Tag: free markets

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).

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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?

How Capitalism Saved the Pilgrims

When I was growing up, my father would occasionally tell me the story around this time of year of how private property rights saved the Pilgrims from starvation.

When the Pilgrims first arrived in 1620, as my father told the story, they tried to live communally according to the spirit of the Mayflower Compact. What crops they grew were put in a common storehouse and then apportioned according to each family’s need. The small colony struggled to survive for two or three years until its leaders declared that every family henceforth would be responsible for growing its own food. The new system proved much superior at putting food on the table.

Years later, when I was writing editorials for the Colorado Springs Gazette, I would tell the story in print on Thanksgiving Day, this time quoting from Governor William Bradford’s first-hand account. One of my fellow editors objected to my version, claiming it was Squanto the friendly Indian who saved the Pilgrims by teaching them how to fertilize their crops with dead fish. We agreed to disagree and I stuck to my version.

Earlier this year, as I was reading Nathaniel Philbrick’s bestselling book, Mayflower: A Story of Courage, Community, and War (New York: Penguin Books, 2007, paperback edition), I came across a passage that weighs in decisively on our editorial dispute. It appears my father did know best after all.

From page 165 of Mayflower:

The fall of 1623 marked the end of Plymouth’s debilitating food shortages. For the last two planting seasons, the Pilgrims had grown crops communally–the approach first used at Jamestown and other English settlements. But as the disastrous harvest of the previous fall had shown, something drastic needed to be done to increase the annual yield.

In April, Bradford had decided that each household should be assigned its own plot to cultivate, with the understanding that each family kept whatever it grew. The change in attitude was stunning. Families were now willing to work much harder than they had ever worked before. In previous years, the men had tended the fields while the women tended the children at home. “The women now went willingly into the field,” Bradford wrote, “and took their little ones with them to set corn.” The Pilgrims had stumbled on the power of capitalism. Although the fortunes of the colony still teetered precariously in the years ahead, the inhabitants never again starved.

Among the many things I’m thankful for this week is that I live in a country that was founded on the solid rock of property rights and free markets.

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Federal Bailout of GM Still Horribly Wrong

Our friends at The Economist magazine usually talk good sense about free trade and free markets, which makes their retrospective endorsement of the government bailout of General Motors all the more disappointing.

In a leader in the current issue, the editors write that critics of the bailout (count Cato scholars among them) owe President Obama an apology. “His takeover of GM could have gone horribly wrong, but it has not,” they opine.

The Economist argues that, in contrast to state coddling of industries in, say, France, President Obama has driven a hard bargain by requiring GM to fire top management, cut jobs, close plants, and reduce its brand names. The magazine grants that the president’s labor-union allies won special concessions that came at the expense of bondholders, but “by and large Mr. Obama has not used his stakes in GM and Chrysler for political ends.”

First, it’s a pretty low bar to say an intervention was right because it did not go horribly wrong. The editors then too quickly brush over the horrible injustice of stiffing the taxpayers of Indiana and others who bought GM bonds and should have been in line ahead of the more politically connected United Auto Workers union.

To curry favor with organized labor, President Obama put $50 billion of taxpayer resources at risk. A post-bankruptcy GM turned a profit last quarter, along with most other automakers, but it is doubtful its anticipated IPO in the next few months will raise anything like the $80 billion or more needed to return the “investment” to taxpayers.

On top of that, the bailout of GM went far beyond any valid power granted to the federal government by the U.S. Constitution, and it blatantly favored two companies over a multitude of others in the very competitive automobile market.

Remind me again who owes whom an apology?

Don’t Be Afraid of the Chinese Economic Tiger

The news that China has surpassed Japan as the world’s second-largest economy has generated a lot of attention. It shouldn’t. There are roughly 10 times as many people in China as there are in Japan, so the fact that total gross domestic product in China is now bigger than total gross domestic product in Japan is hardly a sign of Chinese economic supremacy.

Yes, China has been growing in recent decades, but it’s almost impossible not to grow when you start at the bottom — which is where China was in the late 1970s thanks to decades of communist oppression and mismanagement. And the growth they have experienced certainly has not been enough to overtake other nations based on measures that compare living standards. According to the World Bank, per-capita GDP (adjusted for purchasing power parity) was $6,710 for China in 2009, compared to $33,280 for Japan (and $46,730 for the U.S.). If I got to choose where to be a middle-class person, China certainly wouldn’t be my first pick.

This is not to sneer at the positive changes in China. Hundreds of millions of people have experienced big increases in living standards. Better to have $6,710 of per-capita GDP than $3,710. But China still has a long way to go if the goal is a vibrant and rich free-market economy. The country’s nominal communist leadership has allowed economic liberalization, but China is still an economically repressed nation. Scores have improved, but the Economic Freedom of the World report ranks China 82 out of 141 nations, just one spot above Russia, and the Index of Economic Freedom has an even lower score, 140 out of 179 nations.

Hopefully, China will continue to move in the right direction. That would be good for the Chinese people. And since rich neighbors are better than poor neighbors, it also would be good for America.

Obamacare Complexity vs Free Market Simplicity

Free markets are characterized by voluntary exchange between buyers and sellers. Mapping that relationship is absurdly simply, as this image indicates.

Indeed, the only reason I even bothered to include that image was for purposes of comparison. Here is a new flowchart prepared for the Joint Economic Committee showing the healthcare system under Obamacare.

It’s worth noting, by the way, that the system already was a disaster even before Obamacare was enacted. In the health care sector, free markets are only allowed to operate in very rare cases, such as cosmetic surgery, laser eye surgery, and (for better or worse) abortion. The rest of the sector was heavily distorted by government intervention. Obamacare simply makes a bad situation worse.