Reihan has some post-interview thoughts, including:

At the very least, colleges and universities should be required to release data on whether or not students demonstrate a significant improvement in learning between enrollment and graduation -- and if they don't, they should be barred from receiving federal student loan money.

To understand what Murray does in Coming Apart, imagine this analogy:

A social scientist visits a Gulf Coast town. He notices that the houses near the water have all been smashed and shattered. The former occupants now live in tents and FEMA trailers. The social scientist writes a report:

The evidence strongly shows that living in houses is better for children and families than living in tents and trailers. The people on the waterfront are irresponsibly subjecting their children to unacceptable conditions.

When he publishes his report, somebody points out: "You know, there was a hurricane here last week." The social scientist shrugs off the criticism with the reply, "I'm writing about housing, not weather."

Across the developed world, we see the wages of the bottom half (and in some cases more than half) have stagnated, even as gains have accrued to the top 20%, bigger gains to the top 5%, and the biggest gains to the top 1%.

A social scientist visits a Gulf Coast town. He notices that the houses near the water have all been smashed and shattered. The former occupants now live in tents and FEMA trailers. They're also malnourished because they keep leaving their food on the beach, where the evening tide quickly carries it out to sea.  The social scientist writes a report:

The evidence strongly shows that the hurricane is causing severe malnutrition.  Back when these people had houses they kept their food inside.  The government is turning its back on the indirect effects of natural disaster.

When he publishes his report, somebody points out: "You know, those hungry people could keep their food in their tents at night." The social scientist shrugs off the criticism with the reply, "I'm writing about malnutrition, not food storage."

Whether politicians ignore the poor and pander to the middle class or scare the middle class into thinking they are as bad off as the poor, the result is likely to be the same. Most of our policies will continue to be mis-targeted, as analyses by the Pew Economic Mobility Project and CFED have demonstrated. In turn, they will explode the deficit, leaving less money to promote upward mobility among the poor. And those policies that take the form of tax breaks for investing in savings or education will further price the poor out of markets for mobility-promoting assets--whether higher education or homes--by subsidizing investment the non-poor would have made even without tax incentives. Think "mortgage interest deduction".

Timothy Taylor has more on the politics of tax reform. We could make our tax system more progressive and more efficient at raising revenue. But it is always in the interest of political entrepreneurs to claim that the affluent are threatened as it is, so we cannot take away their precious mortgage interest deduction or make the tax breaks for education expenses and health insurance less regressive.

First, note their use of the word "forced." That panic didn't force the federal government to do anything. The feds chose to intervene. But by using the word "forced," the reporters make it sound as if the regulators are trying to avoid ever being "forced" into something again.

Second, the panic arose because, in 2008, the money market funds were trying to hold on to a $1 per share value and it looked as if they might not be able to. So many people, including me, quickly took their founds out at the $1 per share value to avoid a small haircut. But shares in money market funds are not, repeat, are not like checking accounts or savings accounts. The people who own the funds have no legal obligation to give $1 when you redeem. If earnings fall enough, they might be able to afford only 99 cents or 98 cents or 97 cents. This is called "breaking the buck."

Had the feds not intervened by shoring up the money-market funds, some of the money-market funds would probably have had to cut to a number like 98 or 97 cents. That would have stopped most of the panicked withdrawals. And many people would have learned, or been reminded of, the difference between a checking account and a money-market fund.

Instead, the SEC proposes to stick with moral hazard and add the further regulation that government-caused moral hazard often leads to.

We can't seriously think that people are narrowly and permanently self-interested, because the costs of enforcing agreements and constantly guarding against fraud or theft would be overwhelming.

We might grant the alternative simple view as describing the intentions of most political actors. Still, representative democracy may do a poor job of arriving at good results, because intentions do not necessarily map well to consequences.

Suppose we are looking at Energy Secretary Steven Chu's granting of government-guaranteed loans to energy companies. As Robert Murphy explains, such loans are bad economic policy even if there are no defaults, and even if there was no political favoritism involved.

When political actors are motivated by the public interest to allocate resources, we should not jump for joy. Instead, we should shout in protest.

Robin has spent decades proposing unconventional policy deals.  His track record is an abysmal failure.

Imagine that economists were surveyed and had to choose how they'd best like to describe economic policy recommendations, as:

1. Morals - Arguing for the morality of actions,
2. Deals - Helping groups find and make deals, or
3. Showing Off - Academics do hard things in order to be certified by other academics as impressive, so that students, patrons, and readers can gain status by affiliation with them. Economic policy analysis is such a hard thing.

I'd bet that at least 25% would choose option #2, and even more among those whose style leans sci/tech.

With those three options, I'd expect the breakdown to be roughly 15% morals, 80% deals, and 5% showing off.  But that's just because Robin omits two popular response options:

4. Social Welfare - Identifying the policies that are best for society as a whole.

5. Smart Partisanship - Identifying the most efficient way to advance the political goals you identify with.

With these extra options on the table, I'd bet on a breakdown of 5% morals (which sounds medieval to most economists), 20% deals, 5% showing off, 50% social welfare, and 20% smart partisanship.  Do you disagree, Robin?

P.S. Maybe we could get this on the next Kauffman bloggers' survey?

In the comments, wd40 writes:

During WW2, there was forced saving (war bonds) and investment went into the war effort. Hence, the robust economy of 1946 when consumers could draw drawn their savings and consume items that were not not available during the war. Naive regressions did not sufficiently account for this pent up demand.

The problem is that the part about the drawdown of savings is wrong. Here's what I wrote in my Mercatus study, "The U.S. Postwar Miracle."

Keynesian economists also explained why their glum postwar predictions hadn't come true by arguing that people drew down their savings to finance their "pent-up demand" for the various goods they could not have during the war: cars, tires, refrigerators, stoves, and so on. In 1943, Paul Samuelson, in the article quoted at the beginning of this paper, laid out the idea that pent-up demand for consumer goods would cushion the blow of demobilization. Cited in almost every textbook on U.S. economic history, this explanation has become the orthodox one. There's a problem with this explanation, though: it doesn't fit the evidence.

There are two parts of this explanation. The first, which is plausible, is that there was pent-up demand due to the heavy rationing that the government imposed during the war. People were ready to buy cars, for example, after having not been able to do so for over three years. But Samuelson pointed out that this would be a short-term cushion at best. Of course, one could argue that the two years from 1945 to 1947 were short term. But then, after this pent-up demand was satisfied, there should have been a major drop in economic activity and a major increase in unemployment in the medium term. That didn't happen. The unemployment rate was 3.8 percent in 1948 and kicked up to only 5.9 percent in 1949.

The second part of the explanation is that people drew down their savings that they had accumulated during the war. But the term "savings" is what economists call a stock, whereas "saving" is a flow. If I draw down my savings this year, not only do I not save anything this year, but I also spend some of my stock of savings. So, if people were
drawing down their savings, they would have a negative rate of saving. They didn't. While the personal saving rate did fall substantially from a wartime peak of 25.5 percent in 1944 to 9.5 percent in 1946 and 4.3 percent in 1947, it remained positive.

My closest colleagues seem to mostly take a morals view, but many of my students like a deals view. I think I see a correlation whereby academics who lean toward a sci/tech style tend to favor a deals view, while those who lean toward a humanities style tend to favor a morals view. Sci/tech styles tend more toward math, precision, and local incremental contributions toward specific things and plans, while humanities styles tend more toward bigger pictures, wider-ranging applications, broader interpretations, and joining larger conversations.

In sum, how you think about economic recommendations may depend on whether your thinking leans near or far. It seems deals are near, while morals are far, and sci/tech folks lean near, while humanities folks lean far. Precise formal analysis is more near, while flexible more-metaphorical discussion is more far. Particular suggestions for particular conflicts of particular groups is more near, while general more accessible discussion about what choices tend to be good or bad is more far.

My claim: Robin's "dealism" is actually an extremely "far" doctrine.  The doctrine is so far, in fact, that Robin keeps missing some basic facts:

Fact #1: Robin has spent decades proposing unconventional policy deals.  His track record is an abysmal failure.  Correct me if I'm wrong, but to the best of my knowledge:

• Zero Hansonian deals have been adopted.
• Zero Hansonian deals have come close to adoption.
• Zero Hansonian deals have been embraced by any normal person.  His proposals appeal almost exclusively to fans of economics, libertarianism, futurism, and science fiction.
  

The reason for Robin's failure is pretty obvious: Most human beings are far too conventional and stubborn to even consider Robin's suggestions.  And instead of trying to overcome this hurdle, Robin habitually raises the hurdle by criticizing conventional attitudes.  (The latest example).  No realtor would do this.

Making things even worse, a DOE stimulus adviser, Steve Spinner, whose wife's law firm represented Solyndra on the application, repeatedly pushed for the original loan guarantee to be approved. For example, Spinner wrote an email to an OMB staffer in August 28, 2009 (just before the official approval) asking, "How [expletive] hard is this? What is he waiting for? Will we have it by the end of the day?"
This is from the February Econlib Feature Article, "Lessons from Solyndra," by Robert P. Murphy.

Another excerpt:

Despite the efforts to cast Solyndra as a lone bad apple, the Department of Energy has guaranteed other renewable energy projects that later collapsed. However, even if the DOE program had always backed "winners"--meaning that no borrower ever defaulted, and so taxpayers never contributed a dime--it still would have encouraged an inefficient use of resources.

when you make signaling cheaper, agents' natural response is to signal more intensely or on another dimension.

With that in mind, I do not see how lowering the cost of signaling for people with the trait does anything other than cause people with the trait to choose the low-cost signal. The problem with a low-cost substitute for a diamond is that it lowers the cost of signaling for people without the desired trait (which is a willingness to buy an expensive gift).

If I come up with a low-cost way to earn a badge that signals intelligence, conscientiousness, and conformity, and that badge can only be earned by people with those traits, then my badge should find a market. One challenge is that when few people use the badge, it seems to signal non-conformity. Thus, the early adopters of my cheaper badge do not do as well as they should. But over time, there are two possibilities. One is that the conformity hurdle cannot be overcome, so that the incumbent signaling mechanism remains dominant forever. The other possibility is that eventually a tipping point is reached, and enough people use the new badge so that it no longer signals nonconformity. At that point, the market position of the old badge rapidly deteriorates.

I think that we will arrive at the second equilibrium at some point. However, predicting when it will occur is difficult.

1. Where Bryan sees college as a useful signaling device for those who are cognitively gifted, I see it as a useful segregation device for the Vickies.

As I've said several times, I see college as a useful signaling device not just for intelligence, but for two "Vicky" traits: conscientiousness and conformity.  Which makes me wonder: If college is where the Vickies go, won't college be a strong signal that you're a Vicky?  If so, Arnold's model morphs into mine.

2. The segregation model predicts that as the society gets wealthier, the dollar cost of college will get higher. The signaling model would not necessarily predict that. In fact, it would predict that the market would try to find less expensive signals.

Au contraire.  Not only does the the signaling model predict that a higher payoff for college will increase demand for signals; it predicts that if the price of signaling falls, people need to increase their quantity of signaling to remain separate from the pack.  As I've explained before:

Many economists assume that market forces will somehow figure out a way to make signaling costs disappear.  But as far as I can tell, they never explain why signaling costs would be easier to eliminate than any other costs.  And on reflection, the truth is precisely the reverse: Signaling costs are especially hard to eliminate.  Why?  Because when you make signaling cheaper, agents' natural response is to signal more intensely or on another dimension.

Let me illustrate my claim with a prediction: The typical engagement ring will always cost several weeks' income.  If industry figures out how to cheaply synthesize gold and diamonds, we'll start making engagement rings out of something else - platinum and rubies, or ivory and T-rex teeth.  Why?  Because one major function of engagement rings is to signal commitment with an expensive gift!  To separate the sheep from the goats, the signal has to be expensive enough to convince the goats to give up.

Arnold again:

3. The segregation model predicts the emergence of institutions like Boston University and George Washington University, which require much more money than brains to attend, and yet which have fairly high prestige, considering.

I'm happy to admit that, in addition to their other functions, colleges are social clubs.   I suspect that this social club function is especially important for religious colleges (think Brigham Young) and less-selective private colleges.  But even if students in "clubby" colleges are implausibly apathetic about impressing future employers, belonging to any selective club almost automatically sends a signal.  As long as (a) the average graduate of BU or GWU possesses special traits that employers value; and (b) employers can't costlessly measure these traits, a BU or GWU degree will pay off in the labor market.

4. I think that if either the utilitarian model or the signaling model of higher education were correct, I would be sure to collect on any bet I make with Bryan about the demise of colleges. If college as we know it manages to persist for another two decades, it will be thanks to the segregation model.