How to expand admissions at America’s top colleges
Also: Will America’s uberbillionaires lead it to a sci-fi dystopia?
“Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded — here and there, now and then — are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people.” - Robert A. Heinlein
In This Issue
The Micro Reads: Falling birth rates, carbon taxes, geothermal energy, and more . . .
The Short Read: How to expand admissions at America’s top colleges
The Long Read: Will America’s uberbillionaires lead it to a sci-fi dystopia?
The Micro Reads
👶 “The Puzzle of Falling US Birth Rates Since the Great Recession” - Melissa Schettini Kearney, Phillip B. Levine, and Luke W. Pardue, NBER | Spoiler: Changing expectations and preferences about parenting intensity vs. outside-the-home activities may be playing a role. From the paper: “Such changes are particularly relevant in an era where parents, including mothers, work longer hours outside the home, clashing with career aspirations or a desire for more leisure time.”
🏗 “Efficiency eludes the construction industry” - The Economist | The killer stat here: The productivity of American builders has plunged by half since the late 1960s. From the piece: “Examples of how the industry might move forward are not hard to find. More builders could use computer-aided design, as is standard among architects. Other methods are in earlier stages, but show promise, such as remote-controlled cranes and self-driving bulldozers (Komatsu, a Japanese equipment-maker, is developing the latter).”
💧 “A Tiny Piece of Plastic Is Helping Farmers Use Far Less Water” - Bloomberg | “If Shani’s vision bears out, N-Drip stands a chance at modernizing millions more farms, and transforming freshwater consumption globally.”
🛢 “Democrats Consider Adding Carbon Tax to Budget Bill” - New York Times | Putting a price on carbon might over the long run be more important for the future of clean energy than anything currently in the Biden infrastructure bill or the bigger and broader Democratic priority bill.
🌋 “Green Groups Thwarting Geothermal Solutions to Energy Problems” - The Free Beacon | “Rep. Russ Fulcher (R., Idaho) and Sen. Jim Risch (R., Idaho) introduced a bill that . . . would give geothermal drilling projects the same expedited reviews that oil and gas ventures already receive for public land. By creating a ‘categorical exclusion’ from the National Environmental Policy Act (NEPA), the bill would shave several years off the development time of geothermal wells and make the field more enticing to investors. Green activist groups have quietly lobbied against this plan. These groups oppose changes to NEPA, which requires a lengthy review process for proposed projects that would use public land. Activist groups worry that any exemptions to NEPA, even for clean energy sources, could undermine the rest of the law.”
🌌 “The Math of ‘Foundation’ Doesn’t Add Up” - New York Times | The reviews of Apple TV+’s reimagining of the Isaac Asimov space saga have been rough. Those who said it was unfilmable seem closer to being right than wrong. But if nothing else, we got a great depiction of a space elevator in action:
The Short Read
🎓 How to expand admissions at America’s top colleges
If you think America’s top private universities are providing something of real educational value — something beyond networking opportunities and signaling — then we should want more of our most talented students to have the opportunity to attend schools such as Harvard, Princeton, and Northwestern. But as demand for these schools has risen, supply of student slots hasn’t — unlike at many public universities.
In the new NBER working paper “Why Don’t Elite Colleges Expand Supply?,” economists Peter Q. Blair of Harvard and Kent Smetters of Wharton-UPenn point out that the incoming class of Yale College freshmen in 2015 was 1,360, just 14 more than in 1979. That, even though the number of applications increased by more than 300 percent, from 9,331 students in 1979 to 30,932 in 2015. Blair and Smetters: “Across elite colleges, the story is the same — increasing demand for spaces but with only a small increase in supply. In contrast, less elite colleges have largely expanded supply in response to increasing demand.” According to the paper, Harvard, Princeton, Stanford, and Yale have increased their enrollment by just 7 percent since 1990 versus 61 percent for colleges in the bottom 25 percent of SAT selectivity.
The reason for increased selectivity might not surprise you. After ruling out other obvious explanations such as physical constraints, maintaining student and professor quality, and preserving the “look and feel” of a college, the researchers arrived at “prestige” — defined as how falling admit rates compare to those of their peers. So how do you fix inefficient “prestige competition?” Blair and Smetters:
One sharp policy prediction of our analysis is that allowing elite colleges to coordinate (“collude”) their admissions could be Pareto improving. For example, if legalized, the top 200 U.S. colleges could agree to minimum enrollments by college that increase over time, much like maximum carbon caps by country found in the multinational Paris climate accord that decrease over time for some nations. In some countries, (quasi-)government institutions already determine total enrollment at elite colleges that receive public support, internalizing the prestige externality. A similar practice happens with many U.S. public universities at the state level, although state-level action fails to internalize the prestige externality across state boundaries.
As mentioned above, such collusion is currently illegal on antitrust grounds under the Sherman Act. But if Major League Baseball gets a pass, maybe another great National Pastime — competing for the best colleges — should, too.
The Long Read
💰 Will America’s uberbillionaires lead it to sci-fi dystopia?
Maybe America needs a better class of billionaires. You might naturally draw that conclusion after reading The Contrarian: Peter Thiel and Silicon Valley’s Pursuit of Power. Certainly no one will accuse Bloomberg Businessweek reporter Max Chafkin of committing billionaire hagiography. Perhaps the most quoted bit concerns what Thiel and the far wealthier Elon Musk think of each other: “A person who has talked to each man about the other put it more succinctly: ‘Musk thinks Peter is a sociopath, and Peter thinks Musk is a fraud and a braggart.’”
Keep in mind that those guys are legitimately successful, having invested and started real companies. Thiel is a co-founder of PayPal and Palantir Technologies, while Musk is the founder of SpaceX and Tesla. Imagine what Musk and Thiel think about former billionaire Elizabeth Holmes, currently on trial for fraud in the collapse of Theranos, her blood testing company. In any event, the recent headlines about the super-rich aren’t so good.
But even what seem like positive headlines are often interpreted negatively by some critics of the billionaire class. Maybe they have a point about how Amazon treats some of its workers, but the anti-Bezos crowd seems equally angry about Bezos’ Blue Origin space efforts — and Musk’s for that matter. They see the “billionaire space race” as the super-rich trying to escape Earth’s problems rather than as the first steps preceding a giant leap into a full-fledged space economy.
That accusation, by the way, is basically the plot of the 2013 film Elysium which portrays 22nd century Earth (summary by Wikipedia) as “overpopulated and heavily polluted, with most of the citizens living in poverty while the rich and powerful live on Elysium, space station in Earth's orbit equipped with Med-Bays, advanced medical devices that cure all injuries and diseases.”
I sometimes wonder if the critics of America’s super-entrepreneurs have seen a bit too much dystopian sci-fi that portrays the future as an inegalitarian, plutocratic nightmare run by evil MegaCapitalists. I think of Peter Weyland, founder of the ubiquitous and evil conglomerate Weyland-Yutani Corporation in the Alien franchise (portrayed in Alien: Prometheus by Guy Pearce). Or the cold, inhuman Jules-Pierre Mao, owner of Mao-Kwikowski Mercantile in The Expanse. A 2019 piece in the socialist magazine Jacobin compared Bezos to industrialist Niander Wallace from Blade Runner: 2049. Wallace wants to end the ban on androids, or “replicants,” so they can be workers on off-world colonies. From that essay:
Wallace sees his Replicants as “angels in the service of civilization,” but he can’t produce enough to colonize the cosmos as quickly as he wants to, and he’s failed to figure out how to make Replicants breed. He airs his frustration in a monologue that sounds eerily as though he’s hit a roadblock en route to a future envisioned by Bezos: “Every leap of civilization was built off the back of a disposable workforce. We lost our stomach for slaves — unless . . . engineered. And I can only make so many. We need more Replicants than can ever be assembled. Millions so we can be trillions. More. Worlds beyond worlds, diamond shores. We could storm Eden and retake her.” . . . Wallace is frustrated that humans can no longer be treated as disposable, but Bezos has no such limitation. He has a net worth in excess of $100 billion because he’s been able to squeeze Amazon workers to the bone, and we lack the collective impetus to boycott the digital platform to force the company to improve its working conditions. Convenience is our highest value.
(By the way, Wallace was portrayed by Jared Leto who said that Musk was one inspiration for his take on the character.)
An assumption: Market capitalism is highly likely to continue as the dominant socioeconomic system for the West. And that means more billionaires and, hopefully, trillionaires. As such, the great fortunes of the future are likely to be made from the commercialization of powerful technologies such as AI, biology, energy, and space. Should that worry us as much as Hollywood suggests it should?
Here’s how I see it: If getting crazy rich in America were mostly a function of inheritance, capitalism’s critics would assuredly attack the uberwealthy as layabouts who contribute nothing to society. But that’s not how you get crazy rich in America — unlike, say, France. As the below chart from SuperEntrepreneurs by Tino Sanandaji and Nima Sanandaji shows, no big economy generates more entrepreneurial wealth than America’s.
The annual Forbes 400 list provides more recent evidence of this reality. For the past seven years, the magazine has used an extra metric: a “self made” score to show how the richest 400 Americans got that way. As displayed in the below chart, the scoring systems ranges from 1 to 10 “with 1 through 5 indicating someone who inherited some or all of his or her fortune; while 6 through 10 are for those who built their company or established a fortune on his or her own.” (Oprah Winfrey is a 10, while Christy Walton, the widow of John Walton, son Walmart founder Sam Walton, gets a 1.)
Not only are America’s superbillionaires far more entrepreneurial than not, but it’s becoming more that way. From Forbes: “When we first created the self-made score, we went back and assigned scores for the members of the 1984 list. Less than half of them were self-made. By 2014, 69% of the list was deemed self-made. Fast forward to the present list, and that figure has inched up to 69.5%. All but one of the 18 newcomers this year are self-made.”
A natural follow-up criticism is that those entrepreneurs are getting rich from creating things that are unhelpful, such as social media. I disagree. For starters, most of us attach a high value to social media. We’re glad it exists. Second, when fortunes are created by innovating in the real world, the criticism continues. Bezos doesn’t get credit for creating a retailing and logistics giant, not Elon Musk for returning America to manned space flight.
Some folks just don’t like the idea that some other folks are fabulously wealthy, even if that wealth comes from creating goods and services valued by others. This view misses how the benefits of innovation generally spread beyond the innovator. In the paper “Schumpeterian Profits in the American Economy: Theory and Measurement,” Nobel laureate economist William Nordhaus finds that nearly all of the social returns from technological advances over the second half of the 20th century — some 98 percent — were passed on to consumers rather than captured by producers.
Indeed, if you find a country has a lot of rich people, especially rich entrepreneurs, you’ve probably found a pretty encouraging data point. Again, Tino Sanandaji and Nima Sanandaji: “Countries with higher income, higher trust, lower taxes, more venture capital investment, and lower regulatory burdens have higher billionaire entrepreneurship rates.” Having lots of billionaire entrepreneurs seems to say something is going right in a country — not that it’s on a path to dystopia. Countries with lots of billionaires per capita also tend to have high levels of well-being and competitiveness:
“Let me tell you about the very rich,” writes F. Scott Fitzgerald. “They are different from you and me.” He was right, especially the innovative and entrepreneurial ones. From the Financial Times:
In her book Quirky, [Melissa] Schilling [a professor at New York University Stern School of Business] explores the traits and foibles of eight breakthrough innovators, including Thomas Edison, Marie Curie, Nikola Tesla and Elon Musk. She found almost all of them to be instinctively solitary, manic eccentrics or misfits, driven by a sense of purpose and hard work. “Breakthrough innovation comes from being unorthodox. It has to break the existing paradigm,” she tells me. “It is a lot easier to find an unorthodox person than an unorthodox organisation. That is why innovation is so much more likely to be associated with an outsider prepared to fight for their ideas.”
So, yeah, that famous Apple ad “Here’s to the Crazy Ones” got it right. (I prefer the one narrated by Steve Jobs, by the way.) Now, none of this means America’s rich can’t pay more in taxes. But I’m glad there’s a vast reservoir of wealth not controlled by government that can be deployed in humanity’s service by hard-headed, result-oriented people, such as Bezos and Blue Origin or Bill Gates’ investment into cutting-edge energy ventures. I don’t expect them to lead us to dystopia or utopia, just help solve some big problems.