London’s Uber Ban Shines Light on the Sorry State of the Rule of Law

Transport for London (TfL), the government agency responsible for regulating transportation in the UK’s capital, recently decided to revoke Uber’s license to operate within Greater London. While many advocates of free choice and innovative technology have lambasted the decision as bad for the poor and (in the words of Chris Philp, MP) “anti-free market,” the root cause of the problem— discretionary powers—remains unaddressed.

The Rule of Law

The Private Hire Vehicles (London) Act of 1998 puts the Diceyan legacy in Britain to shame. The British jurist Albert Venn Dicey, known for his 1885 work Introduction to the Study of the Law of the Constitution, that the Rule of Law means “the absolute supremacy or predominance of regular law as opposed to the influence of arbitrary power, and excludes the existence of arbitrariness, of prerogative, or even wide discretionary authority on the part of the government.” Depending on how fierce one’s dedication to the Rule of Law is, this can mean one of two things.

The first, more onerous meaning, is that only the legislature (in this case, parliament) can create law, not the executive. The legislature cannot give the executive the power to make law, which carries substantive consequences.

The second, more practical meaning is that whenever the legislature assigns discretionary power to the executive in the laws it passes, it must include objective criteria which guide the executive official’s exercise of their discretion. In other words, the law cannot be implemented arbitrarily according to the official’s own whims but must be implemented according to legal principles such as reasonableness, rationality, effectiveness, and proportionality, to name but a few.

The Private Hire Vehicles (London) Act of 1998, which empowered TfL to revoke Uber’s operating license, puts the Diceyan legacy in Britain to shame.

The Act provides that no “private hire” operator, such as Uber, may operate in London without a license. To obtain a license, a private hire operator must apply to TfL. TfL, in turn, has absolute (or arbitrary) discretion in who it does or does not grant a license to. Section 3(4) provides that a license may be granted only if “such conditions as may be prescribed and such other conditions as the [TfL] may think fit.” The remainder of the Act is littered with similar provisions giving TfL unjustifiable amounts of power to decide what it “requires” from prospective and re-applying private hire operators to have them licensed. Licenses may be revoked if the TfL is no longer convinced that the operator is “fit” to have the license.

Feeble Justification

TfL provides an explanation for the revocation of Uber’s license. Among other things, it is not satisfied with Uber’s “approach” to reporting crimes and how Uber obtains medical certificates. In the latter case, TfL takes issue with Uber drivers conducting their required medical check-ups via video instead of actually with a doctor. It also criticises Uber for using security software Greyball to obstruct regulatory authorities. Greyball apparently enabled Uber to identify potentially-unwanted passengers and make it more difficult for them to book a ride.

Thankfully, Uber has an opportunity to appeal the decision and hopefully have it exposed for the unsubstantiated and biased twaddle that it is.

The UK is not the only country adopting a flexible approach to the Rule of Law when it comes to suppressing disruptive technologies. South Africa’s transport minister also recently played with the fanciful notion that he is able to create law from thin air by simply making a press statement and require Uber drivers––who operate differently from regulated taxi services in the country––to obtain permits. Section 1(c) of South Africa’s constitution, however, provides for the supremacy of the Rule of Law, and despite government’s ignorance of this provision, ministers can’t simply legislate from the sidelines.

Government’s incessant desire to be in control of everything illustrates the whole point of the existence of the Rule of Law. It goes without saying that in a country with parliamentary sovereignty—the notion that Parliament can make any law it desires, subject to no written constitution—like the UK, Parliament can, if it is so inclined, ban services like Uber. As Professor Trevor Allan of Cambridge University notes, however, the Rule of Law is part of the common law legal order which defines British law and is thus inescapable. If Parliament wanted Uber banned, it can do so directly, and if it wanted to allow TfL to do so, it would need to put substantive criteria—other than the “reasonable cause” cop-out—in the Act.

The UK and South African governments’ decisions to repress Uber, most likely to appease local taxi unions, comes at the expense of consumers. While many argue that Uber has flouted laws all over the globe by working essentially as taxis—but not being subject to the same regulation as other taxis—the issue is not Uber, but the laws themselves. Uber has truly revolutionized transportation by providing a quick, mostly-affordable method of getting a ride somewhere. Tourists no longer need to struggle over language barriers and subject themselves to haggling by uncooperative taxi drivers, because the app does it all for them. Laws which hinder this kind of innovation should be done away with, and there is no doubt that other taxi services would also benefit without excessive regulation.

Government’s incessant desire to be in control of everything illustrates the whole point of the existence of the Rule of Law: to ensure tempered, reasoned, and constrained governance. The UK is the birthplace of the modern understanding of the Rule of Law, and it would be wise for it to live up to its tenets. A good place to start would be to repeal or fundamentally revise the Private Hire Vehicles (London) Act.

This article was originally published on FEE.org. Read the original article.

So, You’re Thinking about Homeschooling…

I have been getting emails like the one below more frequently lately, so I thought I would share my general response.

“Dear, Kerry: I ran across your website while doing research on homeschooling. I am a mother of 3 children ages 6,4 and 2. We moved to the suburbs when my children were smaller to take advantage of the top-rated public schools in our town. We had a wonderful pre-school experience due to the choice of school focused on play, outdoor exploration and emotional development.

However, as my 6 year old embarks on her education in the public school system, I find myself becoming more and more disappointed. More importantly, I find her becoming bored and disinterested in learning as a 1st grader.

All of this said, I am contacting you because I am thinking of homeschooling and I’m scared to death!What are the resources? What curriculum should I use? Where do I begin? So many questions! Help!”

Hello!

Welcome to the exciting world of learning without schooling! You have already taken the important first step in redefining your child’s education by acknowledging the limitations of mass schooling, recognizing the ways it can dull a child’s curiosity and exuberance, and seeking alternatives to school. Now it’s time to take a deep breath, exhale, and explore.

1. First things first: Connect with your local homeschooling network. This network could be a message board through a Yahoo or MeetUp group, or a Facebook group, or a state homeschooling advocacy group (like AHEM for Massachusetts homeschoolers). Maybe you have already joined the Alliance for Self-Directed Education and have connected with the local SDE groups that may be forming in your area. Tapping into your local homeschooling community, posting your questions and introducing yourself, can be incredibly valuable. You may be surprised at just how many homeschooling families are nearby and the many activities and resources available to you. You may also find families on a similar path as yours. This can alleviate much of the anxiety you are experiencing as you take a peek into this new world of learning. These local networks can help you to navigate your local homeschooling regulations and guide you through the process of pulling your child from school.

2. Second: start reading! Obviously, you are already doing this or you wouldn’t have found my blog, but there is much more to learn. Homeschooling and education blogs and websites are great resources. Here is my short list of favorite books/articles/films to get you started:

3. Third: What about curriculum? Personally, I am an advocate for Self-Directed Education (SDE). Sometimes referred to as “unschooling,” SDE shifts our view of education from schooling (something someone does to someone else, often by force) toward learning (something humans naturally do). With Self-Directed Education, young people are in charge of their own learning and doing, following their own interests and passions, with grown-ups available to help connect them to the vast resources of both real and digital communities. Children direct their education, adults facilitate. 

I am a realist though. (Or at least I try to be!) So I know that it is often challenging for families to go directly from a schooled mindset to an unschooled one. Whenever parents ask me what curriculum they should choose, I say *if* you are going to use a curriculum, I recommend Oak Meadow. A Vermont-based company that incorporates a lot of Waldorf-inspired educational ideas, Oak Meadow is a gentle, rich curriculum with a stellar reputation. 

4. Next: think about your family values, needs, and rhythms. Shifting from schooling to learning may involve some big changes to your family life, your routines, and your schedules. It may lead to reassessing priorities and to carefully juggling multiple work and family responsibilities. It also means you need some help to avoid burning out! Consider your support network of family, friends, and community and get the help you need to make this work for the long-term. If there is a self-directed learning center or homeschooling co-op near you, these resources can also be incredibly helpful in enabling you to find balance and connection.

5. Finally: talk with your kids! Learning without schooling is a collaborative endeavor that is mostly focused on your child’s distinct interests, learning styles, and needs. Talk with your child and find out what she wants to do. If you are coming directly out of a school environment, you may need some time to “deschool”– to fully embrace living and learning without being tied to the expectations and accouterments of a schooled lifestyle. Go to the library, the museum, the park, or the beach. Take a walk in the woods. Spend long, slow mornings reading books together on the couch. Bake cookies. Ride bikes. Write a letter to a friend. Watch a movie. Play Scrabble. Go to the grocery store, the bank, the post office. Live life. Soon you will see that living and learning are the same thing.   

Best wishes to you as you embark on this exciting life journey! Remember: schooling is a relatively recent societal construct; learning is a natural condition of being human. Happy learning!

Warmly,

Kerry

Reprinted from Whole Family Learning

This article was originally published on FEE.org. Read the original article.

States Should Follow the Michigan Model

Perhaps because there’s no hope for genuine Obamacare repeal and limited hope for sweeping tax reform, I’m having to look outside of Washington for good news.

I wrote the other day about the very successful tax reforms in North Carolina. So now let’s travel to the Midwest.

The Wall Street Journal‘s editorial page has a very upbeat assessment of Michigan’s turnaround, though it starts by noting that many states teach us lessons on what shouldn’t happen.

…states can provide instructive policy lessons for better and sometimes worse—see the fiscal crack-ups in Connecticut and Illinois.

I definitely agree about the fiscal disasters of Connecticut and Illinois. And Michigan used to be in that group.

Former Michigan Democratic Gov. Jennifer Granholm was a progressive specialist in using the tax code to politically allocate capital, which depressed and distorted business investment. Between 2002 and 2007, Michigan was the only state to experience zero economic growth. …misguided policies were arguably bigger contributors to Michigan’s slump. Between 2002 and 2007, Michigan’s manufacturing grew at a third of the rate of the Great Lakes region. …In 2007 Democrats increased the state income tax to 4.35% from 3.9%. They also enacted a new business tax with a 4.95% tax on income, a 0.8% gross-receipts tax, plus a 21.99% surcharge on business tax liability. …Michigan’s economy plunged amid the national recession with unemployment hitting 14.9% in June 2009.

But Michigan has experienced a remarkable turnaround in recent years.

Michigan…offers a case study in the pro-growth potential of business tax reform. …Mr. Snyder’s first major undertaking with his Republican legislature was to replace the cumbersome state business tax with a 6% corporate tax and trim the individual rate to 4.25%. Michigan’s corporate-tax ranking jumped to seventh from 49th in the Tax Foundation’s business tax climate rankings. …They also reformed state-worker pensions. After the 2012 midterm elections, Republicans passed right-to-work legislation that lets workers choose whether to join unions. In 2014 state voters approved a ballot measure backed by the governor to repeal the personal-property tax for small businesses and manufacturers.

These reforms already are paying dividends.

In 2011 Michigan added jobs for the first time in six years, and it has since led the Great Lakes region in manufacturing growth. Unemployment has fallen below the national average to 3.9% even as the labor-force participation rate has ticked up. …Unemployment in the Detroit metro area has fallen to 3.2% from 11.4% six years ago. Businesses in Ann Arbor and Grand Rapids say they can’t find enough workers. Perhaps they should try recruiting in Chicago or New Haven.

As a fiscal wonk, I’m delighted by tax cuts and tax reform. That being said, I want to specifically focus on the reform of bureaucrat pensions in the Wolverine State.

It was mentioned as an aside in the WSJ editorial, but it may be even more important than tax changes in the long run. We’ll start with a short video the Mackinac Center produced to helped stimulate debate.

[embedded content]

Here’s some of what Investor’s Business Daily wrote about the recent reforms.

We’ll start with a description of the problem that existed.

For years, Michigan had been racking up pension liabilities for public school teachers that it had no money to pay for. By 2016, the state’s unfunded liability had reached $29 billion — which meant state was funding only 60% of its pension obligations. …Michigan is hardly the only state to have made this mistake. Pressured by public sector unions, state lawmakers boosted retirement benefits, using wildly unrealistic forecasts for investment returns and wage growth to justify them.

And here are the admirable reforms that were enacted.

So what did Michigan do to avoid Illinois’ fate? It embraced bold pension reforms that will protect taxpayers and provide a solid retirement benefit to teachers. …it’s shifting its public school teachers toward defined contribution plans. All new hires will be automatically enrolled in a 401(k)-type plan with a default 10% contribution rate. Teachers will still be able to opt for a traditional defined benefit pension, but one that splits costs 50-50 between workers and the state, and includes safeguards that will prevent the funding ratio from dropping below 85%.

The experts at Reason also weighed in on the topic.

Pension analysts from the Reason Foundation (which publishes this blog and advocated for passage of SB 401) say no other state in the country has embraced reforms that go as far as Michigan’s. …new hires will be enrolled in a 401(k)-style pension plan, giving those workers the chance to control their own retirement planning while removing the threat of future unfunded liabilities. …What makes the Michigan proposal unique is it allows future hires to choose a so-called “hybrid” pension system retaining some elements of the old system with a provision requiring pension system to be shuttered if the gap between the fund’s liabilities and assets falls below 85 percent for two consecutive years. The mixed approach, allowing teachers to choose between a traditional pension and a 401(k)-style retirement plan, could be a model for other states to follow as they grapple with similar pension troubles.

Though the bill isn’t a panacea.

Paying down those obligations will take time—all current teachers and public school employees will remain enrolled in the current pension system and retirees will continue to collect benefits from it—but [it]…would make a big difference in the state’s long-term fiscal outlook.

Here’s a chart from the Mackinac Center showing how pensions became a growing problem. Unwinding this mess understandably won’t happen overnight.

But at least Michigan lawmakers took a real step in the right direction.

The same principle applies in Washington. Reforms to Medicare and Social Security wouldn’t change payments to existing retirees. And older workers generally would stick with the status quo.

But proposed entitlement reforms would lead to substantial long-run savings as younger workers are given the freedom to participate in new systems.

Reprint from International Liberty

This article was originally published on FEE.org. Read the original article.

If the Republican Tax Plan Is Bad for Donald Trump, Then It’s Bad for All of Us

“…it’s not good for me. Believe me.“ Those are the words of President Donald Trump, the allegedly savvy negotiator and manipulator of media, about the Republican tax proposal. Officials in the Trump administration also pointed to language in that same plan that allows Congress to impose a surcharge on the highest earners as a way of ensuring that the proposed reform will deliver a tax code that is “at least as progressive” as the one we have now. 

So while Trump and the Republicans are going to great lengths to make sure their tax reform fails to reduce the burden on those with the greatest power to stimulate actual economic growth (yes, the rich), traditional media predictably gave the false impression that the GOP reform is all about slashing rich rates. As a New York Times editorial put it, Trump and the Republicans have “come up with a wish list of tax cuts for the wealthy.” That’s what the left always say, no matter how much Republicans neuter their reductions of the federal tax burden in order to please them.  

Ok, but if Trump is as rich as he says he is, and the Republican plan isn’t good for him, logic dictates it’s also not good for the United States. Much as the overly sensitive want to wish it otherwise, economic growth and prosperity that’s enjoyed by all springs from reducing the tax burden inflicted on those with the most money, and/or those with the greatest potential to earn a lot of money. 

The Rich Benefit Everyone

If readers doubt the above, they need only consider the car, the air conditioner, the computer on which they’re reading this op-ed, or the supercomputer that sits in their pockets in the form of the smartphone. Does anyone seriously think that the innovators who mass produced the previously mentioned goods on the way to broad affordability were typical and unassuming middle earners? Let’s be serious.  The people who change how we work and live become very rich for doing so. Their wealth is an effect of their having removed unease from our lives. Since it is, why are the Republicans and Trump going out of their way to maintain – and possibly increase – the existing rates of taxation on the well-to-do? In Trump’s case, if he’s really and truly the genius developer and entrepreneur that he says he is, why is he so agreeable about having the fruits of his genius taken away?

The rich, by virtue of being rich, have lots of money. The response from some, and this includes those who would prefer a much smaller federal government, might be that people like Jeff Bezos, Warren Buffett, Bill Gates and Trump don’t think about taxation when they set about innovating.  Fair enough, there’s likely some or even a lot of truth to the latter. So driven are the entrepreneurial that the incredible computers and phones created, the unmet consumer needs met, and the tall buildings built, are the true rewards. Money is, well, money.  Ok, but that still misses the point.

Lest we forget, there are no jobs, no businesses and no life-changing innovations without investment first. Nike founder Phil Knight recalls in Shoe Dog that the first eighteen years of Nike’s existence were defined by nightly insomnia owing to his fear that a lack of cash would put his company out of business. And while it’s not true that a successful streak of winning in Las Vegas saved a nascent FedEx from bankruptcy, founder Fred Smith acknowledges that the wiring of $27,000 in Vegas winnings back to Memphis gave the deeply-in-debt company a much-needed psychological boost. What’s important is that Knight and Smith’s flirtations with bankruptcy are the norm for the great businesses. Behind every multi-billion dollar company is a story (or many stories) of near bankruptcy on the way to fortune. 

The above is intensely relevant to any discussion of tax reform simply because the rich, by virtue of being rich, have lots of money. Precisely because they can’t spend it all, they alone have the means to put their capital to work so that the Knights and Smiths of tomorrow will have greater odds of surviving the always lean early years, and sometimes decades. Despite the truth that there’s no economic progress without growth capital that the rich have more of than anyone else, the allegedly growth-oriented Republicans continue to run away from the kind of tax cuts that would do the most to boost the rich, and by extension enhance the investment that benefits everyone. The obvious reply to this is that the media would crucify them if they actually reduced the burden on those with real wealth, but then as the previously mentioned Times editorial makes plain, they’re already crucifying them for allegedly writing up a “wish list” for the rich.  In that case, why not – just once – do just that? If so, the genius of tax cuts will finally become apparent to all but the witless. 

Taxing the Rich Is a Bad Idea

More broadly, why, when it’s an historical truth that the great life-changing advances nearly always enrich their creators and by extension expand the pool of available growth capital, is the tax code written to shrink the availability of that growth capital in response to immense wealth creation? If it’s an accepted truth that the great innovations result from entrepreneurs being matched with capital, why craft a tax code that quite literally exists to shrink capital availability via higher tax rates mindlessly foisted on those with the most capital to match with entrepreneurs?

The media are reporting on huge tax cuts for the rich, the Republicans and Trump are explicitly saying their tax proposal won’t accrue to them. Considering the above questions, readers should never forget that every dollar taken in by Congress expands the federal government’s control over the economy. Yet Trump and the Republican Party continue to assure us that their tax bill won’t shrink government revenues. Instead, they’re literally bragging about how their tax plan will maintain – and likely expand – a number of dollars that will flow to the U.S. Treasury, and by extension, Congress. Yes, you read that right, even though the media are reporting on huge tax cuts for the rich, the Republicans and Trump are explicitly saying their tax proposal won’t accrue to them, and may actually harm them. 

Thinking about all this, it’s worth asking where’s the outrage? For the Republicans to say they’re not going to reduce the tax burden on the very individuals who, by their own statistics account for the vast majority of federal revenue, is for the same Republicans to quietly acknowledge that they have no intention of reducing taxes very much. Government spending is the truest tax on the economy; it’s a function of revenues flowing into that same government, but Republicans have proven timid about doing anything to actually shrink the flow of money into Washington. 

So while the Republican tax plan is better than nothing (the proposed abolishment of the estate tax is hugely bullish as this column extolling capital formation ideally indicates), it could be so much better. The problem is that neither Republicans nor Democrats want to give up the power they exert over the economy. And while their rhetoric is different from that of the Democrats, the sad fact that Republicans promise to maintain confiscatory tax rates on the rich in concert with federal revenues in excess is an explicit sign that they aim to solidify and extend Washington’s control over the economy, not shrink it as they’ve long promised. 

Reprinted from RealClearMarkets

This article was originally published on FEE.org. Read the original article.

The Bad Old Days of Paying Bills

My father was a happy person. But on the first or last Saturday of the month, every month, he was miserable.

He would wake in a grumpy mood, say nothing at breakfast, listen to no one around him, and at 10am, would slump into the small wood paneled room he called his office. He would gather piles of mail around him, dig through to find his books, heave a big sigh and get to work.

It was time to “pay bills.”

Growing up, I didn’t know what that meant other than: today is the day not to speak to Dad. It was a complete wash for us kids. I only knew that something on that day, the day of misery, something was terribly wrong.

It is still called “paying bills” but it not the same. As I got older, I noted the ritual. There was a huge pile of mail called bills. He would open each envelope with a letter opener, and it made a special noise that burned into my brain so hard that I can recreate in my imagination right now. He would examine the letter, to discover whether he had to pay the whole amount or could just pay part of it.

Then the checkbook would come out, and he would write, record the amount in the ledger and rebalance the book, tear off the check and stuff it in an envelope, and put on a return-mail sticker on the top left. He would put a government-issued stamp on the paper envelope. He put that in a stack. This activity was repeated as many as two-dozen times, maybe more, and each time, the paper ledgers had to be updated.

The suffering lasted from 10am to dinner time, but he was so exhausted that he wouldn’t speak.

Every bit of this pained him. You see, he was an artist, intellectual, dreamer, teacher, historian, and musician. He wanted to be throwing the ball with the kids, hiking, playing piano, practicing trombone, boating, or just reading a great book.

He was not an accountant. The whole thing seemed like terrible suffering.

Fast Forward

I’m almost embarrassed to compare what I do now to what he did then. It is still called “paying bills” but it not the same. I open my laptop, click a few things, and then….I’m out of things to do. It is done. I think my whole monthly ritual today lasted about ten seconds.

Imagine total financial disintermediation, the end of national monies, and the triumph of privately produced money that grows in value.  True story.

This point in history required vast innovation across many platforms. It never ends. Even now, my online banking interface is different than it was last month. I assume this will be true next month as well.

How many millions and billions of hours of time have been saved by these innovations?

There are so many pieces and parts that had to be improved to make our lives so much better, so many interfaces, institutions, protocols, rounds of experimentation, and, mostly, time. Somehow all these years later, the experience of the past is unknown, even unimaginable.

How many areas of life have been touched by this very thing, the abolition of drudgery in thing after thing?

The Wood Stove

I once asked a 90-year-old woman what the greatest innovation in her lifetime was? She answered: indoor heating. Before this came to their house, the whole day was consumed by finding trees, cutting them down, chopping them up, dragging them to piles, bringing in log after log, cleaning out soot, keeping the fire lit, turning the logs all day, dealing with smoke, smelling like smoke. This was the only life she knew.

Then one day, it was all gone. She never looked back. She never minded that technology “stole her job.” She hated her job. She was happy for a new life.

We could march through the list. The washing machine, indoor plumbing, refrigeration, the vacuum cleaner (no more rug beatings!), and so on. And dare I mention the Internet? I barely remember life without it. Whatever happened back then, we knew nothing as compared to today. The whole period ought to have a name. How about the Dark Ages?

The End of Suffering

My father had a happy life despite his monthly ritual of the suffering of paying bills. He overcame it. We have plenty of drudgery remaining but fortunately, we have a system that allows human beings to experiment and cooperate to take it away, bit by bit, year by year.

I wish my Dad could see my monthly ritual. I think he would smile, and then ask: what do you do with all your extra time? Today I can say: I write about you, Dad, and how much you inspired me to celebrate the system that liberated me from what you had to endure.

And what’s the next step? Imagine total financial disintermediation, the end of national monies, and the triumph of privately produced money that grows in value. The game has just begun to change. 

This article was originally published on FEE.org. Read the original article.

The Sandusky Fallout Is Bigger than You Think

When Jerry Sandusky, the former Penn State football coach, was convicted of sexually assaulting eight of his student players, few could foresee that he was about to hurt thousands more students, future physicians, and aspiring scientists across the nation.

In response to his sickening crimes, the state of Pennsylvania – with numerous other states following suit – passed Act 153 to prevent similar offenses, which added an immense regulatory burden on all workers, especially those at universities, who have any contact with minors.

As a Penn State student, I have seen first-hand the damage wrought by this controversy, as well as the disproportionate response – one largely carried out more for show than substance.

Slow Education

Their actions have inadvertently disincentivized students from pursuing medicine and science.

Millions of dollars have been wasted, by government mandate, on fingerprinting and background checks for anyone working in a building where a 17-year-old has stepped foot. Whether these well-intentioned measures have actually prevented crimes, or simply caused the loss of countless hours, dollars, and even jobs, is hard to say.

Fearful of lawsuits, universities across the nation have banned students under 18 from interning in labs or volunteering in clinics, making our high school students less competitive and less prepared for their futures. Moreover, their actions have inadvertently disincentivized students from pursuing medicine and science, which, despite being in desperately low supply in our economy, are also the most difficult fields for students to observe, practice, and appreciate without a laboratory, a clinic, and a mentor.

Americans are notorious for their unhurried approach when it comes to choosing and pursuing a profession. In most other developed countries, students begin undergraduate education at 16, and often have a path in mind by middle-school.

Across Europe, many high schools have specialty tracks tailored to individuals’ interests and focused on career preparation – one student attends a science-oriented school where he or she works in a lab, while another attends one with a rhetorical focus and interns at a law firm.

Early Professional Experience

In the US, most students are not exposed to professional settings, such as medical clinics or scientific research laboratories, until they are sent off to college at age 18 or older. By the time they finish their undergrad degrees, they’re often already mired in student debt so accumulating even more debt over the course of decades worth of training seems incredibly unappealing.

Consequently, the US is facing a drastic shortage of physicians in the coming decades, with as much as a 100,000-physician shortfall predicted by 2025, despite ever-inflating government health care spending.

Personal revelations that can only be had in a professional setting, are better made earlier in life.

The prolonged physician education timeline, which is undoubtedly in part to blame for the impending shortage, is the product of an outdated medical education system (spanning back to the Flexner report of 1910 which found that contemporary medical students were severely unprepared) that is unlikely to change anytime soon.

However, even small educational opportunities in said professions before college means that students would graduate with more years of experience, more opportunity and passion for scientific innovation, and more determination to pursue fast-track programs (like the accelerated 7-year BS/MD program I currently attend).

Of course, most students will not be rewriting string theory in high school, and some may even find that their ‘dream’ career is not for them. But these kinds of personal revelations, that can only be had in a professional setting, are better made earlier rather than later in life. Advancements in science and medicine have bred greater specialization and longer training, and we can no longer afford students losing years of their lives figuring out what they want to pursue or switching halfway through training. 

Not every future physician or scientist must start his or her path in high school, but there is no reason every high school student should not have the chance to be a physician or scientist for a day. While in some communities such opportunities are relatively accessible, they are sparse elsewhere. And this disparity is only exacerbated by the thousands of pages of federal, state, and local regulations and legal precedents.

Outmaneuvering The System

A few teachers, like my own former physics teacher, Dr. Janet Waldeck, have pioneered a national high school ‘Science Research’ curriculum, which attempts to get ambitious, diverse, public-school students into university labs and clinical settings. Rather bizarrely, imprisoned football coach Jerry Sandusky has proven a major obstacle to this project.

I have interacted with too many students who have no idea why they are studying science in the first place.

It is natural to respond to Sandusky’s heinous crimes viscerally and feel driven to action. As a Penn State student, I have witnessed first-hand the suffering and fall-out caused by this despicable human being. I understand the fear that parents must feel when sending off their children to distant and unknown settings – fear which has been exploited by politicians for cheap political victories, such as the passage of Act 153. But I have also interacted with far too many science students who have never set foot in a laboratory, or worse, have no idea why they are studying science or medicine in the first place.

I am grateful to my high school and to outstanding individuals, like Dr. Waldeck, for finding every possible path to outmaneuver draconian restrictions and get students into professional settings. I am however ashamed, as a former high school student, as a future physician, and as an American, that it must be this difficult.

The bedrock principles of freedom and opportunity upon which our nation is founded implore us to respond gracefully and show restraint in regulation – even in the face of fear-inspiring evil – to avoid jeopardizing those very loved ones whom we are trying to protect.

This article was originally published on FEE.org. Read the original article.

France May Finally Reform Its Backward Labor Policies

I like France, in part because it’s a nice place to visit, but also because I’ve been able to use the country as an example of bad public policy.

It’s hard to pick which policy does the most damage. As a fiscal policy wonk, I’m tempted to blame France’s woes on high taxes and wasteful spending.

However, there’s a strong case that labor law is the worst feature of economic policy. France has all sorts of rules that “protect” employees, but the net effect is that workers suffer because these laws discourage entrepreneurs from creating jobs.

And even though I get a lot of mileage out of making France a bad example, I actually hope that the nation’s new government will move policy in the right direction. Indeed, this is why I wanted France’s current President, Emmanuel Macron, to get elected.

Réforme en France

Yes, he used to be part of the previous socialist government that sought to make things worse rather than better. But I figured he was most likely to enact some pro-market reforms. And it appears my hopes may be realized, at least with regard to labor policy.

The BBC reports on why Macron wants reform, what he wants to do, and what likely will happen.

President Emmanuel Macron’s government has begun its drive to overhaul France’s rigid labour laws, vowing to “free up the energy of the workforce”. …France has an unemployment rate of 9.5%, double that of the other big European economies and Mr Macron has vowed to cut it to 7% by 2022.

Here’s what he is proposing.

The reforms aim to make it easier for bosses to hire and fire. …France’s labour code is some 3,000 pages long and is seen by many as a straitjacket for business. Among the biggest reforms, individual firms are to be offered more flexibility in negotiating wages and conditions.

…If a business reached a deal with the majority of its workforce on working hours and pay that agreement would trump any agreement in the wider industry. …The government wants to facilitate deals at local level by encouraging companies with fewer than 50 employees to set up workers’ committees that can bypass unions. One of the thorniest problems for the government is how to make it easier for companies to dismiss staff. There is to be a cap on damages that can be awarded to workers for unfair dismissal. However, after months of consultations, ministers have agreed to increase the cap from their original proposal. The cap would be limited to three months’ pay for two years of work and 20 months’ pay for 30 years. Until now the minimum pay-out for two years’ employment was six months of salary.

And he’ll probably get what he wants, both because some of the bigger unions have decided to play ball and also because he’s been granted authority to unilaterally make changes.

Protests against the plan are expected next month, but two of the biggest unions say they will not take part. Jean-Claude Mailly, the leader of Force Ouvrière (FO), said that while the reforms were far from perfect, the government had carried out “real consultation” and FO would play no role in demonstrations on 12 September. The union with the biggest presence in the private sector, CFDT, said its members would not take to the streets either, although it was ultimately disappointed that its position was not reflected in the final text. …Mr Macron has already won parliamentary backing to push these reforms through by decree. An opinion poll on Wednesday showed that nine out of 10 French people agreed that their country’s labour code had to be reformed.

What Could Change?

Dalibor Rohac of the American Enterprise Institute has some analysis of what’s been proposed.

…the National Assembly and Senate…authorized France’s government to amend the country’s byzantine labor code by executive orders… Prime Minister Édouard Philippe unveiled the details of the reform, divided into five decrees, on Thursday. So what exactly are they seeking to achieve? Perhaps most important is the introduction of caps on redundancy pay to those whose employment has been terminated without a just cause…stricter caps are introduced for small companies, for which large redundancy payments can be ruinous. It will also become easier for multinational companies to justify termination of employment on economic grounds. …it will be possible to downsize or close down French operations without having to subsidize them first from profits made overseas. …Companies with fewer than 20 employees will not have to rely on labor union representatives for their collective contracts. Subsidiaries of companies will have more freedom to offer temporary work contracts.

Dalibor is not overly impressed by this collection of changes.

…measured by the standards of what France needs, it is not much… The extent to which the reform elicits a strong reaction reflects purely the overregulated status quo, rather than the revolutionary nature of the proposed measures. …the government is doing something right, however timid.

The Wall Street Journal‘s editorial is a bit more optimistic.

French voters this spring gave themselves their best shot in a generation at reviving their moribund economy, and President Emmanuel Macron is now taking advantage of the opportunity.

…the labor-market reforms he unveiled Thursday could remake the eurozone’s second-largest economy. …Mr. Macron will limit the severance payouts courts can mandate for fired workers. He will free small companies with nonunion workers from the straitjacket of national collective-bargaining agreements covering working hours, overtime pay, vacation benefits and the like. Companies will have more scope to negotiate labor deals at the firm level rather than being forced to abide by national agreements.

By reducing the potential cost of employing workers, the reforms will lead to more employment.

The severance overhaul will go a long way toward inducing businesses to hire more workers. Small- and medium-size French companies report pervasive fear of expanding their workforce lest they be stuck with problem employees or face ruinous expenses to lay off workers if economic conditions change.

And France desperately needs reform.

French unemployment is still 9.5% even at its five-year low. That’s double the rate in Germany, and French unemployment has become a social crisis, especially for young people frozen out of the job market. The jobless rate for French between age 15 and 24 is 25%—for those who haven’t moved to London or the U.S.

Though the WSJ does recognize that the reforms are merely a modest step in the right direction.

France isn’t becoming a laissez-faire paradise. Even if Mr. Macron’s labor overhaul takes effect, the French workplace will still be considerably more regulated than America’s.

Let’s close with some excerpts from a story in the New York Times.

…the government announced sweeping changes on Thursday with the potential to radically shift the balance of power from workers to employers. …an invigorated France is considered critical to the survival of a European Union that is finally showing signs of revival after a lost decade. …Economists in France and across Europe expressed optimism about the new law… France has stagnated for years under chronically elevated unemployment and slow growth. The country’s strong worker protections and expensive benefits have been blamed by some for being at least partly at the root of the problem.

Wow, it must be bad if even the NYT is acknowledging that government is causing the economy to stutter.

Amazingly, the story even admits that economic liberalization is the right way to get more job creation.

Germany crossed that Rubicon in the 1990s under Chancellor Gerhard Schröder. …Roughly 15 years ago, “France and Germany had economies that were more or less comparable, and that ceased to be the case because the Germans wisely did micro-reforms and the French did not,” said Sebastian Mallaby, senior fellow for international economics at the Council on Foreign Relations. So the French ended up with “high unemployment, which fed populism, and getting out of that trap is vital.

For what it’s worth, I think the reference to German reforms is key.

Under a left-leaning government, Germany liberalized labor markets. The so-called Hartz reforms were a huge success, slashing the jobless rate by more than 50 percent.

I don’t know whether Macron’s reforms are as bold as what happened in Germany, but any movement in the right direction will create more employment.

P.S. If Macron wants to save France, he better deal with the tax system as well. The problems are nicely captured by two videos, one about how young people are fleeing the nation and another showing a Hollywood celebrity reacting when told about the tax burden.

P.P.S. Whenever I give a speech in France, I ask the audience whether their government (which consumes for the half of economic output) gives them more and better services than the Swiss government (which consumes about one-third of economic output). The answer is always an overwhelmingly no.

P.P.P.S. I (sort of) agreed with Paul Krugman in 2013 that there is a plot against France.

P.P.P.P.S. Last but not least, the French people occasionally do support good policy(and they’re willing to escape to America if things don’t get better).

Reprinted from International Liberty.

This article was originally published on FEE.org. Read the original article.

Limited Liability Does Not Mean What You Think It Means

In the much-beloved movie, The Princess Bride, Inigo Montoya has spent his life seeking revenge against Count Rugen, the man who murdered his father. When he finally confronts Count Rugen, he keeps repeating, “Hello. My name is Inigo Montoya. You killed my father. Prepare to die.” Finally, in utter frustration, Count Rugen yells, “Stop saying that!”

I know just how Count Rugen felt.

Everywhere I go, people begin arguments for a wide variety of normative conclusions with the premise, “Corporations have the special privilege of limited liability.” Thus:

  • “Corporations have the special privilege of limited liability; therefore, they have social responsibilities that individuals and other businesses do not.”

  • “Corporations have the special privilege of limited liability; therefore, government regulation is required to level the competitive playing field.”

  • “Corporations have the special privilege of limited liability; therefore, they are obligated to manage their company in the interest of all their stakeholders.”

I encounter this statement in so many contexts, both inside and outside the academy, that, like Count Rugen, I want to yell. “Stop saying that!”

However, in my case, it is not because I fear death, but because the statement is so patently false.

Corporations Do Not Have Limited Liability

It is the corporation’s share-holders who have limited liability.

Shareholders have limited liability. If a corporation contracts a debt that it does not pay or is found liable for a tort, one hundred percent of its assets are available to satisfy the debt or judgment. If it does not have enough cash on hand to pay what it owes, its creditors may force the firm to liquidate and sell off its physical assets to discharge its debt. The corporation is fully liable for all the debts it incurs and all the torts it commits.

It is the corporation’s shareholders who have limited liability. They are liable to lose one hundred percent of their investment in the firm, but no more. The firm’s creditors may not collect the corporation’s debt or judgment out of the shareholders’ personal wealth. Thus, the shareholders’ liability for the debts of the firm is limited to the size of their investment in the firm.

Everyone Has Limited Liability

If your brother decides that he wants to buy an SUV to go into business as an Uber driver and you lend him $10,000 to help him do so, you are not liable to pay his judgement if he drives carelessly and injures a passenger. You may lose the $10K you lent to him if he goes bankrupt and cannot pay you back, but that is the limit of your liability.

Our system of contract law does not hold one person liable for the debts of another. Even if rather than loan him the money, you make a $10K investment in his business in return for two percent of the profits, you are still not liable for any unpaid debts or tort judgments he incurs. The most that you can lose is your $10K investment.

Our system of contract law does not hold one person liable for the debts of another unless he or she has voluntarily agreed to take on that responsibility. And our system of tort law does not hold one person liable for the wrongful acts of another. We all have limited liability.

The only exception to this is the rule of respondeat superior, which makes an employer liable for the debts contracted and torts committed by his, her, or its employees when they are acting within the scope of their employment. With this exception, our liberal legal system eschews vicarious liability. Unless we have control over someone else’s conduct, as an employer controls his, her, or its employees, we are not liable for that person’s debts or torts.

Separation of Ownership and Control

The shareholders — the owners — of the corporation exercise no control over the action of the firm’s employees. They are not employers. Their role is analogous to that of the person who gives his brother $10K for his business. Shareholders’ limited liability, therefore, is merely a reflection of the ordinary rules of contract and tort law at work in the context of the corporation.

We all have limited liability. Just for a moment, try to imagine what the world would be like if there were no limited liability for shareholders. How many people would invest in corporations if they knew that should a corporate employee screw up, they could lose everything they own?

We all have limited liability. We don’t lose it merely because we invest in a corporation, and for the health of our economy, it’s a good thing that we don’t.

So the next time someone starts explaining to you how government regulation is needed because corporations have the special privilege of limited liability, please channel Count Rugen, and tell them to stop saying that.

Reprinted from Learn Liberty

This article was originally published on FEE.org. Read the original article.

IMF Head Predicts the End of Banking and the Triumph of Cryptocurrency

In a remarkably frank talk at a Bank of England conference, the Managing Director of the International Monetary Fund has speculated that Bitcoin and cryptocurrency have as much of a future as the Internet itself. It could displace central banks, conventional banking, and challenge the monopoly of national monies.  

Christine Lagarde–a Paris native who has held her position at the IMF since 2011–says the only substantial problems with existing cryptocurrency are fixable over time.

In the long run, the technology itself can replace national monies, conventional financial intermediation, and even “puts a question mark on the fractional banking model we know today.”

In a lecture that chastised her colleagues for failing to embrace the future, she warned that “Not so long ago, some experts argued that personal computers would never be adopted, and that tablets would only be used as expensive coffee trays. So I think it may not be wise to dismiss virtual currencies.”

Let us start with virtual currencies. To be clear, this is not about digital payments in existing currencies—through Paypal and other “e-money” providers such as Alipay in China, or M-Pesa in Kenya.

Virtual currencies are in a different category, because they provide their own unit of account and payment systems. These systems allow for peer-to-peer transactions without central clearinghouses, without central banks.

For now, virtual currencies such as Bitcoin pose little or no challenge to the existing order of fiat currencies and central banks. Why? Because they are too volatile, too risky, too energy intensive, and because the underlying technologies are not yet scalable. Many are too opaque for regulators; and some have been hacked.

But many of these are technological challenges that could be addressed over time. Not so long ago, some experts argued that personal computers would never be adopted, and that tablets would only be used as expensive coffee trays. So I think it may not be wise to dismiss virtual currencies.

Better value for money?

For instance, think of countries with weak institutions and unstable national currencies. Instead of adopting the currency of another country—such as the U.S. dollar—some of these economies might see a growing use of virtual currencies. Call it dollarization 2.0.

IMF experience shows that there is a tipping point beyond which coordination around a new currency is exponential. In the Seychelles, for example, dollarization jumped from 20 percent in 2006 to 60 percent in 2008.

And yet, why might citizens hold virtual currencies rather than physical dollars, euros, or sterling? Because it may one day be easier and safer than obtaining paper bills, especially in remote regions. And because virtual currencies could actually become more stable.

For instance, they could be issued one-for-one for dollars, or a stable basket of currencies. Issuance could be fully transparent, governed by a credible, pre-defined rule, an algorithm that can be monitored…or even a “smart rule” that might reflect changing macroeconomic circumstances.

So in many ways, virtual currencies might just give existing currencies and monetary policy a run for their money. The best response by central bankers is to continue running effective monetary policy, while being open to fresh ideas and new demands, as economies evolve.

Better payment services?

For example, consider the growing demand for new payment services in countries where the shared, decentralized service economy is taking off.

This is an economy rooted in peer-to-peer transactions, in frequent, small-value payments, often across borders.

Four dollars for gardening tips from a lady in New Zealand, three euros for an expert translation of a Japanese poem, and 80 pence for a virtual rendering of historic Fleet Street: these payments can be made with credit cards and other forms of e-money. But the charges are relatively high for small-value transactions, especially across borders.

Instead, citizens may one day prefer virtual currencies, since they potentially offer the same cost and convenience as cash—no settlement risks, no clearing delays, no central registration, no intermediary to check accounts and identities. If privately issued virtual currencies remain risky and unstable, citizens may even call on central banks to provide digital forms of legal tender.

So, when the new service economy comes knocking on the Bank of England’s door, will you welcome it inside? Offer it tea—and financial liquidity?

New models of financial intermediation

This brings us to the second leg of our pod journey—new models of financial intermediation.

One possibility is the break-up, or unbundling, of banking services. In the future, we might keep minimal balances for payment services on electronic wallets.

The remaining balances may be kept in mutual funds, or invested in peer-to-peer lending platforms with an edge in big data and artificial intelligence for automatic credit scoring.

This is a world of six-month product development cycles and constant updates, primarily of software, with a huge premium on simple user-interfaces and trusted security. A world where data is king. A world of many new players without imposing branch offices.

Some would argue that this puts a question mark on the fractional banking model we know today, if there are fewer bank deposits and money flows into the economy through new channels.

How would monetary policy be set in this context?

Today’s central banks typically affect asset prices through primary dealers, or big banks, to which they provide liquidity at fixed prices—so-called open-market operations. But if these banks were to become less relevant in the new financial world, and demand for central bank balances were to diminish, could monetary policy transmission remain as effective?

This article was originally published on FEE.org. Read the original article.