The Race between Education and Technology

August 12, 2010 | By In Technology |

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5 Comments so far

Kenneth E. MacWilliams on August 12th, 2010

I am puzzled by this book and its evaluation by the friends and colleagues of the two Harvard economist authors. I approached it with high expectations but upon examination sadly concluded that although it has much useful data, its central thesis is flawed. Sitting on my side of the table with that judgment is just me,

a non-economist (but with a lifelong career in finance). Sitting across the table confronting me are Lawrence Summers, William Bowen, Nicholas Kristof, Alan Krueger and many others, all of whom have warmly praised the book in blurbs. Indeed, Professor Krueger went so far as to say “This book represents the best of what economics has to offer…” I admire and respect each of these individuals very much. How then to square their uniformly high opinions of the book with my own?

Either I am way off base (I think not) or they are all wrong (hard to believe)….or, it’s just the recipe for how some books are sold these days. First you take a very prestigious university name, then take one or two professors from a major department, take one of their favorite theses dealing with a current popular policy issue, don’t do too much if any independent verification of how solid the thesis is, then have the authors approach present and past luminaries from the same institution for blurbs, plus approach colleagues in sister departments in other prestigious institutions for similar blurbs, then get the press of the prestigious university to publish the book, put a high price tag on it with the prestigious university’s name prominently all over it, and then get good friends and colleagues elsewhere in the profession to write positive reviews to go with the blurbs in unspoken return for — mutatis mutandis — doing the same thing for them later.

In terms of an intellectual onslaught this puts the individual intelligent lay reader and reviewer in somewhat the same position as the “Unknown Rebel” standing in front of the column of advancing Chinese tanks in that iconic photograph taken in Tiananmen Square on June 5, 1989. On anything dealing with the subject of economics who intentionally wants to stand in front of an advancing Lawrence Summers? Or before Alan Krueger when he declares “This book represents the best of what economics has to offer”? Well, filled with trepidation this sole reader will stand his intellectual ground and respond to Professor Krueger by saying

“It would be sad to think so”. In this book the Emperor truly wears no clothes. And beyond that, without his clothes we can easily see that the Emperor also has scoliosis.

Kenneth E. MacWilliams

Portland, Maine
Rating: 3 / 5
Papasage on August 12th, 2010

This book’s thesis is based upon overly simplified and therefore misleading educational and economic concepts and definitions. For instance, the authors’ definition of “educational attainment”, a critical measure supporting the authors’ central argument, is simply the rate of growth in the number of years of schooling experienced by successive “cohorts” (people with the same birth years) throughout the past century. Declining “educational attainment” (which might be expected when a measure has an upper limit) is then correlated with wages. To establish their argument, the authors present this correlation as if it were causal. Another consideration is that the authors’ supply and demand analysis (a declining rate of “educational attainment” has reduced the supply of valuable human capital and has thereby driven up the cost of that supply, resulting in vast wage disparity) is insupportable for reasons stated convincingly by other reviewers, and because wages are not currently determined by free market forces. The authors rely on the above as they argue (repeatedly) that a failing American public education system (as they have defined it, most deceptively in my opinion) is to blame for the growing disparity of wealth between the rich and everyone else in this country. I am certainly no fan of the wage and wealth disparity we see in the U.S. today, the myopic greed of the hyper-rich, the dehumanizing struggles of the poor, and the disappearance of the middle class. Unfortunately, the authors’ argument is unconvincing and feels manipulative and ideological. For me, the authors lose all credibility by not acknowledging the limitations of their own research methodology and analysis. There is plenty of good educational research out there–interesting, informative, and important–I would suggest you keep shopping.
Rating: 1 / 5
R. Albin on August 12th, 2010

This well written book is based on a careful analysis of the effects of educational policy on economic growth and economic inequality in the USA over the last century. The authors have undertaken the very demanding task of reconstructing a large amount of data related to eduational performance and economic performance. In some respects this is a fairly dense book with a lot of data presented, usually in the form of tables and simple charts, though the authors use some multivariate regression methods and some modeling as well. The authors necessarily use some simplifying assumptions and methods, for example, using the benefits of higher education – the college wage premium – as an index of inequality. Given the limitations of the data and the complexity of the topic, these approaches seem reasonable and the end result is a convincing analysis.

Goldin and Katz make a series of important points. One is that a well educated work force is an important driver of economic improvement. In this context, the show that the USA, from the mid-19th century to around 1970, was a world leader in mass education. They show 3 major waves of mass educational advancement; near universal primary education in the 19th century, a huge increase secondary education (“the high school movement”) in the first half of the 20th century, and the enormous expansion of higher education in the post-WWII era. The authors argue very well that this distinctively American series of educational expansions were a major contributor to robust American economic growth. Simultaneously, the success of serial mass education and production of increasing numbers of well educated workers resulted in a relative reduction in inequality with social benefits beyond merely economic benefits. In the last generation, mass education has stagnated and the relative decrease in production of highly educated workers is a major driver of the increasing inequality of American life.

One of the authors’ major points is captured by the title of the book. Given the constantly changing and improving technologies of modern economies, increasing numbers of well educated workers are needed merely to maintain a constant position, let alone to produce increasing welfare. Remarkably, Goldin and Katz argue very well that vigorous increases in education produce not only aggregate economic benefits but also reduced inequality. Investments in mass education produce winners across the board, an amazing effect.

Goldin and Katz see the USA as having gone off the tracks in last generation – roughly the period of conservative predominance of American politics. They point out as well several other nations, notably a number of European countries, have now closed the gap or surpassed the USA in mass education. This is true for indicators of the amount of mass education and quality of mass education. This will reduce American competitiveness in a global economy. The declining rate of educational attainment is a long term drag on economic attainment and causing economic inequality. Their prescription is to take steps to improve mass education. While detailed policy prescriptions are not the focus of this book, their recommendations are sensible. They advocate increased investment in early childhood education, particularly for poorer people, increased investment in K-12 education to improve graduation rates and college preparation, and making college education more accessible. All of this will cost considerable money, but appears to be justified well by this analysis.
Rating: 5 / 5
Michael Bishop on August 12th, 2010

Three stars? This book is undervalued by the current amazon reviews. In my opinion, a majority of books about education are downright bad. Of those that are good, many are not uniquely good – you can find the same information in other popular books on education. This book is good and unique.

This book is excellent on the links between education, productivity, and income inequality over the last century. It makes the case that increasing human capital through education is a very important goal – the claim is not original but the way they argue it is.

The policy recommendations are less well backed up.

Google for an excellent commentary written by Arnold Kling & John Merrifield, entitled “Goldin and Katz and Educational Policy Failures in Historical Perspective.”
Rating: 4 / 5
Devin Finbarr on August 12th, 2010

This book epitomizes everything that is wrong with social science. The modus operandi is to pull together a series of charts showing correlations, assume that the correlation is due to causation, and ignore any discussion of alternative explanations of the trends.

Goldin-Katz spend the bulk of the book hammering away on two points that everyone already knows: years of schooling on a national level correlates with industrialization, and years of schooling on a personal level correlates with income. Goldin-Katz spend precious few pages actually dealing with the causation issue, and never address any of the best arguments against their thesis. Nor is there any attempt to actually talk to people working in technology in order to understand more deeply why the correlation exists.

Let’s examine in detail some of the flaws.

a) Goldin-Katz’s base hypothesis is that years of schooling should continuously rise over time, as technology increases. But the very definition of technology is that you get more output for a given amount of input. Thus we should not expect a proportional increase in education to take advantage of new technology. Indeed, this is what we see on the ground. As a programmer in 2009, I no longer need to learn a huge amount of information that my father needed to know. For my job, I do not need to assembly language, register hacks, memory allocation, pointer arithmetic, etc.

b) Goldin-Katz’s hypothesis is at odds with the experience of all the recent college graduates I know. No one believes that education teaches job skills. A quick check of the top 10 most popular college majors shows that these majors have little to do with technology. Clearly if there is an income bonus from college education, it cannot be from teaching technology, because colleges do not actually teach technology.

c) Goldin-Katz’s hypothesis is at odds with the life experience of most engineers I know. If you ask the typical, engineer, “How many years would it take, starting from the beginning of high school, and working efficiently, to reach an amount of knowledge where you could be a productively employed?” the answer is usually something like 1 to 3 years. If you look at the actual skills to do high tech jobs, you simply notice that very few require 8 years of full time schooling. You’ll also notice that engineers universally deride schooling, and that they learn most of their skills by avoiding school work (this is especially true in high school). For more details Google the essay “Why nerds are unpopular” by Paul Graham.

d) The standard government economic growth statistics have so many methodological problems that’s it’s impossible to draw any conclusions from them (for more details, Google “Economics needs a divorce” ). It’s unclear both a) that growth has actually been declining and b) that the decline has to do with lack of technological innovation ( it might have a lot more to do with the increasing portion of the GDP taken up by bureaucratic sectors that are impervious to technological change – like the education sector itself!). Chinese, Japanese, and Korean mercantilism have also played a great role in the decline of America’s technological-industrial base. Never do Goldin-Katz address either of these points.

e) I do agree that 19th Century America derived great benefits from its strong primary schools and high literacy rates. But I believe this is primarily a threshold effect. After students have the tools to find books and self-educate, further formal schooling has diminishing returns. So I might agree that 19th century America derived an advantage from averaging something like 5 years of schooling rather than the 0-2 years of schooling that was common in other countries. But it does not follow that modern America would derive an advantage from raising the average years of schooling from 13 to 15. In fact, 13 is almost certainly above the point where opportunity costs exceed returns to schooling.

Goldin-Katz never address any of the competing explanations for the correlation between industrialization and education or income and schooling:

a) Richer countries can afford more years of schooling. The experience of my peers and I in college is that college is primarily a luxury good.

b) Academics have greatly increased their influence on politics in the past century, first with the Wilson administration then with FDR’s brain trust. Prior to 1900 academics had neither involvement with politics nor control over policies. Today, virtually all major policy advisers are academics. Not coincidentally, there has been a concurrent increase in government money spent on schooling and on total years of schooling. Thus part of the rise in education over the last century was likely simply two unrelated but concurrent events – the continuing industrial revolution, and the increasing political power of the academic class.

c) On an individual level, selection effects plays a major role in creating the link between college and income. Completing college requires a threshold level of intelligence and diligence. Colleges select for people with high earning potential, because such people are more likely to make money, and donate it back to the school. I was talking to my friend who does hiring for Bain Consulting: “Bain likes to recruit econ majors from top schools, but because they learn anything valuable in the major, but because it means the person is smart and care about business.” I hire programmers at a startup, and I care little about the degree, and a lot more about how smart the person is and what they have done. This does correlate with college and major, but the actual knowledge gained in the college major is a tiny portion of what is needed to be a successful engineer.

The selection/signaling effect is even more important considering the that the 1971 Griggs Supreme Court case made it illegal for employers to use IQ tests for hiring purposes. As a result, companies have to rely more on educational attainment as a proxy for IQ.

d) Finally, and perhaps most importantly, Goldin-Katz completely ignore the impact of credentialing laws. There are now legal degree laws for professions such as: lawyers, architects, doctors, teachers, civil servants, military officers, nurses, and education administrators. These professions receive relatively high salaries because they have either direct government subsidies, or they have monopoly rights to perform certain tasks (prescribe medicine, defend the accused in court, etc). Yet there is no evidence that requiring a degree is a credential is a greater indicator of ability than simply using a test or requiring apprenticeship. Most architects of the 19th century learned via apprenticeship, yet the quality of the buildings was much higher back then than today.

Searches of the book for “signaling”, “credentials”, “credentialing”, “Spence” return zero hits. To write a book about the school about the education wage premium and not discuss these issues is completely egregious. In a just world this failure alone would be enough to ruin the reputation of Goldin and Katz as being serious scholars and to impugn the reputations of the academics who offered such fawning reviews.

Goldin-Katz’s book is fundamentally about policy. It is about how to manage a countries economy to maximize technological growth. You would think that the first thing that anyone would do when writing such a book, is to talk to dozens of people in high technology. You would talk to engineers, entrepreneurs, workers at high tech firms, current college students, recent college graduates. Yet Goldin Katz do none of this. They sit in their ivory tower, plot some regressions and engage in chart-ism of the worst sort. Their statistics add nothing to the stock of knowledge that already exists about the correlations between education and income. And they ignore addressing all the possible arguments against their case. This book is only interesting the way that a car wreck is interesting.
Rating: 1 / 5

The Race between Education and Technology

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