A Vision for the University of Pennsylvania

A group of faculty at Penn have written A Vision for a New Future of the University of Pennsylvania at https://pennforward.com/.  They encourage signatures, even if you're not associated with Penn. I signed. 

Big picture: Universities stand at a crossroads. Do universities choose pursuit of knowledge, the robust open and uncomfortable debate that requires; excellence and meritocracy, even if as in the past that has meant admitting socially disfavored groups? Or do universities exist to advance, advocate for, and inculcate a particular political agenda? Choose.  

Returning to the former will require structural changes, and founding documents are an important part of that rebuilding effort.  For example, Penn and Stanford are searching for new presidents. A joint statement by board and president that this document will guide rebuilding efforts could be quite useful in guiding that search and the new Presidents' house-cleaning. 

There is some danger in excerpting such a document, but here are a few tasty morsels: 

Principles:

Penn’s sole aim going forward will be to foster excellence in research and education.

Specifics:

Lukianoff and Schlott on Cancellation

Last week I was honored to be moderator for a discussion with Greg Lukianoff and Rikki Schlott on their new book "Canceling the American Mind" at the Commonwealth Club of San Francisco.  Link here, if the embed above doesn't work 

Here are my questions. I shared them with Greg and Rickki ahead of time, so the actual questions are a bit shorter. But this may give you some interesting background, and I think they're good questions to ponder in general.

Bhattacharya on Covid censorship

A week ago Jay Bhattacharya gave a great talk at the weekly Stanford Classical Liberalism workshop. (Link in case the embed doesn't work.) He detailed the story of government+media Covid censorship, along with the dramatic injunction in the Missouri v. Biden case. The discovery in that case alone, detailing how the administration used the threat of arbitrary regulatory retaliation to get tech companies to censor covid information -- along with other matters, including the Hunter Biden laptop -- is astonishing. We now know what they did, no matter what judges say about its technical legality. 

Woke week

Two readings from last week, in the self-destruction of American academia and other institutions. 

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The Nature of the Beast

Bari Weiss writes another powerful essay, from a talk given at the new University of Austin. Really, you should read the whole thing, but here is one particularly delicious excerpt: 

The ideology that is trying to unseat liberalism in America begins by stipulating that the forces of justice and progress are in a war against backwardness and tyranny. And in a war, the normal rules of the game must be suspended. Indeed, this ideology would argue that those rules are not just obstacles to justice, but tools of oppression. They are the master’s tools. And the master’s tools cannot dismantle the master’s house.

So the tools themselves are not just replaced but repudiated. 

By ``liberalism'' Bari means the philosophy of freedom, spanning classical liberalism to the traditional American left. She does not say, but could go on, that this is a fundamentally anti-democratic authoritarian movement. When you are in the right, and the opposition is wrong, evil, racist, and so forth, and the world faces crisis after imagined crisis, we have no time for dissenting views and procedural niceties.  

Persuasion—the purpose of argument—is replaced with public shaming. Moral complexity is replaced with moral certainty. Facts are replaced with feelings. The rule of law is replaced with mob rule.

Ideas are replaced with identity. Forgiveness is replaced with punishment. Debate is replaced with disinvitation and de-platforming. Diversity is replaced with homogeneity of thought. Inclusion with exclusion. Excellence with equity.

In this ideology, disagreement is recast as trauma. So speech is violence. But violence, when carried out by the right people in pursuit of a just cause, is not violence at all—but in fact justice.

(Savor a bit Bari's delicious writing. Night is day, truth is falsehood, good is evil -- sonorous repetition is a great tool.) 

In this ideology, bullying is wrong, unless you are bullying the right people, in which case it’s very, very good. In this ideology, information that does comport with The Narrative is recast as disinformation, its proponents as conspiracy theorists. In this ideology, education is not about teaching people how to think, it’s about re-educating them in what to think. In this ideology the need to feel safe trumps the need to speak truthfully. 

In this ideology, if you do not tweet the right tweet or share the right slogan, your whole life can be ruined. Just ask Tiffany Riley, a Vermont school principal who was fired—fired—because she said she supports black lives but not the organization Black Lives Matter.

In this ideology, the past cannot be understood on its own terms, but must be judged through the morals and mores of the present. It is why statues of Grant, Lincoln and Washington were torn down. It is why William Peris, a UCLA lecturer and an Air Force veteran, was investigated because he read Martin Luther King’s “Letter from Birmingham Jail” out loud in class. 

In this ideology, intentions don’t matter. That is why Emmanuel Cafferty, a Hispanic utility worker at San Diego Gas and Electric, was fired for making what someone said they thought was a white-supremacist hand gesture. In fact, he was fidgeting with his fingers out of his car window. 

In this ideology, you are guilty for the sins of your fathers. In other words: you are not you. You are only a mere avatar of your race or your religion or your class. That is why third graders in Cupertino, California, were asked to rate themselves in terms of their power and privilege. It is why an elementary school in Washington, D.C. gave kindergarteners a “fistbook” asking them to identify racist family members.

In this system, we are all placed neatly on a spectrum of “privileged” to “oppressed.” We are ranked somewhere on this spectrum in different categories: race, gender, sexual orientation and class. Then we are given an overall score, based on the sum of these rankings. Having privilege means that your character and your ideas are tainted. This is why, one high schooler in New York tells me, students in his school are told “if you are white and male, you are second in line to speak.” This is considered a normal and necessary redistribution of power.

Victimhood, in this ideology, confers morality. “I think therefore I am” is replaced with: “I am therefore I know.” Or: “I know therefore I am right.”

This ideology says there is no such thing as neutrality, not even in the law, which is why the very notion of colorblindness—the Kingian dream of judging people not based on the color of their skin but by the content of their character—must itself be deemed racist. 

In this ideology, the equality of opportunity is replaced with equality of outcome as a measure of fairness. Racism is no longer about individual discrimination. It is about systems that allow for disparate outcomes among racial groups. If everyone doesn’t finish the race at the same time, then the course must have been flawed and should be dismantled.

(Savor that sequence of topic sentences.)  

Thus the efforts to do away with the SAT, or the admissions test for elite public schools like Stuyvesant and Lowell—for decades, the engines of opportunity that allowed children of poor and working-class families to advance on their merit, regardless of race. Or the argument made by The New York Times’ classical music critic to do away with blind auditions for orchestras.

(Blind auditions were put in place as an effort to remove prejudice in favor of white male performers. They have not produced the desired demographic effect.)  

In fact, any feature of human existence that creates disparity of outcomes must be eradicated: The nuclear family, politeness, even rationality itself can be defined as inherently racist or evidence of white supremacy. The KIPP charter schools recently eliminated the phrase “work hard” from its famous motto “Work Hard. Be Nice.” Why? Because the idea of working hard “supports the illusion of meritocracy.” 

In this revolution, skeptics are recast as heretics. Those who do not abide by every single aspect of its creed are tarnished as bigots, subjected to boycotts and their work to political litmus tests. The enlightenment, as the critic Edward Rothstein has put it, has been replaced by the exorcism. 

What we call “cancel culture” is really the justice system of this revolution. And the goal of the cancellations is not merely to punish the person being canceled. The goal is to send a message to everyone else: Step out of line and you are next. 

It has worked.

A recent CATO study found that 62 percent of Americans are afraid to voice their true views. Nearly a quarter of American academics endorse ousting a colleague for having a wrong opinion about hot-button issues such as immigration. And nearly 70 percent of students favor reporting professors if the professor says something that students find offensive, according to a Challey Institute for Global Innovation survey. Think about that. A majority of students in America think it is a virtue to inform on their wrong-thinking professors. 

Bari goes on to tell her young audience, take your country back, found institutions again. 

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DEI at UC

I saw this week an article on how the University of California's DEI bureaucracy is destroying the institution, by Steven Brint and Komi T. German, professors at UC. (I hate to use the Orwellian term DEI -- it is really Conformity, Preference and Exclusion. But we'll suffer through.) It's a year old, but still vibrant. 

The use of mandatory DEI statements as initial screening mechanisms in faculty hiring is the most dramatic of the new administrative policies...

...By 2019, eight of the ten UC campuses mandated that ladder rank faculty recruitments require candidates to submit diversity statements. These statements ask candidates to discuss what they have contributed to the University’s goals of diversity, equity, and inclusion. The rubric used by the UCs to evaluate diversity statements...delineates criteria for scores ranging from 1 (“poor”) to 5 (“excellent”). An applicant who “doesn’t discuss gender or race/ethnicity” should receive a “poor” score, as should an applicant who sees DEI as “antithetical to academic freedom or the university’s research mission.” By contrast, an applicant who discusses DEI as “core values that every faculty member should actively contribute to advancing” should receive an “excellent” score.

It is the naïve candidate who simply discusses his or her efforts to encourage and recruit students or faculty members of color. These efforts are considered minimal. As UC Merced sociologist Tanya Golash-Boza counseled applicants in the pages of Inside Higher Ed, do not worry about coming across as “too political,” because such fears might lead them to write a “blasé statement.” Instead, she recommends that they demonstrate their “awareness of how systemic inequalities affect students’ ability to excel” and their commitment to “activism.” She encourages applicants to “tell your story”—that is, to point out the obstacles they have faced, or, alternatively, to “acknowledge your privilege.” She also recommends that applicants focus on “racial oppression, sexism, homophobia, transphobia, ableism, or some other commonly recognized form of oppression.” When it comes to teaching, she encourages applicants to express their commitment to “antiracist pedagogy” (Golash-Boza 2016).

My emphasis. I'm all for a diverse faculty and student body, on dimensions including but also beyond skin color and sexual identity and preferences. But the point here is forced political speech and activity, most of all to supporting the DEI office!  

But here comes the good part:

In 2018, the University began to experiment with the use of diversity statements as the initial screening device in faculty searches, .... In a presentation prepared by the UC Davis vice provost for academic affairs search committee members were instructed to review a candidate’s “Contributions to Diversity” statement before any other part of an application, and that candidates who do not “look outstanding with regard to their contributions to diversity” would not advance for further consideration in the hiring process. Reiterating this message, the vice chancellor explained at a conference that “in these searches, it is the candidate’s diversity statement that is considered first; only those who submit persuasive and inspiring statements can advance for complete consideration.” ...(Ortner, 2020).

Jaw drops. 

UC Berkeley has published information about the effects of the policy mandating the use of diversity statements as an initial screening device. In one faculty search, less than one quarter of otherwise qualified candidates had submitted diversity statements that were sufficient for advancement to the next hiring stage.

The constraint binds. This is not a form to fill out with boilerplate.  

The files for these 214 candidates were then sent to the appropriate departmental search committees to create a short list for interviews (these are typically 3-6 candidates per job). 

Note here it is clear -- the departmental search committee does not even get to see the file until the DEI bureaucracy blesses it! 

During their job talks and interviews, candidates were asked to explain their ideas about diversity, and their responses determined whether they were eligible to be hired in this late stage. Thus, at every stage of the hiring process, candidates were eliminated because they were perceived as being insufficiently committed to DEI, regardless of their academic qualifications

During their job talks. Enough about dark matter in the early universe, now, we really want to know how many protests you've been to in the last two years... 

To my mind the screening for active political participation is the most galling. It is, of course, a way to avoid federal and state anti-discrimination laws: 

The race and gender characteristics of the applicant pool in the UC Berkeley search changed substantially after candidates were evaluated on the basis of their diversity statements. The representation of women increased from 42 percent of applicants to 64 percent of the finalists, whereas the representation of men decreased from 57 percent of applicants to 36 percent of the finalists. The representation of African Americans increased from 3 percent of applicants to 9 percent of the finalists; and the representation of Hispanics increased from 13 percent of applicants to 59 percent of the finalists. By contrast, the representation of Asian Americans dropped from 26 percent of applicants to 18 percent of the finalists, and the representation of whites decreased from 54 percent of applicants to 14 percent of the finalists.

After the Supreme Court tosses out Harvard's anti-asian admissions policies, it will be how interesting to see what happens here. But, back to the point, political conformity is the most important message. (I'd be interested to see how many Black conservatives survived the process!) 

The policy of winnowing applicant pools based on diversity statements poses an obvious threat to the climate for academic freedom because of the implicit and explicit expectation that faculty must express a specific view regarding DEI. It is highly plausible that candidates will be (and arguably already have been) discriminated against not only because they do not subscribe to a particular set of political beliefs (as indicated by the UC scoring rubric criteria for “excellent” versus “poor” scores)...

The piece goes on to describe the history of this process, mainly from a desire to increase the number of women and minorities in the faculty. 

Most relevant to academic freedom, the essay goes on to describe the thought police: A secretive bureaucracy that processes all complaints of "behavior that is inconsistent with our Principles of Community." Secretive, because "The number and disposition of incidents filed based on the reports is unknown because UC has failed to disclose incidents or how they have been handled." Then "mandatory training and the appointment of a vice chancellor for diversity, equity and inclusion with a budget of $3 million. UC DEI initiatives accelerated following these events." 

In the summer of 2019, the University added equity advisors to every program on eight of its campuses. The equity advisor is “a senior ladder faculty member who participates in the faculty recruitment process by raising awareness of best practices…. Their role is to help advance diversity and to ensure that a climate of inclusion and equity is maintained throughout the search process” (UCOP 2019). Some Equity Advisor programs have expanded their purview to include other areas, such as faculty advancement and retention, salary equity decisions, formal and informal mentoring of faculty, advancing diversity in graduate admissions, and department climate. They “organize faculty development programs, address individual issues raised by women and underrepresented minority faculty, ... equity advisors are empowered to mediate...People can report, among other things, “expressions of bias,” “hate speech,” “bias incidents,” and a “hostile climate.”

Noting the conflict between free speech and such efforts, the authors note wryly 

it is perhaps indicative of the University’s stance that no academic freedom advisors are on the payroll.

The essay echoes familiar (to us) stories, 

Academic freedom was sacrificed for the representational mission when an accounting professor at UCLA was placed on academic leave for denying students’ demands for a “no-harm” final exam following the death of George Floyd (Flaherty, 2020). It was violated when a political science professor at UCLA was subjected to a review by the University’s Discrimination Prevention Office for presenting Martin Luther King Jr.’s “Letter from a Birmingham Jail” and clips from a documentary on racism, both of which included the “N-word” (Korn, 2020). It was compromised when UC Berkeley faculty and students were advised not to use the phrase “America is a melting pot” or a “land of opportunity” (Volokh 2015). And the climate for academic freedom became chillier when a professor of history at Berkeley wrote an open letter to colleagues expressing concern about the “racial injustice” and “institutional racism” narratives of the anti-racism movement and the Berkeley’s history department responded by issuing a statement that it “condemn[s] this letter: it goes against our values as a department and our commitment to equity and inclusion” (Grimes, 2020).

Yet the main rot is silent: 

Unlike these examples, most of the changes in the day-to-day affairs of the University have not reached the media; they have been incremental, including administrative appointments vetted for adherence to the University’s DEI values; the labeling of DEI statements in department meetings as “helpful” and academic freedom statements as “defensive”; and the institution of “voluntary” listening and diversity training sessions in which the loyalty of those absent becomes questionable in the eyes of attendees. These incremental changes eventually lead to qualitative shifts.  

The essay goes on to discuss Critical Theory vs. rationalism, and useful thoughts on why things have headed this way, along with what seems to be a long "we really aren't racists apoloigia." Worth a read. 

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You're probably tired, as am I, but next read Joseph Manson's Why I'm Leaving the University, on just how UCLA is falling to pieces. 

Economic Freedom in the Alito Draft

I read the draft Supreme Court decision on Roe v. Wade. I was surprised that the draft so quickly prejudges economic liberty, which I thought of as a topic still open for debate. I wrote the essay below. I haven't been able to interest any of the usual places that publish my op-eds, so, with the decision likely to come next week, here it is. 

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Dear Justices: As you overturn Roe, don’t prejudge economic liberty! Economic, social and political freedom are intertwined. Reform of the administrative state is America’s next great challenge. Leave us the chance to argue for liberty and privacy to transact, communicate, and work as we wish. 

Justice Alito’s draft opinion affirms that the Constitution includes privacy and liberty among unenumerated rights. Good. To counter hysteria that other precedents would soon fall, he explicitly affirms them. Good. Of “the right to marry a person of a different race, … the right to marry while in prison,… the right to obtain contraceptives, … the right to reside with relatives, …the right to make decisions about the education of one’s children, … the right not to be sterilized ,… to undergo involuntary surgery, forced administration of drugs,…[the] right to engage in private consensual sex acts,…the right to marry a person of the same sex,’’ Justice Alito writes that overturning Roe, “…does not undermine them in any way”  (p.32).

And then he—or perhaps overenthusiastic clerks—takes a step too far. The draft also reassures the left that their economic agenda is not at risk, by explicitly affirming the radical jurisprudence of the late New Deal. 

The draft opinion savages  Lochner v. New York as  “Freewheeling judicial policymaking,” a “discredited decision,” (p. 14) and an “erroneous decision’’ on the scale of the infamous Plessy v. Ferguson (p.64). Lochner examined whether the state of New York could restrict hours of work. The 1905 court found such limitations interfere “with the right and liberty of the individual to contract.” (George Will's Conservative Sensibility tells the story well.)  The draft praises West Coast Hotel (1937), which overruled an earlier case “which had held that a law setting minimum wages for women violated the “liberty” protected by the fifth amendment.” Economic liberty gets sarcastic scare quotes. Piling on, “West Coast Hotel signaled the demise of an entire line of important precedents that had protected an individual liberty rights against state and federal health and welfare legislation,” including decisions “holding invalid a law banning contracts forbidding employees to join union,” or “holding invalid laws fixing the weight of loaves of bread,” (p. 36) and more. 

The separation between social and sexual liberty and privacy and extensive government intrusion into the most minute economic affairs makes no logical sense. The draft tries and fails. The draft claims that “appeals to a broader right to autonomy…could license fundamental rights to illicit drug use, prostitution, and the like.” But we can talk about Uber drivers’ right to set their own hours without demanding legal prostitution. We might not even want to prejudge a fundamental right to "illicit" drug use, which in that phrasing includes violating the FDA's latest diktats. The draft states that “what sharply distinguishes” other rights from abortion is the “life of an unborn human being.” But even drug use and prostitution do not involve unborn life. 

The draft denies unenumerated rights not “deeply rooted in history and tradition.” (p. 11) That is an interesting addition to the Constitution’s text, and I imagine legal scholars might want to debate that limitation. The framers could have added it, but did not do so. This is its central argument. It extensively describes legal restrictions on abortion in the 19th century, when the 14th amendment was written, to document that an individual right to abortion is not "deeply rooted in history and tradition." 

But by that standard, the Court must then allow that history and tradition, our “scheme of ordered liberty,” long favored economic liberty and privacy. The same history of 19th century law would not find an inkling of the Department of Labor’s intrusive regulations or the FDA’s baby formula fiasco. Economic regulation was novel, not economic liberty. And many people today believe that political and social liberty cannot exist without economic liberty. Start with Friedman's Capitalism and Freedom. 

The draft proclaims that economic liberty is subject to majoritarian rule, where personal and sexual liberty is an individual right. Again citing West Coast Hotel, “the court .. overruled decisions that wrongly removed an issue from the people and the democratic process.” (p. 40.) But economic liberty must be an individual right, protected from the whims of the majority, which is even more inclined to use law to enrich one at the expense of the other than it is to force sexual conformity. We don’t vote whether a city should grab a house and turn it in to a mall or a homeless shelter. Well, we do, but we shouldn’t. To function, property rights must be an individual right. 

In needlessly asserting one narrative history of economic rights while making a decision on abortion, the draft gratuitously denies the possibility of another history: The Lochner-era court did hold to the Constitution’s protections and the country’s history and traditions, until the political pressure and Roosevelt’s court-packing threats caused the court to back down, and to write constitutional gibberish, rather than wait for the consensus that constitutional amendment would bring. 

I support an individual Constitutional right to abortion. But I also support the court overturning Roe v. Wade. Many thoughtful people on the left agree (for example, Yale Law's Akhil Reed Amar on Common Sese). My policy preferences should not matter in any of my arguments today, but I think they do. If more of us were able to separate our policy preferences from judgement whether the court or state legislatures should decide an issue, as a matter of practicality and keeping the country together, we might have a healthier debate. 

Abortion needs to go back to the states. The court never considered a clear right, instead trying to write the compromises only legislatures can broker. How about trading some abortion restrictions for greater funding for contraceptives, adoption, child care and so forth? Only a legislature can do that, and produce the buy-in that such compromises produce. I won't be totally happy, you won't be totally happy, but we can stop tearing the country apart. Yes, “far from bringing about a national settlement of the abortion issue, Roe and Casey have enflamed debate and deepened division” (p. 6) because  “Those on the losing side…could no longer seek to persuade their elected representatives to adopt policies consistent with their views.” (p. 40) More importantly, after Roe, they must try to persuade their fellow citizens to elect different representatives, and politicians will have to recalibrate their positions. It's easy to be extreme when we know nothing can happen. Both parties are now the dog that caught the car. 

Most of all, abortion has poisoned Court politics and public debate for 50 years. The Court, and we who argue about what the court should do, and what kind of justices to appoint, can finally move on to languishing great questions of our government. 

Prime among those is how to reform our dysfunctional government by executive order and imperious bureaucracy. Wickard v. Filburn could be the new Roe v. Wade. Filburn grew wheat on his own farm to feed his own animals. The 1942 Court held that the federal government’s power to regulate interstate commerce extended to forcibly stopping Filburn from doing so, in order to drive up the price of wheat. The Court affirmed it in Gonzalez v. Raich (2005), with even Antonin Scalia concurring. The Court decided that growing pot in your own backyard for your own private medicinal purposes, legal in a state, can be banned by the federal government as interstate commerce. This case lies at the foundation of the administrative state. Really? Is this beyond dispute? 

For years, Justices before the Senate loudly said they would not prejudge Roe v. Wade, so as not to prejudge cases before hearing them. Yes, it is wise for the Court to say loudly that this decision does not imperil to contraception and interracial marriage, if only to reveal how many critics don’t bother to read decisions. But please, don’t needlessly prejudge economic freedom. Sometimes, silence is golden. 

***

Update: The ruling is out, and most of the economic rights trashing is gone! Economic liberty is still in quotes, and West Coast Hotel still reverses a "wrong" precedent, but it's a lot better. 

I heard over and over again on NPR yesterday how the court has never taken away rights before. Uh, hello? The right to contract, to decide your own hours and nature of work, to build whatever you want on your property no matter what the planning, historical, zoning commission say; the right to grow wheat in your own back yard and feed it to your horse.  

The climate finance emperor's clothes

Stuart Kirk of HSBC (head of worldwide responsible investing!) gave an eloquent short speech on climate financial risk.  Youtube link in case the above embed doesn't work. 

Most of the points are familiar to readers of this blog, but they are so artfully put and in such a high visibility place, that you should watch anyway. 

Why the catastrophism? 

"I completely get that at the end of your central bank career there are many many years to fill in. You've got to say something, you've got to fly around the world to conferences. You've got to out-hyperboae the next guy [or gal]" 

A fun bit of hypocrisy: 

"Sharon said, `we are not going to survive'..[ but] no-one ran from the room. In fact most of you barely looked up from your mobile phones at the prospect of non-survival." 

Regulatory bother

"what bothers me about this one is the amount of work these people make me do" 

A good point: Markets are not pricing in end of the world. 

"Markets agree with me. Despite the hyperbolae, the more people say the world is going to end... the more the word "climate catastrophe" is used around the world, the higher and higher risk assets go. "

Video week

It's been a busy week for video. I started Monday with a good roundtable with Benn Steil at the Council on Foreign Relations "Understanding Inflation and its Causes" 

Tuesday we did a great Goodfellows conversation with Larry Summers. (Audio podcast at that link, plus video if the embed doesn't work.) Larry answers "what would you do at the Fed" much better than I did when Benn asked, among other great topics. 

This week also Casey Weade posted a podcast and video interview we did on Fiscal Theory of the Price Level, for a general audience, at his "Retire with Purpose" podcast. Casey did a great job asking good questions and steering the conversation. Link, including audio podcast

More got recorded, not up yet... a busy week.  

Conversations: covid and (separately) nonprofits

 I did a few fun video conversations last week. 

This is a conversation with Ryan Bourne, Megan McArdle, and Alex Tabarrok on economics and the year of covid. Direct link if the above embed doesn't work. 

The conversation  is occasioned by the publication of Ryan's excellent book Economics in One Virus.  I am often asked for recommendations of general readable economics books. (i.e. no equations.) This is a gem. 

Then I had a nice conversation with Mike Hartmann at The Giving Review, link here with transcript, (slightly edited, please refer to that if you want to quote me. The above is just a screenshot, you have to go to the link). 

We explored my view that the US should eliminate the whole non-profit business, most of all the tax deductibility of contributions to non-profits, but also (less importantly) the non-profit corporate form. While many non-profits do a lot of good (my employer!) the system has become obscenely perverted, mostly as a tax-supported vehicle for political action, but also a tax dodge available only to the super duper wealthy, and a means of protection from the market for corporate control for flabby institutions. I trust that genuine useful charities will still attract donations -- maybe more -- from the substitution effect than they lose without tax deductions. 

I've long been meaning to gather facts and figures to see if this salty opinion makes as much sense as I think it does, and I'm glad to learn about Philanthropy Daily, a resource that will be helpful.

Oh yes also a great GoodFellows with Bjorn Lomborg on climate. I love talking to Bjorn. He has an extensive command of the facts and science, and he's still an optimist that facts and science will actually make a dent in this debate. As global warming moved to climate change to climate crisis to climate justice to climate risks (financial) I'm less optimistic, but hope must be let out of Pandora's box.  Also 

with Bari Weiss on media, censorship, free speech and assorted issues. Direct links, podcast  versions, and more all here. 

Unintended consequences

The Dec 14 Wall Street Journal amplifies my warnings on the movement to de-fund fossil fuels by financial regulation, citing "climate risks." 

"The Senate Democrats’ Special Committee on the Climate Crisis recently issued a report detailing how the Fed and eight other regulatory agencies should penalize investment in fossil fuels and promote green energy. They claim financial institutions are underpricing the risk that carbon-intensive assets will become “stranded.”

Mind you, their worry isn’t about how climate change per se would devalue investments, which financial institutions already account for. They want a warning about the costs of government climate policies. “Because Congress has not advanced any comprehensive climate policies in the last decade, the market has not priced in the possibility of significant federal action,” the report notes."

As reported this is at least a refreshing breath of honesty. In all I have read (not everything, it's a mountain) of the BoE, ECB, BIS, OECD, IMF treatment of "climate risk," there is a vague insinuation that climate itself poses a "risk," which is utter nonsense. Beyond nonsense, it is a directive for banks to make up numbers in order to justify de-funding politically unpopular fossil fuel projects. (In case that's not obvious, climate is not weather. The tails of the weather distribution and their minor effect on the profitability of large corporations are better known than just about any other risk, at horizons where bank supervision and risk management operate.) Here, it is at least clear that the relevant "risk" is the risk that Congress or the administrative state will shut down businesses. 

Actually, if taken seriously, honestly and generally, I might be all for it. Yes! Let our financial regulators require that firms and the banks who fund them disclose and account for all of the political risks that future government action might take to harm them -- law, regulation, administrative decisions, and prosecution. Indeed, state every possible nitwit regulation, idiotic tariff (Dec 29 WSJ is a masterpiece of how arbitrary  administrative decisions make or break companies), or ridiculous law or politicized prosecution might harm the company or investment.  Let's make this really tough -- criminal penalties for failing to disclose ahead of time that, say, the government might challenge a decade-old merger, or decide with a secret algorithm that it doesn't like the interest rates you charged or who you hired, or decide (Wal-Mart) to sue you for prescriptions you are legally required to fill. While we're disclosing financial risks, let's disclose the risk that a future Congress might remove the long list of subsidies and protections that your green projects live on. The long lists of well documented potential mischief would be edifying! 

OK, I'll stop dreaming. This isn't serious, it isn't about climate in any vaguely sensible cost-benefit way, it's about fossil fuels. It's about de-funding fossil fuels before alternatives are available at scale, by capturing the regulatory system because the people's elected legislators are not about to do it. (In the US.)

The Philadelphia Statement

 While we're at it, The Philadelphia Statement is another effort to broadcast the value of free speech and open inquiry, with 15163 signatories so far.  A few choice quotes: 

Our liberty and our happiness depend upon the maintenance of a public culture in which freedom and civility coexist—where people can disagree robustly, even fiercely, yet treat each other as human beings—and, indeed, as fellow citizens—not mortal enemies. 

And not just as morally deplorable by virtue of disagreement. We need to listen, not silence.  

... As Americans, we desire a flourishing, open marketplace of ideas, knowing that it is the fairest and most effective way to separate falsehood from truth.

Not an army of censors at internet companies. Concrete objections: 

School of sustainability

In a few recent posts, I was critical of university endowment practices. Why build up a stock of investment, rather than invest in faculty, research, or other core activities? Why wall that pile of assets from being spent, especially when budgets are cratering in a pandemic? When we see businesses with piles of cash, we infer they don't have any good investment projects, and the piles are ripe for diversion to bad ideas.

But universities are non-profits, and one major piece of being a non-profit is that the business is protected from the market for corporate control. If you see a business wasting money on bad investments, buy up the stock, fire management, and run it right. Repurchases were part of an earlier reform effort, to stop management from wasting money on aggrandizing projects.

Perhaps restrictions on endowment spending serve a somewhat parallel function for universities. Perhaps I was wrong to criticize so harshly.

These thoughts are brought to mind by Stanford's announcement of a new school "focused on climate and sustainability." A "school" is bigger than a center, an institute, a department, a division. Stanford has seven "schools," Business, Education, Engineering, Humanities & Sciences, Law, Medicine, and, yes, Earth, Energy & Environmental Sciences.

Why a new school? It will

"amplify our contributions in education, research and impact further by aligning people and resources more effectively.

Says university President Tessier-Lavigne. Vice Provost Kathryn Moller will

"lead an inclusive process designing the school’s structure....consult with key internal and external stakeholders to develop a school organization that amplifies faculty and student contributions to address the most urgent climate and sustainability challenges." 

creating an

"impact-focused community, with new opportunities to enhance the impact of their work on the issues they deeply care about,” 

"Impact" and "amplify" repeat quite a few times.

Boot Camp

The Hoover Institution will host another "Policy Boot Camp" August 16-22. See here for details and how to apply. It's a one-week survey of serious policy analysis.

The program includes  economists such as John Taylor, Ed Lazear, Amit Seru, Caroline Hoxby, Erik Hurst, and yours truly. Learn about international affairs from H.R. McMaster, Jim Mattis and  Condoleezza Rice. Niall Ferguson on Nationalism vs. Globalism and Bjorn Lomborg on climate should be worth it all on their own. And many more.

It's designed for "college students and recent graduates," but I think that is a bit elastic. Food and lodging free.

Update: in response to a commenter. Yes, PhD students and even those a year or two out are welcome. 

The hard road of free markets

The fundamental reason so many markets are not free, and so dysfunctional, is that the voters of our democracy don't really want freedom. Freedom will come when we want it, when we insist on it, when the average voter sees a free market solution rather than endless controls as the answer to real world problems. The sad paradox of free markets is that free markets do not need people to understand them to work. But democracy does require voters to understand how things work.

In that vein today's internet browsing (both HT marginal revolution) brings good news and bad news.

Good news - one more piece of evidence that people from left and right are finally beginning to see the huge damage of zoning and construction restrictions, including inequality, income segregation, and perpetuation of economic status. That "progressives" now see this too is a most heartening development.

Immigration, trade, and child care

Both Mr. Trump and Mrs. Clinton want to lower the cost and, presumably, increase the amount of child care. A quick economics quiz: What is the policy change that would have the greatest such effect?

Testimony

I was invited to testify at a hearing of the House budget committee on Sept 14. It's nothing novel or revolutionary, but a chance to put my thoughts together on how to get growth going again, and policy approaches that get past the usual partisan squabbling. Here are my oral remarks. (pdf version here.) The written testimony, with lots of explanation and footnotes, is here. (pdf) (Getting footnotes in html is a pain.)

Chairman Price, Ranking Member Van Hollen, and members of the committee: It is an honor to speak to you today.

Sclerotic growth is our country’s most fundamental economic problem. If we could get back to the three and half percent postwar average, we would, in the next 30 years, triple rather than double the size of the economy—and tax revenues, which would do wonders for our debt problem.

Why has growth halved? The most plausible answer is simple and sensible: Our legal and regulatory system is slowly strangling the golden goose of growth.

How do we fix it? Our national political and economic debate just makes the same points again, louder, and going nowhere. Instead, let us look together for novel and effective policies that can appeal to all sides.

Regulation:

Settlement skulduggery

Andy Koenig had a WSJ oped on a subject getting far too little attention. When the government goes after big companies such as banks, and obtains huge out of court settlements, just where does the money go?

...In conjunction with the Justice Department, the RMBS Working Group ["a coalition of federal and state regulators and prosecutors"] has reached multibillion-dollar settlements with essentially every major bank in America.

...in April ... the Justice Department announced a $5.1 billion settlement with Goldman Sachs. In February Morgan Stanley agreed to a $3.2 billion settlement. Previous targets were Citigroup ($7 billion), J.P. Morgan Chase ($13 billion), and Bank of America,... $16.65 billion...

The money does not go to any individual who demonstrably lost money as a result of the banks' actions. Instead,

... a substantial portion is allocated to private, nonprofit organizations drawn from a federally approved list. Some groups on the list—Catholic Charities, for instance—are relatively nonpolitical. Others—La Raza, the National Urban League, the National Community Reinvestment Coalition and more—are anything but.

...Many of these groups engage in voter registration, community organizing and lobbying on liberal policy priorities at every level of government. They also provide grants to other liberal groups not eligible for payouts under the settlements...

Blueprint for America

"Blueprint for America" is a collection of essays, organized, edited and inspired by George P. Shultz. You can get an overview and chapter by chapter pdfs here. The hardcover will be available from Amazon or Hoover Press October 1.

Some of the inspiration for this project came from the remarkable 1980 memo (here) to President-elect Ronald Reagan from his Coordinating Committee on Economic Policy.

Like that memo, this is a book about governance, not politics.  It's not partisan -- copies are being sent to both campaigns. It's not about choosing or spinning policies to attract voters or win elections.

The book is about long-term policies and policy frameworks -- how policy is made, return to rule of law, is as important as what the policy is --  that can fix America's problems. It focuses on what we think are the important issues as well as policies to address those issues -- it does not address every passion of the latest two-week news cycle.

The book comprises the answers we would give to an incoming Administration of any party, or incoming Congress, if they asked us for a policy package that is best for the long-term welfare of the country.

The chapters, to whet your appetite:

Brexit or Fixit

Many commenters compare Brexit to the American revolution. I think the constitutional convention is a better analogy for the moment and challenge ahead. A first attempt at union resulted in an unworkable Federal structure. Europe needs a constitutional convention to fix its union.

The EU's first attempt was basically aristocratic/technocratic. Brussels tells the peasants what to do. The EU  needs a hardy dose of accountability, representation, checks and balances -- all the beautiful structures of the US Constitution. What little thought the EU put in to these matters is clearly wanting.

America did not wait for a state to leave. But, though even the Pope admits the EU structure wasn't working, the EU needed this wake up call. Bring the UK to the convention, and bring them back. Fixit. (#Fixit?)

Right Wing NPR

I was listening to NPR this morning over coffee, and nearly spilled it. Host Steve Inskeep was interviewing Mark Surman, Mozilla founder, on the topic of Apple refusing to hand over the keys to the Iphone to the Federal Government (and anyone who might be able to hack the Federal Government. Oh, right, that's never happened!)

INSKEEP: One last thing, coming back to this San Bernardino case, we don't know what's in that iPhone. We don't even know if it's important. But let's spin out the worst case scenario as a prosecutor might. Suppose your side wins, that phone is never opened, and as a result, the government misses a chance to find some other suspect and disrupt some attack. The attack goes forward, and people are killed. Will that have been worth it in order to protect encryption?

Surman, probably flabbergasted that anyone should ask such a question, changed the subject

SURMAN: We need to find ways to really be able to seek communications before they're sent or after they're sent and actually work with law enforcement on doing this well. There are alternative ways to get information, getting access to it before or after it's encrypted. What we want to avoid is creating a precedent where encryption can be broken by an arbitrary third party.

But Inskeep kept at it

INSKEEP: So you're saying, in essence, it may well be harder to catch terrorists, but you can still work at it, and the extra difficulty is worth it.

Remember, this is cloyingly liberal NPR, not some foaming at the mouth right wing program!

Like Surman, I often am too polite to give the right answer to such shocking questions in real time. But with the benefit of hindsight, here's a better answer

COCHRANE: Well, come to think of it, you're right there Steve. And while you're at it, let's keep going. These pesky first and fourth amendments sure get in the way of law enforcement, don't they? I mean all this business about going out and getting warrants, and waiting for a judge is so time consuming. If a terrorist gets away while you're busy getting a warrant, and people are killed, will that really have been worth it to protect some sort of centuries old procedures? If someone stirs up trouble on a Jihadi website, why do we have to allow that? And this annoying business about grand juries, and presenting evidence, and discovery, and Miranda warnings, it's so burdensome. What if some terrorist gets away and kills someone?  The police surely should be allowed to just throw anyone suspicious in jail, to make sure they don't do anything bad. Heck, while you're at it, what's with these prohibitions against torture? Bring back the rack, or start chopping people's fingers off until they talk. If you hold back, and some terrorist kills someone, was your little sense of ethics really worth it?  

There is a reason we have all these protections. There is a reason we need to defend them even in times of turmoil.

Perhaps a President Hillary Clinton will bring a sympathetic ear to the right to digital privacy. She undoubtedly wishes her email had been bullet-proof encrypted, not just from the FBI and NSA, but from the Chinese and Russian hackers likely reading every line.

Update: I realize from some of the comments that the point may not have been clear. This isn't about the Apple decision. It's moot, really, anyway, as even Apple can't open the new Iphones. And one can make cost/benefit arguments either way. My point was about the argument: We will hear quite often in coming years and decades, the argument that even one terrorist caught is worth sacrificing privacy and civil liberty. Be prepared to answer, to point out there are costs as well as benefits, and to list what they are. And, finally, I sound more critical of Inskeep than I should. In fairness, he does not offer an opinion. He asks a question, one commonly asked, and may well have been floating a t-ball in the hope Surman would smash it out of the park as I attempted to do.  Many people will ask that question. It's worth asking, over and over, and rehearsing the answer.

Institutions and experience

These are remarks I prepared for a symposium at Hoover in honor of George Shultz on his 95th birthday. Willie Brown was the star of the symposium, I think, preceded by a provocative and thoughtful speech by Bill Bradley.

Institutions and Experience

Our theme is “learning from experience.” I want to reflect on how we as a society learn from experience, with special focus on economic affairs. Most of these thoughts reflect things I learned from George, directly or indirectly, but in the interest of time I won’t bore you with the stories.

An English baron in 1342 tramples his farmers’ lands while hunting. The farmers starve. Then, insecure in their land, they don’t keep it up, they move away, and soon both baron and farmers are poor.

How does our society remember thousands of years of lessons like these? When, say, the EPA decides the puddle in your backyard is a wetland, or — I choose a tiny example just to emphasize how pervasive the issues are — when the City of Palo Alto wants to grab a trailer park, how does our society remember the hunter baron’s experience?

The answer: Experience is encoded in our institutions. We live on a thousand years of slow development of the rule of law, rights of individuals, property rights, contracts, limited government, checks and balances. By operating within this great institutional machinery, these “structures” as senator Bradley called them last night, these “guardrails” as Kim Strassel called them in this morning’s Wall Street Journal, our society remembers Baron hunter’s experience in 1342, though each individual has forgotten it.