Author Archives: Arnold Kling

The Charitable Deduction

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The IGM Forum asks an odd question. Agree or disagree with the statement

Reducing the income-tax deductibility of charitable gifts is a less distortionary way to raise new revenue than raising the same amount of revenue through a proportional increase in all marginal tax rates.

Janet Currie writes

The wording implies that distortion is bad, but the point of the charitable deduction is to encourage charity, ie to “distort” behavior.

Angus Deaton agrees with the statement, but adds

If minimizing distortion is your target, though seems like a very odd one.

In fact, the consensus seems to be that this was not the right question.

For more on the charitable deduction, you might look at this Hudson Institute event.

For me, the difficulty of assessing the charitable deduction concerns the relevant margin. If the relevant margin that it affects is the mix between profits and non-profits, then I would rather see more firms driven by profit. Non-profit to me means not being accountable to consumers, and that is not a good thing. On the other hand, if the relevant margin is the mix between private charity and government-run charity, then I do not think that shrinking private charity to grow government charity is a good idea.

New Commanding Heights Watch

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Timothy Taylor writes,

there are clearly countries that spend less per student than you would expect given their level of per capita GDP, like Iceland, which is labelled, and Italy, which is the unlabelled point more-or-less under Spain. There are also countries that spend more per student than you would expect given their GDP, including Ireland, Canada, and especially the United States.

He is referring to higher education.

Returning to the Oregon Medicaid study, Tyler Cowen writes,

The key question here is how we should marginally revise our beliefs, or perhaps should have revised them all along (the results of this study are not actually so surprising, given other work on the efficacy of health insurance). For instance should we revise health care policy toward greater emphasis on catastrophic care, or how about toward public health measures, or maybe cash transfers? (I would say all three.) One might even use this study to revise our views on what should be included in the ACA mandate, yet I haven’t heard a peep on that topic. I am instead seeing a lot of efforts to distract our attention toward other questions.

Nick Schulz and I have referred to health care and education as the new commanding heights. That is, they are as important in the 21st century as steel and electric power were in the 20th. However, steel and electric power had major scale economies that lent themselves to top-down, bureaucratic management. Health care and education do not.

What I think this means that those who want to apply centralized, technocratic solutions in health care and education (“Obamacare,” “No Child Left Behind”) are on the wrong side of history. Perhaps my views are mistaken. But in any case, I wish that people were less emotionally invested in the technocratic approach, so that if it does prove to be dysfunctional they are able to back off.

My ebook reviewed in the WSJ

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By Barton Swaim.

One reason American political culture has become polarized and uncivil, Mr. Kling believes, is that each side puts its contentions almost exclusively in terms of its favored language, and fails to see that contrary opinions are manifestations of a different language rather than evidence of stupidity or duplicity.

I notice that The Three Languages of Politics also has ten favorable reader reviews.

Outsourcing Grading

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From the Chronicle of Higher Education.

The graders working for EduMetry, based in a Virginia suburb of Washington, are concentrated in India, Singapore, and Malaysia, along with some in the United States and elsewhere. They do their work online and communicate with professors via e-mail. The company advertises that its graders hold advanced degrees and can quickly turn around assignments with sophisticated commentary, because they are not juggling their own course work, too.

In Swarthmore College’s Honors Program, at least when I went there, grading also was outsourced. The professor sent the syllabus to an outside examiner, who made up the exam and graded it. This was considered a good thing.

Perhaps the graders who work for EduMetry are not as skilled as the outside examiners used by Swarthmore. Still, what is the next best alternative? Multiple-choice tests on Scantrons? Computerized grading?

As a practical matter, the alternative is not careful, skillful feedback provided by distinguished professors. However, I do expect that many professors at lesser-ranked colleges will see this as a threat to “quality,” meaning their incomes.

By the way, if you are looking for yet another article on MOOCs, the Richmond Fed has one. I am quoted a couple of times. This whole education-technology thing is reminding me of the early days of the Web in the mid 1990s, when there were lots of articles about stuff that seemed important at the time but which has long since been forgotten. Magazines like Business Week ran cover stories on “push technology,” “browser wars,” “applets,” etc.

David Boaz on Libertarianism

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He lists the top ten ways that he tries to explain it.

the number 1 way to talk about libertarianism — or at least a sentence I found effective when I was talking about Libertarianism: A Primer on talk shows: “Libertarianism is the idea that adult individuals have the right and the responsibility to make the important decisions about their lives.” Every word is important there: We’re talking about individuals. We’re talking about adults; the question of children’s rights is far more complex. Responsibility is just as important as rights.

The objection from progressives is that this ignores a lot of harm in the world–the harm that people do to themselves, the harm of market failures, and the harm of oppression. To meet this objection, I would say that I believe that humans make mistakes in the context of government that do more harm than the mistakes that they make when pursuing their individual interests in the context of the market.

The objection from conservatives is that this ignores the need for collective action to suppress barbarism, both as an external threat and as an individual tendency. To meet this objection, I would say that I believe that government enforcement of civilized values is more often than not an oxymoron.

Moises Naim Watch

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Mark Manson writes,

One of my best friends recently told me that the prestigious multinational corporation he worked for was itching to permanently send him to India. They wanted him to manage their expansion into that market. And, obviously, India is a huge emerging market. They gave him the Godfather offer to go — enough money to live in a mansion, with personal chefs, private drivers, everything. The irony, of course, was that my friend is a first generation Indian-American. His parents gave up everything decades ago and fought their way to the US to give their kids opportunities they would never have had back in India. They succeeded. What they didn’t expect was that that opportunity for their son they gave up everything for? It was back in India.

One of my big take-aways from Naim’s The End of Power is that emerging economies have a lot going for them. If the future belongs to auto-didacts, it also belongs to people who are comfortable living in more than one country.

Energy Breakthroughs?

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The latest issue of MIT Technology Review lists ten (not-yet-proven) breakthrough technologies. Two that caught my eye:

Solar panels that are twice as efficient as current designs. Although I strongly oppose subsidizing current solar industries, I do hope for a “solar singularity,” meaning that at some point solar power becomes more efficient than other sources of energy and then continues to increase its advantage.

A new circuit breaker that would allow the electric grid to operate on direct current, which

can efficiently transport electricity over thousands of kilometers and for long distances underwater

High School Education

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Julie Berry Cullen, Steven D. Levitt, Erin Robertson, and Sally Sadoff write,

our advice to high schools when it comes to underperforming students is to redefine the mission and eschew traditional success metrics like test scores, focusing instead on more pragmatic objectives like keeping kids out of trouble, giving them practical life skills, and helping with labor market integration. That conclusion will no doubt be unsatisfying to many readers. In an ideal world, high schools would perform miracles, bringing struggling students back from the brink schools and launching them towards four-year college degrees.

So far, I could call this Journal of Economic Perspectives symposium on education “Living with the null hypothesis.”

On Early Childhood Education

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President Obama says that the science is clear. Greg J. Duncan and Katherine Magnuson are not so sure.

We find that the evidence supports few unqualified conclusions. Many early childhood education programs appear to boost cognitive ability and early school achievement in the short run. However, most of them show smaller impacts than those generated by the best-known programs, and their cognitive impacts largely disappear within a few years. Despite this fade-out, long-run follow-ups from a handful of well-known programs show lasting positive effects on such outcomes as greater educational attainment, higher earnings, and lower rates of crime. Since findings regarding
short and longer-run impacts on “noncognitive” outcomes are mixed, it is uncertain what skills, behaviors, or developmental processes are particularly important in producing these longer-run impacts

John Cochrane on Housing Finance

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He writes,

Suppose that mortgages were bundled into securities, intermediated by mutual funds whose values float, just like those of equity mutual funds, and held around the world in retirement accounts, pension funds, and our endowments’ portfolios, without government guarantees at every step. This would be a terrific financial structure

I think that this would be an improvement. However, the household demand for risk-free assets might lead banks or money-market funds to offer fixed-rate instruments backed by these floating-rate securities. Add enough leverage and you have a very shaky financial structure. In any case, I continue to believe that if there were no government actions distorting the price differential between a thirty-year mortgage with an interest rate fixed for just five years and a thirty-year fixed-rate mortgage, the latter would cease to dominate the housing finance system in the U.S.