Rasch’s Models for Measurement and Item Response Theory, Yet Again

A colleague in the midst of writing a peer review for an educational research journal just wrote to ask how it could happen that the automatic association of Rasch’s models for measurement with Item Response Theory (IRT) could still be so prevalent. In this particular case, it was necessary to inform the article’s authors that the Rasch rating scale and partial credit models are not IRT models. Everyone involved in developing those models refers to measurement theory; if IRT comes up, it is in a critical context.

The point applies to all of the multifaceted, multilevel, multidimensional, and polytomous models developed in relation to Rasch’s original dichotomous model. Rasch (1960, pp. 110-115) derives his model for reading comprehension via an analogy to Newton’s Second Law of Motion (Fisher, 2010b, 2021). Despite a wealth of explanations on the distinctions between statistical models like those advanced in IRT and scientific models like Rasch’s, the quick and easy connection continues to be accepted by many researchers, reviewers, and editors. So it seems that an update to the basic argument provided repeatedly in the past (Andrich, 1989a/b/c; Fisher, 2010a; Wright, 1977, 1984, 1997, 1999; many others) is in order.

In the article under review, the works cited (by Andrich, Bond, Masters, Wright, etc.) make no positive mention or constructive use of IRT. This is because the addition of the second and third item parameters renders the models unidentified (they change into incomparable forms across data sets and so cannot support generalized inferences); see Fisher (2021), San Martin & Rolin (2013), San Martin, et al. (2009, 2015). As Embretson (1996, p. 211) put it, “if item discrimination parameters are required to obtain fit, total score is not even monotonically related to the IRT theta parameters.” The illogic of the situation in IRT applications is rarely acknowledged, since basically no one ever bothers explaining why people answering the same questions and having the same scores have different measurements, why the item order jumps around depending on who is responding, and how to keep track of the item hierarchy relevant to each person. Even when multiple IRT item parameters are estimated, end use applications either simply remain silent about the interpretation issues or employ the unidimensional Rasch scale.

Accordingly, Lumsden (1978, p. 22) recommended that “The two- and three-parameter logistic and normal ogive scaling models should be abandoned since, if the unidimensionality requirement is met, the Rasch (1960) one-parameter model will be realized.” Wood (1978, p. 31) similarly said “two- and three-parameter models are not the answer – test scaling models are self-contradictory if they assert both unidimensionality and different slopes for the item characteristic curves.” Wright (1977, p. 220; also see Wright, 1984, 1997, 1999) explained that:

“When scientists measure they intend their measurements to be objective in the sense of being generalizable beyond the moment of measurement. This means that, whatever parameters are thought to characterize the measuring instruments, they must remain relatively stable through the range of intended application and must not interact substantially with the objects being measured. It also means that the parameters intended to describe the process of measurement can be estimated successfully.”

IRT model parameters do not remain stable and in fact focus on the substantive interactions, even though no one deliberately writes items or chooses samples with the intention of fulfilling theoretical expectations that these interactions will occur. That is, no one writes items intending them to change their difficulty order depending on who responds to them. For the second and third item parameters to make sense, though, that variation is exactly what would have to be intended. Such situations do exist, such that models based in sufficient statistics have been formulated to rescale logits and to account for systematic differences in the relationships of the unit and discrimination and guessing (Andrich, et al., 2016; Humphry, 2011). But as Andrich (1989a/b/c) emphasizes, IRT model formulations generally assume that the point is to describe data, no matter how uninterpretable they may be, instead of intentionally designing instruments to produce data satisfying basic principles of inference.

Fisher (2021) gives the history documenting Rasch’s and Thurstone’s involvements in the development of the concept of identified models. Moreover, this position has been substantiated in recent years in a number of articles and books connecting Rasch models with measurement science and metrology (Mari, and Wilson, 2014; Mari, at al., 2021; Pendrill, 2014, 2019; Pendrill and Fisher, 2015; Fisher and Cano, 2022; etc.). Luca Mari, an electrical engineer involved in the Bureau International des Poids et Mesures (BIPM) SI Unit metrological standards deliberations, stated, in an article co-authored with Mark Wilson, that “Rasch models belong to the same class that metrologists consider paradigmatic of measurement.” A past chair of the European Association of National Metrology Institutes, Leslie Pendrill (2014, p. 26), similarly says: “The Rasch approach…is not simply a mathematical or statistical approach, but instead [is] a specifically metrological approach to human-based measurement.”

Of course, as long as the systems of incentives and rewards goes on supporting illogical reasoning and emotional, political, and economic attachments to counterproductive methods, arguments like those presented here are not likely to have much impact. It is important to go on the record, however, with reasoned positions as it does sometime happen that small numbers of readers are persuaded to test and perhaps change their perspectives.

Education and persuasion have a limited place, though, in the overall strategy being pursued in these efforts to advance the science of measurement. The common languages supported by metrologically traceable and quality-assured measurement systems historically have proven themselves vastly more powerful and efficacious than the chaotic confusion of incomparable metrics. And far from reducing rich complexity to manageable uniformity, metrologically sound measurement science is quite akin to tuning the instruments of the human and social sciences, with all the implications that follow from that metaphor concerning support and opportunities for capitalizing on unique local creative improvisations.

The primary obstacle to creating such systems in education, health care, human resource management, social services, environmental sustainability, etc. is how to organically culture new relationships of trust. Work in this vein that has been underway for decades continues to gain momentum (Fisher, 2023a/b).

References

Andrich, D. (1989a). Constructing fundamental measurements in social psychology. In J. A. Keats, R. Taft, R. A. Heath & S. H. Lovibond (Eds.), Mathematical and theoretical systems. Proceedings of the 24th International Congress of Psychology of the International Union of Psychological Science, Vol. 4 (pp. pp. 17-26). North-Holland.

Andrich, D. (1989b). Distinctions between assumptions and requirements in measurement in the social sciences. In J. A. Keats, R. Taft, R. A. Heath & S. H. Lovibond (Eds.), Mathematical and Theoretical Systems: Proceedings of the 24th International Congress of Psychology of the International Union of Psychological Science, Vol. 4 (pp. 7-16). Elsevier Science Publishers.

Andrich, D. (1989c). Statistical reasoning in psychometric models and educational measurement. Journal of Educational Measurement, 26(1), 81-90.

Andrich, D., Marais, I., & Humphry, S. M. (2016). Controlling guessing bias in the dichotomous Rasch model applied to a large scale, vertically scaled testing program. Educational and Psychological Measurement, 76(3), 412-435.

Embretson, S. E. (1996, September). Item Response Theory models and spurious interaction effects in factorial ANOVA designs. Applied Psychological Measurement, 20(3), 201-212.

Fisher, W. P., Jr. (2010a). IRT and confusion about Rasch measurement. Rasch Measurement Transactions, 24(2), 1288 [http://www.rasch.org/rmt/rmt242.pdf].

Fisher, W. P., Jr. (2010b). The standard model in the history of the natural sciences, econometrics, and the social sciences. Journal of Physics Conference Series, 238(1), http://iopscience.iop.org/1742-6596/238/1/012016/pdf/1742-6596_238_1_012016.pdf.

Fisher, W. P., Jr. (2021). Separation theorems in econometrics and psychometrics: Rasch, Frisch, two Fishers, and implications for measurement. Journal of Interdisciplinary Economics, OnlineFirst, 1-32. https://journals.sagepub.com/doi/10.1177/02601079211033475

Fisher, W. P., Jr. (2023a). Foreword: Koans, semiotics, and metrology in Stenner’s approach to measurement-informed science and commerce. In W. P. Fisher, Jr. & P. J. Massengill (Eds.), Explanatory models, unit standards, and personalized learning in educational measurement: Selected papers by A. Jackson Stenner (pp. ix-lxx). Springer.

Fisher, W. P., Jr. (2023b). Measurement systems, brilliant results, and brilliant processes in healthcare: Untapped potentials of person-centered outcome metrology for cultivating trust. In W. P. Fisher, Jr. & S. Cano (Eds.), Person-centered outcome metrology: Principles and applications for high stakes decision making. Springer.

Fisher, W. P., Jr., & Cano, S. (Eds.). (2023). Person-centred outcome metrology: Principles and applications for high stakes decision making. Springer Series in Measurement Science & Technology. Springer. https://link.springer.com/book/9783031074646

Humphry, S. M. (2011). The role of the unit in physics and psychometrics. Measurement: Interdisciplinary Research and Perspectives, 9(1), 1-24.

Lumsden, J. (1978). Tests are perfectly reliable. British Journal of Mathematical and Statistical Psychology, 31, 19-26.

Mari, L., & Wilson, M. (2014, May). An introduction to the Rasch measurement approach for metrologists. Measurement, 51, 315-327. http://www.sciencedirect.com/science/article/pii/S0263224114000645

Mari, L., Wilson, M., & Maul, A. (2021). Measurement across the sciences: Developing a shared concept system for measurement. Springer Series in Measurement Science and Technology. Springer.

Pendrill, L. R. (2014, December). Man as a measurement instrument [Special Feature]. NCSLi Measure: The Journal of Measurement Science, 9(4), 22-33. http://www.tandfonline.com/doi/abs/10.1080/19315775.2014.11721702

Pendrill, L. R. (2019). Quality assured measurement: Unification across social and physical sciences. Springer.

Pendrill, L., & Fisher, W. P., Jr. (2015). Counting and quantification: Comparing psychometric and metrological perspectives on visual perceptions of number. Measurement, 71, 46-55. doi: http://dx.doi.org/10.1016/j.measurement.2015.04.010

Rasch, G. (1960). Probabilistic models for some intelligence and attainment tests (Reprint, with Foreword and Afterword by B. D. Wright, Chicago: University of Chicago Press, 1980). Danmarks Paedogogiske Institut.

San Martin, E., Gonzalez, J., & Tuerlinckx, F. (2009). Identified parameters, parameters of interest, and their relationships. Measurement: Interdisciplinary Research and Perspectives, 7(2), 97-105.

San Martin, E., Gonzalez, J., & Tuerlinckx, F. (2015). On the unidentifiability of the fixed-effects 3 PL model. Psychometrika, 80(2), 450-467.

San Martin, E., & Rolin, J. M. (2013). Identification of parametric Rasch-type models. Journal of Statistical Planning and Inference, 143(1), 116-130.

Wright, B. D. (1977). Misunderstanding the Rasch model. Journal of Educational Measurement, 14(3), 219-225.

Wright, B. D. (1984). Despair and hope for educational measurement. Contemporary Education Review, 3(1), 281-288 [http://www.rasch.org/memo41.htm].

Wright, B. D. (1997, Winter). A history of social science measurement. Educational Measurement: Issues and Practice, 16(4), 33-45, 52 [http://www.rasch.org/memo62.htm]. https://doi.org/10.1111/j.1745-3992.1997.tb00606.x

Wright, B. D. (1999). Fundamental measurement for psychology. In S. E. Embretson & S. L. Hershberger (Eds.), The new rules of measurement: What every educator and psychologist should know (pp. 65-104 [http://www.rasch.org/memo64.htm]). Lawrence Erlbaum Associates.

Excerpts and Notes from Goldberg’s “Billions of Drops…”

Goldberg, S. H. (2009). Billions of drops in millions of buckets: Why philanthropy doesn’t advance social progress. New York: Wiley.

p. 8:
Transaction costs: “…nonprofit financial markets are highly disorganized, with considerable duplication of effort, resource diversion, and processes that ‘take a fair amount of time to review grant applications and to make funding decisions’ [citing Harvard Business School Case No. 9-391-096, p. 7, Note on Starting a Nonprofit Venture, 11 Sept 1992]. It would be a major understatement to describe the resulting capital market as inefficient.”

A McKinsey study found that nonprofits spend 2.5 to 12 times more raising capital than for-profits do. When administrative costs are factored in, nonprofits spend 5.5 to 21.5 times more.

For-profit and nonprofit funding efforts contrasted on pages 8 and 9.

p. 10:
Balanced scorecard rating criteria

p. 11:
“Even at double-digit annual growth rates, it will take many years for social entrepreneurs and their funders to address even 10% of the populations in need.”

p. 12:
Exhibit 1.5 shows that the percentages of various needs served by leading social enterprises are barely drops in the respective buckets; they range from 0.07% to 3.30%.

pp. 14-16:
Nonprofit funding is not tied to performance. Even when a nonprofit makes the effort to show measured improvement in impact, it does little or nothing to change their funding picture. It appears that there is some kind of funding ceiling implicitly imposed by funders, since nonprofit growth and success seems to persuade capital sources that their work there is done. Mediocre and low performing nonprofits seem to be able to continue drawing funds indefinitely from sympathetic donors who don’t require evidence of effective use of their money.

p. 34:
“…meaningful reductions in poverty, illiteracy, violence, and hopelessness will require a fundamental restructuring of nonprofit capital markets. Such a restructuring would need to make it much easier for philanthropists of all stripes–large and small, public and private, institutional and individual–to fund nonprofit organizations that maximize social impact.”

p. 54:
Exhibit 2.3 is a chart showing that fewer people rose from poverty, and more remained in it or fell deeper into it, in the period of 1988-98 compared with 1969-1979.

pp. 70-71:
Kotter’s (1996) change cycle.

p. 75:
McKinsey’s seven elements of nonprofit capacity and capacity assessment grid.

pp. 94-95:
Exhibits 3.1 and 3.2 contrast the way financial markets reward for-profit performance with the way nonprofit markets reward fund raising efforts.

Financial markets
1. Market aggregates and disseminates standardized data
2. Analysts publish rigorous research reports
3. Investors proactively search for strong performers
4. Investors penalize weak performers
5. Market promotes performance
6. Strong performers grow

Nonprofit markets
1. Social performance is difficult to measure
2. NPOs don’t have resources or expertise to report results
3. Investors can’t get reliable or standardized results data
4. Strong and weak NPOs spend 40 to 60% of time fundraising
5. Market promotes fundraising
6. Investors can’t fund performance; NPOs can’t scale

p. 95:
“…nonprofits can’t possibly raise enough money to achieve transformative social impact within the constraints of the existing fundraising system. I submit that significant social progress cannot be achieved without what I’m going to call ‘third-stage funding,’ that is, funding that doesn’t suffer from disabling fragmentation. The existing nonprofit capital market is not capable of [p. 97] providing third-stage funding. Such funding can arise only when investors are sufficiently well informed to make big bets at understandable and manageable levels of risk. Existing nonprofit capital markets neither provide investors with the kinds of information needed–actionable information about nonprofit performance–nor provide the kinds of intermediation–active oversight by knowledgeable professionals–needed to mitigate risk. Absent third-stage funding, nonprofit capital will remain irreducibly fragmented, preventing the marshaling of resources that nonprofit organizations need to make meaningful and enduring progress against $100 million problems.”

pp. 99-114:
Text and diagrams on innovation, market adoption, transformative impact.

p. 140:
Exhibit 4.2: Capital distribution of nonprofits, highlighting mid-caps

pages 192-3 make the case for the difference between a regular market and the current state of philanthropic, social capital markets.

p. 192:
“So financial markets provide information investors can use to compare alternative investment opportunities based on their performance, and they provide a dynamic mechanism for moving money away from weak performers and toward strong performers. Just as water seeks its own level, markets continuously recalibrate prices until they achieve a roughly optimal equilibrium at which most companies receive the ‘right’ amount of investment. In this way, good companies thrive and bad ones improve or die.
“The social sector should work the same way. .. But philanthropic capital doesn’t flow toward effective nonprofits and away from ineffective nonprofits for a simple reason: contributors can’t tell the difference between the two. That is, philanthropists just don’t [p. 193] know what various nonprofits actually accomplish. Instead, they only know what nonprofits are trying to accomplish, and they only know that based on what the nonprofits themselves tell them.”

p. 193:
“The signs that the lack of social progress is linked to capital market dysfunctions are unmistakable: fundraising remains the number-one [p. 194] challenge of the sector despite the fact that nonprofit leaders divert some 40 to 60% of their time from productive work to chasing after money; donations raised are almost always too small, too short, and too restricted to enhance productive capacity; most mid-caps are ensnared in the ‘social entrepreneur’s trap’ of focusing on today and neglecting tomorrow; and so on. So any meaningful progress we could make in the direction of helping the nonprofit capital market allocate funds as effectively as the private capital market does could translate into tremendous advances in extending social and economic opportunity.
“Indeed, enhancing nonprofit capital allocation is likely to improve people’s lives much more than, say, further increasing the total amount of donations. Why? Because capital allocation has a multiplier effect.”

“If we want to materially improve the performance and increase the impact of the nonprofit sector, we need to understand what’s preventing [p. 195] it from doing a better job of allocating philanthropic capital. And figuring out why nonprofit capital markets don’t work very well requires us to understand why the financial markets do such a better job.”

p. 197:
“When all is said and done, securities prices are nothing more than convenient approximations that market participants accept as a way of simplifying their economic interactions, with a full understanding that market prices are useful even when they are way off the mark, as they so often are. In fact, that’s the whole point of markets: to aggregate the imperfect and incomplete knowledge held by vast numbers of traders about much various securities are worth and still make allocation choices that are better than we could without markets.
“Philanthropists face precisely the same problem: how to make better use of limited information to maximize output, in this case, social impact. Considering the dearth of useful tools available to donors today, the solution doesn’t have to be perfect or even all that good, at least at first. It just needs to improve the status quo and get better over time.
“Much of the solution, I believe, lies in finding useful adaptations of market mechanisms that will mitigate the effects of the same lack of reliable and comprehensive information about social sector performance. I would even go so far as to say that social enterprises can’t hope to realize their ‘one day, all children’ visions without a funding allociation system that acts more like a market.
“We can, and indeed do, make incremental improvements in nonprofit funding without market mechanisms. But without markets, I don’t see how we can fix the fragmentation problem or produce transformative social impact, such as ensuring that every child in America has a good education. The problems we face are too big and have too many moving parts to ignore the self-organizing dynamics of market economics. As Thomas Friedman said about the need to impose a carbon tax at a time of falling oil prices, ‘I’ve wracked my brain trying to think of ways to retool America around clean-power technologies without a price signal–i.e., a tax–and there are no effective ones.”

p. 199:
“Prices enable financial markets to work the way nonprofit capital markets should–by sending informative signals about the most effective organizations so that money will flow to them naturally..”

p. 200:
[Quotes Kurtzman citing De Soto on the mystery of capital. Also see p. 209, below.]
“‘Solve the mystery of capital and you solve many seemingly intractable problems along with it.'”
[That’s from page 69 in Kurtzman, 2002.]

p. 201:
[Goldberg says he’s quoting Daniel Yankelovich here, but the footnote does not appear to have anything to do with this quote:]
“‘The first step is to measure what can easily be measured. The second is to disregard what can’t be measured, or give it an arbitrary quantitative value. This is artificial and misleading. The third step is to presume that what can’t be measured easily isn’t very important. This is blindness. The fourth step is to say that what can’t be easily measured really doesn’t exist. This is suicide.'”

Goldberg gives example here of $10,000 invested witha a 10% increase in value, compared with $10,000 put into a nonprofit. “But if the nonprofit makes good use of the money and, let’s say, brings the reading scores of 10 elementary school students up from below grade level to grade level, we can’t say how much my initial investment is ‘worth’ now. I could make the argument that the value has increased because the students have received a demonstrated educational benefit that is valuable to them. Since that’s the reason I made the donation, the achievement of higher scores must have value to me, as well.”

p. 202:
Goldberg wonders whether donations to nonprofits would be better conceived as purchases than investments.

p. 207:
Goldberg quotes Jon Gertner from the March 9, 2008, issue of the New York Times Magazine devoted to philanthropy:

“‘Why shouldn’t the world’s smartest capitalists be able to figure out more effective ways to give out money now? And why shouldn’t they want to make sure their philanthropy has significant social impact? If they can measure impact, couldn’t they get past the resistance that [Warren] Buffet highlighted and finally separate what works from what doesn’t?'”

p. 208:
“Once we abandon the false notions that financial markets are precision instruments for measuring unambiguous phenomena, and that the business and nonproft sectors are based in mutually exclusive principles of value, we can deconstruct the true nature of the problems we need to address and adapt market-like mechanisms that are suited to the particulars of the social sector.
“All of this is a long way (okay, a very long way) of saying that even ordinal rankings of nonprofit investments can have tremendous value in choosing among competing donation opportunities, especially when the choices are so numerous and varied. If I’m a social investor, I’d really like to know which nonprofits are likely to produce ‘more’ impact and which ones are likely to produce ‘less.'”

“It isn’t necessary to replicate the complex working of the modern stock markets to fashion an intelligent and useful nonprofit capital allocation mechanism. All we’re looking for is some kind of functional indication that would (1) isolate promising nonprofit investments from among the confusing swarm of too many seemingly worthy social-purpose organizations and (2) roughly differentiate among them based on the likelihood of ‘more’ or ‘less’ impact. This is what I meant earlier by increasing [p. 209] signals and decreasing noise.”

p. 209:
Goldberg apparently didn’t read De Soto, as he says that the mystery of capital is posed by Kurtzman and says it is solved via the collective intelligence and wisdom of crowds. This completely misses the point of the crucial value that transparent representations of structural invariance hold in market functionality. Goldberg is apparently offering a loose kind of market for which there is an aggregate index of stocks for nonprofits that are built up from their various ordinal performance measures. I think I find a better way in my work, building more closely from De Soto (Fisher, 2002, 2003, 2005, 2007, 2009a, 2009b).

p. 231:
Goldberg quotes Harvard’s Allen Grossman (1999) on the cost-benefit boundaries of more effective nonprofit capital allocation:

“‘Is there a significant downside risk in restructuring some portion of the philanthropic capital markets to test the effectiveness of performance driven philanthropy? The short answer is, ‘No.’ The current reality is that most broad-based solutions to social problems have eluded the conventional and fragmented approaches to philanthropy. It is hard to imagine that experiments to change the system to a more performance driven and rational market would negatively impact the effectiveness of the current funding flows–and could have dramatic upside potential.'”

p. 232:
Quotes Douglas Hubbard’s How to Measure Anything book that Stenner endorsed, and Linacre and I didn’t.

p. 233:
Cites Stevens on the four levels of measurement and uses it to justify his position concerning ordinal rankings, recognizing that “we can’t add or subtract ordinals.”

pp. 233-5:
Justifies ordinal measures via example of Google’s PageRank algorithm. [I could connect from here using Mary Garner’s (2009) comparison of PageRank with Rasch.]

p. 236:
Goldberg tries to justify the use of ordinal measures by citing their widespread use in social science and health care. He conveniently ignores the fact that virtually all of the same problems and criticisms that apply to philanthropic capital markets also apply in these areas. In not grasping the fundamental value of De Soto’s concept of transferable and transparent representations, and in knowing nothing of Rasch measurement, he was unable to properly evaluate to potential of ordinal data’s role in the formation of philanthropic capital markets. Ordinal measures aren’t just not good enough, they represent a dangerous diversion of resources that will be put into systems that take on lives of their own, creating a new layer of dysfunctional relationships that will be hard to overcome.

p. 261 [Goldberg shows here his complete ignorance about measurement. He is apparently totally unaware of the work that is in fact most relevant to his cause, going back to Thurstone in 1920s, Rasch in the 1950s-1970s, and Wright in the 1960s to 2000. Both of the problems he identifies have long since been solved in theory and in practice in a wide range of domains in education, psychology, health care, etc.]:
“Having first studied performance evaluation some 30 years ago, I feel confident in saying that all the foundational work has been done. There won’t be a ‘eureka!’ breakthrough where someone finally figures out the one true way to guage nonprofit effectiveness.
“Indeed, I would venture to say that we know virtually everything there is to know about measuring the performance of nonprofit organizations with only two exceptions: (1) How can we compare nonprofits with different missions or approaches, and (2) how can we make actionable performance assessments common practice for growth-ready mid-caps and readily available to all prospective donors?”

p. 263:
“Why would a social entrepreneur divert limited resources to impact assessment if there were no prospects it would increase funding? How could an investor who wanted to maximize the impact of her giving possibly put more golden eggs in fewer impact-producing baskets if she had no way to distinguish one basket from another? The result: there’s no performance data to attract growth capital, and there’s no growth capital to induce performance measurement. Until we fix that Catch-22, performance evaluation will not become an integral part of social enterprise.”

pp. 264-5:
Long quotation from Ken Berger at Charity Navigator on their ongoing efforts at developing an outcome measurement system. [wpf, 8 Nov 2009: I read the passage quoted by Goldberg in Berger’s blog when it came out and have been watching and waiting ever since for the new system. wpf, 8 Feb 2012: The new system has been online for some time but still does not include anything on impacts or outcomes. It has expanded from a sole focus on financials to also include accountability and transparency. But it does not yet address Goldberg’s concerns as there still is no way to tell what works from what doesn’t.]

p. 265:
“The failure of the social sector to coordinate independent assets and create a whole that exceeds the sum of its parts results from an absence of.. platform leadership’: ‘the ability of a company to drive innovation around a particular platform technology at the broad industry level.’ The object is to multiply value by working together: ‘the more people who use the platform products, the more incentives there are for complement producers to introduce more complementary products, causing a virtuous cycle.'” [Quotes here from Cusumano & Gawer (2002). The concept of platform leadership speaks directly to the system of issues raised by Miller & O’Leary (2007) that must be addressed to form effective HSN capital markets.]

p. 266:
“…the nonprofit sector has a great deal of both money and innovation, but too little available information about too many organizations. The result is capital fragmentation that squelches growth. None of the stakeholders has enough horsepower on its own to impose order on this chaos, but some kind of realignment could release all of that pent-up potential energy. While command-and-control authority is neither feasible nor desirable, the conditions are ripe for platform leadership.”

“It is doubtful that the IMPEX could amass all of the resources internally needed to build and grow a virtual nonprofit stock market that could connect large numbers of growth-capital investors with large numbers of [p. 267] growth-ready mid-caps. But it might be able to convene a powerful coalition of complementary actors that could achieve a critical mass of support for performance-based philanthropy. The challenge would be to develop an organization focused on filling the gaps rather than encroaching on the turf of established firms whose participation and innovation would be required to build a platform for nurturing growth of social enterprise..”

p. 268-9:
Intermediated nonprofit capital market shifts fundraising burden from grantees to intermediaries.

p. 271:
“The surging growth of national donor-advised funds, which simplify and reduce the transaction costs of methodical giving, exemplifies the kind of financial innovation that is poised to leverage market-based investment guidance.” [President of Schwab Charitable quoted as wanting to make charitable giving information- and results-driven.]

p. 272:
Rating agencies and organizations: Charity Navigator, Guidestar, Wise Giving Alliance.
Online donor rankings: GlobalGiving, GreatNonprofits, SocialMarkets
Evaluation consultants: Mathematica

Google’s mission statement: “to organize the world’s information and make it universally accessible and useful.”

p. 273:
Exhibit 9.4 Impact Index Whole Product
Image of stakeholders circling IMPEX:
Trading engine
Listed nonprofits
Data producers and aggregators
Trading community
Researchers and analysts
Investors and advisors
Government and business supporters

p. 275:
“That’s the starting point for replication [of social innovations that work]: finding and funding; matching money with performance.”

[WPF bottom line: Because Goldberg misses De Soto’s point about transparent representations resolving the mystery of capital, he is unable to see his way toward making the nonprofit capital markets function more like financial capital markets, with the difference being the focus on the growth of human, social, and natural capital. Though Goldberg intuits good points about the wisdom of crowds, he doesn’t know enough about the flaws of ordinal measurement relative to interval measurement, or about the relatively easy access to interval measures that can be had, to do the job.]

References

Cusumano, M. A., & Gawer, A. (2002, Spring). The elements of platform leadership. MIT Sloan Management Review, 43(3), 58.

De Soto, H. (2000). The mystery of capital: Why capitalism triumphs in the West and fails everywhere else. New York: Basic Books.

Fisher, W. P., Jr. (2002, Spring). “The Mystery of Capital” and the human sciences. Rasch Measurement Transactions, 15(4), 854 [http://www.rasch.org/rmt/rmt154j.htm].

Fisher, W. P., Jr. (2003). Measurement and communities of inquiry. Rasch Measurement Transactions, 17(3), 936-8 [http://www.rasch.org/rmt/rmt173.pdf].

Fisher, W. P., Jr. (2005). Daredevil barnstorming to the tipping point: New aspirations for the human sciences. Journal of Applied Measurement, 6(3), 173-9 [http://www.livingcapitalmetrics.com/images/FisherJAM05.pdf].

Fisher, W. P., Jr. (2007, Summer). Living capital metrics. Rasch Measurement Transactions, 21(1), 1092-3 [http://www.rasch.org/rmt/rmt211.pdf].

Fisher, W. P., Jr. (2009a). Bringing human, social, and natural capital to life: Practical consequences and opportunities. In M. Wilson, K. Draney, N. Brown & B. Duckor (Eds.), Advances in Rasch Measurement, Vol. Two (p. in press [http://www.livingcapitalmetrics.com/images/BringingHSN_FisherARMII.pdf]). Maple Grove, MN: JAM Press.

Fisher, W. P., Jr. (2009b, November). Invariance and traceability for measures of human, social, and natural capital: Theory and application. Measurement (Elsevier), 42(9), 1278-1287.

Garner, M. (2009, Autumn). Google’s PageRank algorithm and the Rasch measurement model. Rasch Measurement Transactions, 23(2), 1201-2 [http://www.rasch.org/rmt/rmt232.pdf].

Grossman, A. (1999). Philanthropic social capital markets: Performance driven philanthropy (Social Enterprise Series 12 No. 00-002). Harvard Business School Working Paper.

Kotter, J. (1996). Leading change. Cambridge, Massachusetts: Harvard Business School Press.

Kurtzman, J. (2002). How the markets really work. New York: Crown Business.

Miller, P., & O’Leary, T. (2007, October/November). Mediating instruments and making markets: Capital budgeting, science and the economy. Accounting, Organizations, and Society, 32(7-8), 701-34.

The Moral Implications of the Concept of Human Capital: More on How to Create Living Capital Markets

The moral reprehensibility of the concept of human capital hinges on its use in rationalizing impersonal business decisions in the name of profits. Even when the viability of the organization is at stake, the discarding of people (referred to in some human resource departments as “taking out the trash”) entails degrees of psychological and economic injury no one should have to suffer, or inflict.

There certainly is a justified need for a general concept naming the productive capacity of labor. But labor is far more than a capacity for work. No one’s working life should be reduced to a job description. Labor involves a wide range of different combinations of skills, abilities, motivations, health, and trustworthiness. Human capital has then come to be broken down into a wide variety of forms, such as literacy capital, health capital, social capital, etc.

The metaphoric use of the word “capital” in the phrase “human capital” referring to stocks of available human resources rings hollow. The traditional concept of labor as a form of capital is an unjustified reduction of diverse capacities in itself. But the problem goes deeper. Intangible resources like labor are not represented and managed in the forms that make markets for tangible resources efficient. Transferable representations, like titles and deeds, give property a legal status as owned and an economic status as financially fungible. And in those legal and economic terms, tangible forms of capital give capitalism its hallmark signification as the lifeblood of the cycle of investment, profits, and reinvestment.

Intangible forms of capital, in contrast, are managed without the benefit of any standardized way of proving what is owned, what quantity or quality of it exists, and what it costs. Human, social, and natural forms of capital are therefore managed directly, by acting in an unmediated way on whomever or whatever embodies them. Such management requires, even in capitalist economies, the use of what are inherently socialistic methods, as these are the only methods available for dealing with the concrete individual people, communities, and ecologies involved (Fisher, 2002, 2011; drawing from Hayek, 1948, 1988; De Soto, 2000).

The assumption that transferable representations of intangible assets are inconceivable or inherently reductionist is, however, completely mistaken. All economic capital is ultimately brought to life (conceived, gestated, midwifed, and nurtured to maturity) as scientific capital. Scientific measurability is what makes it possible to add up the value of shares of stock across holdings, to divide something owned into shares, and to represent something in a court or a bank in a portable form (Latour, 1987; Fisher, 2002, 2011).

Only when you appreciate this distinction between dead and living capital, between capital represented on transferable instruments and capital that is not, then you can see that the real tragedy is not in the treatment of labor as capital. No, the real tragedy is in the way everyone is denied the full exercise of their rights over the skills, abilities, health, motivations, trustworthiness, and environmental resources that are rightly their own personal, private property.

Being homogenized at the population level into an interchangeable statistic is tragic enough. But when we leave the matter here, we fail to see and to grasp the meaning of the opportunities that are lost in that myopic world view. As I have been at pains in this blog to show, statistics are not measures. Statistical models of interactions between several variables at the group level are not the same thing as measurement models of interactions within a single variable at the individual level. When statistical models are used in place of measurement models, the result is inevitably numbers without a soul. When measurement models of individual response processes are used to produce meaningful estimates of how much of something someone possesses, a whole different world of possibilities opens up.

In the same way that the Pythagorean Theorem applies to any triangle, so, too, do the coordinates from the international geodetic survey make it possible to know everything that needs to be known about the location and disposition of a piece of real estate. Advanced measurement models in the psychosocial sciences are making it possible to arrive at similarly convenient and objective ways of representing the quality and quantity of intangible assets. Instead of being just one number among many others, real measures tell a story that situates each of us relative to everyone else in a meaningful way.

The practical meaning of the maxim “you manage what you measure” stems from those instances in which measures embody the fullness of the very thing that is the object of management interest. An engine’s fuel efficiency, or the volume of commodities produced, for instance, are things that can be managed less or more efficiently because there are measures of them that directly represent just what we want to control. Lean thinking enables the removal of resources that do not contribute to the production of the desired end result.

Many metrics, however, tend to obscure and distract from what need to be managed. The objects of measurement may seem to be obviously related to what needs to be managed, but dealing with each of them piecemeal results in inefficient and ineffective management. In these instances, instead of the characteristic cycle of investment, profit, and reinvestment, there seems only a bottomless pit absorbing ever more investment and never producing a profit. Why?

The economic dysfunctionality of intangible asset markets is intimately tied up with the moral dysfunctionality of those markets. Drawing an analogy from a recent analysis of political freedom (Shirky, 2010), economic freedom has to be accompanied by a market society economically literate enough, economically empowered enough, and interconnected enough to trade on the capital stocks issued. Western society, and increasingly the entire global society, is arguably economically literate and sufficiently interconnected to exercise economic freedom.

Economic empowerment is another matter entirely. There is no economic power without fungible capital, without ways of representing resources of all kinds, tangible and intangible, that transparently show what is available, how much of it there is, and what quality it is. A form of currency expressing the value of that capital is essential, but money is wildly insufficient to the task of determining the quality and quantity of the available capital stocks.

Today’s education, health care, human resource, and environmental quality markets are the diametric opposite of the markets in which investors, producers, and consumers are empowered. Only when dead human, social, and natural capital is brought to life in efficient markets (Fisher, 2011) will we empower ourselves with fuller degrees of creative control over our economic lives.

The crux of the economic empowerment issue is this: in the current context of inefficient intangibles markets, everyone is personally commodified. Everything that makes me valuable to an employer or investor or customer, my skills, motivations, health, and trustworthiness, is unjustifiably reduced to a homogenized unit of labor. And in the social and environmental quality markets, voting our shares is cumbersome, expensive, and often ineffective because of the immense amount of work that has to be done to defend each particular living manifestation of the value we want to protect.

Concentrated economic power is exercised in the mass markets of dead, socialized intangible assets in ways that we are taught to think of as impersonal and indifferent to each of us as individuals, but which is actually experienced by us as intensely personal.

So what is the difference between being treated personally as a commodity and being treated impersonally as a commodity? This is the same as asking what it would mean to be empowered economically with creative control over the stocks of human, social, and natural capital that are rightfully our private property. This difference is the difference between dead and living capital (Fisher, 2002, 2011).

Freedom of economic communication, realized in the trade of privately owned stocks of any form of capital, ought to be the highest priority in the way we think about the infrastructure of a sustainable and socially responsible economy. For maximum efficiency, that freedom requires a common meaningful and rigorous quantitative language enabling determinations of what exactly is for sale, and its quality, quantity, and unit price. As I have ad nauseum repeated in this blog, measurement based in scientifically calibrated instrumentation traceable to consensus standards is absolutely essential to meeting this need.

Coming in at a very close second to the highest priority is securing the ability to trade. A strong market society, where people can exercise the right to control their own private property—their personal stocks of human, social, and natural capital—in highly efficient markets, is more important than policies, regulations, and five-year plans dictating how masses of supposedly homogenous labor, social, and environmental commodities are priced and managed.

So instead of reacting to the downside of the business cycle with a socialistic safety net, how might a capitalistic one prove more humane, moral, and economically profitable? Instead of guaranteeing a limited amount of unemployment insurance funded through taxes, what we should have are requirements for minimum investments in social capital. Instead of employment in the usual sense of the term, with its implications of hiring and firing, we should have an open market for fungible human capital, in which everyone can track the price of their stock, attract and make new investments, take profits and income, upgrade the quality and/or quantity of their stock, etc.

In this context, instead of receiving unemployment compensation, workers not currently engaged in remunerated use of their skills would cash in some of their accumulated stock of social capital. The cost of social capital would go up in periods of high demand, as during the recent economic downturns caused by betrayals of trust and commitment (which are, in effect, involuntary expenditures of social capital). Conversely, the cost of human capital would also fluctuate with supply and demand, with the profits (currently referred to as wages) turned by individual workers rising and falling with the price of their stocks. These ups and downs, being absorbed by everyone in proportion to their investments, would reduce the distorted proportions we see today in the shares of the rewards and punishments allotted.

Though no one would have a guaranteed wage, everyone would have the opportunity to manage their capital to the fullest, by upgrading it, keeping it current, and selling it to the highest bidder. Ebbing and flowing tides would more truly lift and drop all boats together, with the drops backed up with the social capital markets’ tangible reassurance that we are all in this together. This kind of a social capitalism transforms the supposedly impersonal but actually highly personal indifference of flows in human capital into a more fully impersonal indifference in which individuals have the potential to maximize the realization of their personal goals.

What we need is to create a visible alternative to the bankrupt economic system in a kind of reverse shock doctrine. Eleanor Roosevelt often said that the thing we are most afraid of is the thing we most need to confront if we are to grow. The more we struggle against what we fear, the further we are carried away from what we want. Only when we relax into the binding constraints do we find them loosened. Only when we channel overwhelming force against itself or in a productive direction can we withstand attack. When we find the courage to go where the wild things are and look the monsters in the eye will we have the opportunity to see if their fearful aspect is transformed to playfulness. What is left is often a more mundane set of challenges, the residuals of a developmental transition to a new level of hierarchical complexity.

And this is the case with the moral implications of the concept of human capital. Treating individuals as fungible commodities is a way that some use to protect themselves from feeling like monsters and from being discarded as well. Those who find themselves removed from the satisfactions of working life can blame the shortsightedness of their former colleagues, or the ugliness of the unfeeling system. But neither defensive nor offensive rationalizations do anything to address the actual problem, and the problem has nothing to do with the morality or the immorality of the concept of human capital.

The problem is the problem. That is, the way we approach and define the problem delimits the sphere of the creative options we have for solving it. As Henry Ford is supposed to have said, whether you think you can or you think you cannot, you’re probably right. It is up to us to decide whether we can create an economic system that justifies its reductions and actually lives up to its billing as impersonal and unbiased, or if we cannot. Either way, we’ll have to accept and live with the consequences.

References

DeSoto, H. (2000). The mystery of capital: Why capitalism triumphs in the West and fails everywhere else. New York: Basic Books.

Fisher, W. P., Jr. (2002, Spring). “The Mystery of Capital” and the human sciences. Rasch Measurement Transactions, 15(4), 854 [http://www.rasch.org/rmt/rmt154j.htm].

Fisher, W. P., Jr. (2011, Spring). Bringing human, social, and natural capital to life: Practical consequences and opportunities. Journal of Applied Measurement, 12(1), in press.

Hayek, F. A. (1948). Individualism and economic order. Chicago: University of Chicago Press.

Hayek, F. A. (1988). The fatal conceit: The errors of socialism (W. W. Bartley, III, Ed.) The Collected Works of F. A. Hayek. Chicago: University of Chicago Press.

Latour, B. (1987). Science in action: How to follow scientists and engineers through society. New York: Cambridge University Press.

Shirky, C. (2010, December 20). The political power of social media: Technology, the public sphere, and political change. Foreign Affairs, 90(1), http://www.foreignaffairs.com/articles/67038/clay-shirky/the-political-power-of-social-media.

LivingCapitalMetrics Blog by William P. Fisher, Jr., Ph.D. is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
Based on a work at livingcapitalmetrics.wordpress.com.
Permissions beyond the scope of this license may be available at http://www.livingcapitalmetrics.com.

A Simple Example of How Better Measurement Creates New Market Efficiencies, Reduces Transaction Costs, and Enables the Pricing of Intangible Assets

One of the ironies of life is that we often overlook the obvious in favor of the obscure. And so one hears of huge resources poured into finding and capitalizing on opportunities that provide infinitesimally small returns, while other opportunities—with equally certain odds of success but far more profitable returns—are completely neglected.

The National Institute for Standards and Technology (NIST) reports returns on investment ranging from 32% to over 400% in 32 metrological improvements made in semiconductors, construction, automation, computers, materials, manufacturing, chemicals, photonics, communications and pharmaceuticals (NIST, 2009). Previous posts in this blog offer more information on the economic value of metrology. The point is that the returns obtained from improvements in the measurement of tangible assets will likely also be achieved in the measurement of intangible assets.

How? With a little bit of imagination, each stage in the development of increasingly meaningful, efficient, and useful measures described in this previous post can be seen as implying a significant return on investment. As those returns are sought, investors will coordinate and align different technologies and resources relative to a roadmap of how these stages are likely to unfold in the future, as described in this previous post. The basic concepts of how efficient and meaningful measurement reduces transaction costs and market frictions, and how it brings capital to life, are explained and documented in my publications (Fisher, 2002-2011), but what would a concrete example of the new value created look like?

The examples I have in mind hinge on the difference between counting and measuring. Counting is a natural and obvious thing to do when we need some indication of how much of something there is. But counting is not measuring (Cooper & Humphry, 2010; Wright, 1989, 1992, 1993, 1999). This is not some minor academic distinction of no practical use or consequence. It is rather the source of the vast majority of the problems we have in comparing outcome and performance measures.

Imagine how things would be if we couldn’t weigh fruit in a grocery store, and all we could do was count pieces. We can tell when eight small oranges possess less overall mass of fruit than four large ones by weighing them; the eight small oranges might weigh .75 kilograms (about 1.6 pounds) while the four large ones come in at 1.0 kilo (2.2 pounds). If oranges were sold by count instead of weight, perceptive traders would buy small oranges and make more money selling them than they could if they bought large ones.

But we can’t currently arrive so easily at the comparisons we need when we’re buying and selling intangible assets, like those produced as the outcomes of educational, health care, or other services. So I want to walk through a couple of very down-to-earth examples to bring the point home. Today we’ll focus on the simplest version of the story, and tomorrow we’ll take up a little more complicated version, dealing with the counts, percentages, and scores used in balanced scorecard and dashboard metrics of various kinds.

What if you score eight on one reading test and I score four on a different reading test? Who has more reading ability? In the same way that we might be able to tell just by looking that eight small oranges are likely to have less actual orange fruit than four big ones, we might also be able to tell just by looking that eight easy (short, common) words can likely be read correctly with less reading ability than four difficult (long, rare) words can be.

So let’s analyze the difference between buying oranges and buying reading ability. We’ll set up three scenarios for buying reading ability. In all three, we’ll imagine we’re comparing how we buy oranges with the way we would have to go about buying reading ability today if teachers were paid for the gains made on the tests they administer at the beginning and end of the school year.

In the first scenario, the teachers make up their own tests. In the second, the teachers each use a different standardized test. In the third, each teacher uses a computer program that draws questions from the same online bank of precalibrated items to construct a unique test custom tailored to each student. Reading ability scenario one is likely the most commonly found in real life. Scenario three is the rarest, but nonetheless describes a situation that has been available to millions of students in the U.S., Australia, and elsewhere for several years. Scenarios one, two and three correspond with developmental levels one, three, and five described in a previous blog entry.

Buying Oranges

When you go into one grocery store and I go into another, we don’t have any oranges with us. When we leave, I have eight and you have four. I have twice as many oranges as you, but yours weigh a kilo, about a third more than mine (.75 kilos).

When we paid for the oranges, the transaction was finished in a few seconds. Neither one of us experienced any confusion, annoyance, or inconvenience in relation to the quality of information we had on the amount of orange fruits we were buying. I did not, however, pay twice as much as you did. In fact, you paid more for yours than I did for mine, in direct proportion to the difference in the measured amounts.

No negotiations were necessary to consummate the transactions, and there was no need for special inquiries about how much orange we were buying. We knew from experience in this and other stores that the prices we paid were comparable with those offered in other times and places. Our information was cheap, as it was printed on the bag of oranges or could be read off a scale, and it was very high quality, as the measures were directly comparable with measures from any other scale in any other store. So, in buying oranges, the impact of information quality on the overall cost of the transaction was so inexpensive as to be negligible.

Buying Reading Ability (Scenario 1)

So now you and I go through third grade as eight year olds. You’re in one school and I’m in another. We have different teachers. Each teacher makes up his or her own reading tests. When we started the school year, we each took a reading test (different ones), and we took another (again, different ones) as we ended the school year.

For each test, your teacher counted up your correct answers and divided by the total number of questions; so did mine. You got 72% correct on the first one, and 94% correct on the last one. I got 83% correct on the first one, and 86% correct on the last one. Your score went up 22%, much more than the 3% mine went up. But did you learn more? It is impossible to tell. What if both of your tests were easier—not just for you or for me but for everyone—than both of mine? What if my second test was a lot harder than my first one? On the other hand, what if your tests were harder than mine? Perhaps you did even better than your scores seem to indicate.

We’ll just exclude from consideration other factors that might come to bear, such as whether your tests were significantly longer or shorter than mine, or if one of us ran out of time and did not answer a lot of questions.

If our parents had to pay the reading teacher at the end of the school year for the gains that were made, how would they tell what they were getting for their money? What if your teacher gave a hard test at the start of the year and an easy one at the end of the year so that you’d have a big gain and your parents would have to pay more? What if my teacher gave an easy test at the start of the year and a hard one at the end, so that a really high price could be put on very small gains? If our parents were to compare their experiences in buying our improved reading ability, they would have a lot of questions about how much improvement was actually obtained. They would be confused and annoyed at how inconvenient the scores are, because they are difficult, if not impossible, to compare. A lot of time and effort might be invested in examining the words and sentences in each of the four reading tests to try to determine how easy or hard they are in relation to each other. Or, more likely, everyone would throw their hands up and pay as little as they possibly can for outcomes they don’t understand.

Buying Reading Ability (Scenario 2)

In this scenario, we are third graders again, in different schools with different reading teachers. Now, instead of our teachers making up their own tests, our reading abilities are measured at the beginning and the end of the school year using two different standardized tests sold by competing testing companies. You’re in a private suburban school that’s part of an independent schools association. I’m in a public school along with dozens of others in an urban school district.

For each test, our parents received a report in the mail showing our scores. As before, we know how many questions we each answered correctly, and, unlike before, we don’t know which particular questions we got right or wrong. Finally, we don’t know how easy or hard your tests were relative to mine, but we know that the two tests you took were equated, and so were the two I took. That means your tests will show how much reading ability you gained, and so will mine.

We have one new bit of information we didn’t have before, and that’s a percentile score. Now we know that at the beginning of the year, with a percentile ranking of 72, you performed better than 72% of the other private school third graders taking this test, and at the end of the year you performed better than 76% of them. In contrast, I had percentiles of 84 and 89.

The question we have to ask now is if our parents are going to pay for the percentile gain, or for the actual gain in reading ability. You and I each learned more than our peers did on average, since our percentile scores went up, but this would not work out as a satisfactory way to pay teachers. Averages being averages, if you and I learned more and faster, someone else learned less and slower, so that, in the end, it all balances out. Are we to have teachers paying parents when their children learn less, simply redistributing money in a zero sum game?

And so, additional individualized reports are sent to our parents by the testing companies. Your tests are equated with each other, and they measure in a comparable unit that ranges from 120 to 480. You had a starting score of 235 and finished the year with a score of 420, for a gain of 185.

The tests I took are comparable and measure in the same unit, too, but not the same unit as your tests measure in. Scores on my tests range from 400 to 1200. I started the year with a score of 790, and finished at 1080, for a gain of 290.

Now the confusion in the first scenario is overcome, in part. Our parents can see that we each made real gains in reading ability. The difficulty levels of the two tests you took are the same, as are the difficulties of the two tests I took. But our parents still don’t know what to pay the teacher because they can’t tell if you or I learned more. You had lower percentiles and test scores than I did, but you are being compared with what is likely a higher scoring group of suburban and higher socioeconomic status students than the urban group of disadvantaged students I’m compared against. And your scores aren’t comparable with mine, so you might have started and finished with more reading ability than I did, or maybe I had more than you. There isn’t enough information here to tell.

So, again, the information that is provided is insufficient to the task of settling on a reasonable price for the outcomes obtained. Our parents will again be annoyed and confused by the low quality information that makes it impossible to know what to pay the teacher.

Buying Reading Ability (Scenario 3)

In the third scenario, we are still third graders in different schools with different reading teachers. This time our reading abilities are measured by tests that are completely unique. Every student has a test custom tailored to their particular ability. Unlike the tests in the first and second scenarios, however, now all of the tests have been constructed carefully on the basis of extensive data analysis and experimental tests. Different testing companies are providing the service, but they have gone to the trouble to work together to create consensus standards defining the unit of measurement for any and all reading test items.

For each test, our parents received a report in the mail showing our measures. As before, we know how many questions we each answered correctly. Now, though we don’t know which particular questions we got right or wrong, we can see typical items ordered by difficulty lined up in a way that shows us what kind of items we got wrong, and which kind we got right. And now we also know your tests were equated relative to mine, so we can compare how much reading ability you gained relative to how much I gained. Now our parents can confidently determine how much they should pay the teacher, at least in proportion to their children’s relative measures. If our measured gains are equal, the same payment can be made. If one of us obtained more value, then proportionately more should be paid.

In this third scenario, we have a situation directly analogous to buying oranges. You have a measured amount of increased reading ability that is expressed in the same unit as my gain in reading ability, just as the weights of the oranges are comparable. Further, your test items were not identical with mine, and so the difficulties of the items we took surely differed, just as the sizes of the oranges we bought did.

This third scenario could be made yet more efficient by removing the need for creating and maintaining a calibrated item bank, as described by Stenner and Stone (2003) and in the sixth developmental level in a prior blog post here. Also, additional efficiencies could be gained by unifying the interpretation of the reading ability measures, so that progress through high school can be tracked with respect to the reading demands of adult life (Williamson, 2008).

Comparison of the Purchasing Experiences

In contrast with the grocery store experience, paying for increased reading ability in the first scenario is fraught with low quality information that greatly increases the cost of the transactions. The information is of such low quality that, of course, hardly anyone bothers to go to the trouble to try to decipher it. Too much cost is associated with the effort to make it worthwhile. So, no one knows how much gain in reading ability is obtained, or what a unit gain might cost.

When a school district or educational researchers mount studies to try to find out what it costs to improve reading ability in third graders in some standardized unit, they find so much unexplained variation in the costs that they, too, raise more questions than answers.

In grocery stores and other markets, we don’t place the cost of making the value comparison on the consumer or the merchant. Instead, society as a whole picks up the cost by funding the creation and maintenance of consensus standard metrics. Until we take up the task of doing the same thing for intangible assets, we cannot expect human, social, and natural capital markets to obtain the efficiencies we take for granted in markets for tangible assets and property.

References

Cooper, G., & Humphry, S. M. (2010). The ontological distinction between units and entities. Synthese, pp. DOI 10.1007/s11229-010-9832-1.

Fisher, W. P., Jr. (2002, Spring). “The Mystery of Capital” and the human sciences. Rasch Measurement Transactions, 15(4), 854 [http://www.rasch.org/rmt/rmt154j.htm].

Fisher, W. P., Jr. (2003). Measurement and communities of inquiry. Rasch Measurement Transactions, 17(3), 936-8 [http://www.rasch.org/rmt/rmt173.pdf].

Fisher, W. P., Jr. (2004, October). Meaning and method in the social sciences. Human Studies: A Journal for Philosophy and the Social Sciences, 27(4), 429-54.

Fisher, W. P., Jr. (2005). Daredevil barnstorming to the tipping point: New aspirations for the human sciences. Journal of Applied Measurement, 6(3), 173-9 [http://www.livingcapitalmetrics.com/images/FisherJAM05.pdf].

Fisher, W. P., Jr. (2007, Summer). Living capital metrics. Rasch Measurement Transactions, 21(1), 1092-3 [http://www.rasch.org/rmt/rmt211.pdf].

Fisher, W. P., Jr. (2009a, November). Invariance and traceability for measures of human, social, and natural capital: Theory and application. Measurement, 42(9), 1278-1287.

Fisher, W. P.. Jr. (2009b). NIST Critical national need idea White Paper: Metrological infrastructure for human, social, and natural capital (Tech. Rep., http://www.livingcapitalmetrics.com/images/FisherNISTWhitePaper2.pdf). New Orleans: LivingCapitalMetrics.com.

Fisher, W. P., Jr. (2011). Bringing human, social, and natural capital to life: Practical consequences and opportunities. Journal of Applied Measurement, 12(1), in press.

NIST. (2009, 20 July). Outputs and outcomes of NIST laboratory research. Available: http://www.nist.gov/director/planning/studies.cfm (Accessed 1 March 2011).

Stenner, A. J., & Stone, M. (2003). Item specification vs. item banking. Rasch Measurement Transactions, 17(3), 929-30 [http://www.rasch.org/rmt/rmt173a.htm].

Williamson, G. L. (2008). A text readability continuum for postsecondary readiness. Journal of Advanced Academics, 19(4), 602-632.

Wright, B. D. (1989). Rasch model from counting right answers: Raw scores as sufficient statistics. Rasch Measurement Transactions, 3(2), 62 [http://www.rasch.org/rmt/rmt32e.htm].

Wright, B. D. (1992, Summer). Scores are not measures. Rasch Measurement Transactions, 6(1), 208 [http://www.rasch.org/rmt/rmt61n.htm].

Wright, B. D. (1993). Thinking with raw scores. Rasch Measurement Transactions, 7(2), 299-300 [http://www.rasch.org/rmt/rmt72r.htm].

Wright, B. D. (1999). Common sense for measurement. Rasch Measurement Transactions, 13(3), 704-5  [http://www.rasch.org/rmt/rmt133h.htm].

LivingCapitalMetrics Blog by William P. Fisher, Jr., Ph.D. is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
Based on a work at livingcapitalmetrics.wordpress.com.
Permissions beyond the scope of this license may be available at http://www.livingcapitalmetrics.com.

 

One of the ironies of life is that we often overlook the obvious in favor of the obscure. And so one hears of huge resources poured into finding and capitalizing on opportunities that provide infinitesimally small returns, while other opportunities—with equally certain odds of success but far more profitable returns—are completely neglected.

The National Institute for Standards and Technology (NIST) reports returns on investment ranging from 32% to over 400% in 32 metrological improvements made in semiconductors, construction, automation, computers, materials, manufacturing, chemicals, photonics, communications and pharmaceuticals (NIST, 2009). Previous posts in this blog offer more information on the economic value of metrology. The point is that the returns obtained from improvements in the measurement of tangible assets will likely also be achieved in the measurement of intangible assets.

How? With a little bit of imagination, each stage in the development of increasingly meaningful, efficient, and useful measures described in this previous post can be seen as implying a significant return on investment. As those returns are sought, investors will coordinate and align different technologies and resources relative to a roadmap of how these stages are likely to unfold in the future, as described in this previous post. But what would a concrete example of the new value created look like?

The examples I have in mind hinge on the difference between counting and measuring. Counting is a natural and obvious thing to do when we need some indication of how much of something there is. But counting is not measuring (Cooper & Humphry, 2010; Wright, 1989, 1992, 1993, 1999). This is not some minor academic distinction of no practical use or consequence. It is rather the source of the vast majority of the problems we have in comparing outcome and performance measures.

Imagine how things would be if we couldn’t weigh fruit in a grocery store, and all we could do was count pieces. We can tell when eight small oranges possess less overall mass of fruit than four large ones by weighing them; the eight small oranges might weigh .75 kilograms (about 1.6 pounds) while the four large ones come in at 1.0 kilo (2.2 pounds). If oranges were sold by count instead of weight, perceptive traders would buy small oranges and make more money selling them than they could if they bought large ones.

But we can’t currently arrive so easily at the comparisons we need when we’re buying and selling intangible assets, like those produced as the outcomes of educational, health care, or other services. So I want to walk through a couple of very down-to-earth examples to bring the point home. Today we’ll focus on the simplest version of the story, and tomorrow we’ll take up a little more complicated version, dealing with the counts, percentages, and scores used in balanced scorecard and dashboard metrics of various kinds.

What if you score eight on one reading test and I score four on a different reading test? Who has more reading ability? In the same way that we might be able to tell just by looking that eight small oranges are likely to have less actual orange fruit than four big ones, we might also be able to tell just by looking that eight easy (short, common) words can likely be read correctly with less reading ability than four difficult (long, rare) words can be.

So let’s analyze the difference between buying oranges and buying reading ability. We’ll set up three scenarios for buying reading ability. In all three, we’ll imagine we’re comparing how we buy oranges with the way we would have to go about buying reading ability today if teachers were paid for the gains made on the tests they administer at the beginning and end of the school year.

In the first scenario, the teachers make up their own tests. In the second, the teachers each use a different standardized test. In the third, each teacher uses a computer program that draws questions from the same online bank of precalibrated items to construct a unique test custom tailored to each student. Reading ability scenario one is likely the most commonly found in real life. Scenario three is the rarest, but nonetheless describes a situation that has been available to millions of students in the U.S., Australia, and elsewhere for several years. Scenarios one, two and three correspond with developmental levels one, three, and five described in a previous blog entry.

Buying Oranges

When you go into one grocery store and I go into another, we don’t have any oranges with us. When we leave, I have eight and you have four. I have twice as many oranges as you, but yours weigh a kilo, about a third more than mine (.75 kilos).

When we paid for the oranges, the transaction was finished in a few seconds. Neither one of us experienced any confusion, annoyance, or inconvenience in relation to the quality of information we had on the amount of orange fruits we were buying. I did not, however, pay twice as much as you did. In fact, you paid more for yours than I did for mine, in direct proportion to the difference in the measured amounts.

No negotiations were necessary to consummate the transactions, and there was no need for special inquiries about how much orange we were buying. We knew from experience in this and other stores that the prices we paid were comparable with those offered in other times and places. Our information was cheap, as it was printed on the bag of oranges or could be read off a scale, and it was very high quality, as the measures were directly comparable with measures from any other scale in any other store. So, in buying oranges, the impact of information quality on the overall cost of the transaction was so inexpensive as to be negligible.

Buying Reading Ability (Scenario 1)

So now you and I go through third grade as eight year olds. You’re in one school and I’m in another. We have different teachers. Each teacher makes up his or her own reading tests. When we started the school year, we each took a reading test (different ones), and we took another (again, different ones) as we ended the school year.

For each test, your teacher counted up your correct answers and divided by the total number of questions; so did mine. You got 72% correct on the first one, and 94% correct on the last one. I got 83% correct on the first one, and 86% correct on the last one. Your score went up 22%, much more than the 3% mine went up. But did you learn more? It is impossible to tell. What if both of your tests were easier—not just for you or for me but for everyone—than both of mine? What if my second test was a lot harder than my first one? On the other hand, what if your tests were harder than mine? Perhaps you did even better than your scores seem to indicate.

We’ll just exclude from consideration other factors that might come to bear, such as whether your tests were significantly longer or shorter than mine, or if one of us ran out of time and did not answer a lot of questions.

If our parents had to pay the reading teacher at the end of the school year for the gains that were made, how would they tell what they were getting for their money? What if your teacher gave a hard test at the start of the year and an easy one at the end of the year so that you’d have a big gain and your parents would have to pay more? What if my teacher gave an easy test at the start of the year and a hard one at the end, so that a really high price could be put on very small gains? If our parents were to compare their experiences in buying our improved reading ability, they would have a lot of questions about how much improvement was actually obtained. They would be confused and annoyed at how inconvenient the scores are, because they are difficult, if not impossible, to compare. A lot of time and effort might be invested in examining the words and sentences in each of the four reading tests to try to determine how easy or hard they are in relation to each other. Or, more likely, everyone would throw their hands up and pay as little as they possibly can for outcomes they don’t understand.

Buying Reading Ability (Scenario 2)

In this scenario, we are third graders again, in different schools with different reading teachers. Now, instead of our teachers making up their own tests, our reading abilities are measured at the beginning and the end of the school year using two different standardized tests sold by competing testing companies. You’re in a private suburban school that’s part of an independent schools association. I’m in a public school along with dozens of others in an urban school district.

For each test, our parents received a report in the mail showing our scores. As before, we know how many questions we each answered correctly, and, as before, we don’t know which particular questions we got right or wrong. Finally, we don’t know how easy or hard your tests were relative to mine, but we know that the two tests you took were equated, and so were the two I took. That means your tests will show how much reading ability you gained, and so will mine.

But we have one new bit of information we didn’t have before, and that’s a percentile score. Now we know that at the beginning of the year, with a percentile ranking of 72, you performed better than 72% of the other private school third graders taking this test, and at the end of the year you performed better than 76% of them. In contrast, I had percentiles of 84 and 89.

The question we have to ask now is if our parents are going to pay for the percentile gain, or for the actual gain in reading ability. You and I each learned more than our peers did on average, since our percentile scores went up, but this would not work out as a satisfactory way to pay teachers. Averages being averages, if you and I learned more and faster, someone else learned less and slower, so that, in the end, it all balances out. Are we to have teachers paying parents when their children learn less, simply redistributing money in a zero sum game?

And so, additional individualized reports are sent to our parents by the testing companies. Your tests are equated with each other, so they measure in a comparable unit that ranges from 120 to 480. You had a starting score of 235 and finished the year with a score of 420, for a gain of 185.

The tests I took are comparable and measure in the same unit, too, but not the same unit as your tests measure in. Scores on my tests range from 400 to 1200. I started the year with a score of 790, and finished at 1080, for a gain of 290.

Now the confusion in the first scenario is overcome, in part. Our parents can see that we each made real gains in reading ability. The difficulty levels of the two tests you took are the same, as are the difficulties of the two tests I took. But our parents still don’t know what to pay the teacher because they can’t tell if you or I learned more. You had lower percentiles and test scores than I did, but you are being compared with what is likely a higher scoring group of suburban and higher socioeconomic status students than the urban group of disadvantaged students I’m compared against. And your scores aren’t comparable with mine, so you might have started and finished with more reading ability than I did, or maybe I had more than you. There isn’t enough information here to tell.

So, again, the information that is provided is insufficient to the task of settling on a reasonable price for the outcomes obtained. Our parents will again be annoyed and confused by the low quality information that makes it impossible to know what to pay the teacher.

Buying Reading Ability (Scenario 3)

In the third scenario, we are still third graders in different schools with different reading teachers. This time our reading abilities are measured by tests that are completely unique. Every student has a test custom tailored to their particular ability. Unlike the tests in the first and second scenarios, however, now all of the tests have been constructed carefully on the basis of extensive data analysis and experimental tests. Different testing companies are providing the service, but they have gone to the trouble to work together to create consensus standards defining the unit of measurement for any and all reading test items.

For each test, our parents received a report in the mail showing our measures. As before, we know how many questions we each answered correctly. Now, though we don’t know which particular questions we got right or wrong, we can see typical items ordered by difficulty lined up in a way that shows us what kind of items we got wrong, and which kind we got right. And now we also know your tests were equated relative to mine, so we can compare how much reading ability you gained relative to how much I gained. Now our parents can confidently determine how much they should pay the teacher, at least in proportion to their children’s relative measures. If our measured gains are equal, the same payment can be made. If one of us obtained more value, then proportionately more should be paid.

In this third scenario, we have a situation directly analogous to buying oranges. You have a measured amount of increased reading ability that is expressed in the same unit as my gain in reading ability, just as the weights of the oranges are comparable. Further, your test items were not identical with mine, and so the difficulties of the items we took surely differed, just as the sizes of the oranges we bought did.

This third scenario could be made yet more efficient by removing the need for creating and maintaining a calibrated item bank, as described by Stenner and Stone (2003) and in the sixth developmental level in a prior blog post here. Also, additional efficiencies could be gained by unifying the interpretation of the reading ability measures, so that progress through high school can be tracked with respect to the reading demands of adult life (Williamson, 2008).

Comparison of the Purchasing Experiences

In contrast with the grocery store experience, paying for increased reading ability in the first scenario is fraught with low quality information that greatly increases the cost of the transactions. The information is of such low quality that, of course, hardly anyone bothers to go to the trouble to try to decipher it. Too much cost is associated with the effort to make it worthwhile. So, no one knows how much gain in reading ability is obtained, or what a unit gain might cost.

When a school district or educational researchers mount studies to try to find out what it costs to improve reading ability in third graders in some standardized unit, they find so much unexplained variation in the costs that they, too, raise more questions than answers.

But we don’t place the cost of making the value comparison on the consumer or the merchant in the grocery store. Instead, society as a whole picks up the cost by funding the creation and maintenance of consensus standard metrics. Until we take up the task of doing the same thing for intangible assets, we cannot expect human, social, and natural capital markets to obtain the efficiencies we take for granted in markets for tangible assets and property.

References

Cooper, G., & Humphry, S. M. (2010). The ontological distinction between units and entities. Synthese, pp. DOI 10.1007/s11229-010-9832-1.

NIST. (2009, 20 July). Outputs and outcomes of NIST laboratory research. Available: http://www.nist.gov/director/planning/studies.cfm (Accessed 1 March 2011).

Stenner, A. J., & Stone, M. (2003). Item specification vs. item banking. Rasch Measurement Transactions, 17(3), 929-30 [http://www.rasch.org/rmt/rmt173a.htm].

Williamson, G. L. (2008). A text readability continuum for postsecondary readiness. Journal of Advanced Academics, 19(4), 602-632.

Wright, B. D. (1989). Rasch model from counting right answers: Raw scores as sufficient statistics. Rasch Measurement Transactions, 3(2), 62 [http://www.rasch.org/rmt/rmt32e.htm].

Wright, B. D. (1992, Summer). Scores are not measures. Rasch Measurement Transactions, 6(1), 208 [http://www.rasch.org/rmt/rmt61n.htm].

Wright, B. D. (1993). Thinking with raw scores. Rasch Measurement Transactions, 7(2), 299-300 [http://www.rasch.org/rmt/rmt72r.htm].

Wright, B. D. (1999). Common sense for measurement. Rasch Measurement Transactions, 13(3), 704-5  [http://www.rasch.org/rmt/rmt133h.htm].

Contrasting Network Communities: Transparent, Efficient, and Invested vs Not

Different networks and different communities have different amounts of social capital going for them. As was originally described by Putnam (1993), some networks are organized hierarchically in a command-and-control structure. The top layers here are the autocrats, nobility, or bosses who run the show. Rigid conformity is the name of the game to get by. Those in power can make or break anyone. Market transactions in this context are characterized by the thumb on the scale, the bribe, and the kickback. Everyone is watching out for themselves.

At the opposite extreme are horizontal networks characterized by altruism and a sense that doing what’s good for everyone will eventually come back around to be good for me. The ideal here is a republic in which the law rules and everyone has the same price of entry into the market.

What I’d like to focus on is what’s going on in these horizontal networks. What makes one a more tightly-knit community than another? The closeness people feel should not be oppressive or claustrophic or smothering. I’m thinking of community relations in which people feel safe, not just personally but creatively. How and when are diversity, dissent and innovation not just tolerated but celebrated? What makes it possible for a market in new ideas and new ways of doing things to take off?

And how does a community like this differ from another one that is just as horizontally structured but that does not give rise to anything at all creative?

The answers to all of these questions seem to me to hinge on the transparency, efficiency, and volume of investments in the relationships making up the networks. What kinds of investments? All kinds: emotional, social, intellectual, financial, spiritual, etc. Less transparent, inefficient, and low volume investments don’t have the thickness or complexity of the relationships that we can see through, that are well lubricated, and that are reinforced with frequent visits.

Putnam (1993, p. 183) has a very illuminating way of putting this: “The harmonies of a choral society illustrate how voluntary collaboration can create value that no individual, no matter how wealthy, no matter how wily, could produce alone.” Social capital is the coordination of thought and behavior that embodies trust, good will, and loyalty. Social capital is at play when an individual can rely on a thickly elaborated network of largely unknown others who provide clean water, nutritious food, effective public health practices (sanitation, restaurant inspections, and sewers), fire and police protection, a fair and just judiciary, electrical and information technology, affordably priced consumer goods, medical care, and who ensure the future by educating the next generation.

Life would be incredibly difficult if we could not trust others to obey traffic laws, or to do their jobs without taking unfair advantage of access to special knowledge (credit card numbers, cash, inside information), etc. But beyond that, we gain huge efficiencies in our lives because of the way our thoughts and behaviors are harmonized and coordinated on mass scales. We just simply do not have to worry about millions of things that are being taken care of, things that would completely freeze us in our tracks if they weren’t being done.

Thus, later on the same page, Putnam also observes that, “For political stability, for government effectiveness, and even for economic progress social capital may be even more important than physical or human capital.” And so, he says, “Where norms and networks of civic engagement are lacking, the outlook for collective action appears bleak.”

But what if two communities have identical norms and networks, but they differ in one crucial way: one relies on everyday language, used in conversations and written messages, to get things done, and the other has a new language, one with a heightened capacity for transparent meaningfulness and precision efficiency? Which one is likely to be more creative and innovative?

The question can be re-expressed in terms of Gladwell’s (2000) sense of the factors contributing to reaching a tipping point: the mavens, connectors, salespeople, and the stickiness of the messages. What if the mavens in two communities are equally knowledgeable, the connectors just as interconnected, and the salespeople just as persuasive, but messages are dramatically less sticky in one community than the other? In one network of networks, saying things once gets the right response 99% of the time, but in the other things have to be repeated seven times before the right response comes back even 50% of the time, and hardly anyone makes the effort to repeat things that many times. Guess which community will be safer, more creative, and thriving?

All of this, of course, is just another way to bring out the importance of improved measurement for improving network quality and community life. As Surowiecki put it in The Wisdom of Crowds, the SARS virus was sequenced in a matter of weeks by a network of labs sharing common technical standards; without those standards, it would have taken any one of them weeks to do the same job alone. The messages these labs sent back and forth had an elevated stickiness index because they were more transparently and efficiently codified than messages were back in the days before the technical standards were created.

So the question emerges, given the means to create common languages with enhanced stickiness properties, such as we have in advanced measurement models, what kinds of creativity and innovation can we expect when these languages are introduced in the domains of human, social, and natural capital markets? That is the question of the age, it seems to me…

Gladwell, M. (2000). The tipping point: How little things can make a big difference. Boston: Little, Brown, and Company.

Putnam, R. D. (1993). Making democracy work: Civic traditions in modern Italy. Princeton, New Jersey: Princeton University Press.

Surowiecki, J. (2004). The wisdom of crowds: Why the many are smarter than the few and how collective wisdom shapes business, economies, societies and nations. New York: Doubleday.

LivingCapitalMetrics Blog by William P. Fisher, Jr., Ph.D. is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
Based on a work at livingcapitalmetrics.wordpress.com.
Permissions beyond the scope of this license may be available at http://www.livingcapitalmetrics.com.

How Measurement, Contractual Trust, and Care Combine to Grow Social Capital: Creating Social Bonds We Can Really Trade On

Last Saturday, I went to Miami, Florida, at the invitation of Paula Lalinde (see her profile at http://www.linkedin.com/pub/paula-lalinde/11/677/a12) to attend MILITARY 101: Military Life and Combat Trauma As Seen By Troops, Their Families, and Clinicians. This day-long free presentation was sponsored by The Veterans Project of South Florida-SOFAR, in association with The Southeast Florida Association for Psychoanalytic Psychology, The Florida Psychoanalytic Society, the Soldiers & Veterans Initiative, and the Florida BRAIVE Fund. The goals of the session “included increased understanding of the unique experiences and culture related to the military experience during wartime, enhanced understanding of the assessment and treatment of trauma specific difficulties, including posttraumatic stress disorder, common co-occurring conditions, and demands of treatment on trauma clinicians.”

Listening to the speakers on Saturday morning at the Military 101 orientation, I was struck by what seemed to me to be a developmental trajectory implied in the construct of therapy-aided healing. I don’t recall if anyone explicitly mentioned Maslow’s hierarchy but it was certainly implied by the dysfunctionality that attends being pushed down to a basic mode of physical survival.

Also, the various references to the stigma of therapy reminded me of Paula’s arguments as to why a community-based preventative approach would be more accessible and likely more successful than individual programs focused on treating problems. (Echoes here of positive psychology and appreciative inquiry.)

In one part of the program, the ritualized formality of the soldier, family, and support groups’ stated promises to each other suggested a way of operationalizing the community-based approach. The expectations structuring relationships among the parties in this community are usually left largely unstated, unexamined, and unmanaged in all but the broadest, and most haphazard, ways (as most relationships’ expectations usually are). The hierarchy of needs and progressive movement towards greater self-actualization implies a developmental sequence of steps or stages that comprise the actual focus of the implied contracts between the members of the community. This sequence is a measurable continuum along which change can be monitored and managed, with all parties accountable for their contracted role in producing specific outcomes.

The process would begin from the predeployment baseline, taking that level of reliability and basis of trust existing in the community as what we want to maintain, what we might want to get back to, and what we definitely want to build on and surpass, in time. The contract would provide a black-and-white record of expectations. It would embody an image of the desired state of the relationships and it could be returned to repeatedly in communications and in visualizations over time. I’ll come back to this after describing the structure of the relational patterns we can expect to observe over the course of events.

The Saturday morning discussion made repeated reference to the role of chains in the combat experience: the chain of command, and the unit being a chain only as strong as its weakest link. The implication was that normal community life tolerates looser expectations, more informal associations, and involves more in the way of team interactions. The contrast between chains and teams brought to mind work by Wright (1995, 1996a, 1996b; Bainer, 1997) on the way the difficulties of the challenges we face influence how we organize ourselves into groups.

Chains tend to form when the challenge is very difficult and dangerous; here we have mountain climbers roped together, bucket brigades putting out fires, and people stretching out end-to-end over thin ice to rescue someone who’s fallen through. In combat, as was stressed repeatedly last Saturday, the chain is one requiring strict follow-through on orders and promises; lives are at risk and protecting them requires the most rigorous adherence to the most specific details in an operation.

Teams form when the challenge is not difficult and it is possible to coordinate a fluid response of partners whose roles shift in importance as the situation changes. Balls are passed and the lead is taken by each in turn, with others getting out of the way or providing supports that might be vitally important or merely convenient.

A third kind of group, packs, forms when the very nature of the problem is at issue; here, individuals take completely different approaches in an exploratory determination of what is at issue, and how it might be addressed. Examples include the Manhattan Project, for instance, where scientists following personal hunches went in their own directions looking for solutions to complex problems. Wolves and other hunting parties form packs when it is impossible to know where the game might be. And though the old joke says that the best place to look for lost keys is where there’s the most light, if you have others helping you, it’s best to split up and not be looking for them in the same place.

After identifying these three major forms of organization, Wright (1996b) saw that individual groups might transition to and from different modes of organization as the nature of the problem changed. For instance, a 19th-century wagon train of settlers heading through the American West might function well as a team when everyone feels safe traveling along with a cavalry detachment, the road is good, the weather is pleasant, and food and water are plentiful. Given vulnerability to attacks by Native Americans, storms, accidents, lack of game, and/or muddy, rutted roads, however, the team might shift toward a chain formation and circle the wagons, with a later return to the team formation after the danger has passed. In the worst case scenario, disaster breaks the chain into individuals scattered like a pack to fend for themselves, with the limited hope of possibly re-uniting at some later time as a chain or team.

In the current context of the military, it would seem that deployment fragments the team, with the soldier training for a position in the chain of command in which she or he will function as a strong link for the unit. The family and support network can continue to function together and separately as teams to some extent, but the stress may require intermittent chain forms of organization. Further, the separation of the soldier from the family and support would seem to approach a pack level of organization for the three groups taken as a whole.

An initial contract between the parties would describe the functioning of the team at the predeployment stage, recognize the imminent breaking up of the team into chains and packs, and visualize the day when the team would be reformed under conditions in which significant degrees of healing will be required to move out of the pack and chain formations. Perhaps there will be some need and means of countering the forcible boot camp enculturation with medicinal antidote therapies of equal but opposite force. Perhaps some elements of the boot camp experience could be safely modified without compromising the operational chain to set the stage for reintegrating the family and community team.

We would want to be able to draw qualitative information from all three groups as to the nature of their experiences at every stage. I think we would want to focus the information on descriptions of the extent to which each level in Maslow’s hierarchy is realized. This information would be used in the design of an assessment that would map out the changes over time, set up the evaluation framework, and guide interventions toward reforming the team. Given their experience with the healing process, the presenters from last Saturday have obvious capacities for an informed perspective on what’s needed here. And what we build with their input would then also plainly feed back into the kind of presentation they did.

There will likely be signature events in the process that will be used to trigger new additions to the contract, as when the consequences of deployment, trauma, loss, or return relative to Maslow’s hierarchy can be predicted. That is, the contract will be a living document that changes as goals are reached or as new challenges emerge.

This of course is all situated then within the context of measures calibrated and shared across the community to inform contracts, treatment, expectations, etc. following the general metrological principles I outline in my published work (see references).

The idea will be for the consistent production of predictable amounts of impact in the legally binding contractual relationships, such that the benefits produced in terms of individual functionality will attract investments from those in positions to employ those individuals, and from the wider society that wants to improve its overall level of mental health. One could imagine that counselors, social workers, and psychotherapists will sell social capital bonds at prices set by market forces on the basis of information analogous to the information currently available in financial markets, grocery stores, or auto sales lots. Instead of paying taxes, corporations would be required to have minimum levels of social capitalization. These levels might be set relative to the value the organization realizes from the services provided by public schools, hospitals, and governments relative to the production of an educated, motivated, healthy workforce able to get to work on public roads, able to drink public water, and living in a publicly maintained quality environment.

There will be a lot more to say on this latter piece, following up on previous blogs here that take up the topic. The contractual groundwork that sets up the binding obligations for formal agreements is the thought of the day that emerged last weekend at the session in Miami. Good stuff, long way to go, as always….

References
Bainer, D. (1997, Winter). A comparison of four models of group efforts and their implications for establishing educational partnerships. Journal of Research in Rural Education, 13(3), 143-152.

Fisher, W. P., Jr. (1995). Opportunism, a first step to inevitability? Rasch Measurement Transactions, 9(2), 426 [http://www.rasch.org/rmt/rmt92.htm].

Fisher, W. P., Jr. (1996, Winter). The Rasch alternative. Rasch Measurement Transactions, 9(4), 466-467 [http://www.rasch.org/rmt/rmt94.htm].

Fisher, W. P., Jr. (1997a). Physical disability construct convergence across instruments: Towards a universal metric. Journal of Outcome Measurement, 1(2), 87-113.

Fisher, W. P., Jr. (1997b, June). What scale-free measurement means to health outcomes research. Physical Medicine & Rehabilitation State of the Art Reviews, 11(2), 357-373.

Fisher, W. P., Jr. (1998). A research program for accountable and patient-centered health status measures. Journal of Outcome Measurement, 2(3), 222-239.

Fisher, W. P., Jr. (2000). Objectivity in psychosocial measurement: What, why, how. Journal of Outcome Measurement, 4(2), 527-563 [http://www.livingcapitalmetrics.com/images/WP_Fisher_Jr_2000.pdf].

Fisher, W. P., Jr. (2004, October). Meaning and method in the social sciences. Human Studies: A Journal for Philosophy and the Social Sciences, 27(4), 429-54.

Fisher, W. P., Jr. (2005). Daredevil barnstorming to the tipping point: New aspirations for the human sciences. Journal of Applied Measurement, 6(3), 173-9 [http://www.livingcapitalmetrics.com/images/FisherJAM05.pdf].

Fisher, W. P., Jr. (2008). Vanishing tricks and intellectualist condescension: Measurement, metrology, and the advancement of science. Rasch Measurement Transactions, 21(3), 1118-1121 [http://www.rasch.org/rmt/rmt213c.htm].

Fisher, W. P., Jr. (2009, November). Invariance and traceability for measures of human, social, and natural capital: Theory and application. Measurement (Elsevier), 42(9), 1278-1287.

Wright, B. D. (1995). Teams, packs, and chains. Rasch Measurement Transactions, 9(2), 432 [http://www.rasch.org/rmt/rmt92j.htm].

Wright, B. D. (1996a). Composition analysis: Teams, packs, chains. In G. Engelhard & M. Wilson (Eds.), Objective measurement: Theory into practice, Vol. 3 (pp. 241-264). Norwood, New Jersey: Ablex [http://www.rasch.org/memo67.htm].

Wright, B. D. (1996b). Pack to chain to team. Rasch Measurement Transactions, 10(2), 501 [http://www.rasch.org/rmt/rmt102s.htm].

LivingCapitalMetrics Blog by William P. Fisher, Jr., Ph.D. is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
Based on a work at livingcapitalmetrics.wordpress.com.
Permissions beyond the scope of this license may be available at http://www.livingcapitalmetrics.com.

Reliability Revisited: Distinguishing Consistency from Error

When something is meaningful to us, and we understand it, then we can successfully restate it in our own words and predictably reproduce approximately the same representation across situations  as was obtained in the original formulation. When data fit a Rasch model, the implications are (1) that different subsets of items (that is, different ways of composing a series of observations summarized in a sufficient statistic) will all converge on the same pattern of person measures, and (2) that different samples of respondents or examinees will all converge on the same pattern of item calibrations. The meaningfulness of propositions based in these patterns will then not depend on which collection of items (instrument) or sample of persons is obtained, and all instruments might be equated relative to a single universal, uniform metric so that the same symbols reliably represent the same amount of the same thing.

Statistics and research methods textbooks in psychology and the social sciences commonly make statements like the following about reliability: “Reliability is consistency in measurement. The reliability of individual scale items increases with the number of points in the item. The reliability of the complete scale increases with the number of items.” (These sentences are found at the top of p. 371 in Experimental Methods in Psychology, by Gustav Levine and Stanley Parkinson (Lawrence Erlbaum Associates, 1994).) The unproven, perhaps unintended, and likely unfounded implication of these statements is that consistency increases as items are added.

Despite the popularity of doing so, Green, Lissitz, and Mulaik (1977) argue that reliability coefficients are misused when they are interpreted as indicating the extent to which data are internally consistent. “Green et al. (1977) observed that though high ‘internal consistency’ as indexed by a high alpha results when a general factor runs through the items, this does not rule out obtaining high alpha when there is no general factor running through the test items…. They concluded that the chief defect of alpha as an index of dimensionality is its tendency to increase as the number of items increase” (Hattie, 1985, p. 144).

In addressing the internal consistency of data, the implicit but incompletely realized purpose of estimating scale reliability is to evaluate the extent to which sum scores function as sufficient statistics. How limited is reliability as a tool for this purpose? To answer this question, five dichotomous data sets of 23 items and 22 persons were simulated. The first one was constructed so as to be highly likely to fit a Rasch model, with a deliberately orchestrated probabilistic Guttman pattern. The second one was made nearly completely random. The third, fourth, and fifth data sets were modifications of the first one in which increasing numbers of increasingly inconsistent responses were introduced. (The inconsistencies were not introduced in any systematic way apart from inserting contrary responses in the ordered matrix.) The data sets are shown in the Appendix. Tables 1 and 2 summarize the results.

Table 1 shows that the reliability coefficients do in fact decrease, along with the global model fit log-likelihood chi-squares, as the amount of randomness and inconsistency is increased. Contrary to what is implied in Levine and Parkinson’s statements, however, reliability can vary within a given number of items, as it might across different data sets produced from the same test, survey, or assessment, depending on how much structural invariance is present within them.

Two other points about the tables are worthy of note. First, the Rasch-based person separation reliability coefficients drop at a faster rate than Cronbach’s alpha does. This is probably an effect of the individualized error estimates in the Rasch context, which makes its reliability coefficients more conservative than correlation-based, group-level error estimates. (It is worth noting, as well, that the Winsteps and SPSS estimates of Cronbach’s alpha match. They are reported to one fewer decimal places by Winsteps, but the third decimal place is shown for the SPSS values for contrast.)

Second, the fit statistics are most affected by the initial and most glaring introduction of inconsistencies, in data set three. As the randomness in the data increases, the reliabilities continue to drop, but the fit statistics improve, culminating in the case of data set two, where complete randomness results in near-perfect model fit. This is, of course, the situation in which both the instrument and the sample are as well targeted as they can be, since all respondents have about the same measure and all the items about the same calibration; see Wood (1978) for a commentary on this situation, where coin tosses fit a Rasch model.

Table 2 shows the results of the Winsteps Principal Components Analysis of the standardized residuals for all five data sets. Again, the results conform with and support the pattern shown in the reliability coefficients. It is, however, interesting to note that, for data sets 4 and 5, with their Cronbach’s alphas of about .89 and .80, respectively, which are typically deemed quite good, the PCA shows more variance left unexplained than is explained by the Rasch dimension. The PCA is suggesting that two or more constructs might be represented in the data, but this would never be known from Cronbach’s alpha alone.

Alpha alone would indicate the presence of a unidimensional construct for data sets 3, 4 and 5, despite large standard deviations in the fit statistics and even though more than half the variance cannot be explained by the primary dimension. Worse, for the fifth data set, more variance is captured in the first three contrasts than is explained by the Rasch dimension. But with Cronbach’s alpha at .80, most researchers would consider this scale quite satisfactorily unidimensional and internally consistent.

These results suggest that, first, in seeking high reliability, what is sought more fundamentally is fit to a Rasch model (Andrich & Douglas, 1977; Andrich, 1982; Wright, 1977). That is, in addressing the internal consistency of data, the popular conception of reliability is taking on the concerns of construct validity. A conceptually clearer sense of reliability focuses on the extent to which an instrument works as expected every time it is used, in the sense of the way a car can be reliable. For instance, with an alpha of .70, a screening tool would be able to reliably distinguish measures into two statistically distinct groups (Fisher, 1992; Wright, 1996), problematic and typical. Within the limits of this purpose, the tool would meet the need for the repeated production of information capable of meeting the needs of the situation. Applications in research, accountability, licensure/certification, or diagnosis, however, might demand alphas of .95 and the kind of precision that allows for statistically distinct divisions into six or more groups. In these kinds of applications, where experimental designs or practical demands require more statistical power, measurement precision articulates finer degrees of differences. Finely calibrated instruments provide sensitivity over the entire length of the measurement continuum, which is needed for repeated reproductions of the small amounts of change that might accrue from hard to detect treatment effects.

Separating the construct, internal consistency, and unidimensionality issues  from the repeatability and reproducibility of a given degree of measurement precision provides a much-needed conceptual and methodological clarification of reliability. This clarification is routinely made in Rasch measurement applications (Andrich, 1982; Andrich & Douglas, 1977; Fisher, 1992; Linacre, 1993, 1996, 1997). It is reasonable to want to account for inconsistencies in the data in the error estimates and in the reliability coefficients, and so errors and reliabilities are routinely reported in terms of both the modeled expectations and in a fit-inflated form (Wright, 1995). The fundamental value of proceeding from a basis in individual error and fit statistics (Wright, 1996), is that local imprecisions and failures of invariance can be isolated for further study and selective attention.

The results of the simulated data analyses suggest, second, that, used in isolation, reliability coefficients can be misleading. As Green, et al. say, reliability estimates tend to systematically increase as the number of items increases (Fisher, 2008). The simulated data show that reliability coefficients also systematically decrease as inconsistency increases.

The primary problem with relying on reliability coefficients alone as indications of data consistency hinges on their inability to reveal the location of departures from modeled expectations. Most uses of reliability coefficients take place in contexts in which the model remains unstated and expectations are not formulated or compared with observations. The best that can be done in the absence of a model statement and test of data fit to it is to compare the reliability obtained against that expected on the basis of the number of items and response categories, relative to the observed standard deviation in the scores, expressed in logits (Linacre, 1993). One might then raise questions as to targeting, data consistency, etc. in order to explain larger than expected differences.

A more methodical way, however, would be to employ multiple avenues of approach to the evaluation of the data, including the use of model fit statistics and Principal Components Analysis in the evaluation of differential item and person functioning. Being able to see which individual observations depart the furthest from modeled expectation can provide illuminating qualitative information on the meaningfulness of the data, the measures, and the calibrations, or the lack thereof.  This information is crucial to correcting data entry errors, identifying sources of differential item or person functioning, separating constructs and populations, and improving the instrument. The power of the reliability-coefficient-only approach to data quality evaluation is multiplied many times over when the researcher sets up a nested series of iterative dialectics in which repeated data analyses explore various hypotheses as to what the construct is, and in which these analyses feed into revisions to the instrument, its administration, and/or the population sampled.

For instance, following the point made by Smith (1996), it may be expected that the PCA results will illuminate the presence of multiple constructs in the data with greater clarity than the fit statistics, when there are nearly equal numbers of items representing each different measured dimension. But the PCA does not work as well as the fit statistics when there are only a few items and/or people exhibiting inconsistencies.

This work should result in a full circle return to the drawing board (Wright, 1994; Wright & Stone, 2003), such that a theory of the measured construct ultimately provides rigorously precise predictive control over item calibrations, in the manner of the Lexile Framework (Stenner, et al., 2006) or developmental theories of hierarchical complexity (Dawson, 2004). Given that the five data sets employed here were simulations with no associated item content, the invariant stability and meaningfulness of the construct cannot be illustrated or annotated. But such illustration also is implicit in the quest for reliable instrumentation: the evidentiary basis for a delineation of meaningful expressions of amounts of the thing measured. The hope to be gleaned from the successes in theoretical prediction achieved to date is that we might arrive at practical applications of psychosocial measures that are as meaningful, useful, and economically productive as the theoretical applications of electromagnetism, thermodynamics, etc. that we take for granted in the technologies of everyday life.

Table 1 Reliability and Consistency Statistics 22 Persons, 23 Items, 506 Data Points
Data set	Intended reliability	Winsteps Real/Model Person Separation Reliability	Winsteps/SPSS Cronbach’s alpha	Winsteps Person Infit/Outfit Average Mn Sq	Winsteps Person Infit/Outfit SD	Winsteps Real/Model Item Separation Reliability	Winsteps Item Infit/Outfit Average Mn Sq	Winsteps Item Infit/Outfit SD	Log-Likelihood Chi-Sq/d.f./p
First	Best	.96/.97	.96/.957	1.04/.35	.49/.25	.95/.96	1.08/0.35	.36/.19	185/462/1.00
Second	Worst	.00/.00	.00/-1.668	1.00/1.00	.05/.06	.00/.00	1.00/1.00	.05/.06	679/462/.0000
Third	Good	.90/.91	.93/.927	.92/2.21	.30/2.83	.85/.88	.90/2.13	.64/3.43	337/462/.9996
Fourth	Fair	.86/.87	.89/.891	.96/1.91	.25/2.18	.79/.83	.94/1.68	.53/2.27	444/462/.7226
Fifth	Poor	.76/.77	.80/.797	.98/1.15	.24/.67	.59/.65	.99/1.15	.41/.84	550/462/.0029

Table 2 Principal Components Analysis
Data set	Intended reliability	% Raw Variance Explained by Measures/Persons/Items	% Raw Variance Captured in First Three Contrasts	Total number of loadings > |.40| in first contrast
First	Best	76/41/35	12	8
Second	Worst	4.3/1.7/2.6	56	15
Third	Good	59/34/25	20	14
Fourth	Fair	47/27/20	26	13
Fifth	Poor	29/17/11	41	15

References

Andrich, D. (1982, June). An index of person separation in Latent Trait Theory, the traditional KR-20 index, and the Guttman scale response pattern. Education Research and Perspectives, 9(1), http://www.rasch.org/erp7.htm.

Andrich, D. & G. A. Douglas. (1977). Reliability: Distinctions between item consistency and subject separation with the simple logistic model. Paper presented at the Annual Meeting of the American Educational Research Association, New York.

Dawson, T. L. (2004, April). Assessing intellectual development: Three approaches, one sequence. Journal of Adult Development, 11(2), 71-85.

Fisher, W. P., Jr. (1992). Reliability statistics. Rasch Measurement Transactions, 6(3), 238  [http://www.rasch.org/rmt/rmt63i.htm].

Fisher, W. P., Jr. (2008, Summer). The cash value of reliability. Rasch Measurement Transactions, 22(1), 1160-3.

Green, S. B., Lissitz, R. W., & Mulaik, S. A. (1977, Winter). Limitations of coefficient alpha as an index of test unidimensionality. Educational and Psychological Measurement, 37(4), 827-833.

Hattie, J. (1985, June). Methodology review: Assessing unidimensionality of tests and items. Applied Psychological Measurement, 9(2), 139-64.

Levine, G., & Parkinson, S. (1994). Experimental methods in psychology. Mahwah, NJ: Lawrence Erlbaum Associates, Inc.

Linacre, J. M. (1993). Rasch-based generalizability theory. Rasch Measurement Transactions, 7(1), 283-284; [http://www.rasch.org/rmt/rmt71h.htm].

Linacre, J. M. (1996). True-score reliability or Rasch statistical validity? Rasch Measurement Transactions, 9(4), 455 [http://www.rasch.org/rmt/rmt94a.htm].

Linacre, J. M. (1997). KR-20 or Rasch reliability: Which tells the “Truth?”. Rasch Measurement Transactions, 11(3), 580-1 [http://www.rasch.org/rmt/rmt113l.htm].

Smith, R. M. (1996). A comparison of methods for determining dimensionality in Rasch measurement. Structural Equation Modeling, 3(1), 25-40.

Stenner, A. J., Burdick, H., Sanford, E. E., & Burdick, D. S. (2006). How accurate are Lexile text measures? Journal of Applied Measurement, 7(3), 307-22.

Wood, R. (1978). Fitting the Rasch model: A heady tale. British Journal of Mathematical and Statistical Psychology, 31, 27-32.

Wright, B. D. (1977). Solving measurement problems with the Rasch model. Journal of Educational Measurement, 14(2), 97-116 [http://www.rasch.org/memo42.htm].

Wright, B. D. (1980). Foreword, Afterword. In Probabilistic models for some intelligence and attainment tests, by Georg Rasch (pp. ix-xix, 185-199. http://www.rasch.org/memo63.htm) [Reprint; original work published in 1960 by the Danish Institute for Educational Research]. Chicago, Illinois: University of Chicago Press.

Wright, B. D. (1994, Summer). Theory construction from empirical observations. Rasch Measurement Transactions, 8(2), 362 [http://www.rasch.org/rmt/rmt82h.htm].

Wright, B. D. (1995, Summer). Which standard error? Rasch Measurement Transactions, 9(2), 436-437 [http://www.rasch.org/rmt/rmt92n.htm].

Wright, B. D. (1996, Winter). Reliability and separation. Rasch Measurement Transactions, 9(4), 472 [http://www.rasch.org/rmt/rmt94n.htm].

Wright, B. D., & Stone, M. H. (2003). Five steps to science: Observing, scoring, measuring, analyzing, and applying. Rasch Measurement Transactions, 17(1), 912-913 [http://www.rasch.org/rmt/rmt171j.htm].

Appendix

Data Set 1

01100000000000000000000

10100000000000000000000

11000000000000000000000

11100000000000000000000

11101000000000000000000

11011000000000000000000

11100100000000000000000

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11111101000000000000000

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11111111111010101100000

11111111111111010101000

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11111111111111110101011

11111111111111111010110

11111111111111111111001

11111111111111111111101

11111111111111111111100

Data Set 2

01101010101010101001001

10100101010101010010010

11010010101010100100101

10101001010101001001000

01101010101010110010011

11011010010101100100101

01100101001001001001010

10110101000110010010100

01011010100100100101001

11101101001001001010010

11011010010101010100100

10110101101010101001001

01101011010000101010010

11010110101001010010100

10101101010000101101010

11011010101010010101010

10110101010101001010101

11101010101010110101011

11010101010101011010110

10101010101010110111001

01010101010101101111101

10101010101011011111100

Data Set 3

01100000000000100000010

10100000000000000010001

11000000000000100000010

11100000000000100000000

11101000000000100010000

11011000000000000000000

11100100000000100000000

11110100000000000000000

11111010100000100000000

11111101000000000000000

11111111010101000000000

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11011111111111101100000

11111111111111010101000

11011111111111101010100

11111111111111010101011

11011111111111111010110

11111111111111111111001

11011111111111111111101

10111111111111111111110

Data Set 4

01100000000000100010010

10100000000000000010001

11000000000000100000010

11100000000000100000001

11101000000000100010000

11011000000000000010000

11100100000000100010000

11110100000000000000000

11111010100000100010000

11111101000000000000000

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11011110111010100000000

11111111011010001000000

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11011111101101101100000

11111111110101010101000

11011111111011101010100

11111111111101110101011

01011111111111011010110

10111111111111111111001

11011111111111011111101

10111111111111011111110

Data Set 5

11100000010000100010011

10100000000000000011001

11000000010000100001010

11100000010000100000011

11101000000000100010010

11011000000000000010011

11100100000000100010000

11110100000000000000011

11111010100000100010000

00000000000011111111111

11111011010101000010000

11011110111010100000000

11111111011010001000000

11011111101011110010000

11011111101101101100000

11111111110101010101000

11011111101011101010100

11111111111101110101011

01011111111111011010110

10111111101111111111001

11011111101111011111101

00111111101111011111110

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Statistics and Measurement: Clarifying the Differences

Measurement is qualitatively and paradigmatically quite different from statistics, even though statistics obviously play important roles in measurement, and vice versa. The perception of measurement as conceptually difficult stems in part from its rearrangement of most of the concepts that we take for granted in the statistical paradigm as landmarks of quantitative thinking. When we recognize and accept the qualitative differences between statistics and measurement, they both become easier to understand.

Statistical analyses are commonly referred to as quantitative, even though the numbers analyzed most usually have not been derived from the mapping of an invariant substantive unit onto a number line. Measurement takes such mapping as its primary concern, focusing on the quantitative meaningfulness of numbers (Falmagne & Narens, 1983; Luce, 1978; ,  Marcus-Roberts & Roberts, 1987; Mundy, 1986; Narens, 2002; Roberts, 1999). Statistical models focus on group processes and relations among variables, while measurement models focus on individual processes and relations within variables (Duncan, 1992; Duncan & Stenbeck, 1988; Rogosa, 1987). Statistics makes assumptions about factors beyond its control, while measurement sets requirements for objective inference (Andrich, 1989). Statistics primarily involves data analysis, while measurement primarily calibrates instruments in common metrics for interpretation at the point of use (Cohen, 1994; Fisher, 2000; Guttman, 1985; Goodman, 1999a-c; Rasch, 1960).

Statistics focuses on making the most of the data in hand, while measurement focuses on using the data in hand to inform (a) instrument calibration and improvement, and (b) the prediction and efficient gathering of meaningful new data on individuals in practical applications. Where statistical “measures” are defined inherently by a particular analytic method, measures read from calibrated instruments—and the raw observations informing these measures—need not be computerized for further analysis.

Because statistical “measures” are usually derived from ordinal raw scores, changes to the instrument change their meaning, resulting in a strong inclination to avoid improving the instrument. Measures, in contrast, take missing data into account, so their meaning remains invariant over instrument configurations, resulting in a firm basis for the emergence of a measurement quality improvement culture. So statistical “measurement” begins and ends with data analysis, where measurement from calibrated instruments is in a constant cycle of application, new item calibrations, and critical recalibrations that require only intermittent resampling.

The vast majority of statistical methods and models make strong assumptions about the nature of the unit of measurement, but provide either very limited ways of checking those assumptions, or no checks at all. Statistical models are descriptive in nature, meaning that models are fit to data, that the validity of the data is beyond the immediate scope of interest, and that the model accounting for the most variation is regarded as best. Finally, and perhaps most importantly, statistical models are inherently oriented toward the relations among variables at the level of samples and populations.

Measurement models, however, impose strong requirements on data quality in order to achieve the unit of measurement that is easiest to think with, one that stays constant and remains invariant across the local particulars of instrument and sample. Measurement methods and models, then, provide extensive and varied ways of checking the quality of the unit, and so must be prescriptive rather than descriptive. That is, measurement models define the data quality that must be obtained for objective inference. In the measurement paradigm, data are fit to models, data quality is of paramount interest, and data quality evaluation must be informed as much by qualitative criteria as by quantitative.

To repeat the most fundamental point, measurement models are oriented toward individual-level response processes, not group-level aggregate processes. Herbert Blumer pointed out as early as 1930 that quantitative method is not equivalent to statistical method, and that the natural sciences had conspicuous degrees of success long before the emergence of statistical techniques (Hammersly, 1989, pp. 113-4). Both the initial scientific revolution in the 16th-17th centuries and the second scientific revolution of the 19th century found a basis in measurement for publicly objective and reproducible results, but statistics played little or no role in the major discoveries of the times.

The scientific value of statistics resides largely in the reproducibility of cross-variable data relations, and statisticians widely agree that statistical analyses should depend only on sufficient statistics (Arnold, 1982, p. 79). Measurement theoreticians and practitioners also agree, but the sufficiency of the mean and standard deviation relative to a normal distribution is one thing, and the sufficiency of individual responses relative to an invariant construct is quite another (Andersen, 1977; Arnold, 1985; Dynkin, 1951; Fischer, 1981; Hall, Wijsman, & Ghosh, 1965; van der Linden, 1992).

It is of historical interest, though, to point out that Rasch, foremost proponent of the latter, attributes credit for the general value of the concept of sufficiency to Ronald Fisher, foremost proponent of the former. Rasch’s strong statements concerning the fundamental inferential value of sufficiency (Andrich, 1997; Rasch, 1977; Wright, 1980) would seem to contradict his repeated joke about burning all the statistics texts making use of the normal distribution (Andersen, 1995, p. 385) were it not for the paradigmatic distinction between statistical models of group-level relations among variables, and measurement models of individual processes. Indeed, this distinction is made on the first page of Rasch’s (1980) book.

Now we are in a position to appreciate a comment by Ernst Rutherford, the winner of the 1908 Nobel Prize in Chemistry, who held that, if you need statistics to understand the results of your experiment, then you should have designed a better experiment (Wise, 1995, p. 11). A similar point was made by Feinstein (1995) concerning meta-analysis. The rarely appreciated point is that the generalizable replication and application of results depends heavily on the existence of a portable and universally uniform observational framework. The inferences, judgments, and adjustments that can be made at the point of use by clinicians, teachers, managers, etc. provided with additive measures expressed in a substantively meaningful common metric far outstrip those that can be made using ordinal measures expressed in instrument- and sample-dependent scores. See Andrich (1989, 2002, 2004), Cohen (1994), Davidoff (1999), Duncan (1992), Embretson (1996), Goodman (1999a, 1999b, 1999c), Guttman (1981, 1985), Meehl (1967), Michell (1986), Rogosa (1987), Romanowski and Douglas (2002), and others for more on this distinction between statistics and measurement.

These contrasts show that the confounding of statistics and measurement is a problem of vast significance that persists in spite of repeated efforts to clarify the distinction. For a wide variety of reasons ranging from cultural presuppositions about the nature of number to the popular notion that quantification is as easy as assigning numbers to observations, measurement is not generally well understood by the public (or even by statisticians!). And so statistics textbooks rarely, if ever, include even passing mention of instrument calibration methods, metric equating processes, the evaluation of data quality relative to the requirements of objective inference, traceability to metrological reference standards, or the integration of qualitative and quantitative methods in the interpretation of measures.

Similarly, in business, marketing, health care, and quality improvement circles, we find near-universal repetition of the mantra, “You manage what you measure,” with very little or no attention paid to the quality of the numbers treated as measures. And so, we find ourselves stuck with so-called measurement systems where,

• instead of linear measures defined by a unit that remains constant across samples and instruments we saddle ourselves with nonlinear scores and percentages defined by units that vary in unknown ways across samples and instruments;
• instead of availing ourselves of the capacity to take missing data into account, we hobble ourselves with the need for complete data;
• instead of dramatically reducing data volume with no loss of information, we insist on constantly re-enacting the meaningless ritual of poring over undigestible masses of numbers;
• instead of adjusting measures for the severity or leniency of judges assigning ratings, we allow measures to depend unfairly on which rater happens to make the observations;
• instead of using methods that give the same result across different distributions, we restrict ourselves to ones that give different results when assumptions of normality are not met and/or standard deviations differ;
• instead of calibrating instruments in an experimental test of the hypothesis that the intended construct is in fact structured in such a way as to make its mapping onto a number line meaningful, we assign numbers and make quantitative inferences with no idea as to whether they relate at all to anything real;
• instead of checking to see whether rating scales work as intended, with higher ratings consistently representing more of the variable, we make assumptions that may be contradicted by the order and spacing of the way rating scales actually work in practice;
• instead of defining a comprehensive framework for interpreting measures relative to a construct, we accept the narrow limits of frameworks defined by the local sample and items;
• instead of capitalizing on the practicality and convenience of theories capable of accurately predicting item calibrations and measures apart from data, we counterproductively define measurement empirically in terms of data analysis;
• instead of putting calibrated tools into the hands of front-line managers, service representatives, teachers and clinicians, we require them to submit to cumbersome data entry, analysis, and reporting processes that defeat the purpose of measurement by ensuring the information provided is obsolete by the time it gets back to the person who could act on it; and
• instead of setting up efficient systems for communicating meaningful measures in common languages with shared points of reference, we settle for inefficient systems for communicating meaningless scores in local incommensurable languages.

Because measurement is simultaneously ubiquitous and rarely well understood, we find ourselves in a world that gives near-constant lip service to the importance of measurement while it does almost nothing to provide measures that behave the way we assume they do. This state of affairs seems to have emerged in large part due to our failure to distinguish between the group-level orientation of statistics and the individual-level orientation of measurement. We seem to have been seduced by a variation on what Whitehead (1925, pp. 52-8) called the fallacy of misplaced concreteness. That is, we have assumed that the power of lawful regularities in thought and behavior would be best revealed and acted on via statistical analyses of data that themselves embody the aggregate mass of the patterns involved.

It now appears, however, in light of studies in the history of science (Latour, 1987, 2005; Wise, 1995), that an alternative and likely more successful approach will be to capitalize on the “wisdom of crowds” (Surowiecki, 2004) phenomenon of collective, distributed cognition (Akkerman, et al., 2007; Douglas, 1986; Hutchins, 1995; Magnus, 2007). This will be done by embodying lawful regularities in instruments calibrated in ideal, abstract, and portable metrics put to work by front-line actors on mass scales (Fisher, 2000, 2005, 2009a, 2009b). In this way, we will inform individual decision processes and structure communicative transactions with efficiencies, meaningfulness, substantive effectiveness, and power that go far beyond anything that could be accomplished by trying to make inferences about individuals from group-level statistics.

We ought not accept the factuality of data as the sole criterion of objectivity, with all theory and instruments constrained by and focused on the passing ephemera of individual sets of local particularities. Properly defined and operationalized via a balanced interrelation of theory, data, and instrument, advanced measurement is not a mere mathematical exercise but offers a wealth of advantages and conveniences that cannot otherwise be obtained. We ignore its potentials at our peril.

References
Akkerman, S., Van den Bossche, P., Admiraal, W., Gijselaers, W., Segers, M., Simons, R.-J., et al. (2007, February). Reconsidering group cognition: From conceptual confusion to a boundary area between cognitive and socio-cultural perspectives? Educational Research Review, 2, 39-63.

Andersen, E. B. (1977). Sufficient statistics and latent trait models. Psychometrika, 42(1), 69-81.

Andersen, E. B. (1995). What George Rasch would have thought about this book. In G. H. Fischer & I. W. Molenaar (Eds.), Rasch models: Foundations, recent developments, and applications (pp. 383-390). New York: Springer-Verlag.

Andrich, D. (1989). Distinctions between assumptions and requirements in measurement in the social sciences. In J. A. Keats, R. Taft, R. A. Heath & S. H. Lovibond (Eds.), Mathematical and Theoretical Systems: Proceedings of the 24th International Congress of Psychology of the International Union of Psychological Science, Vol. 4 (pp. 7-16). North-Holland: Elsevier Science Publishers.

Andrich, D. (1997). Georg Rasch in his own words [excerpt from a 1979 interview]. Rasch Measurement Transactions, 11(1), 542-3. [http://www.rasch.org/rmt/rmt111.htm#Georg].

Andrich, D. (2002). Understanding resistance to the data-model relationship in Rasch’s paradigm: A reflection for the next generation. Journal of Applied Measurement, 3(3), 325-59.

Andrich, D. (2004, January). Controversy and the Rasch model: A characteristic of incompatible paradigms? Medical Care, 42(1), I-7–I-16.

Arnold, S. F. (1982-1988). Sufficient statistics. In S. Kotz, N. L. Johnson & C. B. Read (Eds.), Encyclopedia of Statistical Sciences (pp. 72-80). New York: John Wiley & Sons.

Arnold, S. F. (1985, September). Sufficiency and invariance. Statistics & Probability Letters, 3, 275-279.

Cohen, J. (1994). The earth is round (p < 0.05). American Psychologist, 49, 997-1003.

Davidoff, F. (1999, 15 June). Standing statistics right side up (Editorial). Annals of Internal Medicine, 130(12), 1019-1021.

Douglas, M. (1986). How institutions think. Syracuse, New York: Syracuse University Press.

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Duncan, O. D., & Stenbeck, M. (1988). Panels and cohorts: Design and model in the study of voting turnout. In C. C. Clogg (Ed.), Sociological Methodology 1988 (pp. 1-35). Washington, DC: American Sociological Association.

Embretson, S. E. (1996, September). Item Response Theory models and spurious interaction effects in factorial ANOVA designs. Applied Psychological Measurement, 20(3), 201-212.

Falmagne, J.-C., & Narens, L. (1983). Scales and meaningfulness of quantitative laws. Synthese, 55, 287-325.

Feinstein, A. R. (1995, January). Meta-analysis: Statistical alchemy for the 21st century. Journal of Clinical Epidemiology, 48(1), 71-79.

Fischer, G. H. (1981, March). On the existence and uniqueness of maximum-likelihood estimates in the Rasch model. Psychometrika, 46(1), 59-77.

Fisher, W. P., Jr. (2000). Objectivity in psychosocial measurement: What, why, how. Journal of Outcome Measurement, 4(2), 527-563.

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Fisher, W. P., Jr. (2009a). Bringing human, social, and natural capital to life: Practical consequences and opportunities. In M. Wilson, K. Draney, N. Brown & B. Duckor (Eds.), Advances in Rasch Measurement, Vol. Two (p. in press). Maple Grove, MN: JAM Press.

Fisher, W. P., Jr. (2009b, July). Invariance and traceability for measures of human, social, and natural capital: Theory and application. Measurement (Elsevier), in press.

Goodman, S. N. (1999a, 6 April). Probability at the bedside: The knowing of chances or the chances of knowing? (Editorial). Annals of Internal Medicine, 130(7), 604-6.

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Goodman, S. N. (1999c, 15 June). Toward evidence-based medical statistics. 2: The Bayes factor. Annals of Internal Medicine, 130(12), 1005-1013.

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Hall, W. J., Wijsman, R. A., & Ghosh, J. K. (1965). The relationship between sufficiency and invariance with applications in sequential analysis. Annals of Mathematical Statistics, 36, 575-614.

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LivingCapitalMetrics Blog by William P. Fisher, Jr., Ph.D. is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
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Contesting the Claim, Part I: Are Rasch Measures Really as Objective as Physical Measures?

Psychometricians, statisticians, metrologists, and measurement theoreticians tend to be pretty unassuming kinds of people. They’re unobtrusive and retiring, by and large. But there is one thing some of them are prone to say that will raise the ire of others in a flash, and the poor innocent geek will suddenly be subjected to previously unknown forms and degrees of social exclusion.

What is that one thing? “Instruments calibrated by fitting data to a Rasch model measure with the same kind of objectivity as is obtained with physical measures.” That’s one version. Another could be along these lines: “When data fit a Rasch model, we’ve discovered a pattern in human attitudes or behaviors so regular that it is conceptually equivalent to a law of nature.”

Maybe it is the implication of objectivity as something that must be politically incorrect that causes the looks of horror and recoiling retreats in the nonmetrically inclined when they hear things like this. Maybe it is the ingrained cultural predisposition to thinking such claims outrageously preposterous that makes those unfamiliar with 80 years of developments and applications so dismissive. Maybe it’s just fear of the unknown, or a desire not to have to be responsible for knowing something important that hardly anyone else knows.

Of course, it could just be a simple misunderstanding. When people hear the word “objective” do most of them have an image of an object in mind? Does objectivity connote physical concreteness to most people? That doesn’t hold up well for me, since we can be objective about events and things people do without any confusions involving being able to touch and feel what’s at issue.

No, I think something else is going on. I think it has to do with the persistent idea that objectivity requires a disconnected, alienated point of view, one that ignores the mutual implication of subject and object in favor of analytically tractable formulations of problems that, though solvable, are irrelevant to anything important or real. But that is hardly the only available meaning of objectivity, and it isn’t anywhere near the best. It certainly is not what is meant in the world of measurement theory and practice.

It’s better to think of objectivity as something having to do with things like the object of a conversation, or an object of linguistic reference: “chair” as referring to the entire class of all forms of seating technology, for instance. In these cases, we know right away that we’re dealing with what might be considered a heuristic ideal, an abstraction. It also helps to think of objectivity in terms of fairness and justice. After all, don’t we want our educational, health care, and social services systems to respect the equality of all individuals and their rights?

That is not, of course, how measurement theoreticians in psychology have always thought about objectivity. In fact, it was only 70-80 years ago that most psychologists gave up on objective measurement because they couldn’t find enough evidence of concrete phenomena to support the claims to objectivity they wanted to make (Michell, 1999). The focus on the reflex arc led a lot of psychologists into psychophysics, and the effects of operant conditioning led others to behaviorism. But a lot of the problems studied in these fields, though solvable, turned out to be uninteresting and unrelated to the larger issues of life demanding attention.

And so, with no physical entity that could be laid end-to-end and concatenated in the way weights are in a balance scale, psychologists just redefined measurement to suit what they perceived to be the inherent limits of their subject matter. Measurement didn’t have to be just ratio or interval, it could also be ordinal and even nominal. The important thing was to get numbers that could be statistically manipulated. That would provide more than enough credibility, or obfuscation, to create the appearance of legitimate science.

But while mainstream psychology was focused on hunting for statistically significant p-values, there were others trying to figure out if attitudes, abilities, and behaviors could be measured in a rigorously meaningful way.

Louis Thurstone, a former electrical engineer turned psychologist, was among the first to formulate the problem. Writing in 1928, Thurstone rightly focused on the instrument as the focus of attention:

“The scale must transcend the group measured.–One crucial experimental test must be applied to our method of measuring attitudes before it can be accepted as valid. A measuring instrument must not be seriously affected in its measuring function by the object of measurement. To the extent that its measuring function is so affected, the validity of the instrument is impaired or limited. If a yardstick measured differently because of the fact that it was a rug, a picture, or a piece of paper that was being measured, then to that extent the trustworthiness of that yardstick as a measuring device would be impaired. Within the range of objects for which the measuring instrument is intended, its function must be independent of the object of measurement”  (Thurstone, 1959, p. 228).

Thurstone aptly captures what is meant when it is said that attitudes, abilities, or behaviors can be measured with the same kind of objectivity as is obtained in the natural sciences. Objectivity is realized when a test, survey, or assessment functions the same way no matter who is being measured, and, conversely (Thurstone took this up, too), an attitude, ability, or behavior exhibits the same amount of what is measured no matter which instrument is used.

This claim, too, may seem to some to be so outrageously improbable as to be worthy of rejecting out of hand. After all, hasn’t everyone learned how the fact of being measured changes the measure? Thing is, this is just as true in physics and ecology as it is in psychiatry or sociology, and the natural sciences haven’t abandoned their claims to objectivity. So what’s up?

What’s up is that all sciences now have participant observers. The old Cartesian duality of the subject-object split still resides in various rhetorical choices and affects our choices and behaviors, but, in actual practice, scientific methods have always had to deal with the way questions imply particular answers.

And there’s more. Qualitative methods have grown out of some of the deep philosophical introspections of the twentieth century, such as phenomenology, hermeneutics, deconstruction, postmodernism, etc. But most researchers who are adopting qualitative methods over quantitative ones don’t know that the philosophers legitimating the new focuses on narrative, interpretation, and the construction of meaning did quite a lot of very good thinking about mathematics and quantitative reasoning. Much of my own published work engages with these philosophers to find new ways of thinking about measurement (Fisher, 2004, for instance). And there are some very interesting connections to be made that show quantification does not necessarily have to involve a positivist, subject-object split.

So where does that leave us? Well, with probability. Not in the sense of statistical hypothesis testing, but in the sense of calibrating instruments with known probabilistic characteristics. If the social sciences are ever to be scientific, null hypothesis significance tests are going to have to be replaced with universally uniform metrics embodying and deploying the regularities of natural laws, as is the case in the physical sciences. Various arguments on this issue have been offered for decades (Cohen, 1994; Meehl, 1967, 1978; Goodman, 1999; Guttman, 1985; Rozeboom, 1960). The point is not to proscribe allowable statistics based on scale type  (Velleman & Wilkinson, 1993). Rather, we need to shift and simplify the focus of inference from the statistical analysis of data to the calibration and distribution of instruments that support distributed cognition, unify networks, lubricate markets, and coordinate collective thinking and acting (Fisher, 2000, 2009). Persuasion will likely matter far less in resolving the matter than an ability to create new value, efficiencies, and profits.

In 1964, Luce and Tukey gave us another way of stating what Thurstone was getting at:

“The axioms of conjoint measurement apply naturally to problems of classical physics and permit the measurement of conventional physical quantities on ratio scales…. In the various fields, including the behavioral and biological sciences, where factors producing orderable effects and responses deserve both more useful and more fundamental measurement, the moral seems clear: when no natural concatenation operation exists, one should try to discover a way to measure factors and responses such that the ‘effects’ of different factors are additive.”

In other words, if we cannot find some physical thing that we can make add up the way numbers do, as we did with length, weight, volts, temperature, time, etc., then we ought to ask questions in a way that allows the answers to reveal the kind of patterns we expect to see when things do concatenate. What Thurstone and others working in his wake have done is to see that we could possibly do some things virtually in terms of abstract relations that we cannot do actually in terms of concrete relations.

The concept is no more difficult to comprehend than understanding the difference between playing solitaire with actual cards and writing a computer program to play solitaire with virtual cards. Either way, the same relationships hold.

A Danish mathematician, Georg Rasch, understood this. Working in the 1950s with data from psychological and reading tests, Rasch worked from his training in the natural sciences and mathematics to arrive at a conception of measurement that would apply in the natural and human sciences equally well. He realized that

“…the acceleration of a body cannot be determined; the observation of it is admittedly liable to … ‘errors of measurement’, but … this admittance is paramount to defining the acceleration per se as a parameter in a probability distribution — e.g., the mean value of a Gaussian distribution — and it is such parameters, not the observed estimates, which are assumed to follow the multiplicative law [acceleration = force / mass, or mass * acceleration = force].

“Thus, in any case an actual observation can be taken as nothing more than an accidental response, as it were, of an object — a person, a solid body, etc. — to a stimulus — a test, an item, a push, etc. — taking place in accordance with a potential distribution of responses — the qualification ‘potential’ referring to experimental situations which cannot possibly be [exactly] reproduced.

“In the cases considered [earlier in the book] this distribution depended on one relevant parameter only, which could be chosen such as to follow the multiplicative law.

“Where this law can be applied it provides a principle of measurement on a ratio scale of both stimulus parameters and object parameters, the conceptual status of which is comparable to that of measuring mass and force. Thus, … the reading accuracy of a child … can be measured with the same kind of objectivity as we may tell its weight …” (Rasch, 1960, p. 115).

Rasch’s model not only sets the parameters for data sufficient to the task of measurement, it lays out the relationships that must be found in data for objective results to be possible. Rasch studied with Ronald Fisher in London in 1935, expanded his understanding of statistical sufficiency with him, and then applied it in his measurement work, but not in the way that most statisticians understand it. Yes, in the context of group-level statistics, sufficiency concerns the reproducibility of a normal distribution when all that is known are the mean and the standard deviation. But sufficiency is something quite different in the context of individual-level measurement. Here, counts of correct answers or sums of ratings serve as sufficient statistics  for any statistical model’s parameters when they contain all of the information needed to establish that the parameters are independent of one another, and are not interacting in ways that keep them tied together. So despite his respect for Ronald Fisher and the concept of sufficiency, Rasch’s work with models and methods that worked equally well with many different kinds of distributions led him to jokingly suggest (Andersen, 1995, p. 385) that all textbooks mentioning the normal distribution should be burned!

In plain English, all that we’re talking about here is what Thurstone said: the ruler has to work the same way no matter what or who it is measuring, and we have to get the same results for what or who we are measuring no matter which ruler we use. When parameters are not separable, when they stick together because some measures change depending on which questions are asked or because some calibrations change depending on who answers them, we have encountered a “failure of invariance” that tells us something is wrong. If we are to persist in our efforts to determine if something objective exists and can be measured, we need to investigate these interactions and explain them. Maybe there was a data entry error. Maybe a form was misprinted. Maybe a question was poorly phrased. Maybe we have questions that address different constructs all mixed together. Maybe math word problems work like reading test items for students who can’t read the language they’re written in.  Standard statistical modeling ignores these potential violations of construct validity in favor of adding more parameters to the model.

But that’s another story for another time. Tomorrow we’ll take a closer look at sufficiency, in both conceptual and practical terms. Cited references are always available on request, but I’ll post them in a couple of days.

A Tale of Two Industries: Contrasting Quality Assessment and Improvement Frameworks

Imagine the chaos that would result if industrial engineers each had their own tool sets calibrated in idiosyncratic metrics with unit sizes that changed depending on the size of what they measured, and they conducted quality improvement studies focusing on statistical significance tests of effect sizes. Furthermore, these engineers ignore the statistical power of their designs, and don’t know when they are finding statistically significant results by pure chance, and when they are not. And finally, they also ignore the substantive meaning of the numbers, so that they never consider the differences they’re studying in terms of varying probabilities of response to the questions they ask.

So when one engineer tries to generalize a result across applications, what happens is that it kind of works sometimes, doesn’t work at all other times, is often ignored, and does not command a compelling response from anyone because they are invested in their own metrics, samples, and results, which are different from everyone else’s. If there is any discussion of the relative merits of the research done, it is easy to fall into acrimonious and heated arguments that cannot be resolved because of the lack of consensus on what constitutes valid data, instrumentation, and theory.

Thus, the engineers put up the appearance of polite decorum. They smile and nod at each other’s local, sample-dependent, and irreproducible results, while they build mini-empires of funding, students, quoting circles, and professional associations on the basis of their personal authority and charisma. As they do so, costs in their industry go spiralling out of control, profits are almost nonexistent, fewer and fewer people can afford their products, smart people are going into other fields, and overall product quality is declining.

Of course, this is the state of affairs in education and health care, not in industrial engineering. In the latter field, the situation is much different. Here, everyone everywhere is very concerned to be sure they are always measuring the same thing as everyone else and in the same unit. Unexpected results of individual measures pop out instantly and are immediately redone. Innovations are more easily generated and disseminated because everyone is thinking together in the same language and seeing effects expressed in the same images. Someone else’s ideas and results can be easily fitted into anyone else’s experience, and the viability of a new way of doing things can be evaluated on the basis of one’s own experience and skills.

Arguments can be quite productive, as consensus on basic values drives the demand for evidence. Associations and successes are defined more in terms of merit earned from productivity and creativity demonstrated through the accumulation of generalized results. Costs in these industries are constantly dropping, profits are steady or increasing, more and more people can afford their products, smart people are coming into the field, and overall product quality is improving.

There is absolutely no reason why education and health care cannot thrive and grow like other industries. It is up to us to show how.

LivingCapitalMetrics Blog by William P. Fisher, Jr., Ph.D. is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.
Based on a work at livingcapitalmetrics.wordpress.com.
Permissions beyond the scope of this license may be available at http://www.livingcapitalmetrics.com.