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Restart Your Engine: How to Educate an American

A review of How to Educate an American: The Conservative Vision for Tomorrow’s Schools, edited by Michael J. Petrilli and Chester E. Finn.1 Readers who are interested in the future of public education will want to read How to Educate an American: The Conservative Vision for Tomorrow’s Schools edited by Michael J. Petrilli and Chester E. Finn. Solid and informed, the book explains the context of education reforms today and proposes a future path that many conservatives will support. For people who favor free markets, the most fundamental education reform over the past 30 years has been school choice. That’s the case for me (and for many of the contributors to this book). I spent much of my career working in Milwaukee, Wisconsin, the city that became the pioneer of school choice reforms. I served as a founding board member and longtime president of a Milwaukee all black charter school that specialized in teaching business, economics, and personal finance. I also served on the board of School Choice Wisconsin, which provided much of the policy impetus for the school voucher program that began in Milwaukee in 1990. The Debate on Free Markets in Education Many people who support a vibrant free market in education with a limited role for government regret the demise of private education that has taken place over the past one hundred years. Many would prefer an education market made up of all private schools paid for by parents, family, friends, foundations, and charities. Parents would clearly be in the driver’s seat when it comes to where, what, and how their children learn. That said, we should remember that Adam Smith wrote favorably about a role for government in education. He said: Though the common people cannot, in any civilized society, be so instructed as people of some rank and fortune, the most essential parts of education, however, to read, write, and account, can be acquired at so early a period of life that the greater part even of those who are to be bred to the lowest occupations have time to acquire them before they can be employed in those occupations. For a very small expense the public can facilitate, can encourage, and can even impose upon almost the whole body of the people the necessity of acquiring those most essential parts of education.2 Without doubt, Smith would be appalled at the high spending and dismal results in many of today’s public schools. Smith imagined public support for education to be a “very small expense.” It was impossible for him to imagine the expense and bureaucracy of today’s big urban school districts. Petrilli and Finn are not writing about an education system that was or might have been. They are clearly focused on how things look today in public schools. It’s not pretty. Their book offers an opportunity to learn about new policy arenas and new “takes” on familiar ones. The first theme is a call for a re-emphasis on moral education, civic education, and history. The second is a focus on diminishing the glorification of college for all and developing school-based and community-based opportunities for young people connecting them to educational opportunities offering dignity and earned success. The third is a consideration of how low income and minority students struggle in public schools due to teaching approaches that fail to meet their needs, the breakdown of the family, and chaos in classrooms. The final theme is the limitations of school choice reforms for improving education in small towns, rural communities, and among forgotten youth. Petrilli and Finn note that national education reform is no longer a priority. To some extent, this may be the result of past successes. For example, school choice reforms are much more widespread than they were 30 years ago. Many reforms were hashed out in a bipartisan manner. Obviously, such bipartisanship is dead. Petrilli and Finn insist that, while school choice initiatives represent impressive gains, much remains to be done. They note that conservatives have sometimes: … circumscribed their own truth-seeking behind a wall labeled ‘school choice’ and have withdrawn their own children into schools that suit them without paying great heed to the education of others or the broader needs of the country we all inhabit. (5) Part I History, Civics and Citizenship The opening two essays by Jonah Goldberg and Eliot A. Cohen note how our schools have failed to provide citizens who know civics. Goldberg cites dismal statistics regarding ignorance of American history and the Constitution. This ignorance is consequential. It helps to explain why today’s younger citizens hold favorable views of socialism and support bans on “hateful speech.” How did this happen? First, there has been an unrelenting effort by the progressive left to reject America’s past and American exceptionalism. Second, Joseph Schumpeter argues that capitalism tends to “burn though” the social capital needed to sustain itself. He writes: The founders, Adam Smith, and public choice theorists alike all understood that the danger to a healthy republic lay in factions using the government to impose a singular vision from above on the diverse moral ecosystem of a continental nation. (15) Third, there is widespread support of politically correct ideas among today’s young people and an accompanying inability to confront opposing views. Finally, the professoriate has a general hostility towards conservative views. Eliot A. Cohen comments on the demise of works of patriotic history. He draws a distinction between modern critical historical writing and patriotic history. Critical history tries to explain what happened. Patriotic history explains what happened but is also written to inspire. He argues that “patriotic history is a kind of glue for an extraordinarily diverse republic” (27). Robert P. George drills down on “groupthink” in higher education. Adam Meyerson and Adam Kissel revisit several of the points made by the first three writers. They decry the state of civics education. Their primary contribution is a description of the many opportunities for private philanthropy to address the civics education desert. Part II Character, Purpose, and Striving Peter Wehner begins Part II with a review of the history of character education in America beginning with the New England Primer. He observes that moral instruction was a central purpose of education through most of our history. The turning point came in the twentieth century with the values clarification movement. Wehner explains: At the heart of values clarification was the belief that morality was subjective rather than objective, that neutrality on moral questions was the teacher’s proper stance, and that the goal of education was not to instill traditional values but to help students clarify their own values and create their own value system. (67) Wehner notes that it is impossible to teach or learn when students are rude, undisciplined, and in charge. He stresses that self-discipline is a “basic virtue but not a natural one. It needs to be taught” (69). He urges action but no specifics. William Damon makes the case for purpose in our lives. He states, “The human species is built in a way that requires purpose for optimal functioning” (75). American schools are failing to encourage the development of purpose among students. Damon places much of the blame on twenty-five years of federal policies that narrowed the curriculum to reading and math. He argues that the “most glaring failure” of schools today has been their failure to produce purposeful, patriotic citizens. Heather Mac Donald writes with the courage of knowing she is right despite the fact that nearly the whole education establishment vehemently opposes what she says. She begins by reviewing the increase in juvenile crime in Chicago and New Orleans. Much of it is very violent. She blames the lack of arrests or other sanctions. Public school leaders would be well served to pay attention to what Mac Donald is saying. In my experience, one of the dominant reasons that parents abandon traditional public schools in favor of charter or voucher schools is that they are seeking a safe environment for their children. Michael Barone provides readers with a brief history of education for gifted students, much of it from a personal perspective. He makes that case that parents and philanthropists are doing a pretty good job serving gifted students assisted by the expansion of school choice alternatives. Rod Paige points to stagnant test scores in reading and math based on statistics from the National Assessment of Educational Progress. He reviews some education reforms that occurred after the publication of A Nation at Risk. He suggests that what has been overlooked is an emphasis on the quality and quantity of the energy that students put into the learning process—student effort. Arthur Brooks and Nathan Thompson conclude Part II by shedding light on a different problem—the demise of dignity. They cite a study showing that “three-quarters of the population either doesn’t feel needed or useful in the work they do, or perceives that they are not valued by the nation’s decisionmakers or institutions” (121). They assert that large segments of society have been left out of the system of earned success. The common policies discussed to address this issue tend to be college for all or universal basic income. Brooks and Thompson reject both as deeply flawed because they do nothing to elevate human dignity. Instead, they propose three reforms. The first is to widen the K-12 curriculum to recognize subjects beyond math and reading, stressing subject mastery over grades. The second is to create local business and school connections so that students can graduate from high school with an industry-recognized associate degree or some other credential. Graduates of such programs would make an immediate and important contribution to themselves and their communities. Finally, they argue that now is time to get over the “glorification” of higher education. Part III Schools, Families, and Society Naomi Schaefer Riley observes that the biggest successes in education over the past few decades are the result of expanded school choice. Conservatives need to create new approaches to address the “toughest case kids” by which she largely means young people in foster care and preventive services. She explains that these youth have no consistent adult presence in their lives. Public education has a role to play in serving these students. School choice alone is not sufficient. Nicholas Eberstadt focuses on the retreat from the world of work by men of working age. He calls for improving K-12 education, vocational education, and the redesign of disabilities programs. Ramesh Ponnuru suggests that we need to rethink the mission of high school. We need to challenge the idea that a college education is prerequisite for individual and national success. We need new pathways for people who do not go to college that lead to earning a good living and making contributions to society. We need to liberalize occupational licensing. He supports apprentices and similar programs. He even supports personal finance education. Kay S. Hymowitz explains a cultural contradiction in American education. Middle class children are often raised in a home that stresses individual choices, recognition, and achievement. Such children are the “perfect customers” for the creative, child centered, constructivist, “guide on the side” classroom so preferred by progressives. But, she notes, when low-income students arrive in such classrooms, they are “entering a foreign country.” She uses this contradiction to explain endless curriculum battles and why charter schools with highly structured classrooms are often so successful. Mona Charen writes about the importance of sharing with young people the advice, built on the research of Isabel Sawhill and Ron Haskins. 1. Finish high school. 2. Get a full-time job. 3. Wait until age 21 to get married and have children. This is called the success sequence. Researchers found that 97% of Millennials who followed all three steps are in the middle class or above by the time they reach young adulthood. Charen argues that the success sequence should not be kept a secret from families and youth. Ian Rowe addresses the limitations of education reform. Family structure, as shown by the percentage of children being raised in single-parent families, seems to be a major explanation for why education outcomes in many locations are so bleak. But current statistical reports make it nearly impossible to study the connections between education outcomes and family structure. Why is that? Part IV Renewing the Conservative Agenda Yuval Levin provides insights into the divisiveness of the education wars by explaining the differing world views of progressives and conservatives. He argues that for substantive and political reasons, public education has become too technocratic and too focused on reading and math. He calls on conservatives to press the case for a return to character formation, civics, and inculcating the best of our traditions. Bill Bennett presents an education agenda for conservatives. He gives examples of states that have made improvements including Massachusetts, Louisiana, and Florida. Bennett’s agenda includes rigorous state standards in all core subjects, rich content, a review of teacher education (to improve teacher content knowledge), licensing, professional development, and accountability. Conclusion Petrilli and Finn return to launch a vigorous defense of school choice reforms but then explain that it is no cure-all. School choice alone cannot address the toughest case youth. School choice does not guarantee a content rich curriculum including character education, history, and civics. Large numbers of children will continue to attend traditional public schools, especially those in small towns and rural areas across the nation. What do conservatives have to offer them? They offer a three part call for action: 1. Refocus on preparing young people for informed citizenship. 2. Restore character, virtue, and morality to the head of the education table where they belong. 3. Build an education system that confers dignity, respect, and opportunity to every youngster. Three Takeaways My intention in providing the long preceding summary is to encourage readers to get the book to learn more. Congratulations to Petrilli and Finn for their heroic effort to try to refocus conservatives on reforms in public education. They have assembled an informative and articulate set of writers who offer readers stimulating ideas all in one volume. “It strikes me that the problems are well defined, but they are bigger than the policy solutions presented.” The book offers thoughtful and persuasive descriptions of problems that are usually accompanied by some sort of advice on how to address the issue. There’s the rub. It strikes me that the problems are well defined, but they are bigger than the policy solutions presented. We can’t restore character education, civics, and history through advocacy alone. What exactly should we do to encourage a return of the nuclear family? To be clear, some specific policy actions are offered, such as advice to follow the lead of states like Massachusetts, Louisiana, and Florida. But it seems to me that some of these problems are endemic to public schools in the way interest group effects are endemic to democratic nations. We should continue to pursue aggressive policies for all forms of school choice. Perhaps it will turn out that the charter school movement will find a way to address issues related to children in foster care or who are in preventative services. Perhaps the competition provided by charters, vouchers, and other forms of school choice will force public schools to change their curriculum, teaching practices, discipline, and to pay attention to parents. But one thing is missing that has serious policy implications for conservatives. We know that dominant instructional practices in today’s public schools with the emphasis on constructivist and discovery learning have failed in important ways. Several authors comment on this. Students’ scores in history and civics are appalling. For more on these topics, see the EconTalk episodes Sarah Carr on Charter Schools, Educational Reform, and Hope Against Hope, Robert Lerman on Apprenticeships, and Doug Lemov on Teaching. What if we knew about well-researched, content and vocabulary rich teaching practices—ones that have proved to be effective with low income and minority students—and what if leaders in traditional public schools ignored them? That is exactly the case we face today. Direct methods of instruction are not explicitly addressed by Petrilli, Finn, and their many colleagues. That is a big shortcoming. Direct instruction goes by a few different names including fully guided instruction and effective teaching. Direct instruction is the Rodney Dangerfield of education. It addresses many of the problems identified in the book, but it can’t get enough respect to be explicitly included. Two University of Oregon education professors, Siegfried Engelmann (deceased) and Douglas Carnine have done heroic work in developing Direct Instruction or DI. It features highly scripted and sequenced lessons in math and reading (and other subjects) with special emphasis on mastery learning. There are hundreds of published studies offering ample evidence of student success.3 Educational psychologists Richard E. Clark at the University of Southern California and Paul A. Kirschner at the Open University of the Netherlands and John Sweller, emeritus professor of education at the University of New South Wales, cite overwhelming evidence showing that constructivist teaching approaches are not nearly as effective as fully guided instruction.4 Equally ignored is the work of Barak Rosenshine (deceased) emeritus professor of educational psychology at the University of Illinois-Champaign. Rosenshine’s research illustrates how teachers who begin with a review, present new material in manageable amounts, demonstrate or model new material, provide much student practice, and present periodic review are much more effective than teachers who do not. 5 These are all “sage on the stage” approaches that empirically demolish calls for teachers to be the “guide on the side.” A discussion of the teaching approaches and related content needs to be on the table of the conservative agenda. Footnotes [1] Michael J. Petrilli and Chester E. Finn (eds). How to Educate an American: The Conservative Vision for Tomorrow’s Schools. Templeton Press, 2020. [2] Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations. R.H. Campbell and A.S. Skinner: General Editors; W.B. Todd: Textual Editor (Indianapolis, Ind.: Liberty Fund, 1981 edition). Page 785. Also available online at: An Inquiry into the Nature and Causes of the Wealth of Nations, paragraph V.1.182. [3] Education Consumer Foundation. Direct Instruction: What the Research Says. Education (Consumer Foundation Arlington, VA, 2011). [4] Richard E. Clark, Paul A. Kirschner, and John Sweller. Putting Students on the Path to Learning: The Case for Fully Guided Instruction. American Education, Spring 2012 P 6 -11. [5] Barak Rosenshine. Principles of Instruction: Research-Based Strategies That All Teacher Should Know American Education Spring 2012, P 12-19, 39. *Dr. Mark C. Schug is President of Mark Schug Consulting Services and Professor Emeritus at the University of Wisconsin-Milwaukee. Dr. Schug taught for over 36 years at the middle school, high school, and university levels. Today, he works as a national consultant on economic and financial education and urban education policy. For more articles by Mark C. Schug, see the Archive. As an Amazon Associate, Econlib earns from qualifying purchases. (0 COMMENTS)

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Markets and the Hidden Superpower of Online Education

Can online education be good education? If you ask most economists, you’ll probably get their favorite answer: it depends. To figure it out, they’ll tell you, you need to know whether the move to online has expanded or contracted the set of tools available to educators. Most economists probably think about education the way I used to think about education: as another kind of exchange between a producer and a consumer. We may be a bit vague about what’s being exchanged, but whatever it is we’re the producers. And like all producers we’re trying to solve a constrained optimization problem. If teaching online means that teachers have a restricted set of opportunities—if we have fewer tools in our toolbox—then it can’t be as good as more traditional options. If online education expands our choice set, it can’t hurt and may make us better. (Of course, there’s always the worry that more choices could confuse the problem and lead to worse outcomes, but let’s set that aside.) I’ve been teaching some of my classes online for over a year. Since the pandemic began my University, like most others, has been experimenting with a bewildering mix of new ways to teach. I have plenty of reservations about online/hybrid classes, but after having taught them I no longer think that the model of education as a production process is a good way to figure out whether it will make education better. I still think economics can help us understand the consequences of going online. I just think we need a different model. We shouldn’t think about education as a kind of bilateral exchange. Education is a complex multilateral social interaction. Whether it’s teaching your kid how to scramble eggs or teaching a PhD student nuances of Austrian economics, all education is an attempt by humans with different specialized skills to cooperate so as to achieve some mutually beneficial outcomes. In other words, education is an economic activity. But it’s not as simple as the model of bilateral exchange suggests. Start thinking along these lines and you’ll see that online education has the potential to inject something helpful into this complex social process. I’ll start by explaining what this is, and then I’ll give a few examples of how it might help. I’ll also consider why, if online education really can be a powerful force for good, it took a pandemic to expand its use. I’ll end on a guardedly pessimistic note, speculating on where and why this could all go wrong. The Hidden Superpower of Online Education Let’s begin—as we so often should—with first principles as described by Ronald Coase. In his classic paper, “The Nature of the Firm,”1 Coase emphasizes that enjoying the benefits of specialization requires coordination and control. This can happen with some sort of hierarchical system—“as department chair, I order you to teach the 8:00 am section of micro.” “Coordination also sometimes relies on markets generating meaningful price signals—“if you teach the 8:00 am section, we’ll pay you for the overload.” And coordination can also be facilitated by bonds of mutual respect and affection, usually found within a small, cohesive group—“my friend, Professor Dad, has to drop his kids off at 8:00 am and so I’ll take the early section”). Every productive institution from Fortune 500 corporations to messianic cults struggles to find the right mix of the three. Educational organizations are no different. The thing is, though, educational institutions tend to make less use of markets than most other institutions. For some sorts of education this makes sense. Five-year olds, for example, are strange, idiosyncratic creatures. A properly educated child must master a complex set of intellectual and social skills. Competitive markets might generate informative price signals about a few things (“Goldfish are cheaper than Pirate’s Booty and so let’s have that for a snack”). But it’s hard to imagine how many of the really important questions involving the allocation of resources could be directed by market prices. (“Dani had trouble with her best friend today. Would you like to pay for an extra 10 minutes in the Calming Corner?”) However, smaller communities of people with shared values might be very good at sorting through all of this. It’s no surprise that Grandparent’s Day at a kindergarten feels very different from a trip to Walmart. Other kinds of education, though, aren’t nearly as tricky and so might benefit from a greater reliance on markets. To appreciate how markets might help, consider the work of economist Robin Hogarth.2 In his view education prepares people to make better decisions under uncertainty.3 Hogarth’s model distinguishes between the learning environment and the target environment. In the learning environment educators provide resources and then confront students with various challenges. The student’s reaction to the challenges is correlated with a reward—score 70 or higher on the driver’s exam and you will get a license. The student moves from this setting to the target environment—aka, the real world—where the student must make appropriate choices. The higher the correlation between success in the learning environment and success in the target environment, the better the education. A learning environment is “kind” when it is possible to design lessons that, if mastered, are highly correlated with the correct choices. For example, in flight simulator training a pilot learns that if a particular warning goes off, it is imperative to decide on a very specific set of actions. If that warning goes off while on an actual flight, a good pilot will decide to follow the training, almost always leading to the best outcome4. In wicked learning environments it is especially difficult to devise lessons that correlate with the correct choices. This could be because the choices themselves are fraught with deep uncertainty—they’re what David Epstein and others have described as wicked problems. Or it could be because it is difficult to design lessons where success in the learning environment correlates with success in the target environment. For example, almost all business schools teach “business ethics”, but it’s not at all clear that this leads to more ethical choices. This could be because deep uncertainty makes understanding the ethical consequences of business decisions difficult. Or it could be that the correct ethical choices are obvious but earning an “A” in business ethics doesn’t correlate with doing the right thing. Especially in wicked learning environments, educators require nearly constant feedback. First, they need to understand the target environment they’re training for—if the goal is to make good decisions when doing business in China, then lessons in Mandarin are better than lessons in Latin. Second, educators need feedback about how closely success in the lesson environment correlates to success in the target environment—if the Mandarin listening quiz is read by a professional actor, it may not help on the streets of Beijing. The need for feedback is not unique to education. Any system of coordination—whether hierarchical, communal, or market directed—requires that information be shared among all the specialized agents involved. In both hierarchical and communal structures. This typically happens through direct, face-to-face interaction—the Department Chair schedules a faculty meeting, the parent notices that the kid never eats her peas, and so forth. But online learning exists because direct interactions are very expensive. If online education is to work at all, it must rely heavily on market signals. “If educators want to depend more on online education, they will have to pay more attention to market signals.” And that, I think, may be online education’s hidden superpower. If educators want to depend more on online education, they will have to pay more attention to market signals. Where More Reliance on Markets Will Help One obvious constituency affected by the move online are those who use education as a signal. This includes graduate schools recruiting students and, most importantly, future employers5. It’s worth asking, then, whether online education can be an alternate means of signaling, perhaps even freeing scarce resources to serve other ends. I don’t see why not. Remember, employers and graduate schools use academic achievement as a signal of some unmeasurable characteristics, usually a particular sort of intelligence and self-discipline. The signal works for two reasons. First, the signal is correlated with those characteristics. Second, it is less expensive for people who possess those characteristics to send the signal than it is for people who lack those attributes. A law school, for example, needs students capable of abstract verbal reasoning. Someone who has or can learn those skills will have a much easier time earning, say, a degree in philosophy from Notre Dame than would someone whose talents lie elsewhere. Educators who love their subjects are loath to admit this, but in many cases the signal is valuable, independent of the value of the education. Understanding Thomas Aquinas doesn’t help understand antitrust law but a demonstrated ability to read Summa Theologica may signal the ability to critically evaluate US v Von’s Grocery. But generating such signals can be terribly expensive—a philosophy degree from Notre Dame comes with a price tag of over $200,000. Could success in at least some online Coursera-like philosophy courses designed by Notre Dame’s best faculty provide as useful a signal? I have no idea. Neither, I suspect, does the faculty of Notre Dame. But students who want to generate a valuable signal and law schools who want to identify the best students have every incentive to find out. Online education is a market place generating information about what kinds of signals work best. A second area where more market based direction might make things better is in education intended to influence values. This notion of values education seems to have become conflated with indoctrination, a pejorative word that implies coercion. But we’re social animals. We need certain values in order to get along. We’re also self-aware, reasoning animals. This means we can shape our own values. Education has always been part of this process of socialization and personal transformation. Religious education of children is intended to instill spiritual values, so many parents seek religious education for their kids. Education in the arts is intended to shape aesthetic values, so many people seek arts education as a means of reshaping their values to have a richer artistic experience. But who decides what values to teach? Here I can only reveal my own view, a view shaped by a strong bias towards individualism. I think that individuals have the self-knowledge to help them understand what values will best contribute to their own flourishing.6 It may not be simple and many mistakes will be made, but I think I’m in the best position to choose the values taught to my kid. I think I’m in the best position to seek educational experiences that will reshape my values. I think you are too. Given this starting point, you can see why I am a big fan of relying more on markets in education. Market decisions are individual decisions. The information that comes from markets is information about what individuals want. If the move online coincides with a greater reliance on markets, values education may better reflect the desires of individuals to select the kinds of values they wish to explore and perhaps embrace. Recently the California State University system implemented a requirement that all students complete at least one course in “ethnic and social justice studies.” Can there be any doubt that the courses are intended to change student’s values? Many of the courses will be taught by proponents of “critical race theory” and a few will be taught by self-described Marxists.7 When my young daughter goes to college, I’d probably encourage her to take one of those courses. I might have benefited from one of those courses when I was in college. But the decision to add that requirement was made by a hierarchical university system that depends on feedback from the California political system. The decision may, by happy coincidence, be the kind of values education that the targeted students and their sponsors want, but without market feedback, how certain can we be of that? And it does no good here to respond—as I’m sure many educators will—that the requirement is necessary because students don’t know what they need to know. Of course, it’s true that students need expert educators to help design their curriculum. That’s no different than saying sick people need experts to design their treatments. But medical experts and patients largely agree on the goal of the treatments—doctors don’t need an elaborate feedback mechanism to know that the patient wants to feel better. That’s not true about values. Different people will seek to move their lives in different directions. Some students may wish to become more sensitive to the plight of minorities. Other students may wish to become more sensitive to the differences between rap and hip-hop. Many students may say that they don’t quite know in what direction they want to be steered, but they trust a particular group of expert educators to help them figure that out. My contention, though, is that educators should respect individual autonomy in setting the curriculum for values education. Relying exclusively on hierarchical structures responsive to political calculations just can’t do that as well as markets. Why Did We Wait for a Pandemic? If, as I’ve argued here, greater reliance on market forces can make education better, then why did it take a pandemic and the forced march online to move us in that direction? If there are $100 bills on the sidewalk, why hasn’t someone picked them up? I think the answer is both obvious and unpleasant to discuss. Creating a hierarchy necessarily creates powerful incentives to resist change. Coase teaches us that to understand economic institutions we should pay close attention to transaction costs. But we should also remember that one person’s cost is another person’s income. The administrators, faculty, and politicians who advanced the Cal State mandate for social justice education don’t work for free. Their income and status derive from having the power to control curriculum. Allowing more market direction threatens that sinecure and so they will—as all of us are wont to do—defend their turf. In summary then, I think that for a very long time educational institutions have made too little use of markets and prices to help direct resources to their highest and best use. The pandemic has forced schools to make greater use of online learning and to rely more on markets. Online classes can only get better as we gain experience. But even if some online classes never overcome their inherent constraints, the movement to online can be a force for good. What Could Possibly Go Wrong? I worry most about whether the educational establishment is ready—either temperamentally or institutionally—to more fully participate in a market based system. Consider what happened in the aftermath of the collapse of the former Soviet Union. I don’t mean to suggest a direct analogy—the typical university is not nearly as inefficient and corrupt as the Communist USSR. But the former Soviet Union and the modern western university have one thing in common: the absence of clear and transferable property rights. And without clear property rights, markets are prone to all sorts of failures. For more on these topics, see the EconTalk episodes David Epstein on Mastery, Specialization, and Range, Emily Oster on the Pandemic, and Michael Munger on the Future of Higher Education. Successful educational institutions have a valuable set of tangible and intangible assets. But these assets are not “owned” in any meaningful economic sense. Most importantly there are very limited pecuniary incentives to preserve the reputational capital that is usually the most important portion of an institution’s value. If the owners of a private business produce a shoddy product they may gain a short term profit, but by damaging the firm’s reputation they reduce the market value of their firm. If a university’s administrators roll out an inferior online program, they may earn short term revenues but may not personally suffer much of a long term loss. The President of my university seems like a good guy but he doesn’t plan on funding his retirement by selling his shares of the University’s stock.8 I wish he did. Even before the pandemic a number of small private colleges were in a weak financial position. Some of these schools will not survive.9 What’s been remarkable is that even the most celebrated universities—schools with multi-billion dollar endowments and ultra-selective admissions—feel deeply threatened. Nothing so concentrates the mind as the sight of the gallows. I don’t know if these schools will sacrifice the future for the present. But I know they have little pecuniary incentive not to do so. I don’t want to overstate the case for online education. I can imagine its possibilities to reshape education but having been on the frontlines I’ve also seen how bad it can be. The pandemic, though, is revealing new choices for education. Sure, we need to think about how to make our Zoom classes better. But more importantly we need to think about how this pandemic, for all its horrors, is giving us thousands of experiments that can help us reshape a sclerotic, inefficient system. Footnotes [1] Coase, Ronald H. (1937), “The Nature of the Firm,” Economica 4 (November): 386-405. [2] Hogarth, R. M. (2001). Educating intuition. Chicago, IL: The University of Chicago Press. [3] This view is best understood as describing practical, vocational education but in fact does not exclude any target environment. Modern popular music, for example, is a target environment characterized by a few brilliant compositions offered up next to the tedious and banal. A class in the history of pop culture can help the interested student make better choices about what pop stars deserve attention. [4] To say that the environment is kind does not mean the lessons are simple or the problem isn’t complex. It just means that a student who masters the lessons will usually make correct decisions. Chess students are trained to quickly recognize patterns. This is fiendishly complicated because of the enormous number of possible patterns, but Grand Masters who have mastered the skill dominate the chess board. [5] If you have any doubts about the importance of educational achievement as a signal, I can only recommend Bryan Caplan’s recent book The Case Against Education. [6] When I talk about “choosing” values I’m revealing the biases of a classically trained economist. For an introduction to the complexities of the problem check out the recent EconTalk podcasts with Agnes Callard on aspiration. [7] If I taught in the system, I’d propose a course based on readings from Thomas Sowell, Gary Becker, and Martin Luther King. And who knows, it might even be approved. [8] It would be helpful if the small army of academics who claim that business suffers from “short-termism” could acknowledge that incentives within their own institutions are much more likely produce the very result they disparage. [9] “Why The Coronavirus Will Kill 500-1,000 Colleges,” by Richard Vedder. Forbes, Apr. 7, 2020. * Michael L. Davis is a senior lecturer in business economics at the O’Neil Center for Global Markets and Freedom at Southern Methodist University’s Cox School of Business. For more articles by Michael L. Davis, see the Archive. (0 COMMENTS)

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Matthew Crawford on Why We Drive

Author Matthew Crawford talks about his book Why We Drive with EconTalk host Russ Roberts. The conversation is about driving but also much more: how human beings interact with technology and what we gain and give up when we embrace technology driven by corporate profit-seeking. The post Matthew Crawford on Why We Drive appeared first on Econlib.

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U.S. Tariffs Are Not “More Punishing to China”

The world would be a different place, more rational and convivial, if all politicians, journalists, and editors had some clear notions of supply and demand as well as of the history of economic thought—if, for example, they had read David Hume, Adam Smith, Jean-Baptiste Say, James Mill, and John Stuart Mill. As an illustration, consider a sentence in yesterday’s Wall Street Journal (“Trump’s Trade War Will Be Left for Biden to Win,” January 3, 2021—my emphasis): [Mr. Biden] has already said he wouldn’t immediately lift the tariffs, which should prove more punishing to China than the U.S., as its economy generally depends more on exports. It is not clear whether the explanation I have emphasized is the journalist’s paraphrase of Mr. Biden’s thinking or the journalist’s own opinion. It could well be both. My guess is that, as the sentence is written, it expresses the journalist’s belief. On the other hand, it is quite obvious that Mr. Biden is as ignorant of trade as Mr. Trump, although the ignorance of the former is not as militant as the ignorance of the latter.  But whoever’s thinking it represents, the clause ignores two centuries and a half of economic understanding, to which only some extreme left and some extreme right have been completely immune. Increasing the tariffs “against China” would increase them against American consumers, who, as was again demonstrated by President Trump’s trade war, end up paying the tariffs in increased prices, which reimburse the tariffs paid by American importers. The only sense in which Chinese exporters pay is that higher tariffs and prices translate into a lower quantity demanded for their wares, assuming they cannot sell them elsewhere in world markets. Thus, increasing the tariffs on Chinese goods would prove more punishing to American consumers. (See my Econlog posts “The Poverty of Protectionism and the Impact of Tariffs,” June 17, 2019; and “Anecdotes and Data in the Trade War,” July 9, 2019.) The last clause of the quote above, “as [China’s] economy depends more on exports” is also (at the very least) misleading. As such, exports do not increase domestic prosperity: they divert to the benefit of foreign consumers (Chinese consumers, in this case) domestic (American) resources that would otherwise be used to produce goods or services for domestic (American) consumers. American exports benefit Americans only in the sense that they allow them to produce more of what they have a comparative advantage in and thus import more goods which are produced relatively more cheaply in China or in other countries. The only benefit of exports for the domestic economy is that they allow more imports. Otherwise, exports would be just a gift from “the Americans” to “the Chinese.” (For an elaboration of this point, see my “Logic, Economics, and Protectionist Nationalists,” Regulation 43:3 (Fall 2020), pp. 9-11.)   (0 COMMENTS)

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Newt Gingrich’s Numeracy Problem

And Trump’s and the Dems’ arithmetic problem. $2,000 * 200 million does not = $2,000. $2,000 – $600 does not equal $2,000. Newt Gingrich tweets: If Senate Republicans fail to bring up the $2000 payment as a clean vote they run a real risk of losing the two seats in Georgia. This is an 80% issue. People get it. Billions for the banks, billions for big companies, but we can’t find $2000 for everyday Americans. If the proposal before the Senate really were to give $2,000 to everyday Americans, no one would be raising an objection because $2,000 divided by, say, 200 million everyday eligible Americans is way, way below 1 penny each. Everyone understands that it’s $2,000 per “everyday American.” With about 200 million Americans qualifying, that’s $400 billion. So if we were to rewrite Newt’s tweet honestly and accurately, it would read something like: If Senate Republicans fail to bring up the $2,000 payment as a clean vote they run a real risk of losing the two seats in Georgia. This is an 80% issue. People get it. Billions for the banks, billions for big companies, but we can’t find $400 billion for everyday Americans. Sounds a little different, doesn’t it? And remember how Trump objected that $600 was way too low an amount to have the government give eligible people and $2,000 was the right amount? Well, they got the $600. So if Trump really believed what he said, and if the Democrats believed what they said they believed, he and they should have pushed for an extra $1,400, not an extra $2,000. Newt’s tweet also shows the difference between those of us who want to have gridlock and divided government in order to restrain government and people who want divided government simply because they want the Republicans to be the majority party in the Senate. Many of us want gridlock because we fear what a Democratic House of Representatives, a Democratic Senate, and a Democratic president will do. One of the main things many of us fear is that they will spend hundreds of billions of dollars more than if the Republicans won the Senate and restrained the Democrats’ spending. But if Mitch McConnell caves so that the feds spend an extra $400 billion and the Republicans win in Georgia, they will have nullified a huge part of the reason for having the Republicans win in Georgia. (0 COMMENTS)

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The costs of not maximizing aggregate utility

Many people don’t like utilitarianism. They advocate alternative (often deontological) approaches to ethics. In 2020, we saw the immense costs of some of those misguided ethical systems. Scott Aaronson has an excellent post that begins with a discussion of why he believes our response to Covid was inexcusably slow. He discusses challenge trials of vaccines, and also a WWII-style plan to build manufacturing capacity just in case the vaccines were successful.  But he also considers possible objections to his arguments, such as the fact that moving faster imposes risks: Let me now respond to three counterarguments that would surely come up in the comments if I didn’t address them. 1.  The Argument from Actual Risk. Every time this subject arises, someone patiently explains to me that, since a vaccine gets administered to billions of healthy people, the standards for its safety and efficacy need to be even higher than they are for ordinary medicines. Of course that’s true, and it strikes me as an excellent reason not to inject people with a completely untested vaccine! All I ask is that the people who are, or could be, harmed by a faulty vaccine, be weighed on the same moral scale as the people harmed by covid itself. As an example, we know that the Phase III clinical trials were repeatedly halted for days or weeks because of a single participant developing strange symptoms—often a participant who’d received the placebo rather than the actual vaccine! That person matters. Any future vaccine recipient who might develop similar symptoms matters. But the 10,000 people who die of covid every single day we delay, along with the hundreds of millions more impoverished, kept out of school, etc., matter equally. If we threw them all onto the same utilitarian scale, would we be making the same tradeoffs that we are now? I feel like the question answers itself. And it’s not just vaccine development; we’ve also prioritized “ethics” over saving lives in the distribution of the vaccine: Update (Jan. 1, 2021): If you want a sense of the on-the-ground realities of administering the vaccine in the US, check out this long post by Zvi Mowshowitz. Briefly, it looks like in my post, I gave those in charge way too much benefit of the doubt (!!). The Trump administration pledged to administer 20 million vaccines by the end of 2020; instead it administered fewer than 3 million. Crucially, this is not because of any problem with manufacturing or supply, but just because of pure bureaucratic blank-facedness. Incredibly, even as the pandemic rages, most of the vaccines are sitting in storage, at severe risk of spoiling … and officials’ primary concern is not to administer the precious doses, but just to make sure no one gets a dose “out of turn.” In contrast to Israel, where they’re now administering vaccines 24/7, including on Shabbat, with the goal being to get through the entire population as quickly as possible, in the US they’re moving at a snail’s pace and took off for the holidays. In Wisconsin, a pharmacist intentionally spoiled hundreds of doses; in West Virginia, they mistakenly gave antibody treatments instead of vaccines. There are no longer any terms to understand what’s happening other than those of black comedy. Everyone is entitled to choose their own preferred ethical system as a guide to their daily life.  But there is only one reliable ethical system to be used in public policy—maximizing aggregate utility.  As soon as you ignore that goal, you end up killing lots of people for no good reason. In retrospect, none of this should have been a surprise (although I admit to being caught off guard.)  I had assumed that our disgraceful policy of banning kidney markets was a one-off exception.  Now I see that the same instinct that leads to tens of thousands of excess deaths of people with kidneys disease also pervades our entire public health system. Aaronson understands that this failure goes well beyond one individual or even one country; it’s a broader failure of society: Furthermore, I could easily believe that there’s no one agent—neither Pfizer nor BioNTech nor Moderna, neither the CDC nor FDA nor other health or regulatory agencies, neither Bill Gates nor Moncef Slaoui—who could’ve unilaterally sped things up very much. If one of them tried, they would’ve simply been ostracized by the other parts of the system, and they probably all understood that. It might have taken a whole different civilization, with different attitudes about utility and risk. At the same time, I do believe that utilitarianism is gradually gaining ground.  But there’s still much more work to be done. HT:  Matt Yglesias (0 COMMENTS)

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When May We Be Happy?

2020 felt like a bad year.  I was definitely less happy than normal.  Yet every day, I tried to be happy. You could question the realism of the goal.  “Be happy during a pandemic?  When over a million human beings are dying?  When the global economy crashes?  When billions lose their freedom?  When immigration restrictions go from draconian to suffocating?  When police murder innocents in broad daylight?  When fanatics riot in the streets?  When friends lose their minds?  When they lose touch with friendship itself?  Not possible.” A totally different reaction, however, is to question the propriety of the goal.  You’re not supposed to be happy when the world is in tatters.  Only a vicious person could be happy when fellow citizens are dying of the plague, when whole populations live under house arrest, when their friends are acting like Martians.  Just because you can be happy in 2020 doesn’t mean you should. Emotionally speaking, this is a powerful point.  Logically speaking, however, the implications are absurd.  Fellow citizens die every day.  Without fail!  When you hear that total 2020 mortality is 15% above normal for the U.S., this means that last year death claimed about 7 times as many Americans as COVID took this year.  The upshot: If you can’t be happy now because your fellow citizens are dying, you can’t be happy ever. And even if your own country was doing great, what about the suffering masses in every other country on Earth?  If your country is perfectly free, should you be sad because North Korea exists?  Should Norwegians be gloomy because of American police brutality?  As I’ve said before, any non-oblivious person has to choose between (a) daily misery, or (b) personal happiness in a world of woe. When you put it that woe, (b) is the only rational choice.  Social Desirability Bias notwithstanding, each of us has the right – nay, the duty – to try to be happy despite the shortcomings of society and the universe.  The key question then becomes: How? I ponder this key question regularly.  Here are the main steps I’ve taken to pursue happiness in 2020. 1. Continue ignoring the news unless it affects you personally.  Dry statistics are OK, but avoid any information source that tries to engage your emotions. 2. Break bad but weakly enforced rules that get in your way.  Never be Lawful Neutral. 3. Refuse to be stampeded. 4. Don’t give up on your friends, but lower your expectations to rock bottom. 5. Living Dale Carnegie I: Try extra hard to make new friends. 6. Living Dale Carnegie II: Help your kids make new friends. 7. If schools won’t even provide daycare, cut the cord and homeschool. 8. Start new projects that you enjoy. 9. Move to Texas for a spell. 10. General rule: Ask “what options are left,” not “what options are lost.”  And make your Bubble beautiful! Confession: My hardest realization of 2020 is that even most seemingly reasonable people go crazy in the face of a rather minor crisis.  Biologically speaking, this pandemic could have easily have killed ten times as many people – or people we’d miss ten times as much.  Never mind World War III.  Taking a far view, I expect a lifetime median of two additional global events worse than COVID. But I’m not going to let that bother me on a typical day, any more than I’m going to fret about my own mortality.  Instead, I’m going to remember how lucky I am to be alive at all.  As I wrote long ago: If you read Woody Allen very charitably, he seems have a perfectly reasonable desire to live longer. But his real complaint is that the time he has is meaningless because he only has a finite amount. And his conclusion resonates with a lot of people, and has for a long time. I’ve never understood the appeal of this argument. If a finite quantity of life is worthless, how can an infinite quantity be desirable? Sure, you could trot out mathematical structures with this property, but come on. If an infinite span of days is so great, what’s stopping you from enjoying today? I suspect that many readers are telling themselves, “This is going to be a great year once the vaccine brings us to herd immunity.”  Wrong.  This is going to be a great year starting today if you choose to make it great.  And if you postpone happiness until society gets its act together, you’ll be waiting for a lifetime. Happy New Year now! (0 COMMENTS)

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Auld Lang Syne

  A beautiful version of Auld Lang Syne with beautiful nature scenes. Happy New Year to all EconLog readers and all people of good will. Let’s hope for a wonderful, and much freer, 2021. (0 COMMENTS)

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Gold hoarding during the Great Depression

Back in 2015, I wrote The Midas Paradox, which showed how gold hoarding helped to cause the Great Depression. I’ve always hoped that another (presumably younger) economist would repeat this research using updated methods.  Better yet, I hoped the new study would confirm my findings. Doug Irwin directed me to a new paper by Sören Karau that reaches a similar conclusion, using better data and much better statistical techniques.  Here’s the abstract: I identify monetary policy shocks in a structural macroeconometric framework and assess their role in causing the initial downturn in prices and production from 1929-31. In deliberate contrast to existing work on the depression, I take an international perspective that builds upon an appreciation of the gold standard system operating at the time. First, I employ a hand-collected monthly data set that covers a large share of the interwar world economy. Second, derived from a theoretical monetary framework, I model monetary disturbances as shocks to central bank gold demand as measured by the world gold reserve ratio. This is preferable not only on theoretical grounds to, say, interest rate measures of individual countries. It also allows me to employ narrative in- formation to sharpen structural shock identification based on sign restrictions. I do so by imposing a single narrative sign restriction that captures a key shift in US and French monetary policy in 1928. In my view, the gold reserve ratio is the best measure of the stance of monetary policy during the Great Depression.  Under a fiat money regime, I generally use expected NGDP growth to measure the stance of monetary policy.  But central banks are somewhat constrained under a gold standard, and hence it make sense to use the one variable they can control—gold reserve ratios.  Other variables such as the money stock and the interest rate are essentially endogenous, determined by global forces.  The other advantage of the gold reserve ratio is that this ratio is stable when countries adhere to the so-called “rules of the game”.  Hence changes in this ratio measure not just discretionary monetary policy, but also deviations from the (admittedly imprecise) rules of the game. Karau’s paper cites previous work along these lines by myself, Doug Irwin, Clark Johnson, David Glasner and other researchers.  But Karau’s paper is the one I’d point to if a younger economist asked for a more “rigorous” demonstration of our claims about the role of gold hoarding in the Depression.  Here’s an excerpt: These findings are remarkably in line with the analysis in Sumner (2015). According to his narrative, the initial slump up to the fall of 1930 was largely caused by central bank gold hoarding after which other deflationary forces became more prominent. Indeed, in Figure 5 there is another steep unexpected decline in industrial production in October and November of 1931, which is not well explained by the identified monetary shock. Instead it might be associated with the wide-spread banking panics, chiefly in the United States. In that sense then the failure of the monetary shock to account for this second decline in production actually speaks to the quality of the simple identification scheme, which is supposed to narrowly identify exogenous innovations in central bank gold hoarding rather than monetary or non-monetary financial shocks more broadly. I strongly encourage scholars interested in the Great Depression to take a look at Karau’s paper. And then buy my book.  🙂 (0 COMMENTS)

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My Top 12 Blog Posts of 2020

  I went through all my blog posts for 2020; there were approximately 250 of them and I singled out 24 for my top posts. That’s too many and so I whittled it down to 12. Here they are from earliest to latest: Tales of Socialism, February 6. Winners, Losers, and Interesting Aspects of the Dem Debate, February 20. Cost Benefit Analysis of Flattening the Curve, March 24. Why the Stimulus Bill As Written Will Keep Unemployment High, March 25. The VSL Quandary, April 12. Zingales on the Rule of Economists, May 17. Commissar Komisar, May 21. Benjamin Boyce Interviews Adrian Lee Oliver, July 15. What’s the Moral Case for Capitalism?, August 20. A Partial Defense of Milton Friedman’s 1970 NYT Essay, September 21. Is Cowen Right about the Great Barrington Declaration? Part 1, October 16. Vaccines’ Last Hurdle: Central Planners, December 4. I’m curious what some of your favorites are. (0 COMMENTS)

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