- Charter schools are money laundries: "The hidden world of charter schools operated for financial gain."
- Disney parks and aggregate demand management: My ongoing series on Medium, for an age of supply shocks.
- Oregon's carbon offsets go up in smoke: The Bootleg Fire is more evidence that markets can't solve the climate emergency.
- Surge pricing violates antitrust law: Even the weaksauce version pushed by the econ establishment.
- This day in history: 2011, 2016, 2020
- Colophon: Recent publications, upcoming/recent appearances, current writing projects, current reading
Charter schools are money laundries (permalink)
Critiques of charter schools usually focus on poor quality education (disproportionately affecting racialized and poor people) and dangerous ideology (the movement is funded by billionaire dilettantes and religious maniacs), and with good reason!
Charters hand public funds to private institutions with minimal oversight. Public money should not go to schools that endorse slavery and indigenous genocide, nor schools that deny evolution and claim humans and dinosaurs co-existed.
Charter students know they're getting substandard educations – that's why the 2019 valedictorians for Detroit’s Universal Academy used their speech to denounce the school, its curriculum and administrators.
The more we learn about charters, the worse the situation gets. Take New Orleans, where, post-Katrina, the Republican statehouse and wealthy dilettante "philanthropists" eliminated all public education in favor of charter schools.
A decade later, the state education regulator gave half these schools "D" or "F" grades.
No wonder that charter teachers joined LA public school teachers on their Red For Ed pickets in 2019:
Charter schools pitch themselves as grassroots phenomena, made possible thanks to the passion of parents seeking quality educations for their kids. The reality is that the movement is funded and promoted through a corrupt network of ultra-wealthy ideologues.
The Kochs and the Waltons (Walmart) have secretly funneled vast fortunes into disinformation campaigns aimed at demonizing teachers' unions:
They were joined by the likes of Trump education secretary Betsy DeVos, a fundamentalist who makes no secret of her view that charters can remove the barrier between church and state and institute publicly funded Christian indoctrination in schools:
Destroying public education is the sport of kings. Bill Gates blew $775m on a failed charter experiment whose subjects were children who got no say in the matter:
Gates has solid teammates in his anti-public-education crusade. I mean, who can say no to Mark Zuckerberg?
Misery loves company, which is why the Sacklers – mass-murdering architects of the opioid epidemic – sunk so much blood money into the charter project (incredibly, this "philanthropy" is supposed to improve their reputation):
But a critique of charters that starts with poor outcomes and ends with ideological billionaires misses the third leg of this stool: money-laundering and financial fraud.
Admittedly some of that has been in plain sight for years. Remember when an LA school board exec plead guilty to felony finance fraud and conspiracy for his role in the charter-backed takeover of the board?
But "Chartered For Profit," a report from Network for Public Education is by far the most comprehensive look at the means by which billions are transferred from public school districts to profiteers, at the expense of kids in both the charter and public system.
In an interview with Jacobin's Meagan Day, NPE's executive director Carol Burris discusses the blockbuster report, which is so damning that it prompted a bill in Congress that bans funding to charters that are managed by for-profit contractors.
Burris explains that even though nearly all charters are nonprofits (except in AZ), there's a widespread practice of contracting with for-profit corporations to "manage" these schools; the for-profits are often owned by the schools founders or their relatives.
Others are nationwide chains that offer comprehensive management services – "comprehensive" in the sense of steering schools to procure materials, services and supplies from affiliates that overcharge and kick-back to the management companies.
From substandard, overpriced cafeteria fare; to janky, nonfunctional ed-tech; to unqualified, underpaid teachers, these for-profit entities figure out how to minimize costs, maximize profits, and disguise poor student outcomes so they can keep doing it.
They deploy opaque corporate structures to give the appearance of a thriving ecosystem of suppliers – meanwhile, the largest chain, Academica, consists of 56 companies at one address, more than 70 at another, and a network of real-estate, holding and finance companies.
Real estate plays a major role in charter profiteering. Profiteers scoop up tax-advantaged funding and subsidized loans to buy buildings, leased at inflated rates to charters, with the tax-payer paying their mortgage.
When the mortgage is paid, more tax dollars are used to buy the school at inflated prices.
But it's even more profitable to run a "virtual school" where you can deliver canned lectures and fake attendance records and pocket vast sums in public money.
For-profits are also loan-sharks. They offer credit to the nonprofit charters so they can afford the inflated prices for educational "services," charging high interest rates that ensure they get an additional rake off of every public dollar the charter receives.
NPE's "Another Day Another Charter Scandal" page is a good look at the tip of the corruption iceberg – the crimes that get caught, from fake invoices to outright embezzlement. Charter execs use the school's credit card to pay for fancy dinners even trips to Disney World.
Charters shouldn't exist, period. But if they must exist, then the loophole that allows for-profits to run the notionally nonprofit charter sector must be closed.
Meanwhile, if you want a look at education "reform" that works, check out Andrea Gabor's 2018 "After the Education Wars," and learn how eliminating hierarchy, funding the arts, offering good wages and good training to teachers transform schools.
The formula is rather simple, really: "a respect for democratic processes and participatory improvement, a high regard for teachers, clear strategies with buy-in from all stake-holders, and accountability frameworks that include room to innovate."
"Robust leadership and strong teacher voice. Their success underscores the importance of equitable funding and suggests that problems like income inequality are far more detrimental to education that the usual suspects, like bad teachers."
Disney parks and aggregate demand management (permalink)
Three weeks ago, I kicked off a new series of weekly essays in my Medium column, the start of a long series on what we can learn about aggregate demand management and scarcity from the history of queues at Disney theme parks.
The combination of the pandemic and the climate emergency have entered an era of supply shocks and shortages. The pandemic-related snags will eventually stabilize (for certain values of "eventually") but the climate-driven problems will only get worse.
Theme parks may seem like an odd lens to look at scarcity, demand, rationing and expectations through, but I think they're a surprisingly reliable microcosm for understanding these issues.
In part, that's because of their seeming triviality – as with science fiction and other pop culture, theme parks have served as incubators for weird ideas that might have been shot down in higher-stakes environments.
And, as with sf and other pop culture, theme parks are anything but trivial: the desire to be immersed in a fantastic narrative is as old as the first story told before the first fire, and immersive built environments have a storied history – from palaces to escape rooms.
Part I is "Are We Having Fun Yet?" and it traces the true origins of Disneyland – not just the official tale of Walt Disney's search for a place where parents and kids can play together – but also a place where Walt could escape his own company.
Part II, "Boredom and its discontents," looks at the history of ticketing strategies for Disneyland, drawing – among other things – on a rare original Disneyland prospectus that I posted online after Glenn Beck bought the only copy and locked it up.
Part III is "Now you’ve got two problems." It looks at the psychological impact of different demand-management strategies – the problems that cropped up when Disney management "solved" its earlier issues with all-you-can-eat, single-price admissions.
I've just come back from a week in Walt Disney World, celebrating my 50th birthday. It was fascinating to spend a week in the park at this moment, when crowds are surging and management has removed its Fastpass systems. Next week's installment will dig into this.
Future installments will look at the problems with adding more capacity – building more rides draws bigger crowds, and lines get longer, not shorter – and the tension between profit, service delivery, and competition.
I'll also be discussing some of the paternalistic techniques Disney uses to manage its queues – like falsifying the expected wait-times as a means of discouraging people from joining lines – and what democratic alternatives for the "real world" might look like.
Oregon's carbon offsets go up in smoke (permalink)
The theory behind carbon offsets is that markets created the climate emergency, so markets will solve it. It's a kind of high-stakes denialism, like a lifelong smoker switching to "light" cigarettes after learning they have stage four lung-cancer.
The climate emergency owes its existence to market doctrine: that firms should manage their affairs to maximize shareholder value, irrespective of the costs that maximization imposes on everyone else.
By that logic, all corporate crime is the result of "poor incentives" – maimed workers, ruined neighborhoods and toxic spills are the results of underpriced insurance, or fines that are set too low.
Rather than criminalizing the conduct that leads to these outcomes – shutting down companies that engage in the conduct, holding managers and shareholders personally liable for it – market doctrine insists that we should "rebalance the incentives."
Enter carbon offsets: rather than prohibiting the pollution that will render our planet permanently uninhabitable by our species, we make that pollution economically disfavorable, by offering bribes to companies that promise not to pollute.
Buy a forest, promise not to cut it down, get a tradeable credit. If the credits pay more than clearcutting, the incentives net out in favor of not committing genocide. As the Climate Ad Project puts it, this amounts to a "murder offset."
From the start, offsets raised an obvious question: how do you know that someone who pledges not to pollute was planning to pollute? How do you keep the system from turning into a market for lemons? Here's a 2010 article raising those questions:
Fast forward a decade. The answers to the questions remain elusive, but the market for lemons is in full swing. Environmental, Social and Governance (ESG) funds are full of absolute garbage, stuff that doesn't even pass the giggle-test:
Offsets are the worst. Corrupt "charities" like Nature Conservancy make vast fortunes ($932m in 2019) helping the world's worst polluters greenwash their fortunes by offering offsets for set-asides on lands that would never be logged anyway.
The Conservancy has a history of boasting about its role in burnishing the credentials of sociopaths who want to watch the world burn:
"The only problem with tainted money is there tain't enough of it" -Patrick Noonan, Conservancy President, 1973-80
Despite that, carbon offsets remain credible, but perhaps that'll change. After all, Oregon's 400,000-acre (and counting) Bootleg Fire is consuming vast of carbon offset forests, releasing the carbon the public paid logging companies not to release.
Once that public money was in private hands, it returned to public officials – regulators who oversee Oregon's forests, who "sought to discredit climate scientists and operated as a de facto lobbying and public relations arm for the timber industry"
Offsets don't just fail to mitigate the climate emergency – they have a business model: funneling lots of public money to rich people, like the millionaire residents of a gated Pennsylvania estate who got huge tax breaks for their private park.
Everything we do to fix offsets just makes them worse: adding complexity to a loophole-riddled system creates more loopholes. We can't save the world and our species with improved murder offsets.
(Image: Cristian Ibarra Santillan, CC BY 2.0, modified)
Surge pricing violates antitrust law (permalink)
If you've paid any attention to the resurgent debate over antitrust, you've likely met the "consumer welfare standard," which is the cornerstone of post-Reagan monopoly law, and which is widely (and correctly) blamed for our new gilded age of vast, unaccountable monopolies.
In the years between the New Deal and the Reagan revolution, the cornerstone of antitrust enforcement was the idea that monopolies are just bad – bad for a clean political process free from excessive corporate corruption.
The watchword of this kind of antitrust is "harmful dominance" – the idea that monopolies hurt workers, suppliers, bystanders, customers, and the legitimacy of the democratic system itself.
Reagan jettisoned those notions, heeding the cries of the Nixonite criminal Robert Bork and his colleagues from the Chicago School of economics, who claimed that "harmful dominance" was too subjective and gave rise to unpredictable enforcement.
"Consumer welfare" was supposed to replace the squishy, qualitative world of "harmful dominance" with an empirical, quantitative standard for when monopolies would face justice. That standard? Higher prices.
Consumers are better off when they pay less and get more. One thing monopolies can do is drive up prices and prices are things we can measure. If a merger is likely create high prices, we can block it. If a conglomerate raises prices, we can punish it.
In practice, this is a nothingburger. Proving consumer welfare harms requires the creation and interpretation of complex mathematical models, and the highest bidder can always hire the most convincing mathematicians to prove that price rises can't be attributed to monopolies.
Consumer welfare advocates – cheerleaders for monopolies – object to this. They say that the monopolies they provide cover for are incredibly efficient, and that's why the FTC and DOJ antitrust enforcers never have cause to go after them.
These monopoly-stans insist that they don't like to see consumers ripped off, and if they ever saw a rip-off that could be definitively attributed to market power, they'd fight it like Teddy Roosevelt going after Standard Oil.
That's not how it works in practice. "The Efficient Queue and the Case Against Dynamic Pricing," a 2020 paper in the Iowa Law Review by U KY law/econ scholar Ramsi A Woodcock documents a widespread consumer welfare harm that's hiding in plain sight.
That harm? Surge pricing.
Woodcock argues that surge pricing is a pure transfer from consumers to producers – that is, a way to use market power to raise prices without any consumer benefit. He says we should ban it.
Woodcock's paper starts with the fact that shortages occur. The demand for a hot Christmas toy, or a spring break plane ticket, or a seat at Hamilton, or a ride on Space Mountain outstrips the supply. When that happens, some people aren't going to get what they want.
Merchants have two main tactics for deciding whom to disappoint: They can run an auction (surge pricing), or they can establish a queue.
Economists have historically hated queues. Camping out for a week to get a Tickle Me Elmo is considered wildly unproductive.
But the information age has given rise to a new kind of queue – the virtual queue, where you add your name to a waiting list or click a link at an appointed hour and see if you got the item or not.
Virtual queues eliminate the inefficiencies of physical queues, and they do so without raising prices – the one thing that antitrust law is supposed to ban.
Woodcock makes some good points about the problems with price gouging as a means to "clear the market" (sell all your inventory to willing buyers). The first one is that price-hikes are "excessive" from a consumer welfare perspective.
If Tickle Me Elmo is priced at $24.99, then we know that the vendor considered $24.99 to be a fair price for him. When demand spikes and the merchant raises the price to $50, they're pocketing $25.01 that was demonstrably not needed to incentivize them to create the toy.
That's $25.01 transfered from consumers to producers, which the producers are able to misappropriate because of their market power as sole suppliers of Tickle Me Elmo dolls (IP plays a role here in ensuring this exclusivity).
Woodcock dismisses arguments that these excessive profits serve a market function by incentivizing others to enter the market. Not only are surges often too brief to provide this incentive, but actual surge pricing exceeds the price needed to bring new sellers to market.
For example, Uber's surge pricing has been documented to substantially exceed the price at which more drivers turn on their apps. Uber uses surge pricing as a pretence for price-gouging – as a transfer from riders to the company.
Woodcock's case for prohibiting surge pricing is bolstered by the "administratability" of such a prohibition. Courts have shied away from intervening in pricing because it's hard to set policies and monitor compliance.
A blanket ban on surge pricing, by contrast, is trivial to enforce, especially in the digital marketplaces where it is most widely practiced: Amazon, Disney World, airlines, Uber, etc.
The paper falters in the final section, though, in which Woodcock addresses the ways in which queues can be subverted: he says that informal secondary markets are terrible, but they're still preferable to the problems of primary surge-priced markets.
He misses a couple of points that would make his case stronger. The first is that many price-discrimination markets are intrinsically hostile to resellers, like airline tickets and theme-park admissions, which are nontransferable and keyed to strong identity systems.
The second point is the way that this "consumer welfare" issue crosses over into "harmful dominance." Many of the secondary markets for surge-priced goods are actually operated by monopolists who also run the primary markets.
Take Ticketmaster, an ugly, criminal monopoly that has grown to dominate ticketing and venues, thanks in large part to vast sums it laundered for the Saudi Royal family:
Ticketmaster operates its own reseller marketplace, an entire shadow industry for tickets in which they collude with scumbags to ensure that no tickets go to fans at face value. Instead, they're sold to profiteers, who list them on Ticketmaster's exchange at inflated prices.
Ticketmaster pockets a commission on each one of these sales – without giving a dime to the performers whose labor they depend on.
Ticketmaster's vertical dominance of the performance industry allows it to get away with this system of wage-theft and price gouging – it's harmful dominance that leads to consumer welfare harms.
But even with that weak third act, Woodcock's paper is fascinating and powerful – and a rebuttal to "consumer welfare" advocates' claims that they actually care about consumer welfare – if they did, they'd be fighting surge pricing.
This day in history (permalink)
#10yrsago Patent trolls and shakedowns: Intellectual Ventures and the “little guy” https://www.npr.org/sections/money/2011/07/26/138576167/when-patents-attack
#10yrsago Ousted EMI boss: pirates are our best customers, suing is bad for business https://torrentfreak.com/former-google-cio-limewire-pirates-were-itunes-best-customers-110726/
#5yrsago Textiles printed directly from sewer covers https://raubdruckerin.de/en/
#1yrago Green Growth https://pluralistic.net/2020/07/26/fierce-slayer/#green-growth
Today's top sources: Len Testa (https://twitter.com/lentesta), JWZ (https://www.jwz.org/blog/).
- Spill, a Little Brother short story about pipeline protests. Yesterday's progress: 263 words (11049 words total)
A Little Brother short story about remote invigilation. PLANNING
A nonfiction book about excessive buyer-power in the arts, co-written with Rebecca Giblin, "The Shakedown." FINAL EDITS
A post-GND utopian novel, "The Lost Cause." FINISHED
A cyberpunk noir thriller novel, "Red Team Blues." FINISHED
Currently reading: Analogia by George Dyson.
Latest podcast: Tech Monopolies and the Insufficient Necessity of Interoperability https://craphound.com/news/2021/07/12/tech-monopolies-and-the-insufficient-necessity-of-interoperability/
- Privacy Without Monopoly, Defcon 29, Aug 7
Keynote speaker, The Quills Conference, Aug 12-15
Reset the Internet? (Project Syndicate)
- Trustbusting (Nicole Sandler)
Launch for Neil Sharpson's When the Sparrow Falls (Mysterious Galaxy):
- "Attack Surface": The third Little Brother novel, a standalone technothriller for adults. The Washington Post called it "a political cyberthriller, vigorous, bold and savvy about the limits of revolution and resistance." Order signed, personalized copies from Dark Delicacies https://www.darkdel.com/store/p1840/Available_Now%3A_Attack_Surface.html
"How to Destroy Surveillance Capitalism": an anti-monopoly pamphlet analyzing the true harms of surveillance capitalism and proposing a solution. https://onezero.medium.com/how-to-destroy-surveillance-capitalism-8135e6744d59 (print edition: https://bookshop.org/books/how-to-destroy-surveillance-capitalism/9781736205907) (signed copies: https://www.darkdel.com/store/p2024/Available_Now%3A__How_to_Destroy_Surveillance_Capitalism.html)
"Little Brother/Homeland": A reissue omnibus edition with a new introduction by Edward Snowden: https://us.macmillan.com/books/9781250774583; personalized/signed copies here: https://www.darkdel.com/store/p1750/July%3A__Little_Brother_%26_Homeland.html
"Poesy the Monster Slayer" a picture book about monsters, bedtime, gender, and kicking ass. Order here: https://us.macmillan.com/books/9781626723627. Get a personalized, signed copy here: https://www.darkdel.com/store/p1562/_Poesy_the_Monster_Slayer.html.
- The Shakedown, with Rebecca Giblin, nonfiction/business/politics, Beacon Press 2022
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