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Volume 7, Issue 45: November 7, 2005

  1. "Liberty and Equality Before the Law" -- The 2005 Garvey Fellowship Winners
  2. Windfall Oil Profits Tax Would Harm Consumers
  3. Bush in Latin America
  4. Green Regulations Slowed Wage Growth

1) "Liberty and Equality Before the Law" -- The 2005 Garvey Fellowship Winners

The Independent Institute is very pleased to announce the winners of the 2005 Olive W. Garvey Fellowship. This year's contestants were asked to submit an essay related to a quotation from Nobel-laureate economist and political philosopher, F. A. Hayek: "The great aim of the struggle for liberty has been equality before the law.”

In the Student Division, the winners are:

First Prize ($2,500): ALEX BINZ (Highline Community College)

Second Prize ($1,500): JEFFREY BERGMAN (University of Chicago Law School)

Third Prize ($500): tie -- ALEXANDER JECH (University of Notre Dame) and ANDREW KASHDAN (George Mason University)

In the Junior Faculty Division, the winners are:

First Prize ($10,000): DANIEL PELLERIN (Assistant Professor of Political Science, University of California, Davis)

Second Prize ($5,000): CHRISTOPH SPRICH (Lecturer, Institute for the International Education of Students, University of Frieburg, Germany)

Third Prize ($1,500): DAVID MITCHELL (Visiting Assistant Professor of Economics, St. Mary's College of California)

In addition to the cash prizes, winners from both divisions will receive assistance in getting their articles published and a two-year subscription (8 issues) to the Independent Institute's quarterly, THE INDEPENDENT REVIEW: A Journal of Political Economy <>.

This year's contest drew 345 applicants from 46 U.S. states, 37 countries, and 5 continents. The applicants' countries included Bangladesh, Bulgaria, Cambodia, Cameroon, Canada, China, Croatia, Cyprus, Czech Republic, Egypt, England, Ethiopia, Georgia, Germany, Ghana, India, Indonesia, Israel, Italy, Kazakhstan, Kenya, Kyrgyzstan, Moldova, New Zealand, Nicaragua, Nigeria, Pakistan, Peru, Russia, Rwanda, Slovakia, South Africa, Uganda, United Kingdom, Uruguay, United States, and Zimbabwe.

The Independent Institute gratefully acknowledges the generous assistance of this year's judges: Thomas J. DiLorenzo (Professor of Economics, Loyola College of Maryland), Gerald Gunderson (Professor of Economics, Trinity College), and Fred Foldvary (Professor of Economics, Santa Clara University).

Founded in 1974, the Olive W. Garvey Fellowship Competition is a biennial essay contest that rewards college and university students and junior faculty for their scholarship on economic and personal freedom.

For links to the winning essays for the 2005 Olive W. Garvey Fellowship, see

For links to the winning essays of past years, see


2) Windfall Oil Profits Tax Would Harm Consumers

Reports of large profits in the oil industry have some politicians clamoring for the imposition of a new "windfall" profits tax on Big Oil. Sound familiar? In 1980, President Jimmy Carter signed the Crude Oil Windfall Profit Tax Act, which hurt both oil producers and consumers, according to Independent Institute Research Fellow William F. Shughart.

"It should come as no surprise that oil production fell [as a result of the 1980 tax law]," writes Shughart in a new op-ed. "In fact, 1.6 billion fewer barrels of crude oil were produced in the United States from 1980 to 1987 than would have been produced otherwise. American dependence on foreign oil rose apace."

Shughart notes that Big Oil's second-quarter earnings were 7.7 cents per dollar of sales compared to 7.9 centers per dollar of sales for U.S. industry as a whole. Consumers will benefit from an increase in oil-industry investment that recent high profits will bring.

"The National Petroleum Council estimates that, to meet expected demand, producers will have to invest almost $1.2 trillion through 2025 to fund oil and gas exploration and production in North America," writes Shughart. "Raising capital of that magnitude requires investor confidence in the industry's long-term fiscal stability. There has to be an incentive for oil and gas development. Profits provide that incentive. Take away industry profits, and drilling will stop."

See “'Windfall' Profits Tax on Oil Would Slow Flow," by William F. Shughart II (11/4/05)
"El Impuesto a las Ganancias 'Extraordinarias' Sobre el Petróleo Disminuirá Su Oferta"

TAXING CHOICE: The Predatory Politics of Fiscal Discrimination, ed. by William F. Shughart II


3) Bush in Latin America

At least weekend's Summit of the Americas, President Bush saw three very different faces of Latin America -- its so-called populism, embodied by Venezuela's Hugo Chavez, and Bolivia's Evo Morales; its managerial inertia, embodied by Mexico, Peru, and Brazil; and a curious mixture of progress and isolation, embodied by Chile and Colombia.

Latin America's populist regimes "consolidated Latin America's backwardness in the second half of the 20th century," write Alvaro Vargas Llosa, senior fellow and director of the Independent Institute's Center on Global Prosperity. "The economic result can be captured with one example: between the 1970s and 1990s, Argentina's per capita income was reduced by one quarter."

The second group of countries is characterized by lack of reform and a system of privilege. "For instance, three million small and mid-sized Peruvian businesses that constitute 98 percent of all the businesses in the country are not able to produce more than 38 percent of the wealth because of barriers to competition and legal restrictions."

The third group has some obvious strengths and weaknesses. Colombia, for example, has cut much red tape, resulting in many new businesses, but is engaged in a war with narco-guerrillas, whereas Chile has signed numerous trade agreements with faraway countries, but all four candidates in its December presidential elections are calling for increasing government intervention in its pension systems.

The best way for the United States to deal with these three cases is in principle simple, writes Vargas Llosa: "Removing the remaining obstacles to trade, eliminating subsidies to farmers and industries, and beginning to “de-narcoticize” the approach to Andean affairs -- of which Evo Morales is somewhat of an epiphenomenon -- would help in the long run. It would not solve the problem because the problem can only be solved from within. But it would make the task of those trying to stem the populist tide less Herculean."

See "George W. Bush Goes South," by Alvaro Vargas Llosa (11/3/05)

For information about LIBERTY FOR LATIN AMERICA: How to Undo Five-Hundred Years of State Oppression, by Alvaro Vargas Llosa

Center on Global Prosperity (Alvaro Vargas Llosa, director)


4) Green Regulations Slowed Wage Growth

Last year, federal environmental regulations cost small U.S. manufacturers $15,747 per worker -- dwarfing small firms' combined cost of tax compliance ($2,582 per worker), economic regulations ($2,577), and workplace regulations ($1,014). Green regulations may become a major public worry if the economy turns south.

But according to Research Fellow Craig S. Marxsen and Academic Affairs Director Carl P. Close, "workers already have plenty of reason for concern because for much of the past 30 years, environmental regulations have slowed the growth of U.S. labor-productivity and workers' weekly earnings."

In a new op-ed based on research from Marxsen's research for the new book RE-THINKING GREEN, Marxsen and Close argue that from 1973 to 1995 "real weekly earnings -- what workers took home in inflation-adjusted dollars -- actually decreased." Further evidence, they write, indicates that from 1974 to 1986 "multifactor productivity -- the efficiency of labor, machinery, and other inputs working together -- had fallen about 11.4 percent short of where it would have been without the EPA's heavy hand."

Although productivity growth accelerated in the late 1990s, it mostly touched six economic sectors less affected by environmental regulations, Marxsen and Close argue. They conclude by calling for Congress to make the EPA more transparent and to reduce the agency's discretionary authority.

Predictions of eco-catastrophe, Marxsen and Close write, "haven't panned out except in one respect: They fertilized a federal bureaucracy that has imposed huge costs on businesses -- costs that have disproportionately dampened the growth of productivity and workers' earnings. The time has come for policymakers and the public to re-think their commitment to the EPA's costly environmental bureaucracy."

See "Environmental Doom and Economic Slowdown: A Self-Fulfilling Prophecy," by Craig Marxsen and Carl Close (10/27/05)
"El Desastre Medioambiental y el Retraso Económico: Una Profecía Auto-Cumplida"

RE-THINKING GREEN: Alternatives to Environmental Bureaucracy, ed. by Robert Higgs and Carl P. Close


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