I have a lot to say in response to Bill on this topic. In fact, I was
too fascinated with the topic to sleep well last night. I'm going to
begin by answering a few specific points, then give one longer post.
William Dickens wrote:
>
> If the decision is literally a "no-brainer," then failing to consider
> alternatives is rational.
>
> >>>??!!! Not if they make the wrong choice! OK, I suppose you are going to argue
>that all the people who didn't have a clue what the return to continuing their
>education was are the ones for whom it was a no brainer and the ones who were about
>to drop out all answered my questions correctly. I can't prove that wrong but do you
>really believe that was what was going on?
I doubt that the marginal students were more accurate on *average*
returns. But I strongly suspect that the marginal students would have
been more pessimistic about *their own* returns. The students who drop
out are precisely the ones who say and think "I don't know if I'm really
getting much out of college." That thought rarely occurs to stronger
students.
> >>>The only evidence I have on this (my survey of Berkeley undergrads taking
>intermediate macro) suggests that they over estimate the percentage return as well.
>However, I don't think people act on this information. It is my strong impression
>that people tremendously overweight their current feelings of happiness or
>unhappiness about being in school so that on net people don't get as much schooling
>as they should if they were truly utility maximizes.
So what is the behavioral deviation you're talking about? It doesn't
seem to be a judgmental bias problem - that cuts in the opposite
direction. Is it a self-control problem? I think you're conflating
behavioral anomalies with high discount rates and/or high disutility of
school. The latter two are perfectly consistent with utility
maximization.
> - - Bill
>
> William T. Dickens
> The Brookings Institution
> 1775 Massachusetts Avenue, NW
> Washington, DC 20036
> Phone: (202) 797-6113
> FAX: (202) 797-6181
> E-MAIL: [EMAIL PROTECTED]
> AOL IM: wtdickens
--
Prof. Bryan Caplan
Department of Economics George Mason University
http://www.bcaplan.com [EMAIL PROTECTED]
"He wrote a letter, but did not post it because he felt that no one
would have understood what he wanted to say, and besides it was not
necessary that anyone but himself should understand it."
Leo Tolstoy, *The Cossacks*
