Shelter in the Open

This is the second of my two reflections on last week’s OpenEd18 conference. This one is personal. I’m stepping outside my normal economist persona and sharing my personal experience. Actually, it’s less a reflection on the conference than reflection on what I learned about myself at the conference.

Open conferences like OpenEd, OER, and OEGlobal should come with warning labels. I’d throw Digital Pedagogy Lab and Domains conferences in there, too, but it would ruin my alliteration around “open”. At good conferences you learn lots of useful things. You think differently afterward. At great conferences  you connect with people. You work differently afterward. But the open conferences can change you. You may be different afterward. I am.  I first wrote about this experience a couple years ago after OpenEd16. It happened last spring at OER18 and OEGlobal. And it happened again last week at OpenEd18. I wasn’t ready for it. They really need a warning label.

At an evening get together with some friends I finally confessed. I’ve never karaoke’ed. Reasons. Many reasons. Some include an utter lack of singing ability. Another is age. I’m from a different generation. I’m a boomer. Karaoke seems like it’s more a Gen X/Millenial thing. An 80’s-90’s thing. I’m a boomer. Grew up in 60’s. Came of age in 70’s. We had radio. Lots of radio. So I don’t sing in public. Instead, there’s a constant rock’n’roll soundtrack in my head. The Who. Stones. Doors. Dylan. Pink Floyd.

This past summer has been brutal. Heck, the last two years have been brutal at the news and macro level. Trump. More war. More hate. At work, it’s been just as stressful. No home or certainty for the open learning project I started. Political infighting. Overwork and no appreciation. Stress. A valued personal friendship hitting the rocks as collateral damage.  That 60’s soundtrack has been turned up to 11, maybe even 12.

The stress culminated in some serious health issues this summer.  Doc says slow down, take care of yourself first.

Ooh, a storm is threat’ning
My very life today
If I don’t get some shelter
Ooh yeah, I’m gonna fade away
War, children
It’s just a shot away, it’s just a shot away

I needed shelter.  A home.
The physical issues have me feeling my age.  People my age, including many colleagues, are thinking retirement. But my soundtrack keeps screaming. There’s work to do. I’m not done yet.

Ooh, see the fire is sweeping
Our very street today
Burns like a red coal carpet
Mad bull lost your way
Rape, murder.
It’s just a shot away, it’s just a shot away

Work to do. But I’ve been lost about how I can help. The Open conferences the past few years have been fantastic. They feel like a home. But I’ve not been clear what I can do. I’m not really an expert in pedagogy. I’m an economist, not ed psychologist or sociologist. I understand tech systems. I can even design some innovative ones. But I don’t actually code. At the school, the semester starts with me feeling ghosted.

Mmm, the floods is threat’ning
My very life today
Gimme, gimme shelter
Or I’m going to fade away

Gimme, gimme shelter.

OpenEd18 answered.  Last year’s OpenEd17 pointed me towards the commons and education.  It led to this blog post last spring. Conversations with David Wiley (and my scholarly spirit animal, Chris Gilliard) inspired me to rejuvenate my scholarly work and do a deep dive on the economics of commons and education. That led to my OpenEd18 presentation and it’s blog post. Conversations and the reaction to it have me fired up to do more on the topic.  And  while they weren’t at this year’s conference, I was reading Sean Morris and Jesse Stommel’s new book at the conference An Urgency of Teachers.  They describe critical pedagogy. One aspect is:

“How can critical pedagogy help to examine, dismantle, or rebuild the structures, hierarchies, institutions, and technologies of education?”

Bingo. I can do that. I know that work. I’ve 40+ years of work leading up to this. I can contribute here.  Thank you to David Wiley, Paul Stacey, Lisa Petrides, Doug Levin, Sean Morris, Jesse Stommel, Robin DeRosa, Rolin Moe, and others for helping see my niche to contribute. I know a lot of you saw this before me, but when it’s about the self, I’m a little slow. Thanks to a comment Rolin Moe made I understand I need to take care of myself precisely so I can continue to contribute for a long time. It’s a long haul.

I had hoped to see my friends at OpenEd18 and I did. But I didn’t expect the love. I know I should have, but I didn’t.  Friends like Ken Bauer, Bonnie Stewart, and Amy Collier not only understood but made sure I took care of myself.

The list of of other people I want to thank is so long I fear I’ll leave too many out. But thanks to Ken, Rolin, David, Bonnie, my new friend Jess Mitchell, Amy, Lisa, Doug. Also Daniel Lynds, Terry Greene, Sundi Luella, James GlapaGrossklag, Shawna Brandle, Bryan Ollendyke, Hugh McGuire, Billy Meinke, Steele Wagstaff,  Autumm Caines, Joe Murphy, Nate Angell, Christina Hendricks, and many many others.

I tell you love, sister
It’s just a kiss away, it’s just a kiss away

I’m not instantly cured. I still need to pace myself. But with friends and kindred souls like these, I will.

In true boomer tradition, the first song on the “radio” (Pandora counts as “radio” right?) in the car on the way home from OpenEd18 was, you guessed it, Gimme Shelter.

I got shelter. I got love. In the open.


Lyrics excerpts in block quotes quoted are from Gimmer Shelter by The Rolling Stones as found at Genius.com. Copyrights apply. Excerpts used under U.S. fair use.

 

Reflection on OpenEd18: Becoming Open Education

Last week I participated in OpenEd18. This was my fourth OpenEd which, given the growth in the conference, makes me one of the “old hands” in the kind words of David Wiley.  This is the first of two reflections I’ll post about the conference. In this one, I’ll give some broad impressions of the topics and content, and how it influenced me. In the next post I’ll cover a bit more of my personal experience of the conference.

The conference this year, I’m told, was the largest yet topping out with over 1,000 registrations. I can’t verify that but I know it seemed larger. I know there were lots of great sessions, often competing with each other, creating as Rolin Moe observed a “tragedy of riches”.  Yes, the opportunity costs of sessions were often high.

I’ll just list here some of the highlights for me.

  • Jess Mitchell’s keynote on inclusion and access. Actually, calling it inclusion and access doesn’t do it justice. It was an inspiration and a model of just being human and treating and seeing everybody as human. Thank you Jess. This was also my first time meeting Jess in person and having a chance for multiple conversations with Jess was a real highlight for me.  I’m richer now.
  • Panel discussion at OpenEd18My panel discussion on “Publishing Your Own Textbooks”.  I had the privilege of moderating a panel discussion with three fantastic and smart people: Karen Lauritsen of Open Textbook Network, Allison Brown of SUNY, and Lillian Rigling of eCampusOntario.  I honestly don’t understand why guys so often organize manels.  It’s pretty easy to look smart when you got a crew like these three leading the way.  Thanks Karen, Allison, and Lillian.
  • There were several sessions discussing the broad, institutional and organizational aspects of open education in higher education, often couched in terms of a “commons”.   I’d like to include my own talk on whether higher education is a commons or not, along with David Wiley’s session and Paul Stacey’s, among others.
  • It was great to see Pressbooks and Rebus community getting so much attention. I really think PB is a key to our future.  I also want to thank Bryan Ollendyke of Penn State and Hugh McGuire for the multi-hour conversation we had about future (it’s present for Bryan!) of the Web technology.  In particular, his explanation of web components and his HAX project had me excited but also had my head exploding. The brain is full.
  • Rolin Moe’s session on innovation and open closed it out for me.  I love it when a session gets me thinking “oh, I don’t thought about that…” and then the grey cells start firing away with all kinds of possibilities.

I was impressed with the number of sessions (including the afternoon “unconference” session) focused on reflection of what our values as open education are, do we really live up to them. Lillian Rigling did a wonderful reflection afterwards about putting our values into practice.  The conference has come a long way in this regard, but there’s more to do as Lillian notes. I have noticed as an “old hand” how much the conversation has shifted from just free textbooks/OER to include sustainability, inclusion, and open pedagogy.

The conference is not just growing but it’s also maturing.  That’s a good thing. Free textbooks and OER are always important, but they’re only part of “open education”. We need to continue to include all aspects of an open education:  including K-12, open institutions and open organizations, open pedagogy, critical pedagogy, sustainability, inclusion, open science, and open access.

Overall, a good conference.  Thanks to David Wiley and the program committee for organizing it.

Big Ag, Big Food, and the Commons -revisited

Today I’m reprising a talk I did last year with Professor Elizabeth Robison’s Sociology class.  We’ll be discussing a brief history of agriculture and food production in the U.S. Key points are how the capital requirements, political dynamics, and technology developments have combined to make food production anything but the success story free market advocates often claim.  One thing I’m adding this year is some insights into how a commons works and how the commons and coops might rescue us from Big Food and Big Ag.

Link to download slides in Powerpoint format.

OER, Higher Ed, and the Commons

After spending the past year studying both the economics of a commons, as well as the history and evolution of higher education, it’s long past time to say something about what I’ve figured out.  This is the first post along those lines and I hope it’s not the last. What follows here is a light introduction to a model I’ve developed about how higher education operates as a commons. I’ll also be talking and introducing the model this week on Thursday morning at the OpenEd 18 Conference in Niagara, NY.  I hope you can you be there, but if not, you can follow along here with the home game.

In the past year or two, or maybe since this whole OER discussion began, several questions have frequently popped up in open education circles. I think the model I’ve developed might help us gain some insights on these questions. I know it is helping me. The model isn’t perfect. Right now it’s even primitive. I know I’ll make statements and warrants below that need to further exposition in future blog posts and papers. But I think the model’s got legs in helping generate insights.

Among the questions I keep hearing in open education circles include:

  • Are OER sustainable?
  • Are for-profit publishers and their “inclusive access” programs helpful and supportive? Or are they just open-washed attempts at enclosure?
  • What’s the relationship between open pedagogy and OER?
  • Is there a connection between open pedagogy, OER, and critical pedagogy?

I hope the model can begin to help sort out these questions.

First off, though, we need to establish some basics about what a commons is and what it isn’t. Many people have grown up and been educated with the Garett Hardin myth of the “Tragedy of the Commons”.

There are lots of flaws with Hardin’s characterization of  a commons. I won’t go into detail about them here, I’ll just let my slide from the presentation summarize of few of them.  Basically, what Hardin describes as a “commons” isn’t one. As Lin and Vince Ostrom spent their careers documenting, the commons does work. In fact, it often works so well that we are blinded to it’s existence.  Before I leave a discussion of Hardin and the “tragedy” of the commons, I want to make a few points. There is a lesson to be learned from Hardin’s “tragedy”. Namely, if we allow conditions and norms to develop within the OER/open education efforts such that we mimic Hardin’s description, then it will lead to tragedy and failure. It will not be sustainable.  Specifically, if we allow unrestricted free access and usage to anyone without regard to reciprocity or care for the commons, then OER is not sustainable. If we allow purely self-interested behavior by participants that emphasizes monetization and a purely transactional, consumer orientation regarding OER, tragedy will ensue. And, most important, if we continue to foster isolated users and isolated teaching while pushing for a commodification of “knowledge” into books and course materials, then our commons will fail.  I don’t believe it must be that way.

Lin Ostrom wrote and researched extensively about what a commons is and how to govern a sustainable commons. Her greatest books, Understanding Institutional Diversity and Governing the Commons are admittedly a tough slog for the reader not well versed in game theory or institutional analysis.  However, there are some clear conclusions that highly relevant to our open education discussions.

First, a commons is NOT about the resources. The commons is about the institutional structures and norms that people use to govern themselves in a productive situation that poses a social dilemma. Yes, there are often resources involved (duh, it’s “productive”).  But the resources in question are what’s properly called a common pool resource (CPR) not “a commons”.  Indeed, it’s not even any particular characteristics of the resources in the CPR that creates the commons. Resources just are. They’re resources. Things. Stuff people use to make to other things. It’s the institutional, social, economic, and technological structures and norms that people create that constititute the commons. They create a commons because they want to produce using an CPR.  Although it’s true that resources which are rivalous (sometimes called “subtractive”) in nature often tend to be associated with a commons, it is not a necessary condition.

So what makes a commons and what is a commons?  In simple terms, a commons is social-economic institution that conforms to neither the market-private property paradigm or the state-leviathan paradigm. The commons is rather stuck between the rock of private property, profit-seeking organizations in the market and the hard place of state organized and run public bureaucracy. In our modern world, particularly in the more developed, richer nations, we have lived under the domination of these two paradigms of socio-economic structures, market and state, for so long it’s often hard to imagine a commons. Yet over 2 billion of the 7 billion on the planet depend on the commons for their subsistence. And nearly all of us are dependent on the commons in one way or another for some significant aspects of our lives.

In short, Commons is A Verb.  A commons is what people do and the institutional structures and norms they establish to accomplish their goals.  Their goals do not necessarily have to be shared goals or priorities. What is is necessary is that the realities of production or achieving their goals causes some group of people to be inter-dependent upon each other for the outcomes.  Yes, a limited, shared CPR that consists of rivalous, non-excludable goods  such as fish in a particular fishing area will create the conditions. But the conditions/properties of the goods themselves do not dictate the existence of a commons. The commons is the response of a group of people to a shared social dilemma. In broad terms, a commons arises when people have individual choices to cooperate or not cooperate but the personal outcomes to them depend on both their own choices and the choices of others.

How is this relevant to OER and open education? OER is not what’s primary.  Yes, OER consists of “educational resources” and we often think of OER as a common pool resource. It is in a way, but it’s not the primary resource and it shouldn’t be the focus of our attention on the commons.  OER are “resources” and we use them to help produce more learning. They’re inputs into the learning process. But they’re not the only resource pool and they’re not the critical resource pool.  If we consider that the pool of OER itself is replenished by the activities of scholars – faculty and students – we realize that OER is more of an output pool of artifacts of previous learning. Educational resources – books, etc – can be thought of as community produced capital goods. Educational resources might appear to us to be a scarce resource, but that’s only a side effect of the technology and organizations used to print and publish educational resources them. With recent revolutions in web technology and information publishing, we might to get past that scarcity. However, we still face some critical CPR’s and a need for a commons.

Higher Education is a Learning Commons.

If we start with the idea that a commons is a verb. That is, it’s what people do, then we can better see the real commons in higher education. What we do is learning. We learn. Faculty and students alike learn. We’ve been enculturated as faculty in the last century to see teaching and research (or scholarly work) as somehow separate. They’re not. They’re both learning. In “research” we focus on ourselves as the learners. In teaching, we focus on the students as learners.

I suggest that the commons in higher education is a learning commons. Ostrom points out that a successful commons has clear boundaries as to who is in and who is out of the commons. I should probably be precise and say higher education consists of a “scholarly learning commons”, but for convenience I’ll stick with learning commons. I emphasize learning commons instead of “education commons” or “knowledge commons” since those alternate terms emphasize things which easily get confused for resources. They’re nouns. The commons is about the doing, the verb. We learn. We facilitate learning in others. And we learn from them.

An aside: I do find it inconvenient that college presidents throughout the country have jumped on a bandwagon to rename tutoring centers as “learning commons”. That’s not what I’m referring to. That’s just a buzzwordy renaming of an existing department. 

There are alternative institutional arrangements for the activity we call higher education. Indeed some of those alternatives such as for-profit, corporate-like structures are attempts to rebuild higher education as a private property, market-oriented firm. Even some non-profits, such as Western Governors, are doing that in my opinion. But, if we think of higher education as a possible learning commons we can begin to see the connection between the learning commons and critical pedagogies. Paulo Friere, of course, in the Pedagogy of the Oppressed,emphasizes the roles of teacher-student and student-teacher and how both teachers and students learn from each other. This is consistent with concept of a learning commons. One feature of any commons that helps distinguish it from private property-market institutions is how members of a commons are simultaneously both producers and consumers. There may be exchange between them, but it’s secondary. Everybody acts as both creator/producer and user/consumer to some degree. Most importantly, the value created in the commons is not universally commodified and monetized. Market exchange is not central.

I think the real reason faculty and students join and engage in the learning commons is because they want to learn. It’s easier, faster, and more rewarding to learn socially. It’s certainly possible to learn more, faster with some instruction than it is by oneself.  This is the core motivation. Certainly it’s the real reason faculty engage the learning commons for a lifetime. They love learning. It’s certainly not the money. The money has never been very good relatively speaking.

But, it does take money or some source of support to live. For that, civilized societies have throughout history (or at least the last 2-3 millenia) found it useful to support some of these specialized learners. There are broad positive externalities to society to having at least some very learned people focused on learning, so the society provides some pools of resources to support the learning commons. In return, the commoners, the scholars, return knowledge and external benefits to society. It’s actually very rational.

The learning commons model with CPR's identified as libaries, places, and learner time.But what kinds of resources does society provide? Are they common pooled resources?  I think there have historically been three major common pooled resources. First is that the learners  themselves must be supported so that they can spend their time learning, studying, and teaching each other. Ultimately, this is the most critical common pooled resource we have: learner time and by learner, I mean both faculty and students.

The other two significant common pool resources are place and libraries/books. Of these, place has been historically one of the most critical since the learning commons is social. It has historically required a dedicated place where learners come together. Roy Lowe and Yoshihito Yasuhara explain very well in The Origins of Higher Learning how these two are closely linked. Dating back to the earliest civilizations, where states created libraries are where the great centers of higher learning emerged. They eventually became our colleges and universities. Libraries gave birth to higher learning.

Books, in fact, are the capital goods of higher learning. The process of learning itself – what the faculty and students are doing in the learning commons – often is best done by writing or creating artifacts. This creates a virtuous cycle. The act of learning is facilitated by writing. We write to learn. But by creating these artifacts, we are not only facilitating our own learning, we are creating the very capital goods – books, articles, notes, lesson plans, etc – that empower greater learning in the future. Libraries (and museums), of course, have been the main repositories of these artifacts of learning. The primary limiting factor on the creation of new education resources is the time of faculty and students to create them and the willingness of faculty and students to share them.

So where do printers and publishers fit in this model? This topic, what I think of as the “capital structure of learning”, is worthy of an extensive deep-dive, which I hope to write soon. Here, I’ll just highlight a few aspects.  The invention of printing by the Chinese 1500 to 1800 years ago helped spread libraries and higher learning by making more copies available faster than was possible from hand-copying. The social accumulation and dissemination of capital (books) made it possible to locate higher learning in more places, making learning more accessible.

When Gutenberg invented moveable type and mechanized the printing press in the 16th century, the accumulation process took off. It really accelerated the collection and dissemination of the written artifacts of learning. Books spread and with them libraries spread. More colleges and universities became possible. The invention of printing made higher learning more accessible to a wider range of people in more locations. In effect, the printing press boosted and accelerated the capital accumulation process in higher learning. More books. More copies.

However, printing presses are themselves capital investments of a different kind. While printing presses could easily disseminate hundreds or thousands of copies of a book or pamphlet, they couldn’t easily print and disseminate all written material. The press, or access to the press, had to be rationed somehow.  Thus began the process of “peer review” or vetting of materials to see if they were “worthy” of printing and dissemination. For several hundred years the primary effect of printing on our learning commons was to enable learning in more places and by more people. Colleges and universities began to grow and really thrive.  Yes, there was an added cost and therefore an added drain on the gross resources devoted by society to higher education but it was easily offset by the expanded positive externalities to society of expanded access to higher education. So far. So good.

Eventually the industrial revolution hits and printing/publishing of educational materials becomes a capitalist for-profit enterprise itself.  What started as a service provided to higher education by printers becomes a for-profit, investor-funded capitalist industry. Growth of the publishing enterprise and its profitability rather than the dissemination of learning becomes the overriding objective. There are some  reliable and time-honored strategies for growing highly profitable industries in capitalism. Not all of them involve net gains for society.  The publishing industry has pursued all of them:

  • creeping enclosure of the commons and conversion to private property
  • divide some sphere of activity into producers and consumers with a resultant commodification and monetization as market transactions
  • erect barriers to entry, limit access, or create an artificial scarcity, ensuring higher prices and therefore profits
  • seek either government subsidies or the creation of a government/social provided stream of resources which can be tapped for investors to extract their profits

I will leave it to another post to detail how the publishing industry has done this, but suffice to say here the fight over OER is a battle over these strategems.  Copyright law has converted books and the information in them into private property. The educational publishers extract value from the same source of resources as all higher learning but the existence of profits (economic profit rates of return) means they remove more than they return – an unsustainable drain on the commons. The emphasis and shift to textbooks as opposed to treatises, simple books, or monographs has been as much an attempt to enclose and displace the faculty as it is a “quality enhancement” or time saver. The expansion of publishers into course platforms, online homework packages, and course-in-a-box represents more of the same expansion of the publisher’s realm. And with that expansion of the publishers role and realm is a shrinking role for the faculty. Faculty and students become consumers, not producing-using learners. They adopt and buy instead of creating and learning. The commons fails and is enclosed.

Toward a Comedy of the Learning Commons

Lin Ostrom and others have talked about how to create a comedy of the commons, meaning the opposite of a tragedy. Fortunately, there are people doing that. I am encouraged, for example, by the Care Framework put forth in the spring of 2018. I wrote about that in a post earlier this year on OER, Care, Stewardship, and the Commons. There are many other noteworthy efforts. This post is already too long, so I’ll only list what I think are some of the key ways we need to change our focus so we can build a comedy of the learning commons.

We need a concerted effort to determine and enunciate what our community values and norms are. Ostrom also points out that a comedy of the commons actively monitors and enforces its norms. That needs to be part of the discussion. The Care Framework is a good first step.  So are the many discussions happening at open education conferences and online about what does it mean to be open. But we need to expand these conversations. We need to involve questions of governance of our college, university, and learned society organizations.  We need to involve as many of our colleagues as possible, not just the “open evangelists”.

Perhaps the CC-BY license isn’t the best for the learning commons. It’s not the only “open” license. There’s GPL. There’s Peer-Production License. There’s also CC-BY-SA and NC. Perhaps we need to write a new one that conforms to our needs and norms.   Yes, CC-BY and CC0 are the “most free” licenses in the free culture sense. And yes, using those licenses constitutes commoning in the Creative “Commons” (remember it’s the actions, not resources that are the commons). But a successful commons is a layered, nested, polycentric thing.  The most successful commons is a small one with personal communication and familiarity among the members. We need to do what is best for our learning commons. But we can only discover what that is by talking.

We need to emphasize fairness. The perception of fairness is critical. I encounter large numbers of faculty who are have created large amounts of educational resources themselves. I suspect everyone who has ever taught has a some files or papers they’ve created but not shared. It may be worksheets. It may test questions. Whatever. But they are isolated. They’re not shared. Why? They’re not shared partly because sharing is actually pretty hard or time consuming these days – and remember, our time is our most scarce resource!  But increasingly I’m hearing and seeing people not sharing because they perceive unfairness. Others will “take” their work and not reciprocate. A perception of unfairness or lack of reciprocity by others will kill any commons. The current craze for “inclusive access” programs by publishers whereby faculty create OER but the access is monetized and sold to students rightly strikes many as unfair.

We need to recognize that higher learning itself is the commons and that our time as faculty, teachers, students, and librarian/archivists is the critical common pool resource. The books aren’t the CPR. We are.

We need to recognize that the creation of learning materials is the critical step. It is integral to learning. Instead of increasing the division of labor wherein a few publishers dictate who the few “creators” are and the rest of us become mere consumers or adopters, we need to focus on creation.

A focus on creation means more and better tools. Some of this happening. Pressbooks is an example. But we need more. A lot more. We need and easier ways to share the pieces or components of educational resources so we can make or mix our own. We need a commons of our own in every college department for sharing assignments, images, questions, and chunks so we can roll-our-own quickly and easily. It’s our time, after all, that’s the scarce and subtractable resource. the critical CPR.

We need to go beyond permissions. Yes, permissions are necessary in a world of state-granted copyright monopolies and property rights. But we should not fool ourselves into thinking that assigning a CC license to a work alone is being a good commoner. The permission to revise or remix is meaningless if source code or source marked up texts or the original creation platform is not available. If it’s impossible or impractical to exercise the permissions, then they are useless virtue-signaling.

Finally, we need to pay attention to resource flows. I’m not opposed to private enterprises. Payment for services is a legitimate use of our scarce resources in higher education if we get good value. But investor-funded for-profit organizations are a risk. Their first objective must always be returns to the investors, not the health of the commons. Further, as the public in general comes to see higher education as just another capitalist industry feeding large publishers, they lose sight of the value to society of supporting higher education with public funds.

We need to add another R to David Wiley’s 5 R’s:  Reciprocity.

My OpenEd18 presentation Powerpoint file on OpenEd18 oct 2018 Commons Tragedy Comedy is available for download here.

 

 

Debt: Good, Bad, Ugly, and Not-Really

Debt is often considered something bad in our society. At the beginning of any semester in the macroeconomics principles I’ll have many students identify debt – either the “national debt” or student loan debt or even just household debt – as a leading macroeconomic challenge facing the nation. The reason is because debt is an ideological issue as much as an economic issue. The ideology surrounding debt, the ideas that it’s purely an individual decision, that the borrower is the one morally culpable, and that default is a character or moral failure of the borrower, is part of enforcing a particular property rights and political power structure.

To determine if debt is “good” or not economically, we should ask what the function or role of debt is.  Why is money being borrowed? What is accomplished economically by allowing borrowing? Why might loans not be repaid? Who benefits from a loan?

The basic economic role of private debt is to help overcome a temporal mismatch. The role of public debt is often to change the distribution of resources and activities.

Private debt is basically a temporal problem. Many desirable economic activities have a mismatch in timing. For example, consider one of the oldest temporal mismatches: agricultural production. Farming requires spending resources (costs) well in advance of the receiving payment or revenue. A farmer has to eat all year and pay for seed, etc, before and during growing season but only receives revenue at the end at harvest. A farmer who isn’t independently wealthy then borrows and pays it back from the harvest.

Student loan debt is another example of temporal mismatch. An educated student can be highly productive as a worker/employee after they receive their education. But the costs of education come first. Obviously having students borrow money to pay the costs and then pay back later out of their (assumed) higher productivity and earnings is a way to pay for the costs. It’s not the only solution. It would also be possible for the government to pay the costs of education now and then recoup the government’s “investment” through a larger tax base and/or more prosperous populace.

Since food and knowledge are generally good things and debt facilitates producing them both, you might think debt would be considered good. But there are also situations where it’s not desirable.  To explain, I’m going to classify debt into four types: Good, Bad, the Ugly, and Not-Really.

Good Debt

Good debt is a temporal (and temporary) redistribution of resources aimed at increasing total production. This includes the example above of a farmer borrowing capital to enable clearing fields, acquisition of seed and fertilizers, equipment, and working capital before and during the growing season. The debt is then paid back from part of the proceeds of the harvest. Much corporate borrowing when the debt is used to finance expansion or capital equipment falls into this “good debt” category. Among individuals and households, debt can also be “good debt”.  Student loans fall into this category. Even car loans can sometimes be considered this category since access to a car is often necessary for employment.

These are economically “good” debts because they enable greater production, greater goods, and a better life in general – all aims of our economy. But being “good” debt doesn’t mean risk free. Any debt is inherently risky. The future is unknowable. Since debt means a partial transaction now (borrower gives lender $) and a completion of the transaction (repayment in the future), it’s always possible the future doesn’t play out as expected. The harvest prices might be too low and the farmer can’t repay. Employers might not pay enough to graduates to enable repayment of loans or recessions may send unemployment rates too high. Societies often provide a “reset” button to enable individuals who are deeply in debt and the future didn’t work out right to enable repayment. In ancient times, many societies instituted “debt jubilees”. In our society we have bankruptcy courts. Either way, the function is to spread some of the risk of the future to lenders and not just on borrowers.

Bad Debt

Economically, bad debt would be debt that facilitates excessive consumption of resources today without increasing our future ability to produce. It’s just shifting consumption forward without creating new or greater resources. It’s prodigality. It’s the spendthrift.

This is image that I suspect many have when they think of debt as “bad”. In most systems or religion, morality, or ideology there are often admonitions against prodigality or being a spendthrift. In our current society this debt could be the household that borrows excessively for recreational toys such as boats, excessive clothing, etc. But it’s not just households that engage in “bad” borrowing. Firms often do too. The productive, profitable firm who is acquired and taken private by “private equity investors” is often forced to borrow excessive amounts of money simply to pay dividends to those same “investors”. No new economic productive capability or resources are created. It’s just a redistribution of wealth to the wealthy.

Not all borrowing for immediate consumption purposes should be judged “bad” though. It depends, like most economic analyses, on what the alternatives are. Typically, the idea of borrowing to finance current personal consumption needs is considered unwise. For example, borrowing money on a credit card to finance the weekly grocery shopping strikes most as a bad idea. But, if the only alternative to borrowing money is starvation or disease, then borrowing is the right thing to do.

The Ugly Debt

Economically ugly debt is debt that’s tainted by fraud or moral hazard. Socially we condemn the borrower who borrows knowing they don’t intend to pay back (Fraud) or conceals from the lender information about future actions (moral hazard). But fraud and moral hazard are present on the lending side as well. In the run-up to the Great Financial Crisis of 2008 banks and mortgage brokers often encouraged marginal borrowers to take out mortgage loans knowing those borrowers were unlikely to be able to afford it. The lenders then sold the mortgages to others, getting their fees and leaving others with the risks and costs of default. Fraud and moral hazard.  Neither are economically useful.

Not Really Debt

All the situations I’ve described above involve what economists classify as “private debt”. That is, it’s private parties, either firms, banks, or households, that are the lenders and borrowers.

When the borrower is the national government it is “public debt”, not private. In the U.S., this is often called the “national debt”. Public debt isn’t like private debt at all. At least if the government is a national government with its own sovereign currency. This means the US, UK, Canada, Australia, China, Japan, and many, many others.  It does not include members of the European Monetary Union such as Germany, Italy, Spain, or Greece.  As long as the nation borrows in its own currency and that currency is a fiat currency, there is no risk of default. This is because the nation can always issue new currency to pay off any bonds used to “borrow”.

In practice, such public debt isn’t really debt in the way we traditionally think of private debt. It doesn’t really have to be “paid off”. Technically bonds come due but can either be rolled over into new bonds or paid off with newly issued currency or acquired by the central bank (same effect as issuing currency). In fact, it’s misleading to draw analogies between the public debt to private debt. Public debt is more like the currency itself. Consider the differences between a $1000 government bond and a $1000 note. Both represent commitments from the government to provide $1000 worth of value in exchange. The key difference is the bond pays interest and the note doesn’t.

There is a limit on the borrowing/spending capacity of the government though. That limit, though, is not the kind of limits we associate with private borrowing/lending. Rather, the limit is inflation and availability of real resources. As long as the unused, unemployed real resources or productive capacity exists in the economy, then the government can create the spending to utilize those resources. Whether or not the government decides for accounting purposes to create new money or to borrow existing money from banks is a macroeconomic policy choice decision. Unlike private borrowing where the money must be borrowed or otherwise obtained first before being spent, the government spends the money into existence first and then uses either taxation or borrowing to remove the money from circulation in the economy.

A major reason for governments to “borrow” money has to do with risks and private spending habits. Wealth and money are very unevenly distributed across the economy. A few very wealthy people possess most of the money. However, those people often do not desire to risk their fortunes by lending it as “good debt”. Instead, they seek interest-paying safe, risk-free ways to store their wealth. Government bonds provide those risk-free ways of storing money. However, in the process, this means the money (capital) is withdrawn from general circulation and doesn’t get put to economically useful “good debt” productive activity.  The government, by issuing risk-free bonds and simultaneously running a budget deficit, provides the safe “investments” for people’s savings and puts the money back into circulation through government spending. In the absence of such deficits, people’s private desires to save part of their incomes and put it into risk-free bonds would create a shrinking spiral of circular flow money in the economy, leading to recession and depression. Deficit spending restores the vitality of the circular flow.

 

 

 

 

Road to a Commons of Our Own: Background

Note this is most of the abstract for today’s presentation at OER18 in Bristol, UK entitled “Commons of Our Own”.  I’ve embedded the slides for the presentation at the end.

Disclaimer:  This is the advance abstract written months before I created the slides.  We’ll see what I actually say today.  I’m kind of curious about that myself since my current thinking is a bit different from when I wrote the abstract. Time moves on.  I plan to write and publish a longer form blog post with what I actually end up saying and explaining in more detail.  With some luck that longer form post will happen this weekend.  Stay tuned.

A college degree is more than the sum of its courses. Randy Bass and Bret
Eynon (2016) argue for the importance of engagement, community and
mentorship, and integration in liberal education. Claiming the digital
revolution has tended to unbundle higher education and reduce it to a
collection of online training courses, they argue for a new “learning-first”
digital ecosystem that is learner-centered, networked, integrative,
adaptive, and open.  They provide many examples including OER and devote an
entire chapter to “Domains of One’s Own” (DoOO) projects.

Martha Burtis, Jim Groom, and Tim Owens pioneered the DoOO concept at
University of Mary Washington (Burtis, 2016). By 2016 over 40 schools,
mostly universities, had begun DoOO projects, but no community college had
attempted it. Lansing Community College became the first in January 2016. We
called it the Open Learn Lab.

We experimented for 1.5 years, creating nearly 300 blogs and sites. Users
were enthusiastic, evidencing success, but challenges remained. Many
faculty, students, and administrators struggled to understand open learning
or how it “fits” with the LMS, OER, and the school mission. The
challenge moving forward has been to “institutionalize”, scale, and
integrate with OER/other initiatives.

To help faculty/administrators conceive how “it fits” we frame open
learning as a digital Commons of Our Own (CoOO). Our concept of CoOO as
social system is informed by David Bollier and other economists (Bollier,
2014). The technology remains mostly WordPress sites, similar to DoOO.
Indeed, we use a DoOO VPS account with Reclaimhosting. Our CoOO uses a .net
domain distinct from the school’s .edu domain to emphasize the
commons-community aspect.

The LMS provides a temporal digital “classroom” while CoOO provides a
stable, digital counterpart to the non-classroom campus. Historically, the
physical campus provided spaces for ambient learning, social connections,
and authentic learning experiences – opportunities to create, connect, and
share. Online, commuter, and part-time community college students tend to
miss these benefits of campus life. CoOO overcomes the physical limitations,
creating the digital eco-system Bass and Eynon envision.

To help people understand the diversity and roles of sites in our CoOO, we
created three clusters called Learn-Create-Connect. Learn sites are faculty
managed and often structured as program-department collaborations, including
our new Pressbooks OER publishing platform. Create/Voice sites are typically
student blog sites and course hubs which we see as “on ramps” to DoOO.
The Connect cluster are social- and outreach-oriented sites providing
engagement both within the campus community and the larger public community.

The CoOO framework links the LMS, classes, and public to students, faculty,
campus groups, and our OER publishing. The CoOO framing began this year with
the goal of accelerating adoption of OER, open learning practices, and
student blogs. Early indicators point to success.

Bass, R. & Eynon, B. (2016). Open and integrative: Designing liberal
education for the new digital ecosystem.  Washington, D.C.: Association of
American Colleges & Universities.

Bollier, D. (2014) Think like a commoner, New Society Publishers.

Burtis, M. (2016) Keynote address to Digital Pedagogy Lab, audio and text at
http://www.digitalpedagogylab.com/hybridped/making-breaking-rethinking-web-higher-ed/

 

How Federal Budget Policy Affects Generations

Today I’m giving a public talk to and for the Michigan Intergenerational Network. I’ll be discussing how government budget policies and priorities are affecting the generations. This is a topic worthy of an entire college course or even a MOOC, but unfortunately I’ve only got a couple hours at most.  This post isn’t a full explanation and is far from a script for that presentation.  I’m only going to try to list some of the highlights and give the slides.

Budget & Intergenerational Issues

This time it’s different

diagram of earning power vs age for typical person. earning power is concentrated in middle age and transfers needed to childhood and old ageIntergenerational transfers are social programs (usually governmental for good reasons) that collect resources from the working generation(s) in a given year and transfer that value to generations at either end of the lifespan – seniors or children.

In the past when I’ve discussed intergenerational transfers in the Federal budget, I’ve emphasized how the hype about the “insolvency” of Social Security or its supposed impending bankruptcy was overblown. There is no real economic or necessary budgetary/monetary reason why Social Security or Medicare or public education or any of the other intergenerational programs should be in jeopardy.  Things are different now. I wasn’t wrong then. Financially, the system is operating fairly well. As I’ve said for years, there’s a strong chance of needing to make some minor tweaks in maybe 5-10 years, but it’s nothing that should cause us to panic and cut benefits now.  There still isn’t a financial reason.

Instead of keep calm and look at the facts, a sign for "be concerned and get active"But there’s political reasons for fear now. So instead of keeping calm (always good advice, BTW) I’m switching to “be concerned and get active”.

To understand why we need to get active and be concerned, we need to understand how political budget rhetoric and processes suck us into a big game, a game that pits each generation against the others instead of bonding.

Budget and Policy

There’s a gap between the supposed process for creating the federal budget and the actual process. Supposedly,  both houses of Congress, reacting to a recommendation proposal from the President, create a budget resolution that sets out spending and tai xing parameters and goals. Then many committees in both houses of Congress spend most of each year preparing detailed appropriations bills that eventually the President signs and then federal agencies are authorized to spend the money.

In reality, there’s increasingly a heated rhetoric amongst politicians using emotionally-laden trigger words to posture for political advantage. Meanwhile high-paid lobbyists work with Congressional staffers behind closed doors and craft the actual language of the spending bills. Usually Congress can’t get this done in time and kicks the can down the road with short-term “continuing resolutions” until, like this 2018 fiscal year, it finally passes an “Omnibus” spending bill for 2018 almost half-way through the year. When they vote on the bill virtually no one is able to read the actual language of the 2000 plus bill before voting.

All this matters because we really only have 3 broad categories of policy with which the government can strongly affect macroecomomics performance: fiscal spending, tax, and monetary (interest rates) policies.  The budget covers fiscal spending and taxing. The Federal Reserve handles monetary.

Taxes for 2018

The big news for 2018 was the comprehensive, or at least wide-ranging, tax reform bill passed in December 2017 for effect in calendar year 2018. This bill continues and greatly accelerates a long-run trend dating back to the sixties of decreasing corporate taxes and a significant shift towards regressive, payroll taxes.  In 1967, corporations paid as much as in taxes, approximately 24% as workers did via payroll taxes. In addition, workers also shouldered  42% of federal revenues via income taxes.  Today, corporations are well below 10% and dropping.  Meanwhile the workers now pay for over 80% of federal taxes via a mix of income and payroll taxes.

Tax policy long ago ceased to be a highly effective macroeconomic growth tool. This is because tax rates were repeatedly lowered over 4 decades to the point where tax rates really don’t effect growth-related investment or consumer spending decisions as they once might have. Yet political rhetoric remains that somehow tax cuts and tax rate cuts in particular for the wealthy and for corporations are somehow growth inducing.  They are not anymore. We’d have to go back to the fifties or sixties to see that.

Instead, tax cuts are about redistribution. While claiming this tax bill will stimulate growth, the reality is it won’t. Even the very conservative, free-market, neo-classical model-based forecasts of Barro and Furman foresee only a +0.4% increase in real GDP over 10 years. Real GDP growth rate only increases 0.04 percentage points.  Not much.

Instead, this tax bill is about redistribution. It overwhelmingly shifts money towards the very wealthy and towards corporate owners. Tax breaks are now the larger than federal discretionary spending.

Spending – Ok this year, but….

The Omnibus Spending Bill for 2018 was just passed a couple days ago and signed yesterday to cover $1.208 in discretionary spending. This is an increase over 2017 of 12.9% and it largely reflects two political realities.  Despite having majorities in both houses and controlling the White House, Republicans cannot assemble the votes necessary to implement the domestic spending cuts they have been pushing.  Both parties are now looking to the 2018 midterm elections and spending cuts won’t get anybody re-elected.

The military, homeland security, state, foreign operations, and energy (think nuclear weapons) are the biggest winners with increases in the 12-15% range, but even domestic programs and agencies such as Labor, HHS, and Education manage to get a 10% increase.   Essentially, 2018 is similar to the spending budgets of the last few years in terms of priorities.  No particular major cuts. Yet.

However, the 2018 budget proposal that President Trump put forward last year has now pretty much become the 2019 budget proposal.  We will get more details in coming weeks.  This budget proposal is indeed drastic. It calls for very serious, very deep cuts in a wide range of discretionary programs that are important intergenerational transfers, such as education, Medicare and Medicaid information and research, senior housing support, senior nutrition, and non-entitlement health spending.

Whether or not the 2019 Trump budget priorities become the 2019 federal budget depends more than ever on political activism.  The election of 2018 and the polls leading up to it will drive a lot of what actually happens.

The Deficit and The Game

As bad as the 2019 budget proposals are for discretionary intergeneration transfer programs, the rhetoric and political objectives of the currently ruling Republican leaders in Congress portend an even worse possibility.  For generations, the idea of cutting Social Security or other significant transfer entitlement programs was considered political suicide.  As Speaker of the House Paul Ryan’s comments openly targeting reductions in Social Security and Medicare benefits indicate, political leaders are now trying what was once considered unthinkable:  cutting, eliminating, or privatizing Social Security, Medicare, Medicaid, and public education.

This is where an enormous rhetoric game ensues. Politicians such as Ryan drove the large tax cuts.  Ryan and Company falsely claimed the tax cuts wouldn’t cut Federal revenues because they supposedly would spur dramatic growth. But they weren’t structured to do that. The tax cuts were really massive redistribution of income to the wealthy.  In the process, the reduced tax revenues open a larger federal deficit. Ryan and Co. then use the increased deficit to argue that we must cut entitlement spending in order to balance the budget.  They depend on people being both afraid of the concept of government deficits and confusion between deficits-debt and between public and private debt.

The reality is that the federal deficit doesn’t really need to be closed. In fact, a balanced federal budget (i.e. no deficit) means the private sector, households and firms, will not in aggregate be able to accumulate risk-free financial assets like government bonds for pensions. Deficits and public debt aren’t really problems as long as the economy has the real resources to produce. They are actually a reflection of a growing, healthy economy with a bright future.  Growth of private debt, however, can be risky problem for the macroeconomy as it was in 2007-08. But cutting federal spending and entitlements long run will not fix Social Security solvency issues. It will, however, create risky private debt problems.  The federal government is not a household and such analogies fail and misguide policy.

An Alternative:  Build Intergenerational Productivity

picture of a cat reading newspaper saying "I should increase my factors of production"

The current political rhetoric which is based on fear- and a false, but emotion-laden analogy of the government’s budget to a household budget ultimately pits one generation against another.  Millennials see baby boomers as taking their future SS benefits. Boomer seniors tend in increasing numbers to vote for cuts in schools because they don’t have school kids themselves.

There is a way out.  Every generation works its way through its lifespan. When young, it needs subsidies. When middle-aged it works and generates the economic value that supports everybody at the time. When aged, they need support again – even if only to have a younger generation work and generate profits to pay the dividends for a private pension scheme.

If people want to insist on thinking of the federal budget as a “household” then we need to see all the generations as equal members of a dynamic family – our national family.  That means we need the intergenerational transfers. But transferring economic support from a working generation to either children or seniors doesn’t have to mean the working generation does with less.

Rather if we support the working generation and the soon-to-be-working generation, we can make our collective production greater, boosting the welfare of all generations.

For example, three proposals that at first glance appear to be irrelevant or even budgetarily competitive for seniors and children are anything but.  Seniors and children should actively support the following proposals:

  • Immediate boost of the minimum wage to at least $15 per hour and to restore the real purchasing power of minimum wage to late 1960’s levels.  How would this help seniors?  It is estimated that as much as 31% of the workforce would see a payroll boost from this proposal.  Empirical studies in the last 30 years of minimum wage boosts indicate that product prices and inflation would not follow.  Rather, the higher payrolls would mean greater Social Security and Medicare payroll tax collections.  Some analyses have indicated that the minimum wage boost alone might be enough to prevent the medium-scenario projected depletion of the SS Trust Fund in the 2030’s.   Workers win. Seniors win.
  • Free college or at least free Community College.  Making it easier for more people to get college degrees and certificates will dramatically boost workforce productivity. Productivity increases, over time, boost GDP and boost tax collections. More importantly, they increase the real resources and capacity available in the economy, making intergenerational transfers more feasible.
  • Student Loan forgiveness. While at first glance, this proposal sounds like a give-away to the Millennial generation, the generation most saddled with the greatest student loan debt, it’s actually win-win.  The Millennial generation is having difficulty with household formation and home buying. This is largely due to heavy student loan repayment burdens.  Eliminating that burden will boost spending and aggregate demand, increasing GDP – and payroll taxes with it.  It will also increase home buying and house construction, which in turn, will strengthen property values. Stronger property values and stronger household formation each, in turn, lead to greater property tax collections and more support for schools.  Kids win too.  Then those kids become highly productive adults and fund the next generation after them.

Our ability to fund intergenerational transfers is limited only by the availability of real resources and will, not by current year government budget policies and rhetoric.

Slides for the Presentation.

If these slides do no display properly here, feel free to open the Google Slide file in a new window.

Additional links to some selected budget resources for 2018-19: