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InsiderOnline Blog: November 2006

The Burden of Sarbanes-Oxley on Small Business

Is it possible that the Sarbanes-Oxley Act goes to far, to the detriment of shareholders? The Committee on Capital Markets Regulation released its interim report today. The Economist reports that Sarbanes-Oxley

added greatly to the compliance costs of companies and their auditors. It also led to a narrowing of the premium investors were prepared to pay for shares in foreign companies listed in America—worryingly, especially those from countries with strong corporate governance, according to Luigi Zingales, a member of the CCMR. This may help to explain why fewer firms are opting to list in America.

There are already moves afoot to make Sarbanes-Oxley less onerous: the Securities and Exchange Commission (SEC) has promised to allow more flexibility in interpreting the law. The CCMR recommends going even further. It also says politicians should consider an exemption from the law’s dreaded Section 404 on internal controls for small companies, which have found the costs of compliance hard to bear. This will work as long as investors in those firms “were clear that it was caveat emptor”, says Glenn Hubbard, one of the committee’s co-chairmen.

Posted on 11/30/06 04:43 PM by Alex Adrianson

Private Charity Still Legal in Las Vegas Parks

From the Rutherford Institute:

LAS VEGAS, Nev. – In response to briefs filed by The Rutherford Institute and a number of concerned organizations in defense of the rights of people of faith and homeless activists to assist the poor by providing them food, a federal court has banned the enforcement of a Las Vegas ordinance that prohibits individuals from feeding the homeless in city parks. In his ruling, Judge Robert Jones of the U.S. District Court for Nevada indicated that the Las Vegas ordinance goes too far by infringing the constitutional rights of those who wish to serve the poor through a meal ministry.

“This ruling is a victory for the rights of individuals of faith to serve the less fortunate,” said John W. Whitehead, president of The Rutherford Institute. “We hope that Las Vegas city officials will abide by the spirit of this ruling and respect the right of religious individuals to exercise their religious beliefs by caring for the hungry, homeless and less fortunate in their community.”

In July 2006, the Las Vegas City Council amended city ordinance LVMC13.36.055, making it illegal to give food to an indigent person in a city park. Defining an indigent person as “a person whom a reasonable ordinary person would believe to be entitled to apply for or receive” public assistance, the law imposes a fine of up to $1,000 or six months in jail on those who violate it.

On August 10, 2006, three human rights activists were fined under the city’s ordinance for feeding the poor in a Las Vegas park. In response, Rutherford Institute attorneys filed a brief with the U.S. District Court for Nevada, asking the court to declare the ordinance unconstitutional. While the Institute’s brief argued that the ordinance violates the First Amendment rights of individuals who feel compelled to express their religious views by caring for the poor, including providing them with food and water, it also pointed out that the ordinance undermines decades of federal court opinions, including a U.S. Supreme Court decision. The federal court ruling permits individuals of faith and homeless activists to resume their service to the poor. However, Las Vegas city officials have intimated that they intend to draft new legislation to discourage the homeless from gathering in city parks.

Posted on 11/30/06 03:44 PM by Alex Adrianson

Pro-Sprawl and Pro-Opportunity

Pollution, traffic congestion, housing unaffordability, lack of economic opportunities … the list of urban ills about which people want the government do something is a long one. But before people head down the wrong track, it would be a good idea to understand why these problems have come to be so pressing. There is no better place to start than with Wendell Cox and his new book. Anti-sprawl policies aggravate—if not cause—many problems that allegedly require other government solutions such as housing price controls, higher gas taxes, living-wage ordinances, and fuel-economy standards. As Cox shows, making it harder for people to spread out, move around, and live where they want is a threat to our quality of life. Where did that idea come from and why did anyone ever fall for it? Read the book.

War on the Dream: How Anti-Sprawl Policy Threatens the Quality of Life
by Wendell Cox

Posted on 11/30/06 11:38 AM by Alex Adrianson

Sports Welfare Reform in Seattle

Earlier this month, the voters of Seattle endorsed the unconventional idea that taxpayers should not subsidize the economic endeavors of billionaires. That’s unconventional because for the past 15 years or so cities around the country have binged on public infrastructure investment that is largely used for private business purposes—professional sports stadiums. Over that same period of time, state and local government debt outstanding has increased by about $1 trillion dollars. But Seattle voters—not the city government—approved a measure that requires city spending on stadiums and arenas to earn a 5 percent annual rate of return, effectively killing plans to spend $200 million renovating the Sonics' Key Arena.

Martin Fridson, at TCS Daily, explains why Seattle’s taxpayers were right not get suckered by questionable claims of economic benefits accruing to cities. Here’s a bit of what he says:

Contrary to the myths perpetrated by the drinkers at the public trough, attracting a professional sports team to a city does not generate new entertainment expenditures. It merely shifts consumers' dollars from other forms of entertainment. Modern sports complexes are designed to make as few of those dollars as possible flow to pubs and eateries in the surrounding neighborhood. League rules require the owners to split ticket revenues with the visiting team, so they strive to capture as much ancillary revenue as they can through luxury suites and in-stadium restaurants. As for the "job creation" for which the subsidy-collectors claim credit, it consists in large part of temporary construction jobs. Under any pretext other than bringing big-league sports to town, local politicians could not get away with spending tax dollars to generate the low-paying service jobs associated with athletic facilities.

Fridson also makes this interesting point: The presence of a sports franchise in a city increases newspaper circulation—and hence ad rates. So newspaper editorials on this subject could be biased by a newspaper’s own economic interests.

King Kaufman at notes how Seattle stadium-financing supporters are only too happy to drop arguments that don’t work:

When politicians are trying to sell stadium welfare to the voters, they're always yammering on about how the new place will be a boon to the local economy, that every tax dollar invested will yield, say, $3 in profit.

But when the voters say, "OK, let's put it in writing—nothing spectacular, just a nice little 5 percent profit," all of a sudden the issue becomes cultural enrichment. Sorry, voters, you looked under the wrong cup. The pea's under "cultural enrichment" this time, not "profits."

Funny. You play that same game on the sidewalk outside the arena and the beat cop runs you in.

Joe Bast, of the Heartland Institute, says the solution to cities getting shaken down by team owners is fan ownership through a non-profit corporation. This model—the Green Bay Packer model—says Bast

reduces the chance that the franchise will threaten to move to a different community to cash in on the bidding war occurring elsewhere. The Green Bay Packers are effectively “out of the bidding” due to the ownership of stock by persons living in Green Bay and surrounding areas, and federal laws requiring that the proceeds of a sale be given to another charitable organization.

Bast notes that sports leagues can allow this type of ownership arrangement anytime they wish to do so.

Posted on 11/30/06 10:06 AM by Alex Adrianson

Teacher Certification Unrelated to Performance

Beware the education-industrial complex:

There seems to be little difference in teacher effectiveness among certified teachers, the uncertified and those who enter the profession under the new “alternative” (often midcareer) certification schemes, according to a major study of nearly 52,000 teachers in New York City.

These results are a heavy blow to decades of conventional wisdom promulgated by the education establishment.

The findings, published as a Working Paper of the National Bureau of Economic Research, suggest that the emphasis on hiring “fully certified” teachers could be drastically cut back with little harm. (The federal No Child Left Behind Act and most state laws require hiring only licensed teachers, or teachers in or from approved “alternative” programs).

Posted on 11/29/06 09:23 AM by Alex Adrianson

Charlie Rangel’s Not a Weasel, He’s Just Wrong

Give Charlie Rangel credit. The raspy-voiced Congressman from New York leaves little doubt what he means when he makes his argument for bringing back the draft. No joke gone wrong here:

I want to make it abundantly clear, if there's anyone who believes that these youngsters want to fight, as the Pentagon and some generals have said, you can just forget about it. No young, bright individual wants to fight just because of a bonus and just because of educational benefits. And most all of them come from communities of very, very high unemployment.[Emphasis added.]

If a young fellow has an option of having a decent career or joining the Army to fight in Iraq, you can bet your life that he would not be in Iraq.

Rangel wants to bring back the draft in order to make sure that the burden of being put in harm’s way doesn’t fall solely to those who lack better economic opportunities. Before endorsing an affront to the 13th Amendment, however, Rangel should have checked his facts. Is it true that poorer people are fighting in Iraq? Has the war induced the smarter kids to seek opportunities other than in the military? Here are just a few facts from a recent Heritage Foundation study by Tim Kane:

  • Since 2001, the proportion of recruits scoring above average on the Armed Forces Qualifying Test has increased from 57 percent to 64 percent.
  • Since 2003, the high school graduation rate of new recruits has remained at 97 percent, compared to 80 percent for the comparable civilian population in 2004.
  • Since 2003, the proportion of military recruits who come from wealthier areas has increased, while the proportion of those who come from poorer areas has decreased.

Rangel is the second member of Congress in less than a month to argue that there is a problem with the composition of new military recruits. He could have benefited from checking Tim Kane’s study, which had already been published when Sen. John Kerry made remarks disparaging members of the military as being less educated than civilians. What’s the problem here? Aren’t these guys on Heritage’s mailing list? We’ll check into that. In the meantime, check out these videos:

Watch John Whitehead’s take on the draft.

Watch Bill Carr, Undersecretary of Defense for Military Personnel Policy, comment on the quality of military recruits.

Posted on 11/28/06 11:51 AM by Alex Adrianson

Supreme Court Declines to Hear Challenge to Religious School Exclusion

The United States Supreme Court has declined to hear a challenge to Maine’s exclusion of religious schools from its school voucher program. In Maine, 17,000 children without a local public school can attend any school of their choice—except religious schools—at taxpayer expense. Eight families had filed the case, seeking to overturn the law excluding religious schools. At Cato-on-Liberty, Andrew Coulson writes:

Under the federal constitution, as interpreted by the Supreme Court, governments must strive to remain neutral with respect to religion, and clearly parents who chose religious schooling in this case are being denied an opportunity afforded to all other parents. That is not neutrality.

The proscription against religious schools is not only legally dubious, but socially divisive, as well. Parents who wish to send their children to religious schools are taxed to pay for services they cannot themselves use—a recipe for social tension. There is, however, a school choice system capable of ensuring that all families have an unfettered choice of schools for their children without anyone being forced to pay for schooling to which they object: the education tax credit.

Posted on 11/27/06 05:53 PM by Alex Adrianson

Charter Schools Beware

In Arizona, charter schools are getting good results—better results than the public schools and for less money per pupil. But that doesn’t necessarily mean additional spending on charter schools would be a good investment. In fact, explains Darcy Olsen of the Goldwater Institute, charter schools should be wary of proposals to equalize per-pupil state funding between charter schools and public schools. With more state funding will come more regulation, undercutting one of the main advantages charter schools have: the freedom to innovate. Says Olsen: “The last thing we want to do is bring the heavy hand of the state on to those innovative and entrepreneurial schools, and more money will bring that hand in the door.”

Watch Darcy Olsen on Arizona Illustrated.

Posted on 11/27/06 12:36 PM by Alex Adrianson

Happy Thanksgiving

Everyone has his own thanks to say. I’ll just say thanks for visiting and hope you enjoy Thomas Sowell as he says thanks for Milton Friedman.

Posted on 11/22/06 01:46 PM by Alex Adrianson

News You Might Have Missed

High taxes lead to black markets: Sweden’s new center-right government has proposed lowering taxes generally and creating a tax credit for household help. Currently, much domestic help in Sweden is hired illegally because it is three times as expensive to hire such workers legally. The left-wing opposition is against this move, because it wants rich people to take out their own trash. Apparently, they think the division of labor is a bad thing. But the opposition does make one good point when it asks: Why should there be a tax break for certain kinds of economic activity but not others?

Government as consumer: Texas deregulated its energy markets, but state agencies do not shop around for the best price on electricity. A government consultant says this failure costs the state’s taxpayers an extra $50 million per year. Hat tip: Knowledge Problem.

Marketing green: Carbon Trust, an independent company funded by the British government, has developed a carbon audit that can be used to measure the amount of carbon emissions generated by a company’s products and services. Carbon Trust says private companies should consider getting this audit done because 66 percent of consumers want to know the “carbon footprint” of the product they buy. Question: If consumers really wanted this information, then why does the British government have to fund the company?

Parent police: The British government has unveiled plans to force parents to be better parents, including teaching them the right way to brush a child’s teeth and sing nursery rhymes. There are just too many youngsters whose lives will fail, says the government, if they don’t get better parenting.

Posted on 11/22/06 01:35 PM by Alex Adrianson

The Coming Week

Monday: Find out the secret of America’s economic success. Carl Schramm of the Kaufman Foundation discusses The Entrepreneurial Imperative: How America's Economic Miracle Will Reshape the World (and Change Your Life).

Tuesday: Peer into the future of Central Asia’s lone democracy. The Jamestown Foundation hosts Upheaval in Kyrgyzstan: The Second Tulip Revolution.

Tuesday: Learn what Texas should do to reaffirm property rights in response to the U.S. Supreme Court’s Kelo decision. Texas Public Policy Foundation hosts this doubleheader event in Houston and San Antonio.

Wednesday: Enjoy the subtle opinions of best selling author and conservative diva Ann Coulter at the Independence Institute’s 2006 Founder’s Night Dinner.

Wednesday: Learn whether multi-culturalism is good for higher education. The Intercollegiate Studies Institute brings David Schaefer, of College of the Holy Cross, and Patricia Bode, of Tufts University, to Dartmouth College for a debate.

Thursday: Attend a conference on prospects for market reforms in Latin America, hosted by the Cato Institute and the Atlas Economic Research Foundation. Latin America: Between Populism and Modernity features numerous first-rate speakers, including both Mario and Alvaro Vargas Llosa.

Thursday: See George Will receive the Goldwater Institute’s 2006 Champion of Liberty Award. The Pulitzer Prize-winning columnist and great baseball fan will be honored, appropriately enough, at Chase Field in Phoenix, home of the Arizona Diamondbacks.

Friday: Hear radio phenom Glenn Beck at the Ashbrook Center’s 22d Annual John M. Ashbrook Memorial Dinner.

Posted on 11/22/06 11:24 AM by Alex Adrianson

Altruism Alone Cannot Solve Our Organ Shortage

Last year in the United States, writes Sally Satel in The American, 4,100 people died without getting the kidney transplant that they needed; meanwhile, 67,000 people are currently waiting for a kidney.

The chasm between the number of available kidneys and the number of people needing one will widen each year. This is due to our misplaced faith in the power of altruism. The “transplant community,” as it is called—organizations that encourage funding and gifts of organs, and many surgeons and nephrologists—expects people, both living donors and loved ones of the deceased, to give a body part and to receive nothing in return. In fact, it is illegal in the United States to receive money or anything of value (“valuable consideration”) in exchange for an organ …

One doesn’t need to be Milton Friedman to know that a price of zero for anything virtually guarantees its shortage.

Selling organs is also illegal in China, and the result in that country is an extensive black market. A Chinese official actually admitted that many transplanted organs come from executed prisoners. Said Deputy Health Minister Huang Jiefu: “The current big shortfall of organ donations can’t meet demand.”

Reports the L.A. Times:

China in recent years has introduced mobile execution vans and lethal injection, supplanting the traditional method of a bullet to the back of the head. Beijing has touted these as more humane; critics say the changes facilitate rapid organ transfers.

Altruism as a policy is clearly absurd. The law prohibits the exchange of something of value for an organ. But what if the thing being traded for is another organ that the donor values for himself or a relative?

Dr. Robert Montgomery, director of Hopkins’ transplant center and head of the transplant team, called Monday for a national kidney-swap program, saying it could help ease the nation’s shortage of transplant organs and cut costs by getting people off dialysis.

He noted, however, that live-donor kidney swaps present ethical problems for some institutions since federal law prohibits receiving something of value in exchange for an organ. Some institutions feel multiple arrangements come uncomfortably close to quid pro quo, Montgomery said. He called for a clarification of the law.

Both the United States and China, says The Economist, could learn from Iran:

[I]f just 0.06% of healthy Americans aged between 19 and 65 parted with one kidney, the country would have no waiting list.

The way to encourage this is to legalise the sale of kidneys. That’s what Iran has done. An officially approved patients’ organisation oversees the transactions. Donors get $2,000-4,000. The waiting list has been eliminated.

Posted on 11/21/06 06:28 PM by Alex Adrianson

Saying Thanks

Approximately 152,000 U.S. military men and women are serving in Iraq right now. Many tens of thousands more are serving overseas in places such as Afghanistan and South Korea. They won’t be with their families on Thanksgiving. Here are some ideas for thanking them for the sacrifices and the risks they take to protect our country:

Carolina Troop Supporters
A Million Thanks
Operation Gratitude
America Supports You, Our Military Men and Women
To Our Soldiers
Let’s Say Thanks
Soldiers' Angels
Forgotten Soldiers Outreach
Operation Take a Soldier to the Movies

Posted on 11/21/06 01:15 PM by Alex Adrianson

Optimal Taxation

Economic growth is maximized when total government (federal, state, and local) taxation is about 23 percent of gross domestic product, according to a new study by Gerald Scully of the National Center for Policy Analysis. Taxation has not been that low in the United States since 1950. Says Scully: If taxation had been kept at that level, the United States would have experienced an economic growth rate of 5.8 percent (instead of 3.5 percent), leading to higher tax revenues that would have funded all of the government spending that has occurred since then without a deficit; in addition, the U.S. economy would have been three times bigger by the year 2004.

Posted on 11/21/06 11:25 AM by Alex Adrianson

Freedom’s Fury

If you are looking for some perspective during the holidays, you might consider catching the film Freedom’s Fury. I’ve heard it is a powerful recounting of the story of the brutal Soviet invasion of Hungary in 1956—50 years ago this month—as seen through the eyes of Hungarian water polo Olympians.

Posted on 11/21/06 09:57 AM by Alex Adrianson

The Dangers of Federal Standards in Higher Education

Secretary of Education Margaret Spellings has proposed creating a higher education information system as a way of holding universities and colleges accountable. Under this plan, the government would publish data on the performance of colleges and universities, and then parents and students would be able to assess whether the education offered is worth the price of tuition paid.

In this month’s issue of Imprimis, Larry P. Arnn, President of Hillsdale College, challenges Spellings’s version of consumer empowerment. Arnn argues that federal subsidies to and regulation of higher education are the major causes of rising tuition, and that those factors may actually increase under the preliminary plan published by the Department of Education. Arnn laments that

the one federal policy that would work is not discussed at all, despite the fact that the Bush administration, in another department, has done some of its best work in pursuing it. In health care, health savings accounts (HSAs) and high-deductible policies are making patients more important in the health care system. These patients are spending their own money, and in a miraculous development, they are more careful with it than they are with the money of others. Instead of learning this lesson, the National Commission is promising more subsidies to colleges and threatening regulation if they do not watch their costs.

Arnn also argues that national standards imposed by the federal government will induce colleges and universities to focus too narrowly on the things that are easy to measure, possibly leading to a politically correct curriculum:

All the vices of “teaching to the test” are latent in these proposals. Charles Murray writes of the No Child Left Behind Act that it has not improved test scores and that it creates an atmosphere of endless drilling, which is poor for learning. And he is probably right. But even worse than the tests’ ineffectiveness and waste of time is that they will be expressions of the worst forms of political correctness. One should fear this, first of all, because the National Commission is not interested in that subject. It justifies its reforms on the ground that math and science knowledge and literacy are poor, and college costs too much. This is true, but not exhaustive. Certain matters formerly thought important do not come up in the Draft Report nor, apparently, in the deliberations of the National Commission. The Draft Report does not mention religion, God, or morality. It does not mention history as a subject of study. It does not mention the Constitution, either for what it commands or allows, or as a subject of study. Although busy governing, the Report does not mention government as a subject of study. Philosophy, literature, happiness, goodness, beauty are not to be seen, even though these terms abound in the mission statements and mottos of American colleges whenever they are older than a hundred years and in most of the younger ones.

Arnn proposes that the federal government become less—not more—involved in higher education, and that universities and colleges

recover the tradition of liberal and civic education that has helped to keep us free by teaching us the purpose of our freedom. To do this, we will have to be willing to take positions on subjects that are “controversial.” We will have to organize our colleges to study the great documents of the American past and those upon which that past was built. This will involve us—gasp—in the study of the Western canon.

Posted on 11/20/06 03:43 PM by Alex Adrianson

The Coming Week

Monday: Learn how Russia’s energy policies are shaping both its domestic and international politics. Robert Amsterdam, attorney for Mikhail Khodorkovsky; and Andrei Illarionov, former economic adviser to President Putin and senior fellow at the Cato Institute speak at the Cato Institute.

Monday: Discover the real story behind Lincoln’s Gettysburg address. Gabor Boritt tells the tale you’ve never heard before, at The Heritage Foundation.

Tuesday: Hear an Iraqi view of what America should do now in Iraq. The Hudson Institute hosts Abdul Aziz al Wandawi and Nibras Kazimi as they assess America’s next steps in Iraq.

Tuesday: Listen to Canada’s Chairman of the Public Company Accounting Oversight Board, as he assesses current Canada’s policies on economic freedom, government spending and taxation, internal trade, and regulation. The Fraser Institute hosts Mark Olson.

Thursday: Be thankful.

Posted on 11/17/06 04:27 PM by Alex Adrianson

U.S. News You Might Have Missed

Bureaucrats disappointed by Hawaiians lack of dependency: The people in charge of handing out disaster assistance might have too much enthusiasm for their jobs. After supplying $13 million in grants and funds to assist those impacted by an earthquake last month, Hawaiian officials are expressing concern that not enough people have applied for grants. Said one official to the Star-Bulletin: “We are urging people to please register. They might be eligible for quite a bit of money.” (Emphasis added.)

In other nanny-state news, Hawaii did succeed in enacting a state-wide smoking ban in restaurants and bars.

Regulating political communication: A Wisconsin state Representative has proposed legislation forbidding the use of robo-calls for political messages. One activist astutely noted that “the calls have become popular with campaigns seeking to reach voters already turned off by a torrent of negative TV ads.” Yet, according to news reports, people really hate robo-calling, too. So perhaps politicians use them to their own detriment.

Election recounts:  Bruce Schneier, writing for Wired, observes that there are real problem with the reliability of election results:

When a candidate has evidence of systemic errors, a recount can fix a wrong result—but only if the recount can catch the error. With electronic voting machines, all too often there simply isn't the data: there are no votes to recount.

This year’s election in Florida’s 13th Congressional District is such an example. The winner won by a margin of 373 out of 237,861 total votes, but as many as 18,000 votes were not recorded by the electronic voting machines. These votes came from areas where the loser was favored over the winner, and would have likely changed the result.

Government waste in promoting democracy: Apparently, democracy goes hand in hand with chocolate and cashmere. That seems to be the theory, anyway. Congressional auditors have found that grants given to Cuban exile groups for promoting democracy have been used for questionable purchases, including the aforementioned confections and fabric which were shipped to the island. The BBC seems to have the pulse of American politics: “Correspondents say the findings will damage the reputation of Cuban-American organisations in Washington. But critics contend that US government aid is more about winning votes from Florida exiles than really trying to change Cuba.”

Posted on 11/17/06 04:25 PM by Alex Adrianson

Fighting for Liberty—the Next 25 Years

Charles Murray gave a great speech last night at the Atlas Economic Research Foundation’s 2006 Freedom Dinner. Murray peered into the future and noted three trends we should all pay attention to.

First, advances in information technology will continue to undermine the authority of centralized bureaucracies, whether they be the library, the Post Office, or totalitarian governments. Yes, technology may provide governments with new means of control, but the forces of liberty have the advantage because all the smart computer geeks want to work for the private sector, not the government.

Second, in the next ten years there will be a moral crisis of the left. The left is animated by the idea of equality, in particular the idea of making all groups equal in everything. But, says Murray, science will soon demonstrate—not as a matter of opinion or speculation, but as a matter of hard fact—that individuals really are different, and that groups are different, too. We will know, for example, that the Italians and the Dutch really are different and each group will be happy that it is not like the other.

Third, as Western societies continue to become wealthier, economics will become less and less important as an argument for liberty. This development is a sign of how far the liberty movement has come, but it means that the ideological front line will shift from making people better off materially to making them better off spiritually. The importance of freedom will be that it allows people to find fulfillment in the stuff of life: work, family, faith, and community.

The other speakers were good also. Michael Walker of the Fraser Institute related a moving anecdote about his last meeting with Milton Friedman just a couple of days ago. He assured everyone that Milton’s lights were burning as brightly as they had ever been.

The Atlas Foundation will have more up soon. Check their Web site.

Posted on 11/17/06 08:53 AM by Alex Adrianson

World News You Might Have Missed

Womens rights: Some good news and some bad news for women’s rights in the Middle East: In Pakistan rape cases are now heard by the secular court system instead of the Sharia (religious) courts. This has provoked outrage from die-hard Islamists. In Afghanistan, however, non-governmental organizations report an increase in incidents of female self-immolation. The women attempt suicide, say the NGOs, in order to escape arranged marriages or abusive relationships.

Deciding who lives: The Nufield Bioethics Commission, a British organization, has recommended that extremely premature babies—those younger than 24 months—should not be resuscitated or given intensive care. The report says such babies are unlikely to survive and therefore should be spared the pain and stress of invasive treatment.

Medical liability gone too far: If you thought medical malpractice was onerous for American docs, consider this: A German court has ordered a doctor who made a mistake installing a birth control device to pay child support to a patient who subsequently became pregnant. The newspaper Die Welt reacted with dismay at the perverse message this sends to the child:  “In addition to the highly private inkling that he was not wanted by his parents, he now has official confirmation that he was born by mistake.”

Concerned about terrorism: Germany is one of the safest countries in the world, says the German government. But the German people are of an independent mind on that subject, reports Der Speigel. Perhaps they are concerned about terrorism. The German courts are certainly concerned and doing what they can to throw away the lock and key on terrorists. They have ordered a Moroccan already convicted on charges of terrorism to stand trial again on additional charges tying him specifically to 9/11.

Voluntary coordination, indeed: Conservatives and libertarians have great faith in the ability of people to solve problems on their own without government. That idea is now being put into practice in a most unexpected fashion and place. Seven European cities are doing away with street signs and traffic restrictions.

European traffic planners are dreaming of streets free of rules and directives. They want drivers and pedestrians to interact in a free and humane way, as brethren—by means of friendly gestures, nods of the head and eye contact, without the harassment of prohibitions, restrictions and warning signs.

This should be a telling experiment. I will be looking out for news on how it goes. Stay tuned.

Chinese censorship v. the World Wide Web: The Chinese government appears to have backed down on its demand that Wikipedia remove articles critical of the Chinese government in exchange for access to Chinese readers. Without any announcement or explanation, the Chinese government has lifted its electronic controls over the Chinese-language version of Wikipedia. However, China is using keyword filters to block specific content on all Web sites accessed in China.

Is patriotism a subject for schools to teach? Japan is debating that question now, as its lower house of parliament has approved a bill encouraging teachers to instill patriotism in their students. Critics say this move might fan a resurgence of the sort of militaristic nationalism that led to World War II.

The Queen likes her climate just the way it is: Queen Elizabeth announced that the British government will consider legislation to reduce carbon emissions in order to halt global warming. No bill has been written, yet, but it is likely to propose curbs in line with the Kyoto treaty goals of a 20 percent emissions reduction by 2010 and a 60 percent reduction by 2050. U.N. Secretary General Kofi agrees with the Queen that something should be done. The Competitive Enterprise Institute does not.

Gay marriage approved in South Africa: Under orders from South Africa’s Constitutional Court, the legislature has passed a bill recognizing same-sex unions.

Posted on 11/17/06 08:28 AM by Alex Adrianson

Milton Friedman, RIP

Milton Friedman, one of the most influential economists of the 20th century and a great champion of individual liberty and limited government, died today. He was 94.

Friedman was a friend of The Heritage Foundation and many other free market think tanks. Heritage President Ed Feulner shares his thoughts:

Milton Friedman was small in stature but a giant in the world of ideas.  His passion and wisdom extended well beyond the field of economics and combined to make him one of the most compelling advocates of human freedom the world has known.

His ideas earned him the Nobel Prize.  But more than that, his ideas have been translated into public policy in this nation and in countries around the world.  And these ideas have empowered millions of people to pursue their destiny, opening for them new economic and educational opportunities that have made them more productive and more prosperous.

From his academic posts in Chicago and, later, at Stanford, and through the Milton and Rose D. Friedman Foundation, he worked tirelessly to instruct, uplift and help all.  He was hugely influential and a truly wonderful human being. He will be missed.

At the 1998 Clare Boothe Luce Awards, Feulner honored both of the Friedman's with these words:

Historian Daniel J. Boorstin notes that great discoveries which change the course of history are often negative: The earth is not flat. It is not at the center of the universe. Neither is the sun, and neither is our own galaxy. In the mode of great discoverers, Rose and Milton Friedman have contributed an impressive array of “nots” to economic theory. They postulated and proved, time and again, that John Maynard Keynes is not the center of the economic universe. They demonstrated that his theories about consumption and spending could not be confirmed. They demonstrated that the Keynesians did not correctly understand the relation between money and inflation; did not correctly understand the relation between employment and inflation; and did not understand the value of the “multiplier.”

Like great discoverers who came before them, Rose and Milton advanced ideas that were met with anger and great resistance by their colleagues—and then somehow absorbed and accepted as conventional scientific wisdom. This is a story not just of discovery but also of stewardship over the ideal of freedom.

Friedman was particularly influential in advancing the ideas of school choice and the flat tax. In 1996, Friedman and his wife created the Milton and Rose D. Friedman Foundation to educate the public about the benefits of and need for school choice. In addition to winning the Nobel Prize for his work on monetary theory in 1976, Friedman was honored with the Presidential Medal of Freedom in 1988.

President Bush paid tribute to Friedman in 2002:

When he began his work, the conventional wisdom held that capitalism’s days were numbered. Free market systems were thought to be unsuited to modern problems. Today we recognize that free markets are the great engines of economic development. They are the source of wealth, and the hope of a world weary of poverty and weary of oppression.

We have seen Milton Friedman’s ideas at work in Chile, where a group of economists called the “Chicago Boys” brought inflation under control and laid the groundwork for economic success. We have seen them at work in Russia, where the government recently adopted a 13 percent flat tax with impressive results. We have seen them at work in Sweden, which has adopted personal retirement accounts. We have seen them even at work in China, where the government conceded long ago that Marxism was, in their words, “no longer suited” to China’s problems.

These are extraordinary developments. They demonstrate that the rest of the world is finally catching up with Milton Friedman.

Michael LaFaive of the Mackinac Center has this gem in the Detroit News:

Reportedly, while traveling by car during one of his many overseas travels, Friedman spotted scores of road builders moving earth with shovels. When he asked why powerful equipment wasn’t used instead of so many laborers, his host told him it was to keep unemployment low. If they used tractors, fewer people would have jobs was his host’s logic.

“Then why don’t you give them spoons?” Friedman inquired. It was quintessential Friedman: Employment doesn’t make us wealthyproduction does.

Clint Bolick of the Alliance of School Choice:

Among the greatest champions of freedom in all of history, Milton Friedman was a giant. His greatest legacy is the tens of thousands of children who now attend high-quality schools because of the idea of school choice that Dr. Friedman pioneered in 1955. He leaves that precious legacy to a new generation of leaders who must nurture and expand it. I will personally miss a dear friend, but he will serve eternally for me and countless others as a source of towering inspiration.

Roger Ream of The Fund for American Studies:

The ideas of Milton Friedman are among those The Fund tries to impress upon students each summer.  Milton Friedman deserves much credit for the collapse of communism, because his writings helped to discredit the ideas of central planning.  But in addition to helping win the war of ideas, Friedman took ideas from the halls of academe to the streets.  He was aware that while the ideas of freedom may have won the war of ideas, the war of logic, we haven’t won on compassion.

Dan Mitchell, a tax policy analyst at Heritage, lauds Friedman for his strong advocacy of tax competition as a means to control the greed of the political class. Friedman’s comment on this: “Competition among national governments in the public services they provide and in the taxes they impose is every bit as productive as competition among individuals or enterprises in the goods and services they offer for sale and the prices at which they offer them.”

Heritage has been fortunate to host Milton Friedman on a number of occasions. Here is a picture of Milton and his wife Rose at a Heritage event in 1986 with President Reagan and Heritage president Ed Feulner.

Photo by Chas. Geer.

And here is the portrait of Dr. Friedman that has been on display at Heritage for many years:

Photo of painting by Chas. Geer.

Heritage’s Stuart Butler has a favorite Friedman quote that he keeps hanging on a wall just outside his office: “You cannot reduce the deficit by raising taxes. Increasing taxes only results in more spending, leaving the deficit at the highest level conceivably accepted by the public. Political Rule No. 1 is: Government spends what government receives plus as much more as it can get away with.”

My favorite Friedman quote: “Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government.”

Bloomberg has an obituary.

Update (11-20-2006): Giancarlo Ibarguen, President of Universidad Francisco Marroquín, sends these thoughts:

Milton Friedman will be remembered by us and so many who have come to know and comprehend his most valuable contributions to the free society.  It was an honor to know him and to have been associated with him. At Universidad Francisco Marroquín we hold very fond memories of him and still have mementos of your visit to Guatemala in 1978.  Dr. Friedman was very generous with his praise of our university and we are deeply indebted to him for his public comments on our behalf.  His beliefs and ideas are taught in our classrooms.  In June of this year, we named the auditorium of the Graduate Business School the Milton Friedman Auditorium.  We regret that he will no longer be with us.  His memory will be perpetuated and cherished at this university.

Posted on 11/16/06 06:06 PM by Alex Adrianson

Drugs and Politics

Forbes reports that Congress’s cross-hairs may be settling on Big Pharma.

Wall Street is getting worried. In a note to investors, analysts at Prudential Equity Group fret, “Democrats are well positioned to force action on drug prices, and contrary to conventional wisdom, a [presidential] veto is not a sure thing.”

Medicare buys half of all drugs in the United States, and if it can control its own costs, pill prices may be pushed down across the board. But that is only the first of many legislative battles drug firms are now facing. A recent report from investment bank Credit Suisse counts six legislative threats.

After years of battling pharma over the issue, Congress is widely expected to enact legislation allowing cheaper drugs from Canada to be shipped into the U.S., the report says. A law that has sped up drug approval times is up for reauthorization, giving Congressional leaders considerable leverage. Fundamental reforms of patent laws could make it easier to launch certain kinds of generic drugs. And there are two bipartisan bills that aim to reform the Food and Drug Administration, giving regulators more power to ensure drug safety.

Left-leaning groups have taken to the theme that hard-nosed collective negotiating of drug prices by the government is just another form of “letting the market work,” thus co-opting the language of free-market advocates. Put aside for the moment the fact that the government does not act with the consent of those for whom it is bargaining, and consider the consequences.

There is a saying: You get what you pay for. Just because you can buy something cheaper, doesn’t mean that it is really in your interest to do so. Cutting drug prices will reduce the incentives of drug companies to undertake the costly research involved in developing and bringing a new drug to market.

A couple of years ago, the Manhattan Institute looked at the consequences that have already occurred as a result of federal negotiating power over drug prices. Researchers John Vernon, Rexford Santerre, and Carmelo Giacotto found

that the resulting government-induced loss of capitalized pharmaceutical R&D expenditures was $188 billion (in 2000 dollars) from 1960 to 2001. This “lost” R&D may be translated into human life years “lost”—literally, increased pain and suffering and shorter lives caused by the absence of new medicines and future research—by using results from recent econometric work on the productivity of pharmaceutical R&D in the U.S. over the same period. We conclude that the federal government’s influence on real drug prices cost the U.S. economy approximately 140 million life years between 1960 and 2001. (Emphasis added.)

That’s worth repeating: Not speculating, but looking backward at the impact the federal government has already had on incentives to produce new medicines, the researchers found that the federal influence on drug prices has cost 140 million life years between 1960 and 2001.

Posted on 11/16/06 12:33 PM by Alex Adrianson

Christmas Is Coming … for Retailers, Too

Wal-Mart, Kohl’s, and Walgreens have decided to resume using the word Christmas after several years of referring generically to “the Holidays.” Supposedly using the term “Christmas” was insensitive to non-Christians. As the Detroit News reports, however, retailers can use the term Christmas, and still be inclusive:

Farmer Jack grocery stores have used and always will use Christmas, Hanukkah and other religious terms to advertise, spokeswoman Angie Bournais said. In fact, the company makes a point of highlighting all religious holidays.

“We joyously acknowledge and celebrate every holiday because traditionally, food is at the center of these celebrations,” Bournais said. “We mention all the holidays because we provide the food for all of them.”

Posted on 11/16/06 11:29 AM by Alex Adrianson

On the Table: Reform the Alternative Minimum Tax

Democrats appear to have one good idea: reforming the Alternative Minimum Tax, which is a step that Heritage and other think tanks have endorsed. Here is what Heritage says (from Mandate for Leadership):

Congress introduced the alternative minimum tax (AMT) for individuals more than 30 years ago as a means of ensuring that a small number of very wealthy taxpayers could not use tax preferences to avoid any tax liability. This provision has grown into an alternative tax universe that is now affecting millions of Americans. The AMT restricts taxpayers from fully using credits or deductions, requires them to calculate taxable income under a new definition, and taxes their income at the relatively high rates of 26 percent and 28 percent, and does not adjust their tax brackets for inflation. Today, thanks to the plethora of special credits and deductions and the gradual impact of inflation (leading to more people becoming subject to the levy), several million taxpayers are paying the AMT. The U.S. Treasury forecasts that over 40 million taxpayers will be paying AMT taxes within 10 years. Congress should repeal the AMT as part of a major program of tax reform.

Greg Mankiw has a proposal for making AMT reform even better: Combine it with eliminating the deduction for state and local income taxes.

Taxpayers who have AMT liability cannot take the deduction for state and local income taxes. Eliminating the AMT would allow more taxpayers to take that deduction, but that raises an equity question, says Mankiw. The deduction for state and local income taxes is essentially a reward for jurisdictions to maintain a high tax rate.

Reports the Washington Post:

The focus on the AMT is hardly surprising, given that victims of the tax have been concentrated in high-cost urban areas such as Washington, New York and San Francisco—places that tend to vote Democratic. Rangel, Hoyer and Nancy Pelosi (D-Calif.), the presumptive House speaker, all represent states hit hard by the AMT, which is sometimes called the “blue-state tax.” To map states with the highest concentrations of AMT taxpayers is to draw bull’s-eyes over California and the Northeastern seaboard.

The Tax Foundation produced just such a map last year:

Number of Tax Returns Affected by the Alternative Minimum Tax as a Percentage of All Tax Returns, by State, 2003

Source: Internal Revenue Service, Tax Foundation calculations.

The Joint Committee on Taxation estimates that the number of taxpayers with AMT liability will surge from 3.8 million this year to 23 million next year. The Tax Foundation explains where that surge comes from:

A far more important factor causing the AMT’s recent expansion is the effect of the 2001 and 2003 Bush tax cuts. Ironically, by reducing regular income tax liabilities without substantially changing the AMT, the Bush tax cuts will be responsible for most of the expansion of the AMT through 2011... Since taxpayers must pay the greater of either their AMT or regular tax liability, the decline in income tax liability without any change in the AMT pushed many taxpayers into the AMT.

In other words, Bush’s tax cuts will have full effect only when the AMT is eliminated.

Additional Resources

The Alternative Minimum Tax: A Better System?
by Alan Viard
American Enterprise Institute Tax Policy Outlook No. 1, November 7, 2006

The Alternative Minimum Tax Threatens Middle Income Families
by Paul Dorasil
National Center for Policy Analysis Brief Analysis No. 571, September 11, 2006

Posted on 11/15/06 05:10 PM by Alex Adrianson

Premature Celebration in New York City

Sol Stern of City Journal tells an instructive tale about the ability of government to measure success. Last year, New York Mayor Michael Bloomberg touted a miraculous achievement at P.S. 33. Eighty-three percent of the school’s fourth graders scored at or above proficiency on the state’s reading test. That was an improvement of nearly 50 percentage points.

This year, however, the same school’s fifth graders (most of whom would have been the previous year’s fourth graders) scored only 41.1 percent. Says Stern:

Put aside the raw numbers and consider the human consequences of this collapse. Last year, the mayor publicly honored 120 poor Hispanic and black children for beating the odds and passing the reading test. This year, half of those kids discovered that they were failures after all. Last year, they shone as stars of a mayoral campaign. This year, they were truly “left behind.”

No one from city hall or the education department came to the school to explain how so many kids could be high achievers one year and failures the next. Nor was the school’s miracle principal, Elba Lopez, around to explain the shocking setback. After last year’s triumphant press conference, she retired, collecting a $15,000 bonus for her school’s spectacular 2005 performance, boosting her pension $12,000 for life. Meanwhile, the school’s wildly fluctuating test numbers are so unbelievable that they should attract the attention of state education authorities and the city school system’s special office of investigations.

As Knute Rockne might advise the schools: When you reach proficiency, act like you’ve been there before.

Hat tip: Cities on a Hill.

Posted on 11/15/06 04:10 PM by Alex Adrianson

Deficits and Dollars

A dollar crisis may be in the offing if the federal budget deficit is not reduced, warned Robert Rubin, former Secretary of the Treasury under President Clinton, and Paul Volcker, former Chairman of the Federal Reserve. Bloomberg reports:

Failure by the U.S. government to shrink its budget deficit may spook the central banks, hedge funds and others who have been buying Treasury notes, Rubin said. Volcker said the U.S. borrowing requirements raise the risk of a “crisis”' in the dollar as soon as the next two and a half years.

“It seems almost inconceivable that this will continue indefinitely,” Rubin, who now chairs Citigroup Inc.’s executive committee, said in a videotaped message for a dinner hosted by the Concord Coalition yesterday in New York.

The U.S. budget situation must be addressed now because the government is just five years from “rapid acceleration” in spending tied to Social Security and Medicare, Rubin said. He reiterated that the incoming Democratic majority in Congress and President George W. Bush should raise taxes to reduce the deficit.

Amity Shlaes, writing at, suggests that instead of endorsing tax increases, Rubin should return to the pro-growth agenda he championed during the Clinton years. She also observes that Democrats want to avoid the politically losing proposition of a tax increase by focusing on the tax gap instead.

The General Accounting Office estimates that there is $345 billion in annual taxes that should be collected but are not. A major part of that estimate is derived from proposals to increase withholding requirements. Says Shlaes:

For Democrats, fighting the Republican administration on the tax gap is a no-brainer. They can make class war, collect extra revenue, and still claim they are not raising taxes.

What's more, they can assign all the blame to Republicans when citizens get outraged at being pursued by squads of Bush revenue hounds.

Meanwhile, foreign central banks already appear to be moving away from dollars. Central banks in Russia, Switzerland, and New Zealand are increasing their holdings of Yen, while China announced

that the world's fastest-growing economy will re-allocate its $1 trillion reserves, more than two-thirds of which are held in dollars, spurring a two-day rally in the yen. Officials in Thailand said they want to reduce their dollar holdings.

Posted on 11/15/06 12:32 PM by Alex Adrianson

The Elections—with Graphics

A graphic can be worth a thousand words of punditry, and Whit Ayres, of the research firm Ayres, McHenry and Associates does a nice job of summing up what was on the country’s mind last week.

Sources: The Gallup Poll (Mar 03-Mar 06), TNS (May-Jun 06), ABC (Aug-Oct 06), and CNN (Nov 06)

Ayres notes:

The critical crossing point occurred at the end of September 2004, when Charles Duelfer and the Iraq Survey Group reported no evidence of weapons of mass destruction. At no time after that report did a majority of Americans think the war was worth it.

Sources: The Gallup Poll (Mar 03-Mar 06), TNS (May-Jun 06), ABC (Aug-Oct 06), and CNN (Nov 06); dissatisfaction: The Gallup Poll

Ayres observes:
While other factors are also at work, since dissatisfaction with the country's direction is higher than dissatisfaction with the war, the relationship between the two lines is unmistakable. A perfect correlation is 1.0; the correlation between these two lines is .87. Dissatisfaction with Iraq has created a floor below which dissatisfaction with the country cannot fall.

Clearly finding a solution to the Iraq situation should be the priority for both political parties.

Posted on 11/14/06 03:29 PM by Alex Adrianson

Hong Kong’s Success with School Choice

Hong Kong has school choice, and it seems to be working, says David Michael at Michael notes the better performance of Asian students in general, and suggests that school choice is a major part of the explanation for Hong Kong’s success.

In Hong Kong … every student has a choice of schools. This is one of the defining businesslike qualities of a Hong Kong education. School choice in Hong Kong is made possible by a voucher system, known as the Direct Subsidy Scheme, in which students and parents choose their schools and the government pays.

The perfect should not be the enemy of the good, but it’s worth noting that Michael’s description of Hong Kong’s system indicates a strong government presence in setting curriculum and achievement standards. Hong Kong’s government actually shuts down underperforming schools. However, choice can supplant these government functions, too. Parents voting with their feet can hold schools accountable for performance. A system of school choice can allow for greater variety in curriculum, too. Ultimately, the system should put parents and students in charge, not government.

Still, as Michael notes, Hong Kong has more school choice than does the United States, and its success commands our attention.

Posted on 11/14/06 12:20 PM by Alex Adrianson

Bad Idea Coming: Minimum Wage Hike

One consequence of Democrats capturing Congress in last week’s election is that raising the federal minimum wage will likely be high on the agenda of the next Congress. Economically illiterate reporters describe this prospect as a win for those earning the minimum wage, but they are wrong. A higher minimum wage is of no use to an unskilled worker who cannot gain employment because Congress has made it too expensive for an employer to hire him.

However, proponents of a higher minimum wage do not usually trouble themselves with examining the consequences of raising the minimum wage. Instead the argument usually begins with the observation that the federal minimum wage has not been increased since 1997. That’s usually where the argument ends, too. The minimum wage exists; ipso facto it is a good thing; ipso facto it should be periodically increased … so goes the war on logic and economic reality.

Everyone wants a raise, but here’s the problem with trying to get it by government fiat: Raising the minimum wage increases the prices of goods produced by minimum wage workers. Consumers respond by buying less, and employers respond by making less, which means fewer jobs. Employers also respond to relatively more expensive labor by investing in labor-saving technology, which again means fewer jobs.

Economists Donald Deere, Kevin M. Murphy, and Finnis Welch confirmed this impact by looking at employment data following the 1990 and 1991 increases in the federal minimum wage. They found that employment fell by a greater percentage for the younger age groups—those groups that would have a larger percentage of minimum wage earners—than for older workers.

In a recent study, Daniel Aronson and Eric French find that prices in the restaurant industry rise when the minimum wage is increased, and they calculate that a 10 increase in the minimum wage leads to employment losses of 2 percent to 2.5 percent. Consistent with Deere, Murphy, and Welch, they find that the magnitude of price changes is greater in low-wage regions than in high-wage regions.

Increases in the minimum wage actually tend to increase the number of those earning less than the minimum wage, as the employment of low-skilled workers is shifted to exempt industries.

Keep in mind very few Americans earn the minimum wage, and fewer still are the primary income earner in their household. The majority of minimum wage earners are younger than 25. Many are teenagers working a summer job or retirees just trying to supplement their retirement. Sixty-five percent of teenagers earning the minimum wage live with families whose household income is at least double the poverty line. The typical minimum wage earner is not trying to support a family.

Further, those who earn the minimum wage are not stuck forever with a low income. For the most part, minimum wage jobs are entry level jobs. Forty percent of those who earn the minimum wage did not have a job the previous year. Two-thirds of workers starting at the minimum wage earn more than the minimum a year later.

So what should Congress do? Tim Kane of The Heritage Foundation says federal minimum wage laws should be repealed:

An improved minimum-wage law would allow each state to have a unique minimum wage, with no limits on how high or low it could be. Let New York try $15.00 an hour, and when its economy stagnates the example will shine brightly for the other 49 states to learn from. When Ohio sets a minimum wage lower than the current federal minimum of $5.15 and reaps a boom in growth, the world will take note. The whole point of a federal system is that diverse states can experiment.

James Dorn of the Cato Institute also favors abolishing minimum wage. Congress, says Dorn, should focus on increasing economic freedom:

Policies that increase competition and choice in public education, reduce marginal tax rates on capital and labor, and protect private property rights would be positive steps toward increasing economic freedom, workers’ dignity, and prosperity.

Additional Resources

The Effects of the Proposed Arizona Minimum Wage Increase
by David Macpherson
Employment Policies Institute, September 2006

The Effects of the Proposed Missouri Minimum Wage Increase
by David Macpherson
Employment Policies Institute, August 2006

How Did the $8.50 Citywide Minimum Wage Affect the Santa Fe Labor Market? A Comprehensive Examination
by Aaron Yelowitz
Employment Policies Institute, December 2005

The Economics of a Higher Minimum Wage in Massachusetts
by David Tuerck and Paul Bachman
Beacon Hill Institute at Suffolk University, June 2005

Posted on 11/13/06 06:54 PM by Alex Adrianson

Dear Readers

I will be on vacation next week and will resume posting on Monday, November 13. Please check for new content then. Thanks for visiting.

Posted on 11/03/06 04:49 PM by Alex Adrianson

The Coming Week

Sunday: Learn how protecting the environment is being put ahead of fighting poverty. The Competitive Enterprise Institute and Universidad Francisco Marroquín host Empowering Green Bureaucrats: How Global Environmental Treaties Threaten National Sovereignty and Hurt the World’s Poor in Guatemala City.

Monday: Hear Erik Root discuss the North Carolina Marriage Amendment at the John Locke Foundation’s meeting of the Shaftesbury Society.

Wednesday: Find out if taxpayers are getting their money’s worth as a result of government investment in intoxicating liquor. The American Enterprise Institute hosts Ethanol: Boon or Boondoggle?

Thursday: Attend an inquest on the elections. The Cato Institute hosts Election 2006: A Look Back and Forward.

Thursday: Hear author Dave R. Palmer discuss George Washington and Benedict Arnold: A Tale of Two Patriots at The Heritage Foundation.

Friday: Honor Sir Winston Churchill at the Claremont Institute’s annual Churchill Dinner. Victor Davis Hanson will be given the Institute’s Statesmanship Award.

Posted on 11/02/06 08:04 PM by Alex Adrianson

U.S. News You Might Have Missed

A government-directed economic development project runs into trouble in New Jersey, because a contractor cannot finish the construction it was supposed to do. The project was supposed to have generated over 20,000 new construction jobs over six years, and 20,000 new permanent jobs once the project was finished.

New York’s likely next governor opposes education vouchers, but favors education tax credits.

Other New Yorkers, meanwhile, seem utterly at war with the concept of consumer choice—and responsibility. A campaign to banish transfats is afoot in the Big Apple.

Medicare cuts payments to physicians. Michael Cannon of the Cato Institute explains why it probably won’t reduce the cost of Medicare, but will decrease the quality of medical care given to seniors.

A new study finds that student evaluations of college professors are a much better indicator of teacher quality than factors like salary, tenure, or amount of research produced.

Thank you for hectoring: A study to be published soon by the American Journal of Public Health says that advertising aimed to discourage smoking may have backfired and encouraged smoking. The problem suggests the researchers: The ads were too annoying.

The Supreme Court will decide whether there is to be a limit on punitive damages, as it has suggested in previous cases. Conservative justices Antonin Scalia and Clarence Thomas, however, have rejected this notion saying that such a limit cannot be found in the Constitution.

The Department of Commerce finally gets around to acting on recommendations to make it easier to rebuild following a natural disaster. Following hurricane Katrina, a number of analysts suggested that suspending some trade restrictions would lower the cost of materials needed for rebuilding, thereby making it easier to recover from a natural disaster. It only took the department 14 months.

That should cheer up Louisiana. On the other hand, new research by Peter Leeson and Russell Sobel finds that bad weather is a cause of political corruption. Natural disasters, say the authors, leads to large-scale disaster relief which creates opportunities for using those new resources to give political favors. Say the authors: “Notoriously corrupt regions of the United States, such as the Gulf Coast, are notoriously corrupt because natural disasters frequently strike them.”

Posted on 11/02/06 07:14 PM by Alex Adrianson

World News You Might Have Missed

The German government gets a windfall in unexpected tax revenues. Now Germans must confront a set of choices Americans faced a few years ago: tax cuts, more spending, or debt reduction. The extra revenue might come in handy, if attempts to privatize the trains fall through. With job cuts at stake, the two parties in the governing coalition can’t quite make up their minds on the appropriate business model.

A currency mystery: Europe’s bankers try to figure out what’s eating the Euro.

Two new English-language news channels will be launched later this month: Al-Jazeera International and France 24. Politics, as much as economics, explains the new competition for CNN and BBC.

Britain has become a surveillance society, says a new report.

Adam Smith, the great economist who wrote about the idea of the invisible hand, gets his face on the new 20 pound note. The reviews are not good.

Daniel Ortega is trying once more to win election as Nicaragua’s president, and he might win this time. He’s campaigning as a paler shade of Red, while dividing the opposition through under-the-table deals. Nicaragua is still a case study in strong-man politics.

South Africa’s affirmative action programs look like cronyism to those who don’t benefit. Poverty in South Africa has gone up since the programs were created.

Google's ad revenue now rivals that of the biggest television stations.

Posted on 11/02/06 05:44 PM by Alex Adrianson

Another Voice for Federalism (and Capitalism) in Health Care Policy

David Graetzer’s The Cure: How Capitalism Can Save American Health Care continues to get attention. Several weeks ago, Graetzer discussed his book at The Heritage Foundation (view, listen).

On Tuesday, Graetzer discussed what ails American health care with an ideologically less-sympathetic interviewer at The Health Care Blog. Here’s a tidbit of what Graetzer had to say:

The Federal and State governments spend billions of dollars a year already on the uninsured, but they do it, I think, in an unsatisfactory way, mainly by funding health bureaucracy in hospitals. I would actually turn over the money presently spent on uncompensated care by the Federal government to the states, let them experiment, and I think some states would simply expand Medicaid, I think that is probably a mistake, some states would be more innovative and probably buy private insurance, I think that's the way to go. But I'm not totally sure! I think that we should allow the states to experiment the way we allowed the states to experiment with welfare reform, and I think we got far more information through experimentation than in really clever people sitting in Washington churning out smart papers.

I’ll note in passing that there are at least a few clever guys in Washington churning out smart papers who have some sympathy for Graetzer’s prescription of federalism—for instance, Brookings’ Henry J. Aaron and Heritage’s Stuart Butler.

Posted on 11/02/06 02:34 PM by Alex Adrianson

An Outdated Rationale for Taxes

There are major differences in cell phone taxes across the states, observes Marc Kilmer of the Buckeye Institute. State tax rates on cell phone service range from 18.72 percent (Nebraska) to 1.02 percent (Nevada). Ohio is slightly below (i.e., better than) average with a tax of 6.88 percent. But, says Kilmer:

There is no reason that states should impose high taxes on wireless service. The traditional rationale for taxing telephone service is that telephone companies use government right-of-ways and other public infrastructure to string their wires. With wireless service, however, that rationale is non-existent. States merely see wireless service as a new area where they can extract money from taxpayers.

Posted on 11/02/06 12:44 PM by Alex Adrianson

Military Preparedness Matters

A nation’s military success, says Max Boot, depends not only on its total resources but also how well it is prepared to fight a war when the war begins. Boot gives a preview of his new book War Made New: Technology, Warfare, and the Course of History, 1500 to Today at The Volokh Conspiracy.

The lesson supposedly taught by World War II was that economic power equates to military power. It is just as easy, however, to read that experience the other way around. Boot notes that in the early years of World War II, the Axis powers achieved considerable gains over the Allies in spite of the fact that the Allies combined gross national product was 40 percent greater and its population was 170 percent larger.

Yes the Allies won, but only once they were able to bring their resources to bear. In general, total resources are not a good predictor of military success. Says Boot:

In a statistical analysis of 20th century wars, the side with the larger GNP, population, armed forces, and defense expenditures won only a little more than half the time, making these factors about as useful in predicting military outcomes as flipping a coin.

A bigger economy, says Boot, is not a guarantee of safety:

The ongoing proliferation of destructive technology means that the link between economic and military power is more tenuous than ever. Al Qaeda, whose entire budget would be insufficient to buy a single F-22, can inflict devastating damage on the world’s richest country. Advances in biological and cyberwar promise to put even more destructive potential into the hands of ever smaller groups—as does the continued proliferation of nuclear weapons.

Imagine the devastating consequences of a mega-terrorist attack. Not only could millions die but international travel and commerce—the lifeblood of the global economy—could be severely disrupted. Such a scenario reveals the falsity of economic determinist arguments which counsel that military strength is unimportant and that it is feasible to stint on military preparedness in order to strengthen the economy. On the contrary, there can be no long-term prosperity without security. The entire world today depends, no matter how begrudgingly or unwittingly, on the protection provided by the United States, whose armed forces keep open air and sea lanes, safeguard energy supplies, and deter most cross-border aggression.

Addendum: Boot will be speaking at Heritage on November 16.

Posted on 11/02/06 11:16 AM by Alex Adrianson

Climate Change: The View from Kenya

You can do anything you want for the environment, but it always helps to ignore the consequences.

Over 2 billion of the Earth’s citizens—including 95 per cent of Africans—still do not have electricity. That means no lights, refrigerators, stoves, radios, televisions or computers; no modern homes, hospitals, schools, offices or factories. Instead, people breathe polluted smoke from wood and dung fires, and die by the millions from lung diseases.

The world should be rushing to their aid. Instead, in the name of preventing hypothetical climate change, environmentalists and rich countries oppose fossil fuel power plants in poor countries. To “protect wild rivers,” they obstruct hydroelectric projects. They resist nuclear power, on the ground that it is “inherently dangerous.” In short, they are telling a third of the world’s people: “You cannot have modern, healthy, industrialized societies. Your only option is piddling amounts of expensive, unreliable electricity from wind and solar. To safeguard the world from speculative risks that we are concerned about, you must endure life-threatening dangers that perpetuate poverty, disease and childhood death in your destitute nations.”

Now, just as thousands of delegates and activists are about to board carbon dioxide-emitting jetliners to attend the next global warming conference in Kenya, the European Union wants to tax imports from poor nations that are exempt from Kyoto. The EU claims the exemption gives poor countries an “unfair trade advantage” over EU countries that are struggling to meet their initial treaty commitments.

Posted on 11/01/06 06:07 PM by Alex Adrianson

Another Reason Why We Need School Choice

Just wondering: If parents could choose their kids' schools, would schools be doing this kind of stuff?

Police in the western Michigan community of Wyoming entered two classrooms at Lee Middle and High School on Thursday and announced there was a threat to the school, The Grand Rapids Press reported.

Students, who were unaware police were conducting a drill, were taken from the classroom into the halls, patted down by officers and asked what they had in their pockets, the newspaper said.

"Some of these kids were so scared, they just about wet their pants," said Marge Bradshaw, a parent with four children in Godfrey-Lee Schools. "I think it's pure wrong that the students and parents were not informed of this."

Officers wore protective gear, including vests and helmets, and carried rifles that were unloaded and marked with colored tape to indicate they were not live weapons, the newspaper said.

hat tip: The Agitator

Posted on 11/01/06 04:25 PM by Alex Adrianson

Who’s in the Military?

By happenstance, a couple of days before a certain former presidential candidate made comments disparaging the educational attainment of those serving in the military, The Heritage Foundation released a study examining the demographics of new military recruits.

The notion that the military has had to accept lower-quality candidates since the invasion of Iraq in 2003, it turns out, is wrong. But there are differences between military recruits and their civilian peers. Examining just new recruits in 2004 and 2005, author Tim Kane finds that “wartime U.S. mil­itary enlistees are better educated, wealthier, and more rural on aver­age than their civilian peers.”

Posted on 11/01/06 12:48 PM by Alex Adrianson

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