Posts Tagged ‘profile’

community colleges vs for-profit colleges

Wednesday, May 27th, 2015

Please excuse my persistence, but I am posting a second portion of the interview with Harvard economist Claudia Goldin. The interviewer asked Professor Goldin why, in the United States, is there such a proliferation of for-profit colleges? Ms Goldin explained that the for-profits have advantages over community colleges that permit them to charge higher tuition charges and still attract students. These advantages are very important for poorly prepared, poorly funded, working students.

If you go to a community college, you may encounter various barriers; the courses you want are all full, or they’re only offered at times when you can’t attend because you have to work. Plus, many students arrive unprepared and might not have taken (or understood) algebra, for example. So they have to take remedial courses; they have to pay for these courses and find time to attend them, and yet they get no credit for them toward graduation.

But if they walk across the street to the school they’ve seen advertised on public transportation or on late-night TV, they will find a school that is going to help them apply for their Pell Grant and a student loan. It’s going to provide career counseling and it’s not going to make them take remedial courses. For-profits really know how to get people in the door. But students end up with very big bills, and those loans have to be paid off at some point.

But, do graduates of for-profit schools do well in the job market? Goldin’s finding is precisely what I would expect (No!), so is not very interesting, at least to me. What is interesting is the design of the research project set up to answer the question. Here is the intuition, in the words of Ms Goldin.

We don’t have IRS [income tax] records matched with where a person earned their degree. So what I did with David Deming, Noam Yuchtman, Amira Abulafi, and Larry Katz was to conduct an audit study. We sent out resumes designed to look like real resumes, but we varied them by where the person went to college, either a for-profit college (online or brick-and-mortar), a nonselective public college (where the students in many ways are indistinguishable from the ones who go to for-profit colleges), or a selective public college. We sent them out for two major types of jobs, business jobs and health jobs, and within those types, to jobs requiring or not requiring degrees. We then compared callback rates. Callback rates aren’t perfectly mapped onto what people eventually earn, but if people don’t get called back they’re not going to do well in the job market. We found the callback rates for business jobs were considerably lower for the candidates from the for-profit schools, particularly the online ones.

Interview/Claudia Goldin“, Federal Reserve Bank of Richmond, Econ Focus (Fourth Quarter 2014), pp. 24-28.

The research that Professor Goldin summarizes is circulating as NBER Working Paper No. 20528, issued in September 2014.

There is more of interest in the full interview, which I recommend you download and read.

women working longer

Tuesday, May 26th, 2015

The Federal Reserve Bank of Richmond interviewed Harvard economist Claudia Goldin for the latest issue of their quarterly magazine. One question the interviewer asked was “What are you working on currently?”. Here is Professor Goldin’s response:

My current project is called “Women Working Longer.” I’m working with a group of people who study aging, retirement, and health. We’re interested in the fact that labor force participation rates for younger women peaked in the 1990s, but that participation for older women has increased enormously. Among college graduates today, about 60 percent of those aged 60-64 and 35 percent of those aged 65-69 are in the labor force. Even among those aged 70-74, about 20 percent are in the labor force.

This raises all sorts of interesting questions about why. Is it because these women were hit with divorce shocks? Do they want to retire but then they look at their savings and realize they can’t retire? Or is it that the world of work has changed and they love what they’re doing? There are a host of issues to study concerning family, occupations, education, health, financial resources, and retirement institutions.

Interview/Claudia Goldin“, Federal Reserve Bank of Richmond, Econ Focus (Fourth Quarter 2014), pp. 24-28.

There is much more in the full interview. Claudia Goldin (born 1946) is well-known for outstanding research in economic history, particularly in the fields of education and employment. In 1990, she became the first woman to obtain a tenured post at Harvard’s economics department. She obtained her PhD at the University of Chicago and taught at the University of Pennsylvania before moving to Harvard.

Ms Goldin has appeared previously in TdJ.

See also her short autobiographical essay “The Economist as Detective,” published in Passion and Craft: Economists at Work, edited by M. Szenberg (University of Michigan Press, 1998). A link to the essay is here (at the bottom of the page).


the Virgin brand of Sir Richard Branson

Thursday, November 6th, 2014

Last week’s crash of the Virgin Galactic spacecraft has shone a spotlight on the charismatic Sir Richard Branson. The real Richard Branson, we learn, is quite different from his public persona. Sarah Gordon, Europe Business Editor of the Financial Times, explains that he is not a manager, nor is he an entrepreneur. His income comes primarily from fees that his Virgin Group charges for use of the Virgin name.

Sir Richard Branson is a mass of contradictions. A man who often appears shy, yet has built a brand around his charisma. Someone who vaunts his social conscience, but who lives as a tax exile on Necker island. A fervent environmentalist, who wants to send wealthy travellers into space.

One of the biggest inconsistencies is that his public persona – that of an entrepreneur running a multifarious business empire – does not reflect reality. In fact, Sir Richard manages very little. His Virgin Group owns stakes – few of them majority ones – in a vast range of businesses, but as an investor rather than a manager. ….

VGH [Virgin Group Holdings] makes a significant amount of its money not from cash flows from its investments – particularly since a number of large Virgin businesses do not turn a profit – but from the fees it charges companies for lending them the Virgin name. ….

There is nothing illegal about Virgin Group Holdings using cash or its stakes in other Virgin companies to support other branded businesses. But it makes it difficult to assess their genuine sustainability, and may skew management decisions – to the detriment of minority shareholders – if cash is needed in another part of the portfolio.

Sarah Gordon, “Virgin group: Brand it like Branson“, Financial Times, 6 November 2014 (ungated – free access, at least when I tested the link!).


Nobel for humility and competence

Wednesday, October 15th, 2014

The Nobel Prize for economics is often awarded to a thinker for one powerful insight. This was the case with Eugene Fama last year with the efficient markets hypothesis, or Robert Lucas with his theory of rational expectations.

In contrast, this year’s winner, Professor Jean Tirole, has excelled in the field of industrial organisation in a way that defies easy summary, precisely because his approach embodies the versatility needed to address the complexity of the modern global economy. ….

What Prof Tirole realised was that you can treat an industry correctly only if you respect its particular features. But this is difficult. Between the dogmatic extremes of market fundamentalism and bureaucratic omniscience lies huge complexity.  ….

John Maynard Keynes expressed the wish 80 years ago that economists be thought of as humble and competent people on a level with dentists. The work of Prof Tirole displays competence of the very highest level. But what makes it so deserving of the Nobel is the humble virtue of continuously adapting his approach to the contours of the real world.

A Nobel for work of true economic value“, editorial, Financial Times, 15 October 2014.

Kenneth J. Arrow: an outstanding economist

Wednesday, September 3rd, 2014

IMF consultant Janet Stotsky profiles Stanford economist Kenneth J. Arrow in the current issue of Finance & Development, a quarterly publication of the International Monetary Fund.

Kenneth Arrow is one of the greatest economists of the 20th century. He was born in 1921, in New York City, to Romanian immigrant parents. He is an uncle of the well-known Harvard economist Lawrence Summers (1954-). In 1972, at the young age of 51, he shared the Nobel Prize for economics with British economist John Hicks (1904-1989). Stotsky explains that Arrow became an economist only because poverty prevented him from continuing his study of mathematics and statistics:

Although Arrow’s first love was mathematics and mathematical statistics, he ended up an economist for a very economic reason. He ran out of money while a graduate student in mathematical statistics at Columbia University just before World War II, and the economics department offered him financial aid.

Stotsky’s profile reflects Arrow’s contributions to many areas of economics, so covers a broad range of topics. I highlight just two of his contributions that helped me, long ago, learn to apply economic reasoning to social problems. The first contribution, which dates from 1951, is the now famous “Arrow Impossibility Theorem”. The second is a 1963 paper in which Arrow explains, logically and convincingly, why provision of medical care should not be left to the market.

In … Social Choice and Individual Values, which was published in 1951, the year he received his doctorate, Arrow laid the foundations for the field of social choice theory, which examines mathematically such issues as how well individual voters’ different views about candidates and issues are reflected in an election outcome. In what is now called the Arrow impossibility (or possibility) theorem, he postulated that when certain reasonable conditions of fairness are imposed, it is impossible for a voting system to accurately reflect societal preferences. …. Arrow’s theorem shows that when only four reasonable conditions are imposed on three or more choices … there is no method to ensure that social preferences (winners of elections, say) will be accurately reached from individual preferences. Social choice theory is used to help understand group decision making and to design voting rules. ….

Arrow’s 1963 paper on uncertainty and the welfare economics of medical care explained the difficulties in designing a well-functioning market for medical care both because some participants know more than others—for example, the gap in medical knowledge between doctors and their patients—and because there is an absence of price competition in this market. He demonstrated the central importance of moral hazard in the medical marketplace—for example, greater demand for medical care by patients with insurance. A committee of leading economists said the article was one of the 20 most influential in the first century of the American Economic Review, the flagship publication of the American Economic Association. ….

Arrow’s concern for the practical problems of economics and social and political issues has taken him from work on climate change to work on subsidizing medicine in developing economies. He was one of the first contributors to the intergovernmental panel on climate change, which provides authoritative estimates on its impact. ….

Janet Stotsky, “Path Breaker“, Finance & Development, September 2014, pp. 2-5.

There is much more at the link above.

Ungated links to Arrow’s 1963 AER paper “Uncertainty and the Welfare Economics of Medical Care” are widely available, for example here, and here.

Edmund Phelps at lunch with the FT

Tuesday, June 17th, 2014

Martin Wolf interviews Columbia University economist Edmund (Ned) Phelps. Mr Wolf’s report is peppered with comments that Phelps made during their long conversation. Here is a small sample.

“[To stimulate innovation] it’s necessary to start with a national conversation on the importance of creativity and discovery …. I’m not against a big government. I’d love to have colossal employment subsidies, to revolutionise the terms on which low-wage workers are employed, and, if there are some exciting initiatives that the government could take to open the way for more innovation, that would be great. But we’ve got to stop all this social protection. We’ve got to use that tax money for things like low-wage employment subsidies – subsidising work, subsidising innovation maybe, subsidising investment maybe.”

What about unemployment benefit? Medicare? “I’m not against social insurance. In my ideal world, wage rates would be so pulled up at the bottom by employment subsidies that everybody would be able to afford good levels of medical and retirement insurance in private markets. But we don’t live in that world. So, I would be loath to crusade against social insurance.”

I suggest that it is difficult to draw the line between the “social insurance” he favours and the “social protection” he condemns “Yes. We have got to protect the indigent. But social protection is out of control now.”

Wouldn’t he also accept that government can provide unemployment insurance and health insurance better than the private sector can?

“Yes, I understand there are flaws in private insurance markets. But the balance of advantage might have been in favour of private insurance if we had distributed the fruits of work more justly.” ….

Phelps believes passionately that creativity allows individuals to live fuller lives and remake the world. He is a true American, in a good way.

Martin Wolf, “Lunch with the FT: Edmund Phelps“, Financial Times, 14 June 2014.

Edmund Phelps (born 1933) won the 2006 Nobel Memorial Prize for “his analysis of inter-temporal tradeoffs in macroeconomic policy”. TdJ has highlighted aspects of his work on previous occasions, for example here, here, and here.

economist Hyman Minsky

Monday, March 24th, 2014

The ideas of Hyman Minsky, though largely ignored during his lifetime (1919-96), have been referred to repeatedly since 2007, the start of the Great Recession. Do you understand the term ‘Minsky moment’? If not, would you like a lucid, short overview of Minsky’s views? A good starting point is a BBC Analysis programme, which can be read online, or downloaded as a  podcast. The target audience is non-economists, but professional economists will also benefit from reading or listening to it.

[American economist Hyman] Minsky spent his life on the margins of economics but his ideas suddenly gained currency with the 2007-08 financial crisis. To many, it seemed to offer one of the most plausible accounts of why it had happened. ….

Although he trained in mathematics, Minsky preferred what economists call a narrative approach – he was about ideas expressed in words. Many of the greats from Adam Smith to John Maynard Keynes to Friedrich Hayek worked like this.

While maths is more precise, words might allow you to express and engage with complex ideas that are tricky to model – things like uncertainty, irrationality, and exuberance. Minsky’s fans say this contributed to a view of the economy that was far more “realistic” than that of mainstream economics.

Duncan Weldon, “Analysis: Why Minsky Matters“, BBC News Magazine, 24 March 2014.

BBC Radio 4 will broadcast the programme today, 24 March 2014, at 20:30 GMT. The full 28-minute podcast should be available within a week (31 March) from BBC.

Ha-Joon Chang at lunch with the FT

Monday, December 2nd, 2013

[For Ha-Joon Chang], economics is a tool for changing the world, not for explaining why the world is as we find it. He is a reader at Cambridge rather than a full professor, a relative sidelining he attributes to his heterodox approach. “I don’t do maths,” he says, blinking softly through his round, silver-rimmed spectacles. “A lot of economists think I’m not an economist.” ….

I ask whether he thinks economics is a moral pursuit. Chang’s starting point seems to be that economic policies can make the world better. “Moral dilemmas are unavoidable,” he says as I signal for the bill. “Don’t forget that, at least in this country, economics used to be a branch of moral philosophy. Adam Smith, Karl Marx, Joseph Schumpeter – they’re not just writing about economics, but about politics and culture and society and morality.” He drains his cup. “How has this wonderful subject we call economics become so narrow-minded? I find that really sad.”

David Pilling, “Lunch with the FT: Ha-Joon Chang“, Financial Times, 30 November 2013.

This is a tiny portion of a fascinating interview – one of the most interesting that I have seen in the “Lunch with the FT” series. Korean economist Ha-Joon Chang (born 1963) has authored numerous books, including Kicking Away the Ladder: Development Strategy in Historical Perspective (Anthem Press, 2002), which won the 2003 Gunnar Myrdal Prize. His work is controversial. He explains “most of my professional colleagues, who are much keener to accept market outcomes than I am, would dismiss me as a crank or – the worst of all abuses among economists – a ‘sociologist'”. Nonetheless he was awarded the 2005 Wassily Leontief Prize from the Global Development and Environment Institute. (Previous prize-winners include Amartya Sen, John Kenneth Galbraith, Alice Amsden and Robert Wade.) FT Asia editor David Pilling notes that “his books have been bought by more than 1.3m people – not bad for an economist who turned up in Cambridge 27 years ago barely able to speak English.”

fear of quantitative easing

Friday, November 1st, 2013

FT columnist Samuel Brittan today examines “the arcane dispute about so-called quantitative easing”. (more…)

Richard Thaler on the EMH and Trust

Monday, October 21st, 2013

This is a wide-ranging interview. I focus on just two of the topics covered: the Efficient Market Hypothesis (EMH) and the role of trust in a market economy.

The office of behavioural economist Richard Thaler (born 1945) is close to that of the 2013 Nobel laureate Eugene Fama, widely regarded as father of the EMH. The two Chicago professors are close friends, but Thaler, like Yale economist Robert Shiller (also a 2013 Nobel laureate), is a critic of the EMH. Thaler stresses that the Efficient Markets Hypothesis has two parts: 1) There is no free lunch. 2) The price is always right. Although the first component is broadly true, the second is not, Thaler argues.

Regarding trust, Thaler believes that this is essential for economic growth. Free markets alone will not do the job.

Region: What are your thoughts about the EMH today, given the recent financial crisis?

Thaler: Well, I think it’s very hard to argue that real estate prices in Phoenix, Las Vegas and south Florida were rational at the peak. Now, Gene [Fama] will say, correctly, that neither I nor anyone else was able to say when that bubble would break. (I’m not allowed to use the word “bubble” when I’m with Gene.) ….

So when Gene and I have these arguments, he’ll say the fact that you can’t predict when they will end means you can’t say anything about them. I say, no, that’s not the case. And that’s why I separate these two aspects of the efficient markets argument: Whether you can get rich (the “no-free-lunch” part) and whether the “price is right.”

It’s hard to get rich because even though I thought Scottsdale real estate was overpriced, there was no way to short it. Even if there were a way … you might have gone broke before you were right.  ….

But, … most active managers underperform the market. So, I think Gene and I would give similar advice to people, which would be to buy index funds. ….

I think it’s hard to beat the market. Nobody thinks it’s easy, and so that part of the hypothesis is truer, but if we look at what happened to Nasdaq in 2000 [when it fell from 5,000 to 1,400], and then the recent crash [from 2,800 to 1,300 in 2009], well, of course, we’ve never gotten back to 5,000. So it’s very hard to accept that markets always get prices right. ….

Region: One thing we haven’t talked about yet is your work on reciprocity and cooperation. ….

Thaler: ….  It’s very fortunate that we don’t live in a society where everybody is out to take advantage of us. For instance, if you have work done in your house or on your car, there’s absolutely no way for you to monitor what they’re doing, unless you’re willing to spend the time watching them and you happen to know a lot about the work, materials and methods being used.

So it has to involve trust. Trust is really important in society, and anything we can do to increase trust is worthwhile. There’s probably nothing you could do to help an economy grow faster than to increase the amount of trust in society.

Douglas Clement, “Interview with Richard Thaler“, The Region (Federal Reserve Bank of Minneapolis), September 2013.

There is much more in the full interview, including a discussion of Nudge: Improving Decisions about Health, Wealth and Happiness (Yale University Press, 2008), a best-selling book that Thaler wrote with US legal scholar Cass R. Sunstein (born 1954).

Douglas Clement, editor of The Region, interviewed Professor Thaler on 17 July 2013, before the 2013 Nobel laureates in economics were announced.