Linkdump: The Schooling Bubble?

There go my prospects!

Arnold Kling thinks schooling is mostly about signaling respect for hierarchy.

There is no cheap alternative to educational credentials if you want to signal respect for hierarchy. Looking for an alternative signal is fundamentally self-defeating. Any attempt to evade the educational credential system inherently signals a lack of respect for hierarchy!

Steven Levitt thinks schooling pays off.

Of all the topics that economists have studied, I would say one we are most certain about are the returns to education. [...] someone who graduated from college will earn about 30 percent more on average than someone who only graduated from high school. And if anything, the returns to education have gotten larger over time. They’re as big as they have ever been.

Peter Thiel thinks people are borrowing too much to pay for schooling, in any case.

Like the housing bubble, the education bubble is about security and insurance against the future. Both whisper a seductive promise into the ears of worried Americans: Do this and you will be safe. The excesses of both were always excused by a core national belief that no matter what happens in the world, these were the best investments you could make. Housing prices would always go up, and you will always make more money if you are college educated.

Like any good bubble, this belief– while rooted in truth– gets pushed to unhealthy levels. Thiel talks about consumption masquerading as investment during the housing bubble, as people would take out speculative interest-only loans to get a bigger house with a pool and tell themselves they were being frugal and saving for retirement. Similarly, the idea that attending Harvard is all about learning? Yeah. No one pays a quarter of a million dollars just to read Chaucer. The implicit promise is that you work hard to get there, and then you are set for life.  It can lead to an unhealthy sense of entitlement. “It’s what you’ve been told all your life, and it’s how schools rationalize a quarter of a million dollars in debt,” Thiel says.

Schumpeter at the Economist thinks the schooling bubble is worth writing about twice.

Paul Krugman has pointed out that, contrary to popular wisdom, expounded relentlessly by the OECD among other august bodies, technological progress may reduce the demand for high-end jobs, not just low-end jobs. Computer software is now employed to perform tasks that used to require armies of lawyers, engineers or highly educated workers.

[...] My third article is also from Slate. This suggests that applications for law school have dropped by more than 11% since last year, in part because students are beginning to realise that it makes no sense to pile up hundreds of thousands of dollars in debt in order to join the legion of unemployed lawyers. 

And the gist of the second:

THIS year American student-loan debt surpassed credit-card debt for the first time.

Scott James at Forbes thinks there are ways to make schooling worth while.

This new set of schools is increasing the value of their delivered content via a Professor + Practitioner teaching model. This P+P teaching team combines a full academic PhD (required for accreditation) with an expert practitioner (who does that type of work as a day job). Think back to the Operations class you took; how much more valuable would it have been to hear both the viewpoints of an academic plus a manager with 30 years of experience in the trenches at General Electric?

[...] Not everyone is meant to – or aspires to – attend a four-year degree program. In fact, some of the brighter high school students are wise enough to see the amount of debt they would be saddled with after a four-year program, and take a pass on it. As more motivated and smart students opt out of the four-year college program altogether, the idea of a re-skilling college seems more viable.

Medicine, Food, and Health

Since health care has been in the public eye recently, I thought I'd post some links and a few thoughts on the nature and possible solutions to rising costs of medical insurance and medical care.

First we have James Hamilton outlining some key issues in the public health care problem:

And there are three ways to determine which medical services don't get provided.

• (a) The government can limit the procedures it will pay for and the people who are eligible to receive them.
• (b) The insurance company or other third party can limit the procedures they will pay for and the people who are eligible to receive them.
• (c) If (a) and (b) both say no and you don't have the money yourself to pay for it, then you do not receive the treatment.

Each of those options is morally troubling to many of us. But reality forces us to choose some mix of the three. Pretending that there are no tough choices just digs us deeper into a debt that can't be repaid.

When facing the intersection of difficult moral and economic decisions, I know what you're all wondering: What would Robin Hanson do? Unsurprisingly, the supreme advocate of "health care isn't about health" would cut medical spending... in half:

King Solomon famously threatened to cut a disputed baby in half, to expose the fake mother who would permit such a thing. The debate over medicine today is like that baby, but with disputants who won’t fall for Solomon’s trick. The left says markets won’t ensure everyone gets enough of the precious medical baby. The right says governments produce a much inferior baby. I say: cut the baby in half, dollar-wise, and throw half away! Our “precious” medical baby is in fact a vast monster filling our great temple, whose feeding starves our people and future. Half a monster is plenty.

Am I being too allegorical? Then let me speak plainly: our main problem in health policy is a huge overemphasis on medicine. The U.S. spends one sixth of national income on medicine, more than on all manufacturing. But health policy experts know that we see at best only weak aggregate relations between health and medicine, in contrast to apparently strong aggregate relations between health and many other factors, such as exercise, diet, sleep, smoking, pollution, climate, and social status. Cutting half of medical spending would seem to cost little in health, and yet would free up vast resources for other health and utility gains. To their shame, health experts have not said this loudly and clearly enough.

What's that? Medicine costs a lot, but doesn't improve health? How can this be??? As Mark Bittman points out, it's because a huge portion of what we're spending money on is 'lifestyle diseases':

A sane diet, along with exercise, meditation and intangibles like love prevent and even reverse disease. A sane diet alone would save us hundreds of billions of dollars and maybe more.

This isn’t just me talking. In a recent issue of the magazine Circulation, the American Heart Association editorial board stated flatly that costs in the U.S. from cardiovascular disease — the leading cause of death here and in much of the rest of the world — will triple by 2030, to more than $800 billion annually. Throw in about $276 billion of what they call “real indirect costs,” like productivity, and you have over a trillion.

So what does this have to do with food, as my title suggests? Well, much of the problem of 'lifestyle diseases' comes from diets steeped in fast food and sixty-four ounce soft drinks, shelf-stable ready-to-eat meals, and feed lot meats, among other things. Things that even the providers of these services will say should not be consumed 'in excess,' yet the average American diet includes far more of them than anyone (with the possible exception of the sellers of these services) considers advisable. And, as Jill Richardson reminds us, there are reasons to think government food policy is part of the problem:

As for the direct payments, since those are based on historic production, there is still an incentive for max yield and max production, it's just a less immediate one because you'll receive the benefits from it later. It depends on which years the USDA bases your direct payments on, and if they allow you to change which years they use to tabulate your payments. [...]

The WTO says that we can't have market-distorting subsidies so our government is trying to get away from our traditional subsidy system. So they essentially outsourced - privatized - their subsidies. The government now subsidizes crop insurance, which farmers can choose to buy (or not) but it seems like a good many - if not most - buy it. If you don't buy crop insurance, you're ineligible for any disaster relief from the government, should you need it.

Rather than trying to defend everything in the above links (and I disagree strongly with some points), here are some general thoughts of mine on the subject.

Large agricultural firms like Monsanto, along with cooperatives of smaller players and anyone else in the business who manages to accumulate enough funding, spend enormous amounts of money on lobbying the right people at the local, state, and national levels. Some of that lobbying influence buys them subsidies, some of it buys them insurance, some of it buys them protectionist legislation restricting international competition, some of it buys them the ability to obscure information about food products, etc. Ultimately what it buys them is small advantages of one commodity over another (what matters here is not whether ag prices in general are up or down, but whether corn and soy are cheaper than they would have been compared to other beans, sweeteners, and sources of calories) on the one hand, and freedom to market food products they develop without revealing more information about the products than they would like on the other.

Farm subsidies, to the extent they exist, are a problem, whether they are the biggest problem or not. Eliminating them actually saves taxpayers money, although it would hurt those receiving the transfer and their favorite politicians. Sales taxes on food (and by this I mean ingredients, not prepackaged food products) bring in revenue, but can also provide advantages to food producers willing to cut corners (and able to obscure it). The same is true for tariffs on foreign agriculture. Government is a non-trivial part of the problem here, and when we factor in the effect of 'lifestyle diseases' on programs like Medicare, these programs are almost certainly a net loss for taxpayers.

But ultimately the problem isn't government. Ultimately the problem isn't even 'Big Agriculture' (despite the personification of the corporate system via the use of capital letters clearly demonstrating that it's just evil). The problem is consumers. 'Big Ag' is like any other business--it's selling what the people want to buy (granted, it's also trying to keep people wanting the same kinds of things). Part of this is an information problem. We don't put much work into buying high quality meats because it's almost impossible to determine the exact conditions under which the animals were raised. We buy prepackaged foods because buying fresh costs more, and no easy mechanism exists for comparing the quality of the foods. Counting calories, checking food pyramids, watching for 'organic' labels, and any other simple metrics can be manipulated, and can lead us astray as easily as point us in the right direction. If there's no way to insure quality, nobody will ever pay what it takes for the highest quality, which means nobody sells the highest quality and a lower quality becomes the new highest quality (and the cycle begins again).

But most of the problem is a matter of priorities. We don't believe the quality differences out there are worth paying for (and because we think this way, we are often correct). We want our food to last in our refrigerators and cupboards, and we don't think about (or necessarily even believe in) a tradeoff between shelf life and nutritional content. We have no interest in learning how gut flora work until we already have Seliac disease. We consider it inconvenient to worry about feeding children things their digestive systems are unprepared to process. We don't want to have to sort out whether what we're eating was fried in trans fats / hydrogenated corn-soybean-canola oils, or if we can find a version cooked with unprocessed animal fats or tropical oils. Like James Bond taking care of his liver, we have other things on our minds.

And until our preferences change--preferences over the kind of lifestyle we want to lead, and the kinds of foods that go with it--McDonald's and Walmart will continue to sell us the products we want at the lowest cost they can manage; 'Big Ag' will continue to lobby for withholding information that would mostly worry, bewilder, and frustrate us out of our grocery aisles; government will continue to provide small bonuses to a few domestic producers in a few industries over others, and especially over world competition; and the costs associated with chronic, lifestyle-related health problems will continue to rise. It's just basic economics.

We have met the true burger king, and he is us.

Four on Education

Brad DeLong offers his thoughts on economics education:

Rethinking, I conclude that there is something subtle wrong with the undergraduate curriculum after all. What is taught in the classroom seems, largely, not bad. But what is retained after college seems to me, at least, to be horrible. What fraction of college-educated Americans have taken Econ 1? And what do they remember from it well enough to use? Tracking little--much less than I would hope or expect.

DeLong also offers Grant Gilmore's thoughts on the strange duty of academics:

We do something called teaching. But we all know from bitter personal experience that nothing is, or can be, taught once we get beyond the communication to small children of the basic mysteries on which civilization depends - how to read, how to write, how to count. [...] It may be that we can stimulate, or irritate, an occasional student into undertaking this arduous task - but, if we do so, it will be much more by accident than by our own design.

Scott Adams recommends hands on entrepreneurial training for most of us:

One day the managers of The Coffee House [a student-run, college-subsidized bar where Adams worked] had a meeting to discuss two topics. First, our Minister of Employment was recommending that we fire a bartender, who happened to be one of my best friends. Second, we needed to choose a leader for our group. On the first question, there was a general consensus that my friend lacked both the will and the potential to master the bartending arts. I reluctantly voted with the majority to fire him.

But when it came to discussing who should be our new leader, I pointed out that my friend—the soon-to-be-fired bartender—was tall, good-looking and so gifted at b.s. that he'd be the perfect leader. By the end of the meeting I had persuaded the group to fire the worst bartender that any of us had ever seen…and ask him if he would consider being our leader. My friend nailed the interview and became our Commissioner. He went on to do a terrific job. That was the year I learned everything I know about management.

Finally, Edge.org offers a massive list of possible answers to the question 'What scientific concept would improve everybody's cognitive toolkit?' A few examples:

Thanks to Karl Popper, we have a simple and powerful tool: the phrase "How Would You Disprove Your Viewpoint?!"- Howard Gardner

There is a widely used notion that does plenty of damage: the notion of "scientifically proven". Nearly an oxymoron. The very foundation of science is to keep the door open to doubt. Precisely because we keep questioning everything, especially our own premises, we are always ready to improve our knowledge. Therefore a good scientist is never 'certain'. Lack of certainty is precisely what makes conclusions more reliable than the conclusions of those who are certain: because the good scientist will be ready to shift to a different point of view if better elements of evidence, or novel arguments emerge. Therefore certainty is not only something of no use, but is in fact damaging, if we value reliability.  - Carlo Rovelli

It is not hard to identify the discipline in which to look for the scientific concept that would most improve everybody's cognitive toolkit; it has to be economics. No other field of study contains so many ideas ignored by so many people at such great cost to themselves and the world. The hard task is picking just one of the many such ideas that economists have developed.  - Dylan Evans, whose check is in the mail

The media cast about for the proximate causes of life's windfalls and disasters. The public demands blocks against the bad and pipelines to the good. Legislators propose new regulations, fruitlessly dousing last year's fires, forever betting on yesterday's winning horses. A little-known truth: Every aspect of the world is fundamentally unpredictable. - Rudy Rucker

The phrase "correlation is not a cause" (CINAC) may be familiar to every scientist but has not found its way into everyday language, even though critical thinking and scientific understanding would improve if more people had this simple reminder in their mental toolkit.  - Sue Blackmore

(I could go on, but just take a look at the links)

UPDATE: Fourth link did not post. It should be working now.

Money, Money, Money

Here's a bit from macroeconomics: In 2008, per person income in the United States was nearly four times that in our neighbor Mexico, more than ten times that in India, and one-hundred twenty-five times that in the Democratic Republic of the Congo. In the United States we have an adult literacy rate of ninety-nine percent, compared to twenty-six percent in Mali.

And here's one from micro: Two products that start out selling for the same price could come to differ for any combination of four reasons: If more people value and want to buy good A or fewer people want to produce and sell good A, its price will go up; but if fewer people want to buy good A or more people want to produce and sell good A, its price will go down. If people care about doing work they enjoy, then the fact that one job gets paid more than another could either mean people want to buy the product of the higher-paid job more (maybe some people value the product more), or it could mean they enjoy doing the higher-paid job less (maybe it takes a lot more to get people to deal with the drudgery / risk involved).

When I think of personal finance and income, these are the things that come to my mind. The vast majority of the wealth I have is mine simply because of where I was born. Any extra wealth I have that comes from my job has more to do with choosing a field most others would find mind-numbingly dull than it does with how much use I am to the corporations of the world, and neither of these has anything useful to say about any sort of inherent personal value. All the things that put me in the position I am in were given by God, anyway, and the more I have to covet the more God requires I give up for others.

In my mind, to hear that someone else makes more money than me sounds a lot like hearing they have a larger shoe size than me. If it matters at all, the ones with more money have a moral obligation to use it in the interests of those around them with less, in the same sense that someone with a bigger bit of floating debris after a shipwreck ought to share it with other survivors.

All this is background to the fact that I tend to be rather nonchalant, and even flippant, about matters of money. It never occurs to me that talking about how much money I make isn't polite, or that mentioning where my expected payscale ranks compared to those around me is the uncouth work of a braggart. How can one brag about the size of one's shoes, or the buoyancy of one's debris? I ask myself. But the fact that it doesn't bother me doesn't make it OK for me to treat others as if they're silly to let it bother them. I am not the arbiter of truth or seriousness, and the world isn't wrong just because it doesn't see things the way I do. On the contrary, ignoring other people's thoughts and feelings, especially when I don't think or feel the same way, is no way to live in community; it is, however, a perfect way to fail at loving my neighbor.

So if I have bragged about money to any of you before, I am sorry. I was wrong, although I hope you'll believe me when I say there was neither malice nor pride behind it. I was "merely" thoughtlessness, which of course isn't really less wrong. I'm trying to be better. I hope you'll bear with me.

"I repent
...of the way I believe that I'm living right
By trading sins for others that are easier to hide
Oh I am wrong and of these things
I repent"
-- Derek Webb (and, all too rarely, me)

Social Insurance and the Church

Nicer than your average insurance office.

I'm a bit late on this, but here is a fascinating post by Frances Woolley:

The Catholic church is one of the world's oldest insurance companies. [...] Religion as social insurance, Christian style, works as follows: individuals tithe, or give 10 percent of their income, to the church. In exchange, the church provides alms for the poor, that is, a minimal guarantee against destitution.

[...] being independent of the established church meant cutting oneself off from the (sometimes expensive and inefficient) social insurance services it provided. Hence these religions preached responsibility, both for oneself and for others in need. Some of the most iconic British brands, such as Clarks and Cadburys, as well as international companies such as Bethleham Steel, were founded by non-conforming Quakers. To generalize from the savings behaviour of these groups to society in general would be dangerous.[...]

In Europe, Canada, and to a lesser extent the US, government-provided social insurance has replaced that provided by religion. 

It's a great post, well worth reading the whole thing. It got me thinking, anyway. Taking it as given that the Church should be caring for the poor, but hasn't been for some time now, is it wrong for the state to try to fill this gap? Does one God ordained institution have the right to fulfill the duties of another when that other is unable or unwilling to do so? I'm thinking specifically about care of widows and orphans, in which the Church is specifically called to perform the duties normally left to the head of the family.  Anyway, interesting thoughts.