Knowing and understanding the scoring system is important.  The right decision in bridge depends on whether you are playing match points or IMPs.  The right decision in golf could depend on stroke play versus match play.  Scoring is an important reason for the effectiveness of capitalism.

Today at the Dell Technologies Championship we saw an odd example of that.  Justin Rose birdied the 15th hole to go four under and improve his Fed Ex standing from ninth to first.  The odd part about the projections is that the PGA tour projects a tie for X as everybody getting X.  In real life they have a playoff for first and everything else gets divided up so if there is a three way tie for second then those three guys split points (or money) for second, third, and fourth.  So when Justin tied for first then all four tied got first place points and Justin is currently first in Fed Ex standings.

Scoring is critical.  Pay attention to get ahead.

Defining Socialism

Earlier this month Kevin Williamson wrote “Socialist” Is The New “Libertarian” that discussed the difficulties folks on all sides have with using exciting words correctly.  One example he gives is:

But we love to fixate on exciting words. For a moment during the presidency of George W. Bush, virtually every figure on the right was denounced as a “neocon,” a term poorly understood by the majority of the people who use it.

The erstwhile neo-neocon is just Neo perhaps because of those difficulties.  But mostly Kevin addresses socialism.  Katherine Timpf at NRO should have read Kevin before writing How [Alexandria] Ocasio-Cortez Makes The Case Against Socialism.  Of course, the case against socialism and for capitalism has been repeatedly made all over the globe before we ever heard from Alexandria.  The problem is the examples that Katherine brings us aren’t about socialism.  A dictionary defines socialism:

[A]ny of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods.

The area of interest are Uber versus the taxi cartel, increasing minimum wage, and large wealth transfers.  It is interesting that Alexandria supports the taxi cartel but uses Uber.  We are 100% with Katherine that Alexandria’s economic ideas are really poor choices.  But not all bad economic ideas are socialism.  Katherine’s use of exciting words makes her article less clear.  We should all always read Kevin.

College Cartel Tofu Edition

Frederick M. Hess and Grant Addison are at NRO discussing some trends in employment.  They start out with:

Earlier this month, the job-search site Glassdoor compiled a list of 15 major companies that no longer require applicants for certain posts to have a college degree. The list included an array of entry- and mid-level jobs —everything from barista to “Apple Genius” to “senior manager of finance”

It is worth reading the whole thing.  We are generally in agreement with Fred and Grant but we find that they go a bit overboard with the red meat.  That’s why we call this tofu edition.

Fred and Grant point out an important reason why lots of employers require a college degree when there isn’t a compelling reason to do so.  They have a useful term for it, degree inflation:

There are multiple factors to blame for degree inflation, but a big one is the unintended consequences of federal anti-discrimination law. Title VII of the Civil Rights Act of 1964 prohibited employers from discriminating against workers or job applicants on the basis of race, color, religion, sex, or national origin. It did, however, allow the use of “professionally developed” ability or employment tests, insofar as they were not “designed, intended or used” to discriminate.

Trying develop an entry level test independently  has been a magnet for lawsuits.  Requiring a degree has not although Fred and Grant don’t see why.  It is OK to disagree with the courts but there is no reason to expect they will suddenly change their minds and agree with us or Fred and Grant.  Here is where some of the red meat comes:

And colleges, of course, reap the outsize benefits of acting as the gatekeepers to employment. It’s an arrangement which allows campus bureaucrats to pull in six-figure salaries while tuition costs soar ever-higher and schools feast on billions in federal student loans and other taxpayer funds.

The actions by the employers in the first paragraph will have precious little impact on highly competitive colleges.  We are not going to name names on who is worried about those employer changes  but we are sure the Ivy League and the Big Ten are not.  Fred and Grant recommend:

While there are policy changes that could help, businesses have a chance to do well by doing good. They can take the initiative to cultivate new partnerships, expand apprenticeships, charge HR departments with reexamining outdated assumptions, and find ways to move beyond routines that close the door to qualified workers who lack the right piece of paper.

We are with Fred and Grant that it is not a policy problem.  We are with them that employers should cultivate and expand partnerships.  Paid apprenticeships, internships, other on-the-job training should be expanded.  The partnerships might be with colleges, high schools,  vocational schools, or on their own.  These programs at the various schools and businesses might be run by highly paid folks.  They might be bureaucrats.  Let the markets sort out the prices.

Who Is A Conservative?

Who is a conservative?  Many recent stories give us reason to discuss The Donald and John McCain.  The editors at NRO add another item to the list of conservative causes The Donald has aided in Goodbye, Clean Power Plan.  Dan McLaughlin follows up on several NRO articles to discuss the relationship between conservatives and The Donald.  There have been too many articles to cite on John McClain since his death.

The Donald’s actions on taxes, especially corporate taxes, judicial nominations, and reducing government as the editors explain would make him the most influential conservative since Reagan.  It is how you think combined with what you do that makes you a conservative.  We appreciate what The Donald has done.  We voted for him in November 2016 and expect to do so in 2020.  He is still not a conservative.

John McClain will forever be connected to McClain-Feingold, perhaps the most anti-conservative legislative action this century.  Yet we think that John should be classified as a conservative because it was about his thinking rather than his actions.

Sidebar: Our explanation of a conservative reason for McClain-Feingold was supplied by another western senator, Jake Garn.  It was at an accounting convention but we don’t remember the details.  Jake said, and we paraphrase and exaggerate a bit, that his friends were losing elections and he wanted to find a way that met constitutional muster [we are pretty sure that is a quote] to keep big money out of elections.  There are some conservative connections to McClain-Feingold even if it is a far from conservative as possible.  End sidebar.

We know that it is impossible to resolve who is conservative conclusively.  It is a big tent.  We think that folks need both the what and the why to make it.  As we see it, The Donald doesn’t have the why to make the grade despite having great accomplishments while John has enough of the what to be classified as a conservative although his conservative accomplishments are more modest.

The Purpose Of Public Subsidies

The NRO article by Frederick M. Hess and Cody Christensen on college dropouts and what can be done is worth reading in its entirety but here we want to look at one sentence to discuss the nature of public subsidies.  The sentence comes early:

As 2 million students drop out of college each year, the costs should give everyone pause — including a half-trillion dollars in unpaid student debt and public subsidies wasted on college-goers who never graduate. [Emphasis added]

The unpaid student debt is an interesting issue but we will focus on the part in bold.  Are public subsidies wasted on college-goers who never graduate?  We think no for two reasons.  First, students can get something out of college without getting a degree. Sometimes they learn something in college while other times they learn something about themselves.  There is, or at the very least, can be, a significant value to college without graduating.

Second, and more important, it is reasonable for the government (local, state, and federal) to take reasonable risks with tax receipts.  Two examples are basic research, mostly at the federal level, and college students, mostly at the state level.  There doesn’t appear to be an effective market mechanism for subsidizing college students.

Sidebar One: Students often change their major in US colleges.  This is one of the reason it was hard to get hiring organizations like accounting firms to support freshman scholarships.  They wanted their scholarships to go to students that had made substantial progress towards a degree.  The state and some other foundations were willing to take such a risk.  End Sidebar One.

Instead, the state subsidizes a wide variety of students and a substantial number fail.  It would be easy to reduce failures by increasing entry standards but that would reduce successes too.  Fred and Cody’s article is well done but they are wrong about subsidy waste.

Sidebar Two: The subsidy loss might be compared to bad debts.  In a for profit organization we try find the level of bad debts that maximizes profits.  For the state the computation of subsidy losses versus graduates is hard to conceptualize never mind trying to compute it.  End Sidebar Two.

It is not a waste to subsidize students that don’t graduate and we don’t want to entirely eliminate students not graduating.  It is, properly, a political decision.  What are the risks necessary to provide the labor force needed?

Evaluating Colleges

Yesterday we wrote about the joys of capitalism.  Today we try to address the challenges of evaluating colleges. It is absolutely true individuals in the corporate world and the college world behave inconsistently with the goals of their organization. The advantage of capitalism is that the need to show a profit reduces such behavior.

David Leonhardt at the NYT has declared there is a new dropout crisis.  The old dropout crisis was in high school and the new dropout crisis is in college:

It’s a good news/bad news story. About a decade ago, the number of college dropouts exceeded the number of K-12 dropouts, and the two have continued to move in opposite directions since then. And if you focus only on high-school dropouts — excluding people, many of whom are immigrants, who dropped out earlier and never reached high school — there are now about twice as many college dropouts as high-school dropouts.

We are not sure that it is bad news but it is news.  There are at least two reasons not to worry about it.  First, it might suggest rational behavior from one or both of the parties involved.  Second, there is the measurement and incentive problem.

Let’s start with rational behavior.  Students could be leaving college because of the bad behavior of colleges.  For example, progressive ascendancy in many classrooms and essentially all dorms might be driving students away.  It could come from good behavior on the part of colleges by enforcing standards.  We doubt David thinks that college is infinitely scalable but this quote suggests it:

The worst part of the college-dropout problem is the cost to students. The returns on a college degree are very large, in terms of money, health and happiness. And a growing share of college dropouts come from low- and middle-income families, which means that colleges’ low graduation rates are stifling upward mobility.

We are a big fan of college but it is not for everyone and especially at 18 years old.  Our first faculty position was at an open-enrollment school.  The faculty believed that open-enrollment means open exits too.  Some folks are ready later like the student that failed or dropped our introductory accounting course seven [that is not a typo] times before passing it and graduating as an accounting major.  We know there are all kinds of interesting stories but we think the most likely explanation for increased dropout rates is rational behavior.

Frederick M. Hess and Cody Christiensen at NRO are all over the incentive problem.  We would say the problem is that colleges are trying to serve multiple masters and so the incentives are hard to follow.  Fred and Cody start with the facts:

Policymakers have sought to answer the challenge [public subsidies wasted on college-goers who never graduate], with most states adopting performance-based funding policies. Currently, 32 states allocate a portion of their higher-education funding based on educational outcomes. Ohio, for instance, allocates more than half of its funding to colleges based on how many students earn degrees. Other common metrics including retention and job-placement rates.

The University of Wisconsin System has an accountability dashboard that reports a wide variety of data including retention and graduation rates by campus.  What UW schools have the highest retention and graduation rates?  Those with the highest admission standards.  We are not surprised when Fred and Cody report that:

Last month, a new meta-analysis conducted by scholars at the University of Oklahoma and the University of Wisconsin found that performance-based funding has not actually yielded gains in graduation rates or other metrics. The authors observe that researchers have not had success linking “performance-based funding policies to increased college completion rates,” note that analyses “consistently show primarily null findings,” and conclude that “performance-based funding has no effect on completion, on average.”

Fred and Cody go on to discuss the need to overhaul reporting systems.  That is exactly the problem.  Reporting systems at the university system level almost never change.  Creating performance based funding was the work of at least a decade.  Try to refine it regularly is an extraordinary challenge.  University systems in the USA are the envy of the world.  We think it is because of student choice but even we are not certain.  We know capitalism works because of consumer choice.  We are not confident that a top down solution is going to help public colleges.



Carillon And Capitalism

Liam Halligan at Unherd has an answer but he should marshall his facts differently.  Liam is writing about the bankruptcy of Carillon, an UK construction firm that had hundreds of contracts with the government.  Liam says:

It’s a story about whether the British public can have faith in private firms delivering public services, and about jaw-dropping failures at the heart of our business and political establishments. Above all, it’s a story about how UK capitalism works – and fails to work.

Yet capitalism double works. First, as discussed below, there was early information about Carillon’s problems. Second, Carillon and everyone in and related to it was punished as, according to CNN, it is going into liquidation.  Of course, the thing about capitalism is that it punishes without pity.  Carillon’s school lunch program might have been fine but Carillon is being liquidated.  KPMG, Carillon’s auditor, faces scrutiny as the Telegraph puts it.  KPMG’s position is not as dire as Arthur Andersen’s (AA) at Enron but the comparison not far off.

Sidebar: Here is an interesting nugget on AA in Wikipedia:

In 2005, the Supreme Court of the United States unanimously reversed Arthur Andersen’s conviction due to serious errors in the trial judge’s instructions to the jury that convicted the firm.

That’s right, the Supreme Court overturned AA’s conviction.  That is not to say that AA was innocent but rather they were wrongly convicted.  End Sidebar

It is certain that KPMG will lose business based on the scandal.  It is close to certain that they will lose a large pile of money to stockholders and others.

What is equally close to certainty is that the governmental folks that made bad decisions will be treated with much more pity.  To be fair, the decisions about Carillon might only be bad after the fact.  As an example of punishing government wrong-doers take the IRS scandal in the US where the decisions were clearly wrong at the time although some folks, we will not cite them, still say it is not a scandal.

One challenge for the government decision makers was what to do after the first news that Carillon was having trouble.  Here is CNN:

Lidington told the BBC on Monday that the government has been working on contingency plans since 2017 in preparation for a potential collapse.

He said that new government contracts awarded to Carillion were structured as joint ventures to ensure that that other partners would be able to step in to complete the necessary work.

But critics are unhappy that the government kept awarding contracts as the company floundered.

First, it reminds us that the system was producing useful information before Carillon was beyond hope.  Second, it is a classic trap for the decision maker.  If the government don’t give Carillon more business they fail and the government gets the blame for their collapse.  If the government does give them more business then they might end up in the current situation.

Carillon shows us why capitalism works and reminds us of the problems with government.  Profit is single minded.  The government is not.  We don’t want to change the former and can’t change the latter.

A Less Bad Idea?

David Neumark is trying to sell a new minimum wage idea in the WSJ.  First let’s talk about a strange headline and sub-headline.  The header is:

Let The Taxpayers Pay The Minimum Wage

That makes some sense.  If taxpayers are foolish enough to want to increase the minimum wage then they ought to foot the bill.  Fair enough.

The sub-headline is:

Employers shouldn’t bear the brunt of redistributive policy.

Well, at best employers share the brunt of a silly policy with employees.  We’re not convinced that David’s idea is less bad enough to support.  That is, sometimes you support a policy or a candidate because the alternative is so bad that less bad is way better.  We don’t see that higher taxes or bigger deficits are good ideas.


An invitation came today.  It was from the National Review Institute announcing that the William F. Buckley, jr. Prize Dinner would be in Chicago.  Our heart was aflutter as we love celebrations, the National Review, and WFB.  Chicago is as close as this is likely to get.  Black tie was not a problem.  It was pricy but we are not going to be regular attendees.

Sadly, the date conflicted with an event with kids and grandkids and that made it an easy choice about missing the event.  Life, politics, and economics are about priorities.  We have unlimited wants and limited time and money.  Most of the decisions are easy and routine, and, of course, everyone has a different utility function, but some are more difficult.

Sidebar: Lots of our northern students wanted to decamp to southern climes.  To make a point about different preferences we would tell them that, climate-wise, we would like to spend the Northern Hemisphere summer in Iceland and the Southern Hemisphere summer on the South Island of New Zealand.  Sixty degrees year-round would be heaven for us.  End Sidebar.

None of our elected representatives get their do list done.  They prioritize a few things and hope for the best on the rest.  We think a carbon tax would be a nice replacement to the federal gas tax.  We don’t have a sports car but we do have a tux.  We will probably never get to a Buckley Dinner and it is a great disappointment but one we are prepared to cope with because life is about priorities.  Perhaps we will send them a check.


Conor Boyle’s discussion of fascism at The Conversation Room got us thinking that it might be worthwhile to discuss what is fascism.  Do read all of Conor and the comments.  First, Conor is right that:

Today calling someone a “fascist” is  more an insulting slur than a description of one’s political ideology.

Conor’s discussion emphasizes the nationalist part of fascism.  We like his insight that there can be different degrees of nationalism and that extreme forms cause problems.  We are 100% on his side in the John Lennon discussion.  We like his discussion and reference on modern China.

Wikipedia references the Merriam-Webster Online dictionary so it would be redundant to use both.  Here is what they said for fascism:

Fascism (/ˈfæʃɪzəm/) is a form of radical authoritarian ultranationalism,[1][2] characterized by dictatorial power, forcible suppression of opposition and strong regimentation of society and of the economy,

That sounds right to us.  We think Conor would agree that they picked an excellent word in ultranationalism.  We believe that Conor misses the authoritarian part and particularly the strong regimentation of the economy.  We might be guilty of not emphasizing the ultranationalist part of it.  Yes, the Antifa are ironically named since they work for forcible suppression of the opposition but we have a hard time categorizing them as ultra-nationalists.  Capitalism might not be the opposite of fascism but it is close.  As fascism has become an epithet it is a good word to avoid.