Category Archives: Economics of Education

Which Economist Are You? The Game

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I played (you can play here), and I got Steven Kaplan. His field is not one that interests me that much, he is not a familiar figure to me. But coincidentally, James Pethokoukis recently interviewed him. I agree with much of what Kaplan says in the interview, but I have my doubts about what he says near the end:

you have an increased regulatory burden on small businesses that everybody talks about – I think is real. And that would be my guess why you see fewer of the kind of mom-and-pop type startups. And you see – but you see no diminution on the high potential startups because they’re high potential enough that regulation doesn’t actually matter.

My guess is that the mom-and-pops are suffering more from competition than from regulation. I think of the challenge of opening up an independent retail store when there are so many advantages held by large chains and by Amazon and Wal-Mart. I think of the challenge of opening an “average” restaurant when there are now chains in every niche, where 30 years ago the only ones not in fast-food hamburgers were KFC, Taco Bell, and Pizza Hut. I think of individual medical practices giving way to large organizations–some of that is driven by health care policy, but I think that some of it is natural evolution, as the share of medical care that is produced by factors other than doctor-labor-time increases. I think of small retail financial firms (brokers, local banks) giving way to much larger institutions. There, too, regulatory influences are pervasive, and you have to attribute some of the concentration to Too Big to Fail. But on the other hand, big banks were over-regulated as of 1975, and I would attribute most of the consolidation that has taken place over the past 40 or 50 years to natural market forces operating in a regulatory environment that allowed more competition.

If you put it all together, I think that it takes a lot more brainpower to start a successful company of any type today than it did 50 years ago. Meanwhile, the large enterprises can afford to acquire lots of brainpower, so there is not a whole lot of it sitting around to start mom-and-pops.

Going back to the IGM survey, my most outlandish opinions relative to the IGM panel of experts were:

–I disagree that health insurance subsidies will produce benefits that exceeds the costs

–I strongly disagree that performance of a teacher’s students on standardized test scores can predict how well the teacher does at improving future outcomes of students.

I think the evidence on health spending is that at the margin it has no effect on outcomes.

I think that the studies that purport to show that teachers make a difference are a suspect molehill next to the mountain of evidence for the null hypothesis. And even if they do make a difference, test scores are too noisy an indicator to rely on.

They Dared to Report This

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Peter Arcidiacono and Michael Lovenheim write,

The evidence suggests that racial preferences are so aggressive that reshuffling some African
American students to less-selective schools would improve some outcomes due to match effects dominating
quality effects.

Pointer from Tyler Cowen, who indicates that it is forthcoming the Journal of Economic Literature. Even Donald Trump finds this offensive.

How Should We Fix Higher Education?

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Daniel Drezner warns against some of the standard nostrums.

When politicians and pundits argue in favor of reallocating resources from one college major to another, they’re trying to say that they can pick disciplinary winners and losers better than universities, foundations or the students themselves.

My instinct is that he is correct that the various tweaks proposed are not going to make a big difference. My thoughts:

1. Reduce federal involvement in higher education. This is probably hopeless, given that higher education is one of the most powerful lobbies in Washington. I think that both aid to higher education (including student loans and grants) as well as regulations are largely used to protect incumbents. That makes cutting back on aid and regulations both politically difficult and better for the general public.

2. Encourage alternatives to college degrees as credentials. For example, Congress could require every Federal government agency to provide an avenue by which people could obtain positions based on demonstrated competence rather than the basis of educational credentials. Similarly, the process of approving government grants should be de-credentialized.

Peter Lawler on Higher Education

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He writes,

the traditional forms of the college serve the genuinely higher forms of liberal education that conservatives often champion. The study of philosophy in light of great texts always serves viewpoint diversity by reminding us that what just is is a perennial and invincibly difficult question that has a variety of plausible answers. When the study of justice is replaced by the activist or engaged championing of “social justice,” viewpoint diversity always suffers, because those with different views of the place and significance of justice are marginalized or worse. It’s the true study of philosophy that keeps “academic freedom” from being displaced by some dogmatic or partial and endlessly questionable view of “academic justice.”

As I see it, he is saying is that conservatives should not be focused on getting more conservatives onto the faculty at elite schools. Instead, just focus on academic rigor. If students take real courses, not “___ studies” courses, then they will learn to think for themselves. I agree.

What is the whole story?

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Jon Gabriel writes,

[Arizona] Gov. Ducey came up with a clever plan to draw $2 billion over a decade from the state trust lands—a constitutional set-aside, established at statehood to promote public education, that currently holds about 9 million acres and more than $5 billion. The governor wanted to put that additional money directly into the classroom, rather than funnel it through layers of bureaucrats. Even with this outflow, the governor’s estimates showed, the trust would continue to grow in the long term, and its value would be higher in five years than today.

More money for schools with no new taxes: What’s not to like? A lot, apparently. Mr. Ducey’s plan disrupted the usual coalition of teachers unions and public school districts, leading some in the K-12 establishment—those administrators and union officials who have a way of soaking up dollars while doing little for students—to take the unfamiliar position of objecting to new education funding.

How could you ensure that the additional money would be spent only on classroom teachers? Money is fungible. And what were the objections of the educrats? The piece is short on details.

The Higher Education Industrial Complex

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The WSJ reports,

Colleges and universities have become one of the most effective lobbying forces in Washington, employing more lobbyists last year than any other industries except drug manufacturing and technology. . .

All that these noble, public-spirited institutions ever ask for is more money with no accountability. What could go wrong?

The failure of political efforts to require more accountability and transparency means that colleges continue to collect billions of dollars annually in student loans with few strings attached, including schools that don’t graduate many of their students and where loan defaults are high.

A lot of people will tell you that higher education is one of the industries that works pretty well in the U.S. all this crony capitalism notwithstanding, I suppose.

De-skilling in the Labor Market

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Beaudry, Green, and Sand write,

the first object of this paper will be to document that the demand for cognitive tasks has actually been declining since 2000. Such a decline in demand has had, and continues to have, a direct impact on more skilled workers, but we go on to show that it has likely had a substantial impact on less skilled workers as well. In particular, we argue that in response to the demand reversal, high-skilled workers have moved down the occupational ladder and have begun to perform jobs traditionally performed by lower-skilled workers. This de-skilling process, in turn, results in high-skilled workers pushing low-skilled workers even further down the occupational ladder and, to some degree, out of the labor force all together. This process had been going on since 2000, but, as argued in earlier papers, the housing boom between 2003 and 2006 masked some of the effects which only become fully apparent after the financial crisis.

Pointer from Mark Thoma (with a couple of clicks in between).

If your main evidence for de-skilling is that people with college education are in jobs that you would not think require college degrees, then there might be another story. That is, credentials do not prove cognitive ability. In fact, we may have observed an increase in the proportion of people attending college who are not really college material and in the number of colleges producing graduates with only high-school level skills. These people would wind up in jobs not requiring great cognitive ability.

Null Hypothesis Deniers

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The IGM forum of economists asks their participants whether they agree with:

Comparing their students’ average gains on standardized tests over the school year makes it easier to predict which teachers — all else equal — are more likely to improve their student’s long-term life outcomes.

Nobody disagrees. Although I would have disagreed out of spite, the wording of the question makes it impossible to disagree. The question stipulates “all else equal” and uses the cautious “are more likely to improve.” So if I thought that, other things equal, there is a .0001 chance of a good teacher causing an improvement of .0001 standard deviations in their student’s [sic] long-term life outcomes, I should answer “agree.”

A more interesting way to phrase the question might have been, “Using students’ average gains on standardized tests over the school year to determine teacher retention and firing decisions can reliably lead to measurably important gains in long-term life outcomes.” The economists probably still would have committed the Type I error, but at least this wording gives the null hypothesis a fighting chance.

Joseph Henrich on Cultural Transmission

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The book is The Secret of Our Success, and I am only a little way into it. An excerpt:

evolutionary reasoning suggests that learners should use a wide range of cues to figure out whom to selectively pay attention to and learn from. Such cues allow them to target those people most likely to possess information that will increase the learner’s survival and reproduction. . .individuals should combine cues related to the models’ health, happiness, skill, reliability, competence, success, age, and prestige, as well as correlated cues like displays of confidence or pride. These cues should be integrated with others related to self-similarity, such as sex, temperament, or ethnicity

I think that by emphasizing how little knowledge we generate internally compared with knowledge we acquire through cultural transmission, this book could bolster libertarian/conservative views. It certainly reinforces my doubts about the ability of technocrats to “fix” society. Henrich does not do much with this, although skipping ahead to the next-to-last paragraph in the book:

Humans are bad at intentionally designing effective institutions and organizations, though I’m hoping that we get deeper insights into human nature and cultural evolution this can improve. Until then, we should take a page from cultural evolution’s playbook and design “variation and selection systems” that will allow alternative institutions or organizational forms to compete. We can dump the losers, keep the winners, and hhopefully gain some general insights during the process.

Yes, Professor Henrich, we have a term for that. We call it “the market.”

Null Hypothesis Watch

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A reader points me to a piece by Dale C. Farran and Mark W. Lipsey, which studies the long-term effects of the TNVPK pre-kindergarten program.

As is evident, pre-K and control children started the pre-K year at virtually identical levels. The TNVPK children were substantially ahead of the control group children at the end of the pre-K year (age 5 in the graph). By the end of kindergarten (age 6 in the graph), the control children had caught up to the TNVPK children, and there were no longer significant differences between them on any achievement measures. The same result was obtained at the end of first grade using two composite achievement measures (the second created with the addition of two more WJIII subtests appropriate for the later grades). In second grade, however, the groups began to diverge with the TNVPK children scoring lower than the control children on most of the measures. The differences were significant on both achievement composite measures and on the math subtests. Differences favoring the control persisted through the end of third grade.

The null hypothesis is that educational interventions make no difference. Technically, the last two sentences suggest that the null hypothesis is rejected here. The intervention of sending kids to pre-K made their outcomes worse in a statistically significant way.

Read the whole article. This will create some cognitive dissonance for progressives who have faith in universal pre-K and also believe in using rigorous social science to guide policy.

And some cognitive dissonance for James Heckman. He argues that measurements at third grade are noisy, but lifetime outcomes favor pre-school education. Pointer from Mark Thoma. I think Heckman is really reaching.