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Published on Leave a comment on Yet Another Reason Why I Don’t Run NIH

My old friend (and former mentor) Geoff Davis runs the website phds.org, where he blogs on matters related to engineering and science, particularly the education and professional development of young scientists. Prompted by the concluding paragraph of my post on opportunity cost as it pertains to stem cell research, Geoff writes:

I suspect that Andrew is more reacting crankily to a boilerplate plea for money rather than being completely serious. After all, this same argument could be made about any contender for federal investment, and I haven't ever heard of anyone else making a serious effort to estimate returns of alternative federal investments in the course of asking for more money.

As if we were still sitting at Murphy's, I will rewrite this paragraph as follows:

I am sure that Andrew is not only reacting crankily to yet another boilerplate plea for money but is completely serious. After all, this same argument should be made about every contender for federal investment, and it should be a part of every stage of the federal budgeting process to make a serious effort to estimate the returns of alternative federal investments in the course of asking for more money.

From the few grant panels on which I've served, I don't think my description is so wide of the mark. The panels rank the grant applications in order of their scholarly promise, and the budget that has been previously allocated determines how high in the ranking an application has to be in order to get funded. In that stage of the process, the ranking is the consideration of opportunity cost. I've even been on some panels in which there was discussion of not using the whole budget allocation if the set of applications was unusually weak.

I have less understanding of how the budget allocations for the grant panels are set, but I presume that policy makers, in consultation with the bureaucrats, assess the returns from past allocations to scientific research and decide on how much they want to budget going forward. Setting that budget is, in some form, the consideration of opportunity cost. As Geoff goes on to say:

His point about opportunity costs is a good one to remember, though. Imagine instead that Fuller and Reeve were demanding a bigger slice of the NIH pie for stem cell research. Something else would have to be cut. How would one make the case for stem cells as opposed to, say, more research on cancer or heart disease?

One would have to get inside the mind of the program officers at the NIH to know this for sure, but at some level, it's already being done. It just wasn't being done--or even acknowledged--in the WaPo op-ed that prompted my original post.

Published on Leave a comment on This Week in Academia

Accusations of racism. Stem cell research controversy. A hunger strike. Read all about it. In the blogosphere, here are some interesting posts at Blackademics and Three Bulls! and TigerHawk.

If the purpose is to get tenure, this will be a tough case to sell. Fewer than half of those who come up for tenure at MIT get it. The set of people coming up for tenure as already been thinned by attrition during the intervening time period. Being denied tenure there is not so unusual, making it harder to point to Sherley's race as a key factor. One of the articles I read on this issue noted that Sherley has gotten big grants and has received other offers of employment. So I think it is reasonable to infer that he has some other purpose in mind. It will be interesting to see how it all turns out.

Published on Leave a comment on Why I Don’t Like 529 Plans: Another Pecuniary Externality

Here's another tax-induced pecuniary externality that concerns me. The list price on college costs has been rising faster than inflation. This prompted politicians to act, and they created 529 plans to allow families to save for college in a tax-advantaged way. Austan Goolsbee has strongly and correctly criticized some of the design issues of these plans, particularly the administrative links to states and the (I think resulting) high management fees. For now, I just want to focus on how the tax advantage is distributed and its impact on future prices.

Contributions are made with after-tax dollars, sometimes with a state income tax deduction, but the returns on the portfolio compound tax-free and withdrawals are tax-free as long as they are used for college expenses. It's like a Roth IRA that way. (You can learn more here.) The benefits of the 529 plan accrue in proportion to a family's tax rate and desired amount of education expenses. Let's leave aside the almost surely positive correlation between (family) income and desired education expenses, which will reinforce the following points, and focus just on the simple fact that the tax rate increases with family income. It is more financially advantageous for a high-income family to invest a dollar in a 529 plan than it is for a low-income family to do so.

But you might say, "Okay, but doesn't the low-income family still get a benefit?" The answer depends on whether you think the supply curve for education is flat or upward sloping. Do you believe that colleges, when faced with dedicated accounts like 529 plans that will pay a penalty if they are not used on college costs, will raise their list prices? About 20 years ago, the conjecture that they would was named the "Bennett Hypothesis," after then-Secretary of Education William J. Bennett, who decried the tendency for colleges to raise tuition prices when the federal government stepped up its financial aid programs. I have little doubt that it is true.

The pecuniary externality comes in when we think about how much the tuition will go up. What drives that? I'd argue that it will be the average size of a 529 plan, as would be the case in any market responding to an increase in consumers' willingness to pay for a good. Since the tax advantage is positively related to income, even if all of the money going into 529 plans were new saving, it would be the higher income families that would have the larger-than-average 529 balances and the lower income families that would have the smaller-than-average 529 balances. (If the higher income families are simply shifting money from other accounts to 529 plans, then this strengthens the argument.)

Putting this all together, we can infer that the list price increases in college costs could outstrip the capacity of low-income families to pay them from their 529 plans. Depending on how much colleges raise their list prices and how the details of financial aid programs work out, lower income families may be worse off by the presence of 529 plans, even if they are saving through them. It is not the low-income families' own 529 plans that make them worse off--it is the high-income families' 529 plans and their greater benefits to using them. The impact of the latter on the price is the tax-induced pecuniary externality.

It's lousy public policy. But as much as I don't like these plans as a policy instrument, I have one for each of my two children. It doesn't make sense financially to leave the money on the table, given what's going to happen to list prices.

Published on Leave a comment on Flagrant Fouls

In story number one, the woeful New York Knicks come to epitomize much of what is wrong with professional [sic] sports today with this display at Madison Square Garden last evening:

Andrew Gombert for The New York Times

Perhaps we've now found the home for Terrell Owens next year.

In story number two, we have the University of Florida changing the rules of the game in its Prepaid Tuition Plan. Here are the details:

The prepaid plan allows people to start saving for college when children are young and guarantees them current tuition rates regardless of what tuition actually costs when the student reaches college.

Because UF's proposal, called the Academic Enhancement Plan, is a fee separate from tuition, it wouldn't be covered by either Florida Prepaid or the merit-based Bright Futures Scholarship Program.

About 2,800 Palm Beach County students currently attend UF, the state's flagship university.

If approved, the fee would be charged to all new and transfer students beginning next fall.

UF President Bernie Machen said the school needs the fee because its cut-rate annual tuition of $3,206 set by the legislature has forced administrators to increase class sizes. UF ranks last nationally in tuition costs when compared with other national flagship universities.

The approximately $36 million that UF would gain from the fee could be used only to hire new faculty.

Machen said he's against exempting prepaid students from paying the fee.

"I don't see why they should be out," Machen said. "Those students will benefit ultimately from it as much as other students."

They should be out because they prepaid their tuition. That's the guarantee they were given. The current price for buying a unit of tuition should go up, commensurate with the new costs, but the value of existing units as a share of tuition should be preserved. I'm all for my home state improving the quality of instruction at UF, and I agree that the current tuition rates look pretty low, but a deal is a deal, even in Gainesville, no?

Published on Leave a comment on Civil Disobedience, Not So Much

Via Powerline, I learn of an incident at Columbia two weeks ago regarding students disrupting a public presentation by Jim Gilchrist of the Minuteman Project. As they say, let's go to the tape:

Powerline links to an article in yesterday's Insider Higher Ed, which contains a number of sensible statements by people at Columbia regarding the students' behavior. But it also includes this passage:

However, another observer of protest rights on campuses said that the students were well within their rights to go onstage. “The students had a right to unfurl banners at an event,” said Heidi Boghosian, executive director of the National Lawyers Guild, a liberal bar association that has supported the protestors. “Some people have asked, ‘Well, was it crossing the line to go up on the stage?’”

“I don’t think that’s crossing the line.”

“We don’t think they caused the violence; they weren’t going to stop Gilchrist from speaking; they just wanted to stand there and hold their banner while he spoke,” Boghosian said.

“In addition to a crack-down on dissent in this country, there seems to be a waning tolerance for civil disobedience. If you want, you can call the act of jumping on the stage an act of civil disobedience, a practice that has been used for hundreds of years in this country to resist tyranny,” said Boghosian, who added that she believed the university would likely have given the students just a “slap on the wrist” if the situation had not turned violent.

You can call that civil disobedience, but only if you don't really care about the meaning of civil disobedience and in fact want to trivialize over a hundred years of struggle against genuine oppression.

What the students did was clearly not civil, but more importantly, it was not disobedient. Don't confuse rudeness with disobedience. To disobey is to refuse to abide a dictate imposed by an authority. There was no such imposition here. The students were not being compelled to obey, they were being invited to listen. The inability to distinguish is a sad commentary not just on current events, but on our current appreciation of those who did resist nonviolently--at great peril to themselves--in the name of just causes.

Published on Leave a comment on ROTC on Campus

Greg Mankiw makes a number of thoughtful points about the relationship between ROTC programs and elite colleges, referencing this post at Open University. I believe that there should be more support for ROTC at Ivy League colleges, and I made a point this year of attending the Army commissioning ceremony.

At the Rockefeller Center, we have also made a point of commemorating Veterans' Day. Last year, we invited Nate Fick '99, a veteran of both Afghanistan and Iraq, who delivered a remarkable lecture. This year, we will host Kathy Roth-Douquet and Frank Schaeffer, authors of AWOL: The Unexcused Absence of America's Upper Classes from Military Service--and How It Hurts Our Country on November 10. (The book is referenced in the Open University post.) There are some elements of citizenship that need to be shared more equitably, regardless of personal characteristics.

Greg ends his post with a poke at some of his colleagues' protests against ROTC:

Some faculty see the Harvard ROTC ban as a protest against the federal government's treatment of gay military personnel. But to me the form of the protest seems particularly sanctimonious, as the faculty are asking for a sacrifice from others (in particular, from potential ROTC students and from other students who would benefit from a more diverse student body), while giving up relatively little themselves. I propose that any professor who wants to protest federal policy can do so personally by refusing to apply for or accept any grants from the federal government.

Well put. I support neither the treatment of homosexuals by the military nor the obstacles to ROTC on campuses. I'll also suggest another dimension along which burdens could be more equitably shared. If conscription should be required in order to protect the United States, then the entire population below the age of service in the Vietnam era should be mobilized, excepting only those who have already been discharged from the military. This does not mean combat for everyone--it means service. There is no reason why the burden of fighting the war against Islamic radicals should fall so disproportionately on young adults.

Published on Leave a comment on Legacy Admits

Greg Mankiw directs us to an interesting book review in The Harvard Crimson about university admission preferences for legacies (i.e., children of alumni). It begins:

I’ve never confessed this before—not even to my roommates: I’m a beneficiary of legacy admissions.

That’s an embarrassing fact to acknowledge at Harvard, where “legacies,” the children of alumni, enjoy preferential treatment in the admissions process. Harvard accepts one-third of legacy applicants—more than three times its overall admissions rate. The federal Office for Civil Rights, in a 1990 review of Harvard’s admissions practices, found that legacy preferences allowed applicants with “weaker credentials” to gain acceptance to Harvard.

The comparison presented in the second paragraph is not an appropriate one to make. I think it's a safe bet that applicants who have a parent who went to Harvard have an above average probability of being admitted at every institution to which they apply. Smart people tend to have smart children.

In this particular case, the acceptance rate for legacies should be compared to the acceptance rate for applicants who have at least one parent with an undergraduate degree from an Ivy League (or similarly selective) institution. Has anyone ever seen this comparison made?

In addition, this comparison, like others we've been discussing this week regarding early admission applicants, needs to be made conditional on observable characteristics of the application. At a minimum, this comparison should be made conditional on SAT scores and GPA.

The author's parents are not Harvard alumni--read the whole article to understand his point.

Published on Leave a comment on And Dartmouth Does Not Follow

From today's The Dartmouth, we learn that Dartmouth is unlikely to follow Harvard and Princeton by giving up its binding early decision program. Quoting Dean of Admissions Karl Furstenberg:

"Every time we've [reviewed our admissions policies] in the recent past, we've come to the conclusion that early decision works well for Dartmouth and its students," Dean of Admissions Karl Furstenberg said. "There's no immediate need to change."

Although Furstenberg believes that Princeton's decision may put more pressure on other schools to make a change, he maintains that early admissions programs continue to offer certain benefits.

The article does not list those benefits. More from Furstenberg:

"We have worked hard to diversify the early decision pool with some success in recent years," Furstenberg said. "At the same time, the overall racial and socio-economic diversity of the entering class has increased in recent years."

According to Furstenberg, Dartmouth admits approximately 35 percent of its class early, as opposed to about 50 percent admitted early by Harvard and Princeton. In judiciously managing its early applicant pool, Furstenberg said Dartmouth ensures that incoming classes will represent many backgrounds.

In addition, Furstenberg believes that Harvard's claim regarding the disadvantages of early admissions with regards to financial aid packages is lacking when it comes to schools in the Ivy League, pointing out that Dartmouth offers need-blind admissions and extremely attractive financial aid awards to early applicants.

Here's some speculation as to what a binding early decision program can do. This is my own speculation, and it does not necessarily match how the Dartmouth admissions office views the issue.

Suppose that a university has two groups of applicants, A & B. Group A is stronger academically on average, but Group B has some other characteristics that the university wants to ensure are represented in its incoming class.

If there is a binding early decision program, then the university needs to accept only one applicant from Group B for every space in the incoming class it wants to be filled by a member of Group B, if it admits them at the early deadline. That leaves more admits for the academically more qualified Group A applicants, whether at the regular or the early deadline.

If there is no binding early decision program, then the university needs to admit more than one applicant from Group B for every space in the incoming class it wants to be filled by a member of Group B, since not all of them will come. But given a limit on the total enrollment of each incoming class, these extra admits from Group B necessarily crowd out admits from Group A or pose the risk that an incoming class will be too large for the facilities.

Under this arrangement, a binding early decision program can actually make it possible to raise the average academic credentials of the incoming class. This is not how the early admissions programs at Harvard and Princeton have been discussed this past week, which accounts for much of my skepticism of what's being reported about those programs. It is more reflective of what is reported in the article above.

Published on Leave a comment on Princeton Also Drops Early Admission

Following Harvard's lead, Princeton announced yesterday that it will drop its Early Decision program. Note that this was a more restrictive program than Harvard's Early Admission program:

Princeton has had some form of early admission program for almost 30 years. Since 1996 it has had an "early decision" program that requires students who apply early to Princeton as their first-choice school to commit to enroll at Princeton if admitted. This year 598 applicants were admitted early to the freshman class, accounting for almost 49 percent of the 1,231-member class.

At Harvard, the admission decision was not binding on the student. So Princeton appears to be giving up a more restrictive program, now having the same program as Harvard. Here's how the University explained the decision:

"We are making this change because we believe it is the right thing to do," said Princeton President Shirley M. Tilghman. "The ultimate test of any admission process for Princeton is whether it is fair and equitable to all our applicants and whether it allows us to enroll the strongest possible class.

"In recent years we have instituted the most generous financial aid program in the country, and we have significantly increased the diversity of our student body. We believe that a single admission process will encourage an even broader pool of excellent students to apply to Princeton, knowing that they will be considered at the same time and on the same terms as all other applicants."

In making a similar announcement last week, Harvard pointed to the inequities of early admission programs for less advantaged students and concerns about early admission that many secondary schools have expressed with increasing urgency in recent years.

"We agree that early admission 'advantages the advantaged,'" Tilghman said. "Although we have worked hard in recent years to increase the diversity of our early decision applicants, we have concluded that adopting a single admission process is necessary to ensure equity for all applicants. We believe that elimination of early admission programs can reduce some of the frenzy, complexity and inequity in a process that even under the best of circumstances is inevitably stressful for students and their families. We hope very much that our decision will encourage other colleges and universities to join in eliminating early admission programs."

I should be clear before I launch into criticism here. I have no particular interest in whether there is early admission, early decision, or neither. I want the best incoming class of students as well. If the admissions officers say that they can better achieve that with one deadline rather than two, then so be it.

But I will reiterate the point from my previous posts. If there was an advantage to applying early, then it was Harvard and Princeton that created it. Nobody forced Princeton to admit half its class at the first deadline--that was its own doing. Why didn't it admit only a third or a quarter of the class that way? (If it was "because they didn't want to reject meritorious applicants," then the argument crumbles.) What I object to is these two universities describing the perceived inequities in early admission as if they were passive actors, caught up in a process beyond their control.

I would be curious to know whether, conditional on observables like test scores, high school GPA, and financial aid eligibility, the probability of admission was higher for early admission applicants. If it was, why have that be so? If it was not, why claim that the process was unfair? So perhaps this is the right decision, perhaps not. But there is nothing particularly noble about it.