>>These are different ideas, and indeed they are often opposite ideas.<<
This. A pretty good way to hobble US manufacturing is to prevent American factories from sourcing the best inputs at the best possible price, regardless of whether they're domestically produced, or imported.
The railroad example is an interesting one. Like, the question of whether we should have a less efficient economy in exchange for more union jobs is one where I think you'd get a lot of disagreement among Democrats.
I think a great place to start on cost/benefit optimization would be higher education. This would dovetail well with Biden’s recent actions on student loan forgiveness in that it would counter the criticism that he’s failing to address the underlying issue.
Biden could work with congress to revise higher education government lending criteria to be based on a financial cost/benefit calculator for the students of individual programs, including both students that graduate and those that fail to graduate. We’d simply estimate the expected median earnings of a student for a given program, at a given school, and then limit the loan amount such that repaying the loan doesn’t overburden someone earning that salary.
For example, the median journalistic masters program graduate likely has rather dismal earnings prospects. That doesn’t mean that such a program can never pass a cost/benefit analysis, but instead the costs must be sufficiently low so that the graduate isn’t financially burdened. Some programs will go on a cost cutting binge to accommodate these requirements whereas others will simply close down.
Additionally, programs will be incentivized to optimize the outcomes of their students. That includes helping them on career searches in addition to ensuring they develop employable skills. Further, programs would be incentivized to weed out weak students that will likely be poorly served by the program since failure to graduate or failure to find gainful employment post graduation will negatively impact the programs expected financial benefit going forward.
I also like the idea of ensuring someone has some real skin in the game when determining the financial cost/benefit estimation. That could be the school’s themselves being at least partially responsible for defaulting students. Or the loans could be at least partially funded through private sources, with that debit subject to standard bankruptcy law.
I mean, I instinctively agree with this column, but I'm not sure it really proved the case. I would have enjoyed more exploration of the counter-arguments (if they exist).
To me the main counter would be: sure use the economists for economic problems, but that's basically inflation and employment - all the other stuff people care about is not *really* in the economists' domain. Concerns about pandemics, immigration, gun control, Roe/Dobbs, race relations, national security through domestic production - of course economists can offer helpful guidance on lots of things, but are we sure they are the first stop on the road to good advice in these areas?
We could have used more economics thinking with COVID policy. Fauci and his public health community followers did not think about the cost of their policies. Fauci recently hand waved away the negative impacts to kids from lockdowns and other schooling policies. He doesn’t seem to be able to even acknowledge there are trade-offs.
We need to form a more well rounded team to make policy in the future.
Thanks for the clear expression of this common sense imperative. You reassured that my instincts about the loan relief were right (economically and—unfortunately, politically). Full of sympathy for those bearing the weight of a poorly conceived and constructed educational system, I’d love to see the student loan burden reduced, but this proposal is just a sop, too little to be transformative and poorly timed for this overheated economy.
In a full employment environment this student debt relief plan is a direct transfer of consumption from people w/o degrees to people with degrees. Either via increased inflation or fed rate hikes to offset. It’s a regressive disaster.
I’m honestly shocked they went through with it once inflation took off. To the extent there’s no one influential at the WH explaining how dumb this is, I agree some adjustments would help.
While I'm not a huge fan of the student loan forgiveness policy, the histrionics from its opponents are genuinely insane.
These same people were calling a tax giveaway to the richest Americans "a historic investment in America's economy".
Also if I hear complaints about "vote buying" one more time I'm going to feel like I'm taking crazy pills. Rewarding your main constituency is literally the most normal thing to do when it comes to politics.
“[Building more stuff in America] doesn’t mean trade protection, but rather an all-out war on rent-seeking and anti-competitive rules.“
Far and away the biggest rent in our economy is inherited wealth. Something like 80-90% of all wealth in this country is either inherited or passive income derived from inherited wealth. How does any politician tell union men to stop featherbedding when they are locked out of the better parts of the real estate market by inherited wealth? How do we tell the AMA to allow more medical residencies when doctors have busted their buts to enjoy the trappings of the gentry and only the smartest and hardest working doctors are able to push their families into the wealthiest 1%? I can imagine a grand fete of efficiency, an American version of France’s August 1791 abolition of feudalism, where a host of parochial inefficiencies are abolished for the common good. But I can’t imagine working stiffs ever buying into this unless the gentry and the upper class give up their rents too.
Politically, the college debt forgiveness is genius. The cap is small enough that the idiots who borrowed six figures for humanities degrees will still have big debt loads. It’s also small enough that the next Democratic presidential candidate can promise to do exactly the same thing. What’s wrong with giving the more articulate parts of the precariat $10k every time a D wins the electoral college?
Okay, but can we agree that it is never time to bring Larry Summers back?
As annoying as it has been to have him outside the tent pissing in, that arrangement is actually better for the country than when he was inside the White House pissing out.
The optimal rate of unemployment should always be calculated as a low single-digit percentage, plus Larry Summers.
Economist brain (along with its siblings like lawyer brain) is one that thinks very logically to solve problems. There's obviously a lot of value to it, but one drawback it can have is when it fails to account for the emotions that most humans predominately have.
My brain is very well suited to think like an economist, and I very much enjoy conversations where the audience is tuned to think and discuss things similarly. (Hence why this community is very enjoyable!) However, I do try to make sure I don't go overboard, and try to account for what gets people emotionally driven in life.
Not sure if I have a profound way to connect this directly to the Obama/Biden difference identified here, but it's an observation I still wanted to add to the record.
IDK if progressives' resistance to discussing the arithmetic of policy -- not even to get into actual economics -- is new or has gotten worse. It seems that way. Try talking to liberal arts university faculty about fiscal realities in higher education. It's impossible. BTW, I think the student debt loan forgiveness initiative seems like a reasonable compromise, and Susan Dynarski of the Harvard Ed School, who focuses on this long has said that the biggest problem is with those owing 10K or less (and she's skeptical this will add to inflation).
The right is just angry because most of the benefit from student loan forgiveness will go to poor black people. I think it was politically astute of the Biden admin to follow Matt's advice* about marketing race-blind policies as racial equity initiative. It gives them a lot more coverage to frame this forgiveness around class and fairness.
Ignoring the awful economics of the student debt erasure, on the purely political side, why would Biden do this? If it is true that this issue is being forced upon him by Stacey Abrams, why would he waste a ton of political capital helping an unimportant Democratic candidate win her election (that she is still likely to lose anyway) while hurting Democrats' chances for retaining Congress? (And I do mean unimportant in the grand scheme of national politics. Brian Kemp has already shown that he will not just hand Georgia' Electoral College votes to Trump, and now hates Trump even more, so Abrams is not crucial for anything, just nice to have). Yes, maybe this will slightly increase turnout among young urban voters, but those House seats were already going to be won by Democrats anyway. It will also probably piss off a bunch of suburban people who didn't get a free $10000.
>>These are different ideas, and indeed they are often opposite ideas.<<
This. A pretty good way to hobble US manufacturing is to prevent American factories from sourcing the best inputs at the best possible price, regardless of whether they're domestically produced, or imported.
The railroad example is an interesting one. Like, the question of whether we should have a less efficient economy in exchange for more union jobs is one where I think you'd get a lot of disagreement among Democrats.
I think a great place to start on cost/benefit optimization would be higher education. This would dovetail well with Biden’s recent actions on student loan forgiveness in that it would counter the criticism that he’s failing to address the underlying issue.
Biden could work with congress to revise higher education government lending criteria to be based on a financial cost/benefit calculator for the students of individual programs, including both students that graduate and those that fail to graduate. We’d simply estimate the expected median earnings of a student for a given program, at a given school, and then limit the loan amount such that repaying the loan doesn’t overburden someone earning that salary.
For example, the median journalistic masters program graduate likely has rather dismal earnings prospects. That doesn’t mean that such a program can never pass a cost/benefit analysis, but instead the costs must be sufficiently low so that the graduate isn’t financially burdened. Some programs will go on a cost cutting binge to accommodate these requirements whereas others will simply close down.
Additionally, programs will be incentivized to optimize the outcomes of their students. That includes helping them on career searches in addition to ensuring they develop employable skills. Further, programs would be incentivized to weed out weak students that will likely be poorly served by the program since failure to graduate or failure to find gainful employment post graduation will negatively impact the programs expected financial benefit going forward.
I also like the idea of ensuring someone has some real skin in the game when determining the financial cost/benefit estimation. That could be the school’s themselves being at least partially responsible for defaulting students. Or the loans could be at least partially funded through private sources, with that debit subject to standard bankruptcy law.
I mean, I instinctively agree with this column, but I'm not sure it really proved the case. I would have enjoyed more exploration of the counter-arguments (if they exist).
To me the main counter would be: sure use the economists for economic problems, but that's basically inflation and employment - all the other stuff people care about is not *really* in the economists' domain. Concerns about pandemics, immigration, gun control, Roe/Dobbs, race relations, national security through domestic production - of course economists can offer helpful guidance on lots of things, but are we sure they are the first stop on the road to good advice in these areas?
We could have used more economics thinking with COVID policy. Fauci and his public health community followers did not think about the cost of their policies. Fauci recently hand waved away the negative impacts to kids from lockdowns and other schooling policies. He doesn’t seem to be able to even acknowledge there are trade-offs.
We need to form a more well rounded team to make policy in the future.
Thanks for the clear expression of this common sense imperative. You reassured that my instincts about the loan relief were right (economically and—unfortunately, politically). Full of sympathy for those bearing the weight of a poorly conceived and constructed educational system, I’d love to see the student loan burden reduced, but this proposal is just a sop, too little to be transformative and poorly timed for this overheated economy.
In a full employment environment this student debt relief plan is a direct transfer of consumption from people w/o degrees to people with degrees. Either via increased inflation or fed rate hikes to offset. It’s a regressive disaster.
I’m honestly shocked they went through with it once inflation took off. To the extent there’s no one influential at the WH explaining how dumb this is, I agree some adjustments would help.
This is the kind of piece that seems so obviously correct to me that I wonder what I’m missing.
While I'm not a huge fan of the student loan forgiveness policy, the histrionics from its opponents are genuinely insane.
These same people were calling a tax giveaway to the richest Americans "a historic investment in America's economy".
Also if I hear complaints about "vote buying" one more time I'm going to feel like I'm taking crazy pills. Rewarding your main constituency is literally the most normal thing to do when it comes to politics.
“[Building more stuff in America] doesn’t mean trade protection, but rather an all-out war on rent-seeking and anti-competitive rules.“
Far and away the biggest rent in our economy is inherited wealth. Something like 80-90% of all wealth in this country is either inherited or passive income derived from inherited wealth. How does any politician tell union men to stop featherbedding when they are locked out of the better parts of the real estate market by inherited wealth? How do we tell the AMA to allow more medical residencies when doctors have busted their buts to enjoy the trappings of the gentry and only the smartest and hardest working doctors are able to push their families into the wealthiest 1%? I can imagine a grand fete of efficiency, an American version of France’s August 1791 abolition of feudalism, where a host of parochial inefficiencies are abolished for the common good. But I can’t imagine working stiffs ever buying into this unless the gentry and the upper class give up their rents too.
Politically, the college debt forgiveness is genius. The cap is small enough that the idiots who borrowed six figures for humanities degrees will still have big debt loads. It’s also small enough that the next Democratic presidential candidate can promise to do exactly the same thing. What’s wrong with giving the more articulate parts of the precariat $10k every time a D wins the electoral college?
"Biden needs to bring back the economists."
Okay, but can we agree that it is never time to bring Larry Summers back?
As annoying as it has been to have him outside the tent pissing in, that arrangement is actually better for the country than when he was inside the White House pissing out.
The optimal rate of unemployment should always be calculated as a low single-digit percentage, plus Larry Summers.
Economist brain (along with its siblings like lawyer brain) is one that thinks very logically to solve problems. There's obviously a lot of value to it, but one drawback it can have is when it fails to account for the emotions that most humans predominately have.
My brain is very well suited to think like an economist, and I very much enjoy conversations where the audience is tuned to think and discuss things similarly. (Hence why this community is very enjoyable!) However, I do try to make sure I don't go overboard, and try to account for what gets people emotionally driven in life.
Not sure if I have a profound way to connect this directly to the Obama/Biden difference identified here, but it's an observation I still wanted to add to the record.
IDK if progressives' resistance to discussing the arithmetic of policy -- not even to get into actual economics -- is new or has gotten worse. It seems that way. Try talking to liberal arts university faculty about fiscal realities in higher education. It's impossible. BTW, I think the student debt loan forgiveness initiative seems like a reasonable compromise, and Susan Dynarski of the Harvard Ed School, who focuses on this long has said that the biggest problem is with those owing 10K or less (and she's skeptical this will add to inflation).
The right is just angry because most of the benefit from student loan forgiveness will go to poor black people. I think it was politically astute of the Biden admin to follow Matt's advice* about marketing race-blind policies as racial equity initiative. It gives them a lot more coverage to frame this forgiveness around class and fairness.
* https://www.slowboring.com/p/race-blind-policies-racial-equity?r=cgrc&s=r&utm_campaign=post&utm_medium=web
Ignoring the awful economics of the student debt erasure, on the purely political side, why would Biden do this? If it is true that this issue is being forced upon him by Stacey Abrams, why would he waste a ton of political capital helping an unimportant Democratic candidate win her election (that she is still likely to lose anyway) while hurting Democrats' chances for retaining Congress? (And I do mean unimportant in the grand scheme of national politics. Brian Kemp has already shown that he will not just hand Georgia' Electoral College votes to Trump, and now hates Trump even more, so Abrams is not crucial for anything, just nice to have). Yes, maybe this will slightly increase turnout among young urban voters, but those House seats were already going to be won by Democrats anyway. It will also probably piss off a bunch of suburban people who didn't get a free $10000.