Charging tuition at public schools

A quick Google search reveals very little on the topic line outside of plans to waive or charge tuition to students from outside the community (outside the school district or foreign students).

I'm referring primarily to primary and secondary education, not college. Still, there's this article in The Nation which notes that the nation's colleges, which Americans attend in higher proportion than most other nations including those in Western Europe (see this and this for example), are increasingly private. The article is slightly misleading, as it mentions that free college began in 1862 and continued until the 1960s, but has been getting costlier since, without once mentioning the fact that attendance is up significantly since both of those periods. Why? I'm guessing greater returns to education, especially in the last 15-30 years.

My point is that charging tuition at public schools isn't as radical as it sounds: it was taken for granted by Jefferson, perhaps the earliest strong advocate of public schooling. In "The Diffusion of Knowledge", Jefferson says,

Sec. XIV. A visiter [sic] from each county ... shall be appointed ... who shall call and preside at future meetings, to employ from time to time a master, and if necessary, an usher, for the said school, to remove them at their will, and to settle the price of tuition to be paid by the scholars [emphasis added].

Sec. XV. A steward shall be employed [to cook and clean, etc.] ; the expense of which, together with the steward's wages, shall be divided equally among the scholars boarding either on the public or private expence [sic]. And the part of those who are on private expence [sic], and also the price of their tuitions due to the master or usher, shall be paid quarterly by the respective scholars.

(This is from Jefferson: Public and Private Papers, but many other interesting education-related Jefferson quotes may be found here) I have stated before a preference for this type of public schooling for which primary schooling is free for all or at least tuition is means-tested, secondary schooling tuition is also means-tested, and advance to further schooling depends on ability (with tuition picked up for those who can't afford it).

Think of it as a co-payment. Or as a revenue-boosting program. In my earlier post, I slightly-tongue-in-cheek referred to it as a Pigouvian tax on a system that fails to provide a public good (analogous to the normal Pigouvian tax on transactions which yield actual public bads).

Tuition at public school is no panacea. People rightly protest about the wanton spending of public money, pointing out that allocating tax money without stipulating outcomes will not automatically fix problems. Others will ridicule such protests because they believe that all public school problems are the result of underspending, but they would be wise to remember that spending is an input, not an output. However, the additional revenue from tuition may address some problems, and it will also give some impetus to people seeking a cause for their voice. They can, in effect, go to the board and demand something for their tuition dollar which they only pay as a result of sending their child to that school, something which they can take away by exiting that school and going to another. They cannot plausibly threaten to take away their tax dollars, which are usually levied against property regardless of whether you have children in a school or not. It is funny that citation of Hirschman is usually done by the left in order to argue against vouchers, but people doing so fail to recognize how Hirschman revised his own argument and fail to recognize that payment through taxation alone does not give them a plausible threat of exit.

I'm certainly not the first person to have this idea, as evidenced by these letters to the editor (see this and this). However, I'm surprised that it hasn't occurred to more people. According to the recent Wall Street Journal ($) article, "Parents Rebel Against School Fund-Raisers", school fundraising has become so necessary that it has spawned both a cottage industry and a rebellion. According to the article, "The association of principals survey shows that 76% of schools expect to hold between one and five fund-raisers during the 2007-08 school year -- and 3% of schools could hold as many as 15." The cottage industry is there to reduce the agony of fund-raising with pre-packaged promotional offers:

Charles Best, a former high-school social-studies teacher from the Bronx, N.Y., created donorschoose.com, a not-for-profit Web site that teachers in more than 5,900 schools have used to raise nearly $12 million in the past few years. The site lets teachers, students and schools alert parents, friends, families and businesses via email and word-of-mouth to the individual projects that teachers need help funding. The philanthropically minded go online, read about the project and its needs, and then contribute. The site currently works with schools in just 10 states. It will roll out nationally in the fall.

Even still, parents are trying to get out of selling crap nobody wants to people who really only buy because we all believe in supporting education, so they are apparently trying to figure out how to write checks directly to the schools, teachers, and coaches.

At Dutch Neck Elementary School in West Windsor, N.J., more than two-thirds of the school's families voted to do away with traditional fund-raisers two years ago and to instead rely on a "Just Write a Check" campaign. The school raises about $15,000 annually with the new campaign, slightly less than a traditional fund-raiser, "but parents like this program so much better because they don't have to solicit donations," says Anita Grueneberg, the school's PTA president.

Why not simply call it tuition and formalize it?

More on the Conservatism of the Left

What are the hallmarks of conservatism?

• Defense of traditional methods and beliefs
• Resistance to change
• Disregard of methods and beliefs used or held by foreigners as un-American

Nothing is more cliched than the defense of public schools by the American Left.

They defend the status quo to the death. No matter that real, per-pupil spending doubles every few years, no matter that test scores are flat or falling, no matter that students are signing up for remedial classes in college or at their employer's in droves. The answer is always the same: there is nothing wrong with it except that it is underfunded.

Suggest any change -- smaller districts, privatization, year-round schooling, changes in the way curriculum is selected, homeschooling, vouchers, or apprenticeships -- and they oppose it.No matter that private schools are all the rage in India, Japan, Eastern Europe, they don't want anything to do with it. Public schooling is an American institution.

For example, see this. It contains several very specious arguments about access to specific public school programs for people who otherwise homeschool. For example,

"One argument that home-schoolers make in favor of access to extracurricular offerings is that they pay taxes that finance the public school enterprise. Therefore, they claim, they are entitled to take advantage of the school's offerings to the extent that they and their children are interested in doing so.

[...]

"This argument may sound persuasive, but it is based on a faulty premise about a taxpayer's entitlements. Paying taxes is not the equivalent of paying tuition for public school. If it were, then people who have no children, or whose children are grown, would not have any obligation or reason to pay. Yet we all pay taxes, regardless of whether we have children and of how many we have."

Note that this whole part of the argument is misdirection. It begins with a statement about whether taxes are tuition, but never actually refutes the claim. What the author is essentially arguing is that public schools are a take-it-or-leave-it package deal: you can either attend and get all of the goodies, or homeschool and get none of them. The underlying truth about school funding is that funds are doled out by many states on the basis of school population, and allowing homeschoolers to participate in some programs might lead to undercounting and therefore underfunding. True enough, but that is not something the author gets around to discussing.

The entire argument, however, rests on a faulty premise itself: that other people should pay taxes to support schools, regardless of whether they have children or not, on the basis that there is a public good generated as an externality. The author makes only passing mention of the private benefits (when pointing out that public schools provide them without charging a fee, as if they were charitable institutions full of volunteer teachers). On average, people's income is related to their educational attainment. The existence of a positive externality is not everywhere and always a reason for moving a transaction totally into the public sphere, nor is it any reason why the institution must be both publicly funded and administered. The author simply assumes away any question of whether the student or his/her parents ought to contribute some percentage of the cost of education, and this is easy to do because the author analyzes only on the basis of the externality, the side-benefit, while hardly acknowledging the main benefit which is private.

This is vulgar Second Best theory at work, yet again, and it proves as bankrupt as in other venues. To review, Second Best consists of a three step process:

1. Identify a market failure (in this case, a positive externality)
2. Recommend a policy solution ("free" public schools)
3. Declare victory (ignore any negative externalities resulting from the policy, ignore any potential market-based alternative solutions)
   

I carry a cell phone, and I can use it to call the police if I see a crime - should the government pay for and operate cellular phone service on that basis alone?

End of the Race?

I have a passing interest in analogies which cause people (including me) to question their basic beliefs and mythical stories. This one makes an analogy between fossil fuels and education which is designed to make people question their commitment to "free" public education or to fuel taxes.

What about natural resources in general? There is an analogy which suggests the earth is like a spaceship, equipped with all of the things we need for life*. As we race to consume those resources, we are only depleting them faster and racing towards our own doom. Eventually, so the theory goes, we will run out of new places to explore, prices will shoot up, and we will wish that we hadn't been in such a hurry.

Does the same logic apply to labor? As transnational corporations search for the cheapest labor, they thrash from one previously uncharted territory to the next: first Japan, then Mexico, then Korea, then Vietnam, then China. This is the so-called "race to the bottom".

What happens when that labor race is over? The consequence claimed by "pro-labor activists" is that all labor will be paid at the same low rate as the cheapest labor, but this relies on such assumptions as equal productivity and zero transportation costs (those activists are frequently either self-interested, i.e. union workers, or mistaken in their theory and therefore anti-labor in practice). The actual consequence is that once you have hired the last untapped laborer, the same thing will happen as when you open the last natural resource mine and still have unsatisfied demand: the price of labor goes up.

That is exactly what is happening in China. See, for example, here at Gapminder (check off the China and USA boxes and watch Chinese income start to catch American income, noting that American income does not fall, directly contradicting the "race to the bottom" theory), here, here, here, and the latest, which I have both on good authority and from here is that there is now a shortage of stitchers on the apparel fabrication lines. They are no longer living in abject poverty, and they are becoming consumers who will eventually demand more of China's manufacturing output. Eventually, they may even move up to importing high quality goods - the type that are still manufactured here in the US. Thus, we have little to fear from export-based foreign countries, and they have much to gain. By blocking them out with trade protection, we also grant truth status to the claims of their demagogues that claim America wants to keep them poor.

Go back to the Gapminder graphic and note something: Africa is the home of last remaining unexploited workers. They could use a sweatshop or two to pull them out of their poverty.

* In reality, the earth was randomly equipped. We happen to have discovered uses for many of those resources, adapting them to our needs. We have barely scratched the surface. "Spaceship earth" is an idiotic parable.

Veg-er-tarians

I keep discovering libertarian vegetarians. It runs counter to the hypothesis that all libertarians are basically libertines, that they just want to do whatever they want to do when they want to do it without regard to morality, social consciousness, or whatever. It does, however, confirm the hypothesis that libertarians ..., uh, ... have "different" or "eccentric" ideas about morality.

No doubt this is not an extensive list. I wonder if any of the bloggers in the list below would like to join a Circle?

• Vernon Smith - not a blogger, but fairly well known libertarian
• Bjorn Lomborg - not a blogger, but fairly well known libertarian (at least more libertarian than his enemies would like)
• Megan McArdle - well known blogger and libertarian, vegetarian dabbler
• Jason Scorse - somewhat libertarian (he gets virulently attacked when he posts on free market environmentalism, but seems to have unrealistic expectations of Democrats), but committed vegetarian

[UPDATE]

• Kevin Meyer - Did not know it.
  
• Kevin Carson? - Not! (I thought there was a chance, but he disabused me of that notion. Maybe we can change his mind?)

[UPDATE 2]

• Julian Sanchez - 15 years!
  

What would it be called:

• Classical vegetarian?
• Veg-lib?
• Lib-veg?
• Vegertarian?

And what would we do? Commiserate?

It did occur to me that we might appeal to the business sense of a few key national chain restaurants to take us seriously. Instead of the old-school, PETA-style approach (spray painting "MEAT IS MURDER" or "COW KILLER" or whatever), we could send them letters that attempted to convince them of the efficiency and profitability of incorporating more vegetarian-friendly recipes. By this, I mean

• c'mon guys, does every dish have to have meat in it? Can't you just leave one bacon-free bean selection on the buffet?
• The breakfast buffet at Furrs and Golden Corral have bacon, sausage (links, patties, etc.), ham, steak, ground beef, etc. So why do you feel compelled to put diced ham and chopped bacon in the potato and other dishes as well?
• I shouldn't have to quiz the server and the cook on soup contents - mark the menu when they are vegetarian, and if it's a soup du jour, educate the wait staff
• I wonder how much the risk of bacterial contamination costs restaurants each year in terms of liability insurance, cleaning, the effect of strong oxidizers on the capital equipment, lawyers, staff training, and refrigeration? Some of this would go away if you eliminated or drastically reduced your dependence on meat.
• A well-cooked vegetarian meal could be just as enjoyable as the obligatory slab of flesh, we would pay similar prices for it, so it could be more profitable (at least, it would be until your competitors figured it out)

There are lots more social cost points to be made, but I wouldn't include those in a letter attempting to explain the business case for going vegetarian (or at least vegetarian-friendly).

Absent from school: Pigou

Let's just stipulate that the use of fossil fuels creates negative externalities. Whether these are supporting terrorists and despots, pollution, AGW, or simply underwriting a lifestyle that cannot be sustained forever, I am indifferent. In any case, this is the case made for public intervention in that market. There are two main responses: One is to subsidize or mandate alternative energy, the other is to raise taxes on fossil fuels with the desired result of shifting investment from fossil fuel exploration and extraction to alternative energy research and development. The former is thought to be the worst approach for a variety of reasons, including the argument that the government is a poor decision maker, that it leads to rent-seeking by interested parties (like ADM lobbying for ethanol from corn), and that it shifts money from taxpayers to political entrepreneurs with lots of deadweight losses in between (spending on lobbyists), whereas the latter merely raises the costs of fossil fuels, possibly buttresses state coffers (allowing us to pay for public goods like defense), and does not put the government in the place of solution-picker.

That sounds plausible, even if you might pick at some of the details and ultimately argue that the best solution would be to get government out of either punishing or rewarding any industry. Let's just say that that is a standard wonk description of the problem and solutions.

So let's look at an industry that has some parallel: public education. In this case, the schools should be providing public goods (literacy, numeracy, critical thinking skills, and other skills that Jefferson would argue are critical for the proper function of a democracy), but are widely regarded as having underproduced them. This is apparent whenever the left demands more spending or when the right demands more accountability. Very few will argue that it is perfect the way it is, and usually when they do, they always come back with, "but it could be improved" (usually with more money). My analogy turns on the idea that overproviding a public bad is similar to underproviding a public good. I also believe, but do not intend to prove here, that public school problems are institutional in character: that they will always underprovide no matter how much money you spend on them in the same way that pollution is always overproduced no matter how expensive oil is in a free market (those of you anti-free marketeers please note, however, that the efficient amount of pollution is not 0 and that the heavily regulated soviet industries tended to pollute even more).

The two responses analogous to those above for fossil fuels would be to subsidize the alternative or to change the price structure on the failing industry to make the alternative look more attractive. The former exists as a policy choice in the form of vouchers, charter schools, and mandatory testing; they are at least as controversial in education policy as alternative energy subsidies and mandates are in energy policy. The Pigovian tax response does not currently exist: it would consist of charging more at the pump schoolhouse. In other words, charging tuition for public schools.

Take a few breaths and allow the shock to wear off before continuing.

I propose that we start charging a moderate, nominal tuition for attendance at public schools. I think this can be made palatable to all political parties except the rabid left and religious right. To the former, who think that all education should be free, I simply point out that it is not and cannot be truly free; someone must pay for it because buildings and equipment must be built and maintained and teachers should be compensated fairly; to the extent that the wealthy are made to pay for it, they will be interested in controlling it; and they have many ways to exert influence in the large, complex state that y'all prefer. The "free" universities in Europe are not as successful as those in the US (see Figure 9 in this, our higher per capita spending results in a better healthcare education system according to this), and the European systems are under tremendous pressure to start charging tuition because the current system is underperforming. The problem for the religious right will come up below. To everyone else, I think you'll find that I can address your concerns.

First, I have no more problem with making the tuition means-tested than I do with providing relief for the poor on fuel taxes (ah, funny how you forgot to be indignant on *that* point, eh?). In fact, it's easier to bring in your 1040EZ and get a waiver at the schoolhouse than at the pump, where it must be done with something like the EITC. Many public school systems already have a mechanism for charging tuition for out-of-district students (not alway to the student: sometimes to the sending district).

Second, I'm talking about nominal tuition: $100 - $500 per year per child. Not the full value, just a little. And I'm not advocating reducing the public expenditure on public schools. A school with 1000 students (the average high school in the US has about 752) will suddenly find itself with an additional $100-500k per year for facilities and teachers. Neat, huh?

Third, schools could charge whatever they decide locally. Schools in wealthy districts would charge more than schools in other districts. This would decrease the pressure on legislatures to equalize spending (more tends to get spent in wealthier neighborhoods now), and poorer schools would therefore find it easier to get more public spending sent their way. And to the extent that the wealthier schools would charge and spend more, and therefore be better, poor enrollees would be better off at those schools (remember, I favor making the tuition means-tested, so they can free ride, same as now).

Fourth, I believe that we should be more circumspect about the subsidies we provide for breeding. If you are concerned about fossil fuels and the environment, you should be at least as concerned about the pressure of population on the environment. And for those of you on the right: how far are you willing to take this "personal responsibility" idea? Isn't it a little unfair that people with no children have to subsidize those of you who do? Why should married couples enjoy both income tax breaks and subsidies for raising their children? You don't want to pay for the pill, condoms, or abortions for other people? Fine, but why should we pay for your refusal to use the pill, condoms, or abortions? Let's face it: the two-income family depends on the public school-as-babysitter as much as an institution of learning, and that in turn subsidizes the culture of conspicuous consumption. Incidentally, contrary to popular myth, people on public assistance tend to have fewer than the average number of children, while people who vote Republican are known to have more children than those who don't. "Free" public schools are an example of a public institution that disproportionately supports those who complain most about the taxation that pays for it.

Fifth, to the extent that schools charge some tuition, they make it possible for alternatives to rise up in a similar way a carbon or fossil fuel tax directs makes research into alternatives possible. If a school charges $500 per student per year, and a competing private school or tutor charges $1000 per year, the difference is more palatable than between the "free" public school and the private school. You get similar results to voucher and charter school plans, but

• without the vouchers that "divert" resources away from public schools (they don't in per pupil terms, if you do the math),
  
• without setting up situations where the state may be sending money to religious schools and charlatans,
  
• without therefore putting the state in the position of certifying schools to receive vouchers,
  
• without having to repeal the Blaine Amendments,
• and without giving the state an opening to start killing the independence of private schools with onerous regulations.

Questions?

UPDATE: Apparently Tyler Cowen has reached the same conclusion:

I would be happier with vouchers if we were starting from scratch in designing educational institutions. And while I agree with Jane that children have a positive right to an education, I think the out-and-out laissez-faire option doesn't get enough attention. Keep the public schools we have, but make them charge tuition.

Sustainability Conference II

Sustainability Conference I

The attention given to solar was completely unrealistic. I happened upon Kunstler's blog; he accused Democrats of as much "magical thinking" as Republicans in this post. WRT solar power, he's right. There was no realistic discussion of this: a few people were obviously interested in it, and a few had done enough research to know the reality, but did not seem to have been dissuaded.

1) The keynote speaker said the cost of solar is going down. Bzzt. As I noted earlier, it has been going up in lockstep with oil prices, though it seems to be plateauing. If each dollar buys less solar panel, given a fixed or declining amount of money left over after other purchases (which is what the End of Suburbia was preaching), you aren't going to be able to buy as much solar in the future. My suspicion is that there are two causes for the rise in price: increasing demand with flat or slowly increasing supply, and subsidies. The former was driven by the increase in fossil fuels in 2003-2006, and may eventually correct itself. The latter is self-fueling (see below).

2) How much power does the average user use? The US national average in 2001 was 888 kW-h/month. Mine is something like 600 kW-h per month. If I had a 1 kW solar array and got 6 hours insolation (direct solar exposure) per day for 30 days, I could generate 180 kW-h per month. That's 1/3 of what I need, 2/3 if I double the size of the system. And I live in New Mexico where we get 6-7 hours of insolation a day (and we have something like 260 cloud-free days per year); the calculus is much tougher if I live in NYC or Seattle where they get far less insolation.

3) Two costs were given at the conference. One was $16,000 for a 1.5 kW system (roughly $10/W). Another was that the typical system costs $0.25 - $0.40 / kW-h to operate. Someone asked if that included sell-back (net-metering). The answer was obscure (I don't think the speaker heard it correctly), but the proper answer should have been: no, but it doesn't matter much. You can only sell back at the rates you pay for electricity, which is about $0.10/kW-h, so it's still 2.5-4 times the cost of commercial supply, i.e. it's no free lunch. Also, you can only sell back to the electric company up to the amount you use. Look at it this way: if you are currently paying $60/month for electricity, you will be paying $90/month for the loan for the system after accounting for rebates and sell-backs. You will also still have that monthly bill from the electricity company, but it will only consist of the subscriber fee plus tax.

Note that these were for grid-tie systems. An off-the-grid system will run at least twice as much, and the batteries require extra care (a well-ventilated area to dissipate the hydrogen generated during storage) and replacement on a regular basis (10-20 years). Incidentally, "grid-tie" and "net-metering" means that the PV system produces more than you use through most of the day, produces just about what you need in the afternoon/evening, and you rely on the grid at night and in the morning; which means someone still has to run a power plant.

3a) Let's look at this. The 1500 W system will be operational in a location that gets about 6 hours of insolation per day. That comes to 65700 kW-hours in the 20 year lifetime of the system. That means the cost of electricity is about $0.24/kW-h, rather toward the low end of the other prediction. This doesn't take into account system degradation, line losses, and so on, which would all drive the cost per kW-h higher. Take the $6,000 tax rebate back and it still comes to $0.15/kW-h. This system was enough to cover the speaker's own daily use.

3b) One thing that occurred to me during the movie I discussed in the previous article (link at top) -- and was later pointed out by one of the builders in the panel session -- was that in the coming era of higher energy costs (remember, this is their basic assumption), the system would be more and more valuable. In other words, if electricity costs increased to something on the order of $0.20/kW-h, the system would be viable at the low end of the calculations above. It would definitely pay for itself quicker if energy costs rose above $0.25/kW-h. That's an interesting bet, especially if you switch to a plug-in hybrid.

4) One of the builders, a self-described long-time left-wing activist, made a point of saying how the Bush Administration had "hammered down" any subsidies for solar power.

4a) Let's review the Clinton Administration environmental initiatives:

• Signatory to Kyoto, never submitted to the Senate for ratification, never did anything about it.
• Some 11th hour rules made in 2000 (first directed in 1996) on arsenic in drinking water changing the maximum exposure level.
• Propose a “Million Solar Rooftop” program, but never pressed it. That's about it.
  

This chart from here shows that Clinton Administration funding for Climate Change programs basically increased from 603 million to 1.1 billion. Not impressive.

Funding for Technology Programs to Combat Climate Change (in millions of dollars)
1993	1994	1995	1996	1997	1998	1999	2000 Estimated	2001 Proposed
603	796	960	788	764	825	1,009	1,095	1,432

This isn't to say that the Bush Administration is exactly the Teddy Roosevelt Administration (or even the Nixon Administration) in terms of its environmental activity, but Clinton only topped him in rhetoric. However, from what I can find, current Climate Change spending is somewhere in the $3-4 billion dollar range. Clinton: 40% increase in 8 years, Bush 400% in 6 years. Of course, since you can't actually pin those numbers down to find out exactly what we're getting for the "investment", I'd guess we had a case of Clinton = Bush = 99% BS. I say that because I suspect that both administrations counted obvious boondoggles (such as ethanol from corn programs) as Climate Change remediation.

I also found that the Bush rhetoric has been a regular but undiscovered drumbeat. This article's author thinks the rhetoric is new, despite earlier press releases like this, this, and this. I think Kunstler is right to be cynical.

4b) Let's review the politics and economics of subsidies. Subsidies are sometimes known as "corporate welfare", which, as we all know, both Republicans and Democrats are against. It is a mystery how they keep getting passed, init? In the solar industry, the subsidies happen to help out little Mom & Pop companies like British Petroleum, Canon, Kyocera, Mitsubishi, Sharp, and GE Energy. Also keep in mind that the subsidies are not secret: the suppliers know about them, too. They know that the bargaining limit for prices will go up by the amount of the subsidy, so they can basically leave production levels where they were before the subsidy even as they raise prices by the amount of the subsidy. The subsidy is no benefit to the consumer when it all goes to the manufacturer, so this merely becomes transfer from taxpayers to PV manufacturers. This is probably one reason for the rise in PV prices, especially in Europe. Still in favor of them?

Conclusion:

I believe we would be much better off with fossil fuel energy prices that more closely reflected the social costs. That's what Mankiw's Pigou Club promises, but it's also what a cap & trade program would bring. Both Kyoto and the 1990 Clean Air Act contain forms of cap & trade programs; the SO2 program in the 1990 Clean Air Act is thought to be very successful (which Administration signed that?) at reducing Acid Rain (resulting in things like this). Raising the cost of production of coal-fired or natural-gas-fired electricity by requiring providers to buy CO2 permits does a much better job of encouraging alternative solutions for two reasons:

First, people might not choose solar. They might choose to cut down on energy consumption with, for example, more insulation, better house design, more efficient vehicles, and/or better urban design. This would be a much better way of balancing our needs with the supplies and AGW forecasts because it would stretch existing supplies. This is the soft energy path favored by Amory Lovins. It is also an example of the principle of substitution noted by Julian Simon, and an example of adaptation recently suggested by Roger Pielke in Nature. Cutting energy use could also be combined with the adoption of alternative energies, enabling us to get there easier. In other words, rather than replacing my entire 600 kW-h usage with solar, I could perhaps cut my energy usage by half and then buy a 1500 W system that meets all of my needs.

Second, making fossil fuels more expensive would not subsidize and therefore support the least efficient providers of solar energy. If there are, say, three providers, the most efficient (least cost) provider would sell all he could make at a price that the competitors could not match up to the point at which consumers would turn to the next least cost provider. Once demand rises that high, the least cost provider would raise his prices to those of the competitor and pocket the extra income because the only alternative consumers have is not the least cost provider. If demand is high enough that the two most efficient providers cannot meet it all, they will raise their prices to meet those of the highest cost provider. As demand continues to increase, the least cost provider will see higher returns, and can therefore command more investment to expand his facility to the point that he might put the least efficient (highest cost) provider out of business. In such an environment, the highest cost provider has an incentive to try to improve his processes to match those of the least cost supplier; either that or risk going out of business altogether (which is fine, since it leaves the two lower cost providers in business at the prices commanded by the second lowest-cost provider). The subsidy thwarts the entire scheme by allowing even the highest cost provider to raise prices in order to capture some of the subsidy from the consumer. It is thus an incentive to capture market share and a disincentive to do it by increased efficiency at using inputs. More investment will go toward marketing than engineering and production management.

Unfortunately, the default setting of people at these conferences is

Democrats good, Republicans bad (and libertarians evil embodied)

Or, alternatively

Command and Control, Tax and Spend, Policymaking Government Good, Market-based Reform Bad

If they could perhaps be bumped off their default settings, I think I could stand listening to the rest of what they had to say. Unfortunately, they wanted to start the second half of the conference worshipping Cuba as the example of the path we should take with another film called The Power of Community. Sorry, I am actually offended by cults of tyrannical, murderous, autocratic personalities.

NOTE: Now that I'm looking up the Cuba film, I'm sorry I missed it. Apparently, one of the responses to the loss of their patron, the Soviet Union, and the subsequent collapse of their system was to establish farms with property rights (property rights in a broad sense - it is owned by a local community) and private markets (at which said community trades). The same thing that brought China out of the Cultural Revolution. Private property saves the day again?

Still, it's limited freedom within an overall oppressive atmosphere. One rooftop farm has this description: "Running free on the floor are gerbils, which eat the waste from the rabbits, and become an important protein source themselves." Yummy, can't wait. Most reviews of the film are the same fawning fluff, but only in a picture caption on this did I find a reference to the private markets. And abelardlindsay comments on The Oil Drum post about the film that Cuba is much less efficient at turning energy into wealth than its neighbors.

Sustainability Conference I

I attended a sustainability conference this weekend. It started with scariest "documentary" ever seen, "The End of Suburbia", a very one-sided point-of-view film that does not attempt to examine both sides of the Peak Oil issue (or at least the portion they showed didn't). The only two laughs of the first half of the conference were sparked by James Kunstler's use of "clusterf#@&" and "$#!tstorm". Though they carefully crafted the message to point out that "Peak" doesn't mean "End of", the editors then went on to paint a picture of 21st century living devolving into 16th century living. Jim Hamilton's How to Talk to an Economist about Peak Oil is highly recommended reference material, including the comments.

Politically, the film was relatively balanced: when they talked about politicians not getting or acknowledging the problem, they started with photos of the Kerry campaign. When discussing increasing militarization of the Gulf region, a commenter noted the Carter doctrine. Clearly, the Bush/Cheney doctrine and the neocon plan to re-shape the middle east is a continuation of that doctrine (Carter/Reagan involvement in Afghanistan, Iran, Lebanon, Bush I in Kuwait, Iraq, Somalia, Clinton in Kuwait, Afghanistan, Somalia, Iraq, Sudan).

I have two notes on this: In 1956, Hubbert predicted peak American extraction in 1965-1970. It actually occurred in 1970-71. Unfortunately, most of his followers have portrayed production curves as if they were symmetric, half before and half after the peak (notably, Hubbert didn't, if the tail on this is any guide). Technology has been improving, including technology for scraping the last little bit out of every well, so more will be pumped after the peak than before, as shown in the chart below (note that the actual (blue) line is gradually drifting above the pseudo-Hubbert-style symmetric prediction (yellow)). What does this mean for world oil peak? The counterargument is that, yes, technology has been improving, so we're only pumping it dry faster than ever.














Other note: The only alternative fuel covered by the documentary was hydrogen. While I agree with the assessment (hydrogen is not an energy source, it is an energy carrier), hydrogen is not our only potential fuel. Nor is fuel replacement our only potential hope (see next post on this subject).

This is hateful

But I laughed out loud.

Hirschman and Olson

In this article, I briefly mentioned a problem that Hirschman had overlooked with respect to the use of voice in improving school quality. Upon starting to read Olson, two more occur to me.

The first has little to do with Olson. It has to do with Hirschman's oversight. In Exit, Voice and Loyalty, he makes the case that as quality declines, consumers differ in their responses to that decline. The work overall is brilliant and addresses a set of issues that economists have inadequately treated: the mechanisms by which consumers respond to declines and by which those responses affect the declining organization. But it seems to me that Hirschman similarly has overlooked a key point: how does decline occur in the first place? Is it due to a set of decisions carefully crafted and acted upon, or to outside factors, or to gradual shifts in the organization's attention?

The implications are serious. If, for example, the organization has decided to take a new direction, those decisions could be reversed when the customers' exercise of exit or voice has the intended effect; the more explicit the link, the easier to reverse course. On the other hand, if the decline is due to outside factors, then management may not know how to respond: there is no decision to reverse, and the outside factors could be causing the problem in a non-obvious way. For example, it could be that society itself is creating more difficult conditions in which to conduct education, with less emphasis on study and discipline and more emphasis on distractions. Or the quality decline could be a perceived decline in comparison to other, similar products, in which case the organization needs to research the underlying comparison and formulate a responding change.

Finally, the decline in quality may be due to a shift in the organization's attention (their mission) toward, for example, greater employee morale rather than toward greater productive outcome. If that is the case, it could be difficult to reverse because the shift was probably determined by other real problems such as high turnover, increasing costs of retention, and increasing costs of recruitment. Reversing course here is in fact a requirement for more resources so that, in the common example, both more guns and more butter be produced.

Quality changes - real or perceived - that result from poor decisions, new environments, and new organizational motivations all require a different set of management responses to the resulting expressions of dissatisfaction. I suggest that exit and voice may interact with each of them with differential success. For example, voice would seem to interact very simply with poor decisions, possibly even preemptively. On the other hand, voice may inform decision-making in the new environment problem, but exit would inform experimental entrepreneurs searching for a better answer. Neither exit nor voice would seem to help in the third case (mission shift), since the organization might discount the voice as uninformed about the true nature of the problem, while exit would only serve to starve the organization of the "required" new resources and thwart the proof of what they have already decided is the correct answer. Please note that this list of possible causes and responses is not exhaustive or even representative or realistic. These were merely the first three I thought of; a true set of causes for decline might be much larger, but perhaps only a few dominate the history of failure.

The second problem has much to do with Olson. In the introductory material to The Logic of Collective Action, Olson makes the case that small groups are more likely to achieve the desired outcomes, and that groups will tend to sustain costs until the outcome desired by the participant with the largest share is achieved. Hence, group members will tend to exploit the largest member. This seems to support Hirschman, since it supports his thesis that the rest of the community will rely on the parents with the greatest interest in quality to lobby for the restoration of quality. However, the problem is that once that person gets what they want, the group will tend to fall apart because that person will then stop contributing. We might find, for example, that one parent insists on getting AP classes in the high school, and stops lobbying when they get them. That works great for that person, but what does it do for parents with special needs children? The school, with limited resources, cannot choose both without an increase in resources, but the most effective lobbyist has now exited just as effectively as if they had gone to another school. If they had *actually* gone to another school, the additional resources would now be available for the parents of the special needs student - oops!