Essays

Essays Icon

Filter By:

Topic

Author

Research Team

Use comma-separated ID numbers for each author

Support the Hoover Institution

Join the Hoover Institution's community of supporters in advancing ideas defining a free society.

Support Hoover

The Economic Effects of the Liability System

by Daniel P. Kesslervia Analysis
Tuesday, June 1, 1999

Liability law has two principal objectives: compensation of parties injured in accidents and deterrence of negligent behavior of potential injurers. Considerable evidence, however, suggests that the current liability system in the United States achieves neither. The system has high transaction costs and fails to compensate injured parties appropriately. There is evidence that liability pressure has distorted firms' incentives for innovation. In the health care sector, liability pressure has led to defensive medicine--precautionary treatments with minimal medical benefit administered out of fear of legal liability.

This essay summarizes recent empirical research on the economic effects of liability-reducing reforms to tort law. The strategy of this research is to compare time trends in economic outcomes from states that adopted law reforms with trends in outcomes from states that did not, controlling for other determinants of the outcomes in question. Differences in trends between the two types of states provide an estimate of the effect of the reforms.

In general, this research suggests that reductions in the level of liability improve productive efficiency. But even if these studied reforms improve efficiency, they may not improve the performance of the system in terms of the compensation goal. The essay concludes with a discussion of the potential effects of a wide range of largely untried reforms to the liability system, some advocating radical changes to the allocation of responsibility for accidental injuries, that seek to address both compensation and deterrence goals.

Reforming Hazardous Waste Policy

via Analysis
Tuesday, June 1, 1999

Hazardous waste regulation in the United States under the Resource Conservation and Recovery Act has several significant problems. The regulations prioritize risks poorly, failing to set tougher standards for more-hazardous wastes. They have forced firms to spend billions of dollars on diverting waste from disposal on land, without convincing evidence of high health and environmental benefits. Finally, because the regulations raise the cost of legally managing wastes, they may encourage illegal dumping of wastes and thus actually hurt the environment more than they help it.

The program needs fundamental reform. Such reforms would relax the regulations and rely more on economic incentives. Setting up these incentives, however, requires some thought. Hazardous waste policy addresses a wide variety of substances, and its environmental effects depend on how facilities manage their wastes. Thus, traditional incentive policies, such as "green" taxes, must be tailored for this purpose. Taxes should be levied not on the wastes themselves but on the environmental releases from waste management facilities. These taxes would decentralize decisions and, perhaps more important, more clearly link the policy to its environmental goals. A modified deposit/refund (similar to bottle bills) could have similar benefits and would eliminate the policy's incentives for illegal disposal.

Welfare for the Well-Off: How Business Subsidies Fleece Taxpayers

via Analysis
Saturday, May 1, 1999

Federal subsidies to U.S. businesses now cost American taxpayers nearly $100 billion a year. If all corporate welfare programs were eliminated, Congress would have enough money to entirely eliminate the capital gains tax and the death tax. Alternatively, Congress could cut the personal and corporate income tax by 10 percent across the board. Either of these alternatives would do far more to enhance the competitiveness of U.S. industry than the current industrial policy approach of trying to help American companies one at a time.

Federal subsidies to corporate America take many forms: direct grant payments, below-market insurance, direct loans and loan guarantees, trade protection, contracts for unneeded activities, and unjustified special interest loopholes in the tax code. Despite their promises to downsize government, congressional Republicans have retreated from any serious attempt to reduce business subsidies. The Clinton administration has routinely requested budgetary increases for corporate handouts, including the Export Import Bank, the Overseas Private Investment Corporation, and the Commerce Department's Advanced Technology Program.

This study refutes common myths about corporate welfare programs: that they create jobs and promote growth; that they =`level the playing field=' with our foreign competitors; that they help small businesses; and that the payments are provided without regard to political considerations. The main effects of industrial policy programs are to undermine the free enterprise system and corrupt the political system. Congress should get businesses off the dole and use the savings to cut taxes, reduce the national debt or both.

Using Power and Diplomacy To Deal With Rogue States

by Thomas H. Henriksenvia Analysis
Monday, February 1, 1999

The end of the cold war a decade ago has ushered in a greatly transformed international landscape. Instead of a pacific era of peace and political harmony, the world, and particularly the United States, has been confronted with a menacing challenge of rogue regimes whose propensity for violence is matched by their intentions to disrupt regional stability, contribute to outlaw behavior worldwide, or to possess weapons of mass destruction. Ruthless rogues also endanger American interests and citizens by their active or passive sponsorship of terrorism. If left unchecked, rogue states like Iraq, North Korea, Iran, Libya, and others will threaten innocent populations, undermine international norms, and spawn other pariah regimes, as the global order becomes tolerant of this political malignancy.

As a major beneficiary of a global order of free markets, free trade, growing prosperity and spreading democracy, the United States, the world's sole superpower, must take the lead in confronting rogue governments, even though our allies may balk from time to time. Specifically, American power should be used to enhance the credibility of our diplomacy. Law and diplomacy alone are unlikely to affect rogue dictators. They must be reinforced with power. Four broad policy options, which in most cases should be combined rather than implemented individually, can be applied:

  • Sanctions and isolation to achieve containment of and inflict economic damage on a rogue state
  • International courts and domestic prosecution to bring rogue criminals to justice
  • Shows of strength and armed interventions to coerce or eliminate rogue regimes
  • Support for opposition movements or covert operations to oust rogue figures

Unless the United States addresses the challenge of rogue states with a combination of force and diplomacy, the new millennium will witness a widening of global anarchy, deteriorating progress toward economic development, and declining political reform. Dire consequences await the United States if it fails to react forcefully to international roguery.

The comments of my colleagues Charlie Hill, James Noyes, Henry Rowen, and Abraham Sofaer were helpful and are gratefully acknowledged along with those from Addison Davis, David Gillette, Bradley Murphy, Douglas Neumann, Piers Turner, and Robin Wright.

Bilingual Education: A Critique

by Peter J. Duignanvia Analysis
Tuesday, September 1, 1998

Bilingual education has been a subject of national debate since the 1960s. This essay traces the evolution of that debate from its origin in the Civil Rights Act (1964) and the Bilingual Education Act (1968), which decreed that a child should be instructed in his or her native tongue for a transitional year while she or he learned English but was to transfer to an all-English classroom as fast as possible. These prescriptions were ignored by bilingual enthusiasts; English was neglected, and Spanish language and cultural maintenance became the norm.

Bilingual education was said to be essential for the purposes of gaining a new sense of pride for the Hispanics and to resist Americanization. The Lau v. Nichols (1974) decision stands out as a landmark on the road to bilingual education for those unable to speak English: bilingual education moved away from a transitional year to a multiyear plan to teach children first in their home language, if it was not English, before teaching them in English. This facilitation theory imprisoned Spanish speakers in classrooms where essentially only Spanish was taught, and bilingual education became Spanish cultural maintenance with English limited to thirty minutes a day. The essay discusses the pros and cons of bilingual education.

Criticism of bilingual education has grown as parents and numerous objective analyses have shown it was ineffective, kept students too long in Spanish-only classes, and slowed the learning of English and assimilation into American society. High dropout rates for Latino students, low graduation rates from high schools and colleges have imprisoned Spanish speakers at the bottom of the economic and educational ladder in the United States.

This revolt, the defects of bilingual education, and the changes needed to restore English for the Children are covered in the essay. The implications of Proposition 227 abolishing bilingual education in California are also discussed.

The Congressional Response to Social Security Surpluses, 1935-1994

by John F. Coganvia Analysis
Saturday, August 1, 1998

Congress has before it more than two dozen proposals for reforming Social Security. Many proposals call for the creation of a large reserve fund within the federal budget. This fund is necessary, proponents argue, to keep the Social Security program solvent when the baby boom generation retires and begins to draw its benefits.

This essay presents a historical examination of the federal government's policy toward Social Security reserves. The historical review casts doubt on the viability of sustaining a large reserve policy. From time to time throughout the program's history, policy decisions, wartime economic conditions, and business-cycle expansions have created large reserves or projections thereof. Those reserves have generated pressures for greater spending. Congress has invariably responded by raising benefits or expanding eligibility.

These results contain an important implication for Social Security reform. Unless a method can be found for altering congressional behavior from its sixty-year norm, any attempt to ensure Social Security's solvency by building a large trust fund reserve will likely prove futile. A large reserve will lead to higher spending. In doing so, it will add to the burden of government borne by both current and future generations of taxpayers.

Race, Culture, and Equality

by Thomas Sowellvia Analysis
Friday, July 17, 1998

In his remarks at the Commonwealth Club of California on June 18, 1998, Thomas Sowell discussed the conclusions he reached after spending fifteen years researching the economic and social impacts of cultural differences among peoples and nations around the world. This essay, Race, Culture, and Equality, distills the results found in the trilogy that was published during these years---Race and Culture (1994), Migrations and Cultures (1996), and Conquests and Cultures (1998).

The most obvious and inescapable finding from these years of research is that huge disparities in income and wealth have been the rule, not the exception, in countries around the world and over centuries of human history. Real income consists of outputs and these outputs have been radically different because the inputs have been radically different from peoples with different cultures.

Geography alone creates profound differences among peoples. It is not simply that such natural wealth as oil and gold are very unequally distributed around the world. More fundamentally, people themselves are different because of different levels of access to other peoples and cultures. Isolated peoples have always lagged behind those with greater access to a wider world, whether isolation has been the result of mountains, jungles, widely scattered islands or other geographic barriers.

Cities have been in the vanguard of cultural, technological and economic progress in virtually every civilization. But the geographic settings in which cities flourish are by no means equally distributed around the globe. Urbanization has been correspondingly unequally developed in different geographic regions--most prevalent among the networks of navigable waterways in Western Europe and least prevalent where such waterways are most lacking in tropical Africa.

If geography is not egalitarian, neither is demography. When the median age of Jews in the United States is 20 years older than the median age of Puerto Ricans, then there is no way that these two groups could be equally represented in jobs requiring long years of experience, in retirement homes or in sports. Even if they were identical in every other way, radically different age distributions would prevent their being equal in incomes or occupations.

Discrimination is also one of the many factors operating against equality. But even if all human beings behaved like saints toward one another, the other factors would still make equality of income and wealth virtually impossible to achieve.

Neither geography nor history can be undone but we can at least avoid artificially creating cultural isolation under glittering names like "multiculturalism."

Hong Kong Under Chinese Rule: The First Year

by Alvin Rabushkavia Analysis
Wednesday, July 1, 1998

July 1, 1998, marks the first anniversary of Hong Kong under Chinese rule. How has Hong Kong fared during its first year as the newly created Hong Kong Special Autonomous Region of China (HKSAR)? The one positive story was the HKSAR's successful defense of the fixed link between the Hong Kong dollar and the U.S. dollar, which serves as backing for Hong Kong currency. In almost every other respect, the people of Hong Kong are worse off than they were during the last years of British colonial rule. The greatest setback was in the political arena. Nearly two million Hong Kong residents lost the right to vote in the May 24, 1998, elections for thirty of the sixty representatives of the HKSAR's legislature, who were chosen from functional constituencies. In general, the principle of one man, one vote was violated in favor of extremely complicated, three-tiered, rigged electoral arrangements to ensure that pro-China candidates would constitute a legislative majority. Several civil liberties were eliminated or reduced. Mainland Chinese cronyism was reflected in the purchase of substantial stakes in Hong Kong firms by Hong Kong branches of mainland firms at a substantial discount to market prices, until the Asian financial crisis transformed connections with mainland business and political organizations from an asset into a liability. The stock and property markets lost up to half their peak August 1997 value. English-language education was curtailed over the objections of parents and students as numerous schools that formerly taught in English were converted into Chinese-language schools.

Affirmative Action in Higher Education: A Dilemma of Conflicting Principles

by John H. Bunzelvia Analysis
Wednesday, July 1, 1998

As a university president in the 1970s (San Jose State) and then as a researcher and writer, Bunzel's long involvement with affirmative action in higher education has led him to conclude that the troubling issues of race and equality cannot be reduced to the easy categories of "right" versus "wrong." He objects to such moral absolutism (also reflected in California's Proposition 209) because it denies legitimacy to the inevitable complexities and nuances inherent in what he regards as a many-sided problem. Affirmative action in college admissions, he argues, must ultimately be viewed in relation to other competing principles and in light of many practical problems.

In trying to balance different claims and interests within a "theory of limits," Bunzel believes a more useful way to think about affirmative action is in terms of a "social contribution theory of universities." Thus he asks (among other questions), "Is some degree of race consciousness never defensible?" He does not think there is only one morally correct answer. Acknowledging that race has too often been considered excessively and sub rosa, he rejects both of the ideologically pure extremes--namely, that anything that overcomes the disadvantages of race is acceptable and that taking race into account is never appropriate under any circumstances.

Reengineering College Student Financial Aid

via Analysis
Wednesday, April 1, 1998

Our society continues to assign considerable value to higher education and, for the most part, desires to have it in the reach of deserving students. Differences arise, however, over the definition of deserving and who should pay for that education. When limited financial resources are available from government as well as from the private sector, student financial aid resources must be used efficiently. The congressional elections of 1994 and 1996 seem to indicate that the majority of the electorate desires to downsize big government, with its bureaucracy and red tape, and to bring decisions on policy and resource utilization closer to the affected populations and the taxpayers who must finance them.

The model presented in this essay seeks to assign to the three sources of student financial aid--the federal government, state governments, and the institutional and private sector--responsibility for helping to fund specific college costs that students and their parents cannot pay. The roles stipulated in the model for federal and state government adhere to the provisions of the United States Constitution. More than $50 billion is awarded each year in student financial aid; $35 billion of that comes from the federal treasury so federal programs receive particular attention.

Reducing the multiplicity of federal student aid programs will certainly be challenged by those who fear that their largesse from Washington will diminish. Resistance to the changes proposed in this essay can be expected, including the argument that these programs have worked well over time and simply need more funding to make them even better. This essay presents what it is hoped are compelling reasons for reengineering all student financial aid now. The changes will bring about greater effectiveness, efficiency, and equity.

Pages