Economist's View

'This Dynamic All But Guarantees a Permanent Underclass'

Laura Tyson:

The United States is caught in a vicious cycle largely of its own making. Rising income inequality is breeding more inequality in educational opportunity, which results in greater inequality in educational attainment. That, in turn, undermines the intergenerational mobility upon which Americans have always prided themselves and perpetuates income inequality from generation to generation.

This dynamic all but guarantees a permanent underclass.

"The Commencement Address That Won’t be Given"

Robert Reich has inspiring words for new graduates:

The commencement address that won’t be given, by Robert Reich: As a former secretary of labor and current professor, I feel I owe it to you to tell you the truth about the pieces of parchment you’re picking up today.

You’re f*cked.

Well, not exactly. But you won’t have it easy.

First, you’re going to have a hell of a hard time finding a job. ... But even when you get a job, it’s likely to pay peanuts. ... Presumably ... when we come out of the gravitational pull of the recession your wages will improve. But there’s a longer-term trend that should concern you.

The decline in the earnings of college grads really began more than a decade ago. ... Don’t get me wrong. A four-year college degree is still valuable. Over your lifetimes, you’ll earn about 70 percent more than people who don’t have the pieces of parchment you’re picking up today.

But this parchment isn’t as valuable as it once was. So much of what was once considered “knowledge work” ... can now be done more cheaply by software. Or by workers with college degrees in India or East Asia, linked up by Internet.

For many of you, your immediate problem is that pile of debt on your shoulders. In a few moments, when you march out of here, those of you who have taken out college loans will owe more than $25,000 on average. Last year, ten percent of college grads with loans owed more than $54,000. ... Loans to parents for the college educations of their children have soared 75 percent since the academic year 2005-2006.

Outstanding student debt now totals over $1 trillion. That’s more than the nation’s total credit-card debt. ... At some point in the not-too-distant future..., College is no longer a good investment. That’s a problem for you and for those who will follow you into these hallowed halls, but it’s also a problem for America as a whole.

You see, a college education isn’t just a private investment. It’s also a public good. This nation can’t be competitive globally, nor can we have a vibrant and responsible democracy, without a large number of well-educated people.

So it’s not just you who are burdened by these trends. If they continue, we’re all f*cked.

Paul Krugman: Wasting Our Minds

College graduates are struggling, and the "war on the young" is "doing immense harm, not just to the young, but to the nation’s future":

Wasting Our Minds, by Paul Krugman, Commentary, NY Times: In Spain, the unemployment rate among workers under 25 is more than 50 percent. In Ireland almost a third of the young are unemployed. Here in America, youth unemployment is “only” 16.5 percent, which is still terrible — but things could be worse.

And sure enough, many politicians are doing all they can to guarantee that things will, in fact, get worse. ... Let’s start with some advice Mitt Romney gave to college students..., “Take a shot, go for it, take a risk, get the education, borrow money if you have to from your parents, start a business.”

The first thing you notice .. is ... the distinctive lack of empathy for those who ... can’t rely on the Bank of Mom and Dad to finance their ambitions. ... I mean, “get the education”? And pay for it how? Tuition ... has soared... Mr. Romney ... would drastically cut federal student aid, causing roughly a million students to lose their Pell grants. ...

There is, however, a larger issue: even if students do manage, somehow, to “get the education,” which they do all too often by incurring a lot of debt, they’ll be graduating into an economy that doesn’t seem to want them. ... And research tells us that the price isn’t temporary..., their earnings are depressed for life.

What the young need most of all, then, is a better job market. People like Mr. Romney claim that they have the recipe for job creation: slash taxes on corporations and the rich, slash spending on public services and the poor. But we now have plenty of evidence on how these policies actually work in a depressed economy — and they clearly destroy jobs rather than create them. ...

What should we do to help America’s young? Basically, the opposite of what Mr. Romney and his friends want. We should be expanding student aid, not slashing it. And we should reverse the de facto austerity policies that are holding back the U.S. economy — the unprecedented cutbacks at the state and local level, which have been hitting education especially hard.

Yes, such a policy reversal would cost money. But refusing to spend that money is foolish and shortsighted even in purely fiscal terms. Remember, the young aren’t just America’s future; they’re the future of the tax base, too.

A mind is a terrible thing to waste; wasting the minds of a whole generation is even more terrible. Let’s stop doing it.

What is Higher Education For?

Michael Perelman responds to recent comments:

What is Higher Education for?, Unsettling Economics: On Mark Thoma’s blog, Economist’s View, there is an active debate about my post on the Demise of Higher Education.

The comments divided relatively predictable ways, according to whether the commentor were inclined toward Republican or Democratic policies, but relatively little energy was given to the question of the value of higher education. Most people can appreciate the beneficial technologies will that depend upon the scientific training and research that goes on in universities, although not everybody recognizes the debt that society owes to higher education in such developments.

Higher education can mean more than learning about science or classical literature. My own first learning experience in higher education had little to do with a classroom. I found myself in contact with a much wider variety of people that I had ever previously encountered. That in itself broadened my perspective on life. Classes in history, as well as classical music and literature, helped to give me a sense of the life and culture of other parts of the world. My greatest benefit from higher education was a curiosity about the world that I had lacked before.

Let me turn for a moment to an observation about my field, economics. Many of the economists who other economists recognize for making the greatest contributions to their field are people who benefited from exposure to different fields. The winner of the not-really Nobel Prize, Kenneth Arrow, was trained as a meteorologist during the Second World War. Similarly, Nobelist Paul Samuelson worked with mathematicians, engineers, and physicists developing radar during the war. Phil Mirowski’s Machine Dreams is filled with such examples. Of course, scientists have gotten inspiration from similar experiences.

In short, education in general is not something that can be easily measured in objective terms. Ideas, which initially seemed kooky, often later turn out to be crucial for future development.

The me finish by saying that my complaints are not the product of some disgruntled academic, upset over low pay, mistreatment, or any other personal problems. I enjoy what I do. In fact, if I were willing to retire, I could teach half-time for a few years while collecting my pension. If I did, my income would increase but I can only do so [keep teaching] for five years. Consequently, I pay to keep teaching. I have good relationships with my chairman, my dean, and president of the University.

My anger is directed toward the forces that are working to destroy a world, which I love.

"The Demise of Higher Education in the United States"

Better education may not be the answer to all of our problems, and it won't work for everyone in any case, but worse education is certainly a prescription for disaster. This is from Michael Perelman:

The Demise of Higher Education in the United States, Unsettling Economics: The United States has experienced two major growth spurts in higher education. In 1862, the Morrill Act changed the face of higher education will by granting each state 30,000 acres of public land for each senator and representative. Sale of the land was intended to create an endowment fund for the support of colleges in each of the states. Prior to the creation of the land-grant colleges, higher education was predominantly intended for wealthy students and those intending to serve as clergy. The land-grant colleges expanded higher education to different regions and a different class of students. This expansion, however, was still incomplete.

The second episode was the G.I. Bill, which was not so much intended to promote education, but rather to prevent another Bonus March, in which angry soldiers returning from the First World War demanded early payment of their promised bonuses to help cushion the hardships of the Great Depression. Offering education was expected to channel potential discontent.

The G.I. Bill paid a different kind of bonus. The doors of colleges and universities opened to people for whom higher education would have been out of reach. Their skills proved invaluable during the postwar economic boom. A second unintended bonus flowed from the G.I. Bill. To accommodate the massive inflow of students, colleges and universities built infrastructure to expand their capacity to handle so many students. After the wave of veteran enrollments dissipated, colleges and universities had to choose between letting this infrastructure sit idle or enrolling more students.

Judging from my experience teaching during the Vietnam War, returning these veterans must have made an important contribution to the teaching environment. Although many soldiers were unable to put their lives together after the trauma of war, some came back, totally focused on making something of themselves. Some of their maturity and dedication rubbed off onto the younger cohort of students.

A less dramatic burst of government spending into education came from the National Defense Education Act of 1958, which was a response to the USSR’s launch of Sputnik, the previous year. This time, much of the money was narrowly focused on improving the quality of science and language education.

I have personally experienced the rise and fall of higher education in the United States. I enrolled at the University of Michigan in 1957, a few months before Sputnik was launched then, in 1965, I enrolled in graduate school at the University of California, Berkeley. This was a time of great optimism about the future. I did not realize that very hard times for higher education were about to begin.

As the student population swelled during the 1960′s, the youth culture developed as a result of demographic changes, the Vietnam War and skepticism about consumptionism clashed with a different kind of pressure: a sagging rate of profit, following decades of unparalleled prosperity.

Under these conditions, the goal became to reverse the gains from the G.I. Bill. Rather than including people in education, who might otherwise threaten the status quo, reining in the University system seemed urgent. In the fall of 1970, Governor Reagan’s aide Roger Freeman, who later served as President Nixon’s educational policy advisor, while he was working at the time for California Governor Ronald Reagan’s reelection campaign, commented on Reagan’s education policy: “We are in danger of producing an educated proletariat. That’s dynamite! We have to be selective about who we allow to through higher education. If not, we will have a large number of highly trained and unemployed people.”

In 1971, just before he was nominated for the Supreme Court, Lewis Powell, a corporate lawyer wrote a now-famous memo, “Attack of American Free Enterprise System” for the Chamber of Commerce. Higher education appeared to be at the heart of this attack on free enterprise. He described how the Chamber could gain more control over the educational system.

Although the memo was superficial at best, it sparked great interest among the elites, influencing or inspiring the creation of the Heritage Foundation, the Manhattan Institute, the Cato Institute, Citizens for a Sound Economy, Accuracy in Academe, and other powerful organizations. ...

Tax reduction ... also had an important effect on education. Growing budget deficits would ramp up pressure to privatize what had been previously public responsibilities. By largely defunding education, universities became increasingly dependent on corporate money. Administrators became cautious about allowing expression of ideas that might seem upsetting to business. These factors took an enormous toll on higher education.

Tuition began a rapid ascent. Student debt accumulated. University funds were concentrated on programs that cater to business needs, such as biotechnology and engineering, and, naturally, business schools. Visiting Berkeley, I am always struck by the lavish libraries for biotechnology and business, while the other disciplinary libraries were unchanged. The one exception that stood out was public health, which was torn down to make way for a new biotech building and then moved to the basement of an old administrative building.

The educational assembly-line that Mario Savio described during the Free Speech Movement at Berkeley has changed, but not for the better. At the same time, leaders in business and politics insist that education is an essential element to a successful economy. Nonetheless, education becomes increasingly unaffordable, at the same time that the quality [is declining]...

Better Academics Through Chemistry?

Ari at The Edge of the American West wonders if juiced academics are just around the corner, and the competitive implications if they are:

Dopers, by ari: This article in Vanity Fair left me thinking that it’s only a matter of time before performance-enhancing drugs become the norm rather than the exception in the academy. I mean, what happens you realize that the assistant professor that your department just hired can concentrate for hours and hours without taking a break for weeks on end? What happens when you realize that s/he is far more productive than you are because of these extraordinary powers of concentration? And then, what happens when you learn that the secret to her or his success is a prescription for methylphenidate? What are you going to do about it*? As for me, I’ll probably go out for a bike ride and then take a nap. But that’s because I’m old and pretty much past my prime already. But if I could still be a contender — whatever being a contender means — I wonder if I’d think twice and call my doctor. ...

Now wait, before you give the obvious reply, yes, I know this already happens. Eric drinks coffee. I don’t. And that’s the only reason he’s written four books and I haven’t. Really, though, if there were a pill that would allow me to be significantly more productive, I worry that I’d think long and hard about taking it. Actually, I suspect that choice is already here. It’s just that I don’t have the right dealer. ...

"The Prestige Chase Is Raising College Costs"

Slow day so far in terms of finding or thinking of things to post -- maybe this will spark some discussion:

... Because of the bitter competition for ... premium salaries, elite educational credentials are often a precondition for even landing a job interview. With so many applications for every vacancy, many consulting firms and investment banks, for example, now consider only candidates from a short list of top-ranked schools.

Degrees from those schools clearly open doors. For example, more than 40 percent of the 2007 graduating class at Princeton landed one of the most highly sought prizes: a position in the lucrative financial services industry.

Universities have responded vigorously to escalating student demands for elite degrees. Their main strategy has been to bid more aggressively for the most distinguished researchers, which explains not only the rapid salary growth for top faculty members in the last several decades, but also the fact that teaching loads at many elite schools have decreased...

Yet no matter how much universities might spend in pursuit of elite status, only 10 percent at any moment can end up in the top 10 percent. To be sure, the additional expense has not been pure waste. ... Researchers have responded as expected to these incentives. But the additional papers they’ve written have added little value. The economist Philip Cook and I found, for example, that in the first five years after publication, many fewer than half of all papers in the two most selective economics journals had ever been cited by other scholars.

Tying federal subsidies to tuition growth would dampen a university’s incentive to bid for prestige in much the same way that league-imposed salary penalties in professional sports help curb the bidding wars for superstars. But if the starting-salary gap keeps widening between the highest- and lowest-paid college graduates, this remedy’s effectiveness would be temporary at best.

We might consider taking more direct aim at the component of tuition inflation that is attributable to growing salary gaps. Raising taxes on top salaries would be a good idea for American society in general, and not just for higher education. It would not only shrink the effect of salary disparities, but would also generate some much-needed revenue.

If you were all powerful, what would you do to improve higher education?

Paul Krugman: Ignorance Is Strength

Why are Republicans turning against higher education"?

Ignorance Is Strength, Paul Krugman, Commentary, NY Times: One way in which Americans have always been exceptional has been in our support for education. ... But now one of our two major political parties has taken a hard right turn against education, or at least against education that working Americans can afford. ... And this comes at a time when American education is already in deep trouble.

About that hostility: Mr. Santorum made headlines by declaring that President Obama wants to expand college enrollment because colleges are “indoctrination mills” that destroy religious faith. But Mr. Romney’s response to a high school senior worried about college costs is arguably even more significant...

Here’s what the candidate told the student: “Don’t just go to one that has the highest price. Go to one that has a little lower price... And don’t expect the government to forgive the debt that you take on.” ...

Mr. Romney’s remarks were even more callous ... given what’s been happening lately to American higher education. ... Adjusted for inflation, state support for higher education has fallen 12 percent over the past five years, even as the number of students has continued to rise... The damage these changes will inflict ... should be obvious. So why are Republicans so eager to trash higher education?

It’s not hard to see what’s driving Mr. Santorum’s wing of the party. His specific claim that college attendance undermines faith is, it turns out, false. ... But what about people like Mr. Romney? Don’t they have a stake in America’s future economic success, which is endangered by the crusade against education? Maybe not as much as you think.

After all, over the past 30 years, there has been a stunning disconnect between huge income gains at the top and the struggles of ordinary workers. You can make the case that the self-interest of America’s elite is best served by making sure that this disconnect continues, which means keeping taxes on high incomes low at all costs, never mind the consequences in terms of poor infrastructure and an undertrained work force.

And if underfunding public education leaves many children of the less affluent shut out from upward mobility, well, did you really believe that stuff about creating equality of opportunity?

So whenever you hear Republicans say that they are the party of traditional values, bear in mind that they have actually made a radical break with America’s tradition of valuing education. And they have made this break because they believe that what you don’t know can’t hurt them.

Discrediting Academic Voices

Does college make students more liberal and less religious? Nope:

The Indoctrination Myth, by Neil Gross, Commentary, NY Times: THE Republican presidential candidate Rick Santorum recently ... called colleges and universities “indoctrination mills” for godless liberalism. But is this true? Does attending college actually make you more liberal and less religious? Research indicates that the answer is: not so much.

It’s certainly true that professors are a liberal lot and that religious skepticism is common in the academy. ... But contrary to conservative rhetoric, studies show that going to college does not make students substantially more liberal. ... Studies also show that attending college does not make you less religious. ...

I've always thought this is more about discrediting academic voices than the supposed indoctrination itself. The author gets this:

So why do conservatives persist in attacking higher education? There’s no doubt that in terms of overall curricular content and campus culture, most colleges and universities do skew more to the left than to the right. And research by the sociologists Amy Binder and Kate Wood confirms that this can be a frustrating and alienating experience for conservative students, even if it’s not serving to indoctrinate anyone.

But that alone doesn’t explain the intensity of the animus. Doing so requires some historical perspective. Conservatives have been criticizing academia for many decades. Yet only once the McCarthy era passed did this criticism begin to be cast primarily in anti-elitist tones: charges of Communist subversion gave way to charges of liberal elitism in the writings of William F. Buckley Jr. and others. The idea that professors are snobs looking down their noses at ordinary Americans, trying to push the country in directions it does not wish to go, soon became an established conservative trope, taking its place alongside criticism of the liberal press and the liberal judiciary.

Academics provide a powerful counterforce to conservative ideas, both through evidence and argument, and to the extent those voices can be discredited, it benefits conservatives. At least politically. But there is a danger in this as well. Discrediting professors as out of touch, elitist, individuals discredits the entire institution of higher education, and this undermines our pursuit of basic science and education that will be needed to compete in a globalized economy (e.g. by making taxpayers less willing to fund these institutions). Most of the academics I know don't have a political bone in their body, and if they do it does not affect their research in any way. They simply want to find the truth, and discrediting the entire institution of higher education to mute the few who do speak out reduces our ability to solve important problems.

"Changing Inequality in U.S. College Entry and Completion"

From the NBER:

Gains and Gaps: Changing Inequality in U.S. College Entry and Completion, by Martha J. Bailey, Susan M. Dynarski, NBER Working Paper No. 17633, December 2011: [open link] We describe changes over time in inequality in postsecondary education using nearly seventy years of data... We find growing gaps between children from high- and low-income families in college entry, persistence, and graduation. Rates of college completion increased by only four percentage points for low-income cohorts born around 1980 relative to cohorts born in the early 1960s, but by 18 percentage points for corresponding cohorts who grew up in high-income families. Among men, inequality in educational attainment has increased slightly since the early 1980s. But among women, inequality in educational attainment has risen sharply, driven by increases in the education of the daughters of high-income parents. Sex differences in educational attainment, which were small or nonexistent thirty years ago, are now substantial, with women outpacing men in every demographic group. The female advantage in educational attainment is largest in the top quartile of the income distribution. These sex differences present a formidable challenge to standard explanations for rising inequality in educational attainment.

There's a more extended summary of the results in the conclusion to the paper.

I Am Worried about My Grade

I've had this conversation many times:

"A Bluesy Road-Novel with a Lot of Economic Theory and Analysis"

I would have never thought to do this, or had the courage to do it if somehow it did occur to me:

Microeconomics using "The Grapes of Wrath", INET: Stephen Ziliak, Trustee and Professor of Economics at Roosevelt University-Chicago and a member of the INET Curriculum Committee Task Force, teaches introductory microeconomics using The Grapes of Wrath (1939). Here is the syllabus. 

The Grapes of Wrath was published by its author, John Steinbeck, in 1939, during the worst economic crisis in American and world history. Set in and written during the Great Depression, The Grapes of Wrath is a bluesy road-novel with a lot of social and economic theory and analysis. It follows a family of homeless and landless tenant farmers from Oklahoma—the Joads—who’ve been forced on account of foreclosure to leave the farm and land which they labored and lived on for several generations.

Forced by a large bank and absentee owners to leave their home, the Midwestern farmers with little education and no income join other displaced workers on the road to California, in search of jobs, food, and housing—a piece of the American Dream.

Steinbeck’s Pulitzer Prize-winning novel was for many years censored and banned by governments and school boards made uncomfortable by the novel’s detailed portrayal of economic inequality, hardship, and oppression.

We asked Stephen Ziliak to share his experience teaching The Grapes of Wrath, which he has used since 1996 to form the basis of his intro economics course.

Q: Why, Professor Ziliak, way back in 1996, did you begin to teach to introductory economics students The Grapes of Wrath?

A: I guess my first response is that I eschewed in my own research the one-voiced, monological approach of conventional neoclassical economics. Trained as an economic historian, I’m an amateur poet who had also worked as a welfare and food stamp caseworker in the county welfare department, going door-to-door in the poorest neighborhoods of Indianapolis. When I became an Assistant Professor of Economics, in 1996, I was searching for a teaching method that would open up the conversation to a wider, more realistic set of issues. It only seemed fair to me: given that I myself had philosophical objections to the conventional approach to teaching utilitarian economics, it hardly seemed right to force-feed my students. Plus, many of my students came from working class families but they’d never experienced a recession. I wanted them to know that growth and bubbles do not last forever.

Q: Why teach The Grapes of Wrath and not some other novel?

A: Good question. First and foremost, it’s an incredibly moving novel that—I openly admit—continues to make me laugh and cry. Now laughing and crying are not necessary for good pedagogy. But it seems to me that if a fact-based story about economic history can make a grown man and professor of economics cry, it must have something important to say. The visible hand of class conflict needs to be aired and this novel does it.

Q: You said fact-based. What do you mean—it’s a novel, it’s fiction, yes?

A: Yes, but it’s historical fiction—meaning that Steinbeck, like Hugo, Zola, and others before him, was deliberately depicting real and felt experiences. There are exaggerations and omissions of fact, true—as economic historians and English professors know full well. But in fact, Steinbeck himself spent a year or more working and studying inside of the same temporary labor camps that the fictional Joad family experienced in California.

Q: How do students react? Can you share some insights from the teacher perspective?

A: Really well, eventually. Some are defensive at first, being trained to believe that stories are for novelists and theory for scientists. Still others have been so deeply entrenched with what I call the banking approach to learning—regurgitating facts and equations—they’re afraid of dialogue and a plurality of voices and interpretation. But students tell me it’s one of those life-changing courses.

Q: What about the “quants”? Do quants survive the course?

A: Again, it’s not for everyone. But yes, absolutely. An example is a student who studied with me at Roosevelt University. He came to Roosevelt as a freshman from Puerto Rico on a violin scholarship. He was preparing for a career in violin at our conservatory and, at the same time, he had a passion for advanced mathematics. On a lark he enrolled in my Grapes of Wrath course. Half-way through the term he told me that something was happening to him. The evolution of the protagonist, Tom Joad, from self-interested ex-con to benevolent labor leader, he found fascinating. He thought that he might have to switch from violin and math to economics. I told him no, if he really wanted to switch he could study math and economics—he wouldn’t have to give up the math. By the time he was a junior (a third year student) he landed a job with the Federal Reserve Bank of Chicago. At graduation he was promoted to Associate Research Economist. Now he’s a master’s student in economics and statistics at Duke University but he is not at all bamboozled by the utility maximization-only school.

Q: Do you supplement the novel with other literature or media?

A: Yeah. For example, a particularly fun day of class is when we play music by Woody Guthrie, Bruce Springsteen, and Rage Against the Machine—who’ve recorded songs about Tom Joad. Springsteen himself recorded an entire CD on the central themes.

From the syllabus linked above:

In 1776 three astonishing works of genius were given to the world. One was the Declaration of Independence. A second was Edward Gibbon’s Decline and Fall of the Roman Empire. For many students these two great works of 1776 require little or no introduction. The third work does. Yet some say it is the most important and influential of all. I am speaking of The Wealth of Nations, a lengthy and learned book written by a humble professor of philosophy living in Scotland. Adam Smith’s The Wealth of Nations supplied an intellectual justification for a free and commercial society. It gave new life to a field of inquiry called "economics" and it continues to challenge and to shape the values of economists, presidents, and ministers of finance all over the world.

Smith’s book is central to the economic conversation, true, but it is not the end-all, be-all of economic truth. It would not be wrong to think of our course as a conversation about "How the economists Adam Smith, Karl Marx, John Maynard Keynes, Joan Robinson, Milton Friedman, and others have responded to Mercantilism, Romanticism, and the rise and fall of Communism and Fascism."

Mostly, however, the course is an introduction to microeconomic ways of thinking. Our course introduces a new grammar, if you will – an economic grammar of scarcity, competition, relative price, opportunity cost, supply and demand, efficiency, and equilibrium, to name a few. At minimum our course will help you to become an informed voter and a sophisticated reader of The Wall Street Journal. It will certainly invite you to engage in a lifetime of learning.

But microeconomics cannot be learned just by reading The Wall Street Journal or Atlas Shrugged, nor by listening to Green Day or Rage Against the Machine. These will help you care about economics. But to learn how to speak economics you’ll have to solve homework problems, read the books, and participate in class.

Still, the economic conversation is shaped by many different texts and experiences, from novels to music and media. It’s important for economists to learn how to speak to the humanistic sides of the conversation, and, likewise, it’s crucial that humanists speak intelligently about economic theory and facts, and not be bamboozed. To this end and others, we’ll read and analyze the most famous protest novel in American literature, John Steinbeck’s The Grapes of Wrath. Set in and written during the Great Depression, The Grapes of Wrath is a bluesy road-novel with a lot of economic theory and analysis. It follows homeless and landless tenant farmers from Oklahoma, who’ve been pushed off of foreclosed farms. Forced by large and foreign banks to leave their rented shacks and lean-tos, the Midwestern farmers with little education and no income join other displaced on the road to California, in search of jobs, food, and housing—a piece of the American Dream.

We’ll read this highly relevant novel using in part the lens of economic theory and facts, and likewise we’ll critically analyze economic theory and facts, using concepts and insights we discover in The Grapes of Wrath. Attached to the back of this syllabus is an example of a homework assignment from a previous semester, indicating how we’ll put Steinbeck’s Depression-era novel together with supply and demand.

Finally, throughout the semester, we’ll occasionally read and discuss parts of Tim Harford’s popular book, The Undercover Economist, which supplies many useful, real-world applications of the microeconomic way of thinking. Harford’s book is a great help, especially to those who do not naturally think of price and incentive when analyzing the human condition. ...

Required Texts: Microeconomics, by David Colander, 7th edition...; The Grapes of Wrath, by John Steinbeck; The Undercover Economist, by Tim Harford. ...

"Academic freedom from Hofstadter to Dworkin"

What is academic freedom?:

Academic freedom from Hofstadter to Dworkin, by Daniel Little: Academic freedom is a core value in American higher education. At certain times in our history it is a value that has been severely challenged, including especially during the McCarthy period of the 1950s. But what, precisely, does it entail?

One way of starting on this topic is to consider Richard Hofstadter's writings on the subject. Hofstadter was an historian who did an excellent job of tracking some deep currents in American political culture, including the powerful currents of progressivism, conservatism and paranoia that American politics have embodied over the past two centuries (The Progressive Movement: 1900-1915, Anti-Intellectualism in American Life, The Paranoid Style in American Politics). (Here is an informative review of Hofstadter's biography in the New York Times.)

One of those currents on the progressive side is the idea of academic freedom. Hofstadter was a champion of the value of intellectual discourse in a democracy, and Development of Academic Freedom in United States (with Walter Metzger, 1955) was a direct response to the attack on the academic freedoms of professors of the McCarthy period beginning in 1953. (The first part of this book was later published as Academic Freedom in the Age of the College (1961), which covers the history of the freedoms assigned to colleges and universities from the European middle ages to American colleges at the time of the Civil War.) The project as a whole is an interesting one. It was funded by the American Academic Freedom Project at Columbia as a response to Joseph McCarthy's attack on universities and professors. Hofstadter's part of the project was to write a history of the evolving idea of academic freedom from the European middle ages through the American colleges of the 1860s. Walter Metzger's contribution analyzed the development of universities and academic freedom in America after the 1860s. Robert MacIver wrote a companion volume, Academic Freedom in Our Time.

What is lacking in Development of Academic Freedom is an analytical definition of the idea of academic freedom. Hofstadter is clearest in his defense of the idea of the independent intellectual, whether in the medieval Italian university of the nineteenth century American university. But neither he nor Metzger give a succinct definition of the concept of academic freedom itself.

So what is academic freedom? And how is it distinct from the other kinds of freedoms we have as either constitutional protections or fundamental human rights -- freedom of association, freedom of speech and thought, freedom of expression? Fundamentally the idea is that the faculty of a university have a more extensive and specialized version of each of these fundamental freedoms, and that their exercise of their academic freedom cannot be used as a basis for dismissing them from their positions within the university. (This is the fundamental justification of the system of faculty tenure.) The employees of a corporation have a right of freedom of expression; but their conditions of employment may set limits on their exercise of that freedom. For example, there are numerous examples of people dismissed from their jobs in the private sector as a result of their comments about the company they work for. The idea of academic freedom is that professors have a special right to think, reason, and express their ideas about subjects relevant to their teaching and research responsibilities without fear of sanction by the universities (or legislatures) that employ them.

A second dimension of the idea of academic freedom is institutional. The university ought to be significantly autonomous from the power centers of society in its internal organization and decision-making. The curriculum, the subjects that are taught and researched, and the processes of appointment and review of faculty should be governed by the processes of the university rather than external powers in society. And most fundamentally, this aspect of the idea depends on the notion that the pursuit of truth should depend on the rational procedures of the disciplines of the sciences and humanities, not on the particular interests of powerful segments of society.

The classical justification for the idea of a form of academic freedom more extensive than the general freedoms that citizens enjoy qua citizens derives essentially from arguments expressed in the nineteenth century in John Stuart Mill's On Liberty: the pursuit of truth requires the untrammeled exploration of and expression of conflicting ideas, so that rational citizens can arrive at a better understanding of the issues. Here is how the 1940 AAUP statement puts the point (link):

Academic freedom is essential to these purposes and applies to both teaching and research. Freedom in research is fundamental to the advancement of truth. Academic freedom in its teaching aspect is fundamental for the protection of the rights of the teacher in teaching and of the student to freedom in learning. It carries with it duties correlative with rights.[1]

The argument is fundamentally utilitarian: Society is best served when it embodies a university system that is fundamentally committed to the the principles of academic freedom.

Here is the classic statement of academic freedom from the AAUP Red Book, drafted in 1940 (link).

Academic Freedom

1. Teachers are entitled to full freedom in research and in the publication of the results, subject to the adequate performance of their other academic duties; but research for pecuniary return should be based upon an understanding with the authorities of the institution.
2. Teachers are entitled to freedom in the classroom in discussing their subject, but they should be careful not to introduce into their teaching controversial matter which has no relation to their subject.[2] Limitations of academic freedom because of religious or other aims of the institution should be clearly stated in writing at the time of the appointment.[3]
3. College and university teachers are citizens, members of a learned profession, and officers of an educational institution. When they speak or write as citizens, they should be free from institutional censorship or discipline, but their special position in the community imposes special obligations. As scholars and educational officers, they should remember that the public may judge their profession and their institution by their utterances. Hence they should at all times be accurate, should exercise appropriate restraint, should show respect for the opinions of others, and should make every effort to indicate that they are not speaking for the institution.[4]

This statement refers to three zones of academic freedom: in research and publication, in the classroom, and in "extramural expressions" by faculty members in the exercise of their ordinary citizens' rights of expression. Essentially this final point comes down to the idea that a faculty member has an ordinary citizen's right to express ideas that are unpopular to the public without punishment, "censorship or discipline" from the university for this expression. Noam Chomsky's opinions about the Vietnam War or the Gulf War were often unpopular with officials and the public; but his academic freedom assured that he would not be censored by his university employer. An employee of Northrup or Krogers would not have had the same protections. (Note that principle 3 is the most qualified of the three, and sets somewhat vague limits on the content and form of extra-mural utterances by the faculty member.)

The AAUP statement does not separately justify its inclusion of the extramural principle; but presumably it goes along these lines. Determining public policy in a democracy requires open debate among well informed citizens. Faculty members are well positioned to develop their knowledge and arguments about important public issues -- welfare reform, desegregation, war and peace. The public and the common good are well served by a set of arrangements that enable faculty members to speak their minds without fear of retaliation from their university employers. So it is felicitous to extend the protections of academic freedom to expressions by faculty members in the public sphere as well as within the university.

The philosopher of jurisprudence Ronald Dworkin provided a pivotal contribution to Louis Menand's The Future of Academic Freedom (1998). Dworkin argues that the issues surrounding academic freedom have shifted since the 1970s, and that they have as much to do with criticisms of faculty speech from the left as from the right. Here is how Dworkin describes the essentials of academic freedom:

We begin reinterpreting academic freedom by reminding ourselves of what, historically, it has been understood to require and not to require. It imposes two levels of insulation. First, it insulates universities, colleges, and other institutions of higher education from political institutions like legislatures and courts and from economic powers like large corporations. A state legislature has, of course, the right to decide which state universities to establish -- whether, for example, to add an agricultural or a liberal arts college to the existing university structure. But once political officials have established such an institution, fixed its academic character and its budget, and appointed its officials, they may not dictate how those they have appointed should interpret that character or who should teach what is to be taught, or how. Second, academic freedom insulates scholars from the administrators of their universities: university officials can appoint faculty, allocate budgets to departments, and in that way decide, within limits, what curriculum will be offered. But they cannot dictate how those who have been appointed will teach what has been decided will be taught. (183)

In addition to the utilitarian reasons for defending academic freedom mentioned above, Dworkin argues that there is also a principled ethical basis for these institutional protections based on his theory of "ethical individualism".

It seems relatively clear that academic freedom is a fragile value that depends substantially on the willingness of the public to recognize its crucial role in securing democratic progress, and legislatures and elected officials who are prepared to resist the inclination to narrow its scope. And it also seems right that Hofstadter's central intuitions about universities are still the strongest justification for the defense of academic freedom: the integrity of intellectuals and scholars seeking and debating the truth and the contribution they can make to a civil democracy. Here is how Robert MacIver puts this point in Academic Freedom in Our Time:

The search for knowledge, honestly undertaken, is a moral discipline. With the pursuit of this discipline goes the liberation from intolerance. . . Thus the intellectual mission of the university becomes also a moral one. Men sensitive to experience may learn the lesson in other ways, but the institution of learning is a major training ground. . . . Not knowledge itself but the free search for and the free communication of knowledge distinguishes the open mind from the closed mind, and the open society from the closed society.... The attack on academic freedom is an attack on all these values. (261-262.)

Here is a review of Hofstadter and Metzger, Development of Academic Freedom in United States as well as MacIver, Academic Freedom in Our Time. Here is an article in the Journal of Philosophy on MacIver's book, including a fascinating letter by John Dewey to the New York Times in 1949 on the subject of academic freedom. And here is an AAUP piece in Academe on what it regards as a different kind of threat to academic freedom -- from commercial and corporate interests.

Rogoff: Technology and Inequality

In this column, I said:

... I’ve never favored redistributive policies, except to correct distortions in the distribution of income resulting from market failure, political power, bequests and other impediments to fair competition and equal opportunity. I’ve always believed that the best approach is to level the playing field so that everyone has an equal chance. ...

But increasingly I am of the view that even if we could level the domestic playing field, it still won’t solve our wage stagnation and inequality problems. Redistribution of income appears to be the only answer. ...

We’ve given the market economy 40 years to solve the problem of growing inequality, and the result has been even more inequality. Markets do not appear to be able to solve this problem on their own, at least not in any reasonable timeframe. Some people say education is the answer, but we have been trying to reform education for decades, yet the problems remain. The idea that a fix for education is just around the corner is wishful thinking. ...

However, Kenneth Rogoff disagrees: (those ideas are apparently "foolish" and "dangerous")

Until now, the relentless march of technology and globalization has played out hugely in favor of high-skilled labor, helping to fuel record-high levels of income and wealth inequality around the world. ...

There is no doubt that income inequality is the single biggest threat to social stability around the world, whether it is in the United States, the European periphery, or China. Yet it is easy to forget that market forces, if allowed to play out, might eventually exert a stabilizing role. Simply put, the greater the premium for highly skilled workers, the greater the incentive to find ways to economize on employing their talents. ...

My Harvard colleague Kenneth Froot and I once studied the relative price movements of a number of goods over a 700-year period. To our surprise, we found that the relative prices of grains, metals, and many other basic goods tended to revert to a central mean tendency over sufficiently long periods. We conjectured that even though random discoveries, weather events, and technologies might dramatically shift relative values for certain periods, the resulting price differentials would create incentives for innovators to concentrate more attention on goods whose prices had risen dramatically.

Of course, people are not goods, but the same principles apply. As skilled labor becomes increasingly expensive relative to unskilled labor, firms and businesses have a greater incentive to find ... substitutes for high-price inputs. ...

The next generation of technological advances could also promote greater income equality by leveling the playing field in education. ... Surely, higher education will eventually be hit by the same kind of sweeping wave of technology that has flattened the automobile and media industries, among others. If the commoditization of education eventually extends to at least lower-level college courses, the impact on income inequality could be profound.

Many commentators seem to believe that the growing gap between rich and poor is an inevitable byproduct of increasing globalization and technology. In their view, governments will need to intervene radically in markets to restore social balance.

I disagree..., the past is not necessarily prologue: given the remarkable flexibility of market forces, it would be foolish, if not dangerous, to infer rising inequality in relative incomes in the coming decades by extrapolating from recent trends.

It seems to me that "the single biggest threat to social stability around the world" poses asymmetric risks. If he's right, then things might improve "in the coming decades." That doesn't help anyone today, and that's a problem, but at least it eventually goes away. But what if he's wrong?

I'm still really uncomfortable calling for government intervention for reasons beyond those listed above -- I don't think I've fully convinced myself even yet -- but with the "threat to social stability" hanging over us, do we have the time to wait and see if the problem fixes itself?

Grad Students

It's graduation day today here at the University of Oregon. (We do graduation on Monday, which to me is a strange day to hold the ceremony. Having graduation on Monday allows us to host the NCAA Track and Field Championship which ended on Saturday, a money maker for the University. But the Monday graduation is likely to exclude some parents and family, particularly working class families who sacrificed the most to put their kids through school, so I don't like it. We need to make it as conveneint as we can for families to attend the ceremony. It means a lot to people, and students and their families ought to come first.)

I was a marshall at the University ceremony this morning (boring), and we have the Department ceremony later today. Yesterday, I went to a graduation party for my Ph.D. students. One is headed to the Federal Reserve Board and the other to an academic position (both got good jobs - yeah!). So unlike the suggestion in the video below, grad school is not always "a terrible life choice." At least not for everyone:

[via]

FRBSF: Economics Instruction and the Brave New World of Monetary Policy

John Williams explains why "the Fed has moved away from targeting the monetary aggregates in conducting monetary policy" (this is the first part of a much longer explanation of recent changes in monetary policy):

Economics Instruction and the Brave New World of Monetary Policy, by John Williams, Economic Letter, FRBSF: ...The first major difference between monetary policy today and policy of a generation or so ago is that our decisions have had less and less to do with monetary aggregates, such as M1. This reflects the fact that payments technology has changed so dramatically over the past 50 years. In the 1950s, when June Cleaver went to buy groceries, she probably paid with cash or perhaps a check. If her purse was empty, she had to get to the bank before it closed at three o’clock, wait in line for the next available teller, and then withdraw enough cash to last until her next bank visit. These simple facts of life determined the monetary theories of that day. They even shaped the definition of M1, which has a nostalgic 1950s simplicity about it.

For example, M1, the most liquid measure of money, is defined as cash and coin, traveler’s checks, demand deposits, and similar bank balances. These include the measures of money that June Cleaver used for her transactions every day. In terms of understanding how much cash June wanted to hold, the Baumol-Tobin theory of money demand might apply. In that theory, households calculate how many times to go to the bank to withdraw cash and how much cash to take out based on two things: the inconvenience cost of each trip to the bank and the household’s typical monthly shopping needs.

Let’s now fast-forward 50 years. Instead of driving to the bank and waiting in line, many of us do most of our banking online or at ATMs. And purchases today can be made using a dizzying array of payment options, including credit cards, debit cards, gift cards, and PayPal, to name just a few. Debit cards and PayPal have many similarities to traditional checking accounts and can be fitted into traditional monetary theories. But credit cards present a much greater challenge. Credit card balances are nowhere to be found in the monetary aggregates, even though they make up a large fraction of total U.S. transactions. If you or I drained our bank accounts, we could still shop until we dropped by running up our credit card balances.

How do 1950s theories of cash and checks apply in a world in which you and I can instantly take out a loan of several thousand dollars with the swipe of a card at the cash register? When Milton Friedman first advocated slow and stable growth of the money supply, he didn’t write a word about credit cards, checkable brokerage accounts, or checkable home equity loan accounts. In the 1950s, these innovations hadn’t been invented or existed only in the most rudimentary form.

Let’s take a closer look at the classic quantity theory of money: MV = PY. It becomes very tenuous when traditional measures of M make up a smaller and smaller fraction of the value of transactions. For example, the velocity of M1 was around three or four in the 1950s. Now it is about eight—and that’s down from a peak of about 10½ a few years ago. Today’s economy uses cash and checking accounts much more efficiently (see Goldfeld 1976).

There have been a number of attempts to find a broader measure of “money” that has a stable relationship with nominal spending—that is, a constant velocity. These include M2 and variants of M2 that incorporate the latest financial innovations (see Small and Porter 1989 and Duca 1995). But, despite repeated efforts, like the mythical city of El Dorado, this ideal measure of money has proven elusive. It is precisely because of the volatility of velocity (V) that the Fed has moved away from targeting the monetary aggregates in conducting monetary policy. Instead, for the past few decades, the Fed has targeted short-term interest rates, in particular the federal funds rate and the interest rate on bank reserves. By targeting these rates directly, the Fed bypasses the uncertain and unpredictable link between money and the economy. Other major central banks target short-term interest rates as well. ...

"In Praise of Ideological Openness"

Dan Klein says you shouldn't do what most of us try to do when we enter the classroom -- leave politics and ideology behind -- instead, ideological openness should be embraced:

In Praise of Ideological Openness, by Daniel B. Klein: Many people, some conservatives included, say we need to get ideology out of the college classroom. Some professors say proudly, “my students never come to know where I stand.”

I practice an opposite approach. I tell students that I am a free-market economist, a classical liberal or libertarian. And I am not suggesting that it is wrong to be ideologically reserved. Different styles suit different professors.

And of course some professors go much too far in pressing their ideological judgments and requiring conformity, even forms of activism. But we should not fall into simplistic ideals of neutrality and objectivity. ... One can open up about ideology without falling into intemperance. Here I meditate on some merits of being open about your own ideology, even somewhat outspoken, when teaching a college course. ...

Paul Krugman: American Thought Police

What happens to people who express views that the GOP's hard right doesn't like?:

American Thought Police, by Paul Krugman, Commentary, NY Times: Recently William Cronon, a historian who teaches at the University of Wisconsin, decided to weigh in on his state’s political turmoil. He started a blog... Then he published an opinion piece in The Times, suggesting that Wisconsin’s Republican governor has turned his back on the state’s long tradition of “neighborliness, decency and mutual respect.”

So what was the G.O.P.’s response? A demand for copies of all e-mails sent to or from Mr. Cronon’s university mail account containing any of a wide range of terms, including the word “Republican” and the names of a number of Republican politicians ...

The Cronon affair, then, is one more indicator of just how reflexively vindictive, how un-American, one of our two great political parties has become.

The demand for Mr. Cronon’s correspondence has obvious parallels with the ongoing smear campaign against climate science and climate scientists, which has lately relied heavily on supposedly damaging quotations found in e-mail records. ...

Nothing in the correspondence suggested any kind of scientific impropriety... But ... this fake scandal gives an indication of what the Wisconsin G.O.P. presumably hopes to do to Mr. Cronon. ...

Now,... Mr. Cronon ... has been careful never to use his university e-mail for personal business... Beyond that, Mr. Cronon ... has a secure reputation as a towering figure in his field. ...

So we don’t need to worry about Mr. Cronon... But there’s a clear chilling effect when scholars know that they may face witch-hunts whenever they say things the G.O.P. doesn’t like.

Someone like Mr. Cronon can stand up to the pressure. But less eminent and established researchers won’t just become reluctant to act as concerned citizens, weighing in on current debates; they’ll be deterred from even doing research on topics that might get them in trouble.

What’s at stake here, in other words, is whether we’re going to have an open national discourse in which scholars feel free to go wherever the evidence takes them, and to contribute to public understanding. Republicans, in Wisconsin and elsewhere, are trying to shut that kind of discourse down. It’s up to the rest of us to see that they don’t succeed.

Paul Krugman: Degrees and Dollars

I've noted in the past that education is essential, but it won't work for everyone. What's the answer for everyone else?:

Degrees and Dollars, by Paul Krugman, Commentary, NY Times: It is a truth universally acknowledged that education is the key to economic success. Everyone knows that the jobs of the future will require ever higher levels of skill. ...

But what everyone knows is wrong..., the idea that modern technology eliminates only menial jobs, that well-educated workers are clear winners, may dominate popular discussion, but it’s actually decades out of date.

The fact is that since 1990 or so the U.S. job market has been characterized not by a general rise in the demand for skill, but by “hollowing out”: both high-wage and low-wage employment have grown rapidly, but medium-wage jobs — the kinds of jobs we count on to support a strong middle class — have lagged behind. And the hole in the middle has been getting wider...

Why is this happening? The belief that education is becoming ever more important rests on the plausible-sounding notion that advances in technology increase job opportunities for those who work with information — loosely speaking, that computers help those who work with their minds, while hurting those who work with their hands.

Some years ago, however, the economists David Autor, Frank Levy and Richard Murnane argued that this was the wrong way to think about it. Computers, they pointed out, excel at routine tasks, “cognitive and manual tasks that can be accomplished by following explicit rules.” Therefore, any routine task — a category that includes many white-collar, nonmanual jobs — is in the firing line. ... Most of the manual labor still being done in our economy seems to be of the kind that’s hard to automate. ...

And then there’s globalization. Once, only manufacturing workers needed to worry about competition from overseas, but the combination of computers and telecommunications has made it possible to provide many services at long range. ... Alan Blinder and Alan Krueger suggest ... that high-wage jobs performed by highly educated workers are, if anything, more “offshorable” than jobs done by low-paid, less-educated workers. If they’re right, growing international trade in services will further hollow out the U.S. job market.

So what does all this say about policy?

Yes, we need to fix American education. In particular, the inequalities Americans face at the starting line — bright children from poor families are less likely to finish college than much less able children of the affluent — aren’t just an outrage; they represent a huge waste of the nation’s human potential.

But ... the notion that putting more kids through college can restore the middle-class society we used to have is wishful thinking. It’s no longer true that having a college degree guarantees that you’ll get a good job, and it’s becoming less true with each passing decade.

So if we want a society of broadly shared prosperity, education isn’t the answer — we’ll have to go about building that society directly. We need to restore the bargaining power that labor has lost over the last 30 years, so that ordinary workers as well as superstars have the power to bargain for good wages. We need to guarantee the essentials, above all health care, to every citizen.

What we can’t do is get where we need to go just by giving workers college degrees, which may be no more than tickets to jobs that don’t exist or don’t pay middle-class wages.

"Generation Un"

We aren't doing enough to create opportunities for young people from middle and low income families, but we're doing plenty to make things harder:

The Plight of Generation Un, by Nancy Folbre: ...Apart from the American Opportunity Tax Credit and modest increases in financial aid, public policy is not doing much to help young people from moderate- and low-income families who can’t find a job or afford the education they need to improve their chances of finding one.

When last reported ... in August, unemployment among those aged 16 to 24 was about 19 percent – unchanged from the previous year. Partly as a result, community college enrollments, already on an upward trend, have grown in the last two years. However,... tuition and fees are increasing at community colleges, as well as at major universities, part of an intensifying trend toward privatization of higher education... Cuts in public support make it difficult for colleges and universities to fulfill their ... mission...

These problems will worsen as states cut their budgets and Congressional Republicans move to cut discretionary spending... [T]he California community college system, currently the largest in the country, may have to turn away 350,000 applicants next year. In Texas, another state with huge community college enrollments, the state legislature is proposing to close four colleges and slash state-subsidized health benefits for all community college employees. ...

Policies governing access to public assistance have also reduced opportunities for young adults to improve their skills. Empirical research exploiting differences in the date at which states implemented new welfare rules in the 1990s shows that stricter requirements that they work caused lower college enrollment among adult women by about 20 percent. ...

Bloomberg Businessweek uses the term “lost generation” to describe the severity of youth unemployment. But young adults are not lost. Most of them know exactly where they are. It’s just that many of them are mired in an un-opportunity society, excluded from productive participation. ...

Maybe we should dub them Generation Un, in recognition of those unable to find a job, unable to pay for college and unable to find the opportunities they need to help generate sustainable economic growth for the rest of us.

Losing the future.

"A Letter to My Students"

Michael O'Hare:

A letter to my students, by Michael O'Hare: Welcome to Berkeley, probably still the best public university in the world. Meet your classmates, the best group of partners you can find anywhere. The percentages for grades on exams, papers, etc. in my courses always add up to 110% because that’s what I’ve learned to expect from you, over twenty years in the best job in the world.

That’s the good news. The bad news is that you have been the victims of a terrible swindle, denied an inheritance you deserve by contract and by your merits. And you aren’t the only ones; victims of this ripoff include the students who were on your left and on your right in high school but didn’t get into Cal, a whole generation stiffed by mine. This letter is an apology, and more usefully, perhaps a signal to start demanding what’s been taken from you so you can pass it on with interest.

Swindle–what happened? Well, before you were born, Californians now dead or in nursing homes made a remarkable deal with the future. (Not from California? Keep reading, lots of this applies to you, with variations.) They agreed to invest money they could have spent on bigger houses, vacations, clothes, and cars into the world’s greatest educational system, and into building and operating water systems, roads, parks, and other public facilities, an infrastructure that was the envy of the world. They didn’t get everything right: too much highway and not enough public transportation. But they did a pretty good job.

Young people who enjoyed these ‘loans’ grew up smarter, healthier, and richer than they otherwise would have, and understood that they were supposed to “pay it forward” to future generations, for example by keeping the educational system staffed with lots of dedicated, well-trained teachers, in good buildings and in small classes, with college counselors and up-to-date books. California schools had physical education, art for everyone, music and theater, buildings that looked as though people cared about them, modern languages and ancient languages, advanced science courses with labs where the equipment worked, and more. They were the envy of the world, and they paid off better than Microsoft stock. Same with our parks, coastal zone protection, and social services.

This deal held until about thirty years ago, when for a variety of reasons, California voters realized that while they had done very well from the existing contract, they could do even better by walking away from their obligations and spending what they had inherited on themselves. “My kids are finished with school; why should I pay taxes for someone else’s? Posterity never did anything for me!” An army of fake ‘leaders’ sprang up to pull the moral and fiscal wool over their eyes, and again and again, your parents and their parents lashed out at government (as though there were something else that could replace it) with tax limits, term limits, safe districts, throw-away-the-key imprisonment no matter the cost, smoke-and-mirrors budgeting, and a rule never to use the words taxes and services in the same paragraph.

Now, your infrastructure is falling to pieces under your feet, and as citizens you are responsible for crudities like closing parks, and inhumanities like closing battered women’s shelters. It’s outrageous, inexcusable, that you can’t get into the courses you need, but much worse that Oakland police have stopped taking 911 calls for burglaries and runaway children. If you read what your elected officials say about the state today, you’ll see things like “California can’t afford” this or that basic government function, and that “we need to make hard choices” to shut down one or another public service, or starve it even more (like your university). Can’t afford? The budget deficit that’s paralyzing Sacramento is about $500 per person; add another $500 to get back to a public sector we don’t have to be ashamed of, and our average income is almost forty times that. Of course we can afford a government that actually works: the fact is that your parents have simply chosen not to have it.

I’m writing this to you because you are the victims of this enormous cheat (though your children will be even worse off if you don’t take charge of this ship and steer it). Your education was trashed as California fell to the bottom of US states in school spending, and the art classes, AP courses, physical education, working toilets, and teaching generally went by the board. Every year I come upon more and more of you who have obviously never had the chance to learn to write plain, clear, English. Every year, fewer and fewer of you read newspapers, speak a foreign language, understand the basics of how government and business actually work, or have the energy to push back intellectually against me or against each other. Or know enough about history, literature, and science to do it effectively! You spent your school years with teachers paid less and less, trained worse and worse, loaded up with more and more mindless administrative duties, and given less and less real support from administrators and staff.

Many of your parents took a hike as well, somehow getting the idea that the schools had taken over their duties to keep you learning, or so beat-up working two jobs each and commuting two hours a day to put food on the table that they couldn’t be there for you. A quarter of your classmates didn’t finish high school, discouraged and defeated; but they didn’t leave the planet, even if you don’t run into them in the gated community you will be tempted to hide out in. They have to eat just like you, and they aren’t equipped to do their share of the work, so you will have to support them.

You need to have a very tough talk with your parents, who are still voting; you can’t save your children by yourselves. Equally important, you need to start talking to each other. It’s not fair, and you have every reason (except a good one) to keep what you can for yourselves with another couple of decades of mean-spirited tax-cutting and public sector decline. You’re my heroes just for surviving what we put you through and making it into my classroom, but I’m asking for more: you can be better than my generation. Take back your state for your kids and start the contract again. There are lots of places you can start, for example, building a transportation system that won’t enslave you for two decades as their chauffeur, instead of raising fares and cutting routes in a deadly helix of mediocrity. Lots. Get to work. See you in class!

"Fewer Low-Income Students Going to College"

This is not a good trend:

Fewer Low-Income Students Going to College, by Emmeline Zhao, RTE: Fewer low- and moderate-income high school graduates are attending college in America, and fewer are graduating. Enrollment in four-year colleges was 40% in 2004 for low-income students, down from 54% in 1992, and 53% in 2004 for moderate-income students, down from 59% over the same period, according to a report recently submitted to Congress by the Advisory Committee on Student Financial Assistance. ...

College expenses and financial aid have become increasingly larger considerations..., driving more qualified students away from enrolling in four-year colleges. The net price for attending a four-year public college in 2007 for a low-income student was $10,620 — 48% of family income...

Among the students surveyed who had parents “very concerned” about higher-education finances just 66% applied to a four-year college. Some 90% of respondents with parents “not concerned” about finances applied to college. Fewer — 43% — with “very concerned” parents enrolled in a four-year college, compared to 88% that enrolled with “not concerned” parents. ...

Persistence through four-year colleges dropped to 75% in students entering in 2003 for low-income students, down from 78% in students entering in 1995, while persistence for students from moderate-income families remained at 81%. Persistence rates for low- and moderate-income students in two-year colleges, however, fell 10 percentage points to 49% over the same period.

“These trends greatly undermine bachelor’s degree completion of high school graduates over the last two decades and, if unchecked, will take an even grater toll this decade,” the report states. ...

Education is not the whole answer to better jobs and a more equal distribution of income, but it's a key part of it and this trend is not encouraging. If it was up to me, college education would be essentially free. And not just because of the economic effects. There is value in education that goes far beyond the salary premium that comes with a college degree.

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

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

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

Part I: Education

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

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

For example, if what is taught at universities actually makes people more productive, then simply taking university courses should be enough increase earnings. In fact, to get much of a payoff from university education, you have to finish your degree (the “sheepskin effect” ). One reason education pays is that completing a degree “signals” your ability, determination, competence and general stick-with-it-ness.

Perhaps we should think of human capital as a fairy tale, a reassuring bedside story. But the power of fairy tales is that they reflect certain elemental truths about the human condition. People who teach economics may find it deeply comforting to think that their pay is justified by their high levels of human capital.

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

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

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

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

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

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

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

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

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

Is It Fair for Education to Be Cheap

Brad DeLong:

Is It Fair for Education to Be Cheap, by Brad DeLong: There is a great tension at the heart of American public higher education. On the one hand, the people who benefit from public and publicly-funded higher education are primarily people who are or will be relatively rich–they will, after all, have a college education, and we know now that people with four-year B.A.s have incomes more than 70% higher than those who finished their education with high school. Publicly-funded higher education is thus, on average, a transfer of wealth from taxpayers in general to the upper-middle class of America today.

On the other hand, the fact that education is as expensive as it is appears to be keeping a great many people from acquiring more. This current cohort of white, male, native-born twenty-year holds will–for the first time in American history–have no more education than their predecessors of a generation ago. This is extraordinary, given that this is a generation during which the college salary premium has risen from 30% to 70%. The returns to college are much greater than they were a decade ago? So why aren’t more people attending.

The answer is that lots of people fear college because it is expensive: they would have to go into debt to attend, and they fear to do so.

So our dilemma: if we don’t keep college cheap–and publicly-funded–we find it next to impossible to increase educational opportunity; if we subsidize college with public money, we are transferring from the not-so-rich to the relatively rich.

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

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

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

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

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

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

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

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

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

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

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

People of color make up about 20 percent of Oregon's population. In Portland, Latinos make up 9 percent, Asians 7 percent and African Americans 6 percent. Native Americans and mixed race people are at 4 percent. ...

[A] study by the Urban League of Portland last year that found blacks in Oregon rank near the bottom of nearly every quality-of-life indicator... Of the 90 members in the Oregon Legislature, only three are people of color.

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

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

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

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

''Scientists Need to Speak Up''

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

On issues like global warming and evolution, scientists need to speak up, by Chris Mooney, Commentary, Washington Post: The battle over the science of global warming has long been a street fight between mainstream researchers and skeptics. But never have the scientists received such a deep wound as when, in late November, a large trove of e-mails and documents stolen from the Climatic Research Unit at Britain's University of East Anglia were released onto the Web.

In the ensuing "Climategate" scandal, scientists were accused of withholding information, suppressing dissent, manipulating data and more. But while the controversy has receded, it may have done lasting damage to science's reputation... Meanwhile, public belief in the science of global warming is in decline.

The central lesson of Climategate is not that climate science is corrupt. The leaked e-mails do nothing to disprove the scientific consensus on global warming. Instead, the controversy highlights that in a world of blogs, cable news and talk radio, scientists are poorly equipped to communicate their knowledge and, especially, to respond when science comes under attack.

A few scientists answered the Climategate charges almost instantly. ... But they were largely alone. ... This isn't a new problem. As far back as the late 1990s, before the news cycle hit such a frenetic pace, some science officials were lamenting that scientists had never been trained in how to talk to the public and were therefore hesitant to face the media.

"For 45 years or so, we didn't suggest that it was very important," Neal Lane, a former Clinton administration science adviser and Rice University physicist, told the authors of a landmark 1997 report on the gap between scientists and journalists. ". . . In fact, we said quite the other thing." ...

Scientific training continues to turn out researchers who speak in careful nuances and with many caveats, in a language aimed at their peers, not at the media or the public. Many scientists can scarcely contemplate framing a simple media message for maximum impact; the very idea sounds unbecoming. And many of them don't trust the public or the press....... Rather than spurring greater efforts at communication, such mistrust and resignation have further motivated some scientists to avoid talking to reporters and going on television.

They no longer have that luxury. After all, global-warming skeptics suffer no such compunctions. ... If scientists don't take a central communications role, nobody else with the same expertise and credibility will do it for them.

Meanwhile, the task of translating science for the public is ever more difficult: Information sources are multiplying, partisan news outlets are replacing more objective media, and the news cycle is spinning ever faster.

Consider another failure to communicate from the global-warming arena: the scientific fallout after a devastating trio of hurricanes -- Katrina, Rita and Wilma -- in the fall of 2005. Just as these storms struck, a pair of scientific studies appeared in top journals suggesting, for the first time, that global warming was making hurricanes more intense and deadly. Other scientists vociferously disagreed, and the two camps fell into combat.

So while public interest in hurricanes was at a high after Katrina, much of the science reporting at the time portrayed researchers bickering with one another ("Hurricane Debate Shatters Civility of Weather Science," announced a Wall Street Journal cover story). Judith Curry, a climate scientist at the Georgia Institute of Technology and a co-author of one of the contested studies, told me recently that the experience made her realize that "this was really the wrong way to do things, trying to fight these little wars and knock the other side down."

With the media distracted by the food fight, scientists weren't leading the public discussion, and other important findings that ought to have received attention in Katrina's wake ... were drowned out.

If the global-warming battle has any rival in its intensity, its nastiness and its risk to scientists if they do not talk to the public, it is the long-standing conflict over the teaching of evolution. Science's opponents in this fight are highly organized, and they constantly nitpick evolutionary science to cast the field into disrepute.

The scientific response to creationists has long been to cite the extensive evidence for evolution. In book after book, scientists have explained how DNA, fossil, anatomical and other evidence indisputably shows the interrelatedness of all species. Further, they have refuted creationist claims that evolution cannot explain the complexity of the eye or the intricacy of the bacterial flagellum. Yet ... polls repeatedly show that a large portion of Americans have doubts about evolution.

For all these efforts, why haven't scientists made any inroads? It's because at its core, the objection to evolution isn't about science at all, but about perceived threats to faith and moral values. The only way to defuse the conflict is to assuage these fundamental fears. Yet this drags many scientists out of their comfort zone: They're not priests or theologians and don't know how to sound like them. Many refuse to try...

Ironically, to increase support for the teaching of evolution, scientists must join forces with -- and show more understanding of -- religion. Scientists who are believers also need to be more vocal about how they reconcile science and faith. ...

In other words, what's needed is less "pure science" on its own -- although of course scientists must continue to speak in scientifically accurate terms -- and more engagement with the concerns of nonscientific audiences. In response to that argument, many researchers will say: "Why target us? We're the good guys. And if we become more media savvy, we'll risk our credibility."

There is only one answer to this objection: "Look all around you -- at Climategate, at the unending evolution wars -- and ask, are your efforts working?" The answer, surely, is no.

The precise ways in which scientists should change their communication strategies vary from issue to issue, but there are some common themes. Reticence is never a good thing, especially on a politically fraught topic such as global warming -- it just cedes the debate to the other side....

On other topics, including evolution, scientists must recognize that more than scientific matters are at stake, and either address the moral and ethical issues themselves, or pair with those who can...

All this will require universities to do a better job of training young scientists in media and communication. ... Scientists need not wait for former vice presidents to make hit movies to teach the public about their fields -- they must act themselves. ...

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

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

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

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

Paul Krugman: The Uneducated American

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

The Uneducated American, by Paul Krugman, Commentary, NY Times: If you had to explain America’s economic success with one word, that word would be “education.” In the 19th century, America led the way in universal basic education. Then, as other nations followed suit, the “high school revolution” of the early 20th century took us to a whole new level. And in the years after World War II, America established a commanding position in higher education.

But that was then. The rise of American education was, overwhelmingly, the rise of public education — and for the past 30 years our political scene has been dominated by the view that any and all government spending is a waste of taxpayer dollars. Education, as one of the largest components of public spending, has inevitably suffered.

Until now, the results of educational neglect have been gradual — a slow-motion erosion of America’s relative position. But things are about to get much worse, as the economic crisis — its effects exacerbated by the penny-wise, pound-foolish behavior that passes for “fiscal responsibility” in Washington — deals a severe blow to education across the board.

About that erosion:... Most people, I suspect, still have ... an image of America as ... unique in the extent to which higher learning is offered to the population at large. That image used to correspond to reality. But these days ... we have a college graduation rate that’s slightly below the average across all advanced economies.

Even without ... the current crisis, there would be every reason to expect us to fall further in these rankings, if only because we make it so hard for those with limited financial means to stay in school [compared to] their counterparts in, say, France. ... But the crisis has placed huge additional stress on our creaking educational system.

According to the Bureau of Labor Statistics,... lost jobs ... in state and local education .... over the past five months [totalled] 143,000. That may not sound like much, but education ... should, and normally does, keep growing even during a recession. Markets may be troubled, but that’s no reason to stop teaching our children. Yet that’s exactly what we’re doing.

There’s no mystery about what’s going on: education is mainly the responsibility of state and local governments, which are in dire fiscal straits. Adequate federal aid could have made a big difference. But ... back in February centrist senators insisted on stripping much of that aid from the ... stimulus bill.

As a result, education is on the chopping block. And laid-off teachers are only part of the story. Even more important is the way that we’re shutting off opportunities.

For example,... generations [of] talented students from less affluent families have used [California’s community] colleges as a stepping stone to the state’s public universities. But in the face of the state’s budget crisis those universities have been forced to slam the door on this year’s potential transfer students. One result, almost surely, will be lifetime damage to many students’ prospects — and a large, gratuitous waste of human potential.

So what should be done?

First of all, Congress needs to undo the sins of February, and approve another big round of aid to state governments. We don’t have to call it a stimulus, but it would be a very effective way to create or save thousands of jobs. And it would, at the same time, be an investment in our future.

Beyond that, we need to wake up and realize that one of the keys to our nation’s historic success is now a wasting asset. Education made America great; neglect of education can reverse the process.

Ideas versus Discipline

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

The Guns of August, and Why the Republican Right Was So Adept at Using Them on Health Care, by Robert Reich: What we learned in August is something we've long known but keep forgetting: The most important difference between America's Democratic left and Republican right is that the left has ideas and the right has discipline. Obama and progressive supporters of health care were outmaneuvered in August -- not because the right had any better idea for solving the health care mess but because the rights' attack on the Democrats' idea was far more disciplined than was the Democrats' ability to sell it.

I say the Democrats' "idea" but in fact there was no single idea. Obama never sent any detailed plan to Congress. Meanwhile, congressional Dems were so creative and undisciplined before the August recess they came up with a kaleidoscope of health-care plans. The resulting incoherence served as an open invitation to the Republican right to focus with great precision on convincing the public of their own demonic version of what the Democrats were up to -- that it would take away their Medicare, require "death panels," raise their taxes, and lead to a government takeover of medicine, and so on. ...

This is just the latest chapter of a long saga. Over the last twenty years, as progressives have gushed new ideas, the right has became ever more organized and mobilized in resistance -- capable of executing increasingly consistent and focused attacks, moving in ever more perfect lockstep, imposing an exact discipline often extending even to the phrases and words used repeatedly by Hate Radio, Fox News, and the oped pages of The Wall Street Journal ("death tax," "weapons of mass destruction," "government takeover of health care.") I saw it in 1993 and 1994 as the Clinton healthcare plan -- as creatively and wildly convoluted as any policy proposal before or since -- was defeated both by a Democratic majority in congress incapable of coming together around any single bill and a Republican right dedicated to Clinton's destruction. ...

You want to know why the left has ideas and the right has discipline? Because people who like ideas and dislike authority tend to identify with the Democratic left, while people who feel threatened by new ideas and more comfortable in a disciplined and ordered world tend to identify with the Republican right. Democrats and progressives let a thousand flowers bloom. Republicans and the right issue directives. This has been the yin and yang of American politics and culture. But it means that the Democratic left's new ideas often fall victim to its own notorious lack of organization and to the right's highly-organized fear mongering. ...

August is coming to a close, and congressional recess is about over. History is not destiny, and Democrats and progressives can yet enact meaningful health care reform... But to do so, we'll need to be far more disciplined about it. All of us, from Obama on down.

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

Update: Andrew Samwick says this all sounds familiar:

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

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

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

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

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

Summers at Brookings

[Transcript of Entire Speech]

"On Financial and Human Capital"

Robert Reich:

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

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

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

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

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

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

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

I'll just add this:

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

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

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

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

This is a huge problem. ...

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

Econ Bloggers

From Tyler Cowen:

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

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

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

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

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

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

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

FRBSF: Can Young Americans Compete in a Global Economy?

Clive Crook recently:

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

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

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

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

Graduation

My Father's Day gift came yesterday afternoon:

Universal Health Care and Military Retention

Worries that universal health care will hurt military recruiting:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Widening Inequality in Skills

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

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

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

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

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

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

And,

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

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

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

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

Mankiw: The Wealth Trajectory: Rewards for the Few

Greg Mankiw on the sources of rising inequality:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Frank Levy and Peter Temin provide one counterargument:

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

Self-Selection, Conservatives, and Left-Leaning Universities

Do conservatives self-select out of academic careers?:

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

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

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

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

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

In comments, Lee adds:

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

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

Conservatives embrace the idea of diversity on campus:

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

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

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

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

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

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

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

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

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

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

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

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

In defense of liberal bias on college campuses:

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

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

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

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

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

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

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

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

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

Higher Education's Canon Wars

What is the purpose of an education?:

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

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

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

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

The "Ivory Tower" Insult in Public Discourse

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

"Sources of Lifetime Inequality"

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

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

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

A Role for Heterodox Economists

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

---

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

One of the first heterodox economists mentioned  is Michael Perelman:

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

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

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

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

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

"The Dead Grandmother/Exam Syndrome"

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

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

And here's the paper:

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

Robert Reich: The Real Scandal of Student Loans

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

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

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

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

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

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

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

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

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

Open University: Where are the Economic Historians?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Run, Run, Run Those Regressions Away...

[video source]

An Interview With David Card

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

• Tax Rates and Labor Supply
• Minimum Wage
• Sticky Wages
• Strike Patterns
• Unions and Inequality
• Skill-Based Technical Change
• Returns to Education
• Voting Machines
• Immigration
• Why Labor Economics?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Inequality, Education, and Government Policy

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

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

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

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

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

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

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