Magazine also looks at critical learning from past guest-worker programs, seeks to neutralize the net-neutrality debate and exposes hedge fund demographics
LOS ANGELES - President Bush′s anticipated State of the Union comments on alternative energy may renew interest in corn, sugar cane and saw-grass futures, but don′t expect ethanol to play any notable role in achieving energy independence, according to experts in the new issue of Milken Institute Review.
Jerry Taylor and Peter Van Doren, both senior fellows at the Cato Institute, argue that highly subsidized corn-based ethanol is a non-starter as a serious effort to wean Americans off of their dependence on oil.
"The dizzying array of federal, state and local subsidies, preferences and mandates for ethanol fuel are a sad reflection of how a mix of cynical politics and we-can-do-anything American naivete can cloud minds and distort markets," state the authors.
Taylor and Van Doren detail the many post-9/11 sound-bite-friendly arguments made in favor of ethanol and how, in reality, they serve as a soundtrack to the only real effect of the ethanol industry: the transfer of money from urban taxpayers to corn farmers and the shareholders of ethanol plants.
Also in this issue, University of California, Davis economist Phil Martin examines today′s guest-worker proposals in light of the unintended consequences of the Bracero program of the 1940s and 50s. "It is important, at very least, to learn from past mistakes. Laws requiring guest workers to return home must be complemented by financial incentives for both employers and employees."
Other highlights from the new Review:
- Diana Farrell and Susan Lund, both of the McKinsey Global Institute, compare the oft-debated economic prospects of India and China -- and identify a weakness common to both: efforts to use the banking system to cope with nagging social and political problems. "These policies have similar unfortunate consequences: wasteful investments that yield negligible returns, inadequate financing for private companies that are driving growth, competition-stifling state ownership of some financial institutions, minimal growth in the countries′ tiny corporate bond markets, and an anemic array of financial products for consumers."
- Tim Taylor, editor of the Journal of Economic Perspectives, crunches the numbers to show that the current focus on pork-barrel spending rather than tax cuts as budget-breaker is misplaced: "if taxes had to be cut at all, it is a pity that so much effort was put into ensuring the favorable distributional consequences for Republican Party donors and so little into streamlining the economy for the difficult decades ahead."
- Simon Hakim, Andrew Buck and Erwin Blackstone of the Center for Competitive Government at Temple University demonstrate the potential for local government funding to fight terrorism by curbing inefficient use of police, fire and ambulance services. "The total savings, conservatively estimated at $40 billion over five years, suggest that 40 percent of the required $98 billion to meet the minimum level of first response could be obtained by restructuring existing emergency services."
- Bob Hahn and Bob Litan of the AEI-Brookings Joint Center examine the budding debate over "net neutrality" in hope of warding off innovation-dampening regulation in the name of fairness. "Policymakers should look at how the Internet really functions from technical and economic perspectives," they write. "If content providers are willing to pay for enhanced quality, there is no good reason for regulators to deter them."
- The Milken Institute′s own Triphon Phumiwasana, Tong Li, James Barth and Glenn Yago take the measure of a mountain of data on hedge funds to provide perspective on the industry′s impact. "The returns of hedge funds have been relatively high over the years, but so, too, have the risks," they conclude. "This should not necessarily be a cause for societal alarm, however, since the investors putting money into hedge funds can bear high risks."
The issue′s book excerpt is from Cliff Winston′s Government Failure Versus Market Failure, a strikingly harsh look at economic regulation. And our Charticle is by demographer William Frey, who compares the prospects of the 300 millionth American with citizens from previous generations. Also included is an only-in-America look at the usage of the labels "liberal" and "conservative" in contemporary politics by Charles Wolf of the RAND Corporation. Last, for those with an anemic blog-roll, the magazine has a specially designed end-of-book "Lists."
The Milken Institute Review is sent quarterly to the world′s leading business and financial executives, senior policy makers and journalists. Its editor is Peter Passell, former economics columnist for The New York Times.