Credentials Matter

November 22, 2010

A political movement suspicious of higher education is gaining traction in the United States.  I’m referring to scorn directed at people with high education credentials.

A couple of recent comments left on Currency Thoughts appear to reflect this kind of anti-elitism.  One on U.S. Deflation Risk: Fact or Fancy objects to the use of the consumer price index in the article’s analysis because of the Boskin distortion.   Michael Boskin headed a commission that concluded in 1996 that America’s CPI intrinsically distorted true inflation upward, and his recommendations to correct for that factor were implemented.  The complaint that the Boskin refinements were politically inspired and distorting themselves has much merit.  For further background material on the Boskin factor, click here. 

Questioning the motivation for the Boskin adjustments is not anti-elitist.  The comment, however, calls any examination of the CPI’s trend “foolish” and suggests one “look at the cost of living for honest people (not government).”  Taking the first point, let’s just suppose that the Boskin changes do in fact yield CPI inflation rates that are 1 percentage point lower than true inflation, that is that they adjust for a phantom upward bias in the index as it was measured previously.  Then every CPI point would be about a percentage point lower than true inflation.  Such a constant distortion for all readings would not render information meaningless regarding how CPI inflation has changed in recent years. 

The comment suggests that the producer price index or Big Mac index of the Economist be used instead.  The PPI is much more volatile than the CPI, posting successive December-over-December changes of 1.1% in 2006, 6.2% in 2007, minus 0.9% in 2008 and 4.3% in 2009.  The Economist readily considers its Big Mac index a simplification, and its editors do not release the measure on a regular and timely basis.  A third alternative, the core private consumption deflator, which Fed staff officials favor, has also decelerated, depicting the same pattern as the CPI.  From 3.3% in December 2008, the core PCE price index slowed to 1.5% a year later 2009, 1.0% annualized over January-September of this year, and 0.7% annualized between June and September of this year.

Let’s now consider the assertion that people in the government are dishonest.   Does that include everyone paid by the government, every member of the armed services, every worker in the CIA, every bureaucrat or elected officials at the federal, state, and local levels?  Must we conclude that the expression “honest Abe” is an oxymoron?  Is the corollary that all private-sector workers are necessarily honest equally true?  So we are supposed to believe that Dick Cheney was a crook while a congressman and in the Ford and Bush administrations but a decent, hard-working, honest guy when he was the Chairman of Halliburton Corporation?  I’d like to think that the common denominator of workers in the public and private sectors, namely human beings, run a whole spectrum from dishonest to honest regardless of where they work.

The other comment left on Currency Thoughts is less subtle in its stereotyping.  In response to my weekly currency article penned on November 19 that observes the heavy criticism Chairman Bernanke has received from people with fewer academic credentials than he, Currency Thoughts received the following mail:

I would take the word of any high school grad with some common sense above the out of touch opinion of PhD Bernanke any day. Clearly, a PhD is not all it is cracked up to be.


Bernanke, like Boskin, has a top-flight academic pedigree.  He earned a B.A. at Harvard and a doctorate from MIT.  His specialty was monetary economics, and his dissertation examined monetary policy during the Great Depression.  He’s been on the faculties of Stanford, NYU, and Princeton, and was both a Fed governor and Chairman of the Council of Economic Advisors before becoming Fed Chairman in early 2006.  To get accepted to Harvard, he already had considerable achievements: winning the South Carolina spelling bee at age 11, teaching himself calculus from a book when the course wasn’t offered by his high school, and receiving the state’s top SAT score.  Somehow that should not be deemed incompatible with basic common sense.  Besides, a lot of common sense is intuitive, but much of economics is not, so having common sense is not sufficient. 

Credentials matter in many fields and always have.  The managed health care system, which the Tea Parties want retained in full, is a prime example.  Health insurers go to extensive lengths back-checking and cataloguing the earned qualifications of doctors in their plans.  The first generation of Americans recognized the importance of credentials.  The first president was a national hero, demonstrating leadership skills as general of the continental army.  Among the next five presidents, two were Harvard graduates, two had gone to William and Mary, and the other was a graduate of Princeton. 

To be against the coastal elites is to be against education and to favor street smarts over a formal education.  That way of thinking can lead to school budget cuts and, in the extreme, book burning.  It is the way of a playground bully where all too often, intimidation and brute force succeed better than hard study.  From the perspective of a national workforce, an ideology that scorns education and the intelligencia is a recipe courting disaster.  For a century starting with America’s post-civil war industrial revolution, the country held a clear lead in measures of education from both a commitment and a results standpoint.   That leadership was the basis for the country’s success.  If those values are discarded, if voters most respect the views of uncredentialed talk-show hosts and politicians, it will get harder and harder for the United States keep up with the competition.


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