Good intentions vs. Scams

Politicians use ‘jobs programs’ to get elected. Jobs programs sound good. They help people find jobs, after all, right?

Not always.

As with many government programs, the actual outcome doesn’t always mesh with the well intended, campaign sound bite.

We need more investigative journalists like John Stossel who recently sent his interns to these supposed jobs programs. Here’s a link on Dan Mitchell’s blog about their findings. This is what one intern reported and it sums up the problem well:

“First I went to the Manhattan Jobs Center and asked, “Can I get help finding a job?” They told me they don’t do that. ‘We sign people up for food stamps.’ I tried another jobs center. They told me to enroll for unemployment benefits.”

How can this be?

As I write about often on this blog, it’s all about feedbacks and incentives. I imagine that when these jobs centers were originally funded by a legislative stroke of a pen authorizing the expenditure of taxpayer funds, they did intend to help folks find jobs.

But that same authorization gave birth to a bureaucracy which would become staffed by self-interested (not greedy) folks just like you and I. Over time, the good intention of helping folks find jobs gets subtly replaced with the bureaucracy’s intention of preserving itself.  As Stossel states elsewhere in his piece:

The private market for jobs works better than government “job centers.”

So the staffers at jobs centers look for other ways to be useful to the politicians who fund them. Soon, jobs centers become the front offices for other government programs.

Feedback is the reason I prefer private activities over government activities.

It’s not that I think government activities are inherently evil or bad. I even believe that sometimes government activities can produce value and innovation.

The weakness I see in government activities is that the failure feedback loop is indirect and weak, and sometimes the opposite of what it needs to be.

That means that when the activity does not produce the intended benefits, it can persist, even grow. Sometimes the failure of a government program can attract even more political and taxpayer support to try to fix the failure. That usually leads to an even bigger failure.

The failure feedback loop happens to be more direct and stronger in private activities. Monster.com is a private ‘jobs center’ that works well. Companies with job openings pay to post their jobs on Monster.com because they like the pool of candidates it brings.

If something else does a better job, Monster.com will either have to adapt or it will go out of business. The failure feedback loop is direct and strong.

Occupy Wall Street

A friend asked what I thought about Occupy Wall Street.  I directed him to John Stossel’s latest column, Wall Street Protesters Half Right, because Stossel does a great job of summing up my views.

I hope that the OWS protesters learn to better distinguish between the free market and the rent-seeking profits that seem to bug them.  Right now, they confuse those concepts.

Here’s another post on this distinction.

“Stupid in America”

Check your FoxNews lineup and set your DVR to record John Stossel’s recent education special, Stupid in America.  If you know when it will next air, let me know and I’ll provide an update.

It originally aired last weekend.  I watched it tonight.  It’s worth watching.  He covers teachers unions, union bosses, firing teachers, the Washington DC school district, charter schools and Khan Academy.

In an interview, one union boss, who represented a district with bad student test scores, assured us that he knows his kids are learning because “he can see it in their eyes.”  Now that’s compelling stuff.  I certainly think there are numerous issues with test scores as a measure of teacher performance, but I much prefer those over what this man sees in his students eyes.

This same union leader defended bad teachers from being fired (I’m paraphrasing): It would be a tremendous cost and a major adjustment for the teacher. We need to seek professional development opportunities for that teacher.

lol?  I did.

I find it strange that we should have to train teachers to be teachers (isn’t that what they were supposed to do before they became a teacher?) to prevent them from not being a teacher. I also find it strange how a trade that’s based so strictly on credentialing (e.g. education certification), would then want to take on the expense of the training the teacher what he or she apparently didn’t learn before.  With that logic, why require credentials at all?  Just let anyone come in and they will be trained.

Of course, this union boss believes training will be the antidote.  What if the teacher doesn’t want to teach?  Why not free up the spot for someone who does?

Another union boss proclaimed that he would try to physically prevent people from going to charter schools in “our” (meaning teacher union) buildings.  Excuse me, aren’t those the taxpayers’ buildings? I didn’t realize that the teachers union now owns their buildings as well.

As Stossel so aptly put it in the show, much of what is wrong with education is that we have “adult fools” running things.

Stossel also showed lots of signs of progress education.

  • Charter schools where the kids love to come and learn.
  • Kids digging math because they’re watching Salman Khan videos.
  • Teachers in charter schools that say things like (paraphrasing again), why shouldn’t they be able to fire me?  If I was a bad doctor, I wouldn’t have any patients.
  • A charter school where the principal actively watches and coaches her teachers to improve their teaching (many businesses can learn from this).
  • A post-Katrina, charter school-based rebirth of education in New Orleans.  One founder of the Sci Academy started with just himself in 2008 and now has a “school” based in trailers and his students are testing well.  He said, if you hear someone in education talking about having top notch facilities, that’s a sign they’re not putting education first.

A better term for rent-seeking

John Stossel has a more intuitive term for economic rent-seeking (which I wrote about here, here and here).

His term is freeloading.

His latest FoxNews television special goes by the title Freeloaders and he too harps on GE for using rent-seeking, or freeloading, as a business strategy.

He also runs the gamut on the freeloading and gives illustrative examples that includes street beggars (he tests whether the ‘will work for food’ signs are truthful), farm subsidies, green energy and corporate welfare like GE.

Stossel says that GE declined to be interviewed for the show.  Too bad.

Stossel did show footage from an interview with a CEO of an ethanol company that agreed to be interviewed when Stossel covered the same subject 13 years ago.  The CEO said:

Why should I care?

I agree with that CEO.  See my previous post.  He shouldn’t care. If the government offers a benefit he’d be stupid and out of a job if he passed on it.  He’s only responding to incentives and he’s probably responding to them very much like many of us would.

Several of Stossel’s guests do touch on where the blame lies.  With us.

We’ve allowed a system to emerge where hundreds of millions, if not more, is spent on lobbying by special interest groups that are looking to freeload.

They’re either looking to get a direct piece of the immense flow of taxpayer funds or they’re looking for government to grant them an advantage that will very likely favor that company and hurt consumers, though it will spun as the opposite.

Stossel’s Battle for the Future

John Stossel did some nice work on his Fox Show The Battle for the Future.  You can watch all six segments on youtube for free.

I enjoyed the story of how Sandy Spring, GA privatized its government work that starts at 7:49 of segment 4:

Citizens complained about their tax dollars becoming profits for a private company.  The Margaret Thatcher look-a-like mayor, Eva Galambos, aptly responds:

Honestly, what difference does it make if some company is making a profit, but you’re getting a service that costs you less?

Amazing, in this time of unfunded government worker pensions that we don’t hear about more local governments going this route.

Also, starting about 6 minute mark is a prescient (I believe I originally saw this show aired a couple months ago) segment on what’s happening in Wisconsin right now.

Jobs and Unemployment Benefits

I highly recommend John Stossel’s excellent one-hour special from Saturday evening on the FoxNews Channel.

The focus of one of Stossel’s segments was the incentives around unemployment benefits.  He interviewed people who said they passed up jobs because the jobs paid less than they made on unemployment and they became more serious about looking at such jobs within a few weeks of their unemployment running out.

He also interviewed people who worked for the agency in charge of tracking the unemployed to ensure they were looking for work.  They said they could tell that some applicants didn’t take some jobs seriously.  They were interviewing in order to check the box to satisfy their requirement to keep receiving unemployment.

Stossel included footage of our President saying that he hasn’t met a single American that would rather collect an unemployment check  than have meaningful work to provide for their family.  Given Stossel’s evidence, it makes me wonder how hard the President looked or what questions he asked when he did look.

While watching the segment, the thought occurred to me that perhaps unemployment benefits should end once the person has been offered a job, even if the job pays less than the unemployment benefits.  Made me wonder what the true goals of unemployment are.  Is the goal to provide a safety net or to preserve a lifestyle that may not be preservable?

Economics Should Be Easy

“Rank-and-file PhD economist” Kartik Athreya explains why Economics is Hard and “bloggers” like John Stossel, Matt Yglesias, Robert Samuelson and Robert Reich are unlikely to have anything “interesting to say” about economics and “cannot meaningfully advance the discussion on economics policy.”  At least in Stossel’s case, that’s a straw man fallacy.

The key is that macroeconomics, which involves aggregating the actions of millions to generate outcomes, where the constituents pieces are human beings, is probably every bit as hard [as predicting Earthquakes].

Kartik asks why a cottage blog industry hasn’t cropped up to “offer their own diagnosis for what had happened, and advice for how to avoid the next big one [regarding earthquakes],” while such a cottage industry has popped up around economics.

I have some thoughts for Kartik.

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Great Stossel Show

If you’re like me and don’t have the Fox Business News channel in your line-up, you’re missing good television.  Luckily, there’s this thing called Youtube where you can also view his show.  His latest show was on Milton and Rose Friedman’s book and video series, Free to Choose. The book came out in 1980.

Here’s the first segment of the show.

You can watch it and the rest of the segments by clicking here.  The Friedmans’ book is also an excellent read.  I read it last year as a check out from my library (I love my library).

I have a few thoughts on the show.

First, Stossel runs video footage of Friedman accepting his Nobel Prize where it appears there is one loud heckler.  It amazes me that the message of freedom can stir such a strong anti-response from people.  This reminds me of graffiti I saw scrawled on an old sheet metal building near by home decades ago that read, “Die Kapitalists Pigs.”  I was too young to know much about politics.  Though it did strike me as odd that my elementary school teachers only ever spoke of one candidate for President in ’76 – Jimmy Carter.  But, I often wondered when I saw that graffiti what was at the root of such message.

Second, the young lady in the 5th segment does a superb job at going toe-to-toe with the Friedman opponent, Ben Barber.

Third, Stossel and his guests do an excellent job at responding to the opponents points.  The one critique I have, though, is that he Continue reading

Great Tea Party Podcasts

Catching up with my Dennis Miller podcasts from the past week, I came across three exceptional podcasts:

Go to iTunes.

Search for The Dennis Miller Show.

Download and listen to these three podcasts:

Andrew Breitbart Interview – April 13, 2010

John Stossel Interview – April 15, 2010

Greg Gutfeld Interview – April 15, 2010

Greg Gutfeld and Miller were discussing comments made by Ted Koppel about media.  Koppel apparently longs for the days of three networks.  Apparently, he doesn’t like the competition from the cable and internet.  As Gutfeld puts it:

You know what he actually said.  He said the real problem here is competition.  He’s saying “in the good old days when the three networks didn’t have to try, when we could just do whatever we wanted because there was nothing else.  And now, all these cable stations came in and now we have to work for a living.

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Good Reading

1.  Walter Williams – Parting Company

I believe we are nearing a point where there are enough irreconcilable differences between those Americans who want to control other Americans and those Americans who want to be left alone that separation is the only peaceable alternative.

I still hold out some hope.  I think a lot of Americans who want to control other Americans simply don’t realize that’s what they are doing.  They think that what they’re doing is for a greater good.  I hope we can help them realize that not controlling others is a fundamental principle of life, it’s what the country was founded upon and produces better results — as David Boaz points out below.

2. John Stossel – What Am I?

Stossel explains a bit about what it means to be libertarian.  He answers the common question of ‘what about the poor and the weak’ with responses from people who appear on this show.

David Boaz, executive vice president of the Cato Institute, took the discussion to a deeper level.

Instead of asking, ‘What should we do about people who are poor in a rich country?’ The first question is, ‘Why is this a rich country?’ …

“Five hundred years ago, there weren’t rich countries in the world. There are rich countries now because part of the world is following basically libertarian rules: private property, free markets, individualism.”

Boaz makes an important distinction between equality and absolute living standards.

“The most important way that people get out of poverty is economic growth that free markets allow. The second-most important way — maybe it’s the first — is family. There are lots of income transfers within families. Third would be self-help and mutual-aid organizations. This was very big before the rise of the welfare state.”

This is an important but unappreciated point: Before the New Deal, people of modest means banded together to help themselves. These organizations were crowded out when government co-opted their insurance functions, which included inexpensive medical care.

Boaz indicts the welfare state for the untold harm it’s done in the name of the poor.

“What we find is a system that traps people into dependency. … You should be asking advocates of that system, ‘Why don’t you care about the poor?’”

I agree. It appears that when government sets out to solve a problem, not only does it violate our freedom, it also accomplishes the opposite of what it set out to do.

Excellent response when someone asks what about the poor?  How did the country get rich in the first place?  Have the solutions put in place to help the poor helped or made things worse?  In fact, it was the answer to these very questions that led me away from my more liberal roots.

3. Thomas Sowell – Race and Politics: Part II

A major factor in the housing boom and bust that created the present economic predicament was massive government intervention in the housing market, supposedly to correct discrimination in mortgage lending. How did they know that there was discrimination? Because blacks were turned down for mortgage loans at a higher rate than whites.

It so happens that whites were turned down for mortgage loans at a higher rate than Asian Americans, but that fact seldom made it into the newspaper headlines or the political rhetoric.

If only more people would ask obvious questions about data and not simply take a newspaper or study headline at face value.  Sowell is good reading for anyone with analyst in their job title.  I believe reading Sowell over the years has helped develop my ability to poke holes in interpretations of data.

I think knowing the real reasons behind the data is more worthwhile than interpreting data to fit my mental model.  I’m prone to my own biases, however, I am also more open to understanding alternative interpretations and why those may or may not be valid.

What do I have to lose?

Now that I think about it, that’s a great question for many people who are cemented into their mental models.  What do they have to lose?  If more people were more open to alternative explanations for why things are the way they are, perhaps we wouldn’t have such a divide.