What’s the value of a degree, Virginia?

07/12/2012 § 4 Comments

My prima alma mater sent me a link to a Washington Post article on a new database:

a groundbreaking database Virginia published Thursday … pinpoints for the first time how much graduates from specific college programs, public and private, earn when they enter the job market.

It’s good to have this sort of information available, although a lot of it is unsurprising. I think most people are aware that psych graduates tend to earn less than IT graduates. There will be some jostling over the earnings by institution, but again, I think people are pretty aware of university rankings. As always, insert the standard disclaimer that money isn’t everything in life.

The article is titled ‘New data tells what a Virginia college degree is worth’. Actually, the data does nothing of the sort. It tells you what annual earnings are by school and degree. It doesn’t actually tell you the present value of the degree. With some calculation and assumptions, you could figure it out from the data. Also, given the costs cited in the article, the benefit-cost ratios are going to vary widely. Anyone interested in an Honours project?

The Treasury has been looking at this issue, both in terms of private returns (to the person) and public returns (to the wider economy). My former colleague James Zuccollo (now part of the NZ Brain Drain) did a lot of interesting research on this, looking at both the theory and the data. We are working on a public report, but here is a chart from a presentation on the research:


The value of tertiary education in New Zealand is comparatively low. It’s still positive, so please don’t let this stop anyone attending university. Also, this doesn’t tell the whole story (so click through on the link above).

The government has been working with data from Statistics NZ, the IRD, and elsewhere to try to get a better handle on the benefits and the heterogeneity involved. I’ve done some web browsing, but haven’t come up with any really good links for you. It would be great if we could do what Virginia has done — tell entering students what they can expect to get for the time and money they spend on their education.

Making the waka go faster

21/11/2012 § 2 Comments

Monday saw the launch of He kai kei aku ringa, the Crown-Maori Economic Growth Partnership. I went along to the launch event. It was a nice affair — lots of people trying to good things for Maori and the whole country, lots of energy and support for the new plan.

Here are some good things about the plan:

  • There is an actual plan (pdf). This isn’t just hand-wringing (ringa-wringing?) about the state of Maori. There are actual things that are planned to be done. Oh, and people who are supposed to do them.
  • There are goals, relatively SMART goals. The Action Plan takes each of the specific goals, explains why they are important, and then provides a way to measure success. Not always, and things will get fudged, etc. But still, goals like ‘Higher completion rate for Maori students studying for tertiary qualifications’ and ‘Higher retention rates for Maori students in tertiary education’ can be measured and success ascertained.
  • The plan has a sensible structure. It has six strategic goals, and then 20-odd specific goals. People can remember six goals (the rule of thumb is 7 plus-or-minus 2). They can get behind six goals — they know the bigger picture. Big laundry lists aren’t suitable for this purpose, not without structure. This way, everybody knows which way the waka is headed.
  • Education is goal #1. The gap between those with tertiary qualifications and those without is growing. We can argue the why and the equity, but it has happened and does continue. Also, getting a tertiary qualification pays for itself and then some. It’s a worthwhile investment. The relatively poor performance of Maori pupils and students has to be turned around if they want economic success.
  • There appears to be actual funding involved. These initiatives cannot happen without money.

So, I’m hopeful. The plan a good first step. Now for the hard work of doing it.

To finish this off, three things:

  1. Declaration of interests: I am not disinterested in Maori development, having a wife and children who are Ngai Tahu/Kai Tahu.
  2. When the working group presented the report to the Minister, they sang a waiata. It was lovely. I have to see how I can get that added to my research contracts.
  3. The report uses the saying, Ka tangi te kākā. And here, spotted in our yard yesterday, is a kaka (the bands are from the local wildlife sanctuary):

Science iz 4 QTs! lol!!!

26/06/2012 § 2 Comments

Education — particularly maths and science education — is a topic that will get me on my soapbox. And yes, I’m prone to the ‘they’re all doing it wrong!’ school of curmudgeonry. Nevertheless, I can still be surprised, because the stupid never sleeps.

It seems that the EU — like all the other governments — has decided We Need More Scientists. One solution is to have more women in science jobs. After all, women are more than half the species. They need to pull their weight in the sciences! Or something like that.

Somebody ginned up a publicity video to get girls interested. Yay! [smilely face]! Only, well, it’s more lipstick than lab coat. Cause, yeah, y’know, the women scientists I’ve known were all about the bling.

I can’t link you to the YouTube video, because it has now been made private. There is still shame in the world. Or, at least, bad press. So let me send you to Martha Gill’s blog for the full story and some snippets of the original video.

Here’s a thought: how about actually teaching them all the interesting things about maths and science while they still want to learn them? I know, that’s just crazy talk.

Virginia’s fight over higher education

22/06/2012 § 2 Comments

The resignation of the president of the University of Virginia has been making the news. She was only half-way through her term when she tendered her resignation, and politics and pressure from the governing board appear to have played a part.

For a wag’s view, click on over to Crooked Timber. Kieran Healy has written a new Declaration of Independence, expressing the board’s opinion of the president (you’ll recall that UVa was founded by Thomas Jefferson, who wrote the American colonies’ Declaration).

Expect to see more of this. First of all, boards and presidents don’t necessarily get along. The College of William and Mary (on the other side of Virginia) had a similar but not so rancorous or public episode a few years ago, when the board declined to renew President Nichol’s contract. His Wikipedia entry tactfully notes that Nichol had ‘the shortest tenure for a William & Mary president since the Civil War’.

Three disputes in higher education are creating turmoil, with President Sullivan an unlucky casualty:

  • who should pay?William and Mary reported in 2011 that ‘Over the last generation, state support for William & Mary’s operating budget has gone from over 43% to under 13%.’ Public funding of tertiary education in the US is declining. One push is shrinking state budgets, but there is also a sense that individuals benefit greatly from tertiary degrees. Therefore, they should bear the costs individually. New Zealand is also heading down this track, too.
  • what should students study? — There is a perennial argument that pits a broad liberal arts education against skills training for employment. I won’t re-hash the argument here. However, as student debt increases, the requirement to pay off the debt tends to push students into skills training. It also increases the pressure on universities to demonstrate value-for-money in the short term. They need to show that their graduates are relevant and employed. That pressure means universities need to be more responsive to short-term business trends (well, fads).
  • how should education be delivered? — This is apparently the reef on which President Sullivan foundered. Technology — that is, the internet — makes information search and transfer easy, cheaper, and faster. If education is transferring information, then the internet should make it cheaper, too. Universities are trying to figure this out. So now, we have MIT online courses and the joint project Coursera. But it isn’t as easy as posting lectures online and charging remote students to access them. The notion that education is lighting a fire, not filling a bucket*, applies here.

These are all disputes in progress, and they are bound up in larger social and political currents. They go to contested questions like, ‘what should society provide me, and what should I provide myself?’, and ‘if it is funded with public money, how much control should taxpayers have over recipients’ choices?’ The situation at UVa is a public struggle over the answers to those questions.

*Apparently, from Plutarch: ‘For the mind does not require filling like a bottle, but rather, like wood, it only requires kindling to create in it an impulse to think independently and an ardent desire for the truth.’

The costs of producing education

17/05/2012 § 4 Comments

As part of the coming ‘zero budget’, the Government has pre-announced changes in educationReported changes are an increase in total funding, a cap on teacher numbers, an increase in the pupil/teacher ratio, and performance pay.

Also, ‘[a] post-graduate qualification will be introduced as a minimum for all trainee teachers’. This policy interacts with the new student loan policy: higher repayments, but also no student allowance for those studying longer than four years (which is more likely when you are earning a post-graduate qualification).

The plan, therefore, is to make it harder and more expensive to become a teacher, make the job more difficult, and reduce the disposable incomes of new teachers. In return, teachers will have performance pay (currently unspecified). Given the increase in funding, they should also have access to more technology and better facilities.

Let’s think about the market for teachers in New Zealand. First, it isn’t a closed market. Candidates come from around the world, and we can export teachers, too. A market with both importing and exporting suggests that the product is not homogeneous. Teachers are seeking the job conditions (and lifestyle) they prefer, while education systems are seeking the best teachers they can afford.

The new plan affects both the supply and demand for teachers domestically. It will be more expensive to produce teachers, reducing domestic supply and shifting the supply curve inward. The quality demanded is also higher, which can be proxied by an outward shift of the demand curve. (This isn’t exact, because of lack of homogeneity). Possible impacts are higher prices (wages) for teachers, fewer teachers, or more imported teachers. The net impact will depend on the the relative elasticities of demand and supply. Domestic supply is somewhat inelastic (only so many teachers are graduated each year) and demand is also inelastic (determined by class ratios and demographics). If this were a market, prices would be volatile and determined by thin volumes, especially the by amount of imports.

So let’s look at the price (wages) of a teacher by using a production function. The factors of production in this case are land, labour, capital, and human capital. Land is the school building; labour is the ‘amount’ of teachers, the class size ratio; capital is the technology available; and human capital is teacher quality. Assembling these factors into a production function, we then produce ‘pupils’, which is a combination of the number and quality. The plan is to increase the production of ‘pupils’, specifically increasing the quality. We will do this by reducing the land (larger classes), reducing labour (larger classes, again), increasing capital (investment in technology), and increasing human capital (better teachers). The expectation is that increased human capital and technology will more than substitute for less land and labour.

The Beehive says, ‘Evidence shows the single most important thing we can do to raise achievement is to improve teaching quality.’ This suggests that the increase in the factor ‘human capital’ with have the biggest impact on the product ‘pupils’. If factors of production are paid according to their marginal contributions, then the (change in) payments to human capital should be larger than the (change in) payments to any other factor.

Which leads to three conclusions:

  • This better be one serious performance-pay plan or the market won’t clear
  • There should be an analysis of whether fewer, better teachers is the most cost-effective way to improve pupil performance (what are the partial derivatives?)
  • Production planning when you control both sides of a market is a right royal pain (where’s a Soviet economist when you need one?).

Teaching kids STEM subjects

13/03/2012 Comments Off on Teaching kids STEM subjects

This is a personal, ranting post. I hope you will oblige.

I use maths for work every day. Different sorts, different levels of complexity. Sometimes, it’s simple diagrams. Other times, it’s proper econometrics. I find I think best when I can toggle between an understanding of the subject matter and the maths we are using to analyse it. My dad was an actuary, and used maths every day. His brother was in banking (more maths) and their uncles were different sorts of engineers (more maths), including, yes, a rocket scientist.

You may have noticed that the people I mentioned are all males.

I have two daughters. They have inherited the family predilection for maths. They are doing well in school, yes, but also have an affinity for maths, a special understanding of patterns that goes beyond book learning.

When a girl is good at running, she is encouraged to run. She runs races at school, she gets prizes, she goes to regional competitions, her personal bests are celebrated. She is encouraged to challenge herself and others.

When a girl is good at maths, she is not encouraged. In each year, teachers prefer to stick to the curriculum. A girl who is ahead of the curriculum is money in the bank for the teacher — job done before we’ve even started. Besides, why would a girl want to get ahead? There would be nothing for her to do next year!

Yes, this is the attitude. No, I am not the only parent who has encountered it.

Maths are the basis for all STEM (science, technology, engineering, and maths) subjects. They are the sine qua non. You have to understand calculus and statistics to do the rest. If you make girls count back and forth along a number line because that’s this year’s curriculum, you are depriving them of the opportunity to get on with learning calculus and statistics. You are depriving them of the possibility of studying STEM subjects.

There is a lot of hand-wringing about STEM at school and university. There is also hand-wringing about STEM and women and minorities (here is an example). Some of it is posturing, absolutely. But some of it raises a valid point: why are children, especially certain groups of children, discouraged from these careers? And what do we do about it?

The ‘why’ is complex. It is easy to say that these are male-dominated subjects, but that can change pretty quickly in a given field. Check out, for example, the enrolment figures from the 1970s and 1980s for US law schools. Another factor is that teaching, particularly primary school teaching, is dominated by people from the humanities. Many people who study humanities are uncomfortable with maths; many don’t even see the value in it.

What do we do about it? Whatever it is, I know we can’t wait until the end of secondary school or university to support these girls. It has to start much, much earlier, from primary onward. A basic principle is: encourage excellence. Regardless of what interests a girl, regardless of what her particular skills are, encourage her to excel. If you find yourself saying, ‘Why bother with that?’, put yourself in time-out and come back when you are ready to be encouraging.

The future value of universities

12/03/2012 § 1 Comment

What will be the value of going to university in the future? The internet makes it incredibly easy to produce, reproduce, and spread information. I have the Library of Alexandria from my desktop, even from my phone. Why do we need universities?

Of course, universities themselves have noticed the situation. MIT is giving stuff away; New Zealand universities are trying to figure out how to deliver courses over the internet.

I think, paradoxically, that all this free information is good for the future of universities.

Let’s use a simple model. Universities provide graduates with two things: knowledge and signals. The internet provides people with knowledge but no signals. As the internet becomes better, it reduces the cost of producing information. This shifts the information supply curve out and reduces the cost. However, the signal supply curve is unaffected. Therefore, the price of signals relative to information actually increases. The premium for a university degree rises, even for similarly knowledgeable people.

There are two ways this might not be true in the model. First, internet learning can start producing its own signal. This is the point of finding ways to verify people’s identities and work on-line. If you can do that, then you may be able to produce a university-like signal. This will likely involve technology that is more invasive of our privacy. In fact, people may be willing to forgo some privacy in order to have better verification.

Secondly, the demand for information could also shift. What you know rather than where you went to school could become more important. This would require that knowledge become a more important factor of production than whatever signalling represents. However, the importance of networks and agglomeration in the modern economy argues for the reverse. Relationships are still important, and probably becoming more highly valued.

It’s about scarcity. University education is still scarce; information is not. Relative prices will shift to reflect the scarcity.

Universities have always had competition: correspondence schools, public libraries, autodidacticism. None of these has knocked universities off their perch, because none of them produces the same signal. I doubt the internet will, either.

Raj Chetty at GEN

15/12/2011 Comments Off on Raj Chetty at GEN

The Government Economics Network held a conference yesterday. Raj Chetty from Harvard University presented on his research into schooling, test scores, teacher abilities, and pupils’ subsequent earnings.

His research (summary here) found, not surprisingly, that kindergarten test scores correlated with later earnings. More interestingly, the earnings correlated with the scores of the other children in the kindergarten class. What made this finding intriguing was that children were randomly assigned to their kindergartens. Because of the design of the education policy, the researchers could discount selection bias. This was a great example of quasi-experimental research following public policy changes, exactly the sort of thing Tim Harford has advocated.

Chetty also presented on later research that concerned teacher quality and its effects, using a longitudinal dataset of pupils’ performance. They constructed a measure of teacher ‘value added’ from changes in pupils’ test scores. That measure correlated with later earnings (+), teen pregnancies (-), home ownership (+), and more. Again, really fascinating quasi-experimental design and interesting techniques to separate signal from noise.

Also, he had a somewhat hopeful message. Better teachers can improve pupils’ outcomes after controlling for parental characteristics. So, education should be able to improve intergenerational class mobility. What’s more, the test scores produced a measure of ‘value added’ that provides information about teacher quality. That gives us a way to measure teacher performance that isn’t hopelessly correlated with pupils’ abilities and socio-economic status.

But, I have some quibbles:

  • as tests have become more linked to pay and performance, the incentive to manipulate results has increased; teachers and administrators have responded to those incentives. So, this research may be a good look at the past, but may not help for the future. (To be fair, the presentation linked above does contain ‘Test manipulation’ as a concern, but IIRC it wasn’t on the GEN presentation)
  • they show that parent characteristics do not correlate with teacher value add (slide 24). I found this worrying, rather than a vindication of their metric. If high incomes buying homes in nice neighbourhoods with high property taxes doesn’t also buy good teachers, then they have uncovered a serious government&market failure
  • Chetty discussed the fact that the results were on the order of a percentage point or two in income. He pointed out that the difference between trend and actual GDP is a few percentage points (in the US) and we think that’s a problem. Therefore, the impact of good teachers is also economically significant. That wasn’t a bad line to take, but I am more interested in how ‘good teacher’ lines up against other influences on pupil success, like parental income and parental education
  • in particular, I would be interested to know how teacher value added compares with or interacts with expectations of pupils. The Pygmalion effect (in both directions) could be either a major contributor to ‘value added’, or could be an additional effect that is either more or less important.

A big hand to GEN for their first conference. By the metric ‘questions generated’, it certainly had value-add.

More on poverty and education

14/12/2011 Comments Off on More on poverty and education

Germane to the recent posts on poverty, childhood, and charter schools are this post at Crooked Timber and the linked op-ed at the NY Times. This is the paragraph that caught my eye:

Data from the National Assessment of Educational Progress show that more than 40 percent of the variation in average reading scores and 46 percent of the variation in average math scores across states is associated with variation in child poverty rates.

The NAEP has a great data website. I didn’t do the analysis reported in the NY Times, but did make this graph:

What are we to make of this? On the one hand, it is easy enough to say that children’s intelligence varies with the parents’, so we would expect school achievements to be correlated. If parental earnings are also correlated with their own education, then family poverty is ‘naturally’ correlated with children’s test scores.

On the other hand, better schools can improve children’s education (is that a tautology?). So, we are once again at the idea that we need to figure out what works for which children. That’s where the posturing over charter schools — and again, in the Dom Post this morning — annoys me. This black-and-white from both sides gets us nowhere. Teachers are not angels placed upon the earth with a sacred calling. Charter schools aren’t perfect incentives incarnate. These are people working in invented institutions with multiple goals and incentives, working things out as they go.

I have an idea. Rather than National Testing (TM), let’s do exit interviews with pupils. I’m sure the Human Resources industry can gin something up. Then we can get some data on what children actually think of what’s being done in their name.

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