The Price of Things to Come: Free

September 24, 2009

(Guest Post by Matthew Ladner)

I am half way through Chris Andersen’s new book Free: The Future of a Radical Price and I can already recommend the book.

Andersen’s treatment of disruptive technologies and firms is simply fascinating. Craig’s List, for example, has from one perspective “destroyed” far more profits for newspapers than it creates for itself. The entire firm runs on a few dozen employees, but has played a large role in reducing a huge revenue stream for the entire American newspaper industry.

Craig’s List actually hasn’t destroyed profits, but in fact has redistributed them to the general public. Craig’s List provides a superior service to a want ad, and it is almost always free.

Likewise, Britannica and others used to make large profits going door to door selling $1,000 encyclopedia sets. Then Microsoft came out with a $99 dvd encyclopedia, and profits withered. Then Wikipedia came along and Microsoft abandoned their dvd project, and Britannica and company will be required to reinvent themselves if they are to survive.

Technology is driving all of these changes-exponential increases in computing power, storage capacity, are driving changes that are fundamentally disrupting several industries: music, newspapers, and perhaps banking.

The question I have half way through this book: who will become the Google of higher education?

Google has a core business of showing you online ads that is very, very profitable. Most of what they do, however, is throwing out products for free. Google has over 100 free software applications online- maps, Earth, documents, etc. and develops new ones all the time.

Highly successful American universities seem to have a core mission of educating students. This however is questionable at best. Some of these universities have endowments so large that if they simply followed the rules for non-profits and spent 5% of their endowment per year, they could eliminate tuition for their students entirely.

What these universities are really about, of course, is getting research grants and adding to their endowments. What if, however, one or more of them were to go down the road of truly seeking to educate the world by putting up entire degree programs online for free.

A Harvard, Princeton or Notre Dame is likely to always have more applicants than spaces, and in any case, these places could survive without students, not that they will ever need to do so. Why not put up entire rigorous degree programs online, and invite anyone and everyone in the world to complete them for free?

Concerned that it would lessen a regular degree? Pshaw-distinguish it from a regular degree, and require an exit exam, say the GRE, that indicates the student knows quite a bit. Random half-baked idea alert, but if a score on the GRE high enough to admit the student in the upper half of graduate programs were required, we’d know far more about the online student than the traditional ones.

Worried about quality? You should be, but don’t forget the recent U.S. Department of Education study showing that technology based learning is substantially more effective than the old fashioned way.

Imagine if students in Bangladesh could earn a Princeton math degree, or a theology degree from Notre Dame for free, or more accurately for the time, computer and internet cost. The marginal players of the American academy would squeal as they are forced to reinvent themselves from making buggy whips, but this is a small price to pay for bringing opportunity to the world.

The only question in my mind is how long it will be until an elite player has the necessary vision to defect from the comfortable cartel. Several universities have the means to do this, and could receive philanthropic help to do so. Attention Oxford and Cambridge: it wouldn’t require an American university to pull this off. A British university could put out a low-cost version of this, and unlike their American counterparts, they aren’t swimming in resources.

14 Comments | economics, higher education | Tagged: , , | Permalink
Posted by matthewladner

First Amendment Repealed, Part Two

September 23, 2009

Pravda

(Guest post by Greg Forster)

No sooner do I put up a post on the death of the First Amendment than along comes Jim Geraghty with more free-speech funeral news.

On the floor of the Senate, Sen. Tom Carper appears to have openly and explicitly confirmed that legislators made an illegal quid-pro-quo deal with PhRMA to design health care legislation a certain way in return for a commitment to run ads supporting the bill.

Geraghty is focused on the bribery aspect – PhRMA bought a legislative outcome in exchange for money (spent on ads the legislators wanted). But it’s also a speech issue – congressional leaders used their power over the laws to bend political speech into the shape they wanted it.

The health care people just can’t destroy our freedom fast enough.

Leave a Comment » | economics, politics | Tagged: , , , | Permalink
Posted by Greg Forster

The First Amendment Is Hereby Repealed

September 23, 2009

Pravda

(Guest post by Greg Forster)

Items in the news this week:

1) The president signals he’s open to a government takeover of the newspaper industry. No word on whether government-supported papers will be required to change their names to PRAVDA.

If you’ve been told that the bill in question doesn’t set up direct government funding for newspapers, you’ve been misled. It doesn’t set up federal funding for newspapers, but it does everything possible to grease the skids for state and local government funding – and who’s prepared to bet that won’t happen once the opportunity is available?

As I wrote back in April:

Since the law already allows nonprofits to publish and distribute their own newspapers if they want to, the only possible rationale for Sen. Cardin’s proposal is that it allows newspapers to continue charging money to cover their costs while also recieving tax-free subsidies. And who would be doing the subsidizing? Even if government (at the state and local level) doesn’t do it directly, it’ll do it indirectly. Politicians have lots of wealthy friends who would love to have their own pet newspapers.

In fact, Cardin’s proposal is actually worse than a direct government subsidy. At least a direct subsidy would be on the books and subject to disclosure, oversight, and some level of accountability.

Cardin invokes the old Jeffersonian saw that it would be better to have newspapers without government rather than government without newspapers. Yes – but either of those would be better than having government newspapers.

I also wrote that “the proposal is obviously going to go nowhere because it fails the laugh test.” But the laugh test is one exam that’s been pretty radically dumbed down over the past six months; these days anyone can pass it.

2) Meanwhile, the latest development in the health care debate: The U.S. government is now openly using the criminal law to censor core political speech solely because the speech in question advocates a position the government opposes.

When I say “censor” I don’t mean they’re regulating donations and spending levels or imposing restrictions on the when, where and how. I mean they’re threatening to impose criminal sanctions for having said a certain thing, simply because it’s something they don’t want said.

And, of course, once the threat is made there’s no real need to prosecute. The threat itself is sufficient to censor all future speech on the subject.

I’ve written before that health care reform is a knife at the throat of our freedom. I had no idea the enslavement process would move so quickly. Care to place bets on which clause of the Bill of Rights will be the next to go?

UPDATE: Yet another health-care-destroys-free-speech story.

5 Comments | economics, politics | Tagged: , , , , , | Permalink
Posted by Greg Forster

Obama Serenades Rabbis: “Deutschland Uber Alles”

August 27, 2009

Obama at AIPAC

“Deutschland, Deutschland, uber alles . . . uber alles in die welt!”

(Guest post by Greg Forster)

Getting a lot of attention: Barack Obama’s statement, during a national conference call with a thousand rabbis on the subject of the proposed government healthcare monopoly, that “we are God’s partners in matters of life and death.”

Not getting a lot of attention: While waiting on hold for the call to begin, the rabbis were serenaded with the traditional German folk tune “Deutschland Uber Alles.”

Deutschland Uber Alles

No, I didn’t make that up. His staff makes a blunder like this and he still thinks government can run the whole nation’s health care?

On the other hand, maybe he’s trying to tell us something. What was that again about “death panels”?

HT Kausfiles

6 Comments | economics | Tagged: , , , | Permalink
Posted by Greg Forster

Death Panels for College Kids!

August 21, 2009

Monopoly - Pennybags

(Guest post by Greg Forster)

Pardon me while I toot my horn that the editors of the Wall Street Journal have picked up on the story that federal student loans illustrate how a “public option” inevitably becomes a single-payer government monopoly. Remember, you read it here first! (Well, OK, not really. You read it on NRO first. But we had it before the Journal!)

And please please please do yourself a favor – read Andy McCarthy’s incisive NRO article today on the probability of, and implications of, an Obama victory on health care. It’s a sobering corrective to the undue optimism many of us (myself included) have begun to feel over the past few weeks.

The spectre of James Madison has been doing yeoman’s work in DC this summer. If you want to know why the Democrats had to neuter the early-year provisions of Cap and Trade and are now struggling so hard over health care, just read Federalist 10. Madison built the walls of the Constitution high and thick to repulse precisely this sort of assault. Thank God for that man!

But it’s all too easy to assume that justice must prevail when the facts and the rights are clear, and McCarthy’s analysis (though I don’t agree with every particular of it) has sobered me up.

People do, in fact, sell their freedom. It happens every day. And not just in far-flung corners of the globe but in your neighborhood, on your block. Why do you think the founders got so animated and hyperbolic about the monstrosity of selling your freedom every time the subject came up? Not because it couldn’t happen here, nor even because it could, but because it did. Repeatedly. To sell your freedom is the fundamental tendency of man’s fallen nature. (Read Federalist 8. Or Federalist 51. Or, for that matter, Federalist 4, 6, 10, 15…)

McCarthy is right: “We could still lose this thing.” And there is nothing to stop the consequences from being as dire as he foresees them being.

Leave a Comment » | economics | Tagged: , , , , , | Permalink
Posted by Greg Forster

The Moral Case for Capitalism in CRB

August 12, 2009

Monopoly - Pennybags

He’s not just ineffective. He’s a thief.

(Guest post by Greg Forster)

The summer issue of the Claremont Review of Books, which just went live for subscribers, contains my essay on the moral case for capitalism. Some articles will be made public one at a time over the next few weeks; I’ll be sure to post here if they make mine available.

Here’s a free sample to motivate you subscribers to head over there and check it out:

Some time last fall, the debate over bank stabilization metastasized into a frontal assault on the principles of capitalism itself. Demagogues whose policies were largely to blame for the crisis trotted themselves out as saviors who would deliver us from the depredations of Wall Street greed. Flushed with victory at the polls, they set to work putting whole sectors of the economy under government control.

During those crucial months, the public heard little counterargument. Capitalism’s defenders in academia, journalism, and think tanks went strangely mute, right at the moment their voices could have made a real difference. A short delay might have been excusable—all of us needed time to absorb and understand an extreme breakdown in financial markets that struck with breakneck speed. However, as the months rolled on and the threat of a socialist resurgence became more real, and still the self-appointed defenders of capitalism remained silent, it became clear enough that many of them were actually suffering a deeper crisis of confidence. By the time they finally started finding their voices, it was too late; the turn to Big Government was a fait accompli.

At the same time, some of capitalism’s traditional political allies began defecting. Social conservative opinion leaders, especially evangelicals, have been shifting leftward on economics for some time. It is now common to hear even the most naïve and undigested liberal clichés circulated among evangelicals as though they were profound discoveries. Savvy socialists like Jim Wallis, who have learned how to dress up their materialistic economic reductionism in religious language, have become big draws on evangelical campuses. Last year, evangelical voters lined up behind Mike Huckabee, whose populist proposals made economic conservatives apoplectic. And, of course, socially conservative Catholics remain deeply ambivalent about capitalism—as exemplified in the latest papal encyclical on the subject.

The diffidence of capitalist intellectuals and the disaffection of their social conservative allies are not two different problems. They are two sides of the same problem—a crisis in capitalism’s moral philosophy.

4 Comments | economics | Tagged: , | Permalink
Posted by Greg Forster

Cash for Crest

August 6, 2009

As Congress scrambles to add a couple billion more to the “cash for clunkers” program, the DC punditocracy sees the program as a sign that government programs are turning the economy around.  Seizing the positive moment, President Obama flew to Indiana to decalre that the economic tide is turning thanks to his efforts and to promise more government programs to spur economic activity.

Who knows if the economy is really turning or how robust a recovery will be?  But whatever progress does occur has nothing to do with cash for clunkers or other stimulus spending. 

Yes, giant government subsidies for new car purchases have led to many more new car sales.  But that doesn’t mean that the program has made a net contribution to economic activity.  All that the program did was divert economic activity from one area to another or from one time to another.  The increase in new car sales comes at the expense of used car sales, new car sales in the future, and the purchase of other goods and services.  There is no free lunch.

If we offered giant government subsidies for anything, we would see more purchases of that thing, but that doesn’t mean that the subsidies made a net contribution to economic activity.

Just yesterday I noticed that Procter and Gamble reported an 18% drop in profits from an 11% drop in sales.  Maybe we need a government program to spark more sales for P&G.  The government could offer “cash for Crest,” P&G’s toothpaste brand.  If the government threw a couple billion dollars of subsidies at toothpaste sales, I’m sure we’d see an explosion in toothpaste purchases.  But if the government did so, all we would be doing is shifting consumption to toothpaste away from other current or future consumption.

The Wall Street Journal has proposed the proper solution to this problem.  How about if we have a $4,500 subsidy for everything?  Of course, the WSJ correctly notes that this is “crackpot economics.”  But that somehow doesn’t stop Obama or the punditocracy from declaring economic victory for government planning.

4 Comments | economics | Tagged: , | Permalink
Posted by Jay P. Greene

Welfareism + Unionism + Greenism = Hilarity

August 5, 2009

Smart Car tipping

(Guest post by Greg Forster)

The Netherlands’ extremely restrictive labor laws (destroying entry-level jobs) and overgenerous welfare state have given Amsterdam a large population of young people who have nothing to do with their lives but find some way to make their own entertainment. Meanwhile, fanatical greenism has subsidized an explosion of those tiny little Smart Cars parked on Amsterdam’s city streets, many of which just happen to be adjacent to the city’s numerous canals.

Result: Smart Car Tipping.

Welcome to the worker’s paradise!

HT Mickey Kaus

1 Comment | economics | Tagged: , , | Permalink
Posted by Greg Forster

The Student Loan Lesson for Health Reform

July 21, 2009

Monopoly - Pennybags

From now on, any time you need care, just come ask my permission!

(Guest post by Greg Forster)

In case you missed it, you’ll definitely want to check out Stephen Spruiell’s NRO column on what we can learn about health care reform from looking at the federal student loan program. “Reform” means irreversible steps that must inevitably end in dictatorial socialization.

It’s important to begin with the understanding that we don’t have a free market in health care as it is. What we have is a government-mandated cartel. Pretty much all the problems people complain about arise from the mandatory cartelization of health care. The question is whether we’re going to stick with this lousy command-economy cartel, or switch to an even worse direct government monopoly.

I’ve noted before how the already-complete monopolization of the education sector provides a general model for the ongoing monopolization of health care. But Spruiell’s article on how government muscled its way to becoming the sole student lender in America demonstrates that the education monopoly provides not only a general model, but a step-by-step tactical plan:

  1. Sponsor a huge, hubristic attempt to monopolize the market.
  2. When you lose that fight, fall back on the comparatively “reasonable” “compromise” of massive subsidies.
  3. Sit back and wait for the massive subsidies to badly distort the market, creating widespread suffering and injustice.
  4. Whip up public anger over the injustices you’ve created, directing blame away from yourself by demonizing the private service providers.
  5. Offer a “public option” as a way to “control costs” and “keep the private sector honest.” Subsidize the public option so it offers a better deal.
  6. Watch the “public option” become the dominant service provider, and then a de facto monopoly.
  7. Demonize the remaining private providers because they’re not as good as the public option.
  8. Outlaw the remaining private providers so everyone must now come to you.
  9. Begin reshaping the government service provider to meet your needs, taking advantage of your complete freedom to order everything however you want, since there are now no alternatives and thus no way for anyone to effectively resist you.
  10. Lie back and enjoy your tyrannical rule over a nation of willing slaves.

On federal student loans Congress is about to take step 8. On schooling generally we’ve long since completed step 6, but the periodic attempts to progress to step 7 have (so far) been successfully repulsed. On health care we are now being invited to take step 5.

The game is pretty simple. Most games are, once you read the box top and know what’s going on.

The only question that matters is: at what point does the progression become irreversible? I suspect that if we ever arrive at step 10, it will be primarily because at some prior stage, the people who were smart enough to see what was going on assured themselves that the point of no return had not yet been reached, when in fact it had.

5 Comments | economics, student loans | Tagged: , , , | Permalink
Posted by Greg Forster

Texas has nothing to learn from California except…

July 10, 2009

2809LD1(Guest Post by Matthew Ladner)

Interesting article from the Economist on California vs. Texas: America’s future.

I’ve been an Economist reader for 20 years now, and their work is usually outstanding. They do however occassionally fall prey to an easy stereotype, and this article contains such a folly.

Read the article for yourself, but keep in mind that Texas has among the highest NAEP scores for Hispanic students in the nation (now edged out by Florida on 4th grade reading) and spends over $10,000 per child per year.

The only thing Texas has to learn from California is what not to do.

P.S.

This has been a settled question on the only true field of battle for some time now.

1 Comment | economics, politics | Tagged: , , | Permalink
Posted by matthewladner

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