Month: March 2012

What is the causal link between parental income and education?

by  Tyler Cowen in

…the connection between income and student performance “is no less true in the Age of Obama than it was in the Age of Pericles.” But, he points out, most of the connection is not causal, but due to other factors.  He cites a study by Julia Isaacs and Katherine Magnuson (Brookings Institution, 2011), that examines an array of family characteristics – such as race, mother’s and father’s education, single parent or two-parent family, smoking during pregnancy – on school readiness and achievement.  The Brookings study finds that the distinctive impact of family income is just 6.4 percent of a standard deviation, generally regarded as a small effect.  In addition, Peterson calls attention to earlier research by Susan Mayer, former dean of the Harris School at the University of Chicago, which also found that the direct relationship between family income and education success for children varied between negligible and small.

Responding to Ladd’s claim that the gap in reading achievement between students from families in the lowest and highest income deciles is larger for those born in 2001 than for those born in earlier decades, Peterson points out that the achievement gap between income groups was growing at exactly the same time the federal government was rapidly expanding services to the poor – Medicaid, food stamps, Head Start, housing subsidies, and many other programs.

“A better case can be made that any increase in the achievement gap between high- and low-income groups is more the result of changing family structure than of inadequate medical services or preschool education,” Peterson says.  In 1969, 85 percent of children under the age of 18 were living with two married parents; by 2010, that percentage had declined to 65 percent.  The median income level of a single-parent family is just over $27,000 (using 1992 dollars), compared to more than $61,000 for a two-parent family; and the risk of dropping out of high school increases from 11 percent to 28 percent if a white student comes from a single-parent family instead of a two-parent family.  For blacks, the increment is from 17 percent to 30 percent, and for Hispanics, the risk rises from 25 percent to 49 percent.

That is from Harvard’s Kennedy School, from Paul Peterson.  Here is more, and for the pointer I thank Ilya Novak.

*Being Global*

by  Tyler Cowen in

The authors are Angel Cabrera and Gregory Unruh, and the subtitle is How to Think, Act, and Lead in a Transformed World.  Cabrera is the incoming president of GMU, as of this summer, so of course I am keen to read this book, which arrived in my pile today.

You can follow Cabrera on Twitter here, among other topics he covers leadership, globalization, and also the Spanish economy.

Is Creativity more like IQ or Expertise?

by  Alex Tabarrok in

IQ, whatever its flaws, appears to be a general factor, that is, if you do well on one kind of IQ test you will tend to do well on another, quite different, kind of IQ test. IQ also correlates well with many and varied real world outcomes. But what about creativity? Is creativity general like IQ? Or is creativity more like expertise; a person can be an expert in one field, for example, but not in another.

In a short piece in The Creativity Post, cognitive Psychologist Rober Baer argues that creativity is domain-specific:

Efforts to assess creativity have been plagued by supposedly domain-general divergent-thinking tests like the Torrance Tests of Creative Thinking, although even Torrance knew they were measuring domain-specific skills. (He create two different versions of the test, one that used verbal tasks and another that used visual tasks. He found that scores on the two tests were unrelated —they had a correlation of just .06—so they could not be measuring a single skill or set of skills. They were—and still are—measuring two entirely different things.) Because these tests have been used in so many psychological studies of creativity, much of what we think we know about creativity may be based on invalid data. These tests have also been widely used in selection for gifted/talented programs — programs that have, in turn, often suffered because by assuming creativity was domain general, these programs often wasted students’ time with supposedly content-free divergent thinking exercises (like brainstorming unusual uses for bricks) that really only develop divergent-thinking skill in limited domains.

The metaphor we use for understanding creativity will impact how we train for creativity:

If one’s goal is to enhance creativity in many domains, then creativity-training exercises need to come from a wide variety of domains—just as we must provide a broad general education if we want students to acquire modest levels of expertise in many areas. But if one’s goal is to increase creativity in just one domain, such as one might want to do in a gifted program focusing on one domain (such as a program in dance, poetry, math, etc)., then it would be appropriate for all of the creativity-training exercises to come from the particular domain of special interest.

Baer’s view is controversial. My inclination is to think that creativity does have a significant general aspect because creativity seems so often to involve combining seemingly disparate ideas. My suspicion is that that there is a neurological basis for this in, to put it crudely, right-brain, left-brain communication channels. The fact that creativity can be stimulated by drugs and travel also suggests to me a general aspect. No one ever says, if you want to master calculus take a “trip” but this does work if you are blocked on some types of creative projects.

Nevertheless, Baer’s view is worth thinking about; he gives more detail to his argument in two academic papers here and here.

*Culinary Intelligence*

by  Tyler Cowen in

The author is Peter Kaminsky and the subtitle is The Art of Eating Healthy (and Really Well).  I enjoyed this book, here is one bit:

If I had to reduce Culinary Intelligence to one guiding principle, it would be maximizing Flavor per Calorie (FPC): the notion that if ingredients are chosen on the basis of optimum flavor, and prepared with the goal of intensifying that flavor, then you can be satisfied while eating less.

The best tip in the book is that you get most of the value of a dessert from the first bite or two.  I believe also — for most but not all meals — that 80 percent of the value of a soft drink comes in the first 10 percent of your consumption of that drink.  What are some other principles of Culinary Intelligence?

Puerto Rico hypergamy fact of the day

by  Tyler Cowen in

In Puerto Rico, women already outearn men — in 2009, women’s wages were 103 percent of men’s.  In other regions, women are close to catching up: in the District of Columbia, with a high number of federal workers and a high proportion of minorities, women earn 88 percent of what men do…Among 25- to 34-year-olds working full-time, women’s earnings were 91 percent of men’s in 2010, up from 68 percent in 1979.

That is from Liza Mundy’s The Richer Sex: How the New Majority of Female Breadwinners is Transforming Sex, Love, and Family.  It is an interesting book, though it does not always focus on the questions that I would.  The core thesis is that women will learn to marry down and men will learn to marry up.

The text has subtitles like “Women Will Have to Learn to Appreciate New Qualities in Men.”

Here is a paper on “the end of hypergamy,” it has fragments like “we estimate a female hypergamy parameter, following Mare’s example (1991),” plus it introduces me to the word “hypogamy.”  The key sentence I suppose is this:

This means that the gender gap in education accounts for almost 80% of the cross-country and within country variance in observed hypergamy.

And it is stated:

According to our results, if current trends in education are to continue the end of hypergamy is near.

That would be for recorded marriages, but at what rate of marriage might such an equalization take place?  This paper on hypergamy suggests that marriage rates are falling predominantly for the less educated women; Betsey Stevenson has work on related topics.  It is a puzzle for the extreme hypergamy theorists why the rate of marriage for educated women has not fallen lower than it has.

Is the European banking model broken?

by  Tyler Cowen in

…a far higher proportion of U.S. loan books are funded by deposits. The U.S. market has a loan to deposit ratio of 78% compared to more than 110% in Europe. European banks have a total funding gap of $1.3 trillion ($1.72 trillion) which they need to finance in wholesale markets, estimates Simon Samuels, a banking analyst at Barclays Capital.

The article is interesting, and depressing, throughout.  Here is the FT on related issues:

Describing it as a “Ponzi scheme”, Marc Chandler, currency strategist at Brown Brothers Harriman in New York, says simply: “Weak banks are buying weak sovereigns.”

Random thoughts on hysteresis

by  Tyler Cowen in

Let’s say you believe labor market unemployment hysteresis is strong, and you also believe that for political reasons (for better or worse) further monetary or fiscal stimulus is unlikely.  Which policies should you be more likely to support?  Should one be more inclined to limit unemployment insurance, ax the minimum wage, expand EITC, and in general decrease labor market regulation and mandates?  Should one be more likely to favor direct government hiring of the unemployed, if only at “make work” tasks at low wages, and less likely to favor projects run through third-party intermediaries, which may or may not focus on hiring the unemployed?  Let’s abolish Davis-Bacon, yes?  Let’s move away from European models, yes?

I thank J. for a useful comment on this matter.

The Golden Rule of Organ Donation

by  Alex Tabarrok in

Here is Joseph Roth, president and CEO of New Jersey Organ and Tissue Sharing Network:

Caseworkers from our organization recently went to the hospital to visit the family of a woman who suffered a stroke. The woman was dead, but machines continued to keep her organs functioning. She was an ideal candidate to be an organ donor. Her husband, it turns out, was on the waiting list to receive a heart.

Our caseworkers asked the husband if he would allow his wife’s organs to be donated. The husband, to the shock of our caseworkers, said no. He simply refused. Here was a man willing to accept an organ to save his own life, but who refused to allow a family member to give the gift of life to another person.

…Cases like this are rare, thankfully, but are nonetheless troublesome.

Roth continues:

Our proposal — we call it the Golden Rule proposal — would permit health insurers in New Jersey to limit transplant coverage for people who decline to register as organ donors. It would be the first such law in the nation. No one would be denied an organ. But under the proposal, insurers could limit reimbursement for the hospital and medical costs associated with transplants of the kidney, pancreas, liver, heart, intestines and lungs.

I am not in favor of messing with the insurance system for this purpose but have argued for a more direct approach. Under what I call a “no-give, no-take” rule if you are not willing to sign your organ donor card you go to the bottom of the list should you one day need an organ. Israel recently introduced a version of no-give, no take which gives those who previously signed their organ donor cards points pushing them up the list should they need an organ transplant–as a result, tens of thousands of people rushed to sign their organ donor cards.

Hat tip to David Undis whose excellent group Lifesharers (I am an adviser) is implementing a private version of no-give, no take in the United States.

Here is my piece on Life Saving Incentives and here are previous MR posts on organ donation.

The Grand Gameshow

by  Tyler Cowen in

Chris Brunk, an all-too-loyal MR reader, writes to me:

I developed a thought experiment that I wanted to share with you.  I call it “The Grand Gameshow”.

In this thought experiment you are a contestant on a gameshow.  The host of the gameshow (let’s call him Alex) has a notecard that says whether or not god exists and to what extent he is involved in the affairs of mankind.   You start with $1,000,000 that you must allocate across five possible categories:

  • Category 1 – Scriptural literalism.  Bet into this category if you believe that one of the religious texts is precisely accurate.
  • Category 2 – God is omnipresent.  Bet into this category if you believe that god is everywhere and intimately involved in our lives.
  • Category 3 – God as a guide.  Bet into this category if you believe that god is only there for the major turning points in life and/or when we reach out in prayer.
  • Category 4 – God as a watchmaker.  Bet into this category if you believe that god set the universe in motion but is no longer around.
  • Category 5 – Atheism.  Bet into this category if you believe that god does not exist.

You can distribute the money however you like (e.g. all $1,000,000 in one category or $200,000 in each).  After you’ve allocated your $1,000,000 Alex flips over the notecard and reveals which of the five categories is correct.  You keep any money that you’ve allocated into the correct category.

Some footnotes.  For the purposes of playing this gameshow assume that your financial situation is that of a farmhand in Mexico.  You earn about $4,000 per year and have no substantial savings or degrees.  I classify simulism as being category 4.

I would be very interested to hear how you’d allocate your funds versus say, Russ Roberts or Robin Hanson.

How about this?: the true “solution” to the universe would be to our minds incredibly complex, although within the theoretical framework of a (non-existent) omniscient being it would be simple.  If we had more knowledge about the true theory, however, though without reaching omniscience, many of us would not agree as to whether it involved a God or not.  The knowledge-enhanced me would think it did not.  The books don’t enter into it, nor do the book trucks, sadly.

For Russ or Robin I would not pretend to speak.  Robin has papers and blog posts on simulism, so at the very least he is interested in that topic but I will leave it to him to describe his stance.

The hysteresis effect on unemployed labor, and unemployment scarring

by  Tyler Cowen in

Here is a good WSJ piece on labor market hysteresis, a topic also of recent interest to Bernanke, Summers, DeLong, and others.  I’ve been trying to learn more about that literature, and here is what I came up with.

Pissarides has a seminal 1992 paper on the loss of skill during unemployment.

This very good paper (pdf) looks at women who take time off to care for their elderly parents, though there is an endogeneity problem.  Arguably it is the workers on a lower earnings trajectory who will take the time off.  Here is a much earlier 1980s paper on how intermittent labor force attachment lowers women’s wages.

Holocaust survivors seem to have earned lower rates of return on human capital (though interestingly their children do better on average).

This German paper (pdf) shows that state dependence of earnings is, and should be, much lower when the unemployment has been generally high for the labor force as a whole.  This paper finds there is not much “scarring effect’ in southern Italy, where unemployment perhaps is less socially shameful, but there is a significant scarring effect in northern Italy; social norms may matter.

This paper on Sweden suggests that one year out of work leads to a depreciation of skills — the skill of reading in their sample — is equal to losing five percentage points in the broader distribution of that skill.

Here is one paper from the psychology literature (with good cites); there are adverse psychological effects for the lower net worth unemployed but not necessarily for the higher net worth individuals.

Here is a whole host of papers on “unemployment scarring.”  This one, on the UK, gives a concrete number: “Our results suggest a scar from early unemployment in the magnitude of 13–21% at age 42. However, this penalty is lower, at 9–11%, if individuals avoid repeat exposure to unemployment.”  There are some reasonable controls for education and the like, though none for conscientiousness.

I was surprised to learn that “unemployment scarring” is a much more effective search term than is “labor hysteresis.”

Is there any good paper which seriously takes endogeneity of separation into account?