Category Archives: Economics of Education

529: Popular != Good Policy

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Peter Suderman writes,

this episode and the swift bipartisan opposition it generated is so revealing, not only about the short term political instincts of the Obama administration, but about the longer term political and policy dynamics of sustaining the welfare state.

He is writing about President Obama’s proposal to tax savings from “529 plans” for college saving, which the Administration has since backed away from. I read Suderman as saying that the larger point is that when it comes to unsustainable fiscal policy, we have met the enemy and he is us. My comments:

1. Re-read Lenders and Spenders. Government debt inevitably leads to political strife.

2. 529 plans are regressive. Nearly all of the benefit flows to people with high incomes.

3. 529 plans are yet another enabler for colleges to boost tuitions.

4. 529 plans subsidize affluent people for doing what they would have done anyway–send their kids to exclusive, high-priced colleges.

529 plans are terrible public policy. Instead of demagogically criticizing the Administration’s proposal to tax them, I would say let’s get rid of them altogether.

Tax the Big Non-profits?

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From the WSJ.

A recent budget plan by Republican Gov. Paul LePage calling for an overhaul of individual, corporate and sales taxes also would make Maine the first state in the nation to require colleges, hospitals and other large charities to go on the property-tax rolls in their municipalities.

I think this is a good idea. What is happening is that these New Commanding Heights enterprises are taking over the nation’s largest cities. That reflects in part the tax distortion.

If you have never encountered my skeptical take on non-profits, you should read this. Even if you are already familiar with my views, it’s an essay worth re-reading.

The FARMS Indicator

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Alex Tabarrok writes,

Eligibility for free and reduced-price lunches, however, depends on eligibility rules and not just income levels let alone poverty rates.

He is criticizing the sensationalist statistics that “half of public school children are in poverty,” when eligibility for free and reduced meals is not quite the same thing.

Still, I think that the percentage of FARMS students is a very useful indicator. For example, a couple of times I have downloaded data on standardized test scores for various Maryland school districts. The scores and the FARMS percentages line up very closely. In contrast, there is almost zero correlation between school spending and test scores. As far as spending goes, the null hypothesis holds.

The interesting question, then, is whether the FARMS proportion is rising because of changes in eligibility rules or because of changes in the demographics of the public school population. I suspect is is the latter, and I suspect that it is a leading indicator of worse outcomes, such as performance on stand in terms of standardized tests and high school graduation rates (provided that schools do not reduce the requirements for graduation).

The Returns to College Going Forward

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Nick Bunker writes,

Intuitively, then, increasing the supply of educated workers should reduce inequality as it would increase wages among a broader supply of more educated workers. But that assumes the demand for educated workers will continue to rise. Problem is, recent research finds that the demand for skilled labor appears to be on the decline.

Pointer from Mark Thoma.

Let us think about the “race between education and technology” idea. The Goldin-Katz story is that the high school movement helped produce a work force that could earn decent incomes in the industrial era. This is a nice just-so story, but note that in the late 19th and early 20th centuries the just-so story was that industrialization was reducing the demand for skills, replacing the craftsman with the assembly-line worker.

But let us suppose that more education is needed to enable the typical worker to keep pace with changes in technology. That is, suppose we buy that there is a race between education and technology. In that case, I am pretty sure that education has to lose that race.

Change in technology is being led by Moore’s Law. The core components of computers get twice as good every couple of years. Maybe that is slowing down a bit. But even so, it is much faster than the rate of improvement in steam engines in the 19th century or electric motors in the 20th century.

As an indicator of faster technological change, look at how much more quickly smart phones achieved mass adoption in comparison with personal computers.

As an indicator of how hard it is for humans to keep up, look at computers and chess. Twenty years ago, the world’s biggest computer could not have beaten the human world champion. Now, you could to it with a laptop. Maybe even a smart phone.

The metaphor of a “race” suggests that the two participants are capable of moving at the same speed. But if you compare Moore’s Law with the highest feasible rate at which me might increase educational attainment, you realize that the two speeds are hopelessly different. Either we come up with some radical, paradigm-shifting way of improving human learning capacity (genetic engineeering? implants? Diamond Age primers?) or the machines are certain to win.

Community College: What is the Right Price?

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Reihan Salam writes,

Texas A&M economist Jonathan Meer kindly pointed me to their recent work on net prices — that is, net tuition and fees after grant aid — for students attending public institutions, including community colleges. It turns out that in 2011–12, “net tuition and fees at public two–year colleges ranged from $0 for students in the lower half of the income distribution to $2,051 for the highest-income group.” That is, net tuition and fees were $0 for students from households earning $60,000 or less while it was $2,051 for students from households earning over $106,000. While I don’t doubt that many households in the $106,000-plus range will welcome not having to pay for their children’s community college education, I’m hard-pressed to see why this initiative will have a “huge” impact, given that we’re presumably most concerned about improving community college access for students from disadvantaged backgrounds.

My comments:

1. Just based on my gut feeling, I think that the vast majority of students attending community college do not have favorable outcomes. (But note this study,pointed to by Tyler Cowen.

Attending a community college increased the probability of earning a bachelors degree within eight years of high school graduation by 23 percentage points for students who would not have attended any college in the absence of reduced tuition.

My guess is that it does not replicate.)

I am not even sure that students in the lower tier of four-year colleges have favorable outcomes. Instead, the true cost, including what the students pay out of pocket plus subsidies plus opportunity cost, exceeds the benefit for many who attend college. In contrast, President Obama seems to endorse the fairy-dust model of college, where you can sprinkle it on anyone to produce affluence.

He said a high school diploma is no longer enough for American workers to compete in the global economy and that a college degree is “the surest ticket to the middle class.”

He describes the U.S. as a place where college is limited to “a privileged few.” I think a more realistic assessment would conclude that the U.S. errs on the side of sending too many young people to college, not too few.

2. At community colleges, most of the favorable outcomes are middle-class students who, if community college were not available, would find some other path to success. (Possibly related: Philip Greenspun writes,

Amanda Pallais of Harvard presented “Leveling Up: Early Results from a Randomized Evaluation of Post-Secondary Aid”, a paper on the Susan Thompson Buff ett Foundation scholarship for lower income Nebraskans who have a high-school GPA of at least 2.5 and maintain a college GPA of at least 2.0. It turns out that people who are going to attend college and graduate will do so even without this grant and people who were marginally attached to academic will become only slightly more attached. The cost of keeping one student in college for an additional semester is $40,000 of foundation funds.

Pointer from Tyler Cowen.

3. For the students that you want community college to help, I think that the case for community college is sort of like the case for last-ditch cancer therapy. Every once in a while it works, and you want to give people hope. But looking at the overall costs and benefits involved, the money is not well spent.

4. Rather than expand community colleges, I suspect the best approach would be to contract them by making them more selective. Try to find the students who are most likely to benefit, and concentrate on those. Robert Lerman, who is far from an anti-opportunity meanie, suggests apprenticeships.

5. If I were President Obama, of course, I would champion universal “free” community college. Worst case, my proposal becomes law. A lot of money gets wasted, but it’s not my money. Best case, the Republicans vote it down and I call them anti-opportunity meanies.

Teaching is Not About Teaching

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Eric Loken and Andrew Gelman wrote,

Being empirical about teaching is hard. Lack of incentives aside, we feel like we move from case study to case study as college instructors and that our teaching is a multifaceted craft difficult to decompose into discrete malleable elements.

More recommended excerpts here. Pointer from Jason Collins.

They refer to statistical quality control. Deming would describe what educators do as “tampering.” By that, he means making changes without evaluating the effect of those changes.

I think that there are two obstacles to using statistical techniques to improve teaching. One obstacle is causal density. It is not easy to run a controlled experiment, because there are so many factors that are difficult to hold constant.

But the more important obstacle may be the Null Hypothesis, which is that you are likely to find very discouraging evidence. Sometimes, I think that what the various consumers of teaching (administrators, parents, students) want is not so much evidence that your teaching methods work. What they want is a sense that you are trying. Teaching is not about teaching. It is about seeming to care about teaching.

Of course, if student motivation matters, and if students are motivated by believing that you care, then seeming to care can be an effective teaching method. I recall a few years ago reading a story of Indian children attempting distance learning, with the computer guiding the substance of their learning supplemented by elderly women acting as surrogate grandmothers, knowing nothing about the subject matter but giving students a sense that someone cared about their learning.

The Paradox of Education

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Joel Kotkin writes,

Generally speaking, those areas that have the heaviest concentration of educated people generally do better than those who don’t.

He looks at statistics across different sections of California.

Sort of randomly, the other morning I went to Zillow and looked up house prices in three places. On Faris Avenue, which is a block over from my childhood residence in suburban St. Louis (my own street was all multifamily dwellings, but I wanted to price a single-family home), there is a 1440 square foot house for sale for $37,900.

I know someone who lives in a more affluent suburb in St. Louis. A 2428 square foot house on their street, Eversdale Court, sold almost two years ago for $417,000. Thus, it is less than twice the size of the house on Faris avenue, but it is worth more than 10 times as much.

In Bethesda, a 45-minute bike ride from where I live now, there is a new condominium building called The Darcy with prices that range from the mid $600 K to $3 million. The smallest floor plan has 835 square feet.

Just to put this in perspective, for the price of an 835 square foot condo in Bethesda, you could buy close to 4000 square feet of home on Eversdale Court and about 20,000 square feet of homes on Faris Avenue (which would just about get you the whole street). I think this tells you everything you need to know about economic disparities. And if you use house prices as your indicator of disparities, my guess is that you will find plenty of correlation with educational attainment rates.

But the paradox is that if you think of education as fairy dust, and you try to sprinkle it on to the residents of Faris avenue, you could sprinkle like crazy without moving their economic status very much. The Null Hypothesis, which says that educational interventions have almost no discernible long-term effects in a replicable controlled-experiment setting, is a pretty safe bet.

As you probably know, Bryan Caplan’s explanation for the paradox is that education is all signaling. My hypothesis, which is not too much different, is that formal education is a cultural norm for the affluent.

In Bryan’s story, the educational credentials play a causal role, because if you don’t get the credentials, you send an adverse signal. In my story, educational credentials are not a cause. They are a symptom of your future affluence, which is caused by the personality traits you inherited from your affluent parents. So when we observe clusters of well-educated young people in particular geographic areas, what we are observing are clusters of children of affluent adults.

College Incompletion Data

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From Tamar Lewin.

At most public universities, only 19 percent of full-time students earn a bachelor’s degree in four years, the report found. Even at state flagship universities — selective, research-intensive institutions — only 36 percent of full-time students complete their bachelor’s degree on time.

One could counter that many of these eventually do graduate, and that is ok, although the article points out that this makes college more expensive–and that does not even include opportunity cost.

One could also argue that colleges are doing a favor by admitting lots of students who will not graduate on time. They are “taking a risk” on marginal students, and all that.

Still, my position is that the reason that few come out of the funnel on time is that too many unqualified students are being crammed into the funnel in the first place. Talk to anyone who has taught at something other than a prestigious private institution, and chances are the professor will be surprised that the graduation rate is as high as it is. Most of those professors are bending over backward to grade generously, and even so….

UPDATE: Possibly related, Ben Wildavasky says that tuition at public universities is too low.

Edifice Complexes

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1. Here is my alma mater, Swarthmore. Trust me, they do not need this building. There are already hundreds of square feet of physical plant per student there.

2. Here is the University of Maryland.

Cole Field House would be reborn under a $155 million plan to convert the 59-year-old former basketball arena at the University of Maryland into an indoor football practice facility and “innovation” lab to help the school recruit athletes and others who are would-be entrepreneurs.

No doubt the funds for this were donated by someone with a deep love of education.

Kevin Carey on Vocational Education for College Grads

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He writes,

The obvious next target for boot camps is the expanding market for professional master’s degrees. This is really a case of one for-profit business competing with another—master’s degrees are market-priced revenue generators for “nonprofit” colleges and are treated as such. If more employers send the signal that “college degrees are not the primary qualification,” there could be a great many more students who decide that $8,000 for three months of intensive work is a much better deal than $50,000 for a master’s degree of questionable quality.

The article describes a program in which young people obtain computer skills using very practical exercises. Read the whole thing.