Assorted links

by on February 27, 2013 at 11:18 am in Uncategorized | Permalink

1. Fish conformism, and one fish rebel (photos).

2. Thomas Edison State College, a results-only approach.

3. Marie Gryphon Newhouse has a new blog on think tank ethics.

4. Leading economists vote on raising the minimum wage.

5. Shadow banking in China.

6. How well was ARRA funding allocated?  By the way, here is another reason why citizens get frustrated and support methods such as the sequester.

TheAJ February 27, 2013 at 12:02 pm

#1 ““It was like a field exam,” said Mr. Brooks, now 48. “He asked about Adam Smith, John Keynes, supply and demand, macro and micro — everything an economics major at any university would be expected to know.” ”

Uhhh. I hope he was speaking generally because that is stuff an AP Econ student should know, not an economics major.

““It sounded like a scam, but the fact that it was a state school, and accredited, made it more real,” Mr. Esterson said.”

The key here is that it is a state-school and non-profit.

MC February 27, 2013 at 7:44 pm

“Uhhh. I hope he was speaking generally because that is stuff an AP Econ student should know, not an economics major.”

Give me a break, of course he was simplifying it for an audience not fluent in econ.

Christopher D. Long March 2, 2013 at 7:41 pm

Thomas Edison is an absolutely wonderful school and a potential model for how MOOCs could revolutionize the 4-year college. A friend of mine was able to finish her final year at Thomas Edison at minimal cost through a combination of various free classes (offered through FEMA; she was studying emergency management) and a variety of inexpensive online courses offered through several different colleges.

JWatts February 27, 2013 at 12:06 pm

“The key here is that it is a state-school and non-profit.”

Are you saying the key to the college’s credibility is that it’s a state-school and non-profit? Why?

Andrew' February 27, 2013 at 12:13 pm

Maybe because in 5 years MOOCs haven’t quite attained the reputation that subsidized schools have accumulated over 500. But, considering their reputation perfectly correlates with fundamentals, then they should have nothing to fear.

TheAJ February 27, 2013 at 12:18 pm

Are you saying the key to the college’s credibility is that it’s a state-school and non-profit? Why?

Because it is focused on education and cost control whereas the University of Phoenix and its satellite campuses across the US are more focused on securing the most financial aid possible.

Andrew' February 27, 2013 at 12:48 pm

My assumption would be they are focused on growth, like any other growth business would be were they them.

TheAJ February 27, 2013 at 1:22 pm

Growth Business? Its a college.

JWatts February 27, 2013 at 1:26 pm

“are more focused on securing the most financial aid possible”

I haven’t noticed that “public” schools are leaving any money on the table, either.

Urso February 27, 2013 at 2:31 pm

The for-profits have raised it to an art form. According to the recent Senate committee report, their business model has everything to do with obtaining federal funds and litle to do with educating. What was incredible to me was the ratio of employees whose job it was to get student loans for incoming students vs. the employyes whose job it was to help outgoing students get jobs (0).
http://coloradoindependent.com/85507/senate-committee-investigates-for-profit-colleges%E2%80%99-use-of-taxpayer-money

http://www.nytimes.com/2012/07/30/education/harkin-report-condemns-for-profit-colleges.html?_r=0

Cicero February 27, 2013 at 2:51 pm

Well this is a bit of a conundrum for a hard-core libertarian. High tech firms in Silicon Valley overwhelmingly prefer to recruit new college hires from state schools and private non-profits: UC Berkeley, UC Davis, Stanford, Santa Clara, San Jose State, Cal Poly. People with degrees, in any discipline, from the likes of Univ. of Phoenix and Heald have their education severely discounted. SO the market is signalling that to date for-profit school graduates have received inferior, or at least less useful, educations. And I dont think a crowding out argument can be made here.

Urso February 27, 2013 at 3:35 pm

I don’t see how that’s inconsistent with liberterianism (or even relevant to it). Organizations are good at what they want to be good at. For-profits want to be good at squeezing $ out of students. Non-profits want the prestige of having the best, most successful students and graduates. The government’s mistake is expecting group 1 to act like group 2 just because they both have “university” in the name. But the guys actually doing the hiring know better.

Although I went to a university in group 2 and managed to spell both “little” and “employees” wrong in my prior post so, you know, either way there’s no guarantee.

Urso February 27, 2013 at 3:44 pm

Great example from the Boston Globe, c/o Matt Y. They talk about how famous athletes’ non-profits are poorly managed because they give so little money to charity while spending a lot on high-cost fundraisers like bowling tournaments and golf outings. That misses the point. For most athletes, what’s important is not only to give to charity, but to be *seen* giving to charity. And having a golf tournament named after you, with proceeds to the local hospital, is a great way to do that. The problem isn’t that they’re fulfilling their goals inefficiently, it’s that they’re efficiently fulfilling goals that we think are less than optimal.
http://bostonglobe.com/business/2013/02/24/nonprofit-game-many-athletes-post-losing-records/a0Eqoz6RUYORFhT0T0j0EO/story.html

TheAJ February 27, 2013 at 3:55 pm

I believe it was almost 7 or 8 years ago, but the Dean of the Indiana’s Business School was giving a speech and was talking about the University of Phoenix, which was already the largest university at the time. He said that while folks like us might scoff at that school, all it will really take is for one almunus to come out of there and make it big to totally change the discourse on how the school is perceived. 8 years later, the school’s most wealthy alumnus is the son of the founder, and its most famous is still Shaq. What a great “university”

The fact is, these places sound great in principal, but “libertarians,” conservatives, and free marketers refuse to different the problem (the for profits) from the whole group (universities) because of their ideological biases against academy. This is why they rail against student loans but do not support the presidents agenda to limit loans to the for profits – because its still important to them that the private sector to win every battle against the government, no matter who is harmed.

Its the same way I feel about online universities and coursework. I’m all for it, but I’ll only start taking it seriously when Tyler and Alex enroll their kids at one of those instead of at George Mason.

JWatts February 27, 2013 at 4:16 pm

I think it might be a good idea to tie Federal financial aid to outcomes by group (major, business specialty, etc) at all colleges. Along with higher transparency.

Available financial aid should vary depending on the average salary of the graduates. With the information determined on a school and major basis.

From the link:

“Colleges with very high loan default rates in the two years after graduation (now changing to three years) lose their eligibility for federal student aid.”

So this sounds like a self-correcting problem. However, instead of judging by defaults rates perhaps the metric should be average starting salaries.

TheAJ February 27, 2013 at 7:27 pm

Available financial aid should vary depending on the average salary of the graduates. With the information determined on a school and major basis.

So this sounds like a self-correcting problem. However, instead of judging by defaults rates perhaps the metric should be average starting salaries.

Trying to figure out why you want to open federal student loans to even more meddling, hurdles, and arbitrage opportunities. I’m wondering if your actual purpose isn’t really to just set it up to fail.

TheAJ February 27, 2013 at 3:40 pm

I haven’t noticed that “public” schools are leaving any money on the table, either

Uh. “Public” schools also receive funding from the state coffers (hence the name “public”) endowments, grants, some service selling, etc. Not just from financial aid. They also happen to use that money on their students. And you know what’s also important? The fact these public students are actually going to pay off that debt because they actually get real jobs. The for-profits do not have to care about this
Tyler posted the default rates last week. They are much lower for the U of Whatever State, Small College Town than they are for the U of Phoenix, Local Office Park.

Jeez, of all the equal-equals that get thrown around here.

DocMerlin February 27, 2013 at 7:03 pm

“They also happen to use that money on their students.”
Not really. Most of it goes to other expenses, not towards their students.
Non-profits are no different in an economic sense than for-profits, they are only different in a tax and legal sense.

JWatts February 27, 2013 at 10:30 pm

I don’t disagree, but it does appear as if the current crop of for-profit institutions is performing poorly. Normally the market would take care of that situation pretty quickly, but with the heavily subsidies and the customer not paying for much of the cost, the incentive structure is broken.

DocMerlin February 27, 2013 at 5:17 pm

Correct, they they do very heavy price discrimination.

Kevin Shih February 27, 2013 at 12:09 pm

More interesting news: transgender 1st grader banned from girl’s bathroom. http://www.cnn.com/2013/02/27/us/colorado-transgender-girl-school/index.html?hpt=hp_c1

Ray Lopez February 27, 2013 at 12:28 pm

@#2 – “Then she married and eventually moved to Indiana. She had 10 children, whom she home-schools, and worked in her husband’s business. About a year ago, at 39, she resolved to complete a degree. In a kind of a higher-education sprint, she took a number of college equivalency exams, earning 54 credits in 14 weeks” – how many of you guys can do that? None. Superwoman!

john personna February 27, 2013 at 12:31 pm

#2 sounds like an awesome model for the future, wonderful that is has this example and track record

libert February 27, 2013 at 12:32 pm

#4. The data is misleading because I think many people were confused by the question. Many people answered “Agree” while their comments expressed opinions more consistent with the “Disagree” answer (see Robert Hall and Judith Chevalier for example)

JWatts February 27, 2013 at 1:29 pm

I was also perplexed by the answers to the two different questions. The answers seemed to be against a minimum wage of $9 in the first question, but in favor on the second question. Probably I was just misinterpreting the wording on the second question.

Cliff February 27, 2013 at 9:48 pm

Seems pretty obvious to me. Many people thought there would be significant disemployment effects, but nevertheless the benefits would outweigh those.

I am surprised at the results. I had thought the weight of the evidence was squarely on the side of disemployment.

C February 27, 2013 at 3:07 pm

“I’m aware that some fairly clean natural experiments have not found effects.” Bob Hall (answered Agree with confidence 3)

That doesn’t inherently contradict his Agree response. To me he is saying “I agree with this statement, but I am aware that there is compelling evidence to the contrary.” Given that he gave a 3 for confidence, I think his answer and explanation are consistent.

Another one that looks like his explanation contradicts his response is Joe Altonji. He agreed but said “The weight of the evidence is that a modest increase in the minimum will have a small negative effect on employment of low skill workers.” But I think he’s making the point that this is not a modest change but a large one, like Chris Udry mentions in his comment.

I will admit, however, that Chevalier has me confused. Besides her response, though, everyone who commented gave a consistent explanation to the response. It seems unfair to completely disregard the data because one person failed to clarify her response in 100 characters.

Nick_L February 27, 2013 at 1:27 pm

Re #4, I suspect that Harry Truman would not evince much surprise at the results for Q1.

AndrewL February 27, 2013 at 1:41 pm

Somewhat related to the federal minimum wage increase: If the federal minimum wage increases to 9$/hr… does that mean I have to increase my tip% at a restaurant? or should I tip more?

Anon. February 27, 2013 at 2:35 pm

#4

Now repeat the same questions for $10, $11, $12, etc. How would the responses change, and on what basis?

Urso February 27, 2013 at 3:26 pm

“Noticeable.” The reason $9 is nbd is that the vast majority of people make more than that and are unaffected anyway. The higher it goes, the more people would be affected, and the effects would become noticeable.

The minimum wage question is kind of like the Laffer curve, right? Everyone kind of agrees that at a certain point, it becomes self-defeating, but no one has any good evidence of where that point is.

Cliff February 27, 2013 at 9:50 pm

Well the Laffer curve is tautologically true, while many economists would say any minimum wage is net harmful.

Urso February 28, 2013 at 12:56 pm

Not sure about that. If you ask that panel of economists the same question with respect to, say, a $2 minimum wage, I’d guess that all or almost all would say there’d be no negative effects.

Spencer February 27, 2013 at 2:39 pm

Conversely, would cutting it to $5.00 actually create jobs, explain how.

JWatts February 27, 2013 at 4:22 pm

A lot of restaurants would hire additional people if wages were much lower. And $5 would be much lower. Do you disagree with that premise?

Brian Donohue February 27, 2013 at 2:44 pm

#4. Economics used to be the ‘dismal science’. Now it’s the art of ‘Yes, we can!’

dbeach February 27, 2013 at 4:18 pm

Yeah I was pretty shocked by the results of this poll, not so much the response to the first question as the second. Admittedly several people said it would be desirable policy but the EITC is better, but these are economists, not politicians. Even if an increase in the EITC is not on the table while a minimum-wage increase ostensibly is, even a liberal economist shouldn’t support inferior policy.

Matt February 27, 2013 at 6:40 pm

I found the near 50/50 split odd too. Maybe it was just the strange questions.

Is the market for low-skilled labor generally monopsonistic, or not? Assuming it’s not, does the minimum wage create a deadweight loss that is borne in some combination by consumers, employers, and the least-skilled workers, or not? Does this deadweight loss rise in proportion to the minimum wage, so that with a really small minimum wage it is kind of hard to measure but it gets easier to measure the more meaningful the MW increase, or not? Assuming there is a consensus on these questions, I find it fairly uninteresting to ask economists whether they think that imposing the above losses are “worth it” for society. Economists have no special training in aesthetics or moral philosophy that would make their opinions on these matters more sophisticated than the average person’s.

Thaler’s comment is interesting: it implies that federal price controls on wages are no more distortionary per “unit of redistribution” than any other policy. This seems unlikely but might be the type of question that economists could apply their expertise to answer without coming to a 50/50 split.

DocMerlin February 27, 2013 at 7:05 pm

It was called the “dismal science” because economists rejected that slavery was moral. But like every group funded by the state, it has been captured to serve those with political power.

Dismalist February 27, 2013 at 7:13 pm

Actually, Carlyle called it the “dismal science” because some economist [I forgot which one] pronounced that not enough Irish people had died to restore equilibrium in the wake of the potato famine. :-(

Steve J February 27, 2013 at 6:15 pm

I have a hard time understanding the need for a minimum wage anymore. It thought it was in place to make sure employers did not “strongarm” employees into agreeing to low wages. Job seekers now are more mobile and have more access to wage related information. And from my perspective just by living in the United States you are overpaid by default. I guess it can also be considered another avenue of income redistribution but it seems we have so many of those we now have to study the impacts of one against the next.

mulp February 27, 2013 at 9:05 pm

You live on less than $15K a year?

How?

Cliff February 27, 2013 at 9:53 pm

Your comment is totally unrelated what you are commenting on. Nevertheless, as a single person it is certainly possible to live on less than $15k per year in relative comfort and I have known people who have.

JWatts February 27, 2013 at 10:43 pm
TheAJ February 28, 2013 at 1:23 pm

I hope one day we can get a clear and concise reconciliation of the “You can make it on $15K a year” and the “It’s really a struggle even at $250k a year” arguments.

Roy February 28, 2013 at 4:17 pm

You haven’t read many 19th century English novels have you?

Hint: it is about maintaining social standing

Dismalist February 27, 2013 at 7:18 pm

#4: I, too, found the combinations of answers and comments to the minimum wage question confusing. Upthread, some had the right idea: How about $10, $11, etc.

Of these economists, I ask: If the minimum wage for economists were 300 grand per year, would the number of economists working as such decline, increase, or remain the same?

My job would disappear, guaranteed.

Noah Smith February 28, 2013 at 11:33 am

That fish looks like he’s a commander giving an inspiring speech to the troops.

“They may take our lives…but they will never take…OUR PLANKTON!!!”

(cheers and whoops)

ThomasH February 28, 2013 at 1:12 pm

While it is interesting to know that the ARRA was not allocated according to state employment rates, that is hardly a criticism of fiscal stimulus as a policy. Ideally, allocations to states would act as a surrogate for the states being able (financially and politically) to borrow so as to carry out activities that have positive NPV when evaluated at the temporarily reduced discount rate and at shadow prices incorporating unemployment of the factors of production used in such activities. I would not expect such an ideal allocation to be highly correlated with unemployment rates of labor across states.

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