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The Lighthouse

The Lighthouse is the weekly email newsletter of the Independent Institute.
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Volume 20, Issue 23: June 6, 2018

  1. How America Can Close the Gap in K-12 Education
  2. Plastic Packaging Bans Can Harm the Environment
  3. Making Sense of High-Deductible Health Insurance
  4. Solving the Housing Crisis Requires a New Mindset
  5. New Blog Posts


1) How America Can Close the Gap in K-12 Education

America is a leader in many types of innovation but a laggard in K-12 education. Some of today’s most important educational breakthroughs, it turns out, are taking place in the developing world. In fact, perhaps the most promising educational innovation is gaining traction in some of the world’s poorest countries, explain Independent Institute Senior Fellow Lawrence J. McQuillan and Policy Researcher Catherine Straus in an op-ed for The Hill.

Years ago, Newcastle University educational researcher Sugata Mitra set out to examine how children with access to few teachers could benefit from educational technology. Mitra put computers with internet access in rural villages in places as far afield as India, East Asia, South America, and Africa. The results, explain McQuillan and Straus, were startling: Mitra found that kids were becoming highly proficient at teaching themselves and each other. Fellow Newcastle professor James Tooley followed the same path and co-founded internet-enabled education in places like Ghana, where his OMEGA schools cost parents the local equivalent of about 65 cents per day.

In the United States, by contrast, government red-tape and lobbying by teachers’ unions keep the Mitra/Tooley approach from gaining much traction. Acton Academy, a private-school franchise, has adopted a similar model on a small scale—albeit with great success. For education entrepreneurs to implement this innovation on a grand scale, however, will require significant reforms. “A boom of low-cost independent schools could be paid for through education savings accounts (ESAs), privately funded tax-credit scholarships, 529 Savings Plans and tax-funded vouchers,” McQuillan and Straus write. “Entrepreneurs could revolutionize U.S. education by rapidly scaling up this approach.”

Developing Countries Lead in Education Innovation, by Lawrence J. McQuillan and Catherine Straus (The Hill, 5/23/18)

Failure: The Federal Misedukation of America’s Children, by Vicki E. Alger

Customized Learning for California: Helping K–12 Students Thrive with Education Savings Accounts, by Vicki E. Alger (1/25/18)

Video: Failure: The Federal ‘Misedukation’ of America’s Children, featuring Vicki E. Alger (8/30/16)

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2) Plastic Packaging Bans Can Harm the Environment

As cities across America evaluate bans on polystyrene packaging and other plastic products in the hope of reducing environmental impacts, a new report from the Independent Institute finds that plastic prohibition may cause more ecological and economic trouble than it’s worth. Instead of discouraging innovation with costly and detrimental bans and restrictions, a better way to deal with the plastic-waste problem is to enable and encourage innovation in the recycling of plastic debris, according to Plastic Pollution: Bans vs. Recycling Solutions, by Independent Institute Policy Fellows Katie Colton, Camille Harmer, Brian Isom, and Senior Fellow William F. Shughart II.

Plastic bans come with heavy economic costs: New York City’s ban on food-service foam products could eliminate 2,000 jobs and $400 million in economic activity. In California, an estimated 8,000 jobs would disappear. Small businesses operating on thin margins are particularly harmed by plastic bans. More surprising is that so-called green alternatives to polystyrene products often create more waste. Compared to a 16 oz. Styrofoam cup, one paper cup with a corrugated sleeve yields more emissions from petroleum, steam electric power, cooling water, wastewater, and landfill mass. Also, biodegradable plastics are not yet a feasible alternative to polystyrene. Nationwide, there are only 113 recycling plants for composting biodegradable plastics, and only about 28 accept municipal food scraps. In California, half of all major cities have access to Styrofoam recycling, but only 15 percent have access to recycling programs for alternatives.

Moreover, bans can stifle innovation by reducing opportunities for recycling. Titus MRF Services and Agilyx are two companies innovating in the waste recycling market. They might not have developed new technologies without the incentives created by recycling opportunities. The bottom line: Market incentives and strong private-property rights are necessary stepping stones on the path of sustainable, cost-effective environmental protection. “The main lesson is that poor countries and those without well-developed market institutions (often the same) are the world’s biggest plastic polluters,” the report concludes.

Plastic Pollution: Bans vs. Recycling Solutions, by Katie Colton, Camille Harmer, Brian Isom, and William F. Shughart II (Independent Institute Briefing, 5/14/18)

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3) Making Sense of High-Deductible Health Insurance

Healthcare policy has long been one of the most complex major issues facing the American people. Why don’t doctors and hospitals post their prices in plain sight for all to see before patients make healthcare decisions? What accounts for how insurance companies establish premiums and deductibles? Why doesn’t the world’s richest nation deliver the world’s best healthcare at the lowest price? Independent Institute Senior Fellow John C. Goodman has spent more than three decades answering these questions for a confused public—and for equally confused government policymakers.

The fact that we continue to ask such “imponderables” is a testament to the unintended consequences of the third-party payment system, a by-product of numerous government regulations going back to wage and price controls during World War II. In a recent column at Forbes, Goodman tries to make sense for readers the myriad reasons that high-deductible insurance plans exist. For the sake of clarity, the question can be simplified: Why do about half of people with employer-provided coverage have deductibles of at least $1,000, whereas employees of fast-food chains often face a $7,150 deductible? The reasons are more complicated than you might think.

The first temptation is to think that high-deductibles are always undesirable. But as Goodman notes, a high deductible generally implies a lower premium, enabling the consumer to save more money at the risk of a costly (but perhaps less likely) medical incident. In such cases, the high deductible makes sense in the consumer’s eyes. Things are seldom so cut and dry, however. In the age of Obamacare, insurers can’t turn down anyone for health reasons and can’t set premiums according to a large array of risk factors. “This creates a perverse incentive to structure the plan so that it appeals more to the healthy and less to the sick,” Goodman writes. “By choosing narrow networks and high deductibles the insurer can kill two birds with one stone: with lower costs (and therefore lower premiums), they can make their product appealing to the healthy and unappealing to the sick.” There’s more to high-deductible plans than this, of course. Anyone interested in nuances of the good, the bad, and the ugly will benefit greatly from a close look at Goodman’s column.

High-Deductible Health Insurance: The Good, the Bad and the Ugly, by John C. Goodman (Forbes, 5/11/18)

A Better Choice: Healthcare Solutions for America, by John C. Goodman

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

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4) Solving the Housing Crisis Requires a New Mindset

For many American families, the high cost of housing is the single greatest obstacle on the path to achieving economic security. For renters and would-be homebuyers in cities such as San Francisco, Boston, and New York, the anxiety caused by high housing prices can be so extreme that their friends and relatives in other parts of the United States can scarcely imagine the toll it takes. The underlying cause of the housing problem, however, should be easy to grasp.

“Housing is expensive for two basic reasons: high demand and low supply,” writes Independent Institute Research Fellow Art Carden in a column at Forbes. “There’s a solution, though: get rid of some of the rules making it so hard for people to supply new housing.”

Land-use restrictions are largely responsible for housing demand outstripping housing supply on the West Coast and North East. (These restrictions are also a reason for the population shift to less regulated regions in America’s Sunbelt.) Along with land-use deregulation, Carden calls for two changes in attitudes. One is for people to stop obsessing about people’s choices regarding their living situations: Don’t allow your moral judgments about housing density, for example, to cloud your respect for people’s right to choose where they live. Another change is to cast off the NIMBY mindset: Don’t use laws and regulations to restrict what property owners can do with the plot of land behind your house. “My backyard ends at the property line,” Carden writes. “If I want a say in what ends up on that lot, I should buy the lot.”

Cut the Red Tape to Get More Affordable Housing, by Art Carden (Forbes, 5/12/18)

Housing America: Building Out of a Crisis, edited by Randall G. Holcombe and Benjamin Powell

Video: Love Gov, Episode 4: House Poor

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5) New Blog Posts

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