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THE LIGHTHOUSE
"Enlightening Ideas for Public Policy..." Vol. 3, Issue 43 October 29, 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. Anthrax Panic Hijacks Pharmaceutical Industry 2. If Environmentalists Owned the Alaskan Oil Fields... 3. Growing Recognition of a Growing Government ------------------------------------------------------------- ANTHRAX PANIC HIJACKS PHARMACEUTICAL INDUSTRY The Bush administration's recent "success" in securing low prices from Bayer AG, the German drug manufacturer, for Cipro, its anti-anthrax antibiotic, will ultimately reduce rather than protect the health of Americans, according to a new op-ed by economists Michael Reksulak and William F. Shughart, a research fellow at The Independent Institute. Bayer agreed to slash its prices to the U.S. only because of strong intimidation by the federal government. Some in Congress have called for the U.S. government to override Bayer's patent protection for Cipro, which expires in 2003, unless Bayer reduces the price of Cipro. Patent protection is especially important in the pharmaceutical industry, because it helps ensure that a company can recover its massive outlays for research and development, as well as make up for the delays and uncertainties associated with the FDA approval process. But "letting the 'anthrax scare'... break this link between up-front investments and future profits reduces the expected returns to R&D and greatly increases the uncertainty of the whole drug development system," Reksulak and Shughart write. "An increase in the number of companies permitted to produce Cipro now -- or forced reductions in the antibiotics' price -- means that fewer new drugs will be produced in the next 10 to 20 years than would have otherwise been the case. Already willing to sell drugs to governments at steep discounts, drug makers now have to worry that they may be bullied into accepting even lower returns or face the loss of patent protection altogether." By threatening private property rights and undermining the rule of law, the U.S. government's shakedown of Bayer, Reksulak and Shughart conclude, "are far more damaging than any single terrorist attack has ever been." See "Political Panic Trumps Terrorist Tragedy," by Michael Reksulak and William F. Shughart II, at http://www.independent.org/tii/lighthouse/LHLink3-43-1.html. For more on drug prices, see "Drug Price Controls: A 'Cure' Worse Than the Disease," by Alex Tabarrok, at http://www.independent.org/tii/lighthouse/LHLink3-43-2.html. ------------------------------------------------------------- IF ENVIRONMENTALISTS OWNED THE ALASKAN OIL FIELDS... Legislation that would permit oil exploration in Alaska's Arctic National Wildlife Refuge (ANWR) may soon reach the president's desk. (U.S. Senate Majority Leader, Tom Daschle, says he will allow the bill to go to a floor vote when there are 60 senators who support it.) In response, many environmental groups, most notably the Audubon Society, have renewed their strong opposition to drilling in the ANWR. Ironically, however, if environmentalists owned ANWR, they would probably allow drilling, using the proceeds to help promote their conservation elsewhere, according to Dwight R. Lee, writing in the fall 2001 issue of THE INDEPENDENT REVIEW. "Consider what an environmental group would do if it owned ANWR and therefore bore the costs as well as enjoyed the benefits of preventing drilling," writes Lee. In fact, the Audubon Society does allow oil drilling on an oil field it owns, the 26,000-acre Rainey Wildlife Sanctuary in Louisiana. "The willingness of environmental groups such as the Audubon Society to allow drilling for oil on environmentally sensitive land they own suggests strongly that their adamant verbal opposition to drilling in ANWR is a poor reflection of what they would do if they owned even a small fraction of the ANWR territory containing oil." If environmentalists owned ANWR, "they might easily conclude that although ANWR is an 'environmental treasure,' other environmental treasures in other parts of the country (or the world) are more valuable. Moreover, with just a portion of the petroleum value of the ANWR, efforts might be made to reduce the risk to other natural habitats, more than compensating for the risks to the Arctic wilderness associated with recovering that value." This is not, Lee emphasizes, a recommendation to give ANWR to environmental groups. Rather, it is a call to recognize that economic incentives matter -- even to environmental groups. An environmental group that refuses to put its money where its mouth is, is free to clamor for locking up resources -- it bears no direct cost for prohibition. One that owns resources, however, faces the reality that wise resource ownership entails the balancing of priorities. Unfortunately, it is the former type of environmental group has tended to prevail. See "To Drill or not to Drill? Let the Environmentalists Decide," by Dwight R. Lee (THE INDEPENDENT REVIEW, Fall 2001), at http://www.independent.org/tii/lighthouse/LHLink3-43-3.html. Also see, "The Commons: Tragedy or Triumph?" by Bruce Yandle (THE FREEMAN, April 1999), at http://www.independent.org/tii/lighthouse/LHLink3-43-4.html. ------------------------------------------------------------- GROWING RECOGNITION OF A GROWING GOVERNMENT The irony that an administration that had trumpeted small government and reliance on market forces now backs numerous significant government interventions -- including huge subsidies to businesses, IMF and World Bank funding to new allies, and far-reaching "anti-terrorism" legislation that has civil libertarians up in arms -- has not been lost on the national press. In a recent article in the NEW YORK TIMES, reporter Richard W. Stevenson reports that after years of wrangling between Republicans and Democrats over the size and scope of the federal government, "the two parties are more or less united now in the view that a strong federal government with expansive powers is vital for the time being." "Scholars say the expansion in the size and powers of the federal government in response to the terrorist attacks is similar to what has happened in past wars and crises," the article continues. "'We are rushing very quickly to throw overboard announced positions about government assistance to private enterprise, about surveillance, about security measures of various kinds that intrude on our liberties,' said Robert Higgs, the author of CRISIS AND LEVIATHAN: Critical Episodes in the Growth of American Government. 'In that respect, this episode mirrors the great national emergencies of our past,' Mr. Higgs said." If, as President Bush implored the country, we must not let the September 11 terrorist attacks change our way of life, we must resist the impulses that have enlarged the federal government -- thus reducing American's political and economic liberties -- every time the nation has seen a national crisis. Fortunately, as pop psychologists tell us, recognizing a problem is half the challenge in correcting it. Unfortunately, special interest groups will work to keep Americans in denial. See "Reconciling the Demands of War and the Market," by Richard W. Stevenson (NEW YORK TIMES, 10/28/01), at http://www.nytimes.com/2001/10/28/national/28ECON.html?ex=1005313185&;ei=1&en=0a21168260e411b1. For an excellent case study in the growth of government, see "War and Leviathan in Twentieth-Century America: Conscription as the Keystone," by Robert Higgs, at http://www.independent.org/tii/lighthouse/LHLink3-43-6.html. ------------------------------------------------------------- THE LIGHTHOUSE, edited by Carl P. Close, 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/LHLink3-43-7.html or contact Mr. Rod Martin by phone at 510-632-1366 x114, fax to 510-568-6040, email to <RMartin@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/LHLink3-43-8.html. ------------------------------------------------------------- For information on books and other publications from The Independent Institute, see http://www.independent.org/tii/lighthouse/LHLink3-43-9.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." ------------------------------------------------------------- THE LIGHTHOUSE ISSN 1526-173X Copyright ? 2001 The Independent Institute 100 Swan Way Oakland, CA 94621-1428 (510) 632-1366 phone (510) 568-6040 fax
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