Take the S out of STEM

Science, technology, engineering and math jobs are seen as being important for the modern economy.Collectively, these are known as STEM majors. Many people have talked about how important it is to have more STEM majors.  The problem is, not all STEM majors are created equal. And this isn't a new phenomena. 

From this 2005 report by the BLS, we see that natural science technicians make less than most other STEM researchers. They have an average salary of almost 40 thousand dollars a year while STEM majors overall average 64 thousand dollars a year. Life Scientists don't do quite as badly on the salary front, but their jobs have been slowly disappearing even over the past year of job expansions. 
This isn't to say that science isn't important. It's just that supply and demand matter. Students aren't being told to think about their job prospects at all when they go to college. Many of them will end up in majors that seem comfortable and familiar because they've already taken similar classes in high school and they have potential career paths.  The problem is that not all biology majors are going to be doctors (if our country was more efficient, maybe we'd be graduating primary care physicians directly from college in the first place) and not all chemistry majors are going to be pharmacists or go on for their PhD's and Master's degrees. And then even those with advanced degrees in chemistry aren't having a great time. So instead these students end up with specialized skills that aren't in high demand relative to the supply of lab workers. And many of workers see lab work as a way to beef up their resume while they apply to schools and therefore are willing to take a lower salary, making it harder for those who just want to earn a living without having to go back for even more years of school after college.

And yet still everywhere people are promoting STEM education and talking about STEM jobs like they are all the same. It's too simple to just take out the S, both because smart students who are interested in basic research should be encouraged and because in fact some of the more niche scientific professions are seeing tighter markets, such as the market for geologists which is being bid up by oil companies.

Alex Tabarrok has a post discussing how important it is to have more STEM graduates. He uses the acronym STEM, but he's generally referring to CS, Chemical Engineering and Math and Statistics majors. There should be a better more widely recognized acronym to highlight the importance of the (non-life science S)TEM majors. What these majors have in common is they generally leave their students feeling comfortable with quantitative analysis. In this modern economy where everything is getting quantified and there is a greater opportunity for businesses to study these numbers and optimize more of their processes, being comfortable with mathematics and statistics is going to be more important. When people talk about training STEM majors, they should instead talk about TEQ majors and TEQ jobs. TEQ stands for Technology, Engineering and Quants. The term "quant" needs to be stolen back from finance, rehabilitated and then applied to everyone who is working with statistics and data analysis. 

Science is important because it forms the backbone of long term technological progress. But we don't need to be telling every impressionable high school student that they should major in something that's familiar but difficult when their job prospects would be much better if they picked something that was less immediately familiar but more scarce in the market place relative to its demand.

Random related items:

Some jobs will have higher average salaries because they involve living in unpleasant places far away from civilized society. Many oil jobs fall into these categories.  This should be adjusted for when students are looking at the average salaries of various majors.

It is possible that there is a negative selection effect to explain the difference in starting salary between engineering and natural science majors. It is more likely that a good engineer will work in industry after school (or a good CS major will drop out while still in school) while someone who excelled in natural sciences isn't likely to stop their education with just a Bachelor's degree.

The better schools provide superior networks and credentials, students at these schools can afford to think less about the average returns to their specific majors. The problem is that every school wants to pretend that they are one of the better schools so the myth of "What you study doesn't matter" is perpetuated even when it really shouldn't be.

Is there a difference?

According to Bloomberg.com, the FBI thinks that there have been quit a few cases of foreign spies getting access to American universities and trying to steal sensitive information. Not only that, but they are taught techniques that will help them get around problems faced by their military engineers back home. The FBI is trying to prevent these spies from stealing potentially valuable information*. 

Then there are the unaffiliated foreign graduate students who have a year after they graduate to either get an H1-B visa, stay in school or get are kicked out of the country. If they get kicked out of the country, they forced to take their training and skills back to their home country. 

So do we want the people learning valuable skills to stay and help create jobs in this country? Because it doesn't seem like it.

*Protecting our intellectual capital is important, but it's a growing world not a stagnant world. The best way for us to stay ahead is to optimize the environment for creating new ideas and new technology in our country. Right now we have a system where foreign PhD's who could join start ups or potentially start their own company are kicked out of the country, and then we have the patent issue where very recently one of the larger tech companies spends $1 billion dollars on patents instead of returning money to their shareholders or investing in developing new products. 

Who resists totalitarians and why?

Via MR, I found this link of an article by Robert Higgs about who is the most likely to resist totalitarianism.  It turns out that historically people of faith were the most likely resistors. Some individual atheists did resist, but atheism was also a key part of some of the more brutal totalitarian regimes ranging from the USSR to China and North Korea.

Higgs is worried that as society becomes more secular, the faith based groups who resisted state expansion in the past are going to be weaker going forward. He attributed this resistance to these groups having a strong belief in something other than the state. It's actually much simpler than that, these religious groups historically have been one of the few groups that are powerful in civil society and separate from the state. Today, there are many more groups, but they may be less tightly knit because they are easier to leave or less likely to share a similar belief system and therefore would presumably be less able or willing to counter a totalitarian state. A group of people today such as a gaming clan (I did not score highly on Charle Murray's quiz) might spend a lot of time together working on the same goals, but their goal is to play a video game not build a society. 

On the other hand, the pessimism of Higgs isn't completely warranted. The internet means that these groups aren't as necessary for coordinating resistance to the state. Religious institutions weren't the only drivers of the Arab Spring. They were just the only ones organized enough to really take advantage of the political void in the aftermath. If what matters is the ability to coordinate and people knowing that they are part of a broader movement, the internet would facilitate a lot of that resistance. The internet's usefulness to those resisting a potential totalitarian threat is why attempts like the UK's government's proposal to increase their monitoring efforts of the interent are so scary.

A quick note on the lottery

The jackpot is going to be over $500 million dollars. Even though there is a 1 in 171 million chance of winning, factoring in taxes and the increased chances of splitting the jackpot means that the ticket is only mildly positive expected value, at best.  Factoring in the time cost of checking the numbers probably makes it negative EV. Any strategy that involves picking numbers that are marginally less likely to be shared (sticking to numbers that aren't part of birthdays) also incurs a time cost versus getting random numbers, and the advantage is not likely to be worth it.  So it's entirely rational not to play even now unless a person enjoys the lottery process itself.

Three thoughts:

1. This is a great advertisement for the lottery.

2. It would be interesting to see how often these types of jack pots occurred in private lotteries if competition with the state was legal. Given that  this is great advertising and a private market lotteries would have to give a higher percentage in payouts due to competition and that this is a great form of advertising it might be a more common occurrence.

3. Some companies will probably do large company pools and buy a lot of tickets. If any of them win the big jackpot, it would destroy that company. This is especially true for start ups.

Full disclosure: I have never bought lottery tickets before, but now I am long a few tickets. 

A surprising prediction?

Tyler Cowen mentions that they are now asking people what their most surprising prediction is instead of their most absurd belief. In many ways these are the same thing, except now the belief has to a prediction of the future.

His prediction is something that I thought wasn't that surprising, a lot of people think that real wages are going to stagnate in the non-resource rich developed world over the next ten years due to the failure of innovation to keep up with factor price equalization with the developing world. It's mostly interesting because right leaning economists usually like talking about how important it is to understand the consequences of long run compounding economic growth (This is a TED talk by his coblogger/coauthor Alex Taborrok).  

Tyler Cowen did write a book about how there isn't enough innovation. My takeaway from it was that the economy as a percent of GDP is consisting more of in health care, government spending and education and these are areas where innovation is stalled for reasons relating to either government regulation, signaling constraints on new competitors (I may have gotten this part more from the GMU related economist blog posts than the book) or some combination of the two. It's nice to see him giving some weight to factor price equalization in his latest prediction, because in his book he pretended that real median wage was measuring technological progress uninfluenced by the relative advancements of the developing world.

So what would my surprising prediction be?

The internet is going to become more closed and regulated over the next 10 years.

The problem is I'm not sure that this is very surprising either. It's just a combination of a few facts:

1. The US government as it is currently run is not very good at saying "no" to copyright holders. The failure their lobbyists to pass SOPA shows how much needs to be done just to halt the expansion of their control.

2. People are spending more of their time on controlled networks like Facebook already so they are slowly becoming more comfortable with the idea of a controlled internet.

3. As shown by California finally taking steps towards collecting sales tax from Amazon, people aren't as worried about the government regulating activity on the internet.

4. In the past few years there have been an increasing amount of high profile cases of foreign hackers. Steps will be taken to stop them, these steps might not work, but they will be used to justify more controls.

I hope that I'm wrong.

Update on what's going on the world

It's been a while since I've posted, so I thought I'd give a brief overview of what's been happening around the world.

1. The US primaries continue. The media loves a foot race, and there is enough happening for them to be able to spend a lot of ink looking into who raised money when. Still, unless Romney drops below 60% it probably isn't worth paying much attention to the details. The details, including tonight's debate, is entertainment masquerading as something relatively important. 

2. There is a Greece deal! For everyone (holding Grek debt)!  Well, the collective action clause won't apply to the ECB who swapped their bonds for a version that won't be impacted by the change in Greek law, but they will give up their profits on the debt they acquired below notional value.  It's too bad no one really thinks this will work out well for Greece or those who are dedicated to funding Greece in the long run, but the can has been kicked! Let's see how far it will roll this time. As long as inflation expectations remain low and the LTRO's continue the can should continue to roll.

3. The nuclear Iran issue seems to be heating up. One way to measure this is to look at news stories. Another way is to look at crude markets, the WTI - BRENT spread is driven by both the glut of oil around Cushing and the geopolitical risks pushing Brent oil up.

 When both the Israeli defense minister and US defense secretary are talking to the Economist about an Israeli strike on Iran and sanctions are currently being tried then it isn't just a lot of hot air. With Iran not cooperating with IAEA inspectors it seems like something is going to happen there soon.

There is also a lot of talk about austerity given the situation that many Western countries find themselves in, but when they don't take into account monetary policy's reaction to fiscal stimulus it feels like I'm reading one side of the debate. 

Betting on facts - Showing confidence

Everyone is very focused on Romney's offer of a $10,000 bet. I'm wondering why if he was so certain that he was right he didn't offer Rick Perry odds at (let's say) 2 to 1 up to $10,000. It probably still wouldn't be that good a move politically, but making someone put their money where their mouth is better done a way that doesn't emphasize how that person has lot less money when one is running for office in a country with a significant unemployment problem. Either he did actually lose control and wanted to assert dominance or he forgot that his peers in this presidential race aren't going to act like his peers in the business world. Someone worth $2.8 million should be able to afford a $10,000 bet if they are confident enough about their facts, but Rick Perry either knew he was wrong or knew that this was an opportunity to outmaneuver Romney politically. 

Tight Money and Ron Paul

One of the worst things for Libertarians about the Bush presidency was that the public associated Bush's failed economic policies with free market economics. This is despite Bush's policies being at most only rhetorically free market. The tax cuts were supposedly part of a "starve the beast" philosophy but throughout Bush's presidency government spending did not decrease and he actually increased future entitlements when it came to Medicare Part D. It was a "Have your cake and eat it too" policy, or as the Italians say "You want your barrel full (of wine) and your wife drunk." And rather than decreasing regulation he increased it by signing laws such as Sarbanes-Oxley, a bill that makes it very expensive for small businesses to raise money in the public markets. 

If Ron Paul were elected, he would do a lot of good. He'd be able to stop prosecuting the ridiculous drug war and would work to reduce a lot of the ridiculous regulatory red tape in our economy.  However, he would also do what he could to enforce a very tight monetary policy.  It's unclear how much he could sway the Fed, but the explicit threat of losing their independence could prevent them from easing when needed in the future. In fact, it might be a large part of what is currently holding them back from easing more now even though nominal GDP is so far below trend.

As much as Ron Paul would do a lot of good it would be unfortunate if the public came to associate libertarian policies with low economic growth due to an excessively tight monetary policy.  

However, with Ron Paul only in second place in Iowa and without a broader base of support this is still a very unlikely event (7% on intrade). And if this ever became a real issue I would categorize it as a high class problem.

99% Leftist

When Mr Hayes says that "very powerful interests will brand this as 'left' rather than 99%", he is right, if by "very powerful interests" he means "all the Americans who recognise that the 99%-er message is coming almost entirely from the left". This is certainly a large and powerful group, commonly knows as "Republicans".

While on the topic of the 1%, it is interesting to know that the level of wealth (as opposed to income) controlled by the 1% is actually still significantly below levels in the 1920's and early 1930's.