The Hamilton Project Discovers the Ecstasy of Composition Fallacies

The Hamilton Project, “Thirteen Economic Facts About Social Mobility and the Role of Education,” June 2013.

“Thirteen Economic Facts” says that “income inequality” (a term I disfavor because it sounds like a sixth grade math problem) causes a divergence in cognitive abilities in children. Well-off parents talk to their kids more, giving them larger vocabularies, and they invest more of their high-income earnings into their kids’ educations. Thus, high-income children tend to obtain high-income jobs, and low-income children are condemned to Morlockery. The solution is to improve education because “income inequality” is a given that has no causes and can’t be solved. (Duh.)

The real fun is in “fact” 11, which is a fact in the way that it’s literally true but misleading, making it a useless fact at best. Behold the awesome return to college investment:

Hamilton Project Fact 11, Figure 11

See how it crushes gold. It crushes gold!

How does the Hamilton Project calculate the return to college investment? By churning through Current Population Survey data via the University of Minnesota’s Population Center’s Integrated Public Use Microdata series for 2010-2012. I note that because it’s not a particularly large time series, and it pales in comparison to the 1928 to 2012 period for the other assets.

But the real dope is in the calculation of the costs of professional education:

The cost of a professional degree is the average of the annual tuitions of all professional degrees, calculated from NCES (2012, Table 352), weighted by the number of degrees given by each type of professional school, calculated from NCES (2012, Table 309). All tuition figures also include university fees, but exclude room and board … The cost of a professional degree includes the opportunity cost associated with the earnings of a college graduate for the 3.48 years that a professional-degree seeker is in school (the average length of each degree program weighted by the number of each degrees given). (22-23)

In other words, the Hamilton Project took the average earnings of all professional degree holders over a three-year period and slapped them against the average cost of education. This means it imputed the relatively high earnings of medical, dental, optometral, etc. graduates to those of law school graduates and likewise the relatively low cost of legal education to medical education. (Note, the latter point weakens my argument, but I doubt by much.) The return is also, of course, the average, meaning we have no idea what the dispersal is.

That, beloved readers, is your composition fallacy in action. If law school had been isolated from the rest, its return would not be very good, certainly once you included student loan debt, which I’m unsure the Hamilton Project did.

(This post finished before breakfast)

2 comments

  1. “See how it crushes gold. It crushes gold!”

    I’ve read into some Hamilton project work that is promulgated through The Atlantic. It’s frustrating when people try to use data (or should I say non-data) to twist people’s decisions on policy. I keep coming back to Clemons observation of “Lies, damn lies, and statistics”.

    But what about a degree in mining gold?

    http://www.bloomberg.com/news/2012-09-17/harvard-losing-out-to-south-dakota-in-graduate-pay-commodities.html

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