Economics

Freakonomics on College Part 2: Costs and Benefits

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Freakonomics on College Part 2: Costs and Benefits

Last week, we featured Part I on the Freakonomics episode on the economics of college.  This week Freakonomics discussed the costs and benefits of college education with students, economics, professors and recent grads.  

Here is a sampling of some of those guests interviewed: 

This episode looks at tuition costs and also tries to figure out exactly how the college experience makes people so much better off. . . . 

 

While there are a lot of different voices in this episode, including current and recent college grads, the episode is also a bit heavy on economists (d’oh!), including:

+ David Card at Berkeley, whose education papers are here;

+ Ronald Ehrenberg at Cornell, whose recent paper “American Higher Education in Transition” discusses tuition inflation;

+ Betsey Stevenson; her blog contributions are here, and she tweets too;

+ Justin Wolfers, whose blog writing is here; he too tweets; additionally, he and Stevenson are a matched pair — heading for the University of Michigan, by the way — who also appeared in our “Economist’s Guide to Parenting” podcast, along with daughter Matilda, whom they discuss again in this episode; and:

+ Steve Levitt, 

Freakonomics on College, Fake Diplomas, and the Value of Real Ones

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Freakonomics on College, Fake Diplomas, and the Value of Real Ones

The Freakonomics Radio Podcast, recently re-ran an episode titled, “Freakonomics Goes to College: Part 1.”  Here is description of the podcast:

The gist: what is the true value these days of a college education?

(You can download/subscribe at iTunes, get the RSS feed, listen via the media player above, or read the transcript below.)

As you can tell from the title, this is the first episode of a two-parter. There is so much to say about college that we could have done ten episodes on the topic, but we held ourselves back to two.

The key guests in this first episode are, in order of appearance:

+ Allen Ezell, a former FBI agent who co-authored the book Degree Mills: The Billion-dollar Industry That Has Sold over a Million Fake Diplomas.

+ Karl Rove, the former senior adviser and deputy chief of staff for President George W. Bush. Rove, it turns out, is not a college graduate. He is, however, a published author — of Courage and Consequence: My Life as a Conservative in the Fight.

+ David Card, an economist at Berkeley who has done a lot of research and writing on the value of education.

Bubbles and Economic Theory

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Bubbles and Economic Theory

Recently, the NPR’s Planet Money Podcast spoke with two of the three economists who won the 2013 Nobel Memorial Prize: Eugene Fama and Robert Shiller. Fama and Shiller are an odd combination as they represent very different philosophical positions in the study of economics.  Shiller is a proponent of behavior economics, whereas Fama ascribes to an efficient-market theory.  This episode which discusses economic bubbles is an example of this debate. As the Planet Money team explain, “Shiller is probably the most famous analyst of bubbles; Fama is probably the most famous skeptic of bubbles.”

Here is a description and excerpt from the interview: 

On today’s show, we talk to two of the three guys who won this year’s Nobel Memorial Prize in economics: Eugene Fama and Robert Shiller.

As we and everybody else pointed out when the award was announced, these two are a bit of an odd couple. Shiller is probably the most famous analyst of bubbles; Fama is probably the most famous skeptic of bubbles.

 

Here are a few quotes from our conversations with Fama and Shiller.

Fama:

The word “bubble” drives me nuts, frankly, because I don’t think there’s anything in the statistical evidence that says anybody can reliably predict when prices go down. So if you interpret the word “bubble” to mean I can predict when prices are going to go down, you can’t do it. …

I believe markets work. And if markets work those things shouldn’t be predictable. If I can predict that housing prices will go down, if the market’s working properly, they should go down now … If the market’s working properly the information should be in the prices.

In other words, Fama says, if stock prices get too high, then people should sell stocks, and the price should fall. Presto, no bubble.

But Shiller himself has predicted the two great bubbles of our time. As he told us:

You can have a fairly high degree of confidence. That’s what I felt in the stock market in late 1990s. I wrote the first edition of my book, “Irrational Exuberance,” then, because… and I was rushing to get it out. I told my publisher, Princeton, “Please get this out! Because I want this book out before the crash, not after.” And then again I felt that in the 2000s with housing bubble.

Fama:

So, what happens each time is the media goes in and finds somebody who predicted it. That person get’s anointed. You don’t go back and look at past predictions and see is this just luck.

So, was Shiller one of those people who was anointed by the media?

Oh yes. …

What would prove it to you that there were bubbles?

Empirical evidence.

Such as?

Well, that you could show me that you can predict when these things turn in some reliable way.

So what is your challenge to Robert Shiller? He should predict the next bubble?

[laugh] Right. Well, I don’t know. Not just the next one. You know, statistically reliability means more than two, really.

The next 10?

Well, the next 10 would be really convincing. Yeah then I’d be convinced.

We asked Shiller what he thought about this:

Fama says he would believe there were bubbles if you could predict ten of them in a row.

Yeah, but I don’t live that long. You know, these big bubbles are rare events that play out over years. They can go a long time.

If you lived long enough, do you think you could make good on Gene Fama’s request that you predict 10 bubbles in a row?

If I lived long enough, yeah.

You do think you could?

Uh. I think so. Yeah. I’m not the most self confident person.

California v. Texas

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Okay, that wasn’t quite the proposition being debated on the Intelligence Squared podcast, but that was essentially what it boiled down to. Instead, the proposition debatined was “For A Better Future, Live In A Red State.”

Moderated by ABC News’ John Donvan, the debate featured Hugh Hewitt–radio host of The Hugh Hewitt Show–and Stephen Moore–editorial board member of The Wall Street, who argued for the motion; and Michael Lind–co-founder of New America Foundation–and Gray Davis–37th Governor of California, who argued against the motion.

Here is description of the debate:

While gridlock and division in Washington make it difficult for either party or ideology to set the policy agenda, single-party government prevails in three-quarters of the states. In 24 states Republicans control the governorship and both houses of the legislature, and in 13 states Democrats enjoy one-party control. Comparing economic growth, education, health care, quality of life and environment, and the strength of civil society, do red or blue states win out?

Bringing Lincoln Back From The Dead: Luxury Cars and American Automaking

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Bringing Lincoln Back From The Dead: Luxury Cars and American Automaking

Today, NPR’s Planet Money podcast reran a story about how Lincoln is attempting to recapture its image as a cool luxury car and the economic implications of a successful re-branding. 

Here is a description of the podcast: 

Lincolns used to be the coolest cars in the world. They used to be driven by kings, moguls and celebrities. Today, Lincolns are driven by the old, the out-of-touch, and the guys hustling you at the airport.

On today’s show: How Lincoln is trying to regain its former glory — and how the story of Lincoln may be the story of the U.S. auto industry, for better or for worse.