The Case Against The SAT And The ACT

The pro bono law from Public Counsel, based in Los Angeles, plans to file a lawsuit against the University of California system for its mandated use of SAT and Act scores for purposes of admission.

California Governor Newsom acknowledged the SAT and ACT “exacerbates the inequities for underrepresented students, given that performance on these tests is highly correlated with race and parental income, and is not the best predictor for college success.”

Stated UC Berkeley Chancellor Carol Christ said of these test scores that they “really contribute to the inequities of our system.”

According to Mark Rosenbaum, Directing Attorney at Public Counsel, “Use of the SAT/ACT is not merely bad policy; it violates the California Constitution and anti-discrimination statutes, and is therefore legally and morally impermissible. Students should not have to endure the stress and expense of preparing for and taking the SAT, and the admissions process should no longer be contaminated by this discriminatory metric.”

I see these plaintiffs, and their supporters, and I raise them one. These scores ought to be prohibited outright, at least for public institutions of higher learning, and those in the private sector subsidized by the government. Our friends on the left might favor this extreme view on the ground that these tests discriminate against the poor and racial minorities (not Asians though). My argument is that they vitiate against the stupid and ignorant, and government has no business doing any such thing. Low information folk pay taxes, just like anyone else. Public libraries, museums, roadways, parks, recreation centers do not discriminate against those with low IQs. Why should colleges and universities engage in such a dastardly act?

What will be the effect on the incoming freshman class if these exams are not made optional but actually prohibited by law? They will at the outset be admitting students who not only “look like America” but, apart from their ages, roughly constitute the average American: some geniuses, others of mediocre intellectual talents, and some who occupy the left tail of the normal distribution in this regard. Boobus americanus, as Mencken would characterize them.

But will not the latter tend to fail out? No. the present intellectual atmosphere on college campuses vitiates against any such result. It would be discriminatory, that is, patently offensive to the wokesters now in charge of higher education. I go further. They should not be allowed to be given failing grades for, wait for it, they pay taxes just like anyone else. They ought to be allowed to partake in this educational benefit on a par with all other taxpayers. After all, we do not first allow Boobus to enter a public bus, train or trolley, a library, museum or playground, give them an exam while he is there, and then expel him for not answering questions correctly. Why should public university be any different?

This will of course spell the intellectual ruination of not only prestigious state universities such as UCLA, Berkeley, Indiana University, University of Michigan–Ann Arbor, University of Virginia, Georgia Institute of Technology, University of North Carolina–Chapel Hill, University of California–Santa Barbara, University of Florida. It will also do precisely that for high-status “private” schools such as Harvard, Yale, Princeton, Columbia, Stanford, etc., since they too are heavily subsidized courtesy of the long-suffering taxpayer. With the intellectually gifted forced to sit cheek-by-jowl next to those who can barely read, the level of instruction, if it is to be “inclusive” will be bound to plummet. This goes in spades for subsequent reputation.

But this is precisely the goal that ought to be embraced. There should be no such thing as public education in the first place. Anything that moves us in the direction of obliterating this evil institution, such as more intellectual “diversity” must be considered an asset not a debit.

What is the case against public education? The financing of it is coercive. People are compelled to pay for it, against their will. A synonym for coercive levies, not to be mentioned in polite society, of course, is downright theft.

The charge will be launched that without public or quasi public education, our country will be consigned to mediocrity at best, and outright illiteracy at worst. Not at all. There was no such institution until the early 1800s, and our nation did just fine in that regard.

The critics of the present modest proposal will cry out: external economies. These are spill over benefits from college. These will be radically reduces without the subsidies that only taxation makes possible.

But there are flaws in this criticism. Rothbard’s (1997, 178) reductio absurdum of public goods is as follows: “A and B often benefit, it is held, if they can force C into doing something. . . . [A]ny argument proclaiming the right and goodness of, say, three neighbors, who yearn to form a string quartet, forcing a fourth neighbor at bayonet point to learn and play the viola, is hardly deserving of sober comment.”

Another reductio ad absurdum of against this stance is that the government should subsidize soap, smiles, Bach, since all of them give off benefits to third parties. (The difficulty here is that this phenomenon is very subjective. The Walgreen Pharmacy in New Orleans plays Bach, loudly, in an attempt to discourage street people from camping out on its sidewalks and interfering with customer flow. This music thus constitutes a negative externality, or external diseconomy, to these people. Come to think of it, not everyone likes smiles or other people using soap either. The point is, we are at sea without a rudder here. Anyone can make any claim he wishes, and no one can say him nay.)

Then there is the argument that public education is not at all a positive externality, but rather a negative one. It is a very strong one. What with political correctness rampant on the campus, the preserve of wokesterism, it is perhaps no accident that Marxism (cultural and economic), socialism, communism are riding high in these environs. If this is not a negative for civilization and the preservation of the human race, then nothing is. These tendencies are fueled by feminist “studies,” black “studies,” queer “studies” and other grievance “studies. Using the “logic” of main stream market failure economics, higher education should be taxed, as a public menace, and heavily so, not subsidized to the ornate level which now prevails.

A basic difficulty with this externality market failure argument is that it is too much akin to nailing jelly to the proverbial tree. It can’t be done. How do we know, in the absence of voluntary market exchange, that expenditures of this sort are beneficial? When someone purchases a pair of shoes, we are entitled to deduce mutual benefit, at least in the ex ante sense. No such conclusion is possible to demonstrate in this field.

Early in his career, Milton Friedman supported public education on positive external economy grounds (neighborhood effects). He thought there were important spill over benefits enriching the overall society, that private educators would not incorporate into their decision-making. Hence, the need for educational subsidies, or public education. But as he grew older and wiser and more radical, he changed his mind on this matter. If even this moderate free enterpriser, this luke-warm supporter of economic freedom, can come out in favor of a separation between government and education, akin to separation of church and state, then those of us who take laissez-faire capitalism seriously, e.g., market fundamentalists, can certainly do so too.

The image shows, “Free Rural School,” by Alexander Ivanovich Morosov, painted in 1865.

Subsidiary And Free Enterprise

Subsidiarity is the Catholic social doctrine which recommends that whenever we face a problem, other things equal, the most decentralized institution we have at our disposal should be the one mobilized to solve it.

For example, if it is a choice between the national and the state government as to which should be brought to bear to address a challenge, and there are no other considerations, then we should rely on the latter, not the former. Similarly, we should favor in this regard the city over the state government, the borough rather than the city, the town instead of the borough, and the neighborhood association vis-à-vis the town.

Let us allow a major advocate of this doctrine to put it into his own words.

According to Pope Pius XI, in his 1931 encyclical Quadragesimo Anno: “Just as it is gravely wrong to take from individuals what they can accomplish by their own initiative and industry and give it to the community, so also it is an injustice and at the same time a grave evil and disturbance of right order to assign to a greater and higher association what lesser and subordinate organizations can do. For every social activity ought of its very nature to furnish help to the members of the body social, and never destroy and absorb them.” (emphasis added)

There are strong parallels between subsidiarity and the free enterprise system. We cannot of course equate the two, but the analogy is strong. Decision-makers such as entrepreneurs, business owners, workers, are subsidiary to government. If there is any clash between them, it is the state that prevails. The government taxes firms, not the other way around. Capitalists are regulated by public servants, not vice versa.

What is the case for preferring free enterprise to government other than subsidiarity? The market consists of nothing but voluntary trade, buying, selling, renting, lending, borrowing. In each and every case, assuming no anti market fraud, both participants necessarily gain at least ex antel and in the overwhelming number of cases, ex post, too. Consumers, under free enterprise, can exercise their dollar vote several times per day; but in the political system, even under full democracy, they can enter the ballot box only once ever several years.

Moreover, the people are constrained with a package deal in the latter case, but not the former; they cannot pick and choose policies except for referendums, as they can in the market. Thus, consumers have far more control over businesses than do voters over politicians.

The empirical evidence attesting to the benefits of the free market system vis-à-vis political regulation is overwhelming; there are several almost controlled experiments that demonstrate that: East and West Germany, North and South Korea, for example. The poorest countries tend to rely on socialism; the wealthiest, on capitalism.

Given the strong parallels between capitalism and subsidiarity, one would expect that advocates of the latter would look positively on the former. They are not quite as alike as the two proverbial “peas in a pod” but the resemblance is strong. But this expectation is erroneous. Supporters of subsidiarity are bitter opponents of the free enterprise system.

Consider the following:

“…all products and profits, save only enough to repair and renew capital, belong by very right to the workers….The easy gains that a market unrestricted by any law opens to everybody attracts large numbers to buying and selling goods, and they, their one aim being to make quick profits with the least expenditure of work, raise or lower prices by their uncontrolled business dealings so rapidly according to their own caprice and greed that they nullify the wisest forecasts of producers ” (Pope Pius XI, also in his 1931 encyclical, Quadragesimo Anno)

Continues this author: “… the right ordering of economic life cannot be left to a free competition of forces. For from this source, as from a poisoned spring, have originated and spread all the errors of individualist economic teaching. Destroying through forgetfulness or ignorance the social and moral character of economic life, it held that economic life must be considered and treated as altogether free from and independent of public authority, because in the market, i.e., in the free struggle of competitors, it would have a principle of self direction which governs it much more perfectly than would the intervention of any created intellect. But free competition, while justified and certainly useful provided it is kept within certain limits, clearly cannot direct economic life – a truth which the outcome of the application in practice of the tenets of this evil individualistic spirit has more than sufficiently demonstrated. Therefore, it is most necessary that economic life be again subjected to and governed by a true and effective directing principle.”

How are we to account for this bifurcation? It might well be that this devotee of Catholic social thought suffers from a hate capitalism syndrome, so deeply embedded that no amount of evidence, nor considerations of logic, can overcome it. He wants to support subsidiarity, which means allowing markets to run the economy. But he finds economic freedom objectionable. He wants to have his cake, subsidiarity and hence laissez faire capitalism, and eat it too, support government control of the economy. He does not see the tension in this position, not to say logical contradiction.

The middle name of “free enterprise” is practically “subsidiarity.” No, “free subsidiarity enterprise” does not roll off the tongue all that easily, but that is only, perhaps, because we are not used to it. From a substantive point of view, it is just about a tautology.

If they want to be coherent, the proponents of Catholic social thought are logically obligated to favor capitalism, not condemn it. I’m not going to hold my breath until that happy day comes around. On the other hand, miracles sometimes occur!

Walter E. Block is Harold E. Wirth Endowed Chair and Professor of Economics, College of Business, Loyola University New Orleans, and senior fellow at the Mises Institute. He earned his PhD in economics at Columbia University in 1972. He has taught at Rutgers, SUNY Stony Brook, Baruch CUNY, Holy Cross and the University of Central Arkansas. He is the author of more than 600 refereed articles in professional journals, two dozen books, and thousands of op eds (including the New York Times, the Wall Street Journal and numerous others). He lectures widely on college campuses, delivers seminars around the world and appears regularly on television and radio shows. He is the Schlarbaum Laureate, Mises Institute, 2011; and has won the Loyola University Research Award (2005, 2008) and the Mises Institute’s Rothbard Medal of Freedom, 2005; and the Dux Academicus award, Loyola University, 2007. Prof. Block counts among his friends Ron Paul and Murray Rothbard. He was converted to libertarianism by Ayn Rand. Block is old enough to have played chess with Friedrich Hayek and once met Ludwig von Mises, and shook his hand. Block has never washed that hand since. So, if you shake his hand (it’s pretty dirty, but what the heck) you channel Mises.

The image shows, “Vegetable Market in Venice,” By Camillo Bortoluzzi, painted in 1894.

Privatize The Highways

There were problems with highway closures at both ends of Canada. The crisis is over for now, but perhaps we can learn something from this difficulty. Indeed, it will occur again.

Things were so bad in Newfoundland that military troops had to be brought in to engage in blizzard cleanup. Part of this effort was devoted to road clearance.

What is going on at the other end of Canada? A few days ago, there were highway closures in relatively balmy British Columbia. In the Lower Mainland parts of Highway One were covered with sheets of black ice. There were more accidents than you can shake a stick at, particularly in the section of this major roadway between Chilliwack and Abbotsford, B.C.

What was the word from the B.C. Ministry of Transportation? There were lots of excuses, good ones, but gridlock, slowdowns, jack-knifed trucks and fender benders were the order of the day.

According to Ministry of Transportation South Coast regional director Ashok Bhatti: “We are using calcium chloride and a combination of techniques, but it has been challenging … We are hitting it with everything we’ve got.”

He continued: Work has been done overnight, but to no avail. With temperatures below -15C and winds that blow salt and sand off the road, no solution was in the offing.

In the event, safety and transportation were restored when the temperatures rose, and, thanks to the rain, the ice, snow and slush were swept away.

Notice what is missing here? There was no vestige of competition. The presumption of the Ministry was that they were in charge, there was no possible other option, they were doing their best to rectify the situation.

Other firms in other industries, too, face difficult tasks. This occurs all throughout the warp and woof of the economy. Sometimes failure occurs elsewhere as well. But, in the private sector, there is always a “fail-safe” mechanism undergirding the entire process: competition. If a given firm faltered, there would be others anxious and eager to take its place. Moreover, different companies could try alternative strategies. If one of them worked, others could follow suit.

But not on the nation’s highways. There, monopoly, central planning, was the only possibility.

What might have been done had competition been allowed. That is, if there were privately owned highways?

One possibility would be the “conga line:” a long line of specially fitted tractors, one after the other, brushing away the ice. This is the technique utilized at some airports. These vehicles travel at a snail’s pace, but at least roadway connections could remain open. “Slow but sure” is perhaps better than nothing at all. If need be, it would not be beyond the scope of private enterprise to use actual military style tanks as snow plows.

Another is to place metal that can be heated just below the concrete of the roadway. People with sloped driveways use this method of melting the snow and ice. The difficulty here is that this is a tremendously expensive option. Costs could be reduced by treating only one lane in this manner instead of all three, but, even so, the expenses would be vast. Would it be worthwhile to maintain automobile travel and reduce accidents? This is something only the free marketplace can answer. This is at basis an entrepreneurial matter.

Are There Other Options?

It is difficult for a mere economist to anticipate the market. If shoes had always been the province of government, and a wild and crazy free enterprise economist had advocated privatization, the objections would come thick and fast. How would resources be allocated between sneakers, slippers, boots and other kinds of footwear? Where would shoe stores be located? How many of them would there be? Who would supply shoe laces?

In the event the market addresses all these difficulties, these are non-problems. And so would it be in the case of roads. Yes, highways are long thin things. People think their provision must necessarily fall to the government. But railroads exhibit similar geographical elements. Privatization in that realm is not unknown.

There are perhaps more important reasons for engaging in this process than black ice. In Canada, some 4,000 people perish each year in motor vehicle accidents. Competition between road owners, as in the case of every other good and service known to man, would undoubtedly lead to improvements in this regard too. Fatalities are not at all the product of drunken driving, speed, vehicle malfunction, driver inattention; those are only proximate causes.

The ultimate cause is the inability of the road managers to deal with these challenges. How could they do so? This can only be speculative, as in the case of shoes, but, perhaps private highway owners could address not velocity, but its variance. Instead of minima and maxima speed limits for the entire highway, do so for each lane.

For example, 120 kilometers in the left lane, 100 in the middle, and 80 on the right. Would this reduce traffic fatalities. Hard to tell. The problem is, such experiments are not now undertaken. They would be, under free enterprise.

Walter E. Block is Harold E. Wirth Endowed Chair and Professor of Economics, College of Business, Loyola University New Orleans, and senior fellow at the Mises Institute. He earned his PhD in economics at Columbia University in 1972. He has taught at Rutgers, SUNY Stony Brook, Baruch CUNY, Holy Cross and the University of Central Arkansas. He is the author of more than 600 refereed articles in professional journals, two dozen books, and thousands of op eds (including the New York Times, the Wall Street Journal and numerous others). He lectures widely on college campuses, delivers seminars around the world and appears regularly on television and radio shows. He is the Schlarbaum Laureate, Mises Institute, 2011; and has won the Loyola University Research Award (2005, 2008) and the Mises Institute’s Rothbard Medal of Freedom, 2005; and the Dux Academicus award, Loyola University, 2007. Prof. Block counts among his friends Ron Paul and Murray Rothbard. He was converted to libertarianism by Ayn Rand. Block is old enough to have played chess with Friedrich Hayek and once met Ludwig von Mises, and shook his hand. Block has never washed that hand since. So, if you shake his hand (it’s pretty dirty, but what the heck) you channel Mises.

The image shows, “A Cart on the Snowy Road at Honfleur,” by Claude Monet, painted 1865 or 1867.

Labor Unions

I.

Do labor unions raise wages in the private sector? In order to answer this question, we must first ask what determines wage rates in the first place. Why is it that movie stars earn a ton of money, a college professor garners a middle class salary and the person who asks “Do you want fries with that?” takes home a more modest remuneration.

The answer in technical terms is discounted marginal revenue product. In verbiage more suitable for a family newspaper, it is: productivity. Why does the employer want to have the employee on his payroll? Simple; because in that way his revenue will increase. Suppose a person, call him Joe, can add to the bottom line of the firm at the rate of $20 per hour.

The company might initially offer him an hourly wage of $12, but this cannot long endure. At that rate a profit of $8 will be earned on Joe’s labor. Some other company will offer Joe $8.01, another $8.02, and a third $8.03. You see where we’re going with this.

Eventually his wage will end up exactly equal to his productivity, if we abstract from the costs of finding him, interviewing him, testing him, and other such transactions costs. Nor need the impetus arise only from the perspective of the hirer. Joe himself can look for other jobs, and his pay scale can also rise from that direction. Nor can his wage long remain above his productivity level. At $30, if there are enough Joes, and they are kept on the shop floor for long enough, bankruptcy will eventually ensue.

So, the question of whether labor unions can boost pay packets comes down to one of, do these organizations raise, lower or leave productivity levels unchanged. When put in this manner it is difficult to see how they can do anything other than lower productivity.

Even if they do not strike, their mere existence is costly. Organizing numbers of people so as to act together is not a free good. Then, when we add in all sorts of labor union activities such as slow downs, job reservations, intra-union squabbles, sign-up activities, elections, law suits, work to rule, collective bargaining, leaders’ salaries, beating up scabs, establishing picket lines, publicity, secondary strikes, boycotts, lobbying congress, etc. These may all strengthen unions, but they lower member productivity, and hence wages.

The point we are making is not that unions cannot raise the wages of all workers. It is, rather, that they cannot even boost their own pay, at least not in the long run. Yes, to be sure, it cannot be denied, that in the short run, based upon violence and the threat thereof, the pay scales of the rank and file can indeed rise.

But, if they exceed marginal revenue productivity, which has been decreasing thanks to their activities, their employers will be rendered bankrupt. It is no accident that Detroit is an economic basket case; these types of organizations were very powerful in the automobile industry. Nor should it occasion any surprise that the entire “rust belt” came into being as a result of unions catapulting compensation above productivity levels.

Unions comprised 33% of the labor force in 1955, and were down to single digits in the private sector by the 21st century. Wages rose markedly during that period. If organized labor were really responsible for this increase in worker well-being, it is more than passing curious it occurred during the time this institution was on the descendancy.

II.

Why are labor unions falling on such hard times (except in government employment)?

Union membership in the private sector was 6.2% in 2019, the lowest level since 1910. It is nowadays one fifth that of public sector workers, who have jumped to 33.6%. In 1954, the apex of organized labor, 34.8% of the private labor force were part of the rank and file.

Several hypotheses have been put forth to explain this radical reduction.

We are now much wealthier that we were in the 1950s. Unions are needed only for the poor, to help lift them up out of poverty. That is why MicroSoft, Apple, IBM and their ilk have not been organized; they don’t need this institution, since they already have high pay. But players in major league baseball, the NBA, the NFL, earn more than these high tech nerds, and they are unionized. There might be some explanatory power here, but maybe not all that much.

Here is another. Organized labor has been afflicted by corruption, mobster infiltration. The award winning movie, The Irishman, encapsulates this charge in dramatic fashion. But this has always been roughly true, all throughout labor union history. It is difficult, then, to see this as an accurate account for the rise and then fall of this institution.

Union leaders are invariably supporters of the Democratic party. Once upon a time that was also true of the vast majority of the membership. But it no longer holds. The rank and file in the age of Trump have to a significant degree embraced the Republican party. This might account, at least somewhat, for lessened support of the organized labor movement.

The government has to a significant degree taken over the role played by unions in the past: promoting healthcare, pensions, etc. To the extent this is true, it might well at least partially explain the lessened interest in unionism.

Then there is the fact that labor has in the last little while been allocated away from customary union strengths: manufacturing, construction. It has flowed in the direction of restaurants, hotels, computers, healthcare, which traditionally, and also at present, were and are not now heavily unionized. A not unreasonable explanation, albeit a partial one at best. For it leaves open the question as to why these other zones of the economy have been so resistant to the blandishments of unionism.

Here is yet another entry into this sweepstakes. Before the Supreme Court’s Janus decision, non union members were required to pay so-called “agency fees” to organized labor. Why? It was thought that their wage increases were due to union activity, and that they were thus “free riders” on the efforts of that organization.

But the Janus finding put paid to all of that. It cited the first amendment, claiming that the free speech rights of the so-called beneficiaries were being violated by compelling them to pay their hard earned money against their will to this group of people.

Indeed, the entire pre-Janus justification was dead from the neck up. First of all, wages are determined by productivity, not union threats. Second, even if A benefits from the acts of B does not justify B compelling A to pay him for them. I smile, take a shower once in a while, wear nice clothes, all of which (I claim), inure to your benefit. Yet if I sued you for these costs, I would be properly laughed out of court.

Several of these elucidations are at least partially correct, but none of them, even all together, can paint a complete picture. Here is another consideration to add to the mix. Wages are determined, ultimately, by labor productivity, and unions, with their strikes, work stoppages, internecine battles, downing tools in “sympathy” with their brethren, lower productivity compared to the level that would otherwise have obtained.

Unions are thus akin to a tapeworm, sucking the life out of an otherwise viable company. Detroit, anyone? Once upon the time this was a reasonably viable city. But the unions kept escalating their salary package demands, which choked off the profits of the automobile firms. Several of them headed south, and many of the others are now a shadow of their former selves.

The reason Lebron James earns a stupendous salary has nothing to do with unionism; ditto for your present author taking home more modest remuneration, nor for the guy who asks you “do you want fries with that,” at a still lower level. No, compensation is determined by how much each of us adds to the bottom line.

Wages are set by productivity levels, and unions lower, not raise them. This might be difficult to see, since many members of organized labor are paid generously. But that is despite union activity, not because of it. Without the “help” of this organization, their productivity would be higher, and so would their pay.

Walter E. Block is Harold E. Wirth Endowed Chair and Professor of Economics, College of Business, Loyola University New Orleans, and senior fellow at the Mises Institute. He earned his PhD in economics at Columbia University in 1972. He has taught at Rutgers, SUNY Stony Brook, Baruch CUNY, Holy Cross and the University of Central Arkansas. He is the author of more than 600 refereed articles in professional journals, two dozen books, and thousands of op eds (including the New York Times, the Wall Street Journal and numerous others). He lectures widely on college campuses, delivers seminars around the world and appears regularly on television and radio shows. He is the Schlarbaum Laureate, Mises Institute, 2011; and has won the Loyola University Research Award (2005, 2008) and the Mises Institute’s Rothbard Medal of Freedom, 2005; and the Dux Academicus award, Loyola University, 2007. Prof. Block counts among his friends Ron Paul and Murray Rothbard. He was converted to libertarianism by Ayn Rand. Block is old enough to have played chess with Friedrich Hayek and once met Ludwig von Mises, and shook his hand. Block has never washed that hand since. So, if you shake his hand (it’s pretty dirty, but what the heck) you channel Mises.

The image shows, “Vote American Labor Party Roosevelt and Lehman,” a poster by the ALP for the Presidential Election, 1936.