BACKGROUND: Before the great financial crash of 2008/2009, Nassim Nicholas Taleb, a former derivatives trader turned NYU professor of Risk Engineering, wrote a book debunking the predictive models of Wall Street gurus and former academics who, for a not-so-insignificant price, lent their vastly complex computer modeling and math skills to the large investment banks and hedge funds that were largely responsible for having accommodated government policy – all of which led to the collapse of the mortgage market and of the financial derivatives upon which it was based.
Taleb titled his book The Black Swan. He chose that designation to underscore his belief that when a segment of society – in this case, Wall Street financial institutions and hedge funds – has come to believe that it has discovered a foolproof way of assuring market success, it is precisely then that unforeseen, improbable events – Taleb calls these “Black Swans” – will cause the bottom to fall out of all the assumptions upon which those complex financial models were based.
To illustrate his assertion, the author points to a hitherto prevailing belief held for many years, that all swans are white – that is, until the discovery of black swans in the Australian subcontinent upset those preconceived notions of certainty.
Simply put, that is why the market for mortgage derivatives fell apart: Its house of cards tumbled in a domino-like pattern in 2008, when The Black Swans of unpredictability brought it down.
HOW TALEB’S “BLACK SWAN” CONCEPT RELATES TO SCHOOL REFORM IN THE GARDEN STATE:
When, in 1990, the New Jersey Supreme Court continued to further insert itself into the educational process by establishing the Abbott Districts, it earnestly thought that it would improve the failing school systems of our central cities, as well as those of other low-performing school districts.
The court’s basis for its decision was that Abbott Districts displayed “evidence of substantive failure of thorough and efficient education.” The prevailing certainty from the bench at that time was that court-mandated state funding to the Abbotts would reverse the tide of educational mediocrity in those districts.
Instead, NJ’s highest court succeeded in merely diverting money away from hundreds of other Garden State districts. The court caused more than half of all state aid to be funneled into failing school systems, an action that pushed New Jersey further into its abyss of indebtedness.
The justices sitting on the bench could never spot The Black Swans over the horizon which would, over time, shatter all of the court’s assumptions about the causal factors which truly determine student performance.
There has been no significant turnaround in the educational alchemy of New Jersey’s failed school districts since 1976, when the New Jersey Supreme Court shut down the public schools for eight days, forcing the legislature to enact the New Jersey state income tax.
(In 1973, the New Jersey Supreme Court ruled that heavy reliance on property taxes for education is discriminatory. However, since that declaration, all Supreme Court justices have been remarkably silent and inactive about that topic – NJ continues to fund education with the heaviest property tax burden in the nation, despite dedicating “about $10.3 billion of the $29.4 billion (state) budget for 2010-11 to education!”)
Indeed, cumulative court directives have failed so badly, that the State of New Jersey has had to take control of some high-profile school districts.
Today, outside help, such as the $100 million donation of Facebook co-founder, Mark Zukerberg, is an embarrassment to the court’s well-intended, but misdirected meddling. In her article on that topic, Mary Helen Ramming writes that, “Throwing money into the bottomless pit of the public education system as it is currently constructed is futile.”
Nonetheless, the same genre of proponents who successfully sued New Jersey in previous years is litigating again: this time to overturn Governor Christie’s decision to reduce state aid for school districts – an action taken because of severe state-level budget constraints.
If the New Jersey Supreme Court repeats its misadventures of past decades and continues to unbecomingly mess about in educational matters, we will have discovered – as did the first non-natives who first set foot in Australia – that we have our own “Black Swans” sitting on the bench, right here in New Jersey’s back yard.
No comments:
Post a Comment