Merry Christmas!
And may I recommend a book currently receiving a lot of positive press right now, from my esteemed colleague Adam English. I have read only an excerpt from The Saint Who Would Be Santa Claus: The True Life and Trials of Nicholas of Myra, but am waiting to read the rest of it now. Here's a nice review from the Wall Street Journal.
| | |
|
Nicholas Kristof has a very interesting commentary in yesterday's New York Times.
THIS is what poverty sometimes looks like in America: parents here in Appalachian hill country pulling their children out of literacy classes. Moms and dads fear that if kids learn to read, they are less likely to qualify for a monthly check for having an intellectual disability.
Many people in hillside mobile homes here are poor and desperate, and a $698 monthly check per child from the Supplemental Security Income program goes a long way — and those checks continue until the child turns 18.
The incentives in place are abhorrently destructive, and as Kristof notes, should be changed. But he then goes on to say:
I don’t want to suggest that America’s antipoverty programs are a total failure. On the contrary, they are making a significant difference. Nearly all homes here in the Appalachian hill country now have electricity and running water, and people aren’t starving.
Our political system has created a particularly robust safety net for the elderly, focused on Social Security and Medicare — because the elderly vote. This safety net has brought down the poverty rate among the elderly from about 35 percent in 1959 to under 9 percent today.
BECAUSE kids don’t have a political voice, they have been neglected — and have replaced the elderly as the most impoverished age group in our country. Today, 22 percent of children live below the poverty line.
Let's talk about incentives again, but this time it's the incentives of the welfare bureaucracy—they're corrupt. Imagine you've been hired for some stated objective and that, if you succeed at this objective, your job becomes unnecessary and obsolete. Do you have any incentive to succeed? Probably not. In fact, you have every incentive to expand your task in some way.
Michael Tanner notes here that from 1965 to 2010, local, state and federal governments spent collectively more than $15 trillion fighting poverty. Poverty won. There has actually been an increase in the number of people living in poverty and in the poverty rate in the U.S. since expand government jobs Medicare and Great Society programs were initiated in 1965? Check out the graph below. Notice how poverty was declining until 1965 and, as Charles Murray pointed out decades ago, then started increasing.
Why have anti-poverty programs targeted at the elderly largely succeeded at reducing poverty among the elderly, as Kristof notes, whereas anti-poverty programs targeted for the rest of the U.S. have largely failed at their supposed objective? It's all in the incentives. Not just for the recipients, but also incentives for the politicians and bureaucrats in charge of these programs.
Social Security and Medicare are age-dependent programs, not income-dependent. You are entitled to the former regardless of income and the latter is only slightly means tested. Once someone gets on Social Security and Medicare, how much wealth they have doesn't matter; they are not kicked off. In other words, since Social Security checks are issued to recipients regardless of income, and Medicare is barely means tested, a reduction in the poverty rate among the elderly does not decrease the budgets of the Social Security Administration and the Department of Health and Human Services. On the other hand, if anti-poverty programs actually succeeded in reducing poverty, let's just say by one-half, the bureaucrats who run the programs won't be throwing parties and tooting their own horns. They have no incentive to succeed because it means cutting their budgets and, therefore, reducing their influence and possibly losing their jobs. In fact, for this reason the incentive is for the politicians and bureaucrats charged with funding and running these agencies to cry wolf louder and longer in order to increase their budgets, and consequently their influence and prestige. They work to expand eligibility requirements, increase benefits, and turn the other way when it comes to investigating and eradicating fraud.
| | |
|
Overall it was a good movie and Daniel Day Lewis will certainly earn a nomination for best actor. It depicted well the animosity and acrimony present in the U.S. Congress at any time, but especially before, during and right after the Civil War. It also includes at least two scenes where main characters (Lincoln and Stevens) compromise their positions (and principle in the case of Stevens) in order to obtain enough votes to pass the 13th Amendment to the U.S. Constitution. Lastly, it also exposed well the lobbying and rent seeking prevalent at the time and with any political enterprise.
My complaints, however, include the following:
| | |
|
The College Board offers via email an SAT Question of the Day. This is to help prepare high school students for the test that will, in part, determine where they go to college.
Now this is nitpicking because in all honesty it's the only error I've come across since I began following these questions about six months ago, but here is the question and my response selected (obviously wrong as indicated by the red circle and white X) for yesterday, November 23, 2012.
And here is the correct (actually, incorrect) response selected.
What a confusing method for answering the question. How about cross multiplying to get 24n = 60 and then solve for n.
I've actually been very impressed with the questions they put online every day. This one, including the answer, was an anomaly.
| | |
|
Craig Newmark links to this study that shows a large increase in the number of teachers and administrators hired relative to the growth in the number of elementary and secondary school students. Talk that we must throw more money at education is shortsighted and will simply compound the problem.
Here is a previous post of mine from June, 2011 that provides some data I looked at for North Carolina schools from 1998 to 2008.
After controlling for inflation, per pupil spending on public schooling in this state increased more than 125% since 1980. We have nothing to show for it. Between 1998 and 2008, the number of teachers, administrators and professional support staff (i.e., psychologists and consultants) per pupil increased by more than ten, eleven and twelve percent, respectively. Schools have become bloated and cutting their budgets seems reasonable.
| | |
|
A 2012 study from Rutgers University reported that slightly more than half of recent college graduates had full-time jobs and only four in 10 said their current job required a four-year degree. That same survey found that the majority of graduates were happy with their college education but if they had it to do over, they would have picked a different major or tried career internships.
“Technology is changing so much faster than we can teach or people can change their skills,” said Daniel Gitterman, professor of public policy at UNC-CH. “We’ve just got a tremendous amount of uncertainty.”
That uncertainty is OK, said Randy Woodson, chancellor of N.C. State University.
“It’s difficult to say we need this many engineers, this many nurses,” he said, “you know, to pigeonhole higher education based on precise workforce needs at the time. The value of public higher education is that we’re constantly reacting to changing needs in society, always attuned to the underpinning need for an educated citizenry.”
Woodson uses the example of Germany to paint a contrast to American higher education. There, students are put into a career pipeline early based on test scores. They are trained very well in apprenticeships, but students have very little flexibility.
“In this country, because of the way the system works, you’re able to continually reinvent yourself,” he said. “And that is frustrating for us when we have kids change majors three times, but I think, I fundamentally believe, it’s one of the reasons why our country is one of the most innovative in the world....The education system allows for innovation.”
| | |
|
Below is a graph showing the relative price increases of textbooks to other goods from 1978 - 2010. Textbook prices have increased an average of 6.8% per year over this 32-year period, compared to the CPI, which increased just 3.8% per year over this time. (BTW - If the data started with, say, 1982, the annual increase in the CPI would fall about 1.1 percentage points. The inflation during the late 70s and early 80s was substantial.)
Academics (including me) complain all the time about the increasing number of students who refuse to purchase the textbooks required for their classes. What do we fail to understand about the first law of demand? (Can anyone identify what's incorrect with the definition of the law of demand used by Investopedia in the link above?)
HT: Mark Perry for the graph.
| | |
|
Whoever started the marketing campaign for breast cancer research is a genius. I see pink ribbons everywhere I go, on people, on cars, on buildings, even on telephone poles. Pink is now plastered on television sets everywhere as every NFL player, coach, and assistant is adorned with something of that hue.
I saw a few students selling baked goods to raise money for breast cancer research. I stopped to ask them if they thought the marginal dollar spent on breast cancer awareness and research could have been spent more effectively and efficiently elsewhere. It wasn't to scold them for raising money for a worthy cause, I was just interested in seeing how they would respond. I gave them a dollar donation.
A company has to allocate its scarce resources across many different venues. Should the next dollar be spent on advertising? Should it invest in more capital or new technology? Should it hire more labor? Would increasing the compensation of current workers lead to more production? Should it donate that dollar to some cause? The market mechanism disciplines firms to allocate those dollars most effectively and efficiently. If not, the firm loses profits and may even go out of business.
There is no market mechanism with donations to charitable organizations like breast cancer research, so it may seem inefficient. Maybe that last dollar spent on breast cancer research and awareness could have been better used elsewhere, such as on my favored cause, melanoma research.
But in a sense, this isn't much different than a market. The cause of breast cancer research was backed strongly enough that it mobilized women and men (mostly women) everywhere to voluntarily champion the cause in order to raise tons of money. Other causes, including melanoma research, have not been as successful in raising both awareness and money. This, however, is likely due to a) other causes not affecting as many people as breast cancer, and b) those who are affected by other causes have not been as passionate about their causes. Given that donations are voluntary, the money is likely going to where it is valued most and improving the lives of more people.
But here is where non-market exchange fails. When money is taken by force, including and especially through taxation (and public debt is just deferred taxation), the marginal dollar spent (actually, trillions of dollars) is largely wasted. There are many examples, but the "War On Drugs" is most noteworthy.
UPDATE: If you're a true Keynesian you would simply say that the blue line (addiction rate) would have been higher had the $1.5 trillion not been spent.
| | |
|
In a market capitalist system properly conceived, in order to make me better off I have to make you better off relative to what anyone else is offering you with similar resources. Competition forces me to continually improve on quality at any given price, which also means discovering ways of producing the same quality at reduced cost, and therefore reduced price. Failing to do so, I go out of business and people quit dealing with me.
Why does this seem so foreign to government school bureaucrats and those with egalitarian mindsets?
Annica Eriksson, the head cook at the Falun school, received an order from the municipality to decrease the quality of her cooking after it discovered she served a variety of 15 vegetables and freshly baked bread to students each day. The municipality claims that these offerings are “unfair” to students at other local schools, who consume meals of a lesser quality, The Local reported.
School choice (and I mean total school choice - free schools from any state mandates, including curriculum requirements) forces schools to compete for students by continually innovating and discovering ways to serve students' needs rather than the interests of teachers and public school bureaucrats.
This egalitarian ideology has had tragic consequences, leading to mass murdering of millions of people around the world throughout the Twentieth Century. This is not to say that forcing the lunch lady to reduce the quality of her meals is going to lead to mass genocide in Sweden. But egalitarianism is a slippery slope, and if it's important that something as trivial as school lunches be equal, and you're willing to force one school to degrade the quality of its lunches so students at other schools don't feel slighted, you're probably pretty far down that slope.
Here is an old post on the travesty of choice in North Carolina schools.
| | |
|
James Heckman has done considerable research on what works in early childhood education and its importance for reducing income inequality. Paul Tough uses Heckman to explain how children learn. In his recent book How Children Succeed, he notes
The Perry Preschool Project, in other words, worked entirely differently than everyone had believed. The goodhearted educators who set it up in the sixties thought that they were creating a program to raise the intelligence of low-income children; they, like everyone else, believed that was the way to help poor kids get ahead in America. Surprise number one was that they created a program that didn’t do much in the long term for IQ but did improve behavior and social skills. Surprise number two was that it helped anyway - for the kids in Ypsilanti, those skills and the underlying traits they reflected turned out to be very valuable indeed.
In other words, cognitive ability or aptitude is only part of the reason incomes diverge in the United States. Other factors, all social and much of them attributed to stress experienced during childhood, have lasting effects not only on income, but on marriage, family and other social outcomes as well.
Ira Glass from This American Life does great job of presenting the arguments here. It's well worth the listen.
| | |
|
