracts flack almost everywhere he writes, these days, and for the life of me, I can’t figure out why.

A couple of years ago the neocons were angry at him for saying that America’s people are generally unconnected to America’s soldiers in Iraq, and that’s bad for policy. But a few months later when others noted exactly the same thing and issued the same call Kennedy issued to support troops, neocon pundits were quick to praise the idea they’d claimed was destructive a few weeks earlier.

Kennedy wrote a review of economist Paul Krugman’s Conscience of a Liberal, for the New York Times. It’s arcane, sure, but economist Brad DeLong at UCLA takes Kennedy to task for not understanding laissez faire economics well enough.

Academic disputes are so bitter because the stakes are so small, still.


NY Times backs overhaul of mining law

October 26, 2007

Congress seriously considers changes in mining laws in the U.S. — the General Mining Act of 1872 is 135 years old with no serious changes since its passage. President Ulysses S Grant signed the law.

The law affected much of the development of the U.S. west of the Mississippi River, but this issue is generally ignored. The New York Times editorial page endorses the change process in an editorial today.

Originally enacted to encourage economic development in the West, the law gives precedence above all other land uses to mining for hard-rock minerals like gold, uranium and copper. It requires no royalties from companies that mine on public lands and contains no environmental safeguards. It has left a sad legacy of abandoned mines, poisoned streams and damaged landscapes throughout the West.

Now, at last, there is real hope for reform. Representative Nick Rahall, a West Virginia Democrat who has been trying to modernize this law for two decades, has persuaded the Natural Resources Committee to approve a major rewrite.

The law is a major study in economics, government intervention and free markets. It would make a good topic for warm-ups or government intervention lesson plans in high school economics classes.


Lot of damage, not much benefit: The truth about Utah vouchers

October 22, 2007

Editorials in two of Utah’s second-tier daily newspapers spell out exactly why the Utah voucher proposal submitted to voters is a bad one. The Provo Daily Herald urges voters to study the voucher proposal, and then vote for it. The Logan Herald-Journal discusses a key problem for Cache Valley parents and educators, in aging buildings that are often older than the grandparents of the students, but which will cost a fortune to replace.

The Utah voucher plan is only half-vampire (blood sucking, that is; or money sucking), leaving with the public schools some of the money allocated for students who choose to leave — at least for five years. In that one regard, the Utah proposal stands a head above other voucher plans offered in the U.S.

That is not enough to make it a good proposal, however. Why?

Here are “givens” for this article, the basic set of facts we have to work from.

1. Crowding is a key problem for Utah schools. Statewide, public schools average 30 pupils per class. That’s above national norms, and twice the concentration of students that studies show make for the most effective classrooms (15 students). (A new study from the Utah Taxpayers Association, a usually credible source, shows Utah’s public school student population growing from today’s almost 550,000, to about 750,000 by 2022 — requiring more than $6 billion in new construction costs.)

2. Partly because of large families in Utah, per pupil spending ranks near the lowest in the U.S. The usual figure used in the voucher discussions in Utah is $7,500 per student per year, but I can find no source that corroborates that figure. The actual number is probably closer to $5,000 per student, but may be lower. Legislative analysts based their scrutiny of the proposal on the $7,500 figure, and for discussion purposes, that’s good enough. It won’t make any difference in the outcome. (A reader in comments on another post says the $7,500 figure comes from the Park City School District, the state’s richest — it may be high by as much as 40% for the state. Can that citation be accurate?)

3. Utah’s schools perform well above where they should be expected to perform, on the basis of number of teachers, teacher pay, and student populations. Despite crowding and shortage of money, three Utah middle schools were named among the nation’s 129 best last month. Utah students score respectably on nationally-normed tests. A high percentage of Utah students go to college. Utah parents deserve a great deal of the credit for this performance boost. Utah has for years had higher than average educational attainment. With several outstanding colleges and universities in a small state, many Utah parents have a degree or two, and they buy books, and that achievement and the drive to get education rub off on their children.

4. These problems should get worse without drastic action. Utah family size may decrease slightly, but immigration from other states adds to pupil population increases. Utah’s economy is not so outstanding that it can easily absorb significantly higher taxes to pay for schools. (See the Utah Taxpayers Association study, again.)

Those are the givens. Advocates of the voucher plan, notably people like Richard Eyre, who made a fortune investing in Kentucky Fried Chicken, and has since invested much of his time in dabblings in public policy, argue several benefits to the voucher plan:

A. Not much damage to public schools by taking money away. In fact, they argue, during the first five years, for each student who leaves a public school with a voucher, the school will keep at least $4,000 (this figure would apply only to the richest districts, if the baseline number comes from Park City as my commenter suggested). This $4,000 would be spread among the other 29 students remaining, effectively, leaving just under $140 additional money per student in the average classroom. (There are problems with this calculation, of course).

B. Public school classroom size will shrink, to the benefit of the remaining kids.

C. Public school spending can hold steady when schools fire the teachers who lose students (I assume this is a misstatement from the Eyres’ video — that instead, some savings might result from dismissal of low-performing teachers in schools where a significant portion of students leave).

D. Magically, competition will create better education.

Below the fold, I’ll tell you why the benefits will not obtain, and point out some of the dangers of pushing the whole education system over a cliff that are inherent in this scheme.

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The curve of binding history

October 16, 2007

From this lead paragraph in a BusinessWeek story could come a heck of a semester of high school economics:

Leonid Hurwicz was born in Moscow in 1917, the year that Vladimir Lenin led the Bolshevik seizure of power in Russia. Ninety years later—on Oct. 15, 2007—Hurwicz was awarded a Nobel prize in economics, in part for explaining the fundamental flaw in the central planning that Lenin imposed in the Soviet Union.


1872 Mining Act – Amend it now?

September 20, 2007

Sherffius cartoon on Bush administration mining regulations

Few people know about the law. Since 1872, mineral extraction from the public lands of the United States has been governed by a law designed to make it easy for miners to get minerals out. The law is essentially unchanged, though some mining operations are now bound by other laws to protect the environment and other uses of public lands, such as grazing, tourism, scientific study, wood production, grazing, wildlife management and hunting.

The Senate Committee on Energy and Natural Resources opens hearings on reforming the law next Thursday, September 27. The hearing will be webcast, most likely.

The House of Representatives has already had a couple of field hearings.

Watch your claims!

Resources: