Illinois Passes Its First, Country’s 18th, Tax-Credit Scholarship Program

This week the Illinois legislature passed legislation creating the country’s 18th tax-credit scholarship program, and the bill is on its way to Gov. Bruce Rauner, who’s said he’ll sign it. UPDATE: Gov. Rauner signed the bill (see here).

Officially called the Invest in Kids Act, Illinois’ flagship tax-credit scholarship program was passed as part of a compromise school funding bill. (See SB 1947. On the lengthy legislative battles, see here and here.)

Unlike voucher scholarships, which are funded by government appropriations, tax-credit scholarships are privately financed through donations to non-profit scholarship organizations.

The Invest in Kids Act makes students from low- and moderate-income families eligible for scholarships, which are scaled based on family income. When awarding scholarships, non-profits must give priority to low-income students, students in districts with poorly performing public schools, called “focus districts,” and siblings of scholarship recipients.

Scholarship amounts cannot exceed the lesser of necessary private school costs and fees, or the statewide average public school operational expense per student, which averages just under $13,000. Scholarship limits are higher for special needs, English learner, and gifted/talented students.

Want a Happier, Healthier, and More Prosperous Society? Try Freedom, Innovation and Incentives

“I will promote freedom at all costs,” is the first line of the Draper University pledge. Draper University of Heroes is a school I created to encourage people with ideas and energy to pursue their visions through entrepreneurship and risktaking. For an entrepreneur, freedom matters most. The ability to try new things without government interference is paramount to the success of an innovative community.

Because freedom is so important to me, I appreciate all the great work the Independent Institute is doing. They understand freedom. Freedom leads to prosperity, to economic growth, and to innovation. While regulation and government control make us feel safer (although at some point they become less safe), they lead to stagnation, fear, and loss of human spirit.

History and studies have shown that a lighter-touch government leads to more innovation, higher economic growth, and a happier, harder working population. A heavy-handed government slows economic growth and stifles creativity. As governments spend more of their people’s wealth, they tend to add more rules and regulations and their innovation and GDP growth decline.

For the past 50 years, Silicon Valley has been perhaps the greatest engine of freedom in the United States, with entrepreneurs and innovators driving great change. It is comforting for innovators to know that Washington, DC, is 3,000 miles away, so they will be relatively unimpeded by the rules and regulations that stymie an innovation economy.

When there is a new innovation, there is almost always a sociological change. That change may affect the customers, competitors, and suppliers of the business, but it also affects the status quo. Fearmongers will spread fear about the new innovation. Once the new innovation starts to spread, these complainers go after the law, the press, and the government to try to keep things the way they were. Lawyers prepare for battle. Competitors fill the press with concerns, and try to make the government take notice and take action. Fortunately, our government generally allows innovation to continue for some time without intervention, but there are some departments that stop innovation in its tracks.

The FDA makes getting a new drug on the market a time-consuming and hugely expensive process, and they often get it wrong. The SEC took a perfectly good law that the JOBS Act provided and plucked it clean of wings so that few entrepreneurs try to raise money that way. The DOD continues to create so many barriers to sell to them that innovators avoid them and we end up with antiquated technologies defending us.

A Plea for Do-Nothing Government

Nothing promotes bad public policy as much as disaster. An economic depression gives rise to demands for Keynesian “economic stimulus” spending; elevated rates of unemployment among low-skilled workers give rise to demands for increases in the legal minimum wage; shortages of goods and services caused by floods, hurricanes, tornadoes, and other such acts of God give rise to demands for legal prosecution of “price gougers”; and so on and on.
Probably the single most beneficial amendment to the U.S. and state constitutions would be an amendment to forbid the government from “doing something” beyond its normal actions in response to national or local emergencies. Nearly everything the government does on such occasions makes matters worse, ultimately if not immediately. If only the people understood that the government waits for emergencies with saliva flowing, knowing that it can then get away with extensions of its power and the enrichment of its cronies to an extent that would be impossible in normal circumstances.
Today’s phrase is “crisis and leviathan.” Can you say “crisis and leviathan,” boys and girls?

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Robert Higgs is Senior Fellow in Political Economy at the Independent Institute and the author of the Independent book, Crisis and Leviathan: Critical Episodes in the Growth of American Government (25th Anniversary Edition) and other books.

Wonder Woman Schools James Cameron on Strength in Character

The dust up prompted by iconic filmmaker James Cameron’s critical comments of Wonder Woman, and by implication, director Patty Jenkins, may have triggered a long overdue discussion over the validity of gender stereotypes in Hollywood.

Cameron called Wonder Woman, the summer blockbuster, “a step backwards” for strong female characters in an interview with The Guardian. Wonder Woman is “an objectified icon, and it’s just male Hollywood doing the same old thing!” He offered up Sarah Connor, his heroine in the Terminator movies, as the alternative. Sarah Connor, he said, “was strong, she was troubled, she was a terrible mother, and she earned the respect of the audience through pure grit.”

Jenkins, not surprisingly, hit back hard, writing in part, “But if women have to always be hard, tough, and troubled to be strong, and we aren’t free to be multidimensional or celebrate an icon of women everywhere because she is attractive and loving, then we haven’t come very far have we.”

Jenkins is right. Kudos to her for standing up to the iconic director of Titanic, AliensThe Abyss, TerminatorAvatar, and schooling him on what writing strong characters is all about, female or male. Just a little reflection on character development shows that Cameron’s superficial take on female characters is far more typical of Hollywood than Jenkins’ more grounded and polished artistic approach.

A Plea to My Male (and Female) Colleagues in Economics

In a recent blog post, Jeffrey R. Brown, a Professor of Business and Dean at the College of Business at the University of Illinois Urbana-Champaign, published a “public plea” to his “male senior colleagues in economics.” In the post, he references the research of an undergraduate student who looked at the words used to describe male and female economists on a popular gossip site for economists—one that Berkeley economist David Romer referred to as a “cesspool.” (Brown agrees with that descriptor, as do I.)

To make a long story short, the analysis found that people on the website (from anecdotal data, this consists mostly of graduate students with apparently very low opportunity cost) tend to focus their “discussion” of women in the profession, not on their research, but on their physical appearance and sexuality. Some of the words used on the site used to discuss female economists include things like, “lesbian, tits, anal, marrying, feminazi, slut, hot, vagina, boobs, pregnant, cute, marry, gorgeous, horny, crush, beautiful, secretary, dump, date, sexy, and prostitute.”

Brown goes on to suggest that there are things that economists can do—particularly senior male economists (by “senior” he means they have tenure). Below are some of his points. Please note: I have edited his points for length. This is not the entirety of his list.

Review: Detroit Shows How Violence Opens Door to Injustice

The opening lines in the chyron running with the black and white still photos did not bode well for Kathryn Bigelow’s new film Detroit. The overly simplistic, politically hyped, narrative ran, in effect, like this: During the Great Migration, African Americans moved north to jobs, whites moved out to better jobs in the suburbs, and the city center hollowed out. By implication, the 1967 “rebellion” in Detroit and in other U.S. cities during that sweltering summer was inevitable.

Fortunately, Bigelow’s moving and evocative drama is much more nuanced and layered than this introduction suggests. She delivers a fact-based story that should leave audiences perplexed. Indeed, even those that choose to label these “domestic disturbances” for what they were—race riots—will be asking themselves the big question she doesn’t answer: Why didn’t these riots evolve into the grassroots rebellions that activists hoped they would become? (See also historian and fellow blogger Jonathan Bean‘s work on race riots, violence, and police here.)

Principal-agent Theory and Representative Government

In recent decades economists have devoted great efforts to the analysis of the principal-agent problem (see for example Milgrom and Roberts 1992 and the Wikipedia article on “Principal-agent Problem”). This area of study has to do with the incentives and disincentives of an agent acting on behalf of a principal that he is presumed or contracted to represent. No brief summary can do justice to the great variety of issues and problems considered in this literature, except possibly this: a perfect agent is, for various reasons, pretty much impossible; and in many cases a great gap exists between what the agent does and what the principal wanted him to do but could neither compel nor induce him to do with any feasible agency contract.

Although this literature resides mainly in the subfield of economics known as industrial organization, it has substantial implications for the study of politics. For example, the framers of the U.S. Constitution created an institutional framework for the operation not of a democracy, but of a representative republic. There’s that troublesome word—representative. Now consider this: if a principal in a market setting, say, the owner of a business, cannot create a workable contractual relationship (i.e., one without shirking or other forms of opportunism) with his agent, say, the hired manager of his business, what are the chances that the so-called representatives of citizens in the United States of America—the president, the state governor, the congress member for one’s district, and the state legislature member for one’s district—can in any meaningful sense represent more than a handful of citizens? People have complex and widely differing political preferences. How can a congress person represent hundreds of thousands of persons when a firm’s board of directors cannot reliably control the firm’s president to attain a simple objective such as maximization of the firm’s market valuation? The political task assigned is impossible. The “representative” part of the representative republic cannot be taken seriously by anyone who thinks about the matter more than a minute or two.

Localize, Don’t Federalize, Educational Choice

Parental choice in education has many advantages, as we see in the growing majority of states with choice programs. Yet using the federal government to expand educational choice is risky, as The Heritage Foundation’s Linsdey Burke, The Cato Institute’s Neal McCluskey, and I explain in our Washington Post editorial.

The Trump administration has made clear that it wants to support school choice. In his February address to Congress, the president called education “the civil rights issue of our time,” and he has pledged to direct $20 billion to advance choice. He also picked school choice stalwart Betsy DeVos as his education secretary.

Trump deserves credit for seeing the need to weaken a government monopoly, let parents choose the best education for their unique children and leave educators free to teach as they see fit. But there is great risk in federalizing choice: He who pays the piper calls the tune, and federal control could ultimately impose the same regulations on once-independent schools that have stifled public institutions.

Sex and Economics: Is Capitalism Less “Bang” for Your Buck?

Several months ago, I wrote a piece titled, “My Vagina Doesn’t Care for Your Identity Politics,” in which I discussed how the most recent presidential election played directly into the idea of identify politics—that an individual should engage in or refrain from certain activities based on a particular group to which they belong.

Alas, here I am again with another discussion of sex and economics. Vaginas (and orgasms) are once again an apparent topic for discussion.

A recent article in the New York Times discussed a study that suggested women behind the iron curtain in communist East Germany reported more sexual satisfaction (in the form of more orgasms) than their Western, capitalist counterparts. The author uses this data to suggest that communism was (is?) better for women in many ways and that this “benefit” of communism is sadly overlooked.

Some might remember that Eastern bloc women enjoyed many rights and privileges unknown in liberal democracies at the time, including major state investments in their education and training, their full incorporation into the labor force, generous maternity leave allowances and guaranteed free child care. But there’s one advantage that has received little attention: Women under Communism enjoyed more sexual pleasure.

Europe’s Lessons for Economic Growth

A bird’s-eye view of the Eurozone economies a decade after the financial crisis invites three conclusions: Governments that made unpopular free-market reforms are already reaping the fruits; families and businesses are acting more sensibly than their governments; last but not least, people have behaved much differently than the European Central Bank (ECB) intended.

The fastest growing countries are Ireland (6.6 percent), Spain (3 percent) and Portugal (2.8 percent). The first had already engaged in reform before the financial crisis, the second did so later on, and the third applied them sequentially under a right-wing government and then a left-wing coalition that included some communists! These three countries have also created the most jobs in the past three years, followed by none other than Greece, which is beginning to grow after undergoing traumatic shock therapy.

All Eurozone countries except Spain and France already comply with the fiscal rules of the union. Ireland’s state accounts are practically balanced, and Greece’s show a surplus of almost 1 percent!

In recent years, if one paid too much attention to Europe’s strident populist movements known as “indignados” (“the outraged ones”), it looked as if most Europeans had bought into third world demagoguery. But far from the fiery streets, families and businesses were patiently purging the excesses of the go-go years. Four years ago household debt amounted 97.5 percent of family income, and now the proportion is down to 93.6 percent. This is one among several areas where the United States might learn something European. In the U.S., household debt has now reached $12.73 trillion according to the Federal Reserve, surpassing the all-time record.