discuss 789
1. Are you behind schedule? If so, how do you plan to catch up?
2. What does it mean when you see###### in an Excel cell?
(Hint: Read
Understand Excel Basics
link within RESOURCES area of this Module).
3. What is PEMDAS? Explain.
4. Which function key helps to switch between relative and absolute cell references?
5. Which two keys when pressed down at the same time helps to switch to formula sheet?
1. What was the most challenging function for you to understand?
2. ExplainAVERAGEIFfunction with an example. 1. What is the earning premium to college relative to high school, and how has it changed over time? What psychological changes in the economy have accounted for this change, according to Caplan?
2. In discussing the college premium, Roberts points out that the heterogeneity of the variables involved makes this figure problematic. Yet he still maintains that this figure can tell ussomething. Whatcanit tell us, and what can we deduce from it?
3. Caplan analogizes the return to education with both marriage and bank loans. How does each compare to education? What other analogies might you suggest?
4. Caplan offers some suggestions for fruitful further research. In doing so, he poses the puzzle of why students are happy when their professor cancels class. How would someone who believes in the human capital model explain this puzzle? The signaling model? Which one do you find more convincing with this example?
5. Throughout the interview, Roberts and Caplan discuss labor economists typical rejection of the signaling model. Roberts challenges Caplan as follows:
Here you have all this evidence that should have convinced all these labor economists. It hasnt.Eitherthey have a terrible confirmation biasOr you do. And the information is not quite as decisive as it appears to you.
What evidence does Caplan offer to buttress his point, and why do you think this hasnt been accepted by most labor economists? To what extent is their rejection justified? Who suffers more confirmation bias?
6. At the end of the interview, Caplan describes education as an arms race. What does he mean by this? To what extent is there a social return to education? Do you agree that too many people go to college? Explain.
7. Inyouropinion, should colleges offer refunds? If so, under what circumstances, and what exactly would they be refunding? If not, why not?
Requirements:
The assignment should be submitted as an evaluation of the information presented in the podcast using the guiding questions as a format for topics that could be covered (although you can go in your own direction) while discussing education. In addition to the information gained from the podcast, students are expected to findtwoadditional respected resources to support their considerations.
The paper should be submitted usingAPA style formatting(Links to an external site.)
. If you are not familiar with APA it is used in research work and is different than MLA,however I will not be grading over this. Grading will be done over content, quality of thought and adherence to academic honesty standards(i.e. plagarism). Podcast Episode Highlights
0:33
Intro. [Recording date: March 20, 2014.]Russ:Our topic for today is education, and part of the conversation I assume will be a sneak preview of your next book. But I’m hoping we’ll get into some more general issues related to measurement and empirical work. What we are going to talk about specifically today is the return to education: What’s the impact on a person’s earning potential or earning power or income after attending college, graduating from college for that person. So, I want to start with some basic empirical measurements. How much more do college graduates earn relative to high school graduates, and how has that return changed over time?Guest:So, in 2011, college graduates made 83% more than high school graduates. And high school graduates, mainly people who have gone to college not at all. How has that amount changed over time? It’s gone up quite a bit. So, maybe around 1970 it would have been only about 35 or 40%, so it’s something like doubled over the last 40 years, during my lifetime.Russ:And what are some of the standard explanations for why that’s happened? So, why is college more productive for people who attend and have graduated?Guest:The usual story is that there has been a lot of psychological change in the economy, globalization as well, and that this has somehow made it more important to be a college graduate. And among most economists, they do tend to focus on the skills that you supposedly receive in school. And so they think of it as: it’s more important to have general thinking ability and reasoning skills, as well as different technical skills you might learn in school; and that when the economy is more technologically complex, and also when you are competing in a global market where one person could mess up a big firm, it’s more important to have these skills. I’d say that’s probably the usual view.Russ:And what do you think of that view?Guest:I think that there is some truth in it, but it’s greatly exaggerated and there’s a lot of other things that are going on that most people who study education would rather not talk about.Russ:What are a few of those?Guest:Well, one of the main ones, strangely, for economists to ignore is–even though they do–is that people who go to college are not the same even when they start. So, the kind of person who goes to college is different at the beginning. And there are a lot of reasons to think that people who are different in the beginning would have made more money even if they hadn’t gone to college. The most obvious one is that people who go to college are generally smarter. It’s not popular to say it, but all of the evidence confirms it. And they were smarter before they started. Now, there’s also a lot of evidence that–Russ:We’ll get into that later. But why would that have changed over time? This is the reason–this is an incredible change, right? I don’t think there is any parallel development in the area of education over any other time period, 30, 40-year time period, a doubling of the returns to education. You are suggesting that–you started by saying that the standard answer, which is, well, the world is more complex, there’s all this technology, and so college students are more valuable–you are not convinced of that. I’m not either, by the way. I used to be more sympathetic to that until I started readingyou. So, I’m interested: Why would think that would change over time?Guest:Right. Well, again, there’s an important distinction to make. You need to distinguish between college graduates being more valuable and college itself being more valuable. Those are two different things. So the main problem that I have with the usual view is that I take a look at what people actually study in school, and I see very little evidence that most students are acquiring any technical skills. And also, surprisingly, when I read educational psychology, there is a lot of question about whether college students are actually learning much in the way of thinking skills, either. So, a more reasonable story is not so much that the skills that college teaches are more valuable than they used to be, but rather the kind of people who go to college are more valuable than they used to be. Which is quite different.Russ:Great. A subtle but important distinction. We’re going to get into how that affects the measurement issue, but let’s start with a puzzle that you identified in a recent post at EconLog, which is that, given that increase in the return to graduating–which is enormous–you’d think that everybody would want to graduate from college. And in particular we see lots of policy encouragement of people to attend college and ideally graduate. There hasn’t been much of an impact, right? You’d think with that increase, that a lot more people would want to graduate from college. They don’t seem to be doing that. So what do we know about what’s happened to enrollment and graduation over the last 20, 30 years? And how do you explain that?Guest:All right. So, female enrollment has increased a lot. Male enrollment has not increased nearly as much. And then the graduation rate has been almost flat for these two decades. It may have gone up a bit for women, but that–the actual picture, is even though we’ve seen this very large run-up in the payoff to finishing college, it doesn’t seem like there has been that much response. Especially when you realize this increase in women going to college probably has a lot more to do with social norms than it does with the return.Russ:We don’t know that, do we?Guest:Well, if you just see all the other ways that gender norms have changed over that period, it seems plausible that this is just another example of women and the role they see for themselves in society has changed, and that’s why they are going to college more, rather than the change in the payoff.Russ:Good point. Let’s throw in one more piece of data, which I left out. Which is: What’s the return to attending college but not graduating? So, the return you say is 83%. By the way, is that an annual difference?Guest:So, this is just a premium. So this says if you just take a look at the average college graduate and his earnings and compare his earnings to the average high school graduate, the average college graduate makes 83% more, in any given year. Or, really, in 2011, the year we are looking at.Russ:What about for someone who has attended college but not graduated? What’s the premium for that?Guest:That is about 10%. A lot less.Russ:So, not very good.Guest:Far less.
7:33
Russ:Which brings us now, finally, to the question I started with; I apologize for the roundabout way of asking it. Given that big increase in the return tograduating–not much of a return to attending, but a big improvement in your income if you graduate–why aren’t people working hard graduating? And why isn’t that getting more people to stay in school and finish.Guest:Well, we have probably a lot of what’s going on is that for many people, graduation is hard. It’s actually hard to pass the classes, hard to keep doing it. The kind of people who write about education are people who have had a fantastic educational experience. They’ve always been doing well in class; they’ve been getting their heads patted from kindergarten on. And not only did they have no trouble finishing, but the people they know had no trouble finishing. But most people have a lot of trouble finishing. So, right now, the 5-year graduation rate for 4-year college is only about 55%. So like 45% fall by the wayside during this period. As to why exactly it is they don’t finish, part of it is probably just the material is too difficult. A lot of it is that people get really bored. And then, another point is that even if you wouldn’t actually fail out, it’s just very discouraging to constantly receive Cs or worse. Even if youcouldget your 4-year college degree with Cs and get something out of the labor market, it’s hard to spend four more years being told that you are at the bottom of the barrel.Russ:But the puzzle then is that, while it is hard, enrollment rates haven’t even increased for men–I think is what you said.Guest:They’ve increased a little bit.Russ:A little bit but not very much, given the huge increase in the premium. And so the question you raised in that post is: why aren’t more people grasping for the brass ring? And your point was, based on some other folks’ research, which was fascinating, was that well, if you don’t finish, it’s not a very good investment.Guest:That’s right. If you were to go and put in 3 or 4 years and then not finish, you might only be getting some of this 10% premium, and that is not very good for all those years you are putting in. It really doesn’t pay very much. Here’s the key thing to keep in mind. When we say that there’s an average graduation rate of like 55%, a lot of that is predictable. So if you have great SAT (Standardized Admission Test) scores, if you are great in high school, then your graduation rate is probably closer to 90 or 95%. On the other hand, if you were in the bottom quarter of your high school class then you are talking about maybe a 10% chance of finishing, something along those lines. So even if you aren’t a great student, doing the math actually eventually becomes fairly easy–yeah, I can get an 83% if I finish but I only have a 10% chance of doing that. Even if you don’t think in such complex terms or think so quantitatively, just noticing that people like you almost never finish probably does discourage a lot of people from trying. And then a lot of people give up once they see [?] something would be easier, and it’s not.Russ:You write–this was a very nice way of capturing it: “For students in the bottom quartile of academic ability, paying a year’s tuition is almost as foolish as buying 10,000 lottery tickets.” Just that the odds are stacked against them; they have a small likelihood of finishing.Guest:That’s right. So the way that some of the researchers that have worked on this topic put it is, for the people with a really high graduation rate, the fact that the college premium went way up doesn’t change anything because college was a great deal in 1970 and a great deal now. If you know you are going to finish, you get a 40 or 50% raise and you have 4 good years where you do well and people say that you are a good student. It’s a nice experience which then pays off. But then on the other hand, for people who only have like a 10% chance of finishing, the fact that the return has doubled just means that it’s gone from abysmally bad to really bad. Still not much of a reason to go. And then the really key people, the marginal people, the people who are just on the edge, the main result of the research is that there just aren’t that many people like that. There aren’t that many people who are on the border. And so even when the payoff doubles if you succeed, there aren’t that many people who then say, Okay, now I’ll put in the extra effort to try to do it.Russ:Do we know anything about why those people don’t finish? How many of them just were getting good grades and just decided to give up, versus flunked out? Do we know anything about that.Guest:Right. So, literal flunking out is pretty rare just because most colleges, perhaps for financial reasons, don’t like flunking people out. It’s far better to string people along, let them keep going, taking classes, trying, trying, getting Ds[?] and Cs. So certainly their academic performance is quite a bit worse than people who finish. But it’s not clear that–it doesn’t seem there’s that many that are literally flunking out. It’s just more of people throwing in the towel.Russ:Interesting. Now, you point out, which I never thought about–it’s just embarrassing but it’s true–that colleges don’t give refunds. Which is an interesting thing. They let you in. Right? I guess the answer would be: You took the classes, you learned what you learned, so you get your money’s worth. But it’s an interesting thing. You’d think the main value of going through college is finishing, not finishing what seems to be–you’d think there would be some refunds possible. But there aren’t.Guest:Right. Well, if you were the first college that started giving refunds, you would probably have a lot ofreallymarginal students showing up. Remember, one of the main things that colleges want to do is preserve their ranking; and being too open does hurt your ranking. So, the kinds of places that would be likely to do this or that would gain the most would be schools that are very unselective to begin with. So, it could work, but probably the problem is there is a large body of people who are not very committed to doing well even by today’s standards. So if you did this you might get a lot of students who–if you think currently the bottom half of students currently aren’t doing a very good job and putting much into it, imagine how bad students would be if you were offering them a money-back guarantee.Russ:And you also point out, and I think it’s important to remind people of this, that one of the major costs of college isn’t tuition. It’s the foregone income that you give up by not working. You don’t get that back, either.Guest:That’s absolutely right. You’re right that that ismoreimportant. One of the things that I’ve learned writing the book is that even though list prices for tuition have gone way up, still the actual tuition for your main 4-year state universities is not that much. After you adjust for all financial aid and everything else, it’s still only in the ballpark of $5000 a year in most places. So actually the foregone earnings could easily outweigh that by a factor of 3 or 4.Russ:$5000? So the list price–this is important, by the way. When people talk about how college is getting so expensive–a small portion at any university pays the full freight. Many people get scholarships. Many people get financial aid. Financial aid, of course, alone, it’s not a–Guest:Right, right. So that $5000 figure, that actually–if it was a loan that would not adjust that number. It’s only grants or tuition reductions or other things like that, that would reduce that number.Russ:Wow. That’s a low number.Guest:Yeah. So you take a look at the list prices for tuition. And again[?] of course these list prices are probably often being paid, especially for public universities, by the elite people that actually write about education. But when people have actually stepped back and say, well, what aboutmostfamilies; what aremostfamilies paying for their kids to go to college? It hasn’t risen nearly as much as it seems on the surface. Which is one of the things that surprised me when I started looking at the numbers.Russ:Do you know offhand the average list price? At state universities?Guest:Yes. So, that’s more like $10,000, $12,000. For four years, for 4-year universities.Russ:Okay. So, it’s a little less than half, is what people actually pay.
15:29
Russ:Now, you make an analogy in your post about this issue of the actual return, because it’s not the same for everybody. So, another way to say it is that the average return is 83%, but if you have low ability or low ability to finish, not 83%; it’s closer to 10%. You make an analogy to marriage, which I found interesting. What is it?Guest:Right. So there is a lot of evidence that on average married couples do a lot better financially. And especially men. So, married men seem to make a lot more money than otherwise very similar single men. And then there are all sorts of other benefits to marriage. One of the main things is you save a lot of living expenses. Just as a side-issue for the book, I wound up looking into how much do people save when they get married. Most estimates are something like, I think it’s like 35% off your cost of living. So you take a look at this, and marriage looks like a fantastic deal. But, it can be a fantastic deal for most people, most people who currently do it; that doesn’t mean it’s a fantastic deal for people who currentlydon’tget married, because they very possibly would have unusually high divorce rates. So, the kinds of people that get married tend to be committed; they are mature; they are ready to settle down. For them, marriage is a great deal. On the other hand, if you are still very immature and impulsive and you just don’t feel ready to settle down, then you might think, I’ll go get married, I’ll have all these benefits, but quite likely you won’t really capture them because you are not self-prepared actually to reap the benefits.Russ:And there are very large differences in divorce rates by education, which of course magnifies the return to–it complicates measuring the return to education and marriage independently, right?Guest:Right, right. Now, actually a much simpler analogy that I drew in an earlier post is this: Suppose you are a bank and you lend money out at 10%, and then someone asks you: How much do you actually make? And you say, 10%. Wait a second–does everyone pay back their loans? No, there’s like a 3% default rate. Wait a second–you aren’t really making 10%. You are making 7%. So that default rate is actually extremely important when you are running any kind of investment fund. Even a very small default rate can completely wipe out the apparent gains you get from the loans that succeed. So imagine if you had a loan at 5% and a 6% default rate, you are actually losing money on average. And what I say is very much goes the same for education. The way that most people talk about education talk, it’s as if every time someone tries to get a degree, they succeed. So they only look at the numbers for the successful people. But, that is a lot like looking at the success of a bank by only looking at the money you make on the loans that get repaid. Really what you need to do is count both the loans that get repaid and the ones that don’t. And that can easily show that a bank is making a modest profit or losing money. And the same goes for education. You need to look at the educational investments that work as well as the ones that fail. And putting in the ones that fail can have a large effect on the overall profitability of investing in educations. Now, you really have to keep in mind–Russ:Well, you are saying, taking that crude 55% graduation rate, and let’s make it 50% to make it easy, it says that the real premium is 40, and it’s 40 because half the people get aid and the other half get closer to zero.Guest:Yeah, yeah, exactly.Russ:10. Excuse me. 10.Guest:Yes. So that is exactly right. And then of course, oh yeah–as I was saying–it’s better to put an average, if the average number is 100%. Right? So right now, when people talk about education, they assume 100% completion rate. Far better to put in the 50%, although even better, of course, is to individually tailor the predictions based upon the performance of the student in high school and SATs and so on, and then you’ll see, well for some people it reallyisvery close to 80%, because they are great students, they always have been, and they almost certainly are going to graduate. And on the other hand, as we said, for other people, who have maybe a 10% graduation chance, then they are talking of a real pittance.Russ:Well, I think it’s a great example–we’ll come back to this a few more times–of heterogeneity. I think the fact that people aren’t the same, people are different; and as a result, when you say, well what’s the return to going to college? In many ways the average is not a meaningful measure. It capturessomething. Even when you include–we’ve talked about two different measures. One would be the assumption that everybody graduated. That’s the 83% return. If we talked about the assumption, the more realistic assumption, the returns are closer to, say, 45 or 50%. Because 55% of the people graduate and the 45% who don’t only get a 10% premium for attending. So as a result, the real return is much lower. But that return, the measured, sort of okay honest average return of 50-something-percent, that’s very misleading, because almost nobody gets that return. There’s a bunch of people who have a very good chance, at the high end of graduating. They are going to get 83%. There’s a bunch of people at the lower end who have very little chance of graduating. They are only going to get 10%. There are people in the middle who are something like that. But almost nobody gets 50%. It’s either you finish and you get something closer to 80%, or you don’t. And so, as a result, the average is not a very useful measure of what’s actually going on.Guest:Yes. And of course, even to say that college graduates get 83% is very misleading. There’s a huge range. One of the main things that matters is your major, where there are your stereotypical high-earning majors, where you are getting a lot more than that. So that would be engineering, computer science, finance. And actually economics. Since this is EconTalk, I was actually very surprised to see that there isn’t that much difference in the payoff for getting an econ bachelor’s degree versus an engineering bachelor’s degree. What I often tell my students is the best-paid of all the easy majors. But I didn’t realize quite how true that was until I looked at the numbers and saying, My God, we’re getting almost as much as a computer scientist who worked 80 hours a week all through college. Crazy.Russ:’And I actuallylearnedsomething.’ That’s a joke. That was a joke.Guest:A lot of [all our?] students learn a lot, Russ. But yeah, what about those other economics students who didn’t learn so much. On the other hand, of course, one of your low-earning majors, like, you know–like, the standard example in the research is actually the education major. Which is not always at the very bottom, but it’s close to the very bottom.Russ:Ironic.Guest:Now, [?] in mind, people often make fun of majors like philosophy or political science or education. Although the truth, when I looked into is–as long as you–people who finish on average with those easier, low-paid majors, they still get a substantial benefit on the job market. It’s not like they get zero. That’s just wrong. But yeah, it is a lot less than they would get if they were engineers or something like that.Russ:Well, I’m going to defend the education, the return to education degree, for a minute here. Not maybe more than a minute. But I don’t think that people who study education learn very much that’s useful about how to be a good teacher. I want to put that on the table. However, the wage they earn, if they go into teaching, has a large non-monetary component, both in terms of get summers off and you also get the thrill of experiencing young minds coming to the light. Which is really a glorious thing. So, salary is not the only thing we really care about that. Let’s make that clear. Having said that, therearelarge differences in the monetary compensation of different majors of the people who do graduate.Guest:There’s a very common view, often associated with David Card and his many students that education is just as lucrative for high-ability students and low-ability students. The way they reached this conclusion is basically saying, look, if you take a look at the graduates of college, high-ability graduates seem to get as large percentage increase in their earnings as low-ability graduates. The main problem with this, again, is that they are only looking at graduates. If you go and look at the fact of ability on whether you graduated all, that’s the main way where you very clearly see that the lower-ability studentsdon’tget the same return as high-ability students, because they are less likely to get much of a return at all. So, it’s one thing to say, if a low-ability student manages to get to the finish line then he’ll get a big gain. But what are his chances ofgettingover the finish line? Pretty bad.
24:02
Russ:So, let’s shift gears. Let’s talk about the underlying explanations for why there is any premium at all. Over the years, since I’ve been studying economics, the two approaches that fight against each other are the human capital model and the signaling model. Talk about what the differences between those two models are, and which you think has, if you can, more weight than the other.Guest:Sure. So, the human capital model and the signaling model are both stories about how education successfully increases earnings. They are not disagreeing about whether education actually raises earnings. Rather they are disagreeing about why. The human capital story says that you go to school; they actually teach you a bunch of useful jobs skills; you then finish and the labor market rewards you because you are now able to do more stuff. The signaling model says, no, no, no, no; that’s not what’s going on. What’s going on is that people go to school; they don’t actually learn a lot of useful stuff; however, the whole educational process filters out the people who wouldn’t have been very good workers. So people who are lower intelligence, lower in work ethic, lower in conformity–those people tend to not do very well in school. They drop out. They get bad grades. And that’s why the labor market cares. It’s not that the school actually transforms you to a good worker from a bad worker. It’s that the schooling, the school puts a little sticker on your head–you know, Grade A student, Grade B student, Grade C student. A very simple way of explaining it is think about two different ways to raise the price of a diamond. One way is by cutting it very beautifully so that it is actually a better diamond. Another way, though, is you put on that funny monocle thing and you look at it and you appraise it. These are both ways that you can raise the price of a diamond. So, cutting the diamond can raise the price. But also a very credible appraisal can raise the price as well. And the human capital story basically says that schools take these diamonds-in-the-rough and it cuts them very nicely and then that’s why they are more valuable. And signaling says, no, no, no: what’s going on is students show up to school basically as well as they are going to be, and then what the school does is it puts them through a bunch of tests and it makes them jump through a lot of hoops, and then it certifies them and certifies their quality. And that’s why employers actually care. Now of course, any sensible person will say: Well, there’s some truth to both stories. But, so the real question is not: Is it all human capital or is it all signaling? The question is: What’s the balance? The general view among most active labor economists is that signaling is basically irrelevant[?]; it’s maybe 5%, 10%; it’s something that we can pretty much forget about. My view, though, is signaling is more like 80%, and that labor economists–Russ:It’s a slight difference.Guest:Yes. Most labor economists are ignoring a lot of relevant evidence or they are disqualifying a lot of evidence that seems to be very credible on strange methodological grounds. [?] We should take a different, a fair look at all the evidence. Don’t just look at the kinds of evidence that economists like. Look at what’s going on in educational psychology, look at what’s going on in sociology. And of course also remember what school is like. Everyone who is talking about these issues spent well over 10 years in school. So, like, does the human capital story even fit with your own experience? What I generally found is what I argue with mainstream labor economists face to face. They make a lot of concessions, that, yeah, signaling does fit everythingIsaw, but it can’t really be. There has to be something misleading about everything that I ever experienced. And I say: Well, why don’t we take what you experienced more seriously and think about whether the evidence that you have is even inconsistent with the signaling model? Because I don’t think it is.Russ:So, let me push back a little bit. I’ve always been troubled by the signaling model. And I agree with you–it’s an interesting–the sociology of labor economists is a fascinating thing. Because I agree with you; I think most labor economists don’t like the signaling model and would be prone, as I am, to dismiss some evidence in favor of it. So I’m going to let you make the case in a second. But let me let the listeners understand why I have a natural skepticism about it. And I think a lot of labor economists do as well. And the reason is that it’s an extremely expensive signal. So, you are saying, for 4 years, I give up the chance to work; I pay this tuition, whether it’s $5000 or $10,000, or $30,000, or $40,000–at a private university. And for that enormous amount of money, I prove that I am a good worker and I get a sticker on my head. Wouldn’t there be an easier, cheaper way to get the sticker? If all it’s doing is measuring ability, this 4-year slog that’s extremely expensive? That’s the best way that people have come up with to get the sticker?Guest:Uh, right. Well, there’s so many things to say. First of all, when you say, Is that the best way we’ve come up with? It’s the best way we’ve come up with given that government showers a trillion dollars a year on education. So, it’s not that it is somehow [?]–Russ:Only a trillion?Guest:Yes. [?] and a fair contest. This is a very heavily subsidized way to evaluate [?], is that government doesn’t just have a hand on the scale. It is a truck on the scale in favor of the status quo. So this is the first thi
