Brilliant Economist Proposes Bold Solution To Education Crisis From Comfort Of Keyboard (@noahpinion)

I saw this on the Atlantic Monthly’s website, written by an economist (/physicist? /finance professor? /midget wrestler?) named Noah Smith. He came up with a plan for solving the nation’s college education crisis. I am so out of touch, I didn’t even know the nation was having a college education crisis! There are too many crises today, it’s hard to keep up with them all so I hope you’ll forgive me.

Anyway, I read through it and my take-away was that economists like Noah Smith have given up on the whole “voluntary social cooperation” style of getting shit done and have decided it’s more effective to just crack a few whips and get people on board with their objectives that way:

So here’s my idea for increasing the supply of college: A system of federal universities. Currently, we have no such system, but it is not unconstitutional. After all, the federal government runs the United States Military Academy at West Point. My idea is simple: The federal government provides start-up funding for a large number of new universities, offering attractive salaries to professors.

I just realized something. Racism isn’t unconstitutional, but if we don’t amend the Constitution, pronto, someone might decide that the fact that racism isn’t unconstitutional is reason enough to be racist.

Why federal universities instead of state universities? State spending is likely to focus on the existing state university systems. But that will have a limited impact on total college availability, for two reasons. First, increased state funding for existing universities may simply displace alumni funding or tuition funding. That could lower the net price of college, but would have a limited impact on enrollment. Second, there are many geographic areas that don’t yet have elite universities, or only have a few (Ohio comes to mind, as well as much of the Southwest and the Pacific Northwest). Federal universities could fill these gaps. Finally, it’s very difficult to coordinate policy between states, and if we want to create new universities on a large scale, only federal government can do it. [bold emphasis added]

Damn straight! We don’t want any of these puny, fancy-pants small scale universities. If we’re gonna get serious about this crisis, we gotta put our big boy pants on and hire the big guns, FedGov-style!

My take? Dragooning national labor and capital into massive social development projects at the federal level is a great idea, Noah. And I agree, public goods, like education and pyramids, can’t be built any other way.

It’s like I’ve always said– if it’s good enough for the Pharaohs, it’s good enough for our education system!

If you enjoyed this article, you might also enjoy Noah Smith’s glowing praise of a man who is “an important and positive figure in America today,” Michael Moore. I love being helpful.

*UPDATE* (11/19/12)

I stand corrected! A reader is also a writer and e-mails in a correction:

It is unconstitutional for the government to be racially biased–See the Equal Protection Act of the 14th Amendment. It’s why affirmative action is getting to the court so much these days.

I think I might still have a technical case in saying that the Average Joe isn’t prevented from being racist by the Constitution itself, but this is close enough that I might as well retract that little bit of wit.

Politicians Open The Oil Supply Floodgates Post-Sandy; Lessons Learned Or Lost? (#economics)

In “Flared Tempers Over Gasoline Lines Prompt Supply Waivers” at Bloomberg.com, we learn that politicians at the state and federal levels of government are temporarily suspending existing rules, regulations and taxes to increase the supply of gasoline  available in storm-stricken areas while simultaneously lowering the price:

The Obama administration said today that it waived the Jones Act, which requires ships moving goods between U.S. ports to use U.S.-flag vessels. The action, which applies only to refined products, will increase the number of tankers available to transport fuel from Gulf Coast refineries to the East Coast.

In New Jersey, Governor Chris Christie suspended requirements that restrict filling stations from buying gasoline from out-of-state suppliers, while New York Governor Andrew Cuomo waived taxes and regulations to accommodate more fuel tankers and process them more quickly.

To the average observer, it may seem that these powerful political leaders are able to work economic miracles. Merely by suspending laws, a vast new supply of much-needed gasoline appears out of thin-air to come gushing forth to the masses, alleviating them of their post-hurricane energy stress.

But did these poles really create these refined oil products themselves? Did they create them and summon them into existence through sheer force-of-will and a few expert penstrokes?

No, of course not! This supply of energy existed the whole time, but it wasn’t able to service the people of the affected East Coast regions because rules, regulations and taxes, imposed and enforced by these very politicians, had forcibly prevented and impeded its efficient and cost-effective arrival!

This is an excellent example of Bastiat’s emphasis on the unseen. When the storm arrived and devastated the normal supply-demand equation, it became transparently obvious to everyone that these interventions impose real, dangerous costs to everyone in society and it became politically necessary to suspend them for the benefit of all. But the costs of these programs and policies do not come and go with the storms– they are with us all of the time, imposing unseen costs because the “margin” of economic activity that is thus proscribed is further and further away from the central attention of the average person.

Because these policies impose costs and undue social burdens all of the time, not just in the aftermath of natural disasters, it follows that if and when — though “temporary” increases in government power almost always prove to be anything but, temporary decreases in government power rarely become permanent — these rules and regulations are reimposed, their costs will return as well. And this means everyone will be the poorer for it.

Who will remember this hands-on lesson with the real economic and social costs of government regulations which senselessly restrain trade and commerce? Who will cry out in anger that the politicians deem it necessary to hurt them once again, having tasted this bit of freedom? How many will stand up and ask, “Why? Why are you doing this to us?”

My guess is almost no one, and the few voices which may sound will quickly be muffled, condemned and ultimately ignored.

Videos – Not The Lesser Of Evils, Just Evil (#voting, #democracy)

This November 6th, enjoy your fleeting and delusional sense of empowerment!

It is imperative that you validate CFR Candidate A or CFR Candidate B (or, alternatively, Bilderberger A or Bilderberger B) on Election Day!

Isn’t it interesting how an election, even when “your side” wins, never manages to bring the lasting sense of security and satisfaction it always promises and which you always believe it will bring?

Attack Of The Self-Control Snatchers! (#nannystate, #neuropsychology)

Here is the abstract from a neuropsychology research paper entitled “A gradient of childhood self-control predicts health, wealth and public safety“:

Policy-makers are considering large-scale programs aimed at self-control to improve citizens’ health and wealth and reduce crime. Experimental and economic studies suggest such programs could reap benefits. Yet, is self-control important for the health, wealth,
and public safety of the population? Following a cohort of 1,000 children from birth to the age of 32 y, we show that childhood self-control predicts physical health, substance dependence, personal finances, and criminal offending outcomes, following a gradient of self-control. Effects of children’s self-control could be disentangled from their intelligence and social class as well as from mistakes they made as adolescents. In another cohort of 500 sibling-pairs, the sibling with lower self-control had poorer outcomes, despite shared family background. Interventions addressing
self-control might reduce a panoply of societal costs, save tax-payers money, and promote prosperity.

The progressives are out to improve society once more! And as per usual, it’s to “save tax-payers money”. Of course, first they’re going to SPEND a little tax-payer money, first. But all is well, these kinds of “investments” will more than pay for themselves in time. That’s why the cost of government keeps shrinking and our economy keeps growing and growing!

I guess the case for free will just gets weaker by the day? And since our actions and decisions are so deterministic and imperfect, of course it logically implies that an extra-social institution with a coercive monopoly could improve each and every one of us. The State truly is inevitable. I’m so glad we have government-funded neuropsychology researchers to help us figure this out.

Does Bernanke Read Blogs? (#EndTheFed)

I learned in a recent Mish blogpost that Ben Bernanke denied that people were taking advantage of the carry trade with record low US government debt yields in a recent letter to the US Congress:

To the charge reduced interest income to savers from quantitative easing is a “tax” on savers, Bernanke responded that it’s in everyone’s interest, both savers and borrowers, to have an economy performing at highest level of capacity.

He also said financial institutions aren’t executing carry trades on U.S. Treasurys, when they use short-term repo transactions to fund investments in longer-dated Treasury notes and bonds. Bernanke says this activity reflects the funding of inventories by securities dealers as part of their market-making activities and not an attempt to exploit differences between short- and long-term rates.

It’s curious that Bernanke covered this particular topic because it was only recently that David Stockman complained about it explicitly in an interview with Doug Casey:

This market isn’t real. The two percent on the ten-year, the ninety basis points on the five-year, thirty basis points on a one-year – those are medicated, pegged rates created by the Fed and which fast-money traders trade against as long as they are confident the Fed can keep the whole market rigged. Nobody in their right mind wants to own the ten-year bond at a two percent interest rate. But they’re doing it because they can borrow overnight money for free, ten basis points, put it on repo, collect 190 basis points a spread, and laugh all the way to the bank. And they will keep laughing all the way to the bank on Wall Street until they lose confidence in the Fed’s ability to keep the yield curve pegged where it is today. If the bond ever starts falling in price, they unwind the carry trade. They unwind the repo, because then you can’t collect 190 basis points.

Does this mean Bernanke reads blogs and follows Doug Casey?

I got excited at first when I noticed this apparent connection. But then I realized it’s more likely he was responding to particular inquiries from Congresscritters, not necessarily the vox populi itself. Congresscritters and their staff do have their ear to the ground and occasionally turn annoying phone calls, emails and fax inquiries at their office into cases for Congressional investigation. I hear some staffers also read ZeroHedge and I’m sure the interview came up there.

This is probably a good example of the charge that politicians are nothing more than social weathervanes– they aren’t intellectuals and they don’t lead the debate in society, they merely follow it and, when they think it’ll earn them some goodwill, they stick their finger into people’s eyes according to which eyes and how deeply they believe “the people” want them to gouge.

That’s not to say they govern according to the people’s will. Standing on your soapbox and shouting is a bit different from actively trying to manage the economy according to your perception of a mass of other people’s wishes. To the extent that what the politicians do to society overlaps with what certain interest groups actually desire and “vote for”, the coincidence is explained by nothing more than the fact that this is how politicians pay people off to remain in power. The rest of the time, they’re firmly entrenched in the elitist conspiracy and power politics of rulership which has its own agenda, set of rules and schedule of procedures.

In conclusion, Bernanke probably doesn’t read blogs. He probably doesn’t have much time in between manipulating interest rates and having his dome waxed and beard trimmed. After all, the central planner of the free world’s got to look illustrious.