The Hanukkah Song for Economists

Federal Government Loses Big in Supreme Court Property Rights Case

Federal Government Loses Big in Supreme Court Property Rights Case

The federal government suffered a major defeat today at the U.S. Supreme Court in the case of Arkansas Game & Fish Commission v. United States. In their unanimous decision, the justices rejected the government’s sweeping claim that a series of recurring floods induced by the U.S. Army Corps of Engineers did not qualify as a taking of property under the Fifth Amendment because the flooding was only temporary in duration. As Justice Ruth Bader Ginsburg wrote for the majority:

Because government-induced flooding can constitute a taking of property, and because a taking need not be permanent to be compensable, our precedent indicates that government-induced flooding of limited duration may be compensable. No decision of this Court authorizes a blanket temporary-flooding exception to our Takings Clause jurisprudence, and we decline to create such an exception in this case.

The Court also rejected the government’s assertion that the Army Corps of Engineers needed to be free from the constraints of the Takings Clause in order to effectively do its job:

Time and again in Takings Clause cases, the Court has heard the prophecy that recognizing a just compensation claim would unduly impede the government’s ability to act in the public interest. We have rejected this argument when deployed to urge blanket exemptions from the Fifth Amendment’s instruction.

As for the surprising claim made during oral argument by Deputy Solicitor General Edwin Kneedler, who told the justices that no property owner whose land lay below a government dam could ever bring suit under the Takings Clause in response to a government-induced flood, the Court observed that because this novel argument “was not aired in the courts below, and [was] barely hinted at in the brief the Government filed in this Court...we express no opinion on the proposed upstream/downstream distinction.”

I’m a little surprised the Supreme Court didn’t reject Kneedler’s bogus upstream/downstream distinction outright, given that most of the justices seemed so dismayed by it during oral argument (Justice Anthony Kennedy likened Kneedler’s position to the “old moral refuge” of German rocket scientists who said “I make the rockets go up; where they come down is not my concern”), but perhaps the justices opted for a unanimous ruling against the government rather than a divided opinion where the majority delivered an even more forceful denunciation.

Bottom line: The federal government went to court in the hopes of restricting property rights and came up short.

David Warsh on The Race Between Education and Technology

The Race Between Education and Technology

The ASET Book club will discuss The Race Between Education and Technology on December 6, 2012.

At our meeting we will also schedule 2013 meetings days and books. (See end of this post.

Possible questions for our discussion:

1. Daron Acemoglu, author of a previous ASET book club read - Why Nations Fail? Describes Goldin and Katz’s The Race between Education and Technology is a monumental achievement that supplies a unified framework for interpreting how the demand and supply of human capital have shaped the distribution of earnings in the U.S. labor market over the 20th century. What did you learn about the supply of labor from reading this book? In what ways did this information about the supply of labor challenge your previously held views or beliefs about education?

2. Goldin and Katz describe an evolution (deterioration) in the supply side of the labor market beginning in 1970? How convincing was their argument – do you view that these is in fact a deterioration and if so, how persuasive is the author’s explanation for this change?

3. In the current issue of The Journal of Economic Perspectives Martin West summarizes “Global Lessons for Improving U.S. Education.” “. . . Rigorous studies confirm that students in countries that for historical reasons have a larger share of students in private schools perform at higher levels on international assessments while spending less on primary and secondary education.. . . In addition, the achievement gap between socioeconomically disadvantaged and advantaged students is reduced in countries in which private schools receive more government funds. . . .”

The authors find a similar outcome as they describe the virtues of the American education system (130+) and contrast American higher education with other countries (last paragraph of page 283) with the observation: “the enormous competition between and within the public and private sectors, and its laissez faire orientation.” (see page 64 for example) What other evidence to you find for this within the text and your reading and how does this evidence challenge or contradict your experience as an educator. How might your resolve any conflict between your reading of the book and your beliefs.

4. Where you surprised by the finding that historically “the supply of quality teachers was extremely elastic”(240)? Might this still be the case and account for the status of teaching wages?

5. Goldin and Katz write: “Education was also a form of insurance . . . (192). How might this account for the historic and contemporary incentives in the labor market, specifically the supply side?

6. What insight did the analysis of technology skill complementarity (121) offer and did this insight broaden your understanding of the demand for labor over the period of this economic history?

7. What is your view of the contention: “Two factors appear to be holding back the educational attainment of American youth: college readiness and finances”(347)?

8. Relative demand and relative supply of labor analysis – “Technology has been racing ahead of education in recent years because educational growth has been sluggish, not because skill biased educational change has accelerated.”(303). Did you find this conclusion surprising and, more importantly, does this provide a satisfactory explanation for the rising college wage premium?

Claudia Goldin speaking on the book. http://libertyandresponsibility.blogspot.com/2012/12/claudia-golden-on-race-between.html

Reviews of the book - http://libertyandresponsibility.blogspot.com/2012/12/reviews-race-between-education-and.html

Teaching the History of Capitalism

In November 2011, the conference on Teaching the History of Capitalism gathered a small group of scholars in the field at Harvard University to reflect on their own teaching, learn from the wisdom and experience of our colleagues, and develop a clearer sense of the field’s pedagogical aims. The conversation focused on how the history of capitalism might enhance college curriculums. Several scholars who could not attend in person also sent their syllabi and suggestions.

http://studyofcapitalism.harvard.edu/teaching-resources

Reviews - The Race Between Education and Technology

Daron Acemoglu, author of a previous ASET book club read - Why Nations Fail?

Goldin and Katz’s The Race between Education and Technology is a monumental achievement that supplies a unified framework for interpreting how the demand and supply of human capital have shaped the distribution of earnings in the U.S. labor market over the 20th century. This essay reviews the theoretical and conceptual underpinnings of this work and documents the success of Goldin and Katz’s framework in accounting for numerous broad labor market trends. The essay also considers areas where the framework falls short in explaining several key labor market puzzles of recent decades and argues that these shortcomings can potentially be overcome by relaxing the implicit equivalence drawn between workers’ skills and their job tasks in the conceptual framework on which Goldin and Katz build. The essay argues that allowing for a richer set of interactions between skills and technologies in accomplishing job tasks both augments and refines the predictions of Goldin and Katz’s approach and suggests an even more important role for human capital in economic growth than indicated by their analysis.

http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1987249

The New York Times -

The authors skillfully demonstrate that for more than a century, and at a steady rate, technological breakthroughs — the mass production system, electricity, computers — have been increasing the demand for ever more educated workers. And, they show, America’s school system met this demand, not with a national policy, but in grassroots fashion, as communities taxed themselves and built schools and colleges.

Beginning in the 1970s, however, the education system failed to keep pace, resulting, Ms. Goldin and Mr. Katz contend, in a sharply unequal nation.

The authors allow that a decline in union membership and in the inflation-adjusted minimum wage also contributed to the shift in who partook of a growing pie. But they rule out the usual suspects — globalization (trade) and high immigration — as significant causes of rising inequality. Amid the current calls to restrict executive compensation, their policy prescription is to have more Americans graduate from college.

If only it were that easy.

The authors’ argument is really two books in one. One offers an incisive history of American education, especially the spread of the public high school and the state university system. It proves to be an uplifting tale of public commitment and open access. The authors remind us that the United States long remained “the best poor man’s country.” A place where talent could rise.

The other story rigorously measures the impact of education on income. The authors’ compilation of hard data on educational attainment according to when people were born is an awesome achievement, though not always a gripping read.

http://www.nytimes.com/2008/10/05/business/05shelf.html?_r=0

History Net and Peter Linkert write:

Where next for research in the economic history of American education? This is the perfect time to ask, now that Goldin and Katz have achieved closure on so many questions. The view from their shoulders reveals two key areas to explore.

First, who was it that under-invested in education? Did private individuals pass up money lying on the sidewalk, or was it the political process failing to realize high social rates of return that took into account both fiscal effects and knowledge externalities? For the purposes of their book, Goldin and Katz are able to finesse these tough questions. By focusing on contrasts between American epochs, they successfully explain the contrasts in “returns” in terms of movements in wage ratios that were dramatic enough to drive movements in all definitions of the rate of return on education. Yet we still need to explore the separate levels of the private versus “social” (private and fiscal only) versus overall rates of return, the last being the one that draws on the recent literature on externalities. Only then can we distinguish private irrationality, or private capital constraints, from a failure of policymakers to capture high societal returns to extra years of education. The new research will have to proceed on different levels for different time periods. For the present day debate, scholars will have to jump the higher econometric hurdles imposed by Heckman, Lochner, and Todd in their rejection of the convenient Mincer return analysis. For earlier periods, it should suffice to make rougher contrasts between the likely private and fiscal returns for different eras and different places.

A related frontier is the political economy of education finance. Who voted for or against taxes for schools, in which states, and why? Goldin and Katz have advanced the political economy agenda with econometric evidence on the determinants of high school and college attendance, and the funding for public state universities. Yet there is much more to be done.

On both these research frontiers, our progress will be accelerated because Goldin and Katz have paved the way.

http://eh.net/book_reviews/race-between-education-and-technology

Claudia Golden on The Race between Education and Technology