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June 2012 posts

Dragas Reappointed

Jonathan B. Wight

Governor McDonnell has reappointed Helen Dragas to the Board of Visitors at UVA.

This shows that if you muck things up sufficiently, you will be rewarded. The Peter Principle has been verified.

Dragas' claim to fame is that she engineered a coup (with questionable due process) against a sitting president who had committed no malfeasance. The president's only non-action was to not jump to adopt Dragas' goofy scheme to turn UVA into a University of Phoenix satellite campus. For a slightly opposing view, see Jim Bacon.

I am amazed at the resilience of Teresa Sullivan, UVA's re-anointed president, who claims she can work with Dragas. That's very much like Ceasar saying he can work with Brutus. That's a lot of forgiveness, but can there be trust?

Politically, the reappointment of Dragas lets Senate-candidate Democrat Tim Kaine off the hook, since he initially appointed Dragas and might have taken heat from Senate-candidate Republican George Allen.

Through this reappointment McDonnell signals to his conservative base that he isn't kowtowing to those damn whiny professors, who are all liberals anyway and who he thinks must stand in the way of market-driven reforms in academia. It also signals his support toward business interests, who largely run the board.

I once felt very strongly that many research universities were wasteful because so many resources go into producing research that may have little value to society. I still feel somewhat that way. Do we really need state-supported PhD programs that rank in the bottom 100? Let's get rid of weak researchers and hire faculty for their teaching abilities.

My views today are somewhat different. Not all researchers are good teachers, and research often does take away from teaching. But being a good teacher means being actively engaged in one's profession that is rapidly evolving. There is no way to do that without attending conferences and reading journals. And even better is going head-to-head by submitting your own papers for publication and critical review. All of that is a huge time commitment.

The rising cost of higher education is typically not the result of lazy faculty. Administrative programs pop up like mushrooms in the forest. Part of this is the bureaucracy assembled to ensure accountability and assessment needed for accreditation—killing forests for paper and taking up huge amounts of faculty time.

The most egregious aspect of rising higher education expenses is the very aspect that conservatives extoll—the market! Yes, in a market-driven world, schools compete for the best students by building fancy recreation centers, elaborate dining halls, and so on. That's the consumer asking for amenities, and universities obliging. Just as it nearly impossible today to buy a plain-vanilla Dodge Dart, early 1960s-style (photo), that gets you from point A to B without fuss or style, it is nearly impossible to find an accredited university without the bells and whistles.

Before you complain, remember that this has been market-driven. The reason schools raised tuition rapidly after the 1990s is because demand rose. Prices rise when consumers signal a greater willingness to buy. That's what happened over the last 20 years with a demographic surge of high school seniors combined with growing real income and assets. Otherwise intelligent people seem baffled by the rising tuition, acting as if it resulted from a grand conspiracy of faculty members. It's just the market!

That bubble is now bursting, and many universities are retrenching. But will business-driven boards get rid of the consumer luxuries and amenities or begin disassembling the liberal arts, one discipline at a time?

Adios, Foi Gras

Jonathan B. Wight

Being cruel to animals is getting increasingly harder, and that's a good thing.

The California ban on foi gras takes effect tomorrow. To produce the fatted liver of fowl the animal is force-fed, as shown in the photograph. The animal is unable to process the excess fatty food and it ends up in the enlarged liver. In a human we might call this a diseased liver; in a goose we call it a delicacy.

Anthropomorphism is always a problem: Do geese or ducks really care that they are being force-fed? Geese and ducks do not have a gag reflex, and perhaps they secretly love the fat—most humans instinctively do.

But my intuition (no science backing it) is that such force feeding is indeed cruelty. There were slaveholders who argued that slaves really couldn't feel pain either, but we now know that was self-serving bunk.

I think we search mightily to justify the status quo—to continue practices that are medieval in their understanding of our relationship to others and the natural world.

The treatment of baby cows (calves) to produce veal is at times not better. In the worst cases, soon after birth they are crammed into crates so that they can't move or develop ligaments. This practice may be ending in the U.S. by 2017, on the voluntary action taken by the American Veal Association. Veal crates are currently banned in 5 U.S. states and in the European Union since 2007.

Of course, California's ban on foi gras will simply create another black market, as in Cuban cigars or Colombian coke. Much better than laws banning these practices would be consumer rejection of such practices.

To quote Dylan, "Yes, how many times can a man turn his head/Pretending he just doesn't see?"

Pragmatic Indifference

Jonathan B. Wight

David Frum opines on the attempt to repeal Obamacare:

Even if Republicans win big in 2012, they will have to fight inch by bloody inch for changes they could have had for the asking in 2010. Truly, this is Waterloo—a Waterloo brought about by a dangerous combination of ideological frenzy, poor risk calculation, and a self-annihilating indifference to the real work of government.

Amen. Compromise ain't what ideologues want but pragmatism would have generated a better health care bill—like the one they have in Massachusetts (oops—are we allowed to say that, Mitt?).

A committee working together is only capable of making a Frankenstein, but by comparison, utopian ideological fantasies make Frank look quite… appealing.

Highlights from the Supreme Court dissenters on Obamacare case

Mark D. White

With respect to the dissent in the Obamacare decision from Justices Scalia, Kennedy, Thomas, and Alito (starting on page 127 of the PDF), I want to note several phrases that struck me as interesting, both in relation to Justice Ginsburg concurring opinion as well as Chief Justice Robert's majority opinion (discussed in a previous post here).

With respect to the activity/inactivity distinction supported by Roberts but refuted by Ginsburg, the four dissenters had this to say:

If all inactivity affecting commerce is commerce, commerce is everything. Ultimately the dissent is driven to saying that there is really no difference between action and inaction... a proposition that has never recommended itself, neither to the law nor to common sense. To say, for example, that the inaction here consists of activity in “the self-insurance market”... seems to us wordplay. By parity of reasoning the failure to buy a car can be called participation in the non-private-car-transportation market. Commerce becomes everything. (pp. 13-14)

With respect to Justice Ginsburg's expansive reading of the Necessary and Proper Clause, they say simply:

Article I contains no whatever-it-takes-to-solve-a-national-problem power. (p. 15)

Finally, with respect to Chief Justice Roberts' reading of the ACA as imposing taxes rather than penalties, justifying his vote to uphold the individual mandate, they say:

For all these reasons, to say that the Individual Mandate merely imposes a tax is not to interpret the statute but to rewrite it. (p. 24)

As many have noted already, Scalia et al's dissent repeatedly refers to Justice Ginsburg's opinion as "the dissent" rather than a concurrence, with only the final part of the actual dissent (beginning of p. 64) reflecting the fact that they lost the case, making the timing of Roberts' decision-making process all the more intriguing. Oh, to be a fly on the wall...

Affirming the individual mandate, Chief Justice Roberts wins the ideological battle on Obamacare

Mark D. White

Even though Jonathan beat me to it, let me put my two cents in regarding today's 5-4 Supreme Court decision affirming the individual mandate in the Affordable Care Act a.k.a. Obamacare.

Pages 17-27 of Chief Justice Roberts' majority opinion contain a masterful counterargument to those who argued that the Commerce Clause justifies the individual mandate because a decision not to participate in the health insurance market affects that market.

The individual mandate, however, does not regulate existing commercial activity. It instead compels individuals to become active in commerce by purchasing a product, on the ground that their failure to do so affects interstate commerce. Construing the Commerce Clause to permit Congress to regulate individuals precisely because they are doing nothing would open a new and potentially vast domain to congressional authority. Every day individuals do not do an infinite number of things. In some cases they decide not to do something; in others they simply fail to do it. Allowing Congress to justify federal regulation by pointing to the effect of inaction on commerce would bring countless decisions an individual could potentially make within the scope of federal regulation, and—under the Government’s theory—empower Congress to make those decisions for him. (pp. 20-21)

He extends the argument, as many have done but even more have ridiculed, to other hypothethical mandates based on inactivity, such as not buying broccoli healthy foods:

Indeed, the Government’s logic would justify a mandatory purchase to solve almost any problem. ... To consider a different example in the health care market, many Americans do not eat a balanced diet. That group makes up a larger percentage of the total population than those without health insurance. ... The failure of that group to have a healthy diet increases health care costs, to agreater extent than the failure of the uninsured to purchase insurance. ... Those increased costs are borne in part by other Americans who must pay more, just as the uninsured shift costs to the insured. ... Congress addressed the insurance problem by ordering everyone to buy insurance. Under the Government’s theory, Congress could address the diet problem by ordering everyone to buy vegetables. (pp. 22-23)

He sums up his point nicely here:

People, for reasons of their own, often fail to do thingsthat would be good for them or good for society. Those failures—joined with the similar failures of others—can readily have a substantial effect on interstate commerce. Under the Government’s logic, that authorizes Congress to use its commerce power to compel citizens to act as the Government would have them act. (p. 23)

He goes on to argue against most of the specific arguments for the individual mandate based on the Commerce Clause, including that everyone will eventually be involved or "active" in the market for health care, and that health care is a "unique product." But my favorite part has to be his dismissal of the application of the Necessary and Proper Clause, which many commentators have confused with an "ends justify the means" clause, but is nonetheless subject to Constitutional constraints:

Even if the individual mandate is "necessary" to the Act’s insurance reforms, such an expansion of federal power is not a "proper" means for making those reforms effective. ... Just as the individual mandate cannot be sustained as a law regulating the substantial effects of the failure to purchase health insurance, neither can it be upheld as a “necessary and proper” component of the insurance reforms. The commerce power thus does not authorize the mandate. (p. 30)

But while he wins the ideological war against the justification of the individual mandate based on the Commerce Clause  and the Necessary and Proper Clause, he affirms the mandate by reinterpreting it under Congrress' taxation power, which is exactly what the drafters of the legislation wanted to avoid.

This just reaffirms the irony of the Obamacare: rather than simply propose universal health care financed by taxation, which would have been unquestionably Constitutional, the president and the Congress tried to square the circle, avoiding the "t" word by instead requiring a more personally intrusive and selective violation of individual rights, which was (of course) questionable. In a sense, Roberts did the other two branches' work for them, allowing them to avoid the taxation issue when writing, promoting, and passing the law, but ending up with a tax bill in the end.

Former Speaker Nancy Pelosi famously said that we'd know what was in the bill after we passed it. It turns out we didn't see how to read it until Chief Justice Roberts told us how.

Health Mandate Affirmed

Jonathan B. Wight

By a 5-4 margin, the Supreme Court upheld the health care mandate.

I've always been puzzled by the legal issue. If it is legal for the state to conscript someone into the Army to work for below-market wages that is clearly an onerous and harsh tax—for which you could pay with your life. Despite the teeth-gnashing, a health care mandate is much less draconian than a draft.

The Supreme Court majority agreed with this perspective, saying a health mandate is an implicit tax for which the federal government has legal authority.

Some Christian Scientists will have their religious preferences impinged and I would prefer some type of deferment for members of these religious groups, just as we have had for the draft.

I am more concerned, however, because no law is workable unless the moral justification for it is widely accepted. If a sizable minority of Americans mount a campaign to refuse to buy insurance, that protest could threaten the legitimacy of other tax collections.

The health mandate is not about paternalism (caring for those who don't want to care for themselves). The issue is about personal responsibility. To pretend we are living in caves as isolated individuals is dysfunctional. We live as part of society, and that means contributing into a fund for national security and – now – for health care.

This is not the end of the world for capitalism. In fact, many health insurers like the idea of capturing 40 million new subscribers. It is also interesting that people who quote Hong Kong as the freest country on the planet somehow forget to mention that Hong Kong provides public health care for all.

The RTD and Warren Buffet

Jonathan B. Wight

Warren Buffet's Hathaway group recently purchased the Richmond Times Dispatch and a number of other mid-size city papers. One can hear the palpable sigh of relief and the joy of the writers, editors, and even the subscribers here in Richmond. A collective whew…. Someone bought the paper who loves small city America as much as we do. Someone bought the paper who wants to be engaged here for the long haul. That will generate loyalty and trust and appropriate risk-taking and all the other good things that keep businesses going. Buffet said he won't interfere with editorials or news stories: he leaves that to the professionals.

But wait! Think!

Would the writers, editors, and subscribers be feeling the same thing if the RTD had been acquired by Bain Capital? By Rupert Murdoch? If not, why not?

And what does the answer tell us about the type of capitalism that we would like to support and endorse? Would it be desirable to change the tax laws to encourage more Buffets and fewer Bains?

Perhaps we need to re-think our economics education, which mistakenly places profit-taking ahead of creating actual products that have intrinsic as well as extrinsic value for communities. Buffet has a passion for doing things well, and I believe that passion can bring better economic results, in the long run, than the short-run financial shenanigans of corporate raiders.

[This post was published also at Pundits Podium.]



Group Selection Theory

Jonathan B. Wight

E. O. Wilson has an essay in today's NY Times on "group selection" theory. For those not familiar with this term, it represents a companion idea to "individual selection" theory. In the familiar survival-of-the-fittest story, an individual mutation gives rise to an adaptation that allows for greater procreation, hence more of the mutated genes survive and get transmitted down the line. The story is about individual adaptation.

In group selection theory individuals live and survive in small tribes. The group that works together best using trust and members showing some altruism can overcome other tribes in which the predominant portion of individuals are free-loaders. Hence, the genes for trust and altruistic behaviors can increase in the population, even though altruists lose out in head-to-head contests with free-loaders.

Wilson believes both theories are simultaneously right. Some part of natural selection has to do with our individual strivings and some has to do with the concerted action of the group. For a book that shows the math behind how selfish individualists AND altruists can co-exist in natural selection, see Elliott Sober and David Sloan Wilson (no relation), Unto Others: The Evolution and Psychology of Unselfish Behavior (1998), pp. 24-25.

All of this is contentious in biological circles, despite the fact that Darwin himself endorsed group selection theory for humans in The Descent of Man (1871).

Those who endorse selfish individualism and greed (like Walter Williams) as a bulwark against government in markets will likewise be unhappy with group selection theory.

But we should clarify: the type of group behavior being identified is not forced collectivized behavior, as in a colony of ants or bees or a Stalin work gang! Instead, Wilson identifies natural instincts that people have to bond with others voluntarily—and to alter their own behaviors in a way that allows for both benevolence and justice. This sounds very much like Adam Smith—who equally railed against big government.

The first line of defense against big government is having societies that work reasonably well without coercion. And that implies something like a voluntary system of natural liberty based on natural moral sentiments, honed though several millions of years of group evolution.

[Thanks to biologist Peter Smallwood for the initial link.)

Deft Maneuvering

Jonathan B. Wight

Update on the UVA story: Carl Zeithaml, the prospective interim president, deftly suspended any further contact with the Board of Visitors until former President Sullivan's role is clarified.

That was a brilliant move, one that strongly hints he's on the side of reinstating Sullivan. It keeps the university community united, rather than divided and conquered.

Governor Bob McDonnell, who has been trying to hide from this mess, could do a lot if he simply announced who he is going to reappoint to the Board on July 1. If he reappoints Rector Helen Dragas, that would leave UVA in a funk for her 4-year term. Instead, by announcing he will not reinstate her, that would clear the way for reconciliation.

The Aristocracy of Moneyed Banks

Jonathan B. Wight

"I hope we shall crush in its birth the aristocracy of our moneyed corporations, which dare already to challenge our government to a trial of strength and to bid defiance to the laws of their country."

--Thomas Jefferson (Source: http://www.readthehook.com/104250/important-alums-did-they-topple-presidency)

Adam Smith had similar reservations about corporations, which he thought would pressure governments to manipulate public policies on their behalf.

Yet Smith also touted the benefits of economies of scale needed for specialization. Our love/hate relationship with size is a perpetual conflict.

Jamie Dimon of JPMorgan and others defend our "too big to fail" banking system by touting the alleged benefits of size needed to provide both economies of scale and scope. A big part of the specialization needed in banking today is to have enough lawyers to fight through all of the regulations emanating from Washington. That, more than anything, spells the death of middle size banks.

Back in earlier days—when we had Glass/Steagall and interstate banking prohibitions—it was easy to keep banks small without inundating them with regulations.

Today we are stuck with regulations that push middle-size banks to merge to cope with regulations, and then we are left with larger banks that are too big to fail. These are the moneyed corporations who then blanket Washington with lobbyists. Not a virtue cycle, for sure.