Wednesday, September 26, 2012

Economic Debate

1) Should capital gains be taxed? Matt Yglesias argues against (HT: Greg Mankiw); Ezra Klein argues for rates more comparable to income tax rates.

2) Merit pay for teachers? Becker say yes; Posner says no.

A couple things on Posner's response:
The average IQ and home environment of students in different classes may differ significantly, random factors may affect their future success, and there can be spillover effects from other classes.
Good value add studies can deal with the first two points, and variation is also why many recommend tying value add merit pay for a teacher to a running three year average. I am also confused by his discussion of IQ later in the piece; value add studies are meant to control for these sorts of things.

The last point in the above quotation is the most important. How big, exactly, are team effects? And do they matter? They don't matter much at all at the lower grades (usually K-5) because a student has only one teacher, but what about at higher grades? Posner's example:
Suppose for example that a mediocre teacher teaches English, and a superb teacher teaches the same students history. Both teachers require essays. The superb teacher improves the students’ writing skills, and that in turn improves their performance in their English class, making the English teacher look better than he or she really is.
My guess is that if a history teacher significantly improves a student's writing, he is also significantly improving the student's knowledge of history (otherwise he's not exactly doing his job...) and a student's test scores in history will significantly improve, as well. The history teacher will get a bonus if history scores are part of merit pay, so he is still incentivized, but what about the English teacher? If we are talking about high school, the history teacher's students will probably be spread out among all the English teachers. Any increase in writing skills that he imparts above other history teachers will average out and not affect an English teacher's relative position with regards to other English teachers, and the English teachers will just get paid a little more than they should. No problems there.

But what about cases where one history teacher and one English teacher teach the same set of students? Many middle schools have teams set up in this way. Then there is a potential problem if team effects are large because one English teacher's value add score can be artificially inflated by a history teacher on the same team and change the relative quality ranking among English teachers which could affect hiring and firing decisions. Here Posner has a point.

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