A Philosopher's Blog

Performance Based Funding: Taking the Fight to the Enemy

Posted in Ethics, Law, Philosophy, Universities & Colleges by Michael LaBossiere on August 14, 2015

Since the whole “war on x” thing is overdone, I will not say that there is a war on public education. Rather, I will say that certain politicians have attacked one of the cornerstones of America’s democratic system and its economic strength, namely public education.

Scott Walker has aimed at eroding tenure at public universities in Wisconsin and Rick Scott has imposed an irrational and harmful performance based funding system in Florida. Similar attacks on public education are occurring in many states. Most states have also cut financial support for public education. While occurring under the guise of cost reduction and accountability, these attacks seem calculated at impeding independent research that might expose troublesome truths and also to open up new avenues of private profit at the expense of the public good.

In 2014 I wrote an essay critical of Florida’s harmful and ineffective (in terms of achieving educational goals) performance based funding system. Writing in 2015, my views of this system remain mostly the same; although the seemingly arbitrary changes in the rules have made me like it even less.

My school, Florida A&M University, took a beating under the existing system. This system, as I noted in the earlier essay, fails to consider the challenges faced by specific schools and the assessment system seems calculated to favor certain schools. Not surprisingly, the 2015 faculty planning sessions focused heavily on performance based funding. It was, in fact, the main subject of the keynote speaker.

This speaker took a rational and pragmatic approach to the problem. He noted that complaining about it and refusing to accept its reality would be a rather bad idea. Roughly put, failure to respond in accord with the punitive standards imposed by the state would simply doom FAMU to ever lower budgets. By meeting the standards, FAMU could escape the punitive level and thus push another school down into the pit of financial pain (the performance based funding system is such that there must always be three losers).

Being pragmatic and realistic myself, I agreed with the speaker. As a state employee, I am obligated to operate within the laws imposed upon me by the state. If I find them too onerous, I can elect to leave my job and head for greener pastures. To use the obvious analogy, if I choose to play a game under a certain set of rules, I am stuck playing within those rules. Muttering complaints about them or refusing to accept their reality will do me no good (other than the dubious benefits of bitching and self-delusion). As such, as a professor I am working conscientiously to meet the imposed standards so as to protect my school and students from the punishment of the state.

To use another analogy, it is like being forced to play a rough game by a movie villain—if we do not play by his rules, he will hurt people we care about. As with most movie villain games, it is set up so that winning means making someone else lose (regardless of how well everyone does, the three lowest schools always lose out on funding). Unlike with the movie villain, I am free to leave the game—I just have to abandon my colleagues, students, job, rank and tenure. The state, I must confess, makes finding a new game more and more appealing every year.

It is important to note that my conscientious adherence to the funding game rules is in my capacity as a state employee. However, I am not just a state employee—I am also a citizen of the state. While the state has the right to command me as an employee, the authority of the state rests on my consent as a citizen. And, as a citizen, I have every right to be opposed to performance based funding and every right to take action against it. I can write essays critical of it, thanks to freedom of speech. I can also campaign against politicians who support it and cast my vote accordingly. I can fund those who would oppose this attack on education.

The laws of the state are, obviously enough, not laws of nature or laws handed down on stone tablets by God. They are but the opinions of people made into rules by the rituals of voting. Thoreau eloquently made this point in his work on civil disobedience:

 

…why expose yourself to this overwhelming brute force? You do not resist cold and hunger, the winds and the waves, thus obstinately; you quietly submit to a thousand similar necessities. You do not put your head into the fire. But just in proportion as I regard this as not wholly a brute force, but partly a human force, and consider that I have relations to those millions as to so many millions of men, and not of mere brute or inanimate things, I see that appeal is possible…

 

As Thoreau indicates, performance based funding, and any rule of the state, can be challenged—it was created by people and people can change it. As a citizen, I believe that performance based funding is harmful to the public good and, as such, I not only have a right as a citizen to oppose it I also have a moral obligation to do so. Meanwhile, as a state employee, I will be conscientiously working to ensure that FAMU meets the standards imposed by the state.

To close with an analogy, think of the public universities of Florida as ships that are under attack. Metaphorically, bombs, missiles and shells are raining down upon them, fired at the behest of an ideology opposed to this cornerstone of American democracy and economic advancement. Working within performance based funding is analogous to only repairing damage and extinguishing fire (and also to maneuver to force another ship to take the brunt of the attack). As any tactician knows, battles are not won by damage control or by letting an ally take the beating for you. Rather, they are won by taking the fight to the enemy. As such, I urge the citizens of Florida, especially students, faculty and staff, to exercise their rights as citizens to oppose the attacks on the public good of public education with their words, deeds and votes.

 

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Law Enforcement as Revenue Stream

Posted in Ethics, Law, Philosophy, Politics by Michael LaBossiere on May 11, 2015

After the financial class melted down the world economy, local governments faced an obvious reduction in their revenues. As the economy recovered under a Democrat President, the Republicans held onto or gained power in many state governments, such as my own adopted state of Florida. With laudable consistency with their professed ideology, Republicans routinely cut taxes for businesses, the well off and sometimes even almost everyone. While the theory seems to be that cutting taxes will increase the revenue for state and local governments, shockingly the opposite seems to happen: state and local governments find themselves running short of funds needed to meet the expenses of actually operating a civilization.

Being resourceful, local leaders seek other revenue streams in order to pay the bills. While cities like Ferguson provide well-known examples of a common “solution”, many cities and towns have embraced the practice of law-enforcement as revenue stream. While the general practice of getting revenue from law enforcement is nothing new, the extent to which some local governments rely on it is rather shocking. How the system works is also often shocking—it often amounts to a shakedown system one would expect to see in a corrupt country unfamiliar with the rule of law or the rights of citizens.

Since Ferguson, where Michael Brown was shot on August 9, 2014, has been the subject of extensive study, I will use the statistics from that town. Unfortunately, Ferguson does not appear to be unique or even unusual.

In 2013, Ferguson’s court dealt with 12,108 cases and 24,532 warrants. This works out to an average of 1.5 cases and 3 warrants per household in Ferguson. The fines and court fees that year totaled $2,635,400—making the municipal court the second largest revenue stream.

It would certainly be one thing if these numbers were the result of the legitimate workings of the machinery of justice. That is, if the cases and warrants were proportional to the actual crimes being committed and that justice was being dispensed fairly. That is, the justice was just.

One point of concern that has been widely addressed in the national media is that the legal system seems to disproportionally target blacks. In Ferguson, as in many places, the majority of the cases handled by the court arise from car stops. Ferguson is 29% white, but whites make up only 12.7% of those stopped. When a person is stopped, a black citizen will be searched 12.1% of the time, while a white citizen will be searched 6.9% of the time. In terms of arrest, a black citizen was arrested 10.4% of the time and a white citizen was arrested 5.2% of the time.

One stock reply to such figures is the claim that blacks commit more crimes than whites. If it were true that blacks were being arrested in proportion to the rate at which they were committing crimes, then this would be (on the face of it) fair. However, this does not seem to be the case. Interesting, even though blacks were more likely to be searched, the police discovered contraband 21.7% of the time. Whites who were searched were found with contraband 34.0% of the time. Also, 93% of those arrested in Ferguson were black. While certainly not impossible, it seems somewhat odd that 93% of the crime committed in the city was committed by black citizens.

Naturally, these numbers can be talked around or even explained away. It could be argued that blacks are not being targeted as a specific source of revenue and the arrest rates are proportional and just. This still leaves the matter of how the legal system operates in terms of being focused on revenue.

Laying aside all talk of race, Ferguson stands out as an example of how law enforcement can turn into a collection system. One key component is, of course, having a system of high fines. For example, Ferguson had a $531 fine for high grass and weeds, $792 for Failure to Obey, $527 for Failure to Comply, $427 for a Peace Disturbance violation, and so on.

If a person can pay, then the person is not arrested. But, if a person cannot afford the fine, then an arrest warrant is issued—this is the second part of the system. The city issued 32,975 arrest warrants for minor offenses in 2013—and the city has a population of 21,000 people.

After a person is arrested, she faces even more fees, such the obvious court fees and these can quickly pile up. For example, a person might get a $150 parking ticket that she cannot pay. She is then arrested and subject to more fees and more charges. This initial ticket might grow to a debt of almost$1,000 to the city. Given that the people who tend to be targeted are poor, it is likely they will not be able to pay the initial ticket. They will then be arrested, which could cost them their job, thus make them unable to pay their court fees. This could easily spiral into a court inflicted cycle of poverty and debt. This, obviously enough, is not what the legal system is supposed to do.

From a moral standpoint, one main problem with using this sort of law enforcement as a revenue stream is the damage it does to the citizens who cannot afford the fines and fees. As noted in the example above, a person could find her life ruined by a single parking ticket. The point of law enforcement in a just society is to protect the citizens from harm, not ruin them.

A second point of moral concern is that this sort of system is racketeering—it puts forth a threat of arrest and court fees, and then offers “protection” from that threat in return for a fee. That is, citizens are threatened to buy their way out of a greater harm. This is hardly justice. If it was practice by anyone else, it would be criminal racketeering and a protection scheme.

A third point of moral concern is that the system of exploiting the citizens by force and threat of force damages the fundamental relation between the citizen and the democratic state. In feudal states and in the domains of warlords, one expects the thugs of the warlords to shake down the peasants. However, that sort of thing is contrary to the nature of a democratic state. As happened during the revolts against feudalism and warlords, people will rise up against such oppression—and this is to be expected. Robin Hood is, after all, the hero and the Sheriff of Nottingham is the villain.

This is not to say that there should not be fines, penalties and punishments. However, they should be proportional to the offenses, they should be fairly applied, and should be aimed at protecting the citizens, not filling the coffers of the kingdom. As a final point, we should certainly not be cutting the taxes of the well off and then slamming the poor with the cost of doing so. That is certainly unjust and will, intended or not, result in dire social consequences.

 

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The University as a Money Funnel

Posted in Philosophy, Universities & Colleges by Michael LaBossiere on March 30, 2015

One serious problem with American higher education is that the cost of a four-year degree is higher than ever—even when adjusting for inflation. The causes of this increase are well known and well understood—there is no mystery about this. One contributing factor is that universities tend to spend considerable money on facilities that are not connected to education. Critics like to, for example, point out that some universities spend millions on luxurious fitness facilities. These sort of expenditures are ironic (and stupid) given that education funding has been consistently reduced across the United States. To use the obvious analogy, this would be like a family putting in a pool, spa, and exercise room when they do not have enough money to pay for their actual necessities.

What seems to be the major factor contributing to costs is the ever-expanding administrative class at universities. This expansion occurs in terms of both individual salaries and overall numbers. From 2000 to 2010 the median salary for the top public university administrators increased by 39%. The top administrators, the university presidents, enjoyed a 75% increase. In stark contrast, the salaries for full-time professors increased by almost 19%.

The money for these salary increases has to come from somewhere and an obvious source is students. My alma mater Ohio State University is leading the way in milking students to pay administrators. Between 2010 and 2012 Gordon Gee, the president of OSU, was paid almost $6 million. At the same time, OSU raised tuition and fees to a degree that resulted in student debt increasing 23% more than the national average.

While some might be tempted to attribute this salary bloating as the result of the usual alleged wastefulness and growth of the public sector, private colleges and universities topped their public counterparts. From 2000 to 2010 private schools saw salary increases of about 97% for their top administrators and their presidents enjoyed a 171% increase. Full time professors also partook of the increases—their salaries increased by 50%.

What is even more striking than the salary increases are the increase in the number of positions and their nature. From 1978 to 2014 administrative positions skyrocketed 369%. This time period also marked a major shift in the nature of faculty. The number of part-time faculty (the analogues of temp workers in the corporate world) increased by 286%. The use of adjuncts is justified on the grounds that doing so saves money. While adjunct salaries vary, the typical adjunct makes $20,000-25,000.

However, the money saved does not translate to a lower cost of education—rather, it “saves” money from going to faculty so that it can go to administrators. Since the average salary of a university president is $478,896 and the number of presidents making $1 million or more a year is increasing, it should be obvious what is helping to drive up the cost of college. Hint: it is not adjunct pay.

There was also a push to reduce (and eliminate) tenured positions which resulted in an increase in full time, non-tenure earning positions by 259%. Full time tenure and tenure-track positions increased by only 23%. Ohio State University provides an excellent (or awful) example of this A&A Strategy: the majority of those hired by OSU were Adjuncts and Administrators. To be specific, OSU hired 498 adjunct instructors and 670 administrators. 45 full-time, permanent faculty were hired.

Interestingly enough, the Republicans who run many state legislatures rail against wasteful spending, impose micromanagement and inflict draconian measures on state universities yet never seem to address the real causes of tuition increase and the problems in the education system. Someone more cynical than I might note that the university seems to no longer have education as its primary function. Rather, it is crafted to funnel money from the “customer” and the tax payer (in the form of federal student aid) to the top while minimizing pay for those who do the actual work.

Tenure has been a target in recent years because tenure provides faculty with protection against being fired without cause (tenured faculty can be fired—it is not a magic shield). This is regarded by some as a problem for a variety of reasons. One is that tenured faculty cannot be let go simply to replace them with vastly lower paid adjuncts. This, obviously enough, means less money flowing from students and the state to administrators. Another is that the protection provided by tenure allows a faculty member to be critical of what is happening to the university system of the United States without running a high risk of simply being let go as a trouble maker. As you might guess, I am a tenured full-professor. So, I can use my freedom of speech with rather less fear of being fired. I also enjoy the dubious protection afforded by the fact that people rarely take philosophers seriously.

 

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Should You Attend a For-Profit College?

Posted in Business, Ethics, Law, Philosophy, Universities & Colleges by Michael LaBossiere on February 16, 2015

The rise of for-profit universities have given students increased choices when it comes to picking schools. Since college is rather expensive and schools vary in regards to the success of their graduates, it is wise to carefully consider the options before writing those checks. Or, more likely these days, going into debt.

While there is a popular view that the for-profit free-market will consistently create better goods and services at ever lower prices, it is wisest to accept facts over ideological theory. As such, when picking between public, non-profit, and for-profit schools one should look at the numbers. Fortunately, ProPublica has been engaged in crunching the numbers.

Today most people go to college in order to have better job prospects. As such, one rather important consideration is the likelihood of getting a job after graduation and the likely salary. While for-profit schools spend about $4.2 billion in 2009 for recruiting and marketing and pay their own college presidents an average of $7.3 million per year, the typical graduate does rather poorly. According to the U.S. Department of Education 74% of the programs at for-profit colleges produced graduates whose average pay is less than that of high-school dropouts. In contrast, graduates of non-profit and public colleges do better financially than high school graduates.

Another important consideration is the cost of education. While the free-market is supposed to result in higher quality services at lower prices and the myth of public education is that it creates low quality services at high prices, the for-profit schools are considerably more expensive than their non-profit and public competition. A two-year degree costs, on average, $35,000 at a for-profit school. The average community college offers that degree at a mere $8,300. In the case of four year degrees, the average is $63,000 at a for-profit and $52,000 for a “flagship” state college. For certificate programs, public colleges will set a student back $4,250 while a for-profit school will cost the student $19,806 on average. By these numbers, the public schools offer a better “product” at a much lower price—thus making public education the rational choice over the for-profit option.

Student debt and loans, which have been getting considerable attention in the media, are also a matter of consideration. The median debt of the average student at a for-profit college is $32,700 and 96% of the students at such schools take out loans. At non-profit private colleges, the amount is $24,600 and 57%. For public colleges, the median debt is $20,000 and 48% of students take out loans. Only 13% of community college students take out loans (thanks, no doubt, to the relatively low cost of community college).

For those who are taxpayers, another point of concern is how much taxpayer money gets funneled into for-profit schools. In a typical year, the federal government provides $6 billion in Pell Grants and $16 billion in student loans to students attending for-profit colleges. In 2010 there were 2.4 million students enrolled in these schools. It is instructive to look at the breakdown of how the for-profits expend their money.

As noted above, the average salary of the president of a for-profit college was $7.3 million in 2009. The five highest paid presidents of non-profit colleges averaged $3 million and the five highest paid presidents at public colleges were paid $1 million.

The for-profit colleges also spent heavily in marketing, spending $4.2 billion in recruiting, marketing and admissions staffing in 2009. In 2009 thirty for-profit colleges hired 35,202 recruiters which is about 1 recruiter per 49 students. As might be suspected, public schools do not spend that sort of money. My experience with recruiting at public schools is that a common approach is for a considerable amount of recruiting to fall to faculty—who do not, in general, get extra compensation for this extra work.

In terms of what is spent per student, for-profit schools average $2,050 per student per year. Public colleges spend, on average, $7,239 per student per year. Private non-profit schools spend the mots and average $15,321 per student per year. This spending does seem to yield results: at for-profit schools only 20% of students complete the bachelor’s degree within four years. Public schools do somewhat better with 31% and private non-profits do best at 52%. As such, a public or non-profit school would be the better choice over the for-profit school.

Because so much public money gets funneled into for-profit, public and private schools, there has been a push for “gainful employment” regulation. The gist of this regulation is that schools will be graded based on the annual student loan payments of their graduates relative to their earnings. A school will be graded as failing if its graduates have annual student loan payments that exceed 12% of total earnings or 30% of discretionary earnings. The “danger zone” is 8-12% of total earnings or 20-30% of discretionary earnings. Currently, there are about 1,400 programs with about 840,000 enrolled students in the “danger zone” or worse. 99% of them are, shockingly enough, at for-profit schools.

For those who speak of accountability, these regulations should seem quite reasonable. For those who like the free-market, the regulation’s target is the federal government: the goal is to prevent the government from dumping more taxpayer money into failing programs. Schools will need to earn this money by success.

However, this is not the first time that there has been an attempt to link federal money to success. In 2010 regulations were put in place that included a requirement that a school have at least 35% of its students actively repaying student loans. As might be guessed, for-profit schools are the leaders in loan defaults. In 2012 lobbyists for the for-profit schools (who have the highest default rates) brought a law suit to federal court. The judge agreed with them and struck down the requirement.

In November of 2014 an association of for-profit colleges brought a law suit against the current gainful employment requirements, presumably on the principle that it is better to pay lawyers and lobbyists rather than addressing problems with their educational model. If this lawsuit succeeds, which is likely, for-profits will be rather less accountable and this will serve to make things worse for their students.

Based on the numbers, you should definitely not attend the typical for-profit college. On average, it will cost you more, you will have more debt, and you will make less money. For the most for the least cost, the two year community college is the best deal. For the four year degree, the public school will cost less, but private non-profits generally have more successful results. But, of course, much depends on you.

 

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The Cost of the Empty

Posted in Ethics, Philosophy, Politics by Michael LaBossiere on August 2, 2013
Government spending

Government spending (Photo credit: 401(K) 2013)

As the Washington Post notes, the US government spends at least $890,000 each year to maintain about 13,000 empty bank accounts. In terms of why such bank accounts exist , the gist is this: when the government gives out a grant an account is opened to distribute the money. When the grant ends, the account goes to zero. However, unless the account is closed, the government still has to pay the fees to maintain the account.

It might be wondered why the accounts are not simply closed. The answer is that closing an account requires that the grant be audited within 180 days of the account closing. Interestingly, there is actually no penalty for missing the deadline.

While $890,000 is a drop in the vast ocean of government spending, each drop adds to that ocean. Also, there is the fact that this spending literally yields nothing. While people do dispute the value of various programs ranging from food stamps to bridges to nowhere, at least that spending is for something. This is money for nothing and hence should be recognized as wasteful by both parties.

There are no doubt many other such expenditures that produce nothing and benefit no one. It would seem to be rather obvious that Congress should begin cutting the budget by dealing with all these empty expenditures. After all, eliminating such spending would be pure savings at no cost and there would be no special interests to battle or political agendas to address. While such expenditures will probably be relatively small, they would also add up. Also, there is the fact that even such relatively small amounts of money are relatively big in other contexts, such as small programs that do generate a valuable public good.

As might be guessed, the main reason such expenditures are not addressed is that it is easier to do nothing than to do something. This is, obviously enough, a bad reason.

It is, however, worth considering whether or not the cost of doing nothing exceeds the cost of doing something. Since the accounts must be audited before being closed, it could be argued that the cost of the audit would exceed the savings of closing the account. Thus, while it costs to keep them open, this is saving money.

One obvious reply is that the rules could be changed. After all, if the accounts can be left open indefinitely without an audit, then it would seem cheaper to forgo the audit rule and just close them to save money. After all, if no audit will ever be done, there seems to be no sense in requiring an audit when doing so merely costs money and does not have any positive benefit.

Another obvious reply is that it seems likely that the cost of an audit would not exceed the cost of keeping an account open indefinitely. After all, those payments could continue until the government ends and that could be quite some time.

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Profit

Posted in Business, Philosophy, Politics by Michael LaBossiere on June 17, 2013
Exchange Money Conversion to Foreign Currency

(Photo credit: epSos.de)

Roughly put, profit (or loss) is the difference between what it costs to sell a product/service and what is received for that product/service. For example, if it costs me $1 to make and transport a widget to the purchaser and the widget sells for $5, then I would make a profit of $4 on each widget sold. Naturally, the overall profit of my widget business would be a more complex matter involving total costs, total income and so on. But the basic idea is profit is what one gets when the cost is lower than what is received for the product/service.

As a general rule, just as Trix is for kids, profit is for employers and not employees. In fact, the stock criticisms of profit tend to focus on the fact that making a profit often involves paying workers less than the value they produce.  So, on the face of it, it seems like the idea of a worker making a profit is a non-starter. After all, the worker gets paid (hopefully) and the mechanism of a profit does not seem to figure in here. However, it seems interesting (though perhaps totally misguided) to consider the matter of a worker making a profit (as a worker, not in another role).

As noted above, profit occurs (crudely put) when the seller makes more for a sale than the sale costs her. One way to look at this is that the value paid by the purchaser exceeds the value of what is sold. In the case of a worker, it would seem that a profit-like situation would arise when a worker is paid more than the value of her work. That is, I would make something profit-like if I were paid more than I was worth. The gap between the value of my work and what I receive for it would be my “profit.”

In either case, it would seem that making a profit generally entails that someone is getting exploited. After all, if all those involved in producing the product got their just share of the value of the product, there would be no surplus left to provide the profit, unless the customer pays more than the value of the product. Likewise, if the worker is paid more than the value of her work, it would seem that she is exploiting the employer.

It can be countered that profit can arise without exploitation. One way for this to occur involves what could be called relative/subjective (or perceived) value. For example, if it costs me $1 to make a widget and I sell it for $5, yet the customer values it at $5 (or more), then it could be claimed the customer  is not being exploited. After all, as she sees it she is getting her money’s worth. However, it would also need to be the case that the workers involved in producing, transporting and selling my widget also regard themselves as properly compensated.  Likewise, if a worker values her work less than the employer values it, then it could be claimed that the employer is not being exploited. For example, if I valued my time at $30 an hour, but I was paid $50 an hour and my employer valued my time at at least $50 an hour, then I would not be exploiting my employer. Or, perhaps more accurately, she would not regard me as exploiting her.

The response to this is to contend that a person can be wrong about being exploited. In the case of a worker, he might regard his pay per widget as fair, but might be mistaken. One obvious cause could be ignorance: the worker is unaware of the value her labor adds to the product and if she were aware of this, she would change her mind about the fairness of her pay. Likewise for an employer: she might believe she is getting her money’s worth (or better) but be wrong about this because I am so very clever about appearing to be worth more than I am actually worth.  Naturally, it could be insisted that in matters of money all value is relative/subjective (or perceived) and that the idea of some sort of objective foundation for claims about exploitation is fundamentally mistaken. If so, this would also entail that the idea of some sort of objective foundation for claims about fair or just profits would also be fundamentally mistaken. Presumably it would come down to whoever had the most power defining what is called “just” and what is called “unjust.” In this case, it would seem most sensible for each party to endeavor to get as much as he can and to get it labeled as “fair” and “just.” That is, the employer should endeavor to get as much for as little pay as possible from employees and employees should endeavor to get as much as possible for as little work as possible from the employer. That is, in a profit focused system everyone should try to exploit everyone else while contending that they are being fair.

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Privatizing

Posted in Business, Ethics, Philosophy, Politics by Michael LaBossiere on July 18, 2012

In times of tight budgets, states endeavor to cut spending. While one approach is to fire state workers directly and eliminate positions, another is to privatize something the state used to handle (such as a prison or school busing).

The reasons given for privatizing are, of course, intended to be sensible. Privatizing is supposed to save money. It is supposed to result in higher quality service. It is supposed to reduce red tape. If privatizing did these things, then it would be a good idea. After all, getting better service for less cost and less red tape would be great. In fact, even if privatizing only improved one area (cost, quality, or bureaucracy) then it would be a good thing (assuming it did not make things worse otherwise). However, there is the obvious question of whether privatizing can deliver these alleged goods.

While it is commonly an article of faith that privatizing saves money, this does not seem to be the case. While the matter has not been extensively studied, the evidence indicates that privatization generally increases costs rather than saving money. While it might be objected that the matter has not been well studied, this would obviously not serve as evidence that privatization would save money. At best, this objection would have as its main impact that it is reasonable to be uncertain about what impact privatization would have-although it clearly did not have a positive impact in the vast majority of cases examined in the study.

Intuitively, it simply seems unlikely that privatizing would save money. After all, there is no private sector magic that enables it to do things that simply cannot be done by the state. As such, the state could save money by doing whatever it is that would be done by the contractors to save money. This would, of course, save the state even more money than privatizing. After all, the private contractors need to make a profit on top of what it costs them to provide the service-something the state obviously does not need to do.

In order for the privatizing of a service to save the state money, the costs incurred by the contractor plus the profit must be less than what it would cost the state to do it. It is not clear how this would be possible without the assumption that the state, as a matter of necessity, must always pay higher costs than the private contractor.

It could, of course, be countered that the state simply must do things inefficiently and in a costly manner. That is, the private sector is simply better than the public sector and hence privatizing can save money.

One obvious reply is that this seems to simply beg the question by assuming that the private sector will do things more cost effectively than could possibly be done by the state and thus be able to save the state money while also making an adequate profit. What is needed, of course, is evidence that this can be done. Ideology is, of course, not evidence. As noted above, the existing (albeit limited) evidence is that privatizing is not a money saver.

This is, of course, a factual matter. I have no objection to privatization in principle—my objection is based on the evidence that it does not save money. If it can be shown that privatizing a service would save money and that it would not be possible for the state to engage in the money saving practices that enable the private contractor to save money (that is, the only way to save is to go private), then I would be for that privatization. If, however, the state can save more money by adopting effective cost savings measures, then that would be the better option. After all, if the goal is to save money, then the greater savings wins. That said, it is also important to take into account the quality of the services.

As far as quality goes, a stock argument is that privatization is a good idea because it will improve quality.  It is often argued that the state is bad at doing things and hence provides low quality services. In contrast, the private sector is supposed to provide higher quality services (at a lower cost).  While higher quality (at a lower cost) is appealing, there is the obvious question of whether this is true or merely a claim based in ideological faith. As with the matter of saving money, this is a factual matter.

While people do point to problems with the quality of state services, it is also easy to point to quality problems with privatized services. These can be rather horrible, as shown by rather serious problems involving the way the privatized half way houses in New Jersey have been run Paul Krugman provides an interesting analysis of this problem that is well worth reading. As such, the idea that the private sector will simply be better because it is private does not seem to be true.

As I argued with the case of savings, unless it is assumed that the state is incapable of providing quality services it would seem that there is nothing that a private contractor could do in terms of quality that the state could not do. After all, there does not seem to be a private sector magic that enhances quality.

There is also the obvious point that the private contractor has to make a profit and this can lead to cutting corners. After all, lowering costs is a rather effective way of increasing profits. However, cost cutting often involves cutting quality and this practice is common fodder for news stories about the horrors of quality cutting to save money.

It might be replied that the private sector has to have better quality because the contractor must keep the customer happy. However, the people they have to keep happy are the same people who would be “customers” of the state. So, if a need to keep people happy leads to good quality, then the state should be subject to this as well. After all, just as unhappy people would change companies, they would also presumably vote to change the people running the state.

I am, of course, in favor of what would provide the highest quality services for a reasonable cost. If privatization would do this better than the state, then that would be the sensible thing to do. However, this must be based on evidence rather than an ideological commitment that simply favors the private (or public) sector.

In regards to the reduction of red tape, privatization clearly does not do that. In fact, it adds more bureaucracy.  Instead of two levels (state and state employees) there are now three levels (state, contractor, and employees).

It might be countered that there will be less bureaucracy at the state level because most of it will be privatized. While this would be true, it does not actually reduce the bureaucracy—it just moves it.

It might then be countered that the private sector is just less bureaucratic than the state and hence it will be able to do the same with less bureaucracy.

One obvious reply is that the private sector seems to have plenty of bureaucracy. Another is that if the contractor can do the job as well with less bureaucracy, then it would make sense that the state could simply follow the same approach—unless, of course, there is a contractor magic that must of necessity be denied to the state.

As with cost and quality, the bureaucracy reduction is a factual matter. If privatization did reduce the overall bureaucracy (rather than shift it) while still being able to provide the same (or better) management, then this would be a gain. However, this is something that must be shown rather being assumed on the basis of ideology.

Overall, if privatization could save money, reduce bureaucracy and increase quality, then it would be a good idea. However, this is not something that should be accepted (or rejected) merely on ideological faith. As it stands, the evidence seems to be that privatization is no magic bullet.

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Monied Corporations

Posted in Business, Politics by Michael LaBossiere on February 25, 2012

Who said the following?

I hope we shall crush in its birth the aristocracy of our monied corporations which dare already to challenge our government to a trial by strength, and bid defiance to the laws of our country.

 

 

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Is SOPA a Shakedown?

Posted in Ethics, Law, Philosophy, Politics, Technology by Michael LaBossiere on January 18, 2012
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I must admit that I have become somewhat cynical over the years. While I still believe in truth, justice and all that, I view politicians in general and congress in particular with considerable skepticism.

Congress is currently considering SOPA and PIPPA. While these sound like Pokemon names, they are being put forth with the stated purpose of combating piracy. Critics, of which there is a multitude, contend that SOPA and PIPA will be devastating to the “small” players in the internet realm.

Being a professional writer and an ethical person, it is hardly surprising that I am against online piracy and have argued that it is immoral. As such, I do support reasonable, just and fair means of combating piracy-if only for the selfish reason that I would prefer that people not steal my work. However, I would prefer to live with the risk of piracy than have draconian laws and regulations in place. Naturally, this is a false dilemma: we can obviously have mechanisms to combat piracy that are not draconian.

Getting back to my cynicism, I suspect that SOPA and PIPA are shakedown tools. In the current political system, members of congress need to spend significant sums of money in order to be re-elected. In order to keep this money flowing in, they need to give people and corporations a reason to fork over that sort of cash. One obvious way to do this is to create legislation that folks with large sums of money are interested in passing or preventing. SOPA and PIPA are backed by many large media corporations and they have, as might be imagined, dumped a lot of money into the campaign coffers of the folks in congress. Those who oppose SOPA and PIPA will need to lobby against them and this also involves money being tossed into those same coffers. As such, these laws are a win-win situation for the folks in congress in that they help them generate the vast sums of cash they need to ensure that they will remain where they can get even more vast sums of cash.

On this matter I find myself agreeing with true conservatives: I am opposed to this expansion of government regulation.

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Is Spending Speech?

Posted in Business, Ethics, Law, Politics by Michael LaBossiere on December 7, 2011
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A while back the Supreme Court of the United States ruled that campaign finance spending limits violates free speech. This ruling seems to rest on two key assumptions. The first is that corporations are persons and are thus entitled to free speech. The second is that spending is a form of free speech and that it should not be limited.

In regards to corporations being persons in regards to free speech, this would seem (as I have argued elsewhere) to entail that they must be treated as persons across the board. This, as I have argued, would seem to lead to absurdities that thus expose the absurdity of treating them as persons in this regard. Naturally, there can be good reasons for allowing collective rights-but these do not require that the entity be regarded as a person but merely as a collection of people.

Also, there is the obvious concern that granting corporations rights is unfair because it gives groups an extra advantage over an equal number of unincorporated individuals. For example, if a corporation has 500 members, they can make 500 contributions to a candidate and also another contribution as the corporation. 500 individuals can make 500 contributions, but they do not get that extra corporate contribution. To use an analogy, imagine a store is having a special in which each person gets a free item (like a small ice cream cone). If three individuals go to the store, they each get the item. But, if there are three people who form a corporation, they would get three items plus a fourth for the corporate person. That seems rather unfair. As such, taking corporations as people seems to be a system of miraculous multiplication-it creates extra super-people out of a collection of normal people. This seems both questionable and unfair.

In regards to spending being free speech, that seems slightly dubious. Suppose that spending money for political purposes is considered speech. Now, it is clearly acceptable to try to persuade a politician by speaking to him or her. If spending is speech, then I should be able to try to persuade  politicians by speaking to them with money. However, this sort of thing already has a name, specifically bribery. But, if spending is a form of free speech, it would seem that bribery should be acceptable as a form of free speech. This seems absurd, to say the least.

It might be countered that the contributions cannot be direct bribes in that there can be no direct giving of money in return for specific actions or promises to act. However, it would be extremely naive to believe that campaign financing is not intended to do just that-namely to influence behavior by providing money and support.

However, suppose that spending is taken as a form of speech and thus protected by the right of free expression. It does not, of course, follow that such speech should be free of limits. After all, limits are justly placed on speech in other cases. The stock example is the yelling of “fire” in a crowded theater in which there is no fire. In the case of unlimited spending by corporations, this does serious harm to the political process by increasing the influence of corporations far beyond the number of people who make them up and thus proportionally decreasing the influence of those who are not in control of corporations. To use an analogy, it is on par with having a public discussion in which the people controlling corporations are allowed to use sound systems up on the stage and individuals are expected to try to shout out their views  from the crowd.

As might be imagined, I believe that it is a mistake to allow corporations such unlimited spending.

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