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February 17, 2013

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Latest Posts from Economist's View


Posted: 09 Feb 2013 12:33 AM PST
Without college, I'd probably be doing what my dad, brother, and grandfather did, work in a tractor store selling parts, and if I was lucky, some day get promoted to sales. College was my ticket out of the small farming town I grew up in, but if it wasn't for the low tuition at California state schools at the time, I probably wouldn't have made it. (Tuition was around $100 per semester, and I could earn enough to pay tuition, dorm fees, etc. working on farms in the summer and at a tractor store selling parts to cranky farmers during school. I also worked at a gas station for a while at minimum wage, and my boss/owner was a real, genuine ass, but I needed the money).
I can't say if it was worth it to society to subsidize my education -- this blog is one result of that investment -- but it was certainly worth it to me and to this day I have not forgotten what the state of California did for me. (I really, really, hated working at tractor stores and the gas station, nobody should have the power over people my boss at the gas station had over me -- he tried to screw me out of overtime, that sort of thing, though once I threatened to report him to the labor board his tune changed a bit -- and the thought of doing jobs like that for the rest of my life was a huge motivation in college. When I'd get to the tractor store in the morning, I'd write "480" on a notepad, that was how many minutes I had left until I could leave eight hours later, and then I'd tick the minutes off the rest of the day. I can remember just wanting one thing, to have a job where I didn't watch the clock all day long, to get lost in my work somehow -- it's hard to explain how much I hated those jobs -- and I was lucky enough to find that.)
I am biased from my own experience, but nobody will ever convince me that college is a bad investment. However, with tuition rising, access to college for naive kids like I was back then is a real issue. It's hard to explain just how naive I was, but when your parents only went to junior college for a year (and then got married at age 19 because you were on the way), and your high school is too small to have advisors to fill in the gaps, it's easy to make bad choices. I had no clue, for example, about how to finance education at a UC school, e.g UC Davis or Berkeley -- my parents simply said "we can't afford that" when I raised the issue, and with no co-signers for loans, and no knowledge about how to get a loan without a parent to co-sign -- it was different then -- the path to anywhere but Cal State Chico was, as far as I could see, closed. I might have found a way if Chico hadn't been so cheap, it would have gone through a JC, but likely not, and I am very grateful there was a path through a four year college for kids like me to take. Still, it was hard to get to a decent graduate school from Chico despite a economics/statistics/math major and nearly perfect grades my last three years, a UC school would have provided much more opportunity, but it was enough to get me here. I only hope that kids today have at least the same opportunity I had, and hopefully even better choices, but I'm not at all sure that they do:
What's the cost and financial value of college?, Peter Dizikes, MIT News: What's the right price for a college education? And what is its value?

Those are crucial questions at a time of rising student debt and high unemployment. But a group of scholars and policymakers at an MIT forum on Thursday suggested that one thing about college remains clear: Expensive though it can be, higher education pays off for Americans as a whole.

Indeed, the much-discussed idea of an "education bubble" — that college costs have soared too high to make a degree worthwhile — is a "dangerous myth that leads people to make bad choices," said David Autor, an MIT labor economist who has extensively studied the relationship between education and earnings. 

Instead, Autor said, the best evidence shows that a college degree leads to a lifetime earnings increase of $250,000 to $300,000, even after subtracting the cost of higher education. Those returns, Autor noted, apply to graduates regardless of their undergraduate majors: Humanities students benefit just as science, engineering or business students do.

And all evidence suggests education remains a key to social mobility in America, noted Janice Eberly... Moreover, Eberly said, "These benefits accrue not only to individuals but society more broadly,"...
The forum's moderator and organizer, James Poterba ... noted in his introductory remarks that higher education is "an extremely important sector of the U.S. economy," representing about 3.5 percent of the national GDP — but one with an even larger impact on the country's fortunes, given its centrality of knowledge and its impact on innovation-based growth to the economy.

Yet excellence in higher education requires a solid foundation of secondary education, observed Claudia Goldin, an economist at Harvard University. And while high school graduation rates in the United States soared in the first half of the 20th century, they have been virtually stagnant since about 1970.

"College completion just cannot advance much when high school completion does not," Goldin said.

For those who do go to college, the amount of student-loan debt they accrue has increased, as Autor acknowledged: At graduation, today's public-university graduates hold $32,000 in student debt, on average, while graduates of private, nonprofit schools owe $46,000, on average. Going into debt always entails risk, Autor said, while asserting that the worst-case scenarios, of students with massive debt and low income, attract disproportionate media attention.

In reality, virtually all college students, Autor said, will emerge with useful work-force skills. ...
A retweet of this link:
Don't ask is it worth it, ask who can afford it? MT "@markthoma: What's the cost and value of college? - MIT web.mit.edu/newsoffice/201…" — Paul Vigna (@paulvigna) February 8, 2013
Posted: 09 Feb 2013 12:03 AM PST
Posted: 08 Feb 2013 10:42 AM PST
One more note from Tim Duy (he's teaching the History of Economic Thought this quarter):
Would Rather Be Blogging, by Tim Duy: I am still trying, and still failing, to keep up on blogging, this term. This morning I see that Mark is traveling, which is usually an extra incentive for me to post (hence a few posts). But, truth be told, I am simply procrastinating on the second half of grading papers on the topic:
Analyze the 1942 film Casablanca as an analogy to the moral framework detailed in Adam Smith's The Theory of Moral Sentiments.
At this point all I can think about is why didn't the Nazis just kill Victor Laszlo when they found him in Casablanca? It is not like they were known for their subtly. As least, they are not particularly subtle in the Indiana Jones movies.
Posted: 08 Feb 2013 10:35 AM PST
Two from Tim Duy -- this is the first:
Currency Wars Over Before They Begin?, by Tim Duy: Are the currency wars already over? From Reuters:
The finance minister's [Taro Aso] comments indicate some surprise within the government at how quickly those expectations among traders translated into declines in the yen.
"It seems that the government's policies have fueled expectations and the yen weakened more than we intended in the move to around 90 from 78," Aso told lawmakers in the lower house budget committee.
Surprise, when you tell market participants exactly what you intend to do, they react accordingly. Market participants received a strong signal that Japanese monetary and fiscal policy would be joined to deliver a significant boost to the economy. The early exit, some might say forced exit, of Bank of Japan Governor Misaaki Shirikawa, clearing away an impediment to such plans, only further entrenched expectations. And market participants delivered accordingly:
Yen
Apparently this was too far, too fast? Was it concerns about the price of imported energy goods? Or international pressure? Still from Reuters:
Recently, Aso has reacted strongly to criticism from German and other European officials that Japan is intentionally trying to weaken its currency with monetary easing, so his comments on Friday could cause some confusion about Japan's currency policy.
I continue to think that Japan made a significant tactical error when outlining their policy objectives. A substantial monetary easing that accomplished the objective of driving up inflation expectations in and of itself would be expected to depreciate the Yen. Japanese policymakers could have framed the policy as simply supporting the domestic economy similar to the approach initiated by the Federal Reserve. The impact on the Yen itself could have been implicit rather than explicit. Instead, by making the Yen a part of the discussion at the beginning, Japanese policymakers angered their international partners. I tend to think this was an unnecessary and ultimately counterproductive strategy.
Bottom Line: If Japanese policymakers really intend the depreciation of the Yen be limited to 90, then the supposed currency wars may already be near an end.
Posted: 08 Feb 2013 10:35 AM PST
Two from Tim Duy -- this is the second:
Payroll Taxes Hitting Home. Or Not, by Tim Duy: Last week, I posted an anecdote about employees not knowing that payroll taxes were heading up. This week I see in the New York Times:
Jack Andrews and his wife no longer enjoy what they call date night, their once-a-month outing to the movies and a steak dinner at Logan's Roadhouse in Augusta, Ga. In Harlem, Eddie Phillips's life insurance payment will have to wait a few more weeks. And Jessica Price is buying cheaper food near her home in Orlando, Fla., even though she worries it may not be as healthy.
Like millions of other Americans, they are feeling the bite from the sharp increase in payroll taxes that took effect at the beginning of January. There are growing signs that the broader economy is suffering, too.
Chain-store sales have weakened over the course of the month. And two surveys released last week suggested that consumer confidence was eroding, especially among lower-income Americans.
Yet I also see this in the Wall Street Journal:
U.S. retailers turned in strong sales for January, a time of heavy promotions to clear holiday goods and make way for early spring merchandise.
January is the end of the fiscal year for most retailers, and the month serves as a good barometer of how much consumers have left over after holiday spending and provides inklings of what type of buying may lie ahead.
January sales were helped by a number of factors, including the averted mix of tax increases and government-spending cuts called the "fiscal cliff," growth in jobs and greater wealth from home prices and the rising stock market.
So which is it? How much will the tax increase weigh on the economy? Is this a case of bifurcated spending growth as higher income groups experience greater spending power via wealth impacts? Or do we simply need to wait until February to see the full impact of the tax hikes?
Posted: 08 Feb 2013 09:08 AM PST
I am here today:
National Bureau of Economic Research Research Meeting
Matthias Doepke and Emmanuel Farhi, Organizers
Federal Reserve Bank of San Francisco
101 Market Street San Francisco, CA
PROGRAM
8:30 am Continental Breakfast
9:00 am Zhen Huo, University of Minnesota Jose-Victor Rios-Rull, University of Minnesota and NBER Engineering a Paradox of Thrift Recession Discussant: Mark Aguiar, Princeton University and NBER
10:00 am Coffee Break
10:30 am Simeon Alder, University of Notre Dame David Lagakos, Arizona State University Lee Ohanian, University of California at Los Angeles and NBER The Decline of the U.S. Rust Belt: A Macroeconomic Analysis Discussant: Leena Rudanko, Boston University and NBER
11:30 am Raj Chetty, Harvard University and NBER John Friedman, Harvard University and NBER Soren Leth-Petersen, University of Copenhagen Torben Nielsen, The Danish National Centre for Social Research Tore Olsen, Harvard University Active vs. Passive Decisions and Crowd-Out in Retirement Savings Accounts: Evidence from Denmark Discussant: Christopher Carroll, Johns Hopkins University
12:30 pm Lunch
1:30 pm Lawrence Christiano, Northwestern University and NBER Martin Eichenbaum, Northwestern University and NBER Mathias Trabandt, Federal Reserve Board Unemployment and Business Cycles Discussant: Robert Shimer, University of Chicago and NBER
2:30 pm Coffee Break
3:00 pm Andrew Atkeson, University of California at Los Angeles and NBER Andrea Eisfeldt, University of California at Los Angeles Pierre-Olivier Weill, University of California at Los Angeles and NBER The Market for OTC Derivatives Discussant: Gustavo Manso, University of California at Berkeley
4:00 pm Greg Kaplan, Princeton University and NBER Guido Menzio, University of Pennsylvania and NBER Shopping Externalities and Self-Fulfilling Unemployment Fluctuations Discussant: Martin Schneider, Stanford University and NBER
5:00 pm Adjourn
5:15 pm Reception and Dinner

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