23 Mar 2015

I Guess Robert Reich Doesn’t Read Cowen and Tabarrok

Economics, Education, Shameless Self-Promotion 23 Comments

…because he’s apparently unaware of the Marginal Revolution. Zing! My latest at Mises CA:

If I still haven’t convinced you, consider it this way: Why stop at education? Surely food and clothing are even more important than formal schooling. So how does the pay of migrant farm and textile workers compare to schoolteachers in the U.S.? I think we need a new federal policy lest we all find ourselves starving and naked.

 

23 Responses to “I Guess Robert Reich Doesn’t Read Cowen and Tabarrok”

  1. Transformer says:

    Is Reich’s point that teachers are paid less than the current market clearing rate ? I read him to mean that we need to up-level the requirements for teachers and to do this the salary would have to increase as the new equilibrium would be higher than now.

    Given the education system is pretty much centrally planned at the moment its impossible to know if teachers pay would go higher or lower than the current rate in a genuinely free market.

    • E. Harding says:

      Transformer, though your interpretation might be right, what Reich says is still amenable to Murphy’s critique. I think “if the nation’s human capital is more important than its financial capital, that ratio is absurd” is pretty clear proof that Reich has forgotten marginal utility. I have no problem with what Murphy actually says in the relevant post.

      In a genuinely free market, teachers’ pay would become much more stratified by the educational institution the teachers find work at.

    • Bob Murphy says:

      Transformer you’re saying you think the trillions (?) in government funds for schools, plus the mandates that guarantee them customers, might plausibly be reducing the amount teachers earn?

      • E. Harding says:

        Also, teachers have strong unionization. This gives them monopoly power over labor supply and raises prices.

      • Transformer says:

        Well , Its quite likely that lots of those trillions that goes on education is wasted on things other than teachers. I can easily imagine that in a free market there will less spent on eduction but more on teachers who will as a result be better paid.

        What I am actually saying is that I believe that in Reich’s model they would make it harder to be a teacher by raising the entry level, and this in turn would raise teachers pay by reducing the supply. This may be a stupid idea but it doesn’t violate the laws of supply and demand. It just restricts the supply through entry barriers. I think other professions have similar things in place.

        • Transformer says:

          Though I agree “if the nation’s human capital is more important than its financial capital, that ratio is absurd” does sound more like something a politician rather than a economists versed in marginalism would say.

        • Transformer says:

          Or rather more obviously, he may just mean increase the demand for teachers until their salary is at the same level as bankers. If this is what he means it violates only common sense rather than the laws of supply and demand or marginalist economics.

  2. E. Harding says:

    In a genuine free market, most lower education would be online, especially for poor upwardly-mobile people. Many would not bother to learn to read and stay illiterate. Higher education would have a somewhat lower sticker price, but there would be more out-of-pocket payments. Bricks-and-mortar schools would exist for those who could afford them. Overall, there would be less investment in education and greater inequality in educational access. Teaching degrees would not be nearly as attractive as they are today.

    • The Pen is Mightier says:

      So “most lower education would be online” and “Bricks-and-mortar schools would exist for those who could afford them” but “Overall, there would be … greater inequality in educational access.”

      I don’t think that follows at all.

      • E. Harding says:

        As Bryan Caplan points out, education has more to do with connections and accreditation than gaining knowledge.

    • Harold says:

      “In a genuine free market, most lower education would be online, especially for poor upwardly-mobile people. Many would not bother to learn to read and stay illiterate.”

      The very term genuinely free market for education is difficult to define. In a genuinely free market the kids would get to choose how much education they got. Parents could give them money if they wanted to. Since kids have very little knowledge about the benefits of education it is difficult for them to make an informed decision, but what the heck, as long as it is free. Without an education it is difficult to make an informed choice about anything, but we can’t let being un-informed or mis-informed get in the way of free markets.

      If we don’t want kids to choose, then we could let the parents choose for them. It is impossible that their interests will align exactly, so we know the kids will be getting less than ideal outcomes. It seems a reasonable argument that the less education you have the less able you are to make informed choices about education, so if people choose to remain illiterate we could be entering a downward spiral.

      • ax123man says:

        “In a genuinely free market the kids would get to choose how much education they got. ”

        I think you’re confused about what a free market is. In my mind, it has nothing to do with what kids “get to do”. A market deals with economic exchange, which kids can’t really participate in because they don’t produce anything. But hey, if my 14 year old came to me and said “Dad, I’m moving out. I have a job and I’m quitting school”, I’d say “Great, be sure to stop in for Easter.”

        Also, I think your statement “Without an education it is difficult to make an informed choice about anything” is nonsense, but I guess it depends on what you mean by “education”. A child probably learns more simply by watching and interacting with adults than they do at public schools (Which often insulate them from watching and interacting with adults).

        • Harold says:

          This is why I said it is difficult to even say what a free market is in this context.

          So who should choose in a free market? Parents? How can a market be free if one person is making the choice for someone else, based not on the subjects benefit but on their own? According to human action, all choices are made on behalf of the chooser.

          If one is illiterate, it is difficult to become informed, and so difficult to make an informed choice.

          I am not sure a free market can exist in education.

          • Patrick Szar says:

            “So who should choose in a free market? Parents? How can a market be free if one person is making the choice for someone else, based not on the subjects benefit but on their own? According to human action, all choices are made on behalf of the chooser.”

            All unemployed, financially dependent (keyword here) children or adults for that matter do still choose for themselves. The children choose to accept a parent’s choices as their own and be obedient to avoid the costs of choosing the alternative. Likewise parents choose consequences to place on children who opt to be disobedient. It still falls under the banner of freedom.

          • The Pen is Mightier says:

            Perhaps you should peek behind the curtain at the history (including the historical justifications) of gov’t-controlled education.

            You seem to be indicating there’s some kind of agency problem if the parent is choosing for the child. Are you saying that the state should choose instead? Why? What is so inevitable about that?

            • Harold says:

              I am not saying who should choose – but that whoever chooses, it doesn’t look like a free market. In order to decide who chooses, we would then have to decide on what basis we were making the choice. Is it the benefit of the parents? The children? The State? The greatest number? There will be different answers to these questions.

              For example, do parents own their children? If so, we get one set of answers, if not then we get another.

              • The Pen is Mightier says:

                I’m not a lawyer, but I do know there’s a lot of literature on the subject of how the law treats children. To put it simply, parents are assumed to have guardianship rights over their children. They don’t own them, but since children aren’t wise or knowledgeable enough to make decisions for themselves, parents act on their behalf in situations where more knowledge or wisdom are required to make an informed decision.

                This is perfectly in line with a free market. It gives the most latitude for free choice while also ensuring that a potential societal issue (i.e. children in a state of confusion as to who is there to help them) is resolved.

    • E. Harding says:

      This one’s good.

    • Harold says:

      Viewing history another way, we may see that Reich has a point.

      Historically, each technological advance brought with it a demand for labour. Agriculture required people to work the land. The increased production from agriculture fed the workers needed to actually do agriculture. The innovation created the means to distribute the gains through employment and wages. Mechanisation of weaving replaced the simple aspects of labour with machines. The lifting and lowering of the warp and weft, the moving from side to side of the shuttle – these are very simple operations. Each machine required a person to do the complicated things, without which the machine could not operate. So we needed someone to sweep the floor, tie in the yarn, load the spools etc. So mechanisation required more people than hand work, and the innovation created the means to distribute the new wealth through wages.

      Meanwhile, in agriculture, mechanisation was leading to the opposite result. Fewer people were required to do the agriculture. Much of what they did was pretty simple, and there was no need for more people when that was taken over by machines. People were freed up to move to the cities to work in factories.

      Perhaps something similar to the mechanisation of agriculture is happening now to work in the city. Machines can now do even the complicated things, like cleaning windows and painting, tying on yarn, balancing books etc. The previous employees will be freed up to do other work.

      Historically, there was new work created by the very innovations that put people out of one sort of work. Agricultural workers moved to the cities. Now that city work has been replaced, where will the workers move to?

      It is possible that mechanisation of tasks that humans previously were required to do will lead humans to do fulfil other tasks that machines cannot do. The new wealth created by this automation would then be distributed in the old way – through wages. However, it is also possible that there will be no task that cannot be done better and cheaper by automation. The new wealth created by the automation will have no mechanism to be distributed.

      Just as mechanisation pushed vast numbers of employees off the land, automation may push vast numbers of employees out of employment altogether.

  3. Lee Waaks says:
  4. Major.Freedom says:

    Statesmen have a particularly self-interested reason for placing education on their “war on…” list, all over the world. It is because influencing children’s minds is necessary to prolong the myth of the mafias calling themselves “government” and to teach the supposed ethical ideal of obedience.

    It is of course communicated to everyone as important to the interests of those being taught to be odedient.

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