Let Me Explain the Economics of College Tuition

The Atlantic has discovered that many colleges are soaking the poor by charging high tuition while handing out discounts to students from wealthy families:

Sometimes, colleges (and states) really are just competing to outbid each other on star students. But there are also economic incentives at play, particularly for small, endowment-poor institutions. “After all,” Burd writes, “it’s more profitable for schools to provide four scholarships of $5,000 each to induce affluent students who will be able to pay the balance than it is to provide a single $20,000 grant to one low-income student.” The study notes that, according to the Department of Education’s most recent study, 19 percent of undergrads at four-year colleges received merit aid despite scoring under 700 on the SAT. Their only merit, in some cases, might well have been mom and dad’s bank account.

There’s nothing inherently wrong with handing out tuition breaks to the middle class, or even the rich. The problem is that it seems to be happening at the expense of the poor. At 89 percent of the 479 private colleges Burd examined, students from families earning less than $30,000 a year were charged an average “net price” of more than $10,000 annually — “net price” being the full annual cost of attendance minus all institutional and government aid. Less technically, it’s what students can actually expect to pay. At 60 percent of private colleges, that net price was more than $15,000.

Of course the author of the article is unable to understand why colleges are partaking in such chicanery:

Otherwise, it’s hard to think of a justification for their behavior. Could it be that their prices are worth it, that the educations they provide justify the eye-popping cost? It’s hard to say definitively. But I’m hoping to put that possibility to the test in the coming week by matching Burd’s data against graduation and student loan default rates. In the meantime, the preponderance of evidence seems to suggest that many private colleges are either undercutting the intent of the Pell program, if not abusing it outright.

I’m nothing if not helpful so let me explain what is going on here. The phenomenon noted by the author is really another version of the state’s war against the poor. That is to say colleges, like states, want to raise a herd of dairy cattle that will produce a lot of milk. Doing so requires culling cattle that produce less milk and breeding cattle that produce more milk.

As the article notes many of the students being favored didn’t score notably well on Scholastic Assessment Tests (SAT) or demonstrate any real form of academic exceptionalism. The primary criteria for handing out discounts appears to be parental income. Why would a college prefer to attract students from wealthy families over students who demonstrate academic exceptionalism? Because students from wealthy families provide more milk.

When a college accepts students from wealthy families they stand to get far more than just tuition. Have you ever wondered how college buildings get their names? In many cases college buildings are named after large donors. For example, Parkhurst Hall at the Georgia College is named so because:

Next to Foundation is Parkhurst (2003), an imposing structure that replaces the 1949 Parkhurst Hall that chiefly had been occupied by faculty. The first Parkhurst was built with money from the Sylvester Mumford Fund, established by Mumford’s daughter, Goertner Parkhurst (1850-1949). Sylvester Mumford was a New York merchant who settled near Waynesville, Ga., and built a stately, antebellum home. The beautiful Goertner Mumford cast a romantic figure in the 1870s as she rode her favorite white stallion through the sand hills and pines of the Brantley County estate. Mrs. Goertner Mumford Parkhurst later used her considerable fortune to support the cause of women’s education.

Wealthy families tend to donate money to the college their student(s) went to even after their student(s) graduated. In addition to donations, colleges also gain name recognition by having students from prominent families in their communities (often wealthy families) attend. Name recognition can greatly increase enrollment because many people want to go to a famous college (I’m told it also looks good on a résumé). Not only that but children are often encouraged by their parents to attend whatever college one or or both of them attended. That means a college may enjoy multiple generations worth of students from a wealthy family, thus expanding the amount of time they enjoy the previously mentioned benefits.

What do colleges stand to get when they accept a student from a poor family? Tuition. Somebody is probably saying, “Hey Chris, you dumbass, a student from a poor family will make more money after they graduate college!” As it turns out economic mobility in the United States isn’t very mobile. If you are born into a poor family you are more likely than ever to remain poor. That means a college is less likely to see large donations from students of poor families after they graduate. On top of that, students from poor families are more likely to be, at least somewhat, fiscally conservative. That means even if the student becomes wealthy he or she isn’t as likely to waste that wealth by tossing it to a college they already paid. Because of those two things the college has to milk cattle from poor families as much as possible right away.

In summary colleges favor students from wealthy families because they expect to gain more. The mistake being made by many people is believing colleges are something other than businesses. Colleges aren’t magical egalitarian institutions that are able to rise above self-interest. If that were the case senior college administrators wouldn’t make six-figure salaries, they would forgo a great deal of their salary so that money could be used to educate more students. But they do make six-figure salaries and they know that they need a strong herd of cattle to milk in order to continue making six-figure salaries.

Harry Reid is Confused

Harry Reid appears to be confused. In his world, likely created by the onset of dementia, he believes that the Tea Party and anarchists are equivalent:

Senate Majority Leader Harry Reid (D-Nev.) says the Tea Party is the main reason why things are not getting done in Congress and views it as a party of modern-day anarchists.

Reid on Wednesday afternoon stood by comments he made on the Senate floor last week comparing Tea Party-affiliated Republicans to 19th century American anarchists.

“I believe that, my experience with the Tea Party, is that they are against government in any form. They throw monkey wrenches into the government,” Reid said during an interview on the “Rusty Humphries Show.”

The Tea Party isn’t ready to rock with us anarchists. They’re like the metalcore fans at the death metal show. While they know some of the lingo and can name a some well-known bands they still complain about their inability to understand the lyrics and won’t venture forth into the mosh pit. Given a few years to mature they may be ready to rock with the big boys but they’re not at that point yet.

Through my mistaken adventure in libertarian politics I attended several Tea Party rallies. Most of the people attending those rallies would qualify, in my book, as being quite patriotic. They love the United States of America, the Constitution, an believe the government has been hijacked by socialists but is still legitimate. What most Tea Party members seem to want want to kick the socialists out of the government and replacement with good all-American conservatives. Tea Party members generally seem to be OK with the concept of taxation and believe we’re simply being taxed “too much.” The neoconservatives in the Tea Party movement (of which there are many) support having a large standing army and even believe that defense is one of the few rightful duties of the federal government. To understand the Tea Party one need only use a layman’s interpretation of the Constitution (as opposed to the convoluted lawyerly interpretation used by the state).

Us anarchists differ by opposing the state in its entirety. We don’t believe in any taxation, oppose standing armies, and don’t believe there are any rightful duties of a state. Those of us who identify ourselves as anarchist don’t believe that the government has been hijacked, we believe the government is running as intended. Whether socialists or conservatives are in charge is of no consequence to us because politicians on both sides of the political spectrum want to expropriate from the general population.

It’s true that many members of the Tea Party may eventually give up their small government desires and transition to no government desires. Tea Party members who transition in such a way will likely become anarcho-capitalists. This isn’t unique to members of the Tea Party though, many socialists and communists may eventually transition to anarchism, specifically anarcho-communism. With that said members of the Tea Party, socialists, and communists haven’t made that transition and many never make that transition. They’re toes may be in the water but they haven’t decided if it’s too cold to jump in yet. To say any of them are equivalent to anarchists are is completely wrong.

The Central Banks are Flying Blind

Are you ready for some surprising news? You may want to sit down for this. As it turns out, the central banks haven’t a clue as to what they’re doing:

Growing concern at the International Monetary Fund over the long-term side-effects of interest rates close to zero came as some of the leading figures in central banking conceded they were flying blind when steering their economies.

Lorenzo Bini Smaghi, the former member of the European Central Bank’s executive board, captured the mood at the IMF’s spring meeting, saying: “We don’t fully understand what is happening in advanced economies.”

But the best part of the article the following paragraph:

It is troubling for monetary policy experts that their crisis-fighting tools – rates stuck at zero, money printing operations to bring down longer-term interest rates and encourage private sector spending, and efforts to calm financial market fears – might have nasty side-effects.

Who would have thought that artificially lowering interest rates to nothing, printing billions upon billions of dollars, and sucking people into malinvestment would have any harmful side-effects? Just everybody with an elementary school understanding of basic economics. Unfortunately the politicians decided that Keynes’s mysticism sounded much better than Mises’s deductive logic, which isn’t surprising since Keynes’s mysticism basically said anything the state does to bolster the economy is good whereas Mises said the state should take an entirely hands off approach. Needless to say the state liked the idea of monopolizing the monetary system and it has been downhill ever since.

Bitcoin Mining isn’t an Environmental Disaster

I don’t know what possesses people who don’t understand the advancement of technology to write about the advancement of technology. Bitcoin has been headlining many news sites recently. Most of the headlines discuss the recent crash but Mark Gimein had decided to write about another aspect of Bitcoin, the energy requirements of Bitcoin mining. According to Mr. Gimein Bitcoin mining is an environmental disaster:

Most people aren’t used to thinking in terms of the energy it takes to solve math problems; a few minutes of Excel may not take much energy. But make the problems complicated enough, and things change. “Mining” Bitcoins takes so much processor power that it’s often done with specialized computers optimized for rapid repetitive calculations. So how much power can that take?

Blockchain.info, a site that tracks data on Bitcoin mining, estimates that in just the last 24 hours, miners used about $147,000 of electricity just to run their hardware, assuming an average price of 15 cents per kilowatt hour (a little higher than the U.S. average, lower than some high cost areas like California). That, of course, is in addition to the money devoted to buying and building the mining rigs. The site estimates the profits from the day of mining at about $681,000, based on the current value of Bitcoins. So mining, at least for the moment, is a lucrative business.

The trade-off here is that as virtual value is created, real-world value is used up. About 982 megawatt hours a day, to be exact. That’s enough to power roughly 31,000 U.S. homes, or about half a Large Hadron Collider. If the dreams of Bitcoin proponents are realized, and the currency is adopted for widespread commerce, the power demands of bitcoin mines would rise dramatically.

What Mr. Gimein fails to understand, or at least mention, is that Bitcoin is in its infancy and, like any technology in its infancy, is still running inefficiently. New technologies always start off rough around the edges and improve over time. A majority of Bitcoin mining was originally performed using computer processors. Today a majority of Bitcoin mining is done using graphics cards. Both processors and graphics cards, especially the powerful ones that were and are used by Bitcoin miners, can require a great deal of power. However the technology is improving.

First, let’s understand the the current trend in computing is power efficiency. More computing is being performed on mobile platforms, which need to run off of energy stored in batteries. A mobile phone, for example, doesn’t do much good if it can only run for an hour before the battery goes dead. This is why manufacturers are sinking huge amounts of research and development dollars into making more power efficient chips. Consumers always want more. They want more powerful devices and better battery life. Manufacturers want to make consumers happy because making consumers happy is what nets manufacturers a profit. So we are seeing more powerful processors and graphics processors that also consume less power.

The age of wearable computing is also beginning. Google has introduced Glass, the Pebble watch is selling very well, and there are rumors that Apple is planning to introduce a watch of its own. Wearable computers are even smaller than mobile phones, meaning there isn’t as much room for batteries. When wearable computers begin to take off the demand for even more power efficient chips will increase.

Today Bitcoin mining may take 982 megawatt hours a day. Tomorrow it will likely take less. Not just because of more power efficiency processors and graphics cards, but because current efforts are being focused on Application-Specific Integrated Circuits (ASICs). ASICs are chips designed to perform a specific task. This contrasts with general purpose computing chips such as the processor and graphics card (which are more specialized than processors but still capable of performing other tasks) found in your computer. Because of this ASICs can be designed to use less power. The linked article linked to Butterfly Lab’s website. Butterfly Labs is purporting to build ASICs for Bitcoin mining (I say purported because I know several people who have ordered from Butterfly Labs but have so far received no hardware). ASCIMiner is another ASIC aimed at Bitcoin mining and is powered off of a standard USB port.

Mr. Gimein must believe that Bitcoin miners like sinking vast amounts of money into buying electricity. If that was the case then Bitcoin miners wouldn’t be looking for more efficient methods of mining. But Mr. Gimein’s apparent belief is incorrect, Bitcoin miners don’t like spending great deals of money on electricity, which is why money is being put into developing more efficient mining hardware. Doing more with less has been the trend in human technology. When somebody makes estimations based on current technology they are doomed to fail. One must also predict how technology will advance. The electricity required in Bitcoin mining will decrease as the technology matures.

Progressives Will Never Accomplish Their Expressed Goals Through Statism

Today’s political climate is so muddled with doublespeak and doublethink that it’s difficult to have any meaningful conversation. Consider the term progressive. The term indicates a forward movement for society that will hopefully mean a better future for everybody. People who identify themselves as progressives generally claim a desire to support the poor through government programs. They tend to advocate universal healthcare, a guaranteed living wage, welfare, and other programs supposedly aimed at ensuring everybody has the bare necessities of survival. In practice their goals tend to oppose one another.

One of the demographics often exploited by modern progressives is the homeless population. Progressives often claim that they want more government programs to help the homeless. Helping the homeless is a noble cause that I want to see society embrace. However, unlike progressives, I want to see voluntary methods used. Voluntary methods tend to avoid the hypocrisy that runs rampant in statist solutions. On the one hand progressives claim to want to support the homeless, on the other hand they support programs that make it difficult or impossible to help the homeless. There have been numerous instances where state officials used force to stop individuals from providing food to the homeless. Most of these instances were done under the guises of health safety. State officials claimed that there was no way to ensure the donated food met nutritional or safety standards. Instead of being allowed to partake in the generosity of giving individuals the homeless were forced to go hungry because some government thug in a city health department didn’t issue a stamp of approval.

Such an outcome in inevitable when medical costs are paid by the state. As I explained in my post about the state and its love of surveillance, the state has a vested interest in keeping its costs down. Programs that return little, no, or, worst of all, negative profit are either axed or retools to be more profitable. Military might, by allowing the state to expropriate from other states, and police, by allowing the state to expropriate locally, will always receive priority for funding. Healthcare, on the other hand, would normally cost the state money. In order to get around this issue states have done several things. First, most states that claim to offer universal healthcare also maintain an ever diminishing list of covered operations. Second, those states generally maintain a skeleton crew in the healthcare sector meaning the wait time for operations becomes great (and if you die the state doesn’t have to foot the bill for your operation). Third, and for this post most importantly, these states implement regulations aimed at reducing their healthcare costs. Any behavior that may incur healthcare costs by the state are made illegal. New York, being one of the most progressive cities in the United States, has continuously implemented prohibitions aimed at reducing the state’s healthcare costs. The most famous prohibition was the one placed on the sale of sugary drinks exceeding 16 ounces.

In addition to axing or retooling unprofitable programs the state also tries to shed itself of unprofitable population. A homeless individual, being without income and able to buy very little, is unprofitable for the state. They generally pay no income tax and very little, if any, sales or use taxes. Compounding the issue is their general lack of possessions. If you have a home, a bank account, or any other property you have value that the state can seize from you. Therefore you, in the eyes of the state, are profitable population. Just as a dairy farmer has an interest in maintaining the health of his dairy cattle the state has an interest in maintaining your health, so long as you’re not consuming so many of its available resources that you become unprofitable (in other words if you actually need a major medical operation the state would rather see you dead).

Here is where things come full circle. In the hopes of reducing healthcare costs the state ends up waging war against the homeless. In the state’s eyes donated food is a potential healthcare cost because it has set itself up to cover the healthcare costs of those who don’t have insurance or possession to seize. Homeless individuals don’t have insurance or possessions so the state is literally better off if the homeless are dead. Preventing the homeless of eating donated food reduces the state’s infinitesimal risk of caring for uninsured individuals who have nothing to steal. If homeless individuals end up starving to death the state has shed unprofitable population. In other words shutting down programs aimed at providing food for the homeless is a win-win for the state.

Herein lies the problem with progressives: their goals are mutually exclusive. By involving the state in healthcare progressives ensure that the state wages a war against the homeless. Voluntary methods of providing healthcare and helping the poor don’t suffer from such conflict of interests because the interests of the people involve is to help those in need. In other words those donating food to feed the homeless are doing so because they want to help feed the homeless. Since they’re not expropriating wealth they don’t suffer from helping those without wealth. I believe that most self-declared progressives mean well but their strategy ensures that their expressed goals will never be accomplished. Only through voluntary cooperation can people help one another. Once the voluntary component is removed costs will inevitably be faced by those who don’t want to face them. At that point the primary focus moves away from helping those in need to reducing costs.

Doing the Goddess’s Work

What is commonly referred to as the religious right never cease to entertain me. A group of most zealous lawmakers in North Carolina have decided to spit in the fact of United States legal history (good on them) by introducing legislation that would allow their fine state to declare an official religion:

Republican North Carolina state legislators have proposed allowing an official state religion in a measure that would declare the state exempt from the Constitution and court rulings.

The bill, filed Monday by two GOP lawmakers from Rowan County and backed by nine other Republicans, says each state “is sovereign” and courts cannot block a state “from making laws respecting an establishment of religion.” The legislation was filed in response to a lawsuit to stop county commissioners in Rowan County from opening meetings with a Christian prayer, wral.com reported.

Although these lawmakers don’t acknowledge her existence, the goddess Eris smiles favorable upon them. Through their single minded attempts to establish order by forcing everybody to abide by their religious beliefs these lawmakers are creating untold amounts of discord. If these bills manage to advance in any way they will almost certainly lead to massive protests full of angry people on both sides shouting at one another. Maneuvers like this also sow seeds of doubt in the minds of those who oppose state established religion. Were this bill to pass opponents of state established religion would have one more reason to view the state as illegitimate. Since the state is the greatest producer of order any strike against it will surely please Eris.

The Police Suck at Acting Like Regular People

The police spent a great deal of time and money trying to track down and punish nonviolent individuals. Oftentimes the police have to assume the identities of regular individuals in order to catch some of those nonviolent individuals. Fortunately, for those of us who are nonviolent but likely under the watchful eye of the police, the police suck at acting like regular people:

As anyone who’s watched a single crime story on TV or film knows, undercover detective work is dangerous business. There inevitably comes a moment when the crime boss gets suspicious. Scary, sure, but at least police officers have a working knowledge of the rules of the crime game. They’ve trained their whole lives to pull off this deception.

Passing yourself off as a credible music scenester, on the other hand, is an order of magnitude more difficult. Never mind drug lords—no one can identify a poseur more quickly than a hipster; sniffing out fakes is essentially the entire job description. That’s what Boston police are finding out as their bungling efforts to infiltrate the underground rock scene online are being exposed.

A recently passed nuisance control ordinance has spurred a citywide crackdown on house shows—concerts played in private homes, rather than in clubs. The police, it appears, are taking a particularly modern approach to address the issue: They’re posing as music fans online to ferret out intel on where these DIY shows are going to take place. While police departments have been using social media to investigate for years, its use in such seemingly trivial crimes would be rather chilling, if these efforts didn’t seem so laughably inept. It’s a law enforcement technique seemingly cribbed from MTV’s Catfish—but instead of creating a fake persona to ensnare the marks in a romantic internet scam, it’s music fandom that’s being feigned.

The story is hilarious and I’m not sure how the police can perform such acts and not feel embarrassed. Adding insult to injury the embarrassment is unnecessary because finding nuisance house parties should be easy, wait for an annoyed neighbor to call the police. When the police arrive to investigate they will probably be able to hear the music from outside and have grounds to write one of those noise violation citations they’re so fond of. If the show can’t be heard by the neighbors then it is not a nuisance and the police don’t need to waste everybody’s time by shutting it down.

While it’s disappointing to see the police sinking so much time and money into shutting down house parties it’s great to see they’re entirely incompetent at it.

Why is Every Collection an Arsenal

Whenever the mainstream media uses the term “arsenal” I’m always left baffled. Take the recent “arsenal” uncovered Connecticut shooter’s home:

The young man who killed 27 people in a massacre in Newtown, Connecticut, owned an arsenal of weapons and ammunition, court papers show.

More than 1,000 rounds of ammunition, a bayonet, several swords and knives were among the items found in a search of Adam Lanza’s home.

1,000 rounds of ammunition? I keep more than that around for most of the popular calibers I shoot. A bayonet? I own several. Swords and knives? I do have knives but I must sadly report that I currently own no swords. Still, these stories seems to be written primarily to scare non-gun owners. If somebody doesn’t own any guns and doesn’t shoot competitively I’m sure 1,000 rounds of ammunition sounds like a lot. For those of us that own guns and shoot competitively 1,000 rounds won’t even get us through a season. Honestly, this news item is really not news, the guy owned ammunition, most of which he didn’t use in the shooting (while you can own 10,000 rounds of ammunition you can’t carry it all on your person). Yet mainstream media sources always try to focus their stories on making situation look more dangerous than they really are. The amount of weaponry housed at the home of the Connecticut shooter is irrelevant because he didn’t use any of those weapons to commit his heinous crime. My only explanation is that the media focuses on these things in an underhanded move to demonize gun owners in the eyes of non-gun owners. The implication appears to be that anybody who owns 1,000 rounds of ammunition, a bayonet, swords, and knives is a potential violent murderer and should be turned over to the Stasi immediately.

Perhaps I’m Becoming more Paranoid

Perhaps I’m becoming more paranoid in my old age but I find it suspicious that one day after Paymar announced that he wouldn’t pursue universal background checks a news story broke that there was a reported active shooting at a middle school in New Prague, Minnesota:

Authorities in New Prague responded this morning to a 911 call concerning an “active shooter” at the middle school, but a staff member later said everyone is safe and there is no danger inside the building.

“We are in the process of trying to clear all the schools at this time,” Scott County Sheriff Kevin Studnicka said at about 8:30 a.m. “We have not come across any injuries at this time.”

At about 9:30 a.m., administrators told families that classes in all schools were canceled for the day.

A School District official said the middle school was on a “code red” lockdown soon after what 911 police scanner chatter termed a “weapon complaint.”

Was the caller a student looking to cause some chaos or a gun control advocate hoping to reignite demands for gun control? I have no idea but the zealous manner in which gun control advocates danced in the blood after the Connecticut shooting leads me to believe they would stoop to almost any level to push their political agenda. My paranoia aside, this story also demonstrates the issue with knee jerk reactions. When the news first broke I saw numerous comments on Facebook saying there was an active shooting happening at the New Prague middle school. It wasn’t until I did some digging that I found out that the only source of this information was a new report saying somebody had called 911 about a weapons complaint. Taking a news story about a 911 call and conjuring up an active shooting is a massive departure from logic and demonstrates how quickly people can take a rather mundane report and turn it into a wild story.

Always take a moment to gather all the available facts before believing what you read or hear. Words that indicate potentiality are often dropped from second hand reports. When you read a friend’s post about an active shooting on Facebook take a moment to determine whether their comment is accurate or conjecture.

Iraq Didn’t have Weapons of Mass Destruction

Speaking of war and saber rattling, even more evidence has come to light that shows the claim that Iraq had weapons of mass destruction was pure malarkey:

Fresh evidence is revealed today about how MI6 and the CIA were told through secret channels by Saddam Hussein’s foreign minister and his head of intelligence that Iraq had no active weapons of mass destruction.

Tony Blair told parliament before the war that intelligence showed Iraq’s nuclear, chemical, and biological weapons programme was “active”, “growing” and “up and running”.

A special BBC Panorama programme tonight will reveal how British and US intelligence agencies were informed by top sources months before the invasion that Iraq had no active WMD programme, and that the information was not passed to subsequent inquiries.

It describes how Naji Sabri, Saddam’s foreign minister, told the CIA’s station chief in Paris at the time, Bill Murray, through an intermediary that Iraq had “virtually nothing” in terms of WMD.

Since the United States government lied about Iraq having weapons of mass destruction why is everybody so quick to believe its current claims that Iran is developing weapons of mass destruction? Why are people so quick to believe a perpetual liar? What makes anybody think that the United States government has decided to tell the truth this time?