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Monday, December 31, 2001


"Enlightening Ideas for Public Policy..."
Vol. 3, Issue 52
December 31, 2001


1. The Colombian Drug-War Quagmire
2. States' Persecution of Microsoft: Throwing Bad Money after Good
3. Freedom Matters More Than Ever, Economist David R. Henderson Explains



In the early days of the war against terrorism in Afghanistan, many pundits tossed around the word "quagmire" to indicate the risk that the U.S. would have no more luck with al-Qaeda and the Taliban than did the Soviets and British during their Afghan escapades. Although the term "quagmire" in retrospect hardly applies (at least not with regard to the "hot" war that has all but officially concluded), the term most certainly seems to fit the case of the U.S. drug war in Colombia.

The United States has spent nearly $1 billion to fight drugs in Colombia, but the country's cocaine production has more than doubled in the past five years. And neither the drug trade nor the drug war in Colombia show any sign of slowing down.

"This is a tragic mistake," writes Ron Gurantz, public affairs intern at The Independent Institute, in a recent op-ed. "Counter-narcotics efforts in Colombia have been ineffective, and additional U.S. intervention will only worsen a desperate situation."

U.S. attempts to thwart the South American drug trade, through fumigation and military action, have proven futile, according to Gurantz. Fumigation efforts have shifted coca growing from Bolivia to Peru to central Colombia to southern Colombia, but total cocaine production has actually increased.

And military aid to Colombia has done little more than embolden right-wing paramilitary groups and escalate the country's 37-year-old civil war. The Cali and Medellin drug cartels were brought down in the mid-1990s only to be replaced by smaller and harder-to-track drug trafficking groups and left-wing guerillas. (Trust government to create competition and greater output in one of the few industries where cartels and lower output are desirable!)

"While America's cocaine habit is fueling a $6 billion industry in Colombia, the American government is spending hundreds of millions to wage a violent and ineffective war on cocaine production. It is also contributing to the escalation of a long and bloody conflict. Plan Colombia must end before more of that country's innocent civilians are forced to pay for America's irresponsible and reckless behavior, and the U.S. increases the ranks of its enemies abroad," concludes Gurantz.

See "A Losing Battle in Colombia," by Ron Gurantz (OAKLAND TRIBUNE, 12/15/01), at http://www.independent.org/tii/news/011215Gurantz.html

Also see:

Transcript of the Independent Policy Forum, "The War on Drugs: Who is Winning? Who is Losing?" with Alexander Cockburn, Jonathan Marshall, and Peter Dale Scott, at http://www.independent.org/tii/forums/000621ipfTrans.html

"Predatory Public Finance and the Origins of the War on Drugs, 1984-1989" by Bruce L. Benson and David W. Rasmussen (THE INDEPENDENT REVIEW, Fall 1996), at http://www.independent.org/tii/content/pubs/review/TIR12_Benson.html



Because government bureaucrats don't bear the costs of their actions directly, governments are especially bad at not knowing when to stop throwing bad money after good. The Microsoft antitrust case clearly illustrates this truism of government pathology.

Although the U.S. Court of Appeals discarded the guts of the government's antitrust suit against Microsoft last June, nine states -- led by California and Connecticut-- have chosen to keep fighting Microsoft. And although the federal antitrust trial uncovered no proof that consumer welfare was harmed by Microsoft's fiercely competitive behavior, the nine states perpetuate the pretense that they are pursuing Microsoft for the sake of consumers rather than Microsoft's rivals.

As Dominick Armentano put it in a recent op-ed:

"The first trial produced not one shred of evidence Microsoft's software licensing or browser integration resulted in any consumer injury; the new trial will be similarly cursed. Instead, the testimony will confirm Microsoft plays competitive hardball (who doesn't?) and intends to take market share from competitors with new innovation, savvy marketing and low prices."

"But that kind of behavior (engaged in by all free market firms) is the very nature of the competitive process and should be applauded, not condemned. Yet the holdout states and their politically ambitious attorneys general falsely believe antitrust laws exist to preserve specific competitors or specific products and that government must constantly level the playing field or micro-manage inter-firm business dealings with antitrust litigation. So the states will put the competitors on the stand and let them whine.

"Consumers (and businesses) in all states require government protection from force and fraud but they don't require decade-long antitrust assaults on firms that innovate and lower prices to consumers. Such assaults are economically inefficient, create incentives for additional litigation, perpetuate business uncertainty and harm society's long-term welfare. Enough already."

The British legal system requires that the loser pay all court costs; this helps discourage frivolous lawsuits. If American antitrust law imposed a similar penalty, perhaps business rivals would spend more time competing and less time in antitrust litigation. And perhaps government antitrust bureaucrats would also curb their costly excesses.

See "It's Time to Quit," by Dominick Armentano (NATIONAL POST, 12/21/01), at http://www.independent.org/tii/news/011221Armentano.html

Also see:

ANTITRUST AND MONOPOLY: Anatomy of a Public Policy Failure, by Dominick Armentano (Second Edition, The Independent Institute), at http://www.independent.org/tii/content/briefs/b_antitru.html

"The Attack on Concentration" by Yale Brozen (THE FREEMAN, January 1979), at http://independent.org/tii/news/790100Brozen.html

WINNERS, LOSERS, & MICROSOFT: Competition and Antitrust in High Technology, by Stan Liebowitz and Stephen Margolis, at http://www.independent.org/tii/content/briefs/BriefWLMS.html



Lovers of liberty should not rest on their laurels but should continue to fight for economic and civil liberties, according to economist David R. Henderson, at the recent Independent Policy Forum, "Why Freedom Matters More Than Ever."

"Let's stop settling; let's speak out when our freedom is violated," Dr. Henderson implored the audience. "Even better: Let's do the same when the freedom of others is violated. It's not too late to seek a freer world."

Dr. Henderson -- whose recent book, THE JOY OF FREEDOM: An Economist's Odyssey, is an inspiring blend of memoir and policy analysis -- recapped some of the most inspiring reasons to fighting for freedom that many people overlook.

Recounting his experience at the Council of Economic Advisers, Dr. Henderson explained how government regulations, such as gasoline fuel economy standards, often backfire.

Dr. Henderson also explained the importance of keeping government power in check during time of emergency, when opposing parties stop bickering and agree to enlarge the scope of government power, much to the detriment of liberty.

Dr. Henderson also explained the importance of some of the "Ten Pillars of Economic Wisdom," found in chapter 2 of his book:

1. TANSTAAFL: There ain't no such thing as a free lunch.
2. Incentives matter.
3. Economic thinking is thinking on the margin.
4. The only way to create wealth is to move it from a lower valued to a higher valued use. Corollary: Both sides gain from exchange. 5. Information is valuable and costly.
6. Every action has unintended consequences.
7. The value of a good or service is subjective.
8. Costs are a bad, not a good.
9. The only way to increase a nation's real income is to increase its real output.
10. Competition is a hardy weed, not a delicate flower.

C-SPAN was also on hand, taping Dr. Henderson's talk for future cablecast. To view the show, please stay tuned for a future LIGHTHOUSE announcement.

For the transcript of David R. Henderson's presentation, "Why Freedom Matters More Than Ever," see http://www.independent.org/tii/forums/011204ipfTrans.html


THE LIGHTHOUSE, edited by Carl P. Close, is made possible by the generous contributions of supporters of The Independent Institute. If you enjoy THE LIGHTHOUSE, please consider making a donation to The Independent Institute. For details on the Independent Associate Membership program, see http://www.independent.org/tii/tii_info/associat.html or contact Mr. Rod Martin by phone at 510-632-1366 x114, fax to 510-568-6040, email to , or snail mail to The Independent Institute, 100 Swan Way, Oakland, CA 94621-1428. All contributions are tax-deductible. Thank you!


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