The Relative Returns to Higher Education

The value and importance of higher education depends on its returns relative to the investment market. The inflationary, low interest rate regime of the past quarter century has increased returns to investment in stock and real estate markets and diminished returns to education. Monetary policy has done so because inflation reduces the present value of future earnings from labor. Real wages have increased slowly while the stock market valuation has increased rapidly. That is, low interest rates increase the value of stock and real estate investments but reduce the present value of future earnings. A prospective student who invested in the stock market instead of education during the post World War II era probably would have made the right financial decision. (He or she would have made the right intellectual decision as well.) Because inflation reduces the present value of future earnings but increases returns on stock and real estate, financially smart families invest in stocks rather than in education. Intellectually smart families home school. But the mania for higher education exploded at the very time the financial (and intellectual) value of higher education was diminished. It is a case of "buying at the top".

The NewsMediaJournal and JB Williams Are Right

Larwyn just forwarded an excellent post from JB Williams of NewsMediaJournal.US about the importance of supporting John McCain this year. The table in Williams's article is excellent and says it all. See Williams's article here.

Obama and Clinton Vie to Impoverish America

There is little question of the comparative advantage of free trade. While specific jobs or professions may be lost or gained due to trade, the net advantage is necessarily positive. Were it not so, the trade would not occur. Two centuries ago the classical economists such as Ricardo and Smith showed that relative price differences among countries create opportunities. If every country focuses on the economic activities at which it is best, the world becomes more productive. Over the long term the higher productivity is translated into higher wages and wealth. In contrast, the arguments that oppose trade are nationalistic and emotional.

At the extreme, countries like North Korea or the communist countries of the immediate post-World War II era that have attempted economic self-sufficiency or autarky have become impoverished. Likewise, countries with substantial protectionism such as India experience high levels of starvation. India, with six decades of protectionism and a high level of income equality leads the world in child starvation. Similarly, the British Corn Laws in the 19th century led to mass starvation in Ireland (with over one million dead). The argument against free trade is the argument for public impoverishment.

It is not surprising that Barack Obama and Hillary Clinton, two economic illiterates, compete to proclaim their opposition to free trade. Yahoo! reports that Obama questions Clinton's anti-free trade credentials. With economic illiteracy among the public, shoddy education, an ignorant mass media and a corrupt Congress, our government aims to impoverish the average American:

PITTSBURGH - Democratic Sen. Barack Obama on Monday questioned rival Sen. Hillary Rodham Clinton's opposition to free trade agreements that some voters contend has eliminated thousands of U.S. jobs and mocked her weekend visit to an Indiana bar as pandering to the working class.

Repeal the Federal Income Tax

April 15 is nearly upon us. Those who pay taxes might consider the low quality of government services and the high amount of federal tax that they pay. On balance, the income tax destroys savings and personal independence, while the uses to which Congress has put the money are of scant value. The income tax should be repealed. I have written the follwing letter to my Congressman, Maurice Hinchey:

April 14, 2008

Dear Congressman Hinchey:

I urge Congress to repeal the federal income tax. Congress has not proven itself intellectually or morally fit to take possession of so large a share of the American purse. I urge you to return the money to the American people, except for a small amount that Congress might devote to its own education by taking basic economics and ethics courses.

Sincerely,


Mitchell Langbert, Ph.D.