Education and the Economy
To graduate from a four-year college, and often from high school as well, most students needs to study a foreign language. Unfortunately, students at every level are permitted to graduate without knowing much about money. The JumpStart Coalition, which promotes financial literacy among the young, surveys high school seniors on this subject, and while the results improved a bit this year, they were still pretty dismal: "This year, 65.5 percent of students failed the exam and 6.1 percent scored a C or better." (The full survey is here.)
This has always been a pet topic of mine. A relatively small investment in teaching kids about personal finance might not only improve their lives as adults but also promote economic growth by leading to better spending decisions and more savings and investment. This could become even more important if the Bush administration moves ahead with any plans for privatizing Social Security.
One way to sell colleges on the idea: more financially savvy graduates will be able to donate more money down the road. The payoff should be highest for arty colleges that don’t produce the kinds of MBAs who will later endow chairs, buildings and the like with just a fraction of their wealth. In fact, given the focus of college presidents on fund-raising, it’s odd that this kind of education hasn’t been given more emphasis by now. Maybe administrators are using the wrong discount rate.
Addendum: Gary Leff of View from the Wing sent a thoughtful email arguing persuasively that college administrators are unfortunately using the right discount rate from their own point of view, because any possible donations are many years off into the future, far beyond the relatively limited term of the average college president. By contrast, the costs (in academic capital as well as dollars) of requiring kids to learn something about money are all too immediate. So it doesn’t happen.
Red in Tooth and Claw
Is it possible that near-universal affluence and the social safety net inevitably make for less moving fiction? This thought is suggested by A Fine Balance, Rohinton Mistry’s heart-wrenching novel of India that invites comparison to the English novels of the 19th century–complete with a kind of workhouse in which our heroes are briefly incarcerated. Such is life in the developing world; fans of Sister Carrie should read "At 18, Min Finds a Path to Success in Migration Wave" at wsj.com (requires subscription), about the odyssey of one young woman from rural China.
Mistry’s book is set around 1975, with periodic excursions into the deeper past, and gives us a portrait of a place (India during the suspension of civil liberties under Indira Gandhi) where affluence is rare and the social safety net almost non-existent. It’s a society where the dead hand of bad government blights almost everything: there is rent control, food rationing, and a bureaucracy so extensive that "facilitators" negotiate it for you for a fee. Corruption abounds, abetted by all the regulation.
In literary terms, it’s too bad modern Western novels aren’t much concerned with money nowadays (you can read more about this), but to the extent the phenomenon reflects reader prosperity it’s probably just as well. Read A Fine Balance and you’ll come away feeling that the characters in most Western novels-like the people in most Western societies-have no idea how good they have it.
Football and Old Growth Forests
My hometown of New York City, where a rigorous political process weeds out all but the nuttiest ideas, is considering building a $1.4 billion stadium to bring the Jets back across the river from New Jersey, where they share quarters with the Giants. New York city and state would ante up $300 million each even though NFL football teams only play eight home games a year. Are communities crazy to do this kind of thing?
Not necessarily, according to economists Jerry Carlino and Ed Coulson, whose highly readable recent paper on the subject tries to take account of the intangible value people derive from sports teams. "We found that once quality of life benefits are included in the calculus," they write, "the seemingly large public expenditure on new stadiums appears to be a good investment for cities and their residents." The authors liken having an NFL team to having an old-growth forest–it’s something people enjoy even if they never visit. This is to say nothing of the pleasure and unity they derive from rooting, discussing, etc.
That would account for why these stadium deals are politically popular; Pittsburgh area households, for instance, said in a survey they’d pay an extra $5.57 annually each to keep the NHL Penguins–which works out to a present value of $66 million at 8% over the presumed 30 year life of a stadium. Carlino and Coulson worked from their estimate of the effect NFL teams have on local rents (for some reason football seems to raise them) to determine that teams bestow an amenity value of $184 per person. In metro New York, this could be huge. Then again, the Jets are already *in* metro New York.
My take: I’m not qualified to comment on the researchers’ methodology, but broadly speaking I think they’re onto something. My sons and I get great pleasure following the Yankees, for instance, and would gladly pay some small annual tax to keep them. But my guess is that the intangible value of an NFL team would be inversely proportionate to the importance of a city. You can’t take the Packers out of Green Bay, but Los Angeles doesn’t seem to mind having no team at all. Then again, maybe it’s just the weather.
Hope for Hart Schaffner Marx
Find you can’t get much done at home? Now we know why. Researchers at Stanford University…
carried out a number of studies in which they exposed individuals to objects common to the domain of business, such as boardroom tables and briefcases, while another group saw neutral objects such as kites and toothbrushes. They then gave all of the participants tasks designed to measure the degree to which they were in a cooperative or competitive frame of mind.
In every case, participants who were "primed" by seeing the business objects subsequently demonstrated that they were thinking or acting more competitively. The effect was the strongest when they had to respond in situations that were deliberately ambiguous.
"Competitively" meant that when quizzed they finished the word "wa_" with an r, and finished the word c__p___tive as "competitive" rather than "cooperative." But apparently the business objects exercised their influence subliminally:
Participants denied that being exposed to business-related objects had influenced their behavior in any way.
That’s not all. In a variant on a well-known experiment,
Participants were given $10 and asked to decide how much they were willing to share with a partner. The catch was that the partner could refuse any offer perceived to be too low, in which case neither participant would receive anything. While subjects exposed to neutral pictures generally split the money 50-50, only 33 percent of those who looked at business-related objects did, showing that they had become less cooperatively oriented. Results were similar when participants were exposed in the experiment room to actual business-related objects, such as a briefcase and an executive pen, as opposed to a backpack and a wooden pencil.
You can read a fuller account here. To me the implications are clear: no more nerf ball and blue jeans at the office. And for those of us who work at home, this is the month to climb out of our pajamas and unload all that Danish modern.
Heavy Going for Airlines
America’s airlines are beset by higher fuel prices, cut-throat competition and costly labor agreements. The industry’s total profits, since its inception, are probably around zero. Now this:
Through the 1990s, the average weight of Americans increased by 10 pounds, according to the Centers for Disease Control and Prevention. The extra weight caused airlines to spend $275 million to burn 350 million more gallons of fuel in 2000 just to carry the additional weight of Americans, the federal agency estimated in a recent issue of the American Journal of Preventive Medicine (fee req’d).
The extra fuel burned also had an environmental impact, as an estimated 3.8 million extra tons of carbon dioxide were released into the air, according to the study.
The full story is here.
My take: The most persuasive explanation for the fattening of America in the past 25 years (two-thirds of adults are now overweight) is technology, including advances not just in computing but also food preparation. What we’re seeing now is what Edward Tenner would call a classic revenge effect, in which technological solutions create new problems–usually, problems requiring constant vigilance. Ed explores this at length in his marvelous book Why Things Bite Back.
Medicare considers obesity an illness, but the costs and benefits haven’t adequately been explored. If obesity has this effect on airline fuel consumption, just think about driving! Look for OPEC to roll out a line of snack foods or soft drinks. My vote for best brand name: "Tank Up."