Market Education — Understanding the Evidence

I recently wrote that that the private sector can and does expand to meet demand in response to large scale school choice programs. I gave as examples the Netherlands, Chile, Sweden, and Denmark, all of which have national school choice programs that resulted in expanded private education sectors.

Though she acknowledges that she is unfamiliar with the programs in Denmark and Sweden, The Quick and the Ed.’s Sara Mead claims that this evidence does not show “what Coulson believes it does.”

She supports that view by questioning the results in Chile and the relevance of the Netherlands, and by presenting American voucher programs as a putative counter-example.

These objections do not hold water.

First, Chile. As Ms. Mead correctly points out, the expansion of the private sector in that country has occurred more rapidly in middle and upper income areas than in low income areas. As I explained in my chapter in What America Can Learn from School Choice in other Countries, there are two main reasons for this: Chilean government schools serving the poor receive substantially greater per-pupil funding than do private voucher schools, and most of Chile’s poor are concentrated in rural areas.

The poor are poor, not stupid. Research shows that when Chilean government schools get total funding that is between 150 percent and 300 percent of the private school voucher amount, they start to do as well or even somewhat better academically. When they get roughly the same per pupil funding, they do poorly compared to private voucher schools. The poor in Chile are thus often making a wise choice when they decide to frequent the much higher spending government schools.

It is also the case that it is easier to open a viable school in an area of high population density than one of low population density. So, until the high-population density areas are saturated with schools, growth of private schooling in rural areas will be slower than in urban areas. If, as seems to be the case, Chilean private voucher schools continue to enroll a larger and larger share of students, this gap will eventually go away.

In the Netherlands, where government schools do not receive higher per pupil funding than private voucher schools, there is little difference in enrollment rates by income. In fact, the private Catholic school sector in the Netherlands has a slightly lower average socio-economic status than does the government sector, but its students nevertheless outperform their wealthier government school counterparts.

I could go on like this at length, picking apart the rest of Ms. Mead’s argument (e.g., existing U.S. voucher programs haven’t grown more because they are explicitly capped in size or funds!), but this is enough to make my point: if you actually look at all the relevant evidence, and make an effort to understand it, the kind of superficial objections that are offered by the anti-market crowd fall apart.

Ms. Mead adds that “If Mr. Coulson sends me a copy of his book and any other relevant materials, I would be happy to learn more about this.”

That’s a nice, polite thing to say. And I appreciate it. But, as scholars, we are not supposed to wait for the evidence to come to us with a bow on it. We are supposed to go out and find it, and if it is apparently contradictory, to try to make sense of it. And we should wait to offer policy advice until we’ve been able to complete that process with a reasonable degree of comprehensiveness and confidence.

I wish I could come up with a nicer way to say that, but it has to be said.

Prosperity Creates More Leisure, But Is “Unfair” to the Rich

An article at Slate.com looks at data showing a big increase in leisure time, especially among those with lower incomes:

In 1965, the average man spent 42 hours a week working at the office or the factory; throw in coffee breaks, lunch breaks, and commuting time, and you’re up to 51 hours. Today, instead of spending 42 and 51 hours, he spends 36 and 40. What’s he doing with all that extra time? He spends a little on shopping, a little on housework, and a lot on watching TV, reading the newspaper, going to parties, relaxing, going to bars, playing golf, surfing the Web, visiting friends, and having sex. Overall, depending on exactly what you count, he’s got an extra six to eight hours a week of leisure—call it the equivalent of nine extra weeks of vacation per year. For women, time spent on the job is up from 17 hours a week to 24. With breaks and commuting thrown in, it’s up from 20 hours to 26. But time spent on household chores is down from 35 hours a week to 22, for a net leisure gain of four to six hours. Call it five extra vacation weeks.

And because those with lower incomes have disproportionately gained from this trend, the author mockingly asks whether they should be forced - as part of the campaign to reduce inequality - to donate unpaid labor to the “less fortunate” with more money but less free time:

…a certain class of pundits and politicians are quick to see any increase in income inequality as a problem that needs fixing—usually through some form of redistributive taxation. Applying the same philosophy to leisure, you could conclude that something must be done to reverse the trends of the past 40 years—say, by rounding up all those folks with extra time on their hands and putting them to (unpaid) work in the kitchens of their “less fortunate” neighbors. If you think it’s OK to redistribute income but repellent to redistribute leisure, you might want to ask yourself what—if anything—is the fundamental difference.

Kanan Makiya Looks Back

Saturday’s New York Times runs a profile of Kanan Makiya, the Iraqi-American intellectual who was at the center of the case for attacking Iraq.  Makiya, chastened to a degree unfortunately uncommon among American neoconservatives, is writing a book about what went wrong.

“I want to look into myself, look at myself, delve into the assumptions I had going into the war,” he said. “Now it seems necessary to reflect on the society that has gotten itself into this mess. A question that looms more and more for me is: just what did 30 years of dictatorship do to 25 million people?”

“It’s not like I didn’t think about this,” he continued. “But nonetheless I allowed myself as an activist to put it aside in the hope that it could be worked through, or managed, or exorcised in a way that’s not as violent as is the case now. That did not work out.”

That may suffice for Mr. Makiya, but it is entirely insufficient for the U.S. government and the neoconservative architects of the war, who continue to peddle their strategic snake oil all over town.  What’s their excuse?

Billionaires and Mill Workers

Presidential candidate John Edwards tells every audience that his “father worked in a mill.” It’s right there on his MySpace page: “My dad was a millworker.” Google “john edwards mill worker” and you’ll find lots of journalists and reference sites reporting that as fact. Washington Post columnist Eugene Robinson upped the ante, declaring that “Edwards grew up poor.”

But is Edwards’s story true? Not quite, according to Boston Globe reporter Patrick Healy, who actually visited his home town back in 2003. Healy found:

On the campaign trail today, the senator regularly describes himself as the son of a mill worker but rarely if ever notes that his father was part of management. “They weren’t quite as humble as Edwards makes it sound,” says Pat Smith of Robbins. “Wallace was a very important man at the mill. … They weren’t rich, but they weren’t struggling poor.”

“John was more middle class than most of us,” says Bill Garner, a high school friend and college roommate.

In the LA Weekly Doug Ireland is more tendentious:

“The Edwardses were solidly middle class” when Johnny was growing up, according to a four-part profile of the North Carolina senator in his home state’s most prestigious daily, the Raleigh News and Observer. It’s true that for a few years as a young man Edwards’ father worked on the floor of a Roger Milliken textile mill. But Edwards père (a lifelong Republican, like his reactionary boss) quickly climbed upward, becoming a monitor of worker productivity as a “time-study” man — which any labor organizer in the South will tell you is a polite term for a stoolie who spies on the proletarian mill hands to get them to speed up production for the same low wages. Daddy Edwards’ grassing got him promoted to supervisor, then to plant manager — and he finally resigned to start his own business as a consultant to the textile industry.

Edwards was no millionaire scion, like the Roosevelts and the Kennedys and the Bushes. And even today he’s no billionaire like possible candidate Michael Bloomberg and avid, though struggling, candidate Mitt Romney. Nor did he completely make up a family history stolen from another candidate in another country, like Joe Biden.

But his background is more middle-class than he tells voters, and he wouldn’t connect so well with union audiences if he noted that his father was a mill manager. Indeed, his upbringing seems to have been more secure and comfortable than that of, say, Ronald Reagan or Bill Clinton.

New Bipartisan Bill Shows Key Senate Committee May Not Be Sympathetic to Dorgan’s Fiscal Protectionism

In a positive development, the Democratic Chairman of the Senate Finance Committee and a senior Republican on the Committee have introduced legislation to make “deferral” permanent for U.S. financial services companies that compete in global markets. This is not nearly as good as pure territorial taxation, but it is a step in the right direction. Equally important, it shows that the Finance Committee may not be very receptive to the protectionist and discriminatory Dorgan legislation - which would end deferral and impose immediate worldwide taxation on American companies with operations in selected low-tax jurisdictions. Tax-news.com reports:

Senators Max Baucus (D-Mont.) and Orrin Hatch (R-Utah) have introduced legislation which they say will protect the jobs that US financial services companies have created in the US, by keeping the industry on an equal tax footing with its international competitors. When foreign financial services companies earn income abroad, it’s not subject to taxation until the money is brought back to the parent company at home. The law giving American companies this tax treatment here at home is set to expire next year. The Senators’ bill would make the ‘Subpart F’ exception for active financing income permanent, so that US firms and their workers are not disadvantaged by tax burdens their competitors don’t face. “We need to make sure that US tax rules don’t make financial services companies less competitive in the world arena, and less able to keep good-paying jobs here at home,” Baucus stated. …“America’s tax laws shouldn’t handicap companies striving to lead in a very competitive global marketplace,” Hatch added. …“When we tax US companies working overseas, we increase their overhead and allow their competitors to undercut them,” Hatch noted. “That hurts American workers, business, our influence abroad, and – ultimately – the tax revenue we’re able to collect. Renewing legislation that puts our top-notch financial companies on competitive footing is good for business and good for our country.”

Tax Havens Protect Against Greedy Government

The New York Times has a story reviewing developments in the private banking industry. The article notes a couple of important points. First, high-tax nations - and the international bureaucracies that represent those nations - resent Swtizerland for serving as a refuge:

For generations, Europe’s wealthy journeyed through mountains and valleys to quietly stash their money with Switzerland’s bankers, famed for taking their secrets to the grave. …many of the country’s detractors complain that Switzerland remains the world’s prime tax haven. The European Union and the Organization for Economic Cooperation and Development have pressured Switzerland to loosen its bank secrecy.

Second, the article notes that high-tax countries can get at least some money to return home if they remove and/or reduce the tax penalites:

Several countries, including Italy and Belgium, have lured back untaxed assets held abroad by decreeing an amnesty for tax evasion. But that is not the biggest challenge.

Third, tax competition is creating other havens for people seeking to avoid not only punitive taxes, but also other forms of oppression:

As Swiss bankers penetrate markets abroad they are facing like-minded competitors from elsewhere in the world. Dubai and Singapore have cultivated sophisticated private banking hubs, offering discreet financial services and a tax haven aimed at luring away wealthy clients. And just as the Swiss have moved overseas, foreign banks like Citibank have flocked to Switzerland. Geneva, once a sleepy lakeshore town, now has branches of 100 foreign banks.

Lastly, the article notes that Switzerland has a completely different approach from America. Unlike the US - which has a so-called Bank Secrecy Act that strips away financial privacy, Swtizerland still respects the fundamental right to privacy. Citizens are treated like adults - a relationship that is facilitated by a better tax regime:

Unlike regulations in the United States, Swiss law forbids bankers from divulging information about clients or their assets, under threat of penalty. Tax evasion is not considered a crime.

Amazing What Patient Control Will Do

In Healthy Competition, Mike Tanner and I argue that when patients control the money involved, health care providers compete much more aggressively for those dollars on the basis of price, quality, and convenience.

Recently, American Public Media’s Dick Gordon conducted interesting interviews with patients of an Apex, North Carolina, doctor who accepts only cash. The doc posts prices for his services, which end up being affordable for his modest-income patients.  For example:

  • Office visit: $45
  • Urine Test: $25
  • Pap Smear: $55
  • Cholesterol Check: $25

(How much does your doctor charge for these things? He probably gets most of his money from insurance companies, doesn’t he?)

Gordon, the doc, and the patients discuss the economics of primary care and what one patient called “the insurance racket.” The doc even offers some good advice on how other doctors can switch from an insurance-based to a cash-based practice.

Gordon then switches gears to interview an uninsured patient who had been in need of heart surgery and who said:

The hospital system in America and the insurance system in America place people who are self-pay at an extreme disadvantage. 

U.S. hospitals had given him price quotes ranging from $70,000 to $200,000. However, Escorts Heart Institute And Research Centre in New Delhi (about which Tanner and I wrote in Healthy Competition) gave him a quote of about $10,000. Not only was he satisfied with his care there, he said he would go back “in a heartbeat.”

The entire program lasts 50 minutes. Click here for the online archive of the show.