One of the Minnesota establishment’s favorite fall-back lines is that our putatively-excellent education system drives the economy.
The evidence shows that it’s actually quite the opposite; a strong economy creates a niche for academics.
Education is not (or was not) training, although the distinction is fuzzy. Private colleges and universities were once the place for a few good men and even fewer good women. They were where we went to be sequestered from physical work, to learn, to mature, to develop communication skills and leadership confidence. Everyone else got calluses. No mammalian species could afford to take more than a few of its offspring, at the height of their fecundity and physical prowess, and isolate them to study Greek. In the 19th century, many didn’t live much beyond 50. Had we sequestered significant numbers from the age of 18 to 26 to pursue a doctoral degree in 1850, this would have converted their value proposition into an unsustainable expense. The popular terminal degree into the early 20th century was an eighth-grade diploma and for a very good reason. Families needed pairs of hands and strong backs. Colleges and universities did not drive the economy, but rather were able to expand as the result of industrialization and mechanized agriculture which improved the output of labor.
Yep, the world has changed; about 1% of the population grows our food these days, rather than the 98+% of 300 years ago. More of what we do to earn a living requires an “education” – which can mean anything from “literacy” to “training” to “developing a working understanding of a complex field” to, in some cases, “learning broadly and deeply about a range of disciplines and areas of human knowledge”.
But the article notes something that, when you read about most of mankind’s great advances, beats you over the head; academic credentials and major leaps in achievement aren’t especially correlated:
In just over 150 years, the likes of Michael Faraday, Thomas Edison, George Westinghouse, the Wright brothers, Henry Ford, Bill Gates, Richard Branson and Steve Jobs changed the world, but they were far from credentialed scholars. Still today, the innovation economy is driven as much by enthusiastic, stubborn and impatient dropouts as by the credentialed. The imaginative and courageous accomplish more. The credentialed often check boxes in a regulatory role or debate rather than do.
The Birth Of The Modern,by the great British historian Paul Johnson, examines the number of things that make up what we call the modern world – everything from pants, the internal combustion engine, mass production, the repeating firearm, yellow paint and the hard-top road to motorized travel, the true “mass media” and the steam engine and true representative democracy – that started in the period between 1815 and 1845.
And in those societies – which were if anything more dominated by social and academic elites than they are today (for now, anyway), the things that defined what we call “modernity” were predominantly achieved by…
…the self-taught, hard-working, brought-up-by-their-bootstraps people with little formal education but great inspiration, intellect, and the ability to tie many disciplines together to make things happen.
Side note: in a world where arts academics avoid hard sciences and hard-science people sneer at arts majors, it’s amazing how cross-displinary the great achievers truly were. In 1820, a great engineer like Robert Fulton or James Watt had to be a talented artist and communicator; artists like Robert Turner were highly versed in the physical world.
Which is something modern academia beats out of the rare academic that tries to practice it.
At any rate – the conclusion?
So what’s the problem? One problem is recognizing that academia follows the economy and doesn’t lead it…
And creating an economy with too many academics with too little academic work to do merely devalues academia itself. You get situations like in Greece and Spain, where college graduates find themselves lucky to get 10 hours a week as a barrista – or like in the US, where chemistry professors sit for years tweeting about politics while worthy younger academics shuttle around between non-tenure-track make-work jobs, eternally…
…while the real work of innovating and building goes on elsewhere.
Kodak saw itself, through the eyes of its marketers and salespeople, as a company that served the picture market. They tried to make digital cameras and printers to serve that market by buying new technology and technologists. They failed.
Fuji saw itself, through the eyes of its technologists, as a chemical company with technologies that could serve other markets. They preserved their technology and technologists and transformed the company by replacing their marketers and salespeople. They succeeded.
The weakness of American manufacturing is that the business is led by a bunch of marketers and financiers who overestimate the importance of markets and finances, and underestimate the value and the difficulty of establishing a technology base. The heart of any manufacturing company is its technology and its technologists. You can replace a marketing or a finance department in a month. The knowledge and people in an R&D and Engineering department will take a decade to replace. The MBAs on Wall Street demand MBAs in the executive suite, and technology and technologists are devalued, to the cost of American manufacturing.
@Emery There is way too much finance in this country. No doubt about it. Congress doesn’t have a clue.
Brilliant Mitch!
Higher education has too much overhead and is too expensive vs. the return on these investments. Low ROI. There will be a collapse.
It so fashionable to say that some people shouldn’t go to college. The reality is, no one would say that if it were priced right. Plus they should teach it the way they did before the 60’s. Critical thinking. Knowledge of the world.
@TheFedSucks:
Finance saps global productivity by taking far too large of a rent for the task it accomplishes. Governments must act (preferably in concert) to reduce the systemic dangers of finance while simultaneously reducing finance’s profitability. Finance needs to become again, as it once was, boring. Perhaps the greatest cost of the rise of the finance industry in the last quarter century has been the loss of talent to the finance industry. An acquaintance of mine got his PhD in geophysics at M.I.T., where he modeled the multi-phase behavior of petroleum in rock formations. He was hired by a Wall street firm to create and simulate the behavior of derivatives. He has made a small fortune and lives very comfortably these days. What a terrible waste of his talents. Finance will not be reformed until talented people like that geophysicist are no longer tempted away from productive pursuits by the rape and plunder offered by the rent-seeking pirates of Wall Street.
Kissinger forgot to mention Tesla. Nicola, not car. And, yet another book by PJ I need to read…
Emery, without finance, and ability to raise money to put ideas into practice, there is no innovation. How effing hard is it for a libturd to realize that? Why is every effing solution for a hardened libturd like yourself is government intervention? Why is it that libturds hate it when people achieve sucess by selling their talents to the highest bidder? How was it a waste of your acquintance talents?
@Emery That is just dead-on.
The other way I’ve heard this explained is, for 3000 years any kind of “agency” relationship was only 15% of any economy. Broker, banker, book agent, market maker etc. Now it’s 35% or something. The starting cause is too much central bank easy money since Nixon closed the gold window.
To be clear, the gold standard sucks, but it would be better than what we have now.
Congress is too damn dumb and corrupt to understand this stuff.
@justplainangry There is just too much finance, that’s all.
Efficiency in manufacturing is making the same widget for less cost. This is a good thing, all things considered.
What is efficiency in the financial sector? Lower cost per transaction? Measuring risk accurately? What value does high freqeuncy trading add to the economy?
I would point to the over abundance of Lawyers and laws. Finance is merely a commodity.
@ jpmn on What’s your point?
Regarding finance, that’s not the problem. Financiers only prosper to the extent that the rest of us contract debt, and it’s worth noting that (see Wiki article on U.S. economy) the major component of total debt in the United States is still contracted by individuals and businesses.
If you take a break from borrowing and instead pay off your debts (a good idea at any time), you exercise a small but real brake on both the growth of the finance sector (yay) and also (bigger yay) on the growth of government.
Finance is your bank or the Credit card company, or your Mortgage company. Some level of finance is a good and necessary thing.
On the other hand the Law has become a thing which is impossible to understand. Tax Law, Enviromental Law, Mortgages have become far to complex and nearly every business could be in violation for something no matter how hard they attempt to be legal.
@bubbasan Uh, no. ” Financialization” of the economy has killed it’s productivity so the *average person* has to speculate or survive using debt. See the “Of Two Minds Blog”
@ jpm on “Finance is your bank or the Credit card company, or your Mortgage company. Some level of finance is a good and necessary thing.”
It’s way more complex and parasitical than that, now. It used to be like that.
Citibank ain’t exactly Bailey Building & Loan, is it?
I’m not sure how a post regarding the claims that higher education (and significant ever increasing public investment in higher education) drives the economy are false gets threadjacked and becomes a discussion that there are too many ‘marketers’ and ‘finance’ types messing up the manufacturing base – but then I see Doug Grow / his alter ego “Emery” is involved and no longer wonder.
In my near 25 years experience in manufacturing and marketing(!), most of the positions I see as critical don’t require a college degree at all. They do require some acquired skills that often require scraped knuckles from the school of hard knocks. The effective sales engineers I work with lack PhD’s or even a masters – they might have a bachelors or associates degrees or perhaps some technical training, but what they lack in higher ed they make up for in being innovative and having an ablility to communicate solutions. The few degree’d engineers I come across are generally blowhards more interested in complicating things to show how smart they are than actually solving the problem.
For awhile we were using a credit card that gave us airline miles on each purchase, but we would pay it off each month, avoiding the interest. A friend of mine who is an executive with a finance firm told me, “Oh, you’re what we call a deadbeat.”
I asked how that could be since we didn’t owe anyone. His response: “You use something without paying for it.”
“TheFedSux”; I’ll agree that the average person has a lot of debt, and I’ll agree that it’s difficult to eschew debt in our society, but for the person who’s willing to delay gratificaiton, it’s possible to at least greatly reduce it. Dave Ramsey isn’t a household name because it’s not, after all.
@Seflores The economic growth in the economy for the last 30 years was largely phony bringing consumption from the future via Wall Street and theFed.
So the value perception / real cost of college got WAY out of whack.
I asked how that could be since we didn’t owe anyone. His response: “You use something without paying for it.”
That’s hilarious — so the credit card company never earned any money on the transaction fees it collects from the merchants?
The cost of finance is a cost that must be paid by every other sector of the economy. The further we can reduce that cost through regulation of wasteful and rent-seeking behavior on the part of investment bankers, the more the rest of the economy benefits. This is true until the savings due to financial regulation are exceeded by the costs of inefficiencies in capital allocation (yes, finance does have a useful role) brought about by new regulation. But I still see plenty of fat in finance and few signs that worthy investments are being passed by. We’ll be done when finance accounts for less than 10% of corporate profits, down from a high of 30%.
There is many a fatted calf yet to slaughter. I want to see more blood on the floor.
Some people are simply unable to say the simplest things without flowery language to hide the meaning.
If you want to scourge the moneylenders, just say so. If you want to purge society of Jews, blurt it out. Having idiocy plainly expressed makes it easier for the rest of us to leave the threadjack and return to the main point of this post.
@TheFedSucks
Financiers like to claim that business needs a lightly regulated financial system to provide the capital for business to operate and grow. On the contrary, the benefits derived from deregulating finance go almost entirely to finance, and not to businesses that finance supposedly serves (certainly not to consumers). Finance is indeed not business, and business is best and most safely conducted with the barest minimum of finance.
@Joe Doakes
I work in manufacturing and there are real shortages out there in any profession that requires lengthy and difficult training. Chemical engineers (most engineers, really)are in short supply, in part because engineering grads often leave the field because banks, med schools, law schools, and most white collar professions would rather take a rigorously trained engineer over someone with a BA any day. Good instrument technicians, electricians, mechanics and pipe-fitters, all of which require long apprenticeships plus in-class training, are very hard to find.
We tell 18-year-old students to do what they love, and they take that advice and create time for an active social life plus video-game time by taking an undemanding major. Consequently they find they love college but are unprepared for life afterwards. The advice that I give my teenage kids is that by the time they hit 25, they need to have acquired marketable skills, through a professional degree or some other form of training. Those without marketable skills should be prepared to find employment unsatisfying, sporadic, and financially unrewarding. By all means, find something you enjoy doing, but don’t forget you need those marketable skills. Life is not school. School is what you do before life really begins. Choose your school path to create the life experience you wish to have, not the school experience you enjoy now.
@Joe Doakes I don’t agree with Ermery’s politics, but when it comes to finance he’s right.
Study up on what Jim Grant, and particularly Chris Whalen say about this stuff. JMO, If the GOP did every single thing that Chris Whalen said, it would save the country and the GOP.
If USA doesn’t implode, it will be for exogenous reasons, because we are ruled by idiots.
@bubbasan People shouldn’t have to cope with this injustice, like that. The average person is getting screwed by a lack of opportunity, inflation, taxes, and asset bubbles. That is just a fact. Now the government they rely on is ineluctably running out of money.
What it comes down to is productivity = investment + growth in quality human capital (educated, mentally stabile, good values) + rule of law.
That productivity pays for the nice things in life and makes human and financial capital grow.
Thanks to the LBJ Great Society, anti-federalism, and too much Fed easy money, this is not the path we are heading on.
We are doomed.
This guy is quite good in the sense I am talking about on the economy http://www.financialsense.com/contributors/simon-a-mikhailovich Pretty hard to argue with, if you ask me.
30 years of the Fed and the government goosing the economy.
Richard Feynman on the social sciences:
http://www.youtube.com/watch?feature=player_detailpage&v=IaO69CF5mbY
Economics is a social science (it depends on human values).
Near the end (about 1:40) Feynman gets a certain look on his face, as though he is trying to say something in the simplest, clearest, possible terms, and says: “I have a great suspicion, that they don’t know . . ., that this stuff is . . ., and then intimidating people . . .”
I disagree.
Economics is a soft science that tries to be hard by using a lot of sophisticated math, but suffers from the same problem as all of the soft sciences: Often the data isn’t very good. There isn’t any way to control other factors, there may not be enough instances of the thing you’re studying for good statistics, and the data is rarely well behaved and normal. Economists rely on governments to collect their data, generally, and governments aren’t very disciplined in their data collection, and they generally have a bias with regards to what they are collecting. So much of economics is destined to remain sophisticated math on unrealistically simple models, or studies of real systems where the data to make firm conclusions doesn’t really exist.
I don’t think, Emery, that economics can make a value choice. It can only measure values. Economics can’t say, for example, whether it is a good or bad thing that a rich man can send his sole child to a good college, while a poor man could send all three of his kids to a worse college for the same price.
Economics used to say that it was the study of the rationing of scarce goods. Now I’ve heard it described as the study of the rational allocation of scarce goods, which is not quite the same thing.
I follow some very smart people that have been making a ton of money for over a decade and they say the CPI and the GDP are complete jokes, so we get a bubble fueled economy that causes the electorate to trade security for freedom. It’s not working, obviously. We are doomed.
We are ruled by idiotic whores https://twitter.com/banaianshow/status/351394662541574144
Financiers like to claim that business needs a lightly regulated financial system to provide the capital for business to operate and grow. On the contrary, the benefits derived from deregulating finance go almost entirely to finance, and not to businesses that finance supposedly serves (certainly not to consumers).
As usual, libturd solution to everything is more regulation.
@justplainangry He’s right. Finance regulation is a completely separate animal from everything else. Don’t lump it in with the other stuff.
Ultimately, we need to let financial institutions fail without it taking down the whole system like it does now. Too much Too Big To Fail. Pawlenty is complicit too.
@justplainangry: It’s more complicated in detail. Banks are by definition in the risk management business; if they stop taking risks, the financial system grinds to a halt. The problem is that large financial institutions which have an artificially low cost of capital because of implicit government guarantees need to have their ability to gamble with that cheap capital artificially constrained. That likely means a future where big banks make low risk low cost loans to big business and government, but can’t make money on the trading floor because of high reserve requirements. They also can’t afford to do high risk lending to most small business. That niche will need to be filled by small banks. Will small financial institutions be created for the purposes of high risk financial strategies other than lending to small business and consumers? Yes, likely so, but if the institution is small enough there will be no artificially cheap money courtesy of an implicit guarantee.
We will not be finished with the re-regulation of Wall Street until every financial firm which is too big to fail is also too safe to fail. Capital holding requirements and risk management regulations on large banks (and any sufficiently large non-bank, hedge fund or other entity that poses a similar systemic risk, Long-Term Capital Management) should be sufficiently high that huge banks produce regular, sustained low margins. Big financial institutions need to be boring. If traders and their customers want excitement and high risk, they should be forced into small firms which pose little systemic risk. When the next crisis hits, those large, government backed banks need to be an asset to stability, not a propagator of risk. I don’t think we have gone nearly far enough yet.
As for the loss of profits in the financial that this might cause, I’m all for it. Finance takes far too large a fraction of the total profits in our economy. Profits should follow real innovation, not dubious financial trickery.
The investment banks and the various stock and futures exchanges should not be publicly held. It provides all of the wrong incentives.
What’s happening is sophisticated speculation is trumping actual intelligent risk taking (where most productivity to make our lives better comes from), and people that don’t want to take risk or should take risk–savers–are getting killed.
So the GDP is never going to recover. We are doomed.
TFS and Emery the Soci@list – you are advocating doubling down. Regulation is regulation. Re-regualtion is just another short lived band-aid. Cure the desease, not the symptom – remove all goverment intervention and regulation and let the chips fall where they may.
@jpa
Worshiping Ayn Rand is not unlike worshiping Marx. That’s the path Lenin started on, and that path led to Stalin, which I think was not what Marx had in mind.
Chemical spills in the United States did not significantly decrease when they increased the fines. Spills greatly decreased when the plant manager was made criminally responsible for the prevention and the reporting of all releases at their facility, and quite a few went to federal prison, mostly for failure to report.
There is a useful lesson to be learned from that experience in the regulation of finance. The amount of money available and the likelihood of getting caught will always tempt underlings to cheat, no matter the level of fine. Throwing the occasional boss (and the underling) in jail ‘pour encourager les autres’ is the only way to convince bank executives to start hiring trustworthy and honest subordinates, rather than slick smart guys with few ethical encumbrances.
quote: “…remove all goverment intervention and regulation and let the chips fall where they may.”
@justplainangrY The dynamics of finance don’t permit this. Regulating finance isn’t the same as all of the other things they regulate.
We could get a lot closer to what you are saying for sure but they would have to completely overhaul EVERYTHING. Private “free” money, punitive legal recourse against leveraged financial institution board members, private FDIC insurance. More of an Ayn Rand /Ron Paul world.
What I’m saying is, you have to SYSTEMATICALLY either regulate or totally deregulate to account for the temptation of reckless speculation, because it only manifests in the FUTURE. Fed policy contributes to this problem.
Fraud always has to be prevented.
That’s right TFS and Sicko Soci@list Emery – everthing Goobernment does works so well. They have such a great record of running things better than the private sector. Heck, it does not matter Sicko Soci@list Marxist Emery’s soci@list nirvana experiments failed in each and every instance over last 100 years, in your minds we can finally make it work! By golly, we do not need to learn from history – we are better than that! In this just one instance regulation will work, even though it failed in every other industry.
Spills greatly decreased when the plant manager was made criminally responsible for the prevention and the reporting of all releases at their facility.
Laws, not regulations by faceless unelected goobernment bureaucrats, you Sicko Soci@list Marxist Emery. Just enforce the damn laws! Just like immigration laws!
Pingback: Rebuiding The State Economy | Shot in the Dark