Students Won’t Be Collateral Damage in California Big Spenders’ Showdown

imagesThere’s a showdown brewing in California’s not-so-OK Corral—make that the UC Corral—and students are fed up with being the ones caught in the crossfire.

It started back in 2012 when Gov. Jerry Brown threatened to slash state funding for California’s ten University of California campuses unless his Proposition 30  (also known as the “Millionaire’s Tax”) passed. The UC Regents fired back, complaining that slashing funds would compel them to hike tuition some 20 percent mid-year—about $2,400.

The massive tax hike passed by more than 55 percent, and Sacramento’s coffers are brimming at $108 billion, with another $3 billion surplus projected for next year. In return, UC officials froze tuition—until this week, that is.

The UC Regents, led by UC President Janet Napolitano, say their share’s not big enough, and they want more of the spoils. So they voted to hike tuition 5 percent annually over the next five years unless they get more state funding.


Right-to-Try Laws Now in 5 States

21096315_SAfter this month’s elections, the number of states that have “right to try” laws for experimental drugs has hit five. One in ten states: Not bad for an effort run out of one think tank in Arizona.

However, I have seen no evidence that any manufacturer of an experimental drug is taking advantage of these laws to supply medicines to desperately ill patients in these states. This is understandable: Doling out the medicines to needy patients threatens the sanctity of clinical trials and, therefore, FDA approval.

Congress needs to reform the rules governing the Food and Drug Administration to make use of more real-world evidence in approving new medicines (as described in a recent book by Peter Huber, The Cure in the Code). This is statistically challenging and not to be undertaken lightly. Nevertheless, if more states pass “right to try” laws, I expect that Congress will see the necessity of taking action to relieve the pain of patients suffering needlessly from FDA’s regulatory burden.

The Anachronistic 1979 Oil Export Ban

3734158_SPolitical pressure is building to repeal the 1979 ban on U.S. exports of crude oil to the rest of the world. I blogged on that issue recently in Inside Sources, which was picked up by Orangeburg, South Carolina’s Times and Democrat. Other blogs on that policy issue are forthcoming.

Several reasons for lifting the export ban are evident to anyone who grasps the benefits of free international trade, but the most compelling of those is that the United States now produces more crude oil than it has the capacity to refine, while the refining capacities of other nations exceed their domestic oil supplies. The potential gains from trade could not be more obvious to anyone who has taken Econ 101.

President Jimmy Carter signed the Export Administration Act in 1979, a time when OPEC ruled the global crude oil market. Now that the United States is the world’s leading oil producer, it makes no sense to ban exports of crude oil to nations other than Canada, which is required to process all U.S. crude into gasoline and heating oil and to consume all of it in what some people other than me refer to as our 51st state.

World prices will be lower and less volatile if we can participate directly in the international oil marketplace.

Always Look on the Bright Side of Life

rationaloptimistThe twenty-first century will be a magnificent time to be alive. Dare be an optimist.” —Matt Ridley

On November 12, 2014, the world watched with excitement as another historic human achievement unfolded: After a decade-long journey that covered 4 billion miles in space, the first human spacecraft landed on a comet. This remarkable event is just the latest in the story of human progress and advancement.

In the modern era, when new cycles are driven by “if it bleeds, it leads” and naysayers continue to insist that things are getting worse, it is easy to lose heart and think we are living a world descending into violence, stagnation, bigotry, and [insert your choice of social ill]. Too often, pessimistic voices and sensationalism drown out sober thinking. Dartmouth College economics professor Douglas Irwin noted in the Wall Street Journal earlier this month of another major humanitarian accomplishment that did not make the headlines:

The World Bank reported on Oct. 9 that the share of the world population living in extreme poverty had fallen to 15% in 2011 from 36% in 1990. Earlier this year, the International Labor Office reported that the number of workers in the world earning less than $1.25 a day has fallen to 375 million 2013 from 811 million in 1991.

Such stunning news seems to have escaped public notice, but it means something extraordinary: The past 25 years have witnessed the greatest reduction in global poverty in the history of the world.

A careful review of facts shows that public perception is often out of sync with reality, particularly when long-term trends are taken into account. Matt Ridley’s excellent book The Rational Optimist tells the uplifting side of the story. In his remarkable synthesis of history, evolutionary biology, anthropology, and economics, Ridley presents a very strong case that life is getting better, at an accelerating rate, for all peoples across the world. More than any other factor, Ridley credits the emergence of trade and specialization as the main drivers of cultural advance and material progress. As a result of exchange and the division of labor, innovation was facilitated and encouraged. The best ideas were able to come together to “meet and mate.”

Around 100,000 years ago, when humans began sharing a “collective brain,” “culture suddenly became cumulative, and the great headlong experiment of human economic ‘progress’ began.” In Ridley’s view, “the cumulative accretion of knowledge by specialists that allows each of us to consume more and more different things by each producing fewer and fewer is ...the central story of humanity.” Looking back at the grand enterprise of human history, disease retreated, poverty declined, violence fell, freedom expanded, and individual happiness increased. Fast forward to modern day, even when accounting for the hundreds of millions who still haven’t experienced all the benefits, what people enjoy today weren’t available to the most powerful and wealthy from the past:

[T]his generation of human beings has access to more calories, watts, lumen hours, square feet, gigabytes, megahertz, light-years, nanometers, bushels per acre, miles per gallon, food miles, air miles and, of course, dollars than any that went before. They have more Velcro, vaccines, vitamins, shoes, singers, soap operas, mango slicers, sexual partners, tennis rackets, guided missiles and anything else they could even imagine needing.

One can only wish this side of the story were better known. But luckily, as another hallmark of the Digital Age, virtual libraries of information, ranging from classic works of literature to complete economic treatises to the latest scientific research, is freely available to anyone with access to a computer and Internet. Many top universities now offer free online courses taught by renowned professors. Education and self-edification have never been easier.

Building upon the work of Matt Ridley, the Cato Institute project,, is another great resource that documents improvements in human well-being and advancements in technological and scientific progress that make the world an increasingly better place to live. This multi-disciplinary endeavor brings together a wide array of evidence from academic institutions and international organizations that shows positive trends in numerous categories.

Consider the following:




  • War is increasingly rare and less deadly.
  • Rape and homicide have been on the continual decline and are presently at historic lows.
  • Capital punishment is being used by fewer and fewer states.


Increased tolerance & equality:

As we celebrate Thanksgiving this year with our family and friends, we have much to be thankful for. Earlier this week, I purchased $4.99 rotisserie chicken from Costco. I couldn’t help but feel grateful and marvel that what I do for granted is possible only under globalization and the twenty-first century market economy. For most of human history, obtaining enough food just to barely survive was the primary aim of everyday life for many people. Life was, as described by Thomas Hobbes, “nasty, brutish, and short.” But thanks to the adoption of specialization and exchange, the massive boost provided by the Industrial Revolution, and the widespread embrace of Enlightenment ideals, the course of human civilization was forever altered in a direction that brought liberation and allowed people reach their full potential.

Yes, sailing was not smooth in the past two centuries. Liberalism declined, statism resurged, two world wars were fought, democide and many other unspeakable atrocities were carried out by totalitarian regimes. Their enduring consequences still pose many challenges for us today. Obviously, there still remains much more to be accomplished.

But in our short time on Earth, we humans learned to master nature, overcame the worst tyrannies, and generated wealth and prosperity beyond our ancestors’ imagination. Our species is resilient, resourceful, and innovative. I, too, consider myself a rational optimist and hold high hopes for human civilization in building a bright future.

Your Kaiser Permanente Doctor Will See You Now—At Target

indexI am a pretty severe critic of hospitals. Nevertheless, I like innovation wherever we find it happening, and it is happening in some large systems:

In a move that reflects the increasing wave of consumer-driven healthcare, Target Corporation is teaming up with Kaiser Permanente to open four in-store Target Clinics in Southern California, taking a host of services directly to thousands of customers.

The clinics opened at Target stores in Vista, San Diego and Fontana, and a fourth clinic will open in West Fullerton Dec. 6. They will be staffed by nurse practitioners from Kaiser.

While Target has maintained clinics for the past 10 years at a number of stores, the partnership will allow for a much broader array of services than it typically offered at retail outlets. Expanded services include telemedicine consultations, prescription reviews, pediatric primary care visits, OB-GYN services, vaccinations and flu shots, pediatric and adolescent care and management of chronic illnesses like diabetes and high blood pressure, according to John Holcomb, vice president of healthcare for Target. (Dan Verel, MEDCity News)

I have not been to one of these Targets, but I saw something similar in Charlottesville, Virginia, last weekend. I went to the Walmart and saw one of those convenient clinics that we like (because of their transparent pricing and—well—convenience). However, it was not operated by a national chain of convenient clinics, but Augusta Health, an integrated health system based in the Shenandoah Valley. Like other convenient clinics, it offered a range of services for listed, reasonable prices. I learned that Augusta Health had teamed up with Walmart in the Shenandoah Valley in 2011.

I also like independent physicians. However, when those physicians gripe about convenient clinics and try to block their expansion, they let an opportunity go by—one that large health systems are learning to exploit.

The End of the American Meth Lab? Don’t Get Too Excited.

When people think of meth labs, it usually conjures images of run down houses or trailers in “anywhere” America, chocked full of cooking equipment, cleaners, other chemicals, men in HAZMAT suits, and the “cooks” of the operation sitting in the back of a squad car.

But this narrative of the “American meth lab” may soon be a thing of the past. According to a recent report by the Associated Press, “the nation’s Heartland is ridding itself of the scourge of homemade methamphetamine, with lab seizures down by nearly half in many high-meth states.”

Meth lab busts have declined by 40 percent or more in states with historically high meth production rates. In 2004, nearly 24,000 meth labs were busted by government agencies. In 2013, the DEA reported this number had fallen to 11,573.

Historically, the midwest has seen the most meth production, but every state (save Hawaii) observed at least one meth bust in 2012.

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While the number of domestic meth suppliers may be shrinking, this doesn’t mean the market for meth is going away. As the Associated Press and others have pointed out, the production of methamphetamine is shifting from smaller operations in the United States, to “super labs” in Mexico (cue the Breaking Bad episodes). Border states are seeing sharp increases in meth-related activities. Federal forces in California, for example, seized 3.5 metric tons of meth in 2013. In 2012, this number was about 0.5 metric tons. We see the same trend in Texas and Arizona.

Law enforcement and others have discussed this shift in production as a largely positive change. In an interview with Vice News, one Missouri sheriff stated that police could now devote fewer resources to shutting down meth labs and dedicate their time elsewhere. He noted that hospitals no longer have to contend with individuals burned or otherwise injured while making the drug. (In some states, up to one-third of patients in burn units were there because of meth production; the average treatment cost came to about $6,000 per day.)

But before we go applauding this change as a “win” for the war on drugs, there are a few other things to consider. As noted above, meth production is rapidly shifting from smaller operations to larger outfits. Stated differently, as opposed to individuals making meth, it has now become an operation of the Mexican drug cartels. The cartelization of methamphetamine production is likely to have a variety of serious and perverse consequences.

A few weeks back, I wrote about the legalization of marijuana in Colorado. In it, I discussed some of the economics of prohibition. The recent stories about the shift in meth production allow us to visit the issue in another way.

Cartelization is one of the “textbook” consequences of drug prohibition. The logic behind this shift is straightforward. As law enforcement clamps down on meth production, smaller producers (think two guys in a trailer) are pushed out of the market. The chances of getting caught, possible fines, or jail time make production too costly, and they exit the market. Other small producers face the same decision and many of them will also leave the market.

This exit drives up the price of meth, meaning that those producers who remain in the industry reap larger profits. The chances of a big payoff, combined with the government effectively stomping out a big part of the competition, means that cartels are more likely to enter and thrive in the industry. Moreover, since the industry is illegal, violence is more likely to be used as a means to settle disputes. After all, you can’t call the police to say, “Bob on the corner sold me bad meth.”

The violence associated with the cartels isn’t limited to customers roughing up a dealer after a bad sale. According to Human Rights Watch, more than 60,000 people have been killed by the drug cartels between 2006 and 2012. Hundreds have “disappeared.” This violence has also occurred in the United States. Los Zetas, a cartel known for kidnapping and beheading its competitors, has expanded its operations into the U.S. According to the FBI, the cartel recruits prison gang members in Texas, equips them with AK-47s, and is uses them to collect debt, commit murder, and traffic drugs into the States.

Meth is a terrible drug. A quick Google image search of “meth before and after” illustrates just some of the consequences the drug inflicts on its users. The recent reports that meth production is down in the U.S. may have some benefits, but they are by no means a cause for celebration. U.S. drug policies have effectively shifted the manufacturing of meth from small town, individual operations into the hands of brutal cartels. The effects of this shift, while evolving on a daily basis, will be severe. The cartelization of meth and other drugs in Mexico is yet another reason it’s time to seriously reconsider U.S. drug policy.

Hiring in Outpatient Clinics Froze Last Month

timthumb.phpHiring in health care continued its moderate pace in October. Because non-health job growth has picked up, healthcare hiring no longer dominates job growth. (In August, one in four jobs added was in health care.)

According to Table B-1 of the employment report (Table 1 below), health care hired 24,500 workers in October (seasonally adjusted), increasing employment by 0.17 percent. Non-farm payrolls, excluding health care, increased 0.15 percent. So, job growth in health care has settled down to a rate similar to the overall economy.

However, hospitals have picked up their hiring, adding 7,000 workers for growth of 0.13 percent, as shown in table 1. Hospital hiring had lagged other health hiring for months. Home health added a lot of employees, while nursing homes actually shed jobs. Outpatient clinics froze hiring in October.

Over the last twelve months, as shown in table 2, employment growth in health care (1.63 percent) lagged nonfarm hiring, excluding health care (1.96 percent). Outpatient clinics’ payroll increased by 4.56 percent.

I would like to think that health care has cut back the pace of hiring because facilities are no longer convinced that Obamacare will bring them a gusher of new revenue. However, that is still to be determined. Certainly, publicly traded hospitals and clinics have credited Obamacare for their improved results lately.

Convenient, retail clinics, which are the most effective way to deliver many primary services, have hired lots of people over the last year. Hopefully, these and other outpatient facilities are just taking a breather to manage their growth responsibly, and not losing market share to more expensive hospitals.

Table 1: Employment Situation Summary (seasonally adjusted, thousands)
9/30/2014 10/31/2014 Change Percentage Change
Total Nonfarm















Offices of Physicians





Outpatient care centers





Home health care services










Nursing & residential care facilities



3 0.08%
Nursing care facilities 1,652 1,651 -1 -0.06%
Total Nonfarm less health 124,661 124,850 190 0.15%

[Source: Bureau of Labor Statistics, The Employment Situation, October 2014 (November 7, 2014)]

Table 2: Employment Situation Summary (seasonally adjusted, thousands)
10/31/2013 10/31/2014 Change Percentage Change
Total Nonfarm 137,037 139,680 2,643 1.93%
Health 14,592 14,830 238 1.63%
Ambulatory 6,560 6,744 184 2.80%
Offices of Physicians 2,461 2,510 49 1.98%
Outpatient care centers 694 725 32 4.56%
Home health care services 1,259 1,304 45 3.60%
Hospitals 4,797 4,822 26 0.53%
Nursing & residential care facilities 3,236 3,264 29 0.89%
Nursing care facilities 1,653 1,651 -1 -0.07%
Total Nonfarm less health 122,445 124,850 2,405 1.96%

[Source: Bureau of Labor Statistics, The Employment Situation, October 2014 (November 7, 2014)]

American Medical Association Backs Telemedicine Compact

indexOur blog usually does not cheer the American Medical Association, because it is largely responsible for the Soviet-style centrally fixed prices that prevail in Medicare. Well, today we applaud the AMA for pledging its support to an important initiative that will increase the adoption of telehealth.

The Federation of State Medical Boards (FSMB) has developed an interstate compact to allow physicians licensed in one state to provide telemedicine services in other states which join the compact. It will greatly advance the effective adoption of telehealth nationwide. Yes, I am aware that the pure libertarian view is that licensing should be abolished and certification by private organizations should govern the recognition of professions. Unfortunately, that is not on the radar screen. An interstate compact allowing physicians to practice telehealth across state lines is a very positive step that will pre-empt federal interference in professional licensing.

The next steps would appear to be a Congressional resolution giving the FSMB’s proposed compact the thumbs up, and the states resolving to join the compact.

NYC’s Success Academy Charter Schools Are Beating the Odds . . . and Powerful Unions

school-choice-300x199It’s no secret that labor union rules impose significant burdens on schools. More than a decade ago Lance Izumi oversaw a rigorous study that examined the impact of 25 years of collective bargaining on the effectiveness of California public schools. It found that rigid union rules put California schools and classrooms in a stranglehold that negatively impact not only day-to-day operations but, most importantly, student achievement.

More recently,’s Nick Gillespie sat down with Eva Moskowitz, founder and CEO of Success Academy, which is one of New York City’s most successful charter school networks, to talk about how charters are shaking up the education establishment. This eye-opening 17-minute interview, How Eva Moskowitz Outmuscled the Teachers Union, is a must-see for anyone frustrated by the schooling status quo in California and across the country.

Thank you to Lisa Snell, Education and Child Welfare Director at the Reason Foundation, for sharing it. As Reason’s Jim Epstein explains:

In November 2003, Eva Moskowitz, then a freshman member of the New York City Council, held explosive public hearings about how union contracts imposed inane work rules on public schools. The city’s political establishment was astonished.

Mosowitz—a former history professor, public school teacher, and self-proclaimed liberal, whose politics up until that point seemed to resemble those of every other Democratic politician in New York—was sacrificing her political career to take on organized labor. Exposing the consequences of teacher union contracts was a direct affront to the United Federation of Teachers (UFT), which wields enormous influence in New York City elections.

Moskowitz didn’t pussyfoot. At one point in the hearings, she even played audio testimony from a whistleblower with a disguised voice. She said that many of her sources declined to appear because they feared union retribution. She also went toe-to-toe with Randi Weingarten, the UFT’s confrontational leader.

Two years later, when Moskowitz ran for Manhattan Borough President, Weingarten and the UFT mobilized against her and sunk her candidacy. So Moskowitz left politics for the time being; if she couldn’t transform the system from within, she would build an alternative to the public schools.

Today, Moskowitz is the founder and CEO of Success Academy, which is the city’s largest and most successful charter school network. With 32 schools around New York City—staffed by a non-union teaching force—Success Academy posted test results last year that astounded education policy experts.

Moskowitz’s courage and conviction are inspirational, and her example serves as an important reminder of the power individuals have to accomplish positive reforms against the odds.


Elizabeth Warren on the Economic Consequences of the Obama Administration

senator-elizabeth-warrenElizabeth Warren, recently appointed to a Democratic leadership position in the Senate, explained her priorities: “Wall Street ... is doing very well, CEOs are bringing in millions more and families all across the country are struggling,” she said. “We have to make this government work for the American people. And that’s what I will fight for.”

The comment is interesting because it embodies the assumption that government policy actually can improve people’s economic well-being. Many people reading The Beacon would think that the less Elizabeth Warren and her Senate cronies do, the better off we’ll be.

But let’s say she’s right, and government policy actually can improve people’s economic lot. When President Obama came into office six years ago, he was supported by a Democratic House and Senate, so they determined the government’s policies. And while the Democrats have now lost their Congressional majorities, Obama is still the president and the Senate will still be majority Democrat for a few more weeks.

If government policy actually does affect people’s well-being, as Warren implies, we could re-state her comment to say, “Our party has been in power for six years now, and thanks to our policies, CEOs are prospering while families across America are struggling.” Is that an unfair interpretation of what she’s said?