Month: January 2015

What is the rate of return on community college?

Here is a 2010 research paper (pdf) by Schenk and Matsuyama, and here is one sentence from the abstract:

Our results show returns are six percent for those completing a community college degree.

Other work shows that fewer than forty percent of those who start will finish with a degree-based reward and that number may be lower yet for the marginals who are not currently enrolled.  Of course those who do not complete will waste some time and money along the way, although the learning may raise their productivity somewhat.

The overall return on additional subsidies to community college participation is therefore…?

The initial pointer is from @herdingbats.

Assorted links

1. Book preview for 2015.  Good stuff, including volume four of Knausgaard, a new Stephenson, a new Gaiman, a new Ishiguro, a Philip Glass memoir, perhaps the Niall Ferguson book on Kissinger will be interesting too.  Here is another preview list.  And who was nominated for a literary Nobel Prize in 1964.

2. The pick-up culture that is Chinese.

3. Another (right-wing?) view on why the leading public intellectual economists are left-wing.  And more from Krugman.

4. Voodoo and Haitian mental health.  And the culture that is Singapore.

5. Sri Lanka’s surprise (positive) political transition.

6. Summers responds to Andreessen on secular stagnation.

MRU New Course: Principles of Microeconomics!

Our newest MRUniversity online course in economics is now starting, Principles of Microeconomics! Tyler and I have created what we think is our most engaging course yet — featuring high production quality videos filled with great examples to illustrate key concepts.

We’ll cover all of the important topics in microeconomics, such as competition, monopoly, price discrimination, externalities, public goods and more. There are practice questions along the way to test your knowledge, and don’t hesitate to post your questions on each video page.

Check out our video introducing the course and economics more generally. We begin with a great story about incentives!

*Thermonuclear Monarchy*

That is a new (early 2014) and excellent book by Elaine Scarry, the subtitle is Choosing Between Democracy and Doom.  Here is one good sentence:

…the British government arranged a secure fallout shelter for 200 leading officials, it neglected to include the queen in its plans…

Here is a more thematic sentence:

The impossibility of “governing” nuclear weapons emerges across many pages of this book.

Recommended, and consistent with my long held view that the production of nuclear weapons represented one of the most fundamental revisions of the U.S. Constitution.  The discussion of nuclear submarines, and how hard it can be to send them revised orders, is both fascinating and scary.

On the multiplication of community college tuition subsidies

Here is some testimony from 2011 (pdf), by Mason M. Bishop:

…the myriad of job training programs funded by multiple federal agencies needs to be curtailed.  Currently, the U.S. Department of Energy, the U.S. Department of Health and Human Services and the National Science Foundation are all funding community college education and training grants.  The proliferation of funding for post-secondary education and training programs from Federal agencies with no experience in education and training issues, only serves to foster “mission creep,” duplication of effort and a waste of valuable resources.

Here are my earlier remarks on the new community college subsidies proposal.  Here is Mason Bishop on Twitter, with further remarks.

Rick Searle reviews *Average is Over*

The review is excellent and interesting throughout, here is one good bit:

Come to think of it, lack of intelligibility runs like a red thread throughout Average is Over, from “ugly” machine chess moves that human players scratch their heads at, to the fact that Cowen thinks those who will succeed in the next century will be those who place their “faith” in the decisions of machines, choices of action they themselves do not fully understand. Let’s hope he’s wrong on that score as well, for lack of intelligibility in human beings in politics, economics, and science, drives conspiracy theories, paranoia, and superstition, and political immobility.

Cowen believes the time when secular persons are able to cull from science a general, intelligible picture of the world is coming to a close. This would be a disaster in the sense that science gives us the only picture of the world that is capable of being universally shared which is also able to accurately guide our response to both nature and the technological world.

Read the whole thing, the pointer is from Arthur Charpentier.

Assorted links

1. The importance of sociologist Howard Becker in France.  And Harry Jaffa has passed away.

2. Many variants of Moore’s Law are now over.

3. 25 predictions about media and the internet.

4. How to convert your Mercedes into a self-driving Mercedes (sort of) and impress your date.

5. Duolingo.

6. Paul Krugman on why there is no right-wing Paul Krugman today.

7. Jeff Denning on the economics of community college.

How much does it cost to overthrow the government of Gambia?

More than 220k, apparently:

The gang allegedly numbered 18-20 people and spent $220,798 on the attack, including $4,000 on two sniper “Barret” .50 calibre rifles that the accountant who compiled their expenses said were “not really necessary, but could be very useful”. Each man had $4,000 to cover costs while they were in Gambia.

But the coup attempt failed and this week, US federal prosecutors charged a Texas businessman with conspiring with a former US Army sergeant and others to orchestrate an attack in Gambia on the last two days of 2014.

There is more here in the FT.  And here is a tidbit of note:

US authorities accuse Cherno Njie, a 57-year-old US citizen of Gambian descent who made a small fortune in the housing industry in Texas, of bankrolling the coup.

The article is interesting throughout, there was at least the ostensible motive of restoring democracy to the country.  I wonder to what extent he viewed this as a philanthropic rather than selfish venture.

Obama’s free community college plan

David Leonhardt writes:

The plan — which would require congressional approval — would apply to students attending a two-year college, including part time, so long as the college offered credits that could transfer to a four-year college or provided training that led to jobs.

David’s article is excellent and has much useful information:

As Reihan Salam of National Review notes, community college tuition is already low. In fact, it’s zero, on average, for lower-income families, after taking financial aid into account. Vox’s Libby Nelson wrote, “Community college tuition for poorer students is often entirely covered by the need-based Pell Grant.”

One potential implication is that by making community college universally free, the government is mostly reducing the cost for higher-income families.

Calculating the completion rate at community colleges is difficult, this estimate does some work to get it up to 38 percent.  What would the completion rate be for the marginal students encouraged under the Obama plan?  We don’t know, but I’ll guess at 20-30%, no more.  That’s the real problem.

Furthermore some of the value of education is signaling to the labor market that you are able to finish college.  I do think the learning component of education is generally more important, but for “marginally not attending community college individuals” — who are often regarded with suspicion by employers — I would not be surprised if the signaling component were one third or more of the value of a degree.  To that extent, pushing more marginals into the degree funnel lowers the value of the degree for the others who were getting it already by lowering the average productivity of the pool of finishers.  That would lower the efficiency gains from the program and also partially offset some of the intended distributional consequences.

Mike Konczal likes the idea, and believes it may lower higher education prices more generally.  Libby Nelson at Vox considers it to be a middle class benefit.  Neil McCluskey at Cato is negative.  Carrie Sheffield is critical.  Here is a look at potential winners and losers in the higher education sector.  The plan could lead to federal money replacing state money, rather than leveraging it.

Citing the growing economy and improving labor market, Andrew Flowers noted:

college enrollment is declining for recent high school graduates (those 16 to 24 years old). And it’s falling fastest for community colleges.

Overall my take is that the significant gains are to be had at the family level and at the primary education level, and that the price of community college is not a major bottleneck under the status quo.

Angus on austerity (words of wisdom)

From this graph I concluded one of two things must be true depending on one’s definition of austerity.

Either austerity means nominal cuts and we never had any of it, or austerity means cuts relative to trend and we are still savagely in its grasp.

Relative to the 2000-2009 decade trend, total government spending is roughly 35% lower in q3 of 2014 than it should be. Hard to say austerity is over by that metric.


The full link is here.  As I wrote in an email to an unnamed correspondent earlier today: “I gladly admit that reading me in 2006 was not a good guide for what happened in 2007-2008.  A bunch of those guys should admit the same about the current day…”

Markets in everything: the ugly mirror

Tucked between their 4K televisio​ns and their induction cooktop stove, Panasonic’s booth at the Consumer Electronic Show is also home to a futuristic magic mirror way more terrifying than that disembodied mask f​rom Snow White.

The Japanese heavy-hitter’s smart mirror has digital displays, including a secondary projection of your own reflection. The projection can be virtually altered to display different makeup looks, hairdos, and even facial hair styles.

But here’s where it gets really fun: it can also pinpoint all your flaws, from tiny wrinkles to barely-perceptible pores, and then “recommend” a series of beauty products and treatments in order to improve your look. Because apparently we weren’t picking apart our reflections enough as it is.

It also keeps track of your horrible, hideous flaws, so you can see if all the money you spent is working, or if you ought to spend more money.

“Once you start using products, you can track whether or not they’ve been working,” sales rep Joey Liao explained cheerfully, gesturing to another volunteer who sat pouting at a vanity. “So if she buys a very expensive new night cream and a month later has made no progress, goodbye night cream! You don’t need to invest in that anymore. You can use a different product.”

That story was sent to me by the excellent Mark Thorson, who also points us to the Norwegian Caribbean cruise that has a special snow room.

Is Jennifer Lawrence Underpaid?

The Daily Beast, Business Insider and The Washington Post all argue that leaked information about Jennifer Lawrence’s pay on American Hustle indicates gender discrimination. Here’s the Washington Post:

If Jennifer Lawrence doesn’t get paid as much as her male colleagues for the same work, ordinary women don’t stand a chance.

Sony’s hacked e-mails have revealed a troubling truth — that even the wealthiest and most powerful women among us are burdened by the ever-present gender pay gap.

jennifer-lawrence-the-hunger-gamesThe picture these articles present is one of poor, little Jenny Lawrence being taken advantage of by powerful, male studio heads who are laughing all the way to the bank. Time for a reality check.

When it comes to business, Jennifer Lawrence isn’t a woman she is a multi-million dollar enterprise. Lawrence Enterprises is run not by Jennifer alone but also by a bevy of managers, agents, publicists and lawyers. If Lawrence is underpaid each of these people (quite a few of them men, by the way) are also underpaid. In particular, Lawrence is repped by CAA of which the WSJ recently wrote:

Within the entertainment industry, the glass-and-steel headquarters of Creative Artists Agency LLC is called the “Death Star,” a reference to its occupants’ reputation as cold-hearted Hollywood power brokers.

Do you think the cold-hearted Hollywood power brokers of CAA are leaving money on the table? No effing way. Which is one reason why Jennifer Lawrence is number 12 on Forbes Celebrity 100 list, coming in just below Steven Spielberg. By the way, 5 of the top 10 on the Celebrity 100 are women and number 1 on that list? Beyonce.

Very good sentences about austerity

Yes, it would be useful to do a more systematic study of fiscal austerity, but the Keynesians don’t seem to know how to do so. All I see are cross sectional studies that mix together countries with an independent monetary policy, with those that lack an independent monetary policy (like the eurozone members.) Mark Sadowski did a regression with only those countries having an independent monetary policy, and found the effect went away. No correlation between austerity and growth. This objection to Krugman’s graphs has been made over and over again, but he never responds.

Simon Wren-Lewis also gets the GDP growth data wrong, in a way that makes austerity look worse. He claims that RGDP growth was 2.3% in 2012 and 2.2% in 2013 (the year of austerity in the US.) But that’s annual y-o-y data, and since the austerity began on January 1st 2013, you need Q4 over Q4 data. In fact, RGDP growth in 2012, Q4 over Q4, was only 1.67%, whereas growth in the austerity year of 2013 nearly doubled to 3.13%.

Wren-Lewis says “other stuff happens.” Yes, but the “other stuff” that happened in 2013 is exactly what you might expect with aggressive monetary stimulus, whereas the other stuff that happened when Britain saw a couple years of low RGDP growth, was not at all what the Keynesian model predicts. The British growth slowdown was a productivity story (their job creation is more impressive than the US), and productivity slowdowns suggest supply-side factors (declining North Sea oil output, a structural shift from high compensation City jobs to low compensation service sector jobs, etc.)

Do I need to tell you that is from Scott Sumner?  I would add that the “other stuff” — for some but not all countries — is that the regenerative powers of a market economy are stronger than most Keynesians are willing to let on.  And you can buy into the entire Keynesian apparatus (I don’t) and still recognize that most of the time fiscal policy simply isn’t that important.

Assorted links

1. The Strange Reason Murakami Fans Gather At A Hokkaido Sheep Farm Every Year.  And the campaign to create koala mittens.

2. North Korean defectors review The Interview.

3. Children and play in the Holocaust.

4. Japan’s birth rate problem is worse than thought.

5. Robin Hanson on vote trading and quadratic voting.

6. The best films of the decade so far?

7. A new breed of economist is helping firms crack markets.

8. More on Texas vs. California.

Cardiff Garcia on the AEA meetings, and the health care cost slowdown

Here is one bit of many:

The embedded papers by Louise Sheiner of Brookings, Chapin White of the Rand Corporation, and Thomas Getzen of Temple University are recommended. To be simplistic, there was agreement that much of the slowdown was likely the result of the recession and sluggish recovery, as slow economic growth translated into less health spending and also slower wage growth for health care workers. But not all of it.

Sheiner finds that outside of spending on prescription drugs — which has been flat since 2008 because of the patent cliff — there actually hasn’t been any unexplained slowdown in health spending relative to the fifteen years before the recession. In this context, “unexplained” means a change in health spending that can’t be attributed to the business cycle. She also adds the intriguing observation that in a downturn, more health workers join the labour force, often because their spouses have lost their own jobs — but wages for health workers fall. The shortage of registered nurses mostly evaporated after the recession of 2008, she said.

White looked more closely at the Medicare slowdown and believes that the Affordable Care Act’s price cuts did have an impact, as did a recent crackdown on fraud by the Centers for Medicare & Medicaid Services.

I hope the rest is not “too gated” for you, hat tip goes to Claudia Sahm.  And Philip Greenspun reports on the meetings.