Monthly Archives: January 2008

Government Influence Of Science — Mandating Losers

Democrats seem to want the federal government to invest huge sums of money in development of alternative energy sources. tarran, last year, pointed out that government has all the wrong incentives and thus often picks the most politically-palatable technologies, not the most effective.

This is currently occurring in Britain, a nation which has gone down the same path towards ethanol as the United States. What’s interesting is where the opposition is currently coming from— the greens:

Yet even as their star has risen at Westminster, biofuels have been raising doubts among greens. Friends of the Earth and Greenpeace, two environmental-lobbying groups, have given warning that biofuels may not be as eco-friendly as they seem. On January 14th a more august body took a similar line. The Royal Society, Britain’s national science academy, published a report that analysed the bewildering range of biofuels on the market. It concluded that, thanks to carbon emissions from fertilisers and processing, some biofuels may cause more climate change than petrol. That raises the risk of a spectacular official own-goal: if targets encourage people to use the wrong sort of fuel, transport may get dirtier, not cleaner. The Royal Society wants ministers to specify targets not for biofuel consumption but for greenhouse-gas reduction. The government says it may do that after 2010.

I’ve pointed out that in the US, we have a system where we subsidize corn and tax sugar. This is a situation where our ethanol mandate distorts the market by raising the price of corn, raising the price (and reducing the supply) of food crops, raises the price of fuel, and if Greenpeace is correct, doesn’t even improve the environment. Why does this occur? Because corn producers vote and lobby Washington, while sugar producers are largely foreign, and thus cannot vote for politicians in Congress.

Government and science don’t mix.

So What’s Going On With Romneycare ?

When Mitt Romney was Governor of Massachusetts, he signed into a law a bill mandating that every resident purchase health insurance or pay a fine to the state to subsidize the cost of state-provided insurance.

When the law was passed it was assumed that most people would be covered by employer provided insurance, but according to the Boston Globe, Romneycare is costing the state a lot more than expected:

Spending on the state’s landmark health insurance initiative would rise by more than $400 million next year, representing one of the largest increases in the $28.2 billion state budget the governor proposed yesterday.

The biggest driver of the cost increase is projected growth in the number of people signing up for state-subsidized insurance, which now far exceeds earlier estimates.

State and federal taxpayers are expected to bear nearly all of the additional cost.

Of course they are, it’s only logical. Why should employers provide health insurance to their employees when they know that those employees will be able to take advantage of a taxpayer subsidized alternative ? Why should individuals make the effort to find cost-effective health insurance when they know the state will provide it for them ? When you subsidize something, in this case uninsured citizens, you get more of it, and that’s exactly what’s going on here.

Keep in mind what’s going on here. We are talking about a health insurance plan that was proposed nearly three years ago by then Republican Governor Mitt Romney, who is now running for President claiming to be a conservative. Is this what he would impose upon America; a massive, unfunded mandate that will single-handedly wreck the private insurance market ?

And it’s not just the insurance market that’s at stake here:

[T]he long-term cost of the insurance initiative continues to concern pol icy makers and analysts, who are worried that it may become unaffordable.

“These increases are more than anticipated, so we absolutely have to find ways to hold down the rate of growth in future years,” said Michael Widmer, president of the Massachusetts Taxpayers Foundation, a business-funded budget watchdog that has supported the initiative.

Steve Verdon points out, accurately I think, just exactly how that is likely to happen:

Here are two ideas that push the cost back on the individuals in the plan and will never show up on a balance sheet anywhere:

  1. Increase waiting times.
  2. Suspend certain procedures, treatments, etc.

The nice thing about these two is that while they impose costs in the individuals in the plan, there are no dollor costs.

In other words, rationing health care. Thanks Governor Romney, but I’ll pass on that one.

Bush, Congress To Pass Ineffective “Stimulus” Package

It hasn’t been made official yet, but it looks like the Bush Administration and Congress have reached a deal on an economic stimulus package, the major component of which will include tax rebates of up to $ 600 per person:

WASHINGTON (CNN) — American taxpayers would get checks of several hundred dollars from the federal government under a plan to stimulate the economy, sources said Thursday.

Congressional leaders of both parties were talking with their membership to sell the plan, sources said.

Sources on Capitol Hill and at the Treasury Department said congressional and White House negotiators agreed upon checks of $600 per individual and $1,200 per couple who paid income tax and who filed jointly.

People who did not pay federal income taxes but who had earned income of more than $3,000 would get checks of $300 per individual or $600 per couple.

A Democratic aide and Republican aide said there will be an additional amount per child, which could be in the neighborhood of $300.

Concidentally, Don Boureaux points out in today’s Christian Science Monitor why such “tax rebate” plans won’t do anything to stimulate the economy:

Government cannot create genuine spending power; the most it can do is to transfer it from Smith to Jones. If the Treasury sends a stimulus check to Jones, the money comes from taxes, from borrowing, or is newly created.

If it comes from taxes, the value of Jones’s stimulus check is offset by the greater taxes paid by Smith, who will then have fewer dollars to spend or invest. If Uncle Sam borrows to pay for the stimulus checks, this borrowing takes money out of the private sector. Any dollars borrowed – whether from foreigners or fellow Americans – for purposes of stimulus would have been spent or invested in other ways were they not loaned to the government.

The only other means of paying for such stimulus is for the Federal Reserve to create new money. Unfortunately, this option leads inevitably to inflation.

All Americans wind up with more dollars in their wallets but also paying higher prices in the stores. Prosperity is not created by raining down upon the populace more monochrome pictures of dead statesmen.

Stimulus funded with newly created money is especially harmful. Most obviously, the inflation it causes prompts investors to flee the dollar. But because inflation can take time to show up, injecting new money into the economy can create a temporary sense that consumers and investors are wealthier than they really are. Such a false sense dangerously delays the necessary pruning of unfruitful investments. A bad economy is prolonged.

Creating a “temporary sense” that the economy isn’t really that bad is, of course, exactly what the politicians are aiming for here. They’re not aiming to actually fix what’s wrong, they’re aiming to make it seem like they fixed it in time for the upcoming elections. Which is why both political parties, Republican and Democrat, are behind the idea and why it’s taken less than a week from when President Bush first spoke about a stimulus package for Congress and the White House to reach an agreement. It’s in both their interests to make people think that they’re doing something that will help, even if it won’t.

Instead of the temporary fixes that Washington is concentrating on, Boudreaux says that politicians should focus on fixing the fundamentals and stop engaging in policies that discourage investment and growth:

First, Mr. Bush should call for a substantial and permanent cut in both capital-gains and personal-income tax rates.

Next, he should insist on a large reduction in federal spending, including elimination of all agricultural subsidies. While he’s showing such courage, he might as well unconditionally endorse free trade.

Cutting taxes is, of course, a good thing, but it’s important to know why. The goal would not be to increase consumer spending. Instead, it would be to raise the returns on investment and work.

By letting investors and workers keep more of the fruits of their risk-taking, creativity, and efforts, the economy will enjoy more risk-taking, creativity, and effort. Businesses that would otherwise not be started would be created. Likewise with machinery and training that increases worker productivity. Investors worldwide would flock to take advantage of these lower tax rates, further increasing productive investments.


Finally, Bush should assure the Board of Governors of the Federal Reserve that he neither expects nor wants them to use monetary policy politically. Reminding them of the wisdom of Milton Friedman, he should strongly urge them to keep a tight rein on the money supply.

Of course, as Boudreaux notes, none of these policies will have the immediate impact that politicians desire, and none of them will be as readily apparent to voters as a $ 1,200 check in their mailbox, which is exactly why thery won’t be adopted.

Free Market Organs

Last week, Doug linked a post about British Prime Minister Gordon Brown’s support for a policy that would allow hospitals to harvest organs without prior consent of the decedent or his/ her family. In essence, the organs of all deceased British citizens would belong to the government’s healthcare system except for those individuals who “opted out” prior to death.

The policy in the U.S. is an “opt in” approach rather than “opt out.” Why is this distinction important? Answer: the presumption of ownership. If citizens have an option of opting in, this shows that individuals own their bodies; to suggest that an individual has to opt out shows that citizens’ bodies are property of the government (unless s/he makes an affirmative claim on his/her body).
The reason for Brown’s support for this policy is quite obvious: like just about everywhere else in the world, Britain is having an organ shortage.

So if presumed consent is not the answer to solving the organ shortage, what is? Randolph Beard, John D. Jackson, and David L. Kaserman of Auburn University published a study in the Winter 2008 issue of Cato’s Regulation Magazine. The team studied the effectiveness of current policies aimed at maximizing donor participation and organ matching. Among the policies they analyzed were: increased government funding for organ donor education, organ donor cards (such as having the words “organ donor” on driver’s licenses), required request, kidney exchange programs, and donor reimbursement. None of the policies have come close to solving the shortage. The researchers estimate that roughly half of the potentially viable cadaver organs are ever harvested. With the exception of the inefficient kidney exchange program, one feature that all of these programs have in common is that they each rely on altruism on the part of individuals to donate organs without any sort of compensation.

The one solution which the researchers believe would be effective, monetary compensation to organ donors or their families, is illegal almost everywhere. In 1984, the National Organ Transplant Act was passed making it a crime in the U.S. for a surviving family to receive payment for their loved one’s organs. The law was passed mostly on ethical grounds without any consideration for what would happen to the supply of available organs. The researchers estimate that some 80,000 lives from 1984 to present have been lost because of the bill’s passage and other subsequent policies in the current “altruistic” system. The researchers further project that another 196,310 lives will be lost between 2005- 2015 (and this is what they consider a “conservative” estimate!).

As controversial as compensating families organs of deceased family members is, the thought of an individual driving to a hospital, removing an organ (such as a kidney), and selling that organ to someone in need of the organ for a profit is a complete non-starter. This shouldn’t come as a shock given that in today’s lexicon; the word “profit” is a dirty word. The people who scream bloody murder whenever people decide to “scalp” tickets to sporting events or tickets for Hanna Montana concerts (what’s the big deal with Hanna Montana anyway?) will not likely be in favor of selling vital organs. Anti-capitalist objections aside, free market buying and selling of organs appears to be the most practical solution.

Cato Institute’s Director of Bioethics Studies Sigrid Fry-Revere found that Iran is the only country that does not have an organ shortage and has not had a shortage in ten years. Why? Because Iran (of all places!) is one of the only countries where it is legal for individuals to buy and sell organs from live, voluntary, donations. Revere’s findings also revealed that even if all the viable organs were taken by force by the government from cadavers, there would still not be enough organs to provide an organ to everyone who needs one (Cato Daily Podcast dated January 15, 2008). Maybe the Iranians are on to something here?

David Holcberg, writing for Capitalism Magazine agrees arguing in favor of a free market system for organs on both practical and moral grounds:

If you were sick and needed a kidney transplant, you would soon find out that there is a waiting line–and that there are 70,000 people ahead of you, 4,000 of whom will die within a year. If you couldn’t find a willing and compatible donor among your friends and family, you could try to find a stranger willing to give you his kidney–but you would not be allowed to pay him. In fact, the law would not permit you to give him any value in exchange for his kidney. As far as the law is concerned, no one can profit from donating an organ–even if that policy costs you your life.

Patients’ attempt to circumvent this deplorable state of affairs has led to the emergence of “paired” kidney donations, an arrangement whereby two individuals–who can’t donate their organs to their loves ones because of medical incompatibility–agree that each will donate a kidney to a friend or family member of the other. But this exchange of value for value is precisely what today’s law forbids. Thus, under pressure to allow this type of exchange, in December the U.S. House and Senate passed The Living Kidney Organ Donation Clarification Act, which amends the National Organ Transplant Act to exempt “paired” donations of kidneys from prosecution.

The congress says that kidneys can be exchanged without sending anyone to jail; how thoughtful. While this is an encouraging step in the right direction, why won’t our elected officials go the rest of the way? Is it the potential risks for the donors? Holcberg points out that the risk for a healthy person dying from donating a kidney is about .03% and usually live normal lives without reducing his or her life expectancy.

No, I suspect the objection to selling organs is more rooted in the overall distain far too many people have towards capitalism. It’s simply unethical to make a profit off of something that someone else “needs” whether its gasoline, Hanna Montana tickets, or a kidney. Only the “privileged” will be able to buy organs if such a system were adopted, they would argue.

Even if this were true, denying a person the right to purchase an organ to save his or her own life should not be subject to a vote or someone else’s ethical hang-ups. If I want to remove a kidney and sell it to a willing buyer for $30,000 (or whatever the going market rate is) I ought to have that right. Why must we assume the government has the right to tell us what we can do with our bodies whether it’s selling our organs by our own choices or government taking them from us after we die without prior consent? Our individual rights of life, liberty, and property demand that we have the ability to make these choices for ourselves.

French Prefer Linguistic Purity To International Relevance

France is a nation that once dominated the world. In the 14th Century or so, the King of France would have likely been considered the “most powerful man in the world”, much as an American President would be considered today. Over time, the French have become irrelevant, as their empire has shrunk and their power– including a goal to dominate Europe through the EU– has dissipated as well.

How have the French people taken this change? With a whole host of sour grapes, and rarely has this been more apparent than in their language. Preferring not to use terms like “e-mail” due to its English root, the French government tried in vain to promote the term “courier electronique”. In an effort to re-assert their prominence in the news world, they began their own international news network to compete with CNN, known as France 24. At the time, they offered it in multiple languages, as English has become the lingua franca of international business. Now, though, French President Nicolas Sarkozy wants to shut down the English version of the channel:

“GOBSMACKED!” That is how one journalist at France 24, a television news channel, described the newsroom’s reaction to President Nicolas Sarkozy’s announcement that the channel should in future broadcast only in French. That such a colloquialism—in English—reverberates so readily around a French television studio shows how bilingual the channel has become in a land known for linguistic chauvinism.

France 24, jointly owned by the public broadcaster and TF1, a private station, was set up just over a year ago as a result of French exasperation at American dominance of the airwaves. The French were vexed, particularly during the invasion of Iraq, by the cheerleading of American networks, and wanted a CNN à la française. From the start, it was obvious that to offer a “French perspective” to others, it would have to broadcast in languages other than French, just as al-Jazeera knew it could not broadcast only in Arabic. France 24 began with channels in French and English; an Arabic station followed.

So why does Mr Sarkozy want to close down its non-French channels? One reason is budgetary: he says he is “not disposed to finance a channel that does not speak French”. The other is diplomatic. “In order to present a French vision,” he says, “I would really prefer it to be presented in the French language.” The French have long considered their language to be more than a tool of communication: it is an embodiment of culture, identity and independence. To speak to the world in another language seems like a gesture of submission.

Submission? Perhaps. But to speak to the world in French is largely a gesture of futility.

To be fair, I’m not saying that broadcasting only in French is a bad thing. French is still one of the world’s great languages. According to wikipedia, somewhere in the range of 500 million people worldwide have “significant knowledge” of the language. That puts it roughly near Spanish, slightly ahead of Arabic, and only behind Chinese (Mandarin) and English worldwide.

But if France wants to expand its culture, it needs to reach out to areas where its culture currently does not penetrate. America and the rest of the English-speaking world would be a great market. Trying to enter the US market will be difficult enough for a French network, but trying to do so in the French language will be impossible.

Sarkozy has a choice: either continue with the attempt to expand French culture, knowing that you will have to do so in other languages, or give up on the plan to expand the culture, and use France 24 as a competitor to CNN and Al-Jazeera in markets with already heavy French influence. If there will be any chance to reverse the trajectory of French culture over the last century, it might be best to attempt the former.

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