The Lighthouse^®

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The Lighthouse^® is the weekly email newsletter of the Independent Institute.
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Volume 13, Issue 43: October 25, 2011

1. Beyond Politics Exposes the Roots of Government Failure
2. Mismatch of Jobs and College Degrees Harms Students and Taxpayers
3. Lessons for ‘Occupy Wall Street’
4. A U.S. Quagmire in Central Africa?
5. New Blog Posts

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Please join with us to celebrate The Independent Institute’s 25th Anniversary Dinner: A Gala for Liberty, November 15th, at the Ritz-Carlton in San Francisco. Honorees Lech Walesa, Mario Vargas Llosa, and Robert Higgs will be presented with the Alexis de Tocqueville Award as champions of individual liberty, entrepreneurship, personal responsibility, civic virtue, and the rule of law.

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Economic “stimulus” packages that don’t revive the economy and that increase federal deficits and undermine private investment and job growth? Check. Laws meant to protect endangered species but which incentivize landowners who have them on their property to “shoot, shovel, and shut-up”? Check. Anti-poverty programs that foster dependency and hinder participation in the job market? Check. Social and economic problems are usually met with calls for the government to “do something,” especially when the trouble is allegedly caused by the failure of a free market. But good intentions don’t ensure good results. In his illuminating new book, Beyond Politics: The Roots of Government Failure, political scientist Randy T. Simmons (Senior Fellow, The Independent Institute) explains why government policies don’t work as promised.

To understand why government policies fail, Simmons argues, we must rethink common assumptions about politics and markets, and make sense of the institutions that shape the incentives and decisions of voters, politicians, bureaucrats, and interest groups. After presenting a thorough examination of those assumptions and institutions, Simmons exposes the roots of government failure in areas as varied as public education, environmental protection, social welfare, consumer protection, tax policy, producer-rigged markets, and macroeconomic policy. He concludes by offering guidelines that would foster a society consistent with the Founders’ vision of a republic that safeguards individual liberty.

Originally published in 1995 with co-author William C. Mitchell, Beyond Politics has been revised and updated to provide readers with insights about the financial crisis of 2008, America’s fiscal problems, and other realities of twenty-first century political economy. Readers versed in economics and political science will find the book a refreshing synthesis of public-choice theory, New Institutional Economics, and the market-process analysis of the Austrian school of economics. Practitioners of the dark arts of policymaking will find it a treasure trove of cautionary tales that illustrate the adage, “Fools rush in where angels fear to tread.” After reading Beyond Politics, no one will ever be surprised to see public-policy outcomes diverge, often tremendously, from political promises, and no reader will lack useful ideas to improve the public sphere.

Beyond Politics: The Roots of Government Failure, by Randy T. Simmons

Detailed book summary

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Although U.S. college enrollment has risen 50 percent over the past 25 years, the number of students graduating with degrees in science, technology, engineering and math has remained flat. Which majors have attracted more students? Some of the biggest gains have been in the visual and performing arts, psychology, and communications and journalism: over the past quarter century, the number of degrees issued in those disciplines has doubled. This trend is worrisome, according to Alex Tabarrok, research director at the Independent Institute.

One problem, Tabarrok argues, is that students in those disciplines are often mismatched for the U.S. job market: most humanities graduates end up in jobs that don’t require college degrees, and those grads don’t get much of a financial “bonus” to show for their years of higher education. Moreover, the subjects those grads studied are far less likely to foster the kind of innovations that drive economic growth, as compared to science, technology, engineering and math. And yet taxpayers are told they must subsidize college students across all majors because doing so allegedly contributes to positive spillover effects for society.

“College has been oversold,” Tabarrok writes. “It has been oversold to students who end up dropping out or graduating with degrees that don’t help them very much in the job market. It also has been oversold to the taxpayers, who foot the bill for subsidies that do nothing to encourage innovation and economic growth.”

College Has Been Oversold, by Alex Tabarrok (Investor’s Business Daily, 10/19/11)

The Academy in Crisis: The Political Economy of Higher Education, edited by John W. Sommer

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The Occupy Wall Street movement has a lot to learn if it is to become a force for positive change. Independent Institute Research Fellow Art Carden notes several principles that the members of the movement would benefit from learning.

Carden elucidates six principles in particular: (1) Because unfettered commerce is a positive-sum game, wealth accumulation is not prima facie evidence of wrongdoing. (2) Far more than policies of redistribution, it is economic growth that has been responsible for pulling dozens of generations out of grinding poverty since the advent of the industrial revolution two centuries ago. (3) Student-loan debt forgiveness would be another form of wasteful taxpayer bailouts. (4) Malfeasance in the financial sector was enabled or encouraged by government policies that weakened mortgage-lending standards. (5) The cronyism that the protestors decry is not an exception to political society; it’s a central feature of it. (6) “Greed” explains the current economic malaise no more than gravity explains airplane crashes; a full explanation is a lot more complicated.

The radical leftists among the Occupy Wall Street movement should rethink their demands that we “smash capitalism” and “abolish private property,” Carden argues. The current economic malaise is the result, not of unfettered markets, but of political interferences in the operation of free markets. Carden writes: “Even in its present corrupted and cronyized form, ‘modern capitalism’ . . . is a goose that lays golden eggs, and not merely for the super-rich. If you disagree, ask yourself how many of those claiming to speak for ‘the 99%’ have smart phones, which Louis XIV couldn’t have bought for all the gold in France.”

Smash Capitalism and You Destroy Civilization, by Art Carden (Forbes.com, 10/21/11)

Student Loan Debt: ‘Occupy’ Movement’s Weakest Talking Point, by Art Carden (Christian Science Monitor, 10/18/11)

Lessons from and for the Class Struggle on Wall Street, by Art Carden (Forbes.com, 10/13/11)

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A week before President Obama said the United States would meet its scheduled withdrawal of troops from Iraq by year end, he told Congress he would dispatch 100 U.S. Special Forces troops to advise four central Africa countries on their campaigns to defeat the violent rebel group that calls itself the Lord’s Resistance Army (LRA). This seemingly minor development could lead to another quagmire that undermines Americans’ true vital interests. In addition, it illustrates the problems with how Congress conveys to the executive branch its wishes in the realm of foreign policy, according to Ivan Eland, director of the Independent Institute’s Center on Peace & Liberty.

The White House might argue that by sending military advisors to Uganda, Congo, Southern Sudan, and the Central African Republic it is meeting its obligations under a law passed last year that it provide “comprehensive U.S. efforts to help mitigate and eliminate the threat posed by the LRA to civilians and regional stability.” Unfortunately, that law is vaguely worded. It does not specifically authorize the administration to put U.S. troops in harm’s way. Apparently, the 112th U.S. Congress hasn’t learned the lessons of the 88th Congress’s Gulf of Tonkin Resolution, the amorphous 1964 law that sparked the escalation of the Vietnam War.

The current administration might also argue that its actions comply with the War Powers Resolution. This is false, however. That resolution requires the White House to inform Congress that it has dispatched troops within 48 hours of deployment—but only when the United States is under attack. “Otherwise, for all other U.S. military interventions, the law requires, in keeping with the framers’ original intent as expressed in the debates at the constitutional convention, a specific prior authorization from Congress,” Eland writes. “In this case, that was not obtained, and Obama, as he did in Libya, has violated the Constitution and the War Powers Resolution in this unneeded, financially reckless, preposterous military adventure.”

Another Potential Quagmire on the Horizon, by Ivan Eland (10/20/11)

Recarving Rushmore: Ranking the Presidents on Peace, Prosperity, and Liberty, by Ivan Eland

The Empire Has No Clothes: U.S. Foreign Policy Exposed, by Ivan Eland

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From The Beacon:

From MyGovCost News & Blog:

The Independent Institute’s Spanish-language blog has surpassed 3 million page views! You can find it here.

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