Andrew Ruapp reached out to me about a possible error in my post. He presented some evidence that the term STEM has been used prior to 2001. Casually Googling the topic did not bring me to a reputable source for the claim I had made last week. “SMET” is comically bad. So, I did start to wonder if it had never been officially used at the NSF and was just a funny story getting repeated online.
To solve this problem, I reached out directly to the person who was credited with making the transition. Dr. Judith Ramaley is currently President Emerita and Distinguished Professor of Public Service at Portland State University.
Having her permission to share, here is our email correspondence:
Encouraged by her reply, I looked online and found a public NSF document from 1998 that clearly uses SMET.
Lastly, I asked her several questions, in a mini email interview:
Are you surprised by how widespread the STEM term has become?
Ramaley: I wasn’t surprised because once NSF adopted the new acronym, I expected it would catch on.
2. Do you feel that the “STEM” brand has been successful?
Ramaley: STEM isn’t really a brand. It is simply an acronym. It works better than SMET I think because engineering and technology are framed by science and mathematics rather than trailing along behind as if less important. I am fascinated by the growing pressure to add other elements to STEM, making it STEAM, for instance.
3. My son in 2nd grade goes to a STEM activity class once a week. (They just call it “STEM.”) This week he tells me they are working on a pollination project. Would you recommend anything different than the current system for encouraging American students to pursue technology fields?
Ramaley: Your third question is a sweeping one. It would help to know what a STEM activity means each week in your son’s second grade class. I am drawn to ways of learning STEM that encourage students to approach these issues in an inquiry-based way that lets them explore what it means to ask interesting questions and work out ways to try to answer them. Young people are very curious about how the world works. I doubt that I need to tell you that since I bet your son sometimes drives you nuts with WHY and HOW questions. Questions like that are beautiful questions.
Black families are the poorest major racial or ethnic group in the US. With a median income of $59,541, a Black family only has about 59 percent of the income of a White, Non-Hispanic family. That’s the same proportion, 59 percent, as was true in 1972, the earliest date that we have comparable data. (For most of the data in this post, I will be using Table F-23 from the Census Bureau’s Historical Income Tables.) That’s almost 50 years with no closing of the racial gap in total money income for families.
Of course, what this also means is that family incomes of both Black and Whites grew at the same rate from 1972 to 2021. They both are about 50 percent larger than in 1972, and that’s after accounting for inflation (using the CPI-U-RS). As a first point of optimism, this very much goes against the typical narrative of income stagnation since the early 1970s.
To be sure, some of this growth is because families have more earners today, but even so: they have a lot more income. Having two earners does mean that you must spend more on some consumption categories, such as daycare when kids are young, possibly more on dining out or prepared meals. But even with those additional expenses, these families will have significantly more disposable income than their 1970s counterparts.
There is an ever more optimistic fact that we need to point out for Black families today: there are many, many more rich Black families today than in 1972. There are more rich families in absolute terms and as a proportion of the total. Here is the basic data from the Census Bureau (it goes back to 1967, the earliest date available for Blacks).
Why does the average drinker consume alcohol? There are plenty of reasons, one of which is social. Alcohol, while inhibiting clarity, precision, and discretion, is a social lubricant. If you’re one of those drinking, then it’s enjoyable to be around other drinkers. Also, people build the habit of drinking *something* while socializing. We all know that prohibition resulted in bootlegging and tainted cocktails. But what were the legal alternatives? One was that you could purchase grape juice and make your own wine (that’s a story for another time). Another is to switch to another drug.
Alcohol is a depressant and arguably the most popular one in the US. It’s not a clear substitute for alcohol in terms of its direct effects on the body. However, it’s a liquid, safe, and tasty. That make is a good candidate for satisfying the physical urge to imbibe. But, importantly, it is also a social drug. People would get so hopped up on coffee and feed off of one another’s high that Charles the II of England banned coffee houses in order to prevent seditious fomentation. This brings us to an important characteristic of coffee. It’s a stimulant. You’d think that a stimulant would not be a substitute for alcohol. If anything, one might think that they are complements. Coffee helps to provide that kick in the pants after having an enjoyable night. But, the social feature makes coffee a good candidate to substitute alcohol, should the times be dire.
Illegal activity aside, people wanted an outlet for their physical and social proclivities. They wanted intoxication. Coffee provided exactly that. Conveniently, the continental US didn’t grow any of its own coffee. That means that imports and domestic consumption have a tight relationship.
One hundred years ago, the British writer G.K. Chesterton traveled to the United States for a lecture tour. He published his observations of America in What I Saw in America (1922). In an essay titled “The American Businessman”, Chesterton notes with surprise how passionate Americans appear about their professional work.
Chesterton recognizes this enthusiasm for work as more than mere greed.
This is the intro to my latest article for the OLL Reading Room. I discuss the American work ethic and Chesterton’s prescient insight into American economic dynamism compared to Britain. (Relatedly, Alex on British stagnation this week.)
Here’s a fun bit of the book that I didn’t include in the OLL article. Chesterton wrote this about seeing New York City for the first time:
But there is a sense in which New York is always new; in the sense that it is always being renewed. A stranger might well say that the chief industry of the citizens consists of destroying their city; but he soon realises that they always start it all over again with undiminished energy and hope. At first I had a fancy that they never quite finished putting up a big building without feeling that it was time to pull it down again; and that somebody began to dig up the first foundations while somebody else was putting on the last tiles. This fills the whole of this brilliant and bewildering place with a quite unique and unparalleled air of rapid ruin.
The scars of Hurricane Katrina were still obvious eight years afterward when I moved to New Orleans in 2013. Where I lived in Mid-City, it seemed like every block had an abandoned house or an empty lot, and the poorer neighborhoods had more than one per block. Even many larger buildings were left abandoned, including high-rises.
Since then, recovery has continued at a steady pace. The rebuilding was especially noticeable when I spent a few days there recently for the first time since moving away in 2017. The airport has been redone, with shining new connected terminals and new shops. The abandoned high-rise at the prime location where Canal St meets the Mississippi has been renovated into a Four Seasons. Tulane Ave is now home to a nearly mile-long medical complex, stretching from the old Tulane hospital to the new VA and University Medical Center complex. There are several new mid-sized health care facilities, but most striking is that Tulane claims to finally be renovating the huge abandoned Charity Hospital:
Old Charity Hospital, January 2023
The new VA hospital opened in 2016 as mostly new construction, but they’ve now managed to fully incorporate the remnants of the abandoned Dixie Beer brewery:
VA Hospital incorporating old Dixie Beer tower, January 2023
Dixie beer itself opened a new beer garden in New Orleans East, and just renamed itself Faubourg Brewery. Some streets named for Confederates have also been renamed, though you can still see plenty of signs of the past, like the “Jeff Davis Properties” building on the street renamed from Jefferson Davis Parkway to Norman C Francis Parkway.
Statue of Diana, Original Sculpture GardenPart of the Expanded Sculpture Garden
Of course, even with all the improvements, many problems remain, both in terms of things that still haven’t recovered from the hurricane, and the kind of problems that were there even before Katrina. The one remaining abandoned high-rise, Plaza Tower, was actually abandoned even before Katrina.
My overall impression is that large institutions (university medical centers, the VA, the airport, museums, major hotels) have been driving this phase of the recovery. The neighborhoods are also recovering, but more slowly, particularly small business. Population is still well below 2005 levels. I generally think inequality has been overrated in national discussions of the last 15 years relative to concerns about poverty and overall prosperity, but even to me New Orleans is a strikingly unequal city; there’s so much wealth alongside so many people seeming to get very little benefit from it.
The most persistent problems are the ones that remain from before Katrina: the roads, the schools, and the crime; taken together, the dysfunctional public sector. Everywhere I’ve lived people complain about the roads, but I’ve lived a lot of places and New Orleans roads were objectively the worst, even in the nice parts of town, and it isn’t close. The New Orleans Police Department is still subject to a federal consent decree, as it has been since 2012. The murder rate in 2022 was the highest in the nation. Building an effective public sector seems to be much harder than rebuilding from a hurricane.
As much as things have changed since 2013, my overall assessment of the city remains the same: its unlike anywhere else in America. It is unparalleled in both its strengths and its weaknesses. If you care about food, drink, music, and having a good time, its the place to be. If you’re more focused more on career, health, or safety, it isn’t. People who fled Katrina and stayed in other cities like Houston or Atlanta wound up richer and healthier. But not necessarily happier.
Gordon starts by recapping four recent financial bubbles:
The commercial real estate bubble of the mid-1980s
The internet stock craze of the late 1990s (with the highest price/earnings valuations ever – – e.g., a startup called Netbank possessed nothing but a website, yet was valued at ten times book value; and went bankrupt a few years later)
The mid-00s housing bubble.
The 2020/2021 COVID bubble: “The trifecta of a ‘disruptive business model’ stock bubble, SPACs and crypto. You know how this story is ending.”
Gordon then presents an explanation of why humans keep doing financial bubbles, despite the experiences of the past. He suggests that there are both bubble addicts, who have a need to chase bubbles and therefore create them, and bubble enablers who are only too happy to make money off the addicts.
THE BUBBLE ADDICTS
The greedy. Some of us just think we deserve more. I think of an acquaintance who said he was approached to invest with Bernie Madoff, who famously promised steady 10% returns. My friend turned down the offer because he required 15% returns.
Pension funds. This $30 trillion pool of investment dollars targets about a 7% return in order to meet future pension obligations. If pension fund managers can’t consistently earn at least 7%, they have to go to their sponsor – a state government, a corporate CEO, etc. – and ask for more money, or for pension benefits to be cut. And probably lose their job in the process.
Back in the day, bonds were the mainstay pension fund investment. But over the past 20 years, bond yields haven’t gotten the pensions anywhere close to 7%. So increasingly they have invested in stocks and alternative investments like private equity, as this chart shows:
And venture capital fundraising, in large part from pension funds, has soared since the pandemic…
How many great new ideas are out there for venture capitalists to invest in? [Obviously, not an unlimited number]. So their investments are by necessity getting riskier. But if the pension funds back away from the growing risk, they have to admit they can’t earn that 7%. Then bad things happen, to retirees and to pension plan sponsors and then to pension fund managers. So pension fund managers are pretty much addicted to chasing bubbles.
The relatively poor. The “absolutely poor” have income below defined poverty levels. The “relatively poor” feel that they should be doing better, because their friends are, or their parents did, or because the Kardashians are, or whatever. Their current income and prospects just aren’t getting them to the lifestyle they aspire to. [Gordon provides example of folks chasing meme stocks and crypto, and getting burned]. …But can the relatively poor just walk away from chasing bubbles? Not without giving up dreams of better lifestyles.
THE BUBBLE FEEDERS
Bubbles don’t just spontaneously occur; they require skilled hands to shape them. And those skilled hands profit handsomely from their creations. Who are these feeders?
Private equity and venture fund managers. They typically earn a 2% management fee plus 20% of profits earned. That adds up fast. A $10 billion venture fund could easily generate $400 million a year in income, spread among a pretty small group of people. VC News lists 14 venture capitalists who are billionaires.
SPAC sponsors. [ A SPAC (Special Purpose Acquisition Company) is a shell corporations which raises money through stock offerings, for the purpose of going out and buying some existing company. SPAC sponsors make a bundle, and so are motivated to promote them. SPACs proliferated in 2020-2021, and for a while pumped money into acquiring various small-medium “growth” companies. But now it is clear that there are not a lot of great underpriced companies out there for SPACs to buy, so SPACs are fizzling]
Wall Street earns fees from (A) raising funds for private equity, venture capital and SPACs, (B) buying and selling companies, (C) trading bubble stocks, crypto, etc., and (D) other stuff I’m not thinking of right now.
The Federal Reserve. Part of the Federal Reserve’s mandate is to reduce unemployment. Lowering interest rates increases stock values, which creates wealth, which drives the “wealth effect”. The wealth effect is the estimate that households increase their spending by about 3% as their wealth increases. More spending increases GDP, which reduces unemployment, which makes the Fed happy, and politicians happy with the Fed.
In my view, the wealth effect is why the supposed economic geniuses at the Fed never figure out that bubbles are occurring, so they never take steps to minimize them.
Social media and CNBC certainly benefit from more viewers while bubbles are blowing up [i.e., inflating].
INVESTING IN CURRENT MARKET ENVIRONMENT
Gordon sees us still in recovery from the recent bubble of “disruptor companies” and crypto, and so the market may have more than the usual choppiness in the next year. So he advises being nimble to trade in and out, and not mindlessly commit to being either long or short. “Value stocks are probably the best near-term bet, even if they can’t offer the adrenaline jolt offered by bubble stocks.”
English philosopher G.K. Chesterton traveled to America for a lecture tour. His observations are recorded in What I Saw in America (1922).
The book is not primarily about Prohibition nor is it mostly critical of America. He wrote one of his essays on Prohibition, which begins as follows:
This was 100 years ago, so start with this summary of the facts from Britannica:
Prohibition, legal prevention of the manufacture, sale, and transportation of alcoholic beverages in the United States from 1920 to 1933 under the terms of the Eighteenth Amendment. Although the temperance movement, which was widely supported, had succeeded in bringing about this legislation, millions of Americans were willing to drink liquor (distilled spirits) illegally…
Chesterton clearly is not a teetotaler, and I will not argue for or against temperance here. What was counterproductive about Prohibition is that elites passed a law that they would not abide by themselves.
Consider the decision by an individual to drink or not drink. For many people, drinking is social. If your friends are meeting at a bar, then you will drink at the bar to be with them. If your friends are going hiking with water bottles, then many people can pass the day without alcohol happily. We can model a game called Meeting Friends that has multiple equilibria.
Borrowing from Myerson (2009):
In such games, Schelling argued, anything in a game’s environment or history that focuses the players’ attention on one equilibrium may lead them to expect it, and so rationally to play it. This focal-point effect opens the door for cultural and environmental factors to influence rational behavior.
There was an opportunity for American elites to move social life to a new focal point after the 18th Amendment was passed. They could have led by example. Laws that do not follow norms cause problems, such as a large prison population arrested for drug offenses today. In 2021, I wrote about why attempts at drug prohibition helped the Taliban defeat the US coalition in Afghanistan.
On Twitter, folks have been supporting and piling on to a guy whose bottom line was that we are able to afford much less now than we could in 1990 (I won’t link to it because he’s not a public figure). The piling on has been by economist-like people and the support has been from… others?
Regardless, the claim can be analyzed in a variety of ways. I’m more intimate with the macro statistics, so here’s one of many valid stabs at addressing the claim. I’ll be using aggregates and averages from the BEA consumer spending accounts.
Today as I gave my last final and took my kids to a huge school party, it struck me that things are finally back to something like 2019 levels of normality.
2020 was a lost cause, of course. I had high hopes for 2021 that vaccines would immediately get us back to normal. They did get my school back to fully in-person by Fall 2021, but not really back to normal, partly thanks to the variants. My students were out sick more than normal, and I was out watching my sick kids more than normal, as every cold meant they would be home until the school was sure it wasn’t Covid. Toward the end of the Spring 2022 semester worries were subsiding, and my state was pretty much fully re-opened, but things still weren’t really back to normal. Student attendance and effort were still way below normal, partly from the lingering effects of Covid, and partly from celebrating its end- partying to make up for lost time (and cheering on a great basketball team).
Fall 2022 finally felt like a basically normal semester. I still see the occasional mask, still hear from the occasional student out with Covid, and still have one kid missing 2 school days with every cough (policies stricter than 2019, but much relaxed from the days when both kids were at schools that could have them miss 5+ days with every non-Covid cough). Overall though student attendance and effort are back to what seem like normal levels. Up to Spring 22 I’d have students just disappear for a few weeks, not in class, not answering e-mails about why they weren’t showing up or completing work, needing lots of help to get on track once they finally reappeared. This Fall that didn’t happen; in my Senior Capstone everyone turned in a quality paper basically on-time and without me having to chase anyone down for it. Also, everyone just seemed happier now that their stress levels are back down to the baseline for college students.
This semester was nothing special- and that was beautiful.
Economist Writing Every Day 
