Russ Nelson's blog

Kim commented on an earlier posting of mine about vouchers. Well, actually, it wasn't about vouchers per se except to diss somebody who was attacking vouchers. I had much more to say about her motivation for attacking vouchers than the actual attack itself. But Kim isn't sure vouchers would be so wonderful. Rather than praising the reasonable things to say (how outré), I'll just attack the economically-ignorant things he says. Um, at least I think it's a he. Kim is one of those sexless names, you know.

But in a free-market situation for education, which vouchers would theoretically produce, the poor would get the worst quality education of anyone in the country. Do we really want that? Since all the studies say that education level is the best predictor of future income, wouldn't we be setting up a system that ensured a permanent lower class? It seems like we'd be denying the poor the single most important antidote to being poor.

Many poor parents realize this, and pour a higher percentage of their resources into education. Some don't. Remember that poverty is not a disease of the stupid, yet some people who are poor will be stupid. The existance of some young people who are badly educated by their parents does not mean that all young people should be badly educated!

[...]Well, there's only so many jobs. If the best 30% of jobs go to the 30% best educated, then it won't wake any difference if we improve the education of the poor if it doesn't increase in step to the other economic classes. We'll just have better educated McDonald's workers.

"Well, there's only so many jobs" is a damfool thing to say. Sorry, but it's just plain silly. Think about all the jobs that exist right now: grass blade straightener (think of all the blades of grass that get bent over in parks), garbage washer (don't you think it's horrible that garbagemen have to endure smelly garbage?), glass picker-upper (every minute, another glass bottle is broken in America). Okay, enough abuse. The problem clearly is not jobs. There are plenty of jobs out there, most of which suck. The problem is not JOBS (yo, politicans, read this sentence again!) the problem is capital.

Capital formation is the #1 primary problem facing people. If not for the presence and utility of capital, we would each and every one of us still be scratching in the dirt for our living. Not that I wish to demean anybody who makes the choice to scratch in the dirt! It's just not a job that I'd choose to do for my sole source of income.

I really ought to be linking to Human Action by Ludwig von Mises (pronounced like pieces). He points out that there are generally three commercial roles (and it must be noted that these are roles, not people): the laborer, the entrepreneur, and the capitalist. Here is generally how commerce works:

1. The entrepreneur conceives of an unease in people.
2. The entrepreneur thinks of a way to fulfill that unease.
3. The entrepreneur locates a capitalist to get capital.
4. The entrepreneur pays capital to the laborers to create the product, buys them the equipment they need, rents the building, etc. All of these are a capital expense, because there are no sales yet.
5. The entrepreneur sells the product to customers.
6. The entrepreneur pays the capitalist for the use of his capital.
7. (Note that the laborers have already been paid out of the capital).
8. The entrepreneur rebuilds the pool of capital to pay the laborers for the next production run.
9. If anything is left over, the entrepreneur keeps it.
10. If the entrepreneur makes a lot of money, other entrepreneurs are attracted like flies to garbage.
11. If the entrepreneurs doesn't make any money, he leaves the business to succeed or fail on its own.
12. Over time, the competition reduces the entrepreneurial profit. In order to make more money, the entrepreneur must create new businesses, new products, or new cost savings. An entrepreneur must keep innovating to make money.

There is no shortage of jobs. There is only a shortage of capital. Capital comes from savings. Who generally saves the most? The wealthy. That is why taxing the wealthy is a regressive tax. Over the long time, taking most of your tax dollars from the rich leaves the poorest worse off. It's called "eating your seed corn" and everybody knows that you only do that when you're most desperate, right?

Am I missing something here? I hope so. I think the best solution to the educational crisis would be to delink school spending with property taxes, which produces the same sort of perpetual underclass I describe here, and instead federally fund it. But that's not currently politically viable, so vouchers seem to me a second-best solution.

Vouchers are definitely a second-best solution. They create a market, but it's not a terribly free market. Vouchers will inevitably come with strings; whether tests or certifications or minimums, vouchers substitute one really bad bureaucracy (the public school system) for a better bureaucracy (the voucher system). You still have population A spending population B's money; never a good idea, and the root cause of a low-quality educational system.

posted at: 23:47 | path: /economics | permanent link to this entry