Tag: libertarian

We’re Terribly Czarry

My former colleague Dave Weigel makes the excellent point that the supposed explosion of “Czars” under this administration is, in significant part, a function of journalists trying to make the same old “deputy undersecretary” sound sexier. Which is a shame, since it means that the pernicious and the benign get lumped together under the same sensationalist label – one whose public effect is to normalize the idea of unaccountable individuals within the executive branch given sweeping powers to solve specific problems, whether or not that picture is accurate.

I don’t know how much it can be attributed to the Czarmania, but I’m especially puzzled by the apparent emergence of legal scholar and prospective OIRA Adminstrator Cass Sunstein as the new hot bogeyman for conservatives. The Office of Information and Regulatory Affairs, which Sunstein’s been tapped to head, was created in 1980 and is precisely the sort of agency conservatives should love – tasked with catching inefficient and excessively burdensome regulations before they go into effect. It has, unsurprisingly, been most active under conservative presidents, and is one of the few offices where fans of limited government should want a vigorous, influential, and intellectually formidable director at the helm.

Now, Cass Sunstein is not somebody I agree with on a great number of things. On the day he’s tapped for a seat on the Supreme Court bench, I’ll break out in hives. But it’s awfully hard to imagine any realistic alternative – anyone Obama might actually have appointed – who would be better in the OIRA post from a limited government perspective. (I considered some of the specific concerns being raised about Sunstein back in the spring and found that they ranged from exaggerated to simply mendacious.) That’s one reason hardcore progressives have, in fact, been freaking out over his nomination. They must be pinching themselves  now that it seems Glenn Beck is out to do their work for them. Say what you will about the tenets of “libertarian paternalism,” but at least it’s an ethos that would demand a far lighter touch on markets than the unreconstructed technocracy of your average regulator.

It’s Not About the Speech to Schoolchildren

The reaction to President Obama’s planned speech to schoolchildren and the lesson plans sent out by the Dept. of Ed have sparked a firestorm of criticism and accusations about indoctrination, etc.

Many, many people just can’t understand what the big deal is. After all, it’s just a pep-talk about doing well in school and working hard. Sure, there was some language promoting Obama and political leaders. But who cares? It’s just a brief speech by the President after all. Just like Bush the Elder gave in gentler times (which got him a Congressional investigation).

Many are asking the same questions about a number of issues these days. Why the outrage over the deficit? Where were the complaints when Bush the Younger ran it up? Why so exercised about the government health option? Don’t we have Medicare and Medicaid?

Of course Cato scholars, libertarians and many conservatives have criticized these things all along. For some, the new sensitivity, the emotion, is the result of the proverbial straw on a camel’s back, the accumulation of dissatisfaction with various aspects of the government over decades. And what has changed for others is the pace and scope of government expansion at the close of the Bush presidency and the dawn of Obama’s.

The furious reaction to the politicized lesson plan and Obama’s speech to schoolchildren cannot be understood without the context of the bailouts, the stimulus, the debt, GM, the attempt to take over health care.

And now, our kids. And not just the speech and lesson plan, but federal expansion into preschool and early childhood initiatives and home visitations (however voluntary and innocuous-seeming in different times).

They … the government, the meddlers, the nannies … they are coming for our money, our doctors, our guns and our kids. They won’t stop until they control everything.

That’s how it looks to millions of Americans. Fair or not, people are now very sensitive to any actions by the Obama administration.

Just as a lifetime of exposure to an allergen and modest immune reactions can reach some ill-defined tipping point and bloom into full-blown anaphylaxis, many Americans have developed an acute allergy to government intervention and Obama’s grand plans.

In isolation, the reaction to this speech seems wild. Given the context, it’s completely understandable.

Anti-Sex School for Johns?

In a novel approach to punishing men who attempt to hire prostitutes, Nashville and other cities are sending first-time offenders to a one-day class where they learn from former prostitutes, health experts, psychologists and law enforcement officers about “the risks of hiring a prostitute.”

This is a waste of time.

Prostitution is “the oldest profession” for a reason: sex is a biological imperative. A day of anti-sex school will have no effect on the demand for prostitution.

The better approach is to legalize.

Under legalization, the vast majority of men would patronize legal establishments. This would also allow quality control, since competition would encourage prostitution services to certify their employees as free from STDs and above the age of consent. Legalization would help the women who serve as prostitutes by reducing the violence they suffer from johns and pimps. In particular, legalization would mainly eliminate forced prostitution.

The claim that prostitution encourages sexual assault does not pass the sniff test. Many countries, plus Nevada and Rhode Island, allow legal prostitution to varying degrees, but no evidence suggests they have a higher incidence of violence toward women.

C/P Libertarianism, from A to Z

Wait! How’d I Get in This Invisible Box Again?

Kevin Carey has posted his response to my reply to him, and apparently he just won’t take it from a libertarian that we libertarians see no dilemma in the college-cost problem. At least, he can’t see how libertarians could “think seriously about restraining college costs” and still come to the conclusion that the best way to cut government spending on higher education is to, well, cut government spending. He still insists that the only way to “bend down the long-term higher education cost curve and thus reduce government spending is to increase government regulation.”

The mime who is boxing libertarians in must be one powerful illusionist, because Carey just can’t seem to not see a real box. But reading Carey’s post makes clear why this is: He wants desperately to believe that we must spend more on higher education, and that regulation is all that will work to keep colleges’ excesses under control.

What makes me say this? For one thing, Carey for all intents and purposes admits the spending part:

Just to be clear: I’d like to spend more public money on higher education, not less, albeit in a way that’s substantially more performance-sensitive and directed toward institutions that serve academically and economically at-risk students.

What about his obsession with regulation? Well, the whole point of his argument is that we must regulate higher ed more. Perhaps just as telling, though, is that he offers nothing to refute – or even acknowledge – what I wrote about government failure and the huge inefficiencies of regulation in my previous reply. You know, the hugely important cost side of the regulation ledger that most people whose first response to a problem is “regulate” typically ignore.

But let’s get to what Carey does offer in substantive response to my critiques, namely my argument that market forces, not regulation, best provide the information consumers need and most efficiently deliver goods and services.

I want to start by making one thing very clear: We absolutely do not have a free market in higher education! Far from it! State and local governments control the institutions attended by about 74 percent of students, and almost half of students receive federal aid in the form of grants, cheap loans, or work-study, (not to mention tax credits). In addition, governments fund billions of dollars of university-based research. Indeed, when you tally total revenues for public and private, not-for-profit institutions in the 2005-06 school year (the latest with available federal data), and then tally the amount that comes through government (directly to institutions and through student aid), it turns out that more than 52 percent of total postsecondary revenues come from taxpayers, making them the majority share holders in Ivory Tower, Inc.!

That shows clearly that higher education is absolutely not a free market! It also provides powerful insights into the principal/agent problem in higher education, the problem discussed at length by Robert Martin in the paper that touched off this whole debate, and the focus of Carey’s reply to me.

In general, the principal/agent problem boils down to the reality that everyone is self-interested, and the interests of, say, a company’s owners are not always aligned with those of the people they employ. At the most basic level, employers want employees to work as hard as they can for as little pay as possible, and employees want to work as little as possible for as much pay as they can get.

Carey believes – and is bolstered by Martin’s agreement – that the best way to mitigate this problem in higher education is regulation, because schools and their employees will not voluntarily reveal bad things about themselves:

In higher education, Martin argues, the principal / agent disconnect is less about risky profit-taking and more about status. Colleges are inherently status-maximizing institutions, even if the principals—taxpayers, donors, and students—would rather colleges focused on a different set of priorities, like giving every student a high-quality affordable education. As Martin writes,“senior administrators can persuade themselves that lavish offices, extensive building projects, expensive public relations events, luxury travel, and high compensation are in the institution’s interest. Board members may consider expensive social events to be in the institution’s interest.” The same could be said for giving too much weight to the research mission at the expense of teaching and lots of other things.

How do you get more status, particularly in an industry where reputations are seemingly as ancient and permanent as the stone buildings themselves? You buy it, by purchasing nicer buildings (old-looking stone is a popular choice of materials) and more prominent researchers and students with better SAT scores. Or you just let it accumulate in the endowment, also a major benchmark of prestige. All of this dovetails with Bowen’s revenue-to-cost-hypothesis: college spending is capped only by revenues and colleges have every incentive to spend, so they constantly build up fixed costs, raise more money, spend more money, raise more, spend more, and so on.

Martin’s solution? More information. To mitigate the principal / agent problem, give the principals more data so they know what’s really going on. And the government has to play a role

So how does the principal/agent problem get controlled – though it can never be totally eliminated – in the private sector? Yes, there is regulation, but as I made clear in my previous post, regulation has serious costs and often fails completely. I urge you to re-read my previous post for details, or, if you really want to get a feel for regulatory and government failure, consider the current economic mess, driven by government pushing risky mortgages; implied – and then very real government bailout assurances for large financial institutions; and, if you’re inclined to think good regulation could have prevented our current woes, regulators failing in their duties. And no, unlike what Carey says, government requiring McDonald’s or Ruth’s Chris to publish nutrition information isn’t what makes them set consistent standards or deliver food people want – it’s the need to acquire and keep customers, who are highly motivated to spend their money on things that they think are worth it.

Wait. Customers? Of course! What forces high standards and constrains costs in true private markets is not regulation, but the need for firms to maximize revenue, which means competing with one another and, ultimately, serving customers as best they can. That is also what aligns the interests of principals and agents – if they don’t both focus primarily on satisfying customers, both will be out of jobs and money. Of course, principals help keep agents in line with performance bonuses and other tools, and there is the threat of legal prosecution if an agent outright steals from a principal, but mutual self-interest is the most powerful force keeping principals and agents aligned in the private sector.

The problem in higher education is that this alignment is all but nonexistent! With over half of the “business owners” involuntary shareholders with no power, the agents can run wild. Worse yet, the principals’ customers consume their product to a large extent on the principals’ dime, greatly inflating what the customers demand and are willing and able to pay.

Now, consider the very real-world, negative ramifications of this misalignment of interests. Because students are largely paying for their education with someone else’s money, they have greatly reduced interest in shopping for the most efficient education, and instead look for the swankiest rec facilities; celebrity professors who may teach few, if any, classes; and buildings made of “old-looking stone.” They also have reduced incentives to determine if higher education is really best for them to begin with, explaining such colossal waste as 34 percent of first-year students taking remedial courses; only 56 percent of students graduating within six years of entry; and 29 percent of Americans ages 25 and older having bachelor’s degrees, though only 25 percent of jobs require them. And, of course, there’s the rampant tuition inflation that ends up scaring away many of the truly poor people that government is supposed to be focused on helping.

But it doesn’t end with those things. Because college employees don’t have to provide a return to their “shareholders” – or anyone else, for that matter – to make their money, they can pursue their interests without much if any regard for how their interests align with those of principals or customers. And their interest is, often, to pursue the “prestige” that Carey (and certainly many others) laments is the coin of the realm in higher ed. Oh, and it doesn’t help that principals are often forced to directly fund things like research that adversely affect a college’s teaching mission but really build professors’ reputations.

What if we were to remove much of the forced, distorting, third-party money? Carey, in unfortunate, scaremonger fashion, warns that “massive public disinvestment in higher education…would cripple thousands of institutions and shut the doors to college for hundreds of thousands of students nationwide.”

If you think reducing the amount of money colleges spend on wasteful extravagances, or professors who teach very little, is “crippling” institutions, then you’ll think Carey is right. If you believe eliminating much of the aid that encourages people to pursue education they aren’t ready for, often don’t finish, and that seriously inflates college prices is shutting “the doors to college,” then you’ll think Carey is right again.  But if you realize that by reducing aid many of the major distortions that drive up prices would also have to be reduced – the cheap, third-party money wouldn’t be there to fund them anymore – then you also realize that the new higher education market would still provide necessary education to most if not all of those people who could truly benefit from it. Indeed, even the poorest person would be able to get aid if he or she had strong, demonstrated earning potential, because both a private lender and the student would gain in the long run from agreeing to a loan. And there is such a thing as “charitable giving,” by the way.

Amazingly, Carey actually finds a way – though a very weak one – to blame the free market for the distortions in higher education. And by “free market” Carey means, simply, the much reviled U.S. News and World Report college rankings:

The free market has given us the U.S. News & World Report college rankings, which are all about status and spending. Fully 10 percent of each college’s score is based on a simple measure of spending per student — the more you spend, the higher you rank. Another 20 percent is based on things that cost money to buy — low class sizes, faculty salaries, etc. — and much of the rest flows from larger reputational and selectivity factors that are directly and indirectly enhanced by spending.

In other words, the free market has created an information environment that exacerbates the runaway college-cost problem that McCluskey is supposedly interested in trying to solve.

Where to start…

Yes, the U.S. News ranking probably relies too much on reputation and spending, but it also includes valuable output information, such as graduation and retention rates. And here’s the thing: Despite what Carey would lead you to believe, there are a lot more college guides out there than U.S. News! The Princeton Review gives you all kinds of insights into the atmosphere at numerous colleges. The Intercollegiate Studies Institute’s Choosing the Right College furnishes lots of insights into schools for conservatives. Forbes, in conjunction with Richard Vedder’s Center for College Affordability and Productivity, recently published rankings based on several college output measures. In other words, there seems to be almost a competitive rankings market burgeoning, a sign of market forces pushing their way into a non-market system, like shoots that somehow find a way through cracks in even the most concrete of jungles.

And rankings aren’t the only sign of market forces adapting as best they can to a government-distorted system. Indeed, in a system where everyone is artificially encouraged to pursue higher education, and employers are essentially banned from using the most straightforward way to assess applicants’ qualifications – direct testing – it makes sense to use the prestige of the schools that applicants attended as a proxy for their potential as employees. From an employer’s point of view, it is a relatively useful and inexpensive signal for what an applicant would bring to the job. Of course, it would be much better, especially for taxpayers, if employers were free to use more efficient and effective measures, and we didn’t push so many unqualified people to get increasingly watered-down degrees, but considering the restrictions and incentives government has imposed, market forces are doing the best they can.

With all that now said, I’m pretty sure I’m once again out of the mime’s box, hopefully this time to stay. Analyzing the principal/agent problem as it applies to higher education, as well as the numerous costs and failures of government regulation, point clearly not to regulation as the solution to what ails the ivory tower, but reducing or eliminating government spending. And please, don’t blame the free market for our higher ed problems. It’s doing all it can to fix them, but government failure is a heck of a tough thing to overcome.

Trapped Inside the Mime’s Box

Kevin Carey, policy director at the think tank Education Sector, asserts that when it comes to higher education libertarians are boxed in, unable to find a solution to out-of-control college costs that won’t violate at least one, basic libertarian principle:

This puts libertarians in somewhat of a box. On the one hand, they tend to be hostile toward the tens of billions of public dollars that flow into colleges every year. The more colleges cost, the greater the claim on the average citizen’s hard-earned money and thus reduction in their precious liberty etc., etc.

But the best way to bend down the long-term higher education cost curve and thus reduce government spending is to increase government regulation in the form of mandatory reporting. So it’s a pick your poison situation for the Cato folks — would you rather have Big Brother’s hand in your wallet or his eye on your business? You really can’t avoid both.

Now, I don’t want to seem obnoxious about this. After all, in the same piece that produced this quote, Carey notes that “while my politics are pretty far from Cato’s and I often think they’re wrong, they tend to be wrong in interesting ways.” I thank him for that (I think), though I should note that the impetus for his piece is a paper that comes from the John William Pope Center – the same paper I discuss here – not from Cato. So it might not even be Cato that Carey finds interesting. Regardless, here’s my potentially obnoxious-sounding reply:

Without even discussing the extremely dubious assumption that more regulation will lead to lower college costs, wouldn’t the best, most direct way to “reduce government spending” obviously be to, well, reduce, or even stop, government spending?

Of course it would, and that is the obvious solution for libertarians! It would get Big Brother out of our wallets and kill whatever justification subsidies might give him to gaze into our business. And it wouldn’t just make libertarians feel better – the benefits would accrue to almost everyone. If students and donors, rather than taxpayers, were to cover much more of colleges’ costs, taxpayers would save money, colleges would be unable to charge as much as they currently do, and schools would have to focus much more on their customers and patrons.

So there is no either-more-regulation-or-higher-costs box. Indeed, the only box that libertarians could possibly be trapped in is a mime’s box – a purely illusory one that someone has to really, really want to believe in for it to have any sort of existence at all. 

Having broken free of the invisible, intangible box, let me address one other thing that Carey brought up both in the discussion held at Cato, and his latest commentary:

The problem is that colleges aren’t just going to unilaterally release lots of new information on their own. Nor would it help matters much if they did; for data to matter it has to be standardized in a way that allows for comparison. That’s why companies report one set of quarterly financial results to the SEC, not 50 different sets to each state. Given that higher education is a national market this leads to a similar national solution: The federal government should compel colleges to release much more information about success as a condition of receiving direct or indirect federal aid.

The idea that a market that happens to be national in scope somehow requires federal control is both very common, and very inaccurate, simply equating “national” with “federal” and moving on from there. Even worse, though, is the even more basic assumption that to get something good, or just standardized, government control is required.

Whether it’s McDonald’s or Ruth’s Chris, an item on the menu in Beverly Hills is going to be essentially the same as in New York City. Why? Not because Washington says it must be, but because that keeps the customers coming. Or consider the QWERTY keyboard: It became the national standard by free-market, not government, forces. And how about the Model T, which was driven by Americans from Maine to San Diego? It was standardized not because the federal government said “this is a national car, so we must make it the national standard,” but because one company produced it and it was freely chosen by customers from sea to shining sea. And how do we choose automobiles today? Not by going to some federal report on what a car should be (though perhaps that day is coming) but, often, by consulting such trade mags as Road and Track.

Clearly, we don’t need government to set standards or inform consumers – markets will do those things themselves. But that markets will set their own standards is just part of the story. Sometimes – indeed, almost all of the time – you simply don’t want a single standard: Vegetarians don’t want a great steak. Many people would rather click than type. The English major fascinated by Chaucer doesn’t need a cyclotron. The working mom often doesn’t want the same education as the parentally funded 18-year-old.

And then there is the gigantic – but usually ignored – problem of government failure: Government regulation and standardization is very costly. It can be used to crush the opponents of the politically well-connected rather than advance the common good. It can have crippling unintended consequences. And, as former Dickinson College president, Clinton-era Department of Education assistant secretary, and current George Mason University professor A. Lee Fritschler made clear at the discussion of the Pope Center’s paper, it also simply fails – a lot. Indeed, based on his experience at the Department of Education, Fritschler is adamant that the feds are simply incapable of effectively regulating higher education.

So once again, Carey sees a mime’s box. This time, though, it’s not one he imagines entrapping libertarians, but one he thinks Washington can drop on the ivory tower to make it work right. It’s a different box, but just as illusory.

Bob Barr on Drug Reform

President Obama’s new drug czar, Gil Kerlikowske, says he wants to banish the idea of a “war on drugs” because the federal government should not be “at war with the people of this country.”

At a Cato policy briefing on Capitol Hill on July 7, former Republican congressman Bob Barr, once a leading drug warrior in the House, explained why carrying out an end to the “war on drugs” will require a bipartisan solution.

Hate Crime Legislation: A Shocking Disregard for Federalism

Last week’s Senate Judiciary Committee hearings (video at the link) on the proposed federal hate crimes bill showed the dark underbelly of the Senate. The road to undermining the rule of law is being paved with the best of intentions and casual disregard (if not outright hostility) for the principles of limited government and equality under the law.

I raise some objections to the bill in this podcast:

The bill federalizes violent acts against victims by reason of their actual or perceived race, color, religion, national origin, gender, sexual orientation, gender identity, or disability.

Never mind that these acts are already prosecuted by the states, and that violent crimes of this nature are universally perceived as an affront to justice. Matthew Shepard, the gay man brutally killed in Wyoming, has provided one of the rallying cries for passage of this legislation. His killers both received two consecutive life sentences from a state court. James Byrd, Jr., the African-American man dragged to death behind a truck in Texas, is cited as another reason to pass the law. His killers received death sentences or life imprisonment.

The federal government would also be authorized to prosecute whenever “the verdict or sentence obtained pursuant to State charges left demonstratively unvindicated the Federal interest in eradicating bias-motivated violence.” While this doesn’t violate the letter of the Supreme Court’s Double Jeopardy jurisprudence (the federal and state governments are considered separate sovereigns) it certainly violates its spirit.

The hearing video shows a complete disregard for limitations on federal power. Senator Ben Cardin (D-MD) claims that we need a “uniform” law across the states (82 minute mark). This claim ignores the fact that 45 states have their own hate crime laws and that violence against others is universally unlawful and routinely prosecuted. It also disregards the fact that general police powers belong to the states, not to the federal government.

Senator Charles Schumer (D-NY) then makes a brief appearance (89 minute mark) to slander opponents of the legislation - how could anyone oppose legislation with such a noble goal? He claims that this is tantamount to saying that it is acceptable to harm people because you do not like who they are.

The problem is that a broad array of actions are implicated as “hate crimes.” Virtually all rapes seem to fall under the new law - it is hard to see how the choice of a rape victim would not implicate their sex. Gail Heriot, a member of the United States Commission on Civil Rights (which came out 6-2 against this legislation), testified that when she consulted with Department of Justice attorneys in previous attempts to pass this legislation, they didn’t seem fazed by this prospect.

Don’t expect the application of this legislation to be the rare and exceptional prosecution that Attorney General Holder promises in his testimony. Janet Cohen testified that her upbringing in a racially divided America decades ago justifies passage of this law. She also proposes that prosecutions with the new law will be “wise” on account of Holder’s “brilliance and integrity.”

And to think, we were once a nation of laws, not of men.

This legislation doesn’t promote the rule of law, it undermines it. Prosecutions that favor one group of victims over another mark the destruction of equality before the law.

The worst facet of the legislation is its counterproductive nature. A real true believer, a hardcore racist or homophobe, would want to be prosecuted under a statute that criminalizes his motives. Prosecution under a murder statute makes him a common criminal; prosecution for murdering someone given special status by the government makes him a martyr for his cause and incites those motivated by his brand of hatred and animus.

This is nothing new. The Animal Enterprise Protection Act (AEPA) criminalized harassment, vandalism and violence against companies that test their products on animals. When seven activists from Stop Huntingdon Animal Cruelty tried to intimidate people associated with Huntingdon Life Sciences, a company engaged in animal testing, they weren’t just prosecuted for stalking. They were prosecuted for conspiracy to violate a federal statute enacted at the behest of their target industry. This made martyrs of the “SHAC 7” and highlighted the undue influence that an industry can exert over government. The focus is now on the propriety of the law used to prosecute someone, not the fact that they unlawfully stalked people engaged in lawful commercial activity.

You don’t defeat politically motivated violence by politicizing the laws used to prosecute it.

Murder is always murder most foul. We criminalize rape, assault, vandalism, and criminal threats because they harm a citizen - not a super-citizen held in some special regard by the government.

For more Cato work on hate crime legislation, go here and here.