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For richer, for poorer: How family structures economic success in America

October 29, 2014 Comments off

For richer, for poorer: How family structures economic success in America
Source: American Enterprise Institute

The standard portrayals of economic life for ordinary Americans and their families paint a picture of stagnancy, even decline, amidst rising income inequality or joblessness. But rarely does the public conversation about the changing economic fortunes of Americans and their families look at questions of family structure. This is an important oversight because, as this report shows, changes in family formation and stability are central to the changing economic landscape of American families, to the declining economic status of men, and to worries about the health of the American dream.

Who’s making money on the Internet? Comparing ROIC across Internet sectors

October 13, 2014 Comments off

Who’s making money on the Internet? Comparing ROIC across Internet sectors
Source: American Enterprise Institute

One of the background questions in Internet policy debates concerns what and who contributes value to the overall system and who extracts profits. In a perfectly functioning market, profits will reward innovation, investment, and the creation of value for users; unfortunately, there exist very few perfect markets. A number of things distort market efficiency; government policy is certainly one such thing, and market power is another.

Return on invested capital (ROIC) is a very good way to evaluate competition, profitability, and leverage in capital-intensive industries.

According to Morningstar, firms with 15 percent or more ROIC for a number of years are most likely have a “moat” that protects them from competition.

So let’s look at three sectors: content creators such as Disney and Viacom, who create the movies and TV shows that we stream into our homes; network services firms such as Comcast and AT&T, who provide us with broadband networks; and Internet “edge services” such as Netflix and Google, who connect network users with content and services.

Solar radiation management: An evolving climate policy option

June 7, 2013 Comments off

Solar radiation management: An evolving climate policy option

Source: American Enterprise Institute

Measures to reduce greenhouse gas (GHG) emissions have long dominated public discourse about responses to man-made climate change. However, major institutional and political hurdles dim future prospects for controlling emissions. While adaptation to climate change can accomplish much, flawed institutions are likely to limit its efficacy.

Solar radiation management (SRM) appears to promise at least some capacity to offset the warming caused by the rising atmospheric GHG concentrations. SRM would seek to enhance and manage physical processes that currently reflect sunlight back into space. For example, most researchers have envisioned implementing this concept by adding to the layer of sulfuric acid that is already present in the lower stratosphere. All else remaining equal, global mean temperatures would fall even though GHG levels would not; the Intergovernmental Panel on Climate Change estimates that physical processes such as these already offset about 40 percent of global warming. By lessening the rise in temperature, SRM might lessen some of the risks of global warming.

Preserving Medicare for Future Generations: Market-Based Approaches to Reform

April 22, 2013 Comments off

Preserving Medicare for Future Generations: Market-Based Approaches to Reform

Source: American Enterprise Institute via Robert Wood Johnson Foundation

These Robert Wood Johnson Foundation-supported reports from the American Enterprise Institute highlight market-based solutions to Medicare’s sustainability crisis and the inherent inefficiencies of the current system.

The nonpartisan Congressional Budget Office (CBO) projects the cost of providing benefits to Medicare enrollees will increase at an annual growth rate of 7 percent, reaching at least $1 trillion in fiscal year 2022.

America’s fee-for-service Medicare program represents the third-largest category of federal spending and has been under scrutiny for decades for spending more on health care benefits for enrollees than taxes can generate to pay for them. The CBO estimates that over the next 10 years, the number of Medicare enrollees will increase by one-third—approaching 67 million Americans.

Initiatives for containing the cost of higher education

April 19, 2013 Comments off

Initiatives for containing the cost of higher education

Source: American Enterprise Institute

How to contain the cost of colleges and universities is attracting much attention in higher education policy circles. The reasons for the attention are not hard to fathom. Students and parents labor under ever-rising tuition rates. Schools feel they must spend more in real terms to build or protect their brand, by boosting faculty research and scholarship, enhancing the student experience, and so on. And to round out the perfect storm, most states are curbing higher education appropriations because of rising budget pressures.

The result is that many colleges and universities are experiencing financial difficulties in spite of yearly tuition increases—difficulties that often erode the quality of undergraduate learning. For example, restricted course offerings, large class sizes, and a high proportion of classes taught by adjuncts and other casual-payroll teachers are common features of the undergraduate experience at many universities. Faculty feel ever more stressed by these money-saving changes—which makes it more difficult to achieve innovations in the methodology and culture of teaching or even to sustain current levels of quality.

Failure to change will make traditional universities vulnerable not only to political forces but also to disruptive innovations from for-profit universities and online offerings. In time, much of the traditional sector will be seriously weakened, or worse, if it does not reinvent itself. Many, including myself, believe this would be extremely unfortunate because it would strand massive amounts of human and physical capital, damage our global competitiveness, and deprive both the best and most vulnerable in our population of the face-to-face teaching and mentoring that are best delivered in a campus setting.

So far, however, more has been said than done. The lack of traction is a major problem for students, their families, and the state and federal agencies that fund higher education. So what is to be done? The good news is that traditional campuses do not lack for opportunities to effect needed improvements. The bad news is that organizational and market forces work to sustain the status quo.

See also: Addressing the declining productivity of higher education using cost-effectiveness analysis

See also: Public policies, prices, and productivity in American higher education

The Truth Behind Higher Education Disclosure Laws

November 14, 2011 Comments off

The Truth Behind Higher Education Disclosure Laws
Source: American Enterprise Institute

Recognizing that higher education is a market driven by consumer choice and reluctant to regulate college behavior directly, state and federal policymakers have created a host of college information disclosure and reporting requirements. Armed with better data, the theory goes, students and parents will vote with their wallets, putting pressure on low-performing colleges to improve while avoiding direct government intervention.

The problem, according to Education Sector’s Kevin Carey and Andrew P. Kelly, a research fellow at the American Enterprise Institute, is that the reporting requirement provisions are not working nearly as well as intended. In The Truth Behind Higher Education Disclosure Laws, to be released this Thursday, Carey and Kelly investigate scores of four-year colleges and universities to gauge their compliance with the information requirements of the Higher Education Opportunity Act.

The researchers examined five areas of strong interest to policymakers and the general public:

  • Pell Grant graduation rates;
  • Credit transfer and articulation agreements;
  • Employment and graduate school placement;
  • Textbook prices; and
  • Private student loans.

Researchers first looked at each school’s website for the elements of the disclosure provisions. For those elements that were not publicly available, researchers contacted the colleges via phone or email.

Carey and Kelly found that compliance rates vary widely. There is nearly universal compliance on the requirement that schools post their credit transfer criteria (99 percent). But just 25 percent of institutions meet the requirement that schools disclose the six-year graduation rate for students who receive a Pell Grant.

+ Full Paper (PDF)

Linking Costs and Postsecondary Degrees: Key Issues for Policymakers

September 17, 2011 Comments off

Linking Costs and Postsecondary Degrees: Key Issues for Policymakers
Source: American Enterprise Institute
From press release:

With the costs of college rising, policymakers and institutional leaders have struggled to cut spending while improving student-success rates. In “Linking Costs and Postsecondary Degrees: Key Issues for Policymakers” (published by AEI’s Future of American Education Project), Nate Johnson offers practical advice for decision-makers struggling to rein in college costs while improving productivity. Johnson, who previously served as executive director for planning and analysis for the State University System of Florida, currently works as a higher education policy consultant with a particular expertise in effective cost management.

Johnson provides a step-by-step guide to different approaches for calculating costs. He highlights the tremendous variability in cost across programs within institutions, and documents some of the “hidden costs” of higher education. Rather than cut budgets across the board, as many cash-strapped schools have done, officials should make budget decisions based on clear and reliable data that prioritize performance and productivity, Johnson argues.

Johnson offers five simple “rules of the road”:

  • Acknowledge that different degrees do not all cost the same. Decision-makers should keep the variability in program and degree cost in mind as they seek to reduce spending and balance budgets.
  • Private-sector colleges and universities show where growth in enrollments is possible even without massive state subsidies. Policymakers would be wise to examine what private colleges are doing and how much it costs them to do it.
  • Larger institutions are less costly because they benefit from economies of scale. Smaller institutions may be able to share facilities or merge entirely.
  • Policymakers must distinguish between enrollments and degrees. Low-cost, high-enrollment programs with low rates of student success can be a false bargain.
  • Past program performance may not be the best indicator of future success. Institutions with high costs per degree may have the most room for productivity gains.

+ Full Paper (PDF)

See also: Opportunities for Efficiency and Innovation: A Primer on How to Cut College Costs

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