Month: May 2016

Why College Costs so Much

The US Government (USG) has decided that it is its job to help everyone purchase health care, houses, and higher education. It is not a coincidence that health care, houses and higher education costs are climbing out of control.

I’d like to go beyond generic “USG involvement” to examine some of the mechanisms causing higher education inflation.

A big one is the accepted legal theory of disparate impact. Disparate impact basically holds that if (i) some gateway results in fewer people from a protected class (certain races, certain colors, women, people over 40 years old, disabled, non-citizens etc.) than their share of the population passes the gateway, than (ii) it is presumed to be illegitimately discriminatory. This applies even if the gateway is neutral by any other examination. Once a disparate impact on a protected class is shown, the only defense to a civil rights lawsuit is business necessity. Not only does it have to be proven that the gateway has a demonstrable relationship to the job. Even more, the user of the gateway has to prove that there is no less discriminatory standard that would  do as well as that particular gateway in selecting appropriate candidates for the job.

Needless to say, with such amorphous concepts the party with the burden of proof loses. Just being sued is a sort of loss because if the burden of proof is against you the suit goes on until you affirmatively prove something in court.

In practicality, disparate impact made it impossible for any employer to give an IQ test to applicants. If you give an IQ test to any population we can predict with certainly some racial groups will come out with  higher scores than their share of the population. It has even undermined giving a knowledge test such as the fireman promotion test. The results are always skewed to not reflect the portions of the population each race enjoys. Even if the test is about which saw blade will cut through a metal door to rescue the people inside, if there is disparate impact the poor municipality has to go spend more money in creating another test which will yield more acceptable results, while still weeding out unqualified fire chiefs. How do you prove no other gateway would be more fair unless you try every other possible gateway?

So disparate impact made the employers throw in the towel on any objective test of applicants. How to get smart people, who after all do better then dumb people at most or all tasks? Simple, require a college degree. You can be pretty sure that the people who graduated from Stanford, Yale or Harvard have a higher IQ than the high school grad submitting an application. Middling college grads are probably smarter than non-grads. People with a few years of college are probably smarter than people who never went. Imperfect but better than nothing.

So the poor kids have to spend $70,000 a year for four years of borrowed money to be able to legally show prospective employers that they have brains. It is the only legal way for them to show their IQ.

Second on the walk of shame is the federal money loaned freely to college students and the bankruptcy exception for student loans. Non Dischargeable loans mean more loans can be made to questionable credits, unleashing a flood of [borrowed] money.  And federal subsidies and policies make even more lending to students possible.

What a golden age for students. Wait, if the USG subsidized car loans, would it mostly benefit drivers or car manufacturers? Drivers still have to pay off the inflated price of the cars sold. Car manufacturers would have more customers with money in their pocket that could only be used to purchase cars. Car manufacturers get the money, subsidised customers get the loan. Sudent loan largess has mostly benefited institutions of higher education to the detriment of student borrowers. The local university often has the nicest buildings, the best jobs, the finest grounds, the most events and parties, in the whole town.

The last thing I have time to write about is the ability to price discriminate. Imagine if before you purchased an airline ticket, the airline could demand to see your tax returns, income statement, expenses and net worth? Then imagine the airline could legally set a different price for you based on the information it learned. Student financial aid is a thinly disguised price discrimination scheme. The price is set so high that they expect nearly no domestic student to pay list price. Then they offer a discount designed to extract the highest portion of your disposable income that you can part with and your graduate’s disposable income over the next ten years. All for the coffers of the institution. Arn’t they nice benevolent institutions?

These are college material students and college educated parents they are fooling. Wow a $10,000 grant and $50,000 loan. Lucky me.

Federalism

Everyone says The Civil War decided once and for all that the individual States could do nothing against an overreaching Federal Government. Whatever the Feds want, I’m good with it, says the States.

Does anyone think that in today’s emotional environment the Federal government is going to wage domestic war? As a culture, we can’t hurt the feelings of a delusional male who thinks he is a female. States that openly allow pot sales against Federal law suffer no repercussions. No one is going to fight a war against the citizens of a State because they don’t follow the Federal line.

What they would do is stop some Fed swag. No highway money. Companies would withdraw business. Entertainers would refuse to concert there.

Perhaps the states would assert what pressure they could against the Feds. Stop local banks from remitting income tax collections until the Feds honor their legal obligations. Stop cooperating with Federal law enforcement. Execute no Federal warrants, particularly for Federal tax issues. Stop all cooperation with Federal police authorities. Require the Federal government to explicitly authorize with a statute anything it wants to impose on the States (the supremacy clause provides that Federal law superceeds State law but says nothing about Federal regulations or administrative dictates). EPA directives, not Federal law, IRS regulations, not Federal law, etc.

Here’s the key. I have learned that the best way forward is often to not ask permission and then litigate afterwards. The best way is often to do and let the other party litigate if it thinks you are prohibited. Many of these questions are unclear. If you ask, “May
I,” it might take years. If the States do several of these things, and the Feds have to exert force or litigate , the entire State / Federal balance of power would shift rapidly.

The Trade Deficit is a Non-Issue

Look, if you have the world’s reserve currency, other countries will need to accumulate your currency. Every country needs dollars in their bank account (could be treasury securities or anything else priced and convertible to dollars).

You can’t conduct trade in dollars when your checking account has zero dollars.

So, to get dollars they sell us stuff.  They need to sell us more stuff than they buy from us to get the dollars they need. Or they could buy the dollars on the foreign exchange market which just means other countries would have to sell us more stuff then they buy from us to get the dollars to sell on the foreign exchange markets.

Having the reserve currency means the really great thing that lots of people have to hold your currency, giving you real value to get it, and the difficult thing that domestic producers have to see more goods come in than go out. The goods have to come in so other countries have dollars to fill their checking account

Trump and Friedman on Free Trade

Takeaway line from what Milton was referring to: “Free trade consists simply in letting people buy and sell as they want to buy and sell. It is protection that requires force, for it consists in preventing people from doing what they want to do. Protective tariffs are as much applications of force as are blockading squadrons, and their object is the same—to prevent trade. The difference between the two is that blockading squadrons are a means whereby nations seek to prevent their enemies from trading; protective tariffs are a means whereby nations attempt to prevent their own people from trading. What protection teaches us, is to do to ourselves in time of peace what enemies seek to do to us in time of war..”

Why are “sanctions” (preventing them from engaging in international trade) punishment for Iran and Russia, but a “good thing” for America?

If Russia were in our position, with the world’s reserve currency and control of the SWIFT bank transfer system, etc., and we pissed them off, say, by making Cuba the 51st state, they would punish us by preventing us from importing Ford trucks from Mexico, and we would suffer from that.. It is just as we are trying to punish Russia for Crimea by restricting their ability to import and export. Trump is talking about self inflicted punishment.

Determinism

Determinism is  au courant. It’s stylish. It’s fashionable. It’s up to date.

Why so much interest today in an obscure and ancient philosophical question?

Of course the negation of free will is vaguely part of Marxism. The collapse of capitalism is predetermined no matter what the participants want. It’s “You didn’t build that.” It’s “the root cause of crime”.

But the best part of the pro determinism frame for leftists is the attack on objective reality and knowledge of objective reality.

They say that what you believe about objective reality is simply an adaptive evolutionary fiction that increases your chances of survival. You know nothing about reality; you know only representations that are useful to you.

If you claim that even if  you are on the wrong side of history, you are nonetheless on the right side of reality. They can respond that there is no knowing reality. If you claim that men and women are different and you can support that by the number of hours worked or choice of occupations. They respond that your evidence is only belief in a manufactured “reality” that forwards your survival prospects.

Of course, since people do have beliefs they are quick to attribute beliefs to social influence. All beliefs are malleable, the ones you subscribe to now are a reflection of a certain societal power structure. If women had more power their choice of occupations would mirror men and their hours worked would be statistically identical to those of men.

The one belief that is not doubted is the belief in their theory of beliefs. There, they are correct. It is not a group of leftists seeking to influence fellow citizens and policy for their own self preservation. It is observation and reason proving that observation and reason cannot prove anything. Science proves that science is meaningless.

Wishful thinking finally is the final determinant of what we should do.