Archived Posts June 2012 - Page 4 of 10 | Acton PowerBlog

One of the most worrisome economic troubles coming down-the-pipe is the “student debt bubble” which many argue is caused by too many students seeking degrees in higher education as the costs of tuition increase. Because we understand that poverty and economic misfortune are serious barriers to human flourishing, it is very important to try and understand the economics involved in the education market. Dylan Pahman gave a good explanation earlier today about how administrative costs are rising to promote a myriad of diversity-advocacy programs, a process which is clearly affecting  the supply-side of the issue. What about the demand side where students are making the decision to go to college?

How is it that so many students are making a seemingly irrational choice? In a post at strategyprofs, Steve Postrel explains here that while it may be true that college degrees may be becoming more common and watered down in the quality of education they represent, that it is also true that high school quality is dropping. This means that college degrees represent a greater increase in knowledge than they used to, signaling a greater value relative to non-college educated persons.

Typical graduate business school education has indeed become less rigorous over time, as has typical college education. But typical high school education has declined in quality just as much. As a result, the human capital difference between a college and high-school graduate has increased, because the first increments of education are more valuable on the job market than the later ones. It used to be that everybody could read and understand something like Orwell’s Animal Farm, but the typical college graduates could also understand Milton or Spencer. Now, nobody grasps Milton but only the college grads can process Animal Farm, and for employers the See Spot Run–>Animal Farm jump is more valuable than the Animal Farm–>Milton jump.

So the value of a college education has increased even as its rigor has declined, because willingness to pay for quality is really willingness to pay for incremental quality. This principle holds true in many markets.

Interestingly, one of the best ways to help lower the cost of college education might to be to improve the quality of education that a high school diploma represents. Understanding why high school education is declining requires us to think beyond a knee jerk “just spend more” reaction and understand that our current public education system is insulated against the processes that wipe out nearly all other inefficient and inferior services: the market.

To effectively help others become productive agents in the market and realize their vocations, we need to advocate for steps that will cause education at all levels to reflect a true added value. School choice seems to be an obvious candidate for improving educational outcomes.

H/T Marginal Revolution

Mark Summers, a historian in Virginia, wrote two articles for Religion & Liberty on faith issues in the American Civil War. Summers wrote about the evangelical revival that swept through the Southern armies and then in a subsequent 2011 issue focused on the Catholic Church in the Civil War.

The articles were meant to draw attention to the 150th anniversary of the conflict. I wrote more about the R&L project in my own PowerBlog post back in December. Read the articles by Summers. They are well researched and very good. Below is a June 11 audio clip of Summers discussing Catholics in the Civil War on the Son Rise Morning Show with Brian Patrick:

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Just a note: Summers is referred to as a “Catholic historian” during the interview, but he is in fact Presbyterian.

In a follow up interview to “Is Capitalism Immoral?,” Joseph E. Gorra on the Patheos Evangelical channel talks with Rev. Robert A. Sirico, Acton Institute president and co-founder, about the publication of his new book, Defending the Free Market: The Moral Case for a Free Economy. Gorra begins the interview by observing that “within Western societies today there appears to be a kind of fact/value dichotomy that operates as an assumption in much of our discourse, where questions of ‘economics’ (and the sciences in general) are in the category of knowledge and facts and therefore tend to trump questions of theology.”

Patheos: The dichotomous fact/value assumption also stunts our comprehension of what is true.

Sirico: It’s also true that some economists become hegemonic in thinking that the whole of truth is seen through their particular lens of expertise, rather than appreciating the immense complexity of humanity and situating their part of the truth within the broader truth of who the human person is. But that’s not just a problem for some economists—scientism infects almost every discipline that has a strong empirical element.

It would be humorous, if it were not tragic, when one becomes so blinded by the subjectivism of such relativism that they accuse others of what they themselves are infected with. What I am trying to do is broaden our comprehension of the truth that permeates everything—in the case of my book, how the economic can be seen to emerge from a reflection of human nature and empower us to do the good intentionally.

Read “Does Capitalism Promote Greed?: An Interview with Father Robert Sirico, Part 2″ on the Patheos Evangelical channel.

If you missed the recent Acton University, here is a roundup of reactions and reflections by bloggers to give you an idea of why you need to attend next year:
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Blog author: dpahman
Thursday, June 21, 2012
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ABC’s Chancellors for Equity and Inclusion, 1985-1988
Source: http://www.imdb.com/title/tt0088885/

I have recently written on the moral implications of growing tuition costs and the resulting student loan debt (here). One factor I did not explore in depth was the reason for rising tuition costs, which, adjusted for inflation, have more than doubled since the 1980s. No doubt, there are many factors that have contributed to this, but George F. Will of the Boston Herald points to one possible cause: bureaucratic sprawl under the auspices of promoting diversity. Despite rising costs for students, Will writes,

UCSD found money to create a Vice Chancellorship for Equity, Diversity and Inclusion. UC Davis has a Diversity Trainers Institute under an Administrator of Diversity Education, who presumably coordinates with the Cross-Cultural Center. It also has: a Lesbian, Gay, Bisexual, Transgender Resource Center; a Sexual Harassment Education Program; a Diversity Program Coordinator; an Early Resolution Discrimination Coordinator; and Cross-Cultural Competency Certificates in “Understanding Diversity and Social Justice.” California’s budget crisis has not prevented UC San Francisco from creating a new Vice Chancellor for Diversity and Outreach to supplement UCSF’s Office of Affirmative Action, Equal Opportunity and Diversity, and the Diversity Learning Center (which teaches how to become “a Diversity Change Agent”), and the Center for LGBT Health and Equity, and the Office of Sexual Harassment Prevention & Resolution, and the Chancellor’s Advisory Committees on Diversity, and on Gay, Lesbian, Bisexual and Transgender Issues, and on the Status of Women.

Personally, I think that fair treatment of all and appreciation of cultural heritage is a good thing, but do we really need more and more administrators to ensure it? Indeed, Will notes, “In 2009 the base salary of UC Berkeley’s Vice Chancellor for Equity and Inclusion was $194,000, almost four times that of starting assistant professors. And by 2006, academic administrators outnumbered faculty.” Surely there must be a more efficient (not to mention ethical) way. (more…)

How about a tax on fires?

On National Review Online, Acton Research Director Samuel Gregg examines the push for a “transaction tax” to solve some of the fiscal problems in the European Union. The move would, Gregg explains, “levy a tax on any transaction on financial instruments (securities, loans, deposits, derivatives, and various asset classes) between banks, hedge funds, insurance businesses, investment companies, and other financial organizations whenever one contracting party is located in the EU.” That may not sound like much, but would apply to literally millions of financial transactions daily. The scheme has drawn the support of “EU apparatchiks” but the opposition of the British who see the tax proposal as a threat to London’s financial competitiveness. Gregg sees what’s behind it:

In short, the EU’s transactions-tax scheme reflects a long-standing desire to “throw sand” in the wheels of financial globalization. Its origins lie in what’s called the “Tobin tax,” named after the American economist James Tobin, who argued in 1972 for the levying of a 0.5 percent tax on all spot-currency conversions. The point, for Tobin, was to discourage “speculators” who “invest their money in foreign exchange on a very short-term basis.”

Unfortunately for its advocates, there’s considerable evidence that Tobin-like taxes on financial transactions don’t reduce volatility. In the midst of financial crises, long-term and short-term investors behave in very much the same way — they get out, and transaction taxes don’t prevent them from abandoning ship. Greece, for example, currently applies a transaction tax to the sale of Greek-listed shares. That, however, isn’t doing much to prevent the present exodus of capital from Greece.

Taking the broader view, it’s hard to avoid concluding this latest EU harmonization boondoggle is about two things. First, it’s a way for EU officials and governments to appear to be punishing European financial institutions for their contributions to Europe’s economic crisis. Second, it reflects the general European failure to come to grips with some of the deeper problems contributing to Europe’s debt crisis.

Read “Financial Fiddling while the Euro Burns” by Samuel Gregg on NRO.

One of the real challenges in arguing for various social policies is getting reliable data about the effectiveness of government programs. This is particularly the case with regard to welfare spending. It’s often very difficult to measure a particular program’s effectiveness, however. But this is an essential task, as Jennifer Marshall writes:

The measure of our compassion for the poor should not be how much we spend on federal antipoverty programs. Compassion must be effective.

We ought to define success by how many escape dependence on welfare to pursue their full potential as human beings. To measure our commitment to the poor by the number of dollars spent on antipoverty programs is to diminish human dignity.

Researchers in the UK have written a report arguing for an approach to public policy that integrates “randomized controlled trials” (RCTs) into attempts to measure the impacts, intended and otherwise, of government programs. In “Test, Learn, Adapt: Developing Public Policy with Randomised Controlled Trials,” (HT: Hacker News) the authors argue that RCTs are used widely in the private sector, but at least in the UK they “are not routinely used to test the effectiveness of public policy interventions.”

They go on to explain why RCTs are particularly helpful in determining the effectiveness of a particular program:

What makes RCTs different from other types of evaluation is the introduction of a randomly assigned control group, which enables you to compare the effectiveness of a new intervention against what would have happened if you had changed nothing.

The introduction of a control group eliminates a whole host of biases that normally complicate the evaluation process – for example, if you introduce a new “back to work” scheme, how will you know whether those receiving the extra support might not have found a job anyway?

Check out the whole report which provides details on the nine suggested steps for implementation (PDF).

The Office of Management and Budget’s (OMB) 2012 draft report to Congress on costs and benefits of federal regulations states that “agencies should carefully consider how best to obtain good data about the likely effects of regulation; experimentation, including randomized controlled trials, can complement and inform prospective analysis, and perhaps reduce the need for retrospective analysis.”

This last point is somewhat dubious, for as the title of the UK report indicates, the process of evaluating the effectiveness of public policy interventions is ongoing: Test, learn, adapt, repeat! The ninth step is actually to “return to Step 1 to continually improve your understanding of what works.” But in any case it might well be that RCBs are going to be one tool increasingly relied upon to provide some helpful insight into what works and what doesn’t.

Blog author: jcarter
Thursday, June 21, 2012
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On AEI’s Values & Capitalism blog, RJ Moeller kicks off a new series that will “highlight the work and ideas of people advocating for free enterprise in especially compelling and interesting ways” with a review of Rev. Sirico’s Defending the Free Market:

As you continue through the richly insightful pages of “Defending The Free Market,” Rev. Sirico goes to great lengths to drive home an incredibly important point: Freedom is not normal. The United States is not just an aberration. It is the aberration of human history. No civilization has flourished like we have in our 235 short years, and Rev. Sirico implores the reader not to miss the very important fact that we did this because of (not in spite of) our radically different views on concepts like liberty, equality, and charity.

We have prized certain values over others. We have valued things that other countries and cultures have scoffed at since Jamestown and Plymouth Rock. And attached to all of the other freedoms we hold so dear—the one that binds and undergirds all others—is economic freedom. The right to freely seek one’s own vocation. The right to both bear risk and reap reward. The right (and responsibility) to provide for one’s own family. The Judeo-Christian duty to use one’s own property and possessions to personally help the least among us.

Read more . . .

Blog author: jcarter
Wednesday, June 20, 2012
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Perhaps no other adjective better captures the American political climate than fearful, says Andrew Knot in this week’s Acton Commentary (published May 25). “The past decade has witnessed a spike in fear-driven politics, at least accusations of such. The coming election appears no different,” he adds. The full text of his essay follows. Subscribe to the free, weekly Acton News & Commentary and other publications here.
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David Paul Deavel has a fine review of Rev. Robert Sirico’s Defending the Free Market over at National Review Online.

Deavel notes:

What makes Sirico’s defense of a free economy all the stronger is his consistent acknowledgment that a functioning free market neither immanentizes the eschaton, making heaven on earth, nor makes a society virtuous or whole. Freedom of economic (and other) action is not the goal of society — acting virtuously in freedom is. And the intellectual and spiritual resources for virtuous action do not inhere in markets themselves. In his chapter on why state-sponsored health care is not really a compassionate answer, he writes against “the seduction that the power of economic freedom can in itself generate a system of health care marked by honesty and love.” Economic freedom must be accompanied by other kinds of freedom, particularly religious, and by people thinking about their duties toward the sick, the dying, and the poor. Homo economicus may be a useful abstraction for certain economics problems, but the human capital of love, loyalty, and sacrifice is the kind of capital required for a successful capitalism.

Read the entire review at National Review Online.