jamesz

University enrolments are down

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The FT reports that university enrolments in the UK have dropped 6% over last year, following a similar fall in the previous year. It speculates that this may be, in part, because “the rise in fees from £3,375 to an average of more than £8,000 appears to be suppressing demand.” No doubt the reduced subsidy has had an effect but we need to be careful with language here. The FT’s reporting suggests that demand has been ‘suppressed’ by the fall in the Government’s fee subsidy. It might be more accurate to say that the subsidy no longer inflates demand to the same extent.

The difference is important because the main justification given for subsidies is that tertiary education generates some wider benefit to society. The important question then is how great the benefit is relative to the subsidy, and so how much we want to subsidise to boost demand. Talking about ‘suppression’ implicitly assumes the optimality of the previous subsidy and ignores the distortionary effect that the subsidy has had on the market for tertiary education. If the externalities from tertiary education are small then it is entirely possible that the fall in student enrolments represents a welfare gain for society.

jamesz

Harford on economic forecasts

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Writing in the FT he says:

I think forecasting in a complex world is a poor test of expertise because luck is the overwhelming success factor. … The wonderful thing about a forecast is that both the forecaster and his audience feel that something profound has been expressed. And nobody will remember the forecast anyway.

I’m not sure that’s wholly true: forecasters seem to spend a lot of time disavowing their predictions and claiming that the narrative is the important thing. Of course, they still publish headline figures and institutions such as the Bank of England, who only publish a range, get regularly criticised for being too vague. Even if you don’t believe Harford’s explanation, those facts need to be reconciled somehow.

jamesz

Performance evaluation of teachers

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From the AER:

…observable teacher characteristics like graduate education and experience are not typically correlated with increased productivity [among teachers]. Many researchers and policymakers have suggested that, under these conditions, the only way to adjust the teacher distribution for the better is to gather information on individual productivity through evaluation and then dismiss low performers. This paper offers evidence that evaluation can shift the teacher effectiveness distribution through a different mechanism: by improving teacher skill, effort, or both in ways that persist long-run.
…
We find that teachers are more productive during the school year when they are being evaluated, but even more productive in the years after evaluation. A student taught by a teacher after that teacher has been through the Cincinnati evaluation will score about 10 percent of a standard deviation higher in math than a similar student taught by the same teacher before the teacher was evaluated.
…
our estimates indicate that postevaluation improvements in performance were largest for teachers whose performance was weakest prior to evaluation, suggesting that teacher evaluation may be an effective professional development tool.

Not a surprising result but it’s always nice to have the empirics to back up your assertions.

jamesz

Costs of unemployment

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Simon Wren-Lewis:

…the long term unemployed typically do not think that at least they have more leisure time, so they are not so badly off. Instead they feel rejected, inadequate, despairing, and it scars them for life. Now that may not be in the microfounded models, but that does not make these feelings disappear, and certainly does not mean they should be ignored. It is for this reason that I have always had mixed feelings about representative agent models that measure the costs of recessions and inflation in terms of the agent’s utility.

Models should inform our interpretation of the evidence, but they are rarely complete descriptions of all relevant information.

Matt Nolan

Again with the middle class …

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Good article in the Sunday Star Times on the middle class in NZ – the author seemed to share some of the sentiments I’ve had in the past (*, *, *, *,*), where he feels that concerns should be for the worst off in NZ not the “doing alright”.

I love this quote:

Of course, this is about statistics – the average. This isn’t you, living from pay cheque to pay cheque, scraping together the school donation, the football subs, the car repayment, the Sky bill, the rent for the bach this Christmas.

Although as a nerd I’d point out we are discussing the median not the average 😉 .  I wonder how many people just nodded and completely missed the sarcasm here …

I found this strange

She argues we have a tax system “very generous” to the rich, with a low maximum tax rate. And she points to Working for Families cutbacks, our unusual lack of an initial tax-free chunk of income, and an increased amount of compulsory student loan repayments – now at 12 per cent – being taken from wage packets, which particularly disadvantages women returning to work.

I realise Susan St John is a good economist, and I’ve heard many good things about here.  But the top tax rate is just over 43% (33% on income, then 15% of 67% for GST), and we definitely have a progressive tax system – I mean, does 43% of each additional dollar sound low to people?  It may be lower than we believe is optimal, but I wouldn’t put it in the low camp.

Also, we don’t have an initial tax free rate because it is not a good idea. I’d point out that non-targeted cuts of this sort will lead to higher effective marginal tax rates for the same level of final revenue – reducing efficiency for no gain.  Essentially a tax free band forces us to increase EMTR’s for the same average tax rate … this is very undesirable.

And I could then say that instead we should target benefits and not get rid of tax on the first $X of everyones income.  In layman’s terms getting rid of tax on the first $X of income means that tax rates have to be higher on other income levels to achieve the same level of spending, it would be better to directly give the very poorest money but keep tax on the very low level of income – this would achieve the same equity outcomes at a lower cost.

When it comes to tax we should also think of tax incidence here – if the very poorest only get paid the minimum wage and would otherwise have no bargaining power, then the minimum wage ensures that the entire cut in taxes goes into their pocket!  Without a minimum wage, and with no bargaining power, it would go into the employers pocket.  This is ok, however it both ignores the impact on hours worked and employment, and insofar as those stay the same the same welfare gain could be provided by simply giving low income people a flat stack of income … targeting the benefit rather than creating another tax band.

And finally, student loan repayments and the payment on investment – people have a choice to invest in higher education.  This is only an equity issue if access to education is being restricted due to it, which is not the point being made here.

Final note, I enjoyed saying this:

“It seems strange,” concludes Nolan, “to demand transfers [of wealth] to the middle-class at the same time we’re demonising those unemployed during a recession and making it harder for them to get benefits.”

😀 [Note:  My intention when I said this was to convey the idea that people were saying we should be harder on beneficiaries – the actual change in policy has been more mild, with at most an increase in work testing requirements.  While I think the push to get people to take the “first job available” is unfortunate, and bad policy, what I said to the author here in literal terms exaggerates the actual policy changes that have taken place IMO.  This is of course my fault – so I thought I should clarify here]

Matt Nolan

The dessert co-ordination game

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I was recently out having dinner with my family and it reached the part of the night where we needed to order desserts while some are playing games such as 벳엔드.

I did my usual thing of ordering a beer for dessert, which is all well and good, and it gave me an opportunity to sit around and watch everyone else determine what they were going to have.

It seemed obvious everyone else wanted an actual dessert, people were tossing up between different cheese dishes, with a person occassionally staring longingly at the chocolate cake on the menu.  However, then something very interesting happened – no-one ordered dessert.  Instead, everyone ended up getting coffee, tea, or hot chocolate.

The catalyst for this seemed to be my mother.  After saying to me that she was going to get a blue vein cheese platter she looked up to the person taking orders and asked for a pot of tea.  Immediately I saw other family members respond in a flurry, shouting out for coffee or hot chocolate.  At that moment I realised that my family had just fallen victim to an awful co-ordination failure.

As the waitress went away I said to the table that their choice of dessert was dependent on the choice of dessert other people were ordering – as no-one wants to be the only person digging into a big dessert.  As a result, we have two equilibrium, one where everyone buys a big tasty dessert, and another one where everyone buys a drink and misses out on the cheese or cake.  This is a pure and simple co-ordination game.

First of all, playing these games will increase a child’s computer fluency, which is vital in this day and age. Whatever job they may end up in when they grow up, they will need to be able to use computer systems and software. If you will like to try games that are  rated for adults, you should visit คาสิโนสดของไทย.

First of all, playing these games will increase a child’s computer fluency, which is vital in this day and age. Whatever job they may end up in when they grow up, they will need to be able to use computer systems and software. Whilst playing games online, a child will have to use the keyboard or mouse at the same time as looking up at the screen, for more on online gaming, check here Farmingless.com. This will develop their hand-eye coordination, which can also help them in activities such as sports.

My family members admitted that this was the case, no-one wants to be the only person eating dessert and they also do not know whether the other people want a proper dessert or a drink.  As a result, they are relying on the actions of others.  Although it seems that it would have been, ex-post, parteo optimal to have everyone eating dessert, the people at the table did not realise that – and the fear of the potential cost of being the only person eating dessert had seen my mother switch to only purchasing a drink.  With her decision made, the rest of the table quickly followed her to this sub-optimal equilibrium.

To me the moral of the story is simple, my family should learn to communicate with each other in order to avoid pareto inferior equilibrium in the future.  My families response to this suggestion was simply that I’m a nerd, fair enough.