Arnold Kling  

The Case for Government

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A new publication from the Boston Fed informs us.


Time will tell. But universal public education still stands as one of America's most successful government programs.

America's public schools have taken their share of criticism, and some of it may be warranted. But given what we expect them to do--meet the needs of students who come from very different economic, social, and cultural backgrounds and often act as caregivers to those students--our public schools do a pretty good job.

Pointer from Phil Izzo. The publication gives a litany of all the government activities for which we should be thankful.

You might as well read the whole thing. You paid for it.

Meanwhile, Timothy Taylor writes,


Back in the 1960s, about one-third of all federal spending was devoted to building up these various types of capital. Now only half that share of federal spending goes to these purposes, and the Third Way report projects that public investment spending may be headed for just 5% of all federal spending in a few decades. Conversely, entitlement spending was only about 15% of all federal spending back in the 1960s. Now it's more than half of all federal spending, and the share is rising. The main functions of what the U.S. government actually does are shifting before our eyes.

The report to which he refers is Collision Course: Why Democrats Must Back Entitlement Reform, a title that is likely to annoy Krulong.

Similarly, I think that the share of state and local spending going to current services is falling, while the share going to pay pensions to retired government workers is rising. At some point, Democrats who want to see effective state and local government are going to have to back pension reform for government workers, which creates another collision course, in this case with public sector unions.


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COMMENTS (22 to date)
John Thacker writes:

When you mention state and local government, I wonder if you're thinking, as I do, of Maryland versus Virginia. Virginia has been hostile to taxes, whereas Maryland has raised them. Maryland is a wealthier state.

And yet it's Virginia that is spending on infrastructure, whereas Maryland is the state that has built only one road (after large effort) and is constantly raiding the Transportation Trust Fund.

Why? State and local pay and especially pensions and benefits. They're growing faster than Maryland can raise taxes, it appears.

TallDave writes:

At some point, Democrats who want to see effective state and local government are going to have to back pension reform for government workers,

Your optimism is amusing. More likely they'll just ask for more taxes, as they've been doing the past several decades. You can always get more taxes, just ask Europe -- oh wait.

Mr. Econotarian writes:

There is nothing wrong inherently with pensions per se, the problem is that it is highly unclear why government should be responsible for the management of government employee pensions.

If a private fund can't actually guarantee a 7% ROI year over year, how can a government do that?

Plus public choice argues that governments are not likely to set aside enough to fully fund pensions even with rosy forecasts.

pcm4 writes:

I'm a pretty liberal guy. I agree that pension accounting is mostly bs. That being said I think that the focus on pensions is too often based on the returns of a pension fund over much too small of a time horizon.

As for "entitlements" SS would be more or less okay if payroll taxes actually covered 90% of income as they are supposed to (I believe Reagan was the last one to fix this). The real issue is Medicare. Lumping them together as "entitlements" is highly misleading imo as one is WAY more of an issue than the other. Ironically it's a pretty well established fact that all the countries that spend less on health care and get better outcomes have more government intervention than we do. Somehow I doubt that's what the authors of that report had in mind...

Mike Rulle writes:

What makes the Warren/Obama "you didn't do it alone" framework so ingenius is it actually does make one hesitate before responding.

Because they say it with such ferocity and swagger they tempt one to equate "you didn't do it alone" with "lets have a huge government that also increases taxes on "the rich"".

When I first saw Elizabeth Warren trying to scream her way out of the Native American problem with her outburst I became confused. Who does anything "alone"? Philosophically, one gets immediately thrown off track. Who disagrees with this? But it is the equivalent of saying "you could not have done this without oxygen". Or without parents. Or the Sun. Or without a head.

And of all things to pick, why "roads, bridges and schools"? Has there ever been a political party campaigning on "no new schools, roads and bridges"? Conversely, has there ever been a party which has bragged they are the standard bearers of roads, schools and bridges as the basis for their election?

Yet this argument has not been laughed out of the political arena. Worse, the GOP has not found a way to use this framing as self humiliating for Obama. It is as if they don't understand how utterly absurd this rhetoric is.

deepelemblues writes:
America's public schools have taken their share of criticism, and some of it may be warranted. But given what we expect them to do--meet the needs of students who come from very different economic, social, and cultural backgrounds and often act as caregivers to those students--our public schools do a pretty good job.

We spend oodles of your money on X. There are some criticisms of X. Some of them may be warranted. We aren't really sure. But we are sure we should keep spending an ever-increasing amount of your money on X, and you should be grateful that we're spending so much of your money on X. We don't really know enough about it to know if the criticisms of X are warranted or not, but trust us to keep spending more and more of your money on X. Because X works. We're sure.

Ken writes:

But universal public education still stands as one of America's most successful government programs.

Is this even true? How is success determined? It certainly isn't clear that public education is providing a better education to more people at a better price than would have occurred if local governments hadn't taken it over. Americans were well educated before the mandated government monopoly. Literacy rates were extremely high during revolutionary times, with some saying literacy rates were higher then than now.

Jack writes:

Like Ken, I would like to ask the Boston Fed authors: "Compared to what?" How can we say program X has been successful if we do not have a good control group? The argument that "We did X, and now things are good, thus X was a good idea" is your basic post hoc ergo propter hoc fallacy. Always a winner. What's more, even if X indeed improved our lot, how do we know a different policy Y couldn't have yielded better outcomes?

Ted Craig writes:

"At some point, Democrats who want to see effective state and local government are going to have to back pension reform for government workers,"

I have seen the future and her name is Gina M. Raimondo.

By the way, Sweden realized the limits of the welfare state after its own banking crisis and has made life much less fun for those who don't produce.

I tire of hearing pro-government people say, "The government put a man on the moon." Yeah, but today they have to kill NASA because so much is spent on transfer payments. The government is very good at building things: the Erie Canal, the interstate highway system, the USPS, etc. The problem is the government doesn't do that anymore.

If you want to see where this is all headed, study General Motors.

Frank Howland writes:

I guess it is just a matter of faith among libertarians that public education must be a bad thing because it is public.

There are clearly a lot of problems with current public education. However, Arnold et al. at least should give us some references to empirically support the case that historically public education has not done so well. Surely the extremely impressive record of economic growth in the United States has a great deal to do with pretty good institutions (rule of law, trust, etc.) and technological improvement, but doubtless an increasingly educated populace has something to do with it. And that populace was mainly publicly educated.

Ken who says that literacy rates were extremely high in revolutionary times should confront that claim with the fact that literacy rates rose continuously from 1870 to 1979. (Note that large waves of immigration occurred after 1800 so that the population was very different in 1870 than it was 100 years previous.) Did black illiteracy fall from 80% in 1870 to next to zero because of private education? That's not a rhetorical question--I am interested in empirical evidence on these points.

See http://nces.ed.gov/naal/lit_history.asp.

Hedron Pentas writes:

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John Voorheis writes:

Just to be as big of a nit-pick as possible, note that, even in a rhetorical sense, since the REgion Federal Reserve banks are self funded, you didn't actually pay for that report.

Jim Glass writes:

The report to which he refers is "Collision Course: Why Democrats Must Back Entitlement Reform", a title that is likely to annoy Krulong.

Krugman observed years ago that the US govt is becoming a retirement benefits program with nuclear weapons. It's just that he approves.

A while back Glenn Hubbard asked Krugman: I can understand why you want to tax the rich to pay benefits to the poor, but why do you want to tax the rich to pay benefits to the rich? That's deadweight cost doubled for what the rich would buy for themselves. Krugman answered: "I believe in the social welfare model".

If a private fund can't actually guarantee a 7% ROI year over year, how can a government do that? Plus public choice argues that governments are not likely to set aside enough to fully fund pensions even with rosy forecasts.

Calpers, the biggest public pension plan of all is, say reports, as little as 55% funded and projecting it will earn a 7.25% annual return while actually earning 1.1%. More good news for California.

Sweden realized the limits of the welfare state after its own banking crisis and has made life much less fun for those who don't produce.

That's very true of the Scandinavian states generally -- after hitting the wall on social welfare costs and being unable to repeal them they greatly increased accountability for performance elsewhere in govt services to make up the difference, and climbed to the top of the "economic freedom" rankings.

Sweden itself has: a 100% voucherized public school system -- any private person or business can open a public school and compete -- which has been a big popular success ... given up the postal monopoly and contracted out postal services ... private investment accounts in its social security system ... contracted out municipal services ...etc -- becoming a veritable CATO front for govt reform.

I still don't understand how school choice reformers in the USA never, ever mention the success of Sweden's voucher system. I mean, it's a nation-sized voucher system that has succeeded as promised ... and it's Sweden!

Jeff writes:
And yet it's Virginia that is spending on infrastructure, whereas Maryland is the state that has built only one road (after large effort) and is constantly raiding the Transportation Trust Fund.

Why? State and local pay and especially pensions and benefits. They're growing faster than Maryland can raise taxes, it appears.

No sweat. We'll just build another casino or five, and the tax revenues will pay for it in spades!

daublin writes:

+ to Mike Rulle. People who object to the next trillion in the federal budget are getting suckered into a debate about the first trillion. Regardless of one's persuasion, budget spending is going to be subject to diminishing returns.

There's a similar thing going on with discussion about global warming. Democrats propose weak policies like electric cars, but they don't have to defend them. They shifted the debate to being about scientific models.

Komori writes:

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It certainly isn't clear that public education is providing a better education to more people at a better price than would have occurred if local governments hadn't taken it over.

Especially since the U.S. was the world leader in literacy BEFORE Horace Mann launched the public school revolution. Toqueville mentioned it in Democracy in America.

R Richard Schweitzer writes:
Time will tell. But universal public education still stands as one of America's most successful government programs
.[emphasis added]

"Public" or "General" education is not the result of a government program. That is a false premise.

Public education has been the outgrowth of facilities established by citizens who determined the objectives and the means for their attainment: the general education of the young, and increasing the levels of education to be made available for those objectives.

There was no "government program" to establish public education.

In establishing those facilities, the citizens, as determiners of the objectives and means, engaged others charged with the assigned tasks of attaining those objectives by those means.

As a result of the involvement of political processes, principally for capital needs, the facilities became "systems" and through those same processes the facilities became "institutionalized" as those previously charged to meet specified objectives using specified means, increasingly - and finally fully - came to determine those objectives and determine the means for attainment.

That institutionalization was fomented by, and complementary to, the political processes, which are still becoming more and more centralized in deterministic structures.

The "government programs" are essentially programs for political objectives.

As a result, we have begun to see efforts to circumvent the instutionalized "education system" through the use of various alternatives. Seldom can institutions, such as guilds, bureaucracies,"professional" oligopolies, be effectively "reformed." If circumvented they atrophy and die, sometimes leaving nostalgic vestiges.

Since "education" and education systems have become more and more encompassed in "government programs" - and regarded as such - their functions for the originating objectives have been perverted and effectiveness has declined.

It should also be noted about 'Collision Course', that to the extent they argue for higher taxes to 'solve' the problem, they're still starving investment. That's likely to be the opportunity cost; less private investment.

Ken writes:

Frank,

I guess it is just a matter of faith among libertarians that public education must be a bad thing because it is public.

This is such a blatant strawman, that I can't even believe you said it. The very point of MY comment was that statists seem to think that because government currently has a monopoly on education and many are reasonably well educated, then this MUST imply that government run education is a success.

Here is a source for literacy rates as cited here that literacy rates were higher in the late 1700's compared to today.

Did black illiteracy fall from 80% in 1870 to next to zero because of private education?

I guess you never heard of Jim Crow. You know, the GOVERNMENT rules designed to hold blacks down.

Mark Griffith writes:

Has the money spent on American schooling been spent wisely?

Is there evidence that material and moral standards would have been lower with a lower school-leaving age? Compulsory schooling strikes me as a modern institution whose value is always assumed but rarely demonstrated.

(Frank Howland): "I guess it is just a matter of faith among libertarians that public education must be a bad thing because it is public."
Not (school = education). Not (government-operated schools = public education). In abstract, the education industry is an unlikely candidate for State (government, generally) operation. Education only marginally qualifies as a public good, the "public goods" argument implies subsidy and regulation, at most, not State operation of an industry. Beyond a very low level, there are no economies of scale at the delivery end of the education indistry as it currently operates. The education industry is not a natural monopoly.
(Frank Howland): "...Arnold et al. at least should give us some references to empirically support the case that historically public education has not done so well. Surely the extremely impressive record of economic growth in the United States has a great deal to do with pretty good institutions (rule of law, trust, etc.) and technological improvement, but doubtless an increasingly educated populace has something to do with it."
Why "doubtless"?
Richard Arkwright, Cyrus McCormick, and Thomas Edison were homeschooled.
E.G. West
"Education Vouchers in Principle and Practice: A Survey"
__The World Bank Research Observer__ 1997-Feb.

In economics the three most quoted normative reasons for state intervention in education are to protect children against negligent parents, to internalize beneficial "externalities," and to ensure equality of opportunity. Compulsory education laws are generally regarded as satisfying the first argument for state intervention.
The externalities argument, to be completely persuasive, needs the support of evidence that externalities really exist and are positive at the margin-that is, that people outside the family unit are willing to pay for extra units of education beyond what parents would purchase. In the absence of formal or systematic evidence, most writers simply assume, explicitly or implicitly, that positive marginal external benefits do exist.
The third argument for intervention-the need to ensure equality of opportunity-reflects concern about the distributional implications of purely private provision. Richer parents are likely to spend more than poorer parents to educate their children, just as they spend more on cars, homes, and clothes. The view that children's life chances should not depend on the wealth of their parents or the fortuitous circumstances of the community in which they live is widely accepted. The prospect of upward mobility, of ensuring that one's children will be better off, has been a keystone of political support for the public school system in the past. This "equality" argument for intervention depends on the assumption that governments are best equipped to supply the appropriate institutions. But a public system that confines children to schools nearest their home or within administratively determined attendance zones can actually reduce mobility. And where the quality of public education is better in middle-class zones than elsewhere, upward mobility is obviously blocked. In other words, the public system can often narrow a child's options, forcing the child to attend an inferior school when a superior one may be physically within reach. One of the arguments for vouchers is that they enable families to break through these obstacles to give equal opportunity a genuine chance.
Gerard Lassibile and Lucia Navarro Gomez
"Organization and Efficiency of Educational Systems: some empirical findings"
__Comparative Education__, 2000, Feb.
Furthermore, the regression results indicate that countries where private education is more widespread perform significantly better than countries where it is more limited. The result showing the private sector to be more efficient is similar to those found in other contexts with individual data (see, for example, Psucharopoulos, 1987; Jiminez, et. al, 1991). This finding should convince countries to reconsider policies that reduce the role of the private sector in the field of education.
Marvin Minsky
__Communications of the Association for Computing Machinery__
...the evidence is that many of our foremost achievers developed under conditions that are not much like those of present-day mass education. Robert Lawler just showed me a paper by Harold Macurdy on the child pattern of genius. Macurdy reviews the early education of many eminent people from the last couple of centuries and concludes (1) that most of them had an enormous amount of attention paid to them by one or both parents and (2) that generally they were relatively isolated from other children. This is very different from what most people today consider an ideal school. It seems to me that much of what we call education is really socialization. Consider what we do to our kids. Is it really a good idea to send your 6-year-old into a room full of 6-year-olds, and then, the next year, to put your 7-year-old in with 7-year-olds, and so on? A simple recursive argument suggests this exposes them to a real danger of all growing up with the minds of 6-year-olds. And, so far as I can see, that's exactly what happens.
Our present culture may be largely shaped by this strange idea of isolating children's thought from adult thought. Perhaps the way our culture educates its children better explains why most of us come out as dumb as they do, than it explains how some of us come out as smart as they do.
I recommend also James Tooley's __The Beautiful Tree__.

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