More Newt

It turns out that the new ideas maven also does tired clichés:

Winning the challenge of China and India will require profound domestic transformations, especially in math and science education, for America to continue to be the most successful economy in the world and the best source of high paying jobs and enough economic growth to sustain the Baby Boomers and their children when they retire.

I'm consistently baffled by the invocation of China and India in this context; I'd love for somebody to write up a model for me in which the optimal level of US investment in math and science education is increased by an increase in the number of Asian scientists and engineers. If anything, it should be the reverse, right? If engineers are scarce, then a country with a lot of engineers will be a country with a lot of relatively well-compensated people. But if the supply of foreign engineers is going to increase at an astounding rate in the near future, then engineering won't be as relatively lucrative as it is today so it makes sense to cut back on our investment in educating engineers.

Comments

I have repeatedly claimed that I can come up with an economic model with any implication you choose, but that is a tough one. I can think of two ways to make it work.

One is Marshallian spillovers imply increasing returns to engineers world wide. Basically we might benefit twice from our engineers if they invent stuff and China and India have enough engineers to adapt that stuff to labor abundant economies and we get more cool stuff from them (I mean what would be the point of inventing the internal combustion engine without Toyota to make decent cheap cars).

I don't think this is what Newtie had in mind.

The other is subsidizing education of engineers is a way to subsidize tehcnology intensive industries which might make sense as strategic trade policy. This is clearly what he has in mind (why is it that Republicans can be counted on to be against free markets ?). This would mean that we have to keep ahead so as to keep all of the high wage high profit margin production in the USA (except bit late for that eh). It can be made to work if we are at a sweet spot of the grabbing rents with subsidies curve and should stay there. As the amount of subsidies needed to keep that share of the good jobs industries in the USA increases in the number of Chinese and Indian engineers the desired result obtains.

Actually to get closer to a semi serious model, the claim must be that the elasticity of market share with respect to subsidies decreases in current market share. Thus the better other countries are at making the goods associated with rents (high profits or high wages given worker characteristics) the higher is the optimal subsidy.

In this neo-mercantalist model it doesn't matter whether the subsidy is of the form of paying to train engineers or cash later provided that engineer intensive industries generate high rents.

It is possible to write models in which mercantalists are right (you should look at "Industry Rents: Evidence and Implications" by Larry Katz and Larry Summers Brookings Papers on Economic Activity:Microeconomics 1989 209-75 which I think is the same as "Can inter-Industry Wage Differentials Justify Strategic Trade Policy" in a book except Summers was advising Dukakis and said the phrase "Strategic Trade Policy" was a no no).
You will noticed that Summers was not convinced by Katz and Summers.

Posted by Robert Waldmann | June 1, 2007 11:04 PM

Plus, we can import the Chinese and Indian scientists and engineers.

Even if we did boost math and science scores up significantly, that would probably just mean we have more lawyers, sales people, and managers who know how to take derivatives and compute integrals. I am not really sure if that would really improve things.

Until science and engineering careers become more appealing to Americans as careers, increasing math and science scores really won't increase the number of people going into careers that they really don't want to go into. It will only make people in other careers have better math and science knowledge, which isn't a bad thing, but Matt, when was the last time you took a derivative of anything. The whole math and science skills thing isn't nearly a marketable as a lot of non scientists and engineers seem to think.

Posted by Mark | June 1, 2007 11:16 PM

Better math and science scores aren't meant to benefit students, they're meant to benefit the students' future employers.

There's also a belief in a trickle-up effect in which having a lot of technically-proficient people (scientists and engineers, but also adept hobbyists) can lead to scientific and engineering developments that create entire new industries (which will go on to hire those students who graduated with the high math and science scores). Silicon Valley. Massachusetts Miracle.

This all begs the question as to whether increased test scores actually imply increased proficiency in the critical areas of insight and creativity, but they're a convenient streetlamp beneath which to seek our lost car keys.

Posted by dm | June 2, 2007 2:51 PM

There's also seemingly no huge connection between absolute numbers of engineers/scientists and competing with China or India. Pure numbers of engineers/scientists simply doesn't always translate to economic growth, wealth or progress. Russia has always had a big emphasis on engineering education since at least the 19th century, and has nearly always also been lagging the rest of Europe economically.

Posted by burritoboy | June 2, 2007 7:47 PM

I certainly think it is a very good idea to invest more in education of scientists and engineers. The challenge, however, was to explain why this is an even better idea than it would be if China and India weren't developing so rapidly. My comment was meant to imply that this is, as argued by our host, a very dumb argument. Actually, after further thought, I think of a model justifying Gingrich's cliché which isn't so absolutely absurd.

One can argue that the services supplied by scientists and engineers in Chindia complement the services supplied by scientists and engineers in the USA even if they all have the same knowledge and skills.

The argument is that the most profitable use of engineers in poor countries is to assist the adoption (imitation if you want to be rude) of rich country technology -- that they are needed to design factories and to explain to untrained workers what to do with such factories. In rich countries, these needs are met and, besides, it takes fewer engineers to expand a factory than to design a new one (one can copy the old part) and many fewer to train new workers if the firm employs experienced workers who have learned on the job and can show the new workers what to do. Also chindian engineers might profitably spend their time adapting the technology appropriate to capital rich labor poor countries to their own labor rich capital poor countries. No sane manager would pay an engineer to do any such thing in rich countries.

Thus engineers in the USA are likely to work on developing new technology -- new products and processes. The increased supply of old products from China and India (from now on Chindia) increases the relative price of new inventions increasing the marginal product of engineers in rich countries.

Thus, even if the engineers are identical except for their location (and language skills) they may provide their employers with services which are different and, indeed, complementary.

Can such a model be written ? Sure. Do I believe it is relevant to the real world. Certainly not.

Posted by Robert Waldmann | June 3, 2007 8:01 AM