Tenure

The institution of tenure for school teachers is merely the product of our dysfunctional public school system. It is curious that this practice exists almost exclusively in the education industry. Why is this? Why do we think that school teachers are in need of more protection than any other class of workers? If it is important to protect teachers from the whimsical and capricious actions of their supervisors, it must also be important to protect other professionals. In fact, why don’t we make it impossible to fire anyone after a few years on the job?

The very obvious reason that this practice does not exist in any other industry is that it is horribly inefficient. It encourages good behavior and effort only up until the time when tenure is granted. Afterwards, the rational individual will work just hard enough to not be fired (although certainly there are motivated individuals who will always do their best). In most cases (especially in education), that is very little effort indeed. That is why there are so many complaints about ineffective, tenured teachers that do barely enough to scrape by.

If there ever was a problem with teachers being fired for reasons unrelated to performance, it could only happen because consumers (parents and their children) have no other options. When parents can remove their children from a school if the quality suffers, the administrators have a powerful incentive to keep the best teachers, regardless of whether they like them. Once the public school system removed the consumer oversight that only a free market can provide, administrators could play favorites with teachers with no thought towards losing customers.

Why We Don’t Need the Post Office

The Post Office, along with the DMV, is a favorite target for proponents of small government. The reason I am going to rehash some of those arguments in favor of privatizing the Post Office is that it happens to be a very concrete example of a government program that can be made better and less costly by taking it out of Washington’s hands.

One of the primary arguments for a government-run Post Office is that if it is placed in private hands, there is no guarantee that everyone in America will get mail service. A for-profit company may decide that it is simply not rational to deliver to Nowheresville, Montana. This is undoubtedly true, but not the problem that some believe it to be.

When I send a letter through the Post Office (which holds a monopoly on First Class mail), I pay the same price no matter what its destination is. However, the cost to the Post Office is very different depending on where it is being mailed. Paying a mailman (and an entire Post Office branch) to deliver to a town of 300 people is very expensive. Yet the people living there pay no more to receive or send letters than I do, despite the fact that I live in the eighth largest city in America.

In effect, I am subsidizing the mail service of those individuals who live in these rural areas (and those who send mail to them). A private company would naturally charge higher rates to those who cost them more. This price discrimination would allow them to lower the price for people like me, making First Class mail cheaper than it is now. Mail service would still exist for those that live outside of big cities, but its price would accurately reflect one of the costs or living in the country instead of the city.

One of my favorite arguments for the abolition of the government-run Post Office is the absurd practice of not delivering mail one day out of the week. If private companies were allowed to compete with the Post Office, I have no doubt that competition would immediately push providers to deliver all week long. This would benefit everyone, and the only reason it does not currently exist is because there is a government mandated monopoly.

Making Education More Affordable

There was an article in the State Press (ASU’s newspaper) recently about student groups pressuring congressmen to help make college more affordable for everyone. Normally I ignore everything in the State Press except the crossword and the word jumbles, but this one caught my eye because this argument is made quite often. It goes: a college education is getting more and more expensive; therefore, Congress, or state legislatures, must give more money to young people (and of course, taxes must go up).

What puzzles me about these arguments is that there is a very simple alternative to taxing some people to let others go to college: pressure the universities to lower their costs. This changes the transaction from one involving coercion (government forcibly taking money from some and giving it to others) to one of voluntary agreement (the college/university can lower its prices or risk losing students or bad media attention).

The simple reason why student groups would not utilize this method is that a reduction in the price of something necessitates a reduction in the level of service. Rather than lower the quality of the university they are attending, it is more rationale for the student groups to pressure government institutions to spend other people’s money to help still others pay for college.

Paying Interest For Nothing

One of the classes I am taking this semester is Public Economics. It examines the role of government in the economy, and how its goals can be accomplished with the least amount of economic efficiency lost. I’m really excited about the class, not the least of reasons why being that my professor describes herself as “fiscally right of Genghis Khan.” Nice.

Anyways, the first few days we have mostly focused on historical trends in government spending, taxation, and Gross Domestic Product. There was one trend in particular that I noticed and wanted to comment on.

One of the economic stories that we are constantly bombarded with is the fact that America is borrowing hoardes of money to finance its deficit spending. Far be it from me to argue with that, and I think it’s undoubtedly true. However, the amount of interest that we pay on our debt as a percent of GDP is at almost the same level that it was in 1959. It has increased only 2%, from about 8% of GDP to about 10%, in the last 50 years.

However, interest payments by themselves are nothing to be concerned about. In fact, I will be paying a very large amount of interest on the loans that I have taken out to pay for college. I cannot afford to pay for college myself, therefore I must borrow money and pay for the privilege of  doing so. This doesn’t bother me because I know the returns from going to college and to law school far outweigh the amount that I will pay in loans. More generally, borrowing money is not a problem unless the capital borrowed isn’t generating as much value as you pay in interest.

That seems to be the position that the federal government is in. In 1959, when interest paid was 8% of GDP, government was spending 60% of its revenue on consumption (actual goods and services). If the government is receiving good value for its money, (i.e. high quality infrastructure, planes for defense, returns on healthcare, etc.) then the interest payments are worth the price.

What we see now though is that government spending is 60% transfer payments. These are payments to individuals where the government requires nothing in return. Social security, welfare payments, and Medicare especially are just transfers from the the government to its citizens. Therefore, the government does not receive any return on the money that it spends. It can’t possibly recoup the interest that it must pay in order to spend this money.

The main point of this is while the amount that we pay in interest as a percent of GDP is relatively unchanged, the return for the government’s investment was much higher 50 years ago than it is today.

 

[So I am not entirely sure about my arguments here, anyone think I'm way off? Anyone agree with me?]

Education for the Poor

This is a long one. Originally it was supposed to be my speech for the Koch policy presentation, but I ended up taking mine in a different direction. I had this left over, and thought I would share. You might want to read it in several parts, or just carve out fifteen minutes or so to read the whole thing.

 

It is a sobering fact that the foremost reason most of us are sitting in this room is we were fortunate enough to be born in a country that is able to educate its children well. For all of the problems with the American education system, it is a beacon of excellence compared to much of the world.

 Lack of human capital is the primary reason why poor people stay poor, and why poor countries stay poor. Despite technological advances around the world, these third world countries cannot achieve the growth in standards of living they so desperately need. An inadequate education system is a stone ceiling above the heads of citizens trying to improve their lives.

 Recognizing this, the United Nations created the Millennium Project, an ambitious venture headed by economist Jeffrey Sachs. One of the explicit goals of the project is universal primary education by 2015. This should be applauded. No country gains by having others languish in abject poverty. In fact, all nations can gain by having new markets for their goods and increased competition in a global economy.

 Unfortunately, the development experts are attempting to achieve universal education in the wrong way. They insist that government-run schools are the only way to bring about this revolution of education. In many countries around the world (especially developing ones), private schools are seen as pariahs in this quest. According to education experts, private schools can play no role in educating the poorest members of society. Only government-run schools, and the requisite billions of dollars in international aid, can ensure that everyone receives an adequate education.

 While this happens to be the pervasive view in most every country on Earth, it also happens to be completely wrong.  To be sure, the posh private schools located in the middle of the Hamptons or Bel Air would not be much help to the poorest people of India or Africa. Unfortunately, most people cannot envision a private school that serves the needs of anyone else. James Tooley’s book, The Beautiful Tree, details at length his experience with private schools for the poor in the poorest areas of developing countries.

 When one typically envisions a private school serving the poor, what comes to mind is a filthy hovel with a few emaciated children crowded around a dilapidated chalk board without textbooks or writing materials and taught by a teacher who can barely read or write himself. Whatever the proprietor is charging for tuition is going straight into his own pocket, while he provides the lowest level of care for his charges. This is the view held by the same experts that demand government-run schools. No one will deny that a private school for the poor will not have expensive buildings, up-to-date computers, and fancy textbooks. But to assume that these materials are necessary to a quality education is to completely miss the point of education.

 The reason Westerners assume all schools should have the resources mentioned above is because Western schools have them, and Western schools have them because it is believed they will lead to a higher quality education. But what if that isn’t necessarily true? What if the attitude of the proprietors and the quality of the teachers are what really affect student achievement? Tooley’s survey of public and private schools in developing countries confirms this to be the case. Despite spending a fraction of what public schools spend per pupil, private schools have better results on standard examinations.

 For an economist, the reasons for this discrepancy are readily apparent. In most countries, government-run schools are controlled by powerful teacher’s unions and corrupt bureaucrats. This leads to considerable deference to teachers, a large many of which use the latitude to sleep during class, read the newspaper, or just not show up at all. Since principals and administrators must go to incredible lengths to fire them, a large amount of students are left with apathetic instructors.

 Contrast the above situation with what we know of private schools. While they may not have the best equipment, they have dedicated teachers and administrators who ensure that everything possible is done to aid the pupils. Why is there such a difference between private schools and public schools? Because the owner of a private school knows that if his teachers do not show up for work or his students are not learning, parents will take their children to another school. This accountability is sorely lacking in public schools.

 It is not surprising that poor and developing countries rank among the lowest in international measures of educational achievement. We should all be concerned by this, and the global economy can only gain from universal primary education. But we should also be very skeptical of the claims that only government-run schools can provide this education. The same development experts who recognize the short-comings of government-run schools are the first to insist that they are the only way forward. But if private schools can provide better results at a fraction of the cost, shouldn’t the governments do more to support private schools?

 In fact, private schools can be most helpful in rural areas, which constitute a large part of developing nations. The reason for this is that the government simply does not have enough money to put a government-run school in each village, and the villages can be many miles apart. Thus, any place that the government puts one of its schools will only reach a handful of students. Private schools are erected with very little infrastructure. Many times it is simply the home of the proprietor, or perhaps an addition to the home. No government funds are necessary, and every structure is a potential school.

 These private schools allow the villagers to gain some measure of education, since oftentimes walking to the nearest government-run school is not an option. By banning such schools, or subjecting them to regulations that the owners have no way of complying with (large playgrounds, expensive equipment, teacher certification, etc.), the government is denying education to vast swathes of its rural population.

To be fair, many of these private schools do stay in existence despite government bans or overbearing regulation. But the only way for them to operate in such an inhospitable regulatory climate is through bribes. Many of the private schools that Tooley encountered in India and Africa are forced to pay hundreds or even thousands of dollars (in local currency) in order to stay open. This exacerbates the problems of trying to provide education for the poor, since the owners of the private schools must charge more in tuition in order to cover the bribes.

 Quite possibly the most compelling reason to support an increased role for private schools is often used as a criticism: they undermine government-run schools and therefore the government. Poor countries are usually not poor because of a lack of money. Billions of dollars in aid flow out of developed countries and into developing countries every year, with few noticeable results. Yet we are constantly told that the problems can be solved if only we give more money. (Sound like the public school system?)

 Why does this happen? Because the charitable efforts of the developed nations are thwarted time and again by the corrupt and inefficient governments that handle the aid money. Without a paradigm shift within developing nations everywhere, there is no reason to think that billions more in aid for government-run schools will do anything meaningful besides enrich the administration in power.

 This same logic applies to any country, not just poor ones. Government officials have every incentive to siphon money into pet projects or to family members, rather than actually directing them towards the purpose they were designated for. The United States happens to have some of the most honest officials in the world, so we find it shocking that all of our aid money is diverted to those in charge, instead of those in need. A true solution to education and development problems should not involve large sums of foreign money.

 Instead, it should create incentives for institutions like private schools. Private schools need no outside aid whatsoever. Loans would certainly be helpful, but this can be accomplished by microfinance organizations operating outside of government interference. Using companies, as opposed to governments, would ensure not only that the schools and villagers are self-sufficient, but also any aid that does flow into the country actually reaches those who need it.

 As detailed above, most countries are not supportive of private schools. The schools are subjected to unreasonable demands by government inspectors, intrusive and overbearing regulations from the state, and ridicule and contempt from the education “experts” of the West. This presentation should not be interpreted as a call to overthrow public education in developing nations, or anywhere for that matter. Instead, it is merely a proposition in support of a greater role for private education in serving the needs of all those that need educating.

Airport Terror

Hello loyal readers.

Sorry about the week-long hiatus. I was in Washington D.C. for a while for the closing of my internship. It was a great time, but I was so busy that there was no opportunity to write. I have some great ideas for entries though, and I’ll ease back in with a short one.

In the course of my travels to and from D.C., I spent some time in four different airports: Sky Harbor (Arizona), JFK (New York), Atlanta, and Reagan (D.C.). In several, I remember hearing an announcement about the current TSA threat level: orange. No context was given for why it’s orange, why orange is bad, or what we should be doing differently than if it were one color lower (yellow?) or higher. So in my opinion, here’s what the announcement should actually say:

“Attention passengers, the TSA would like you to know that today’s threat level is orange. We really don’t know what that means, and neither do you, but it sounds sufficiently menacing ennough to make you wonder if you are in danger. But despite the apprehension you might feel at the moment, we certainly would not want you to change your behavior in any way, and for God’s sake don’t stop flying. Ceasing to do that would be helping the terrorists destroy the freedoms that they hate about us. Therefore, go on with your lives as usual, but with the nagging fear of a catastrophic attack and the certainty that only the government can save you from it. (Oh, and to do so, we’re going to need more money and more control over your life.)”

What are the chances the TSA steals this post and uses it for their next script?

New Car: Rational or Unprincipled?

As I mentioned in my last post, I took advantage of the “cash for clunkers” program – a program I completely disagree with. As the Wall Street Journal explains, this program is crackpot economics. It will not increase net wealth and amounts to “destroy[ing] a perfectly serviceable asset in return for something he might have bought anyway.” So am I a hypocrite because I took advantage of a government subsidy I completely disagree with?

Before any decision, it is always important to ask “what is this going to accomplish?” If I chose not to take advantage of this program, would my defiance have had any effect? No. The allotted money was spent in a week and if I didn’t take that money someone else would have. The Journal piece also makes a very important point: Americans are not stupid. I was going to buy a new car next summer anyway, and now I got one for significantly cheaper.

There are a lot of things the government does that I disagree with, and it would be nonsensical for me to avoid every one of them. I don’t think the government should give me subsidized student loans, but I take them. I don’t think the government should have given me a stimulus check last year, but I spent it. It boils down to the fact not taking these things would hurt me significantly, while having no effect on the overall policy.

That does not mean I would advocate for these programs. In fact, I advocate against them. While my advocacy may not make economic sense, this is where I feel principles do play a role. When my actions start to have an impact (even minor) on the policy, that is where I draw the line.

Cash for Clunkers, an anecdote

Jeff’s absolutely right about the cash for clunkers program: it creates an incentive for people to sell their cars to dealerships when they would have sold it to someone else. I’m one of those people.

I’ve been driving around my parents’ old 1995 Ford Explorer that had 225,000 miles on it but. But it has been maintained well and ran quite nicely. It actually would have been a great, cheap car for someone who only needs transportation to get to and from work.

But along came the government.

I  have been thinking about getting a new car for a while. I don’t actually need a big SUV and was planning on buying a sedan. My dad called me when he heard about the cash for clunkers program and suggested I take advantage of it. Since I am not at home right now (where my car is), he said he would be willing to trade in the car and co-sign on a new one.

Why act now and not wait until I get home? Well the government set aside a limited amount of money and if I had waited I may not have been able to take advantage of the program. So after deciding I could afford a new car, we went ahead and bought a 2010 Toyota Corolla.

I was never going to get $4,500 (plus trade-in value) for my old car. Heck, I would have been happy with half that. And I am sure someone would have been willing to pay me that asking price. But instead my old car is going to be scrap metal. I was looking at getting a new car and taking advantage of this program was good economics.

My dad half-jokingly referred to what we did as “misusing taxpayer money,” which raises a question I’ll address in my next post: should libertarians take advantage of programs that we disagree with (and know are wrong)?

A Government Divided

On Thursday, Nick Gillespie argued on Reason’s blog that libertarians often underestimate the influence laws can have on shaping attitudes. He quoted Mark Tushnet, a professor at Harvard law, who says “If you’re trying to chart the direction of the country–and I’ll make up a number here–95 percent of it is due to changes in culture and politics.” Tushnet argues that the Supreme Court has very little influence on social behavior and attitudes.

While I agree with Gillespie that legislation can have a powerful effect (for good or ill) on shaping beliefs and behavior, I think he and Tushnet underestimate the power of the other branches of government. Take for example, the case of Brown v. Board. Chief Justice Warren pushed very hard for a unanimous decision, knowing that a divided Court could have a negative impact on the desegregation movement.

Even after the Court found 9-0 in favor of Brown, President Eisenhower needed to enforce the decision before it could have its full impact. Only when all three branches of government were working together, did the change in social beliefs come. Obviously, racism did not immediately disappear, nor was this the only important event of the civil rights movement. But when those nine African American students walked into Little Rock High School, it affected the attitudes of many of Americans—including the other students at the school.

Overall, I feel like this reflects the wisdom of our system of government. It took all three branches of government, working together, to have such a big impact. When our government is divided, the power it has over the behavior and attitudes of citizens is weakened.

Bruno lacks intelligence of Borat

Let me preface this by saying that I really wanted to like Bruno. I thoroughly enjoyed Borat, and I expected Baron Cohen to deliver just as superb a performance. I honestly get upset at people who dismiss his performances just because they happen to be shocking or offensive to some. In fact, I read a recent article in the Wall Street Journal that detailed GLAAD’s indignation at the movie with contempt. Then, I actually saw the movie.

Bruno was basically entirely about dick. Every encounter that he had went back to him being a homosexual. There was no nuance to his performance, no subtlety, just complete shock humor. Even one of the funnier scenes, where he brings his adopted African baby to an African-American tv show, was set up by his professed desire to find “Mr. Right.” One of the greatest things about Borat was that he adapted his act to the various situations. He was a chauvinist to the feminists, had jungle-fever around the Southerners, and sang the Kazahkstan anthem in place of the Star-Spangled Banner in the rodeo. He turned that in for a pair of short shorts and an array of sex toys and anal sex in Bruno.