The Lighthouse^®

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The Lighthouse^® is the weekly email newsletter of the Independent Institute.
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Volume 13, Issue 34: August 23, 2011

1. Downgrading America’s Politicians
2. Government Crackdown Inspires Lemonade Freedom Day
3. Bolivia’s San Pedro Prison: A Model for Prison Reform?
4. Benjamin Powell on the New Financial Regulations
5. New Blog Posts

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Standard and Poor’s downgrading of Uncle Sam’s credit rating reflects the quality of America’s politicians more than the U.S. economy. According to Independent Institute Research Fellow Emily Skarbek, the United States can recover from the current mess only by enacting deep cuts in entitlements and defense spending—and by demonstrating a principled commitment to smaller government. By showing that the era of Big Government is really over, Washington would create an economic climate friendly to private investment and job growth.

“The bailouts, quantitative easing, stimulus, and excessive spending have done little, if anything, to ease our economic woes,” Skarbek writes in the Sacramento Bee. “What they have done is add political uncertainty, and that is ruining the economy.”

In a separate op-ed for the Daily Caller, Independent Institute Research Editor Anthony Gregory notes that recent polls show how low public regard for the White House and Congress has sunk. A Gallup poll put President Obama’s rating at 39 percent, and Rasmussen Reports found that only 6 percent of those polled said Congress’s performance was either good or excellent. “It is an all-out crisis of legitimacy,” Gregory writes. “While a majority of the political class believes the government has the people’s consent, 77 percent of mainstream voters do not.”

Downgrading America’s Politicians, by Emily Skarbek (The Sacramento Bee, 8/17/11)

Obamanomics on the Defensive, by Anthony Gregory (The Daily Caller, 8/18/11)

What will Washington’s spending spree cost you? Find out at MyGovCost.org.

Beyond Politics: The Roots of Government Failure, by Randy T. Simmons

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Saturday marked the occasion of Lemonade Freedom Day, created to protest reported government crackdowns of children operating lemonade stands without a permit. The lemonade stand is an iconic rite of passage for young entrepreneurs. It teaches kids the basics of how a business operates while enabling them to earn a few bucks in the process. But, as Independent Institute Research Fellow Art Carden explains, the government crackdown also teaches valuable lessons.

When government intervenes in commerce, it invariably creates winners and losers. For example, business owners who are better adept at jumping through regulatory hoops may be able to outlast competitors who are better at offering their customers good products at low prices, but who do a poor job of cutting through bureaucratic red tape. That’s a pretty advanced lesson—one likely to divert kids’ attention away from the basics of how market-based entrepreneurship works. Lemonade Freedom Day also teaches a valuable lesson, according to Carden.

“It may not seem like much, but Lemonade Freedom Day is a small-but-important exercise in civil disobedience,” Carden writes. “I look forward to seeing how it goes.”

Lemonade and Liberty, by Art Carden (Forbes.com, 8/18/11)

Taxing Choice: The Predatory Politics of Fiscal Discrimination, edited by William F. Shughart II

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Prison life isn’t known for exemplifying social harmony—far from it. A life of internment seems to better fit philosopher Thomas Hobbes’s description of human existence before government, in the mythic state of nature: nasty, brutish, and short. But San Pedro Prison in La Paz, Bolivia, is an anomaly—a fascinating experiment that shows how, even in prison, the creation and enforcement of property rights can reduce conflict and foster a cooperative, entrepreneurial spirit.

San Pedro Prison operates like a self-contained, self-governing city, as economist David Skarbek has explained in The Independent Review. Its inmates are allowed to open restaurants, offer carpentry services, and operate commissaries that serve nonprisoner visitors and any wives or children who may live with them. They also purchase their own prison cells from each other, provide for their own medical care and often their own meals, and adjudicate their own disputes, leaving the prison’s administrators with little more to do than to keep the prisoners from escaping.

San Pedro Prison isn’t Nirvana, of course—it’s a prison that metes out harsh punishment to those who would try to break its rules, including the norms fostered by the inmates themselves. But because the inmates possess property rights, San Pedro Prison provides a stark contrast to a more famous but less harmonious example of self-governance in a prison environment: the Andersonville prison camp in Georgia during the U.S. Civil War. At a time when governments are saddled with escalating costs of incarceration, San Pedro Prison offers an alternative model worthy of study and—with modifications—adoption, at least on a limited test basis.

Self-Governance in San Pedro Prison, by David B. Skarbek (The Independent Review, Spring 2010)

Changing the Guard: Private Prisons and the Control of Crime, edited by Alexander T. Tabarrok

To Serve and Protect: Privatization and Community in Criminal Justice, by Bruce L. Benson

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

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How have new financial laws—especially the year-old Dodd-Frank Wall Street Reform and Consumer Protection Act—affected the U.S. economy? Last month Independent Institute Senior Fellow Benjamin Powell addressed this question, along with investment analyst Liz Peek and Montclair State University Political Science and Law Professor Brigid Harrison, on Fox Business. See Powell discuss Dodd-Frank and its impact on the U.S. economy, here.

Video: Benjamin Powell on New Financial Regulations (Fox Business, 7/19/11)

The Dilemma of Bailouts, by Roy C. Smith (The Independent Review, Summer 2011)

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From MyGovCost News & Blog:

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

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