Friday, June 21, 2013

The Multiple Roots of Our Misery

As Director of the Office of Management and Budget (OMB) from January 1981 to August 1985, David Stockman learned first-hand the workings of the federal government at the highest levels. Educated at Harvard, his firm belief was that free market capitalism will create more prosperity for the population than “crony capitalism” - the latter being a system in which markets are nudged by the government into various patterns, rather than allowing patterns to emerge organically as free individuals make decisions about buying and selling.

In addition to favoring free markets over regulated markets, Stockman also understood that in order to get the full benefit of tax cuts, such cuts must be accompanied by roughly corresponding cuts in the federal budget. When the Reagan administration opted to take tax cuts despite congressional unwillingness to make any spending cuts, Stockman declared that the “Reagan Revolution” had failed. Only when taxes and federal spending are simultaneously reduced can a country hope to make progress against both debt and deficit. Stockman saw that clear economic prescriptions were corrupted by the political process. Disillusioned, he resigned from the OMB and never returned to politics.

From his private-sector perch, he continues to offer explanations about economic events, illuminated always by the distinction between free markets on the one side, and crony capitalism on the other side.

It requires a great deal of self-discipline for a government to oversee a truly free market: the temptation to intervene is omnipresent. While it may seem catastrophic for one or more large enterprises to fail, and seem negligent for a government to stand back and allow large businesses to go bankrupt, such events are necessary, and in the long run beneficial, to the national economy.

The specter of factories closing, workers being laid off, and large unemployment numbers appearing in reports can instill fear in the stoutest hearts. But oftentimes, enduring such short-term pain paves the way for long-term gain. Enduring a few months of unemployment often leads workers to new jobs at even higher wages, if they are working in a truly free market.

Sadly, most elected political leaders - Democrat or Republican, liberal or conservative - do not have the stomach to stand back and simply let major industries collapse. Although this crash would pave the way for an economic boom, the temptation is to intervene. Stockman writes:

By the time of the September 2008 crisis, however, these long-standing rules of free market capitalism had undergone fateful erosion: traditional rules of market discipline had been steadily superseded by the doctrine of Too Big To Fail (TBTF). The latter arose, in turn, from the notion that the threat of “systemic risk” and a cascading contagion of losses from the failure of any big Wall Street institution would be so calamitous that it warranted an exemption from free market discipline.

While a political leader can sound very confident as he labels this or that concern as “too big to fail,” there is in fact no theoretical construct which clearly defines such a category of businesses. In fact, some theoretical models of free markets predict that every firm will eventually fail, and that such a failure is not only a necessary part of the business cycle, but it is a beneficial part of the cycle - such failures create the next round of opportunities.

But there was no proof of this novel doctrine whatsoever. It implied that capitalism was actually a self-destroying doomsday machine which would first foster giant institutions with wide-ranging linkages, but would then become vulnerable to catastrophe owing to the one thing that happens to every enterprise on the free market - they eventually fail.

Even if one were to grant, for argument’s sake, the TBTF hypothesis, then one would expect, as a logical consequence, that governments would simply regulate the economy so that no corporation ever grew so large that it was TBTF. While wrong-headed, that would at least be internally consistent from a theoretical point of view. But instead, the nation’s central bank chose to simply tinker with the market place.

In fact, if TBTF implied an eventual catastrophe for the system, there was an obvious solution: a “safe” size limit for banks needed to be determined, and then followed by a 1930s-style Glass-Steagall event in which banking institutions exceeding the limit would be required to be broken up or to make conforming divestitures. Yet while the TBTF debate had gone on for the better part of two decades, this obvious “too big to exist” solution was never seriously put on the table, and for a decisive reason: the nation’s central bank during the Greenspan era had become the sponsor and patron of the TBTF doctrine.

President Ronald Reagan had appointed both David Stockman to the OMB and Alan Greenspan as Chairman of the Federal Reserve. While Stockman remained true to his economic training and worked for truly unregulated markets and for spending reductions to match tax cuts, until he resigned after seeing “the triumph of politics” over rational economics, Alan Greenspan, on the other hand, seemed to shed his free market ideology upon taking office. Whether Greenspan was truly a die-hard laissez-faire advocate, or whether Reagan merely mistakenly thought he was one, is open to debate. Reagan thought that, in appointing Stockman and Greenspan, he was appointing two ideological soulmates; that hope was quickly shattered, as was the hope that Congress would see the wisdom in cutting spending as it cut taxes. When Congress refused to cut spending, Reagan took the tax cuts as a political compromise. In politics, one can take “half a deal” as a compromise; but in economics, one cannot take half an equation and get half the results.

This was an astonishing development because it meant that Alan Greenspan, former Ayn Rand disciple and advocate of pure free market capitalism, had gone native upon ascending to the second most powerful job in Washington. In fact, within five months of Greenspan’s appointment by Ronald Reagan, who had mistakenly thought Greenspan was a hard-money gold standard advocate, the Fed panicked after the stock market crash in October 1987 and flooded Wall Street with money.

Abandoning the basis of the free market, Greenspan saw his objective as the stabilization and maintenance of certain market levels. This was one of many steps which led the nation toward economic disaster.

For the first time in its history, therefore, the Fed embraced the level of the S&P 500 as an objective monetary policy. Worst still, as the massive Greenspan stock market bubble gathered force during the 1990s it had gone even further, embracing the dangerous notion that the central bank could spur economic growth through the “wealth effect” of rising stock prices.

Greenspan found justification in the writings of Milton Friedman. Friedman, a Nobel Prize winner in economics, while propounding an orthodox version of the free market, introduced another error. Friedman endorsed the notion of floating exchange rates for currencies, even after President Richard Nixon cut the final loose connections between the US dollar and the price of gold. Friedman’s vision of floating exchange rates paved the way, perhaps unwittingly, for an entire industry of currency speculation. The worst effects of that industry would take decades to emerge after Nixon’s disastrous 1971 decision.

It thus happened that Leo Melamed, a small-time pork-belly (i.e., bacon) trader who kept his modest office near the Chicago Mercantile Exchange trading floor stocked with generous supplies of Tums and Camels, found his opening and hired Professor Friedman. Even as several dozen traders at the Merc labored in obscurity to ping-pong a thousand or so futures contracts per day covering eggs, onions, shrimp, cattle and pork bellies, Melamed was busy plotting the launch of new futures contracts in the major currencies. In so doing, he inadvertently demonstrated how radically unprepared the financial world had been for the Friedmanite coup at Camp David.

The Chicago Mercantile Exchange - known simply as the ‘Merc’ - is an institution which facilitates the trading of futures and options, two types of financial instrument. A “future” is a contract to buy or sell a given quantity of a given commodity at a given price at some specified future time. For example, we can write a “future” to sell one ton of steel for $50 three months from now, or to buy one ton of wheat for $75 two months from now. Originally designed for industries which used these commodities, they eventually began to be used for pure speculation. An “option” is a document which gives its owner the right to buy or sell a quantity of a commodity at a given price at a specified future time, but does not oblige him to do so. The trading of futures and options requires complex calculation, involves great risk, but can yield great profits. Traditionally, the commodities involved were wheat, steel, copper, cotton, corn, beef, pork bellies, and a few other agricultural and mining products. Now, that would change. Because of floating exchange rates for major world currencies, and finally because of floating exchange rates for the US dollar, futures and options would be traded, not for wheat or steel, but for currencies. This would change the world’s exchange dynamic in ways which were unpredictable and which took years to manifest themselves.

Leo Melamed was the genius founder of the financial futures market and presided over its explosive growth on the Chicago “Merc” during the last three decades of the twentieth century. He understandably ended up exceedingly wealthy for his troubles, but on Friday afternoon of August 13, 1971, it would not have been evident to most observers that either of these outcomes was in the cards.

While the speculative trading of currencies was quietly starting - the world didn’t seem to notice at the time - other harmful changes to the nation’s economy were underway. Greenspan managed interest rates and managed the money supply with an eye to keeping equities markets at certain levels.

This should have been a shocking wake-up call to friends of the free market. It implied that the state could create prosperity by tricking the people into thinking they were wealthier, thereby inducing them to borrow and consume more. Indeed, the Greenspan “wealth effects” doctrine was just a gussied-up version of Keynesian stimulus, only targeted at the prosperous classes rather than the government’s client classes. Yet it went largely unheralded because Greenspan claimed to be prudently managing the nation’s monetary system in a manner consistent with the profoundly erroneous floating-rate money doctrines of Milton Friedman.

Allegedly different from each other, both President George W. Bush and President Barack Hussein Obama would find themselves in the financial turmoil of 2008, more than 25 years after Nixon’s currency rate decision, and both would seek advice from Greenspan’s successor, Ben Bernancke, who insisted on comparing the situation in 2008 to the situation in 1929.

The great contraction of 1929-1933 was rooted in the bubble of debt and financial speculation that built up in the years before October 1929, not from mistakes made by the Fed after the bubble collapsed. In the fall of 2008, the American economy was facing a different boom-and-bust cycle, but its central bank was now led by an academic zealot who had gotten cause and effect upside-down.

If the situation in 2008 was misdiagnosed, inasmuch as Bernancke saw it as parallel to 1929, then the misdiagnosis led to incorrect prescriptions.

The panic that gripped officialdom in September 2008, therefore, did not arise from a clear-eyed assessment of the facts on the ground. Instead, it was heavily colored and charged by Bernancke’s erroneous take on a historical episode that bore almost no relationship to the current reality.

The prescription for the problems of 2008 were not appropriate for that situation, or indeed for any situation. They helped not at all, but rather created two additional problems: further distortion of the market’s natural trend, and further undermining of currency’s credibility. Yet these bad prescriptions were delicious to those business leaders who did not want to operate in a free market. Cronyism had a heyday. Instead of exposing all businesses to the hurricane of market fluctuations and seeing which of them could weather the storm, markets were warped to create safe havens for those businesses which abandoned their laissez-faire ethics and would sell their honor for a government handout.

Nevertheless, the bailouts hemorrhaged into a multitrillion-dollar assault on the rules of sound money and free market capitalism. Moreover, once the feeding frenzy was catalyzed by these errors of doctrine, it was thereafter fueled by the overwhelming political muscle of the financial institutions which benefitted from it.

From Stockman’s viewpoint, 2008 was 1985 all over again. Theoretical purity was negotiated away to political pragmatism. Such damage, once done, is not quickly or easily undone.

These developments gave rise to a great irony. Milton Friedman had been the foremost modern apostle of free market capitalism, but now a misguided disciple of his great monetary error had unleashed statist forces which would devour it. Indeed, by the end of 2008 it could no longer be gainsaid. During a few short weeks in September and October, American political democracy had been fatally corrupted by a resounding display of expediency and raw power in Washington. Every rule of free markets was suspended and any regard for the deliberative requirements of democracy was cast to the winds.

In David Stockman’s view, then, a series of bad decisions led to the nation’s economic decline: Nixon’s free floating currency, the Fed attempting to manage the stock markets via interest rates, speculation on currency exchange rates, Congress’s refusal to cut spending, and more. The lingering question remains: can it be undone?

Wednesday, June 19, 2013

Education Funding and Education Policy

Would you buy a book, even if the author hadn't finished writing it yet? Would you start playing a game, even if all the rules for the game hadn't been clarified? Would you get onto an airplane, even if you didn't know where it was going?

State legislatures around the nation have adopted a nation-wide educational program called 'Common Core State Standards' - often simply called 'Common Core' or CCSS. Educational programs have come and gone over the decades, but what is new about this one is the fact that the individual state legislatures have adopted it without knowing what it even is, because at the time they adopted it, it wasn't completely written or finalized. Tim Walker, writing in NEA Today, notes that

Forty-five states have adopted the CCSS, which means for the first time there will be consistency among states in what students should know and be able to accomplish in the two core subject areas of English language arts and math. The purpose of the CCSS is to provide a consistent, clear understanding of what students are expected to learn, no matter where they live, so teachers and parents know what they need to do to help them. The CCSS is also designed to be much more rigorous, focused, and coherent than current standards. It is also relevant to the real world, reflecting the knowledge and skills that young people need for success in college and their careers.

Thus far, the CCSS sounds good. It's difficult to argue with consistency, rigor, focus, coherence, and relevance. Who wouldn't want students to have knowledge and skills? But, in fact, while curricula and tests are being rewritten, and

student assessments are being remapped to the Common Core, the design and implementation of these new exams is still largely a work in progress, despite the expectation that they will be implemented for the 2014 – 2015 school year.

Why would anyone commit to complying to a program which didn't yet exist? Why would someone promise to follow a set of guidelines that hadn't yet been written? The answer is money. The federal Department of Education "gave" money to individual states in return for a blanket promise to follow whichever guidelines the department might issue to the states in the future. Note the years:

In 2010, two consortia of states were awarded federal Race-to-the-Top money to develop a new set of assessments that will be tied to the Common Core Standards scheduled for implementation during the 2014–2015 school year. Both groups — the Smarter Balanced Assessment Consortium (SBAC) and the Partnership for Assessment of Readiness for College and Careers (PARCC) — plan to administer these new exams primarily on computers, and both aim to minimize multiple-choice questions in favor of open-ended problems requiring creativity and critical thinking. Both groups also plan to develop materials for teachers, such as curriculum maps, to show how the material on the assessments can be taught over the course of the year, and they will create items that can be used formatively in classrooms. The PARCC consortium consists of 23 states, and the Virgin Islands. Twenty-seven states belong to SBAC.

"Race to the Top" was a slogan created by the Department of Education. It was a label for a contest: those states which would make the most blanket promises to the federal level - turning over the state's present and future decisions to the national government - would receive funding. Step by step, various states gave away more and more of their freedom, and promise to let the federal Department of Education dictate current and future educational policy inside the states. Both federal and state governments seemed to be ignoring the ninth and tenth amendments to the Constitution - the final two amendments in the Bill of Rights.

While criticizing previous educational programs as relying too much on high-stakes standardized testing, "Race to the Top" drove states into the arms of CCSS, which simply repackages such testing in new formats. Despite misgivings on the part of some educators, many states rushed to embrace CCSS, simply because doing so would result in money from the federal government arriving their school systems. Or so they thought. Because "Race to the Top" was constructed as a contest among states, the winners were those states which promised to turn over the most control the federal government. Some states promised to give almost complete control to the federal government; they lost the contest, because other states gave total control to the new program. But those states who lost the race - because they promised to give "almost" complete control instead of simply complete control - were still obligated to fulfill the commitments they'd made, even though they now received none of the special Common Core funding. An article in the MEA Voice notes that

Many states, including Michigan, began the process of adopting the standards in 2009 — despite not having seen them — in order to qualify for federal Race to the Top funding. The Race to the Top program, part of the 2009 federal stimulus package, doled out more than $4 billion to states “that are leading the way with ambitious yet achievable plans for implementing coherent, compelling, and comprehensive education reform.” The program also included more than $300 million to develop tests based on the new curriculum standards.

The Michigan State legislature, then, lured by the possibility of millions of dollars from Washington, agreed to implement a program about which it freely admitted that it had no clear idea - a program about which it knew nearly nothing. How they "began the process of adopting the standards" which had not been formulated is a puzzling matter. In any case, while they promised to abandon Michigan's sovereignty and ability to decide its own matters for itself, their efforts were in vain. Other states surrendered even more autonomy, and Michigan got no money from the program.

The Michigan Legislature passed numerous “reforms” in an attempt to secure Race to the Top dollars. While Michigan failed to win any of those federal dollars, the state is still responsible for implementing the Common Core State Standards by the 2014-15 school year.

The State of Michigan is now "on the hook" to pay for programs it didn't even understand when it agreed to adopt them. Not only has the federal government usurped the state's autonomy, and not only has the state agreed to this usurpation, but now the state must pay for the removal of its own freedom. The state had hoped to sell its freedom for money; instead, the state has lost its autonomy and now must pay for the removal of that autonomy.

Much of the state's educational bureaucracy will have to be re-tooled, at the expense of Michigan taxpayers, to align itself with the new federal dictates. MEA Voice cites William Schmidt at Michigan State University:

Schmidt reports that more than 90 percent of teachers support the concept of Common Core standards. However, there is a big gap between what teachers understand the standards to be and what they actually are.

In the end, the State of Michigan gave away its autonomy, got no money in return, and must now pay to re-tool its own system to make it correspond to a set of guidelines which originated neither with the Michigan legislature nor with the Michigan voters. The federal Department of Education's trickery, and the state legislature's naivete, resulted in massive damage to Michigan's educational programs.

Sadly, Michigan is not an isolated example. Many other states followed suit. The question now confronting these states is whether they can in any way regain the liberty and autonomy thus lost.

The Complexities of Immigration Policy

Immigration policy, at first blush, would seem to be about deciding whom we allow into our country, and about when and why and how we allow them, and about how we prevent others from violating the law by sneaking in illegally. But the question quickly becomes even more complex when we see the ripple effects that immigration policy has in terms of education, healthcare, and the economy.

One topic within the larger theme of immigration policy is the notion of 'amnesty' - allowing those who have knowingly violated the law by sneaking into the country to stay, and allowing them to obtain papers as legal resident aliens. Those who favor the amnesty approach to dealing with immigration envision that these aliens might one day even became voting citizens, just as those who enter the country legally do.

In an report issued by the Excellence in Broadcasting Network, a surprising link was found between what might seem to be two unrelated policy questions: abortion and immigration:

If you use the popularly accepted figure of 1.3 million abortions a year, go back to Roe vs. Wade 1973, 52 million taxpayers haven't been born, is the way Washington looks at it. They don't look at it morally. They don't look at it in any kind of cultural way or any kind of cultural impact. They just say we're 52 million people short. We have 52 million fewer people paying taxes. We gotta replace 'em. Hello amnesty.

The economic effects of abortion policy have long been understood: social programs for retirees, like Social Security and Medicare, require a large pool of working people. It is a relatively simple matter to arrive at a numerical ratio which expresses the situation - the number of working people compared to the number of retired people. The more workers per retiree, the better. If the USA had, for an extreme example, twenty working people for each retiree, there would be no problem funding these programs. At the other extreme, if we had one working person for twenty retirees, the system would quickly collapse. We have found ourselves at neither extreme, but the trend is for fewer and fewer working people. This is the source of the funding problems which have plagued Social Security and Medicare.

There is a twofold reason for which some politicians drive toward more immigration. The more cynical elected officials need

a permanent underclass in order to keep themselves alive as Santa Claus, to keep winning elections and stay in power. But Washington overall, much as they hate people, much as they hate their base, much as they hate the middle class, they still need people working and paying taxes, regardless how many people are gonna be paying a lot or a little. The illegals income levels might be such they wouldn't be paying much, but it's better than nothing.

One group, therefore, wants more immigrants simply to supply itself with another constituency from which to obtain votes. The second group, less cynical, sees a need for workers, i.e., a need for taxpayers.

There are, however, other solutions to these problems. One, obviously, would be to encourage a higher birthrate. Economies are most sustainable when the birthrate is around three children per adult woman. Birthrates lower than that, in any country anywhere, encounter economic instability.

Thursday, June 6, 2013

Transformational Presidents

Harvard's Professor Joseph Nye, surveying the USA's 44 presidents, divides them into "transformational" and "transactional" in terms of their foreign policy:

Leadership experts and the public alike extol the virtues of transformational leaders — those who set out bold objectives and take risks to change the world. We tend to downplay “transactional” leaders, whose goals are more modest, as mere managers. But in looking closely at the leaders who presided over key periods of expanding American primacy in the past century, I found that while transformational presidents such as Woodrow Wilson and Ronald Reagan changed how Americans viewed their nation’s role in the world, some transactional presidents, such as Dwight D. Eisenhower and George H. W. Bush, were more effective in executing their policies.

He notes that transformational foreign policies are risks: they can be wildly successful, or tragic failures. Transactional policies, on the other hand, are more cautious, and make progress which is steady but perhaps less exciting:

Compare Woodrow Wilson, a failed transformational president, with the first George Bush, a successful transactional one. Wilson made a costly and mistaken bet on the Treaty of Versailles at the conclusion of the First World War. His noble vision of an American-led League of Nations was

revealed in the course of time to be good-hearted, well-intentioned, and idealistic. It was also doomed to failure. Not only were Wilson's internationalist visions destined for ineffectiveness because of their naively utopian nature, but also because of Wilson's poor managerial skills:

He lacked the leadership skills to implement this vision in his own time, and this shortcoming contributed to America’s retreat into isolationism in the 1930s. In the case of Bush 41, the president’s lack of what he called “the vision thing” limited his ability to sway Americans’ perceptions of the nation and its role in the world. But his execution and management of policy was first-rate.

Unlike Wilson, George H.W. Bush understood working relationships with other world governments - before becoming president, he had served as ambassador to the United Nations, as a diplomat to China, and as director of the CIA. Wilson, by contrast, had been a strictly domestic figure, with little understanding, experience, or contact to any government outside the United States; inside the USA, Wilson had been a somewhat distant and academic figure, not a hands-on manager. The elder Bush had played on a successful baseball team and managed successful energy companies: he knew how to work with people.

Woodrow Wilson's quixotic plans for international relations were perhaps naive, but not simplistic. The League of Nations, Wilson's brainchild, was tasked with enforcing not only the provisions of the Treaty of Versailles, but also the other postwar agreements, like the Treaty of Saint-Germain and the Treaty of Trianon (both of which dealt primarily with the Balkans), and the Treaty of Sevres (which dismembered the Ottoman Empire). This tangled skein - composed between 1918 and 1920 - was so complex that the U.S. Senate feared unintended and perhaps disastrous consequences, should the USA become party to it. The Senate refused to ratify the USA's entry into the League of Nations, not wanting to saddle the country with the burden of enforcing all these treaties, and not wanting to obligate the country to enter wars in the future: entry into the League would have required the USA to come to the military defense of any other League nation which might find itself under attack.

By contrast, President George H.W. Bush gained the respect of other world leaders, not by a dramatic recasting of the world, but rather by patient, cautious, gradual and organic development of international relations. When the senior Bush proposed creating a coalition which would include both European states and the Islamic states of the Middle East, and use this coalition for the purposes of defeating Iraq, many of his critiques deemed this impossible. Yet he created a coalition of more than thirty nations, ranging from Saudi Arabia to South Korea, and including both Argentina and the United Kingdom. Bush's patient diplomacy drew Vietnam, China, Mongolia, Guatemala, and Senegal into the coalition. Most delicately, he persuaded Pakistan and other Islamic nations into a coalition which could have been perceived as a coalition which would benefit Israel. The 1990/1991 Gulf War coalition remains one of the most amazing feats of international diplomacy.

Saturday, June 1, 2013

Economics, Then and Now

The study of economics is contested territory - some see it as a "hard" science, like chemistry or astronomy, subject to the rules of empirical observation and mathematical modelling; others see it as a "soft" science, in which reflection and analysis are of a more nuanced type and not subject to algebraic patterns. It is also a controversial topic inasmuch as the purely descriptive nature of economic laws is continuously conscripted to work in the service of prescriptive policy. It is a rare economist indeed who can keep his work as a purely academic exercise in categorizing data under the headings of various hypotheses; if, by himself, he is not tempted to veer from the descriptive into the prescriptive, someone else will nudge him into that temptation.

Wherever economics crosses into the prescriptive - which is almost everywhere - then it will become controversial as a matter of course, as policy makers and parties seek justification for their views.

The use and abuse of economics becomes clearer over time. A student graduating from Yale University in 1950 would have been exposed to an economics curriculum shaped by the teaching faculty and its views. One such graduate, William F. Buckley, recorded his experiences. The introductory concepts can be taught by professors of various leanings - despite their biases, they are competent

to explain the price system, the laws of supply and demand, the cost curves of the business firm, and the myriad details and background knowledge that must serve as the basis for any well-conceived course in economics. The elementary textbooks at Yale do this job well enough. It is when the author begins to talk about desirable government action, appropriate social policies, just economic goals; it is when he discusses the obsolescence of individualism and the waning of free enterprise and capitalism, that he reveals his biases. And these biases are readily espoused by the average student.

The practicalities of economics are, in many cases, non-controversial. But the economist always walks the tightrope over the abyss of policy recommendations. There is a double danger here: in the examples given by Buckley, the textbook author writes about which government actions might be "desirable" - first, in choosing one set of actions over another, the author has betrayed a bias; but second, in assuming that government actions can be "desirable," the textbook author has already accepted the premise that the government should act, rather than leaving the organic economy to work on its own to find its way to an approximation of an equilibrium.

Likewise, not only is there a subjectivity in choosing one or more social policies as "appropriate," but there is a deeper belief behind the choice - the hidden and unquestioned belief that a government should have a "social policy," rather than letting society choose its own course. Societies can largely structure and guide themselves, and it is a large assumption to assert that the government can and should override society's internal guidance.

And so it is with the other examples listed by Buckley: not only is it an assumption that one can decide which economic goals are just; it is also an assumption that a government should have economic goals, or that such goals could possibly be just. It is a conjecture that individualism is "obsolete" or that capitalism and free enterprise are "waning" - a conjecture which is not strong enough to be stated as a brute fact in introductory textbooks.

These were the ideologies hidden in the curriculum of economics at Yale in the late 1940's. Although still current among some people - among some elected leaders of both parties, among some career bureaucrats and civil servants, and among the less competent academics who are all the more influential because of their incompetence - these ideas are even less credible 65 years later than they were then.

However incredible, these ideas were influential, and influential by design. The teaching of them was part of a broader social and political vision. The ideas were certainly not meant to fuel some violent overthrow of the economic system:

It is a revolution of the second type, one that advocates a slow but relentless transfer of power from the individual to the state, that has roots in the Department of Economics at Yale, and unquestionably in similar departments in many colleges throughout the country. The documentation that follows should paint a vivid picture.

Buckley goes on to list the examples already discussed. There is certainly neither crime nor sin in teaching various ideas, but there is both when the mission of the university is thereby betrayed. Yale in particular, as a privately owned and operated university, has the mission of fulfilling the desires of its founders, of those who fund it, and of its alumni. By contrast, a publicly run university, to the extent that it is funded by tax dollars, has the mission of carrying out the desires of the voters and taxpayers, as those desires are expressed by their elected representatives.

I cannot repeat too often that I have cause to object to the current Yale policies only if there exists a disparity between the values the alumni of Yale want taught, and those currently being taught in the field of economics. If, after digesting this section or pursuing personal investigation, the alumnus finds himself in accord with the values that are being fostered at his college, I have nothing more to say to him - unless, of course, I find him, some day, lamenting the collectivist drift of our government.

It may well be inevitable, that as long as economics is taught as an academic discipline, it will be an ideological battleground in a way in which, e.g., trigonometry is not. In any case, the biases and unspoken dubious assumptions which Buckley identified in Yale's curriculum remain common, despite the fact that they are intellectually even less respectable now than they were then. To present such ideas, and deliberately withhold data which reveal such ideas as untenable, while being funded by those whose desires are not represented in such ideas, and funded by those whose well-being is measurably harmed by policies based on such ideas - be they taxpayers or alumni donors - amounts to fraud.