Semi-Daily Journal

"Profits, it turns out, never stopped rising as a share of national income all through the 2001 recession and the months afterward of weak economic growth ... the Bureau of Economic Analysis erases all doubt on this point."

BEA (b of $):
Year ..... NI .... Profits .... P/NI
1999 ... 8,234..... 851 ..... 10.3%
2000 ... 8,795 .... 818 ...... 9.3%
2001 ... 8,981 .... 770 ...... 8.6%

All doubts erased, everyone?

Compensation of employees
......................... Comp/NI
1999 ... 5,357 .... 65.1%
2000 ... 5,783 .... 65.8%
2001 ... 5,940 .... 66.1%

http://www.bea.doc.gov/bea/dn/nipaweb/TableView.asp#Mid

"Edward N. Wolff, a New York University economist, [has constructed a measure of profit] that includes not only standard net income, but also profit from self-employment ... interest..."

That's cute. If I work as a lawyer for a corporation for $80k a year, that's "compensation of employees" and part of labor's share. If I then start working for myself and earn $80k a year from my billed hourly work, that becomes "profit" from self-employment and labor's share of national income falls! Presumably *I* am worse off! Since that entire loss of "labor's share" is due to me.

So we treat income from self-employed labor as "profit" (turing an increase that should be a *good* thing into a "bad" thing) add interest to "profit", etc., and the number goes up. ;-)

Well, as Coase said, if you torture the numbers enough they'll confess to anything.

But isn't it around this point that someone notes Edward Wolf and Dean Baker are well known for not being impartial in this argument ... that the reporter quoted nobody else with a different balancing or even impartial point of view -- perhaps on what "profit" is, and why the BEA is so stupid as to use the definition of it that it does ... that high-paid reporters should perhaps look at the BEA web site before filing a story that claims "BEA data leaves no doubt", in case there is data there that does ... that unquestioningly accepting Wolf's rather questionable made-up definition of "profit" over the BEA's turns this into an opinion piece passing itself as a news story ... and then goes on to ask:

"Oh why, oh why can't we have a better press corps?"

Actually, Uchitelle wrote almost this identical piece, citing Wolff, in 1999, so I don't think he believes there's much difference between high productivity and 4% unemployment and high productivity and 6% unemployment. In fact, that's what he means when he writes: "But the productivity improvement came in a strange way," rather than in revenue being channeled to labor.

A few things I find confusing about this piece. First, the profit-share numbers are different (and, interestingly, smaller) than the ones Uchitelle cited in 1999. (When I say they're different I don't mean this article includes 2001-2003 numbers, I mean that the statistics clearly derive from different calculations.) Second, what does it mean to include "profit from self-employment"? Is that different from "income from self-employment," and if so, how? And finally, has rent traditionally been included in "corporate profits"? Does that mean that the rent I pay my landlord, who lives in the same building as I do, is treated the same as a dollar earned by Microsoft?

... what does it mean to include "profit from self-employment"? ... has rent traditionally been included in "corporate profits"? Does that mean that the rent I pay my landlord, who lives in the same building as I do, is treated the same as a dollar earned by Microsoft?
=====

Wolfe/Uchitelle give a 30% of national income figure for "profts". Using BEA 2002 data just to get to 27% I have to include all corporate profits, plus all proprietor's income (income from self-employment -- there is no "profit" line on a self-employed's tax return or financial statement, it's just net income), all rental income of persons, and all net interest.

Heck, we might as well add in employees' profits from employment.

Let's throw out the BEA's accounts entirely, I'm sure there's no rhyme or underlying reason to them, and all economists will approve.

Aggregate analyses like the one on hand (labor share going down!) are not very meaningful especially at a time when the structure of the economy is changing.

I mean, Jeremy Rifkin(?) was talking about "End of Work"(?), obviously looking at manufacturing sector only, while Microsoft offices were open 24/7!

I can imagine, however, circumstances under which there would be no such thing as labor, labor market, or wages.

I mean, if a gang of buddies get together and buy materials and build themselves a sail ship, there is value added and labor there, but is it "labor"?

What kind of labor notions or concepts apply to Open Source software?

When productivity becomes so high that people don't need to work to have food and shelter, then there is really no labor and you need to come up with entirely new motives and cultural/moral basis to organize work and production.

Yeah, yeah, Jim, James, I'm sure that a high unemployment rate, the disappearence of unions, rapid productivity growth, all that doesn't has any influence at all in labor share of national income.

But...but...where is the stuff that the profit is being made on coming from, and where is it being bought? Is it possible this is largely goods manufactured and sold entirely outside of the USA? Or services likewise provided? If the profits are largely the results of manufacturing undertaken outside of the USA, with non-US labor the USA will not, ultimately, hold on to them--the producer nations can simply do the job themselves. Likewise for services.

This is an awfully simple economic model...but what am I missing?

I understand part of the profit is coming from sales transactions that recently caused an increase in private debt.

At a different level:

An ancient Greek author wrote something like "you don't steer a sailship with your hands, you really steer it with your brains.."

Vikings raiders were all knowledge workers, then.

I wonder what kind of notions and concepts of labor, labor market, and wages applied to Viking enterprises?

Did Vikings have to "work" for food and shelter?

Carlos --

I have little doubt that the profit share of national income was higher in 2003 than in 2001: profit shares are usually higher in the early stages of recoveries, just as they are lower in the early stages of recessions. That's not what's questionable about this piece. What's questionable is the assertion that the profit share never stopped rising during the recession (actually, this is not questionable, it's just false) and the broader assertion about labor having become a forgotten part of the economy. If labor is more disposable today than it was in the 1970s and 1980s, as the piece suggests, why was the only lengthy period of sustained real wage growth -- for hourly workers, not just for workers as a whole -- in the last three decades in the 1990s? In fact, in the wake of the productivity boom that began in 1995, "revenue from rising output per worker" was "again channeled to labor as well as to profits," just as "many forecasters" thought it would be.

The numbers don't even support the idea that wage growth has significantly slowed recently. Wages and salaries in private industry rose 3.2% in 1999, 4% in the year ending 2000, 3.6% in the year ending 2001, 3.2% in the year ending 2002, and 3.0% in the year ending 2003, while benefit costs rose significantly faster than that: http://www.bls.gov/news.release/eci.nr0.htm. (All numbers similar for blue-collar and white-collar workers.)

The real problem, I think, is unemployment. And it's possible that, as some have suggested, there is something different about this business cycle, and that corporations will be much less quick in the future to hire people back and much more quick to let them go. I don't think we know the answer to that question yet. But I don't think this has anything to do with labor's "bargaining power."

Randolph --

I think all profits in the National Income Accounts are profits earned on goods sold in the United States, though I may be wrong.

James Surowiecki

"... corporations will be much less quick in the future to hire people back and much more quick to let them go..."

Now yours truly the ten percent economist comments:

What does this mean exactly? If it means employment rate will increase more slowly and it will decrease more quickly, it would in turn mean either (a) economy is on a medium to long term decline or (b) existing old sectors are automating and becoming capital intensive at rates faster than output growth while new sectors are not developing and hiring as quickly as existing sectors are shedding labor.

And perhaps an assessment should be made against that state of affairs concerning whether across the board tax cuts were a good idea.

Well, I definitely don't think (a) is true, and I'm skeptical of (b), but as I said, I don't think we know if things have changed. But if neither of those things is true, across-the-board multi-trillion-dollar tax cuts were still a bad idea.

"But isn't it around this point that someone notes Edward Wolf and Dean Baker are well known for not being impartial in this argument..."

Ah, good ole Jim "ad hominem" Glass.

JS: a drop in the rate of gain in wage & salary income growth from 4% in 2000 to 3% in 2002 is a 25% drop in the growth rate. Real wage and salary income is still below where it was at the economic botttom in Nov. 20001. In recoveries in the 1960s & 1970s this measure was up nearly 10% two years into the recovery. But this is in sharp contrast to the big jump in productivity. So far this recovery few of the gains in productivity have gone to labor because it has been offset by the drop in employment.

The rate of gain in total compensation is much higher than wage in salaries growth. What we have is a major problem of healthcare insurance costs so that labor costs from the employer point of view -- total comp -- is rising much faster than it is from the employee point of view (take home pay)
Thus soaring health insurance costs is creating a wedge in the system between costs and wages.

In addition to high unemployment, we can add low savings/investment as an item not helping the labor income keeping pace with overall income growth.

Jim Glass: My initial reaction to your 1st post was that your P/NI measured only part of profits. You later noted other sources of profits. Did your more comprehensive measure of proftis decline from 1999 to 2001?

Spencer --

Inflation is roughly 1.5% lower in 2003 than it was in 2000. So in real terms, the growth rate in wage and salary income has not slowed.

In May of 2001, average hourly earnings were $14.26: http://www.tennessean.com/business/archives/01/04/05444833.shtml. (This was the first article that popped up on Google with average hourly earnings from 2001.) They're now $15.46. That's an increase of 8.4%, while inflation is up 3.8% over that same stretch. How can real wage and salary income be below where it was in November 2001? Or are you talking about total wage and salary income (not average)?

Here's a chart from the Economic Policy Institute of year-over-year growth in real average hourly earnings: I don't see any two-year stretch dating back to 1960 where wages rose 10%. In fact, by historical standards, the increases in average earnings over the past two years look perfectly respectable.

Stephen's right that ad hominem attacks are out of order, but Dean Baker does have a serious credibility problem. He told Uchitelle that in 40 years, we have never seen "wage growth that has been this slow." A quick glance at the EPI chart will tell you that this is simply wrong: from 1978 to 1995 hourly wages pretty much went straight downhill. Even the "coming out of recession" numbers don't support Baker's contention: hourly wages were flat in 1991, 1992, and 1993, before rising a minuscule 0.5% in 1994. So what could he be talking about? Well, what he really means is that nominal wage growth has never been this slow, which is what he said in this article: http://seattletimes.nwsource.com/html/businesstechnology/2001808911_econjobs06.html

I'm not sure, after looking at the EPI chart, how even that stat could be true, but even if it is, the difference between nominal wage growth and real wage growth is pretty important, I think, especially when you're comparing a low-inflation era to eras when inflation was two or three times as high as it is now.

Posted by Jim Glass at December 21, 2003 06:27 PM:

>>"Profits, it turns out, never stopped rising as a share of national income all through the 2001 recession and the months afterward of weak economic growth ... the Bureau of Economic Analysis erases all doubt on this point."

BEA (b of $):
Year ..... NI .... Profits .... P/NI
1999 ... 8,234..... 851 ..... 10.3%
2000 ... 8,795 .... 818 ...... 9.3%
2001 ... 8,981 .... 770 ...... 8.6%

All doubts erased, everyone?<<

In a word, no.

I have a few objections to raise:

1. The time period you have excerpted does not fully contradict the quote. It's true that the NIPA profit measure's share of NI fell in the periods *prior* to the recession. But the time period described in the quote (and displayed in a graph of Wolff's data in the print article) begins with 2001:I and ends with 2003:III.

The data series you excerpt go on to show NIPA profits' share of NI rebounding smartly in 2002 and 2003 -- actually, starting with 2001:IV -- such that in 2003:II the profit share of NI exceeds that in 1999:I-II. It's perhaps not beyond imagining that but for the events of 2001:III, the profit trough there would not have appeared to be a trough at all. At the same time, the compensation share fell sharply from 2001:III to 2001:IV and has drifted down a bit from there; it was about 2.5 percentage points below the peak in 2003:II. (This is true even if you add proprietors' income to compensation.) So even the simple BEA data do lend considerable support to the main thrust of the article.

(Harold, the NI share of a profit measure including NIPA profits, interest, rents, and proprietors' income drops 1.5 percentage points, or 5.6 percent, from 1999:II to 2001:III. NIPA profits' share of NI fell 2.4 percentage points or ~23%, over the same period. I can't tell how this would compare to the data with Wolff's adjustments.)

2. Depending on exactly how it is constructed, some of proprietor's income could amount to wages by another name, as your scenario suggests. However, to the extent some (if not most, at least by dollar value) sole proprietorships and partnerships pay salaries to the proprietors/partners, then it would not be so prima facie "cute" to treat the proprietor's income as tantamount to profits instead of wages.

3. Including interest, rents, etc., also is not unreasonable -- those are obviously not payments to labor, and it suits some corporations to claim their interest payments as pro forma profits.

4. Compensation, meanwhile, includes the compensation of corporate officers, who overall seem to have been doing much better than average before, during, and after the recession; and whose economic status is not particularly reflective of rank-and-file workers. One Fortune 500 CEO's compensation, after all, would offset a lot of low-to-middle income self-employed.

Add to the lengthy list of Great Moments in Self-Unawareness on Semi-Daily Journal:

----------quote-----------
"But isn't it around this point that someone notes Edward Wolf and Dean Baker are well known for not being impartial in this argument..."

Ah, good ole Jim "ad hominem" Glass.

Posted by Stephen J Fromm at December 22, 2003 04:59 AM
----------endquote--------

Here's a timely NY Times article:

http://www.nytimes.com/2003/12/22/nyregion/22ADUL.html?pagewanted=print&position=

With anecdotes that have some bearing on this thread, as well as the earlier one on the Krugman Nation piece, such as:

-------------quote-----------
The shape of life for those between 18 and 34 has changed so profoundly that many social scientists now think of those years as a new life stage, "transitional adulthood" — just as, a century ago, they recognized adolescence as a life stage separating childhood from adulthood.

"There used to be a societal expectation that people in their early 20's would have finished their schooling, set up a household, gotten married and started their careers," said Frank F. Furstenberg Jr., a sociology professor at the University of Pennsylvania. "But now that's the exception rather than the norm. Ask most people in their 20's whether they're adults and you get a nervous laugh. They're not sure."

Sociologists say there are several indicators of this state of mind. Nationwide, the median age of first marriage, which hovered around 21 for women and 23 for men from the 1940's to the 1970's, has risen steadily since to 25 for women and 27 for men.

Education takes longer. Only about a third of those who go straight from high school to four-year residential colleges graduate four years later. With so many young people taking time out to make money or change direction, most education experts now use six-year graduation rates as their benchmarks.

[snip]

In part, Professor Furstenberg and others say, the longer transition to adulthood reflects an economy in which most jobs that pay enough to support middle-class life require years of advanced education. For most young people, that means years of semiautonomy, in which they piece together loans, part-time jobs and whatever money their families can provide. Many spend their 20's and early 30's shuttling between college and work, professional school and travel, community service and internships, never earning enough to settle down, marry and raise a child.
------------endquote------------

Thanks for pointing out the temporal displacement, Mr. Bozzo. It's an article of faith among Republicans that the recession began under Clinton, hence it must have been in 2000. And, as we know, faith trumps facts.

Are we allowing this argument to be nibbled to death by ducks? Is it the entire argument that is flawed, as Jim Glass seems to think, or just a bad time to ask the question, as Bulent Sayin argues? I don't think this is a question one should ignore just because the structure of the economy is changing (when has it not been changing?). With unit labor costs falling pretty steadily since Q3 of 2001 (one of the few declines, and certainly the most persistent, on record), structural changes seems to me a good argument for looking hard at changes in GDP shares. There is a big shift underway, even if we don't know quite what it is. Issues of equity and general welfare, even political stability, at the extreme, seem at stake right now. Certainly, one wouldn't want to dismiss such issues out of hand merely because one has put one BEA series over another and found it is rising or falling.

Patrick Sullivan wrote, "Add to the lengthy list of Great Moments in Self-Unawareness on Semi-Daily Journal:"

Uh huh. So pointing out that Jim Glass committed the fallacy of ad hominem argument is an ad hominem argument?

Go back to designing your anti-matter rocket engines.

This has got to be a potent, class-warfare issue the Democrats can use against Bush. If we drop the ball on this one, we really are hopeless.

James Surowiecki wrote, "Stephen's right that ad hominem attacks are out of order, but Dean Baker does have a serious credibility problem."

That's arguable. But no more so than Milton Friedman, Robert Barro, Martin Feldstein, etc. If we're going to judge economists on credibility, let's do it across the board.

I would like to call the forum's attention to the text posted by Patrick R. Sullivan from economist Krugman's Nation peace, relaying observations from one Prof. Furstenberg about changes in what I would call a typical citizen's life cycle in United States. And I think this is the key observation made by Krugman here:

"...the longer transition to adulthood reflects an economy in which most jobs that pay enough to support middle-class life require years of advanced education...."

And I think that means the education sector would need to be supported by public funds and that perhaps the generally accepted notion that higher education is more of a private good than public good would need to ne reconsidered, revised.

I think the structure of US economy is changing in significant ways and you just can't even describe, let alone manage, that process of change, if you limit yourself to concepts and notions and generally accepted principles as they are applicabble to existing structure of the economy.

Why you may even have to re-invent the science of economics! (Was that too far off the mark? :-/)

I was quoting data on total real wage and salary income. Real average hourly earnings have been rising moderately over this recovery, but real weekly income has been stagnant as the increase in the real average wage has been roughly offset by the drop in hours worked--employment.

By the way you can go directly to bls.gov and download any of the data series, including history that they publish.

This is pretty much true for all the economic data sources.

James--

You are right, the BEA says on their web site; the numbers are domestic. "Domestic" in the current economy is an elusive term, of course--but, at least, there does not seem to be a dramatic change in exports. So, then, who's buying the stuff? Study of the numbers show increase in consumer purchases of durable goods and military purchases. Looking at interest payments, it appears the personal spending is not based in borrowing, so I expect this is the well-to-do--the people with good jobs--spending.

Well, could be worse. But it does seem to reflect the shift in income distribution.

http://www.bea.doc.gov/bea/dn1.htm
http://www.bea.doc.gov/bea/dn/nipaweb/TableView.asp?SelectedTable=1&FirstYear=2002&LastYear=2003&Freq=Qtr
http://www.bea.doc.gov/bea/dn/nipaweb/TableView.asp?SelectedTable=2&FirstYear=2002&LastYear=2003&Freq=Qtr

Why does posting numbers from prior to the recession (1999-2001) count as an argument against what has happened from 2001-2003?

Marc

Why does posting numbers from prior to the recession (1999-2001) count as an argument against what has happened from 2001-2003?

Posted by Marc at December 22, 2003 01:53 PM

As I suggested earlier, it doesn't.

So part of my answer to K Harris's questions would be that Jim Glass doesn't marshall any data to suggest that everything is fine with capital-vs-labor since the recession. (Also, the post-work world to which Bulent Sayin alludes seems to be, for now anyway, far enough into the long run that I expect to be dead first, barring major genomics/nanotechnological medical breakthroughs.)

A couple of musings related to the broader point K Harris raises:
- If D*v*d Br*&ks accurately summarizes the administration's plans for the addressing the changing nature of job security, then it seems the approach is to cut taxes for the base and cross fingers otherwise. The Dems ought to have a field-day with "personal re-employment accounts" if the President actually proposes them. (Presumably, it will be the unemployed's fault if they waste the proceeds on food or shelter instead of re-training.)
- I also think that there is something of note going on in the program of eliminating, or at least greatly reducing, taxation of income from capital (and perhaps unearned income more generally). There's more than a little subtext of 'work doesn't really matter' there. Which, given the source, isn't that surprising.

Stephen, Patrick was merely trying to give us another Great Moment in Right-Wing Freudian Projection. Similar to the accusations by the WSJ editorial page that the Clintons were practicing 'the politics of personal destruction'.

Bulent, Krugman is not the author of the NY Times article I quoted from. However, you are making the same non-sequitur Krugman made in The Nation:

" I think that means the education sector would need to be supported by public funds and that perhaps the generally accepted notion that higher education is more of a private good than public good would need to ne reconsidered, revised."

There has been a HUGE increase in public spending on education in the last 30 years (see Caroline Hoxby), That's undoubtedly a large part of the problem, it's clearly been counterproductive.

Just as most of the other programs launched in the sixties and seventies are almost surely responsible for such results as are being discussed in this thread, and in Krugman's Nation piece.

" Uh huh. So pointing out that Jim Glass committed the fallacy of ad hominem argument is an ad hominem argument?

" Go back to designing your anti-matter rocket engines."

Posted by Stephen J Fromm at December 22, 2003 10:38 AM

That would be Self-Unawarenesssquared.

Posting numbers from 1999 and 2000 is relevant because Uchitelle writes, "Profits, it turns out, never stopped rising as a share of national income all through the 2001 recession and the months afterward of weak economic growth." Profits as a share of national income were not rising going into the 2001 recession -- that is, they fell from 1999 to 2000 -- and they fell again in 2001.

And the numbers from the 1990s are also relevant because the main thrust of Uchitelle's piece is not that things have gotten worse for labor since 2001. It's that things have been getting worse for labor over the last twenty years: "We all know how weak labor soon became." And this sentence: "When the productivity growth rate revived in the mid-1990s and accelerated in recent years, many forecasters thought that the revenue from rising output per worker would again be channeled to labor as well as to profits." Well, from 1995-2001 that's exactly what did happen, but Uchitelle makes it sound as if the forecasters were wrong: "The productivity improvement came in a strange way."

I don't think comparing Dean Baker to Friedman, Barro, or Feldstein is really fair to Baker. Dean Baker is not an economist in the sense that those other three are. They're just playing in a different league. It'd be comparing Donald Luskin to, well, Paul Krugman.

There has been a HUGE increase in public spending on education in the last 30 years (see Caroline Hoxby), That's undoubtedly a large part of the problem, it's clearly been counterproductive.

Clearly, clearly, we're all so much poorer than we were in 1974. I know I am.

Patrick, dsquared:

I would rather think that the problems may have been rooted in (a) poor design and /or mismanagement of programs started in 1960s, and (b) the Reagonomic backlash of the 80s against those programs.

Productivity is increasing. Life expectancy is increasing. Education needs and requirements are increasing. You cannot respond to these trends without increasing investment in education. And public financing of such investment would probably need to be increased as well.

Tom Bozzo:

"(Also, the post-work world to which Bulent Sayin alludes seems to be, for now anyway, far enough into the long run that I expect to be dead first, barring major genomics/nanotechnological medical breakthroughs.)"

Yes, my view on that is rather a long term view, but the seeds of that world already exist: NGO activity is expanding along with public financing of it. Is NGO activity "work"?

BTW, I favor income security to job security, for I think the latter inhibits productivity and so it costs to the economy more than income security.

K Harris writes:

"... With unit labor costs falling pretty steadily since Q3 of 2001 (one of the few declines, and certainly the most persistent, on record), structural changes seems to me a good argument for looking hard at changes in GDP shares. There is a big shift underway, even if we don't know quite what it is. Issues of equity and general welfare, even political stability, at the extreme, seem at stake right now...."

My sentiments exactly, in case I posted any thing that would indicate otherwise. However, I think that concentrating too much on ups and downs in GDP distribution in the short run may cause us to lose perspective and framework.

Bulent Sayin:

'Is NGO activity "work"?'

Depends on the activity ;-).

Seriously, you make fair points in both posts. I agree that excessive job security can be counterproductive (someone may point out the same about income security). My core concern is the absence of a coherent policy in any direction.

" I don't think comparing Dean Baker to Friedman, Barro, or Feldstein is really fair to Baker. Dean Baker is not an economist in the sense that those other three are. "

Even more obviously, Baker was quoted in this story, but not the three economists Stephen Fromm wants to drag in from left field.

" Clearly, clearly, we're all so much poorer than we were in 1974. I know I am.'

Ah, another former college bookstore employee who has made good.

" I would rather think that the problems may have been rooted in (a) poor design and /or mismanagement of programs started in 1960s, and (b) the Reagonomic backlash of the 80s against those programs."

It's much simpler. The incentives were drastically changed, beginning in the mid-1960s. And shortly thereafter we got the logical results, decried by the likes of Paul Krugman, but without full comprehension of why and how.

"Productivity is increasing. Life expectancy is increasing. Education needs and requirements are increasing. You cannot respond to these trends without increasing investment in education. And public financing of such investment would probably need to be increased as well."

Again, that is a non-sequitur. But let's introduce some facts:

http://www.educationnext.org/unabridged/20014/hoxby.pdf

" If one simply calculates NAEP points per thousand real dollars spent per pupil... They show that, between the 1970-71 and 1998-99 school years, productivity fell by between 54.9 percent (based on math tests for 9 year olds) and 73.4 percent (based on reading tests for 17 year olds). "

Here's a dramatic example of the changed incentives that some economists are oblivious to (and I provide it in full knowledge of the wailng and gnashing of teeth it's likely to provoke from the usual suspects):

http://www.nytimes.com/2003/12/23/national/23OSHA.html?hp=&pagewanted=print&position=

I especially like this little giveaway:

" Mr. Hubert, 63, spent his early career as a labor organizer, a prosecutor and a criminal defense lawyer. He saw opportunity in the burgeoning world of workplace safety law."

Patrick Sullivan says, "There has been a HUGE increase in public spending on education in the last 30 years (see Caroline Hoxby), That's undoubtedly a large part of the problem, it's clearly been counterproductive."

Hoxby fails to address the fact that the "huge" increases have largely been for disadvantaged pupils and the incorporation of heavily disadvantaged minorities. It's also true that teachers' salaries, which used to be appalling, are now merely dismal. Her "productivity" measure of education is of questionable validity because of the change of composition of the public schools. (To be fair, her analysis is much more carefully drawn than most of the critics of public education.)

Finally, education is largely funded and almost exclusively controlled at the local level. There *are* serious problems with public education. These are largely connected to communities that think that football is an academic subject and that evolution is "just a theory", not with the "programs of the 60s and 70s" that feature so highly in Kulturkampf rhetoric.

Patrick R. Sullivan:

I made a quick, sort of random review of passages in Hoxby report.

1- She says school productivity as measured in achievement scores per grand dollars spent dropped. She doesn't say any thing about increased investment in education caused a decrease in achievement levels.

2- Hoxby says school choice reform improved productivity and I think she favors school choice. Me too.

And I still think investment in education should be increased and more public funds should be used to support investment in education, especially in terms of expanding enrollment in higher education.

Suppose a good part of that budget surplus were used to start a global facility, a global revolving fund, for provision of individual loans for higher education? The world and human civilization could have been by now on a very different, and shorter route towards a better future for all, because of that facility.

" Hoxby fails to address the fact that the "huge" increases have largely been for disadvantaged pupils and the incorporation of heavily disadvantaged minorities."

Actually, Hoxby does address (in other work) the counterproductive expenditures on "disadvantaged" pupils. As for "heavily disadvantaged minorities", they used to be much better off, before they began to be treated as natural failures who had to be "understood". Once more, this is just a matter of incentives.

" It's also true that teachers' salaries, which used to be appalling, are now merely dismal."

Teachers make an average salary to slightly above salary, for people with similar credentials. But less well paid teachers in the past produced at least as good results.

" Her 'productivity' measure of education is of questionable validity because of the change of composition of the public schools. "

No, she controls for that. IIRC, she points out that the average public school student today is far more likely to be a child of college grads, and to be from a wealthier family, than in the past.

" Finally, education is largely funded and almost exclusively controlled at the local level."

I'm not sure what relevance this would have in the context of this thread, even if the above were true. Which is is not, in at least the states with which I'm familiar. Whether the incentives facing people are changed at the federal, state or local level seems unimportant.

" There *are* serious problems with public education. These are largely connected to communities that think that football is an academic subject and that evolution is "just a theory", not with the "programs of the 60s and 70s" that feature so highly in Kulturkampf rhetoric. "

Oh no, not true at all. The problems with public schools are most appalling in inner cities, and for those too poor to move to communities where the schools are more responsive to parents' political clout.