Archive for the 'Personal' Category

The Scamming Beggar

I have a long standing rule to NEVER EVER give money to bums. No matter what the circumstances. I even look down on people who do. They rub me as purely emotional acts with not even one second of real thought. I do this for two reasons: one experience, the other logical. Growing up in Compton, I was approached by what we called cluck-heads daily. Crack addicts who would do anything, and I mean anything, for a $1. They would give you the most extravagant reason why that dollar was absolutely necessary. Then, after a moment of weakness, you would see them smoking that dollar – digging themselves further into the crack addiction. After years and years of this, I have developed quite a thick skin from beggars.

The logical reason has to do with the fact that it is very difficult to separate the true needy beggar from the scammer.  When confronted for a donation, with such limited information, there really is no statistically significant way to know if the bum is going to use the donation for something useful, or simply another hit of drugs. Much more beneficial is to save the donation and send it to a charity devoted to helping the truly needy. They have the means of separating the sincere bum ready to change their life, from the one who just wants another hit. With such noisy information, it’s much more logical to withhold your money and choose an efficient charity of your choice.

With that said, I was touched by the news article showing a New York Police officer giving a pair of winter boots to a shoeless bum. I thought, maybe in that situation that is the best thing to do, as the bum currently needs shoes, else his feet will freeze. It’s an immediate, obvious need that should be fulfilled. Sending money to a charity is not going to cut it, as by then the bum could have lost his feet to frost bite. Anyway, I didn’t think much more of it until later when I saw the story on CNN.

While reading the article, still torn between feelings of admiration and disapproval, I came across this interesting section:

There were some who considered the officer a victim, taken in by another scam.

“This guy is only barefoot as a begging strategy,” wrote David Levy. “I’ve been seeing him around midtown for years. I’ve even witnessed someone buy him slippers in a freezing day which he promptly put in his shopping cart.”

“Clever stunt! The (man) is ‘parked’ at the entrance of a shoe shop. He got like 10 pairs that day,” commented Louis Zehmke.

Which cured my short lapse of judgement.

Beverly Hills As The USA

Imagine that you lived in Beverly Hills, among the richest people in the United States. Some of your friends were the kids of executives at Fortune 500 companies. Others were the kids of famous Doctors, Lawyers, and some were the kids of hedge fund managers. While all relatively rich, assume there was quite a range of wealth from really rich, to filthy rich.

Further assume, that one day, a bleeding heart liberal starts feeling bad for the really rich. Her complaints are along the lines of: “The really rich can’t eat out at the $500/plate restaurants, they have to settle for the $100/plate restaurants, or, god forbid, make sandwiches at home”. Her complaints continue: “The really rich can’t afford the Lamborghini’s or Ferrari’s, they have to get by with the – GASP! – BMW’s and Mercedes Benz’s”. Worst yet, “the really rich actually have to live in mansions with no ocean view, or golf courses”. Most heartbreaking of all, “the really rich have to actually prioritize their lifestyle and set a budget. They can’t go to Europe on a moments notice, they can’t eat out everyday”.

Now further assume that said bleeding heart liberal decided to set up an “alleviate suffering” fund that took away from the filthy rich to give to the really rich. Such a fund would help equalize Beverly Hills and “bring people together”. But instead of making this fund voluntary, the bleeding heart liberal wanted to enforce this through the city. She wanted to make it a city tax that merely takes from the filthy rich and gives to the really rich. Her arguments, again, are to “alleviate suffering”.

What would your reaction be if you were suddenly transplanted to that society and debate? Would you support the “Beverly Hills tax”? I am not one of those that believes there are absolutely no circumstances that justify forcibly taking the wages of one to give to another. But such circumstances have to be met with atleast reasonable justification. Yet simply moving money around amongst the worlds richest people does not seem to me like an acceptable justification.

Such is the image that comes to mind whenever I have a discussion with a liberal about increasing redistribution via taxes to help the USA “poor”.  It’s the image my dad and uncles, who immigrated to the United States in their twenties from ranch life in the poorest parts of Mexico, gave me. It is certainly how they viewed me and my cousins growing up – no matter what our circumstances, be it growing up in Compton (as I did), living off of the income of mechanics, gardeners, or window tinters – we were all blessed beyond their wildest dreams. Where they had to eat tortillas off the dirt floor, work in fields in the scorching heat where there were no “sick days” or “vacation time”, even the McDonalds cashier can seem privileged. And this view isn’t far from reality. Even the “poor” in the United States are among the richest in the world (see here and here).

The Institute For Justice Shows Results

One of my favorite organizations is the Institute For Justice. It is an extremely successful organization that fights against the powers of the government in areas where there are little other organizations doing so. For example, there  is the licensing fight – an especially discriminatory and arbitrary arm of the government that gets little attention – where the District of Columbia government threatened hairbraider Pamela Ferrell and her husband Talib-Din Uqdah with fines and jail time for practicing their craft without an unnecessary government license. The license would have been expensive, and worse, unnecessary, as the barbers license had no class for hair braiding – a predominantly African American practice. The Institute for Justice took the case and won! See more here.

[youtube:http://www.youtube.com/watch?v=2tjTheDqQrw&feature=youtu.be]

Then there is the case of the El Paso governments war on taco trucks. Prodded by restaurants afraid of the competition, the El Paso government tried to ban taco trucks in the area. So the Institute for Justice stepped in.

[youtube:http://www.youtube.com/watch?v=q1YlXcORhUs&feature=player_embedded]

It also fought against the state of Arizona in its attempt to regulate eyebrow threading.

[youtube:http://www.youtube.com/watch?v=MpsqEB5q7TA&feature=player_embedded]

Then there is the case of Atlanta’s war against street vendors.

[youtube:http://www.youtube.com/watch?v=1XDLN14yDUg]

But a case that has hit close to home is the Institute for Justice’s recent victory against the city of National City on eminent domain. The Liberator today explains:

The Institute for Justice has obtained a victory in the long running dispute between National City and the Community Youth Athletic Center, which was designated as blighted in order to allow seizure of the gym by the city so that an influential developer can build luxury condos…National City took the route of declaring the area “blighted” by paying a private consultant to produce a report allegedly proving the blight. However, they then refused to provide the details of the report.“. . .the Court also held that when the government retains a private consultant to perform government functions—in this case, documenting the existence of alleged “blight” in National City—documents that the private consultant produces are public records subject to disclosure under the California Public Records Act. The Court also set a clear standard for what government agencies have to do in searching the records of their private consultants in response to a Public Records Act request.”

National City, for readers unfamiliar with the area, is one of San Diego’s low income neighborhood. The Barragan family have run the gym primarily as an alternative outlet for gangmembers who want a way out of the gang. The gym has been successful and the residents of National City hold the gym and the family in high regard (to read a moving article on how a 2006 tragedy to the Barragan family was dealt with by the community, see here).   But this didn’t matter to the greedy politicians who cared more about money than doing whats right. Luckily for the Barragan family and the community of National City, the Institute for Justice stepped in.

[youtube:http://www.youtube.com/watch?v=8pB_TmpSjJI]

The Institute for Justice doesn’t stop there, it also helps fight for school choice, property rights, and other cases involving economic liberty.There are three things that make the Institute for Justice unique: first, it helps those who need help the most. Mostly the poor and recent immigrants. How could a poor immigrant from Africa trying to make a living hair braiding have paid for a lawyer on her own? Or the taco truck owners? Or the Barragan family in the low income neighborhood of National City? Second, it targets laws that primarily harm the poor and minority. Third, it has a strong winning record. Few other organizations could say the same.

Phoenix Area Bloggers?

I’ll be in the Phoenix area tomorrow and Tuesday night through Thursday morning of next week…if any bloggers would like to meet up, send me a personal email.

The Leftist View Of The World

Readers of my blog, especially those who comment frequently, know my good friend Jon. He’s a recent convert to the left and believes in it passionately. A common theme of his world view, and those on the left in general, is the tug of war between the rich and the poor. The powerful and the non-powerful. The politically connected and the those with no political power. Basically the heart of leftist’s worldview revolves around this paradigm.

Every political fight, every economic decision and every current event is filtered through this prism.  Since I consider Jon a smart, honest and sincere person, I have been trying to understand how he could be so enthralled by such a political philosophy. I try to read, watch and listen to everything he asks me to. And a big part of that is Chomsky and his writings. So I go over to Chomsky’s site and this is the latest article of his, on the Winsconsin union political fight:

As working people won basic rights in the 1930s, business leaders warned of “the hazard facing industrialists in the rising political power of the masses,” and called for urgent measures to beat back the threat, according to scholar Alex Carey in “Taking the Risk Out of Democracy.” They understood as well as Mubarak did that unions are a leading force in advancing rights and democracy. In the U.S., unions are the primary counterforce to corporate tyranny.

By now, U.S. private-sector unions have been severely weakened. Public-sector unions have recently come under sharp attack from right-wing opponents who cynically exploit the economic crisis caused primarily by the finance industry and its associates in government.

Popular anger must be diverted from the agents of the financial crisis, who are profiting from it; for example, Goldman Sachs, “on track to pay out $17.5 billion in compensation for last year,” the business press reports, with CEO Lloyd Blankfein receiving a $12.6 million bonus while his base salary more than triples to $2 million.

Instead, propaganda must blame teachers and other public-sector workers with their fat salaries and exorbitant pensions — all a fabrication, on a model that is all too familiar. To Wisconsin’s Gov. Scott Walker, to other Republicans and many Democrats, the slogan is that austerity must be shared — with some notable exceptions.

The propaganda has been fairly effective. Walker can count on at least a large minority to support his brazen effort to destroy the unions. Invoking the deficit as an excuse is pure farce.

In different ways, the fate of democracy is at stake in Madison, Wis., no less than it is in Tahrir Square.

Lost on Chomsky, and which bears no mention in this article or other writings, is an investigation into whether or not the claims of opponents of teachers unions are actually true. This is typical Chomsky. He doesn’t care about declared motives. There has to be other reasons, and those reasons have to fit into a powerful vs nonpower paradigm. Anything else is not even worth investigating.

Ignored by Chomsky then is the long trail of writings and arguments that opponents of teachers unions have been making. Opponents of teachers unions make the claim (among others) that the teachers union stifles reform and entrenches a low quality public education system. One that ultimately harms the poor most, especially minorities.

The proof of this is so one sided that even traditional supporters of unions have a hard time making a compelling case in their defense and instead resort to distortions and misleading claims (see here for an example). But where is Chomsky on this issue? Nowhere. He is so blinded by his worldview, that anything contrary to union power is ipso facto a power grab against the ‘poor and powerless’ in favor of the ‘rich and powerful’.

I bet you can read all of Chomsky’s material, all of his writings, videos and historical accounts and you will not find anything on say, the unions role in entrenching racism (pdf), or vast corruption throughout history, or more currently, the teachers unions negative affect on public education – his is a simple storyline, unions and ‘workers’ are good, rich people are evil.

This is typical of Chomsky and leftist in general. Their simplistic paradigm is so ingrained in them that they often cannot see the forest for the trees, and miss the fact that it is the students and poor minorities in particular, who are the powerless in need of defending, and it is the teachers unions and their political allies that are the powerful.

Famous Economists Time

Years ago, I was given the opportunity to meet Milton Friedman in person. It had always been a dream of mine and a picture with him would have been something I would have cherished forever. There was only one problem: it would have cost me $10,000. Even at that price, I still considered it. When he died, a year or so later, I look back on the lost opportunity and second guess myself. Maybe I should have just paid it!

Some of my (not so very economically inclined) readers might balk at the idea of an economist charging for his time. But that never really bothered me. Some of these people are so famous and so sought after that if they’d give their time away free they wouldn’t have any time left for anything else. And more importantly, I would have less of a chance of ever actually meeting them. Time is money, and everybody has priorities. If you want your place above certain priorities, it should be mutually beneficial.

In fact, I believe in this so much that I have often suggested it to other economists. For example, in a discussion with a knowledgeable opponent, you may reach a point where you don’t know what to say next. Does the data fit your intuition? Are his points stronger than yours? What does the “mainstream” economist believe? But while you may not have the answer, you are certain someone else would. Only problem is: how do you get it from them? Sure, an email sometimes works. But oftentimes it doesn’t. In the past, I’ve suggested to the more famous bloggers that they should have an “hourly rate” posted somewhere on their blog. A means that guarantees access to them. For example, I would easily pay $100 for an hour of back and forth discussions with, say Scott Sumners. Or Tyler Cowen. Or especially Bryan Caplan. Even Paul Krugman, Matthew Yglesias, and Ezra Klein would be on my list (sometimes you want to know what the real, thought out, opposing view is). But alas, they don’t have that option – so most emails go unmet.

Lucky for us though, many famous free-market  economists have already thought about this idea and made it public. Bloomberg reports:

Becker, a University of Chicago professor who won the Nobel Prize in Economics in 1992, will be selling his time on ExpertInsight.com, a website offering one-to-one video chats with leaders, which opened yesterday. He’ll join people such as economics professors Jeffrey Miron of Harvard University and Laurence Kotlikoff of Boston University, “Freakonomics” co- authors Steven Levitt and Stephen Dubner, poker celebrities Patrik Antonius and Tom Dwan, and tennis coach Jeff Salzenstein.

“The idea is to bring this coaching model to everything,” said Brandon Adams, Expert Insight’s 32-year-old founder and chief executive officer.

I think this is a great idea and hope it becomes the norm. This is a great step in the path towards a smarter and more knowledgeable citizenry. I’m excited!

The Left vs Right Economic Model (aka Europe vs United States model)

My good friend Jon asked an important question: why not prefer the European economic model vs the United States economic model? I didn’t want to bog down his comments section with a long response, so I thought I’d post my longer response here.

Basically, there are two paradigms, two “visions” of an economy. The first, is generally considered left (or European): an economy with a large safety net, strong unions, and generally high taxes. The second, and my preferred, is considered right (or USA model): an economy with a large percentage of immigration, weak unions, weak safety net, and generally low taxes. The leftist economy tends to grow slowly. The rightwing economy tends to grow in a boom and bust way, with higher average growth than the leftist economy.So which one is better? Well that depends on personal preferences. The answer will be different for each person, depending on their personality (It would be like asking someone if they should join a union – it depends). If you are ambitious, entrepreneur minded, and generally a high achiever, you would prefer the United States model economy, where it’s easier to strike it rich (and, similarly, you would tend to oppose union membership). If you are someone who, for example, prefers small gains over large risks, and doesn’t have any ambitions to be CEO one day, you just want a steady pay with little growth – then the leftist economy is better for you (and, similarly, you would probably tend to favor union membership).

It’s kinda like asking someone should you invest their money in stocks or bonds? There is no right answer…it depends on the personality. Stocks give you better long term gains, but they are a lot riskier and volatile. Bonds are safer, but you sacrifice long term growth. It depends on the person (and age group – which is why the young around the world tend to prefer the USA, while the older Canada, see here).

Here is the important thing you have to notice about these two economies: they are mutually exclusive (please, click on the link and read the blog, it’s very pertinent to this discussion ). You can’t have a large safety net, for example, and a large immigration class. And you don’t need high taxes if you don’t have a large safety net. And you don’t get high growth with high taxes. etc. It’s all a domino.

So for example, in the United States, you have a dynamic corporate sector with one company rising to prominence in one decade, and going bankrupt in the next decade. Whereas in Europe, it’s usually the same companies, decade after decade (see here and here). Again, the United States model gives you boom and bust, with more growth, while the European model gives you steady growth, with less long term growth.

Or take immigration. Germany, for example, is not very friendly to the immigrant Turks (only recently, beginning to change, see here). And Germany – like the Scandinavian countries – is generally homogeneous (White).

More importantly,  these dynamics feed off of each other. Because safety nets are indeed zero sum – your welfare gain really is my loss – large safety nets foster an ant-immigrant culture (it’s the same reason that during a recession, anti-immigration sentiment increases – the people feel that in a time of scarce jobs, immigrants are “stealing” their job).

Matthew Yglesias, who lived in Europe, writes on the cultural difference between Europe and the United States:

There’s often a kind of conventional idea on the left that the United States is an unusually racist society. And I think there’s also often a kind of image of Europe as a place where more of the progressive agenda has been achieved than in the USA. But I think that you’ll find if you look at Europe through the eyes of the liberal agenda that while the German left has certainly been more successful than the American left at securing universal health care, it’s been much less successful at promoting a tolerant, integrated, multicultural society. And allowing for the errors implicit in making any kind of sweeping generalization, I’d say that’s pretty generally the case across Europe. …

In the US, in other words, racial problems have been more salient for a long time since we’ve been a racially diverse society for a long time. But by the same token, for all the problems we have with us today, we’ve made enormous progress over the years. Racial and ethnic tensions are a common problem in the world, and the United States manages diversity pretty well in comparison with other places (not just in Europe) even if we fall short in some absolute terms. Just look at Barack Obama. I think we’ll be waiting a while yet before someone of non-European ancestry is elected head of government in a European country. Denmark has some great public policy ideas, but it’s also kind of made itself into the gated community of nations in a way I don’t find particularly appealing.

Just look at this youtube video on Black soccer players to see how different race relations are in Europe compared to the United States.

The United States is much more tolerant of immigrants not because we are inherently different than Europeans, but precisely because of our smaller safety nets. Because immigrants that come here are largely excluded from our safety nets, we don’t feel that they come to steal our piece of the pie – instead they are viewed as coming here to enlarge the pie for everyone (unless of course, you are a poor Black person – in that case you do feel threatened from immigration, and rightly so – which helps explain the high anti-immigration sentiment in the poor Black communities) .

That is not to say that the European economic model is bad for everyone. I agree that some people probably are better off under the European model. If you are a White, not very ambitious member of the middle to lower upper class (think liberal arts university professors, or White union members), the European model probably is better for you than the United States model.

But liberals often speak as if all that mattered were White union members (another example of this is in the minimum wage debate), but immigrants and minorities count as well and so do the non union members (White or not) and the very poor and even the very rich. And so the question is: are they better off under the European economic model?  And on that I would say no. In addition to the exceptions mentioned above, the unemployment rate is significantly higher in European than in the United States (and especially higher if you have the bad luck of being a minority in Europe). And strong welfare nets notwithstanding, having a job counts for a lot (Highly recommended article here). It’s a source of self respect, pride and happiness. Furthermore, the unhappiness associated with being unemployed swamps out any happiness gains from the slightly higher job security gains of others.

And don’t say that ‘a couple percentage points of unemployment is worth it’, since even a couple points of unemployment could have a drastic affect on happiness levels. An economist explains: ‘Think about how hard it was to find a job back in January 2009 when our unemployment rate was 7.2%. The plight of the job-seeker wasn’t 30% worse than it was in May, 2008,  when the unemployment rate was 5.5%.  It was probably more like two or three times worse. Now imagine turning 7.2% unemployment into a way of  life.  It’s pretty awful to imagine, isn’t it?  Well, you don’t just  have to imagine it, because in France and Germany, 7.2% is normal.  The horror!”

So to summarize: the European economic model is better for low ambition White union prone citizens. It’s worse for immigrants and minorities of all  stripes. White non-union members. The United States model is better for those at the bottom and top of the economic ladder, and those who prefer risk and growth over stability.

In Defense Of For-Profit Colleges

One of the biggest blind spots of policymakers and pundits is the inability to take target market into account. For example, you can’t just compare the wages of employees at Hilton Hotels vs Motel 6′s and conclude that Hilton Hotels are superior because the employees are paid more. You have to take the companies vastly different target market into account. Motel 6′s target a much poorer and cost sensitive segment of the economy, and so it’s understandable that they pay their employees less. In addition, Motel 6′s also hire from a lower socioeconomic level than does Hilton Hotels, so again you’d expect their pay to be lower (in exchange for lower productivity, ie education, ability to speak English, etc). What seemed like a bad wrap for the poor without taking target market into account, turns out to be an overall net gain when it’s included (who doubts that from the poor’s perspective, Motel 6′s are better than Hilton hotels?).

The same blind spot is apparent in the Wal-Mart vs union run grocery stores debate. Wal-Mart caters to a lower socioeconomic class, by hiring and providing cheaper products to those at the lower end of the income distribution. So it makes sense that their employees are paid less than their union run grocery stores counterparts, who cater to a higher socioeconomic class. Seen in that aspect, Wal-Mart is no different than the Motel 6. And since it’s our ghettos and poor areas that are plagued by unemployment, empty lots and general lack of opportunities, the Wal-Mart model is a superior model for the ghettos and poor areas.

The same blind spot resurfaces when talking about for-profit colleges. When comparing for-profit colleges to non-profits, critics will primarily focus on graduation rates and default rates, taking nothing else into account. But what happens when you take target market into account?

For-profit colleges tend to cater primarily to the marginalized segments of society: working mothers, high school drop outs, older people trying to change careers, and people who are in a rush to graduate. In other words, the riskier segment of society. The very same people that the non-profit education system often ignores.

Seen from this perspective, it’s expected that for-profit schools will be worse than non-profits when it comes to student debt. It’s expected because they cater to riskier students, so they are going to have a larger variance of outcome – whether that is graduation rates, or student loan repayment. But catering to a riskier segment of the population is not something that should be punished, it should be encouraged. Lets remember, for-profits are actually doing what we berate businesses to do – serve those at the bottom, often forgotten by others. They are a lot better at helping students who may have messed up through high school and want to change their lives around.

And this is without even mentioning all of the other benefits that come from for-profit colleges vs traditional colleges. For example, a significantly shorter time to graduation (averaging 3 years, when non-profits are getting closer to 6 years – a huge gain in opportunity cost), more income oriented majors (even the worst of the for-profit colleges will never have such time wasted majors like Chicano Studies, for example) and a clear path towards graduation. All benefits that primarily help the marginalized segments of society.

In the interest of full disclosure, I should mention that I graduated from a for-profit institution. I got my BS in 3 years. Before that I was a high school drop out (in 10th grade) with about a 2.0 GPA. I had only a GED and no community college credits. I was also the child of a poor single mother, living in Compton, Ca. The group of friends I currently run with all have similar stories – all of us grew up poor, are minorities and graduated from the same for-profit college. None of us received any grants (my mom refused to fill out the FAFSA – she always hated anybody knowing how much she made and was convinced I would find out). More importantly, in the for-profit college I went to there were others – not a majority, but certainly a strong minority – in the same situation I grew up in. It’s the privileged kids that were the exception at the for-profit college, not the the poor minorities.

All of us, also, are currently successful engineers. We all make around 6 figures a year or more. All of us with just the bachelors degree from the for-profit college (I have some undergraduate and graduate work at UCSD, but never completed a full degree there). Without a doubt, graduating from that for-profit college was the single best thing I could have done for my life. Without it, my life would have been very different.

Update: Matt Rognlie makes a similar point here.

Two Arguments In Favor Of Immigration

With the Arizona (anti-)immigration laws coming into affect soon, I have seen a lot of arguments in favor of immigration by those opposed to the Arizona laws. Most of them are either weak on economics, or miss the point completely. As a strong supporter of immigration, I thought I’d give two of my favorite arguments in favor of immigration.

My favorite argument in favor of immigration is that immigration is a huge boom to the immigrants themselves. It is, without a doubt, the strongest poverty alleviation tool in the history of man. Nothing else, no social program, no foreign aid, no economic reform, nothing, can so positively improve the lives of people like the freedom of an immigrant to move from an underdeveloped country to a developed country. The only way immigration is even debatable on humanitarian grounds is for one to assign almost zero importance to the welfare of the immigrants themselves. The argument is made stronger when you consider that immigrants also have a (small) net positive affect on the developed country. But even if you disagree, and believe that immigrants are a net loss to the receiving country, that loss would still have to be weighed against the overwhelming positive gain it gives immigrants themselves, almost always of which consist of the poorest members of the world. An impossible hurdle to overcome.

My second favorite argument in support of immigration, and this one specifically appeals to my libertarian and conservative friends, is that immigration is mutually exclusive from social programs. You have to pick: either an economy with abundant immigrants and low levels of social programs, or an economy with abundant social programs and low levels of immigrants. You can’t have both. Counter intuitive you say?

Not really:

Although poor immigrants are likely to support a bigger welfare state than natives do, the presence of poor immigrants makes natives turn against the welfare state. Why would this be? As a rule, people are happy to vote to “take care of their own”; that’s what the welfare state is all about. So when the poor are culturally very similar to the rich, as they are in places like Denmark and Sweden, support for the welfare state tends to be uniformly strong.

As the poor become more culturally distant from the rich, however, support for the welfare state becomes weaker and less uniform. There is good evidence, for example, that support for the welfare state is weaker in the U.S. than in Europe because our poor are disproportionately black. Since white Americans don’t identify with black Americans to the same degree that rich Danes identify with poor Danes, most Americans are comfortable having a relatively small welfare state.

Thus, even though black Americans are unusually supportive of the welfare state, it is entirely possible that the presence of black Americans has on net made our welfare state smaller by eroding white support for it.

Immigration is likely to have an even stronger counter-balancing effect on natives’ policy preferences because, as far as most Americans are concerned, immigrants from Latin American are much more of an “out-group” than American blacks. Faced with the choice to either cut social services or give “a bunch of foreigners” equal access, natives will lean in the direction of cuts. In fact, I can’t think of anything more likely to make natives turn against the welfare state than forcing them to choose between (a) helping no one, and (b) helping everyone regardless of national origin.

This is not something peculiar to one blogger, this is widely recognized on the left and the right. From Paul Krugman and Matthew Yglesias on the left, to Bryan Caplan, Jeffrey Miron and David Friedman (also here) on the right.

Taking the side of immigration over safety nets doesn’t just make sense economically, it also makes sense on humanitarian grounds. As Bryan Caplan explained:  “…unlike the welfare state, immigration has and continues to help absolutely poor people, not relatively poor Americans who are already at the 90th percentile of the world income distribution. There’s no reason for libertarians to make apologies to social democrats: Libertarian defenders of immigration are the real humanitarians in the world, and the laissez-faire era of open borders without the welfare state was America’s real humanitarian era.”

The Effort To Keep Ethnic Studies Professors Employed

As someone who both grew up in Compton and attends UCSD, I feel compelled to comment on the recent race relation issues UCSD is having.  As most of you have probably already heard, the whole thing started when UCSD students, outside the campus, had a “Compton Cookout”, where participants were to wear “chains, rapper-style urban clothing by makers such as FUBU and speak very loudly.” Female participants were encouraged to be “ghetto chicks” with gold teeth, cheap clothes and “short, nappy hair.” Also, “The invitation said the party would serve watermelon, chicken, malt liquor, cheap beer and a purple sugar-water concoction called “dat Purple Drank.” It’s goal, apparently, was to mock Black History Month.

That was followed up a couple of days later by a Noose hung from the UCSD library.  With just this information at hand, it paints a very dim picture of UCSD and the racial climate on campus. Especially when you see pictures of students crying and claiming to be ‘afraid to walk to their car’.

Since I have taken many undergraduate and graduate courses at UCSD,  and my experience with the campus is the exact opposite – it is a welcoming campus and not in any way racist -  I was suspicious about the news allegations and decided to dig in deeper.

The first thing I found that contradicted the image the media tried to portray was that the main organizers of the Compton Cookout were Black.  This is how the main organizer defended his decision:

[youtube:http://www.youtube.com/watch?v=3Bd7VmDkCTo]

Right or wrong, he claims that the real reason of the Compton Cookout was “to bring the races together”, because “for one night everybody is on the same playing field”. Listen to the full interview. He even debates an ethnic studies UCSD professor on the appropriateness of the event.

Then comes the news story of the Noose.  The student who hung the noose was a female minority. She explains how it happened here:

The student claims in her letter that she and her friends were playing with a rope when one of them tied it into a noose.

“I innocently marveled at his ability to tie a noose, without thinking of any of its connotations or the current racial climate at UCSD. I left soon after with one of my friends for Geisel to study, still carrying the rope,” she writes. “After a bit of studying I picked up the rope to play with, and ended up hanging it by my desk. It was a mindless act and stupid mistake. When I got up to leave, a couple hours later, I simply forgot about it.”

Yet with all of these details left out, UCSD is still forced to cave to the wishes of the race police:

On Monday , the university outlined the actions it has taken to improve the school’s climate and cultural diversity. They include creating a task force to focus on recruiting minority faculty, forming a commission to address the campus climate, continuing to fund Faculty-Student Mentor Programs, ensuring ongoing funding for the Chancellor’s Diversity Office, identifying space for an African-American Resource Center on Campus and meeting with member of the Black Student Union at least once every academic quarter. (emphasis added)

So you see, it was all one big conspiracy to keep ethnic studies professors employed.

The Problems With Pell Grants

I admit it, I get uneasy feelings when people congratulate Obama for increasing Pell Grants. I don’t see it as the universal positive that many others do. For three reasons.

First, Pell grants are politically cheap. Increasing funding for Pell grants takes little courage and comes with no political cost. Who disagrees with more funding for poor people to go to college? Certainly only the heartless. Whats more, it doesn’t come out of Obama’s own pocket, it’s after all, the tax payers money. And what politician doesn’t like being generous with other peoples money?

Second, it can make the problem worse. Richard Vedder, director of the Center of College Affordability and Productivity and professor of economics at Ohio University explains:

Work done at my research center reinforces findings of others that exploding student loan programs have contributed to higher tuition charges, and if Pell Grants grow more inclusive and generous, the same effect will occur with them…

The demand for higher education grows with rising federal financial assistance, but the supply grows less rapidly, pushing up prices (tuition fees). Supply is comparatively rigid because the so-called best schools attain their lofty reputation by turning away customers: college rankings are enhanced by taking very qualified bright kids who likely will graduate (and are disproportionately affluent). Dropping money out of airplanes over the houses of college students (or its equivalent) is not the solution.

Normally, this shouldn’t be a difficult concept to understand. After all, who doubts that the spread of low cost mortgage financing helped fuel the housing bubble? Its the same concept here: low cost Pell grants, and especially low cost student loans, are a primary cause of University tuition increases. It’s standard subsidy economics.

Third, it crowds out the private sector. The more the government funds it the less private donors will feel the need to, and thus, you replace private charity with public charity. And because public charity is less scrupulous than private charity, you make the grants less efficient. Which helps to explain why most pell grant recipients do not earn a college degree.

Arthur M. Hauptman, from the Center For American progress, explains:

Instead, we should worry more that increases in Pell Grants may lead institutions to reduce the amount of discounts they would otherwise have provided to the recipients, who are from poor families, and move the aid these students would have received to others. This possibility of a substitution effect is supported by the data showing that public and private institutions are now more likely to provide more aid to more middle-income students than low-income students.

In short, I see Pell grants as a way for Obama to escape real education reform by throwing us crumbs, just enough for us to shut up, and many do.

For more on this see this see here and here.

Marginal Difference

Related to yesterdays post, I have previously tried to explain the concept of marginal return and why, because of the already overwhelming flow of educated minorities going into social services fields, the hard sciences may be the place to make the biggest impact – if that is your end goal.

I wrote:

Second, it is inefficient. Minorities in education, in community outreach, and in most other nonprofits are literally “a dime a dozen”. Another minority, because of diminishing returns, is not likely to make much of a difference. Factor in the effectivity of community outreach (very low) and the contributions that minorities in education add, and you are looking at near insignificant levels of added value.

Contrast that to the number of minorities in the for profit fields like engineering, chemistry, and technology. They are a scarcity and companies are thirsty for more. In short, you are likely to do more good for yourself and for the community as one additional engineer than as one additional member of a community outreach program.

This argument escaped some of my friends, they simply didn’t understand it. On my bicycle ride to work this morning, while listening to a bloggingheads discussion on genes, a related point was made.  Except that instead of social workers and engineers, it was doctors vs engineers, and how an additional engineer may make more of a difference than an additional doctor. Well, being a big supporter of outsourcing, I will let them explain what I tried to explain before:

The full bloggingheads discussion can be found here.

More On Majors And Why Chicano Studies Is Garbage

A frequent topic of discussion in my family is what university, what major and the return to investment my sister should pursue after finishing high school. My dad is a man of modest means and is the only bread winner in a family of five – 3 children of which, have yet to pursue a college degree. Aside from the financial help I provide, he has nobody else to rely on. My families situation is not that different from other minorities, at some point – regardless of grants and financial aid – you have to weigh the trade-offs and cost/benefit of sending your child off to college.

Long time readers of this blog know my position, which is fundamentally that the two most important variables are: what major you choose and the grades you get. Everything else is secondary at best and more likely irrelevant. I’m so extreme in my beliefs that I advised my dad that unless my sister chooses something in the hard sciences, he refuse to pay for her education (she would still be able to get her own grants, financial aid and his blessing – just not his money).  Also, despite the fact that my sister went to a good public school (my parents fake their address),  took advanced classes – AP and honors Math, Physics, English, History etc – and finished near the top of her class, I still advised her to go to a Cal State. Even the relatively cheap cost of the UC’s, had she applied (to avoid the temptation, she didn’t even apply) and been accepted, would not have been worth the costs, IMHO. The hiring premium between say a Berkeley student and a Cal Poly student is not that much (trust me, I’ve done interviews for my company) and it certainly doesn’t cover the long term debt difference the two schools would leave the student with (debt that comes not just from the tuition but also the living costs of living in the area). Factor in years of experience and, I strongly believe,  in the long run there is no difference between the two schools that cannot be attributed to personal characteristics (IQ, work ethic, connections, etc).

This is one of the main disagreements I have with Chicano Studies and the culture it creates for minorities entering college. A year or so ago I wrote:

One of the many things I dislike about Chicano Studies as a major is its over emphasis on “nonprofit activism” vs “personal interest”. In the status circles of Chicano Studies students, you are admired more for your desire to ‘build a community outreach center for disadvantaged children’ than for say, getting an engineering degree and ‘making the big bucks’….a kid from the ghetto is taking an enormous risk by accepting a low salary. They are, in effect, “putting all their eggs in one basket”. And unless they are the lucky ones, they are doomed to rear their next generation of children in the very same environment they were raised in.

I called it a luxury of the rich to pursue a college degree based solely on personal interest and void of personal gain. Some of my friends disagreed then. Some of my friends disagree now. They think I am too harsh in my advice on my sister. They think instead she should be able to ‘pursue her dreams and interests’ as if all family situations were the same (remember, my dad has finite dollars – every dollar spent on my sister is one less he can spend on the rest of the family…a high return is a necessity, not a luxury).

Well, for those who still disagree I point you to this well written advice column in The Chronicle of Higher Education. It’s not completely related but it still hints at the same conclusions and remarks I mentioned before – only better written and communicated. The full article really should be read in full but for those of you short on time, I quote below his concluding remarks:

As things stand, I can only identify a few circumstances under which one might reasonably consider going to graduate school in the humanities:

  • You are independently wealthy, and you have no need to earn a living for yourself or provide for anyone else.
  • You come from that small class of well-connected people in academe who will be able to find a place for you somewhere.
  • You can rely on a partner to provide all of the income and benefits needed by your household.
  • You are earning a credential for a position that you already hold — such as a high-school teacher — and your employer is paying for it.

Those are the only people who can safely undertake doctoral education in the humanities. Everyone else who does so is taking an enormous personal risk, the full consequences of which they cannot assess because they do not understand how the academic-labor system works and will not listen to people who try to tell them.

It’s hard to tell young people that universities recognize that their idealism and energy — and lack of information — are an exploitable resource. For universities, the impact of graduate programs on the lives of those students is an acceptable externality, like dumping toxins into a river. If you cannot find a tenure-track position, your university will no longer court you; it will pretend you do not exist and will act as if your unemployability is entirely your fault. It will make you feel ashamed, and you will probably just disappear, convinced it’s right rather than that the game was rigged from the beginning.

But please do read the article in full. It can be found here.

Limited Governments Best Friend: The CBO

Remember the Democrats claim that by empowering a new panel (the Independent Medicare Advisory Council) to recommend future spending reductions we could save several billions of dollars in healthcare costs? If this was before the creation of the CBO (1974, according to Wiki), such claims would be nearly impossible to disprove. Democrats could get away with making the claim and fiscally conservative politicians would have little to say in opposition. The whole debate would break down into a he-said she-said debate, with Republicans pointing to some economist at some University showing the proposal would barely save a few billion dollars and Democrats responding with their own economist and study arguing that it would save multiple billions. How would the average citizen distinguish who is right?

Of course, years after the policy changes had been put into effect, the truth would have come out – which is why in every single healthcare change, including the recent Massachusetts healthcare reforms, the healthcare policies have turned out to cost far more than people assumed – but by then the changes would have already been in affect for atleast a couple of years. New special interest groups would have already been created, and the government program, like any other government program, would become nearly impossible to stop.

But that was before the CBO had so much influence. Today, Democrats have to get their claims past the CBO and are having a very difficult time doing it. The latest is their claim that an Independent Medicare Advisory Council would save several billions of dollars. The CBO argues that that simply is not true, Donald Marron reports:

CBO estimates that the proposed legislation would save a paltry $2 billion over the next ten years, less than 1/500 of the 10-year cost of health reform.

This is on top of the earlier headaches the CBO has given Democrats.

Long gone are the days when Democrats could simply propose some theoretical cost saving legislation and ask the public to take it on good faith. Imagine if the CBO had existed when FDR was around? LBJ?

Although that doesn’t mean the CBO itself doesn’t have serious shortcomings, on the contrary, it too tends to underestimate the costs of policies, as it recently did in predicting the fiscal stimulus recovery (see here and here) but atleast now the Democrats proposals have to pass a higher standard than simply their word.

Keith Hennessey has more here.

Update: The Economist has more.

The Clinton Years vs The Bush Years – A Pet Peeve I have

Casey B. Mulligan, professor of economics at the University of Chicago, made a comment that he should know is disingenuous, he wrote:

the “big spending Democrat” stereotype is incorrect — government spending / GDP fell under Clinton and increased under Bush.

This comparison, used to argue that when it comes to spending there is no difference between Republicans and Democrats,  is made often, both in the blogosphere and by academics who should know better. The main problem I have with it is that it is not comparing apples to apples.  Milton Friedman argued that the best form of government, from a small government and low spending perspective, is a Democratic president and a Republican Congress, where Republicans control the spending (congress), and Democrats control foreign policy – precisely what we had under Bill Clinton. The worst form of government is when the same party controls the presidency and congress – precisely what we had under George W Bush.

In other words, you are comparing arguably the best scenario under a Democratic president with the worst scenario under a Republican president – of course they are going to be alot closer than what they really are. Don’t get me wrong: I am not arguing that Republicans are true fiscal conservatives, no, I am arguing that the gulf between the two is larger than what these “Clinton years vs Bush years” argument would lead you to believe.

The difference between the two is even larger when you compare the kind of spending each does: Republicans tend to overspend on wars while Democrats tend to overspend on entitlements. Wars are temporary, they are one time events that come to an end, whereas entitlements are forever and worst of all, they get more inefficient and expensive with time. Take FDR and LBJ – both were involved in wars and both created entitlements, FDR with World War II and social-security and LBJ with the Vietnam war and medicare. Yet today we worry about the growing costs of social-security and medicare while the financial costs of World War II and Vietnam, though expensive at the time, are now but forgotten.

And Bill Clinton would not have been any different, had he had more control of congress, Matthew Yglesias explains:

If the health care bill that the Clinton administration authored, pushed for, and staked its presidency on had passed you would say that FDR, LBJ, and Bill Clinton were the three main architects of the modern welfare state. Because the bill didn’t pass, the institutional legacy of the Clinton years is considerably more moderate than that and the Clinton administration is instead remembered for its responsible stewardship of national affairs. But that’s because congress blocked the bill not because of Clinton’s moderation.

That was the Republican controlled (for the first time in ~50 years) congress that blocked the bill.

A better comparison is between the Bush years and the Obama years – but given the fact that in Obama’s first 100 days in office, he’s already proposed spending more than Bush spent in his entire 8 years, including both wars, its a strong argument that there really is a difference between the two parties. Especially considering that most of Obama’s spending comes in the form of very expensive entitlements – entitlements that Obama is hoping will last forever.

You can argue that entitlements are worth the costs, that is an argument for another day, but you can’t make the argument that the spending is the same between the two parties.

The Cultural Argument Against Gay Marriage

Of all the arguments against gay marriage, the religious liberties argument, the reductio absurdum argument, the better safe than sorry argument, and others, the one people have the most difficulty understanding, atleast from my experience in discussing it, is the cultural argument against gay marriage, yet it is one of the ones I find most persuasive. So here I try to give a better explanation of what I see as the cultural argument against gay marriage.

It starts with the assumption that laws shape peoples cultural mores and beliefs. It does not have to be consciously, many times it is subconsciously. Abortion is more acceptable, for example, because it is legal. Making it legal, to alot of people, gives it a stamp of approval, a cultural acceptance. The cultural argument states that if gay marriage is legalized, because gay unions are inherently unable to produce children, it will send a cultural signal that marriage and children are not tied together.

This is how Maggie Gallagher explains it:

The argument is that extending marriage to include same-sex couples would not just give rights to a small subset of the population, but would radically transform what marriage is. So long as only opposite-sex couples can marry, the thinking goes, marriage is linked to procreation; if same-sex couples can marry, too, then marriage is transformed into something else entirely. Adding same-sex marriage would ruin the old institution and create a new one, and the new institution would not longer retain a focus on having and raising children. Viewed in that light, same sex marriage is a threat to society: by redefining the institution, it will kill off its most important feature…

Sex makes babies. Society needs babies. Babies need fathers as well as mothers. That’s the heart of marriage as a universal human institution.

Please note: Procreation is not the definition of marriage. It is the reason for marriage’s existence as a public (and yes legal) institution. People who don’t have children can still really be married (just as people who aren’t married can and do have babies).

But if sex between men and women did not make babies, then marriage would not be a universal human institution, or a legal status in America.

In other words, people raised in a society where gay marriage is legal will view marriage differently than people raised in a society where gay marriage is banned. The former will see the link between marriage and procreation weak at best, whereas the latter will see a stronger connection between procreation and marriage (Btw, preliminary data suggests this is already happening, see here).

This is especially troubling when you consider what this cultural change would do to areas where marriage is already in a precarious position.  Poor inner city neighborhoods, for example, will see a weakening of their already weak cultural mores regarding marriage and if there is one thing they need less of, it is that.

This is what Heather Mac Donald writing at the SecularRight blog referred to, though few understood her connection,  when she blogged this:

The biggest social problem in the U.S. today is the crime and academic achievement gap between blacks and whites…One overpowering cause of black social failure is the breakdown of marriage in the black community. Nationally, the black illegitimacy rate is 71%; in some inner city areas, it is closer to 90%. When boys grow up without any expectation that they will have to marry the mother of their children, they fail to learn the most basic lesson of personal responsibility. A community without the marriage norm is teetering on the edge of civilizational collapse, if it has not already fallen into the abyss. Fatherless black boys, who themselves experience no pressure to become marriageable mates as they grow up, end up joining gangs, dropping out of school, and embracing a “street” lifestyle in the absence of any male authority in the home.

If the black illegitimacy rate were not nearly three times the rate of whites’, I would have few qualms about gay marriage. Or if someone can guarantee that widespread gay marriage would not further erode the expectation among blacks that marriage is the proper context for raising children, I would also not worry. But no one can make that guarantee.

In other words, gay marriage is a social experiment with an institution that has been around in every culture at almost every time period for as long as recorded history can go back, where the costs of the social experiment are borne mostly by those at the bottom of the economic ladder. This helps explain why so many of the black community, especially the inner city black community(and minority community in general), is adamantly opposed to gay marriage – gay marriage primarily hurts them!

I grant that this argument is not powerful enough to ban gay marriage – it’s ultimately a cost/benefit analysis. There may very well be scenarios where gay marriage, seen as a right issue, may outweigh the costs of further marriage breakdown in the inner cities of the United States. My point here is not to give the complete argument against gay marriage, only to show that there are trade-offs involved. Very real and important ones.