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The Lighthouse


The Lighthouse is the weekly email newsletter of the Independent Institute.
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Volume 19, Issue 34: August 22, 2017

  1. Yeonmi Park’s Hope for North Korea
  2. Paul Ryan’s Tax Plan
  3. Oregon and the Drug War
  4. Tim Draper and the Future of Entrepreneurship and Liberty
  5. Independent Updates


1) Yeonmi Park’s Hope for North Korea

Yeonmi Park, who will be honored at Independent Institute’s 30th anniversary Gala for the Future of Liberty on September 22 in San Francisco, was 13 years old when she and her mother escaped North Korea. Although few things in this underdeveloped communist dictatorship have changed since then—now it’s Kim Jung-un who rules the country with an iron fist, instead of his father or grandfather—one aspect of the life that Park saw there continues to give her hope: widespread participation in the black market.

An estimated four out of ten North Koreans engage in black market commerce. This is encouraging not only because it shows that ordinary people are willing to risk serious penalties to acquire goods that make their lives a little more tolerable, but also because it means that many of Park’s compatriots see the standard of living available to those who live beyond the confines of what many outsiders call “the hermit kingdom”—through watching films and videos acquired on the black market.

“My generation of millennials, called the Jangmadang generation, or black market generation, has grown up with these private markets, giving us at least a small sense of personal control and self-reliance,” Park writes in an op-ed for the East Bay Times. “By presenting an alternative to the regime’s propaganda about life’s possibilities, the underground economy is showing North Koreans that a different future is attainable. That, I learned, is what the market—whether the free market of the black market—can do.”

How the Black Market Helped Me, and Others, Escape North Korea, by Yeonmi Park (The East Bay Times, 8/15/17)

A Gala for the Future of Liberty, September 22, Ritz-Carlton San Francisco

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2) Paul Ryan’s Tax Plan

It’s been more than 30 years since President Ronald Reagan signed the largest tax-simplification reform in U.S. history. Since then, the page count of federal tax law—including Treasury regulations, IRS documents, and related court decisions—has nearly tripled to about 70,000 pages. The Ryan-Brady tax proposal, also known as “The Better Way Tax Plan,” would simplify the tax code—but would it live up to the promise of boosting economic growth without ballooning the deficit? The answer is yes, according to Independent Institute Senior Fellow John C. Goodman. (For more on tax reform, please see Independent Institute Research Fellow Randall Holcombe’s excellent five-part series in The Beacon, beginning with Part 1 on the case for expanding the Individual Retirement Account.)

In a lengthy piece at Forbes, Goodman and Boston University economics professor Laurence Kotlikoff report the findings of two major studies of the Ryan-Brady plan. Here are a few: “[1] There is no give away to the rich: the distribution of resources under the reform is ‘almost as fair’ as the current system,” Goodman and Kotlikoff write. “[2] There are no huge deficits: in fact, the plan gains revenue for the government. [3] There is a boost in wages: about $4,000 in additional wage income in the near term for the average household and larger gains in future periods.”

Interestingly, the estimated wage increases come from increases of capital flowing into the United States from abroad. This capital, which would fund new private investment, would boost wages by raising labor productivity. “For a $40,000-a-year worker, this means a boost in pay of more than $2,000 a year—rising to almost $3,000 by 2040,” Goodman and Kotlikoff write. Low-skilled workers would see wages rise 5.7 percent, increasing to 7.9 percent by 2040. Workers earning $80,000 per year would see yearly pay rise by $5,000, increasing another $2,000 by 2040—or by $3,000 if corporate income taxes were abolished. Without tax reform, however, global capital would likely continue flowing to lower-tax countries such as Canada, Ireland, Britain, and Denmark.

The Better Way Tax Plan, by John C. Goodman and Laurence Kotlikoff (Forbes, 8/10/17)

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3) Oregon and the Drug War

Last week, Oregon governor Kate Brown signed what is arguably one of the boldest pro-liberty state measures in recent U.S. history, a bill that scales back the so-called war on drugs. Effective August 15, the possession of cocaine, heroin, methamphetamine, and other drugs for personal use has been downgraded from a felony to a misdemeanor. The change was supported by law enforcement, according to US News & World Report. Contrary to its opponents, it’s a pro-health measure that will lead to fewer overdoses resulting from unscrupulous dealers cutting the drugs with even more dangerous chemicals, according to Independent Institute Senior Fellow Benjamin Powell.

For evidence that Oregon will not increase the rate of fatal overdoses, Powell offers the example of Portugal, which decriminalized the possession of a 10-day supply of drugs in 2000. “The number of overall drug users [in Portugal] fell during the first fifteen years of decriminalization and ebbs and flows with European trends now,” he writes in an op-ed for The Hill. “Meanwhile, drug overdose rates have fallen, and Portugal’s overall drug-induced death rate is more than five times lower than the European Union average.”

It’s difficult to tell whether or not other states will follow Oregon’s lead, especially given U.S. Attorney General Jeff Sessions’s call for revitalizing the drug war. But if they decriminalize hard drugs, Powell believes this would likely reduce drug fatalities because “illegality makes the potency of the drugs less predictable,” he writes. “When drugs are illegal, there is, by definition, no legal supply chain that can be held accountable for the drug’s quality.”

States Should Follow Oregon’s Lead and Decriminalize Hard Drugs, by Benjamin Powell (The Hill, 8/7/17)

Drug War Crimes: The Consequences of Prohibition, by Jeffrey A. Miron

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4) Tim Draper and the Future of Entrepreneurship and Liberty

A free and prosperous society depends on risk-taking entrepreneurs alert to new opportunities for meeting the needs of potential customers. Yet many entrepreneurs with young startups lack the resources for turning their innovative ideas into products that get market traction and turn a profit. Enter the venture capitalist, who helps commercialize the entrepreneur’s vision by providing early-stage capital—and frequently no small measure of critical intangibles such as industry connections, domain expertise, and savvy business judgement. For Silicon Valley venture capitalist Tim Draper, who’s been helping entrepreneurs since 1985, this value-added includes sharing actionable insights about the perils of government run amuck.

This may be why he’s such a great fan with Love Gov: From First Date to Mandate, Independent Institute’s award-winning video series, which he says helps Millennials to recognize government bureaucracy as a threat—and to work hard to overcome it. Love Gov, he told us last year, is “the first real public outreach attempted by any think tank that has been successful.”

Along with his contributions to high-tech startups, Tim Draper is also a dedicated philanthropist and the founder of the entrepreneurship-education organizations BizWorld.org and Draper University of Heroes. We will be honoring him at Independent Institute’s 30th Anniversary Gala for the Future of Liberty, along with North Korean human-rights activist Yeonmi Park and Nobel Laureate economist Vernon L. Smith. With political satirist P. J. O’Rourke as our Master of Ceremonies—author of an excellent new op-ed on predicting the future in the San Francisco Chronicle—you can expect plenty of wit as well as wisdom. Please join us for a memorable celebration!

A Gala for the Future of Liberty, September 22, Ritz-Carlton San Francisco

Video Series: Love Gov: From First Date to Mandate

Predicting the Economic Future: Karl Marx’s Crackpot Predictions in a New Light, by P. J. O’Rourke (San Francisco Chronicle, 8/16/17)

Entrepreneurial Economics: Bright Ideas from the Dismal Science, edited by Alexander T. Tabarrok

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5) Independent Updates

The Beacon: New Blog Posts

MyGovCost: New Blog Posts

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