Richard Rahn

Richard W. Rahn is an economist, syndicated columnist, and entrepreneur. He was a senior fellow of the Discovery Institute. Currently, he is Chairman of Improbable Success Productions and the Institute for Global Economic Growth. He also writes a syndicated weekly economic column which is published in The Washington Times, Real Clear Markets and many other places. He was the Vice President and Chief Economist of the United States Chamber of Commerce during the Reagan Administration and remains a staunch advocate of supply-side economics, small government, and classical liberalism.


The End of Progress

Have things stopped getting better? Americans had become used to ever-increasing living standards, but there is evidence that for many people, life is not improving. There is also a growing pessimism about the future with surveys showing that Americans do not think their children and grandchildren will be better off. Last week, there was a most interesting discussion between two of the world’s leading tech gurus – George Gilder and Peter Thiel — at FreedomFest in Las Vegas. Mr. Gilder has written some of the most influential books of our time, including Wealth and Poverty, Microcosm and Telecosm, and was the one who popularized Moore’s Law, which says computer power doubles about every 18 months and costs fall by half. Mr. Thiel is best known as a co-founder of

Primer on the Great Debate

Do you understand why well-known economists, including Nobel Prize winners, are on opposite sides of the debate about the stimulus package and what should be done about the recession? Not only Americans, but people everywhere are confused, largely because the economists who are writing and speaking about what should be done have such fundamental disagreements. There are two main schools of thought. One group is under the broad umbrella of the Chicago or Austrian school economists who are heavily influenced by the teachings of F.A. Hayek (1899-1992) and Milton Friedman (1903-2007). The members of the other group are commonly known as Keynesians, who accept many of the teachings of John Maynard Keynes (1883-1946) and his disciples. Recessions/depressions are usually the result of excessive

Model Hypocrites

You can bet that almost anytime a politician attempts to raise your taxes or pushes for a big, new government spending program, the justification is at least partially based on the results of some mathematical model. Al Gore, and many others endorsing the global warming rage, tell us the climate models show government must do something about global warming before we are all cooked (or at least lightly tanned). Having spent three decades around model builders and reading their studies, I have concluded it is infinitely easier to obtain government funding to build a mathematical model likely to show the need for more government activity and spending rather than less. Both physical and social scientists use mathematical models to make predictions about the future. The model is

Taxing Questions

Do you think your taxes are too high or too low? Though I expect that well over 90 percent of you are thinking “too high,” many in the media and political class keep telling us taxes are too low. The left-leaning intelligentsia, in their arrogant smugness, claim we just don’t know what is good for us. Yet, they are the ones who ignore the empirical evidence and are unable to distinguish between variables and constants. As a prime example, a May 7 editorial in The Washington Post, advocating higher tax rates on the rich, states: “Economics cannot predict how high taxes can be raised before they reach counterproductive levels.” The editorial then says an increase of “taxes on the top 1 percent by 5 percentage points would raise $85 billion annually

Cost-Effective Warfare?

Do you think too much or too little is spent on defense? The U.S. government now spends a half-trillion dollars a year on its military, or about $1,700 for every man, woman and child in America.  I asked the opening question in the way many members of the media and political class pose it. The correct question is: What does America (or any other country) need to do to protect itself, and how can it do that in the most cost-effective way? Anyone who has ever spent any time around a major military organization in any country knows there is tremendous waste. This less-than-shocking fact has been true ever since nation-states began operating their own militaries. Military departments are normally state monopolies that suffer from all the common bureaucratic problems faced by

Eradicating European Flu

Europe has not yet suffered from bird flu, but it suffers from an even more debilitating economic flu — excessive government dependency. That dependency is sapping both its economic vitality and its spirit and has grown most acute in the core of Europe: Germany, France and Italy. We need to help our European friends fight this disease, not through a new Marshall plan but through a sound economic education campaign. The European Union is still the world’s second-largest economy after the United States and is the major or significant trading partner for almost every country. Europe provided mankind the modern concepts of liberty and justice, and European culture and civilization have enriched the lives of most of the world’s people. It has also been the source of great

In Defense of Business

If you are saving money for retirement or to put a child through school, would you be likelier to buy the stock of a company with a reputation for providing a good return to its shareholders or one that prides itself on its “social responsibility”? You may like to do both, but the evidence is companies that change their focus from benefiting their shareholders to “social responsibility” often end up providing much lower total returns to their shareholders. In one of the great ironies, an organization calling itself Business Ethics (which rates companies by a social responsibility index that includes such things as “diversity,” “concern for the environment,” etc.) gave its “2004 Best Corporate Citizen” award to Fannie Mae. You

Good Governance

Have you noticed Congress and administrations periodically claim they will save a great deal in some government program by ending “waste, fraud, and abuse,” and then provide a “number” representing the obtainable savings? Yet few ever ask how the waste, fraud, and abuse got there in the first place, and why they are not taken out of every other government program. The poor management of these programs causes a huge and unnecessary dead weight loss on the economy, which reduces living standards and economic opportunity. The president has been stymied on many of his initiatives, but he still has a golden opportunity to make his mark by doing a few things to make the government much more cost-effective. There is much the Bush administration can do without going

Tax Reform Timidity

The president’s tax reform panel’s report is due at the end of this month, but don’t hold your breath if you were looking for the reform that is really needed. Preliminary signs are the panel will recommend relatively modest (but several desirable) changes to the federal tax system. For decades the present income tax system, with its tens of thousands of rules and regulations, has been widely recognized as so complex no one human, no matter how talented, can understand it. The present system puts even those who fully intend to comply with the code at risk of being convicted as tax felons because it is impossible to know with certainty when one is or is not in compliance (even federal tax courts rulings sometimes rule contradict other federal tax courts). The

Rewards of Economic Freedom

If you had to list 10 freedoms that are important to you from your most to your least important, how would you rank them? You might ask your family and friends the same question, and I expect you will find the lists and priorities quite different.Those who work in the media are likely to rank freedom of the press near the top. Civil libertarians are likely to put the right of peaceable assembly, the right against self-incrimination and the right against unreasonable search and seizures on their list. Hunters are likely to rank high the right to bear arms, while city dwellers may not list it at all. Most people will probably list freedom of speech and freedom of religion in the top 10. Economic libertarians are likely to list the right to be secure in their property, or for their

Britain Slowly Sinking

From the time of the Thatcher reforms in the early 1980s, Britain has been the star economic performer among the major European nations. The British went from having the lowest per capita income of the European big four (Germany, France, Italy and Britain) to having the highest one, but now there are signs the economic sickness in “old Europe” is beginning to infect the British. The British economy had been growing an average of almost 3 percent yearly for the last two decades, which is quite respectable, given that French and German economies have grown much more slowly. Over the same period, the U.S. grew at an average rate of almost 4 percent, far higher than any of the major European economies. When Tony Blair took office, he had the wisdom not to undo the

Lessons of Smaller States

REYKJAVIK, Iceland. Why is this cold, rainy land with its stark volcanic landscape, without much in the way of natural resources, one of the wealthiest places on Earth? Small states, in the past, were most often poorer on a per capital income basis than large states, but in the last half-century many have become much richer then their large neighbors. Among the wealthiest places on the planet, in addition to the United States, we now find Luxembourg, Hong Kong, Denmark and Ireland, none with many natural resources. In a just-concluded meeting of the Mont Pelerin Society in Iceland, some leaders of small states that have developed very successful economies met with some of the worlds’ leading free-market economists and policy institute professionals, partly to discuss what

Who’s Afraid of Scientific Methods?

People who consider themselves very rational argue that most disputes about what is true and what is not can be settled by calmly looking at the evidence and letting it guide them to the proper conclusion. However, many who claim to be adherents of the scientific method seem to lose their “scientific objectivity” in some of the great debates of the day. The global warming debate is a glaring example of where many enthusiasts have lost all sense of the scientific method in reaching their conclusions. Some European leaders have even implied President Bush and Americans are stupid for not embracing both the theology of global warming and their policy solutions, all designed to enhance state power. To rationally debate the issue, we should start by being modest about what

EU Extortionists

Imagine you own a successful business, and you have a much larger and less efficient competitor. Your inefficient competitor has demanded you make payments to him or he will pressure your suppliers to stop doing business with you. I have just described classic criminal extortion, as now conducted by some governments in the European Union. In the above example, substitute: France, Germany and Italy for the “inefficient competitor;” smaller, low tax jurisdictions for the “successful business;” global financial institutions for “suppliers;” and coerced taxes and information for “payments.” Now you begin to understand what is going on. On July 1, the controversial European tax savings directive took effect. This requires 25 EU members and

Uninformed Expropriation

If you were told the government could take your real property and give it to another preferred, private person, would you be more or less prone to make improvements on your property? If you were a clear-thinking person with a basic knowledge of economics, you would reply, “less prone.” Unfortunately, five U.S. Supreme Court justices — David Souter, Ruth Bader Ginsburg, Stephen Breyer, John Paul Stevens and Anthony Kennedy — failed that elementary question last week in Kelo v. City of New London. Many others have commented on their faulty legal reasoning. I will leave that to the lawyers. But clearly, the decision was bad economics. Those familiar with economic literature know that protection of private property is a key ingredient in economic development and

Regulatory Oppression

Do you think there is too little or too much regulation? Though the appropriate amount of regulation may be in the eye of the beholder, we do have objective evidence of the growth of federal regulation. The Annual Regulators’ Budget Report by Susan Dudley of George Mason University’s Mercatus Center and Melinda Warren of Washington University’s eidenbaum Center has just been released. Their study shows both the cost and number of regulators continues growing far faster than inflation and population, which means in real terms we are becoming an increasingly regulated people. In inflation-adjusted dollars, the most of federal regulation has gone from $2.3 billion in 1960 to $38.9 billion expected in this next fiscal year. This is a greater than fourteenfold

Destructive Government

The basic function of government is to protect person and property, but all too often government does just the opposite. In their zeal to protect us from financial fraud, government officials recently engaged in a series of actions that have cost tens of thousands of innocent people their jobs, reduced U.S. international competitiveness, and destroyed more than $1 trillion in value for American shareholders. Every American now suffers from the excesses of certain prosecutors and judges, and from Congress’ tendency to pass legislation aimed at correcting what they perceive as problems without thinking through the consequences of their actions. In the wake of the Enron scandal, the government went after Enron’s auditor, Arthur Andersen, and destroyed the company. The Supreme

Saving Europe

Fortunately, there are few problems that have not been at least partially solved by others some time in the past — and this is true for the mess in which Europe now finds itself. In 1786, the United States was in a somewhat similar situation. Near the end of the Revolutionary War, in 1781, the Articles of Confederation were adopted that formed the United States. It quickly became apparent the Articles of Confederation were fatally flawed, in that tensions were rising among the states and the economy had stagnated. Several Founding Fathers, notably Alexander Hamilton and James Madison, called for a convention to revise the Articles. The convention met in Philadelphia in 1787, where it was decided to replace the Articles with a new Constitution. The Constitution was adopted by the

A Run on the World Bank

If you were a stockholder of a bank and its managers kept telling stockholders they would have to “write off” the loans they had made because the borrowers were in no position to repay them would you fire the management for incompetence? If you are a taxpayer, particularly an American taxpayer, you are a stockholder in such a bank — the World Bank. The World Bank was set up in 1944 (along with the International Monetary Fund) to assist with post-World War II reconstruction. Its mandate is to reduce world poverty and promote economic growth but, in fact, many of its activities have had precisely the opposite effect. It now has 184 member countries, but most of the $400 billion it has dispensed in loans, grants and credits have been underwritten or guaranteed by the

Drift to World Government?

What level of government (local, state, federal, multinational institution or none) should regulate the following: What trees you may cut on your home property; whether you may burn logs in your home fireplace; what identification you need to open a bank account in your local bank? Traditionally, it was not considered anyone else’s business, including the government’s, as to what trees, flowers and other plants one grew on one’s own property. Slowly, local governments and zoning authorities began regulating these decisions. As the influence of agricultural and environmental interests grew, federal laws and regulations were passed regarding which crops and trees could be grown or removed from private property. Until roughly a century ago, every home had a fireplace, used for