mandag 12. november 2012

Keen on "deregulation of schools"

Steve Keen is angry that schools are "deregulating". What does this "deregulating" consist of ?

"Government regulation used to require universities to set a minimum entry standard to apply for entry to courses based on performance at the final school exam (now known as an “Australian Tertiary Admission Rank” or ATAR). Deregulation of the sector means that this is now optional, and two major universities in my region – the University of NSW and Sydney University – have responded by letting students apply for a course regardless of their anticipated performance at high school." - Keen

Well, it consists of government universities allocating funding after where students choose to study, with....government funding.

This is a peculiar sort of deregulation, one often favored by so-called "neo-liberals". It might be summed up as the police departement deregulating by asking the victims of police brutality: tazer or stick ?

But this is not to be, Keen goes along with the claims of neo-liberals (or right wing social-democrats) that they are enacting market deregulation and constructs his whole flawed argument around it.

The change in practices has resulted in the university wanting to shut down the economics departement. Cheers! As Sudha Shenoy once remarked:

"I’m prepared to say that nearly every economics department in the world could be shut down without having an ill-effect on the world of ideas."

To be fair, this is probably directed more towards the Neo-Keynesian, New-Classical paradigm usually taught for the last 50-60 years.

Anyway, carrying on with Keen

"You might argue that this is just a knee-jerk reaction by bureaucrats who lack the nous that entrepreneurial managers of private universities might have. The latter could see through the change in policy, and anticipate that numbers will have to improve: the Sandstones don’t have the capacity to take all applicants, so once the actual high school results are known, they’ll fill their lecture theatres to the rafters with high-achieving students, and send rejection letters to the rest."

Translation: You might notice my whole argument is flawed and that talking about government managers actions as failures of "market deregulation". By "lacking nous" he is misconstruing the promoters of private education as claiming entrepreneurs are better at adjusting to the decision of bureaucrats, than bureaucrats. This is of course not the private enterprise position.

"There’s a modicum of truth in that argument, but even if universities were run by far-sighted entrepreneurs rather than cautious bureaucratic bean-counters, this move from a regulated to an unregulated market would still have reduced competition."

Alright why ?

"Firstly, the Sandstones will increase their share of the market. By squeezing every last available student into their lecture halls, their higher capacity utilisation will reduce the share available to the other universities. Secondly, even a privately run university would be squeezed – especially if its activities were partly debt-financed (as they inevitably would be). Not reacting to a downturn in demand by cutting back on capacity would court bankruptcy."

Again, this just presumes the whole question in mind. If Australians didnt pay tax for Keens and other bloated salaries to circle jerk over statictics and pontificate on all sorts of nonsense like "gender roles", "ecological philosophy", macroeconomics etc. Then the universities would be private and talking about...

"The latter[non-elite universities] could see through the change in policy"

...policy would be nonsensical. There would be no policy.

"The best economic model of this conundrum – that a less regulated market can be less competitive and less diverse – was developed by hotelling."

Of course it can. If Bureaucrats decide that there should be 200 different subjects taught in a university, making it even necessary to invent subjects people do not want to take (like economics at UWS) then there would be more than in a private market . But these excess subjects would be waste, they would be an unnecessary use of scarce resources (i know, know, keynesians dont believe in scarcity).

"Imagine a beach with an even distribution of bathers: where is the best spot for an ice-cream shop to set up business? The simple answer is right in the middle of the beach: that maximises the market (the less people have to walk, the more likely they are to buy an ice-cream) and it suits customers too – they have the shortest possible walk to get an ice-cream."

No, they do not have the shortest possible walk. The people at each far end, now has a longer way to walk then if the ice-cream shop was closer. If this matters to them, then an entrepreneur could make more money by establishing one on the far end of the beach.

"But what if there were two ice-cream vendors? Socially, the best situation would be for one to locate one-third of the way along the beach, and the other two-thirds along it. That way, they each get half the market, and customers only have to walk a maximum of one-sixth of the beach’s length to buy an ice-cream. That’s a great improvement over a maximum walk of half of the beach.
However, if one of the vendors moves closer to the other vendor, he will increase his market share at the other’s expense (if consumers don’t differentiate between them). At the extreme, one vendor can capture 67 per cent of the market by moving right next to the other vendor: he will get 100 per cent of the purchasers from two-thirds of the beach."

And then it would be profitably for the other vendor to move past him and capture this bigger share of the market again.

"If left to free competition, both vendors would end up right in the middle of the beach – forcing customers to have to walk up to 50 per cent of the beach to get an ice-cream – and the vendors would still split the customers 50:50."

This is a nonsensical declaration. The vendors could perhaps make more money by moving closer to the right, simply because this might entice more people who do not want to walk  "50 percent of the beach", but who would buy if they just had to walk "15 percent of the beach".

"You’d get a socially and economically better outcome if vendors were regulated, and required to set up some minimum distance apart from each other: people would have to walk less, and ice-cream sales would rise because of the shorter walk to get an ice-cream."

If ice-cream vendors were regulated, that would put an additional barrier and contigency in ADDITION to profitability on whether a ice-cream vendor should be set up. There is no reason to presume that this would get better economically, and social outcomes. This is also not considering that government regulators have no profitability to care about, if they regulate too much and stop vendors they do not personally lose money and their employer does not either. This also goes the other way around.

As analogy, the profitability of paying people like Keen to construct pseudo-scientific arguments to justify government control over people lives is not measureable. When the government then decides to cut him out because of their own folly, he is enraged and wants to blame "market deregulation".

"if it ain’t broke, don’t fix it”. Governments have “fixed” higher education so many times now that it’s well and truly broken. Rather than attempting to improve complex systems that they clearly don’t understand, politicians and bureaucrats should respect what has evolved over time"

Right, Keens try to play himself off as a critic of government. The fact is that this "evolution" was also simply enacted by government diktats, and if this earlier evolution was made on the same basis as he is critiquing, then he should accept the evolution towards a "economics"-less University of Western Sydney.

And hopefully a real market deregulation in the form of fully private universities, as was the norm long time until governments decided to "fix" higher education.

I also thinks this reveals why most economists are left-leaning social-democrats, unionists or right-wing social-democrats. Its sheer self-interest,they want to keep their unproductive jobs as propagandists for government and central-banking and their high salaries, government pensions etc.

Ingen kommentarer:

Legg inn en kommentar