Why Are College Degrees Valuable?

The "tea party" governor of Florida recently declared that he wants to eliminate the liberal arts majors at state universities and community colleges because he does not think that they produce job skills.  However, liberal arts majors (humanities, social sciences, science, and math) do better on tests of learning than job-oriented majors like business, education, and engineering:

Liberal arts majors earn less immediately after college, but their incomes grow more quickly than job-oriented majors and ten years after graduation, they earn almost the same amount as job-oriented majors.  That is because the most important part of education is learning how to learn and exercising thinking and communication skills.  This is why economics majors do so well at getting into law schools and have such high earnings: it is a challenging major.  But how much you get out of your education depends upon how much work you put into it.  An economics major who wants to scrape by won't do as well later as one who is challenged by wanting to master difficult material.   

Leonhardt, NYTimes.com:

A century ago, the United States decided to make high school nearly universal. Around the same time, much of Europe decided that universal high school was a waste. Not everybody, European intellectuals argued, should go to high school.
It’s clear who made the right decision. The educated American masses helped create the American century, as the economists Claudia Goldin and Lawrence Katz have written. The new ranks of high school graduates made factories more efficient and new industries possible.
Today, we are having an updated version of the same debate. Television, newspapers and blogs are filled with the case against college for the masses... The evidence is overwhelming that college is a better investment for most graduates than in the past. A new study even shows that a bachelor’s degree pays off for jobs that don’t require one: secretaries, plumbers and cashiers. And, beyond money, education seems to make people happier and healthier.
...the returns from a degree have soared. Three decades ago, full-time workers with a bachelor’s degree made 40 percent more than those with only a high-school diploma. Last year, the gap reached 83 percent. College graduates, though hardly immune from the downturn, are also far less likely to be unemployed than non-graduates. Skeptics like to point out that the income gap isn’t rising as fast as it once was, especially for college graduates who don’t get an advanced degree.
The Hamilton Project, a research group in Washington, has just finished a comparison of college with other investments. It found that college tuition in recent decades has delivered an inflation-adjusted annual return of more than 15 percent. For stocks, the historical return is 7 percent. For real estate, it’s less than 1 percent.
Another study being released this weekend — by Anthony Carnevale and Stephen J. Rose of Georgetown — breaks down the college premium by occupations and shows that college has big benefits even in many fields where a degree is not crucial.
Construction workers, police officers, plumbers, retail salespeople and secretaries, among others, make significantly more with a degree than without one. Why? Education helps people do higher-skilled work, get jobs with better-paying companies or open their own businesses.
...
None of this means colleges are perfect. Many have abysmal graduation rates. Yet the answer is to improve colleges, not abandon them. ...
think about it this way: People tend to be clear-eyed about this debate in their own lives. For instance, when researchers asked low-income teenagers how much more college graduates made than non-graduates, the teenagers made excellent estimates. And in a national survey, 94 percent of parents said they expected their child to go to college.
Then there are the skeptics themselves, the professors, journalists and others who say college is overrated. They, of course, have degrees and often spend tens of thousands of dollars sending their children to expensive colleges.
I don’t doubt that the skeptics are well meaning. But, in the end, their case against college is an elitist one — for me and not for thee. And that’s rarely good advice.

Similarly, the book Poor Economics says that subsistence farmers in developing countries end up earning higher incomes with more education even though their jobs don't really "require" education in any obvious way.

Why Crime Keeps Falling

WSJ.com:

When the FBI announced last week that violent crime in the U.S. had reached a 40-year low in 2010, many criminologists were perplexed. It had been a dismal year economically, and the standard view in the field, echoed for decades by the media, is that unemployment and poverty are strongly linked to crime. The argument is straightforward: When less legal work is available, more illegal 'work' takes place.

The economist Gary Becker of the University of Chicago, a Nobel laureate, gave the standard view its classic formulation in the 1960s. He argued that crime is a rational act, committed when the criminal's 'expected utility' exceeds that of using his time and other resources in pursuit of alternative activities, such as leisure or legitimate work. Observation may appear to bear this theory out. After all, neighborhoods with elevated crime rates tend to be those where poverty and unemployment are high as well.

But there have long been difficulties with the notion that unemployment causes crime. For one thing, the 1960s, a period of rising crime, had essentially the same unemployment rate as the late 1990s and early 2000s, a period when crime fell. And during the Great Depression, when unemployment hit 25%, the crime rate in many cities went down. Among the explanations offered for this puzzle is that unemployment and poverty were so common during the Great Depression that families became closer, devoted themselves to mutual support, and kept young people, who might be more inclined to criminal behavior, under constant adult supervision. These days, because many families are weaker and children are more independent, we would not see the same effect, so certain criminologists continue to suggest that a 1% increase in the unemployment rate should produce as much as a 2% increase in property-crime rates.

Yet when the recent recession struck, that didn't happen. As the national unemployment rate doubled from around 5% to nearly 10%, the property-crime rate, far from spiking, fell significantly. For 2009, the Federal Bureau of Investigation reported an 8% drop in the nationwide robbery rate and a 17% reduction in the auto-theft rate from the previous year. Big-city reports show the same thing. Between 2008 and 2010, New York City experienced a 4% decline in the robbery rate and a 10% fall in the burglary rate. Boston, Chicago and Los Angeles witnessed similar declines.

Some scholars argue that the unemployment rate is too crude a measure of economic frustration to prove the connection between unemployment and crime, since it estimates only the percentage of the labor force that is looking for work and hasn't found it. But other economic indicators tell much the same story. The labor-force participation rate lets us determine the percentage of the labor force that is neither working nor looking for work—individuals who are, in effect, detached from the labor force. These people should be especially vulnerable to criminal inclinations, if the bad-economy-leads-to-crime theory holds. In 2008, though, even as crime was falling, only about half of men aged 16 to 24 (who are disproportionately likely to commit crimes) were in the labor force, down from over two-thirds in 1988, and a comparable decline took place among African-American men (who are also disproportionately likely to commit crimes).

The University of Michigan's Consumer Sentiment Index offers another way to assess the link between the economy and crime. This measure rests on thousands of interviews asking people how their financial situations have changed over the last year, how they think the economy will do during the next year, and about their plans for buying durable goods. The index measures the way people feel, rather than the objective conditions they face. It has proved to be a very good predictor of stock-market behavior and, for a while, of the crime rate, which tended to climb when people lost confidence. When the index collapsed in 2009 and 2010, the stock market predictably went down with it—but this time, the crime rate went down, too.

So we have little reason to ascribe the recent crime decline to jobs, the labor market or consumer sentiment. The question remains: Why is the crime rate falling?

One obvious answer is that many more people are in prison than in the past. Experts differ on the size of the effect, but I think that William Spelman and Steven Levitt have it about right in believing that greater incarceration can explain about one-quarter or more of the crime decline. Yes, many thoughtful observers think that we put too many offenders in prison for too long. For some criminals, such as low-level drug dealers and former inmates returned to prison for parole violations, that may be so. But it's true nevertheless that when prisoners are kept off the street, they can attack only one another, not you or your family.

Imprisonment's crime-reduction effect helps to explain why the burglary, car-theft and robbery rates are lower in the U.S. than in England. The difference results not from the willingness to send convicted offenders to prison, which is about the same in both countries, but in how long America keeps them behind bars. For the same offense, you will spend more time in prison here than in England. Still, prison can't be the sole reason for the recent crime drop in this country: Canada has seen roughly the same decline in crime, but its imprisonment rate has been relatively flat for at least two decades.

Another possible reason for reduced crime is that potential victims may have become better at protecting themselves by equipping their homes with burglar alarms, putting extra locks on their cars and moving into safer buildings or even safer neighborhoods. We have only the faintest idea, however, about how common these trends are or what effects on crime they may have.

Policing has become more disciplined over the last two decades; these days, it tends to be driven by the desire to reduce crime, rather than simply to maximize arrests, and that shift has reduced crime rates. One of the most important innovations is what has been called hot-spot policing. The great majority of crimes tend to occur in the same places. Put active police resources in those areas instead of telling officers to drive around waiting for 911 calls, and you can bring down crime. The hot-spot idea helped to increase the effectiveness of the New York Police Department's Compstat program, which uses computerized maps to pinpoint where crime is taking place and enables police chiefs to hold precinct captains responsible for targeting those areas.

Researchers continue to test and refine hot-spot policing. After analyzing data from over 7,000 police arrivals at various locations in Minneapolis, the criminologists Lawrence Sherman and David Weisburd showed that for every minute an officer spent at a spot, the length of time without a crime there after the officer departed went up—until the officer had been gone for more than 15 minutes. After that, the crime rate went up. The police can make the best use of their time by staying at a hot spot for a while, moving on, and returning after 15 minutes.

Some cities now use a computer-based system for mapping traffic accidents and crime rates. They have noticed that the two measures tend to coincide: Where there are more accidents, there is more crime. In Shawnee, Kan., the police spent a lot more time in the 4% of the city where one-third of the crime occurred: Burglaries fell there by 60% (even though in the city as a whole they fell by only 8%), and traffic accidents went down by 17%.

There may also be a medical reason for the decline in crime. For decades, doctors have known that children with lots of lead in their blood are much more likely to be aggressive, violent and delinquent. In 1974, the Environmental Protection Agency required oil companies to stop putting lead in gasoline. At the same time, lead in paint was banned for any new home (though old buildings still have lead paint, which children can absorb).

Tests have shown that the amount of lead in Americans' blood fell by four-fifths between 1975 and 1991. A 2007 study by the economist Jessica Wolpaw Reyes contended that the reduction in gasoline lead produced more than half of the decline in violent crime during the 1990s in the U.S. and might bring about greater declines in the future. Another economist, Rick Nevin, has made the same argument for other nations.

Another shift that has probably helped to bring down crime is the decrease in heavy cocaine use in many states. Measuring cocaine use is no easy matter; one has to infer it from interviews or from hospital-admission rates. Between 1992 and 2009, the number of admissions for cocaine or crack use fell by nearly two-thirds. In 1999, 9.8% of 12th-grade students said that they had tried cocaine; by 2010, that figure had fallen to 5.5%.

What we really need to know, though, is not how many people tried coke but how many are heavy users. Casual users who regard coke as a party drug are probably less likely to commit serious crimes than heavy users who may resort to theft and violence to feed their craving. But a study by Jonathan Caulkins at Carnegie Mellon University found that the total demand for cocaine dropped between 1988 and 2010, with a sharp decline among both light and heavy users.

Blacks still constitute the core of America's crime problem. But the African-American crime rate, too, has been falling, probably because of the same non-economic factors behind falling crime in general: imprisonment, policing, environmental changes and less cocaine abuse.

Knowing the exact crime rate of any ethnic or racial group isn't easy, since most crimes don't result in arrest or conviction, and those that do may be an unrepresentative fraction of all crimes. Nevertheless, we do know the racial characteristics of those who have been arrested for crimes, and they show that the number of blacks arrested has been falling. Barry Latzer of the John Jay College of Criminal Justice has demonstrated that between 1980 and 2005, arrests of blacks for homicide and other violent crimes fell by about half nationwide.

It's also suggestive that in the five New York City precincts where the population is at least 80% black, the murder rate fell by 78% between 1990 and 2000. In the black neighborhoods of Chicago, burglary fell by 52%, robbery by 62%, and homicide by 33% between 1991 and 2003. A skeptic might retort that all these seeming gains were merely the result of police officers' giving up and no longer recording crimes in black neighborhoods. But opinion surveys in Chicago show that, among blacks, fear of crime was cut in half during the same period.

One can cite further evidence of a turnaround in black crime. Researchers at the federal Office of Juvenile Justice and Delinquency Prevention found that in 1980, arrests of young blacks outnumbered arrests of whites more than six to one. By 2002, the gap had been closed to just under four to one.

Drug use among blacks has changed even more dramatically than it has among the population as a whole. As Mr. Latzer points out—and his argument is confirmed by a study by Bruce D. Johnson, Andrew Golub and Eloise Dunlap—among 13,000 people arrested in Manhattan between 1987 and 1997, a disproportionate number of whom were black, those born between 1948 and 1969 were heavily involved with crack cocaine, but those born after 1969 used very little crack and instead smoked marijuana.

The reason was simple: The younger African-Americans had known many people who used crack and other hard drugs and wound up in prisons, hospitals and morgues. The risks of using marijuana were far less serious. This shift in drug use, if the New York City experience is borne out in other locations, can help to explain the fall in black inner-city crime rates after the early 1990s.

John Donohue and Steven Levitt have advanced an additional explanation for the reduction in black crime: the legalization of abortion, which resulted in black children's never being born into circumstances that would have made them likelier to become criminals. I have ignored that explanation because it remains a strongly contested finding, challenged by two economists at the Federal Reserve Bank of Boston and by various academics.

At the deepest level, many of these shifts, taken together, suggest that crime in the United States is falling—even through the greatest economic downturn since the Great Depression—because of a big improvement in the culture. The cultural argument may strike some as vague, but writers have relied on it in the past to explain both the Great Depression's fall in crime and the explosion of crime during the sixties. In the first period, on this view, people took self-control seriously; in the second, self-expression—at society's cost—became more prevalent. It is a plausible case.

Culture creates a problem for social scientists like me, however. We do not know how to study it in a way that produces hard numbers and testable theories. Culture is the realm of novelists and biographers, not of data-driven social scientists. But we can take some comfort, perhaps, in reflecting that identifying the likely causes of the crime decline is even more important than precisely measuring it.

—Mr. Wilson is a senior fellow at the Clough Center at Boston College and taught previously at Harvard, UCLA and Pepperdine. His many books include "The Moral Sense," "Bureaucracy," and "Thinking About Crime." This essay is adapted from the forthcoming issue of City Journal, published by the Manhattan Institute.

A crime puzzle

The Public Intellectual By Claude Fischer: The economy is down. Shouldn’t violent crime be up?

By Claude Fischer

Violent crime went down in America again last year. According to preliminary statistics from the FBI covering the first half of 2010. The number of violent crimes dropped by about 6 percent from the same period a year before. Given population growth, that means that the rate of violent crime dropped even more. And property crime dropped too.

This is a puzzle because crime is more common among the poor; the percentage of poor Americans has been trending up since about 2000. The economy tanked in the last couple of years. One would have expected a rise, not a fall, in violent crime.

But this head-scratcher is just part of a larger puzzle – understanding long-term trends in America’s criminal violence.

Murder History

The most reliable measure of violent crime is the homicide rate. Americans kill one another at a much higher rate – double, quadruple, or more – than do residents of comparable western European nations. This gap persists despite a roughly 40 percent drop in our homicide rate in the last 15 years or so. Americans have been notably more violent than western Europeans since about the mid-to-late 19th century.

This graph shows the American homicide rate over the last century-plus. (A few notes about construction of the chart are at the end of the post.)

The puzzle compounds. We see a roughly cyclical pattern: a high plateau in the 1920s and early 30s; a rapid drop of more than half to a low point in the late 1950s; then, a sharp rise, more than doubling, by 1980 and 1990. That’s followed by what will probably be a drop of about half by 2010. These are huge swings.

We can put this story into yet greater perspective with the graph below. The line in that graph represents my rough estimate of fluctuations in the U.S. rate of homicide over many more generations, drawing on the historical literature (see some references at the end of this post). While the details are informed guesses, the general trend is well established.

The overall story is that homicide rates declined substantially (as did rates of interpersonal violence of all sorts). The drop in violent crime in the U.S. after about 1850 was not as fast or as consistent as it was in Western Europe. That is when the striking violence gap between the U.S. and Europe opened up. The graph also shows that progress was hardly uniform, as there were many upswings of violence. Spurts often coincide with wars and the aftermaths of war – notably having many demobilized soldiers, trained and armed fighters, roaming the land. (See this paper for one analysis of the war effect.) Another short-term influence is bloody competition among armed criminals – for example, over alcohol distribution during Prohibition and over crack cocaine during the 1980s.

Scholars have offered several explanations for the centuries’-long decline of violence in the West. Here are three common ones:

Government: Over many generations, political authorities gained greater policing power and legitimacy. This allowed them to suppress criminal attacks, intergroup battles, and personal feuds. Also, court systems provided a peaceful way to resolve conflicts. And mandatory schooling swept dangerous boys off the streets.

Economics: Greater and more broadly distributed wealth reduced people’s motivation for crime and raised the costs of getting into trouble. (Barroom brawling seems less attractive if it will cost you a steady and well-paying job.) This explanation may seem to have foundered in the last several years, but in the long run – if not the short run – goes the argument, the affluent society is the pacific society.

Culture: Over the centuries, westerners increasingly came to feel that violence was uncouth and distasteful. Historians refer to the “civilizing process,” a phrase German sociologist Norbert Elias used to describe how the royal courts of Europe suppressed bloody feuds among lords. The repression of violence spread to the bourgeois who, in turn, taught it to the working classes – or forced it on them through, for example, schooling. Over time, hitting, knifing, and shooting came to seem (to most people) as vulgar as smelling from body odor or defecating in the castle hallway.

Back to the Present...

Recently, scholars have added yet another explanation: Immigration – although not in the way that some people might expect. Cities and neighborhoods that have received the largest influx of immigrants (including Mexican immigrants) have had – despite popular stereotypes to the contrary – the largest drops in criminal violence. (See, for example here and here. Thus, increased immigration may explain part of the crime drop since 1990. In a wider view, perhaps the more puzzling part of the story is the rapid upswing in violence from around 1960 to 1990 (see the first graph above).

Notes on the Chart: The basic sources are listed on the chart. Eckberg (1995) corrected the raw federal data for missing states in the early part of the century. I excluded the victims of 9/11. The 2010 point is a rough estimate from the first half of the year.