Arnold Kling  

We Don't Need No, Continued

Rumor: Government to Buy Bad ... Morning Commentary...

Steven Yamarik writes,

Labour economists have estimated the micro-Mincerian wage equation using different time periods, samples, and econometric techniques. For the US, the private return to schooling ranges from 4 %to 16% with a consensus estimate is around 10%.

The recent construction of state-level physical and human capital stock data has provided the opportunity to apply the macro-Mincerian model to US states. Chad Turner and his co-authors estimated a social return of 12% to 15%, while I estimated a slightly lower social return of 9% to 13%. The closeness of the estimates of the social return to the private return suggests that US schooling generates little to no external return.

For economics teachers, I cannot recommend this article strongly enough. It demonstrates how economists show that something that is good for the public (education) is not necessarily a public good (something that taxpayers ought to subsidize). It would be worth spending 45 minutes explaining this article to a freshman econ class.

Thanks to economics teacher Professor Mark Thoma for the pointer.

Update: Thoma points to some counter-arguments by Richard H. Serlin here and here.

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COMMENTS (5 to date)
John Thacker writes:

Some of the strongest advocates for subsidizing education that I know make essentially the Sen. Obama argument: while the private gains overall (especially if one takes the best-remunerated position) are close to the social return, there are jobs where the social return to more education would be even higher, but people are forced to take the higher-paying jobs that the education qualifies them for instead.

In other words, Harvard Law may make you a much better community organizer, but the tuition (and thus the debt you incur) is commensurate with working on Wall Street, so if you go and work as a community organizer you'll be struggling to pay off your debts and get by (unless you write a best-selling book and get elected Senator).

Surely, though, if you want more highly educated teachers the answer is not to subsidize education for everyone, but rather to raise teacher pay if they're skilled, or to use programs like Teach For America.

dearieme writes:

Good pointer, thanks. Is there any way to estimate the harm done by Universities, as they indoctrinate another generation in left-wing emptyheadedness? Shouldn't one set that against the advantages? Would it count as private or public disadvantage?

Isaac K. writes:

I find this interesting, considering your status as a teacher in a private school.
Though, in principle, I agree with you - people shouldn't be "entitled" to send their kids to private school, as the tax payer shouldn't be forced to provide for another persons child. The problem, to me anyhow, is the inability for market entry, exit, and consumer shifting. If individuals could choose which public school they desire to attend (provided they can transport their child for a reasonable commute rather than an extended bus ride) The market would eventually stabilize, as better performing schools are initially flooded and then tamp down on their offerings.
Eventually we should reach a market equilibrium where better-distributed populations of public schools lead to better distributed levels of resources and a better overall level of education.

Don't get me started on "grade" mechanics.

anon writes:

Freshman econ? How about graduate micro? I heard a professor state pretty flatly that a public library is a public good since the government doesn't charge you to enter (ergo nonrival good, right?).

Oskar Shapley writes:

Subsidizing education is not a good idea, when the subsidized person can bail the system afterwards and you get zero social benefits.

Consider teaching doctors in third world countries. They get free education but are in return expected to work for next to nothing in government hospitals.

What do they do? They emigrate to rich countries, which pay them well yet have never had to bear the high cost of their education.

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