Category: Education
How to save the world — earn more and give it away
Dylan Matthews reports:
Jason Trigg went into finance because he is after money — as much as he can earn.
The 25-year-old certainly had other career options. An MIT computer science graduate, he could be writing software for the next tech giant. Or he might have gone into academia in computing or applied math or even biology. He could literally be working to cure cancer.
Instead, he goes to work each morning for a high-frequency trading firm. It’s a hedge fund on steroids. He writes software that turns a lot of money into even more money. For his labors, he reaps an uptown salary — and over time his earning potential is unbounded. It’s all part of the plan.
Why this compulsion? It’s not for fast cars or fancy houses. Trigg makes money just to give it away. His logic is simple: The more he makes, the more good he can do.
He’s figured out just how to take measure of his contribution. His outlet of choice is the Against Malaria Foundation, considered one of the world’s most effective charities. It estimates that a $2,500 donation can save one life. A quantitative analyst at Trigg’s hedge fund can earn well more than $100,000 a year. By giving away half of a high finance salary, Trigg says, he can save many more lives than he could on an academic’s salary.
…In many ways, his life still resembles that of a graduate student. He lives with three roommates. He walks to work. And he doesn’t feel in any way deprived. “I wouldn’t know how to spend a large amount of money,” he says.
The full story is here. Here is commentary from Salam and Sanchez. And I have just received the new book by Michael M. Weinstein and Ralph M. Bradburd, The Robin Hood Rules for Smart Giving, an analytical treatment written by two economists.
Markets in Everything: AER Publication
From EJMR:
I have a new paper that I consider my best work. For a variety of reasons, the marginal return professionally for this paper is very small for me. But I think it has an excellent shot a top
journal, I would estimate 1/3 at the AER (I have published there before). So I am offering it for sale. Here are the details:1. This paper is not yet posted on my website. It has not been circulated and I have not yet presented it.
2. The paper is applied micro although I will sell it to anyone.
3. Email bids to [email protected]. Use a fake account and make sure to send no revealing information.
4. Your bid is for an AER or QJE. If it ends in Restud, you pay 65%. If it ends in the Journal of Labor Economics, Journal of Public Economics, or EJ, you pay 35%. Other journals are negotiable. You can choose the submission path as long as it starts with one of the top journals.
5. I will contact the winning bid (or highest real bid) to arrange an in person meeting in Philly at the meetings. We will never leave a paper trail.
6. Half of payment is due with a revise and resubmit. I will also make the needed changes. The final half is due with final acceptance.
7. Spare me any discussion of the ethics here. I am dead serious and I will not be commenting further on this thread.
The whole thing could be a troll or an experiment but let’s assume it’s real. An AER could easily be worth 50k, especially for someone early in their career but that’s for one you wrote yourself. An AER written by someone else has a significantly lower expected value since, if revealed, it may end your career. Moreover, suppose the buyer, as unlikely as it seems, takes advantage of the big push and makes it big on their own. Is the buyer not then vulnerable to blackmail from the seller who already has signaled their ethics? I can see this appealing, however, to the scion of some dictator who could afford to pay well over 50k and also afford to make the seller pay if the secret is revealed. Caveat emptor and also caveat venditor. True, there are not many econ PhDs among the dictator set but there are a few and sadly this kind of thing does have precedents.
P.S. I did like the discounting by journal, a nice, accurate touch.
Do Lacanians understand the third derivative?
I continue to read from Bruce Fink’s A Clinical Introduction to Lacanian Psychoanalysis Theory and Technique. Here is another bit of interest:
…Lacanian analysis seeks to keep the analysand off guard and off-balance, so that any manifestation of the unconscious can have its full impact.
When fixed-length sessions are the norm, the analysand becomes accustomed to having a set amount of time to talk, and considers how to fill up that time, how best to make use of it. Analysands are very often aware, for example, that the dream they had the night before about their analyst is what is most important to their analysis, yet they try to fit in plenty of other things they want to talk about before they get to the dream (if they get to the dream). They thus attempt to minimize the importance of the dream in their own eyes, minimize the time that can be devoted to associating to it, or maximize the amount of time the analyst gives them. Analysands’ use of the time allotted to them in the session is part and parcel of their larger neurotic strategy (involving avoidance, neutralization of other people, and so on), and setting session length in advance merely encourages their neurosis.
The variable-length session throws analysands off guard, to some extent, and can be used in such a way as to encourage the analysand to get right to the good stuff.
I know some of you are making fun of me, but this is not the least interesting book I have read this week (though I would not want to base very much on it).
The job choices of Harvard graduates
Another 15 percent will be working in finance, nearly doubling the 9 percent who entered the sector last year but still paling in comparison to 2007, when before the financial crisis, 47 percent of graduating seniors went into finance.
The article is here, interesting throughout on other points too. I say they are lying about the sex and drugs, and maybe a few other things too, hat tip goes to @MattYglesias.
The GMU/UVa wage disparity and the signalling model of education
It’s a well-known fact — well-known around GMU that is — that GMU graduates earn higher average salaries than do UVA grads (direct link here), that is for four year undergrads in their first year of employment.
It’s not just that UVa is in decline, or that some of them end up richer later in life. Or others may use their wealthier parents to live in Williamsburg, Brooklyn and avoid direct employment. A major reason for the wage discrepancy is simply that a disproportionate chunk of GMU students are likely to get jobs in the relatively high-paying Washington, D.C. area.
OK, so how does this relate to the broader ongoing debate over the signaling theory of education and wages?
It is widely accepted that UVa is a more exclusive school than GMU by the usual standards. Yet here we see labor markets “seeing through” those credentials, and paying more to the GMU graduates. In other words, labor markets are seeing that GMU students are, on average, “less exclusive by origin but will have a higher marginal product very quickly.”
The signaling model, in its simplest, most stripped down form, assumes that employers cannot judge the marginal products of individual new hires but instead pay them according to their credentials. Yet here we have a case where employers seem quite willing to make a judgment about marginal product and indeed that is a judgment which contradicts data on exclusivity of academic origins. Once you postulate that employers are willing to make estimates of individual marginal products which differ from the rankings that might be given by “raw ability,” the signaling model is less applicable. I don’t want to claim that the wages converge exactly on marginal products, but the credentials clearly are just one factor of many. Employer judgments of expected marginal products are not dominated by credentials, and you can imagine that after having a worker for a year or two the credentials are even less important as a means of judging prospective marginal product.
Another way to put this point is that the speed of employer learning is in fact fairly rapid, and some of it happens before the job even starts.
The virtual therapist
The virtual therapist sits in a big armchair, shuffling slightly and blinking naturally, apparently waiting for me to get comfortable in front of the screen.
“Hi, I’m Ellie,” she says. “Thanks for coming in today.”
She laughs when I say I find her a little bit creepy, and then goes straight into questions about where I’m from and where I studied.
“I’m not a therapist, but I’m here to learn about people and would love to learn about you,” she asks. “Is that OK?”
Ellie’s voice is soft and calming, and as her questions grow more and more personal I quickly slip into answering as if there were a real person in the room rather than a computer-generated image.
…With every answer I’m being watched and studied in minute detail by a simple gaming sensor and a webcam.
How I smile, which direction I look, the tone of my voice, and my body language are all being precisely recorded and analysed by the computer system, which then tells Ellie how best to interact with me.
Right now there are two assistants guiding the avatar, in essence standing behind a screen, but that will not always be the case:
Real people come in to answer Ellie’s questions every day as part of the research, and the computer is gradually learning how to react in every situation.
It is being taught how to be human, and to respond as a doctor would to the patients’ cues.
Soon Ellie will be able to go it alone.
The full article is here, and for the pointer I thank Michelle Dawson.
Titling of Property
The NYTimes has an excellent piece on Greece’s broken property system:
In this age of satellite imagery, digital records and the instantaneous exchange of information, most of Greece’s land transaction records are still handwritten in ledgers, logged in by last names. No lot numbers. No clarity on boundaries or zoning. No obvious way to tell whether two people, or 10, have registered ownership of the same property.
As Greece tries to claw its way out of an economic crisis of historic proportions, one that has left 60 percent of young people without jobs, many experts cite the lack of a proper land registry as one of the biggest impediments to progress. It scares off foreign investors; makes it hard for the state to privatize its assets, as it has promised to do in exchange for bailout money; and makes it virtually impossible to collect property taxes.
… less than 7 percent of the country has been properly mapped, officials say. Experts say that even the Balkan states, recovering from years of Communism and civil war, are far ahead of Greece when it comes to land registries attached to zoning maps — an approach developed by the Romans and in wide use in much of the developed world since the 1800s.
Here from our course on development economics at MRUniversity is our video which covers the theory and empirical research on titling from Peru to Palau:
http://youtu.be/1CFqK_lHngs
Some of the longer-run economic news is turning around
Here is my latest New York Times column. I would stress that the observed good news is not much showing up in real wages, but at least the outlines of a potential positive narrative are falling into place. For instance:
The nation’s high school graduation rate has risen — to 78 percent in 2010, the Education Department says in its most recent estimate. That’s obviously still not where it should be, but it’s the highest figure since 1974. (For a long time, the rate was under 70 percent. After decades of stagnation, the graduation rate started to turn up in 2000, and the growth has been robust for more than a decade.)
On average, these additional high school graduates — not to mention college degree recipients — will find better jobs and enjoy better health, long-lasting benefits that will be reaped for many decades.
And this:
The growth rate in health care costs has been slowing for the last four years. In some years, in fact, it’s been no higher than the growth rate of the economy as a whole. And much of the change appears driven by efficiencies, rather than by the recent recession. This is documented in a paper by David M. Cutler, an economics professor at Harvard, and Nikhil R. Sahni, a fellow at Harvard Business School; it appeared in the May 2013 issue of Health Affairs.
This cost deceleration isn’t guaranteed to stick, but the danger that sharply rising health care costs, compounding over time, will crash the entire economy is now somewhat reduced.
That’s hardly the Jetsons, but still education and health care have been major productivity drags on the economy in the past (not in terms of the measured number, but in terms of actual performance). Coming from another direction, we even find that California suddenly has a budget surplus. One other reason for optimism is this:
While the populations of countries like the United States are aging, the number of innovative young people worldwide has never been higher. Countries like China, India, Brazil and Russia, despite recent slowdowns in growth, still are making progress in improving their educational systems and scientific networks. That increases their ability to supply technological innovations — or scientists and entrepreneurs — to the United States. These gains can be reaped in coming decades.
For the cold water, do note that none of these other countries are currently major innovators in a way which benefits the United States. Still, perhaps the dependency ratio should be defined in terms of potential ideal creators, rather than bodies and ages per se, and then it is more favorable looking forward. Finally:
Note, too, that none of these trends can be reduced to breathless or utopian claims about the future of information technology, even though each is intertwined with tech progress in subtle ways. Further breakthroughs in technology, perhaps in the field of quantum computing, could add substantially to these positive trends.
The forthcoming clustering of human capital
A radical change is taking place in the German job market: Today’s immigrants to Germany are better trained and have a higher level of education than native Germans, according to a study carried out by labor market researcher Herbert Brücker on behalf of the Bertelsmann Stiftung, a private think tank based in Gütersloh. Today, 43 percent of newly arriving immigrants between the ages of 15 and 65 have graduated from a university, a technical school or a graduate program, compared to only 26 percent of Germans without an immigration background.
The German public still largely believes that immigrants come primarily from low-skilled segments of the population, according to research done by the Nuremberg-based Institute for Employment Research (IAB).
Here is a bit more.
Questions that are rarely asked
In my email, from Eric Crampton:
Imagine the following deal, which is entirely not on any PPF so it’s not really a deal anyway. But imagine it. Genie offers a button. Push the button, and it burns the last n years of every journal in economics, along with all knowledge that those results ever existed, though they can be rediscovered. At the same time, every potential voter is brought up to a thorough Econ 101 level of understanding of Economics. At what value of n is the deal no longer worthwhile? A decade? Two?
Here is a related blog post by Eric. And here is Eric in praise of New Zealand health care institutions.
What did I learn from (another) re-read of Adam Smith?
Here is my MRU video on precisely that topic.
By the way, Brandon Dupont has done for us this excellent video on John Law.
When will most universities teach in English?
Higher Education Minister Genevieve Fioraso this past week introduced a bill that would allow French universities to teach more courses in English, even when English is not the subject. The goal, she explained, is to attract more students from such countries as Brazil, China and India, where English is widely taught, but French is reserved largely for literature lovers.
“Ten years ago, we were third in welcoming foreign students, but today we are fifth,” she said in a Q&A in the magazine Nouvel Observateur. “Why have we lost so much attraction? Because Germany has put in place an English program that has passed us by. We must make up the gap.”
The reaction?
Yet it has sparked cultural and nationalist outrage — not only from Paris intellectuals but also from several dozen members of Parliament, opposition as well as Socialist, who insist that learning French should be part of any foreign student’s experience in France.
From Jacques Attali:
“Not only would such a reform be contrary to the Constitution (which provides in its Article 2 ‘the language of the Republic is French’), but you cannot image an idea that is stupider, more counterproductive, more dangerous and more contrary to the interest of France,” he intoned in a blog.
There is more here. On one hand, on-line education makes fluency in English more important for plugging into dominant networks. On the other hand, technologies of easier subtitling and dubbing may keep other languages in contention. Still, I predict the former effect will win out, just as the internet has boosted English more generally, with or without Google Translate. The internet has indeed done a good deal to preserve, record, and ultimately transmit true minority languages, Nahuatl being one example of many, but it has not elevated them into general media of instruction.
The Adam Smith segment of the Great Economists course is underway
You will find it here, at MRUniversity.com. We have recorded videos covering, annotating, and explaining every single chapter of Smith’s masterwork Wealth of Nations, along with some coverage of surrounding historical material. Having to explain a book “along the way” is a very interesting way to read, and I was surprised how much Wealth of Nations rose in my eyes as a result of this project. I would like to do Keynes and Hayek and perhaps Marx in this manner as well.
Sentences to ponder
For jazz players, there is a negative relationship between earnings and having a BFA or a MFA.
The quotation is from here (pdf), the original source is Thomas M. Smith, pdf of the underlying paper here. There are other interesting results in this paper as well. Do note that if you don’t end up as a jazz player the degree still correlates with higher earnings.
How to make the rate of return on higher education negative
They’re signing up as we speak for a two-year degree course in heavy metal music (believed to be the first of its kind), which begins in September in a college in Nottingham.
…The degree organisers are loftily talking up the course by using terms such as “culture” and “context”. They point out that you can study music at Oxford, Cambridge or any other university, but that this “genre” degree is unique.
“Heavy metal is an extremely technical genre of music and its study is a rising academic theme,” they say. Metal is “seriously studied in conservatoires in Helsinki”, has classical music roots, and leading axe-men such as Joe Satriani incorporate the works of Paganini in their oeuvre.
Wow, Paganini. Get this:
“It’s a degree, so it will be academically rigorous,” said Mr Maloy [the sequence designer].
And why Nottingham?:
Not only was Earache Records, a heavy metal-focused record label, founded in the city, but additionally, the region’s Download Festival appeals to over 75,000 rock and metal fans on an annual basis.
The course fees are £5,750 a year. Here is a bit more information.