RiskProf

My Congressional Testimony Part I (The Back Story)

I have been teaching a special three week term.  Each class meets about 3 hours per day and I am teaching two. (I just finished yesterday.)  At the beginning of the term I was asked to testify before Congress regarding my opinion about the future of insurance regulation.  I was teaching intensively six hours a day and I was getting a little brain fried, so I said yes.  That is when the trouble started.

I received the official invitation from the subcommittee at 5:00pm on Friday. I didn’t read the fine print until Sunday.  I had to have 100 copies of my testimony to the subcommittee 48 hours prior to the hearing on Wednesday.  That was not a big deal—it just meant I had to finish writing up my testimony by Sunday night and then I would overnight a package to DC.  Well, thanks to the anthrax scare of late 2001 --

OUCH! But not surprising.

Frederick Sachs writes in the

The Scientist

Complaints by scientists about the flat NIH budget have grown louder in recent years. For scientists to effectively lobby Congress for increased funding, however, we need to show that increased funding increases productivity. Given this need, I decided to examine scientific productivity as a function of the budget. Since the NIH budget doubled from $15 billion to $26.4 billion from 1999 to 2003, I reasoned that there should have been a corresponding jump in productivity. The test was the simplest measure of productivity: the number of publications.

Here's what I found: The number of biomedical publications from US labs did in fact increase from 1999-2004. However, so did the number of publications from labs outside the US where the research budget did not double. ... There is no upward jump that you would expect to see with a sudden increase in productivity.

[emphasis added]

via FuturePundit

While this is a unidimensional look at productivity (it does not take into account any potential impact of the research), it is pretty discouraging, but not surprising that the government can not efficiently purchase R&D.  In addition, it imposes a tremendous amount of overhead on universities (to prevent fraud).  Our overhead rates on federal contracts are in the 40-50 percent range.  Historically this funded utilities, the upkeep of research labs and the like, but now it funds auditors, contract administrators, and an entire university bureaucracy devoted to obtaining and administering even more grants.  Just look at your alumni magazines.  They are now almost 100 percent glossy descriptions of all the cool research going on at the old U.

Moral Hazard I

Moral hazard is everywhere even at Universities.  Academic tenure allegedly causes shirking.  Today’s VC has an interesting discussion of this phenomena.  I have a slightly different take.  It is not just tenure, but the retirement systems which may cause future problems in academia.

Opponents of tenure (including me) claim professors obtain job security through tenure and and then supposedly stop working.  I don’t see it everyday, but I know it happens.  Dead wood likely abounds at US universities and it likely to get worse.  This is, in part, due to the change in the universities’ retirement systems. Most younger professors (50 and below) have been switched to, or voluntarily chose, defined contribution plans.  This is a common trend across universities and the private sector.  In contrast, most older professors (50+) are on defined benefit plans.  The DB-ers retire at 30 years of service because they get a “formula benefit” based on the highest three years of salary and the number of years of service.  At some point it pays to quit as the pension approximates some relatively large percentage of full time pay.

In contrast, the each year the DC crowd keeps putting money into a retirement plan like a 401k.  Some years the returns on the retirement portfolio are positive and in some years they are negative. If there is any economic uncertainty, the individual professor bears all of the risk of a market down turn.  Thus, it makes sense to keep working if the market is in turmoil.  Well, just about everyone thinks the market is in turmoil (even if it has had a couple of goods years).  Further, one never knows, but the next crash could be just around the corner.  So, the risk averse tenured professor decides to keep working even into his or her dotage. To compound the tenure problem there is no mandatory retirement age to “force” retirements.  In Georgia (where I live) unlike other states like California, it is probably illegal or unconstitutional to offer buy out plans to faculty.  I suspect we will be seeing in the future a large number of older professors like me graying at the vine. 

I don’t really want to “force” professors to retire with a mandatory rule, but there is likely to be an optimal retirement age for many of us and we need to design a proper incentive system.  Right now the individual’s incentive might be to go beyond that optimal retirement age.  As people age they become more risk averse and are likely to stay employed (assuming they can handle the work) taking a guaranteed income rather then retire and face a potential variable income.  In addition, each year of work provides an additional contribution to the retirement portfolio.  However, each year of work beyond the optimal retirement age costs the university in terms of lower productivity (even if the professor is not “dead wood”).  I can see private universities being able to have a greater ability to craft buy- out packages for their faculty.  They will be able to compete by saying “Our faculty are young  and dynamic and are in the prime of their research lives.  Come to our school to study!”  This places Georgia public universities at a disadvantage.

See also TIAA CREF Study, Marginal Revolution and links therein.

Where have I been?

I have been posting for a little over three years and except for trips where I didn't have good Internet access, I have been posting regularly up to last month.  I had to take a little sabbatical.  Katrina, Mississippi, and Louisiana was just plain wearing me out.  I wasn't planning on a sabbatical, but it felt good to take a break.

During the sabbatical I sat around in my boxers watching Judge Judy and eating bon bons. In between commercials, I was able to get two papers published (see March Issue of the JRI where I appear twice), another two papers accepted (Experimental Economics and the Journal of Banking and Finance).  I also had a rejection and a revise and resubmit.  (Everyone say awwww).  I am also working on a optional federal chartering project and one involving insurance taxation.  And, huff,  I have been working with the gang at the Wharton School on an economic analysis of (mostly) the Florida homeowners market. I cowrote two grant proposals --and the early indications are that they are going to be funded.  I will be talking about them more after the official notification.  Finally, I was writing a paper for the AEI on tort reform which is almost done.  So done, in fact, that I can feel good about posting once again. Now this is just the fun  part of my job.  I also did some executive education teaching, taught my classes, and served on both the department's and the college's promotion and tenure committee.  So, I am feeling like I earned my salary this month.

I can't wait until I get tenure so I can goof off.

In other news, I have invited a new blogger to join us here at Riskprof.  I will let him introduce himself when makes his first post.

On Higher Education

My former colleague Arthur C. Brooks from the Maxwell School at Syracuse University tells us in today’s Wall Street Journal (sub $ req’d) that the political philosophy of college professors does not have a long run impact on college students’ political attitudes.  This is for two reasons: the effects of one’s parents viewpoints and the effects of education on the student’s future income prospects.

What the statistics really show is that higher education by itself doesn't affect political views very much. Rather, in addition to the strong influence of parents, it is higher incomes -- which typically reward a college education in America -- that push people to the right politically.

Erin O’Connor links to a slightly different take on the value of a college education.  Evidently while students do not take on the political biases of the professoriat — they don’t seem to get anything else either.  She presents a summary of a study from the ISI on what students know about American History, Economics, and Civics and find that students at no-name colleges do better than those at expensive private schools.  So … we can’t brainwash them and we can’t (or don’t) teach them.  Good thing I am at a lesser know school and thus I am chock full of pride at the way us no-namers do.

A Call to Action?

I can’t drive 55. Georgia State students try … and show why …. the song is so popular in the south.

via many places, but most recently from the VC.

Wow

It’s hard enough keeping teenagers awake for a lecture.  Think of the problems here!  Of course, my students find my lectures stimulating and would never, ahem, sleep in class.

Fewer Future Lawyers?

Walter and Ted seem to be doing an excellent job.

via Prof. Bainbridge

Don't Get Any Ideas

Yesterday’s WSJ ($) had an article on the nasty fight between certain proponents of the hypothesis that global warming is making hurricanes more intense and those that say that hurricanes are more intense due to “seasonal” changes in currents and the like. It seems that the students of a certain hurricane expert (Dr. William Gray) are on the opposite side of the debate as their dissertation advisor.  One charges her advisor with “Brain Fossilization.”  Usually academic spats never get to the front page of the WSJ.  I asked the Risque-wife if she’d ever refer to her advisor in public as a fossil.  She didn’t even have to think it over as she has class.  Dr. Gray’s former student went on to say that “Nobody except a few groupies wants to hear what he has to say."

I just hope my students are nicer than Dr. Grays’ and only say that my brain has just petrified.  I couldn't stand to have my groupies think I was fossilized.

Update:  It turns out that I had misread the article yesterday (see Richard’s comment in the comments).  It was not one of Dr. Gray’s students who commented on Dr. Gray’s brain fossilization, but a co-author of one of his students.  In addition, Dr. Gray said something somewhat derogatory about the coauthor too.  Suitably chastised… I now (hand over heart) promise I won’t say to a writer for the WSJ that my former student’s (or their coauthors) don’t know what they are talking about …well, except for Ty.  He’s still fair game.

 

What Do Walmart Job Seekers and Liberal Arts Ph.D.s Have in Common?

I ask myself this question daily.  Well … almost daily anyway.   I bet the Unknown Professor does too.

(via Instapundit)