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The Lighthouse is the weekly email newsletter of the Independent Institute.
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Volume 14, Issue 17: April 24, 2012

  1. Robert Higgs Exposes Delusions of Power
  2. Only 363 Days until Earth Day!
  3. Toward a Less-Taxing Tax Code
  4. Massachusetts Realtors Are ‘Cleaning House’
  5. New Blog Posts

1) Robert Higgs Exposes Delusions of Power

Why have so many Americans abandoned the Jeffersonian principle that the best government is that which governs least? In his new book, Delusions of Power: New Explorations of the State, War, and Economy, Independent Institute Senior Fellow Robert Higgs suggests that part of the reason is that we have fooled ourselves into believing that if we cede more power to democratic institutions, they will somehow solve problems that they’re not really capable of fixing. Rather than cling to demonstrably dubious beliefs—another one is James Madison’s view that the U.S. Constitution is an effective bulwark against government abuses—Higgs urges us to search for better institutional arrangements to safeguard liberty.

In addition to fascinating insights about democracy and the state, Higgs offers new analyses of the Great Depression, the two world wars, the Cold War, the Nixon years, and the post-9/11 era. Regarding the recent recession, Higgs exposes the six worst mistakes of the current orthodoxy and shows how they contributed to a surge in the government’s size, scope, and power. Wars abroad have been particularly detrimental to liberty at home, he explains. Tax withholding, for example, became a permanent feature during World War II and was adopted in order to make it easier to raise taxes in the future. Wars also illustrate the profound gulf between the interests of U.S. presidents and those of ordinary people.

But this is just the tip of the iceberg. Readers unfamiliar with Robert Higgs will discover that Delusions of Power brings greater clarity to the interaction of politics and economics. And the growing number of readers already acquainted with Higgs’s works will find that his latest book offers more of the refreshing intellectual rigor, elegant erudition, and morally grounded wit that they’ve come to expect from the most astute critic of government power on the scene today.

Delusions of Power: New Explorations of the State, War, and Economy, by Robert Higgs

Detailed summary

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2) Only 363 Days until Earth Day!

Earth Day offers few surprises these days. It’s an established holiday embraced by a new orthodoxy: environmental religion, a nominally secular worldview that borrows elements of the Judeo-Christian tradition, including modified versions of the Creation, the Fall, and the Apocalypse. The influence of sixteenth-century theologian John Calvin, who viewed the natural world as the artisanship of the Creator, is especially large, according to Robert H. Nelson, senior fellow at the Independent Institute and author of The New Holy Wars: Economic Religion versus Environmental Religion in Contemporary America.

“The residual Protestantism of environmentalism—while now taking a mostly secular form—has deep roots in America’s Puritan heritage,” Nelson writes in Forbes. “Rejecting the Christianity of their childhood, Muir, Leopold, Carson and Brower turned as adults to a secularized form of Calvinism in which reverence for ‘the Earth’ became a disguised substitute for worship of ‘God.’ The Christian right and the environmental left have more in common than they realize.”

Like all belief systems, environmentalism has its share of rituals and taboos. On the ritual side are all the measures meant to limit human appetites—for heated homes, for lavish packaging, for crashworthy automobiles, for foods that leave a large carbon footprint. On the taboo side, consider the spectacle of the hapless forgetful soul whose green housemates constantly nag her never to mix the tiniest scrap of recyclable trash with garbage that is bound for the dump. May her tears—absorbed in biodegradable tissue paper, of course—hasten an environmentalist Reformation.

Earth Day’s Environmental ‘Religion,’ by Robert H. Nelson (News Observer, 4/18/12)

Environmentalism: The New Religion Freely Taught in Schools, by Robert N. Nelson (Forbes, 3/27/12)

Rethinking Church and State: The Case of Environmental Religion, by Robert H. Nelson (Pace Environmental Law Review, Fall 2011)

The New Holy Wars: Economic Religion versus Environmental Religion in Contemporary America, by Robert H. Nelson

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3) Toward a Less-Taxing Tax Code

The taxman treats stock investors a lot like he treats gamblers: he taxes the winners’ gains but limits the ability of losers to deduct their losses. The taxman treats gains and losses differently because he fears that treating them symmetrically would result in less tax revenue collected. But this approach is both unfair and economically inefficient, according to Independent Institute Research Fellow John C. Goodman.

In his latest op-ed, Goodman argues for the abolition of the capital gains tax. This is partly because “fair” treatment of capital gains would be revenue neutral. In other words, if the taxman treated winners and losers symmetrically, the capital gains tax would be superfluous. This becomes more apparent if we consider what would happen if gamblers’ gains and losses were treated symmetrically: “The deductions by the losers would offset the gains of the winners and there would be no net revenue for Uncle Sam,” Goodman writes.

Americans disagree, of course, about what constitutes “fairness.” A majority might believe that the capital gains and losses of professional stock traders should be treated differently from those of amateur investors. If so, we would still be better off finding a remedy without taxing capital gains generally, Goodman argues. If we seek to minimize the inequities and inefficiencies of the tax code, he argues, we should replace the current version with the right kind of flat-rate income tax. Writes Goodman: “The idea behind a flat tax can be summarized in one sentence. In an ideal system, (a) all income is taxed, (b) only once, (c) when (and only when) it is realized, (d) at one low rate.”

Why Tax Capital Gains?, by John C. Goodman (4/14/12)

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4) Massachusetts Realtors Are ‘Cleaning House’

Regulatory capture. If the term were as familiar as its better-known cousin government failure, people might be more skeptical of measures that end up harming them by reducing competition for their patronage. Independent Institute Senior Fellow Benjamin Powell and his co-author Evgeny Vorotnikov found a fascinating example of regulatory capture in Massachusetts, where the state association of Realtors succeeded in boosting Realtors’ incomes by driving out competition, mostly from part-time real estate agents. Its tool: a 1999 requirement that agents complete 12 hours of continuing education as a condition of renewing their licenses.

“The continuing education requirements reduced the number of active real estate agents by 58 percent, while increasing the incomes of remaining agents by 17 percent,” Powell and Vorotnikov write in an op-ed based on a study they conducted for the Beacon Hill Institute.

The Massachusetts Association of Realtors adopted the requirement on the grounds that doing so would improve the quality of service that agents offered homebuyers and home sellers. But the requirement didn’t perform as advertised. “The study found no evidence that either the volume of complaints, or those requiring a response from the board, decreased after mandating the continuing education course,” Powell and Vorotnikov continue. “Massachusetts residents are now forced to overpay for brokerage services of no better quality than they were before [the association] passed the continuing education requirement. Clearly, the Realtors are benefiting while the public pays the price.”

Realtors ‘Clean House’ by Stifling Competition, by Benjamin Powell and Evgeny Vorotnikov (The Herald News, 4/10/12)

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

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5) New Blog Posts

From The Beacon:

How the Tax System Fosters Big Government
Carl Close (4/23/12)

Free John Edwards?
Anthony Gregory (4/23/12)

Ann Coulter Is Essentially Right (4/20/2012)
Anthony Gregory

The U.S. Welfare State Is Bigger than You Think (4/20/2012)
Randall Holcombe

To Protect and to Serve (4/17/2012)
Anthony Gregory

From MyGovCost News & Blog:

Empty Chairs = No Budget (4/19/12)
Craig Eyermann

Defense Secretary Spends $30,000 Per Trip to Go Home Weekly
Stephanie Freedman (4/17/12)

You can find the Independent Institute’s Spanish-language blog here.

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