An enterprise transforming coffee beans into economic theories
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An enterprise transforming coffee beans into economic theories
Historical note: I wrote the following article about six years ago. See here below the Appendix on the current controversy on tuition fees (2012).
In some cities, many people talk about the ups and downs of their hockey or baseball teams. In the little village of Quebec City, since we don't have any professional teams of any kind, we tend to talk about university tuition fees (currently "frozen" by the State at a low level). Our "playoff season" is election time, and the big championship trophy is free university tuition!
Seriously, what should students pay for a post-secondary diploma? Nothing? Everything? Somewhere in between? If so, where exactly in between?
I consider these questions very important, since in a way education is the root of all solutions. If you define "education" as "illuminating our reason and straightening out our will", then obviously education is the most powerful natural force for the Common Good! Unfortunately, the high importance of this topic is inversely proportional to my very low economic competence. I'll try to avoid saying dumb things, but please keep in mind I'm not trained as an economist.
I might not now much about the economy, but many people seem to know even less. So let's list some basic economic principles. (If you think they are too simplistic, take a few days to read the newspapers, and count the number of times these principles are completely ignored!)
2.1) The Sabbath is made for man [Mc 2:27]. "This is so because the purpose of the economy is not found in the economy itself, but rather in its being destined to humanity and society" [CoSoDo, #331].
2.2) Immorality rhymes with bankruptcy. Economic prosperity is not guaranteed if all your citizens are Church-going, pay all their taxes, work hard and well, avoid booze and drugs, and so on. But economic disaster is guaranteed if enough citizens behave immorally. See also "The Gross National Product And The Ten Commandments".
2.3) Dollar bills have free-will. If Economists really did study dollar bills, they would have it easy. A paper banknote by itself behaves in a perfectly predictable way: fold it, and it will crease; put a match to it, and it will burn. But dollar bills are controlled by men, who are endowed with free-will. So it's impossible to perfectly predict a dollar's behavior. See also "Do You Want To Be A Proton Or An Electron?".
2.4) Money doesn't grow on trees. Somehow, somewhere, somebody will end up paying. There is a infinity of economic illusions that seem to contradict that principle, but they are all exactly that: illusions. For example, you can imagine you're rich by racking up your credit cards (which you, or all solvent cardholders, will eventually pay down). Or you can steal a car (which will be paid for by all car insurance policyholders who pay premiums). Or a whole country can saddle their children and grand-children with a massive national debt, or rivers and forests ruined by pollution, etc. See also the boast of the chap riding the magic carpet in "Sustainable Development, And Pollution By Pious Wishes"
2.5) No use cutting trees efficiently, if you're in the wrong forest. If you're aiming for the wrong economic goal, then all efforts to reach that goal will be wasted, no matter how heroic and ingenious. Soldiers means the same thing when they talk about "Selection and maintenance of the aim".
2.6) Leaky pipes. Anybody can allocate resources, but allocating them efficiently requires real talent. Let's imagine a metaphor where money is water down a deep well, and your project that needs funding is your kitchen sink. We could say that, directly or indirectly, almost all pipes lead to your kitchen sink. Except all pipes are leaky, most are far too leaky, and some are filled with so many holes you'll never get a drop of water out of them! In economic terms, we actually could put all our money in a big heap in the middle of our country, and the Government would plan absolutely everything centrally, including how many toothpicks you'll need this year. Mathematically, it's the ideal solution, but in real life it can't work.
2.7) "Ceteris Paribus". Without the famous insecticide called "Ceteris Paribus", you'll be stung to death by the swarm of economic factors. In other words, name me an economic measure, any economic measure, and I'll come up with scenarios where that measure will massively improve the situation, or make it horribly worse, or have no effect whatsoever! That doesn't mean the situation is hopeless, but rather that any economic solution must target several factors at once.
If you have ever heard of some kind of "Book of Economic Proverbs", please contact me! Of course, you'll still need to read many books to learn Economic Science, but it would be nice to be able to refresh one's memory without re-reading several linear decimeters of books on library shelves.
Ideally, this "Bumper-sticker Economic Science" would not only list very short and easy to memorize proverbs, but it would also organize them in a hierarchy, give a short explanation for each principle, list the "synonymous proverbs", give bibliographical references, etc.
I don't yet have my book on "Bumper-sticker Economic Science", but let's imagine what it might talk about, for one of the above principles. Principle #2.6 is particularly interesting. In a way, if you can "plug the leaky pipes", you've earned your salary as an economist. Let's try to analyse that principle, and list some "Principles for efficient resource allocation":
4.1) Virtue. There is no substitute for honesty, selflessness, hard work, etc. This is just a repetition of Principle #2.2, but it's so important that repeating it is always a good idea, whatever area of Economics we happen to be talking about. In a way, if you don't have virtue, the pipes will leak, whatever other measures you implement, and if you do have virtue, the pipes will not leak, no matter how many holes in them.
4.2) Private property. What is the difference between a "community bicycle" which belongs to a whole village, and my bicycle? If you think about it, there is no physical difference. Private property is what philosophers call "a moral entity", i.e. it only exists in minds of men. This doesn't mean that private property doesn't exist, or that it's not important! On the contrary, it's essential, among others because private property can make it easier for men to work for the Common Good. Let's try to explain this briefly. (See also Aristotle, Politics, Lib. 2, Cap. 3, 1261b.) If men had perfect reasons and perfect wills, then they would almost feel physical pain when they saw somebody puncturing the tires of the community bicycle (or the community forest, or the community water well, etc.). This is because damaging a particular good always ends up harming the Common Good. But men often don't see clearly the connection between the Common Good (which is the true personal good of each human), and some apparent personal evil (which is actually their true personal good). So they puncture tires (or cut down trees illegally, or pollute the water table, etc.), because that provides them with some apparent personal good. But if through social conventions we say that this bicycle "belongs" to them, then they will have a tendency to take better care of it, because of the natural tendency of men to pursue their own interests. This "Law of Interest" is not the supreme economic law, and private property must be understood in the light of the higher principle of the Common Destination of Goods [CoSoDo, #171]. But it's still a very important law which cannot be denied, but which must be ingeniously used, a bit like aeronautical engineers use the law of gravity and other physical laws to actually make airplanes fly. (This is what is known in Latin as "Natura vincitur nisi parendo", "Nature can only be conquered by being obeyed".)
4.3) Accounting. This is an obvious principle to reduce "leaky pipes", but it's still an important one. It's the reason why accountants exist, so they can tell us where each dollar went.
4.4) The shorter and less convoluted the pipe run, the better. Just as in plumbing you add potential leaks every time you add an unnecessary joint, every time you add another middleman or layer of bureaucracy, you add a potential waste of economic resources.
An example of this is current provincial transfer payments in Canada. The fundamental idea is excellent: "System of unconditional fund transfer letting less-rich provinces provide services comparable to those of richer provinces, without imposing an excessive tax burden on their residents" [PELLETIER, Réjean, TREMBLAY, Manon. Le parlementarisme canadien, 3e édition, PUL, 2005., p. 530]. Currently, this good system needs to be adjusted, since the Federal taxes Quebec too much, then gives back this money to the Quebec Provincial Government through transfer payments (this has been going on for many years). The Federal Government should just lower its taxes, and the Province of Quebec should increase them by an equal amount to avoid this unnecessarily complex loop (Why take money from Quebec to transfer it to Quebec?). Countless other examples could be given.
4.5) More and better training. Given the same "input", a worker can increase his "output" (i.e. be "less leaky" to use our pipe metaphor) just by improving his knowledge.
4.6) Better tools. The fancy way of saying the same thing is "high-technology". Remember that one of the biggest technological advances was just padding the yokes used by cattle to pull farm equipment. Thanks to this innovation, the same animal could pull more, increasing productivity. These days, computers are fantastic tools which are making us more efficient in just about all areas of the economy.
Etc., etc. ...
Let's come back to our original problem of tuition fees for university students in the Province of Quebec. Here is a list of statements which I consider inevitable, given the principles here above:
5.1) By #2.7, we know it's impossible to answer the question in this short article. The shortest possible answer would be a complete electoral platform. To illustrate this, let's imagine two scenarios. First: Suppose we decree that students now have to pay 100% of their tuition. Maybe all that would happen is that 100% of the students would increase their student loans, and 100% of them would declare bankruptcy after graduation. Since the Government backs those loans, this would just mean that the taxpayers would pay 100% of the student's tuition! Second: We decree that tuition is absolutely free! But all schools start enforcing excessively strict standards, so 99% of all students fail their entrance exams. So even though tuition is free, almost nobody has access to post-secondary education. Since so few students can go to university, the Government makes a ton of money by selling the big campus buildings to private companies, and re-opens the university in a small garage. So even though the Government was supposed to pay, it ends up making a profit!
5.2) By #2.2, whatever the situation in Quebec schools as we speak, things would go better if all students and teachers became members of the Opus Dei, or something similar. Imagine: all students would stop wasting their money on beer, pornography, used cars (they would ride bicycles or take the bus!), trips to Cuba, etc. All students would avoid neglecting their studies, avoid using foul language in class and in corridors (you wouldn't believe how tough it is for a Christian to just hang around with typical Quebec students these days), avoid cheating in exams, avoid damaging school property, etc. On their part, all teachers would tell the truth ("Sorry, I don't know the answer to your question. I'm only a lecturer without a Ph.D. or experience in what I'm teaching.") They would work hard to keep up-to-date in what they teach. They would also have the courage to be disliked by bad students, because they would impose discipline in class (so good students could peacefully learn without being bothered), and fail students who deserved to fail, etc. All this could be done tomorrow, at zero cost to the Government! (Of course, it wouldn't have to be only the Opus Dei, it's just an example. But the Opus Dei is very good at encouraging students and teachers to do their work better.)
5.3) By #4.5 and #4.6, "If you think education is expensive, try ignorance". Give me an economy, any economy. It doesn't matter whether it's the economy of a country in the South, or the North, or Today, or in the Middle Ages, or whatever. If you improve everybody's knowledge, you will increase wealth (Ceteris paribus, of course). Investing in education, if well done, is always a good investment. I simply cannot imagine why a Government would not want to help good students get good university degrees.
5.4) By #4.3, we should find out where all the taxpayer's money is going. What's the use of having the Government dump taxpayer's money into the education system, if we don't even know what we're getting for our money? In other words, how much education are we getting for our "edu-dollars"? To find out, we need more open and independent assessment of skills. This is explained in The Quebec Bureau Of Skills Assessment.
5.5) By #2.5, stop using universities as human parking lots to reduce unemployment statistics. Yes, a Government can pay large grants and back many student loans, in order to increase the number of useless degrees in Sexology, Sociology, Native Studies, Basket Weaving, etc. Except the economy needs more technicians, engineers and scientists. Even the slightest knowledge of human nature tells us that, unfortunately, people tend to take the easy way out. And since Math, Physics, Biology, etc., are hard, then the Government has to bias its student grants and loans against Mickey-Mouse degrees, and in favor of more difficult disciplines. See also Dear Olivier (Letter To A Quebec Cegep Student).
5.6) By #4.3, we should make the total price as visible as possible. A sure way to increase wastage is to hide the price, totally or partially. I know when I was a student, I never found out neither how much my poor mother was shoveling out, nor how much my education actually did cost (the university didn't publicize the actual cost, but just the heavily-subsidized cost). If it costs 40 000$ a year per student, then bill the student 40 000$ a year! The State can always write on the invoice: "You owe us 40 000$, minus the 39 000$ that came from the overworked and underpaid pockets of lower-middle class workers who want you to get a good education, even though they don't even know who you are". At least the student would feel a bit more guilty when he didn't study!
5.7) By #4.2, tuitions should hurt student's wallets. I see no reason for making post-secondary tuition free. I see no reason why taxpayers should make big sacrifices, if the first person to be responsible for his or her education doesn't trust that "this horse can win this race". If a student realizes that he doesn't yet have the maturity or the motivation to finish his degree, he should have a good financial incentive to stop pretending he's a student, to stop accumulating debt, and to start working. Also, if a student realizes that the market conditions are such that he will probably never get a job in the field where he's currently studying, he should have a good financial incentive to change fields. Many other rules should probably apply to this financial "pain":
- If a student changes provinces or countries after he gets his degree, he should refund the part of his tuition that was paid for by the taxpayer.
- If a graduate from a Third-World country is drawn to immigrate into a rich country like Canada by our immigration policies and eligibility criteria, we should refund that Third-World country. (The brain-drain from poor to rich countries is scandalous. They are the ones who need their graduates the most.)
- The amount of "pain" to a student's wallet has to be made proportional to the size of his wallet. As soon as the Government hands out grants and loans, it needs to means-test students.
- If, as a whole, students get richer, the part of tuition paid for by students should go up.
Etc., etc. ...
So what is the exact proportion of the tuition that should be paid for by students? I would need to have access to many figures I currently don't have. Actually, I would probably need to work for the Government, because some of this information must be confidential (like the income tax returns of parents of spoiled students who party and don't study). But offhand, I don't think it would matter that much. If we implemented all the above suggestions, then any reasonable proportion of the financial burden transferred to the students would be OK with me. And remember, I speak as "The Taxman's Dream": I'm single, I earn good wages which I all declare in my income tax returns, I have zero children or dependents, and I consume zero Government services like Health or Welfare, etc. So any increase in State-funding for students comes from the pockets of people like me.
This article has just scratched the surface of the tuition fee problem, and the huge discipline of Economy, so there is no real conclusion, apart from:
Don't let those Economy books turn yellow, red and brown, then fall to the ground like dead leaves. Pick them up and let the sap of your intellect inject them with life, for a new Springtime of the Economy!
I wrote this article around 2006-November-11. A few days ago (I'm writing this 2012-May-24), many Quebec students "celebrated" 100 days of the boycott of their courses. The controversy over tuition fees has this time lead to massive protests, stone-throwing against riot police, molotov cocktails, shutting down the Montreal subway system during the morning rush hour using smoke bombs, masked students disobeying court injunctions and preventing other students from entering school, etc.
I'm not familiar with the details of the dispute. From what I've gathered, many students don't want to boycott their courses, but are being intimidated by a minority who doesn't shy away from manipulation and intimidation. Also, the usual Leftist politicians (Pauline Marois, Amir Khadir, etc.) and Leftist media (Radio-Canada, Le Devoir, etc.), are stoking the flames of discontent as much as they can.
As far as I know, the actual financial aspect is not controversial: the Government just wants to catch up on the tuition fees, since they've not been adjusted for inflation for several years. Apparently, the raise for this year would amount to less than one cup of coffee a day for students. Even with all the planned increases, the tuition fees in this Province would still be well below anything else in North America.
The picture at the top of this Appendix sums up my opinion of this round of the controversy. (Sorry, no, I wasn't clever enough to come up with it!) It mocks a recent cover of Time Magazine. It shows Pauline Marois, Leader of the Parti Québécois, which is a very Leftist party, very committed to the Welfare State or "Gouverne-Maman" as we call it in French. This is shown hilariously by her breastfeeding Gabriel Nadeau-Dubois, a spokesman of the "CLASSE", the student coalition that is most pro-boycott and least inclined to condemn the many illegal acts being committed. Even the fake additional headlines are hilarious: "Masked people are the victims" and "Nasty Charest!" (i.e. Jean Charest, current Provincial Prime Minister). Indeed, they are barely exaggerated, compared to the "news" daily fed to us by Radio-Canada and Le Devoir.
I've heard Nadeau-Dubois is a student in Sociology. Even that is ironic, since none of the many Leftist journalists in this Province has dared to ask a simple sociological question:
Of all the students who are boycotting their courses, what percentage has studiously avoided Mathematics?
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