Three ways in which the solution is the problem

Just in case anyone was still curious as to why my blog is called “The Solution is the Problem,” I’ve decided to show a few examples from the recent news.  If people begin to think of policies not in terms of what they are supposed to do, but instead in terms of what they actually will do despite the best intentions of their proponents, I will be a happy Socrates.

First, an article from Smart Money about how college aid makes college more expensive. Though there has long been much conjecture about a causal connection, there is only a little evidence.  I find it entirely plausible that more government college aid causes college to become more expensive, and the data are continuing to mount:

Federal aid for students has increased 164% over the past decade, adjusted for inflation, according to the College Board. Yet three-quarters of Americans and even a majority of college presidents see college as unaffordable for most, and that sentiment has been steadily spreading, the Pew Research Center reports.

…If subsidies puff up buying power and shift prices higher, as economics courses teach, could federal aid for college help create an affordability problem? After all, the federal government began spending more on college aid with the Higher Education Act of 1965 and the full funding of Pell Grants in 1975. Since 1979, tuition and fees have tripled after adjusting for inflation. That’s much faster than the increase for real estate and teacher pay.

…After adjusting for differences among schools, the authors find that Title IV-eligible schools charge tuition that is 75% higher than the others. That’s roughly equal to the amount of the aid received by students at these schools.

Studies like these suggest that if one goal of government is to make college affordable, aid should become more thoughtful instead of merely more plentiful.

Today’s second topic comes from a Reason article called “Drug Warriors Encourage Mexican Meth Makers to Sharpen Their Chemistry Skills.” Recall that the safe and effective nasal decongestant pseudoephedrine was federally limited and tracked some seven years ago to combat meth.

Seven years later, Jacob Sullum helpfully points out that, although pseudoephedrine was never required to make meth anyway, the upshot of the law has been the emergence of a Mexican black market.

The prevalence of meth production in Mexico was driven home this month when authorities reportedly seized 15 tons of meth on the outskirts of the city of Guadalajara, a known stronghold of Sinaloa cartel leader Joaquin “El Chapo” Guzman.

“This is a cyclical drug. If you pass a precursor bill it goes down, and then it comes back up again,” Maxwell said. “The lesson on this is that we can’t congratulate ourselves for doing away with pseudoephedrine. People keep looking for other recipes.”

The results have been interesting to say the least. First, the pseudoephedrine ban has led to an increase in meth making using other ingredients. It has pushed much production over the border, which has in turn fostered more violence in what is basically a war-torn country. It has led to increased border patrol costs. It has raised the price of meth, making addicts more desperate and possibly driving more crime. It has emphatically not reduced the use of meth.

Oh, and it makes it much harder for the vast majority of innocent Americans to deal with the common cold.

Bang up job so far, drug warriors. I’d say you’ve probably lost the drug war when people are posting directions for the synthesis of useful pseudoephedrine from the much more common and less-effectively controlled meth.

Finally, Megan McArdle writes in the Atlantic about how newly proposed government rules on money market funds will likely put them out of business.

This is really just the latest in a series of government actions designed to protect people from the risks of their investment decisions, whereupon one quickly finds that, without risks, there are no rewards.

At last, the government is proposing new rules, which are supposed to make MMFs less risky.  The funds would have to raise new capital, and some minor withdrawal limitations would be imposed on customers.  They would also have to offer a floating net asset value instead of the current “guarantee” that if you deposit a dollar, you’ll always get at least that dollar back.

The last is all by itself disastrous for these funds, whose main attraction is that they act like bank accounts.  As for the rest, in a normal interest rate environment, this would be onerous.  But with interest rates as low as they are, there’s no way for MMFs to absorb the hit by offering a lower return; it looks to me as if the interest rate would probably have to be negative.  Which is to say, your MMF would actually be charging you for the privilege of giving you their money.

If passed as proposed, the rules would seemingly put the MMFs out of business.

In its zeal to protect the supposedly helpless, harebrained twits who make up the entirety of Washington’s constituency, Washington removes the possibility that people may make informed decisions and enjoy/suffer the consequences. It seems as if the prevailing regulatory wisdom is that it is better to throw the baby out with the bathwater than it is to deal with any bathwater at all.

The cynic in me sees this as just another way that the government fosters dependence, and thereby its own survival, because when people are not allowed to provide for their own old age, the only alternative is government.

Replace the LSAT with Psychological Testing?

TaxProfBlog highlights a bit of interesting legal scholarship, called “Predicting Lawyer Effectiveness – A New Assessment for Use in Law School Admission Decisions.”  Briefly, the paper looks to overcome some difficulties with the Law School Admissions Test by replacing it with psychological measuring for those things which correlate with effective lawyering:

Innovative exploratory research by two UC Berkeley faculty (Marjorie Shultz, Law and Sheldon Zedeck, Psychology) has demonstrated that on-the-job professional effectiveness of lawyers can be predicted. The new Shultz-Zedeck tests, developed based on models from employment selection and promotion and the field of industrial psychology, identify and assess many factors not measured by the LSAT that are vital to lawyer efficacy, such as problem solving, advocacy, practical judgment, and communication skills. Exploratory research conducted with participation of more than 5000 law grads suggests that tests can be developed and validated that will predict professional performance (as appraised by peers and supervisors).

As an attorney myself, I have a couple of problems with this.

The first one is easily the most serious, and I think it highlights the real and stark disconnect between the scholarly pursuits of legal academia and the realities of the real world.  Of course, these peer and supervisor reviews sound perfectly good in theory, but as anyone who has submitted to an annual performance review in a company’s down year will know, there is often no true connection between performance and the results of your performance review.

The idea that assessments can be done in an objective manner exhibits, I believe, a willful ignorance of the actual psychology of the workplace.  Odd for a psychological study.  I would like to believe that perhaps these effects would be tempered by an aggregation study, but even that would matter but little.  After all, job performance is an individual metric, as is the decision whether to admit a potential law student.

I simply do not believe that there is a way to remove office politics, which are often backstabbing and brutal.  There is no good way to control for the subjective measure of attractiveness, shown to be correlated with increased earnings on average, and more than likely correlated with friendlier performance reviews.  There is no good way to control for the questionable effects of height, also shown to be correlated with greater success.  And how would one correct for the fact (fact!) that some groups of peers and supervisors are far better than others?  After all, being judged effective at a top New York City law firm is different than being judged effective in your job at the local suburban ambulance chaser’s firm.  The worst lawyers at the best firms may well be better than the best lawyers at poor firms.

Also, as someone who has studied and taught the LSAT, I refuse to believe that there is anything peculiar to it that disadvantages underrepresented minorities.  Anyone who knows the test knows that LSAC bends over backwards to reduce test bias, to the point where the only credible way to posit bias would be to claim that it is tilted against “overrepresented” groups (one might call this “reverse-bias,” but like “reverse-racism,” I revile this term; racism and bias are what they are, and they require no direction, forward or reverse).

Perhaps instead of introducing pseudo-scientific and easily manipulable psychological data points as a replacement for a very cut-and-dry test, we should recognize that the purported lack of qualified minority candidates for law school is far more likely due to our failures in public education, and the massive amounts of structural waste in the public school systems? In reality, it does unqualified minorities no favors to introduce them to a situation where everyone else (whose grades form the curve!) is better equipped to succeed.  This leads to underachievement, poor job prospects, usually crushing debt, and ultimately – although not for everyone – perverse consequences.

For the foreseeable future, there will be no perfect way to determine whether law students will succeed as lawyers, nor is there any particular reason to require them to be, given that there are basically no legal job openings but for the very top candidates anyway.  I cannot imagine that this psychological profiling program would be successful.  And perhaps more importantly, I cannot imagine that we could comprehend ex post what the possibly horrifying unintended consequences would be.