Sunday, November 29, 2009

Bastiat Meeting - December 2nd

Please join us in welcoming Dr. Robert Bradley Jr. from the
Institute for Energy Research.

5:00pm Reception
6:00pm Speaker

Harbor Club
35 Prioleau Street
Charleston, SC

His topic for us will be:

"Political Capitalism: The Beast that Broke the Cage"


Drawing upon his research for his book trilogy on political capitalism, Bradley explores the theory and history of business/government relations in the United States. Of particular interest in the author's take on Enron, where he worked for 16 years and was Ken Lay's speechwriter. While the mainstream interpreted the fallen giant as capitalism gone awry, Bradley convincingly shows that Enron was a government-dependent enterprise that would not have existed in a free-market economy.

Bradley is author of, most recently, Capitalism at Work: Business, Government, and Energy (the first volume of his trilogy), copies of which will be available at the talk.

Please RSVP by emailing us at -

More on Dr. Robert Bradley Jr.

Robert L. Bradley Jr. is the founder and chief executive officer of the Institute for Energy Research, a 501(c) 3 educational foundation with offices in Houston, Texas, and Washington, D.C. He is an adjunct scholar of the Cato Institute and of the Competitive Enterprise Institute; a visiting fellow of the Institute of Economic Affairs in London; and an honorary senior research fellow at the Center for Energy Economics at the University of Texas at Austin. Bradley, who holds a BA and MA in economics and a PhD in political economy, received the Julian L. Simon Memorial Award in 2002 for his work on free market approaches to energy sustainability.

Bradley worked at Enron for 16 years. As director of public policy analysis, he was a trenchant critic of the company's (government-dependent) investments in wind and solar and climate alarmism. His principled opposition to Ken Lay's "political capitalism" model is documented at

Bradley is author, most recently, of Capitalism at Work: Business, Government, and Energy, an application of the capitalist worldview to corporate and energy controversies. His website expands on material in this work and in the two forthcoming books in his trilogy on corporate governance and political capitalism in the energy industry.

Bradley's other books are: The Mirage of Oil Protection (1989); Oil, Gas, and Government: The U.S. Experience (2 volumes: 1996), called "a landmark in regulatory studies"; Julian Simon and the Triumph of Energy Sustainability (ALEC: 2000); Climate Alarmism Reconsidered (2003); and (with Richard Fulmer) Energy: The Master Resource (2004), which Milton Friedman praised as a "splendid" book that "effectively debunks the widespread predictions of energy doom."

Bradley, who blogs at, has also published numerous essays pertaining to government intervention, with particular application to energy markets. His public-policy approach combines an understanding of the historical record with market-process economics and libertarian social theory.

For more information regarding the Institute for Energy Research click here.

Saturday, November 28, 2009

Peter Bernstein on Risk

Business is always and everywhere the act of taking a risk.

The more we understand the nature of risk, the better decisions we will make, both in business and in its dependent and unstable partner, government.

From the McKinsey Quarterly, Peter Bernstein, the celebrated author of Against the Gods: The Remarkable Story of Risk explores the history of risk and how it works in real-world markets and in our lives.

McKinsey Quarterly, Permission Granted.

Friday, November 27, 2009

Wealth Creation in Africa

More Aid and More Government is Not the Answer

In this provocative talk, journalist Andrew Mwenda asks us to reframe the "African question" -- to look beyond the media's stories of poverty, civil war and helplessness and see the opportunities for creating wealth and happiness throughout the continent.

Thursday, November 26, 2009

A Thanksgiving Prayer

"Dear Global Economy,

We thank thee for thy economies of scale, thy professional specialization, and thy international networks of trade under Ricardo's Law of Comparative Advantage, without which we would all starve to death while trying to assemble the ingredients for such a dinner as this.


From Overcoming Bias.

Wednesday, November 25, 2009

The Real Meaning of Thanksgiving

by Dr. Peter C. Calcagno
Professor of Economics at the College of Charleston

As we are sitting around the table this year giving thanks for our friends and family and getting ready to enjoy turkey and football we should remember why the pilgrims gave thanks. It was not just for the bountiful harvest and their survival, or for the agricultural knowledge they gained from the American Indians. What they were truly thankful for was the institution of private property. As Gary Galles and Richard Ebelling each explain the Pilgrims of Plymouth had tried an experiment with common property and it failed miserably. The colonists had started out with collective farming and were starving to death Governor William Bradford wrote:

"For this community of property (so far as it went) was found to breed much confusion and discontentment and retard much employment that would have been to their benefit and comfort . . . all being to have alike, and all to do alike . . . if it did not cut off those relations that God hath set amongst men, yet it did at least much diminish and take off the mutual respects that should be preserved amongst them."

He decided drastic steps were necessary and he privatized the farms.

"All their victuals were spent . . . no supply was heard of, neither knew they when they might expect any. So they began to think how they might raise as much corn as they could, and obtain a better crop than they had done, that they might not still thus languish in misery. At length . . . the Governor (with the advice of the chiefest among them) gave way that they should set corn every man for his own particular, and in that regard trust to themselves. . . . And so assigned to every family a parcel of land . . . "

The end of the story we all know: A bountiful harvest for which they gave thanks. So when you sit down to give thanks remember Governor Bradford and give thanks for the birth of private property rights in the colonies, which are the corner stone of free-market capitalism.

Tuesday, November 24, 2009

The Sponge Is a Mess!

By Robert Anderson for

It’s been over fifty years since I first heard Leonard Read make the comment, "The market is analogous to a sponge. The market can absorb a lot of government mess until, like a saturated sponge, it becomes a mess too!" Looking back, it’s been almost fifty years since Leonard (he was my best man at our wedding) told me marriage and the market share this similar trait, so keep your sponge dry. While our marriage has done so, sadly the same cannot be said about the free market economy over these past fifty years.

Today I find myself reflecting on another Read comment, but this one related to human progress. He often noted that a social order advances through folks overcoming adversity, and thus periods of what he liked to call devolution, are essential to achieving that end. Of course, Leonard’s abstract idea sounded a lot better to me fifty years ago than it does from experiencing it today!

It’s frightening to me how much individual liberty has been lost during my lifetime, and especially since the birth of my father. When my father was born near the end of the nineteenth century, the only awareness that a federal government even existed in his family’s life was the local postman delivering the mail. Today, that same government is about to force some people to purchase medical insurance with fines and jail threatened if they do not comply. These are apt anecdotal reminders showing how the concept of government has radically changed when compared to more than a century ago. Unfortunately, an omnipotent and omnipresent plundering state has become today’s replacement for that old nineteenth-century relic.

Read the entire article here.


Sunday, November 22, 2009

Tax Those Who Have It

The timeless script in Washington is a simple one. No thought required.

"Higher-income Americans should be taxed to pay for [insert favorite government program here]."

The latest Washington wise man to use this script is Senator Carl Levin (D-MI), the chairman of the Senate Armed Services Committee.

Bloomberg reports that Senator Levin said “an additional income tax to the upper brackets, folks earning more than $200,000 or $250,000” a year, could fund more troops...They have done incredibly well, and I think that it’s important that we pay for it if we possibly can."

The Senator's argument makes it sound like the people who earn more than $200,000 are just lucky. They didn't work hard to make that much money, according to the Senator, they just "did well," like a lottery winner or a gambler in Vegas.

If he had been honest about this point, the Senator would have said, "Folks earning more than $200,000 a year have some money coming in, and I think it's important they pay our bills because we can't get money from folks who don't have it."

Of all our natural resources, the first one to be exhausted may be the taxpayer.

Saturday, November 21, 2009

Friday, November 20, 2009

Getting Creative with Creation

From the "Least Surprising News of the Week" file -

From ABC News

Creating Job Creation?
Lawmakers Question Obama Administration Stimulus Claims Vast Errors in Reporting Jobs Data Leave Lawmakers Angry at Numbers

A raft of reports of questionable or downright faulty jobs numbers -- including many uncovered by ABC News that show dozens of jobs created and millions of dollars spent in congressional districts that don't exist -- has cast a harsh spotlight on the jobs claims connected to the $787 billion stimulus package.

Leading members of Congress from both parties are promising increased scrutiny of the Obama administration's data on job creation, amid widespread errors in official stimulus data reported by the federal government.

The Obama administration stands by its claim that the stimulus "saved or created" 1 million jobs. But the reporting process has involved errors: The administration chose not to include some 60,000 jobs reported by recipients as products of stimulus spending, citing "unrealistic data."

Read the entire article here.


I'd still like to know how you would document a "saved" job.

Thursday, November 19, 2009

Unleashing Capitalism in SC

Here is a much-needed alternative to top-down government planning for prosperity.

Unleashing Capitalism is an expert prescription for the systemic problems that keep South Carolina poor. The book is a road map to prosperity through policy reforms that will put economic power back in the hands of the people.

View the book here.

It is edited by Peter T. Calcagno of the College of Charleston, along with associate editors, Joshua C. Hall and Russell S. Sobel.

Wednesday, November 18, 2009

Cap and Tax

The economics of clean electricity is simple - if we demand clean energy, they will provide it - at a cost. If we, as a society have decided against "dirty" energy (as the politicians claim we have), then we should have no problem paying a premium for it. If our policy makers are confident that society is truly against "dirty" energy, why disguise the additional costs through subsidies, taxes, and carbon trading systems? Why not simply force energy companies to "go green" and make us pay for though increased energy bills? I suspect that would be to much to ask of our pseudo environmentalist policy makers.

Nov 12th 2009
From The Economist print edition

Nuclear energy is unlikely to work without a carbon tax

PLANNING is not the only obstacle to a rebirth of nuclear power in Britain. The technology’s torturous economics are, if anything, even trickier. The trouble is that, whereas the fuel is cheap, nuclear-power plants themselves are very expensive to build and the pay-off from that investment is slow. To the industry’s opponents, all this is proof that nuclear electricity is uneconomical. Generous atomic subsidies offered in America—including loan guarantees, tax breaks and promises to cover cost overruns—lend support to that view, though ministers have promised that new nuclear plants in Britain will receive no such special treatment.

Read the entire article here

Tuesday, November 17, 2009

Envelopes and Stethoscopes?

Economist Steven Horowitz writes...

"CNN reports that the US Postal Service lost $3.8 billion last fiscal year. Delivering the mail is pretty easy compared to running the health care system. Why would anyone trust the folks who can't even deliver the mail to run health care?"

Monday, November 16, 2009

Stimulating the Piggy Bank

Savings in the US is slowing increasing, despite the spend, spend, spend mentality in Washington. Maybe we are beginning to learn a valuable lesson - you cannot spend your way out of debt. Now, if we can only get Congress on board with this idea.

from NPR's Weekend Edition

For nearly two years, the U.S. economy has been struggling with a recession brought on by excessive borrowing, both for home mortgages and consumer purchases. Economists say many people have learned a lesson; the personal savings rate is inching back up as more Americans embrace the "new frugality."

Still, half of U.S. households don't have even modest savings, according to a new study conducted by TNS Group, a market researcher, with help from professors at the Harvard Business School and Dartmouth College.

The researchers conducted a survey to see how many households could round up $2,000 within 30 days to cope with an emergency, such as having a car breakdown or needing a major home repair. About half said that even if they turned to relatives for help, they could not come up with $2,000 for a "rainy day," the study found.

Read or listen to the entire story here.

Sunday, November 15, 2009

New Prisoner, New Prison

Popular culture both reflects and influences the angst of an age.

Anyone who is seriously concerned with promoting a free society must pay attention to popular culture, and specifically to the two most powerful forces, religion and entertainment. What themes are circulating? Who are the villains? Who are the heroes? What is more important, the individual or the community? What does heaven look like? Is there a hell?

The answers to these questions reveal the dominant social operating system, and they make it easier to identify and combat anti-individualist ideas embedded in daily life.

Consider this example. AMC is remaking The Prisoner, the 1967 cold-war classic about a man furiously trying to assert his individuality in a captive world of cheery conformity.

The old series starred Patrick McGoohan as a top-secret government employee who resigns from his job, only to wake up in the Village, a comfortable sea-side resort. The problem is he can't leave. He is a prisoner. He has become No. 6. The Village is run by No. 2.

What does No. 2 want? "Information."

"You won't get it." No. 6 throws back.

"By hook or by crook, we will."

No. 6 shouts, "I am not a number, I am a free man!"

A menacing and mocking laugh follows.

In 1967, the social operating system was the battle of the individual versus the state. Whose state? It didn't matter. They all played the same game, and individuals were the game pieces.

But 1967 was a long time ago. In the new AMC series, the prisoner is in a new prison. He is enslaved by capitalism. So says Sir Ian McKellen who plays the part of the new No. 2.

No. 2 embodies the drawbacks of capitalism, McKellen says. "Capitalism offers you freedom, but far from giving people freedom, it enslaves them...That's part of the show's message."

Naturally, the new No. 6 is no longer a top-secret government employee. He's an employee of a "shadowy corporation" with it's very own web site, Summakor.

The show's writer, Bill Gallagher says, “The original [series] says we must assert our individuality....But one thing that interests me is that perhaps we have become too individualistic.”

It sounds like the new Prisoner is the doppelganger of the old series. Fans of the old series are likely to be disappointed if they tune in looking for a revival of the man versus state story-line. Best be prepared for something different. It's not just the prisoner who has changed. The prison has, too. Or, more accurately, the popular idea of what is a prison has changed, and not necessarily for the better.

But let's be charitable. It's not fair to draw too many conclusions about a show until you've actually seen it. That's why I'll be tuning in this Sunday at 8 pm Eastern. Frankly, I'm skeptical.

Watch episodes of the classic series here. The first episode appears below. At the very least, watch the introduction, and consider whether or not it has lost any of relevance.

Be seeing you.

Saturday, November 14, 2009

The Triumph of Socialism

By Llewellyn H. Rockwell Jr., Mises Daily

A new BBC poll finds that only 11 percent of people questioned around the world think that free-market capitalism is a good thing.

What can we learn? Far from not having learned anything, people have largely forgotten the experience and have developed a love for the ancient fairy tale that all things can be fixed through collectivism and central planning.

The fashion for socialism and the opposition to capitalism should alarm every lover of freedom the world over. We have our jobs cut out for us, but with numbers this bad, it is not difficult to make a difference. Every blow you can land for free markets helps protect freedom from its enemies.

Read the entire article here.

Special thanks to the Ludwig von Mises Institute

Friday, November 13, 2009

The Conventional Wisdom on Higher Education – Not Just Wrong, but Harmful

By George Leef
Reprinted with permission of the author

The case I’m going to present began taking shape in my mind in September of 1980.

After having foolishly devoted three years to earning a law degree, I realized that I would rather teach than practice law. While job hunting in the summer of 1980, I was lucky enough to hear about a small college with a decidedly free-market perspective that was in desperate need of someone who could teach economics, business law, and a few other courses.

I was hired in July and started preparing for the courses I’d be teaching. One of them was an ethics course for juniors and seniors. About two weeks into the semester, one of the readings in the text raised the issue of “social justice” and I figured that the students should read F.A. Hayek’s attack on that concept. I copied a few pages from his book The Mirage of Social Justice and handed the material out at the end of a Thursday class, telling the students that I wanted them to have read it and be ready to discuss it on Monday.

In Monday’s class, I asked several questions intended to catalyze discussion of Hayek’s argument that “social justice” is not just meaningless but a dangerous idea. But each question drew only puzzled looks, yawns, and downcast eyes. It began to dawn on me that the students had either not bothered to do the reading, or if they had, nothing from it had stuck in their heads.

At last, after much painful silence, one young fellow raised his hand. I called on him eagerly. He said, “Couldn’t you just, y’know, tell us the main point?”

I tried to gently rebuke him and the whole the class, saying that college isn’t about simply memorizing a few “main points” but rather should be about learning to pry out meaning on your own. You can’t go through life waiting for others to always tell you “the main point,” after all.

That incident made a big impact on me. I had already begun to suspect that many of the students I had were not much interested in learning and that class confirmed it. As I got to know the students better and better, I discovered that few of them had any sparks of intellectual curiosity. Most were academically weak and disengaged, with reading and writing skills that would have been thought poor for grade schoolers back when I was in grade school. Mostly, they were in college because it was fun to get away from home and because they assumed that having a college degree was the ticket to a good career and prosperity.

I began to see, in short, that college had been oversold.

My teaching career came to an end in the fall of 1989 and the reasons why are also pertinent to my case. For years I had ignored suggestions from the administration that I was too hard on the students. My grade average was one of the lowest at the school – only a few hard-nosed accounting professors were usually lower – and some students were choosing to take Business Law at a community college where the amount of work was less and it was easy to get at least a B. The school was concerned about the loss of revenue. Therefore, I was given an ultimatum: either I had to make my courses more “user friendly” or else my contract would not be renewed.

I didn’t think that I was too hard on the students. Those who made any decent effort passed. The problem, as I saw it, was that a large percentage of the students were used to passing without putting forth the least bit of effort. They hated the few courses where their enjoyment of college life was hampered by the need to read and study. Instead of caving in, I decided to quit.

Ten years later I was hired for a think tank job involving higher education, director of the Pope Center, then a branch of North Carolina’s John Locke Foundation. As I immersed myself in the world of American higher education and especially its problems, I came to see that there is a conventional wisdom about higher education – a galaxy of ideas that’s overwhelmingly accepted by education leaders, politicians, and most of the public. At the center of that galaxy, to continue the astronomical allusion, is a pulsar that keeps sending out the core idea. MORE EDUCATION IS GOOD. MORE EDUCATION IS GOOD. MORE EDUCATION IS GOOD.

The “education” there means formal education. Excluded is education that occurs on the job or is undertaken individually. It’s not that such education is bad, but that we must place our trust in organized education that’s overseen by experts.

What I want to do with my remaining time is to take a critical look at some of the main ideas in the galaxy of conventional wisdom. I’ll argue that those ideas are mistaken and that their acceptance by policy-makers has some adverse consequences for the country. Here’s the first:

College education adds greatly to a person’s knowledge and skill base, thereby increasing his lifetime earnings.

We hear constantly that getting a college degree is a great “investment” for both the individual and the nation because people with degrees earn much more than do people without them. It’s almost always assumed that the years of college work is responsible for this high level of success and that if only we could get more people into and through college, we would have a more prosperous society.

It is true that on average, people with college degrees earn substantially more than do those without them, but it does not follow that this higher earnings level is caused by the human capital gains from college studies. Nor does it follow that putting anyone who has not gone to college through to a degree will give him any earnings boost at all, much less the million dollar figure that is carelessly tossed around.

Now, I’m emphatically not saying that college education never does any good for any student. I’m confident that I learned some useful things in my college years. I’m even more confident that my son at Duke with his dual major in mathematics and biology, is adding to his stock of human capital. My contention is that it’s a mistake to assume that every college student gains in useful knowledge and skills from his college courses.

We shouldn’t jump to the conclusion that high-income people who are college graduates enjoy that success because they went to college. Most of them already have an abundance of knowledge, skill, and ambition before taking any college classes. Whether their studies enhance their productivity or not, they’d still have greater financial success in life than those who have less natural ability and drive.

And on the other hand, it’s clear that many of those who have graduated from college derive little or no benefit from it. Several years ago I discovered that the Bureau of Labor Statistics keeps track of the level of education of workers in a vast number of occupations. For years I had been hearing anecdotes about PhDs delivering pizza and the like, but the BLS provides hard numbers to show that lots of Americans with college credentials are employed in mundane jobs that could be done by almost any moderately bright high school kid.

Here are just a couple of data points I recently pulled from the BLS site. In the job category of “baggage porters and bellhops,” 33 percent have “some college” (that is, they took some classes but did not graduate) and 16 percent have a BA degree or higher. In the job category “ushers, lobby attendants and ticket takers,” 30 percent have “some college” and 17.5 percent have a BA degree or higher. There is much more information like that, showing that we have such a glut of college graduates that they are spilling over into work that demands nothing more than basic trainability.

It isn’t true that college adds a lot of “human capital” to every student and it also isn’t true that there are good-paying jobs for every graduate. Believing that we can make everyone better off by sending him through college is like believing we can make everyone better off just by printing up more and more money.

Here’s a second belief:

Economic growth and competitiveness depends on an increasing level of educational attainment.

It is widely believed that our national prosperity hinges on maintaining a high level of formal education in our labor force – and best of all to have the position of international “leadership.”

For example, in his speech to Congress last February, President Obama asserted that the country needs to regain the place we once held as the nation with the highest percentage of college graduates in its workforce in the world. The president’s idea is perfectly consistent with the pulsar: MORE EDUCATION IS BETTER.

The trouble here is that there is no necessary relationship between the level of formal education and prosperity in a nation. Just as there is no necessary connection between an individual’s educational level and his income, so is there no necessary connection between the general level of education in a country and its prosperity.

In her excellent and iconoclastic 2003 book Does Education Matter? Alison Wolf, who teaches at King’s College in London, examined the assumption that there is a direct relationship between a nation’s educational level and its standard of living. She found that the assumption does not hold. There are prosperous and economically advanced countries (for example, Switzerland) that have less “investment” in education than other countries with poorer economies but more “investment” in education (for example, Egypt).

Maximum prosperity in a nation does not come from pushing more and more formal education. Rather, it’s a result of finding the optimal level of investment in both physical and human capital. Individuals and firms are quite good at discovering the level of knowledge and training that maximizes productivity, and much of that comes from personal and on-the-job learning rather than formal courses.

It is often said that America’s great post-war economic surge was due to sending many veterans to college under the GI Bill, but that proves nothing because the US had the world’s most vibrant economy back in the 19th century and early 20th century when there was comparatively little college education.

Back when my grandfather was a young man starting a business just about a century ago, the US was a highly skilled and educated country, but most of that skill and education was derived outside of formal education. We had no shortage of excellent engineers, architects, accountants, lawyers, teachers, and so forth, but few of them had college educations. The GI Bill did not give the nation a “more educated” workforce; all it changed was to put a college degree in front of the process of learning many occupations.

Eventually, having college credentials would become a requirement for a great many fields, but that is not because only individuals who’ve been to college could possibly learn what’s needed to do the job. Rather, it’s because college is now treated as the proving ground that high school used to be. When people say that most good jobs now require a degree, that just means that companies won’t consider high school graduates. I recently learned, for example, that Enterprise Rent-a-Car only hires college grads for its service positions. Obviously you don’t have to completed college to learn that work.

But what about the fact that several other nations now surpass the US in terms of the percentage of the labor force that has a college education? Belgium and Finland already have a higher percentage, at least of younger workers, but what many are really worrying about is China and India, which are said to be investing heavily in education, producing more scientists, engineers, and mathematicians than we are.

We should stop worrying. If it really makes the Belgians and Finns and Chinese and Indians more productive to push higher education – and I’m very skeptical about that; I suspect this is just rent-seeking on the part of the higher ed establishments in those countries -- that doesn’t tell us anything about what we should do. Since we already have large numbers of people with college degrees in mundane jobs, it’s clear that further expansion of higher education would be a poor use of resources. That’s something that truly would damage our economy.

College education leads to good social outcomes such as better health and civic participation.

Advocates for the higher education establishment often haul out the argument that the nation benefits from having more and more people go to college because there are ancillary social benefits. For example, a report called the national report card on higher education put out by the National Center for Public Policy and Higher Education claims that besides the supposed economic benefits of promoting higher education, there are also social benefits including higher voting percentages, more volunteerism, and increased charitable giving. And I’ve even heard it said that college is good because college grads are less likely to smoke.

No doubt, all of those outcomes correlate with college, but it isn’t true that college is their cause. People who are more inclined to civic participation and disinclined to smoke are apt to choose to go to college, but there’s little reason to believe that being in college changes people in any of these respects. In fact, there is a lot of evidence that it doesn’t do so, starting with a well-known smoker who went to Columbia and Harvard Law and now resides in the White House.

If there are behaviors we want to encourage or discourage, putting people through college is a very costly and ineffective way of doing so.

I’d like to turn now to some harms that stem from our mania for higher education.

Credential inflation.

One of the consequences of overselling college education is credential inflation. That is, once a certain level of formal education becomes commonplace, it takes a higher credential for top people to distinguish themselves.

Stanford University professor David Labaree hit the nail on the head in his book How to Succeed in School Without Really Learning, writing:

“The difficulty posed by the glut of graduates is not that the population becomes overeducated (such a state is difficult to imagine) but that it becomes overcredentialed, as people pursue diplomas less for the knowledge they are thereby acquiring than for the access that the dipomas themselves provide. The result is a spiral of credential inflation, for as each level of education in turn gradually floods with a crowd of ambitious consumers, individuals have to keep seeking ever higher levels of credentials in order to move a step ahead of the pack. In such a system, nobody wins….At all levels, this is an enormously wasteful system.”

Work that used to be done by people with a high school education or less is now often restricted to those with BA degrees, and many jobs that used to be done by college grads are now open only to those with MBAs. All of that formal education is often irrelevant to the work involved, but with a glut of people in the labor market with these educational credentials, employers can afford to screen out people with lesser ones. As James Engell and Anthony Dangerfield put it in Saving Higher Education in the Age of Money, “ The U.S. has become the most rigidly credentialized society in the world. A BA is required for jobs that by no stretch of imagination need two years full-time training, let alone four.”

Credential inflation means we’re wasting resources. People spend great amounts of time and money pursuing pieces of paper just so they can get over the credential hurdle and have a shot at employment that only calls for trainability, not advanced academic coursework in preparation.

Dumbing down the educational system.

Another adverse consequence of our overselling of higher education is that we dumb down the whole educational system.

As colleges have sought to keep growing by accepting increasing numbers of weak and disengaged students, they have chosen to accommodate the preference of such students for courses that aren’t rigorous by allowing (or as in my case, encouraging) professors to lower their standards and water down the material. Temple University English professor Stephen Zelnick writes that academic standards “went slack” in the 1990s “when Temple decided to open its doors to all and sundry in order to pay its bills.”

Not only have standards plunged and grades been inflated, but we now find the curriculum at many schools cluttered with courses on pop culture and leftist manias like global warming and “sustainability.” As a result, employers find that many college graduates can’t write a clear paragraph or do simple math, but can hector you on the imperative to recycle everything.

Furthermore, since so many high school grads (around 70 percent) now end up in college, the pressure that high schools used to feel to ensure that their students were well educated has eased. With most colleges doing remedial education, the K-12 system can slide into the easy path of passing students along even if they haven’t learned much about reading, writing and math.

Bad influences

I’ll add just one more point before closing. Higher education often has a bad influence on young people. For every professor like my two compatriots here, there are dozens who use their classrooms to push their collectivist, anti-market beliefs on students. Rarely do those beliefs have any relevance to the academic subject matter of the course. Even that well-known leftist intellectual Stanley Fish has complained that, for example, composition courses are often far more about the highly ideological reading material than they are about the competence with which the student writes about that material.

Overwhelmingly, American higher education promotes and reinforces ideas that are hostile to limited government and the market order. The longer students are in the presence of the professoriate, the more they’re apt to absorb at least some of their belief system, which embraces a host of socialistic notions while rejecting capitalism. That, I believe, is the unspoken reason why Obama and his allies want to expand college education. They know that it tilts the political playing field in their favor.

At the root of all this waste and educational degradation is government subsidization of higher education. It plays the same role as government subsidization of home ownership, changing people’s incentives, distorting the market, and wasting resources. I’m convinced that the change that would do the most good of all would be for the federal and state governments to withdraw from the financing of college education so that all costs would be borne by voluntary payers.

I’ll conclude with this thought. It is frequently said that the United States is such a prosperous country because it has spent so much in educating its citizens. The truth, I submit, is exactly the reverse. Only a very prosperous country could afford to squander so much on an educational system as wasteful and inefficient as ours.

Thursday, November 12, 2009

The Stupid Horse

From Investor's Business Daily...

In a short article on the economist Joseph Schumpeter, David Saito-Chung relates this story:

Peter Boettke, a professor of political economy at George Mason University in Virginia, likens capitalism's success to a horse race.

One horse, named Schumpeter, represents innovation. The second horse, called Smith, stands for free trade. The third is government "and its stupid decisions," Boettke said.

"As long as the first two horses stay ahead of the stupid horse, the economy's cycles are manageable," he told IBD. "The trouble happens when the stupid horse's nose gets in front by (creating) policies that restrict trade or are anti-technology."

Wednesday, November 11, 2009

Risk Takers

by Russ Roberts on November 10, 2009
in Financial Markets

From an article on Goldman Sachs, from a conversation with the CEO, Lloyd Blankfein:

He starts with a little humility. He understands that “people are pissed off, mad, and bent out of shape” at bankers’ actions. Goldman played its part in the meltdown that almost destroyed the global financial system. It, like most other banks, lent too much money, made its first quarterly loss for more than a decade last year and ended up taking bail-out cash from Washington. “I know I could slit my wrists and people would cheer,” he says. But then, he slowly begins to argue the case for modern banking. “We’re very important,” he says, abandoning self-flagellation. “We help companies to grow by helping them to raise capital. Companies that grow create wealth. This, in turn, allows people to have jobs that create more growth and more wealth. It’s a virtuous cycle.” To drive home his point, he makes a remarkably bold claim. “We have a social purpose.”

I used to feel this way. I used to think that Wall Street innovation was part of our prosperity because the innovation made markets more efficient. But that only works when firms face profits and losses. When losses are truncated by bailouts, you get anti-social risk-taking. You get a cycle not of virtue but of vice. You get $1.5 trillion poured down the black hole of subprime lending. The bottom line of the current system is that Blankfein won and the we, the people, lost. Shame on the people who allowed him to play with our money instead of his own. Shame on him for pretending he earned our money and the profits he made playing with it.

Tuesday, November 10, 2009

Monday, November 9, 2009

Long and Confusing Rules

Now that the House has passed a health care bill that it promises will fix the health care system once and for all, we should stop and think about the proper use of the law before we go any further.

The law was not made to manage the many fine threads of complex human relationships. Trying to fix the health care system with legislation is like trying to fix a spider web with the broad end of a broom.

Properly used, the law should define the general rules of the game, and no more. When it goes beyond that, when it attempts to legislate every contingency, it morphs into a 2,000 page bill which no one will read...until it is too late. Then the 2,000 page bill will spawn 20,000 pages of regulation, and what used to be an individual decision will become a hopelessly public one.

In such a world, life will be a Kafkaesque journey where the rules are so long and confusing that they might just as well be arbitrary. In such a world, more will be lost and destroyed than ever will be saved.

Sunday, November 8, 2009

Saturday, November 7, 2009

The Quotable Bastiat

"When legislators, after having ruined men by war and taxes, persevere in their idea, they say to themselves, 'If the people suffer, it is because there is not money enough. We must make some.' And as it is not easy to multiply the precious metals, especially when the pretended resources of prohibition have been exhausted, they add, 'We will make fictitious money, nothing is more easy, and then every citizen will have his pocket-book full of it, and they will all be rich.'"

"What is Money"?

Quand les législateurs, après avoir ruiné les hommes par la guerre et l'impôt, persévèrent dans leur idée, ils se disent: « Si le peuple souffre, c'est qu'il n'a pas assez d'argent. Il en faut faire. » Et comme il n'est pas aisé de multiplier les métaux précieux, surtout quand on a épuisé les prétendues ressources de la prohibition, « nous ferons du numéraire fictif, ajoutent-ils, rien n'est plus aisé, et chaque citoyen en aura plein son portefeuille! ils seront tous riches.»

Maudit Argent!

Friday, November 6, 2009

Atlas Continues to Shrug

"She would have been horrified," Anne Heller tells All Things Considered host Guy Raz. Heller's new book is titled Ayn Rand and the World She Made.

Over the past year, Rand's books have reappeared on the bestseller lists. Heller says that makes perfect sense.

"When there are periods of economic decline," she says, "people are more likely to absorb [Rand's] message."

At last summer's tea-party rallies, some people held signs with the famous first line from Atlas Shrugged, "Who is John Galt?" Galt is the character who personifies capitalist idealism.

Read and listen to the interview here.

Thursday, November 5, 2009

Rap and Reality

From How Capitalism Will Save Us by Steve Forbes and Elizabeth Ames...

Is Capitalism Moral?

THE RAP: Capitalism is an amoral, dog-eat-dog system founded on greed and the survival of the fittest.

THE REALITY: Capitalism is the world's most humane economic system, promoting the democratic values of a free and open society: hard work, cooperation, generosity, charity, and devotion to the rule of law.

Isn't Capitalism Brutal?

THE RAP: The free market is brutal: Big players with too much power crush smaller competitors. People are laid off without warning or protection. Individuals are vulnerable to ups and downs in remote sectors of the economy that have little apparent connection to their daily existence, suffering untold disruption to their lives and businesses.

THE REALITY: Democratic capitalism can be disruptive and unpredictable. But the process of "creative destruction" is critical to a healthy economy and society. New products and industries render old ones obsolete. Some jobs may be destroyed. But other jobs--more of them--are created. In this way, individuals and resources go where they are most needed by people and businesses, and wealth-producing innovations are developed. Without creative destruction, the economy would stagnate. Living standards would be lower and unemployment would be far higher.

Aren't The Rich Getting Richer At Other People's Expense?

THE RAP: The rich are a privileged group that prospers at the expense of everyone else, exploiting employees and customers to stay on top, while getting special treatment and tax breaks? Meanwhile, the poor get poorer and the middle class struggles to keep from falling behind.

THE REALITY: Rich people make their fortunes by creating opportunity and wealth for others. They do this by launching businesses that create jobs, by investing in new ventures, or by spending money on other people's products and services. The rich are not a fixed aristocracy. Who is rich and who is poor is always changing. You can't have a prosperous or innovative economy unless people are allowed to become rich

Monday, November 2, 2009

Bastiat Meeting

November 4th

Please join us this Wednesday for our November Bastiat Society Meeting. Our guest speaker for this month is George Leef from the Pope Center for Higher Education Policy. His talk is entitled:

"The conventional Wisdom on Higher Education: Not Just Wrong, but Harmful"

Please RSVP by emailing us:

5pm - Reception
6pm - Speaker

The Harbor Club
35 Prioleau St
Charleston, SC 29403


Sunday, November 1, 2009

Monopoly Money

Would currency competition lead to a sounder U.S. dollar?

By Dr. Ron Paul (R-TX)
Submitted to CNN

"The prospect of American citizens also turning away from the dollar toward alternate currencies should provide an impetus to the U.S. government to regain control of the dollar and halt its downward spiral. Restoring soundness to the dollar will remove the government's ability and incentive to inflate the currency, and provide stability to the financial system. With a sound currency, everyone is better off, not just those who control the monetary system."

Read the entire op-ed here