The Unbroken Window

OK, so I didn’t watch the SOTU last night, I listened to it in my car. Then I listened to Governor Daniels’ response. I promised not to comment, so I’ll outsource one part that I would have posted on – I almost punched a hole in my car window when I heard it. The second part is a fantastic rhetorical play by Daniels.

(1) President Obama made some pretty generous claims about how good for the energy economy he has been, particularly when it came to oil and gas production. I cannot believe he actually tried to take credit for this boom, and right on the heels of the Keystone fiasco. Here is the relevant detail. Note to my students: the IER will be coming to campus for an event in March.

(2) Governor Daniels used a term I am mad at myself for not adopting years ago: “trickle-down government.” I couldn’t imagine a more apt ridicule.

A student came to me the other day and mentioned, sort of out of the blue, that private agencies should not deliver water to cities, and that rural and suburban water ought not be priced because it would cause the poor to suffer. I did not push the issue. But this person, if asked what model of the world he was operating under, would very likely not have been able to offer one. And that is a problem, as we’ll elaborate on in the future. But he certainly was operating under a model – and I wonder how he’d defend it. The simple model? That the elasticity of demand for water is zero. If that were indeed true, then when private agencies charged market prices for water that reflected its true social cost, we’d only see transfers from customers to firms – and no economizing on water use at all. But we know that perfectly inelastic demand curves cannot exist, and we can also ask our student what conditions would have to prevail in order to generate such a curve in the water market. And he’d have seen that those conditions are extraordinarily unlikely.

So, while I am not a huge fan of fancy, technocractic model building, that does not mean I am not a strong supporter of logical and systematic explanations of behavior. To say that you can dispassionately look at facts, examine history or understand the social, political and cultural influences on people and that means you do not need an economic model to describe behavior is implausible. The point is, when making such judgments you are still using an economic model, it’s just that you are not articulating what it is. I have taken this to heart lately. It doesn’t make sense trying to reason with people, so what I do is simply ask questions about how they came to the positions they are taking.

First the Obama Administration kills the Keystone pipeline. No need to comment on it here – if environmentalists think that preventing this pipeline from being built has any impact on carbon emissions or pollution, or somehow “saves” the midwestern water reservoirs they are badly mistaken. Now, I just learned that the Obama Justice Department is insanely challenging a recent appeals court ruling that would have allowed bone marrow donors (now really just blood donors) to be compensated. The “no money” quote:

The donor registry said its experience is that “a donor system that relies on the human desire to help others is far superior to one that focuses on self-gain.”

Of course, some of us disagree on what the term “superior” means.

Here’s a decent research topic for interested students: find out how large the take-up rates for various welfare programs are by different demographic groups. Why do I ask? My sense is that a decent (apx 20%) share of the users of food-stamps, Medicaid and other public welfare programs are not from the class of needy folks that many of us would imagine draw on these programs.

Ask yourselves – when you learn that something like 1/3 of our students will graduate into full-time permanent jobs, while the rest volunteer, attend graduate school, work in low-paying non-profits, do Teach for America and other similar endeavors, do you think that none take advantage of these public programs. How do you think the voting public would respond to finding out that after enrolling in an elite college which spends $70,000 per year to educate students, that a non-negligible number of graduates end up doing this? How would the voting public feel if they knew this was a regularity for students who were obtaining generous financial aid from state and federal sources too?

I speak from having some pretty good inside information on usage. Would any readers view this as a problem? I ask because I find that I get seriously serious opposition to negative income tax-like proposals that I would prefer to see replace the entire welfare state.

That’s really what green energy religion has become. And now the Wall Street Journal is peddling it:

For instance, the Production Tax Credit, first passed in 1992, has generated massive amounts of new growth in the wind industry, a sector employing 85,000 Americans. But each time Congress allows this credit to expire after a mere two years, investment grinds to a halt, giving our global competitors the advantage in innovation, manufacturing and installation. The Production Tax Credit is set to expire again this year.

Now, anyone, and I mean anyone, who has taken basic economics should have their BS meter going insane. So, what these guys are telling is that after 20 years of subsidies and credits the industry can still not stand on its own? That it will grind to a halt if the subsidies stop? And by the way, I propose a new constitutional amendment: if someone wants to demagogue the income tax deductions and credits that we all get as “tax expenditures” (e.g. the government allowing us to keep some of our money, even if part of a nutty tax system is now considered an expenditure by the intelligentsia) then it should be required that all such items be called tax expenditures. So, what Congress is considering is reducing these brutal and costly tax expenditures by letting the credit expire.

A little earlier in the piece we read this:

Expanding these clean-energy investments is good economics. Several technologies, such as solar power, are already cost-competitive with fossil fuels, even without considering the health and other costs of pollution.

We have a phrase for that too. If it ain’t holy sh*t it is certainly of the escalating stock market variety. I have studied and seen dozens and dozens and dozens of papers on the cost of renewables, and solar ain’t anywhere cost competitive. Wind ain’t. None of it ain’t. And yes, I’m using ain’t on purpose. Seems kinda fitting to me.

OK, rant over, now back to our regularly scheduled boring programming.

Update #1:Yes, I know the State of the Union is being delivered tomorrow. I am NOT going to allow myself to watch it, comment on it, comment on anyone else’s comments on it. Nothing. Nada.

Update #2: I agree with Bret Stephens but even moreso. The Republican party should be embarrassed by what they are fielding. If I cared about the Republicans, I still think I might hope for an Obama victory in the fall anyway – maybe that is their strategy.

I must admit, I have no tolerance for people playing charades. And in no sector do I see such games played more than in education. As I’ve said time and again: education is not about education. Let’s agree to an idea that should cut across party lines and ideological lines. What should we be able to agree upon? That our children grow up to have fulfilling lives, free lives, lives of opportunity and ultimately end up making positive contributions to the world from having been in it. Typically to ensure that this happens we teach our children to read, write, do math and learn and develop other valuable basic skills. We also do this by teaching them (even if informally) cultural values and norms, exposing them to music, art, dance, the outdoors, sports, etc. – in other words, we try to show them the wonders of the world and the wonders of humanity and the wonders of learning about each.

We can also cut across party and ideological lines by temporarily agreeing to disagree on what the proper scale (not scope) of government involvement in ensuring that these things are achieved for our children. Let’s agree that democratic political institutions are responsible to make sure our children achieve some agreed upon level of advancement in these areas. And let’s not debate what this level would be and what is appropriate. Shouldn’t we see a heck of a lot more experimentation and diversity in how we achieve these goals? Is it not utterly startling that virtually every one of the 311 million or so Americans has or will attend government run schools (and if not government run, heavily influenced by them and the graduate programs in education)? Perhaps more astonishing is that most kids go to school with kids the same age, take the same kind of math, reading, science, english, and so on at precisely the same times and in almost the same sequence and in the same settings, and using the same tools. Is it really reasonable to think that all kids learn best this way? Shouldn’t my daughter sometimes be learning with older kids? With younger kids? Does she need to wait until 7th grade to learn biology? Should she start art in Kindergarten? And so on.

The point being is that the way we structure elementary education today is the ultimate form of an input standard. An analogy would be appropriate. Suppose that we are worried that too much coal is being burned by residents of a city which results in unhealthy smog. The goal is to reduce the emissions of harmful particulates into the air. The most extreme version of an “input standard” – or a standard where the authorities decide exactly what is to be done to achieve the goal, would be to ban or mandate reductions in coal use. Why is this undesirable? Because it will possibly achieve the goal of fewer emissions, but it will come at a much higher economic cost than other ways of regulating and also because it drastically reduces the freedom of people to make their own choices – which ought to count for something. Instead of telling everyone to burn 50% less coal, for example, a better regulatory policy would be to set emissions standards for coal users, and penalize users for going beyond such standards. This would be an output standard. The regulators would have control over how much particulate matter is emitted, but it would allow the heterogeneous population to adjust to the standard in ways that are most beneficial to them. Some folks would indeed use less energy. Other folks would take measures to filter their emissions. Perhaps others would switch to other fuels. In any event, the goal would be achieved from the regulatory side, and the costs would be lower while preserving individual sovereignty.

Our current method of education is akin to an input standard. With the goal of having kids become “educated” we simply tell every single one of them how to be educated (and assume it works too). If you were seriously interested in improving the lives of our children and if you were truly serious about doing it cost effectively and respecting the diversity of human capabilities and interests, wouldn’t we see our government take a more “output standard” type of approach to education? Wouldn’t there be myriad ways of getting educational outcomes outside of funding and running government schools as we do? We could simply mandate each family have their children reach a particular standard. We could provide money to other institutions to use freely toward achieving their educational vision. I don’t want to go into particular reform ideas here, just to suggest that hundreds are out there. Any one of those would be preferable to the current situation because it allows for the current system to operate if it was indeed the most preferred – just as under a particulate output standard a choice for individuals would always be to use less coal, just as the input standard recommends.

I can imagine a major objection being that if the desired educational outcomes are not achieved (assuming they are agreed upon and measurable, which are big ifs, a point which I’ll raise in the future – I am not sure we even need to have an objective) then what recourse is there? Suppose a family was given $8,000 per year to ensure their kid met some standard, and when the kid turns 16 those standards are not met, do we want to put families in prison? Do we want to financially penalize them? Not only would the unintended consequences of those policies be awful, the administration of such programs would be prohibitively costly. This objection is hollow however. The current system, particularly for urban minorities, goes beyond failing – it is closer to a national tragedy, and a tragedy that is no closer to being dealt with today than when I was a kid 30 years ago. What are the consequences of failing today? The teachers unions are stronger. The school boards are stronger. The Ed Schools still maintain a tight grip on the accreditation process. The taxpayers don’t get a refund – indeed they end up spending more when poorly educated students end up in poor health, in poor economic circumstances or even in prison. Yikes.

If people really cared about “the children” wouldn’t we see a very aggressive popular movement toward educational experimentation? What is particularly annoying is that edutochracy preaches diversity, creativity, difference and respect for everything except the very product they are responsible for producing. Odd, isn’t it? Either it ain’t about the children, or the edutochracy is too dumb to experiment, or the edutochracy is a hotbed of experimentation and they have concluded that they have it right.

In 2010 the sporting event(s) that had the most regular attendees at them?

• Surprisingly not Major League Baseball
• Surprisingly not College Football
• Not NASCAR
• Not golf
• Not Professional football

Answer: high school sporting events. The sport with the most occasional fans? College football.

Also: More people regularly attend equestrian events than professional soccer events. Can’t you see why I am upset that they are going to drop the Statistical Abstract?

You might think I am referring you to this to illustrate the insanity of the Germans’ insistence on funding solar power. That would be too obvious, particularly if you were unlucky enough to have sat through three weeks of my energy economics lectures last fall. No, what is scary is that this sentiment is widely held, and not just in Europe (HT to Powerline):

SPIEGEL: If you were the president of a global government, and you alone could determine the course of international climate policy, what would you do?

Röttgen: I can only offer the view of the German environment minister — and from my perspective, it is reasonable and necessary to introduce rules of competition that protect the climate. The ultimate objective would then be a per capita budget for greenhouse gas emissions, which would apply to every person on the planet. It’s ultimately also a matter of justice

By the way, am I the only one who cannot stomach the cultural exceptionalism that is wafting through the entire piece?

Tags: authoritarian navel gazing

Def: (noun): Someone who built his mountain cabin last year.

HT to William Tucker, writing recently in reference to anti-energy crusades. I used to reject this characterization. Not any more.

Remember those bumper stickers? Does anyone, particularly those sporting those bumper stickers care to remember this:

Roosevelt fed the hysteria by claiming that he possessed a “secret map” showing Nazi plans to conquer South and Central America, as well as secret documents proving that Hitler planned to supplant all existing religions with a Nazi Church. Needless to say, those statements were further falsehoods.

That again from Ralph Raico’s Great Wars and Great Leaders.