Philip Greenspun’s Weblog

Part of The Smartest Kids in the World: And How They Got That Way by Amanda Ripley concerns big changes to the Polish schools.

And there he was, in Poland at last. Everything was more or less going according to his plan. The thing is: When Tom walked to the front of that classroom in Poland that day, he was carrying an American burden no one could see. Despite his Yo La Tengo T-shirt and his winter of Chekhov, Tom was in at least one way a prototypical American teenager. Tom was not good at math. He’d started to lose his way in middle school, as so many American kids did. It had happened gradually; first he hadn’t understood one lesson, and then another and another. He was too embarrassed to ask for help. He hadn’t wanted to admit that he wasn’t as smart as other kids. Then he’d gotten a zero on a pre-algebra quiz in eighth grade. In other classes, a bad grade could be overcome. But, in math, each lesson built on what happened before. No matter how hard he tried, he couldn’t seem to catch up. It felt like he was getting dumber, and it was humiliating. The next year, he got an F in math.

Note that this reminds me of the frustration expressed by a friend who quit a wonderfully well-paid job as a public school teacher to become a flight instructor and then commercial pilot of a $5 million aircraft (total compensation about half of a senior schoolteacher’s). He said that classes should be organized like a Latin American Spanish-language school for gringos in which people took a placement test every month and might move ahead or behind so as to ensure that they were always in an appropriate level.

Is this guy Tom from the lavishly funded Gettysburg, Pennsylvania high school an exception?

America’s math handicap afflicted even its most privileged kids, who were more privileged than the most advantaged kids in most other countries, including Poland. Our richest kids attended some of the most well-funded, high-tech schools in the world. Yet these kids, including the ones who went to private school, still ranked eighteenth in math compared to the richest kids in other countries. They scored lower than affluent kids in Slovenia and Hungary and tied with the most privileged kids in Portugal.

Our poorest kids did even worse, relatively speaking, coming in twenty-seventh compared to the poorest kids in other developed countries, far below the most disadvantaged kids in Estonia, Finland, Korea, Canada, and Poland, among many other nations.

How does math class work in Poland?

Back in America, Tom and all his classmates had used calculators. In his Polish math class, calculators were not allowed.

In Poland, the lowest grade was always one, and the highest was five. After each test, he waited to see if anyone would get a five; no one ever did. No one seemed surprised or shattered, either. They shouldered their book bags and moved on to the next class. Kids in Poland were used to failing, it seemed. The logic made sense. If the work was hard, routine failure was the only way to learn. “Success,” as Winston Churchill once said, “is going from failure to failure without losing your enthusiasm.”

There were no sports at Tom’s school in Poland. Sports simply did not figure into the school day; why would they? Plenty of kids played pick-up soccer or basketball games on their own after school, but there was no confusion about what school was for—or what mattered to kids’ life chances.

Did Poland have a deep tradition of pedagogical excellence? A Danish-style harmonious society with low poverty?

The defenders of America’s mediocre education system, the ones who blamed poverty and dysfunction for our problems, talked as if America had a monopoly on trouble. Perhaps they had never been to Poland. It is difficult to summarize the tumult that occurred in Poland in the space of a half century. After the fall of communism in 1989, hyperinflation took hold; grocery store shelves were empty, and mothers could not find milk for their children. The country seemed on the verge of chaos, if not civil war. Yet Poland tumbled through yet another transformation, throwing open its institutions to emerge as a free-market democracy. The citizens of Wrocław renamed their streets for a third time.

By 2010, when Tom arrived from Gettysburg, Pennsylvania, Poland had joined the European Union. The country still struggled with deprivation, crime, and pathology of all kinds, however. While Tom was there, the local soccer teams started playing in empty stadiums, silent but for the sounds of their feet kicking the ball. There’d been so much violence among the fans that they’d been banned from their own teams’ games. Nearly one in six Polish children lived in poverty, a rate approaching that of the United States, where one in five kids are poor. It is hard to compare relative levels of sadness, but the data suggested that poor children in Poland led jagged lives. In a United Nations comparison of children’s material well-being, Poland ranked dead last in the developed world. Like the United States, Poland was a big country where people distrusted the centralized government. Yet something remarkable had happened in Poland. It had managed to do what other countries could not. From 2000 to 2006, the average reading score of Polish fifteen-year-olds shot up twenty-nine points on the PISA exam. It was as if Polish kids had somehow packed almost three-quarters of a school year of extra learning into their brains. In less than a decade, they had gone from below average for the developed world to above. Over the same period, U.S. scores had remained flat.

Poland still had not joined the top tier of education superpowers. But, unlike the United States, it had dramatically improved its results in just a few years—despite crime, poverty, and a thousand good reasons for why it should fail.

Just a few weeks before, a friend of Tom’s had been mugged at knifepoint there, in broad daylight, as he’d walked home from the school. The Triangle kids did not have easy lives. Some had fathers in prison; others had mothers who drank too much vodka. On some days, kids came to school tired and hungry. To an outsider, it didn’t look all that different from an American ghetto.

So how have they done so well?

In 1997, when Mirosław Handke became Poland’s minister of education, he was an outsider. A chemist with a white mustache and dramatic, black-slash eyebrows, he looked like an Eastern Bloc version of Sean Connery. Handke was accomplished in his own world at AGH University of Science and Technology in Kraków. He’d published more than eighty papers on the obscure properties of minerals and become the head of the university, one of Poland’s best. However, he knew next to nothing about education policy or politics. His cluelessness would serve him well, at least for a little while.

In the spring of 1998, he and his boss, the new prime minister, Jerzy Buzek (another chemistry professor), announced a series of reforms the likes of which they might never have contemplated if they’d had more experience with the political sensitivities of education. “We have to move the entire system—push it out of its equilibrium so that it will achieve a new equilibrium,” Handke said. He was still teaching chemistry, this time to thirty-eight million people. To get to the new equilibrium, the country would enter what scientists called a transition phase. This phase would, as Handke put it, “give students a chance.” It had four main parts, laid out in a 225-page orange book that was distributed to schools all over the country. First, the reforms would inject rigor into the system. A new core curriculum would replace the old, dumbed-down mandates that had forced teachers to cover too many topics too briefly. The new program would lay out fundamental goals, but leave the details to the schools. At the same time, the government would require a quarter of teachers to go back to school to improve their own education.

Along with rigor came accountability. To make sure students were learning, they would start taking standardized tests at regular intervals throughout their schooling—not as often as American kids, but at the end of elementary, junior high, and high school.

For younger kids, the tests would help identify which students—and teachers and schools—needed more help. For older students, the tests would also have consequences, determining which high schools and then universities they could attend.

The Poles couldn’t know it yet, but this kind of targeted standardized testing would prove to be critical in any country with significant poverty, according to a PISA analysis that would come out years later. Around the world, school systems that used regular standardized tests tended to be fairer places, with smaller gaps between what rich and poor kids knew. Even in the United States, where tests have historically lacked rigor and purpose, African-American and Hispanic students’ reading and math scores have gone up during the era of widespread standardized testing.

autonomy was the fourth reform. Teachers would be free to choose their own textbooks and their own specific curriculum from over one hundred approved options, along with their own professional development. They would start earning bonuses based in part on how much professional development they did. In a booming country where people were judged by how much money they made, the cash infusion would telegraph to everyone that teachers were no longer menial laborers. The principal, meanwhile, would have full responsibility for hiring teachers.

the new system would demand more accountability for results, while granting more autonomy for methods. That dynamic could be found in all countries that had dramatically improved their results, including Finland and, for that matter, in every high-performing organization, from the U.S. Coast Guard to Apple Inc. All this change would happen, Handke declared, in one year.

Did the people who’d been getting paychecks from the old system welcome the change?

the Union of Polish Teachers came out against the reforms, accusing Handke of trying to change too much too quickly with too little funding. In another article in the same newspaper, one principal prophesied disaster: “We can look forward to a deterioration in the standard of education for most young people, a deepening of illiteracy and a widespread reluctance to pursue further education.”

And the results?

in 2000, Polish fifteen-year-olds took the PISA. No one realized it then, but the timing was perfect. PISA captured, entirely by coincidence, a snapshot of Poland before and after the reforms. The Polish kids who took the first PISA in 2000 had grown up under the old system. Half had already been tracked to vocational schools, half to academic schools. They were the control group, so to speak. No one in Poland had expected to lead the world, but the results were disheartening all the same. Polish fifteen-year-olds ranked twenty-first in reading and twentieth in math, below the United States and below average for the developed world. Once again, Poland had found itself on the outside looking in. If the vocational students were evaluated separately, the inequities were startling. Over two-thirds scored in the rock-bottom lowest literacy level.

Three years later, in 2003, a new group of Polish fifteen-year-olds took PISA. They had spent their elementary years in the old system but were by then attending the new gymnasia schools. Unlike their predecessors, they had not yet been tracked. They were the experimental group. The results were shocking—again. Poland, the punch line for so many jokes around the world, ranked thirteenth in reading and eighteenth in math, just above the United States in both subjects. In the space of three years, Poland had caught up with the developed world. How could this be? Typically, it takes many years for reforms to have any impact, and most never do. But the results held. By 2009, Poland was

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Part of The Smartest Kids in the World: And How They Got That Way concerns American schools. Unfortunately it is mostly to contrast them with effective schools elsewhere.

Amanda Ripley identifies the following major problems with American schools:

• people who are poorly educated are hired as schoolteachers
• teachers have limited autonomy (partly as a result of their low level of knowledge and ability)
• schools have multiple missions, only one of which is education, which leads to a loss of focus
• teachers and administrators dwell on student and family backgrounds so as to build up a catalog of excuses for poor educational outcomes
• parents are complacent regarding the low expectations set for their children

Here are some excerpts from this interesting book:

Scott Farmer had just been appointed the town’s first new superintendent in twenty years. He had short brown hair and a boyish face. The state of Oklahoma had 530 superintendents like him, each with their own fiefdom. There were about as many superintendents in Oklahoma as there were members of Congress for the entire country.

This tradition of hyperlocal control, hard-wired for inefficiency, hinted at one reason that the United States spent so much more than other countries on education. Farmer made about $100,000 per year, which made him one of the top earners in Sallisaw. He had an assistant superintendent, too, along with eight director-level managers and a school board. It was quite an operation for a district that included just four schools. But it was hardly unusual. Compared to the rest of the state, in fact, Sallisaw was one of the more efficient school districts in Oklahoma.

That, too, was a common refrain among educators all over the United States. Whatever the problem, it was, it seemed, largely outside their control.

Sallisaw had plenty of good students, too. Other than the destitute and the dropouts, Sallisaw High School had its success stories, like every town. About half the kids who graduated from Sallisaw enrolled in public colleges and universities in Oklahoma. Others went to out-of-state colleges or looked for jobs. What happened to these success stories after they left? Their colleges tested their basic skills and found them wanting. More than half these students were promptly placed into remedial classes at Oklahoma public colleges. That meant that some of Sallisaw’s best students were paying good money for college, often in the form of student loans, but they weren’t getting college credit.

I asked Principal Martens about all the Sallisaw alumni who were retaking math or English. “That really doesn’t bother me,” he said, “because at least they are trying.” The main goal was to go to college. Whether his graduates succeeded there was out of his control, or so it seemed. The fact that those kids had spent four years in his school preparing to get to college—and that he’d given them a diploma that was supposed to mean they were ready—did not seem relevant.

American teachers taught with textbooks that were written to appease thousands of districts and many states all at once, as education researcher William Schmidt has documented in detail. That meant that American textbooks tended to be far too long—covering (and repeating) way too many topics in too little depth. Internationally, the average eighth grade math textbook was 225 pages long; in the United States, eighth grade math texts averaged 800 pages. That was about 300 pages longer than all thirteen volumes of Euclid’s Elements.

The end result was that American students ended up learning about, say, fractions every single year, from first to eighth grade, while their peers in smarter countries covered fractions in grades three through six.

By eighth grade, seven out of ten kids went to schools that did not even offer algebra courses with the kind of content that was standard in most other countries. It was only logical that American kids were behind their peers in the smart-kid countries; they were essentially taking remedial math, whether they needed it or not.

Aside from the high cash compensation, three months of summer vacation, and secure pension, what motivates Americans to work in an environment where failure is almost guaranteed?

… consider Kim’s math teacher back home, Scott Bethel. He’d decided to become a teacher mostly so that he could become a football coach. In America, this made sense. As a student at Sallisaw High School, he was an all-state quarterback in 1989. “My dad taught at a school about ten miles from here,” Bethel told me. “He was also a football coach, and I was always good at sports, and I thought, ‘You know what, I’d like to become a coach.’ ”

If you too wanted to be a high school sports coach/math teacher, what would you have to do?

Although Bethel hadn’t taken calculus in high school, he’d always been pretty good at math. So, he figured the best way to become a coach was to become a math teacher. Bethel was one of several coaches that Kim had as teachers over the years, a hybrid job that would be considered bizarre in Finland and many countries, where sports lay beyond the central mission of schools. In Oklahoma alone, Bethel could choose from nearly two dozen teacher-training programs—almost three times as many as in all of Finland, a much bigger place. Oklahoma, like most states, educated far more teachers than it needed. At most U.S. colleges, education was known as one of the easiest majors. Education departments usually welcomed almost anyone who claimed to like children. Once students got there, they were rewarded with high grades and relatively easy work. Instead of taking the more rigorous mathematics classes offered to other students, for example, education majors tended to take special math classes designed for students who did not like math. Bethel did his training at Northeastern State University, like the Sallisaw superintendent and many Oklahoma teachers, including Kim’s mom. The university prepares more teachers than any other institution in the state and has a good reputation. However, it also has a 75 percent acceptance rate, which means that it admits, on average, students with much weaker math, reading, and science skills than Finnish education schools.

During his sophomore year at Northeastern State University, Bethel had applied to the university’s education college. Here was another chance for the university to select its best and brightest to become teachers. But to be admitted, Bethel had to have a grade-point average of just 2.5 or higher (out of 4). He would have needed a higher GPA to become an optometrist at the same university today. To be a teacher, he also had to have at least a C grade in freshman English and a C in speech or a class called the fundamentals of oral communication. He also needed a score of 19 or higher on the ACT, a standardized test like the SAT. The national average for the ACT back then was 20.6. Let’s consider what this meant: It was acceptable to perform below average for the country on a test of what you had learned throughout your educational career if you aspired to dedicate your career to education.

At the education college, Bethel discovered that he didn’t have to major in math to become a high-school math teacher. So he didn’t. Nationwide, less than half of American high-school math teachers majored in math. Almost a third did not even minor in math.

Bethel liked math, but his primary goal was to become a coach, so he majored in physical education and minored in math. When he took the required test for high school math teachers in Oklahoma, he passed easily. Most of the material was at a tenth or eleventh grade level, and he didn’t find it difficult. However, if he had, he would have been allowed to retake the test until he passed.

When researchers tested thousands of aspiring teachers in sixteen countries, they found that future middle-school math teachers in the United States knew about as much math as their peers in Thailand and Oman. They had nowhere near the math competence of teachers-in-training in Taiwan, Singapore, or Poland.

Maybe American teachers get more practical training to compensate for their weak college experience?

In Oklahoma, Bethel’s student teaching experience helped him learn to plan lessons and manage a classroom. But it lasted just twelve weeks, compared to the year-long residency typical in Finland. Nationwide, U.S. teacher-training colleges only require an average of twelve to fifteen weeks of student teaching,

Has any state ever tried to “pull a Finland” and restrict teacher education and hiring to those who were reasonably good students?

Why hadn’t that evolution ever happened in the United States—or in most other countries? Had anyone even tried? The examples were few but revealing. As the new education commissioner in Rhode Island, one of Deborah Gist’s first acts was to raise the minimum test scores for teachers-to-be in 2009. At the time, Rhode Island allowed lower scores than almost any state in the nation. She had the power to change this unilaterally, and she did, taking one small step in the direction of Finland by requiring new teachers to score significantly higher on the SAT, ACT, and the Praxis, a teacher certification test. Immediately, critics called her elitist, lobbing the same accusations critics had used against reformers in Finland in the 1970s. Some argued that a teacher who struggled in school was actually a better teacher, because that teacher could relate to students who were failing.

Others worried that higher standards would lead to a teacher shortage. Yet Rhode Island’s teacher colleges already churned out 1,000 teachers a year, about 800 more than the school system needed to hire.

Because this was America, a diverse country with a long history of racism in colleges, public schools, and every other institution, Gist’s efforts were also attacked as discriminatory. Higher education leaders warned that the new standards would prevent minority students, who tended to score lower on tests, from becoming teachers.

It was interesting to note that higher standards were seen not as an investment in students; they were seen, first and foremost, as a threat to teachers. Rhode Island’s teacher-preparation programs produced five times more teachers than Rhode Island’s public schools actually hired each year. The only institution benefiting from this system seemed to be the colleges themselves, but college leaders still complained that they would lose too many students if the standards were higher. They voiced this concern to newspaper reporters, and reporters quoted them without irony.

Under the new, higher standards, about 85 percent of Rhode Island College’s education students would not make the cut, the dean threatened. Coming from the college that produced more Rhode Island teachers than any other, this was an astounding statistic, one that should have been a source of deep shame, but was not. Gist did not back down, however. “I have the utmost confidence that Rhode Island’s future teachers are capable of this kind of performance,” she said. She did agree to phase in the higher cut score gradually over two years and to allow colleges to ask for waivers for highly promising candidates who did not make the cut score. Three years later, she had not received any waiver requests. At Rhode Island College, the percentage of minority students studying to be teachers went from 8.8 percent to 9.24 percent, remaining essentially unchanged despite all predictions to the contrary.

What does a good American high school look like to a Finnish teenager?

Elina discovered one important difference about America. Back home, she’d been a good student. In Colon, she was exceptional. She took Algebra II, the most advanced math class offered at Colon High. On her first test, she got 105 percent. Until then, Elina had thought it was mathematically impossible to get 105 percent on anything. She thought she might have more trouble in U.S. history class, since she was not, after all, American. Luckily, her teacher gave the class a study guide that contained all the

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The New York Times has a story about how colleges might switch from admitting students based on race to admitting students based on income. But what would stop a traditional married couple from getting divorced prior to their children applying to schools? In The Smartest Kids in the World: And How They Got That Way, Amanda Ripley reported on Korean parents getting legal (but not practical) divorces in order to improve their children’s chances of admission to elite universities that had established preferences for children of single parents.

If two parents of a Harvard aspirant got a sham divorce, and only one of them had an income, the applicant could claim to be estranged from the high-earning parent and therefore be the child of a destitute family (this article says that the non-custodial parent’s income is not considered for calculating Federal and state financial aid).

A stay-at-home mother friend of mine often jokes about how if she and her husband would get legally divorced she could then obtain an array of valuable assistance from taxpayers, notably free health insurance and food (via SNAP or “food stamps”). Could the possibility of otherwise-impossible admission to the Ivy League for her children push her over the edge into implementation?

[Separately, The Smartest Kids in the World: And How They Got That Way notes that in the countries with high-performance education systems, there is only one way to get into a top college: score well on a national exam (a 50-hour essay-heavy test in Finland). Family background and wealth are not considered.]

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Biotech remains strong in Massachusetts, but we’ve faded into obscurity when it comes to software. The City of Cambridge, however, has come up with one way to level the playing field: make it illegal to be a customer of a Silicon Valley success story. Here’s a posting from Uber about how the Cambridge city government is proposing effectively to shut Uber down within Cambridge. (There is a public hearing tonight.)

California may be ahead of us in grape production, but they are sour grapes and we do not want them.

[Separately, this relates to the Piketty postings. By definition taxi medallions tend to be owned by millionaires (since one medallion costs close to $1 million and in fact most medallions are owned by people who own multiple medallions). Uber drivers are trying to catch up to these rich folks, but government regulation can prevent them from earning any kind of living in this industry (other than, perhaps, the minimum wage job of working for a taxi medallion owner).]

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I’ve written a few posts about the trees inside Thomas Piketty’s verbose tome, Capital in the Twenty-First Century:

• tax people who don’t live in France
• economics and morality
• banks are rich and they don’t get high returns automatically
• can rich people actually get richer past a certain point, or just have more dollars?
• tax and spend to halt climate change
• Piketty, Democracy, and Hugo Chavez
• sample bias leads to Piketty’s conclusion that rich people earn high returns
• better to take money from rich people than to work
• why U.S. GDP is so high
• why Europeans love Socialism
• is income inequality actually higher than 200 years ago?
• can anything be learned from the U.S. housing craze of the 2000s?

Now it is time to look at the forest.

One reason that Piketty’s book deserves attention is that it is a book, not a paper. When a field is pre-paradigmatic, The Structure of Scientific Revolutions (Kuhn) says that progress is made with books, not with journal papers. Is Economics a paradigmatic science like chemistry, biology, or physics? Due to its lack of predictive power, as evidenced by the fact that economists did not predict the Collapse of 2008 nor predict which countries would emerge from that event in the best shape, Econ is pretty plainly pre-paradigmatic (otherwise economists would be as rich as John Paulson). Piketty throws some rocks at his colleagues:

To put it bluntly, the discipline of economics has yet to get over its childish passion for mathematics and for purely theoretical and often highly ideological speculation, at the expense of historical research and collaboration with the other social sciences. Economists are all too often preoccupied with petty mathematical problems of interest only to themselves. This obsession with mathematics is an easy way of acquiring the appearance of scientificity without having to answer the far more complex questions posed by the world we live in. There is one great advantage to being an academic economist in France: here, economists are not highly respected in the academic and intellectual world or by political and financial elites. Hence they must set aside their contempt for other disciplines and their absurd claim to greater scientific legitimacy, despite the fact that they know almost nothing about anything.

Piketty reminds us continuously that much of the economic growth for which politicians take credit is simply population growth. And also that national borders are substantial barriers to efficient deployment of capital:

If the rich countries are so flush with savings and capital that there is little reason to build new housing or add new machinery (in which case economists say that the “marginal productivity of capital,” that is, the additional output due to adding one new unit of capital “at the margin,” is very low), it can be collectively efficient to invest some part of domestic savings in poorer countries abroad.

the income of Africans is roughly 5 percent less than the continent’s output (and as high as 10 percent lower in some individual countries). With capital’s share of income at about 30 percent, this means that nearly 20 percent of African capital is owned by foreigners:

According to classical economic theory, this mechanism, based on the free flow of capital and equalization of the marginal productivity of capital at the global level, should lead to convergence of rich and poor countries and an eventual reduction of inequalities through market forces and competition. This optimistic theory has two major defects, however. First, from a strictly logical point of view, the equalization mechanism does not guarantee global convergence of per capita income. At best it can give rise to convergence of per capita output, provided we assume perfect capital mobility and, even more important, total equality of skill levels and human capital across countries—no small assumption. In any case, the possible convergence of output per head does not imply convergence of income per head. After the wealthy countries have invested in their poorer neighbors, they may continue to own them indefinitely, and indeed their share of ownership may grow to massive proportions, so that the per capita national income of the wealthy countries remains permanently greater than that of the poorer countries, which must continue to pay to foreigners a substantial share of what their citizens produce (as African countries have done for decades).

if we look at the historical record, it does not appear that capital mobility has been the primary factor promoting convergence of rich and poor nations. None of the Asian countries that have moved closer to the developed countries of the West in recent years has benefited from large foreign investments, whether it be Japan, South Korea, or Taiwan and more recently China. In essence, all of these countries themselves financed the necessary investments in physical capital and, even more, in human capital, which the latest research holds to be the key to long-term growth.35 Conversely, countries owned by other countries, whether in the colonial period or in Africa today, have been less successful, most notably because they have tended to specialize in areas without much prospect of future development and because they have been subject to chronic political instability.

When a country is largely owned by foreigners, there is a recurrent and almost irrepressible social demand for expropriation. Other political actors respond that investment and development are possible only if existing property rights are unconditionally protected. The country is thus caught in an endless alternation between revolutionary governments (whose success in improving actual living conditions for their citizens is often limited) and governments dedicated to the protection of existing property owners, thereby laying the groundwork for the next revolution or coup. Inequality of capital ownership is already difficult to accept and peacefully maintain within a single national community. Internationally, it is almost impossible to sustain without a colonial type of political domination.

historical experience suggests that the principal mechanism for convergence at the international as well as the domestic level is the diffusion of knowledge. In other words, the poor catch up with the rich to the extent that they achieve the same level of technological know-how, skill, and education, not by becoming the property of the wealthy.

In other words, a rich country will continue to invest in its industries, schools, and transportation network even though a much better return on investment is available from investing in a poor country (building a new road to a growing city in Brazil should have more value than repaving an existing road in the U.S.; building high-speed rail in China at a low cost per mile is a much better investment than building high-speed rail in California).

Piketty also notes that the more capital is accumulated the lower the return on capital tends to be, in the same sense that the availability of 1 billion skilled workers in China will tend to lower wages elsewhere or the discovery of natural gas fields will tend to lower the cost of natural gas.

After explaining these factors, however, Piketty pretty much ignores them and posits that returns on capital going forward will be just as good as they have been in the past. And then adds that rich people and organizations will get an even higher return than average schmoes invested in the S&P 500 and other public equities.

Piketty has collected copious data that he says shows that wealth inequality is high right now, comparable to conditions prior to World War I. Critics have said that he is misinterpreting, misquoting, and mistranscribing the data. But let’s suppose that he is right. Piketty argues that this means we are about to enter an era of soaring wealth inequality, the likes of which the world has never seen, in which the rich run away with it all. The top 0.1 percent will taxi their Gulfstream G-650s down Main Street whenever they want to buy a quart of milk. But perhaps Piketty, like Karl Marx, will prove to be a better historian than prophet. The same data could also be interpreted as evidence that capitalism is inherently self-correcting and wealth inequality over 200 or so years has swung between limits despite radically changed circumstances, governments, and technology.

As noted in a previous posting, Piketty’s call to action/arms is based on his prediction that wealth inequality is a runaway process that will lead to a handful of people owning virtually everything on the planet within 100 or 200 years. This prediction rests on the following assumptions:

1. rich people get a better return on their investments than regular investors
2. governments will stop taxing dividend and capital gain income
3. the world economy will grow at best slowly for the next 50-100 years
4. the return on capital will be high
5. rich people won’t consume too much (which means most of their income gets plowed into additional investment)

All of these assumptions are questionable. Regression toward the mean has been one of the safest bets in finance, calling into question Assumption 1. Piketty doesn’t cite any examples of governments that have willingly given up a rich vein of tax revenue. When rates are cut it is typically by politicians seeking to increase actual collections, not in an attempt to shrink revenue. Piketty’s book came out right about the same time that the U.S. added the 3.8% Obamacare tax to investment income, roughly a 25% increase in the tax on capital-based income (depending on one’s tax bracket and whether dividends were “qualified”). Finally, the U.S. actually already has a wealth tax. It is called the capital gains tax not adjusted for inflation. For example, suppose that you bought a stock for $1 million in 2000. The market hasn’t moved much since then, so let’s say that the stock has appreciated only at the official inflation rate. Now it is worth $1.38 million. If you sell it to rebalance your portfolio, you’ll pay federal, state, and Obamacare taxes of about 30%, depending on the state where you live. That’s a $111,400 tax on a non-existent gain, i.e., an 11.4% tax on the wealth that you had in 2000. If we use an inflation rate closer to reality for rich people, instead of the government’s CPI that is based on a lifestyle of consuming Chinese-made DVD players and Costco hot dogs, the stock might have gone up to $1.6 million and the tax would be $180,000 on what is, from the perspective of someone who is buying fancy houses, restaurant meals, hotel rooms, etc., a non-existent gain. That’s an 18% wealth tax.

World economic growth in the 20th century was led by the U.S., a country with poorly educated people according to the PISA test. Since human capital is an important driver of growth, maybe the 21st century will be as strong or stronger now that countries with high PISA scores have market-oriented governments. Thus Assumption 3 may be wrong. If Piketty is right about Assumption 4, i.e., that the return on capital will remain high, he needn’t have wasted his time scribbling out a 700-page book. He could be making literally infinite money in the swap market (since the rest of the folks in finance think that the return on capital going forward will be low).

Assumption 5, that rich people won’t spend, seems questionable as I sit here at the Teterboro airport looking out at a forest of Gulfstreams. It may be hard to imagine that the owner of an Embraer Phenom 300 craves a Gulfstream G-450 or that the owner of a Gulfstream G-450 craves a Gulfstream G-650, but somebody is always buying those fancier planes. As business jets, luxury houses, luxury cars, etc., all depreciate over time, this is spending, not investment. And when rich people bid up the price of houses and/or build new mansions, they end up paying out huge property taxes. Rich people may spend money involuntarily. Most of them will try to live the middle class dream of marriage and children, but this paper by Brinig and Allen predicts that they will be targeted

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Matt Guthmiller has made it across the Atlantic in a single-engine Bonanza (tracker). Inspired by his daring, I made it to Teterboro today, flying right seat in a friend’s Embraer Phenom 100 business jet. My favorite part of the flight was measuring 76 dBA of interior noise at 220 knots indicated and 16,500′.

The ramp looks as though the 2 and 20 crowd robbed a Gulfstream store…

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Atlantic magazine carries an interesting obituary of Karen DeCrow, who was president of the National Organization for Women in the 1970s but found that she couldn’t get on board with younger people who call themselves feminists. Now that I’m in the second half-century of my life I have seen a lot of people identifying with a political movement and watching with dismay as that movement pulls away from them. The 1970s parents in my childhood neighborhood (Bethesda, Maryland) grew their hair long, placed Save the Whales bumpers stickers on their Volvos, occasionally smoked marijuana, hung rows of love beads in their homes, and even said “groovy” from time to time. They would have considered themselves “liberals” but their beliefs on social issues would today likely be more aligned with politicians whom we identify as “conservative Republicans.”

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I’ve started reading The Smartest Kids in the World: And How They Got That Way and the author follows a Midwestern exchange student to high school in Korea. Here’s what it is like…

A few minutes later, he glanced backwards at the rows of students behind him. Then he looked again, eyes wide. A third of the class was asleep. Not nodding off, but flat-out, no-apology sleeping, with their heads down on the desks. One girl actually had her head on a special pillow that slipped over her forearm. This was pre-meditated napping. How could this be? Eric had read all about the hard-working Koreans who trounced the Americans in math, reading, and science. He hadn’t read anything about shamelessly sleeping through class.

Next was science class. Once again, at least a third of the class went to sleep. It was almost farcical. How did Korean kids get those record-setting test scores if they spent so much of their time asleep in class?

Soon he discovered the purpose of the teacher’s backscratcher. It was the Korean version of wake-up call. Certain teachers would lightly tap kids on the head when they fell asleep or talked in class. The kids called it a “love stick.”

At ten past two, Eric left school early. Since he was an exchange student, he was exempt from having to experience the full force of the Korean school day. He asked one of his classmates what would happen after he left. “We keep going to school.” Eric looked at him blankly. “Until when?” “Classes end at ten after four,” he said.

Then he went on: After classes, the kids cleaned the school, mopping the floors, wiping the chalkboards, and emptying the garbage. The kids who had received demerits—for misbehaving or letting their hair grow too long—had to wear red pinnies and clean the bathrooms. Work, including the unpleasant kind, was at the center of Korean school culture, and no one was exempt. At four thirty, everyone settled back in their seats for test-prep classes, in anticipation of the college entrance exam. Then they ate dinner in the school cafeteria. After dinner came yaja, a two hour period of study loosely supervised by teachers. Most kids reviewed their notes from the day or watched online test-prep lectures, as the teachers roamed the hallways and confiscated the occasional illicit iPod. Around nine in the evening, Eric’s classmates finally left Namsan. But the school day still wasn’t over. At that point, most kids went to private tutoring academies known as hagwons. That’s where they did most of their real learning, the boy said. They took more classes there until eleven, the city’s hagwon curfew. Then—finally—they went home to sleep for a few hours before reporting back to school at eight the next morning.

Even over summer break, libraries got so crowded that kids had to get tickets to get a space. Many paid $4 to rent a small air-conditioned carrel in the city’s plentiful supply of for-profit self-study libraries. Korea’s sky-high PISA scores were mostly a function of students’ tireless efforts, Lee [an education minister] believed, not the country’s schools.

How far have they come?

the country had no history of excelling in math. In fact, the vast majority of its citizens were illiterate as recently as the 1950s. When the country began rebuilding its schools after the Korean War, the Korean language did not even have words for modern concepts in math and science. New words had to be coined before textbooks could be published. In 1960, Korea had a student-teacher ratio of fifty-nine to one. Only a third of Korean kids even went to middle school. Poverty predicted academic failure. If PISA had existed back then, the United States would have trounced Korea in every subject.

Listening to Lee, I realized that the rest of the world could learn as much from what worked in Korea as from what didn’t work. First, countries could change. That was hopeful. Korea had raised its expectations for what kids could do despite epidemic poverty and illiteracy. Korea did not wait to fix poverty before radically improving its education system, including its teacher colleges. This faith in education and people had catapulted Korea into the developed world.

What happens when it is time for college?

University admissions were based on students’ skills as measured by the test. Full stop. Nobody got accepted because he was good at sports or because his parents had gone there. It was, in a way, more meritocratic than many U.S. colleges had ever been.

It was an extreme meritocracy for children that hardened into a caste system for adults. Even when more universities opened, the public continued to fixate on the top three.

How much does it cost?

Per student, Korean taxpayers spent half as much money as American taxpayers on schools, but Korean families made up much of the difference out of their own pockets.

Are the students happy?

One Sunday morning during that school year, a teenager named Ji stabbed his mother in the neck in their home in Seoul. He did it to stop her from going to a parent-teacher conference. He was terrified that she’d find out that he’d lied about his latest test scores.

According to his test scores, Ji ranked in the top 1 percent of all high school students in the country, but, in absolute terms, he still placed four thousandth nationwide. His mother had insisted he must be number one at all costs, Ji said. When his scores had disappointed her in the past, he said, she’d beaten him and withheld food. In response to the story, many Koreans sympathized more with the living son than the dead mother. Commentators projected their own sour memories of high school onto Ji’s crime. Some went so far as to accuse the mother of inviting her own murder. A Korea Times editorial described the victim as “one of the pushy ‘tiger’ mothers who are never satisfied with their children’s school records no matter how high their scores.” As for Ji, he confessed to police immediately, weeping as he described how his mother had haunted his dreams after he’d killed her. At the trial, the prosecutor asked for a fifteen-year prison sentence. The judge, citing mitigating circumstances, sentenced the boy to three and a half years.

Is a country where every bureaucrat is good at math able to sort out bad teachers from the good ones?

To elevate the profession, Lee rolled out a new teacher evaluation scheme to give teachers useful feedback and hold them accountable for results.

Korea’s teacher evaluation scheme did not include student test-score growth; officials I talked to seemed to want to use this data, but they didn’t know how to assign accountability, since so many students had multiple teachers, including outside tutors, instructing them in the same subjects.) Under Korea’s new rules, low-scoring teachers were supposed to be retrained. But, as in U.S. districts where reformers have tried imposing similar strategies, teachers and their unions fought back, calling the evaluations degrading and unfair. Pretty policies on paper turned toxic in practice. As a form of protest, some Korean teachers gave all their peers the highest possible reviews. In 2011, less than 1 percent of Korea’s teachers were actually sent for retraining, and some simply refused to go.

What does the author think that we can learn from this system?

As Eric [the exchange student from Minnesota] had noticed on his first day, Korean schools existed for one and only one purpose: so that children could master complex academic material. It was an obvious difference. U.S. schools, by contrast, were about many things, only one of which was learning. This lack of focus made it easy to lose sight of what mattered most.

it was clear that the real innovation in Korea was not happening in the government or the public schools. It was happening in Korea’s shadow education system—the multimillion-dollar afterschool tutoring complex that Lee was trying to undermine.

More: read the book.

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Four thumbs down from our group this evening at Smart People, a play put on by the Huntington Theater. The play has two black characters, an Asian-American woman who is a Harvard professor, and a white guy. Our little group included an Asian-American woman who is a Harvard professor and yet the situations did not seem credible or interesting. Some of the dialog was good and the actors did complete justice to the script, but the idea that putting white, black, and Asian people together in the same country immediately leads to compelling tensions is questionable.

Much of the play concerns Barack Obama’s 2008 election. Yet it is unclear that Barack Obama’s racial background plays a part in what he is doing day to day any more than King Bush II’s racial background did. The name “Obama” appears four times on the New York Times front page right now. Once is an article about “the Obama administration” denying a request for military assistance from the Iraqi Prime Minister. Was it denied because of Obama’s race? The article does not say that it was. Occurrence #2 is in an article about a woman whom the Times identifies as “African-American” and works as a Broadway usher who went to her workplace to see Obama attend a play despite the fact that she was not scheduled to work that day. She was fired. It was the Times reporter who chose to assign a racial identity to the usher, however. It wasn’t part of the event per se. The third mention is a 2:46 video about “Obama’s Cold War”. The reporter says that “Obama fits the mold of Republican Cold War Presidents” and doesn’t mention the race of any of these people or explain how race might have been a factor. The last mention on the front page concerns Obama trying to get money from 50 rich people in Weston, Massachusetts. There is no mention in the article of anyone’s race. Would Obama have done something different with these 50 rich people if his racial background had been different?

If nothing else, Smart People proves that talking about race does not make the conversation profound or even worth having.

[Separately, we enjoyed our dinner at Stephi’s on Tremont beforehand.]

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Last week Isaac Jordan of Boch Honda delivered a 2014 Odyssey to my front door in Cambridge. Given the number of systems in the vehicle it impresses me that everything seems to work perfectly (i.e., as designed), including the software.

It was going to cost about $2000 extra to have a GPS, so I figured out that a RAM mount placed on the shelf underneath the factory nav screen (you get the expensive screen even if you don’t pay $2000 for the $15 GPS chip and database) works well.

The one thing that doesn’t work is integrating a Samsung Note 3 mobile phone with the car, but I don’t think Honda could have anticipated that Google Contacts/Samsung Contacts would broadcast a “contact” that is just an email address (of a person to whose email I might have replied 6 years ago, for example). Consequently there are literally tens of thousands of “contacts” stored in the car now, most of which do not have any associated phone number. The voice recognition doesn’t work because the Honda engineers didn’t anticipate that a driver would be speaking one of potentially tens of thousands of contacts. It should work fine with an iPhone, though.

But mostly I am posting this to thank the manufacturing engineers who worked out how to deliver a perfect product. Why can’t we software engineers do as well?

[I do recommend Boch Honda and Isaac Jordan, by the way. The price was lower than at other dealers and it was a reasonably no-nonsense transaction.]

Related: my review of the 2011 Odyssey. (The things that were bad about the Odyssey in 2011 are mostly still bad. They did add an RFID key system. The car still isn’t smart enough to protect children left indoors on hot days. It is still noisier on the highway than a normal sedan. The crazy expensive entertainment system for the kids has about one quarter the resolution of the phone in your pocket (800×480!). Will it play Blu-Ray? No. The car desperately needs iPad/Android tablet docks.)

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