Water problems in Jackson, Mississippi
I am now reading quite a few analyses of the problem, and so few mention price! Even when written by economists. I find this article somewhat useful:
“We are a city with very high levels of poverty, and it’s difficult for us to raise the rates enough to do large scale replacement type projects and not make it unaffordable to live in the city of Jackson,” said former city councilman Melvin Priester Jr.
Yet the cost of Jackson’s poor quality water is still passed on to families who don’t trust the tap and purchase bottled water — which can cost a family of four $50-$100 a month — to drink instead.
The city raised water rates in 2013, but the Siemens deal penned the same year came with an onslaught of problems, including the installation of faulty water meters and meters that measured water in gallons instead of the correct cubic feet. This made any benefits of the rate increase virtually impossible to see.
The results have been nonsensical. Over the past several years, the city has mailed exorbitant bills to some customers and none to others. Sometimes, the charges weren’t based on how much water a household used and other times, city officials advised residents to “pay what they think they owe.” Past officials said the city lacked the manpower and expertise in the billing department to manually rectify the account issues with any speed.
In trying to protect people during the persistent billing blunders, the city has at times instituted no-shutoff policies, which demonstrate compassion but haven’t helped to compel payment.
Today, more than 8,000 customers, or nearly one-sixth of the city’s customer base, still aren’t receiving bills. Nearly 16,000 customers owe more than $100 or are more than 90 days past due, a city spokesperson told Mississippi Today. Jackson water customers owe a total of $90.3 million.
As a result, the city continues to miss out on tens of millions of water revenues. In 2016, when officials first uncovered the issue, the city’s actual water sewer collections during the previous year was a startling 32% less than projected — a roughly $26 million shortfall.
And most generally:
“The nature of local politics is that city governments will tend to neglect utilities until they break because they’re literally buried,” he said. “One of the things that is a perennial challenge for governments that operate water systems is that the quality of the water system is very hard for people to observe. But the price is very easy for them to observe.”
From WSJ here is some important background information:
Unlike bridges, roads and subway lines, clean drinking water isn’t primarily funded by taxes. More than 90% of the average utility’s revenues come directly from constituents’ water bills.
In other words, the price is too low, and government failure is the reason why. A higher price is no fun for a relatively poor set of Jackson buyers, but the city’s per capita income is 22k or so, and plenty of countries in that income range have satisfactory water systems where you can shower without closing your mouth. You just have to get the institutions and incentives right. It is remarkable to me how few people in the public sphere are making theses relatively straightforward points.
Trade Adjustment Assistance might be going away
The program that Mr. Ogg looked to for help, known as Trade Adjustment Assistance, has for the past 60 years been America’s main antidote to the pressures that globalization has unleashed on its workers. [TC’s aside: this first sentence is quite false.] More than five million workers have participated in the program.
But a lack of congressional funding has put the program in jeopardy: Trade assistance was officially terminated on July 1, though it continues to temporarily serve current enrollees. Unless Congress approves new money for the $700 million program, it will cease to exist entirely.
And:
Some academic research has found benefits for those who enrolled in the program. Workers gave up about $10,000 in income while training, but 10 years later they had about $50,000 higher cumulative earnings than those who did not retrain, according to research from 2018 by Benjamin G. Hyman, an economist at the Federal Reserve Bank of New York.
Still, those relative gains decayed over time, Mr. Hyman’s research shows. After 10 years the incomes of those who received assistance and those who did not were the same…
Here is the full NYT article. With the China shock largely behind us, perhaps phasing this out is the right thing to do?
Friday assorted links
The Cream Rises to the Top
NBER: Can efforts to eradicate inequality in wealth and education eliminate intergenerational persistence of socioeconomic status? The Chinese Communist Revolution and Cultural Revolution aimed to do exactly that. Using newly digitized archival records and contemporary census and household survey data, we show that the revolutions were effective in homogenizing the population economically in the short run. However, the pattern of inequality that characterized the pre-revolution generation re-emerges today. Almost half a century after the revolutions, individuals whose grandparents belonged to the pre-revolution elite earn 16 percent more income and have completed more than 11 percent additional years of schooling than those from non-elite households. We find evidence that human capital (such as knowledge, skills, and values) has been transmitted within the families, and the social capital embodied in kinship networks has survived the revolutions. These channels allow the pre-revolution elite to rebound after the revolutions, and their socioeconomic status persists despite one of the most aggressive attempts to eliminate differences in the population.
That’s the abstract of Persistence Despite Revolutions one of Alberto Alesina’s last papers (with
Hat tip: The excellent Stefan Schubert.
Shruti Rajagopalan talks talent with Daniel Gross and Tyler
A Conversation, a special bonus episode, taped in San Francisco in front of a live audience, here is the audio, video, and transcript. Here is one bit:
RAJAGOPALAN: …Daniel, if you’re looking for talent in investing or finance, how does that look different from the talent in the start-up world?
GROSS: In the start-up world? What makes a good investor is very different from what makes a good founder. If you were to make a scatterplot of it, some of the attributes are completely diametrically opposed. For example, I think very good investors are the right degree of optimistic but also realistic, whereas founders are too optimistic, which they should be.
At the end of the day, start-ups are a very funny activity when you think about it from a probability standpoint. Most companies fail. Almost all companies fail, and yet, people seem to be seemingly doing this activity over and over. They’re jumping off the cliff over and over again. You look over the cliff, and everyone who jumped off of the cliff is just on the ground dead, but people keep on jumping off the cliff. Founders are almost too optimistic.
When you’re evaluating a business, especially at later and later stages, I think optimism can be your enemy. Often, you see when a lot of founders later on in life — and I’m such a person — who started a business, sold it, and became an investor, you actually have to be able to wear very different kinds of psychometric hats. One of them is this continuum of realism and optimism. I’d probably say that’s the starkest difference between what makes a good start-up investor and a good founder. There are probably many others, but that’s the main thing that you look for.
I later have a monologue on chocolate ice cream, but overall Shruti steals the show. Recommended.
From the comments, from Susan Dynarski on debt forgiveness
Here is the link, to my post on the educational returns to the marginal student. Please go back and read that for the context on Dynarski’s statement.
And from an email from David J. Deming, Harvard researcher in the area:
Sue is right that community college attendance is more common for students below the threshold in the Zimmerman paper. But many of them also attend no college at all. Table 4 shows that making the GPA cutoff increases years of 4 year college attendance by 0.46 and decreases years of community college attendance by 0.17. This implies that there is an increase in total college attendance – so the counterfactual is a mix of 2-year college and no college.
On the substance of the comment “do these people need debt forgiveness”? I’d say that ex ante they do not, but maybe some should receive it ex post. The Zimmerman estimate captures ex ante returns. Debt forgiveness is ex post. FIU’s grad rate was around 50% at that time, so the average return of 22% includes graduates and dropouts together. Ex post returns could be 44% for graduates and zero for dropouts.
Your idea of limiting debt forgiveness to dropouts was great. I wish that had been on the table. We’d worry about moral hazard if it became a forward-looking policy, but the Biden policy was probably not foreseeable in advance.
I would have also liked to see debt forgiveness focused on institutions rather than students. Forgive debt obtained at low-quality for-profit colleges. I would actually guess that college quality is a better predictor of lifetime wealth than current income. A person making $50k as a working adult 2 years after dropping out of University of Phoenix surely has lower expected lifetime wealth than a person who graduated from Harvard a few years ago and is making $50k in a public sector job.
My view is that decent returns to the marginal student still create problems for the Dynarski debt forgiveness argument. Overall the private returns to education are good. You can pack some of the problems into specific subgroups, but to the extent you do that the case for more debt relief targeting — much more targeting — rises rather steeply and rapidly.
That was then, this is now
Poland’s top politician said Thursday that the government will seek equivalent of some $1.3 trillion in reparations from Germany for the Nazis’ World War II invasion and occupation of his country…
“We will turn to Germany to open negotiations on the reparations,” Kaczynski said, adding it will be a “long and not an easy path” but “one day will bring success.”
He insisted the move would serve “true Polish-German reconciliation” that would be based on “truth.”
That is an article from today!
Thursday assorted links
1. Short breaks from surgery seem to improve surgeon performance.
2. How much do the French earn?
4. A big quantitative analysis of MR posts, including a complete list of guest bloggers, analysis of when the posts go up, and a treatment of whether daylight savings time matters. Can you guess who was our last guest blogger? The piece also covers where I link to the most.
5. The man who married a hologram in Japan can no longer communicate with his virtual wife.
6. Free short on-line course on economics of innovation and science, with top people.
Cost-Benefit Analysis of the TSA
A nice opening anecdote on life at the TSA from the Verge:
People cry at airports all the time. So when Jai Cooper heard sobbing from the back of the security line, it didn’t really faze her. As an officer of the Transportation Security Administration (TSA), she had gotten used to the strange behavior of passengers. Her job was to check people’s travel documents, not their emotional well-being.
But this particular group of tearful passengers presented her with a problem. One of them was in a wheelchair, bent over with her head between her knees, completely unresponsive. “Is she okay? Can she sit up?” Cooper asked, taking their boarding passes and IDs to check. “I need to see her face to identify her.”
“She can’t, she can’t, she can’t,” said the passenger who was pushing the wheelchair.
Soon, Cooper was joined at her station by a supervisor, followed by an assortment of EMTs and airport police officers. The passenger was dead. She and her family had arrived several hours prior, per the airport’s guidance for international flights, but she died sometime after check-in. Since they had her boarding pass in hand, the distraught family figured that they would still try to get her on the flight. Better that than leave her in a foreign country’s medical system, they figured.
The family might not have known it, but they had run into one of air travel’s many gray areas. Without a formal death certificate, the passenger could not be considered legally dead. And US law obligates airlines to accommodate their ticketed and checked-in passengers, even if they have “a physical or mental impairment that, on a permanent or temporary basis, substantially limits one or more major life activities.” In short: she could still fly. But not before her body got checked for contraband, weapons, or explosives. And since the TSA’s body scanners can only be used on people who can stand up, the corpse would have to be manually patted down.
“We’re just following TSA protocol,” Cooper explained.
Her colleagues checked the corpse according to the official pat-down process. With gloves on, they ran the palms of their hands over the collar, the abdomen, the inside of the waistband, and the lower legs. Then, they checked the body’s “sensitive areas” — the breasts, inner thighs, and buttocks — with “sufficient pressure to ensure detection.”
Only then was the corpse cleared to proceed into the secure part of the terminal.
Not even death can exempt you from TSA screening.
Later we get to the economics:
Actuaries measure the cost-effectiveness of an intervention — say, a pharmaceutical drug or a safety device like a seat belt — with a metric called “cost per life saved.” This calculation tries to capture the total societal net resources spent in order to save one year of life. For example, mandatory seat belt laws cost $138; railway crossing gates cost $90,000; and inpatient intensive care at a hospital can cost up to $1 million per visit. As long as an intervention costs less than $10 million per life saved, government agencies are generally happy to back them.
The most generous independent estimates of the cost-effectiveness of the TSA’s airport security screening put the cost per life saved at around $15 million. And that makes two big assumptions: first, that the agency is both 100 percent effective and 100 percent responsible for stopping all terror attacks; and second, that it stops an attack on the scale of 9/11 about once a decade. Less optimistic assessments place the number at $667 million per life saved.
China fact of the day
China’s carbon emissions fell almost 8 per cent in the April-to-June quarter compared with the same period last year, the sharpest decline in the past decade, according to climate research service Carbon Brief.
The fall in emissions reflects a dramatic slowing in Chinese economic growth caused by large-scale coronavirus lockdowns and a crisis in the heavily indebted property sector. It was the fourth consecutive quarter in which emissions have fallen in China, the world’s biggest emitter.
Lauri Myllyvirta, an analyst at the Helsinki-based Centre for Research on Energy and Clean Air, which compiled the data for Carbon Brief, said there had been a drop of 44 per cent in the number of construction projects started and a 33 per cent fall in those completed during the second quarter.
Here is more from the FT.
The Returns to College Admission for Academically Marginal Students
I combine a regression discontinuity design with rich data on academic and labor market outcomes for a large sample of Florida students to estimate the returns to college admission for academically marginal students. Students with grades just above a threshold for admissions eligibility at a large public university in Florida are much more likely to attend any university than below-threshold students. The marginal admission yields earnings gains of 22% between 8 and 14 years after high school completion. These gains outstrip the costs of college attendance, and they are largest for male students and free-lunch recipients.
Here is the Journal of Labor Economics piece by Seth D. Zimmerman. So is the non-statistically-summarized account of Susan Dynarski painting too negative a picture?
And do those people need debt forgiveness to the tune of hundreds of billions of dollars? Write down your social welfare function!
This piece by David J. Deming surveys the broader literature, and with broadly concordant results.
U.S.A. facts of the day
In 2021, the average American could expect to live until the age of 76, federal health researchers reported on Wednesday. The figure represents a loss of almost three years since 2019, when Americans could expect to live, on average, nearly 79 years.
The reduction has been particularly steep among Native Americans and Alaska Natives, the National Center for Health Statistics reported. Average life expectancy in those groups was shortened by four years in 2020 alone.
The cumulative decline since the pandemic started, more than six and a half years on average, has brought life expectancy to 65 among Native Americans and Alaska Natives — on par with the figure for all Americans in 1944.
Here is more from the NYT. Do note that Native Americans are generally considered to have done OK in terms of their vaccination rates.
Wednesday assorted links
1. Dan Klein on whether classical liberalism is anti-democratic.
2. France uses AI to find hidden swimming pools and then tax them.
3. Chris’s dating info/profile (29, male hetero, wants kids, nerdy).
4. Book of Vitalik’s writings is coming out.
The temporary popularity of Caplanian views on higher education
Bryan Caplan as you know argues that even the private return to higher education isn’t what it usually is cracked up to be, especially since large numbers of individuals do not finish with a four-year degree. Susan Dynarski (tenured at Harvard education, but an economist), writing in the NYT, seems to have started flirting with this view:
…a majority of people holding student debt have moderate incomes and low balances. Many have no degree, having dropped out of a public college or for-profit vocational school after a few semesters. They carry little debt, but they also do not get the benefit of a college degree to help them pay off that debt.
Defaults and financial distress are concentrated among the millions of students who drop out without a degree. The financial prospects for college dropouts are poor; they earn little more than do workers with no college education. Dropouts account for much of the increase in financial distress among student borrowers since the Great Recession.
And dropout is not at all rare. A bit less than half of college students don’t earn a bachelor’s degree. Some people earn a shorter, two-year associate degree. But more than a quarter of those who start college hoping to earn a degree drop out with no credential. A full 30 percent of first-generation freshmen drop out of four-year colleges within three years. That’s three times the dropout rate of students whose parents graduated from college.
I’ve seen modest variants on those numbers, but the general picture is broadly accepted. Now here is Dynarski’s Congressional testimony from last summer:
College is a Great Investment
A college education is a great investment. Over a lifetime, a person with a bachelor’s degree will earn, on average, a million dollars more than a less-educated worker. Even with record-high tuition prices, a BA pays for itself several times over.
She is quite clear in the former NYT piece that she has changed her mind, so there is no “gotcha” here. But clearly her views are evolving in Bryan’s direction.
In terms of policy, Dynarski notes that more than a quarter drop out of college with no credential. Shouldn’t we restrict loan forgiveness to them? Doesn’t that at least deserve discussion? Or should we just go ahead and grant forgiveness to those with the “great” returns as well? Her change of mind concerns the higher-than-expected problems of the non-finishers, not that she has seen new and inferior income numbers for the successes. (In fact since the numbers for the average return haven’t changed, being more pessimistic about the losers has to mean being a bit more optimistic about the successes. That should make us all the more interested in targeting the forgiveness.)
Why are we not allowed to know what percentage of the forgiveness beneficiaries fall into the “didn’t finish” category? What should we infer from the reality that no one is reporting that statistic? Is that good news or bad news for the policy?
What does Dynarski think is the marginal return from trying to finish college? Are they really so positive for the marginal student? What is the chance of the marginal student finishing? The cited figures are averages, presumably for the marginal student the chance of finishing is much worse. Presumably she is pessimistic about the nature of the college deal for the marginal student?
Now I know how these discussions run. Suddenly there is plenty of talk about how we should make it easier for people to finish, perhaps by offering more aid. As someone who teaches at a non-elite state university, I do understand what is going on with students who need to drop out to take care of family, and so on. Still, in the meantime should we be encouraging more marginal students to try their hand at college?
Yes or no?
That question runs against the prevailing mood affiliation and good luck trying to get a straight answer. In the meantime, the world is taking an ever-so-temporary foray into the views of Bryan Caplan. Let’s see how long it stays there.
What is the equilibrium in higher education policy?
That is the topic of my Bloomberg column, here goes:
Critics of the policy see it as rewarding Democratic supporters and interest groups, including university faculty and administrators but most of all students. This perception, regardless of whether it’s true, will influence political behavior…
Republicans, when they hold political power, are likely to strike back. They may be more interested in draining the sector of revenue. The simplest way of doing this would be to limit tuition hikes in state universities. De facto tuition caps are already common, but they may become tighter and more explicit, especially in red and purple states. Such policies might also prove popular with voters, especially during a time of high inflation.
A second set of reforms might limit the ability of public universities to spend money on hiring more administrators, including people who work on so-called DEI issues. Given the fungibility of funds, and the ability of administrators to retitle new positions, such restrictions may not be entirely enforceable. Still, they would mean less autonomy for public universities as policy in many states tried to counteract their current leftward swing.
Another possible reform could tie funding for a school or major to the future earnings of graduates. That likely would penalize the humanities, which already tend to be one of the more politicized segments of the modern university…
Longer-term, a future Republican administration might decide to restructure the entire system of federal student loans. How about making student loans dischargeable through normal bankruptcy proceedings? That might sound like a pretty unremarkable idea to most voters, and many economists, including Larry Summers, favor it. It would also allow for some measure of debt relief without extending it to the solvent and the well-off.
Still, the long-term consequences of this reform would probably lead to a significant contraction of lending. Most enrolled students do not in fact finish college, and many of them end up with low net worth yet tens of thousands of dollars of debt. (By one estimate, the net worth of the median American below age 35 is $13,900.) So the incentives to declare bankruptcy could be relatively high. This would make federal student loans a more costly and less appealing proposition. Private lenders would be more wary as well. Higher education would likely contract.
The net effect of the president’s loan-forgiveness initiative — which is an executive order and thus does not have an enduring legislative majority behind it — could amount to a one-time benefit for students, no impact on rising educational costs, and the intensification of the culture wars over higher education.
Sad but true.