The Case for Small Government

A Libertarian Perspective on Economic and Social Policy

April 24, 2006

New Blog Site

Dear Readers:

I am moving my blog to a new site:

The reason for the change is that typepad is easier to use and more flexible than Blogger. Of course, the recent technical glitches at Blogger did help motivate the switch.

I am not sure if I can import everything from this site to the new site; I will try.

In any case, this site will stay live with its current content for a few weeks.

Thanks for reading, and I apologize for any inconvenience.


The CIA Leak Case

In April, 1963, having been arrested for participating in a non-violent civil rights demonstration, Martin Luther King sat in a Birmingham jail and wrote the following words to his fellow clergyman:

I hope you are able to ace [sic] the distinction I am trying to point out. In no sense do I advocate evading or defying the law, as would the rabid segregationist. That would lead to anarchy. One who breaks an unjust law must do so openly, lovingly, and with a willingness to accept the penalty. I submit that an individual who breaks a law that conscience tells him is unjust and who willingly accepts the penalty of imprisonment in order to arouse the conscience of the community over its injustice, is in reality expressing the highest respect for law.

King’s perspective is relevant to the case of Mary McCarthy, a CIA employee who was fired last weak for leaking information about secret overseas prisons to the Washington Post.

The CIA, like any employer, has the right to fire employees who violate the terms of their employment. And maintaining the confidentiality of classified information is presumably a reasonable condition of employment at the CIA.

Yet at times an honorable employee, at the CIA or elsewhere, might believe that conscience requires violating the conditions of employment. In this situation, what should a person do?

My advice is to take a lesson from the King quote above. Resign first; then release the classified information; and accept any legal penalty that results from these actions.

Had Mary McCarthy proceeded in this manner, people would still disagree about whether her actions serve the national interest. But far fewer would question her motivation or integrity.

April 22, 2006

Sexual Harrassment and "Friends"

Civil liberties attorney Harvey Silvergate discusses a recent sexual harassment case in California involving the TV show Friends. He writes:

The protracted battle between the First Amendment and the PC notion that we're all entitled to go through life without being made to feel uncomfortable took an unexpected turn two days ago. The California Supreme Court—a pioneer in curtailing free speech, ostensibly to protect the “vulnerable” from “verbal harassment”—unanimously reversed a lower court decision that would have allowed a sexual harassment lawsuit to proceed to trial against the producers of the sitcom “Friends.”

Read the full column here.

If nothing else, this case shows the extent to which a well-intentioned law—the 1964 Civil Rights Act—can have ramifications far beyond anything the sponsors envisaged at the time.

April 21, 2006

Housing Vouchers

New York City has announced a plan to increase the rents paid by the better off tenants in its public housing. Rents in these units have not increased since 1989. The proposal makes good sense as far as it goes: better off tenants should pay higher rents, reserving more of the housing subsidy for low-income households. Some of the current tenants have incomes as high as $100,000 per year. Under the proposal, low-income residents do not face a rent hike.

An alternative approach is for the city to sell its public housing units and offer means-tested housing vouchers. This reduces the city’s expenditure by limiting housing subsidies to low-income residents. And it means recipients can choose safer neighborhoods, better schools, or closer proximity to work.

Existing evidence on housing vouchers does not find dramatic effects on outcomes like employment for adults or standardized test scores for children. But the evidence doe suggest that voucher recipients are happier than they were in public housing. Choice seems to make people better off.

April 20, 2006


One alternative to drug prohibition is decriminalization, which means eliminating criminal penalties for possession while maintaining penalties against trafficking. Many critics of prohibition advocate decriminalization rather than outright legalization.

Decriminalization does reduce the legal consequences of prohibition for drug users. So, it is plausibly a step in the right direction.

But decriminalization does not eliminate the black market for drugs, since trafficking is still illegal. Thus violence, low product quality, corruption, redistributions to criminals, erosion of civil liberties, foregone tax revenues, and other ills of black markets are likely to continue. And it is odd for policy to say that drug possession is legal but production and sale are not.

This assessment of decriminalization might seem inconsistent with evidence that drug-related ills are lower in countries that have decriminalized marijuana or other drugs. But this evidence confuses decriminalization with reduced enforcement of drug laws generally. Most effects of prohibition depend on the degree to which it is enforced. If decriminalization means reduced enforcement, then its effects are beneficial because it moves policy from prohibition towards legalization. But policy can obtain these benefits by lowering enforcement against trafficking just as well as by reducing enforcement against possession.

April 19, 2006

Flat Taxes

Much discussion of tax reform considers a flat tax on income or consumption. I focus here on the income case.

The simplest possible flat tax imposes a constant tax rate on all income. This case is mainly of theoretical interest, since few people endorse taxing people with very low income.

A modified flat tax (MFT) therefore includes a zero bracket amount, a range over which no tax is owed. The flat rate then applies to all income above this amount. Many MFTs also eliminate various deductions, exemptions and credits, although this is separable issue from whether the tax rate structure is “flat.” And most MFTs impose a tax rate that is low relative to current top rates.

What are the pros and cons of an MFT on income compared to the current system?

One advantage is simplicity. Some improvement comes from the reduced number of rates, although this is minor given that most people let H&R Block or TurboTax calculate their taxes. Greater simplification comes from taxing all income at the same rate and eliminating deductions, exemptions, and the like.

A second advantage of an MFT is the lower tax rate on high incomes, This improves the incentive to work and save.

The negative of MFTs, according to critics, is reduced progressivity. An MFT is progressive, of course. Low income taxpayers pay zero taxes, while higher incomes taxpayers pay amounts that increase, as a fraction of income, as income rises. But critics are right that MFTs are less progressive than the current system.

Whether this aspect of MFTs is undesirable depends on one’s views about redistribution. I argued in an earlier post against redistribution except for the poor, so I do not mind the lesser progressivity of an MFT.

All in all, there is a reasonable case for a flat tax on income, subject to one key qualification: consumption is plausibly a better basis for taxation than income. Consumption taxation requires a zero tax rate on capital income, however; a flat tax on income imposes the same rate on labor income and capital income.

A future post will discuss income taxation versus consumption taxation in more detail.

April 18, 2006

Oil Prices and "Gouging"

As oil prices surpass $70 per barrel and gasoline prices near $3 per gallon, calls for government to stop “profiteering” and “price gouging” are again on the rise. President Bush, for example, stated Tuesday that “the government has the responsibility to make sure that we watch very carefully and investigate possible price-gouging, and we will do just that.” Similarly, the two Democratic Senators from New Jersey, Frank Lautenberg and Bob Menendez, called Monday for the administration to crackdown on price gouging and hold oil companies accountable for rising gas prices.

Anti-gouging and anti-profiteering efforts, however, are misguided. Without question oil producers gain when prices rise. And these gains look like windfalls, since producers do not incur exploration costs when they sell additional units of existing supplies.

But policies that limit prices and profits have two large negatives. These policies reduce the incentive for consumers to economize on energy use, and they reduce the incentive for producers to discover new supplies or bring marginal reserves on line. Thus, government limits on prices and profits mean more expensive oil and gas in the long term.

Scapegoating oil producers might be good politics, but it is bad economics. As in medicine, primum non nocere; first, do no harm.

April 17, 2006

Gun Buybacks

The city of Boston is considering a new gun buyback program under which it will provide gift certificates to people who turn in guns. Many cities, including Boston, operated such programs in the 1990s, but most let them lapse. The programs took in modest numbers of guns relative to the outstanding stock. Moreover, many guns appeared to be older guns that had not recently been in use, or they were types of guns not commonly employed to commit crime. Plus, some of those who received the cash used it to buy—guess what—new guns.

This time Boston is planning to offer gift certificates rather than cash to discourage purchase of new guns. This will not work. Those receiving the certificates will use them to buy other things and save that cash for purchasing new guns, if that is what they want.

Thus, gun buybacks actually offer criminals a subsidy to upgrade their guns. And, there is no evidence buybacks reduce crime. For example, declines in crime over the past 15 years occurred in virtually all cities, whether or not the city conducted a buyback.

Boston should save its money.

April 16, 2006

Single-Race Schools

The state legislature in Nebraska has adopted, and the governor has signed into law, a bill that divides Omaha’s public schools into districts that fall along racial lines: Black, Hispanic, and White. The key proponent of the bill, Ernie Chambers, is an African-American who believes this approach will give black parents more power over their childrens’ education.

This policy will strike many as misguided, and I agree. It rarely, if ever, makes sense for governments to treat people differently on the basis of race.

But the motivations of those advocating this policy are reasonable. Some black children might learn better in schools with other black children, just as some boys or girls might learn better in single-sex schools.

More broadly, learning styles and learning goals might differ across children in ways that most people would accept as reasonable: some kids need college prep while others need vocational training; some kids need science programs while others need language programs. And so on.

Then a policy that promotes variety and choice has real benefits. The policy that achieves this is vouchers.

Under vouchers, government need not take a stand on single-race schools or on other dimensions of variety. Instead, government provides vouchers and lets parents decide what is best for their kids.

Parents will not always make perfect choices. But many will use the flexibility provided by vouchers to find educational opportunities that best suit their kids.

In addition, vouchers diminish the need for government to take a stand on controversial issues like single-race schools. Most people will find it less objectionable that parents use vouchers to choose a single-race school than that government own and operate singles-race schools. This is exactly the current situation regarding parochial schools. Governments do not operate them, but existing voucher programs permit parents to choose them.

The voucher approach is not perfect. But as the Nebraska case illustrates, it allows the government to sidestep polarizing positions while making parents and children better off.

April 15, 2006

Endangered Species

One controversial environmental policy is the Endangered Species Act, which makes it illegal to harm a species that is “listed” by the Environmental Protection Agency. The Act often prevents private owners from developing or using their land if an endangered species is present.

There are two standard arguments for protecting endangered species. Particular species might have commercial or emotional value. Alternatively, “bio-diversity” might provide a social benefit. For example, some scientists believe bio-diversity can be an important source of valuable medicines.

The fact that a species has high commercial or emotional value, however, does not make a case for the ESA. If the species is on private land, market forces give private owners adequate incentive to protect the species. This approach does not work in all instances, such as for whales in the ocean. But in these instances the ESA does not work well either.

The goal of promoting bio-diversity more plausibly suggests a role for government. If everyone benefits from diversity, but no person or group can capture the full benefits, the private protection of endangered species is less than optimal.

Nevertheless, the ESA works badly in practice. The evidence shows it mainly protects megafauna—Bambi—while having minimal impact on diversity. Indeed, the ESA has encourages pre-emptive destruction of habitats that might house an endangered species. And the ESA generates acrimony from owners whose property is “taken.” Such taking are controversial, as discussed in an earlier blog, because current interpretations of the takings clause allow governments to pay less than property owners’ minimum willingness-to-sell price.

If there is a case for protecting endangered species, governments can authorize expenditure to purchase the relevant land. Of course, this approach makes the costs explicit, and many environmentalists fear taxpayers will not ante up. This concern may be accurate. But in a free society, the costs of policies should be more rather than less apparent.

April 14, 2006


One way governments regulate business is through antitrust law, which prohibits monopolization and other business practices deemed to lessen competition.

The standard argument for antitrust is that monopolies restrict output and raise price above costs. Consumers who value the good at more than cost but less than the monopoly price lose out.

This perspective is correct as far as it goes. But other considerations suggest antitrust does more harm than good.

To begin, existing evidence does not suggest monopoly or market power would be rampant without antitrust. Monopoly and market power unquestionably exist in the short run, such as when a new product emerges. Over time, however, innovation and competition erode much of this monopoly power. Thus, the need for antitrust is less compelling than it might appear.

In addition, antitrust laws have their own negatives. Mergers and takeovers can improve efficiency by permitting economies of scale or scope. The threat of takeover is one mechanism that disciplines bad management practices. And limiting monopoly profits can reduce the incentive for innovation. Thus antitrust might increase short-term efficiency but decrease long-term efficiency by reducing technological progress.

Antitrust policy also distracts attention from cases where governments, not markets, create monopoly or market power. Examples include public schools and the Post Office. More generally, governments erect numerous barriers to entry in the form of fees, permits, and licenses.

If antitrust limited itself to the most obvious and egregious cases, such as naked price-fixing, the benefits would plausibly exceed the harm. But ideal antitrust enforcement does not exist. Rather, the history of antitrust illustrates the mission creep and overextension that often characterize government intervention.

April 13, 2006

Iran's Nuculear Program

Iran announced earlier this week that it has made a technological breakthrough in its nuclear program. Iran claims its intentions are to produce energy, but the Bush administration believes Iran plans to develop nuclear weapons. What, if anything, should the U.S. do in response?

To make the issue as stark as possible, assume the U.S. knows for certain that Iran aims to develop nuclear weapons. And assume the U.S. knows for certain that, absent some action by the U.S., Iran will attain this goal within a few years. Under these assumptions, does it make sense to undertake economic sanctions, or air strikes, or any other intervention?

My answer is no. We do not know whether Iranian possession of nuclear weapons would harm the U.S. or its allies. Iran has little incentive to use such weapons, since it knows this would unleash an unprecedented response from the U.S. and others. Indeed, Iran’s main motivation is probably to deter potential aggressors in the Middle East, like Iraq or Pakistan.

In addition, any attempt to derail the Iranian nuclear program will be costly, unsuccessful, or both. Economic sanctions will have little impact; Iran has oil that the rest of the world wants, creating a huge incentive for cheating. Air strikes might precipitate regime change, but the new regime could be worse than what exists now. And outright invasion would be far more expensive than the invasion of Iraq given how thinly U.S. forces are stretched already.

That leaves one obvious option: do nothing. This approach is not without risks. But it seems preferable to the alternatives.

April 12, 2006

Medical Marijuana

Under current federal law, marijuana is a Schedule I drug. This means that, according to federal law, marijuana has no legitimate medical uses.

Many marijuana users, however, believe marijuana is efficacious in relieving nausea, pain, and muscle spasms. They also believe marijuana alleviates symptoms of glaucoma, epilepsy, multiple sclerosis, AIDS, and migraine headaches, among other ailments.

Those who defend current law claim there is no proof—in the form of appropriate double-blind studies—that marijuana is efficacious in treating various medical conditions.

This claim is roughly accurate, but disingenuous. The absence of scientific evidence results from barriers to marijuana research erected by federal drug enforcement authorities. And the scientific studies that do exist (typically from other countries) support the claim that marijuana has valid medical uses. In addition, abundant anecdotal evidence makes the claims of medical value at least deserving of careful scientific assessment.

It seems odd to many people that drug enforcement authorities oppose medical marijuana; they view this as a separate issue from legalizing recreational marijuana use.

Yet on this point the drug warriors are correct: legalizing medical marijuana would amount to de facto legalization of all use, since the number of ailments for which marijuana can be prescribed is broad. Without an enormous increase in enforcement resources and invasive oversight of physician prescribing practices, authorities could not prevent diversion of “medical” marijuana to other uses.

The drug warriors are correct on one other point: medical marijuana advocates are being disingenuous when they claim the campaign for medical marijuana is just about helping the sick. Most advocates of medical marijuana realize this amounts to back door legalization. And so do many people who listen to the debate between drug warriors and medical marijuana advocates. So these advocates discredit their own cause when they hide behind the medical marijuana shield.

In my view, legalizing marijuana is the right policy. But the effective way to advocate for this policy is by addressing the issue head on, not by focusing on medical marijuana.

April 11, 2006

Wal-Mart Banking

Wal-Mart wants to enter the banking business. Many Wal-Mart critics oppose the move and want federal regulators to block it, suggesting Wal-Mart already wields too much power in the U.S. economy.

This view is misguided. If Wal-Mart can do for prices in the banking sector what it has done for prices in the retail sector, everyone should be delighted (except existing banks). The reason Wal-Mart wields power is because it is efficient. That is exactly as it should be.

April 10, 2006

Public Colleges And Universities

The case for government subsidy of education relies on three main arguments.

The first is that society benefits from having an educated populace, beyond any benefits to the person acquiring the education. In economics language, education generates positive spillovers.

The second is that some people obtain too little education because they are myopic; that is, they fail to recognize that education produces a long-term benefit even though it is costly up front.

The third is that some people cannot afford education.

I do not address for now whether these arguments are convincing. Nor do I address the possibility that government support for education generates unintended costs.

Instead I note that even if the usual arguments for subsidy are compelling, and even if subsidy has no unwanted side effects, the case for education subsidies has two important qualifications.

To begin, this case does not mean government needs to own and operate public schools; governments can subsidize education via vouchers, loans, or grants. In addition, the case for subsidy applies more convincingly to young children in low-income households than it does more generally.

Viewed from this perspective, public colleges and universities make no sense. Much of the expenditure for these institutions benefits high-income households, and it benefits students who are old enough to make reasonable decisions, who can borrow to finance an education, and who are beyond the point at which obvious spillovers occur.

Thus, at a minimum, public college and universities should set much higher maximum tuition rates but then offer discounts on a means-tested basis. Better yet, state governments should replace public colleges and universities with means-tested vouchers. And perhaps best yet, state governments should eliminate subsidies for higher education entirely.

April 09, 2006

Immigration "Reform"

Congress appears to have reached an impasse in its attempt to “reform” U.S. immigration law. This time-out is a good occasion to ask what changes, if anything, might be desirable.

Illegal immigration results from two factors: restrictions on legal immigration, and the gap between economic opportunities available in the U.S. relative to poorer countries. These gaps include both differences in wages as well as differences in government benefits.

Reducing illegal immigration, therefore, requires one of the following steps: fewer barriers to legal immigration; more effective barriers to illegal immigration; or a smaller gap between economic opportunities here and elsewhere.

I personally favor expanded opportunities for legal immigration, even to the point of open borders. Political support for even mild relaxation in immigration restrictions appears wanting, however. I also favor reducing the generosity of “welfare” policies in the U.S., although I do not think the “welfare” magnet is the main reason for illegal immigration.

Enhanced border controls or employers sanctions will not reduce illegal immigration substantially, at least not without huge costs. Moreover, there is little support for the draconian measures that might significantly reduce the inflow.

And anything the U.S. might do to enhance economic growth elsewhere (such as promoting free trade) is likely to take decades rather than years.

The prospects for reducing illegal immigration are therefore bleak. So, what should Congress do?

Probably nothing. Most of what has been proposed will have little effect, and some “reforms” might generate substantial costs (e.g., increased employer sanctions). Amnesties that impose few restrictions on illegal immigrants will bring some of them above ground, but this approach also might generate increased interest in immigration. And the amnesties being proposed are bureaucratic nightmares that few illegal immigrants will find attractive in any case.

The only proposal that is in the right direction is the guest worker program proposed by President Bush. Unfortunately, this proposal has not received strong support.

April 08, 2006


One version of libertarianism holds that governments should intervene only when private actions harm someone else’s person or property; that is, only when private actions generate externalities. For example, externality libertarianism opposes policies that sanction drug or alcohol use, arguing that any harms accrue mainly to those who consume these goods.

The externality perspective on government policy is a useful rule of thumb. Most government policies that make sense are ones that address substantial externalities like crime or pollution. Nevertheless, the externality perspective is incomplete.

The first problem is that almost any action generates at least some externality. Driving under the influence of drugs or alcohol, for example, causes accidents. More broadly, some might claim they suffer a negative externality from contact with persons of particular races, religions, or political views; or from disparities in wealth; or from seeing messy clothes.

Thus, externalities might appear to justify apartheid, wealth redistribution, or taxes on T-shirts, yet no one would accept such logic. One can attempt to avoid this problem by considering only “substantial” externalities, but this quickly becomes hopelessly subjective. The mere existence of externalities, therefore, is not a convincing basis for government intervention.

A second problem is that even when externalities are substantial, government attempts to reduce them generate their own side effects. In some cases these unintended consequences are worse than the externalities; drug prohibition is a standard example.

April 07, 2006


Prostitution is legal in many countries, and in much of Nevada. In legal prostitution markets, government can collect tax revenue. In legal prostitution markets, violence is rare because participants resolve their disputes with lawyers rather than violence. In legal prostitution markets, HIV and other HIdiseases are less likely to spread. Legal brothels test their prostitutes and compete on this basis; government regulation is possible as well.

So why is prostitution prohibited in most of the U.S. and some other countries? Advocates might argue prohibition reduces the incidence of prostitution, but this claim is implausible. The Yellow Pages in every major city contain large sections devoted to “escort” services, and no one doubts that many supply prostitution. Police make many arrests for prostitution, but these produce little jail time or other serious penalty.

The more likely reason the U.S. and some other societies ban prostitution is deference to religious or moral views. Even those who share these views should recognize that promoting them via government bans is costly.

April 06, 2006

Democrats and Vouchers

Democratic politicians tend to oppose education vouchers. One reason is that Democrats obtain substantial support from teachers’ unions, which see vouchers as a serious threat.

Yet one constituency Democrats claim to represent—the economically disadvantaged, especially minorities—is the one with the most to gain from vouchers. This group has the worst public schools and the least ability to choose better ones.

Apparently some Democratic politicians and low-income, minority parents are beginning to realize vouchers might be worth a try. Read more about it here.

April 05, 2006

Massachusetts Insurance Mandate

Massachusetts is set to enact a health insurance plan designed to cover the uninsured. The legislature has approved the bill, and Government Mitt Romney is expected to sign it. Many are pointing to the program as a model for other states, or for the country as a whole, especially since Romney is widely touted as a candidate for the Republican presidential nomination.

The novel feature of the Massachusetts plan is a mandate that all individuals must obtain health insurance. Those who do not have coverage from an employer or from a government program like Medicaid, and who fail to purchase an affordable plan the state promises to make available, must pay a fine assessed via the state income tax.

Why would this kind of mandate be a good idea? As a rule, forcing people to purchase something they have chosen not to buy makes them worse off. Remember the people affected by this mandate are not the poor, since they are covered by Medicaid. Rather, the people affected by the mandate have sufficient income they could afford private insurance, albeit an expensive version in many cases.

The standard justification for this kind of mandate is that society cannot restrain itself from bailing out those who chose not to purchase insurance but then become ill. Therefore, according to this view, government should force everyone to purchase to prevent free-riding.

This argument is a bit odd. It says that because society cannot keep itself from doing the wrong thing (bailing out those who take advantage of society’s good will), society should adopt a policy that punishes some people who are doing a reasonable thing—choosing not to buy health insurance because the costs outweigh the benefits.

Society , moreover, does have a way to discourage free-riding: provide backup health care in a manner few will choose deliberately—via hospital emergency rooms.

And even if the free-rider problem is serious, an insurance mandate is problematic. For many of those subject to the mandate, paying for the “low cost” plan is a significant stretch of their budgets. This creates political pressure to keep the cost artificially low via regulation. Further, it means the mandate might become be a back door mechanism for more subsidized health insurance.

Whether that would be a good outcome is a question for another blog.

April 04, 2006

Funding for Baseball

Baseball is back. And the Red Sox won their first game. So all is right in Boston (for now).

Libertarians, however, must watch their favorite teams with a guilty conscience. Chances are a government subsidy helped pay for the local stadium.

The case for subsidizing stadiums relies on two arguments.

The first is that subsidies pays for themselves by bringing in tax revenue from out-of-town fans. The evidence does not support this claim, however. Yes, some fans come from other jurisdictions, but not enough to justify the hundreds of millions of dollars that cities and states routinely throw at baseball teams.

The other argument for government funding is that baseball generates beneficial “spillovers.” Proponents of this view might claim, for example, that baseball promotes pride in America, or sportsmanship, or civic pride.

Such claims are problematic justifications for government spending, however. One can make similar arguments for government funding of other professional sports, and for museums, opera, symphonies, skating rinks, zoos, and so on; indeed, governments subsidize all these activities based on precisely this reasoning. But this means a political process determines which kinds of entertainment receive government support, and this process reflects the preferences of well-connected elites rather than objective assessments of “spillovers.”

A better approach is to let the marketplace decide.

Go Red Sox!

April 03, 2006

Income Redistribution

Should governments redistribute income?

To address this question, consider two different aspects of redistribution: anti-poverty programs that benefit the poor, and general redistribution that transfers income from richer to poorer at every point on the distribution. Welfare, Food Stamps, and Medicaid are examples of anti-poverty programs. Progressive income taxation is the standard example of general redistribution.

Proponents of anti-poverty programs rely mainly on one or more of the following arguments:

that society should care for the poor out of compassion;

that everyone benefits from alleviating poverty, but since some people might free ride on the charitable actions of others, government must force everyone to contribute;

that private markets do not supply sufficient “income insurance,” so government must intervene;

that a dollar means more to someone in poverty than to Bill Gates, so government can increase aggregate utility by transferring from rich to poor;

that anti-poverty programs prevent revolution;

that anti-poverty programs make it easier for society to avoid distorting policies like rent control or minimum wages.

Each of these arguments has merit. Anti-poverty programs generate costs, of course, so their net benefit is open to discussion and depends on the generosity of the programs. But a reasonable case for some degree of anti-poverty spending exists.

None of the arguments for anti-poverty programs, however, applies with the same degree of force to general redistribution. Setting aside the low end of the distribution, high incomes result partly from luck but also from greater effort, longer hours, willingness to accept risk or unpleasant working conditions, and so on. Moreover, general attempts to redistribute income discourage work and saving far more than (well-designed) anti-poverty programs.

These concerns do not “prove” general redistribution is a horrible policy. And some degree of general redistribution is likely even in the simplest possible tax system. But the main focus of redistribution should be anti-poverty programs, not broader redistribution or “soak the rich” objectives.

April 02, 2006

Gay Marriage

The gay marriage debate has unleashed passionate responses from both opponents and supporters. Opponents believe gay marriage violates moral and religious values, while supporters believe bans on gay marriage are discriminatory.

Lost in the acrimony is the one thing both sides agree on: that government should define and provide civil marriage. Yet this is arguably the source of the trouble.

From a policy perspective, legal marriage is a collection of contractual arrangements between the government, the marrying couple, and their children (if any). In particular, marriage establishes default rules about inheritance, division of common property, and guardianship of children. And civil marriage bundles all these contractual rights and responsibilities.

Governments probably should define and enforce default rules about each component of the marriage contract, such as those about who is the legal parent of a minor child.

Governments can do this, however, without defining or “supplying” marriage. Indeed, governments already do so. If an unmarried woman has a child, government rules determine this mother’s rights and responsibilities with respect to that child, as well as those of the biological father. Likewise, government rules already exist regarding communal property and inheritances for people who are not married.

By exiting the marriage business, governments would avoid any necessity of taking a stand on gay marriage. This would calm the debate and polarization over this issue. Couples that wanted the particular bundle of contracts included in civil marriage could arrange for this through private contracts. Paradoxically, government exit from the marriage business might strengthen religious marriage, precisely the goal of many gay marriage opponents.

The approach outlined here is, without question, unlikely to occur. But it still provides a useful framework for thinking about gay marriage. Viewed from the “contracting” perspective, the main argument for civil marriage would be that this particular bundle helps vulnerable groups, like children. This claim does not seem particularly convincing. If it is, however, it presumably applies to children of same-sex couples and opposite-sex couples alike. Thus, the contracting approach says that if governments do provide marriage, they should include gay marriage.

Would this then mean governments had to provide civil marriage for polygamous relations? Not necessarily. Governments might reasonably decline to provide polygamous marriage simply because such contracts could easily become hopelessly complicated and difficult to enforce.

April 01, 2006

Daylight Savings Time

As we try to recover from the loss of an hour’s sleep Saturday night, it is interesting to think about whether Daylight Savings Time (DST) is a good policy.

The standard argument is that DST saves energy. Even if this is right, however, DST penalizes groups that do not like DST (e.g., farmers) and imposes costs on groups that must adjust twice a year to the change in timing (e.g., airlines). So, the net effect of DST is not obvious.

To read more about DST (which was first proposed by Benjamin Franklin), click here.

To read an op-ed by the foremost historian of DST, click here.

To read about Indiana’s decision to finally impose DST state wide, starting this year, click here. Indiana did exempt bars just this one time because the NCAA Final Four Tournament is played in Indianapolis.

March 31, 2006

Liberal vs. Libertarian Legalizers

An essay I wrote in 2004 discusses liberal versus libertarian views on drug legalization. The first paragraph is here:
To most observers of the drug policy debates, all drug legalizers are alike. The reality, however, is that legalizers come in two distinct flavors. Most legalizers are liberals, and their views on drug policy are consistent with liberal views on other issues. A minority of legalizers are libertarians, however, and their views on drug policy reflect libertarian perspectives on policy generally. There is ample overlap in the views espoused by these two camps. But there are also substantial differences in their views on legalization and related matters.
The full essay is here.

March 30, 2006

Minimum Driving Ages

Due to a tragic accident involving a 17 year old driver, Massachusetts might raise its minimum driving age from 16 ½ to 17 ½. This one accident does not by itself suggest the minimum driving age should be higher; after all, accidents occur every day involving 20 year olds, 30 year olds, and so on. Any minimum driving age must balance the benefits of driving for younger teens against the increased risk of accidents this might entail. Thus, without more systematic evidence, the recent incident tells us nothing.

Nevertheless, the discussion in Massachusetts raises an interesting question: what is the right minimum driving age? To consider this issue, it is useful to ask what would happen if the government imposed no minimum driving age at all.

Most people assume the results would disastrous. Without a minimum legal driving age, according to this view, many young teens would ­drive and leave death and destruction in their wake.

I am not about to suggest that governments should repeal the minimum driving age laws. But the view that repeal would have catastrophic results is likely too pessimistic. In the absence of government-imposed minimum driving ages, two private mechanisms would constrain at least some “underage” driving.

The first mechanism is parents. Few want their 8 year olds driving the family car, for all the obvious reasons. Many parents might want, say, their 14 year old to drive the car on occasion. But most parents would allow this only under restrictive, safe circumstances, such when a parent is in the car or for a short trip to the local grocery store.

Would the discipline exercised by parents be perfect? Of course not, but it would probably not be trivial either. Parents care about their children, so many, perhaps most, would discourage unreasonable risk-taking.

The second private mechanism that would discipline teen-driving is insurance. Current laws mandate auto insurance, and most people want insurance in any case. In the absence of a minimum legal driving age, insurance companies would likely impose minimum driving ages as a condition of coverage. Or, they would charge outlandishly high rates for coverage of young teens.

The potential upside of the private approach is that it might allow for variety that does not exist under current law. For example, some insurance companies might grant coverage at reasonable rates for young teens who have taken extensive drivers’ ed, or who have passed rigorous driving tests, or who live in rural areas. This variety might produce a better balance between the benefits of a lower driving age and the cost. This is not guaranteed by any means. But neither is it guaranteed that the private approach would be worse than current policy.

Does this discussion mean I support repeal of minimum legal driving ages? No, or at least, not yet. It does make me curious about whether accident rates are substantially different in states with low minimum driving ages. And it makes me doubt that raising the minimum driving age in Massachusetts is a good idea, absent evidence that a higher age would reduce accidents enough to justify the added inconvenience to teen drivers and their families.

March 29, 2006

The Takings Clause

The takings clause of the 5th Amendment to the U.S. Constitution states, in part,

Nor shall private property be taken for public use without just compensation.

Much debate addresses the phrase “public use.” In Kelo v. New London, CT, the Supreme Court held that economic development constitutes public use even if a private developer receives the “taken” property. A new case just getting started pushes public use even farther. As Edward Herlihy explains in the Wall Street Journal, the village of North Hills, Long Island, wants to condemn a private golf course in order to replace it with—you guessed it—a “public” golf course.

These cases seem to stretch the concept of public use so far as to make it meaningless. Providing a clean definition, however, is not trivial. So consider the other key phrase in the takings clause, “just compensation.”

One definition is the price at which the property in question would sell on the open market.

An alternative is “willingness-to-sell,” the minimum price at which a property owner would sell voluntarily. Willingness-to-sell can exceed market price. For example, an elderly couple might attach sentimental value to staying in their home.

Willingness-to-sell is the preferable concept from the perspective of economic efficiency. If government forces property owners to sell at a lower price, this imposes a loss that is relevant to calculating whether a government project is desirable.

Current practice in eminent domain cases, however, uses market price as just compensation. That is why situations like New London arise. Government offers the market price, and many property owners sell. A few hold out, however, so the government then uses its eminent domain powers.

What if governments used willingness-to-sell as the measure of just compensation?. Assume for the moment sellers honestly state their true willingness-to-sell.

Under this assumption, the takings clause is irrelevant. The government does not need eminent domain powers to conduct voluntary transactions with property owners.

The problem is that owners might try to “hold up” governments by stating ridiculous willingness-to-sell prices. Whether this problem is serious in practice, however, is not clear.

If property owners overstate their willingness-to-sell, they risk blocking transactions entirely. In that case, they gain nothing. Indeed, rational property owners will overstate only to the point where the government project still occurs. Overstatement therefore transfers wealth to the property owners, but it does not reduce efficiency. In practice, some owners might hold out for ridiculous amounts, in which case some valuable projects would not occur. But the magnitude of this loss might be modest.

The ideal way to apply the takings clause is thus not obvious. My hunch is that using willingness-to-sell as the measure of just compensation would improve resource allocation on average. In the absence of evidence examining this approach, however, it is difficult to know for sure.

March 28, 2006

Congress and Insider Trading

Democratic lawmakers apparently want to ban insider trading by members of Congress and their staffs. Perhaps unsurprisingly, these groups have so far been exempt from the general prohibition against insider trading.

Rather than broadening the ban, however, Congress should repeal it entirely. The ban is problematic on efficiency and equity grounds.

The ban is inefficient to the extent it delays release of relevant information, since this means delayed adjustment of stock prices. Markets cannot allocate resources properly unless they know which companies are doing well or badly.

The ban is inequitable because some corporate executives trade on inside information despite the law. Thus the ban rewards dishonest insiders.

March 27, 2006

Drug Re-Importation

According to a recent story in the Boston Globe, the U.S. government has stepped up enforcement of a law that prevents re-importation of prescription drugs. Many U.S. residents purchase drugs abroad, especially from Canada, to take advantage of lower prices.

This law is misguided.

If drug manufacturers are losing money due to re-importation, they can raise their prices abroad or lower them here. If price controls in other countries prevent higher prices, the manufacturers can refuse to sell there.

U.S. patent laws protect U.S. manufacturers from infringement of their patents. And U.S. laws against fraud protect manufacturers and consumers from fake medicines. The ban on re-importation, however, applies even to drugs that are legally sold abroad, and even when U.S. customers have valid prescriptions.

The justification for banning re-importation is therefore weak. The law is difficult to enforce, so evasion is successful much of the time. The people who suffer most are low-income U.S. citizens who obey the law.

March 26, 2006

U.S. Support of Israel

In a recent paper that has generated enormous controversy, John J. Mearsheimer and Stephen M. Walt examine U.S. support of Israel. The authors, professors at the University of Chicago and Harvard University, respectively, make two main points. The first is that the “Israel Lobby” has pushed the U.S. toward more or less unquestioning support of Israel. The second is that this support harms U.S. interests and should be curtailed or eliminated.

The claim that the Israel Lobby yields outsized influence is hard to assess. Without question various individuals and groups advocate strenuously for U.S. support of Israel. The U.S. electorate is broadly supportive of Israel, however, so the apparent influence of the Lobby is perhaps a reflection of this general perspective, rather than an independent factor.

The claim that support of Israel harms the U.S. is the more fundamental issue, however.

In my view the authors are correct on this claim, and I would go even further. It was a mistake for the U.S. to help create Israel in 1948, and it is a mistake for the U.S. to provide financial or military support now. The creation of Israel endorsed the notion of a sectarian state, and it generated the virtually unresolvable problem of displaced Palestinians. Ongoing U.S. support of Israel produces bitter resentment in the Middle East and likely generates far more terrorism than it prevents. Against these negatives, any benefit to the U.S. from support of Israel is hard to discern.

Israel now exists, so the question of whether it should have been created is moot. But continuing U.S. support is not a given. It is time for open discussion of this issue. The Mearsheimer and Walt paper is an excellent start.

March 25, 2006

Consequentialism, II

If consequential libertarianism is simply cost-benefit analysis, why does it consistently conclude that small government is the right policy?

On the one hand, consequentialism argues that markets work better than most critics recognize. This is not to say markets work perfectly. But in the consequentialist assessment, market work well enough that the case for intervention is not obvious.

On the other hand, consequentialism argues that government works less well than advocates of intervention recognize. This is not to say interventions always make things worse. But in the consequential assessment, government causes sufficient problems that a presumption against intervention is reasonable.

None of this proves the consequentialist perspective is correct. The statements above describe consequentialism rather than “prove it.” Support for consequentialism must come from showing on on a case-by-case basis that markets work moderately well while interventions work badly.

March 24, 2006


What is Libertarianism?

The traditional version, often referred to as philosophical or rights-based libertarianism, asserts that government policy should never infringe individual rights or freedoms. Philosophical libertarians oppose virtually all government intervention since regulations, taxes, mandates, prohibitions and the like all limit individual freedoms.

A different version of libertarianism, often referred to as consequential libertarianism, opposes most government interventions because these appear to generate adverse side-effects that are worse than the problems they were designed to alleviate. Consequential libertarians share the policy conclusions of philosophical libertarians for the most part, but they disagree in some cases. In addition, consequential libertarians argue for small government based on consequences rather than rights.

In my view the consequential approach has several advantages over the philosophical perspective.

To begin, the consequential approach allows one to distinguish moderately bad policies from really bad policies. Drug prohibition is a terrible policy from the consequential perspective because it generates a black market and all the attendant negatives. Moderate sin taxation, however, does not create a black market This does not mean sin taxation is a good idea; it harms responsible drug users by raising drug prices. But the ratio of benefits to costs from moderate sin taxation is likely better than for prohibition. Thus consequential libertarians can feel comfortable encouraging sin taxation over prohibition, even if they have reservations about sin taxation itself.

Philosophical libertarianism has a harder time adopting this kind of nuanced stand. Philosophical libertarianism tends to suggest an absolutist “all interventions are horrible” perspective.

A second benefit of the consequential approach is that it can persuade people who do not agree with the principle that policy should never infringe individual rights. Some such people, for example, might agree that drug prohibition causes more harm than it prevents, even if they would impose limitations on individual rights if they thought such infringements were beneficial overall.

Stated differently, consequential libertarianism is just cost-benefit analysis. Ample room exists for disagreement about any given cost-benefit analysis. But few people dispute that society’s choice of policies should consider the entire range of pros and cons from different interventions. In this sense, few dispute the basic approach that underlies consequential libertarianism.

Maybe consequential libertarians should not use the term libertarian at all; it is often more confusing than illuminating. Maybe the right label is just, “Consequentialism.”

March 23, 2006

Fuel Economy

The Bush administration has proposed revising current fuel economy standards to include SUVs and vans weighing more than 8,500 pounds. Pickup trucks above 8,500 pounds would still be exempt. The fuel economy standards, known as CAFE (for Corporate Average Fuel Economy), impose minimum miles-per-gallon requirements on each manufacturer’s fleet. Current regulations apply only to vehicles weighing 8,500 pounds or less.

Rather than expanding existing fuel economy regulations, the administration should abolish them. Fuel economy standards serve no useful purpose.

Fuel economy is distinct from pollution. Exhaust from cars is a reasonable object of government regulation since it adversely affects everyone. Fuel-inefficient vehicles, however, affect only people who choose to buy them.

The desire to reduce U.S. dependence on foreign oil—the usual justification for fuel economy standards—is misguided. OPEC and other producers must sell their oil somewhere. If a country like Saudia Arabia tried to use oil as a “weapon,” the U.S. would buy oil from third parties who had purchased it from Saudia Arabia.

March 22, 2006

Public Schools and Accountability

Florida is adopting a new method of encouraging good teaching in its public schools. Under this system, salary increases for teachers will depend on student test scores on state-wide exams, not just on seniority and academic degrees.

The policy is one variant of the accountability approach to improving public schools. The theory is that public schools work badly because no one faces real consequences from failure. Thus, policy should hold teachers and students accountable for their performance.

The accountability approach in general, and the Florida version in particular, sound reasonable at first glance. After all, most private employers use salary increases to encourage productivity. Yet caution about accountability is in order.

To begin, accountability does not address the single biggest problem with public school systems, the lack of competition. The ideal reform of public schools recognizes that government support of education does not require public schools. Instead, government can provide vouchers to parents of school-age children. All schools would then be private, and parents would have a choice about where to educate their children. Competition would generate the compensation schemes, curricula, and testing paradigms that conform to parent preferences.

A second problem with accountability is that teachers can respond in various ways. Some might expend more effort on teaching. But others might instead focus on test-specific skills, or encourage low-performing students to stay home on test days, or get students classified as learning disabled, or encourage cheating on the tests. The evidence suggests that both the good and bad responses occur.

None of this means Florida’s new approach is necessarily ill-advised. Assuming the public school system is not replaced by vouchers, merit-based salary increases might be desirable.

The danger, however, is that focus on accountability crowds out support for vouchers. Vouchers are no panacea, of course. But a true voucher system accomplishes everything achieved by accountability and more. So if accountability reduces support for vouchers, it is probably a bad idea.

March 21, 2006


National Public Radio (NPR) and the Public Broadcasting System (PBS), which produce public radio and television programming, both rely in part on government funding. The standard justification is that NPR/PBS programs serve a valuable social purpose yet would never be produced by private markets. This argument is not convincing

Much NPR/PBS programming would exist without government funding. Shows like All Things Considered and Sesame Street are high quality and can compete on their own. Pay cable channels such as Biography, the History Channel, or Arts and Entertainment show that serious, in-depth content can survive in the marketplace. And some NPR/PBS programs, such as Car Talk, serve no broad social purpose even if highly entertaining.

Some NPR/PBS programs might not succeed without government funding. If so, then government is shaping what is presented on TV and radio. Supporters of NPR/PBS would like to believe this shaping is “neutral,” merely promoting high quality programs without taking sides. That view is naïve, at best. Any organization has a perspective, and since NPR/PBS receive government funding, everyone must support their perspective whether they agree or not. The funding is therefore a polarizing activity for government.

The real pity is that government funding represents a small percentage of NPR/PBS funding. Thus all the controversy occurs over small amounts of money. It would be better for everyone if NPR/PBS could be hard-hitting whenever they wish, without worrying about running afoul of Congress. This can only happen if the funding stops.

March 20, 2006

Arrest of a Canadian Pot Dealer

The U.S. Drug Enforcement Administration and Canadian police recently arrested Marc Emery, a Canadian, for selling marijuana to U.S. customers. Emery has for years operated one of the largest marijuana seed operations in Canada. The government there has mainly ignored him, since enforcing anti-marijuana laws is not a priority north of the border. U.S. officials view Emery as an impediment to enforcement of U.S. laws, however, so they arranged to arrest him in hopes of getting him extradited to the U.S.

This incident is just the latest foolishness in the U.S. war on drugs, which generates costs far in excess of any plausible benefits. Prohibition harms drug users by raising prices, reducing quality control, and imposing criminal penalties for drug use. Prohibition breeds corruption of police, prosecutors, and judges, both domestically and in countries like Colombia. Production generates violence between participants in the drug trade, who cannot resolve disputes using lawyers. Prohibition creates unwarranted restriction on the use of marijuana as medicine. Prohibition spreads HIV by encouraging the sharing of dirty needles. Prohibition restricts civil liberties and exacerbates racial tension. On top of all this, prohibition costs roughly $35 billion dollars per year along with the loss of about $15 billion in taxes not collected on drugs.

Prohibition probably does reduce drug use to some degree. The evidence, however, suggests only a modest impact. And to the extent the reduction corresponds to responsible use, this is a cost rather than a benefit of prohibition.

Reasonable people can disagree about whether governments should discourage the consumption of “risky” goods. In any case, however, prohibition is a terrible approach for achieving this goal. Moderate sin taxation accomplishes the same goal—reduced drug use—without generating a black market and the attendant negative effects. This is exactly what most societies do regarding alcohol and tobacco.

March 19, 2006

Gays in the Military

A recent report indicates that more military personnel who have been identified as gay are being allowed to remain in the service. The news is welcome, but it is not enough.

Sexual orientation should not disqualify anyone from serving in the military. Under the current policy of “don’t ask, don’t tell,” military personnel can be discharged merely for being gay, independent of any behavior. This makes little sense.

A policy that forbids fraternization—romantic or sexual relationships between military personnel—is understandable, assuming it applies to heterosexual and homosexual relationships alike. Anti-fraternization policies are difficult to apply consistently in practice, but at least they address on the job conduct rather than sexual orientation per se.

As the country’s attitude toward homosexuality has evolved, so has the military’s. Resistance to ending the ban on gays appear to have weakened substantially. It is time to end the ban once and for all.

March 18, 2006

The Abortion Pill and the FDA

The FDA has announced it is investigating the safety of RU-486, the abortion pill, because of two recent deaths potentially related to its use. Some abortion opponents have suggested taking the drug off the market pending the review, while others have suggested banning RU-486 entirely.

Whether the two recent deaths merit investigation is unclear. The number of U.S. deaths attributable to RU-486 is seven over a period of six years, hardly an epidemic. And any reasonable assessment must acknowledge that surgical abortion and pregnancy carry risks as well.

In addition, the possibility of adverse side-effects is not sufficient reason to remove RU-486 from the market. Many medications carry serious risks, including death, yet they remain legal because their beneficial effects outweigh the negatives. If RU-486 has greater risks than previously recognized, the right response is to provide this information to doctors and patients.

This incident does illustrate the unintended side-effects of government intervention. If the FDA did not regulate which drugs can be sold legally, interest groups would have a harder time politicizing the availability of RU-486.

March 17, 2006

Legalize Purchase and Sale of Organs

Why is it illegal to buy and sell organs?

Opponents of legalization make two arguments.

The first is that legalization helps wealthy patients at the expense of everyone else. The second is that legalization encourages the poor to sell their organs out of desperation.

Neither argument is persuasive. Legalization is likely to increase the supply of organs, thereby benefiting everyone. Access for the poor is a separate issue best addressed by programs like Medicaid. Legalization also means the market for organs will be above ground, which promotes informed consent and appropriate medical care for donors. In the black market that now exists, donors do not have these protections.

Concern for the equity of organ transfer is sensible. But legalization of organ purchase and sale eases equity concerns in addition to making this market more efficient.

Campaign Finance Regulation

House Republicans have introduced a bill that imposes new restrictions on 527 groups, the independent organizations that attempt to influence politics. Under the new restrictions, individuals would face strict limits on their contributions to these groups. Republicans support these restrictions because rich donors like billionaire George Soros have given millions to Democratic-oriented 527s.

The proposed restrictions, along with all campaign finance regulation, are fundamentally misguided.

Campaign finance regulation does not reduce money’s influence in politics; interest groups always find ways around the regulation. A perfect illustration is 527s, which arose in response to pre-existing restrictions on contributions to candidates and political parties. 527s now spend large amounts on “issue ads,” communications that address political topics but do not explicitly endorse candidates. This has changed the way money influences politics but has not reduced that influence.

Money’s influence on political outcomes, moreover, is not necessarily bad. Some monied interests support bad policies, but others support good ones like reduced regulation and taxation. No mechanism consistent with the Constitution’s guarantee of free speech can limit one kind of influence without also limiting the other.

The best campaign finance regulation, therefore, is none at all.

March 15, 2006

Open the Borders

Most Libertarians oppose restrictions on immigration. They hesitate to open the borders, however, without first scaling back entitlement programs. The fear is that many immigrants would enter the U.S. simply to “live off the dole.”

Even without reductions in entitlements, however, the U.S. should remove all impediments to immigration.

By opening the borders, the U.S. would eliminate the costs of enforcing immigration restrictions. These include the expenditure for border controls plus the corruption and disrespect for the law engendered by imperfect enforcement of existing restrictions.

By opening the borders, the U.S. would signal its desire to help those seeking a better life. This would plausibly combat terrorism better than any policy currently being pursued.

By opening the borders, the U.S. would encourage other rich countries to open theirs.

By opening the borders, the U.S. would provide humanitarian assistance to many in desperate need.

On top of these benefits, increased legal immigration might generate political pressure to scale back entitlement programs. So the standard Libertarian view on the relation between entitlement and immigration policies is perhaps backwards.

Opening the borders does carry the risk that a flood of immigration might overwhelm the economy. This concern is understandable but likely exaggerated. Historical experience does not suggest immigration would be dramatically larger than occurs now. And if the borders were open, many immigrants would not migrate permanently. Instead they would earn income here for a period and then return to their country of origin. This occurred frequently before the imposition of immigration restrictions early in the 20th century.

No immigration policy is perfect. But open borders is the best tradeoff available.

March 14, 2006

Libertarians for Hillary!

If Libertarians had to choose between the two major political parties, which should they prefer?

Most seem to lean toward the Republicans. This is probably because Republican rhetoric sounds a bit like Libertarianism, with its emphasis on small government.

Yet the past six years has shown that Republicans are just as un-Libertarian as Democrats. The Bush administration, along with a Republican Congress, has invaded two countries, created a new federal entitlement program (the Medicare prescription drug benefit), expanded campaign finance regulation (McCain-Feingold), and adopted intrusive new regulation of business (Sarbanes-Oxley). The Republicans have also let federal spending mushroom, advocated numerous restrictions on civil liberties (warrantless wiretaps, incommunicado detentions), and expanded the federal role in education (No Child Left Behind). It would be hard to design a less libertarian agenda.

Many Democrats, of course, endorsed large parts of this agenda. And Democrats endorse many other policies that Libertarians oppose. So the point here is not that Libertarians should lean toward the Democrats. It is that Republicans and Democrats are both for big government. Libertarians should prefer neither.

What political outcome, then, can Libertarians support?

Divided government.

If one party controls the White House while the other controls Congress, stalemate results, with little expansion of government. This is what occurred during the divided-government Clinton years, in contrast to the past six years of one-party rule.

Since current political realities suggest Republicans will control Congress in the near future, Libertarians should therefore hope for a Democratic presidential victory in 2008. And the more polarizing the Democrat, the better.

Gridlock is good.

March 13, 2006

Regime Change in Iran?

The U.S. is thinking about engineering regime change in Iran. The main motivation is Iran’s alleged efforts to develop nuclear weapons.

Should the U.S. try to topple the ayatollahs? My answer is no.

The benefits of regime change are likely to be small. We do not know for sure that Iran is developing nuclear weapons; if nothing else, recent experience in Iraq tells us that intelligence about these issues is noisy at best. And Iran could just be bluffing to scare off its enemies. Moreover, Iran has weak incentive to use nuclear weapons, since this would precipitate a swift military response from the U.S. and its allies.

The costs of an attempt at regime change, by contrast, are likely to be substantial. Any such attempt, even if successful, will generate resentment of the U.S. in the Muslim world. Any such attempt, even if successful, will take a toll in money and lives. And any such attempt, even if successful, might produce a country of warring factions, further destabilizing the Middle East.

The tradeoff is therefore between a modest, uncertain benefit and a substantial, more certain cost. The choice is clear.

March 12, 2006

Corruption, Gambling, and Abramoff

What causes corruption?

Most people’s answer is greed. That is a necessary condition, but it is not the whole story. The other critical ingredient is government policies that create the incentive for corruption in the first place.

A perfect example is the Jack Abramoff corruption scandal. Abramoff is a lobbyist recently convicted of multiple felonies in connection with Indian tribes seeking federal authorization to operate casinos.

If state governments allowed anyone to operate casinos, rather than imposing substantial barriers that can only be overcome with Federal intervention, the Indian tribes would never have needed Abramoff’s services. So this type of corruption would never have occurred.

The fact that government restrictions breed corruption does not by itself make such laws undesirable. A law against murder gives those who are caught an incentive to bribe police, judges, and jurors. Yet this does not suggest repeal of the laws against murder.

In the case of gambling, however, the government restrictions make no sense. Gambling is entertainment that millions enjoy every day; the fact that some gamblers do not control their impulses is no reason to bar the activity. Most problem gamblers will find alternative ways to gamble, like internet gambling or day trading, if legal gambling is not available.

The appropriate policy response to the Abramoff incident is therefore not more restrictions on lobbying; that simply creates more reason for people to break the law. The right response is to eliminate legal restrictions, such as those on gambling, that make little sense in the first place.

March 11, 2006

Adoption and Discrimination Against Gay Couples

Catholic Charities of Boston announced this week that it is discontinuing its adoption work in Massachusetts because it opposes the state law that prohibits adoption agencies from discriminating against same-sex couples.

Many will blame this situation on the Catholic Church’s position on homosexuality, and that is part of the story. The Church's position is particulary hard for many people to accept in this context given that children bear a large part of the cost. And no evidence suggests that gay couples are less fit parents than heterosexual couples.

Government policy also played a role in generating this unfortunate circumstance, however. Were it not for the state law that bars private adoption agencies from discriminating against gays, Catholic Charities would be continuing to offer adoption services.

Well-intentioned government policies often have negative consequences. In this case the attempt to help same-sex couples will harm innocent children who need parents. The remaining adoption agencies in Massachusetts can fill some of the void caused by this incident. But since Catholic Charities devoted extra effort to special-needs children, and these children are often difficult to place, a gap in coverage is likely to remain.

March 10, 2006

Recycling, Unions, and Affirmative Action

What do recycling, unions, and affirmative action have in common?

One might think the answer is, “Libertarians oppose them all.” But that answer is not correct.

Libertarians have no objection to recycling per se. If private markets recycle voluntarily because it is profitable to do so, that is desirable because it represents an efficient use of society’s resources. What libertarians oppose is government policies that mandate recycling.

Libertarians have no objection to unions per se. If employees wish to form voluntary organizations and attempt to bargain collectively with employers, that is their privilege. Indeed, this approach might benefit everyone by reducing the “transactions costs” of negotiating employment contracts. What libertarians oppose is government policies that force employers to bargain collectively with unions.

Libertarians have no objection to affirmative action per se. If companies believe a diverse work force is good for the bottom line, or if companies wish to promote minorities and women because they believe it is right, that is their business. Indeed, many libertarians believe diversity is valuable and therefore support certain kinds of private affirmative action. What libertarians oppose is government policies that mandate affirmative action in hiring and related activities.

Whether the libertarian positions on recycling, unions, and affirmative action are persuasive is a question for future blogs. The point here is that libertarianism distinguishes between whether something is good or bad and whether government policy should encourage or discourage that something.

March 09, 2006

The Death Penalty and Zacarias Moussaoui

The penalty phase of the Zacarias Moussaoui trial began earlier this week. Moussaoui has been convicted of participating in the 9/11 attacks even though he was behind bars at the time. Moussaoui admits he was aware of the plot, and prosecutors argue he could have prevented the attacks by revealing this knowledge when arrested on other charges a month earlier. The question for the penalty phase is whether to impose the death penalty or life in prison.

The Moussaoui case raises two issues.

The first is whether the death penalty is the appropriate verdict in this case, given existing federal law. I take no stand on this issue, since I have not heard all the facts of the case.

The second issue is whether the death penalty is good policy. My answer is no.

To begin, mountains of social science evidence have failed to uncover a substantial deterrent effect of the death penalty. Moreover, common sense suggests that absent execution rates far higher than those observed in modern economies, no criminal should reasonably fear the death penalty. There are fewer than 100 executions per year in the US compared to roughly 16,000 murders.

Beyond failing to reduce murder, the death penalty prevents the criminal justice system from correcting mistakes. The number of people falsely convicted of capital crimes is probably small, but it is unlikely to be zero. Everyone benefits if such cases are partially remedied by freeing those found innocent post conviction.

In addition, the death penalty crowds out discussion of policy changes that might actually reduce crime. I will argue in a later blog that drug legalization is the best example of such a policy.

Use of the death penalty does have one potential benefit, which is saving the resources required to incarcerate someone for life. The net reduction in government expenditure, however, is likely small or even negative given that death penalty cases involve protracted penalty phases and lengthy appeals. The penalty phase of the Moussaoui trial would be trivial if the death penalty were not an option, but it is expected to last one to three months because of the prosecution’s request for the death penalty.

Putting Moussaoui to death might seem appropriate to many people, and this is understandable given the horror of the 9/11 attacks. The broader question, however, is whether the death penalty is an effective criminal justice policy. The answer appears to be no.

Military Recruitment and Federal Funding

In a decision handed down earlier this week, the Supreme Court ruled in favor of a federal law that compels colleges and universities accepting federal funds to permit military recruiters on campus. Several law schools had sought to ban such recruitment activities out of opposition to the military’s “don’t ask, don’t tell” policy.

The Court’s ruling is not especially controversial; 8-0 decisions are few and far between. And the ruling is consistent with most people’s common sense that if institutions of higher learning want the government’s money, they must accept the conditions under which it is given.

The Court’s decision does raise a more troubling issue, however; it shows that government support of education means government control of education. This control is not absolute, since schools can decline government money. But eschewing federal funds puts an institution at a competitive disadvantage, so the funding hook helps government push various policies on higher education. At a minimum this suppresses variety and innovation; in the extreme it facilitates thought control.

Whether this negative of government funding outweighs any benefits is a more difficult question. At a minimum, however, such funding comes with strings attached.

March 08, 2006

Keep Abortion Legal, But Repeal Roe

On Monday South Dakota adopted a ban on abortion except when necessary to save the life of the mother. The law is intended as a direct challenge to the Supreme Court’s Roe v. Wade decision, which held in 1973 that state laws banning abortion violate the U.S. Constitution.

Abortion is a difficult issue because both policy extremes–an outright ban on abortion, or full legalization of abortion–have substantial undesirable consequences.

Bans on abortion set the precedent that government can restrict what people do with their own bodies. This opens the door to a broad range of invasive policies, from drug prohibition to forced sterilization. Bans also breed disrespect for the law, since some women get abortions from the black market or other countries. Bans harm the women who are forced to have unwanted children as well as the pre-existing children of such women.

Fully legalized abortion also has negative consequences. Many people regard abortion as murder, and this view is not without merit. No one disputes that terminating a one-day old baby is murder, so it is not ridiculous to believe that terminating a 9 month old fetus is murder also. But then what is so different about an 8 month fetus, or a 7 month fetus, and so on? Thus, full legalization is highly inflammatory, and for a reason that is understandable even if one disagrees.

The issue, therefore, is how to compromise on abortion policy.

The best approach is to repeal Roe v. Wade. Regardless of how one feels about abortion, Roe was a bad decision. The Tenth Amendment to the Constitution states, “The powers not delegated to the United States by the Constitution, nor prohibited to it by the States, are reserved to the States respectively, or to the people.” Since states have always had the power to regulate murder, which is what abortion policy is about, the Constitution does not plausibly prohibit states from engaging in this type of regulation.

Repeal of Roe would mean that each state could set its own abortion policy. Contrary to the claims of pro-choice advocates, this would not lead to wide-scale banning of abortion. Before 1973, New York, California and three other states had already fully legalized abortion, and many others had partially liberalized their abortion laws. Numerous others would have followed suit had it not been for Roe. And there would have been more pressure on the FDA to legalize RU-486, the abortion pill.

In the absence of Roe, therefore, most states would continue to allow legal abortion on demand. Some states would impose restrictions, such as parental notification laws. Only a few states would ban abortion in most or all cases, as South Dakota is attempting to do.

The vast majority of women would therefore retain the same access to abortion as now. A few would face greater difficulty in obtaining a legal abortion, but many of these would have access in nearby states. And most would have access to RU-486, which did not exist in 1973.

The benefit of this approach is that the country would not suffer the polarization and acrimony that Roe engenders by imposing a one-size-fits-all policy on the entire country. Neither pro-life nor pro-choice advocates would be fully satisfied with this outcome, but neither would feel utterly frustrated either. That is a reasonable compromise.

March 07, 2006

Withdraw From Iraq Now

A recent opinion poll conducted by Washington-Post –ABC-News reports that more than 80% of Americans now believe civil war between Iraqi Shiites and Sunnis is likely or very likely. And 52% believe the U.S. should begin withdrawing troops. Yet only one sixth supports immediate, total withdrawal.

If one believes a continued U.S. presence will increase the likelihood of peace, or democracy, or economic growth, then it is reasonable to oppose immediate withdrawal.

If one believes, however, that civil war or totalitarian Islamic rule is virtually inevitable – whether the U.S. withdraws in one year, or five years, or fifty – then our continued presence is all cost and no benefit. In this case, no matter how awful withdrawal might be, the U.S. should do it now and avoid the costs of occupation. Moreover, a continuing U.S. presence probably increases terrorism against the U.S., since it is above all our presence in the Middle East that Islamic terrorist groups detest.

No one can know with certainty whether U.S. efforts can eventually prove beneficial in Iraq. But few historical examples provide a basis for optimism. The right policy, therefore, is to withdraw now. Not in a year or a month or a day. Now.

March 06, 2006

Do Not Rebuild the Levees

According to an article in today’s Washington Post, independent inspectors believe attempts underway to rebuild the New Orleans levees are using substandard materials and will thus produce a levee system weaker than the one that failed during Katrina. The Army Corps of Engineers disputes these claims but admits the levees will require ongoing reconstruction after the projected June 1 completion date and will not be able to withstand a storm the magnitude of Katrina.

The details of this dispute are not the key issue here; the fundamental problem is that government should not reconstruct the levees at all. The Katrina disaster occurred mainly because government spent billions constructing these levees in the first place; without this intervention, people would not have been living in areas well-below sea level. Repeating the initial mistake is an incredible waste of resources. More generally, government-subsidized flood insurance, and attempts by the Corps to promote human activity in areas where Mother Nature never intended, make no economic sense.

The Katrina episode illustrates well a general theme of this blog: to fix a problem, first get rid of the government intervention that caused or exacerbated the problem. Nothing can prevent hurricanes. But when governments encourage stupid behavior – living in areas below sea level – major disasters become far more likely.

March 05, 2006

The Ports Fiasco

Should Congress kill an impending deal that would allow an “Arab” company to manage six U.S. ports?


Restrictions on port operation, like most measures the U.S. adopts to promote “security,” do not prevent terrorist attacks against the U.S. The number of potential targets is virtually unlimited: buildings, chemical plants, nuclear facilities, bridges, trains, subways, stadiums, school buses, and so on. Any determined group, and especially any group with access to suicide bombers, can terrorize the U.S. at will. Thus restrictions on port ownership, and anti-terrorist measures generally, are all cost and no benefit.

What are the costs of restricting port management? Increased burdens for cities that want cost-effective operation of their ports. Increased opportunity for non-Arab companies to use anti-Arab racism as backdoor protectionism. Increased hostility toward the U.S. as a result of this perceived racism. And a false sense of security for Americans who think killing this deal will reduce terrorism.

Islamic terrorists target the U.S. because the U.S. interferes in the Middle East. The way to reduce terrorism is to stop interfering.

March 02, 2006

Introduction to This Blog

In this blog I provide a libertarian perspective on economic and social policy. By libertarian, I mean consequential libertarian, not philosophical libertarian. Thus, my arguments are based on assessments of costs and benefits, not on assertions about rights. My claim is that most government policies do more harm than good, even when the policies have good intentions and even when private arrangements work imperfectly.

Each post presents the libertarian position on a specific policy issue of the day. I emphasize three themes in particular.

The first is that consequential libertarianism is consistent in its approach to the issues. Modern liberalism and conservatism are not.

The second theme is that both liberals and conservatives advocate massive amounts of government intervention. The two perspectives disagree about precise policy choices, but overall they are far more similar than different. The libertarian perspective, however, is truly distinct from either mainstream view.

The third theme is that most economic and social problems are best addressed by eliminating the government interventions that caused or exacerbated the problem in the first place. Creating even more government is never a sensible approach.

This blog aims to persuade, but it also aims to educate. I hope to convince readers that the libertarian perspective is interesting, even if I cannot convince them it is right. Time will tell whether I succeed.

This blog is one outgrowth of a course titled A Libertarian Perspective on Economic and Social Policy that I teach at Harvard University. The course presents the libertarian perspective on a broad range of issues, from drug legalization to Social Security to environmental policy to abortion rights to gay marriage and more. For more information, visit my Harvard web site.

A second outgrowth of the course will be a book on the same themes. The publication date will likely be early 2007. I will provide details as they become available.

To everyone who visits this blog, thanks for your interest. Comments and suggestions are welcome.

Jeffrey Alan Miron