If You Haven't Switched to the New Conversable Economist Website Yet ...

 If you have been checking this Conversable Economist website and wondering at the lack of recent posts, or if you had been signed up to receive posts by email and have been wondering where they went, the answer is that about a month ago I switched the Conversable Economist blog from Blogger to WordPress. The new web address  http://conversableeconomist.wordpress.com. The 2500 or so archived posts from the last decade have been transferred over, too. All future posts will be added at that website.

The proximate reason for the shift is that Google made a decision to stop supporting Feedburner, which was the software that allowed people to sign up to receive emails about each post. There are subsidiary reasons for the shift, as well, but it doesn't feel worth getting into the minutiae here. I had been feeling for awhile as if the shift might be a good idea, and when Blogger started dropping features that were important to me, it gave me a nudge to go ahead. 

At the Blogger website, I had about 3,000 readers signed up to receive an email of each post. Of course, I don't want to lose you. I think that the names of past email subscribers have been successfully transferred over to WordPress. But of course, there is also a hitch. Many email subscribers have mentioned to me that they like getting the entire post in their email--not just a link to the post. This is still possible! But to receive the full post in your email, you need to sign up for emails via WordPress at the new site.  Overall, if you stop getting emails about new posts, please go to the new home of the blog and sign up there.

One final change perhaps worth noting is that I have added a "Donation" button at the upper right of the new site. Blogger has been free to use. WordPress is not particularly expensive, but it's not free, either. Also, the blog has been for an uncompensated hobby for me during the last decade.  If you are in a financial position to make a donation, it would be a genuine help: in particular, it would help me stop thinking about moving the blog to a subscription model, and instead keep it freely available--which is my preference. 

Thanks for following my musings as the Conversable Economist,

Timothy Taylor

Learned Hand: "The Spirit of Liberty is the Spirit Which is Not Too Sure That It is Right"

Learned Hand is often on the short list of greatest American judges who never made it to the US Supreme Court. In 1944, during World War II, he delivered a speech on "The Spirit of Liberty" to a vast crowd in Central Park in New York City--with particular attention to the estimated 150,000 newly naturalized Americans attending the event. 

His speech contains one of my own favorite comments: "The spirit of liberty is the spirit which is not too sure that it is right ..." Hand viewed liberty within an ordered society not as the freedom of isolated individuals to act as they wish, but as part of a shared concern for others. He also viewed freedom as an ideal toward which America continually strives, rather than an accomplished reality. He said: 

What do we mean when we say that first of all we seek liberty? I often wonder whether we do not rest our hopes too much upon constitutions, upon laws and upon courts. These are false hopes; believe me, these are false hopes. Liberty lies in the hearts of men and women; when it dies there, no constitution, no law, no court can save it; no constitution, no law, no court can even do much to help it. While it lies there it needs no constitution, no law, no court to save it.

And what is this liberty which must lie in the hearts of men and women? It is not the ruthless, the unbridled will; it is not freedom to do as one likes. That is the denial of liberty, and leads straight to its overthrow. A society in which men recognize no check upon their freedom soon becomes a society where freedom is the possession of only a savage few; as we have learned to our sorrow.

What then is the spirit of liberty? I cannot define it; I can only tell you my own faith. The spirit of liberty is the spirit which is not too sure that it is right; the spirit of liberty is the spirit which seeks to understand the minds of other men and women; the spirit of liberty is the spirit which weighs their interests alongside its own without bias; the spirit of liberty remembers that not even a sparrow falls to earth unheeded; the spirit of liberty is the spirit of Him who, near 2,000 years ago, taught mankind that lesson it has never learned, but has never quite forgotten; that there may be a kingdom where the least shall be heard and considered side by side with the greatest.

And now in that spirit, that spirit of an America which has never been, and which may never be; nay, which never will be except as the conscience and courage of Americans creates it; yet in the spirit of that America which lies hidden in some form in the aspirations of us all; in the spirit of that America for which our young men are at this moment fighting and dying; in that spirit of liberty and America I ask you to rise and with me pledge our faith in the glorious destiny of our beloved country.

Last Post Here: Moving From Blogger to WordPress

The Conversable Economist blog has been based on the Google Blogger platform for 10 years, since I started the blog in May 2011. However, this will be the last post here on Blogger. I am transferring the blog over to WordPress, at http://conversableeconomist.com. The 2500 or so archived posts from the last decade have been transferred over, too. All future posts will be added at that website.  

The proximate reason for the shift is that  Google made a decision to stop supporting Feedburner, which was the software that allowed people to sign up to receive emails about each post. I've got about 3,000 readers signed up to receive an email of each post, and I didn't want to lose them. I think that their names have been successfully transferred over to WordPress, but if you signed up in the last 2-3 weeks, it's possible that your name did not get added to the WordPress list.  If you stop getting emails about new posts, please go to the new home of the blog and sign up there. 

There are subsidiary reasons for the shift, as well, but it doesn't feel worth getting into the minutiae here. Overall, it feels to me as if WordPress has more features that are easier to access. 

One change perhaps worth noting is that I have added a "Donation" button at the upper right of the new site. Blogger has been free to use. WordPress is not particularly expensive, but it's not free, either. Also, my wife and I are paying for any sins we committed in  past lives with multiple years of college tuition purgatory. If you are in a financial position to make a donation, it would be a genuine help: in particular, it would help me stop thinking about moving the blog to a subscription model, and instead keep it freely available--which is my preference. 

Many thanks to Cameron Payne for her work in setting up the new home for the blog and for transferring the archives and mailing lists.

Interview: Amartya Sen on a Bicycle

Christina Pazzanese interviews 87 year-old Amartya Sen (Nobel '98) for the Harvard Gazette (June 3, 2021), with an emphasis on the long arc of his life and career (‘I’ve never done work that I was not interested in. That is a very good reason to go on.’ June 3, 2021). The interview is full of interesting nuggets, like the time he co-taught a Harvard course on social choice theory with Kenneth Arrow and John Rawls. One point that caught my eye was Sen's passion since his boyhood for bicycling: 

I was a bicyclist of quite an extreme kind. I went everywhere on bicycles. Quite a lot of the research I did required me to take long bicycle trips. One of the research trips I did in 1970 was about the development of famines in India. I studied the Bengal famine of 1943, in which about 3 million people died. It was clear to me it wasn’t caused by the food supply having fallen compared with earlier. It hadn’t. What we had was [a] war-related economic boom that increased the wages of some people, but not others. And those who did not have higher wages still had to face the higher price of food — in particular, rice, which is the staple food in the region. That’s how the starvation occurred. In order to do this research, I had to see what wages people were being paid for various rural economic activities. I also had to find out what the prices were of basic food in the main markets. All this required me to go to many different places and look at their records so I went all these distances on my bike.

And when I got interested in gender inequality, I studied the weights of boys and girls over their childhood. Very often, it would happen that the girls and boys were born the same weight, but by the time they were five, the boys had — in weight for age —overtaken the girls. It’s not so much that the girls were not fed well — there might have been some of that. But mainly, the hospital care and medical treatment available were rather less for girls than for boys. In order to find this out, I had to look at each family and also weigh the children to see how they were doing in terms of weight for age. These were in villages, which were often not near my town; I had to bicycle there. ...

When the Nobel committee after you get your prize asks you to give two mementos or two objects connected with your work, I chose two. One was a bicycle, which was an obvious choice. And the other was a Sanskrit book of mathematics from the fifth century by Aryabhata. Both I had a lot of use for.

Also, although I do not expect to be saying anything similar about my ongoing intellectual in 2047, when I have every intention of turning 87, one cannot help but appreciate Sen's ongoing zest for what he does. 

I’m planning to do a book on gender. There should be one in about a year or two. There are so many different problems people get confused that I thought I might put together the problems that make up gender disadvantage. It will draw on prior research, but there will be a number of new things in it. ...

People have given up hope that I might retire. But I like working, I must say. I’ve been very lucky. I’ve never done, when I think about it, work that I was not interested in. That is a very good reason to go on.

I’m 87. Something I enjoy most is teaching. It may not be a natural age for teaching, I guess, but I absolutely love it. And since my students also seem not unhappy with my teaching, I think it’s a very good idea to continue doing it.

For another interview with Sen, this one from summer 2020, see "Interview with Amartya Sen: 
Economics with a Moral Compass?" (August 5, 2020). 

From Pandemic to Digitalization to Productivity?

We know that the pandemic caused people and firms to make much more widespread use of digital technologies: working from home, ordering on-line, tele-medicine, education from K-12  to college delivered on-line, and so on. Indeed, it seems likely that this surge of digital activity is also providing an incentive for substantial investments in physical capital, intangible capital (like software), and complementary human skills to make use of these investment. Might these shifts in patterns and investments provide a boost to improved productivity growth in the next few years? 

The Group of Twenty has published a report (prepared by staff at the IMF) on these subject: "Boosting Productivity in the Aftermath of COVID-19" (June 2021). The report suggests the possibility that while many people will be better off because of the shift to digital technologies, these gain in well-being may not be well-reflected in conventional economic statistics like GDP. 

It's worth noting that nothing in the report seeks to put a happy face on the economic side of the pandemic experience. Unemployment has soared. Worker skills have been unused, and in some cases will have depreciated. Firms and communities have suffered, many of them grievously. As the report notes: "For instance, the so called `jobless recoveries' from previous US recessions were driven by contractions in routine occupations, which account for about 50 percent of total employment, that are never recovered. More recently, the COVID-19 shock has also hit sectors that are more vulnerable to automation much harder and lowered the share of low-skilled and low-wage workers in the workforce. As we look ahead, the productivity and earnings of low-skilled workers that have lost their jobs in sectors vulnerable to automation are therefore at risk ..."

But it is also true that use of digital technologies has increased, in ways that seem likely to persist, at leas in part, as the pandemic recession faced. Indeed, this shift to heavier use of digital technologies is one reason why stock prices of leading tech companies have done so well in the last year or so. Here are a couple of interesting illustrations from the report. The first shows the pattern of new US patent applications related to remote work and e-commerce, and how it has risen. The second shows the results of a survey of business executives, emphasizing that for most of them, the pandemic recession led to heightened efforts to digitize and automate their operations. 

The report discusses the extent to which this shift may increase productivity: for example, the reallocation of resources away from less-productive to more-productive firms should boost productivity. The report expresses cautious and hedged optimism about the chances for productivity: for example, "In sum, the impact of reallocation so far looks beneficial for productivity, but much remains to be learned and it is associated with several concerns."

The report also raises the difficult question of productivity measurement. Workers who have greater flexibility to work from home may benefit, for example, from less time spent commuting. But shorter commutes don't provide a direct boost to JEP. If I have groceries delivered more often, but my purchase of groceries is pretty much the same, the benefits to me may not be well-captured by conventional economic statistics. If I see my doctor on-line, or children see a K-12 teacher online, or college students attend classes remotely, there will be a mixture of effects on the quality of what is provided and the costs of providing it that will not translate in a simple way into productivity statistics. These kinds of issues have been lurking in the productivity statistics for years, but the economic after-effects of the pandemic may strengthen them.

Mismeasurement of the digital economy has been an often-cited contributor to the prolonged slowdown in measured productivity growth prior to the COVID-19 pandemic. As the productivity slowdown occurred alongside a fast pace of innovation in the hard-to-measure digital economy, a commonly mentioned contributor to the measured slowdown is the inability to capture well in price statistics and deflators the increases in convenience, varieties, free online products, and lower quality-adjusted prices that arises from the digital economy. ... Looking forward, if the pandemic accelerates growth in the digital economy, its contribution to mismeasurement may become more salient. For example, greater prevalence of remote work and online interactions across borders may reduce travel costs, which, if not properly captured, may lead to an underestimation of productivity growth. A shift to digital and peer-to-peer platforms could also bring added convenience, making it feasible to access an increasing number of varieties and lower prices, which, if not properly accounted for, would also result in mismeasurement.

Finally, it's worth noting that the pandemic will affect future productivity growth in a number of ways, not just via the effects on digitalization. For example, many students around the world have experienced a severe disruption of their education. The report notes: 

School closures affected 1.6 billion learners globally at the peak of the pandemic and continue to disrupt learning for millions. These disruptions had disproportionately adverse impacts on schooling in economies with preexisting gaps in infrastructure (such as access to electricity and internet), which constrained their ability to implement remote learning. Girls and learners in low-income households faced disproportionately greater risk of learning losses as they lost a boost from peer-effects that occur in school and may have been less likely to have parental support for remote learning. Women may also have needed to take on additional caregiving and teaching responsibilities while at home, putting them at a disadvantage in the labor market. These interruptions to learning and work will likely set back human capital accumulation—with such effects spread unevenly across generations, genders, and income levels, and with adverse implications for longer-run productivity.

The Social Nature of Government Actions

Economics famously begins with an idea of individuals pursuing their own interests, and then discusses both the positive and negative dynamics that can emerge. But there has been a long-time pattern in human affairs, going back to the days of the hunter-gatherers, that certain outputs have been produced socially--by families, communities, and in modern times also by government. Emmanuel Saez explores this issue in his American Economic Association Distinguished Lecture at the virtual AEA meetings last January on the subject, "Public Economics and Inequality: Uncovering Our Social Nature" (AEA Papers and Proceedings 2021, 111: 1-26, subscription required, but freely available at Saez's website here). Saez writes: 

[O]ur social nature, absent from the standard economic model, is crucial for understanding our large modern social states and why concerns about inequality are so pervasive. Taking care of the young, sick, and elderly has always been done through families and communities and likely explains best why education, health care, and retirement benefits are carried out through the social state in today’s advanced economies. Behavioral economics shows that we are not very good at solving these issues individually, but descriptive public economics shows that we are pretty good at solving them socially. ...  Even though an individual solution through markets is theoretically possible, it does not work well in practice without significant institutional or government help. Human societies are good at providing education, health care, and retirement and income support even though individuals are not.

Although Saez offers a brisk overview of earlier human societies, his main focus is on what he calls ""the rise of the social state in the twentieth century:" He writes: 

Perhaps the most striking fact in modern economies illustrating both our social nature and concerns for inequality is the size of government and the large direct impact it has on the distribution of economic resources. In advanced modern economies, we pool a large fraction of the economic output we produce through government. In the richest countries today, taxes generally raise between 30 and 50 percent of national income and are used to fund not only public goods needed for the functioning of the economy but also a wide array of transfers back to individuals, both in cash and in kind. Even though modern economies generally allocate the fruits of production to workers and owners through a capitalistic market system with well-defined property rights, as societies, a significant fraction of market incomes, typically between one-third and one-half, is shared (that is, effectively “socialized”) through government.

Here's are a couple of figures showing the rise in government spending in advanced economies in the 20th century:

(In the figure "Regalian public goods" is a category that Saez defines as the basic roles of a very limited government, including defense, law and order, administration, and infrastructure).

As Saez notes, the US economy is near the lower end of this range--but it's still a substantial share. I would add that a significant part of the difference is that the US has kept a large portion of its health care spending in a heavily regulated private sector. Saez also notes that there is relatively little cross-border redistribution, and when it happens, it's often in the form of disaster relief. People seem to define their circle of sharing within their country, or to some extent within a lower-level jurisdiction like a state or city, 

Again, the big four social categories on which Saez focuses are education, retirement benefits, health care, and income support. To get a sense of the tone of his argument, here are a few of his comments on these categories: 

Historically, mass education is always government driven through a combination of government funding (at all levels including higher education) and compulsory schooling (for primary and then secondary education). ... 

Before public retirement programs existed, a large fraction of the elderly was working (80 percent of men aged 65 or older were gainfully employed in the United States in the late nineteenth century ...). The elderly who could no longer work enough to support themselves had to rely on family support. Public retirement systems were a way to provide social insurance through the state instead of relying on
self-insurance or family insurance. ... 

[U]niversal health insurance creates significant redistribution by income and also, of course, by health and health-risk status. One important question is why health-care quality is the same for all in such universal health-care systems (at least as a principle, not always realized in practice). Why isn’t health insurance offered in grades, with cheap insurance covering only the most cost-effective treatments. Probably because humans are willing to spend a lot of resources to save a specific life, that is, an actual person with a condition that can be treated. This is likely a consequence of our social nature shaped by evolution: taking care of the sick or injured was helpful for group survival. This makes withholding treatment to the poorly insured socially unbearable. ...

People make mistakes in health- care utilization and treatment choices. Copayments and deductibles lead consumers to reduce demand for high-value care. This may explain why universal health-care systems have low copays and deductibles and why health-care decisions for patients are made primarily by health-care professionals. Like for education, the difficulty for users to understand and navigate health-care choices implies that the market does not necessarily deliver efficiency. In sum, the problem of health care is also primarily resolved at the social level rather than the individual level. ... 

Everywhere, there is strong social reprobation against “free loaders” who could work and support themselves but decide to live off government support This is why income support is concentrated among groups unable or unexpected to work, such as the unemployed, the disabled, and the elderly.

As Saez discusses, the fact that advanced societies have decided that government provision will play such a large role in these four areas is rooted in other social judgements: for example, judgements about the fairness and importance of widespread education for children, judgements about whether the elderly should need to work (and how to define who is "elderly"), judgements about whether the sick and injured will have access to care, and judgements about which groups of people deserve income support and under what conditions. Of course, this kind of social consensus can shift. We saw a shift in the 1980s and 1990s about whether single mothers with small children were expected to work, or not. As another example, back in the 1980s, 50-55% of Americans in the 16-19 age bracket were in the labor force; now, it's about 35%. A substantial part of that shift is in our sense of what people in that age group should be doing with their time. Saez writes: 

However, the social state also intentionally reduces labor supply by design through various regulations: child labor prohibitions and compulsory education limit work by the young, retirement benefits sharply reduce work in old age, and overtime hours-of-work regulations and mandated paid vacation (for example, five weeks in France) reduce work across the board. This implies that labor supply should be seen partly as a social choice, with society having disutility of labor for the very young, the old, and very long hours with no vacation break.

There's much more in the lecture itself. But the main theme deserves attention. Saez writes: "Therefore, social organization does seem to come naturally to us. We can easily take a group perspective and act accordingly." Understanding the group perspective and the social organizations that form as a result seems like an important tool for understanding what we expect from government--and what some of the barriers are to redesigning government programs to operate more effectively 

How to Improve College Completion Rates: The Time Commitment Problem

The US higher education system does an OK job of enrolling US high school students. About 70% of US high school graduates enroll in a two-year or four-year college. But the higher education system does a poor job actually producing graduates who have completed college. About half of students who enroll at a four-year college graduate within six years; the completion rate is lower for two-year colleges. If the goal of getting more high school student to attend college is to be a meaningful one, it needs to be accompanied by efforts to raise the college completion rate. 

Philip Oreopoulos discusses these issues in  a review article "What Limits College Success? A Review and Further Analysis of Holzer and Baum’s Making College Work" (Journal of Economic Literature 2021, 59:2, 546–573, subscription required). As Oreopolous details, Holzer and Baum provide an overview of steps to encourage college enrollment and completion. In particular, some of the steps to encourage college enrollment can be fairly low-cost, like requiring high school students as part of their coursework to fill out at least one college application and to take the SAT or ACT, and having states dol a better job of communicating about available financial aid to low-income households. 

Here, I want to focus on policies more directly aimed at improving college completion. For example, one approach discussed in the Holzer and Baum book is a comprehensive set of support services for first-year students. Oreopoluos describes perhaps a prominent example of such a program this way (citations omitted): 

Exhibit A for demonstrating how to improve college access and success is the Accelerated Study in Associate Program (ASAP). MCW [Making College Work] and many other researchers point to it as the central example worth considering. ASAP provides incoming freshman an envelope of comprehensive support services, including tutoring, counseling, career advising, free public transportation passes, and funding for textbooks. Taking advantage of the potential benefits of more structure, students are required to meet regularly with their advisor and tutors, attend a student success seminar, and enroll full-time to participate. The program was experimentally tested on low-income students with remedial needs at CUNY in colleges where the three-year graduation rate was only 20 percent. ASAP doubled graduation rates at CUNY, and similar impacts on persistence were replicated in Ohio ....

Among the evidence we have, comprehensive support programs such as ASAP offer the most promise for improving college completion, at least among community college freshman from disadvantaged backgrounds. The impact of ASAP is the largest I know of, compared to other college program evaluations ... The program represents an impressive “proof of concept” for how much we could help if we offered a gamut of student support and made participation mandatory. As impressive as the results are—doubling completion rates from 20 to 40 percent— they also highlight serious policy limitations. Even with a full range of proactive mandatory support services and financial incentives to stay engaged, 60 percent of ASAP participants still did not complete their degrees. The best program we know, which ... many administrators feel is unaffordable, still fails to help more than half of its target population.

One problem underlying low college completion rates is that the incoming students lack necessary skills to do college-level work. Such students may be admitted to college but then required to take remedial classes before they can begin the classes that lead to their desired degree. Oreopoulous describes the tradeoffs this way: 

Many community colleges provide open access, meaning that they admit any applicant with a high school degree into at least a general studies program. This level of access increases opportunity for all graduating high school seniors to pursue higher education at a relatively low cost. The downside is that many entrants are not well prepared to handle the academic standards of their program. The same colleges therefore often require entrants to take remedial mathematics and English courses before being allowed to take courses that would contribute toward a degree or certificate in their desired program. “About 68 percent of students entering public two-year and 40 percent of those entering public four-year colleges in 2003–2004 took at least one remedial class by 2009” (p. 21). Freshmen find themselves feeling stuck working on subjects they covered earlier and concerned about the longer road they face to completion.

College dropout rates for those taking remediation courses are shockingly high—Jaggars and Stacey (2014) report a 72 percent dropout rate among community college students who take a remedial education course. Adams et al. (2012) use data from 33 participating states and find a 65 percent overall dropout rate by sixth year for students taking remedial courses. Those who require remediation are obviously less prepared and less likely to graduate compared to those who don’t require it, but a consensus of policy researchers agree that reform is needed to avoid discouraging these marginal students facing long delays to complete their degrees.

There may be ways to make such remedial classes feel like less of a hurdle to students: for example, by figuring out ways that students can at least start their desired course of study at the same time as the remedial course, and thus do them side-by-side, rather than being required to start their college experience completely focused on remedial courses. Of course, the better answer would be for high schools to produce fewer graduates who need remedial courses.

Oreopolous also focuses on  theme that I have often found myself emphasizing to prospective or newly-arrived college students: making the necessary time commitment. As he writes: "Many college administrators and faculty recommend two or three hours of study for each hour a student spends in class, implying 25 to 35 hours of effort outside of class for someone enrolled full-time (there is a reason
they call it “full-time” enrollment)." However, a typical college student actually studies about 15 hour/week (or so they say), which  means that a sizeable minority study less than that. 

Oreopoulous discusses the results of some polling he carried out among first-year students at the University of Toronto about their expectations of outside-of-class study time. He  writes: 

Low-performing students admit to time management problems and procrastination, but even when asked to plan their hours in advance, they often set low goals. .,. If students entered a plan with fewer than 15 hours of routine study [as their personal plan on the survey form] , we asked “[W]e’d like to better understand how and why you decided on this number. Is it because you did not expect to gain much from studying more, or because you did not think you would haveenough time, or some other factor? Please share your thoughts in a paragraph or two” ... [A]mong those who eventually ended up with a fall grade average less than 60 percent. ... [a] majority said they felt their target was fair and reasonable. Some justified their answer based on their successful high school experience;
others said they wanted to leave room for sports, extracurricular activities, and friends. Very few of these students anticipated doing so poorly and none said they felt constrained from work. In fact, about half said they were intending to complete graduate studies in the future, 58 percent expected to receive above average fall grades, and the average expected economics grade was 76 percent. It seems as though these students had the wrong reference point for sufficient study time. By the end of the semester ... these kinds of students update their academic expectations downward, but rather than respond by planning to study more, they tend to accept their academic fate and plan to study about the same the following semester.

Of course, some college students have highly limited time to study because of job or family responsibilities. But those examples are not the core of the time commitment problem. Moreover, Oreopolous and his co-authors have found no noticeable effects on grades from trying to encourage more study time with an online program of information, reminders, and coaching. Trying to raise college graduation rates, or levels of academic achievement, for full-time students who are only putting in 15 hours or less of study time per week will inevitably be an uphill battle.