The Lighthouse^®

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The Lighthouse^® is the weekly email newsletter of the Independent Institute.
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Volume 17, Issue 51: December 22, 2015

1. Santa Claus and the Price System
2. Ban on Muslim Immigration Wouldn’t Stop Terrorism
3. Budget Deal to Raise U.S. Debt by $1.2 Trillion
4. Pacific Trade Deal Undercuts Biologic Patents
5. New Blog Posts
6. Selected News Alerts

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Leave it to Robert P. Murphy to explain why Santa Claus needs prices. Murphy, the author of Choice: Cooperation, Enterprise, and Human Action—a book that makes Ludwig von Mises’s masterwork in economics and social philosophy accessible to general readers—has a gift for illustrating important economic principles with clever examples. In his latest piece for The Freeman, Murphy tells us why Santa, as hardworking and conscientious a worker as any that ever lived, would do an even better job of delivering toys to all the world’s good girls and boys if he were to use market prices to help guide his decision-making.

Consider the dilemma Santa Claus faces: “How does Santa decide which combination of presents to produce in a given year?” Murphy writes. “As he’s climbing into his sleigh on any particular Christmas Eve, Santa’s magical bag could contain a mind-boggling number of possible combinations of gifts. At the start of the season, how does Santa decide what orders to give his elves to fill that bag?” In essence, it’s the same problem facing a benevolent and otherwise well-informed dictator trying to centrally plan the economy (granted, a dictator with such traits is as fictitious as Saint Nick).

And the answer, as Ludwig von Mises explained in 1920, is that central planners lack a rational system for making economic decisions. That’s because only market prices allow individuals to perform economic calculation—that is, to weigh alternative courses of action using a measure of comparison that conveys the relevant trade-offs and scarcities. “To be sure, Christmas movies wouldn’t be as much fun if they depicted St. Nick as a CEO trying to please shareholders rather than as a jolly old man trying to please children,” Murphy continues. “But it’s important to recognize why real-world factories should not be run like Santa’s workshop.”

Santa Needs Prices, by Robert P. Murphy (The Freeman, 12/15/15)

Choice: Cooperation, Enterprise, and Human Action, by Robert P. Murphy

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Donald Trump’s proposal to temporarily ban Muslims from entering the United States is unconstitutional and a false solution to the problem of terrorism, according to Independent Institute Senior Fellow Ivan Eland. In his latest piece for the Huffington Post, Eland also castigates the New York businessman and presidential candidate for fanning the same sort of views that prompted President Franklin D. Roosevelt to order the internment of Japanese-Americans during the Second World War.

“Legalities aside, Trump’s proposal is moronic, because banning 1.6 billion Muslims to stop a few terrorists, who just happen to be Muslims, doesn’t solve the problem,” Eland writes. Moreover, the idea overlooks what scholars have long argued is one of the most salient features of Islamist terrorism directed against the West: that it is mainly retaliatory in nature.

To stop Islamist terrorism directed at the United States and its allies, therefore, Western governments should reduce their footprints in the Middle East rather than continue on a meddlesome path, Eland argues. (Incidentally, the “no Western boots on the ground” stance, which Eland has long advocated, has gained traction among the GOP presidential hopefuls, as least in relation to combatting ISIS.) “Retaliatory Islamist terrorist attacks will end at home,” he continues, “if the U.S. and allied governments quit needlessly poking the hornet’s nest in the Middle East, which citizens should pressure their governments to do.”

Trump’s Ban on Muslims Is Unconstitutional and Obscures Real Solution, by Ivan Eland (The Huffington Post, 12/14/15)

Recarving Rushmore: Ranking the Presidents on Peace, Prosperity, and Liberty, by Ivan Eland

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

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On Friday, President Obama signed the recent congressional budget deal into law. All told, it is expected to push the federal government $1.2 trillion deeper in debt over ten years. In a recent piece at MyGovCost, Independent Institute Research Fellow Craig Eyermann examines the tax and spending choices most responsible for the debt surge.

The biggest portion of the spending component, he explains, is related to Medicare—namely, policies designed to insulate enrollees from a major spike in premiums for Part B coverage. Without the new policies, about 14 percent of enrollees would have seen premiums rise as much as 52 percent next year. Thus, the administration and much of Congress seem more intent on hiding the harmful effects of federal intervention in the medical insurance marketplace (or taking credit for a phony cure) than on solving the underlying problems.

Nevertheless, there may be one reason for fiscal optimism. The Congressional Budget Office has announced that, as Eyermann puts it, “repealing the Affordable Care Act would actually reduce the nation’s deficits by $474 billion over the next 10 years, in good part by reducing the kind of tax credit subsidies that the [Committee for a Responsible Federal Budget] seems to find so objectionable.”

Digging Deeper Into the New Budget Deal, by Craig Eyermann (MyGovCost News & Blog, 12/20/15)

MyGovCost’s Government Cost Calculator and Mobil App

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It took seven years of negotiation for the 12 parties to the Trans-Pacific Partnership to reach an agreement. The treaty was “settled” by U.S. trade representatives in October, but now it awaits approval from Congress. And that’s hardly a sure thing, according to Independent Institute Senior Fellow John R. Graham. Even some Republican lawmakers who championed giving the administration “fast-track” authority to negotiate trade deals with congressional input are balking at the Pacific trade treaty.

“The biggest obstacle to congressional approval,” he writes, “appears to be the deal’s inadequate protection of intellectual property in ‘biologic’ medicines.”

Biologics—so-called because they’re made using living cells instead of synthetic chemicals—require strong patent protections, according to Graham, due to the huge research and development costs needed to invent, test, and bring them to market. “Unfortunately, the administration’s failure to ensure adequate protection of biologic medicines has put the entire agreement at risk,” Graham concludes.

TPP Trade Agreement Undercuts Biologic Patents, by John R. Graham (Washington Examiner, 12/16/15)

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6) Selected News Alerts

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