Tuesday, July 29, 2008

Educational attainment and inequality

Today David Brooks again writes about educational attainment over time in the U.S., and I think I understand why I misunderstood his earlier columns.

The first paragraph in a recent NBER working paper by Jim Heckman says it all: "American society is polarizing. Proportionately more American youth are graduating from college than ever before. At the same time, American-born youth are graduating from high school at lower rates than 40 years ago."

If you take a quick look at the educational attainment statistics, comments like Brooks's earlier remarks about declining attainment just don't seem to hold up. This is what I originally found, but the mistake I made was looking just at college attainment, which is only relevant for about 30% or so of the workforce. Apparently closer inspection reveals this divergence in skills between the bottom and the top that Heckman and Brooks talk about.

Credit crunch affects more than just the housing market

Yesterday an article about evaporating bank loans described exactly why a credit crunch is so dangerous to the macroeconomy. Having felt stung by underperforming real estate loans, banks are restricting credit to businesses and consumers.

A telling statistic: the $99 billion decline in credit from $3.36 trillion last year to $3.27 trillion this year comes close to the amount of stimulus in the tax rebates that Congress injected into the economy this year, a number quoted at about $150 billion.

Saturday, July 19, 2008

Who's to Blame?

It's baffling to me why we feel the need to blame something tangible, ideally one or two people, groups, or agencies, for macroeconomic events.

When it's rising gas prices or the declining value of the dollar, we blame speculators who supposedly twist markets in ways they should not be going. In previous decades, we heard officials in developing countries engage in this kind of finger pointing; now we hear it in the U.S. and from members of Congress.

When it's crumbling housing finance, strain on banks, and a recession, as we are seeing today, the blame-game is again in full force. An otherwise thoughtful piece today in the Times on the current macroeconomic crisis argues at the end of the article that we should blame the Federal Reserve for low interest rates during the recession of 2001 that spurred lending.

I'm not sure it's helpful to view macroeconomic events as anybody's fault, because it's precisely the interconnectedness of an entire economy that leads to trouble. And placing blame on the shoulders of a particular subpopulation is not politically healthy for a republic.

Wednesday, July 16, 2008

Talk of more fiscal stimulus

The Times is reporting talk around Washington of another fiscal stimulus package of an indeterminate character. A second bill could include infrastructure spending, a gas tax holiday, corporate tax cuts, or more personal income tax refunds in the form of checks sent to taxpayers.

Although June figures may indicate something different, I wouldn't say that the May personal income report showed much stimulus during the round of rebate checks. Out of a $600 billion increase in disposable personal income that month, only about $41 billion or 6% was apparently spent.

Zimbabwe's descent into economic and political purgatory

Today Tom Friedman took a break from talking about energy policy (which he has done both very frequently and very well) to talk about the continuing deterioration of conditions in Zimbabwe.

He cites an AP report from May gauging annual inflation at 1,063,572 percent, "based on prices of a basket of basic foodstuffs” presumably measured by reporters, to a level where “a loaf of bread now costs what 12 new cars did a decade ago.”

That's right, inflation of a million percent.

That's a multiplicative increase of 100 million.

Imagine a million dollar bill. Now imagine its purchasing power dropping to that of a penny.

More on rotten jobs and female aspirations

Yesterday in the Times John Tierney wrote an article about sex representation and discrimination in academia, and specifically in federally supported research universities.

The twist on the topic in my earlier blog post in June, where the Atlantic book review article discussed rotten jobs and females understandably opting out of them, is that one might view being a physics research professor as a rather rotten job. Or at least, not preferable. The article cites a study that found no sex differential in entrance into the computer industry once an individual's preferences for "tinkering with inanimate objects" were controlled.

One can certainly question whether these preferences are the product of nature or nurture. Is it possible that preferences are just different at birth between males and females? Or are they "socialized in"?