201606

June 30, 2016 3:01PM

Good Schools Coming — in 10 or 20 Years (Maybe)

Kaya Henderson has gotten great reviews for her work as chancellor of D.C. Public Schools. Test scores are up during her tenure, though not as much as the hype. But take a look at this vision in an article on her departure:

Henderson cautions that improving schools that had long struggled does not happen quickly. And even with the school reform efforts over the the past decade, it may still be another decade — or more — before anyone can declare something approaching victory.


“There will be a day when every school in the city is doing amazing work and you won’t have to enter a lottery, you literally could drop your kid off at any school and have them an amazing experience. I believe we’re within reach of that, probably sometime in the next 10 or 20 years,” she says.

Good schools “sometime in the next 10 or 20 years” — “probably”? Can you imagine a private‐​company CEO promising that his company would be good at its core business “probably sometime in the next 10 or 20 years,” after his retirement?


No wonder Albert Shanker, the first head of the American Federation of Teachers, said back in 1989:

It’s time to admit that public education operates like a planned economy, a bureaucratic system in which everybody’s role is spelled out in advance and there are few incentives for innovation and productivity. It’s no surprise that our school system doesn’t improve: it more resembles the communist economy than our own market economy.

Indeed, we have in each city in the United States an essentially centralized, monopoly, uncompetitive, one‐​size‐​fits‐​all school system that has been stagnating for more than a century. As I wrote in the book Liberating Schools,

The problem of the government schools is the problem inherent in all government institutions. In the private sector, firms must attract voluntary customers or they fail; and if they fail, investors lose their money, and managers and employees lose their jobs. The possibility of failure, therefore, is a powerful incentive to find out what customers want and to deliver it efficiently. But in the government sector, failures are not punished, they are rewarded. If a government agency is set up to deal with a problem and the problem gets worse, the agency is rewarded with more money and more staff — because, after all, its task is now bigger. An agency that fails year after year, that does not simply fail to solve the problem but actually makes it worse, will be rewarded with an ever‐​increasing budget. What kind of incentive system is this? 

This is ridiculous. Every form of communication and information technology is changing before our eyes, except the schools and the post office. It’s time to give families a choice. Free them from the monopoly school system. Give families education tax credits or education savings accounts. Make homeschooling easier. Let them opt out of the big‐​box school — and get their money back — and watch Khan Academy videos. 


Children spend 12 years in government monopoly schools. If they don’t get started right in the first couple of years, they’re running behind for life. It’s just not right to tell parents to wait 10 to 20 years for the tax‐​supported monopoly schools to start educating decently.

June 30, 2016 1:44PM

Postal Reform: Timid Americans and Bold Europeans

The U.S. Postal Service (USPS) has lost more than $50 billion since 2007, even though it enjoys legal monopolies over letters, bulk mail, and access to mailboxes. The USPS has a unionized, bureaucratic, and overpaid workforce. And as a government entity, it pays no income or property taxes, allowing it to compete unfairly with private firms in the package and express delivery businesses.

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As we discussed yesterday at a Cato forum on Capitol Hill, the USPS needs a major overhaul. It should be privatized and opened to competition.


But instead of reform, congressional Republicans are moving forward with legislation that tinkers around the edges. Their bill adjusts retiree health care, hikes stamp prices, and retains six‐​day delivery despite a 40 percent drop in letter volume since 2000. The bill would also create “new authority to offer non‐​postal products,” thus threatening to increase the tax‐​free entity’s unfair competition against private firms.


The Democrats overseeing postal issues are happy as larks with the GOP bill, which appears to be a victory for unionized postal workers. You might wonder what the point of electing Republicans to Congress is if they are just going to let Democrats run the show in defense of unions and monopolies.


Republicans see their party as the one favoring free enterprise and competition. Yet those pro‐​growth goals are obliterated in America’s tightly regulated postal monopoly. When it comes to the postal industry, federal law defends bureaucracy and bans entrepreneurship, and the GOP seems to have no problem with that.

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June 30, 2016 11:20AM

The New York Times Misrepresents Charter School Research

Yesterday, the New York Times ran a front-page story purporting to show that "betting big" on charters has produced "chaos" and a "glut of schools competing for some of the nation’s poorest students." (One wonders how many of those low-income families are upset that they have "too many" options.). However, the article's central claim about charter school performance rests on a distorted reading of the data.

The piece claims that "half the charters perform only as well, or worse than, Detroit’s traditional public schools." This is a distortion of the research from Stanford University's Center for Research on Education Outcomes (CREDO). Although the article actually cites this research -- noting that it is "considered the gold standard of measurement by charter school supporters across the country" -- it only does so to show that one particular charter chain in Detroit is low performing. (For the record, the "gold standard" is actually a random-assignment study. CREDO used a matching approach, which is more like a silver standard. But I digress.) The NYT article fails to mention that the same study found that "on average, charter students in Michigan gain an additional two months of learning in reading and math over their [traditional public school] counterparts. The charter students in Detroit gain over three months per year more than their counterparts at traditional public schools."

As shown in this table from page 44 of the CREDO report, nearly half of Detroit's charter schools outperformed the city's traditional district schools in reading and math scores, while only one percent of charter schools performed worse in reading and only seven percent performed worse in math.

CREDO 2013 Michigan Charter School Study

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June 30, 2016 11:17AM

GE Capital: Smaller Is Just Better

Earlier this week, the Financial Stability Oversight Council (FSOC) removed GE Capital from its list of systemically important financial institutions (or SIFIs).  How big a deal is this?  Big.  And not so big.  And a little bit scary.  Let’s back up a bit to see why.

FSOC is a new entity created by Dodd-Frank.  Its members are the heads of the federal financial agencies, with the Secretary of the Treasury serving as Chair.  In comparison to other similar bodies, which only advise the president, FSOC has broad authority to act.  Chief among its tools is the ability to designate an entity as a SIFI, and to impose stringent oversight and regulatory requirements on it thereafter. 

The SIFI designation and attendant oversight have been promoted as a means to end Too Big to Fail.  Many people, myself among them, have questioned how labeling entities as systemically important and putting them under greater oversight can possibly end Too Big to Fail.  Isn’t a SIFI designation essentially the same as slapping a big “TBTF” label on the thing?  Well, here’s where GE Capital’s story gets scary.

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June 30, 2016 9:29AM

Brexit and Beyond

In this post, I will stray a bit from monetary issues but not too far.  The British people voted last Thursday (June 23rd ) to exit the European Union.  How should that decision be viewed by classical liberals?  Do Americans have a stake in the outcome?

The political classes on both sides of the Atlantic are appalled at the voters’ decision.  The peasants have risen up in revolt and their decision cannot be allowed to stand.  There are already calls for a political mulligan in the form of a second referendum.  Others have called for the British Parliament to nullify the vote.  Both suggestions reveal the low regard for democratic decision making among Britain’s and Europe’s political elites.  No one can predict the outcome at this point.

Let us pause for a moment and consider what the vote’s outcome says about the prescience of the ruling class in Britain, on the Continent and, yes, over here.  (President Obama interjected himself into the vote and appeared dumbstruck last Friday when British voters rejected his advice.)  Political leaders pretend to be wiser and better able to look into the future and discern what is best for the people.  But almost to a person, they were unprepared for the referendum’s outcome.  That speaks both to their distance from the people they claim to represent and their ability to forecast events even 24 hours in advance.  So much for the wisdom of the elites.

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June 30, 2016 5:04AM

Elevated CO2: A Key Driver of Global Greening Observations

Despite a constant barrage of stories portraying rising atmospheric carbon dioxide (CO2) as a danger and threat to the planet, more and more scientific evidence is accruing showing that the opposite is true. The latest is in a paper recently published in the journal Scientific Reports, where Lu et al. (2016) investigated the role of atmospheric CO2 in causing the satellite-observed vegetative greening of the planet that has been observed since their launch in 1978.

It has long been known that rising CO2 boosts plant productivity and growth, and it is equally well-established that increased levels of atmospheric CO2 reduce plant water needs/requirements, thereby improving their water use efficiency. In consequence of these two benefits, Lu et al. hypothesized that rising atmospheric CO2 is playing a significant role in the observed greening, especially in moisture-limited areas where soil water content is a limiting factor in vegetative growth and function. To test their hypothesis, the three scientists conducted a meta-analysis that included 1705 field measurements from 21 distinct sites from which they evaluated the effects of atmospheric CO2 enrichment on soil water content in both dryland and non-dryland systems.

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June 29, 2016 10:20AM

Globalization’s So‐​Called Winners and Losers

A recent Washington Post analysis has argued that political events as diverse as the Brexit and the rise of Donald Trump can be explained by a “revolt” of the world’s economic “losers.”


Before proceeding, it is important to keep in mind that all income groups in the world have seen gains in real income over the last few decades. That said, some have gained more than others. Between 1988 and 2008, for example, the lowest gains were made by people whose incomes fit beteen the world’s 75th to 90th income percentiles. That includes much of the middle and working class in rich countries.


The Washington Post calls the people in this group the bitter “losers” of globalization. But, are they?

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There are at least two problems with characterizing such people as “losers.” First, it seems to suggest that income growth rate matters more than absolute income level. Yet a person in the 80th income percentile globally would not want to trade places with or envy someone in the bottom 10th percentile, despite the latter’s much higher income growth rate.


Consider real GDP per person, adjusted for differences in purchasing power, in China and the United States. Between 1988 and 2008, China’s per person GDP grew by over 340 percent. America’s per person GDP, in contrast, grew by “only” 40 percent. China may be making gains more quickly, but it would be wrong to argue that the United States was a “loser,” for American GDP per person in 2008 was $52,704 and China’s $8,104.

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Poor countries are seeing faster income gains partially because their starting point is so much lower — it’s a lot easier to double per person GDP from $1,000 to $2,000 than from $40,000 to $80,000.


The second problem is that the Washington Post piece suggests that the incredible escape from poverty that has occurred in poor countries during my lifetime has come at the expense of the middle classes in the developed world. (This is a fascinating reversal of the more popular, but equally inaccurate, opinion that the Western riches came at the expense of poor countries).


Thus, the Washington Post piece claims, “global capitalism didn’t always work so well for workers in the United States and Europe even as — or, in some cases, because [emphasis mine] — it pulled hundreds of millions of people out of poverty everywhere else.”


Fortunately, prosperity is not a zero sum game.


When trying to understand the “winners” and “losers” of globalization, it is important that we do not compare income growth rates over the last few decades with some imagined ideal. Instead, we should compare income growth to what would have happened in a world without globalized trade. In such a world, hundreds of millions of people would have remained in extreme poverty. And the middle class of the developed world would also have made fewer gains. Just look at the amazing reduction in price of consumer goods that we have collected at HumanProgress.


A few individuals in select industries would benefit from protectionism, like the U.S. sugar industry does now. But on average everyone would be poorer, just as in 2013 Americans collectively paid 1.4 billion dollars more for sugar than they would have without protectionism. (The U.S. manufacturing industry, it may be worth noting, would not be among the “select industries” to benefit — most manufacturing job losses have come from mechanization rather than outsourcing, and have been offset by new jobs in other sectors).


Thanks to trade and exchange, people in all income percentiles have made real gains, and living standards for the middle class in advanced economies have soared in ways not captured by looking at income alone. America’s middle class is getting richer, and the people in the world’s 75th to 90th income percentiles are also winners.