The Lighthouse^®

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The Lighthouse^® is the weekly email newsletter of the Independent Institute.
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Volume 18, Issue 44: November 1, 2016

1. How to Innovate in K-12 Education
2. Clinton and Trump Wrong on Mandated Family Leave
3. For Better Access to Meds, Prescribe Economic Freedom
4. Soda Tax Nonsense
5. Independent Updates

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Texans can boast about their state’s superior economic performance and business climate—they’re usually ranked among the top ten in the nation—but when it comes to educational innovation, the Lone Star State is a laggard, not a leader. If public opinion is any indication, however, things may quickly improve: A recent survey by EdChoice found that 71 percent of Texans polled support adopting a new policy tool for K-12 education—Educational Savings Accounts.

Texans’ support for ESAs may stem partly from their success in Arizona, where surveys of ESA-participating parents found that 100 percent reported they are “satisfied” or “very satisfied” with their state’s program. This popularity shouldn’t be surprising, according to Independent Institute Research Fellow Vicki E. Alger. While ESA programs vary by state—five states have enacted them, so far—all share an essential ingredient: They enable any parent to supplement their child’s education with additional funds, not simply the well-to-do, Alger explains.

ESA funds typically amount to some portion of the cost of a student in a public school, and they can be spent only on approved education-related services, including distance learning courses, tutoring services, educational therapies from accredited and licensed therapists, limited transportation services, tests, books, curricula, tuition and fees for public schools or any accredited private school. Funds not used in one year can be rolled over for future education expenses, including college tuition. Thus, a system of universal ESAs, not merely for a small segment of the public school population, can be a game-changer, Alger explains: It would vastly increase the supply of educational providers and foster more innovation and higher quality in education.

Education Savings Accounts for Texas: How Educational Choice through ESAs Create Greater Innovation and Quality, by Vicki E. Alger (10/19/16)

Failure: The Federal Misedukation of America’s Children, by Vicki E. Alger

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Paid family leave, anyone? It’s a perk that many workers in today’s competitive labor market now enjoy—but don’t call it “free”: Employers aren’t the only ones who cover the cost; ultimately, others bear the brunt, such as employees who end up getting less compensation than they otherwise would. It’s just like the tradeoff between the apparent advantage and the invisible disadvantage that French economist Frédéric Bastiat described in his 1848 piece, “What Is Seen and What Is Unseen.” And now Donald Trump and Hillary Clinton—each of whom has proposed to expand paid family leave—offer their own versions of the illusory “free lunch.”

Trump would mandate six weeks of paid leave from work for new mothers who currently are ineligible for it; Clinton’s parental leave plan covers new fathers as well as new mothers (and any worker who would attend to a family member with a long-term illness). Despite the proposals’ differences, such mandates share an unfortunate side-effect: They would disproportionately harm the employment prospects of job-seeking women of child-bearing age, according to Independent Institute Research Fellow Abigail R. Hall Blanco. Even if employers received government relief to help pay for the mandated benefit, they would still bear the burden of paying overtime for someone to fill in for the absent worker—or hiring a temp (and the extra hidden costs this would entail).

Supporters for paid-leave mandates often point to Norway and Denmark as proof that policies far more generous than anything proposed by Clinton or Trump can work. What they fail to consider, however, is that as a result of those policies, female workers in Scandinavia typically see their wages diverge more from their male counterparts than is common in the United States. The economically sound alternative for government-mandated paid leave, Hall Blanco argues, is for young workers “to negotiate parental leave as they would salary and other benefits,” she writes. “This would allow for women who intend to have children to obtain time off without harming women as a whole.”

Clinton’s and Trump’s Family Policies—Terrible Ideas for Women, by Abigail R. Hall (Sun-Sentinel, 10/31/16)

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A United Nations group has prescribed bad medicine to “cure” a serious problem afflicting developing countries. It calls for improving public health by having governments take over research and development, pricing, and distribution of pharmaceuticals. But this cure is worse than the disease, according to Independent Institute Research Fellow John R. Graham, because it would undermine the essential role of private investors and patents in the pharmaceutical industry.

“Blaming patents for developing countries’ lack of access to medicine is wrong-headed,” Graham writes at Real Clear Health. Citing studies by Boston University economics professor Ian Cockburn, Graham notes that patent rights have been shown to accelerate, not delay, the introduction of new drugs to the market. In India, a country known for its weak patent system, the availability of new drugs already in use elsewhere is particularly appalling: It took five years for half of 184 drugs the U.S. Food and Drug Administration approved between 2000 and 2009 to become available in India; and one-quarter of the 184 drugs had not become available in India ten years after they made their debut elsewhere. Price regulation, Cockburn and his colleagues find, slows down the introduction of a new drug.

“The problem is not in the current medical R&D system,” Graham writes. “Rather, developing countries suffer from a lack of economic freedom.... Instead of threatening investors who put their capital at risk researching and developing new medicines, the U.N. should encourage developing nations to adopt policies—including laws protecting intellectual property—that will increase their citizens’ economic freedom, incomes, and health.”

The United Nations Report on Access to Medicines Is a Public Health Hazard, by John R. Graham (Real Clear Health, 10/13/16)

A Better Choice: Healthcare Solutions for America, by John C. Goodman

Priceless: Curing the Healthcare Crisis, by John C. Goodman

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Soda-tax advocates in San Francisco and Oakland are making a final push for ballot measures—Proposition V and Measure HH, respectively—that would impose a one-cent-per-ounce tax on soda and other sugar-sweetened drinks. For anyone who passed Econ 101, the advocates’ propaganda is sure to leave a bad aftertaste.

Independent Institute Senior Fellow Lawrence J. McQuillan has noted the economic ignorance on display when they claim the tax would burden only distributors, not consumers. Now Independent Institute Research Director William F. Shughart II and Strata Policy Analyst Josh T. Smith are calling them out for touting a fatally flawed study of beverage consumption after Berkeley enacted a similar soda tax. Ironically, the study itself cautions against applying its findings to other cities.

“The fundamental scientific problem with the study,” Shughart and Smith write, “is that it required people in a nonrandom, street intercept survey to recall and compare their pretax and post-tax drinking habits.” Such informal surveys, the two economists note, are highly vulnerable to their respondents’ hazy memories and tendency to placate their interviewers. Moreover, Shughart and Smith write, “it simply is inconceivable that the tax will have perceptible effects on obesity, tooth decay, or any other health problem.”

Oakland’s Voters Should Stop Soda Tax, by William F. Shughart II and Josh T. Smith (East Bay Times, 10/25/16)

Why Michael Bloomberg’s Pro-Soda-Tax Ad Is Misleading, by Lawrence J. McQuillan (The Beacon, 9/22/16)

Why Pro-Soda-Tax Ad in Bay Area Is Misleading, Part II, by Lawrence J. McQuillan (The Beacon, 10/10/16)

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

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