Monday, June 25, 2007

Quote of the day: Poverty and the Yankees

I've been grading papers for a Fraser Institute essay contest, and I pass along this gem (from a high schooler, no less):

"Poverty is simply not solvable by throwing money at the issue, as the developing world is not a New York baseball team."

Thursday, June 21, 2007

College rankings

In a movement that's been gaining support for a number of years, the members of the Annapolis Group have decided to try and stick it to the U.S. News & World Report college rankings by boycotting the process entirely. Well, they've only recommended boycotting it to the respective institutions-- their statement is here. They claim not to like the reputation part of the rankings in which college presidents are asked their opinion of the other schools in the survey, and this metric accounts for 25% of the final tally.

Personally, I think they don't like the rankings as a whole, and that's just a margin by which they can find a leg to stand on. College rankings are a zero-sum game. You go up when others go down, and your overall score doesn't matter one bit-- it only matters as compared to everyone else's. As such, self-interested college presidents should form opinions of these surveys based on how their institutions rank relative to where they feel they should rank. Those presidents most in favor of change should be those that feel most underrated-- and those at the summit of the list should never be against the rankings. It's interesting that the three presidents quoted in the article as being against the rankings-- or at least on record as against the reputation survey-- are from colleges ranked 41st, 45th and 65th, or those right in the range of feeling that a) they are underrated, and thus b) would likely stand to gain the most from an elimination of the U.S. News and World Report process.

(I could be mistaken, but I believe Reed College boycotted these rankings for a while in the late 90s and maybe into this century. Again, I could be wrong, but I think they were roughly around 10th when they decided to do this, and now I notice they are back in the rankings at around 50th, which is an interesting story in its own right.)

College presidents, as well as students, know exactly how important these rankings are. I was fortunate enough to attend one of the colleges nearer the top of the Liberal Arts list, and also served in student government there during the search and selection process of a new president. There was no larger factor in the decision than the candidates impact on the college's standing in the rankings. It wasn't something we were trying to conceal-- the student newspaper had the exact same debate we were having. Rankings are a massive recruiting tool, and colleges want the best students they can get.

I personally don't see the U.S. News and World Report rankings fading into the background any time soon. The market needs third party rankings, and all said they do a solid job-- independent of the rankings, there's a lot of data in one concise place. One solution put forth by the Annapolis Group is that there exist competing rankings that do a better job; they name National Association of Independent Colleges and Universities and the Council of Independent Colleges, among others. Of course, there's no reason to believe that these groups' rankings can insulate themselves from the discontent that U.S. News and World Report has fielded-- and once those new rankings come out, I can assure you that those nearer the bottom will be ready to cry foul.

Tuesday, June 19, 2007

Commandments for Driving

This one looks like a trick, but is peddling it, so I'll take it as real. The Vatican has released the Ten Commandments of driving. It's in a document called "Guidelines for the Pastoral Care of the Road." My favorite new Commandment is "On the road, protect the more vulnerable party." Not sure about the incentive compatibility of that one.

One small issue: If the (original) Ten Commandments were given to Moses from God on Mount Sinai, how does the Church fit into the whole ordeal of being God? Isn't God the only one in a position to decree Commandments? I'm not even going to go down that path-- but I will say my co-blogger knows a lot more about that stuff than I claim to.

Monday, June 18, 2007

Dynamic Rent-Seeking

We're back! Comprehensive exams put a hiccup into the blog process, but now that I'm (hopefully) done with those things for the rest of my life, there shouldn't be any more 6 week gaps.

Here's an issue I've been wrestling with for the last couple of days. We know rent-seeking as the process of devoting resources to gaining political favors. People would be willing to spend up to the amount that they would gain from said favor to win the policy change. Nothing new here.

A discrepancy arises in the literature concerning the permanence of laws and how this may affect the amount of rent-seeking we observe. Landes and Posner show that a more independent judiciary creates a more stable policy environment in the sense that laws would persist longer. This would, in turn, create more valuable laws (via a longer horizon to glean rents from a policy change), and we would then observe more rent-seeking.

Randy Holcombe comes to a different conclusion. In his pursuit of creating a tax system that would minimize political costs (such as rent-seeking), he puts forth that tax codes should constitutional so they would be more difficult to change. This permanence, he says, would reduce the level of rent-seeking.

Something has to give, right?

A couple of thoughts:

- There is a flip side to this that's not being examined; namely, the cost of changing a tax code. If a more permanent law is more costly to change-- which may well be the case-- then there may be a reduction in the amount of rent-seeking. It's an elasticity issue.

The only problem I see with this is that rent-seeking literature almost exclusively ignores this half of the problem. Typically, you look at potential benefits, and groups will spend up to that amount. End of story. Maybe it's not a problem-- maybe it's something that needs to be looked at. But that doesn't seem to mesh well with what's already out there.

- Consider the following thought experiment: Let's say anyone could change the tax code with the flip of a switch. Anyone can change it; the person after you can do so just as easily as you did. How much rent-seeking would happen now? I don't think it's hard to see that there would be zero rent-seeking; it is the permanence of the law that gives it any value in the first place. After all, a zero time horizon doesn't lead to any present value calculations.

For this reason, I'm tending to think that the Landes/Posner position might be a bit more accurate, but I'm certainly not sold either way.