“Unintended Consequences represents the most cogent and persuasive analysis of the Financial Crisis to date.” - Andrei Shleifer, 1999 John Bates Clark Medal Winner
“…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 full-throated defense of economic dynamism.” - The Wall Street Journal
“…a comprehensive explanation of the modern economy.” - Julian Robertson, Founder, Tiger Management
“…a must-read for serious students of economic policy.” - Glenn Hubbard, Dean, Columbia Business School, and former Chairman of the Council of Economic Advisers
“…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 very valuable contribution.” - Larry Summers, former Secretary of the Treasury and director of the National Economic Council, president emeritus, Harvard University
“…reminds us that inequality sends a signal of what society lacks most, in America’s case, entrepreneurship and risk taking.” - Lawrence Lindsey, CEO, The Lindsey Group, former Director of the National Economic Council
“…serious thinking for serious thinkers. …a thought-provoking blueprint for growing middle- and working-class incomes.” - Mitt Romney, former Governor of Massachusetts
“Unintended Consequences should be read by anyone who takes for granted the superiority of progressive taxation and has not thought carefully about the trade-offs involved.” - The New Republic
“Unintended Consequences provides a provocative interpretation of the causes of the global financial crisis and the policies needed to return to rapid growth. Whether you agree or not, this analysis is well worth reading.” - Nouriel Roubini, New York University; Chairman, Roubini Global Economics

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In the Salary Race, Engineers Sprint but English Majors Endure

David Deming New York Times

Date Posted:: September 23, 2019
Is Database:: Database

By age 40, male STEM graduates see salaries double to $124,458, yet liberal arts majors catch up, with social science & history majors surpassing $131,154, aided by roles in management, business & law.

While STEM graduates initially earn more, with computer science and engineering majors aged 23-25 earning an avg of $61,744 in 2017 (37% higher than liberal arts peers at $45,032), the earnings gap narrows over time. By age 40, male STEM graduates see their salaries double to $124,458, yet liberal arts majors, benefiting from skills like problem-solving and adaptability, often catch up. The avg salary for all male college graduates at age 40 is $111,870, with social science and history majors surpassing this at $131,154, aided by roles in management, business, and law. This trend highlights the long-term value of a liberal arts education in diverse career paths, suggesting that initial salary advantages in STEM may diminish as liberal arts graduates leverage their broad skill sets for higher-paying opportunities later in their careers.

Takeaways by Macro Roundup^® AI

Computer science and engineering majors aged 23–25 earn 37% more ($61,744 vs. $45,032) than liberal arts peers, yet by age 40 this advantage shrinks as social science and history majors reach $131,154—surpassing male STEM graduates at $124,458—driven by career transitions into management, business, and law roles.
Male college graduates with social science and history degrees earn $131,154 by age 40, exceeding the $111,870 average for all male graduates by 17%, as broad skill sets in problem-solving and adaptability lead to higher-paying positions unavailable to early-career STEM specialists.

"...although liberal arts majors start slow, they gradually catch up to their peers in STEM fields. This is by design. A liberal arts education fosters valuable “soft skills” like problem-solving, critical thinking and adaptability. Such skills are hard to quantify, and they don’t create clean pathways to high-paying first jobs. But they have long-run value in a wide variety of careers. Computer science and engineering majors between the ages of 23 and 25 who were working full time earned an average of $61,744 in 2017, according to the Census Bureau’s American Community Survey. This was 37 percent higher than the average starting salary of $45,032 earned by people who majored in history or the social sciences (which include economics, political science and sociology). Large differences in starting salary by major held for both men and women. Men majoring in computer science or engineering roughly doubled their starting salaries by age 40, to an average of $124,458. Yet earnings growth is even faster in other majors, and some catch up completely. By age 40, the average salary of all male college graduates was $111,870, and social science and history majors earned $131,154 — an average that is lifted, in part, by high-paying jobs in management, business and law...."
David Deming, "In the Salary Race, Engineers Sprint but English Majors Endure,"New York Times, September 20, 2019, https://www.nytimes.com/2019/09/20/business/liberal-arts-stem-salaries.html

Easy A’s, Less Pay: The Long-Term Effects of Grade Inflation

Jeffrey Denning, Rachel Nesbit, Nolan Pope and Merrill Warnick National Bureau of Economic Research

Date Posted:: March 24, 2026
Is Database:: Database
Is Important:: Important

Data from Los Angeles and Maryland linking high school, postsecondary, and earnings records suggest that one class-year with a teacher with 1 SD higher mean grade inflation reduces the PDV of their students’ lifetime earnings by ~$213,872.

We develop two teacher-level measures of grade inflation: one measuring average grade inflation (the year-specific teacher fixed effect showing the teacher’s average contribution to grades after controlling for the student's contemporaneous performance in the focal subject as measured by the corresponding subject test score as well as prior test scores, prior grades, and other background characteristics), and another measuring a teacher's propensity to give a passing grade [which affects primarily students near the bottom of the distribution]. A [separate] cognitive value-added measure [included in the regressions] is a teacher fixed effect capturing how much a teacher raises students' standardized test scores relative to what would be predicted from the students' prior test scores and background characteristics. Grade-inflating teachers have moderately lower cognitive value-added and slightly higher noncognitive value-added. The two [grade-inflation] measures differentially impact students' long-term outcomes. Being assigned a higher average grade inflating teacher reduces a student's future test scores, the likelihood of graduating from high school, college enrollment, and ultimately earnings. A teacher with one standard deviation higher average grade inflation reduces the present discounted value [PDV] of lifetime earnings of their students by $213,872 per year. In contrast, passing grade inflation reduces the likelihood of being held back and increases high school graduation, with limited long-run effects. [Figure 7 in the gallery].

Master’s Programs Are Cash Cows for Universities. Do They Pay Off for Students?

Mark Schneider American Enterprise Institute

Date Posted:: September 10, 2024
Is Database:: Database
Is Important:: Important

Mark Schneider @AEIecon reviews the ROI of master’s degree programs and finds “vast differences among fields of study and among programs in the same field of study.” He argues that policymakers need to provide accurate ROI metrics to applicants.

The absolute increase in lifetime earnings is the average gain in income between students completing the degree and the counterfactual earnings of similarly situated students without the degree. Incorporating the time spent getting a master’s degree, the cost of obtaining the degree, and the probability of completing a program generates an “adjusted ROI.” Taking these costs into account drastically reduces the return to the student—and puts the return for master’s degrees dead last. [But] Averages Hide Lots of Information. Business is the single largest field of study for master’s students; but, on average, business master’s degrees have a negative ROI. But graduates from the top performing programs—including Dartmouth, the Massachusetts Institute of Technology, and the University of Pennsylvania— can earn millions more than graduates from other business programs. Students who choose badly could experience a negative ROI of over $1 million. Even in computer science, the field with the highest overall ROI, graduates from some programs experienced negative ROIs.

Human Capital Spillovers and Health: Does Living Around College Graduates Lengthen Life?

Jacob Bor, David Cutler, Edward Glaeser and Ljubica Ristovska National Bureau of Economic Research

Date Posted:: April 25, 2024
Is Database:: Database

Bor, @Cutler_econ, Glaeser, and @lj_ristovska find a strong negative correlation between the % of college graduates in an area and all-cause mortality, even after controlling for individual education.

[There is] a strong and robust relationship between area human capital and mortality, even after controlling for individual education. More than half of the correlation between area human capital and mortality can be explained by differences in smoking rates and obesity rates across areas, and that [these effects are] strong even after controlling for individual education. More than half of the correlation between area human capital and mortality can be explained by differences in smoking rates and obesity rates across areas. We find empirical evidence for [both] regulatory policies such as workplace smoking bans, and peer effects about the harms of smoking. Health-related behaviors are particularly sensitive to human capital spillovers among younger individuals, implicating the role of changing social norms around smoking and obesity across generations in the widening geographic gaps in health between high and low human capital areas.

Comments On: "Accounting For the Widening Mortality Gap Between American Adults With and Without a BA" By Anne Case and Angus Deaton

Caroline Hoxby Brookings Papers On Economic Activity

Date Posted:: October 10, 2023
Is Database:: Database

Caroline Hoxby argues that Anne Case and Angus Deaton’s recent findings on the divergence btw Americans with a BA and those without is largely driven by a compositional shift that has occurred as more Americans have graduated college.

I find it entirely plausible that selection accounts for most or even all of the widening mortality gap. Measures of achievement have not risen among 12 graders and other high school students for essentially the entire period since we started to measure them in a consistent way (i.e. since the early 1970s). However, the share who obtain a BA degree has increased quite dramatically over the same period. An NLSY [National Longitudinal Survey Youth] exercise shows that non-BAs are increasingly negatively selected. A comparison between the NLSY79 (1979) and the NLSY97 (1997) shows that the distribution of ASVAB [Armed Services Vocational Aptitude Battery] percentiles of non-BAs is shifted to the left for 97 vis-a-vis 79.

Diversifying Society’s Leaders? The Determinants and Causal Effects of Admission to Highly Selective Private Colleges

Raj Chetty, David Deming and John Friedman National Bureau of Economic Research

Date Posted:: July 24, 2023
Is Database:: Database
Is Important:: Important

.@OppInsights finds that the “Ivy-Plus” (Ivy League, plus UChicago, Duke, MIT, Stanford) admit students from the highest income families scoring in the top 1% of SAT/ACT at far greater rates than those from lower-income families.

Children from families in the top 1% are more than twice as likely to attend an Ivy-Plus college (Ivy League, Stanford, MIT, Duke, and Chicago) as those from middle-class families with comparable SAT/ACT scores. Two-thirds of this gap is due to higher admissions rates for students with comparable test scores from high-income families; the remaining third is due to differences in rates of application and matriculation. The high-income admissions advantage at private colleges is driven by three factors: (1) preferences for children of alumni, (2) weight placed on non-academic credentials, which tend to be stronger for students applying from private high schools that have affluent student bodies, and (3) recruitment of athletes, who tend to come from higher-income families. Highly selective public colleges that follow more standardized processes to evaluate applications exhibit smaller disparities in admissions rates by parental income than private colleges that use more holistic evaluations.

Education Has Less to Do With Inequality Than You Think

Paul Krugman Krugman Wonks Out

Date Posted:: May 11, 2022
Is Database:: Database

@PaulKrugman, according to his Wonk Out piece, the gap btw median male college graduate wages and the 95th percentile has widened since 2000, with the latter seeing substantial gains while the former’s real income has stagnated or declined.

Since 2000, wage inequality has risen while the college wage premium has stagnated, challenging the notion that education is a primary driver of economic inequality. Data shows that the gap between wages at the 95th percentile and those of the median male college graduate has widened, with the former seeing substantial gains while the latter's real income has stagnated or declined. This suggests that a college degree is no longer a reliable path to financial success for many, contradicting the belief that college-educated individuals are part of the economic elite. The disparity highlights that factors beyond education, such as structural economic changes, play a significant role in rising inequality. This insight is crucial for policymakers considering student debt relief and broader economic reforms, as it underscores the need to address systemic issues rather than focusing solely on educational attainment.

The Economic Policy Institute had a very useful analysis of this data just before the pandemic. Between 1979 and 2000, there was a rough match between growth in one measure of overall inequality — the gap between wages at the 95th percentile and those of the median worker — and its estimate of the average wage premium for college-educated workers. Since 2000, however, wage inequality has continued to rise, while the college premium has barely changed... my own version of this observation, comparing growth of incomes of households at the 95th percentile with those of the median male college graduate. Now, Americans at the 95th percentile don’t consider themselves rich, because they aren’t, surely as compared with C.E.O.s, hedge funders and so on. Nonetheless, they have seen substantial gains. On the other hand, the typical college graduate — who is, remember, someone who made it through and received an accredited degree — hasn’t.

Paul Krugman, "Education Has Less to Do With Inequality Than You Think,"Krugman Wonks Out, April 29, 2022, https://www.nytimes.com/2022/04/29/opinion/college-student-loan-debt.html

Education Has Less to Do With Inequality Than You Think

President Biden says that he is taking a “hard look” at student debt relief, which probably means that some significant relief is coming. For one thing, Biden promised relief during the 2020 campaign. For another, it’s one progressive priority he can address by executive action, which is important given the extreme difficulty of getting anything through an evenly divided Senate.

How much relief will he offer? I have no idea. How much relief should he offer? I’m for going as big as political realities allow, but I understand that too generous a debt write-off might produce a backlash. And I have no confidence that I know where the line should be drawn.

What I think I do know is that much of the backlash to proposals for student debt relief is based on a false premise: the belief that Americans who have gone to college are, in general, members of the economic elite.

The falsity of this proposition is obvious for those who were exploited by predatory for-profit institutions that encouraged them to go into debt to get more or less worthless credentials. The same applies to those who took on educational debt but never managed to get a degree — not a small group. In fact, around 40 percent of student loan borrowers never finish their education.

But even among those who make it through, a college degree is hardly a guarantee of economic success. And I’m not sure how widely that reality is understood.

What is widely understood is that America has become a far more unequal society over the past 40 years or so. The nature of rising inequality, however, isn’t as broadly known. I keep encountering seemingly well-informed people who believe that we’re mainly looking at a widening gap between the college-educated and everyone else.

This story had some truth to it in the 1980s and 1990s, although even then it didn’t account for the huge income gains at the top of the distribution — the rise of the 1 percent and even more among the 0.01 percent. Since 2000, however, most college graduates have actually seen their real incomes stagnate or even decline.

Education Has Less to Do With Inequality Than You Think: Extended Excerpt Image 1

Furthermore, not all college graduates have had the same experience. Some have done pretty well, but many have seen no gains at all:

Education Has Less to Do With Inequality Than You Think: Extended Excerpt Image 2

I have my own version of this observation, comparing growth of incomes of households at the 95th percentile with those of the median male college graduate:

Education Has Less to Do With Inequality Than You Think: Extended Excerpt Image 3

Now, Americans at the 95th percentile don’t consider themselves rich, because they aren’t, surely as compared with C.E.O.s, hedge funders and so on. Nonetheless, they have seen substantial gains. On the other hand, the typical college graduate — who is, remember, someone who made it through and received an accredited degree — hasn’t.

So here’s how I see it: Much of the student debt weighing down millions of Americans can be attributed to false promises.

Some of these promises were scams pure and simple; think Trump University. Even those who weren’t outright cheated, however, were pulled in by elite messaging assuring them that a college degree was a ticket to financial success. Too many didn’t realize that their life circumstances might make it impossible to finish their education — it’s hard for comfortable, upper-middle-class Americans to realize how difficult staying in school can be for young people from poorer families with unstable incomes. Many of those who did manage to finish found that the financial rewards were far smaller than they expected.

And all too many of those who fell victim to these false promises ended up saddled with large debts.

Of course, there are many Americans who have suffered from rising inequality. I wouldn’t argue that college debtors are greater victims than, say, truck drivers who have seen their real wages plunge or families stuck in declining rural areas and small towns. And we should be helping all of these people.

Unfortunately, most things we could and should be doing for Americans in need — like extending the expanded child tax credit — can’t be done in the face of 50 Republican senators, plus Joe Manchin. Student debt relief, by contrast, is something President Biden can do. So he should.

By age 40, male STEM graduates see salaries double to $124,458, yet liberal arts majors catch up, with social science & history majors surpassing $131,154, aided by roles in management, business & law.

Why do STEM's early salary advantages disappear by midcareer?

Takeaways by Macro Roundup® AI

Data from Los Angeles and Maryland linking high school, postsecondary, and earnings records suggest that one class-year with a teacher with 1 SD higher mean grade inflation reduces the PDV of their students’ lifetime earnings by ~$213,872.

Related Articles:

Mark Schneider @AEIecon reviews the ROI of master’s degree programs and finds “vast differences among fields of study and among programs in the same field of study.” He argues that policymakers need to provide accurate ROI metrics to applicants.

Related Articles:

Bor, @Cutler_econ, Glaeser, and @lj_ristovska find a strong negative correlation between the % of college graduates in an area and all-cause mortality, even after controlling for individual education.

Related Articles:

Caroline Hoxby argues that Anne Case and Angus Deaton’s recent findings on the divergence btw Americans with a BA and those without is largely driven by a compositional shift that has occurred as more Americans have graduated college.

Related Articles:

.@OppInsights finds that the “Ivy-Plus” (Ivy League, plus UChicago, Duke, MIT, Stanford) admit students from the highest income families scoring in the top 1% of SAT/ACT at far greater rates than those from lower-income families.

Related Articles:

@PaulKrugman, according to his Wonk Out piece, the gap btw median male college graduate wages and the 95th percentile has widened since 2000, with the latter seeing substantial gains while the former’s real income has stagnated or declined.

Takeaways by Macro Roundup^® AI