December 05, 2019
The Financial Times recently published an excellent profile of Esther Duflo, a French economist who shared the Nobel Prize in Economics with two of her co-authors for pioneering empirical work using field experiments (randomized controlled trials) to evaluate the effectiveness of social policies and the effects of taxation. Over the last several decades, economics has evolved from a largely theoretical field, which from the 1960s to 1980s at times resembled conservative political assumptions restated in mathematical formulae (see, e.g., here, here, here, here, here, here, and here), into a largely empirical field more akin to science. Law & Economics has followed, albeit more slowly.
From the FT:
“Duflo’s drive to spread the use of RCTs reflects her original motivation for entering economics — a deep-seated belief that research can influence policy. . . .
Duflo believes her research on what drives behaviour in poor countries carries important lessons for governments in the rich world. She also believes strongly that economists need to speak out more — if people distrust experts, it is partly because the best academics, wary of being misinterpreted, are leaving the field to ideologues and pundits.
Duflo and [her co-author] Banerjee contend that, in reality, people do not necessarily move to the best jobs, or invest in the most productive businesses; nor is there any evidence they work less in response to higher taxes. They care about many things — health, self-respect, clean air — more than they do about maximizing per capita GDP, an elusive goal that may no longer be the right priority for policymakers in the developed world. . . . For her, the priorities in the US would include . . . a huge investment in early-years education, to create high-status jobs ‘that no robot is ever going to come to take’.
Duflo believes that an excessive faith in financial incentives is one of the big things mainstream economics got wrong. ‘You can see the long shadow of that misconception in our thinking on trade, in our thinking on taxation . . . in our thinking on social programmes.’
Although a reassessment is now under way, Duflo is critical of her profession’s reluctance to accept evidence that did not fit with accepted theories. She cites the example of Petia Topalova, an IMF economist whose early work at MIT showed poverty reduction was slower in areas of India that were more exposed to trade. Topalova’s conclusion — on the need to compensate losers from globalization — now seems self-evident. At the time, however, her paper was greeted with near-universal scorn — and she was forced to seek a career outside academia.
‘I wish I could say for sure that something like that would not happen again, but it might, with another blind spot,’ Duflo says. This failure on the part of economists to question their assumptions reflected cultural problems . . .
Duflo’s main message, though, is that economists — for all their flaws — have something to contribute. ‘A focus on the right policies can make an enormous amount of progress. When I feel low, that’s what I think about.’ ”
March 12, 2019
White House proposes to spend approximately nothing on early childhood education to minimize taxes for top 0.1 percent (Michael Simkovic)
NPR reports that the Trump administration has proposed a meager one-time increase in funding for childcare / early career eduction equal to approximately 0.0045 percent of GDP ($1 billion out of $22 trillion estimated 2020 GDP) or about 0.001 percent of household networth. Total federal spending would increase to $5.4 billion, or 0.0225 percent of GDP.
In contrast, Senator Elizabeth Warren has proposed to spend approximately $70 billion per year on childcare and early childhood education--13 times as much as President Trump. Warren's plan would be financed with approximately one third of the revenue generated by an annual ultra-high net-worth wealth tax of 2 percent on personal fortunes above $50 million, and 3 percent above $1 billion. It would therefore cost 99.9 percent of households nothing in increased tax burdens.
The White House explained that its less generous proposal was motivated by a desire to avoid spending "unsustainable amounts of taxpayer dollars" and instead come up with a plan that would be (politically) "viable."
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 08, 2019
How Big Tobacco’s star advocate became an education expert for the New York Times and Forbes (Michael Simkovic)
Richard Vedder, a leading opponent of excise taxes on cigarettes, takes a dim view of most of higher education. Vedder depicts colleges and universities as overpriced, wasteful, and deserving budget cuts. Vedder argues that academic freedom and research impede teaching marketable skills.
The reality is that public investments in higher education more than pay for themselves. More spending is linked to more innovation and better labor market outcomes. Educational quality and access have improved over time. The economy would likely grow faster if governments invested more in education. More people would find jobs, they would earn more money, and governments’ long-term fiscal position would likely improve.
Vedder would be easy to dismiss if not for his backing from industries that spend heavily on advertising and lobbying—like tobacco, for-profit education, and private student lending. Vedder has become a regular contributor to the New York Times, Forbes, and other publications with wide circulation, and frequently testifies before Congress.
Despite his general antipathy to education, Vedder forcefully defends for-profit education. Vedder likes that for-profit institutions have little interest in “promoting research, saving the earth [or] achieving progressive objectives.” Perhaps harried adjuncts are less likely than tenured research faculty to assess whether taxing cigarettes saves lives.
Public health spillovers aside, for-profit education is typically not great for students or taxpayers.
For-profit institutions spend far more of their revenue on sales and marketing and far less on instruction. For-profits account for a disproportionate share of federal student loan defaults and federal subsidies. Although for-profits typically serve weaker students, after accounting for student characteristics, for profits typically provide less value for the money than non-profit and public competitors. For-profits are the only type of educational institution which have been shown to increase tuition after gaining access to federal student loans, without increasing quality. Many for-profits have been linked to consumer fraud.
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.
February 01, 2019
Brian Leiter and Paul Caron both recently noted a study by Adam Chilton, Jonathan Masur, and Kyle Rozema which argues that law schools can increase average faculty productivity by making it harder for tenure track faculty to get tenure. While this seems plausible, denying tenure more often is no free lunch.
A highly regarded study by Ron Ehrenberg (published in the Review of Economics and Statistics) found that professors place a high monetary value on tenure, and a university that unilaterally eliminated tenure would either have to pay more in salary and bonus or suffer a loss in faculty quality. After controlling for faculty quality, university rank, and cost of living, university economics departments that are less likely to offer faculty tenure must pay untenured faculty more, in part to compensate for increased risk. Reduced tenure rates is associated with higher productivity, but it is costly.
It's easy to understand why. A promising candidate with offers from otherwise comparable universities A and B would be unlikely to take an offer from A knowing that A denies tenure 70 percent of the time while B only denies tenure 10 percent of the time.
Faculty who are untenured and at an institution with high tenure denial rates would also have strong incentives to spend their most productive years avoiding publishing anything that might upset private sector employers who could give them a soft landing in the event that they are denied tenure. Quantitative measures of faculty "productivity" based on number of citations and publications don't capture the harmful qualitative shift this would produce in faculty research, particularly in an area like law.
There are numerous other advantages to tenure (and disadvantages to weakening it), which I've discussed here and here, including protecting intelletual freedom, encouraging faculty to share rather than hoard knowledge, promoting investment in specialized skills, aligning faculty and institutional incentives, increasing the rigor of teaching and improving outcomes for students (compared to use of adjuncts).
October 07, 2018
Financial Times: White House Considered Blanket Ban on Student Visas for Chinese Nationals, partly with goal of hurting Universities (Michael Simkovic)
From the Financial Times:
"White House hawks earlier this year encouraged President Donald Trump to stop providing student visas to Chinese nationals, but the proposal was shelved over concerns about its economic and diplomatic impact. . . .
Stephen Miller, a White House aide who has been pivotal in developing the administration’s hardline immigration policies, pushed the president and other officials to make it impossible for Chinese citizens to study in the US, according to four people familiar with internal discussions. . . .
While the debate was largely focused on spying, Mr. Miller argued his plan would also hurt elite universities whose staff and students have been highly critical of Mr Trump, according to the three people with knowledge of the debate.
The issue came to a head in an Oval Office meeting in the spring during which Mr Miller squared off with administration opponents, including Terry Branstad, the former Iowa governor who is US ambassador to China.
According to the four people familiar with the discussions, ahead of the Oval Office meeting Mr Branstad argued that Mr Miller’s plan would take a much bigger toll on smaller colleges, including in Iowa, than on wealthy Ivy League universities. US embassy officials in Beijing also made a broader economic argument that most American states enjoy service-sector trade surpluses with China, in part because of spending by Chinese students.
Mr Branstad succeeded in convincing the president that Mr Miller’s proposal was too draconian, according to one person familiar with the White House showdown. At one point, Mr Trump looked at his ambassador and quipped: “Not everyone can go to Harvard or Princeton, right Terry?”
One person familiar with the debate said Mr Miller’s opponents were worried the president might return to the issue, particularly as he takes an increasingly tough line on China over everything from trade to cyber security.
September 29, 2018
Public pension funds in New York and California are increasingly considering Climate Change related risks as a criteria for guiding their investment decisions. The move to consider climate change is driven in part by a perception of insufficient federal action on these issues and the prospect of environmental harm eroding long term performance for a diversified portfolio of investments.
Should university endowments also emphasize ESG considerations?
Comments are open and moderated. Real names only, please.
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."
September 25, 2018
A recent working paper by Caroline Hoxby (Stanford) suggests that the economic returns to online education (measured in terms of wage growth) may be too low to recoup the costs of these programs, especially as administered at for-profit institutions. Hoxby used a fixed effects approach, measuring earnings before and after online education compared to likely earnings without online education. She found that online education does not boost earnings by very much, and it does not do much to move students into more lucrative industries or occupations. Hoxby found evidence that most students pursuing exclusively online degrees lived within commuting distance of brick-and-mortar institutions that likely offered higher quality education with better returns.
Hoxby's observational results are consistent with experimental studies that have found worse outcomes for students randomly assigned to online education compared to traditional education.
In previous research, Hoxby warned that the spread of online education could undermine highly selective institutions' ability to finance original research and teaching innovations. Hoxby wrote: "selective] institutions weaken rather than strengthen their market power in research and original content creation when they increase their exposure on the internet."
Hoxby's working paper has been criticized by groups advocating partnerships between for-profit technology companies and educational institutions to spread online education to non-profit and public institutions. For-profits have been online education's earliest and most enthusiastic adopters, while private non-profit and public institutions have generally taken a more conservative approach. The strongest of the critiques of Hoxby's paper is that it looked at returns over the course of 10 years rather than a lifetime. The present value of lifetime earnings premiums is a more appropriate measure of the returns to education.
Related coverage: Should online education come with an asterisk?