“Voting Against” is Still Voting

My piece on the “Vote Against” movement here in North Carolina–and how a breakdown of the statewide results actually shows support for Hoppe’s ideas on democracy as a process–in The Chronicle, Duke University’s student-run, daily independent newspaper:

“Voting Against” is Still Voting

I will be uploading an expanded version of this column here in the next couple of days, complete with figures and a slightly more in-depth analysis.

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Kubrick’s Gold Story

Rob Ager does a series of videos on what he interprets as a gold standard narrative behind Stanley Kubrick’s The Shining . Ager makes a pretty compelling case, and draws from the director’s personal letters and correspondences. He even spots Woodrow Wilson, the rest of the first family, and others implicated in the founding of the Fed in the famous picture of Jack Nicholson at the end of the film.

Rob Ager’s take on The Shining as Gold Standard commentary

Kubrick fans should be sure to check out his videos on 2001: A Space Odyssey and A Clockwork Orange . Also, his video on Starship Troopers as a parody and warning of fascist propaganda makes for good viewing, too.

Hayek in the WSJ

John B. Tayler draws from Hayek’s The Road to Serfdom and The Constitution of Liberty in an op-ed in today’s Wall Street Journal. Some comments on state law and central banking to feel less than rosy about, but the gist of the column is insightful, and Hayek’s frequent mention in the WSJ over the past year is something to feel good about for sure.

My favorite part of the piece?

Some will claim, of course, that crises force policy makers to deviate from predictable rules. One can argue that bailouts and other discretionary interventions were needed during the panic of the fall of 2008, and perhaps they prevented a more serious panic. But that is like saying that the person who set fire to your house should be exonerated because he helped put out the fire and saved a few rooms.

Read the full piece here

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Federal Student Loans and Law School in NYT Today

This morning, the New York Times ran an op-ed by Brian Tamahana entitled “How to Make Law School Affordable.” Surprisingly, the piece correctly identifies the federal student loan program as one of the problems behind what Tamahana calls “the economics of law school,” although the conclusions drawn from this turn out, as we shall see, to be off the mark.

The author starts off strong, lamenting $100,000 average debt that young lawyers incur out of school and the job market that currently keeps them from paying it back, before arriving at this line:

Two factors have combined to produce this situation: the federal loan system and American Bar Association-imposed accreditation standards for law schools. Both need to be reformed.

(As a brief side note here, I am slightly surprised that Tamahana fails to reference the poor job market and economic crisis in general as at least a contributing factor to this problem. Although I don’t believe it’s the cause, so to speak, it seems plausible that retainers might have been one of the first thing cut by businesses following the crisis in 2008, and thus could have brought the problem to a head).

Regardless, Tamahana’s identification of the federal student loan program as a problem is impressive, especially in a paper like the New York Times. In fact, probably the strongest point that Tamahana makes throughout this entire piece comes in his first sentence on federal student loans:

For more than three decades, law schools have steadily increased tuition because large numbers of students have been willing and able to pay whatever price the schools demanded. Annual tuition at many law schools in just over a decade surpassed $30,000, then $40,000, and is now more than $50,000 at a few. The reason that students have been able to pay such astronomical sums is that the federal government guaranteed student loans from private lenders, and now it supplies the loans itself with virtually no limits.

Interestingly, Tamahana’s argument about federal student loans for law school sums up a similar argument (actually, an identical one) to be made against the same process in undergraduate education: once these schools know that the government is a) guaranteeing loans or b) providing them themselves, tuition skyrockets. Since a school is no longer exchanging its services directly with the consumer, it is not limited by what consumers may or may not be able to pay. The infinite purse of Uncle Sam incentivizes universities to charge more than they can ever charge a student alone, since they know that the state can and will pay. And why not? We have essentially written them a blank check.

Unfortunately, Tamahana only suggests that we make alterations to this program, like capping the amount of subsidy a student can receive at $125,000 or cap the amount that any given law school can receive. Tamahana also identifies the shortcomings of these solutions, noting that the former will result in larger student bodies in law schools. On the one hand, this is a realistic approach. The federal student loans program is an outgrowth of a much larger beast, and to merely do away with it while holding the rest of its context constant admittedly hurts potential students most of all. On the other hand, though, this is the fundamental problem that underlies all forms of higher education right now, and a solution is needed.

Then, Tamahana comes back with another strong observation:

Whichever cap is chosen, it will function properly only if the government refuses to guarantee private loans and if private loans can be discharged in bankruptcy, which would make banks leery of lending money to law students who are unlikely to repay.

This would effectively revoke the “infinite purse,” and would set unofficial limits on the boundaries of tuition that a law school could reasonably charge. And, as we see anywhere else, the game gets much more sobering when risks/costs are privatized. As long as they are externalized, law schools will be motivated toward raising tuitions. (This is the same principle, at least very basically and fundamentally, often at work in banking, where we have incentivized risky behavior by bailing out banks and, now, even officially classifying some as too big to fail). This is perhaps the best of Tamahana’s prescriptions, because rather than capping it instead serves only as a return to market norms.

From federal student loans, Tamahana then gets into the American Bar Association accreditation standards for law schools, and their contributions to the current state of affairs:

In theory, these standards, put in place a century ago at the urging of legal educators, ensure a certain level of quality by requiring every law school to be run like an expensive research university–limiting, for instance, the use of adjuncts and teachers on contract. In practice, however, by imposing a “one size fits all” template, these standards ensure that there is little differentiation among law schools–no lower-cost options and no range of choices comparable to what exists at the undergraduate level among community colleges, teaching colles, and research universities.

In fact, this problem is also at the heart of contemporary medical education and, I believe, one of the leading sources of our healthcare problems today, something that I am planning to get deeply into in future posts.

Tamahana suggests stripping away certain requirements; those, for instance, that mandate paid research time for professors or that limit the number of adjuncts on faculty. These are, again, steps in the right direction, and perhaps Tamahana is writing for his audience in remaining relatively tame. He certainly is able to diagnose the problems facing law schools now, more so than most NYT writers or politicians, for instance.

I worry that it is easy to nod our heads in agreement with Tamahana, but fail to truly appreciate what is being lamented here. Keep in mind that, up until the 20th century, there was a great diversity in the field of medical education, and that for-profit teaching schools oftentimes accepted blacks and women. It was only once these schools were crowded out by well-meaning educational reformers that disparities in the field began growing at the rate they did. I don’t want to get too much into this here, since these are gross oversimplifications of what happened and there are arguments to be made against both. I only urge that we should keep in mind that our contemporary paradigm of what a medical school or law school is or should be is severely limited, and opening our minds (and markets) to alternatives we may not previously have considered could help to get us out of this mess, and back towards prosperity again.

Finally, Tamahana makes another point with which I agree, but which I believe comes off as short-sighted in his article:

If we don’t change the economics of legal education, not only will law schools continue to graduate streams of economic casualties each year, but we will also be erecting an enormous barrier to access to the legal profession.

Of course, as many know this is already the case. Organizations like the AMA and the American Bar Association operate like de facto unions, artificially restricting the pool of medical and legal professionals with the results being that a) the field becomes monolithic, and the diversity of choices presented to consumers is consequently limited, and b) the salaries of those who do make it in are artificially inflated. Licensing is one of our grossest contributors to this problem, but certainly the current education system contributes greatly to restricting the field of would-be professionals.

All in all, however, Tamahana’s points are well taken, especially in a major paper like the NYT. Find the whole article here .

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