Worthwhile Canadian Initiative

Canada's residential schools and the dangers of educational hubris

In 1953 the Canadian Geographical Society published a glossy black-and-white volume called "Image of Canada." It has the usual inspiring pictures of Saskatchewan wheat fields and Toronto city lights; of majestic glaciers and mighty log booms.

The book also contains images that open a window to the past, and let us see the world through 1950s eyes.

On the left is a picture of a Indian boy, going to school and learning to adopt a Canadian identity.

The educational smorgasbord

At the Green Door restaurant, customers line up, take a plate, then fill it with their choice of items from the restaurant's vegetarian buffet. At the cash each plate is weighed, and the customer's bill is calculated: price per gram*grams of food taken=cost of dinner.

This pricing scheme creates an interesting choice problem. It might appear that the best strategy would be to load up one's plate with the items that cost the most, in terms of price per gram, to prepare. So the savvy restaurant goer should stock up on avocado salad, because avocados are very expensive in Canada, but eschew the rice and the beetroot salad, because rice is easy to cook at home, and beetroots are one of the cheapest vegetables available.

Personally, I always help myself to a generous spoonful of avocado salad. However I've found that maximizing "value" in terms of the preparation cost per gram of the items on one's plate generally produces a sub-par dining experience.  For example, one of the tastiest items at the buffet is a potato-kale bake, loaded with butter, cheese and cream.  Because potato and kale are cheap, it probably has a fairly low cost per gram. But to pass it over on cost grounds means missing out on a delicious dish. Also, some of the healthiest items, like the bean curries and the rice, are some of the cheapest to prepare. A dinner made up entirely of high cost-per-gram items may not be as healthy or satisfying as a dinner that includes low cost-per-gram items.

Perhaps the solution, then, is to ignore cost considerations entirely, and just fill one's plate with whatever takes one's fancy?

Not quite. The Green Door has been in business for many years, and its owners are pretty savvy. They didn't have to read Nudge to work out that people fill their plates with the first items they come to in the buffet line-up. The avocado salad is generally positioned towards the back of the buffet. The less expensive potato-kale bake and broccoli-tofu stir-fry are prominently featured. Actually, I may be doing the restauranteurs a disservice here - I've been told that the positioning of the items simply reflects their popularity. But whatever the reasoning behind the buffet set-up, the point is still valid: it's hard to select "whatever takes one's fancy" when the choice architecture in place nudges one towards making particular decisions.

Undergraduate education in Canada uses roughly the same pricing strategy as the Green Door restaurant. The price students pay per course is more or less the same, regardless of the actual costs of delivering the course, or the value - either the entertainment value or the "human capital formation" value - of the course in question. BA students pay the same fee for being in a class of 15 students taught by a full professor paid $150,000 per year as they do for being in a class of 300 students taught by a contract instructor paid $10,000 per course. Students pay the same fee for courses with ultra-low-cost multiple choice examinations, based on questions straight from the test bank provided to the instructor with the textbook, as they do for courses where the instructor puts in 60 or 70 hours weeks so he or she can read and comment on his or her students' essays. Students pay the same fee whether the professor is conscientious or irresponsible, and regardless of whether or not the course imparts valuable skills (though the cost per course is higher in some degrees, for example, a Bachelor of Computer Science or Bachelor of Engineering, than in other degrees, for example, a Bachelor of Arts).

University budget surpluses: irreversible investment and uncertain demand

Unless it has a massive endowment fund, a university's biggest asset is its reputation. If it loses its reputation and students stop coming and paying, a university has only got a bunch of buildings that often aren't well-suited for any alternative use.

That asset is not on the books.

Unless it has a massive debt, a university's biggest liability is the future salaries of its tenured professors. It's hard to just lay them off and stop paying profs if students stop coming and paying for them.

That liability is not on the books.

Even those assets and liabilities that do appear on the books aren't always recorded in a useful way. My university has the campus land valued at what we paid for it in 1947, IIRC.

So take a handful of salt with the balance sheets and income statements that university accountants present.

Rethinking the traditional academic office

During my time as a professor, I've had a series of offices with a series of big, solid, 1970s oak desks.

I have never worked at these desks. They're useless for computing, as they're the wrong height. They're useless for explaining things to students, because they aren't designed for two or more people to sit side-by-side. All they're useful for is looking imposing, serving as a place to dump stuff, and creating a barrier between myself and any visitors to the office.

So this summer I decided to replace my wooden desk with a meeting table. (I bought the table a few years ago, back when I had a really large office; the chairs are rejects from the economics department's computing lab). To make room for the table, I'm using a minimalist computer desk. 

I love my table.  It's a friendly but professional place to meet with colleagues and students. There is enough room for students to get out their papers and laptops. I can sit beside a student and explain a diagram, or a group of students can sit down and have a mini-seminar. And I've got a big, clear space for writing, working on my laptop.

Now that I've got this new office arrangement, I've been thinking, "Why doesn't everyone do this?"

Economics can't be encapsulated into knowledge pills. And that matters for research funding.

Antibiotics - when they work - are miraculous.

A patient does not have to understand what antibiotics are, or why antibiotics are effective. All that is required is for someone somewhere in the world to create an effective antibiotic and put it into a pill. Then it can be shipped to someone with a bacterial infection, and the patient will be cured.  

Economics isn't like that. There are economic pills: Eliminate Barriers to Trade. Cut Government Spending. Target Inflation. Target NGDP.  Tax Consumption Not Income.  And some countries do take their economic medicine. But swallowing economics pills does not always lead to the hoped for results.  

Partly that's because some economic prescriptions are simply bad medicine.

But the point I want to make here is that patient cannot use economic medicine effectively unless they understand how it works. Take, for example, carbon taxes.  There is a fairly high degree of consensus among economists carbon taxes are a good idea (see here). Yet it's not possible to simply swallow a carbon tax pill. Designing and implementing a carbon tax requires specific knowledge.

Can universities persuade professors to act like employees? Should they even try?

As university employees, professors have a fiduciary obligation to act in their employer's best interests. The number one interest of a university is financial survival, and the key to survival is reputation, because reputation attracts students, faculty, and donors.

A university's reputation, to the extent that it is at all malleable, can be enhanced by serving students well, and by moving up various university rankings. These rankings are, in turn, driven by metrics such as student/faculty ratios, research funding, journal publications, citations of journal articles, and - because this is all somewhat circular - reputation. 

University professors, as a rule, work hard. But some of this work aligns more closely with the employer's interests than others.

Ontario Universities: Is Change Coming?

Well Happy New Year! The start of the New Year is as good a time as any for reflecting on the state of things – including universities. As 2015 dragged to a close, a number of items came out which of course did not generate too much of a stir given the run up to the holiday season. The Ontario government’s final consultation report on its journey to a new funding formula for Ontario universities was released on December 10^th. The report is too lengthy to appropriately paraphrase so I suggest if you are interested you go to the report itself. Nevertheless, some items that caught my eye.

Monetary business cycles and counter-cyclical human capital investment

I happened to be chatting with an Earth Science prof this morning. He mentioned that enrolment in Earth Science graduate degrees was strongly counter-cyclical (with a short lag). When the job market weakened, more students decided to get a graduate degree. When the job market strengthened, applications for graduate programs dropped.

There seems to be nothing surprising about that. This is ECON 1000 stuff. The main cost of getting a degree is the opportunity cost of lost wages. When you can't get a job, the opportunity cost of getting a degree is low, so more people invest in human capital. And there's presumably nothing special about Earth Science; it's just that mining and exploration fluctuate a lot, so it's easier to see this effect in Earth Science than in other subjects.

But it's very surprising when you compare it to other forms of investment. Business investment is strongly pro-cyclical.

Both human and non-human capital are used to produce goods. Why should investment in human capital be counter-cyclical, and investment in non-human capital be pro-cyclical?

I think there's a simple answer, and that answer tells us something about the nature of the business cycle.

Is it ethical to sell complimentary copies of textbooks?

Faculty Books Recycling is a company that takes the complimentary copies of textbooks that publishers send professors, resells those comp copies to students, and makes a profit on the transaction.

Faculty Books does everything possible to make professors feel that selling - or giving away - comp copies is an ethical thing to do. In their emails soliciting textbooks from faculty (sample below), they remind potential donors of the good that textbook recycling does. It puts textbooks into students' hands at a low price.  Those professors who choose to sell rather than give away their comp copies are told, "the money could sponsor a student event, be donated to  charity, or spent however you like."

Making Change?

Alex Usher at Higher Education Strategy Associates had a great post on his One Thought Blog today dealing with policy-making and change.  His comparison to policy-making in Ottawa as a slow stately moving river compared to Washington's high-pressure ice jam was pretty entertaining - he only left out that parts of the policy making river in Ottawa sometimes get backed up and are full of still and stagnant water, but I digress...Nevertheless, he made some interesting points.

Maybe profs should haggle over textbook prices?

Mark Perry shows that textbook prices have been increasing, a lot.

I don't know why that is. But maybe there's something that profs could do about it.

The publisher's rep drops by your office. She asks which book you will be adopting for your course. She really wants the sale. You say:

Are Technology and Learning joint inputs?

[More musings. I started writing this post arguing that they are joint inputs. Now I'm not so sure. So I changed the title into a question.]

We need both land and labour to produce wheat, but land and labour are not "joint inputs", because we can combine them in variable proportions. The marginal product of land is the extra wheat per extra land, holding labour constant; the marginal product of labour is the extra wheat per extra worker, holding land constant. Both are well-defined under variable proportions. If we are combining land and labour optimally (to minimise costs of producing a given amount of wheat), the envelope theorem (IIRC) tells us that the marginal cost of an extra ton of wheat will be the same whether we produce that extra ton by: adding extra land to labour; adding extra labour to land; or adding both extra land and extra labour.

But suppose we could only produce wheat by combining labour and land in fixed proportions: one acre of land plus one (full-time) worker produce one ton of wheat. Two workers and one acre produce one ton; two acres and one worker produce one ton. The marginal product of land is either: zero (if there is more land than labour); one (if there is less land than labour); or undefined (if there is equal quantities of land and labour). The same for the marginal product of labour. Land and labour would then be "joint inputs". We could only talk about the marginal product of the composite input land+labour (one acre of land plus one full-time worker have a combined marginal product of one ton of wheat); and the marginal cost of wheat would be the cost of the extra land+labour needed to produce an extra ton of wheat.

AK/Solow/Smith/Schumpeterian growth

More random musings, mostly to try to get my own head straight on some questions. (I should steal Robert Waldmann's idea of calling them "stochastic thoughts".) And probably not very original. But sometimes it's easier to try to reinvent the wheel than walk to the library and read all the books on "wheels"; and experiential learning is a good thing anyway, they tell me.

"AK": Ideas (about new technology) are neat, because a good idea can double output across all scales of the other inputs.

"Solow": But the trouble with ideas is that you have to learn them (investment), and that's time you can't spend working at producing consumption goods. And then you die, so that investment is lost (depreciation). So there's decreasing returns to ideas at the macro level, because more ideas to learn means less time producing goods using those ideas.

"Smith": But we have a division of labour, so not everyone has to learn everything. And the division of labour is only limited by the extent of the market.

"Schumpeter": The really good ideas are new ideas that destroy old ideas, so you don't have to learn the old ideas and can torch the ancient libraries.

Are apples non-rival?

Suppose we had an apple replicating machine, that could replicate apples costlessly and instantly. How would we go about answering the question: "Are apples a non-rival good?".

1. We could have a lovely philosophical argument about whether the original apple and the copy are two different apples or just two different manifestations of the same apple. We would need to answer that question before we could decide whether the same apple was being consumed twice, which is one way to define "non-rival" goods.

2. Or we could simply say "yes", because the answer to the first question doesn't matter for economics; what does matter is that the marginal cost of producing the second and all subsequent consumptions of the apple(s) is zero.

Are ideas really non-rival?

I was writing a simple teaching post, on ideas and increasing returns to scale, in micro and macro. I wrote down "Ideas are non-rival". Then I thought I had better explain what I meant by that. Then I thought about professors, who do research (thinking up new ideas), and teaching (communicating existing ideas to other people). Then I thought about how some professors like research but don't like teaching. Then I thought about this post.

Sure, two people can use the same idea (ideas are non-rival), but can't eat the same apple (apples are rival). But the second person can't use that idea unless the first person communicates that idea to the second person. The first has to teach it, and the second has to learn it, and teaching and learning are (sometimes) costly. The cost of communicating the idea to the second person might even be greater than the cost of the first person coming up with the new idea in the first place. Sometimes it might be cheaper to reinvent the wheel than walk to the library.

And the marginal cost of communicating the idea to the n'th person very probably will be greater than the cost to the first person of figuring out the idea, if n is large enough. Teaching and learning can be very hard and very costly at the margin, if you push the margin out far enough, and try to teach a difficult idea to everyone. If you put "number of people who use the idea" on the horizontal axis, starting with those who are easiest to teach and who find it easiest to learn, that marginal cost curve is going to slope up, eventually. Will it always eventually cross the average total cost curve, at some point? And does this matter, for how we teach the economics of ideas? But is it really the same good, as we move along that MC curve? And can you separate the activities of research and teaching (communicating research)? Professors love to argue that you can't. But then they would say that, wouldn't they?

Maybe Frances is right.

Dammit, now I've confused myself. I'm off to the cottage. Have fun.

Unbundling the BA

The most useful university courses and degrees are the hardest to get into. For example, most people would benefit from knowing something about accounting. But do universities facilitate the study of accounting? No. Everywhere admission into Bachelor of Commerce and Bachelor of Business Administration programs is restricted. 

It's the interests of business schools to turn away customers. As faculty complements respond only slowly to changes in student numbers, in the short run fewer students mean smaller classes and a generally pleasant life for faculty. Moreover, when admission to business school is difficult and competitive, only the best students are able to gain admission. Hence a Bachelor of Commerce degree becomes a signal of ability - specifically, the ability to earn high school grades above the entrance cut-off. 

Yet if competitive entry requirements mean that Bachelor of Commerce graduates are, on average, better students than other graduates, they will also be better employees (providing success in school and success in the workplace is correlated). So employers, regardless of whether or not business schools actually teach anything useful, will prefer to hire B Comms. Potential students, observing this, will try even harder to get into business school - and so the cycle continues, until the business school has a shiny new building and every professor earns over $200,000 a year.

I've picked on business here, but a similar story can be told for many other degrees. Another factor leading to admission restrictions is that many useful courses, for example, ones involving writing, tutoring, or hands on data analysis, require a lot of instructional resources. It's cheap to pack students into a 500-person lecture theatre and give multiple choice exams.

What can people in the arts and social sciences do to keep up student numbers, and at the same time protect the reputation of their programs?

SSHRC Grant Trends in Economics

Well, the past week saw notifications go out to academic economists on the results of their 2014-15 Social Science and Humanities Research Council of Canada (SSHRC) Insight Grant applications.  Needless to say, there will be a lot of unhappy campers but then there always are when it comes to grant application success.   Needless to say, unhappiness has probably been on an upward trend given the fall in success rates not just in economics but across all disciplines.  The outcomes in economics are an interesting example of recent trends.

Funding and the Future of Ontario Universities

Well, the Council of Ontario Universities or COU is looking for a new President and CEO.  The role of COU is to serve as a voice for the province’s university sector and help improve the public policies that affect the sector.  As the ad for the position states: “As a member-based organization, COU provides the collective voice of Ontario universities to government in an effort to enhance higher education in the province. COU works with its member institutions to convene the dialogue on issues, develop consensus, advocate positions, and advise policy makers. In addition to its important advocacy and policy work, COU co-ordinates a number of shared services for members, including inter-university transit of documents, application processing, and an online portal of research resources for students and faculty.”

Ours the task eternal -- investing in human capital

That's the motto of Carleton University, where I work. Carleton's task, and my task, and the students' task, is to produce educated students. It takes a lot of resources to do this: my time, the students' time, the support staff's time, plus the use of buildings and land, and hydro. All those resources could be doing other useful things. There's an opportunity cost to educating students. Why do we do this?

Because we think the world will be a better place in future if we do this. And it's not just that the more productive students will get higher-paying jobs and more enjoyable jobs, though that's part of it. We think that it's better to understand things better, whether that thing is economics, chemistry, or literature. My blogging is itself part of that task, and if you are reading this you are a Carleton student, and part of our common task, whether you have a student number or not.

What do economists call it, when you do something that is costly today, because you think it will produce future benefits? We call it "investment". Investment is the creation of capital. Our task is to create capital. And that capital, in our case, is embodied in humans. Which is why it makes sense to call it "human capital".

Beware middle-aged men waving feminist flags

On December 12, 2006, Ontario ended "mandatory retirement." As of that date, employers could no longer base termination decisions on an employee's age. Ontario was following the lead of Quebec and Manitoba, which stopped having a standard retirement age in the early 1980s.  Within a couple of years, mandatory retirement had effectively ended  right across the country. 

Fast forward to 2014. The first Ontario professors to elude retirement are now collecting their pensions. Yup, Canada Revenue Agency requires people to begin drawing their pensions at age 71, regardless of employment status.  The average salary of a full professor in Ontario is around $150,000 per year (see p. 7 here), and university pension plans are generally fairly generous. So a typical professor working full-time into his 70s will have a combined pension plus salary income of at least $200,000 a year, often more. No wonder professors 65 and older outnumber the under 35s (p. 21 here; 2010-11 data). Who would willingly give up a nice office, the freedoms of academia, and a quarter million dollars or so a year?

Now if the professors fighting to eliminate the standard retirement age had said, "we have a very pleasant lifestyle and we'd like to hang onto it, thank you very much," I could have respected their honesty, if nothing else. But instead, they draped themselves in the feminist flag. A standard retirement age of 65 was wrong because it hurt women.  Thomas Klassen and David Macgregor, writing in the CAUT (Canadian Association of University Teachers) Bulletin, challenged ageism in academy on the grounds that "Mandatory retirement at an arbitrary age is devastating for female faculty who often began their careers later than males and may have had interruptions to raise children."