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Category: General

Why charge less when increasing the price increases demand?

[ 30 ] February 10, 2015 |

That’s a question that university administrators have been asking themselves for many decades now. A couple of days ago, when asked to opine on the issue, Elena Kagan delicately suggested that, in conventional economic terms, it doesn’t make sense for Denny’s to charge almost as much for its Grand Slam Breakfast as Le Bernardin charges for its Thinly Shaved Geoduck.

[Northwestern Law School’s dean Dan] Rodriguez asked Kagan about the troubled state of legal education. Kagan demurred, stating that she was no longer in a position to advise law schools. But she did say she thinks “there ought to be more than one mode of legal education.” Since graduates of different law schools have different job opportunities when they graduate, Kagan said, not all schools should have the same teaching model—or tuition level—as “the elite law school model.”

No it certainly doesn’t seem to make sense for schools that send 5% of their graduates to high-paying legal jobs and four times as many to the unemployment line to charge 80% as much as Harvard, but such schools have been consistently charging 80% as much as Harvard since the memory of man runneth not to the contrary, aka the Eisenhower administration, if not earlier.

So why did they do so? The short answer is because they could. They could for a variety of reasons, but the one I’m going to focus on here is because the market for law degrees in this country seems to have featured an inverted demand curve — that is, one in which, all other things being equal, raising prices actually increased demand relative to competitors.

Consider a couple of natural experiments.

(1) The New York City area offers applicants about a dozen private law schools, and one public institution: CUNY. If you compare CUNY’s historical applicant pool to that of, say, New York Law School (not NYU), you’ll discover that until a couple of years ago, when after a blizzard of bad publicity NYLS’s applications started to collapse, NYLS was consistently getting about three times as many applicants as CUNY, even though it charged four times as much in tuition for New York residents relative to CUNY, and almost three times as much for non-residents. NYLS even had slightly higher entrance requirements, even though neither school carried any prestige on the hiring market (if anything, CUNY might have been the more desirable school from a prospective employment perspective, since it went and continues to go to great lengths to position itself as a law school dedicated to public interest practice).

Why, given the similar value of degrees of degrees from the schools on the employment market, would 6,000 people apply to NYLS in 2011 for the chance to pay $48,000 per year in tuition, when only 1,900 people applied to CUNY, where in-state tuition was $12,000, and non-resident tuition was $19,000? Why would three times as many people attempt to pay four times as much for what, in conventional economic terms, was pretty much the same thing?

(2) An even more stunning example of a radically inverted demand curve is provided by the tuition history of the University of Colorado Law School, where I teach.

Throughout the 1990s, CU raised its resident tuition (everybody gets resident tuition after their first year if they’re not already a resident, so for all practical purposes resident tuition represents the price of attending the school) by an average of about 8.5% per year, which incredibly enough was a markedly lower rate of increase than the typical public law school during these years. (Nation-wide, average public law school resident tuition nearly tripled between 1990 and 2002, but it only doubled at CU, from $3,130 to $6,352).

In 2003 the new dean convinced the central administration — I don’t imagine he had to break any arms or anything — to essentially quasi-privatize the school’s tuition over the next few years. This led to, even by the heady standards of American law schools, a truly mind-boggling series of price hikes, with the result that by 2011 tuition was fives times higher than it had been nine years earlier (four times higher in constant, inflation-adjusted terms).

What did this do to demand? Behold the wonders of the beneficent Market, home to sophisticated consumers, rationally maximizing their individual utility, world without end amen:

2.88% of all law school applicants applied to CU in the 2003-04 cycle.

4.13% of all law school applicants applied to CU in the 2011-12 cycle.

By increasing prices five-fold, CU increased demand by 43% relative to law schools nationally, even though over this same time average private law school tuition “only” went up by 61%, while average public resident tuition roughly doubled.

Did CU perhaps lower admissions standards, in order to make the school more attractive to a larger pool of potential applicants? Far from it stout yeoman: while the 2004 class had a median LSAT in the 84th percentile, the 2012 class’s median was in the 90th, and featured higher GPAs as well.

These experimental results are made even more vivid and robust by comparing CU’s outcomes to those at the University of Denver, just 30 miles down the road. While CU was quintupling its tuition, DU’s didn’t even double — meaning that in practical terms DU slashed its tuition relative to its neighbor’s — yet DU’s applicant pool was almost the reverse image of CU’s over these years, going from 4.18% of the national total in 2003 to 3.09% in 2011.

Note that if CU were a private corporation, its management would be violating its fiduciary obligation to the firm’s shareholders it they hadn’t raised tuition from $6,000 to $31,000, just as Honda’s management would be violating its legal duties if they hadn’t raised the price of an Accord from $20,000 to $100,000, if doing so would have led to selling 43% more cars relative to Toyota.

Now it seems, shall we say, unlikely that raising the price of an Accord to $100,000 would cause demand for the car to spike, but higher education in this country is clearly a very special sort of market.

Extending knowledge, improving the human condition, searching for truth — these are the three demons you must slay if you wish to succeed in business.

[ 40 ] February 10, 2015 |

Sadly, this kind of thing will probably improve Walker’s chance of getting the nomination. 

The Unprecedented Obstructionism of Barack Obama

[ 116 ] February 9, 2015 |

Neo – neocon is outraged that Barack Obama would use his phony-baloney “clearly assigned constitutional powers” in ways that reflect his policy preferences — almost as if he was elected or something.  And never before has a president showed such contempt for democracy on so many occasions!

Historically, most presidents have saved their vetoes for the issues that matter most to them, because they have been afraid to challenge what appears to be the will of the majority of the people too many times. But Obama has no such hesitations. The last time he cared about the will of the people was on November 6, 2012.

Yes, back in the day presidents were very cautious about using the veto power, but under Barack Obama it’s nothing but reckless tyranny.  Assuming that Obama vetoes the Keystone Pipeline, consider this remarkable record of indiscriminate vetoes in historical context:

Obama: 3 (5, pro-rated to a full two terms)

George W. Bush: 12

Ronald Reagan: 78

Gerald Ford: 66 (in less than 3 full years!)

Richard Nixon: 43 (less than 2 full terms)

Dwight Eisenhower: 181

Calvin Coolidge: 50 (less than 2 full terms)

Teddy Roosevelt: 82

Grover Cleveland: 584

As you can see, the data is clear.  Obama’s lawlessness and obstructionism are unparallelled.   The veto used to be a very rare event, but now it’s ubiquitous.  I think we can all agree as well that Neo- neocon’s assumption that vetoes are somehow illegitimate and undemocratic is every bit as sound as her history.

So this line of argument is really going to be a thing.  I assume the next step is to argue that Obama and Biden are defying the will of the voters by refusing to resign.

 

Bar Lines

[ 222 ] February 9, 2015 |

I like a good rant. Especially when it is for a good cause. Such as people holding up bar lines to order complicated drinks.

The faddish reintroduction of “cocktail culture” on these shores has been a boon for liquor distillers and prohibition cosplayers. But it’s turned the once-efficient practice of ordering drinks into a sick and broken system. To be stuck in line behind a cocktail drinker when all you need is someone to pop the top off a beer is to be victim to a cruel and defective practice.

It is time to fight back against this invasive species.

There’s an obvious solution. Patrons at packed, under-staffed bars should consider the long line of customers behind them as they order a Gin Fizz or whatever, and instead purchase a drink that requires less time to make, such as: one beer. This will never happen, because people are assholes. And so we are forced to consider another option: Segregation.

Separate lines, each with its own bartender. One for those of us attempting to buy a quick beer, shot, or any liquor on the rocks; another for anyone purchasing a cocktail.

Will people cheat the system, like they do for express check-out lines and HOV lanes? Of course. “Could you put some bitters in that bourbon?” they’ll ask in the express lane. “Maybe a splash of vermouth, too?” No, fuck you. These rule breakers can be dealt with, with expulsion from the establishment. Customers will no doubt complain at first, too. Expel them. As the place is emptied out by force, the path to the bar becomes ever clearer.

I like a good mojito but I never order them at a busy bar. Why? Because it’s a jerk thing to do. It really operates in the same world as people talking loudly at concerts (I paid for this after all!) and, far more seriously, people choosing not to get their kids vaccinated. It’s the apotheosis of individualistic ideology that. Of course I shouldn’t be surprised by this ideology infecting all parts of our life since it central to is the consumerist individualism so promoted by modern capitalism and the corporate behavior that allows executives to make enormous decisions that affect millions of people based upon a quarterly report.

Of course, one can say this is ridiculous and that people ordering complicated drinks in a crowded bar (and probably tipping 50 cents for them) is meaningless. And maybe it’s true. But it’s not like these daily choices aren’t shaped by larger factors.

Obama on Inequality

[ 66 ] February 9, 2015 |

Barack Obama gets why income inequality is so stark and why the fortunes of American workers have declined so far in the past forty years.

President Barack Obama did an interview with Vox.com.

At one point he was asked what he thought was leading to growing income inequality in the US.

Here’s what he said:

“Some of it has to do with technology and entire job sectors being eliminated — travel agents, bank tellers, a lot of middle management — because of efficiencies with the internet and a paperless office.”

“A lot of it has to do with globalization and the rest of the world catching up. Post-World War II, we just had some enormous structural advantages because our competitors had been devastated by war, and we had also made investments that put us ahead of the curve, whether in education or infrastructure or research and development. And around the ’70s and ’80s and then accelerating beyond that, those advantages went away at the same time as, because of technology, companies are getting a lot more efficient.”

“One last component of this is that workers increasingly had less leverage because of changes in labor laws and the ability for capital to move and labor not to move.”

Add all that up, and Obama says workers are in a tougher position. He was then asked about taxes, and he gave this additional reason for pressure on wages:

I think that part of what’s changed is that a lot of that burden for making sure that the pie was broadly shared took place before government even got involved. If you had stronger unions, you had higher wages. If you had a corporate culture that felt a sense of place and commitment so that the CEO was in Pittsburgh or was in Detroit and felt obliged, partly because of social pressure but partly because they felt a real affinity toward the community, to reinvest in that community and to be seen as a good corporate citizen. Today what you have is quarterly earning reports, compensation levels for CEOs that are tied directly to those quarterly earnings. You’ve got international capital that is demanding maximizing short-term profits. And so what happens is that a lot of the distributional questions that used to be handled in the marketplace through decent wages or healthcare or defined benefit pension plans — those things all are eliminated. And the average employee, the average worker, doesn’t feel any benefit.

I know Obama is constrained by the realities of the limitations of power to pass legislation. But it is quite striking to me that while he well understands the problems of income inequality and stagnating wages, his trade policies are so counter to the interests of American workers. The promoters of the Trans-Pacific Partnership, which Obama is trying to convince Congress to give him fast-track authority for, say that the problems of NAFTA won’t be repeated here and that the TPP will create American jobs. There is simply no reason to believe this. The TPP will just continue the process of the worldwide race to the bottom while protecting corporations from lawsuits and giving workers even less power than they do now to live a dignified life. It’s very difficult for me to believe that someone who supports the TPP and hires advisors like Larry Summers and Tim Geithner really has the interests of American workers in mind. Or maybe Obama does have their interests in mind, but is so under the control of the dominant ideologies of neoliberalism and global capitalism that he can’t see beyond his limited horizons to understand that a significant departure from current economic orthodoxies is necessary to reverse these trends. It’s certainly true that some of these problems are bigger than anything any president could do; the U.S. isn’t going to be in a position where so many of the world’s nations are either recovering from war or opting out of the global economy again. But Obama’s plans for the TPP are certainly not going to help.

I’m glad my president understand the roots of these problems. I just wish he could articulate better solutions.

Workplace Safety

[ 23 ] February 9, 2015 |

One of things that drives me really crazy is when people talk about unions only in terms of financial gain. While workers (or anyone) will never turn down more money, unions are not primarily about money. They are about dignity on the job and worker power to have a say in their work life. To achieve that dignity and that voice, workers may very well want higher wages. But they may also want shorter hours, better equipment, a break for lunch, not to have to provide their own clothing or safety equipment, and an end to arbitrary firings, just to name a few of the issues workers have fought for in the past and/or fight for in the present.

Central to these demands is workplace safety. The United Steelworkers went on strike last week against the oil industry, in large part over workplace safety issues. Steelworkers president Leo Gerard:

In Anacortes, Wash., last week, approximately 200 Tesoro workers began picketing the oil refinery where an explosion incinerated seven of their co-workers five years earlier.

Butch Cleve walks that picket line, serving now as strike captain for the USW local union at Tesoro. On the day of the catastrophe in 2010, Cleve walked the coroner to the shrouded bodies of three of his friends.

Steve Garey, who helped make the decision to strike as a member of the USW’s oil bargaining policy committee, wept repeatedly that April day five years ago as he told the relatives of his dead friends that their loved ones would never come home.

Kim Nibarger, a USW health and safety specialist, suffered flashbacks of an earlier blast as he investigated the one at Tesoro. He was an operator in 1998 at the refinery adjacent to Tesoro in Anacortes when a massive detonation instantly cremated six of his co-workers.

The Tesoro strikers are among more than 5,000 USW members nationwide on unfair labor practice strikes demanding corporations respect their bargaining rights and the rights of workers and communities to safety.

Over the past two negotiation cycles, the USW’s 30,000 refinery and chemical workers struggled to persuade their highly profitable employers to include strong safety language in the collective bargaining agreements. The deaths at Tesoro, as well as fatalities, injuries, explosions, fires and toxic releases at other plants nationwide since then, demonstrate that the measures didn’t go far enough. Now refinery and chemical workers are trying to increase the odds that they aren’t killed at work and that their communities aren’t engulfed in flames or fumes.

No one cares more about workplace safety than unions. Sometimes, unions care more about workplace safety than the workers themselves, as at times work cultures develop that connect masculinity, tradition, and workplace danger in what can be a toxic combination that creates tensions between union safety officers and the rank and file. When unions and workers are on the same page though, it can create a powerful motivation for workplace action, including strikes. With the oil industry so dangerous, the need for action is very real. Hopefully, this strike and the bad publicity the oil industry so wants to avoid will force the companies to make concessions that make work safe.

End the Tipped Minimum Wage in New York

[ 36 ] February 9, 2015 |

I’m normally very skeptical of Facebook-status style online activism, but I do think there’s one circumstance in which that kind of activism really works: when you have a discrete policy decision on an otherwise technical and overlooked issue that can be influenced by public pressure. The recent victory on net neutrality is a good example of this phenomenon.

Now we have an opportunity to exert the same kind of influence on a policy decision that would make a real material difference in the lives of 229,000 low-wage workers.

New York State’s Acting Commissioner of Labor is considering whether or not to raise the tipped minimum wage to the statutory minimum wage, which would be a huge gain for working poor people in New York. So **please send the following email** to wageboard@labor.ny.gov:

Dear Acting Commissioner Musolino,

I write to ask that you issue a wage order that enacts recommendations A-D of the Wage Board and rejects recommendation E. In particular, the wage order should enact recommendation D and look for ways to eliminate the sub-minimum tipped wage.

While stopping short of full elimination, the recommendation to raise the tipped wage to $7.50 on Dec. 31, 2015 is a significant step forward that translates into increased housing stability, food security, and basic human dignity for a quarter million New Yorkers – anything less would be unconscionable. However, the unenforceable, unwieldy recommendation allowing employers to pay a lesser wage if employees reportedly meet a certain tipped threshold effectively brings the minimum back down to an extreme poverty wage and guts the proposed increase. It is irrational, without precedent nationally and undermines the Board’s other recommendations. It is nothing more than a subsidy to more profitable restaurant employers.

Additional wage board recommendations including merging the two existing tipped tiers into one, adding $1 for New York City tipped workers should legislators raise New York City’s minimum wage, and pursuing full elimination of the tipped wage are to be commended. Significantly raising the wage for tipped workers is long overdue.

The Acting Commissioner must make every effort to extend the full state minimum wage to tipped workers and raise wages for 229,000 servers and hospitality industry workers around the state, who are disproportionately women and who suffer from more than double the poverty rate of the workforce as a whole. Gov. Andrew Cuomo should support the commissioner in this. Full elimination of the sub-minimum tipped wage enjoys broad popular support, has been implemented with success in seven other states, and is the right thing to do for NY’s tipped wage earners.

Thank you for your consideration.

Sincerely,

NAME

(Hat tip to Renata Pumarol from New York Communities For Change for the information!)

What happens when you walk up to a frat bro and say, “Don’t be racist”?

[ 18 ] February 9, 2015 |

If you’re me and they’re like they are, they’d probably yell “KIKE!” and run away.

File under: Some days I really don’t miss teaching.

“But look at that hang-dog expression. He’s learned his lesson. Let’s get him a present!”

[ 36 ] February 9, 2015 |

Speaking of the fallacies inherent in paying attention to motives rather than results, much of the mainstream media’s ongoing ridiculous treatment of Paul Ryan is a classic case in point.  “I think it’s outrageous for Ryan to attack Obama on income inequality, given this extensive evidence that Ryan has devoted his entire political career to the massive upward redistribution of wealth.”    “But he did a Meet the Press interview at a bookstore, the kind that might be visited by pointy-headed, coffee-drinking urban liberals!”   Oh well, then.

It probably goes without saying that Weisman goes on to talk about all the bipartisan grand bargains Ryan might be able to get through Congress.  High Broderism never dies.

Lessons From Vaccine Trooferism

[ 76 ] February 9, 2015 |

A couple of really excellent comments in djw’s vaccines thread. First, from longtime friend of LGM gmack:

The phenomenon you point to also highlights the collapse of any faith in collective or social life. The anti-vaxxers conceive of their position purely as a private lifestyle choice. They want to make their child “pure” and “uncontaminated,” and their means of doing so is the practice of virtuous consumption. So we deal with the very many toxic dimensions of modern life not through any concerted action, but simply by buying “organic” or “chemical-free” products (and then, by not putting “artificial chemicals” in our children in the form of vaccines. The logic here is straightforwardly akin to the predominant corporate attitudes of our day: The anti-vaxxers are trying to privatize profit (their pure and uncontaminated child) and socialize the risk (the outbreak of an epidemic is someone else’s problem). Hence that doctor’s comment that he doesn’t care if his refusal to “put chemicals in his children” leads to the death of other children. So I want to leave aside, for a moment, the idiocy and anti-scientific dimension of the anti-vaxxer position; what’s also interesting (to me) is its refusal to entertain any notion of community, of the realization that things like immunity or a “chemical free environment” must be understood as a shared space that can only be the product of a social and collective activity.

Thatcher was a prophet, and not in a good way.

And second, from stepped pyramids:

To my eternal shame, my dad fell for that routine when fluoride was on the ballot here in Portland. In fact, my whole damn family other than me was opposed. These are otherwise fairly rational, intelligent left-liberals who would identify themselves as wanting policy to be driven by good science.

To be fair, none of them explicitly endorsed the “no CHEMICALS in my WATER” campaign. The arguments tended along the lines of “instead of spending all this money to make [murky, underdescribed industrial interests] profits, why don’t we spend it on universal dental care for children?” The fact that it was not an either-or choice, or that you can’t pay for universal dental care with the budget of a fluoridation program, did not sway any opinions.

There’s got to be a term for the phenomenon where people think they’re being perceptive and intelligent by asking “cui bono?” but are actually being foolish.

There’s actually very important good points here. The “presenting an irrelevant alternative” routine has been used to argue against progressive change for time out of mind. Although at least it wasn’t successful at the time, the attacks on the ACA from both left and center are a classic example of the fallacy — why pass the ACA instead of government-provided Cadillac health care plans for all/Democratic control of Congress in 2011 and 3% unemployment instead? The objection is not always irrelevant — sometimes there are real tradeoffs or questions of priorities. But the objection is pernicious when there’s no actual chance that if policy A is rejected allegedly superior policy B will be implemented, which is much more common.

The “cui bono” point is also a good one. Again, it’s not that it’s never a good question — there’s a lot of venality and self-dealing in politics, and it’s often important to understand it.  But it’s also true that people tend to place way too much emphasis on motives in politics. This frequently drove me crazy during the Iraq War. The most obvious example is the time Michael Moore wasted in Fahrenheit 9/11 with the silly crap about the pipeline. But that’s just an illustration; in general, Iraq War opponents tended to waste far too much time talking about Halliburton or Iraqi oil reserves. Obviously, there was a lot of cynicism and some self-interest among the proponents of the Iraq War. But, ultimately, it’s beside the point. The Iraq War was a horrible, horrible idea whether its proponents wanted to make money or sincerely believed that Iraq would be a conservertarian paradise if Saddam was deposed and/or that Saddam’s balsa wood drones of terror would unleash atomic doom on Salt Lake City if we didn’t invade. The Koch brothers don’t stand to realize any material gains when their groups stop states from expanding Medicaid, but the poor people who consequently die because of it will be just as dead as if every dime the of the rejected federal money went right into David Koch’s pockets.  (And, on the other side, even the Emancipation Proclamation and Civil Rights Act involved cold political calculation as well as high principle. Observing that a public official is not pure of motive is very rarely of any actual relevance to the merits.)

And at least Moore reached the right conclusion about the war. Sometimes, a misplaced cui bono (a cui boner?) causes you to make really stupid political judgments on the merits, as is the case here.

The NFL’s Systemic Homophobia

[ 25 ] February 9, 2015 |

There is no excuse other than homophobia for why Michael Sam is getting shut out of the NFL.

Owner of .200 Team Attacks Fan

[ 11 ] February 9, 2015 |

The “respectfully” is my favorite part.

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