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The Lighthouse is the weekly email newsletter of the Independent Institute.
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Volume 7, Issue 44: October 31, 2005

  1. The Libby Indictment
  2. Greenspan To Be Replaced -- But Why Not the Fed?
  3. Private Developers and the Post-Katrina Recovery
  4. Public Roads and Eminent Domain

1) The Libby Indictment

Independent Institute Senior Fellows Robert Higgs and Ivan Eland weigh in on the indictment of Lewis Libby in the CIA leak case.

First Higgs: "The charges against him [Libby] are not trivial -- if convicted on all counts, he can be sentenced to 30 years in prison and fined $1.25 million -- yet in view of the much greater crimes in which he has long played such an integral part, the present charges are the moral equivalent of a parking ticket."

These "greater crimes," Higgs argues, include the Bush administration's violation of the U.S. Constitution, which requires the executive branch to honor the treaties to which it is a signatory. "One such treaty is the Charter of the United Nations, signed by representatives of the United States and ratified by the Senate in 1945." The Charter "explicitly condemns preventive wars, which the Bush administration has made the centerpiece of its national security strategy."

Despite the administration's crimes, Higgs writes, "all we have to show for the legal process against top U.S. officials is an indictment for one apparatchik's workaday dirty tricks -- the sort of thing countless government flunkies do every day of the week."

Ivan Eland, director of the Independent Institute's Center on Peace & Liberty, notes that last December, President Bush awarded the Medal of Freedom to Gen. Tommy Franks, George Tenet, and Paul Bremer, although each of the three had gone out of his way to avoid utilizing expertise that might have helped tame the chaos of post-war Iraq.

Eland writes: "Giving medals to Franks, Tenet, and Bremer was the ultimate chutzpah in the face of an impending disaster in Iraq... The administration faces a comparable calamity in the Plame affair.... Thus, don't be shocked if this administration -- which specializes in make-believe -- thinks that medals for Libby, Rove, and Cheney may be a smart 'in-your-face' strategy to get out of this Plame thicket once-and-for-all."

See "Our Greatest Criminals Are Never Charged With Their Greatest Crimes," by Robert Higgs (10/31/05)
http://www.independent.org/newsroom/article.asp?id=1597

Also see, "Medals for Libby, Rove, and Cheney?" by Ivan Eland (10/31/05)
http://www.independent.org/newsroom/article.asp?id=1600
SPANISH TRANSLATION:
"¿Medallas para Libby, Rove, y Cheney?"
http://www.elindependent.org/articulos/article.asp?id=1600

RESURGENCE OF THE WARFARE STATE: The Crisis since 9/11, by Robert Higgs
http://www.independent.org/store/book_detail.asp?bookID=60

To purchase AGAINST LEVIATHAN: Government Power and a Free Society, by Robert Higgs, see
http://www.independent.org/store/book_detail.asp?bookID=53

To purchase THE EMPIRE HAS NO CLOTHES: U.S. Foreign Policy Exposed, by Ivan Eland, see
http://www.independent.org/store/book_detail.asp?bookID=54

To purchase PUTTING "DEFENSE" BACK IN U.S. DEFENSE POLICY, by Ivan Eland, see
http://www.independent.org/store/book_detail.asp?bookID=19

Center on Peace & Liberty (Ivan Eland, director)
http://www.independent.org/research/copal/

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2) Greenspan To Be Replaced -- But Why Not the Fed?

Although the media devoted much attention to President Bush's nomination of Ben Bernanke to replace Alan Greenspan to head the Federal Reserve System, no one in the mainstream press has asked the more fundamental question: Can an economy that depends so much on the choices of one person -- the Chairman of the Fed -- remain stable in the long run?

Independent Institute Research Fellow Benjamin Powell addresses this issue in his latest op-ed, "Bush Names a New Federal Reserve Chairman -- But Do We Really Need the Fed?"

Powell argues that a fiat money standard managed by a central bank is too vulnerable to the public's expectations about the top central banker's decisions. Despite Greenspan's relative popularity in the financial community, the price level has increased 71 percent during his tenure, Powell notes.

"Although many take the existing monetary regime for granted, other arrangements that don’t rely on something as shaky as expectations have served us well in the past and may again in the future," writes Powell.

"Nobel Laureate F.A. Hayek argued in his 1976 monograph, THE DENATIONALIZATION OF MONEY, that private firms should be allowed to compete with government money and that the competition would provide a more stable and sound currency. With globalization, technological change, and firms like Paypal and E-gold we may eventually get there. In the meantime, as the Fed changes personalities, it is important to keep in mind that our modern monetary system, based entirely on expectations, has existed for only a brief time and its stability should be monitored cautiously."

See "Bush Names a New Federal Reserve Chairman -- But Do We Really Need the Fed?" by Benjamin Powell (10/26/05)
http://www.independent.org/newsroom/article.asp?id=1594
SPANISH TRANSLATION:
"Bush Nombra un Nuevo Presidente de la Reserva Federal -- ¿Pero en Verdad Necesitamos a la Fed?"
http://www.elindependent.org/articulos/article.asp?id=1594

Also see:

"Did Greenspan Deserve Support for Another Term?" by Joseph T. Salerno (THE INDEPENDENT REVIEW, Summer 2004)
http://www.independent.org/publications/tir/article.asp?issueID=38&articleID=218

"Virtual Money, Privacy, and the Internet," featuring Peter Thiel and Richard Rahn (10/20/99)
http://www.independent.org/events/detail.asp?eventID=37

MONEY AND THE NATION STATE: The Financial Revolution, Government, and the World Monetary System, ed. by Kevin Down and Richard Timberlake
http://www.independent.org/store/book_detail.asp?bookID=45

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3) Private Developers and the Post-Katrina Recovery

How can market incentives be utilized best to help the Gulf Coast recover from Hurricane Katrina? One way is for government to allow private developers to create privately governed residential communities, often called common interest developments (CIDs), explain Independent Institute Research Fellows Jeffrey Pompe and James Rinehart.

Drawing on their chapter in the new book, RE-THINKING GREEN: Alternatives to Environmental Bureaucracy, Pompe and Rinehart explain that CIDs "use explicit contracts among residents to select the kinds of policies and amenities that local governments determine."

CIDs are already being used successfully to enhance environmental amenities, such as the sensitive shorelines of South Carolina's barrier islands. Because the islands' CID residents see a direct connection between the costs of environmental protection and the resulting benefits, they strongly favor policies that will protect the environment. "For example, covenants on many of these barrier islands require residents to build houses farther back from the beaches than state law requires, allowing sand dunes to accrete sand, which offers greater protection from hurricanes."

Also, CIDs can avoid the moral-hazard problem that accompanies government-subsidized flood insurance -- a major problem that must be confronted if post-Katrina development is to avoid devastation of future hurricanes, as Research Fellow William F. Shughart explained in a recent op-ed.

Pompe and Rinehart continue: "Our experience with CIDs shows that developers, by owning or controlling tracks of land that make up the community, are able to package environmental amenities along with other location assets and recover their costs through higher lot prices. Property buyers and sellers engage voluntarily in transactions that provide for environmental goods such as flood control, green space, and wide beaches." Thus, CIDs offer an important model for post-Katrina recovery.

See "How Private Development Can Help the Post-Katrina Recovery," by Jeffrey Pompe and James Rinehart (10/18/05)
http://www.independent.org/newsroom/article.asp?id=1588
SPANISH TRANSLATION:
¿Cómo la Urbanización Privada Puede Ayudar en la Recuperación del Daño Causado por el Huracán Katrina?"
http://www.elindependent.org/articulos/article.asp?id=1588

Also see, "Hurricanes Kill; So Can Hurricane Relief Efforts," by William F. Shughart (10/10/05)
http://www.independent.org/newsroom/article.asp?id=1585
SPANISH TRANSLATION:
"Los Huracanes Matan, Al Igual que Pueden Hacerlo los Esfuerzos Asistenciales ante un Huracán"
http://www.elindependent.org/articulos/article.asp?id=1585

RE-THINKING GREEN: Alternatives to Environmental Bureaucracy, ed. by Robert Higgs and Carl P. Close
http://www.independent.org/store/book_detail.asp?bookID=58

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4) Public Roads and Eminent Domain

According to the conventional wisdom, road transportation would be highly inefficient without the government's power of eminent domain because property owners could refuse to sell their property at the government's asking price. According to Senior Fellow Bruce L. Benson, however, there are strong grounds for thinking that private, for-profit road companies would have fewer problems with holdouts -- and few problems as severe as that of government failure in road transportation.

Benson presents his findings in the lead article of the fall issue of THE INDEPENDENT REVIEW, “The Mythology of Holdout as Justification for Eminent Domain and Public Provision of Roads,” which will also appear in the forthcoming Independent Institute book, STREET SMART: Competition, Entrepreneurship, and the Future of Roads, edited by Gabriel Roth.

"In this article, I examine this market-failure justification for public roads from three different perspectives and demonstrate that it is not valid," writes Benson.

First, Benson argues that even if eminent domain is necessary to obtain right-of-way properties, the government can purchase the land and then transfer it to private entities. The possibility of holdouts therefore does not mean that the government must own, build, or operate roads.

Second, Benson argues that the holdout problem is not as severe for private organizations as it is for government agencies. Private entities typically act more quickly than government and can pay more for a property than its assessed value, and these differences greatly weaken the rationale for eminent domain.

Third, Benson argues that when governments invoke eminent domain, the problem of government failure often follows. For example, political pressures have led to the relaxation of the Fifth Amendment's public-use requirement and also the standard for “just” compensation. Governments are biased to systematically undervalue the properties they can acquire through eminent domain, Benson concludes.

See "The Mythology of Holdout as Justification for Eminent Domain and Public Provision of Roads," by Bruce L. Benson (THE INDEPENDENT REVIEW, Fall 2005)
http://www.independent.org/publications/tir/article.asp?issueID=43&articleID=544

For more on transportation, see
http://www.independent.org/issues/search.asp?subID=45

To subscribe to THE INDEPENDENT REVIEW, see
http://www.independent.org/store/tir/subscriptions.asp

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