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Facing Criticism of ‘Value Added’ Teacher Evaluations

In light of my recent research brief about teacher value-added models, which estimate teachers’ contribution to student achievement, I was interested to read a recent Atlantic article by E.D. Hirsch.

Prof. Hirsch has been an influential voice in education reform for decades, and from the article’s title, “Don’t Blame the Teachers,” one can guess that he is not a fan of value-added models’ use in educational policy. His writing has always focused on cultural literacy and the use of a specific curriculum to improve education. Through this lens, he argues that value-added models are looking in the wrong place.

There are actually two separate criticisms here. One is that “current modes of testing cannot identify which student achievements and progress are the result of school instruction.” In other words, value-added models cannot separate teachers from other educational inputs as they claim.

The second is that the emphasis on value-added models implies that the best way to improve educational quality is by improving the caliber of teachers. Hirsch’s body of work fervently argues that a more cohesive curriculum and teacher environment would do far more than removing the worst teachers in the current system.

Policymakers must wrestle with both questions, but in studying the value-added research I can mainly speak to the first. Hirsch has previously argued that testing reading comprehension is particularly difficult because student understanding is not independent of the content of the material. Students may have trouble parsing an essay written on an unfamiliar subject, but have no trouble with an equally complex text on a topic about which they have more knowledge. What reading tests purport to measure, such as a general ability to find the main idea, Hirsch calls a “nonexistent general skill.”

While I do not agree this critique makes value-added measures invalid, it is certainly true that some subjects are easier to test than others. Imagine, for instance, that Hirsch’s critique of reading tests is half right. What if student test scores are affected by their prior knowledge of the subject matter of the tested passage, as he argues, but students also really do have a separate “critical reading” ability that they apply when reading about any subject?

Further, suppose that English teachers can help students improve their general “critical reading” skills, but whether their students happen to be assigned passages on familiar subjects on tests is random. If only one of these factors is even partly under the teacher’s control, how will that manifest in teachers’ value-added scores?

What will happen is that better teachers would, on average, still have higher value-added scores, but our estimates of teacher effects would be smaller and noisier than in subjects where the teacher can affect all relevant student skills. And indeed, studies with student math and reading scores regularly find stronger estimates for teacher effects on student scores in math.

Keeping in mind Hirsch’s critique, it might be that a perfect system would use value-added measures in teacher evaluations for some subjects but not others, or at least use different relative weights on value-added versus other measures of teacher effectiveness. However, I do not agree that the current system renders value-added measures useless; under the present regime, the teacher value-added model is still a useful tool for educational policy that we would be worse off for ignoring entirely.

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New Home Sales Pull Back in August

Corrected version.

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Sales of new single-family homes fell in August after posting strong gains for much of the past year. Sales came in at a seasonally-adjusted annual rate of 609,000, down from 659,000 in July, a drop of 10.7 percent.  However, that is 33 percent above the September 2015 rate of 457,000. New home sales have been trending higher since bottoming out in 2010-2011 and are now in the 600,000 to 800,000 range that was typical in economic expansions before the housing bubble of the 2000s.

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At the same time, new single-family home construction has been picking up with new home starts coming in at a 722,000 pace in August. Though that pace is well above the recession lows, it is still below the 1,000,000+ pace that occurred in prior expansions.

Overall, single-family sales and starts have been trending higher since the end of the last recession but neither is pointing to a strong housing market. However, the inventory of new homes for sale paints a different picture. The months’ supply of new homes on the market currently comes in at 4.6 months in August, only slightly above the average of about 4 months during the height of the housing boom, lower than the 5 to 7 month supply that was typical in prior expansions and much lower than the peaks of 10 months or more during prior recessions.

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Housing markets will always be “local” but on an aggregate level, activity measures continue to trend higher while inventory remains tight.

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New Home Sales Pull Back in August

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Sales of new single-family homes fell in August after posting strong gains for much of the past year. Sales came in at a seasonally-adjusted annual rate of 609,000, down from 659,000 in July, a drop of 10.7 percent.  However, that is 33 percent above the September 2015 rate of 457,000. New home sales have been trending higher since bottoming out in 2010-2011 and are now in the 600,000 to 800,000 range that was typical in economic expansions before the housing bubble of the 2000s.

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At the same time, new single-family home construction has been picking up with new home starts coming in at a 722,000 pace in August. Though that pace is well above the recession lows, it is still below the 1,000,000+ pace that occurred in prior expansions.

Overall, single-family sales and starts have been trending higher since the end of the last recession but neither is pointing to a strong housing market. However, the inventory of new homes for sale paints a different picture. The months’ supply of new homes on the market currently comes in at 4.6 months in August, only slightly above the average of about 4 months during the height of the housing boom, lower than the 5 to 7 month supply that was typical in prior expansions and much lower than the peaks of 10 months or more during prior recessions.

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Housing markets will always be “local” but on an aggregate level, activity measures continue to trend higher while inventory remains tight.

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The Value of Practical Experience

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When AIER interns arrived on campus last week, their academic counselors were happy that students would be getting practical experience in the workplace. But what does “practical experience” mean and how is it different from classroom experience?

David Moore’s seminal 2013 book “Engaged Learning in the Academypresents a summary of the theoretical underpinnings of the educational value of learning in the workplace. The author suggests that the learning that occurs in the workplace is not just an “application” of the concepts acquired in the classroom. The out-of-school environment, Moore says, requires different kinds of cognition. The skills that are attained at a professional site differ from the skills developed in an academic setting.

One of the cognitive abilities that develop differently in the workplace as compared to academia is “problem formation,” according to Moore. Let me explain this in the context of an economic think-tank: At AIER, our researchers define an economic problem or issue, and then try to solve it or obtain the answer to a research question about this economic issue. Our interns work closely with the researchers on these tasks. Therefore, interns participate actively in both defining the problem and solving it.

In the classroom setting, on the other hand, the teacher is usually the one who defines the problem and assigns this problem to students to “solve” or research. Since the workplace requires additional tasks, our internship program helps students gain those additional cognitive abilities. In addition, the skills acquired in the classroom take a different form in the workplace. For example, critical thinking at AIER advocates action, preparation of well-articulated ideas, and efficient delivery of those ideas to others.

This is just one aspect of learning that occurs during an AIER internship. And as our alumni tell us, the skills they acquired here help them to land jobs in the marketplace.

Picture: 2016-2017 academic year interns at AIER. From L to R: Sakshi Pareek (Drexel University); Fahd Zia (Lee High School) ; AIER’s Max Gulker (standing); Kevin Deptula (Williams College); Jacob Broude (Williams College).

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My Mini Days

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Editor’s note: The author wrote a companion piece about the MINI Cooper and globalization, which was published yesterday.

 In January of 1974, I drove the Morris back to my house. It was a cold day and the heater was intermittent at best. It still needed work, but the plan was that I would use the car and return to my uncle’s when time permitted to continue improvements.

I drove the car to school and back, learning its idiosyncrasies. It wouldn’t start in damp or wet weather, and was so low to the ground that if there was any snow beyond a dusting, you might find yourself hung up on a drift.

When spring finally appeared I spent much of my time addressing the obvious foibles and most immediate needs to keep the Mini on the road.

One bright August day that year, I went to a friend’s house to give him a lift to summer school. My friend John asked if he could drive the car the five miles to our destination. I agreed, and we went off with John behind the wheel.

We had just driven through town and down a hill on the other side. We pulled out to pass a car in our lane, and a second one came straight at us. John spun the wheel. We clipped a telephone pole, removing the passenger door in the process, and landed in a field.

We were both awake and jumped out of the car. He and I survived with some bruises; I had a minor concussion. The Mini was not so lucky. It was ready for a proper burial.

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The MINI Cooper: At Globalization’s Crossroads

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Not too long after World War II, the United Kingdom was second only to the United States as the largest builder of cars, and the biggest exporter.

Think about the world order in those days: This was before the auto industries of Japan and Germany, or for that matter, China began exporting their products.  Auto factories throughout much of Europe were in their post-war ruins. England saved its steel for its own major exporting businesses – notably, cars.

And in postwar America, returning GI’s and their baby-booming families demanded more new vehicles than the American industry could supply.

The British cornered the market on the sports car. Iconic names like MG, Riley, Singer, Triumph, Sunbeam and Austin Healey had the ability to make Americans swoon with their top-down, low-cost, cheeky by-the-mile fun.

The future looked very bright indeed; yet less than three decades later, most of these brands were gone: either they were swallowed up in another merger, or were in receivership.  What might have looked like labor unrest or supply chain problems or even unimaginative design from the perspective of 1970s U.K., is today more clearly understood as the impact of globalization. Lower cost structures in developing economies put pressure on U.K. producers and resulted in labor disputes with management and the government, quality issues, supplier problems. Furthermore, investment in production facilities in developing countries increased competition and U.K. producers were sometimes slow to respond, which contributed to uninspired new products at higher price points.

In the years that followed, England lost ownership of many of its storied marques. Jaguar and Land Rover went to Tata Group of India, Rolls-Royce to BMW, and venerable Bentley to Volkswagen.

There is one car perhaps more than any other that embodies the many facets of globalization. Of all the vehicles the U.K. has produced through the years, none speaks more clearly to the British automotive story than the Mini (see sidebar). Designed by Sir Alec Issigonis and launched by BMC (British Motor Corp) in 1959, it captured a nation’s heart.

If any car can be said to have driven the “Swinging Sixties,” it was the Mini. Peter Sellers, The Beatles, Twiggy, James Garner, and Steve McQueen were all owners. It had a starring role in the 1969 film “The Italian Job” with Michael Caine. The Mini’s impact today is still both visceral and immediate.

The last “classic” Mini came off the line in October 2000. BMW of Germany had acquired Rover in 1994 from British Aerospace and in 2001 began building the new generation MINI at its Oxford, U.K. facility. The re-design, including larger wheels, was still based upon the revolutionary front-wheel-drive, transverse engine, combined sump and gearbox platform. These cars and the many variants now available have been highly successful in both the U.K. market and abroad.

It is not too far a leap to say that there has been something of a resurgence in U.K. car production within the past several years. A few of these marques are niche English brands, such as Morgan, TVR, AC and Bristol that were essentially too small to have been impacted by the larger forces of globalization.

A number of other companies build their cars in the U.K., including Honda and Nissan, much like those companies have opened factories in the United States. This is another aspect of globalization.

But in the wake of this summer’s vote for Britain to leave the European Union, the future of England’s motor industry is again somewhat clouded. Brexit could make it more challenging for the U.K. to get parts from other European countries, and to export finished cars to those countries. While BMW officials say they “will not speculate about the outcome of the Brexit negotiations,” observers have noted that the company, with factories throughout Germany and on four continents, will face pressure to keep production in place because of the MINI’s British heritage.

So globalization has been the archetypal blessing and curse to the Mini brand and others. Without the capital and reinvestment by foreign governments and entities, the country’s motor industry could look quite different.

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Ask the average Briton and they will probably say they would much prefer to return to the England of the 1960s when 1,000,000 people made British-owned cars in the U.K.

A distant second, but certainly preferable to no industry at all, is the reality of the day. There are 800,000 people involved in designing, engineering, manufacturing and mending motor vehicles as well as making components for them.

With Brexit on everyone’s mind, the specter of a much smaller workforce than what is now required is ever-present. Some iconic brands are gone and others will never again be part of the empire. How the current workers fare will be the next chapter in the story of globalization.

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The Value-Added Teacher Modeling Conundrum

“Value-added” teacher models are being used less at the same time that evidence of their usefulness is increasing, according to a new research brief out today from the American Institute for Economic Research.

Value-added models show the difference between how students perform on a standardized test, and how they were expected to perform. Such models attempt to show the added value of particular teachers to their students’ achievement.

Such measures rightfully raise questions about teaching to the test, said the author of the research brief, AIER research fellow Patrick Coate.

But he points to various studies that show value-added models are more useful when averaging teacher scores over a period of three or more years. When the tests show consistently higher scores among a teacher’s students over a period of years, it establishes a pattern of better learning, Coate said.

This can be cross-checked against alternate forms of teacher validation, like student surveys and video classroom observations, to guard against teaching to the test, Coate said.

Studies have also shown that higher teacher value-added scores lead to better economic outcomes for their students, Coate said. A pair of 2014 studies showed that students of high value-added teachers were more likely to attend college and have higher wages as adults.

And yet, these models are coming under increasing public scrutiny, as well as lawsuits, as individual states wrestle with how to use value-added models in evaluating teachers. Ohio, for example, decided last August not to use value-added teacher data from the last two years.

“A balance must be found where the information in value-added models can be used without distorting teachers’ incentives enough that they prioritize test scores to students’ detriment,” Coate wrote.

To read his full brief, which is available to read free of charge, click here.

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Higher Household Net Worth Should Support Economy

net-worth-2q-2016With the consumer being the engine of the slow but steady economic expansion, some new data from the Federal Reserve Board suggests that engine can continue motoring along.

Household balance sheets are benefitting from increasing asset values. Total assets for households increased by $1.2 trillion to $103.8 trillion in the second quarter of 2016, according to the Flow of Funds report released on Friday. Financial assets ($72.3 trillion) and nonfinancial assets ($31.4 trillion) both rose during the quarter.

On the liabilities side of household balance sheets, total household liabilities rose by $166.3 billion to $14.7 trillion. Loans, including mortgages and consumer credit, account for more than 96 percent of household liabilities. So Americans are showing their increasing willingness to use credit, which may be a sign of confidence.

The net of assets and liabilities – net worth – rose to $89.1 trillion in the second quarter, a record high. That is an increase of $1.1 trillion from the prior quarter.

Strong household balance sheets and a record high net worth are both positives for the consumer sector and economy overall. Combined with continued gains in jobs and income, these data suggest continued gains in consumer spending are likely.

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The Value of a Sullied Vacation

It was the long awaited extended family vacation, at an all-inclusive resort in the Poconos this past July. The kids had a great time on the bumper cars and in the swimming pool, and we’d had an exhausting day and night chasing them around. I needed to recharge, but sleep was not to be.

We realized, belatedly, that the resort had placed us directly across the hall from the lodge where they held their nightly dance party, complete with DJ. I could feel the techno bass thumping as I lay in bed.

I marched into the lobby, in my pajamas, complaining to the front desk attendant. They had offered to move us. Tough to do in the middle of the night with a young family like mine. They said they turned down the bass, but I didn’t notice any change. Nothing more we can do, the attendant said, but the owner will see you at your breakfast table in the morning. And I was thinking, yes, this is going to cost you.

And one of the owners did visit us at our breakfast table, offering our party some cash compensation, a free meal, and a late checkout. Through my morning haze, it seemed like a good deal, and we accepted it.

But on the drive home, I had second thoughts. The money, while not insubstantial, still represented a small slice of the cost of our family vacation. I was coming home from vacation exhausted. And there was no do-over: I could never get my vacation back, nor could I recover the three precious vacation days I had used from work, nor the miles I logged on my car.

With the benefit of hindsight, I wonder if I sold myself short. I posed the question to my colleague, economist Max Gulker. He turned my attention to the word “utility,” which is defined as the usefulness of a good or service.

When economists talk about utility, he said, “we’re talking about more than dollars and cents. While happiness is impossible to exactly quantify, having a vacation ruined may be a bigger loss than what was spent on the trip and lost wages at work.”

“Some workers get one vacation per year; the loss beyond money is the distress of losing that trip as well as the loss of benefits from having had a week to relax. This component is quite similar to the damages claimed for ‘pain and suffering’ in lawsuits,” he told me.

I was intrigued by a recent blog Max had written about travel agents, which gave me the idea to call one to seek advice for handling a situation like this in the future. My vacation in the Poconos was hardly the first time I’ve stayed at a hotel that has come up short, and it’s a good bet most tourists will eventually face a situation where they are offered compensation in exchange for their trouble.

I spoke with Robert Baker of Global Link Travel in Bennington, Vermont. In situations like this, he recommends taking a hard look at what’s being offered before accepting. Any property manager is likely to offer immediate compensation to an unhappy customer, to try create a “quick fix,” Baker said.

And for that customer, the feeling of immediate recovery is powerful, he said. But if the problem is bad enough, he suggests showing some restraint: Meet with the highest ranking person on the property, and write a letter when you get home, he said. Collect business cards of every person you spoke with that day, and then copy everyone on the message, he said. You may get more compensation in return if you do that, he said.

It’s important to talk with people onsite and in the moment, because a whole new group of people will arrive the next day with no immediate knowledge of what happened, he said.

“I would not take anything you thought was not fair compensation,” he said. Of my own situation, he said, “You could have done far better by grinning and bearing it, and really thinking about it once you got home, saying the value of my vacation was more than what I got.”

Once you accept the compensation, the problem is considered resolved, he said. Most reputable properties make you sign a waiver, he said.

It’s important to keep your cool when going through the complaint process, he said. “I’ve seen it going the other way, people have totally exploded. The agent shuts down, and says, ‘Sorry, you have to call our customer care.’”

Compensation, he said, can take many forms. It isn’t just cash: It could be a return trip, or some service a resort provides, like an excursion or a massage. Until you accept it, you have some power to make demands, he said.

“The pressing thing is, your experience, what you expected, and what you did not get. How do you put a value on that? It comes down to you being comfortable with what’s being offered,” he said.

In hindsight, in my bleary, sleep-deprived haze the morning after, I was in a more vulnerable state. I should have taken the owner’s business card and spoken with my extended family when we got home. For me, it wasn’t just the money, but the galling idea that they would put families with young children across the hall from an every-night dance party. My time, and my right to peace and quiet, was worth more than the compensation we received in exchange.

But by that point, I had lost my leverage. Live and learn.

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Warren Buffett’s Portfolio is Irrelevant to Us

I was recently at a lecture about investing and the inevitable question was posed to the lecturer at the end of his presentation: “So, how are YOU invested?”

The question came from a good place. The attendee just wanted to know how the lecturer applies his knowledge to his actual investments. The problem is that the lecturer’s answer is probably irrelevant to the attendee.

If the lecturer had said that he was 100 percent invested in stocks, you might think that was a pretty risky position. But what if I told you that the lecturer was 30 years old and had no children? Or what if the lecturer was going to get a $100,000 annual pension from his employer in retirement? In either of those cases, a 100 percent stock allocation for his investments might not seem so far-fetched.

How about if the lecturer responded that he was only 30 percent invested in stocks, with the rest in bonds and cash? That might seem pretty conservative. But if he was risk averse and 75 years old, that might be a perfectly reasonable asset allocation for his situation.

The point is that any individual’s asset allocation is irrelevant to you and me without context, regardless of their level of intelligence or wealth.

That brings me to Warren Buffett, the well-known investor who is worth billions as a result of his investing acumen. The financial media is constantly reporting on what Buffett is doing with his money. For instance, in 2011 when bank stocks were depressed, Buffett bought $5 billion worth of preferred stock from Bank of America. This is certainly newsworthy, but how is it relevant to you and me as investors?

Buffett is worth so much money that he had $5 billion sitting around ready to invest. Most people aren’t in such a position. Buffett has massively increased his wealth as a result of this savvy trade, but it was hardly something that you or I could have replicated.

Financial columnist Barry Ritholtz recently wrote an article titled “Invest Like a Billionaire (If You Are One).” The title says it all. If you’re a billionaire, perhaps Buffett’s investments are relevant to you. Otherwise, you have to look at your own situation and assess the right investments for you.

Another example involves Michael Dell, founder of Dell Computers. When the share price of Dell Computers was struggling in the early 2000’s, he bought $70 million worth of the stock. That’s a huge investment for most anyone in the world, but not for Michael Dell or Warren Buffett. In fact, Mr. Dell had a net worth of about $20 billion at the time, meaning that his $70 million investment was less than half a percent of his wealth. That’s like the average investor throwing $1,000 into the market. People lose more than that in a  weekend in  Las Vegas.

All of these examples are simply meant to convey the idea that how you invest should be based on your situation. If you’re young, have no children, and you have lots of years of earnings in front of you, a more aggressive portfolio of stocks may be prudent. If you’re retired and reliant on your portfolio for a fixed income, a more conservative portfolio of bonds and cash may be prudent.

Focus on how your investments fit in with your own situation and try to ignore the noise about what Warren Buffett is doing.

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**Past performance is no guarantee of future results. This information should not be considered personal investment advice.**