Archive for February, 2010
It’s Not Camelot, ‘It’s Only a Model’
In Monty Python’s Quest for the Holy Grail, the assembled knights look in awe upon the imposing walls of “Camelot”… until someone points out that “it’s only a model.”
I feel I’m watching a remake of Quest every time I read another blog post about the economics paper “Anti-Lemons” by MacLeod and Urquiola.
Matt Yglesias reproduced its abstract last month, saying “I would have to pay $5 to read the whole paper, but the abstract conveniently supports political positions I like, so I’ll talk about it some more.” That, needless to say, isn’t the sort of talk that calls for a thoughtful response.
But now that Megan McArdle has picked up the thread from a second Yglesias post, read the paper, and it given it a favorable verdict, it’s time to point out that “it’s only a model” — and not a very good one at that.
“Anti Lemons” is not an empirical study. Instead it presents a series of abstract mathematical models with arbitrary assumptions. The final model purports to demonstrate the authors’ conclusion that “For-profit entry turns out to be feasible, despite these assumptions, as long as private schools can cream skim the highest ability students from the public system.”
What are the authors’ assumptions?
i) individuals differ only with respect to innate ability
ii) all schools are equally productive
iii) for-profit schools must operate unsubsidized
The first two of these assumptions are nonsense and the third contravenes the whole point of a school choice program (whether tax credits or vouchers), which is to subsidize access to private schooling for those who could not otherwise afford it.
As if these problems were not enough, the model also incorrectly assumes that when academic selectivity is permitted, every private school will not only select students based on academic entrance tests, but that they will all use the same test. Like the others, this assumption is out of touch with reality. When I analyzed survey data for Arizona private schools in 2006, I found that nearly half of all private schools were not academically selective. Only a third actually administered an academic admissions test of any kind. The only admissions criteria applied by a majority of schools were measures of student and parent desire to attend the school and students’ and parents’ willingness to abide by its code of conduct.
So the MacLeod and Urquiola model has precious little to do with reality. It tells us nothing about the real world or about tax credit or voucher programs or proposals. In fact, it seems to serve no productive purpose whatsoever, unless one considers it productive to give left-wing bloggers a study abstract to talk about that “conveniently supports political positions [they] like.”
Though MacLeod and Urquiola briefly discuss a modified model that relaxes the proscription against subsidization of private schools, its other erroneous assumptions remain and so it produces a result that is, not surprisingly, completely at odds with the reality established by the large body of empirical findings in this field.
Last year, I reviewed the worldwide literature comparing public and private schools (65 studies reporting 156 different statistical findings) and found that the statistically significant findings favor private schools by a margin of roughly 8 to 1. More importantly, when we focus more precisely and compare truly market-like school systems to monopolies such as U.S. public schooling, the statistically significant results favor markets by a margin of nearly 15 to 1 (and they greatly outnumber the insignificant findings as well). It is thus the least regulated private schools that show the most consistent advantage.
MacLeod and Urquiola mischaracterize that research literature as follows: “there is no consistent evidence that introducing choice substantially improves learning, or that private schools have higher value added than public ones.” The sources they cite to back up their mischaracterization are both incomplete and imprecise, failing to look at a large swath of the research and failing to distinguish among various forms of “choice” with fundamentally different features.
So, no, the “Anti-Lemons” study is not the Camelot it is cracked up to be by recent rhapsodic blog posts. It’s not even a good model.
[Should anyone want to interject Hsieh and Urquiola's 2006 empirical study of the highly regulated Chilean voucher system at this point, I've already offered my thoughts on it here.]
The Government Has Your Baby’s DNA
My 2004 Cato Policy Analysis, “Understanding Privacy — and the Real Threats to It,” talks about how government programs intended to do good have unintended privacy costs. “The helping hand of government routinely strips away privacy before it goes to work,” I wrote.
There could be no better illustration of that than the recent CNN report on government collection and warehousing of American babies’ DNA. “Scientists have said the collection of DNA samples is a ‘gold mine’ for doing research,” notes a sidebar to the story.
I have no doubt that it is—and that government-mandated harvesting of this highly valuable personal data from children is an unjust enrichment of the beneficiaries.
Evan Bayh and Congressional Comity
Today Politico Arena asks:
Is Bayh’s lament on target?
My response:
The heart of Evan Bayh’s surprising announcement yesterday that he would not be seeking another term in the Senate was captured in three short sentences:
For some time, I have had a growing conviction that Congress is not operating as it should. There is too much partisanship and not enough progress — too much narrow ideology and not enough practical problem-solving. Even at a time of enormous challenge, the peoples’ business is not being done.
Beguilingly attractive as those sentiments may be, suggesting that some Golden Age of congressional comity has been lost, a candid look at our history shows that comity has been the exception, not the rule. And it’s occurred mainly when one party dominated Congress, as Democrats did during a fair part of the post-War period while Republicans were searching for their identity. So why not over the past year, when those conditions seemed to be in place? Is there something about today’s congressional divisiveness that distinguishes it from the past? I submit that there is, that it’s not narrow policy differences that mainly underpin what we’re seeing, but that the nation is up against a fundamental reality that much of the public is coming to see, even if many in Congress are slow to grasp it.
To barely summarize the matter, the Constitution sets forth a plan for limited government, not for government engaged in all manner of “problem-solving,” as Bayh put it – the problems of private life, mostly, from retirement security, to health care, education, job-creation, you name it. But for more than a century, Progressives have worked to overturn that design. And their something-for-nothing promises that have spurred the ever-greater socialization of life have attracted enough people to make it seem that we were, wonderfully, “all in this together,” especially since the costs of socialization were largely put off to the future. That’s the “comity” of the good life on borrowed money. But those costs cannot be put off forever. Eventually, they come due. And when they do, the differences between those who come finally to recognize reality, and those who still live the dream, are irreconcilable — because reality doesn’t “compromise.” I submit that we’re now at that point.
Not that there haven’t been voices decrying our episodic flights from reality all along — indeed, from the nation’s founding. But the post-New Deal trends, and the critique of those trends that came to wider attention through the Goldwater-Reagan revolution within the Republican Party, which the two Bush presidencies inflamed and thus sharpened, have produced a perfect congressional storm, so to speak, with irreconcilable proposals for how to get out of the mess looming before us. At bottom, in short, two different conceptions of government are at war.
Senator Bayh tells us that he looks forward to working with the president during the next 11 months ”to get our deficit under control, get the economy moving again, regulate Wall Street to avoid future financial crises, and reform education.” Yet his party’s actions, building on many of the Bush administration’s, have given us a deficit unprecedented by orders of magnitude, an economy stagnating due largely to political uncertainty, an analysis of our financial crisis that blames Wall Street while all but ignoring the role of the Fed and government-sponsored enterprises like Fannie and Freddie, and an approach to educational “reform” that denies poor children in the District of Columbia the vouchers that have enabled them to flee our appalling public schools. Compromise? How does one compromise with a proposal to expand Medicare when the program itself is moving fast toward bankruptcy?
Which brings us to the nub of the matter. It’s easy to get into socialism. Getting out is much harder, as the nations of Eastern Europe discovered, and are still seeing. It is here that compromise and comity are needed — to chart a way out. But that will never be achieved as long as there are enough in Congress who cling to the something-for-nothing myths that have brought us to this state. A comity that shields us from this reality is no answer to the divisiveness before us. If the elections of the past few months are any indication, the people are ahead of the politicians in seeing this — and that’s a good thing. If war is needed to reclaim a footing in reality, bring it on.
The Capture of Mullah Baradar in a Regional Context
The capture of the Taliban’s top military commander, Mullah Abdul Ghani Baradar, is a success in the broader war on terror; however, only time will tell whether it signals Pakistan is convinced that its future security no longer lies in its support for Islamist proxies.
It is important to recognize that this apprehension was not a result of blunt military force, but a direct result of diligent intelligence gathering by the military and CIA, in close cooperation with Pakistan’s Inter-Services Intelligence. This fact serves to further question our objectives in Afghanistan, where blunt military force is the main solution. Indeed, over 100,000 U.S. and coalition troops are deployed, large amounts of resources are expended, and lives are continually lost for what President Obama’s national security adviser, Gen. James Jones, noted in October, “is less than 100 [al-Qaeda] operating in [Afghanistan].”
Another important point is that for years the United States and Pakistan were not on the same page at the strategic level. Pakistan’s cooperation in this recent operation could signal a shift in its strategic thinking; however, U.S. policymakers must recognize that along with an increased push toward negotiating with ground insurgents, they must also acknowledge how Pakistan’s strategic orientation and its regional tensions with India impact Afghanistan. Only by developing a comprehensive South Asia strategy and moderating the strategic competition between India and Pakistan will there be hope for anything more than temporary peace in Afghanistan. In this respect, while Mullah Baradar’s capture is great news, it might do little to compel regional belligerents to alter their policies as it impacts Afghanistan—the underlying source of the Afghan mission’s vulnerability.
In short, the broader policy prescription of remaining in Afghanistan without addressing Pakistan’s use of extremist proxies vastly oversimplifies the conditions that exist between Pakistan and India and the ability of present solutions to influence their policies. Long-term stability will only come about when all countries in the region are on the same page, but judging from history, that prospect looks unlikely.
Rhode Island District Fires All Its HS Teachers
Performance, it seems is abysmal. The district’s high school graduation rate is said to be less than 50 percent, and things have been bad for a long time. Charged with turning things around, the superintendent asked teachers (who are making between $70,000 and $78,000 vs. the town’s median income of $22,000) to work an extra 25 minutes a day, provide tutoring on a rotating schedule, and have lunch with the kids once a week. The union said no. So superintendent Frances Gallo went reluctantly to plan B: she fired the school’s entire staff.
Union leaders seem to think that the old rules still apply. Maybe they do, for now. The union plans to challenge the firings and it remains to be seen if they’ll find a way to reverse them.
But America is reaching a tipping point after which the old rules will go out the window. Having more than doubled public school spending per pupil in real terms over the past 40 years and not seen a smidgen of improvement in outcomes at the end of high school in return, having become frustrated that we have choice in virtually every area of life except public education, Americans are starting to chafe. When an education system fails to deliver on its promises for generation after generation, Americans will ultimately throw it on the scrap heap of history, and find something that will fulfill their educational needs and ideals. Yes. We. Can.
Food Stamp Price Tag Rising
Food stamp usage is at record levels according to the New York Times, with one in eight Americans now receiving benefits. There are several reasons for the upswing, including expanded eligibility in the 2000s and the severe economic downturn. The following chart shows the dramatic rise in spending for the Supplemental Nutrition Assistance Program, known as the Food Stamp program until 2008 when Congress changed its name to sound more palatable.
Most Americans think that we should aid those in real need, but individuals should do so voluntarily without resorting to forced government transfers.
The Times gives three examples of people who recently started receiving food aid. Each offers some food for thought.
The first is a 45 year-old Harlem widow with an annual income of $15,000. A food bank had encouraged her to apply for the benefits:
A big woman with a broad smile, Ms. Bostick-Thomas swept into the group’s office a few days later, talking up her daughters’ college degrees and bemoaning the cost of oxtail meat. “I’m not saying I go hungry,” Ms. Bostick-Thomas said. “But I can’t always eat what I want.” The worker projected a benefit of $147 a month. “That’s going to help!” she said. “I wouldn’t have gone and applied on my own.”
I don’t know this woman’s exact circumstances, and there’s no reason to doubt she needs assistance. But aren’t her college-educated daughters in a position to help their mother? Government welfare undermines the traditional role the family played in mutual assistance.
Here’s the second example:
Juan Diego Castro, 24, is a college graduate and Americorps volunteer whose immigrant parents warned him “not to be a burden on this country.” He has a monthly stipend of about $2,500 and initially thought food stamps should go to needier people, like the tenants he organizes. “My concern was if I’m taking food stamps and I have a job, is it morally correct?” he said.
But federal law eases eligibility for Americorps members, and a food bank worker urged him and fellow volunteers to apply, arguing that there was enough aid to go around and that use would demonstrate continuing need. “That meeting definitely turned us around,” Mr. Castro said.
This fellow’s annualized monthly stipend is more than I made in my first job in Washington. And for Mr. Castro, who was warned not to be a burden on this country, he ought to be told that the federal Americorps program is exactly that. But more disconcerting is the fact that the food bank worker urged him and his colleagues to go the dole in order to advertise it.
This anecdote illustrates Michael Tanner’s argument that government poverty programs serve vested interests:
Among the non-poor with a vital interest in anti-poverty programs are social workers and government employees who administer the programs. Thus, anti-poverty programs are usually more concerned with protecting the prerogatives of the bureaucracy than with fighting poverty.
The last example from the Times is a Colombian immigrant who missed three months of work as a janitor because she fell and had to have knee surgery:
Last November, she limped into a storefront church in Queens, where a food bank worker was taking applications beside the pews.
About her lost wages, she struck a stoic pose, saying her san cocho — Colombian soup — had less meat and more plantains. But her composure cracked when she talked of the effect on her 10-year-old daughter. “My refrigerator is empty,” Ms. Catano said.
Last month, Ms. Catano was back at work, with a benefit of $170 a month and no qualms about joining 38 million Americans eating with government aid. “I had the feeling that working people were not eligible,” she said. “But then they told me, ‘No, no, the program has improved.’”
This is precisely the sort of person that is deserving of charity. But the federal government isn’t a charity; it is a forced transfer machine. The less fortunate, and society as a whole, would be better off if the taxes paid to support inefficient, counterproductive government programs were instead left in the hands of supportive individuals and organizations.
See this essay for more on government food subsidies.
China’s Dilemma
In the Wall Street Journal, Ian Buruma puts Google’s conflict with China in its historical context: the long struggle by China’s leaders to have the benefits of knowledge and trade from around the world without loosening their own hold on the Chinese people:
One way of dealing with this problem was to separate “practical knowledge” from “essential” culture, or ti-yong in Chinese. Western technology was fine, as long as it didn’t interfere with Chinese morals and politics. In practice, however, this was not feasible. Political ideas came to China, along with science, economics, and Western religion. And they did help to undermine the old established order. One of these ideas was Marxism, but once Mao had unified China under his totalitarian regime, he managed for several decades to insulate the Chinese from notions that might undermine his power.
Once China opened up to the world for business again in the late 1970s, under the leadership of Deng Xiaoping, the old problem of information control emerged once again. Deng and his technocrats wanted to have the benefit of modern economic and technological ideas, but, like the 19th century mandarins, they wished to ban thoughts which Deng called “spiritual pollution.” The kind of pollution he had in mind was partly cultural (sex, drugs and rock ‘n’ roll), but mainly political (human rights and democracy).
Way back in 1979, David Ramsay Steele of the Libertarian Alliance in Great Britain wrote about the changes beginning in China. He quoted authors in the official Beijing Review who were explaining that China would adopt the good aspects of the West — technology, innovation, entrepreneurship — without adopting its liberal values. “We should do better than the Japanese,” the authors wrote. “They have learnt from the United States not only computer science but also strip-tease. For us it is a matter of acquiring the best of the developed capitalist countries while rejecting their philosophy.” But, Steele replied, countries like China have a choice. “You play the game of catallaxy, or you do not play it. If you do not play it, you remain wretched. But if you play it, you must play it. You want computer science? Then you have to put up with striptease.”
As I wrote on the eve of the Beijing Olympics, China is launched on a long process of economic growth and openness to the world, which is inevitably leading to political unrest and challenges to established authority. I believe that the changes in China over the past generation are the greatest story in the world — more than a billion people brought from totalitarianism to a largely capitalist economic system that is eroding the continuing authoritarianism of the political system. In the long run, I think that the attractions of growth and openness will overwhelm the rulers’ attempt to maintain their hold on power. But that process is rarely entirely peaceful, and we can expect conflicts of all kinds as this struggle proceeds.
School Choice, Realpolitik, & Brookings
Jay Greene has responded to my review of the new Brookings Institution school choice report which he co-authored, raising a crucial issue for the education policy and research communities. Jay points out that the report is a work of realpolitik rather than scholarship, and as such contends that it must find a compromise between the policies best supported by the evidence and those that have a real chance of being implemented. He makes the related argument that incrementalism is the only realistic path to success.
I agree with Jay that it’s good for analysts to find ways of improving current policy even when the ideal policies are not politically feasible. But these realpolitik recommendations must be clearly distinguished from the ideal policies themselves. Analysts should report both viable compromise reforms AND ideal policies, explaining to policymakers the likely costs and risks associated with the compromises–the reasons why they are inferior. Failing to do this leads to two serious problems:
First, presenting only the compromises robs the public and its elected representatives of crucial information, making it more difficult to build support for the ideal policies and leading to guilt by association when the compromise policies prove disappointing for reasons that should have been — but were not — clearly laid out in advance.
Second, when analysts don’t present their ideal policies and the evidence (if any) on which they are based, there is no way for the public or policymakers to judge the wisdom of their realpolitik compromise recommendations. This is particularly problematic when the analysts’ recommendations conflict with what the available evidence shows to be ideal policy.
As to the need for incrementalism in U.S. policy reform, the evidence is not entirely one-sided. The Emancipation Proclamation did not give slaves a 50 percent share in themselves, rising gradually to 100 percent over time. When women won the franchise, it was not at a discounted rate — one female vote equal to 1/3 or 1/2 of a male vote. They won the right to vote outright. Prohibition was not undone gradually, with beverage categories being re-legalized in order of alcohol content. I’m sure we could think of other major policy shifts in U.S. history that were not incremental.
In all of the above cases, major social movements were necessary to win the day, and if scholars and advocates who knew better had championed only half-measures instead of the policies they knew to be right, it surely would have delayed the eventual victories. Scholars who know what kind of school choice is necessary to best serve children should clearly advocate such policies, especially in any context in which they also offer any interim recommendations they deem more politically feasible.
And even if we grant, for the sake of argument, that all school choice policies must be incremental, there are incremental policies already in existence that are highly consistent with ideal policy. Existing scholarship donation tax credits such as those in PA, FL, RI, etc., and personal use education tax credits such as those of Illinois and Iowa, are expanding organically over time. Eventually, as that expansion continues, they could be combined and thus ensure universal access to the education marketplace without needing to impose regulations on private schools that the research shows to be intrusive and counterproductive. By contrast, it is hard to see how introducing federal regulation of virtual schools (a Brookings Report recommendation) moves us close in the direction of the minimally regulated parent-driven markets supported by the evidence.
So, yes, let’s be realistic in our policy recommendations, but let’s also be clear about the ideal policies indicated by the empirical evidence, so that policymakers and the public hear a consistent message about where we need to go.
Washington Is Booming in the Bush-Obama Years
Unemployment is high in most of the country, but the Washington area is adding jobs — at least in the government sector:
Walking around the District, Abel Lomax can’t help but look around and think: What recession?
After a stint abroad, it took the 27-year-old just four months to find a job with the government — not bad for the Great Recession. And the neighborhoods where he spends his time sport new restaurants crowded with patrons enjoying Czech Pilseners and Wagyu beef brisket….
With thousands of new federal and government-related jobs, Washington has benefited from some of the circumstances that have caused Main Streets to go dark elsewhere. The government has taken a greater oversight role on the financial sector, and companies have been drawn to the area because of its economic stability.
But even in Washington, people in the productive sector of the economy are not doing so well.
About 42,000 local jobs were lost over the past year, most of them in less-affluent areas and among lower-paying positions in retail and construction….
From November 2008 through November 2009, about 27,000 jobs were created in the Washington area, among them positions for lawyers, lobbyists, accountants, federal workers, educators, health professionals and government workers, according to an analysis by Fuller.
Of the 42,000 jobs lost, about 16,000 were in construction, 9,000 in retail and about 11,000 in financial and information fields that had been in decline since before the recession.
Find more on the Washington boom in the Bush years (and here) and in the Obama years (and here).
Krugman: The Hubris of Central Planning
In the New York Times today, Paul Krugman discusses the Euro and the problem of Greece. He hastens to note that the problem is not debts, deficits, and government profligacy, which it sure might seem like to the untrained eye. But he fingers a different and deeper problem:
No, the real story behind the euromess lies not in the profligacy of politicians but in the arrogance of elites — specifically, the policy elites who pushed Europe into adopting a single currency well before the continent was ready for such an experiment….
It’s an ugly picture. But it’s important to understand the nature of Europe’s fatal flaw. Yes, some governments were irresponsible; but the fundamental problem was hubris, the arrogant belief that Europe could make a single currency work despite strong reasons to believe that it wasn’t ready.
Now, you’ll note that Krugman says that Europe wasn’t yet “ready” for a single currency, suggesting that in some happy day it will be. Because of course the logic of history is always to move toward centralization and conformity, right? Nevertheless, it’s great to see Paul Krugman criticizing the arrogance of elites and the hubris of the centralizing impulse.
Government-Run Monopolies or School Choice Competition?
Cato’s Isabel Santa uses school choice as an example of why competition is better than government-imposed monopolies. The video explains that government schools cost more and deliver less, which is exactly what one might expect when there is an inefficient monopoly structure. The evidence about the school-choice systems in Sweden, Chile, and the Netherlands is particularly impressive.
There are many other reasons to support school choice, including diversity and innovation. There also is no need for fights over school prayer and sex education when parents can choose schools that reflect their values.
Perhaps most important, school choice should be the civil rights issue of the 21st century. Many minority families live in areas where the government school monopoly does a scandalously poor job of educating children, even though these often are the school districts with higher-than-average per-pupil spending.
For more information about education issues, see what Cato’s scholars have written.
Same Old SAFRA Tune
Congressman George Miller (D-CA) is at it again, publishing a letter in the New York Times Saturday implying that the Student Aid and Fiscal Responsibility Act — which is, thankfully, languishing in the Senate right now — would save taxpayers $87 billion over ten years.
Quite the opposite: The bill would almost certainly cost taxpayers additional tens-of-billions, not save money. But that doesn’t seem to deter Miller. Unfortunately, neither does the galactic national debt, nor that people appear to have had it with seemingly incessant expansion of federal power.
Cato on Facebook
Cato on Twitter
Cato on Google+
Cato on YouTube
