The Changing Selectivity of American Colleges

Caroline M. Hoxby (Stanford University) has a new paper on the changing selectivity of American colleges:

This paper shows that although the top ten percent of colleges are substantially more selective now than they were 5 decades ago, most colleges are not more selective. Moreover, at least 50 percent of colleges are substantially less selective now than they were then. This paper demonstrates that competition for space–the number of students who wish to attend college growing faster than the number of spaces available–does not explain changing selectivity. The explanation is, instead, that the elasticity of a student’s preference for a college with respect to its proximity to his home has fallen substantially over time and there has been a corresponding increase in the elasticity of his preference for a college with respect to its resources and peers. In other words, students used to attend a local college regardless of their abilities and its characteristics. Now, their choices are driven far less by distance and far more by a college’s resources and student body. It is the consequent re-sorting of students among colleges that has, at once, caused selectivity to rise in a small number of colleges while simultaneously causing it to fall in other colleges. I show that the integration of the market for college education has had profound implications on the peers whom college students experience, the resources invested in their education, the tuition they pay, and the subsidies they enjoy. An important finding is that, even though tuition has been rising rapidly at the most selective schools, the deal students get there has arguably improved greatly. The result is that the “stakes” associated with admission to these colleges are much higher now than in the past.

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R&D Spending Slows

A new study by the Democratic Leadership Council predicts that American investment in research and development will decline by its highest rate in thirty years. In 2009, R&D spending is anticipated to drop 2.4%.

To put American R&D spending in perspective, see the chart below:

Today, U.S. R&D spending accounts for only 2.5% of its GDP. In Sweden, Finland, Japan and South Korea, R&D spending accounts for in over 3% of national economic output.

China-America trade war continues

China Set to Impose New Tariffs on Nylon (via Greg Mankiw):

China’s Ministry of Commerce has made a preliminary ruling to impose tariffs of as much as 36% on certain nylon imports from the U.S., saying the imports have damaged the domestic industry….The move is the latest in a series of Sino-U.S. trade disputes after the Obama administration said in September that it would impose duties of between 25% and 35% on imports of tires from China for the next three years. China followed that decision with probes of potential antidumping measures on U.S. auto parts and chicken.

Women in Spain and South Korea Earn More Than Male Counterparts

According to the Economist:

University offers more than the chance to indulge in a few years of debauchery. A new report from the OECD, a rich country think-tank, attempts to measure how much more graduates can expect to earn compared with those who seek jobs without having a degree. In America the lifetime gross earnings of male graduates are, on average, nearly $370,000 higher than those of non-graduates, comfortably repaying the pricey investment in a university education (female graduates earn an extra $229,000). In South Korea and Spain female graduates pull in a lot more than their male counterparts. In Turkey, although the additional wages are more modest, the difference between men and women is far less pronounced.

Any ideas why women in Spain and South Korea earn more than men? (In a previous post we saw that New York City women earn more than New York City men.)

On an interesting note, however, even though a pay disparity between men and women exists, American women continue to earn more than any other women in the world.

A Global Currency to Replace the Dollar?

According to Bloomberg:

The dollar’s role in international trade should be reduced by establishing a new currency to protect emerging markets from the “confidence game” of financial speculation, the United Nations said.

UN countries should agree on the creation of a global reserve bank to issue the currency and to monitor the national exchange rates of its members, the Geneva-based UN Conference on Trade and Development said today in a report.

I’m not sure that ditching a national monetary policy is the best course of action for the United States. Nor do I think the American people support forfeiting their monetary sovereignty to the “global community.”

Milton Friedman has this to say about a global currency:

I view it as a monstrosity—on a par with my reaction to world government, for that is what a common currency amounts to for one aspect of economic activity. As a citizen of the United States, I find it bad enough that we have developed monetary arrangements under which so much power has been vested in a small group of unelected individuals, subject only indirectly to political control. I find it far worse to vest so much power in individuals chosen by international negotiation, individuals who are not accountable in any meaningful way at the ballot box.

Federal Lands in the U.S.

Strangemaps writes,

The United States government has direct ownership of almost 650 million acres of land (2.63 million square kilometers) – nearly 30% of its total territory. These federal lands are used as military bases or testing grounds, nature parks and reserves and Indian reservations, or are leased to the private sector for commercial exploitation (e.g. forestry, mining, agriculture). They are managed by different administrations, such as the Bureau of Land Management, the US Forest Service, the US Fish and Wildlife Service, the National Park Service, the Bureau of Indian Affairs, the US Department of Defense, the US Army Corps of Engineers, the US Bureau of Reclamation or the Tennessee Valley Authority.

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34% Say U.S. Heading in Right Direction

A new Rasmussen poll shows that “just one-third (34%) of likely U.S. voters believe the United States is heading in the right direction.”

How limiting the work week increases work

Tim Worstall of the Adam Smith Institute explains why capping the work week doesn’t reduce work, it simply reduces paid work,

There is, sadly, a terrible misconception about the world of work. This misconception leads to, as ignorance of the basics so often does, really rather bad policies being enacted. The misconception is that the only form of work we do is outside the home, the labour that we perform in offices and factories for cash and lucre under the lash of The Man.

This of course is not true, we all also work in the home, unpaid. There’s always the washing, the cleaning and cooking, the maintenance, the clearing of gutters and painting and so on. Some people enjoy these things, true, but then some also enjoy their paid work as well, and they are both work. Possibly the best description of what is work and what is not is the one used in time use surveys: work is whatever you could pay somone else to do for you*. You cannot pay someone else to sleep for you but you can to make your bed: you cannot pay someone else to eat for you but you can to cook, cannot to wash on your behalf but can for someone to wash you.

So in these time use surveys there are three basic classes of time: personal services, work (both inside and outside the home) and leisure. Those who have more leisure are those who are spending less hours in work, assuming that that personal part remains reasonably constant, as it does.

So what are the numbers for leisure in a country which deliberately restricts the paid for working week? Surely they have more than those who do not, no? Well, actually, no, France has an average of 4.28 hours of leisure a day for each adult while the UK has 5.08. The Americans, who everybody knows keep their noses to the grindstone, have 5.18.

The reason would seem to be that if people are denied the opportunity to work the paid hours they desire (possibly to then buy in parts of that unpaid household labour) then they will try to make up that desired income by unpaid household work. But the world of paid work, with its specialisation, leads to work being done more efficiently. Thus it is necessary to work longer hours inefficiently in order to reach the same desired outcome in material (ie, not just cash but goods and services) income. It is more efficient in the use of labour for the butcher to make the sausages in his factory than for every housewife to do so inexpertly at home, after all.

All of which leads me to a tentative and counter-intuitive conclusion. The laws which deliberately restrict the length of the working week actually increase the amount of hours of work done by those subject to them.

Another example of when intentions and results meet different ends.

Do Immigrants Affect Wages?

The New York Times reports:

The estimated number of illegal immigrants in a state’s population shows no apparent correlation with the median wage for less educated workers in that state.

‘Why immigration is good for America’s business’

The Economist writes,

For all its current economic woes, America remains a beacon of entrepreneurialism. Between 1996 and 2004 an average of 550,000 small businesses were created every month. One factor is a fairly open immigration policy. Vivek Wadhwa of Duke University notes that 52% of Silicon Valley start-ups were founded by immigrants, up from around a quarter ten years ago. But since 2001 the threat of terrorism and rising xenophobia has made immigration harder. Today more than 1m people are waiting to be granted legal status as permanent residents. Yet only 85,000 visas a year are allocated to the sort of skilled workers that might go on to found successful businesses of their own.