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The Lighthouse


The Lighthouse is the weekly email newsletter of the Independent Institute.
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Volume 17, Issue 5: February 3, 2015

  1. Healthcare Reform Should Target Bad Incentives
  2. Americans Ignore Real Threats at Their Peril
  3. Why the Pope Needs Public Choice
  4. The New Greek Tragedy
  5. New Blog Posts
  6. Selected News Alerts



1) Healthcare Reform Should Target Bad Incentives

Almost all Republicans in Congress say they want to repeal and replace Obamacare, but few agree on what to replace it with. Why? According to Independent Institute Senior Fellow John C. Goodman, it’s because “they think about health reform in the wrong way.” In a recent piece for Forbes, Goodman explains the right way.

Many politicians—Democrats and Republicans alike—think the most serious problems in American healthcare originate in the private sector. In contrast, Goodman believes most problems originate in the public sector—especially in the bad incentives created by misguided government policies. These bad incentives encourage people to drop private coverage when the government expands the public safety net and relegate people into non-portable coverage that ends when they switch jobs.

“When people act on these perverse incentives, they shift costs to others in the form of higher taxes, higher premiums, higher medical bills, lower wages, etc.,” Goodman writes. “How can we correct all of that? By taking a do-no-harm approach—making sure that government is not causing the very problems we want to solve.... A do-no-harm approach creates a level playing field—free of government distortions—upon which the private sector is free to make choices and solve problems.” Goodman’s op-ed elaborates on this approach. Highly recommended.

Why Don’t Republicans Have an Alternative to Obamacare?, by John C. Goodman (Forbes, 1/19/15)

Priceless: Curing the Healthcare Crisis, by John C. Goodman

Healthcare Solutions for Post-Obamacare America, by John C. Goodman

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2) Americans Ignore Real Threats at Their Peril

Americans worry too much about low-probability risks to their security and well-being, and don’t worry enough about government encroachments that pose a real threat. Case in point: While we were focusing on the brutal terrorist killings that struck Paris last month, the vast majority of us missed a news story revealing the U.S. government’s unlawful collection of Americans’ phone records—in bulk and without probable cause of criminal wrongdoing—for purposes other than national security. The culprit? The U.S. Drug Enforcement Administration.

Although Americans should be outraged when politicians and bureaucrats violate the Constitution for the sake of “national security,” one can make a reasonable case that violations for the sake of domestic policy are often worse. In the current example, the Drug Enforcement Administration allowed its agents to access bulk phone records if they had “reasonable actionable suspicion”—not “probable cause”—that a phone number was related to an active federal criminal investigation. Such a program, as Independent Institute Senior Fellow Ivan Eland explains in his column for the Huffington Post, is illegal because the U.S. Constitution doesn’t authorize general warrants, only specific warrants that identify a particular suspect and crime. That’s because the Founders believed that British authorities prior to the American Revolution had abused their authority by using general warrants to go on “fishing expeditions” that harassed innocent colonists.

Hopefully, the Drug Enforcement Administration’s unconstitutional program has been discontinued. “A spokesman for the Justice Department claimed that the DEA’s data collection program was suspended in September 2013, has been terminated, and the data deleted,” Eland writes. “If true, that is rare good news in the field of civil liberties preservation; however, citizens should still be alert for other unconstitutional or illegal government behavior originating from bureaucratic incentives to exploit people’s excessive fear of being killed by the rare terrorist attack.”

A Second, Even More Unjustifiable Episode of Government Collection of Phone Records, by Ivan Eland (The Huffington Post, 1/19/15)

Audio: Ivan Eland on the DEA’s New Database (Doug Stephan’s Good Day, 1/21/15)

Recarving Rushmore: Ranking the Presidents on Peace, Prosperity, and Liberty (Updated Edition), by Ivan Eland

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3) Why the Pope Needs Public Choice

Last December, Pope Francis gave his diagnosis of the ills that plague the upper echelons of the Roman Catholic Church. If he wishes to making last reforms, His Holiness would do well to study a discipline that specializes in the pathologies of non-market organizations: public choice. Such study would help him to better understand the incentives and constraints of the church hierarchy—an essential first step if he is to make lasting improvements, according to Independent Institute Research Fellow William F. Shughart II and Utah State University Visiting Assistant Professor of Economics and Finance Jayme Lemke.

Here’s an excerpt from Lemke and Shughart’s analysis in National Review: “Pope Francis is the product of a South American political climate affected by ‘liberation theology.’ He is happy to put authority in bureaucratic hands to further political causes, including efforts against ‘climate change’ and ‘income inequality,’ that are dear to the Left. If he is serious about curial reform, however, as he gives every indication of being, he might want to peruse more of the public-choice literature on bureaucracy and on the political process generally.”

Familiarity with public-choice theory would allow Pope Francis to recast his diagnoses in ways more amenable to treatment. For example, in his December 22 notice to the Roman curia (the Catholic Church’s governing body), he failed to identify the role that institutional self-interest plays in shaping the behavior he wishes to change. He also failed to recognize that what he calls “spiritual Alzheimer’s disease”—forgetting the Church’s core tasks—stems from mission creep, what Lemke and Shughart call “a predictable side effect of the survival instinct.” Seen in this light, the pontiff’s message, they write, “is less an indictment of the curia than a lesson in the dangers and limitations of bureaucratic organization.”

The Pope Should Read Public-Choice Theory, by Jayme Lemke and William F. Shughart II (National Review, 1/24/15)

Taxing Choice: The Predatory Politics of Fiscal Discrimination, edited by William F. Shughart II

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4) The New Greek Tragedy

Greece just elected a left-wing prime minister—Alex Tsipras—who is threatening to pull his country out of the euro unless the European Union and International Monetary Fund drop demands that he carry out draconian austerity measures. Tsipras wants lower interest rates on Greek debt and a longer repayment schedule. The greatest tragedy in all of this, according to Independent Institute Senior Fellow Alvaro Vargas Llosa, is that Greek voters now equate austerity with free-market capitalism and don’t appreciate that their leaders—and ultimately their dysfunctional political culture—bear the brunt of the blame.

The troubles between Greece and the European Union are deeply rooted in Greece’s failure to reform its welfare state—a failure that helped drive down GDP by 25 percent in five years and push up unemployment to 25 percent. The standoff could have far-reaching consequences, Vargas Llosa explains in Investor’s Business Daily. If Greece decides to go along with its creditors by increasing taxes and repaying 7 billion euros in debt it is supposed to pay off this summer, this would further strain the Greek economy and help prevent it from recovering anytime soon. But if the European Union caves in to Tsipras’s demands, this could encourage the voters of Portugal and Ireland to follow Greece’s lead and stage revolts themselves.

Writes Vargas Llosa: “No one in the EU bureaucracy foresaw this dilemma when they came up with these rescue packages, which may have bought some time but haven’t solved the problem that Europe’s economies face: the need to reform the welfare state radically and liberate European producers and consumers from high taxes, anti-competitive regulations and other destructive practices.”

Lack of Reform, Not Austerity, Doomed Greek Economy, by Alvaro Vargas Llosa (Investor’s Business Daily, 1/30/2015)

Global Crossings: Immigration, Civilization, and America, by Alvaro Vargas Llosa

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5) New Blog Posts

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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6) Selected News Alerts

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  • MyGovCost.org
  • FDAReview.org
  • OnPower.org
  • elindependent.org