I read a couple really good pieces the last couple Sundays in the San Antonio Express-News:
“The reality is that as a country we do a poor job of making financial literacy a priority. What we do instead is promote rampant consumerism and that works well for the companies that are beneficiaries of that. Most of the time it doesn’t lead to sustainable personal financial practices that enable someone to be successful over time.”
"Not only are there no good credit cards, the question itself feels wrong to me. It makes me cringe in all my sensitive finance places. I think of the question as the equivalent of asking a nutritionist what the best candy bars are for a college student. Or asking a substance abuse counselor what the very best narcotics would be for a graduating senior to take.
"They are all bad choices. Some could be less bad than others, but the product itself could not be intrinsically good, or advisable. No responsible financial adviser, nutritionist or drug abuse counselor should endorse any of these things."

And then my wife & I took our first stab at doing our taxes last weekend. The best thing that came out of that horrible experience was a possible teachable moment.
It'll already surprise no one who knows me that there's no way in hell I'd ever condone my daughters getting a credit card once they leave the nest (once I'm not supporting them anymore, or claiming them on my taxes, they're free to make their own such decisions). I already encourage them to save, but yesterday gave me another idea.
I'll advise them to have as little withheld from their paycheck as possible, and save on the side to pay their taxes. Then, hopefully, when they get the bill, they can a) pay it easily and b) be reminded of just how much Uncle Sam is ... how to put this nicely ... raking them over the coals, ESPECIALLY the more successful they are.
If they ever get a 'refund'* large enough to smile about, or do anything more than buy a nice dinner, I know I will have failed them in some small part.
* And it's NOT a refund. It's Uncle Sam returning to you the principle of a loan you gave to him INTEREST-FREE.

​I’ve been a huge Metallica fan for 30 years.  The intro to “Battery” off the thrash-terpiece album “Master Of Puppets” sucked me in.  Then when I saw my parents’ and their friends’ reaction to their cover of the Misfits’ profane “Last Caress”, I was hooked.  As I was reading a recent analysis in The Economist magazine, the title of an even more outrageous song they covered by the 1980s British punk band Anti-Nowhere League repeatedly came to mind; “So What?”
 
“The Case For Taxing Death” the cover read, complete with a skull fashioned partially out of a dollar bill.  The impetus was the easing of the estate tax in the reform bills that recently made their way through congress.  But the only thing for which the magazine really seemed to make a case was why individuals and/or entities shouldn’t get to keep all they have earned.
 
It starts out informatively enough, for those whose knowledge about “some of the world’s oldest taxes” is sketchy.  It cites a roman emperor, Teddy Roosevelt and philosophers such as John Stuart Mill and Jeremy Bentham, both of whom were generally predisposed to individual liberty, as favoring some form of inheritance or estate tax.  “Mere accident of birth shouldn’t entitle” one to great wealth.
 
It’s understandable to feel it’s not fair that the children of Sam and Helen Walton were born to a couple whose industriousness drove them to build one of the most commercially successful businesses in history, the value of which was subsequently bequeathed to them in the form of billions of dollars of Wal-Mart stock wealth.  It’s no more fair than the child that’s born to methhead parents who’d rather get high than get a job. 
 
What’s the alternative though, to that fortune staying in family hands?  It being taxed away by an entity that would merely redirect the funds into the hands of the less-diligent and/or less-driven, or into subsidized life-support for less successful companies?  (And any notion that WalMart’s bottom-line would take a significant, substantive long-term hit should these federal public assistance funds be pared back is too silly to be taken seriously.  It feeds into the preposterous, condescending implication that without government assistance, beneficiaries would simply starve, wither away and litter the streets with their malnutritioned bodies.) 
 
One of the points the article attempts to make regards the alleged laziness and incompetence of heirs. 
 
Not all family-business successors resemble the bumbling, book-cooking Ted Beneke from “Breaking Bad.”  Nor are they as selfish as the drugged-out, combed-over kung-fu fighter Bobby Pellit from 2011’s “Horrible Bosses.”  But even if some are, so what?
 
The authors point to an unsubstantiated “risk: that people with inheritances work less hard or drop out of the workforce altogether.”  There are plenty of people who don’t need inheritances not to work hard, much less at all.  Look no further than the 21st century downward trend that has dragged the labor force participation rate to historic lows.  And as a former chairman of the president’s Council of Economic Advisers recently asserted, it’s not just reflective of retiring baby boomers. 
 
They also note research that “suggests that lottery winners work less,” and that the more one inherits, the more likely he/she is to “leave the labor force.”  Well duh!  I don’t imagine the recent Louisiana lottery winners of almost $200M ($119M after taxes) feel any particular pressure to continue to work to support themselves.  Having inherited many more times that, I bet the Walton children didn’t either.  But that they did, staying active in the management of WalMart, banking, community development, etc.  There are more than a few folks out there whose inner drive to be productive overwhelms any desire for perpetual leisure.  Pride in keeping the family business going probably plays a part as well.
 
On the other hand, the report is quick to point out that “the long-run effect … of inheritances … is to increase wealth inequality … in part because richer folk tend to save their windfall, in contrast to poorer folk, who spend it.”  Maybe the solution to this problem, such as it is, is in fact fewer/lower taxes, or at least fewer of the wrong ones, like those on work and saving.  Perhaps the focus should be on consumption taxes instead.  Unwinding artificial monetary policy that has only served to aid those with great means, while disincentivizing saving by those with less, would probably be helpful as well.
 
Yet another study is cited as claiming “firms that promote family CEOs see declines of 14% in operating return on assets.”  So what?  Wouldn’t multi-generational companies be at least as likely to suffer from the dynamism of a free market economy?  Even if my bosses’ daughter had taken over the video store where I worked after high school, Netflix likely would have devoured it more than a decade ago.
 
Another “so what” has increasingly come to mind during the current tax reform debate, that “the economic benefits of cutting such wealth-transfer taxes may have been overplayed and the drawbacks underappreciated.”  Since when did doing things for “economic benefit” come at the expense of doing the right thing; confiscating less of a free person or entity’s resources?  Many estates are the result of ingenuity, diligent work ethic, frugality, etc.  The very word “estate” implies a cumulative result of success.  It’s quite possible that they’ve already been taxed out the wazoo on multiple levels: the first building blocks of income, the resultant investment gains, the earnings from those investments … how much is enough?
 
There were other “so what” instances in this piece:

• “Observations from Sweden and America … suggest that … (p)eople save to insure against personal risks, rather than to pass on wealth when they die.”  So what? 
• “Research also suggests that … parents derive happiness from the pre-tax amount bequeathed, rather than what a child will receive after the tax is applied.”  So what?
• “In OECD countries, the proportion of total government revenues raised by such taxes has fallen from over 1% to less than .5% since the 1960s.”  So what?

 
The most troubling aspect of this report however, is captured in two passages: “wealth-transfer taxes ought to be the subject of more public debate,” and “is it sensible for the state to privilege family firms?”  The authors apparently believe government, and those who didn’t build the targeted estates, should get a say in what happens to said estates upon the death of he or she who built them.  It’s reminiscent of a notion JFK rejected during the Berlin Crisis of 1961: "What's mine is mine and what's yours is negotiable."
 
One is left to wonder if they are in the “you didn’t build that” camp.  Alas, there is nary a mention of the government “needing” money for education, roads, job-training, infrastructure, or any of the usual statist red herrings.  It’s almost as if they want companies to die with their makers, and a good chunk of the value be remitted to public coffers.
 
A nerd like me will always value a publication like The Economist, whether they’re running a “Six Big (economic) Ideas” series like they did this summer, or documenting the history and current relations between India and Pakistan in a multi-page special feature.  But sometimes the articles supporting government claims on private property just fall flat, that’s what happened here.  It left me anxious to do something else Metallica covered; “Turn The Page.”

It's been a pretty good year, considering I didn't actually write anything until May.  But here they are, chronologically, in their most prominent settings:
Tax Lingo for Dummies
The End Of The Boom/Bust Cycle?
'Do It For The Children': School Choice
Ice Cream, Hurricanes & 'Price Gouging'
Maybe Artificial Intelligence Can Expose Artificial Tax Arguments

​I’ve been caught in a lie.
 
For a while now I’ve been telling friends, family & classes “don’t fear the robots.  They’ll only make our lives easier, better.  If we don’t have jobs & income, we won’t be able to buy anything the robots make.”  Some folks have taken the “Terminator” movies’ Cyberdine Systems’ Skynet too seriously. 
 
After some more thought though, maybe we should fear them.  Maybe we should be wary of the ones that create misleading headlines & flimsy stories.  The ones programmed to manufacture self-righteousness warrant suspicion.  Worst of all are the cyborgs designed by their masters (more familiar to us as politicians elected by voters) to confiscate private resources from us once they’ve tied our hands. 
 
These particular robots have recently set their sights on tax reform. 
 
As if on cue, the politically cynical concern about the federal budget deficit is back in vogue.  This has come and gone as long as I remember.  Who is concerned at the moment depends on who is in power.  These days, it’s democrats who feign such anxiety since republicans hold all levers of federal control.  A few years back, republicans were the worry warts, and a few years before that it was democrats who were all hot and bothered by the red ink.  And so on and so on. 
 
Republicans’ problem is that they can no longer be taken seriously when it comes to curtailing spending, (itself a tax on productive society), which is the real problem.  Not only do some of them favor more, whether it be on defense, propping up Obamacare or building a border wall, but they’re not even willing to rein in the bloated leviathan that’s been built up over the last century. 
 
And as for democrats, no one who seriously thinks ‘the rich’ can fund the vast majority of government operations, and that such spending has a wealth-producing multiplier, could possibly know enough to care about budget deficits. 
 
Watching these two parties compete to show the most concern about the deficit is like watching a democrat leech and a republican leech attached to the American citizen arguing who’s responsible for the patient’s deficit of blood. 
 
Alas, too many in the media dig a good story, even if they don’t get to juice it up a little …
 
Meanwhile, you’re probably aware of the different, though predictable takes on tax reform proposals put forth by the usual suspects amongst the punditocracy, political class, etc.: the left wing thinks we shouldn’t enact ‘tax cuts (for the rich) at the expense of vital federal government programs’, while the right wing generally supports reform as a way to ‘kickstart the economy that will pay for itself’. 
 
But before the House GOP released their detailed plan, the aforementioned media had all they needed with the president’s 9-page “framework”.  MarketWatch even put out a calculator (which was also based partially on republican proposals of prior years) so folks could figure out how the guideline would affect them.  The story that grabbed my attention however, was on National Public Radio’s website.  It had the clickbait headline cautioning Americans not to pin their hopes on the “promised $4,000 raise from the GOP tax plan”.  In fairness, the piece clarified that there was no such promise, but that’s like T.V. lawyers who get to say something outrageous even if the remarks are ‘officially’ stricken from the record.
 
It seemed to reinforce this persistent notion that we live in a static society.  It’s that concept after all that informs the Congressional Budget Office’s predictions of the effects of legislation; $1 of tax cuts equals $1 of tax revenue lost by the government.  There’s no ripple effect whatsoever.  Private citizen’s behavior is unchanged.  In this case, a report by the president’s Council of Economic Advisers regarding reform of the corporate tax code was implied in the headline to predict an exact effect on individuals.
 
Nothing can be forecasted perfectly in a relatively free, dynamic economy, especially with so many other exogenous influences: new discoveries/inventions, business creation/closure, the regulatory state (a bright spot in the Trump administration), trade policy (a dark spot in the same), other legislation, events closer to home or on the other side of the world, alien invasion, etc.  I maintain faith that most productive members of society aren’t gullible enough to think that as soon as any corporate tax reform passes, they can expect a subsequent raise soon thereafter.  They know raises will continue to be based on the same core principles: how diligent are you at work, how much value are you adding to your company, how is your company doing, how is your industry doing, how is the economy doing, etc.  These kinds of things aren’t as easily predictable as a government handout. 
 
Another headline that jumped out at me came from ABC News’ website that reported “60% of Americans say Trump tax plan will benefit wealthy”.  Well, duh.  In the interests of equal treatment for all, it stands to reason that those who pay progressively more would realize more after-tax income as a result of ideal reform.  Apparently some wealthy folks not only want no part of it, but think no one else in their tax brackets should benefit from reduction and/or simplification either.     
 
Berkshire Hathaway CEO Warren Buffet, who once famously claimed that his secretary pays a higher rate of tax than he does, recently said “I don’t think I need a tax cut.”  Former hedge fund manager Tom Steyer piped in pleading “I’m a billionaire.  Please raise my taxes.”  And Morris Pearl, head of an outfit called Patriotic Millionaires, said that only the “poorest among us … should have tax cuts.”
 
Mr. Buffett’s secretary claim was sufficiently debunked by none other than Politifact, citing reasons that are apparently lost on Mr. Pearl; not only do most folks at such income levels fall into lower tax brackets, but they end up paying little-to-no net income taxes thanks to deductions and various loopholes.  Yet according to Mr. Steyer, it has been “at the expense of working families” that “upper-income people in the United States have done disproportionately well … for 35 years.”  I don’t know about you dear reader, but I’m struggling to remember the last time I felt “taken advantage of by the richest Americans.”
 
Surely with a political science degree from Yale, Mr. Steyer isn’t referring to cuts in the size of government.  After my weekly consultation with USDebtClock.org just now, I see that Uncle Sam is spending more than $4 trillion, is in a $20 trillion hole, and has $109 trillion in unfunded liabilities.  Regardless of the extra-constitutional functions for which he fears the deprivation of funds, it appears Uncle Sam’s operations continue apace.
 
And certainly as the holder also of an economics degree, he’s familiar with the concept of deadweight loss.  As John Stossel recently pointed out, the latest count is 7 billion hours that we devote to filing our taxes, “the equivalent of 3.7 million people working 40-hour weeks.”  If they are so eager to pay more taxes, I bet they could save some of that time and money by refraining from exploiting all the legal loopholes available to us all.  Failing that, the Bureau of the Fiscal Service is happy to accept “gifts and unconditional donations” on behalf of the federal government (whether or not such a donation is tax deductible is unclear).
 
Whether such folks feel a little guilty for skillfully navigating the system as it is set up, or would perhaps prefer to maintain their perch atop the same for which they might have lobbied, or whether they just don’t get it is anyone’s guess.  The core principle of this whole debate is a sensible one: the tax burden on laborers and wealth-creating entities should be as miniscule and simple as possible.
 
In a recent essay in the Wall Street Journal, Dr. Christoph Koch, chief scientist and president of the Allen Institute of Brain Science, explained the research that he’s been leading to “create technologies to enhance the processing and learning capabilities of the human brain” in response to AI (artificial intelligence, i.e. robots).  Such work he hopes could turn “anyone into a programmer” who could create a “precise and error-free piece of digital code … at the speed of thought”.
 
Hopefully the general public figures out how to use such technology in order to better decode the nonsense fed to us by public opinion makers and spinners.

​I have a weakness for ice cream.  Years ago regional favorite Blue Bell put out the most divine flavor to grace my palette; Caramel Sundae Crunch; vanilla ice cream swirled with caramel and chocolate-covered crushed-up bits of ice cream cones … it was the BOMB!

And then it was gone.  The little creamery in Brenham just ... stopped ... making it.  I considered special ordering it, but I drew the line at paying something like 10X what I did in the store.  I didn’t value it THAT much.

Fast-forward to this year.  I decided to give Blue Bell’s Sea Salt Caramel a try.  I love caramel, but marrying sugars and salts doesn’t do it for me.  I’m glad I took the dive though, because that’s some good stuff. 

And now IT has disappeared.  I haven’t been able to find it at any nearby grocery store for the last few weeks.  You'd think I'd have learned my lesson and stocked up like Elaine Benes hoarding sponges on “Seinfeld.”  But no, I didn't. 

Alas, if I had, you can bet there would have been a premium put on every bite, for both my daughters AND me.  Who knows when, or IF Blue Bell would ever make it again??  It would have been my version of a fine wine that you break open only on a special occasion.  Its scarcity has increased its value.

Now imagine it’s YOUR favorite food, and you did have the foresight to stock up in anticipation of such a possible shortage.  But instead of consuming it, you rely on selling it to make a living.  That's the dilemma vendors of water, gasoline, batteries and the like face when a hurricane like Harvey is heading their way.  They don't know when their next supply shipments are coming, or IF they’re coming.  They don't even know if their place of business will still be standing post-landfall.
 
Keep this in mind when demagogues start screaming about price gouging. These vendors are humans just like us, humans with strong enough nerve to risk a LOT to supply us with everything we want AND need.  And now, just like the rest of us, they’re facing what is hopefully just a temporary disruption of an important part of their life.  They don’t raise prices to screw consumers, but rather to defend their livelihood.
 
Or take for instance the guy who was filmed selling bottles of water out of the back of his truck in the parking lot of a WalMart in Houston as Harvey was bearing down.  The man filming the video berates him, presuming to know what he and his family needs, telling him he “should be ashamed of himself.” 
 
But why?  No one is forced to buy from him.  If someone values the water enough, they’ll pay for it, no coercion involved.  So what if he marks it up more than usual??  The whole episode invariably ends up being pro-consumer: either no one will buy the water and he’ll be forced to drop his price, or people will scoop all of it up, thereby luring in other suppliers who’ll offer a lower price in order to gain the business.  Some of my students seemed to know this on the first night of class last night.
 
Buyers and sellers, acting independently, will always bring about a result that is satisfactory to all parties.  We shouldn’t allow our emotions, our sense of envy or insecurity, or presumptuousness of others’ business, to demonize someone making a profit, especially when it’s fleeting and short-term.  The only individuals who profit from such intellectual and emotional gullibility are politicians, from BOTH major parties, wanting to look heroic.  The worst of them are only too happy to hook up some more dependents to the State.
 
In the meantime, HEB does more to endear itself to Texans by sending caravans of food, supplies, etc. to my hometown of Victoria, and other communities in the area hardest hit by Harvey.  As the mosque burning earlier in the year demonstrated, the free market of charity is as effective as any government action at helping people truly in need.
 
Especially here in the great Lone Star State. 

​I was pleasantly surprised earlier this year when I learned that my oldest daughter would have a choice of magnet schools here in San Antonio: health careers near the medical center, business at Holmes, science & engineering at Jay, communications at Taft and construction at Warren.   
 
Also around this time, Betsy DeVos was girding for a contentious confirmation battle over her appointment as Secretary of Education.  She faced hostile opposition both from senate democrats still sore about the presidential election, and from teachers unions and ‘public school’ advocates who oppose what Mrs. DeVos has pushed for years; more freedom of choice & parental control in K-12 education.
 
The Department of Education arguably shouldn’t even exist in the first place.  It is a prime example of those “powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people” as per the 10th amendment.  If the only thing Secretary DeVos ever did was fold that department, she would be a success.  Short of that, promoting more school choice is a close second.
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From t-ball to cheerleading, music lessons to gymnastics, my girls have run the gamut of extracurricular activities.  They’ve been as far away as the Y.M.C.A. downtown, or as nearby as baseball fields in Westover Hills.  Distance has never mattered as much as the organization with whom we signed up.    
 
Why can’t we have the same choice with their schools?  Because at least here in Texas, where you pay property tax for your primary residence determines the public schools for your children. 
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This issue didn’t appear on my radar until I took Dr. John Merrifield’s urban & regional economics course at UTSA.  He has spilled a lot of ink on this topic, including a few books, most notably perhaps 2001’s “The School Choice Wars”.  Having just become a father at the time only heightened my interest. 
 
We do have some semblance of choice here.  In addition to the magnet schools, children can literally be ‘grandfathered’ in to the NISD if their grandparents live here and provide "significant after-school care".  One of my daughter’s friends was able to go to the same elementary school because that’s where her mother taught.  Transfers are possible for a handful of other reasons, but “are generally denied due to lack of space”.  
 
If parents were allowed however, to use a proportionate amount of public revenue earmarked for education, they could send their kids to any school they choose, assuming it meets a minimum level of state-approved criteria (mastering certain levels of basic subjects by a certain grades).  Beyond that, the schools would be free to specialize however they see fit: art schools for musicians, painters & actors; schools that cater to kids who like to build things; culinary schools when Easy-Bake Ovens will no longer do; technology schools for computer geeks.  The possibilities are limitless. 
 
These schools would be free to set their own tuition: more than, less than or equal to the amount allotted to each child by the state.  But those prices would be unlikely to stay put.  For example, if a particular metro area turned out to have a higher concentration of young would-be engineers than schools to serve them, the price of tuition would in all likelihood rise … in the short term.  Parents might have to decide whether or not they value those schools enough to make up the difference.  As Dr. Merrifield reiterated to me recently, that’s one reason the current system is flawed; it lacks such price signals. 
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One point I stress in my classes is that suppliers react differently to prices than demanders do.  We’re all demanders, and thus familiar with that angle: price goes up, we buy less.  However, only a handful of us are suppliers (excluding the labor we supply when we go to work), and thus not wholly in-tune with how they react.
 
Those higher prices would emit a signal of opportunity for enterprising entrepreneurs.  To enter the market competitively, they’d have to charge lower tuition, offer more for the same price, or some combination of both.   To stay competitive, the existing schools might expand.  They also might extend financial assistance to those excelling students of lesser means.  What could be better for a school’s reputation than educating the best & brightest?
 
More choices, lower prices, better quality … what’s not for a consumer to like?? 
 
All this assumes of course, a light, basic regulatory touch.  Otherwise, innovation would be dulled, disincentives would arise, current market participants would become entrenched, etc.  In other words, a wet blanket thrown on progress. 
 
Alas, as it stands now the only price signal that exists in grammar school education is … real estate??
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We’re all familiar with good sides of town, and not-so-good sides of town.  The latter tend to be run-down, more susceptible to crime, gangs, etc.  Perhaps not surprisingly, that negatively impacts property values, and in turn minimizes property tax collections.
 
According to the Texas Education Agency, about 50% of public school funding derives from property taxes (roughly 10% comes from Uncle Sam, while around 40% comes from the Lone Star).  It hardly seems fair that a child’s education, the ultimate example of equality of opportunity, should be restricted  by a socioeconomic situation not of his/her making. 
 
The state legislature tried to remedy this a generation ago by passing what is commonly known as ‘Robin Hood’, whereby a school district that has “wealth per student that exceeds” a certain level subsequently has that excess “recaptured” and redirected to property-poor districts.


And a generation later, public school funding in Texas is still an issue.
 
Perhaps an alternative to property taxes could be a county or metro-area sales tax, a rate that would apply to ALL areas of town & the local economy uniformly.  This would be a most efficient way to pull the funds.  No more artificial inflation of property values.  One less inefficiency in the rental market.  A lesser tendency to build arguably exorbitant facilities tied as much to property wealth as student outcomes. 
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The Texas constitution states that the legislature “shall … make suitable provision for the support and maintenance of an efficient system of public free schools,”  so some traditional ‘public’ schools would remain.  Some parents may prefer the convenience of the nearby school.  Some may simply not be able to get a bead on what it is their child has a particular knack for.
 
It also states that “a general diffusion of knowledge” is “essential to the preservation of the liberties and rights of the people.”  Education has spillover benefits.  The knowledge & skills a student attains benefit the general public when employed on the push toward greater progress & prosperity. 
 
No one is more vested, or has a greater interest in this venture than we the parents.  My daughters are my best opportunity to make a positive impact on society.  Their mother & I are as integral to their education as anyone or anything.  It should be an option for us to fund their education with some portion of the taxes we pay, at whichever school we see fit.    
 
A market of millions of parents can’t be wrong.

I was pleasantly surprised earlier this year when I learned that, upon entering high school, my oldest daughter would have a choice of magnet schools here in San Antonio: Northside Health Careers near the medical center, Business Careers at Oliver Wendell Holmes HS, Science & Engineering at John Jay HS, Communication Arts at William Howard Taft HS and Construction Careers at Earl Warren HS.  Ever since she & her sisters were born, their mother & I have always kept our eyes open for any & all options available to us regarding their education. 
 
Also around this time, philanthropist & activist Betsy DeVos was girding for a contentious confirmation battle over her appointment as President Donald Trump’s education secretary.  She faced hostile opposition both from senate democrats still quite sore about the president’s electoral defeat of their nominee, Hillary Clinton, and from teachers unions and ‘public school’ advocates who oppose what Mrs. DeVos has pushed for years; more freedom of choice & parental control in K-12 education.
 
Let’s dispense with something first & foremost; the federal department of education arguably should not exist in the first place.  Nowhere in the U.S. Constitution is “education” or “school” mentioned.  It is one of the best examples of those “powers … reserved to the States respectively, or to the people” as per the 10th amendment.  If the only thing Secretary DeVos ever achieved while in office was to carry out Kentucky congressman Thomas Massie’s bill to abolish the DoE, she would rightly be hailed as a most successful public servant.  Short of that, promoting more school choice is a close second.
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From swim lessons, to t-ball, to cheerleading, to music lessons, to gymnastics … you name it, my girls have done it, with multiple organizations, some as far as 10-15 miles away from home.  We even chose as our pediatrician a doctor whose office was further away than that.  Not only has her replacement upon retirement been just as pleasant, but now she’s just a couple miles from the house. 
 
We personally would be lucky if doctors were ‘assigned’ to us the same way public schools are; place of residence.  But why should it be that way?  Why can’t we pick from a variety of schools like we do extracurricular activities?  Because at least here in Texas, where you pay property tax for your primary residence determines the public schools for your children.  That might be the only thing I like less about my great home state than the climate.
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This mystery didn’t occur to me until I took Dr. John Merrifield’s urban & regional economics course at UTSA.  He has spilled a lot of ink on the topic of school choice, including a few books, most notably perhaps 2001’s “The School Choice Wars”.  The fact that my first daughter was a toddler and her first sister was on the way at the same time only served to heighten my interest. 
 
We do have some semblance of choice here, exemplified in part by the aforementioned magnet schools.  Children can also literally be ‘grandfathered’ in to our district if their grandparents live within its borders and provide "significant after-school care".  One of my oldest daughter’s friends back in elementary school went there because that’s where her mother taught.  Transfers are possible for a handful of other reasons, but “are generally denied due to lack of space”.  
 
If parents were allowed however, to use as their initial round of funding, a proportionate amount of public revenue earmarked for that specific purpose, they could send their kids to any school they chose, assuming it meets a minimum level of state-approved criteria (children should be able to master a certain level of math by a certain grade, reading comprehension by a certain grade, knowledge of history, etc.)  Beyond that, the schools would be free to specialize however they AND the market sees fit.
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At an early age her mother & I noticed that our second-born liked putting things together.  Nowadays she has taken an interest in cooking & baking.  Our third daughter is somewhat athletically-inclined, while our fourth is kinda artsy.  Our oldest daughter is musically inclined, playing the baritone in high school band while taking piano lessons on the side. 

Those are just a few specialties around which schools could focus.  Maybe some of the places we patronize(d) would expand or merge their operations to include general schooling.  Some already provide after-school care.  The possibilities are limited only by our imagination, and that of enterprising entrepreneurs. 
 
Such schools would be free to set tuition at whatever level they deem appropriate: more than, less than or equal to the amount of the vouchers (NOT the dirty word demagogues make it out to be) allotted to each child.  But those prices would be unlikely to stay put.  For example, if a particular metro area turned out to have a higher concentration of young would-be engineers than schools to serve them, the price of tuition would in all likelihood rise to find a new market equilibrium.  Parents would have to decide whether or not they value those schools enough to make up the difference.  As Dr. Merrifield reiterated to me recently, that’s one reason the current system is flawed; a lack of price signals.  The subsequent shift in the balance of the market would be temporary, setting off an adjustment.
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As I’ve alluded to before regarding recent changes in the bee population, prices are not just the cost it takes for us to buy something.  There is a plethora of information wrapped up in the price of a good: the supply & demand of/for a good, cost of inputs, the availability of substitutes, preference for a particular good, etc.
 
One point I stress in my classes, THROUGHOUT the semester, is that suppliers react differently to prices than demanders do.  Since the entire population plays the part of a demander almost daily, we’re all familiar with that angle.  However, only a handful of us are suppliers (excluding the labor we supply when we go to work), and thus not wholly in-tune with how they react. 
 
Those aforementioned higher tuition prices would emit a signal; an opportunity for profit (another word soiled by irresponsible linguistic manipulators).  That would likely lure others to open up such schools.  In order to be competitive, the new market entrants would charge lower tuition, offer more for the same price, or some combination of both. 
 
To stay competitive, the existing schools might expand.  They also might extend financial assistance in the form of grants or scholarships to those excelling students of lesser means.  What could be better for a school’s reputation than educating the best & brightest?
 
In any event, what used to be a producer surplus would turn into a consumer surplus, as the market would be cleansed of inefficient/ineffective operators, all the while benefitting parents & children. 
 
All this assumes of course, a light regulatory touch.  As in nearly all markets, the more a public bureaucracy grows, the more innovation is dulled.  Disincentives arise.  The more standards are augmented, or altered, the more likely current market participants become entrenched at the expense of prospective new entrants (see the current debate over licensing).  All these would constitute a wet blanket that suppresses the price signals that fuel progress. 
 
Alas, as it stands now the only price signal that exists in grammar school education is … real estate??
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Even growing up in modestly-sized Victoria, TX (population 50,000), I learned there are good sides of town, and not-so-good sides of town.  The latter tend to be run-down, more susceptible to crime, illicit drug-related activity, gangs, etc.  Perhaps not surprisingly, that negatively impacts property values, and in turn suppresses property tax collections.
 
According to the Texas Education Agency, about 50% of public school funding derives from property taxes (roughly 10% comes from Uncle Sam, while around 40% comes from the Lone Star).  That hardly seems fair to those children born & raised in such property-poor settings.  Children’s education is the ultimate example of equality of opportunity, and it shouldn’t be restricted by a socioeconomic situation that was not of their making. 
 
A generation ago, after a couple of efforts by the legislature to remedy the situation were rejected by the state Supreme Court, the court eventually blessed what is commonly known as ‘Robin Hood’ (technically referred to as Chapter 41 Wealth Equalization).  A school district that has “wealth per student that exceeds” a certain level subsequently has that excess “recaptured” and redirected to property-poor districts.


And a generation later, public school funding in Texas is still an issue.
 
To make up the local component of funding for public education, perhaps an alternative to property taxes could be a county or metro-area sales tax that would be inclusive of ALL areas of town & the local economy.  This would be the most efficient, direct way to pull the funds.  No more artificial inflation of property values & taxes for childless homeowners and seniors on fixed incomes.  It would remove an inefficiency from the rental market.  It might also curtail the construction of arguably exorbitant facilities that are as tied to property wealth as they are to student outcomes.
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The Texas constitution states that “a general diffusion of knowledge” is “essential to the preservation of the liberties and rights of the people,” a point few would dispute.  Education is a prime example of a positive externality; the knowledge, skills & general human capital a student attains benefits society as a whole when employed on the push toward greater prosperity. 
 
The constitution also states that the state legislature “shall … make suitable provision for the support and maintenance of an efficient system of public free schools.”  Some number of traditional ‘public’ schools would remain where an education could be attained for the face value of the individual vouchers.  Moreover, some parents may prefer the convenience of the nearby school.  Some may simply not be able to get a bead on what it is their child has a particular knack for.
 
At the end of the day, no one is more vested, or has a greater interest in a child’s well-being & enlightenment than his/her parents.  My daughters are my best opportunity to have a positive impact on society.  Their mother & I are as integral to their upbringing & education as anyone or anything else.  Still, it should be an option for us to fund their education with some portion of the taxes we pay, at whichever school we see fit.  Every parent should have that option.   
 
A market of millions of parents can’t be wrong.

The good, the bad & the ugly from the show last night.

​The good: they sounded good.  It is, after all, Metallica.  You don’t do stadium tours unless you’re doing something right.  The stage production was pretty cool: the lasers, the flames, the videos they played with the songs, especially recreating the album cover of “Master Of Puppets”.  They also kept solos to a minimum, and made them count, especially what might have been my favorite moment; Robert Trujillo’s bass solo.  That solo just happened to be “(Anesthesia) Pulling Teeth”, a Cliff Burton track of their first album “Kill ‘Em All”.  I won’t lie; my eyes watered & my heart swelled when they showed Cliff playing the Day On The Green concert back in 1985.  Good stuff.
 
The bad: the venue.  This was only the third concert I’ve seen in a stadium, and it could be my last.  If not for Metallica, I’m not likely to pay more than we did last night to get down on the floor.  Regardless of the ginormity of the video screens, the stage still seemed so far away.  I’ve been spoiled the last few years in that most of the shows we’ve seen have been in theaters.  We’ll be able to make an immediate comparison when we see Iron Maiden at the AT&T Center next Saturday.
 
The ugly: the setlist.  I talk about this all the time with my coworker Mark, who happened to be there last night, also.  This is another thing that’ll be on our minds at the Maiden show.  First off let me say that I’m glad these bands make new music if they have it in them.  Invariably however, some other older songs get dropped from shows in favor of songs from the album they’re promoting.  That said, thank goodness a few of these bands (Slayer included) do occasional ‘classics’ tours, where all they play is older stuff.  Fortunately, I like all the new ones Metallica played last night (though they could drop the mega-bongo part from “Now That We’re Dead”), the roving flame shoring up the weakest one, “Moth Into A Flame”.  I know the black album is where Metallica made it big, but at least “Wherever I May Roam” and “Unforgiven” could have been replaced with any number of better tunes.  Maybe “Nothing Else Matters”, too.  Alas, I’m realistic about it.

It’s fascinating how much of an effect people allow a ‘big boogeyman’ to have on their psyche, especially those we can ignore if we choose to: whether it’s the ‘big, bad rich guy’, or the ‘big, evil corporation’, or the ‘big foreign strongman leader’, etc.  Throw OPEC into this mix.  Some feared they would totally crush the reborn U.S. energy industry when they declined to cut production a couple years ago.  The price duel was indeed costly for all parties, but we’re still here, and we’re not likely going anywhere.
 
Our continual improvements kept domestic production on the upswing for more than a year after the price of oil started tumbling in June 2014.  Over that time, the active rig count was dropping by almost two-thirds, assets were being sold off and the first waves of layoffs were occurring.  Yet our oil kept flowing.  It wasn’t until July 2015, eight months after OPEC made the fateful decision not to support prices, that U.S. output started experiencing a downward trend. 
 
U.S. Crude Oil Production (thousand barrels per day)

​(Source: U.S. Energy Information Administration)
 
By that time, the gutting of prices had been done.  The increased productivity that resulted from the hydraulic fracturing (fracking) innovation converged with OPEC’s defense of market share to totally overwhelm demand to the point of pushing the price all the way down to $26 in February 2016.  Adjusted for inflation, oil & gas were at historic lows.  More asset sales, layoffs (by now numbering in the hundreds of thousands) and even bankruptcies ensued.  Within OPEC, dissension started to stir.
 
As 2015 gave way to 2016, the non-Arab contingent of OPEC, who didn’t have near the savings to draw on during this market correction as Arab members, started to push for organized output cuts.  Everyone had lost a piece of the pie to the shale producers, and were now possibly set to lose more as the U.S. government lifted the oil export ban in December 2015. 
 
At last, in late 2016, as a slight recovery had already taken hold, OPEC & Russia agreed to remove more than a million barrels of oil per day from the market.  Since then, the price has fluctuated around $50.  

​Perhaps as a result of this massive market adjustment, a prospect unimaginable just a decade ago has started rising above a whisper; the ‘end of OPEC’.  Whether or not that happens remains to be seen.  It might be more likely that we’re witnessing a taming of the boom-bust nature of the industry.
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The Organization of Petroleum Exporting Countries was formed in 1960 “to coordinate and unify … policies … and ensure the stabilization of oil markets in order to secure a … regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry.”  It’s a cartel, something we don’t see in the U.S. because it’s illegal for firms to collude in price/supply fixing. 
 
Oil is a perfectly competitive good.  It’s a homogenous product in that it differs very little from one producer to another.  ‘Your oil is like my oil is like his oil.’  A producer in such an industry is a price taker, and in a perfectly competitive market free of collusion, all profit is eventually drilled away.  Moreover, as are many other commodities (agricultural products), oil is an inelastic good.  Demand is less sensitive to price because food & energy are more valuable to consumers than say, another pair of sneakers or earrings or T.V. 
 
Combine those two characteristics, and one motivation for OPEC’s formation becomes apparent.  Add a flexible & nimble independent wild card like shale producers, and the result is the 2-year battle for market share from which we’ve only recently begun to emerge.
 
Perhaps the catalyst to OPEC’s current predicament was the growth of the developing world, the various international skirmishes & conflicts and dollar weakness during the dawn of this century.  These forces came together to push the price of oil up to almost $150 in 2008.  Compounding matters was the particularly low level of spare capacity it had, precluding its ability to bring the price down with more supply.  This turned out to be the price signal that was needed to make fracking viable.  And once that genie was out of the bottle, there was no putting it back. 
 
OPEC Spare Production Capacity (million barrels per day)

​(Source: U.S. Energy Information Administration)
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From the current juncture, there are multiple directions price could go.
 
According to OPEC’s website, the oil industry makes up an average of almost half of the gross domestic product of member countries, and accounts for 90% of export revenues.  Some plan, or have attempted to put their economic eggs into other baskets. 
 
Under the direction of King Salman’s son, Crown Prince Mohammed bin Salman, Saudi Arabia last year announced a plan with the goal of diversifying its economy so that it relies less on oil.  It appears as much social advances (more women in the workplace and defanging religious police) as financial ones, the latter of which includes expanding their sovereign wealth fund into the world’s biggest, and selling almost 5% of the state-owned oil company, Saudi Arabian Oil company (Saudi Aramco). 
 
If other countries succeeded in such efforts, as Nigeria has tried for a number of years in developing their digital economy industry & mining of other natural resources, the supply of oil could theoretically decline, as inputs such as capital & labor would be pulled in other, possibly more lucrative directions.  That’s what shale producers are facing as they attempt to respond to a firming market; laid-off workers have moved on, in some cases picking up stakes & moving to other states altogether.  This raises expenses beyond which some companies can afford.  Hence, supply dries up, and upward pressure on oil prices is felt. 
 
On the other hand, some non-OPEC countries have opened the door to foreign participation in their respective industries. 
 
In 2014, Mexico did so for a small portion of its proven reserves, and a large chunk of exploration for new resources.  There also may be opportunities for these firms to work with the state company, Petroleos Mexicanos (PEMEX).  While down on the other side of the equator in Latin America, Petróleo Brasileiro SA (Petrobras), Brazil’s scandal-plagued, mostly-state-owned petroleum company, has fielded interest from Shell et al regarding the so-called pre-salt oil fields in the deep waters off its coast. 
 
Even Russia’s state-controlled company Rosneft is selling off chunks of itself.  And while Russia does have significant shale resources, international partnerships to exploit them ground to a halt as a result of diplomatic sanctions put in place after its annexation of the Ukranian territory of Crimea.  As it is, the most prominent case of diffusion of fracking technology looks set to take off in the Vaca Muerta region of a more business-friendly post-Kirchner Argentina.
 
If such foreign direct investment bears fruit, it would likely introduce efficiencies into the sectors of the respective countries.  Consequentially, they would realize the dropping breakeven points experienced here.  Hence, more product would flow into the international market thereby pushing the price down.  
 
Conversely, if they suffered the same fate of asset seizure that many companies of varying industries have experienced in Venezuela (most recently GM), this would tend to restrict supply, sending prices in the other direction. 
 
Venezuela is an extreme case in that it has been poorly governed under the late Hugo Chavez and his successor, Nicolas Maduro.  They have so mismanaged the largest reserves in the world that they can barely afford to bring any to market.  Theirs is a classic case of the distortions introduced into an economy by government meddling; their production should have been on an upward trend until prices tanked.  As it is, they serve to put a floor under prices.  And if Venezuelans continue to ramp up their dissent in the face of increased government efforts to ineffectively assuage (six hikes of the minimum wage in the last year!) and/or suppress it, the result could be something that causes further drops in production; armed conflict.  

Nigeria & Libya were exempted from the recent OPEC cuts for just such reasons.  The former has suffered attacks mainly from the terrorist group Boko Harem, while the latter endures civil strife in the battle to control production since Muammar Gaddafi was deposed in 2011.  Closer to home, Mexico has experienced a surge of pipeline thefts recently, partially at the hands of the notorious drug cartels that operate within its borders.  All these countries have experienced drop-offs in production, which pushes the price up.
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All the while, the U.S. shale producers have emerged as a new type of ‘swing producer’. 
 
We have a comparatively stable society where the risk of armed conflict is low, and the chance to strike it rich with technological innovation is encouraged by the presence of intellectual property protection.  And now, not only do we have the opportunity to export that know-how, but for the first time in a couple generations we can export some of our resultant abundance to the rest of the world (not to mention possibly a little more security to our allies, subsequently fostering more peace). 
 
The lifting of the export ban enhanced efficiency by reintroducing the U.S. as a major international player, comprised itself of hundreds of autonomous participants.  It provoked what was, for all intents & purposes, a free market response from OPEC in the fight for market share. 
 
The evolving nature of our industry could actually serve to stabilize prices from here forward.  As the Wall Street Journal reported a month ago, a recent 4-month trading range of oil was the tightest such stretch in 14 years.
 
Moreover, our industry isn’t directly burdened with the responsibility of funding the state; it makes up only 5-10% of our diverse economy.  We have been able to produce more & more at less & less cost, while redeploying resources that got us here to the other 90+%.  OPEC countries et al can no longer afford the higher breakeven prices necessary to support their relatively more bloated bureaucracies. 
 
OPEC’s next official meeting is May 25th.  It’s looking to be somewhat anti-climactic however, given the signs they have been sending lately pointing to continuing the cuts instituted last November.  While we are certainly witnessing the end of the old OPEC, the organization itself probably isn’t going anywhere.  Given its recent outreach to Egypt & Turkmenistan, not to mention its closer cooperation with Russia, its ranks might actually swell a bit.
 
U.S. shale producers aren’t going anywhere either.  In fact, we’re likely going to keep on improving.  Just the other day, I toured a 2-year old rig that’s even more nimble than our 4- & 5-year old rigs.  Technology does not recede; it only advances.
 
In the past, some of the U.S.’ competitors blamed ‘the Great Satan’ for theirs & the world’s ills.  Ironically enough, they would be correct this time, but for all the right reasons.