The cost of a four-year education has outpaced regular inflation by a considerable amount. Student loan debt is causing further financial constraints for recent graduates, and keeping the interest rates on federal student loans only exacerbates the problem. These rising costs beg for higher education reform. In spite of artificially low interest rates and the societal expectation that everyone who graduates high school should immediately enter college and get their four-year degree, there is one phenomenon that neither the government nor society have been able to stop: the rise in online learning. The prospective of more predominant online learning has its allure, and I'm all for providing alternatives to the four-year college to provide better competition in the marketplace. However, the question remains: Is online learning really the way to go in our digital age or is there something qualitatively different about the traditional classroom framework that an online class cannot replace?
Online learning provides a fair amount of advantages, the foremost of which is cost. The development of online learning has been a technological improvement that has increased the supply curve of higher education because overall cheaper technology inputs are being substituted for more expensive labor and capital inputs, not to mention it utilizes the economies of scale to make it cheaper for each marginal unit. Online learning does not have to deal with the same facility, maintenance, and utility costs. Another advantage offered by online learning is the flexibility in time. Students who decide to work in the daytime so they can finance their education, live at home, or still maintain their familial obligations, can do so by deciding to take their classes either in the evening or during the weekend. Very rarely, if ever, will you find a teacher to offer such flexibility in when they teach or hold office hours. Essentially, it is costly to coordinate students and teachers.
Students also have the convenience of learning right from home. No need to commute to class (or potentially no need to relocate oneself to campus), which saves time and money. There are also time savings in terms of the online courses not being repetitive. How so? If a student doesn't understand something in a traditional classroom setting, the teacher has to repeat it, which is a waste of time for those who understood the concept the first time. If a student doesn't understand something on an online course, the student can replay the section, which is a method to help students learn at their own pace.
Much like anything else, online learning does have its downsides. One is a lack of social interaction (although a counter-argument can be made about the quality of interaction of online learning). Classroom learning provides a face-to-face interaction you cannot get with a computer. Plus, why do we want people spending even more time in front of a screen? It seems like intuitive thinking because it's easier for a teacher to pick up non-verbal cues that show frustration or boredom. However, the Department of Education published a meta-analysis in 2009, in which it found that those who performed in online courses fared moderately better than those in traditional classes (see Abstract) and provides a more conducive learning environment (DoE, xviii). As a side-note, I enjoyed this analogy between movie and stage actors with regards to the quality of online learning.
There is also the issue of the digital divide, i.e., Internet accessibility. There are people who do not use the Internet, and their reasons vary. With the overall decreasing prices of computers and the increasing prices of college tuition, I wonder which is less burdensome for low-income and rural students. There are also costs of online learning, which include the costs of migrating the teaching to the online venue, design and implementation costs, as well as maintenance costs. A lot of these costs are upfront, and short of performing a cost-benefit analysis, I will surmise that in the long-run, it will end up being cheaper than maintaining the traditional system.
As nice as the advantages of online learning are, technology has its limitations, and I don't solely mean that if equipment broke down or if the Internet connection is not working. If I had to make a prediction, online courses will complement the college experience to provide the consumer with more options, not completely replace the traditional brick-and-mortar university. It will most likely replace those lecture-style courses (e.g., introductory courses) that have a large enough of a class size in which engagement and attention spans are already problematic, which covers a sizable amount of undergraduate classes.
I was fortunate enough to attend a university where the average class size was twelve students, and there was a lot of social interaction between the professor and the students. For courses that are discussion-style and more interactive, such as the ones at my undergraduate alma mater, the social interaction argument is much stronger because the face-to-face interaction in a class that facilitates discussion is much more effective learning method. Especially in more advanced courses, there is more required than the straight-forward delivery of knowledge. Online courses also cannot replace courses, that require work in a laboratory, e.g., natural sciences, engineering. Even courses in visual sports, dance, art, or music require the usage of facilities, and online learning cannot find away around that. And don't forget the communication-based learning of foreign languages that could theoretically be replaced by online learning, but would qualitatively suffer.
In spite of these limitations, online learning should be implemented where applicable so that we can drive down tuition costs and save time while using 21st century methods to provide the best college education possible.
Thursday, October 17, 2013
Monday, October 14, 2013
Why More Privatization of National Parks Would Hardly Be Unbearable
One of the problems with the pervasiveness of Big Government and more centralized government is when a government shutdown occurs. When the government predominantly or exclusively gets its hands on certain aspects of our lives, certain goods and services are temporarily out of reach during a shutdown, and as a result, casualties ensue while politicians are playing games. One of those causalities is the closing of national parks. Even if some of the parks are in the process of re-opening, national parks should not be held hostage while politicians in the Beltway are putzing around during debt-ceiling or other budgetary fights. After all, isn't public land supposed to be public? If public land is supposed to be both non-excludable and non-rival (at least in theory), why can't people have access to national parks during a government shutdown? Isn't there something that can be done so we can prevent this, or a similar government prohibition of entering public land, in the future?
Well, yes. It's called greater privatization and marketization. The justification for having public land for national parks in the first place is the idea that the markets are not going to protect national parks and the beautiful scenery that accompanies the land. If markets do not have an incentive to protect the pristine of Mother Nature, then the government should. Or so goes the argument. First of all, who do you think is more myopic and will thus be more prone to letting facilities become run down: the politician who typically gets re-elected every two or four years, or the businessman who is looking to stay in business for more than a few years? Second, there are more than 280 million visitors every year. There is evidently a demand for national parks, even if that demand has been distorted by the government. It's hard to have an actual market when government regulates it so heavily. Third, there is less labor rigidity (e.g., 80% of the public agencies' costs are tied up in labor costs) in the private market than there would be for the government bureaucracy, which is to say that the private sector can utilize a work force for less money and more effectively. This also means that if the private management company experiences a budget contraction, they have more flexibility to adapt and cut costs where need be. Since parks are a lower priority in government budgets, they are more prone to shutdowns and massive spending cuts when the government experiences a contracting budget. Fourth, the private sector already has a precedent of managing land, whether that is more indirectly in terms of beaches or country clubs or golf courses, or more directly with many parks, including Disney's Animal Kingdom (yes, they are accredited), Bryant and Central Parks in NYC, or the Fraser River Basin in Canada.
Out of an understanding of political feasibility, national parks will not become completely privatized anytime soon. Even so, I would recommend a step that gradually brings us closer to privatization, which means a public-private partnership that puts a large amount of emphasis on the more privatized aspect of the merger. How would we go about such a merger?
The federal government would lease the land to private land managers in which one of the more predominant conditions of the lease would be to "conserve and preserve the land or lose the lease." Alternatively, one can opt for a conservation easement. In this arrangement, the land would still be public and there would be some government oversight and regulation. However, the management and upkeep of the land would be relegated to the private sector. After a predetermined amount of time, the agency doing oversight can inspect the quality of the private land manager and determine whether they merit a contract renewal.
In case the profit incentive to upkeep the pristine landscape isn't enough for conservationists, another provision in the lease can be to donate a certain percent of profits (within reason, to be sure) to wildlife funds to help further wildlife preservation. This is not ideal, and I don't necessarily recommend this as a provision because private businesses should be allowed to use their profits in whichever way they choose, but I just throw it out there as an option.
We should also give the private managers leeway in terms of charing their own user fees that better reflect market prices. The government currently enacts a price ceiling on national park fees to keep them artificially low. Knowing how well government-enacted price ceilings work (e.g., rent control, human organ market, anti-price gouging laws), I'd rather have slightly higher prices in user fees that are more diffuse in nature than have land overuse that results in congestion and more rundown facilities.
What the private-public partnership does is two-fold. One, it conserves the land so visitors can have an unspoiled view of nature, which is the role of keeping the land public. The second is to use market mechanisms, mainly using incentive to keep costs low, improve on the overall infrastructure, and be more generally responsive to change than a bureaucracy, to not only help the parks generate more profits, but also to improve on the overall quality of the parks. By operating our national parks under this framework, we can enjoy the beauty of nature for many more generations without succumbing to political pressures or economic inefficiencies.
Well, yes. It's called greater privatization and marketization. The justification for having public land for national parks in the first place is the idea that the markets are not going to protect national parks and the beautiful scenery that accompanies the land. If markets do not have an incentive to protect the pristine of Mother Nature, then the government should. Or so goes the argument. First of all, who do you think is more myopic and will thus be more prone to letting facilities become run down: the politician who typically gets re-elected every two or four years, or the businessman who is looking to stay in business for more than a few years? Second, there are more than 280 million visitors every year. There is evidently a demand for national parks, even if that demand has been distorted by the government. It's hard to have an actual market when government regulates it so heavily. Third, there is less labor rigidity (e.g., 80% of the public agencies' costs are tied up in labor costs) in the private market than there would be for the government bureaucracy, which is to say that the private sector can utilize a work force for less money and more effectively. This also means that if the private management company experiences a budget contraction, they have more flexibility to adapt and cut costs where need be. Since parks are a lower priority in government budgets, they are more prone to shutdowns and massive spending cuts when the government experiences a contracting budget. Fourth, the private sector already has a precedent of managing land, whether that is more indirectly in terms of beaches or country clubs or golf courses, or more directly with many parks, including Disney's Animal Kingdom (yes, they are accredited), Bryant and Central Parks in NYC, or the Fraser River Basin in Canada.
Out of an understanding of political feasibility, national parks will not become completely privatized anytime soon. Even so, I would recommend a step that gradually brings us closer to privatization, which means a public-private partnership that puts a large amount of emphasis on the more privatized aspect of the merger. How would we go about such a merger?
The federal government would lease the land to private land managers in which one of the more predominant conditions of the lease would be to "conserve and preserve the land or lose the lease." Alternatively, one can opt for a conservation easement. In this arrangement, the land would still be public and there would be some government oversight and regulation. However, the management and upkeep of the land would be relegated to the private sector. After a predetermined amount of time, the agency doing oversight can inspect the quality of the private land manager and determine whether they merit a contract renewal.
In case the profit incentive to upkeep the pristine landscape isn't enough for conservationists, another provision in the lease can be to donate a certain percent of profits (within reason, to be sure) to wildlife funds to help further wildlife preservation. This is not ideal, and I don't necessarily recommend this as a provision because private businesses should be allowed to use their profits in whichever way they choose, but I just throw it out there as an option.
We should also give the private managers leeway in terms of charing their own user fees that better reflect market prices. The government currently enacts a price ceiling on national park fees to keep them artificially low. Knowing how well government-enacted price ceilings work (e.g., rent control, human organ market, anti-price gouging laws), I'd rather have slightly higher prices in user fees that are more diffuse in nature than have land overuse that results in congestion and more rundown facilities.
What the private-public partnership does is two-fold. One, it conserves the land so visitors can have an unspoiled view of nature, which is the role of keeping the land public. The second is to use market mechanisms, mainly using incentive to keep costs low, improve on the overall infrastructure, and be more generally responsive to change than a bureaucracy, to not only help the parks generate more profits, but also to improve on the overall quality of the parks. By operating our national parks under this framework, we can enjoy the beauty of nature for many more generations without succumbing to political pressures or economic inefficiencies.
Friday, October 11, 2013
Parsha Lech Lecha: Leaving Home, Leaving Your Comfort Zone
At age 75, the Torah records G-d's first interaction with Abraham (formally known as Abram), which was G-d giving Abraham a commandment (Genesis 12:1): לך לך (lech lecha). This commandment was the beginning of Abraham's Ten Trials. Why was it a test for Abraham to "go forth from his native land, from his birthplace, and from his father's house to the land that G-d was to give him?" What made leaving so difficult and arduous?
To answer this question, we should answer another question: Why does the verse say לך לך? It would have been sufficient to say "go" (לך). The second "לך" is seemingly superfluous. Why say לך לך? According to Rashi, G-d said לך לך because that second לך meant "for your benefit." Rashi opined that the benefit was so that Abraham could become rewarded and become a great nation. Not that I disagree with Rashi, but I think there is something more taking place.
The phrase לך לך is used in one other place in the Torah: right before Abraham's Tenth Trial, the one where Abraham is supposed to sacrifice his son (Genesis 22:2). Both passages also have a threefold description that follows לך לך, both passages conclude with similar blessings, and both passages act as brackets for Abraham's narrative, which is to say that there is a connection. Both the first and last of Abraham's trials were arguably his most difficult trials. If we are to take Rashi's interpretation and apply it to both trials, then I can infer that there was to be some sort of benefit from the trial, but what is the benefit?
If the test were truly a benefit, I have to wonder what the test is in the first place. One can argue that leaving one's homeland, community, and family is difficult. If the verse were to only convey that leaving a place to which one is accustomed is strenuous, the verse would have said that Abraham was to leave "from the home of your father, from your birthplace, from your country," not the other way around. The Malbim picked up on the reverse word order, and he concluded that the order is "in reverse" is because the behaviors most heavily ingrained within us take place in the home.
לך לך is not leaving a physical place, but rather one in which you are to "go to yourself," i.e., go to your true self [by serving G-d] (Lubavitcher Rebbe). Going off the Lubavitcher Rebbe's interpretation, לך לך is not a physical departure, but a spiritual one. Since the Torah is oddly silent about Abraham's life prior to this moment, we have to use other texts to fill in the blanks. Midrashic tradition teaches us that Abraham was surrounded by idolatry (Mirdrash Rabbah, Genesis 38:13).
The first step is always the most difficult to take. Even if Abraham intellectually realized that monotheism is correct during his time in Haran, he just couldn't pick up and leave because understanding something from an intellectual standpoint and internalizing it are not the same thing. Introspection and reflection take time. He had to detach himself emotionally from his family and native land first. It takes time to realize what your purpose in life is and who you are meant to be, and that process does not get any easier with age. To leave family, friends, and community, essentially, everything Abraham knew for some unknown land and a newly found religion. He essentially had to become non-conformist. This first step not only takes a good amount of faith in G-d, but it also requires a huge step out of one's comfort zone, which I would argue was Abraham's first test.
As scary as the unknown can be, it is also exhilarating. To paraphrase the Blues Brothers, Abraham was on a mission from G-d. By leaving home, Abraham not only became the patriarch of Judaism, but he established ethical monotheism in this world. Abraham was a man who was so great that he walked in front of G-d. He became Judaism's archetype of חסד (loving-kindness). Abraham realized that change is neither good nor bad, but what you make of it. Upon realizing that, he stepped well outside his comfort zone and took those first steps, and as a result, he became a better human being.
To answer this question, we should answer another question: Why does the verse say לך לך? It would have been sufficient to say "go" (לך). The second "לך" is seemingly superfluous. Why say לך לך? According to Rashi, G-d said לך לך because that second לך meant "for your benefit." Rashi opined that the benefit was so that Abraham could become rewarded and become a great nation. Not that I disagree with Rashi, but I think there is something more taking place.
The phrase לך לך is used in one other place in the Torah: right before Abraham's Tenth Trial, the one where Abraham is supposed to sacrifice his son (Genesis 22:2). Both passages also have a threefold description that follows לך לך, both passages conclude with similar blessings, and both passages act as brackets for Abraham's narrative, which is to say that there is a connection. Both the first and last of Abraham's trials were arguably his most difficult trials. If we are to take Rashi's interpretation and apply it to both trials, then I can infer that there was to be some sort of benefit from the trial, but what is the benefit?
If the test were truly a benefit, I have to wonder what the test is in the first place. One can argue that leaving one's homeland, community, and family is difficult. If the verse were to only convey that leaving a place to which one is accustomed is strenuous, the verse would have said that Abraham was to leave "from the home of your father, from your birthplace, from your country," not the other way around. The Malbim picked up on the reverse word order, and he concluded that the order is "in reverse" is because the behaviors most heavily ingrained within us take place in the home.
לך לך is not leaving a physical place, but rather one in which you are to "go to yourself," i.e., go to your true self [by serving G-d] (Lubavitcher Rebbe). Going off the Lubavitcher Rebbe's interpretation, לך לך is not a physical departure, but a spiritual one. Since the Torah is oddly silent about Abraham's life prior to this moment, we have to use other texts to fill in the blanks. Midrashic tradition teaches us that Abraham was surrounded by idolatry (Mirdrash Rabbah, Genesis 38:13).
The first step is always the most difficult to take. Even if Abraham intellectually realized that monotheism is correct during his time in Haran, he just couldn't pick up and leave because understanding something from an intellectual standpoint and internalizing it are not the same thing. Introspection and reflection take time. He had to detach himself emotionally from his family and native land first. It takes time to realize what your purpose in life is and who you are meant to be, and that process does not get any easier with age. To leave family, friends, and community, essentially, everything Abraham knew for some unknown land and a newly found religion. He essentially had to become non-conformist. This first step not only takes a good amount of faith in G-d, but it also requires a huge step out of one's comfort zone, which I would argue was Abraham's first test.
As scary as the unknown can be, it is also exhilarating. To paraphrase the Blues Brothers, Abraham was on a mission from G-d. By leaving home, Abraham not only became the patriarch of Judaism, but he established ethical monotheism in this world. Abraham was a man who was so great that he walked in front of G-d. He became Judaism's archetype of חסד (loving-kindness). Abraham realized that change is neither good nor bad, but what you make of it. Upon realizing that, he stepped well outside his comfort zone and took those first steps, and as a result, he became a better human being.
Wednesday, October 9, 2013
Simply Amazing How the Ethanol Mandate Fails
Even if oil has not reached its peak, it still is a non-renewable resource, its production and consumption still causes pollution, and both drilling and transporting have created environmental hazards. Oil clearly has its downsides. America should look into alternative energy sources. One of those alternatives is ethanol fuel. Whether one is Democrat or Republican, fighting global warming or Islamic terrorism [with increased energy dependence], ethanol is a politically popular policy. I personally do not care whether ethanol is politically popular. I pondered on the topic of the government getting involved with ethanol a while back, but I would like to take a closer look as to whether the if the validity of the ethanol mandate has a kernel of truth to it, or if it is a poor enough of a policy where it should just be shucked.
If ethanol production had any merit, no government intervention would be required because the private sector would have already invested in it. Up until 2012, the government had been directly subsidizing corn in the amount of $6B per annum. The ethanol proponents allowed the tax credit and the ethanol subsidies to expire back in 2012 without a real fight. The reason? There was still an ethanol mandate in play. According the EPA's Renewable Fuel Standards (RFS), there has to be a certain amount of renewable fuel to be blended into gasoline. Whether it is an ethanol subsidy or a mandate, it is frustrating because both essentially have the same economic effect, which is the artificial increase of demand. An increase of demand means an increase of prices in corn (See the CBO report, World Bank report [p. 17]). Since fructose corn syrup is in so many foods, this policy translates into increased food prices. Ditto for any foods that use corn feed during production!
Attempting to increase corn production in the attempts to make ethanol a viable replacement for petroleum is futile. Even if we use every last bushel of corn towards ethanol fuel, it would still only satisfy 12% of America's fuel demand. This certainly refutes the "we would spend less on oil and more on ethanol, which would stick it to Islamic terrorists" argument. This also refutes the "energy independence" argument because the petroleum market is a global market, which means that energy independence has, at best, a negligible effect on petroleum prices.
An increase in corn demand also creates the "food versus fuel" dilemma. The United States produces 40% of the world's corn. 40% of the US' corn production is used for ethanol, which means that 16% of the world's corn supply is used on ethanol production. All of that corn for a little over 1% of energy consumption! The amount of corn used for a gallon of ethanol can feed a person for an entire day. This policy is causing some serious food shortage issues (Santa-Barbara, 2007). Imagine what 16% of the world's corn supply could do to feed those who are starving, whether they live here in the United States or abroad (NIH report). What would be a better usage of about a sixth of the world's corn production: supplying a small amount of fuel inefficiently or feeding millions? You know the problem is getting bad when the United Nations asked the United States to curtail ethanol production last year.
And all of this without even considering that the cost to produce ethanol is greater than the benefit, ethanol only has 73-83% of the efficiency of a gallon of gasoline, the EPA's unrealistic quota for cellulosic ethanol, or the fact that land-use conversion, usage of pesticides, as well as the fossil fuels used for production make ethanol quite the carbon-intensive endeavor. The winners of this policy are corn producers, ethanol producers, and bioengineering companies. The losers? Everyone else. Sometimes, more complex policy is required to resolve a policy problem, but in this case, it's really simple: repeal the mandate.
If ethanol production had any merit, no government intervention would be required because the private sector would have already invested in it. Up until 2012, the government had been directly subsidizing corn in the amount of $6B per annum. The ethanol proponents allowed the tax credit and the ethanol subsidies to expire back in 2012 without a real fight. The reason? There was still an ethanol mandate in play. According the EPA's Renewable Fuel Standards (RFS), there has to be a certain amount of renewable fuel to be blended into gasoline. Whether it is an ethanol subsidy or a mandate, it is frustrating because both essentially have the same economic effect, which is the artificial increase of demand. An increase of demand means an increase of prices in corn (See the CBO report, World Bank report [p. 17]). Since fructose corn syrup is in so many foods, this policy translates into increased food prices. Ditto for any foods that use corn feed during production!
Attempting to increase corn production in the attempts to make ethanol a viable replacement for petroleum is futile. Even if we use every last bushel of corn towards ethanol fuel, it would still only satisfy 12% of America's fuel demand. This certainly refutes the "we would spend less on oil and more on ethanol, which would stick it to Islamic terrorists" argument. This also refutes the "energy independence" argument because the petroleum market is a global market, which means that energy independence has, at best, a negligible effect on petroleum prices.
An increase in corn demand also creates the "food versus fuel" dilemma. The United States produces 40% of the world's corn. 40% of the US' corn production is used for ethanol, which means that 16% of the world's corn supply is used on ethanol production. All of that corn for a little over 1% of energy consumption! The amount of corn used for a gallon of ethanol can feed a person for an entire day. This policy is causing some serious food shortage issues (Santa-Barbara, 2007). Imagine what 16% of the world's corn supply could do to feed those who are starving, whether they live here in the United States or abroad (NIH report). What would be a better usage of about a sixth of the world's corn production: supplying a small amount of fuel inefficiently or feeding millions? You know the problem is getting bad when the United Nations asked the United States to curtail ethanol production last year.
And all of this without even considering that the cost to produce ethanol is greater than the benefit, ethanol only has 73-83% of the efficiency of a gallon of gasoline, the EPA's unrealistic quota for cellulosic ethanol, or the fact that land-use conversion, usage of pesticides, as well as the fossil fuels used for production make ethanol quite the carbon-intensive endeavor. The winners of this policy are corn producers, ethanol producers, and bioengineering companies. The losers? Everyone else. Sometimes, more complex policy is required to resolve a policy problem, but in this case, it's really simple: repeal the mandate.
Tuesday, October 8, 2013
Unemployment Benefits Decrease Poverty? Really?!
With the possible exception of the Pew Research Center, I would opine that any think-tank has its Weltanschauung, even my most favorite think-tank, the Cato Institute. Worldviews notwithstanding, I still expect a think-tank to maintain as much objectivity as possible, regardless of its leanings. I was under the impression that the Center of American Progress (CAP) was the Left's equivalent of the Heritage Foundation, and that CAP would be the only think-tank to lean that far to the Left. In spite of leaning to the Left, I thought that a think-tank such as the Center on Budget and Policy Priorities (CBPP) was still respectable as think-tank. But then I read an article of theirs postulating that a key reason why poverty has not declined is because the government has not pumped enough money into unemployment insurance (UI), and I had to reconsider.
If CBPP is correct in its assertion, at the very least, there should be a high correlation between poverty rates and money spent on unemployment benefits [per recipient]. This means that X leads to Y, i.e., increasing spending on UI leads to lower poverty rates. Whether it is with something like crime or poverty, I have a problem when people say that X is [one of] the [primary] causes of Y because the world is usually much more complex than that. Their assertion should be easy to [dis]prove. First, aggregate the data on money spent on unemployment insurance, which is courtesy of the Department of Labor. Then, aggregate the data on poverty rates (Census) and synthesize the data to run a regression analysis. Unfortunately, due to the government shutdown, I was unable to retrieve the poverty rate data. The link should work when the tomfoolery in DC is over, but in the interim, I have to show graphs illustrating the trends of both spending on unemployment benefits and poverty rates. (I may or may not run the bivariate regression once the shutdown is over). I created the first graph since the Department of Labor's graph was not as illustrative (FYI: The first graph is in real 2013 dollars). The second graph comes from the UC-Davis Center of Poverty Research, whose graph is based on data from the US Census.
When comparing the poverty rate trend with the outlays in unemployment benefits, I am looking at these trends and I am not seeing anything remotely resembling causation. Now why would that be? Given the interconnectedness of economic activity, you would think that factors such as supply and demand, technology and innovation that typically lower prices, rates of taxation, the number of burdensome regulations, monetary policy, or larger forms of fiscal policy would be better explanations for the poverty rate. But no, the CBPP wants to cling on to the notion that unemployment benefits are so pivotal that if we eliminated unemployment insurance right this second, we would most likely have a double-dip recession.
Much like with food stamps, one would have a much stronger argument if unemployment insurance were used for temporary financial relief, as opposed to long-term poverty relief. For one, if the job market truly worked where the government could just print money and send people a paycheck, why not do so as a long-term stimulus? That way, no one would have to work ever again. The downside to that is that is not how the world of economics works.
I also brought this up last year during my kvetch about unemployment benefits, but one of the primary functions of unemployment insurance is that it is essentially a subsidy for unemployment. As the Federal Reserve of Chicago (Mazumder, 2011), Federal Reserve Bank of San Francisco (Valletta and Kuang, 2010), Federal Reserve Bank of Philadelphia (Hagedorn et al, 2013, which goes into detail as to how the unprecedented length of unemployment insurance has caused much of the uptick in the unemployment during the Great Recession), and other economists (Rothstein, 2011; Zandi, 2012) all point out, how can you expect there to be any poverty relief when unemployment insurance only increases unemployment? It doesn't matter if you cut back on the waste created by unemployment insurance or create more stringent forms of conditionality because politicians cannot escape economic reality, no matter hard they try. In my humble opinion, if politicians are going to try anything, it should be collaborating on solutions that actually work instead of squabbling over Obamacare and debt ceilings while shutting down the government.
11-16-2014 Addendum: Add the Federal Reserve Bank of St. Louis to the list of those who found that unemployment benefits create substantial issues (in this case, moral hazard and monitoring costs). Apparently, the basic universal income would be a better policy alternative in comparison.
2-2-2015 Addendum: This study is worth the read (Hagedorn et al., 2015) because it shows that removing unemployment benefits added 1.8 million jobs to the economy in 2014.
11-16-2014 Addendum: Add the Federal Reserve Bank of St. Louis to the list of those who found that unemployment benefits create substantial issues (in this case, moral hazard and monitoring costs). Apparently, the basic universal income would be a better policy alternative in comparison.
2-2-2015 Addendum: This study is worth the read (Hagedorn et al., 2015) because it shows that removing unemployment benefits added 1.8 million jobs to the economy in 2014.
Thursday, October 3, 2013
100 Years of the Income Tax: Just What We Needed
When people hear the word "anniversary," one either commemorates a travesty or celebrate an event such as a birthday or wedding. But the income tax? Why not? On October 3, 1913, which is one century ago from today, Woodrow Wilson signed the Revenue Act of 1913 into law. Prior to, the Supreme Court declared the income tax unconstitutional (Pollock v. Farmers' Loan and Trust Co. , 1895), but was circumvented when the income tax had been declared constitutional via the amendment process. This act was the piece of legislation that has made the federal income tax a part of American taxation ever since. I'm sure that there are those on the Left celebrating because it has provided much revenue to fund their favorite pet projects. However, I am much closer to lamenting than I am celebrating this anniversary. As concisely as I can write, I have to beg the question of why should I bother to lament in the first place.
The leviathan tax code has taken on a life of its own. In 1913, the federal tax code was only about 400 pages, and the income tax code started off with a mere four pages. Now, the federal tax code is so complicated that it takes up nearly 74,000 pages, and it's constantly changing. How many people can honestly say that they can read all the stipulations on the income tax code and actually understand it, let alone keep up with all the changes? What about the IRS' incapability of defining something as essential as income? With all the loopholes and exemptions [for special interests] that were created, should the inefficiencies and waste created by the IRS surprise anybody?
The income tax rate has increased dramatically since its implementation (Tax Foundation; Tax Policy Center). Along with the income tax rate, a couple of other factors have increased. Historically speaking, this country has had a much smaller debt-to-GDP ratio prior to ratification of the income tax, and so was the burden of federal spending (in terms of percentage of GDP). Yea for the ratchet effect! Ever since, the income tax has given the federal government much greater ability to spend more and aggrandize in the process. Essentially, the income tax was the means by which government could become the bloated, oversized nanny state that keeps people dependent on government. (As a side note, an increased tax rate does not mean more tax revenue, either, especially when looking at tax revenue as a percent of GDP.)
Although it's nice to mention the joys of how taxation collects more revenue, taxation has a secondary function: disincentivizing behavior. What sort of behavior is an income tax discouraging? Earning income. Considering the progressive nature of the income tax (which is wonderful because whatever happened to equal treatment under the law?), those with higher incomes feel the sting even more, which is unfortunate, especially since those in the highest quintile are the ones in the best position to create more jobs. The income tax ends up distorting business investments and financial planning. If the principle is "the more you make, the more they take," how long will it take before a business owner realizes it's either not worth it to have so many employees or even continue running his business?
Although my purpose of the blog entry is not to come up with an alternative to the income tax at this given moment, how about suggesting a consumption-based tax, even if it is a tad more progressive in nature? Since I wouldn't want to create shock to the system, I would be for a gradual repeal of the income tax, and have it replaced (not in addition to, but in lieu of) with sales taxes, value-added taxes, or other consumption and excise taxes. In addition, I would want a more gradual repeal because we still need to pay off our debt, which is going to need to entail larger revenue in the short-to-medium. Even with all of this, what I hope from today is that it doesn't take another 100 years for the American people to realize just how adverse the income tax really is.
The leviathan tax code has taken on a life of its own. In 1913, the federal tax code was only about 400 pages, and the income tax code started off with a mere four pages. Now, the federal tax code is so complicated that it takes up nearly 74,000 pages, and it's constantly changing. How many people can honestly say that they can read all the stipulations on the income tax code and actually understand it, let alone keep up with all the changes? What about the IRS' incapability of defining something as essential as income? With all the loopholes and exemptions [for special interests] that were created, should the inefficiencies and waste created by the IRS surprise anybody?
The income tax rate has increased dramatically since its implementation (Tax Foundation; Tax Policy Center). Along with the income tax rate, a couple of other factors have increased. Historically speaking, this country has had a much smaller debt-to-GDP ratio prior to ratification of the income tax, and so was the burden of federal spending (in terms of percentage of GDP). Yea for the ratchet effect! Ever since, the income tax has given the federal government much greater ability to spend more and aggrandize in the process. Essentially, the income tax was the means by which government could become the bloated, oversized nanny state that keeps people dependent on government. (As a side note, an increased tax rate does not mean more tax revenue, either, especially when looking at tax revenue as a percent of GDP.)
Although it's nice to mention the joys of how taxation collects more revenue, taxation has a secondary function: disincentivizing behavior. What sort of behavior is an income tax discouraging? Earning income. Considering the progressive nature of the income tax (which is wonderful because whatever happened to equal treatment under the law?), those with higher incomes feel the sting even more, which is unfortunate, especially since those in the highest quintile are the ones in the best position to create more jobs. The income tax ends up distorting business investments and financial planning. If the principle is "the more you make, the more they take," how long will it take before a business owner realizes it's either not worth it to have so many employees or even continue running his business?
Although my purpose of the blog entry is not to come up with an alternative to the income tax at this given moment, how about suggesting a consumption-based tax, even if it is a tad more progressive in nature? Since I wouldn't want to create shock to the system, I would be for a gradual repeal of the income tax, and have it replaced (not in addition to, but in lieu of) with sales taxes, value-added taxes, or other consumption and excise taxes. In addition, I would want a more gradual repeal because we still need to pay off our debt, which is going to need to entail larger revenue in the short-to-medium. Even with all of this, what I hope from today is that it doesn't take another 100 years for the American people to realize just how adverse the income tax really is.
Tuesday, October 1, 2013
Pirkei Avot 1:4 and 1:5: There's No Place Like Home
Home is where the heart is. Charity begins at home. Even the chickens come home to roost. For many people, the home is more than just an abode or a dwelling place to protect oneself for the elements. It is supposed to be a place where something more transformative and meaningful takes place. As I was studying Pirkei Avot with a dear friend yesterday, I ended up asking what the purpose of a home is, particularly in a Jewish context. What makes for the hallmark of a Jewish home?
A Jewish home entails more than putting up a mezuzah on doorposts or making sure there is enough kosher food in the home. In Pirkei Avot, there are two opinions as to what is the [primary] intention of a Jewish home. Yosei ben Yoezer of Tzeredah opines that the home is meant to be a meeting place for the sages (Pirkei Avot 1:4). Although חכם literally means "intelligent person," the rabbis of yore interpret it to mean "Torah scholar," which is to say that the home is a gathering place for Torah scholars to meet and discuss Torah. Not only that, as the host, you are supposed to wait on them. The reason for this is based on an analogy provided by Rav. Much like being in a perfumery, by merely being in the presence of a Torah scholar, one absorbs more Torah knowledge through the process of osmosis.
Conversely, Yosei ben Yochanan of Jerusalem is of the opinion that the home is meant to be לרוחה (ibid 1:5). The reason why I don't provide a direct translation of לרוחה is because the word can have two different interpretations, depending on the vocalization. On the one hand, Rav and R' Yonah interpret לרוחה to mean "open wide," much like the tent of Avraham was open. Tiferet Yisrael interprets לרוחה as "for relief," i.e., have the place ready for food, shelter, etc. The difference between the two interpretations is that of passive and active.
Regardless, which Talmudic rabbi is correct? I ask this question because Judaism presents a bit of a dichotomy between Torah study and good deeds. When push comes to shove, is the home meant to be an exclusive place for Torah scholars, or is it meant to be a place where anyone requiring help can wander in and/or receive aid? This question would be better answered by determining whether Torah study leads to good deeds, or vice versa.
On the one hand, Torah study is important enough to be in the recitation of Shema. It is so important that some consider it more important than any of the other mitzvahs (Babylonian Talmud, Kedushin 39b; Mishnah Peah 1:1; Mishneh Torah, Hilchot Talmud Torah, 3:3). I can see that making sense. After all, you have to know what you're doing before you actually do it, and Torah study is the way to acquire said knowledge. On the other hand, Torah scholars will not just go anywhere because they do not frequent the homes of those with "low spiritual standards" (R' Yonah). It takes time and effort to make it a spiritually appealing place for a Torah scholar to spend his time there. Looking back at the hospitality homily in Genesis 18, the Talmudic rabbis (Shabbat 127a) concluded that hospitality (הכנסת אורחים) is so great that it is even greater than receiving the Divine Presence. As another insight, why does one put on the tefilin (תפילין) for the arm before the tefilin for the head? It is to act as a reminder that action precedes thought. It doesn't take years of profound Torah study to know that הכנסת אורחים is an important mitzvah.
So rather than say that your house needs to have one function, why not realize that a home can serve multiple functions? After all, a house has multiple rooms in which the abode can be multi-purpose. Since the Pirkei Avot teaches ideals in a Jewish, ethical context, there would be no reason to say that one is more important than the other: both are necessary for a vibrant Jewish home. Looking back at Pirkei Avot 1:2, the world stands on three principles: תורה (Tosafot Yom Tov interprets this to be active study of Torah, as opposed to passively accepting Torah as a concept), עבודה (literally meaning "service," interpreted as prayer), and גמילות החסדים (acts of loving-kindness). The concept of the home is embodied within these three principles. The communal home, i.e., the synagogue, is a place for prayer. An individual's home takes care of the other two principles. By being a place for both Torah study and acts of loving-kindness (e.g., הכנסת אורחים), the Jewish home actualizes its full potential.
A Jewish home entails more than putting up a mezuzah on doorposts or making sure there is enough kosher food in the home. In Pirkei Avot, there are two opinions as to what is the [primary] intention of a Jewish home. Yosei ben Yoezer of Tzeredah opines that the home is meant to be a meeting place for the sages (Pirkei Avot 1:4). Although חכם literally means "intelligent person," the rabbis of yore interpret it to mean "Torah scholar," which is to say that the home is a gathering place for Torah scholars to meet and discuss Torah. Not only that, as the host, you are supposed to wait on them. The reason for this is based on an analogy provided by Rav. Much like being in a perfumery, by merely being in the presence of a Torah scholar, one absorbs more Torah knowledge through the process of osmosis.
Conversely, Yosei ben Yochanan of Jerusalem is of the opinion that the home is meant to be לרוחה (ibid 1:5). The reason why I don't provide a direct translation of לרוחה is because the word can have two different interpretations, depending on the vocalization. On the one hand, Rav and R' Yonah interpret לרוחה to mean "open wide," much like the tent of Avraham was open. Tiferet Yisrael interprets לרוחה as "for relief," i.e., have the place ready for food, shelter, etc. The difference between the two interpretations is that of passive and active.
Regardless, which Talmudic rabbi is correct? I ask this question because Judaism presents a bit of a dichotomy between Torah study and good deeds. When push comes to shove, is the home meant to be an exclusive place for Torah scholars, or is it meant to be a place where anyone requiring help can wander in and/or receive aid? This question would be better answered by determining whether Torah study leads to good deeds, or vice versa.
On the one hand, Torah study is important enough to be in the recitation of Shema. It is so important that some consider it more important than any of the other mitzvahs (Babylonian Talmud, Kedushin 39b; Mishnah Peah 1:1; Mishneh Torah, Hilchot Talmud Torah, 3:3). I can see that making sense. After all, you have to know what you're doing before you actually do it, and Torah study is the way to acquire said knowledge. On the other hand, Torah scholars will not just go anywhere because they do not frequent the homes of those with "low spiritual standards" (R' Yonah). It takes time and effort to make it a spiritually appealing place for a Torah scholar to spend his time there. Looking back at the hospitality homily in Genesis 18, the Talmudic rabbis (Shabbat 127a) concluded that hospitality (הכנסת אורחים) is so great that it is even greater than receiving the Divine Presence. As another insight, why does one put on the tefilin (תפילין) for the arm before the tefilin for the head? It is to act as a reminder that action precedes thought. It doesn't take years of profound Torah study to know that הכנסת אורחים is an important mitzvah.
So rather than say that your house needs to have one function, why not realize that a home can serve multiple functions? After all, a house has multiple rooms in which the abode can be multi-purpose. Since the Pirkei Avot teaches ideals in a Jewish, ethical context, there would be no reason to say that one is more important than the other: both are necessary for a vibrant Jewish home. Looking back at Pirkei Avot 1:2, the world stands on three principles: תורה (Tosafot Yom Tov interprets this to be active study of Torah, as opposed to passively accepting Torah as a concept), עבודה (literally meaning "service," interpreted as prayer), and גמילות החסדים (acts of loving-kindness). The concept of the home is embodied within these three principles. The communal home, i.e., the synagogue, is a place for prayer. An individual's home takes care of the other two principles. By being a place for both Torah study and acts of loving-kindness (e.g., הכנסת אורחים), the Jewish home actualizes its full potential.
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