Categories
Miscellany Monopolization Uncategorized

Don’t Cancel Student Debt; Redistribute It

A culture that does not understand, let alone value the innerness of things is going to have an ambivalent relationship with learning, especially elite learning. For such a culture—our culture—the question what is it for? will forever trouble the educator’s sleep, or, more to the point, the sleep of government officials who are asked to allocate funding for higher education and the voters who are asked to vote for those government officials.

Add into the mix the fact that the politics of the academy are not broadly shared by the electorate at large, and I see in fully-government-funded higher education nothing but: danger. The danger that America’s great system of higher education will starve and wither.

Fortunately, and no doubt because of our cultural ambivalence to education, the funding system we currently have in place provides some protection. The student loan system taxes those who have actually worshipped at the altar of education to pay for its survival. It is, in a sense, a regime of forced alumni giving, with schools asking students to borrow against the future cash flows that become student loan payments so that schools can take this giving up front in lump sums.

The effect is to tell those who wonder what is it for?: we don’t need you. We will pay for this system ourselves.

To be sure, it is not really the students who are saying this, at least not entirely. It is the schools that have been able to decide, within certain limits, just how much funding they receive, because schools have a great deal of market power with respect to students.

Part of that power (this part not, technically, market power, but rather scarcity power) is due to students’ fairly inelastic demand for education: they rightly place great value on education, and are willing to pay a lot for it. But lots of the schools’ power is also due to students’ lack of understanding of the meaning of the large amounts of debt they take on, allowing schools to raise tuition levels without fear of alienating their clients. And more power still comes from schools’ reputations, which are so strong that many schools can raise tuition levels without losing even those students who understand the meaning of long-term indebtedness.

Insidious, perhaps.

But it is thanks to this power of schools to choose their own funding levels that America has the greatest, wealthiest system of higher education in the world. I do not think that an America in which student debt were cancelled, and the student loan funding system for higher education replaced by one of full government funding for higher education, would be anywhere near so wealthy, or so excellent.

It is easy for a graduate pushing for debt cancellation to forget that 60% of Americans do not have a college degree. And many more Americans who do are still troubled by the question what for? Why should they be expected to vote the levels of funding that schools have been able to arrogate to themselves through the current student loan system? The answer is, they won’t.

True, other developed countries that have a public funding model still manage to funnel a lot of cash to schools. But America is different. Remember: each and every developed country in Europe and Asia has a concept of culture.

We have no such thing here in the United States.

Each of those European and Asian countries descends from kingdoms and empires that claimed power by divine right, which is to say, claimed to have a direct connection to the innerness of things. Though many have mellowed and democratized, or at least acknowledged the moral superiority of democracy, they all retain the notion that the state has inner meaning. The expression of the state’s inner meaning is culture, and culture is realized through elite education. The notion that the state should pay for education is not, therefore, subject to question in those countries in the way that it is here, where the state’s only meaning is out-in-the-world practical: to make us happy.

All this is not to say that the student loan system doesn’t need reform. It does. If we correctly understand the system to be a tax on the educated, then we should reasonably ask that it be progressive: that the rich should subsidize the poor.

The current system does that, but only very little. At present, borrowers can sign up for income-based repayment, which uses the federal government’s general tax revenues to reduce the student debt burden of poor students who end up earning less after graduation. To the extent that federal taxation is mildly progressive, income-based repayment is itself mildly progressive.

But real progressivity in the student loan system would mean something different entirely. What we should demand is that rich students—or those who go on to become rich—subsidize poor students and those who go on to be poor. Thus the redistribution associated with progressivity should remain “in the family” of the educated, and be much more extreme than it is today.

Today, those from rich families pay the sticker price for tuition up front and then are free of any further payment obligations to schools, no matter what heights their incomes happen to reach. By contrast, poor students fund themselves through loans, and unless they do well enough after graduation to pay off their loans in full, they go on income-based repayment and their repayment burden varies with income. If they make more, their payments go up, if less, they go down. Thus today, the student-loan system is progressive only with respect to poor students who don’t do well after graduation! The rich, by contrast, pay the equivalent of a flat tax. That’s not progressive.

Instead, we need all students, including the rich, to make payments to fund education over their entire working lives, and those payments need to be adjusted based on income, to the end of redistributing wealth from the most successful to the least.

One way to do that would be vastly to increase tuition bills, so that even rich students must take out loans to fund their education. Then all students would go on income-based repayment after graduation, and the income-based repayment schedules could be used massively to redistribute from the most successful of the educated to the least. The poorest, least successful graduates would end up with very low monthly payments, or immediate debt forgiveness, and the richest and most successful would end up with very high monthly payments—right into the millions of dollars per month, if necessary. Think of it, again, as forced alumni giving, in which those who can give more, do.

The introduction of increasingly generous income-based repayment terms over the past couple of decades signals that the student loan system is already moving slowly in this direction.

Instead of calling for student debt cancellation, and placing politically-vulnerable, inescapably elitist institutions at the mercy of democratic majorities that are not sure they want them, let’s keep education in the family—but make sure that anyone who wants to join, can join, and that the richest graduates pay their way.

[Note: Given that the New York Times doesn’t have to disclose its interest in smashing Google or Facebook whenever it writes about the antitrust cases against them, maybe I don’t need to disclose my own competitive interests when I write about them. But I am an educator.]

Categories
Civilization Meta Miscellany World

Why Do Mechanical Explanations of the Social Deny Software?

They say that a good social theory must throw out some reality in order to have any explanatory power. Thinkers who favor mechanical explanations of the social—the people who claim that it is climate or asteroids or guns, germs, and steel that explain the rise and fall of civilizations—always seem to throw out the part of the mechanism that is the software. Why?

That is, all mechanistic explanations of the social treat people as machines—robots—that have certain operating limits. They need food and water. They need temperatures that are not too high and not too low. They cannot withstand the slash of a steel weapon. They are susceptible to disease. And so on and all true. These operating limits do constrain what the robots can do. But that is far from all.

Robots need an instruction set to run; they need, in other words, a behavior. And if the dawn of the age of artificial intelligence should be teaching us anything, it is that behavior matters a lot. There is a very big difference between a car, a car that knows to break before hitting something on the highway, and a self-driving car. There is a very big difference between a Rhoomba that moves only in straight lines and one that criss-crosses the room. It would seem to follow that the robots’ software should matter a lot in the rise and fall of civilizations. So why not make social theory by keeping the software and throwing out the robot hardware instead?

Programming in the social is thought, belief, training, worship, prejudice, emotion, philosophy, literature, letters, culture, art. It is the humanities. Humanistic explanations for things—Ruskin’s observation that you can read the decline of a civilization in its art—theorize the social in terms of the human robot’s programming. The humanities throw out the hardware.

(By programming I do not mean that we are necessarily controlled by others. In human beings we are dealing with semi-autonomous, artificially (nay, actually!) intelligent robots. So programming, for us, necessarily means self-programming at both the individual and social levels. Our programs are some peculiar function of inputs from other robots, inputs from the programs of the robots themselves (that is, we use our thought to influence ourselves), and hard-coded inputs (those determined by our genes).)

It is a peculiar thing that at the same moment that, as a technological matter, we are coming to recognize the transformative nature of artificial intelligence in relation to hardware, and indeed at the same moment that, thanks to the great financial success of companies like Google and Facebook, which derives entirely from the value of connecting businesses with individual minds, we are coming to appreciate the great difference influence over minds makes in social outcomes, we should continue to favor mechanical explanations for the social, to attribute the fall of Rome to barbarian invasions rather than decadence, or the rise of China to good policy rather than good spirit.

When we do consider the software, we tend to ignore the most important parts. We credit the power of propaganda, but not the power of religion, ideas, philosophy, love, or, indeed, art. But these too are a part of the programming, and if you judge by the things you yourself hold most dear, likely the most important part.

So do not tell me that talking won’t work. That writing will never change things. That symbolic protest is weak. Or that the only political power grows out of the barrel of a gun—unless you believe that your computer will behave the same no matter what software it runs.

Categories
Meta Miscellany World

If Mars Attacks, It Will Be Us

Maybe the best Martian policy would be to prevent anyone from colonizing Mars, rather than to colonize it first.

Let’s assume for a moment that Mars really can be developed into a self-sufficient Earth 2.0. A big if, of course.

But if true, then see: The New World.

Settlers always have high asabiya, thanks to the challenges they face, and homogeneous interests relative to those who remain in the Old World, with its historic divisions. The Old World always thinks it can control the new, otherwise it wouldn’t foolishly bankroll settlers. But the new is far, far away. It is protected by distance. It is bigger than the territory of any one mother country.

And because it is united—or will become united, because, again, regardless of the origin of the settlers, their interests are always more in common with each other than with those of their mother countries—it can exploit this bounty at scales that no one mother country can ever hope to match.

So, eventually, the new will know its own power and come to dominate the old.

It has, after all, happened before.

And even if we don’t think Mars might be viable, or we think it might be more likely to make a Cuba than a U.S.A., why risk it?

Indeed, colonizing activity by a dominant country is always a self-inflicted wound. Colonization necessarily dilutes the dominant country’s power, because any new territories dilute the power of the earth entire. If I’m two thirds of one and I add one, now I’m one third. The only reason to colonize is to preclude others from doing so; it’s a race to the bottom.

But you can also try to enforce a rule against racing.

And if you were wondering why, in the 15th century, it was the Spaniards who went off looking for new worlds, and not the great powers of the day, not the Ottomans or the Chinese, you have your answer.

Categories
Miscellany

And Then There’s the Carrot

When April’s jobs numbers disappointed, the governors of South Carolina and Montana responded by cutting unemployment benefits. The idea is that, given the low minimum wage in those states, some low-wage workers are making more money by staying home and cashing unemployment checks than they could make working. Stop mailing the checks and they will get back to work—and work is good, because work means more restaurants can reopen and stay open for longer hours, making consumers happy.

Herein, of course, the stick: make workers lives’ worse so that they will cry uncle and go back to work.

Then there’s the carrot: convert the unemployment benefits into handouts. That is: stop conditioning the delivery of those unemployment checks on proof that the worker is unemployed.

That would send workers back to work because when you live at the bottom end of the income distribution you can always use more money. Even if you are already getting an extra $300 per week in unemployment, you are not exactly living the good life. You will go back to work to earn another $300 if the government won’t cut your $300 unemployment check if you do so.

Removing the requirement that a worker be unemployed to earn the current batch of extended federal unemployment gives workers a carrot for working: the extra wages they can earn, above and beyond those unemployment benefits, by going back to work.

I know removing that requirement undermines the paper rationale for unemployment insurance, which is to tide over people who are looking for work. But this country has a major inequality problem, this would be a one-time thing and Congress has already appropriated the money, and those currently receiving benefits (who, under this plan, are the only ones who would be made eligible to continue to receive payments even if they go back to work) are more likely to be poor and deserving than the vast swaths of the middle class that received stimulus checks over the past year.

(It might be a little unfair to those who did find jobs and went back to work, or those who didn’t lie about looking for work in order to get their checks. But as between a little unfairness and the stick, I say we go with unfairness. And if there’s money in the extended unemployment budget to pay out benefits to those who went off unemployment early, then we should do that, and the unfairness would be much reduced.)

Plus the fix that President Biden has mooted—making sure people on unemployment really are looking for work—is impossible to execute without a lot of unnecessary bureaucracy, which the Administration is not likely seriously to pursue anyway.

If you have the choice between achieving efficiency (getting people back to work) using the carrot or the stick, and the carrot is there, why not use it?

The worst you could do is make the poor a little richer.

Categories
Miscellany

Ménière’s Disease and the COVID Vaccines

A lifelong friend writes:

I took the first shot of the Pfizer COVID vaccine on January 16. Two days later I developed a feeling of fullness in my left ear, some sinus congestion, and chills, which I took to be side effects of the vaccine. The next day, the chills and congestion were gone, but the feeling of fullness–almost water-loggedness–in my ear has persisted since. But that was just the beginning. On January 29, my left ear started ringing and I had an attack of vertigo and vomiting that lasted several hours: the world spins around you making all forms of physical activity, including walking, impossible. Every day since then, I’ve had an attack of vertigo that lasts more than an hour, and the ringing and sense of fullness in my ear have ebbed and flowed, making it difficult to concentrate; indeed, the experience has been debilitating.

I saw a doctor yesterday, an eminent expert on hearing and balance, and he diagnosed Ménière’s disease. I asked him if this was triggered by the vaccine and he said that he has been seeing cases like this arising from the vaccines, as well as from COVID itself; he suggested that the vaccines may trigger inflammation in the ear that the body’s immune response does not eliminate. He recommended that, given my apparent reaction to the first shot, I not take the booster shot of the vaccine.

I saw another doctor today, and he insisted that there could be no connection between the vaccine and my condition and suggested that the fact that it started two days after I had taken the vaccine was pure chance. This doctor said that I should take the booster.

Although I have never had this sense of fullness or ringing in my ear before, and have never had daily attacks of vertigo before, I have had a total of three or four bouts of vertigo in the past; those occurred six to ten years ago and until now I had had none since.

Categories
Inframarginalism Miscellany Monopolization Philoeconomica

Was Personalized Pricing the Epstein Grift?

The Times reports that pedophile Jeffrey Epstein earned more than $100 million from private equity magnate Leon Black in exchange for providing some “idea-generator”-type tax advice on a handful of Black’s family trusts, advice that Black still had to pay his own tax lawyers to implement.

Does that mean that Epstein, who was a college dropout, was a self-taught tax genius? Not likely.

But it does suggest that Epstein knew the value of personalized pricing. Here’s the key passage from the article:

Jack Blum, a Washington lawyer who has led corruption investigations for several Senate committees, said he was surprised by the size of the fees Mr. Epstein’s work commanded. “You could be the best lawyer in Manhattan working on the most complicated trusts and estates and it would never come anywhere close to that kind of money,” he said.

Matthew Goldstein & Steve Eder, What Jeffrey Epstein Did to Earn $158 Million From Leon Black, N.Y. Times (Jan. 26, 2021).

So what gives?

The answer is that tax lawyers price for the marginal consumer: the marginal client using their services. They not only serve magnates like Leon Black, but also the merely rich, like an executive mentioned in the Times article whom Epstein initially refused to take on as a client for being insufficiently wealthy.

The merely rich can’t afford $100 million, so, to get their business, tax lawyers must charge them lower fees. When the truly rich, like Leon Black, go looking for tax advice, they knock on these lawyers’ doors, and the lawyers charge them about the same price they charge everyone else.

They don’t try to charge higher fees to their wealthiest clients because tax law is a reasonably competitive industry. You need to be smart to work at the high end of the field, but tax is not a field in which “the best are easily ten times better than the average.”

And for the many who do have what it takes, the cost of entry into the market is relative low; all you need is a JD and an LLM, which cost a few hundred thousand dollars to obtain, about the amount needed to open a cleaners or a pizzeria (okay, there’s also the opportunity cost of time spent in school, but we are still probably only talking about the high six figures).

So if you start raising your fees above what the marginal client is willing to pay, your super-rich inframarginal clients will take their business to another tax lawyer who is still pricing for the marginal client. So you, too, continue to price for the marginal client.

But what if you could find a way to charge your richest clients prices personalized to them, and not have them jump ship to your competitor?

It looks like Epstein’s grift was figuring out how to do that.

The answer, as in so many other lines of business, was to make tax advice into a luxury product: to make the product exclusive.

The Times tells us that Epstein sold himself to clients as a genius who would only give tax advice to the richest of the rich. He cultivated the image of being, not some pathetic, overworked, upwardly-mobile professional, but one of them, a fellow member of the super-rich who was willing to cut other members in on secrets that only they could access because of who they were.

Exclusivity creates brand loyalty, and brand loyalty means that you stop shopping around; you are willing to pay a price determined by what you can afford, rather then what competitors are offering. You are willing to pay, in other words, a personalized price.

Graphically, the tax market may have looked like this:

Gerrit De Geest observes in Rents: How Marketing Causes Inequality, that in today’s economy, it’s not those who make who earn all the profits, or those who distribute who earn all the profits; it’s those who do the marketing. That’s where all the rents live. Competition drives profits to zero for all save those who beguile.

It seems somehow fitting that this economy would spawn a figure like Epstein, who sold tax advice but didn’t even bother to do his legal work in house. He didn’t really sell tax advice; he marketed it.

As the Times recounts, Epstein referred one acquaintance to outside tax lawyers, whom the acquaintance then paid for tax advice, and then Epstein, having never mentioned a fee to this acquaintance, sent him a bill for 10% of the purported tax savings that the lawyers, and not Epstein, had created.

That 10% was the price of enchantment, nothing more.

But you still have to wonder how a private equity guy like Black, whose business revolves around deals hammered out by armies of lawyers and shaped by tax considerations, could have thought he was getting something special from Epstein.

Did he really think tax was like music, and it was worth paying his Mozart to dream up a tune, even if Black still had to pay someone else to write all the notes down for him?

Maybe he didn’t, and there’s more left to tell in this story.

Or maybe we need a new razor: Never attribute to conspiracy what can otherwise be attributed to marketing.

Categories
Inframarginalism Miscellany Monopolization

Dynamic Pricing Meets Music Licensing?

Just when you thought the most toxic of information age innovations had already spread as widely as possible:

The big publishers — which are all divisions of the major record conglomerates — own far too much material to exploit it all properly, he says. Sony/ATV, for example, has nearly five million songs in its portfolio. . . . In its place, he posits a bold but somewhat vague plan called “song management,” in which leaner companies look after smaller collections of high-value hits, and each track is held to a profit-and-loss analysis to ensure its value is maximized.

Ben Sisario, This Man Is Betting $1.7 Billion on the Rights to Your Favorite Songs, N.Y. Times (Dec. 18, 2020).

The big publishers block-license their songs, which means that they don’t adjust the prices of individual songs based on shifts in the willingness of licensees to pay for them. It sounds like Mercuriadis wants to capture additional profits by pricing songs dynamically–jacking prices up during periods when buyers are willing to pay more–which is why he can afford to pay more for song rights himself. “Song management” is the tell: In hospitality, which pioneered the practice in the context of hotel rooms and airline tickets, they call it revenue management.

Categories
Meta Miscellany

F-Stop

Source: Adapted from N.Y.Times.

The thing that astonishes me about photography is the proof it seems to provide that the past was real. I should never, ever have thought that was the case were it not for photography, my own memories appear so much as dream images to me. They crystallize, like Stendhal’s twigs pulled from the salt mines encrusted with diamonds, until I cannot be sure that they were real. Whatever led scientists to pick, out of the vast spectrum of possible explanations for memory, out of the fairies and gods, the view that memory is just the lasting impression made by light upon the brain?

Categories
Miscellany

Two Kinds of Humanism

“American society used to be segregationist before it moved to a multiculturalist model, which is essentially about coexistence of different ethnicities and religions next to one another.”

“Our model is universalist, not multiculturalist,” he said, outlining France’s longstanding insistence that its citizens not be categorized by identity. “In our society, I don’t care whether someone is Black, yellow or white, whether they are Catholic or Muslim, a person is first and foremost a citizen.”

Ben Smith, The President vs. the American Media, N.Y. Times (Nov. 16, 2020).

That is because France still believes in the state. America has never had that problem.

America’s joy today at the success of SpaceX — a private firm — in sending four astronauts on their way to the space station, something the state has been powerless to do for nearly a decade, illustrates this rather nicely.

Categories
Miscellany

Place

“When you are a displaced person, and when you are longing for that place and you cannot visit it, that place becomes more than just a stone or mountain, it becomes like a beloved person. You want to kiss it, and lie down on it and feel the energy from the earth.”

Anton Troianovski & Carlotta Gall, After War Between Armenia and Azerbaijan, Peace Sees Winners and Losers Swap Places, N.Y. Times (Nov. 15, 2020).

I wonder how many Americans have such an attachment to place.

We've been here so little time,
And move so much, 
And it's such a big country,
With so many different soils.

But some do.