Is Student Debt Forgiveness Fair?

Khaleda Rahman asked me for my views on cancelling existing student debt. Influenced by Richard Shinder’s Wall Street Journal op-ed shown below, I said we should make student debt dischargeable in bankruptcy.

Here is what I wrote to Khaleda in full (he used all but the last paragraph and the links):

Most Americans would view blanket student loan forgiveness as unfair to those who sacrificed to pay off their loans. And the vast majority of college students come from the upper half of the income distribution. We already have a system for loan forgiveness for those who are in dire financial trouble: it is called bankruptcy court. We should make student loans eligible to be discharged or modified in bankruptcy on the same basis as other loans. As it is now, they can't be discharged in bankruptcy.

Part of the problem students have in paying off loans is not the loans themselves, or even the high cost of college more generally, but that often students aren't getting a good education, or aren't given a true picture of their financial prospects after different majors. Colleges and universities need to have their feet held to the fire to do collect data and do honest reporting about the quality of their education and the financial prospects of students who follow different tracks. I write about this in my Bloomberg piece "False Advertising for College is Pretty Much the Norm.”

On the high cost of college, disruptive innovation that can dramatically reduce the cost of a college education already has a foot in the door. We just need to welcome it in. I write about that in my Quartz column “The Coming Transformation of Education: Degrees Won’t Matter Anymore, Skills Will.”

A Flexiblog

As I said in the 10th anniversary post for my blog, “Everything is Changing.” I have been realizing that one of the things I love most is to be able to do tasks and projects in whatever order feels right to me at the time. Having to do things in order of urgency is sometimes necessary, but feels like a cost to me. So I’m going to try an experiment of blogging with less of a weekly schedule to my posts. I plan to write as I feel inspired to write, aiming to continue to write at a good pace overall.

In some ways, this is a return to how I did my blog at the very beginning. Then I had no particular pattern to my posts. They came out whenever I had an idea. (Of course, then I was so excited by beginning to blog that I couldn’t sleep!)

There is a Golden Mean between being too flexible and being too rigid. (See “The Golden Mean as Concavity of Objective Functions.) I think I have been too focused on avoiding the harm from being too flexible (thinking of it as being undisciplined) and not focused enough on the harm from being too rigid. But I’ll try not to overcorrect.

Everything is Changing

Today is the 10th anniversary of this blog, "Confessions of a Supply-Side Liberal." My first post, "What is a Supply-Side Liberal?" appeared on May 28, 2012. I have written an anniversary post every year since then:

  1. A Year in the Life of a Supply-Side Liberal

  2. Three Revolutions

  3. Beacons

  4. Why I Blog

  5. My Objective Function

  6. A Barycentric Autobiography

  7. Crafting Simple, Accurate Messages about Complex Problems

  8. On Human Potential

  9. Pandemic Passage: My Past 12 Months in Blogging

I don’t say lightly that I feel more than ever in my adult life that the world is changing. The pandemic, besides its direct stresses, has made us all look at work differently. Large-scale war has returned to Europe. Political polarization and associated bad behavior is worse than it has been since the 1960s.

More parochially, the audience for blogs seems to be changing. I feel I am serving a different readership than I was a few years ago, as many are drawn off toward following the news of the other changes I mentioned above. I can’t predict where things will go in the future.

In my personal life, everything seems different in 2022. New Year’s day found me and my family temporary refugees from a wildfire that destroyed about 10% of the houses in my town of Superior, Colorado and the neighboring city of Louisville, Colorado. (See “New Year's Gratitude on the Occasion of the Marshall Fire.”) Soon after that I began a semester in which I put a concerted effort into creating a new course and improving an existing course. (See “Ethics, Happiness and Choice—Miles's Economics 4060,” “Intermediate Macroeconomics—Miles's Economics 3080.”) It felt more like I was changing than simply what I was teaching. On May 15, our youngest, Jordan, married Caroline. That, too, has far-reaching ramifications us as a family as well as for them as a couple. (Our daughter Diana married Erik in 2017. Jordan’s marriage to Caroline means both of our children are now married.)

To handle everything going on (my research continued at full speed), for the first time in a long time I missed doing some blog posts in my usual 3-times-a-week schedule (not counting link posts). But as I look back over the year’s blog posts using the “Archive” button up above I am amazed at how well I did manage to keep up the pace on my blog.

For the past decade, blogging has been a major part of my life. It gives meaning to every week as I put down in words what I have been learning and thinking and try to influence in some small way the path our civilization is taking.

A decade from now, I plan to retire. I think I can do a lot in that time, personally, academically and on this blog. And I have big plans for my retirement after that, beginning with writing an autobiography. 

I look forward to seeing where the world will go in the next ten years. I am an optimist. Event sometimes thrust us into the underworld, but we learn things there and with a little luck and a lot of fortitude, we can come back stronger and more true to our deepest values. May we all strive toward a better world ten years from now than the one we see around us now. I’ll meet you there.

Cognitive Behavioral Therapy for Insomnia Can Prevent Major Depression

Why do we care about causality? The primary reason is that we are looking for interventions that can make things better. Some causal results give only one part of the puzzle of designing an intervention to make things better, while other causal results directly recommend an intervention once combined with a reasonable judgment about what constitutes “better.”

The result in “Prevention of Incident and Recurrent Major Depression in Older Adults With Insomnia” by Michael R. Irwin, Carmen Carrillo, Nina Sadeghi, Martin F. Bjurstrom, Elizabeth C. Breen, and Richard Olmstead that “Cognitive Behavioral Therapy for Insomnia” (CBT-I) applied to adults 60 years or older who have insomnia, but don’t initially qualify as having major depression both reduces insomnia and reduces the incidence of major depression. This is a very useful thing to know.

It is tempting to interpret this result as strong evidence that insomnia causes an increased incidence of major depression. It is quite plausible that is true, since many experiments show that extreme sleep deprivation (or extreme deprivation of just REM—dreaming—sleep) quickly causes people to go crazy. But underlying subclinical depression could easily disrupt sleep, so there is a real possibility of reverse causality. And as a statistical instrument, CBT-I does not satisfy the exclusion restriction: Cognitive Behavioral Therapy (CBT) in general is known to have a powerful effect in reducing depression even in people who don’t have insomnia. So the CBT elements in CBT-I are likely to have a direct effect in reducing depression that doesn’t all work through reducing insomnia.

What about fact that those whose insomnia lessened were especially likely to have a reduction in incidence of major depression? I am thinking of this result:

Those in the CBT-I group with sustained remission of insomnia disorder had an 82.6% decreased likelihood of depression (hazard ratio, 0.17; 95%, CI 0.04-0.73; P = .02) compared with those in the SET group without sustained remission of insomnia disorder.

That can be explained simply by lessened insomnia being a sign that the CBT principles “took” for that individual. That is, CBT is going to work better for some people than others, if only because after being taught CBT principles, some people will really use those principles in their lives and others won’t. If CBT “takes” for an individual, it can have benefits in multiple areas.

Should we care whether reduction in insomnia is the pathway by which CBT-I reduces the incidence of depression? Not if CBT-I is, and would stay, the only effective treatment for insomnia. But when there is another effective treatment for insomnia, it matters. Whether that other treatment for insomnia will reduce the incidence of depression depends on the extent to which the pathway by which CBT-I reduce depression is through lessening insomnia. The best way to find that out is to do a similar study with other effective treatments for insomnia. If enough different effective treatments for insomnia also reduce the incidence of depression, that raises confidence that the next effective treatment for insomnia will also reduce the incidence of depression, which is the most important practical thing we would mean by claiming that insomnia causes a higher incidence of depression.

Statistically, many different effective treatments for insomnia reducing the incidence of depression would make it more likely that at least one of those treatments approximately satisfied the exclusion restriction by not having a big direct effect on incidence of depression. Note how that would depend on how different the “different effective treatments for insomnia” are. For example, in the extreme, if they were all minor variations on CBT-I, then they don’t lend much additional evidentiary weight to the claim that insomnia causes a higher incidence of depression.

The Federalist Papers #54: Defending the Indefensible—How Attempting to Justify the 3/5 Rule for Slaves Digs the Hole Deeper

The Federalist Papers #54 provides some evidence for those who want to argue that—to an important but not total extent—the United States of America was founded on slavery. And what the Federalist Papers #54 says about slavery is only part of its horror. Below, let me lay out some of the passages that are rightly shocking to modern sensibilities, separated passages by added bullets. On slavery:

  • All this is admitted, it will perhaps be said; but does it follow, from an admission of numbers for the measure of representation, or of slaves combined with free citizens as a ratio of taxation, that slaves ought to be included in the numerical rule of representation? Slaves are considered as property, not as persons. They ought therefore to be comprehended in estimates of taxation which are founded on property, and to be excluded from representation which is regulated by a census of persons. This is the objection, as I understand it, stated in its full force.

  • … representation relates more immediately to persons, and taxation more immediately to property, and we join in the application of this distinction to the case of our slaves.

  • But we must deny the fact, that slaves are considered merely as property, and in no respect whatever as persons. The true state of the case is, that they partake of both these qualities: being considered by our laws, in some respects, as persons, and in other respects as property.

  • In being compelled to labor, not for himself, but for a master; in being vendible by one master to another master; and in being subject at all times to be restrained in his liberty and chastised in his body, by the capricious will of another, the slave may appear to be degraded from the human rank, and classed with those irrational animals which fall under the legal denomination of property. In being protected, on the other hand, in his life and in his limbs, against the violence of all others, even the master of his labor and his liberty; and in being punishable himself for all violence committed against others, the slave is no less evidently regarded by the law as a member of the society, not as a part of the irrational creation; as a moral person, not as a mere article of property. The federal Constitution, therefore, decides with great propriety on the case of our slaves, when it views them in the mixed character of persons and of property. This is in fact their true character.

  • Could it be reasonably expected, that the Southern States would concur in a system, which considered their slaves in some degree as men, when burdens were to be imposed, but refused to consider them in the same light, when advantages were to be conferred?

  • Let the case of the slaves be considered, as it is in truth, a peculiar one. Let the compromising expedient of the Constitution be mutually adopted, which regards them as inhabitants, but as debased by servitude below the equal level of free inhabitants, which regards the SLAVE as divested of two fifths of the MAN.

  • Such is the reasoning which an advocate for the Southern interests might employ on this subject; and although it may appear to be a little strained in some points, yet, on the whole, I must confess that it fully reconciles me to the scale of representation which the convention have established.

Saying that wealth or “property” is a legitimate basis of political power:

  • Government is instituted no less for protection of the property, than of the persons, of individuals. The one as well as the other, therefore, may be considered as represented by those who are charged with the government. Upon this principle it is, that in several of the States, and particularly in the State of New York, one branch of the government is intended more especially to be the guardian of property, and is accordingly elected by that part of the society which is most interested in this object of government.

  • It is a fundamental principle of the proposed Constitution, that as the aggregate number of representatives allotted to the several States is to be determined by a federal rule, founded on the aggregate number of inhabitants, so the right of choosing this allotted number in each State is to be exercised by such part of the inhabitants as the State itself may designate. The qualifications on which the right of suffrage depend are not, perhaps, the same in any two States. In some of the States the difference is very material. In every State, a certain proportion of inhabitants are deprived of this right by the constitution of the State, who will be included in the census by which the federal Constitution apportions the representatives.

  • Nor will the representatives of the larger and richer States possess any other advantage in the federal legislature, over the representatives of other States, than what may result from their superior number alone. As far, therefore, as their superior wealth and weight may justly entitle them to any advantage, it ought to be secured to them by a superior share of representation.

Not every idea in the Federalist Papers #54 is bad. This bit—logically separable from the horrifying bits—one can agree with:

In one respect, the establishment of a common measure for representation and taxation will have a very salutary effect. As the accuracy of the census to be obtained by the Congress will necessarily depend, in a considerable degree on the disposition, if not on the co-operation, of the States, it is of great importance that the States should feel as little bias as possible, to swell or to reduce the amount of their numbers. Were their share of representation alone to be governed by this rule, they would have an interest in exaggerating their inhabitants. Were the rule to decide their share of taxation alone, a contrary temptation would prevail. By extending the rule to both objects, the States will have opposite interests, which will control and balance each other, and produce the requisite impartiality.

Below is the full text of the Federalist Papers #54, to show that I have not misrepresented the thrust of this number, which is quite willing to accommodate slavery for the sake of having states that are into slavery in a big way assent to union with the other states. The author of this number (Alexander Hamilton or James Madison) is sometimes putting an argument of another imagined interlocutor, but everything I quote above about slavery is treated by the author as a reasonable argument with no hint of strong disagreement. The author actually distances himself most from anti-slavery attitudes—as you can see from this bit:

Might not some surprise also be expressed, that those who reproach the Southern States with the barbarous policy of considering as property a part of their human brethren …

FEDERALIST NO. 54

The Apportionment of Members Among the States

From the New York Packet
Tuesday, February 12, 1788.

Author: Alexander Hamilton or James Madison

To the People of the State of New York:

THE next view which I shall take of the House of Representatives relates to the appointment of its members to the several States which is to be determined by the same rule with that of direct taxes. It is not contended that the number of people in each State ought not to be the standard for regulating the proportion of those who are to represent the people of each State. The establishment of the same rule for the appointment of taxes, will probably be as little contested; though the rule itself in this case, is by no means founded on the same principle. In the former case, the rule is understood to refer to the personal rights of the people, with which it has a natural and universal connection.

In the latter, it has reference to the proportion of wealth, of which it is in no case a precise measure, and in ordinary cases a very unfit one. But notwithstanding the imperfection of the rule as applied to the relative wealth and contributions of the States, it is evidently the least objectionable among the practicable rules, and had too recently obtained the general sanction of America, not to have found a ready preference with the convention. All this is admitted, it will perhaps be said; but does it follow, from an admission of numbers for the measure of representation, or of slaves combined with free citizens as a ratio of taxation, that slaves ought to be included in the numerical rule of representation? Slaves are considered as property, not as persons. They ought therefore to be comprehended in estimates of taxation which are founded on property, and to be excluded from representation which is regulated by a census of persons. This is the objection, as I understand it, stated in its full force. I shall be equally candid in stating the reasoning which may be offered on the opposite side. "We subscribe to the doctrine," might one of our Southern brethren observe, "that representation relates more immediately to persons, and taxation more immediately to property, and we join in the application of this distinction to the case of our slaves. But we must deny the fact, that slaves are considered merely as property, and in no respect whatever as persons. The true state of the case is, that they partake of both these qualities: being considered by our laws, in some respects, as persons, and in other respects as property. In being compelled to labor, not for himself, but for a master; in being vendible by one master to another master; and in being subject at all times to be restrained in his liberty and chastised in his body, by the capricious will of another, the slave may appear to be degraded from the human rank, and classed with those irrational animals which fall under the legal denomination of property. In being protected, on the other hand, in his life and in his limbs, against the violence of all others, even the master of his labor and his liberty; and in being punishable himself for all violence committed against others, the slave is no less evidently regarded by the law as a member of the society, not as a part of the irrational creation; as a moral person, not as a mere article of property. The federal Constitution, therefore, decides with great propriety on the case of our slaves, when it views them in the mixed character of persons and of property. This is in fact their true character. It is the character bestowed on them by the laws under which they live; and it will not be denied, that these are the proper criterion; because it is only under the pretext that the laws have transformed the negroes into subjects of property, that a place is disputed them in the computation of numbers; and it is admitted, that if the laws were to restore the rights which have been taken away, the negroes could no longer be refused an equal share of representation with the other inhabitants. "This question may be placed in another light. It is agreed on all sides, that numbers are the best scale of wealth and taxation, as they are the only proper scale of representation. Would the convention have been impartial or consistent, if they had rejected the slaves from the list of inhabitants, when the shares of representation were to be calculated, and inserted them on the lists when the tariff of contributions was to be adjusted? Could it be reasonably expected, that the Southern States would concur in a system, which considered their slaves in some degree as men, when burdens were to be imposed, but refused to consider them in the same light, when advantages were to be conferred? Might not some surprise also be expressed, that those who reproach the Southern States with the barbarous policy of considering as property a part of their human brethren, should themselves contend, that the government to which all the States are to be parties, ought to consider this unfortunate race more completely in the unnatural light of property, than the very laws of which they complain? "It may be replied, perhaps, that slaves are not included in the estimate of representatives in any of the States possessing them. They neither vote themselves nor increase the votes of their masters. Upon what principle, then, ought they to be taken into the federal estimate of representation? In rejecting them altogether, the Constitution would, in this respect, have followed the very laws which have been appealed to as the proper guide. "This objection is repelled by a single observation. It is a fundamental principle of the proposed Constitution, that as the aggregate number of representatives allotted to the several States is to be determined by a federal rule, founded on the aggregate number of inhabitants, so the right of choosing this allotted number in each State is to be exercised by such part of the inhabitants as the State itself may designate. The qualifications on which the right of suffrage depend are not, perhaps, the same in any two States. In some of the States the difference is very material. In every State, a certain proportion of inhabitants are deprived of this right by the constitution of the State, who will be included in the census by which the federal Constitution apportions the representatives.

In this point of view the Southern States might retort the complaint, by insisting that the principle laid down by the convention required that no regard should be had to the policy of particular States towards their own inhabitants; and consequently, that the slaves, as inhabitants, should have been admitted into the census according to their full number, in like manner with other inhabitants, who, by the policy of other States, are not admitted to all the rights of citizens. A rigorous adherence, however, to this principle, is waived by those who would be gainers by it. All that they ask is that equal moderation be shown on the other side. Let the case of the slaves be considered, as it is in truth, a peculiar one. Let the compromising expedient of the Constitution be mutually adopted, which regards them as inhabitants, but as debased by servitude below the equal level of free inhabitants, which regards the SLAVE as divested of two fifths of the MAN. "After all, may not another ground be taken on which this article of the Constitution will admit of a still more ready defense? We have hitherto proceeded on the idea that representation related to persons only, and not at all to property. But is it a just idea?

Government is instituted no less for protection of the property, than of the persons, of individuals. The one as well as the other, therefore, may be considered as represented by those who are charged with the government. Upon this principle it is, that in several of the States, and particularly in the State of New York, one branch of the government is intended more especially to be the guardian of property, and is accordingly elected by that part of the society which is most interested in this object of government. In the federal Constitution, this policy does not prevail. The rights of property are committed into the same hands with the personal rights. Some attention ought, therefore, to be paid to property in the choice of those hands. "For another reason, the votes allowed in the federal legislature to the people of each State, ought to bear some proportion to the comparative wealth of the States. States have not, like individuals, an influence over each other, arising from superior advantages of fortune. If the law allows an opulent citizen but a single vote in the choice of his representative, the respect and consequence which he derives from his fortunate situation very frequently guide the votes of others to the objects of his choice; and through this imperceptible channel the rights of property are conveyed into the public representation. A State possesses no such influence over other States. It is not probable that the richest State in the Confederacy will ever influence the choice of a single representative in any other State. Nor will the representatives of the larger and richer States possess any other advantage in the federal legislature, over the representatives of other States, than what may result from their superior number alone. As far, therefore, as their superior wealth and weight may justly entitle them to any advantage, it ought to be secured to them by a superior share of representation. The new Constitution is, in this respect, materially different from the existing Confederation, as well as from that of the United Netherlands, and other similar confederacies. In each of the latter, the efficacy of the federal resolutions depends on the subsequent and voluntary resolutions of the states composing the union. Hence the states, though possessing an equal vote in the public councils, have an unequal influence, corresponding with the unequal importance of these subsequent and voluntary resolutions. Under the proposed Constitution, the federal acts will take effect without the necessary intervention of the individual States. They will depend merely on the majority of votes in the federal legislature, and consequently each vote, whether proceeding from a larger or smaller State, or a State more or less wealthy or powerful, will have an equal weight and efficacy: in the same manner as the votes individually given in a State legislature, by the representatives of unequal counties or other districts, have each a precise equality of value and effect; or if there be any difference in the case, it proceeds from the difference in the personal character of the individual representative, rather than from any regard to the extent of the district from which he comes. "Such is the reasoning which an advocate for the Southern interests might employ on this subject; and although it may appear to be a little strained in some points, yet, on the whole, I must confess that it fully reconciles me to the scale of representation which the convention have established. In one respect, the establishment of a common measure for representation and taxation will have a very salutary effect. As the accuracy of the census to be obtained by the Congress will necessarily depend, in a considerable degree on the disposition, if not on the co-operation, of the States, it is of great importance that the States should feel as little bias as possible, to swell or to reduce the amount of their numbers. Were their share of representation alone to be governed by this rule, they would have an interest in exaggerating their inhabitants. Were the rule to decide their share of taxation alone, a contrary temptation would prevail. By extending the rule to both objects, the States will have opposite interests, which will control and balance each other, and produce the requisite impartiality.

PUBLIUS.

Links to my other posts on The Federalist Papers so far:

How to Get Abundant Affordable Housing

The way to have abundant affordable housing is to have abundant housing. That means making it easy to add residential units. I want to propose a simple, if radical policy that can guarantee abundant affordable housing: state or federal laws requiring mandatory permitting of trailer parks that meet a few basic standards.

There is little worry that trailer parks will spring up in a long-lasting way in totally inappropriate places, because any place land is worth too much, a trailer park operator can’t earn a profit. On the other hand, a trailer park gives a developer a nice threat point to persuade a neighborhood to allow more appropriate (and profitable) high-density housing.

Where land is cheaper—perhaps because of noise, or simply by being further out from the city center, a trailer park might make a lot of sense.

As “Do Trailer Parks and Mobile Homes Have a Future As Affordable Housing?” suggests, there is also no reason a trailer park can’t stay a trailer park but go upscale. The legal definition would be that it would have to be the locational home to manufactured housing—at least in the sense that large pieces were made in a factory. This would give an extra boost to home manufacturing, which is desperately needed. As I discuss in “Why Housing is So Expensive,” construction has shown almost no productivity growth by the usual measures. I suspect a lot of that is because most homes don’t have large pieces made in factories. It is hard to improve production if it doesn’t have some degree of centralization and standardization—or at least modularity. The bigger the percentage of homes that have large manufactured pieces, the faster total factor productivity in housing production will improve.

Note that with a state or federal law requiring mandatory permitting of trailer parks that meet a few basic standards you can get affordable housing in most places without subsidies. It is market rate affordable housing—which should be considered the Holy Grail, while subsidized affordable housing is typically just tokenism. I’d like to suggest one place to put the budgetary savings from not subsidizing housing: instead, subsidize convenient, frequent bus service to any sufficiently large concentration of trailers. This helps make sure that the affordable trailer-park housing will work for people. The residents have to be able to get to their jobs, after all—and those with low income often own unreliable cars or no car. (Note that trailer parks have full-scale house rentals as well as people who own the house and only pay plot rent and home-owner’s association fees.)

Also, nearby current residents shouldn’t have to suffer from an increase in crime when a trailer park is created next door. And those in the trailer parks themselves shouldn’t have to suffer with high crime rates, whether many felonies or many small misdemeanors. If this is a genuine danger, we need to be brutally honest about it—and if a genuine danger, it is a legitimate concern. Thus, in addition to subsidizing good bus service to new trailer parks, I suggest state and federal subsidies for extra police to police the new trailer parks and surrounding areas.

Let me give you a challenge: when you hear someone talking about affordable housing without offering a radical scheme that moves at least 10% toward what I am saying, you can know they aren’t serious about affordable housing beyond tokenism. Let’s get real about affordable housing. It is a huge part of the typical individual’s or families budget. So the poor get much less poor when housing gets cheaper. And the rich or middle class whose property values suffer some because the scarcity value is less—or because now they can’t have as much residential segregation can afford the hit.

By the way, people often talk about “systemic racism” without pointing to what it is actually made of. Barriers to residential construction are a big part of structural racism by perpetuating residential segregation that helps the rich and middle class to not care about the poor because they are out of sight, out of mind, and deprives talented children from poor families of mentors they desperately need. (If the poor living near the rich and sending their kids to the local schools makes the rich hate the poor more, rather than caring about them more, then we have worse problems.)