Education

Even though the Greek electorate has elected left-wing leaders, the “the Greek government” hasn’t actually changed all that much.  It is still dysfunctional, corrupt, and very protective of special interests in nationally harmful ways.  Yet I find that if I criticize the Greek government on Twitter I receive many angry, self-righteous comebacks, often but not always from Greeks and usually with a left-wing slant.

One reason the Greek government is so popular with “the Left” has to do, I think, with theories of social change.  I often read or hear it suggested that, if only the truth is spoken in forthright, galvanizing terms, beneficial social change will follow.  This was a common meme in Krugman’s columns for instance over the years.  The claim was that Obama needed to be more like FDR and mobilize a coalition around a commonly articulated series of truths.  I don’t think it was ever promised this would succeed right away, due to Republican intransigience, but it has been portrayed as a good long-run investment in political change through the education of the citizenry.

The new Greek government of course has done this and more.  They have rather flamboyantly staked out extreme positions, insulted their opponents, and warned of the doom that will follow if renegotiations were to run along the lines of EU law rather than the New Old Keynesian economics.  They told their citizenry how much they were standing up for them, and how much this was a moral clash of progressive good vs. austerity evil, with the values of democracy and national sovereignty (supposedly) on the side of good.

The thing is, it’s turned out to be a total catastrophe.  As I had suggested early on, there is, in the ruling Greek coalition, no Plan B.  Germany and especially Spain just held tight on the negotiations and the Greek government more or less had to fold, not even wanting to vote on the negotiated plan.  That plan then failed to receive European approval, nor has Greece drummed up much general support from the other peripheral countries, and now no one knows what to do next.  The ECB, IMF, and others still have Greece “by the balls,” to cite one colloquial expression.  They’re still trying to spin that “the institutions” are not the Troika, but they don’t talk much about liberating the economy as a means of increasing exports.  It seems Emergency Liquidity Assistance may be up for review.  Oops.

The Greek government also riled up its citizens and now doesn’t know how to deliver anything satisfactory to them, to the detriment of political stability.  The latest irresponsible plan is to threaten a referendum on a new government, a new economic plan, or in one case even a referendum on euro membership was mentioned.  Message discipline is scarcely to be seen.

All of that is simply painting the Greek government into a corner all the more, since a referendum will simply heighten the demands for mutually inconsistent outcomes.  Signs of broader eurozone recovery, and the relative success of QE in talking down the value of the euro, have almost completely removed the bargaining power of Syrizas, or so it seems as of early March.

As I’ve said before, these people ruling Greece are The Not Very Serious People, and they are increasingly acquiring a reputation as such within the rest of the EU and eurozone.

All of this reminds me of the wisdom of Dani Rodrik and his propositions about the incompatibility of democracy, national sovereignty, and global economic integration.  Angry words won’t undo those constraints and they are not something you will hear the Greek government mention very often.

Krugman a few times has praised Syrizas for renegotiating the required primary surplus figures, but it seems this is hardly mattering.  Due to plummeting tax collection, the primary surplus is gone in any case, and the agreement with “the institutions” [read: Troika] is not even the main driver of the action here.  Greece needs to take steps to reestablish a higher [read: positive] primary surplus in any case.

The broader lesson is this: if politicians are not “speaking the truth to power,” there are usually some pretty good reasons for that.   As a political strategy, it doesn’t typically work and it is worse than irrelevant as it very often backfires.

The situation is still not beyond repair, but the Very Serious People are serious for a reason.

That is a recent question from Michael.  I am a biased source, but I say yes for three reasons:

1. A master’s in economics, or for that matter many other areas, is of considerable value if you are working in the DC bureaucracy and trying to scale the ladder.

2. A master’s in economics can be of value in a non-profit organization.  It shows you understand the material, and can in some way help promote it, even if you are not producing the research yourself.

3. As Bryan Caplan will be chronicling, there is an increasing demand for degrees and advanced degrees in many endeavors, even when the degree appears irrelevant to the nature of the work.  Having a Master’s can set you apart from the crowd.

4. If you study more economics, you actually learn something.

Those of you with the highest of elite aspirations should opt for a Ph.d of course, but still the Master’s in economics will be making somewhat of a comeback.  I mean this as something above and beyond the terminal Master’s often given to those who, for whatever worthy reason, do not finish their Ph.d degrees.

I do not readily find good data on line about the economics Master’s, do any of you know of good sources?

Lars P. Feld, Sarah Necker, and Bruno S. Frey have done some new research on this question, I would say this is good news for us, and bad news for many of you, though apparently you are clawing back some of what you gave to us:

We study the importance of economists’ professional situation toward their life satisfaction based on a unique survey of mostly academic economists. On average, economists report to be highly happy with life. Satisfaction is positively related to spending more time on doing research. The lack of a tenured position decreases satisfaction. However, the extent to which the uncertainty created by the tenure system affects satisfaction varies with the contract terms. The effect is stronger if the contract expires in the near future or cannot be extended. Publication success has no effect if it is controlled for academic rank and the contract duration. The finding suggests that publications are rather a means to an end, e.g., to acquire a tenured position. While the perceived level of external pressure also has no impact, the perceived change of pressure in recent years is positively related to economists’ life satisfaction. An explanation is that economists have accepted a high level of pressure when entering academia but are not willing to cope with the recent increase.

The SSRN link is here, via www.bookforum.com.

The copyright on Mein Kampf is running out in 2016, so what will Germany do?  Here is the latest:

The Institut für Zeitgeschichte got the call, and apparently their critical edition should be available already shortly after the copyright runs out, in January 2016. In Die Zeit they report on some of the details — including that the two-volume edition might extend to 2000 pages, some 780 of actual text and the rest taken up largely by the up to 5000 explanatory notes.

That is from Literary Saloon.

Paul E. Smaldino and Joshua M. Epstein have a new paper, note they are not responsible for my blog post heading, they called it “Social conformity despite individual preferences for distinctiveness.”  The abstract is here:

We demonstrate that individual behaviours directed at the attainment of distinctiveness can in fact produce complete social conformity. We thus offer an unexpected generative mechanism for this central social phenomenon. Specifically, we establish that agents who have fixed needs to be distinct and adapt their positions to achieve distinctiveness goals, can nevertheless self-organize to a limiting state of absolute conformity. This seemingly paradoxical result is deduced formally from a small number of natural assumptions and is then explored at length computationally. Interesting departures from this conformity equilibrium are also possible, including divergence in positions. The effect of extremist minorities on these dynamics is discussed. A simple extension is then introduced, which allows the model to generate and maintain social diversity, including multimodal distinctiveness distributions. The paper contributes formal definitions, analytical deductions and counterintuitive findings to the literature on individual distinctiveness and social conformity.

Other sources for paper drafts are here, and for the pointer I thank Michelle Dawson.

Here is the GMU press release:

Marginal Revolution University’s “Everyday Economics” video series has been nominated for an International Academy of Web Television award in the Best Documentary or Educational Series category.

There is more information here.

I used to think it was a decent enough school, and now:

Sweet Briar College announced today that it is shutting down at the end of this academic year.

Small colleges close or merge from time to time, more frequently since the economic downturn started in 2008. But the move is unusual in that Sweet Briar still has a $94 million endowment, regional accreditation and some well-respected programs. But college officials said that the trend lines were too unfavorable, and that efforts to consider different strategies didn’t yield any viable options. So the college decided to close now, with some sense of order, rather than dragging out the process for several more years, as it could have done.

The story is here, and this is not the last such event of its kind.  Why is it failing financially?  Here is one take:

Sweet Briar officials cited overarching challenges that the college has been unable to handle: the lack of interest from female high school students in attending a women’s college like Sweet Briar, declining interest in liberal arts colleges generally and declining interest in attending colleges in rural areas. Sweet Briar is in the foothills of the Blue Ridge Mountains in Virginia. “We are 30 minutes from a Starbucks,” said James F. Jones Jr., president of the college.

It seems to me that many other small colleges are in a far worse position, but are instead papering over the cracks, for how long I do not know.  Update: This revised version of the story has additional information.

It’s in an economics journal, so it must be true.   Agne Suziedelyte reports, from Economic Inquiry:

According to the literature, video game playing can improve such cognitive skills as problem solving, abstract reasoning, and spatial logic. I test this hypothesis using the data from the Child Development Supplement to the Panel Study of Income Dynamics. The endogeneity of video game playing is addressed by using panel data methods and controlling for an extensive list of child and family characteristics. To address the measurement error in video game playing, I instrument children’s weekday time use with their weekend time use. After taking into account the endogeneity and measurement error, video game playing is found to positively affect children’s problem solving ability. The effect of video game playing on problem solving ability is comparable to the effect of educational activities. (JEL I2, J13, J24)

I wonder how much endogeneity can be overcome in such settings, but if nothing else there is positive selection into video games and perhaps you should not be upset if your child is playing them.

Do any of you see an ungated copy?  The pointer here is from Kevin Lewis.

Over at Vox, Mr. Money Moustache notes:

The first trick is to remind yourself that buying something — pretty much anything — is very unlikely to improve your long-term happiness. Science figured this out for us long ago, but not many people got the memo. Go to your junk electronics drawer and look at your old flip phones or your dusty iPad 1. Look at the clothes you’ve recently pruned from your closet that are now headed to the Goodwill. You traded a lot of good dollars for those, not very long ago at all. Are they still making you happy today?

And:

…I try to get people to think of things in 10-year chunks at a minimum and then move on to a lifetime perspective. For example, spending $100 per week on restaurants equates to a $75,000 hit to your wealth every ten years, compared to keeping that money and just investing it in a conservative way.

If I understand him correctly, he recommends a very high savings rate and very early retirement.

From an individual point of view, my worry is that happiness may not go up much in this early retirement and in fact it may go down; people seem to enjoy working, which is good for their health and their social involvement.  Perhaps Mr. Money Moustache derives a sense of purpose from spreading this gospel, but most people would end up bored and indeed frustrated if they retired at age thirty as he has (apparently) done.

From a social point of view, if everyone did this, productivity would collapse.  Workers over the age of thirty make the world go round, and teach and pass down skills to others.  When you retire involves an external cost or benefit, and retirement can come either too early or too late.

I’ll note in passing that my “dusty iPad 1″ gave me an enormous amount of pleasure, as does my later iPad.  And I wish my old flip phone still worked!  Sadly, it is no longer still making me happy today.

Addendum: Ryan Decker comments.

Price Ceilings

by on February 27, 2015 at 7:25 am in Economics, Education | Permalink

This week we released two new sections of our principles of economics class, price ceilings and trade. Most textbooks discuss how price ceilings create shortages and deadweight loss. Modern Principles delves much deeper to explain how price controls impede the operation of the price system creating economic discoordination and a misallocation of resources.

The introductory video is short but it covers a lot of economics.

That is the new Robert D. Putnam book and it focuses on the widening opportunity gap among America’s young.  Much of the work is narrative and case studies, starting with Port Clinton, Ohio but not stopping there.  Any Putnam book is an event, and this one is the natural sequel to Charles Murray’s Coming Apart.  The writing and the underlying intelligence are of an extremely high quality.

One significant theme is that upward mobility results from a mingling of the upper and lower income classes, and such mingling is more scarce than in the immediate postwar era.  You can think of it as case study evidence for the cross-sectional statistical regularities stressed by Chetty et.al.  Contra Chetty, however, Putnam believes that declines in socioeconomic mobility will start to show up in the data as current generations age.

The book’s problem is finding a new note to strike.  Putnam stresses this is a story of social forces rather than personal villains, but, for all the merits of his text, he identifies no new culprits or solutions.  Inequality of opportunity seems to have more to do with parents than schools, but how to control parents?  This book does not flirt with the so-called Neoreaction.  Putnam favors increased access to contraception, professional coaching of poor parents, prison sentencing reform and more emphasis on rehabilitation, eliminating fees for school extracurricular activities, mentoring programs, and greater investment in vocational education; contra Krugman he gives a lot of evidence for skills mismatch (pp.232-233).  More generally, he asks for federalist solutions and lots of experimentation.  Maybe those are good paths to go, but the reader feels (once again) that matters will get worse before they get better.  There is very little on either political economy or the evolution of technology.

Do read this book, but by the end Putnam himself seems to come away deflated from dealing with some of America’s toughest problems.

The wisdom that is Japanese

by on February 25, 2015 at 2:27 pm in Education, Religion | Permalink

Funerals are being held for ROBOTIC dogs in Japan because owners believe they have souls…

It is a funeral like any other in Japan. Except that those being honoured are robot dogs, lined up on the altar, each wearing a tag to show where they came from and which family they belonged to.

The devices are ‘AIBOs’, the world’s first home-use entertainment robot equipped with Artificial Intelligence (AI) and capable of developing its own personality.

And don’t forget this:

The only source of genuine parts are ‘dead’ robots, who become donors for organ transplantation, but only once the proper respects have been paid.

There is more here, with video, via Claire Hill.

Here’s a stunning graph from the New York Fed’s Liberty Street Blog:

What it shows is that default rates on student debt decrease with higher balances or, to put it the other way, the students with the highest default rates are the ones with the least debt.

I wouldn’t have predicted that but here are some possible explanations. First, dropouts have less debt and also less income. But while the debt rises proportionally with years of education the income rises in less than proportion. As I said in Launching, students who drop out after 2 years get less than half of the gains from completing a four-year degree (the sheepskin effect). Thus the 40% or so of students who dropout see their debt rise faster than their income so burdens are higher and default rates increases.

Although the debt to income ratio story is plausible it’s still surprising how many students default with low amounts of debt. Raymond, a commentator at the Liberty Street Blog, offers some additional hypotheses:

I work in financial aid at a large public community college. We pulled data on our defaulters and we found over 60% started with remedial coursework and borrowed their first and second terms. About 80% of the total data population suspended soon after the second term – thus the low amounts. Many were not students just out of high school, they were independent adults. Putting this altogether with the many years I’ve been in financial aid speaking with students I’ve come to a conclusion. 99% of the time when I have a student that has been suspended asking for loans and I mention private or alternative loans they immediately say they don’t have good credit. Bad credit seems to correlate with bad academics. Many seem concerned more with paying bills than paying education. Sometimes they are just out of jail and no one will hire them. Their probation requires they work or get a job which the later is nearly impossible. Other times we have people so deep in the hole in debt already that the student loans was a way to buy more time. The word is out if you have bad credit and are desperate for funds just go to a community college where tuition is low and borrow the maximum. We noticed in our data pull many students graduated from high school or received their GED up to 10 years ago or more! Want the defaults to go down – stop lending to students that have a significant number of remedial courses their 1st and 2nd terms at a college where tuition is already low.

That is the newly published volume 16 of The Collected Works of F.A. Hayek, edited by Sandra J. Peart.  Of course this is splendid from beginning to end, including Peart’s introduction, the letters, Hayek’s commentary, and assorted documents, and the book even contains three very nice poems written by Harriet Taylor.

Is Hayek here blaming Taylor for moving Mill in a collectivist direction?  Is that the Straussian reading of this book and the reason why Hayek did it?

If there were a phrase for “one step above and beyond self-recommending,” this volume would get it.

Ironically, given all the concerns about robots destroying jobs, Mr Tsuda said one of the main constraints on the market’s growth was a shortage of human engineers.

“To use robots — not just to make them — you need quite a level of engineering,” he said. “If anything, for us and the market as a whole, growth is held back by the number of engineers who can do that.”

From Robin Harding at the FT, there is more here.