Doubts about the Obama Community College PlanSTEVEN N. DURLAUF

QuestionWhy would someone decline to support the Obama plan who shares the general egalitarian commitments of its advocates?

My goal in this presentation is to explain why.

While I believe my position is right, this does not mean that Sara Goldrick-Rab or anyone else is wrong.

By this, I wish to communicate how I think about policy evaluation and why I have come to a negative conclusion.

Issue 1: What does it mean to support a proposal?

I do not equate the support of the proposal with support for “improved opportunities for higher education among the disadvantaged”- this objective does not entail any particular policy.

For me, support of a policy requires

1. Evaluation of merits in isolation (obvious)

2. Consideration of alternative plans with similar proximate goals. When do “details” negate support.

3. Accounting for opportunity costs. The program is nontrivial in size, so these matter.

Free CC versus other programs

Annual cost of free community college: $12 – $30? billion

Housing Programs:$50 billion

Food Stamps:

$83 billion

Child Nutrition Programs:$21 billion

TANF:$21 billion

VERSUS

Source: Office of Management and Budget, Historical Tables: Budget of the US Government, FY 2014, Table 11.3, April 2013

EITC:$55 billion

Feeding Programs:$7 billion

Opportunity costsIt is unreasonable to limit support to policies that are more worthy than any other. CC should not be compared to cancer research.

It is also, I think, unreasonable to assess desirability as if the cost is zero.

How to resolve?

Opportunity costs (continued)I interpret support as requiring an answer to the question: if I had $60+ billion over the next six years to devote to policies to redress socioeconomic disadvantage, would I commit to this policy?

Another opportunity cost involves politics. How does political effort needed to implement the policy impact other policies?

As you will see, my judgment is that opportunity cost exceeds benefits. To be clear, one can disagree about my support requirement and my conclusions relative to the support requirements.

Background issue 2: Structure of policyevaluation

Policy evaluation has two components:

1. Specification of process generating outcomes of interest

2. Specification of evaluative criteria

Outcome determination: A policy induces outcomes

where

assumptions

data

unknowns

PreferencesPreference specification describes values of policymaker, i.e. what matters and relative importance of different dimensions of values. Includes attitudes towards uncertainty.

Algebraically,

where describes the conditional probabilities of unknowns given data and assumptions.

Where SGR and I (possibly) disagree

1. Differences in assumptions. These may include substantive social science commitments on micro and macro levels, use of particular types of models, etc.

2. Differences in probabilities assigned to . These can reflect different empirical philosophies different prior beliefs, etc.

3. Differences in evaluative criteria. These can involve levels of risk aversion (upside versus downside risk), weightings of different outcomes, and ethical desiderata.

Cromwell’s ruleI beseech you, in the bowels of Christ, think it possible that you may be mistaken

-Oliver Cromwell 1650

As formulated by statistician David Lindley, Cromwell’s Rule means that one should avoid dogmatic prior beliefs.

I present this since it is important to see my disagreements with SGR should not be dogmatic.

CC Policy in Context of Life Course (process which produces outcomes of interest)

To think about CC, one can think of individuals on life courses. Here is a heuristic.

Childhood and adolescence lead to 3 outcomes:

no HS degree

HS degree

GED.

What happens next?

Paths associated with these outcomes

Conditional on the labor market, one can either stay or later enroll in 2-year college or 4-year college, assuming high school degree of GED.

Conditional on HS degree and GED, one can either enter the labor market, enroll in 2 year college or enroll in 4 year college.

Conditional on 2-year enrollment, one either completes the 2 year degree or does not complete the 2-year degree, each of which lead to either labor market or 4 year college enrollment.

Conditional on 4-year enrollment, one either completes a 4-year degree or does not complete a 4-year degree, each outcome leads to labor market.

Education in the life course

GED

No HS degree

HS degree

End of High School Enrollment Choice

4 year college

2 year college

Work

College Continuation Labor Market

Bachelor

Associate

Policy evaluationWhat do I care about with respect to individuals and education policy?

1. Richness of opportunities independent of family background (nonconsequentialist)

2. Experience of flourishing life (consequentialist), flourishing: income/wealth, richness of experience

Changes in enrollment, etc. are proximate mechanisms to achieve these.

There are also social objectives, e.g. educated citizenry, that matter.

Micro-level effect of the CC policy

Zero tuition CC reduces the price of the nodes in this trajectory

One can understand the policy as having two effects

Possibilities are enhanced (income effect)

Relative prices are changed (substitution effect)

Comments on this dichotomy1. Income effect indicates something important: lower CC costs only benefits CC attendees. This raises a fairness issue. What about disadvantaged people who do not attend CC?

2. Substitution effect raises the possibility of shifts of 4 year enrollees to 2 year colleges. This could either lower 4-year college completion or diminish quality of 4 years of education.

Thought experimentSuppose my goal is to increase likelihood of graduation from 4 year college among the disadvantaged. How will free CC proposal affect outcomes? Possibilities:

1. High school graduates enroll in 2-year colleges rather than enter the labor force

2. High school graduates who now attend 2-year colleges shift to GED since it is sufficient for community college.

3. High school graduates/GED recipients shift from 4-year to 2-year colleges

The second and third mechanisms are worrisome as they mean the program, in theory, can reduce the number of 4 year graduates!

Strong evidence GED is a poor substitute for high school completion  Highest Postsecondary Credential Attained 

(As of June 2009)

  Certificate (Percent) (RSE Percent)

Associate Degree (Percent) (RSE Percent)

Bachelor’s Degree (Percent)(RSE Percent)

GED 61.0 (6.3) 31.2 (11.8) 7.8 (26.6)

HS Graduates 16.1 (4.7) 18.1 (4.0) 65.7 (1.2)

RSE = relative standard errorSource: US Department of Education, National Center for Education Statistics, 2003 – 04 Beginning Postsecondary Students Longitudinal Study, Second Followup (2009)

CC completion rates and associated 4 year degree completion rates are low

Source: US Department of Education, National Center for Education Statistics, 2003 – 04 Beginning Postsecondary Students Longitudinal Study, Second Followup (2009)

Note that these percentages are likely overstatements of how new enrollees will do. Students who shift to CC are likely to have lower family wealth and weaker preparation than current cohorts

  Degree Attained by 2009 Degree Not attained by 2009  Certificate Associate’s

degreeBachelor’s

degreeStill enrolled Not enrolled

Begin at 2 year Public college 8.5 14.4 11.6 19.6 46.0

Begin at 4 year college 1.7 4.6 58.0 12.2 23.6

What is known? (quasi-experimental evidence)

0

2

4

6

8

10

12

Change in CC enrollment associated with $1000 drop in tuition

Percen

tage Points

* Response of attendance at any college to $1000 extra financial aid.

While estimates all positive, aggregate evidentiary value is unclear

Devil is in the details.

Denning (2014) “College on the Cheap: Costs and Benefits of Community College” uses Texas data based on communities joining CC districts and as a consequence, makes residents eligible for lower tuition.

Districts choose to join. This is the classic problem of self-selection applied to communities rather than to individuals. Fixed effects do not solve this problem.

Communities have to implement property taxes to defray tuition reduction. Not the same policy as free CC in isolation.

Example 2:Angrist et al (2014) “Leveling Up: Early Results from a Randomized Evaluation of Post-

Secondary Aid” uses data on recipients of a private scholarship sponsored by the Buffett

Foundation in Nebraska. Applicants were placed in three categories after ranking:

highest funded, lowest not, and middle randomized.

1,430 applicants in 2012, 2,267 in 2013. Senior classes in Nebraska 22,678 for 2011-

2012 and 22,641 for 2012-2013. Generalizability is a question (beyond

representativeness of Nebraska).

At best this is quasi-experiment for a group of self-selected students who constitute less

than 10% of high school seniors who then fell into intermediate category in a ranking

process.

Example 3Barrow et al (2014) “Paying for Performance: The Education Impacts of a Community College Scholarship Program for Low-Income Adults.”

Sample limited to 18-34 year olds with dependent children; largely poor single mothers.

This population group is a major exception to general finding that GED=high school drop out.

What is policy implication? Perhaps improved day care options make more sense.

Statistical limitationsThere are a controversies about empirical methodology in social science.

1. Functional form assumptions. (Linear probability models are theoretically unsound.)

2. Modeling of dependence across observations.

3. Model uncertainty. This can be first order; different studies report “certain” results; once one acknowledges that there are not principled grounds for assumptions on functional forms, exchangeability of observations, control variables, etc., evidence can turn out to be very weak. (Self promotion: Durlauf, Fu and Navarro (2011) “Capital Punishment and Deterrence: Understanding Disparate Results” on capital punishment.)

Bottom Line: Data do not speak for themselves, even for quasi-experiments!

Possible adverse educational effects

I focus on observational studies.

Such studies employ longitudinal data to evaluate whether CC inhibits 4 year completion and whether, if it does not, lower CC quality for first two years inhibits labor market success.

These studies are generally problematic in my view, when they are not “theoretically” informed, by which I mean derived from a formal theory of choice. This is an empirical philosophy stance. (This is also why I am relatively skeptical of quasi-experiments.)

What is my justification?

Possible adverse effects (continued)

Example 1: an empirical finding that, other things equal, a high school student who starts in a 2 year college is more likely to complete a 4 year than one who does not, may not address the substitution effect I describe. It may reflect the fact that the 2 year enrollees are different from those who do not.

Example 2: an empirical finding that CC + 4 year may appear to have similar payoff to 4 year may be due to differences in types of people on these paths, e.g. special ambition distinguishes the CC+4 year college students, rather than because of equivalence of educational input..

These are classic self-selection issues. History of research on job training is suggestive that self-selection is empirically important.

Important caveat to my concerns: there may be reasons why one can rule out these types of problems, such as ethnographic evidence! Note that SGR has important informational advantage here.

Example 1: Passing the Torch by Attewell and Lavin (2007)

This book argues that open admissions to CUNY led to substantial gains in educational attainment, wages, etc. It is based on comparing a data set of CUNY women to NLSY women

All comparisons are, in my view, too flawed to be informative about policy.

1. CUNY women are self-selected. Controls for observables does not suffice to address the fact the CUNY women all enrolled in CUNY!

2. Comparisons to NLSY women who ever enrolled are not valid, these are different behaviors.

Hot off the press Goodman, Hurwitz, and Smith (2015) “College Access, Initial College Choice and Degree Completion”

Use regression discontinuities in admissions criteria for colleges in Georgia.

“First, access to four-year public colleges diverts students largely from two-year colleges, though some would have attended other four-year colleges or no college at all. Second, enrollment in four-year public colleges instead of those alternatives substantially increases bachelor’s degree completion rates, by about 30 percentage points, and even more so for low-income students.” p. 4

This does not trump SGR evidence in other direction. Indicates evidence is unclear.

Upshot: Micro evidenceEvidence of positive educational effects is not, in my judgment, particularly strong.

Downside risk exists. My preferences are such that this matters, even if average effect on outcomes is positive.

Caveat: I am allowing my preferences to trump those of students themselves, i.e. I would rather student go to 4-year than free 2-year even if he or she would prefer not to.

Macro levelIt is one thing to ask how a single person is affected by a policy. A distinct question is what happens to a population?

These are called general equilibrium effects in economics.

Two issues here:

1. Does increased CC enrollment diminish quality of CC?

2. Does increase in enrollments cause a wage decline as supply of types of worker increases?

In other contexts these types of effects have been studied, but CC literature does not have statistical evidence of which I am aware.

This is at best ambiguity. Worst case scenario preferences (or something similar) may be needed to give this much weight in policy evaluation.

Segregation

I worry greatly about the effects of CC plan (and others) on segregation of higher education institutions by socioeconomic status.

Segregation can create non-intersecting life courses, i.e. persistence in relative socioeconomic status within and across generations.

“memberships theory of inequality” (SD)

Alternative plan formulationsA second reason why I decline to support the Obama plan is that in important respects I think different forms of changes finance for CC can be more effective.

Are these differences from free CC sufficient to regard them as constituting another plan?

My judgment is yes.

Free versus graduated tuitionZero tuition lowers costs for many nonmarginal students, i.e. provides the equivalent of cash transfers to those who would have attended CC under both current and zero tuition policies.

This suggests an inefficiency in terms of “bang per buck.” Under graduated tuition, one could even have negative tuition for most disadvantaged.

Are these objections to specific features sufficient to decline to support plan?

This is a judgment call.

Goldrick-Rab and Kendall (2013) “Redefining College Affordability: Securing America’s Future with a Free Two Year College Option” proposes a plan for free first two years of college at any public institution. This plan avoids the relative price effect I have raised. Preference for it does not, I think, constitute grounds for rejecting free CC and, more important, neither do the authors.

Qualitatively different case? Free tuition for two years, once two years are completed, for any nonprofit 4 year.

Opportunity cost revisitedI believe that there are more effective ways to use $12 billion per year to ameliorate disadvantage.

This is where opportunity cost of revenue matters.

Policies can target each of the stages/choices in the life course model.

Strong evidence on efficacy of resources devoted to early childhood investment. Disparity in evidentiary strength, in my judgment justifies prioritization.

Is zero “special”Arguments that zero tuition is important per se include

1. opacity of financial aid.

2. credibility of financial aid.

Here it is important to distinguish between “facts” and “behaviors”. By this, in principle graduated tuition can be transparent and credible. Separate question involves whether it is reasonable to expect disadvantaged students to form beliefs on this.

Further, behavioral responses may be discontinuous at zero. But this type of argument is not dispositive. There is evidence in behavioral economics that runs the other way. i.e. 0 price might adversely affect effort, expectations of student’s in terms of what they deserve from faculty.

Loans versus grantsIn my view, loans (at reasonable interest rates and payment schedules) are, in general, more appropriate then grants, to the extent that the benefits of CC (or for that matter college) are private.

Case for grants is stronger for social returns.

What about free K-12? I do not see a clean analogy since

1. education for these years is supposed to be (largely) mandatory.

2. agency is a function of age.

Background Issue 3: Placement of policy in context of life course

Socioemoti-onal Skills

Cognitive Skills

Health

Birth Early Childhood Adolescence Adulthood (age 18)

Socioemoti-onal Skills

Cognitive Skills

Health

Socioemoti-onal Skills

Cognitive Skills

Health

Socioemoti-onal Skills

Cognitive Skills

Health

Sources: • Heckman (2006). Skill Formation and the Economics of

Investing in Disadvantaged Children, Science. • Heckman and Krueger (eds.) Inequality in America: What

Role for Human Capital Policy? MIT Press, 2003

Preschool programs: Headstart; Perry

Schooling Interventions: Big Brothers/Sisters; Sponsor-A-Scholar; Quantum Opportunity Program; Learning, Earning, and Parenting; Teenage Parent Demonstration; Summer Training and Employment Program; Tomorrow;

Job Training: Job Training Partnership Act; Job Corps

Opportunity cost of funds: payout per year if the dollar is invested in financial assets instead

Early Childhood Investments

Targeting through universalismOne argument, most famously associated with the sociologist Theda Skocpol, is that universal programs possess a political viability that targeted programs do not.

Famous examples: social security.

I question the need for universality for several reasons.

Universalism in history?I believe that history calls into question the need for universalism.

Much of the writing on universalism stimulated by the election of Reagan and the failure of health care reform under Clinton.

In fact, we have seen sustained growth.

Source: Ron Haskins (2012). “Reflecting on SNAP”, Brookings Institute.

Ethics matterThe political viability of early childhood is stronger than free CC because it is much easier to link to shared belief in mitigation of barriers to success which directly affect children. In this sense, I believe a variant of John Roemer’s responsibility-sensitive egalitarianism is politically viable.

Political viability also requires attention to desert, which is not part of Roemer’s theory, although it is part of his pragmatic recommendations, at least implicitly. Desert may be philosophically controversial, but I believe it should be a consideration.

More generally, I believe that there is a tendency to underestimate the importance of ethical motivations of citizenry in policy outcomes.

Greatest egalitarian achievements: abolition, civil rights, women’s suffrage were driven by emerging recognition of immorality of laws, institutions.

What Determines Support for Redistribution beyond whether one gains or loses?

Alesina, Glaeser, and Sacerdote (2001, p. 238) “Why Doesn’t the United States Have a European-Style Welfare State?”

“more people believe that luck drives success, the larger is the share of social spending.”

Alesina and La Ferrara (2005, p. 929) “Ethnic Diversity and Economic Performance”

“beliefs in equal opportunities have a sizeable impact on individual attitudes towards redistribution even after controlling for one’s own future income prospects.”

Less clear that brute facts of inequality matter increase support for aid to disadvantaged

Kuziemko, Norton, Saez, and Stantcheva (2014) “How Elastic are Preferences for Redistribution? Evidence from Randomized Survey Experiments” do not find that increasing information on levels of inequality or one’s location in income distribution has a strong effect on support for redistribution.

“The…experiment provides several findings we believe to be novel relative to existing literature… First, we find that respondents’ concern about inequality is very elastic to information…By contrast, while there are some effects on policy preferences such as top income tax rates, the minimum wage and food stamps (always in the “expected” direction), they are small and often insignificant despite the large sample size. The only exception is the estate tax…” p. 2-3

Reasons why Free CC may be especially hard to sustain politically

1. Reciprocity: Bowles and Gintis (2006) “Social Preferences, Homo Economicus, and Zoon Politikon” on evolution and social preferences and Moskos and Sibley Butler (1997) “All that We Can Be: Black Leadership and Racial Intergration the Army Way” on supply-side affirmative action are a theoretical and an empirical example.

2. Failure to distinguish the more and less needy decouples program from “desert.”

Opportunity cost reduxI believe that political capital spent on CC is better spent on ECI or other programs which better match public’s preferences.

I am disappointed that Obama elected to trumpet CC when ECI, trumpeted in the past, has largely fallen by the wayside.

This is why I called the proposal “empty”.

Bottom Line1. Evidence on expected levels of education effects is weak.

2. I am “risk averse” and “ambiguity averse” with respect to possible adverse effects.

3. Alternative policies have stronger cost-benefit justifications

4. Opportunity costs mean proposal is sufficiently far from justifying a cost-benefit calculation relative to early childhood investment that prioritization is warranted.

5. Disagree with claims about political viability.

6. I am a “weak” egalitarian. My concern is that certain types of barriers to success based on effort and talent are mitigated. This is in the spirit of Joseph Fishkin’s “bottlenecks” view of opportunities, especially arbitrary. No intrinsice virtue in downward mobility.

7. I put value on desert, on individual agency.

A just and wise legislation would abstain from holding out motives for dissipating rather than saving the earnings of honest exertion. Its impartiality between competitors would consist in endeavoring that they should all start fair …. Many, indeed, fail with greater efforts than those with which others succeed, not from difference of merits, but difference of opportunities; but if all were done which it would be in the power of a good government to do, by instruction and by legislation, to diminish this inequality of opportunities, the differences of fortune arising from people's own earnings could not justly give umbrage. 

John Stuart Mill, Principles of Political Economy 1858

It is…for all time to come that we should perpetuate for our children's children this great and free government, which we have enjoyed all our lives. I beg you to remember this, not merely for my sake, but for yours. I happen temporarily to occupy this big White House. I am a living witness that any one of your children may look to come here as my father's child has. It is in order that each of you may have through this free government which we have enjoyed, an open field and a fair chance for your industry, enterprise and intelligence; that you may all have equal privileges in the race of life, with all its desirable human aspirations. It is for this the struggle should be maintained, that we may not lose our birthright--not only for one, but for two or three years.

Abraham Lincoln Speech to the One Hundred Sixty-sixth Ohio Regiment

Washington, D.C.August 22, 1864