Comments on economics, mystery fiction, drama, and art.

Monday, April 18, 2016

On the incoherence of Ted Cruz


Earlier this morning, I happened to see part of Ted Cruz’s appearance on Good Morning America; he was answering questions from the audience, and one , by a man who started by saying he was in a same-sex marriage, asked what Cruz’s stance on same-sex marriage was.  Cruz’s response was (a) that the first amendment guarantees freedom of religion and (b) the Supreme Court (or, as he referred to them “five unelected lawyers in Washington D.C.” had wrongly decided the issue, that it should be left to the states, that one of the strengths of our nation was that different states could have different laws.

I was struck by the incoherence of his comments.  I wanted to ask him if he thought Loving v.Virginia (unanimously, in 1967, invalidating state laws that prohibited “inter-racial” marriages) was wrongly decided, whether states should be allowed to regulate marriage between “racial” or ethnic groups—and, if he thought that decision was correct, what made that decision different from the more recent one.  I wanted to ask him if he thought different states should be allowed to have significantly different laws of contract. 

I wanted to pose a hypothetical:  Suppose two people of the same sex in New York entered into a marriage that was legal and valid in New York, graduated from college, and both received wonderful job offers—in Houston.  If they took those jobs and moved to Houston, would the State of Texas recognize their marriage?  If not, why not?  And if not, what happens next?  Because marital status is implicated in any number of other family situations, and if their marriage is not valid in Texas, then the State of Texas is imposing (in my opinion) undue burdens on them.

For example, it has implications for taxes.  A married couple can file a joint federal income tax return.  Now, Texas does not have a state income tax.  But could this couple still file jointly for federal income tax purposes?

For example, it has implications for end-of-life care issues.  Generally, a spouse can, in certain circumstances, make medical care decisions on behalf of a spouse who is unable to make those decisions. Would that be allowed in Texas?  Could a doctor even legally share information about the patient’s condition with the spouse (who is, after all, not recognized as a spouse in Texas)?

I could go on.  But Cruz wanted to imply that having different definitions of marriage in different states was costless (as, for example, having different speed limits is pretty much costless, or even different zoning laws).  But it clearly is not.  And the burdens would be borne by the people whose marriages are not recognized in some states.

(This, of course, leaves aside the fact that Cruz’s actual position is not leaving this decision to the states, but enacting a constitutional amendment defining marriage as a union or one woman and one man.)

Saturday, April 02, 2016

Grade Inflation Again

For some reason, grade inflation seems to be (once again) a hot topic.  Larry Summers weighs in, with a brief headlined "If we really valued excellence, we would single it out."  I've already suggested a couple of reasons why I think that people who are concerned about grade inflation might be a bit overwrought.  So what does Summers add to the discussion?

I think that the pervasiveness of top grades in American higher education is shameful. How can a society that inflates the grades of its students and assigns the top standard to average performance be surprised when its corporate leaders inflate their earnings, its generals inflate their body counts, or its political leaders inflate their achievements?

That's an argument?  Evidence that grade inflation exists?  Frankly, I read it as an assumption that grade inflation--defined as students receiving higher grades for equivalent work than they would have received in the past--exists.  I don't see any attempt to present evidence.

Consider the equivalent in any other sector of the economy...say, health care.  In a world in which production processes change, in which we learn more about how to do things, in a world in which we observe that there are some things that we need to focus on, would we be content with a hospital sector that produced the same results it did 20 or 30 or 40 or 50 years ago?  Of course not.  So when hospitals report that they have reduced patient infection rates during hospital stays, or reduced patient readmissions to hospitals (because the patients don't need to be readmitted), do we go "Ooooh...bad hospitals...how could things be getting better like that?"

Well, look at Harvard, since Summers has essentially spent his academic life there.  What has happened to the quality of the incoming students with which Harvard has to work to produce quality educational outcomes? This has:
Fifty years ago, Harvard sent acceptance letters to 20 percent of roughly 6,700 applicants to the Class of 1969. By 2006, that figure had dropped to 9.7 percent for the class of 2010 and since then has continued on a downward trend overall, reaching a record-low 5.3 percent acceptance rate earlier this month.

So someone applying for admission to Harvard when I was about to enter college  would have had a 20% chance of admission.  Today, it's 5%.  In addition, the entering class at Harvard is about the same size as it was in 1965, despite a 60% increase in the US population and a vastly larger pool of applicants from outside the US.  Do you think Harvard attracts a less qualified pool of applicants today than it did 50 years ago?  Or would you guess that is uses stricter admissions criteria?  I know which end of that I'd take.  The quality of Harvard's entering students is higher today than if was in the past.  How much higher?  I don't know.  But it's probably substantial.  (Yale's acceptance rate is 6.3%; Dartmouth is 10%...all of these are much lower than in the past.)

With a more talented, better-prepared group of admitted students, wouldn't we expect students at Harvard to perform better?  If not, why not?  Harvard has a Bureau of Study Counsel that provides assistance to students who need it.  I'd be willing to bet that no such thing existed 50 (or 40 or 30) years ago.  Go look at that.  Guides to writing papers in 29 different courses/situations.  Guides for studying in introductory science courses.  Do you think that first year students in 1965 (or 1975, or 1985) had anything like that?  Wouldn't we expect that such additional support would lead to better performance. 

Harvard has a large and diversified faculty development program, which includes development of teaching skills.  Wouldn't you be surprised to discover that these programs existed in 1965 (or 1975...maybe by 1985)?  In the sciences, Harvard faculty have been leaders in developing new methods of pedagogy.  Wouldn't we expect that this additional support for faculty would lead to increased learning?

And what has happened at Harvard has happened at institutions across the country.  Highly selective institutions have become more selective.  My undergraduate institution (a fairly selective, private, liberal arts college) enrolled about 2,400 students in 1965; it now has about 2,200.  And it also has expanded its recruiting efforts overseas.  Its potential student base has probably at least doubled.  But it is smaller.  More, not less selective.  Why wouldn't students there perform better?

If all this is right, student performance is rising, not constant, at least at selective institutions.  The only way to have maintained the grade distribution that existed 50 (40, 30, 20, 10) years ago is to redefine the criteria upwardI do not necessarily object to that.  But if that's what we want to do, we should be open about it.  And unless our standards have changed, we should not be surprised that, at least at selective colleges, student performance has improved.

Thursday, March 31, 2016

The Economics of Columbia Law School

Paul Campos has an interesting post at Lawyers, Guns, and Money, in which he discusses the changes in (inflations) adjusted tuition, endowment and annual giving revenue for Columbia's law school.  I thought it would be interesting to put the distribution of revenues in percentage terms, and revenue per enrolled student.




Year

Total
 Revenue

% from
Tuition

% from Endowment
% from
Annual
Giving
Revenue per Enrolled
Student
1975
1995
2015
$25.6 Mill.
$59.4 Mill.
$114.2 Mill.
66.8%
68.2%
70.2%
27.3%
27.1%
24.7%
5.9%
4.7%
5.2%
$24,381
$44,000
$78,219
(In 2016 $$)

Strikingly, there has been little change in the percentage distribution of revenue sources.  Tuition is up a little, and use of endowment income is down a little.  But, overall revenue per student has increased by a factor of 3.  [Enrollment has increased from 1,050 (1975) to 1,350 (1996) and to 1,460 (2015).]  Where has the money gone?  Unfortunately, Campos does not tell  us.  However, the Chronicle of Higher Education data base lists full professors at Columbia University (not just the Law School) as earning $201,400 in 2014-15.  The earliest year in their data base has Columbia fulls at $131,900 in 2003-04.  (Columbia has apparently not participated in surveys of law school salaries.)  So faculty salaries at Columbia, overall, grew in real terms by about 1.4% per year between 2003 and 2015.  If that rate of growth holds for the entire 1975-2015 period, then average law school salaries would have increased by about 76% between 1975  and 2015.

Columbia has about 125 full-time faculty now, or about 1 for every 12 students (The school also employs a large number of part-time, adjunct, and other faculty; the total list is about 450 people with one sort of academic rank or another.)  I suspect both that the number of full-time faculty and the  number of total faculty have grown more rapidly than enrollment, although in the case of full-time faculty, probably not much faster.  A constant student-faculty ratio would suggest about 88 f-t faculty in 1975 and 110 in 1995.  But I would bet that the number of other-than-f-t faculty (currently about 325) has increased much more rapidly than enrollment.  Let's suggest, then, that faculty salaries as a budget line would have tripled between 1975 and 1995 (or, given the likely growth in non-full-time ranks, perhaps even quadrupled).  Given the 40% increase in enrollment, faculty salaries per enrolled student have increased by something like 50%.

Where has the rest come from?  I suspect that administrative positons have grown more rapidly than faculty positions (and perhaps salaries have grown more rapidly as well).  The Law School, as is true of almost every academic program everywhere, has had to make large, and on-going, investments in technology. But the tripling of law school revenue per enrolled student seems extraordinary (and note that tuition per enrolled student has slightly more than tripled).  That probably is not, in the long-run, a positive outcome for Columbia Law School students, or for the School itself.

Thursday, March 10, 2016

A minor rant on grade inflation

This is a comment I posted on a blog elsewhere.

Grade inflation is one of those topics that nags at me. The linked article refers largely to “elite” universities. Other things equal, I would have expected average grades to have gone up somewhat in those institutions, because they have become even more selective. Unless their selection algorithms are even more messed up than we would have thought, they should be doing a better job of selecting students more likely to succeed. Why wouldn’t grades rise?

And that’s without considering two other phenomena that extend beyond elite institutions.

The first is the more widespread availability of assistance for students–study skills, writing/math/language labs, tutors (I’m adjuncting at a reasonably selective private liberal arts institution right now that has tutors available for intro econ; until the mid-1980s, or even later, many if not most public universities did not offer tutors for those courses), and so on. An immense amount of research on which study practices work better (and for which types of students), and that information is fairly widely available.

The second is that more and more institutions–yes, even elite schools and R-1s–are at least paying more attention to preparing people to teach and supporting better teaching practices. This is true at all of the institutions at which I have taught, and it appears to be true generally. There has been an explosion in the number of journals that focus on teaching in higher education, with actual evidence of what does and does not work. Institutions have teaching/learning centers and run series of workshops. So, I would contend, the average effectiveness of instruction has increased.

Put all this together–why wouldn’t we expect grades to have risen? If I am correct, the only way to prevent that is for grading standards, far from eroding, to become more stringent.

I do not intend to imply that no one anywhere has eased up. I simply intend to argue that a rising average grade distribution is not necessarily *proof* that standards are eroding. Hell, I’m not sure it’s even *evidence* that standards are eroding.

Monday, March 07, 2016

Rules for constructing a "space opera"

Charles Stross finds his publishers wanting him to write a "space opera" (think a multi-volume, thematically-connected episode of Star Trek, or a multi-volume "hobbits in space."  He has been thinking about the pitfalls to be avoided in developing the institutional and physical structure of such a work (and, it seems to me implicitly says such works can't be coherently constructed).  I decided not to read through the 500+ comments already on his blog post (he has a huge and literate following), but wanted to add this.

Any "space opera" will   have to have either (or both) of the following characteristics:

1. Much faster-than-light travel and communications.
2. Extremely robust  social/political/economic institutions.
Why?  Simple.  Planets are a long way apart; the closest likely  habitable planets to us are 4+ light-years away, the second closest more like 13 l.y.  For commercial purposes, there needs to be a way to finesse the extremely long time it would take for beings on Planet A to place an order with beings on Planet B and have that order delivered.  With out closest possible neighbors, we're talking around 10 years, even with communications and travel at (or near) the speed of light.  Transactions times in the decades are perhaps more plausible.

The alternative is, in effect, inter-planetary commerce that consists of "tramp spaceships" picking up loads of stuff on Planet X, heading off to the nearest planetary systems, and hoping to find a market (that seems to me to have been the Ferengi economic plan in Star Trek: Deep Space 9).  And hoping that your customers will pay you in something that you find useful or can sell (barter) elsewhere.  And being able to live with what you can get for sustenance.  At the speed of light, you've got maybe 10 or 12 ports of call in your lifetime, assuming (a point Stross raises) you can keep your ship from falling apart, and/or can fend off space pirates.  (Let's face it, piracy was a major problem for global commerce on this planet for hundreds of years.)

The alternative to all this is simply to hope your readers aren't paying enough attention, of just don't care.


 

Saturday, January 09, 2016

Factors leading to relatively strong growth in the econmy in 2015: How important was the increase in government employment?

An article in VOX discussing the causes of the relative strength the US economy in 2015 lists three factors:

1. Declining oil prices (more generally, declining energy prices)
2. Continued low interest rates
3. An increase in government employment (and, more generally, in government spending)


I don't think there's much reason to doubt the first of these. But my own take on the data is that neither the second nor the third factor cited by VOX made any significant contribution to faster growth in 2015, compared to earlier years.

According to BLS data, consumer energy prices fell between the end of 2014 and the end of 2015 as follows:

Fuel oil:  down 24%
Electricity:  essentially unchanged
Natural gas:  down 12%
Gasoline:  down 24%


The Producer Price Index for energy prices has this:

Coal:  down 4%
Electricity:  essentially unchanged
Natural gas:  down 10%
Gasoline: down 33%

The Department of Energy data show crude oil prices declining from the end of 2014 to the end of 2015 by about 44%

Clearly, declining energy prices led to increased purchasing power across the economy. 


The second--continued low interest rates--is a good description of reality.  For example, car loan rates (according to the FRED database maintained by the St. Louis Federal Reserve Bank, were at 4.06% in November 2014 and 4% in 2015.  The average rate on a 30-year fixed rate mortgage rose slightly, from 3.87% at the end of 2014 to 4.01% at the end of 2015.  Moody's 30-year Aaa rate was 3.79% at the end of 2014 and 3.97% at the end of 2015.  But the continuation of low rates does not mean that the economy would necessarily receive any additional stimulus.  That is, the incentive to borrow (in the face un unchanged nominal rates and unchanged expected inflation) was essentially unchanged. 

Finally, and the reason I began looking at this to begin with, was :


But as this data from the Brookings Institution shows, things started to change in mid-2014. After years of shedding employees, state and local governments started hiring again.

Again, this is true.  (The following data were retrieved from the BLS web site.)  Total government employment rose by  99,000 between December 2015 and December 2015.  Federal government employment rose by 0.6%; state government employment rose by 0.7%, and local government employment rose by 0.3%.  Overall, government employment (which is about 2/3 local government employment) rose by 0.4%.  But total employment rose by 1.9% (2.65 Million).  And the increase in government employment was only 3.7% of the increase in total employment--government employment, in total, is a little over 15% of total employment.  Government employment as a % of total employment continued to fall in 2015. 

I would, in fact, argue that the rise in government employment, far from being a major factor in causing total employment to rise, was instead a consequence of rising private sector employment. 

My own conclusion is that of the three factors cited by VOX, only declining energy prices were a significant contributing factor to reasonably robust growth of the US economy in 2015.  Stable interest rates meant that monetary policy did not turn contractionary in 2015.  And the quite small increases in government employment point to continued weakess of government as a source of economic growth, not to government as a major factor in economic growth.

Tuesday, December 29, 2015

Is Inter-Stellar Trade Even Possible?



Many science-fiction books and movies have as a central plot convention the existence of very large, multi-star-system confederations that are linked both politically and economically.  Unfortunately, unless some method of by-passing what is currently believed to be the limit to the speed at which interstellar travel can occur can be found, such systems are impossible.  And that limit is the speed of light, about 186,000 miles per second.
The closest solar system that apparently might have habitable planets is the Alpha Centauri system. Which is approximately 4.25 light-years away.[1]  What about this makes, in particular, economic links between stellar systems impossible?
The terrestrial calendar year has 31,536,000 seconds.  The speed of light is about 186,000 miles per second.  So the distance light travels in one year (one light year, or 1 LY) is 5.8657x1012 miles.  And suppose we want to ship some physical object from Earth to a (hypothetical) inhabited planet located 1 LY away.  How much will that cost, and what are the implications of such a cost?
I own a car (1997 Honda Accord) which weighs approximately 3,000 pounds,[2] and can carry about 1,000 pounds of load (passengers plus baggage), for a  total of 2 tons.  My cost per mile of operating the car, excluding any capital costs or depreciation, and ignoring the value of the time of the driver, is approximately $0.10 per mile, or approximately $0.05 per ton-mile.  But since we’re talking about moving cargo, let’s suppose we manage to develop extremely cost efficient interstellar transports that travel at very nearly the speed of light.[3]  What do I mean by “extremely efficient,” and what would that entail?  By “extremely efficient,” I mean a cost of moving 1 ton 1 mile of one one millionth of a cent [($0.01)/(1,000,000)]. 
What could we move?  The space shuttle had a gross vehicle weight of about 2,000 tons, and could carry a payload of about 24 tons.[4]  So to move the shuttle 1 mile, fully loaded, at a cost of $0.00000001, would cost $0.000002024.  Now we have to move that 1 LY…which would cost approximately $119 million.  And that’s a cost of $5 million per ton of cargo, to travel 1 LY.  Alpha Centauri is 4.23 times as far, so to get something to or from there would be nearly $21 million per ton of cargo…around $500 million for the flight.
That does not include any costs attributable to staffing the transports.  But that is almost irrelevant.  Consider a cargo that is valuable enough that we are willing to pay $21 million (or more, for longer distances—the next closest is Tau Ceti, 11.9 LY away—and wait at least 4+ years to get it.
I would argue, incidentally, that the cost per ton mile is unlikely to be as low as I have suggested here.  The cost of propelling a large spacecraft at a high rate of speed is likely to be considerably greater than $0.00000001 per ton-mile.[5] 
If all this is even anything close to accurate, then the possibility of interstellar trade is remote.  Overcoming that sort of cost issue requires that the cost per ton mile be reduced to an almost unimaginably low level.  And free energy is not yet on the horizon.



[1]List of nearest terrestrial exoplanet candidates,” Wikipedia, August 2015, https://en.wikipedia.org/wiki/List_of_nearest_terrestrial_exoplanet_candidates
[2] https://www.google.com/?gws_rd=ssl#q=weight+of+honda+accord.
[3] Charles Stross makes the case for the great expense and difficulty of interstellar exploration/colonization at http://www.antipope.org/charlie/blog-static/2007/06/the_high_frontier_redux.html
[4] http://www.esa.int/Our_Activities/Human_Spaceflight/Space_Shuttle/Shuttle_technical_facts
[5] One source projects a cost per pound from launch to earth orbit of $10,000 for the ship’s payload…about $20  million per ton just to get it into orbit, let alone to Alpha Centauri.  https://launiusr.wordpress.com/2015/03/06/the-space-shuttle-and-the-costly-nature-of-space-access/