Macro Roundup

AEI’s Kupiec looks at theppP loans by bank size, “….Small bankppP loan originations far outpaced their overall share of total lending whilelarge bank originations lagged historical norms. Statistical analysis attributes a large share of the variation inppP loan activity to differences in bank operational characteristics, but large differences remain. The unexplained differences could owe to systematic differences in risk management practices or bankppP loan demand. Analysis of data on bank-specific averageppP loan size produces results that are inconsistent with a loan demand explanation. Absent good measures ofppP loan demand, the source of the observed differences in bankppP loan activity cannot be definitively identified using bank regulatory data alone…Surprisingly, analysis of regulatory data on bank averageppP loan size produces the opposite pattern—averageppP loan sizes appear to shrink monotonically as bank asset size increases beyond a $100 billion threshold. The analysis shows very large and highly statistically significant reductions in averageppP loan size for banks larger than $250 billion in assets. While these results seem inconsistent with a loan demand explanation, lacking good measures of bank specificppP loan demand, it is not possible to completely discount the possibility thatppP lending difference owe in part to systematic differences inppP loan demand…”

Paul H. Kupiec, "Did prudent risk management practices or weak customer demand reduce Paycheck Protection Program lending by the largest banks?," American Enterprise Institute, December 15, 2020, https://www.aei.org/research-products/working-paper/did-prudent-risk-management-practices-or-weak-customer-demand-reduce-paycheck-protection-program-lending-by-the-largest-banks/

Good table of equity taken out of banking system (Through 2018) in terms of fines - $166.9B from large US banks (BAML, JPM, Citi, Wells, MS, GS)

DeBoer, "...mobility of individual students in quantitative academic metrics relative to their peers over time is far lower than popularly believed. Students sort themselves into an ability hierarchy at a very early age and tend to stay in their position in that hierarchy for the remainder of their lives, to a remarkable degree. The children identified as the smart kids early in elementary school will, with surprising regularity, maintain that position throughout schooling. Do some kids transcend (or fall from) their early positions? Sure. But the system as a whole is quite static. Most everybody stays in about the same place relative to peers over academic careers. The consequences of this are immense, as it is this relative position, not learning itself, which is rewarded with economic gain by our society....."

He makes the point that it’s an individual’s relative position, not absolute that matters in terms of our ability to use education to address social problems, “…If Harvard (or Caltech or whoever) selected an incoming freshman class, and then aliens came to earth and abducted every one of them, Harvard would just reach into their bag of valedictorians and admit the next rung of students on their list. Those students would presumably have meaningfully lower ability in absolute learning compared to their abducted peers, if Harvard’s selection process means anything3. But they’d be the best relative to who was left. Correspondingly, would that reduced level of absolute learning mean that they wouldn’t receive the advantage that a Harvard degree confers in the labor market? Of course not. They would still be perceived as the cream of the crop relative to labor market peers. You sell your academic credentials in a market; their value is a function of their supply and their demand. We know that the college wage premium is to a large degree a simple function of the ratio between the number of jobs that require a college degree and the number of applicants who have one. (Duh.) The absolute learning represented by that degree is not the relevant criterion. The position of the student in the hierarchy is….”

Freddie on why this is the case, “…Now it seems to me that the most likely, most parsimonious explanation for all of this is genes. I’m not going to try and summarize the entire field of behavioral genetics/social genomics, nor am I qualified to argue in its defense. But there is a very large body of research that lends credence to that idea. (And, as I have said, a very large body of criticism against it.) Again, I consistently find it hard to understand how genetics, which influences absolutely every other part of who we are as organisms, would have literally no impact on cognition and the mind. That this idea is not just prevalent but rigidly enforced as a matter of social dogma is baffling to me. But I am not at all a genetics partisan. I have always said I am mechanism agnostic when it comes to why intrinsic academic aptitude exists. Any manner of explanations could apply to why some of us are intrinsically better at school than others. I am however quite partisan about the fact that intrinsic academic aptitude exists, because both overwhelming evidence and common sense insist that it exists. If the genetic explanation is conclusively disproven tomorrow I will not suddenly start believing that we are all 100% the product of our environments and our teachers, as many liberals believe. I will instead say “OK, what’s the mechanism creating innate ability then?” Because that is the only sensible approach given the evidence. The alternative is the hand-waving mysterianism of referring to shadowy hidden variables no one has thought to measure in the past 150 years of education research. The first step to answering the question of why this happens is to acknowledge that it happens, the overwhelming evidence for a construct of innate academic ability….”

Freddie deBoer, "Education Doesn't Work,"Freddie deBoer Substck, April 12, 2021, https://freddiedeboer.substack.com/p/education-doesnt-work

More, “…Consider this large meta-analysis of techniques attempting to help low-SES students succeed… The dots are the mean weighted effect sizes9 of a given intervention. The red lines are the error bars, which help to tell you if the observed effect is statistically meaningful. If the red line cross the vertical dotted line, we can’t say with statistical confidence that the effect is greater than zero. Which means that of 14 major studied interventions only 6 have statistically meaningful effects at all, and of those 3 are less than.2 of a standard deviation, which means they have very limited practical effects10….”

This is a great chart, “…The persistence of relative academic performance is remarkable. Standardized test scores collected at the age of thirteen are strong predictors of not just future high school and college educational performance but adult outcomes like academic career milestones and economic position, even after adjusting for parental income:…”

Evidence, “..If you’re a college administrator, what is the best predictor of how your incoming freshman class will perform as college seniors on a standardized test of college learning? Their performance on the SAT as high school seniors, of course. What else?The distance between the blue and red regression lines represents absolute learning, how the students at the average college have improved over the course of their college careers7. The relationship between the variables, the tight grouping and angle of the data pattern shows that the relationship between the mean SAT score your students got near the end of high school and the mean Collegiate Learning Assessment8 score your students got near the end of college is quite strong.If your admissions process screened out weaker students coming in, your reward was stronger students going out. Obviously. Were individual student outcomes as elastic as people in the policy and politics world assume, you wouldn’t predict this kind of relationship. Students would go to different colleges and the supposedly dominant environmental variables would overwhelm prior advantage to create very different relative performance. That simply doesn’t happen. What, you think Harvard is going to risk its reputation on something as illusory and intangible as “school quality”?If you’re an administrator at a college that is not selective (the kind of college I went to), you can take heart in the fact that even though your student body is likely on the lefthand side of the plot due to low incoming SAT scores, you can move your institutional average northwards over the course of a class’s career by producing absolute learning gains. Your students will leave knowing more than they did when they came in. But what you probably can’t do - what there’s simply no reason to believe you can do - is teach your students so well that they catch the student bodies of the schools on the right half of the plot. Because those students not only started out ahead, they’re learning at college too, inconveniently. There is no evidentiary basis for the conventional wisdom that schooling can change the performance of students relative to their peers, with any consistency at anything like scale - and it is change at scale that would be required to “fix our education system.” Wonks should perhaps ask themselves why they believe otherwise…”