Gaming Gainful Employment

It looks like the U.S. Department of Education is fudging the numbers...again.

The Obama administration is taking another run at imposing onerous gainful employment regulations on private, for-profit career colleges.

Under the new proposed regulations unveiled earlier this year, for students to qualify for federal aid for-profit career colleges must prove the estimated annual loan payments of graduates do not exceed 20 percent of their discretionary earnings, or 8 percent of their total earnings, and the default rate for former students does not exceed 30 percent.

Education Secretary Arne Duncan insisted that 72 percent of career college graduates earn less than high school dropouts. That figure was soundly discredited, but it seems the department hasn’t learned its lesson about fudging the numbers. As’s Bre Payton reports:

The U.S. Department of Education doesn’t know for sure how many comments the public submitted to it nearly four months ago about the controversial “gainful employment” rule.

Experts say the “witch-hunt” like rule ought to be able to stand up to feedback from those affected by it, but while the public comment period closed May 27, the department still hasn’t “counted up an exact figure” of comments received.

The department is instead “spending our time having conversations and crafting a rule that will best serve students,” a spokesman from the department said on background in an email to ...

The department spokesman confirmed staff received “less than 100,000 comments this go-around.”

Advocates worry the department’s opaque treatment of these comments is not only a transparency issue, but a disservice to the rule-making process.

If gainful employment regulations go through, they’ll also inflict more hardships and less opportunities for students and taxpayers.

Jameis Winston . . . Again?

jameisIf you’re even a little bit of a sports fan, you probably know that Florida State University’s quarterback, Jameis Winston, has been suspended from the first half of the FSU-Clemson game for standing on a table in the student union and shouting out obscenities. As good as he’s been on the field, Jameis has been in the news a lot over the past year, receiving negative publicity for his off-the-field activities.

I’m on the faculty at Florida State, and when I heard the news, I questioned whether his offensive behavior really warranted that punishment. He offended some people (most of them, people who weren’t there at the time but just heard about what he did on the news), but he didn’t hurt anybody, and he apparently had no malicious intent. But, I thought, maybe because this isn’t the first time he’s done something questionable, the suspension is warranted as a warning in light of all he’s done before. (I’m not talking about a rape accusation, which is a matter for law enforcement.)

But now I’ve been told by a student who was there when the incident happened that Jameis was only one of about 15 individuals who were standing on tables and shouting the same obscene phrase. I’ve never seen this in any of the news stories about the event. I’m hearing this second-hand and taking the student’s word that Jameis was just one of more than a dozen engaging in the same acts. I wasn’t there . . . but neither were members of the news media who are now reporting the story.

If it is true that Jameis was just one of many, then I’m thinking his suspension is unfair. None of the others have even been mentioned, let alone punished. While at first it appears that there is some parallel here with the NFL sanctions for players who have behaved badly off-field, the parallel breaks down because the NFL is a private organization (albeit with monopoly powers protected by the government) whereas Florida State University is most definitely a government institution. Private organizations can make their own rules. Governments should follow rule of law.

If the student’s eye-witness account is accurate, Jameis was just trying to be one of the guys, although admittedly, one of the guys engaging in offensive and rude behavior. But he meant no harm, and rudeness is normally not a punishable offense. (Increasingly, offending people is.)

Should a government organization really be punishing people for behaving crudely in public? That, in itself, is questionable, but if it is the case that Jameis was just a part of a larger rude group with no malicious intent, and he’s the only one who was punished, that’s another issue.

If Florida State University were a private organization, I’d say that they can do what they want (even if I disagree). But as a government organization, FSU should be obligated to follow the rule of law and to treat everyone equally. After hearing a student’s account of the event (no media was present to witness it), I question whether FSU’s bad boy was treated fairly in this case.

The Giver’s Dystopia: Total Equality and No Humanity

tg-180x300Submitting to censorship is to enter the seductive world of The Giver: the world where there are no bad words and no bad deeds. But it is also the world where choice has been taken away and reality distorted. And that is the most dangerous world of all.” —Lois Lowry

Last month, I had the pleasure of reading The Giver and seeing its recent film adaptation. After hearing many of my friends rave about the book, I decided to read it myself (for some reason, I was never assigned this book during my grade school years). I was not disappointed. Despite being a children’s novel, The Giver deals with many mature themes and offers a deep, thought-provoking commentary on politics and society.

The Giver presents us with a world where war, poverty, crime, suffering, and bigotry have been completely eliminated. In this utopian Community, people strive to maintain “Sameness” where everyone and everything is equal and same. But the reader quickly perceives something is wrong with this supposedly perfect society. Memories of basic human emotions such love, hate, and empathy have been completely suppressed in the populace; and defining cultural features including art, music, literature, and even color, have also been completely erased. Both the best and the worst aspects of humanity are instead stored within the mind of the titular character, the Giver. As the Giver explains to the protagonist Jonas in the novel: “Our people made that choice, the choice to go to Sameness. Before my time, before the previous time, back and back and back. We relinquished color when we relinquished sunshine and did away with difference. We gained control of many things. But we had to let go of others.”

Despite taking liberties with the novel, the film adaptation made graceful use of black-and-white cinematography to showcase a colorless dystopian world and slowly transitioned to full color as Jonas gradually learns the truth about his society and its past. Most of all, the main theme of the inspiring individual struggling against the all-powerful State was not lost in the film. After Jonas was selected to be the new Receiver, he realized the vast social cost that had to be paid for his Community to achieve perfection and “Sameness.” READ MORE

Smarter Forest Management Could Yield Water for California’s Population Growth

30839009_MThere is mounting evidence that poor policies are creating California’s water troubles. California has a policy problem disguised as a water problem. The poor policies create massive misallocation of water and water waste throughout the state.

More evidence of this comes from Roger Bales, a hydrologist with the University of California, Merced, and Scott Stephens, a professor of fire science at the University of California, Berkeley. Professor Bales argues that the Sierra Nevada, which is the source of 60 percent of California’s water in a typical year, has twice the number of trees than 100 years ago. Deliberate government policies to limit timber harvesting and suppress naturally caused forest fires have produced overgrowth.

All of these additional trees over millions of acres consume snowpack runoff that in the past would have emptied into California’s streams, rivers, reservoirs, and canals for use throughout California.

The solutions are to allow more naturally caused low-intensity fires to burn and allow timber companies to harvest small trees, especially thirsty pines, to thin the forest. But government policy has generally prevented either solution, often because of opposition by environmental groups. Once again, good intentions have resulted in harmful unintended consequences, this time less water for people and more high-severity forest fires when fires occur.

Thinning the Sierra could provide up to one million acre-feet of water annually, according to Professor Bales—enough water for the yearly needs of two million California households. Incidentally, the San Francisco Bay Area is expected to add two million people by 2040.

A Very Weak Case for Hospital Mergers

One consequence of Obamacare is 18862233_Shich can reduce competition and increase prices. Writing in the Wall Street Journal, Dr. Kenneth L. Davis, MD, CEO and President of Mount Sinai Health System in New York City, puts forward a number of claims in favor of hospital consolidation. Each assertion is weak, making an unconvincing argument overall.

First, Dr. Davis asserts that the new goal of hospitalization is not to make any individual patient well, but rather to improve “population health management.” Dr. Davis’s theory of population health management leads him to conclude that “stand-alone hospitals have neither the number of patients to manage the actuarial risk of population management, nor the geographic coverage to serve a large population. Hence the reason for allowing strategic hospital mergers.”

Wait a minute: Actuarial risk is managed by insurers, not providers. When we talk about insuring buildings, we look to property insurers to take on actuarial risk, not construction companies. The latter have to manage engineering, budgetary, and other risks. Similarly, hospitals already have enough medical risks to manage, without expecting them to take on actuarial risk as well.


Perfecting Tyranny

tir_19_2_210When discussing the costs of foreign intervention, it’s typical for scholars, elected officials, and the general public to focus on the international consequences. As the U.S. prepares for new offenses in Iraq and Syria, for example, many have called into question issues of civilian casualties, the impact on these countries’ political and economic systems, and how these policies will impact international relations.

But foreign interventions do not only impact people “over there.” In the most recent issue of The Independent Review, my co-author Chris Coyne and I examine how foreign interventions undertaken by the U.S. government have long-term domestic consequences. In the article, “Perfecting Tyranny: Foreign Intervention as Experimentation in State Control,” we explain how foreign interventions work to increase the scope of government activities domestically, resulting in a reduction of citizens’ liberties and freedoms.

We argue that foreign interventions serve as a sort of “testing ground” for the U.S. government to experiment with new forms of social control. Domestically, the government faces constraints on what it may and may not do to U.S. citizens. When intervening abroad, however, many of these constraints are either weakened or altogether absent. Without these restrictions, the government is able to develop and hone new methods of social control. We identify the channels through which these new methods are imported back into the U.S. and show how these changes allow the government to become more effective at controlling not only foreign populations, but the domestic population as well.

Through our theory of the “boomerang effect,” we demonstrate how foreign interventions generate changes in technology and professional skills (what economists call “physical” and “human capital”) which lowers the cost of using social control technologies domestically. We illustrate how foreign intervention changes the structure of the larger government, as well as private and public industry. These changes allow for social control methods to be more easily implemented domestically.

We apply our framework to two cases—the origins of national surveillance (NSA) and the creation and rapid increase in the use of police paramilitary units (PPU) or SWAT teams in the U.S.

The idea that foreign interventions have real domestic consequences has important implications. It implies that a government, though technically abiding by domestic laws, may nonetheless erode the liberties and freedom of its own citizens through foreign intervention. It also indicates that it is important to examine the scope of government activities, in addition to the scale. With the notable exception of Robert Higgs’ work, most scholars tend to focus on issues of scale. This work indicates that issues of scope are just as important for those of us concerned about individual liberties.

Lastly, this work illustrates another cost of engaging in foreign intervention. I discussed in my last post how the actions of the U.S. government abroad have unintended costs. Before advocating intervening abroad, we should consider that such actions may not only cost us monetarily, but we may pay with our freedoms.

Governments often utilize rhetoric of freedom and liberty to justify foreign interventions. This supposed commitment to higher ideals is indicated by the names the U.S. government has assigned to recent foreign military interventions—Operation Enduring Freedom, Operation Iraqi Freedom, Operation Falcon Freedom, and so on. Despite this rhetoric, it may be the case that foreign interventions do more harm to freedom than good. Foreign interventions change the fundamental structure of the system intended to protect us from government suppression. These changes are likely to erode, not protect, our liberties.

Celebrating Human Action—Ludwig von Mises’s Masterpiece

B976September 14 marked the 65th anniversary of the publication of Ludwig von Mises’s masterpiece Human Action. I have been studying Mises’s classic text very carefully the past two years, as I’ve completed the manuscript for a forthcoming Independent Institute book, Cooperation and Enterprise: The Economics of Choice, that crystallizes the essence of Human Action for an undergraduate reader. Fresh off of this journey, I wanted to summarize two of the main themes in Human Action.

Let’s begin with the title itself, which I remember struck me as an odd choice for a book on economics. Yet Mises explains in the opening of his treatise that the narrow subject matter of technical economics is not a self-contained discipline. Instead, Mises argued that the subjectivist revolution ushered in by Carl Menger (as well as Léon Walras and William Stanley Jevons) required placing the study of market phenomena within the broader context of a study of purposeful human behavior, or what Mises simply called action. Here is how Mises explains this development in the social sciences:

[T]he transition from the classical theory of value to the subjective theory of value was much more than the substitution of a more satisfactory theory of market exchange for a less satisfactory one. The general theory of choice and preference goes far beyond the horizon which encompassed the scope of economic problems as circumscribed by the [classical] economists.... It is much more than merely a theory of the “economic side” of human endeavors.... It is the science of every kind of human action. Choosing determines all human decisions.... The modern theory of value widens the scientific horizon and enlarges the field of economic studies. Out of the political economy of the classical school emerges the general theory of human action, praxeology. [Human Action, p.3]

For the present post, I can’t do justice to Mises’s strategy outlined in the quotation above. Instead, let me summarize one of the arguments I made in defense of Mises’s methodology in my 2013 debate with David Friedman: Most economists would consider themselves very strong proponents of “free trade,” but how did they arrive at this conviction? Was it because they made falsifiable predictions about GDP after a trade deal was signed, then ran regressions after the fact to see if the observed outcome was close enough?

Of course not. Rather, people turn into “free traders” by thinking through the logical consequences of thought experiments. In this respect, Bastiat’s famous satire “Petition of the Candlemakers” is worth a thousand regressions. Notice that my remark doesn’t indicate that economics is really “ideological and not scientific.” Rather, my remark indicates that when it comes to economics, the truly scientific approach differs from what works in the hard natural sciences, like physics or chemistry. Those who criticize Mises’s views as being unscientific, dogmatic, or anti-empirical are clinging to a crude notion of how “science” must operate.

The other theme I want to highlight is the importance Mises placed on economic calculation. Other economists of his day recognized that the use of resources carried opportunity costs, and that decisionmakers—whether entrepreneurs in a market or central planners in a socialist commonwealth—had to reckon with these costs when forming production plans.

Yet Mises described the institutional prerequisites for accurate cost accounting: namely, private property in the means of production, and the use of money. (For this reason, I use the term monetary calculation rather than the shorter term calculation that Mises and his followers often employ.) The mental operations of double-entry bookkeeping are only a useful guide to action when the numbers emerge from a genuine market process. This insight is the starting point for Mises’s pioneering work on the problems with socialism, the function of entrepreneurship, and the driving force of money.

Now in its 65th year, Ludwig von Mises’s classic, Human Action, remains as relevant and insightful as ever. All serious students of economics should read this admittedly lengthy volume for a fuller appreciation of the market economy.

Obama’s Latest Hostile Takeover Target: Private Career Colleges

ObamaClassroomThe Obama administration’s latest college crusade claims it will help students. In reality, it’s a hostile takeover attempt by government of the private for-profit career college sector that will hurt students, taxpayers, and the economy.

Education Secretary Arne Duncan acknowledges that the “majority of career colleges play a vital role in training our workforce to be globally competitive.” Yet he insists that students must be protected from debt he says is foisted on them by a relative handful of bad actors.

Rather than hold those select institutions accountable through existing laws, since 2010 Duncan has been attempting to use his department to gain control of the private for-profit career college sector, which is the fastest growing nationwide increasing from 200,000 students in the late 1980s to 2 million as of 2010 (pp. 2, 5, 7-8).

This isn’t the Obama administration’s first attempted takeover of higher education.

Thanks to an Obamacare provision the U.S. Department of Education took over direct lending to students. Duncan insisted that the feds would be more efficient and cost-effective than private lenders, but costs actually went up. In recent years the Obama administration has also pushed interest rate freezes on federal student loans, which have done nothing to make a college education more affordable.

The administration’s latest takeover scheme is attempting to impose onerous regulations on all private for-profit career colleges.

Back in 2010 the U.S. Department of Education unveiled a set of proposed “gainful employment” rules requiring private for-profit colleges to meet mandated loan repayment rates and debt-to-earnings levels before their students could qualify for federal student aid.

In 2011 the department unveiled the final gainful employment regulations, which deemed students’ employment “gainful” only if it was “in a recognized occupation.” The regulations further mandated that at least 35 percent of former career college students must be repaying their loans; the estimated annual loan payments cannot exceed 30 percent of their disposable income; or the estimated annual loan payments cannot exceed 12 percent of former students’ total earnings.

The regulations were supposed to go into effect on July 1, 2012, but they were struck down the day before by Federal Judge Rudolph Contreras for being “arbitrary and capricious.”

In 2013 the Obama administration revived its crusade against what Duncan called “predatory” career colleges with proposed mandates that are no less arbitrary or capricious than their predecessors. Under the new proposed regulations unveiled earlier this year, for students to qualify for federal aid for-profit career colleges must prove the estimated annual loan payments of graduates do not exceed 20 percent of their discretionary earnings, or 8 percent of their total earnings, and the default rate for former students does not exceed 30 percent.

Duncan justified the move saying that “of the for-profit gainful employment programs the Department could analyze and which could be affected by our action today, the majority—72 percent—produced graduates who on average earned less than high school dropouts. The Washington Post’s Fact Checker found that this claim didn’t come close to passing the Pinocchio Test:

Could attending a for-profit institution actually result in a three-out-of-four-chance of earning less than a high school dropout?...In straining for a striking factoid, the Education Department went too far.

Department of Education officials insist that 90 percent of career college students losing aid will find suitable alternatives, but independent research concludes the figure will be far lower.

Should the Obama administration succeed and gainful employment regulations take effect next year, more than 4 out of 10 students currently enrolled at private for-profit career colleges could lose access to federal financial aid. Over the next decade as many as 7.5 million students could lose access.

And who are these students?

Most of private career college students are older adults, more than half (51 percent) are low-income, and 80 percent of them are the first in their families to attend college (pp. 9 and 23). Moreover, close to half of all career college students (49 percent) are high-risk students, compared to less than 20 percent at public and not-for-profit institutions.

Compared to public institutions private for-profit career colleges enroll more women and minorities, not to mention more than one-quarter of military family members (28 percent).

These students seek out private for-profit career schools precisely because the public and non-profit sectors aren’t the right options for them, including not offering the desired degree programs or flexible schedules that help them balance family and career responsibilities. Forcing these students into schools and programs the feds (and their union allies) prefer won’t help them or taxpayers.

The net taxpayer cost of a private for-profit college student is $183 compared to more than $13,000 per public college student (2013 Fact Book, p. 40). If private for-profit options aren’t available, many of these students would have to transfer to public colleges at cost taxpayers nationwide an additional $1.7 billion annually. In the long-run gainful employment regulations could cost students and taxpayers even more.

As many as 23 million skilled and educated workers are needed over the next decade, and private for-profit career colleges specialize in offering degree programs in the highest-growth occupational fields (2013 Fact Book, pp. 37-39).

At a time when 90 million Americans are undereducated, 12 million are unemployed, and family incomes are down, a government takeover of education through gainful employment regulations is the last thing American students, taxpayers, or our economy needs.


Never Forget

Beacon...that 9/11 was successfully carried out because American government agencies with very large budgets, and with more than sufficient spying authority, ignored multiple reports that had been spoon-fed them by their own agents:

In a memo from the Phoenix FBI to headquarters, the agents recommended an urgent nationwide review of flight schools “for any information that supports Phoenix’s suspicions” of a terrorist connection. The memo reportedly cited Osama bin Laden by name.

...that the attacks of 9/11 were followed by an avalanche of lies from the U.S. government, foisted upon the American public in support of unleashing invasive, “pre-emptive” wars and fueling the greatest growth of U.S. government power in history. Increased federal spending by more than 50% under President Bush ranged from pure pork—a farm bill larded bigger and better and an 80% increase in spending on education—to spy agencies that capture and indefinitely store every detail of every American’s life (including every nude selfie or other salacious tidbit from your phone or email now providing amusement for the otherwise bored boys at the NSA).

...that the U.S. government has propped up brutal dictator after brutal dictator in the name of fighting an “even worse evil:” Do Americans have no memories, or study no history? Can we not remember Stalin, Vietnam, the Shah of Iran, Saddam Hussein, and others petty and great? Backed by millions and billions of dollars of U.S. spending providing arms and training that have subsequently fueled the power behind the Taliban, al-Qaida, and others.

If not history, what about current affairs: Col. Gadhafi, rehabilitated by George W. Bush and Condeleezza Rice as “a model” for others to follow, killed under the Obama administration, and succeeded, with “our” arms, by the Islamic State.

“The enemy of my enemy is my friend” is not a Judeo-Christian value. It is reportedly taken from the Arthashastra—something of a 4th century precursor to Machiavelli:

a book that frequently discloses to a king what calculating and sometimes brutal measures he must carry out to preserve the state and the common good.

The U.S. government has failed, and badly, its established role of either providing our own security, or that of peoples around the world. It is time to say, “Enough” and insist upon a restoration of our Founding principles.

We can then concentrate on serving as “the shining city on a hill,” providing inspiration to the masses yearning to be free globally.

As President Reagan put it:

“[N]o arsenal or no weapon in the arsenals of the world is so formidable as the will and moral courage of free men and women.”

The Soviet Union fell in a “velvet revolution,” as the Poles and other enslaved peoples threw off their captors through such will and courage, inspired especially by Pope John Paul II.

China began its continuing, long journey from brutal repression to liberty by the opening of trade with the U.S., not economic sanctions or the dropping of bombs.

Homegrown opposition in Nepal has turned back the murderous Maoists threatening its people.

In Tunisia, birthplace of the Arab Spring, a new Constitution:

As he was signing the new constitution, Tunisia’s President Moncef Marzouki observed that “With the birth of this text, we confirm our victory over dictatorship.” It was not about trading in a “better” dictator for a “worse” one.

These are the pockets of hope that individual Americans and its politicians ought to hold up, and encourage their emulation.

Meanwhile, we the American people need to hold our own governments accountable to us and quit permitting their reckless endangerment of our lives, liberty, prosperity, and the future of our country and our children.

Arming Syrian Rebels—Afghanistan Deja Vu?

mccain-syria-rebelsConcerns over the Islamic State of Iraq and Syria, or ISIS, have continued to grow. Last night, President Obama addressed the nation on the “ISIS threat.” He announced his intentions to provide further assistance to opposition groups. More specifically, he is asking Congress for $500 million to arm and train “moderate Syrian rebels.”

The idea of sending weapons to fight a regime or group deemed “unfriendly” to U.S. interests is not a new phenomenon. In fact, between 1970 and 1979, the U.S. arranged for more than $74 billion in weapons to be sent abroad. This number has only continued to climb. The logic behind sending weapons is straight forward. By selectively equipping groups friendly to U.S. interests, the U.S. government is able to “tip the scales” in a particular conflict. The U.S. can effectively defeat the opposition with fewer or no American troops on the ground. Moreover, once the conflict has come to an end, those in power (i.e. those who received military assistance from the U.S.) will look to maintain relations with the U.S. so as to obtain more benefits. In essence, by providing arms, the U.S. is able to end a conflict, position a “friendly” regime to take power, and ultimately influence international policy.

As appealing as this narrative sounds, in reality it’s not that simple. The scenario suggested by the President and others falls prey to linear thinking. That is, such plans assume that the U.S. government can 1. identify a problem, 2. construct a solution, and 3. implement it. This type of thinking maintains that an intervention only impacts those areas which the U.S. government intends.

What this type of thinking ignores is that it is impossible for these kinds of interventions to do only one thing. When acting in a complex system like Syria, there are innumerable moving parts, literally millions of actors, each responding to their own unique incentives. It is impossible to know at the start how interfering in one part of the system will impact other parts, either immediately or in the future.

Take, for example, the Soviet occupation of Afghanistan in 1979. In an effort to drive out the Soviet Union, the U.S. chose to arm a rebel group, the Mujahedeen. Reflecting upon the conflict in 1983, President Reagan stated that,

To watch the courageous Afghan freedom fighters [Mujahedeen] an inspiration to those who love freedom....The West has no designs upon Afghanistan....All we seek is the restoration of peace and freedom for a noble and brave people

Arming the group may have had the desired short-term effects. The Soviet Union ended its occupation in early 1980 and the U.S. military sent no troops to the region. But the consequences of the policy had long-reaching effects. The Mujahedeen were able to gain control of the country. But those “freedom fighters,” once lauded as heralds of liberty, formed the Taliban. Afghanistan became a safe haven for individuals like Osama bin Laden and others, who not only opposed the interests of the U.S. government, but directly impacted the freedom of Afghan citizens.

The situation in Syria is no different in principle. Syria’s regime is unfriendly to the U.S. The country is in the midst of an ongoing civil war with a death toll considered tragic on any margin. But the idea that the U.S. can arm rebels and keep weapons in “responsible and moderate” hands is unfounded in theory and practice. If the U.S. were to send weapons to Syria, there are no guarantees how such weapons would be used, who would ultimately possess them, or how such an arrangement would change conditions over time. If Afghanistan and other U.S. ventures into the Middle East are any indication, there is a very real possibility that weapons sent to protect U.S. interests today could be used to threaten them tomorrow.

The situation in Syria is undoubtedly a difficult one. Mounting international concerns have placed new pressures on the U.S. government to “do something.” But before advocating or undertaking any action in Syria, it is imperative to understand that such interventions have costs. Many of these costs are not visible and won’t materialize immediately. Pretending otherwise will yield disastrous results.