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The Lighthouse is the weekly email newsletter of the Independent Institute.
Subscribe now, or browse Back Issues.

Volume 13, Issue 33: August 16, 2011

  1. The Benefits and Hazards of Crisis Economics
  2. Taliban Reaps Benefits of U.S. Military Aid to Afghanistan
  3. ObamaCare and Job Growth
  4. A Gala for Liberty to Honor Lech Walesa, Mario Vargas Llosa, and Robert Higgs
  5. New Blog Posts

ALERT: Independent Institute Senior Fellow Benjamin Powell to appear on Fox Business Network’s Freedom Watch with Judge Napolitano, TUESDAY, August 16th, at 8:00 p.m. and 11:00 p.m. Eastern Time (5:00 p.m. and 8:00 p.m. Pacific Time).


1) The Benefits and Hazards of Crisis Economics

Coverage of the recent financial crisis has been rife with errors of fact and interpretation. Crisis Economics, by Nouriel Roubini and Stephen Mihm, belongs in a special category. The book weaves together underappreciated truths and common falsehoods and does so in ways that relatively few scholars can easily untangle, as Independent Institute Research Fellow and University of Georgia economics professor George Selgin explains in the summer 2011 issue of The Independent Review.

For this brief write-up, two examples will have to suffice. Roubini and Mihm rightly castigate the Federal Reserve and other central banks for monetary policies that contributed to the recent worldwide housing boom and bust, but they seriously underestimate the role of the Community Reinvestment Act and the government-sponsored enterprises in facilitating the surge of subprime mortgage loans in the United States, according to Selgin. In addition, their proposals to prevent future financial crises rest on errors about the repeal of the Glass-Steagall Act and other matters of economic history.

Crisis Economics bills itself as a “crash course” in the future of finance, but the book’s mixed qualities pose a challenge for readers who would rely on it to gain mastery of its subject matter—say, in order to ace a hypothetical test on the origins of the real-estate bust and the resulting financial turmoil. “Readers will find in this book a great deal that is well worth knowing about the causes of the great subprime debacle and about ways to prevent similar debacles in the future,” Selgin writes. “If they are looking to pass with flying colors, however, they had better cram with caution.”

They Stumble Who Run Fast: Roubini and Mihm’s Crisis Economics, by George Selgin (The Independent Review, Summer 2011)

Good Money: Birmingham Button Makers, the Royal Mint, and the Beginnings of Modern Coinage, 1775–1821, by George Selgin

Subscribe to The Independent Review. Get two complimentary issues when you purchase your subscription online!

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2) Taliban Reaps Benefits of U.S. Military Aid to Afghanistan

Millions of U.S. dollars paid to Afghan contractors have ended up in the hands of the Taliban. This conclusion, the result of a yearlong military investigation, should come as no great surprise, given the limited accountability and strong propensity for corruption of the Afghan government. What’s surprising is that the U.S. government seems to believe that U.S. national security is inextricably linked to the quixotic quest to build Afghanistan into a stable democracy with a flourishing economy, argues Independent Institute Senior Fellow Charles V. Peña in the San Francisco Chronicle.

“Indeed, the only real U.S. national security requirement is that the Afghan government not support al Qaeda or any other terrorist group that might attack the United States,” writes Peña.

Peña’s op-ed comes in response to a yearlong military investigation of the diversion of U.S. aid to the Taliban, including the funneling of nearly $3.3 million into the bank account of an Afghan National Police commander—money that was withdrawn to provide weapons, explosives, and cash for insurgents. “There is little we can do about corruption,” Peña continues. “There is much we can do to remove the bull’s-eye from Uncle Sam’s chest.”

Afghan Corruption No Surprise, by Charles V. Peña (San Francisco Chronicle, 8/9/11)

More by Charles V. Peña

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3) ObamaCare and Job Growth

What would you do to improve job growth in the United States? Reason recently posed that question to several economists, writers, and entrepreneurs. Independent Institute Senior Fellow Robert Higgs argued that one way to spur job hiring—especially for permanent positions—would be to repeal the Patient Protection and Affordable Care Act—a.k.a. ObamaCare.

One problem with ObamaCare, according to Higgs, is that it will take many years and thousands of administrative regulations to implement—and therefore to determine its substantive content and coverage. Until then, employers will have trouble forecasting the cost of hiring new employees. Some businesses—perhaps a great many—will be leery to take on new workers until it becomes clear to them the magnitude of the effects of ObamaCare on their bottom line.

“This situation creates tremendous uncertainty that affects virtually all firms,” Higgs writes. “After all, no matter how firms may differ in other regards, they all hire employees, and in most cases employee compensation amounts to a major part of their total cost of operation. Repeal of ObamaCare would have many benefits, but surely a great benefit would be the removal of an ominous cloud of uncertainty about a critical matter that now hangs over the entire labor market. In the face of this uncertainty, few firms have been, or will be, willing to assume the risk associated with increasing their permanent, full-time workforce.”

Independent Institute Research Fellow Jeffrey Miron and Research Director Alex Tabarrok also weigh in on Reason’s job-growth symposium.

What Would You Do to Improve Job Growth? (Reason, 8/12/11)

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

Hazardous to Our Health? FDA Regulation of Health Care Products, by Robert Higgs

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4) A Gala for Liberty to Honor Lech Walesa, Mario Vargas Llosa, and Robert Higgs

The Independent Institute will present the Alexis de Tocqueville Award to Lech Walesa, Mario Vargas Llosa, and Robert Higgs at its 25th Anniversary Gala for Liberty on November 15, 2011, at the Ritz-Carlton Hotel in San Francisco, Calif.

Lech Walesa is best known for heading the Solidarity trade union and becoming Poland’s first freely elected president after the end of communist rule; Mario Vargas Llosa, winner of the 2010 Nobel Prize in Literature, is recognized as one the greatest living writers in the Spanish-speaking world; and economist and historian Robert Higgs is best known for his path-breaking analysis of the growth of the U.S. government in response to economic and military crises.

The gala host committee now comprises more than two dozen world-renown luminaries, including Sir Richard Branson, Desmond Tutu, Elie Wiesel, Muhammad Yunus, Ronald Coase, Robert W. Galvin, James Buchanan, Timothy Draper, and Lord Griffiths of Fforestfach. Tables are filling up quickly, so we recommend that you purchase your tickets early.

A Gala for Liberty, featuring Lech Walesa, Mario Vargas Llosa, and Robert Higgs (San Francisco, Calif., 11/15/11)

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5) New Blog Posts

From The Beacon:

From MyGovCost News & Blog:

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

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