The weekend's interesting reads

"Light-Years Ahead of the Crowd: Interview With James B. Rogers, Private Investor" by Lawrence Strauss with Barron's:

"Q: You have been quoted as saying you don't think bailouts of troubled companies are a good idea. Is that still your view?

A: Yes, it is. If the government had not bailed out the hedge fund Long-Term Capital Management in 1998, I don't think we would have some of the problems we have now. Investment banks have been going bankrupt for hundreds of years. It is not the first time something like Bear Stearns has happened and the world has always survived.

If you had a few investment bankers go broke in 1998 or after the dot-com bust -- or if they lost hundreds of millions of dollars -- they probably would have had a different approach to their balance sheets. But since relatively few people got hurt with Long-Term Capital Management, in a few months everybody had forgotten the lessons that should have been learned about leverage or crazy products or crazy approaches. The government has been intervening to save all its friends for a decade or so rather than letting the market work properly.

Q: But isn't it so that a Bear Stearns bankruptcy would have devastated the financial system?

If the system is so fragile that the fifth-largest investment bank can bring it all down, then you better go ahead and have the problems now. What if three or five years from now it is the largest investment bank that fails or the largest five or six banks that fail? Then there will be a disaster.

Q: As an investor, you often allude to the importance of understanding history.

History will teach you that, first, we have seen all of this before, whether it's bubbles or panics or collapses. And yet, somehow, the world adapts. It also shows that whatever we are seeing today is not going to be true in 10 years, as was the case with the bubble in technology stocks in the late 1990s. As an investor, it's crucial to figure out what is going to change."

This was actually from a couple weeks ago. I think he nailed the incentives discussion on the head. Incentives were distorted 10 yrs ago with LTCM. They were distorted this year with Bear Stearns. The longer they become distorted, the greater the pain will be when something really bad happens.

"Twenty-Five Years Later, A Nation Still at Risk" WSJ op-ed by Chester Finn:

"What to do now? It's no time to ease the push for a major K-12 education make-over – or to settle (as Barack Obama and Hillary Clinton apparently would) for reviving yesterday's faith in still more spending and greater trust in educators. But we can distill four key lessons:

First, don't expect Uncle Sam to manage the reform process. Not only does Washington lack the capacity to revamp thousands of schools and create alternatives for millions of kids, but viewing education reform as a federal obligation lets others off the hook. Yet some things are best done nationally – notably creating uniform standards and tests in place of today's patchwork of uneven expectations and noncomparable assessments. These we have foolishly resisted.

Second, retain civilian control but push for more continuity. Governors and mayors remain indispensable leaders on the ground – but the instant they leave office, the system tries to revert. The adult interests that rule it – teacher unions, yes, but also colleges of education, textbook publishers and more – look after themselves and fend off change. If three consecutive governors or mayors hew to the same agenda, those reforms are more apt to endure.

Third, don't bother seeking one grand innovation. Education reform is not about silver bullets. But huge gains can be made by schools that are free to run (and staff) themselves, attended by choice, expected to meet high standards, and accountable for their results.

Finally, content matters. Getting the structures, rules and incentives right is only half the battle. The other half is sound curriculum and effective instruction. If we can't place enough expert educators in our classrooms, we can use technology to amplify the best of them across the state or nation. Kids no longer need to sit in school to be well educated."

There might be some need for regulation and uniform standards, but only a floor of absolute basic topics that need to be convered and taught, not standards of student achievement. We then should give parents the freedom to choose how their tax dollars are spent. I'd like to give parents who choose to homeschool access to those funds, but it's have to be done in a way that doesn't give people the incentive to "home school" but use the money for tv's, cars, etc. Some schools very well might opt for the "budget education" and only provide the basics, but when kids score low on standardized tests, parents will pull their kids from the school and it would lose funding, forcing it to change.