Category Archives: Publications

Raise, Don’t Level: New CEI Papers on Inequality and Poverty Relief

Economic inequality is one of today’s defining issues. How to address it? Iain Murray and I offer an unconventional approach in a new two-part CEI study, released today. The first part frames the issue. The title sums it up well enough: People, Not Ratios: Why the Debate over Income Inequality Asks the Wrong Questions. The second part,The Rising Tide: Answering the Right Questions in the Inequality Debate, outlines a concrete policy agenda to make the poor better off.

Anti-poverty activists routinely fret about the ratio between a CEO’s salary and her lowest-paid employee’s, or how the top one percent’s ratio of national income compares to the bottom one percent’s. Instead of mathematical ratios, we encourage activists to focus on human beings. Again, we plead: focus on people, not ratios.

Ratio-obsessed activists from Thomas Piketty to Naomi Klein ignore some obvious questions due to their monomania:

  • How are the poor actually doing?
  • Is their economic situation improving over time?
  • What policies can make the global poor better off over time?

We seek to fill these disappointing gaps. According to nearly all available data, poor people are better off than ever before in human history—keep at it, then! There is still lots to do, but ignoring the accomplishments people have already made, and what can make more accomplishments possible, only hurts the poor.

Over the course of the 20th century, infant mortality went down by more than 90 percent—just think of how many parents’ broken hearts have stayed whole thanks to modern technology and sanitary practices.

Life expectancy improved by 30 years during the 20th century. And that’s not the only type of length modernity has improved: from 1900 to 1950, the average American became three inches taller, thanks to better nutrition, food security, and health care. The process has only continued since then.

Even if it was only the top one percent that enjoyed zero infant mortality, lived a hundred years, and were all seven feet tall, their best efforts could not bias society-wide statistics nearly that much, despite their most conspiratorial plutocratic efforts. This is what mass prosperity looks like.

According to the Swedish economist Max Roser, since 1960 the number of people living in absolute poverty has declined from nearly two billion to about 700 million—a two-thirds decline. And this happened as total world population more than doubled! This is good news. Today’s most important task is to keep this great enrichment going, and to eliminate absolute poverty altogether.

The poor will never have as much as the rich—every curve has a bottom and a top ten percent, and always will. No changing that. But only the hardest heads deny that most poor people today live better lives than their parents or grandparents did—and that future generations can expect this wonderful trajectory to continue, if they’re allowed to.

This is both a reason to celebrate, and a reason to double down. Now that we haveasked the right questions about inequality, the second part of our study, The Rising Tide, seeks to answer them: what policies can continue to make the world’s poor better off?

There are a lot of answers. We don’t pretend to have all of them, but we offer a few. One is an honest price system: runaway-inflation countries such as Zimbabwe and Venezuela are universally poor. Keeping inflation in check and making sure prices convey honest information will help consumers and entrepreneurs make wise decisions that create value for people.

Affordable energy is another answer, allowing everything from clean home heating (natural gas is somewhat cleaner than dung and logs, especially indoors) to more and better transportation choices, which expands employment options.

Any aspiring entrepreneur needs access to capital—Dodd-Frank-style financial regulations openly insult every person trying to escape poverty. So do many governments’ resistance to granting formal property rights to their people.

Another answer—there really are a lot of them, and no single panacea—is occupational licensing reform. There is no legitimate reason for an interior decorator or a hair-braider to undergo hundreds of hours of training in something they already know how to do, in order to do for pay something they can do for free. Nearly a third of American workers require government permission to begin their day’s work. That is ethically wrong, and should be immediately reformed.

Inequality is a complicated issue. Properly addressing it requires both asking and answering the right questions. Ask how real-world people are doing, not abstract income ratios. And ask about policies that can help people escape poverty. The answers are numerous, and Iain’s and my papers do not pretend to have all of them.

But, we humbly submit, a general ethos of not stamping down on impoverished hands would be a good start. It would also be quite a change from current policy in the U.S. and many other countries.

For more, see our papers, People, Not Ratios: Why the Debate over Income Inequality Asks the Wrong Questions, and The Rising Tide: Answering the Right Questions in the Inequality Debate.

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Ten Thousand Commandments

The brand new 2016 edition of Clyde Wayne Crews, Jr’s Ten Thousand Commandments report is out now. You can read it here. If you prefer the short version, Wayne and I did a short writeup for The Hill’s Congress Blog, emphasizing why presidential candidates should start talking about regulation:

We hear a lot about spending in candidate debates and speeches. But federal regulations impose estimated total costs on the economy of $1.88 trillion, roughly half the size of the federal budget, according to our findings, published in the 2016 edition of the Competitive Enterprise Institute’s annual Ten Thousand Commandments report.

So while politicians from both parties loudly complain about “waste, fraud and abuse” in taxing and spending, the costs of regulation mean the federal government is 50 percent more bloated than even the most strident stump speech would suggest. Indeed, if federal regulations were their own country, they would comprise the world’s 10th largest economy, ahead of Russia and behind India.

Read the whole piece here, or, better, the entire study here.

How to Address Income Inequality

Over at the Foundation for Economic Education, Iain Murray and I give a short preview of our two forthcoming CEI papers on income inequality and poverty relief.

In the first, “People, Not Ratios: Priorities, Please,” we argue that inequality in itself is not the problem — poverty is.

Piketty and Krugman’s focus on income inequality treats people like statistics. Instead, we should focus on individuals’ actual standards of living and on ways to empower them — as individuals — to improve their lot.

In the second paper, “Policies to Help the Poor,” we suggest a policy agenda to make poor and middle-class individuals better off in absolute terms.

Of course, the elimination of global poverty is a bigger topic than even the longest think tank policy paper can fully address, so we focus on some key regulatory actions that can have a significant impact, such as ensuring access to affordable energy, easing access to capital for entrepreneurs, ending minimum wages to create greater employment opportunities for the young and low-skilled, and repealing compulsory collective bargaining laws that hurt nonunion workers.

Read the whole thing here; the papers will be released soon.

Regulatory Reform in 2016 Starts Now

The House is voting on two pieces of regulatory reform legislation today, the Sunshine Act and the SCRUB Act. Both will likely pass, then it’s on to the Senate, though veto threats to both bills complicate matters. Over at RealClearPolicy, I break down both bills. The Sunshine Act would reform a regulatory practice called sue-and-settle:

In a typical sue-and-settle situation, an environmental-activist group sues the Environmental Protection Agency for not meeting deadlines or not enforcing certain regulations thoroughly enough. EPA officials, who may have been working with the plaintiffs behind the scenes, happily admit guilt and agree to a settlement that expands the agency’s power and scope.

See also my colleague William Yeatman’s work on sue-and-settle reform. Meanwhile, the SCRUB Act would:

[E]stablish an independent commission to comb through the 175,000-page Code of Federal Regulations for old, obsolete, redundant, and harmful rules. Its goal is to “achieve a reduction of at least 15 percent” in cumulative regulatory costs. With that goal in mind, and given that federal regulations now cost nearly $1.9 trillion per year, a successful commission could save the American people around $285 billion per year.

Read the whole thing here.

Much to Be Thankful For

Thanksgiving is tomorrow, and all of us have much to be thankful for. Over at Inside Sources, I have a Julian Simon-inspired take on the holiday:

This Thursday is an opportunity to give thanks for a wonderful fact: In all of human history, there has never been a better time to be alive than right now. This might seem an odd thing to say at the moment. War, terrorism, poverty, political repression and hunger still plague many countries. The most recent wounds, inflicted in Paris, Syria, and elsewhere, are still fresh.

But life is improving in unprecedented ways.

Over the last century or so, the typical American’s income has grown sixfold. Life expectancy increased 30 years during the 20th century, from 47 years in 1900 to 77 in 2000. Infant mortality went down by more than 90 percent over that period, from roughly one in 10 to less than one in 100. Just think of all the broken hearts avoided. Nutrition and health care improved so rapidly that the typical American in 1950 was three inches taller than in 1900. Today’s Americans are taller still.

Read the whole thing here.

Virtuous Capitalism in Theory and Practice

Government is responsible for billions and billions of dollars of corruption and corporate welfare. Considering the potential returns on investment compared to honest entrepreneurship, it is a minor miracle the vice-to-virtue ratio in the economy isn’t even worse than it already is. Why is that? CEI founder Fred Smith and I wrote a recent paper, “Virtuous Capitalism,” which explores several possible answers to the question.

If you don’t have time to read the whole thing, Fred summarizes it in his most recent Forbes column, to which I contributed:

Capitalism has a bad reputation. Many people see it as corrupt, uncaring, and in bed with politicians. And popular wisdom isn’t always wrong. For example, take the Export-Import Bank’s pending renewal. How dare large, healthy businesses such as Boeing and General Electric receive billions of dollars-worth of special privileges?

Has Big Business thought through the political and social costs of such self-aggrandizement? Is sacrificing long-term moral standing for short-term dollars really wise?

Read the whole column here. The paper is here.

The Mild, Mild West: Regulation in America

Over at the newly launched US edition of the UK-based CapX wesbite, Wayne Crews and I have a short primer on U.S. regulation:

America has a reputation as the land of Wild West cowboy capitalism. The truth is rather more mundane. The US economy is one of the most heavily regulated in the world, with the total cost of federal regulations standing at nearly $1.9 trillion—equivalent to nearly two thirds of the UK’s entire GDP.

Read the whole piece here. For a more through treatment, see Wayne’s annual Ten Thousand Commandments report.