The Lighthouse^®

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The Lighthouse^® is the weekly email newsletter of the Independent Institute.
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Volume 15, Issue 43: October 22, 2013

1. Will the Next Fed Chair Unleash Massive Inflation?
2. Fixing the Shortage of Foreign Workers
3. Economics, Environmentalism, and Secular Religion
4. Mainstream Media Misconstrues the Terrorist Threat?
5. New Blog Posts
6. Selected News Alerts

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The Independent Review: Subscribe or renew today and get a free copy of the 25th Anniversary Edition of Crisis and Levithan: Critical Episodes in the Growth of American Government, by Robert Higgs.

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Janet Yellen may have earned President Obama’s trust, but the new nominee to chair the Federal Reserve has her work cut out for her. Under the tenure of Fed Chairman Ben Bernanke, American banks now possess $2.2 trillion in excess reserves. Last April, Yellen said that concerns about this staggering growth and the prospects for a major rise in prices are less worrisome than the nation’s unemployment rate, but Independent Institute Research Fellow Burton A. Abrams has serious doubts about her priorities.

“How the Fed eliminates these excess reserves before they produce an explosive growth in the money supply and surging inflation should be more of a concern to the next Fed Chair than an unemployment rate that is more the product of uncertainties associated with deficit spending and business fears about Obamacare than any lack of liquidity caused by the Fed,” Abrams writes in The Daily Caller.

Abrams also cites unfavorable similarities between Yellen and Arthur Burns, Federal Reserve chairman under President Nixon. “The Nixon-Burns inflationary cycle is surely one of the worst economic blunders of the past 100 years,” he writes. “But is another one like it just around the corner?” Yellen’s political credentials—as a Clinton appointee to the Federal Reserve Board of Governors in the mid-1990s and now as an Obama nominee to chair the Fed—give one pause.

Barack Obama’s Nixonian Fed Pick, by Burton A. Abrams (The Daily Caller, 10/16/13)

The Terrible 10: A Century of Economic Folly, by Burton A. Abrams

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A recent protest against U.S. immigration restrictions led to more than 150 arrests in Washington, D.C., including eight members of Congress. Unfortunately, the demonstration did little to raise public awareness of the many problems with current policy. One of the most troubling aspects of the law, at least from the standpoint of economic growth, is its limit on the number of visas available to foreign-born workers. As a result of these arbitrary caps, American companies are often unable to fill job openings that require workers with special skills. In a new op-ed for Forbes, Independent Institute Senior Fellow Benjamin W. Powell sheds light on this problem—and examines an innovative proposal to fix it.

The current program for highly skilled foreign workers is the H1-B visa program, which admits 65,000 workers per year. That number is far too low to meet employer demand. “In fiscal 2013, the government ran out of H1-B visas in less than a week,” Powell writes. “Indeed, only twice in the last decade has the supply of H1-B visas lasted for more than half the fiscal year; in both instances, this occurred during economic downturns.” The H2-B program, designed for temporary and seasonal workers, has similar problems: employers want more than the 66,000 H2-B visas that the government issues each year.

Although a bill now before the U.S. Senate would expand the number of work visas in various categories, a more effective approach would be to allow American employers, rather than Congress, to determine the number of foreign workers welcomed into the country. How might this principle be implemented? An innovative proposal called Red Card would enable guest workers to work in the United States for a specific employer and duration; an electronic card would enable employers and law enforcement to monitor compliance. “The Red Card plan would not resolve the immigrant labor issue,” Powell writes. “But it’s a step in the right direction and would make the market for foreign-born labor more efficient.”

A U.S. Worker Shortage Calls for ‘Red Card’ Immigration Reform, by Benjamin W. Powell (Forbes, 10/18/13)

Broken Borders: Government, Foreign-Born Workers, and the U.S. Economy, by Benjamin W. Powell and Zachary Gochenour

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Is economics a science? Writing in Sunday’s New York Times, Harvard University economics professor Raj Chetty argues in the affirmative, noting that the bread and butter of many economists consists of formulating and testing precise hypotheses. Economists’ growing agreement about the importance of empirical testing bodes well for the science of economics, according to Chetty, whatever their disagreements about less fundamental issues. But that argument is not compelling. Some economists would argue that the kind of empiricism that Chetty celebrates lies not at the core of economic science, but instead applies only in certain realms of analysis. If the meaning of the term “science” is hotly contested, it might be more fruitful to ask a different question: Is economics value-free? On close examination, much of the way many economists go about their work is decidedly not value-free, according to Independent Institute Senior Fellow Robert H. Nelson.

Writing in The New Atlantis, Nelson argues that most economists accept an implicit moral premise: that economic growth is the main goal of the economic system. This has long been the case. Indeed, the Progressive economists who founded the American Economic Association (AEA) in the 1880s proselytized a “gospel of efficiency,” holding as an act of faith the notion that economic growth would end most social problems and thereby establish a heaven on earth. Functionally similar elements of secular religion can also be found in the works of Marx, Comte, Bentham, and Smith, although the differences are noteworthy. “For the American progressive utopians [such as AEA co-founder Richard Ely], unlike for Marx,” Nelson writes, “this earthly perfection of the human condition would be achieved gradually and incrementally, by the steady accumulation of economic knowledge and its continuing application.”

The failure to openly acknowledge their faith in the redeeming properties of economic growth may be one reason that economists have faced growing challenges from a competing secular religion: the modern environmental movement. In addition to its critique of the orthodox notion of economic progress, “environmentalism holds out hope for a kind of quasi-religious salvation,” Nelson writes. Green energy, recycling, and “sustainable” local agriculture are its means to redemption. But environmentalism and the doctrine of economic growth may face new challenges from other secular religions. “Looking beyond the economic progressivism that has played such a large role in American history, it may be that rather than the elimination of material scarcity, the central theme of our future civil religion should be the maintenance of human freedom,” Nelson continues. “Whatever the economic model we subscribe to, we would do well to acknowledge its religious qualities—the extent to which it affects our understanding of the human condition, of how good ought to overcome evil, and even of our eschatological hopes.”

The Secular Religions of Progress, by Robert H. Nelson (The New Atlantis, Summer 2013)

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

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The New York Times and Wall Street Journal hailed the recent capture of Abu Anas al-Libi—a prime suspect in the deadly 1998 bombing of U.S. embassies in East Africa—as a major victory in the war against al-Qaeda. But according to Independent Institute Research Fellow Angelo M. Codevilla, this notion is not only mistaken, it’s dangerous.

Contrary to the media outlets, it’s hardly a sure thing that al-Libi’s capture will have any affect on al-Qaeda. Enhanced interrogation does not necessarily yield actionable intelligence; indeed it can easily result in false leads. Moreover, the ranks of anti-U.S. terrorists have spread far and wide. Capturing the remnants of al-Qaeda does little to address militant animosity toward the United States.

“The point is simple: by trying to fit the world’s manifold terrorists into the concept of al-Qaeda, U.S. intelligence dumbs itself down,” Codevilla writes. “Most dumbing is the notion that terrorism is about Mr. al-Libi, al-Qaeda, or any rogues, and that all we have to do to is to ‘score victories’ against such people. If only it were that easy!”

Ignorance, Intelligence, and War-making, by Angelo M. Codevilla (Library of Law and Liberty, 10/13/13)

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From The Beacon:

From MyGovCost News & Blog:

You can find the Independent Institute’s Spanish-language website here and blog here.

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