Macro Roundup

Note the University of Florida is in Gainesville - so the teacher is likely just teaching the professors kids, “…I wanted to understand how this otherwise average public high school in Florida had managed to win 13 of the last 14 national math championships. The extraordinary thing about the Buchholz math team is how ordinary Buchholz is. It’s ranked 66th among schools in Florida and outside the top 1,000 across the country, according to U.S. News & World Report. But at the annual championships of Mu Alpha Theta, the national math honor society, the Buchholz kids have trouble counting the shiny objects they lug home…The big difference between a traditional honors class and Mr. Frazer’s class is the way students learn to approach tricky problems. He teaches accuracy, but he also teaches speed, since competitive tests are timed. He believes that pattern recognition is a more useful skill—in math, and in life—than cloning questions his students might have seen on their homework the night before. Here’s a basic example involving a famous math problem: What’s the sum of every integer from 1 to 100? You could answer the question with brute force and punch all those numbers into a calculator, but students who are trained to think outside the box would instinctively look for symmetry. They would see that pairs of 1+100 and 2+99 and 3+98 add up to the same total and would simply multiply 101 by 50. They get the correct answer of 5,050 in a fraction of the time. “Everyone has this idea that we practice constantly,” Mr. Frazer said as his students plowed through problem sets on their summer vacation. “It’s not true. We use our time efficiently.”…”

Ben Cohen, "How a Public School in Florida Built America’s Greatest Math Team,"Wall Street Journal, July 14, 2022, https://www.wsj.com/articles/the-secrets-of-americas-greatest-high-school-math-team-11657791000

How a Public School in Florida Built America’s Greatest Math Team

GAINESVILLE, Fla.—It was a sticky Thursday afternoon in the middle of summer break when dozens of teenagers walked through the doors of their high school. One of the world’s most dominant teams was about to start math practice.

There was probability in one classroom and pre-algebra next door, code-breaking down the hall and number theory around the corner. And there were few adults to be found anywhere. The students would spend the rest of the day teaching each other.

I had also come here to learn from them. I wanted to understand how this otherwise average public high school in Florida had managed to win 13 of the last 14 national math championships.

The Buchholz High School math team is a dynasty built by one teacher with a strategy for identifying talent, maximizing potential and optimizing the American system of education.

Will Frazer popped out of his flaming red Corvette as his students were trickling into the classrooms. A bond trader on Wall Street in the 1980s, Mr. Frazer retired young and moved to Florida, where he became a scratch golfer and lived the dream for a decade. Then he got bored.

He took a job at Buchholz coaching golf, switched to teaching math, quickly formed a math team, applied the lessons of his experience in finance and turned a bunch of teenage quants into a fearsome winning machine.

“The difference between what I do now and what I did on Wall Street is that I used to get paid money,” said Mr. Frazer, 63. “Now we get trophies.”

The extraordinary thing about the Buchholz math team is how ordinary Buchholz is. It’s ranked 66th among schools in Florida and outside the top 1,000 across the country, according to U.S. News & World Report. But at the annual championships of Mu Alpha Theta, the national math honor society, the Buchholz kids have trouble counting the shiny objects they lug home.

Buchholz is an outlier in more ways than one. The math team’s run since 2007 coincides with the U.S. slipping to 37th place in the latest international rankings of teenage math performance and China starting to produce more STEM doctorates than American universities for the first time.

The son of an economist, Mr. Frazer believes in competition. He refuses to call the Buchholz math students a club because he wants them to think of themselves as a team. “A club is a social organization,” he said. “A team comes together to win.” And he was out to win.

As he picked the brains of rival coaches whose teams consistently beat Buchholz, Mr. Frazer became obsessed with one question: Why were their kids better at math?

It was because they were teaching math in an entirely different way.

“Here’s the typical model at every school,” he said. “You teach the kids the boring honors stuff during the day, and then you come after school to practice the competitive stuff.” What he meant by the boring honors stuff was the rote memorization and regurgitation that makes Mr. Frazer want to eat his calculator. “Life is not like that,” he said.

The trader in Mr. Frazer saw an inefficiency that he could exploit.

“My thought was I should find out what the best are doing and then figure out what the flaw in the model is,” he said.

With the backing of his school principal and the cooperation of his superintendents, he set about overhauling the Buchholz math department, implementing his own curriculum and hunting for talent at younger ages.

He believes the pipeline for the high school’s math team must begin long before students reach high school, so Mr. Frazer searches for prospects in elementary school and steers them to accelerated math classes in middle school.

“You wouldn’t grab a kid in ninth grade who’s never played football and expect him to be a great high-school football player,” he said. “For most of these kids, this is their football.”

Mr. Frazer’s insight was to connect four levels of education: The kids he scouts in elementary school develop in middle school, compete in high school and take specialized classes from college professors that he brings to Buchholz’s campus. As soon as the system was in place, the team started winning and never stopped.

It turned out there was value in putting a bunch of smart kids in the same room: They feel empowered to make each other smarter.

Many of the gifted kids in his program have parents who work at the nearby University of Florida and push to get on Mr. Frazer’s radar. Others he finds on his own. He tracks down test scores of students in his district, follows the data and recruits high achievers. Some who were discovered by his spreadsheets have since graduated from the Massachusetts Institute of Technology with math degrees and landed on Wall Street themselves.

The mathletes who try out for the team and make the cut are combined into one class section and fly through competitive algebra, geometry and calculus during the school day. Mr. Frazer essentially bends the rules to move faster through harder material and pack more than two years of math into one school year. “I cover everything the state wants me to cover,” he said. “But there is no restriction on covering extra material.”

Here’s a basic example involving a famous math problem: What’s the sum of every integer from 1 to 100? You could answer the question with brute force and punch all those numbers into a calculator, but students who are trained to think outside the box would instinctively look for symmetry. They would see that pairs of 1+100 and 2+99 and 3+98 add up to the same total and would simply multiply 101 by 50. They get the correct answer of 5,050 in a fraction of the time.

“Everyone has this idea that we practice constantly,” Mr. Frazer said as his students plowed through problem sets on their summer vacation. “It’s not true. We use our time efficiently.”

That means taking advantage of an opportunity hiding in plain sight: the summer. Hundreds of students come to school four hours a day, five days a week for a month during vacation. It adds up to 80 hours of extra practice.

There was a buzz inside Mr. Frazer’s classroom when I was there because the teacher at the whiteboard was charismatic—and she wasn’t Mr. Frazer.

Instead, a high-school sophomore named Katie He was instructing middle-schoolers, one of Mr. Frazer’s methods for pulling off a feat that many consider impossible: making math fun.

It’s a universal truth of childhood that nothing is cooler than being around someone a few years older. They may be there because of their parents, but they stick around because of their peers. The younger kids want to impress the students they idolize, and the high-schoolers are compensated for their time in community-service hours. The model is cheap, innovative and wildly effective. It’s as if Billy Beane were running a math team.

Timothy Jin, a rising Buchholz sophomore, wasn’t exactly thrilled by the idea of waking up early for summer math while in middle school. “I obviously thought, like, ‘Oh, it’s going to be another boring math class,’” he said. But he soon realized how wrong he was. Now he’s a teacher at the camp.

Hailey Lin knows how it sounds when people hear about math practice. “But it’s not, like, ‘Oh, my God, I have to do math,’” the Buchholz junior said. She loves the collaborative elements of team competitions and challenging herself against the best of the best. “I thought I was really good at math,” she said. “Then I came here.” (Mr. Frazer described her as one of the best female math students in the country.)

For someone always on the lookout for the latest edge, the pandemic unexpectedly presented Mr. Frazer with one. After the school shutdowns in early 2020, he feared more disruptions in 2021, so he made a curious decision: He resigned from Buchholz—and he kept teaching.

The math team proceeded to win last year’s state and national titles by the widest gaps in the history of the program. The average margin of victory in Buchholz’s previous national titles was 315 points. Last year, it won by 920.

Total freedom from bureaucracy was tempting, but Mr. Frazer missed school enough to return to Buchholz and his old classroom right in time for politicians around the state to pay attention.

“The Buchholz math program should serve as a national model for other schools and districts to follow,” Florida education commissioner Manny Diaz Jr. said.

Buchholz is trying to beat them first. There was math to be done and trophies to be won at the Mu Alpha Theta convention this week in Washington, D.C., where Mr. Frazer bused 70 students for team events and individual subjects ranging from probability and combinatorics (“Prob & Combo”) to differential equations (“Diffy Q”). The star of the team this year happened to be his elder son, Jake, who’s off to college next month, but there were younger whizzes like Ms. He, Mr. Jin and Ms. Lin among the hundreds of students in quiet rooms attacking exams with their pencils.

Mr. Frazer spent years trying to crack the code for making students better at math. He’s still working on it. But one measure of his success is that the best kids on his team are now better than he is.

“Every kid at Alabama is better than Nick Saban at football,” Mr. Frazer said of the legendary coach with the most college national championships. “He just knows how to win better than anyone on the planet.”

By the time their buses were on the road back to Florida, the Buchholz math team had been crowned national champions. Again.

“…Robbed of revenue by price controls, pharmaceutical companies find it where they can—the U.S. The American consumer pays high prices to support research and development that benefits the world. The U.S. invests 44% of the world’s R&D budget for pharmaceuticals, and produces the largest share of patented pharmaceuticals, at any given time accounting for some 40% of the world’s patented drugs…. It has been estimated that if OECD countries lifted their price controls, the number of new pharmaceuticals that would be developed would increase by between 9% to 12% by 2030. This could extend life expectancy of today’s 15-year-olds by up to 1.6 years. To increase prices in price-controlled European countries by only 20% would lead to $17.5 trillion in combined welfare gains for the U.S. and Europe alike….”

Richard Owens, "Why Canada Should Pay More for Medications,"Wall Street Journal, July 17, 2022, https://www.wsj.com/articles/canada-should-pay-more-for-medications-price-controls-oecd-innovation-prescription-drugs-revenue-prices-pharmaceuticals-11658084406

Why Canada Should Pay More for Medications

American lawmakers are threatening to impose price controls on prescription drugs, and it isn’t hard to see why. We Canadians, like others outside the U.S., get our medications at bargain prices—and at the expense of the American consumer, who pays full freight and then some. Americans are tired of free riders, and they deserve a break.

But there’s no way to maintain the vehicle if everyone rides free. U.S. price controls would perhaps benefit consumers in the short term, but at the cost of killing innovation. The only solution is for Canada and other countries to step up and accept their fair share of the cost.

The Patented Medicine Prices Review Board administers Canada’s price controls, forcing drugmakers to sell at a deep discount. Prices of patented pharmaceuticals are almost 3.5 times as high in the U.S. as in Canada. Even so, Canadian prices are among the highest in the Organization for Economic Cooperation and Development—but all non-U.S. members of the 38-country OECD cluster in a narrow pricing band far below America.

Consumers outside America do pay a price for this, as new drugs reach the market more slowly if at all. At any given time, U.S. pharmacies can sell some 90% of available patented pharmaceuticals, compared with about 47% across price-controlled countries (this figure is somewhat higher, 65%, in Canada).

Price controls depress investment for research and development. Out of 56 countries ranked for their contributions to global pharmaceutical innovation, the U.S. ranks first while Canada ranks 27th. A profitable pharmaceutical industry benefits everyone, because R&D spending grows in proportion to profits. More R&D means more new pharmaceuticals, more years of life and health, and less spending on expensive nonpharmaceutical treatments. But the pharmaceutical industry isn’t especially profitable. Automobiles, financial services, information technology and other industries earn far more return on equity.

Robbed of revenue by price controls, pharmaceutical companies find it where they can—the U.S. The American consumer pays high prices to support research and development that benefits the world. The U.S. invests 44% of the world’s R&D budget for pharmaceuticals, and produces the largest share of patented pharmaceuticals, at any given time accounting for some 40% of the world’s patented drugs.

If a country exported a product at a below-market subsidized price to benefit its own producers, it could face a dumping complaint to the World Trade Organization. Trade law has no remedy for price controls by importing countries. But the U.S. could make proportional price reduction for the U.S. consumer a quid pro quo for allowing other nations to import its innovative pharmaceuticals. It could impose export fees equivalent to some or all of the lost wholesale pricing attributable to price controls.

To lower prices again, countries with price controls would have to get together to effect an equitable sharing of price increases in their more open markets. The U.S. could also bring foreign drug producers to support local price reform by implementing a rule requiring that no drug in the U.S. sells for more than it sells in its exporting jurisdiction.

The cost of low drug prices is high for everyone. It has been estimated that if OECD countries lifted their price controls, the number of new pharmaceuticals that would be developed would increase by between 9% to 12% by 2030. This could extend life expectancy of today’s 15-year-olds by up to 1.6 years. To increase prices in price-controlled European countries by only 20% would lead to $17.5 trillion in combined welfare gains for the U.S. and Europe alike.

The world desperately needs international pharmaceutical pricing reform, but there’s a collective-action problem. The cost for Canada or any other single nation to go cold turkey on price controls would be prohibitive. But if nations act in concert, pressure on the U.S. market could be relieved and price increases in local markets managed. Canada and other OECD countries aren’t poor. It’s time for us to pay our share.

Key Finding, "..Do transitory changes in corporate and personal income taxes have persistent effects on output? And what are the channels?The effects of personal income taxes on output are large and significant during the first six quarters but return to zero within two years. In contrast, a corporate income tax cut generates a smaller stimulus on impact but has larger expansionary effects over the medium- and long-term, with peak effects occurring around eight years after the shock.Variable factor utilization is crucial to produce the short-run response of productivity. While the dynamic effects of personal income taxes are short-lived on productivity and negligible on R&D expenditure, changes in corporate income taxes are associated with a sustained, but temporary, rise in R&D spending and a persistent increase in aggregate productivity. R&D is key for the model’s ability to generate a persistent response of productivity and output following a temporary change in corporate income taxes. A standard New-Keynesian model would not deliver pro-cyclical productivity, thereby missing the estimated output responses to either shock...."
The Evidence

“…Using the approach outlined above, we now present our baseline set of empirical estimates about the longer-term effects of cuts to corporate and personal income taxes. We first focus on the response of the average tax rate, GDP and productivity, with the latter being a key and novel focus of our analysis. We will then extend our empirical evidence to examine investment, R&D and consumption to shed light on the most likely mechanism driving the GDP responses. Each further variable is added to the benchmark data vector Z one at the time to avoid a sharp increase in the number of parameters to be estimated. In Figure 1, we present our first set of main results. The figure contains two columns. On the left, we show the IRFs to a reduction in the average corporate tax rate. On the right, we show the results for a reduction in the average personal tax rate. The impact effect is normalized so that both shocks reduce their respective average tax rate by 1 percentage point in the first period. The solid red lines are the posterior medians and the shaded bands refer to 68% and 90% (Bayesian) credible intervals. Impulse response functions are computed using posterior draws of the coefficients A0 and B1. The solid blue lines come from the estimated structural model that will be presented, solved and estimated in Section 5. The first row in Figure 1 reveals that, following a shock to corporate and personal income taxes, the average tax rates decline temporarily. The change in the average corporate tax rate (first column) loses significance after 8 quarters and goes back to zero after around 20 quarters. The changes in the average personal income tax rate are somewhat less persistent, losing significance after 6 quarters and touching zero after around 16 quarters. Despite the different method (i.e. local projections vs. VAR), these results largely replicate the findings in Figures 2 and 3 of Mertens and Ravn (2013), where the results are plotted for the first 20 quarters. In short, the estimated tax cuts are rather transitory….”

The Mechanisms

“….The impulse responses in Figures 1 and 2 replicate the results in Mertens and Ravn (2013) over the first 20 quarters, which is the horizon at which most previous literature stops. On the other hand, we have shown that there are significant longer-term effects of corporate tax cuts that persist beyond the typical IRF horizons presented in earlier work. These persistent dynamics are not, however, evident for the effects of personal tax cuts. In the rest of the paper we investigate what may explain these findings. In this sub-section, we look at a number of additional variables that could offer insights on the transmission mechanism, especially at longer horizons. These are R&D expenditure, investment and consumption expenditure. The endogenous growth literature argues that R&D spending has the potential to generate persistent effects on both output and productivity. On the other hand, studies in the Real Business Cycle tradition emphasize the role of capital expenditure as an important propagation mechanism. Finally, given such longer-term output responses, we would also expect to see persistent effects on household expenditure for corporate tax changes, with short-lived effects from personal tax changes. The findings are reported in Figure 3. The first row shows the impulse responses of R&D expenditure to a corporate tax cut (left column) and to a personal tax cut (right column). The second and third rows show the dynamic effects on investment and consumption respectively. Red lines represent medians and 68% credible sets of the impulse response posterior distributions. Shaded areas refer to 90% central intervals. As discussed in Section 2, each variable is added one at the time to our baseline dataset to avoid a sharp increase in our already richly parameterized local projections….”

James Cloyne, Joseba Martinez, Haroon Mumtaz and Paolo Surico, “Short-Term Tax Cuts, Long-Term Stimulus,”National Bureau Of Economic Researchhttps://www.nber.org/papers/w30246

Jonathan Wai and Jeff Allen, "What Boots Talent Development? Examining Predictors Of Academic Growth In Secondary School Among Academically Advanced Youth Across 21 Years,"Gifted Child Quarterly, August 24, 2019, https://journals.sagepub.com/doi/full/10.1177/0016986219869042

Subgroups Of Interest

"...Although the total sample is predominantly White, subgroup sample sizes are still robust, ranging from N = 8,260 for students from non-English speaking homes to N = 20,895 for African Americans. From 1996 to 2017, significant im- provement in growth was observed for females, males, African Americans, and students with disabilities but not for Hispanic, low-income, and students from non-English speaking homes (Table 4). Relative to the total group (β = 0.035), the improve- ment in growth was less pronounced for African American students (β = 0.011). The improvement for males (β = 0.036) was similar to the improvement for females (β = 0.031); the improvement for students with disabilities was slightly lower (β = 0.028) than the total group improvement. Each subgroup showed more improvement during the later time period (2005-2017) relative to the earlier time period (1996- 2004). The largest differential was observed for Hispanic students and students with disabilities; the smallest differential was observed for students from non-English speaking homes and low-income student..."