An Ivy's Worth

A column in the Journal recently argued that Americans "hate" [macro-]economics because it over turns common sense (for example that paying people to not work leads to less working) and -- unlike, for example, physics which can be equally counter-intuitive -- does not, generally, work.

The counter-claim that macro-economic conclusions are strongly data-driven, is easy to call into question.

For example, the President's nominated Chief Economist is, in part, known for research showing there is no economic benefit to elite undergraduate education. This conclusion is only superficially data-driven. It turns out -- unsurprisingly -- that, controlling for objective academic measures, elite college grads do economically better. In other words, Penn alumni with 1400 SAT scores tend to make more money then Penn St. alumni with the same scores.

To get around this, Krueger suggests there are un-observed material variables -- such as "motivation and creativity." In an initial paper, he modeled these factors by schools a student was accepted to. He found that students accepted to, for example, Penn with equivalent SAT scores were likely to make equivalent money even if they chose to attend Penn St. In a later paper, he found "quality of schools applied to" a more precise proxy.

This is, of course, crazy-talk. Common sense dictates the following: A Wharton finance major is likely to make a lot more then a Penn St finance major; Concentrating on women's and religious studies is not a recipe for economic success whether from Penn or Penn St; A C student has better prospects from Penn than Penn St.; Some students are better served by Penn St. and, knowing who they are, more likely than others to turn down Penn; Quality of school applied to says more about social resources and expectations than intrinsic motivation or creativity (which are, in any case, likely the stronger factors).

Which is all to say: Students ought think twice before dumbly following what Dr. Krueger (B.S. Cornell '83, Ph.D. Harvard '87) says. And Conservatives are absolutely right to be skeptical of the "data-driven" conclusions of macro-economic models.

Galuth

"Galuth" is, perhaps, the most powerful and contemporary Jewish conception. We are taught that it was not only the Jews who were exiled with the destruction of their Temple -- G-d, Himself, was as well. Where some see a world in which "God is dead," the Jewish tradition teaches that He is merely in exile. And not because we, today, do not believe in Him faithfully enough. Rather, because, we have not been good enough to each other.

Heads I Win, Tails You Lose

In the high stakes poker game, they were playing, Boehner folded.

As described by the President, the new deal is staged:

The first part of this agreement will cut about $1 trillion in spending over the next 10 years... the second part... establishes a bipartisan committee of Congress to report back by November with a proposal to further reduce the deficit... To hold us all accountable for making these reforms, tough cuts that both parties would find objectionable would automatically go into effect if we don’t act.

The threatened tough cuts would be to defense and medicare providers.

The President made absolutely clear in his statement that the substance of the negotiations -- tax raises vs spending cuts -- weren't going to change. In effect, what this deal does is switch the "hostage" from the debt limit to defense and seniors. Which is to say from a hostage many in the GOP -- who believe smaller government leads to economic growth -- would be happy to sacrifice. The committee it sets up will give equal weight to House Democrats and Republicans despite the 2010 elections that gave republicans an almost 2-1 edge.

Finally, and above all, there is absolutely nothing in this deal that would motivate Democrats to compromise. Should the committee come back empty handed, they would gleefully look forward to arguing to voters that crazy Republicans skewered Defense and Seniors to protect "the rich".

In other words, politically, Republicans would be well advised to trash this deal -- argue that Obama's insistence on playing politics with Defense spending renders him an unfit Commander-In-Chief -- and roll the dice on default.