Wealth: Distribution or Creation?
Nov 6th, 2007 by Micah Tillman | 17 Comments |
In his book, The Undercover Economist, Tim Harford said something I’d never considered before:
Both seller and buyer come out ahead on their exchange. The seller wants the buyer’s money more than the product he’s selling. The buyer wants the seller’s product more than her money. An exchange happens and both profit.
Charities aren’t like that. The buyer (”donor”) loses. That’s why it’s called charity.
(And that’s why we get angry at televangelists and have Senators investigate them. They pose as charities, so their donors lose like all donors do. But instead of using the money to benefit others — like real charities would — televangelists purportedly keep [large chunks of] the money.)
Radioheads aren’t like that either: “Some 62 percent of the people who downloaded ‘In Rainbows’ in a four-week period last month opted not to pay the British alt-rockers a cent.”
Whenever the Left talks about “wealth” changing hands, they use the word “distribution.” That does seem to be what happens with charities and Radioheads.
But I’ve also heard people talk about wealth “creation.” That does seem to be what happens when people buy stuff from other people. Somehow they both have more than what they started with.
So is wealth “creation” possible? Or is all wealth exchange a matter of “distribution”? (Aristotle has some things to say about distribution and justice. But it’s too late to bring him in here at the end of this post).
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I am a less…coherent thinker than my husband, but here is my stab at this:
If wealth is defined entirely as bars of gold, and we imagine
that all the gold on the planet has been extracted and turned into bars, then wealth is just distribution, and cannot be created.
But if this is all wealth is, it doesn’t seem very useful.
Doesn’t it depend upon how we define wealth?
It seems to me that a lot of class resentment comes because people imagine that wealth is like a big pie, and every large slice for one person means less pie for everyone else. But wealth is not a zero sum game.
Is wealth “stuff” and luxury? If it is, in the very short term, it’s not obvious that wealth is created, rather than just distributed. But if wealth is “stuff” and luxury, then much of the world is a great deal wealthier compared to 1000 years ago. If wealth is “stuff” and luxury, then surely indoor plumbing, air conditioning, the steam engine, waterbeds, and the Nintendo Wii are examples of wealth creation.
Is wealth a healthy and long life? This is obviously not
simple distribution of a single health pool. Your good
health does not result in my being less healthy. As for wealth creation in the area of health, I submit: surgery, anesthesia, and modern dentistry.
Is wealth time? Improved farming technology means a few people can grow enough food to feed millions, freeing those millions to focus on other tasks, such as inventing plastic or pitching in the World Series. Electric/gas water heaters and stoves are safer, heat more evenly, and require less time than the coal and wood burning versions they replaced.
So wealth creation is about new ideas, inventions, and techniques that improve quality of life.
Thanks Lesley! Andrew’s coherent thinking is extremely helpful. :-)
I think you’ve nailed the fundamental issues in this response. I’m going to use it in my further pondering on the issue.
Good distinctions (and that’s high praise coming from a student of Msgr. Robert Sokolowski, who says drawing distinctions is the very method of philosophy :-)
Lesley is just being modest, of course. I was almost tempted to write an apologia for capitalism in response to this post, explaining why I am a capitalist pig, but I refrained.
*laugh*
If “capitalism” means “the theory in which capital is the thing of highest value,” then I can’t call myself a capitalist.
But if it means “the theory that the market should be free” then I think it’s the way to go.
One of these days, however, I’ll have studied enough economics to have an informed opinion on the subject. At the moment, I just have the appeal of freedom.
Lesley Stevens beat me to it and did a bang-up job!
I have strong libertarian leanings, and Lesley’s pie analogy is often used in those circles.
In a free market, everyone has his own pie and can make it as big as his motivation and talents allow him to. That’s what wealth creation is about. And the bigger my pie, the more I can benefit others indirectly.
As Lesley points out, inventions are a way of creating welath for everyone. Thomas Edison became a wealthy man through his inventions, but look at how they have blessed us. They have not made our “pies” smaller but larger.
Those greedy capitalists benefit everyone else by their inventions, their production, their job creation, their invenstments, and their spending.
[...] cases of distribution (which I was wondering about a few posts back), justice is established through proportionate equality. Those who deserve more (honor, love, [...]
Hmmm. I think maybe I’m a bit left of some of the folks who posted above. A few observations in no particular order:
#1) There are some situations in which a buyer is effectively forced into buying at prices which do not leave him either feeling or being a winner. I think our version of Capitalism does a fairly effective job of limiting these; but monopolies, vertical integration, and other anti-trust issues can create a situation in which an agent is forced into purchasing a necessity at a damaging price.
#2) Donators to charity do walk away with something for the money. It’s not a tangible good, but neither is a massage or a therapy appointment. Just like therapy patients or massage clients, donators choose to donate based on the nonmaterial benefits. The benefactors get to feel good, earn bragging rights, confirm their beliefs, whatever… This is not to say that we shouldn’t donate. I’d just say that this economic arrangement isn’t as unique as it first appears.
#3) Just like we could weigh all the gold, or count up all the money in the world, we could ultimately catalogue every form of capital. Services, of course, we couldn’t actually store in a physical place, but there is still an upward limit to them. The fact that there is a theoretical limit on goods and services implies to me that distrubtuion really is a zero-sum game, and that wealth “creation” is a bit of a misnomer, if the implication is that the creation is ex nihilo.
#4) One of the measures of how just/fair/equitable our society is shouldn’t be based on whether there is the theoretical possibility of all people reaching the same level of success… it should be based on the equality of opportunities; we shouldn’t pat ourselves on the back if their is a .00000001% chance that a student in an inner city school will reach the same wealth as a suburbanite. The intensity with which we pat ourselves on the back should be proportional to how close the chances for economic success are between the students in two widely different situations.
I’m not convinced that simply redistrubuting wealth equalizes these chances: I think if we leveled the playing field in that way in this generation, next generation things will be close to where they are now… I believe that the inequalities are much more insidious than the amount of money in our back accounts.
UPDATED:
Jeff–
Thanks for the input!
On #1
Good points. But if the buyer didn’t want what he bought more than he wanted what he had, he wouldn’t buy it. Would he?
This does bring up an interesting question, though: Should buyer and seller be equally happy about how far ahead they both come out? It would definitely seem nice if they were.
On #2
Seems to me that if charity is a purchase then it’s not morally good and therefore isn’t charity. Charity is giving. Right?
Certainly we feel good about being good, but the moment we start thinking about purchasing goodness is the moment we . . . I don’t know. Become morally warped?
I like calling people morally warped *grin*
On #3
I don’t know what an “upward limit” on services means. Perhaps you could help me?
I’m suspicious of the zero-sum assumption at least for the reason that Marx failed at predicting what was going to happen economically under that assumption, even though he was such a brilliant analyst.
On #4
I don’t think we should pat ourselves on the back for anything we don’t personally do. But knowing there’s an equality of opportunities would definitely make me feel good!
I hope Jeff doesn’t get the impression that I’m picking on him when I critique his arguments here.
#1) There are some situations in which a buyer is effectively forced into buying at prices which do not leave him either feeling or being a winner. I think our version of Capitalism does a fairly effective job of limiting these; but monopolies, vertical integration, and other anti-trust issues can create a situation in which an agent is forced into purchasing a necessity at a damaging price.
In a system of voluntary exchange, nobody pays more for a thing than it is worth to them (except in cases of imperfect knowledge, e.g. fraud or a mistake made by the purchaser), as Mr. Tillman points out above. For example, if I were dying of thirst in a desert and somebody found me and offered to sell me a glass of water at a price of $1,000,000, I would happily pay it and be grateful for the opportunity to do so. While I might not feel like a winner in this transaction, I unquestionably am one. Jeff is right about the difficulties caused by monopolies. People might be paying more for something than they would under a system of perfect competition. (This is Adam Smith’s “invisible hand” theorem. Perfect competition creates the optimal amount of goods.) However, markets don’t create monopolies. Governments do. Markets break up monopolies.
#2) Donators to charity do walk away with something for the money. It’s not a tangible good, but neither is a massage or a therapy appointment. Just like therapy patients or massage clients, donators choose to donate based on the nonmaterial benefits. The benefactors get to feel good, earn bragging rights, confirm their beliefs, whatever… This is not to say that we shouldn’t donate. I’d just say that this economic arrangement isn’t as unique as it first appears.
I actually agree with this 100%. Whether this makes people “morally warped” as Mr. Tillman thinks, I don’t really have an opinion about.
#3) Just like we could weigh all the gold, or count up all the money in the world, we could ultimately catalogue every form of capital. Services, of course, we couldn’t actually store in a physical place, but there is still an upward limit to them. The fact that there is a theoretical limit on goods and services implies to me that distrubtuion really is a zero-sum game, and that wealth “creation” is a bit of a misnomer, if the implication is that the creation is ex nihilo.
This is both true and false. It is certainly the case that goods and services are scarce, i.e. there is an upward limit to them (particularly at any given point of time). Indeed, this is the reason why we need an economic system. If goods were infinitely abundant, we wouldn’t need economics at all since we would be living in Utopia. All economic systems, then, are systems of denial. We can’t all have everything we want, so we must deny things to people. Capitalist systems use capitalist systems of denial (if you can’t afford it, you can’t have it). Socialist systems use socialist systems of denial (if the government decides you can’t have it, you can’t have it). Many people who espouse, for example, socialist health care seem to believe that we will suddenly live in a world of plenty and health care won’t be denied to anyone. But this can’t be true since we have a more or less unlimited demand for health care. All socialist systems have to ration just as capitalist systems do. The first thing to go in most socialist health care systems (though by no means does this have to be the case) is usually research and development, since the effects of the loss of it are long-term and not felt immediately. In this regard, the United States of America, with its robust research and development program, acts as the indispensable capitalist nation. We subsidize the health care of the rest of the world by paying for its research and development. If we socialize, I often worry about who will subsidize us. (Of course, as I said, it is not necessary to get rid of research and development, it’s just that this is an easy thing to cut since cutting it is painless in the short term.)
By the way, I should comment that our current health care situation is pretty far from capitalist (due to Medicare, about half of all health spending comes from the government), though it’s much further from socialist than most countries. I don’t actually wish to support our current health care system, which has many very large problems. I don’t even want to claim that it’s superior to socialist systems in other countries. Even if I believe that a capitalist system might be for the best, one can certainly argue that our current system is the worst of both worlds.
However, to conclude from scarcity that wealth creation is impossible seems to me to be false. Wealth creation is the act of moving things from a lower-valued use to a higher-valued use. When you pick an orange off a tree and eat it, you are creating wealth. The orange on the tree was a lower-valued use for the orange. Eating it is a much higher-valued use. Taking gold out of the ground and using it to make jewelry is wealth creation. When I buy a newspaper, I am moving that newspaper from a lower-valued use (cluttering up the shelves) to a higher-valued use (being read by me) and creating wealth. When a man who could be a great poet stops digging ditches for a living and starts writing poetry, he is creating wealth. He has moved his poetic talent from a lower-valued use (digging ditches) to a higher-valued use (writing poetry). As long as this genuinely is a higher-valued use, he will then be paid more for his creation of wealth. The fact that there is a theoretical upper limit on this, i.e. that we could reach an optimal point where every good or talent is at its highest-valued use, does not constitute a denial of wealth creation.
Contra Tillman, I’m not sure that Marx actually theorized that economics was zero-sum, though I know this has been argued. I have a couple of problems with the equal distribution proposed by Marx (or, more accurately, distribution by need). For one thing, I don’t think it actually leads to equal outcomes. Forgive me for my hubris, but I am quite gifted at making do with what most people consider a small amount of money. For years, I lived as a beatnik, making far smaller amounts of money than I could have done, because I really didn’t feel the lack. I preferred to work jobs where I didn’t have to work very hard, particularly intellectually, because this freed my mind to think about the things I wanted to think about, rather than the things people would pay me to think about. If we just distributed all the money equally, I would live, in comparison to most people, rather opulently. My abilities at self-denial, buying shrewdly, and saving and investing intelligently would give me far more wealth than most people. Eventually, I assume, the socialist state would be forced to seize my “excess” wealth and redistribute it. However, if I knew that was coming (and, believe me, I would), I would then have an incentive to simply waste my excess, taking opulent vacations or whatever, things that I don’t even particularly want. This would, ultimately, not be in the best interests of society.
The second problem is that capitalism did provide me with an incentive to move my talents from lower-valued to higher-valued uses. Even so, it wasn’t enough incentive for years. In a socialist society, I would have no incentive at all and society would never be able to make optimal use of my ability.
The fundamental problem with Marx’s analysis was the labor theory of value. For this, Marx deserves no criticism (though his later apologists might). Adam Smith and other great thinkers of the time also endorsed the labor theory of value, though everybody knew it was incomplete. (Since it implied that digging a huge hole nobody wanted had more value than picking an orange off a tree.) It was the Marshallean revolution in economics (the discovery of supply and demand, basically a mixture of the labor theory of value and the utility theory of value) which really falsified Marx’s economics. Unlike Smith and Ricardo, Marx’s economics absolutely relied on the labor theory of value and could not sustain itself without it.
#4) One of the measures of how just/fair/equitable our society is shouldn’t be based on whether there is the theoretical possibility of all people reaching the same level of success… it should be based on the equality of opportunities; we shouldn’t pat ourselves on the back if their is a .00000001% chance that a student in an inner city school will reach the same wealth as a suburbanite. The intensity with which we pat ourselves on the back should be proportional to how close the chances for economic success are between the students in two widely different situations.
The problem with this analysis is simply that all men are certainly not created equal. For example, the chances of a person with Downs Syndrome reaching the same level of wealth as, for example, Jeff, is basically 0, no matter what system of distribution we had. (Again, the equal distribution theory or even distribution by need would still not solve the problem. The person with Downs Syndrome would always have a lesser quality of life than Jeff.) Inequality is definitely a bug of capitalism, not a feature. On this, we can both agree, but inequality is also a bug of the natural world and we’re rather stuck with it.
I gather, though, that Jeff probably means to compare an ideal couple of people, each with exactly equal abilities, health situations, etc. I agree with Jeff that we’re not at a situation where we have equal opportunities (the abilities and situations of parents matter, because parents are willing and able to pass on their own advantages to their children and will attempt to do so in every way possible), but I believe our current culture is closer to such equality than the current models of other economic systems. Take the remaining communist countries, for example. The leader of North Korea inherited the position from his father. Does anybody believe that Fidel Castro’s children live lives which are at the same level as other Cubans? (To be fair, Castro does appear to forbid them to live luxuriously. But in Cuba, three square meals a day is a luxury.) All societies yet known have fat cats at the top. Capitalist fat cats, however, are less determined by accidents of aristocratic birth and the luck of knowing people with power and influence. It is quite possible for a Bill Gates or a Warren Buffett to become wealthy almost solely by their own ability to create wealth. Moreover, do we really want a system in which it is impossible for parents to pass on their advantages to their children? It is not at all clear to me that this would be a good thing. (For example, then I would again have had very little incentive to turn my talents from lower-valued to higher-valued uses, since I did so only in order to benefit my future children.)
Anyway, my support of capitalism has nothing to do with this particular argument and I don’t want to oversell the “equality” of capitalism. My analysis relies on how good a deal capitalism is for the poor, with no particular regard for how much better it is for the rich. I believe the poor in capitalism fare much better than they do in any other known economic system. (Full disclosure: my family was plunged into poverty when I was very young, due to my father’s schizophrenia, so this is an argument dear to my heart.) Unlike most systems, the poor in America don’t really face a poverty problem. While there are poor people who are dependent on charity (my mother availed herself of food donated to her church), there are very few poor people who are in any realistic danger of starvation. This is because we live in a system which shucks off so much wealth that you can live like a Pharaoh off the garbage of other people. Those that do exist are children in terrible situations (the children of drug addicts or abusive parents, for example). The poor in America do suffer from a crime problem. How this should be dealt with is more a matter of social policy than economics and the correct trade-offs are not so clear. Contrast this with command economies, though, and see the difference. We can argue about how much redistribution of wealth should exist, but I believe the triumph of capitalism over all other tested economic systems has so much evidence behind it that I am baffled that anybody disputes it. How much we should regulate capitalism and how much we should redistribute wealth is an open question, however. There are fairly successful heavily regulated capitalist societies with large amounts of wealth redistribution like Sweden, for instance.
I want to state that I agreee almost entriely with Andrew Stevens.
#1
His point about monopolies needs to be more widely understood. Look at the history of monopolies in the United States. In every case they were businesses that were propped up through various government subsidies, tax breaks, and regulations that shut out competition. Andrew is right that it is governments that support monopolies and free market competition that busts them up.
#3
I want to add stress to Andrew’s assertion that upper limits on wealth creation, particlarly in the sector of services, are temporary. New services usually follow inventions. Think for example, of the entire computer “doc” industry that arose because of personal computers. Or think of the industry of converting home movies to VHS and then to DVD.
As for raw goods, there may be an upper limit in the future. Again, though, technology has so far been able to make more and more of the raw goods that we have and even to help us find more of them.
These are reasons to support and be thankful for the entrepeneurs who are so castigated by liberals.
#4
I agree with Jeff that we could do a lot more, as a society, to even the chances for inner city kids to succeed financially. In my mind the two biggest things that we could do are (1) improve our public schools along the lines of the models provided by successful private schools and/or (2) give vouchers to families so that their kids could attend the school of their choice. But it’s liberals, especially liberals in the teacher unions, that oppose those two things. Except for giving those kids a good education, I’m not sure what we could do to improve their chances of success. I am sure that it won’t be by just giving them more free food or housing.
Fascinating points. I’m clearly out of my element on most of these areas. (As a liberal and member of a teacher’s union, though, I happen to have a certain set of beliefs that I’ll get to in a minute that are baed on first hand knowledge). I’d always heard the argument that a market left unchecked would tend to produce monopolies. I’m unfamiliar with the idea that the U.S. actually created these… I’m certainly not going to debate it, though. There’s a certain logic to the claim that a sufficeintly powerful company could wield it’s economic might to influence government into giving it enough advantages that it becomes the sole provider.
Some of the thoughts on health care I’d not considered. .. Particularly around R & D. I think a factor that should be weighed into the equation is how many health care dollars actually get spent on health care. Despite all the “inneficient government” arguments, something like .95 to the dollar spent on medicare actually pays for goods or services; it’s something like .75 from the best of the private organizations (the “extra” money is spent on beuaracry and profits.)
Several people above were absolutely right to point out that I’m underestimating the value of a profit incentive in private industry. However, a profit motive isn’t the solution to all our ills. Few people find it a good idea to privatize the police or fire departments. Turning on the news shows why it’s a bad idea to privatize the military; I’d suggest that medical care ought to be categorized with this grew up of services best funded without a profit incentive.
As for the issue of vouchers. I’m a Special Education Teacher. In the last ten years I’ve taught in residential schools for behaviorally disordered teen agers, and major urban schools working with b.d. kids. I have a bit of experience and passion on this issue.
The dirty little secret of vouchers is that they actually would benefit the upper middle class in that they might give access to these folks to educations they might not otherwise get. But the results would be devestating to the lower middle class and below. But the deal is that this would happen at the expense of the lowest.
For reasons I’ll go into below, the charter and private schools are not very effective. Anecdotal evidence pops up all the time about how effective they are. But even when it appears they’re doing better this is an illusion rooted in the following:
#1) Private schools and charters have a much easier populations. By definition, these schools have parents more invested in their kids education. Parents of kids in private schools are paying for it. Parents of kids in charter schools have gone through the rigamoral of getting their kids in. The cost and entrance process are actively filtering out kids who would tend to have lower scores. Furthermore, Special Education services are abysmal in both places. Though technically the services should be equal the reality is that parents with Special Needs kids end up going back to public schools because the kids’ needs aren’t getting met.
#2) When they do perform better, it’s because the test is all that’s being taught. At great personal effort I’m restraining from beginning a rant against the way we do standardized testing. For now, I’ll simply assert the claim that the things that standardized tests assess are only a tiny piece of the picture… And the things they assess are the things that private schools and charter schools do best. I’d go so far as to claim that this is not an accident. I believe that the high-takes testing/standardize testing movement has actually been hijacked by the provoucher crowd. They are attempting to discredit urban schools in an attempt to get the inner city vote on board with their agenda. (I’ll defend this claim if anybody wants to take it on, but this is another rant that’ll take pages, so I’ll limit myself here.)
#3) A variety of private and charter schools are spending a large ammount more per pupil than public school counterparts. They’re able to do this through federal and private grants, donations, and tuitions.
The bottom line is that it costs more to provide an education in a private setting. Much like medical care, the issue is with economies of scale and the fact that private industries have to generate a profit. But suppose I grant that private and public institutions could work for the same cost. This is what will happen:
Just to keep the math simple, suppose we currently spend $1,000/child in schools. If we turn this $1000 into vouchers and give it directly to the parents to be used wherever they want, there are two possibilites:
A) The voucher ammount– however much it is– is used to supplement the full tuition ammount. These people would actually potentially end up with a better education. Families which could afford to kick in a bit might see an improvement. (This is the group I alluded to above.)
But how many of us have money? Statistics show that hardly anyone… We borrow for college, we put our utility bills on credit cards, etc. etc. Perhaps we’re wasteful. Perhaps our priorities are terrible. But this won’t change if we suddenly go to vouchers. A few people will prioritize appropriately and find more money for schools. Some people will go further into debt. Most people will end up sending their kids to places that they don’t have to send any extra money to… Because they feel that this is all they can afford.
For the above-mentioned reasons, these schools which except the voucher ammount won’t do a better job than schools.
If we leave public schools at all, they’ll be the repository for societies forgotten… Kids who’s parents can’t get their act together enough to take advantage of the vouchers. There will be no excellent students to act as role models, we’ll have this three-tiered society, worse than it is now.
Another problem in all this is the idea that we’ve sold out the public schools agenda… We’ve turned schools into centers to produce little factories, we’ve forgotten the issue of citzenship entirely.
This is such a huge issue. Probably none of my arguments are particularly new to anybody reading this… But I feel a bit like the guys on the front lines of Vietnam, who nobody listened to, because they felt like the guys involved were too close to the fight… The truth is, that until you’ve watched kids making drug deals on there cell phones of high school cafeterias, until you’re read essays from barely literate teen agers about their first drive by, it’s hard to get how desperate the situation is.
(Having said all that I have to admit that this year I sold out and took a position an affluent suburb. The liberal guilt of accepting a job that I actually might succeed it wakes me up at night, sometimes…)
I can actually name one “pure monopolist” who was not aided and abetted by the government. That would be Alcoa in the first three decades of this century. (Standard Oil was not a real monopolist, controlling only 88% of the refined oil in the United States, but Alcoa had a genuine monopoly on raw aluminum.) I don’t think anyone has ever alleged that Alcoa actually charged an unfair price. For one thing, they had to compete with recycled aluminum. They brought this up in the anti-trust action against them, but were rebuffed by the Supreme Court. They also argued (correctly) that they had attained their monopoly through greater efficiency and lower prices than any competitor could charge. This was uncontradicted, but the Court ruled that irrelevant as well.
However, economists usually define a monopolist as a firm which faces a downward-sloping demand curve. I.e., the firm can lower its price and sell more units or raise its price and sell fewer units. In perfect competition, like agriculture, a firm must accept the market price. Raising its own price would mean that it would sell zero units. By this definition of monopoly, there are a great many monopolies. Coke is a monopoly. So is Pepsi. So is your local convenience store. But now monopoly isn’t so scary. There is some deadweight loss associated with it, but not a lot, and there certainly isn’t any danger of “a situation in which an agent is forced into purchasing a necessity at a damaging price.” The only firms I can think of which could have that kind of power are government-owned or regulated utilities. In a great many countries, the government owns the phone company and treats it as a cash cow, charging far more than the competitive price would be. I can’t off-hand think of a situation where a monopolist has been able to do this in the United States.
I’m disappointed that nobody has called me a capitalist pig getting fat off the toiling masses, a class traitor, or an intellectual puppet of the moneyed class yet.
Private insurance only spends about 16.7% on average, not 25%, on administrative costs, including commission fees, premium taxes, and profits. (It’s as low as 12.5% for large group policies.) It is very difficult to get a handle on what Medicare’s true administrative costs are. For example, Medicare doesn’t need a legal arm to ensure payment; it has the IRS. Medicare doesn’t need to spend any money on premium collection. It forces private employers to collect its premiums as payroll taxes. Medicare doesn’t have to pay taxes; we could achieve this same efficiency in the private sector by eliminating the corporate income tax. Medicare also pays more than twice the amount per claim as private insurance (due to its more elderly population). This also improves its administrative efficiency ratio. Even the salaries of employees is hard to compare. Government agencies do not usually account for accrual of pension liabilities the way private employers have to. There are also things Medicare doesn’t have to pay for because it is the government, but which do represent genuine gains in efficiency, e.g. profits, sales commissions, advertising, underwriting (a biggie), pricing of products, etc., so these things shouldn’t be counted against it.
Putting all those together, I’m not certain who actually wins on efficiency. It could easily still be a Medicare win, but it’s probably not a blowout. However, my argument is that Medicare distorts the market by causing people to overconsume health care (since they don’t have to pay anything for their own health care — it is essentially a “free” good for them) and doesn’t have much to do with the relative efficiency of public versus private. (However, private insurance also introduces these kinds of distortions, particularly the employer-subsidized variety, just not as much.)
On the subject of vouchers, I don’t have a whole lot to say. I’ve never spent any serious amount of time studying the issue. I do have a reflexive abhorrence of government schools engaging in “citizenship” issues though. While I’m sure this could very easily be a good thing, I worry about the possibility of governmental brainwashing. (E.g. see textbooks used in Weimar Germany and their extreme anti-Semitism prior to the rise of the Nazis.) This may very well just be a black helicopter fantasy though and I don’t want to oversell it; I’m not that worried about it. On the other hand, my wife plans to homeschool our children because I wouldn’t trust anyone else, either public or private, to do something so important. Or at least not without an extremely significant amount of oversight.
My own opinion about vouchers has always been why not try them in the inner cities? As you point out at the end of your post, it’s not as if things could get much worse. Since you seem to be worried about their being used as subsidies for the middle class and upper class, by all means let’s means-test them and only allow them to the poor. At the very least, we might get an idea of whether your fears come true or not. But on this subject, I have never made any serious attempt to analyze the evidence. Perhaps I’m wrong.
Interesting… I hadn’t considered that comparing medicare with private insurance is kind of an apples-vs-oranges thing.
As for the issue of citzenship being taught in schools– for my money democracy only works if we have a free, public education system that teaches critical thinking. (I suppose it’s rather convenient to decide that all of western democracy rests on one’s profession. But hey, it’s either that or admit I took the gig for the long vacations. ;) )
If people can’t make effective voting choices, we shouldn’t trust them with a vote at all. Some people have the ability, means, and interest to home school, and I think that’s great (as long as it’s done responsibly… much like public education, I’ve seen home-done educations done very well and done very poorly) but many people don’t have the ability, means, or interest for these people I see that education is huge and that it’s more important that we teach these people to reason clearly and effectively and to understand why and how democracy works than anything else… Sometimes big businesses complaints that graduates are unprepared are legitimate, but other times, it’s simply big business wanting to shift the cost of training employees into the public sector. Corporate sponsorships of charter and private schools, I think, should be much more worrisome to people than the government teaching citzenship… we can wonder and doubt about bias creeping into a government run system, but it shouldn’t even be a question if a corporation is writing checks… of course the corporation’s interests will be served!
Vouchers are being explored in a variety of ways and places. The latest language in the reauthorization of No Child Left Behind (there’s an Orwellian piece of doublespeak!) begins to open that door.
The data from the vouchers is newer than the data from private schools and charters, and my understanding of it comes from folks with vested interests against them (i.e. NEA newsletter, etc.) but it isn’t looking good.
A final note on the subject: Massachusetts (my home state) has taken control of “failing” schools away from local control. The sick/sad/hilarious thing: Scores continue to plummet. (And they’ve had several years now) The agency that’s in charge of holding schools to these standards can’t do any better than the cities. The emporer is butt-naked and nobody is calling him on it!
By the way, I’ll call you a capitalist pig, but only if you call me a commie pinko. I don’t feel like my days complete with out somebody accusing me of being a commie pinko.
Jeff, thanks for your replies.
First let me applaud your work as a special education teacher. You folks are a whole different breed from most other teachers, and it’s sad that you are over-burdened and under-appreciated. You have my respect.
A few questions:
1) Do you agree that getting a good education is the best way out of poverty for inner city kids? If not, then what is a better way?
2) Does it appear to you that 40 or so years of giving free food, housing, and medical care to poor families has eliminated poverty or even made a dent in it? If not, then should we keep doing it?
2) Do you think our public schools are doing a good enough job in providing an education for such kids? If so, then why are so many of them ending up illiterate and unable to qualify for work? Why do so many of them drop out?
3) If private schools are not really doing anything different or better than public schools, then why do so many poor families wish for the chance to send their kids to them? Are they just deluded? Are they just getting “uppity”?
4) If private schools are really doing no better than public schools, then why don’t all rich people (who are supposedly greedy) save their money and send their kids to free public schools? (Why did Chelsea Clinton’s parents send her to very expensive schools if they believe that public education is just as good?)
Thanks for your kindness.
Most of the time I love my job– I almost feel guilty when people are all nice about it, because I feel blessed to get to do what I do.
As for your interesting questions:
#1) I believe that school is one part of the answer. The problem is wider than schools, I think it’s an issue of socialization. I think that schools could be doing even more than they are now, but they would need more resources– better training, better support, better technology.
#2) There are clearly problems with the system. We all here stories about people who are ripping the system off. And this needs to be stopped. But that’s only a small part of the picture. I think it’s instructive to put see this as paralell to business practices at the other end of the system… There’s a large number of businesses that are following all the rules; there’s a handful of folks bending them; and a smaller number of enrons. We ought to treat each group accordingly.
I personally know of kids who come to school hungry. Often. I know of kids who’ve had no electricity for weeks on end. In some cases, these kids have cell phones, satelite TV, etc…
To me, this is clearly an issue of education. Somebody should have taught the parents to delay gratification, they should have taught them critical thinking, budgeting skills, and perhaps most importantly to resist commercialism.
In some ways this might come down to the topic that started this whole string: is wealth created or distrubuted. I’d be interested to hear from folks about where the economic flaws are in my reasoning. (You all seem better informed than me)
Consider Joe the owner of a dollar store. He lives in the suburbs. He’s done well for himself.
Joe appreciates the system that he’s been sucfesful in. He appreciates the status quo– it worked for him. Joe is well-intentioned. His heart is in the right place. But Joe benefits by the way things are. Joe benefits by inner city unemployment– it creates a glut of potential employees and lowers the wages he has to pay. Joe benefits by mantaining the culture of commercialism that tells his potential employees they should spend their money on bling, not books. They keep the dead-end jobs to buy rings, rather than prioritizing for education, etc. One reason then, that hand outs haven’t work is because many powerful people don’t have a vested interest in them working.
I actually agreen that hand outs are generally a bad idea. We all hear about how the reforms to welfare didn’t work, how people manage to avoid the work requirements in the press and anecdotes. I don’t deny that they are around. I humbly submit that they are the exception.
I think we need to continue to move in the direction of welfare-to-work requirements; but I think we have to be careful. Part of the reason that people ended up on welfare in the first place is that they never got the lesson that earning is important, that delaying gratification is important, that we should be disciplined, et… This was a failure in education in the first place. I’m not totally sure how to fix it. But saying “Look, we gave them a chance to work.” Quite misses the point that disenfranchised, truly uneducated people aren’t prepared to do the work in the first place…
I guess I advocate some sort-of character education/generalized job skills training/capitalism 101/group therapy experience as the first “work” required of recipients in the hope of resocializing them.
#2) I think that schools have had hands tied in a variety of ways. Much of this is related to the standards movement which has made an idol of poorly implemented objective asssessment. Virtually every state now has curricular frameworks, and this is not a bad thing. Frameworks say we’ll teach 9th graders X, 10th graders Y, etc.
The problem is the rigid expectations.
Federal Law says that all students are required to be exposed to the fullness of the curriculum for the grade level. On paper that sounds lovely. In reality I have had 11th graders reading at a first grade level. I could end up in a court for spending instructional time on teaching this 11th grader the phonic skills he needs to read traffic signs: the expectation is that I am teaching him subordinate clauses.
The expectation is that I’m expecting a drug-dealing senior the importance of Magellan’s route into the new world. Nobody ever told him why he should care in the first place. To be quite truthful, it’s pretty hard for me to generate reasons myself. (I’m a lover of history and not disputing its value to society as a whole, or even it’s value to this student… I’m pointing out that where he is in his life, he will not see it.)
#3 & #4) I think people send their kids to private schools because they are misinformed, or perhaps for the same reason that they spend $200 on what is basically the same pair of jeans that I’ll spend $40 on; bragging rights and name-brand recognition. Additionally, Some of the privates actually are doing better than the public schools. I don’t want to deny this. But if you gave the public schools that money or freedom, if you gave the private schools students limited in the same way that the public schools have… these differences would disappear.
A final thought around the state of education:
Folks think about the ‘good old days’ and wonder why we can’t do the same things we used to.
The truth is that we’re doing amazing things. Kids used to be turned away from schools who didn’t speak English or who suffered certain disabalities. They used to be permanently kicked out when they acted up. They used to be allowed to drop out.
There are numerous behaviors which were once considered institutional. Self-mutiliation, for example, (cutting) was an epidimic in mental hosptials in the early 80’s. It’s now an accepted part of subcultures in public settings.
Some of this may have gone to far. Some destructive behaviors would be far better served in more restrictive settings.
But this does not change the fact that in past generations a large percentage of kids weren’t served in public schools (think Boo Radley from “To Kill a Mockingbird”) the fact is that we’re faced with these kids now… and the fact that schools get stuff done is fairly amazing.
-Jeff