The Independent Institute

 
        

Introduction to Public Choice



48791353_mlPublic choice uses economic methods to analyze political decision-making. Too often, both “policy experts” and the general public perceive problems and conclude that the government should do something about them, without evaluating whether government intervention could actually make things better. Public choice examines how the political process actually works rather than relying on a hope that if things aren’t ideal, somehow government can improve them.

I have just published a short book that gives an introduction to the theory of public choice. It presents the fundamental models that underlie the discipline to describe the way the political process actually works. The book isn’t anti-government or pro-government. It just presents public choice models of the political process in a manner similar to the way that economic theory presents models of the way the market economy works. From that analysis, it is apparent that sometimes even well-intentioned government intervention will make things worse.

For organizational purposes, my book divides the study of public choice into three major areas. The first is “Aggregating Voter Preferences,” which looks at how individual preferences are aggregated into group preferences through voting. The second is “Designing Public Policy,” which discusses the way that interest groups, elected officials, and government bureaucrats interact with each other to produce government policies. The third is “Constitutional Design,” which explains how the rules within which government decisions are made and how they evolve over time.

Free to Burn the Flag



My grandfather retired as a Lieutenant Colonel from the United States Air Force. As such, he was given a full military funeral upon his death.

I remember that day better than most. It was bitterly cold and had rained non-stop for several days. I remember thinking that the men shooting during the “21 gun salute” were probably none too pleased about the TLC they would need to give their weapons later. I remember the pallbearers carrying my grandfather’s flag-draped casket through the cemetery and how their polished shoes were covered in mud.

Most of all, I remember the remarkable precision that several military personnel took to remove the flag from his coffin, fold it, and hand it to my father. After the funeral, my parents bought a special box for the folded flag where it remains to this day, in my dad’s office.

Without a doubt the flag holds a great deal of symbolism for many people. Perhaps this is why so many are in agreement with recent statements (or a tweet, rather) by President-elect Donald Trump.

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While many people have used this as yet another illustration of Trump’s radical rhetoric, this sentiment is not far off from what a great deal of Americans actually feel. Consider that, at the time of this writing, Trump’s tweet has been re-tweeted some 65,000 times and liked another 200,000.

The Price Is Right! Trump’s Choice of Health Secretary Indicates Push to Repeal and Replace Obamacare



30216439 - hand writing obamacare on a white boardDonald Trump’s choice of Rep. Tom Price, MD, (R-GA) as his nominee for U.S. Secretary of Health & Human Services indicates the Trump administration will make a serious effort to repeal and replace Obamacare with patient-centered health reform.

After some initial signs of hesitation to try to achieve this six-year old campaign promise, Obamacare’s opponents can now be confident that skilled leadership will wage a sophisticated and likely successful effort to restart health reform. Here are four reasons why:

  1. Price is a physician, an orthopedic surgeon by specialty. One reason he entered politics was his own experience dealing with the increasing burden of insurance and government bureaucracy.
  2. Price is Chairman of the House Budget Committee. He knows how to deal with Congress. More importantly, he knows the ins and outs of “reconciliation,” the parliamentary procedure which allowed Congress to get an Obamacare repeal bill (H.R. 3762) to President Obama’s desk last year. Reconciliation is a procedure that allows a bill to bypass a Senate filibuster. In the current lame-duck session, Dr. Price has continued to champion reconciliation as the way to keep momentum on repealing and replacing Obamacare.
  3. Under his chairmanship, the House Budget Committee led the House and Senate to agree on a concurrent budget resolution for FY 2016, the first in six years! If President Obama had cooperated, this would have re-instituted businesslike budgeting for the U.S. government. A post-Obamacare health reform will likely include significant changes to how the U.S. government will finance and subsidize access to health care. Dr. Price’s experience will allow him to discuss the options thoroughly with the Treasury Secretary and other members of the cabinet who will be involved, as well as a cooperative Congress.
  4. Price first introduced his own health reform bill in 2009 and has re-introduced and improved it in every Congress since. He knows how to negotiate health reform legislation with his congressional colleagues, an experience which will serve him well in the Trump administration.

The choice of Dr. Price to lead the U.S. Department of Health & Services should make proponents of health care that puts patients and doctors – not politicians and bureaucrats – in charge of our health care very optimistic about positive change in 2017.

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For the pivotal alternative to Obamacare, see Priceless: Curing the Healthcare Crisis and A Better Choice: Healthcare Solutions for America, by John C. Goodman, published by Independent Institute.

Ideology, Identity Politics, and Politico-Cultural Conflict



55272658_mlThe past year’s political events, especially the campaign for the presidency as it converged on a contest between Hillary Clinton and Donald Trump, have illuminated the way in which ideology, with the identity politics that springs from it, drives a dialectical process: political domination creates resentment, which feeds reaction and, on occasion, revolution against a previously entrenched ruling class and its belief system.

The various interest groups and institutions linked with the espousal of political correctness—in short, Hillary’s base—had become more and more pervasive and intrusive for fifty years or so. No doubt the members of this ideological bloc took for granted that they could, and would, only march toward greater and greater power over the populace until that glorious day when the last remnants of the old, despised social order, including the belief systems that supported it, would be crushed once and for all beneath the wheel of history that they had insisted on giving a boost lest the inexorable “progress” be slowed or—perish the thought—halted.

Meanwhile, however, the scores of millions of Americans whose ideas and social actions did not comport with the progressive agenda grew more and more resentful, but the political process failed to cough up a champion who would, and could effectively, lead a counter-revolution by the “deplorables” against the detested cultural and political establishment.

“Surprise” Medical Bills a Big Problem



33919068 - doctor typing on a computer keyboard at officeYale University professors Zach Cooper and Fiona Scott Morton have published a new article reporting their research on “surprise” medical bills. These occur when a patient goes to an in-network hospital but is treated (without his knowledge) by an out-of-network doctor and receives an unexpected bill from the doctor (or doctors).

Examining 2.2 million claims from a database of privately insured patients, Cooper and Morton found that over 99 percent of visits to emergency rooms were at in-network hospitals, but over one-fifth of those visits generated a claim from an out-of-network doctor. At the extreme, one patient faced a bill of almost $20,000.

Professor Cooper (with whom I am slightly acquainted from conferences) thinks a solution lies in state laws making hospitals price all services, including physicians’, in a bundled contract with insurers. How much doctors charge would then be subject to private negotiation between doctors and hospitals.

Within the current system, it is a reasonable solution. However, it invites the question: Why are hospitals, physicians, and insurers not already operating like this? The answer must lie in the overly complex regulatory morass governing how these actors interact with each other.

No other service business would try to get away with this. Remember when President Obama was trying to convince us that the Obamacare health-insurance exchanges would operate like Expedia or Travelocity? It is laughable in hindsight. Nevertheless, while most people agree that actual airline travel (which is regulated by the federal government) is miserable, buying a ticket to fly is a convenient and transparent process. A passenger does not get a bill from the co-pilot a month after his flight, stating the co-pilot was not in the airline’s network, and the passenger must pay extra!

Bundled pricing is a characteristic of a normally functioning market. In health care, that invites less, not more regulation.

Reference: Zack Cooper & Fiona Scott Morton, “Out-of-Network Emergency-Physician Bills—An Unwelcome Surprise,” New England Journal of Medicine 2016; 375:1915-1918 (November 17, 2016) DOI: 10.1056/NEJMp1608571

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For the pivotal alternative to Obamacare, see Priceless: Curing the Healthcare Crisis and A Better Choice: Healthcare Solutions for America, by John C. Goodman, published by Independent Institute.

Students for Democratic Society?



55986706_MLI am the faculty advisor for the Florida State University Students for Liberty. I am guessing that is the reason I received an email from the FSU Students for Democratic Society which says, in part:

Anyone who has been following Donald Trump’s campaign has seen examples of Trump’s racist, xenophobic, and misogynistic, far-right ideology. Supporting the deportation of Muslims, building a wall on the US-Mexico border, and carpet bombing Syria are just a few examples of what Trump is trying to accomplish. ... On January 20th the day of Trump’s inauguration, we are interested in organizing a campus wide walk-out. Afterwards during Trump’s Inauguration ceremony, there will be a protest at the old Capitol Building organized by various progressive groups at FSU, TCC and FAMU.

I replied to the email noting the irony that an organization which claims to support “democratic society” is protesting the outcome of a democratic election. I can well-understand why people might be uneasy about the impending Trump presidency, but it is more difficult to understand why an organization that, by its name, purports to be pro-democracy, would object to the outcome of a democratic election before the person who was democratically elected has even taken office. If Trump eventually engages in anti-democratic actions after he takes office, that might merit a protest by a pro-democracy group. In this case, it appears that the SDS is anti-democratic.

Yes, I know the left-wing history of the SDS. My comment isn’t so much expressing surprise at the group’s dislike for Trump, but rather noting that the Students for Democratic Society is demonstrating by its actions that in fact, it does not support democracy.

Make No Mistake: Fidel Castro Was a Horrible Person



62871096 - portrait of fidel castro in yangiyer, uzbekistan, may 11, 1963.Cuba’s former dictator, Fidel Castro, has died at the age of 90.

When I woke up on Saturday morning to see the news, I was surprised by the reaction of many friends on social media, as well as the national media. The New York Times headline read, “Cuban Revolutionary Who Defied U.S., Dies at 90.” Al Jazeera’s headline read, “Castro: The Making of a Legend.” Others on Facebook and Twitter seemed saddened by the death of a “revolutionary.” Canadian Prime Minister Justin Trudeau called Castro a “remarkable leader.”

Let’s be clear—Fidel Castro was not a good person.

His ideas were not good.

His policies destroyed the liberties of millions of Cubans.

His government is responsible for the murders of tens of thousands of people.

His “legacy” should be one of pure shame.

I won’t delve into the history of Fidel Castro’s revolution in Cuba—but those lamenting the loss of such a “great leader” would do well to crack open a history book, or at least spend a solid 90 seconds reading Wikipedia. As opposed to restoring the freedoms lost under the U.S.-backed dictator that Castro ousted, he crushed them.

In his first decade in power, Castro’s government instituted a variety of “progressive” reforms. His backers point to programs aimed at literacy and equality. Filmmaker Michael Moore foolishly lauded Cuba’s medical system in the the film Sicko. (For a discussion of how the Cuban healthcare system actually works, see here.)

What these individuals tend to ignore, however, is the cadre of human rights abuses inflicted by the hands of the Castro regime. Systematic mass executions of ex-government officials, the internment of homosexuals, and the implementation of mass government surveillance are all a part of the Castro story. This is not to mention the myriad of show trials, executions, and punishment of any dissent from average citizens, writers, academics, journalists, and artists.

Castro’s body count varies depending on who you ask. The Cuba Archive Project has one of the most reliable data sets. The group’s records cover a period from May 1952 to the present. In order to be counted, the stories of each victim must be verified by two independent sources. To date, the Archive attributes some 10,723 deaths to the regime. Including nearly 1,000 deaths linked to “disappearances,” more than 2,000 extrajudicial killings, and over 3,100 people killed by firing squad. Some 100 minor children have been murdered by the regime via beating, the withholding of medical attention, and other methods. In addition to these killings, some 78,000 people are estimated to have died while trying to flee the country.

To those unconvinced by mass murder that Castro was a lamentable dictator, consider his government’s practice of forced blood donation. This can range from taking a person’s blood forcibly without their consent to coercing individuals to offer their blood.

The Cuba Archive has credible information on at least 11 cases of forced blood extraction prior to execution. According to the Inter-American Commission on Human Rights of the Organization of States (OAS) 1967 report regarding the practice at Havana’s La Cabaña prison, an average of seven pints of blood were forcibly taken from prisoners on their way to be executed, causing “cerebral anemia and a state of unconscious paralysis.” (For perspective, the average adult has around 10 pints of blood in their body.) Victims would then be taken to the firing squad on a stretcher.

The Cuban government would then sell the blood to the North Vietnamese for around $50 a pint.

Today, Cubans are required to “donate” blood before even minor medical procedures. Year-round media campaigns encourage citizens to donate in an effort to “save lives.” In reality, the Cuban government has kept up with its history of exporting blood products. According to Cuba’s Oficina Nacionel de Estadísticas (National Office of Statistics), the country exported some $622.5 million—an average of $31 million per year—of blood products between 1995 and 2014. (It’s worth noting that these numbers may very well be understated. Other products made from blood derivatives may not be classified as blood products when exported.)

In the event that mass murder and force blood donation don’t quite do the trick, see the following.

Click here for a general discussion of the regime’s atrocities.

Click here for information on the use of “Military Units to Aid Production”—forced labor camps for conscientious objectors, homosexuals, and other “enemies of the state.”

Click here to learn about the sinking of the 13 de Marzo tugboat, which killed 41 fleeing Cubans, including 10 children.

Click here for a breakdown of the murders committed by the Castro regime between 1959 and January 2012.

When celebrating “revolutionary” thinkers, we would do well to actually know what it is that we are discussing. When it comes to Castro, those mourning his death reveal their complete and utter ignorance of history or show their total lack of appreciation for even the most basic human rights—including life.

Fidel Castro died peacefully as an old man. The same cannot be said for the thousands of Cubans who died violently and prematurely at the hands of his regime.

Tax Reform for Investment Income



39435815 - businesswoman calculating tax at desk with calculator in officeExecutive Summary

The unexpected election of an at least nominally Republican president, along with Republican control of both Houses of Congress, presents a unique opportunity for the incoming Congress to make meaningful reforms to the tax system. One major problem has been the over-taxation of corporate income. Another is the under-taxation of carried interest.

In brief, I propose:

  • Tax corporate income and dividends in such a way that the total tax burden for investors in the top personal tax rate is the same as for salary income, while giving investors in lower tax brackets some of the advantage of their lower bracket. Achieve this by adding half of “qualified” dividends (i.e. those that are “qualified” by coming from taxed US corporations) to taxable income, and taxing corporations at that rate that makes the total burden equal to the top personal rate. As shown below, this corporate rate would be 24.7% under the current top personal rate of 39.6%, or 19.8% under the 33% top personal rate proposed in 2016 by the the House leadership. Add all of non-qualified dividends to taxable income.
  • Add half of “qualified” capital gains (again “qualified” by coming from taxed US corporations) and all of non-qualified capital gains to taxable income. Abolish the distinction between short-term and long-term capital gains, since favorable treatment of long-term gains will no longer be necessary to mitigate the double taxation of corporate income. Abolishing the special treatment of long-term gains will incidentally eliminate the unwarranted favorable tax treatment of “carried interest.”
  • Allow all capital gains to be indexed for inflation, thereby removing a second rationale for special treatment of long-term capital gains.
  • Abolish the 2013 3.8% surtax on investment income, since it merely aggravates the over-taxation of investment income at present.
  • Expand the tax-deferred treatment of institutionalized savings to remove artificial restrictions on contributions and withdrawals.

Political Power Takes a Hit in J. K. Rowling’s Fantastic Beasts



fantastic_beasts_and_where_to_find_them_posterJ. K. Rowling’s entertainment and cultural empire expands with the addition of Fantastic Beasts and Where to Find Them, a well-crafted action film that will surely push the Harry Potter film franchise beyond the $8 billion gross receipts milestone. Fantastic Beasts has already earned nearly $300 million worldwide, solidifying Rowling’s role as a leading producer and now screenwriter. This is good for liberty because Rowling’s story continues her interest in promoting tolerance, vigilance against tyranny, and the courage of everyday heroes.

David Yates, the director who also helmed the last four Potter films (Order of the Phoenix, The Half-Blood Prince, and the two-part Deathly Hallows), keeps audiences engaged with plenty of action involving mischievous and sometimes humorous magical creatures as well as state-of-the-art special effects. Strong performances by veteran actors Eddie Redmayne (Newt Scamander), Colin Farrell (Percival Graves), Katherine Waterston (Porpentina “Tina” Goldstein), and creative casting in supporting roles (e.g., indie rock singer Alison Sudol as Queenie and Dan Fogler as Jacob Kowalski) provide a remarkably good balance of depth, seriousness, and humor. Rowling’s screenplay seems to reflect a more complete and intentional effort at filmmaking, and audiences benefit as a result.

The story begins as Newt Scamander, the author of what will become one of Harry’s standard textbooks at Hogwarts, lands in 1926 New York City. The city is a stopover, a port of entry into the United States, and we soon find that the wizarding world of North America operates differently than the one in England. Non-magical people are called No Majs rather than muggles, and their society is governed closely by the Magical Congress of the United States, or MACUSA, led by President Seraphina Picquery (Carmen Ejogo) and Graves, her Director of Magical Security.

I couldn’t help but note how the acronym MACUSA when spoken in the movie, rhymes with Yakuza, the transnational crime network based out of Japan. While I have no evidence that this was intentional, the analogy is not too much of a stretch, given the controlling nature of some in the Congress, the harsh justice meted out to those who disobey their rules, and the regressive nature of some of the laws.

The Congress has been relentlessly purging magical beasts because they are considered universally “dangerous,” placing Newt at immediate risk since he is transporting enough creatures to fill a nature preserve in his suitcase. Newt’s motivations become central to the plot because his life’s calling is to protect, conserve, and preserve magical beasts. He sees their beauty, accepting them for what they are rather than what others want or perceive them to be. A more open-minded and sophisticated approach would result in successfully integrating these creatures into wizarding society.

When some of these animals escape onto the streets and into the shops of New York, their mischief triggers a crisis that requires the Congress to intervene and the deployment of aurors to rein in wayward wizards. Newt is betrayed by disgraced auror Tina’s naive understanding of the Congress, but then forges a partnership with tinges of romantic attraction. Her sister Queenie joins the team while No Maj Jacob Kowalski ends up stumbling into their quest and enthusiastically assists in recapturing the animals.

The wizarding world’s problem, however, is much bigger than Scamander’s escaped beasts. The city is also under attack by an Obscurace, a dark force that manifests itself in wizarding children who try to conceal their powers. An Obscurace is pure evil—uncontrollable, indiscriminately destructive, and parasitic, using children as its host. We find that Newt has encountered and defeated one before, and this puts him in a unique position for understand its power. Not surprisingly, the Obscurace’s dark power is coveted by some wizards, particularly those in positions of authority within the Congress. What starts out as an attempt to recapture and save largely benign, often lovable if annoying creatures becomes a life-or-death struggle to destroy the Obscurace before all of New York is destroyed and the wizarding world revealed to all No Maj kind.

The dark quest complements embedded social commentary, another one of Rowling’s storytelling hallmarks. Set in the middle of the Roaring Twenties, a period of cultural dynamism, growing wealth, personal excess, alcohol prohibition, and the rise of organized crime, Fantastic Beasts examines the underbelly of Western culture, political power, and corruption through the lens of a parallel magical world. For example, Newt and Tina meet with a seedy and duplicitous goblin (played by Ron Pearlman) operating out of a speakeasy as a illegal trafficker of magical creatures. The Magical Congress prohibits marriage between magical and non-magical people. Magical humans are not allowed to own magical creatures. The Congress relentlessly enforces rules that prohibit activity and behavior that might reveal their world to non-magical people, even putting to death those that break these rules and appear to jeopardize the security of their world. Fantastic Beasts has plenty of anti-authoritarian and pro-individual freedom themes and subthemes for those willing to look. At one point, Newt observes that the U.S. magical world is not that much different from the one in Britain except that it’s less advanced (less politically and socially progressive).

Fantastic Beasts also continues Rowling’s explorations in the abuse of power. Those in authority try to usurp the Obscurus to expand their power, and, in the process, destroy any hope for redemption for the unwitting host (who is a socially marginalized character). Tolerance and the role of ordinary people standing up to evil remain front and center in the actions of the lead characters. Newt is no superhero; he is a bookish researcher, with a great deal of empathy for the plight of humans and beasts. The fallen auror Tina doesn’t have special powers or abilities (for a wizard), but she has a passion for justice and protecting the abused.

While the action in Fantastic Beasts is well timed and choreographed, and the plot is sufficiently layered and complex to keep many in suspense until the closing scenes, the characters are not particularly well drawn or layered. This may be intentional, to emphasize the unremarkable and everyday nature of the heroes. The only major character with a clearly defined arc is the No Maj, Jacob Kowalski, a World War I veteran who returned to mundane factory work but aspires to open his own bakery. He is brought into the journey by happenstance, but discovers a entirely new world with all its beauty and danger. As Jacob’s memories are about to be erased for the sake of preserving wizarding kind, Dan Fogler poignantly conveys Jacob’s feeling of loss and the injustice of the act even as he accepts its necessity.

These limitations in character development, however, don’t distract significantly from the film. Fantastic Beasts and Where to Find Them fits well into the pantheon of J. K. Rowling’s world, one that is largely consistent with the skepticism of power, the value of individual leadership and courage, and the importance of tolerance and understanding as a foundation for civil society. These are also values that map well over Millennials, as research by Anthony Gierzynski and Kathryn Threlkeld has shown in Harry Potter and the Millennials: Research Methods and the Politics of the Muggle Generation. Having them built into a solid, imaginative action film with dazzling special effects certainly doesn’t hurt.

The White Man’s Burden: More Drinking, Drugs, and Suicides Since 2000



46586331_mlMore nonsense has been written about White nationalism/supremacy in the wake of Donald Trump’s election than anyone should have to read. So, it is a pleasure to find some actual data analysis on the role of the non-college educated white citizen in the success of the Trump candidacy, especially versus Mitt Romney’s failed 2012 campaign.

The Economist has determined that health status explains the Trump vote better than being a non-college educated white citizen does. Health status is inversely related to voting for Trump: The sicker you are, the more likely you are to have voted for Trump. Non-college educated whites are also likely to be sicker, so the two variables are not independent. Nevertheless:

Although we could not find a single factor whose explanatory power was greater than that of non-college whites, we did identify a group of them that did so collectively: an index of public-health statistics. The Institute for Health Metrics and Evaluation at the University of Washington has compiled county-level data on life expectancy and the prevalence of obesity, diabetes, heavy drinking and regular physical activity (or lack thereof). Together, these variables explain 43% of Mr. Trump’s gains over Mr. Romney, just edging out the 41% accounted for by the share of non-college whites.

(“Illness as an Indicator,” The Economist, November 19, 2016)

  • MyGovCost.org
  • FDAReview.org
  • OnPower.org
  • elindependent.org