Is there another office software more worthy of championship?

A bit of odd news caught my eye today, UK student Rebecca Rickwood beat 228,000 global competitors to win a global competition to find the best user of Microsoft's Excel software.

While the contents sounds a bit like a publicity stunt for the technology giant, I'll be the first to admit that once you start using Macros Excel can get pretty complicated. I've built spreadsheets that I thought were worthy of some kind of trophy (preferably made of chocolate).

Here are additional software contests I'd like to see:

• Make a Powerpoint deck that actually balances information and entertainment (the use of sound effects and motions are strictly prohibited)
• Make a consistently formatted text file with embedded charts that your co-workers can edit without destroying all the formatting
• Air brush a photo of yourself you are happy with in 10 minutes or less with the photo software of your choice

What's your software challenge of choice?

A little competition never hurt anyone

Robert Cringely had a strange editorial in the NY Times last week -- strange because its central thesis seemed to disregard 400 years of economic thought. Referring to the recent competition between Microsoft and Google, Cringely writes:

"This is all heady stuff and good for lots of press, but in the end none of this is likely to make a real difference for either company or, indeed, for consumers. It’s just noise — a form of mutually assured destruction intended to keep each company in check."

According to Cringely, competition between Microsoft and Google is more about posturing --Microsoft showing that it can compete in the search engine market and Google showing it can compete in the operating system market--than about innovation.

This begs the question, 'what's the difference?' Modern economics is largely founded on the idea that competition improves social welfare. So we should expect that Microsoft's new search engine Bing will push Google to make its search engine better and Google's Chrome OS should push Microsoft to make Windows better.

Of course, that's just theory. What does the empirical evidence say? According to the Atlantic Monthly, we're already seeing the fruits of competition:

"...Microsoft is hoping to launch a cheap, online version of its Office suite that doesn't include all the features of the paid-for version, to keep companies buying that product. But the company still claims that its software will provide "fuller service" than Google Apps, the free suite of online applications with about 15 million users. In short, Microsoft is trying to thread the needle here by creating a free online Office version with enough features to displace Google Docs, but not enough features to encourage companies to give up their lucrative Office purchases. That strikes me as a pretty significant challenge."

I seriously doubt that Microsoft the monopolist would launch an online version of its Office software; Microsoft the competitor, on the other hand, feels the need to answer Google's challenge. What will Google do to counter Microsoft? We consumers can only wait excitedly for the next innovation out of Mountain View, CA.

The point is simple: competition is good, monopoly is bad. If Microsoft had no competition, then they'd still be selling copies of Windows Vista, rather than working feverishly on Windows 7 -- and that's good for all of us.

Enhancing Child Safety and Online Technologies

As promised, here are the links to the Harvard study on the risks faced by minors on the internet. The executive summary is here and the full study is here.

Page 75 of the full study PDF discusses the evidence regarding sexual solicitation online.

Safer than we thought

As I've written recently, many parents and child advocates view social networking sites as online swamps full of lurking sexual predators, kind of like this:



But a new study from researchers at Harvard's Berkman Center for Internet and Society suggests that may be more the product of media hype and parental fears than reality. According to the New York Times (who received a draft version of the report due out tomorrow*):

"The report criticized previous findings that one in five or one in seven minors are sexually propositioned online, saying that in a strong majority of those situations, a child’s peers are responsible for the proposition, which typically amounts to an act of harassment or teasing."

Further, the authors of the study note that in most cases of online sexual predation, "teenagers are typically willing participants and are at risk in other ways (with poor home environments, depression or substance abuse, for example)."

It's doubtful that a study like this will have much impact in the psyche of parents. The dangers of online behavior have been greatly exaggerated for years and empirical evidence is usually overwhelmed by an anecdote or 10 minutes of "To Catch a Predator". But the research supports the conclusion that while the internet provides a new medium for social interaction, people are still people. As John Cardillo--chief executive of Sentinel Tech Holding, which maintains a sex offender database and was a member of the task force--is quoted saying:

“Social networks are very much like real-world communities that are comprised mostly of good people who are there for the right reasons.”

*I'll be sure to post the link as soon as the study is available online.

This just in: 18 year olds talk about sex!

If you want to frighten parents and educators, mention "MySpace". The social networking site has become public enemy number one in the fight against teenage vice. Now, even the medical community is getting involved. According to a study published in the Archives of Pediatrics & Adolescent Medicine, "54 percent of teens talk about behaviors such as sex, alcohol use, and violence on the social networking giant MySpace".

Actually, that quote is a bit misleading. A few paragraphs down, we find out:

The study looked at MySpace profiles of 500 people who identified themselves as 18-year-old males and females in the United States. References to risky behaviors included both words and photos, the authors said.

So this means that 54% of 18-year-olds on MySpace reference sex or drugs (there's no mention of "rock-n-roll" in the study) in their profiles. Let's put aside for a moment the fact that 18-year-olds are legal adults. Studies of the sexual behavior of Ameircan teens reveal that 58% of 18-year-olds in this country have had sex. If you believe these statistics, MySpace users are actually less likely to have sex than the general population.

You may be wondering why anyone would be interested in this (I know I was). Accodring to one of the authors:

Even if teens have not actually engaged in risky behaviors but merely brag about them online, this can still affect their future behavior, said study co-author Dr. Dimitri Christakis, professor of pediatrics at the University of Washington and director of the Center for Child Health, Behavior and Development at Seattle Children's Hospital.

Those who lie about the behaviors to show off may receive positive feedback from others -- comments such as "that's great" or "I do the same thing" -- that encourage them to actually try out the behaviors, he said.

So the danger here is not MySpace, per se, but rather peer pressure--pressure that results from essentially any contact with peers.  That means that if MySpace is dangerous, then so are cell phones, or any other communication device.  If MySpace is dangerous, so is talking.

Interestingly, one of the researchers makes this point, though it is buried in the article:

"It's really not that MySpace is bad or good. I think the lesson is that it's a tool, and how you use it determines the kinds of outcome you're going to get," Moreno said.

Technology changes, but people typically stay the same.  Teenagers--in this case, young adults--think about, and talk about, sex.  It's easier to see that now that social networking sites have gained popularity.  But just because it's more apparent, doesn't mean it's new.  

More on trade (sorry, no witty Kubrick reference this time)

Following on the trade theme, consider the following facts about US trade:

• imports account for only 16.7% of US Gross Domestic Product (GDP) and imports from China account for 2.2%
• between 60% and 70% of the US economy faces virtually no international competition (including low-wage jobs like auto mechanics, high-wage jobs like doctors and the 18.5 million government employees)
• Chinese exports only overlap with between 5% and 10% of the US economy

For all the concern about trade in this election cycle, trade is a relatively unimportant part of the US economy (particularly compared with the rest of the industrialized world). The average US tariff on foreign goods, currently 2%, is already very low (note that many goods face 0% tariffs, while some goods, particularly agricultural products, face close to 100% rates). According to the World Bank, removing these remaining tariffs would boost the US economy by $16 billion per year; a large number, but certainly a drop in the bucket in the $10 trillion US economy.

One of the biggest trade issues discussed in the campaigns has been NAFTA. In my last post I cited a quote from Barack Obama in which he said, "Well, I don't think NAFTA has been good for America -- and I never have". But the empirical evidence doesn't implicate NAFTA in the downfall of American manufacturing. David Leonhardt, writing in the New York Times states:

When Nafta took effect on Jan. 1, 1994, Ohio had 990,000 manufacturing jobs. Two years later, it had 1.03 million. The number remained above one million for the rest of the 1990s, before plummeting in this decade to just 775,000 today. It's hard to look at this history and conclude Nafta is the villain. In fact, Nafta did little to reduce tariffs on Mexican manufacturers, notes Matthew Slaughter, a Dartmouth economist. Those tariffs were already low before the agreement was signed.

And yet candidates on both sides of the aisle have cited trade as a major concern for the American economy. Some even promised to bring manufacturing jobs back to Michigan. However, this stance misinterprets the structural changes the American economy has experienced over the past twenty years.

The focus on trade shifts our attention away from the real factors that determine wage inequality and job creation, particularly technology and skills. Austan Goolsbee, Obama's economic adviser, estimates that roughly 80% of income inequality in the US can be explained by changes in technology. Highly educated workers have benefited disproportionately from technological change. In 1980, college graduates earned on average 30 percent more than those with only high school diplomas. Today, that difference has widened to 70 percent. Over the same period, the average earnings of people with advanced degrees went from 50% more than workers without degrees to 100% more.

Unfortunately, stoking trade fears is a cheap and effective means for politicians to seem like they're "doing something" about the economy. Congress can easily derail CAFTA or some other trade agreement if voters are concerned. The impact any one such deal would be slight to the American economy. But if voters are really concerned about jobs, they shouldn't look to protectionism as a solution. The only way to change trends in job creation and income inequality is to improve the skill level of the American workforce; and this can only be achieved by reducing educational inequalities. But that's a big task. It's much easier to blame people who talk funny.

Rise of the machines, or how I learned to stop worrying and love trade

It's been a tough election cycle for proponents of trade. In particular, Hilary Clinton and Barack Obama turned the Democratic nomination race into a contest to see who hates trade the most. While campaigning in Ohio a few months ago, Obama declared:

"One million jobs have been lost because of NAFTA, including nearly 50,000 jobs here in Ohio. And yet, 10 years after NAFTA passed, Sen. Clinton said it was good for America. Well, I don't think NAFTA has been good for America -- and I never have"

Now Obama, the Democrat's presumptive nominee, has proposed a tax credit that is aimed at keeping jobs from moving overseas.

Why all the focus on trade? The concerns center on the decline of manufacturing employment and stagnant wages for blue collar workers.

Are these concerns warranted? Economic theory indicates that trade with developing countries could put downward pressure on wages for poorer Americans. However, empirical investigation of this issue has suggested that this effect is not that large. A recent book by Harvard economist Robert Lawrence shows that the gap between white- and blue-collar workers has not risen that much since the late 1990s when China's global integration accelerated and that the wages of the least skilled have improved relative to those in the middle. (see here for a larger discussion of these issues).

A large part of the problem here is disentangling the separate effects of trade and technology. Wages are closely tied to productivity. The main reason that American workers earn more money than their Chinese counterparts is that they produce more stuff in the same amount of time. Of course, one of the main factors that increase productivity is technology.

However, technology is a double edged sword. While technology raises productivity (and thus wages) it also eliminates many jobs. Consider this: despite losing 4 million manufacturing jobs between 1998 and 2007, US manufacturing output increased by 22%. Thanks to machines, we can make more stuff with less people.

What's interesting is despite the fact that technology has much more effect on manufacturing jobs than trade, politicians are not warning us against the impending robot threat. None except Arnold Schwarzenegger that is. And yet trade and technology have essentially the same impact: greater economic efficiency, which leads to lower prices and higher standards of living.

Politicians railing against technology would be laughed at as kooks. Certainly John McCain, who is already dealing with concerns about his age, wouldn't want to seem anti-progress. No one would support a tax credit for business that avoid using computers or other machinery.

However, unlike technology, foreigners represent salient fear for the public. Bryan Caplan has written extensively on the issue. There is a tendency to talk about trade with other countries in terms of it being a "race" or a "war", when in reality trade is mutually beneficial. Further, trade is a policy that politicians can change; technology is something they have less control over. So even if they have the same impact, it is more effective for politicians to rail against cheap labor in southeast Asia than to hate those adorable robots.

The good news is that we really don't need to fear either. Trade creates new economic opportunities and lower prices, which raise living standards. And recent research has shown that trade actually increases the purchasing power of the poor more than the rich, helping to stem inequality. Technology has largely the same effect. Despite the loss of 4 million manufacturing jobs over the last 10 years, unemployment has remained fairly constant. Technology may eliminate some jobs, but it creates many others.

So don't hate trade. And don't hate the machines either. Both improve your life in countless ways you don't even see.