Category Archives: Economics of Education

Tabarrok and the Baumol effect, reconsidered

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A bunch of folks got together at Cato for lunch to gang up on Alex Tabarrok. Recall that he and Eric Helland want to claim that the high prices of health care and education are almost entirely due to the Baumol Effect.

I offered as an alternative hypothesis that much of the higher prices can be accounted for by the government subsidizing demand and restricting supply. Here are some notes, based on the discussion.

1. Health care spending has been rising at the same rate in most developed countries. Can government policy be the cause everywhere? On the other hand, in most developed countries the proportion of health care spending paid for out of pocket is low, to perhaps there really are not such significant differences in policy across countries.

2. Veterinary care prices have been rising even faster than human health care prices. Yet there are no government subsidies for pet care.

3. Incomes for other high-skill professions, such as accountants and lawyers, also have risen sharply. Point (3) sounds like it could support the Baumol-effect story, but on closer examination it is more problematic.

4. A pure Baumol Effect would raise wages in every occupation where productivity growth is slow, including for barbers and waiters. That has not taken place.

5. It is difficult to account for the vast difference in pay between adjunct professors and tenured professors. At one point, I asked “Are adjuncts idiots?” That is, are their skill levels so dramatically lower than those of tenured professors?

6. Another question to ask is, “Are college administrators idiots?” In theory, it would seem that you could create a university with all courses only taught by adjuncts and offer a low-cost degree. That this does not happen shows how difficult it is to compete in higher education.

Overall, I still suspect that the story of “It’s all a Baumol effect” is an intellectual swindle. It is tautologically true that in a two-good world, if the relative price of good X falls, then the relative price of good Y goes up. But it is not necessarily the case that the price of good Y has to rise relative to *the* wage rate. In fact, the opposite seems more likely. But the actual ata seem to show that prices in health care and education have gone up faster than wages. I have a hard time coming up with a two-good, homogeneous-worker general equilibrium model that can exhibit that behavior.

In fact, when it comes to talking about wages, Tabarrok pulls a switch and starts talking about the wages of high-skilled workers, so we are no longer talking about “the” wage rate. Instead, we are talking about a skill premium. So Tabarrok has already added an epicycle, as it were, to the Baumol Effect story. That is, he has grafted on a skill premium.

I can more easily fit the data to a story that includes a skill premium as well as a Baumol effect. But then one can argue that this skill premium depends in part on regulations that protect credentialed workers. It is amplified by demand subsidies for education and health care, which put government in the role of enhancing the skill premium.

You teach, we’ll grade

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Steven Hayward writes (WSJ),

Mr. Benson’s model is spreading in variations at other universities. A few similar programs already existed, such as the James Madison Program at Princeton and the Thomas Jefferson Center for the Study of Core Texts and Ideas at the University of Texas at Austin. Since 2016 I have been a visiting scholar at the University of California, Berkeley—an unimaginable prospect if not for my time at Boulder.

Hayward praises the reign of Bruce Benson as head of the University of Colorado at Boulder.

The question of what to do about higher education is top of mind for many conservatives these days, and it should be. Also from the WSJ, Allen C. Guelzo reviews a book by Richard Vedder.

some of the reforms Mr. Vedder puts forward—converting federal loan programs to vouchers and allowing students to assemble self-tailored programs across a variety of institutions; making a national Collegiate Learning Assessment the real credential for a degree rather than the mix of vacuous classes and inflated grading that now suffices; upping campus facility use to year-round schedules that will permit the completion of a degree program in three years rather than four.

I like the idea of using someone other than the professor to grade students. That was the way the Honors program worked at Swarthmore when I was there. The professor sent the syllabus to an examiner from another college or the world of work, and the examiner made up an exam and graded it.

The student cannot be certain that the examiner will bring the same prejudices as the professor. So students have to think about the material, not just aim to please their own professor. If there is a chance that the outside examiner has a conservative point of view, this might force professors and students to take conservative viewpoints seriously during the course.

Think about how this would change how students rate professors. If the professor is not doing the grading, then the students are not going to reward the professors who are easy graders.

I’m all for outside examiners.

Michael Strong on Evolutionary Mismatch

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He writes,

If our existing schooling system is unnecessarily exacerbating mental health issues, then parents, teens, educators, and policy-makers should re-evaluate the premises of our existing schooling system. If schooling-as-we-know-it is excessively different from our environment of evolutionary adaptation, then how should we rethink schooling in order to create healthier adolescent populations in the future?

It is a long essay, which covers a lot of research on the problems of contemporary adolescents. As I read it, I applied my rule of thumb, which is to focus on technology as a cause. Also, I came across the essay concurrently with my reading of Panic Attack by Robby Soave.

For example, Strong lists five characteristics of adolescent tribal life that are not shared by today’s youth. I will put them in a table.

tribal life modern life
(1) small tribal community of a few dozen to a few hundred with few interactions with other tribal groups. exposed to hundreds or thousands of age peers directly in addition to thousands of adults and thousands of electronic representations of diverse human beings (both social media and entertainment media).
(2) shared one language, one belief system, one set of norms, one morality, and more generally a social and cultural homogeneity that is unimaginable for us today. exposed to many languages, belief systems, norms, moralities, and social and cultural diversity.
(3) immersed in a community with a full range of ages present, from child to elder. largely isolated with a very narrow range of age peers through schooling.
(4) engaged in the work of the community, typically hunting and gathering, with full adult responsibilities typically being associated with puberty. Have little or no opportunities for meaningful work in their community and no adult responsibilities until 18 or even into their 20s.
(5) mating and status competitions would have mostly been within their tribe or occasionally with nearby groups, most of which would have been highly similar to themselves. are competing for mates and status with hundreds or thousands directly and with many thousands via electronic representations (both social media and entertainment media).

Of these five contrasts, (3) and (4) are linked to our schooling process. (1), (2), and (5) are much exacerbated in the world of smart phones and the Internet. I speak of it as the world of our new species, Homo Appiens.

The mental health problems of Homo Appiens have been emphasized by Jean Twenge and Jonathan Haidt.

Colleges’ right to discriminate

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Dennis L. Weisman writes,

On what basis can we credibly claim that a university that trades off academic talent for diversity or financial resources (to a degree disciplined by market forces) is discriminating and not simply selecting the optimal set of inputs to maximize its objective function in furthering the university’s institutional mission?

The court in the Harvard discrimination case may further delineate the boundaries of university discretion insofar as the admissions calculus is concerned. Whereas the court’s job is to enforce the law dispassionately, a ruling that eliminates or even tightly circumscribes the use of racial preferences while leaving athletic and legacy preferences largely intact would send a message that is likely to cut against the grain in the arena of social discourse: not all preferences in college admissions are created equal.

1. Note that if a university has the right to discriminate in favor of blacks, then it has a right to discriminate against them. That would seem rather awkward, except to a libertarian who subscribes to the view that only the government has an obligation not to discriminate.

2. I restate my suggestion, which is to abolish the admissions office and admit applicants by lottery. Then ruthlessly flunk out the lottery winners who cannot pass their courses. If the football team is more amateurish, so be it. If wealthy alumni have less incentive to contribute bribes on behalf of their children, so be it.

3. The issue of racial bias in college admissions is not high on my list of concerns. My concern is that the elite institutions of higher education may have reached a point where they do more harm than good, because of the way that they inculcate progressive dogmas.

4. Those of us who are worried about the issue of progressive dogmas in higher education have three avenues. One, which I call the Samizdat approach, is to utilize alternative media and hope that the availability of our point helps to save our culture. A second is to support Jonathan Haidt’s efforts to reform the academy from within, although I give these efforts almost no chance of succeeding. A third is to promote competing avenues for attaining access to wealth and status. The Thiel fellowship is one drop in what I would like to see fill a large bucket.

Scott Alexander on the APA meetings

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He writes,

Were there really more than twice as many sessions on global warming as on obsessive compulsive disorder? Three times as many on immigration as on ADHD? As best I can count, yes. I don’t want to exaggerate this. There was still a lot of really meaty scientific discussion if you sought it out. But overall the balance was pretty striking.

I’m reminded of the idea of woke capital, the weird alliance between very rich businesses and progressive signaling. If you want to model the APA, you could do worse than a giant firehose that takes in pharmaceutical company money at one end, and shoots lectures about social justice out the other.

Higher education has an awful disease, and it has spread in several directions.

Claremontism

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Thomas D. Klingenstein writes,

we are engaged in a contest between two understandings of justice, one built on the principle that all human beings are equal—the other on the principle that all “marginalized” identity groups are equal, and all are oppressed by white males.

This is from the Claremont Review of Books, and it may be behind a subscription wall. I am out of alignment with the Claremont folks, but this publication is still very fulfilling.

They are solidly behind President Trump. As Klingenstein puts it,

Nourished in our colleges and universities, multiculturalism is an insane exercise in self-flagellation. It sees America’s past as a series of crimes against humanity: genocide, racism, and all its co-morbidities. Multiculturalism’s worldview is enforced by a ruthless speech code (political correctness) which makes it virtually impossible for anyone in the mainstream of American life to challenge it. Trump, however, is the exception. He has shown that it is possible to stand up to multiculturalism.

My own thoughts.

1. I agree that the leftist intellectual outlook on elite campuses is poisonous. The poison then spreads to less-elite campuses, to schools of education, and to schools of journalism.

2. I disagree that the antidote is Donald Trump.

3. Think of the problem this way: Harvard and the New York Times are infected with bad ideas, such as hostility to capitalism. These bad ideas then spread. Our challenge is to ensure that better ideas have a chance to reach young people.

4. One approach is Samizdat. Soviet dissidents, excluded from mainstream media under Communism, resorted to secret copying to in order to disseminate their ideas. The IDW is our Samizdat.

5. A second approach is internal reform. Jonathan Haidt’s Heterodox Academy is an example.

6. A third approach is to try to disrupt higher education. Somehow make it possible for people to bypass the indoctrination centers and still have the same life opportunities.

Race and education

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This is the topic of a wide-ranging discussion between Michele Kerr and Glenn Loury. They get into the highly-charged subject of racial disparities in school suspensions, and the Obama Administration’s presumption that such disparities reflected racism, which pressured schools to reduce suspensions. Here is a recent article blaming the Obama edicts for an increase in attacks on teachers.

I actually was interested in Kerr’s description of T’s, K’s, and S’s. That is, a teacher can be most focused on Teaching, on the Kids, or on the Subject. As I interpret this, a T is focused on “moving the needle” with real signs of progress for the students. K’s focus on kids and making them comfortable (think of a kindergarten teacher). An S would focus on the subject matter (think of a college professor).

I was trying to relate to this to my own experience teaching high school. I had a bit of each type of behavior.

K behaviors: On the first day, I started out with an icebreaker. Also, I told students that my goals were long term. I would value an email from a student five years later.

T behaviors: I always hoped that the AP scores would be good.

S behaviors: I had very strong views of what I wanted to get across in my statistics and economics classes.

I am not sure whether this is K or T, but I also adopted the philosophy of my favorite college professor, Bernie Saffran, which was never to let the material get in the way. If a student came in with an interesting question, even if it was totally off topic or even off subject, if I thought that I could provide an interesting take on the topic, I would go with it.

Overall, I think I was more S than K and more K than T.

Null hypothesis watch

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Sarah Cohodes and co-authors write,

We study a policy reform that allowed effective charter schools in Boston, Massachusetts to replicate their school models at new locations. Estimates based on randomized admission lotteries show that replication charter schools generate large achievement gains on par with those produced by their parent campuses. The average effectiveness of Boston’s charter middle school sector increased after the reform despite a doubling of charter market share. An exploration of mechanisms shows that Boston charter schools reduce the returns to teacher experience and compress the distribution of teacher effectiveness, suggesting the highly standardized practices in place at charter schools may facilitate replicability.

One of the main pillars of the null hypothesis is that education interventions that succeed as experiments often fail to replicate. If this study is valid (if it replicates, so to speak) then it helps knock down one of those pillars. Since it favors charter schools, I am actually rooting against the null hypothesis in this case. But we’ll see.

Fair market test for American universities?

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Tyler Cowen writes,

American higher education does pass a massive market test at the global level — foreign students really do wish to come and study here.

If you just look at the Anglosphere, it’s not clear to me that we are winning a market test. The foreign students are not flocking here from Australia, Canada, and the UK. As for the Asians who are flocking here, I would ask whether they strongly prefer U.S. universities to universities in Australia and Canada, and if so, why. Two seconds of Googling yields this, for example:

A boom in international student numbers in South Australia and the impending merger of two Adelaide universities convinced James Hines to abandon plans for a hotel on a prime city site and instead turn it into one of the world’s tallest student accommodation towers.

And if it turns out that the U.S. does relatively better at drawing Asian students, some reasons could include:

1. A student visa is a relatively easy way to get an extended stay in America, if that is what you want.

2. If you can then get a job here, you can get a green card and stay even longer.

3. Although you might get fine instruction at McGill or Adelaide, you can pick up American culture more readily at Mason.

Thoughts on the Adversity Score

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The WSJ reports

The College Board plans to assign an adversity score to every student who takes the SAT to try to capture their social and economic background, jumping into the debate raging over race and class in college admissions.

My thoughts:

1. The graphics that accompany the article show that parents’ income, education, and race are predictive of their childrens’ SAT scores. I suppose that the politically correct interpretation is that this is because wealthy, well-educated, whites and Asians are the oppressors and others are the oppressed. In theory, when social justice prevails, there will be no more statistical differences in SAT scores. But I’ll just come right out and say that I am inclined to believe that the statistical differences primarily reflect genetics.

2. If it were up to me, there would be no admissions decisions and no charge for a college application. Admissions would be by lottery. A student who applies to Harvard is responsible for being able to pass the courses there. If you enter the lottery, get chosen, and flunk out, then the waste of time and money is on you and your parents.

3. With a lottery, the football coach would not be able to recruit players for admission. Oh gosh, what would that do to college sports teams? Make them. . .amateurish?

5. Meanwhile, I am rooting for the existing college admissions process to become discredited. I was glad to see it take a hit with this year’s scandal. I hope that the “adversity score” deals another blow.