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

Tuesday, November 24, 2009

China's Economic Stimulus Program

A report, courtesy of Al Jazeera:

Monday, November 23, 2009

The American Economic Association's "Economists Calendar" for 2010-2011

I just received my copy of the AEA's "Economists Calendar," and am pleased to discover I share a birth date with David Card and Nicholas Georgescu-Rogen. Order yours today! (Sorry, apparently there is no online order facility; information here.)

Monday, November 09, 2009

Advertising claims that don't always mean what they seem to mean

While watching (sporadically) Monday Night Football and reading John LeCarre's The Lookingglass War, I noticed a claim by Toyota: "80% of all Toyotas sold over the past 20 years are still on the road."

And just what do they want you to think? Well, one possibility is that they want you to think that 80% of the Toyotas sold in (not just since)1990 are still on the road.

Suppose that Toyota's sales have increased at a constant 5% per year over the part 20 years. Then, it's possible that the oldest Toyotas still on the road were sold 14 years ago.

(The faster the rate of growth in sales, the closer in the past 80% of the sales would be; at 7% per year sales growth, it'd take only the last 13 years.)

I guess the moral of this is to be wary of advertising claims. (Did anyone need to learn that? I hope not.)

Productivity and the Employment Situation

When I read the productivity report for the third quarter (July through September) on Thursday, November 5, I knew we would see a disappointing employment report for October on Friday, November 6.

Productivity rose at an annual rate of 9.5% in the third quarter. And output did not rise nearly that fast. It's clear that when productivity rises more rapidly than output, employment will fall. And if output does not rise sufficiently faster than productivity growth, employment will rise very slowly.

Now, productivity growth can change a lot from one quarter to the next, and the correlation between this quarter's productivity growth and last quarter's productivity growth is what one might call modest (0.018, which is not significant at any conventional level of significance). Nonetheless it does suggest that a higher rate of productivity growth last quarter does not suggest a slower rate this quarter.

The productivity growth that occurred in the third quarter is hardly bad news. But, assuming productivity growth did not suddenly slow down in October, and that output growth did not suddenly accelerate, then, we were likely to be facing an employment decline. And decline employment did. If you want the gruesome details, they are here.

Thursday, November 05, 2009

Tuition and Enrollment at Elite Private Universities

As I think about the article (“The $50K Club: 58 Private Colleges Pass a Pricing Milestone”) in the November 1 edition of the Chronicle of Higher Education on the breakthrough into $50,000+ annual college costs, I find myself puzzling over one issue. What has happened to undergraduate enrollment at these institutions?

Since I entered college (at a small, selective, private liberal arts college) in 1965, the population of the United States has increased by about 70%. Median family income has increased by about 50%. So the number of students with the academic qualifications to succeed, and the family income to support, enrollment at elite universities has probably close to doubled. In addition, rising populations, expanded access to education, and rising incomes in the rest of the world has expanded still further the pool of fully qualified students.

But what has happened to undergraduate enrollment at elite private universities?

If the experience of the school I attended (DePauw University) is any guide, the answer is—almost nothing. Undergraduate enrollment at DePauw in 1965 was about 2,400. It is now about 2,200 (and the decline was planned). If the experience of the other highly-regarded small, selective liberal arts schools that I know of personally is any guide, the answer is—almost nothing.

So in a market for enrollments at elite private universities in the U.S. that has at least doubled in size, and probably more like tripled or quadrupled in size, if I am right, undergraduate enrollment at these elite institutions has responded little, if at all.

Now I know that one response to this is that the educational experience would not be the same if the school doubled or tripled in size. And I think I agree with that (although undergraduate enrollment at DePauw did roughly double in the 20 years before I entered). But expanding enrollment on the current campus is not the only way for elite private universities to have responded.

The number of institutions that have referred to themselves (or have been referred to by others) as “the Harvard of the Midwest” is quite large. So why not the real Harvard of the Midwest? Why not Sarah Lawrence-Santa Fe? Or Middlebury-St. Petersburg?

Why hasn’t Harvard built a campus in Chicago? I don’t think it could be the cost of doing so; Harvard’s endowment would easily allow the school to have done so, if it chose. It has chosen not to.

A private, profit-motivated business, seeing an increase in demand that allows it to roughly triple its price (in inflation-adjusted terms), would almost certainly seek to expand. It would leverage its brand name to find new locations (at the very least) from which to offer its products.

Elite private universities have chosen, in large part, to leverage their brand names, not to provide increased access, not to expand, but to increase tuition. (And, yes, I know that technologies have changed, that costs have changed. But do we really think that accounts for the entire increase in tuition? I sure don’t.) Unless I’ve missed something. Unless I’m wrong about enrollments.

So let some enterprising reporter find out.

The issue is not just that tuition and other costs have soared; it’s also that elite institutions have responded by not expanding. Let’s ask about that, as well.

Tuesday, November 03, 2009


An article in this week's Chronicle of Higher Education (unfortunately paywalled here) notes that "...58 private colleges and universities published rates for tuition, fees, room, and board totaling $50,000 or more in 2009-10. Last year only five institutions did so." Recalling the tuition I paid when I entered college in 1965, at a selective private liberal arts school, I thought it would be interesting to bring that up-to-date in 2008 prices.

Entering tuition, 1965: $1,400 per year.
Adjusted to 2008 prices: $9,569.
Tuition at that institution in 2009/10: $32,800.

At least my school is not one of the $50K institutions. Makes it a bargain, right?

The leader nationally is Sarah Lawrence University, at $55,788. Northwestern leads the schools inthe midwest at $50,164. Harvard isn't on the list, somewhat to my surprise...

To be fair, the "list price" is not what many-to-most students pay, because of various forms of financial aid, whether need-based or merit-based. Nonetheless, tuition and other direct expenses private, non-profit, four year schools averaged nearly $36,000 this year, nearly 60% of median family income. My 1965 tuition was less than 25% of the median family income then.

Whatever one might say, this looks not like a sustainable trend to me. And, as Herb Stein once said, if a trend can't be sustained, it won't be.

Jack Gilbert

Jack Gilbert has published a new collection of poems, his fifth over a span of 47 years. His first book (Views of Jeopardy) appeared in the Yale Series of Younger Poets. 20 years later, Monolithos appeared. In 1996, The Great Fires (a Pulitzer Prize finalist). Refusing Heaven came out in 2007. He's 84 now, and The Dance Most of All is brilliant. Here's one very short example:

I was getting water tonight
off guard when I saw the moon
in my bucket and was tempted
by those Chinese poets
and their immaculate pain.
Not surprisingly, I suppose, death--or, at least, the end of life--is a frequent visitor.

If you have not made his acquaintance, and if you love poetry, I urge you to spend some time with his words.