Tuesday, February 21, 2012

Money is a Flawed Mirror

Imagine the government payed 10% of the population to dig holes and then fill them up again. Would that be bad?

Yes, of course .. but why? If you think that this would be bad because the private sector tax payers would lose lots of money for nothing, you're wrong.

What would happen if the government took the money it used to pay the diggers, doesn't pay them, and instead burned the money? Would that be bad? Well, as long as the central bank would print and properly distribute enough money to prevent a deflation, no. That wouldn't be a problem. Sure, most people would feel cheated if the government took their money and then burned it, but they would look into the money mirror; and this mirror is flawed.

What ultimately determines our welfare is not money, but which and how many goods and services are produced and how they are distributed. This is very important to understand. The money is just a tool we use to distribute the goods and services and to provide incentives to create those goods and services the people want.

If everybody payed 50% taxes and then the money would get burned, we would all have 50% less money, which is why prices would be half as high and everybody would do just the same thing he did now. Goods and services were produced and distributed the same way.

In fact, some years ago the German government did exactly that. It ordered by law that everybody would have to (roughly) cut his prices and wages in half and then call his money 'Euro' from now on. If it had been practicable, the government could just as well have taxed the other half of our money away, burned it, and then ordered us to call the rest 'Euro'. It wouldn't have made a difference!

On the other hand, if the government didn't do anything, but some aliens used a mind-control device to make 10% of the population dig holes and then fill them up again, and if the aliens then made the rest of us offer them goods and services for free, that would be very bad - for everybody. (Except for, maybe, the aliens - who knows :).

The point is: money itself doesn't matter. What matters is its effect on the creation of goods and services and their distribution.

Today I read an article in a big German newspaper about how we all need to save more so that we have enough money when we are old. This makes perfect sense for each individual. But it doesn't necessarily make sense for a society! Here's the reason.

How many goods and services we will be able to ask for when we are old is determined by how many of those goods and services, which we want when we are old, are available when we are old. Now, the supply of those goods and services is determined by how attractive the wages of the people supplying these goods and services are when we are old. But, in Germany, these wages are kept artificially low by laws and regulations.

The politicians look into the money mirror and think that if the wages of carers for the elderly are low, they are easier to finance. But the only thing this will lead to, is not enough people working as carers for the elderly. And it doesn't matter how easy they are to finance: if there are not enough carers for the elderly, there aren't enough !

If lots of people take their money and save it now, this means that they supply goods and services to the rest of society, but don't consume as much as they give away. These savings, in Germany, go to investors who produce goods and services for people outside of Germany; that's exports. The flip side is that Germany, as a whole, in the future owns claims against the citizen of other nations. When we are old we can then use these claims to request goods and services from them (if they haven't gone bankrupt), so that we are able to employ more of the young German citizen as carers for the elderly and have other nations' citizen produce the cars we drive. But this will only work if the wages of carers for the elderly rise. It is the only way (except for force) to attract more young people to be a carer for the elderly.

There's another problem with saving money. How much goods and services of other currency zones our money buys is determined by the exchange rate. If, in the future, there's suddenly much more Euros, but the same (or even less) number of goods and services that can be bought with these Euros, the exchange rate will suffer. Our Euros will buy less goods and services. The same is true inside a currency zone. If, when we are old, there's suddenly more money around because old people access their savings, this only causes inflation.
Saving the money and then throwing it at the market when we are old makes sense for the individual, but not necessarily as a society.

The lesson is: don't look at the money, but look at what it does!

Do private sector employees have less money because public sector employees receive it? Yes. Do private sector employees enjoy less prosperity because public sector employees receive part of their money? Not necessarily.

It is true that the private sector is forced to pay taxes to finance the public sector. But this doesn't mean that without these payments the private sector would be better off. Don't look at the money! Instead, look at which and how many goods and services are created and how they are distributed with the help of our financial system!

If public sector servants produce useful stuff and if this stuff is distributed well, their work is just as valuable as if private sector citizen produce useful stuff and if this stuff is distributed well. The flow of money is often enlightening but, ultimately, it is always irrelevant. What matters is .. well I hope you could finish this sentence by now ...


  1. For a couple of posts now I've asked at what percentage of private to public do you see this working and where does it breakdown. I assume that we all agree 100% public doesn't work and can't support itself. Right?

    So somewhere between 0% public and 99% public (inclusive) is the answer. Let's use your 50% taxes as an example. But change one thing. Instead of burning the money or digging a hole just give the money away for nothing required in return. Bbasically this boils down to a redistribution of wealth from the private sector to public workers that contribute nothing in this example.

    What you will soon find is workers in the private sector asking why they should work when they could be public sector and get the same benefits and do nothing. Soon you have a shift from those willing to work and pay 50% to those doing nothing but getting paid.

    Now tie this into my point above as to what breakdown works and you'll soon see that you must incentivise the private sector in order to pay for the public sector. As soon as you stop this (tax the rich which is really tax the private sector) you get less private and more public.

    And my earlier posts show that the incentive for government tobe efficient and productive is low. Studies prove the productivity of the private sector is much greater than public.

    1. I answered this question in a comment of last post. Please stay on topic.

    2. I was trying to point out that while money is a tool you can't ignore it. In my 50/50 private to public example the money stays the same yet the standard of living will go down.

      Money drives productivity as it is both a reward and a measure. If you take away the reward then people are less willing to take risk or do productive things, especially if they get the same reward for doing less or nothing at all. Soon you have more and more doing nothing at all and that means a decrease in items that impact the standard of living.

    3. I don't think anybody on this planet doubts that money taken from the private sector (or the public for that matter) that goes somewhere, where it is wasted, is bad. (?)


      When it comes to taxes reducing incentives, this is more tricky. I know only a few people who ever told their boss that they don't want the promotion because, even though the wage is higher, after taxes, it's not high enough. And those who did that, did it purely to haggle. They still wanted to work at a better-paid job and be the boss of 20 instead of 4 employees.

      The same is true for investors. They always choose the highest profitable investment. If all investments are taxed by x% they still invest in the most profitable thing they can think of! They certainly won't leave it at the bank just to save taxes, if that means that they miss a chance to make more money!

      No taxes:
      - Investment: 20% pa
      - Bank: 4% pa

      Now we introduce 25% taxes:
      - Investment: 15% pa
      - Bank: 3% pa

      What do you think the investor is going to do in either scenario?

    4. This is true, all taxes do is change WHO spends the money, and what it gets spent on. Now the argument is...who would use that money in a manner that is more productive, and better benefits society?

    5. 15% vs 20% changes the risk reward profile.

      For investments that were previously 20%, that's the risk premium it had over something safe like the 4%. When the expected after-tax return is 15%, that may be below an acceptable risk tolerance. Only naive investors would choose the higher number at face value like that.

    6. It is true that in the 0% taxes example (20,4) the risk premium is 16% and in the 25% taxes example (3,15) the risk premium is 12%.
      However, this is calculating in absolutes. In both scenarios the risky investment (or its expected value) is potentially 5x as profitable as the safe investment ...

  2. Personal feelings of envy aside, the same arguments can be made for the case of CEO bonuses.

    As much as I may personally like the redistributive qualities of bonus caps and other popular notions, I think getting my fair share of 0.000001% of a CEO's bonus makes me a hole digger.

    1. But your analogy to a CEO doesn't work. If you work less you get fired and get zero money. But working for the government lets you work at a lower productivity level (at elast for my arguments sake). So sorry can't compare the two.

      Oh and if you meant that you would quit your private job and work for the public sector, because you don't earn what the CEO does then that proves my point.

    2. A given CEO doesn't work less if they're paid less. They quit or move elsewhere. They're far more mobile than you or I.

      If you implement a cap (not an across board tax), the company has extra profit to either reinvest or redistribute. If there was already opportunity for a good ROI, it would have already been taken. Hence, most often than not, it gets redistributed to shareholders like myself. We do nothing for the company other than keep the marketshare up.

      You're also hit with the secondary effect of only being able to afford a CEO at the price you're willing to pay - which is substantially lower than everyone else. You will get a different quality of leader for that price.

      At the end of the day, caps like that are the same as digging a hole and refilling it. I might get a little extra directly for my 'work', but there's absolutely no value created and inevitably, I actually end up making less than I would have without the handout.

  3. "Money drives productivity as it is both a reward and a measure."

    Except that, in the United States at least, productivity is no longer rewarded with money, i.e. wages. Productivity increases mostly pad the corporate bottom line. So, work is in fact less attractive. High finance hucksterism, on the other hand, never more so, despite the lessons we should have learned from 2008.

    http://economics.stanford.edu/files/Theses/Theses_2007/Sachdev2007.pdf for an overview (relevant graph and conclusion on pages 25 and 32 if you don't care for the mathematical analysis). The paper is five years old, but the trends described have only been wildly exacerbated during the current 'jobless recovery'.

    1. What you state is true. And for some they realized this and placed their funds into investments that benefit from the increased corporate bottom line.

      But that doesn't then mean that government is now productive. Government for the most part is the least productive form of 'investment' available. I use the term investment as a means to use tax dollars for various things. The same tax dollars could remain in private hands. Now the question becomes which sector does more with that tax/non-tax dollar.

      I know Nils made a post that said government is just as good as the private sector, and while I support some government, I think it has to be limited as the private sector will produce a higher return on that dollar.

    2. Just a second ..

      I never said that government is just as good as the private sector. What I say is that the public and the private sector are differently good at different tasks.

      E.g.The private sector is terribly bad (and corrupt!) at keeping the water clean. But the public sector is terrible at creative destruction.

      Creative destruction and plurality are the big - very big - strengths of the private sector. Working in an environment in which competition doesn't make much sense is the strength of the public sector.

      And sometimes neither the private nor the public sector are really good - for example the mail service, planes, railroads, electricity supply, water supply. That's when societies usually try hybrid private-public models.

      Since the private and public sector are differently good at different things we need to decide: For example, do we want cleaner water or more private investment? Do we want more basic public education so that kids from poor families have higher chance at competing with kids from richer families? Or do we want more private investment which might invent a completely new product nobody ever thought about before?

      These questions need to be answered on a case-to-case basis.

      And one last thing. The public/private quota is pretty useless. Everything depends on what is done with the money! Is it used to employ 100.000 public servants in a monster-bureaucracy or is it given to the private company that offers to repair the bridge for the least amount of money?

    3. Points taken. In the US the private sector actually excels at mail/shipping (FedEx, UPS) but the government dictates prices and wants the same cost for a letter to be delivered anywhere in the US.

      Also, trains (freight), planes, electricy, gas are all handled by private sector and they do a great job. There are needed government regulations but the private sector does things like build planes, fly them etc.

      My whole point is that in a previous post you implied, and others agreed, that public was just as good as private and it wouldn't matter if there was no private sector. My argument was a public sector is needed but it would be extremely limited in scope in what it was responsible for and the size of government in the US was way out of wack and much too large to sustain itself.

    4. "My whole point is that in a previous post you implied, and others agreed, that public was just as good as private and it wouldn't matter if there was no private sector."

      If anyone was arguing that there should be no private sector at all, I must have missed it. To my mind, we were discussing (prompted by Greece) what reverses a recession better: money spent by the government or given back to the private sector in tax cuts. In his previous post, Nils usefully defined a lot of the terms (and complicating factors) for us, though he is being rather coy about taking a clear position within the Keynes, Friedman and Hayek triangle.

      For me, social justice and equality (within reason) are the most important public values. I suppose that makes me a socialist in Europe and a wretched scumbag commie in America. However, if I were presented with a sustainable minimal-government, market-based model which ensures free healthcare and hospice care, free mandatory education, environmental protection, anti-trust safeguards, minimum wage, basic living allowance for every citizen (welfare/old age benefit), independent media, and so on, I would be happy to consider it. But it is unlikely.

      Because the poor will always be with us, wealth must always be artificially redistributed to provide for human dignity and equality. The only question is to what extent, in order to keep it sustainable.

  4. Nils, there are a lot of assumptions to debate in this article. A lot of "IFs".

    Working on your assumptions though, lets take the last couple paragraphs. Private sector employees would only benefit from paying more taxes to hire more public sector workers IF public sector workers were on average just as productive or more productive than private sector workers (on average). Otherwise, they are exchanging their buying power for less than what the private sector could have provided for itself.

    This leads one to realize that public sector jobs are only really useful in certain scenarios. First, if they provide goods and services that cannot otherwise be provided by the private sector for various reasons (example: military service). Or, the existence of a public sector in that market somehow adds more productive competition to an otherwise uncompetitive market and therefore increases the productiveness and efficiency of the private sector (or puts them out of business).

    In order for the latter to truely benefit society it would have to be a profitable enterprise that did not use the bottomless pockets of Government to keep itself afloat. (The US postal service comes to mind here).

    1. You make it look as if the question was whether we would like the private or the public sector to produce iPhones. We don't! That's a business the private sector excels at.

      The question is how much money we want to use to pay for things only the public sector does well (e.g. educate all children)? I'd rather have some money flow towards an inefficient school administration than having no schools and all the money flow towards a very effective mobile phone producer.

      The point is that we have to determine which tasks should be done by which sector and how to keep both sectors as efficient as possible.

    2. You do know that private schools actually educate children better in the US than public schools. And this even takes into account income, race etc. Many Catholic schools in the US educate poor students much better than public schools in the exact same neighborhood.

      And the US university system is actually a private business. It is not government controlled like the lower grades are.

      I admit I have no clue how Germany or other countries do it but in the US at least private schools excel at education.

    3. The private sector can be good at education. But it only works for kids from families who are able (and willing) to spend money on it. This is also a question of justice. The kid born into poverty doesn't enjoy any equality of opportunity against the kid who gets his MBA paid by his dad.

      Now, US citizen might want to live with this injustice. In Germany the government finances every citizen an university-level education if he wants. However, German government doesn't pay for an MBA. For that you either need to earn enough money to finance it, first - or you need a dad.

      The private sector can be good at education - but only for the kids who have enough money. That's why a purely private education is wrong, in my opinion. First, because it doesn't make use of the talents of children born into poverty. And second, because a society without equality of opportunity is not a just society, in my opinion.

    4. But it only works for kids from families who are able (and willing) to spend money on it.

      In the US they want a voucher system where the parents can decide to spend the tax dollars for education. So I can take those dollars and go to a private or public school if I wanted to.

      Not to mention that many private Catholic schools are in the poorest areas of the US. So your comment isn't accurate when it comes to the US.

      The kid born into poverty doesn't enjoy any equality of opportunity

      This is kinda hard to really believe considered who the current president of the US is. It disproves your 'equality of opportunity' statment outright.

      Finally, private sector education in the US is not the same thing as a fee education. In fact both public and private cost money. Taxes are collected and distributed for primary and high school grades. These can be used in public schools run by the government or some private schools like charter schools. I believe in expanding this to all private schools so the poor kid CAN get into that same exclusive school that your rich kid did.

      And in the US at the University level all of them cost money. Harvard, Yale (private) cost bucks as do all state run public universities like Stanford, Univ of Michigan etc. And to be honest the cost differential between the two is shrinking fast.

    5. The voucher system is only in some states, will not cover the more expensive private schools and doesn't take into account that most people who are truly poor and need the vouchers can't afford the transportation and other costs to get thier children to another school district.

      My wife teaches in a very poor district and I find most people in the US far underrate the factors that make poverty so hard to escape. The biggest being parents with no education who don't have a clue what their children should be learning or have any skills to help them learn.

      Children born into poverty do not have equal opportunity in the US or any place on earth.
      There is a huge difference between enjoying the same constitutional protections and enjoying the same opportunities. I think you've conflated the two.

  5. I'd argue that while public sector can be less efficient in "return on investment", it is better at giving money that get spent immediately. Not in convoluted schemes "save, bank invests, some company gets credit, new product arrives to stores", but in immediate and clear way - by buying things like food. This should create faster turnaround of money in economy, which obviously benefits everyone.

    As we see now, "trickle down economy" doesn't really work. With more money you spend or invest less relative to your total wealth. As money get more concentrated, decent investment opportunities get rare and require more time and effort. At the same time, willingness to spend more time and effort ("take risks") doesn't rise with more money in your hands - in fact, either the opposite is true (you take less risks as your needs are fulfilled with your money) or money don't change situation at all (you take same risks regardless of amount of money in your hands).

    1. And tax breaks work the same.

      As we see now, "trickle down economy" doesn't really work.

      Huh? See where? If by "trickle down" you mean cutting taxes then you are way wrong as numerous studies have shown. Real tax cuts (not the gimmicks that the US has done recently) have been proven to spur the economy and have lead to a faster growing economy. And ironically higher revenues for the government.

    2. If you take private investment and put it into public investment, like checking the drinking water, you often have this effect: the GDP drops.

      That's quite obviously so because checking the drinking water isn't something that creates lots of GDP, while some private investment usually does.

      This is exactly the reason many governments, including the German one, want to move away from the sole focus on GDP. It's just not the only thing a society should want. For example, if a society polluted its environment as much as it wanted, this would raise GDP. But it certainly wouldn't raise the well-being of the population.

      Of course, reducing taxes while keeping spending has a different effect: taxes are substituted with debt. And, thus, the money is still not available for the private sector.

      However, in contrast to taxes, debt is private money given to the government voluntarily. And that's good in the short-run because only the investors who can't find a better investment would give money to the government; while taxes take the money from everybody - no matter how good his investment ideas are.

      It's even better if the debt comes form other nations, like China. In this case the debt that results from tax reductions, directly translates into higher GDP because you can spend other peoples' money; look at Greece.

      Look at Greece again to see the problem ...

  6. You do know that private schools actually educate children better in the US than public schools.

    Nope. Not at all. Unless perhaps you have more recent studies than 2006 and 2008? And I'd hesitate to call Catholic schools "private" if they enjoy the same tax benefits as religious institutions (do they?) - a tax break is a government subsidy by another name.

    Besides, (early) education is one area in which it is more harmful to society overall to entirely privatize: poor kids get a poor education and remain poor. The US is stronger overall with a more intelligent, skilled workforce.

    What you will soon find is workers in the private sector asking why they should work when they could be public sector and get the same benefits and do nothing.

    And they will apply to said public jobs, but just like everywhere else, there are none available.

    1. I'm well aware of the NCES study based on 2003 NAEP data. Both articles are not the study but instead just commentary about the sudy. So here is another commnetary about the study and why it was flawed.


      It is also interesting that no follow-up study has even been published based on any other years of data. One would think it would be pretty easy as you just have to plug in the numbers so to speak. Or maybe the results aren't what they want?

      And look at the footnotes for a number of studies that show in voucher states private schools did much better.

      And they will apply to said public jobs, but just like everywhere else, there are none available.

      And in that case they will collect unemployment. but you still have the same problem as to who is paying for it since you don't have a private sector anymore.

    2. How do you feel about Stanford University? They have a longitudinal study (PDF) published in 2009 showing 17% of charter schools performed better than public schools, 46% did the same, and 37% did worse.

      The main website links to some more recent (2011) news articles showing that X charter school in Y state is doing Z% better than public schools. But each article also notes how there is a persistent gap in equity when it comes to charter schools accept kids with special needs.

      I'm not against the idea of shaking up the education system, or even teacher unions for that matter. What I am against is exactly what your article mentions:

      Voucher programs specifically target the aca­demic needs of low-income (frequently minority) students, who often live and go to school in high-poverty areas. These children are frequently stuck in persistently low-performing public schools that are not meeting their educational needs.

      It's great that (presumably) low-income minority students are "spared" from persistently low-performing schools. But... what of the kids without vouchers? If everyone had vouchers, the good schools would get filled up, and everyone else is still stuck with bad schools, assuming a private company would even run such a low-performing school. Or maybe they would, to service people without any other option, and run it like the companies importing lead-laced Chinese toys and toothpaste.

      And in that case they will collect unemployment. but you still have the same problem as to who is paying for it since you don't have a private sector anymore.

      Err... what? They would quit their jobs and collect unemployment when they can't get government jobs? Would you quit your job if you found out someone was getting paid more than you for less work?

      I don't know why you persist in your implicit, false premise that the public sector is incapable of producing something. Either make the argument, or don't.

  7. In the US (or at least New York) Public school teachers that are not performing or are deemed not able to teach are stuck in a room to do busy work all day. They cannot get fired because they have tenure. This is hardly an "efficient" use of taxpayer money. I myself first tried to become a public school mathematics teacher. I got my certification did my student teaching and everything.

    The jobs weren't there for a few obvious reasons. First, the money schools had was being used inefficiently. Second, the number of applicants had jumped tremendously because public teacher pay/benefits were better than private sector jobs. Third, the jobs that were available were distiributed based on who the applicant knew inside the system and not based upon their ability to teach or their expertise with the subject matter.

    In terms of providing education for low income families in an attempt to create equality of opportunity, I can say this....many low income parents in the US use school as a babysitting service for their little ones and, according to most studies on the matter, they tend to value education the least. For a family that is of below average income to be given an opportunity to give their kids a better shot at life and not take advantage of it is upsetting to most taxpayers. Point is, you cant just throw money at a problem and expect it to get better....it won't.

    1. I'm ever more surprised about how corrupt the US system apparently is ...

    2. Welcome to how the US really is Nils. Much of this corruption is due to public sector unions and here is why.

      Public sector unions give big comapaign dollars to politicians that they get elected. These dollars come from union dues. Now to keep the union members happy since they have large union dues they need big rasies and benefits. The politicians give them it and get releceted due to the union campaign funds.

      See the problem is the union dues are paid for with tax dollars and these tax dollar union dues go to politicians who keep raising taxes to get more union dues and campaign dollars.

      Now why would anyone ever suspect corruption in this type of scheme?

    3. In "socialist" Germany, by the way, 'Beamte' (=~ civil servants), which teachers usually are, are forbidden to go on strike. There is no teachers' union here.

      Being a teacher is like being a soldier: You can't strike, you can't resign (in a proper way), you are completely at the whim of the government. The government, then, gives you a generous wage and a quite generous pension, which you, btw, lose completely should you quit the job for any reason other than retirement.

      Consequently, "Beamte" are people who consider safety, predictability and hopefully duty more important in life than the rest of the population. And that's quite the intention.

      If you want to make lots of money you need to go to the private sector. If you want to be dependent just on the state and not dependent on anybody else, you try to be become a "Beamter". The independence from the private sector is considered necessary to keep corruption down. And, maybe I am blind, but it seems to work pretty damn well.

      There are sometimes people who argue that "Beamte", since they can't (realistically) be fired, don't work as hard as they could - and that may be true. The possibility to be fired, however, would be useless without a good way to measure how hard somebody, e.g. a teacher tries. And I don't think there's a good way to do this with teachers.

      And, of course, campaign contributions are very limited here. We don't want rich people or organizations to have more influence on our elections than anybody else - neither unions, nor billionaires.

    4. Much of this corruption is due to public sector unions and here is why.

      Oh, please.

      Hey, could you explain the difference between how you claim unions work, and how lobbyists in general work? Let's see... big companies give millions of dollars to politicians for loopholes and earmarks. The money for these *cough*bribes*cough* campaign contributions come from somewhere... but where? Oh, yeah, from the dollars that could have been paid to the employees, but was withheld for this express purpose.

      The big, glaring difference is that within the unions themselves, you can vote the officers who determine policy in or out. If you have a grievance at a private company, you get fired.

      @Degrin Third, the jobs that were available were distiributed based on who the applicant knew inside the system and not based upon their ability to teach or their expertise with the subject matter.

      And the difference between that and how the private sector works is...? Or do we assume that, by default, whomever a boss hires is the de facto most efficient use of company resources?


      Yes, you should definitely rely on internet comments to inform your opinion on the corruption inherent in US institutions, especially when it comes to unions.

      I belong to a union by default; you get charged union dues either way, so you may as well get the protections. Has this led to poor performers getting away with months of shenanigans? Yes. Have weaker employees gotten promotions over stronger ones due to seniority? Yes.

      At the same time, the Executive Director of my department tried to blacklist me after a... particularly honest new employee interview. She went so far as rewrite my manager's 6-month evaluation of me, extending my probation period by 75 days. Under a private company, I'd be fired, no questions asked. At the time, I was the second highest performer in the department, out of 20 individuals.

      Everyone is for meritocracies when they think they have merit, and for unions when their boss screws them over for personal reasons. The only real difference is the diffusion of power - would you prefer one guy to have all the power, or a bunch of people? Which is more corruptible, more prone to abuse? You tell me.

    5. That comment was half-ironic, Azuriel ;)
      In fact, it amazes me to what extend US commenters on this blog think that their country is broken.

    6. I think the problem is we have such an open society that all our dirty laundry is continually aired and it sometimes seems like everything is falling apart. Ironically it's a symbol of how strong we are that we can do that. And we are so relatively isolated from other countries we don't get to see how much better things are here than in the rest of the world. I've actually had people try to tell me China was run better than the US before because their entire world experience was out of Forbes and Business Week.

      I really wish there were some realistic way to make every American live in a third world country for one year once they become an adult. It would completely change most people's perspective on how broken things are.

      It's like listening to a child from a really wealthy family rag on how bad things are because the pool didn't get cleaned and the maid quit.

  8. goodmongo I'll argue the point about private schools educating better than public schools. You can take individual schools and prove it on a micro level but it falls apart at the macro level When you start comparing apples to apples and oranges to oranges.

    The rational debate over our school's performance went off the logical rails long ago. For example, all of the other countries that we keep rating ourselves against filter out the poor performing students in various ways before they get to High School, then our full Bell curve of students is graded against their top half of bell curve and we look bad. And both right and left have a vested interest in convincing the public the sky is falling.

    For example in Germany, well before High school they start identifying the children that will most likely go to college and then the rest of the children are funneled into vocational programs and work study programs etc. Here in the US we take every child regardless of ability or inclination and run them through a college prepatory program. Of course we look bad when every child in special ed, or who doesn't care to go to college or even the poor below average students who couldn't make it through college are compared to other countries best and brightest. It would be like taking the test scores of Yale and Princeton and comparing them to some mediocre community college and then declaring the community college was failing.

    Private Schools get the advantage of weeding out those students as well. As private entities they can refuse students and pick the cream of the crop.

    The left went off the rails because they thought if they screamed the sky was falling they'd get more money, and the Right followed right along trying to use the false idea's as a reason to turn every school into a business unit.

    Typical politics and it sells well with the public because we are all looking for someone to blame for the shape we are in. It's a lot easier to blame the teaching profession than ourselves for living beyond our means for 50 years.

    1. For example in Germany, well before High school they start identifying the children that will most likely go to college and then the rest of the children are funneled into vocational programs and work study programs etc.

      Children in Germany all go to one school for the first 1-4, sometimes 6, grades. Then they divide up in three parts. The upper part can go on to university after the 13th grade. The two other parts can't - unless they switch, which they can if their marks are good enough. One can also gain the right to visit university later in life in various ways.

      It's not a perfect system as the lower part (Hauptschule) is suffering from very high unemployment even today. There are constant reforms happening there.

    2. And if that system happened in the US we would never hear the end of it. it would be called racist and unfair and an attack on the poor. See I guarantee that the first part would be mostly white/asian students while the other parts would be mostly black/hispanic (percentage of race total wise).

      And then things like affirmative action would be put into place where different races would be guaranteed a certain percentage of the top part regardless of grades/marks.

    3. My point was merely that the college bound students that are tested in the high schools in Germany are the cream of the crop, vs our entire pool of students. The comparison of our schools vs their schools never takes into account the differences in the groups of students. I just used Germany because I lived there for 4 years and have some idea of how their school system works.(though I'm sure it's changed some since I lived there) I wasn't throwing it up as a model of perfection. Just using it to illustrate that comparing a German High School that is prepping kids for college to an American High School is at best a flawed comparison and thus of little value. Both the right and the left do this to push their own issues but they unfortunately ignore the reality that with all its flaws our system isn't as broken as they'd like us to believe. I'm sure the German system has many problems as does ours. But they sky has never been falling.

      In the US if you crunch the data without partisanship it always breaks along poverty lines. Impoverished children perform worse than middle class and rich children. And poverty in the US has been growing since the 1980's. No surprise then that students scores have dropped. Till you fix that fundamental problem no amount of money or change will help. I suspect no one wants to touch that because fixing poverty is a daunting challenge.

    4. Goodmongo's statement is quite accurate for the most part. The problem is that there is a culture in the lower classes to shun education. This happens largely in households of african american and hispanic descent but not exclusively. Asians and whites tend to be the highest performers in public education America(in that order). This is especially true for Math and Sciences.

      Its a double edged sword. If you allow them (low performing students) to have a premium education, most (not all) tend to take it for granted, achieve low marks, and resources are wasted. If you make it restricted based on grades etc, it becomes a racial/class war.

      Individuals from that segment of US society need to step up and do whats best for their own good. It requires them to do a lot of work, but our society is willing to meet them half way. The attitude about education in communities of low socio-economic status needs to change in order for them to take advantage of education that is being provided.

    5. Let's give you Russian perspective on education! It's always fun to know where things are different, and how different :)

      First, our constitution states that everyone has right for basic education (school) free of charge. This is unlikely to change anytime soon. Overwhelming majority of schools are financed by government, but there are some private schools too. Teacher pay in public schools is considered to be on low side - often below regional average, even though government has taken some steps to improve situation lately (mostly by telling regional governors "teacher pay should not be below regional average", with each governor doing different creative accounting to rise it as little as possible by interpreting this as broadly as possible). As a result, school jobs are unpopular - it's a lot of work for fairly low pay. It's hard to lose such job though since there might be no replacement available at all.

      School education takes 11 years, and starts at 7. Technically you can opt out after 9 classes (getting your "certificate of middle education"), and go to "technical college" (used for blue-collar jobs), but this is quite unpopular. Most take all 11 classes then go to university.

      And when i say most i mean pretty much everyone coming out of school and willing goes to some kind of university. Universities become extension to "16-year school" shielding people from joining workforce. As extra benefit, while studying in university you cannot be drafted (huge bonus if you're male - draft evasion in Russia is on same scale as tax evasion in Greece)!

      Transition is simple - at the end of school you take country wide assessment exam (hugely unpopular innovation, btw, taken from "west" and only a few years old - things weren't MUCH different before though, each university just had their own set of exams), and results of that exam decide universities you're eligible for - with universities modifying their thresholds according to national averages of the same exam. Our demographic collapse in 90s means that universities cannot be too choosy on applicants - there are government-mandated suggestions on how many students there should be per professor, and if your university drops below that (by being so unpopular that noone goes there even as last resort to avoid draft), funding might be cut accordingly. Even if your grades aren't great, you can still join university of your dreams with additional payments - usually universities set up their "thresholds" so that they can get some "free" students with good grades (their education gets paid by government), and fill remaining spots with paying ones for extra cash.

      And even if you started as "free", if your grades aren't good, you might be required to become "paying" student as well. As long as you pay though and maintain at least some effort at studying, you're highly unlikely to get kicked out.

    6. Oh, and one more thing - school education is not optional. If your kids aren't going to school, and aren't getting home-schooled (usually by paying same teachers from nearby school for private lessons), you WILL be charged with child neglect and get your parental rights revoked.

    7. The Russian perspective is interesting, and fairly similar to what I recall from my time of living in Eastern Europe myself. The draft isn't a bad whip to get people to stay in school, is it. :)

      Though I don't think an institution of higher education would ever be allowed to fail in practice in that part of the world. There is a tremendous amount of sentiment attached.

      I'll have to be less gentle than Sam and say that the language of racial distinction with regard to school performance leaves a foul taste in my mouth. American test scores track far better with socioeconomic background than with race. I disagree that it is up to black leaders to try to inspire inner city kids to achieve, and all the rest of that saccharine pass-the-problem dreck. It's up to the United States as a whole to become more equal, eliminate ghettos (and trailer parks) and the poverty-begotten anti-intellectual culture that festers within them. Your country will be better for it.

    8. Eliminate Ghettos and Trailer Parks? And replace them with what? More rent controlled housing? The idea is to enable people...not coddle them. Giving people enormous amounts of welfare to bring them out of the "Ghetto" or "Trailer Park" will not change their Ghetto or Trailer Park mentality. Its just the same people living in a better neighborhood, which as seen degenerates back to ghetto status. If someone from the Ghetto really had the strong desire to get out of the Ghetto it is very possible. It just requires an enormous amount of work and dedication. Its not that the resources aren't there, its that the guidance (especially to the youth) does not steer them in that particular direction.

      The middle and upper class can't be expected to open doors AND walk through them at the same time. There needs to be a sea-change in the attitude about education and hard work in these communities. Again, throwing money at the problem doesn't work. Its been tried.

    9. This comment has been removed by the author.

    10. I completely agree with this. You don't fix these kinds of problems in years it takes decades or centuries.

      @ soresu.. It is up to our country as a whole but if you don't get community leaders onboard then how do you influence the community? National politics is great for wars and big things like civil rights. But local engagement is the key to fixing social issues.

    11. Oh, I don't mean eliminating ghettos and trailer parks by government order, or any daft thing like that. I do mean evolving them out of existence through better distribution of national wealth. There will always be poverty, but the steepness of descent between percentiles in the United States is staggering.

      I agree that poverty does breed a mindset of apathy and despair and that change will take longer than a single election cycle. That is what leads to people saying things like 'money has been thrown at the problem, and it doesn't work'. Well, it hasn't been thrown. Various programmes are introduced, thoroughly underfunded and cut again after having been given little to no chance to work. Schools doomed to fail on account of underfunding and recruitment difficulties (talented idealists who want to teach in the ghetto are few and far between) are subjected to evaluations and punished with further cuts or threat of shutdown. Never mind luxuries like education: something like 40 million Americans are still insecure about their next source of food, and programmes like Feeding America are constantly begging for more money.

      Give a poor neighbourhood secure housing, food security, smart policing, health care and prescription drug coverage, well-funded schools and preschools, micro-credit for small business and, hell, to stay on topic, a few government dig-a-hole/fill-a-hole jobs, and after a while, mentality will change. Spare me the churches and community leaders preaching to these people about how lazy, dissolute and procreatively short-sighted they are. Contrary to what conservative culture warriors, and sadly, occasional crypto-racists on American airwaves insist, taking a man out of the ghetto takes the ghetto out of the man.

  9. @shalcker. I think when the government made taxes lower on capital gains than actual work they started the slow strangulation of trickle down economics. Why invest your money in building something when you can put it in a safe company and pay 1/2 the taxes on your profits.

    It's criminal that money you make while sipping your latte and doing nothing is taxed at a lower rate than money spent on say building out solar power plants, or feeding people or providing internet access.

    1. Well, the safe company still has to make its money somehow. And usually that's investments. I would agree, though, that the financial sector might have developed a life on its own during the last decade. That would be a very bad thing.

    2. I'm not saying you shouldn't be able to make money in the market, But why are you taxed less for money you've done nothing with? It makes no sense to reward people for doing less work. It sends the wrong message. Tax incentives are supposed to be for those companies and individuals who do things that are good for society. The current system at least in the US is a perverse reward for taking the least risk.

  10. In the US since the 1964 the US government has spent between 8-10 trillion dollars in its war on poverty. For those that argue that the government needs to help the poor and that government is the right tool to do this I ask a simple question.

    Recent articles say there are about 30 million people living in poverty. Just giving the money to those 30 million would have resulted in 333K per every man women or child. Someone please tell me how this is working, productive, or efficient?

    let's face it. Our problem isn't lack of money its culture. The culture that allows uneducated teenage girls to get pregnant and have baby after baby with no idea how they will support them. This is not a race issue. It is a culture issue.

    1. It's more than just culture, but I certainly agree that throwing money at the problem doesn't work.

      This stereotypical girl you describe has nothing else in life that looks interesting at this point in time. This is one major reason why she wants a baby. Oh - and then she might argue that she didn't want it when it turns out that it wasn't such a good idea.

      As much as just handing out money is useless - and harmful, so is depicting this stereotypical girl as an irrational player. Humans are very rational; especially when it comes to their future. Similar to alcohol and drugs (yeah, sorry for the comparison), there is this one sentence that is very true for most of the people we are talking about:

      Not having a baby at this point in time isn't going to make her life better, either.
      If you can change this truth, you can solve the problem. But to conclude that, just because trowing money at the problem didn't solve it, you have to cut all programs and just hope for a sudden change in 'morality' is ridiculous. I hope you agree with that.

    2. Nils, actually we are exttremely close on this topic. I'm not saying to cut off all money and I'm not saying that simple platitudes will change the culture (or as you put it the choice to have a baby).

      I'm saying that some of the money is incentive to have the baby and I agree that we need to make it so her life would be better without the baby. That can be accomplished with incentives and disincentives. No more glorifying the baby mama. Instead highlighting how those that didn't get pregnant have better lives.

      Money is just a tool here. The culture, government, statem famaily, church has to make it clear that not having the baby is the way to go.

    3. Changing culture and morality is a long term project at best. It is one of the protections and limitations of democracy that long term pressure to change in any way is difficult to achieve because you have to maintain a majority opinion in power to do it.

      I think our culture isn't as broken as some would believe. It's just that we have Cnn and fox sticking every bad thing that happens in our face every minute of every day.

      By most statistic(except money we are in a recession), teenage births, crimes, number of people getting educated.etc our society has had steady improvement in the US. It's a shame we keep obsessing about the things that still need work. But that's an American trait. Ignore the success and obsess about the failure. It helps us do incredible things but sometimes it makes us look like crazy people to the rest of the world.

      Seriously do you think 1950 was a better world than now?