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Volume 13, Issue 2: January 11, 2011

  1. EPA’s New Rules Would Hamper Economic Recovery
  2. Fixing the U.S. Legal System
  3. A Radical Solution for Ending the War in Afghanistan
  4. The Tragic Life of Carlos Andres Perez
  5. Cut Your 2010 Taxes Now!—Plus, New Blog Posts

1) EPA’s New Rules Would Hamper Economic Recovery

The Obama administration has delayed the imposition of new restrictions for smog and emissions from industrial boilers. Unfortunately, the Environmental Protection Agency is still pursuing a host of new regulations that will hobble economic growth and worsen unemployment. Many of these regulations target the oil and natural gas sector—an important driver of jobs as well as the source of 85 percent of the U.S. energy supply, according to Independent Institute Senior Fellow William F. Shughart II.

For example, the EPA plans to impose new regulations for carbon dioxide and other greenhouse gases emitted by power plants and industrial users—regs that will help push up electricity rates across the United States. In addition, new air quality standards that require coal-powered plants to be retrofitted are projected to cost $70 billion over the next decade. Shughart outlines the impact of these and six other proposed or forthcoming regulations in his new op-ed, “Congress Should Rein in the EPA.”

“The dreams of federal bureaucrats and their environmental-activist supporters notwithstanding, windmills and other ‘green’ sources of power are unlikely to replace fossil fuels anytime soon,” Shughart writes. “In the meantime, when the U.S. economy is anemic and nearly 10 percent of the labor force is unemployed, EPA has done (and can do) much harm. The new Congress should rein it in.”

“Congress Should Rein in EPA,” by William F. Shughart II (Clarion Ledger, 1/9/11)

Rethinking Green: Alternatives to Environmental Bureaucracy, edited by Robert Higgs and Carl Close


2) Fixing the U.S. Legal System

Is the U.S. legal system broken? If so, how should it be fixed? On December 9, 2010, the Independent Institute hosted a forum at its headquarters in Oakland, Calif., to address these questions. The event’s keynote speaker, economist and Research Fellow Edward J. López (editor, The Pursuit of Justice) argued that the system is indeed broken and that bad incentives are largely to blame for a broad range of problems, including wrongful convictions, overpriced legal services, politicized judicial decisions, eminent domain abuses, and wealth redistribution that favors the legal profession. Overhauling the incentives embedded in the legal system—the inducements that shape the decisions of judges, juries, attorneys, law enforcement, and others—offers the best hope for securing justice for all, Lopez concluded.

The second speaker, law professor David Friedman (Santa Clara University), credited López’s book for taking the first steps toward a systematic explanation of how the pursuit of self-interest shapes legal outcomes. Friedman then offered ideas for improving the legal system. Wrongful convictions could be reduced, he suggested, if indigent felony defendants were given state-funded vouchers to hire private attorneys, rather than having them rely on public defenders, who may be less capable or compromised by government employment. Moreover, lawmaking itself could be improved, Friedman argued, if people were free to choose directly which set of laws would govern them—as occurs to some extent when litigants opt for private arbitration or when businesses select a state in which to incorporate.

The final speaker, Chief Justice Alex Kozinski (Ninth Circuit Court of Appeals), also lauded The Pursuit of Justice for its pioneering contributions, but he focused on what he called his quibbles with the book. Kozinski was much less worried about eminent domain than was López. A worse problem, he argued, occurs when governments fail to pay a property owner any compensation for having in effect “taken” private land via regulation, such as by passing a statute that prohibits construction on the owner’s beachfront property or wetland. Kozinski’s contrarian remarks foreshadowed a lively audience Q&A session devoted to topics as diverse as lawyer licensing, paid informants, capital punishment, jury nullification, constitutional interpretation, and the scope of private-property rights.

Video, Audio and Transcript: “Is the U.S. Legal System Broken? Overcoming Government Legal Failure,” featuring Edward J. López, David Friedman, and Judge Alex Kozinski (12/9/10)

The Pursuit of Justice: Law and Economics of Legal Institutions, edited by Edward J. López


3) A Radical Solution for Ending the War in Afghanistan

Pakistan’s unwillingness to destroy Taliban sanctuaries in its territory has become increasingly apparent to the U.S. military—hence the recent expansion of U.S. Special Operations ground raids into that country. The basic problem is one of divergent interests: Pakistan’s leadership views the Afghan Taliban as the best hope for heading a friendly government on its western border, whereas the U.S. leadership wants to ensure that al-Qaeda—and by extension its former host, the Taliban—does not gain another toehold in the region.

The best solution to the problem may be the oldest in the book: divide and conquer by offering a positive incentive—much as the U.S. military did in Iraq when it paid Sunni militias to turn against Iraqi insurgents. By hammering a wedge between al-Qaeda, on the one hand, and the Afghan Taliban and Pakistan on the other, the United States could neutralize Osama Bin Laden’s terrorist network, according to Ivan Eland, senior fellow at the Independent Institute and director of its Center on Peace & Liberty. In return for giving the Taliban and Pakistan partial or full control of an Afghanistan devoid of U.S. troops, the United States would demand the capture and delivery of the al-Qaeda leadership. Such an offer would likely be too good for Pakistan and the Taliban to refuse, and it would help advance what should be the leading U.S. national-security objective.

“The U.S. might as well attempt this deal while it still has some leverage,” Eland writes. “Eventually, the U.S. will have to withdraw from Afghanistan and thus allow the Taliban some role in the Afghan government, but later will probably not get any concessions in return.”

“A Radical Solution for the War in Afghanistan,” by Ivan Eland (12/21/10) Spanish Translation

Video: Ivan Eland on Russia, Wikileaks, and the START Treaty (Al Jazeera “Inside Story,” 12/2/10)

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

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

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


4) The Tragic Life of Carlos Andres Perez

Christmas saw the passing of the man who could have been the savior of Venezuela: Carlos Andres Perez. The first time Perez was president of Venezuela, in the 1970s, he fought off Castro-inspired guerrillas while managing to uphold the rule of law. But although Perez valued civil liberties, he discounted the importance of economic liberties and pursued policies that concentrated the country’s wealth in the hands of the state.

By the time Perez returned to power in 1989, the country’s economy and democratic institutions had severely deteriorated. The state he helped feed had turned on him. He was impeached and exiled. Then Hugo Chavez came to power, and the deterioration of Venezuela accelerated.

“Perez saw what was coming more clearly than most and never stopped denouncing it,” writes Independent Institute Senior Fellow Alvaro Vargas Llosa, who met the exiled Perez in the early 2000s. “The battle-hardened soldier had become sadly wise about his country’s fate and that of the few countries in which populist authoritarianism was still a dominant force.”

“Carlos Andres Perez’s Prediction,” by Alvaro Vargas Llosa (1/5/11) 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


5) Cut Your 2010 Taxes Now!—Plus, New Blog Posts

IRA Contributions Eligible for 2010 Tax Savings Through January 2011

The season of giving has been extended for U.S. seniors age 70 1⁄2 years or older who make charitable gifts from their Individual Retirement Accounts through January 2011. A provision signed into law on December 17, 2010, makes charitable gifts of up to $100,000—paid this month from an IRA—eligible to be declared as a 2010 gift.

Take advantage of this opportunity for tax savings, and help further the work of the Independent Institute. For more information, please see here and contact Development Director JuliAnna Jelinek at 510-632-1366.


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