I have to say I think the reason elite colleges are dropping standardized tests is mostly that it makes it harder to sue them over admissions practices. Students for Fair Admissions v Harvard relied on having SAT/ACT scores to show the admissions process was biased against Asian-Americans. You can't do that without test scores!
Basically, people (especially left-wing people) are inclined to trust college administrators and view them as "one of us," but they absolutely should not do that. College administrators are every bit the slippery, dishonest C-suite types CEOs are.
> is mostly that it makes it harder to sue them over admissions practices
I agree, but I also think admissions wants less transparency in the admissions game and dropping standardized exams is one of the ways to achieve that.
I think it's time for a moderate version of supply side economics. Rather than the Reagan era version that for some reason focused on tax cuts (when all you have is a hammer...), we should keep talking about how good the increasing supply of energy, housing, and other goods and services is for the economy. Education and cognitive labor in general seem like they will also see a huge expansion in supply with the advent of ever-better AI.
What's left? We're just getting started on housing, so there's a lot more work to do there. Healthcare, elder care, and childcare seem like tricky ones. I'm not betting on humanoid robots coming through in those areas any time soon. New wonder drugs and personalized therapies will help... Maybe we just need to make society so much richer with everything else we're doing that we can afford a few sectors that still suffer from Baumol's?
Yep. I’m a physician-scientist and the policy point that I keep trying to make is that delivering the latest in cutting edge medicine - cellular and gene therapies, next gen sequencing, bone marrow and solid organ transplantation - to everyone is going to take a lot more physicians and healthcare workers. My preference is that we make policy changes to shift the number of administrators needed and decrease costs where we can so that healthcare doesn’t forever increase the amount of the economy dedicated to it.
Between costly new therapies, the aging of the population, and productivity improvements in other sectors, my hand-wavy take is that eye-popping increases are already baked in. I'm not sure we can do much beyond hoping to slightly mitigate the rate. At least we still have a modestly growing population. I don't envy countries like South Korea and the dilemma of caring for the old (ration care or spend far too much) that they will soon face, given fertility rate crashes.
The best bet for healthcare and elder care imo is anti-aging therapies. Generally slowing down the aging process delays or mitigates ~every disease and keeps people out of hospitals and nursing homes.
Maybe caring for young children is the actual AGI-complete task?
Not to nitpick (ok, totally to nitpick), but Horpedahl's chart is absolutely not a log-log graph as you describe it but rather a semi-log (or log-lin) graph, because the horizontal axis is linear.
Good catch. Showing a person's age on a log scale seems so silly, at least in this context, that I guess we all just corrected it mentally without noticing
Not something you have to worry about. My point is just that someone who just knows how to get in peoples ass can still provide some use in the doctor's office.
Worth noting that the share of US wealth belonging to millennials is way down compared to when boomers were that same age, so that's an interesting dynamic even if the average is improving. I'm also curious whether millennials have greater wealth inequality within their cohort versus when boomers or gen X were that age.
"In 1989, when baby boomers were around the same age as millennials are today, they controlled 21% of the nation’s wealth. That’s almost five times as much as what millennials own today."
Oh yeah, you're talking about the *share* of the nation's wealth. I'm talking about the absolute level. Young people's *share* is down only because old people were poor back in the day, after the Depression.
I would sure love to see another graph of share of wealth by age, instead of amount. As we know, being relatively less well off is something that people are keenly aware of and has a big impact on their sense of well being.
There is no reason for The Fed to change interest rates at all. As you said it’s a Goldilocks economy, with good growth, low inflation and full employment. Why would they do anything differently?
Keeping rates high indefinitely hurts investment _in general_. Like that's the whole point. You raise rates to slow down the I component of Y = C + I + G + (X-M).
Plus maybe some people would like to be able to move. As it is we might as well bolt everyone into their homes from the outside, because they sure as hell can't afford a new mortgage, and there aren't any houses for sale.
I'm of the age that views 5.5% interest rates as "low", so I'm a little biased. I like being able to make 4.25% in a savings account, so I agree with El Monstro. The artificially low rates fueled a real estate boom that caused high home prices and rents. Developers still have plenty of incentive to build. Having nominal interest rates encourages good behavior (savings, not buying more house than you can afford, recucing debt, etc.). Having more equalibrium between buyer and seller seems to be a good thing. Why not let this current economy chug along for a while? I feel like everyone is looking a gift horse in the mouth.
> So really, when you’re looking at this graph, you’re looking at the average per capita wealth of 30-year-old Americans.
Which is twice the size of gen X. This is hard to believe to be honest and I feel that using an average, rather than a median here, is highly suspect in all cases of measuring wealth.
The median 30 year old doesn’t own a house (only 35% of 25-29 year olds do).
Our younger son bought a four BR ranch house with his GF when he was 29 and she was 24. They could do so because they bought in a little farming community in Northern Central Valley California, that most millennials would not lower themselves to stop in, let alone live in. That, and a little down payment help from family, but they can make the payments long with all the other bills that come with homeownership, take care of the place and their too many pets with their not so awesome but not terrible paying jobs (my son commutes less than a mile, his GF works out of home office).
My spouse works at an office in Silicon Valley, in a job that actually does require being in person much of the time (hardware test engineering). My own job is very portable, but unless I want to get divorced, I'm not leaving a 20-30 mile radius around Mountain View.
We need to actually build a ton more housing in areas with lots of well paid jobs. San Mateo County, where I live, has added around 11 jobs for each new housing unit, year after year, for three decades.
We _do_ own a house -- but it took saving until we were forty, as a pair of highly-paid engineers. It's insane. Even if it's true that on paper we have more wealth than our parents at a similar age, it's very questionable whether the paper value of our house translates into a higher standard of living. Both of our sets of parents were able to afford comparable houses _on one income_. And honestly my family took more vacations when I was a kid than we ever have time for.
Yes. It is. My kids grew up in Silicon Valley (they graduated from Saratoga High). I am also an engineer turned patent attorney many decades ago. We bought a tear down in Saratoga back in 1995 for what was then an astronomical price ($500K). Would probably be $3M now. One of our sons won't leave the area (because "friends and places") to move to a location where he can afford to buy (Reno has been mentioned but that's as far as it gets), so he rents a bedroom in an older post WW2 house in Santa Clara (near 49ers stadium). Share's a bathroom with two room mates. Basically like college living, although he makes twice as much as his brother who bought the house in the middle of nowhere central valley. But money in Silicon Valley goes 20% as far as out there in the weeds and sticks and farms, housing wise.
It's much better to tax income than wealth (land value).
My aunt and uncle bought a 2bdrm house in a sleepy Toronto exurb, in 1970 for about $12K. It has a land value tax, and recently sold for just shy of $6M.
That house is the last on the street to to get re-developed - the rest of the street is already filled with a mishmash of 10k sq. ft mansions in every style imaginable.
That former exurb is now just an outer suburb, with 2 BRTs and a subway on the way. It's amazing what 50 years of urban growth can do.
And all of these wealth analyses have the problem of the total being inflated by recent marginal prices.
That is, the "wealth" of boomer homeowners is mostly housing, and housing prices have gone up, but if suddenly all those boomers dropped dead and their houses went up for sale all at once, glutting the market, the prices would plummet, calling into question the earlier wealth numbers. It's all a little hand-wave-y.
The fact that most 30-ish folks don't own houses, and are having a much harder time saving for houses, and are very notice-ably rent-burdened while trying to, strongly suggests there's some kind of problem with arguing that 30-year-olds today are "wealthier".
It's so weird for me to see what you really look like in that youtube convo, for so long I thought that avatar (of Whitman?) was what you looked like. Are you sure you are not an imposter? :)
Now, the fact that where students went to high school is an even better predictor of college success IS an interesting fact. Regardless of the prediction capability of test scores - this other issue tells us a lot about how we fund american schools and how much issues like poverty and opportunity carry forward right from the beginning. I realize Noah was focused on the test score issue, but to me this is the far bigger one.
Public school funding imbalances are not what you think they are. This is a decades old talking point that is no longer very relevant after the policy changes of those past few decades.
Re: standardized tests. I have been involved with admissions for a fairly competitive graduate STEM department. I agree that standardized test scores are reasonably predictive when one uses them coarsely to bucket strong vs. relatively weak scores. What concerns me is the use of scores to differentiate between “good” and “excellent” (ie 90th percentile vs. perfect scores.) My concern is that at this level they may not reflect a student’s cognitive ability, but may be more a reflection of test-taking ability and (sadly, to a greater extent) test-taking preparation effort. I can only cite anecdotal experience here, but as a graduate advisor it has not been my experience that this good vs. perfect test scores distinction (particularly in math) captures the skills needed to deeply grasp advance topics and do creative research. But competitive schools really do want scores to work that way. I wish we could gather some data on outcomes that addressed this.
The other thing is that college success often is different than real-world success. I was a software architect for years and I had to train almost every college graduate (including graduate degrees) on how to actually do software engineering.....
Test-taking ability is quite different than real world capabilities. Yes, big differences in scores are probably meaningful, but smaller ones are often just noise or prep (especially now days with all the SAT prep courses and tutors, etc)
Medical Administration: I agree that the ratio of administrators to practitioners has increased. Largely the drive has been to keep up with government regulations changes over the last 15 years. As no one knows the optimal formula, the spamming for administrators has been a shot in the dark to find margins. Having said that, the elusive goal to improve public morbidity and mortality, still remain with the practitioners. But the essence remains at the feet of the educators who have been unable to leverage science. Worse yet, there has been inability to generate hypotheses for science to test. Practitioners are left rudderless.
On the millenial wealth - hard to really judge things from this chart - as Noah noted, it is an "average" not a median. And averages in the US are notoriously skewed by the wealthy. I know Noah talks about possibly misleading charts, but to me this is one of those. And the fact that so much is real estate value speaks to this even more - again possibly a big skew due to the very wealthy (average vs median).
NOW, this doesn't mean that Noah's point is Wrong, but just that I don't think this data particularly verifies it one way or the other.
"Note also that this is a log-log graph." Actually, no. The abscissa in the graph that Noah claims is log-log is obviously linear, the distance on the abscissa in the plot is exactly the same for 20-30, 30-40, and 40-50. It would actually be useful to plot the log-log graph, which to a scientist replotting this data on a log-log graph shows that what matters is primarily the exponential accumulation of wealth with age, although a majority of large wealth accumulation occurs after age 50. On the log-linear graph posted wealth increases by a factor of 10 ($40,000 to $400,000) with an increase from 26-50 (ca. 2x) on the abscissa. Wealth accumulation for many starts later in life and continues well past 50 which would display more vividly on a log-log plot. I have a large group of friends from college and graduate school who have increased their wealth exponentially (correct use of term) from 40 to 60. Some are still working which appears hard to stop when you're making over $1M/yr, but most have retired.
Does this graph tell us anything? Is it something a competent scientist would ever use? At age 28 Millenials and Gen-X are equal, at age 30 Millenials are 2x Gen-X. Is this data jump reasonable? No! Average Net worth peaks in the 65-69yr old range and median net worth peaks in the 70-74 age range. Does any of that show in this graph? No!
I have to say I think the reason elite colleges are dropping standardized tests is mostly that it makes it harder to sue them over admissions practices. Students for Fair Admissions v Harvard relied on having SAT/ACT scores to show the admissions process was biased against Asian-Americans. You can't do that without test scores!
Basically, people (especially left-wing people) are inclined to trust college administrators and view them as "one of us," but they absolutely should not do that. College administrators are every bit the slippery, dishonest C-suite types CEOs are.
> is mostly that it makes it harder to sue them over admissions practices
I agree, but I also think admissions wants less transparency in the admissions game and dropping standardized exams is one of the ways to achieve that.
I think it's time for a moderate version of supply side economics. Rather than the Reagan era version that for some reason focused on tax cuts (when all you have is a hammer...), we should keep talking about how good the increasing supply of energy, housing, and other goods and services is for the economy. Education and cognitive labor in general seem like they will also see a huge expansion in supply with the advent of ever-better AI.
What's left? We're just getting started on housing, so there's a lot more work to do there. Healthcare, elder care, and childcare seem like tricky ones. I'm not betting on humanoid robots coming through in those areas any time soon. New wonder drugs and personalized therapies will help... Maybe we just need to make society so much richer with everything else we're doing that we can afford a few sectors that still suffer from Baumol's?
Yep. I’m a physician-scientist and the policy point that I keep trying to make is that delivering the latest in cutting edge medicine - cellular and gene therapies, next gen sequencing, bone marrow and solid organ transplantation - to everyone is going to take a lot more physicians and healthcare workers. My preference is that we make policy changes to shift the number of administrators needed and decrease costs where we can so that healthcare doesn’t forever increase the amount of the economy dedicated to it.
Between costly new therapies, the aging of the population, and productivity improvements in other sectors, my hand-wavy take is that eye-popping increases are already baked in. I'm not sure we can do much beyond hoping to slightly mitigate the rate. At least we still have a modestly growing population. I don't envy countries like South Korea and the dilemma of caring for the old (ration care or spend far too much) that they will soon face, given fertility rate crashes.
The best bet for healthcare and elder care imo is anti-aging therapies. Generally slowing down the aging process delays or mitigates ~every disease and keeps people out of hospitals and nursing homes.
Maybe caring for young children is the actual AGI-complete task?
Not to nitpick (ok, totally to nitpick), but Horpedahl's chart is absolutely not a log-log graph as you describe it but rather a semi-log (or log-lin) graph, because the horizontal axis is linear.
Very true!
Good catch. Showing a person's age on a log scale seems so silly, at least in this context, that I guess we all just corrected it mentally without noticing
So, the medical administrative apparatus is only the size of an elephant, not an apatosaurus. Some comfort in that.
https://cdn.britannica.com/52/8052-050-B535C6B6/Apatosaurus-adult-elephants-rest-body-whiplash-tail.jpg
I am picturing the local clinic waiting room ... "You're Administrator will see you now"
That will definitely reduce healthcare usage.
Maybe, but maybe people will prefer administrators to actual doctors. For example, administrators would make excellent prostate checkers.
Yuck.
Not something you have to worry about. My point is just that someone who just knows how to get in peoples ass can still provide some use in the doctor's office.
Hi yo!
Erik's "I'm looking for a head of special projects for my personal team" ad he uses to open Econ 102 kind of makes him sound like a supervillain.
Worth noting that the share of US wealth belonging to millennials is way down compared to when boomers were that same age, so that's an interesting dynamic even if the average is improving. I'm also curious whether millennials have greater wealth inequality within their cohort versus when boomers or gen X were that age.
It's actually up compared to the Boomers.
"In 1989, when baby boomers were around the same age as millennials are today, they controlled 21% of the nation’s wealth. That’s almost five times as much as what millennials own today."
https://www.cnbc.com/2020/10/09/millennials-own-less-than-5percent-of-all-us-wealth.html
Oh yeah, you're talking about the *share* of the nation's wealth. I'm talking about the absolute level. Young people's *share* is down only because old people were poor back in the day, after the Depression.
I would sure love to see another graph of share of wealth by age, instead of amount. As we know, being relatively less well off is something that people are keenly aware of and has a big impact on their sense of well being.
It seems Furman and Krugman are both in
basic agreement about PCE vs CPI. I easily could misunderstand. PCE if I understand a bit, factors Rents, which you mention Noah, over CPI.
A macroeconomic paradigm shift?
My whole take was inflation was driven mostly by the supply spiking frailty of it's inane interdependence , than stimulus.
There is no reason for The Fed to change interest rates at all. As you said it’s a Goldilocks economy, with good growth, low inflation and full employment. Why would they do anything differently?
Well, because inflation has been vanquished, and leaving rates high for a long time might needlessly hurt the commercial property sector...
Keeping rates high indefinitely hurts investment _in general_. Like that's the whole point. You raise rates to slow down the I component of Y = C + I + G + (X-M).
Plus maybe some people would like to be able to move. As it is we might as well bolt everyone into their homes from the outside, because they sure as hell can't afford a new mortgage, and there aren't any houses for sale.
I'm of the age that views 5.5% interest rates as "low", so I'm a little biased. I like being able to make 4.25% in a savings account, so I agree with El Monstro. The artificially low rates fueled a real estate boom that caused high home prices and rents. Developers still have plenty of incentive to build. Having nominal interest rates encourages good behavior (savings, not buying more house than you can afford, recucing debt, etc.). Having more equalibrium between buyer and seller seems to be a good thing. Why not let this current economy chug along for a while? I feel like everyone is looking a gift horse in the mouth.
Good call on the possibility of extended five percent interest rates a year ago. It seemed nuts at the time but now looks prescient.
> So really, when you’re looking at this graph, you’re looking at the average per capita wealth of 30-year-old Americans.
Which is twice the size of gen X. This is hard to believe to be honest and I feel that using an average, rather than a median here, is highly suspect in all cases of measuring wealth.
The median 30 year old doesn’t own a house (only 35% of 25-29 year olds do).
Our younger son bought a four BR ranch house with his GF when he was 29 and she was 24. They could do so because they bought in a little farming community in Northern Central Valley California, that most millennials would not lower themselves to stop in, let alone live in. That, and a little down payment help from family, but they can make the payments long with all the other bills that come with homeownership, take care of the place and their too many pets with their not so awesome but not terrible paying jobs (my son commutes less than a mile, his GF works out of home office).
How nice for them.
My spouse works at an office in Silicon Valley, in a job that actually does require being in person much of the time (hardware test engineering). My own job is very portable, but unless I want to get divorced, I'm not leaving a 20-30 mile radius around Mountain View.
We need to actually build a ton more housing in areas with lots of well paid jobs. San Mateo County, where I live, has added around 11 jobs for each new housing unit, year after year, for three decades.
We _do_ own a house -- but it took saving until we were forty, as a pair of highly-paid engineers. It's insane. Even if it's true that on paper we have more wealth than our parents at a similar age, it's very questionable whether the paper value of our house translates into a higher standard of living. Both of our sets of parents were able to afford comparable houses _on one income_. And honestly my family took more vacations when I was a kid than we ever have time for.
Yes. It is. My kids grew up in Silicon Valley (they graduated from Saratoga High). I am also an engineer turned patent attorney many decades ago. We bought a tear down in Saratoga back in 1995 for what was then an astronomical price ($500K). Would probably be $3M now. One of our sons won't leave the area (because "friends and places") to move to a location where he can afford to buy (Reno has been mentioned but that's as far as it gets), so he rents a bedroom in an older post WW2 house in Santa Clara (near 49ers stadium). Share's a bathroom with two room mates. Basically like college living, although he makes twice as much as his brother who bought the house in the middle of nowhere central valley. But money in Silicon Valley goes 20% as far as out there in the weeds and sticks and farms, housing wise.
My aunt and uncle bought in Sunnyvale in the '70s for five figures. Their house is now worth well over $2M. (Or rather the land under it is.)
We need to abolish Prop 13 and replace it with a Land Value Tax.
It's much better to tax income than wealth (land value).
My aunt and uncle bought a 2bdrm house in a sleepy Toronto exurb, in 1970 for about $12K. It has a land value tax, and recently sold for just shy of $6M.
That house is the last on the street to to get re-developed - the rest of the street is already filled with a mishmash of 10k sq. ft mansions in every style imaginable.
That former exurb is now just an outer suburb, with 2 BRTs and a subway on the way. It's amazing what 50 years of urban growth can do.
> It's much better to tax income than wealth (land value)
Did you mean the opppsute?
Land isn't wealth.
https://astralcodexten.substack.com/p/your-book-review-progress-and-poverty
And all of these wealth analyses have the problem of the total being inflated by recent marginal prices.
That is, the "wealth" of boomer homeowners is mostly housing, and housing prices have gone up, but if suddenly all those boomers dropped dead and their houses went up for sale all at once, glutting the market, the prices would plummet, calling into question the earlier wealth numbers. It's all a little hand-wave-y.
The fact that most 30-ish folks don't own houses, and are having a much harder time saving for houses, and are very notice-ably rent-burdened while trying to, strongly suggests there's some kind of problem with arguing that 30-year-olds today are "wealthier".
It's so weird for me to see what you really look like in that youtube convo, for so long I thought that avatar (of Whitman?) was what you looked like. Are you sure you are not an imposter? :)
Yeats :)
it was a very good conversation, enjoyed it
Now, the fact that where students went to high school is an even better predictor of college success IS an interesting fact. Regardless of the prediction capability of test scores - this other issue tells us a lot about how we fund american schools and how much issues like poverty and opportunity carry forward right from the beginning. I realize Noah was focused on the test score issue, but to me this is the far bigger one.
Public school funding imbalances are not what you think they are. This is a decades old talking point that is no longer very relevant after the policy changes of those past few decades.
Re: standardized tests. I have been involved with admissions for a fairly competitive graduate STEM department. I agree that standardized test scores are reasonably predictive when one uses them coarsely to bucket strong vs. relatively weak scores. What concerns me is the use of scores to differentiate between “good” and “excellent” (ie 90th percentile vs. perfect scores.) My concern is that at this level they may not reflect a student’s cognitive ability, but may be more a reflection of test-taking ability and (sadly, to a greater extent) test-taking preparation effort. I can only cite anecdotal experience here, but as a graduate advisor it has not been my experience that this good vs. perfect test scores distinction (particularly in math) captures the skills needed to deeply grasp advance topics and do creative research. But competitive schools really do want scores to work that way. I wish we could gather some data on outcomes that addressed this.
The other thing is that college success often is different than real-world success. I was a software architect for years and I had to train almost every college graduate (including graduate degrees) on how to actually do software engineering.....
Test-taking ability is quite different than real world capabilities. Yes, big differences in scores are probably meaningful, but smaller ones are often just noise or prep (especially now days with all the SAT prep courses and tutors, etc)
Medical Administration: I agree that the ratio of administrators to practitioners has increased. Largely the drive has been to keep up with government regulations changes over the last 15 years. As no one knows the optimal formula, the spamming for administrators has been a shot in the dark to find margins. Having said that, the elusive goal to improve public morbidity and mortality, still remain with the practitioners. But the essence remains at the feet of the educators who have been unable to leverage science. Worse yet, there has been inability to generate hypotheses for science to test. Practitioners are left rudderless.
On the millenial wealth - hard to really judge things from this chart - as Noah noted, it is an "average" not a median. And averages in the US are notoriously skewed by the wealthy. I know Noah talks about possibly misleading charts, but to me this is one of those. And the fact that so much is real estate value speaks to this even more - again possibly a big skew due to the very wealthy (average vs median).
NOW, this doesn't mean that Noah's point is Wrong, but just that I don't think this data particularly verifies it one way or the other.
Similar in some ways to some graphs about average income, average wealth due to stock, etc.
"Note also that this is a log-log graph." Actually, no. The abscissa in the graph that Noah claims is log-log is obviously linear, the distance on the abscissa in the plot is exactly the same for 20-30, 30-40, and 40-50. It would actually be useful to plot the log-log graph, which to a scientist replotting this data on a log-log graph shows that what matters is primarily the exponential accumulation of wealth with age, although a majority of large wealth accumulation occurs after age 50. On the log-linear graph posted wealth increases by a factor of 10 ($40,000 to $400,000) with an increase from 26-50 (ca. 2x) on the abscissa. Wealth accumulation for many starts later in life and continues well past 50 which would display more vividly on a log-log plot. I have a large group of friends from college and graduate school who have increased their wealth exponentially (correct use of term) from 40 to 60. Some are still working which appears hard to stop when you're making over $1M/yr, but most have retired.
Does this graph tell us anything? Is it something a competent scientist would ever use? At age 28 Millenials and Gen-X are equal, at age 30 Millenials are 2x Gen-X. Is this data jump reasonable? No! Average Net worth peaks in the 65-69yr old range and median net worth peaks in the 70-74 age range. Does any of that show in this graph? No!
https://www.canarymedia.com/articles/solar/the-biggest-solar-plus-storage-project-in-the-us-just-came-online?utm_source=nicenews