There are three convenience stores in the student area west of the University of Texas campus. Store A sells the most beer, and barely looks at student IDs; but it also charges the highest price of the three. Store B is a bit stricter on fake IDs, refuses some underage students, and charges a lower price. Store C has the best prices, but its clerks inspect IDs thoroughly. My student reports that nobody makes it through with a fake ID. This near-campus oligopoly defines a new pricing strategy: lenience on IDs that is unsurprisingly related to the stores’ pricing policies. I wonder about differences in the characteristics of the patrons of the different stores.
Public higher education in the U.S. is not in good shape—and the main reason is lack of funds. States will not increase their funding, and often they severely limit tuition increases. My university appears to have hit upon a solution: product placement and direct advertising. The new computer building, the Gates Building, is part of the Dell Computer Science Center, and has a Dell logo and signs for eBay and PayPal in front of the building.
But why stop here? Five hundred students stare at me for 1-1/4 hours 28 times each fall semester. The university could ask me to advertise—wear a cap, or a t-shirt, just like a tennis star—showing the product of whichever companies bid the most for the rights to advertise on my apparel during class. While I would probably insist on some of the royalties, the bilateral monopoly between the university and me would surely raise funds for the university. With enough professors required to do this, public universities could alleviate some of their financial problems. No doubt readers have similar clever ideas for product placement that would help fund public universities, albeit at some cost in dignity.
I get invitations to guest lecture at English universities on Wednesdays, but almost never for Wednesdays in the U.S. I didn’t know why this difference exists, until one of the inviters mentioned that many English universities keep Wednesday afternoons free of regularly scheduled classes, historically so students can engage in inter-scholastic athletics. Universities thus have created a positive coordination externality.
We economics professors don’t engage in these athletic endeavors, but the athletic coordination creates a positive externality for economists: In scheduling seminars, we know that most faculty members at other universities are free to visit, and most of our colleagues should be available to attend the seminar. (HT: NT)
The black-white education gap has been widely observed at many age levels. In a new working paper called “Race and College Success” (abstract; PDF), Peter Arcidiacono and Cory Koedel examine why blacks who are admitted to college are so much less likely than whites to graduate:
Conditional on enrollment, African American students are substantially less likely to graduate from 4-year public universities than white students.* Using administrative micro data from Missouri, we decompose the graduation gap between African Americans and whites into four factors: (1) racial differences in how students sort to universities, (2) racial differences in how students sort to initial majors, (3) racial differences in school quality prior to entry, and (4) racial differences in other observed pre-entry skills. Pre-entry skills explain 65 and 86 percent of the gap for women and men respectively. A small role is found for differential sorting into college, particularly for women, and this is driven by African Americans being disproportionately represented at urban schools and the schools at the very bottom of the quality distribution.
* “At around 40 percent, six-year graduation rates for African Americans are over twenty percentage points lower than for whites (DeAngelo et al., 2011, National Center for Education Statistics, 2012).”
Taking advantage of unique longitudinal data, we provide the first characterization of what college students believe at the time of entrance about their final major, relate these beliefs to actual major outcomes, and, provide an understanding of why students hold the initial beliefs about majors that they do. The data collection and analysis are based directly on a conceptual model in which a student’s final major is best viewed as the end result of a learning process. We find that students enter school quite optimistic/interested about obtaining a science degree, but that relatively few students end up graduating with a science degree. The substantial overoptimism about completing a degree in science can be attributed largely to students beginning school with misperceptions about their ability to perform well academically in science.
Do we file this item under “overconfidence” or “good gatekeeping”?
The Chronicle of Higher Education just published its survey of public university presidents’ compensation, which rose 4.7 percent, with four presidents receiving more than $1 million. During that year, public university faculty salaries rose less than 2 percent, a discrepancy that replicated the previous four years. Why the difference?
Market explanations would be that these wages reflect jobs increasingly well done relative to faculty performance (increasing relative productivity) and/or increasing difficulty in attracting talent. The first explanation is not credible: having taught at public universities for 40 years, I’ve seen the quality of public universities decline compared to private universities. (In 1969, one could argue that 3 of the top 10 economics departments were at public universities. Today, only 1 is.) Nor is there a dearth of high-quality potential university presidents.
In 2010, CBS and Turner Broadcasting agreed to pay $10.8 billion to broadcast the NCAA men’s basketball tournament from 2011 to 2024. As a result of this contract, fans of this tournament can watch these games on four different networks. And perhaps more importantly (for those of us who work during the day), we can see these games on our computers in our offices.
Certainly all these games make us fans very happy. And all that money has to make coaches, athletic directors, and other university administrators happy. But what about the people we are actually watching?
The people on the court are referred to as student-athletes. And according to the NCAA rules, these athletes are supposed to be amateurs. In other words, other than a scholarship, these athletes are not supposed to be paid.
We present a method of ranking U.S. undergraduate programs based on students’ revealed preferences. When a student chooses a college among those that have admitted him, that college “wins” his “tournament.” Our method efficiently integrates the information from thousands of such tournaments. We implement the method using data from a national sample of high-achieving students. We demonstrate that this ranking method has strong theoretical properties, eliminating incentives for colleges to adopt strategic, inefficient admissions policies to improve their rankings. We also show empirically that our ranking is (1) not vulnerable to strategic manipulation; (2) similar regardless of whether we control for variables, such as net cost, that vary among a college’s admits; (3) similar regardless of whether we account for students selecting where to apply, including Early Decision. We exemplify multiple rankings for different types of students who have preferences that vary systematically.
A new working paper (PDF; abstract) from economists Michael F. Lovenheim and Emily G. Owens examines the effects of federal financial aid, a somewhat controversial issue during last fall’s campaign, on the college attendance of students with drug convictions. From the abstract:
In 2001, amendments to the Higher Education Act made people convicted of drug offenses ineligible for federal financial aid for up to two years after their conviction. Using rich data on educational outcomes and drug charges in the NLSY 1997, we show that this law change had a large negative impact on the college attendance of students with drug convictions. On average, the temporary ban on federal financial aid increased the amount of time between high school graduation and college enrollment by about two years, and we also present suggestive evidence that affected students were less likely to ever enroll in college. Students living in urban areas and those whose mothers did not attend college appear to be the most affected by these amendments.
Elena Malik, communications chair of the 12th annual Carroll Round at Georgetown, writes to solicit applications for a worthwhile event:
The Carroll Round is an annual undergraduate international economics conference at Georgetown University that provides a unique forum for research and discussion among the world’s top undergraduates. Each year, we invite applications from students to present and discuss their work with peers, professors, and policy-makers invited to participate. This year we are honored to host guest speakers including Dr. John B. Taylor and Dr. Janet Currie. We are still recruiting applications from students.
This year’s Carroll Round will be held from April 18-21; more info here.
On that last point — the demand side — we should especially consider “consumption amenities,” as Brian Jacob, Brian McCall, and Kevin M. Stange label them in a new working paper called “College as Country Club: Do Colleges Cater to Students’ Preferences for Consumption?” (abstract; pdf). I find the passage that I’ve bolded, below, to be especially fascinating:
This paper investigates whether demand-side market pressure explains colleges’ decisions to provide consumption amenities to their students. We estimate a discrete choice model of college demand using micro data from the high school classes of 1992 and 2004, matched to extensive information on all four-year colleges in the U.S. We find that most students do appear to value college consumption amenities, including spending on student activities, sports, and dormitories. While this taste for amenities is broad-based, the taste for academic quality is confined to high-achieving students. The heterogeneity in student preferences implies that colleges face very different incentives depending on their current student body and the students who the institution hopes to attract. We estimate that the elasticities implied by our demand model can account for 16 percent of the total variation across colleges in the ratio of amenity to academic spending, and including them on top of key observable characteristics (sector, state, size, selectivity) increases the explained variation by twenty percent.
It would be great news if this meant that high-achieving students craving high academic quality will be rewarded with cheaper tuition in the future, but somehow I don’t see that happening. Do you?
Q. Michael Pollan summed up his philosophy of nutrition in seven words: “Eat food, not too much, mostly plants.” Do you have similarly pithy advice for students trying to maximize their college experience? Don’t feel limited to seven words – I’m just looking for something aphoristic. –Glen Davis
A. Your choices in college matter more than your choices of college, so choose wisely.
I assume this is only a coincidence but still, it’s a good one.
Shortly after putting out the first half of our “Freakonomics Goes to College” podcast, which included a segment on the market for fake diplomas from counterfeiters and diploma mills, I got the following piece of spam. It appears to be from a Norwegian e-mail domain:
Last week, I asked Freakonomics.com readers “Which Social Science Should Die?” The results are in. Thank you for your clear-eyed, sober judgment. Recall that some of you answered in the comments (see previous link) and others visited the on-line poll (which is still open). As of this writing, more than 1,200 votes have been registered.
And the winner — er, “LOSER”(!) is:
Let’s Kill Off Sociology and Political Science!
As you can see from the chart below, nearly 50 percent believed that college/university presidents should eliminate sociology. Nearly 30 percent thought poli sci should be shuttered. [Editor’s note: it is perhaps not surprising that Freakonomics readers wouldn’t vote to eliminate economics.]
Spending on big-time college athletics is often justified on the grounds that athletic success attracts students and raises donations. Testing this claim has proven difficult because success is not randomly assigned. We exploit data on bookmaker spreads to estimate the probability of winning each game for college football teams. We then condition on these probabilities using a propensity score design to estimate the effects of winning on donations, applications, and enrollment. The resulting estimates represent causal effects under the assumption that, conditional on bookmaker spreads, winning is uncorrelated with potential outcomes. Two complications arise in our design. First, team wins evolve dynamically throughout the season. Second, winning a game early in the season reveals that a team is better than anticipated and thus increases expected season wins by more than one-for-one. We address these complications by combining an instrumental variables-type estimator with the propensity score design. We find that winning reduces acceptance rates and increases donations, applications, academic reputation, in-state enrollment, and incoming SAT scores.
I’d like to enlist you in a debate that, to date, is mostly occurring within the academy.
Imagine that, in order to respond both to budgetary pressures and calls for greater relevance of the American academy, College & University Presidents are re-examining their social science disciplines. They have decided to eliminate one major discipline. In your opinion, which of the following is no longer as relevant to the mission of research and education, and should be eliminated as a consequence?
We’ve blogged in the past about the college tuition inflation. Now some students think they may have a solution. FixUC, a student organization based at UC Riverside, wants the university to stop charging tuition and instead take 5 percent of students’ yearly salaries for the 20 years after graduation. “Charging students when they don’t have money doesn’t make sense,” says Chris LoCascio, the group’s leader. “In 20 years, our plan would double the amount of money coming into the UC system.”
I’m nearly certain that a pair of students cheated on my final exam—the probability they had so many identical answers on the multiple-choice exam is infinitesimal. If I pursue them, it takes me time, and there’s no assurance they will be found guilty. If I don’t, I’ll feel badly about giving them an undeserved grade. Even for fairly risk-averse students, cheating seems like a good idea. I doubt that most cheating is caught; and unless the penalty is very severe (expulsion) and/or the students’ costs of contesting the accusation are high, and both are very well-publicized, the incentive to cheat for students with weak consciences seems overpowering. To salve my own conscience I’ll report them, although it’s probably a waste of my time; but I doubt that reporting them will deter their future cheating or deter others very much.
What better time then to blog about a strange new study about Italian nepotism? Authors Ruben Durante, Giovanna Labartino and Roberto Perotti study the effects that a 1998 law decentralizing the hiring process at Italian universities had on levels of nepotism. Pre-1998, candidates for academic positions were selected through a national process. After 1998, however, universities were given the power to hire their own professors. The researchers found that this decentralization led to increased nepotism in areas of “low civic capital,” but not in areas of “high civic capital.”
A tenured senior professor at another university, one of his department’s top researchers and best teachers, asked his department chairman for a temporary one-course teaching reduction for this Fall. The chairman refused but offered a terminal three-year appointment that included this reduction for all three years, at the same salary as if this professor taught a full load each year.
The professor accepted the deal, as he desperately wanted the teaching reduction this Fall, figuring he could get a teaching job elsewhere after three years. But he tells me he would have been happier teaching a full load over the next two years, and would rather not have to search for a job in two years. He is worse off. The department and university are also worse off, since they lose his courses in each of the next two years, and thereafter will not get the benefit of his teaching and his research/publication luster; and students are worse off too.
Is this really a Pareto deterioration—a new economic phrase denoting a change in which at least one person is worse off, and nobody better off? And is the phrase Pareto deterioration the best name for this unusual phenomenon?
A recent post of mine was addressed to the super-rich who are considering endowing a chair in order to garner public recognition. But what about the merely rich who wish to have their names recognized in perpetuity with an eponymous endowed chair at their university? Is there anything they can do?
Yes. There are two things.
First, a much larger swath of people can follow the Benjamin Franklin strategy and endow a delayed chair. Franklin famously bequeathed about $4,000 in 1790 to the Commonwealth of Pennsylvania. Franklin:
An example of irrationality? A colleague at another university was offered a buy-out: A full year’s pay if he would resign/retire at the end of the current semester. At the same time his school also offered a phased retirement deal: Two years at half pay, with half a usual teaching load.
This economist chose to take the phased retirement, thus choosing the same pay, but teaching four courses over two years instead of no teaching. I think he’s crazy; but I think you can write down a utility function that is consistent with his behavior and violates none of our assumptions about preferences.
Should professors have tenure? The question, debated recently on this blog, misses the mark—as do the usual answers, whether “yes,” “no,” or “maybe.”
On the “no” side, it is argued that tenure protects incompetent spongers. A very reliable (tenured) colleague, at a university that shall remain nameless, tells me of professors whose interests are no longer intellectual and who spend their time playing the real estate market. Their research productivity, measured in grant dollars or papers, is low; thus, the university is angry. Their teaching is also substandard, yet not quite abysmal enough to get them fired. To urge them to resign, the department punishes them… by assigning extra teaching!
On the “yes” side, it is argued that tenure protects academic freedom. That point is made by my colleague on this blog Dan Hamermesh. Ten years ago I agreed with him. I would not have imagined my future self happy as an associate professor at Olin College of Engineering: Olin offers six-year renewable contracts instead of tenure. Now I see Olin’s system as a reasonable alternative to tenure, for I no longer believe that tenure supports academic freedom.
My Department chairman is mystified: You would think that with the crisis in public budgets, the demand for new economics faculty members would have shifted leftward. Similarly, with graduate students having delayed entry into the market, the supply of new Ph.D.s this year would have shifted rightward. Together, these changes should have lowered the price (wage) that the market pays new Ph.D.s.
It’s final exam time, and my office is packed with a few of the 520 students in my bigger class. Although I’m pleased by their interest, I ask why they’re spending so much time on my course. The answer is that it’s the only final exam they have.
The Texas A&M University system has embarked on a new accountability program. For every department – indeed, for every professor – revenue generated and cost incurred are calculated; and profit – the difference – is reported. Each professor is presumably supposed to have a marginal revenue product above his/her compensation.
Closing the black-white – and the rich-poor – achievement gap is a frequent topic of conversation on this blog. Economist Christopher Avery takes a look (ungated version here) at one intervention aimed at closing the gap: providing college counselors for high-achieving, low-income students.
University students are returning to campuses throughout the country. It is a migration that raises my spirits – seeing the energetic, eager faces tackling another course in contracts or intellectual property. But this year something is different. For the first time, a federal law has taken effect which requires “institution of higher education receiving Federal financial assistance” to provide students with information on textbook pricing.