In a recent New York Times column, Princeton economics professor Uwe E. Reinhardt bucks generally accepted market theory to argue against the all-volunteer army in the U.S.

The argument he addresses goes like this: Spreading military service across all societal strata (a draft) would place some of our most valuable economic assets (our brain surgeons, our bankers, our politicians) in harm’s way while denying those who could most benefit from a military paycheck (our poor, our patriots) from receiving this pathway to economic mobility.

As a lot of economic theory values efficiency above all else, many economists like this argument, as do those of us with comfortable lives that would be disrupted by a military tour in a far-away place littered with roadside bombs.

Reinhardt points out that because most people in Congress are millionaires (see the Center for Responsive Politics data on this), our decisions about going to war are fraught with moral hazard. The members of Congress who vote to wage war and the executives of companies that make billions selling goods and services to war efforts are not the same people losing limbs on the roadside. Reinhardt’s point is one about human nature and policymakers: If it were their personal limbs or those of their children on the line, would our decisions about going to war be different? If we created a ‘profit draft’ on corporations in which companies take losses when supplying goods and services to U.S. wars, would they still lobby for the war machine?

Harvard Professor Michael J. Sandel and others have drawn attention to a similar rich/poor divide in the U.S. blood banking system, which transfers blood from the poor, who are so destitute they sell it, to the rich, who have health insurance and the ability to buy and use blood as needed.

The same question applies to war and blood banks: Should a person of wealth be called upon to give away her blood when there is a poor person willing to sell it cheaply instead?

The economist’s answer is no, and for good reasons. Market allocation is brutally efficient. And what happens when the lawyer takes the place of the destitute in the blood line? The destitute person becomes worse off, not better, and the lawyer is taken away from lawyering, a more productive use of her time for the economy. So these questions about allocating blood become questions about the type of society in which we live, an area pure economics is ill-equipped to address.

Because, ideally, nobody would be so out of options that they feel compelled to sell their blood or risk having their limbs blown off.

Thinkers like Reinhardt and Sandel are not just arguing about economic theory, they are bringing up issues about how good we are as a society based on the rules we make. Their questions are existential for us as Americans. Do we sell our blood because human nature requires it, or is it just a matter of education? If we all understood how an all-volunteer military or a blood banking system transformed the suffering of the lower classes into profits for the upper, would we change our rules? Can  suffering be legislated away?

I don’t know, and it is clear that when it comes to my everyday life, I follow market principles. Case in point: I posted a job on Elance looking for someone to perform what looked like 25 hours of data entry. This is how I met Candie (I’ve changed all the names) from Oklahoma, who said she and two of her associates were “ready to serve” and Micha, a former SUNY student with a sexy profile pic who said she was really hoping we could talk soon, and Raven in Tennessee, who assured me that her “clients are always satisfied.”

Fake ad.

The job was to enter about 5,000 data points into a spreadsheet while confirming that 1,700 or so urls were real and alive. How much would I pay? I checked the box that said “Less than $500.” Within a couple of hours, about 80 people submitted proposals for the work. I could have it in one day. I could have it for $20. People with 20 years of experience were sending me their picture and asking me to call them. The Internet had turned the world into one giant Burger King where I could have it my way.

These higher-level concerns about markets, inequality and human suffering were not part of my thinking as I looked for someone to do this work, which, without Elance, would take me week to finish in-between my other chores, the final product I would create riddled with fat-finger typos and screwed up in places where I got distracted. I was focused on this pain being removed from my personal, privileged ass. This is the market at work and the only question for the market is: Who would do this, and for how much cheese?

One applicant wanted the full five-hundo, about $20 an hour, $41,600 a year. This is a living wage on a world scale, and less than I would personally charge to do this data entry. Micha wanted $11 per hour, Candie wanted $12, even with two people helping her.

I support increasing the minimum wage in the U.S., like the idea of a ‘profit draft,’ would like to see the buying and selling of blood end in the U.S. But when it came to my personal allocation of resources, I bypassed all of what looked like living-wage offers and hired TJ, who offered to do all of this work for $27.40, a little more than $1 per hour. TJ lives in the developing world, where it is worth it for him to do three days of data entry for about $30, about 1/10^th the going rate in the developed world.

In aggregate, all of the small businesses like mine, or large corporations buying labor from all the TJs for a buck an hour participate in our own kind of moral hazard. I benefit from TJ’s low living standards, while Candie and Micha and Raven are forced to ask for less and less. The market is self-perpetuating in just this way. The divide between those buying the labor and those supplying it bid one another down, and the companies that refuse to pay the lowest rates cannot compete effectively. Mine is not a business that can pay $20 an hour for data entry, and if I did, I would go out of business and nobody, not even TJ would be making anything.

Economics, the study of the allocation of scarce resources, only explains the cold, efficient levers of incentive. It will make note of the minimum standards of nutrition and shelter workers require to survive and contribute to the economy, but has few tools to account for humanist concerns. Economics does not cringe when a single mother in the U.S. competes for odd-jobs with someone in the developing world willing to work for $1 an hour. The question of how to create a better situation for both of these people when their interests seem in opposition is bigger than economics, which is why thinking about it will only become more important as the divide between rich and poor, decision-maker and worker expands in the U.S. and the rest of the world.

Click here to find out how much banks spend to sell products and services to you.

2. In terms of selling financial products and services, banks out-spend consumer education groups by …
Answer: $16.3 billion annually.

3. The leading advocates of consumer education, in terms of annual spending are …
Answer: Nonprofit groups, which spend $472 million a year on consumer financial education. This is almost four times the amount spent by the federal government.

Source: The Consumer Financial Protection Bureau report “Navigating the Market: A comparison of spending on financial education and financial marketing.“

This is not Meg. This is a model.

Meet Meg. She’s a fan of Ben Folds Five and The Handmaid’s Tale. She has a master’s degree in lit . She posted this information on a public blog a couple of years ago. The blog has a total of two posts and no followers. It was last updated in October 2011, and its creation is apparently one in a series of plans that didn’t work out for Meg. In it, she gripes about her “$100,000 McChickens”-worth of student loan debt and her part-time job that pays $7.14 an hour. (She tells Typewriter People that she has since gotten a job as a teaching assistant, but this is temporary, and she anticipates going “back to the drawing board” soon.)

Overall, her message is one of desperation; she makes a general appeal for guidance after being hit by a string of bad, nonsensical outcomes. She went to school for many years and paid a lot of money only to have the American economy ignore her existence.

“So tell me, Internet,” she writes, “what is a person to do in this situation?” She got one response, from a site promoting a shoe sale.

Meg is far from alone in feeling ripped off by the education industry. She, after all, did pretty much what students are told to do: Stay in school. Follow your passion. America will make a place for all motivated, educated people. But because around half of new college graduates are un-, under- or marginally employed these days, their success rate when it comes to finding good jobs is the same as that of marriages: half fail. The numbers are worse and regret levels higher for students who majored in the arts.
McKinsey & Company, a global management firm, recently examined this trend of regret felt by students like Meg. The company’s report, Voice of the graduate, reinforces Bureau of Labor Statistics data showing a generation of overeducated workers or a badly underperforming, inefficient job market, depending on how you look at it. The Voice report found that many students tend to regret their undergraduate majors, with significant numbers of those who studied arts and humanities wishing they had taken a different path.
As the Megs of the world cry out in desperation asking what to do and what they did wrong, the education industry over the past 30 years has been unstoppable.

Its position as a doorman collecting admission for entrance into our economy has allowed its prices and demands on consumers to become utterly disconnected from what it delivers.

While education is marketed as a public good, in practice it is big business, even to the point of following the strange American penchant for outsized executive salaries.
A recent analysis of top executive salaries at private colleges found a record number of presidents (42) making more than $1 million McChickens a year. The very top earners saw their compensation double and triple in short periods of time.

Regardless of where you stand on the executive salary debate (I tend to think it’s a simple moral hazard thing), the staggering rise in the cost of a college education (more than 1,000 percent since the 1970s), makes it clear that the education industry, like any business, is focused on its own growth and not with how students fare once they leave campus.

Otherwise, people like Meg wouldn’t be starting blogs about joblessness and debt, a story that has become so common no one bats an eye.
Education in the purest sense is essential in a democracy and makes us free on both personal and organizational levels, but having this necessity pass through the hands of industry has put us $1 trillion in debt, arguably one of the nastiest ways people lose life options. Understanding and addressing this tension between business and education will likely be critical to keeping us from continuing to see a generation of Megs, young people sidelined for their most productive years and unlikely to ever catch up.
Visit Meg’s blog here.
See the McKinsey report here.
See university execs’ salaries tallied by the Chronicle of Higher Education here.

EDITOR’S NOTE
Meg resurrected her blog, The Homeless and Unemployed College Grad, as typewriterpeople.com prepared to run this story. Her first post in two years: How to Get By on Free Food, Or Nearly Free.

Yale economist and law professor Ian Ayers grabbed national attention this summer when he sent letters to 6,000 401(k) sponsors, telling them they could be paying too much in fees.  The letters were bashed hard by the industry as fear mongering since many companies that sponsor retirement plans have no idea whether they are paying too much. Critics pointed out that the odds are any individual company wasn’t overpaying because the majority of plans do not over-charge, especially since the Department of Labor has cracked down on rampant overcharging in recent years.  In addition, the data was old (2009), and the federal filings Ayers used were not reliable because good info on these things is not given to our government. In other words, Ayers was trying to know the unknowable.

Question: ‘Are my retirement plan fees too high?’ Industry answer: ‘Eeeh, too hard to say. You should probably check on that.’

The letters went on to say that Ayers and research partner Quinn Curtis (University of Virginia) would publish the full results, with names, this spring. This is an example of  a “fear game,” because businesses whose retirement plans are the most fee-laden have a vested interest in not having that information shared publicly — on twitter, no less. In response, powerhouse law firm Drinker Biddle sent out an open letter discrediting the Ayers and Curtis study, based on an early draft of the findings. This raises the question: On what basis could a law firm publicly bash the results of an M.I.T.-educated economist, even before the results are published? Perhaps more interesting: Why would a law firm be interested in discrediting the findings of an academic researcher?

Ayers’ mailings, whether an experiment in poking the hornets’ nest, publicity grabbing or an earnest attempt to get lower fees for people, touches on a recurring theme in the technology-driven economy: Gatekeepers beware. Asymmetry of information, a critical factor in all rip-offs, is under siege in this time of massive processing power and networks able to do the bidding of curious individuals like Ayers. Want to rank thousands of 401(k) plan fees? No problem. Here is your spreadsheet. Want to name-names publicly on absolutely anything at all? Tweet me.

Names will be named, increasingly, and gatekeepers who have repeatedly mystified us with all the unknowables about how much we are paying for our retirement investments or our health care or even our cars are hopefully going to be exposed. Comparison shopping is one of the things that the Internet was made to do, and in some ways Ayers and Curtis are extending its reach and empowering consumers, regardless of their motives. (Note: Ayer’s got famous among the law professor set for writing about gender and race discrimination in the car-buying process.)

Here is a copy of one of the letters.

You can see Ayers page at Yale here.

This is the Drinker Biddle open letter: View pdf.

You really can go home again if you want, but be prepared for weirdness.  A typewriter fetishist blog reviewed the still-being-produced Royal Scrittore II portable manual typewriter earlier this year, with author “Richard P” noting that he ordered the machine because he wanted a typewriter fresh off one of the few remaining assembly lines before they shut down for good. The review is not flattering, nor are the images of sample type impressive. The typewriter looks cool and new, but is made of plastic and overall appears to be a kind of crappy impostor of real Royal typewriters from back in the day. Still, some fetishists will spend $169 on these things as part of an extremely niche market. Thus goes the march of the modern economy and creative destruction.

You would think. But it turns out that the Richard Ps of the world are not the customers that keep the admittedly tiny typewriter manufacturing industry afloat. You are, as a taxpayer, and you have spent about $28 million since 2001 on government orders that include, you guessed it, typewriters and typewriter-related stuff. Richard P’s little purchase was probably years premature.

The Wall Street Journal recently praised a small U.S. company, Swintec, for tenaciously staying in business as a maker and seller of typewriters, relying on prisons, funeral homes and antiquated city halls for business even as the rest of the world has moved on. The company invented a clear plastic typewriter for prisons that prevents inmates from smuggling contraband inside the machines. This proved to be a stroke of genius that saved the company. Federal statistics show 1.5 million people were incarcerated in the U.S. as of 2011, enough people to create a whole bizzarro sub-economy. (The Prison Legal News magazine, for example, generated $100,000 in subscriber revenue last year.) While the figure might be plateauing amid budget stress, the counterbalance of population growth should make selling stuff to the corrections industry a stable proposition for years to come.

The bizzarro prison sub-economy does more than keep irrelevant technologies in business. It sidelines vast amounts of human capital for years, essentially shutting a segment of society out of the economy even after they have paid up for whatever they did.  From the nonprofit Fortune Society:

“Even when these men and women are able to find employment, they are often unable to make ends meet because of insurmountable child support debt that accumulated as they make $1/day in prison; or other mandatory fees and fines assessed as a result of their involvement in the system.”

Local governments alone spent $26 billion to incarcerate people in 2011, and this figure does not count the lost productivity and drain former inmates represent long-term as they are unable to re-join society because they come out of prison even more ill-equipped than when they went in.

Even for those who believe people who commit crimes shouldn’t have access to technology or education, or even a decent life once they get out, the question remains: What is the real economic cost? People who have been Rip-Van-Winkled from society and never catch up still consume resources such as shelter and food, and creating a system that makes it impossible for them to earn their keep, ever, impoverishes the economy. They become dead weight, or, as many do, they opt to fend for themselves through criminal means, which is all they know.

A Swintec clear cabinet electronic typewriter retails for $649, more than the cost of a new iPad.

To view a report on local prison spending click here.

See the Royal Scrittore II review here.

How to Live on 24 Hours a Day

Yet it has been said that time is money. That proverb understates the case. Time is a great deal more than money. If you have time you can obtain money – usually. But though you have the wealth of a cloak-room attendant at the Carlton Hotel, you cannot buy yourself a minute more time than I have, or the cat by the fire has. …

… You wake up in the morning, and lo! your purse is magically filled with twenty-four hours of the unmanufactured tissue of the universe of your life! It is yours. It is the most precious of possessions. A highly singular commodity, showered upon you in a manner as singular as the commodity itself!

For remark! No one can take if from you. It is unstealable. And no one receives either more or less than your receive. (1)

The certainty and pride with which Bennett doles out his advice that people should read and ponder books at night can be annoying, but some of this is just the style of his day. On the whole, Bennett comes off as deeply concerned with the time squeeze facing the modern worker who spends two hours in commute and eight hours a day and “begins his business functions with reluctance, as late as he can, and he ends them with joy as early as he can.” (7) Enlivening the mind when it is not rented to others is Bennett’s primary concern and, for him, the only way to truly be alive and escape what he calls the “uneasy doze” of day-to-day drudgery. (5)

Surprisingly, Bennett is not snobbish when it comes to which subjects and topics people decide to pursue in their mental yoga. Whatever blows your hair back, he advises, offering gently that poetry is more challenging than prose and, somewhat hilariously given a hundred years of perspective, that E.B. Browning is a better writer than the Brontes or Jane Austen.

Bennett stresses not only to read, but to think, while warning against becoming a pedantic “prig,” lording the life of the mind over everybody. He also advises against becoming a slave to your reading and thinking regimen and to avoid at all costs being overly ambitious, lest you become overwhelmed and give up altogether. “A programme of daily employ is not a religion,” he writes. (23)

How to Live on 24 Hours a Day is a clear forerunner to today’s deluge of how-to booklets, covering narrow topics in a conversational style. It rises above the common herd, however, in that the topic he chooses is, for him, utterly serious. It’s not just about how to get smarter. From Bennett’s point of view he is prosthelytizing about what he considers life itself. In line with the classical philosophy of the day, Bennett believes a life of the mind is real life, and anything less a mere impostor.

The most prescient part of the work is the preface, in which Bennett attempts to appease readers who were offended by his generalization that people did not enjoy or live a life of the mind during their daily working hours. Though noting such critics are a minority, Bennett offers some special advice for this group. (He tells them to incorporate the reading and thinking regimen in the morning before work, avoiding doing it at night when they’re tired from daily mind exertions.) In this way, he is arguably a forerunner of the interactive how-to book in that, more than simply doling out advice, he is interacting with and adjusting to his audience.

Still, he was a man of his time, and a well-off one at that, writing for other well-off white men. He addresses the issue of “food, and servants” by directing his readers to instruct a servant “whoever she may be” to leave two biscuits, water, tea leaves and a spirit lamp on a tray near the bed at night. He then gives instructions on how to boil water.

Maybe, like boiling water, living a life of the mind is something everybody knows how to do, but the idea of writing something utilitarian, short and conversational makes Bennett relevant more than 100 years after How to Live’s  publication. The little book is part of the public domain now can be gotten in digital format for free.