Economist's View

Paul Krugman: Know-Nothings for the 21st Century

"So will our modern know-nothings prevail?":

Know-Nothings for the 21st Century, by Paul Krugman, NY Times: These days calling someone a “know-nothing” could mean one of two things..., you might be comparing that person to a member of the Know Nothing party of the 1850s, a bigoted, xenophobic, anti-immigrant group that at its peak included more than a hundred members of Congress and eight governors. More likely, however, you’re suggesting that said person is willfully ignorant, someone who rejects facts that might conflict with his or her prejudices.

The sad thing is that America is currently ruled by people who fit both definitions. ...

The parallels between anti-immigrant agitation in the mid-19th century and Trumpism are obvious. ...

After all, Ireland and Germany, the main sources of that era’s immigration wave, were the shithole countries of the day. Half of Ireland’s population emigrated in the face of famine, while Germans were fleeing both economic and political turmoil. Immigrants ... were portrayed as drunken criminals if not subhuman. They were also seen as subversives: Catholics whose first loyalty was to the pope. A few decades later..., immigration ... of Italians, Jews and many other peoples inspired similar prejudice.

And here we are again..., there are always new groups to hate.

But today’s Republicans ... aren’t just Know-Nothings, they’re also know-nothings. The range of issues on which conservatives insist that the facts have a well-known liberal bias just keeps widening.

One result of this embrace of ignorance is a remarkable estrangement between modern conservatives and highly educated Americans... Remarkably, a clear majority of Republicans now say that colleges and universities have a negative effect on America. ...

Think of where we’d be as a nation if we hadn’t experienced those great waves of immigrants driven by the dream of a better life. Think of where we’d be if we hadn’t led the world, first in universal basic education, then in the creation of great institutions of higher education. Surely we’d be a shrunken, stagnant, second-rate society.

And that’s what we’ll become if modern know-nothingism prevails. ...

Trumpism is as an attempt to narrow regional disparities, not by bringing the lagging regions up, but by cutting the growing regions down. For that’s what attacks on education and immigration, key drivers of the new economy’s success stories, would do.

So will our modern know-nothings prevail? I have no idea. What’s clear, however, is that if they do, they won’t make America great again — they’ll kill the very things that made it great.

What Can Be Done to Improve the Episteme of Economics?

Brad DeLong:

What Can Be Done to Improve the Episteme of Economics?: I think this is needed:

INET: Education Initiative: "We are thrilled that you are joining us at the Berkeley Spring 2017 Education Convening, Friday, April 28th 9am-5pm Blum Hall, B100 #5570, Berkeley, CA 94720-5570... https://www.ineteconomics.org/education/curricula-modules/education-initiative

...Sign up here: https://fs24.formsite.com/inet/form97/index.html or email [email protected]...

I strongly share INET's view that things have gone horribly wrong, and that it is important to listen, learn, and brainstorm about how to improve economics education.

Let me just note six straws in the wind:

The macro-modeling discussion is wrong: The brilliant Olivier Blanchard https://piie.com/blogs/realtime-economic-issues-watch/need-least-five-classes-macro-models: "The current core... RBC (real business cycle) structure [model] with one main distortion, nominal rigidities, seems too much at odds with reality.... Both the Euler equation for consumers and the pricing equation for price-setters seem to imply, in combination with rational expectations, much too forward-lookingness.... The core model must have nominal rigidities, bounded rationality and limited horizons, incomplete markets and the role of debt..."

The macro-finance discussion is wrong: The efficient market hypothesis (EMH) claimed that movements in stock indexes were driven either by (a) changing rational expectations of future cash flows or by (b) changing rational expectations of interest rates on investment-grade bonds, so that expected returns were either (a) unchanged or (b) moved roughly one-for-one with returns on investment grade bonds. That claim lies in total shreds. Movements in stock indexes have either no utility-theoretic rationale at all or must be ascribed to huge and rapid changes in the curvature of investors' utility functions. Yet Robert Lucas claims that the EMH is perfect, perfect he tells us http://www.economist.com/node/14165405: "Fama tested the predictions of the EMH.... These tests could have come out either way, but they came out very favourably.... A flood of criticism which has served mainly to confirm the accuracy of the hypothesis.... Exceptions and 'anomalies' [are]... for the purposes of macroeconomic analysis and forecasting... too small to matter..."

The challenge posed by the 2007-9 financial crisis is too-often ignored: Tom Sargent https://www.minneapolisfed.org/publications/the-region/interview-with-thomas-sargent: "I was at Princeton then.... There were interesting discussions of many aspects of the financial crisis. But the sense was surely not that modern macro needed to be reconstructed.... Seminar participants were in the business of using the tools of modern macro, especially rational expectations theorizing, to shed light on the financial crisis..."

What smart economists have to say about policy is too-often dismissed: Then-Treasury Secretary Tim Geithner, according to Zach Goldfarb https://www.washingtonpost.com/blogs/wonkblog/post/geithner-stimulus-is-sugar-for-the-economy/2011/05/19/AGz9JvLH_blog.html: "The economic team went round and round. Geithner would hold his views close, but occasionally he would get frustrated. Once, as [Christina] Romer pressed for more stimulus spending, Geithner snapped. Stimulus, he told Romer, was 'sugar', and its effect was fleeting. The administration, he urged, needed to focus on long-term economic growth, and the first step was reining in the debt.... In the end, Obama signed into law only a relatively modest $13 billion jobs program, much less than what was favored by Romer and many other economists in the administration..."

The competitive model has too great a hold: "Brad, you're the only person I've ever heard say that Card-Krueger changed their mind on how much market power there is in the labor market..."

The problem is of very long standing indeed: John Maynard Keynes (1926) https://www.panarchy.org/keynes/laissezfaire.1926.html: "Some of the most important work of Alfred Marshall-to take one instance-was directed to the elucidation of the leading cases in which private interest and social interest are not harmonious. Nevertheless, the guarded and undogmatic attitude of the best economists has not prevailed against the general opinion that an individualistic laissez-faire is both what they ought to teach and what in fact they do teach..."

Studying Advanced Mathematics: The Potential Boost to Women’s Career Prospects

From Microeconomic Insights:

Studying advanced mathematics: the potential boost to women’s career prospects: The university gender gap has been reversed in many countries in recent years, with greater participation among young women than among young men. Yet women remain underrepresented in high-powered and highly paid careers as chief executives and, more generally, in finance and business, and in science, technology, engineering and mathematics (STEM) fields.

Our research assesses three potential explanations for this inequality:

• First, are the labour market rewards for advanced mathematical skills lower for women than for men?
• Second, are women less talented than men in terms of mathematical abilities?
• Third, does the way we promote and teach mathematics in schools drive away talented young women?

The answers to these questions are: no, no, and yes! In particular, we show that restrictive course bundling in high school constitutes a barrier for the mathematical talents of young women. ...

Help for Business Scholars and Students Affected by the US Restrictions

Via Joshua Gans (and Brad DeLong's excerpt):

The Rotman School of Management, University of Toronto... is offering to help scholars and students impacted on by the new US immigration restrictions. We would like to hear from anyone who:

• Can no longer return to the US to continue their academic position or studies in a business, economics or related areas.
• Missed application deadlines for University of Toronto degree programs in business, economics, or related areas; but are concerned they will not be able to undertake studies in the US anymore.
• Facing temporary disruptions as a result of the new policies who may need a place in North America to continue their academic work.

The official statement is here: http://www.rotman.utoronto.ca/Connect/MediaCentre/NewsReleases/20170201

A Family-Friendly Policy That’s Friendliest to Male Professors

Justin Wolfers:

A Family-Friendly Policy That’s Friendliest to Male Professors: The underrepresentation of women among the senior ranks of scholars has led dozens of universities to adopt family-friendly employment policies. But a recent study of economists finds that some of these gender-neutral policies have had an unintended consequence: They have advanced the careers of male economists, often at women’s expense. Similar patterns probably hold in other disciplines, too. ...

Three economists — Heather Antecol..., Kelly Bedard..., and Jenna Stearns ... evaluated ... gender-neutral tenure-extension policies in important new research. The policies led to a 19 percentage-point rise in the probability that a male economist would earn tenure at his first job. In contrast, women’s chances of gaining tenure fell by 22 percentage points. Before the arrival of tenure extension, a little less than 30 percent of both women and men at these institutions gained tenure at their first jobs. The decline for women is therefore very large. It suggests that the new policies made it extraordinarily rare for female economists to clear the tenure hurdle. ...

The authors ... found that men who took parental leave used the extra year to publish their research, amassing impressive publication records. But there was no parallel rise in the output of female economists. ...

'Spending on Public Higher Education Overlooks Net Benefits as Investment in State's Future'

Whether or not the estimates are precise or directly applicable to other states, the broader point is noteworthy:

Spending on public higher education overlooks net benefits as investment in state's future, Eurekalert!: ... the state of Illinois continues to underinvest in public higher education. But considering higher education funding as an investment that lowers state welfare and prison costs, generates tax revenues and leads to economic growth in the future -- and not as mere consumption spending -- could reframe the debate, according to an article by ... Walter W. McMahon, an emeritus professor of economics and of educational organization and leadership at the University of Illinois. ...

Published in the Journal of Education Finance, the article develops the total return of public education relative to the full costs to the state of Illinois, the key criteria for determining whether there is under- or over-investment for the most efficient statewide development.

McMahon concluded that public education in Illinois contributes to investment returns of 9.5 percent for K-12; 15.3 percent for community college; and 13.4 percent for university, respectively, for every dollar that's spent -- returns that are well above the 7.2 percent the money would have earned if invested in an index fund that tracked returns of the S&P 500, McMahon noted.

(Updated calculations based on the newest earnings data at each education level, corrected for dropouts and other factors, show returns relative to costs of 12.9 percent at two-year institutions and 12.3 percent at the four-year institutions.)

"These earnings-based and total social rates of return both show that higher education is economically very efficient - in fact, more efficient than the average corporation in the S&P 500," McMahon said.

This measure of efficiency trumps any possible overspending on administrative costs cited by critics...

"All told, the state of Illinois' education investment pays for itself every 2.3 years in state budget savings alone."

The return to the state is considerably larger if nonmonetary outcomes are considered.

"A major opportunity being missed is estimating the effects of higher education on state tax revenues and on budgeted state tax costs for health care, welfare, child support and the criminal justice system," McMahon said. "Beyond these state budget savings, I also found about a 30 percent total return that includes these wider health and other benefits to statewide development." ...

'College Sports and Deadweight Loss'

Rajiv Sethi:

College Sports and Deadweight Loss: The amount of money generated by college sports is staggering: broadcast rights alone are worth over a billion dollars annually, and this doesn't include tickets sales for live events, revenue from merchandise, or fees from licensing. But the athletes on whose talent and effort the entire enterprise is built get very little in return. As Donald Yee points out in a recent article, these athletes are "making enormous sums of money for everyone but themselves." Even the educational benefits are limited, with "contrived majors" built around athletic schedules and terribly low graduation rates.

Since colleges cannot compete for athletes by bidding up salaries, they compete in absurd and enormously wasteful ways:

Clemson’s new football facility will have a miniature-golf course, a sand volleyball pit and laser tag, as well as a barber shop, a movie theater and bowling lanes. The University of Oregon had so much money to spend on its football facility that it resorted to sourcing exotic building materials from all over the world.

The benefit that athletes (or anyone else for that matter) derives from exotic building materials used for this purpose are negligible in relation to the cost. Only slightly less wasteful are the bowling lanes and other frills at the Clemson facility. The intended beneficiaries would be much better off if they were to receive the amounts spent on these excesses in the form of direct cash payments. This is what economists refer to as deadweight loss.

But are competitive salaries really the best alternative to the current system? I think it's worth thinking creatively about compensation schemes that could provide greater monetary benefits to athletes while also improving academic preparation more broadly. Here's an idea. Suppose that athletes are paid competitive salaries but (with the exception of an allowance to cover living expenses) these are held in escrow until successful graduation. Upon graduation the funds are divided, with one-half going to the athlete as taxable income, and the rest distributed on a pro-rata basis to each primary and secondary school attended by the athlete prior to college. A failure to graduate would result in no payments to schools, and a reduced payment to the athlete.

This would provide both resources and incentives to improve academic preparation as well as athletic development at grade schools. Those talented few who make it to the highest competitive levels in college sports would clearly benefit, since their compensation would be in cash rather than exotic building materials. But the benefits would extend to entire communities, and link academic and athletic performance in a manner both healthy and enduring. It's admittedly a more paternalistic approach than pure cash payments, but surely less paternalistic than the status quo.

'How Socioeconomic Status Impacts Online Learning'

 Are MOOCs the answer to educational inequality?:

How Socioeconomic Status Impacts Online Learning: The driving force behind the increasing popularity of massive open online courses (MOOCs) is that they provide — as the term defines it — open access to a massive online audience. Anyone with an Internet connection who wants to learn, can. Whether you’re rich or poor, living in a New York City high-rise or a remote Nepalese village, MOOCs promise to level the higher education playing field. The question is: Does reality reflect this ideal?

A new research study by MIT education researcher Justin Reich and Harvard University’s John Hansen seeks the answer. “Democratizing Education? Examining Access and Usage Patterns in Massive Open Online Courses” takes a close look at how socioeconomic resources influence MOOC enrollment and course completion — and whether online learning is truly opening as many doors as anticipated.

“One way we might democratize education would be to provide more widespread access to academic experiences previously reserved for the elite,” explains Reich, who is the executive director of MIT's PK-12 Initiative. “But historically, emerging learning technologies — even free ones — have often benefited people with the social, technical, and financial capital to take advantage of new innovations. As we try to bridge the digital divide, we need to carefully examine how new tools are used by learners from different walks of life.” ...

Reich’s study uses three indicators: parental educational attainment, neighborhood average educational attainment, and neighborhood median income.

The research finds that these indicators are correlated with student enrollment and success in MOOCs, especially among younger students. Young students enrolling in HarvardX and MITx on edX live in neighborhoods where the median income is 38 percent higher than typical American neighborhoods. Among teenagers who register for a HarvardX course, those with a college-educated parent have nearly twice the odds of finishing the course compared to students whose parents did not complete college. At exactly the ages where online learning could offer a new pathway into higher education, already affluent students are more likely to enroll in a course and succeed.

The takeaway is that MOOCs have not yet solved SES-related disparities in educational outcomes, and Reich believes it’s critical to turn these learnings into actions in order to narrow the gaps between MOOC perception and reality.

“MOOCs and other forms of online learning don’t yet live up to their promise to democratize education,” he says. “Closing this digital divide is exactly the kind of grand challenge that the world’s greatest universities should be tackling head on.”

'Student Debt in America: Lend With a Smile, Collect With a Fist'

On student loans:

Student Debt in America: Lend With a Smile, Collect With a Fist: ... Borrowing is risky, financial decisions are not always rational, and people often do a poor job of properly weighing the interests of their present and future selves.

The private enterprise system is built to limit overborrowing by sharing risk between lenders and borrowers. ... They charge more interest when they take on more risk. Because most loans can be discharged in bankruptcy, lenders share the cost of default. ...

But the federal student loan program doesn’t work that way. Those ads that run on bus stop signs and on late-night television — “No Cash? No Credit? No Problem!” — are essentially the Department of Education’s official policy on student loans.

On the front end, the department is the world’s nicest, most accommodating lender. Interest rates ... are lower than banks charge... Borrowing for college is essentially an entitlement...

When the loan bill finally comes due, the federal government transforms into a heartless loan collector. You don’t need burly men with brass knuckles to enforce debts when you have the Internal Revenue Service..., which can and will follow you as long as you live.

The government acts this way because the federal student loan program has been removed from the norms and values of prudent lending. Because the Department of Education doesn’t consider risk, it takes no responsibility. If life, luck and bad choices leave you ... in the hole, it’s all on you. ...

Most college students ... pay back their loans and enjoy the fruits of their degrees. But most pack-a-day smokers don’t die of lung cancer. And most people who bought cars with Takata airbags from 2002 to 2008 weren’t killed by shrapnel from explosions. Nevertheless, we still regard small risks of catastrophic outcomes as problems to be solved. ...

Just one quick comment. We need to solve the student loan problem for existing loans, but I wish talk about how to address this problem going forward was more about how to provide adequate funding for colleges so that large loans aren't needed in the first place rather than focusing on how to change the loan program itself.

Calibrating the Hype about Online Higher Education

This is from Tim Taylor:

Calibrating the Hype about Online Higher Education: "Massive open online courses" (MOOCs) and other aspects of online higher education were white-hot a few years ago, but I'd say that they have cooled off to only red-hot. Two economists who have also been college presidents, Michael S. McPherson and Lawrence S. Bacow discuss the current state of play and offer some insights in "Online Higher Education: Beyond the Hype Cycle," appearing in the Fall 2015 issue of the Journal of Economic Perspectives. Here are some points that caught my eye.

About one-quarter of higher education students took an online course in 2013, and about one-ninth of higher education students took all of their courses online that year. 

"The US Department of Education recently began to conduct its own survey of online education as part of its Integrated Post-Secondary Education Data System (IPEDS), with full coverage of the roughly 4,900 US institutions of higher education. As shown in Table 1, IPEDS data indicates that as of 2013, about 26 percent of all students took at least one course that was entirely online, and about 11 percent received all of their education online." 

When it comes to the possibility of education technologies that can operate at large scale with near-zero marginal costs, there's a history of overoptimism. Here's a quick sketch of promises about educational radio, and then educational television. 

"Berland (1992), citing a popular commentator named Waldeman Kaempffert writing in 1924, reported that “there were visions of radio producing ‘a super radio orchestra’ and ‘a super radio university’ wherein ‘every home has the potentiality of becoming an extension of Carnegie Hall or Harvard University.’” Craig (2000) reports that “the enthusiasm for radio education during the early days of broadcasting was palpable. Many universities set up broadcast stations as part of their extension programs and in order to provide their engineering and journalism students with experience in radio. By 1925 there were 128 educational stations across the country, mostly run by tertiary institutions” (p. 2831). The enthusiasm didn’t last—by 1931 the number of educational stations was down to 49, most low-powered (p. 2839). This was in part the result of cumbersome regulation, perhaps induced by commercial interests; but the student self-control problem ... likely played a role as well. As NBC representative Janice Waller observed, “Even those listeners who clamored for educational programs, Waller found, secretly preferred to listen to comedians such as Jack Benny. These “intellectually dishonest” people “want to appear very highbrow before for their friends . . . but down inside, and within the confines of their own homes, they are, frankly, bored if forced to listen to the majority of educational programs” (as quoted in Craig 2000, pp. 2865–66). 

"The excitement in the late 1950s about educational television outshone even the earlier enthusiasm for radio. An article by Schwarzwalder (1959, pp. 181–182) has an eerily familiar ring: “Educational Television can extend teaching to thousands, hundreds of thousands and, potentially, even millions. . . . As Professor Siepman wrote some weeks ago in The New York Times, ‘with impressive regularity the results come in. Those taught by television seem to do at least as well as those taught in the conventional way.’ . . . The implications of these facts to a beleaguered democracy desperately in need of more education for more of its people are immense. We shall ignore these implications at our national peril.” Schwartzman goes on to claim that any subject, including physics, manual skills, and the arts can be taught by television, and even cites experiments that show “that the discussion technique can be adapted to television.”"

The Internet offers the possibility not just of widespread distribution of education material, but also of interactive content. But if the content is to be richly interactive--that is, more than just a short multiple-choice quiz inserted into the recorded material--the costs of design and production could be very substantial. 

"Richly interactive online instruction is obviously much more expensive than Internet-delivered television. The development costs for Carnegie Mellon’s sophisticated but far from fully computer-adaptive courses in statistics and other fields have been estimated at about $1 million each (Parry 2009). Although future technical developments will reduce the costs of providing a course of a fixed level of quality over time, those future technical developments will also encourage the provision of additional features. Universities can invest in improving the production values of such television programs at the margin in ways that range from multiple camera angles to the incorporation of sophisticated graphics and live location video. Many interactive courses could also conceivably benefit from regular updating based on recent events or scholarship ... Our point is that while online courses offer the potential for constant modification and updates, realizing this potential may in fact be expensive, leading to less-frequent updates than for traditionally taught subjects. ... Those who foresee the widespread adoption of adaptive learning technology often underestimate the cost of producing it. Stanford President John Hennessey, in a recent lecture to the American Council of Education, estimated that the cost of producing a first-rate highly interactive digital course to be in the millions of dollars (Jaschik 2015). Few individual institutions have the resources to make such investments. Furthermore, while demand may be substantial enough to support such investments for basic introductory courses in fields that easily lend themselves to such instruction, it is unlikely that anyone will invest in the creation of such courses for upper-level courses unless they can be adopted at scale.

There's no guarantee that online tools will reduce the costs of higher education. One possibility is that well-endowed universities use online higher education as a way to drive up costs--since these schools often compete to provide a high-end experience. For example, expensive schools might "flip the classroom" by paying for both a rich and interactive online course, and then also hiring enough faculty members (not graduate students!) to staff a large number of discussion and problem-solving sections.

Indeed, there is a real chance that at least in selective higher education, technology will actually be used to raise rather than lower cost. There are obvious ways to use online materials to complement rather than to substitute for in-person instruction. Flipping the classroom, as we will explain further, is one. Instructors can also import highly produced video material—either purchased or homemade— to complement their classes, and there could easily emerge a market in modular lessons aimed at allowing students to extend material farther or to get a second take on a difficult set of concepts. If individual faculty members are authorized to make these choices, and universities agree to subsidize expensive choices, costs seem likely to rise. 

Conversely, schools that are lower-ranked and with fewer financial resources may be pushed to focus on implementing a low-cost and mostly online curriculum. 

Broad-access unselective institutions are already among the largest users of online instruction. These institutions are responsible for the education of many students—at least half of all those enrolled in postsecondary education—and they disproportionately educate lower-income students and students of color. Enabling technological advances to support improvement in the educational success of these institutions at manageable cost is an important goal, arguably the most important goal for using technology to improve American higher education. (Of course, the implications of these technologies for global learning would be potentially gigantic.) There is especially high potential for online education to cater to the large number of nontraditional students, which includes adult learners and those who have a very high opportunity cost of attending college whether at the undergraduate or graduate level. For this group of students, asynchronous online learning can be a godsend. Opportunities surely exist for technology to penetrate this market further, and quality is likely to improve as faculty and others figure out how to take better advantage of new educational technology. As the technology improves and as more institutions adopt it, more of these students are likely to receive all or at least some of their education online. 

Yet this great opportunity is accompanied by considerable risk. It is all too easy to envision legislators who see a chance to cut state-level or national-level spending that supports higher education by imposing cheap and ineffective online instruction on institutions whose students lack the voice and political influence to demand quality. It’s equally easy to imagine for-profit institutions proffering online courses in a way that takes advantage of populations with little experience with college in a marketplace where reliable information is scarce.

(Full disclosure: I've been Managing Editor of the Journal  of Economic Perspectives since 1987. All JEP articles from the current issue going back to the first issue are freely available online courtesy of the publisher, the American Economic Association.)

'Education Gap Between Rich and Poor Is Growing Wider'

Eduardo Porter:

Education Gap Between Rich and Poor Is Growing Wider, NY Times: ...in the 1970s..., African-American children had nowhere near the same educational opportunities as whites. The civil rights movement, school desegregation and the War on Poverty helped bring a measure of equity to the playing field. Today,... racial disparities in education have narrowed significantly. ... But ...the achievement gaps between more affluent and less privileged children is wider than ever... Today the biggest threat to the American dream is class.

Education is today more critical than ever. ... And yet American higher education is increasingly the preserve of the elite. ... The problem, of course, doesn’t start in college. ...

“If we could equalize achievement from age zero to 14,” Professor [Jane] Waldfogel told me, “that would go a long way toward closing the college enrollment and completion gaps.”

It can be done. Australia, Canada — even the historically class-ridden Britain — show much more equitable outcomes..., yet the strains from our world of increasing income inequality raise doubts about our ability to narrow the educational divide... The ... rich ... are spending hand over fist to ensure that their children end at the front of the rat race. Our public school system has proved no match to the forces reproducing inequality across the generations. ...

Today, the proficiency gap between the poor and the rich is nearly twice as large as that between black and white children. In other words, even as one achievement gap narrowed, another opened wide. ...

The Good and Bad Parts of Online Education

I have a new column:

The Good and Bad Parts of Online Education: Is online education the solution to widening inequality, rapidly rising costs, and lack of access to high quality courses? Will it lead to the demise of traditional “brick and mortar” institutions? I was initially very skeptical about the claims being made about online education, but after teaching several of these course during the past academic year my own assessment has become much more positive.

My main worry, as expressed in a previous column, was that the availability of online courses degrees would create a two-tiered education system and exaggerate inequality instead of reducing it. I still worry about that, but I didn’t give online education enough credit for the things that it can do. Here are some of the positives and negatives of online versus traditional education gleaned from my experience teaching both types of courses. ...

For the Poor, the Graduation Gap Is Even Wider Than the Enrollment Gap

Susan Dynarski on inequality in education:

For the Poor, the Graduation Gap Is Even Wider Than the Enrollment Gap: Rich and poor students don’t merely enroll in college at different rates; they also complete it at different rates. The graduation gap is even wider than the enrollment gap.

In 2002, researchers with the National Center for Education Statistics started tracking a cohort of high school sophomores. The project, called the Education Longitudinal Study, recorded information about the students’ academic achievement, college entry, work history and college graduation. A recent publication examines the completed education of these young people, who are now in their late 20s. ...

Thirteen years later, we can see who achieved their goals. Among the participants from the most disadvantaged families, just 14 percent had earned a bachelor’s degree. That is, one out of four of the disadvantaged students who had hoped to get a bachelor’s had done so. Among those from the most advantaged families, 60 percent had earned a bachelor’s, about two-thirds of those who had planned to. ...

And the gap looks just as bad when students with similar academic achievement in high school are compared, e.g. among the "teenagers who scored among the top 25 percent of students on the math test..., the students from the top socioeconomic quartile had very high bachelor’s degree completion rates: 74 percent... But only 41 percent of the poorest students with the top math scores did so. That’s a completion gap of 33 percentage points, not much smaller than the overall gap of 46 percentage points."

'Economic History is Dead; Long Live Economic History?'

I really hope The Economist is right about this, but I'm a bit more pessimistic:

Economic history is dead; long live economic history?: Two years ago, in a very interesting paper, Peter Temin bemoaned the decline of economic history as a research topic at universities. He took the example of what happened at the Massachusetts Institute of Technology (MIT) to prove his point. There, the subject reached its peak in the 1970s, when three members of the faculty taught economic history. But from then it declined until economic history vanished both from the faculty and the graduate programme around 2010.

But is economic history really dead? Last weekend, Britain's Economic History Society hosted its annual three-day conference in Telford, attempting to show the subject was still alive and kicking. The economic historians present at the gathering were bullish about the future. Although the subject's woes at MIT have been echoed across research universities in both America and Europe, since the financial crisis there has been something of a minor revival.

What revival does the article have in mind?:

renewed vigour can be most clearly seen in the debates economists are now having with each other

The conclusion:

Economic history may well be dead as a subject studied in independent academic departments, as it was at universities in the 1970s. But as a subject that is needed as part of the study of economics and the making of public policy, economic history is—and should be—very much alive.

'Why More Education Won’t Fix Economic Inequality'

Speaking of Larry Summers:

Why More Education Won’t Fix Economic Inequality: Suppose you accept the persuasive data that inequality has been rising in the United States and most advanced nations in recent decades. But suppose you don’t want to fight inequality through politically polarizing steps like higher taxes on the wealthy or a more generous social welfare system.

There remains a plausible solution to rising inequality that avoids those polarizing ideas: strengthening education so that more Americans can benefit from the advances of the 21st-century economy. This is a solution that conservatives, centrists and liberals alike can comfortably get behind. After all, who doesn’t favor a stronger educational system? But a new paper shows why the math just doesn’t add up, at least if the goal is addressing the gap between the very rich and everyone else.

Brad Hershbein, Melissa Kearney and Lawrence Summers offer a simple little simulation that shows the limits of education as an inequality-fighter. In short, more education would be great news for middle and lower-income Americans, increasing their pay and economic security. It just isn’t up to the task of meaningfully reducing inequality, which is being driven by the sharp upward movement of the very top of the income distribution. ...

'Student Loan Debt Is the Enemy of Meritocracy'

Thomas Piketty on a theme I've been hammering lately, student debt is too damn high!:  

Student Loan Debt Is the Enemy of Meritocracy in the US: ...the amount of household debt and even more recently of student debt in the U.S. is something that is really troublesome and it reflects the very large rise in tuition in the U.S. a very large inequality in access to education. I think if we really want to promote more equal opportunity and redistribute chances in access to education we should do something about student debt. And it's not possible to have such a large group of the population entering the labor force with such a big debt behind them. This exemplifies a particular problem with inequality in the United States, which is very high inequality and access to higher education. So in other countries in the developed world you don't have such massive student debt because you have more public support to higher education. I think the plan that was proposed earlier this year in 2015 by President Obama to increase public funding to public universities and community college is exactly justified.

This is really the key for higher growth in the future and also for a more equitable growth..., you have the official discourse about meritocracy, equal opportunity and mobility, and then you have the reality. And the gap between the two can be quite troublesome.  So this is like you have a problem like this and there's a lot of hypocrisy about meritocracy in every country, not only in the U.S., but there is evidence suggesting that this has become particularly extreme in the United States. ... So this is a situation that is very troublesome and should rank very highly in the policy agenda in the future in the U.S.

'We’re Frighteningly in the Dark About Student Debt'

Susan Dynarski:

We’re Frighteningly in the Dark About Student Debt, NY Times: ...The ... United States government ... has a portfolio of roughly $1 trillion in student loans, many of which appear to be troubled. The Education Department, which oversees the portfolio, is ... neither analyzing the portfolio adequately nor allowing other agencies to do so.

These loans are no trivial matter... Student loans are now the second-largest source of consumer debt in the United States, surpassed only by home mortgages. In a major reversal, they now constitute a larger portion of household debt than credit cards or car loans. ...

The frightening reality, however, is that we are remarkably ignorant about student debt..., we can’t quantify the risks that student debt places on individual households and the economy as a whole. ...

Over at the Federal Reserve and consumer bureau, as well as outside the government, highly trained analysts are eager for data. A sensible solution would be for the Education Department to put it in their hands and let them get to work.

An additional longer-term solution is to move the loan program out of the Education Department entirely — either into an existing agency that has the statistical expertise or a new student-loan authority. ...

An even better solution would be to stop saddling students with so much debt.

'When a Summer Job Could Pay the Tuition'

In case this was missed when it was in the daily links. This is from Tim Taylor:

When a Summer Job Could Pay the Tuition: When I was graduating from high school in 1978, a number of my friends went to the hometown University of Minnesota. At the time, it was possible to pay tuition and a substantial share of living expenses with the earnings from a full-time job in the summer and a part-time job during the school year. Given the trends in costs of higher education and the path of the minimum wage since then, this is no longer true.

Here's an illustration of the point with the University of Minnesota, with its current enrollment of about 41,000 undergraduates,as an example. (The figure is taken from a presentation by David Ernst, who among his other responsibilities is Executive Director of the Open Textbook Network, which provides links to about 170 free and open-license textbooks in a variety of subjects.)

Just to put this in perspective, say that a full-time student works 40 hours per week for 12 weeks of summer vacation, and then 10 hours per week for 30 weeks during the school year--while taking a break during vacations and finals. That schedule would total 780 hours per year. Back in the late 1970s, even being paid the minimum wage, this work schedule easily covered tuition. By the early 1990s, it no longer covered tuition. According to the OECD, the average annual hours worked by a US worker was 1,788 in 2013. At the minimum wage, that's now just enough to cover tuition--although it doesn't leave much space for being a full-time student.

 [Me on the same topic.]

'How Higher Education Perpetuates Intergenerational Inequality '

Bad news for those who propose education as the solution to inequality:

How Higher Education Perpetuates Intergenerational Inequality, by Tim Taylor: Part of the mythology of US higher education is that it offers a meritocracy, along with a lot of second chances, so that smart and hard-working students of all background have a genuine chance to succeed--no matter their family income. But the data certainly seems to suggest that family income has a lot to do with whether a student will attend college in the first place, and even more to do with whether a student will obtain a four-year college degree.

Margaret Cahalan and Laura Perna provide an overview of the evidence in "2015 Indicators of Higher Education Equity in the United States: 45 Year Trend Report," published by the Pell Institute for the Study of Opportunity in Higher Education and the and University of Pennsylvania Alliance for Higher Education and Democracy (PennAHEAD). ...

The report offers a range of evidence that the affordability of college is a bigger problem for students from low-income families even after taking financial aid into account. Students from low-income families take out more debt, and are more likely to attend for-profit colleges. Indeed, a general pattern for higher education a whole is that even as the cost of attending has risen, the share of the cost paid by households, rather  than by the state or federal government, has been rising. ...

The effects of these patterns on inequality of incomes in the United States are clearcut: higher income families are better able to provide financial and other kinds of support for their children, both as they grow up, and when it comes time to attend college, and when it comes time to find a job after college. In this way, higher education has become a central part part of the process by which high-income families can seek to assure that their children are more likely to have high incomes, too.

This connection is perhaps underappreciated. After all, it's a lot easier for professors and college students to protest high levels of compensation for the top professionals in finance, law, and the corporate world who are in the top 1% of the income distribution, rather than to face the idea that their own institutions of higher education are implicated in perpetuating inequality of incomes across generations. ...

[He also has a long quote from Alan Krueger on this topic.]

The Best Investment the U.S. Could Make — Affordable Higher Education

I have a new column. Education is not the solution to inequality, but we still need to a much better job of supporting higher education:

The Best Investment the U.S. Could Make — Affordable Higher Education

[I should add that I wrote this before I saw Paul Krugman's latest column.]

Self-Selection and 'Liberal' Professors

Dan Little of Understanding Society:

Self-selection and "liberal" professions: Neil Gross stirred up a quite a storm a few years ago when he released a body of research findings on the political complexion of university professors. Conservative organizations and pundits have made hay by denouncing the supposed liberal bias of universities. Gross opens his most recent book, Why Are Professors Liberal and Why Do Conservatives Care?, by confirming that multiple measures demonstrate that faculty members are substantially more likely to be liberal than the general population. But he believes this is both indisputable and uninteresting. What is most interesting for a sociologist is the "why" -- how can we explain the skewed distribution of political identities across this professional group?

Gross positions his work as falling in a tradition of research that included two major survey-based studies in the past 75 years, Lazarsfield and Thielens (The Academic Mind: Social Scientists in a Time of Crisis) and Everett Karll Ladd and Seymour Martin Lipset (The Divided Academy: Professors and Politics). He also finds creative ways of incorporating the GSS surveys. In addition, Gross and Solon Simmons carried out their own substantial survey, the Politics of the American Professoriate survey (PAP).

It will be noted that this is a problem that calls out for a social mechanisms explanation, and a fairly simple one at that. Suppose marbles of two colors in equal numbers are raining down in a thoroughly mixed stream on a pair of urns. Occasionally a marble falls into one urn or the other. When we count the marbles in both urns we find that 65% of the marbles in the urn on the left are green, whereas the larger urn on the right has 50% of each color. How is it that there are a higher percentage of green marbles in the urn on the left? There are only a few possibilities, each corresponding to a different mechanism. (i) The marbles have a degree of choice about which urn they enter, and green marbles have a preference for the left urn. (Or a variant: red marbles have a preference for avoiding the left urn.) We could call this "selection bias by chooser". This is different from two other possible mechanisms: (ii) there is a filter on the left urn, bumping green marbles in and red marbles out ("selection bias by receiver"); or (iii) marbles have a slight tendency to shift color from red to green when they enter the left urn ("environment transformation").

Fundamentally the question is analogous to the "nature-nurture" conundrum in the study of personality. Are universities more liberal than average occupations because they cultivate liberal thinking (nurture)? Or are they more liberal because of some sort of selection mechanism, drawing liberal members more frequently than chance (nature), and liberal-tending new faculty members bring their political values with them? Gross makes a powerful empirical case for the latter possibility.

I develop an alternative account: for historical reasons the professoriate has developed such a strong reputation for liberalism that smart young liberals today are apt to think of academic work as something that might be appropriate and suitable for them to pursue, whereas smart young conservatives see academe as foreign territory and embark on other career paths. (p. 105)

It might be speculated that this distribution exists because the faculty selection process is biased -- conservative candidates are turned away. Gross's explanation is different. He draws on a strong literature studying gendered occupations that finds that the reputation of the profession has a powerful influence on girls and women as they make educational and career choices. Gross extends this reasoning to liberals and conservatives contemplating an academic career. Essentially he explains the political composition of university faculties as a consequence of a powerful public reputation for being a liberal workplace and a distinctly skewed process of self-selection towards this career. The profession is "typed" as being a particularly good career for more liberal young people, and young people make their career choices in consideration of that assumption. Essentially he argues that universities are publicly perceived as being hospitable to people on the left, and liberal-leaning young people are drawn to the career because of this reputation.

The question of political bias within universities is treated using an interesting experiment that Gross and colleagues Joseph Ma and Ethan Fosse conducted to test whether conservative students have a harder time gaining entrance to graduate programs (164). The project involved sending fictitious letters of inquiry to directors of graduate studies in leading departments in a wide range of disciplines. The letters indicated the same level of preparation for the field. One batch indicated no political information about the student, while the other two batches included the phrases "Worked for the McCain campaign" or "Worked for the Kerry campaign." Responses were rated according to the degree of encouragement or discouragement they expressed. The experiment is ingenious but it indicates "no result". There is no statistically significant evidence of bias against applicants who self-identify as conservative. (Gross does report a strong negative response from some of the academics whose potentially discriminatory behavior was tested.)

The study should count as reasonably strong evidence that most social scientists and humanists in leading departments work hard to keep their political feelings and opinions from interfering with their evaluations of academic personnel. (165)

I find Gross's treatment of this topic to be an exemplary use of quantitative survey data in theoretically informed ways. The PAP survey that Gross initiated (along with colleagues and research assistants) provides substantial new information about the political attitudes and social backgrounds of faculty in the United States. Gross makes deft use of this data source (as well as several others) to evaluate hypotheses about what causes the distribution of political profiles among faculty. Gross's question is about both groups and individuals, and the survey data helps to evaluate answers to both. And, incidentally, this appears to be a sterling example of the kind of theoretical work that John Levi Martin calls for (link): careful stipulation of various explanatory theories, accompanied by a rigorous effort to evaluate them using appropriate empirical data.

For anyone who cares about universities as places of learning for undergraduate students, Gross's book is an encouraging one. He provides a clear and convincing explanation of the mechanisms through which a non-random distribution of political attitudes wind up in the population of university and college professors, and he provides strong evidence against the idea that universities and professors exercise discriminatory bias against newcomers who have different political identities. And finally, Gross's analysis and my own experience suggests that professors generally conform to Weber's ethic when it comes to proselytizing for one's own convictions in the classroom: the function and duty of the professor is to help students think for themselves (Max Weber, "The Meaning of Ethical Neutrality,", Methodology of Social Sciences.)

There is an interesting set of replies to Gross in Society here.

'Higher Education, Wages, and Polarization'

Rob Valletta in an SF Fed Economic Letter:

Higher Education, Wages, and Polarization, by Rob Valletta, FRBSF Economic Letter: Holding a four-year college degree gives a worker a distinct advantage in the U.S. labor market. The wage gap between college-educated working adults and those with high school degrees is large and has grown steadily over the past 35 years. This gap appears to be bolstered by technological advances in the workplace, notably the ever-growing reliance on computers, because the skills needed to apply these technologies are often acquired through or associated with higher education. Since 2000, however, this trend has altered. Increasingly, the U.S. labor market favors workers who hold a graduate degree, while the wage advantage for those who hold a four-year college degree has changed little. In this Economic Letter, I examine the potential explanations for this change. I focus on the polarization hypothesis, which emphasizes employment and wage growth at the top and bottom portions of the skill distribution (Acemoglu and Autor 2011). ...

'Is Economics Really a Dismal Science for Women?'

Since I posted an excerpt from Noah Smith's column, I should also post this response from Frances Woolley:

Is economics really a dismal science for women?: Donna Ginther and Shulamit Kahn have just published a paper that tracks thousands of American academics from the time they first get their PhDs through to their tenure and promotion decisions. ...

Noah Smith ... takes, Ginther and Kahn's cautious and nuanced results, and leaps to the conclusion that economics "seems to have a built-in bias that prevents women from advancing." 

Really?

I have never seen a woman denied tenure when a man with similar number and quality of publications was awarded it. I don't deny Ginther and Kahn's findings, but might there be a non-discriminatory explanation of the fact that a woman in economics with X number of publications is less likely to receive tenure than a man with X publications? ...

She goes on to give the "non-discriminatory explanation", and then says:

"Sexism" is not the result of some high level conspiracy. It is the product of millions of every day actions by thousands of ordinary people. ... If a man with 5 publications gets tenure while a woman with 5 publications does not, there must be a reason: either the man has higher quality publications, or higher impact publications, or more evidence of national or international reputation, or better letters of reference.

But a scholar's reputation and impact is determined by ... others: who they choose to acknowledge, who they choose to network with. Every single active academic can, through the citation and other decisions they make every day, influence other academics' reputations - and thus the probability that they will receive tenure or get promoted.  

Who do you cite? If you're like most people, you're more likely to cite the seminal work of some well-known male academic than the work of a female scholar. ...

Do you give women credit for their ideas? Just about every woman has had the experience of sitting in a committee, saying something, and having her contribution ignored. A man will then restate her point, and he is listened to, and receives credit for the idea. ...

How do you word your letters of reference? Do you use the same adjectives to describe women and men? Or are women delightful, pleasant, conscientious and hard-working while men are strong, original, insightful and persistent?

Who do you invite to present at conferences or departmental seminars? If a man, do you turn down invitations to participate in conferences with all-male line-ups...? Do you make it easy for female colleagues to come for a drink in the bar after a seminar by corralling them into the bar-going group? 

The economics profession is far from perfect. I personally don't find it any worse than the world of media (that the Globe and Mail paid Stephen Gordon more than me still burns), or the world of academic administration. But it could be better - and the power to change it lies within every one of us.

'Is (Teaching) Economics Doing More Harm Than Good?'

Brian Lucey:

Is (teaching) Economics doing more harm than good?: Every September thousands of students enter into universities and institutes of higher education. A large number of these take some economics courses. ... Economists also typically teach courses such as statistics, or introductory mathematics for social scientists. And yet, we have no idea whether or not this does any good. Much worse, we have no idea whether or not this does harm. Maybe we should find out? ...

He goes through a large body of evidence showing that "Economists are different," and how student attitudes may be changed by taking economics courses.

'Thoughts on High-Priced Textbooks'

Tim Taylor on why textbooks cost so much:

Thoughts on High-Priced Textbooks: High textbook prices are a pebble in the shoe of many college students. Sure, it's not the biggest financial issue they face, But it's a real and nagging annoyance that for hinders performance for many students. ...

David Kestenbaum and Jacob Goldstein at National Public Radio took up this question recently on one of their "Planet Money" podcasts. ... For economists, a highlight is that they converse with Greg Mankiw, author of what is currently the best-selling introductory economics textbook, which as they point out is selling for $286 on Amazon. Maybe this is a good place to point out that I am not a neutral observer in this argument: The third edition of my own Principles of Economics textbook is available through Textbook Media. The pricing varies from $25 for online access to the book, up through $60 for both a paper copy (soft-cover, black and white) and online access.

Several explanations for high textbook prices are on offer. The standard arguments are that textbook companies are marketing selling to professors, not to students, and professors are not necessarily very sensitive to textbook prices. (Indeed, one can argue that before the rapid rise in textbook prices in the last couple of decades, it made sense for professors not to focus too much on textbook prices.) Competition in the textbook market is limited, and the big publishers load up their books with features that might appeal to professors: multi-colored hardcover books, with DVDs and online access, together with test banks that allow professors to give quizzes and tests that can be machine-graded. At many colleges and universities, the intro econ class is taught in a large lecture format, which can include hundreds or even several thousand students, as well as a flock of teaching assistants, so some form of computerized grading and feedback is almost a necessity. Some of the marketing by textbook companies involves paying professors for reviewing chapters--of course in the hope that such reviewers will adopt the book.

The NPR show casts much of this dynamic as a "principal-agent problem," the name for a situation in which one person (the "principal") wants another person (the "agent") to act on their behalf, but lacks the ability to observe or evaluate the actions of the agent in a complete way. Principal-agent analysis is often used, for example, to think about the problem of a manager motivating employees. But it can also be used to consider the issue of students (the "principals") wanting the professor (the "agent") to choose the book that will best suit the needs of the students, with all factors of price and quality duly taken into account.  The NPR reporters quote one expert saying that the profit margin for high school textbooks is 5-10%, because those books decisions are made by school districts and states that negotiate hard. However, profit margins on college textbooks--where the textbook choice is often made by a professor who may not even know the price that students will pay--are more like 20%.

The NPR report suggests this principal-agent framework to Greg Mankiw, author of the top-selling $286 economic textbook. Mankiw points out that principal-agent problems are in no way nefarious, but come up in many contexts. For example, when you get an operation, you rely on the doctor to make choices that involve costs; when you get your car fixed, you rely on a mechanic to make choices that involve costs; when you are having home repairs done, you rely on a repair person or a contractor to make choices that involve costs. Mankiw argues that professors, acting as the agents of students, have legitimate reason to be concerned about tradeoffs of time and money. As he notes, a high quality book is more important "than saving them a few dollars"--and he suggests that saving $30 isn't worth it for a low-quality book.

But of course, in the real world there are more choices than a high-quality $286 book and a low-quality $256 book. The PIRG student surveys suggest that up to two-thirds of students are avoiding buying textbooks at all, even though they fear it will hurt their grade, or are shifting to other classes with lower textbook costs. If a student is working 10 hours a week at a part-time job, making $8/hour after taxes, then the difference between $286 book and a $60 book is 28.25 hours--nearly three weeks of part-time work. I am unaware of any evidence in which students were randomly assigned different textbooks but otherwise taught and evaluated in the same way, and kept time diaries, which would show that higher-priced books save time or improve academic performance. It is by no means obvious that a lower-cost book (yes, like my own) works less well for students than a higher-cost book from a big publisher. Some would put that point more strongly.

A final dynamic that may be contributing to higher-prices textbooks is a sort of vicious circle related to the textbook resale market. The NPR report says that when selling a textbook over a three-year edition, a typical pattern was that sales fell by half after the first year and again by half after the second year, as students who had bought the first edition resold the book to later students. Of course, this dynamic also means that many students who bought the book new are not really paying full-price, but instead paying the original price minus the resale price. The argument is that as textbooks have increased in price, the resale market has become ever-more active, so that sales of a textbook in later years have dwindled much more quickly. Textbook companies react to this process by charging more for the new textbook, which of course only spurs more activity in the resale market.

A big question for the future of textbooks is how and in what ways they migrate to electronic forms. On one side, the hope is that electronic textbooks will offer expanded functionality, as well as being cheaper. But this future is not foreordained. At least at present, my sense is that the functionality of reading and taking notes in online textbooks hasn't yet caught up to the ease of reading on paper. Technology and better screens may well shift this balance over time. But even setting aside questions of reading for long periods of time on screen, or taking notes on screen, at present it remains harder to skip around in a computerized text between what you are currently reading and the earlier text that you need to be checking, as well as skipping to various graphs, tables, and definitions. To say it more simply, in a number of subjects it may still be harder to study an on-line text than to study a paper text.

Moreover, as textbook manufacturers shift to an on-line world, they will bring with them their full bag of tricks for getting paid. The Senack report notes:

Today’s marketplace offers more digital textbook options to the student consumer than ever. “Etextbooks” are digitized texts that students read on a laptop or tablet. Similar to PDF documents, e-textbooks enable students to annotate, highlight and search. The cost may be 40-50 percent of the print retail price, and access expires after 180 days. Publishers have introduced e-textbooks for nearly all their traditional textbook offerings. In addition, the emergence of the ereader like the Kindle and iPad, as well as the emergence of many e-textbook rental programs, all seemed to indicate that the e-textbook will alter the college textbook landscape for the better. However, despite this shift, users of e-textbooks are subject to expiration dates, on-line codes that only work once, page printing limits, and other tactics that only serve to restrict use and increase cost. Unfortunately for students, the publishing companies’ venture into e-textbooks is a continuation of the practices they use to monopolize the print market.

'The Silver Lining in Falling College Enrollment'

At MoneyWatch:

The silver lining in falling college enrollment, by Mark Thoma: College enrollment "declined by close to half a million (463,000) between 2012 and 2013, marking the second year in a row that a drop of this magnitude has occurred," according to a report from the Census Bureau. And it's the largest two-year drop since Census began collecting enrollment data in 1966. Notably, the decline was concentrated in two-year colleges.

It is, of course, desirable to have a more educated population, particularly in an era of globalization and technological change that makes it harder for low-skilled workers to find good jobs. But the report also has a silver lining. ...

'More Education = More Income'

Eduardo Porter:

A Simple Equation: More Education = More Income, by Eduardo Porter, NY Times: ...the gap between the wages of a family of two college graduates and a family of high school graduates..., between 1979 and 2012...,grew by some $30,000, after inflation. This ... amounts to a powerful counterargument to anybody who doubts the importance of education in the battle against the nation’s entrenched inequality.

But in the American education system, inequality is winning, gumming up the mobility that broad-based prosperity requires. ... Only one in 20 Americans aged 25 to 34 whose parents didn’t finish high school has a college degree. The average across 20 rich countries in the O.E.C.D. analysis is almost one in four. ...

Given the payoff, the fact that many of those who would benefit most are not investing in a college education suggests an epic failure. And the growing cadre of countries that outperform the United States suggests failure is hardly inevitable. ...

Mr. Schleicher told me that, while places like Japan, Singapore and Canada have learned how to educate socially disadvantaged children, in the United States social background plays an outsize role in the educational outcomes. ... “But a lot depends on policy. There is a lot we can do.”

Decimating public education is not to anyone’s advantage...

'The Wage Growth Gap for Recent College Grads'

Via the SF Fed:

The Wage Growth Gap for Recent College Grads, by Bart Hobijn and Leila Bengali, FRBSF Economic Letter: Starting wages of recent college graduates have essentially been flat since the onset of the Great Recession in 2007. Median weekly earnings for full-time workers who graduated from college in the year just before the recession, between May 2006 and April 2007, were $653. Over the 12 months ending in April 2014, the earnings of recent college graduates had risen to $692 a week, only 6% higher than seven years ago. 

The lackluster increases in starting wages for college graduates stand in stark contrast to growth in median weekly earnings for all full-time workers. These earnings have increased 15% from $678 in 2007 to $780 in 2014. This has created a substantial gap between wage growth for new college graduates and workers overall.

In this Economic Letter we put the wage growth gap in a historical context and consider what is at its heart. In particular, we find that the gap does not reflect a switch in the types of jobs that college graduates are able to find. Rather we find that wage growth has been weak across a wide range of occupations for this group of employees, a result of the lingering weak labor market recovery. ...

Education and Inequality

At macroblog, Julie L. Hotchkiss, a research economist and senior policy adviser at the Atlanta Fed, and Fernando Rios-Avila, a research scholar at the Levy Economics Institute of Bard College look at the relationship betwen education and inequality:

... There is little debate about whether income inequality has been rising in the United States for some time, and more dramatically recently. The degree to which education has exacerbated inequality or has the potential to reduce inequality, however, offers a more robust debate. We intend this post to add to the evidence that growing educational attainment has contributed to rising inequality. This assertion is not meant to imply that education has been the only source of the rise in inequality or that educational attainment is undesirable. The message is that growth in educational attainment is clearly associated with growing inequality, and understanding that association will be central to the understanding the overall growth in inequality in the United States.

More here.

'The Share of Borrowers with High Student Loan Balances is Rising'

We need to provide more support for education if we want it to be a vehicle for enhanced opportunity rather than a means of promoting existing inequities:

The Share of Borrowers with High Student Loan Balances is Rising, On the Economy, St. Louis Fed: It’s not just the total number of student loan borrowers that is going up. The average balance per borrower is going up as well. And, in particular, the fraction of borrowers with more than $10,000 in student debt is rising.

In a recent Economic Synopses essay, Alexander Monge-Naranjo, research officer and economist with the Federal Reserve Bank of St. Louis, examined the recent growth in student loan debt in the U.S. over the period 2005-2012. As of March 2012, student loan debt stood at $870 billion and had surpassed total credit card debt ($693 billion) and total auto loan debt ($730 billion).

In addition, Monge-Naranjo found that the distribution of student loans by debt levels had shifted, with the share of borrowers with loan balances in excess of $10,000 increasing. Increases were greater at higher levels of debt:

• Only 3 percent of borrowers in 2005 owed more than $100,000. By 2012, that fraction reached 6.2 percent.
• The share of borrowers who owed between $150,000 and $175,000 rose from 1.7 percent to 3.7 percent.
• The share who owed between $175,000 and $200,000 went up from 0.6 percent to 1.5 percent.
• The share of those owing more than $200,000 went up from 0.2 percent to 0.6 percent.

While Monge-Naranjo noted that “high levels of student loan debt pose no problems as long as the investment in education has high returns and the loans are repaid,” he also indicated that some borrowers may suffer adverse effects in the future, such as difficulty obtaining other forms of credit.

Higher Ed Cuts, Tuition Hikes Worsen Low-Income Students’ Struggles

As a follow-up to the previous post on black-white differences in economic mobility:

Higher Ed Cuts, Tuition Hikes Worsen Low-Income Students’ Struggles: State cuts to higher education have led colleges and universities to make deep cuts to educational or other services, hike tuition sharply, or both, as we explain in our recently released paper.  These tuition increases are hitting low-income students particularly hard, lessening their choices of schools, adding to their debt burdens — and likely deterring some from enrolling in school altogether. ...

'Refocusing Economics Education'

Antonio Fatás (each of the four points below are explained in detail in the original post):

Refocusing economics education: Via Mark Thoma I read an interesting article about how the mainstream economics curriculum needs to be revamped (Wren-Lewis also has some nice thoughts on this issue).

I am sympathetic to some of the arguments made in those posts and the need for some serious rethinking of the way economics is taught but I would put the emphasis on slightly different arguments. First, I  am not sure the recent global crisis should be the main reason to change the economics curriculum. Yes, economists failed to predict many aspects of the crisis but my view is that it was not because of the lack of tools or understanding. We have enough models in economics that explain most of the phenomena that caused and propagated the global financial crisis. There are plenty of models where individuals are not rational, where financial markets are driven by bubbles, with multiple equilbria,... that one can use to understand the last decade. We do have all these tools but as economics teachers (and researchers) we need to choose which ones to focus on. And here is where we failed. And we did it before and during the crisis but we also did it earlier. Why aren't we focusing on the right models or methodology? Here is my list of mistakes we do in our teaching, which might also reflect on our research:

#1 Too much theory, not enough emphasis on explaining empirical phenomena. ...

#2 Too many counterintuitive results. Economists like to teach things that are surprising. ...

#3 The need for a unified theory. ...

#4 We teach what our audience wants to hear. ...

I also believe the sociology within the profession needs to change.

'Greening Economics: It is Time'

Another call for change in how economics is taught:

Greening Economics: It is time, by Carlo Carraro, Marianne Fay, Marzio Galeotti, Vox EU: ... It took the deepest economic and financial crisis since the Great Depression to provoke an open debate amongst macroeconomists as to whether the ‘economic model’ taught in economics programs is adequate. We do hope it will not take the full realization of the adverse consequences of climate change for the profession to come to its senses regarding environmental economics and the way natural capital is ignored in most macroeconomic work. How many superstorm Sandys will it take? By how much does the sea level have to rise? How many severe droughts and floods (and where) will it take before we come to the realization that ignoring natural capital and its many externalities is simply bad economics?

The difference between the financial and environmental crisis is that we actually do have a good body of work that incorporates natural capital in models of growth. The problem is that it has remained to a large extent the restricted domain of environmental economists. The vast majority of us were able to get degrees in economics without ever reading a single paper on environmental economics or encountering natural capital as an argument in the production functions we studied. We did hear about Pigouvian taxes of course – and so figured the problem had been solved…

Environmental economists have long modified growth models to account for the role of the environment, thus revisiting the conditions that ensure growth, whether sustainable or sustained. Classical references are three 1974 articles by Partha Dasgupta and Geoffrey Heal, by William Nordhaus, and by Robert Solow (though Solow could be hardly defined an environmental economist). More generally, existing work is summarized in the survey chapters by Tasos Xepapadeas and by William Brock and Scott Taylor, both published in 2005. A more recent example that compares ‘traditional’ (brown?) and ‘green’ models of growth is a 2011 World Bank working paper by Stephane Hallegatte, Geoffrey Heal, Marianne Fay, and David Treguer.

As a result, environmental economists tend not to talk about economic growth per se, but about sustainable economic growth. When macroeconomists refer to sustainable growth, however, they usually mean sustained growth. When growth economists study the role of externalities in the growth process they almost exclusively refer to technological and knowledge externalities, and generally ignore environmental ones, even though the latter are likely to become largely more relevant in the coming decades. Even social capital, a relative newcomer in economics, appears better integrated into the growth literature.

Why such disregard for an issue that epitomizes market failures from externalities, common property issues, and whose importance in both growth processes and human well-being is well documented? Sheer ignorance, likely – or a vague notion that innovation will come to the rescue. But why would markets generate the technology to solve a problem that combines both knowledge and environmental externalities?

The teaching of economics

Here is a plea then for an urgent change in the economics curriculum, at both introductory and advanced levels. Growth chapters in today’s macroeconomics textbooks make no reference to the environment – whether as an input into the production function or as a limiting factor affecting the productivity of human or physical capital. This is the case, for example, of David Romer’s textbook, in its fourth edition in 2011; of Jean-Pascal Benassy’s 2011 volume; or those of the Chicago School economists, such as Nancy Stokey, Robert Lucas and Edward Prescott’s (1989) and of Lars Ljungqvist and Thomas Sargent (third edition, 2012); or even that of Neo-keynesian economists such as Olivier Blanchard and Stanly Fischer (1989); or, finally, the very recent example of Michael Wickens (2012).

What is needed is not simply that more environmental economics be offered, but rather that the macroeconomics courses teach that natural capital is a key input into production processes, and that the environment – through massive mismanagement and a chronic failure to apply the basic principles of economics – has now become a serious macroeconomic problem, one that requires a profound and dramatic change in our model of growth. The development model of the industrial revolution (‘grow now and clean up later’) partly worked for a world of 1.5 million people; it simply won’t do for a global population approaching 9 billion.

If introducing the notion and role of the environment is necessary in macroeconomics teaching, it is a fortiori necessary when the student is presented with the theory and models of economic growth. There are a few economic growth textbooks written by well-known growth economists who are very active in that area. Going through the tables of contents, however, one is quickly disappointed. Neither the volume by Robert Barro and Xavier Sala-i-Martin (2003) nor the one by Daron Acemoglu (2008), for instance, consider explicitly the role of the environment in the process and in the perspectives of economic growth of a country. The same holds for the textbook by Olivier de la Grandville (2009), while Charles Jones and Dietrich Vollrath (2013) include a chapter on economic growth and natural resources, which is only a component of natural capital. Only the book by Philippe Aghion and Peter Howitt (2008) includes a chapter – the sixteenth – where the authors study ‘how new growth theories can integrate the environmental dimension, and in particular how endogenous innovation and directed technical change make it possible to reconcile the sustained growth objective with the constraints imposed by exhaustible resources or the need to maintain the environment’ (p.377).

It is remarkable that all textbooks on which undergraduate and graduate students learn the fundamental of economic growth invariably include a chapter on the role of human capital and of technological change, but always miss addressing the issue of the environment and natural capital.

As we believe that it is time to stop teaching that economic growth is uniquely measured by the growth of the production of all goods and services, we also firmly believe that the time has come to teach – from the first steps – that economic growth cannot abstract from the explicit consideration of the constraints and opportunities imposed by the environment and natural exhaustible resources. It is clear from many recent assessments (including the recently released IPCC Fifth Assessment Report) that environmental externalities, constraints on natural resources, and climate change – largely a macro problem – will constantly and deeply affect mankind’s future. The teaching of economics can no longer ignore it.

'Will MOOCs Lead to the Democratisation of education?'

Some theoretical results on MOOCs:

Will MOOCs lead to the democratisation of education?, by Joshua Gans: With all the recent discussion of how hard it is for journalists to read academic articles, I thought I’d provide a little service here and ‘translate’ the recent NBER working paper by Daron Acemoglu, David Laibson and John List, “Equalizing Superstars” for a general audience. The paper contains a ‘light’ general equilibrium model that may be difficult for some to parse.

The paper is interested in what the effect of MOOCs or, in general, web-based teaching options would be on educational outcomes around the world, the distribution of those outcomes and the wages of teachers. ...

'Women in Economics in the Chronicle of Higher Education'

John Whitehead:

Women in economics in the Chronicle of Higher Education: Kate Bahn ("a doctoral student in economics at the New School for Social Research and a writer and co-editor at LadyEconomist.com) in the Chronicle:

So the problem is really twofold: Women have been discouraged and excluded, and those who make an impact anyway have had their contributions discredited. ...

So that’s the state of play. That said, women have made huge gains in the field over the past 40 years..., 35 percent of new economics Ph.D.’s are women, up from about 7 percent in the 1970s.

Dig a little deeper, though, and the signs are less encouraging. ...

A disproportionate number of women remain stuck in certain subfields. ... Women are drawn to those areas where they are already better represented. So while there are pockets of female economists within certain subfields, there’s still a major disparity across the field as a whole. ...

In the coming months, I’ll write more about what this all means, for women and for the field as a whole. For now, I won’t delve too deeply into my experiences as an openly feminist economist and the eye-rolls I get from some of my peers whenever I suggest we hold more lectures and classes on feminist economics. Discussing that subfield just opens up a whole other can of worms, except yuck, girls don’t like worms.

This should be an interesting series.

Twenty-eight percent of our sample of AERE members are women and there are some gender differences on some of the items... I'm not sure where environmental and resource economics falls in the quant to caring field range. Probably closer to caring? Since we *might* care more about environmental issues than other economists?

'Climate Change, Public Policy, and the University'

Robert Stavins:

Climate Change, Public Policy, and the University, by Robert Stavins: Over the past year or more, across the United States, there has been a groundswell of student activism pressing colleges and universities to divest their holdings in fossil fuel companies from their investment portfolios.  On October 3, 2013, after many months of assessment, discussion, and debate, the President of Harvard University, Drew Faust, issued a long, well-reasoned, and – in my view – ultimately sensible statement on “fossil fuel divestment,” in which she explained why she and the Corporation (Harvard’s governing board) do not believe that “university divestment from the fossil fuel industry is warranted or wise.”  I urge you to read her statement, and decide for yourself how compelling you find it, and whether and how it may apply to your institution, as well.

About 10 days later, two leaders of the student movement at Harvard responded to President Faust in The Nation.  Andrew Revkin, writing at the New York Times Dot Earth blog, highlighted the fact that the students responded in part by saying, “We do not expect divestment to have a financial impact on fossil fuel companies …  Divestment is a moral and political strategy to expose the reckless business model of the fossil fuel industry that puts our world at risk.”

I agree with these students that fossil-fuel divestment by the University would not have financial impacts on the industry, and I also agree with their implication that it would be (potentially) of symbolic value only.  However, it is precisely because of this that I believe President Faust made the right decision.  Let me explain. ...

Higher Education and the Opportunity Gap

A quick one on a moderately long travel day:

Higher Education and the Opportunity Gap, by Isabel V. Sawhill, Brookings: America faces an opportunity gap. Those born in the bottom ranks have difficulty moving up. Although the United States has long thought of itself as a meritocracy, a place where anyone who gets an education and works hard can make it, the facts tell a somewhat different story. Children born into the top fifth of the income distribution have about twice as much of a chance of becoming middle class or better in their adult years as those born into the bottom fifth (Isaacs, Sawhill, & Haskins, 2008). One way that lower-income children can beat the odds is by getting a college degree.[1] Those who complete four-year degrees have a much better chance of becoming middle class than those who don’t — although still not as good of a chance as their more affluent peers. But the even bigger problem is that few actually manage to get the degree. Moreover, the link between parental income and college-going has increased in recent decades (Bailey & Dynarski, 2011). In short, higher education is not the kind of mobility-enhancing vehicle that it could be. ...

New Research in Economics: The Return and Risk of Pursuing a BA

This is from Frank Levy at MIT:

I am attaching a paper co-authored with two former students that uses California higher ed data to make stylized calculations of the return and risk of pursuing a BA. The paper makes two main points.

Most studies of the rate of return to college use a best-case scenario in which students earn a degree with certainty in four years. More realistic calculations that account for students who take more than four years and students who drop out without a degree, etc. result in an average rate of return that is lower than it was in 2000 but still exceeds the interest rate on unsubsidized Stafford student loans – i.e. college remains a good investment by the normal criteria.

Most studies present an average rate of return without considering the investment’s risk. Over the last decade, rising tuition and deteriorating earnings for new college graduates (particularly at the bottom of the distribution) have increased the risk of pursuing a BA – e.g. the risk that a graduate at age 30 will have student loan payments that exceed 15% of their income. This growing risk is one explanation for increased  skepticism about the value of a college degree despite the apparently high rate of return. It also underlines the importance of students becoming aware of the government’s income contingent loan repayment plans.

The paper is posted on SSRN.

U.S. Higher Education Enrollments, Falling Behind

Tim Taylor:

In almost every high income country, the share of 25-34 year-olds with higher education is higher than that for the age 25-64 population as a whole--about 7 percentage points higher. This is the pattern one would expect to see if a country is expanding access to higher education. But the U.S. is an exception, where the share of 25-34 year-olds with with a tertiary education degree is lower than for the age 25-64 population.

More here.

'Liberal Peking University Professor Threatened with Expulsion'

On tenure:

Liberal Peking University professor threatened with expulsion, South China Morning Post: A renowned professor has confirmed online rumors that his peers will decide whether he will be expelled from China's most eminent university after he made a series of remarks in favor of free speech and constitutional governance. Economics professor Xia Yeliang of Peking University was told by his department that his fate would be decided by a faculty vote, he told the South China Morning Post on Monday. "They told me it's because of all the things I have said and written," Xia said. "They have threatened me before, but this is the first time they will vote on my expulsion."

Over the last years, Xia has been one of the most outspoken liberal voices among Chinese academics. A friend of imprisoned Nobel Peace Prize laureate Liu Xiaobo, he was among the first signatories of Charter 08, the call for personal freedoms that landed Liu in jail. ...

I wanted to link to his Twitter account, but I couldn't find it:

... Recently, he has been writing critical remarks - on Twitter and Sina Weibo - about party censorship and President Xi Jinping's "Chinese Dream" slogan. 

Several, at least seven he said, of his Sina Weibo accounts have been deleted...

The Toulouse School of Economics

Just a quick note to say how impressed I've been with the progress that The Toulouse School of Economics (TSE) has made in attracting first-rate scholars to their program. They have an excellent department -- I didn't realize how excellent it was until I got here (which, I suppose, was part of the reason to bring me here to the TIGER forum). I talked to Olivier Blanchard a bit about the progress that Europe more generally has made in economics, and he told me that there were some fairly special conditions that allowed Toulouse to make such great progress, and he also cited a few other universities that have also made large strides (again, also due to special conditions, in particular having advocates within the bureaucratic structure). 

But, special conditions or not, it is clear that Europe is making more progress than I was aware of, and it has attracted far more high powered brain power in macroeconomics than I realized (it is highly probable that the same is true in microeconomics, but since I mainly attended the macrofinance seminars at this conference, I can't speak to that first-hand -- but all the evidence points strongly in that direction). The sessions I attended were every bit as good as any NBER session, and the gains that Europe is making is an encouraging development. If the universities that have made the greatest strides continue to be successful, then perhaps lessons will be learned and it won't be necessary to exploit special conditions to the same degree in order for European universities to prosper academically (though there are significant institutional hurdles).

Toulouse itself is also a wonderful place to visit, and some of the sessions/dinners were hold in awesome places (e.g. Trichet's talk was at at the Augustins museum). The hospitality has been unsurpassed (thanks to Paul Seabright for all the tips about places to visit while I'm here, this is my first time to France so I really appreciated that and am taking full advantage of his suggestions). If you get a chance to attend this conference, go for it! I'm looking forward to returning in 2014 (this was their first attempt, and it will only get better in future years).

Help Students from Low Income Households Attend College

New column:

How a College Education Can Close the Income Gap

The title doesn't quite capture the main topic -- it's a plea to do more to help students from low income households attend college.

'Public Colleges are Often No Bargain for the Poor'

Remember all those calls from both conservatives and liberals for (sufficiently) equal opportunity? How's that working out?:

Public colleges are often no bargain for the poor, by Renee Schoof, McClatchy: Many public colleges and universities expect their poorest students to pay a third, half or even more of their families’ annual incomes each year for college, a new study of college costs has found.

With most American students enrolling in their states’ public institutions in hopes of gaining affordable degrees, the new data shows that the net price – the full cost of attending college minus scholarships – can be surprisingly high for families that make $30,000 a year or less.

The numbers track with larger national trends: the growing student-loan debt and decline in college completion among low-income students.

Because of the high net price, “these students are left with little choice but to take on heavy debt loads or engage in activities that lessen their likelihood of earning their degrees, such as working full time while enrolled or dropping out until they can afford to return,” Stephen Burd wrote in a recent report for the New America Foundation...

There's a graphic in the article that shows the "Average net annual cost of public 4-year schools for in-state students in families earning $30,000" (scroll over a state to see the cost). For Oregon, it's $10,701 according to their calculations.

Cuts to Higher Education Since 2008

[source]

'College Costs & Enrollment for Low-Income Students'

A follow up to the recent posts on college costs:

College Costs & Enrollment for Low-Income Students, by Owen Zidar: According to data compiled by Avery & Hoxby, effective college costs are much lower for low income families at the most selective schools compared to other schools. Despite this fact, many low income students aren’t applying to the most selective schools and end up getting lower quality education and higher student debts on average. This outcome compounds a previously mentioned problem that many potentially high scoring students don’t take the SATs and don’t end up enrolling in college at all. …

'Public Support for Education in Real Terms'

pgl follows up on the post about education costs:

Public Support for Education in Real Terms, EconoSpeak: Travis Waldron is rightfully worried about the cost of a college education and the diminishing support from the government:

Only 12 states now spend more on higher education than they did before the recession. The decrease in funding has contributed to the six-fold increase in college tuition over the last 30 years.

A six-fold increase? Let’s be fair – consumer prices today are about 2.5 times what they were 30 years ago – so in real terms, college tuition is up by a factor of 2.5 or so. But OK – this is a staggering increase. Mark Thoma highlighted this as well and is getting some comments doubting that government support for education has declined. This table labeled “Table 3.15.6. Real Government Consumption Expenditures and Gross Investment by Function, Chained Dollars” shows that in real terms (2005$), total government spending on education was $690 billion in 2009 but was only $648 billion in 2011. I know that the austerity freaks in the Republican Party want to claim reducing government spending is good for growth but they are wrong on two fronts. Any fiscal restraint now prolongs this Great Recession. And this kind of austerity impairs the creation of human capital needed for long-term growth. It is not just the cutbacks in higher education that concern me but the general tendency for state and local governments to layoff teachers in order to balance their budgets.

'Six-Fold Increase in College Tuition over the Last 30 Years'

Via ThinkProgress:

...CNN Money reports:

Average tuition costs – the amount students paid in tuition and fees after state and institutional aid was taken into account — rose by 8.3% to an average of $5,189 in the 2011-12 school year ,the State Higher Education Executive Officers Association reported. In the previous academic year, students paid an average of $4,793.

At the same time, state and local funding for operating expenses, research and student aid fell by 9% to $5,896, the lowest level in 25 years, said association president Paul Lingenfelter.

The upward trend is likely to continue in 2013, since state governments plan to spend 10.8 percent less on higher education this year than they did in the year prior to the Great Recession. ... The decrease in funding has contributed to the six-fold increase in college tuition over the last 30 years. ...

We're headed in the wrong direction.

What’s the Cost and Financial Value of College?

Without college, I'd probably be doing what my dad, brother, and grandfather did, work in a tractor store selling parts, and if I was lucky, some day get promoted to sales. College was my ticket out of the small farming town I grew up in, but if it wasn't for the low tuition at California state schools at the time, I probably wouldn't have made it. (Tuition was around $100 per semester, and I could earn enough to pay tuition, dorm fees, etc. working on farms in the summer and at a tractor store selling parts to cranky farmers during school. I also worked at a gas station for a while at minimum wage, and my boss/owner was a real, genuine ass, but I needed the money).

I can't say if it was worth it to society to subsidize my education -- this blog is one result of that investment -- but it was certainly worth it to me and to this day I have not forgotten what the state of California did for me. (I really, really, hated working at tractor stores and the gas station, nobody should have the power over people my boss at the gas station had over me -- he tried to screw me out of overtime, that sort of thing, though once I threatened to report him to the labor board his tune changed a bit -- and the thought of doing jobs like that for the rest of my life was a huge motivation in college. When I'd get to the tractor store in the morning, I'd write "480" on a notepad, that was how many minutes I had left until I could leave eight hours later, and then I'd tick the minutes off the rest of the day. I can remember just wanting one thing, to have a job where I didn't watch the clock all day long, to get lost in my work somehow -- it's hard to explain how much I hated those jobs -- and I was lucky enough to find that.)

I am biased from my own experience, but nobody will ever convince me that college is a bad investment. However, with tuition rising, access to college for naive kids like I was back then is a real issue. It's hard to explain just how naive I was, but when your parents only went to junior college for a year (and then got married at age 19 because you were on the way), and your high school is too small to have advisors to fill in the gaps, it's easy to make bad choices. I had no clue, for example, about how to finance education at a UC school, e.g UC Davis or Berkeley -- my parents simply said "we can't afford that" when I raised the issue, and with no co-signers for loans, and no knowledge about how to get a loan without a parent to co-sign -- it was different then -- the path to anywhere but Cal State Chico was, as far as I could see, closed. I might have found a way if Chico hadn't been so cheap, it would have gone through a JC, but likely not, and I am very grateful there was a path through a four year college for kids like me to take. Still, it was hard to get to a decent graduate school from Chico despite a economics/statistics/math major and nearly perfect grades my last three years, a UC school would have provided much more opportunity, but it was enough to get me here. I only hope that kids today have at least the same opportunity I had, and hopefully even better choices, but I'm not at all sure that they do:

What’s the cost and financial value of college?, Peter Dizikes, MIT News: What’s the right price for a college education? And what is its value? 

Those are crucial questions at a time of rising student debt and high unemployment. But a group of scholars and policymakers at an MIT forum on Thursday suggested that one thing about college remains clear: Expensive though it can be, higher education pays off for Americans as a whole.

Indeed, the much-discussed idea of an “education bubble” — that college costs have soared too high to make a degree worthwhile — is a “dangerous myth that leads people to make bad choices,” said David Autor, an MIT labor economist who has extensively studied the relationship between education and earnings.  

Instead, Autor said, the best evidence shows that a college degree leads to a lifetime earnings increase of $250,000 to $300,000, even after subtracting the cost of higher education. Those returns, Autor noted, apply to graduates regardless of their undergraduate majors: Humanities students benefit just as science, engineering or business students do. 

And all evidence suggests education remains a key to social mobility in America, noted Janice Eberly... Moreover, Eberly said, “These benefits accrue not only to individuals but society more broadly,”...

The forum’s moderator and organizer, James Poterba ... noted in his introductory remarks that higher education is “an extremely important sector of the U.S. economy,” representing about 3.5 percent of the national GDP — but one with an even larger impact on the country’s fortunes, given its centrality of knowledge and its impact on innovation-based growth to the economy.

Yet excellence in higher education requires a solid foundation of secondary education, observed Claudia Goldin, an economist at Harvard University. And while high school graduation rates in the United States soared in the first half of the 20th century, they have been virtually stagnant since about 1970. 

“College completion just cannot advance much when high school completion does not,” Goldin said. 

For those who do go to college, the amount of student-loan debt they accrue has increased, as Autor acknowledged: At graduation, today’s public-university graduates hold $32,000 in student debt, on average, while graduates of private, nonprofit schools owe $46,000, on average. Going into debt always entails risk, Autor said, while asserting that the worst-case scenarios, of students with massive debt and low income, attract disproportionate media attention.

In reality, virtually all college students, Autor said, will emerge with useful work-force skills. ...

A retweet of this link:

Don't ask is it worth it, ask who can afford it? MT “@markthoma: What’s the cost and value of college? - MIT web.mit.edu/newsoffice/201…” — Paul Vigna (@paulvigna) February 8, 2013

Will Online Education Reduce the Income Gap?

My latest column argues that online education has the potential to help lots of people, but contrary to some claims:

...traditional colleges are not going away, and the potential of online education to reduce inequality is overrated. ...

See: Will Online Education Reduce the Income Gap?

'Higher Education and Theory of the Second Best'

John Holbo:

... My basic thought ... is that the paradigm college experience is just plain going to cost a lot. Four years being a full-time student at a residential college, say. That’s not going to come cheap. We shouldn’t beat our brains out about how we can do this thing inexpensively... There isn’t some conspiracy to artificially inflate the cost of college. We could do different things. That might cost less. ... But there isn’t any reason to think we can do substantially the same things we already are, just at much lower cost. This is clearly a source of sincere disagreement... Some people think that the rate at which college costs have gone up means that there must be some way to pop the cost bubble and dramatically lower costs back down without sacrificing quality. There’s some conspiracy of incompetence or venality by the administrators/teachers. We need to break the back of that, whatever it is, then things would get better. I don’t really think that’s plausible, but if you think it’s plausible, go ahead and work out your own solution to the problem along those lines.

College is a premium product. A costly good. But a valuable one we want people to have. If the state isn’t going to subsidize its provision, making it available to all, then how will it go?

Option 1: everyone who isn’t rich goes into serious debt to pay for this costly but valuable good.

Option 2: we devise a less premium product. It won’t be as good, but it will cost less.

I distrust Option 1. In fact, I’m paranoid about it, for reasons outlined in this article. I don’t quite drink the full jug of kool-aid. For example, I don’t buy that tuition has skyrocketed ‘because it can’. That is, there’s just a speculative bubble, in effect. I don’t think the growth in administration is quite as sinister as they suggest. It’s largely a function of universities wanting to do so much for students – so many programs and options and choices – which is a good thing. But it creates overhead costs.

I do agree that private for-profit outfits like University of Phoenix are, in effect, trying to get their noses into the huge trough of student loan money. That’s worrisome. The old are eating their young, leaving them holding the debt bag [pardon my mixed metaphor]. I am less worried by things like Western Governors University, which seems genuinely committed to trying to find a way to Option 2. Which makes me sad, but at least it isn’t some private sector trick to saddle students with debt. At least it’s an attempt to keep the democratic ideal of higher education for all alive, even if the dream looks pretty shabby.

Western Governors gives up the dream of a well-rounded liberal arts education. It gives up all the stuff that you can only do hands-on, in person. It gives up college as a formative social experience. It gives up a lot. But what it provides is worth something, and it’s not clear they are charging more than it is worth. It just makes me depressed to look at it, is all. But I can’t really argue with the logic of it, if the alternative is Option 1..., it might be the way of the future. ...