Education

How do partisans of the signaling model of education explain female wage growth over the last few decades?  It’s easy for the human capital theory: female education went up and so did female productivity (plus discrimination fell, but let’s put that aside for now).

But if those women were just signaling, their productivities are about the same and yet their wages are way higher.  Are they now massively overpaid?  That hardly seems possible — when will the en masse firing begin?

Alternatively, perhaps the women were considerably underpaid in 1963, because their lack of interest in educational signaling branded them as lower quality workers.  (Again, this has to be an effect net of discrimination.)  But why would that have been a rational inference for employers to make?  If a woman didn’t go to college or graduate school back in 1963, there were plenty of obvious sociological reasons why not, and it didn’t much signal low intelligence or low conscientiousness.  It shouldn’t have lowered wages, not in the signaling model.  So in 1963 there was a discrimination-based underpayment, but it is hard to argue for a signaling-based underpayment to women as a class.

You also might think that female wages have gone up since 1963 because women have been socialized to desire work and money more.  But if that socialization raises productivity, it still won’t support a signaling story, which treats productivity as fixed due to type.  Furthermore then the door is open for socialization theories of education, even if college is not the only source of socialization.

So why then have net-of-discrimination female wages gone up so much, if not for the human capital story?

You will note that the signaling theory seems most plausible as an explanation of what happens right after people get out of college, and thus it appeals to many students and also to some academics.  Signaling theories of wages are least plausible as they try to explain broad patterns of wage movements over time, and then you must bring in human capital considerations.  In similar fashion, signaling theories won’t explain the relative wage stagnation since 1999 and many other longer-term puzzles; they just don’t play in this arena.

Here are some data on female wages and labor supply over this period.

Addendum: Bryan Caplan refers me to this piece of his on related issues.  And here is my Econ Duel with Alex on education and signaling.

Group selection bleg

by on September 2, 2016 at 12:56 pm in Books, Education, History, Science | Permalink

What are the best arguments for and against explanations relying on the concept of group selection?  I would like to read more in this area, your suggestions are welcome, please leave them in the comments.  Thanks!

Here’s an excellent letter from Don Boudreaux. I admit he had me at the title, Thinking At the Margin: It’s Revolutionary:

…I agree that most people are troubled that the likes of Tom Brady and Jennifer Lawrence earn far higher pay than does any firefighter or school teacher.  But this reality reflects not people’s correct understanding of a failing economy but people’s incorrect understanding of a successful economy.  It reflects also a failure of economists to better teach basic economics to the general public.  So let me ask: would you prefer to live in a world in which the number of people who can skillfully fight fires and teach children is large but the number of people who can skillfully play sports and act is very tiny, or in a world in which the number of people who can skillfully fight fires and teach children is very tiny but the number of people who can skillfully play sports and act is large?

I’m sure that you’d much prefer to live in a world in which skills at fighting fires and teaching children are more abundant than are skills at playing sports and acting.  Precisely because saving lives and teaching children are indeed far more important on the whole than is entertainment, we are extraordinarily fortunate that the numbers of our fellow human beings who possess the skills and willingness to save lives and to teach children are much greater than are the numbers who can skillfully play sports and act.

The lower pay of fire fighters and school teachers simply reflects the happy reality that we’re blessed with a much larger supply of superb first-responders and educators than we are of superb jocks and thespians.  Were it the other way around, then while we’d be better entertained with more top-flight sporting events and movies, all but the richest amongst us would suffer significantly greater risks of being unable to educate our children and of dying in house fires and from other mishaps.

That is my latest Bloomberg column, here is one bit:

…new evidence on mutual fund managers suggests that the managers from poorer backgrounds beat the performance of wealthier peers. And it’s not a small effect: Managers from families in the bottom quintile of wealth appear to outperform those from families in the top quintile by 2.16 percent a year, in risk-adjusted terms.

That is one result from a new study by Oleg Chuprinin of University of New South Wales Business School and Denis Sosyura at the University of Michigan Business School.

Why might that be?:

Most individuals from less wealthy backgrounds don’t get to be mutual fund managers at all, and so as an entire class they do underperform. But if they do become fund managers, that may indicate superior smarts and hustle and eventually higher returns. Those from wealthier families, in contrast, maybe had to work less hard and be less smart to get those posts, and that may be reflected in their subsequent performance.

This hypothesis is supported by several features of the data.  For instance, the managers from wealthier families had a higher dispersion of returns. In other words, some of them did very, very well but others were lemons. That distribution is a classic sign of a relatively loose quality filter, and on strictly meritocratic grounds some of those managers probably didn’t deserve to be there.

Along those lines, the data show also that the fund managers from the wealthier families were more likely to receive promotions when their returns were subpar. The returns of the managers from the poorer families were much more tightly bunched, which is consistent with the notion that they passed through much tougher quality filters.

There are some relevant caveats, however, so do read the whole thing.

This is from the Telegraph obit:

“However, not many, perhaps, were aware that the serial was commissioned with a serious political purpose: to popularise public choice theory. It is because it succeeded spectacularly that Jay received a knighthood in 1988.”

There are numerous interesting points in the obituary, for instance:

In Zimbabwe, Robert Mugabe was said to be a No 1 fan.

For the pointer I thank David Stein.  And here is my earlier Conversation with Margalit Fox, senior obituary writer for The New York Times.

The subtitle is The Power of Disorder to Transform Our Lives, and it is Tim’s best and deepest book.  You’ll be hearing more about it in due time, the publication date is October 4, you can pre-order it here.

No, that is not enlightenment about life, that is enlightenment about Enlightenment, as in the eighteenth century phenomenon.  P., a loyal MR reader, wrote to me with such a request, noting correctly that “I usually find that broad, ambitious survey books are not the answer.”

That survey would be Peter Gay, recently a bestseller in China by the way, and then Ernst Cassirer, Jonathan Israel, and Roy Porter, but let me outline an alternative program of study.  The goal here is to be practical, engaging, and vivid, not comprehensive or scholarly per se:

Books:

Geoffrey Clive’s short book The Romantic Enlightenment.

James Boswell, Journals, selected excerpts, he was an early blogger by the way, and David Hume, An Enquiry Concerning Human Understanding.  I find that to be one of the wittiest of books.  Plus Hume’s Essays.

Diderot, Rameau’s Nephew, and Rousseau’s Second Discourse.  Condorcet, Essay on the Progress of the Human Mind.  Voltaire I consider overrated.

Swift, Gulliver’s Travels, yes I know it is arguably “anti-Enlightenment,” better yet.  If you insist on another Irishman, Bishop Berkeley is an entertaining writer as well.

Founding documents of the United States, and Ben Franklin, Autobiography.

Kant, Perpetual Peace, “What is Enlightenment?”, and Lessing, Nathan the Wise.

Beccaria, Of Crimes and Punishments.

If you have the time to tackle longer books, start with Smith’s Wealth of Nations and Boswell’s Life of Johnson and then Casanova and Tristram Shandy (there is by the way a splendid book on the postmodern in the Enlightenment but I can no longer remember the cite).  Leave Montesquieu to the Straussians, although the returns are high if you are so inclined.

For history, read up on eighteenth century scientific societies, Robert Darnton on the rise of publishing and the book trade, Habermas on the coffeehouse debate culture and the public sphere, and Brewer and McKendrick on the rise of consumer society in England.  Try Wikipedia for Catherine the Great, Frederick the Great, and other rulers of the time.  There is also Margaret C. Jacob, The Radical Enlightenment, and books on 18th century Freemasonry.  The French Revolution seems to require its own blog post, as does the Industrial Revolution, slavery too, in a pinch resort to the MR search function box on this blog.  Foucault will give you a sense of the dark side of the Enlightenment, his history is unreliable but read him on Discipline and Punishment and on ideology try the rather dense The Order of Things.

That all said, I would start with music and the arts first.

Music:

Haydn, the London symphonies and late piano sonatas and string quartets Op.76.

Mozart, the major operas, including reading through the libretti while listening.  If you can only do one thing on this list…

Gluck, assorted operas, noting he is not nearly the equal of Haydn or Mozart as a composer but he did capture the spirit of Enlightenment.

C.P.E. Bach, the Prussian Sonatas.

Painting:

Study French painting from Chardin through David, picture books will do if you can’t visit the original works.  Focus on Watteau, Boucher, Fragonard, Vigée-Le Brun, Boilly, Hubert Robert, and others, how their works tie into the history of the period and how the styles transformed over time.  Visit Paris, Huntington Gardens, and Tiepolo’s work in the Residenz in Würzburg.  Do a tour of Georgian architecture in England, in a pinch visit the derivative works at Harvard, Yale, and Alexandria, Virginia.  Study Tiepolo more generally, Goya, and also Antonio Canova.

Canova

Movies:

Why not?  I’ll toss up Dangerous Liaisons (Vadim and Malkovich versions), Barry Lyndon, Casanova, Amadeus, A Royal Affair (can’t forget Denmark!), Marie Antoinette, Ridicule, and The Madness of King George.

What did I leave out that is of utmost importance?

Interview with Erik Hurst

by on August 28, 2016 at 12:15 am in Economics, Education | Permalink

From the Richmond Fed, it is excellent and interesting throughout, here is one good bit of many:

EF: Given the wage premium associated with a four-year degree and the availability of education financing, it seems like a real puzzle why more people are not obtaining degrees.

Hurst: I have been thinking a lot about that. What is it that’s causing so many young people, particularly young males, to not obtain skills required to be successful in today’s workforce? I have been working with Mark Aguiar and Kerwin Charles and Mark Bils to try to understand what these people’s lives look like. There’s a budget constraint that still has to hold. They have to eat. What you’re finding is that a lot of them are living in their parents’ basements or their cousin’s basement. So many are relying on family support. And a lot of them just aren’t even working at all. So when you go and take a look at the fraction of people in their 20s who haven’t worked in the prior 12 months in 2015, it’s 20 percent for men with less than a four-year college degree. In 1990, that number was 4 percent. So the first thing we are doing is documenting these facts and trying to find out what their lives look like: how they’re eating, what their living situations are like, what attachment they have to the labor force.

The second part we’re trying to think about is why. What we are considering is whether it’s possible that a leisure lifestyle is easier now in your 20s than it was in the past. In 1980, if you were in your 20s and you weren’t working, you were pretty isolated. You were sitting by yourself. You could watch a few channels on TV but no one else was out there. Now if you’re not working, you could be online on social media or you could be playing videogames in an interactive way, things that make not working more attractive than before. And those videogames and leisure goods generally are relatively cheap compared to what they were in 1980. So when you’re making your choice of working relative to your reservation wage, your reservation wage has gone up some because the outside option of not working is a lot more attractive. So that’s what we’re thinking but I don’t know how we’re going to test it.

Also, eventually these people will get older, of course, and many will have a spouse or kids. When that happens, their income requirements go up and they need jobs, but they probably haven’t been building the type of skills required to get a job. So that’s hard to understand. I have never written a paper before where people were myopic, but the behavior of a lot of people in their 20s now seems myopic.

I wish to suggest a related observation.  If one argues that some percentage of unemployment is “voluntary” in this manner, one is often met with scorn, and with a not entirely accurate redescription of the view, based on a rebuttal that a sudden outbreak of laziness is unlikely.  However if the return to higher education goes up, and the elasticity response is mediocre, sociological explanations are somehow entirely acceptable and perhaps even mandatory.  You might call this Quantity Stickiness for Me But Not For Thee.  It’s a bit like how wage stickiness is an acceptable behavioral postulate but employers’ “firing aversion” is not.

Hat tip goes to Justin Wolfers.

arlingtoncover

That is from Arlington magazine.  When I clicked on the site, the first five articles were about food.

From the University of Chicago letter welcoming students:

…Earning a place in our community of scholars is no small achievement and we are delighted that you selected Chicago to continue your intellectual journey.

Once here you will discover that one of the University of Chicago’s defining characteristics is our commitment to freedom of inquiry and expression. … Members of our community are encouraged to speak, write, listen, challenge, and learn, without fear of censorship. Civility and mutual respect are vital to all of us, and freedom of expression does not mean the freedom to harass or threaten others. You will find that we expect members of our community to be engaged in rigorous debate, discussion, and even disagreement. At times this may challenge you and even cause discomfort.

Our commitment to academic freedom means that we do not support so called ‘trigger warnings,’ we do not cancel invited speakers because their topics might prove controversial, and we do not condone the creation of intellectual ‘safe spaces’ where individuals can retreat from ideas and perspectives at odds with their own….

Hong Kong’s streets are safer, with fewer murders by the fierce crime organizations known as triads that figured in so many kung fu films. And its real estate is among the world’s most expensive, making it difficult for training studios to afford soaring rents.

Gone are the days when “kung fu was a big part of people’s cultural and leisure life,” said Mak King Sang Ricardo, the author of a history of martial arts in Hong Kong. “After work, people would go to martial arts schools, where they’d cook dinner together and practice kung fu until 11 at night.”

With a shift in martial arts preferences, the rise of video games — more teenagers play Pokémon Go in parks here than practice a roundhouse kick — and a perception among young people that kung fu just isn’t cool, longtime martial artists worry that kung fu’s future is bleak.

High studio rents are of course a big problem:

…According to Mr. Leung’s organization, the International WingTsun Association, former apprentices have opened 4,000 branches in more than 65 countries, but only five in Hong Kong…

“Kung fu is more for retired uncles and grandpas.”

That is from Charlotte Yang at the NYT, interesting throughout and yet I hear the author is only a summer intern.

A few of you have asked, I considered that question in 2012, here is a significantly revised update:

1. Now I know how to text, sort of, though I hardly ever do it.  It strikes me as the worst and most inefficient technology of communication ever invented (seriously).  It’s not that fast, and it’s broken up into tiny bits of back and forth.  I don’t see how it makes sense beyond the “What should I get at the supermarket? — Blueberries” level.  There is intertemporal substitution, so just, at some other point in time, spend more time talking, writing longer letters, making love, whatever.  Not texting.  It is never the best thing to be doing, except to answer some very well-defined question.

2. I now carry only one iPad around, as I donated my spare iPad to a poor Mexican family.  I use it very often for directions, book and restaurant reviews, and general life advice.  Plus email and keeping current on my Twitter feed.  I simply don’t want a screen any smaller than that.  My iPad now also has a rather pronounced crack on the front glass, but that adds to its artistic value.  I dare not drop it again.

3. I have an iPhone, which I hardly ever use for anything.  Occasionally someone calls me on it, or I use it to check email in situations when it might be rude to pull out the iPad.  Other times I am rude, but it’s actually a form of flattery if I am willing to check my iPad in front of you.  You may not feel flattered, however.

3b. Except for the occasional Uber ride, I don”t use apps and hate reading news sites through the apps, I won’t do it.  I’m used to the web, not your app, and I hope I can get away with being a stubborn grouch on this forever.

4. I now have a Bloomberg terminal, which is very cool.  It is amazing that a product designed in the “before the internet as we know it” era still is the clear market leader and the best option.  Bloomberg is a great company with a great product(s).  Right now I can do about 5 of the 25,000 separate commands, but the fault is mine not theirs.  In the meantime, send me email at my gmu address, not what is listed on the Bloomberg column.

5. I use my Kindle less over time.  It remains in that nebulous “fine” category, but I prefer “real books.”  Kindle is best for works of fiction when I know in advance I wish to read every page in the proper order.  I am continuing with my long-range plan to read Calvin’s Institutes on my Kindle, bit by bit, in between other works.  This will take me ten years, but a) he is a brilliant mind, and b) in the meantime I won’t lose sight of the plot line.

6. I have a new Lenovo laptop, sleek and fast, plus some computers at work.  I don’t even know what they are, but probably they are quite subpar.

Way more iPad and way less texting are I suppose the main ways in which I deviate from the dominant status quo.  Come join me in this and we shall conquer the world.

This link is now about two weeks old, but I’m on my way to Denmark and you’re going to get whatever I am thinking about, like it or not:

The first big idea is that Denmark is not a nation of Horatio Algersens. Its high social mobility is not the result of an economy that is uniquely good at helping poor children earn middle-class salaries. Instead, it is a country much like the U.S., where the children of poor parents who don’t go to college are also unlikely to attend college or earn a high wage. Social mobility in Denmark and the U.S. seem to be remarkably similar when looking exclusively at wages—that is, before including taxes and transfers.

It is only after accounting for Denmark’s high taxes on the rich and large transfers to the poor that its social mobility looks so much better than the U.S.’s. America’s (relatively conservative) economic philosophy is that, with low taxes and little regulation, the market is an open savannah where the most talent will win out. But Denmark’s economic philosophy seems to be that the market is an unfortunate socioeconomic lottery system, and so the country compensates the poor with generous transfers paid by high taxes on the rich.

The second big idea in the paper is that Denmark’s large investment in public education pays off in higher cognitive skills among low-income children, but not in higher-education mobility—i.e., the odds that a child of a non-college grad will go on to finish college.

That is from Derek Thompson.  Here is his source:

…this Danish Dream is a “Scandinavian Fantasy,” according to a new paper by Rasmus Landersø at the Rockwool Foundation Research Unit in Copenhagen and James J. Heckman at the University of Chicago. Low-income Danish kids are not much more likely to earn a middle-class wage than their American counterparts. What’s more, the children of non-college graduates in Denmark are about as unlikely to attend college as their American counterparts.

Both the paper and the article are recommended.

That is one question I consider in my latest Bloomberg column, here is one excerpt:

Nima Sanandaji, a Swedish policy analyst and president of European Centre for Entrepreneurship and Policy Reform, has recently published a book called “Debunking Utopia: Exposing the Myth of Nordic Socialism.” And while the title may be overstated, his best facts and figures are persuasive.

For instance, Danish-Americans have a measured living standard about 55 percent higher than the Danes in Denmark. Swedish-Americans have a living standard 53 percent higher than the Swedes, and Finnish-Americans have a living standard 59 percent higher than those back in Finland. Only for Norway is the gap a small one, because of the extreme oil wealth of Norway, but even there the living standard of American Norwegians measures as 3 percent higher than in Norway. And that comparison is based on numbers from 2013, when the price of oil was higher, so probably that gap has widened.

Of the Nordic groups, Danish-Americans have the highest per capita income, clocking in at $70,925. That compares to an U.S. per capita income of $52,592, again the numbers being from 2013. Sanandaji also notes that Nordic-Americans have lower poverty rates and about half the unemployment rate of their relatives across the Atlantic.

It is difficult, after seeing those figures, to conclude that the U.S. ought to be copying the policies of the Nordic nations wholesale.

There is more to the piece, and I will note that I see a Land of Twitter where many Danes have read only that part of the piece.   I close with this:

How’s this for a simple rule: Open borders for the residents of any democratic country with more generous transfer payments than Uncle Sam’s.

Do read the whole thing.  You can buy the Sanandaji book here.

Faroe Islands fact of the day

by on August 16, 2016 at 2:57 am in Books, Education, History, Law | Permalink

…the first monolingual Faroese-Faroese dictionary was only published in 1998, the first Bible in Faroese didn’t appear until 1961, and the language only won official status in the islands in 1948 with the introduction of the Home Rule Act.

That is from James Proctor, Faroe Islands.  Here is some Faroese on YouTube.  Here is a short (2:32) Faorese drama, with profanity in Faroese, subtitles too.