Category Archive: Economics

  1. Reddit AMA with Isaac Morehouse, founder of Praxis, Tuesday January 24th

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    Next week is National School Choice Week!

    Join us on Reddit for an AMA (“ask me anything”) discussion with Isaac Morehouse on Tuesday, January 24th, at 3:00pm EST.

    Isaac is the author or co-author of six books: Better Off Free, The Future of School, Freedom Without Permission, Why Haven’t You Read This Book?, How to Get Any Job You Want, and Don’t Do Stuff You Hate; and the founder and CEO of Praxis. He has written hundreds of articles and given hundreds of talks on education, entrepreneurship, philosophy, economics, how to change the world, and more.

    He’ll be talking with us about educational choice, homeschooling, unschooling, entrepreneurship, alternatives in higher ed, and his story as the founder of Praxis.


  2. Why education isn’t a public good — and why government doesn’t have to provide it

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    One argument often used to defend public schools and discourage school choice is that education is a “public good,” not a private one. Despite several attempts to dispel the idea that K-12 education meets the economic criteria for a public good, this trope is still kicking around.

    But what do people even mean when they say education is a public good? In a recent article titled “Education is a Public Good, Not a Private Commodity,” Australian writer Stewart Riddle argues that education creates public, and not purely private, benefits. He doesn’t deny that education produces private benefits (like skills that students can use to get a good job), but points out that education also produces significant public benefits (like gains in public health and robust democratic participation).

    In a similar article, “Education as a Public Good,” Tom Vander Ark suggest that the reason education is a public good is because education is supposed to advance goals (like ensuring equal opportunity and giving every student access to good schools) that are of public concern.  

    So is education really a public good?

    The easy answer is no — as long as by “public good,” we mean the same thing economists mean. For a good to be a “public good” in econspeak, it must be nonrivalrous (one person’s consumption does not diminish the quality of the good for others) and nonexcludible (it is impossible or next to impossible to exclude people from using the good).

    Think of air, or a pdf file, or a neighborhood fireworks show. If I enjoy one of those things, that doesn’t take anything away from my neighbor’s ability to enjoy it. And my neighbor could not effectively exclude me from enjoying those things.

    K-12 education has neither of these qualities. First, it is rivalrous (as long as you think class size affects educational quality, for instance, you believe education is rivalrous to some degree). K-12 education is also excludable. People can be, and have been, quite easily excluded from K-12 education; up until 1975, disabled children, for instance, were commonly excluded from receiving (public) education.

    But clearly, the above authors (and most who say that education is a public good) do not mean “public good” the way economists mean it. Their concern is more about the idea that public education produces significant benefits to the public, and leaving it in private hands risks people consuming education in a way that puts those public benefits in jeopardy. People, they fear, might instead produce and consume kinds of education that would produce only private, and no public, benefits.

    But even so, I still think these authors’ arguments don’t stand up, for 3 big reasons.

    First, producing significant public benefits is not enough.

    Every day before I go to work, I put on cologne. My cologne arguably produces more benefit to others (public benefit) than it does benefit to me (private benefit). Yet, people continue to buy cologne and perfume in order to produce the public benefit of smelling nice to others.

    If cologne and perfume produce more public than private benefit, why do we buy and use them? I think it is because the public benefit of smelling nice to others is accompanied by a pretty nice private benefit of knowing that I am not offending others with my body odor (and the benefit of avoiding the embarrassment that would cause).

    So, the question should be less whether my cologne or schooling produces public benefits, but whether it also produces the kind of private benefits that would convince me to consume the good.

    In Stewart Riddle’s article, he mentions several public benefits that schools produce. He suggests that increased literacy rates lead to better public health outcomes. But individual students also benefit from their increased literacy, because literacy helps them get hired for jobs, read restaurant menus, use Facebook, and so on.

    Riddle also mentions that education leads to decreased crime rates, but it is easy to see how individuals themselves are the primary beneficiaries of not having to turn to risky criminal behavior to survive. These and other public benefits are byproducts of individuals pursuing their own private benefits.

    Second, even if education were a public good, that wouldn’t mean government must provide it.

    Things that provide massive public benefits are provided privately quite often.

    But if we are worried that people might not consume enough education for the public benefits to materialize, there are ways to remedy that without the education being provided directly by the state. A voucher system (with some stipulation that participating schools provide a type of education that generates those public benefits) would do.[1]

    Lastly, calling education a public good is potentially dangerous.

    Despite the many public benefits education produces, I believe it is potentially dangerous to tell people that the primary reason they are undergoing twelve years of compulsory schooling is so that their education will produce public, rather than private, benefits. Doing so treats the individuals being educated as instruments of the public good rather than as ends in themselves.

    If we argue that education produces a strong economy that we all benefit from, it becomes fairly easy to rationalize the kind of tracking that steers individuals towards jobs that they may dislike, but that experts think “we” need. The more we believe the primary justification for education is the public benefits it produces, the less we allow individuals to receive the education they want rather than the education the government believes is good for them.

    Does education produce public benefits? Absolutely. But I don’t think this is sufficient to argue that education therefore needs to be provided by the government or can’t effectively be provided by private organizations. Nor does it mean that education is a public good.

    [1] As a side-note, conversations with folks who think education is a public good tell me that one of their concerns is that the quality of schooling not depend on a family’s ability to pay. In that case, the education is less a public good than a merit good, something we want to be available to all regardless of individual ability to pay. In that case, the government could still fund or subsidize education without directly administering it.

  3. Not your business: Let restaurant owners make their own decisions

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    Michael Lugo, owner of Michael’s Tasting Room in St. Augustine, Florida, recently received a note from a customer stating that the Christmas music playing in his restaurant was “offensive” and too “religious.”

    Meanwhile, across the pond, Hilary Penning, owner of Organic Kitchen in London, England, was heavily criticized by some of her customers and by the popular website for mothers, Mumsnet. They faulted Penning for her new policy of prohibiting children under 5 in her restaurant.

    Both of these are examples of a certain kind of popular arrogance when it comes to other people’s private property.

    The free-market concept is simple — private property owners should be able to preside over whatever policies they want. Restaurant owners do not owe anyone a restaurant experience. They cannot “hurt” customers by turning them away or playing music, because the customers have no right to be on another person’s property.

    Customer Freedom and Owner Freedom

    Nor do restaurant owners force any customer to enter their establishments.

    I have never been to a restaurant because I was hit over the head with a bat, dragged in, and then awakened to a meal placed in front of me at a table. In my experience, every time I have eaten a meal at a restaurant it has been because I have voluntarily chosen to walk in to the establishment, sit down, and order the food. If I didn’t like the ambience or anything else, I could have walked out. I have never eaten at a restaurant where I was chained to the table and forced to stay.

    Lugo was playing Christian music during the Christmas season —shocking, I know. But if Lugo wanted to play Christian music (or music from any other religion) every day of the year, that is his right, because it is his establishment. He is not forcing it on anyone else.

    Penning has justified her child policy by explaining that many customers had been complaining that they could not enjoy their meal because of the loud and ill-mannered behavior of young children. Penning has also argued that because her restaurant is small, having young children running around or baby strollers bogging down the limited space is a safety hazard for the food servers and for the customers.

    That is all fine and well, but she does not have to justify her policy. As a private property owner, she should even be able to be harsh and say, “I don’t like children so do not bring them inside my restaurant.” Period.

    Incidentally, Penning is a mother herself, so I don’t think her motivation is that she hates children. Rather, she is making a business decision that takes the majority of her customers into consideration.

    Again, I will repeat that Penning does not owe anyone a restaurant experience or a meal. Nor does she force her restaurant on anyone. People can go to restaurants that allow children, or they can cook for their own kids, or they can be entrepreneurial and open their own “child-friendly” restaurants.

    As a business owner, Penning should be able to determine whatever policy she believes is best. Keep in mind, if she is wrong — if child-welcoming restaurants will bring in more happy customers just as safely as her child-free one — she will suffer the wrath of the market, and that is fine.

    But when people get angry or offended at a business owner for their policies, they often act as if it was their right to eat or enjoy the property of another person. Instead, in a free market, individuals can vote with their money and just frequent the businesses they support and withhold their money from businesses with which they disagree.

    Individuals have a right to play whatever music they want in their own homes when they host a party and they have the right to put “no children please” on their wedding invitations. This same policy should hold true for private business owners, who should have the autonomy to determine their business policies.

  4. How entrepreneurs can make better schools for real kids

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    Suppose that there are children throughout America who are utterly disengaged in their assigned public school each day, but that are absolutely riveted by the sports news on TV or YouTube each night.

    Suppose that at least one set of their parents realize their sports nut child is uninterested in school because it targets the instruction and examples to generic children. Dad wonders how much better their son would do if only he was in a classroom (or an online setting) that taught math through sports stats, taught science through sports examples, and taught reading and writing through sports stories. Mom says there are probably a lot of kids like their son.

    They wonder, could a sports-stories-themed school be successful? Could it work as a private school or a chartered public school?

    Our diverse kids need diverse schools.

    Children are very diverse in terms of which instructional approaches and which subject themes will achieve the needed engagement in the learning process. This means that any single approach to education cannot achieve acceptable rates of success as long as children are mostly sorted into schools by attendance zone and into classrooms only by age.

    The public school system tries to address student diversity by creating options within large, comprehensive, mall-like campuses, often-impossible differentiated instruction, and sometimes with ability grouping within classrooms. That has created unmanageable school goliaths and student alienation, and stressed teachers, but not improved performance.

    Efforts to make this approach to student diversity yield acceptable outcomes will continue, but the evidence is overwhelming in volume and urgency that policymaking needs to pursue the engagement of diverse children in other ways.

    One of the roots of the problem is that political processes tend to create uniformity because of its appearance of fairness. So, as institutions under political control, even the best traditional public schools will fail to engage a significant percentage of their students in useful learning.

    That sad fact continues to survive frenzied efforts to improve materials, teachers, and a variety of other factors.

    To get diverse schools, we need entrepreneurs.

    My non-ideological premise is that an alternative to the current public-policy strategy of different options within huge mall-like schools is “school choice” from a menu of diverse schooling options, including choices developed through the entrepreneurial initiative that drives most of our economy.

    At present, private schools struggle to exist, and are rare now, because it is very tough to sell schooling when it is available from the government for no additional charge beyond taxes you must pay.

    The charter route to specialized schools, such as sports-themed schools, depends on state law (7 states don’t allow chartered public schools, and the feasibility of charter schools varies widely in the other 43 states). And because charter law does not allow tuition co-payments, the viability of an envisioned, innovative school largely depends on whether per pupil costs are below the state’s per charter pupil payment.

    An innovative school may need philanthropic support to meet that requirement; if not permanently, then still temporarily, in many cases, to get through the developmental stages when costs can be especially high. Dependence upon donor support severely limits the potential spread of innovative instructional approaches.

    Note that specialized schooling such as sports-stories-themed schools must be schools of choice. You cannot bureaucratically assign children to specialized instructional approaches. Many themes or pedagogies that could engage a lot of children would bore or disengage the vast majority.

    How could an entrepreneurial private school work?

    Suppose that our hypothetical family with their sports-obsessed boy finds teachers talented and passionate about using sports stories to teach general things like the three r’s. Suppose that they live in a state with a Nevada-style Education Savings Account program (a $5100 annual tuition discount) that makes parents’ money available for a school like this. Suppose that they find a great location for the school. And suppose that there is a local entrepreneur willing to take on the risk of leading and funding the project.

    With all these factors put together, the new school could fill all its seats with a tuition rate way above the cost of delivering the instruction. The owner-entrepreneur will charge “what the market will bear.”

    The school’s resulting profit would be a short-term reward for the entrepreneur’s risk and wisdom. It would also be a magnet for increased investment and competition by other entrepreneurs, who would force the tuition price of sports-stories-themed schooling down to the cost achievable by the most efficient schools.

    That process will discover, reinvent, and fill the highest value instructional niches. That combination of idea-driven enterprise, profit-and-loss, and price change is what would determine the public-private mix of diverse schooling options on a “playing field” leveled by tuition tax credits, tuition vouchers, or education savings accounts. Only school choice expansion through policies like these can unleash the entrepreneurial initiative we need to create the diverse schools our kids need.

  5. Car crashes and hockey fights — how safety mandates can make life more dangerous

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    Suppose you want to reduce deaths in automobile accidents. Should you make cars safer? Seems like a no-brainer, right? But consider: suppose instead of an airbag in your steering column, we put a six-inch dagger. If you hit something hard head-on, you get the dagger through your sternum.

    That jerk tail-gating you on I-95 would give you more space if his BMW featured an ice pick instead of a soft, comfy airbag.

    In fact, economist Sam Peltzman has found that while real mandated safety features in cars reduce the chance that a person in a car will be hurt in an accident, drivers then behave more recklessly, and thus increase the chances of accidents occurring.

    This is what we call a “Peltzman Effect.” People respond to a safety regulation by increasing their risky behavior.

    Peltzman Effects happen not only on the road but also on the ice. Hockey, both professional and amateur, has fallen prey to this sort of effect over the last few decades.

    Hockey Helmets

    There are three factors that interact to determine player safety in any game, in ways that are hard to predict. The first is the inherent physical riskiness of the sport: zooming around on the ice with 11 other people is just more dangerous than swinging a golf club.

    The second is rules and equipment: sometimes equipment evolves, and sometimes new rules dictate substantial changes, as in 1975 when the NHL required players to wear helmets with full face protection.

    The third is behavior, the human element. It’s not surprising that this element is the hardest to predict.

    We see a pretty clear Peltzman Effect in the behavior of NHL players responding to the 1975 rule requiring them to wear helmets with full face protection. Here’s the explanation from a medical journal:

    The increased protection of the face through the compulsory wearing of helmets with full face protection, which was introduced in 1975, appears to have led to a more aggressive playing style perhaps because it is believed that the head, face, and throat are now at less risk. Many believe that, after the mandatory use of helmets with a full facemask, players developed a false sense of security and invincibility leading to excessive risk taking behaviour with a resultant increase in illegal and injurious activity. It is also interesting that increased high stick violation and the use of the full facemask as a weapon were noted … after mandatory use of the full facemask.…  Other authors have even speculated that the mandatory use of helmets with full facemasks has increased the risk of neck [and brain injuries].

    Hockey Fights — The Code

    A similar kind of unintended consequence occurred after a 2003 rule change against fighting.

    Players in professional sports are governed, not just by the official rules of the league, but also by what author Ross Bernstein calls, “the code,” the unwritten rules among players. Bernstein argues that for many years, the code of hockey fights actually reduced the level of violent danger in the game as a whole.

    Hockey “goons” enforced norms against poking a star such as Wayne Gretzky in the ribs with the butt of your stick. The refs might not catch you, but if you bruised Gretzky you had to face a professional fighter.

    Of course, your team would also defend you if you behaved within the code, and send up their own enforcer for the stylized combat. But if you broke the code, you had to fight, and you would likely be both hurt and humiliated.

    So Gretzky skated free and had more of the assists and goals that fans paid to see, increasing the salaries even of the players on teams that the Oilers defeated.  Hockey thrived because the stylized violence of goons was tolerated.

    Then in 2003, the league cracked down, punishing fighting. This means there are fewer formal fights in the game.

    But now code-breakers can more easily escape the retribution of the goons. One clear effect of the rule change has been an increase in hard checks on the open ice, and an overall increase in injuries.

    Putting these factors together, we can see the unintended consequence of the change in rules and the change in equipment for behavior: more danger. Players can now fly in recklessly, using their (protected) faces to block shots and their shoulders to give hard checks. The shock of the impact is transferred to necks, spines, and joints. And there is no goonery to punish those who injure star players, so we see the paradox: more safety equipment and less fighting imply more injuries.

    Peltzman Effects vs The Man of System

    The reason for this discussion extends beyond hockey, of course. (Though I like hockey!) The point is that bearing Peltzman Effects in mind helps policymakers and analysts remember that we are talking about people — actual sentient creatures who react and respond, not billiard balls or chemicals in solution, whose reactions are predictable.

    There is a tendency among regulators to act like Adam Smith’s “Man of System,” moving objects around on a chess board.

    The man of system … is often so enamoured with the supposed beauty of his own ideal plan of government, that he cannot suffer the smallest deviation from any part of it.… He seems to imagine that he can arrange the different members of a great society with as much ease as the hand arranges the different pieces upon a chess-board. He does not consider that the pieces upon the chess-board have no other principle of motion besides that which the hand impresses upon them; but that, in the great chess-board of human society, every single piece has a principle of motion of its own, altogether different from that which the legislature might chuse to impress upon it. If those two principles … are opposite or different, the game will go on miserably.

    The “game” may be hockey or public policy; the insight is the same. Unintended consequences may reduce, or even eliminate, the good you hope to do with a policy change.

  6. The millennial marriage drought

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    Why aren’t Millennials getting married? Despite the popularity of dating apps like Tinder, Grindr, and OKCupid, Millennials are not pairing off.

    Only 26% of Millennials are married now, compared to 36% of Gen-Xers and 48% of Baby Boomers when they were young. We propose (no pun intended) that the economy is to blame.

    When they were between 18 and 33, Gen-Xers had a median household income of $64,949 — enough to support two adults, according to Economic Policy Institute’s budget calculator. At the same age, a Millennial today can expect to earn only $62,528. A difference of $2,000 may not seem significant, but rising costs of living and a more competitive job market place increasing pressure on Millennials’ budgets, leaving little room to support a family.

    Facing very little financial breathing room, the average Millennial is often cornered into taking whatever job he can find to pay the bills. So, while their incomes are similar to Gen-Xers, Millennials’ effective wealth is not.

    In fact, the average Millennial is more likely to move back into his parents’ home or to live with roommates than to shack up and settle down.

    Taking on a long-term partner presents a high risk to the average Millennial. A whimsical job market may require him to move across the country at any time. Throw a partner into the mix, and now this couple must choose which of them gets to ascend the career ladder faster.

    If the couple commits to moving to Seattle, for instance, for one member’s career, the other member’s probability of finding a good job is likely much lower now that her job search is restricted to that geographical area.

    Furthermore, because of the uncertain nature of employment in today’s economy, she may be unable to rely on her partner for long-term financial support while she looks

    With higher effective wealth, a Gen-Xer was able to take on a long-term partner with less risk of financial ruin or heartbreak.

    The Gig Economy

    Luckily, Millennials are solving their own problem. As of 2015, one in three Americans are earning income in some way other than the traditional 9-to-5 job. Many of these have turned to the Internet for their alternative income streams.

    Those with cars can offer their services via Uber. Others are making money with only their computers and some Wi-Fi. On outsourcing platforms like Upwork and Amazon Mechanical Turk, Millennials are logging hours doing tasks for employers all over the world. From earning 2 cents for transcribing the words on a picture of a receipt to making $150 an hour for advanced graphic-design work, this generation is finding ways to make ends meet.

    How can we help these mostly poor singles? By staying out of their way.

    Government regulation of the gig economy looms inevitable on the horizon; Uber has already faced several setbacks brought on by bitter taxi drivers and persuadable bureaucrats. But the longer we can hold regulation off, and the more we can reduce the existing regulatory burden, the more hope Generation X has for grandchildren. By allowing Millennials to market their skills online without hindrance, we can allow them to make their small fortunes with their unique knowledge.

    Millennials are not getting married and, for now, the economy is to blame. Let’s allow them to find their paths with the tools and technology they have, lest, generations from now, history finds those who encouraged intervention to blame.

  7. A champion of “absolutely unlimited competition” in education

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    Americans concerned about the dismal state of public education in many schools increasingly want more choice, competition, and local control. Such people may draw inspiration from the wisdom of 20th-century theologian J. Gresham Machen, who affirmed the necessity of “absolutely unlimited competition” in education.

    Who was J. Gresham Machen?

    The famous journalist and skeptic H.L. Mencken wrote an obituary on January 18, 1937, that praised “a man of great learning” and “sharp intelligence.” That man was J. Gresham Machen, a Protestant theologian who taught at Princeton Theological Seminary before going on to found Westminster Theological Seminary in Philadelphia in the 1930s.

    Mencken was no Christian believer, but he did nevertheless “greatly admire” Machen’s consistent defense of freedom[1] and his “remarkable clarity and cogency” in argumentation.[2]

    “The worst fate into which any country can fall”

    In 1926, Machen testified before a congressional committee regarding a proposed federal department of education. Machen wasted no time in getting to the heart of the matter. In the first minute of his testimony, he explained that the purpose of the bill was “to promote uniformity in education,” which, he asserted, “is the worst fate into which any country can fall.”

    A radical position? Yes. But take a moment to consider some of the reasoning that led him to it.

    First, it will be of some value to point out that Machen was not blind to the obvious benefits of public education. He admits in the first chapter of his most famous book, Christianity and Liberalism, that “A public school system, in itself, is indeed of enormous benefit to the [human] race” and “a noteworthy and beneficent achievement of modern times” due to its delivery of at least a rudimentary education to larger portions of the population than had been known in most societies before modern times.[3]

    Moreover, Machen stated in his congressional testimony that in the absence of federally enforced uniformity in education that “there have been grievous sins in the sphere of education on the part of individual states,” not to mention “a lot of crazy private schools and church schools.” In other words, Machen admitted what we all must: liberty can be a messy affair.

    Nevertheless, the medicine of uniformity in education was, for Machen, worse than the disease of “crazy private schools.”

    We must consider, second, Machen’s response to the notion of uniformity: he demanded the circumscribing of any federal education system with the “absolutely free possibility of competition” from various types of private schools. Without this, governmentally enforced uniformity in education would be “the most perfect instrument of tyranny which has yet been devised,”[4] due to its power to control thought and to encourage widespread mediocrity.

    Machen left no room for doubt about his suspicions that a distant, centralized state had no authority, much less ability, to educate children well:

    Place the lives of children in their formative years, despite the convictions of their parents, under the intimate control of experts appointed by the state, force them then to attend schools where the higher aspirations of humanity are crushed out … and it is difficult to see how even the remnants of liberty can subsist.

    Instead, such a system would produce “one huge ‘Main Street,’ where spiritual adventure will be discouraged and democracy will be regarded as consisting in the reduction of all mankind to the proportions of the narrowest and least gifted of the citizens.” In brief, Machen feared that state-enforced uniformity in education would produce a mediocre populace unable to sustain a free society.

    [1] For example, during a national debate over a proposed child labor amendment to the U.S. Constitution, Machen called it “one of the most cruel and heartless measures that have ever been proposed in the name of philanthropy” due to the likely consequence that it would lead to a variety of unintended consequences including greater poverty in American society and harsher working conditions for children who would still find work but under less salutary conditions. Lawrence W. Reed, Real Heroes: Inspiring True Stories of Courage, Character, and Conviction (Wilmington, Delaware: ISI Books, 2016), 133.

    [2] Those interested in reading more about Mencken’s assessment of Machen are directed to D.G. Hart, Damning Words: The Life and Religious Times of H.L. Mencken (Grand Rapids, Michigan: Eerdmans Publishing, 2016).

    [3] J. Gresham Machen, Christianity and Liberalism (Grand Rapids, Michigan: Eerdmans Publishing, 2009), Chapter 1.

    [4] Ibid.

  8. What standard should we use to judge school choice?

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    The United States spends a lot of money each year on public schooling. As a percentage of GDP, government expenditures on public education (five percent) exceed the amount we spend on defense (four percent) or welfare (two percent). But how do we know if we are getting our “money’s worth” on public school?

    Too often, the primary criterion of effectiveness is standardized testing. A school is rated almost exclusively on on how well its students perform on standard testing (usually limited to reading and math) as compared to other students in the same city, district, or state. When the issue of school choice comes up, critics assume that this standard is the only one that matters.

    If an experiment in school choice doesn’t show improvement on test scores, it’s often considered empirical proof choice doesn’t work. Yet as economist Tyler Cowen says,

    To be sure, we’re still not sure how well vouchers work, and I would suggest continuing experimentation rather than full-on commitment.  Frankly, I find a lot of the voucher advocates unconvincing, but let’s not forget the single most overwhelming (yet neglected) empirical fact about vouchers: they improve parent satisfaction.

    Cowen points out there’s almost no dispute that parents who take advantage of school choice are satisfied with their option, adding:

    Of course parents may like school choice for reasons other than test scores. To draw from the first link above, parents may like the academic programs, teacher skills, school discipline, safety, student respect for teachers, moral values, class size, teacher-parent relations, parental involvement, and freedom to observe religious traditions, among other facets of school choice.

    Perhaps now is the time to remind you that how the buyers like the product is the fundamental standard used by economists for judging public policy? That is not to say it is the final standard all things considered, but surely economists should at least start here and report positive parental satisfaction as a major feature of school choice programs. In fact, I’ll say this: if you’re reading a critique of vouchers and the critic isn’t willing to tell you up front that parents typically like this form of school choice, I suspect the critic isn’t really trying to inform you.

    Since the money for public schools is funneled through the government, the issue is often framed as if the government is the “buyer” of educational goods and services. If the faceless, impersonal bureaucracy is the “customer” then perhaps it does make sense to have standardized testing—which lumps all students together and reduces them to a statistical metric—as the criterion for satisfaction. But if we believe children belong to parents, and not the state, then we should allow the true customers of public education to determine if they are satisfied with the product.

    “Parents will not be perfectly informed consumers of public schools,” says economist Arnold Kling. “But bureaucrats in Washington will be much less well informed.”

    As Kling adds, “Perhaps the voucher movement ought to be called the ‘Make schools accountable to parents’ movement.”

    This piece was originally published at the Acton Institute Power Blog.

  9. Turning away Cuban refugees is a victory for Cuba’s dictatorship

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    President Obama is abandoning America’s five decade-old policy that guarantees Cubans asylum in the United States. The change comes at a time when more Cubans are arriving at U.S. borders than at any time since 1980, and it is a major win for the Cuban regime and opponents of immigration, who both want to stop Cuban immigration to the United States.

    But the sudden reversal is bad policy that will harm efforts to secure the border and aid the regime most hostile to human rights in the Western Hemisphere.

    Cuban Immigration Is a Win for America

    In 1966, Congress passed the Cuban Adjustment Act (CAA), granting lawful permanent residency to any Cuban national who has resided in the United States for at least two years (later lowered to one year). Each of the last eight administrations has interpreted the law to allow almost all Cubans who arrive at U.S. borders to apply for “parole” — a discretionary legal status that permits them to enter and wait a year to receive a green card to stay permanently.

    This system has served the United States extraordinarily well. Because Cubans who enter illegally cannot apply for a green card, border security is enhanced, since they never try to sneak past Border Patrol. Instead, they just line up and turn themselves in at a port of entry. They show their Cuban passports, receive background checks, and then are admitted. The United States has very few unauthorized immigrants from Cuba precisely because all Cuban immigrants who make it into the country are paroled and adjusted to legal permanent residency.

    America — and specifically Miami — has benefited enormously, both economically and culturally, from the presence of Cuban immigrants. After the 1980 Mariel boatlift brought about 125,000 Cuban refugees to Florida, Miami’s population has grown much faster than other cities. Despite often arriving destitute, Cuban-Americans have achieved the same median income as all Hispanics and actually have the highest rate of home ownership. The Kauffman Foundation ranked Miami in the top two cities in the country for entrepreneurship in 2016, driven in part by its large immigrant population. Miami also has the best ranking in the state for upward mobility.

    Most importantly, U.S. immigration policy has allowed 10 percent of all Cubans to escape the most tyrannical regime in the Western Hemisphere. This policy has been a constant threat to and check against a regime that survives by preying on its own people, and, for this reason, the island’s dictatorship has repeatedly condemned it.

    The Excellent Reason Cubans Are Treated Differently

    President Obama says that the United States will now treat “Cuban migrants the same way we treat migrants from other countries.” But Cuba is not like all other countries. It is the only dictatorship on America’s side of the world. As I wrote in the Miami Herald last year:

    The basic principle that people should not be treated differently based on national origin is valid, but Cubans receive special treatment not due to where they are from, but due to how they are treated where they are from. Cubans aren’t treated uniquely because they are Cubans, but because, according to Freedom House, Cuba is the only “unfree” country in the Western Hemisphere.

    The communist system has no electoral process, political dissent is a criminal offense, corruption is rampant, independent media is banned, and all forms of everyday activities are regulated, including internal movement. Cuba is the 12th most unfree country in the world. It is less free than Iran and South Sudan. Even communist China received a higher score.

    No other country in the Americas comes close. In 2015, the pretend socialists in Venezuela were still 50th and ranked “partly free.” Haiti and Honduras came in at 57th and 62nd respectively. This is why Cubans are singled out.

    Congress stated in 1996 that the law would end when “a democratically elected government in Cuba is in power.” As long as Cuba remains unfree, America will continue to welcome Cubans. Rather than repeal this principle, Congress should expand it to any country in our part of the world that is unfree.

    What Happens Next

    The fact remains, however, that President Obama cannot repeal the Cuban Adjustment Act itself, which guarantees permanent residency after one year to any Cuban who has legally entered the United States. This change could result in Cubans filing asylum claims under the normal asylum system, as Central Americans do, and waiting in line for a year before applying for a green card under the CAA, as they always have. Ultimately, this could dilute the impact of the policy shift.

    Nonetheless, the current asylum system, which is already massively backlogged, will only grow more so as a result. At a time when a record number of asylum seekers from Central America are coming to the border, the United States is going to throw the Cuban refugees in with the rest, making a broken system that much more dysfunctional. It will also increase illegal immigration, as Cubans will know that they can no longer be guaranteed entry to the U.S., and those who expect their asylum claims to be denied will seek illicit means of entry.

    Some people claim that the only reason so many Cubans are coming right now is that they feared the administration would do exactly what it has just done. But the reality is that the rise in Cuban arrivals in recent years started before President Obama announced any changes in Cuban policy. Its true causes are 1) the Cuban regime’s relentless assault on human rights, and 2) its decision to end restrictions on travelling abroad, which has led many oppressed Cubans to seize the chance to leave.

    Despite President Obama’s hopeful message after the death of Fidel Castro, the Cuban government continues its oppressive policies. Nearly 10,000 people were arbitrarily arrested in 2016 alone, and there was a particularly large surge of arrests after Castro’s death, demonstrating that his dying changed little.

    Donald Trump — whose statement condemning the Cuban dictator after his death had more moral clarity than any single statement that the president-elect has ever made — should immediately reverse this policy upon assuming office. The United States should honor its commitment to remain open to the Cuban people for as long as the electoral process in Cuba remains closed to them.

    A version of this article first appeared at

  10. Why schools should be businesses (sort of)

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    In an article called “Why Schools Aren’t Businesses,” a teacher is depicted challenging an ice cream company president on why schools can’t operate like ice cream companies. Ice cream companies, says the teacher, can send back ingredients that don’t meet their standards and can insist on only using the best ingredients they can afford. But schools, she says, do not have that luxury; they take the students they get. “We take them big, small, rich, poor, gifted, exceptional, abused, frightened, confident, homeless, rude, and brilliant… We take them all! Every one! And that, Mr. Vollmer, is why it’s not a business.”

    But are students analogous to the ingredients ice cream companies use to make their products — something to be packaged and sold to others? Or are students the patrons who benefit from the education schools sell? Ice cream companies may reject defective ingredients (just as schools may reject defective school equipment or curriculum packages), but schools’ not turning away students is more like the ice cream company that doesn’t reject customers it believes can’t benefit from their ice cream.

    Cleaning services don’t reject potential clients whose houses are too dirty. Doctors don’t turn down patients they believe to be too ill, though they may refer them to specialists.

    And if we are worried that schools-as-businesses would turn down students that they believe would cost too much to educate — perhaps the poor or the disabled — we can make those students more attractive to schools by designing vouchers or other programs to offer additional funding for those students. (Such weighted voucher systems have been proposed, most notably some decades ago in a book called Education by Choice).

    Democratic Education

    The article “You Should Run Schools Like Businesses… Well Not Really” suggests that “schools must be democratic if we want parents and taxpayers to have input into how schools are run. And schools must model democracy if we want children to be prepared to function in a democratic society.”

    Presumably, making schools businesses takes the “democracy” out of them.

    First, I’m not sure how many people would suggest that today’s public school systems allow parents and taxpayers any say outside of the ability to petition the school board or vote for its members. But it seems clear that a public system of schooling is not synonymous with allowing parents and taxpayers a real say in how schools are run.

    Second, we do live in a democracy, but we also live in a liberal market society. We buy goods and services much more often than we vote. Most of the goods and services we enjoy we buy through the market, and most of us understand why this is a good thing.

    Consumers get to shop around for what best suits their needs, producers are pressured to offer a product that keeps consumers coming back, and the involved parties transact directly. Markets mean that that consumer and producer can shop around and deal directly with each other. Markets empower.

    Neither does the profit motive create a problem for education. In fact, it provides the solution. We know that the companies we buy from strive to provide quality at least partly because of a desire for profit. And while some depict the profit motive as the only thing that drives people in the private sector, I find it hard to believe that the people who work at, say, Google, Apple, or your local supermarket are not in any way motivated by the personal satisfaction that comes from providing good service.

    I suspect that many folks who suggest schools shouldn’t be businesses have a particular type of business in mind: the large company that sells standardized widgets. If that is the kind of business we are talking about, I’d have to say that I agree: schools probably shouldn’t be those kinds of businesses. (Notice that the closest thing we currently have to that kind of business is the public school system.)

    But think about your local cleaning service, yoga studio, or — the more direct analogy — tutoring service. None of these is big and impersonal. None sells standardized widgets. All offer service tailored to the customer’s needs, or at least a variety of service packages to serve different needs. Maybe the critics of for-profit education aren’t thinking of the right kinds of businesses.

    This piece originally appeared at the Foundation for Economic Education.

  11. Why people fail at New Year’s resolutions — and how you can succeed

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    At this point in the year, many of us find ourselves struggling to keep our New Year’s resolutions. In fact, more than a quarter of people break their resolutions by the end of the first week.

    Why are New Year’s resolutions so hard to keep, and how can we increase our odds of success? The fundamental economic principle of marginal analysis can provide some answers.

    Marginal Costs and Benefits

    Most New Year’s resolutions are focused on overcoming long-standing habits: Eat healthier. Get more exercise. Quit smoking. Spend less. Save more. These types of lifestyle changes require regular and costly sacrifices in the present, but only offer payoffs that accumulate gradually over a long period of time.

    Economists have long recognized that when human beings make choices, they are focused, not on the cumulative costs and benefits of a long-term decision, but instead on the additional costs and benefits of each incremental choice. This type of thinking is referred to as marginal analysis.

    In the language of economics, keeping most New Year’s resolutions involves incurring a high marginal cost on a regular basis in exchange for a miniscule marginal benefit.

    Exercising more frequently is a goal many people set at the beginning of each year. Even without considering the monetary cost of purchasing a gym membership or new workout gear, you need to exert a lot of effort up front in order to adhere to this resolution. An additional hour of cardio is physically taxing to anyone who is not accustomed to regular exercise, and its benefits to your health are barely observable. You won’t build endurance or lose weight right away; most of the physical benefits you receive from that hour of hard work will go largely unnoticed. It takes months of repeatedly making the “right” marginal choice before the benefits can be recognized.

    Similarly, comparing marginal costs and marginal benefits can help us understand why quitting a bad habit, like smoking cigarettes, is such a challenge. To addicted smokers, one additional cigarette provides a lot of pleasure and satisfaction —it activates the dopamine receptors in their brains. And the cost of smoking one additional cigarette, both to their health and wallet, is negligible. People who try to quit smoking must give up the pleasure of smoking and instead incur the pain of dealing with cravings each time they make the marginal decision not to smoke.

    The Power of Short-Term Feedback

    If high marginal costs relative to marginal benefits prevent us from keeping our New Year’s resolutions, then finding ways to lower the marginal costs should raise our chances of success.

    People can lower the cost of exercising by finding physical activities that are fun to them, such as dancing, hiking, or even hula hooping. They can lower the cost of eating healthier by avoiding temptation — keeping junk food out of the house, using grocery pick-up services to avoid impulse purchases, or using online resources to plan healthful meals.

    More often than not, these efforts alone are not sufficient. To truly succeed with these long-term goals, we also need ways to increase the marginal benefits.

    Insights from behavioral economics indicate that when it comes to increasing the odds that individuals will sufficiently constrain their behavior in order to accomplish a long-term goal, receiving regular feedback about their efforts is key. People are much more likely to continue to work hard when they receive positive affirmations that acknowledge their efforts. Similarly, negative feedback received when individuals slack off imposes a mental cost that many will actively try to avoid.

    Entrepreneurs have long recognized the potential to generate value for consumers by providing goods and services tailored to helping people commit to long-term goals by providing this feedback. Weight Watchers and other types of support groups have been around for decades. The success of these programs can be attributed, at least in part, to the regular feedback participants receive.

    More recently, there is a flood of new products and phone applications that allow you to track your progress and remind you to work out and log your meals. From Fitbits and Apple Watches to apps like MyFitnessPal and Noom, people who embark on the arduous journey of forming healthier habits have a feedback mechanism literally at their fingertips.

    So before you give up on your New Year’s resolutions, it might be worth thinking about how to lower the marginal cost or increase the marginal benefit of sticking to your goal.

  12. What do Politicians Mean by “Pro Business?”

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    “Pro-Business” can mean a few different things when it comes out of politicians’ mouths. It could mean they want to let free markets create as many jobs and opportunities as possible, or it could mean they want to treat the economy like a machine, pulling levers and pushing buttons to pick winners and losers. Mercatus Senior Research Fellow Matthew D. Mitchell explains.