Archives: 04/2009

National Defense, Keynesianism, or Just Pure Rent-Seeking?

Sen. Johnny Isakson (R-GA) is fighting hard to maintain production of the F-22 Raptor fighter jet, which happens to be made by Lockheed Martin in Marietta, Ga. But Isakson insists that he’s not fighting for the plane just because it’s made in Georgia. No, he tells NPR, it’s important to recognize that it’s actually made by 90,000 workers in 49 states, and you don’t want to lose those jobs at a time of high unemployment.

In a letter to President Obama, he spelled out his argument, albeit with slightly different numbers:

Over 25,000 Americans work for the 1,000+ suppliers in 44 states that manufacture the F-22. Moreover, it is estimated that another 70,000 additional Americans indirectly owe their jobs to this program. As we face one of the most trying economic times in recent history it is critical to preserve existing high paying, specialized jobs that are critical to our nation’s defense.

To be sure, Isakson does insist that the plane is vital to national security, an argument that Defense Secretary Robert Gates and Cato’s Chris Preble challenge. But it doesn’t say much for Republican arguments against President Obama’s wasteful spending when Republican senators argue that we should build a hugely expensive airplane as a jobs program.

New at Cato Unbound

This month’s Cato Unbound continues our tradition of stirring up controversy. The lead essay is by Patri Friedman, who challenges the advocates of liberty as follows:

I deeply yearn to live in an actual free society, not just to imagine a theoretical future utopia or achieve small incremental gains in freedom. For many years, I enthusiastically advocated for liberty under the vague assumption that advocacy would help our cause. However, I recently began trying to create free societies as my full-time job, and this has given me a dramatic perspective shift from my days of armchair philosophizing. My new perspective is that the advocacy approach which many libertarian individuals, groups, and think tanks follow (including me sometimes, sadly) is an utter waste of time.

Argument has refined our principles, and academic research has enlarged our understanding, but they have gotten us no closer to an actual libertarian state. Our debating springs not from calculated strategy, but from an intuitive “folk activism”: an instinct to seek political change through personal interaction, born in our hunter-gatherer days when all politics was personal. In the modern world, however, bad policies are the result of human action, not human design. To change them we must understand how they emerge from human interaction, and then alter the web of incentives that drives behavior. Attempts to directly influence people or ideas without changing incentives, such as the U.S. Libertarian Party, the Ron Paul campaign, and academic research, are thus useless for achieving real-world liberty.

Cato isn’t called out by name, but it easily could have been. Like I said, Cato Unbound tries to be controversial.

What’s needed, Friedman claims, is not more study or advocacy, but a change in the deeper institutional structures that give rise to government policies. Competition among states (and non-state agents!), new technologies, and new intentional communities may just induce old-fashioned governments to behave a whole lot better. By contrast, just recommending somewhat better policies won’t do very much, not if all we do is write about them. (Friedman seems particularly skeptical about blogs. Ahem.)

Is this just a young person’s impatience? Or has Friedman found a serious weakness in libertarian activism? One reply I might make is that Cato scholars have researched quite a few topics that Friedman would probably find worthwhile. It’s important to document these things, and much of this work directly furthers the kind of structural reform that Friedman favors.

Consider the many Cato scholars who have heralded the rise of tax competition – in which states feel increasing pressure to deliver a low-cost product when their taxpayers can move elsewhere. Or consider Bryan Caplan’s The Myth of the Rational Voter, a book whose conclusions inform Friedman’s own project. This book began with a series of discussions among public policy scholars (on a blog no less!). Cato actively promoted Caplan’s work, and we would hope that Friedman would find this an effort well-spent. An upcoming event with author James Tooley shows how the world’s poor are founding their own schools to educate themselves, admirably free from any state interference – a new, private social practice bests an incompetent government! These things matter, I’d say, and they matter even if we accept Friedman’s premises. (We’re also giving a platform to Friedman, both here and at an event on April 7.)

In any case, this a big and very important discussion for the libertarian movement, of which the Cato Institute is only a part. Cato Unbound will have a remarkable series of panelists commenting throughout this week and next, including Jason Sorens, founder of the Free State Project; Peter Thiel, co-founder of PayPal and noted philanthropist; and Brian Doherty, who has researched and written about more forms of libertarian activism than most of us can even recall. Whatever side of the debate you end up taking, be sure to stop by to catch this month’s edition of Cato Unbound.

The More Obama ‘Challenges,’ the More Education Will Look the Same

The Obama Administration talks a mighty game about “change” and taking politics out of decision making, but at least when it comes to education it seems to be all about playing politics.

The Wall Street Journal has a terrific editorial on the latest evidence of old school political maneuvering by Obama’s education apparatus. (And Andrew Coulson has just blogged about the nefarious goings-on.) Basically, the Obama people let Congress slash the jugular of DC’s school voucher program despite almost certainly having an evaluation in hand showing that students in the program did better than those who tried to get vouchers and failed. And when was this report finally released? Last Friday afternoon, a perfect time to keep press coverage to a minimum. 

I had to insert “almost certainly,” by the way, when stating that education department people had the report in hand while the voucher killing was going on because, according to the WSJ, U.S. Secretary of Education Arne Duncan’s people have refused to say who knew about the report’s results when. Apparently, they didn’t want to deliver any smoking gun showing that they tried to suppress the DC evidence.

So the Obama Administration is hostile to school choice. What, then, is its plan for reform?

Here’s what Secretary Duncan recently told the Washington Post after dismissing DC’s voucher program:

The way you help them [all kids] is by challenging the status quo where it’s not working and coming back with dramatically better schools and doing it systemically.

Oh, challenge the status quo and deliver “dramatically better schools”! Of course! Why didn’t I think of that?” I mean, that’s powerful stuff, along the lines of how do you get to Mars? You fly there!

Obviously, the important thing is how you challenge the status quo and provide better schools, and for decades we’ve been trying sound-bite-driven reform like Duncan offered the Post, and exhibited in his recent declaration that he will “come down like a ton of bricks” on any state that doesn’t use waste-rewarding “stimulus” money effectively. And how will we know when a use is ineffective? Why, we’ll make states report on test scores, teacher quality, and other things, and then threaten to withhold money if outcomes don’t get better.

Of course, we know how well that’s worked before.

Simply put, tough talk from politicians has delivered pretty much nothing good for kids or taxpayers. The powers of the status quo – the teachers unions, administrators, and bureaucrats who live off our moribund public schools – have effectively neutered almost every top-down, tough-guy reform ranging from state standards, to Goals 2000, to the No Child Left Behind Act. And of course they have: These groups have by far the most political power in education because they have by far the greatest motivation and ability to control education politics. After all, the system provides both their livelihoods and much of the money they use for political action, and you and I have no choice but to pay for it! And like all of us, the adults who control the schools want as much money, and as little accountability, for themselves as possible.

So what would really challenge the status quo? Look no further than what the unions, administrators, and bureaucrats hate the most: school choice! Yes, the very reform that Duncan has regularly pooh-poohed, undercut, and ignored is by far the greatest threat to the status quo. Why? Because it is the only reform that would destroy the monopoly that keeps the education interests in power! Choice would also unleash specialization, competition, and innovation – the wonderful market forces that give us everything from constantly improving computers to incredibly reliable delivery services – but from a reform standpoint, the most fundamental thing that choice would do is actually challenge the status quo, not just talk about it. 

Unfortunately, it seems that kind of change is too challenging for Obama and company. It’s just much easier to give the special interests all the money they want, wrap it up in tough talk, and kneecap anything that would really challenge the woeful status quo.

Bloggers: Help Spread the Word about Cato University 2009

Cato University, the Cato Institute’s premier educational event of the year, is right around the corner!

On June 26-31 in Rancho Bernardo, California, Cato University will bring together outstanding faculty and participants from across the country to discuss how the state has expanded during times of crises; the threats to liberty, privacy, and independence, as the rush for government-imposed solutions (and, hence, power) increases in pace; and, what can be done to restrain – or reverse – its growth.

This year’s topic: Economic Crisis, War, and the Rise of the State.

We’ve created a special banner (below) for this year’s Cato University – and hope you’ll take an opportunity to use the image to spread the word about this year’s program to friends, blogs, other Web sites, and more. The embed code is provided for your convenience….so, just click and share!

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New at Cato

Here are a few highlights from Cato Today, a comprehensive daily email from the Cato Institute. You can subscribe, here.

  • Doug Bandow weighs the usefulness of NATO in the American Spectator.
  • David Isenberg discusses the use of private military and security contractors in war for United Press International.
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CER: A (Slightly) Different Perspective

My colleague, Michael Cannon, makes several good points about comparative effectiveness research (CER), both in his letter to USA Today and in his excellent paper on the subject. I strongly agree with him that we should not reflexively oppose CER—much of health care spending is wasteful or unnecessary, and it makes sense, therefore, to test and develop information on the effectiveness of various treatments and technology, giving consumers tools to evaluate the value of the care they receive. There is also a case for the use of CER in taxpayer-funded programs like Medicare and Medicaid. Taxpayers should not have to subsidize health care that has not proven effective, nor can Medicare and Medicaid pay for every possible treatment regardless of cost-effectiveness.

However, I am more skeptical in general about CER than he is for several reasons.

  • First, “quality” and “value” are not unidimensional terms. In fact, such concepts are highly idiosyncratic with every individual having different ideas of what “quality” and “value” means to them, based on such things as a person’s pain tolerance, lifestyle, feeling about hospitalization, desire to return to work, and so forth. For example, a surgeon may tell you that the only way to ensure a cure for prostate cancer is a radical prostectomy. But that procedure’s side-effects can severely impact quality of life - so some people prefer a procedure with a lower survival rate, but fewer side effects. Who is better suited to determine which of those procedures represents “quality” and “value,” a government board or the person directly affected?
  • Second, comparative effectiveness research too often has a tendency to gear its results toward the “average” patient. But many patients are outliers, whose response to any particular treatment, for either good or ill, can vary significantly from the average. This matters little when the research is simply informative. However, if the research becomes the basis for more prescriptive requirements, for example prohibiting reimbursements for some types of treatment, the impact on patient outliers could be severe.
  • Third, comparative effectiveness research can create a time lag for the introduction of new technologies, drugs, and procedures. The FDA, for example, has already caused delays in introducing drugs that have resulted in unnecessary deaths. Depending on how the final program is structured, comparative effectiveness research could create another layer of bureaucracy and testing between the development of a new drug, for example, and its introduction into the health care system. One only has to look at the difficulty in expanding Medicaid drug formularies to see how this could become a problem.

The advocates of government-sponsored CER clearly intend for it to be used as a basis for rationing care, not just in government programs, but for private insurance as well.

Cannon points out that government-sponsored CER is likely to be corrupted under pressure from special interest lobbies and politicians. I couldn’t agree more. Government-sponsored CER, therefore, is liable to yield the worst of all possible worlds, not only rationing, but rationing that is based on special interest lobbying rather than science.

Health care, is of course, a finite good. Therefore, it will always be rationed in some fashion. But, it is far better if the rationing agent is the consumer himself, rather than the government or any other arbitrary agent. The private sector is already undertaking CER. To the degree that consumers, insurers, and providers make use of this information, that is a good thing. If consumers don’t like how an insurance company, for example, uses CER in determining its reimbursement policy, he or she can choose a different insurer.

Government-imposed fiat rationing allows for no such choice. Therefore, we should oppose any government involvement in CER, and any efforts by the government to use CER to restrict reimbursement, especially in private insurance plans.