The Lighthouse^®

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The Lighthouse^® is the weekly email newsletter of the Independent Institute.
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Volume 18, Issue 15: April 12, 2016

1. Why the Slow Economic Recovery?
2. Presidential Race Ignores Nuclear Issues at Our Peril
3. FBI Drops Effort to Conscript Apple for iPhone Access—for Now
4. Libyan Catastrophe 2.0
5. New Blog Posts
6. Selected News Alerts

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The official U.S. unemployment rate is only 4.9 percent, but that statistic excludes the masses of discouraged would-be workers who have given up looking for jobs. A different measure of the economy’s health—the labor-participation rate—is at about its lowest level since 1978. One reason may be an unintended consequence of government folly: Obamacare and the Dodd-Frank financial industry reforms caused business leaders to postpone making major investments until they gained confidence that property rights and the freedom of contract would not suffer too badly from government encroachment. This is the “regime uncertainty” thesis put forward by Independent Institute Senior Fellow Robert Higgs in works such as his outstanding collection Taking a Stand, winner of the 2016 Independent Voice Award from Independent Publisher.

The idea is further developed by Wolf von Laer and Adam Martin in their article for the latest issue of The Independent Review, “Regime Uncertainty and the Great Recession.” According to Von Laer and Martin, the Federal Code of Regulation grew faster after the onset of the Great Recession and opinion surveys revealed that trust in government had fallen. Domestic net investment didn’t return to its pre-recession heights until the third quarter of 2015. Regime uncertainty is not only a likely culprit for the recovery’s lackluster performance, Von Laer and Martin argue, but it’s also a concept that enriches our theoretical understanding of how markets operate.

For markets to coordinate economic activities effectively, “as if guided by an invisible hand,” in Smith’s famous phrase, business leaders and other economic decision-makers must be able to discover profit opportunities. They must also be able and willing to act on the “entrepreneurial alertness” that enables such discoveries. But doing so requires a business climate with stable legal rules and freedom of contract. Thus, regime uncertainty acts as a negative shock to the economy’s coordination process, Von Laer and Martin argue. This idea has potentially measurable effects. For example, some kinds of firms may be less capable of absorbing such shocks. Indeed, small- and medium-size enterprises have had greater trouble adapting to Obamacare and Dodd-Frank than have large firms. For this reason and others, the authors conclude, regime uncertainty is a phenomenon rich in theoretical and empirical implications and is highly deserving of economists’ attention.

Taking a Stand: Reflections on Life, Liberty, and the Economy, by Robert Higgs

Audio: Robert Higgs interview on Taking a Stand (Libertarianism.org, 11/20/15)

Video: Robert Higgs discusses Taking a Stand (Cato Institute, 11/10/15)

Regime Uncertainty and the Great Recession, by Wolf von Laer and Adam Martin (The Independent Review, Spring 2016)

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Two great nations—one governed from Moscow, the other from Washington, DC—each possess about 7,000 nuclear weapons. But judging by how rarely members of the media mention these atomic arsenals, you would be forgiven for thinking that the world’s nukes are mostly in the hands of China, North Korea, Iran, Israel, and Pakistan. Unfortunately, neglect of the nuclear issue is not something anyone can afford, especially during an election year, according to Independent Institute Research Fellow Mike Moore (no relation to the documentary filmmaker). Our Mike Moore, unlike the other one, is well respected in the worlds of journalism and global security, having served as editor of The Bulletin of the Atomic Scientists.

In his award-winning 2008 book Twilight War: The Folly of U.S. Space Dominance, Moore argued against the militarization of space by the U.S. government. Such a move, he argued, would spark an international arms race in space as well as crowd out the commercial development of the “final frontier.” In a recent op-ed for the Chicago Tribune, Moore reminds us that the lives of hundreds of thousands, perhaps millions, could be destroyed by the launch—intentional or accidental—of only a few hundred of the 14,000 nuclear weapons possessed by the United States and Russia.

The American public and the press have put hundreds of questions to the presidential hopefuls. Nuclear policy and, for lack of a better term, nuclear temperament should be among them, and high on the list. “At a minimum, the next occupant of the White House must possess a keen, thoughtful and analytical mind,” Moore writes. “He or she must be well-versed in history and world affairs. Most important, the American president must be capable of keeping his or her head during a fast-moving East-West crisis, when others are losing theirs.... Today, in a worst-case scenario, a president might have hours or minutes to determine the fate of the United States and Russia. That’s a reality that we need to consider when we finally enter the voting booth in November.”

Nuclear Weapons: Whose Finger Do You Want on the Button?, by Mike Moore (Chicago Tribune, 3/28/16)

Twilight War: The Folly of U.S. Space Dominance, by Mike Moore

Audio: The New International Arms Race in Space—And How to Avoid It, featuring Mike Moore (3/7/08)

Video: Is the U.S. Provoking an Arms Race in Space?, featuring Mike Moore (2/12/08)

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Apple’s conflict with the Federal Bureau of Investigation may have ended, due to the agency’s claim that it no longer needed help from the technology company to open an iPhone belonging to a San Bernardino jihadist. But the larger battle over encryption and government access is enjoying only a temporary ceasefire. And each side is on hair-trigger alert. As Independent Institute Research Fellow Randall G. Holcombe explains, the stakes involve far more than whether or not law enforcement obtains information that cell phone users—be they ordinary people or terrorists with blood on their hands—would rather keep secret.

“This was nothing like a search warrant,” Holcombe writes in the Sacramento Bee. “Apple did not have the information the FBI was seeking—and never had it.” Few have called it conscription, but what else does one call it when the government demands that private parties undertake actions against their will?

The FBI’s demands went beyond the federal government’s constitutional authority to search when it has probable cause and a warrant. The Fourth Amendment “does not say that third parties can be conscripted to aide the government in its searches,” Holcombe continues. “More than the threat of a backdoor into our phones, the real danger we would face is a backdoor attack on our rights.”

Apple CEO Was Right to Defend Basic Rights, by Randall G. Holcombe (The Sacramento Bee, 3/31/16)

Writing Off Ideas: Taxation, Foundations, and Philanthropy in America, by Randall G. Holcombe

Audio: Randall G. Holcombe on the Larry Conners USA Radio Show (11/15/15)

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The toppling of Libyan strongman Muammar Gaddafi, overseen by the Obama administration in 2011, reportedly at the urging of then–Secretary of State Hillary Rodham Clinton, created a power vacuum that was quickly filled with rival armed factions, ISIS now among them. The United States and assorted allies are hoping to end this chaos by supporting a unity government designed to bring together Libya’s eastern and western regional governments. This too is a bad idea, according to Independent Institute Senior Fellow Ivan Eland, whose 2009 book, Partitioning for Peace, offered a promising solution to sectarian violence in Iraq.

The U.S.-led military alliance faces an uphill battle that it is likely to lose, although it may not admit the loss after it sends home its soldiers and airmen. If foreign military intervention elsewhere in the Middle East and Africa are any indication, here’s what we can expect from a new Libyan campaign: Alliance members will become a target for insurgents, who will attract greater numbers as more and more Libyans become radicalized by the inevitable “collateral damage” resulting from foreign bombs and bullets. The United States and its partners will inadvertently give extremist groups of various stripes a cloak under which they will hide their bloody campaigns against one another. And the Western coalition will be for naught, as it attempts to unify people with strong regional affiliations but no true Libyan national identity, the country being an artificial construct that gained independence from European colonial powers a mere 65 years ago.

The alliance is pinning its hopes on one Fayez Serraj, a returning technocrat with little organic support in Libya. “Instead, the U.S.-led Western nations should realize that they have made a mess of Libya and can only compound the problem with more military meddling,” Eland writes in the Huffington Post. “Libyans need to solve their own problems, and that may well mean dividing up the country into two or more political entities.”

More Western Military Meddling in Libya Is a Bad Idea, by Ivan Eland (Huffington Post, 4/4/16)

No War for Oil: U.S. Dependency and the Middle East, by Ivan Eland

Partitioning for Peace: An Exit Strategy for Iraq, by Ivan Eland

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6) Selected News Alerts

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