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Is Michelle Obama a Brilliant Experimental Economist? by B.K. Marcus

A consensus is emerging among advocates of personal freedom and economic literacy that the Healthy, Hunger-Free Kids Act, passed in 2010 with the support of Michelle Obama, is a typical failure of the nanny state.

Reason’s Robby Soave writes, “Like so many other clumsy government attempts to make people healthier by forbidding the consumption of things they like, the initiative is a costly failure.”

But I’d rather imagine the first lady is conducting a sophisticated empirical test of economic theory. All she needs are a few more interventions to correct the “unintended consequences” of the 2010 law, and we’ll be swimming in data.

As Ludwig von Mises explained in “Middle-of-the-Road Policy Leads to Socialism,” each round of intervention into voluntary exchange leads to consequences the interventionists find undesirable. Over and over, the officials are confronted with a choice: undo the initial intervention or initiate the next round of laws and regulations in an attempt to undo the effects of the previous round. Rinse, lather, repeat.

Testifying before the House Subcommittee on Early Childhood, Elementary, and Secondary Education, school administrator John S. Payne from Hartford City, Indiana, told Congress about some of the supposedly unintended consequences in evidence at his area’s public schools.

“Perhaps the most colorful example in my district is that students have been caught bringing — and even selling — salt, pepper, and sugar in school to add taste to perceived bland and tasteless cafeteria food.”

“This ‘contraband’ economy,” says Payne, “is just one example of many that reinforce the call for flexibility” on the part of local government officials.

While laissez-faire liberals may call for the scrapping of government-managed school lunches altogether, and federalists might join Payne in advocating the efficacy of decentralized, local authority over dietary central planning from Washington, DC, those who care more about economic science than nutrition or freedom should look forward to the next several rounds of loophole-closing, ratcheting coercion, and other adjustments needed to isolate students from their remaining lunchtime alternatives.

Currently, according to Payne, some of the parents in his district are signing their children out in the middle of the school day and taking them out for a quick fast-food meal. Those without the option of escape simply choose to eat less during the day. “Whole-grain items and most of the broccoli end up in the trash,” Payne told the subcommittee.

While exit and abstention are of some interest to economic theorists, the real intellectual treat is in seeing what happens when an isolated and otherwise powerless community is reduced to black markets and barter.

In “The Economic Organisation of a POW Camp” in the November 1945 issue of Economica, former prisoner of war R.A. Radford described the economic laboratory of German prison camps:

POW camp provides a living example of a simple economy which might be used as an alternative to the Robinson Crusoe economy beloved by the text-books, and its simplicity renders the demonstration of certain economic hypotheses both amusing and instructive.

In Radford’s camp, everyone received the same rations from both the prison and the Red Cross. Some prisoners also received private parcels, but these were less reliable. At first, barter exchange among the prisoners made them all subjectively better off: the lactose-intolerant smoker will feel richer from trading his tinned milk for the nonsmoker’s cigarettes.

While those who weren’t hooked on tobacco were at first happy to trade their extra smokes for more appealing products, over time, “cigarettes rose from the status of a normal commodity to that of currency.”

This means that all goods could be exchanged directly for cigarettes. There was no longer any need to find another prisoner who both (1) had a surplus of exactly what you needed and (2) wanted just what you had in excess. Everything took on a “price” in cigarettes, eventually listed on “an Exchange and Mart notice board in every bungalow, where under the headings ‘name,’ ‘room number,’ ‘wanted’ and ‘offered’ sales and wants were advertised.”

The public and semi-permanent records of transactions led to cigarette prices being well known and thus tending to equality throughout the camp, although there were always opportunities for an astute trader to make a profit from arbitrage.

Cigarettes were the best money in the context of a POW camp. A good commodity money is valuable, countable, and fungible — divisible in such a way that it retains proportional value. A half an ounce of gold, for example, is worth about half the value of a full ounce of gold. Cutting a diamond in half is not only difficult; it could render two smaller stones whose combined value is far lower than the one you began with.

Cigarettes are somewhere in between gold and diamonds: a single cigarette isn’t as easily divisible, but a half carton probably trades for half the value of a full carton. And the cigarette itself plays the same role with its tobacco contents as coinage does with precious metals: it establishes a countable unit that makes trade more convenient and prices easier to establish and track. And in a POW camp, where the supply is limited and relatively predictable, price inflation isn’t a problem.

Today’s Hartford City schools have not yet developed the economic sophistication of Radford’s German stalag. Students smuggle in packets of salt, pepper, and sugar, and trade them directly for consumption. But if a few more rounds of intervention can reduce students’ lunch options, we can expect to see a new medium of exchange emerge. I’m betting on salt, which already has a long history as commodity money throughout the ancient world.

But if the nanny-state nutritionists are forced to back off and allow either more flexibility or more freedom, we will lose an excellent opportunity to study the evolution of basic monetary economics in a controlled setting.

Won’t someone please think of the science?

B.K. Marcus

B.K. Marcus is managing editor of the Freeman.

Texas Will Stop Putting Kids in Prison for Skipping School by Jason Bedrick

The AP reports some good news out of Texas over the weekend:

A long-standing Texas law that has sent about 100,000 students a year to criminal court – and some to jail – for missing school is off the books, though a Justice Department investigation into one county’s truancy courts continues.

Gov. Greg Abbott has signed into law a measure to decriminalize unexcused absences and require school districts to implement preventive measures. It will take effect Sept. 1.

Reform advocates say the threat of a heavy fine – up to $500 plus court costs – and a criminal record wasn’t keeping children in school and was sending those who couldn’t pay into a criminal justice system spiral.

Under the old law, students as young as 12 could be ordered to court for three unexcused absences in four weeks. Schools were required to file a misdemeanor failure to attend school charge against students with more than 10 unexcused absences in six months. And unpaid fines landed some students behind bars when they turned 17.

Unsurprisingly, the truancy law had negatively impacted low-income and minority students the most.

In the wake of the arrest of a Georgia mother whose honor role student accumulated three unexcused absences more than the law allowed, Walter Olson noted that several states still have compulsory school attendance laws that carry criminal penalties:

Texas not only criminalized truancy but has provided for young offenders to be tried in adult courts, leading to extraordinarily harsh results especially for poorer families.

But truancy-law horror stories now come in regularly from all over the country, from Virginia to California. In Pennsylvania a woman died in jail after failing to pay truancy fines; “More than 1,600 people have been jailed in Berks County alone — where Reading is the county seat — over truancy fines since 2000.”)

The criminal penalties, combined with the serious consequences that can follow non-payment of civil penalties, are now an important component of what has been called carceral liberalism: we’re finding ever more ways to menace you with imprisonment, but don’t worry, it’s for your own good.

Yet jailing parents hardly seems a promising way to stabilize the lives of wavering students.

And as Colorado state Sen. Chris Holbert, sponsor of a decriminalization bill, has said, “Sending kids to jail — juvenile detention — for nothing more than truancy just didn’t make sense. When a student is referred to juvenile detention, he or she is co-mingling with criminals — juveniles who’ve committed theft or assault or drug dealing.”

It’s encouraging to see movement away from criminalized truancy, but it’s not enough. As Neal McCluskey has noted, compulsory government schooling is as American as Bavarian cream pie.

We shouldn’t be surprised when the one-size-fits-some district schools don’t work out for some of the students assigned to them. Instead, states should empower parents to choose the education that meets their child’s individual needs.


Jason Bedrick

Jason Bedrick is a policy analyst with the Cato Institute’s Center for Educational Freedom.

EDITORS NOTE: This post first appeared at Cato.org.