Category Archive for: Universities [Return to Main]

Sunday, March 28, 2010

"Human Capital: Literal Truth, Fairy Tale or Myth?"

Nick Rowe says "This is from my Carleton colleague Frances Woolley":

Human capital: literal truth, fairy tale or myth?, by Frances Woolley:

Part I: Education

Every undergraduate student in labor economics gets told the story of human capital. Education and experience make people more productive. The skills so acquired are called “human capital.” This explains why some people earn more than others, and why some countries are richer than others.

Is human capital theory the literal truth? There is an element of truth in it. The typing skills learnt from Mr. Darby in grade 9 make me more productive than my hunt-and-pecking colleagues. Educating girls reduces fertility rates (pdf), promotes female autonomy, and has a host of other productivity-enhancing benefits. But there are many things that human capital cannot explain.

For example, if what is taught at universities actually makes people more productive, then simply taking university courses should be enough increase earnings. In fact, to get much of a payoff from university education, you have to finish your degree (the “sheepskin effect” ). One reason education pays is that completing a degree “signals” your ability, determination, competence and general stick-with-it-ness.
Perhaps we should think of human capital as a fairy tale, a reassuring bedside story. But the power of fairy tales is that they reflect certain elemental truths about the human condition. People who teach economics may find it deeply comforting to think that their pay is justified by their high levels of human capital.

But human capital is more than a comforting story – it is a myth that shapes our understanding of the world and thus public policy. Ontario’s government is urging universities to increase retention rates, so everyone who starts university completes a degree. If the human capital theory is true, then this is sound policy: more students completing university means more human capital means a more productive economy. If, however, the value of university education is as a signal of ability, then one of the most important things that universities do is fail students. Unless some students fail, the ability to complete a university degree confers no special distinction on the graduate.

Whether or not human capital theory is true determines the best response to the demographic challenges much discussed this blog. If education makes people more productive, then more education can increase the productivity of our economy – possibly enough so that fewer workers are able to support the large number of pensioners. If, however, education is basically about sorting workers – if people are getting more and more degrees in hope of eventually capturing that one elusive stable professional job with benefits – then the best way of responding to the demographic crisis is to scale back post-secondary education. Doing so would effectively increase the size of the working age population substantially, easing demographic problems. ... [Part II: The experience part of the human capital equation]...

My case is unusual since I have a job in a university, but there is no doubt at all that education enhanced my productivity (i.e. that education was more than a signal to potential employers). If California had set tuition at just over $100 per semester at its state universities (colleges then), I'd most likely be selling tractor parts somewhere and hating it. That's what my grandfather did, that's what my dad did, and although my brother isn't in parts directly, he sells John Deere engines so he is involved in the tractor business as well (both my grandfather and my dad managed to work their way up to sales and, in my dad's case, part ownership and general manager toward the end of his career -- my brother and my dad have severe dyslexia, and they overcame much more than I did in achieving the success they realized).

I started working at the parts counter in tractor stores during high school, and I continued all through college to support myself. I hated that job, and it was all the motivation I needed to go to class every day and do my best (which did not rule out doing my share of partying -- I will be in surplus the rest of my life just from those four years...). I had a math professor who loaded his classes up in the morning, and was at the golf course by 1:00 every day (where his son was the pro). I had another who spent a lot of time hunting, fishing, and generally doing whatever he wanted with his free time. I looked at both of them, thought about the stupid tractor parts counter job I was doing and how bored I was with it -- how much I hated going there every day -- and thought "I can do that job." I can play golf every day, enjoy the outdoors, take summers off, etc. (When I showed up to work in the morning, I would write down the number 480 on a piece of paper -- that was how many minutes I had left until I could go home -- and then I'd write down and check off each minute one by one during the day. It was agonizing and counting every minute made it worse. If 15 minutes passed by without my checking off any numbers, a whole 15 minutes without thinking about getting out of there, I considered it a success. Occasionally, a whole hour might go by before I wrote down how long until the day was over, but that was rare. I remember thinking that all I wanted was a job where I wouldn't count the minutes from the time I got there until it was time to go home.) Somehow, though, during graduate school I became convinced that I was supposed to do research, not just play all day when I wasn't teaching, so I skipped the teaching jobs and took a position that required research. But I wouldn't be here without cheap tuition, the math guy who played golf every day -- I took every class I could from him and every other math class they offered that fit my schedule (when I found a good teacher I'd take every class he or she taught no matter what type of math it was), and all the economics I took from the professor who'd rather be hunting or fishing. And I certainly wouldn't be here without all the technical skills I learned (the computer science classes were very valuable). As I said, I have no doubt that my productivity was enhanced by going to college.

But I want to take on the basic premise that the purpose of an education is to enhance productivity, to prepare students for the workforce. That's part of it, certainly, though that is much more the case in professional schools that are attached to universities than in the universities themselves. I didn't just get technical skills from college -- math, computer science, etc. -- I got a liberal arts education (or, at least as much of one as you can get at a state institution charging $100 tuition). I learned things about the world and about ideas that I would not have learned elsewhere, things that helped me to think about and evaluate the world around me from new, different, and valuable perspectives. Even if I'd ended up back at the tractor store, and that was certainly a possibility since I got into graduate school by luck -- I only applied two places, Berkeley and Stanford, and got rejected at both places. (I didn't know how hard it was to get there from Cal State Chico and thought my grades/GRE/math training/letters would be enough, I was pretty naive at that time. I can still remember reading the letters on my front porch and feeling crushed.) A professor I was working for at the time helping with medical consulting (pricing of pharmaceuticals for Medicare) got me into Washington State with support after deadlines had passed. If that had not happened, and it was a bit of luck that it did, I wouldn't have gone to graduate school.

However, even if I'd ended up selling tractor parts, what I learned at Chico is something nobody could have ever taken away from me. We often forget about the education part of education and focus on the vocational training aspect, but to me the broad-based liberal arts education is one of the more valuable parts of the education I received. I tended to focus on economics, mathematics, and computer science. I only took courses outside those areas when I was forced to, and I am so glad they made me to take other courses. I loved geology even though I thought I'd hate it, psychology was surprisingly good -- I read the entire text after the course was over, I read most of the books for my undergraduate courses cover to cover at some point -- cultural geography was a surprise (lots of economics). Now that I think about it there were only one or two courses I didn't like and that was mostly because of the instructors.

I didn't always appreciate it at the time, but the general education part of the degree was of great value. That's one of the main reasons I wish I could have afforded to go to a better school than Chico. I doubt the technical training would have been any better, I made a conscious effort to cover all those bases and a motivated student could get what was needed without too much trouble, but the liberal arts part of the education would have likely been much better (and the opportunities for graduate study would have been considerably enhanced -- there are places you can't get to from Chico). I still have lots of holes in history, philosophy, the arts, religious studies, and so on that were left unfilled growing up in a small farming community with parents who never graduated from college. There were so many things I didn't even know I didn't know (though there are also insights that come with such an upbringing that cannot be learned in college or anywhere else, I think I understand things other people sometimes don't, so I don't mean to put down growing up in a small, farming community, not at all). However, even though Chico probably wasn't the best place in the world for a liberal arts educations, for me it was a great leap forward.

Given my background, and the near certainty that it was only the cheap tuition that saved me from a life I would have hated, I am very sad about what is happening to educational access in California and elsewhere. When I think of all the people stuck in their version of the job at the parts counter, people that could be doing so much more if the path were open to them, it makes me both sad for them and very, very appreciative that the state made it possible for me to find a way out.

I know there are many of you who don't see education the way I do -- as a ticket to someplace better and the only real chance I had -- but I believe education is the key to a better future and I will not give up trying to increase access to as many people as possible. I don't care at all if if dilutes the signal to employers, they'll just have to figure out some other way to cull the herd. The value of an education to an individual goes far beyond training for a job, and I see no reason to deny those benefits to anyone who has done the work required to prepare themselves for college level work.

Wednesday, March 17, 2010

Is It Fair for Education to Be Cheap

Brad DeLong:

Is It Fair for Education to Be Cheap, by Brad DeLong: There is a great tension at the heart of American public higher education. On the one hand, the people who benefit from public and publicly-funded higher education are primarily people who are or will be relatively rich–they will, after all, have a college education, and we know now that people with four-year B.A.s have incomes more than 70% higher than those who finished their education with high school. Publicly-funded higher education is thus, on average, a transfer of wealth from taxpayers in general to the upper-middle class of America today.
On the other hand, the fact that education is as expensive as it is appears to be keeping a great many people from acquiring more. This current cohort of white, male, native-born twenty-year holds will–for the first time in American history–have no more education than their predecessors of a generation ago. This is extraordinary, given that this is a generation during which the college salary premium has risen from 30% to 70%. The returns to college are much greater than they were a decade ago? So why aren’t more people attending.
The answer is that lots of people fear college because it is expensive: they would have to go into debt to attend, and they fear to do so.
So our dilemma: if we don’t keep college cheap–and publicly-funded–we find it next to impossible to increase educational opportunity; if we subsidize college with public money, we are transferring from the not-so-rich to the relatively rich.

I think the answer is to place more of the funding burden on those who do well because of their education than we do now rather than restricting access, i.e. increased progressivity of the tax code (and no, I don't think this will take away or diminish the incentive to get rich). Education is not just about learning things that will help you make a lot of money, though that is certainly a desirable outcome, a well-rounded liberal arts education has benefits that go far beyond training for an occupation. That, in conjunction with the economic benefits of education to the individual and to society, points to more rather than less access.

Wednesday, February 10, 2010

"They Can't be of Asian, African, Latino or Native Descent"

A minority advocacy group in Oregon plans to offer college scholarships to white students only:

Oregon minority group to offer scholarships to white students, by Janie Har, The Oregonian: An Oregon group that represents minorities will start offering scholarships to white students -- and only white students -- in a bid to get people in the majority to champion issues important to minorities.

The stipends will be small, perhaps no more than $2,000 over five years, for students to study race relations in college. The idea is to get students to translate what they learn in school into action in life.

The Oregon League of Minority Voters has not figured out details for the awards, to be issued this spring, said Promise King, executive director of the statewide nonprofit organization. But recipients must live in Oregon. And they can't be of Asian, African, Latino or Native descent. ...

The idea of nudging white people to take up diversity and equity may be the way to go in a state and city where whites far outnumber people of color. But it also underlines a stark reality in Oregon: the stubborn lack of color in power.

"The minorities we have in Oregon are not in a position to effect changes," King said. "The ones in position to effect changes are white."

But not all minority leaders are comfortable ceding control to majority whites. Nichole Maher,  executive director of the Native American Youth Family Center in Portland, welcomes any move to get whites involved in matters usually relegated to minorities.

She rejects the idea that Oregon lacks qualified people of color to lead committees, serve in office or otherwise shape public policy. ...

"Promise's group should not just focus on whites being good allies but ensuring those people use their power and influence to give up their spot for a person of color," she said. "The most courageous thing a white ally can do is truly share power."

People of color make up about 20 percent of Oregon's population. In Portland, Latinos make up 9 percent, Asians 7 percent and African Americans 6 percent. Native Americans and mixed race people are at 4 percent. ...
[A] study by the Urban League of Portland last year that found blacks in Oregon rank near the bottom of nearly every quality-of-life indicator... Of the 90 members in the Oregon Legislature, only three are people of color.

King, a native of Nigeria, said he deliberately courted white leaders when he launched the group in 2007. ... He needed prominent policymakers to make progress on race and poverty, and in Oregon, that meant getting more whites on board. ...

Former state Rep. Jo Ann Bowman, who is African American, isn't sure how she feels about spending cash on whites. But, she readily agrees that diversity and equity matters shouldn't be limited to people of color. "It's certainly thought provoking," Bowman said.

Others are more effusive about the league's ideas to sign up more whites. "I love it," said Kendall Clawson, a self-described middle-class African American and executive director of Q Center,  a North Portland nonprofit group that serves the gay, lesbian, and transgendered communities. ...

If the goal is to get "prominent policymakers to make progress on race and poverty," I'd guess that there are much better ways to spend the money.

Saturday, January 02, 2010

''Scientists Need to Speak Up''

The academic community needs to do a better job at responding to attacks on its credibility:

On issues like global warming and evolution, scientists need to speak up, by Chris Mooney, Commentary, Washington Post: The battle over the science of global warming has long been a street fight between mainstream researchers and skeptics. But never have the scientists received such a deep wound as when, in late November, a large trove of e-mails and documents stolen from the Climatic Research Unit at Britain's University of East Anglia were released onto the Web.
In the ensuing "Climategate" scandal, scientists were accused of withholding information, suppressing dissent, manipulating data and more. But while the controversy has receded, it may have done lasting damage to science's reputation... Meanwhile, public belief in the science of global warming is in decline.
The central lesson of Climategate is not that climate science is corrupt. The leaked e-mails do nothing to disprove the scientific consensus on global warming. Instead, the controversy highlights that in a world of blogs, cable news and talk radio, scientists are poorly equipped to communicate their knowledge and, especially, to respond when science comes under attack.
A few scientists answered the Climategate charges almost instantly. ... But they were largely alone. ... This isn't a new problem. As far back as the late 1990s, before the news cycle hit such a frenetic pace, some science officials were lamenting that scientists had never been trained in how to talk to the public and were therefore hesitant to face the media.
"For 45 years or so, we didn't suggest that it was very important," Neal Lane, a former Clinton administration science adviser and Rice University physicist, told the authors of a landmark 1997 report on the gap between scientists and journalists. ". . . In fact, we said quite the other thing." ...
Scientific training continues to turn out researchers who speak in careful nuances and with many caveats, in a language aimed at their peers, not at the media or the public. Many scientists can scarcely contemplate framing a simple media message for maximum impact; the very idea sounds unbecoming. And many of them don't trust the public or the press....... Rather than spurring greater efforts at communication, such mistrust and resignation have further motivated some scientists to avoid talking to reporters and going on television.
They no longer have that luxury. After all, global-warming skeptics suffer no such compunctions. ... If scientists don't take a central communications role, nobody else with the same expertise and credibility will do it for them.
Meanwhile, the task of translating science for the public is ever more difficult: Information sources are multiplying, partisan news outlets are replacing more objective media, and the news cycle is spinning ever faster.
Consider another failure to communicate from the global-warming arena: the scientific fallout after a devastating trio of hurricanes -- Katrina, Rita and Wilma -- in the fall of 2005. Just as these storms struck, a pair of scientific studies appeared in top journals suggesting, for the first time, that global warming was making hurricanes more intense and deadly. Other scientists vociferously disagreed, and the two camps fell into combat.
So while public interest in hurricanes was at a high after Katrina, much of the science reporting at the time portrayed researchers bickering with one another ("Hurricane Debate Shatters Civility of Weather Science," announced a Wall Street Journal cover story). Judith Curry, a climate scientist at the Georgia Institute of Technology and a co-author of one of the contested studies, told me recently that the experience made her realize that "this was really the wrong way to do things, trying to fight these little wars and knock the other side down."
With the media distracted by the food fight, scientists weren't leading the public discussion, and other important findings that ought to have received attention in Katrina's wake ... were drowned out.
If the global-warming battle has any rival in its intensity, its nastiness and its risk to scientists if they do not talk to the public, it is the long-standing conflict over the teaching of evolution. Science's opponents in this fight are highly organized, and they constantly nitpick evolutionary science to cast the field into disrepute.
The scientific response to creationists has long been to cite the extensive evidence for evolution. In book after book, scientists have explained how DNA, fossil, anatomical and other evidence indisputably shows the interrelatedness of all species. Further, they have refuted creationist claims that evolution cannot explain the complexity of the eye or the intricacy of the bacterial flagellum. Yet ... polls repeatedly show that a large portion of Americans have doubts about evolution.
For all these efforts, why haven't scientists made any inroads? It's because at its core, the objection to evolution isn't about science at all, but about perceived threats to faith and moral values. The only way to defuse the conflict is to assuage these fundamental fears. Yet this drags many scientists out of their comfort zone: They're not priests or theologians and don't know how to sound like them. Many refuse to try...
Ironically, to increase support for the teaching of evolution, scientists must join forces with -- and show more understanding of -- religion. Scientists who are believers also need to be more vocal about how they reconcile science and faith. ...
In other words, what's needed is less "pure science" on its own -- although of course scientists must continue to speak in scientifically accurate terms -- and more engagement with the concerns of nonscientific audiences. In response to that argument, many researchers will say: "Why target us? We're the good guys. And if we become more media savvy, we'll risk our credibility."
There is only one answer to this objection: "Look all around you -- at Climategate, at the unending evolution wars -- and ask, are your efforts working?" The answer, surely, is no.
The precise ways in which scientists should change their communication strategies vary from issue to issue, but there are some common themes. Reticence is never a good thing, especially on a politically fraught topic such as global warming -- it just cedes the debate to the other side....
On other topics, including evolution, scientists must recognize that more than scientific matters are at stake, and either address the moral and ethical issues themselves, or pair with those who can...
All this will require universities to do a better job of training young scientists in media and communication. ... Scientists need not wait for former vice presidents to make hit movies to teach the public about their fields -- they must act themselves. ...

I agree that the academic community should speak up more often, and engage in the public discourse in areas where they have particular expertise. I also agree that alone will be enough.

I'd describe the problem a little bit differently. Over the last few decades -- and perhaps longer -- there has been a concerted effort from the right to discredit and diminish academic voices. We hear academics are nothing but a bunch of liberals out of touch with the real world, etc., etc. -- you've heard it all -- and I think the right has been at least moderately successful at attacking the messengers when they don't like the message (and there's not much coming out of academia they agree with).

So, yes, we have to get out there and explain what research says about a topic in terms the public (and more importantly newscasters) can understand. But the political battle has to be engaged as well. If academics continue to ignore or place themselves above such political battles, then they will continue to be be undermined by those who want to silence research that stands in opposition to their interests (and who do not care at all about the integrity of the scientific process, their goal is to win the battle).

Academics have lost considerable respect in the eyes of the public in the last few decades, and while we often don't do ourselves any favors when we do speak up (so yes, let's become more media savvy), that outcome is no accident. It's the result of a concerted effort from those on the right. If we don't do more to counter the political attacks on our credibility, nobody else is going to do it for us. If the voices that are aligned against the academic community are not taken on directly, then the influence of the academic community over important pubic policy questions will continue to diminish.

Friday, October 09, 2009

Paul Krugman: The Uneducated American

The crisis in education is "about to get much worse":

The Uneducated American, by Paul Krugman, Commentary, NY Times: If you had to explain America’s economic success with one word, that word would be “education.” In the 19th century, America led the way in universal basic education. Then, as other nations followed suit, the “high school revolution” of the early 20th century took us to a whole new level. And in the years after World War II, America established a commanding position in higher education.
But that was then. The rise of American education was, overwhelmingly, the rise of public education — and for the past 30 years our political scene has been dominated by the view that any and all government spending is a waste of taxpayer dollars. Education, as one of the largest components of public spending, has inevitably suffered.
Until now, the results of educational neglect have been gradual — a slow-motion erosion of America’s relative position. But things are about to get much worse, as the economic crisis — its effects exacerbated by the penny-wise, pound-foolish behavior that passes for “fiscal responsibility” in Washington — deals a severe blow to education across the board.
About that erosion:... Most people, I suspect, still have ... an image of America as ... unique in the extent to which higher learning is offered to the population at large. That image used to correspond to reality. But these days ... we have a college graduation rate that’s slightly below the average across all advanced economies.
Even without ... the current crisis, there would be every reason to expect us to fall further in these rankings, if only because we make it so hard for those with limited financial means to stay in school [compared to] their counterparts in, say, France. ... But the crisis has placed huge additional stress on our creaking educational system.
According to the Bureau of Labor Statistics,... lost jobs ... in state and local education .... over the past five months [totalled] 143,000. That may not sound like much, but education ... should, and normally does, keep growing even during a recession. Markets may be troubled, but that’s no reason to stop teaching our children. Yet that’s exactly what we’re doing.
There’s no mystery about what’s going on: education is mainly the responsibility of state and local governments, which are in dire fiscal straits. Adequate federal aid could have made a big difference. But ... back in February centrist senators insisted on stripping much of that aid from the ... stimulus bill.
As a result, education is on the chopping block. And laid-off teachers are only part of the story. Even more important is the way that we’re shutting off opportunities.
For example,... generations [of] talented students from less affluent families have used [California’s community] colleges as a stepping stone to the state’s public universities. But in the face of the state’s budget crisis those universities have been forced to slam the door on this year’s potential transfer students. One result, almost surely, will be lifetime damage to many students’ prospects — and a large, gratuitous waste of human potential.
So what should be done?
First of all, Congress needs to undo the sins of February, and approve another big round of aid to state governments. We don’t have to call it a stimulus, but it would be a very effective way to create or save thousands of jobs. And it would, at the same time, be an investment in our future.
Beyond that, we need to wake up and realize that one of the keys to our nation’s historic success is now a wasting asset. Education made America great; neglect of education can reverse the process.

Tuesday, September 01, 2009

Ideas versus Discipline

"This is just the latest chapter of a long saga":

The Guns of August, and Why the Republican Right Was So Adept at Using Them on Health Care, by Robert Reich: What we learned in August is something we've long known but keep forgetting: The most important difference between America's Democratic left and Republican right is that the left has ideas and the right has discipline. Obama and progressive supporters of health care were outmaneuvered in August -- not because the right had any better idea for solving the health care mess but because the rights' attack on the Democrats' idea was far more disciplined than was the Democrats' ability to sell it.
I say the Democrats' "idea" but in fact there was no single idea. Obama never sent any detailed plan to Congress. Meanwhile, congressional Dems were so creative and undisciplined before the August recess they came up with a kaleidoscope of health-care plans. The resulting incoherence served as an open invitation to the Republican right to focus with great precision on convincing the public of their own demonic version of what the Democrats were up to -- that it would take away their Medicare, require "death panels," raise their taxes, and lead to a government takeover of medicine, and so on. ...
This is just the latest chapter of a long saga. Over the last twenty years, as progressives have gushed new ideas, the right has became ever more organized and mobilized in resistance -- capable of executing increasingly consistent and focused attacks, moving in ever more perfect lockstep, imposing an exact discipline often extending even to the phrases and words used repeatedly by Hate Radio, Fox News, and the oped pages of The Wall Street Journal ("death tax," "weapons of mass destruction," "government takeover of health care.") I saw it in 1993 and 1994 as the Clinton healthcare plan -- as creatively and wildly convoluted as any policy proposal before or since -- was defeated both by a Democratic majority in congress incapable of coming together around any single bill and a Republican right dedicated to Clinton's destruction. ...
You want to know why the left has ideas and the right has discipline? Because people who like ideas and dislike authority tend to identify with the Democratic left, while people who feel threatened by new ideas and more comfortable in a disciplined and ordered world tend to identify with the Republican right. Democrats and progressives let a thousand flowers bloom. Republicans and the right issue directives. This has been the yin and yang of American politics and culture. But it means that the Democratic left's new ideas often fall victim to its own notorious lack of organization and to the right's highly-organized fear mongering. ...
August is coming to a close, and congressional recess is about over. History is not destiny, and Democrats and progressives can yet enact meaningful health care reform... But to do so, we'll need to be far more disciplined about it. All of us, from Obama on down.

[On another issue - people "who like ideas and dislike authority" are the types who tend to end up in universities, so this would also explain how self-selection could lead to a disproportionate number of Democrats in academia.]

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Update: Andrew Samwick says this all sounds familiar:

Robert Reich Is Having Deja Vu, Too, by Andrew Samwick: But he doesn't quite realize it.  In his latest post..., he laments the way Democrat "ideas" couldn't persevere against the onslaught of Republican "discipline."  Change a few details, and he's talking about failed Social Security reform in 2005:

I say the Democrats' "idea" but in fact there was no single idea. Obama never sent any detailed plan to Congress. Meanwhile, congressional Dems were so creative and undisciplined ... they came up with a kaleidoscope of health-care plans. The resulting incoherence served as an open invitation to the Republican right to focus with great precision on convincing the public of their own demonic version of what the Democrats were up to... The Obama White House -- a veritable idea factory brimming with ingenuity -- thereafter proved unable to come up with a single, convincing narrative to counteract this right-wing hokum. Whatever discipline Obama had mustered during the campaign somehow disappeared.

Being "coherent" enough to overcome "hokum" ought to be the minimum standard for legislation on this scale.  Like it or not, if you want to use the tools of a democratic government to reorganize markets for health care, you need more than an idea factory and staged townhall meetings.  You need some discipline yourself.  And we're not talking about Ironman triathlon level discipline.  We're only talking about government level discipline: white papers, Congressional hearings, and, critically, a forum in which the ideas in the bills that are moving through Congress are shown to be better ideas than the alternatives.  We haven't seen that at all.  In particular, show me why the bills moving through Congress, with all of their attendant costs, are better than a simple reform consisting only of:

  1. Community rating
  2. Guaranteed issue
  3. Ex post risk adjustment
  4. An individual mandate, with Medicaid for a fee as the backup option

And spare me the whining about how the Republicans don't have a better plan.  They don't have the White House.  They don't have the Senate.  They don't have the House.  They don't have to have a better argument than the claim that the Democrats' plan isn't better than the status quo.  It's not as if the Democrats shot down Social Security in 2005 and have now done something better.

Friday, March 13, 2009

Summers at Brookings

Wednesday, December 03, 2008

"On Financial and Human Capital"

Robert Reich:

Of Financial Capital and Human Capital: Why We're Bailing Out Wall Street While Allowing Our Schools to Get Clobbered, by Robert Reich: Our preoccupation with the immediate crisis of financial capital is causing us to overlook the bigger crisis in America's human capital. While we commit hundreds of billions of taxpayer dollars to Wall Street, we're slashing our outlays for public education.

Education is largely funded by state and local governments whose revenues are plummeting. As consumers cut back, state sales and income taxes are shrinking... On average, state revenues account for half of public school budgets, and most of the funding of public colleges and universities. On top of this, home values are dropping, which means local property taxes are also taking a hit. Local property taxes account for 40 percent of local school budgets.

The result: Schools are being closed, teachers laid off, after-school programs cut, so-called “noncritical” subjects like history eliminated, and tuitions hiked at state colleges.

It's absurd. We’re bailing out every major bank to get financial capital flowing again. But we’re squeezing the main sources of our nation's human capital. Yet America's future competitiveness and the standard of living of our people depend largely our peoples’ skills, and our capacities to communicate and solve problems and innovate – not on our ability to borrow money.

What’s more, our human capital is rooted here, while financial capital moves around the globe at the speed of an electronic blip. ...

Don't get me wrong: I’m not saying funding is everything when it comes to education. ... But without adequate funding we can’t attract talented people into teaching, or keep class sizes small enough to give kids a real chance to learn, or provide them with a well-rounded curriculum, and ensure that every qualified young person can go to college.

So why are we bailing out Wall Street and not our nation’s public schools and colleges? Partly because the crisis in financial capital is immediate while our human capital crisis is unfolding gradually. But maybe it's also because we don’t have a central banker for America’s human capital – someone who warns us as loudly as Ben Bernanke did a few months ago when he was talking about Wall Street's meltdown, of the dire consequences that will follow if we don’t come up with the dough.

I'll just add this:

College Costs, by Paul Glastris, Washington Monthly: Some scary numbers out today about the growing unaffordability of college.

Over all, the report found, published college tuition and fees increased 439 percent from 1982 to 2007, adjusted for inflation, while median family income rose 147 percent.

The current economic downturn will probably make matters worse. ... And, like everything in life, the poor are hit hardest:

Among the poorest families -- those with incomes in the lowest 20 percent -- the net cost of a year at a public university was 55 percent of median income, up from 39 percent in 1999-2000. At community colleges, long seen as a safety net, that cost was 49 percent of the poorest families' median income last year, up from 40 percent in 1999-2000.

This is a huge problem. ...

Update: See also Restoring America’s Academic Competitive Edge.

Wednesday, October 29, 2008

Econ Bloggers

From Tyler Cowen:

Econ bloggers gain clout in financial crisis, Marginal Revolution: Here is the article, there is lots from me and from Mark Thoma, among others.

On a more casual note, I've enjoyed blogging the same topic week after week after week.  I wonder at what point I will feel like cracking?

I'm not sure the quote about doctors came out quite right:

Are the econ bloggers able to better explain and analyze the often-complex factors that have led to the current crisis?

"I'm in academics," he replied. "On the academics side, you don't ever diagnose the patient. It's all theoretical, and what I'm doing now, especially with the financial crisis, is like having a patient show up at the doctor's office and say, 'I've got these symptoms, what's wrong with me?' And the doctor sticks him. That's a completely different use of economics -- a real time analysis -- that I haven't seen before."

Instead of "and the doctor sticks him," I meant that the doctor is asked to diagnose what is wrong and recommend a prescription - a cure of some sort - that will fix the problem (or explain why no cure is available and the patient will have to suffer through the problem until it fixes itself). You don't have the luxury  you have as an academic of waiting until it's all over, looking at the data, and then figuring out how well the policy worked, what could have been done better, etc. Part of real-time policymaking is learning what to look at ("Get me a TED spread, stat!"), and then learning how to interpret the diagnostics that you get so that you can understand what is happening and recommend a course of action. Real-time policy making is not easy, and you find out very fast just how good your models really are, and I've gained a lot of respect for those who do it and do it well since I've started doing this.

As in the medical profession, we need an interface between theory and practice - in economics the gulf has been too wide for too long - and I think blogs are one way the profession has started to close the gap between the theoretical community and policymakers. Practitioners have a lot to learn from the theoretical research in medicine and in economics, but there also has to be a feedback in the other direction where the practitioners can say, "this treatement doesn't work, has the following flaws, etc., and it would work better if..." so that the theorists can provide better tools for polcymakers and other practitioners. The Fed and other policymaers have always had to do this - make policy decisions in real-time - but the process wasn't very visible. With blogs, it's starting to come out into the open, e.g. look what Krugman did on his as policies to abate the financial crisis were proposed, and I think that's a very healthy development.

Friday, July 18, 2008

FRBSF: Can Young Americans Compete in a Global Economy?

Clive Crook recently:

A startling and profoundly important fact about the US economy has received surprisingly little attention. The educational quality of the country's workers is starting to decline - not just relatively (because other countries are catching up and moving ahead) but also, for the first time, in absolute terms. Over the coming years, baby-boomers departing from the labour force will have better educational qualifications than the younger workers replacing them. If the ultimate source of an economy's ability to grow and prosper is its human capital, the US is in trouble.

[Update: I should have included this too.] The absolute decline is a concern, but maybe the relative comparison isn't so bad, at least for now? This Economic Letter argues that U.S. students do poorly in comparison with other students around the world when the comparison is made in high school, but if the comparison is made when they are older, 26-30 years old, the comparison looks better - U.S. students are in the middle of the group rather than at the bottom. Thus , it appears that U.S. students reap substantial benefits from college (and other post high school learning) relative to foreign students in many other countries, and U.S. students attend college in greater numbers than do foreign students. The question is, though, as foreign countries develop their higher education systems, and if we fail to make the necessary investments in education ourselves, will this advantage persist?:

Can Young Americans Compete in a Global Economy?, by Elizabeth Cascio, Economic Letter, FRBSF: Young Americans entering the labor market today face substantial competition. Employers can look all over the world for workers with the skills to meet their firms' needs. Are young Americans ready for these challenges? The answer isn't obvious. On the one hand, U.S. high school students consistently perform worse on international standardized tests than students in other industrialized countries; on the other hand, the United States generally has maintained the highest college completion rate in the world. Sorting out the net effect of these two phenomena on young Americans' readiness to compete in a global job market has been difficult given the dearth of suitable data.

This Economic Letter summarizes new research by Cascio, Clark, and Gordon (2008) (hereafter CCG) that uses data from the International Adult Literacy Survey (IALS), fielded in the 1990s, to address this issue. The authors estimate the skill levels of 16- and 17-year-olds and 26- to 30-year-olds for the United States and other high-income countries. Consistent with other assessments of the school-age population, the IALS data show that U.S. 16- and 17-year-olds perform poorly relative to their counterparts in other nations. By their late 20s, however, those in the U.S. group in the IALS data compare much more favorably to their counterparts abroad, suggesting that they are able to "catch up" in college or beyond. The authors then discuss why the U.S. "age profile of skill" is so different from that in other countries.

Continue reading "FRBSF: Can Young Americans Compete in a Global Economy?" »

Sunday, June 15, 2008


My Father's Day gift came yesterday afternoon:

Continue reading "Graduation" »

Friday, May 30, 2008

Universal Health Care and Military Retention

Worries that universal health care will hurt military recruiting:

Health’s Gain May Be Army’s Loss, by Floyd Norris, Commentary, NY Times: Call it the law of unintended consequences. When you fix one thing, it messes up other things.

If the Democrats win the election this year, and are able to enact a health care plan that extends adequate coverage to all Americans, the loser could be the Army. Getting enough people to enlist could become a major problem for the next president. ...

Government polls show that the proportion of young people who think they might enlist is roughly half what it was in the late 1980s. The military has responded with more recruiters and higher cash enlistment bonuses, and has met its goals. A significant factor for many recruits, it turns out, is the military’s generous health benefits for dependants.

Michael Massing, writing in the April 3 issue of The New York Review of Books, tells the story of one part-time college student from Brooklyn, who was holding down two jobs but still going into debt. “Meanwhile, he got married, his wife got pregnant, and he had no health care. From a brother in the military, he had learned of the Army’s many benefits, and, visiting a recruiter, he heard about Tricare, the military’s generous health plan.” He enlisted. ... All that could change if the push for some kind of national health insurance program were to be successful. ...

[I]f such a program were adopted, it seems likely that the military, and particularly the Army, would feel the immediate effect. To expand the Army, as all the candidates say they want to do, would require some other incentive for enlistment... In the near term, it is possible that a recession will improve the military’s recruiting success. ...

One partial solution to the negative effect on enlistment of a health care plan for all could be a new G.I. education benefit. Both the House and Senate have approved such a plan... President Bush is opposed to the legislation, which its sponsors say would cost $50 billion over 10 years, and it is far from clear it will be enacted. ...

Senator Jim Webb, a freshman Democrat and Vietnam veteran, is the principal Senate sponsor of the legislation. He argued — with something less than precise data — that passage of the bill would increase enlistment by 16 percent...

Senator McCain has proposed a less costly alternative that would provide better benefits to those who stay in the military longer. He may have a point. Last year about three-quarters of Army volunteers who completed their first term of enlistment, and nearly as many marines, chose not to re-enlist. ...

If we get a real health care plan for all Americans, it might require something like the Webb bill — or a very unpopular revival of the draft — just to keep fighting in Iraq and Afghanistan. The backers of health care legislation do not want to hurt the Army, but that is what could happen.

Continuing a discussion of this topic from not too long ago, the right way to do this is to state the the goals we are trying to reach, then build incentives into the polices that direct people toward those goals with as few negative consequences as possible.

One possible goal is retention. If you want people to stay longer, deferred compensation schemes are a way to accomplish that goal. We need to decide how many people we want to stay for additional terms, and then set the compensation incentives accordingly (these can be tweaked as needed, e.g. you can have incentives for reenlistment at each decision point, or you can discourage reenlistment after some number of terms if there is some reason to do so). Yes, it may require that the government pay people serving in the military more, at least those who stay longer, but that is simply what it will cost to reach the goal, that's the price to command these resources. People who applaud the ability of markets to value resources should understand that. If it costs too much to induce sufficient reenlistment, i.e. if the costs of producing higher retention rates are greater than the benefits, then it's not a very good policy anyway.

But if the goals are different, e.g. if the goal is to provide educational benefits to make up for lost opportunities in the private sector due to service in the military, the the policy will, of course, be different as well. When evaluating a proposed policy to, for example, increase educational benefits all of the consequences, including the effects on retention, should be examined. But this is part of a cost benefit calculation. If the educational benefit - the goal of the policy - exceeds the retention cost, then it's still worthwhile.

And it may not be necessary to give up on the retention goal just because you offer educational benefits, one does not have to be traded against the other. It's possible - if you are willing to pay the cost - to offer both higher education benefits and higher deferred compensation so that both goals are attained. More help for education is available for those who choose to leave when their term ends, but since deferred compensation is higher for those who reenlist, just as many stay as before. Whether it's worth it to do this is  matter of comparing the costs and benefits, but increasing education benefits does not have to lower retention rates.

If national health care is enacted and that lowers the incentive to enlist, or to reenlist, then the compensation levels will have to be adjusted to compensate, but it doesn't have to change retention rates or the ability to provide education benefits after people leave the military if we are willing to pay what's needed to induce the desired behavior.

Tuesday, May 06, 2008

Widening Inequality in Skills

Why aren't people responding to the skill premium by increasing their investment in education? One reason is that they are rational and realize that widening inequality is due to other forces:

"the most important factor" in rising inequality "is the rising skill premium, the increased return to education."

That's a fundamental misreading of what's happening.... What we're seeing isn't the rise of a fairly broad class of knowledge workers. Instead, we're seeing the rise of a narrow oligarchy: income and wealth are becoming increasingly concentrated in the hands of a small, privileged elite. I think of Mr. Bernanke's position ... as the 80-20 fallacy. It's the notion that the winners in our increasingly unequal society are a fairly large group ... the 20 percent or so of American workers who have the skills to take advantage of new technology and globalization...

The truth is quite different. Highly educated workers have done better than those with less education, but ... real earnings of college graduates actually fell more than 5 percent between 2000 and 2004. Over the longer stretch from 1975 to 2004 the average earnings of college graduates rose, but by less than 1 percent per year. ...

The notion that it's all about returns to education suggests that nobody is to blame for rising inequality, that it's just a case of supply and demand at work. And it also suggests that the way to mitigate inequality is to improve our educational system — and better education is a value to which just about every politician in America pays at least lip service.

The idea that we have a rising oligarchy is much more disturbing. It suggests that the growth of inequality may have as much to do with power relations as it does with market forces. Unfortunately, that's the real story.


Decomposing the sources of inequality involves calculations that don’t belong in a family newspaper, but basically it seems that only around a third of the rise in inequality over the past generation is associated with a rising premium for education.

There has been considerable debate about this, but even if only a third of the change is due to the education premium, the change has been large and one third is enough to provide a decent incentive for action. Thus, even with the qualifications above in full force, it still seems like we should have observed more response to the rising premium on education than we can find in the data:

The anemic response of skill investment to skill premium growth, by Joseph G. Altonji, Prashant Bharadwaj, and Fabian Lange, Vox EU: Since 1980, the demand for skilled labour has risen faster than the supply of skills, fuelling a steady increase in the earnings premia found for measures of skills such as schooling or cognitive test scores.[1] The rapid rise in the skill premium represents a substantial increase in the economic incentive to acquire skills. For example, Heckman, Lochner, and Todd (2008) show that between 1980 and 2000 the internal rate of return for completing high school rather than dropping out after tenth grade has increased from approximately 40% to 55%. Standard economic theory suggests that such an increase in the skill premium should induce young adults to invest more in their skills and supply more skills to the labour market.

How rapidly and how much young adults respond to this increase in the returns to skills and how this response varies across the population have important implications for the development of the US economy. Young adults’ investment in their skills determines directly how much the US economy will be able to benefit from ongoing technological progress. And, whether earnings inequality within and between groups will decline during the next few decades depends, to a large extent, on how those who traditionally have acquired few labour market skills respond to the increase in the skill premium.

Continue reading "Widening Inequality in Skills" »

Saturday, April 19, 2008

Mankiw: The Wealth Trajectory: Rewards for the Few

Greg Mankiw on the sources of rising inequality:

The Wealth Trajectory: Rewards for the Few, by N. Gregory Mankiw, Economic View, NY Times: If there is one thing about the United States economy in recent years that is beyond dispute, it is this: It’s a great time to be rich. ...

You see it in the daily headlines... Lloyd C. Blankfein, chief executive of Goldman Sachs, took home $68.5 million last year.... Bill and Hillary Clinton raked in $109 million. These stories are not mere aberrations. According to the economists who crunch the numbers, they reflect a long-term trend of increasing economic inequality.

The best data on the superrich comes from Thomas Piketty ... and Emmanuel Saez... They report that ... the superrich have been getting an increasing slice of the economic pie. In 1980, the top 0.01 percent of the population had 0.87 percent of total income. By 2006, their share had more than quadrupled to 3.89 percent, a level not seen since 1916.

Critics of the Piketty-Saez data argue, with some justification, that tax return data is unreliable. ... It is hard to escape the conclusion, however, that Professors Piketty and Saez are finding something real. ...

Offsetting this trend to some degree is the shrinking gender gap. Female workers started well below their male counterparts and have been catching up. But despite this equalizing force, the earnings ratio of the 90th to 10th percentiles, men and women combined, has risen 30 percent.

What accounts for rising inequality? Some pundits are tempted to look inside the Beltway for a cause, but the case is hard to make. Government policy makers do not have the tools to exert such a strong influence over pretax earnings, even if they wanted to do so.

Also, the trend toward increasing inequality has been fairly steady, despite changing political winds. The income share of the richest families increased substantially both during Ronald Reagan’s eight years in office and during Bill Clinton’s.

The best diagnosis so far comes from ... Claudia Goldin and Lawrence F. Katz... Their bottom line: “the sharp rise in inequality was largely due to an educational slowdown.”

According to Professors Goldin and Katz, for the past century technological progress has been a steady force not only increasing average living standards, but also increasing the demand for skilled workers relative to unskilled workers. ...

For much of the 20th century, however, skill-biased technological change was outpaced by advances in educational attainment. In other words, while technological progress increased the demand for skilled workers, our educational system increased the supply of them even faster. As a result, skilled workers did not benefit disproportionately from economic growth.

But recently things have changed. Over the last several decades, technology has kept up its pace, while educational advancement has slowed down. ...

Because growth in the supply of skilled workers has slowed, their wages have grown relative to those of the unskilled. This shows up in the estimates of the financial return to education made by Professors Goldin and Katz. In 1980, each year of college raised a person’s wage by 7.6 percent. In 2005, each year of college yielded an additional 12.9 percent. The rate of return from each year of graduate school has risen even more — from 7.3 to 14.2 percent.

While education is the key to understanding broad inequality trends, it is less obvious whether it can explain the incomes of the superrich. Simply going to college and graduate school is hardly enough to join the top echelons...

But neither is education irrelevant. If Mr. Blankfein had left the New York public school system and gone directly to work, instead of attending Harvard College and Law School, most likely he would not be the head of a major investment bank today.

If the Clintons had been content with high school diplomas and not attended Georgetown, Wellesley, Oxford and Yale, they most likely would not ... now be getting multimillion-dollar book deals and $100,000 speaking dates. A top education is no guarantee of great riches, but it often helps.

Maybe educational levels are like Willie Wonka’s chocolate bars. A few of them come with golden tickets that give you opportunities almost beyond imagination. But even if you aren’t lucky enough to get a golden ticket, you can still enjoy the chocolate, which by itself is well worth the price.

More from Goldin and Katz on this topic here (see also Krugman:  Graduates Versus Oligarchs, Acemoglu: The Source of Rising Inequality, Delong: Driving Forces Behind Rising Income Inequality: Tracking the Internet Debate, and Yellen: Economic Inequality in the United States).

Frank Levy and Peter Temin provide one counterargument:

Inequality and institutions in 20th century America, by Frank Levy and Peter Temin, Vox EU: A central feature of post-World War II America was mass upward mobility: individuals seeing sharply rising incomes through much of their careers, and each generation living better than the last. It therefore is problematic that recent productivity gains have not significantly raised incomes for most American workers. In the quarter century between 1980 and 2005, business productivity increased by 71%. Over the same quarter century, median weekly earnings of full-time workers rose from $613 to $705, a gain of only 14% (figures in 2005 dollars), as our recent research shows.[1] Detailed analysis of these years shows that college-educated women are the only large labour-force group for whom median compensation grew in line with labour productivity.

Continue reading "Mankiw: The Wealth Trajectory: Rewards for the Few" »

Wednesday, February 20, 2008

Self-Selection, Conservatives, and Left-Leaning Universities

Do conservatives self-select out of academic careers?:

Do Conservatives Self-select Away from Academic Careers?, Lee Sigelman, The Monkey Cage: Academicians in this country, especially those in the social sciences and humanities, are disproportionately left of center, or at least centrist, politically, rather than conservative. That finding has cropped up in so many surveys over the years that I won’t even bother to cite sources. Let’s just take it as a fact and go from there.

Go where? How about addressing the “Why?” question? It’s here that things begin to get interesting.

One answer is that conservatives are discriminated against in academia. They don’t get hired in the first place, and the fortunate few who do find academic employment aren’t tolerated for long by their liberal colleagues. That answer is simple, straightforward, and politically combustible. It’s the standard story that conservatives tell and liberals dispute.

Now, however, comes quite a different answer. Based on their recent research, Matthew Woessner and April Kelly-Woessner contend that the culprit isn’t discrimination against conservatives, but rather self-selection on the part of conservatives. ... Woessner and Kelly-Woessner conclude that “The personal priorities of those on the left are more compatible with pursuing a Ph.D.” than are the priorities of their conservative counterparts. For example, ... conservative undergraduates are outnumbered by two to one in the social sciences and humanities. Conservative students are more oriented toward financial security and raising families. Accordingly, they gravitate toward more “practical” courses of study that lead them into highly remunerative professions like accounting and computer science. They’re also less willing to delay having children — a common pattern in academic life, where childbirth often awaits a favorable tenure vote.

For a chatty and not especially informative introduction to this project in the current issue of the Chronicle of Higher Education, click here. For a copy of the paper itself, click here. ...

In comments, Lee adds:

Richard Posner has some interesting thoughts about self-selection into or away from academia; click here. Among other things, he notes that members of the military are disproportionately Republicans. Does that mean that the military discriminates against Democrats? Maybe or maybe not, but a more plausible account would be that liberals are less drawn to military service in the first place. Another of his points is that liberals may be more attracted, and conservatives less so, to the "quasi-socialistic" culture of academia. Like so much of what Posner writes, you may like it or not, but it will make you think.

I had this ready to post a few days ago, but never actually posted it. But it seems relevant here.

Conservatives embrace the idea of diversity on campus:

University creates a position to promote conservative thought, by David Accomazzo, Longmont Times-Call: The College of Arts and Sciences at the University of Colorado has approved an academic position specializing in conservative thought to foster ideological diversity on campus.

In December, the University of Colorado Foundation began raising $9 million to create the Visiting Endowed Chair of Conservative Thought, which CU spokesman Bronson Hilliard says could be funded as early as the 2008-09 academic year.

The chair would teach one class a semester, give speeches around Colorado, and assist with research and coursework in the department closest to his or her specialty, Hilliard said.

Todd Gleeson, dean of the College of Arts and Sciences, will hire an instructor every two years to fill the temporary position. An advisory board of donors, alumni, well-known conservative leaders and others will recommend a candidate to the dean, Hilliard said. Officials have not yet recruited the advisory board.

The university will not necessarily hire an academic, but candidates should have a background in conservative thinking, such as former politicians, political strategists and journalists in addition to political science scholars, Hilliard said.

He named political strategist and pundit Bill Kristol as an example of a qualified candidate. “It’s going to be someone with some national standing who could teach a class,” Hilliard said.

Former Chancellor Richard Byyny said via e-mail that he proposed the idea for the chair to a receptive political science faculty sometime between 2001 and 2003. “I did not pursue this because I am a conservative,” Byyny wrote. “I pursued it because I thought it was the right and responsive approach (for intellectual diversity).” ...

Uriel Nauenberg, physics professor and chairman of the Boulder Faculty Assembly, said the chair “is a perfectly good idea to discuss as long as the faculty are in charge of the curriculum.”

Economics department chairman and professor Nicholas Flores said he supported the new position but thought CU also would benefit from a chair in liberal ideology. “There should be a diversity of thought,” Flores said. “I’d like to see something on the other side as well.”

Professor Kenneth Bickers, chairman of CU’s political science department, supports the position and doesn’t believe the chair is necessarily political in nature. “I don’t see it as a partisan chair,” Bickers said. “The idea behind the chair is to expose students to a wide array of ideas that could be considered conservative.”

[A letter to the editor from my pre-blogging days. I'd write it a bit different today, but not much.]

Saturday, November 10, 2007

"Conservatives Ought to Appreciate Academia, Because It’s a Vicious Market System"

In defense of liberal bias on college campuses:

Liberal Bias is A-OK, by J.D. Porter [senior majoring in English], Columbia Daily Spectator: Here at Columbia, as at most top universities, we enjoy belittling conservative beliefs. Even the professors are in on it, and conservatives often find their beliefs directly challenged by academic trickery, like thinking about things, and facts. But shouldn’t good pedagogy incorporate all sides of an issue? No, it should not. If conservativism is absent from the University, it’s because it hasn’t earned its way in.

The fundamental problem here is that good intellectual exercise of any kind doesn’t mean including all the viewpoints available; it means including the good viewpoints. When I get a headache, I don’t equally weigh the taking aspirin option with the putting leeches on my head option even though many people, including several major founding fathers, have been adamantly pro head-leech. Similarly, when a news program has scientists on to talk about global warming, it doesn’t make sense to invite one who believes in it and one who doesn’t. It makes sense to invite two good scientists, even though they will probably agree. I don’t care about “unbiased” reporting; I want accurate reporting. I also want good scholarship, whether or not it has a balanced political perspective. If your idea gets left out, it’s your fault for having a dumb idea.

The obvious question, of course, is who decides which opinions are good. It’s a tricky issue that requires a lot of thought, but one place to start might be with people who know what they’re talking about. We all know this on some level, but we’re bad at applying it to politics. If you want to know what’s wrong with your car, for example, you don’t poll your neighbors; you ask a mechanic. If most of your neighbors disagree with the mechanic, you ignore them, even if they quote the Bible. For the same reason, it doesn’t really matter what most of the country thinks about global warming or evolution, because the people who know actual facts about those things have pretty much formed a consensus. Yes, you can dig up a scientist who disagrees, just like the tobacco industry has found doctors who think Marlboros make fun Halloween treats, but consensus among experts is really what matters here.

Of course, the experts can be wrong. For example, the New York Times recently reported that scientists in general have basically been wrong about what makes a healthy diet for about a half century. But at least with science there’s a correction mechanism of some kind, namely other science. Unlike, say, conservativism, science doesn’t exist to endorse past beliefs. If scientists could prove that the Earth has secretly been flat all these years, they would, and the other scientists, instead of taking it as a personal affront, would probably give them a Nobel prize.

The same holds for academia. A sociology professor isn’t going to get ahead just by finding a way to blame America first. She’s going to have to do some sociology stuff, which will probably be judged on the quality of the scholarship rather than the viewpoint espoused. Just as there is no organization called Science that holds secret meetings to determine which part of Christianity is going down next, there is no cabal of academics trying to keep campuses liberal, as in, “You barely seem to grasp the difference between supply and demand, but you say you ‘really like Marx,’ so you’re our new economics professor.”

In reality, conservatives ought to appreciate academia, because it’s a vicious market system. Professors have absurdly specific training in tiny career fields. A guy who spends years writing a dissertation on the importance of beads to indigenous tribes in Brazil really wants the world’s other bead expert to fail. If he doesn’t get tenure, there’s a good chance he won’t find a decent job anywhere else ever. He doesn’t care whether bead-man number two is a Republican; he could be left of Castro and the first guy would still spend days writing scathing articles blasting his shoddy bead analysis.

Similarly, Columbia isn’t going to refuse to hire a conservative who has done prominent work, because rich people like prominence, and we at Columbia need rich people to send us their progeny. You could argue that conservative professors have a more difficult time becoming prominent, but if most professors are liberal, then a conservative doing convincing research or writing influential journal articles would probably just be more conspicuous. You might also argue that the liberal environment at Columbia makes conservatives less inclined to work here, but that just sounds like a way of saying that conservatives are pansies who can’t handle disagreement, which seems unfair to me.

Speaking pragmatically, it doesn’t really matter why campuses are liberal, because we don’t have a way to change that. Theoretically, schools could start hiring professors based on their political beliefs, but that’s uncomfortably like totalitarianism, or, even worse, some kind of affirmative action. Of course, if academia is truly a marketplace, and there are truly students interested in conservative education, then we ought to see the emergence of conservative universities. So far we have at least one. It’s called Liberty University, and it is to academia what Larry the Cable Guy is to the performing arts.

If conservatives truly feel under-represented in the academy, their only option is to do better work. They shouldn’t allow themselves to be coddled by some sort of regulatory system looking out for their welfare. It’s a mistake, however, to say that we even need more conservative voices at Columbia. We need good scholarship and good pedagogy, and not lip service to an ideology just because it’s popular. That may mean we hire conservatives, or, if history is any indication, it more likely won’t. If we judge professors purely on their work, however, conservativism will have the place in academia that it deserves.

Friday, September 14, 2007

Higher Education's Canon Wars

What is the purpose of an education?:

Revisiting the Canon Wars, by Rachel Donadia, NY Times: Twenty years ago, ... a book arrived like a shot across the bow of academia: “The Closing of the American Mind,” by Allan Bloom ... at the University of Chicago. Subtitled “How Higher Education Has Failed Democracy and Impoverished the Souls of Today’s Students,” it spent more than a year on the best-seller list...

Bloom’s book was full of bold claims: that abandoning the Western canon had dumbed down universities, while the “relativism” that had replaced it had “extinguished the real motive of education, the search for a good life”; ... that America had produced no significant contributions to intellectual life since the 1950s; and that many earlier contributions were just watered-down versions of Heidegger, Nietzsche, Weber, Freud and other Continental thinkers. For Bloom, things had gone wrong in the ’60s, when universities took on “the imperative to promote equality, stamp out racism, sexism and elitism..., as well as war,” he wrote, because they thought such attempts at social change “possessed a moral truth superior to any the university could provide.”

“The Closing of the American Mind” hit the scene at a time when universities were embroiled in the so-called canon wars, in which traditionalists in favor of centering the curriculum on classic works of literature faced off against multiculturalists who wanted to include more works by women and members of minorities. In early 1988, students at Stanford held a rally with Jesse Jackson, where they shouted, “Hey hey, ho ho, Western culture’s got to go,” to protest a required Western civilization course. ... Bloom’s book shared space at the top of the best-seller list with E. D. Hirsch’s “Cultural Literacy” (1987), which argued that progressive education had left Americans without a grasp of basic knowledge. It also inspired further conservative attacks against the university, including Roger Kimball’s “Tenured Radicals” (1990) and Dinesh D’Souza’s “Illiberal Education” (1991).

Although it had great popular appeal, “The Closing of the American Mind” did not go over well among academics. ... “The amazing thing about Allan Bloom’s book was not just its prodigious commercial success ... but the depth of the hostility and even hatred that it inspired among a large number of professors,” John Searle, the Berkeley philosophy professor and former proponent of the ’60s radical Free Speech Movement wrote in The New York Review of Books in 1990. Searle also noted a “certain irony” that the Western canon, from Socrates to Marx, which had once been seen as “liberating,” was now seen as “oppressive.” ...

Continue reading "Higher Education's Canon Wars" »

Wednesday, August 08, 2007

The "Ivory Tower" Insult in Public Discourse

This is about the role of academics in public discourse. Much of what academics say is dismissed as "ivory tower nonsense," or something similar, but should it be dismissed so easily? The essay below from Mark Kleiman was written partly in response to Michael Ignatieff's apparent apology for his support of the Iraq war that appeared in the New York Times Magazine. In the article, Ignatieff blames his errors about Iraq on an thinking like an academic rather than with the good judgment he has learned in politics:

I’ve learned that good judgment in politics looks different from good judgment in intellectual life. Among intellectuals, judgment is about generalizing and interpreting particular facts as instances of some big idea. In politics, everything is what it is and not another thing. Specifics matter more than generalities. Theory gets in the way.

But he has this wrong. Academics learned long ago to look at the data rather relying on emotions, precisely what Ignatieff says he has now learned from being in practical politics. Go back and see what the academics were saying (here too) and compare it to what the "practical politicians" were saying and judge for yourself who had the better perspective on the likely consequences of the war and its aftermath. As Mathew Yglesias states:

Academics in the field of Middle East studies were overwhelmingly opposed to the war. Similarly, international relations scholars opposed the war by a very large margin. The war's foci of intellectual support were in the institutions of the conservative movement, and in the DC think tanks and the punditocracy where the war had a lot of non-conservative support. People with relevant academic expertise -- notably people who weren't really on the left politically -- were massively opposed to the war. To imply the reverse is to substantially obscure one of the main lessons of the war, namely that we should pay more attention to what regional experts think and give substantially less credence to the idea that think tankers are really "independent" of political machinations.

The academic community has often been opposed to conservative plans in a variety of areas, and there have been concerted attempts by some conservatives to undermine academic voices in public discourse (liberal bias, ivory tower, etc.) The attempts have been fairly obvious, and somewhat successful, or so it seems to me. Mark Kleiman says academics should speak up, but if they want to maintain their credibility with the public they should avoid claiming any special authority when speaking outside their main area of expertise:

The academic estate and the political process, by Mark Kleiman: In general, academic specialists in foreign policy, strategy, and Middle Eastern affairs made much better guesses about what would happen if we invaded Iraq than did politicians and pundits. (Yeah, yeah, I shoulda listened. Sorry, sir! Won't happen again, sir!)

And yet "ivory tower" remains an unanswerable insult in political discourse, as if journalists and politicians were proud of their ignorance. Many academics don't speak out much in public fora, even in areas of their expertise. Why doesn't the academic estate do more to claim its rightful voice in public affairs, and why, when it does, is it so little heeded?

I think there are two key distinctions here that are often lost: the distinction between an expert's proper authority in his own field of expertise and a general claim by people with faculty appointments to opine about public affairs, and the distinction between research and policy analysis.

Academics are, by nature, specialists. In general, the claim of specialists to offer expert opinion outside their specialities is to be treated with skepticism. (Socrates made that point, if I recall correctly.)

Back in 2003, the UCLA Faculty (or, rather, the 200 people who bothered to show up for the meeting) voted its opposition to the pending invasion of Iraq. That conclusion was arrived at by vote after a short and chaotic debate (mostly among people with no scholarly credentials relevant to the choice at hand), and was not subjected to the sort of peer review or careful analysis that we require in our scholarly lives. I thought then that the resolution did not deserve the attention that, in fact, it didn't get. By passing it as a faculty, we were illicitly claiming for our political opinions the authority that properly belongs only to our scholarly views. I still think so, though the proponents of that resolution turned out to be right...

That's not to say that academics, per se, have no proper public role. Someone who studies Iraq or climate change or taxation professionally is entitled to a hearing — and, elitist though it may be to say it, to a more respectful hearing than a non-expert ... Non-experts, including other academics, ought to disagree with experts, or disregard expert views, only cautiously and tentatively, unless there are comparably credentialed experts on the other side.

But, even if someone is a genuine expert in a relevant subject area, his claim to dictate the correct policy has much less force than his claim to describe what is the case and predict what is likely to happen, unless that person is also an expert in thinking about choosing good policies...

Read the "policy implications" section of a typical social-science paper. It rarely reflects the sort of cautious judgment about the relationship between observation and inference displayed in the "methods and results" section. That's partly because many social scientists haven't thought about the very different methods appropriate to policy analysis...

To earn respectful attention to our opinions about what ought to be done, we need to learn to make those opinions intellectually respectable, which means, among other things, both carefully distinguishing what we know from what we prefer and accurately representing the limits of our knowledge.

I'm not saying that, if we do so, we will get such attention; we probably won't. But I am saying that the attempt to use intellectual prestige, separated from serious and dispassionate critical truth-seeking, as a weapon in political struggle is no more legitimate than the use of money or celebrity as a weapon in political struggle, and less so if that attempt falsely claims the respect due to actual expert relevant knowledge.

Since academics have some capacity to lead opinion, some leisure, and some money, and since they're mostly on the right side of the current major political divide, I'd like to see them more active in politics. ...

But when I saw an ad in the New York Times in October 1968, with a bunch of professors' signatures under the headline "A Thousand People Who Think for a Living Think You Should Vote for Hubert Humphrey," I thought that was arrogant bullsh*t: "elitism" in the legitimately pejorative sense of the term. And I still think so.

And don't miss this commentary on the Ignatieff article [as highlighted by Brad DeLong].

Update: I've been bothered by how to fit someone like Paul Krugman, who I think has earned the right to be heard on a broad array of issues, not just economics, into the framework outlined by Mark Kleiman. So I don't think we should rule out that people can establish credibility beyond their academic area of expertise.

Thursday, July 19, 2007

"Sources of Lifetime Inequality"

This NBER Working Paper by Mark Huggett, Gustavo Ventura, and Amir Yaron assesses the relative importance luck and initial conditions in explaining inequality, and asks which type of initial condition, human capital, learning ability, or financial wealth best explains later dispersion in individual earnings. The paper finds that 60% or more of the variation across individuals is due to initial conditions rather than shocks that hit agents during their lifetimes (i.e. good or bad luck), and that among the initial conditions, variation in human capital is the most important factor.

As noted in the conclusions, because the evaluation of initial conditions is conducted at age 20, "pushing back the age at which lifetime inequality is evaluated will raise the issue of the importance of one's family more directly than is pursued here. The importance of one's family and one's environment up to age 20 is not modeled in our work..." But however that turns out, an implication of this work is that we need to do all that we can to ensure that disadvantaged children, all children, are able to build up the human capital they will need to be competitive at age 20 and beyond:

Sources of Lifetime Inequality, by Mark Huggett, Gustavo Ventura, and Amir Yaron, NBER WP 13224, July 2007 [open link]:
1 Introduction To what degree is lifetime inequality due to differences across people established early in life as opposed to differences in luck experienced over the lifetime? Among initial conditions, individual differences established early in life, which ones are the most important? A convincing answer to these questions is of fundamental importance. First, and most simply, an answer serves to contrast the potential importance of the myriad policies directed at modifying or at providing insurance for initial conditions (e.g. public education) against those directed at shocks over the lifetime (e.g., unemployment insurance programs). Second, a discussion of lifetime inequality cannot go too far before discussing which type of initial condition is the most critical for determining how one fares in life. Third, a useful framework for answering these questions should also be central in the analysis of a wide range of policies considered in macroeconomics, public finance and labor economics.

Continue reading ""Sources of Lifetime Inequality"" »

Wednesday, May 30, 2007

A Role for Heterodox Economists

This is my entry in the discussion of Chris Hayes' article on heterodox economists at TPM Cafe. It should appear early tomorrow. There are currently entries from Chris Hayes, Thomas Palley, Tyler Cowen, James Galbraith, Nathan Newman, Max Sawicky, and James Galbraith with a follow-up, and there are others yet to come. [Update: Here's the link to the post at TPM Cafe]

Most of the points to be made about Chris Hayes' recent article on heterodox economists and their place  within the economics profession have been made here already, so I am going to take a bit of a different approach and talk about one of the heterodox economists discussed in the essay.

One of the first heterodox economists mentioned  is Michael Perelman:

I strike up a conversation with economist Michael Perelman in the hallway. ... Perelman, who is there for the EPI reception, works at the margins of the discipline; he is one of a few hundred self-described "heterodox" economists at the conference. ... I ask him about how he relates to the so-called mainstream of his profession. "It's a mafia," he says quietly, his eyes roving over to the suits spilling out of the Freedom to Choose room.

I first met Michael in the late 1970s during my undergraduate days at California State University at Chico where he was a faculty member. I never took a class from Michael, and that is part of the story, but I also want to use his example to talk about how heterodox ideas are expressed within economics departments more generally.

Here's what the department website says about him today:

...Michael Perelman, Professor of Economics, is the most prolific author in the Department of Economics at Chico. He enjoys teaching a wide range of courses including [principles of micro and macro], ... Economics of the Future ..., ...U. S. Economic History..., ...Economics of Big Business..., ...History of Economic Thought... and ... Marxist Economic Thought... His classes emphasize critical thinking about the application of economic thought... He likes to publish what is discussed in classes. To date, Professor Perelman has authored fifteen books.

"Although known for his radical views, Professor Perelman is widely respected throughout the campus. Dr. Perelman is a scholar of high productivity--he has a record of scholarly research, writing and presentations that is prodigious. Even more, his level of work has been consistently high since he joined our faculty in Economics in 1971." (Arno J. Rethans, Dean, College of Business)

Continue reading "A Role for Heterodox Economists" »

Thursday, May 10, 2007

"The Dead Grandmother/Exam Syndrome"

This is over 15 years old, but with exams approaching, it seems topical and a useful safety warning for the families of students. I became aware of this today through an email about our Macro Group meeting tomorrow:

I have attached Sims' JME paper on rational inattention for tomorrow's meeting. I have also included another paper that moved me deeply and that I think everyone should read.

And here's the paper:

The Dead Grandmother/Exam Syndrome and the Potential Downfall Of American Society, by Mike Adams, Biology Department, Eastern Connecticut State University, The Connecticut Review, 1990: It has long been theorized that the week prior to an exam is an extremely dangerous time for the relatives of college students. Ever since I began my teaching career, I heard vague comments, incomplete references and unfinished remarks, all alluding to the "Dead Grandmother Problem." Few colleagues would ever be explicit in their description of what they knew, but I quickly discovered that anyone who was involved in teaching at the college level would react to any mention of the concept. In my travels I found that a similar phenomenon is known in other countries. In England it is called the "Graveyard Grannies'' problem, in France the "Chere Grand'mere," while in Bulgaria it is inexplicably known as "The Toadstool Waxing Plan" (I may have had some problems here with the translation. Since the revolution this may have changed anyway.) Although the problem may be international in scope it is here in the USA that it reaches its culmination, so it is only fitting that the first warnings emanate here also.

Continue reading ""The Dead Grandmother/Exam Syndrome"" »

Tuesday, April 10, 2007

Robert Reich: The Real Scandal of Student Loans

Robert Reich wonders why the government provides loan guarantees and subsidies to banks and other lenders so that they can make profitable student loans when direct provision of the loans by government is cheaper:

The Real Scandal of Student Loans, by Robert Reich: The emerging scandal over student loans – and financial aid administrators that have cozy relationships with lenders – is only the tip of a scandalous iceberg.

Consider: The Federal government subsidizes college loans in two different ways, giving colleges and universities the option of which way to go.

The first way is for the federal government to lend students the money directly. ... The alternative is for the federal government to subsidize student loans indirectly by guaranteeing banks and other private lenders that if a student doesn’t repay the loan, the government will. The government also gives banks and private lenders additional subsidies to ensure they get a profitable return on any student loan they make.

Obviously, this second alternative is a great deal for ... lenders. Hey, a guaranteed return on a no-risk loan! But it’s a lousy deal for American taxpayers. According to a study by the Center for American Progress, taxpayers pay about $7 more for every $100 lent by the private lenders than they do on direct government loans.

That amounts to billions of taxpayer dollars each year ... that could be saved if the direct loan program was the only program. Billions of savings that could be put, for example, into Pell Grants for needy students.

So here’s the multi-billion-dollar question. Why does the federal government continue to provide colleges and universities the option of going with the more expensive program when the government can offer direct loans more cheaply? Why is it that some fifteen years after the direct student loan program was first established, more than three-quarters of student loans still come through the more expensive system?

Let me hazard a guess. Because the banks and other private lenders have enormous political clout in Washington. They also have clout within colleges and universities.

This is the real scandal of student loans, and it’s got to stop. There’s no good reason for the federal government to waste taxpayer money by subsidizing banks and other private lenders when government direct loans are cheaper.

Tuesday, March 27, 2007

Open University: Where are the Economic Historians?

Eric Rauchway of Open University explains the disappearance of economic historians from history departments:

Where are the Economic Historians?, by Eric Rauchway, Open University: Darrin McMahon asks "about the fortunes of economic history and of the understanding (or not) of economics by historians." As I believe the only economist on the Open U contributor list is Lawrence Summers, whose response to this query may not come quickly, I will offer my 2 cents.

My university, UC Davis, hosts one of the best collections of economic historians in the country: Gregory Clark, Peter Lindert, Alan Olmstead, and Alan M. Taylor. I can say this without immodesty, because not one of them is in my department--the History Department--they're all economists. Nor is this atypical. Off the top of my head--this is not a comprehensive list--I can name sharp scholars of the economics of the Great Depression (Christina Romer, Brad DeLong; Ben Bernanke before he became Fed chair), nineteenth-century globalization (Jeffrey Williamson, Lance Edwin Davis), railroads (Robert Fogel), immigration and internal migration (Claudia Goldin, Joseph P. Ferrie), slavery, emancipation, and reconstruction (Fogel, Goldin, Stanley Engerman, Richard Sutch, Gavin Wright), who all work outside history departments, as indeed do most of the authors who publish in the Journal of Economic History. You can still find economic historians in history departments--Sutch's coauthor Roger L. Ransom; Robin L. Einhorn, William R. Summerhill, Niall Ferguson--but they're no longer so thick on the ground as once they were.

What happened? Partly, technical innovations in economic methods made it difficult for the untrained to understand the new economic history. ...

Economic history might have moved out of history departments for market reasons as well. If, to pursue economic history, you had to master technical skills that would make you eligible for an appointment in an economics department, you would probably prefer that to an appointment in a history department: economists get paid more because they're eligible for employment in government and business as well as universities.

Is this split a Bad Thing? Well, if traditional historians continue to keep abreast of changes in economic history relevant to their work and vice versa, so they can incorporate it into their teaching and scholarship, then it's probably okay.

I wish I could reassure Eric that economic history is alive and well within economics departments generally. I cannot, and that's a loss for our profession. I was fortunate enough to be forced to take both history of economic thought and U.S. economic history during graduate school, and face a core exam if I didn't learn them well enough, but that is no longer the case in most programs. In may cases, the courses are no longer offered at all.

Saturday, February 24, 2007

Bill Gates: Open the Doors to More High-Skill Immigration

Bill Gates continues his crusade to allow more high-skilled immigrants into the U.S.:

How to Keep the U.S. Competitive, by Bill Gates, Commentary, Washington Post: ...Innovation is the source of U.S. economic leadership and the foundation for our competitiveness in the global economy. Government investment in research, strong intellectual property laws and efficient capital markets are among the reasons that America has for decades been best at transforming new ideas into successful businesses.

The most important factor is our workforce. Scientists and engineers trained in U.S. universities -- the world's best -- have pioneered key technologies such as the microprocessor, creating industries and generating millions of high-paying jobs.

But our status as the world's center for new ideas cannot be taken for granted. Other governments are waking up to the vital role innovation plays in competitiveness. ...

Two steps are critical. First, we must demand strong schools so that young Americans enter the workforce with the math, science and problem-solving skills they need to succeed in the knowledge economy. We must also make it easier for foreign-born scientists and engineers to work for U.S. companies. ...

Our schools can do better. Last year, I visited High Tech High in San Diego; it's an amazing school where educators have augmented traditional teaching methods with a rigorous, project-centered curriculum. Students there know they're expected to go on to college. This combination is working: 100 percent of High Tech High graduates are accepted into college, and 29 percent major in math or science, compared with the national average of 17 percent.

To remain competitive in the global economy, we must build on the success of such schools...

American competitiveness also requires immigration reforms that reflect the importance of highly skilled foreign-born employees. Demand for specialized technical skills has long exceeded the supply of native-born workers with advanced degrees, and scientists and engineers from other countries fill this gap.

This issue has reached a crisis point. Computer science employment is growing by nearly 100,000 jobs annually. But at the same time studies show that there is a dramatic decline in the number of students graduating with computer science degrees.

The United States provides 65,000 temporary H-1B visas each year to make up this shortfall -- not nearly enough to fill open technical positions.

Permanent residency regulations compound this problem. Temporary employees wait five years or longer for a green card. During that time they can't change jobs, which limits their opportunities to contribute to their employer's success and overall economic growth.

Last year, reform on this issue stalled as Congress struggled to address border security and undocumented immigration. As lawmakers grapple with those important issues once again, I urge them to support changes to the H-1B visa program that allow American businesses to hire foreign-born scientists and engineers when they can't find the homegrown talent they need. This program has strong wage protections for U.S. workers: Like other companies, Microsoft pays H-1B and U.S. employees the same high levels...

Reforming the green card program to make it easier to retain highly skilled professionals is also necessary. These employees are vital to U.S. competitiveness, and we should welcome their contribution to U.S. economic growth.

We should also encourage foreign students to stay here after they graduate. Half of this country's doctoral candidates in computer science come from abroad. It's not in our national interest to educate them here but send them home...

During the past 30 years, U.S. innovation has been the catalyst for the digital information revolution. If the United States is to remain a global economic leader, we must foster an environment that enables a new generation to dream up innovations, regardless of where they were born. Talent in this country is not the problem -- the issue is political will.

On High Tech, the fact that more graduates major in math and science in college than at other schools (29% versus 17%) is not, in and of itself, evidence that these schools work since a high degree of selectivity bias is likely present (those who like math and science are more likely to enroll in a "High Tech High" than other students, the web site says they get 3,000 applications for 300 slots). I agree completely with the message on education, but worry that instead of building upon what works, we are too ready to tear it all down and start over. We have a Gates Foundation small schools initiative here in Eugene that broke an existing high school into three smaller specialty schools (an International High School, a school specializing in Invention, Design, Engineering, Arts, & Science, and North Eugene Academy of Arts). If it works, great, but these are kids lives we are playing with and if it doesn't work and outcomes deteriorate, the price of innovation, the risk, becomes very localized and very steep for those students who participate in the failed experiments (and it's not always voluntary). I wish there was a better way to spread the risk of these experiments across the population rather than localizing it in schools that are already, for the most part, having troubles.

As for immigration, I am generally supportive of open door policies. However, I do want to point out that there is another solution for Gates and others. They believe that there is plenty of talent in the U.S., that's not the problem, it's just that workers lack the training they need. Microsoft could provide the training itself instead of free-riding on the educational system. It takes a little longer and costs more, of course, but consistent with advocates of privatization and efficient markets, it forces Microsoft to internalize the costs of training its workers, particularly specialized training. But I can't blame Microsoft for wanting to avoid these costs if it can, and for wanting to increase the supply of labor as much as possible by opening the borders to more high-skill immigration.

The shortage of U.S. graduates in this area may be because students have no certainty that specialized skills in these areas will retain their value in the future, a consequence of changes in technology that undermine existing skills over time, digital technology that allows collaborative work to be performed outside of the U.S., and the prospect of more temporary visas being issued in the future.

My observation is that there is a large set of talented students who respond strongly to expected employment prospects when they choose a major, though there is, of course, a time-delay between the appearance of shortages and surpluses in particular areas and changes in the number of majors. But the effect is there. If U.S. students perceive that an investment in computer science training relative to investing their time elsewhere will have the largest long-run payoff, any shortage will take care of itself. [And, as noted in comments, access to education may not be equal so that another way to increase supply is to increase educational opportunities within the U.S.]

In the long-run, due to technology and globalization and to comparative advantage, trying to close doors to high-skilled workers is, for the most part, a losing battle. We can create artificial barriers to foreign competition and steer our students in particular directions but there is a danger that in doing so, we set them up for a bigger fall later. If the walls keeping out foreign competition cannot be maintained in a digital age, and if we artificially direct students to particular occupations, once the walls do come down people employed in these areas will be very exposed and in danger of a large fall in income and employment prospects due to the increased competition. For that reason, I think we are better off letting the walls come down now, within reason of course, and allowing prices direct our students to the places they will, so far as markets can predict, be most highly valued in the future.

Update: Dean Baker also comments in Bill Gates Comes to the Coward's Corner. PGL too.

Friday, February 09, 2007

Run, Run, Run Those Regressions Away...

[video source]

Wednesday, December 06, 2006

An Interview With David Card

David Card is interviewed about a wide variety of topics in his research. Here are bookmarks to specific topics:

Interview with David Card, by Douglas Clement, The Region, Minneapolis Fed, December 2006 (Interview: October 17, 2006): David Card seems like a pretty mild-mannered guy. True, he speaks with conviction, but it is confidence backed by meticulous research and tempered with open acknowledgment of the limits of that research. Card, an economist at the University of California, Berkeley, is the antithesis of a zealot.

Nonetheless, by virtue of the topics he investigates, he has frequently found himself in the center of the nation's most incendiary controversies. And in many cases, Card's findings have been at odds with the conventional wisdom. Raising the minimum wage modestly is likely to have a negligible impact on employment levels, he has found.

Immigration has only a minor impact on wages of native-born workers. But it would be wholly inaccurate to say he's been drawn into these debates. In fact, he has scrupulously avoided taking advocacy positions. A public stance, he believes, might raise doubt as to the rigor of his methods and the impartiality of his findings—two qualities he does defend zealously.

In 1995, Card was awarded the John Bates Clark Medal, given every two years to an outstanding American economist under 40 years of age. In granting the award, the American Economic Association highlighted Card's ingenious use of “natural experiments”—naturally occurring instances of the phenomena under study.

To study the impact of minimum wage legislation, for instance, Card looked at fast-food jobs in New Jersey and Pennsylvania. To understand immigration, he examined the 1980 Mariel boat lift, when Miami's labor force increased by 7 percent. In a just-released paper on unemployment benefits and job search behavior, he scrutinized data from Austria, where workers on the job for 36 months or longer get generous severance.

“If one unifying principle runs through David Card's work,” observes Harvard economist Richard Freeman, “it is a belief in the power of empirical economic science—in the ability to use statistics creatively to make inferences about how the economy operates.”

Continue reading "An Interview With David Card" »

Wednesday, November 29, 2006

Is There an "Anti-Affirmative Action Wave Washing over America"?

Is America ready for the end of "the affirmative action era"? According to this, the answer is no:

The end of affirmative action?, by Erin Aubry Kaplan, Commentary, LA Times: At least a dozen times in the last decade, I've read or heard that the United States is coming to the end of the affirmative action era. I don't believe it.

Americans are always making premature or wrongheaded pronouncements about the ends and beginnings of eras... The guy making this case most recently is former University of California Regent Ward Connerly. Connerly has made a career out of being the black man who opposes affirmative action no matter what, and after a dozen years, he's satisfied that his work is close to done.

Proposition 209, which banned affirmative action in public education, hiring and contracts, was approved by California voters 10 years ago. Since then, the complexion of the UC student body has paled considerably. Measures modeled after 209 are passing in other parts of the country, including in Michigan earlier this month. On the federal level, the most conservative Supreme Court in modern history looks poised to limit or eliminate the federal mandate that created affirmative action.

Connerly is encouraged by all these good omens. He has said that he feels an "anti-affirmative action wave washing over America" and that he's following that wave to Oregon, Nevada and other states still in need of conversion. Spreading the gospel, apparently.

The gospel of what, exactly? What I find sad about this crusade, apart from the fact that its spiritual leader is a black man, is that it's so hellbent on destroying something meant to help folks but offers nothing helpful to take its place. It's a movement built on people in power gathering up all the marbles (which were mostly theirs to begin with) and going home. The best it can do is preach equality by doing nothing, a kind of free-market approach to solving deep-rooted racial problems. Such an approach only works for those controlling the free market. ...

The most troubling question raised by the potential end of the affirmative action era, however, is what kind of era we can expect next. For 40 years, affirmative action has been a modest political expression of a much bigger vision of America that emphasizes inclusion, and righting past wrongs where feasible, to make our social experiment into something truly great.

If Connerly is right, Americans are now admitting that this is too utopian for their tastes. Now they're ready to launch a new era in which it's perfectly OK to acknowledge that America doesn't really care about a level playing field, if it ever really did. Personally — and theoretically — I fear a future like that.

[For more on Proposition 209 and affirmative action, see Anti-bias law has backfired at Berkeley, by Robert J. Birgeneau, UC Berkeley Chancellor, March 2005.]

Friday, November 24, 2006

Inequality, Education, and Government Policy

Federal Reserve chairman Ben Bernanke says "the most important factor" in rising inequality "is the rising skill premium, the increased return to education." According to this view, widening inequality is justified by differences in productivity. Others, however, believe government policy plays an important role in generating inequality.

In general, those who believe rising inequality is due to a rising skill premium dismiss arguments that government action in areas such as minimum wage legislation, changes in taxes, and anti-union policies are behind changes in equality. On the other side, there are strong arguments against the skill-based technological change argument that inequality is due to market forces rewarding higher productivity.

However, as this editorial shows, even if education based differences in productivity are the source of rising inequality, the underlying cause can still be government policy that has reduced the ability of the disadvantaged to get the education they need:

Shrinking Opportunities, Editorial, Washington Post: Guess which high school graduate is more likely to go to college: the ill-prepared student who is financially well-off or a high-achieving student from a low-income family? According to a new study, they have pretty much the same chance -- and that is an embarrassment to the American educational system.

The sad story of the obstacles low-income and minority students face in enrolling and graduating from college has been documented in two recent reports by the Education Trust. Giving the lie to a perception that there has been progress in widening educational opportunities, the independent research and advocacy organization shows greater disparities between the haves and have-nots than there were 30 years ago. It rightly takes aim at federal, state and college policies and practices. Particularly troubling was the group's finding that the nation's flagship universities, generally the oldest and most prestigious public campuses, are becoming less accessible to low-income and minority students. Or, in the words of Education Trust Director Kati Haycock, America's top public schools are getting "whiter and richer" as high school graduating classes are becoming more diverse.

At the heart of the problem are growing inequities in how financial aid is apportioned. There are fewer state resources, and the stagnant federal policy on student aid has not kept pace with soaring tuition. But the universities also bear responsibility for decisions that divert money from low-income students who can attend college only if they receive financial assistance. In a bid to enhance their prestige by becoming more selective, public universities are using financial aid to compete for high-income students who are able to go to college without assistance.

Consider that the average institutional grant aid in 2003 to students from families earning more than $100,000 a year was higher -- at $3,823 -- than the $3,691 awarded to students with family incomes of less than $20,000. ... An estimated 400,000 students each year aren't able to attend a four-year college because of financial considerations...

Friday, November 10, 2006

Neoclassical Indoctrination

This story is from a reporter who enrolled in an introductory economics course at the University of Chicago to learn about "left-wing indoctrination" in college courses as practiced in economics:

What We Learn When We Learn About Economics, by Christopher Hayes, These Times, November 2006: There’s a case to be made that the single most intellectually and politically influential neighborhood in the United States is Chicago’s Hyde Park. Integrated, affluent and quiet, the 1.6 square mile enclave on the city’s south side is like a tiny company town, where the company happens to be the august, gothic, eminently serious University of Chicago. Students at the U. of C. sell T-shirts that read “Where Fun Goes To Die,” and the same could be said of the neighborhood, which until very recently had a bookstore-to-bar ratio of 5:2.

But the university is probably best known for the school of economic thought it has produced. When the Chicago School first emerged in the ’50s, its zealous support of free markets and critique of government intervention were considered reactionary and extreme. ...

Neoclassical economics, as the Chicago School of thought is now called, has become an international elite consensus, one that provides the foundation for the entire global political economy. In the United States, young members of the middle and upper-middle class first learn its precepts in the academy. Polls routinely show that economists and the general public have widely divergent views on the economy, but among the well-educated that gap is far narrower. A 2001 study ... showed that those with college degrees are more likely to subscribe to the views of neoclassical economists than the general public...

Conservatives have long critiqued academia for the ways professors use their position to indoctrinate students with left-wing ideology, but the left has largely ignored the political impact of the way people learn economics, though its influence is likely far more profound. So in order to find out just what students learn when they learn economics, I headed down to Hyde Park, where the University generously let me enroll in “Principles of Macroeconomics” for a quarter.

Continue reading "Neoclassical Indoctrination" »

Saturday, October 28, 2006

The Relative Value of Sports and Academics

John Whitehead at Hypothetical Bias on the relative value of sports and academics in higher education:

Perfect substitutes: At halftime of the ASU-Furman game..., the ASU Chancellor (i.e., President) stated that holding the NCAA I-AA championship football trophy felt just as good as having a Nobel Prize winner on the faculty...

Saturday, October 21, 2006

Playing Games with Economics

A video game designed to teach the principles of microeconomics:

Aliens Teach University Economics Class, by Nell Boyce, NPR, All Things Considered: ...[S]tudents taking ECON 201 at the University of North Carolina at Greensboro ... don't even come to class, they just log in to the Internet. The entire microeconomics course is a video game that students play online to earn three college credits.

A Sarbonian hunter in Jeff Sarbaum's online ECON 201 game.
Camera Watch Sarbonians Crash-Land on Earth and Grapple with Economics of Survival

...The Sarbonian aliens are named after economics professor Jeff Sarbaum. "This is a game in which the students are literally immersed in a story. And they take on the role of a character," he explains. "So all of the reading material, all of the content, all of the examinations and homework, if you will, are built inside the engine of the game."

The Sarbonians come from an alien world that knows no scarcity. After they crash-land on Earth, the students have to grapple with economic challenges like how to make and distribute goods, and how to trade with another group of aliens.

A screenshot of Sarbonians negotiating outside a cave on a post-apocalyptic Earth.

..."I believe we are the first ones to fully emerge students in a narrative story and treat the whole course as a game," Sarbaum says...

In his microeconomics game, a robot acts like a tutor. As the game goes on, the characters talk more and more like economists. ...

To gauge how well students are picking up on the concepts, they take multiple-choice tests as they move through the different levels of the game. ...

Thursday, October 19, 2006

"Shocked that Their Leaders Are so Out of Touch"

A "bachelor's degree is no longer a guarantee of raises big enough to beat inflation" even in the presence of strong productivity growth:

Why It Takes a Doctorate To Beat Inflation, by By David Wessel, WSJ: The typical American worker with a four-year college degree earns a lot more money than a similar worker who didn't go beyond high school -- 45% more. Education does pay. But in today's economy, getting a bachelor's degree is no longer a guarantee of raises big enough to beat inflation.

Although the best-paid college grads are doing well, wages of college grads have fallen on average, after adjusting for inflation, in the past five years. The only group that enjoyed rising wages between 2000 ... and 2005 ... were the small slice with graduate degrees.

Think about that: Even though the economy and productivity have been growing smartly, lots of workers who played by the rules and went the distance to get a four-year college degree aren't getting ahead. ... The very best-paid workers are getting the bulk of the raises. ...


Before nitpicking emails arrive: No single set of numbers gives a complete picture. The data in this chart cover only cash wages -- not health benefits or pensions. If they were included, ... inequality wouldn't disappear. The best-paid 20% of workers on private payrolls are three times as likely to have health insurance as those in the bottom 20%, and this tally doesn't count stock options and the like -- and you know who gets the bulk of those.

The question isn't whether the gap between winners and losers in the labor market is widening; it's why. And it's no longer as simple as saying: The more education one gets, the more one earns. Something more complicated is driving up pay at the top. ...

[I]n the middle -- where many four-year college graduates work -- ... imports, overseas outsourcing and technology seem ... to be reducing U.S. employer demand ... significantly, and thus restraining wages. That is the kind of shift in the tectonic plates of the economy that produces political earthquakes.

And it's an earthquake the GOP has largely ignored or denied as it has tried to convince middle class America that the economy has been good for them. Here's Robert Reich:

The People Are Rising, by Robert Reich: A Republican operative told me the other day that if Republicans could only get Americans to focus on the economy instead of Iraq, the GOP could hold on to the House. He's got it completely wrong. A big reason Republican poll numbers are sinking around the country is Americans are focusing on the economy.

The great sucking sound you hear every time Bush or any other Republican says the economy is doing fine is the collective inhalation of tens of millions of Americans, shocked that their leaders are so out of touch. Republican candidates are dropping like dead fruit flies ... everywhere wages and jobs are under sharpest assault -- because Republicans won’t admit what their constituents know: that wages are stuck in the mud, that job security is gone, that pensions are drying up, that health insurance costs are out of control, that housing prices (the only nest eggs left) are leveling out or falling. The only people who are getting much out of this economy are in the top one percent ...

Bush’s father was sent packing in 1992 when he insisted the economy was in fine shape. He sounded looney – as if he lived on another planet. It’s too late to uproot the current Bush but Americans are ready to uproot congressional Republicans who have shown not a jot of what most people are going through.

Worse yet, over the last few years Congressional Republicans gave away the store to big corporations and the rich, and robbed average working people. At the behest of the credit-card industry, they made personal bankruptcy almost impossible, while allowing big companies to declare bankruptcy and rid themselves of pension and health obligations to their workers. At the behest of the oil and gas industry, they gave away billions in subsidies, while oil companies got record profits and most people paid through their noses for gas and home heating oil. At the behest of the drug companies, they created a Medicare drug benefit that prevented Medicare from using its huge bargaining leverage to get lower drug prices for the elderly. At the behest of chain stores and the fast-food industry, they blocked the minimum wage from catching up with inflation. At the behest of corporate America, they got rid of overtime pay for millions of hard-working Americans. At the behest of the richest, they created tax cuts that made the rich even richer, while cutting housing assistance and health care for poor kids.

Here's what Americans are deciding: It’s time to throw the rascals out. The people are rising because they’ve had enough. And when the Democrats take over the House, and perhaps the Senate as well, Democrats must remember they were put there to get the nation back on track – to end this reverse Robin-Hood scourge and to give everyone once again a fair shot at decent work so the economy once again works for everyone.

Saturday, October 14, 2006

Professors and God

"Even at elite, doctoral universities, a majority of professors are neither atheistic nor agnostic":

Survey finds belief in God in the halls of academe, The Associated Press: Contrary to stereotype, most college professors are not atheists or agnostics, according to new research. In fact, only about one-quarter of professors deny God exists or claim it is impossible to know, according to survey results analyzed by sociologists Neil Gross of Harvard University and Solon Simmons of George Mason University. The rest say they believe in God at least part of the time, or some kind of higher power.

College professors are less religious than the general population, the authors report. For example, about 40 percent of professors frequently attend religious services, compared to 47 percent for the general population. But the authors say religious commitment levels are higher than previous surveys, which did not include professors at community colleges, who are more religious.

But even at elite, doctoral universities, a majority of professors are neither atheistic nor agnostic, and 20 percent say they have no doubt God exists.

Maybe a professor is God. Perhaps there's this all-powerful, all-knowing scientist out there somewhere, and we along with beings on other planets in the universe are experiments in the equivalent of the scientist's Petri dishes. The scientist sets up a dish, seeds it with creatively designed self-replicating biological processes, then watches to see what happens over time as evolution unfolds in response to the external shocks built into the dynamic system. All day long, twenty-four hours a day every day, the scientist records everything we do in one huge data set, a data set that is bigger and more complete than we can understand (well, maybe this guy gets it). When we die, our data are reviewed at a gateway. The data from the good observations in the dish are retained (their spirits go to heaven) while the unsuccessful experimental outcomes are discarded (they go to hell and burn). Events like great floods are a sterilization of the Petri dish due to the emergence of unstable trajectories (and, before sterilizing you need to retain the best outcomes in each class in an "ark" to use to reseed the next experiment). Thus, we are the outcome of creatively designed and creatively destructed experiments on evolutionary processes.

Or maybe not.

Tuesday, August 29, 2006

Disappointing News on Income, Poverty, Health Insurance, and the Earnings of College Graduates

Some disappointing news in today's income data from Census. The NY Times sets the table:

Downward Mobility, Editorial, NY Times: If you’re still harboring the notion that the economy is “good,” prepare to be disabused...

On to the news:

Young College Grads in Free Fall, by Michael Mandel, Economics Unbound: Today's income release from Census was filled with all sorts of interesting numbers. Real median household income rose for the first time since 1999. But it turns out that all of the gain came from foreign-born households--immigrants in other words. The income of native households remained "statistically unchanged." That will give both the pro-immigrant and anti-immigrant forces plenty to talk about.

More disturbingly, the numbers show that young college grads face a steadily worsening future of falling wages. The real earnings of workers aged 25-34 with a BA dropped by 3.3% in 2005. All told, the earnings of young college grads are down by almost 8% since 2002.

Isn't this a horrible looking graph?


The Center on Budget and Policy Priorities (CBPP) examines income and poverty statistics:

Poverty Remains Higher, and Median Income for Non-Elderly is Lower, Tthan When Recession Hit Bottom, CBPP: Summary Overall median household income rose modestly in 2005, while the poverty rate remained unchanged.  For the first time on record, poverty was higher in the fourth year of an economic recovery, and median income no better, than when the last recession hit bottom and the recovery began.

In addition, the 1.1 percent increase in median income in 2005, which was well below the average gain for a recovery year, was driven by a rise in income among elderly households. Median income for non-elderly households (those headed by someone under 65) fell again in 2005, declining by ... 0.5 percent.  Median income for non-elderly households was $2,000 (or 3.7 percent) lower in 2005 than in 2001.

In a related development, the median earnings of both male and female full-time workers declined in 2005.  Median earnings for men working full time throughout the year fell for the second straight year, dropping ... 1.8 percent, after adjusting for inflation.  The median earnings of full-time year-round female workers fell for the third straight year, declining by ... 1.3 percent.

Furthermore, the poverty rate, at 12.6 percent, remained well above its 11.7 percent rate in 2001, while median household income was $243 lower than in 2001 (not a statistically significant difference).  In addition, both the number and the percentage of Americans who lack health insurance climbed again and remained much higher than in 2001.  Four million more people were poor, and 5.4 million more were uninsured, than in 2001.  The percentage of children who are uninsured rose in 2005 for the first time since 1998.

The Poor Become Poorer

The poor also became poorer.  The amount by which the average person who is poor fell below the poverty line ($3,236) in 2005 was the highest on record, as was the share of the poor who fell below half of the poverty line....


Results Disappointing for this Stage of an Economic Recovery “Four years into an economic recovery, the country has yet to make progress in reducing poverty, raising the typical family’s income, or stemming the rise in the ranks of the uninsured...” Center executive director Robert Greenstein said. “It is unprecedented in recoveries of the last 40 years,” he noted, “for poverty to be higher, and the typical working-age household’s income lower, four years into a recovery...”

Continue reading "Disappointing News on Income, Poverty, Health Insurance, and the Earnings of College Graduates" »

Sunday, August 13, 2006

Assessing Student Achievement

I received a couple of emails about this report, and it caught my attention as well. Like Greg Mankiw, I don't understand why the government feels it needs to get more involved in higher education. Greg says:

Higher Education Report, by Greg Mankiw: Today's NY Times reports:

A federal commission approved a final report on Thursday that urges a broad shake-up of American higher education. It calls for public universities to measure learning with standardized tests, federal monitoring of college quality and sweeping changes in financial aid.

The Washington Post notes:

A commission member representing nonprofit colleges declined to sign on, however, saying the report reflected too much of a "top down" approach to reform.... [David] Ward said he supported many of the commission's objectives, but opposed "one-size fits all" prescriptions that fail to reflect the differing mission of colleges.

Ward makes a good point. Higher education in the United States is highly diverse and competitive, and these features are among the strengths of the system. Any attempt to centralize oversight in the federal government is likely to be counterproductive.

I typically support standardized tests. For college admissions, for example, objective measurements of ability and achievement, though imperfect, are more free of bias than are subjective judgments from recommendations and interviews. In my Ec 10 class, multiple-choice questions are a significant part of the evaluation process. But I cannot imagine a standardized test that would be appropriate to test a large number of exiting college students, whose experiences are so heterogeneous...

I agree with Greg on the main point. If what I am teaching my students can be measured with a standardized multiple-choice test, then I'm not doing my job.

For that reason, unlike Greg, I refuse to give multiple-choice tests even for introductory classes with hundreds of students. An A- rather than an A could make the difference someday for admission to a particular graduate school, obtaining a dream job, etc., and I feel obligated to give the best possible assessment of what students have achieved. My experience is that written tests are much more discriminating and revealing than multiple choice tests. It's a lot more work than selecting questions from a test bank and running the answer sheets through a Scantron, and I don't think TAs ask to be assigned my courses, but as I said I think it allows me to see what students know much better.

The main reason, though, is that it also forces students to learn the material beyond the more superficial level that often works on multiple choice exams and getting the most learning out of them is the important thing. Many students don't like essays/problems because they are more work, but I'll take the resentment if they learn more at the end of the day. And not all students prefer multiple choice. I know I always felt I had an advantage when I could fully express what I knew in essay/problem form instead of second guessing myself on some stupid "a and e only" answer.

My view is not widely held. Most people don't have a problem with using multiple choice tests to assess how much students have learned, i.e. they don't believe that moving to essay tests would improve assessment enough to make it worth the effort and at many schools budget realities force this choice. But if multiple choice tests are used in nearly every class a student takes, that makes it harder to oppose exit tests designed to test knowledge of the same material.

Saturday, August 05, 2006

Do You Believe in Markets?

Jeffrey Miron, who describes his blog as "a libertarian perspective on economic and social policy," on liberals in academia:

The Liberal "Bias" in Academia, by Jeffrey Alan Miron: A long-standing complaint of the political right is that academia displays a strong liberal bias. In a recent op-ed, Debra Saunders of the San Francisco Chronicle discusses two recent studies that document the overwhelmingly prevalence of Democrats among academics...

[T]he disproportionate share of Democrats is not in serious dispute. And no one who has spent time in academia would find any reason to think otherwise.

The facts raise an interesting question, however, and one that should trouble right-wing critics of the current situation: why is liberal dominance of academia a problem given that it represents a market outcome? That is, if liberal academics are so bad, why does the market support so many of them? Why is there not a demand for conservative universities? If one believes markets do things right, in what sense is the liberalism in academia excessive?

A possible response from conservatives might be that higher education is not a competitive market; a substantial fraction of higher education is owned and operated by state governments. This line is not persuasive, however, since many of the most successful colleges and universities are private, and they are every bit as liberal as their government counterparts.

So free-market critics of the liberal "bias" in academia need to think through their criticism. In what sense is Democratic predominance a problem? And what "market failure" is responsible?

Perhaps the truth is that many conservatives do not really believe in competition; instead they want conservative ideas imposed because these ideas are not doing well in the marketplace.

Sunday, July 30, 2006

"Comparative Advantage, Comparative Advantage, Wherefore Art Thou, Oh Comparative Advantage?"

An email suggested looking at this paper by Richard Freeman on globalization and trends in U.S. and worldwide labor markets. It was a good suggestion. This is longer than usual even though I cut quite a bit, but well worth the time it takes to read it:

Labor Market Imbalances: Shortages, or Surpluses, or Fish Stories?, by Richard B. Freeman, Boston Federal Reserve Economic Conference: There are two competing narratives about the how the labor market in the US will develop over the next decade or two.

The Impending Shortage narrative, which has attracted attention from business and policy groups, is that the retirement of baby boomers will create a great labor shortage. Slower growth of new entrants from colleges and universities, an increased proportion of young workers from minority groups, and inadequate training in science and math will produce a shortage of the skills the country needs to maintain itself as the leading economy in the world. The message to policy makers is to forget about the sluggish real wage growth of the past three decades, the deterioration in pensions and employer provided health care, and fears of job loss from off shoring or low wage imports. Instead policy should focus on helping business find workers in the coming shortage.

Shortage claims have focused on science and engineering. Many leaders of the scientific establishment and high tech firms have complained that the US faces a shortfall of scientists and engineers and have asked for governmental policies to address this problem. ... The heads of Intel, Microsoft, and other high tech firms have spoken out on this issue as well. ...

But the shortage claim goes beyond science and engineering. Demographic projections of the US labor supply that show a sharp reduction in the growth of the work force through 2050 (see table 1) have aroused concern in the business and policy community. Reporting the consensus from the Aspen Institute’s Domestic Strategy Group, David Ellwood stated that: "CEOs, labor leaders, community leaders, all came to the unanimous conclusion that we will have a worker gap that is a very serious one.“ ... A 2003 Fortune Magazine headline declared “Believe It or Not, a Labor Shortage Is Coming” for virtually all workers (Fisher, 2003).

Believers in the impending shortage story generally favor increased immigration, particularly of highly skilled workers through H1B and other visas; increased spending on education and technological innovation; and guest worker programs to keep a sizable flow of less skilled but legal immigrants coming to the country. They regard many of these immigrants as complements rather than substitutes for US workers. They also advocate greater education and training of US citizens, particularly of disadvantaged minorities.

The Globalization Surplus narrative, which has attracted attention as part of discussions of the current mode of globalization, takes the opposite tack. It holds that the spread of global capitalism around the world, particularly to China and India, has generated a labor surplus that threatens wages in advanced and higher wage developing countries. Trade, off-shoring, global sourcing of jobs, and flows of capital to the low wage giants combine to reduce the demand for workers in manufacturing and tradable services in advanced countries and in moderate income developing countries.

At first, the advent of huge numbers of workers from India and China into the global capitalist system seemed to offer a boon to most workers in advanced countries. The labor force is less skilled in the global giants than in the advanced economies. According to the Heckscher-Ohlin model, skilled workers in the advanced countries would benefit from the new trading opportunities while only the relatively small number of unskilled workers would lose. If all workers in the North were sufficiently educated, they would avoid competing with low paid labor overseas and benefit from the low priced products produced there. Competition from low wage workers in China and India might create problems for apparel workers in Central and Latin America or for South Africa, but not for ... the advanced North. Similarly, the “North-South” trade model that analyzes how technology affects trade between advanced and developing countries implied that trade would benefit workers in the North, who had exclusive access to the most modern technology. More low wage workers in the developing world would lead to greater production of the goods in which the South specialized, driving down their prices.

Tell it to Lou Dobbs! The off shoring of computer jobs, the US’s trade deficits even in high technology sectors, and the global sourcing strategies of major firms have challenged this sanguine view. The advent of China, India, and the ex-Soviet Union shifted the global capital-labor ratio massively against workers. Expansion of higher education in developing countries has increased the supply of highly educated workers and allowed the emerging giants to compete with the advanced countries even in the leading edge sectors that the North-South model assigned to the North as its birthright.

Which narrative better fits the labor market? ... In this paper I assess the two competing visions and the demographic and economic projections on which they are based. I reject the notion that the retirement of baby boomers and slow growth of the US work force will create a future labor shortage in favor of the argument that the increased supplies of skilled labor in low-wage countries will squeeze highly skilled as well as less skilled US workers. I examine the problem of attracting native US talent in science and engineering in the face of increasing supplies of highly qualified students and workers from lower wage countries. Going beyond the US, I argue that the expansion of global capitalism to China, India, and the former Soviet bloc has initiated a critical transition period for workers around the world. Pressures of low wage competition from the new giants will battle with the growth of world productivity and the lower prices from those countries to determine the well being of workers in higher income economies as the low-income countries catch up with the advanced countries. While US wages will not be “set in Beijing” how workers fare in China and India and other rapidly developing low wage countries will become critical to the position of labor worldwide.

Continue reading ""Comparative Advantage, Comparative Advantage, Wherefore Art Thou, Oh Comparative Advantage?"" »

Monday, July 24, 2006

Blogging and Academics

This is not the first time this question has been addressed in blog land, but there are some interesting views on the topic collected in one palce, so I thought it was worth bringing up again. It's about blogging and academic careers (via Daniel Drezner):

Can Blogging Derail Your Career?, 7 Bloggers Discuss the Case of Juan Cole, The Chronicle Review: With the debut of his Web log, Informed Comment, four years ago, Juan R.I. Cole became arguably the most visible commentator writing on the Middle East today. A professor of modern Middle East and South Asian history at the University of Michigan at Ann Arbor and president of the Middle East Studies Association, Cole has voiced strong opposition to the war in Iraq and to the treatment of the Palestinians, garnering him plaudits from the left and condemnation from supporters of Israel and President Bush's foreign policy. In the words of a colleague, Cole has done something no other scholar of the region has done since Bernard Lewis: "become a household word."

In the spring, Informed Comment took center stage in another arena — Cole's own career. After two departments recommended him for a tenured position at Yale University, a senior committee decided last month not to offer him the job after all. Although Yale has declined to explain its decision, numerous accounts in the news media have speculated that Cole's appointment was shot down because of views he expressed on his blog. We asked seven academic bloggers to weigh in on Cole's case and on the hazards of academic blogging.

Here's Brad's contribution followed by my comments. I may follow with some of the other contributions later [Update: Brad DeLong just posted summaries of a few other contributions as well as his own, which is repeated below]:

The Invisible College by J. Bradford DeLong, The Chronicle Review Volume 52, Issue 47, Page B8: Right now I'm looking out my office window, perched above the large, grassy, Frisbee-playing, picnicking, and sunbathing area that stretches through Berkeley's campus. I'm looking straight out at the Golden Gate Bridge. It's a view that I marvel at every dayI wonder why the chancellor hasn't confiscated such offices and rented them out to hedge funds to improve the university's finances.

I walk out my door and look around: at the offices of professors who know more about topics like the history of the international monetary system or the evolution of income distribution than any other human beings alive, and at graduate students hanging out in the lounge. It's a brilliant intellectual community, this little slice of the world that is our visible college. You run into people in the hall and the lounge, and you learn interesting things. Paradise. For an academic, at least.

But I am greedy. I want more. I would like a larger college, an invisible college, of more people to talk to, pointing me to more interesting things. People whose views and opinions I can react to, and who will react to my reasoned and well-thought-out opinions, and to my unreasoned and off-the-cuff ones as well. It would be really nice to have Paul Krugman three doors down, so I could bump into him occasionally and ask, "Hey, Paul, what do you think of .. ." Aggressive younger people interested in public policy and public finance would be excellent. Berkeley is deficient in not having enough right-wingers; a healthy college has a well-diversified intellectual portfolio. The political scientists are too far away to run into by accident — somebody like Dan Drezner would be nice to have around (even if he does get incidence wrong sometimes).

Continue reading "Blogging and Academics" »

Sunday, July 23, 2006

The Need for Immigration

A defense of businesses employing migrant workers from the director-general of the British Chambers of Commerce:

Employers are not the villains in the battle over immigration, by David Frost, Commentary, Financial Times: The publicity surrounding the launch of the government’s proposals on asylum and immigration, due tomorrow, has focused heavily on punishing British businesses for employing illegal migrants.

As far as business is concerned this is a complete diversion. The real issue is the fact that UK companies are increasing their use of legal migrant labour at an enormous rate. ... Businesses tell me that the single biggest problem they face is finding the skilled people they need to drive their businesses. They are solving the problem by employing migrant labour.

At the root of this, our school system is not providing significant numbers of our young people with the foundation in essential skills they need for the workplace. Only 44 per cent of school-leavers gain five GCSEs at grade A to C including English and maths. The Department for Education and Skills views this standard as the very minimum employability skills for basic productivity. In addition, there are up to 8m adults lacking the very lowest level of literacy and numeracy needed for the world of modern work.

The response of the business community to the poor quality of young people entering the labour market is to look increasingly to migrant labour, particularly from central Europe and specifically Poland. Employers tell me the reasons for this are simple and twofold: migrants have higher-level skills and a far better attitude to work than local people. They are enthusiastic and committed. ... Indeed, I met the owner of an electronics company in the east of England this month who has now given up recruiting through local newspapers. He finds it more cost effective to send his human resources manager out to Poland to recruit directly.

While business needs continued managed migration, we have to question whether this is the panacea for the UK’s skills shortages. We could be storing up significant social problems, especially in urban areas, if we assign the large number of young people with no qualifications and no work ethic to the scrap heap. Overall numbers in the labour market are rising, but so are the numbers of unemployed. It will not be a cohesive society if we have increasing numbers of migrants employed but at the same time the indigenous population is unable to find jobs.

The government must, therefore, ensure that the education system is fit for purpose. ... The current focus ... within our schools is divisive and elitist. The education system must engage all young people, whatever their talent or ability, and inspire them to learn and succeed. Our businesses and economy need skilled young people...

In addition, the government must ensure that the tax and benefits system acts as an incentive to get people into work. It is clear, particularly in the case of hourly-paid employees, that it does not currently provide a strong enough incentive... Until these issues are dealt with, migration will continue to play an ever growing role in addressing the needs of British business.

The British Chambers of Commerce will never support employers who flout the law and employ illegal immigrants. Indeed, ... employers who knowingly take on illegal immigrants [must be] punished accordingly. However, the overwhelming majority of employers are keen to ensure that they are operating within the constraints of the law. What business needs is an immigration process that is simple, clear and transparent...

But the employment of illegal migrants is a minor part of the issue and it is disingenuous to imply otherwise. The government should concentrate on solving the problems that are making our economy dependent on migration instead of shifting the blame for the failure of its complex and bungled immigration policy on to business.

I don't know how the percentage of illegal immigrants in the U.K at various skill levels compares to the numbers here, but this is directed mainly at high skill, not low skill immigration. To that extent, I agree with the main thrust of the argument - it's a nasty sort of bait and switch when we let our schools deteriorate and then claim we must allow high skill immigration because domestic workers aren't up to the task and the needs of business must take precedence in the global economy.

So long as cheap skilled labor is available elsewhere, business does not have a strong incentive to participate in efforts to improve the skill level of domestic workers. Notice he says "government should concentrate on solving the problems that are making our economy dependent on migration instead of shifting the blame ... to business." He calls on government to do more, but the attempt is to absolve business of responsibility for problems. He doesn't call for business to share in the responsibility and participate in the effort by, minimally, helping to set the political tone needed to make the improvements in domestic education he desires.

Update: Comments lead me to believe that perhaps my assertion that this is directed at higher skill immigration is incorrect. The talk of the biggest problem being businesses "finding the skilled people they need," the mention of "skills shortages," and that "migrants have higher-level skills" as well as the electronics firm example (which I took to mean high-skill employment) led me astray...

Friday, July 21, 2006

Why Oh Why is Income Inequality Increasing?

That increasing income inequality is a reality is widely acknowledged by economists, the debate has shifted to the source of the inequality, e.g. see Brad DeLong, Greg Mankiw, Paul Krugman, and Alex Tabarrok for openers. Is it due to a skill premium, non-linearities in returns to education, a rising oligarchy, a winner take all economy, luck, or some other factor?:

Brad DeLong: Optimal Tax Policy: An old New York Times column by Hal Varian:

Hal Varian: In the debate over tax policy, the power of luck shouldn't be overlooked: Those who argue for a more progressive income tax emphasize equity: a tax dollar paid by a rich person causes less pain than a tax dollar paid by a poor person. Those who argue for a less progressive system emphasize efficiency: the most productive people should face lower tax rates to give them strong incentives to work harder and produce more.... This formulation of the optimal income tax problem was first examined by the economist James Mirrlees of Cambridge University, who received a Nobel in economic science for his analysis. In the simplest version of the Mirrlees model... those at the very top of the income scale should face low marginal rates....

Of course, the fact that it pays to reduce the marginal tax rate for billionaires doesn't say much about what tax rates should be like for mere millionaires.... But the intuitive argument presented above is pretty compelling: if income depends only on ability, those at the very top of the income-ability distribution should face low marginal tax rates.

But perhaps this model is too simple.... So let's consider a different model: one in which differences in income are a result only of luck.... In this case, the optimal income tax may well involve taxing billionaires at very high marginal rates. True, aspiring billionaires won't work quite as hard.... But the chances of becoming a billionaire are pretty low anyway, so taxing billionaires at a high rate won't really discourage much effort by those hoping to become one.... This is about as far as theory can take us, but it highlights the critical question: How much income results from ability and how much from luck?...

Christopher Jencks, and his collaborators pointed out many years ago that income inequality among brothers, who share similar genetic and environmental characteristics, is almost as great as for the population as a whole....

If luck plays a substantial role... it makes sense to have a progressive income tax, creating a form of social insurance in which the lucky subsidize the unlucky. Perhaps the folk singer Phil Ochs had the best answer for why the upper half of the income distribution should pay so much more in taxes than the lower half: ''And there but for fortune, may go you or I.''

Wednesday, July 12, 2006

SmartEconomist: Business Education and Executive Jobs

Q&A 10 - Next: Business Education and Executive Jobs Stanford GSB Professor Paul Oyer will answer readers' questions on the value of business education, on how the macroeconomic situation affects career choices, on the effectiveness of firms’ incentives, and on the implications for personnel policies. Ask Your Question

Q&A 9 - July 10, 2006: Open Source and Patents UC Berkeley Professor Bronwyn H. Hall answered readers' questions on the relative advantages and disadvantages of open source vs. intellectual property rights (IPR) in knowledge creation, on the role of innovation management in firms and universities, and on the implications for technology policy. Read Q&A

Monday, July 03, 2006

Government's Business

This commentary on the President's management style speaks for itself, so other than to note this piece by former Bush economic adviser and Columbia Business School Dean Glenn Hubbard who defends MBAs and uses President Bush as an example, I'll let it do just that:

President wanted, MBA not required, by Charles R. Kesler, Commentary, LA Times: George W. Bush is the first president with an MBA (from Harvard Business School, no less), but it's not clear that being a master of business administration has made him a better chief executive. The disarray in Iraq, the debacle after Hurricane Katrina — these aren't exactly the kinds of triumphs that the alumni office likes to boast about. ...

It's hard to say what President Bush absorbed from his management studies. We can only draw inferences, though eventually historians may know more. Defending Donald H. Rumsfeld a few weeks ago, Bush said: "I hear the voices, and I read the front page, and I know the speculation. But I'm the decider, and I decide what is best. And what's best is for Don Rumsfeld to remain as the secretary of Defense."

Being the decider-in-chief suggests one paradigm of modern management: the executive who makes the final decisions, the tough calls. He "hears" and even listens to others before deciding... Bush's management style is long on decisions and short on explanations. He's apparently better at listening to others than questioning their views. He prefers to have around him people whose judgment he trusts implicitly, even as he insists that they trust and abide by his decisions implicitly.

This isn't simple cronyism or "hackocracy," as the left charges. But neither is it a model of political wisdom. It leads to a disinclination to deliberate, a reliance on peremptory assertions of subordinates' good character to quiet doubt about their judgments, and a certain habitual speechlessness. On ordinary rhetorical occasions, Bush and his text seem hardly acquainted. On great occasions, he tends to overshoot the mark, calling for impossibilities such as an "end to evil." He lacks a rhetorical mean, much less the rhetorical mien that served Ronald Reagan so well. ...

The GOP loves to call for applying the businessman's common sense to government problems. Rumsfeld, a former Fortune 500 executive, is applying business methods (just-in-time inventories, information networks, strict control of labor costs) to try and transform the Pentagon and, while he's at it, win the war in Iraq.

The precedents aren't entirely encouraging. In the 1960s, Secretary of Defense Robert McNamara tried to revolutionize the Pentagon using the systems analysis techniques he'd championed in his former job as president of Ford Motor Co. He succeeded in discrediting himself, the techniques and the war he was trying to win.

Pray things work out better this time. In general, however, the analogy between business and politics so beloved by Republicans is a flawed one. At the simplest level, politicians report to a large electorate and have fixed terms of office; businessmen do not. And although the latter can hire and fire at will, the former cannot, and thus face vast, recalcitrant bureaucracies.

Second, government deals not merely with property, ... but also with life and liberty. Government thus involves issues of national defense, criminal justice and other "involuntary transactions" backed by a monopoly on the legitimate use of force.

Third, though both pursuits involve self-interest, economic self-interest is less complicated. By contrast, there are many forms of political self-interest, frequently in conflict: Should you desire security or glory? Low taxes or a balanced budget? Much political skill must be devoted to persuading people where, exactly, their interest lies. (This is the rhetorical part, at which Bush doesn't excel.)

Finally, and most significantly, politics has to reconcile multiple goals — consent, security, liberty, prosperity, justice, virtue — in the presence of continuing disagreements about both means and ends. These inherent differences frustrate, eventually, all businesslike schemes of government. Too bad they don't teach that in business school.

Wednesday, June 28, 2006

Glenn Hubbard Defends Business Schools

Yesterday, I defended a liberal arts education. Today, Columbia Business School Dean and former Chair of the Council of Economic Advisers for the Bush administration Glenn Hubbard defends business schools and MBAs:

Do not undervalue the impact of business education, by Glenn Hubbard, Commentary, Financial Times: I expected many surprises as the new dean of a business school, but not an immediate challenge to defend the idea of business education. Until my appointment, I had seen no reason for such challenges...

A tough take on business schools came in a 2005 Harvard Business Review article by Warren Bennis and James O’Toole saying that “MBA programmes face intense criticism for failing to impart useful skills, failing to prepare leaders, failing to instill norms of ethical behaviour – and even failing to lead graduates to good corporate jobs”. In business circles, this is shocking – something like L’Osservatore Romano asking: do we still need a pope?

Such criticisms should be taken seriously. Pure theory pulls the academy apart from the worlds of commerce, industry and finance. And if the MBA does not at least cultivate leadership, what good is it? ... We are so enmeshed in a world shaped by business principles that only the big picture can remind us of its power.

For example, why did social conditions not change for the human race for thousands of years until England’s industrial revolution in 1750? Why did that revolution begin with the Spinning Jenny in the mid-18th century and not in the mid-first century AD when Hero of Alexandria developed a steam engine? Columbia Business School’s Bruce Greenwald says that human progress “appears to have arisen largely from the application of sustained management attention to everyday enterprise”. In a word, business. ...

Countries today prosper or fail to the extent that they embrace basic business principles. The task of the business school is, then, enormous – to apply knowledge to transform financial markets, to convince other societies of the benefits of transparency and to remind our own opinion leaders of the value of basic business principles. We have largely succeeded in the US, which is seeing sustained increases in growth of about 3.5 per cent a year with little inflation... This one percentage point addition to growth is happening ... because of improvements in productivity.

Why, then, is the US adding productivity growth when so many other big economies see negative growth in productivity? Those who say the answer is technology have spent too little time in Tokyo, Seoul and Berlin. The fact is, technology is better in many other countries. So US companies did not become more productive by simply buying faster computers. They became more productive by having managers and entrepreneurs who knew how to integrate these investments with new business models to raise productivity. These abilities to think strategically are teachable; and the central classroom for teaching leaders ... is the business school.

Many measure success by the salaries of business graduates after school. This is irrelevant. The real value of a business education is its impact years later, training future leaders how to unlock one set of problems after another. Business schools have pulled this off by integrating disciplines within the university and integrating academics with business leaders.

But the critics have a point. The present challenge for the top business school is to inspire researchers to be in even closer contact with business leaders, to answer real-world needs. By generating cutting-edge ideas that bridge theory and practice, a great business school’s research offers an education for a lifetime career, not just a toolkit for a first job. ...

State Universities, Competition, and Access for Low-Income Students

Here's a bit more on public universities and the effects of falling state support. As support has fallen, there has been an increased reliance on tuition, private sector funding of research, and donations as a means of funding, all of which subject state universities to market pressures that did not exist in the past.

How will universities respond? Of particular interest is whether the change will affect the ability of universities to provide access to low-income students. Do universities face competition and does that impact their ability to provide access? This is the enrollment manager at Oregon State University, which is about 40 or so miles north of us here at the University of Oregon, in an interview with The Atlantic magazine:

The Best Class Money Can Buy,  by Mathew Quirk,  The Atlantic:  I asked Bob Bontrager what he thought about eating other people's lunches.

"I personally prefer kicking their ass," he replied. "It's a zero-sum game. There's a finite number of prospective students out there. Are you going to get them, or is your competitor going to get them? You face the pressure and say, 'That feels burdensome to me; I don't want to deal with that.' Or you say, 'That's a pretty interesting challenge; I'm going to go out there and try to eat their lunch. I'm going to try to kick their ass.' That defines people who are more or less successful and those who stay in the position."

Bontrager, who works at Oregon State University, is the school's head of enrollment management—a relatively new but increasingly essential post in higher education. Three quarters of four-year colleges and universities employ an enrollment manager to oversee admissions and financial aid. The position is standard at private schools, and is spreading quickly across public institutions.

Over the past twenty years, often under cover of the euphemisms with which the industry abounds, enrollment management has transformed admissions and financial aid, and in some cases the entire mission of a college or a university. At its most advanced it has a hand in every interaction between a student and a school, from the crafting of a school's image all the way through to the student's successful graduation. Any aspect of university life that bears on a school's place in the collegiate pecking order is fair game: academic advising, student services, even the curriculum itself. Borrowing the most sophisticated techniques of business strategy, enrollment managers have installed market-driven competition at the heart of the university.

With their ever-expanding reach, enrollment managers are inevitably dogged by controversy. But it's the way they have changed financial aid—from a tool to help low-income students into a strategic weapon to entice wealthy and high-scoring students—that has placed them in the crosshairs of those who champion equal access to higher education. Adopting data-mining and pricing techniques from the airline and marketing industries, they have developed a practice called financial-aid leveraging that allows a school to buy, within certain limits, whatever class it wants. Often under orders from a president and trustees, enrollment managers direct financial aid to students who will increase a school's revenues and rankings. They have a host of ugly tactics to deter low-income students and to extract as much money as possible from each entering class.

All this, understandably, has given the enrollment-management industry a black eye. "It's a brilliantly analytical process of screwing the poor kids," says Gordon Winston, an economist at Williams, and an article last year in The Chronicle of Higher Education included a warning that "enrollment managers are ruining American higher education." But some in the industry use its techniques responsibly—to guarantee enough revenue to support the academic mission, or even to expand low-income access to higher education. Indeed, the sophisticated methods of enrollment management may be the only way for schools to hang on to their principles while surviving in a cutthroat marketplace. [... continue reading ...]

I'm told Bontrager was asked to use different language when descibing his competitive spirit to the media. We have an enrollment manager, and she relies on the results of an econometric model that has been developed over many years by colleagues to help uncover the responsiveness of enrollment to changes in enrollment policy and the implementation of programs designed to affect recruitment and retention. It's been a helpful tool.

The effect on access for low-income students is a big concern, though I know both the Admissions/Enrollment Manger and Financial Aid Directors here and they certainly fall into those trying to preserve the core mission of equal access and are among the most devoted advocates of these principles.

But the tension is there -- our funding and ability to provide quality education depends critically on these revenue sources -- and we have also instituted scholarship programs designed to attract quality students irrespective of need. These programs are based, in part, upon knowledge about elasticities gleaned from the econometric estimation of enrollment decision models and other statistical work and they do pay attention to the revenue that is generated.

My view from the inside, for what it's worth, is that people are worried about these issues and doing their best to preserve access, but the pressure is there and the argument that always carries the day is that we must survive to serve any low-income students at all even if that means serving fewer low-income students than we might desire to fulfill our commitment to equal opportunity. Over time, in a competitive marketplace, that leads to incentives and outcomes that bear watching as a matter of public policy.

If you are interested in these issues, the article does a good job or presenting the tensions universities feel to maximize revenue at the expense of other values such as equal access, though it may be a bit strident on the access issue.

Tuesday, June 27, 2006

The Decline of Liberal Arts Education

Reading this piece in Project Syndicate about the future of European universities reminded me of discussions about the decline of classic liberal arts education in the U.S. Let's start with this essay by Warren Goldstein, chair of the History Department at the University of Hartford, appearing in the Yale Alumni Magazine.

This echoes my own experience. When I was Department Head, I began bringing back former students who had found success in the business world to talk to our undergraduate majors about how best to prepare for the working ("real") world. Time and again I heard the view expressed in this article, that businesses want people who can think, write, analyze, develop persuasive arguments, they want the type of skills a liberal arts education is intended to promote. With that foundation, they would tell me, they can teach the people the skills needed to do the job effectively. Some were adamant in their refusal to hire business school graduates, preferring instead to hire people with the broad set of skills acquired with a broader education. Economics generally received praise, not so much for specific theoretical tools we teach, but rather for the way it taught students to think about the world and approach problems:

What would Plato do? A (semi-)careerist defense of the liberal arts, by Warren Goldstein, Yale Alumni Magazine:

Nahh, don't tell me -- I bet I can guess your major: art history, right? -- Tom or Ray Magliozzi

If you're an NPR listener, you've probably heard some version of this line on Car Talk. Usually the hapless college student on the phone is female, and Tom and Ray (aka Click and Clack...) are showing their avuncular concern for her employment prospects. ...[L]iberal arts-bashing is one of their favorite sports. As far as I can tell, from my turret in the besieged educational outpost of the liberal arts, nearly all parents of college-age students agree with them. ...

Continue reading "The Decline of Liberal Arts Education" »

Wednesday, June 07, 2006

The 'Creative Economy' and the Future of the American Worker

Richard Florida of George Mason University writing in Cato Unbound says developing the creative class is the key to success in the global economy:

The Future of the American Workforce in the Global Creative Economy, by Richard Florida, Cato Unbound: ...American economic experts and policy-makers are rightly preoccupied with the emergence of behemoths like India and China, which offer huge markets, capable workforces, and cost advantages. Unfortunately, they overlook a subtler but even more profound shift in the nature of global competition. ... where knowledge, innovation, and creativity are key. At the cutting edge of this shift is the creative sector of the economy: science and technology, art and design, culture and entertainment, and the knowledge-based professions.

The U.S. is at the forefront of this global creative economy. Over the next decade, it’s projected to add 10 million more creative sector jobs, according to the newest numbers from the Bureau of Labor Statistics. At the present rate of increase, creative jobs alone will soon eclipse the total number of jobs in all of manufacturing. ...

Such remarkable job growth goes far beyond technology and engineering. While the U.S. economy will add 950,000 computer jobs and another 195,000 in engineering, the biggest gains by far will be in health care and education, which will add more than 3.5 million. Jobs for college professors alone are projected to increase by more than half a million. Arts, music, culture, and entertainment will contribute some 400,000 new jobs. That’s twice as many as engineering.

The rise of this global creative economy changes the rules of international competition in four crucial ways.

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Friday, June 02, 2006

Correlation is Not Causation: Museums and Elite Colleges

Tyler Cowen at Marginal Revolution finds:

How to get your kid into a better college:

The only out-of-school activity that increased the likelihood of a student ending up enrolled at an elite college was parental [sic] visits to art museums.

That is correlation, not causation....  Read more here. How about this?

Two types of participation made it more likely students would end up at elite colleges: yearbook or school newspapers and “hobby clubs.”  ...Numerous activities had no apparent impact on whether or not students will end up in college — elite or otherwise. School plays, interscholastic individual sports, intramurals, cheerleading, academic honor societies, public service clubs — no impact is clear from any of them.

... What do you all think of these results?

Here's more from the link above explaining why the authors think the correlation between parents going to art museums and kids getting into elite colleges is causal:

And to the extent that parents who visit art museums (even without their children) are likely to talk about high art and culture, their children (if they pay even a little attention) will pick up cultural knowledge that their peers lack. And if those parents teach their children to name drop, there could be an impact, especially if it allows students to shine in interviews. “A chance mention of the new Bertolucci film or the Ruscha show at the Whitney may tip an applicant from one pile to another,” the authors write.

This is telling, "There’s no correlation between visiting art museums and ending up at a top college yourself." I wonder what else you could find that is "caused" by parents going to art museums?

Friday, May 19, 2006

Business Without Borders

A recent paper "Are Elite Universities Losing Their Competitive Edge," by E. Han Kim, Adair Morse, Luigi Zingales (discussed by Greg Mankiw) argues that information technology has eroded locational externalities in economics, the advantage of having good colleagues around for collaboration. The advantage of being at Harvard isn't what it used to be:

We study the ... research productivity of economics and finance faculty who have ever been affiliated with the top 25 universities in the last three decades. We find that there was a positive effect of being affiliated with an elite university in the 1970s; this effect weakened in the 1980s and disappeared in the 1990s. We find ... that its decline is due to the reduced importance of physical access to productive research colleagues.

The collaborative efforts among academics occur between people within countries and between people in different countries.

Thomas Friedman says a similar phenomena is happening in the world of business, locational advantage is falling and this can also occur both within and between countries. Because of this, in many cases what appears to be outsourcing is really something else, global collaboration. With global collaboration there is no real home to the ideas that are being produced anymore than there is a home to a mathematical proof done jointly by two people through a series of emails with attachments or some other information sharing technology. Because global collaboration opens up considerable opportunities that didn't exist previously, enhancing these opportunities increases world economic growth and has the potential to create new jobs and help to lift the poor out of poverty, even more so if developing countries have the ability to take advantage of the opportunities afforded by such collaborative efforts:

Outsourcing, Schmoutsourcing! Out Is Over, by Thomas L. Friedman, Commentary, NY Times: ...I was recently interviewing Ramalinga Raju, chairman of India's Satyam Computer Services ... one of India's top firms doing outsourced work from America, and Mr. Raju told me how Satyam had just started outsourcing some of its American work to Indian villages. ... There is enough bandwidth now, even reaching big Indian villages, to parcel out this work, and the villagers are very eager. "The attrition level is low, and the commitment levels high," Mr. Raju said. "It is a way of breathing economic life into villages." It gives educated villagers a chance to stay on the land, he said, and not have to migrate to the cities.

A short time later I was interviewing Katie Jacobs Stanton, a senior product manager at Google, and Krishna Bharat, founder of Google's India lab. They told me that Google had just launched Google Finance, but what was interesting was that Google Finance was entirely conceived by the Google team in India and then Google engineers from around the world fed into that team — rather than the project's being driven by Google headquarters in Silicon Valley.

It's called "around sourcing" instead of outsourcing, because there is no more "out" anymore. Out is over. ... Mr. Bharat added: "We have entered the generation of the virtual office. Product development happens across the global campus now."

Last story. ... I meet Andy Astor, chief executive of EnterpriseDB, which provides special features for the open-source database called PostgreSQL. His primary development team ... consists of 60 Pakistani engineers in Islamabad... "The New Jersey team — software architects, product managers and executives — comes to work a couple of hours early, while the Islamabad team comes in late, and we have at least five to six hours per day of overlap," Mr. Astor said. "We therefore have multiple face-to-face meetings every day, which makes a huge difference... We treat videoconference meetings as if we were all in the same room."...

[W]e are seeing the emergence of collaborative business models that were simply unimaginable a decade ago. Today, there are so many more tools, so many more ideas, so many more people able to put these ideas and tools together to discover new things, and so much better communications to disseminate these new ideas across the globe.

If more countries can get ... enough telecom and bandwidth so their people can get connected; steadily improving education and decent, corruption-free economic governance; and the rule of law..., there is every reason for optimism that we could see even faster global growth in this century, with many more people lifted out of poverty.

I'm not happy that the song "It's a Small World" is now playing in my head. Damn you Tom Friedman. Still, this seems like a pretty good argument for policies that encourage, or at least do not limit, this type of global collaborative effort.

Monday, May 08, 2006

Growing Income Inequality and the Education Gap

Edward Lazear and Katherine Baicker of the President's Council of Economic Advisers say the growing disparity in wage income between skilled and unskilled labor is not the result of globalization, immigration, or administration policy. The reason for growing income inequality, they say, is increasing returns to education for skilled labor, and this is an opportunity not a problem. "Having an economy that places a greater value on skills and education is a good thing."

They promote a solution to the problem of growing income inequality that attempts to take advantage of this opportunity by reducing the education and skill gap. Three particular steps are recommended as solutions, the No Child Left Behind education reform, the American Competitiveness Initiative, and more importantly they say as responsibility is shifted away from government, is the hope that families will do a better job to "provide the environment and encouragement that is so helpful in producing an educated population":

America at Work, by Edward P. Lazear And Katherine Baicker, Commentary, Wall Street Journal: There is no question that the U.S. is experiencing strong economic gains... The economy created about two million jobs last year, and Friday's jobs report for April showed that we are on track to add more than two million new jobs this year.

This job growth is undeniable, but some ... claim that the benefits of this economic boom are being enjoyed only by the relatively well-off, and that we have left the rest of our workforce behind. Is this true? Over the last 25 years, the wages of the skilled have continued to grow faster than the wages of the less skilled. For example, the wages of the college-educated have grown by 22% since 1980, while the wages of high-school drop-outs has fallen by 3%.

This does not mean, however, that the rich are benefiting at the expense of the poor. Instead, it means that the return to investing in education and training continues to grow. ... Having an economy that places a greater value on skills and education is a good thing. Our economy can grow more quickly when the returns to investment are high, and human capital investment is the most important form of investment.

This presents us with opportunities and challenges. We have the opportunity to increase our standard of living as our workers reap the benefits of the skills that they have acquired. We face the challenge of ensuring that all Americans have access to the education and training that the modern economy values so highly.

The data show that it is this greater return to investing in education that is driving the long-run widening of the income distribution. The cause is not increases in immigration or international trade, as some have alleged. First, wages for less-skilled workers have not declined with growing trade, even in sectors of the economy with the greatest import competition. Second, some of the groups that have experienced the highest wage growth have also seen increased immigration swelling their ranks. Silicon Valley is full of highly paid immigrants and native-born Americans ... earning very high salaries in the high-tech sectors ... Third, those who have examined the data systematically find that trade and immigration can account for at most a small proportion of the increased wage spread that has occurred over the past 25 years.

To make sure that the gains from technology are enjoyed by all, we must be vigilant in providing training and educational opportunity for all. Programs such as the No Child Left Behind ... and American Competitiveness Initiative are vital steps in that direction. Perhaps even more important are steps that families can take to provide the environment and encouragement that is so helpful in producing an educated population. The president's tax cuts have made the tax code more progressive, which also narrows the difference in take-home earnings.

Through education, hard work and entrepreneurship, there is great opportunity for Americans to improve their economic circumstances over their lifetimes. ... Those who invest in education increase dramatically the likelihood that they will enjoy these improvements in their standard of living. ...

Given the importance being given to education in explaining wage disparity, I would like to see a higher level of commitment from the administration to improving education at all levels than has been exhibited to date.

With regard to the claim that taxes are more progressive, see this recent report from the Center for Budget and Policy Priorities for a counterargument:

Recent Tax And Income Trends Among High-Income Taxpayers: Administration officials have consistently sought to portray the distribution of benefits from the 2001 and 2003 tax cuts as balanced or even progressive. Recently, for example, the Treasury Department released a ... fact sheet... The fact sheet makes two main points: that “the individual income tax is highly progressive ... higher income taxpayers pay most of the individual income tax...,” and that the burden these taxpayers bear has increased as a result of the tax cuts enacted under the Bush Administration.[1] These Administration claims are designed to counter arguments that the tax cuts enacted since 2001 are tilted to those at the top of the income scale. The claims, however, are misleading...

Update: Brad DeLong comments on the progressivity claim and on Greg Mankiw's response to the editorial in "Cue the Noisemakers."

Update: I should have linked this commentary by Paul Krugman on whether the returns to education explain the growing income gap, "Graduates and Oligarchs." Quoting, "But Mr. Bernanke did stumble at one point. Responding to a question ... about income inequality, he declared that "the most important factor" in rising inequality "is the rising skill premium, the increased return to education.""

Monday, April 24, 2006

The Value of Writing for the General Public

I have a lot of sympathy for Greg Mankiw's position about writing for the general public:

Greg Mankiw's Blog: E-mail of the Day: On The Optimal Use of My Time: I received this email this weekend:

Continue reading "The Value of Writing for the General Public" »