Austrian Economics Forum Fall 2015 Recap

After quite the hiatus, I suppose that I should try to get back to blogging.  

North Carolina State University is the location for the open to the public campus club: "Austrian Economics Forum."  Since its founding the idea was to promote the development of Austrian Economics from the Graduate-Student level and above.  This year we have decided to open it up to include undergraduate students and any other interested parties.  The idea is to go back and start filling in the foundations.

In an attempt to get back to the roots I presented several lectures. The first was on October 16, 2015. Here is the link: Dr. Paul F. Cwik 10-16-2016 NCSU - Menger & the Early Austrians  



(The preview picture, which was automatically edited by this cite, clearly thinks that I was excited about this point on the Methodenstreit.)

In this talk I cover the four most significant contributions made by Carl Menger.  I also take a look at Eugen von Bohm-Bawerk and Friedrich von Wieser. I present a little of who they were and I explore their most important contributions to the science of economics.  Additionally, I add some important points made by Philip Wicksteed, William Smart and David I. Green.

The second lecture that I presented took place on November 1, 2015.  Here is the link to that lecture: Dr. Paul F. Cwik on Austrian Capital and Interest Theory  



In this lecture, I build on the first lecture.  I begin with Bohm-Bawerk's review of others' ideas on Capital and Interest.  Then we build his positive theory and compare it with John Bates Clark.  In addition to this, I also look at the way in which the Austrians view interest rates (based upon the subjective notion of time preference) and compare it with the mainstream view, which is based upon both subjective and objective factors.

I then build the Structure of Production and stress the importance of not only capital substitution, but capital complementarity.

The third lecture was a presentation of the Austrian Theory of the Business Cycle, which builds upon the first two lectures.  At some point in the near future, it will be posted to Youtube and I will link it here.

I, Pencil: The Movie

Our friends at the Competitive Entreprise Institute has just put "I, Pencil: The Movie" up on YouTube.  I invite everyone to take a look.

Competition vs. Conflict

Last week President Obama said that we do not live in autarky.  In other words, one person did not build a business, he had help.  Well, duh!  No one argues that we should each live in solitude, not even the more ardent Randian Objectivist.  


So what is he really getting at?  He is trying to emphasize that communities need to work together.  Fine.  However, his emphasis is on the public sector's "contribution" to society.  Here are a few thoughts on this...


First, before government can make any contribution to society, it must first take from society.  Just because the public sector has spent money on an area, e.g., roads, schools, etc., it does not mean that such things would not be produced if the private sector was left alone.  In deed, the public sector tends to crowd out the private sector whenever it does anything.  Additionally, the public sector is unable to determine whether it is spending money efficiently and thus is always more wasteful of resources than the private sector.


Secondly, autarky may be a starting point for economic theorizing, but it does not mean that we stay there.  Austrians almost always start with the assumption of a lone individual on an island when developing theories of capital and interest.  However, one of the most important insights of all of economics is the Law of Comparative Advantage, which Mises takes to the level of the individual and calls it the Law of Association.  It says that when we specialize and trade, we are made better off.


Finally, many on the left simply do not understand how a free society works.  At the center of the economic system all they see is one person trying to out-compete all rivals--doing whatever it takes to get resources for that dollar of profit.  This conception of the market economy is a skewed envisioning by Marx and the left.  


While there is competition, to be sure, the market cannot operate at odds with itself.  The market is less about competition than it is about harmony.  Consumers have preferences that are subjective and unknown to the producers of goods and services.  Manufacturers have resources and plans to make goods, but do not know which goods to make and in what quantity or quality.  The problem that faces every society is to convert the resources into  goods and services, but not just random goods and services.  They need to make items that satisfy the most intense wants and desires first, and then work down the consumers' preference list.  The market coordinates the conversion of these resources through the use of the price system.  The result is a harmony of action.  Different firms, through trial-and-error, through profit and loss, through competition discover the best combination of resource blends.  The result is that more people are served with less waste than any other system ever.


The reason why the left, Marxists in particular, focus on the single aspect of competition is that they view the world through the lens of conflict.  Marxism is born from Hegelianism.  Hegel saw the world in terms on conflict.  There is a thesis, which is today's mainstream.  Through time, a reaction builds in opposition to it, the antithesis.  A conflict eventually ensues and a synthesis emerges.  For Marx, the Monarchy was the thesis and the exploited were the antithesis.  The result that emerged from the French and American revolutions were the rise of Capitalism.  Capitalism is the new thesis, in which the proletariat will rise up against the bourgeoisie.  The result of this conflict will be Communism.  To the Marxists, the totality of history is conflict, so why should the internal workings of a free society be any different?


What a horrid way to look at the world--conflict, fighting and death!  A vision of a free society is one of liberty and one of individual responsibility.  In this vision, I need you and rely on you so that I can better myself.  When I trade with you, we are not in conflict, we are mutually helping each other.  We are both made better off by the trade.  A free society is the furthest thing from autarky.  If, in college, our President read Bastiat instead of Marx,  I doubt he would be able to make such foolish statements.

Problems and Prices on FEE TV

Hollywood is known for making "magic," likewise the staff at FEE TV should also be congratulated for making me look presentable. Thank you guys.

Austrian Economics Forum Spring '12 #5--Efficiency in an Open-Ended Universe

The fifth Austrian Economics forum centered on Roy Cordato's book, Efficiency and Externalities in an Open-Ended Universe.  In particular we focused on Chapter 3, "Catallactic Efficiency: Welfare Economics."  


In traditional welfare economic analysis, we make judgments about net effects of policy.  Does this policy help more people than it hurts, or is it the reverse?  Usually, this means that the economist must make a comparison between people's subjective utilities.  This analysis is called "interpersonal utility comparisons."  Since values are subjective, such a feat is impossible.  There is no way we can judge how much a person values something, and nearly all economists agree on this point.  However, this is where the Austrians an the neoclassicals part company.


The neoclassical economists will waive their hands and say that interpersonal utility comparisons are impossible, but then they do exactly that; they make interpersonal utility comparisons.  There are some theoretical constructs that confront the problem head-on, like the Pareto Optimality measure of efficiency.  However, these sorts of approaches have very little real world application.  For example, the Pareto condition says that a policy is good if, and only if, at least one person is made better-off while no one is made worse-off.  In the real world, this is never the case.  And so, as a mental exercise, such methods are fine, but the reality is that these end up calling for maintaining the status quo.


Cordato's chapter avoids this problem.  


The first thing that needs to be made clear is the distinction between positive and normative economics.  Positive economics is pure theory.  Normative economics is a value judgement made by the analyst.  For example, positive economic analysis says that whenever the price is below the market clearing price, there will be a shortage.  An example of a normative judgment is the statement that we should set the price below the market clearing price.  Normative economics deals with "should statements."  We should do policy X but should not do policy Y.  Cordato's chapter sets positive economics aside and focuses exclusively on normative economics.


The next thing that we need to examine is the concept of an open-ended universe.  So what's that?  The opposite of a closed universe, duh.  (I know, not helpful, but I couldn't resist.)   A closed universe is one that has a final state of rest, an equilibrium point toward which the market tends.  The neoclassical position tends to start in this state, which is fine for positive analysis.  However, we are dealing with normative analysis for the real world and the real world is definitely not in equilibrium.  Even if the real world does manage to get itself into an equilibrium, it would only be there for a moment.  This is because the demand curve is based upon things like tastes and preferences and the supply curve is based upon things like expectations.  When any of those factors change, the curves shift and a new market clearing relationship emerges.  


Kirzner's approach says that we are constantly chasing these market clearing prices.  It is the entrepreneurs' actions that coordinate the economy and move us closer to market equilibria.  Cordato argues that for normative economic analysis, we should jettison the very notion of equilibrium.  Let me be clear, Cordato is not saying we should jettison equilibrium altogether.  In fact, he does say that it is perfectly legitimate to still use it for positive economic analysis.  (Personally, I like the concept of "harmony" better, but that is a different discussion.)  


It is when we deal with normative economics that we should discard equilibrium.  The reason is that we have no idea where such an equilibrium would be.  We cannot argue that in the real world that each transaction moves us closer to an equilibrium, because each transaction adds new information into the system--information that was unknown before.  As new information is added into the system, the theoretical equilibrium changes.  Thus, it is impossible to determine (either before or even after the fact) whether a trade moves us "closer" to an equilibrium or not.  So an open-ended universe says that we cannot know where these equilibria are and whether a transaction moves us closer to or further from any of these points.


While this analysis is close to the Lachmann/Shackle position of economic kaledics, it is not the same.  The difference is that Cordato says that the use of equilibrium is legitimate when doing positive economics.  Lachmann and Shackle reject the concept of equilibrium for both normative and positive economics.


So then how are we to judge which policy is better, or in economic jargon, which policy is welfare enhancing?  Cordato proposes that we use a standard of "Catallactic Efficiency."  Catallaxy is an alternate word for the economy/economics.  It comes from the Greek root "katallasso" (καταλλάσσω), which means trade or exchange.  It also means "to befriend."  


Anyway, Cordato argues that methodological individualism holds that each person has his own set of goals and his own set of information.  "[Efficiency] is to be judged by the extent to which the catallaxy encourages individuals existing in a social context, to pursue their own goals as consistently as possible." (page 62)  Cordato continues,

By its very nature, then, questions of catallactic efficiency must focus on the institutional settings in which individual actors operate.  In particular there are two overriding issues.  The first centers around the institutional settings that will best facilitate the use and discovery of information, the appropriateness and relevance of which can only be known by those who need to discover and use it.  The second concerns the institutional setting that will allow individuals to gather the necessary physical resources [and use them].  pages 62-3.

So there are two conditions to be met: the first is the ability to discover information and the second is the ability to use resources to achieve the goals sought.  The conclusion is that a laissez-faire policy is best for enhancing the welfare of the community.


Such an approach, I believe, fits well with Mises' conception of Interventionism.  Mises argued that there were three manners in which the government could intervene in an economy.  The first is the role of the impartial judge and enforcer of private property rights. When there is a dispute, the government can resolve the dispute.  Mises thought that this was a normal and healthy function of government.  The second manner is when the government buys items from the market.  Suppose that the government wants to publish its annual budget.  To do so, it needs paper.  The government taxes people and then spends that money on paper.  While there are distortionary effects that result from the governmental action, the normal market process is intact.  The demand curves for the items that the taxed people would have purchased are reduced and the demand curve for paper is increased.  The market mechanism operates normally.  


The third type of intervention is where the government stops or hinders the market mechanism from operating normally.  In this form, the government prevents trades to take place by rules, regulations, or price controls.  For example, if the government passes a law that says all toys need to be tested for lead before they can be sold, this interferes with the normal market process.  If the government says that during "a state of emergency" prices can only rise above the 30-day average by 10% interferes with the normal market process.  In the first example, people will not be able or willing to sell toys and in the second, the goods  will not be rationed according to price.  Long lines will emerge and shortages will persist.


Cordato's "Catallactic Efficiency" standard and Mises' third type of interventionism go hand-in-hand.  They both focus the analyst's attention to the coordination process of the market.  How is new information generated and incorporated into the greater social order?  When obstacles restrict the market's ability to do this, we have catallactic inefficiency and interventionism.

Austrian Economics Forum Spring '12 #4--Kirzner & Cwik

For our fourth meeting, it was decided that we would discuss the paper that I presented at the Austrian Scholars' Conference in Auburn.  While I love to talk about myself, I decided to include a paper by Kirzner as well. 

The Kirzner paper is "The alert and creative entrepreneur: a clarification."  Basically, this is Kirzner responding to supporters and critics of Capitalism and Entrepreneurship, and then telling them that they are all wrong.

Kizner says that his work is not about how to become a successful entrepreneur.  Rather his work focuses on how the market process is set in motion be entrepreneurial decisions.

The interesting points he puts forward is an almost rewritting of his stance on Schumpeter.  He says that everyone knows of Schumpeter's creative-destroyer and so he did not want to dwell on that aspect of entrepreneurship.  He wanted to show how entrepreneurship coordinates the economy.

He then argues that many misinterpreted his writings to say that the entrepreneur was a passive noticer of opportunities.  He says that a false tension was created between the Schumpeterian "bold, disruptive, innovators or [the] passively alert, harmony-restoring responders to changes that have already occurred."  He then states,

[T]here must be scope for both a creative ("Schumpeterian") entrepreneur (one who generates pure profit) and a "passive," alert ("Kirznerian") entrepreneur (one who snuffs out given profit opportunities by promptly exploiting them.) p. 149 (italics in the original)

Cordato argued that his own work tends to connect the two positions.  He argued that we live in an "open-ended universe."  He means that there is no such thing as a final equilibrium to strive for.  In fact, as new information is added, the equilibrium point changes. 

It was based upon this point that we decided that the next week would center on Cordato's book, Efficiency and Externalities in an Open-Ended Universe.  And so we tabled further discussion on this point for the next week.

****************************************************************************
Then the discussion turned to my paper, "Greed in Public and Private Institutions."

My paper, as is too often the case, was based upon frustration.  There is a general attitude that anything that happens in the private sector is due to greed, but when we switch to the nonprofit sector, motives are now made of pure light.  Indeed!

Of course people in every walk of life are greedy.  (As an aside, economists throw out the word "greed" because it cannot be precisely defined.  A typical definition of greed is the wanting of something too much.  However, what is "too much"?  Who decides?  As a result, economists use levels of self-interest.)  Self-interest is omnipresent and it propels Adam Smith's butcher, brewer and baker to serve others.  On the other hand, we have a separation of self-interest and the interest(s) of the overall organization.  It is a question of aligning incentives.  In other words, we are examining a principal-agent problem.  What if Bernie Madoff, Ken Lay or other suitable villain was in charge of the State Department or the US Treasury?  Would we even know what they would be up to?

My paper suggests that two questions arise: Can the institution efficiently allocate resources to satisfy the most intense wants and desires of consumers?  And can the principal-agent problem be overcome to ensure that the leadership will carry out its intended purpose or will the leadership use the entity as a means to a selfish (greedy) end?

In my paper, I looked at three institutional settings: for-profit companies, bureaucracies and nonprofits.  I conclude that the for-profit sector can answer both of the questions.  The bureaucracies cannot calculate efficiency, but it does issue rules, orders and regulations to control and guide the behavior of beaucrats.  It is in this way that bureaucracies have a chance of overcoming the principal-agent problem.  The nonprofit sector, on the other hand, is incapable of answering either question.

Overall, the discussion was friendly and supportive.  During the course of the discussion, Cordato asked a good question, "When it comes to bureaucracies, who are the principals?"  I did not have a ready answer for him.  When I wrote the paper, I had Mises' Bureaucracy in the back of my mind.  In it, he uses the model of a king that basically is in charge issuing orders.  And so in my mind, the king was the principal and the bureaucrat was the agent.  How that translates into a representative government is much more complex.  Although, the point that there is a potential solution remains.

Additionally, a student suggested that when it comes to the nonprofit organizations, we can split them into two groups.  The first group is primarily donation driven, while the second is endowment supported.  The first group "has its feet to the fire."  They must be very aware of what the donors expect, otherwise the funding disappears.  The second group is insulated from today's donors because an endowment has been built up.  (For example, think of colleges and universities that have large endowments.)  They are able to upset today's donors because they have the resources in place for tomorrow.  Of course, such an institution cannot upset significant donors forever, but they have a lot more room to be independent.  This insight certainly adds to the discussion that I make in separating the true-believers from the careerists.

A Note on Price Gouging

Of course, there is no economic definition of "price gouging," but let's set that issue aside for a moment and focus on a particular objection in favor of price controls I recently came across.

Suppose that a storm knocks out water in the city and the price for water jumps from $1 to $10 for a single 16 oz. bottle.  If the government imposes price controls that limit the increase to 10% above the 30-day moving average, as many states do, then there will be a shortage. 

So the economist argues that the price spike is good because it reduces use of water and encourages suppliers to bring more in.

The objection runs like this, if you are a poor guy, you can't afford the $10 price and so you go without.  Alternatively, if we have to stand in line for rationed water, he has a chance to get some water.

This scenario is a false dichotomy.  Regardless of the method of distribution (by price, by 1st come/1st served, etc.), some people will be without water.  The reason is that a storm has knocked out the water supply. 

The correct question to ask is, "Which system gets water to the damaged area faster, so that the time is minimized for those who are without water?"

The correct answer is the price system.  High prices send a signal, to all, that water is needed in the area and rewards those who are there first with high revenues.  As the water comes "flooding" in (yes, a pun), the price falls and then even the "poor guy" will be able to get water.

Disasters are horrible situations to live through.  I remember the eye of a hurricane passing overhead.  It was an interesting experience.  The point is which system puts into place a system of incentives that gets the most relief to the most people in the shortest period of time.  And the best answer we have is the open and free market.

Austrian Economics Forum Fall '11 #1--Competition & Entrepreneurship

We have finally kicked-off the new semester of the Austrian Economics Forum at NCSU.  About a dozen of us decided that the best thing to do at 4:30pm on a Friday afternoon was discuss Austrian Economics.  (I know that this is not normal behavior, but I still find that I have an overwhelming need to be there.)

We are reading Israel Kirzner's Competition and Entrepreneurship (1973).  There are six sessions scheduled for this semester and there are six chapters.  (That was just fortunate.)  The first chapter "Market Process versus Market Equilibrium" was this week's focus.  I found that I needed to remind myself several times that this is only the introductory chapter.  There are a number of points that need further clarification and refinement, but Kirzner doesn't (and shouldn't) go into an in depth explanation in the introductory chapter. 

The next point that I needed to remind myself was who the target audience was for Kizner.  Professor Cordato gave a brief overview of the state of the profession in 1973.  This was a time when General Equilibrium (price) theory reigned supreme and that all firms were either perfectly or imperfectly competitive.  So the target of this book is not me.  I was "raised" Austrian.  I was taught from the beginning competition is a verb and not a noun.  The target of the book is obviously not those professors who are locked into their ways.  Then who is the target?  My guess is that the targets are graduate students in economics.  They are still forming their opinions on which school is correct and will be more open-minded about the different approaches.

Kirzner sees the profession completely focused on equilibrium.  The dominant view is that we should be in equilibrium and, if reality differs from it, then there is an imperfection that needs to be studied and corrected (usually by government).  Kirzner suggests that there is an alternative.  Competition should not be studied as a state of being, for example, "the XYZ Market is in a state of perfect competition."  Rather the normal, vernacular, usage of "competition" as a rivalrous process should be adopted.  Competition is a verb and not a state of being.  Therefore, equilibrium, while an important tool, should not be the focus of the economist.  Instead the questions of "Why is there a change in prices?" and "What are the forces behind the price changes?" should dominate the economist's thinking.

Economists too often use phrases such as "market forces" to describe the market process.  "Market Forces" move the market to equilibrium.  Professor Margolis challenged the group by asking us to describe exactly what we mean by "market forces"?  He stated that we all like to tell a story that illustrates an example of market forces, but we tend to leave "market forces" as a fuzzy concept.  My thoughts are that it is shorthand for explaining how individuals have some sort of "felt uneasiness" (to use Mises' phrase) and think about how they can replace that state for a better one.  Then they act.  Within this analysis we are implicitly assuming time and ignorance (to use the title from Rizzo and O'Driscoll's book).

As buyers and sellers enter into the market they bring with them knowledge.  As the desires of the buyers confront scarcity, a price is generated and ignorance is lessened.  It is in this step-by-step manner that the market will equilibrate.  Contained in this notion is an implicit ceteris paribus assumption.  We need to realize that tastes, preferences, expectations, etc. need to be held constant.  When we (economists using this thought experiment) start to relax the ceteris paribus assumption, we are allowing supply and demand to change and thus equilibrium prices and quantities change.  Despite the fact that the equilibrium point (intersection of supply and demand curves) changes, the market forces are chasing that point around.  So while equilibrium is an important theoretical concept, we might never, ever be in equilibrium.  The important concept to focus on is that competition is always driving us toward equilibrium.

These driving forces then require the interaction of individuals with limited knowledge.  They require that this process takes time, meaning that we do not simply jump from equilibrium point to equilibrium point.  Finally, this is not an automatic or mechanical process; it requires actual people to move the market.  That person is called the entrepreneur. 

The Kirznerian pure entrepreneur is an ideal type.  This archetype has no physicality.  It is an observation of a profit opportunity.  This construction is fairly controversial within Austrian circles.  To me it seems strange to push it this far.  Without physicality, there is no action and it then falls outside of praxeology and is therefore not a market force.  (It is at this point I need to remind myself that this is the introductory chapter and there is a whole book to follow.) 

We argued about the implications of the pure entrepreneur.  A traditional manner of characterizing the Kirznerian entrepreneur is someone stumbles across money lying on the ground.  (If this is the case, then my son is a Kirznerian entrepreneur because he found 12-cents on the ground today!)  However, the act of picking up the money is a physical act and thus is not a pure entrepreneur.  After much discussion, the consensus of the group was that the pure entrepreneur is an observer and accumulates knowledge.  The action is separate and distinct.  An interesting question was raised and so I'll throw it out to you to ponder and comment...  "Is an entrepreneur only a person who finds Pareto Superior moves?"

The last issue that we discussed was the point on resource monopoly.  While he defines most monopolies are a "barrier to entry" problem, Kirzner argues that resource monopolies are "very real and significant."  In other words, a single owner of a resource can be a monopolist and this has consequences that are "very real and significant."  I disagree.  Rothbard disagrees.  In fact most of the people in the room disagreed.  (Some didn't vocalize one way or another, which was fine.)  We thought about who else (Austrian) thinks that a single resource owner is a real and significant problem, and the only one that anyone could think of is Sandy Ikeda, at SUNY - Purchase.  I like Sandy and he is usually fairly solid in his economics so I will have to ask him about this point.  Furthermore, this is still just the first chapter and there is a whole chapter on monopolies coming up and so we will see how "real and significant" this problem really is.

Unfortunately, we ran out of time and closed the meeting there.  If you are reading along (or even if you aren't) please feel free to post your comments and continue the discussion.

Failure is a Necessary Option

An often repeated and overused phrase is, "Failure is not an option."  How ridiculous!  In fact, the reverse is not only true, but it is a necessity.

One major problem with the public school system is that failing schools do not close.  In fact, a failing school usually gets more funding the next year in order to "turn it around."  Ask yourself if this policy really makes long-term sense.  What sort of incentives are being created when failing schools are given expanded budgets?  An axiom in economics is that people respond to incentives.  If we pay people more for failing schools is it any wonder that we get failing schools?

In the private sector, the customer is sovereign.  The customer chooses what to buy (or not buy) and no one can force such a decision on another.  An entrepreneur who is able to please his customers receives continued business as his reward.  Hopefully, with proper management, profits also accrue to the entrepreneur.  However, if the company does not please the customer, regardless of reason, the business suffers.  Maybe there was rudeness, maybe the product was shoddy, or maybe the price was too high, the reason doesn't matter because the end result is the same: the loss of business.  When the customer is not pleased with the entrepreneur, he takes his business elsewhere.  The entrepreneur had better shape up quickly or the venture will close its doors and the resources will be transferred to others who are better at satisfying customers. 

The continuous process of pleasing customers continually shifts resources to those who are the most efficient users and most effective satisfiers.  This phenomenon is relatively new; it has only been around for the last couple of hundred years.  During this short period of history, we have achieved higher living standards for more people than at any other point in recorded human history.

When we step away from the market and into the world of public provision of goods and services, we see that it operates by a whole different set of rules.  In the public sector, the government collects the revenue to operate the institution.  However, it can't simply hand someone billions of dollars and say, "Go educate some kids."  Along with the dollars come the rules and regulations.  These reorient the focus of the employees and managers away from "customer" and toward the rulebook.  Additionally the same system strips away all vestiges of competition between providers of education.  The children are assigned schools; the parents are not allowed to choose.  Imagine if such were the case with phone and Internet providers.  (Actually I can imagine it, because it was the law of the land for decades.  What was the result?  Poor quality, high costs, lack of convenience, ugly phones, and attaching an answering machine was considered illegal because it was "installing a foreign device.")

Our public education problems are far too complex to simply say that the answer is competition between our schools, but don't discount that simple phrase too quickly.  Imagine the impact the following three changes would have on our public schools:

1. allow parents to choose which school to send their child to;
2. attach the dollars to the child so that a school's budget is based upon the number of students that enroll at their location; and
3. allow schools that cannot cover its costs to close and be sold.

Such a proposal will cause the teachers' and administrators' unions to howl, but I am not concerned with protecting their jobs any more than I am concerned about protecting McDonald's workers' jobs when I go to Burger King.  In fact, our university system has this feature and it seems that we have a large and diverse set of higher educational institutions.

Competition will weed out the bad teachers and they should lose their jobs.  Competition will weed out the bad administrators and they should lose their jobs.  Competition will weed out the unnecessary overhead and reward quality.  It will reward good schools, good teachers and good administrators.  

Many think that competition is scary because some producers are winners and some are losers.  Unfortunately, too many people think this way.  I say "unfortunately," because this thinking is backwards.  There is too much focus on the providers and too little attention paid to the customers, the children.  When there is competition, the customers are the big winners.  And, paradoxically, the only way that we can guarantee a successful school system is if we make failure not only an option, but a necessity.