UPDATE 8/8/2011: Craig Newmark ran all 50 states and was kind enough to send me the results. Bottom line is a flimsy correlation 0.211, which is short of statistical significance. We also get an R-squared figure of .045 which is “not too impressive.” While it ‘aint zero, I gotta come up with something better than this really make my case…
One of my favorite topical pinatas is the romantic notion that if we just put the “smart” people in charge, they can solve our problems (FYI, romantics usually say “smart” when they mean educated). My feeling is more aligned with William F. Buckley, who said: “I’d rather entrust the government of the United States to the first 400 people listed in the Boston telephone directory than to the faculty of Harvard University.”
While finding super-geniuses with passionate yet non-sensical beliefs is like shooting fish in a barrel, (a favorite bit of nonsense here) it’s always nice to run across some data that appears to confirm what Buckley knew.
Economist Craig Newmark’s post Sometimes, formal education just doesn’t seem to pay discusses a Chronicle of Higher Education study that tracked the level of education of state legislators. Newmark referenced a Cal Watchdog post that indicated a negative correlation between education and economic freedom:
When comparing the top and bottom 15 states to the Mercatus Center’s Freedom in the 50 States Economic and Fiscal Freedom Indicators, the statistics show that the bottom 15 educated states have a higher economic freedom and fiscal freedom score than the 15 most educated states.
Given this, I decided to run the numbers to see if there was a correlation between “smartness” and state deficits (gap as % of 2010 general fund), as I found with “blueness” and fiscal irresponsibility.
Because the folks at Chronicle.com absolutely refuse to provide us with raw data — just a “cool” (NOT!) Flash interactive map — I decided not to spend a ton of time trying to key in information they MUST only present as pixels. Instead, I took the top and bottom five states (listed but can’t be easily copied/pasted grrr.) These ten states were aligned with 2010 state deficit data. Thankfully, the two biggest states are included (NY and CA alone capture 20% of the entire population of the USA).
The result? A small yet “statistically significant” positive correlation coefficient of .25. The smarter the legislators, the bigger the deficits.
Is this predictive? Who knows? Is it surprising? Not at all.
While I have the most polar data and a very large population sample represented, If anyone wants to grab the information for the other states and send me the data, I’ll be happy to run it.
If someone wants to rebut this post please, please, PLEASE have a better argument than “other things correlate too! — look!” I already know my correlation here is not 1.0…
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“Deserve” is a word I hear frequently from my progressive friends (but rarely/never from an economist). The word is usually conjured up as a straw man argument. “Those millionaires actually believe they deserve that money!” etc. Sometimes it’s used as Robert Reich did here as in the rich “don’t deserve it.”
Even in unguarded moments, I do hear millionaires use the word “lucky” frequently, but “deserve” — never. Those with the tragic worldview don’t have any kind of evaluation of “cosmic deservedness” present in their mindset. The presumption of knowledge of what the cosmos desire is opaque at best and non-existent at worst.
Regardless, the word bubbles up in my brain every time I see scenes like this from Greece. Consider the retirement benefits of these militant beneficiaries of monopoly rents as described by the New York Times:
(emphasis mine)
“Vasia Veremi may be only 28, but as a hairdresser in Athens, she is keenly aware that, under a current law that treats her job as hazardous to her health, she has the right to retire with a full pension at age 50.”
“…it is still difficult to explain to outsiders why the Greek government has identified at least 580 job categories deemed to be hazardous enough to merit retiring early — at age 50 for women and 55 for men.”
“As a consequence of decades of bargains struck between strong unions and weak governments, Greece has promised early retirement to about 700,000 employees, or 14 percent of its work force, giving it an average retirement age of 61, one of the lowest in Europe.”
“…it also covers radio and television presenters, who are thought to be at risk from the bacteria on their microphones, and musicians playing wind instruments, who must contend with gastric reflux as they puff and blow.”
“Deserve” indeed…
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I’ve blogged several times about the Gallup Presidential Center site, where viewers can compare the approval levels of any/all post_WW2 presidents for the same point in their presidency.
The parallels between Reagan and Obama are striking (both had to contend with really bad economies, and the resulting bad poll numbers) — yet their philosophies toward economic/growth and the role of government diverge so greatly, It’s compelling to see how the results of their policies are ultimately are graded by the electorate.
It appeared back in April that Obama’s ratings were about to dive below Reagan’s but the killing of Bin Laden provided Obama with a deserved reprieve. That reprieve has now ended:
Despite this minor 4 point delta (47/43), I claim it’s likely Obama is now destined to be a permanent laggard. Given the current economic forecast, (and the Gipper’s decided and extended upward trend) my prediction is that if Obama doesn’t catch up by the end of August, he simply won’t be able to achieve Reagan-parity again. Ever.
Despite the profound demographic changes that have occurred which shift the Obama’s approval curve in it’s entirety upward, it’s not enough to compensate for the inherent economic drag created by policies that focus on collectivism vs. growth. This chart from the minneapolis fed tells the resulting tale:
Arguments are made that our financial asset price bubble recession was inherently “worse” than the one in ’82 (so why the original prediction of 6.5 percent unemployment in Q2 2011? hmmmm.) This line of thought is usually stressed by those who conveniently forgot, or weren’t alive to see realtors picketing outside banks in the 1980’s. I sure didn’t see those unemployed picketers in this round.
There are valid points made that unlike Reagan, Obama did not have the same fiscal bullets available to him (largely thanks to the big government/deficit inducing policies of Bush) and I’d be remiss not to endorse that sentiment. Guns, AND butter, AND tax cuts during booms don’t leave you much to work with when the recession hits — barely a trillion dollars in “stimulus.”
Regardless the focus on non-shovel-ready entitlement spending and wholesale governmental monopoly generation (student loans, healthcare, labor unions, etc) are the path to efficiency losses, entrepreneurial demoralization and resulting economic malaise.
I’ll quote again from econ text Public Finance and Public Policy. By MIT’s Jonathan Gruber:
“Correspondingly, a large literature finds that when state-owned companies are privatized, efficiency improves dramatically, and a smaller company is required to produce the same level of output. Mueller (2003) lists 71 studies that compared the performance of state-owned companies: in only 5 of these studies did state-owned companies outperform their counterparts in terms of efficiency.”
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Just read an intriguing quote from Richard Morrill, a Seattle demographer and University of Washington geography professor emeritus. Because there is a generation who thinks this kind of stuff matters beyond all else — I encourage all to refer to his impressive academic credentials. Morrill has had stints at several “smart” organizations including Dartmouth, the Guggenheim, the University of Glasgow, the American Council of Learned Societies, and many other admirable institutions.
The Seattle Times piece Seattle’s households far from average, contains a quote from Morrill that jumped out at me, and I’d argue flies in the face of the common, judgmental anti-suburb mindset. You know — the one that says we all should move into ant-farms. Here’s what Morrill had to say (emphasis mine):
Increasingly across the city, town homes and condos have replaced single-family homes and, “we are seeing fewer and fewer housing (units) suitable for families with children,” he said.
Gee, that market segment consisting of families with children not only overwhelmingly desire single family homes, but it’s also the “suitable” choice according to the smart set? Who woulda thought?
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…and buttresses my opinion that retirement may be best enjoyed later in life.
There’s been a ton of discussion online of late regarding the lack of a decent ROI provided by many four-year degrees. This recently from the New York Times:
Young graduates who majored in education and teaching or engineering were most likely to find a job requiring a college degree, while area studies majors — those who majored in Latin American studies, for example — and humanities majors were least likely to do so. Among all recent education graduates, 71.1 percent were in jobs that required a college degree; of all area studies majors, the share was 44.7 percent.
I’ve written before about how for many high school grads, pursuing an expensive degree in an esoteric less-marketable field may be taking the equivalent of an early retirement which could result long-term in a suboptimal investment of time and money. This implies that the result may be a net reduction in overall happiness. It was not intended to imply that one should not study these topics, or pursue these passions, just that for some, it might be better put off to later in life. And in many cases, may even be free(!).
The genesis of my original post was the Yale study that concluded that starting a career during a recession can “damage salary for decades.”
Compare the following two scenarios:
- Spend X dollars at an expensive four year university studying Lithuanian folk dancing (2 years of dedicated study).
- Graduate, discover that there are no jobs in desired field.
- Get job as admin at accounting firm, pay rate Y get professional and salary enhancements at annual rate Z
- Retire at age 65 with (fingers crossed) cash in bank, amount Q
OR
- Spend .5X dollars getting accounting degree at state school.
- Graduate, discover that there are jobs in pursued field.
- Get job as accountant pay rate 2Y get professional and salary enhancements at annual rate 1.2Z
- Retire at age 55 with cash in bank, amount 1.4Q
- Spend 10 years studying (and performing!) Lithuanian folk dancing and/or hanging with the grandkids.
Spreadsheet attached.
Potential holes in my logic:
- Lithuanian folk dancing as a red herring. Many academic fields expand the mind in ways that are valuable and life-enhancing and are best not put off. Money isn’t everything.
- One may be dead at age 50 and any opportunity to pursue desired passion would be tragically lost. (Likely a non-issue as “passions” at age 20 usually prove to be not long-lived. My guess is true academic passions are arrived at later in life.)
- The personal discount rate may indicate that 2 years now is superior to 10 years later.
- There are dance jobs available, and will be pursued. Possibly at great financial gain. (this is contraindicated by experience, as the vast majority of people I know with esoteric degrees rapidly abandon (or never pursue) related work.
The only nonsensical argument I’ve heard so far is the magical thinking that rates Y, Z, and Q are at-large the same in either case. If one needs evidence to reinforce my (common-sense?) line of thinking, Georgetown University’s Center on Education and the Workforce has just published a study that makes my case. This study also reinforces the opinion that econ major Ben Stein put forth in his 1996 New York Times editorial.
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In his somewhat misleadingly titled post, my friend Steve breathlessly reports that a small survey of 299 college professors shows them to mostly vote Democratic. Whaaaa…? College professors mostly “D”s? Stop the presses(!?)
While I suppose it’s mildly interesting those surveyed happen to be professors of Economics, they are hardly representative of the 15,000 economists in the United States, or the millions who have formally studied how goods and services are created and allocated. It’s also not well aligned with my post (which he claims to be refuting) where I address ideology and worldview (constrained vs unconstrained), not political party. There are many members of both “Sowellian” worldviews in any single party. Even a staunch capitalist/individualist like me can make the case that I have checked the “D” box more often on ballots than I have the “R” box.
If you step outside the ivory towers of academia and strive for a representative, broad sampling of those trained in Economics, a different story emerges. When you go for real statistical significance — of say 2,000 samples — and include controls for a number of personal background variables the data is much clearer and aligned with what common sense would tell an econ major. I’ll let the New York Fed report speak for itself:
…those who took more economics classes or who majored in economics or business were more likely to be members of the Republican party and less likely to join the Democratic party. Those findings hold even after controlling for the higher salary, higher equity in real estate holdings, and earning a graduate degree.
For example, taking five economics courses is associated with an eight percent decrease in the likelihood of joining the Democratic party and more than a 10 percent higher chance of joining the Republican party. These marginal effects are large relative to the unconditional means reported in Table 1. For example, approximately 40 percent of respondents report being members of the Republican party, so a 10 percentage point increase for 5 economics courses represents a 25 percent increase…
Following previous research on the relationship between studying economics and attitudes on public policy issues (Allgood and Walstad 1999; Becker, Walstad, and Watts 1994), we drew several items on public policy issues from a survey of 464 American Ph.D. economists Alston et al. (1992). Becker, Walstad, and Watts (1994) sent a survey of 28 items to national samples of economic educators, secondary economics teachers, secondary [social studies] teachers not specializing in economics, and journalists, and found that the responses of economic educators and economics teachers were closer to responses of economists in the Alston et.al.
“Courses” refer to formal economics educational attainment. I assume those who have pursued a “self-taught” route toward economics selective/partial-literacy would only find their pre-existing world-views pleasantly reinforced.
As I’ve always said, I admit I have a slanted worldview, but it’s one based on formal education. You don’t spend years studying a discipline based on scarcity and find yourself believing that you can magically legislate away competition for housing or medical care.
On a related note, I encourage all to read this article which summarizes the happenings at a 2007 American Economics Association (AEA) convention. The ideological bent amongst the professional economists was palpable there, and aligns with what I would have anticipated. Not Democrat, not Republican, just Constrained.
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I spend a lot of time banging away on the keyboard producing not-always-complimentary thoughts regarding our President’s economic policies. I’ve posted a bit about his approval rating as well.
I would be remiss to not note a job well done by Obama’s intelligence gathering team and his Navy Seals for their execution of Osama Bin Laden. You don’t see much (any?) postings here about Obama not taking the killing of our enemies seriously. I’d like to take the time to comment that I have for some time been grateful to our President for his hard work and success in this arena.
In addition, I think he should bask in the deserved spike in his approval rating that is due to result from this recent awesome and successful effort.
To Bin Laden, the only line I’d like to deliver at this stage was best said by Helen Hunt.
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Nothing like a little perspective…
World Bank economist Branko Milanovic provides us with evidence which appears to refute the romantic worldview that 1930’s dustbowl poverty is pervasive in the world’s most prosperous country.
Some of us have been running this chart/distribution natively in our brains, glad to see the empirical analysis backs us up.
I guess for the professional hand-wringers, data can be an inconvenient thing.
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This common, romantic statement recently surfaced in a post by J. Bradford DeLong and aligns with my other favorite, “the government is us.” Apparently (unlike the University of Washington) they don’t teach Public Choice classes at Berkeley. If they did, DeLong would likely hold a more enlightened view thanks to the work of Tullock, Buchanan et al.
I’m a bit fuzzy as it was 1982 when I was first exposed to their works, but here are a few references that capture what both common sense and their scholarly efforts provide us:
This from Buchanan: (emphasis mine)
Initially, the work of economists in this area raised serious doubts about the political process. Working simultaneously, but independently, Kenneth Arrow and Duncan Black proved that democracy, interpreted as majority rule, could not work to promote any general or public interest. The now-famous ‘impossibility theorem’, as published in Arrow’s book Social Choice and Individual Values (1951), stimulated an extended discussion. What Arrow and Black had in fact done was to discover or rediscover the phenomenon of ‘majority cycles’, whereby election results rotate in continuous cycles with no equilibrium or stopping point. The suggestion of this analysis was that majoritarian democracy is inherently unstable.
Gordon Tullock, who wrote a seminal paper in 1959 using the example of farmer voters, each of whom wants to have his local road repaired with costs borne by the whole community. Tullock showed that majority rule allows for coalitions of such farmers to generate election results that impose unjust costs on the whole community while producing inefficiently large outlays on local roads.
In the context of the issue at hand — this on confiscatory reallocation:
An illustrative example is provided in inheritance and estate taxation. In the standard discussion of fiscal reforms, merely to raise issues concerning this tax is to choose sides. And the choosing is not difficult. Those persons who identify themselves with favorable asset positions tend to argue persuasively against increases in and for reductions in such taxes. Those other persons who cannot or do not make this identification argue, with equal persuasiveness, that these taxes should be made confiscatory. The collective decision process becomes strictly analogous to a zero-sum game, and no reasoned discussion of an efficient or optimal scheme or asset-transfer taxation can possibly take place.
Daniel Klein on “The People’s Romance:”
The point here is that nested within the conventional view that government is not a mammoth apparatus of coercion is the tenet that society is an organization to which we belong. Either on the view that we constitute and control the government (“we are the government”) or on the view that by deciding to live in the polity we choose voluntarily to abide by the government’s rules (“no one is forcing you to stay here”), the social democrat holds that taxation and interventions such as a minimum- wage law are not coercive. The government-rule structure, as they see it, is a matter of “social contract” persisting through time and binding on the complete collection of citizens. The implication is that the whole of society is a club, a collectively owned property, administered by the government.
Murray Rothbard, (PhD Economics, Columbia) with a no-holds-barred approach:
…it is common to hear sentiments expressed which violate virtually every tenet of reason and common sense such as, “we are the government.” The useful collective term “we” has enabled an ideological camouflage to be thrown over the reality of political life. If “we are the government,” then anything a government does to an individual is not only just and untyrannical but also “voluntary” on the part of the individual concerned. If the government has incurred a huge public debt which must be paid by taxing one group for the benefit of another, this reality of burden is obscured by saying that “we owe it to ourselves”
The genesis of this post is The Rich Man Who Can’t be Taxed.
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Apologies to Harold Ramis.
I’ve written in the past about how Obama and Reagan’s approval ratings have compared at the same point in their presidencies. At the beginning of the year I showed how Obama had a comfortable lead, and I asked who wanted to bet me that Reagan would pass him. No takers. I assume that’s because I have no readers, not because the Obama enthusiasts lacked confidence (well, maybe one was afraid…)
Regardless, I am getting ahead of myself and am prematurely announcing that Reagan will take the lead, and is likely to hold it — forever. See below, live chart available here.
How did this happen? Phil Gramm explains it all here.
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