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Blurred Lines: The Humanitarian Threat to Free Speech – Article by Aaron Tao

Blurred Lines: The Humanitarian Threat to Free Speech – Article by Aaron Tao

The New Renaissance HatAaron Tao
June 25, 2015
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“Think of liberalism … as a collection of ideas or principles which go to make up an attitude or ‘habit of mind.’” – Arthur A. Ekirch

In Democracy in America, Alexis de Tocqueville was keen to observe that “once the Americans have taken up an idea, whether it be well or ill founded, nothing is more difficult than to eradicate it from their minds.”

Reflecting upon my experience as a first-generation immigrant who grew up in the United States, I concur with Tocqueville; this inherent feature of the culture and character of the American people holds true even today.

In America, there are no sacred cows, no one is above criticism, and no one has the final say on any issue. It is worth emphasizing that today, the United States stands virtually alone in the international community in upholding near-absolute freedom of personal expression, largely thanks to the constitutional protections provided by the First Amendment.

But without certain internalized values and principles, the legal bulwark of the First Amendment is nothing more than a parchment barrier.

As cliché as it may sound, it is important to recognize that our cherished freedom to think, speak, write, and express ourselves should not be taken for granted. Defending the principle of free speech is a perennial conflict that has to be fought in the court of public opinion here and abroad.

Unfortunately, a number of recent developments have greatly alarmed civil libertarians and may very well carry long-term negative repercussions for the United States as a free and open society.

In his new book, Freedom from Speech, Greg Lukianoff, the president of the Foundation for Individual Rights in Education (FIRE) and tireless free speech advocate, highlights a troubling cultural phenomenon: the blurring of physical safety with psychological and ideological comfort.

It is a disturbing trend that is not limited to the United States:

People all over the globe are coming to expect emotional and intellectual comfort as though it were a right. This is precisely what you would expect when you train a generation to believe that they have a right not to be offended. Eventually, they stop demanding freedom of speech and start demanding freedom from speech.

On the other side of Atlantic, Great Britain is undergoing what one writer describes as a “slow death of free speech.” The land of Milton is now home to luminaries who wish to reinstate Crown licensing of the press (not seen since 1695!).

Meanwhile, ordinary people face jail time for callous tweeting. In British universities, student-driven campaigns have successfully shut down debates and banned pop songs, newspapers, and even philosophy clubs.

While the United States is fortunate enough to have the First Amendment prevent outright government regulation of the press, cultural attitudes play a greater role in maintaining a healthy civil society.

Lukianoff reserves special criticism for American higher education for “neglecting to teach the intellectual habits that promote debate and discussion, tolerance for views we hate, epistemic humility, and genuine pluralism.”

Within academia, “trigger warnings” and “safe places” are proliferating. In a truly Bizarro twist, it has now come to the point that faculty members are defending individual rights and due process and decrying mob rule, while their students run off in the opposite direction.

We now hear on a regular basis of campus outrages involving a controversial speaker or perceived injustice, and the “offended” parties responding with a frenzied social media crusade or a real-world attempt to shame, bully, browbeat, censor, or otherwise punish the offender.

A small sampling from this season include attempts to ban screenings of American Sniper at the University of Michigan and the University of Maryland, resolutions to create a Stasi-like “microaggression” reporting system at Ithaca College, and the controversy involving AEI scholar Christina Hoff Sommers speaking at Oberlin College.

These incidents are just the tip of the iceberg.

With the endless stream of manufactured outrages, perhaps it is fitting that George Mason University law professor David Bernstein would raise the question, “Where and when did this ‘makes me feel unsafe’ thing start?”

My personal hypothesis: When postmodernism found itself a new home on Tumblr, spread across the left-wing blogosphere, became reinforced by mobs and echo-chambers, and spilled into the real world.

Luckily, not all progressives have sacrificed the basic principles of liberalism to the altar of radical identity politics and political correctness. One liberal student at NYU courageously pointed out the grave dangers posed by the ideology embraced by many of his peers:

This particular brand of millennial social justice advocacy is destructive to academia, intellectual honesty, and true critical thinking and open mindedness. We see it already having a profound impact on the way universities act and how they approach curriculum. …

The version of millennial social justice advocacy that I have spoken about — one that uses Identity Politics to balkanize groups of people, engenders hatred between groups, willingly lies to push agendas, manipulates language to provide immunity from criticism, and that publicly shames anyone who remotely speaks some sort of dissent from the overarching narrative of the orthodoxy — is not admirable.

It is deplorable. It appeals to the basest of human instincts: fear and hatred. It is not an enlightened or educated position to take. History will not look kindly on this Orwellian, authoritarian perversion of social justice that has taken social media and millennials by storm over the past few years.

I, too, am convinced that these activists, with their MO of hysterical crusades, are one of today’s biggest threats to free speech, open inquiry, and genuine tolerance, at least on college campuses. The illiberal climate fostered by these their ideologues seems to be spreading throughout academia and is continuing to dominate the headlines.

As of this writing, Northwestern professor (and self-described feminist) Laura Kipnis is undergoing a Kafkaesque Title IX inquisition for writing a column in the Chronicle of Higher Education and making comments on Twitter that offended a number of students. The aggrieved mobilized in full force to have her punished under the federal sex discrimination law.

These groups and their tactics represent what Jonathan Rauch would describe as the “humanitarian” challenge to free speech. In his must-read book, Kindly Inquisitors: The New Attacks on Free Thought, Rauch identified how these “humanitarians” sought to prevent “offense” to “oppressed and historically marginalized” peoples. In the name of “compassion,” words became conflated with physical action.

As speech codes spread and the definition of “harassment” (reading a book in public, for instance) became broader within the bureaucracy of academia, an “offendedness sweepstakes” was cultivated and turned into the norm.

Rauch’s book was published in 1993, but his diagnosis and arguments still apply today, if not more, in the age of social media when the “offendedness sweepstakes” are amplified to new levels.

Nowadays, PC grievance mongers can organize much more effectively and more often than not, get rewarded for their efforts. The future of a free society looks very bleak should these types become a dominant force on the political landscape. I can’t help but shiver at the prospect of seeing the chronically-offended eggshells of my generation becoming tomorrow’s legislators and judges. The chilling effects are already being felt.

Even as numerous challenges emerge from all corners, free speech has unparalleled potential for human liberation in the Digital Age. The eternal battle is still that of liberty versus power, and the individual versus the collective. I remain confident that truth can still prevail in the marketplace of ideas. It is for this reason we should treasure and defend the principles, practices, and institutions that make it possible.

Last month marked the birthday of the brilliant F.A. Hayek, the gentleman-scholar who made landmark contributions to fields of economics, philosophy, political science, and law, and established his name as the twentieth century’s most eminent defender of classical liberalism in the face of the collectivist zeitgeist.

For all his accomplishments, Hayek practiced and urged epistemological humility (a position that should be natural to any defender of free speech) in his Nobel lecture. Looking back on his life’s work, Hayek was highly skeptical of the nebulous concept of “social justice” and its totalitarian implications. He even went as far as to devote an entire volume of his magnum opus, Law, Legislation, and Liberty, to completely demolish The Mirage of Social Justice.

Hayek concluded:

What we have to deal with in the case of “social justice” is simply a quasireligious superstition of the kind which we should respectfully leave in peace so long as it merely makes those happy who hold it, but which we must fight when it becomes the pretext of coercing other men [emphasis added].

And the prevailing belief in “social justice” is at present probably the gravest threat to most other values of a free civilization.

Hayek did not predict that “social justice” would be first used to silence dissent before moving on to its long-term agenda, but it would not have surprised him. Weak ideas always grasp for the censor in the face of sustained criticism — and feeble ideas made strong by politics are the most dangerous of all.

Humanitarians with guillotines can be found from the French Revolution to present day. Modern day defenders of individual liberty would do well to heed Hayek’s warning and resist the Siren song of “social justice,” the rallying cry of collectivists who cannot realize their vision without coercion.

Aaron Tao is the Marketing Coordinator and Assistant Editor of The Beacon at the Independent Institute.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

Unsustainable: Little Ways Environmentalists Waste the Ultimate Resource – Article by Timothy D. Terrell

Unsustainable: Little Ways Environmentalists Waste the Ultimate Resource – Article by Timothy D. Terrell

The New Renaissance HatTimothy D. Terrell
June 23, 2015
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The memo told me to get rid of my printer — or the college would confiscate it.

The sustainability director — let’s call him Kermit — is an enthusiastic and otherwise likable fellow whose office is next door to mine. Kermit had decided it would be better if the centralized network printers in each department were used for all print jobs. He believed that the environment was going to benefit from this printer impoundment.

Some sustainability advocates object to printers because little plastic ink cartridges sometimes wind up in landfills — but I saw no effort at the college to promote cartridge recycling; the sustainability policy had skipped persuasion and gone straight to confiscation.

Certainly the IT people didn’t want to maintain the wide variety of desktop printers or supply them with cartridges — but the printer on my desk was not college-supplied or maintained, and I provided all my own cartridges. Personal printers were now verboten. Period. The driver behind the policy, apparently, was the rectangular transformer box plugged into the wall, which consumed a trickle of a few watts of electricity 24/7.

A typical household inkjet printer draws about 12 watts when printing, and when it’s not, it draws about 5 watts. At 5 watts per hour, then, with a few minutes a week burning 12 watts, my lightly used inkjet would use around 46 kWh a year, which at the commercial average rate of 11 cents per kilowatt-hour translates to an annual cost of $5.06. There may be side effects, or externalities, to use a term from economics. A 2011 study in the Annals of the New York Academy of Sciences that renewable energy advocates often cite estimates that the side effects of coal-produced electricity cost about 18 cents per kWh, so assuming that all the electricity saved would have been produced by burning coal (nationwide, it’s actually less than 40 percent), that brings the total annual cost to $13.34.

Kermit must have calculated that confiscating printers would collectively generate several hundred dollars a year of savings for the college — and allow the college to put another line on its sustainability brag sheet.

There’s certainly nothing wrong with trying to save electricity. But Kermit had forgotten the value of an important natural resource: human time.

Time is a valuable resource: labor costs are a large chunk of most businesses’ costs. The college basically wanted to save electricity by wasting my time — and everyone else’s.

Here’s how that works. Suppose I want to print out a recommendation letter and envelope on college letterhead. Using the network printer involves the following steps:

  1. Walk down hall with letterhead and insert letterhead in single-feed tray.
  2. Return to office.
  3. Hit Enter and walk back to printer.
  4. Discover that page was oriented the wrong way and printed upside down.
  5. Return to office.
  6. Walk back to printer with new letterhead page.
  7. Return to office.
  8. Hit Enter and walk back to printer.
  9. Discover that someone else had sent a job to the printer while I was in transit and printed his test on my letterhead.
  10. Return to office.
  11. Walk back to printer with new letterhead page.
  12. Wait for other guy’s print job to finish.
  13. Insert letterhead, properly oriented.
  14. Run back to office to reduce chances of letterhead being turned into another test.
  15. Hit Enter and walk back to printer.
  16. Pick up successfully printed letter.
  17. Walk back to office, quietly weeping at the thought of repeating the process to print the envelope.

This “savings” turns into more than 12 trips to and from the communal printer, plus any time spent waiting for another print job. The environmentalist may bemoan the two wasted sheets of paper, but he would quickly remember that there’s a recycling bin beside the printer. The more significant cost of this little fiasco is human time.

Let’s suppose that’s a total of six minutes. Of course, I’ve learned the right way to orient paper and envelopes after a mistake or two, and printer congestion is rarely a problem. And I never did higher-volume print jobs, such as tests for classes, on my own inkjet anyway, so the lost time in trotting back and forth would apply mainly to one- or two-sheet print jobs, envelopes, and scanning. Suppose the confiscation of my inkjet means, conservatively, five additional minutes a week during the school year. That’s about three hours a year sucked out of my life, absorbed in walking back and forth.

Suppose, again to be conservative, my time is worth what fast food restaurant workers in Seattle are getting paid right now — $15 per hour. So the university is wasting $45 of my salary to save $13.34 in utilities. Does that sound like the diligent stewardship of precious resources?

(I will assume that any health benefits from the additional walking are canceled out by the additional stress caused by sheer aggravation.)

I am pleased to say that the desktop printer kerfuffle ended with the sustainability director backing down. We were all allowed to keep our printers, and I thereby kept three hours a year to do more productive work. Kermit and I remained on good terms, though he never took me up on my offer to provide an economist’s voice on the sustainability committee.

But we must make the most of small victories, for college and university sustainability proponents march on undeterred. If anything, the boldness and scale (and the waste) of campus initiatives has only increased. The National Association of Scholars (NAS) recently released a report showing that colleges trying to reduce their environmental impact have spent huge amounts of money on sustainability programs for little to no gain.

The unintended consequences of these programs abound. And though each initiative may destroy only a small amount of human time, the collective impact of these microregulations is a death by a thousand cuts.

Many college cafeterias are now “trayless,” in the hopes of reducing dish use and wasted food. But students must manage unwieldy loads of dishes, leading to inevitable spills, or make multiple trips (and student time is valuable, too). One study mentioned in the NAS report found that “students without trays tend to run out of hands and to skip extra dishes — usually healthy dishes such as salads — in order to better carry their entrée and dessert. This leads to students consuming relatively fewer greens and more sweets.”

A college’s “carbon footprint” has also become the object of campus policy. Middlebury College, for example, pledged in 2006 that it would be “carbon neutral” by 2016. So it has spent almost $5 million a year (over $2,000 per student) on things like a biomass energy plant, organic food for the dining hall, and staff and faculty tasked with improving sustainability. All of this has cost the college about $543 per ton of CO2 reduction. So even if one accepts the $39 per ton figure the Obama administration has stated as the value of reducing carbon dioxide emissions (and I, for one, am skeptical), Middlebury has greatly overpaid.

We can all appreciate the desire to be good stewards of the resources entrusted to us. But this doesn’t mean that every environmental sustainability initiative makes sense. Overpaying to reduce CO2 emissions, as with Middlebury, means that the product of hours of our work is needlessly consumed, and we have fewer resources for other valuable pursuits.

Sustainability advocates need to remember that resources include more than electricity, water, plastic, paper, and the like. Humans have value, too, here and now. Chipping away at our lives with little directives to expend several hours saving a bit of electricity, water, or some other resource, is to ignore the value of human life and to waste what Julian Simon called “the ultimate resource.”

Timothy Terrell is associate professor of economics at Wofford College in South Carolina.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

Commonly Misunderstood Concepts: Education (2009) – Article by G. Stolyarov II

Commonly Misunderstood Concepts: Education (2009) – Article by G. Stolyarov II

 

The New Renaissance Hat
G. Stolyarov II
Originally Published October 3, 2009
as Part of Issue CCX of The Rational Argumentator
Republished July 24, 2014
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Note from the Author: This essay was originally published as part of Issue CCX of The Rational Argumentator on October 3, 2009, using the Yahoo! Voices publishing platform. Because of the imminent closure of Yahoo! Voices, the essay is now being made directly available on The Rational Argumentator.
~ G. Stolyarov II, July 24, 2014
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There are several terms that are commonly misunderstood in most contemporary societies, with devastating consequences. Among these are “education,” “health care,” “employment,” “wealth,” and “happiness.” In this series, I hope to dispel – one by one – common fallacies surrounding these terms and to replace them with truer, more life-affirming understandings.

Education is the first colossally misunderstood term that I would like to address – as misunderstandings of it create massive societal problems where none need exist, and at the same time blind many people to genuine, but oft-overlooked problems.

Dictionary.com defines “education” in several ways:

1. The act or process of imparting or acquiring general knowledge, developing the powers of reasoning and judgment, and generally of preparing oneself or others intellectually for mature life.

2. The act or process of imparting or acquiring particular knowledge or skills, as for a profession.

3. A degree, level, or kind of schooling.

4. The result produced by instruction, training, or study.

5. The science or art of teaching.

Already the multiple possible meanings impart some ambiguity to the term. Clearly, acquiring general knowledge and developing the powers of reasoning and judgment are not the same as attending a school. Many a person has attended schools – even elite schools – and learned scarcely anything at all. While the dictionary writers at least take care to distinguish the different uses of the term “education,” a more commonplace tendency in today’s world is to package all the meanings together and to consider them inextricable from one another.

It is thus that the obsessive emphasis of contemporary societies on formal schooling operates. Abuses of the term “education” lead to a belief that schooling is both necessary and sufficient for learning, as if sitting in a classroom with thirty other similarly ignorant people is indispensable for attaining knowledge, but will also magically impart this knowledge to everyone involved.

I will preface further discussion by emphasizing that I have probably gotten the most out of formal schooling that an individual could hope to get. I was valedictorian of my class in high school and salutatorian in college, where I pursued three majors. And yet, in retrospect, I find that my best learning had always been self-initiated and self-motivated – and that I could not have succeeded in school without the effort I put in to acquire knowledge on my own.

Equating education with formal schooling is not a harmless idiosyncrasy; it is both expensive and costly. The equation of education with formal institutions leads to the demand to spend vast amounts of money on such formal institutions – as if dollars spent could purchase motivation, curiosity, and initiative. Conventional institutionalized schooling also makes substandard use of the most formative time in an individual’s life – the time when that person’s mind forms the habits and connections that shape both learning and character for decades into the future. Literally hundreds of millions of young people spend the vast majority of their time sitting behind desks, walking in lines, and being confined to “restricted areas” within school buildings, when they could much more readily utilize their talents elsewhere.

One problem with the model of Western public schools is that it creates a one-size-fits-all standard to which every student is expected to conform. The teacher can typically only do one thing in the classroom at a time. Teachers generally have no choice but to gauge the average level of knowledge and skill in the class and to teach primarily to that level. The students who know the material already or who grasp it more quickly have their time wasted; the students who do not follow as quickly as their “average” peers are often left behind. And the “average” students – to be quite blunt – generally do not learn particularly much, certainly not enough to justify forgoing twelve to sixteen years of their lives.

The second problem with Western public schools is that they segregate individuals by age groups, separating young people from those who are most qualified to give them an education – their elders – people whose experience exceeds that of the young people by anywhere from a few years to a few generations. Within public schools, and to a degree within universities as well, most young people are barely aware of anything beyond the immediate, pressing concerns of their own age group; few learn to expect the major transitions that are about to come in virtually all of their lives, and few absorb the skills needed to handle such transitions successfully. Within a peer group for which there exist no serious role models who have actually accomplished something, the lowest common denominator tends to prevail. This is, in part, why reckless, self-destructive, and delinquent behaviors among young people are so common in the West today.

The third problem with Western public schools is the manner in which uniform curricula tend to stifle the development of individual agendas of learning and curiosity in general. The teacher is paid to lecture on a certain predetermined subject material; if a student asks an interesting but tangential question, the teacher – even if he favors curiosity – must often suppress the inquiry for fear of lacking the time to do the job for which he was paid. At the same time, other students may not be interested in the same tangential questions, but might have other questions of their own; it is simply not possible to address all the questions and actualize all of the vast potential of every individual within the standardized structure of a classroom.

The fourth and most disturbing problem of public schools arises from the fact that the best children and teenagers are herded together with the worst: the bullies who mercilessly inflict every kind of petty and not-so-petty abuse imaginable on those who are better than they – for the very fact that their victims are better. Bullying creates an atmosphere of fear, stifled ambition, and anti-intellectualism – even among many students who would never engage in bullying themselves. Bullying – both of the physical sort and of the “softer” verbal sort that happens so often via the cliques and popularity contests that emerge in the schools – is the enforcement mechanism for conformity to the lowest common denominator. Its product is the unthinking acceptance by millions of young people of the latest fads, the most careless risks, and a complete unawareness of their future potential.

It is true that formal schooling could work in some cases – where every student is already reasonably knowledgeable, motivated, and respectful of others. A university course where each student desires to delve deeply and earnestly into the subject matter is a good example of this. But even universities today have become populated with students who neither need nor deserve to be there – all a result of government subsidies fueled by a mistaken perception that college and university educations are needed for even the most routine clerical jobs. As a result, the universities are rapidly succumbing to the same kinds of intellectual apathy, lowest-common-denominator teaching, and reckless behavior that have long plagued the public schools. The term “student” no longer carries a connotation of great honor and respectability, as it did even a century ago. Instead, everyone appears to have a Bachelor’s Degree these days, and to have trouble finding work at a fast-food restaurant with one. In an effort to remedy this, the best and brightest are often pigeonholed by public opinion into attending graduate school, even though many of them have little interest in subsequently becoming academicians. By the time they leave graduate school, they are already in their late twenties, almost certainly poor, and likely in severe debt. Misguided overvaluation of formal schooling has prevented aspiring lawyers and doctors from simply taking the bar and medical exams whenever they wished and receiving their licenses if they passed the rigorous exams. Instead, protectionist professional associations – the white-collar equivalent of labor unions – have collaborated with academia to make the expenditure of hundreds of thousands of dollars on formal schooling a requirement prior to even being allowed to take these exams. The ideal of a meritocracy or natural aristocracy of talent has been replaced by the ideal of the pecking order of seniority and pull, where one must grovel and pay in hopes of someday – probably only when one’s health begins to fail – receiving the groveling and payments of others.

At the same time, societal attitudes make formal schooling a virtual requirement for self-esteem. Many bright, talented individuals who could accomplish tremendous feats if they entered a trade in their early teens are pressured to feel inferior and incompetent until they have served their time. In truth, they have nothing to feel substandard about. Formal schooling is not a requirement for knowledge, skill, or good character; it is not a substitute for entrepreneurial insight, creativity, or determination. It cannot make a person a success or prevent failure. It cannot teach a person anything he could not teach himself. It is not needed as a proof of a person’s competency, nor as a requirement to get a job. Most of what a person does for a living is learned through the experience of doing it – and schooling requirements simply serve as arbitrary barriers to deny some the opportunity of getting this experience.

Formal schooling, to be sure, has its uses – especially for training the academicians and other intellectuals of the next generation. But it would only be strengthened in this role if educational institutions did not have to deal with the people who do not need to attend them and whose education can be achieved spectacularly without them.

Read other articles in The Rational Argumentator’s Issue CCX.

A College Degree Does Not Make You a Million Dollars – Article by Andrew Syrios

A College Degree Does Not Make You a Million Dollars – Article by Andrew Syrios

The New Renaissance Hat
Andrew Syrios
April 13, 2014
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It is becoming substantially less difficult these days to convince people that college is not a sure fire way to the good life. Even Paul Krugman has conceded that “it’s no longer true that having a college degree guarantees that you’ll get a good job.” You can say that again: 53 percent of recent graduates are either jobless or underemployed. Unfortunately, myths die hard. Many people still believe as Hillary Clinton once said, “Graduates from four-year colleges earn nearly an estimated one million dollars more [than high school graduates].” This may sound convincing, but this figure — based on a Census Bureau report — is about as true as it is relevant.

After all, isn’t it true that the most hard-working and intelligent people tend more to go to college? This is not a nature vs. nurture argument, the factors behind these qualities are unrelated to the discussion at hand. If one grants, however, that the more ambitious and talented go to college in greater proportion than their peers, Mrs. Clinton could have just said “the most hard-working and intelligent earn nearly an estimated one million dollars more than their peers.” I think the presses need not be stopped.

For one thing, the Census Bureau estimate includes super-earners such as CEO’s which skew the average upward. Although some, such as Mark Zuckerberg and Bill Gates, didn’t graduate college, most did. This is why it’s better to use the median (the middle number in the data set) than the mean or average. It’s also why Hillary Clinton and other repeaters of this factoid don’t.

Furthermore, just because most smart people go to college doesn’t mean they should. They may earn more money, but what they keep is more important than what they make. Financial columnist Jack Hough created a very illuminating hypothetical scenario with two people, one who chooses college and one who enters the labor force after high school. Hough then uses the average cost of college as well as U.S. Census Bureau data for the average income of college graduates and non-graduates, adjusted for age. He assumes both save and invest 5 percent of their income each year. By the age of 65, how does the net worth of each look?

  • College Graduate: $400,000
  • High School Graduate: $1,300,000

When one thinks about the common narrative of college vs. no college, it truly becomes absurd. Indeed, who exactly are we comparing? We’re not only comparing Jane-Lawyer to Joe-Carpenter, but we’re also comparing financial analysts with the mentally disabled, medical doctors with welfare dependents, building engineers with drug addicts, architects with pan handlers, marketing directors with immigrants who can barely speak English, and university professors with career criminals (whose earnings, by the way, are rarely reported). Many of these troubled people didn’t graduate high school, but it is shocking how they shuffle kids through the system these days. Some 50 percent of Detroit high school graduates are functionally illiterate and it isn’t that much better for the country on the whole. And something tells me that these particular non-graduates need something other than four years of drinking and studying Lockean (well, more likely Marxian) philosophy.

It certainly could be a good thing to earn a college degree. If one wants to be an accountant, engineer, or doctor, a degree is required. And those jobs have very high incomes. But can one really expect to make a killing with a degree in sociology or Medieval-African-Women’s-Military-Ethnic Studies? Pretty much the only jobs those degrees help one get, in any way other than the “hey, they got a college degree” sort of way, are jobs teaching sociology or Medieval-African-Women’s-Military-Ethnic Studies. And that requires an advanced degree as well (i.e., more money down the tube).

Furthermore, a college degree does not even guarantee a particularly high income. CBS News ran an article on the 20 worst-paying college degrees. The worst was Child and Family Studies with a starting average salary of $29,500 and a mid-career average of $38,400. Art History came in 20th with a starting average of $39,400 and a mid-career average of $57,100. Other degrees in between included elementary education, culinary arts, religious studies, nutrition, and music.

These are decent salaries, but are they worth the monetary and opportunity costs? With the wealth of information on the Internet, many skills can be attained on one’s own. Alternatives to college such as entrepreneurship and apprenticeship programs are often ignored. Indeed, apprentices typically get paid for their work while they are learning. The average yearly wage of a plumber and electrician are $52,950 and $53,030 respectively. That’s better than many college degrees and comes without the debt.

And that debt is getting bigger and bigger as college tuition continues to rise. In the last five years, tuition has gone up 24 percent more than inflation. Including books, supplies, transportation and other costs, in-state college students paid an average of $17,860 for one year in 2013 (out-of-state students paid substantially more). And despite all of that, many students don’t even finish. According to US News & World Report,

Studies have shown that nonselective colleges graduate, on average, 35 percent of their students, while the most competitive schools graduate 88 percent. Harvard’s 97 percent four-year graduation rate might not be that surprising … [but then] Texas Southern University’s rate was 12 percent.

12 percent is simply ridiculous, but the 35 percent for nonselective schools is extremely bad as well. Even the 88 percent for competitive schools leaves 12 percent of their students with no degree, but plenty of debt.

Given all of that, it can’t be surprising that the default rates on student loans (which cannot be wiped away in bankruptcy) appear to be much higher than is typically reported. According to The Chronicle,

[O]ne in every five government loans that entered repayment in 1995 has gone into default. The default rate is higher for loans made to students from two-year colleges, and higher still, reaching 40 percent, for those who attended for-profit institutions …

[T]he government’s official “cohort-default rate,” which measures the percentage of borrowers who default in the first two years of repayment and is used to penalize colleges with high rates, downplays the long-term cost of defaults, capturing only a sliver of the loans that eventually lapse …

College is good for some people. If you want to go into a field that has high earning potential (engineering, medicine, accounting, etc.) or you really like a certain subject and want to dedicate your career to it even if it may not be the best financial decision, go for it. But don’t go to college just because as Colin Hanks says in Orange County, “that’s what you do after high school!”

Andrew Syrios is a Kansas City-based real estate investor and partner with Stewardship Properties. He also blogs at Swifteconomics.com. See Andrew Syrios’s article archives.

This article was published on Mises.org and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.

This Isn’t the Way To Do Business: Review of John O’Hara’s “From the Terrace” – Article by Sarah Skwire

This Isn’t the Way To Do Business: Review of John O’Hara’s “From the Terrace” – Article by Sarah Skwire

The New Renaissance Hat
Sarah Skwire
October 6, 2013
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John O’Hara. From the Terrace. New York: Carroll and Graff, [1959] 1999. 897 pages.

John O’Hara’s From the Terrace, a sprawling novel of business and politics, traces the career of Alfred Eaton from his boyhood in small-town Pennsylvania to his work in business, banking, D.C. politics, and, finally, to his retirement in California. As Howard Thompson observed in his New York Times review of the 1960 film adaptation, its director “logically . . . settled for about fifteen years” of the story. And I’d like to focus in even more closely—on a single conversation.

After college and World War I, Alfred and his friend Lex Porter decide to start an aviation company. Lex and his family will contribute the funding, Alfred will serve as the business manager, and they will hire an outside designer. Their goal is to do for airplanes what Ford, Dodge, and others have done for cars. As Alfred explains in a conversation with his father:

“We’re not deceiving ourselves. All we know is that aviation is the coming industry in this country. In ten years everybody’s going to want aeroplanes.”

“Personally, I’d rather have some Dodge Brothers, common or preferred.”

“Who wouldn’t? That’s a sure thing, for those who like sure things, and I like sure things, too. But we’re hoping to be Dodges.”

With the perfect hindsight the 21st century offers, we know the enterprise is doomed from the moment we hear about it. Personal planes still haven’t replaced the car and aren’t likely to. But from the standpoint of an entrepreneur in 1920, it’s a pretty good idea.

It’s a pretty good idea, that is, until Alfred, Lex, and their designer Von Elm try to get down to business. While they begin with a fairly clear plan to “build a small aeroplane of up-to-the-minute design and highest quality workmanship, built to sell to men who could afford Rolls-Royce automobiles,” they rapidly move away from this plan into a deadlock between the demands of practicality and the desire for perfect design. Lex, who wants to experiment and constantly change designs, argues, “If we sell an aeroplane in, say, November 1921, and another one in December 1921, the December one may be so different that you wouldn’t recognize it as coming from the same maker.”

Alfred quite rightly protests that this is no way to do business:

Let’s not think we’re going to build custom-made aeroplanes. I don’t care how much we charge for the aeroplane, we’re not going to start making money until we can produce it in some quantity. We ought to build next November’s aeroplane and manufacture it, produce it, till we have, say, fifty sold. And a year later we manufacture the new model, with all those refinements you speak of. We don’t sit around waiting for some guy to come and ask us to build a special ship for him. We make fifty and sell them.

As he later points out, all this chopping and changing requires only one thing—and that isn’t entrepreneurship or business acumen. It’s an “inexhaustible bank account.” Lex’s response to such critiques is telling: “Jesus H. Christ! Are we going to build Dodges? I thought we were going to build a fine aeroplane.”

This criticism of the very company that Alfred calls a “sure thing” and that he takes as his model, along with the conflict the criticism suggests, are at the very center of their business. It leads to Lex and Von Elm buying expensive engines without Alfred’s approval. It leads to a rift in their perceptions of the business and their plans for its future, and it leads to the company’s eventual collapse.

In my last column I praised the entrepreneurial spirit. And I am an enormous fan of the guts and drive, the expertise and steadfastness necessary in order to start and run one’s own company. But not everyone should do it. Lex shouldn’t do it. He wants to build planes. He wants to design planes. He doesn’t care if he sells them.

We’ve heard a lot lately in the media about how everyone doesn’t need to go to college, and how the ever-growing burden of student loan debt sometimes turns out to have been a bad risk for students, particularly in our sluggish economy. But while I am deeply concerned about that, I am equally concerned about glossing over the rigors of starting, running, and maintaining a business. It would be irresponsible, no matter how much we love entrepreneurship, to let students think that it is somehow a sure road to success, or a straight line to the top, or easier and more certain than a college education. And not only is it irresponsible, it’s insulting to the entrepreneurs who know exactly how much work it takes to get to the top—or even the middle—of an industry.

Expertise in entrepreneurship, like expertise in metaphysical poetry or string theory, is hard to come by. You have to study it, work at it, fail at it, and then do it some more until you get it right. It is a great road for those who are drawn to it. But like metaphysical poetry or string theory, it’s not a road for everyone.

Sarah Skwire is a fellow at Liberty Fund, Inc. She is a poet and author of the writing textbook Writing with a Thesis.
***
This article was originally published by The Foundation for Economic Education.
Your Student Loan Shall Not Be Forgiven – Article by Andrew Heaton

Your Student Loan Shall Not Be Forgiven – Article by Andrew Heaton

The New Renaissance Hat
Andrew Heaton
May 4, 2013
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There’s a decent chance you know a recent graduate with a student loan balance that makes Greece look tight-fisted. That graduate might occasionally jabber on about “student loan forgiveness,” which is a popular notion among people with large student loans.

The concept behind forgiveness is that college graduates are sweating debt through their pores like vodka, so the government ought to swoop in and write them a check. This plan sounds pretty swell if you’re a recent graduate, but if you’re some kind of weirdo who pays income tax it means you get to foot that bill. So watch out.

One such proposal presently in embryonic form is H.R. 1330, The Student Loan Fairness Act. This particular scheme would create a new “10-10” standard for student loan repayment, in which individuals would repay one-tenth of their disposable income for 10 years, after which their debt would be forgiven.

You’ll notice that representatives usually come up with similar token gestures in order to make graduates appear to be seriously contributing to their loans. For instance, a congressman might suggest that an alumnus periodically toss fistfuls of loose change at their bursar, or set up a “repayment fund” by hoarding pennies in the ashtray of their car. Then at some point, as in H.R. 1330, Uncle Sam steps in and waives their debt away. Their onerous student loan is “forgiven.”

In the world of finance, “debt forgiveness” is not the same thing as regular forgiveness, wherein the aggrieved party absolves you of guilt but secretly nurses a grudge. “Debt forgiveness” simply means someone else pays your debt instead of you. Your tuition bill does not magically disappear, but is rather transferred via legal mechanisms to another shmuck. The federal government steps in to magnanimously fork over the remainder of your tab to a university, loan shark, etc. But “the government,” which sounds distant and vaguely sterile, is funded by you.

And by me, for that matter. Which is irritating, because I strenuously avoided going into debt during college. I attended a state school despite acceptance to a pretentious “boat shoes” school. I obtained my masters degree through a scholarship. I intentionally zigzagged around accruing debt because I had the foresight to realize that both of my majors were utterly useless and would never earn the money back.

Thus, I do not carry a significant debt burden. However, I am still poor, underemployed, and probably eligible for food stamps. Assuming I make enough money this year to even pay taxes, should the government confiscate my income and give it to people who opted for expensive private colleges or who chose even more frivolous majors than I did?

Ultimately someone has to repay all these student loans, be they alumni or taxpayers. I nominate Warren Buffett. He’s always whining about not paying enough taxes anyway. If you’re unfamiliar with the man, Warren Buffett is a wealthy investor from Omaha who apparently was the inspiration for the lead character in the Pixar film Up.

Between his net worth of $53.5 billion and his endearing toothbrush-bristle eyebrows, I would like him to adopt my entire generation as his surrogate grandchildren. Then we can ask Mr. Buffett to use his vast, undertaxed fortune to pay off our student loans.

Better yet, what if we treated student loans like the sorts of investments Mr. Buffett needed to calculate himself in order to become a finance mogul? What if we treated student loans more like private enterprise? For instance, if you approached me for a $40,000 loan to obtain a degree in engineering, I might regard that as a savvy venture, whereas I might deny a $400,000 request to study Jurassic art. In a few years, you would see a dramatic reduction in redundant arts and sciences majors like myself, and no one would ever speak of nurse or technician shortages again.

Student loans, unlike all other species of finance, are ineligible for discharge in bankruptcy. Why not remove this legal impediment, allowing graduates to decide for themselves the pros and cons of filing for Chapter 7, which results in a personal balance sheet purged of debt, but a horrendously blemished credit rating? This option is better than the current option for students, which consists of faking their own deaths. Couple that with student loan speculation, and you could potentially push students toward degrees they might actually benefit from. Allowing them the option of bankruptcy would create an opportunity for true “forgiveness” of debt.

The combined student debt of our nation’s college graduates is massive, sad, and oppressive. We need to come up with solutions to deal with it. But remember: forgiveness of debt punishes someone else. The spiritual world may run on confession and absolution, but the financial realm is still firmly ruled by Mammon and Karma.

Guest blogger Andrew Heaton is a former congressional staffer, now working as a writer and standup comedian in New York City. More of his wit and insight can be found at his website, MightyHeaton.com.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.

Iterative Learning versus the Student-Debt Trap – Video by G. Stolyarov II

Iterative Learning versus the Student-Debt Trap – Video by G. Stolyarov II

Mr. Stolyarov explains why the structure of formal schooling does not teach the ways in which real achievements are attained. The worst obstacle to true, iterative learning is student debt that locks people into a particular path for most of their lives.

References
– “Iterative Learning versus the Student-Debt Trap” – Essay by G. Stolyarov II – The Rational Argumentator. This essay was originally published on the as a guest post on the “Education Bubble and Scam Report” website.
– “Reasons Not to Pursue a PhD” – Video by G. Stolyarov II
– “Advice for Most Recent High-School and College Graduates” – Video by G. Stolyarov II
– “Commonly Misunderstood Concepts: Education” – Video by G. Stolyarov II

Iterative Learning versus the Student-Debt Trap – Article by G. Stolyarov II

Iterative Learning versus the Student-Debt Trap – Article by G. Stolyarov II

The New Renaissance Hat
G. Stolyarov II
December 18, 2012
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This article was originally published as a guest post on the “Education Bubble and Scam Report” website.
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Contemporary formal schooling inculcates a counterproductive and often stressful fallacy into millions of young people – particularly the best and brightest. The fallacy, which undermines the lives of many, is that, when it comes to learning, productivity, and achievement, you have to get it absolutely right the first time. Consider how grades are assigned in school. You complete an assignment or sit for a test – and if your work product is deficient in the teacher’s eyes, or you answer some questions incorrectly, your grade suffers. It does not matter if you learn from your mistakes afterward; the grade cannot be undone. The best you can do is hope that, on future assignments and tests, you do well enough that your average grade will remain sufficiently high. If it does not – if it takes you longer than usual to learn the material – then a poor grade will be a permanent blot on your academic record, if you care about such records. If you are below the age of majority and prohibited from owning substantial property or working for a living, grades may be a major measure of achievement in your eyes. Too many hits to your grades might discourage you or lead you to think that your future prospects are not as bright as you would wish.
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But this is not how the real world works. This is not how learning works. This is not how great achievements are attained. It took me years to figure this out. I was one of those students who insisted on always attaining the highest grades in everything. I graduated first in my class in high school (while taking honors and Advanced Placement courses whenever they were offered) and second in college – with three majors. In high school especially, I sometimes found the grading criteria to be rather arbitrary and subjective, but I spent considerable time preparing my work and myself to meet them. While I did engage in prolific learning during my high-school years, the majority of that learning occurred outside the scope of my classes and was the result of self-study using books and the Internet. Unfortunately, my autonomous learning endeavors needed to be crammed into the precious little free time I had, because most of my time was occupied by attempting to conform my schoolwork to the demanding and often unforgiving expectations that needed to be met in order to earn the highest grades. I succeeded at that – but only through living by a regimen that would have been unsustainable in the long term: little sleep, little leisure, constant tension, and apprehension about the possibility of a single academic misstep. Yet now I realize that, whether I had succeeded or failed at the game of perfect grades, my post-academic achievements would have probably been unaffected.
***
How does real learning occur? It is not an all-or-nothing game. It is not about trying some task once and advancing if you succeed, or being shamed and despondent if you do not. Real learning is an iterative process. By a multitude of repetitions and attempts – each aiming to master the subject or make progress on a goal – one gradually learns what works and what does not, what is true and what is false. In many areas of life, the first principles are not immediately apparent or even known by anybody. The solution to a problem in those areas, instead of emerging by a straightforward (if sometimes time-consuming) deductive process from those first principles, can only be arrived at by induction, trial and error, and periodic adjustment to changing circumstances. Failure is an expected part of learning how to approach these areas, and no learning would occur in them if every failure were punished with either material deprivation or social condemnation.
***
Of course, not all failures are of the same sort. A failure to solve a math problem, while heavily penalized in school, is not at all detrimental in the real world. If you need to solve the problem, you just try, try again – as long as you recognize the difference between success and failure and have the free time and material comfort to make the attempts. On the other hand, a failure to yield to oncoming traffic when making a left turn could be irreversible and devastating. The key in approaching failure is to distinguish between safe failure and dangerous failure. A safe failure is one that allows numerous other iterations to get to the correct answer, behavior, or goal. A dangerous failure is one that closes doors, removes opportunities, and – worst of all – damages life. Learning occurs best when you can fail hundreds, even thousands, of times in rapid succession – at no harm or minimal harm to yourself and others. In such situations, failure is to be welcomed as a step along the way to success. On the other hand, if a failure can take away years of your life – either by shortening your life or wasting colossal amounts of time – then the very approach that might result in the failure should be avoided, unless there is no other way to achieve comparable goals. As a general principle, it is not the possibility of success or failure one should evaluate when choosing one’s pursuits, but rather the consequences of failure if it occurs.
***
Many contemporary societal institutions, unfortunately, are structured in a manner hostile to iterative learning. They rather encourage “all-in” investment into one or a few lines of endeavor – with uncertain success and devastating material and emotional consequences of failure. These institutions do not give second chances, except at considerable cost, and sometimes do not even give first chances because of protectionist barriers to entry. Higher education especially is pervaded by this problem.
***
At a cost of tens of thousands of dollars per year, college is an enormous bet. Many think that, by choosing the right major and the right courses of study within it, they could greatly increase their future earning potential. For some, this works out – though they are a diminishing fraction of college students. If a major turns out not to be remunerative, there may be some satisfaction from having learned the material, and this may be fine – as long as it is understood that this is a costly satisfaction indeed. Some will switch majors during their time in college, but this is often in itself an extremely expensive decision, as it prolongs the time over which one must pay tuition. For those who can afford either non-remunerative or serial college majors out of pocket, there is the opportunity cost of their time – but that is not the worst that can happen.
***
The worst fate certainly befalls those who finance their college education through student debt. This was a fate I happily avoided. I graduated college without having undertaken a penny of debt – ever – largely as a result of merit scholarships (and my choice of an institution that gave merit scholarships – a rarity these days). Millions of my contemporaries, however, are not so fortunate. For years hereafter, they will bear a recurring financial burden that will restrict their opportunities and push them along certain often stressful and unsustainable paths in life.
***
Student debt is the great disruptor of iterative learning. Such debt is assumed on the basis of the tremendously failure-prone expectation of a certain future monetary return capable of paying off the debt. Especially in post-2008 Western economies, this expectation is unfounded – no matter who one is or how knowledgeable, accomplished, or productive one might be. Well-paying jobs are hard to come by; well-paying jobs in one’s own field of study are even scarcer. The field narrows further when one considers that employment should not only be remunerative, but also accompanied by decent working conditions and compatible with a comfortable standard of living that reflects one’s values and goals.
***
Money is ultimately a means to life, not an end for its own sake. To pursue work that requires constant privation in other areas of life is not optimal, to say the least – but debt leaves one with no choice. There is no escape from student debt. Bankruptcy cannot annul it. One must keep paying it, to avoid being overwhelmed by the accumulated interest. Paying it off takes years for most, decades for some. By the time it is paid off (if it is), a lot of youth, energy, and vitality are lost. It follows some to the grave. If one pays it off as fast as possible, then one might still enjoy a sliver of that precious time window between formal education and senescence – but the intense rush and effort needed to achieve this goal limits one’s options for experimenting with how to solve problems, engage in creative achievement, and explore diverse avenues for material gain.
***
If you are in heavy debt, you take what income you can get, and you do not complain; you put all of your energy into one career path, one field, one narrow facet of existence – in the hope that the immediate returns are enough to get by and the long-term returns will be greater. If you wish to practice law or medicine, or obtain a PhD, your reliance on this mode of living and its hoped-for ultimate consequences is even greater. You may defer the payoff of the debt for a bit, but the ultimate burden will be even greater. Many lawyers do not start to have positive financial net worth until their thirties; many doctors do not reach this condition until their forties – and this is the reality for those who graduated before the financial crisis and its widespread unemployment fallout. The prospects of today’s young people are even dimmer, and perhaps the very expectation of long-term financial reward arising from educational debt (or any years-long expensive formal education) is no longer realistic. This mode of life is not only stressful and uncertain; it comes at the expense of family relationships, material comfort, leisure time, and experimentation with diverse income streams. Moreover, any serious illness, accident, or other life crisis can derail the expectation of a steady income and therefore render the debt a true destroyer of life. Failure is costly indeed on this conventional track of post-undergraduate formal schooling.
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It may be difficult for many to understand that the conventionally perceived pathway to success is in fact one that exposes a person to the most dangerous sorts of failure. The best way forward is one of sustainable iterative work – a way that offers incremental benefits in the present without relying on huge payoffs in the future, all the while allowing enough time and comfort to experiment with life-improving possibilities at one’s discretion. Diversification is the natural companion of iteration. The more you try, the more you experiment, the more you learn and the more you can apply in a variety of contexts.
***
Having avoided the student-debt trap, I can personally attest to how liberating the experience of post-academic learning can be. Instead of pursuing graduate or professional school, I decided to take actuarial and other insurance-related examinations, where the cost of each exam is modest compared to a semester of college – and one can always try again if one fails. In the 3.5 years after graduating from college, I was able to obtain seven professional insurance designations, at a net profit to myself. I have ample time to try for more designations still. My employment offers me the opportunity to engage in creative work in a variety of capacities, and I focus on maximizing my rate of productivity on the job so as to achieve the benefits of iterative learning and avoid the stress of an accumulated workload. I could choose where I wanted to live, and had the resources to purchase a house with a sizable down payment. Other than a mortgage, which I am paying ahead of schedule, I have no debt of any sort. Even the mortgage makes me somewhat uncomfortable – hence my desire to pay it off as rapidly as possible – but every payment gets me closer to fully owning a large, tangible asset that I use every day. In the meantime, I already have a decent amount of time for leisure, exercise, independent study, intellectual activism, and family interactions.
***
My life, no doubt, has its own challenges and stresses; anyone’s situation could be better, and I can certainly conceive of improvements for my own – but I have the discretionary time needed to plan for and pursue such improvements. Moreover, the way of iterative learning is not fully realizable in all aspects of today’s world. Comparatively, I have fewer vulnerabilities than debt-ridden post-undergraduate students of my age, but I am not immune to the ubiquitous stressors of contemporary life. We continue to be surrounded by dangers and tasks where it is truly necessary not to fail the first time. As technology advances and we come to life in a safer, healthier world, the sources for life-threatening failure will diminish, and the realm of beneficial trial-and-error failure will broaden. The key in the meantime is to keep the failure points in one’s own life to a minimum. Yes, automobile accidents, crime, and serious illnesses always have a non-zero probability of damaging one’s life – but even that probability can be diminished through vigilance, care, and technology. To avoid introducing vulnerability into one’s life, one should always live within one’s present means – not expectations of future income – and leave oneself with a margin of time and flexibility for the achievement of any goal, financial or not. Productivity, efficiency, and skill are all welcome assets, if they are used to prevent, rather than invite, stress, anxiety, and physical discomfort.
***
Learning absolutely anything of interest and value is desirable, as long as the cost in time and money – including the opportunity cost – is known and can be absorbed using present resources. This principle applies to any kind of formal schooling – or to the purchase of cars, major articles of furniture, and electronic equipment. If you enjoy it, can afford it out of pocket, and can think of no better way to use your time and money – then by all means pursue it with a clear conscience. If you cannot afford it, or you need the money for something more important, then wait until you have the means, and find other ways to use and enjoy your time in the interim. With the Internet, it is possible to learn many skills and concepts at no monetary cost at all. It is also possible to pursue relatively low-cost professional designation programs in fields where sitting in a classroom is not a requirement for entry.
***
Remember that success is attained through many iterations of a variety of endeavors. Try to make each iteration as inexpensive as possible in terms of time and money. Except in times of acute crisis where there are no other options, avoid all forms of debt – with the possible exception of a mortgage, since it is preferable to the alternative of renting and giving all of the rent away to another party. Do not put all of your time and energy into a single field, a single path, a single expectation. You are a multifaceted human being, and your job in life is to develop a functional approach to the totality of existence – not just one sub-specialty therein. Remember, above all, never to lose your individuality, favored way of living, and constructive relationships with others in the pursuit of any educational or career path. You should be the master of your work and learning – not the other way around.
Federal Student Aid and the Law of Unintended Consequences – Article by Richard Vedder

Federal Student Aid and the Law of Unintended Consequences – Article by Richard Vedder

The New Renaissance Hat
Richard Vedder
July 8, 2012
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RICHARD VEDDER is the Edwin and Ruth Kennedy Distinguished Professor of Economics at Ohio University and director of the Center for College Affordability and Productivity. He received his B.A. from Northwestern University and his M.A. and Ph.D. in economics from the University of Illinois. He has written for the Wall Street Journal, National Review, and Investor’s Business Daily, and is the author of several books, including The American Economy in Historical Perspective and Going Broke by Degree: Why College Costs Too Much.

The following is adapted from a speech delivered on May 10, 2012, at Hillsdale College’s Allan P. Kirby, Jr. Center for Constitutional Studies and Citizenship in Washington, D.C.

Reprinted by permission from Imprimis, a publication of Hillsdale College.

FEDERAL STUDENT financial assistance programs are costly, inefficient, byzantine, and fail to serve their desired objectives. In a word, they are dysfunctional, among the worst of many bad federal programs.

These programs are commonly rationalized on three grounds: on the grounds that assuring more young people a higher education has positive spillover effects for the country; on the grounds that higher education promotes equal economic opportunity (or, as the politicians say, that it is “a ticket to achieving the American Dream”); or on the grounds that too few students would go to college in the absence of federal loan programs, since private markets for loans to college students are defective.

All three of these arguments are dubious at best. The alleged positive spillover effects of sending more and more Americans to college are very difficult to measure. And as the late Milton Friedman suggested to me shortly before his death, they may be more than offset by negative spillover effects. Consider, for instance, the relationship between spending by state governments on higher education and their rate of economic growth. Controlling for other factors important in growth determination, the relationship between education spending and economic growth is negative or, at best, non-existent.

What about higher education being a vehicle for equal economic opportunity or income equality? Over the last four decades, a period in which the proportion of adults with four-year college degrees tripled, income equality has declined. (As a side note, I do not know the socially optimal level of economic inequality, and the tacit assumption that more such equality is always desirable is suspect; my point here is simply that, in reality, higher education today does not promote income equality.)

Finally, in regards to the argument that capital markets for student loans are defective, if financial institutions can lend to college students on credit cards and make car loans to college students in large numbers—which they do—there is no reason why they can’t also make student educational loans.

Despite the fact that the rationales for federal student financial assistance programs are very weak, these programs are growing rapidly. The Pell Grant program did much more than double in size between 2007 and 2010. Although it was designed to help poor people, it is now becoming a middle class entitlement. Student loans have been growing eight to ten percent a year for at least two decades, and, as is well publicized, now aggregate to one trillion dollars of debt outstanding—roughly $25,000 on average for the 40,000,000 holders of the debt. Astoundingly, student loan debt now exceeds credit card debt.

Nor is it correct to assume that most of this debt is held by young people in their twenties and early thirties. The median age of those with loan obligations today is around 33, and approximately 40 percent of the debt is held by people 40 years of age or older. So when politicians talk about maintaining low interest loans to help kids in college, more often than not the help is going to middle-aged individuals long gone from the halls of academia.

With this as an introduction, let me outline eight problems with federal student grant and loan programs. The list is not exclusive.

(1) Student loan interest rates are not set by the forces of supply and demand, but by the political process. Normally, interest rates are a price used to allocate scarce resources; but when that price is manipulated by politicians, it leads to distortions in the use of resources. Since student loan interest rates are always set at below-market rates, too much money is borrowed for college. Currently those interest rates are extremely low, with a key rate of 3.4 percent—which, after adjusting for inflation, is approximately zero. Moreover, both the president and Governor Romney say they want to continue that low interest rate after July 1, when it is supposed to double. This aggravates an already bad situation, and provides a perfect example of the fundamental problem facing our nation today: politicians pushing programs whose benefits are visible and immediate (even if illusory, as suggested above), while their extraordinarily high costs are less visible and more distant in time.

(2) In the real world, interest rates vary with the prospects that the borrower will repay the loan. In the surreal world of student loans, the brilliant student completing an electrical engineering degree at M.I.T. pays the same interest rate as the student majoring in ethnic studies at a state university who has a GPA below 2.0. The former student will almost certainly graduate and get a job paying $50,000 a year or more, whereas the odds are high the latter student will fail to graduate and will be lucky to make $30,000 a year.

Related to this problem, colleges themselves have no “skin in the game.” They are responsible for allowing loan commitments to occur, but they face no penalties or negative consequences when defaults are extremely high, imposing costs on taxpayers.

(3) Perhaps most importantly, federal student grant and loan programs have contributed to the tuition price explosion. When third parties pay a large part of the bill, at least temporarily, the customer’s demand for the service rises and he is not as sensitive to price as he would be if he were paying himself. Colleges and universities take advantage of that and raise their prices to capture the funds that ostensibly are designed to help students. This is what happened previously in health care, and is what is currently happening in higher education.

(4) The federal government now has a monopoly in providing student loans. Until recently, at least it farmed out the servicing of loans to a variety of private financial service firms, adding an element of competition in terms of quality of service, if not price. But the Obama administration, with its strong hostility to private enterprise, moved to establish a complete monopoly. One would think the example of the U.S. Postal Service today, losing taxpayer money hand over fist and incapable of making even the most obviously needed reforms, would be enough proof against the prudence of such a move. And remember: because of highly irresponsible fiscal policies, the federal government borrows 30 or 40 percent of the money it currently spends, much of that from overseas. Thus we are incurring long-term obligations to foreigners to finance loans to largely middle class Americans to go to college. This is not an appropriate use of public funds at a time of dangerously high federal budget deficits.

(5) Those applying for student loans or Pell Grants are compelled to complete the FAFSA form, which is extremely complex, involves more than 100 questions, and is used by colleges to administer scholarships (or, more accurately, tuition discounts). Thus colleges are given all sorts of highly personal and private information on incomes, wealth, debts, child support, and so forth. A car dealer who demanded such information so that he could see how badly he could gouge you would either be out of business or in jail within days or weeks. But it is commonplace in higher education because of federal student financial assistance programs.

(6) As federal programs have increased the number of students who enroll in college, the number of new college graduates now far exceeds the number of new managerial, technical and professional jobs—positions that college graduates have traditionally taken. A survey by Northeastern University estimates that 54 percent of recent college graduates are underemployed or unemployed. Thus we currently have 107,000 janitors and 16,000 parking lot attendants with bachelor’s degrees, not to mention bartenders, hair dressers, mail carriers, and so on. And many of those in these limited-income occupations are struggling to pay off student loan obligations.

Connected to this is the fact that more and more kids are going to college who lack the cognitive skills, the discipline, the academic preparation, or the ambition to succeed academically. They simply cannot or do not master well much of the rather complex materials that college students are expected to learn. As a result, many students either do not graduate or fail to graduate on time. I have estimated that only 40 percent or less of Pell Grant recipients get degrees within six years—an extremely high dropout or failure rate. No one has seriously questioned that statistic—a number, by the way, that the federal government does not publish, no doubt because it is embarrassingly low.

Also related is the fact that, in an attempt to minimize this problem, colleges have lowered standards, expecting students to read and write less while giving higher grades for lesser amounts of work. Surveys show that students spend on average less than 30 hours per week on academic work—less than they spend on recreation.  As Richard Arum and Josipa Roksa show in their book Academically Adrift: Limited Learning on College Campuses, critical thinking skills among college seniors on average are little more than among freshmen.

(7) As suggested to me a couple of days ago by a North Carolina judge, based on a case in his courtroom, with so many funds so readily available there is a temptation and opportunity for persons to acquire low interest student loans with the intention of dropping out of school quickly to use the proceeds for other purposes. (In the North Carolina student loan fraud case, it was to start up a t-shirt business.)

(8) Lazy or mediocre students can get greater subsidies than hard-working and industrious ones. Take Pell Grants. A student who works extra hard and graduates with top grades after three years will receive only half as much money as a student who flunks several courses and takes six years to finish or doesn’t obtain a degree at all. In other words, for recipients of federal aid there are disincentives to excel.

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If the Law of Unintended Consequences ever applied, it is in federal student financial assistance. Programs created with the noblest of intentions have failed to serve either their customers or the nation well. In the 1950s and 1960s, before these programs were large, American higher education enjoyed a Golden Age. Enrollments were rising, lower-income student access was growing, and American leadership in higher education was becoming well established. In other words, the system flourished without these programs. Subsequently, massive growth in federal spending and involvement in higher education has proved counterproductive.

With the ratio of debt to GDP rising nationally, and the federal government continuing to spend more and more taxpayer money on higher education at an unsustainable long-term pace, a re-thinking of federal student financial aid policies is a good place to start in meeting America’s economic crisis.