It’s just a matter of time until we see the same meltdown in traditional college education. Like the real estate industry, prices will rise until the market revolts. Then it will be too late. Students will stop taking out the loans traditional Universities expect them to. And when they do tuition will come down. And when prices come down Universities will have to cut costs beyond what they are able to. They will have so many legacy costs, from tenured professors to construction projects to research they will be saddled with legacy costs and debt in much the same way the newspaper industry was. Which will all lead to a de-levering and a de-stabilization of the University system as we know it.

And it can’t happen fast enough.

IMHO, the biggest problem the economy has is the enormous student debt new college grads and those leaving college find themselves with. In the past leaving college meant getting a job and getting a used car and/or an apartment with some friends. Yes there was student debt, but it wasn’t any where near your car payment. You could still afford the car and the apartment. Now its the exact opposite. Today, the minute you graduate college you face the challenge of debt against a college education whose value is immediately “underwater”

Cuban argues that college debt is to blame for many of the economy’s woes.  ”The crush of college debt has taken an entire generation of graduates, current and future out of the economy,” he writes. “Which is exactly why the economy hasn’t grown and won’t grow beyond microscopic growth rates we have seen so far.”  Interestingly, student debt doesn’t seem to have soured university grads on the college experience; recent survey data indicates that only 3 percent of college grads regret having gone to college.

Related: we are working on a Freakonomics Radio podcast about “the value of college,” which is so interesting (to us at least) that it might become a two-parter, set for release sometime this summer.

(Photo: Joe Shlabotnik)

A few months ago we wrote about whether shoemaker-to-the-stars Christian Louboutin ought to have a monopoly over red shoe soles. Last week, in Kentucky, a similar issue arose concerning red wax. The red in question was on the neck of bottles of booze—specifically, Maker’s Mark bourbon and Jose Cuervo’s Riserva de la Familia tequila, which both feature a bottle cap seal made of red, dripping wax (Cuervo has since shifted to a straight-edged red wax seal).  Maker’s, which used the dripping wax seal first, sued Cuervo, claiming trademark infringement.

The dispute is interesting because we like to drink bourbon and tequila it highlights two things about brands in the modern economy.

First, trademarks are not limited to words, like Nike or Apple, or symbols, like the swoosh or the apple-with-a-bite-missing. Increasingly, they are baked right into the product (think Louboutin’s red soles) or fall halfway between product and packaging (the dripping red wax that adorns all the tops of bottles of Maker’s Mark). In a global economy with diverse languages, symbolic branding like this can be especially valuable.

Second, the dispute highlights the complex economic relationship between aesthetics and function. In the case of the Louboutin shoes, the court held that Louboutin did not have a lock on red soles because red soles were actually “aesthetically functional”—that is, color is one of the things that gives a piece of apparel a competitive advantage in the marketplace.

The same may be true for liquor, but we think to a much lesser extent. While the look of a bottle of liquor is significant—witness the great diversity of bottle shapes and logos, including vodka in a bottle the shape of a human skull–ultimately taste trumps (we hope).

So as the court in the Makers Mark/Cuervo dispute declared, competitors are not really put at a disadvantage if they have to use black or green wax to seal their bottle caps. Port wine shippers have been using black wax seals for decades, maybe centuries. For high-end shoes, on the other hand, looks are much more central, and the consumer’s desire for a certain color in a shoe much more likely to drive consumption decisions than the color of wax on a liquor bottle. Hence in the fashion context, the potential harm from granting one competitor control over a color is much larger.

For our grandparents’ generation, marriage was about separate roles, separate spheres and specialization. Gary Becker, an economist at the University of Chicago, won the Nobel Prize partly for describing the family as an economic institution — a bit like a small firm that employs people with different skills to produce both income and a well-run household.

In Becker’s view, the joining of husband and wife yields a more productive firm, because it allows one spouse to specialize in earning income from working in the market, while the other specializes in the domestic sphere. The division of labor allows for greater productivity, just as it does in the workplace. The different skills required for these separate roles provide an economic rationale for the advice your grandmother may have offered, that “opposites attract.”

It’s that generation who prized traditional separate-spheres marriages who find the idea of same-sex marriage to be foreign.  And this type of marriage was not a particularly appealing institution for same-sex couples, whose relationships typically eschew this traditional division of labor. 

But heterosexual couples in more recent generations are also less likely to aspire to separate-sphere marriages. Economists describe a “second Industrial Revolution” in which washing machines, dishwashers and microwave ovens have reduced the value to the family “firm” of employing a domestic specialist. Cheap clothes can be imported from China, rather than sewn at home. Healthy meals can be purchased from the freezer at Trader Joe’s.

What’s more, legal and social changes have broken down many of the barriers keeping women out of the labor market. Explicit discrimination has declined. Women have gained more control over their fertility.

All these developments have increased the opportunity cost of having a spouse stay home, because that spouse now has greater value in the marketplace. As a result, our grandparents’ marriages, in which husband and wife have separate roles and spheres, are no longer so popular. Two-earner couples have become the norm, and families spend less time on housework.

The point is, technological, economic, social and legal change have undermined the benefits of the traditional marriages of the 1950s.  When the benefits of marriage decline, you might expect marriage itself to disappear.  Instead, it has evolved to offer different benefits:

Today, we search for a soul mate rather than a good homemaker or provider. We are more likely to regard marriage as a forum for shared experiences and passions.  Viewed through an economic frame, modern partnerships are based upon “consumption complementarities” — the joy of sharing things and experiences — rather than the production-based gains that motivated traditional marriage. Consistent with this, co- parenting has replaced the separate roles of nurturer and disciplinarian.

We have called this new model of sharing lives “hedonic marriage.” These are marriages of equality in which the rule “opposites attract” no longer applies in the same way, because couples with more similar interests and values can derive greater benefits. So likes are now more likely to marry each other.

All of this means that changes in heterosexual marriage have yielded an institution that is now more attractive to same-sex couples.  In turn, we believe that this explains why the gay and lesbian community have become so active in advocating for access to marriage.

Moreover, these same economic forces may also explain why it is that younger generations are so much more likely to support same-sex marriage:

For heterosexuals who have embraced the modern notion of marriage, the idea of same-sex marriage seems natural. These couples aren’t any different from them. They love and support each other, raise kids together and are committed to each other. They share values, desires and interests. Not allowing them to marry is as arbitrary as not allowing couples of different races, ethnicities or religions to marry.

Looking ahead, we think these same factors will continue to re-shape marriage:

It is no coincidence that many of the opponents of same-sex marriage are also opponents of the ongoing shift to marriages of equality. Theirs is a futile battle. The reach of markets will keep expanding, allowing individuals and families to reap greater returns by selling their specialized skills and services outside the home. Technological change will further undermine the benefits of specialization within the family. Improvements in women’s education will continue to raise the opportunity cost of staying at home.

My prediction: The reach of same-sex marriage will continue to grow, and in a decade or so, will be largely uncontroversial.

You can read our full column here.  Ezra Klein has some useful commentary here; Marina Adshade adds her thoughts here, and the wonderful Stephanie Coontz has a related column—with more of an historian’s take—here.

Below are his responses about confirmation bias in religion, the “score” of our morals, the power of branding, how his research has made him a centrist, and how the search for truth is hampered by our own biases. Big thanks to him and all our readers for another great Q&A.  

Q. Why is it that both “sides” of the religion/atheism debate have what appears to be a systemic insistence on talking past each other, each one constructing a straw man of the other, beating that into submission, and then smugly declaring victory?  Clark W.

A. Public debates often look like professional wrestling matches, except that in wrestling the combatants are just pretending to hate each other.  In the religion-atheism debate, they really see each other as evil, and so they feel free to use more low-blows and illegal holds than do wrestlers.

The first principle of my book is “intuitions come first, strategic reasoning second.” This means that we all have quick gut feelings which point our thinking in one direction. We then send our reasoning out to search for confirming evidence only (this is called “the confirmation bias”). We almost always find SOME evidence to support our initial inclination. The other side is doing the same thing.

Now, let’s add in the third principle of the book: “morality binds and blinds.” People who share sacred objects and then circle around them can then trust each other and function more effectively, particularly in intergroup competition. I believe this is in fact why we evolved to be religious. But the sacred thing at the center does not have to be a god. It can be a flag, a book, an ideal, or a social institution such as marriage or science. The New Atheists are mostly men of science, or men who claim to speak for science. But when you make science sacred and then claim to speak for it, something very unfortunate happens: you don’t just think your opponents are wrong, you think they are stupid, and you adopt an arrogant and dismissive tone. You’ve got science on your side, after all. (I argue in my book that the New Atheists get the science mostly wrong.) The religion/atheism debate is therefore particularly prone to straw men and smug declarations.

Q. You say you used to be a liberal but are now a centrist. Why the change? Vincent. 

A. I have the personality traits, occupation, social network and lifestyle of a liberal. It was over-determined that I would be a liberal. But in 2005 I changed my research direction. I had previously studied how morality varied across nations.  After a second Democratic challenger lost to George W. Bush, in part because they failed to make compelling moral arguments, I began to study left and right in the USA as though they were different cultures. Which they are.  I tried to apply a cultural psychology framework to the research, meaning that I tried to understand each side from inside. I tried to get a feel for what each side held sacred, and for what values and virtues they were trying to implement in their political and economic programs.  At first I disliked watching Fox News and reading National Review. But within a year, I began to see that the conservative vision of morality, history, and economics was just as coherent as the alternative liberal vision.

Once I lost my feelings of repulsion and anger toward conservatism I discovered a whole world of ideas I had never encountered. Some of them struck me as quite good, e.g., the value of institutions and traditions for creating moral order; the principle of federalism (which failed spectacularly on civil rights, but is valuable in most other cases); and the glorification of earned success while being critical of efforts to achieve equality of outcomes without attention to merit. I now hold the view that left and right are like Yin and Yang. As John Stuart Mill put it in 1859:  “A party of order or stability, and a party of progress or reform, are both necessary elements of a healthy state of political life.”

Q. How well can you predict a person’s degree of liberalism/conservatism based on his/her moral value scores? Andy

A. A person’s scores on our surveys at YourMorals.org can help us predict where they are on the left-right dimension fairly well. The Loyalty, Authority, and Sanctity foundations in particular show high correlations (between .4 and .6) with left-right self-placement. But the exciting thing for us is that having the six foundation scores lets us see way beyond the one-dimensional left-right scale.

In a recent paper led by Sena Koleva, we analyzed  people’s attitudes on culture war issues and found that knowing a person’s moral foundation scores often tells you more about their political attitudes than does knowing how liberal or conservative they are.  More importantly, moral foundation scores point you to some of the underlying motives at work. For example: you won’t be surprised to learn that people who oppose flag burning as a form of political expression are more conservative, and they score higher on the Loyalty foundation (which picks up their patriotism). But the big surprise for us was that the Sanctity foundation was just as big a predictor as their ideological self-placement. Some people see sanctity in physical objects, such as flags, which must be protected from desecration.

The Sanctity foundation was the most powerful predictor of attitudes on many culture-war issues, particularly abortion, biomedical issues (such as stem cell research) and sexual issues. And it predicted attitudes well even after partialling out ideological self-placement. The moral foundations give you much better resolution for political analysis and persuasion than does simply knowing if a person is liberal or conservative. (You can get the paper by going to JonathanHaidt.com and requesting publication #87) 

Q. Do you think that businesses are consciously harnessing our “groupish” nature to develop brand loyalty? Is it possible to do so? Is it ethical?  Erin

A. Yes, many businesses do this, and those who could do it and don’t should be sued by their shareholders for corporate malpractice.  Many businesses long to be like Harley-Davidson, one of the few brands that is literally tattooed upon their most loyal customers’ skin. I don’t think promoting product-based groupishness is unethical. If a cigarette maker tries various tricks to get kids to start smoking, it’s evil. They are trying to hook kids into a habit that the kids themselves might well later regret. But brand loyalties are not like this.

The last third of my book is about how deeply tribal we are. It’s only because of our tribal minds that we play sports, and devote time, money, and portions of our identities to becoming sports fans.  I personally think sports fandom is a waste of time, but hey, if people enjoy it, and don’t commonly regret having been a sports fan, then I think it’s fine. And it’s fine for professional sports teams, which are cold, calculating businesses, to market to their fans and encourage them to identify with the team. And by the same reasoning, it’s fine for Apple, or Volkswagen, or Absolut, to try to entice their customers into making those products a part of their identity.

Q. You describe the “statistically impossible” imbalance in academia in favor of liberalism and against conservatives, which would be recognized as an appalling lack of diversity if there were a similar skew in race or gender. What examples can you give where the search for truth has been harmed by this bias?  Vincent

A. My field – social psychology – is similar to most of the other social sciences, and to the humanities, in having hardly any conservatives within its ranks. Since I believe that left and right are like yin and yang, and that “morality binds and blinds,” this is a bad state of affairs. Science as an institution works well NOT because each scientist is an open-minded genius, immune to the confirmation bias. We’re normal people, and we each try to confirm our own theories. But the institution works well because there are so many others out there who have no vested interest in confirming our theories, and who are looking hard for disconfirming evidence. But when we study any issue related to the sacred values of the left – particularly issues related to race, prejudice, gender, or the psychology of conservatives – this dynamic of disconfirmation breaks down. Most people want to believe certain things (e.g., that stereotypes are caused by cognitive errors, rather than by observable differences among groups). There are no conservatives out there who can say that (in rare cases) the emperor has no clothes. Politically correct errors are tolerated; offensive truths are shunned.

I think the search for truth in political psychology has been harmed by this bias. Conservatives are generally presented in the worst possible light that is consistent with the data, and nobody objects during the peer review process.  For example, a recent study by Gordon Hodson and Michael Busseri got a lot of press for showing that kids with low IQ grow up to become more intolerant toward outgroups. That’s not news, but the authors showed that conservative beliefs mediated the relationship. In other words, conservatism makes dumb people into racists. But the measures of “conservatism” used were mostly questions about authority and submission to authority. The authors had measured authoritarianism and passed it off as a measure of conservatism. It has long been known that authoritarians are intolerant and less intelligent. But most conservatives are not authoritarians, so this was misleading. It would be like measuring support for anarchism and then writing an article claiming to show that angry children grow up to endorse vandalism and violence precisely because they embrace liberal ideals. It would be an error to conclude that liberal beliefs were the culprit, because liberal beliefs had not been measured. 

(Photo: Chris Martino)

Time reports on a new study on why Asians have a higher rate of nearsightedness:

It has long been thought that nearsightedness is mostly a hereditary problem, but researchers led by Ian Morgan of Australian National University say the data suggest that environment has a lot more to do with it.

Reporting in the journal Lancet, the authors note that up to 90% of young adults in major East Asian countries, including China, Taiwan, Japan, Singapore and South Korea, are nearsighted. The overall rate of myopia in the U.K., by contrast, is about 20% to 30%.

“We postulate that bright outdoor light would stimulate the release of the retinal transmitter dopamine, which is known to be able to block the axial growth of the eye, which is the structural basis of myopia — the eye simply grows too big.” Morgan notes that both Chinese and Caucasian children living in Australia have lower rates of nearsightedness. 

(Photo: Michael Mandiberg)

In The Atlantic, Megan McArdle traces the economics of ransom negotiation:

Economists would describe hostage negotiation as a bilateral monopoly price negotiation that is structurally just a special case of chicken. That is, unlike a barrel of oil or a freight car full of soybeans which can trade on an extremely liquid market with innumerable buyers and sellers, a hostage has exactly one seller (the kidnappers) and exactly one buyer (the employer and/or family of the hostage). When there is only one buyer, the opportunity cost for ransoming the hostage is zero. Likewise, the employer and/or family has no realistic alternative means to recover the hostage. In order for everybody to walk away happy, we need a cooperate-cooperate outcome: the kidnapper has to give up the hostage and the employer/family has to give up a ransom.

Here’s one big tip from the article: if you’re ever kidnapped by Somali pirates, don’t tell them how much you’re worth.  It narrows the bid-ask spread.

(Photo: Keith Allison)

Here is how the Associated Press led the story describing the Miami Heat’s elimination of the New York Knicks in the 2012 NBA Playoffs:

The final horn sounded, and LeBron James wrapped his arms around Carmelo Anthony in a warm embrace.

Their head-to-head scoring matchup in this series was even, 139 points apiece.

Just about everything else tipped Miami’s way — so the Heat are moving on and the New York Knicks are going home. 

Such a lead gives the impression that Carmelo Anthony and LeBron James played about the same in this series.  If we delve a bit deeper, though, we see that the scoring totals are quite deceptive.  Here is each player’s level of shooting efficiency in the series: 

Carmelo Anthony: 0.435 Effective Field Goal Percentage, 0.489 True Shooting Percentage

LeBron James: 0.517 Effective Field Goal Percentage, 0.604 True Shooting Percentage

Because Melo was a far less efficient scorer, he had to attempt 34 more shots from the field than LeBron in the series.  And because shot attempts are a finite resource, this means that other players on the Knicks had to attempt fewer shots (with the exception of J.R. Smith, everyone else on the Knicks who attempted at least 10 shots from the field was more efficient than Melo in this series). 

In contrast, LeBron was able to achieve his scoring total with fewer shots, giving him more opportunities to set up his teammates.  One can see this clearly when we look at assists.  LeBron finished the series with 28 assists while Melo only had 11. 

Melo did finish with more rebounds and fewer turnovers.  But when we consider the vast differences in shooting efficiency and assists we see that King James – as has been the case throughout each player’s respective careers – had a far bigger impact on his team’s fortunes. In fact, Andres Alvarez – at the Wages of Wins Journal – notes that LeBron led the Heat in Wins Produced during this series (he did the same for the regular season).  In contrast, Melo’s production of wins – because he was a very inefficient scorer – was in the negative range.

Such a story highlights an important lesson: scoring totals in the NBA can be quite deceptive.  A player can boost his scoring totals by simply taking more and more shots. But if this shooting is inefficient, teams actually suffer from this choice.  Of course, as the AP story illustrates, the inefficient scorer’s reputation often does not decline from this choice.  Hence we see this story repeat itself over and over again in the NBA. 

(Photo: Juan Pablo de la Cruz G.)

The BBC reports that Portugal will be cutting 4 of its 14 public holidays as an “austerity measure”:

Two religious festivals and two other public holidays will be suspended for five years from 2013.

The decision over which Catholic festivals to cut was negotiated with the Vatican.

It is hoped the suspension of the public holidays will improve competitiveness and boost economic activity.

The four days affected are All Saints Day on 1 November; Corpus Christi, which falls 60 days after Easter; 5 October, which commemorates the formation of the Portuguese Republic in 1910; and 1 December, which marks Portuguese independence from Spanish rule in 1640.

A recent report on British public holidays (they have nine) finds that the holidays cost the British economy more than £18 billion ($29 billion) — about £2.3 billion ($3.7 billion) on average. The researchers noted that while shops and restaurants benefit, all other sectors lose out, resulting in a net loss. It makes you wonder about Austria, the country with the most holidays in the world. This excellent graphic from The Economist indicates that Greece is second on the list.

(Photo: Babak Fakhamzadeh)

An FDA panel just approved the first drug recommended for preventing infection by, rather than limiting the effects of the HIV virus.  Part of the discussion by panel members was classic economics, expressing concerns that the drug’s availability would reduce people’s willingness to take as much care, in particular that it might reduce condom use.  

The same issue has been mentioned and analyzed in various economic studies, including old ones about the effects of mandating car seat-belt use on automobile accidents, and about the impact of sex education on teenage sexual activity and pregnancy.  Any insurance or safety measure generates a moral hazard; the important issue is the net effect on the outcome of interest — in this case, HIV infection.

Hi, I just listened to your podcast with NPR on the impact of shipping flowers. May I suggest, if you should ever air it again, you consider the song “Plastic Roses“ by the Chenille Sisters. A sample line: “He sent me plastic roses, the kind that never fade … ” A touching love song about lasting memories.

Here is more on the Chenille Sisters; it’s also interesting to read about chenille itself.

And, most important:

Happy Mother’s Day to all!