Edward Conard

Top Ten New York Times Bestselling Author

  • “…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
  • “Unintended Consequences offers deep and well-argued analyses on almost every issue.” - The New York Times
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “Unintended Consequences is far smarter and more thought-provoking than most economics written for the general public” - Greg Mankiw, Harvard University, Former Chairman of the Council of Economic Advisors
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…challenges misconceptions that distort our economic debates.” - Arthur Brooks, President of the American Enterprise Institute
  • “…a fresh argument for the productive value of inequality.” - David Autor, Professor of Economics, Massachusetts Institute of Technology
  • “A full-throated defense of economic dynamism.” - The Wall Street Journal
  • “…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
  • “…a very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
Upside of Inequality Oxford Unintended Consequences

Macro Roundup


Wednesday, May 13, 2020

AI Summary. Sticker tuition at public universities has more than doubled since the mid-1990s, but financial aid rose almost as much, leaving average net tuition for low- and middle-income students up by less than $600 over two decades. The analysis attributes affordability pressures to living expenses that aid has not fully covered.

Jason Delisle American Enterprise Institute
Date Posted:
Is Database:
Database

Financial aid has largely offset the rise in sticker prices of colleges, but hasn’t kept pace with the rise in non-tuition costs. @JasonDelisle

Has financial aid offset rising public university tuition for lower-income students?

Core argument: Average net tuition prices for low- and middle-income students at public universities rose by less than $600 between 1995–96 and 2015–16, as increases in financial aid nearly offset sticker prices that more than doubled since the mid-1990s.

Analysis reveals that claims of sharply rising tuition prices at public universities are exaggerated. While sticker prices have more than doubled since the mid-1990s, financial aid has increased almost as much, nearly offsetting these rises. For low- and middle-income students, average net tuition prices rose by less than $600 between 1995-96 and 2015-16. The real affordability issue stems from rising living expenses, which financial aid has not fully covered. Despite this, financial aid has kept net tuition prices nearly constant for targeted students. The cost of providing education is rising faster than inflation, with federal and state governments bearing these costs rather than students.

Takeaways by Macro Roundup® AI

  1. Average net tuition prices for low- and middle-income students at public universities rose by less than $600 between 1995–96 and 2015–16, as increases in financial aid nearly offset sticker prices that more than doubled since the mid-1990s.
  2. The analysis attributes the affordability problem at public universities to rising living expenses that financial aid has not fully covered, rather than to tuition prices, which aid has held nearly constant for targeted students.
  3. The cost of providing higher education is rising faster than inflation, with federal and state governments rather than students bearing those costs, according to the analysis.

AEI finds the college cost shift to students isn't found in the data. IE that after student aide there hasn't been that much of an increase in the tuition prices that student pay to attend public universities (See Figure 1 and 2) There has been an increase in other living expenses (See Figure 5 and 6) This analysis is limited to low and middle income students

“…The findings in this report show that popular claims about sharply rising tuition prices at public universities are greatly exaggerated. While sticker prices have indeed increased markedly since the mid-1990s (they have more than doubled),financial aid has increased by almost as much—enough to nearly offset the rise in sticker prices.And net tuition prices at these institutions are a fraction of the $10,000 sticker prices prominent free-college advocates frequently cite.....Among low- and middle-income students, average net tuition prices increased less than $600 between the 1995-96 and 2015-16 academic years....The findings also suggest that rising living expenses, not tuition prices, are to blame for major changes in affordability at public universities, a topic that deserves more attention in debates about college affordability.... Financial aid has also increased to cover more of these students’ living expenses, but not enough to fully offset rapidly rising non-tuition costs…Existing financial aid policies have successfully held average net tuition prices at public universities nearly constant between the 1995-96 and 2015-16 academic years for the students whom free-college policies typically target. The increase in financial aid has even been enough to cover more of a student’s living expenses than during the mid-1990s. These findings do not, however, contradict other concerns about the cost of a four-year degree at public universities. The data confirm that the cost of providing these educations are rising at rates that greatly exceed inflation, assuming that sticker prices generally reflect the educational costs that universities incur. While students have not had to pay these rising costs, other entities have, mainly the federal government and state governments to a lesser extent….”

Evidence Against the Free-College Agenda: An Analysis of Prices, Financial Aid, and Affordability at Public Universities: Extended Excerpt Image 1


Jason Delisle, "Evidence Against the Free-College Agenda: An Analysis of Prices, Financial Aid, and Affordability at Public Universities," American Enterprise Institute, May 2020, https://www.aei.org/wp-content/uploads/2020/05/Evidence-Against-the-Free-College-Agenda.pdf

(Steve Comment: I suspect most of the debate about college affordability is driven by household with income >125,000 smart kids chasing elite schools who this doesn’t cover) And as the report points out other entities are covering those financial aid costs.

Thursday, May 14, 2020

AI Summary. Treating job creation as the measure of economic success is a fallacy, since jobs are a cost of production rather than a benefit; US manufacturing output has reached record highs even as employment has returned to 1940 levels because of rising productivity. Policies that preserve jobs through tariffs or protectionism risk weakening the economy.

Mark Perry American Enterprise Institute
Date Posted:
Is Database:
Database

Manufacturing output hits record while jobs return to 1940 levels by 2024. Productivity gains, not job protection, drive economic growth/competitiveness.

Is judging economic success by job creation a fallacy?

Core argument: BLS forecasts show U.S. manufacturing employment returning to 1940 levels by 2024 even as manufacturing output reaches record highs, which the author attributes to rising productivity.

The notion of "jobism," which prioritizes job creation as a measure of economic success, is fundamentally flawed. Despite Lighthizer's belief that American factory jobs will return, BLS forecasts indicate a return to 1940 employment levels by 2024, while manufacturing output reaches record highs due to increased productivity. This reflects the ideal economic scenario: maximizing output with minimal labor input. Jobs, often seen as economic benefits, are actually costs of production and consumption. Embracing Schumpeterian creative destruction, including job destruction, is essential for economic growth and competitiveness. Policies focused on job preservation through tariffs or protectionism risk weakening the economy. Instead, fostering innovation and progress by allowing job destruction can enhance productivity and maintain global competitiveness.

Takeaways by Macro Roundup® AI

  1. BLS forecasts show U.S. manufacturing employment returning to 1940 levels by 2024 even as manufacturing output reaches record highs, which the author attributes to rising productivity.
  2. The author argues that jobs are costs of production and consumption rather than economic benefits, making "jobism" — judging economic success by job creation — a fallacy that Robert Lighthizer accepts.
  3. The author contends that preserving jobs through tariffs or protectionism risks weakening the economy, while allowing Schumpeterian creative destruction, including job destruction, supports productivity and global competitiveness.

"... Despite what Lighthizer thinks, American factory jobs ain’t comin’ back — we’re headed back to the factory employment level of 1940 by 2024 if BLS forecasts are accurate. At the same, US manufacturing output will continue to rise to new record high levels due to increases in factory worker productivity. And that’s really the best of all possible outcomes — increasing factory output with fewer inputs (workers) — and achieves the ultimate economic goal, one that should be celebrated as the most desirable type of economic progress possible. As hard as this concept is to accept for most people, we should never forget that jobs are not a true economic benefit, but are rather a cost or price of production and ultimately of consumption. As Milton Friedman explained, the appropriate national objective is to have the fewest possible jobs in any given industry. That is, we want the greatest amount of output with the least amount of work (and fewest jobs) — think farming...."

Mark Perry, "Robert Lighthizer falls for the ‘jobism’ fallacy," American Enterprise Institute, May 12, 2020, https://www.aei.org/carpe-diem/robert-lighthizer-falls-for-the-jobism-fallacy/

Robert Lighthizer falls for the ‘jobism’ fallacy

In a 1992 Wall Street Journal op-ed (“Help the Economy: Destroy Some Jobs”) featured previously on CD here, here and here, economist Richard McKenzie criticized the misguided political obsession with what he referred to as “jobism” — the modern public-policy philosophy that mistakenly focuses on of the number of jobs as being the “key measure of a country’s economic success or failure.” It’s an excellent and overlooked view of the economy and labor market, and worth revisiting again today in response to US trade representative Robert Lighthizer, who concluded in his New York Times op-ed “The Era of Offshoring U.S. Jobs Is Over” that (bold added):

The era of reflexive offshoring is over, and with it the old overzealous emphasis on efficiency and the concomitant lack of concern for the jobs that were lost. After we have defeated this disease and reopened our economy, we cannot forget the hard lessons learned from this misguided experiment. Over the long run, the path to certainty and prosperity is the same for our companies as it is for our workers: Bring the jobs back to America.

To understand why “bringing lost jobs back to America” is misguided, here are some key excerpts of Professor McKenzie’s 1992 WSJ op-ed (emphasis added):

Economic progress and job destruction go hand in hand. Jobs are destroyed when a better mousetrap or computer program is developed or when work is made obsolete by more efficient or cheaper means of production. No country can afford an idle population. By the same token, no country can afford to treat jobs as so many ounces of gold that must be counted stored and protected from obsolescence.

Job creation (and protection) is a favored goal of our leaders because it appeals to existing political interests and is seductively misleading and counterproductive. It is also one of the easiest goals to achieve. To create or protect jobs, all Congress has to do is to obstruct progress and kill or retard opportunities for competitiveness and entrepreneurial spirit.

Job destruction is shunned as a national policy goal not only because it appears openly hard-hearted (which paradoxically it is not) but also because job destruction is so very difficult to achieve. Job destruction requires ingenuity, creativity and the courage to take a few risks that others will not take. It requires intensive study, hard work and detailed knowledge of the multitude of economic circumstances that can only be known by real people in the workaday hinterlands, not Washington. It requires, in short, the types of skills and understandings that are generally absent in political circles.

Over the past several years, politicians and pundits have called for a renewal of “American competitiveness.” They don’t seem to get the underlying message in the country’s failures in domestic and international markets: America had been destroying too few jobs.

Moreover, they have not yet realized that renewed competitiveness must be built on a commitment to progress, which means relying on people outside the political capitals.

Revitalized competitiveness mandates a willingness to replace much that is old with much that is new. It requires widespread (not wanton) job destruction. And it means that we must view, for example, the loss of several hundred thousands manufacturing jobs over the past two decades as a measure of the success of the industry in dramatically improving productivity and maintaining its world-class status.

When renowned Harvard Economist Joseph Schumpeter lauded the market is a system of “creative destruction” 80 years ago, he meant every word. Destruction — specifically job destruction - is pervasive to any economic system that is creative.

Bottom Line: The philosophy of “jobism” is fundamentally flawed, deficient and misguided because it treats jobs as an economic benefit rather than as an economic cost, and therefore any public policy based on “jobism” that attempts to create, save, or “bring back” US jobs (e.g., via tariffs, protectionism, presidential bullying, tax breaks/incentives, etc.) are destined to make the US economy worse off and weaker, not better off and stronger. To maximize economic growth, vitality, competitiveness, progress, innovation, and dynamism, and raise our standard of living to the highest level possible, we should embrace Schumpeterian creative destruction in all its forms including job destruction.

Economic Reality Check: Despite what Lighthizer thinks, American factory jobs ain’t comin’ back — we’re headed back to the factory employment level of 1940 by 2024 if BLS forecasts are accurate. At the same, US manufacturing output will continue to rise to new record high levels due to increases in factory worker productivity. And that’s really the best of all possible outcomes — increasing factory output with fewer inputs (workers) — and achieves the ultimate economic goal, one that should be celebrated as the most desirable type of economic progress possible. As hard as this concept is to accept for most people, we should never forget that jobs are not a true economic benefit, but are rather a cost or price of production and ultimately of consumption. As Milton Friedman explained, the appropriate national objective is to have the fewest possible jobs in any given industry. That is, we want the greatest amount of output with the least amount of work (and fewest jobs) — think farming.