Archive for February, 2010

Macro Economy as a Capacitor

Sunday, February 28th, 2010

Dear Friends,

It seems to me that the macro economy, in many ways, acts like distributed capacitance. Slowly ratcheting supply out of phase with demand. In the economy, once distributed capacitance in supply chains cause supply and demand to get too far out of phase, recession is the inevitable result. The lowered costs that the recession cause (to lower inventory) then drive the next boom cycle.

Whenever you transmit a wave form through a capacitor the wave form emerges ninety degrees out of phase. The voltage leads the amperage. A pair of wires is basically a capacitor. The longer the wires the greater the capacitance in Micro Farads. When we transmit signals through wires long distances we have to account for this distributed capacitance.

Since power is a factor of voltage times amperage power is reduced in the signal. Because when the voltage spikes in the waveform amperage is low. (Not in phase). When amperage is high voltage is low. Both dampen the signal.

The economy can be thought of similarly. As inputs move through the economy they are converted into outputs. Then some of the outputs are converted into more complex outputs, and so on. At each step in the process some inventory is held to form a buffer incase of a spike in demand or a temporary hiccup in some input. Labor is similar.

When a business is flush with increasing demand the firm is likely to hire a marginally cost effective worker because as the worker becomes more proficient demand will grow, creating a need for that worker, just as his efficiency peaks. This can be effective at keeping ahead of the demand curve. It also protects the quality of products.

All this angling, to protect against legitimate issues that may come up and to get the best advantage on our competitors in the demand cycle, makes business works like a capacitor. Storing up output and surplus workers on the bet they will be needed. At some point the macro supply gets too far out of phase with demand and a recession results. Selling backlogs of cheap inventory (and cheaper labor cost) starts the economy again.

History shows us that every economy goes through a boom bust cycle. This cycle was supposed to be stopped by enlightened Federal Reserve policies. These policies were supposed to at least lower the magnitude of future recessions. At best the Federal Reserve has been only marginally successful. Because it only controls a portion of the supply. Money.

Products, services and workers make up a far larger and more important part of the macro economy. A hiccup in the money supply can trip an economy into recession, (if supply and demand have grown out of phase enough), as it has in the recession we are now in. But the money supply is simply a means for the rest of the economy to do the real work. The ends, (output).

Money can be and has been used as a choke point to control an economy like the throttle to a car engine. This analogy quickly breaks down. Choking off money in the capacitive system that is the macro economy is more like lowering the amplitude of the waveform entering a distributed capacitor. The phases still get out of phase but it seems make the snap back smoother. It is only how it seems however. The real result of lowering the amplitude of the money supply is to lower the signal strength. In the case of the economy the total output and demand. (Equilibrium will be higher where money is not used this way).

Engineers use a different method to control the phases. Electrical engineers use inductors to balance the capacitive effect. In short an inductor is a coil that causes the opposite effect as a capacitor. It makes the amperage lead the voltage ninety degrees out of phase. When you place an inductor in parallel with distributed capacitance it puts the voltage and the amperage back in phase.

In a macro economic sense this would require many efficiency gains, like, real-time information on demand for output and availability of inputs for a given firm. Then just in time inventory would help alleviate some of the capacitive effect. Other means to lower the capacitive effect and raise the inductive effect in a macro economy would be the most effective means to slow or lower the amplitude of the economic boom bust cycle.

Wouldn’t it be something if Maxwell’s Equations can be applied to the macro economy?

Japan’s Economy

Friday, February 26th, 2010

Dear Friends,

It seems to me that Japan has real economic problems. They rely far too much on large business. The model served them well in the age of behemoths but today Japan would be better served to open up the internal markets and help develop small entrepreneurial business.

The manufacturing model can be phased out with the lowering of the working population. The younger people, who are excellently educated, can move to management of the large industries their parents and grandparents built. Other more outside the box thinkers should be encouraged through harnessing a market for start up ventures. Deregulate startups and lower tax rates for startups. This would open the throttle to the Japanese economy.

Today Japan is mired in the policies that the US administration wants to take. Japan is ten years down the road. It doesn’t look good to me… Japan carries a debt load that sops up funds from the capital markets. Fortunately for Japan the Japanese people have always had an excellent savings rate. That has been a godsend to them today. It allows the Japanese government to borrow and borrow to try to prop up demand ala John Maynard Keynes.

Government demand always favors large well connected (politically) companies. As demand moves from private sector demand to “temporary” government demand, that never stops, industry moves to the paradigm that fits it’s customers needs. And that is large politically connected companies. Only these companies can fill out the necessary paperwork and spend the rescores to meet government criteria.

Japan is reaping the rewards of government keeping up demand. Supply has shaped demand. Large corporations dominate the Japanese economy. I would bet the ratio of the economy that makes up small business share to large business, is skewed to large business in Japan, against a world mean.

That coupled with government sopping up all available local capital. Diminishing capital markets of startup money is never a good means to an increasingly productive, vibrant economy. Helps keep Japan in the economic doldrums. Sleepy GDP growth year over year corrodes the Japanese standard of living.

I hope they will move into a better fitting paradigm. Like the one I have suggested. To do this however the government must put down the toys. Some Japanese government must have the guts to stop spending. Pay down it’s debt and reload the capital markets with money.

One of Confucius’s disciples asked him what must a kingdom have to be in order. Confucius replied, Adequate supplies of food, adequate supplies of munitions and the confidence of the people. Confucius was then asked, what if he had to go without one? Munitions was his answer. What about if he had to go without another? Food; For all through history death has come to all men (yet society survives). But people who have no confidence (in their rulers) are undone, was Confucius reply.

Government must have the confidence of the people. Ten years of stagnation is too much. Japan has shown Keynesian economics to have major flaws. Every time there is a recession people turn to government to “do something.” That always involves spending money. But as Japan shows, no matter how government spends money, it is not as effective as money spent by individuals.

Individuals buy from small business. That drives up demand for small business. That is exactly where Japan should go. To encouraging small business, moving from manufacturing to management, and funding entrepreneurs. The next Google or Microsoft could be from Japan… Or Moldova. It is only a matter of government policies not getting in the way. No matter how well intentioned.

With Age, Wisdom… and bad skin.

Thursday, February 25th, 2010

Dear Friends,

It seems to me that when we are young we lack wisdom. We may have great intelligence but we lack wisdom. Later, when we have gained life experience, we gain wisdom. Keeping this thought in mind, remember the old saw, “Those who are not liberals at seventeen have no heart. Those who are not conservative at fifty have no brains.”

Some people have a natural affinity for philosophical introspection. But no matter how well suited a person is to gain wisdom they must hone it with life experiences. It is the very things in life that vex and bore us that we extract wisdom from.

Children are a great source of wisdom for parents. Children demand a great deal of time and energy. Giving this much time and energy to rear a child gives us insight into many things that we may have never thought of before. When we lose a parent we have access to a font of wisdom. Great loss, and the grief that goes with it, give us insight into life and death. Something a child has no real notion of.

Books are another place to find wisdom. Socrates and Confucius were teachers of profound wisdom. They had such power in personality their philosophy was recorded for them. They have left us no records by their hands. Yet the wisdom they taught was so revered that others thought to record them for posterity. We have access to their great wisdom through these books.

Socrates and Confucius were also men of great age. Socrates was over seventy when he was ordered executed by the democratic process. Confucius was over eighty when he died. They didn’t really get underway philosophically until they were over fifty. Socrates said in the Phaedo that he as a youth liked the sciences. But as he grew older he grew to understand that the sciences could not be reasoned out in the year 500 BC. But if he followed a philosophy that asked, and tried to answer, the great questions of mankind, he had a better chance. They both had the benefit of many years of contemplation to hone their philosophies. A child, no matter the prodigy, doesn’t have that advantage.

The Nazi’s knew this. It was the youth they went after. College students were given propaganda films to watch. Films that would show people with profound mental and physical deformities. They would be shown as caricatures and with the correct music to set the mood.

Then the students would be asked, “would you want to be forced to live this way?” Upper middle class youth, who have never actually had a real hard time and enamored with appearances, all agreed, “Yes, I would rather die.” The result was the extermination of everyone in the asylums. Some people (children) were dragged out kicking and screaming then shot in the head. It is history. Read it.

Young people can be convinced of almost anything. Their gullibility is our undoing. When the youth of any nation or country mass and get behind a political movement it always ends badly for them and society. History gives us many examples of this. But none that confound. The Communists came to power or were largely backed in every case by the youth. The National Socialist movement was ushered in by angry youths that had been hopped up on patriotism. Mao, Che and Castro all praised the willingness of youth to do violence. The drug the would be dictator uses is not of consequence. The end is. Tyranny.

That is why when I see a political movement largely backed by upper middle class youth… I shudder. Today the PBS news cast of the McNeil Lehrer Hour had an item about the latest American generation. Gen Next was the appellation used. They are largely liberal according to a new poll. They were also credited with voting the present administration into office. The unbiased newscasters were positively giddy with the news.

What the unbiased newscasters failed to realize is that people, especially upper middle class youths, are intelligent, free willed, self maximizes. We all learn quickly. Gen nexters are no different. They will quickly become more conservative/ libertarian as they gain life experience. This is as inevitable as that young people always poll more liberal than older people. The question is only, when will a given person mature enough, to realize the truth…

What Government Can “Do For” The American People.

Sunday, February 21st, 2010

Dear Friends,

It seems to me, the absolute best thing the US government could do “for” the American people, would be to all go on an extended luxury vacation. Spending the rest of their term on it at the American tax payer’s expense. Maybe at Herod’s or Hedonism II. As soon as they announced their plans to do so the markets would rebound like we haven’t seen in our lifetimes. The economy would start generating jobs… in the private sector.

All government seems to do lately is to undermine any economic rebound. As we said in our last blog, their energy policies are a poison pill for any recovery. Moreover government’s policies on healthcare is another source of economic destruction.

The argument that other countries provide “corporate welfare” in the form of “free” healthcare is simple sophistry. To believe this one has to also believe that the money that provides the “free” healthcare is generated out of thin air. We all know this is not true. The money to provide free healthcare is taken from some producer to provide that producer healthcare. In the process efficiency is lost or quality goes down.

The “Stimulus’s” elephant in the room is that, as soon as the stimulus money runs out, the jobs will evaporate. Like the ether they are made of. All the jobs saved or created are government jobs. Jobs that will require tax increases to keep. Tax increases that will, again, undermine any economic recovery. Tax increases that will necessarily require the layoffs of these new or saved government workers.

Now government wants to have “targeted” tax cuts. The problem with targeted tax cuts is that they are less efficient than general tax cuts. Part of the reason is that no one knows where an economic rebound will take place. It may be in some overlooked sector of the economy. Or it may be in a sector of the economy that was thought to be dead. Government’s track record of picking winners is very poor. When government target’s a sector or action, that they feel is good for the economy, other sectors or actions that may have greater benefits are undermined. Simply because money and resources are diverted to the sector or action that has been chosen by government. The market is warped by this type of tax cuts.

Constantly threatening greater and greater regulation and interference with the markets forces business to focus on government instead of profit and job creation. When government is in the mood to gore some oxen… everyone wants to be on the side of government. (To protect their ox from being gored).

Simply threatening regulation has a negative effect on job creation. The threat means business must also horde money and resources as well as focus on government instead of their markets. Both to have in case of a new opportunity opening from the new regulation. Also to protect from opening a new branch, product or service, being regulated out of business by the regulatory innovation. Business necessarily slows when regulation is in the works. When it is perpetually in the works…

Politicians always want to tout that they got “something Done for the American people.” Every time they get something done however they make things worse. Most of what they need to get done are problems of government’s making. Unintended consequences of poorly thought out regulation. Government official’s know, the unintended consequences of their new, poorly thought out regulation to mitigate the consequences of their last, poorly thought out regulation, will be the side of the bread the butter will be on… next legislative season.

So… Send the president and his staff, the congress and their staffs all on a luxury vacation. After a few years they will be more rested and relaxed. The economy will have recovered. And they will be able to swoop in and do something for the American people… Break it again.

Energy and Recovery

Wednesday, February 17th, 2010

Dear Friends,

It seems to me that any economic rebound that gets underway will be dragged down by world energy policies. Policies that drive up the cost of energy. Both intentionally and unintentionally. In the name of a hoax. (Climate Change) Economic rebounds are largely driven by low costs. Costs that were driven down by the recession. If government actions drive up basic costs of doing business, like energy, air is taken from the economic ball, blunting the rebound.

Energy is a leading economic indicator. Because energy is used as soon as a product or service is made or delivered. Other indicators lag energy. Partly because energy is a global commodity. The price is closely tied to use. Also other inputs that may or may not be traded on the commodity markets, lag in need.

Unless “Just in Time Inventory” is used business has a stock of inventory to use before it needs to purchase more. This puts a lag on other inputs to an economic upturn. But energy, in whatever form, is used and paid for within a month. Turn around is exceptionally fast and energy stocks compared to energy production (use) compared to historic averages is a snapshot of economic out put.

Here is the kicker. Energy production has been cut, and cut, to keep the price high. The US has seen the permanent closing of refineries. All the offshore drilling and production leases that George Bush signed have been shelved by Obama and Salazar. But economic demand for energy has dropped faster. Every time economists have looked for a tightening of energy supplies and inventories, they have grown. Despite cuts in all aspects of production. This bodes ill. The greatly reduced demand suggests greatly reduced economic output. GDP numbers notwithstanding.

This is strongly suggestive that actual economic output is very low. Cars Trucks, machines, and computers have not become exponentially more efficient over night. But the actual demand for energy has dropped much more than the GDP numbers would suggest. But there must be less of them running. If there are less trucks, cars, machines and computers running less work is being done by them. Less work being done by machines means less economic output.

The curtailment of future production by shelving offshore leases by the Obama administration should have leveraged crude prices higher. Remember when oil prices were at their highest, Obama said, they were not too high, that they just rose, too fast. If he believed it then he probably believes it today. Today he is president and has acted on those beliefs.

The high price of energy was a contributing factor to the economic contraction. It wasn’t a coincidence that the economic contraction followed a round of unsustainable energy price rises. As a basic input to the economy energy has a profound effect on profit.

Think about your own situation. When your cost of driving to work. (An unavoidable cost) goes from twenty dollars a week to fourty dollars a week. Something has to give. You must cut back on other expenditures to get to and from work. That drained money from other things. Those businesses then had less money to spend. Plus were strangled by the cost of energy too. The cycle was vicious. And we are setting it up again. I suppose… to ensure that we will have no rebound.

No matter how strong an economic rebound is, curtailed energy production, will inevitably curtail economic growth. Government policies have choked off future supply. You can see it in the volatility of crude oil prices. This suggests that as soon as demand goes up the price will skyrocket. Production is limited by governmental interference in the market. Demand is driven by economic output. The math is simple.

So if the price of fuel goes up fast and high we will know a recovery is under way. Barring a fast and hard price increase in energy prices we will see the economy stay in the doldrums. Any recovery will be presaged by $4.00 a gallon gas. (In the US). So as hard as it is to swallow… as soon as the economy recovers we will see very high energy prices again… With government that likes and wants them high…

Executive Foolishness

Sunday, February 14th, 2010

Dear Friends,

It seems to me that If President Obama does indeed use his executive powers to force legislation/regulation on energy, environmental and fiscal matters, as is reported in this article in the New York Times, he will put us, in the US, on the same tracks the European Zone are on. We can read our future in the reports coming from Europe today. Like the devaluation of the Euro. The pending default of Greece and the eroding standard of living in the PIIGS (Portugal, Italy, Ireland, Greece, and Spain) nations.

The New York Times article can be read here;

Milton Freedman claimed that the European zone wouldn’t work largely on the grounds it is failing today. That is there is no incentive for Nations within the Euro zone to keep spending in check. European nations have been on a spending and regulating binge. The chickens must come home to roost sometime.

It is no coincidence that the PIIGS nations are the ones that are in the most trouble. Spain for instance is the farthest along the path to controlling green house gas emissions. The resulting regulation has ham strung Spanish business. Millions and millions of green jobs created notwithstanding.

Greece has a strong Communist party presence in their legislature. Communist philosophy is in fashion at Greek universities. The communist led protest that accompany any cut in spending are testimonials to this fact.

Out of control spending and taxing is no way to improve an economy. Government spending necessarily sops up available investment capital. Doing so lowers the availability of capital for business to upgrade the plant. It is precisely plant upgrades that improve the productivity of the workers. This productivity increase necessarily drives up wages and lowers costs. Making the whole economy more competitive.

Think about two carpenters. One has a stone to pound nails the other has a nail gun. With a nail gun, level, tape measure and circular saw and precut lumber a good man should be able to frame a wall in, say, ten minuets. A man with only a stone, hand saw, string and measuring sticks can frame a wall in say a day. Can you pay the man who, as a result of not having the tools, the same as you can the man who has tools? Of course not. Moreover, as the man with few tools, amasses tools, he becomes more productive lending him a higher and higher wage for less and less effort.

Too much government spending also hurts the aggregate balance of trade. This happens because when government spends money it must tax or borrow. When it borrows it takes money from the available capital markets. If there is demand for capital to improve plant interest rates will rise. This rise will demand foreign capital to make up the difference. The inflow of capital is counted in the aggregate balance of trade. One dollar if capital inflow, to fund government spending, counts against one dollar of value in an export, say a kitchen magnate.

So when government borrows money to provide some good or service to the people, to buy their loyalty, it is like you or I borrowing money and spending it going out to eat. No one would argue this a wise use of borrowed money yet government does this all the time. Borrows money and essentially wastes it.

I have to laugh when people argue, “Well, see the poor guy there, he had no money to spend, now the government has provided him with free health care, free housing, and free food, all at your expense. Look at all the demand that is generated.” To argue that, one must believe that if government did not take money from people, they would burn it. Pile it like leaves and burn it. Because, of course, people will spend and invest money they make. If they spend it demand will rise, if they invest it capital will be available for enterprise to invest in productivity enhancements.

Another unintended consequence of government borrowing and spending on frivols schemes, is it lowers the money available for our children, to invest in tools and equipment (plant). They will necessarily have a lower standard of living as we spend money frivolusly and indebt them for it.

Obama has the ability to make this an American headline;

He has only to follow through…


Wednesday, February 10th, 2010

Dear Friends,

It seems to me that, as Time Magazine once said, Merit is the only real measure of a man. Most in the USA would agree that merit is a good scalar (yard stick) to measure people. It is the basis of the American Meritocratic system.

Aristocratic systems as we see in modern Europe and elsewhere are striated. They have more rigid hierarchy and less class mobility. Merit is a minor attribute in the greater scheme. Birthright is higher on the social scale of value. Not only in aristocratic systems, but in other, more popularly known as populist systems. Some people argue, (in these “populist” systems), that some groups have been discriminated against and so they should get preferential treatment… Essentially making these groups aristocrats (on some level). These are non meritocratic systems.

Other societies assign different values to different attributes. Some systems give great value to the elderly. This can be said to be a kind or type of meritocratic system (Meritocracy). The elderly contain a vast reserve of wisdom, those that hold the elderly to have value, have access to that reserve. To always rely on the written word is to blind oneself for that sake of it. Others assign great value to military achievement, still others value piety as the highest good. These are said to be the “Societal Myths” of these societies. And represent forms of merit.

Merit implies earning a given reward, position, accreditation, job, etc… To merit something is to have earned it by giving some good for it. When something is earned common usage implies that the earning was done by the “sweat of the brow.” Not taken from a plebian because he has no rights and the other has rights.

Aristocracy (class based) or Caste systems have within their societal myth that the goods of society are earned by virtue of one’s birth or status. Merit reverses this by saying that, to justly deserve a good, it must be earned by “the sweat of one’s brow.”

The sweat of ones brow can mean many things. The obvious would be to fashion a product from some primary input such as a stone. Less obvious means are to invent and record something or simply to facilitate it’s being fashioned. The good in question need not even be a thing… It could be a thing, but it could also be a good like an idea, fidelity, fecundity, or a service.

So we see that merit depends on the society in which we live. The definition of which can be fluid. But the overriding theme that runs through all societies is the idea that to merit something one has to have done something to earn it or have some natural talent to merit it. Systems that give value to birthright, party status, place in a tribe, etc are non meritocratic.

The argument against meritocracy is always the same. That some people have fewer marketable talents than others so that inequality will result in any meritocracy. To make this argument it is necessary to ignore the historical fact that, no system, ever devised by man, actually resulted(s) in equal in outcomes.

I say that, who cares how equal everyone is, if we are all starving, or how unequal, if the poorest among us are overweight. I would rather live in the unequal nation where the poorest have plenty than the one where we are all starving. Especially because I know we won’t all be starving… The Elite will have plenty. It is the masses that will always go without. No system is truly equal. Some just claim to be as a sophist way of getting power.

I hold that it is in fact America’s meritocratic system that has not only raised the lot of the American people but the lot of all mankind as well. If other countries and nations adopted America’s meritocracy, as well as some other American traits, starvation on Earth would be eradicated in less than a generation.

Lets just face it… to be anti meritocratic is to be lazy.

Productivity as it Applies to Wages

Sunday, February 7th, 2010

Dear Friends,

It seems to me that One of the biggest factors leading to the historic rise in affluence of the American people in the last two hundred years is the unprecedented rise in productivity led by American workers. Today, the American worker is more productive than any other worker, anywhere in the world.

Productivity is simply a measure of the efficiency to produce a given output with given inputs. A higher productivity workforce can produce more and better outputs from the same inputs than a less productive workforce. The USA for example produces more GDP for the amount of energy it uses than any other nation. Including the European countries that signed on to Kyoto. They are far behind the US in energy efficiency as measured in GDP output per barrel of oil input.

The main reason why American workers are so productive, relative to the rest of the world and are paid more as a result, is that American workers have several advantages.

The US transportation infrastructure is more flexible. Americans, for the most part, own and use cars to get to work. By doing so American workers leverage their productivity. When a person drives to work they have the advantage of flexibility of work hours. They need not work in conjunction with mass transit schedules. Another advantage of mobility of the American workforce is that Americans are not tied to a certain urban area. If a better job opens thirty miles in the opposite direction, outside the reach of mass transit, an American worker can take advantage of the new opportunity. The worker tied to mass transit must stay within the footprint of the mass transit system.

Basic infrastructure is endemic. Telecommunications infrastructure is everywhere, as is electricity, water and sewage. These alone give American industry great flexibility. This allows US business to move to wherever they can find an underutilized workforce. (Knowing utilities will be available). This keeps competition for jobs between areas within the US near perfect. Actually perfect competition would level the playing field such that no area of a nation would enjoy a higher or lower standard of living. As perfect competition in business gives the consumer the best product at the lowest possible cost to him. Capitalism thrives on perfect competition in both business and in political jurisdictions.

A worker supplied with tools is far more productive than a worker without them. The better suited for the job the tools are the more productive will be the worker. In fact he will be able to work less hard and have greater output than someone without them. Take a screwdriver. A worker with one can easily start and sink screws say at a rate of one a minuet. A worker making do with a dime can start and sink one in three minuets. The worker equipped with a screwdriver can be said to be three times as efficient (productive) than the worker making do with a dime. Moreover the worker making do is subject to greater likely hood of being injured. Further reducing his output and dramatically increasing overhead.

What drives the invention and production of infrastructure and tools is innovation. Innovation that is fostered by business and government investing in basic research. Business, being beholden to the bottom line, must innovate where they can find quick payoffs. Government being less short term profit oriented, can invest in longer term innovation, with longer term payoffs… Like space travel.

Historical records show that the march of productivity in the US has not been uniform. It has had times of fast growth followed by periods of slow growth or even reductions in productivity. The period starting after the Second World War and ending around Nineteen Seventy Three saw a great expansion in American productivity growth. The end of this period of productivity growth followed Nixon’s dismantling the manned Space Program in favor of the then new space shuttle. US investment in Space technology stagnated until Ronald Regan started research on the International Space Station.

In the early Nineteen Nineties American productivity growth resumed. This coincided with the widespread replacing of non Y2K compliant computers by American business. This widespread rebuilding of American data manipulation kick started America’s growth in productivity. As always productivity grows when new technology is introduced and slows when new technology introduction is stagnant.

No other metric can predict the fortunes of a nation better then productivity growth. Maybe John Maynard Keynes was partially right. But instead of burying money at the bottom of a well and having business dig it up… Government should try to put people permanently on the Moon. When that has been done reach farther and farther out. This will ensure steady productivity growth for the workers of the world. Into the future.

Workers of the world would have higher standards of living and would have to labor less. A win for labor. But the Elite would loose leverage on us.

Maybe that is why the far sighted US government has gutted spending on NASA?

Distributive Justice at Universities

Wednesday, February 3rd, 2010

Dear Friends,

It seems to me that since colleges and universities are the biggest proponents of distributive justice, it is only fair that they get to take part in the grand experiment, that they want the rest of us to participate in. Using the distributive justice model, we can clearly see, that the way college endowments are distributed is unjust. So the best means of rectifying this injustice, (according to these very institutions), is for government to seize from the rich colleges and universities then redistribute the money to poorer colleges and universities.

There are over fifteen intuitions of higher learning in the US that have more than a Billion dollars in their endowments. These happen to be the universities that have the biggest turn down rates and highest tuition. These huge endowments distort the ability of people to get quality college educations.

When a very few elite and select universities have far more money than they need, while others have far less than they need to run a quality curriculum, then we have a system set up to discriminate. Let’s look at the difference between the haves and the have nots in collages. Harvard University has over a billion dollars in it’s endowment. Some State collages have no endowments at all. So we can say the gap between the rich and the poor collages is a billion to one. When you have a gap between rich and poor collages that big it sets up a fundamentally discriminatory educational system.

Tuitions in American collages have been rising at over double the rate of inflation. The reason is that collages and universities are inelastic at increasing supply. But the demand rises every year. Despite the government’s increasing taxes and subsidies to collages and universities, the tuition rate, as measured in today’s dollars, is far less affordable than it was ten years ago. That affordability gap has been increasing every year due to the inelasticity of supply to meet increasing demand.

Redistributing these endowments would give colleges and universities incentives to increase supply. Poorer colleges, (that provide most of the growth in enrollment), would get the most benefit. This redistribution of funds would allow poor universities and colleges to expand their curriculums and enrolments. If this causes the supply of openings to go up the rate of growth in tuitions would be slowed or even reversed.

The endowments would be taxed on a progressive scale. The richest universities and colleges would have the most money taken from their endowments and the poorest colleges and universities would get most redistributed wealth. Like the income tax system this would level the playing field for colleges and universities.

The gap between the rich and the poor universities and colleges screams for a more equitable cutting up of the endowment pie. Lets let some of the little guys get a piece of the pie. Lets not let some fat cat universities and colleges suck up all the money. These greedy fat cats should give up some of what they don’t need or use. So that others may simply live.

Most college and university professors are big proponents of distributive justice. They argue that people with more should be taxed more and the money redistributed to make up for systematic and structural deficiencies. These manifest themselves as racism, sexism and all the other ism’s that appear in society. They also manifest themselves as unequal access to goods and services as well as unequal access to education. The educational piece of the puzzle can be solved by applying distributive justice, (as those that run our universities and collages argue should be applied to us).

As I would be happy to have my proscriptions applied to me, (life, liberty, right to property and to be recognized by government as a end in and of myself) I am certain that Colleges and universities would like to be treated as they propose others be treated. (To believe otherwise is to be a hypocrite). They will all be glad to have their proscriptions used on them, and see first hand… the results.