Tag: creative destruction

This Month’s Cato Unbound: The Online Education Revolution

As Joseph Schumpeter famously wrote, markets are agents of “creative destruction”: when market forces are free to operate, and when entrepreneurs are free to act on their ideas, the old must often give way to the new.

Innovation and cultural dynamism are the hallmarks of a free economy. This state of constant flux is to our way of thinking a welcome and valued thing. Only an economy that is constantly in transition can hope to approximate the changing needs and wants of a robust and flourishing society.

Our love of dynamism is one reason why libertarians aren’t really conservatives, and why we might even wish that we could claim the label “progressive” for ourselves—if it hadn’t been taken, long ago, by individuals whose beliefs differ sharply from our own.

At Cato Unbound this month we are discussing what may prove to be a remarkable example of creative destruction. Within the last few years, Massive Online Open Courses—MOOCs, for short—have become one of the most important trends in higher education. As our lead essayist Alex Tabarrok argues, traditional higher education hasn’t changed substantially for centuries. Yet there is no good reason why this should be, not with all of the new information technology that the market has put at our disposal.

Together with his colleague Tyler Cowen, Tabarrok has founded Marginal Revolution University, which is planned as a growing series of free, online courses that anyone can take. The lectures are brief, watchable on your own schedule, viewable on mobile devices, and replayable. You can ask questions of the professors and receive detailed, personalized feedback. You can study in a group or entirely on your own, and students are invited to create supplemental videos that might be included in future class sessions.

MR University, as it’s called for short, hopes to deliver flexible, inexpensive higher education to the masses, in a way that Oxford, Cambridge, and Harvard—for all their tradition—never could. And it’s just one small player in a burgeoning new educational sector. So how should educators and policymakers think about these developments?

To answer that question, we have recruited a panel of distinguished commentators: Siva Vaidhyanathan is the Robertson Professor in Media Studies and Chair of the Department of Media Studies at the University of Virginia; Alan Ryan is the former Warden of New College, Oxford, and a frequent commentator on developments in liberal education; and Kevin Carey is director of the education policy program at the New America Foundation.

As always, Cato Unbound readers are encouraged to take up our themes, and enter into the conversation on their own websites and blogs, or on other venues. We also welcome your letters. Send them to jkuznicki at cato dot org. Selections may be published at the editors’ option.

In the Lake Wobegon Fantasy World, All Investments Make Money

I sometimes wonder whether journalists have the slightest idea of how capitalism works.

In recent weeks, we’ve seen breathless reporting on the $2 billion loss at JP Morgan Chase, and now there’s a big kerfuffle about the falling value of Facebook stock.

In response to these supposed scandals, there are all sorts of articles being written (see here, here, here, and here, for just a few examples) about the need for more regulation to protect the economy.

Underlying these stories seems to be a Lake Wobegon view of financial markets. But instead of Garrison Keillor’s imaginary town where “all children are above average,” we have a fantasy economy where “all investments make money.”

I don’t want to burst anyone’s bubble or shatter any childhood illusions, but losses are an inherent part of the free market movement. As the saying goes, “capitalism without bankruptcy is like religion without hell.”

Moreover, losses (just like gains) play an important role in that they signal to investors and entrepreneurs that resources should be reallocated in ways that are more productive for the economy.

Legend tells us that King Canute commanded the tides not to advance and learned there are limits to the power of a king when his orders had no effect.

Sadly, modern journalists, regulators, and politicians lack the same wisdom and think that government somehow can prevent losses.

But perhaps that’s unfair. They probably understand that losses sometimes happen, but they want to provide bailouts so that nobody ever learns a lesson about what happens when you touch a hot stove.

Government-subsidized risk, though, is just as foolish as government-subsidized success.

Wash. Post, CBS, NBC Should Disclose Receipt of ObamaCare Subsidies

It’s not an easy period for major media organizations, what with all this creative destruction revamping that sector of the economy.  So the Washington Post Co. couldn’t help but be pleased when it received a $570,000 bailout from ObamaCare’s Early Retiree Reinsurance Program.  That program allows the Obama administration to run up the national debt another $5 billion by doling out cash to corporations that provide retiree health benefits.   The CBS Corporation received more than $720,000.  General Electric, a part owner of NBC Universal, Inc., cleared nearly $37 million.

Since The Washington Post, CBS News, NBC News, and MSNBC have now received subsidies (the latter two indirectly) from this very controversial law, their reporters should disclose that fact to their audiences when reporting on ObamaCare.  A disclaimer like this should suffice: “The Washington Post Corporation has received subsidies under the health care law.”  That would be consistent with how NBC discloses its relationship with General Electric:

Oh, and kudos to the marketing whiz who decided to call all these ObamaCare spending programs “slush funds.”

Political Economy in Three Panels

Indeed, every improved product or service may make us no longer value products and services we previously used. That’s what Schumpeter called “creative destruction.” A longer version of the same phenomenon was on the front page of Monday’s Wall Street Journal, in an article about how Wal-Mart’s rivals secretly fund “grassroots local campaigns” against Wal-Mart, organized by political consulting firms, to protect the existing firms’ positions. Every innovator puts somebody out of business, as Agnes’s friend recognizes.