The Lighthouse^®

---

The Lighthouse^® is the weekly email newsletter of the Independent Institute.
Subscribe now, or browse Back Issues.

---

Volume 18, Issue 1: January 5, 2016

1. Make New Year’s Resolutions Better
2. Pope Francis and the Climate for Giving
3. Recycling Myths of Environment Religion
4. The Tall and Short of ‘The Big Short’
5. New Blog Posts
6. Selected News Alerts

---

---

Want to get fit and stay healthy? Get more enjoyment out of life? Spend less and save more? Who doesn’t? Unfortunately, every spring or late winter, graveyards fill up with New Year’s resolutions that died an undignified death, often accompanied by angst, self-blame, and hopeless resignation. But 2016 can be different. According to Independent Institute Research Fellow Gary M. Galles, one of the best ways to make and keep your New Year’s resolutions is to cross-check them against basic economic principles.

“Given that many make New Year’s resolutions in an effort to improve their lives, it is worth considering some economic principles that aid that effort,” Galles writes in The Beacon. “Economics does not provide everything necessary for wise choice.... Rather, its principles typically teach about mistakes to avoid.”

Economics teaches that scarcity is a fact of human existence: our desires will always exceed our capacity to fulfill them. Thus, resolutions that ignore this fact are foolish: they simply can’t deliver the goods. Resolutions that deny the inevitability of trade-offs also set the stage for failure. So too are resolutions that dwell on changing the past and thereby commit what economists call the sunk-cost fallacy. Success comes from focusing on what you can control now and examining how you can sustain desired change. “Aristotle said ‘an unexamined life is not worth living,’” Galles writes. “Economic principles help make that examination more useful.”

Economics and Resolutions, by Gary M. Galles (The Beacon, 1/1/16)

^Top

---

Judging by the Vatican’s latest encyclical, Pope Francis equates free-market advocacy with tolerance for a host of mortal sins. According to two Independent Institute researchers, however, the pope’s stance reflects a poor understanding of how free markets operate and what they achieve. For evidence, contrast Pope Francis’s call for greater philanthropy with the institutional conditions that encourage giving. 

In an op-ed published recently in Forbes, Independent Institute Senior Fellow Lawrence J. McQuillan and Policy Researcher Hayeon Carol Park show that individual giving is strongly correlated with a nation’s level of economic freedom, and even more strongly correlated with a nation’s enforcement of private property rights. Using data provided by the World Giving Index, the Economic Freedom Index, and the International Property Rights Index, McQuillan and Park show that when rights and liberties are protected, individuals generally both accumulate more wealth and give more to charity. (None of this will be news to faithful Lighthouse readers.) 

Moreover, citing recent Nobel laureate economist Angus Deaton, McQuillan and Park find that one of the most counterproductive approaches to fighting poverty and promoting giving is one endorsed wholeheartedly by Pope Francis: government-to-government development aid. “Instead of attacking markets and promoting a larger role for government, the pope should channel his fervor into the expansion of economic freedom and stronger private property rights,” they write. “That will boost effective giving, alleviate poverty, and improve the well being of those less fortunate around the world.”

Pope Francis’ Charity Goggles Ignore the Power of Capitalism, by Lawrence J. McQuillan and Hayeon Carol Park (Forbes, 12/22/15)

Making Poor Nations Rich: Entrepreneurship and the Process of Economic Development, edited by Benjamin Powell

^Top

---

“Reduce, reuse, recycle” is a slogan enshrined in municipal code in cities across the United States. It’s also among the most illogical. Most recycling programs, according to Independent Institute Senior Fellow William F. Shughart II, actually expend more resources than they save. Mandatory recycling therefore works against the conservation ethic it was supposed to reflect.

In an op-ed published in more than two dozen media outlets, Shughart debunks widespread myths, including falsehoods put out by the Environmental Protection Agency, about some of the leading targets of municipal recycling programs: scrap paper, plastic, and glass. Estimates that claim recycling these materials saves resources and reduces carbon dioxide emissions fail to account for the substantial environmental impact caused by transporting them to a recycling center. “By sending an extra fleet of trucks around town once a week, adherents of the recycling religion actually are undermining their stated goal of protecting the environment,” Shughart writes. Materials that consumers sometimes rinse before sorting into recycling bins, such as cans and plastic containers, leave an even greater impact.

“The true recycling test is whether someone is willing to pay you to sort and save your trash,” Shughart writes. “If they’re not, what you’ve been told about recycling in the past is probably just garbage.”

Recycling Makes Greens Go Gaga, but It’s a Real Burden for the Rest of Us, by William F. Shughart II (Newsday, 12/17/15, plus other outlets)

Taxing Choice: The Predatory Politics of Fiscal Discrimination, edited by William F. Shughart

The New Holy Wars: Economic Religion vs. Environmental Religion in Contemporary America, by Robert H. Nelson

^Top

---

“The Big Short”—the new movie about the housing bubble and the speculators who worked to both expose it and profit from its inevitable collapse—doesn’t get everything right. Still, the movie, which stars Ryan Gosling, Christian Bale, Brad Pitt, and Steve Carell, is both enlightening and highly entertaining, according to Independent Institute Fellows John C. Goodman and Robert Murphy.

Murphy, author of Choice: Cooperation, Enterprise, and Human Action, argues that the film tars too many in the financial services industry and is silent on the blameworthiness of the Federal Reserve’s Open Market Committee—headed by then-Chairman Alan Greenspan—and the federal policymakers who, in a quest to expand homeownership, encouraged lax mortgage-lending standards and “liar loans.” But Murphy lauds “The Big Short” for an unusual attribute: it shows the good that speculators do when they are successful. “[Financial speculation] promotes the efficient allocation of resources when firms can profit from correcting mispriced assets,” Murphy writes. Rare is the movie about Wall Street or high finance that gets this right.

Goodman calls out the same omissions: “The Big Short” is mostly silent on the federal government’s role in causing the financial crisis. He also names the same virtues. In particular, the film shows that it was the private sector that exposed the financial fraud—precisely at a time when the government was unwilling to do so. Moreover, “As the movie makes clear, government regulators had no interest prosecuting fraud, even when the protagonists put the evidence right in front to them,” Goodman writes. “And the government’s indifference continued, even after the facts were made public.” Goodman in his review also discusses his proposed reform for containing the damage of future financial bubbles: grant corporate limited-liability protections only to banks that do not themselves own financial assets.

Ryan Gosling’s Shorts, by Robert Murphy (The Beacon, 1/4/16)

What You Need to Know about “The Big Short”, by John C. Goodman (Townhall, 12/20/15)

Choice: Cooperation, Enterprise, and Human Action, by Robert P. Murphy

^Top

---

6) Selected News Alerts

Back to Top

---