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Volume 11, Issue 43: October 26, 2009

  1. The Case Against a Carbon Tax
  2. Suitcase Stuffed with Chavez’s Expanding Influence
  3. Flood Insurance and Government Failure
  4. Genuine Patriotism Would Limit Military Influence, Eland Argues
  5. This Week in The Beacon

1) The Case Against a Carbon Tax

Climate-change proposals debated in Washington, D.C., have centered around so-called cap-and-trade legislation, but many economists and scientists favor a carbon tax to curb the carbon dioxide emissions believed to cause global warming. The case for a carbon tax, however, is weaker than they assume, according to Robert P. Murphy, an economist for the Institute for Energy Research, in an article for the fall issue of The Independent Review.

The most influential economic model used to calculate an “optimal” carbon tax—developed by William Nordhaus of Yale University—is deeply flawed, Murphy argues. Among other problems, it employs questionable estimates of (1) future concentrations of carbon dioxide, (2) temperature increases associated with those concentrations, and (3) economic costs associated with those estimated temperature increases. A change in any one of those inputs would yield a vastly different “optimal” carbon tax—and the model employs scores of dubious inputs.

But even if the models were perfected, political pressures would likely prevent a carbon tax from working as advertised. Murray therefore recommends the removal of legal and regulatory obstacles that would keep people from adjusting effectively to climate changes. “Rather than depending on conjectural models and the good faith of politicians,” writes Murphy, “economists should instead consider the ability of markets to generate wealth to ease the adaptation process.”

“Rolling the DICE: William Nordhaus’s Dubious Case for a Carbon Tax,” by Robert P. Murphy (The Independent Review, Fall 2009)

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2) Suitcase Stuffed with Chavez’s Expanding Influence

Worries about Venezuelan President Hugo Chavez’s interference with other countries’ elections escalated in late 2007, after an airport customs official in Argentina confiscated a suitcase—stuffed with $790,550—that Chavez secretly had sent to help fund Cristina Kirchner’s presidential campaign. Later investigations discovered that the Venezuelan attempted to send another suitcase, containing $4 million, for Kirchner’s campaign fund, but by then Kirchner had become president of Argentina. The suitcase scandal and subsequent political indiscretions have left a bad flavor in the mouths of many voters, as became evident in the recent legislative elections, where Kirchner allies suffered significant losses.

Journalist Hugo Alconada uncovered many—but perhaps not all—of the facts about Chavez’s influence on Kirchner in his book Los secretos de la valija (The Secrets of the Suitcase). Further revelations potentially could undermine Kirchner’s reelection bid in 2011. That possibility may explain Kirchner’s (successful) push for a law granting the national government extraordinary powers over Argentina’s privately owned media, according to opposition politician Francisco de Narvaez, who met recently with Independent Institute Senior Fellow Alvaro Vargas Llosa.

“Narvaez mentioned that the media law was much more than a move against critical outlets,” writes Vargas Llosa in his latest syndicated column. “It was part of an effort to subvert the rule of law from within, in order to impede a democratic succession in 2011. Observing the desperation with which the Kirchner couple, who attributed the affair of the suitcase to a U.S. plot against a sovereign anti-imperialist nation, has sought to emasculate the media before the next Congress takes over, one can see that Narvaez’s suspicion is no fairy tale.”

“Beyond the Suitcase,” by Alvaro Vargas Llosa (10/21/09) Spanish Translation

Lessons from the Poor: The Triumph of the Entrepreneurial Spirit, edited by Alvaro Vargas Llosa

Liberty for Latin America: How to Undo Five Hundred Years of State Oppression, by Alvaro Vargas Llosa

The Che Guevara Myth and the Future of Liberty, by Alvaro Vargas Llosa


3) Flood Insurance and Government Failure

Floods are among the worst natural disasters in the United States, costing billions of dollars annually in damages. Despite their destructiveness, however, most people have only one option for protection against flood-related losses: the National Flood Insurance Program. Unfortunately, the program has encouraged construction in flood-prone areas and hindered the creation of private flood insurance, according to a new report from the Independent Institute, “Watery Marauders: How the Federal Government Obstructed the Development of Private Flood Insurance,” by Eli Lehrer (Research Fellow, the Independent Institute; Senior Fellow, Competitive Enterprise Institute).

According to Lehrer, the harmful effects of federal flood policies stem from four major factors: (1) the Army Corps of Engineers’ massive levee-building project, which increased flooding; (2) the Tennessee Valley Authority’s mapping efforts and subsequent zoning ordinances, which also exacerbated flooding problems; (3) the suppression of a private insurance market via an enacted but unfunded flood insurance statute; and (4) Congress’s decision to remove risk-based pricing from the flood program to encourage participation.

Although it’s impossible to know for certain how or even if the private market would have created flood insurance, government intervention made the development of private flood insurance more problematic. “The failures of flood insurance, ultimately, are political rather than purely a matter of policy,” Lehrer writes. “America ended up with a system of political insurance that has placed an enormous burden on the Treasury and created a moral hazard. The creation of such a system, this paper has argued, did not result from inevitable, unavoidable market failures but, rather, from several deliberate, interconnected political actions.”

“Watery Marauders: How the Federal Government Obstructed the Development of Private Flood Insurance,” by Eli Lehrer (10/19/09)

More insurance reports


4) Genuine Patriotism Would Limit Military Influence, Eland Argues

Recent news stories have reported that U.S. military leaders are frustrated by President Obama’s seeming hesitation to increase troop levels in Afghanistan. According to Ivan Eland, Director of the Independent Institute’s Center on Peace & Liberty, opinions expressed publicly by military leaders, about decisions beyond their purview, are a matter of grave concern. Eland attributes this problem in part to a political culture that has come to worship the military out of a misguided notion of patriotism.

“The nation’s founders would roll over in their graves at what patriotism has become,” Eland writes in his latest op-ed. “The U.S. Constitution rejected European militarism in favor of tight congressional controls over the employment, organization, and funding of the U.S. armed forces.”

Americans would be better off with stronger congressional controls on the military and foreign policies that avoided overseas military interventions, Eland argues. “True American patriotism, following the tradition of the founding, rejects militarism without rejecting an appropriate role for the military,” writes Eland.

“Is Adulation of the Military Really Patriotic?” by Ivan Eland (10/21/09) Spanish Translation

Video: Ivan Eland on Joe Biden’s Poland Visit (10/22/09)

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

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

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


5) This Week in The Beacon

Visit the Independent Institute’s Spanish-language blog, El Independent. Below are the past week’s offerings from our English-language blog, The Beacon.


  • Catalyst
  • Beyond Homeless