Student Loan Derivatives

What this nation needs is financial innovation in the realm of student loans. Milton Friedman described a simple contract whereby students would receive tuition aid from an investment fund in exchange for a portion of their salary over the immediately following 10 years. In a sense, a fund would be taking a risk in investing in people the same way it does when looking for an entrepreneur to invest in.

If implemented, such a system of human capital contracts will revolutionize education and provide information to students. Percentage of income collected could be based upon a combination of degree attained, major chosen, and expected performance in the job market. For instance, a driven student who is deciding between going into gender studies or engineering will be instantly hit with the expected earnings of each degree simply by looking at the percentage of income that they would have to give up in each case. People who are not as driven will find that they would be required to pay a higher percentage of their income and may consider doing something more socially productive such as a trade school.

Such a system would be a far better alternative to the status quo. As it currently stands, a student loan is federally guaranteed and non-dischargable in the case of bankruptcy. By removing federal subsidies from student loans, students will become more productive, more likely to graduate promptly and more knowledgeable about the costs and benefits of each major. It would also save students from the crushing debt that they face when they graduate.



propitiate- to conciliate; to appease

pulchritudinous- beautiful

The Political Panacea

Every once in a while, the political class find an allegedly urgent problem that needs "fixing". K-12 education has been plagued by the parasite of reform, each time planning to fix the education system for the better. The glaring failure of all of this is that while spending per pupil adjusted for inflation has more than tripled, test scores in the United States have  remained stagnant. The problem is not that education needs more money, but rather that every effort up until this point to reform education has increased cost and done nothing to address the needs of studnets.

What we need to do is align school administrators with a profit motive, rather than an effort to maximize federal grants. While a beautiful new gym complex may leave a lasting legacy for a principal, improvements to student performance have nothing to recommend them. By switching to a voucher system, the goals of the parents will be aligned with the goals of administrators and the performance of students will improve. If they don't improve, then the schools will fail, and others will rise in their place.

Treacly- too sweet; over sentimental
Vacillated- wavered; hesitated

Fixing unemployment

I was talking to a former teacher of mine about the issue of unemployment. I agree with unemployment is theory, but I cannot disagree more the the current implementation of it. As it currently stands, Congress on a day to day basis offers an extension to unemployment benefits. This creates a perverse incentive.

One of my teacher's friends is currently unemployed. Prior to his unemployment he worked for a salary upwards of $200k. Now that the market has collapsed, whenever he seeks a job, the best salary he can find is in the low $100k range. If he remains unemployed, he will continue to earn unemployment benefits and reject job offers for a relatively lower salary.

My proposal is simple. Unemployment insurance should be a single payout large enough to help someone through a tough time. The size of this payout is not important, but what is important is that a monthly payout system encourages people to reject a lower salary even if the market is telling them that the lower salary is all that their labor is worth. By coming to the realization that people respond to incentives, congress will take the unprecedented step towards understanding the economy that they ignorantly regulate.

Apiary – place where bees are kept

Dictum – positive statement

The Value of a Human Life

I am a pretty religious man, but often there are issues on which I disagree with my fellow thinking religious compatriots. One of them is the value of a human life. It is taken as almost axiomatic among the religious community that a human life is priceless. I wholeheartedly agree with the notion that a human life is incredibly valuable, however I cannot bring myself to the conclusion that the value of a human life is infinite while at the same time operating as a moral being in this world.

Whenever a design of a vehicle is under consideration, an increase in safety features is weighed against the cost of the car itself. There is no question that every car on the market can improve its safety, if only marginally, by adding in one more feature. While one could throw price out the window and focus on making an indestructible car that would survive a drop off of the empire state building, such a car would be ludicrously expensive. As a matter of public policy, the state could mandate that all cars be able to protect their passenger from a head-on collision with a tank at 100 mph, and I guarantee that traffic fatalities would fall dramatically. The state could also set a national speed limit at 20 mph, and once again traffic fatalities would fall dramatically. The point is, that the cost of each and every one of these laws would be incredibly high, but they would unquestionably save lives. One typically considers balancing the cost of a 20 mph speed limit when comparing it to the amount of lives it would save implies that cost benefit is necessary.

Those who value human life on any grounds cannot value it infinitely for if they do, they cannot operate in a world where costs and benefits must be considered. Even the act of stepping out of the house increases one's risk of being killed in a mugging gone wrong. Every action has costs and benefits and pretending that the loss of a human life is infinite would require one to live in a hamster ball and only eating completely sterilized food for the rest of one's life.

abnegation- denial of comfort to oneself
assiduous- hard-working, diligent

Thou Shalt not Tax

Evangelical conservatives are often criticized for being hypocritical whenever they oppose increasing taxes on the wealthy. Pundits are often quick to point out that many of these evangelicals are lower-middle class would not benefit from a more progressive tax system, and that they are probably being brainwashed by some conservative overlord. There is a perfectly rational explanation for this conundrum.

This wouldn't be the first time I reference PJ O'Rourke, but I believe that he made a very interesting observation about the tenth commandment.

“You shall not covet your neighbor's house; you shall not covet your neighbor's wife, nor his male servant, nor his female servant, nor his ox, nor his donkey, nor anything that is your neighbor's.”

This commandment defines the conservative psyche. Conservatives are not opposed to giving. They are opposed to stealing. Jesus' call to charity involved giving your cloak and tunic, not in giving other people's cloak and tunic. 

Its fair to then ask whether or not the evangelical right lives up to the call to charity. A somewhat dated study done by a researcher at Syracuse University explored that very question. He found that while Liberals on average made 6% more than conservatives, conservatives donated 30% more to charity.

The fact is, the definition of a charitable society depends on which side of the political spectrum you are on. The right define a charitable society as one where individuals voluntarily give up large sums of money to help the less fortunate. The left define a charitable society as one where people are coerced into giving large sums of money to Uncle Sam who then arbitrarily distributes the money to the less fortunate in the way they see fit. This difference in definition explains why conservatives don't see themselves as greedy and liberals don't see themselves as thieves. 

eschew- Deliberately avoid using; abstain from

plenary- Complete in all respects; unlimited or full