Signals vs Causes: Education

In this excellent EconTalk podcast, EconLogger Bryan Caplan discusses his upcoming book on education. He closes with this:

…the private return [of education] is high is really a very bad argument for pouring more money on.

Now, the other point, as we were saying, the return that you should be looking at in terms of this argument of not being able to borrow against your future earnings–what you are looking at is return for the marginal people who are just on the edge of going or not going. And as we’ve seen, the return for those people is actually… quite mediocre. And then finally if you adjust for ability and everything else, really I would say that once you appreciate signaling you realize that, so we have subsidized education way past the point of [?] returns. So by my calculations, actually, the social return to education is now quite negative.

And it would be a much better policy to drastically scale it back, so rather than encouraging more people to go, I think it’s better to discourage them from going or at least to encourage them less. So in fact–so, the biggest policy implication that’s going to come out of my book is we just have way too much education. I call this the white elephant in the room. There are way too many people going to school, maybe not from their own selfish point of view, but certainly from a social point of view to go and pour more money on this really is just throwing gasoline on the fire. And we need to do less of it.

I agree. Caplan’s argument is that we college education isn’t the cause of higher income, rather it’s just become the customary path that people with above average ambition and ability take and along the way we’ve mistaken it for the cause of that higher income.

It’s similar to the mistake ‘we’ made with housing. We thought owning a house made people responsible, so we made it easier to irresponsible people to own homes. We learned the hard way that owning a home was a marker of a responsible person, not a cause.

Now, we’re learning the same about college education as many kids graduate and find themselves deep in student loan debt and no higher income job to pay it off.

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Art and arguments

This week’s EconTalk podcast featured Jonathan Haidt. It was an interesting discussion. This part made me go hmmm…., cock my head a little to the side and squint my eyes a little:

Russ: …I think libertarians have handicapped themselves tremendously by failing to realize that most people aren’t like us. Guest: That’s right. I agree. Russ: Most people are groupish, most people are emotional. They don’t want an analytical argument. Most people don’t. They want an argument that appeals to the heart; and they want to feel part of something. So the libertarian–obviously there are many different strands of libertarianism, but I think the worst strand is the one that is totally individualistic and totally analytical; and that appeals powerfully to an analytical individualist. And then they can’t understand why no one wants to go with them. And the answer is because you’ve made it unattractive.

I think there’s more to it than an attractive emotional argument. The people who prefer them also seem prone to believe that attractive emotional arguments provide enough information to know the answer and not have to think about it any more.

Update: Adding to my last thought, it helps if the argument is emotionally attractive and easy to envision. More about that in the next post.

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Taleb on education

I’m currently reading Nassim Taleb’s Antifragility: Things That Gain From Disorder. I’m enjoying it and recommend it. There is much to discuss.

I ran into this today:

Authors theorize about some ancestry of my ideas, as if people read books then developed ideas, not wondering whether perhaps it is the other way around; people look for books that support their mental program.

Agreed. That sets up a section about education that ties in with a recent discussion about education on this blog. He introduces what he calls epiphenomenom, which is

…mistaking the merely associative for the causal; that is, if rich countries are educated, immediately inferring that education makes a country rich, without even checking.

He refers to work from Lant Pritchett (recent EconTalk guest) and Alison Wolf that supports that education is a marker of a wealthy country, not necessarily a cause (wealthy countries can afford education). I liked this story:

I once ran into Alison Wolf at a party (parties are great for optionality). As I got her to explain to other people her evidence about the lack of effectiveness of funding formal education, one person got frustrated with our skepticism. Wolf’s answer to him was “real education is this,” pointing at the room full of people chatting.

Taleb is clear in that he is not saying that education and knowledge are not important to an individual, it’s just oversold as a cause of a nation’s wealth. I also agree with this (emphasis mine):

…note that I am not saying that universities do not generate knowledge at all or do not help growth (outside, of course, of most standard economics and other superstitions that set us back); all I am saying is that their role is overly hyped-up and that their members seem to exploit some of our gullibility in establishing wrong causal links, mostly superficial expressions.

That puts into words something I’ve often thought about credentials. In so many areas credentials play on our gullibility and the folks with the credentials seem okay with that, which is a reason I have an inherent distrust for someone who rests on their credentials. You don’t often hear people qualify their credential and caution you to not put that much weight into it. They usually appeal to it.

The spider and the starfish

starfish

starfish = bottoms-up (Photo credit: kevinzim)

I enjoyed listening to this EconTalk podcast with guest Lant Pritchett about education, specifically in poorer countries. I recommend it.

He begins with a nice discussion about bottom-up and top-down systems using metaphors (emphasis added):

…the basic distinction is between a top down organization where the metaphor of a spider is, all of the resources of the spider web, however spread out they are, merely serve to transmit information to one spider, who synthesizes that information and responds with the resources of the system. So, if there is a bug, the spider crawls out and gets it. But kind of all the web is kind of an ancillary to the brains of the top. The starfish is a creature that actually has no brain. It’s neurally connected, but a starfish moves because the individual units of the starfish sense something and if they sense more food they try and pull that way. And if the other side isn’t pulling as hard, the starfish moves. So it’s really a metaphor of a decentralized system, where individual units responding to local conditions create the properties of the system. And the beauty of a starfish is if you cut a starfish up into 5 bits, you get 5 starfish. The danger of a spider is that when the spider dies, it’s dead. The whole system therefore falls into dysfunction [single point of failure].

Later, he proposes why bad school systems may persist:

…one of the conjectures I put in the book is that it persists partly by camouflage. It pretends to be something it’s not and then can project enough of the camouflage that it maintains its legitimacy. So, sociologists of organization have a term called ‘isomorphic mimicry’, which is adapted from evolution where some species of snakes look poisonous but aren’t, but get the survival value of looking poisonous. So, one of the things that’s happened is by this pressure to expand schooling and by the governments’ desire to control that socialization process, they have created all the appearances of schools that provide education but without actually doing it. But have at the same time not produced the information that would make it clear that they weren’t doing it. So they produce enrollment statistics, numbers of buildings, numbers of toilets, numbers of textbooks, numbers of everything. But have, you know, all of which can project the image that there’s a functional system and providing real learning there. But they don’tprovide metrics of learning or incentives for learning or feedback on learning or accountability for learning at all.

There’s much more good discussion throughout, but I’m fond of something Pritchett said near the end:

You know, the United States has always been much more of a starfish system. And the starfish system has enormous strengths, and I think those enormous strengths have led America to be a leader in education in many ways. And one of the examples I use in my book is, if there’s a scaled example of a starfish education system, it’s American universities. And it’s just unbelievable from the data the extent to which America dominates quality universities. It’s just unbelievable compared to Europe, which always took the same approach to universities that other countries want to take to their basic education. And you see the consequences of it. America’s universities–in the book I have numbers of the top 200 universities in the world, what fraction of them are in Anglo countries, and it’s just way disproportional to the population size. And even wealth. Because Europe, which is equally sized and equally wealthy, continental Europe, just has nowhere near. And it’s the result of a starfish system, in my view.

I’ve made the same point several times on this blog. Here and here are a couple of examples.

I do appreciate the spider and starfish metaphors. Those roll-off the tongue better than top-down and bottom-up.

Sports

For a change of pace, on this week’s EconTalk podcast Russ Roberts interviews David Epstein about his book, The Sports Gene. It is worth a listen.

I don’t recall there being a boring part to it and I think it will have wide appeal for sports fans, anybody who has played sports or just ran around the yard playing tag and anybody with kids who are interested or not interested in sports.

I learned things about what my body type is well-suited for that fits with my experience. You might, too.

It has lots of good discussion on nature/nurture, gaining 10,000 hours of deliberate experience and what we think we know about what makes us better at something isn’t necessarily true.

There was also some debunking on what we think makes a good hitter in baseball. Perhaps my micro teacher gave up too soon. He played in the minors and said he decided to quit when a fellow batter, who happened to be a good hitter, told him the secret was watching the ball to see where the spot was.

It turns out that nobody quite has reflexes for that. It’s more about reading visual cues of the wind up and release and projecting the path of the ball based on that.

That reminds me of a sports science show that tested something similar with soccer player Cristiano Ronaldo. They shut the lights out as soon as someone kicked a ball across the net to see if he could still play it into the net. He could. Why? Because of experience. He’s reacted to a ball tens if not hundreds of thousands of times and his body has a good sense of the path of the ball based on what he sees from the kick.

I wonder how many players quit too soon because some player told them something untrue like that. Perhaps the answer is more about practice than anything.

Localism

Something Nassim Taleb said in his EconTalk podcast reminded of a point Daniel Hannan made in his book, The New Road to Serfdom that I wrote about it here.

Taleb makes the point that local government is more effective than national government and one reason is that at the local level there is some skin in the game in the form of shame. That is, if you take advantage of your neighbors, they’ll frown upon it. But, at the national level, government is more about taking skin out of the game through bail-outs and insurance. Here is Taleb:

And government can be a local, neighborhood union. And then let’s figure it out from the history of countries that have been very successful, like Switzerland or Sweden, places like that. That people making the decisions are usually embedded in a community. And their skin in the game is typically shame. Because they are socialized by the community. Their skin in the game is shame. Whatever government official in Washington can make a mistake, and it’s a spreadsheet looking at him. It’s not someone in church on Sunday looking at him and making him feel shame. And that’s where the main difference is.

So let me go back to the point about government. It’s true, at the local, local level, there are some natural incentives. But at the national level, say in the United States, a lot of what government does is to remove skin in the game–bailouts, insurance policies, do-overs, ad hoc interventions.

Here’s Hannan’s version:

…localism under-girds the notion of responsibility: our responsibility to support ourselves if we can, and our responsibility to those around us–not an abstract category of the “the underprivileged,” but the visible neighbors–who, for whatever reason, cannot support themselves.  No longer is this obligation discharged when we have paid our taxes.  Localism, in short, makes us better citizens.

Update: The title of the post made me think of an inconsistency. The folks who advocate ‘buying local’ rarely seem to advocate ‘governing local’. Perhaps they should.

‘…losses encourage prudence.’

As I mentioned at the end of this post, last week’s EconTalk with Nassim Taleb, Skin in the Game, is worth listening to. He describes some history of how having skin in the game is a simple and effective risk management rule and how removing it causes problems.

In ancient Babylonia, architects who built houses that fell down and killed people could themselves be killed. As Taleb explained, ‘that simple rule outperformed any inspector.” And, yet, there were still architects there. Apparently good and/or confident ones.

Here is more of what Taleb had to say about the Golden Rule:

And of course we have the Golden Rule that we see in the Old Testament, which is a positive–up till then it was a negative rule: ‘Don’t do unto others what you don’t want them to do to you.’ And then the Golden Rule: ‘Do to others what you want them to do to you’ and so on. Up to then we had a civil rule. What you see behind this is the foundation of moral philosophy, as a foundation of ethics and a foundation of civil society. But in it we saw something much more potent–we saw the foundation of risk management.

I thought this was interesting, too, regarding parenting and letting kids grow up:

The expression in Lebanon, that the first 7 years you play with them (and protect them), the second 7 years you let them get in trouble and the third 7 years you advise them on how they got in trouble.

Nation going into retirement: India

I finished listening to last week’s EconTalk podcast with Jagdish Bhagwati this afternoon while mowing the lawn and was amazed at how some of the comments tied in with my previous post and made me think that India is feeling like it wants to retire.

After the 44 minute mark, Bhagwati says:

…the Food Security Bill will double the share of expenditure from about 1% to at least 2% of GDP (Gross Domestic Product). That’s a big expenditure increase.

But the point is they are doubling it now, not because there is any huge compulsion to do so except political. They think they are going to get a lot of mileage out of it. You see, this is also something that the government has been steadily doing, which is itself risky, which is as you know, basically the civil and political rights are supposed to be relatively cost-free. So, like, habeas corpus has to be provided even if you are a poor country. But the economic rights, they are expensive. So these are two separate things. So, what this government has been doing is increasingly shifting from the approach where you just have guiding principles which we call directed principles to turning each of these things into rights. Which means you’ve got to spend moneys, which of course leads to a great pressure to spend more money.

But right now because we want more and more votes, they’ve been not–I mean, we could afford to do some of this because the growth-enhancing policies had led to steadily increasing revenues. But now having slowed down all of that, the government is in a situation where they are on high speed on social spending. But, they are on low speed on raising revenues. So now they are getting exactly the problem, which is a disjunction between what you are taking in by revenue, which permits you to do these sorts of social expenditures, and the steadily expanding, politically driven social expenditures.

Too bad. They will be going into early retirement, when there is still much that could be done to lift hundreds of millions out of poverty through innovationism.

 

Ask, how much? Part 2

In the same EconTalk podcast with Morris Fiorina that I wrote about in this post, Fiorini describes another ‘how much’ scenario:

…I saw a paper presented yesterday on taxes. And it was very interesting that the population according to these surveys does think we should have more taxes on the rich. But then when you ask them, what are the rich actually paying, they underestimate, of course, what the rich are currently paying. And, what’s interesting is they think the rich should be paying less than they actually are. But you ask them, what is the fair tax to pay for various income brackets? They come in at figures that are actually below what the rich, what people in those brackets are actually paying. So here’s a case of people being uninformed and mal-informed at the same time.