(Guest Post by Matthew Ladner)
Stock portfolio taken a dive? Cheer up…you could be running a gin-joint in a third world country controlled by the Nazis and run into your long lost love, only to find that she is married to the leader of the resistance.
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economics | Tagged: Casablanca, Dooley Wilson, Knock on Wood | 
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Posted by matthewladner
Congress passed the Emergency Economic Stabilization Act (EESA), but the markets have hardly stabilized. Don’t the markets know that it is against the law for things not to be stable now that Congress passed a stabilization act?
I think recent events demonstrate that the EESA was completely unhelpful if not counter-productive. But others interpret events as showing that the EESA didn’t go far enough. I’m sure that there are also Marxist academics out there still arguing that full communism has never really been tried because the Soviets didn’t go far enough. And there are education interest groups saying that the doubling in real per pupil spending hasn’t yielded academic improvement because we haven’t spent enough yet. Something didn’t work? Just try more of it!
Well, I came across a very sensible op-ed in the WSJ yesterday that offers an explanation for why the crisis continues and what might be done to really bring about stability. Manuel Hinds suggests that the problem at this point is that financial institutions are refusing to lend to each other. The problem is that some of those institutions won’t repay money that is lent to them because they are truly insolvent, but no one knows for sure who those institutions are. So the safe thing to do is not to lend to any other banks. But this lack of inter-bank lending is having a negative spiral effect. Hinds likens the problem to playing poker with ten people knowing that a few aren’t good for their chips. No one will play until you figure out who can settle at the end of the game.
The solution is to improve transparency so that we all more clearly know who is and who isn’t able to repay money that is lent to them. One of the best ways to gain that transparency is to allow insolvent institutions to go bankrupt so that we know the ones still standing are healthy. Efforts to prop up insolvent institutions just prolong the crisis by disguising who really can repay and who can’t. It would also be essential for transparency to continue mark-to-market accounting, despite calls to do away with it. Without mark-to-market we would have much less information about the value of securities held by financial institutions. More information is the solution and ending mark-to-market subtracts information. There may also be reasonable regulations that would improve the quality of information about financial institutions.
There are real problems in financial institutions but masking them just makes the problem worse.
(edited for typos)
4 Comments | economics | Tagged: Bailout, Jay Greene, Jay P. Greene | Permalink
Posted by Jay P. Greene
(Guest Post by Matthew Ladner)
I have an admittedly odd appreciation for left-wing protest songs. For my money (sorry baby-boomers) there is none finer than Tracy Chapman’s Talkin’ Bout a Revolution. Released in 1990, Chapman’s spare and urgent song delivers an ominous warning:
Don’t you know they’re talking about a revolution?
It sounds like a whisper
While they’re standing in the welfare lines
Crying at the doorsteps of those armies of salvation
Wasting time in unemployment lines
Sitting around waiting for a promotion
Don’t you know they’re talking about a revolution?
It sounds like a whisper
Poor people are gonna rise up
And get their share
Poor people are gonna rise up
And take what’s theirs
Although stirring, the underlying assumptions of this song are dead wrong. Income redistributing revolutions obviously have a romantic appeal to some, but rather sordid history in practice. Ask the Russians.
Anti-poverty strategies fall into two broad categories: redistribution plans and growth oriented plans. One can either try to take wealth from one group and give it to another, or else focus on creating more wealth for everyone.
Today, the growth strategy stands triumphant.
A recent World Bank report, for example, finds that we are living in a golden age of global poverty reduction. The World Bank notes that economic growth is producing a “spectacular” decline in Asian poverty. In 1990, there were over 470 million people in the East Asia and Pacific region surviving on less than $1 a day. By 2001, there were 271 million living in extreme poverty- a 42.5% decline.
The World Bank projects that by 2015 there only 19 million people will be living under such squalid conditions- a 96% decline in twenty-five years. A complete elimination of extreme poverty in this region seems entirely possible well within our lifetimes, thanks to high rates of economic growth and job creation. Free market policies are lifting millions out of poverty, in stark contrast to the catastrophic consequences of income redistribution policies of socialist and communist regimes.
Other parts of the world, notably Africa, have not been doing nearly as well. A broad consensus now exists in explaining the reason. The work of Hernando de Soto on development economics, for instance, has convinced observers from Bill Clinton and Kofi Annan on the left to Ronald Reagan and George W. Bush on the right that a system of property rights is absolutely critical to allowing economic growth and thus eliminating poverty. Why do some countries remain mired in poverty? People cannot own property such as land, they cannot reliably contract with each other. Rotating cliques of kleptocrats often take turns using government as an instrument of theft, corruption, and oppression. Poverty will not decline without addressing these fundamental flaws, regardless western aid.
One does not need to look abroad for examples of growth reducing poverty. In 2006, the Goldwater Institute released a study comparing the relative success of states in reducing poverty during the 1990s. The study found that during the 1990s, on average high tax states had increases in poverty rates during the booming economy of the 1990s, while low tax states on average saw larger than average declines.
Economic growth (or lack thereof) can quickly make a big difference in poverty statistics. Mississippi began with the highest poverty rate in the country in 1990, twice as high as California’s poverty rate (25% compared to 12.5%). Enjoying the benefits of economic growth, Mississippi’s poverty rate dropped by 20% in the 1990s, while poverty increased by 13.6% in California. If such rates were to be sustained (by no means a given) then California would overtake Mississippi in poverty rates by 2010.
As we struggle through the current financial crisis, we must take care to remember the radical success of free trade and free market polices have produced in reducing poverty. Those who promoted free trade, property rates and lower taxes weren’t just talking about a revolution: they delivered one.
8 Comments | economics | Tagged: Free Market Economic Reform, Poverty Reduction, Tracy Chapman | Permalink
Posted by matthewladner
(Guest post by Greg Forster)
I am an angry man this morning.
My daughter, who just turned three, can’t talk much yet. (For the record, that’s not her picture at the top of the post.) Of all the difficulties she goes through because of her very limited ability to speak, one of the worst is that when she’s scared or in pain, she can’t tell us what’s wrong. She’s accustomed to communicating with us (through sign language, by pointing, by pulling us over to something, and through the limited set of words she can use), so when she desperately needs to communicate that her throat hurts or her head hurts and she doesn’t know how, she panics. Ordinary illnesses are terrifying to her. And of course that makes them doubly painful for us.
We thank God for the medicine companies that have produced the pain relievers and other medicines that get our daughter, and us, through these ordeals. I can only imagine what my daughter’s life would be like if she couldn’t take medicine to relieve her pain, and her terror.
On page B8 of your Wall Street Journal this morning, you will find a story about how the medicine companies that make children’s cold and cough remedies are “voluntarily” relabeling their products at the “request” of the FDA. These medicines will now be (mis)labeled with the warning that they shouldn’t be given to children under four.
These medicines are known to be safe for small children when used as directed. The FDA doesn’t dispute this. If the FDA had a legitimate reason to act, it wouldn’t make a request, it would make a rule, and enforce it.
These medicines were even marketed for children under age two until last October, and that change was also made “voluntarily” at the “request” of the FDA.
When the FDA requests that medicine companies voluntarily do something, it’s like when Vito Corleone summons the undertaker to the morgue and asks if he’s prepared to do him a favor.
So what justification was given for this request? Well, it seems that two-thirds of ER visits associated with these medicines come from children under four accidentally ingesting them. Different sources are saying either 6,000 or 7,000 ER visits are associated with these medicines, meaning that we’re talking about roughly 4,000 visits. [UPDATE: It appears to be 6,000 visits by children under 6, 7,000 visits total. It’s not surprising that most of the visits are by children under 6 given that these are medicines specifically marketed to young children. But that only makes it worse. The FDA is alarmed because, out of all ER visits by children under 6, two-thirds are by children under 4. Think about that. It’s like the old Dilbert cartoon where the boss is enraged that 40% of all sick days are taken on Monday or Friday.]
Most of the ER visits presumably don’t result in death or even long-term health impacts. If these medicines killed 4,000 children a year, the FDA would have acted against them openly rather than by subterfuge, and it would have done so a long time ago.
Who gets to speak for the millions of children who will suffer, over and over again, suffer every moment of pain that an untreated illness causes, because a relatively tiny number of parents can’t be bothered to store their medicines properly and as a result they have to endure one lousy ER visit? No one.
I am an angry man this morning.
Why would the FDA do such a moronic thing? We all know the answer. I don’t even have to say it. (Check the title of the post if you’ve forgotten it.)
Now, I know that in reality, many parents will keep on using these medicines. But some won’t. Lots of parents trust the FDA, more fool they. And what about future parents, who aren’t paying attention to what the FDA does today because they’re not parents yet? No dobut some will hear the truth, but others won’t. And what if the drug companies decide that now that these medicines are labeled for kids over four only, they can up the dose? We can watch for that, of course, but it’s one more obstacle between children and pain relief.
By tomorrow I will have resigned myself to this latest injustice. By now I ought to know better than to get this mad. I’ve spent my career fighting a government school monopoly that systematically destroys children’s lives so that the unions can make the gravy trains run on time. I can write about that without getting mad; if I got mad every time I contemplated the injustice of the system, I couldn’t do what I do. Why am I mad when it’s my daughter and not somebody else’s?
Because I’m human, I guess.
5 Comments | economics | Tagged: Greg Forster | Permalink
Posted by Greg Forster
In my last post I described Jennifer Jennings as the blogger formerly known as Eduwonkette. I had thought we only had to call her Eduwonkette when we didn’t know who she was. But I guess she continues to go by her rapper name, Eduwonkette. And Aaron Pallas, an otherwise respectable scholar, continues to call himself Skoolboy — with a k! And I guess they are both cribbing (in the non-rapper meaning) from Eduwonk, who we’ve always known to be Andy Rotherham.
I find the use of rapper names by bloggers to be downright silly. It’s especially silly when accompanied by self-aggrandizing cartoons and graphics. Here at Jay P. Greene’s Blog we’ve gone for a minimalist approach, both out of laziness and an aesthetic vision that tried to put the focus on content.
But if a bunch of other folks are going to continue to call themselves rapper names and have cartoon graphics to represent themselves, maybe I should do the same. Perhaps I should go by my rapper name — DJ Super-Awesome. And maybe we should use Thundarr the Barbarian graphics to represent ourselves. I call the image of Ookla and I’ll let Greg and Matt fight over who gets to be Ariel.
11 Comments | blogging | Tagged: Eduwonk, Eduwonkette, Jay Greene, Jay P. Greene, Skoolboy, Thundarr | Permalink
Posted by Jay P. Greene
Is it good policy to reduce barriers to firing sub-par teachers?
According to Jennifer Jennings, the blogger formerly known as Eduwonkette, the answer is no. We need to preserve teacher tenure, she argues, because she has found an example of a really great teacher, Art Siebens, who was fired when his DC school was reconstituted. His case is “haunting for the glimpse it offers into the brave new world of unchecked principal autonomy.”
Well, Siebens wasn’t actually fired. He wasn’t re-hired at the same school and was instead offered a job teaching a different science course at a different DC public school. Don’t fret ye of weak hearts — continued employment for teachers is still essentially guaranteed even if not in the school and class of their choosing.
It’s puzzling why Siebens wasn’t re-hired given that he was an award winning teacher with what appears to be a strong record of excellent work. But the fact that he wasn’t is hardly evidence against DC superintendent Michelle Rhee’s proposal to offer teachers significant pay increases if they give up tenure. Perhaps there is more to Siebens’ story than is publicly known.
More importantly, the case of Art Siebens is not evidence against abandoning tenure because it is a single case. The plural of anecdote is not data. We shouldn’t make policy by referencing anecdotes. Instead, we should look “through the lens of social science,” as a wise person once wrote, and consider systematic evidence when formulating education policy.
The remarkable investigative reporting by Scott Reeder has powerfully documented the problems with teacher tenure. After filing 1,500 Illinois Freedom of Information Act requests with the state board and all 876 Illinois school districts, Reeder uncovered the following:
1) “Of an estimated 95,500 tenured educators now employed in the state [of Illinois] an average of only seven have their dismissals approved each year by a state hearing officer. Of those seven, only two on average are fired for poor job performance. The remainder is dismissed for issues of misconduct.”
2) “Of Illinois’ 876 school districts only 61, or 7 percent, have ever attempted to fire a tenured faculty member since the teacher evaluation reforms were imposed 18 years ago.”
3) “Of those 61 school districts, only 38 were successful in actually firing a teacher.”
4) “Not only is it exceedingly rare to fire a tenured teacher in Illinois, but it also is extraordinarily expensive. In fact, Illinois school districts that have hired outside lawyers in these cases have spent an average of more than $219,000 in legal fees during the last five years.”
5) “In the last 10 years, about 477,000 evaluations of Illinois tenured teachers have been performed, but only 513 received unsatisfactory evaluations… In other words, only 1 out 930 evaluations result in a tenured teacher receiving an ‘unsatisfactory’ rating.” Conducting those evaluations consumed 2.5 million administrative hours.
OK, so it is next to impossible to fire tenured teachers. And we also know from systematic evidence that the quality of the teacher is the single most important factor within school control to influence student academic improvement. (See for example the research referenced here.)
Unless we believed that all but .007% of tenured teachers are doing a solid job, the current system is clearly keeping incompetent teachers in the classroom. Any meaningful reform strategy has to involve getting rid of dud teachers and attracting better teachers as replacements. Rhee’s proposal to increase pay in exchange for greater flexibility in terminating sub-par teachers seems like a promising idea to do just that. The higher pay might attract better new people into teaching and the flexibility on termination could remove bad teachers from the classroom.
Of course, the blogger formerly known as Eduwonkette makes a fair point when she asks, “Why are you confident that principals will always – or even often – pick the ‘best teachers?'” For a system with reduced tenure protections to work, principals would also have to be properly motivated to distinguish between effective and ineffective teachers. But this could be done either through meaningful merit evaluation and rewards for principals or through market accountability in choice programs. If continued employment or pay raises for principals depended upon identifying effective and ineffective teachers, they are unlikely to let talented teachers like Art Siebens go and are likely to get rid of duds.
But we should all accept that any system of hiring and firing teachers will have its injustices. The status quo tenure system has the injustice of protecting bad teachers in their jobs. And if cuts have to be made it is newer teachers who have to be let go, even if they are better teachers than their senior colleagues. A system like Rhee proposes will occasionally mistakenly let go of a good teacher. But with well-designed incentives for the principals this should be the exception and not the rule.
Besides, we have to ask ourselves: how many kids do you want to condemn to an ineffective teacher to avoid the possibility of unjustly terminating a good teacher? If we care more about the kids than the adults in schools, then the injustice to the students should matter much more to us than the possible injustice to a few teachers.
11 Comments | teacher quality | Tagged: Eduwonkette, Jay P. Greene. Jay Greene, Jennifer Jennigs, Michelle Rhee | Permalink
Posted by Jay P. Greene
(Guest post by Greg Forster)
Over the weekend, Pajamas Media carried my column on the centruy-long failure of public schools to teach civics effectively:
On the other hand, just because the school system’s failure has been going on for a long time doesn’t mean it isn’t a failure. And school failure always has consequences.
Just think how much better American life might have been over the past century if we had been a nation of citizens who knew what citizens ought to know, rather than a nation whose schools failed so miserably and so consistently at their jobs. Would fewer people have succumbed to the siren song of isolationism in the 1930s, while Hitler and Stalin built their empires of mass murder and Mao took control of the Chinese revolutionaries? Would the triumph of the civil rights movement have come sooner and with less toil and bloodshed, and left behind fewer of the unresolved problems that still fester in our politics? Would there have been a clearer understanding of the nature of communism, meaning less denial and excuse-making for Soviet and Maoist atrocities, perhaps even leading to an earlier and more complete victory for freedom in the world? Who can say what horrors we might have avoided if our citizens had all along understood the intellectual and historical foundations of liberty?
Moreover, if the failure is so long-term, we can’t attribute it to transitory phenomena like 1960s radicalism. We have to expect it to be rooted in the basic structure of our educational institutions — whatever we’re doing wrong, it’s something we’ve been doing wrong for at least a century.
2 Comments | civic values, vouchers | Tagged: civic values, Greg Forster, Pajamas Media | Permalink
Posted by Greg Forster
(Guest Post by Matthew Ladner)
Ok- so I don’t like Bill O’Reilly, don’t watch his show, etc.
I also think that he should have made a more substantive case against Frank. Anybody who buys stock based on what some Congressman says on CNBC, after all, is asking for trouble, especially if it is Barney Frank.
Having said that, Frank’s story he tries to get out about doing something about the Freddies as soon as he became chairman is simply revisionist spin.
3 Comments | economics | Tagged: Bailout, Barney Frank, Bill O'Reilly, Credit Crunch | Permalink
Posted by matthewladner
(Guest post by Greg Forster)
I didn’t bother watching the debate, but from the comments around the web it looks like my prediction that there would be nothing really worth watching was accurate.
Cruising through the commentary, though, I came across this from Mickey Kaus:
Palin sounded like she was campaigning in Iowa for the teachers’ union vote when she talked about education. We need to spend more money. Pay teachers more. States need more “flexibility” in No Child Left Behind (“flexibility” to ignore it). I didn’t hear an actual single conservative principle, or even neoliberal principle. Pathetic.
So much for all that talk about how the McCain staff was overcoaching her. It’s remarkable – yet few seem to be remarking upon it, which is also remarkable – that Barack Obama is more of an education reformer than Palin. (At least, on paper he is. In practice they’re probably both about the same, which you can take as a compliment to Obama or as a criticism of Palin according to preference.) At any rate, her approach to education is pretty hard to square with McCain’s.
The lack of attention to this rather glaring contradiction, even by Palin detractors (and McCain/Palin detractors) who presumably have a motive to pay attention to it, shows just how irrelevant education has become as a national issue, at least for this cycle. Remember how big education was in 2000?
Good thing real reforms like school choice are winning big at the state level. The movement was wise not to bother showing up in DC for the big NCLB hulaballoo eight years ago. Now they’re not tied to NCLB or in general to the fortunes of education as a federal issue. I’ve heard some conservatives bash NCLB because it lacks serious choice components. But NCLB was never about choice. It seems clear that the choice components in Bush’s original proposal were only there to be given away as bargaining chips. The important question is, where would the school choice movement be now if it had tied itself to NCLB?
1 Comment | money myth, NCLB, politics, vouchers | Tagged: Greg Forster, NCLB, Sarah Palin, vouchers | Permalink
Posted by Greg Forster
(Guest Post by Matthew Ladner)
And the winner of the greatest bad movie of all time….
The rest of the flicks are going down! It’s gotta be that way!
Barney Frank’s version of events in the $700b taxpayer heist, bailout, rescue plan.
A sequel? You’ll have to pay me $50m, bro! Go Netflix Speed 2 if you want to see what happens in a Keanuless Keanu sequel…
2 Comments | Pass the Popcorn | Tagged: Point Break | Permalink
Posted by matthewladner
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