Julia Vitullo-Martin offers a calm take on the McKinsey Report and the future of New York's markets, pointing out that even as "New York's relative share of the pie will necessarily decline… its individual piece grows. Far from being in a slump, Wall Street has just closed a year of record profits."

I've argued that the McKinsey report is well and good, but that its recommendations for reform to SarbOx and other regulations that impede American businesses need to be supplemented by changes to the local economic climate, which squeezes every cent it can out of Wall Street, if New York is to remain competitive. Vitullo-Martin offers some sensible advice to the mayor on how to proceed:

That's why the Bloomberg administration should push very hard on an issue it's been studying—New York's high construction costs. Over the past quarter century, the cost of construction increased 300% in New York City—far above the cost increases in any other large American city, according to a December 2006 study for the Manhattan Institute by Urbanomics. In recent years, the cost curve has accelerated, rising from 6% in 2004, to 9% in 2005, to 1% monthly in 2006. Land prices have accelerated beyond all other factors. So far, the administration's main policy response to high costs has been to subsidize housing costs through its affordable housing programs that benefit limited groups. A far better policy would be to benefit all housing markets by analyzing (which the administration is doing) and then combatting the factors making New York construction so much more expensive, including work rules and contractual restrictions, the effects of traffic congestion on material costs, and excessive and duplicative governmental regulations, such as environmental reviews.

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Elsewhere at the Instiute, Jay Greene and Marcus Winters have a damning new report on public teacher pay. Bureau of Labor Statistics data shows that the average public school teacher is paid 34.06 an hour, making more than, among others, nurses, psychologists and urban planners, and 61% more per hour than private school teachers. They also find almost no correspondence between public school teacher pay and graduation rates—and a slightly inverted correspondence between per pupil spending and graduation rates.

In a Journal OpEd elaborating on their findings, Greene and Winters argue not for lower pay, necessarily, but for a pay system that rewards results, not just seniority:

Evidence suggests that the way we pay teachers is more important than simply what they take home. Currently salaries are determined almost entirely by seniority—the number of years in the classroom—and the number of advanced degrees accumulated. Neither has much to do with student improvement.

There is evidence that providing bonuses to teachers who improve the performance of their students does raise academic proficiency. With our colleagues at the University of Arkansas we found that a Little Rock program providing bonuses to teachers based on student gains on standardized tests substantially increased math proficiency. Researchers at the University of Florida recently found similar results in a nationwide evaluation.

On the subject of education myths, I'm reminded of a point that Sol Stern has been making for years about smaller class sizes. This is always a favorite proposal of teachers unions, since a higher teacher-to-student ration means more teachers and so a larger union. The problem, Stern points out, is in how it cuts against the shortage of qualified teachers, especially of math and science. If we're having a hard time finding qualified candidates now, just imagine the problems with tens of thousands of new teachers being pipelined into the public schools.