This is a blog about economics, history, law and other things that interest me.
Saturday, April 15, 2017
Thursday, April 13, 2017
Public Education and the Libertarian Nirvana Fallacy
Art Carden tweeted a link to Arnold Kling’s blogpost What I
Believe About Education
This is what Kling believes (in bold)
1. The U.S. leads the world in health care spending per
person, but not in health care outcomes. Many people look at that and say that
health care costs too much in the U.S., and we should be able to get the same
our better outcomes by sending less. Maybe that is correct, maybe not. That is
not the point here. But–
2. the U.S. leads the world in K-12 education spending per
student, but not in student outcomes. Yet nobody, says that education costs too
much and that we should spend less. Except–
3. me. I believe that we spend way too much on K-12
education.
4. We spend as much as we do on education in part because it
is a sacred cow. We want to show that we care about children. (Yes, “showing
that you care” is also Robin Hanson’s explanation for health care spending.)
5. We also spend as much as we do because of teachers’
unions. They engage in featherbedding, adding all sorts of non-teaching staff
to school payrolls (and adding more union members in the process). In
Montgomery`County, last time I looked, there was one person on the payroll for
every 6 students, but there were more than 25 students per classroom teacher.
That is why I do not think that cost disease, as discussed recently by Scott
Alexander, is the full story. It’s not just that it’s hard to raise
productivity in teaching. It’s that teachers’ unions cut down on productivity
by continually getting schools to add non-teaching staff.
6. If I could have my way, the government would get out of
the schooling business.
7. If we wish to subsidize education, we should do it
through vouchers. Note that this could be done on a progressive basis, with the
size of the voucher a declining function of parent’s income.
8. I do not expect educational outcomes to be any better
under a voucher system. That is because I believe in the Null Hypothesis, which
is that educational interventions do not make a difference.
9. However, a competitive market in education would drive down
costs, so that the U.S. would get the same outcomes with much less spending.
A few additional notes:
10. When parents seek out schools with good reputations,
they are going after schools where most of the students come from affluent
families. The schools themselves do not do much.
11. Even within income-diverse school districts, affluent
parents figure out a way to keep their kids from being surrounded by poor
children.
12. I have grown increasingly uncomfortable with the leftist
ideology preached in government schools.
At the risk of offending Art, and probably some other
people, I do not agree with most of what Kling believes. Actually, there isn’t
much in it I can find to agree with. Kling’s statement isn’t an argument. It is
a creed, with statements like “I believe we spend way too much on K-12
education.”
Even the premise isn’t consistent with the available
evidence. These
numbers from the OECD show that U.S. does not lead in spending on K-12. As
a percentage of public spending the U.S. is right around the OECD average. The
results of that spending are more difficult to compare. The usual rankings
based on test score comparisons are really not very informative, because many
of the differences in scores do not reflect statistically significant
differences. The
Brown Center Report shows that relatively few countries have scores that are significantly
higher those of the U.S. In other words, the United States
spending is near the upper end but not at the very top, and the results are at
the upper end but not at the top. The story that American public education is
outrageously expensive and appallingly ineffective is simply not supported by
the evidence.
Moreover, you would only expect spending the most money to
get you the best education, or best health care, if you think that spending is
the only determinant of educational or health performance. I don’t know anyone
who believes this. In addition, evidence of relative cost and performance is
only evidence against public education generally if the countries that perform
better are ones that do not rely on public education. I don’t know of any
evidence to that effect.
There is, on the other hand, more than a little evidence
that education matters for both individual earnings and economic growth.Measured outputs of education are associated with economic
growth. To the extent that inputs do not improve outcomes they are not
associated with economic growth. People with more knowledge about how to
produce things produce more things, if producing things is rewarded.
Easterlin, Richard A. "Why
isn't the whole world developed?." The Journal of Economic
History 41, no. 01 (1981): 1-17.
Barro on Education and Growth
David Mitch Education
and Growth a EH.Net Encyclopedia
David Hanushek on increases
in skill and economic growth
Race based differences in educational quality have also contributed
to differences in earnings between blacks and whites in the United States. See
And
Or you can watch Marianne Wanamaker present the research here
Education matters and public education has, at the very
least, been consistent with long run economic growth. If recent elections are
any indication, public schools do, however, appear to be failing at preaching
leftist ideology.
Kling’s creed about getting government out of education is
an example of libertarian Nirvana fallacy. The Nirvana fallacy is generally
used in economics to refer to a situation in which people compare an imperfect
market with a perfect (Nirvana) government solution that has never actually
existed. It, however, makes no more sense to compare an imperfect government
action to an idealized market outcome that has never actually existed.
Taken to the extreme libertarian Nirvana fallacy produces
things like Rothbard’s Power and Market
“Let us, then, examine in a little more detail what a
free-market defense system might look like. It is, we must realize, impossible
to blueprint the exact institutional conditions of any market in advance, just
as it would have been impossible 50 years ago to predict the exact structure of
the television industry today. However, we can postulate some of the workings
of a freely competitive, marketable system of police and judicial services.
Most likely, such services would be sold on an advance subscription basis, with
premiums paid regularly and services to be supplied on call. Many competitors
would undoubtedly arise, each attempting, by earning a reputation for
efficiency and probity, to win a consumer market for its services. Of course,
it is possible that in some areas a single agency would outcompete all others,
but this does not seem likely when we realize that there is no territorial
monopoly and that efficient firms would be able to open branches in other
geographical areas. It seems likely, also, that supplies of police and judicial
service would be provided by insurance companies, because it would be to their
direct advantage to reduce the amount of crime as much as possible.”
This isn’t economics; it is speculative fiction. This is
what you are able to do when you free yourself from the onerous constraint of
evidence. You can state with certainty that we can get rid of government
support for education, law enforcement, or even national defense, which have been associated with long periods of rapid economic growth, becauseyou just know that a better private
solution will emerge. By the way, Rothbard does suggest that people underestimate the private provision of law in history but see Edwards
and Ogilvie and Ogivlie
and Carus argument that people actually underestimate the role of the
state in the examples that Rothbard provides.
On a personal note, I have nothing against private schools. My
family has used both public and private schools. My wife went to Catholic
schools in St. Louis, our youngest son goes to a private school here in
Fredericksburg. Our two older children went to public schools in
Fredericksburg. I went to a lot of public schools: Longfellow Elementary
(Hastings, NE); Holstein Elementary (Holstein, NE); Minden Elementary (Minden,
NE); Sherman Elementary, Potrero Hill Junior High, Galileo High School (all in
San Francisco); and senior year at Port Angeles High School in Washington.
Tuesday, April 4, 2017
Some big economic history
Elis, Haber and Horrillo attempt to explain why different patterns of political and economic development since about 1750 appear to be geographically clustered Climate, Geography, and Political and Economic Development
Thursday, March 30, 2017
two meetings, a list, and review
Meetings:
Business
History Conference and the Economic
History Society are meeting. Both have programs posted, with links to some abstracts and papers. Naomi Lamoreaux’s paper on Culture
and Business History for the opening plenary session at BHC is available.
A List:
Pseudoerasmus has posted a great list of economic history papers
and blogposts. The list is a great resource for anyone interested in economic
history, which should be everyone. Most of the papers in the U.S. section are
ones that I have used in my economic history class. In addition to presenting
important arguments, many of the papers are very accessible. You do not need a
Ph.D. in economics to read the papers by Wright, Meyer, or Temin.
Pseudoerasmus notes that the list is a work in progress. Some
papers I would consider adding
Rousseau, Peter L., and Richard Sylla. "Emerging
financial markets and early US growth." Explorations in Economic
History 42, no. 1 (2005): 1-26.
Naomi Lamoreaux and John Wallis States,
Not Nation: The sources of political and economic development in early United
States
Hanes, Christopher, and Paul W. Rhode. "Harvests and
financial crises in gold standard America." The Journal of
Economic History 73, no. 01 (2013): 201-246
And, even though it is quite old, I still like
Goodrich, Carter. "The revulsion against internal
improvements." The Journal of Economic History 10, no. 02
(1950): 145-169.
A Book Review:
EH.Net has a review
by Gavin Wright of Slavery’s Capitalism
edited by Sven Beckert and Seth Rockman. Here is my
take on the book. Thanks to Tom Maloney for bringing the EH.Net review to my attention.
Friday, March 24, 2017
Fraudulent Publishing
The
New York Times reports on one effort to uncover fraudulent journals and
conferences.
Although these journals have been referred to as predatory, I am
inclined to agree with Jeffrey Beal’s assessment
Dr. Beall, who until
recently published a list of predatory journals, said he believes many
researchers know exactly what they are doing when they publish there.
“I believe there are
countless researchers and academics, currently employed, who have secured jobs,
promotions, and tenure using publications in pay-to-publish journals as part of
their credentials and experience for the jobs and promotions they got,” Dr.
Beall said.
Although the Times article does not mention it, my colleague
Margaret Ray published similar research last year
Ray, Margaret. "An
Expanded Approach to Evaluating Open Access Journals." Journal
of Scholarly Publishing 47, no. 4 (2016): 307-327.
She found numerous “journals” that were happy to publish
(for a price) papers written by her daughters and their friends for 8th
to 10th grade classes. “One of the writers described her paper as
‘not some of my best work.’”
Tuesday, March 21, 2017
A Do It Yourself Video Course on Modern Economic Growth
This is just a bunch of videos and a few papers related to the topic of modern economic growth.
For a long time, the Industrial Revolution was the central
concern of economic history. Economic historians attempted to explain why the
people in England began to develop new sources of power (the steam engine) and
ways to replace human effort with mechanical effort, like the spinning jenny. Marxists,
and later institutional economic historians, tended to look earlier for the key
changes.
A good place to start
is the work of Nicholas Crafts and Robert Allen on the Industrial Revolution
Nicholas Crafts Industrialization: Why
Britain Got There First
Robert Allen Why was the
Industrial Revolution British?
and
Recently, several historians have challenged the evidence of
high wages in England, an important element of Allen’s argument
In these videos
Jane Humphries presents one of these challenges and, in doing so, provides a
great description of an economic historian’s use of primary sources.
Marxist’s have longargued that the important transition(from
feudalism to capitalism) took place before the Industrial Revolution, but they argued
with each other about the nature of that transition. See the Dobb-Sweezy Debate
and, later, the Brenner Debate (with worlds systems theorists). Unfortunately, I don’t have any good videos on
this topic.
Institutionalist, like Doug North (a former Marxist), have
also looked for a transformation before the IR.
And after Kenneth Pomeranz published the Great Divergence,
many economic historians began to try to identify more precisely when, where
and why modern economic growth began.
Stephen Broadberry has done interesting work in terms of
both measurement and explanation
The quality of this video is not particularly good Accounting for Divergence
but the paper it is
based on is very readable.
See also
Professor Osamu Saito Growth and Inequality in the Great Divergence
Debate: Mughal India, Stuart England and Tokugawa Japan Compared
Professor Bruce
Campbell "The Great Transition: Climate, Disease
and Society in the 13th and 14th Centuries"
Economic historians
now have to explain both The Great Divergence, between East and West, but also
little divergences within Europe and Asia.
So what explains these divergences. Two popular answers are
institutions and ideas. A lot of these arguments are really matters of
emphasis. Most of the people listed below are interested in both.
Despite what
Deirdre McCloskey might tell you, I can assure you that Doug thought that ideas and
beliefs matter. The first two books I remember him telling me I had to read
were Berger and Luckmann’s Social
Construction of Reality and Alan MacFarlane’s Origins of English Individualism.
Sometimes it is not too clear what the difference between ideas and institutions are. Nevertheless, some emphasize one while others emphasize the other.
So here are some videos emphasizing the role of institutions
Douglass North The Natural State
There are a lot of videos of Doug, but
this one reflects the work he was doing with Barry Weingast and John Wallis. I
also like this interview
that Timur Kuran did with him.
This is a short video with Sheilagh Ogilvie. You can also check out this paper with A.W. Carus on Institutions and Economic Growth
See also (parts of some of these may be a little difficult for non-economists to follow, but stick with it and you will get the main ideas)
Timur Kuran on the Long Divergence: How Islamic
Law Held Back the Middle East
Mark
Koyama Jewish Communities and European City Growth
Eric Chaney The Medieval Origins of
Comparative European Development: Evidence form the Basque Country
Here are some emphasizing the role of ideas
Joel Mokyr Culture of Growth
See also
Deirdre McCloskey Bourgeois Equality: How
Ideas, Not Capital, Enriched the World
Anton
Howes on the Ideology of Innovation from about 15:00 to 35:00
If those don’t work for you maybe you want to consider this
Ashraf and Galor on genetic
diversity and economic growth
Finally, you could just watch this entire course on World Economic
History with Greg Clark
Thursday, March 9, 2017
Some Recent Economic History of Slavery
Trevon Logan and Caitlin Rosenthal jointly gave the Chandler
Lecture at University of North Carolina, The video of the Lecture is now available.
You might also want to watch Caitlin Rosenthal on Slavery’s Scientific Management:
Quantification on Plantations.
Robert E. Wright has published The Poverty of
Slavery: How Unfree Labor Pollutes the Economy.
I have only had a chance to read the Introduction. Wright is
primarily a financial historian, but he appears to have been drawn into the
history of slavery through his concern with the continued existence of unfree
labor around the world today. He argues that the overall effect of slavery on
economic growth is negative because it creates negative externalities. I
tend to agree with his argument in regard to the United States, the case
that I am most familiar with. The available evidence is consistent with long
term negative impact of slavery. Slavery has been associated with both lower
levels of investment in public goods, like infrastructure and education, and
lower levels of innovation (see for instance Majewski in the recent Slavery’s Capitalism.
It is also possible that the
distribution of income was less conducive to the development of industry.
I will mention there were a couple of things that I thought
were peculiar in the Introduction. First, although he criticizes Edward
Baptist’s views on slavery and economic growth, Wright refers to Baptist’s
“otherwise excellent The Half Has Never
Been Told.” There is really nothing excellent in the book. Olmstead and
Rhode (use google scholar to find their working paper on Cotton, Slavery, and
the New History of Capitalism) and Trevor
Burnard showed that Baptist handles narrative evidence as poorly as he does
quantitative evidence, economic concepts and basic logic. On a related note,
Wright appears to cite the Roundtable on the Half Has Never Been Told in the Journal
of Economic History as anonymous even though each of the reviews clearly
identifies the author. Nevertheless, I look forward to reading the rest of
Wright’s book when I have more time.
Seth Rockman retweeted to me the link to the paper When
Wealth Encourages Individuals to Fight: Evidence From the American Civil War
by Hall, Huff and Kuirwaki. They use the Cherokee land lotteries to
try to determine whether, other things equal, slave holding made someone more
likely to fight in the Civil War. After the Yazoo Land scandal, which led to
the famous decision in Fletcher v. Peck,
Georgia used a lottery to distribute land, including that was taken from the Cherokee.
The Cherokee land lottery in 1832, provided a large wealth shock to a random
sample of Georgia citizens. Much of this increase in wealth appears to have
ended up as investment in slavery. The authors conclude that men from households
with slaves enlisted at higher rates than those in households without slaves
(though majority of soldiers came from families that did not own slaves). Their
work is generally consistent with the work
done by Hoyt Bleakley and Joseph Ferrie on the long term effects of the
wealth shock. At the end of the paper they seemed to have made a reasonable
case that an individual with more
slave wealth would be more likely to choose to enlist, but it was still not
clear to me why an individual with more
slave wealth would be more likely to choose to enlist. Why not choose to
freeride? An individual’s enlistment did nothing to make his property more
secure. It would have required an incredible amount of hubris to believe that
one’s individual participation in the war was going to affect the outcome of
the war. In what way did individuals expect to benefit from enlistment? Was it
because they were more likely to support slavery ideologically? Were there
other potential benefits in terms of prestige or possibly political
advancement? Did they need the cash more than those who had not purchased
slaves?
On a related note, Georgia seems to have done more than its
share to create experiments for economic historians. I recently mentioned a
paper on the long term negative consequences of slavery in Georgia by Tyler
Beck Goodspeed.
And James Feigenbaum, James Lee and Flippo Mezzanotti use the destruction caused
by Sherman’s March to examine the long run effects of capital and
infrastructure destruction. They find that “both agricultural and manufacturing
output fell relatively more from 1860 to 1870 and 1880 in Sherman counties
compared to non-Sherman counties in the same state. These relative declines do
not appear to be driven by differential out-migration, demographic patterns, or
long-lasting infrastructure destruction. Instead, by collecting new historical
data on local banks, we show that damage to credit markets was more severe in
march counties and that these financial disruptions can help explain the larger
declines in economic output.”
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