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*Opinions expressed here may or may not reflect the views of the Fernley Republican Women. Blog posts should not be considered an endorsement from the FRW.

RIP, Sheldon Adelson; Prayers for Dr. Miriam Adelson

1/12/2021

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​A truly Distinguished Nevadan, great American and all-around Mensch, Sheldon Adelson, died Tuesday.  This self-made fabulously wealthy entrepreneur, businessman, philanthropist, and political and communications force of nature was also a great human being who will be hugely missed.
In this hour, we send condolences and prayers to his wife, Dr. Miriam Adelson, and family and friends.
Many people know some aspects of his remarkable life, but only some.  Born into a one-room Boston tenement in 1933 to a Lithuanian-Ukrainian cab driver and knitting-shop owner daughter of a Welsh coal miner, Sheldon became the third-richest person in America in 2007.  Following some ups and downs, he left a fortune of $33.5-billion, plus a vast legacy of gifts to many good causes.
At 12, he began his career by borrowing $200 from his uncle to buy a license to sell newspapers on street corners.  He went on to create nearly 50 other businesses in his life.  He attended college but dropped out and attended trade school, hoping unsuccessfully to become a court reporter, before joining the army.  By his thirties, via entrepreneurial ventures, he had twice built and lost million-dollar fortunes.  Later, he lost $25-billion and recovered that.
In the 1970s and 1980s, he also adopted and cared for the three children of his first wife.
He didn’t invent trade shows, but he and partners bought the fledgling COMDEX computer industry shows in the late 1970s.  Sheldon’s vision and creativity built it into one of the largest trade shows in the world in the next two decades – and remade the resort and casino industry into its modern form.
Previously, the casino business overwhelmingly concentrated on the gaming floor, with cheap accommodations and food.  Besides pioneering trade shows to diversify the business and upgrade the eats and accommodations to world-class levels, he also recognized the tourist business could be much more than merely gaming.
Honeymooning in Venice in 1991 with his second wife Miriam, he envisioned the mega-resort hotel and casino.  He added exotic shopping, entertainment and recreation to lavish rooms and food to set off the Las Vegas explosion that made him and many others very wealthy.  The first such property, the magnificent Venetian, opened in 1999.
Soon, he realized the model of bringing tens of millions of visitors annually to Las Vegas was insufficient, and he led the industry to the People’s Republic of China, opening the 1,000,000 square-foot Sands Macao in 2004.  It multiplied his fortune by a factor of fourteen, and he built many more from there.  Today, Macau’s industry dwarfs Las Vegas’s.
In 2010, he opened the $5.5-billion Marina Bay Sands in Singapore, the sixth-most expensive building in the world.  It has the greatest amenities of any such building and was featured extensively in the 2018 mega-film Crazy Rich Asians.
But here’s what’s important about all this.  In 2008, the Nevada Policy Research Institute gave him its Chairman’s Award for efforts to advance free market principles in Nevada.  Before 1996, he was a Democrat, but since then has been a free markets and Republican stalwart.
In 2010, as a Regent, I nominated him and Miriam for the Distinguished Nevadan award from our system of higher education.  Why?
In bestowing the award, I emphasized that the money he had made in business and investment only reflected the even bigger value he bestowed upon customers, his 100,000-plus employees and legions of investors, as well as Las Vegas and Nevada.  When people talk abut giving back, they miss the fact that fearless entrepreneurs like Sheldon become wealthy by the great value they deliver to others via their creativity, investment, vision and guts.
In 2014, he was named to CNBC’s list of 200 people who transformed business in the previous 25 years: “top leaders, icons and rebels, a definitive list of people who have had the greatest influence, sparked the biggest changes and caused the most disruption in business.”
There’s so much more to tell.  He has been a major force in philanthropy, newspaper publishing, diplomacy and politics in America, Israel and the world.
But his humanity showed perhaps brightest when the Coronavirus pandemic hit.  He’s kept the ten-of-thousands of Southern Nevadans he employs on payroll and covered by health insurance.
Ron Knecht, MS. JD & PE(CA), has served Nevadans as state controller, a higher education regent, economist, college teacher and legislator.  Contact him at RonKnecht@aol.com .
Ron Knecht

775-882-2935
775-220-6128
 
www.RonKnecht.net
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Response to Jim Schnieder’s Way to Welcome 2021

1/5/2021

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Jim Schnieder of Sparks writes occasional opinion columns in the Reno Gazette Journal.  I called him to discuss his recent opus, which offered three ways for Nevada to welcome 2021.  After a pleasant, constructive conversation, here’s my rebuttal.
Schnieder’s first recommendation is that we, “[f]ormulate and apply the least harmful taxes.”  My interest in this subject began in 1989 when I took the public finance and taxation courses in Stanford’s economics department while in graduate school.  For over 30 years, I’ve kept up with empirical academic literature on this subject, used it in my public service and written about it.
His concern is that state and local governments need money – more money now due to the Corona virus and related lockdowns – for education, law enforcement, public health agencies and municipal transportation.  He adds, “There needs to be a mindset that when needed, equitably apportioned taxes are good.”
His proposal raises two separate points.  First, are new taxes needed and appropriate now?  Second, if they were, what are the least harmful taxes?
There’s no doubt the virus and especially the lockdowns have increased public spending needs relative to what they were a year ago.  However, there are offsetting factors, and my conclusion is now is exactly the time not to increase taxes.
Schnieder is candid that he has not weighed the damage the virus and lockdowns have caused to Nevada families and businesses, plus the further damage tax increases would add, against the good new public revenues could do.  The damage so far has been by far the worst hit to our families and businesses since the Great Depression of the 1930s.
Following the Great Recession of 2008-09, even Brian Sandoval running for governor in 2010 agreed the hit they suffered then made the case against new taxes at that time.  Things are much worse now, and even if one thought our overall tax levels are not high enough – a view with which I greatly disagree – now would not be the time.
Here’s the key point.  As discussed at length in the four Controller’s Annual Reports I authored for 2015-18, “The size, scope and reach of American government – including spending, taxing borrowing, statutory mandates, regulation, monetary and credit-allocation policy, and other intervention – long ago exceeded levels that promote the public interest in maximum economic growth and fairness.”
I added, “These excesses at federal, state and local levels have increasingly slowed growth and diminished fairness and will continue to do so unless they are reined in.”
In assessing the optimal level of public spending, I relied not only on my long familiarity with the subject but also a confirming review of the literature by some scholars at the University of Nevada, Reno.  The optimal total tax burden on our economy is 17 percent to 26 percent, but the actual level has now passed 40 percent and continues to rise.
Instead of increasing taxes and borrowing for more public spending, we should be realizing economies in total spending like those regularly achieved by the private sector, and thereby bringing down public spending and borrowing relative to our economy.
In the 21st Century, Nevada’s real state spending on health and human services has skyrocketed (aided greatly by federal grants) and that for K-12 has also risen hugely.  All other state spending and the real per-person incomes of families and businesses have fallen significantly.
Also, the crushing burden of lockdowns has fallen heaviest on low-income folks.  Which brings up his concern for the least fortunate among us, where he advocates progressive taxes as a solution.
First, his view seems to overlook that government has long made huge income transfers to the poor, in addition to subsidizing their health care, schooling, diets, etc.  And it has already greatly increased these benefits in response to the virus and lockdowns.  People still cry out in need, but the fact is America has always responded generously and even more so in 2020.
Real fairness consists in lowering the overall tax and other public sector burdens to let productive folks keep the fruits of their labor, investment, creativity and productivity – and thereby grow the economy for the benefit of all.
Government growth exacerbates the problem; it’s not the solution.
Ron Knecht, MS, JD & PE(CA), has served Nevadans as state controller, a higher education regent, economist, college teacher and legislator.  Contact him at RonKnecht@aol.com. 
Ron Knecht

775-882-2935
775-220-6128
 
www.RonKnecht.net
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My Big Picture View of Policy, Economy & Politics

12/29/2020

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​I hope you enjoy and share this.  Constructive criticsm always welcome. -- RK


My Big Picture View of Policy, Economy & Politics
By Ron Knecht – 29December2020
Recently, I spoke to the Carson City Men’s luncheon group about my big picture view of public policy, economics and politics.  Herewith, some things I told them.
Let’s start with the duty (beyond integrity, etc.) of elected officials and high-level bureaucrats – something most of them get wrong.  Their duty is to represent the people and the broad public interest to the agencies of government.  That is, to control the agencies and whole of government to serve the people’s interests and the broad public interest.
Not, as most politicians and bureaucrats do, to represent and advocate for government and its agencies to the people, often at the expense of the broad public interest.
For example, too many school board members and superintendents are consumed with telling the people endlessly the district needs more tax revenues and special-interest legislation.  That benefits mainly teacher and administrator unions, whose political captives they’ve become.  Instead, they should spend their time and energy seeking to incorporate cost-reducing technologies and business-model innovations to serve the interests of students and the people.
Also, some local planning departments serve as advocates for new infrastructure, business subsidies or proposed developments.  Thus, they become agents for crony capitalists seeking money, special privileges, or both from local governments.
While we need to rein in regulatory over-reach and tax and fee burdens on business, the people and public interest are not served by using special favors to offset government excess.  These departments need to be more focused on the public interest and objective analysis.
All this begs the question: What is the public interest?  That question has been central to my work as a state economist, controller, legislator, regent and college teacher.  Even as a writer.
From all my experience, I conclude there are two main elements to the public interest: economic growth and fairness among parties.
Increasing economic growth means we maximize the size of the pie.  That allows us to take better care of folks who, through no fault of their own, cannot adequately care for themselves.  It means we have greater overall wealth and incomes via both more effective private markets and improved public services.  Better education, diets, health care and human flourishing in general.
Our measures of economic provision – primarily gross domestic product – are, of course, imperfect, albeit improving.  Until someone devises a better measure for aggregate human wellbeing, maximizing economic growth seems self-evidently a key public interest.
Fairness comes in many forms, including civil and criminal laws and regulations to minimize conflicts and establish equity among individuals.  To keep one person’s free actions or choices from harming others.
In economic matters, I submit the institutions, principals and policies that promote growth also are the essence of fairness.  Foremost among these is that our primarily market economy and political system allows people to keep most of the fruits of their labor, creativity, investment, and productivity.
Market systems are fair because they reward people for the value they deliver to others, whether by labor, creativity or investment.  Mandating equal outcomes for everyone is simply not fair.
It’s certainly true public services and goods play a role with private inputs in creating the value firms and people deliver.  However, this does not mean, as Barack Obama claimed, that “You didn’t build that.”  Overwhelmingly, the value delivered to people by a mixed economy comes from the private sector.
Essentially, contributions of the public sector justify its role in spending, taxation, fees, borrowing, law and regulation.  However, extensive empirical research has shown that the optimal levels of public spending and other intervention are far lower than actual levels have been for over half a century.  In short, we would have higher degrees of aggregate human wellbeing and fairness with a smaller public sector at all levels.
The sum of human experience has shown the following items are central to economic growth and fairness: the rule of law (not “living constitution” judges or the administrative state); constitutionally limited government; and separation of powers between national, regional and local governments.
Also, separation of functional powers (legislative, executive and judicial) at each level; individual sovereignty and personal liberty; individual rights, not group rights and identity politics; strong property rights; and high levels of economic freedom.
Ron Knecht, MS, JD & PE(CA), has served Nevadans as state controller, a higher education regent, economist, college teacher and legislator.  Contact him at RonKnecht@aol.com.
Ron Knecht

775-882-2935
775-220-6128
 
www.RonKnecht.net
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Christmas Memories Through the Years

12/22/2020

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​The Perfect Wife and Awesome Daughter urged me to write a Christmas memories column.  Most of mine are unexceptional, but maybe these items can bring some cheer to end an otherwise dreary year.
In my first Christmas memory, I was seven years old.  I got a felt cowboy hat, two-holster gun belt and twin cap pistols.  Cowboys were the big thing then for little boys, and I was in Hopalong Cassidy/Wild Bill Elliot/Lone Ranger heaven.
One of my uncles who had a churlish streak – most of them did – spent the evening challenging me to quick-draw contests and winning all of them.  I was pretty frustrated, but learned the lesson that The Establishment always wins, even if it has to cheat.  He was, after all, merely raising his index-finger and saying “bang” while I had to get my pistol out of my holster, aim and fire. 
A seven-year-old boy today who brought his cap-guns to school would be suspended or expelled and would get his parents in trouble.  Social change isn’t always progress.
A few years later, my brother and I got matching Schwinn 26-inch bikes with baskets.  This was also heaven, because we were now mobile, a fact that changed our lives greatly for the better.  It was a marvelous act of generosity by our parents who could not really afford such extravagances.  Thanks, Mom and Dad, for blessing us this way, as well as many others.
And I’m sorry that a few years later we painted those beautiful metallic red bikes a hideous dark dull green.  However, we both learned our first lessons about things mechanical.
Later, my parents splurged again, getting me the top-of-the-line transistor radio I desperately wanted.  It was the size of a small pack of cigarettes and made a boy of twelve feel cool to have in his front pocket.  It was high quality and ushered me into the modern era of communications and rock-and-roll before disappearing into the mists of time.
A year and a half ago, my brother brought out its original box with the radio, accoutrements and instructions all packed neatly as new, but now quite weathered by time.  It no longer works, but is a treasured memento.  Thank you, Tom.
Kids get Christmas gifts.  In high school, college and young adulthood, people cultivate and remember experiences as gifts.  And emphasis moves from receiving to giving.
In college, I took my first plane ride with a girlfriend and went skiing for the first time.  Later, another girlfriend got an annual gift from me of a poinsettia in Atlanta.  She said Christmas couldn’t begin at their home until my poinsettia arrived.
I had an MG-B in my twenties and took my little sister and brother skiing a few Christmases.  Lisa sat in front.  Brent was stuffed into the back compartment above the batteries; sorry.
Also in those days, as I drove three hours from Urbana to Belleville for Christmas, I would think about what I had achieved that year and how much better it had been than previous years.  And where I was going in life.  I was becoming an adult.
My other sister lived a few miles out of town and had a horse she let me ride a few Christmas mornings through the farms, woods and hills.  In two inches of snow and alone with my thoughts and dreams, those were some of the best hours of my life.  Thank you, sister Kathy.
In San Francisco in my thirties and forties, I made Christmas dinner for eight and then took everyone to the center box for the SF Ballet’s Nutcracker.  One year, the Ballet shifted the start time from eight o’clock to seven.  We got there at intermission.  My regrets to the Agnews and Kathy and her parents, especially because I had told everyone how great the first half would be.
In those days, we also spent some holidays travelling.  And skiing in the Sierra, especially because the traffic on the slopes was very light Christmas morning.
Since moving to Nevada, our Christmas kick-off has been family and friends watching It’s A Wonderful Life, one of my favorite films.  Tonight’s joy for Kathy, Karyn and me.
Merry Christmas to you.
Ron Knecht, MS, JD & PE(CA) has served Nevadans as state controller, a higher education regent, economist, college teacher and legislator.  Contact him at RonKnecht@aol.com.
Ron Knecht

775-882-2935
775-220-6128
 
www.RonKnecht.net
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A Day That Will Live in Infamy: The Rest of the Story

12/8/2020

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​In my last column, I said I’d complete my series on higher education this week.  But with Monday being December 7, the 79th anniversary of the “day that will live in infamy” – Japan’s attack on Pearl Harbor – and this column being written Tuesday for publication Wednesday and Thursday, I’m postponing that piece to next week.
The horrible Pearl Harbor attack was followed by many heroic actions.  I want to recall two of them.  As legendary radio and newspaper columnist Paul Harvey said: The rest of the story.
Bob Feller was an Iowa farm boy who, by legend, could throw a baseball through a brick wall.  At 17, “Rapid Robert” broke into professional baseball in 1936 with the Cleveland Indians, becoming an instant star.  In his first start, he struck out the first three batters and 15 batters total.  That strikeout record for a first start still stands today.  Three weeks later he tied the then major league record with 17 strikeouts in a game.
His amazing first year made him “the best-known young person in America, with the possible exception of Shirley Temple,” said one sportswriter.  By 1939, he was the best pitcher in baseball and fans, especially children seeking autographs, swooned.  On opening day 1940, he pitched his first of four no-hitters, the only such opening-day feat ever.
In 1941, Life magazine wrote, “he is unquestionably the idol of several generations of Americans, ranging in age from 7 to 70.”  The best hitters of the 1940s and 1950s anointed him the best hurler of his era.  Ted Williams: “the fastest and best pitcher I ever saw.”  Stan Musial: “probably the greatest pitcher of our era.”
On December 8, 1941, Feller drove to Chicago after visiting his terminally ill father in Des Moines.  On his car radio, as he drove there to sign a new contract with the Indians, he heard about the Japanese attack.  Two days later, he volunteered for the Navy, becoming the first professional athlete to enlist, according to Wikipedia.  America loved him.
“I told them I wanted to … get into combat; wanted to do something besides standing around handing out balls and bats,” he said.  On the USS Alabama, he saw extensive action in the Atlantic and Pacific theaters, mustering out in 1945 as a Chief Petty Officer.
He completed one of the greatest pitching careers ever in 1956.  During his career, he did much barnstorming with Negro League players to show how good they were.  He also advocated for major league players’ rights against management.
Ted Williams was born in San Diego in 1918, two months before Feller.  After being a minor league phenom, he made his major league debut in 1939 with the best rookie hitting season up to that time.  As with Feller, things only got better from there.
In 1941, he batted .406, the highest since 1924, and the last time anyone topped .400.  Many people consider his 1941 season the best ever – even better than Babe Ruth’s top years in 1921 and 1927.  Some people even say “The Splendid Splinter’s” career hitting was better than the Babe’s, which “The Kid” denied.
But Williams became as unpopular as Feller was beloved.  The rookie was told in 1939, “Wait ‘til you see Jimmy Foxx (his team’s star) hit.”  Teddy Ballgame’s answer: “Wait ‘til Jimmy Foxx sees me hit.”  He also fought continuously with the press and fans.  In 1942, Williams was drafted, but managed to duck going into service.  Despite a Triple Crown year, this went down very badly with fans and press.
But in 1943-45, he became a crackerjack Marine Corps Naval Aviator and returned to baseball in 1946 as good as ever.  His redemption with fans grew when he returned to the Marines in 1952 for the Korean conflict, where he flew 39 combat missions and earned medals.  Leaving and returning to baseball, he was feted a hero.
At ages 39 and 40, he won two more batting crowns.  In 1960, in his last at bat, he homered.
At his Hall of Fame induction, he spoke for recognition of Negro League stars, and they soon also were inducted.
Two great WWII heroes.  And that’s the rest of the story.
Ron Knecht, MS, JD & PE(CA), has served Nevadans as state controller, a higher education regent, economist, college economics teacher & legislator. Contact him at RonKnecht@aol.com.
Ron Knecht

775-882-2935
775-220-6128
 
www.RonKnecht.net
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Self-inflicted Problems of Higher Education: Part 4

12/1/2020

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​In parts 1-3 of this series of columns, I noted the long-term rapidly rising costs of tuition and fees at U.S. public colleges and universities: 225 percent increases in real terms from 1984 to 2014, versus 25 percent in median family income, which measures folks’ ability to pay.
These hikes caused huge increases in student debt.  As federal student aid rises, colleges raise their charges to absorb the new money available.  Student debt now totals $1.67-trillion, a large part of our total public and private national debt, which long ago passed sustainable levels.
The money goes to administrative bloat, emphasis on research over teaching, and excessive compensation all across campus.  National numbers of university administrators rose by 2012 to almost one per faculty member.  And they are paid better than folks in comparable positions outside academe.
For faculty, research tends to crowd out excellence in teaching.  And university professors’ pay is as bloated as for administrators.  Compensation bloat is not a problem in our community colleges, nor among graduate teaching, grading and research assistants and adjunct faculty.  They are part-time and poorly paid.  As a Nevada Regent, I observed all these phenomena here.
The key problem of higher education is the same as for K-12 public education and all the public sector: The enterprises are run for benefit of the employees, not for benefit of students, other clientele, taxpayers and families paying the bills, nor for the public interest.
Twelve years ago, in a major article for the Chronicle of Higher Education, I pointed out that higher education – and all education, health care and the whole public sector – exhibit “cost disease”.  That’s the problem of showing few gains in productivity over long periods of time and little business model innovation because they do not really embrace opportunities made possible by technological progress and operational innovation – as competitive businesses do.
In the article, I attributed the problem to the public sector’s cost-plus budgeting approach.  Twelve years later, I realize it’s due more to the predatory special-interest providers, bureaucrats and politicians who run things by taking an ever-larger share of our economy, contrary to the public interest.
So, what is higher ed’s future in view of these problems?
In my article, I pointed out that technological progress and business innovation leads to “bypass” by new entrants of incumbents in regulated and public-sector enterprises that don’t embrace such changes.  This had already happened in communications, energy utilities and transportation.
“Education at all levels could experience the same upheaval in coming decades.  We have already seen signs with the rise of for-profit colleges and in certification alternatives to traditional undergraduate degrees,” I wrote.
Nevada regents, administrators, faculty and students had already begun discussing these issues.  However, administrators assured us adoption of new instructional paradigms, including distance learning and other digital methods, would lead to cost increases, not decreases.
This is an example showing it’s the people more than the budgetary system that’s the problem.  Instead of using the changes to cut costs and reduce outmoded offerings and methods, they continued to increase those in their budget requests and treat innovation merely as an optional add-on.
The UNLV president assured me that, despite predictions of experts, bypass would not dent the current system, and the status quo would continue.  In the twelve years since then, the wolf was already at the door before the Covid pandemic arose.  Some private colleges had already closed, and nearly all institutions were scrambling to fight off challenges from bypass entrepreneurs and to incorporate new technology such as distance learning and competency certificates.
The pandemic, the unduly harsh responses of mostly Democrat governors, and the economic swoon they have caused have led our institutions to clumsily embrace digital distance learning and other changes to a huge extent that now almost fully displaces in-person instruction.  This has sped up the needed progress hugely.
But unless our public institutions do these things right and add value that bypass institutions such as for-profit colleges and certificate-oriented schools cannot, many will not survive.  The pandemic, shutdowns and economic collapse will require administrators, faculty and politicians to promptly and effectively change or public institutions will die.
Final installment next time: specific changes to make.
Ron Knecht, MS, JD and PE(CA), has served Nevadans as state controller, a higher education regent, economist, college teacher and legislator.  Contact him at RonKnecht@aol.com.
Ron Knecht

775-882-2935
775-220-6128
 
www.RonKnecht.net
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Self-inflicted Problems of Higher Education: Part 3

11/24/2020

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​In parts 1 and 2 of this series of columns, I presented data on the long-term rapidly rising costs of tuition and fees at U.S. public colleges and universities: 225 percent increases in real terms from 1984 to 2014, versus 25 percent in median family income, which measures folks’ ability to pay.
These increases have led to average student debt of $29,900 for 69 percent of graduates and parental debt of $37,200 for 14 percent.  As federal student aid rises, colleges raise their charges to absorb the new money available.  Student debt now totals $1.67-trillion, a large part of our total public and private national debt, which long ago passed sustainable levels.
I explained the money is going to administrative bloat, emphasis on research over teaching, and paying excessive compensation all across campus.  Aggregate numbers of administrators rose by 2012 to almost one per university faculty member.  But no one seems to know in the aggregate who these people are or what they do.  Yet, they are paid better than folks in comparable positions outside academe. 
For faculty, research tends to crowd out excellence in teaching.  And university professors’ pay is as bloated as for administrators.  Compensation bloat is not a problem in our community colleges, nor among graduate teaching, grading and research assistants and adjunct faculty.  They are part-time and poorly paid.  As a Nevada Regent, I observed all these phenomena.
The key problem of higher education is the same as for K-12 public education and the rest of the public sector: The enterprise is run for the benefit of the employees, not for the benefit of students, other clientele, taxpayers and families paying the bills, nor for the public interest.
Twelve years ago, in a major article for the Chronicle of Higher Education, I pointed out that higher education – and all education, health care and the whole public sector – suffer from “cost disease”.  That is the problem of showing no gains in productivity over long periods of time and little business model innovation because they do not really embrace opportunities made possible by technological progress.  Competitive sectors of the economy necessarily embrace all this.
In that article, I attributed the problem to the cost-plus budgeting methods used in higher ed and the public sector in general.  That is, they start with the previous year’s budget and plug in increases for “maintenance” (inflation and scheduled cost increases), “head counts” (more students) and “enhancements” (often noneducational mandates of dubious merit), while ignoring needs for real gains in productivity (more output for fixed or reduced total inputs).
I noted: “The rest of the world doesn’t work that way.  It works by continuously doing more with less [or the same amount] – not just more with more.”
Having served six more years as a Regent since I wrote that and four years as Nevada Controller, I now recognize that attributing the problem to a budgeting structure was too kind.  In fact, it’s the people in higher ed and politics that are responsible.
Begin with faculty, administrators and Regents – the vested interests.  They actively embrace the cost-disease-causing budget model and mentality.  Search their proposed budgets in vain for incorporation of productivity gains and business model innovation.  When I wrote the article, those groups were beginning to discuss online and other new educational delivery methods.  But the Chancellor and administrators assured us those methods would yield cost increases, not savings.
When the Governor’s proposed budget goes to the legislature, higher ed sends more people to influence legislators than does any other part of state government I’ve observed.  This reflects the administrative bloat discussed above.
Instead of suggesting that such a turn-out means higher ed’s administrative budget should be cut, legislators are overwhelmed.  In recent years, due to budget constraints, they have cut state funds and maneuvered higher ed into increasing the tuition, fees and “self-supporting” funds charged to students.  Robbing Peter to pay Paul.
The Coronavirus recession is already causing businesses to more aggressively embrace new technology and business models to cut costs – and even some of the public sector to do the same.
Next time: How new bypass institutions and methods fostered by the recession will force public education to adapt or die.
Ron Knecht, MS, JD and PE(CA), has served Nevadans as state controller, a higher education regent, economist, college teacher and legislator.  Contact him at RonKnecht@aol.com.
Ron Knecht

775-882-2935
775-220-6128
 
www.RonKnecht.net
0 Comments

Self-inflicted Problems of Higher Education: Part 2

11/17/2020

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​In part 1 of this series of columns, I presented data on the long-term rapidly rising costs of tuition and fees at U.S. public colleges and universities: 225 percent increases in real terms from 1984 to 2014, versus 25 percent in median family income.
These increases have led to unaffordability of public colleges for many folks and to average student debt of $29,900 for 69 percent of graduates and parental debt of $37,200 for 14 percent.  Student debt now totals $1.67-trillion, a large part of our total public and private national debt, which long ago passed sustainable levels.  As federal student aid rises, colleges raise their charges to absorb the new money available.
I explained that the money is going to administrative bloat and emphasis on research over teaching.  Also, it’s paying excessive compensation all across campus.
Finally, I noted that the aggregate numbers of administrators rose by 2012 to almost one per university faculty member.  Despite diligent efforts in eight years as Nevada higher education Regent, I couldn’t get definitive administration figures for Nevada or any of its institutions.  The system and institutional administrations claimed they don’t keep such data.  As the Church Lady said, “How convenient.”
Quillette magazine quoted Todd Zywicki, a George Mason University law professor and author of the paper, “The Changing of the Guard: The Political Economy of Administrative Bloat in American Higher Education.”  He said: “The interesting thing about the administrative bloat in higher education is, literally, nobody knows who all these people are or what they’re doing.”  Administrator titles include, for example, Health Promotion specialist, Student Success Manager, Senior Coordinator and Student Accountability Manager.
Quillette adds, “Often, executives and administrators at colleges and universities are paid significantly more than those in comparable positions with comparable duties.”  A 2017 audit at the University of California (UC) found the Senior Vice President for Government Relations was paid $130,000 per year more than each of the three highest paid state employees in comparable positions.
The audit also concluded UC, “amassed substantial reserve funds, using misleading budgeting practices, providing its employees with generous salaries and atypical benefits, and failed to satisfactorily justify its spending on system-wide initiatives.”  As a Regent, I saw the same problems in Nevada.
When I was Controller, I was the eleventh highest paid state employee with “controller” in his title (not including air-traffic controllers).  The first nine such positions were all in higher education.  The tenth was my deputy, whose salary, like mine, was set by statute.
For faculty, Quillette notes their research “often finds itself in direct conflict with the education of students in terms of allocation of funds and time, as well as what skills the university looks for in candidates, i.e., strong emphasis on research capabilities rather than educational prowess.”
The article illustrates this point with a quote from a University of Oklahoma professor whose department chairwoman told him, “To get tenure, you need a book or a series of articles.  If you have great publications but lousy teaching, you’ll still get tenure.  If you have great teaching but not-so-great publications, you won’t get tenure.”
It adds, “universities … focus more on research, which increases the institutions’ financial gains and standing, and less on what should be their primary goal: the education of students.”  I observed this, too, as a Nevada Regent.
I also saw that full-time university faculty compensation is as bloated as administration, both in salaries and benefits.  This happens in great part because universities reference their institutional “peer groups” to justify compensation.  These groups typically include mainly aspirational peers that rank higher than they do.  Also, because there are few if any similar jobs in other sectors for comparison.
Compensation bloat is not a problem in our community colleges.  Nor among graduate teaching, grading and research assistants and adjunct faculty; they are part-time and poorly paid.
The key problem of higher education is the same as for K-12 public education and the rest of the public sector: the enterprise is run for the benefit of the employees, not for the benefit of students, other clientele, taxpayers and families paying the bills, nor for the public interest.
More next time, including explaining the dynamics of all this.
Ron Knecht, MS, JD and PE(CA), has served Nevadans as state controller, a higher education regent, economist, college teacher and legislator.  Contact him at RonKnecht@aol.com. 

Ron Knecht

775-882-2935
775-220-6128
 
www.RonKnecht.net
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Four Great Things Happened the Last Two Days

10/27/2020

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​After 32 years, the Dodgers finally won another World Series, their seventh, beating the Tampa Bay Rays 4-2.  There was such great hitting, so many great plays and other highlights, I was overwhelmed.
Remember, I became a Bums fan in 1957, before they left Brooklyn.  That was due to Topps #400 card in the 1957 baseball card set, which I got in my first nickel pack – the famous Dodgers’ Sluggers card that was Topps’ first stars card.
The irony was that my first card, bought in a penny pack a week earlier, was the Bobby Thompson card that hooked me on the hobby and sport.  Thompson, of course, hit the (second) “Shot Heard ‘Round the World” in 1951 to rob the Dodgers of the pennant.  After decades of frustration, the Dodgers finally won their first Series in 1955, against the despised Yankees.
Moving to Los Angeles in 1958, they won in 1959, when I had grown up as a fan.  They won again in 1963 and 1965, behind Sandy Koufax, the greatest left-handed pitcher ever.  And in 1981, with perhaps the best infield ever.
But the most memorable Series win was in 1988, when Kirk Gibson, limping on two injured legs and thus really only able to swing with his arms, hobbled to the plate as a pinch-hitter with two out in the ninth inning of the first game.  He ran the count to 3-2 and then awkwardly homered for the win.  He limped slowly around the bases and was unable to play the rest of the series, which the Dodgers won 4-1.
Gibson and Thompson’s homers are generally considered the most memorable moments in baseball history.
The Dodgers now have the most Series appearances of any National League team, 21.  Although they’ve been the dominant NL team since 2013 and appeared in three of the last four Series, this was their first Series championship since 1988.  That makes this one sweet, but even more so for the memorable performances and character of nearly every member of this team.
Shortstop Corey Seager, the unanimous winner of the Series’ Most Valuable Player award, hit .400 and eight clutch homers in the National League series and against the Rays.
With stellar fielding, hitting and base-running, Mookie Betts showed why the Dodgers paid megabucks to land him in the off-season.  What an inspiration with at least three great catches!  And Clayton Kershaw won two games and found redemption after frustrating post-season losses the last seven years.
Justin Turner was pulled late in the game because he had tested positive for Corona virus.  Before that, his hitting was awesome, but fans will remember most the play in which he dove in the dirt to tag out one baserunner between third and home, and then still down, whirled and threw out another runner at third base.  Max Muncy, Will Smith and Joc Pederson put up great batting numbers or key monstrous homers.
Cody Bellinger got things started with a big homer to score the team’s first Series run; and he robbed the Atlanta Braves of a homer in the National League series. Also credit starter Walker Buehler, who was completely dominant in his game; ace relief pitcher Julio Urias: Kike Hernandez, Chris Taylor, Austin Barnes, A.J. Pollock, Kenley Jansen and half-a-dozen other relievers, and of course manager Dave Roberts.
No one will forget the steely determination that led them to win three in a row in the National League series after being down 3-1.  Although they gave away Series game four in the last inning, they were steely-eyed and determined in the other games – real men.
***
Monday, the U.S. Senate confirmed Amy Coney Barrett to the Supreme Court and Mr. Justice Clarence Thomas, my favorite, swore her in at the White House.  President Trump gave a fine speech.
Also Monday, I received a copy of the book The Essential Scalia, a compendium of writings by perhaps America’s greatest jurist.  It includes a warm forward by Justice Elena Kagan, one of his ideological opponents and great friends.  Class!
I began Monday with a trip to my back surgeon’s Nurse Practitioner, who relieved me of my back brace and cane.  What a prelude to today!
Ron Knecht, MS, JD & PE(CA) has served Nevadans as state controller, a higher education regent, economist, college teacher and legislator.  Contact him at RonKnecht@aol.com.  
Ron Knecht

775-882-2935
775-220-6128
 
www.RonKnecht.net
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Progressives & Liberals Are Wrong About Capitalism

10/20/2020

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Progressives, liberals and other critics of market capitalism make particular criticisms purporting to show why it’s unfair to workers and consumers, leads to unreasonable inequalities in incomes and wealth, is unsustainable, locks in the poor to generations of poverty, etc.
They are simply wrong, as I’ll show today for the consumer/producer relationship.  In later columns, I’ll address the other criticisms.  My analyses show capitalism is in fact the greatest economic engine for enriching individuals and societies and fostering fairness, freedom, human flourishing, and wellbeing.
Starting with the relationship between consumers and producers, the capitalists commit the unpardonable sin to the critics of making profits!  That is simply predatory and unfair, and the producers should lower their prices until profit is eliminated.
The fundamental fact of which the critics are simply ignorant or from which they hide is that market exchanges on average benefit consumers more than producers.  No one forces a shopper to buy a bunch of cilantros.  He does it of his own free will because he values that ingredient more than the money it costs him.  So, in the exchange with the grocer, each gets more value than he gives.
In technical terms, every voluntary exchange yields a producer surplus – the profit – and a consumer surplus – the consumer’s gain in value of the purchase versus the price he pays.
But more than pedestrian purchases in common equilibrium markets, there are high profits producers make from invention and innovation.  That sticks more in the craw of leftists than profits from daily exchange.  From John D. Rockefeller and Henry Ford to Bill Gates and Jeff Bezos, aggressive and creative entrepreneurs who disrupted existing production and marketing regimes made huge fortunes.  That’s obviously greedy and unfair.
Or maybe not. Innovation and disruption create wealth, which again is shared between producers and consumers.  Consumers buy in part because they can’t get enough of the value created by innovation and disruption.  And in fact they get almost all of it.
That may be hard to believe when Bezos and Gates are jointly worth about $250-billion, even after giving away gobs and making a few bad investments.  But long ago it became clear to me by considering now ubiquitous products such as word-processing and spreadsheet applications.  Just after the Fall of Rome, when I was starting out as a consultant and expert witness, I needed many large, complex spreadsheets.
I had a stable of assistants working by candle-light on butcher or ledger paper with pencils and hand calculators.  Because the calculations for each cell typically depended on calculations for previous cells, each spreadsheet had to be done twice, simultaneously by two munchkins to assure their accuracy.  Each human computer would work about 15 minutes, and then they’d stop and compare the values they computed.  If they agreed, they’d both proceed to the next 15 minutes.  If not, they had to backtrack and find and correct any errors before they could again move forward.This was truly tedious and time-consuming, and the spreadsheets were so large that each one took hours.  Plus, the quality and extent of the analysis was limited because I couldn’t run sensitivity cases to see the effect of changing a key value or parameter.
When some brilliant entrepreneurs invented computer-based spreadsheets and subsequent generations of them, the munchkins were relieved of their drudgery and I could create the basic spreadsheet in 45 minutes or less. Accuracy was improved, and I could run endless variations and sensitivity cases so my analyses were robust and definitive.
The cost for each case and turnaround times were greatly reduced.  So, the value to me and my clients was huge.  Multiplying that value by many billions for the number of people doing similar exercises almost daily, the net consumer value of the spreadsheets for which they paid very modest prices greatly exceeded the hundreds of millions or even billions reaped by application creators.
In fact, in 2005-06 Yale economist William Nordhaus, later a Nobel laureate, did extensive research to quantify the producer and consumer benefits from such innovation.  He concluded that, “Innovators were able to capture about 4 percent of the total social surplus (value) from innovation.”  Consumers got the other 96 percent.  ‘Nuff said.
Ron Knecht, MS, JD & PE(CA), has served Nevadans as state controller, a higher education regent, economist, college teacher and legislator.  Contact him at Ron Knecht@aol.com.
Ron Knecht

775-882-2935
775-220-6128
 
www.RonKnecht.net
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