Category: Education

Insurance markets in everything

The University of Illinois at Urbana-Champaign has paid $424,000 to insure itself against a significant drop in tuition revenue from Chinese students.

In what is thought to be a world first, the colleges of business and engineering at the university signed a three-year contract with an insurance broker to pay the annual six-figure sum, which provides coverage of up to $60 million.

The university came up with the idea in 2015 and implemented it last year but received permission from the broker to discuss it in public only earlier this month.

Here is the story.

Fading Legacies: Human Capital in the Aftermath of the Partitions of Poland

This paper studies the longevity of historical legacies in human capital. The Partitions of Poland (1772-1918) represent a natural experiment that instilled Poland with three different legacies of education, resulting in sharp differences in human capital among the Polish population. I construct a large, unique dataset that reflects the state of schooling and human capital in the partition territories from 1911 to 1961. Using a spatial regression discontinuity design, I find that primary school enrollment differs by as much as 80 percentage points between the partitions before WWI. However, this legacy disappears within the following two decades of Polish independence, as all former partitions achieve universal enrollment. Differences in educational infrastructure and gender access to schooling simultaneously disappear after WWI. The level of literacy converges likewise across the former partitions, driven by a high intergenerational mobility in education. After WWII, the former partitions are not distinguishable from each other anymore.

That is from Andreas Backhaus, a job market candidate from University of Munich.

Open questions from Gwern

This is all Gwern, I won’t add another layer of indentation:

Open Questions

Some questions which are not necessarily important, but do puzzle me or where I find standard answers to be unsatisfying (along the lines of Patrick Collison’s list & Alex Guzey; see also my list of project ideas):

  • What is personal productivity and why does it vary from day to day so strikingly, and yet not correlate with environmental variables like weather or sleep quality nor appear as the usual kind of latent variable in my factor analyses? Is it something much weirder than the usual kind of latent variable, like a set of zero-sum measurements drawing on a generic pool of energy or mana?
  • Does listening to music while working serve as a distraction, or motivation?
  • What, algorithmicly, are mathematicians doing when they do math which explains how their proofs can usually be wrong but their results usually right?Is it equivalent to a kind of tree search like MCTS or something else? They wouldn’t seem to be doing a literal tree search because then there would almost never be mistakes in the proof (as the built-up tree of theorems only explores valid inferential steps), but if they’re not, then how are they handling logical uncertainty? Are they doing something like MCTS’s random playouts where lemmas are not proven but simply heuristically given a truth value to shortcut exploration and the heuristic is accurate enough to usually guess correctly and this is why the proofs are wrong but the results are right?
  • Why did Jean Calment live so many more years than other centenarians, breaking all records and setting a life expectancy record which decades later has not just not been broken, but not even approached? Which is extraordinary considering that she smoked, medicine has continuously advanced, the global population has increased, life expectancy in general has increased, and the Gompertz curve implies that, with mortality rates approaching 50%, centenarians should die like flies and ever closer in age to each other and not have occasional enormous permanent 3 year gaps between the record setter (Calment) and everyone since then.
  • Why do humans, pets, and even lab animals of many species kept in controlled lab conditions on standardized diets appear to be increasingly obese over the 20th century? What could possibly explain all of them simultaneously becoming obese?
  • What happened to the famous genome sequencing cost curve after late 2012, which stopped price decreases, damaged genetics, and delayed the advent of whole-genome sequencing by perhaps a decade? Was it really just the Illuminati’s fault?
  • Why do humans have such a large mutation load on common genetic variants? Common SNPs make up a large fraction of variance, even for traits which must be fitness-affecting. Culture or technology slow evolution doesn’t wash when human fitness differentials are so large and so many people died young or as infants, and how did the many deleterious variants get pushed up to such high frequencies in the first place?
  • Why does the immune system so often surface as a genetic correlation or tissue enrichment in GWASes for many things not generally believed to be infectious? Are we missing an enormous range of infections directly causing bad things (or indirectly through autoimmune mechanisms), or the immune system just sort of like intelligence in being a general health trait?
  • Why does catnip response vary so much across countries in domestic cats, and also across feline species, with no apparent phylogenetic or environmental pattern? It is so heritable in domestic cats that a genetic reason is plausible, but if it’s adaptive, what is it doing when catnip doesn’t exist in the ranges of most tested cats, and if it’s neutral why can so many closely-different different animals respond to it in different ways?

TC again: There is much more at the link.  If you don’t know Gwern, you should know Gwern.

Why do so many academics dislike the market?

It seems Nozick was right after all, here is Raul Magni-Berton and Diego Rios:

In this article, the authors explore why academics tend to oppose the market. To this intent the article uses normative political theory as an explanatory mechanism, starting with a conjecture originally suggested by Robert Nozick. Academics are over-represented amongst the best students of their cohort. School achievement engenders high expectations about future economic prospects. Yet markets are only contingently sensitive to school achievement. This misalignment between schools and markets is perceived by academics – and arguably by intellectuals in general – as morally unacceptable. To test this explanation, the article uses an online questionnaire with close to 1500 French academic respondents. The data resulting from this investigation lend support to Nozick’s hypothesis.

Via Rolf Degen.

The best results on assortative mating and inequality I have seen

This paper studies the evolution of assortative mating in the permanent wage (the individual-specific component of wage) in the U.S., its role in the increase in family wage inequality, and the factors behind this evolution. I first document a substantial trend in assortative mating, as measured by the permanent wage correlation of couples, from 0.3 for families formed in the late 1960s to 0.52 for families formed in the late 1980s. I show that this trend accounts for more than one-third of the increase in family wage inequality across these cohorts of families. I then argue that the increase in marriage age across these cohorts contributed to the assortative mating and thus to the rising inequality. Individuals face a large degree of uncertainty about their permanent wages early in their careers. If they marry early, as most individuals in the late 1960s did, this uncertainty leads to weak marital sorting along permanent wage. But when marriage is delayed, as in the late 1980s, the sorting becomes stronger due to the quick resolution of this uncertainty with work experience. After providing reduced-form evidence on the impact of marriage age, I build and estimate a marriage model with wage uncertainty and show that the increase in marriage age can explain almost 80% of the increase in assortative mating.

That is from the job market paper of Alparslan Tuncay, from the University of Chicago.

My Conversation with John Nye

John is one of the smartest people I know, and one of my favorite people to talk to, here is the transcript and audio.  Here is the opening summary:

Raised in the Philippines and taught to be a well-rounded Catholic gentleman, John Nye learned the importance of a rigorous education from a young age. Indeed, according to Tyler he may very well be the best educated among his colleagues, having studying physics and literature as an undergraduate before earning a master’s and PhD in economics. And his education continues, as he’s now hard at work mastering his fourth language.

On this episode of Conversations with Tyler, Nye explains why it took longer for the French to urbanize than the British, the origins of the myth of free-trade Britain, why Vertigo is one of the greatest movies of all time, why John Stuart Mill is overrated, raising kids in a bilingual household, and much more.

Here is one bit:

NYE: In fact, one of the things I do know about the 19th century is that there’s no evidence that either unilateral free trade or multilateral did very much.

Almost all the free trade in Europe in the 19th century was a product of, initially, the bilateral trade agreement between Britain and France, sometimes known as the Anglo-French Treaty of Commerce of 1860, in which they each agreed to much more liberalized trade on a most-favored-nation basis. Once they accepted this, then what happened is, anyone who signed on to either Britain or France on the most-favored-nation basis then bought into, in some sense, this system.

Here is another:

COWEN: Particular mistakes aside, what were the systemic mistakes the Western world was making in, say, 1910, 1912?

NYE: I think the systemic mistake really boils down to how do you deal with the problem of power? How do you deal with the problem of different groups, different cultures wanting their place at the table? It’s clear that, if you look, a lot of the fight of imperialism was great-power competition.

If you look in the Far East, for example, some people may know that the United States took the Philippines from Spain at the end of the period of Spanish control of the Philippines in 1898, and partly this was due to Perry’s decision to sail into Manila Bay.

One of the things that’s not discussed — most people are unaware of — is that the German and British fleets were waiting in Hong Kong. They were waiting to see what the Americans did. And it’s quite likely that, had the Americans not steamed into Manila Bay, that the Germans or British would have intervened in the Philippines once the Spanish collapsed.

And:

COWEN: And if there’s an underlying political subtext or import of Hitchcock, what do you think that would be? Not what he necessarily intended as his politics, but what’s in the movies in terms of human nature and political man?

NYE: Well, I think there’s this question of suspicion and the tendency to not appreciate how much is going on under the surface. I think people tend to see these things narrowly in terms of Cold War paranoia. But Hitchcock was a political conservative, and he was much more of the very old British conservative view that one should be wary in times of —

COWEN: Suspicion is metaphysical, right?

Definitely recommended, I am very honored to have had the chance to do this with John.

The long-run impacts of same-race teachers

From Seth Gershenson, Cassandra M.D. Hart, Joshua Hyman, Constance Lindsay and Nicholas W. Papageorge:

We examine the impact of having a same-race teacher on students’ long-run educational attainment. Leveraging random student-teacher pairings in the Tennessee STAR class-size experiment, we find that black students randomly assigned to a black teacher in grades K-3 are 5 percentage points (7%) more likely to graduate from high school and 4 percentage points (13%) more likely to enroll in college than their peers in the same school who are not assigned a black teacher. We document similar patterns using quasi-experimental methods and statewide administrative data from North Carolina. To examine possible mechanisms, we provide a theoretical model that formalizes the notion of “role model effects” as distinct from teacher effectiveness. We envision role model effects as information provision: black teachers provide a crucial signal that leads black students to update their beliefs about the returns to effort and what educational outcomes are possible. Using testable implications generated by the theory, we provide suggestive evidence that role model effects help to explain why black teachers increase the educational attainment of black students.

I would describe the strength of this effect as one of the main and most important things economists have taught us over the last five years.

*Where Economics Went Wrong: Chicago’s Abandonment of Classical Liberalism*

That is the new book by David Colander and Craig Freedman, here is one short bit:

The best way of conveying our conception of what is at least suggestive of a Classical Liberal stance is to present a handful of economists who, in our view, reflect this attitude.  We have chosen six economists: Edward Leamer, Ariel Rubinstein, Alvin Roth, Paul Romer, Amartya Sen, and Dani Rodrik.  Each have, in our view, displayed a Classical Liberal attitude to methodology in important aspects of their work.

I am very much in favor of what the authors propose here, although I might reserve the term classical liberal for the more traditional political distinction.

*Aquinas and the Market: Toward a Humane Economy*

By Mary L. Hirschfeld, here is the opening passage from the Preface:

My rather peculiar intellectual journey began with my pursuit of a Ph.D. in economics at Harvard University, granted in 1989, and culminated in a second Ph.D. in theology, from the University of Notre Dame in 2013.  Economics and theology are two very different sets of discourses, and this book is the result of my effort to sort out the resulting cacophony in my own head.  When I began my career, I would never have imagined writing such a book.  For starters, I was an ordinary somewhat spiritually inclined but definitely not religious type when I began my academic career at Harvard in the fall of 1983.

Definitely recommended, and not just for Ross Douthat.  It is exquisitely written as well.  I enjoyed this sentence in the acknowledgements:

It is because of Tyler that I am a convinced Thomist, though that outcome would undoubtedly horrify him.

I am not easily horrified these days!  Thus there are doubts, always doubts.

Buy the book here.

All Hail Dalton Conley

Conley describes his early academic work as “lefty sociology.” His Ph.D. thesis was on the black-white wealth gap and he dedicated his early career to studying the transmission of health and wealth between parents and children.

At N.Y.U., Conley kept getting into disagreements with geneticists, arguing that their methods were dangerously naïve. It seemed to him implausible that studying only twins — the gold standard of genetics research — was enough to teach us the difference between nature and nurture. But over time, he decided that it wasn’t enough to just argue. Conley is an academic, and even within that tortured group he is something of a masochist. At that time he was a tenured professor, the kind of gig most people see as the endgame of an academic career, and yet he decided to go back and grind out another Ph.D., this time in genetics. He went into his program believing that our social environment is largely the cause of our outcomes, and that biology is usually the dependent variable. By the end of his time, he says, the causal arrow in his mind had pretty much flipped the other way: “I tried to show for a range of outcomes that the genetic models were overstating the impact of genetics because of their crazy assumptions.” He sighs. “But I ended up showing that they’re right.”

From the New York Times piece on Geno-Economics (Tyler linked to it yesterday also).

Teacher expectations matter

From Nicholas W. Papageorge, Seth Gershenson, and Kyung Min Kang:

We develop and estimate a joint model of the education and teacher-expectation production functions that identifies both the distribution of biases in teacher expectations and the impact of those biases on student outcomes via self-fulfilling prophecies. Our approach leverages a unique feature of a nationally representative dataset: two teachers provided their educational expectations for each student. Identification of causal effects exploits teacher disagreements about the same student, an idea we formalize using lessons from the measurement error literature. We provide novel, arguably causal evidence that teacher expectations affect students’ educational attainment: Estimates suggest an elasticity of college completion with respect to teachers’ expectations of about 0.12. On average, teachers are overly optimistic about students’ ability to complete a four-year college degree. However, the degree of over-optimism of white teachers is significantly larger for white students than for black students. This highlights a nuance that is frequently overlooked in discussions of biased beliefs: less biased (i.e., more accurate) beliefs can be counterproductive if there are positive returns to optimism or if there are socio-demographic gaps in the degree of teachers’ optimism; we find evidence of both.

This is the most important thing I will have to tell you today.  Here is commentary from Vera.

Do we need a Journal of Controversial Ideas?

That is the topic of my latest column for Bloomberg, here is one excerpt:

Now enter a newly announced project, called the Journal of Controversial Ideas. It will publish one issue per year, devoted to ideas that otherwise may not receive a fair hearing, and it will allow for anonymous or pseudonymous publication. Princeton philosopher Peter Singer is one of the names associated with the journal, which does not yet have an agreement with a publisher.

I am skeptical though not hostile toward this enterprise. It is sad that such a journal is seen as necessary. But I would suggest instead putting forth your ideas on a blog, on Twitter or on YouTube. Many politically incorrect figures have done just that. A Jordan Peterson YouTube lecture might range from the Bible to Jung to a critique of contemporary feminism, none of it refereed, but he has attracted millions of viewers. At the end of it all you get the Jordan Peterson worldview, which I suspect has more resonance than any particular empirical claim Peterson might make along the way.

In an internet-centered intellectual world, what persuades people is reading or hearing a charismatic personality, year in year out, promoting a particular view of the world. A lot of controversial ideas will have to ride that roller coaster, for better or worse.

The Journal of Controversial Ideas is intended to be open access, though without a publishing contract we can’t know if it will have an open online comments section. It would be odd if not (would we have to create a companion Journal of Controversial Comments?), but with open comments you have to wonder whether a prestige publisher will take on the associated libel and reputational risks, and how high status the journal actually will be. It would not be practical to referee the comments, but that may mean the truly open internet, with its free-for-all atmosphere, will remain the dominant source for controversial ideas. “Controversial for me but not for thee” hardly seems like a winning slogan for such a revisionist enterprise.

Overall, I think controversial ideas will do best on the non-refereed internet, but I am not opposed to giving this venture a try.  Refereeing is supposed to boost status, but will anyone put a publication here on their tenure vita?  And:

To make a controversial idea stick through the academic process, maybe you do have conquer the biases and beat the odds against you, as Harvey MansfieldRobert P. George and Oded Galor have done (to name just three). You also might pursue a “Straussian” approach, embedding subversive messages in your paper and covering them up with flowery rhetoric, hoping that some but not too many people notice what you are really saying.

Do read the whole thing.

The philosophy and practicality of Emergent Ventures

Let’s start with some possible institutional failures in mainstream philanthropy.  Many foundations have large staffs, and so a proposal must go through several layers of approval before it can receive support or even reach the desk of the final decision-maker.  Too many vetoes are possible, which means relatively conservative, consensus-oriented proposals emerge at the end of the process.  Furthermore, each layer of approval is enmeshed in an agency game, further cementing the conservatism.  It is not usually career-enhancing to advance a risky or controversial proposal to one’s superiors.

There is yet another bias: the high fixed costs of processing any request discriminate against very small proposals, which either are not worthwhile to approve or they are never submitted in the first place.

Finally, foundations often become captured by their staffs.  The leaders become fond of their staffs, try to keep them in the jobs, regard the staff members as a big part of their audience, and adopt the perspectives of their staffs, more so as time passes.  That encourages conservatism all the more, because the foundation leaders do not want their staffs to go away, and so they act to preserve financial and reputational capital.

To restate those biases:

  1. Too much conservatism
  2. Too few very small grants
  3. Too much influence for staff

So how might those biases be remedied?

Why not experiment with only a single layer of no?

Have a single individual say yes or no on each proposal — final word, voila!  Of course that individual can use referees and conferees as he or she sees fit.

The single judge could be an expert in some of the relevant subject areas of the proposals (that is sometimes the case in foundations, but even then the expertise of the foundation evaluators can decay).

This arrangement also can promise donors 100% transmission of their money to recipients, or close to that.  If someone gives $1 million to the fund, the award winners receive the full $1 million.  This is rare in non-profits.  (In the case of Emergent Ventures there are unbudgeted time costs for me and my assistant, who prints out the proposals, and the paper costs of the printing get charged to general operating expenses at Mercatus.  Still, a $1 million grant at the margin leads to $1 million in actual awards.  I am not paid to do this.)

The solo evaluator — if he or she has the right skills of temperament and judgment — can take risks with the proposals, unencumbered by the need to cover fixed costs and keep “the foundation” up and running.  Think of it as a “pop-up foundation,” akin to a pop-up restaurant, and you know who is the chef in the kitchen.  It is analogous to a Singaporean food stall, namely with low fixed costs, small staff, and the chef’s ability to impose his or her own vision on the food.

Once a fixed sum of money is given away, and the mission of the project (beneficial social change) has been furthered, “the foundation” goes away.  No one is laid off.  Rather than crying over a vanquished institutional empire and laid off friends/co-workers, the solo evaluator in fact has a chance to get back to personally profitable work.  It was “lean and mean” all along, except it wasn’t mean.

The risk-taking in grant decisions is consistent with the incentives of the evaluator, consistent with the level of staffing (zero), and consistent with the means of the evaluator.  A solo evaluator, no matter how talented, does not have the resources to make and tie down multiple demands for complex deliverables.  Rather, a solo evaluator is likely to think (or not) — “hmm…there is some potential in this one.”  The wise solo evaluator is likely to look for projects that have real upside through realizing the autonomous visions of their self-starting creators, rather than projects that appear bureaucratically perfect.

And how about the incentives of the solo evaluator?  Well, a fixed amount of time is being given up, so what is the point in making safe, consensus selections with the awards?  The solo evaluator, in addition to pursuing the mission of the fund, will tend to seek out grants that will boost his or her reputation as a finder of talent.  You might worry that an evaluator, even if fully honest will self-deceive somewhat, and use some of these grants to promote his or her own interests.  I would say donate your money to an evaluator who you are happy to see rise in status.

In other words, the basic vision of Emergent Ventures, the incentives, and its means are all pretty consistent.

The solo evaluator also has the power to make very small grants, simply by issuing a decision in their favor at very low fixed cost.  Alchian and Allen theorem!  That helps remedy the bias against small grants in the broader foundation world.

The single evaluator of course is going to make some mistakes, but so do foundations.  And the costs of these evaluator mistakes have to be weighed against the other upsides of this method.

In my view, at least two percent of philanthropy should be run this way, and right now in the foundation world it is about zero percent.  So I am trying to change this at the margin.

How does this idea scale?  What if it worked really well?  How would we do more of it?

Well, it is not practical for this solo evaluator to handle a larger and larger portfolio of grant requests.  Even if he or she were so inclined, that would bring us back to the problems of institutionalized foundations.  The ideal scaling is that other, competing “chefs” set up their own pop-up foundations.  Imagine a philanthropic world where, next year, you could give a million dollars to the Steven Pinker pop-up, to the Jhumpa Lahiri pop-up, to the Jordan Peterson intellectual venture fund, and so on.  Three years later, you would have an entirely different choice, say intellectual venture funds from Ezra Klein, David Brooks, and Skip Gates, among others.  The evaluators either could donate some of their time, as I am doing, or charge a fee for performing this service.  You also could imagine a major foundation carving off a separate section of their activities, and running this experiment on their own, with an evaluator of their choosing.

In a subsequent post, I will discuss how this model relates to the classical age of patronage running through the Renaissance, into the 18th century, and often into the 20th century as well, often through the medium of individual giving.  I also will consider how this relates to classic venture capital and the relevant economics behind “deal flow.”

In the meantime, I am repeating the list of the first cohort of Emergent Ventures winners.  That link also directs you to relevant background if Emergent Ventures is new to you.