Charley Ferrari

More on What is Scarce in an Abundant Society: MOOCs and the Future of Higher Education

My last post touched on the disruption of our current economy that 3D printing will cause, and how it's not entirely correct to say that we're entering a totally abundant world. The potential of MOOCs to disrupt higher education shows another side to what internet caused abundance really means.

Maria Bustillos at The Awl had a relatively damning analysis of MOOCs, comparing the positions of Aaron Bady and Clay Shirky.

She correctly identifies the tendency to simplify industries when trying to disrupt them. Making industries wildly efficient involves using hard measurements to drive production. For education, this results in high stakes testing, and evaluating teaching methods solely based off of those numbers. For non-personal industries this sort of cold approach makes sense, but it feels wrong when applied to education.

Maria correctly portrays higher education today as a bundle of services. "College" in America today includes not only a series of lectures, but the forming of a social network of like-minded intelligent people, interacting with professors during office hours, taking advantage of the academic community available to you in college, and the signaling that going to an elite institution provides. She also describes what makes higher education different from other sectors by invoking Baumol's cost disease, but misses an important connection between these two concepts. It's not accurate to simply say higher education suffers from Baumol's cost disease. Parts of the bundle of services that we currently define as higher education suffer from Baumol's cost disease.

Looked at this way, you can see why she mentioned that Shirky and Bady had more agreements than disagreements. they're talking about two different things, and both are neglecting to look at the whole picture. Lectures are very easily adapted to an abundant online format, but the community and professor interactions are not. The comment below is wiser than its snark would suggest:

Touring office hours seems like a fun idea! You have the beginnings of this with the current "celebrity professors." Some professors blog, others have podcasts (and these innovative professors seem to cluster in George Mason University's economics department.) I could imagine this sort of idea expanding in a more local way. A community college professor could become an expert in his or her field, and have periodic talks relating to lectures a group of students is going to.

This line of thinking leads to the problem of incentives and motivation. The hidden benefit of having educational services bundled is to force students to take advantage of the entire bundle. The positive aspects of community, social networks, and professor office hours are not explicitly stated as benefits of college, and cannot be commoditized in the same was as lectures can be.

Commoditizing lectures will be an amazing boon. Students who could previously not afford it will have access to college level and quality information. But, there needs to be a corresponding change in culture. Instead of automatically being placed in an educational environment, students will have to actively make the decision to seek out an educated community of like minded intelligent people.

On the professor's side, there will be less of an incentive to provide open office hours without a tenured university position. While I believe opportunities for students to form their own intellectual communities to accompany lectures will abound once this paradigm matures, professors do not have an incentive to add their expertise to these communities. With lectures largely free or minimally priced, I could see the role of government funding moving towards forming these networks of experts available for students.

Traditional college in America is a luxury. I don't believe there will be a world where everyone will be able to afford to take four productive years out of their lives to live in a dorm, meet new people, and occasionally go to lectures. With MOOCs and targeted government investment in an academic culture however, I believe everyone will be able to have a high quality university level education that we today equate to "the college experience."

What is Scarce With 3D Printing

I ended up on an interesting line of thought tonight about what exactly the world will look like with ubiquitous 3D printing. 3D printing will bring in an age of abundance, but in a very specific way.

Once the manufacturing process is made costless, the only physical costs in any object will be raw materials. These materials will still be subject to the same laws of supply and demand as they always have.

Ideas will matter more. For designed objects, the design knowhow will be in demand, while for practical objects the technical knowledge will be more important. In both cases, the actual knowledge of 3D design techniques will be needed at some stage, and in either case, they will face the exact same pressures faced by media companies today. These ideas will be easily copied, and a system will have to be arranged to allow designers, engineers, and 3D artists to be properly compensated for their efforts.

For the first time however, this model will be applied to something completely new. Media companies had established business lines, and obviously tried to preserve those in the face of the unique pressures of the digital age. The ability to completely bypass the manufacturing industry has never existed before, and therefore the incentive structure surrounding it will necessarily be entirely new.

The economics of the future will be completely built around this fact. When "copy and paste" is applied to the real world, ideas, skills, and raw materials will have to interact in an entirely new way. We'll still have physical limits, but these will be expressed as raw material limits that will be immediately apparent to everyone. Ideas are no longer tied to physical objects, and can therefore no longer be priced as a "value add" to goods as they are today. Looking at it from this angle, it seems arbitrary that ideas were ever tied to physical goods, but in the future, we will need to come up with a way to properly incentivize people to create. The dystopian version of real world copy and paste is a world where creativity dies, society finds a way to function in a sustainable way, and continues eternally in a static world of no change.

The Past and Future of Philadelphia

Aaron Renn's recent post on Philadelphia made me think of a few of the qualities that make it so unique. The other large Northeastern cities, New York, Boston, and Washington DC, have all followed similar tragectories: seemingly permanent urban decline followed by a drastic recovery. These trends apply to Philly as well, but it would seem they have taken a different form.

Aaron explains the fabric of Philly as being a collection of small towns without a real city identity. Steve W, in one of the comments, further explains the relationship between the University of Pennsylvania and West Philadelphia. One could see this in stark contrast to the relationship Columbia and NYU have with their surrounding neighborhoods.

Alan Ehrenhalt devotes one of the chapters of The Great Inversion to Philadelphia, and explains another unique character of Philadelphia: its concentration of row house homeowners. Moreso than any other comparable city, Philadelphia is a city of families who own their own row houses. Alan describes how in our new reality of demographic inversion, this hinders large scale developers which are more successful in other cities. In Philly, a single holdout is more likely to impede the development of a large scale modern apartment building in an improving neighborhood.

Taken together these yield some interesting conclusions about Philadelphia. The established low-rise community-oriented character of Philadelphia act as a moderating force for the city. The community will serve as a stabilizing force during decades of decay, but will also prevent it from feeling the current wave of gentrification (for better or for worse.)

While I wouldn't argue that Philadelphia was a safer place to be in the 70s than New York, Boston, or DC, I'd say its trough could be more compared to Detroit. In terms of the positive change, Philadelphia is still an anomaly on the east coast. It remains the cheap option to those who want the large city urban east coast experience. Even the most expensive neighborhoods in center city are extremely affordable when you're comparing them to other large cities in the Bos-Wash corridor. Of course this also means the poorer neighborhoods of Philly are more destitute than comparable neighborhoods in other cities, so while displacement hasn't happened to the degree it has in other cities, there isn't as much in city opportunity available to people from these marginal places.

The Real Problem With High Frequency Trading

This podcast did a great job explaining a lot of things: The origins of high frequency trading, the absurdity of financial regulation made from the point of view of a bygone era, and the absurdity of high frequency trading today. High frequency trading has (rightfully so) been under intense scrutiny since the near collapse of Knight Capital and the previous afternoon long flash crash.

High frequency trading is not bad as a concept. If the market reacts to data a day later, and you find a way to react in half a day, you have a more efficient market. You're essentially "oiling the gears" of the stock market.

The problem lies in the incentives: they're winner take all. If I come up with that improvement, I get all of the value from my information edge as the market adjusts to normalcy. And if someone jumps ahead of me to react in an hour rather than half a day, they get all of the value. There is absolutely no mechanism to stop this from devolving into a destructive arms race, which is obviously happening as HFT companies are now fighting over milliseconds, and going to extreme lengths to get that edge.

The marginal benefit of these increases in efficiency decline, but it's not reflected in the incentives. It's a good thing to take a process that normally takes a day and reduce it to an hour, but the efficiency gain in reducing this process by a millisecond is minuscule.

There should be more regulation to correct this error. Some firms should specialize in high frequency trading, but they should not be encouraged to fight over such trivial time differences. I'm not sure what sort of policy would best fit this problem, but it does need to come from a place where it addresses this exact issue.

This is only one of several problems that exist in our current financial system, but I believe it's a good example of how these problems should be approached. Instead of letting populist feelings guide thought around the regulation of the financial industry, policy makers should be looking for these misaligned incentives that are the true cause of wall street malfeasance.

Urbanists Should Pay More Attention To The Jersey Shore

No really.

Well, I'm sure my experience of the Jersey Shore is somewhat unique. I have a friend who has family in Bradley Beach, so when I think of the Jersey shore, I think specifically of the range from Asbury Park down to Belmar, and not of Snookieland. Through a series of particularities in their development, these towns might lead to a future development path for suburban areas.

All of these towns were developed and incorporated in the late 19th century, which partially explains why the form of the area east of Main Street are very compact grids, and in some areas the architecture is more Victorian. These are also of course vacation oriented beach towns, which should lend itself more towards a compact form since there's an amenity everyone wants to be close to (I'd love to see a study that actually explains this, it does seem to be true anecdotally!)

Throw in an NJT train with closely spaced stops, and you have an urban area that's urban for every reason except proximity to the city. I think this sort of development is cool because it stands in stark contrast to more traditional transit oriented development. Instead of looking at the suburbs and trying to retrofit a series of centers around train stops, this is more of an urban sprawl similar to what one would find in the inner city.

Because it's a beach town, cycling is of course a major mode of transportation. This definitely helps poorer residents further inland, who benefit from a more bike friendly culture and safety in numbers as a result of living close to the beach and don't have to waste money having a car.

Inner ring suburbs could particularly benefit from this sort of development, since they share the age and bones of this portion of the Jersey Shore. It's more natural to have infill development in the suburbs to have a more uniform nature, rather than concentrations near stations interspersed among more open space. Tracts of these medium density developments would be amazing places for bike culture to flourish, and would help with its current image problem of being a toy for coastal yuppie elites.

Express Buses and SBS: An Easy Win

Noah Kazis reported on Streetsblog yesterday the reaction of the New York City council at a transportation conference to select bus service: They want more of it!

Vacca's comment was one of the more telling of the councilmembers quoted:

Vacca also called for additional efforts to speed express buses. “They get stuck in the same traffic as everybody else,” he said, leading riders to turn to their cars. “That’s exactly what we want to avoid.”

Having grown up in Vacca's district, I not only get the sentiment of this comment, but have a deeper understanding of the transportation decisions people living in these areas actually go through, and see more in this comment and its general sentiment that would (in my opinion) be dismissed too quickly as a "windshield perspective" by a blog like Streetsblog.

I agree our elected officials can do way more for public transportation in our city instead of focusing on parking issues or other ways to make it easier to drive. But it helps to understand where outer borough dwellers are coming from. If you're in the outer areas of the outer boroughs, you live at the intersection of car culture and mass transit culture, and individual people can make the choice to orient themselves either way. I would further argue that choosing auto orientation is a more insular option, which is why it lends itself to the perspective that everyone in your neighborhood drives, and is the true basis for a windshield perspective.

Unless a politician is positioning him or herself as a transportation visionary, it's easy to get caught up in viewing your outer borough neighborhood as an island from which you drive to the suburbs for most of your needs, and see a populist tinge in what you see as Manhattan-centric policies to make it harder for you to drive downtown, especially when they're not paired equally with transit benefits that your constituents will see.

Vacca's comment shows that the windshield perspective isn't an ideological, stodgy, or blind perspective. It's simply one brought on by the climate one is in. In the right climate, outer borough politicians can be pro-transit. While there have been amazing strides made in transportation infrastructure under the Bloomberg administration, a lot of these strides were achieved in such a way as to alienate the people on this fringe. This alienation actually drives people in these areas to become more entrenched in car culture.

The fact that Vacca mentions express buses in his comment-- something most people living in Manhattan and the gentrified outer boroughs have probably never even heard of-- shows an easy win for sustainable transit policy makers. Select bus service is amazing, but so far has been positioned as improvements on existing local bus routes. Directing these sorts of changes towards express bus routes shows that the city's policy makers are specifically targeting these marginal individuals who would otherwise be nudged towards an auto-oriented existence.

I believe that targeting these marginal individuals is the key to New York City's transportation future. The transit oriented future of New York does not rely on making it easier for people living within the downtown core to stick with alternative modes of transportation. They already have the infrastructure available, and the car free culture to live off of. The future lies in the marginal users. Only by giving marginal individuals an easier alternative to car culture will we be able to begin to affect the greatest amount of change. Urban living isn't something that has to remain insular from the rest of the country; it is something that can be spread very easily.

Sudden Changes in Demand and the Great Inversion

I've been making my way through The Great Inversion by Alan Ehrenhalt. His main thesis is that the majority of the changes going on in central cities, which is occasionally attributed to gentrification, are actually symptoms of a more systematic demographic inversion taking place across the country. This process is fairly quickly reversing a decades long trend of suburbanization to create new American cities that more closely resemble those of nineteenth century Europe.

This is an extremely apt observation. While gentrification as a process occurs, it's important to put it into a larger framework of what the root cause really is. It always has taken as its assumption a changing pattern of demand (coupled with a potential value in urban land not currently realized), and Ehrenhalt's analysis of what this means for downtowns, exurbs, and everyplace in between is extremely enjoyable.

One thing I still found missing from the analysis is a clearer explanation of why this change in demand is occurring. The demand created by aging boomer parents is fairly apparent, but it isn't so with millennials. For millennials, Ehrenhalt included anecdotes of college students polled showing a preference for living in the city, after watching Seinfeld and Friends from the safety of the suburbs. While I'm sure this happened to many American college students, I still think there is something broader to be said about the general change in urban demand among millennials without falling back on the story of the bored suburban kid rebelling by moving to the big city.

A possible explanation for this change in demand is the fact that suburban growth was always in essence a ponzi scheme. Demand for the suburbs was dependent on the fact that demand for suburbs would always continue among later cohorts. The analogy I would draw is a line that is constantly growing longer. You'll more willingly get on line if you see people will gather behind you. The wait doesn't seem too long when compared to the growing number of people behind you. Whatever inconveniences you have to deal with in your suburb is mitigated by the fact that people are still moving further away than you, and they have it worse out there.

Of course like any ponzi scheme, collapse is inevitable. Once this process stops, demand for suburban areas as a whole ends up suffering. Exurban areas immediately feel the hit, as they have during the latest housing crisis, and other suburban areas are forced to adapt in the myriad of ways Ehrenhalt describes, which depends on whether the metro area is growing, stagnant, or declining, and how far out the area is.

This ends up describing both why this change is happening now, why it seems to be happening to millennials (it would happen to any cohort in our position), and why the change seems to be happening so suddenly.

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