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The Lighthouse®

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Volume 19, Issue 42: October 10, 2017

  1. Las Vegas and the Need for Healing
  2. How to Transcend Government and Foster Human Well-Being
  3. Will Trump Overhaul the Federal Reserve?
  4. Would Adam Smith Have Supported Brexit?
  5. Independent Updates

1) Las Vegas and the Need for Healing

The Las Vegas massacre was a horrific tragedy unmatched in the United States since September 11, 2001. Unlike back then, however, it became politicized almost before all the casualties had been counted. The partisan rancor and mud-throwing aren’t exclusive to anonymous denizens of social media, talk radio, or your favorite news website’s comments pages, either. Even people in otherwise circumspect professions such as law and academia have spouted off hateful nonsense, further deepening rather than healing America’s political and cultural fissures, notes Independent Institute Research Fellow William J. Watkins Jr.

A senior lawyer for CBS, for example, after expressing pessimism for the enactment of the gun prohibitions she desires, wrote on Facebook: “I’m actually not even sympathetic bc country music fans often are Republican gun toters.” She quickly apologized, and we hope she genuinely recognizes the magnitude of her offensiveness. Another case—there are countless more—is a professor at Drexel University who was quick to associate the Las Vegas mass murderer with the “white victimization” of “Trumpism.” Months earlier he had asked for “white genocide” for his Christmas present. We wish his students well.

Vitriol of this sort is unbecoming of thoughtful citizens eager to foster constructive change. Yet careful thought is seldom rewarded at a time when cable news outlets and social media too often take their cue from hot-headed partisans. It should “give us pause as we see how they view a large segment of fellow citizens,” Watkins writes. Expect to hear Independent Institute fellows discuss the public-policy implications of the Las Vegas tragedy in the weeks and months ahead. As always, we will strive to provide analysis guided not by knee-jerk partisanship, but rather by evidence, sound reasoning, enduring principles, and “the better angels of our nature.”

Response to Vegas Attacks Shows the Heart and Mind of the Left, by William Watkins (The Beacon, 10/5/17)

When Government Neglect Turns Deadly, K. Lloyd Billingsley (MyGovCost News & Blog, 10/6/17)

Crime Control Through Private Enterprise, by Bruce L. Benson (The Independent Review, Winter 1998)

Let’s Focus on Victim Justice, Not Criminal Justice, by Bruce L. Benson (The Independent Review, Fall 2014)

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


2) How to Transcend Government and Foster Human Well-Being

Good governance matters. The rule of law is responsible for almost half of the total wealth in high-income countries; together with human capital, the quality of institutions, and other intangibles, it’s responsible for 80 percent of their wealth, whereas in low-income countries the intangible capital stock contributes to only about three-fifths of total wealth. Those startling figures, published by the World Bank more than a decade ago, should have inspired politicians, especially in developing countries, to adopt systematic reforms. It should have sent them on a quest to strengthen the rule of law and other intangibles that enable business leaders and entrepreneurs to use physical capital to more productively meet human needs. Instead, major changes in governance are still the exception rather than the rule, as Independent Institute Senior Fellow Lawrence J. McQuillan explains in The Beacon.

“Moments of true innovation in governance are so rare that they capture worldwide media attention, such as the emergence of Dubai as a financial and research hub,” McQuillan writes. Once a mere fishing village, Dubai has become one of the fastest-growing economies on the planet, and it transformed itself largely by adopting best practices gleaned from the world’s leading countries.

Easier said than done, but Dubai shows the payoff is worth the effort. Moreover, policymakers around the globe have many promising options for enabling what McQuillan calls “governance entrepreneurs.” Their options, he writes, “could range from special economic zones at the national and regional levels to private charter cities, voluntary cities, and homeowner associations at the local and community levels, each with unique governing frameworks that could be implemented elsewhere.” Stay tuned for more analysis and insights on how technological advancements can empower governance entrepreneurs to help foster more prosperity, peace and harmony, and the freedom to create a good life.

Transcending Government — A Future of Competitive Governance Driven by “Governance Entrepreneurs”, by Lawrence J. McQuillan (The Beacon, 9/28/17)

Transcending Government — Consensual Governance and New Technology, by Lawrence J. McQuillan (The Beacon, 9/11/17)

Future: Economic Peril or Prosperity?, edited by Robert M. Whaples, Christopher J. Coyne, and Michael C. Munger


3) Will Trump Overhaul the Federal Reserve?

U.S. presidents are typically overestimated in regard to how much they can affect the economy’s overall performance. President Trump, however, possesses unusual power to influence such things as unemployment, inflation, and the growth of total output. That’s because five of the seven members of the Federal Reserve’s board of governors will soon see their terms expire—including Fed Chair Janet Yellen on February 3, 2018. (Fed governor Stanley Fischer’s recently announced resignation goes into effect later this month.) Hopefully, President Trump will appoint replacements who successfully navigate the treacherous course that Yellen’s predecessor, (then) Fed chairman Ben Bernanke, undertook in response to the financial crisis, explains Independent Institute Research Fellow Robert P. Murphy.

Among other roles, the Federal Reserve is tasked with promoting the safety and soundness of the banking system. Bernanke sought to do this in part by initiating the Fed’s purchase of “toxic assets” from banks deemed at risk of failing and potentially causing a financial meltdown. It did this, however, without publically disclosing precisely how it determined which banks would get de facto bailouts. “One doesn’t have to be paranoid to think these policies were at least partly motivated by cronyism, not concern for the commonweal,” Murphy writes in The Hill.

The Fed’s quantitative easing and near-zero interest rate policies have caused much alarm. They haven’t (yet) created the price inflation that some had predicted, Murphy acknowledges, but they have seriously distorted the signals that help guide business investment and planning. “Firms are encouraged to start long-term projects for which society as a whole does not have adequate real savings to finish,” Murphy writes. Undoing these interest-rate and price distortions while avoiding inflation should be paramount for the central bank’s policymakers. “President Trump has the opportunity to staff the Fed with economists who understand the importance of shrinking the Fed’s footprint in financial markets and who will resist the temptation to flood the credit markets with easy money if and when the next crisis strikes,” Murphy concludes.

Trump’s Chance to Reform the Fed, by Robert P. Murphy (The Hill, 9/30/17)

Choice: Cooperation, Enterprise, and Human Action, by Robert P. Murphy


4) Would Adam Smith Have Supported Brexit?

Adam Smith owes his enduring reputation to The Wealth of Nations—his a wide-ranging treatise that spread clear thinking about international trade, the division of labor, economic coordination through the “invisible hand” of the market, and much more. But he was also a profound thinker in the realm of moral philosophy and jurisprudence. His framework of natural liberty and justice “led him to oppose slavery, colonialism, empire, mercantilism, and taxation without representation at a time when such views were unpopular,” writes Vernon L. Smith, the 2002 Nobel laureate in economics and an honoree at the Independent Institute’s 30th Anniversary Gala for the Future of Liberty. Strange as it may seem to many, this is why some advocates of Brexit—the United Kingdom’s vote in 2016 to leave the European Union—call Adam Smith their patron saint.

Adam Smith supported free trade—which, at least in name, is what the UK’s membership in the European Union provided vis-à-via other member states. In reality, thanks to lobbying by special interests, 12,651 import tariffs plague the trade pact, including a 16 percent tariff hike for oranges entering the UK, according to Independent Institute Research Fellow Kevin Dowd. Adam Smith detested colonialism and its bureaucratic edicts—essentially the sort of thing that Brexit’s advocates claim the EU had imposed on them. Thankfully, there’s nothing contradictory about leaving the union and supporting free trade, Dowd argues.

“Brexit will give the UK the opportunity to pursue its own free trade policy with the rest of the world and to escape the needless regulatory burdens of the single market,” Dowd writes with co-authors David Paton and David Blake in a recent piece. “Whether or not Brexit leads to improvements or reductions in economic well-being remains to be seen. What should not be in doubt is that there are sound economic reasons for believing that Brexit has the potential to bring about significant economic gains for the UK.”

The Core of the Classical Liberal Tradition: Adam Smith’s Concept of Justice, by Vernon Smith (The Beacon, 10/6/17)

The EU’s Thousands of Senseless Tariffs Simply Serve to Punish the Poor, by Kevin Dowd (The Beacon, 9/25/17)

How the UK Can Benefit from a Free Trade Future After Brexit—Even Outside the Single Market, by Kevin Dowd, David Paton and David Blake (The Beacon, 9/28/17)

Money and the Nation State: The Financial Revolution, Government, and the World Monetary System, edited by Kevin Dowd and Richard H. Timberlake, Jr.


5) Independent Updates
The Beacon: New Blog Posts MyGovCost: New Blog Posts


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