Monday assorted links
1. New book by Natasha Lance Rogoff, Muppets in Moscow: The Unexpected Crazy True Story of Making Sesame Street in Russia.
2. Newfoundland gannets diving for fish.
3. “Those who are unable to be vaccinated or boosted for health or religious reasons should contact [email protected] for information about an exemption.” AEA adds vaccine exemptions.
4. Why are contracts hard to read? And New Zealand tries to eliminate jargon from legislation (WSJ).
5. Do old people enjoy spending money less?
Taxing Mechanical Engineers and Subsidizing Drama Majors
In The Student Loan Giveaway is Much Bigger Than You Think I argued that the Biden student loan plan would incentivize students to take on more debt and incentivize schools to raise tuition with most of the increased costs being passed on to taxpayers through generous income based repayment plans. Adam Looney at Brookings takes a deep dive into the IDR plan and concludes that it’s even worse than I thought. Here are some of Looney’s key points:
- As recently as 2017, CBO projected that student loan borrowers would, on average, repay close to $1.11 per dollar they borrowed (including interest). Borrowing was often perceived to be the least favorable way to pay for college. But under the administration’s IDR proposal (and other regulatory changes), undergraduate borrowers who enroll in the plan might be expected to pay approximately $0.50 for each $1 borrowed—and some can reliably expect to pay zero. As a result, borrowing will be the best way to pay for college. If there’s a chance you’ll not need to repay all of the loan—and it’s likely that a majority of undergraduate students will be in that boat—it will be a financial no-brainer to take out the maximum student loan.
- The data shows that roughly half of Americans with some college experience but not a BA would qualify for zero payments under the proposal, as would about 25% of BA graduates. However, the vast majority of students (including more than 80% of BA recipients) would qualify for reduced payments.
- [A] lot of student debt represents borrowing for living expenses, and thus a sizable share of the value of loans forgiven under the IDR proposal will be for such expenses…A graduate student at Columbia University can borrow $30,827 each year for living expenses, personal expenses, and other costs above and beyond how much they borrow for tuition. A significant number of those graduates can expect those borrowed amounts to be forgiven. That means that the federal government will pay twice as much to subsidize the rent of a Columbia graduate student than it will for a low-income individual under the Section 8 housing voucher program…
Looney agrees that the incentive to increase tuition will apply to some graduate and professional programs but he thinks there is less room to increase tuition at undergraduate programs because borrowing is capped (currently! AT) at fairly low rates. But he offers an even more plausible but disheartening scenario that takes us in exactly the wrong direction.
Because the IDR subsidy is based primarily on post-college earnings, programs that leave students without a degree or that don’t lead to a good job will get a larger subsidy. Students at good schools and high-return programs will be asked to repay their loans nearly in full. Want a free ride to college? You can have one, but only if you study cosmetology, liberal arts, or drama, preferably at a for-profit school. Want to be a nurse, an engineer, or major in computer science or math? You’ll have to pay full price (especially at the best programs in each field). This is a problem because most student outcomes—both bad and good—are highly predictable based on the quality, value, completion rate, and post-graduation earnings of the program attended. IDR can work if designed well, but this IDR imposed on the current U.S. system of higher education means programs and institutions with the worst outcomes and highest debts will accrue the largest subsidies.
Looney does a back of the envelope calculation and estimates that typical graduates in Mechanical Engineering will on average get a 0% subsidy but graduates in Music will get a 96% subsidy, in Drama a 99% subsidy and Masseuses a 100% subsidy on average. This of course is exactly the wrong approach. If we are going to subsidize, we should subsidize degrees with plausible positive spillovers not masseues.
The problem is not just the subsidy but the encouragement this gives to create low-value programs:
- …institutions will have an incentive to create valueless programs and aggressively recruit students into those programs with promises they will be free under an IDR plan….The fact that a student can take a loan for living expenses (or even enroll in a program for purposes of taking out such a loan) makes the loan program easy to abuse. Some borrowers will use the loan system as an ATM, taking out student loans knowing they’ll qualify for forgiveness, and receiving the proceeds in cash, expecting not to repay the loan….I suspect that such abuses will be facilitated by predatory institutions.
Overall, the student loan program, as currently written, is looking to be one of the most costly, inefficient and unwise government programs of the 21st century. As I said in my first post, “fixing” the program is likely to drive ever more increasing intervention into higher education much as has happened with health care. My guess is that no one really thought this albatross through.
Nigeria facts of the day
On the supply side, dollar revenues from oil have plummeted because of massive theft, pushing down official daily production of crude to 1.1mn barrels, far below Nigeria’s Opec quota of 1.8mn b/d. Angola has now usurped Nigeria as Africa’s biggest oil producer.
Nigeria’s petrol subsidy, under which its car owners enjoy among the cheapest fuel in the world ($0.40/litre), means the federal government receives less revenue. The higher the oil price, the bigger the gap between the real and the subsidised price and the higher the bill for the government. Nigeria will spend an estimated $9.6bn on petroleum subsidies this year, about 2 per cent of gross domestic product and almost 10 times the budgeted amount.
Here is more from the FT, in other words Nigeria is failing to benefit from much higher oil prices.
Will the British government remain stubbornly attached to this idea?
That’s why, when people talk about this as an ideological government, they are more right than they know. The ideology is growth, driven by supply-side reform of the economy. Kwarteng dispensed with Tom Scholar, his chief civil servant, and set a new 2.5 per cent growth target because he believes the Treasury has become too focused, over a period of decades, on sharing out the cake rather than increasing its size.
The moment that really signalled a new approach came when Truss was interviewed by Laura Kuenssberg the day before her victory was announced. She was confronted with a chart showing that her proposed national insurance cuts would predominantly advantage the rich. She didn’t blink. “What I am about is growing the economy,” she said. “And growing the economy benefits everyone.”
This might sound obvious. But in a political context, it is revolutionary.
…Growth, in short, is a moral issue. One of the reasons that it is so easy to over-regulate, to refuse planning permission, to stifle entrepreneurialism, is that it seems like a victimless crime. But impeding growth punishes not just our future selves, but everyone else around us.
Here is more (gated) from Robert Colville at the Times of London.
What should I ask Reza Aslan?
I will be doing a Conversation with him, here is Wikipedia:
Reza Aslan (Persian: رضا اصلان, IPA: [ˈɾezɒː æsˈlɒːn]; born May 3, 1972) is an Iranian-American scholar of sociology of religion, writer, and television host. A convert to evangelical Christianity from Shia Islam as a youth, Aslan eventually reverted to Islam but continued to write about Christianity. He has written four books on religion: No God but God: The Origins, Evolution, and Future of Islam, Beyond Fundamentalism: Confronting Religious Extremism in the Age of Globalization, Zealot: The Life and Times of Jesus of Nazareth, and God: A Human History.
And he has a new book coming, namely An American Martyr in Persia: The Epic Life and Tragic Death of Howard Baskerville. So what should I ask him?
Sunday assorted links
*Magnificent Rebels*
The author is the excellent Andrea Wulf and the subtitle is The First Romantics and the Invention of the Self. The focus is on the German group of thinkers who worked together in or near Jena, including the Schlegels, Novalis, Schiller, Goethe and Schelling, with a later cameo from Hegel. This is one of my favorite books of the year, but note it focuses mostly on their personal stories and not so much on their ideas. Perfect for me, but not the ideal introduction for every reader. And their ideas are hard to explain! Their emphasis on imagination and subjectivity has been so absorbed into the modern world it can be hard to grasp their revolutionary nature at the time. Context is that which is scarce. Recommended nonetheless.
Interview markets in everything
Some job candidates are hiring proxies to sit in job interviews for them — and even paying up to $150 an hour for one.
In a recent Insider investigation into the “bait-and-switch” job interview that’s becoming increasingly trendy, one “professional” job interview proxy, who uses a website to book clients and keeps a Google Driver folder of past video interviews, said he charges clients $150 an hour.
The proxy was approached by Aamil Karimi, who works at cybersecurity firm Optiv as a principal intelligence analyst. Karimi, who posed as a job seeker to talk to the proxy, told Insider’s Rob Price that the “bait-and-switch” trend has been on the rise because of more work-from-home jobs and overseas hiring.
The “bait-and-switch” interview works like this: a job candidate hires someone else to pretend to be them in a job interview in hopes they will secure the job. When the job starts, the person who hired the proxy is the one to show up for work.
Here is the full story. Let someone else say what your open browser tabs are! For the pointer I thank the excellent Samir Varma.
Saturday assorted links
John Stuart Mill was Woke and Based
I love that John Stuart Mill was woke and based:
Looking at democracy in the way in which it is commonly conceived, as the rule of the numerical majority, it is surely possible that the ruling power may be under the dominion of sectional or class interests, pointing to conduct different from that which would be dictated by impartial regard for the interest of all. Suppose the majority to be whites, the minority negroes, or vice versâ: is it likely that the majority would allow equal justice to the minority? Suppose the majority Catholics, the minority Protestants, or the reverse; will there not be the same danger? Or let the majority be English, the minority Irish, or the contrary: is there not a great probability of similar evil? In all countries there is a majority of poor, a minority who, in contradistinction, may be called rich. Between these two classes, on many questions, there is complete opposition of apparent interest.
What is happening to American youth?
These numbers are for high schoolers:
From 1991 to 2015, seat belt use was about 3.3% higher each survey cycle compared with the previous survey cycle, adjusting for gender, race/ethnicity, and age. After 2015, seat belt use was about 1.8% lower each survey cycle than the previous survey cycle, adjusting for the same covariates.
Here is the article, and for the pointer I thank the excellent Kevin Lewis.
Markets in everything
That John is on his feet at all is impressive—and probably foolish—considering that only eight months prior, he was five feet eight and a half. Back in September, he paid $75,000 for the agonizing privilege of having his legs surgically lengthened. That entailed having both his femurs broken, and adjustable metal nails inserted down their centers. Each nail is made of titanium, which is both flexible and sturdy, like bone, and about the size of a piccolo. The nails were extended one millimeter every day for about 90 days via a magnetic remote control. Once the broken bones heal, ta-da: a newer, taller John.
Here is the full story. Oh and this:
With a procedure like this, there are, of course, some caveats. All the height gain obviously comes from your legs, so your proportions can look a little weird, especially when you’re naked. Also, the recovery can be long and taxing. When we meet, the bones in John’s legs are not yet fully healed, and a small section of his right femur is still a little soft, like al dente spaghetti; the smallest stumble could snap a bone in two. And it’s especially dangerous since he’s a big guy, over 200 pounds.
Then there’s the pain, which is relentless, ambient. The extension of the nails in his legs stretched the nerves and tissue around the bones—especially the thick, meaty muscles like the hamstrings—to an almost excruciating degree. He couldn’t walk for months. “They fill you with enough painkillers that it’s bearable,” John explains, but his biggest fear was becoming addicted to the drugs, so he weaned himself off the regimen earlier than he should have.
File under: “The costs of lookism.” The technique is originally a Soviet one. Via Anecdotal.
*Second City: Birmingham and the Forging of Modern Britain*
By Richard Vinen, do not forget that the Lunar Society (subject of the very first MR post!) was based there. Here is one excerpt:
What has come to be called the Birmingham or Midlands Enlightenment brought together an unusually curious and energetic group of men…Joseph Priestly and William Hutton epitomized the atmosphere of optimism, uninhibited enquiry and material prosperity some associated with Birmingham in the eighteenth century. The former was a minister of religion, though mainly known to posterity as a scientist; the latter was a well-to-do bookseller, though mainly known to posterity as a writer, particularly as the author of the first history of his adopted city. Both men, however, came ot have less happy memories of Birmingham than those implied by the quotations above because both their houses were burned down in the Church and King riots of 1791.
Strongly recommended to all those who care about such things, you can order here.
Prediction Markets Should Be Legal
I submitted a public comment on Kalshi’s request to the CFTC to create a prediction market on which political party will be in control of each chamber of the U.S. Congress.
Political election markets have proven themselves to be a powerful tool for forecasting elections and are typically more accurate, timely and complete than alternative methods such as polls. These markets have been widely used by researchers to understand political behaviour, institutions and events. e.g. see the research summarized here
https://www.nber.org/papers/w18222
and an important application to understanding the costs of war here:
https://onlinelibrary.wiley.com/doi/full/10.1111/j.1468-0335.2008.00750.x
Political election markets are also useful to hedgers, traders and other market participants to help them predict and incorporate information about risks into asset prices.
Markets similar to political election markets have been used to predict other important events such as the prospects for war or scientific breakthroughs and have been adopted by firms to better estimate sales forecasts and other relevant events.
The United States has pioneered the use of these innovative markets and we should continue to lead in creating better means of aggreating information to improve the quality of decision making.
The David J. Theroux Chair in Political Economy: Job Opportunity
The Independent Institute is seeking a capable intellectual leader with a deep and energetic commitment to classical liberal principles, an ability to communicate and connect with others, and the qualities and drive to help perpetuate David J. Theroux’s vision in the research program of the organization in the decades ahead.
As part of Independent’s commitment to excellence, continuous improvement and teamwork, the David J. Theroux Chair is responsible for ensuring that all research activities have intrinsic intellectual merit and would have a significant impact in the service of Independent’s mission to boldly advance peaceful, prosperous, and free societies, grounded in a commitment to human worth and dignity.
The Theroux Chair will ensure that Independent’s scholarship, research and peer-reviewed publications adhere to the highest scholarly standards; provide leadership in support of acquisitions, peer review, author relations, and editorial quality; collaborate with Independent’s other experts to ensure that research, content, and promotional plans and activities are appropriately aligned; and in broad terms sustain Independent’s reputation as a well-respected policy institute.
The Theroux Chair will network with scholars, academic and policy organizations, and professional organizations, in leveraging and promoting mutual efforts in advancing classical liberal analytical methods and aspirations. As opportunities present themselves, the Theroux Chair will organize conferences, symposia, and other events.