Category: Education

Eric, a loyal MR reader, puts forward a request:

1) Your assessment of rising and falling economics departments (in terms of research productivity, prestige, etc)

2) Your assessment of skills/focus areas associated with success in the academic economists job market.

The big change in the former has been the rise of economics departments around the world in virtually all developed countries (though not Italy).  It's now quite easy to encounter a place you have heard of — yet never really thought of — and find they have a bunch of young faculty with articles in tier one journals.  In essence the standards are now so high in terms of skills and data sets and thoroughness that it is mainly the young and ambitious who publish in tier one journals.  Those people are found around the world.

The 44-year-old tenured Princeton economist isn't so much in the AER as in times past.  The incentive, relative to the required work, has changed dramatically.  Note also that consulting returns, or public intellectual returns, are more lucrative today than they were twenty or thirty years ago.

Empirical work usually has a shorter shelf life and top producers cash in earlier than before.  So the top six schools have a smaller intellectual edge than was once the case.  Many mid-tier U.S. schools are lower on the totem pole, or simply stuck in a thick mix of numerous global competitors, without in any way being noticeably worse but no longer having privileged third-tier positions either.

That's the big recent change as I see it.

1.  More tragedy of the commons.  See also here for a great video from 60 Minutes useful for teaching this material.

2.  Alan Greenspan's new paper, The Crisis.

3.  Larry White talks with Richard Timerberlake about the gold standard in an Econ Journal Watch podcast.

4.  Prizes for philanthropy.

Manpacks.com.

Their motto is:

Get a subscription service for your socks, t-shirts, and underwear. Starting at just $7. Delivered to your door every 3 months.

One of their slogans is: "Free Your Mind."

For the pointer I thank Kathleen Fasanella.

Three entrepreneurs are offering a share of their life’s income in exchange for cash upfront and have banded together to form the Thrust Fund, an online marketplace for such personal investments.

Kjerstin Erickson, a 26-year-old Stanford graduate who founded a non-profit called FORGE that rebuilds community services in Sub-Saharan African refugee camps, is offering 6 percent of her life’s income for $600,000.

(quoted here).  A closer look reveals that this is more of clever marketing play to interest donors in supporting a philanthropy.  What, for example, does Kjerstin want do with the money? She writes:

Some people may think that it's crazy to give up a percentage of your income for the sake of scaling a nonprofit venture. But to me, it makes perfect sense.

Well it does make perfect sense for Kjerstin but not so much for a profit-seeking investor (moreover any income would be taxed twice, a problem with equity financing in general but especially so here without corporate tax breaks.)  Investing in just one entrepreneur is also risky – why not subdivide the investment and invest in many?

Jeff at Cheap Talk raises a larger but closely related issue, "Why don’t we replace student loans with student shares?" In fact, Milton Friedman advocated income contingent loans in 1955. 

The counterpart for education would be to "buy" a share in an individual's earning prospects: to advance him the funds needed to finance his training on condition that he agree to pay the lender a specified fraction of his future earnings. In this way, a lender would get back more than his initial investment from relatively successful individuals, which would compensate for the failure to recoup his original investment from the unsuccessful. There seems no legal obstacle to private contracts of this kind, even though they are economically equivalent to the purchase of a share in an individual's earning capacity and thus to partial slavery

…One way to do this is to have government engage in equity investment in human beings of the kind described above. …The individual would agree in return to pay to the government in each future year x per cent of his earnings in excess of y dollars for each $1,000 that he gets in this way. This payment could easily be combined with payment of income tax and so involve a minimum of additional administrative expense. The base sum, $y, should be set equal to estimated average–or perhaps modal–earnings without the specialized training; the fraction of earnings paid, x, should be calculated so as to make the whole project self-financing.

Another Nobelist of a more liberal stripe, James Tobin, helped to implement an income-contingent tuition program at Yale in the 1970s.  Alas, the program was terminated largely due to rent-seeking when many Yale graduates become so successful that the repayment amounts became substantial and the nouveau riche chose to default (also here).

Bill Clinton later tried to take the idea national but it didn't get very far in the United States.  (Not coincidentally Clinton had been a beneficiary of the Yale program.)

Australia, however, implemented an income contingent loan program in 1989. Australian students don't pay anything for university when they attend but once their
income reaches a certain threshold they are charged through the income tax system.  Many other countries are experimenting with income contingent loans.    

Hat tip to Alexander Ooms.

I was astounded to read in the NYTimes that Bill Perkins, state senator from Harlem, opposes charter schools:

Over the last decade, as charter schools have multiplied, Mr. Perkins has undergone a dramatic shift and emerged as their most outspoken critic in the Legislature, writing guest columns in newspapers and delivering impassioned speeches criticizing the “privatization” of public schools.

When officials of the city’s Department of Education announced last year that they planned to place a charter school inside the Public School 123 building in Harlem, Mr. Perkins was infuriated. With help from his chief of staff, several parents and teachers’ union representatives staged a protest there on the first day of school, holding signs that labeled charter schools as “separate and unequal.”

Perkins's opposition is astounding because among the charter schools he opposes are Geoffrey Canada's Harlem Children’s Zone schools.  Here from the NBER Digest is a summary of recent research on these schools:

Will Dobbie and Roland Fryer find that in the fourth and fifth grade, the math test scores of charter school lottery winners and losers are virtually identical to those of a typical black student in the New York City schools. After attending the Promise Academy middle school for three years, black students score as well as comparable white students. They are 11.6 percent more likely to be scoring at grade level in sixth grade, 17.9 percent more likely to be scoring at grade level in seventh grade, and 27.5 percent more likely to be scoring at grade level by eighth grade. Overall, Promise Academy middle school enrollment appears to increase math scores by 1.2 standard deviations in eighth grade, more than the estimated benefits from reductions in class size, Teach for America, or Head Start.

These increases are very large and although supported by randomized experiment I wouldn't be surprised if future research cuts them down but if the true effect were even a quarter as large it would still be big news.  As Fryer told David Brooks “The results changed my life as a researcher because I am no longer interested in marginal changes."

I don't know why anyone interested in the welfare of children would want to discourage this kind of experimentation.