What should we want in a society?

It's a hard question to answer in a short blog post, much less in a long book, or in a lifetime of writing. But let me take a stab here, in one sentence:

I want a society with incredible economic dynamism, and the social institutions to assist the losers of that dynamism.

What does that look like?

Well, for one, I want labor churn. Sure, people get hired and fired regularly. But private companies have great difficulty in laying people off these days, to the point that many are burdened with so-called zero-marginal product workers. We should make it harder for people who get fired to launch lawsuits.

This is particularly important in public sector employment, where the "no firings" problem is even worse. Public sector unions should be barred from collective bargaining, and hiring/firing should be liberalized there.

On the other side of this, I want so many people to get laid off so often by failing businesses and government agencies that the stigma of getting laid off goes away. In a world where everyone is at great risk of losing their jobs all the time, it becomes virtually impossible to avoid hiring people who have lost jobs. This is more fair than a society that makes it difficult to fire people. Those who do lose their jobs in such a system have great difficulty getting back into the labor force, because of the stigma. Stigma is good sometimes, but not on this.

This great labor churn will encourage risk-taking and will destigmatize personal failure. People learn from their failures. If we can minimize the broad consequences of failure and limit failures to the local, we will be healthier as a society.

In general, our economic institutions should be steered towards continuous innovation. This means that starting a business should be very easy. Regulation should not put in hard employment caps before certain requirements kick in; that just disincentives hiring. In general, regulation should have a light touch, and each new regulation promulgated should have to pass a rigorous cost-benefit calculation. We want food safety inspections; we want drug testing; we want (some) environmental protection. Things like Sarbanes-Oxley need to go away.

The professional guilds, in general, should be fought relentlessly, for their interests are not on the side of innovation. Licensing requirements should be reduced. We should be explicitly open to new models for service delivery: nurse practitioners providing primary care; non-certified teachers exploring new types of education in decentralized settings; computer programs producing legal documents; etc. Some of these will fail, but the successes will push the overall quality of life forward.

I'm asking for a lot here, in terms of the stresses of capitalism. A lot of safe jobs will be destroyed, with successful risk-takers essentially taking some of the money now delegated to public servants.

For social harmony, great labor churn requires a robust safety net for those who are willing to work. Unemployment benefits should be fairly generous. We should even consider temporary wage subsidies for people who get back into the labor force and take lower salaries, because we want to foster an ethos of work.

I want strong community institutions and religious institutions doing the role of keeping people mentally and spiritually sane and healthy. People who are successful should happily offer some of their free time towards those who the modern era leaves behind. I also want politics to play less of a role in daily life as well. It is bad when we self-segregate from people we disagree with. We should be able to disagree without disdain for our opponents. We should also have a high degree of tolerance for dissent.

I want the government to be largely unseen in people's daily lives. We shouldn't have to think about what's going on in Washington when we think about what's going on in Portland, or Peoria, or the Pine Barrens. This implies that presidents should reduce their public schedules. Thomas Jefferson made two public speeches in office: his first inaugural, and his second inaugural. I wouldn't necessarily have the president appear so seldom, but would it be the end of the world if no one saw the next president for a couple of weeks here or there? Do we really need to know the president's tastes in music, or his opinion about local crime stories, or his thoughts on the name of a sports franchise?

Long-term, I want people not to think of the government as being "here to help." It has a lot of things to do. People's personal difficulties should be more often responded to locally than federally, when at all possible.

Lastly, of course, we should move slowly in this direction. These are big changes, and big changes are difficult to accomplish without fostering backlash and resentment. 

This is (mildly) Utopian, obviously. But this is the broad outline of what I would like to see in the country. And if you agree with me that this would be a good place to go, you should loathe the recent state of affairs, because it is basically the opposite of my position on every single point.

On the VA and Organizational Death

Unsurprising news from the Department of Veterans Affairs, courtesy of the Washington Examiner:

Every top manager of the Department of Veterans Affairs received a positive performance evaluation for the past four years, and 78 percent got a bonus in 2013, despite a string of patient deaths and falsification of records related to patient wait times, according to congressional testimony Friday. 

Agency executives write their own performance evaluations, which seem to receive only cursory reviews from their supervisors, several committee members said in questioning the VA’s top personnel officer. 

While everyone was deemed at least “fully successful” in meeting their performance goals, 57 percent of top managers were rated to have exceeded expectations and another 21 percent were found to be “outstanding,” according to testimony from Gina Farrisee, assistant secretary for human resources and administration at VA.

A very common retort to conservative criticisms of public sector inefficiency is the production of valid private sector counterexamples. And this is a perfectly reasonable retort to any argument simply that government is inherently inefficient. Large organizations, to an extent, all generate a degree of drag. Firing bad employees is difficult for private sector companies, too, what with the lengths that companies go to prevent lawsuits from former employees claiming wrongful termination. So liberals, on this point, are entirely correct: private organizations and public organizations all can be highly inefficient.

But the difference between the public sector and the private sector is not that one is intrinsically inefficient. It's the ever-present threat of organizational death.

Government agencies rarely die. If they do, it was because they were established for an extremely narrow purpose and failed to expand their mission. More often, organizations that were formed for one thing grow and expand their authorities and missions. (The World Bank and International Monetary Fund are archetypal examples on the international stage.)

Meanwhile, in the private sector, just like in government, Facebook, General Motors, Sears and most other private companies can deceive themselves with bad metrics, or saddle themselves with destructive and incompetent employees, or simply fail to fulfill the needs of their customers. But the difference is simple: barring government protection, those companies will die if they fail. Organizational death serves two purposes:

1. It puts the fear of God into managers, who are more likely to endeavor to fix their issues.
2. It cleans the economy of less efficient business models.

In a well-functioning private economy, bad business models die, and good business models live. There is a great deal of churn as this process unfolds: people lose jobs, start-ups form and create new jobs. When it's working right, more jobs are created than destroyed. Companies that are struggling have two options: either they fix their problems, or they die.

But the public economy is different. Bad models do not die. In fact, they often attract more money, at the behest of well-intentioned bureaucrats and politicians, who argue that more money can fix the issues. They may be right sometimes. But the incentives don't change, and the fear of organizational death never arrives.

One of our public policy goals should be to try to transition as much public service delivery as we can to arenas where the fear of organizational death can reign. That implies more decentralization and much less of a role for a big government. Instead, it seems to me that the recent policy regime has been to move more of the private economy into a world where organizational death is not an option. (See: General Motors.) That's a real shame.

Postscript: Using this framework, one can argue that the US military, which is highly effective at certain things while still being incredibly bureaucratic, succeeds because the fear of organizational death is supplanted by the fear of actual death, which is a far stronger motivation.

Scattered Thoughts on Higher Education

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"The good news is more young people are earning college degrees than ever before. That's something we should be proud of, and that's something we should celebrate. But more of them are graduating with debt. Despite everything we're doing, we're still seeing too big a debt load on too many young people." - President Barack Obama

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"The sad thing about a guy like you is, in 50 years you're gonna start doing some thinking on your own and you're going to come up with the fact that there are two certainties in life: one, don't do that, and two, you dropped 150 grand on a f***ing education you could have got for a dollar fifty in late charges at the public library!" - Will Hunt, in Goodwill Hunting, to a Harvard graduate student who was embarrassing his friend by spouting off grad school history cliches in an attempt to look intelligent.

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President Obama has made focusing on the cost and value of higher education a significant part of his domestic program. He has spoken out on numerous occasions about the need for increasing federal grants and loans to lower-income students. He is in the process of implementing a federally-backed ratings system of schools. And he has spoken frequently about how important college is. The quote at the top of the post is yet another pronouncement from him extolling the increase in college graduations.

All of those things on their own seem like good ideas. But I tend to think it's missing the point a bit. The higher education system in this country is too rigid and too expensive, and will only be fixed by starting to break it apart.

I will generalize a bit from my own college experience. Feel free to take or leave whatever you want, but these are the facts as I see them.

1. I majored in history in college, and had a good experience, in which I learned a great deal about a variety of subjects. I had at least 6 excellent history professors, all of whom taught interesting, stimulating classes.
2. I read a ton of very good books in college.
3. I worked harder than just about any history major I knew and rarely attended parties.
4. The average GPA is incredibly high these days in American undergraduate universities. One does not need to work nearly as hard as I did to get a great GPA.
5. My GPA and the name of my liberal arts school have been the most valuable things I have taken into my professional life.
6. I had a significant scholarship and need-based aid. I graduated with approximately $60,000 in debt in 2008.
7. Of the non-history courses I took, I look back fondly on exactly 5 of them: a linguistics class, a class on constitutional law, a class on race and politics, an educational psychology class, and a music appreciation class.
8. The best paper I ever wrote as an undergraduate, I wrote as a sophomore.
9. I learned more about formulating a persuasive argument from my own independent reading of books, blogs, and their comment threads than in school.

My conclusions from those facts: as a liberal arts major, I spent at least 4 semesters longer in college than I really needed in terms of my own intellectual development. This cost me roughly $35,000 in debt. The cost was worth it to graduate, but only because the GPA and diploma have made me more employable than I would have otherwise been. If not for the signaling value of the GPA and diploma, I probably could have gotten the exact same intrinsic benefit for much, much cheaper. This would have required the following:

1. A long list of books to read based on areas of interest.
2. A vibrant online community of motivated learners with whom to exchange ideas, perhaps moderated by history "buffs" or enthusiasts.
3. One or two semesters of a "post-high school" program entirely focused on critical reading, writing, and analysis. (Or, alternatively, cover those areas more rigorously in high school.)
4. A la carte access to courses at a major university, or at least similar online offerings.

Those four things would have gotten me 90 percent of the way to the intrinsic benefit I derived from school, at, at the absolute most, half cost. I suspect it would have been much, much lower in cost. Note that this is not about puffing up my own ego. It's about reflecting on where I could have learned the most, or grown the most intellectually. I would have been better off personally spending two additional years in the real world, learning there, reading there, and asking questions there. Instead, I spent an additional two years in the higher education bubble, and paid for the privilege to do so.

The issue in higher education remains that we conflate intrinsic benefit with a signaling benefit. But it goes beyond that. The current model takes our most intelligent, broad-based thinkers (in the liberal arts, at least), and then encourages them relentlessly to focus on an extremely narrow intellectual area for 5-7 years, in order to pursue a limited number of jobs in a field that just produces more of the same. It's a tremendous, systematic squandering of human capital.

This is not a particularly conservative line of thinking from me, but my point is that we should be thinking a lot about ways to get at the intrinsic benefits of higher education at a lower cost than what we are doing today. Decentralize this process and let a hundred flowers bloom.

Some potential objections, and my rejoinders:

1. It's different in the sciences! Absolutely. But the need for longer educational programs in more complicated fields can be addressed by more on-the-job training, or employer-sponsored education. In other words, it makes sense, on some level, for Intel, Google, and Microsoft to be paying for top-notch professors of computer science and engineering than it does for Stanford and Princeton. It would also make sense to move some of the current federal outlays on need-based aid ($50 billion+, according to the New America Foundation) into direct research expenditures, instead of counting on a Rube Goldberg-style web of cross-subsidization.

2. There is a real social benefit to college! Balderdash. There's a real social benefit to interacting with other people in all sorts of settings. Such a benefit does not require geographic isolation, class affinity, or age similarities. In fact, limiting interactions to only fellow students is part of why inequality is growing in America. Colleges become areas of sorting, and people who aren't part of it have a major disadvantage. (See Charles Murray's Coming Apart for more on this.) And even without the sorting problem, this is not a good enough reason to crush an entire generation with six figures of debt.

3. What about professional degrees? Law school? Medical school? Business school? All could be dealt with on more of an apprentice model, supplemented by a la carte coursework. Medical school is already halfway there, at least, with its residency requirements. And blowing up the professional schools would do wonders to fight the cartelization of those fields.

4. This is unrealistic! Probably true. But if we must continue to pour tax dollars into this field, we need to think more about what it is we're actually doing with the money. The current model is defective.