This is an interesting and superlative fact about Facebook, which is an interesting and superlative company with an interesting and superlative IPO. That makes it news. But it doesn't make it indicative of anything about Facebook except that the IPO price turned out to be high.

The fault line that emerged was over the treatment of carried interest, the "hedge fund loophole," which allowed partners in investment firms to have their compensation--typically, a 20 percent cut of profits--taxed at the 15 percent capital gains rate instead of the 35 percent top rate for ordinary income.

Despite its name, the loophole benefited private-equity partners more than most hedge fund managers, who often trade on too short-term a basis to qualify for it. But hedge funds and private-equity firms alike bucked as it became clear that Congress was intent on closing the loophole in such a way that would hit all of them in a place that hurt: their profits, should they decide to sell stakes in their firm. Tax reformers had worried that, if the loophole was closed, managers would respond by selling shares in their firms to a third party. The money they gained from the sale--essentially, up-front payment for the firm's expected cut of investment gains--would be taxed at a lower rate as capital gains. In order to prevent one loophole being replaced by another, the emerging legislation would tax part of the sale of a stake in a firm at the much higher rate for ordinary income.

To many fund managers, this approach, which they dubbed the "enterprise value tax," was pure expropriation: They had built their firms from scratch and felt they deserved to have any sale taxed as capital gains. In his letter in 2010, Loeb declared the proposal an "arguably unconstitutional Bill of Attainder." The lobbyist who has represented hedge funds says: "The biggest thing that's infuriating to the hedge fund industry--the single biggest thing--is this enterprise-value tax. They feel they've been singled out. ... [It] is what they're metaphysically upset about. (Emphasis added.)

Hedge and private equity fund managers may be every bit the spoiled brats that MacGillis and Krugman say they are, but sometimes even spoiled brats are treated unfairly. The proposed "enterprise value tax" would in fact go far beyond putting carried interest on par with ordinary income; it would single out the sale of one kind of business for tax treatment not applicable to (as far as I know) any other kind of business at all. (I would like to know if there are other examples of business sales not being eligible for capital gains treatment.)

And how in the world is realizing capital gains by selling a portion of one's business a "loophole?" The proposed tax isn't aimed at some types of sale transactions which could be argued don't actually transfer the business interest; it would apply to any sale of any amount of a business which advises such funds (see page 139 of the proposed American Jobs Act).  Is selling stock after holding it for 1 year rather than 364 days a "loophole" because the sale then qualifies for long-term capital gain treatment?) If selling some or all of a business is a "loophole," then the term "loophole" has no meaning other than "something which enables people I don't like to reduce their taxes."

Substantively, this is no different than, say, if revulsion at Mark Zuckerberg inspired a proposed tax code change to render the sale of shares in technology company IPOs ineligible for capital gain treatment. I'd respectfully suggest that if such a change was ever mooted, the reaction from Silicon Valley and their fans would make the billionaire egotists excoriated by Krugman and MacGillis' piece seem like Buddhists by comparison.  Sometimes even paranoids have real enemies, and it's not surprising that they'd oppose people who have targeted them in such unique fashion. Even if they really are a bunch of spoiled brats.

Last week, 41 American companies received awards at a little-noticed White House ceremony. Despite the recession, the companies -- most of them small and medium-size businesses -- have experienced rapid growth and handsome profits in recent years. And they've beaten Chinese, Indian and European competitors at their own game.

How? By selling to a burgeoning global middle class expected to grow by 1 billion people -- primarily in Asia -- over the next decade.

Zippo Manufacturing Co, the maker of the iconic American cigarette lighter, has experienced 1,000 percent sales growth in China over the last 20 years and 900 percent growth in India over the last eight years. While other American companies have shed jobs, the 650-employee, Bradford, Pennsylvania-based company has added 150 jobs in the last three years and experienced a 20 percent increase in sales, most of it overseas.

"It's tough to compete, but we're doing it," said Greg Booth, the company's president and CEO, referring to cheap lighters manufactured in Asia. "We're competing in a category that is under incredible pressure."

WORKING HERE, SELLING THERE

DSC Dredge, a small, Louisiana-based builder of dredges, has increased its overseas sales by 1,300 percent over the last 10 years and nearly doubled in size from 80 to 140 employees. Their biggest overseas customers? Nigeria and Bangladesh, countries that Americans think of as impoverished but are experiencing significant economic growth. The firm's overseas sales have risen from $1.4 million a year in 2002 to over $20 million last year and make up 65 percent of its business. Charles Sinunu, the director of international sales, said the firm just sold three dredges to Russia and sells to 48 countries worldwide.

"It's become something where it really wasn't a big deal 10 years ago, and now it's a huge deal," he told me. "Right now, we have a record backlog of business and are actively trying to hire additional people."

And OSIsoft of San Leandro, California has done the seemingly impossible. While other companies have outsourced programming and technical work to India, the $300 million business software firm has grown from 150 to 750 employees in the last six years. Where are its new customers? In 110 countries around the world. Where are nearly all of its employees? Inside the U.S.

"We basically came to the conclusion that the cost of software development outside the U.S. is more expensive," said Nand Ramchandani, OSIsoft's director of business development and government affairs. "We just can't afford to have negative experiences. We'd rather develop that in-house."

A rough pattern emerged in interviews with senior executives of five of the 41 winning firms, which sell everything from vitamins to "waterless urinal technology" to oilseed presses. The rise of middle classes in China, India and other developing nations was not the death knell of the American middle class, they said. Instead, it represents an opportunity for American businesses that are willing to adapt.

"The real war that is being waged every day is an economic war," said Tom Kallman, a former Air Force F-15 fighter pilot whose New Jersey-based consulting firm, Kallman Worldwide, won an award for helping other U.S. companies export. "America's strength and future depends as much on a strong economy as it does on laser-guided bombs and jet fighters."

'A HORRIBLE THING'

American politics, though, is not changing fast enough, the business leaders warned. They expressed derision for the partisan politics of both parties in Washington.

"I can't state this strongly enough," said an executive at one of the award-winning companies who asked not to be named. "There aren't words in our language to express it. They are so far off base it's sad."

He and other executives said the problems come from the extreme right and left. Last week, a Tea Party-backed bill to close the U.S. Export-Import Bank, which lends money to U.S. firms that export, was defeated in the Senate. Several of the businesspeople said the bank wasn't perfect but it was an invaluable tool for countering Asian competitors, particularly Chinese companies that receive state support. DSC Dredge's Sinunu said the Chinese are "eating our lunch" in Africa, which now boasts seven of the world's 10 fastest-growing economies.

"I think that would be a horrible thing," Sinunu said. "The Ex-Im Bank is one of the very few things that I can shoot from my quiver to be successful. Getting rid of the Ex-Im Bank would be an absolute disaster for American companies that want to do business overseas."

Executives from the small firms generally praised an initiative by the Obama administration to consolidate the Commerce Department and six trade- and business-related agencies into a single, more effective body and the president's goal of doubling American exports by 2014. But they said American government export-promotion efforts still pale in comparison with those of China, Korea and many European countries.

The U.S government does not do enough to support American companies when they have designs stolen or counterfeited overseas, they said. The Commerce Department does not have enough staff based overseas to help American businesses, and post-2001 restrictions on granting U.S. visas to foreigners, particularly from predominantly Muslim countries, alienate overseas customers.

The executive who asked not to be named praised Korea's government for fiscal discipline, creating exceptional education systems and providing vast loan guarantees for Korean companies that are trying to export.

"I think it's relatively ingenious," he said, "to take their government money and utilize it to provide really good financing."

The awards -- and the places these companies have found customers -- show that the gravest threat to America's prosperity isn't the rise of middle classes overseas. It is Washington's blind adherence to dated ideologies that handicap our innovative small businesses. The world is changing, but Washington is not.

This article also appeared on Reuters.com, an Atlantic partner site.

The New York Times columnist David Brooks wrote that (young) people today are "less good at using the vocabulary of moral evaluation, which is less about what sort of career path you choose than what sort of person you are." I'm not sure if he has evidence for this assertion -- or precisely what he means by it -- so I thought I'd throw it out to thoughtful Atlantic readers and gather some feedback.

Brooks pointed out that graduates of elite universities -- Stanford, Harvard and the like -- tend to gravitate toward elite entry level opportunities in finance and consulting. Many, he writes, "have a blinkered view of their options," showing "little interest in or awareness of the ministry, the academy, government service or the zillion other sectors."  One wonders how many actual recent college grads Brooks has spoken with in recent months. Does he really believe that academia, for instance, is ripe with opportunities for young scholars? Is he unaware that Government has shed 2.6 percent of its jobs over the past three years, marking the greatest reduction in history? Does he truly believe that graduates of Harvard and Stanford do not understand that not all social workers are good people, or that not all investment bankers are bad people? 

As a teacher of the "young people" to whom Brooks eludes, I can vouch that they seem to be every bit as good at making these so-called "moral evaluations" as were their parents.  What's changed is their realistic options -- and their debt load. When Brooks (and I) graduated from university, the world seemed -- and was -- ripe with opportunity to "do the right thing."  Today, not so much. What Brooks failed to mention in today's column is that last year 18 percent of Harvard's graduating class applied for a gig with Teach for America.    Which makes one wonder: who, precisely, is blinkered? 

Using status updates from U.S. users, Facebook's data team has constructed a daily measure of America's mood--an index of gross national happiness. There is a long literature on how people's mood affects the market (yes, sunnier days in New York City are better for stocks), so Yigitcan Karabulut, a graduate student at Goethe University Frankfurt, decided to examine the link between Facebook's GNH index and share prices.

What Mr. Karabulut found was that GNH didn't seem to merely move up and down with the stock market, but to predict it: A bump up in people's sentiment one day tends to lead to a statistically significant increase in returns the following day.

How is that possible? As the report notes, vehicle output only accounts for 3 percent of gross domestic product. But because it fluctuates so much with the economy, it also has an outsized impact on growth. And recently, the new car market has been on a tear. Sales are on pace to reach 14.5 million for the year, up 13% from last year. This chart from the bank's report should put that in perspective.

During the last decade, Americans bought an average of 16.6 million new light vehicles a year. We're obviously still well below that figure. In fact, you'd have to reach back to the early 1990s to find a time when sales were at this level. Some might interpret that as good news and a sign that we still have plenty of room for growth before we match our old normal. 

I'm skeptical. First, a lot has clearly changed since the housing boom and dot-com bubble. Americans no longer feel flush thanks to the illusion of magically rising home prices and stock portfolios. Much of the recent buying spree, meanwhile, has been fueled by sheer necessity, as car owners who decided to hold off on trading in their aging vehicles during the recession are now heading back to dealer lots. We're finally back above the replacement rate -- the magic number of sales it takes scrap old, dying vehicles while maintaining the same number of cars and trucks on the road -- of roughly 13 million a year. 

Moreover, the auto industry itself has changed. In the aughts, American auto makers were operating far too many factories and building far too many cars, which they sold by any means possible just to keep the whole, bloated system running. Detroit relied heavily on steep discounts, including those 0 percent financing deals you see marked on the graph above. Thanks to the bankruptcies at GM and Chrysler, the industry has been able to scale back its operations, shuttering factories and getting rid of excess capacity. Meanwhile, they've done away with the discounts. As the Wall Street Journal has noted, they've gotten more profitable by selling fewer cars. 

Americans don't feel as rich as they used to. The industry doesn't need to sell as many cars as it used to. In short, there isn't much reason to think we'll see the auto market return any time soon to the heights of a few years ago. If the country's growth depends on car buying, that's trouble. (For a more optimistic view, here's a post from Morningstar analyst David Whiston on Seeking Alpha).

Few issues illuminate the presidential candidates' wildly divergent views on the appropriate size and role of the federal government more than taxes and spending.

For President Obama, fiscal policy is a means for preserving the country's safety net; promoting education, environmental protection, and other social goals; raising taxes on the wealthiest Americans to help to pay down the budget deficit and address income inequality; and boosting the domestic economy through manufacturing tax breaks and infrastructure programs, with the hope that both will create jobs.

---

MORE FROM NATIONAL JOURNAL

• Hispanics Divided on Romney
• Demography and 2012
• Why The Racial Gap Will Widen

---

"We don't need to be providing additional tax cuts for folks who are doing really, really, really well," Obama said at Northern Virginia Community College earlier this year, after the release of his fiscal 2013 budget. "Do we want to keep these tax cuts for the wealthiest Americans? Or do we want to keep investing in everything else--education, clean energy, a strong military, care for our veterans? We can't do both. We can't afford it."

The president's view of government is considerably less radical than Mitt Romney's. Obama would keep the government largely intact and recognizable to those it now serves. A hallmark of his budget is the preservation of entitlement programs for children, seniors, and the poor.

Romney's fiscal proposals lay out a much different future, with a smaller, streamlined federal government that turns a handful of programs over to the states and that ultimately provides a social safety net for fewer people. House Budget Committee Chairman Paul Ryan, R-Wis., has said that his fiscal 2013 budget blueprint, which the presumptive GOP presidential nominee backs, prevents the safety net from becoming a "hammock" that "lulls able-bodied people into lives of complacency and dependency."

If elected, Romney has agreed to sign Ryan's budget brainchild. It calls for deep spending cuts that would eliminate some government agencies, turn Medicaid and food stamps into block-grant programs, and overhaul Medicare by giving its patients a subsidy to either buy private health insurance or stay with the traditional fee-for-service program. On top of this, the Romney-backed Ryan plan would slash tax rates across the board for individuals and corporations--paying for the lower rates by eliminating unspecified tax breaks.

"I do not, for one moment, share my opponent's belief that our spending problems can be solved with more taxes. You do not owe Washington a bigger share of your paycheck," Romney recently told supporters in Des Moines, Iowa. "Instead of putting more limits on your earnings and your options, we need to place clear and firm limits on government spending."

Romney's limits on federal spending and lower taxes versus Obama's Keynesian-style spending and higher taxes on the wealthy offer contrasting prescriptions for jump-starting the economy, spurring growth, and managing the deficit. Each is betting that his vision will work.

TAXES

At a time when voters list jobs and the economy as their primary concern, talking about taxes may seem a bit off topic.

Still, taxation will take center stage in the weeks immediately after the election, when trillions of dollars in tax provisions will expire, from the Bush-era cuts to breaks for businesses. The across-the-board spending cuts known as sequestration, mandated by last year's Budget Control Act will also be on the agenda.

The winner of the presidential contest will influence these decisions. If Obama is reelected, he will  try to sway the contentious congressional debates over these issues in the lame-duck session. If Romney wins, Republicans in Congress may try to delay the major decisions until after his inauguration and the start of a new session in January.

Just as surely as Obama would try to use the lame duck to end the Bush tax cuts for high-earners, Romney and the Republicans would attempt to use the session to lay the groundwork for a major tax overhaul. Their plan would make the Bush cuts permanent and might also include Romney's proposal to reduce marginal tax rates by 20 percent--a move that would reduce the federal government's revenues by $480 billion in 2015, according to the nonpartisan Tax Policy Center.

In contrast, Obama wants to tweak the tax code by raising additional revenue from households that make over $250,000 a year. People in this bracket would see their rates rise. Taxes on the highest earners, for instance, would return to the 39.6 percent rate, up from the current 35 percent. Obama would further target people who earn more than $1 million a year. His second-term administration would try to limit their deductions, setting up a minimum tax for millionaires.

Both candidates released corporate-tax proposals in February, within hours of one another, in a race to win the title of tax reformer. Romney's plan would establish a territorial tax system, which would tax corporations only on income earned in the United States, and reduces the corporate rate from 35 percent to 25 percent. (In a November report, Congress's Joint Committee on Taxation concluded that even if every corporate tax break were eliminated, it would be difficult to lower the rate below 28 percent without adding to the deficit.)

Obama's plan, equally vague on specifics, would reduce the corporate rate to 28 percent; institute a minimum tax on multinationals' overseas earnings; and give American manufacturers a special tax rate of 25 percent. Critics have argued that this would further complicate the code with yet another special-interest giveaway.

SPENDING AND DEFICIT

On government spending, the two candidates again represent polar opposites. Romney pledges to significantly reduce federal spending, even as he calls for huge tax cuts. Obama prefers to spend money now on federal projects that he hopes will boost the economy and spur job creation.

Romney has said he would put his spending plan into effect on his first day in office, when he has promised to cut nondefense discretionary spending by 5 percent. (Defense, in Ryan's budget, is one of the few line items spared the red marker). Romney says he would cap federal spending at 20 percent of the country's gross domestic product by 2016.

In his budget, Obama proposed spending billions on infrastructure and transportation projects, proposals he has introduced before with little success. Unlike Romney, the president would not cap federal spending as a share of GDP. His budget experts say that such a cap could hinder the government during tough times and preclude programs to stimulate the economy during downturns.

Not surprisingly, the two men take similarly divergent approaches to the federal deficit. Obama's budget proposes $4 trillion in deficit-reduction over 10 years, with $1.5 trillion of that coming from tax increases and other savings from cuts in spending for such programs as farm subsidies and defense.

Romney, by contrast, would make immediate, drastic moves toward austerity. His deficit plan would slash federal spending to 20 percent of GDP by 2016, and as low as 18 percent of GDP in later years--well below historic averages. In addition, Romney's plan bets that lower tax rates will spur economic growth, boost the economy, and return the country to an era of budget surpluses and prosperity.

Of course, that's a goal that the candidates share: leading the U.S. toward pre-recession-level economic growth, controlled government spending, balanced budgets, and financial security. Through their tax and spending policies, though, Romney and Obama offer up drastically different strategies for traversing that path.

Mitt Romney has released his plan for bringing down the cost of higher education, and although it's not extensive, it is enough to tell us where his heart is on the issue. And, unsurprisingly, his heart is in the private sector. 

This is the bullet point version of Team Romney's agenda. As president, the candidate would: 

• Loosen restrictions on for-profit universities
• Get banks back into the federal student loan game
• Streamline (or possibly just cut) government aid programs
• Give colleges more flexibility when it comes to how they award degrees

In other words, it's a very conventionally conservative blueprint, beginning with the core presumption that the main culprits behind rising tuition are a lack of competition and the limitless amounts of student aid that schools can simply pocket as they raise their rates. As Romney's position paper puts it, "a flood of federal dollars is driving up costs and burdening too many young Americans with too much debt and too few opportunities." It assumes that tightening the money hose and encouraging more companies to get into education will bring down prices. It's about unabashed faith in the free market.  

Here's a point-by-point rundown of the good, bad, and irrelevant in the plan.  

1. LIMITING STUDENT AID
Interesting idea in theory. Painful, and maybe pointless, in practice.  

Although it tends to elicit a knee-jerk reaction from some liberals, the idea that student aid contributes to the rising cost of college is not crazy. Far from it. Econ 101 says that when you subsidize something, it increases demand and prices go up -- especially when there isn't stiff competition in the marketplace. But studies on the effect of student aid on college costs suggest that the link might be much more subtle and complicated than the basic logic would imply. The research suggests that the growth of loans and grants has in fact led to some tuition inflation, but there's little agreement about what kinds of aid are responsible, what schools are most likely to hike up their rates when the government's dollars come rolling in, or how significant the effect is. Basically, the details are hazy. 

Nonetheless, the notion that aid fuels college costs has become an article of faith on the right and is gaining currency on the left. President Obama himself embraced it a few months ago, when he declared that "if colleges and universities can't stop their costs from going up, then the funding they get from taxpayers, it should go down." Romney, for his part, promises that under his administration, "the federal government will no longer write a blank check to universities to reward their tuition increases, and by supporting institutions that are pursuing innovative operating models to drive down costs." 

Unfortunately, Romney doesn't detail exactly how he plans to do that. He does pledge to eliminate "duplicative, inefficient, or ineffective" aid programs to save administrative costs. As for Pell Grants, which help low-income students pay for school, he plans to "refocus" them "on the students that need them most and place the program on a responsible long-term path...." In other words, he'd cut the Pell budget and the number of loan programs the government runs. Would that pressure colleges into keeping down costs? Maybe. Or it might just drive students into the private loan market. It would certainly make paying for school more difficult for the neediest families, and without an explicit mechanism that punishes schools for tuition hikes, its hard to predict how college administrators would react. 

2. GETTING BANKS BACK INTO STUDENT LENDING
There is no good reason for this. No, really. None. 

Romney's suggestion that banks should once again play a larger role in student lending might be the only portion of his platform without a shred of good public policy rationale. One of the bonuses tucked inside Obama's health care reform bill was a provision that finally put the kibosh on the Family Federal Education Loan program, which slapped a government guarantee on private student loans issued by private banks. The program was an awful vestige of the 1960s, when Congress realized that, thanks to a bit of budget gimmickry, backing private loans would appear cheaper than making them directly. In reality, it turned out to be vastly more expensive, to the tune of billions of dollars a year by the time Obama nixed it. Today, the government makes all federal subsidized loans straight to students. There's no more middle man. 

Romney claims that when Obama "nationalized the student loan market," he "drove away private lenders and moved a trillion-dollar obligation to the federal balance sheet." This simply isn't true. The government was already on the hook for that money -- that's what it means when to guarantee a loan. If it goes bad, you pay. Other than that, Romney makes some noise about private lenders offering students more information and choice. Again, this is nonsense, unless you believe the banks were doing a fabulous job informing 18-year-olds about the risks of taking out debt before 2010. The long and the short of it: This idea looks like a give-away to the banks, or possibly a way to weaken the federal direct lending program.

3. UNLEASHING FOR-PROFIT COLLEGES
Maybe not the greatest idea, unless you think recruiting at homeless shelters is OK.  

Romney would like to see less regulation across the economy, and higher education is no exception. He specifically singles out the "gainful employment" rule, which cuts off federal financial aid for vocational schools that fail to place enough of their graduates in decently paying jobs. The for-profit college industry fought an all-hands-on-deck lobbying battle against the regulation and would still love to see it disappear (It's probably no coincidence that two Romney's education advisers previously lobbied for Apollo Group, corporate parent of The University of Phoenix).

There are many smart people who believe the for-profit colleges are helping push higher education into the 21st century, especially through their pioneering role in online learning. There's certainly no reason to strangle the industry in its cradle. But the gainful employment rule was aimed at scaling back the sector's worst excesses, like recruiting hopeless students at homeless shelters and halfway houses, then encouraging them to load up on debt. Unless you truly in your heart of hearts believe that all regulation is bad regulation, there's no reason to eliminate it. 

4. LETTING COLLEGES DECIDE HOW TO AWARD DEGREES
Now we're talking!

Of course, there are some regulations that do stifle innovation. Consider the government's decision in 2010 to formally define a credit hour. That appears to be the rule Romney is suggesting we eliminate, when he argues that colleges need more leeway to award degrees based on demonstrated skills rather than the time spent in a classroom. 

As the country's major education lender, the Department of Education is interested in making sure degree programs meet certain standards, and since schools are accredited partly based on the amount of time students spend studying in and out of a classroom, the agency felt compelled to issue a formal rule. 

The problem, which Romney's paper articulates rather well, is that time is an expensive and ineffective way of measuring achievement. Here's his take:

The current emphasis on time to degree, rather than measured competency, discourages more innovative learning solutions and continues the frustration of employers who are unable to fill high-skilled positions. Forcing students to complete a fixed term of study also drives up the costs for those who might need less time, while graduating those who have not yet obtained market-ready skills. Federal regulations and aid rules must change to facilitate instead of obstruct models that recognize and address this reality.

Exactly. If schools can figure out ways to graduate students faster and cheaper without compromising the quality of their education, there's no reason to let the government get in the way. 

If anyone could be described as the poster child for public colleges, it would have to be me.

I'm a graduate of SUNY-Binghamton and CUNY-Graduate Center. My brother has a BA from the University of Virginia. My sister attended SUNY-Binghamton. My husband has degrees from Miami University, Cleveland State University, and CUNY-Graduate Center. His father also attended Miami University.  My husband and I collectively taught at four different public colleges. 

My parents were the first in their families to attend college and both attended public universities. My dad, the third generation to work in Chicago's steel mills, started at the University of Illinois at Navy Pier, which transformed him from a C student to an A student. Two years later, he earned a full scholarship to the University of Chicago. He later became a professor and taught at City College of New York for 35 years. 

Over her Italian father's protests, my mother went to Hunter College back when it was a woman's college. She worked two jobs to pay her tuition. 

The affordable tuition and excellent education at these state schools were critical for the success of my family, as well as millions of working class and middle class Americans. 

So, what's the state of state colleges today? Are public colleges still taking care of their core constituency? 

Last week's New York Times article on student loan debt showed that students from state colleges had lower debt burdens than private college students. Tuition was half the price of private schools. (Please play with the Times' interactive graph.) That's good news. 

The Times also reports that all public colleges have been getting more selective, as students are priced out of private schools.

Across the country, the most selective public colleges have been growing more so for decades, with many of them seeing a notable shift in the past few years. The share of entering freshmen who were in the top 10 percent of their high school classes rose to 73 percent last fall from 69 percent in 2007 at the University of Texas at Austin, to 57 percent from 49 percent at Binghamton University and to 80 percent from 76 percent at the University of North Carolina at Chapel Hill, to name a few.

So, smart students are deciding to forgo expensive private school tuition and limiting their student loan burden. That's good news, too. 

The bad news is that a growing number of faculty at state or public colleges are adjunct instructors. Adjuncts are temporary faculty members who teach classes for low pay, no benefits. They do not have the protections of tenure. They are often not unionized. 1 million of the 1.5 million people teaching in American colleges are adjuncts. The number of adjunct faculty has increased dramatically over time. LinkedIn reports that it is the fastest growing job description. 

Doing some back of the envelope computations using data from the Chronicle of Higher Education, I found some depressing news about my alma mater and other public colleges. At SUNY Binghamton, of the 812 faculty, 383 are adjuncts. That's 47 percent of their total faculty.  At Penn State, of their 3,187 full time faculty, 1,428 are not tenured or on tenure track positions. In other words, 49 percent of their faculty do not have job security, equal pay, or benefits. If you attend University of Tennessee at Knoxville, you are highly likely to be taught by a graduate assistant. Of, their 4,235 teachers, only 1,295 are tenured or tenure-track professor. 2,062 of their teachers are graduate assistants. 

In a report released last year, 56 percent of all classes at community colleges in Pennsylvania were taught by adjunct or non-tenure track professors. They receive $2,500 per class. If the adjuncts taught a staggering five classes per semester, their salary would be $25,000 per year. They often receive no benefits. 

All these adjuncts are bad news for undergraduates at the public colleges. Many adjuncts are excellent teachers, but their temporary status and their exclusion from faculty meetings means that students can't rely on them for advice on course selection. It's difficult to develop relationships with faculty that may not have their own offices or might teach at multiple schools. It's also hard to be an excellent professor when you're poor and your career is unstable. 

State colleges have been forced to rely on non-tenure track faculty for several reasons. One factor has been the economic downturn, which has caused states to cutback on their support of higher education. State appropriations for colleges fell by 7.6 percent in 2011-12, the largest annual decline in at least five decades. With a decrease in revenue, an obvious way to save money is to hire cheap labor. At $2,500 per class, adjuncts are a bargain. 

Colleges have also been forced to rely on adjuncts as they push their tenured faculty to concentrate on research and graduate education. 

With tuition at private colleges in the $40,000 range, we're highly likely to be a third generation public school family. In a few years, I will be taking my son to tour Penn State and SUNY-Binghamton. I hope that in that time, I will see a reverse of some of these "bad news" trends. I hope that tenured faculty will return to the undergraduate classrooms and that all faculty members will be rewarded for excellence in the classroom.  

You know what happened next: Glitch, snitch, and flop went the IPO. What the heck happened? I caught up with Robak for the post-mortem of the public offering. Here's an edited transcript:

Well, that was disappointing. Has the Facebook IPO fallout shocked you?

I wouldn't say I'm terribly surprised. This was always an uncertain valuation and an uncertain investment. And the stock price hasn't really moved that much, when you think about how much of a crap-shoot this valuation was going to be. That would be my take.

That's a pretty calm reaction for the biggest tech IPO of all time falling 25 percent from its opening price!

Well, obviously, most people were assuming that Morgan Stanley and Facebook would have managed the IPO price to produce much more of a pop for it to continue trading up. But this is not easy to guess. You look at what happened to LinkedIn, which popped more than 100%, and that was clearly a substantial undervaluation.

You said Friday that private Facebook stock was trading in the low 40s in the secondary market, and that those investors probably expected the stock to be in the low-50s in six months. Explain that again to me.

When you buy something that you know is going to be illiquid -- and these people couldn't trade Facebook stock for 180 days after the IPO -- you want to give it a little bit of a haircut. The people who bought private Facebook stock in the 40s  were buying illiquid stock. They thought the so-called "fully liquid" version would be worth significantly more. That would take you into the low 50s. But actually, the price of privately traded Facebook shares went a little down before the IPO.

But by and large, most of the transactions in April were in the low 40s. So, yes, you would expect that these investors were unpleasantly surprised.

I'm reading some very smart economic writers who're blasting Facebook and the banks for letting big institutional traders gobble up all the value in Facebook, then setting the IPO price too high, and then screwing over retail investors who bought stock at $42 at the opening and immediately saw their investment fall by 25%.

But after LinkedIn's IPO, I read some very smart economic writers who blasted the banks for setting the IPO price too low and for screwing over the entrepreneurs. 

I'm really happy you said that, because I've had the same idea. This is an interesting thought experiment. What if Facebook had popped. What if Facebook debuted at $15 and popped to $35? Nobody would be complaining about the forecasts, or the Nasdaq glitch, the various things that went on. The CFO of Facebook, the analysts at Morgan Stanley, the tech guys at Nasdaq -- none of them would be in hot water now. So it reemphasizes for me that the IPO process is a somewhat delicate undertaking for everybody: for the company, for the underwriters, for everybody involved. Ideally you want to be right, but it pays to be low.

What do you think about the current accusations that Facebook leaked information to their underwriters, who shared it exclusively with big investors?

I have no idea. It's really not my place to say.

Is it fair to say we were all too optimistic a week ago?

I think people might have been over-excited about it, yes. It's not easy to price private companies since so much of the value is dependent on things that are going to happen in a year. The very nature of a company like this is highly speculative.

But the rise of working women has been much slower around the world. Here's a graph, via the International Labor Organization, comparing the gap between youth male and female participation rates around the world in 1991, 2001, and 2011. Worldwide, the gap has barely budged. In South Asia, it's still terribly high. In East Asia, the gap is totally inverted: women are officially working more than men.

What's going on here?

Sometimes the biases behind these gaps are purely institutional. In Sudan, for example, women still lack access to bank accounts, and in Yemen, it is illegal for women to leave the home "without permission from a male family member or an escort," according to the Economist Intelligence Unit.

In some cases, the gap is cultural. The women don't expect to work because their mothers didn't work, or because the national values don't emphasize employment as a "female" virtue. In Pakistan, for example, male participation rates are among the highest in the world, but less than "one out of five young Pakistani women participates in labor markets, which primarily seems to reflect cultural barriers to female labor force participation."

But some of the most interesting barriers are economic. In underdeveloped economies with large informal sectors (such as families selling their wares at bazaars), a strong economy ironically pushes women out of the workforce because the men find that their income alone can support the family. (Studies of countries in South Asia have often found that when household income goes up, female participation goes down, according to the ILO.) The introduction of a manufacturing sector -- an essential part of any country's industrialization -- overwhelmingly benefits men, opening up a wider gap between male and female employment and earnings.

As a result, female participation rates don't rise in a straight diagonal line like we tend to see in most positive trends. Instead, it follows a funky U-shaped pattern, with high female participation rates in many struggling countries, low participation rates as manufacturing transforms the economy, and higher participation rates as the service sector develops. This helps to explain why extremely strong economic growth in South Asia has done little to reduce gender gaps, even though the gap has declined relatively strongly in the slower-growing Middle East.

Growth is a requirement for the betterment of women's (and men's) lives everywhere. But the international road to equality through growth is loopy.

Fisheries continue to be among the best examples of the tragedy of the commons in action. As Garrett Hardin himself noted in his 1968 essay, "the oceans of the world continue to suffer" from the dynamic of the commons. Alas, little has changed. Ocean fisheries remain in trouble, as study after study reveals. Most fisheries around the globe are fully or over-exploited, and a substantial number have already faced collapse. The problem with fisheries management runs deep. 

It would be nice to think this is a problem confined to poor or developing countries, but it's not. Dozens of fish stocks in the United States remain overfished, despite herculean efforts to impose meaningful fishery regulations, from total catch limits to restrictions on fishing gear other inputs. Such measures try to limit access, but they do not alter the fundamental incentives of the commons. Each participant in the fishery retains every incentive to get what he or she can, even at the expense of the whole. In many fisheries, we see this manifested in a destructive and wasteful "race to catch," as each boat tries to get what it can before the fishery reaches its catch limit and closes. The resulting practices may make for good reality television, but they don't foster sound ecological stewardship. Traditional regulatory strategies do little to encourage concern among resource users for the long-term health of the resource and pit resource users against conservation interests. 

It does not have to be this way. Even before Hardin wrote his essay fishery economists had diagnosed the problem and explained how property rights in fisheries could solve the problem. Specifically by recognizing property rights in a percentage of the catch for a given species (or, in some cases, by recognizing rights in fishing territories), the "race to catch" could be eliminated and fishing crews could be given an incentive to husband the resource. The creation of property rights in the underlying resource aligns the incentives of those who work in the fishery with the health of the fishery. As owners of a share in the catch year-after-year, the fishers have a stake in ensuring there are more fish tomorrow than there are today. 

The benefits of such a system are not merely theoretical. They have now been confirmed through extensive empirical research. A recent study in Science that looked at over 11,000 fisheries over a fifty year period found clear evidence that the adoption of property-based management regimes, often called "catch shares" or ITQs, prevents fishery collapse. (More here.) This is only the latest piece of evidence supporting the use of property institutions for fishery conservation. As Hardin predicted, the institution of property rights averts the tragedy of the commons. 

There are many reasons for this. The creation of property rights in an ecological resource not only creates incentives for greater resource stewardship, to conserve the underlying value of the resource today and into the future. It also gives those who rely upon the resource a stake in the broader set of institutions that govern the resource. 

Under traditional fishery management, those who fish and those who regulate are typically at odds. Fishermen lobby for less restrictive catch limits so they may catch more today, out of fear the fishery may be more constrained tomorrow. Interestingly enough, the creation of property rights in the fishery catch encourages fishermen to take the opposite tack. More precautionary catch limits actually enhance the value of their catch shares, so they seek more protective policies. In some cases, as has been observed in New Zealand, fishery share owners themselves effectively take over the management of the stock, enforcing catch shares and limits, policing restrictions on by-catch, and funding the research necessary to ensure the fishery maintains its maximum sustainable yield over time. 

The move toward property rights appears to have had positive social benefits as well. Consider the experience of the popular reality show "The Deadliest Catch," which chronicles the efforts of several boats in the Alaskan King Crab fishery in the Bering Sea. The title for the show derives from the fact that Alaskan king crab fishing is one of the deadliest jobs around - or at least it used to be. 

After the first season, catch shares were adopted in the Alaskan king crab fishery, eliminating the race-to-fish that had made for such dramatic television, but a poorly run fishery. Among other things, this caused a significant increase in the safety of the fishery. As vessels no longer had to race to fish, there was now less of an incentive to cut corners and risk life and limb. They've also encouraged the boats to pay more attention to the ecological conditions of the waters in which they operate. As one of the captains explained in WSJ op-ed: 

Now we have a stake in protecting crab populations for the future. Because we aren't in such a race against the clock, we're able to get more young and female crabs we don't keep back into the ocean unharmed. When we find an area has too many juvenile crabs, there's time to go somewhere else instead. 

What made for better ecological management may not have made for good TV. After the second season the producers looked for new ways to up the excitement level in the absence of a race to catch. But it was good for those who work in the fishery, and certainly good for sustainability. 

The recognition of property rights in marine resources can also make it easier to adopt additional conservation measures. For instance, the adoption of catch-shares can reduce the incremental burden from the imposition of by-catch limits or the creation of marine reserves (though there are property-based ways to pursue these goals as well). A shift to catch-shares would have fiscal benefits as well. 

The most prominent objections to property-based fishery management are not ecological, but social and economic. Some fear the distributional consequences of recognizing transferable rights in a fishery or worry about the possible effect on local communities, particularly if fishery shares are bought out by larger companies. Such concerns are legitimate, but are best addressed directly. They should not be an excuse for leaving unsustainable fishery management regimes in place. 

 The theoretical and empirical case for property-based fishery management has been made. If we care about the health of marine resources, there is no reason not to move in this direction. Whether or not property rights in ecological resources are the solution to every environmental problem, they are in the case of fisheries.

If you want to buy a used television, you are in for a world of hurt. As you peruse through the Craigslist listings for used TVs, you may notice something surprising. The prices are kind of high. Do a quick check on Amazon and your suspicions will be confirmed. Lots of people try to sell their used television for more than that same TV would cost brand new.

That doesn't make any sense. No one would ever buy a used TV for $800 when they could buy the new one under warranty for $750. A market like this cannot possibly function properly. What is going on in the market for used TVs?

THE USED TV CHALLENGE

At the risk of stating the obvious, a used television should always cost less than its new counterpart. First, someone else has already used it. Second, the condition and quality of a used item is uncertain. The seller could be getting rid of the TV because it is a lemon. Finally, buying a used TV from some stranger's living room is less convenient than buying with one click on Amazon or at a Best Buy showroom. A used TV is strictly inferior to a new one and should be priced accordingly.

It turns out, people have very inflated expectations for how much they call sell their used TV. Only 3 of the 26 televisions we analyzed were discounted more than 30% versus a new TV. Insanely, for some TV models, the median used price is higher than the new market price.

Would a 14% discount entice you to buy a used television that might be a dud? Even if the average used TV seller offers this measly discount, plenty of people are out there trying to sell their TVs for a price higher than the new price on Amazon. What gives?

THE INCREDIBLE SHRINKING PRICE OF TVs

The typical Craigslist TV ad reads like this: "55 inch Samsung HD TV - $1000 . . . We bought this TV in August 2011 at the beginning of the school year for $1500."

The seller thinks: "I bought it for $1500, I'm being very fair discounting it 33% for the next owner." Unfortunately, the seller does not realize that during the 9 months they've been using the TV, it no longer costs $1500 new. Most likely you can buy that TV new today for $1000 or less.

People appear to be anchored to the price they originally paid for the television, not the current market price. This leaves them blind to the fact that the price of a new TV is always dropping precipitously. CNN illustrates:

Alas, even the writer of this article is vulnerable to used television pricing blindness. Having bought a TV for $900 last year, $600 seems like it would should be a fair price to list it for resale. In reality, the new price has fallen tremendously according Amazon Price Tracker Camel:

Ouch, it's a bitter pill to swallow that the TV dropped in price so steeply. When people (this author included) try to sell their televisions, they seem to be anchored on the price they originally paid. What they fail to realize is that the price of a new television is falling faster than their internal expectation for how much the item depreciates.

WHAT'S IN A NAME: THE "LG-47LK520" PROBLEM

Another terrible characteristic of the used television market is that practically no one properly identifies the product they are selling. Television manufacturers have developed an arcane product naming system where products are called things like LG-47LK520. The result is that no one actually knows what their television is called so they list it as a "LG 47 Inch LCD TV". Unfortunately, there are many possible products that meet this description.

Without accurately identified products, it's hard for buyers and sellers to know if they're talking about the same product. If people don't know they are talking about the same product, it makes it difficult for a transaction to take place.

We looked through a sample of television listings for sale to see if people properly identified their televisions for sale. We found that only 16% of sellers properly listed their TV with a product code, the rest only included the brand name of the TV.

In the market for used televisions, it's hard to know what is actually for sale. Once you figure that out, you may be disgusted by the price anyway.

HOW TO FIX THE MARKET FOR USED TVs

The used television market is broken. Sellers overprice their TVs and aren't even sure exactly what product they're selling. It's likely the size of the used TV market is only a fraction of how large it ought to be.

The market for new TVs works because products are accurately classified and rationally priced. Buying through Amazon is pleasant because it's like picking and choosing from a product catalog. You know exactly what you are getting and how much to pay for it. Buying a used TV is like shopping at flea market in a foreign country where you can't speak the language and suspect you're getting ripped off.

It seems likely that one day a local secondary market will emerge where products for sale are classified with the proper metadata and sold at price where buyers would be happy to "buy it now". That marketplace would look a lot more like Amazon than Craigslist. In the meantime, we hope that the Priceonomics data can help buyers and sellers agree on prices and add more liquidity to markets like used televisions.

This article also appeared on the Priceonomics blog, a content partner

If you thought the social media bubble was a sign of trouble, though, let me introduce you to Churchkey Can Co., the "retro beer company" that's become "a new tech investor darling," according to Tech Crunch. Churchkey was co-founded by Entourage star Adrian Grenier. It reportedly brews a pretty decent pilsner, which it sells in a steel cans with sealed flat tops, just like they used to package beer back in the 1950s and 60s. You know, the way real men like Don Draper drank it. In order to open it, you have to puncture the can with an actual churchkey, one of which comes with each six pack.

But that's about as far as the upside goes. First off, the market is crowded. There are already about 2,000 breweries operating, including about 250 new ones that opened last year. Getting a new brewery off the ground is a painstaking process that involves convincing distributors in each state to sell your product. The commodities markets can wreak havoc on your bottom line, or force you to raise prices. And even if you're wildly successful, the profit margins still aren't necessarily that great. Consider two of the top players in the industry, Craft Brewing Alliance, owner of Red Hook and other craft brands, and Boston Beer Company, maker of Sam Adams.

HOOK Profit Margin data by YCharts

Yep, that's right, 0.70 percent. Pretty measly.  

SAM Profit Margin data by YCharts

Sam Adams has fared significantly better, mostly ranging between 5 percent and 10 percent profits over the past decade. Its stock has also performed very nicely, rising from about $20 in 2009 to $105 today. On the other hand, it's Sam Adams, the single largest American-owned brewery, the biggest success story in the modern history of craft beer. 

Perhaps Churchkey has some sort of secret plan to top their results, to really "disrupt" beer making as we know. But a punch top can -- which, by the way, Miller Lite is already marketing their own version of, except that it can can be opened using a house key or any other nearby pointed object -- isn't going to remake the way America drinks.   

For some perspective, that's a hair more than a New Yorker would pay for a similar space in the heart of Manhattan's east village, at least based off a quick Craigslist search.

Williston is located in the northwest corner of the state, about a four hour-drive from the capital of Bismarck, and smack dab in the middle of the oil rich Bakken Shale formation. The first map below comes courtesy of Wikipedia, and should give you a sense of just how remote a locale we're talking about. 

Meanwhile, this second map, from the U.S. Geological Survey, shows the boundaries of the major oil exploration areas in North Dakota and Montana. Note: Williston's in the middle of it all. Mayor Ward Koeser told the AP that 90 percent of the oil rigs in the state are operating within 90 miles of the city. The influx of workers has doubled its population in two years, from 14,716 in 2010, according to the Census Bureau, to about 30,000 today. 

Those new arrivals have overwhelmed the housing market. Again, in 2010, there were 6,500 housing units in the city and about 6,000 households. New construction hasn't kept up with the new demand, which has left workers scrambling to find living spaces anywhere they can, causing massive rent inflation.

The final result is deals like this one: $2,000 a month to rent a motor home 5 minutes from downtown. Utilities are included.

It wasn't bad enough for Facebook to see its stock cascade by 18% -- or seven points -- since its delayed and disappointing Friday IPO. No, the real story lurks behind the numbers: the disastrous performance of the overwhelmed stock exchange and new rumors that Facebook might have broken the law before its first minute as a public company by leaking exclusive news about its earnings to large banks, who then went ahead and told big investors to sell Facebook at the opening.

First, the glitch. Technical issues with Nasdaq's trading systems delayed the Facebook IPO by two hours. Big deal? Sure is, Nicholas Carlson reported in an exclusive interview with a hedge funder at Business Insider. Nasdaq's slip-up, and its response to traders Monday morning, could have driven the stock down by encouraging big investors to sell. Money quote: "NASDAQ knew its systems were broken before the Facebook IPO, and instead of aborting the offering and facing huge embarrassment, it went ahead. Traders then lost hundreds of millions of dollars as they tried to buy and sell Facebook stock without getting confirmation that their trades had been executed."

Even after Friday's mayhem and Monday's fog, the stock continued to fall through Tuesday. So you can't blame glitches for all of Facebook's slide ... which could always rebound by, say, tomorrow. Stocks do that.

This brings us to the snitch. Here's what we think we know so far, based on reporting by the New York Times, Reuters, and Business Insider.

In the run-up to Friday's IPO, Morgan Stanley's lead consumer Internet analyst cut revenue forecasts for the company. JPMorgan Chase and Goldman Sachs, two other major underwriters, followed. That takes us one step closer to solving the mystery of Facebook's falling stock price: Three huge banks changed their mind about Facebook's immediate future and told institutional investors to back off the stock around $40.

The logical follow-up question is why did all three lead underwriters take the extraordinary step --  one mutual funder: "I've never seen that before in 10 years" -- of cutting their Facebook forecast? One clue might be in Facebook's S-1, which it updated on May 9 (9 days before the IPO).

Based upon our experience in the second quarter of 2012 to date, the trend we saw in the first quarter of DAUs increasing more rapidly than the increase in number of ads delivered has continued. We believe this trend is driven in part by increased usage of Facebook on mobile devices where we have only recently begun showing an immaterial number of sponsored stories in News Feed, and in part due to certain pages having fewer ads per page as a result of product decisions. [my emphasis]

Keep your eye on the bigger picture. Facebook's $100 billion valuation was never about its first-hour pop or its second-quarter earnings. The valuation reflected a belief about the future -- by definition, not reflected in today's numbers -- that the biggest Internet company, as measured by attention, simply had to become the biggest Internet company, as measured by market cap.

"When you're trading at massive multiples, any hint of a slowdown in growth, or of failing to meet pretty aggressive targets, is a key sell signal," Felix Salmon writes. Too true. But, as I'm sure Felix would agree, the implicit assumption behind Facebook's $100 billion valuation was that Mark Zuckerberg, boy-king and chancellor of the social universe, could transcend the drudgery of banner ads-per-user. Facebook is deeper, wider, more media-pervasive, and life-insinuating than every social media company put together. How does that sort of company not become the next Google?! ... is the kind of rhetorical question buyers were asking themselves.

"If Facebook's profit model stays the same, this valuation doesn't make any sense," Espen Robak, the president of Pluris Valuation Advisors, told me on Friday morning, just minutes before Facebook traded publicly for the first time. In one or ten years, Facebook won't be judged by Nasdaq's glitches, or its executives' alleged snitches. It will be judged by the degree to which Zuckerberg meets the historic burden of expectations placed on his company's shoulders.  Hiccups or no hiccups, this was always a bet on something not unlike magic.

_________

*On the other hand! When LinkedIn's stock popped 100% after its IPO last year, critics blasted the banks for setting that IPO price not too high, but TOO LOW, thus screwing the entrepreneurs out of tens of millions in shares that only blossomed after LinkedIn sold them. This is a good time to reiterate that stocks are bets; analysts are notoriously hyperbolic; and whether an IPO flat-lines or goes to infinity, you can be sure that somebody is allegedly getting a raw deal.

mrfoto/Shutterstock

Ronald Coase won the Nobel Prize in Economics for showing that social costs are symmetrical. In The Problem of Social Cost, Coase invoked the example of a farmer whose crops are trampled by the neighboring rancher's cattle. Before Coase, it would have been common to view the rancher as the culprit responsible for imposing costs on the blameless farmer. Coase pointed out that no matter which way the legal rights were allocated, one was imposing costs on the other. If the law forces the rancher to keep his cattle fenced in, the farming imposes fence-building costs on the rancher. If the law gives the rancher the right to let his cattle roam free, then the farmer bears the social cost.

Coase's work was instrumental in establishing a new field of scholarship -- the economic analysis of the law, which has been highly influential in many legal areas. In light of this, it is surprising how little role the core Coasian insight had in the Supreme Court's recent oral argument about the Obamacare mandate. Much of the discussion seemed to take for granted that this mandate encroaches on individual liberty, depriving individuals of the "freedom" not to purchase health insurance.

But as Coase's analysis makes clear, framing the issue in terms of individual liberty is deeply misleading. When the uninsured get sick and go to the emergency room for care they cannot afford, someone has to pay the costs. If the law gives the uninsured the right not to buy health insurance, then the costs for their emergency care are imposed on the insured, whose payments must cover the hospital's costs. If the law instead requires the uninsured to buy health insurance, they become personally responsible for the cost of the care they receive.

In other words, the issue is not whether to have a mandate, but rather on whom the mandate should be imposed. If the Supreme Court strikes down Obamacare, we will simply return to the old mandate, which was imposed on the insured rather than on the uninsured. It is not clear why that mandate would be constitutionally preferable to a mandate that everyone pay his or her own way. It surely does not involve any less of an infringement on liberty.

What is clear is that millions would not or could not obtain health insurance under the old mandate, which made health insurance less and less affordable to an ever-growing share of the population. This is why the Obamacare mandate was adopted. All the highfalutin' talk of the precious liberties at stake is an irrelevant, if highly effective, distraction.

Opponents asserted in oral argument that the Obamacare mandate went beyond this problem, by requiring more than catastrophic coverage, but this assertion seems to be mistaken. According to the Kaiser Family Foundation, the standard minimum "bronze" plans required under Obamacare would have an "estimated deductible of $4,375 for a single individual and double that for a family... a level of coverage that most would consider catastrophic."

Obamacare also explicitly allows anyone who is either under 30 or can show financial hardship to buy even skimpier plans that are undisputedly catastrophic. In short, the Obamacare mandate targets expensive treatments that would likely be unaffordable without insurance. The real debate is (or should be) over whether the mandate to pay for these treatments should be shifted from society at large to those who receive them.

A dose of Coase would go a long way towards clarifying the reality that the issue at stake is not individual liberty, but individual responsibility.

We're not used to thinking of the old industrial Midwest as a beacon of good news. Just the opposite. It's Exhibit A in the story of America's economic decline -- a land of hollowed-out factory towns and shrinking cities. There's an entire genre of photography dedicated to Detroit's decaying cityscape alone.  

Yet, it may be time to rethink that view. Because there are signs that the heart of the rust belt may be finally shaking off its rust. 

For the past thirty years or so, there have been two great running narratives about American manufacturing, both of which have been disastrous for the Midwest's economy. The first has been about the disappearing factory worker -- how by shipping some jobs abroad and replacing others with machines, companies have figured out ways to produce more goods with millions of fewer employees on their assembly lines. The second narrative has been about migration -- the decision by companies to move production away from once-booming industrial centers of the north, to southern states with weaker unions and lower wages.

Both of those trends, it appears, may have drawn to an end. 

The first sign of hope is the bounce-back the country has seen in manufacturing employment since the end of the recession. The graph below, courtesy of a recent Brookings Institute report, shows the great plunge of U.S. factory jobs over the last three decades, from more than 19.4 million in 1979 to a little more than 11.5 million in 2010. Recently, manufacturing has staged a small comeback. Between January 2010 and December 2011, we added 350,000 jobs in the sector. It's a modest increase, but at least it's a movement in the right direction. 

It's certainly possible that manufacturing is experiencing its own version of a dead cat bounce -- that employment fell so low in the wake of the recession, it simply had to recover a bit, even though the sector is still effectively moribund. But there are reasons to believe that we're seeing bona fide signs of life. The auto industry has gotten healthy. Exports are increasing. And some large manufacturers, including General Electric, Whirlpool, and Ford have started bringing jobs back to the U.S. from overseas -- a trend often referred to as "onshoring." These companies have discovered that with rising costs in China, it can be just as cost effective to make products here at home as overseas. 

The biggest beneficiary of these trends has been the Midwest -- which is something of a shock. For years, many observers have believed that if America ever experienced a manufacturing renaissance, it would happen in Dixie. States like Alabama, South Carolina, and Tennessee made themselves attractive to foreign manufacturers as well as companies up north, by using right-to-work laws to weaken unions and keep wages at cut-throat-competitive levels. They also offered up incentives in the form of sweet tax deals. All of this was supposed to make them the center of the future manufacturing economy. 

That hasn't been the case. The graph below is from the same Brookings report I cited earlier, which contains an extensive mapping of America's industrial base, and the way its geography has shifted for the last several decades. What it shows is that, contrary to popular belief, the great flight of manufacturers to the South effectively ended at the turn of the millennium. From 2000 to 2010, manufacturing employment fell in the Midwest and South at roughly same the pace. Since 2010, the Midwestern factory employment has recovered faster than the rest of the nation's, growing by 5 percent compared to 2.2 percent in the South. It's not simply that industries clustered in the region, such as cars and heavy machinery, have come back faster than others. If the Midwest had simply regained jobs at the same rate as its dominant industries, factory employment would have only grown by 2 percent.  

There's a relatively simple explanation for this recovery. When it comes to the price of operating a business, the Midwest is a lot more competitive than it used to be. As the Wall Street Journal  recently reported, the overall cost of doing business in the region, including factors such as labor and energy prices, is now about 96 percent of the national average. In the South, it's about 95 percent. The graph below shows how that gap has changed over the years. 

How did rust belt get back into fighting shape? In part, it has chased the South down to the bottom. Though states like Michigan and Illinois haven't gone to war against their unions, some factory wages have dropped. The major labor unions have also switched gears from trying to bid up pay and benefits to job preservation, as was vividly demonstrated by the most recent round of negotiations between the major car companies and the United Auto Workers. The famously pugnacious union accepted a two-tier wage system that would essentially pay new workers in Detroit and Ohio the same wage they'd make at a Toyota plant Alabama. In return, they got assurances that the companies would hire more workers, and bring more production back from abroad. Meanwhile, Midwestern states have become more adept at luring factories with generous tax breaks. 

The manufacturing revival has been far too modest to bring back the rust belt's glory years. But it appears that some of the region's worst economic bleeding has stopped. Its an opportunity for its cities and states to go into rebuilding mode. Hopefully, that'll mean more good news in the future. 

Thanks to Megan for inviting me to spend some time over here.  As she mentioned, much of my work focuses on environmental law and policy. I also do a fair amount on "administrative law" more generally (aka the law governing administrative and regulatory process), structural constitutional law (aka federalism and separation of powers), and the Supreme Court. Much of my academic work can be found on my SSRN page. While this first post will discuss some environmental issues, I expect to touch on these other subjects as well, particularly since The Atlantic has given me some of the credit (blame?) for marshaling legal arguments against the constitutionality of the individual mandate.

Much of my environmental work cuts against the traditional pro-regulatory grain of contemporary environmental law and policy. There have been significant environmental gains in many areas over the past fifty years, and traditional regulatory strategies deserve some of the credit, but modern environmental regulation is hardly a model of efficient governmental intervention. What, then, should we do differently? To answer this question it's important to think first about the nature of environmental problems, as our diagnosis of the problems will influence our choice of remedy.

The way we think about environmental concerns was heavily influenced by Garrett Hardin's seminal 1968 essay on "The Tragedy of the Commons." In this essay, Hardin described the fate of a common pasture, unowned and available to all. As Hardin explained, in such a situation it is in each herder's self-interest to maximize his use of the commons at the expense of the community at large. Each herder captures all of the benefit from adding one more animal to his herd. Yet the costs of overgrazing the pasture are distributed among every user of the pasture. And when all of the herders respond to these incentives, the pasture is overgrazed -- hence the tragedy. As Hardin explained it, the pursuit of self-interest in an open-access commons leads to ruin. Without controls on access and use of the underlying resource, the tragedy of the commons is inevitable. 

Hardin's essay is tremendously important, not so much because he discovered the commons problem -- others had documented this dynamic before -- but because he popularized a useful way of thinking about many environmental problems. As Hardin explained, the metaphor of the commons can be applied to virtually any environmental resource. Instead of a pasture we could talk of a herd of animals, a fishery, a lake or even an airshed. In each case, the underlying economic dynamic is the same, and if access and use are not limited in some fashion, over-use is inevitable as demand grows. [A quick caveat: What Hardin called the "commons," is more properly described as an open-access commons, as there are some resources that are owned or managed in common that do not suffer the tragedy because they are subject to community management of some form or other, but the central point stands.]

Hardin's diagnosis is often identified as a rationale for prescriptive regulation Hardin famously termed "mutual coercion, mutually agreed upon." This was his way of describing those regulations we adopt to keep a common resource of any sort from befalling the fate of an open-access commons, and it's largely the path we've followed in environmental policy for the past fifty years.

Administrative regulations have produced some gains, but also many failings. Our air and water are cleaner today than forty years ago -- and substantially so -- but many ecological resources are as threatened now as they ever were. Federal environmental regulation was not the savior many think, and many environmental regulations actually get in the way of further progress. The imposition of land-use controls under the Endangered Species Act, for example, discourages effective conservation on private land. 

One thing that Hardin overlooked is that the political process often replicates the same economic dynamic that encourages the tragedy of the commons -- a dynamic fostered by the ability to capture concentrated benefits while dispersing the costs. Like the herder who has an incentive to put out yet one more animal to graze, each interest group has every incentive to seek special benefits through the political process, while dispersing the costs of providing those benefits to the public at large. Just as no herder has adequate incentive to withhold from grazing one more animal, no interest group has adequate incentive to forego its turn to obtain concentrated benefits at public expense. No interest group has adequate incentive to put the interests of the whole ahead of the interests of the few. The logic of collective action discourages investments in sound public policy just as it discourages investments in sound ecological stewardship. This, in addition to the pervasiveness of special-interest rent seeking, explains many of the failings of centralized regulation. So despite the environmental gains of the past half-century, real challenges remain, and the tragedy of the commons is still with us.

Administrative regulation has been the dominant tool in environmental policy over the past half-century, but it was not the only prescription Hardin offered. What many forget is Hardin actually offered two prescriptions for preventing the tragedy of the commons. "Mutual coercion, mutually agreed upon" was one approach; but Hardin had another. In the alternative, Hardin suggested that greater reliance on property rights was a proven way to prevent the tragedy of the commons. As he explained, the tragedy of the commons "is averted by private property or something formally like it." Indeed, Hardin suggested this was one of the primary functions of property in land. 

As Hardin recognized, where property rights are well-defined and secure, the tragedy of the commons is less likely for each owner has ample incentive to act as a steward, caring for the underlying resource and preventing its overuse, both for themselves, and others who may value the underlying resource. In this way, the institution of property rights "deters us from exhausting the positive resources of the earth."

Hardin was not altogether sanguine about the potential for property rights to avert the tragedy of the commons in many areas because he feared it would be too difficult to define and defend property rights in threatened ecological resources, particularly against the threat of pollution. It's one thing to post and fence private land. Quite another to demarcate property rights in air or water. Yet there is far greater potential here than is commonly realized. Enhanced technologies and greater understanding of ecological conditions make it possible to conceive or property rights today where once they were the stuff of ecological fantasy.   

Pursuing the identification and expansion of property rights in ecological resources will be difficult, but the potential benefits are large. We understand the importance of property rights for economic prosperity, but we are also beginning to understand the importance of property rights for ecological sustainability. What we're learning is that where property-based institutions can be adapted to ecological resources more sustainable practices tend to result (and in my next post I'll provide a concrete example).

The importance of property rights for environmental conservation is not a new idea. It lay at the core of the early American conservation movement. After all, it was the institution of property rights that enabled the first Audubon Societies to post private reserves to protect birds from hunters who sought to collect their feathers for women's hats. It was the institution of property rights that enabled Rosalie Edge to turn Hawk Mountain from a hunting ground into a bird sanctuary. It is the institution of property rights that allows land trusts large and small, from the American Prairie Foundation to the Western Reserve Land Conservancy to protect precious places. The need to day is to keep moving beyond property in land and adopt property institutions to a wider array of ecological resources so that property institutions can have the chance to succeed in those areas where mutual coercion, mutually agreed upon has failed.