March 10, 2019
QJE: Investments in education continue to provide economic benefits two and half centuries later (Michael Simkovic)
A recent article in the Quarterly Journal of Economics (the leading journal in economics) finds evidence that early investments in education in the 1600s through mid 1700s continued to provide economic benefits in the form of persistently higher eduction levels and 10% higher wages and centuries later.
The study examined the economic performance of communities based on their proximity to Jesuit missions established and subsequently closed hundreds of years ago. The Jesuits emphasized literacy and job training. The missions were established in locations that were not particularly desirable in terms of population density, soil fertility, climate, or access to transportation and trade, because Franciscans who arrived earlier claimed the best locations for their missions. The Jesuits were expelled from the Spanish Empire in 1767, at which point Jesuit missions shut down.
The closer communities were to Jesuit mission, the higher subsequent education levels and earnings, and the quicker communities adopted new technologies. These benefits persisted for centuries. The benefits are similar across national boundaries and do not appear to be due to institutional or legal differences.
Proximity to Franciscan missions, which emphasized healthcare and anti-poverty efforts rather than education, did not provide similar benefits.
Felipe Valencia Caicedo; The Mission: Human Capital Transmission, Economic Persistence, and Culture in South America, The Quarterly Journal of Economics, Volume 134, Issue 1, 1 February 2019, Pages 507–556, https://doi-org.libproxy1.usc.edu/10.1093/qje/qjy024
This article examines the long-term consequences of a historical human capital intervention. The Jesuit order founded religious missions in 1609 among the Guaraní, in modern-day Argentina, Brazil, and Paraguay. Before their expulsion in 1767, missionaries instructed indigenous inhabitants in reading, writing, and various crafts. Using archival records, as well as data at the individual and municipal level, I show that in areas of former Jesuit presence—within the Guaraní area—educational attainment was higher and remains so (by 10%–15%) 250 years later. These educational differences have also translated into incomes that are 10% higher today. The identification of the positive effect of the Guaraní Jesuit missions emerges after comparing them with abandoned Jesuit missions and neighboring Franciscan Guaraní missions. The enduring effects observed are consistent with transmission mechanisms of structural transformation, occupational specialization, and technology adoption in agriculture.
The Washington Post has provided a good summary.
March 02, 2019
President Trump uses scuffle at Berkeley as pretext to pressure universities into promoting views he endorses (Michael Simkovic)
A recruiter for a far-right group that maintains a "Professor Watchlist" was recently punched in the face while using slogans about "hate crime hoaxes" to recruit (or perhaps to intentionally provoke an incident) at the University of California Berkeley.
The FBI and Department of Education have both found that serious (at times deadly) hate crimes against racial, ethnic and religious minorities on campus have increased since President Trump took office and a group of conservative billionaires began funding efforts to depict universities as hostile to racially charged "free speech."
The New York Times has reported that neither the recruiter for the conservative organization nor the alleged perpetrator are students or employees of the University of California.
In spite of the minimal connection to the University--which responded professionally, condemned the attack, and worked with the police to arrest a suspect--President Trump and other conservative activists have expressed intent to use the incident as a pretext to threaten universities with cuts to federal funding unless universities do more to promote conservative views on campus.
UPDATE 3/4/2019: An advocacy group that works to protect academic freedom from efforts to politicize universities has prepared an online form to help those who wish to email their Senators to ask them to block President Trump's Executive Order.
UPDATE 3/6/2019: The AAUP opposes the executive order and has prepared an open letter that interested parties can sign here.
UPDATE 3/7/2019: The President of the University of Chicago, Robert Zimmmer, the former dean of Yale law school, Robert Post, and Professors Geoffrey R. Stone, Catherine J. Ross, and Noah Feldman have all spoken out against the proposed executive order. Teri Kanefield has published an interesting analysis of the proposal at CNN, linking it to Global Warming Denial and White Supremacy.
A Washington Post Editorial warns that the proposal violates conservative values, undermines conservatives' credibility and, if enacted, would create a bureaucracy that could be turned against religious institutions when Democrats retake the White House. And editorial in the conservative Washington Examiner makes a similar point about the relationship between academic freedom and religious freedom from government interference.
FIRE, a conservative advocacy organization which defends controversial speakers, is waiting for more details before expressing an official view on the proposal. However, individuals affiliated with FIRE have endorsed it.
Frederick Hess of the American Enterprise Institute, writing in Forbes, is strongly in favor of the proposal, arguing that federal funding for scientific research through the Department of Defense, the National Institutes of Health (NIH), the National Science Foundation should be subjected to ideological litmus tests as a form of "quality control." AEI does not explain the connection between the quality of university research teams working on better treatments for cancer or technologies to keep U.S. military personnel and civilians safe and the extent to which undergraduate student groups on campus choose to provide a platform for Milo Yiannopoulos or Ann Coulter's views on sex. Nor does he express any of conservatives' usual skepticism of top down government control.
In an essay defending Trump's proposed executive order in Inside Higher Education, Hess misunderstands a survey by FIRE of "self-censorship" by students on campus, which found that 54% of students say they sometimes pause before speaking every thought that occurs to them. The leading reasons students "self-censor," according to the survey, are because they believe they might be wrong and are concerned about their peers judging them. Students were not concerned about any formal sanction from the university for deviating from an approved ideology, but rather were worried that if they appeared foolish in public, they might lose social status with their peers. Some students also point to tact, empathy, and basic norms of decency as reasons to choose their words wisely. The same survey found that "Almost all students (92%) agree that it is important to be part of a campus community where they are exposed to the ideas and opinions of other students" and that "(87%) feel comfortable sharing ideas and opinions in their college classrooms." This is not strong evidence of problems on campus. Hess also incongruously cites the AAUP, which (as noted above and below) unequivocally opposes federal regulation such as Trump's proposed executive order that would strip universities of autonomy.
Adam Kissel, formerly at the Koch Foundation, FIRE, and the the Department of Education, is only slightly less enthusiastic in his support for Trump's proposed executive order. Writing in the National Review, Kissel argues that although in an ideal world the federal government would spend nothing funding scientific research, conservatives would be justified politicizing federal research funding as retaliation for liberal efforts to deny federal research funding to principal investigators who engage in sexual harassment, inadequate due process for those accused of sexual harassment on campus, overly burdensome internal review boards that are established to ensure that scientific research does not unethically harm human test subjects, and campus speech codes meant to prevent harassment and emotional abuse. Kissel argues that conservative control of universities should be enforced through courts rather than an administrative agency to ensure that conservative advocacy groups continue to have influence even if Democrats take control of the White House.
September 27, 2018
Testimony before the House Judiciary Committee on the "State of Intellectual Freedom in America" (Michael Simkovic)
I testified earlier today at the House Judiciary Committee on the "State of Intellectual Freedom in America." A copy of my written testimony can be seen here. My shorter oral remarks are available here.
An excerpt appears below:
"Disagreement between knowledgeable scientific experts and median political views often do not suggest political bias on the part of scientists, but rather an effort by think tanks, media organizations, interest groups and politicians to inappropriately politicize scientific issues.
For example, the causes and consequences of Climate Change are scientific issues. The likely economic harm from such changes, and the costs of preventing or mitigating them, are also scientific issues. So are the adverse health consequences from air and water pollution or the health effects of smoking. So is the question of whether tax cuts can generate enough economic growth to reduce the Debt-to-GDP ratio.
While scientific questions can have political and policy implications, scientific inquiry should not be politicized. The best evidence should be analyzed with the best methods, and the implications and degree of uncertainty honestly conveyed to policymakers and the public.
But according to scientific experts, many scientific issues have been inappropriately politicized when scientific evidence threatened private sector profits or government budgets. These issues include the causes and effects of climate change, the health risks of pollution, and the dangers of tobacco use.
According to a Pew survey, nearly 80 percent of scientists believe that previous administrations suppressed government scientists’ findings for political reasons. Many scientists worry that suppression of scientific findings for political reasons is becoming more common.
Note that the Pew sample consists overwhelmingly of natural or “hard” scientists in fields such as medical sciences, chemistry, physics and geosciences. Pew’s sample included those who work in private industry as well as those who work in government and universities.
Recently, there have been systematic efforts by some members of Congress to weaken the role of science in informing agency rule-making and increase the role of political actors. Some politicians have also sought to prevent government agencies from collecting basic data about demographics, the environment, health and safety, and the economy, even if de-identified to protect individual privacy.
Today, threats to academic freedom can come from powerful donors, political leaders, and outside pressure groups who sometimes seek to subtly (or not so subtly) influence ostensibly neutral and unbiased academic research to further their own business interests or other political preferences.
The best way to protect universities from undue influence may be to secure and expand revenue sources that are indifferent to or cannot sway the conclusions of academic research. This is analogous to the approach we take to try to protect the independence of members of the federal judiciary or the Federal Reserve."
May 14, 2018
- Universities face serious threats to academic freedom from outside pressure groups
- Some Donors have made demands that can undermine university provision of unbiased, high-quality research
- Accommodating ethically questionable Donor demands can undermine public confidence not only in individual researchers, but in entire institutions and even in the broader academic enterprise
- Stronger, more secure, and more stable funding for universities—without strings attached—would help insulate universities from undue pressure by outside groups
- Universities should work together to secure their financial and intellectual independence, articulate clear ethical standards, and enforce those standards
I recently documented efforts by a well-organized network of libertarian and conservative academics, advocacy groups, and media organizations to foster resentment toward universities and then gain control over them, under the pretense of supporting free speech. These efforts continue a decades-long assault on higher education, and have been remarkably effective at tarnishing universities’ reputations. This has paved the way for legislation that further undermines universities’ intellectual and financial independence.
A complementary threat to academic integrity comes from powerful outsiders exploiting universities’ financial needs to leverage relatively small donations into enduring influence over faculty, curriculum and student life. Such money-for-influence arrangements could alter what research gets produced, and by whom.
Outside funding can increase research output and impact in media and policy circles. It can fund great research that might not have been produced otherwise. But funding under inappropriate terms risks undermining the central and unique role that universities play in society as providers of high quality, reliable, and unbiased information. This could quickly destroy the goodwill and trust that universities painstakingly cultivated over decades (in some cases, for centuries).
This issue has come to a head recently with press coverage of some financial relationships and recently disclosed contracts between conservative and libertarian donors (including foundations and re-granting organizations funded by the prominent Koch family) and George Mason University. Much of the controversy relates to a libertarian / free-market embedded think tank at George Mason, The Mercatus Center, which provides supplemental compensation and resources to GMU’s economics faculty and some law faculty members, as well as opportunities to produce commissioned research on timely policy issues. Through Mercatus, the university has received tens of millions of dollars in donations.
GMU faculty members’ chances of obtaining funding and resources apparently did not depend exclusively on an unbiased assessment of their intellectual rigor and academic contributions, but rather appear to have depended at least in part on the political implications of their research. In contravention of academic ethical norms, donors had substantial influence over which faculty members would receive compensation supplements known as “chairs” or “professorships.” Donors maintained control through representation on selection committees, evaluation committees, rights to recommend removal of chair holders, gift rescission rights, and key-man clauses for senior executives, including the dean of the law school.
“The objective of the Professorship is to advance the . . . acceptance and practice of . . . free market processes and principles [as] promot[ing] individual freedom, opportunity, and prosperity . . . The occupant of the Professorship (“Professor”) shall . . . be qualified and committed to the forgoing principles.”
Rudy Fichtenbaum, president of the American Association of University Professors said “When you start getting into a study of free enterprise then you’re really, I think, stepping into a territory where you’re promoting a political agenda.” Donors may specify a topic of study or type of expertise for a holder of a chair; but they should not specify the chair-holder’s politics.
Critics say Mercatus’s ideologically based funding tips the playing field at GMU in favor of the production of economically right-wing scholarship and the retention of economically right-wing scholars and instructors. Neither Mercatus nor GMU appear to have imposed any limits on the fraction of a faculty member’s total annual compensation that could come from non-state sources such as Mercatus. This is unusual—many funders and universities worry that too much outside funding creates the appearance of impropriety. At least one prominent member of the GMU faculty with a Mercatus affiliation derived over 40 percent of his compensation in 2016 from “non-state” sources, according to public records.
Without supplemental compensation from Mercatus, GMU faculty compensation appears to be uncompetitive with comparable institutions. Thus, working at GMU may not have made sense financially for economists or law professors who were unlikely to obtain Mercatus compensation supplements—i.e., those whose scholarship might support increases in taxes, an expansion of public investment or social insurance, or more stringent regulations of business. At least one moderate economics faculty member says that she “carefully chose [her] research so it wouldn’t be objectionable” to her more conservative colleagues.
August 21, 2017
Vanderbilt Tax Professor Herwig Schlunk wants the federal government to tax university endowments, preferably out of existence. He writes: “In the best of all possible worlds, the federal government could and probably should . . . confiscate[e] all private university endowments . . .”
Toward that end, Schlunk recycles arguments that were discredited years ago.
Professor Schlunk is famous for asserting that law school is a bad investment. Schlunk’s bold claim—based on back of the envelope calculations and highly unscientific website surveys—was popularized by the Wall Street Journal and echoed by sympathetic media outlets. Peer reviewed research by labor economist Frank McIntyre and me—using high quality nationally representative government data and well-established econometric techniques—subsequently demonstrated that Schlunk was mistaken. (See here and here).
This post critiques Schlunk’s recent work on endowments for misuse of discount rates, overlooking the importance of educational quality, mismeasuring student earnings and higher education expenditures, selectively targeting higher education, supporting policies that undermine economic growth, and overlooking stark differences between popular votes and political power.
Misuse of discount rates
To arrive at his headline-grabbing law school result, Schlunk relied on some spectacularly unrealistic assumptions. As Frank McIntyre and I explained four years ago:
“Professor Schlunk’s analysis assumes astronomical discount rates, low earnings growth rates, and zero inflation for thirty-five years. None of these assumptions are empirically or theoretically justifiable.
Most studies [of higher education] by economists have generally used a discount rate between 2.5% and 3%. . . . Compared with the 3% discount rates applied in labor market studies by economists and suggested by the real (net-inflation) costs of financing a law degree . . . Professor Schlunk applies real discount rates of between 8% and 27%.
If Professor Schlunk had used comparable assumptions about discount rates to evaluate the value of a college degree compared to a high school diploma, he would have reached the conclusion that few should go to college. Indeed, given a 30% nominal discount rate, whether it makes financial sense to complete high school might be debatable.”
Undeterred, Professor Schlunk once again relies on unrealistically high discount rates and overlooks differences in completion rates, this time to argue that private non-profit universities provide little value when compared to leanly funded, politically vulnerable public universities. Based on this analysis, he concludes that the federal government should tax universities more heavily than it already does. Higher discount rates mean that future cash flows have a lower present value. Thus the value of a lifetime of higher earnings from higher quality education is diminished by choosing a higher discount rate.
Schlunk’s justification for using such high discount rates is that higher education “puts me in mind of income streams I confronted when advising investors in the private equity sector [where] discount rates of as high as 30% were generally applied.”
For the record, peer reviewed research generally finds that private equity returns net of fees are close to or less than those that can be found in the stock market—not remotely close to the 30 percent returns assumed by Schlunk. (In addition, discount rates are supposed to reflect the weighted average cost of capital, NOT the (higher) returns to equity). If P.E. investors were applying high discount rates to cash flow projections, this likely means that investors believed that P.E. cash flow projections were over-optimistic.
Overlooking college completion rates
In his latest critique of higher education, Schlunk also overlooks large differences in completion rates. Four-year completion rates for bachelor’s degrees are almost twice as high at private non-profit universities as at their more leanly funded public counterparts. If one accepts Schlunk’s assumptions of extremely high discount rates, even a modest delay in completion would have a dramatic impact on value.
Overlooking effects of increased educational expenditures and educational quality
Peer reviewed studies that control for differences in student characteristics consistently find that higher expenditures per student lead to significant increases in student earnings and likely contribute to higher completion rates. (For brief reviews of the literature, see The Knowledge Tax and Populist Outrage, Reckless Empirics; See also here).
Professor Schlunk overlooks these studies.
Mis-measuring student earnings and educational expenditures
Schlunk overestimates the difference in expenditures and resources at elite public and private universities, which leads him to over-estimate the earnings premiums necessary for more resource-intensive private education to be worthwhile. Schlunk assumes incorrectly that all students at elite flagship state universities pay low in-state tuition, when many students at these institutions pay much higher out-of-state or international student tuition. He overlooks the extent to which expenditures per student at elite public universities exceed in-state tuition because of state subsidies and cross-subsidies from out-of-state students. He overlooks the extent to which differences in financial aid affect net-tuition—and therefore educational resources and expenditures—at different universities.
The elite public universities that Schlunk presents as controls that he sees as similar to private universities, but without endowments, actually have larger endowments than many private universities.