We study grading outcomes associated with professors in an elite university in the United States who were identified using voter registration records from the county where the university is located as either Republicans or Democrats. The evidence suggests that student grades are linked to the political orientation of professors: relative to their Democratic colleagues, Republican professors are associated with a less egalitarian distribution of grades and with lower grades awarded to Black students relative to Whites.
Regarding the last result, the authors note:
An obvious question that arises regarding the second finding is whether and to what extent Democratic professors discriminate in favor of Black students or Republican professors discriminate against them. At this stage we only note that in the absence of an appropriate benchmark for comparison, this question cannot be credibly answered.
There seems to be a conventional wisdom forming that long-term interest rates in the United States are as about as low as they can possibly be. For example, this is from an article in today’s Wall Street Journal:
“Rates are so low it’s hard to see them going much lower, but it’s easy to imagine them going higher,” said Kevin March, chief financial officer of Texas Instruments.
It is certainly true that most of the time when the yield spread is high the way to bet is that long-term bond rates are coming down and long-term bond prices are going up. But somehow I can’t see U.S. nominal interest rates falling much lower than they are now.
I don’t buy it. Why? Note this fact: The U.S. ten-year Treasury bond pays 3.18 percent, whereas a ten-year Japanese government bond pays 1.16 percent.
No, I am not predicting the United States is about to become just like Japan. But it is not inconceivable. That is why buying long-term bonds now is not a crazy investment strategy, and selling them (as many companies are now doing) is not at all a sure thing.
Addendum: Another noteworthy fact about bonds is that they have recently been negative beta assets. (You can verify this fact with this link.) Their hedging properties also make buying bonds a reasonable investment strategy.
I have long been what might be called a moderate supply sider (as well as a new Keynesian on various issues of macro theory). I believe that tax rates have important influences on behavior and, as a result, tax hikes do not generate as much revenue as static estimates suggest. However, I have long been skeptical that the United States is on the wrong side of the Laffer curve, except perhaps in a few special cases.
So imagine my surprise when I read this headline over at Bloomberg:
The brief article alleges to summarize what I said in an interview. My first reaction was, I didn’t say that. My second reaction was, did I misspeak? Fortunately, the audio of the interview is right there. So I listened to myself (always a painful experience), and I think I said what I really believe–that tax hikes do not generate as much revenue as you might think. The Bloomberg headline is an unfortunate misrepresentation.
When people look at data on economic mobility, they see different things. For example, it is well known that if your father had high income, you are more likely to have high income than if you father had low income. According to this study (which I found thanks to a pointer by Paul Krugman), the elasticity of son’s income with respect to father’s income is about 0.5 in the United States. How do you interpret this fact?
Some people might be tempted to see it as evidence against equality of opportunity. After all, it shows that it matters where you started. Rich parents can buy better schools, expensive tutors, fancy summer camps, and all sort of other great stuff for their kids. How fair is that?
But what strikes me about that 0.5 number is not how large it is but how small it is. As I understand it, that 0.5 estimate is roughly the correlation between father and son income. That means that the fraction of variance of son’s income explained by father’s income–that is, R-squared–is only 0.25. This last number is sometimes called the “heritability” of a characteristic.
By contrast, the heritability of IQ is usually estimated to be much larger than that. At least some of the heritability of income must come not from inequality of opportunity but from the genetic transmission of talent. Other aspects of talent, such as drive, energy, and spunk, might well have a genetic component as well, but they are harder to measure and thus we know less about them. But the one that has been studied extensively, IQ, seems more heritable than income.
The bottom line: In light of the heritability of talent, it would be shocking if we did not find some significant heritability of income. And that would be true even if equality of opportunity were perfect.
One further thought: The study cited above points out that economic mobility is greater in some European countries. That fact does not surprise me, as those are nations with less inequality. Moving up and down a short ladder is a lot easier than moving up and down a tall one.
— For a related previous post and links to a couple relevant studies, click here. See also this survey of the literature.
