Adam Smith warned that adults exploit young people's optimism by paying them too little for the risks of being soldiers and sailors.

The same warning about exploitation has entered the debate about student loans.
Private loan companies, with the collaboration of colleges and the government, exploit students' trust that college will improve their lives.

Over two-thirds of college students in 2008 borrow to pay for tuition (up from 58 percent in 1996), and their average debt load is $23,186. Graduates also had $4,100 in credit card debt in 2008, up from $2,900 four years earlier.

The borrowing increases as college tuition prices march to their own tune. In the worst economy since the Great Depression and when, for the first time in 33 years Social Security recipients got no cost of living boosts, tuition consistently beats inflation.

Yet, the increased cost of college, and the...

What is the most important thing a government can do with its citizens?  Collect taxes? Build roads? Public education? All important; but the power to take away liberty, through punishment and imprisonment, is the most fundamental power and democratic governments have a special responsibility to be rational and accountable in using it.

The United States uses this power a lot. We have 5 percent of the world's population, but 23 percent of the world's incarcerated.

And the most severe form of punishment is irrevocable, putting people to death. Unlike most countries in the world, the United States allows the death penalty and uses it. In 2008, five countries -- the U.S., China, Iran, Pakistan, and Saudi Arabia -- accounted for 93 percent of all executions worldwide.   

So we use state power a lot. But embedded in American politics is resistance to paying, through taxes, for the public...

In my previous post, I praised the award of the Nobel Prize in economics to Elinor Ostrom, the first woman to win that prize, for her work recognizing the value of community ownership and governance, with practical applications in many different settings. Surely this represents a proud moment for the economics profession. Oh, wait -- Ostrom isn't an economist, but a political scientist. And therein lies a tale about the Nobel Prize in economics (actually "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.") The original Nobel Prizes are given in physics, chemistry, physiology or medicine, literature, and peace. In 1969, the Swedes instituted this separate economics prize, but it isn't part of the original Nobel awards. 

And as Ostrom's work and the history of the prize show, economics is not a science like physics, chemistry, or medicine.  (Whether it is more...

The Nobel Prize in Economics this year was the first to go to a woman.

Elinor Ostrom is an excellent choice. The London Guardian praised Prof. Ostrom's work in environmental economics, especially in turning standard economics models on their pointy heads.

I praise the awardee and question the existence of the award. The economics profession, and the world, might be better off without the award and the misleading notion that economics is a science in the same way that physics and chemistry are.

But first to Elinor Ostrom and why she deserves attention. Most economists believe that expanding private property rights is everywhere and in all cases a good thing. They cite the "tragedy of the commons," a model that concludes since a free good available to all comers (like a grassy common pasture) will be overused (by owners of grazing animals in the pasture case,) eventually the common...

Health Care Reform 3: What We'll Get

Despite their efforts to kill it -- discussed in previous blogs -- the Republicans won't be able to stop some version of health-care reform from becoming law. Tuesday, the Finance Committee will vote on an amended version of Montana senator Max Baucus's bill. Last week the Congressional Budget Office importantly assessed that his bill, which proposes new taxes on high cost health insurance plans and cuts in Medicare, will pay for subsidies for low and middle income people to buy insurance. The CBO estimated that the bill won't add to the deficit and might even reduce it modestly. That quieted the criticisms about cost and maintained important industries' glee with the bill:

--Private insurers are resisting a bit now but have been delighted. If the government offered everyone subsidies to buy shmattas, wouldn't the shmatta industry be happy?...

In my last post, I argued the U.S. has a hard time getting major social legislation like health care passed because we don't have a parliamentary system and have -- for mostly good reasons -- multiple checks on central government authority. Yet, those checks can be dizzying and depressing. As the old saying goes: "Laws are like sausages. You should never watch them being made." So the inability to act, especially in the Senate, is partly by design, and partly because of what is happening to the Republican party.

Politicians -- schooled by Newt Gringrich -- aim to make government not work. Their most obvious tactic is filibustering -- which can only be stopped by 60 votes (cloture). This means when Republicans routinely threaten to filibuster they routinely prevent majority votes, transforming all of government from majority rule to minority rule. In the last Congress, 139 cloture...

Are you tired of health care reform yet? Fox News wants you to be. True the U.S. Senate Finance Committee has yet to get a bill out, combine it with a Health Committee bill, and send it to the Senate floor. If the bill gets that far it has to go to a conference committee with the House, which will already have blended its own three separate bills. Then a conference bill gets sent back to the House and Senate for debate, amendment, and, with hope, passage.

Sounds bleak for health-care reform? Wrong! The good news is we will likely get a major health bill signed into law. The bad news is it will be incomplete -- like Social Security was back in 1935. Welcome to the U.S. Constitution and our nation's history of major social-policy reform, accompanied now not only by years of customary legislative practice, but by increasingly negative politics, 24-hour entertainment-style media coverage, a...

(Please see correction in fourth paragraph.)

Rice pudding. A new Rorschach test: some see a nostalgic dessert; I see a recession indicator.

The stock market might be doing better; but the real economy is a swamp; unemployment is scarily stuck; The New York Times reports the gap between job openings and job seekers is at record highs. Unemployment is mostly permanent loss: income never to be recovered; detachment from work habits and skills; and much higher rates of mortgage and credit-card defaults. These are losses that devastate families long after an official recovery starts. And, more people are taking early Social Security benefits -- and a permanent 28 percent cut in benefits -- because they can't find work now. (Warning! Higher elderly poverty rates in 10 years.)

I watch traditional recession indicators; but, there are other, more subtle signs of desperation. Sunday, on a...

That squeaking sound you hear on your college campus is coming from economists nervously shifting in their chairs.

As the recession wallops jobs, eagle eyes and sharp tongues are pointing to economists asking where they were when the economy collapsed. (After all we would haul up the Center for Disease Control after an outbreak of TB.)

A serious European paper, "The Systematic Failure of Academic Economists" came out at the beginning of the year; The Nation started a good discussion in May; and preeminent economist Paul Samuelson indicted neoclassical economics by summer. The business press chimed in: Mainstream Financial Times rudely asked (rude if you are an economist):  "What is the point of economists?"

Just two weeks ago, Nobel prize winner Paul Krugman prominently criticized our profession arguing that mathematical models and abstract formulations got the better of the...

Here’s real fight. Is the recession good for us? UCLA economics professor Ed Leamer sees a silver lining in the worst recession since the 1930s: “The recession .. is a much-needed break from many years of unsustainably high levels of building homes, cars, offices and retail stores. ... Though it's a painful process, we will emerge in a better place with a more appropriate stock of homes, cars, retail stores and office buildings, a higher savings rate (which is essential to funding the retirements of our growing elderly population).” 

To his credit, Leamer acknowledged the pain but saw the gain if people built up their pensions. Sadly he is wrong about that advantage. Though savings rates always go up in recessions, including the recession that started in 2008 (see the Bureau of Economic Analysis and Conerly’s blog) workers don’t have better pensions.

Today, the results of a new...