Smell the supply and demand?

The New York Times says Japan is running out of engineers. My response:

The red line is the number of people who study engineering. The blue line is the number of engineers that Japanese industry demands at the given salary. If we are at the light blue line, firms want more engineers than Japanese universities produce. In this situation, firms will raise the salary they pay to engineers, more students will enter the now more lucrative field, and we will end at the market clearing yellow line.

My guess is that the equilibrium used to be a a higher number of engineers, and the government is worried. In an efficient market, labor will go where it is most socially useful. The New York Times seems to think that the migration of workers to the arts and service industries is a bad thing, but here in Taiwan Japanese art is everywhere, from the fashion on the streets to the J-Pop on the radio. If Japan is a cultural force here in Asia, why not let that part of the economy grow stronger?

One of the key early insights in Economics was that in any voluntary transaction, both parties are made better off. Markets aren’t zero-sum games. If Japanese are choosing to pursue non-engineering careers, it might change the composition of Japan’s economy, but that isn’t a bad thing. In fact, students’ choice of other careers is making the Japanese (as a whole) better off.

Clerics Schmerics

I posted the following comment to Edward Luttwak’s editorial on the New York Times website:

Although it is true that even if Mr. Obama becomes president the United States will be viewed with distrust abroad, Mr. Luttwak’s analysis of how Muslims will perceive Mr. Obama is wide off the mark. The Middle East is not a monotone swath of fiery clerics and their mindless followers. I spent last year in Turkey and met a wide variety of Muslims. Many Turks both enjoy their national alcoholic beverage raki with fish and attend mosque services on Friday afternoons. The idea that Turkish police would refuse to protect Mr. Obama because of some obscure Sunni cleric’s sharia decision is patently ridiculous.

Mr. Luttwak gives examples of state persecution in Iran and Afghanistan. Those two countries are indeed very repressive Islamic states. Most Muslim countries are not devastated war zones like Afghanistan or run by clerics like Iran. Judging how Mr. Obama will be perceived in the Middle East by referencing “jurists of all Sunni and Shiite schools” is like judging how President Gul of Turkey will be received in the United States by reading what the far Christian right thinks of Islam.

Religions are not monolithic unchanging institutions, and culture isn’t easily deciphered by reading religious scripture in Maryland. However Mr. Obama’s religion is perceived abroad, the very fact that he is not President Bush will instantly improve America’s image throughout the Muslim world.

Luttwak’s mistake is seeing the world as more black and white than it really is. This common misperception is apparently also one of the reasons that conservatives are happier than liberals.

The Value of a Harvard Education

The author of this New York Times editorial is making fun of Harvard dynasties and the increasingly tiny chance anyone has of getting in, but it got me thinking about something else.  The editorial is a mock acceptance/rejection letter for kids from Harvard families who couldn’t make the GPA cut.  The letter states that although the kids won’t get a Harvard education,  they will be allowed to live on campus for four years and get Harvard “diploma-like” documents at the end.

If the diplomas were real, I would have been very tempted by this deal when I was applying for colleges eight (!) years ago.  Maybe a Harvard education is better than, say, the education I received at Carleton College, but I bet the difference is marginal.  The bulk of the difference reflected in price and selection stems more from the prestige one gets from the Harvard name, and the boost having gone to Harvard will give one in future endeavors.  Both of these factors are on offer in the Times proposed program.

To put it another way, the marginal benefit one gets from a Harvard education as opposed to another school’s education is worth maybe $1000 a year.  The benefit one gets from collectively recalling your Boston years with your law firm colleagues at a SoHo loft party?  Priceless.