The Perfect and the Free

About the Author

Jacob Vigdor is Professor of Public Policy and Economics at the Sanford School of Public Policy at Duke University, and a Faculty Research Fellow at the National Bureau of Economic Research.

Curriculum Vitae

The great race & GPA dustup

My Duke colleagues Peter Arcidiacono and Ken Spenner have been getting a lot of attention lately for their unpublished study documenting differences in behavior among Duke undergraduates.  In case you haven't been paying attention, the study examines patterns of persistence within a student's intended major, and outcomes such as GPA.  The controversial aspect of the study is its finding that African-American students are significantly more likely to switch away from majors such as science and engineering (and economics) and towards subjects in the "softer" social sciences and humanities.  Somewhere along the line these majors were labeled as "easier," which is unfortunate.  For many, including myself, parsing Foucault is more difficult than taking a derivative.  A more accurate, and possibly less controversial, way to describe the difference between the "hard" and "soft" majors is that students tend to receive better grades in the latter. For example, consider unsung Duke basketball alum Nick Horvath, who famously double-majored in English and Physics.  The odds are that a student like Horvath would have a higher GPA in English courses than in Physics courses.

What brought the Arcidiacono/Spenner study to light, of course, was a reference in an amicus curiae brief for an affirmative-action related case.  So naturally there are deeper points to think about than just the study at hand.  Affirmative action is utilized primarily because most of the other admissions criteria we use in the selective-higher-education business make it tough for disadvantaged students to compete (the choice of terms is intentional -- these days, it is pretty easy for affluent families of any race to find their children a spot in a selective college).  Not to mention the fact that we have these enormous sticker prices that scare many otherwise qualified but poor applicants away.

Universities like Duke are giving an unfortunate meaning to the concept of an "elite" college.  There are notoriously few students from low-to-moderate income families on our campus.  You might respond by saying students from these families are less likely to be qualified to attend, but the counterpoint would be exactly why do we think that the University's highest purpose is served by focusing admission decisions on those with near-perfect GPAs and test scores?

The University's mission should be to admit those students for whom the education they stand to receive will make the greatest difference.  This does mean we need to pay attention to whether students are ready for the rigors of the education we provide.  But think about the typical son or daughter with two professional parents who attended a private high school or a public school in a district serving houses so expensive that it may as well have been private.  Is it going to make much difference in their lives if they attend Duke rather than a somewhat less prestigious alternative?  Given the advantages they have already enjoyed in life, the best bet is that they will be fine either way.  In other words, a Duke-caliber education will make very little difference to them in the long run.

In the end, I don't think there is any evidence of erroneous thinking in the Acridiacono and Spenner study.  The erroneous thinking arises from the presumption that "elite" colleges should admit those who have already found their way to the top, rather than those for whom our education might actually show the way.

Broadband is not the answer.

I had to slap my head in disbelief at a few of the arguments made in yesterday's New York Times by Susan P. Crawford, law professor and former advisor to the Obama administration.  In case you didn't see that article, the basic argument is that the lack of wired (or more accurately computer-based) broadband access would doom the disadvantaged to a life of unemployed carbon-emitting squalor, followed by a hasty death abetted by the inability to schedule a doctor's appointment.

OK, where to start.  First of all, historians will one day view the advent of the internet as yet another blow to the unskilled or semi-skilled worker in America, to go along with foreign competition and trade, declining unionization, the decline in the real minimum wage, technological innovations that obviate the need for labor, etc.  The internet destroys jobs.  Tried applying for a job in a video store lately?  Have you even seen a video store lately?  How about a travel agency?  Bookstore?  To be fair, the internet creates jobs too, but you have to be pretty skilled to land one.  Overall, the internet is inherently an inequality-exacerbating technological innovation.

So we have to start from that perspective.  For the disadvantaged, the internet is a bus that just ran them over.  So now the question is, wouldn't they be better off if we gave them a seat on that bus?  I've written previously about the hazards of broadband access for kids, and won't rehash those here.  Instead, let's go through Professor Crawford's arguments one by one.  The inescapable conclusion: this is a bus to nowhere.

1. Without broadband, you can at best stream a movie on your smartphone, and that uses up most of your data allowance.

Absolutely true.  And without a set of golf clubs, it is also hard to play a round at Pebble Beach.

2. Within a decade, it will be hard to schedule a doctor's visit except online.

Based on my interactions with the American health care system, I just don't see it happening.  But suppose it's really true.  The good news is that a huge proportion of the technologically illiterate will die before this happens.  No, seriously -- it's the elderly who really have the most difficulty with new technology.

3. It's hard to take a virtual class, or get a college degree, from the comfort of your own home without broadband.

I'm sure that's true.  But again, the good news is that we're talking about young people here, who are reliably savvy with tech stuff and increasingly hard to find in those sparsely populated areas with poor internet service.  And the jury is still out as to whether one of those University-of-Phoenix-style virtual degrees gets you anything anyway.

4. You won't be able to monitor your energy usage or CO₂ emissions.

I'm sure this is an issue that keeps many disadvantaged Americans awake at night.

5. Job applications and interviews will soon be conducted exclusively online.

If you're hiring a new assistant professor for your law school, I could really see this happening.  But again, the greatest threat to the disadvantaged is not that they'll need the internet to get a job, but that the internet will destroy that job in the first place.  For those un-outsourcable jobs, like serving food or cleaning up after people, the best candidates will always be those close by, and it's hard to envision your local Marriott holding interviews for cleaning staff via videoconference.

6. It's hard to start a business using only a smartphone.

That's probably one reason why most people who start businesses have more capital than the $0.00 it takes to acquire a smartphone.

7. It's hard to participate in a virtual business meeting using only a smartphone.

I would posit that most people who participate in virtual business meetings are either (a) self-employed entreprenuers or (b) employed.  The entrepreneurs face the capital constraint thing.  If the employed are working for a firm that can't afford a computer with wired internet, then they need to think about sending out resumes, which brings me to

8. It's hard to type up a resume using only a smartphone.

Fortunately, the smartphone can be used to call up the Craigslist website, where in virtually any city it should be possible to find a used computer and printer that together will set you back no more than a couple hundred bucks.  Stationery sold separately.  Oh, and if you're employed I've heard stories about people using the company's equipment to not only type up the resumes, but print them out or email them as well!

To close this off on a serious note, it is absolutely true that the market for broadband internet has some problems with insufficient competition.  The textbook solution to lack-of-competition problems, however, does not involve government subsidy -- particularly for a service primarily geared to entertain us, not make us more productive.

 

 

Can tuition keep rising?

Back in 1950, an "average" (median income) family sending their child to Duke University would have paid an amount equivalent to 15% of their income for the privelege.  Thirty years later, the median family would have paid about 20% of their income to send a child to Duke.  Tuition rose quite a bit over this time period (from $500 to $4,230), but median income almost kept up.

After 1980, Duke's tuition pulled far ahead of the average family's income.  Today, Duke's tuition equates to 63% of the median family's income.

Of course, a student from a family with "median" income can expect to receive significant amounts of financial aid, most of it in the form of grants rather than loans, from Duke should they attend.  The rapid escalation of tuition thus represents a fundamental shift in pricing policy.  Back in 1950, universities basically charged one price to all students and expected them to pay it.  Today, universities assess prices according to a sliding scale.  In economic parlance, they are price discriminators.  Tuition is no longer set at a level that most families can afford; rather it reflects what the wealthiest students can pay.

The turning point in the evolution of tuition, around 1980, coincides with a turning point in the income distribution.  Around that time, the income of families in the top 0.1% (one-in-a-thousandth) of the distribution began to soar.  Thus, while tuition as a share of the average family's income has tripled in thirty years, as a share of income for families at the 99.9th percentile, it has barely budged.

Because of financial aid, one might be tempted to dismiss the escalation of tuition costs.  Financial aid keeps college affordable for average families, while price discrimination permits the university to extract plenty of cash from those who can afford it.  There are three reasons to be worried about tuition, though.

1. Sticker shock.  Those of us in the know recognize that tuition is not relavent for low-income families, who can expect generous aid almost anywhere they go.  But the low-income families themselves might not.  Tuition is highly publicized; the magnitude of financial aid packages less so.  Moreover, the gateway to financial aid is the FAFSA, a daunting form in dire need of streamlining.
2. Families caught in the middle.  At a place like Duke, eligibility for need-based financial aid runs out at family income levels around $200,000 -- somewhere above the 95th percentile of the national income distribution.  In today's economy, it may be difficult to shed a tear for families at the 97th percentile, but their experience has been very different from those at the 99.9% level. Incomes for these types of professional-but-not-executive families have not changed much over the past 30 years, adjusting for inflation, while inflation-adjusted tuition has quadrupled.  At Duke, about half of all undergraduates receive no financial aid -- implying that a large proportion of them are drawn from this slice of the income distribution.  This may not be so worrisome for society as a whole, but elite universities really need to think carefully about putting the squeeze on such a critical segment of their customer base.
3. Public percpetions.  Universities and their faculty are often derided as being out-of-touch with broader society.  The tailoring of tuition prices to elite income levels, the use of tuition revenue to fund country club-level amenities for undergraduates, and the corresponding under-representation of students from lower-income families on campus, do not help this image problem.

Can tuition keep rising?  The easy answer is yes, so long as there are a sufficient number of families willing to pay it.  Elite private universities benefit from the perception that they offer a higher-quality education than other alternatives.  I like to think that this percpetion in fact reflects reality, but for our business model to survive it is the perception that matters.  Nearly four years after the dawn of the "great recession" there is no signal that demand for a Duke education has waned.

One could advocate for deep cuts in tuition, to return back to the good old days of 1950-1980.  That would require places like Duke to cut their tuition by more than half.  Universities pursuing that type of strategy might receive great PR, but in reality such a maneuver would do very little to help lower-income families.  Financial aid will always be the most important method of helping those families.  A tuition cut would bestow benefits primarily on those families paying full price -- at the 95th percentile of the income distribution and up.

Tuition cuts -- or even just a stall in the rate of tuition increase -- are thus not justified by either market conditions or equity considerations.  The escalation of tuition is based on a foundation of perceptions, however, and perceptions can change quite rapidly.

Will the "new artisans" save the global economy?

Everybody loves small businesses.  To the Occupy {your location here} protestors, mom-and-pop establishments represent the authentic alternative to soulless corporations.  To tea partiers, small businesses are the entities most vulnerable to taxation and regulation.  Statistics show that small businesses create a lot of jobs.  It is impossible to conceive of an anti-small-business lobby in America today.

What's more, in certain corners of the United States this is a golden age of small business.  Durham, NC is one of those corners.  We have a vibrant community of small-scale businesses doing a wonderful job of selling bread, wine, popsicles, chocolate, grass-fed hamburgers, beer, handicrafts, and so forth.  We have a thriving year-round farmer's market.  You can say much the same thing about many other cities -- Seattle, for example, has an astonishing array of small business-people plying artisan trades.

These "artisan" small businesses compete directly with big corporations.  They survive by offering higher-quality merchandise to a clientele that values quality.  Because they do not employ mass-production techniques, and often insist on higher-quality raw materials, their wares are more expensive than what you might find at McDonald's or Wal-Mart.  The 99-cent McDouble competes directly against the (local-pasture-raised, antibiotic-free, with a patty made in the restaurant's kitchen and not at a factory) $6 "Bull City" burger.  A $125 pair of Bill's Khakis competes against the imported Dockers that go for $20 on sale at JC Penney.

Technology has played a critical role in the establishment of the new artisans.  Up until a couple of years ago, a stop for lunch on the road in an unfamiliar town would typically involve a fast food outlet.  Today, armed with a smartphone, one can seek out the best mom-and-pop restaurant in any town -- or even track down a food truck serving great grub with almost no overhead.  The potter who once relied on foot traffic can now rely on web traffic (not to mention the availability of inexpensive worldwide shipping).  Free information is clearly the artisan's friend.  Cheap transportation is more of a two-edged sword.  It's what helped Amazon kill bookshops and Wal-Mart kill almost everything else.  But it also frees the artisan from the tyranny of having to rely only on local customers.

One vision of the next full-employment American labor market would look heavily to the artisans.  After eliminating most of our own jobs by inventing production processes that obviate the need for all but the cheapest, least-skilled labor, maybe we'll discover that we like the old products, made the old-fashioned way, better.  We'll gravitate toward a pattern of economic activity that looks more like the days before Henry Ford's invention of the assembly line, just without all the racial discrimination, toxic effluents, communicable disease, etc.

There's one problem with this vision, and it all goes back to the fact that artisans are expensive.  Not every family will pay $5 for a loaf of bread when they can get one for less than $2 at the grocery store. It is not coincidental that the new artisan meccas also happen to be cities closely tied to booming post-industrial industry.  For the artisans to survive, they need a clientele with large--or at least modest-- amounts of disposable income.  In Seattle, New York, London, and the Research Triangle, you've got that.  In the withering small towns and former industrial cities of America, you don't.

There's a second problem, which just goes with the small-business territory.  Small ventures are risky, and many artisan entreprenuers may find they need to try a few times before they succeed.  If you work for Ford or Goldman Sachs, and you are competent at what you do, your job is almost certain to be there for ten years or more.  You can't say the same thing about any artisan business.

So, artisans by definition live a precarious existence, and to survive need either people earning big paychecks -- from the corporate entities of the world -- or to convince the larger majority of citizens that it is worth cutting back on certain areas of expenditure in order to eat better food and own sturdier stuff.  Will the average American family give up the annual trip to Disney World in order to afford better but much more expensive goods?  Will they downsize their homes and cars?  The neo-Victorian-Utopian vision of an economy based on thriving little shops (each with their side business in internet sales) will work on a grand scale only under two conditions.  First, consumers must be willing to part with at least some of their post-Victorian niceties: big houses, big vacations, and plenty of cars.  Second, at least some workers must be willing to accept certain aspects of employment in the Victorian era that we'd sooner forget: long hours, low pay, and little job security.

The future of technology in the schools

I've enjoyed reading Matt Richtel's series of in-depth articles on the industrial complex pushing educational technology at school and in the home.  Research -- including my own -- has shown that access to home computers is detrimental to student achievement in fundamental academic subjects.  And there have been many studies of educational software programs, only a few of which show any significant benefit to learning-by-computer versus the old-fashioned way.

Computers may be pretty good at using information provided by a student to figure out how best to use that student's time.  A good teacher can do the same thing.  A great teacher can do even better than that.

Here's the problem, though.  Great teachers are more expensive than computers.  A desktop computer equipped with top-notch educational software might run $2,000, tops.  The computer probably lasts for about four years, and each year it can probably serve an average of four students -- that's the computer-to-student ratio in the typical American school.  So, to educate one student for one year, the technology option runs somewhere around $125.

By comparison, the cheapest kind of teacher -- an inexperienced rookie, who is not very likely to be "great" in the first year on the job -- runs at least $30,000.  Even in a class of 30 students, that's a cost of $1,000 per student per year.  The "great" teachers will typically have more experience, and might also have spiffy credentials like Master's degrees that pump up their pay without really helping them become better at their job.  What's more, for every "great" teacher there will also be teachers a few rungs below the "great" level who are nevertheless paid just as much, because they have the same experience and degrees.

Given the budget crunch underway in most school districts, the movement away from expensive teachers and toward about-equally-effective-but-much-cheaper computer instruction is inevitable.

The real trouble with this trend is that computers are best at instructing kids to do things that computers already know how to do.  A computer can figure out whether you got your math problem right, but it has a harder time figuring out whether you've properly parsed Descartes.  And if all you know how to do is stuff computers can do instead, your economic fate doesn't look all that much better than the teacher your computer replaced.

School suspensions aren't as bad as you think

Big news today regarding a study issued by the Justice Center of the Council of State Governments.  The main takeaway points are as follows:

(1) a large number of students are subjected to suspension or expulsion.

(2) a disproportionate number of students punished by suspension or expulsion are black or Hispanic.

(3) suspended students are at elevated risk for dropout and other negative outcomes.

If you look at these points without thinking, the obvious conclusion (which becomes even more obvious when you look at the name of the organization that conducted the study) is that school discipline is a miscarriage of justice that contributes to the poor educational outcomes of disadvantaged groups.

If you jump to that obvious conclusion and think a bit more, you realize that the implication is that deans of students -- or whichever school administrator is responsible for meting out punishments to misbehaving students -- must be virulently biased against these disadvantaged groups.

Both the obvious conclusion and its corollary are wrong.  That is the conclusion of research by Josh Kinsler at the University of Rochester, who conducted a much more careful study of school discipline in North Carolina public schools.  Here are the real takeaway points you should remember any time you think about school discipline.

(1) School discipline officers are not racially biased.  Blacks and Hispanics tend to be suspended more often because they attend schools where discipline is applied more strictly across the board.  The strictest schools are those that serve the most high-risk student populations.  They punish harshly to deter bad behavior.

(2) Suspending misbehaving students improves the learning environment for others.  The distractions caused by misbehaving students detract from the achievement of others.  Suspensions are not a socially wasteful denial of education.  By removing select students from the learning environment, they improve it for others.

(3) The students subjected to suspension are, in fact, not harmed by their removal from school.  For most suspended students, poor academic performance predates their disciplinary experience by a matter of years.  If legislatures passed laws banning suspension, these students would continue to drop out at high rates and do poorly in school.

Josh's work goes so far as to argue that a relaxation of school discipline standards -- the recommendation implied by the Justice Center's study -- would in fact widen the black-white test score gap. The relaxation of standards would lead to a higher proportion of disruptive students in schools serving minority populations, and their presence would drag down average test scores in those schools.

The 10% down payment blues

I know it has been a very long time since my last post... I was moved to write today by this strange piece of reasoning from the Center for Responsible Lending (HQ right here in Durham, NC).  The basic story is that down payments are bad because it takes people too long to save for them.  According to their calculations, it would take a schoolteacher 14 years to save up a 10% down payment for a $173,000 house.

Here's the problem.  Said schoolteacher walks into a lender's office in 2025 with $17,300 and asks for a loan.  The answer will most likely be no, and here's why.  "Conventional" lending standards dictate that monthly payments for principal and interest should not exceed 28% of your monthly income.  At current (incredibly low, by historical standards) interest rates -- 4.375% is the quote I got -- the teacher's monthly payment would be $840: too much!

Bottom line: a teacher with an annual income of $33,530 can't afford a $173,000 house, even if they put 10% down.  If we relax the down payment requirement, the monthly payment will have to go up -- we still haven't solved the probelm: teacher can't afford house.

Not by him or herself, anyway.  Most teachers I know live in two-earner families, wherein the presence of a second income vastly increases the ability to save for a down payment and make monthly payments thereafter.

Anyway, why exactly is it a bad thing for people to rent rather than own?  Now that we've deflated our little property bubble, the truth can be told: the rate of return on real estate is highly variable and awfully low in the long run.  Advocating home ownership as a means of forced savings and asset accumulation makes little sense.  I'm all for encouraging people to save more, but why make the centerpiece of a savings strategy such a risky investment vehicle?

If you give a kid a computer...

 A couple of years ago, I started work on a paper (co-authored with my Duke colleague Helen Ladd) examining the impact of home computer and broadband access on student achievement.  We finally got the paper into decent-enough shape to distribute a couple of weeks ago and made it broadly available.

The results have drawn a bit of attention.  It turns out that access to computers and broadband is, on balance, not good for kids.  This is not a super-surprise for those who have followed earlier careful studies on the subject.  Our study advances those because it is a larger-scale study on relatively young (age 10-14) kids based in the US.  

A couple of notes to bear in mind when thinking about this study:

1. We observe what happens to kids when computers show up in their household sometime between their 5th and 8th grade year.  Ask yourself, what child in the past decade did not have a computer in their household by the time they reached 5th grade?  Less than a quarter of kids fall into this category, and they are a disadvantaged group -- both in terms of income and in terms of their performance in school.
2. You may be inclined to think "well, maybe their reading and math scores suffer, but they are going to learn valuable computing skills."  But ask yourself this.  Are kids who struggle with elementary-level reading and math (see above) suddenly going to turn into master programmers?  For every handful who do, how many handfuls will there be who don't?
3. Could computers potentially be beneficial?  Absolutely.  Early access to computers will help a small, elite group of today's students turn into tomorrow's master programmers.  Most of the kids in this small, elite group already have access to a home computer by the time they are 10, though, because they tend not to be drawn from the poorest 20% of the income distribution.
4. Could we possible devise a plan to take kids from disadvantaged households and give them the computing knowledge they need to survive in the 21st century labor market?  You bet.  But that plan probably should involve more than tossing them a laptop and telling them to have fun with it.

One last note: this study is old news to people in Australia.

My new book on immigration

 Here are a couple of things you might not know about immigrants in the United States these days:

1. On the whole, today's immigrants arrive with better English skills than the Southern and Eastern European immigrant groups of a century ago.  Those who don't know English when they arrive are less likely to learn, though.
2. Even though the process of becoming a citizen is much more complicated than a century ago, the naturalization rate has barely budged over the past century.  Of course, some immigrant groups naturalize much more often than others.
3. For the first time in history, the nation's largest immigrant group earns less, on average, than the typical native-born person.  Even Italian immigrants in 1910 made more money than average Americans, even though they tended to be poorly educated.  Their secret?  They moved to cities, where the big opportunities were, while the native born were still predominantly in rural areas.
4. None of the most common proposals for immigration reform will do much to encourage immigrants to assimilate -- economically, culturally, or civically.  There is an alternative, though.

How do I know these things?  I wrote an award-winning book about them!  Here are a few ways you can learn a bit more about it:

If you have two minutes, you can watch the highlights of a presentation I made at the John Locke Foundation in Raleigh this past Monday.

If you have more time than that, you can watch the entire presentation here.

And if you have about $30, you can buy your own copy.

If you're interested but broke, check your local library!

Why I hate daylight savings time

It was a lovely morning in North Carolina today.  I went for a run around 7, through a misty drizzle, with a quite comfortable ambient temperature of 60 degrees, admiring the sights of (literal) green shoots on lawns, the sounds of tree frogs in the wetlands near our neighborhood, and the sights of hundreds of robins, mockingbirds, cardinals, and other winged creatures flittering about while trying to "get" the proverbial worm.

I really had to enjoy this chance for a springtime weekday morning outing, because it's the last one I'm going to get all year.  You see, come Monday we will have switched to daylight savings time, whereupon the hour of 7 AM will transpire in predawn darkness.  Not until April 25 will the hour of 7 occur a half hour past daybreak, as it did today.  By April 25th, Durham has already made its transition to the mugginess of summer.

Why?  Why must I -- why must everyone -- forgo these morning pleasantries?  In the name of "daylight savings."  A policy conceived in the depths of world war, with the goal of reducing fuel consumption.  A policy expanded by Congress a few years ago, promoted with promises of environmental benefits.  Well, guess what.  Daylight Savings Time doesn't save energy.  Yes, we don't have to burn as much whale oil, or use whatever light source we've developed to replace 1914-era technology, but we end up air conditioning our homes while spending our extra hour of daylight doing the same thing we would otherwise do at the same hour every evening -- sitting in our houses and watching TV.  Daylight savings time has been promoted as reducing traffic fatalities, but a note published in the New England Journal of Medicine notes that the risk of traffic accidents will be 9% higher -- not lower -- this coming Monday, relative to this week.

There is a more basic argument here.  In a democracy, there is a constant balance to be struck between independent initiative and collective regulation.  We believe that people should be left to their own devices, unless they want to start doing something that harms other people.  With this thought in mind, let's think about the rationale for government regulation of time.  Yes, it makes sense for government to coordinate people's clocks.  I really appreciate not having to ask someone what time it is in their own personal time zone before I schedule an appointment with them.  Sure, it would be fun to have my own personal time zone, but just think of the harm I'd do to other people by telling them I'd meet them for dinner right after work, at 4:17 AM JVT?  Standardized time zones are the way to go.

But what's the rationale for using the power of government to make everybody wake up earlier?  Because we want to conserve energy?  Well, there is this small matter that DST doesn't save energy.  Moreover, even if it did, why can't we rely on people's own instinct of thrift to influence behavior?  Everybody knows the old "early to bed, early to rise" maxim -- if people realize personal benefits from waking up early, they'll do it on their own, without annual prompting from the government.  Because we want people to drive home in daylight rather than darkness?  Again, presuming that most people would do almost anything to avoid being in a car accident, and that many employers are quite happy to have people go home early if they also show up early, why can't we trust people to do the right thing on their own account?

For fourteen years in my youth, I lived in the great state of Indiana, which until very recently was one of only a few enclaves throughout the nation that did not observe DST.  I feel confident in asserting that I have experienced no long-term ill effects of this experience.  Sadly, the Hoosier state recently succumbed to peer pressure and adopted the practice.  Perhaps one day we will all rise up and cast off the shackles of tyranny, returning to an era where a sundial could really tell you the accurate time all year round, and a 7 AM jog on March 12th was just as pleasant as a 7 AM jog on March 15th.