08 Apr Does Central Planning Work?; University Admissions and the American Meritocracy*
Does Central Planning Work?
Well, does it?
Citizens of the former Soviet Union and its Eastern Bloc satellites would answer with a resounding “No.” The economic failures of Soviet-style Central Planning led inexorably to government collapse, the disintegration of the Soviet Empire and the adoption of market-friendly economic models.
Citizens of China would answer with a definitive “Absolutely.” Central Planning with Chinese characteristics has been a smashing success for China, optimizing its prosperity, ensuring stability and leading to historically-unprecedented growth.
A similarly enthusiastic “Yes” would be voiced by Central Bankers who would point to their coordinated management of the global economy over the past decade. They would declare that they’ve succeeded in fine-tuning growth in the G7 countries, avoided a feared deflationary cycle while sustaining modest inflationary expectations, maintained interest rates at historically low levels, avoided triggering a recession for an unprecedently-long time, inhibited volatility and ensured stable markets. Those indeed are impressive accomplishments. If Central Bankers can continue to successfully manage the global economy on a similar basis for 5 or 10 more years, the conclusion would be inescapable that Centrally Planned economics can work, albeit with appropriate international and governmental cooperation. It also would prove the efficacy of Central Bankers’ economic models, their ability to execute on those models, and the beneficent control coordinated Central Banking can exercise over the economic cycle.
Yet, there are a number of analysts and economists who question Central Bankers’ ability to do so. They similarly express concern over the unintended consequences of the Bankers’ prior actions. Others question the long-term costs of their methods.
In order to achieve their goals, Central Bankers have utilized a combination of coordinated money printing, suppression of interest rates, and asset value manipulation. These policies have created enormous large national deficits (over $1 trillion/year in the U.S.), even more enormous extraordinary record-breaking national debts (over $22 trillion in the U.S.), enormous quantities a significant amount of negatively-yielding government bonds (over $10 trillion of primarily European debt), and overvalued inflated wonderfully-high stock market valuations. Moreover, the Bankers have told the world that they will stop at nothing to achieve their goals, doing “whatever it takes” to avoid recession and ensure their definition of continued global economic stability.
The questions being asked primarily by economists who are proponents of the Austrian School of Economics are: how much longer can the Central Bankers’ Central Planning experiment continue?; and how horribly miserably will the Central Planning experiment by the Central Bankers end? Is the past a prelude to a “new normal” – that is, have the Central Bankers repealed or at least modified the economic cycle? – or will the world return to a less-predictable period of boom-and-bust?
These are the same questions many analysts and economists have been asking since QE1 began in 2008 then continued with QE2 in 2010 and QE3 in 2012 and Operation Twist. Despite that questioning, Central Banker successes have continued. There are those Keynsians who believe that the Central Bankers have struck the right notes, are on the right track and should continue their money manipulations indefinitely. Finally, there is a third group that believes that an event that is out of the control of the Central Bankers at some point will tip the global economy over the edge … and that there’s nothing the Central Bankers can do to prevent such an event. And, of course, there is always the possibility that the Central Bankers will ignore their models (for example, if the ranks of the Federal Reserve were to be filled by political appointees (possibly Stephen Moore and Herman Cain?)) or will cease to coordinate with each other.
In the final analysis, it’s wise to recall again American economist Herbert Stein’s Law: “If something cannot go on forever, it will stop.”
University Admissions and the American Meritocracy
As the result of a sting codenamed Operation Varsity Blues, the FBI has accused more than 50 wealthy parents of fraudulently securing admission for their children to highly-selective universities.
This should surprise no one. Wealthy Americans have been buying their children into elite educational institutions for decades. They have done so, and continue to do so, not only by bribing proctors and admissions officers, but by bribing the universities themselves … by making tax-deductible charitable donations to build facilities and endow chairs bearing their names in amounts that far exceed the monies doled out by the Varsity Blues’ parents.
Although it’s easy to legally distinguish the two, many would argue that it’s a distinction without a difference: The Varsity Blues’ parents misrepresented their children’s academic credentials by engaging in outright bribery – while their wealthier counterparts had no need to do so since they were openly buying admission for their children. A payment made to a university to fund a new facility or endow a chair isn’t a bribe. It’s is an act of charity, proof of beneficence and generosity.
Any method used to buy children into elite educational institutions strikes at the heart of America’s meritocratic ethic … and is a symptom of a broader merit-vs.-money ideological conflict.
Consider the following reconstructed imaginary true-to-life hypothetical telephone conversation:
Attorney: “Good morning Mr. University President. I believe one of your notable alumni has indicated I would be phoning this morning. My name is Mr. Lawyer and I represent Wealthy Patron. He and I have spent a great deal of time studying your university. We are quite impressed. A wonderful place. Filled with distinguished professors. Lots of good education going on. Smart students. Very smart. Very old buildings though. Distinguished, but old. In need of some work.”
University President: “Thank you, Mr. Attorney. That’s so very nice of you to say. Might I add that it’s a pleasure to meet you. A great pleasure. I’ve read so much about your client. Very impressive sir!”
Attorney: “Thank you. The empire my client has built has given him the ability to give back a portion of his great wealth to further the educational experience of those who are less fortunate.”
University President: “Well, Mr. Attorney, I certainly applaud that sentiment. As one of the premier educational institutions in America, we here at Major University strive for excellence. We value our students. Greatly value them. We strive to create an atmosphere where students of all economic backgrounds can flourish. Of course, doing so requires a significant amount of funding. Although we are financially comfortable, we never have sufficient funds to provide our students with all possible educational opportunities.”
Attorney: “Yes. Admirable. Quite admirable. As I said, what we’ve noticed is that some of your students live in dormitory facilities that are a bit old, tattered in our view. That’s not right. Not right at all. Those old buildings need to be replaced, and the new buildings need to have the most modern technology, don’t you think?”
University President: “Undoubtedly true. We have a long-term plan to upgrade our facilities – I’m afraid quite long-term. It would be a blessing if we could do so sooner. Would I be too forward in suggesting that your client might help us accelerate that project?”
Attorney: “That’s precisely the purpose of my call. My client would very much like to become a benefactor of Major University. A long-term benefactor. At present, he’s considering writing a check for $10 million. He anticipates liquidating some of his stock holdings in early May to fund that donation and would consider contributing the money shortly thereafter. Would that work for you?”
University President: “That would be fantastic, Mr. Attorney! I’m tremendously grateful for your client’s beneficence and generosity. I’ll have our legal counsel prepare the papers and send them to you. You and he can work out the precise wording. I assume that the new buildings would bear your client’s name. Is that correct?”
Attorney: “Of course.”
University President: “Wonderful! Is there anything else that your client would like us to do together? Endow a chair for our illustrious faculty? A special program for graduates perhaps? A seminar?”
Attorney: “In time, Mr. University President. In time. Those and other endowments are under consideration as well. However, at present, the dormitory project seems sufficient.”
University President: “Most appreciated, Mr. Attorney. Will that be all for today, then?”
Attorney: “Yes, I believe so. Oh, yes [rustling of papers], by the way, my client’s daughter will be applying to Major University next month. She’s currently a senior at Premier Boarding School. Major University seems a good fit. I suggested to my client that she apply here. I understand that you make your admissions decisions by April 1st, a month before my client’s intended stock sale. Is that correct?”
University President [without hesitation]: “Yes, it is.”
Attorney: “Could I ask you to personally make certain that her application is received and processed in a timely manner? She’s also applying to my client’s alma mater, Minor University. Although he has emotional ties there, my client understands that his daughter would receive a better education here. Far better. He was enthusiastic about that suggestion. Does that make sense to you?”
University President: “Quite clearly. I’m certain that your client’s daughter would find Major University an outstanding fit, Mr. Attorney. I will personally oversee her application, ensure that it is given appropriate consideration and that a decision is made expeditiously.”
Attorney: “Thank you, Mr. University President. It’s gratifying to know that we understand each other. I look forward to hearing from your legal counsel. Have a nice day.”
The conversation between Attorney and University President did not implicate fraud. Attorney at no time said “My client will donate $10 million only if you admit his daughter.” But that will be the result.
The only difference between the Varsity Blues’ parents and Wealthy Person … is wealth. Wealthy Person had the means to bribe the university. The Varsity Blues parents bribed lesser folk: proctors, university officials, and physicians who boosted admissions scores and faked diagnoses. Unlike America’s super-wealthy aristocracy, the Varsity Blues parents did not have the means to make artful donations.
Money has been buying university slots for decades. The FBI’s sting caught only those foolish enough to cheat in obvious ways.
The FBI has exposed an odious practice. The question is whether merit alone or merit and wealth should drive American university education. Don’t be seduced simply by the Varsity Blues spectacle.
Finally (from a good friend)
Research has led to the discovery of the heaviest element yet known to science. The new element, Governmentium (Gv), has one neutron, 25 assistant neutrons, 88 deputy neutrons, and 198 deputy assistant neutrons, giving it an atomic mass of 312.
These 312 particles are held together by forces called morons, which are surrounded by vast quantities of lepton-like particles called peons. Since Governmentium has no electrons, it is inert; however, it can be detected, because it impedes every reaction with which it comes into contact. A tiny amount of Governmentium can cause a reaction normally taking less than a second, to take from four days to four years to complete.
Governmentium has a normal half-life of 2-6 years. It does not decay, but undergoes a reorganization in which a portion of the assistant neutrons and deputy neutrons exchange places. In fact,
Governmentium’s mass will actually increase over time, since each reorganization will cause more morons to become neutrons, forming isodopes, not to mention multiple oxymorons.
This characteristic of moron promotion leads some scientists to believe that Governmentium is formed whenever morons reach a critical concentration. That hypothetical quantity might normally be called ÔÇÿcritical mass’ but, in this unique case it is known as ÔÇÿcritical mess.’
When catalyzed with money, Governmentium becomes Administratium (Am), another just-discovered element that radiates just as much energy as Governmentium since it has half as many peons but twice as many morons.
*┬® Copyright 2019 by William Natbony. All rights reserved.