Your Education Dollars At Work
Bloomberg has an article on how some state university systems have been wisely spending your tax and tuition dollars. Since 2012, California schools have spent $7.5 million in speaker fees and Florida schools have spent more than $2 million; data from other states are not available. Recipients of this largesse have included Hillary Clinton ($225,000 from the University of Nevada at Las Vegas, which obviously decided to diversify its public image from purely sporting scandals), Kevin Bacon ($70,000 from the University of South Florida for a speech in which he admitted that he is much better “when I’m not the one writing the lines”), and Spike Lee ($25,000 for a 10-minute speech in New Jersey, during which he doubtlessly denounced corporate greed).
At the same time, the US government has granted over $1 trillion in student loans to create massive tuition inflation and churn out graduates, many with no marketable skills, as is proven when over 50% of them ultimately accept jobs that don’t require college degrees. Meanwhile, companies routinely report 3 million job openings for which they can’t find employees with the right skills while foreigners, who make up 40% of the Masters and PhD students in STEM programs, often on scholarships, are chased from the country and into the welcoming arms of places like Canada and Australia due to idiotic immigration laws that, among other things, limit India and China to the same absolute number of green cards as much smaller countries. We then bankrupt the State of Illinois, among others, paying over 6,000 public school teachers and administrators (a.k.a., the Democratic Party’s “base”) pensions of over $100,000 per year, which frequently result from abusive, late-career “pension spiking” techniques.
Is it any wonder that I sometimes feel like the character Mugatu in the film Zoolander: “Doesn’t anyone notice this? I feel like I am taking crazy pills!”
There They Go Again
The record $25 billion initial public offering (“IPO”) of Alibaba Group Holding Ltd. probably also set another record: the largest wealth transfer from the existing shareholders to the favoured clients of the underwriters (Goldman Sachs, Credit Suisse, Deutsche Bank, JP Morgan, Morgan Stanley and Citibank).
The roughly 367 million shares of Alibaba placed in the IPO at $68 opened for trading at $92.70, for an instant wealth transfer of approximately $9.1 billion. Half of the IPO was reportedly allocated to ten investors, almost certainly large hedge funds benefiting from plenty of hints about the overwhelming level of demand, which thereby pocketed about $900 million in hard-earned performance fees. In addition to the gratitude of their investor clients, the underwriters earned $300 million in fees for their excellent work on this IPO.
In the words of one analyst, investors in Alibaba “seem to be using Alibaba as a proxy for the (Chinese) macroeconomy and consumer economy.” Regular readers of this blog know how favorably I view the future economic prospects of China, a country that, in just two years (2011 and 2012) produced more cement than the US economy did during the entire 20th century, where debt (as a percentage of GDP) has increased from 140% at the end of 2008 to 250% today, and where house prices in Beijing and Shanghai are two to three times more expensive, compared to incomes, than the already unsustainable levels of London.
In addition to exposure to these highly attractive and clearly sustainable economic trends, investors in Alibaba can take comfort in knowing that the company is being guiding by some very astute financial minds: apparently the reason why the IPO price stayed at $68 in the face of clear excess demand at this price is that the numbers “6” and “8” are considered lucky by the Chinese. I mean, no price is really too high to pay for access to management of this quality.
I feel like I am taking crazy pills.
Lake Wobegon Days at Harvard
The Economist reports on a study done by Stuart Rojstaczer, an American writer and critic of grade inflation, who has used a variety of official and unofficial sources to estimate that the average grade at Harvard is an “A-“, up from an average “C+” in 1950. Like the children in Garrison Keillor’s fictional town of Lake Wobegon, it appears that all of the Harvard students are now above average.
In the title of a recent article, Barry Ritholtz over at Bloomberg makes the obvious point that it is time to “Get Over It and End Cuban Embargo”.
In addition to pointlessly imposing economic hardship and therefore encouraging periodic visits to our shores from Cuban refugees, the embargo is an obvious prop for the corrupt and incompetent Communist regime. Without the yanquis to blame for their myriad economic and political failures, the Castro clan would certainly have to work harder to retain its grip on power.
It is only a matter of time before this throwback regime is consigned to the famous “dustbin of history,” but we can speed the process by removing this pointless embargo. Maybe it takes a Marco Rubio to do this, like it took a Richard Nixon to make the opening to Communist China?
Judges and Juries
This may come as a surprise to my readership, but the American practice of electing judges is shared, to my knowledge, by no other major Western country. And for good reason: it’s nuts.
Democracy is a very flawed mechanism. Even when deciding about senior positions in politics, the electorate has demonstrated a limited ability to make an informed and intelligent decision. Nor should we expect them to do so: with the exception of political junkies and policy wonks like me, for whom it is a form of play, educating yourself about candidates and their policies is costly and time-consuming work. Combine this with the likelihood of your vote actually swaying an electoral result and it is fairly easy to demonstrate that taking the time to vote intelligently, or even to vote at all, is strictly irrational. But your average citizen still does it out of a sense of civic responsibility or other non-economic motives.
But we shouldn’t push it, which is precisely what we do when we submit minor roles to the vote. It is absurd to believe that voters have either the ability or inclination to make an informed decision on something like judges, which means that we end up with decisions made on superficial characteristics such as party affiliation, name recognition, race or ethnicity, or general presentability. It also means that interested groups, such as lawyers in the case of judges, have a grossly disproportionate influence on the outcome of races.
The Economist makes another good point about the difference between the role of a judge and the other roles submitted to a vote:
“Electing judges is a bad idea because judges are not like politicians. It is fine for a politician to make deals with voters; to say, “Vote for me and I’ll raise the minimum wage” or “Vote for me and I’ll cut taxes.” But is an abuse of power for a judge to promise – or even hint – that he will decide future cases on any basis other than the facts and the law. Standing for election gives judges an incentive to smile on people voters like and get tough on those they hate. That is hardly a recipe for impartiality.”
There is another way in which the US legal system deviates from international norms and that is in its use – or rather, abuse — of juries. The same argument applies here: it is absurd to believe that “twelve good men and true” will have the ability or the inclination to decide matters which are beyond their expertise or interest. I myself have sat on a jury involving a double murder, seemingly sufficiently dramatic to engage the interest of anyone; nonetheless, a juror was dismissed after she loudly fell asleep during the proceedings. In a similar vein, the Economist reports that the chief justice of the Caribbean island of Trinidad and Tobago wants to abolish jury trials completely, arguing that they slow trials down and raising basic questions about the “functional literacy” of the pool of jurors.
After inheriting the jury system from England, it has long since been abolished in a large number of former colonies, such as India and South Africa. Yet, America continues its use, including in circumstances where the Mother Country and the other Anglo Saxon inheritors have long since abandoned it. We might not want to fully abolish the jury system, but its use should clearly be restricted to only the most serious criminal matters. It is frightening to consider how jury decisions are made in the case of minor crimes or almost any civil matter, the latter producing so much irrationality that it is not even necessary to give examples. The nearly random decisions produced by jury trials in civil matters are a huge source of spurious litigation. With both sides knowing the quirks of the system, litigants are greatly encouraged to “give it a shot” and defendants, frequently corporate ones, are often forced to succumb to this legalized form of extortion out of fear of a jury result.
It has been said that, in America, the “rule of law” has been replaced by the “rule of lawyers”. Elected judges and disinterested juries, both incompetent, are major causes of this very unfortunate development.
I finish these short takes on a lighter note, with a movie recommendation. The movie is Four Lions, an obscure British black comedy by Chris Morris that won a BAFTA, the British equivalent of an Oscar, for the Outstanding Debut by a British Writer, Director or Producer.
The movie chronicles the inept attempts of four British muslims to practice mujahedeen in Sheffield. Along the way, everything from Islam to political correctness are viciously and hilariously satirized – if a fatwa against Salman Rushdie was issued because of The Satanic Verses, then I am amazed that the director and actors of Four Lions haven’t been knee-capped.
One health warning, though: the Northern English accents, with a heavy Pakistani overlay, were a struggle even for me, with over 20 years in this part of the world. Make sure you get sub-titles.
Roger Barris, London