Nobel Criticism and Agricultural Economics

This year's winner of the Prize in Economic Sciences in Memory of Alfred Nobel went to Princeton economist Angus Deaton. The internet was abuzz with commentary all day, so this post is a bit late.

I would wager that most ag economists who took PhD consumer demand after 1980 used "Economics and Consumer Behavior" by Angus Deaton and John Muellbauer in that course. For those of us who don't work in development, Deaton's work on the Almost Ideal Demand System was probably our introduction to him. The blog posts I read today (here, here, here, and here) brought me up to speed on his tremendous contributions and I certainly recommend reading them.

As the title suggests, I read another commentary on the Econ Nobel that was notable for its negativity toward the prize and (at least the author seems to think) to economics in general. The article, written by anthropologist Joris Luyendijk, excoriates the Sveriges Riksbank (the Swedish central bank behind the Econ Nobel and its $1 million cash prize) for failing to present the award to social scientists in different fields, and the economics profession in general for its inability to live up to its claimed status as a science.

Certainly there's a lot packed into the article, but I just want to respond to a few things. First, no one is stopping any organization interested in sociology, anthropology, or political science from establishing an annual prize for contributions to those fields.

“Free” Community College for Everyone

During Obama’s SOTU address last night, he again proposed providing free community college. However, most folks know that nothing in life is really free. The White House’s own estimate is around $60 billion. There are plenty of studies out there that show college degrees do help improve a person’s lifetime earnings. So, at first glance, this might seem like a good idea to have a more educated workforce.

However, if the extra earnings from a college degree outweigh the costs of the degree, why isn’t everyone already in college. After all, there are already student loan programs available that alleviate the cost of obtaining the degree. Obama’s proposal really only makes sense if there was some kind of market failure that was preventing students from going to college.

There are two things that will happen under this proposal. First, students who would attend college anyway, will end up with less cost for their degree. The flip side is that this degree still costs money and now taxpayers will be on the hook for subsidizing this student. What is the benefit here?

Second, some people will attend community college who most likely would not have attended. These folks, without an option of free community college, would have internally weighed the costs and benefits of attending college and decided they would be better off by not attending college. After all, not everyone is successful in college as seen by the dropout rates. Also, some people have skills that would be better served in a trade occupation that might not need a college degree.

Obama’s proposal would have negative consequences when applied to this second group as the costs to provided a free college degree would not be covered by the degree’s benefits. If the issue is one of students not having the money to attend college then maybe there needs to be changes to the the student loan program.