Bryan Caplan's Blog, page 69

Capitalism vs. Socialism: Reply to Bruenig, by Bryan Caplan

Since Elizabeth Bruenig has posted her whole opening debate statement, I thought I'd reply point-by-point.  She's in blockquotes; I'm not.  Before I get started, though, let me say that personally, Elizabeth seems a gracious and kind human being.  Still, even if I were an avid socialist, I'd be baffled by the way she tackles the issue.

It
seems very fitting to me that we should discuss these matters at
LibertyCon, as I do agree that we are currently facing a crisis of
liberty. The great authors of the Western tradition, the ancients and
the late antique and medieval luminaries who laid out the foundations
for what remains true and beautiful in our culture, would look see us as
profoundly unfree.

I spent many years studying intellectual history.  Still, my honest reaction: While these "luminaries" were smart, most were also profoundly ignorant and dogmatic - and apologists for the brutal societies in which they lived.  Most had near-zero knowledge of what actually sustains the true and beautiful in our culture, namely: science, tolerance, and markets.  They have far more to learn from us - both factually and morally - than we do from them.

That said, I suspect the large majority of these luminaries would look at us with amazement.  Indeed, when they exited of the time machine, they'd wonder if they'd died and gone to heaven.  After all, they'd witness amazingly well-fed, healthy people enjoying a cornucopia of technology and art beyond their wildest dreams.  Then they'd learn about the abolition of slavery and serfdom, the amazing progress of women, and the peaceful co-existence of conflicting religions and philosophies.  And hygiene.  And Netflix.

Would any of the luminaries till have the nerve to call us "unfree"?  Probably a few misanthropes and hate-mongers like Augustine and Marx, though perhaps even they could be shock-and-awed to their senses by our resplendent world.

There is the first and greatest matter of interior unfreedom. In the Phaedrus,
one of his Socratic dialogues, Plato had his mentor liken the human
soul to a team of two winged horses led by their charioteer... The bad horse, undisciplined and self-indulgent, is always
dragging its poor yokemate and charioteer into pathetic and immoral
behavior; it is unbridled lust and greed and ravenous want, and
its domination of its team is the very definition of unfreedom. Nobody
ruled by such mad appetites could be said to be truly free.

I agree that Socrates might have this reaction.  But even that's unclear; perhaps he'd reach the more sensible view that the human nature is pretty stable.  Stoic self-control was rare in ancient times, and remains rare today.  And if he were even more sensible, he'd object to Bruenig's hyperbole.  In a world with eight billion people, you can find unbridled lust and ravenous want if you search hard enough.  But most of the lust is bridled, and most of the want is measured. 

Then there is the matter of exterior freedom. In Politics, Aristotle considered the natural slave, "one
who is," in the words of Greek philosophy scholar Joseph Karbowski,
"naturally suited for slavery..." Aristotle's natural slaves are confined
to pursuing the interests and purposes of others, he imagines, by a kind
of moral and psychological weakness; so much less binds us to the same
sort of existence, performing labor that only serves another person's
ends, selling off the possibility of living toward our own...

When I heard Bruenig invoke Aristotle on slavery, I was expecting at least some acknowledgement that modern U.S. workers are freer than ancient Greek slaves.  But if I'm reading her correctly, she seems to think that modern conditions are no better, or possibly worse.  If so, this is beyond absurd.  Even the crummiest job in the U.S. lets workers serve their own end of making money, and spending or saving it as they like.  The vast majority of workers also get some satisfaction from being productive and socializing with their coworkers.  It's a lot better than historic slavery.

It's
something of a shame now to see these greats peering down at us from
the occasional courthouse pediment or Cathedral niche. What would they
make of us now?

To repeat: Most would be astounded to witness what, to their eyes, would look like heaven.  In any case, these "greats" were at best great for their time.  Few would measure up to modern intellectual or moral standards.  And yes, as a moral realist, I say today's standards are plainly morally superior to those of the pre-modern thinkers who took slavery, persecution, and dictatorship for granted.

We're ruled by passions and owned by things; we have
been taught that freedom is a vast blankness defined only by its
featurelessness, and we spend our lives laboring at the behest of
others, in hopes of surpassing those nearest to us instead of
cooperating with them.

Absurd hyperbole.  In a world with eight billion people, you can probably find a few that fit most of this bleak description (though I doubt that a single human being has ever been taught that "freedom is a vast blankness defined only by its featurelessness").  But the overwhelming majority mix passion with self-control, and materialism with cherished ties to family and friends.

Capitalism itself sits at the
center of a web of mutually reinforcing ideological and material
structures which, taken together, diminish human freedom from the inside
out, and militate against human flourishing.

What measures of "human flourishing" does Bruenig have in mind?  Every measure that social scientists study - happiness, health, leisure, life expectancy, consumption, and beyond - are near their all-time highs in the world's most capitalist countries.

I. Capitalism and the will

Consider
the bondage of the will. Wherever the bourgeoisie has got the
upperhand, Marx and Engels observed, "it has drowned the most heavenly
ecstasies of religious fervor, of chivalrous enthusiasm, of philistine
sentimentalism, in the icy water of egotistical calculation."

In other words, capitalism brought modern religious toleration.  Until Marx's followers gained power in half of Europe and introduced the most heavenly ecstasies of atheistic fervor.

So
the spirit of morally neutral, self-interested utilitarianism came to
displace all that had come before. Hughes noted that "the spirit of
modern capitalism appears to be utterly value-free, without substantive
commitments, neutral with regard to the question of human flourishing.
This follows from its pure instrumentality; it is a concern with methods
regardless of goals, means not ends."

If you wanted to convince students to not bother to read pre-modern thinkers, this would be a good way to do it.  What childish hyperbole these "luminaries" write.

Capitalism fosters an obsessive
focus on one's interests, meaning
one's material well-being, and argues that the pursuit of such is an
unqualified moral good; it renders sustained contemplation for no other
purpose than to know the truth utterly useless and irrational, and
largely impossible.

"Largely impossible"?  People have far more leisure time today than ever before.  I agree that they spend little of it on "sustained contemplation for no other purpose than to know the truth."  But that's because of the timeless fact that most human beings are philistines.  Always have been, and probably always will be.  No pre-modern thinker enjoyed the opportunities for Enlightenment that modernity delivers to everyone with Internet access. 

It is preferable, for capitalists, that we do not
spend any time shaping or educating our wills, and thus they're
simultaneously weak and tyrannical.

Absurd.  Capitalists want disciplined, focused workers - and well-reward those who possess these traits.  Impulsive people in capitalist societies have trouble even holding down a job, as sociologists of poverty are well-aware.  Even if you focus on consumers, plenty of firms - such as insurance companies and lenders - want people to be strong-willed, because their products offer long-run gain for short-run pain.

II. Capitalism and the world

And
yet, capitalism claims to be the political-economic form that most
values free choice. The contradiction between the conditions on the
ground and capitalism's self-image perhaps explains why, when you trace
its ideological roots, so much time is spent trying to explain how
people have consented or agreed to things they obviously haven't
consented or agreed to.

A better story is that even relatively capitalist thinkers are over-eager to justify existing governments, which plainly are not consensual.  See Mike Huemer's The Problem of Political Authority.

John Locke claimed, for example, that by
agreeing that gold and silver are valuable, we agree to the unequal
distribution of wealth arising from the accumulation of capital;

This is indeed a poor argument on Locke's part, but it's a red herring.  No sensible defender of capitalism claims people consent to aggregate social outcomes; that's why Hayek's slogan about society being "the product of human action but not human design" is so widely quoted.  Instead, as in Nozick's Wilt Chamberlain example, we focus on whether individuals consent to what they're personally doing with their own bodies and their own stuff.  (Thus, the capitalist ideal upholds the right of two men to marry each other, even if everyone else is horrified by gay marriage).  Then, as I explained in my talk, there's a second set of arguments designed to show that this system leads to good aggregate outcomes.

Thomas
Hobbes said that you can still be understood to have consented to that
which you were forced to do, even upon pain of death: All it means is
that you chose life.

Agreed.  Hobbes' argument is Orwellian and silly.

Similar hey-buddy-you-asked-for-this arguments
arise in cases where there are no other choices really available, as in
the payment of poverty wages and unsafe, sexually abusive or
exploitative working conditions.

It's worth pointing out that in pre-modern times, the economy was so unproductive that almost everyone had to live in poverty.  And even in the poorest countries, it's normally multinational corporations that provide the best wages and working conditions.

But more fundamentally, almost everyone thinks that we can give morally meaningful consent even when our other option is terrible.  As I mentioned in my talk, if you're highly unattractive, your options in the dating market are poor, but that doesn't make dating non-consensual.  Similarly, if your productivity is very low, your wages will probably be low too.  But why treat the employer as an "exploiter," when no one else on Earth will offer you a better deal?

The
illusion of consent only emerges, in this context, to conceal the fact
that the average person under capitalism does not really control much of
his or her own economic activity, much less his or her own destiny.

Even if you believe that people can't meaningfully consent to work for subsistence wages, what does this have to do with the vast majority of First World jobs that provide living standards that medieval kings would have killed for?

For
workers, paradoxically, the fullest expression of their agency (offered
under capitalism, that is) is the full alienation thereof. Huw Beynon
put it aptly in his account of Working for Ford:
"Workers are paid to obey."

Sure, every employer expects you to take his desires into account.  Why else would he hire you?  But what's so objectionable about the mundane fact that businesses don't pay people to do whatever they feel like doing?

III. Socialism

But it doesn't have to be this way, which is why I've come today to argue in favor of socialism.

Socialism has a range of expressions, and though it's mostly argued against (though rarely, if ever argued for)
in its twentieth-century historical forms, the effect of any strands I
would advocate would be, at least, fourfold: 1) to de-commodify labor,
and as many other domains of life as possible; 2) to reduce or eliminate
workers' alienation from their labor, society, and themselves; 3) to
reduce or the vast social and political inequality brought about by
capitalism; and 4) to diminish or destroy capital's control over
politics, society and the economy.

If someone claimed that North Korea or Venezuela approximated these ideals I'd disagree, but at least understand why it might be plausible.  But Sweden, where 70% work in the private sector?  Furthermore, while Sweden has relatively low income inequality, it has very high wealth inequality - and it's hard to deny Sweden's richest families have considerable sway over Swedish politics.

We
already agree, generally, with the de-commodification of certain goods:
education, for instance, is largely de-commodified; there is also a
major grassroots movement to de-commodify healthcare. All this means is
to protect certain domains from total domination by market-based forces.

"Protected from total domination by market-based forces"?  It's more accurate (though still overstated) to say that these sectors are totally divorced from market-based forces.  The results are predictable: Massive stable waste and low innovation, paid for by exploited taxpayers.  Education is a case in point.

...These processes,
along with a more general process of de-commodification across the
board, will reduce social and personal alienation by transforming the
overwhelming competitive impulse in capitalist society into a
cooperative impulse. (It's worth noting, I think, that is a goal that
sounds unreasonably optimistic only because capitalism sells us the
worst possible story about ourselves, imagining human nature as
inherently greedy, jealous, destructive and anti-social; this is another
way in which our own liberation to excellence is foreclosed for us.)

It also sounds unreasonably optimistic because self-identified socialists have dominated numerous countries without noticeably increasing the cooperative impulses of their citizenry.  And don't forget evolutionary psychology.

These
four fronts are only a rough sketch of the sort of socialism I
envision; my purpose here was to debate for its merits rather than to
supply particular policy parameters, which can be left to more talented
policy-makers than I. But the moral case, too, is important���--���primary,
even. Socialism represents a moral response to an immoral society, and a
harsh rebuke to the commandeering of the modern imagination by
individualism, cynicism, competition, misanthropy and indifference. With
regard to certain practices and industries, socialists may claim that
socialist-style approaches will result in greater utility or efficiency,
but the greatest recommendation of socialism is that it is its own
moral case, and this is nowhere clearer than in contexts where freedom
is held among the highest values.

As I mentioned in the talk, the Orwellian doublethink is palpable.  People who do what they want with their own bodies and their own stuff are "unfree."  People who do what socialist policy-makers force them to do are "free."  And frankly, it's Bruenig who seems cynical, misanthropic, and indifferent to me.  Yes, people who run businesses want to make money; but most are also glad to create economic and personal opportunities for their workers, and valuable products for their consumers.  And my opponent seems totally indifferent to these amazing achievements.  I suspect she'll insist that workers and consumers are unwitting accomplices in their own oppression.  But again, that seems like a rather cynical and misanthropic view of things.  Why not just say that businesses, workers, and consumers are working together in dignity for mutual advantage - and focus instead on the plight of the global poor who are excluded from this glorious marketplace by force of government?

(9 COMMENTS)

Capitalism vs. Socialism: The Bruenig-Caplan Debate, by Bryan Caplan

On Saturday at LibertyCon, I debated Elizabeth Bruenig of The Washington Post on "Capitalism versus Socialism." Here's my opening statement.  Here's hers.

"Capitalism" and "socialism" - what do these words even
mean?  You could just say that capitalism
is the economic system of countries like the United States, and socialism is
the economic system of countries like the former Soviet Union.  In that case, I'd say that capitalism is at
least ok, while socialism is hell on earth. 
Perhaps my opponent would even agree! 
It's more fruitful, though, to treat capitalism and socialism as
positions on the ideal economic
system.  Something like: the capitalist
ideal is that government plays very little role in the economy - and the
socialist ideal is that government plays the leading role in the economy.  In that case, I say that capitalism is
awesome, and socialism is terrible.

What's so awesome about the capitalist ideal?  It's a system based on individual freedom and
voluntary consent.  You're allowed to do
what you want with your own body and your own stuff.  If other people want to cooperate with you, they
have to persuade you; if you want other people to cooperate with you, you have
to persuade them.  Can consent really be
"voluntary" if some people have a lot more to offer than others?  Absolutely. 
Some people are vastly more attractive than others, but that does
nothing to undermine the voluntariness of dating.  Under capitalism, how people use their freedom is up to them; they can try to get
rich, they can relax, they can help the poor, all three, or none of the above.

Society by consent: Capitalism is such a compelling moral
ideal that I'm tempted to rest my case right now.  But there's a looming doubt: Is capitalism
one of those ideals that sounds wonderful, but works terribly in real
life? 

How can we even begin to answer such a sprawling
question?  Simple: Start by looking at
the most capitalist countries that actually exist.  Next, weigh the probable effects of the main
policy reforms necessary to bring those countries into harmony with the capitalist
ideal.

By usual rankings, the world's most capitalist countries are
Hong Kong and Singapore; other exemplars include the United Kingdom, Canada,
and the United States.  By world and
historic standards, all are incredibly rich and pleasant countries.  This wasn't true for Hong Kong or Singapore
in 1950, but after decades of top rankings, they're two of the richest and most
pleasant countries on Earth. All of these countries still have relatively poor people, but there's very
little absolute poverty.  Indeed, the
poor in these countries have such a nice life that people around the world eagerly
immigrate there to work in hard, low-skilled jobs.

The reason is clear.  Free
markets channel the fundamental human desire to better oneself in socially
productive ways.  If you can deliver a
product that people like at a price they find attractive, you get rich.  This doesn't just lead to mountains of cheap,
amazing products.  It also leads to
constant innovation, a ceaseless effort to do more with less.  Of course, most of us aren't huge successes in
business.  But since business competes
for both customers and workers, most of the benefits ultimately go to us.  Amazon has got to be the best store in human
history, providing a cornucopia of great, convenient deals.  But its lifetime profits sum to just a few
billion.

To repeat, none of the world's most capitalist countries
actually live up to the capitalist ideal. 
But they still provide a useful benchmark.  How is the status quo likely to change if
government's role drastically shrinks? 
I've only got time for the highlights:

1. Even the most capitalist countries heavily restrict
immigration.  Non-citizens need
government permission to live and work there - and such permission is almost
impossible for most of humanity to attain. 
If these laws were repealed, there would be massive international migration.  People around the world would move from
countries where their labor produces little to countries where their labor
produces much.  A standard long-run
estimate is that this would double the production of the world - and
drastically reduce global poverty and inequality in the process.

2. Even the most capitalist countries tightly regulate construction,
especially in high-wage areas.  If these
laws were repealed, there would be a massive increase in the supply of housing
in the most prosperous areas of the country, soon followed by massive intranational
migration.  Standard estimates of even modest housing deregulation say it would
raise U.S. GDP by 10% - and markedly reduce poverty and inequality in the
process. 

3. Even the most capitalist countries engage in massive
involuntary redistribution.  Strangely,
however, this redistribution focuses not on the poor, but the old.  If these laws had never existed, a large
majority of people would have simply taken care of their own retirement - and
taxes would be so much lower that saving wouldn't be hard.  What about the minority who can't take care
of themselves?  It would cost so little
compared to the status quo that it's not unreasonable to leave it to private
charity.  If that seems like wishful
thinking, just retain a small welfare state for poor children and the severely
handicapped.

4. Even the most capitalist countries heavily subsidize
education.  In my new book, The Case Against Education, I argue that
the main effect of these subsidies is not to prepare people for good jobs, but
to spark fruitless credential inflation. 
If these laws were repealed, we'd still be literate and numerate, but
become independent and self-supporting years earlier.  What about poor kids?  Again, my preferred answer is private
charity; but if that's not good enough for you, then a means-tested voucher
program solves the problem.

Now what's so terrible about the socialist ideal?  It's a system based on government authority
and coercion.  Democracy is a decent way
to mitigate the mass murder and slavery of socialist dictatorships.  But even under democratic socialism, the
individual is at the mercy of popular opinion. 
And popular opinion is not pretty. 
Just look at the shameful way American democracy treats peaceful
immigrants like criminals - to popular acclaim.

Socialists like to compare their ideal society to a
family.  But in actual families, you
don't have to support your siblings if you don't want to.  Indeed, you don't even have to support your
parents who gave you life.  Why should your
moral obligations to complete strangers be any stronger?  The idea that the rich are morally obliged to
give away everything they don't need until poverty is vanquished has some
superficial appeal.  But objectively
speaking, almost all of us have vastly more than we need, especially if you
remember the market value of all your free time.  I loathe hyperbole, but if a socialist
government enforced the obligation to give away all your surplus to the poor,
you would literally be a slave.

Once again, though, there's a looming doubt: Is socialism
one of those ideals that sounds terrible, but works wonderfully in real
life?  To resolve this, let's return to
my same two-step procedure.  First, start
by looking at the most socialist countries that actually exist.  Next, weigh the probable effects of the main
policy reforms necessary to bring those countries into harmony with the
socialist ideal.

By usual rankings, the world's most socialist countries are
North Korea and Venezuela.  No decent
socialist upholds these hell states as ideals, and I certainly am not accusing
my opponent of doing so.  There are many
praiseworthy ways to bring relatively socialist countries into harmony with the
socialist ideal, starting with: stop murdering and jailing people to keep the
ruling plutocrats in power.  But as long
as the North Korean and Venezuelan governments play the dominant roles in their
economies, they'll remain impoverished and oppressive societies.  How would democracy fix that, short of abandoning
socialism?  To be fair, if I were a
socialist, I'd want to start with Sweden as my benchmark - and work from there.  But that's crazy; by most measures, Sweden is
only modestly less capitalist than the U.S.

People often mock socialists for insisting that "true
socialism" has never been tried.  I'm not
going to say that, because I don't think "true capitalism" has ever been tried,
either.  But if we want to forecast the
effects of the true version of either system, it still makes sense to start
with the closest existing approximations, then analyze the probable effects of bringing
their policies into harmony with the ideals. 
When we do so, we see that capitalism is a wonderful ideal that's likely
to work wonderfully in practice, and socialism is a terrible ideal that's
likely to work terribly in practice. 

(11 COMMENTS)

A Question of Talent Arbitrage, by Bryan Caplan

I just received another thought-provoking email about my new book.  Here it is, reprinted anonymously with the sender's permission.  I really had no solid advice for him, but perhaps EconLog readers will...

Good afternoon! I recently picked up The Case Against
Education, and thoroughly enjoyed it, so thank you for your contribution.

Like many of your readers, I suspect, my interest in the
book was born of reflection on my own educational journey. Even as an actuary
that directly applies my college major (math) and subsequent education (FCAS)
more than most professionals, I am horrified by how much time and energy I have
spent on formal learning. I have also hired young workers into corporate roles
many times over, and have often noted how candidates' costly education serves
only to keep their resume towards the top of my pile.

After experience working with a couple well-credentialed
duds, though, I've had periodic conversations with executives at my company
([redacted]) about whether there's a better way. I'd love to convince
your "Good Student" to work for me for four years in some sort of long-term
internship, rather than running up tens of thousands in debt in pursuit of
their sheepskin; the resulting professional would be light years more
employable in year 5 and onward. Ultimately, even assuming I could persuade the
Student, it's difficult to convince corporate hiring managers to forego a very
strong signal that's paid for by public policy and the students themselves.

I cannot help but think that with this much inefficiency in
the system, though, there must be some opportunity for talent arbitrage. I'm
curious, since you've spent so much time investigating this topic- have you
come across any sort of research on alternative talent sourcing? Perhaps an
alternative hiring program that's trying to break the cycle of waste? Your book
has practical application for politicians/voters/students, but I'd love to find
an incentive for the corporate world to be an agent of change as well.

(9 COMMENTS)

Medical School: A Whistleblower's Story, by Bryan Caplan

 Here's an email from a former medical student who heard my EconTalk with Russ Roberts.  Reprinted anonymously with his permission.

Good afternoon Drs. Caplan and Roberts,

My name is [redacted] and I recently listened to your conversation
on Econtalk regarding education. I wanted to pick your brains regarding the
structure and finance of medical education in the US.

I recently left medical school after one semester. I spent
years and thousands of dollars on tuition, preparing and taking the MCAT,
applying to medical school, going on interviews, etc. Ultimately I came to the
decision that my heart wasn't 100% in medicine and I was unwilling to pay the
opportunity costs.

I've actually applied to anesthesiologist assistant (AA)
programs, which are just two years in length. AAs legally must work under the
supervision of a physician anesthesiologist and they essentially function like
physician assistants, but are specific to anesthesia. 

This got me thinking about the practice of medicine and the
scope of practice issues that have come up in the last few decades across state
legislatures. I am not an economist by any means, though I definitely wish I
took more econ courses in college. I even though about grad school in public
policy but that's a conversation for another time.

I'm not sure if any of your research has addressed the topic
of medical education or not. I've heard the American Medical Association
referred to as a cartel in another podcast, Freakonomics.* I think the episode
was discussing the role of nurse practitioners which has made some primary care
physicians uncomfortable.

Specific to anesthesia has been the ongoing battle between
certified registered nurse anesthetists (CRNAs) and anesthesiologist
assistants, who have actually been around for over 40 years. According to legal
precedents, anesthesia is considered both a nursing specialty as well as a medical
speciality. The CRNA lobby is phenomenally politically savvy and they have
blocked legislation for AAs to work in various states. Currently, AAs are only
allowed to practice in 18 states. Of course the irony is not lost upon me since
the very same arguments CRNAs use against AAs are the same ones physicians have
used against other mid-levels.

Having worked in healthcare prior to med school, I was able
to see the enormous financial decisions that go into patient care. There are
clearly external forces influencing behavioral ���decision making, from C-suite
executives to physicians-in-training.

As an intellectual exercise, I've often pondered about the
state of medical education in the US. Nowhere else in the world are medical
students required to attend college for four years before matriculating into
medical school. The so-called Hopkins model has been championed by the Flexner
Report of 1910 and we apparently still think it's the only appropriate
pedagogical model to train the next generation of physicians.

Perhaps it was one of the major reasons why I left med
school. The constant testing  and ineffective teaching strategies left
much to be desired, particularly for long-term retention. Even the licensing
schedule that has developed through the years has become cumbersome: Step 1,
Step 2 (which has two parts), and Step 3. This does not include the exams you
take in your actual specialty once you finish residency. Each exam can cost
thousands of dollars, not including preparation materials that help you pass
the tests.

The argument for all of this testing is always in the name
of "patient safety" and to "protect the public." I think it
also serves to exclude others who would otherwise try to practice medicine.

I question the sustainability of this system. Billions of
dollars pour in from Medicare to fund graduate medical education and yet we're
still projected to have a physician shortage. To be fair, I have also read
research indicating it's not so much a shortage of physicians as it is a maldistribution
of physicians. I think physicians are trying to have their cake and eat it too:
restricting other providers' scope of practice while simultaneously refusing to
practice medicine in underserved areas.

I see the issue of medical education as both a public policy
concern as well as a curricular one. Yes, the curriculum is rigid and doesn't
reflect the advances made in technology and learning sciences. It's also
incredibly expensive. Some med schools charge out-of-state tuition upwards of
$60,000 for ONE year. Where the money goes, I have no idea. I think if you cut
out the mandatory baccalaureate degree, people would be able to save time and
money. Most other countries allow students to begin medical studies right after
high school.

My sister is a high school sophomore and I'm trying to steer
her in the right direction so she doesn't make the same mistakes I did. My
parents are immigrants from Vietnam and neither of them have a college
education. We were always told to go to college and the hard work will pay off
in the future. That piece of paper will mean something. And then 2008 hit and
things changed. I see the proliferation of meaningless master's degrees and a
certification test for X, Y, Z field. I don't think this rampant obsession with
credentialism actually brings forth any value though.
 

As economists,
what are your thoughts on the state of American healthcare? Do you think more
healthcare providers makes economic sense or does it endanger patient safety?

* A similar discussion occurred in this EconTalk episode with historian Christy Ford Chapin.

(3 COMMENTS)

A Bloom-ish Defense of Education, by Bryan Caplan

Here's an email from an anonymous reader, criticizing my views on education.  Reprinted with his permission.

So here is some anecdotal evidence in support of your
thesis.  I'm a working stiff (first in law, now in the financial sector) -
but an absurdly overeducated one (PhD and JD).  What I learned in four
years of college, five years of grad school and three years of law school did
nothing for my career.  Maybe 0.5% of the law school curriculum was useful
when I practiced law.  Being a lawyer is like being a plumber: you learn
on the job.  I suspect the other professions are mostly the same. 
What I got out of my education was the stamp of approval - pure
signaling.  I suppose if I had stayed in academia the stuff I learned in
grad school (e.g., the scholarly literature in my field) would have been more
helpful, so the usefulness quotient would have been somewhat higher than
0.5%.  You'll have a better sense of that than I have.

But I remain stubbornly attached to the overblown,
romanticized, Allan Bloom-ish view of liberal education.  My story here
isn't all that persuasive, I concede.  In those twelve years of higher
education, there were maybe four or five teachers who really moved me and
changed my path for the better.  That's it...but I think it's enough to
sustain the (massively wasteful) ideal.  If high culture (plus love) is
the only thing that makes our existence worthwhile, then a bit of waste in
pursuit of the goal is to be expected.  (I'd rather that the waste not be
at taxpayer expense, but that's a separate topic.)  Would I have
eventually found all of those books, artworks, etc. without the handful of
great teachers?  Sure, probably.  I put nearly all of my free time,
energy and resources into things like literature, philosophy, travel, cuisine
and theater.  (I won't feel insulted if you distrust this
self-report.)  So even with respect to the stuff I care most deeply about
I'm 98% self-taught.  But I think the 2% I learned in school justifies my
higher education.  It helped to kick-start me.  It planted
seeds.  I met some good people.  If the schools had been better, and
if I had been a harder-working and humbler student, the percentage would be a
bit higher.  So: two cheers (or maybe a cheer and a half) for liberal
education.

(4 COMMENTS)

Reply to Tyler on The Case Against Education, by Bryan Caplan

Tyler has two recent posts referencing my new book.  Here are my responses.  Tyler is in blockquotes; I'm not.

Response to Tyler's first post:

I'll be doing a Conversation with Bryan, but for the time being I'll
say this: everyone obsesses over the mood-affiliated "I'm going to lower
the status of education signaling argument."  Hardly anyone has
discussed what to me is Bryan's strangest assumption, namely a
sociologically-rooted, actually anti-economics "conformity is stronger
than you think" argument,

Coordination games have long been standard in economics: If everyone else is driving on the left-hand side of the road, conformity is prudent, regardless of what's globally optimal.  Indeed, branded as "path dependence," empirical economists have used this approach to study not only technology, but location, language, and much more.  Yes, many of the specific tech path-dependence stories have been overblown.  But the general insight remains profound: our current system of English spelling is godawful, but who expects a decentralized switch to a sensible phonetic system?

Thus, there's nothing "anti-economics" about my approach - unless it's "anti-economics" to take psychology and sociology seriously.

That said, conformity does play a somewhat novel role in my analysis.  To be specific, I argue that:

1. Conformity is one of the main traits that employers want. 

2. Education signals conformity. 

3. Trying to signal conformity in unconventional ways generally signals non-conformity, leading to serious lock-in of existing conformity signals.

Again, how are any of these claims "anti-economics"?

...which Bryan uses to assert the status quo will
continue more or less indefinitely.  It won't.  To the extent Bryan is
correct (and that you can debate, but at least he is more correct than
most people in the educational establishment will let on),
competency-based learning and changes in employer behavior will in fact
bring about a new equilibrium...not quickly, but certainly in well under two decades.

As you you might guess, I'm happy to bet Tyler on this.  Tyler didn't bite when I offered terms on this seven years ago (and wisely so).

And what about on-line education?  Well, a lot of students don't like
it because they have to actually work on their own and pay attention. 
To the extent education really is just signaling, that should give
on-line options a brighter future all the more.  But not in the
Caplanian world view, as conformity serves once again as an intervening
factor.

Fans of online education initially made (fairly reasonable) arguments about how it's better for human capital creation.  Lately, they've switched to (pretty unreasonable) arguments about how online education is going to provide great signals too.  My story explains why online education won't dominate despite its obvious advantages for learning.  What other explanation is there?   

For better or worse, Bryan's book subverts economics as a
science at least as much as it does education. 

Again, no.  My book shows the power of economics, though of course economics works best when married to psychology, sociology, and beyond.

Bryan of course is smart
enough to see the trade-offs here, and he knows if the standard model
of economic competition were allowed to reign supreme, we would (even
with subsidies, relative to those subsidies) tend to see strong moves
toward relatively efficient means of signaling, if only through changes
in the relative sizes of institutions.

When government gives the status quo a trillion dollars of subsidies per year, efficiency "relative to those subsidies" is nothing to crow over.  And I see little sign that we're approaching even that low bar.  Some small schools are going bankrupt, but that's just one pro-efficiency force in a deeply dysfunctional system.

Response to Tyler's second post:

My view is this:

1. Learning at least one language is of high value for America's
elite.  It helps them see different points of view,

Seems like a small payoff for 2-4 years of high school coursework.

and prepares a small
number for careers in the foreign service or in other international
capacities. 

Only slightly, given the low quality of instruction.

It makes intellectuals deeper and improves their
scholarship.

Frankly, it's not even clear that the correlation is positive.  Lots of Ph.D. programs have dropped their foreign language requirements.  Should we bring them back?!

[...]

2. If we could target foreign language acquisition to this future
elite, I would gladly let the vast majority of the student population
off the hook.  One move toward this end would be to use foreign language
"tiebreakers" for those wishing to finish in the top quarter of their
high school class. 

An improvement.  But we've got the standard inefficiency of signaling: If you need a foreign language to be the in the top quarter, far more than 25% of students will study one in the hope of occupying that top quarter.

[...]

3. Here is an estimate that knowing a foreign language brings a wage premium of about 2%; I have not read the paper, but I do not wish to overclaim on the causality front.  It still is measuring something about quality.

That seems like a pretty low estimate for actually knowing a foreign language.  But as I've shown, near-zero Americans even claim to have learned to speak a foreign language very well in school.

4. Many European countries teach their citizens English (above all),
French, and German with reasonable success and high returns, especially
for English.  So it is possible to succeed with this endeavor within a
public education system.

Yes, it's much easier to teach students subjects they expect to use one day - and frequently practice outside of school regardless of the curriculum.

[...]

6. I do not think opportunity costs during high school are especially high.

This is probably my biggest disagreement with Tyler.  If the government required him to study a blatantly useless subject for years, I think he'd consider the opportunity cost very high indeed - even if it just crowded out his leisure time.  I say that imposing such requirements on kids is an outrageous form of bullying.  If any government did this to adults, who would defend it?

Addendum: Disagreement aside, I am so pleased that
this year the two big exciting economics books so far are by Bryan and
Robin Hanson.  Do buy and read both!  As for Bryan, maybe some of you
are thinking you just can't accept his argument about education being so
wasteful.  But I'll say this: Bryan always defends his "absurd" views
much better than you think he is going to be able to.

Thanks!  I would add, though, that most of what I say seems like common sense to readers who focus on their first-hand educational experiences instead of ubiquitous pro-education propaganda.

(6 COMMENTS)

The Double Whammy of Uselessness, by Bryan Caplan

While promoting my new book, I've repeatedly argued that foreign language requirements in U.S. schools are absurd and should be abolished.  For two distinct reasons.

Reason #1: Americans almost never use their knowledge of foreign languages (unless they speak it in the home).

Reason #2: Americans almost never learn to speak a foreign language very well in school, even though a two- or even three-year high school requirement is standard.

This double whammy is easily generalized.  If studying X for years yields minimal knowledge, and you wouldn't use X even if you knew it, you could defend X as an elective.  But how could anyone defend X as a requirement? 

Yet plenty of people I've met can and do stand by such requirements.  Indeed, they think I'm the crazy one.

(23 COMMENTS)

Harassment: A Keyhole Solution, by Bryan Caplan

Way back in The Undercover Economist , Tim Harford taught us the wonder of "keyhole solutions" for social ills:

Keyhole surgery techniques allow surgeons to operate without making
large incisions, minimizing the risk of complications and side effects.
Economists often advocate a similar strategy when trying to fix a
policy problem: target the problem as closely as possible rather than attempting something a little more drastic.

How, then, can we fix health care?... [I]s there a 'keyhole'
solution...?

So far, it's advocates of open borders who most frequently invoke keyhole solutions.  My forthcoming graphic novel with Zach Weinersmith has a whole chapter on the topic.  The idea, though, is universal.  Faced with any social problem, you can use a hand grenade... or a scalpel.  So why not carefully define the problem, then craft carefully targeted remedies with minimal collateral damage?

Case in point:

Over the last year, resentment of unwanted job-related sexual attention (better known as "sexual harassment") has gone from high to extreme.  It's easy to grasp why people would see such harassment as a problem.  The standard remedy, though, is to punish virtually all job-related sexual attention, wanted or not.  In practice, workplaces now discourage employees from dating each other - and heavily discourage mixed-status romance.

What explains the ubiquity of these broader policies?  Simple: It's hard to know in advance if sexual attention is unwanted.  (To quote Merlin in Excalibur, "Looking at the cake is like looking at the future, until you've
tasted it what do you really know? And then, of course, it's too late.")  Especially if the person making an unwanted advance outranks you, you may be uncomfortable bluntly refusing.  The surest way to abolish unwanted attention is to abolish attention itself.

Unfortunately, the abolition of attention causes massive collateral damage.  People spend tons of time getting to know their co-workers.  As a result, many promising matches are discovered on the job.  Furthermore, humans find high status attractive.  As a result, attention from higher-status co-workers is often appealing.  Ban workplace romance, and you deprive many people of the partner of their dreams.  I don't want my kids to live in a world where fear crushes love.

What can be done?  Before I answer, let's back up.  In speed dating, a standard practice is to give every participant a list of names.  Men check off all the women they're interested in dating.  Women check off all the men they're interested in dating.  Once the results are in, organizers inform individuals about all cases of mutual interest.  The rest go in the trash. 

Thus, if Jack checks Sally and Jane, Tom checks Jane, Sally checks Tom, and Jane checks Jack, Jack and Jane are informed that they have a match.  But Sally never finds out that Jack liked her - and Tom never finds out that Sally liked him.  This doesn't just spare Jack and Sally the humiliation of being rejected.  It also spares Sally and Tom the awkwardness of having to reject.  Jack and Jane, in contrast, both get to enjoy each others' wanted attention.

So what's my keyhole solution for harassment?  Firms should adopt the speed dating paradigm.  Let everyone secretly record their feelings, if any, for their co-workers.  If the feelings are unrequited, no one ever finds out.  If the feelings are mutual, however, both parties receive official confirmation.  And unless they edit their recorded preferences, they waive their right to complain about (or sue over) unwanted attention from whoever they explicitly approved.

How is this better than the status quo?  Simple: It retains standard rules against unwanted attention, but gives people a safe way to take a chance on love.  Indeed, my proposal even shields everyone from the knowledge that someone has unrequited feelings for them.  Don't want to know how anyone feels about you?  Then check zero boxes, and you're safe.

The most obvious objection is that people could change their minds.  But I've already got that covered: If you decide you no longer welcome someone's attention, you edit your preferences - and they get a polite email informing them of your wishes.  Worried that they won't listen?  Then don't check them in the first place.

Couldn't an aggressive harasser pressure someone to consent?  Of course.  But that's also true in the current system.  The key difference: Under my proposal, pressuring someone to consent would be unambiguous evidence of unwanted attention.  The status quo, in contrast, affords everyone some plausible deniability.

The strongest objection, in my view, is that this keyhole solution for harassment would make adultery highly convenient.  The simplest remedy is to rewrite the program so married employers can't check boxes.  If that seems overly restrictive to my polyamorous friends, this rule could be overridden with spousal consent.

OK, so why should profit-seeking employers adopt my keyhole solution?  Legally, it provides both clarity and protection.  It draws a bright line between wanted and unwanted attention - and shields the former from legal liability.  Practically, my proposal helps recruitment and retention by raising worker satisfaction.  My proposal gives employees the best of both worlds: protection from unwanted attention combined with opportunities for wanted attention.

Do I seriously expect my proposal to catch on?  Sadly, no.  Most people are too emotional about harassment to even acknowledge the main trade-offs.  No successful politician would currently be foolish enough to advocate even slight liberalization of existing laws.  But I'd still like to hear your views on how well my idea would work if implemented.  Why not?

(9 COMMENTS)

Against Argumentative Definitions: The Case of Feminism, by Bryan Caplan

Suppose I define socialism as, "a system of totalitarian control over the economy, leading inevitably to mass poverty and death."  As a detractor of socialism, this is superficially tempting.  But it's sheer folly, for two distinct reasons.

First, this plainly isn't what most socialists mean by "socialism."  When socialists call for socialism, they're rarely requesting totalitarianism, poverty, and death.  And when non-socialists listen to socialists, that's rarely what they hear, either. 

Second, if you buy this definition, there's no point studying actual socialist regimes to see if they in fact are "totalitarian" or "inevitably lead to mass poverty and death."  Mere words tell you what you need to know.

What's the problem?  The problem is that I've provided an argumentative definition of socialism.  Instead of rigorously distinguishing between what we're talking about and what we're saying about it, an argumentative definition deliberately interweaves the two. 

The hidden hope, presumably, is that if we control the way people use words, we'll also control what people think about the world.  And it is plainly possible to trick the naive using these semantic tactics.  But the epistemic cost is high: You preemptively end conversation with anyone who substantively disagrees with you - and cloud your own thinking in the process.  It's far better to neutrally define socialism as, say, "Government ownership of most of the means of production," or maybe, "The view that each nation's wealth is justly owned collectively by its citizens."  You can quibble with these definitions, but people can accept either definition regardless of their position on socialism itself.

Modern discussions are riddled with argumentative definitions, but the most prominent instance, lately, is feminism.  Google "feminism," and what do you get?  The top hit: "the advocacy of women's rights on the basis of the equality of the sexes."  I've heard many variants on this: "the theory that men and women should be treated equally," or even "the radical notion that women are people."

What's argumentative about these definitions?  Well, in this 2016 Washington Post/Kaiser Family Foundation survey, 40% of women and 67% of men did not consider themselves "feminists."  But over 90% of both genders agreed that "men and women should be social, political, and economic equals."  If Google's definition of feminism conformed to standard English usage, these patterns would make very little sense.  Imagine a world where 90% of men say they're "bachelors," but only 40% say they're "unmarried."

What would a non-argumentative definition of feminism look like?  Ideally, feminists, non-feminists, and anti-feminists could all endorse it.  If that's asking too much, all these groups should at least be able to accept the proposed definition as a rough approximation of the position they affirm or deny.  My preferred candidate:

feminism: the view that society generally treats men more fairly than women

What's good about my definition? 

First, the definition doesn't include everyone who thinks that our
society treats women unfairly to some degree.  In the real world, of
course, every member of every group experiences unfairness on occasion.

Second, a large majority of self-identified feminists hold the view I ascribe to them.  Indeed, if someone said, "I'm a feminist, but I think society generally treats women more fairly than men," most listeners would simply be confused.

Third, a large majority of self-identified non-feminists disbelieve the view I ascribe to feminists.  If you think, "Society treats both genders equally well," or "Society treats women more fairly than men," you're highly unlikely to see yourself as a feminist.

At this point, you could declare, "Given all the #MeToo revelations, it's obvious that society does treat men more fairly than women."  Or, "Men are vastly more likely to be violently killed than women, so it's obvious that society treats women more fairly than men."  Similarly, you could declare, "Since women earn x% less than men, society treats men more fairly than women" or "Since men are jailed nine times more often than women, society treats women more fairly than men."  (In both cases, naturally, someone else could respond, "After a basic statistical corrections, these gaps goes away.") 

And you know what?  Despite their overconfidence and impatience, all of these statements are on point.  They're real arguments, not semantic trickery.  If you calmly collect and carefully quantify a few hundred such arguments, you won't just know whether feminism is true.  You'll know how close the other side is to being right.

(10 COMMENTS)

Is Education Worth It? My Opening Statement for the Caplan-Hanushek Debate, by Bryan Caplan

It was great fun debating Eric Hanushek, truly a gentleman and a scholar.  Here's my opening statement.

Is
the education system really a waste of time and money, as my new book claims
right on the cover? This is a strange topic to debate with Eric Hanushek.  Why? Because if Hanushek had absolute power
to fix the education system, education might actually be worth every penny.  Hanushek
is famous for focusing on what schools teach rather than what they spend - and
documenting the vast disconnect between the two.  If you haven't already read his dissection of
"input-based education policies," you really ought to.  Hanushek, more than any other economist, has
taught us that measured literacy and numeracy are socially valuable - but just
making kids spend long years in well-funded schools is not.  

Tragically,
however, Hanushek is not our education czar. 
Instead, all levels of our education system are extremely wasteful and
ineffective.  After spending more than a
decade in class and burning up over $100,000 in taxpayer money, most Americans
know shockingly little.  About a third of
adults are barely literate or numerate.  Average
adult knowledge of the other standard academic requirements - history, social
studies, science, foreign languages - is near-zero.  The average adult with a B.A.  has the knowledge base you'd intuitively
expect of the average high school graduate. 
The average high school graduate has the knowledge base you'd
intuitively expect of the average drop-out. 
This is the fruit of a trillion taxpayer dollars a year.

For
economists, however, there's a powerful objection to this condemnation.  If students really learn so little, why on
earth is education so lucrative in the labor market? Why do high school grads
outearn dropouts by 30%? Why do college grads outearn high school grads by 73%?
Explain that! Employers want profit and they aren't dumb.  They wouldn't pay exorbitant premia unless
education dramatically improved worker productivity, right?

Wrong.  There are TWO solid business reasons to pay
extra for educated workers.  One is that
education teaches useful skills, transforming
unskilled students into skilled workers. 
This is the standard "human capital" story.  The other reason, though, is that education certifies useful skills, helping
employers distinguish skilled workers from imposters.  This is the "signaling" story.  In the real world, naturally, it's a
continuum.  But since Hanushek is not the
education czar, signaling explains most of education's financial reward. 

How
can we know this? We should start with the massive gap between learning and
earning, combined with the fact that even the most irrelevant subjects and
majors yield decent financial rewards.  If
human capital were the whole story, why on earth would employers care if about
whether you've studied Shakespeare, Latin, or trigonometry?  Think about all the classroom materials you
haven't used since the final exam. 

If
that doesn't fully convince you, many other facts that every student knows cut
in the same direction.  Such as:

1.  It's easy to unofficially attend college
classes without enrolling or paying tuition, but almost no one bothers.  Why not? Because after four years of guerilla
education, there's one thing you won't have: a diploma.  The central signal of our society. 

2.  Students' focus on grades over learning, best
seen in their tireless search for "easy A's." Signaling has a simple
explanation: If a professor gives you a high grade for minimal work, you get a
nice seal of approval without suffering for it. 

3.  Students routinely cram for final exams, then
calmly forget everything they learn.  Signaling
provides a clean explanation: Learning, then forgetting, sends a much better
signal than failing.

In The Case Against Education, I also
review multiple major bodies of academic research to help pin down the true
human capital/signaling breakdown.  In
the end, my best estimate is that signaling explains 80% of the payoff.  Key pieces of evidence:

1.  Most of the payoff for school comes from
graduation, not mere years of study.  This
is a doozy for human capital theory to explain; do schools withhold useful
skills until senior year? But it makes perfect sense if graduation is a focal
signal of conformity to social norms. 

2.  There has been massive credential inflation
since 1940.  The education you need to do a job hasn't changed much, but the
education you need to get any given
job has risen about three years.  Hence,
the fact that waiter, bartender, security guard, and cashier are all now common
jobs for college grads. 

3.  Though every data set yields different
estimates, the effect of national education on national income is much smaller
than the effect of personal education on personal income.  How is this possible? Signaling! Give
everyone more useful skills, and you enrich the whole nation.  Give everyone more stickers on their
foreheads, and you fritter away valuable time and tax money. 

If
you've been wondering, "What does signaling have to do with wasteful
education?," I hope you're starting to see the link.  Sure, it's useful to rank workers.  But once they're ranked, prolonging the
ranking game is a socially destructive rat race.  When education levels skyrocket, the main
result isn't good jobs for every graduate, but credential inflation: The more
education the average worker has, the more education the average worker needs
to be employable.  And while sending
fancy signals is a great way for an individual to enrich himself, it's a
terrible way to enrich society. 

Given
Hanushek's work, I'm optimistic that he'll agree with much of what I've said.  It's our remedies that starkly diverge.  My primary solution for these ills is cutting
education spending.  In a word, austerity.  Austerity: It's word I love.  It's a word I believe in.  If Hanushek's bleak assessment of input-based
education policies is right, austerity will save tons of time and money with
little effect on worker skill. 

Strangely,
though, my opponent doesn't seem excited by this glorious free lunch.  His primary solution for what ails us -
correct me if I'm wrong - is to take the money we currently waste and use it to
increase measured learning, especially in math and science. 

I
disagree on both strategic and fundamental grounds. 

Strategically,
spending less is easy and transparent.  We
totally know how to do it.  Spending more
effectively, in contrast, is hard and foggy. 
And to make it happen, we have to trust the very education system that's
spent decades ripping off taxpayers and wasting students' time. 

Fundamentally,
while I agree that measured learning is much more socially valuable than mere
years in school, Hanushek's enormous estimates of the benefits of higher test
scores are just too good to be true.  In
his view, higher average math and science scores not only dramatically increase
our wealth, but permanently raise the economy's rate of growth.  It's practically a perpetual motion machine. 

But
how can this be true, when the typical worker uses little math and almost no
science on the job? The simplest explanation for Hanushek's results is that
national test scores are misleading proxies for a much more crucial - and far
less malleable - cognitive skill: intelligence. 
If everyone were smarter, we would all do our jobs better.  But if everyone knew more science, most of us
would rarely encounter an opportunity to use our extra knowledge.  I use my intelligence on the job every day;
but whole months go by when I don't use biology, chemistry, or physics.

In
sum, if I had to hand over a trillion dollars of taxpayer money to one stellar
researcher, I'd be sorely tempted to hand it to Eric Hanushek.  Few educational experiments would be more fun
to watch.  Nevertheless, I predict the
results of the experiment would be very disappointing.  Entrenched interests - and legions of
touchy-feely parents - would block Czar Hanushek at every turn: "Test scores?
That's so narrow and boring.  Let's
assign more poster projects!" And even if Czar Hanushek managed to sharply
boost math and science scores, I'd only expect a modest social payoff.  Once we admit the massive defects of the
status quo, the only remedy we can really count on is austerity.

(5 COMMENTS)