Do Teacher Unions Advance Education?

Wisconsin is undergoing quite a bit of strife as the Governor tries to curb the power of unions, including the teachers’ union. Opponents predict disaster and falling education quality if the union’s power is reduced. Blogger IowaHawk looks at the data and comes to the conclusion that students in non-unionized Texas scores better than students in highly unionized Wisconsin. This post is interesting for the light it sheds on education, but also for the danger in taking a simplistic, unquestioning approach to presenting data.

Thanks to Don Boudreaux for the link on Cafe Hayek.

Follow up July 1, 2011: Wisconsin’s new law has come into effect reducing the scope for union bargaining. Byron York gives an example of a school district that has benefited in a major way from the changes, rather than falling apart promptly as the unions would have you believe. [HT Thomas Lifson]

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I Am Right, If You Disagree with Me You Are Evil

I believe in X. I am a moral, conscientious person. I try to do what is right by others. I believe that in supporting X I am making the world a better place. I believe that if X comes to pass there will be (pick one or more) fewer uninsured, more people employed, less hunger, less homeless, less crime, world peace, etc.

You believe in Y. X and Y appear to be on the opposite side of the argument. Given that I believe my position is the morally correct one, you must be selfish, greedy, and downright evil since you do not support X. How could it be otherwise? X is the morally correct position (it must be for I am moral and support it), you do not support X, therefore you must be evil.

That seems to be the favorite method of discourse today on any controversial topic. How can we possibly make progress in the debate if that is the approach we take?

If I were king, before anyone would be allowed to debate a topic they would first have to discuss the goals, and discuss them clearly and in detail. What is the ultimate end in mind? What are they hoping to accomplish? I suspect that many people on opposite sides of a debate would find that they actually agree on the goal. They are fighting toward the same end of the football stadium. They disagree on the best, most effective means to get to the goal. One team thinks passing would be better. The other thinks running is more likely to get us to the end zone. If we are both trying to achieve the same end, then can one be any more morally upright than the other? Sure it is possible that the ends do not justify the means – there could be serious problems with the means. But too often I hear invective that unfairly and inaccurately accuses the opposite size of nefarious goals. Sure, go ahead and accuse them of having their facts wrong, attack the likelihood that their means will achieve the end, but be very, very careful about ascribing to them evil motivations – you may tar yourself with the same brush if you are both actually aiming at the same goal.

Postscript February 27, 2011.

After I wrote this post I came across a blog post describing how the author was subject to exactly the problem I am talking about. He cares about poverty and expressed opinions on the best method for alleviating it, but was accused of hating poor people by those who disagreed with his proposed methods.

Steven Horwitz has an excellent blog post describing concrete ways libertarians and progressives can start working together if they would only stop calling each other names.

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K-12 School Should Prepare Children to Engage in Learning

When I went to college I barely engaged with the professors. I sat passively in class taking notes, rarely spoke up, and hoped not to be called on. I’m not sure why. I wonder if it was because I wasn’t taught to engage with the teacher during class, wasn’t taught that it was OK to ask questions, wasn’t taught that an intellectual give and take could be exciting for both student and teacher. I was there to listen. The teacher was there to tell me what they thought I should know. Period. If that was the case, it is a shame. I wonder if that is still happening in our elementary, middle, and high schools.

I could certainly see how our children were being taught to keep their heads down and not ask questions. They would come home with a combination of excitement about a topic and obvious frustration when they were prevented from running with the topic. This was one of the reasons we started home schooling. We wanted to encourage our kids to be intellectually curious, to ask questions, to engage us in a discussion about the topic and extend it into new areas. This will prepare them for getting the most out of college and their careers as it will prepare them to think, to question, to engage in the process. Even if we were as successful as I hope we are in imparting knowledge just teaching our children how to get engaged in learning would help prepare them for a successful life.

This all came to mind as I read David Henderson’s post My Philosophy of Teaching on EconLog. Henderson describes how he was thrilled to engage with those who were obviously enthusiastic about the topic and about learning. I want our kids to have that experience in college. And in life. Parents can do much to prepare them. I wish more public schools were setting kids on a path of intellectual curiosity and exploration.

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Job creation by the government – slight of hand

Much is made in the news and public pronouncements lately about how federal (or state) policies and programs are designed to create jobs. The stimulus program was supposed to create jobs. Lets think through the the issues to see if it seems possible that the federal government can create a net increase in jobs by moving money from one set of activities to another.

I’ll make up an example to illustrate the issues. Say the government wants to create jobs in roofing and gives a tax credit to those who buy a new roof. That will make roofs cheaper for those buying them, which will raise the demand for roofs. Assuming the supply of roofers is elastic then more demand for roofs will increase the employment of roofers. Thus it looks like the government tax credit did its job. However, to really answer that question we have to look at the entire effect of the tax credit, not just at its specifically intended effect. Where did that money come from? Taxpayers – either right away or eventually as they have to pay off the federal debt. One way or another it has to come out of tax payers pockets. (The federal government could just print more money but that still costs tax payers ultimately – a subject for a blog post another day.) That means the government took money out of everyone’s pocket to pay for the tax credit for roofers. Everyone now has a little less money to spend somewhere else. The money that was spent on roofs cannot also be spent on something else – we all get to spend our money just once. Given we are now spending less money than before in other areas of the economy then employment has to FALL in every other sector of the economy except roofing. It has to, there is no getting around it.

Now if employment fell in the rest of the economy less than it rose in roofing then there would still be a net gain in employment. Is that possible? The only way it could be possible is if the government somehow knew better than the market how to effectively use all our resources. If that were true then centrally planned economies would out-perform free market economies. We have ample evidence that that is not the case.

Thus any federal plan to spend money to increase employment in some specific sector is bound to fail when measured against the total employment level. The federal government has a proper role but creating jobs is not it. Leave that to the free market.

Here is another way to think about the issue – it is equally valid but a bit harder for me to express in convincing words. When people spend money freely, that is they are not coerced to spend money via tax, then they choose to spend money in areas that maximize their personal utility. Money is scarce for most of us so we try to get the most from it. If the government takes some of our money and spends it elsewhere and we have no control over how it is spent then it is impossible for the government to achieve the same maximized utility for any one of us. If they cannot do it for any individual then as a nation as a whole they cannot do it either. Thus any federal spending reduces total utility.

Prior to the tax incentive, the only roofers employed over the long term were those that could be employed profitably by the roofing company. If a company could make more profit (or for that matter more of whatever the owners wanted to make – even leisure time) by hiring an additional worker then they would do it. Thus with the addition of tax incentives, the roofing industry as a whole will hire more workers than is economically efficient. They have already chosen an efficient level of employment, adding tax dollars cannot move them to a more efficient level of funding.

“Creating jobs” as a rationale for tax policy is rarely ever an efficient approach – every tax dollar spent on one thing is one less dollar that could be spent by the tax payer on something else. Thus an increase in economic activity in the advantaged sector is completely offset by a decrease in economic activity everywhere else. When talking about federal initiatives to ‘create jobs’ politicians talk as if their spending creates economic activity that would not have been created otherwise. However the money they are spending doesn’t grow on trees, it comes out of someone’s pocket. The cumulative spending decisions of the whole populace are much more likely to allocate that money efficiently than is a small group of decision makers in Washington D.C.

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Why SmithHayek?

This is my first post after a fresh install of my blog on my new site – SmithHayek.com.

Why SmithHayek? It is named after Adam Smith and Friedrich A Hayek, two of the most famous and influential economists of all time. I admire the way they think, the way they examine the world around us and draw conclusions about the way things operate. I named the site to pay tribute to them and to telegraph that many of my posts will deal with economics, how the world operates from an economic perspective, and how trade has been a crucial factor in our evolution from the moment we differentiated ourselves from the other great apes.

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Trade With Your Children

Consider this question: Is your family better off if everyone pitches in and helps? I hear my mother giving an answer to that question clear back in my childhood. Is it better if everyone does each task together or if some do one thing while others do something else? For example, Sally vacuums while Sammy does the dishes. In our house that will work much better than having to clean up the mess if two children try to work in the sink at the same time. If the goal is to teach the children about cooperation then perhaps working together may be an efficient means to that end. However, if the goal is a clean house then some amount of specialization can improve your outcome.

Now consider this question: You just adopted the neighbors on both sides, do the answers to our first two questions change? I wouldn’t think so. Will you all be better off if some of your new family members specialize in particular house cleaning tasks? Clearly yes. Now you can have vacuuming, dishwashing, dusting, and picking up all happening at the same time – your house will be spotless in no time and you will have more time to play a wonderful game together!

Is there a dark side to this happy story? Is something terrible happening because of all this cooperating? The longer you cooperate and specialize the more you will come to depend on each other. That increases your vulnerability while increasing your welfare. If your neighbors aren’t trustworthy then you may want some assurance that they will hold up their side of the bargain. But if you can achieve that you will be better off cooperating with your neighbor.

Now expand your family even farther. Does the same logic of specialization and cooperation apply to a larger family? One of the most interesting differences between us and all other animals is that we evolved to cooperate with strangers to achieve mutual ends. No other animal does that – they cooperate with relatives, but not with strangers. It seems to me that this fact tells us that cooperating between larger groups does indeed produce some advantage, at least from an evolutionary point of view.

Why then do some people get so bent out of shape by international trade? Why should we consider trade with China to be any less good than trade with our adopted neighbors? We will certainly want to establish some rules and enforcement mechanisms to ensure contracts are honored since it is harder to walk next door and demand payment, but the volume of international trade tells me that we have perfectly adequate solutions to this issue. If specialization and cooperation – trade by another name – with our neighbors helps make life better, why wouldn’t we want to open up to a wider range of options and trade with anyone and anywhere? The logic of those opposed to international trade and globalization and suspicious of trade with China escapes me.

[Edit on February 14, 2011]
A nice, short post by Donald J. Boudreaux on Cafe Hayek illustrates some of the faulty logic of arguments against the benefits of trade.

Posted in Economics, Politics, Trade | 1 Comment

Liberal – Progressive – Conservative

The meaning of the word ‘liberal’ in politics used to be aligned with notions of personal and business freedom, along the lines of the meaning of ‘libertarian’. However its meaning changed over time to now mean “Lets have the government mess with people’s lives and with what business does, for we know better how everything should run.” Over time, with the help of “conservative” invective, the term liberal was tainted. Now it seems people are trying to adopt the term ‘progressive’ which seems to mean “Lets have the government mess with people’s lives and with what business does, for we know better how everything should run, only this time we know how to do that better.” So it seems that modern day liberals are trying to escape the label without changing their positions.

However, at least they are consistent (for the most part). People who adopt the label ‘Conservative’ seem to take some positions that are diametrically opposed to each other from a philosophical perspective, e.g., ‘Lets have the government tell people how to live their lives but it should stay out of business affairs.’

Don Boudreaux has a short but eloquent discussion of a similar issue on CafeHayek.com at
http://cafehayek.com/2010/11/from-free-to-choose-to-choose-to-obey.html

For a slightly different take on the issue, Walter Russell Mead describes how the environmental movement has lost the connection it used to have with people from the early days of the environmental movement – it used to be that environmentalists were suspicious of government-provided solutions but now seem to think that only the government can save us. The Greening of Godzilla – Walter Russell Mead’s Blog That fits with my default thought: we ought to be seriously suspicious of any claims that government solutions will be the best approach to our problems – see my series on Unintended Consequences for more along those lines.

[Added April 2, 2011]
FA Hayek wrote about this issue in the Road To Serfdom and said:
“I use throughout the term “liberal” in the original, nineteenth-century sense in which it is still current in Britain. In current American usage it often means very nearly the opposite of this. It has been part of the camouflage of leftish movements in this country, helped by the muddleheadedness of many who really believe in liberty, that “liberal” has come to mean the advocacy of almost every kind of government control. I am still puzzled why those in the United States who truly believe in liberty should not only have allowed the left to appropriate this almost indispensable term but should even have assisted by beginning to use it themselves as a term of opprobrium. This seems to be particularly regrettable because of the consequent tendency of many true liberals to describe themselves as conservatives.” Location 1218.

[Update March 30, 2012]

Tim Nerenz today offered a clarifying post discussing the relationship between Democrats, Republicans, and Libertarians stating “The difference between the modern day Democrat Party and the modern day Republican Party is that Republicans are un-libertarian, while Democrats are anti-libertarian.” He notes that Libertarians and Democrats ought to find common ground on some issues but that the Democrat’s default assumption that the government ought to be busy meddling in things moves them away from Libertarians more often than not.

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The Great Depression – Plenty of Blame to Share

[This is part of a series, which is introduced in the posting titled “Unintended Consequences” here.] [Edited September 13, 2011]

There are plenty of options for pointing to government policies and behavior that brought about the Great Depression, deepened it, and helped it to last much longer.

The Gold Standard and France against the World.

I owe most of the following to an EconTalk podcast with Douglas Irwin, a professor at Dartmouth College (October 11, 2010. http://www.econtalk.org/archives/2010/10/irwin_on_the_gr.html)

Before the Great Depression most of the world was on the gold standard. French leaders were very afraid of inflation and so wanted to keep the value of their currency low relative to the rest of the developed world. By following this policy, they gradually accumulated more and more foreign exchange reserves. In 1927 they held 7% of the world’s gold reserves and by 1932 they held 27% of the world’s gold reserves. Given the structure of and support for the gold standard taken by the other major economies this created a shortage of money in the rest of the world, which hampered economic activity. Irwin said “If the country is losing gold reserves, it has to raise interest rates, tighten monetary policy to prevent that outflow, and pursue more contractionary policies.”

Irwin reported that “countries not on the gold standard managed to avoid the Great Depression almost entirely, while countries on the gold standard did not begin to recover until after they left it.” The US left the gold standard in 1933 and according to Irwin, that action alone may deserve the lion’s share of the credit for the U.S.’s eventual recovery.

Sources:

  • EconTalk podcast with Douglas Irwin of Dartmouth College

Monetary policy was restrictive instead of expansionary

It is fairly common in the economic story of the Great Depression to point fingers at monetary policy authorities in the United States for maintaining a contractionary monetary position during the depression, which restricts economic activity exactly at the time they should have been striving to promote economic activity. Prices fell dramatically during the depression, so inflation shouldn’t have been a worry leading them to proceed cautiously. I’d like to know more about the link between this contractionary economic policy and France’s accumulation of gold reserves. Irwin’s argument would imply that the monetary authorities in the U.S. did not have much of a choice in the matter. I’d welcome any suggestions for information on this topic.

Minimum Wage

The minimum wage was established in 1938 at 25 cents an hour. (source) This reduced the incentive to hire workers, raised the cost of business, reduced the incentive to grow businesses – all while the Great Depression was dragging on. The minimum wage gave a windfall to those who already had low-paying jobs but at the cost of leaving more people unemployed and raising costs for everyone. It seems hard to see how this could not have helped but worsen the general economic conditions.

Restrictions on Free Trade

It is also fairly common in the economic story of the Great Depression to point fingers at congress and the president for creating tariffs and lowering import quotas during the depression. This brought a lot of economic activity to a halt and raised prices. This rewarded domestic industries in protected areas but moved the costs on to everyone else in the country.

What Got Us Out of the Depression?

How did the U.S. finally escape the clutches of the Great Depression? A commonly heard narrative was that the massive government spending of the New Deal created the fiscal stimulus to bring around aggregate demand and get us out of the Depression. I have read and heard quite a bit lately that debunks that particular myth. Here are some citations to some of the material on this subject.

  • Russ Roberts has had several guests on EconTalk discussing the Great Depression. Searching there will get you several hits. My favorite was a discussion with Robert Higgs in an EconTalk podcast on December 5, 2008. If you want more from Higgs he has written a book on the topic.
  • Amity Shlaes talks with Russ Roberts in an EconTalk podcast on June 4, 2007.
  • Arthur Herman writes September 12, 2011 in the “The Ultimate Stimulus?: Weekly Standard on World War Two and economic growth”.


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The Housing Crisis in the United States

[This is part of a series, which is introduced in the posting titled “Unintended Consequences” here.]

There is a lot of blame to spread around for the housing crisis we are still experiencing and the accompanying financial crisis. The main stream stories mostly point at rapacious rich bankers. I don’t doubt that greed played a large role – but we always have the potential for greed to interfere with the efficient flow of the economy. What enabled greed to cause so much trouble this time? I have heard of some options and will expand on these as time goes along:

U.S. government policies were explicitly designed to encourage home ownership. At first this supported standard loans to generally credit-worthy buyers – but in the form of 30 year fixed rate mortgages with no pre-payment penalty. That put all the risk on the bank’s shoulders and little on the homeowners’. Then the government began pushing for more and more loans to ever more marginal buyers – those the market would not serve because they were too risky. If you increase the risk of your portfolio of loans, lending to ever more risky borrowers, it only should be expected that more and more loans would default. [Edit 2011-02-08:] Arnold Cling has a nice post on EconLog about Peter Wallison‘s work on Freddie and Fannie’s role in the housing crisis. His conclusion: They were the main cause.

US v Canada – Canada did not have the magnitude of housing crisis the United States did, by a long shot – why? Possible answers: no government guarantees (check on that), no 30 year loans, pre-payment penalties were allowed. 10 or 20% down was the norm. Presto, no housing crisis! A coincidence? I think not.

The next thing I’d like to research is the rules that encouraged credit default swaps. This is a dense topic so I’d welcome any pointers anyone has to offer.

Update July 3, 2011: George Will has an excellent book review of “Reckless Endangerment,” a book by Gretchen Morgenson and Joshua Rosner which describes how the government pushed policies that led to the housing crisis. [HT Don Boudreaux on Cafe Hayek.]

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Fiscal Irresponsibility

Well doesn’t that just fill you with confidence about the plans the federal government has for dealing with the deficit. The first big headlines they make after the Republican resurgence is three things guaranteed to fix the deficit: cut income tax, cut social security tax, and extend unemployment insurance. Wonderful. At least they had two in favor of higher employment vs one that will work to keep unemployment high.

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