Tag: free markets

Bacon, Duct Tape, and the Free Market

It’s hard to imagine how we would get through life without necessities like bacon and duct tape. But have you ever thought about how the free market gives you so much for so little?

Here’s a video that should be mandatory viewing in Washington. Too bad politicians didn’t watch it before imposing government-run health care.

And since we’re contemplating the big-picture issue of whether markets are better than statism, here’s some very sobering polling data from EurActiv:

A recent survey has found deep pessimism among European Commission staff on a wide range of issues, including the course of European integration over the past decade and the likelihood of success of the EU’s strategy for economic growth. Some 63% partially or totally agreed that “the European model has entered into a lasting crisis.”

This is remarkable. Even the statist über-bureaucrats of the European Commission realize the big-government house of cards is collapsing, yet politicians in Washington still want to make America more like Europe.

The Morality of Profit

The free market needs and deserves a moral defense. Cato senior fellow Tom G. Palmer delivers part of that defense, regarding economic profits, in a new video:



This is an installment in a series entitled “The Morality of Free Enterprise,” a joint project of the Atlas Economic Research Foundation, where Palmer serves as the vice president of international programs, and the John Templeton Foundation.

Palmer is also the director of Cato University; so if you’d like to hear more from him, we hope you’ll register today and join us July 24-29 in historic Annapolis, Maryland for our annual summer seminar on political economy. Students may also apply for a scholarship.

Obama’s Economic Policies Create Misery

The public has finally started to give President Obama’s economic policies a big “thumbs down”.  This shouldn’t surprise anyone who is familiar with the Misery Index.

While President Obama sings the glories of big government, it is ironic that he has been marked by the curse of government failure.  One metric that measures how this curse will affect the President’s performance is the Misery Index (see the accompanying chart).

The Index is calculated by adding the difference between the average inflation rate over a president’s term and the average inflation rate during the last year of the previous president’s term; the difference between the average unemployment rate over a president’s term and the unemployment rate during the last month of the previous president’s term; the change in the 30-year government bond yield during a president’s term; and the difference between the long-term, trend rate of real GDP growth (3.25%) and the real rate of growth during a president’s term.

I have forecast what President Obama’s most likely Misery Index score will be at the end of his current term.  This miserable score – one that is relative to George W. Bush’s very weak performance in his second term – is already baked in the cake and can be laid squarely at the feet of President Obama’s own policy errors and government failure.  For a president whose agenda is designed to overthrow the Reagan Revolution, the Misery Index should be a sobering reminder that free markets, not big government, generate prosperity.

Cato Unbound - There Ain’t No Such Thing As Free Parking

This month at Cato Unbound we’re discussing a practical, everyday issue – parking!

Yes, Cato Unbound is supposed to cover big ideas, deep thoughts, and the like, but parking policy is both important in its own right and also points to what I consider a very interesting problem: Given a theoretical or abstract commitment to free markets, well, how do we get there in the real world? What would a free-market policy look like in this or that issue area?

The answer isn’t always obvious, and the map isn’t the territory. Parking is interesting in this respect and possibly helpful. Parking is all around us, most of us deal with it every day, and the unintended consequences of parking policy are I think maybe easier to see than the unintended consequences in other fields. Parking affects how we live, how we shop, and how we work. It touches our cities, our family life, our environment, and even our health. Learning to look for such unintended consequences is part of developing a political culture that values economic insights and puts them to work.

That’s why this month we’ve invited four urban economists, each of whom can fairly be said to value the free market. Still, there will be a few disagreements among them – as I said, the map isn’t the territory. Donald Shoup leads the issue with his essay “Free Parking or Free Markets?” – arguing that our expectation of abundant free parking is both bad for our communities and the product of anti-market planning.

The conversation will continue throughout the month, with contributions from Professor Sanford Ikeda, Dr. Clifford Winston of the Brookings Institution, and Cato’s own Randal O’Toole. Be sure to stop by throughout the month, or else subscribe via RSS.

Pro-Choice Activists Become Skeptics of Regulation

In the Richmond Times-Dispatch, Barton Hinkle notes that the Virginia General Assembly has just passed “tough new regulations on abortion clinics.” And

Suddenly, outraged liberals are sounding remarkably like libertarian advocates of laissez-faire capitalism and the industries they defend.

For instance, abortion-rights supporters already are warning that the heavy hand of government will impose requirements so absurd and so economically burdensome that they will force clinics to close their doors. “What they’ll do is put a burden of extra cost that is not backed up by sound science,” said one abortion provider who spoke on condition of … whoops! Actually, those were the words of Alva Carter Jr., chairman of a New Mexico dairy industry group, who was protesting new groundwater pollution regulations last April.

“The scale of the … current assault is unprecedented,” complained Planned Parenthood spokes — no, that was The Wall Street Journal, raging last November against the EPA. The paper said the agency “has turned a regulatory firehose on U.S. business and the power industry in particular.”

“The massive red tape … threatens to strangle … the industry,” complained — well, that was Investor’s Business Daily, writing about the Dodd-Frank financial bill last year. The paper cited a report by the American Bankers Association warning that “the coming ‘tsunami of regulations’ could wipe out hundreds of smaller banks.” Substitute “abortion clinics” for “smaller banks,” and you have the Virginia debate in a nutshell. (And yes, let’s stipulate right here that many so-called conservatives believe in limited government everywhere except the uterus.)

“They could require things that are completely unnecessary.” That actually was a quote from an abortion-rights supporter: Shelley Abrams, the director of A Capital Women’s Clinic in Richmond.

And she is entirely right. Sometimes government does require things that are not strictly necessary. And those requirements impose a heavy financial burden. This is hardly a revelation. Small-government advocates have been saying it for many years. Yelling it, actually, at the top of their lungs. To little avail.

Example: Supporters of abortion rights now worry that even existing clinics might have to obtain a Certificate of Public Need from the state. To which one might reply: Why should they be different? For years, certain voices in Virginia have been suggesting that the COPN process — essentially, a government permission slip for health-care providers — creates an unnecessary market entry barrier. They have argued that government has no business deciding whether a particular community needs a particular health-care facility.

He goes on to note that

when free-marketeers and industry groups gripe about the burden of governmental regulation, they often get truth-squadded by deeply skeptical liberals. On Monday, the AP’s “Spin Meter” gave the gimlet eye to predictions that the Obama administration’s new smog regulations could destroy more than 7 million jobs. The news service pointed out that the researcher who came up with the number was “industry-sponsored.” (Boo.) It lamented the “imprecise economic models” used. (Hiss.) And it pointed out that “those opposed to government regulations rarely mention the potential benefits to society.” Amen, brother.

Hinkle hopes that people concerned about the burden that regulation imposes on abortion clinics will eventually come to recognize that regulation also imposes costs and burdens on every other business.

Jerry Taylor and I have both noted in the past the differing media treatment of abortion and other science and health issues. Looking at two NPR stories on the same day, I praised one on the dangers of abortion pills:

It was a good example of careful, cautious reporting. But why are journalists seemingly much more cautious in reporting medical risks involving abortion than in reporting other kinds of risks? There are plenty of critics of the “junk science” involved in the Vioxx stories; why aren’t they interviewed in Vioxx stories? The numbers were small in the Vioxx study, as in the case of the abortion drugs, but that fact was dismissed in one report and emphasized in the other.

Cato’s Jerry Taylor noticed something similar in a Wall Street Journal column 11 years ago (January 3, 1995; not online). He noted that the Journal of the National Cancer Institute

caused quite a stir by publishing an epidemiological study suggesting that women who have abortions are 50% more likely to develop breast cancer than women who do not….”Not so fast,” countered epidemiologists; a 1.5 risk ratio (as epidemiologists put it) “is not strong enough to call induced abortion a risk factor for breast cancer.”

Taylor agreed that a 1.5 risk ratio is below the appropriate level of concern. But he wondered why “the same risk ratio that was so widely pooh-poohed by scientists as insignificant and inconclusive when it comes to abortion was deemed by the very same scientists an intolerable health menace when it comes to secondhand smoke. Actually, that’s not quite true. The 1.3 risk factor for a single abortion was significantly greater than the really hard to detect 1.19 risk ratio for intensive, 40-year, day-in-day-out pack-a-day exposure to secondhand smoke (as figured by the EPA).”

American Manufacturing Continues to Thrive in a Global Economy

University of Michigan economist and American Enterprise Institute scholar Mark Perry has an excellent oped in today’s Wall Street Journal [$] about how U.S. manufacturing is thriving.  It can’t be emphasized enough how important it is to present such illuminating, factual, compelling analyses to a public that is starved for the truth and routinely subject to lies, half-baked assertions, and irresponsibly outlandish claims about the state of American manufacturing.

The truth matters because U.S. trade and economic policies—your pocketbook—hang in the balance.

For more data, facts, and background about the true state of U.S. manufacturing, please see this Cato policy analysis and these opeds (one, two, three).

Random Assignment

The Brookings Institution released a new study today on charter schooling—assessing how well it’s working and what the federal government should do about it. One of the recommendations reads as follows:

Student participation in lotteries for admissions to any public [charter] school and the results of such lotteries should be a required student data element in state or district longitudinal data systems supported with federal funds.

Why? Because it would make it a lot easier to measure relative school quality, by permitting more widespread use of randomized, control group experiments. Experiments are certainly great from a researcher’s standpoint, but mandating that schools must admit students on a random basis has a catch:

an observer effect as subtle as an 80-foot fire-breathing robot. One of the reasons markets work is that exchanges are mutually voluntary, and producers and consumers don’t enter into an exchange unless each perceives it to be beneficial. If you eliminate the mutually voluntary character of an exchange in the process of trying to observe how beneficial it is to one of the parties, you’re affecting the very thing you’re trying to measure. It becomes more likely that you will have students assigned to schools that are not well equipped to serve their particular needs, injuring such students’ educational prospects.

Lottery admission to oversubscribed charter schools appeals to people’s desire for fairness, but a much better solution is to adopt a true market approach to education in which oversubscribed schools have not only the freedom but the incentives to expand as demand increases. For-profit enterprises, schools among them, do not generally ignore rising demand for their services. Kumon, the for-profit tutoring service, does not turn students away when it reaches capacity at a given location, it grows that location or opens a new one. As a result, it now serves about four million students in 42 countries.

Rather than figuring out how to ration good schools, why don’t we just unleash the market forces that will grow and replicate them?