Sunday, December 22, 2013

Technology, academia and the division of labor

     Over the last several years the impact that technology will have on higher education has become a topic of great interest to educators, policy makers, students and parents. In the December 2013 issue of The Freeman, Mr. Michael Gibson and Dr. Peter Boettke debate the future of higher education and the role technology will play. Mr. Gibson believes that technology will fundamentally transform higher education while Dr. Boettke argues that higher education will continue as it always has with relatively few changes. I agree more with Mr. Gibson than Dr. Boettke and I think that one potential outcome is that technology will allow for a division of labor that has been absent from academia. The researcher who teaches, which is the accurate job description of professors at large research institutions today, may finally be divided into the researcher and the teacher.

           As a current graduate student and instructor it is obvious to me that there are different comparative advantages among newly minted PhD’s and professors.  Like being a good player versus being a good coach, the skill sets of researches and teachers do not necessarily overlap. In the current academic climate nontenured professors are told that teaching matters. But the dirty-little-not-so-secret truth, especially at research universities, is that the strength of your research record determines your ability to obtain tenure. Being a good teacher doesn’t hurt, but it doesn’t help much either. This begs the question; why do some professors have to teach at all?

           In a world of scarce resources academic departments have a finite amount of funds to hire a staff. Thus many of the professors who add more value doing research are required to teach at least some classes even if their time would be better spent doing only research. To ensure that the best research professors spend the least amount of time teaching as possible many universities use cheaper graduate students, lecturers, and adjunct professors to teach as well. But technology may allow universities to take this a step further. If education technology keeps improving and the student experience along with it, it is feasible that professors could someday be divided into teaching specialists and research specialists.

Teaching specialists would be full time professors, but instead of focusing on research they would focus on teaching. Today, many universities simply do not value teaching enough to pay a premium for relatively good teachers in the same way that they will pay a premium for relatively good researchers. However, if technology gains made the best teachers more productive universities would be willing to pay for this increased productivity. Each of these teaching specialists could utilize technology and capital to teach hundreds or perhaps even thousands of students, eliminating the need for professors who have an advantage in research to teach classes. The best teachers, those who are able to adapt and take advantage of the economies of scale that technology provides, would experience gains in income even if teaching is all they did. As higher paid professional teachers they would also be more likely than adjuncts or lecturers to remain at one university for long periods of time. This would allow them to build relationships with students in ways that shorter stints prohibit.

Teaching specialists would also lead to more classroom innovation. Many professors do not want to take the time to invent or experiment with new teaching techniques. This is understandable since teaching is only a small part of their job. Keeping up with the latest literature and research techniques of their respective fields is far more important for their career than keeping up with the latest teaching techniques. But is that a good thing? Should universities value improvement in research but expect parents and students to accept, and pay for, mediocrity in teaching? I agree with Dr. Boettke that the peer to peer and teacher to student interaction found on college campuses is important; but it is not priceless.  If the student experience at universities does not keep up with the improving student experience of online and virtual classes, brick and mortar institutions will find it difficult to charge the premium that they are currently charging. Having a portion of the full time faulty focused on maximizing the student experience in the classroom could be an ace up the sleeve for universities.

I admit that specialization might not be the answer to everything and experimentation will be required to find the right balance. Teaching specialists would improve undergraduate education, but second, third and in some cases fourth year graduate students will need to be taught by professors who are on the cutting edge of their field. Teaching specialists will likely not have the time to maintain that high level of expertise. But I see no reason why a competent PhD holder cannot instruct first year graduate students in many fields. Most of the literature used in first and second year economics courses is at least several years old and often much older. A thorough understanding of this material is well within the reach of teaching specialists who have obtained a PhD, and they will likely teach it better since they will be experts at teaching instead of researchers who teach. I think that teaching specialists would be capable of being educators for undergraduates, masters, and early PhD students.

Economists since Adam Smith have praised the benefits that the division of labor has produced. As a serious student of economics I think it is time that academia realized these benefits. The overlap of teacher and researcher is cumbersome and when compared to other industries it seems anachronistic. I cannot think of any other industry today that so crucially relies on one type of worker to produce such two distinct outputs.  Technology may be just the thing that finally breaks up this marriage of convenience and allows individuals to focus on what they do best. I think the result will be better universities for both faculty, and most importantly, students.

Monday, December 16, 2013

Sherrod Brown + clean energy manufacturing = wasted money

Sherrod Brown is once again touting Ohio's green energy economy:

"Ohio's clean energy economy is also adding jobs at a much faster rate than the state's overall economy: the Ohio’s clean energy economy increased by 8.5 percent from 2007 to 2010, while Ohio's economy as a whole lost nearly 350,000 jobs over the same period, a decrease of roughly 6.1 percent."

 I am not sure why he uses jobs numbers from 2007 - 2010 when we are about to enter 2014. My guess is that the numbers are not nearly as rosy for the clean energy economy from 2010 - 2013 relative to the economy as a whole.

Brown again criticizes China's "unfair" trade practices, lamenting their use of subsidies to prop up certain industries, including green energy. So what is his solution? Offer the same subsidies to U.S. manufacturing:

"A recent report revealed that we can create jobs and revitalize our manufacturing base by investing in the clean energy economy and strengthening valuable energy programs, such as renewable energy standards and federal tax credits for wind and solar power."

 Either he doesn't care or doesn't understand that U.S. subsidies for wind and solar power distort the energy market just as much as China's subsidies do. Misguided subsidies for green energy just distort the price signals that investors rely on to make their investment decisions.

New sources of energy are great as long as their producers are forced to compete based on the true costs of producing that energy. Natural gas is thriving right now and it has a lower carbon impact than oil. It is also cost effective. The same is true for nuclear power. We should not have policies in place that artificially increase investment in wind and solar at the expense of nuclear power, natural gas, and other energy sources that make economic sense.

Sherrod Brown prefers to waste more taxpayer dollars and resources on green energy than to actually help America find new energy sources.

Tuesday, December 10, 2013

Thursday, December 5, 2013

Pope’s anti-capitalism rhetoric is wrong

Since becoming the head of the Catholic Church, Pope Francis has been on an anti-capitalism binge, denouncing it several times over the past 8 months.  All of this despite the preponderance of evidence that free market capitalism has lifted more people out of poverty than any other economic system ever tried. Now I know that economics is not the pope’s area of expertise, but this does not mean that he can’t be criticized. One particularly odd belief of Pope Francis is that capitalism is exclusive, leaving the poor to fend for themselves or be exploited by the rich and powerful:

“Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalized…”

But unlike the Catholic Church (women priests? gay priests?), markets properly understood are incapable of systematic, long term discrimination or exclusion. More specifically, if markets are allowed to work free of intrusive government meddling entrepreneurs interested in earning profits will emerge who will sell goods and services to anyone, regardless of what group they may belong to.

Markets are formed when people with different subjective values and desires meet to voluntarily exchange goods and services. A market economy is simply a collection of markets for different goods and services. Capitalism as implemented by the countries that use is at its core a market economy, and market competition is what ensures the removal of discrimination. There is no racial, cultural, or social group in which each member harbors the same biases or preferences. If one white business owner does not want to sell to a black customer you can be sure that another white business owner will have no issue with meeting that black customer’s needs. The same goes for the Jew, the Italian, the Irish, the Chinese, etc. Systematic discrimination by a business, either on the employment side or on the customer side, is costly. Entrepreneurs under the constant threat of competition cannot afford to not hire the best worker because of their skin color, sex, or sexual orientation. Similarly they cannot afford to eliminate entire groups from their customer base. If they do, some other profit seeking entrepreneur will capitalize on their intolerance by having the best workforce or serving an under-served community.

The only way markets systematically discriminate among consumers is through the consumer’s willingness to pay. The prices of goods are what prevent some people from buying them, and the value added of a worker is what prevents some workers from being hired. But these are things that are largely under an individual’s control. People can increase the value they add to an employer by acquiring more skills and they can increase their willingness to pay by using these skills to earn more income. If there is any exclusion in a country that uses capitalism, it is the result of a poorly designed and implemented welfare state and the exclusion that occurs in the government monopoly of public education.

Monday, December 2, 2013

A comment on human rationality

     Over the last ten years behavioral economics has become quite popular, especially among members of the news media and some left wing academics. The idea that people are in general not rational has been used as a reason to implement various policies, such as the relatively harmless automatic enrollment in company 401K’s to the more intrusive elements of Obamacare and Mayor Michael Bloomberg’s soda ban. The reasoning goes that if people are in fact irrational then certain government policies can steer them towards better choices. This is where the danger to individual liberty lies.
     Behavioral economics takes society down the slippery slope of social engineering. Through experiments some economists and financial researchers claim that they have “proven” that humans are in general not rational creatures and that there is a role for the government to play in everyday decision making. If only intelligent people such as themselves, they argue, are able to pull a string here or adjust a lever there then people can be manipulated into making a better decision than they would otherwise make for themselves. This is absurd. The economic idea of rational is that humans operate under the cost benefit principle, namely that if the marginal benefits of any activity exceed the marginal costs then more of that activity should be done until the two are as close to equal as possible. This principle does not state that humans never miscalculate the costs or benefits of an activity nor does it say that all human beings everywhere will always make what is in hindsight the correct decision. Information is costly to obtain, both in effort and time as well as opportunity cost. If one makes a decision using the cost benefit principle along with the information available to them then they are being rational. If they choose to refrain from gathering more information before making a decision because they feel that the marginal cost is greater than the marginal benefit then that is also rational. Notice that I never said that a person has to make the “correct” decision to be rational. The “correct” decision is often subjective, and for someone to impose their preferences on someone else under the guise of helping that person make the “correct” decision is something that everyone who cares about individual liberty should reject. Only individuals know their true costs and benefits because only individuals know their true opportunity cost. A third party who asserts otherwise is egotistical and a danger to individual liberty and self-ownership.
      Economics as a discipline is interested in understanding and explaining why people make the choices that they do. If laboratory and natural experiments can increase our understanding then as a purely academic exercise they may have some value. But taking the results from experiments that use human beings, and are thus by their nature likely to be flawed, and then extrapolating those results to the population as a whole is dangerous. Behavioral economists looking to make a name for themselves by latching on to the misguided idea that people are not rational are doing a disservice to both economics as a discipline and society. A better goal of economists is to focus on information rather than manipulation. Cheaper, more accessible information will help consumers make better choices about everything from credit cards to health care. The Internet has allowed society to make progress along both of these dimensions and economists should be promoting policies that utilize the rationality of people instead of denying its existence. 

Wednesday, November 20, 2013

Senator Sherrod Brown and wealth destruction

In a recent email I received from Sen. Brown (OH) he talks about wanting to help Ohio manufactures out innovate the rest of the world. His plan for doing this is the typical liberal plan of throwing federal dollars at manufacturing firms and trade organizations.

One such organization, the National Additive Manufacturing Innovation Institute (NAMII) recently opened in Youngstown, OH, a city that has been hit hard by the loss of manufacturing jobs. According to Brown,

"The institute is supported by $30 million of federal funding and matched by $40 million of private funds – and it’s making Youngstown a world leader in 3-D printing manufacturing technology."

 So essentially taxpayers from around the country are contributing their dollars in order to make Youngstown a manufacturing hub again. Do the taxpayers in North Dakota, Massachusetts, or Arizona actually care whether Youngstown is a manufacturing hub again? Probably not.

Every community in every region has wants that could be satisfied with the dollars going to Youngstown, OH. But federal politicians think that it is their job to pick which regions should succeed and what those regions should do. Sen. Brown and others like him think that since Youngstown was a manufacturing town it should stay a manufacturing town, regardless of how much money it takes and how many resources are wasted.

Politicians like Sen. Brown who try to pick winners and losers distort real prices and the disrupt the feedback loops that allow resources to be allocated to their highest valued use. Taking dollars from one region of the country and giving it to another does not create real wealth. In fact, it decreases real wealth because it wastes resources subsidizing industries that can't survive on their own. If 3-D printing manufacturing in Youngstown was really a profitable business opportunity it would be funded by private entrepreneurs who want to make money. When federal tax dollars are used for things like the NAMII it means that money was taken from profitable, value creating business that pay the taxes and given to unprofitable, value destroying business that likely squander the money.

I would like to see Ohio become a manufacturing hub again, but only if it is because the workers, capital, and firms of Ohio can create goods that people are willing to pay for without government help. Sen. Brown's plan of throwing federal money at the problem is a bad plan that destroys wealth. Unfortunately the simple minds of politicians often propose bad plans.

Sunday, November 10, 2013

Another article about adjunct instructor pay

You can read it here.

Unfortunately the editors did not give my article a title which likely reduced the outcry against it. That's a shame since I enjoyed reading the comments last time.

Sunday, October 27, 2013

How to prevent low skilled people from working

Eric Liu, a former speech writer for Bill Clinton, talks about Sea Tac, WA proposal to raise the minimum wage for hospitality and transportation workers to $15/hour.

What is especially annoying about Mr. Liu's article is his complete ignorance of economics. He writes:

"The economic rationale for a minimum wage hike is that it creates a virtuous cycle of increasing demand: When workers have more money, businesses have more customers, which means businesses hire more workers, which in turn generates more customers. Customer creation begets job creation, from the middle out and bottom up."

No serious economist would ever agree with this statement. There is no virtuous cycle of demand created when money is taken from one group (business owners and consumers) and given to another (workers). Productivity increases that lead to higher wages will increase the demand for some goods, but taking money from one person and giving it to another will not increase the demand for all goods and services. It will simply reallocate purchasing power.

See my other blog posts here and here for the economic truth about the minimum wage.

Saturday, September 21, 2013

Wednesday, September 18, 2013

Recycling myths

Here is a post from my Clemson colleague Danielle Zanzalari that debunks some myths about recycling.

Thursday, September 12, 2013

Retired General Petraeus harassed by City University children

It's OK to disagree with people but it shouldn't be done like this. My guess is that most of those children don't even know what they are talking about either.

Here is the article.

Friday, August 30, 2013

Jared Bernstein is a bad, and dangerous, economist

No serious academic economist considers economics a science on par with physics. At best it is comparable to biology; there are some clear, predictable outcomes but because the objects that are studied are constantly adapting and changing extrapolating the results of any particular study to a species of animal as a whole in the case of biology or humans as a whole in the case of economics can lead to erroneous predictions. Many studies need to be done on many different samples under various conditions before economists reach a consensus on anything, and often a consensus is not reached even then. 

Jared Bernstein, a man with no formal economic training but who somehow became VP Joe Biden’s main economic adviser, recently wrote a piece for the Huffington Post acknowledging that economics is not a hard science. Good for him. Yet despite his statement that economics “cannot tell you what will happen, nor will it ever be able to do so”, he basically calls for economists to pretend that they are physicists in a never ending quest to identify and correct market failures. Mr. Bernstein says that “A key component … is the part of economics that I think is the most important: identifying market failures. The best and most useful economists these days are the ones who spot ways in which markets are working badly or not at all.”

I could not disagree more. The government is so involved in markets today that finding a true market failure that is not in reality government induced is like finding a needle in a hay stack. But even if market failures were abundant (they are not), would we really want someone like Mr. Bernstein, a man who admits that even correctly predicting what happens when prices change is beyond the scope of economics, creating and implementing policy? He cannot possibly know what will come of his policies if he thinks that the law of demand is suspect sometimes.

I think economics and the economic way of thinking can correctly predict a lot more than Mr. Bernstein acknowledges. The field of public choice can often predict a politician’s behavior with stunning accuracy. It is often correctly predicted that price ceilings and price floors will lead to shortages and surpluses respectively. The simple supply and demand model can qualitatively predict all kinds of scenarios, even if getting an actual magnitude of the effect proves difficult.

Economics is far more useful than Mr. Bernstein recognizes; not only for its ability to predict behavior but as a way of viewing the world. Unfortunately Mr. Bernstein doesn’t really understand economics and wants to use the economic concept of externalities along with taxes and subsidies to embark on social engineering projects under the guise of “correcting” markets. This is a dangerous endeavor for even an expertly trained economist but for someone holding only a PhD in social welfare like Mr. Bernstein it is absolutely frightening.

Good economics is studying social interactions, voluntary exchange, and analyzing how and why people make choices in a marketplace. Good economics is not some bureaucrat restricting those choices for individuals in a faulty effort to save them from themselves or the “evil” marketplace. Good economics is also about analyzing the secondary consequences of policies. It is not enough to impose a tax on carbon and then say “hey look, we will have less carbon now.” What else will happen? The effects do not stop at the carbon market; they will ripple throughout the economy. A good economist will trace them all out and weigh the costs vs. the benefits. This is something that social engineers like Mr. Bernstein often fail to do. And this is why he is a bad economist.