Category: Education
Not Catching Up: Affirmative Action at Duke University
A working paper titled What Happens After Enrollment: An Analysis of the Time Paths of Racial Difference in GPA and Major Choice by Duke university economists Peter Arcidiacono and Esteban Aucejo and sociologist Ken Spenner is creating a stir. The authors track a sample of Duke students from admissions to graduation in order to determine the effects of affirmative action.
Under one theory of affirmative action the goal is to give minority students an opportunity to catch-up to their peers once everyone is given access to the same quality of schooling. On a first-pass through the data, the authors find some support for catch-up at Duke. In year one, for example, the median GPA of a white student is 3.38, significantly higher than the black median GPA of 2.88. By year four, however, the differences have shrunk to 3.64 and 3.31 respectively.
Further analysis of the data, however, reveal some troubling issues. Most importantly, the authors find that all of the shrinking of the black-white gap can be explained by a shrinking variance of GPA over time (so GPA scores compress but class rankings remain as wide as ever) and by a very large movement of blacks from the natural sciences, engineering and economics to the humanities and the social sciences. It’s well known that grade inflation is higher in the humanities and the social sciences so the shift in college major can easily explain the shrinking black-white gap in GPA. (The authors show that grades are higher in the humanities holding SAT scores constant and also that students themselves report that classes in the sci/eng/econ are harder than classes in the humanities and that they study more for these classes).
The shift of black students across majors is dramatic. Prior to entering Duke, for example, 76.7% of black males expect to major in the natural sciences, engineering or economics but only 35% of them actually do major in these fields (almost all Duke students do graduate so this result is due to a shift in major not dropping out). In comparison, 68.7% of white males expect to major in sci/eng/econ and 63.6% of them actually do graduate with a major in these fields (this is from Table 9 and is of those students who had an expected major). White and black females also exit sci/eng/econ majors at high rates, although the race gap for females is not as large as for males. The authors do not discuss the consequences of dashed expectations.
An important finding is that the shift in major appear to be driven almost entirely by incoming SAT scores and the strength of the student’s high school curriculum. In other words, blacks and whites with similar academic backgrounds shift away from science, engineering and economics and towards the easier courses at similar rates.
I have argued that the United States would benefit from more majors in STEM fields but that is not the point of this paper. The point is that there is no evidence for catch-up at Duke and thus to the extent that affirmative action can work in that way it may have to occur much earlier.
Hat tip: Newmark’s Door.
Can “education as signaling” models explain recent changes in labor markets?
Acemoglu and Autor present a few non-controversial stylized facts about labor markets, including falling wages of low-skill workers, flattening of the wage premium for workers with less education than college completion, non-monotone shifts in inequality, polarization of employment in advanced economies, and skill-replacing technologies (and don’t forget the new Brynjolfsson and MacAfee book; it is important).
The simplest model is that, because of information technology, employers demand more skills. The job market responds accordingly, and eventually the education system responds too. The major shifts are driven by changing productivities of human capital, and that is one reason why the human capital model of labor markets has proven so robust. It accounts (mostly) for the big changes in labor market returns.
What would a signalling model predict as the results of skill-biased technical change? I am never sure. Those models are tricky with comparative statics predictions for at least three reasons:
1. Multiple equilibria are common and arguably essential,
2. It is assumed that employers cannot in the short run (medium run?) observe the marginal products of workers, and
3. The (supposed) relevant factor for employers, the degree, is past history and, if not quite carved in stone, credentialed retraining remains the exception in many market segments. It hardly drives wage outcomes or observed changes in wages.
The simplest (non-signaling) model is that wages follow MP, albeit with some lag, and adjusting for a suitably sophisticated notion of marginal revenue product, including morale effects on other workers.
Again, how should skill-based technical change matter in a signaling model? In the model, no employer observes (across what time horizon?) that the MPs of some workers have gone up and that other workers’ MPs have gone down. Yet it seems that changing MPs matter at margins. And if employers can sniff out changing MPs, this implies they can sniff out large MP differences more generally, which limits the scope of educational signaling.
It is a strong result these days that occupation and also job tasks predict earnings better than before (see pp.26-27 in the first link), including relative to level of education. That also seems to run counter to what signaling theories predict. Most likely we are now better at measuring the quality of workers and their educational signals don’t matter as much as they used to. The higher returns to post-secondary education, which account for most of the recent growth in the returns to college degrees (p.145 and thereabouts), are skill-based and they are tightly connected to occupation and job tasks.
These are all reasons why the signaling model for education is not growing in popularity, namely that it does not speak well to current comparative statics and to the current big stories in labor markets.
It is an embarrassing question for signaling models to ask: with what lag do employers get a good estimate of a worker’s marginal product? If you say “it takes 37 years” it is hard to account for all the recent changes in wage rates in response to technology, as discussed above.
Alternatively, let’s say the lag is two years. There are several RCT estimates of the return to education, based on earnings profiles measured over twenty or thirty year periods. The estimated returns to education are high, and if those returns were just signaling-based you would expect the IV-elevated individuals to show up as underskilled and for the credentials-based wage gains to fall away with a few years’ time. That doesn’t happen (if you are wondering, the IV-elevated individuals are those who for essentially random reasons end up getting more education, or an instrumental variable proxies as such, without the elevation being correlated with their underlying quality as workers,).
In other words, the signaling model is caught between two core results — high long-term measured returns to the education of IV-elevated individuals, and technology drives wage changes in the medium-term. It is hard for a signaling model to explain both of those changes at the same time.
There is a way to nest signaling models within human capital models, rather than viewing them as competing hypotheses. Using matching theories, let’s say employers learn the quality of workers they have, but find it hard to estimate the quality of workers they don’t have. IV-elevated workers can’t fool the market/the employer for very long, and so their high pecuniary returns from education really do measure productivity gains. Nonetheless there can be undervalued “diamonds in the rough.” Think of them as geniuses, or at least good workers, who hate getting the education.
From the point of view of these students (or dropouts, as the case may be), the signaling model will appear to be true. They will resent the education and they won’t need the education. If it is costly enough to sample worker quality from the “outsiders bin,” it will remain an equilibrium that a degree is required to get the job, at least provided workers of this kind are not too numerous. If there were “lots and lots” of such workers, more employers would scrounge around in the outsider’s bin. In other words, the anecdotal evidence for signaling fits into a broader model precisely because such cases aren’t too common.
The influence of MIT on macroeconomic policy
From Rich Miller and Jennifer Ryan:
At MIT, King, 63, and then-professor Ben S. Bernanke, 58, had adjoining offices in 1983, spending the early days of their academic careers in an environment where economics was viewed as a tool to set policy. Earlier, Bernanke and European Central Bank President Mario Draghi, 64, earned their doctorates from the university in the late 1970s, Draghi with a thesis entitled “Essays on Economic Theory and Applications.”
Fischer, 68, advised Bernanke’s thesis on “Long-Term Commitments, Dynamic Optimization and the Business Cycle,” and taught Draghi. Greek Prime Minister and former ECB vice president Lucas Papademos and Olivier Blanchard, now chief economist for the International Monetary Fund in Washington, earned their doctorates from MIT at about the same time.
Other monetary policy makers who have passed through MIT’s doors include Athanasios Orphanides, head of the Central Bank of Cyprus, Duvvuri Subbarao, governor of the Reserve Bank of India and Charles Bean, King’s deputy in the U.K.
Central banking is filled with former attendees of the Cambridge, Massachusetts, university not just because it was and is one of the world’s top schools for economics.
Arnold Kling comments.
Do economists understand the concept of opportunity cost?
Remember those old debates on MR as to what opportunity cost is exactly supposed to mean? Joel Potter and Shane Sanders have an interesting follow-up paper:
Abstract: Ferraro and Taylor (2005) asked 199 professional economists a multiple-choice question about opportunity cost. Given that only 21.6 percent answered “correctly,” they conclude that professional understanding of the concept is “dismal.” We challenge this critique of the profession. Specifically, we allow for alternative opportunity cost accounting methodologies—one of which is derived from the term’s definition as found in Ferraro and Taylor— and rely on the conventional relationship between willingness to pay and substitute goods to demonstrate that every answer to the multiple-choice question is defensible. The Ferraro and Taylor survey question suggests difficulties in framing an opportunity cost accounting question, as well as a lack of coordination in opportunity cost accounting methodology. In scope and logic, we conclude that the survey question does not, however, succeed in measuring professional understanding of opportunity cost. A discussion follows as to the concept’s appropriate role in the classroom.
Specialization of science bleg
I am looking for good writings on whether science has become an overly specialized endeavor, and if so what are the scientific and social consequences of that development? Any leads you might offer would be most appreciated. Of course this could cover many different fields.
What kinds of movie stars marry each other?
Marital sorting on education is an important but poorly understood source of inequality. This paper analyzes a group of men and women who do not meet their spouses in school, are not sorted by education in the workplace, and whose earnings are not correlated with their years of education. Nevertheless, movie actors marry spouses with an education similar to their own. These findings suggest that male and female preferences alone induce considerable sorting on education in marriage and that men and women have very strong preferences for nonfinancial partner traits correlated with years of education.
Hat tip goes to Steve Sailer. And here is another paper by Bruze:
US middle aged men and women are earning in the order of 30 percent of their return to schooling through improved marital outcomes.
Sentences to ponder
In about 7 days, BenchPrep can convert any textbook, say one on Calculus that sells for $50, into an interactive course it can sell for $100.
Here is more, and for the pointer I thank Michael Rosenwald.
Addendum: Here is an Annie Lowrey piece on the importance of teacher quality, the paper is here and the effects are long-term.
Might schooling raise IQ?
Children who have more schooling may see their IQ improve, Norwegian researchers have found.
Although time spent in school has been linked with IQ, earlier studies did not rule out the possibility that people with higher IQs might simply be likelier to get more education than others, the researchers noted.
Now, however, “there is good evidence to support the notion that schooling does make you ‘smarter’ in some general relevant way as measured by IQ tests,” said study author Taryn Galloway, a researcher at Statistics Norway in Oslo.
Findings from the large-scale study appear in this week’s online edition of the Proceedings of the National Academy of Sciences.
…In 1955, Norway began extending compulsory middle school education by two years. Galloway and her colleague Christian Brinch, from the department of economics at the University of Oslo, analyzed how this additional schooling might affect IQ.
Using data on men born between 1950 and 1958, the researchers looked at the level of schooling by age 30. They also looked at IQ scores of the men when they were 19.
“The size of the effect was quite large,” she said. Comparing IQ scores before and after the education reform, the average increased by 0.6 points, which correlated with an increase in IQ of 3.7 points for an addition year of schooling, Galloway said.
The summary is here, the paper is here, and for the pointer I thank Michelle Dawson.
Why do universities have endowments?
Alan Gunn asks:
Why do universities (in the US and Britain only) have endowments, and should they? And why does no one but Henry Hansmann [pdf, eBook version here] write about this question?
Because they can. Tax law doesn’t stop them, and why should a University President spend down the fund? An ongoing high balance in the fund means prestige, a good ranking, and an ability to make credible commitments to quality faculty and quality programs.
Current donors know that their support will feed into something long-run and grand. Rationally or not, it is less persuasive for an alumni donor to hear a pitch like “We will spend down the corpus. Penn State will rise seventeen spots in the ratings, for twenty years, and then fade into obscurity.” Many givers care predominantly about the “here and now,” but they donate to political campaigns, or benevolent charities, not universities.
Ultimately we need a theory of segmented giving, and how board structures of universities support such giving. University board members benefit most from a prestigious school with a high endowment and other prestigious board members. In general those boards will support accumulating the endowment, at least if the school has any chance for prestige in the first place. Spending money within the university instead distributes those benefits to current faculty and students, rather than to the decision-makers over the endowment.
Note that while the most visible colleges and universities usually have large endowments, the median and modal schools have endowments very close to zero. They have no chance of accumulating their way to substantial prestige benefits.
Alternatively, you could drop the fancy institutional economics and apply crude price theory. Universities can borrow or otherwise raise money tax-free, and at g > r you should expect ongoing and rising accumulation.
It is striking how much the list of top U.S. universities does not change over the last century, albeit with some new entries from the west coast. Among other things, that suggests there has been no fancy, expensive and effective new product that a school might invest in and run down its endowment for. This might change in the next twenty years. One can imagine a middling school running down its endowment to spend its way to leadership in on-line education.
I have never seen a good paper on which non-profits accumulate endowments and which do not, and how that difference functions as both cause and effect. I would think, for instance, that the Heritage Foundation has a substantial endowment, but many think tanks do not.
Here is a new paper on university endowments (pdf), by Gilbert and Hrdlicka, asking whether endowments are invested in too risky a fashion. It also raises the question of how well endowment practices will survive in a time with low rates of return. Here is a 2008 dialogue on endowment reform. Here is a 2009 law review piece on university endowments, it is a little slow to load. Here is a TIAA-CREF perspective (pdf) on the investment committees for university endowments; they tend to be run by donors. Here is a look at mandatory payout proposals. Here is a good 2010 paper (pdf) on what happens when endowment values decline, it is called “Why I Lost My Secretary.”
Why is India so low in the Pisa rankings?
That is a request from J. and here is one recent story, with much more at the link:
A global study of learning standards in 74 countries has ranked India all but at the bottom, sounding a wake-up call for the country’s education system. China came out on top.
On this question, you can read a short Steve Sailer post, with comments attached. Here are my (contrasting) observations:
1. A big chunk of India is still at the margin where malnutrition and malaria and other negatives matter for IQ. Indian poverty is the most brutal I have seen, anywhere, including my two trips to sub-Saharan Africa or in my five trips to Haiti. I don’t know if Pisa is testing those particular individuals, but it still doesn’t bode well for the broader distribution, if only through parental effects.
2. Significant swathes of Indian culture do not do a good job educating women or protecting their rights, even relative to some other very poor countries. On educational tests the female students are at a marked disadvantage and that will drag down the average.
3. Countries taking the test for the first time may face a disadvantage in manipulating the results to their advantage; admittedly this cannot account for most of the poor performance.
4. Indian agricultural productivity is abysmal, in large part due to legal restrictions. I discuss this in more detail in my next book An Economist Gets Lunch, due out in April. That hurts the quality of life and opportunities for hundreds of millions of Indians, including of course children.
Overall, India has a lot of low-hanging fruit, but the country has further to go than many observers realize. A quadrupling of per capita income would put them at what, the level of Thailand?
A meeting with the politeness expert?
From the always-excellent Laura Miller:
I confess that I have met Alford briefly and have found him polite, though not extraordinarily so. However, he reports that he volunteers as a New York City tour guide for visiting foreigners, always tries to strike up conversations with people standing alone at parties and considers himself responsible for the cleanliness of the toilet seat in any “single-stall facility” he emerges from, whether or not he splashed it himself. Such behavior does indeed seem above and beyond the ordinary call of manners and sets a standard worthy of a role model.
Yet all these points for gallantry are nearly wiped out in my book by Alford’s account of a game he is fond of playing in restaurants, called “Touch the Waiter.” The goal is to “see who at your table can touch the waiter the greatest number of times without the waiter’s figuring out you’re doing so.” Although he stipulates that this touching should never be lecherous or “directed at the sullen or the insecure” (the preferred target is an overly attentive or effusive waiter) it is nevertheless a creepy activity, a prank aimed at people whose livelihood depends on making themselves agreeable to patrons. Would it kill him to stop doing that?
Brainy bibs for baby, markets in everything
They have transcribed my TEDx talk on stories
The link and pointer come from Ben Casnocha, here is one excerpt (emphasis is from Ben):
…as a general rule, we’re too inclined to tell the good vs. evil story. As a simple rule of thumb, just imagine every time you’re telling a good vs. evil story, you’re basically lowering your IQ by ten points or more. If you just adopt that as a kind of inner mental habit, it’s, in my view, one way to get a lot smarter pretty quickly. You don’t have to read any books. Just imagine yourself pressing a button every time you tell the good vs. evil story, and by pressing that button you’re lowering your IQ by ten points or more.
One interesting thing about cognitive biases – they’re the subject of so many books these days. There’s the Nudge book, the Sway book, the Blink book, like the one-title book, all about the ways in which we screw up. And there are so many ways, but what I find interesting is that none of these books identify what, to me, is the single, central, most important way we screw up, and that is, we tell ourselves too many stories, or we are too easily seduced by stories. And why don’t these books tell us that? It’s because the books themselves are all about stories. The more of these books you read, you’re learning about some of your biases, but you’re making some of your other biases essentially worse. So the books themselves are part of your cognitive bias. Often, people buy them as a kind of talisman, like “I bought this book. I won’t be Predictably Irrational.” It’s like people want to hear the worst, so psychologically, they can prepare for it or defend against it. It’s why there’s such a market for pessimism. But to think that buying the book gets you somewhere, that’s maybe the bigger fallacy. It’s just like the evidence that shows the most dangerous people are those that have been taught some financial literacy. They’re the ones who go out and make the worst mistakes. It’s the people that realize, “I don’t know anything at all,” that end up doing pretty well.
The talk itself is here on video.
Steven Landsburg Reviews Launching
I am a big fan of Steven Landsburg’s books such as The Armchair Economist, More Sex is Safer Sex, and The Big Questions so Landsburg’s review of Launching the Innovation Renaissance was a personal thrill:
…This is a great book. It’s fast-paced, fun to read, informative as hell, and it gets everything right. At first I wished I’d written it— until I realized I could never have written it half so well.
…I wish everyone in the world would read this book. It only takes a couple of hours, and it is by far the best introduction I know of to the topic that towers above all others in its importance for the happiness of human beings everywhere, now and in the future, namely how to foster and accelerate the kinds of innovation that lead to economic growth. It will, I hope and expect, make you an enlightened advocate for enlightened policies. And it will arm you with a bundle of fun facts and anecdotes to share with your friends. This book might turn you into a proselytizer, but it will surely not turn you into a bore.
Buy Launching the Innovation Renaissance (Amzn, Nook, iTunes) and read it over the holidays!
That was then, this is now
In 2004, I wrote this to Alex:
The United States remains a strong and prosperous country. Our infrastructure, national culture of innovation, human capital, and economic dynamism are unparallelled in world history. The Bush fiscal policies, whatever their irresponsibilities, costs, and drawbacks, haven’t changed those core facts.
So I walked down to Alex’s office and issued him the following challenge: if you think I am wrong, sell all your stocks and go short on U.S. Treasury securities (and long on Brazil, if you wish!). With all the money you will make, you can buy out my half of this blog.
In my own defense, 2004 was the year when the available run of productivity statistics was looking the best, and there was no reason to think the 2001-2004 numbers were biased or misleading.
For the pointer I thank…Alex.
p.s. he didn’t do it.