Kevin Drum - May 2011

Is Harvard Worth It?

| Thu May. 12, 2011 11:08 AM PDT

What's the value of a college education? Quite a bit, if the wage premium for college grads means anything. But maybe it doesn't. After all, smart kids go to college, and smart kids are going to earn more regardless. Maybe college doesn't have any independent effect at all. Annie Lowrey explores that question here.

But what about elite colleges? Are they really worth the skyrocketing prices they charge? Here we have much better data. A few months ago Stacy Dale and Alan Krueger updated a paper they wrote a decade ago that examined the earnings of college grads, and what they found was that elite universities don't seem to provide much benefit over lesser universities. What they did was clever: instead of just looking at SAT scores and college selectivity, they also looked at which colleges students originally applied to. David Leonhardt summarizes:

Once the two economists added these new variables, the earnings difference [of elite universities] disappeared. In fact, it went away merely by including the colleges that students had applied to — and not taking into account whether they were accepted. A student with a 1,400 SAT score who went to Penn State but applied to Penn earned as much, on average, as a student with a 1,400 who went to Penn.

“Even applying to a school, even if you get rejected, says a lot about you,” Mr. Krueger told me. He points out that the average SAT score at the most selective college students apply to turns out to be a better predictor of their earnings than the average SAT score at the college they attended.1

I'm a pretty good example of this phenomenon. I ended up graduating from Cal State Long Beach, and I did pretty well during my pre-blogging career. But what schools did I apply to? Answer: Caltech, Stanford, and UC San Diego. That, it turns out, was a better predictor of my future success than which school I eventually ended up at.

For what it's worth, then, high school seniors probably shouldn't worry quite as much about which university they attend as they do. If you're good enough to get into Harvard, you'll probably do just as well if you end up going to the University of Michigan instead. Having a degree is important (though even here the jury is out on exactly why it's important), but having an elite degree probably isn't. If you can only afford to go to a state university, don't fret about it too much. You'll do fine anyway.

1It's worth noting that this isn't universally true. It's true for white and middle-class kids, but minority and low-income students seem to benefit at least somewhat from attending elite universities.

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Fun With Charts: Making the Rich Look Poor

| Thu May. 12, 2011 10:21 AM PDT

Jon Chait takes a closer look at a Wall Street Journal chart intended to suggest that the middle class has all the money:

The chart has been making the conservative blog rounds, from Powerline to Hoosierpundit to Reihan Salam to (not really conservative) Andrew Sullivan, who reproduces it under the headline "Where the Money Is." The chart most certainly does not demonstrate the Journal's point. It instead relies upon an optical illusion. Democrats have been arguing that their tax increases should solely affect income over $250,00 a year. The Journal makes that pot of income appear small by divvying it up into seven different lines. See, the $100,000-$200,000 line is tall, and all the other lines to the right of it are short. That tall line must be where the money is!

As a public service, I've redrawn the chart for the Journal. On the left is the original. On the right is the chart that shows the actual amount of money earned by the tiny handful of people making over $200,000. It's a lot.

NYT Paywall Update

| Thu May. 12, 2011 9:23 AM PDT

So how's that new paywall working out for the New York Times?

The paywall introduced by The New York Times at the end of March is hurting traffic to its website, as expected, but perhaps within acceptable levels....Page views from March to April declined 24.4% at The New York Times Online while slipping just 7.5% for newspaper sites as a group, according to the new ComScore numbers.

...."Our framework suggests that even if The New York Times loses 20% of its web traffic, it will need to add about 107k subscribers to break even," Citi analyst Leo Kulp said in a note to investors. Times Co. management said during its first-quarter conference call on April 21 that it had already added 100,000 subscribers, Mr. Kulp noted. That doesn't count home-delivery subscribers who get digital access free or the heavy users enjoying free access all year courtesy of a Lincoln promotion, but it does count people still enjoying a 99-cent introductory rate for their first four weeks.

I'm not sure why I'm highlighting this. I don't really have anything insightful to say about it. But since I had to buy a subscription after the paywall went up, I feel a sort of proprietary interest in following its success or lack thereof. Despite the happy talk from Times honchos, however, this doesn't really sound like a great launch to me. I suspect that page views will decline some more, lots of trial subscribers will quit after the trial period is over, and that heavy users will migrate toward cheating to get access instead of paying for it.

But we'll see. I actually wish them the best of luck, since I think news should be worth paying for. And if the news at the New York Times isn't worth paying for, then pretty much no one else's news is either.

Fox News and the Rapper Known as Common

| Thu May. 12, 2011 7:29 AM PDT

On Tuesday night I was idly flipping through TV channels and happened upon Sean Hannity and Karl Rove going ballistic over something. An invitation to the White House, it turned out. For some rapper. He'd called for the assassination of George Bush, Rove said. He was a thug. (A black thug, entirely by coincidence.) Hannity was outraged. Etc. etc.

The whole thing pegged the needle on the ridiculo-meter so hard that I hardly knew how to react. It was like Fox was doing a parody of Fox. I couldn't even bring myself to blog or tweet about it. Luckily, Jon Stewart did the job last night. Enjoy.
 

  The Daily Show With Jon Stewart Mon - Thurs 11p / 10c
  Tone Def Poetry Jam
  www.thedailyshow.com
 
 
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Social Security is Easy!

| Wed May. 11, 2011 2:22 PM PDT

Reihan Salam says that although Alan Simpson may have proven himself to be a moron when it comes to life expectancies and Social Security, we lefties shouldn't laugh quite so hard:

But here’s the thing: what really matters in a pay-as-you-go system is the dependency ratio, i.e., the ratio of workers paying into the Social Security system to the number of Social Security beneficiaries.....The dependency ratio is the pressing issue, not increasing life expectancy per se. So while some of our friends poke fun at Alan Simpson, I’d suggest that the rest of us think through the implications of the changing dependency ratio.

At the risk of repeating myself endlessly on this topic: no, we don't need to think through the implications of the changing dependency ratio. Or life expectancies. Or immigration rates. Or productivity levels. Or much of anything else.

Why not? Because the Social Security trustees have already done that for us. If you want to argue with the trustees' model, that's one thing. Then you need to dive into the details. But most of us don't want to do that. We accept their basic model, and once you accept their model then the solvency of Social Security boils down to precisely one thing: how much money is going in and how much money is getting paid out. That's it. And here's the chart that shows it:

This is the great thing about Social Security from a policy point of view: it's pretty easy. It's fundamentally a pure accounting exercise. By 20301, the income-outgo gap is about 1.5% of GDP, so all you have to do is pick and choose from a menu of options that gradually raise revenue and cut benefits by a combined total of 1.5% of GDP. That's it. Your choices will depend a lot on your values and your priorities, but in the end the only thing you have to do is make sure the numbers add up. Simple.

POSTSCRIPT: Go ahead! Give it a try! This CBO report lists 30 options for you to choose from (summarized in Table 2 on page 33). They use the 75-year gap as their unit of account, rather than the annual gap, which they peg at 0.6% of GDP. So pick a basket of options that adds up to 0.6% and you've fixed Social Security. Congratulations!

1Actually, the trust fund makes up for the gap between 2015 and about 2040. So you only really need to close the gap after that. But eventually you have to come up with about 1.5% of GDP.

Newt Gingrich and the 11th Commandment

| Wed May. 11, 2011 1:49 PM PDT

Newt Gingrich has famously cheated on and then divorced two wives, all while loudly trumpeting his own family values bona fides and slamming liberals for their ruinous effect on our national culture. David Corn:

None of this is a secret, and Gingrich hopes to defuse this story line by placing Callista [i.e., wife #3] in the limelight. Yet, his jump into the presidential pool will likely produce a series of tales and news reports about Gingrich's bad-boy days, for as long as he remains in the race. In a presidential contest, biography matters much. And fresh details—even about well-known episodes in a candidate's past—are much valued, at least by reporters and cable news viewers. Thus, Gingrich may find it tough to escape the tawdry escapades of his earlier decades.

Maybe! But here's the thing: Gingrich may be a cannier media player than we think. Sure, he knows he's going to get slammed for his sexual adventures, but he also knows that one of the iron laws of the news business is that no one is interested in "old news." So the key to his success is to get in the race now, get all of these stories out in the open over the next few months, and then count on the media to yawn and refuse to bother itself over this stuff by the time serious campaigning starts later this year.

The only question is whether his fellow candidates will play along. If they decide to be good Reagan Republicans and keep their traps shut, Gingrich might get away with it. If one of them makes it a big issue, then the press will report it because — um, because it's now an "issue."

In the end, I think David is probably right: Gingrich can't escape his past. His primary opponents will stay quiet about his lecherous past as long as he's no threat, but the minute he looks like he might really have a chance to win, at least a few of them will go after him with all guns blazing. Politics ain't beanbag, after all.

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Congress Yawns Over Warmaking Power

| Wed May. 11, 2011 11:55 AM PDT

Under the War Powers Act, the president can commit troops to a military operation for 60 days before getting congressional approval. Next week, that 60 days is up for the war in Libya. So what happens then?

Doug Mataconis rounds up some reporting on this, and the answer is.....nothing. Apparently no one in Congress really cares, and President Obama, like every president before him, doesn't recognize the WPA as a legitimate check on his commander-in-chief powers anyway.

Whatever else you can say about Bush's wars, he did get Congress's approval for them. Obama isn't even bothering with that much. Still, it's hard to come down on him too hard over this. It's up to Congress to defend its authority in the warmaking arena, and they're tacitly agreeing that Obama's actions have been just peachy. If both branches agree on this, then I guess that's that. The president can deploy troops any time and in any way he wants. I just hope congressional Democrats don't start whining about this sometime in the future when a Republican president does the same thing.

The Free Market and the Culture of Victimization

| Wed May. 11, 2011 10:46 AM PDT

Here is American politics in a nutshell:

“I’m glad to see they’re trying to rein in Fannie Mae, but I think I’m being disproportionately penalized,” said Rayn Random, who is trying to sell her house in the hills for $849,000 so she can move to Florida.

Actually, that's probably everyone's politics in a nutshell. The issue here is that in 2008, after the collapse of the housing market, the federal government raised the limit for the size of the home loans that Fannie Mae would guarantee. Now, three years later, they're planning to lower the limit back to near its old value. This is a small step toward limiting Fannie Mae's involvement in the mortgage market, something that's almost a unanimous, bipartisan goal.

But no matter how broadly supported a policy is, there's always somebody who's going to get the short end of the stick and is convinced they're being singled out for unfair treatment. In this case, it's upper middle class homeowners, who might have a bit harder time selling their homes and might have to pay a bit more when they're buying one. This is, of course, the free market in action, but no one in the housing industry cares about that when it's their paychecks on the line:

The National Association of Realtors, 8,000 of whom have gathered in Washington this week for their midyear legislative meeting, is making an extension of the loan guarantees a top lobbying priority....The Mortgage Bankers Association has opposed letting the limits drop, although a spokesman said its members were studying the issue.

I'd peg the number of genuine believers in free market capitalism at about 1% of the population. Maybe. The rest of us just want whatever policies benefit us the most. And the richer you are, the more money you make from policies that benefit you. Among the rich and the corporate elite, true believers in the free market probably number about 0%.

Public Opinion and World War I

| Wed May. 11, 2011 10:04 AM PDT

This is a little off the beaten path, but let's do a bit of World War I blogging. (Need a news hook for this? Here it is.)

Tyler Cowen just read Dance of the Furies: Europe and the Outbreak of World War I, by Michael Neiberg, and says he was "stunned" by the claims in the book, a few of which can be summarized quickly:

First...few Europeans expected a war and even fewer wanted one. Europe was not a place of white-hot nationalist passions looking for a spark…Virtually no one in Europe sought a war to correct supposed inequities stemming from the turbulent nineteenth century or as a way to adjust borders. Even in France, there was no desire for war as a way to avenge the loss of Alsace-Lorraine...

Third, the people of Europe accepted the necessity of war primarily because they believed their wars to be defensive.

Fourth, disillusion with the war...was well in place by the end of the war’s first year.

Sixth, despite their concerns and suspicions, societies kept fighting. Their reasons for doing so included a desire to avenge the losses of 1914, the quite real threats to their existence which remained from foreign armies, and an awareness that the hatreds unleashed by the war as early as the end of the first month made anything short of total victory or total defeat unthinkable.

I'm genuinely curious about this. All of these four claims seem, to me, not only non-stunning, but almost pedestrian. If you'd put them in front of me with no commentary, I'm pretty sure I would have said that this is pretty much the modern conventional wisdom about WWI.

So: am I completely off base here? Are these claims more unusual than I think? And if they are, why did they seem so familiar to me? I've read a few books about the war, but that's about the extent of my knowledge.

Republicans and Osama bin Laden

| Wed May. 11, 2011 9:22 AM PDT

A while back I suggested that the killing of Osama bin Laden wasn't likely to provide President Obama with much of a long-term benefit. Now I'm beginning to change my mind.

Why? Not because of the fundamentals of the situation, which haven't changed. It's because over the past week I've been watching the almost pathetic desperation with which conservatives are trying to denigrate Obama's part in the bin Laden operation. Really, it's been awesome. On radio, TV, blogs, op-eds, pretty much everywhere, they've been in a lather insisting that Obama himself played no real role; that he's arrogantly hogging the spotlight; that he screwed up by announcing the operation so soon; that the entire success is really due to Bush-era torture policies; that he shouldn't have killed bin Laden; that he's being churlish by not giving George W. Bush enough credit; etc. etc. etc. It's been a virtual feeding frenzy, and the stink of fear that Obama is appropriating the traditional Republican role as killer of bad guys is palpable.

Sure, this is just politics, and if it were the summer silly season that's how I'd view it. But Republicans already have a message that they want to stay laser-focused on: tackling the deficit. The fact that they're taking so much time out from that to denigrate Obama's role in the bin Laden operation suggests that they think this is a big deal. And if they think it's a big deal, then maybe it is. They're usually pretty good at reading the public mood, after all.