Prop. 8 and Crossing the Rubicon.

In the Prop. 8 arguments on Tuesday, Justice Kennedy focused on the fact that there are 40,000 adopted children of same sex couples in California. It was perhaps the most poignant moment in the whole oral argument (I bothered to listen):

"On the other hand, there is an immediate legal injury or legal — what could be a legal injury, and that's the voice of these children. There are some 40,000 children in California ... that live with same-sex parents, and they want their parents to have full recognition and full status. The voice of those children is important in this case, don't you think?"

I don't think that Justice Kennedy was asking a question here. Justice Scalia followed up with an oblique history reference:

"I mean, we granted cert. I mean, that's essentially asking, you know, why did we grant cert. We should let it percolate for another — you know, we — we have crossed that river, I think."

The allusion to Caesar crossing the Rubicon was appreciated by the historian in me.  The phrase originates with Julius Caesar's seizure of power in the Roman Republic in 49 BC. Roman generals were strictly forbidden to bring their troops into the home territory of the Republic in Italy. On 10 January, Caesar led his army across the Rubicon River, crossing from the province of Cisalpine Gaul into Italy. After this, if he did not triumph, he would be executed -- it was a point of no return.

I think that Justice Scalia (and probably Justice Kennedy) are aware that society has reached a point of no return when the families of 40,000 children are at issue.  The court needs to do something, one way or another. I continue to think there's going to be a decision on the merits.

The Plutonium Standard.

Free Exchange, one of the Economist's bloggers, speculates today on the value of the U.S. Government as a venture capitalist, and comes down in favor, with significant caveats.  The one that grabbed my interest was:

"... it might make sense for America's government to ... support innovation while also being a very bad idea for [nations like] Belgium or ... Mexico. Why? Well the "extraordinary privilege/burden" afforded America by its control of the world's favourite currency and safe asset means that the dollar is always going to be a bit too strong and foreigners are always going to be lending American money a bit too cheaply. That status places American exporters at a slight disadvantage (except in knowledge industries where trade costs are negligible) and means that in the absence of government borrowing cheap loans may flow to less productive investments in stuff like empty exurban homes. It makes sense, then, for America to plow a lot of money into research activities that may boost long-run growth, helping to keep it attractive as controller of the currency/safe-asset of first resort."

This is a less perceptive point than it first appears to be -- the salutary effects of national debt are many, as Alexander Hamilton argued.  Rather than liquidate the national debt, Hamilton recommended bonds be issued and repaid to promote their exchange as legal tender, equivalent in value to hard currency, which allowed the government to increase the money supply and stimulate investment, which in turn increased revenue. Alexander Hamilton didn't argue that such government borrowing can also reduce speculative or inflationary economic activity through upward pressure on interest rates, which is what this blogger's arguing for here. The unstated assumption is that the government allocation of capital might be more efficient at the margin than privately directed investment, a point one or two people might argue with.

But the columnist does finish well, at least analytically speaking:

...  the unique role of America's military as chief guarantor of the public good that is international peace also shines a (generally) more favourable light on investment in technologies ..."

This is the "plutonium standard" argument. America's near-overwhelming military power means that investors have a great deal of confidence in the U.S. Government, and that power has been built on technological innovation.  Instead of an economy based on a gold standard, it is ideas and innovation that the dollar (and ultimately, the American economy) is built upon, which inclines me to agree with the blogger, who argues it is "hard to regret big government investments in technology despite the frequent emergence of waste and failure."

Cyprus, Bank Runs, and the Metallic Flick-Click of a Switchblade.

Wolfgang Münchau, in his column in the Financial Times today, paraphrases Sir Mervyn King, the Governor of the Bank of England. Normally, not a big deal.

Today it's about Cyprus. Also not usually a big deal.

However, the paraphrase today is about bank runs, and specifically, how the European Union has now created the potential for one in Cyprus.  I've tracked down the actual quote.

"These things are very fragile. Once the run starts it was then rational for other people to join in"

Because the quote suggests that a run is rational for depositors, and because of the potential for a Cypriot run to cause the same to occur in Spain or Italy, this is the banking-finance-economics equivalent of the metallic flick-click of a switchblade in a dark alley. 

What did the EU do to cause this? The EU is bailing out the Cypriot banks via a "stability levy" of 9.9% on deposits larger than €100,000. There are strong arguments this is a good idea; deposit insurance's protection is typically not unlimited, and bank deposits over a certain sum begin to look more like investments, where socialized risk has substantial downsides -- namely moral hazard.  

The EU didn't stop there -- they also imposed a 6.75% levy on deposits smaller than €100,000. That was dumb. Banks provide payment services, and bank accounts are indispensable to businesses and individuals. By undermining the security of those smaller accounts, the EU risks destroying the Cypriot economy -- and has sent a message that other customers throughout Europe are not protected against the same.  And the thing is, for smaller banking customers, certainly in Cyprus, and maybe throughout the EU, taking their money out of their accounts is now rational. The design of deposit insurance should make that argument wrong, always.  

Since 2008, Atlantic civilization has faced the dismal truth that while standard economics has offered good answers, political leaders — and all too many economists — chose to forget or ignore what they should have known. This isn't my awesome, unique idea -- it's Paul Krugman's.  And he's right, once again.

Le Mieux est l'ennemi du Bien.

One of the hardest things in life is to know when something's done -- when it's good enough, versus when it's perfect.  Voltaire's observation that the best is the enemy of the good (the original version,
en français, is the title of this post) and Herbert Simon's principle of satisficing both come to mind. The list of interesting blog posts in my drafts folder is a testament to that fact; I'm definitely the sort that wants the post to be right, not merely good.

But having said that, sometimes I see something in my daily reading that's so obviously important that I have a sense that it's worth comment on, even if only briefly.

Civilian Employment-Population Ratio

Federal Reserve Bank of St. Louis

available at http://research.stlouisfed.org/fred2/graph/?g=glG

Today, it's the graph on the right, courtesy of Brad DeLong, a professor of Economics and chair of the Political Economy major at the University of California, Berkeley.  His post today concerns the +236,000 change in nonfarm payrolls in February 2013.  Anyone getting back into work is A Good Thing, but Brad's reality check is well warranted.  The graph on the right really tells the story.  The St. Louis Federal Reserve Bank has outstanding statistical reports on their web site (oh, if I had only been a student today with tools like this available ...), and Brad's has his eye on the Civilian Employment-Population Ratio.  It was around 63% until 2008, and then fell off a cliff that it hasn't recovered from.  To start getting this number up over 59% again generally will require more than 300,000 new jobs every month, and as this graph (painfully) demonstrates, it's just not happening.  

It seems that every spring since the start of the Lesser Depression businessmen are hopeful this will be the year things turn. Yet to paraphrase Brad, there has been no closing of the output gap and no decline in the unemployment rate from putting a greater share of the adult population to work -- all of the decline in the output gap and all of the decline in the unemployment rate since 2008 is from the collapse in labor force participation. And as Paul Krugman notes this morning, hundreds of billions of dollars are piling up in the treasuries of corporations that, facing weak consumer demand, see no reason to put those dollars to work -- and thus, sadly, I must note that this time it doesn't look like it's going to be any different.

A Billion Reasons to Like Peg Melnik.

Peg Melnik

Peg Melnik writes a nice blog for the Press Democrat which weighs in on interesting wine and tourism related issues in Napa and Sonoma from time to time. She's a great resource for anyone visiting the area, and her book, the Explorer's Guide to Napa & Sonoma, is now in its 9th Edition (you can pick up a copy on Amazon). She writes with her husband, Tim Fish, who is an associate editor for Wine Spectator.  

She put up a piece a few weeks ago about Sonoma Valley rebranding itself, a screenshot of which is at the right. It's an interesting article, but there was just one thing that really jumped out at me ... $7 million spent in Sonoma County on tourism per year? 

Peg Melnik, "Identity Crisis?"
Tasting Room Blog, The Press Democrat, Jan. 29, 2013
available at http://tinyurl.com/cgxg555

Someone gave Peg some very bad statistics.  The actual number in 2011, was, of course, much higher - about $1.32 billion.

By way of contrast, the value of the County's entire grape crop in 2011 was $347 million.

The figures are courtesy of Sonoma County's Economic Development Board, whose graph on the issue I excerpt at the right, and the Sonoma County Agricultural Commission.  

So -- Peg -- don't underestimate the effects of books like yours on the local economy ...

Moodys.com, "Annual Tourism Report, 2012"

Sonoma County Economic Development Board

available at http://tinyurl.com/ckwm5t3

These statistics are part of the very comprehensive economic reporting done on Sonoma County on a yearly basis.  The statistics on the EDB's web site go back more than a decade, and reading through them (and watching the changing predictions) is often illuminating.  These materials, like the UCLA Anderson Forecast and the Moody's annual reports to the County, are a great for answering questions about the economy for anyone involved in local government.

Dan Walters on Education Funding, Part 2.

I've blogged previously about Dan Walters and his views on California's budget. Dan has access to most of official Sacramento, and I generally believe that if he's thinking and writing about a certain problem, it is something that most of Sacramento already is (or soon will be) thinking about, too.

California State Assembly

The column that has my attention is about ELL.  Dan points out that Jerry Brown's latest plan for education reform "provides a 'base grant' of about $6,800 per student and then, over several years, adds as much as $5,000 to districts that have above-average concentrations of English learners and students who qualify for free or reduced-price lunches[.]" Dan Walters points to Los Angeles Unified as the potential biggest winner from this change in policy, noting that 76% of LA Unified is Latino or Hispanic.

However, Dan did miss a bit of the story; just pointing out the racial demographics of a school district isn't necessarily a good proxy for how many ELL students there are.  Those numbers are available.  27.3% of LA Unified, for example, are ELL students -- 180,495 out of 662,140.  Sonoma Valley's numbers are available, too.  31.7% of Sonoma Valley Unified students are ELL students -- 1,483 out of 4,673.

It's probable that Sonoma Valley Unified wouldn't receive the maximum grant under the program, because the calculation includes free and reduced price lunch enrollment, where SVUSD is just about at the Statewide average. But if Sonoma Valley Unified got even close to the maximum proposed grant, that would push Sonoma Valley's funding per student to somewhere near $11,800 per student -- which would add more than $10 million per year to the District's budget -- and which would bring total funding fairly close to the level enjoyed by, say, Healdsburg.

 I doubt Jerry Brown's plan will be enacted as proposed -- too many wealthy suburban school districts are highly motivated to fight it. But the specifics of the plan are less important at this point in the budget cycle than the simple fact that the issue's been identified -- that the battlefield in Sacramento has been chosen, and it's funding for ELL-impacted schools.

I suspect the choice by the Governor was a good one.

Finally, since it's "Catch Up With Dan Walters Day" for me, I also noted that Dan took on the "shadow budget" in a recent column, pointing out that the general fund (~$91 billion) does not equal the budget (~$225 billion).  He argues that the practice of reporting only on the balance status of the general fund tends to deceive voters.  I agree, Dan, I agree.

The Philosophy of Data and Sonoma's SAT Scores.

David Brooks, with Mark Shields and Judy Woodruff

"Weekly Political Wrap," PBS NewsHour

 available at http://tinyurl.com/abgqguu.

David Brooks' column regularly features in my weekly reading list, and his segment on the NewsHour with Mark Shields on PBS is a Friday night favorite at our house.  According to Wikipedia, he's "the sort of conservative pundit that liberals like, someone who is 'sophisticated' and 'engages with' the liberal agenda[.]" Today, his column's interesting because it's all about data, but it's specifically interesting for the observation he makes that there are two things that data does really well -- it can illuminate patterns of behavior we haven’t yet noticed, and it's very good at exposing when our intuitive view of reality is wrong.

"Highest Average SAT Scores in Sonoma County"

California Schools Guide, Los Angeles Times

available at http://tinyurl.com/bglbet5

His two points resonate for me, because I've been looking over Sonoma Valley High's SAT scores over the past two weeks, in response to some data sent to me by a concerned friend.  

The table in question showed that Sonoma Valley High's SAT scores ranked 11th out of 16 public schools in Sonoma County. The presumption was that these schools were all comparable to Sonoma Valley High. 

 The individual wondered what conclusions could be drawn about the performance of Sonoma Valley High as a consequence. So, I took a look.

The data comes from the Los Angeles Times, as a part of their California Schools Guide. As you can see, Sonoma Valley High is right behind Piner High and ahead of Windsor High.  Santa Rosa High is at the top, Technology High in Rohnert Park's around the middle ... 

Wait a minute.  Piner High is above Sonoma Valley High? For someone who grew up in Sonoma County, that data point is completely implausible.  I just knew there had to be some real problems with the method used to create the database, given what I know about Piner High.

Number of Test Takers Versus Size of School.
Data from "Highest Average SAT Scores in Sonoma County"
California Schools Guide, Los Angeles Times
available at http://tinyurl.com/bglbet5

Thankfully, the LA Times includes the number of students in the student bodies of the schools -- and also includes the number of total test takers at each school. I gathered up the data (it wasn't exactly conveniently arranged), and ranked the schools by number of test takers.  That table's on the right.  

Technology High comes in at the top, which shouldn't really surprise anyone.  It's the highest ranked high school in Sonoma County based on API scores.  The program (it's a magnet school) is designed to send its students to college (the school itself is located on the campus of Sonoma State University).  An awful lot of seniors at Tech High are taking the SAT, and the ones that aren't may very well be taking the ACT instead. 

I'd say that Sonoma Valley should be proud that it's managing to motivate so many of its seniors to take the SAT.  Only Analy and the Petaluma schools do better, and even then it's not by much.  Piner, meanwhile, comes in nearly dead last, with only 16.7% of its students taking the SAT. 

Thus, to me, it looks like there's just a very, very serious problem in trying to draw any conclusions from ranking high schools by average test scores on the SAT, when there's a large self-selection bias taking place in the pool of test takers -- you don't have to take the SAT, after all.  You have to sign up for it (and pay for it!).  At Piner High, not many students are doing so -- in stark contrast to Sonoma Valley High.

An illustration of the Normal Curve.
From "Normal Distribution," Wikipedia
available at http://tinyurl.com/m2gx6

OK, but what about the raw scores -- can we compare the test scores on the SAT by trying to control for self selection bias?  Can we "correct" the data to try to draw conclusions? Well, if we just assume that the distribution for each school is unimodal, symmetrical, and bell-shaped -- that the distribution is normal ...

Such an effort immediately runs into a problem, which is that some high schools are unimodal, and some (like Sonoma Valley) are bimodal, and that the data is anything but symmetric. The data for the bimodal schools looks like the table at the right,  where g/t is an SAT score, and t is the number of test takers that got that score.

A Bimodal, Asymmetric Distribution.
From "Unimodality," Wikipedia
available at http://tinyurl.com/aowq5jn

Given that I knew there was an oddity in the data, I deliberately focused on only those schools that are bimodal. Thus, this comparison is for high schools where no single ethnic group constitutes more than 70% of the population -- those schools where Spanish-English dual immersion (which I happen to be interested in for my kids) is generally possible.

Pursuing that idea, I took a stab at coming up with, at least theoretically, what the 50th percentile and the standard deviation for the SAT score would be for each of these schools, presuming the sample (the self-selecting students) are all on the right end of a normal distribution (that they're more-or-less the best test takers).

Making the (heroic?) assumptions outlined above, I did what I could to estimate the score for a student who was 1 SD above average --  and correcting for different sample sizes -- again, assuming the data is normal, which it isn't. The only reason doing something like this could make any sense at all is that these schools all have the same issue with their data -- they're all bimodal and asymmetric (admittedly to different degrees). Further, while the actual 1 SD performance -- roughly the 85th percentile of test takers -- is quite possibly higher than these estimates indicate, it bears repeating that it is the relative differences I'm more interested in here.

And finally, I put in per-pupil spending for 2007 -- the last year before the real estate bubble made a lot of oddities hit these numbers, and the only year I had data for all of them -- for each of these schools.

Estimated SAT @~85% versus Spending Per Pupil,

Selected Sonoma County and Napa County Schools.

Data from "California Schools Guide," Los Angeles Times,

available at http://tinyurl.com/bglbet5, and the 

"Federal Education Budget Project," New America Foundation,

available at http://tinyurl.com/all2wyk

The end result of this is the table on the right. Sonoma Valley does pretty well, all things considered.  Sonoma Valley has less funding per pupil than the lowest scoring school, yet still lands in the upper half of the table.

But the story is really the spending-per-pupil. To try to measure Sonoma Valley against, say, Healdsburg, when Healdsburg has 33% more money per student, is hideously unfair.  An extra $1.2 million a year (the amount necessary to match Napa) would significantly help Sonoma Valley Unified.  And what about giving Sonoma Valley Unified an extra $12 million a year -- the amount necessary to match Healdsburg? I bet SVUSD could accomplish an awful lot with that much money ...

The whole exercise of looking at this data certainly illuminated one pattern that I hadn't noticed, which was the very significant disparity inside Sonoma County concerning school funding.  I didn't have any idea that Healdsburg was funding its schools as well as it is, and frankly, it's to Healdsburg's credit.  But the really useful part is that I think it again exposes that most people's intuitive view of Sonoma Valley High is wrong -- Sonoma Valley High, and Windsor to a lesser degree, look like they're overachieving, given what they have to work with financially.  Further, Sonoma Valley's performance is better than one of the two closest high schools (Vintage) and is in striking distance of the other.

I've been speculating why the idea that "Sonoma Valley High is a poor performer" has gotten entrenched in the community.  I was tempted to mine the Index-Tribune's archives, to perform a textual analysis to see if I can find harder evidence, in the form of a shift in the changing language used to describe the High School.  But I think the story here doesn't need that much data in order to grasp the narrative.

Sonoma's a fairly rural, agricultural place.  My hunch is that many such communities began to get a little bit skeptical of their high schools sometime in the late 1950's -- think of the charmingly quaint anti-authoritarianism of Grease.  Such grousing was probably mostly harmless until the near-revolution that took place in American Society after 1968.  When school funding really took a hit a decade later, and the decrease in funding began to bite, the slow degradation of the physical plant probably kept the idea alive in many people's minds that Sonoma Valley High was a troubled place -- now, think Fast Times at Ridgemont High.

Meanwhile, the population of the Valley became more stratified as Sonoma gained an allure as a high-end destination as a consequence of the "Judgment of Paris," and the significant population growth between 1978 and 1986 meant the High School had to grow physically while dealing with less funding per pupil from property taxes. Fast forward to the present, when the demographic profile of the school district is changing as Sonoma continues to become ever wealthier, and I suspect the older idea in people's minds that "there's a problem at the High School" gets triggered fairly easily. Even if the evidence doesn't appear to be there to support the argument, the fear now is something along the lines of Dangerous Minds, perhaps.

But the data shows that Sonoma Valley High's doing a surprisingly good job of encouraging its students to apply to college, despite the fact that it makes the school look like it's underperforming. Further, the school looks like it's overachieving next to its peers as far as performance on the SAT is concerned, despite the funding situation.  If anything, this starts looking just a little bit like a case of Stand and Deliver. Again, not the conventional wisdom -- but perhaps in keeping with David Brook's "Philosophy of Data."