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RE #5, In the small Eastern Washington town I grew up in (not far from the article) there was a plant that compacted alfalfa into cubes for export (mostly to Japan). They only took very high quality hay, and paid top dollar (well over 2x the market rate for locally used hay. It amazed me then that it was worth shipping hay across an ocean.

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2. On the crack v. heroin issue, injecting any drug requires a greater level of commitment to the lifestyle. Those who inject coke are usually more hardcore than crack smokers to use an apples-to-apples comparison.

It is not statistically significant, but female heroin users do better staying in the middle class than female non-heroin users.

I posted this on John Hagels blog but I wanted to see if the MR community was interested in my extremely TGS thesis.

My view is that the cause of the developed countries current stagnation is a lack of innovation in the education sectors. All over the world there are massive government monopolies or massive public cash fueled interventions in education markets.

Lower income citizens rely heavily on education to climb the income ladder but the response to the sudden increase in demand by the education establishments around the globe has been to drastically and regularly increase tuitions and fees.

We will be stuck in stagnation until the higher education market is forced to compete for students by lowering tuitions and increasing innovation. Innovation is especially needed; college professors still educate the same way they did 50 years ago.

New sites like khanacademy.org and Western Governors University offers some hope for the future but there is a lot more room for this market to grow.

EDIT: "extremely simplistic TGS thesis"

James Tooley's "The Beautiful Tree" seems relevant to this.

I suspect we'd have better outcomes if America's poor spent a few thousand dollars a year on schools their kids went to voluntarily to learn what they thought would be useful compared to spending $10,000+ to force them to sit for 12 years in an institution to be taught what some middle class progressives think they need to learn. And - shock! - most kids in the current system explicitly do not want to be there, and they work to undermine their own progress in the institution. Since this institution is so sacrosanct and old, we tell ourselves that this is normal behavior for teenagers. This is only normal behavior in a broken institution.
The response I usually hear from people who defend the public schools is that many poor families care so little for their kids that imprisoning them in this failed institution until they are adults is the best choice for them. I find that response disturbing and elitist.

"I find that response disturbing and elitist." That's what's good about it. Now tell us what you think is bad about it.

What's shocking to me is how deeply the notion of public education is ingrained not just in American society but all over the world. No one from any country anywhere is saying that we need to de-regulate schools.

I think the innovation is likely to disrupt the higher education system before the K-12 system. Working age adults desperately need affordable retraining not 10-15 years from now but RIGHT NOW and it's just getting more expensive every semester with quality staying the same or even dropping. Also theres a daycare/babysitting service in the K-12 system that a lot of the public relies on.

It is my understanding that tuition has outpaced inflation because schools have funneled that money into administration. I don't think much innovation is necessary, really. The costs need to come down but only when the market demands lower costs instead of higher academic rankings (which don't really matter for undergraduate education anyways).

I think you underestimate humanities potential to innovate. The education sector has been allowed to stagnate for a long, long, time - multiple generations. How is a current college class much different from one in Aristotle's day? It's possible that we have a lot of low hanging fruit available in this sector if we just force it to innovate under the power of market priced competition. Can you imagine specifically what an iPhone would look like and operate like having only experienced a first generation telephone? Or telegraph even? That's how outdated our education techniques are.

I'll be honest I'm not really sure what it is you are suggesting. The problem you describe is precise: "Lower income citizens rely heavily on education to climb the income ladder but the response to the sudden increase in demand by the education establishments around the globe has been to drastically and regularly increase tuitions and fees."

Why, if there has been no innovation since Aristotle, is tuition only a problem now? It seems that Universities are dealing with the sudden spike in demand with increased prices. This suggests to me that there is an inelasticity here, either on the supply or demand side, that is causing a price boom.

It's debt spending plus a captive market. Student loans increase demand and inflate the price. Then the ballooning bureaucracy takes a chunk. Plus the schools can raise tuition any single year, and the four-year students have to pay it if they want to continue.

On #2, I think Hagel is correct here: “what has stagnated isn’t the economy but, rather, economists’ and statisticians’ capacity to measure economic activity and its contribution to human well-being.”

This is very clear now when we have everyone believing that we are in a recession when technically we are not. It also reminds me of the issue I have with your way to value the internet... if we can't find a way to define its value the problem is with the metrics not with the clear and obvious value the internet provides.

Another clear indication that we are going through some sort of metric crisis is that you get stupid columns like the one I mentioned here: http://fyiblog.wordpress.com/2011/09/07/column-of-the-week/. The guy thinks we have so much stuff we cannot measure that we don't need jobs anymore!

I agree that we could improve our measurement of many economic concepts. And yet, we need to give credit where credit is due. There are a number of government sector statisticians and economists who labor in the background producing estimates of GDP, the unemployment rate, and even median household income. I am primarily a consumer of data and not a producer of it, but I interact with a lot with the producers and have immense respect for what they try to do. Tyler is right to raise our awareness about measurement issues (it was one part of the book where I agree with almost all of what he said) and yet I do no think it is helpful to berate those economists' and statisticians' work as 'stagnated.' Personally, I would not find such words encouraging and a motivator to work harder. We need to recognize that a lot of things we try to do everyday are difficult (this applies to everyone not just economists), and while we must push for improvements (lest TGS is right), we need to give ourselves a pat on the back for how far we have come. There are some countries in the world where the median income statistics are not published or are highly suspect. We could have better data, but we could also make better use of the data we have.

I believe Hagel and others miss a major point of Tyler's book: he's looking at the MEDIAN individual.

I think Hagel is well aware of that. His point that the stagnation hypothesis is hard to defend when you look at standard of living using consumption measures rather than money income applies to the median individual.

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