Semi-Tough — New Ed Report Offers Right Diagnosis, Wrong Cure

An ultra-blue-ribbon report published last month by the National Center on Education and the Economy argues that America is headed for economic disaster unless we dramatically restructure our schools. True enough.  But diagnosing a problem and solving it are two different things, and it is in the solution department that the report, titled “Tough Choices or Tough Times,” disappoints.

The study correctly observes that America must produce a more knowledgeable, flexible, and creative workforce if we are to have any hope of maintaining our current standard of living. If we don’t, an ever-increasing share of U.S. jobs will be filled by better-educated, lower-wage workers in countries such as India and China.

In explaining this economic challenge, the authors (a who’s who of political, business, academic and labor leaders) make a compelling case for free markets. They show how competition, consumer choice, and the profit motive encourage businesses to hire the best and brightest workers they can find – wherever they can find them. Free from intrusive regulation of their personnel and product design decisions, businesses seek to satisfy their customers’ demands as ably and efficiently as possible. They do not do so out of charity, or because they are told to by the state, but because it serves their own interests. This is Adam Smith’s invisible hand at work – and oh how it works.

The fact that the authors understand this process so well makes their education policy recommendations all the more disappointing and incongruous. Instead of recommending that we harness these same free market forces to transform our schools, they offer what amounts to a weak charter school reform, suffocated with regulation.

The report is a central planner’s Christmas list. Teachers would continue to be certified by the state and their (dramatically increased) salaries set by the state. They would administer to students a curriculum determined by the state, and gauge students’ success using mandatory state tests. In fact, progression through the system from secondary to higher education would be dependent on students passing government examinations.

These nanny-state recommendations are, mercifully, punctuated by the occasional dose of liberty. The authors recommend, for instance, that schools should be chosen by families instead of being assigned to students by bureaucrats. This alone, they seem to imagine, would create a vibrant educational marketplace. But consumer choice is meaningless in the absence of producer freedom. If schools cannot specialize and cater to different interests and preferences – by setting their own curricula, choosing their own tests, determining their own teacher selection criteria – then the diversity and innovation that characterize free markets cannot and will not arise. And the report’s recommendations curtail all of these freedoms.

Further inhibiting market processes, the authors would preclude the ability of their charter-like schools to set their own prices or even to charge tuition. But as any first year economics student is aware, market-determined prices are an indispensable mechanism by which consumer preferences are communicated to producers, and by which producers are encouraged to offer the particular kinds of services most in demand. Eliminate market prices and you cripple the market.

How could the contributors to this report have produced recommendations so fundamentally at odds with their own astute diagnosis of the problem? By thinking very hard, inside a very small box.

Marc Tucker, vice chairman of the commission responsible for the report, told the Post’s V. Dion Haynes that they aimed to produce “the best national public school system in the world.” If you set out to build the best horse-drawn buggy, you won’t end up inventing the automobile.                 

The authors of this report assumed that the state must be at the center of our education system much as early astronomers assumed that the Earth must be at the center of our solar system – with equally unsatisfactory results.

Unaware that the planets orbit the sun, pre-Copernican astronomers tried to reproduce their trajectories with clever, intricate, but inevitably doomed geocentric models. In a similar vein, the Center struggled unsuccessfully to reproduce market incentives within their state-centric policy environment. “Both the state and the district could create a wide range of performance incentives for the schools to improve the performance of their students,” the report suggests.

But instead of trying to simulate market incentives within a centrally planned system – a venture proven futile by the failed socialist economies of the 20th century – why not actually create a free education marketplace? With a simple program of need-based financial assistance, all families could be assured access to schools of their choice.

The National Center’s report fails to even consider this market-centric solution, however, and thereby consigns itself to the status of an historical footnote – a doomed and oddly anachronistic attempt to achieve market results through government edict.

[An edited version of this post previously appeared in the New York Daily News].

 

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Is Bush Helping Africa?

On Sunday, December, 31, the Washington Post featured a banner headline reading “Bush Has Quietly Tripled Aid to Africa.” The article noted:

The president has tripled direct humanitarian and development aid to the world’s most impoverished continent since taking office and recently vowed to double that increased amount by 2010 — to nearly $9 billion.

The moves have surprised — and pleased — longtime supporters of assistance for Africa, who note that because Bush has received little support from African American voters, he has little obvious political incentive for his interest.

“I think the Bush administration deserves pretty high marks in terms of increasing aid to Africa,” said Steve Radelet, a senior fellow at the Center for Global Development.

Conservative press critics might be surprised at the positive tone of the article, which ran for 34 column inches, about a third of a page. But one could also wonder why the Post, in all that space, couldn’t find room for a single critical comment from a foreign aid skeptic. For decades, economists have argued that government-to-government aid bolsters dictatorial governments, increases dependency, and discourages local entrepreneurship and enterprise. People can hardly fail to note that Africa has been the largest recipient of economic aid for decades, and the continent remains poor and undeveloped. So will Bush’s huge increase in aid be more successful? The outlook isn’t good.

Post readers who want the full story might consult foreign aid critiques by pioneering development economist P. T. Bauer, former World Bank economist William Easterly, Ugandan journalist Andrew Mwenda, longtime aid practitioner Thomas Dichter, Cato’s Ian Vasquez, or four African economists, or this story from the BBC.

Cloned Food 101

The FDA’s Center for Veterinary Medicine recently issued three documents related to cloned foods:

  • “Animal Cloning: A Draft Risk Assessment”
  • “Animal Cloning: Proposed Risk Management Plan for Clones and Their Progeny”
  • “Guideline No. 179: Guidance for Industry Use of Edible Products from Animal Clones or Their Progeny for Human Food or Animal Feed” 

These are drafts open for comment until April 2, 2007.

The FDA concluded that, while there were little data, the data available indicated that “SCNT [somatic cell nuclear transfer, i.e., cloning] results in an increased frequency of health risks to animals involved in the cloning process, but these do not differ qualitatively from those observed in other ARTs [Assisted Reproductive Technologies] or natural breeding.” Furthermore, “[e]xtensive evaluation of the available data has not identified any food consumption risks or subtle hazards in healthy clones of cattle, swine, or goats.” 

In short, unless the comments provided within the next three months indicate otherwise, food from cloned animals will be on the market in about a year and require no additional labeling to distinguish it from food products from non-cloned animals.

Keeping the Facts Straight   Most objections to “cloned foods” stem from a misunderstanding of the technology and its ramifications:

  • First, not the food, but the animal used to produce the food is what is cloned.  Potentially, the actual clone could be used as food but, since it costs $15,000 to $20,000 to produce a clone, it is usually only the clone’s milk or offspring that are intended for the food market.
  • Cloning is not a form of genetic engineering. The DNA provided by the animal being cloned is not altered. Cloning is a form of assisted reproduction that creates an identical twin at a later time. Any accidental alteration of the DNA results in death of the clone usually in the lab, but occasionally one survives through gestation and birth, but not beyond the perinatal period. Thus, all clones that have the potential of entering the food supply or of being bred are genetically identical to the animal that was cloned.
  • Food from clones poses no more risk to the consumer than the animal being cloned. The susceptibility to disease or other conditions that may disqualify clones from food production is no greater than that of the original animal. Thus, the fact that an animal is a clone poses no unique risk to the food supply.
  • The first sheep (Dolly) was cloned in 1996. The first cow was cloned in 1998 and the first pig in 2000.
  • In 2001, the FDA decided to study the issue of food from cloned animals and asked the food industry not to introduce any food produced by clones or their progeny into the market. The FDA’s notice of publication that accompanies the afore-mentioned drafts requests that this “voluntary moratorium” continue.
  • It is possible that some cloned animals or their progeny have already entered the food supply, but there is no definitive evidence that this has happened.
  • The FDA has asked for a “voluntary” moratorium because, under current law, the agency probably doesn’t have the authority to ban foods made from clones. Unless Congress amends the Federal Food, Drug, and Cosmetic Act (FFDCA), this will continue to be the case regardless of what the FDA decides when it publishes its final rule.
  • The milk and beef from cloned cows is indistinguishable from that produced by other cows. It’s not adulterated; there are no additives. The following is an oversimplified description of federal law,  but should shed some light on why the FDA is proceeding as it is. Basically, federal law (the FFDCA) presumes that unadulterated food is safe. The FDA has the authority to regulate the use of additives and to require accuracy in labeling. Labeling may be regulated to assure that the identity of the food is correctly represented (margarine is not butter) and that potentially harmful additives or allergens are indicated on the label. Food from cloned animals simply does not differ from regular food in any manner that justifies regulation under the FFDCA.
  • It is time to give some clarification regarding the phrase “genetic engineering.” Genetically engineered animals have been genetically altered, not just reproduced. Under a broad definition of “genetic engineering”, all animal husbandry that involves changing the genetic makeup from one generation to the next involves genetic engineering. In this sense, each time a breeder chooses a mate for an animal, he is engaged in genetic engineering. This type of genetic engineering actually takes place through selective reproduction. A newer type of genetic engineering, which is what most people mean when they use the term, refers to genetic alterations made by man not through selective breeding but through selecting the actual specific genes that will be combined. This can also involve taking out or adding genetic material, including the addition of genetic materials from different breeds, species, phyla, or even kingdoms. The resulting animal or plant is called “transgenic” if foreign DNA is integrated into the genome.
  • There are over a billion acres of land, most of it in the United States, planted with strains of transgenic crops. These crops, for the most part, are corn, soybeans and cotton.
  • At this time, there is only one transgenic fish approved for sale in the United States, and it is an aquarium fish, not for human consumption. There is, however, a petition pending with the FDA to approve a transgenic salmon, and it will be labeled as such if it is approved.
  • The Center for Food Safety and several other consumer groups have filed a Citizen Petition with the FDA encouraging the agency to regulate cloned foods as new animal drugs. Under the FFDCA, drugs require pre-approval for safety and efficacy before being marketed. This is quite a stretch. The relevant part of the FFDCA definition of a “drug” according to the petition is “any articles (other than food) intended to affect the structure or any function of the body of man or other animals.” It is further worth noting that genetically modified foods, including transgenic animals, require pre-market approval by the FDA because they are considered as containing “food additives.” This actually makes some definitional sense since genetic material is added or changed to create a genetically modified plant or animal. But, this same logic does not hold for cloning.

The conclusion I draw from these facts is that the FDA should not be involved at all in regulating food from clones or their progeny. Under existing law, the FDA doesn’t have the authority to regulate food from clones even if there were a safety issue. 

Regarding labeling — that issue will take care of itself without FDA interference. If there is enough public concern that food produced from clones or their progeny is unsafe, then producers of organic foods will start specifying “Not from cloned animals” on their labels in the same way they have advertised “Not from animals treated with hormones or antibiotics.” 

The Center for Food Safety claims that “63% of Americans would not buy cloned food, even if FDA deemed the products safe.” They present these data from a 2005 poll as an argument for regulation. I think such poll results only justify purchasing stock in organic food companies that promise not to sell products from cloned animals — but not government intervention.

Ethical Considerations   The ethical concerns addressed here are primarily moral considerations that legitimately could influence actions taken by individual breeders, producers, and consumers, but not legitimately be used to argue for government intervention. Even the FDA agrees with this point. In its proposed risk management plan, the agency states: “The Draft Risk Assessment is strictly a science-based evaluation of animal health and food consumption risks, and the Proposed Risk Management Plan and Draft Guidance for Industry do not address any ethical or other non-science based concerns regarding animal cloning.”

Most ethical objections to cloning and genetic engineering in general come from a fear of the unknown consequences of such technology, a religious or moral objection to tampering with natural reproduction, and/or a concern for preventing cruelty to animals. While all these concerns hold legitimate moral sway with various portions of the population, they are not grounds for government action. We live in a pluralist society and those who disagree on religious or moral grounds with cloning should be free to speak out, boycott, or not participate in the objectionable activity, but those who do not object should be equally free to participate in producing food from clones and/or eating it.

The one legitimate concern I see with cloning is one almost as old as animal husbandry itself. By its very nature, manipulating a gene pool to create certain desired phenotypes creates a homogeneity that can put the whole group at risk. As a 25-year veteran breeder of rare breed dogs and cats, I know first-hand that breeders often attempt to ferment type at the expense of health. A lack of genetic diversity in purebred animals caused by too much inbreeding makes those animals more susceptible to disease, shorter-lived, and more prone to unhealthy offspring. Domestically bred animals loose their genetic resilience when intentional line-breeding or the overuse of certain choice animals makes it difficult to find animals that aren’t related. 

To prevent such homogeneity, some breeders feel it is their moral obligation not to flood the gene pool with one particular genotype. They do this by not breeding two animals related more closely than five generations back or by not breeding their pride stud more than four times a year. Such ethical standards are usually set by individual breeders or private breed associations. Cloning itself is not inbreeding but it can result in flooding a gene pool; for example, there are reports of a farmer who has cloned his prize bull five times already. Now an animal whose genetic material would appear in X number of offspring, will in fact appear in X6 number of offspring. In this way, cloning can over-saturate a gene pool with a particular animal’s genes, making the group more susceptible to intentional or accidental inbreeding and, in turn, genetically weaken the group as a whole. 

Like cloning, genetic engineering could be used to create consistency within a breed, but it also could be used to create diversity. Genetic engineering could help eliminate genetically linked diseases, even those in rather homogeneous groups. It could also be used to create more diversity in ways that help preserve the desired traits without creating too much homogeneity. 

Also, while individual breeds within a species become more homogeneous, genetic engineering could help the number of breeds proliferate — just look at the number of dog, cat, and bovine breeds that exist today. It certainly would be disappointing for those who like the taste of a particular kind of beef to learn that the breed of cattle that produces that beef is failing in part because of too much cloning, but that would not mean the end of all beef or all bovines. It would simply mean regenerating the breed either from a survivor, hopefully genetically engineering out the flaw that caused problems, or altering another breed to have the characteristics that were prized in the breed that failed. 

None of the ethical issues presented by cloning food-producing animals are new. Cloning and genetic engineering only provide new and more effective methods of doing what humans have been doing for millennia  — that is, manipulating the genetic makeup of plants and animals to create better food. Put another way, humans have been tampering with nature, playing God with the creation of animals, and eating their creations for thousands of years. The only thing that has changed is the technology. The goals and the ethical problems inherent in those goals remain the same. And, as is usually the case, the very technology that poses potential problems, undoubtedly also holds the solution to those problems should they arise.

State Health Reforms — Do They Deliver?

The AP reports,

Maine’s Dirigo Health Reform Act drew national attention when it was signed into law in 2003, making Maine the first state in recent years to enact legislation aimed at providing universal health care access.

The law, which went into effect Jan. 1, 2005, is designed to contain health care costs and ensure access to health care for all. When it passed in the Legislature, its goal was to insure 31,000 people in its first year and to cover all of the state’s 130,000 uninsured by 2009.

The program has fallen short of its goals — 12,153 were enrolled in the Dirigo Choice health insurance program at the end of October — and was placed under review this year by a Blue Ribbon Commission representing business, insurers, consumers, labor and the state.

The article reports that Maine is considering tax increases among other measures to address problems with its reform.

There is a huge incentive for states to over-promise and under-deliver on providing health care solutions. The most popular programs will be ones that have not been given a thorough trial yet.

A King, Not a President?

Gene Healy praises former president Gerald Ford for proclaiming himself “a Ford, not a Lincoln” and demonstrating “a modest approach to the most powerful office in the world.” The Washington Post notes:

Ford never forgot his humble roots, famously presenting himself as “a Ford, not a Lincoln.” He was not even born a Ford. His original name was Leslie Lynch King Jr. 

So if not for his mother’s remarriage, he could have begun his presidency by declaring “I’m a King, not a President.” But that’s a claim better suited to the current president than to President Ford.

Start the Engines on the Inequality Debate

With the Democrats taking over Congress, most pundits are expecting much debate about income inequality in 2007. Indeed, the debate has already begun in the blogosphere over Alan Reynold’s recent op-ed in the Wall Street Journal.

For other takes, check out econ bloggers Greg Mankiw, Brad DeLong, and Tyler Cowen and Alex Tabarrok’s Marginal Revolution.  

A few observations: 

  • Alan’s full paper on trends in income inequality will be released by Cato in the second week in January. 
  • Please join Alan, Diana Furchtgott-Roth, and Gary Burtless for a discussion of income inequality at Cato on January 11.
  • I believe Alan has uncovered some very interesting information on the use of tax return data to illustrate income trends over time. Trends have been influenced by the rising amount of business income that is now reported on individual tax returns instead of business returns, the 401(k) explosion, and the effects of two types of stock options on reported income.
  • I’m no expert on income trends, but I know enough to see that there are huge data issues here. You simply can’t look at a raw IRS or Census table and make a hard conclusion about income trends. You need to think about what is included and excluded from “income” at each point in time. 
  • The much-cited Piketty-Saez data on the share of income going to those at the top do not reveal a steady rise over recent decades. Instead, most of the rise comes sharply in a single two-year period, 1987-1988. That should make economists and pundits skeptical about whether the supposed inequality trend is actually related to long-term changes such as international trade or wage premiums for college grads.
  • I think it’s still an open question whether income inequality has increased or decreased in recent decades, but we’ll see what the experts say on January 11.

The iPod Nano: Assembled in China, designed and enjoyed in America

Among the Christmas presents in our house this year were two iPod Nanos. On the back of each of these nifty devices is the inscription, “Designed by Apple in California. Assembled in China.”

That tells a more accurate story than the more common but misleading “Made in China.” As with many other high-tech devices, iPods are indeed assembled in China, but the real guts of the device—the design, the brand name, the more sophisticated components—come from countries outside of China.

To those obsessed with the trade balance as a zero-sum scorecard, another iPod imported from China merely adds to our growing bilateral trade deficit with China. Granted, assembling iPods does create jobs for Chinese workers that probably pay higher than average wages, so China does benefit. But who is getting rich from all the iPods Americans bought this Christmas, and who is getting the most enjoyment from them?

The answer: Americans.