THE LIGHTHOUSE
"Enlightening Ideas for Public Policy..."
VOL. 2, ISSUE 40
October 17, 2000

Welcome to The Lighthouse, the e-mail newsletter of The Independent
Institute, the non-partisan, public policy research organization
<http://www.independent.org>. We provide you with updates of the
Institute's current research publications, events and media programs.

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IN THIS WEEK'S ISSUE:
1. Defective Tires, Defective Bureaucracy
2. Paul Craig Roberts on the War on Crime
3. Medicare Reform: Economics versus Politics

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DEFECTIVE TIRES, DEFECTIVE BUREAUCRACY

Some fans of the regulatory state believe that NHTSA, the National
Highway Traffic Safety Administration, deserves much credit -- and,
in reward, expanded powers -- for its role in exposing the Firestone
tire/ Ford Explorer fiasco. But although NHTSA received early reports
of fatalities caused by the separation of Firestone tires, its
investigation began very recently -- last May -- long after
investigations by State Farm Insurance, the Center for Auto Safety,
and Safety Forum brought the problem to light.

This isn't the first time that NHTSA has failed its mission, argues
Michael I. Krauss, law professor at George Mason University and
author of the recent Independent Institute book FIRE AND SMOKE:
Government, Lawsuits and the Rule of Law.

"NHTSA, the agency responsible for minimum fuel economy standards
(found by a court to have likely cost many lives by forcing
manufacturers to produce light, dangerous cars) and for
illegal-to-disable, baby-killing airbags, does not deserve to be
rewarded for its asleep-at-the-switch approach to the tire problem,"
Krauss wrote recently.

It would be absurd to reward Firestone for selling defective tires.
However, when NHTSA fails, self-proclaimed "consumer advocates" call
for a parallel absurdity: lavishing the agency with more regulatory
authority and taxpayer funds. But NHTSA's pattern of failure
indicates a systemic problem -- a design flaw -- that cannot be
easily repaired. In contrast, as the Firestone episode demonstrates,
the watchful eyes of the American economic and legal systems have
enormous incentives to detect and report product defects. In this
light, perhaps what most needs to be recalled and held accountable
for sloppy workmanship and false advertising is: the defective
regulatory state.

For more information, see "The Feds Eye Firestone," by Michael Krauss
(The Washington Times, 9/22/00), at
http://www.independent.org/tii/lighthouse/LHLink2-40-1.html.

For Michael Krauss's book, FIRE AND SMOKE: Government, Lawsuits and
the Rule of Law (The Independent Institute, 2000), see
http://www.independent.org/tii/lighthouse/LHLink2-40-2.html.

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PAUL CRAIG ROBERTS ON THE WAR ON CRIME

Election-year promises always renew the risk that peaceful Americans
will see their rights sacrificed for the sake of political
expediency. This is especially true when politicians promise to "get
tough on crime," as syndicated columnist and Independent Institute
research fellow Paul Craig Roberts pointed out recently.

Although one "anti-crime" bill (or "anti-privacy" according to its
critics) was recently defeated, another "anti-crime" bill -- this one
strengthening asset forfeiture laws -- has just been introduced.
Unfortunately, says Roberts, asset forfeiture laws violate due
process and are any easy way for politicians to look "tough on crime"
even though such laws harm innocent Americans far more than criminals.

"The House Judiciary Committee led by Henry Hyde, R-Ill., has
documented the most extraordinary abuses of the asset forfeiture
laws," writes Roberts. "The Banking Committee and [the bill's author]
should sit down with Hyde and listen carefully before they create any
more Gestapo powers for law-enforcement officers."

For more information, see "Dangers lurk in war on crime," by Paul
Craig Roberts, at
http://www.independent.org/tii/lighthouse/LHLink2-40-3.html.

For more on civil forfeiture laws, see CIVIL FORFEITURE AS A "SIN
TAX" by Donald J. Boudreaux and Adam Pritchard, at
http://www.independent.org/tii/lighthouse/LHLink2-40-4.html.

Also see the Independent Institute book, TO SERVE AND PROTECT:
Privatization and Community in Criminal Justice, by Bruce Benson, at
http://www.independent.org/tii/lighthouse/LHLink2-40-5.html.

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MEDICARE REFORM: Economics versus Politics

Debates over Medicare reform didn't start with Al Gore and George W.
Bush. In fact, legislation similar to Medicare had been intensely
debated since the mid-1940s. However, its advocates found no way to
overcome opposition until 1965, when Medicare's staunchest advocate
on the House Ways and Means Committee found the opportunity to
smuggle Medicare legislation into another bill at the last minute.

Yet as vocal as debates over Medicare have been, very little of that
debate has been informed by sound economic principles. This omission,
which has stalled any genuine reform of Medicare, is largely the
fault of economists, says economist Robert B. Helms in the new issue
of THE INDEPENDENT REVIEW.

"My criticism is not directed to the economists who have attempted
for many years to apply market principles to health-care issues, but
to the larger number of economists who have not," Helms writes.
"Moreover, my criticism pertains to the failure of economists to
teach the fundamental principles of economics to educated Americans,
rather than to the failure of 'economics.'"

To improve the quality of the debate over Medicare, Helms recommends
three measures. First, more economists must explain to policymakers
and the public that that market competition in health care, as in
other markets, would improve quality of health care. Second, they
must explain that competition would also make health care more
efficient by allocating scarce resources to higher-valued uses.
Finally, they must explain that price controls and destructive of
these desirable ends.

Without a concerted effort to impart these principles to a wider
audience, Helms argues, Medicare reform -- and other necessary
health-policy reforms -- will become victim of political maneuvering,
much to the detriment of the lives and well-being of the American
public.

"This lack of education in economics is appallingly evident in
Washington, D.C., especially on Capitol Hill," says Helms.

For more information, see "Medicare Reform: Economics versus
Politics" by Richard B. Helms (THE INDEPENDENT REVIEW, Fall 2000), at
http://www.independent.org/tii/lighthouse/LHLink2-40-6.html.

For more on Medicare, see "Medicare's Progeny: The 1996 Health Care
Legislation" by Charlotte Twight (THE INDEPENDENT REVIEW, Winter
1998), at
http://www.independent.org/tii/lighthouse/LHLink2-40-7.html.

Also see the Independent Institute book, AMERICAN HEALTH CARE:
Government, Market Processes and the Public Interest, edited by Roger
D. Feldman, at
http://www.independent.org/tii/lighthouse/LHLink2-40-8.html.

For the Independent Institute's "Guide to Resources on Price Controls
in Health Care," see
http://www.independent.org/tii/lighthouse/LHLink2-40-9.html.

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For previous issues of THE LIGHTHOUSE, see
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