Economics at Yahoo!

I've blogged before about Hal Varian, Chief Economist at Google, and how his role in the organisation has been central to Google's business model. I have also mentioned pioneering work at Yahoo! Research on the effectiveness of online advertising, the battle between Google, Yahoo! and Bing in the economics of internet search, and the statement by Yahoo! Research that they routinely compete for talent with the top ten economics departments in the world.

However, it has only now come to my attention that Varian has a counterpart at Yahoo! The economist in question is Preston McAfee, on leave from the position of J. Stanley Johnson Professor of Business, Economics, and Management at the California Institute of Technology. At Yahoo!, Professor McAfee is Vice President and Research Fellow at Yahoo! Research in Burbank, CA, where he leads a group focused on microeconomics research. Here is a list of recent publications from the Microeconomics and Social Systems cluster at Yahoo!

Professor McAfee wrote Introduction to Economic Analysis, a free, open-source text that spans both principles and intermediate microeconomics. In 1994, the FCC in the USA auctioned access to a number of radio frequencies for new communications services, using an auction designed by Paul Milgrom, Robert B. Wilson, and Professor McAfee, and raised over $17 billion. This auction design was copied around the world. McAfee, Milgrom, Wilson and John McMillan (1951-2007) formed a company, Market Design, Inc., that advises governments on how to maximize the return from sales of radio frequencies, mineral rights, airports, and other assets.

Returning to Yahoo!, The Register magazine describe the company's Right Media exchange — a display advertising marketplace that matches advertisers with publishers and ad networks — as (by one measure) the largest exchange in the world, running over nine billion auctions each day. Finally, the Yahoo! Advertising Blog is also an interesting read; the current post - Mad Men No More - features a discussion by "advertising’s new guard" on how they are re-defining the industry.

Links of Interest: 29th September

1. President Barack Obama chose Austan Goolsbee to succeed Christina Romer as the head of the U.S. Council of Economic Advisers. Here, the Wall Street Journal do a profile of Goolsbee.

2. The Guardian: a "nudge unit" set up by David Cameron in the Cabinet Office is working on how to use behavioural economics and market signals to persuade citizens to behave in a more socially integrated way.

3. The Daily Telegraph on Rory Sutherland's quiet behavioural economics revolution in the advertising industry.

4. Greatest Good: "a unique firm formed with the goal of applying rigorous, cutting-edge data analysis and economic methods to the most salient problems of business and philanthropy." Founding partners include Steven Levitt, Gary Becker, Daniel Kahneman and John List. Affiliates include David Laibson, Emily Oster, Steven Pinker and Richard Thaler.

5. The U.S. National Commission on Fiscal Responsibility and Reform. They have a separate mandate to the Congressional Budget Office. "The Commission is charged with identifying policies to improve the fiscal situation in the medium term and to achieve fiscal sustainability over the long run."

6. A fascinating read for any Ph.D. student in Economics, or Ph.D. economist: 'Market Structure in the Production of Economics Ph.D.s'. Frank A. Scott, Jr. and Jeffrey D. Anstine; Southern Economic Journal Vol. 64, No. 1 (Jul., 1997), pp. 307-320.

7. The (Irish) Department of Education and Skills Inventory of Data Sources: "This document contains a matrix of educational data sources which are available from the Department of Education and Science and the agencies under its aegis."

8. University Attendance Scanners: "Northern Arizona University has installed electronic devices that record student attendance in an effort to boost freshmen grades and lift lagging graduation rates. But some students say the monitoring makes them feel less independent." (Southern California Public Radio).

9. "The Production and Deployment of an On-line Video Learning Bank in a Skills Training Environment" - Gerald Cannon, Mary Kelly, Colette Lyng, Mary McGrath; AISHE-J: The All Ireland Journal of Teaching and Learning in Higher Education, Vol 1, No 1 (2009).

10. For economics undergraduates: the Irish Taxation Institute Fantasy Budget Competition. Who needs fantasy football?

The saturation mailings and advertising of Harlem Success Academy

See this message from a friend who lives on the Upper West side, who has a child entering Kindergarten next year, about the multiple mailings he has received from Harlem Success Academy:

Today we received the 3d or 4th mailing in the last week from the Harlem
Success Academy, looking to enroll [his son’s name].

This really surprises me: A. How do they get the $ to do direct mail & find out what kids are going to start kindergarten?
B. Why are they direct mailing to White couples on 102nd?

Really curious if you have any thoughts or insight - -

The infamous Eva Moskowitz/Joel Klein emails, FOILed by Juan Gonzalez of the Daily News and posted here, revealed how Klein overturned long-standing policy to provide her with names and addresses of prospective parents through mailing houses; and allowed her to make repeated mailings to promote her chain of charter schools.

Juan’s column in which he showed how she picked out the space she wanted for her schools in existing zoned public schools, which Klein then tried to illegally close for her benefit, is here.

His earlier column about the preferential treatment she received from Klein, including his help in securing a $1 million grant from the Broad Foundation to build an army of parents to promote their political agenda, is here.

In her emails to Klein, Eva confides her desire to engage in saturation mailings, supposedly to promote “choice”, but really to build up her waiting list; which then she uses as a political weapon in their battle to lift the charter cap.

This may be one reason DOE is making parents register for Kindergartens earlier at public schools, so they can capture their addresses and make them available to charter schools in time for their lotteries.

Though Eva told the NY Times she spends $325,000 on recruitment, a cursory examination of the school’s financial statements shows that her spending on recruitment is actually much more.

She has run ads in buses and is now also advertising on NY1. The actual expense must be near a million dollars or more. Harlem Children’s Zone was featured on American Express ads during the Oscars.

Of course, no district public school could afford this sort of marketing campaign; and if they did, they would be accused of wasteful spending.

To the left is Eva’s message to Klein, dated Dec. 21, 2007, in which she complains about the fact that DOE only allows “one mailing to elementary and pre-K families” and that she wants to be able to mail promotional materials 10-12 times to each family.

As in all things between Klein and Eva, she quickly gets her way. Her choices are clearly maximized! Soon thereafter, she is provided with unlimited mailings through a third party mailing house to prospective public school parents.

To the right and below is the response from Michael Duffy, the head of the DOE charter school office, written the day after Xmas, in which he pledges cooperation and tells her she can always call him, day or night, on his cell.

Eva has now extended the reach of her mailings into large swathes of Manhattan and the Bronx. As one astute observer pointed out, this not only allows her to build up her charter school waiting list, but also to gather names for future battles over the charter school cap, funding, or her own future candidacy.

Her mailings and advertising, financed through contributions from her hedge-fund supporters and billionaires like Broad, resemble the saturation mailings and domination of the air waves that New Yorkers have been subjected to by our billionaire mayor, each time he runs for re-election, sparing no expense.

Just as he has bought his way into a third term, the hostile takeover of public education by charter schools has nearly unlimited financing to back it up. No one could argue that this is an equal contest, when all the advantages are being provided to the charters; not to mention Klein’s relentless promotion of charter schools, which is priceless.

Is this the future we really want for our public schools?