mathbabe

I’m reading a fine book called Nobody Makes You Shop at Walmart, which dispels many of the myths surrounding market populism, otherwise described in the book as “MarketThink”, namely the rhetoric which “portrays the world (governments aside) as if it works like an ideal competitive market, even when proposing actions that contradict that portrayal,” according to the author Tom Slee.

I’ve gotten a lot out of this book, and I suggest that you guys read it, especially if you are libertarians, so we can argue about it afterwards.

One thing Slee does is distinguish between different kinds of competitive and power-dynamic systems, and fingers certain situations as “arms races”, in which there are escalating costs but no long-lasting added value for the participants. They often involve relative rankings.

Slee’s example is a neighborhood block where all the men on the block compete to have the nicest cars. Each household spends a bunch of money to rise in the rankings just to have others respond by spending money too, and at the end of a year they’ve all spent money and none of the rankings have actually changed.

One of Slee’s overall points about arms races is that the way to deal with them is through armament agreements, which everyone involved needs to sign onto. Later in the book he also talks about how hard it is to get large groups of people to agree to anything at all, especially vague social contracts, when there’s an advantage to cheating, something he calls “free riding.” (as a commenter pointed out to me, free riding is more like someone who gets something for nothing, like a worker who benefits from the work of a union without being in the union and paying dues. This is just cheating.)

I’d argue, and I believe the book even uses this example, that education can be seen as an arms race as well. Take the statistics in this Opinionator blog from the New York Times, written by Jonathan Cowan and Jim Kessler, and entitled “The Middle Class Gets Wise.”

It describes how much more money the average high school graduate, versus two-year college, versus four-year college, versus professional degree graduate makes. In other words, it describes the payoffs to being higher ranked in that system. The money is real, of course, and everyone is aware of it as an issue even if they don’t know the exact numbers, so it is very analogous to the car status thing.

Cowan and Kessler describe in their article how, in the face of recession, lots more people have gone to college. That makes sense, since many of them didn’t have jobs and wanted to make themselves employable in the future, and at the same time people knew the job climate was even more rank-oriented since it has become tighter. People responded, in other words, to the incentives.

There’s a feedback loop going on in colleges as well, of course, and paired with the federal loan program and the fact that students cannot get rid of student debt in bankruptcy, we’ve seen a predictable (in direction if not size) and dramatic increase in tuition and student debt load for the younger generation.

My reaction to this is: we need an armament agreement, but it’s really not clear how that’s going to all of a sudden appear or how it would work, considering the number of entities involved, and the free rider problems due to the cash money incentives everywhere.

From the point of view of employers, rankings are great and they can be sure to pick the highest ranked individuals from that system, even if that means – as it often does – having Ph.D. graduates working in mailrooms. So don’t expect any help from them to add sanity to this system.

From the point of view of the colleges, they’re getting to hire more and more administrators, which means growth, which they love.

Finally, from the point of view of the individual student, it makes sense to go into debt, with almost no limit (to a point, but people rarely do that calculation explicitly, and if they did there’d be intense bias) to get significantly higher in the ranking.

In other words, it’s a shitshow, and possibly the only real disruption that could improve it would be widespread and universally respected basic and free-ish education. At least that would solve some of the arms race problems, for employers and for students. It would not make colleges happy.

The authors of the Opinionator piece, Cowan and Kessler, don’t agree with me. They have a goal, which is for even more people to go to school, and for tuition to be somehow magically decreased as well. In other words, up the antes for one feedback loop and hope its partner feedback loop somehow relaxes. Here’s the way they describe it:

So what can we do? Anya Kamenetz, the author of “Generation Debt,” has put together some excellent ideas for Third Way, the centrist policy organization where we both work. Let’s start by reducing the number of college administrators per 100 students, which jumped by 40 percent between 1993 and 2007. We should demand a cease-fire to the perk wars in which colleges build ever-more-luxurious living, dining and recreational facilities. Blended learning, which uses online teaching tools together with professors and teaching assistants, could also help students master coursework at less cost.

There are 37 million Americans with some college experience, but no degree. So pegging government tuition aid to college graduation rates would entice schools to find ways of keeping students in class. And eliminating some of the offerings of rarely chosen majors could bring some market efficiencies now lacking in education.

That really just doesn’t seem like a viable plan to me, and pegging government money to graduation rates is really stupid, as I described here, but maybe I’m just being negative. Cowan and Kessler, please tell me how that “demand” is going to work in practice.

Also, what’s funny about their idealistic demand is that they also think of a couple other things to do but dismiss them as unrealistic:

The most commonly discussed solutions to the problem of income inequality seem unlikely to get to the heart of the problem. Yes, we could raise additional taxes on the wealthy, but we just did that. Bumping up the minimum wage would help, but how high would lawmakers allow it to go? We should look instead at what Americans are already doing to solve this problem and help them do it far more successfully and at less cost.

Am I the only one who thinks raising the minimum wage would help more to address income inequality and is easier to imagine working?