Archive for January, 2014

What has two eyes, one brain, and costs a quarter million dollars to educate?

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Publicly-funded education is perhaps one of America’s greatest triumphs. Education has been part-and-parcel to our democracy and the founding fathers realized early that if government was going to be of the people, for the people, and by the people, then the people better be well-educated.

The idea of compulsory public schools goes back to the founding of the nation but actually took some time to gain traction. This is likely because education was and (despite recent history) remains largely a local responsibility. Throughout the 1800’s States passed laws making education compulsory. It took some time for these laws to create a culture where education of children was largely left up to the State, sort of “outsourced” from parents.

In 1912, 72% of America’s children were in school. By 1930, this percentage had reached virtually 100%. I believe this is the main factor behind the dawning of American dominance in the 20th century. There were other factors, but the US had early success in making education compulsory, which gave us a head start in innovation and business. It led to almost a century of leadership of the world’s economy.

Yet, somehow this educational prominence has slipped, or at least has been perceived to have slipped. International comparisons tend to show that our students are not doing well compared to other developed countries. Although many of the prophesies of “A Nation at Risk” have not come to fruition, the concerns expressed more than 30 years ago are resurfacing.

Complaints about the educational system seem to flow with the business cycle and peak at times of economic uncertainty. And we shouldn’t ignore the economics: the resources we spend to educate our children are considerable. My local school district currently spends $12,684 per student per year. Some quick math implies that it cost about $165,000 to educate my child from grades K-12.  Since I have two children, it has cost about $330,000 to get them to a high school diploma. As a parent, I owe our local taxpayers a thank you.But, as a taxpayer soon to not have children in school, I have to be concerned about this level of public investment.

Take the case of a child in the school district where I live, which is a suburban district in New York State.Most students from this district end up going to a 4-year college. For demonstration sake, I picked the closest State college and closest private university to where I live. The annual tuition, room and board, etc. for these students runs $18,055 at the State college and $45,602 at the private university. I am assuming this captures the full cost of what it takes to educate a student for a year at these institutions. These costs might be paid by parents and students, or loans, or grants. For this example, it doesn’t matter where the money comes from.

Using these figures, the total cost of educating a child in our district from Kindergarten until he/she turns the tassel at college is about $237,000 for the State college and $347,000 for the private university. This is what it costs “society” to educate a child from my area, with society being a mix of tax dollars, parent and child money, scholarships, loans, etc.

This is likely an underestimate of the true costs of education. Costs are higher than this calculation for the State college, as they receive government subsidies that help keep their tuition costs down. And, there is an opportunity cost to not having the student in the workforce and contributing to the economic output of the nation until he/she is 21 or 22 years old.

This example shows that there is an understandable economic underpinning to current criticisms of our education system. At a time when we have pressed an increasing base of students to go to college, the college costs have risen substantially. That in itself is not problematic – more problematic is that the costs of college have been growing at a much faster rate than the benefits.

A recent piece by the Wall Street Journal indicates that since 2006, the cost of a 4-year degree has increased by 16.5%. At the same time, starting salaries have stagnated, and I have even seen calculations suggesting first year salaries for college graduates have fallen for the first time in history, when calculated on a real basis.

So, is this a bubble that will have to pop? I guess the definition of a bubble is that nobody really knows we are in one until it punctures. But, it is predictable that education institutions, both K-12 schools and colleges and universities, are going to be under even more intense pressure in the future.

The Best Graph Ever

Marketers tend to be obsessed with graphs. A challenge for many research projects is determining how to best distill statistics gathered from hundreds of respondents into a simple picture that makes a convincing point. A good graph balances a need for simplicity with an appreciation for the underlying complexity of the data.

Recently, as part of a year-end series, the Washington Post has been unveiling its “Graphs of the Year.” The Post has been inviting its contributing “wonks” to choose one graph that best encapsulates 2013 for them. I found myself spending way too much time looking through them. Some of the graphs are truly outstanding summaries of a key issue – and their conclusions are striking. Others show the political biases of the wonks themselves, and show how data can indeed be manipulated to make a point. If I were to teach a class in market research, an entire lesson would be devoted to these graphs.

I judge graphs by a simple criterion:  If you were carrying a deck of graphs down the hallway and one fell onto the floor, would someone who picked it up be able to understand its main point, without any other context? We try our best to draw graphs that meet this threshold.

In the end, the good graphs from the Post are those that spur thought and are ideologically independent. In particular, I like Bill Gates’ graph which shows the causes of death in the world as well as how each is increasing or decreasing. This isn’t a simple graph, but it clearly shows the progress the world is making and priorities for the future.

Some graphs didn’t do it for me. Senator Wydens’ graph reminded me of a David Ogilvy quotation: “They use [research] as a drunkard uses a lamp post —  for support, rather than for illumination.” Wyden’s graph came off as a platform to make a political point. It confused me and I didn’t see how the conclusions he suggests flow from the graph at all.

Senator Patty Murray’s graph may very well make a valid point about what drives the federal deficit, but it shows a shocking example of correlation and causation not being the same thing. Just because two lines are displayed next to each other does not mean one leads to another, or in this case, does not mean they are not correlated. Her explanation of the graph is political and as far as I can tell the graph not only doesn’t illuminate her point. The graph doesn’t seem to make any point at all.

Perhaps the most misleading graph comes from Peter Thiel. His graph indicates that as student loan debt has increased, the median income of households with a bachelor’s degree has declined. The problem? The two lines on the graph are on different scales! The median income line is shown per household. The student debt load line is across the entire population. They aren’t comparable.

To make sense, the student debt load should instead be shown on a per household basis. College enrollments have increased steadily over the time frame of the graph, so of course debt load in total will be increasing. And, as a wider base of students pursue degrees, it would be expected that median income might be impacted downward. This is not to say that student debt is not an important issue – as it clearly is. But, this graph seems to take the focus off student debt and indicate that college education does not pay off.

So, what would I have picked as my graph of the year? Actually, I can do it one better. I have a graph that I consider to be the best graph of all time.  It comes from Gallup and is shown in the graph below. (It is best to go to Gallup’s site and click on “historical trend” to view this graph, which shows up-to-date tracking through Obama.)

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This graph shows the Presidential approval rating tracked since modern polling began. It begins with Harry Truman and on Gallup’s site it runs right up to Obama’s current numbers.

I like it because it is a clear and consistent measure over a long period of time. To me, it is fascinating to look at with a mind towards what was going on historically as the polls were taken. It shows how memories can change as events move to the past. For instance, G.W. Bush’s approval rating was nearly the highest ever measured early in his Presidency (just after 9/11) and moved to one of the lowest ever measured by the time he left office. Clinton is the only President whose approval rating displays a positive trend throughout his term in office. Kennedy’s approval rating was moderate by historical standards near the end of his time in office.

To me, it is fascinating to think of a historical event and then look at the chart to see what happened to approval ratings.Watergate preceded a large drop in Nixon’s ratings, and Ford’s pardon of Nixon did the same. Once WWII was over and the US became mired in Korea Truman’s popularity took a huge hit. Eisenhower’s ratings were very stable compared to others.

All Presidents start office with their approval ratings at their highest. It seems that the first day on the job is the best day. Which may be why the first 100 days is always considered key to any Presidential agenda.

Although graphs may be best judged by their ability to convey one thought, I find that I can stare at this one for hours.