von Mises on Private Property

Friedman's columns for Newsweek via The Hoover Institute

            Want to learn liberty? The Hoover Institute's archive has all Newsweek columns by Milton Friedman here: http://hoohila.stanford.edu/friedman/newsweek.php

FEE: Meet the Targets or Die the Death

            by JEFFREY A. TUCKER

            Sometimes a national story, reported in big venues in big ways for 48 hours, just goes away for no good reason. No lessons are learned. No insights are gained. No fundamental reforms are inspired. 

 

            That is the case with Atlanta public school scandal in which investigators identified 178 teachers and principals in 44 of the system�s 100 schools involved in cheating on student tests. The investigation has finally been completed and some people are going to the pen. 

 

            The response to the news was typical: down with these lying teachers. This response taps into a feeling we all have that tests should record actual student achievement. Falsifying exam results outright, solely to make the students and system look better than they are, is the height of fraud.

 

            But let�s look a bit deeper. 

 

            What�s the incentive structure behind the cheating scandal? No one at the top had ordered teachers and principals to change the tests. Bureaucrats put in place a system designed to make kids successful by fiat. Everyone knew the rules: Teachers and principals who failed to achieve these goals, however unreasonable, would be fired. And yet when the smoke cleared, everyone simply blamed the teachers.

 

            When she was hired as superintendent in 1999, Beverly L. Hall gave all principals three years to meet the state-mandated targets. They didn�t. She closed 20 percent of the schools and fired 90 percent of the principals. People cheered for the obvious reason: these schools were non-functioning. Someone had the pay the price. 

 

            Everyone who survived got the message and the new hires were on notice: Meet the goals or face professional death. 

 

            Then around 2004 the schools magically turned around. Scores on the exams mandated by the federal �No Child Left Behind� legislation started to rise. Dr. Hall became a national hero and fixture on the media and lecture circuits, explaining how inspiration and good management can make the difference. 

 

            Behind the scenes, the reality was very different. After collecting all the students� tests, a group of teachers nicknamed �the chosen� would meet behind closed doors. They sat in a big room and went over each test, erasers in hand, looking for incorrect answers to fix.

 

            It sounds crude and ridiculous. Initially, according to the main witness�elementary school teacher Jackie Parks��the chosen� were reluctant. But then the scheme started to show results. The scores showed that 86 percent of eighth graders passed math compared with 24 percent the year before. The same was true for reading: 78 percent passed versus 35 percent the year before. 

 

            The conspirators received nothing but praise for the results. The business community was thrilled because it drew new attention to the city and inspired investment and migration. The government was happy because everyone wants the public schools to work. 

 

            Most importantly for those doing the dirty work, they kept their jobs. Since the cheating didn�t seem to incur any penalties, but insufficient scores would have, it was an easy enough choice. 

 

            In 2010, investigators got involved. The jig was up. Now Dr. Hall may be facing 45 years in prison. 35 Atlanta-area teachers face similar charges. As she languishes in jail, we should ask what this does for the kids. Do they benefit? The answer is nothing changes for them. They didn�t actually become better educated in 2004 and they won�t be suddenly made less proficient now. It�s just the same old broken system. 

 

            The first response to this kind of story is: Lock �em up. But, again, what does that actually fix? I can�t help but be somewhat sympathetic to everyone involved, and that even goes for Dr. Hall. 

 

            Here�s why I say this: Every government plan gives rise to cheating and manipulation. This is true for the smallest cases or the biggest. This is easier to understand if you consider more famously epic cases. 

 

            Consider an example. It is 1935 Russia. Grain crops keep failing, despite the Five Year Plan Stalin imposed. He�s sick of it. It�s embarrassing. So this year, he decides to crack some skulls. Already tens of thousands have died, and everyone knows he means business. It�s the same in every industry actually, from steel to cars to railways. 

 

            What happens? The new farmer or plant manager faces either professional or real death or he fudges the records. He figures out a way to survive. And the difference between Soviet five-year plans and public school five-year plans seem to me to be mostly a difference of degree.

 

            Are people going to cheat? Absolutely. Is it wrong to cheat? Yes�but look at the bigger picture and the inherent problems with the system. The problem is not the cheaters per se; the problem is the ridiculous idea that you can reinvent reality by passing a law and enforcing it.

 

            �No Child Left Behind� was nothing but a soft version of Stalin�s Five Year Plan. It was an attempt to reform around the edges a system that is fundamentally wrong. It mandated that nationalized institutions, with students are who required to be there or face penalties, achieve a certain level of output or else everyone in charge gets replaced. This reform legislation was passed as a �back to basics� plan to replace the previous liberal plan that seemed to have no standards at all. 

 

            Now it stands as just another failed reform, another attempt to make reality different by passing laws and cracking skulls. It never works. So long as schools remain the province of politicians and are owned and run by the State, these reforms will continue as they have for a century. And in the same way, there will be incentives to cheat the system, no matter how strict the penalties. 

 

            The real way that education is being reinvented in our time is through myriad private efforts. Home schooling, privately managed charter schools, privately owned schools, unschooling, Internet-based learning, church schools�each of these solutions is something that the political and bureaucratic class doesn�t like. But they are marking out the only real path for reform that can work. 

Gregory Hicks (Benghazi Whistleblower) Embarrassed By Blame Placed On YouTube Video

 

Defense Distributed shutdown by Department of Defense

            FTCN has been extremely interested in the developments of Cody Wilson's DefDist, a company opensourcing data to print and distribute 3D printed guns.  After having success fired the first 3D printed handgun last weekend, and after the resultant 100,000+ downloads of the data, the Department of Defense has shut down the operation.  Below is the text now found on DefDist's website.

This file has been removed from public access at the request of the US Department of Defense Trade Controls. Until further notice, the United States government claims control of the information.

Jacob Mchangama on Free Speech

Menckenism: How The Federal Reserve Became History's Biggest Bad Bank

            by BILL FREZZA

            Every time a plane crashes, a team of engineers and aviation experts jump into action, methodically reconstructing the event to determine the cause�whether mechanical failure, bad design, pilot error, or poor aircraft maintenance. This painfully acquired knowledge is then immediately fed back into remediation programs for existing airplanes, while informing future aircraft designs. If negligent culpability is found, executives are cashiered and enormous damage claims are paid. The insurers that make these payouts then revise their policies, rates, and eligibility requirements. Airlines with consistently bad safety records disappear. As a result of this feedback, air travel is safer now that it has ever been in the history of aviation.

            Compare this to what happens every time a stock market, currency, or national economy crashes. Teams of bankers, economists, and technocrats are dispatched by those in power�to deny responsibility and affix blame on rival bankers, economists, and technocrats. Financial engineers who examine the wreckage rarely agree on what caused the problem, and even when they do politicians ignore their recommendations if they find them unpalatable. Painfully acquired knowledge is usually dismissed because �this time is different.�

            Culpable individuals rarely face consequences, and some even run for Congress or governor or get appointed Secretary of the Treasury. Failed banks that had implicit government backing are bailed out and given explicit backing. Congress passes massive regulatory bills that bear little or no relation to the actual cause of the problem. And after a few cursory mea culpas, everyone resumes business as usual, in a vicious circle that has left the global economy less stable after each crisis.

            As the Western Democracies expand their footprint across the world�s financial plumbing, the great money center banks increasingly eschew the boring world of commercial lending and dive ever deeper into the trading of derivative instruments so exotic that not one person in a thousand understands them, and certainly not the bureaucrats trying to regulate them. Each turn of the cycle brings tighter global connectivity and integration, everything riding on hair trigger algorithmic trading seeking to squeeze out the last drops of advantage. Many believe this interdependency has reduced the risk of catastrophic failure. These are the same people who tell us that �this time is different.� They are living under a cloud of willful denial about the fragile chains of counter-party risk upon which the whole edifice is propped, believing that the web of complex financial instruments they have woven will protect their own fortunes because their equations tell them so.

            Providing the liquidity for it all is an opaque and unaccountable ringmaster whose unique legal status confounds all efforts to audit it, much less bring it under control�the U.S. Federal Reserve. This banker to the banks, lender of last resort, and greatest money printer in history has embarked on a plan of indefinite monetary expansion as a magic tonic to cure unemployment, restore growth, and mitigate the political class� fiscal insanity. As the Fed presides over this plan-with-no-exit, it gets an assist from hordes of court economists and friendly media pundits who try to convince the rest of us that everything is under control.

            �Look at the stock market, it�s booming! Look at the housing market, it�s recovering! Look at consumer price inflation, it barely moves the needle! Look at gold, we have crushed it! Pay no attention to that debt behind the curtain! Forward!�

            Outsiders watch bewildered. What does it mean that hopelessly bankrupt nations like Spain can borrow money at less than 5 percent interest? What does it mean that 60 percent of home purchases in many U.S. metro markets are being made in cash, and that hedge funds and institutional investors are the largest buyers? What does it mean that the Dow and S&P 500 are hitting record highs while 47 million Americans are on food stamps? What does it mean that the official unemployment rate is going down while the number of people not working is going up? What does it mean that the Consumer Price Index is showing less than 2 percent inflation?

            I�ll tell you what it means. It means that this whole thing has become an insider�s game.

            The reason we are not seeing consumer price and wage inflation is precisely because quantitative easing�the Fed�s fancy term for flooding the economy with new cash�is failing, and everybody knows it. Businesses and consumers are not fooled by the illusory wealth effect. Despite the happy-days-are-here-again campaign, ordinary people and companies are not running out to borrow and spend, hire, or expand, because they are not stupid. Anyone with half a brain is hunkering down, knowing that when the next crisis comes, it�s going to be very, very ugly.

            The insiders don�t care because, as Keynes said, we are all dead in the long run. They are too busy making paper fortunes as they watch the tsunami of freshly printed money chase its own tail in ever tightening circles, all within the financial industry. The Fed, through its bond buying and interest rate manipulation, has destroyed the yield on safer assets, and thus driven investors into a desperate search for return. Predictably, bubbles are forming everywhere this money can be put to work. And behind it all, acting like a giant debt sponge, is the Federal Reserve, loading up on mortgages and sovereign bonds.

            Meanwhile, every other central banker on the planet must follow suit, lest they risk destroying their countries� export industries due to competitive devaluation. Mortgage debt and sovereign bonds, every bank stuffed to the gills, all �insured� by a chain of derivatives only as strong as its weakest counter-party link. But isn�t the souring of mis-priced debt exactly what caused the last catastrophe? Yep. So what is different this time? What is different this time is that when history�s biggest Bad Bank, the lender of last resort, the printer of the only global reserve currency runs out of gas, there will be no one left to bail it out.