Bryan Caplan's Blog, page 137

Pious Thinking, by Bryan Caplan

I often argue that popular ideas are deeply mistaken.  I attacked everything from nationalism and militarism to Tiger Parenting and labor market regulation.  There's one utterly corrupt outlook, though, that I almost never bother to criticize.  As soon as I hear it, I instinctively tune it out, because you can't argue with it.  For want of a better phrase, I call this outlook "pious thinking."

On my usage, there is nothing intrinsically religious about pious thinking.  Yes, it's prominent in moderate religious services.  But it also dominates political speeches, public health campaigns, commencement addresses, and every Back-to-School-Night.  Pious thinking has two key features.  First, surrender to Social Desirability Bias - saying whatever sounds good on every topic, without bothering to check statements against the facts.  Second, indifference to consistency - saying whatever sounds good on every topic, without bothering to check statements for internal consistency. 

My most vivid experiences with pious thinking come from my K-12 years: The P.A. declaring things like, "Our school takes every effort to ensure every student a stimulating educational experience" - while requiring every student to take a health class that consisted almost entirely in copying sentences out of the textbook.  Anyone who objected that copying sentences is less than stimulating received the pious reply: "Health is an essential part of our curriculum."  Similarly, the P.A. might announce, "Our school guarantees the safety of every student" - even though school rules against fighting automatically suspended the victim along with the perpetrator!  Wouldn't that strongly discourage reporting of violence?  Pious reply: "Oh, it takes two to tango."

As a practical matter, pious thinking is less harmful than taking bad ideas to their logical conclusion.  Religions that say both, "Blasphemy must be illegal" and "We must respect freedom of conscience" commit less savagery than religions that say, "Blasphemy must be illegal, so to hell with freedom of conscience."  But intellectually, coherent-but-wrong views are at least manageable.  They make definite claims, so it's possible to disprove them.  Pious thinking, in contrast, is irrefutable by design.  If you score a telling point, pious thinking allows your opponents to claim they've agreed from the get-go.  But that changes nothing.  The status quo must go on... as long as it keeps sounding good.

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Why is the Right Soft on Education?, by Bryan Caplan

When the American left complains about domestic poverty, you might think the American right's standard response would be either:

1. "What poverty?  By any sensible standard, the 'American poor' are rich."

2. "America doesn't have a poverty problem; it's the American poor who have a conscientiousness problem."

Unfortunately, few right-wingers embrace either of these strong responses.  The modal reaction, rather, is:

3. "We need more and better education for the poor."

The "better" part isn't necessarily a call for bigger government; sometimes it's a plea to convert existing expenditures into vouchers to check the power of the public school monopoly.  The "more" part, however, is clearly a call for bigger government - to pile even more government spending on top of the existing annual trillion dollar pan-boondoggle.  While it's easy to understand why "big government conservatives" would favor such an answer, even avowed "limited government conservatives" and "free-market economists" often rebut calls for a new War on Poverty with calls for a redoubled War on Ignorance. 

What's going on?  A few stories to ponder:

1. Right-wingers correctly judge that more and better education is a great poverty remedy.  Alas, I can't take this one too seriously.

2. Right-wingers think in positive-sum terms.  Conventional poverty programs are redistributionist, but education spending purports to "grow the pie" by investing in human capital. 

3. Right-wingers love the work ethic.  Conventional poverty programs are need-based, but education is effort-based; no matter how much the government pours into education, the poor can't profit from it without years of hard work.  

4. Right-wingers are meritocratic.  Education, unlike conventional poverty programs, ranks people from best to worst based on their performance - and helps the well-ranked to escape poverty.

Others?

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Social Security: The Inside Story, by Bryan Caplan

The Social Security Administration's latest "Actuarial Note" is as fascinating as actuarial notes get.  Its main lessons:

1. Social Security used to be a great deal.  The poorest one-earner couples born in 1920 got a real return of 9.18%; the richest one-earner couples got 5.87%.

2. Social Security remains a very good deal for one-earner couples: about 6.5% for the very poor, 5.5% for the poor, 4.5% for middle-income, 3.9% for the rich, and 2.9% for the richest (people who max out their Social Security taxes).  These rates have held almost steady for cohorts born since 1940.

3. For singles and two-earner couples, Social Security's return has heavily fallen.  Even the middle-income (career average inflation-adjusted earnings of $41,655 per year) now get a crummy return of under 3%.  For the rich, the return is around 2%, and for the richest, about 1%. 

4. Over time, singles and two-earner couples have become the norm.  So the decline in Social Security's return is more pervasive than it looks.

All these return estimates are based on the current formula.  The SSA also considers what will happen if taxes are raised or benefits are cut to keep the program out of deficit.  The two scenarios:

The Increased Payroll Tax scenario raises payroll-tax
rates, beginning with the year of Trust Fund reserve
depletion, to finance scheduled benefits fully in every
year. The payroll-tax rate increases from the present law
amount of 12.4 percent beginning in 2033. The payroll-tax
rate increases to 16.54 percent for 2034 and continues
to increase year-by-year, reaching 16.89 percent for
2086. Under this scenario, the payroll tax rate increases
further after 2086 due to continuing increases in life
expectancy.


Under the third scenario, Payable Benefits, payroll-tax
rates hold constant while benefits decrease for each year
after Trust Fund reserve depletion so that, for the Trust
Funds as a whole, benefits paid equal taxes received.
The reductions from scheduled levels apply equally proportionally
to all types of benefits paid during the year.

5. In both alternate scenarios, returns for recent cohorts (born 1970 and later) fall by about 1 percentage-point.  Single-earner couples aside, a majority of recent cohorts can expect a real return of 2% or less.  The richest singles and two-earner couples get a return barely over 0%.

6. These are the SSA's own estimates.  What would neutral outsiders' estimates say?

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The Welfare State as Extended Warranty, by Bryan Caplan

"Extended warranty?  How can I lose?"

            -- Homer Simpson

Value is subjective, and taste for risk varies widely.  But every economist I've asked - and virtually every savvy consumer - concludes that extended warranties are a lousy deal.  The short case against extended warranties:

1. You normally get a very good warranty for free.  When you buy an extended warranty, you only receive a marginal increase in security. 

2. This marginal increase is usually grossly overpriced.  You often pay 20% of the purchase price to protect yourself against a 1% risk. 

3. In any case, by the time your extended warranty kicks in, your product has already lost most of its value.  Most of the time, the vendor just repairs and returns your original semi-obsolete device. 

The lesson: Even if you're a deeply anxious person, self-insurance is the prudent course: Just take your chances, and use all the money you save to buy replacements when the need arises.

If extended warranties are such a bad deal, why are they so popular?  Psychological bias.  Vendors are preying on your absurd yearning for certainty - your desire to know that you'll never lose what you have.  Why absurd?  Because true certainty is unavailable at any price.  Can you be certain that the vendor will remain in business?  No.  Can you be certain that the vendor will honor the contract?  No.  Can you even be certain that you'll still be alive tomorrow?  The answer, I'm afraid, is no.  Extended warranties sell because they provide the illusion of certainty - and many human beings are too soft-headed to disbelieve the illusion.

Readers often misinterpret my The Myth of the Rational Voter as arguing that people are rational in markets, but irrational in politics.  My actual view is simply that people are markedly more irrational in politics than in markets.  Given the bustling market in extended warranties, then, my natural reaction is to ask: Does this absurd yearning for certainty play an even larger role in politics?  My answer is a resounding yes.  The absurd yearning for certainty lies at the heart of support for the welfare state.

Think about the populist case for fully socialized medicine.  What's supposed to be so great about it?  The certainty.  You know that no matter what happens, the government will provide your health care.  Of course, this certainty is merely rhetorical.  Can you be certain that the government will cover the treatments you actually need?  No.  Can you be certain that the government will competently deliver whatever treatments it covers?  No.  Can you even be certain that your medical problems are curable?  The answer, I'm afraid, is no.  What is the point of this rhetoric of certainty?  To confuse voters so they don't ask the questions that matter to savvy consumers.  Namely:

1. What is the marginal health benefit of socialized medicine?

2. How much extra does the government charge for this marginal health benefit?

If voters did ask these questions, they'd find considerable evidence that government health spending, like extended warranties, is a crummy deal.  You pay an arm and a leg, and the marginal improvement in health is slight.

The same goes for government retirement programs.  What's so great about Social Security?  You know that no matter what happens, the government will provide your retirement income.  But once again, this certainty is merely rhetorical.  Can you be certain that Social Security will give you a decent standard of living?  No.  Can you be certain that Social Security will suffice for your basic needs?  No.  Can you even be certain that you'll still be eligible for Social Security by the time you retire?  The answer, I'm afraid, is no.  But the rhetoric of certainty silences the awkward questions every savvy consumer should ask:

1. What marginal income security benefit does Social Security provide?

2. How much extra does the government charge for this marginal security benefit?

If voters did ask these questions, they'd find that projected Social Security returns are pretty crummy for most people - even according to the Social Security Administration itself.  The SSA's own estimates look worse yet when they factor in probable future changes in the benefit formula.  There's "certainty" for you!

Are there any important differences between the market's extended warranties and the government's welfare state?  Sure.  Most economists will highlight a difference that makes the welfare state look better: Extended warranties usually insure against relatively small losses; the welfare state, in contrast, often insures against relatively large losses.  These economists have a point, but exaggerate: The welfare state's biggest programs "insure" against the rather foreseeable problems of old age and unprotected sex.   

Relatively few economists, though, will highlight a difference that makes the welfare state look worse: If you don't want an extended warranty, all you have to do is tell the vendor, "No thanks, I'll take my chances."  Once you realize that extended warranties are a bad deal, you never have to get ripped off again.  The welfare state, in stark contrast, won't take no for an answer.  Once you realize that the welfare state is a bad deal, the rip off continues until the day you die.  Or flee the country.

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Social Desirability Bias and Abortion, by Bryan Caplan

Economists have long argued that we should pay a lot more attention to what people do and a lot less attention to what people say.  But they make little effort to justify their pro-action/anti-talk position.  The strongest support for economists' methodological scruples actually comes from psychology, especially research on Social Desirability Bias.  Earlier today, though, I stumbled on some striking confirmation from a unexpected field: medicine. 

Choi, Riper, and Thoyre, "Decision Making Following a Prenatal Diagnosis of Down Syndrome: An Integrative Review" (Journal of Midwifery and Women's Health, 2012) meta-analyzes research on women's decision to abort a fetus with Down Syndrome.  As their decision becomes less and less hypothetical, women are more likely to opt for abortion.  In other words, Social Desirability Bias declines as the cost of doing what sounds good (accepting a mentally disabled child) rises:

The decision to undergo an induced abortion varied depending on whether participants were prospective parents recruited from the general population (23%-33% would terminate), pregnant women at increased risk for having a child with DS (46%-86% would terminate), or women who received a positive diagnosis of DS during the prenatal period (89%-97% terminated).

These are huge effects.  A supermajority of prospective parents says they would not terminate the pregnancy - but an even more lop-sided supermajority of parents who actually face this tragic choice takes the opposite stance. 

My question: Why do so many economists rely on half-baked philosophy of science to justify their pro-action/anti-talk position when fully-baked supportive empirical research is only a Google Scholar search away?

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The Puzzling Ubiquity of Disability, by Bryan Caplan

In 1976, 8.3% of students in U.S. public schools were officially disabled.  By 2010, the disabled share was up to 13%.  What on earth happened?  This piece by Jay Greene and Greg Forster considers and critiques three main stories.  Prepare to be edified:

At least three different culprits have been identified: greater real incidence of disabilities, the advent of high-stakes testing, and the financial incentives created by special education funding.

What's wrong with the "real incidence" story?

Defenders of the U.S. special education system argue that the growth of enrollment in special education reflects growth in the real incidence of disabilities in children. According to this explanation, there are simply more disabled students than there used to be, and those students have more costly disabilities... They attribute this alleged growth in student disabilities to social forces over which schools have no control, pointing to three factors in particular: improvements in medical technology, deinstitutionalization of children with serious difficulties, and increases in childhood poverty...

However, this account is not consistent with the facts. The authors argue that there are now more children with mental retardation because improved medicine saves more low-birth-weight babies. While it is true that the number of such babies expected to exhibit retardation has grown, the actual number of students classified as mentally retarded has dropped remarkably-- from about 961,000 in 1976-77 to about 599,000 in 2000-01... As a general matter, while medical improvements will certainly cause some number of children to survive with disabilities where in a previous era they would have died, it will also cause other children to avoid developing disabilities where in a previous era they would have become disabled. From improved prenatal medicine to safer child car seats to reductions in exposure to lead paint, medical improvements have saved untold thousands of children from disabilities.

Furthermore, the decline in the number of students with mental retardation, as well as those with other severe types of disability, also disproves the argument that deinstitutionalization of students with severe problems is driving increases in special education enrollment. As for childhood poverty, it hasn't actually increased. For children under 6, it was 17.7% in 1976 when federal law first required special services for disabled students, and it was 16.9% in 2000.

Greene and Forster could have further strengthened their case by pointing out the rising role of selective abortion: This meta-analysis estimates that Americans abort 67% of detected Downs fetuses.

How about the other stories?

Why would schools place more students in special education when they didn't truly need it? Some researchers are now identifying high-stakes testing as a possible cause. More and more states have adopted test-based accountability programs in which significant consequences, such as student promotion and graduation or school funding cuts, are attached to performance on a standardized test... But these programs can also create a perverse incentive: an incentive to game the system by getting low-performing students out of the testing pool altogether. By labeling such students as disabled and placing them in special education, schools can exempt them from mandatory testing.

Despite its intuitive appeal, Greene and Forster finds little support for this explanation.  But another incentive-based story looks very strong indeed:

School districts have traditionally received state funding for special education, which makes up the bulk of all special education funding, in such a manner that they receive more money if their special education programs are larger. This provides school districts with a financial reward--a bounty, so to speak--for placing students in special education. Critics of the U.S. special education system have long argued that this creates a perverse
financial incentive to put as many students as possible into special education. Defenders of the system often argue that funding for special education cannot create perverse incentives because placing a student in special education creates costs at least equal to the new funding it generates. This misrepresents what truly is and is not a "cost" of placing a child in special education. A true cost is an expenditure that the school would not have made otherwise. Some services that a school would have provided to a particular child no matter what can be redefined as special education services if the child is placed in special education; these services are not truly special education costs because they would have been provided anyway. For example, if a school provides extra reading help to students who are falling behind in reading, the school must bear that cost itself. But if the same school redefines those students as learning disabled rather than slow readers, state and federal government will help pick up the tab for those services. This is financially advantageous for the school because it brings in new state and federal funding to cover "costs" that the school would have had to pay for anyway.

The only obvious problem with Greene and Forster is that it's over a decade old.  Question for readers: What relevant evidence has emerged since 2002, and what does it say?  Please show your work.

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How High Is Schools' Implicit Land Rent?, by Bryan Caplan

If a business rents land, any accountant will count the rent as a cost of doing business.  If a business borrows to buy land, any accountant will count the interest payments as a cost of doing business.  What happens, though, if a business owns its land outright?  A good accountant will estimate implicit land rent - the rent the land would have fetched in the open market - and count that as a cost of doing business.  Opportunity cost, not out-of-pocket cost, is what counts.

The same logic holds, of course, for schools that own their land outright.  If you're estimating the total cost of education, you should count schools' implicit land rent.  As far as I can tell, however, official spending numbers don't do this.

How big is the problem?  To get a rough answer, I searched for estimates of (a) typical school acreage, (b) rent/price ratios, and (c) the price of an acre of land.  What I found:

For (a), the best source I could find was a 1963 (!) piece by the Planning Advisory Service.  The report begins by quoting their earlier finding:

Although acreage is related to size of school enrollments, most
authorities say that the minimum land area requirement for elementary
schools is five acres, with an additional acre for each one hundred
pupils of ultimate enrollment. Secondary schools should have a minimum
of ten acres, plus an additional acre for each one hundred pupils of
ultimate enrollment.

It then adds:

Although elementary school standards for minimum site
size have not changed appreciably during the past decade, those for
junior and senior high schools have increased rather dramatically, in
some cases 100% over what they were in 1952. The recommended size of
junior high sites ranges from 10 to 20 acres, with the median being 15
acres; recommended senior high sites range from 20 to 30 acres, with the
median being 25 acres. The standard formula of one additional acre for
each one hundred pupils of ultimate enrollment applies for both junior
and senior high schools.

For (b), I found the Lincoln Institute of Land Policy's up-to-date numbers here.  The current rent/price ratio is about 5%.

For (c), I found no usable nationally representative numbers. (Please tell me if I've missed anything).

Fortunately, we don't need precise numbers on acreage price to see the magnitude of the effect.  Consider a high school with 1000 students.  Using the original rule of thumb, the school will have 20 acres.  So even assuming a very steep land price of $500,000 an acre, the per-student cost of land is only $500/year.  That's less than 5% of total spending.  Using a more normal - though still somewhat high - price of $100k an acre, implicit land rent only adds 1% to the education's true cost. 

Bottom line: Implicit land rent may be important in New York or San Francisco.  But at the national level, it's a rounding error.

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Tribal Desire, by Bryan Caplan

On Twitter, Mark Krikorian opined that, "Desire for membership in a tribe is as inherent to the human personality as some form of body covering."  He's not exactly wrong, but omits three essential caveats.

1. Desire for tribal membership varies widely.  Some humans, like Mark, seem to think about their tribal membership on an hourly basis.  Others, like me, are perfectly happy belonging to no group larger than the nuclear family.  The median level of tribal desire is hard to nail down.  Do most Americans think about their Americanness once or more per day?  People usually find even simple abstractions boring, so I doubt it. 

2. Desire for tribal membership is extremely elastic.  Virtually any identity sticks if you're immersed in it at an early age: city, state, country, religion, ethnicity, political party, union, sports team, hobby - even a show on t.v.  The real barrier to cosmopolitanism
isn't "inherent tribal desire," but inertia - the same barrier
countless successful redefinitions of identity have already managed to
overcome.  If you can convince British subjects that they're Virginians, and Virginians that they're Americans, you can convince Americans that they're humans.

3. Desire for tribal membership is superficial.  Social Desirability Bias leads most Americans to announce passionate commitment to the American tribe.  But their behavior tells another story.  What fraction of Americans bother to recite the pledge of allegiance on their own initiative?  To display a flag on their front lawn?  To participate in a weekly patriotic function?  99% of the ubiquitous icons of Americanism that popped up after 9/11 have long since faded into nothingness.  Americans put about as much energy into their identities as Christians who only attend church on Easter and Christmas. 

Am I projecting my freakish individualism onto all mankind?  Ponder this: How far would government revenue fall if Americans' tax bill were a voluntary recommendation rather than a legal obligation?  Sure, a few libertarians would conscientiously refuse to pay because they "love their country but fear their government."  But most Americans have no doubt that government spending on pensions, education, health care, military, etc. is good for their country.  If they were sincere patriots, they'd happily pony up for the perceived common good.  But it's hard to imagine that government revenues wouldn't plummet - especially a few years into the great voluntary tax experiment. 

Of course, if the true patriots of America want to prove me wrong by giving my experiment a try, they have my full support.

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The Universal Citizenist, by Bryan Caplan

In the past, I've argued that Steve Sailer's citizenism is a moral travesty.  Advancing the interests of your in-group should always play second fiddle to respecting the rights of out-groups.  But recently, he presented what sounds like a universal argument for citizenism:

We live in a world of about 200 countries, a world that for all its
flaws, is relatively peaceful and prosperous. And the basis of that
order has been a set of assumptions about what the purpose of government
is that both Caplan and myself call citizenism... The difference between Caplan and me is merely that he wants to take
this order based on citizenism and blow it up, while I don't.

Charitably interpreted, Sailer's saying something like: "Citizenism isn't just great for us; it's great for mankind.  Vigorous pursuit of national self-interest leads to great global outcomes."  An interesting claim, but is there any reason to believe it?  Steve's only argument seems to be that (a) most countries on earth rest on citizenist principles, and (b) the modern world is, by historical standards, awesome. 

This argument is painfully weak.  Citizenism is hardly a recent ideological development.  Appeals to the moral ideal of national self-interest have been around for as long as the nation-state itself.  Recall Cicero's maxim, "Let the good of the people be the supreme law" ("Salus populi suprema lex esto").  What's novel about the modern world is precisely that aggressive pursuit of national self-interest is finally widely recognized as a vice, not virtue.  Putin's policies are bad for Russians, but we condemn them primarily because they're bad for Ukrainians.

You could object, "Due to comparative advantage and blowback, bellicose
nationalism is actually contrary to national self-interest.  The best
way for countries to help their own people is the path of trade and
peace."  A fair point, but not one that citizenists have ever
emphasized.  Psychologically, the wonders of trade and peace are easier
for tolerant cosmopolitans to internalize.  I've yet to meet an
open-borders citizenist - or even a citizenist intrigued by the prospect
of using keyhole solutions to redistribute the astronomical benefits of immigration from foreigners to natives. 

In any case, the harmony between national self-interest and civilized policies is far from perfect.  Bellicose nationalism occasionally pays.  In a citizenist world, countries would self-righteously harm foreigners each and every time such callousness genuinely advanced the national interest.  Not a pretty picture.  It would be like living in a world where everyone steals whenever they know they can get away with it.

If citizenism can't possibly deserve credit for the awesomeness of the modern world, what does?  Distinctively modern ideas - ideas like tolerance and cosmopolitanism.  This isn't rocket science.  When people idealize patriotic solidarity, they build repressive, inward-looking societies.  When they idealize cosmopolitan tolerance, they build live-and-let-live, outward-looking societies.  Sure, no country fully lives up to these ideals.  What's special about the modern world is that the influence of these modern ideals is noticeable.

Contrary to Sailer, I deeply appreciate the modern world - probably more than he does.  But the world now enjoys historically unprecedented peace and prosperity despite citizenism, not because of it.  The modern world exists because cosmopolitan tolerance finally loosened citizenism's time-honored cultural stranglehold.  But there's still plenty of room for greater peace and prosperity.  The sooner cosmopolitan tolerance fully triumphs, the sooner we'll get them.



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Implicit Rent and the True Cost of Education Bleg, by Bryan Caplan

As far as I can tell, spending statistics for education do not count implicit land rent as part of the cost of education.  The Digest of Education Statistics' Table 213 for example, states that:

Current expenditures include instruction, support services, food services, and enterprise operations. Total expenditures include current expenditures, capital outlay, and interest on debt.

Construction costs - but not land - should be included in capital outlay.  If the school borrowed money to buy land, that would be counted in debt service.  But otherwise, it sounds like implicit land rent never enters the equation.

Am I right about this?  Please share relevant references.

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