The Lighthouse^®

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The Lighthouse^® is the weekly email newsletter of the Independent Institute.
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Volume 13, Issue 23: June 7, 2011

1. The Road to Better Highways
2. Joint Chiefs Showdown: Dempsey vs. “Hoss” Cartwright
3. Higgs Exposes the Great Society’s Economic Window Dressing
4. Louis XIV, the Electric Toothbrush, and Innovation
5. New Blog Posts

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What should the federal government do about the nation’s highways? On May 17, Independent Institute Research Fellow Gabriel Roth addressed this question at a hearing on financing twenty-first-century infrastructure convened by the U.S. Senate Committee on Finance. His recommendation: the federal government should fund no transportation infrastructure at all, and the federal Highway Trust Fund should be phased out.

Getting rid of federal financing would encourage state and private-sector funding, Roth argued. In addition to describing the current role of the private sector in road transportation—and why that role should be enlarged—he sketched a fascinating picture of what a high-tech private road system might look like. One alternative would use a payment system based on GPS technology.

Here’s how it might work: Every vehicle would contain a device—an in-vehicle unit—that would record the vehicle’s data about miles traveled, locations, and times, and the owner would submit some of that data (distances traveled, for example) to a billing agency. The biller would debit the vehicle owner’s account and credit the road owners’ accounts. This way the privacy of the vehicle owner would be guaranteed. Also, mobile inspectors could ensure that vehicles that use the new charging system carry the right equipment and that it operates property. The use of surveillance cameras could be minimized. “Payment could be made directly to road providers (in the public or private sectors) with no need to send them to the federal government,” Roth writes. Science fiction? Hardly. More than 900,000 vehicles in Germany and Slovakia have utilized a GPS-based payment system.

Testimony on Financing Infrastructure, by Gabriel Roth (Senate Committee on Finance, 5/17/11)

Let's Leave Our Roads to the States, by Diana Furchtgott-Roth (RealClearMarkets.com, 5/26/11)

Street Smart: Competition, Entrepreneurship, and the Future of Roads, edited by Gabriel Roth

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A battle was fought recently in Washington, DC, over who would become the next chairman of the Joint Chiefs of Staff—Dempsey or “Hoss” Cartwright? No, not the boxer and the television cowboy. The opponents were Army General Martin Dempsey and Marine Corps General James “Hoss” Cartwright. Dempsey—the favored pick of the military establishment—prevailed. The appointment says a lot about the leadership style of Barack Obama, according to Ivan Eland, director of the Independent Institute’s Center on Peace & Liberty.

Obama initially favored Cartwright for advocating a more targeted focus on al-Qaeda in Afghanistan and opposing a surge of 40,000 more troops favored by the military establishment. Obama caved in, but not without insisting publicly that Dempsey and the rest of the Joint Chiefs of Staff provide him with a “full range of options.” Obama will likely face continued pressure from the military establishment to prolong the U.S. military campaign in Afghanistan—pressure he will need to resist if he is to take maximum advantage of the successful targeting of Osama bin Laden, Eland argues.

“Obama needs to follow Franklin Delano Roosevelt’s example of not being bullied by his generals and avoid Abraham Lincoln’s bad example of being so intimidated by ‘experts,’” Eland writes. “He must not accept any military suggestion that a slow draw-down from Afghanistan—for example, the current date for a complete withdrawal is 2014—is the only viable option.”

Obama Should Follow FDR’s Example in Dealing with Generals, Not Lincoln’s, by Ivan Eland

The Empire Has No Clothes: U.S. Foreign Policy Exposed, by Ivan Eland

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

Partitioning for Peace: An Exit Strategy for Iraq, by Ivan Eland

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The 1960s saw a host of new federal regulations and social-welfare programs that were designed primarily to serve political objectives, but which were rationalized in theoretical terms that made them palatable to the economics profession. Thus mainstream economists gave their blessings to President Lyndon Johnson’s Great Society agenda, even though the economic theories alleged to support it had less to do with the real world than with the highly abstract general-equilibrium models of academic theorizing.

“Closely examined, such efforts represented a form of madness,” writes Robert Higgs, senior fellow at the Independent Institute, in a recent issue of The Freeman. “The assumptions that underlay these economic interpretations and applications...could be sustained only by wishful thinking.”

Among other flaws, the academic mainstream assumed that government bureaucrats would possess the knowledge and incentives needed to identify and remedy alleged market failures. “In short, the Great Society amounted to social engineering—or worse, to sheer, groping social experimentation—on a grand scale,” Higgs continues. “People ought not to have been surprised when its attainments failed to match its pretensions.”

Economics Analysis and the Great Society, by Robert Higgs (The Freeman, 5/26/11)

Ideological and Political Underpinnings of the Great Society, by Robert Higgs (The Freeman, 3/15/11)

Against Leviathan: Government Power and a Free Society, by Robert Higgs

Video: Robert Higgs on the Decline in Investment Spending (Freedom Watch, FoxNews.com, 3/10/11)

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A Sonicare electric toothbrush can be purchased at Walmart for $50—about half the price it sold for ten years ago. Had the price kept up with inflation, it would go for $120. Louis XIV couldn’t have purchased one at any price, but an American worker can now buy one for a little more than two hours of earnings at the average wage rate.

“This teaches us a few important lessons about the distribution of the capitalist bounty and the subtlety of economic growth,” writes Independent Institute Research Fellow Art Carden in a recent piece at Forbes.com. “The real winners from capitalist innovation are not the dynasties of yore. They’re ‘regular people’ like you and me. Capitalism has created wonders that were out of reach of the richest kings from ancient times to modernity and made them widely available.”

The benefits from cheaper, better electric toothbrushes are numerous—less dentistry and more money saved, higher productivity, less pain and a more pleasant life. The benefits from everyday innovations in consumer products are common, but we often overlook them because they take place in small, almost imperceptible increments. Drop by drop, over time, however, they fill up a “pool” of prosperity. It was precisely this market process that led “new dignity and esteem for simple acts of innovation that helped create modern economic growth,” Carden explains.

What Would Louis XIV Have Paid for a Sonicare?, by Art Carden (Forbes.com, 5/26/11)

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From The Beacon:

From MyGovCost News & Blog:

The Independent Institute’s Spanish-language blog is available here.

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