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THE LIGHTHOUSE
"Enlightening Ideas for Public Policy..." VOL. 3, ISSUE 22 June 4, 2001 Welcome to The Lighthouse, the e-mail newsletter of The Independent Institute, the non-politicized, public policy research organization <http://www.independent.org<;. We provide you with updates of the Institute's current research publications, events and media programs. Do you know someone who would enjoy THE LIGHTHOUSE? Please forward this message to a friend. If they like it, they can add themselves to the list at http://www.independent.org/tii/lighthouse/Lighthouse.html. ------------------------------------------------------------- IN THIS WEEK'S ISSUE: 1. The Regulatory Trap 2. World Freedom Index 3. Why Are the Public Schools Failing and What Can Be Done? -- Next Independent Policy Forum (July 5, 2001) ------------------------------------------------------------- THE REGULATORY TRAP California's energy crisis is often portrayed as a failure of deregulation. In reality, however, the restructuring of the Golden State's power industry short-circuited rather than deregulated the market process. Legislation that squeezes all buyers and sellers into a short-term spot market rather than lets them agree on the terms of their contracts, imposes protectionist price floors that then become price ceilings, and tilts the playing field against new suppliers and distributors can be considered "deregulation" only in the sense that Soviet-style economic planning can be considered "economic." Had California taken deregulation seriously, it is likely that electricity would be more plentiful and cheaper than before, as in Pennsylvania, where deregulation, while still not 100 percent, is at least worthy of the title. But why didn't California legislators attempt genuine deregulation? More broadly, why is deregulation so seldom attempted anywhere, despite the fact the economists routinely take pains to show how regulation is wasteful? Economists often argue that resistance to deregulation stems mostly from the fact that the benefits of deregulation are spread out among potentially millions of people, while the benefits of regulation are concentrated; the few who benefit find it easier to politick for their cause. While this is often a factor, there are several other reasons why regulations become entrenched, according to economist Fred S. McChesney. First, politicians assume that the public can live with the status quo. Second, deregulation is likely to be entrusted to the very politicians and bureaucrats who oversaw, and politically benefited from, the existing regulatory regime. Third, regulation's beneficiaries would expect to be paid off by the deregulation's beneficiaries. Fourth, some of the costs of regulation are sunk, e.g., spent on lobbying, and therefore can't be recovered by deregulation. Fifth, the government may well confiscate the gains of deregulation through taxes. What McChensey explains is the existence for a stubborn regulatory "lock-in," which unlike the urban myths of market lock-in (refuted in Stan Liebowitz and Stephen Margolis's persuasive book, WINNERS, LOSERS AND MICRSOFT), does not go wanting for empirical examples. "As many have noted, regulation is much easier to get than to get rid of. The predictable path, once regulation has been adopted, is a series of ratchets upward." Here McChesney relies on the notion of a ratchet effect (described in detail in Independent Institute senior fellow Robert Higgs's book, CRISIS AND LEVIATHAN): Each new government regulation or program creates a new baseline from which it rarely if ever retreats. This description of the regulatory state is apt, but let us suggest a more vivid one. As in the old Roach Motel TV commercials, regulations check in, but rarely check out. This metaphor at least has the advantage of helping us keep in mind the sort of critters we are dealing with. See "Of Stranded Costs and Stranded Hopes" by Fred S. McChesney (THE INDEPENDENT REVIEW, Spring 1999), at http://www.independent.org/tii/lighthouse/LHLink3-22-1.html. For an examination of regulatory lock-in during the Reagan administration, see the Independent Institute book, REGULATION AND THE REAGAN ERA, edited by Roger Meiners and Bruce Yandle, at http://www.independent.org/tii/lighthouse/LHLink3-22-2.html. For the Independent Institute's archive on energy policy, see http://www.independent.org/tii/lighthouse/LHLink3-22-3.html. ------------------------------------------------------------- WORLD FREEDOM INDEX According to the 2001 Index of Economic Freedom, only 12 countries, representing 7 percent of the world's countries, can be considered free. The report is overly optimistic, however; it overstates the freedom and understates the repression in the freer countries, according to Paul Craig Roberts, research fellow at The Independent Institute, in a recent syndicated column. "Hardly any of the index's 12 free countries are really free," writes Roberts. "For example, both the United States and Great Britain fall in the 'repressed category' of the index with regard to tax burden, as do Luxembourg, the Netherlands and Australia." The share of personal earnings collected as government taxes in the index's freest countries often rivals the one-third taken from feudal serfs by their lords or the fifty percent taken from 19th century slaves by their masters. "How can property rights be secure when taxation can claim a feudal lord's or slave master's share of a citizen's working time?" asks Roberts. Further, property rights are seldom fully secure even in the index's highest-ranking countries. For example, "U.S. property owners are at grave risk of many federal, state and local laws that permit their property to be seized on the slightest pretext. In 80 percent of asset forfeitures, no charges are brought against the former owners. To overlook this great insecurity of property in the United States is to concoct a fanciful measure of property rights." What the index really shows, Roberts concludes, is that there are virtually no free countries in the world. See "Freedom's Unheard Call" by Paul Craig Roberts, at http://www.townhall.com/columnists/paulcraigroberts/printpcr20010516.shtml. For a detailed critique of earlier indexes of freedom, see "Are We All Capitalists Now?" by John R. Hanson II (THE INDEPENDENT REVIEW, Spring 1999), at http://www.independent.org/tii/lighthouse/LHLink3-22-5.html. On the relationship of property rights to liberty, see: Peter Mentzel's review of PROPERTY AND FREEDOM by Richard Pipes (THE INDEPENDENT REVIEW, Fall 2000), at http://www.independent.org/tii/lighthouse/LHLink3-22-6.html. T. Norman Van Cott's review of THE NOBLEST TRIUMPH: Property and Prosperity through the Ages, by Tom Bethell http://www.independent.org/tii/lighthouse/LHLink3-22-7.html. ------------------------------------------------------------- WHY ARE THE PUBLIC SCHOOLS FAILING AND WHAT CAN BE DONE? -- Next Independent Policy Forum (July 5, 2001) American children learn less than they did 30 years ago, and even where there are signs of improvement, they are small. Many high school graduates -- 90 percent of whom attended government-operated public schools -- lack the skills needed in today's knowledge-intensive workplace. Further, many students fail to graduate. (The dropout rate in California is 32 percent overall, and 45 percent for immigrants.) Parents and educators have long recognized the shortcomings of the public school system, but their efforts to reform it have failed. Are school vouchers and charter schools the answer? What about teacher-owned schools? What other reforms might make schools more innovative and accountable to parents? Please join us as education experts RICHARD VEDDER and JOHN MERRIFIELD examine new strategies for achieving educational excellence. SPEAKERS: -- RICHARD VEDDER, Senior Fellow, The Independent Institute; Professor of Economics, Ohio University; author, CAN TEACHERS OWN THEIR OWN SCHOOLS? -- JOHN MERRIFIELD, Senior Research Associate; The Education Policy Institute; Professor of Economics, University of Texas, San Antonio; author, THE SCHOOL CHOICE WARS WHEN: Thursday, July 5, 2001 Reception and book signing: 6:30 p.m. Program: 7:00 - 8:30 p.m. WHERE: The Independent Institute Conference Center 100 Swan Way Oakland, CA 94621-1428 For a map and directions, see http://www.independent.org/tii/tii_info/about.html#map TICKETS: $30.00 per person: includes one copy of Richard Vedder's book, CAN TEACHERS OWN THEIR OWN SCHOOLS?, OR John Merrifield's book, THE SCHOOL CHOICE WARS, OR admission without a book is $10 per person ($7 for Independent Institute Associate Members) Praise for Richard Vedder's book, CAN TEACHERS OWN THEIR OWN SCHOOLS? "Vedder suggests for-profit schools owned and operated by teachers and school administrators would offer a promising alternative to the present public school system." -- SCHOOL REFORM NEWS "Nobody yet has found a foolproof formula for revitalizing American K-12 education. So let's be humble enough -- and empirical enough -- to try as many tantalizing approaches as we can. In that spirit, I commend Richard Vedder's pioneering ideas." -- CHESTER E. FINN, JR., former Assistant Secretary, U.S. Department of Education For more information about CAN TEACHERS OWN THEIR OWN SCHOOLS? see http://www.independent.org/tii/lighthouse/LHLink3-22-8.html. Praise for John Merrifield's book, THE SCHOOL CHOICE WARS "Professor Merrifield asks this question: what is meant by and what is the intended consequence of reforms bearing such labels as vouchers, school choice, charter schools, privatization, and competition? This book brilliantly and clearly exposes the superficiality and extraordinary fuzziness of those labels." -- SEYMOUR B. SARASON, author, CHARTER SCHOOLS: Another Flawed Educational Reform? For more about this event, see http://www.independent.org/tii/lighthouse/LHLink3-22-9.html. ------------------------------------------------------------- THE LIGHTHOUSE is made possible by the generous contributions of supporters of The Independent Institute. If you enjoy THE LIGHTHOUSE, please consider making a donation to The Independent Institute. For details on the Independent Associate Membership program, see http://www.independent.org/tii/lighthouse/LHLink3-22-10.html or contact Ms. Priscilla Busch by phone at 510-632-1366 x105, fax to 510-568-6040, email to <PBusch@independent.org<, or snail mail to The Independent Institute, 100 Swan Way, Oakland, CA 94621-1428. All contributions are tax-deductible. Thank you! ------------------------------------------------------------- For previous issues of THE LIGHTHOUSE, see http://www.independent.org/tii/lighthouse/LHLink3-22-11.html. ------------------------------------------------------------- For information on books and other publications from The Independent Institute, see http://www.independent.org/tii/lighthouse/LHLink3-22-12.html. ------------------------------------------------------------- For information on The Independent Institute's upcoming Independent Policy Forums, see http://www.independent.org/tii/lighthouse/LHLink3-22-13.html. ------------------------------------------------------------- To subscribe (or unsubscribe) to The Lighthouse, please go to http://www.independent.org/subscribe.html, choose "subscribe" (or "unsubscribe"), enter your e-mail address and select "Go." ------------------------------------------------------------- Copyright ? 2001 The Independent Institute 100 Swan Way Oakland, CA 94621-1428 (510) 632-1366 phone (510) 568-6040 fax
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