Conservatives have a massive majority in the Mississippi state legislature.  Are they about to deliver real conservative policy?  Or will we see the implementation of a soft-left, progressive-but-slower agenda to expand government?

When it comes to education, a blizzard of bills has just appeared which suggest that we might actually see something authentically conservative soon. 

The Mississippi Student Freedom bill (HB 1449) is the most exciting piece of legislation I have seen in the House in three years. 

It would give families the right to have their child’s share of state education tax dollars paid into their child’s own Magnolia Scholarship Account.  Each family would then be free to allocate that money to meet their child’s needs.

Think how transformative it would be if every mom and dad were allocated $8,000 - $10,000 tax dollars to spend on their child’s education, be it public, private, charter school or home school? 

The Mississippi Student Freedom bill would establish a system of school choice similar to what Governor Sarah Huckabee Sanders has implemented over in Arkansas.   Eligibility would be phased in over time, but the end goal would be to allow universal school choice. 

“But what if lots of students from failing school districts tried to move to successful school districts?” some will ask.

The bill anticipates precisely this concern.  School districts will not be compelled to take kids from out of area if schools in those districts are already full. 

Unsurprisingly, various vested interests that currently get to spend your education tax dollars are bitterly opposed to allowing families to have control.  No prizes for guessing why.  Turkeys might not vote for Christmas, but that does not stop Christmas from happening. 

A second bill in the House, the Opportunity Scholarships bill (HB 1452) proposes a similar system of school choice, but one that would only be available for those in failing school districts.  Good, if not quite excellent. 

Then there is the INSPIRE bill (HB 1453), which offers a complete overhaul of our antiquated school funding system.  

Mississippi's current school funding formula, the MAEP, was created in 1997.  MAEP stands for Mississippi Adequate Education Program Funding, but it has proved to be anything but adequate.

The MAEP funding system is Soviet in its complexity.  Over the past quarter century, it has proved pretty useless at getting your tax dollars where they are supposed to go: the classroom.  We ought instead to have a formula that funds students, not a system. 

This is precisely what the INSPIRE bill would do.  Every child in Mississippi would get an amount weighted to reflect their own needs. 

For years, policy makers have talked (and talked) about change.  Now, there is a plan to make it happen.

What is so significant about all these bills is that they have been sponsored by the House’s new education committee chairman, Rep. Rob Roberson.  He has made a remarkable start in the role. 

It is clear, too, that Speaker Jason White is also a driving force behind these excellent reforms.  If he is successful, Mr. White will transform our state’s education system for the better.  Every family in the state should rally behind him.  Indeed, every Mississippian who wants to see our state doing better should be with him 100%. 

Mississippi is now surrounded on every side by school choice states that have either implemented or are implementing these kinds of changes.  Here is our chance to be a leader, not a laggard. 

Mississippi voters have elected an overwhelmingly conservative legislature.  It ought to be possible for them to make these mainstream conservative policies happen.

Douglas Carswell is the President & CEO of the Mississippi Center for Public Policy.

If a family in the United States is not satisfied with their assigned district school, they do have options besides moving to a different school district, but these options are not available to everyone or even most.

One option is charter schools. Charter schools are public schools that receive government funding but are given the flexibility to innovate while being held to a high academic standard. Like traditional district schools, they are open to all children (though that is often limited based on capacity and district lines), they do not charge tuition, and they do not have special entrance requirements.

Charter schools are approved by an authorizing entity, which in some instances may be the local school district, and are run by either non-profit or for-profit entities. Each charter school has a “charter” that can be revoked by the authorizer after a certain period of time if that school is not producing the academic outcomes agreed upon. The authorizing board provides one level of accountability. Parents provide additional accountability. No family is assigned to a charter school; rather families must choose to enroll their children, or “opt-in,” and they can leave at any time.

Charter schools are relatively new in the United States. The first charter law passed in Minnesota in 1991 and City Academy in St. Paul, Minnesota became the nation’s first charter school to open its doors the following year. After the first school, the charter school movement soon began to spread. Numerous states quickly followed Minnesota’s lead and by 2016, 44 states including Mississippi had approved charter schools on some level.

For the 2016-2017 school year, more than 6,900 charter schools are serving an estimated 3.1 million students. In a ten-year period, enrollment in charters has tripled from 1.2 million since the 2006-2007 school year. The current numbers represent about 6 percent of total public school enrollment today.

In many urban areas that have long suffered from having the worst district schools in the country, the charter movement has flourished. During the 2016-2017 school year, 17 districts across the country had 30 percent or more of “enrollment share,” the percentage of public school students attending a charter school,” with New Orleans being the nation’s first nearly all-charter district.

However, charter schools are not readily available to every family who may wish to enroll their child. This may be due to either new laws, restrictive laws, or lack of school options and availability. That is certainly the case in Mississippi where the school districts in which a charter school can be located and the number of charter schools that can be authorized each year is limited.

Mississippi was one of the last states to join the charter school movement. The state’s first charter schools opened for the 2015-2016 school year.

The current law created a state authorizing board who is the sole authorizer of charter schools in the state. If a charter wishes to open in a school district rated “A,” “B,” or “C,” they first need to get approval from the local school board. That has yet to occur, and the focus has instead been on failing school districts. Students who wish to attend a charter school must either reside in the school district where the charter is opening, or they can cross district lines if they attend a school district rated “C,” “D,” or “F.”

This is an excerpt from School Choice: How to Unleash the Market in Education by Brett Kittredge. It was published in Promoting Prosperity in Mississippi.

Since the inception of the Balance Agriculture with Industry (BAWI) plan, the State of Mississippi has provided private business enterprises with billions of dollars in taxpayer-funded subsidies. The argument advanced by the proponents of selective or targeted incentives is that the benefits of subsidies (i.e., more employment, higher wages, more tax revenue to state and local governments) in luring companies to locate in Mississippi are substantially greater than their costs. As discussed earlier, forecasts of the total economic benefits anticipated from business subsidies are based on projections of employment gains and promises of higher wages paid by the targeted businesses. Through a Keynesian multiplier effect, these employment and wage gains will spill over to other areas of the economy and create even more employment opportunities and higher wages.

However, the employment projections rarely become reality because the models used commonly to estimate the multiplier do not account for the job displacement effect, instead assuming contrary to fact that every person employed at the subsidized plant is a new addition to the workforce and that every dollar paid to those employees (the plant’s total payroll) adds to the income earned by residents of the state. Our simple graphical analyses in the previous section show clearly that the promised job gains from the Nissan’s Canton, Mississippi, plant fell far short of those projected ex ante. However, even if the benefits of a taxpayer-funded subsidy did outweigh the costs using standard measures of economic impacts, such an outcome would be a necessary, but not sufficient condition for concluding that the incentive package passes a benefit-cost test, thereby delivering net economic benefit (benefits > costs) because the analysis fails to consider the subsidy’s opportunity cost. One opportunity cost of a taxpayer-funded subsidy is the private-sector economic activity that would have been generated (but is lost) had the subsidy not occurred and the dollars allocated to it remained in the hands of private individuals and commercial businesses. As just explained, an additional dollar injected into the private sector is exchanged repeatedly in series of market transactions and thus creates economic value greater than the initial dollar. The converse also is true: Every additional dollar of tax revenue taken from the private sector reduces economic activity by more than one dollar.

The true cost of a taxpayer-funded subsidy to business therefore is not just the actual dollar amount of the subsidy, but rather the actual dollar amount of the subsidy plus lost private-sector consumption if the subsidy resources were to remain in the private sector. This observation suggests that the true economic cost of a taxpayer funded subsidy is much larger than the subsidy’s accounting. So, for example, in the case of Nissan’s Canton plant, the true economic cost per worker actually exceeds the $203,125 accounting cost presented earlier because in order to finance the $1.3 billion subsidy, economic activity in the private sector will fall by more than $1.3 billion (the multiplier effect working in reverse). The economic criterion for a subsidy to generate a positive net benefit is that those benefits must be greater than the dollar value of the subsidy plus the opportunity cost of the lost private sector consumption.

A business subsidy inherently assumes that every dollar of a taxpayer-funded subsidy is worth more to the economy than if the dollar remained in private sector hands. While this may be true in some cases, the academic research and evidence presented herein suggest that possibility is more the exception than the rule. So, as was discussed in Chapter 3, public officials who advocate for taxpayer-funded subsidies to business are implicitly claiming that they know better than do private individuals and firms interacting in free and open markets how to most effectively allocate resources to their highest valued uses. If that actually were true, then we should allow legislators and public officials to decide all business activity within a state. But, we have seen throughout history (the former Soviet Union, Cuba, Venezuela, and North Korea immediately come to mind) how poorly planned economies perform. Of course, the argument is not being made here that taxpayer-funded subsidies to lure businesses to Mississippi and other states is equivalent to having a planned economy like the aforementioned countries, but the difference is only a matter of degree. Even though less economic planning occurs in the United States than in other nations, planning fails wherever politicians and public officials displace market processes because they lack the information (price and profit signals) and incentives necessary to decide which economic activities merit encouragement and which do not.

Legislators and other public officials who support taxpayer-funded subsidies likely do so with the best intentions — to create greater economic opportunity and a better future for the citizens of their respective cities, counties and states. However, despite these best intentions, it is likely that, in most cases, taxpayer-funded subsidies will do more economic harm than good, in part owing to ignoring the opportunity cost of lost private-sector consumption. That harm is amplified because officials everywhere compete with one another to assemble incentive packages that will entice businesses to their respective jurisdictions. Such competition for business creates ever larger taxpayer-funded subsidy packages that likely will cause even more substantial net economic losses for society as a whole. The only way to stop this race-to-the-bottom is for public officials to stop offering selective incentives to businesses and instead foster a more favorable economic environment for all business activity, which includes companies already doing business in a state, whether large or small (e.g., lower taxes on citizens and businesses across the board, control over-excessive and wasteful government spending, promoting a skilled workforce, and minimal regulation). The free market, rather than politicians and bureaucrats, will then decide where business activity will locate.

We think that, in order to promote prosperity, all states and localities should abolish their economic development agencies, thereby saving the budgetary costs of official salaries, benefits and travel expenses to visit and cut deals with companies looking to move or to build new plants. Unilateral disarmament in the vigorous incentives arms’ race triggered by Mississippi during the Great Depression may, of course, cause the state to lose opportunities to lure big-name employers in the short or medium term. If an announcement that the Mississippi Development Authority has been shut down is paired with a dramatic cut in state business income taxes, however, the negative impact on revenue will be at most short-lived.

Here’s a chance for Mississippi to lead the nation forward with much better effect than its adoption long ago of the Balance Agriculture with Industry program. State officials may then realize that they all are made better off by disarming because selective incentives only shift economic activity around geographically and do not foster prosperity. On the surface, interstate competition for business location is a zero-sum game: one state’s gain is another’s loss. But, looked at more deeply as we have done in this chapter, the arms’ race is a negative-sum game because the ostensible benefits of the competition in terms of job gains, whether direct, indirect or induced, are less than the costs imposed on the private sector, thus hindering economic growth and prosperity in all states, including Mississippi.

This is an excerpt from “Selective Incentives,” Crony Capitalism and Economic Development by Thomas A. Garrett and William F. Shughart III. It was published in Promoting Prosperity in Mississippi.

One reason we have Medicaid is because most Americans believe insurance coverage is necessary to obtain health care. The ACA reinforces this bias by penalizing employers who do not offer insurance and fining individuals who do not obtain insurance. While there is a place for third-party insurance in health care, employer-based insurance, in particular, has almost completely undermined the U.S. health care market by training Americans not to approach health care with a consumer mentality that balances price against quality.

Hospital pricing is nontransparent. Health care pricing, in general, is nontransparent because insurance companies (along with Medicaid and Medicare) are the largest purchasers of health care. Most individual consumers simply do not care how much their health care costs because their insurance provider is paying the bill. Those few who do pay out-of-pocket are often charged exorbitant prices, with one recent study finding charges more than 10 times the amount allowed by Medicare, with “a markup of more than 1,000 percent for the same medical services.” “Because it is difficult for patients to compare prices, market forces fail to constrain hospital charges,” conclude the authors.

Fixing health care will require creating a market that incentivizes quality care at a lower price. Lawmakers should promote policies that encourage consumers to pay cash for health care, or to at least begin to ask about price. Three policy reforms, in particular, can unleash the power of pricing in health care: Large Health Care Savings Accounts (HSAs); direct primary and surgical care; and comparative shopping incentives.

An HSA is a tax-advantaged medical savings account that, under federal law, must be paired with a high-deductible health insurance policy. Because HSA holders have high deductibles, they tend to pay cash for minor services. If HSA contribution limits were higher, more consumers could use their HSA to pay for major medical procedures. While Mississippi can’t increase the federal limit, it can increase its own. Much like Singapore, federal policymakers could also create subsidized HSAs as an alternative to Medicaid.

State lawmakers should also incentivize direct surgical care. In 2015, Mississippi became one of the first states to protect the contractual right of physicians to provide direct primary care, also known as “concierge care.” Concierge care patients pay a monthly fee to a physician in exchange for a predefined set of benefits, such as unlimited doctor visits. The next step is to expand the direct payment model to surgical care, as is being done at the Surgery Center of Oklahoma. At least one public health plan (Oklahoma County) and numerous private employers are bypassing the traditional insurance model and partnering with the center, which bills itself as a “free-market loving, price displaying, state-of-the-art facility.” The center lists on its website all-inclusive prices for hundreds of procedures, attracting customers from around the world. It does not accept insurance. The center’s prices are about 1/6 that charged for comparable procedures at local nonprofit hospitals and lower than what Medicare or Medicaid would pay.

Finally, even people with traditional insurance can be encouraged to comparison shop. Some states have experimented with mandatory pricing transparency without much success. The missing element is to provide an incentive for consumers to actually shop around. New Hampshire is seeing success by using an app that enables state employees to compare health care pricing. If an employee elects to use a less expensive provider, he gets to keep some of the savings. The rest accrues to the state. In three years, the New Hampshire State Employee Health Plan has saved $12 million, with $1 million going back to shoppers. In 2017, Maine also instituted incentivized shopping for small-group health plans.

The reforms described above would benefit all consumers by using the power of pricing to deliver affordable, quality care.

This is an excerpt from Medicaid: A Government Monopoly That Hurts the Poor by Jameson Taylor. It was published in Promoting Prosperity in Mississippi.

While we tend to think of our wealth in dollars, true wealth has nothing to do with paper money itself. Total wealth in a society is not a fixed pie waiting to be divided among us. Wealth, instead, is constantly being created by each of us; the ‘economic pie’ grows each day. Wealth is created through both production and exchange. An example will help to illustrate.

Suppose that two neighbors trade a bushel of hay for a load of wood. Both are now better off; after all, they were only willing to trade with each other because each wanted what the other person had more than what they traded away. Both have become wealthier in every sense of the word even though no new money has been printed, nor existing money passed around.

On an everyday basis, money only represents wealth to people because it measures the quantity of these trades—or purchases—we can undertake when we exchange money that we earn from producing at our jobs for the goods and services produced by others. A man on a deserted island with $1 million is very poor indeed without anything to purchase with the money. On the other hand, a man deserted on an island with no money, but a group of other people, will be much wealthier because of his ability to produce and exchange with others—even in the absence of paper money on the island.

Taking the example further, suppose a group of island castaways decided that half of them should dig holes and the other half should fill them in. After a full-day’s work, they would have nothing to show for this effort; nothing was produced. Holes were dug and filled again. No wealth was created, even though people worked very hard.

Wealth would be created if instead half the tribe collected coconuts and the other half fished. Now they would have dinner. Suppose one castaway invents a new tool that increases the number of fish she can catch. This invention would further increase wealth; there is more food at the dinner table. In fact, the new tool might increase productivity so much that only half as many castaways are needed fishing, and the extra castaways are free to labor at a new task such as building a shelter, further increasing wealth. As these examples illustrate, there is a close link between prosperity, or ‘wealth,’ and the quantity, quality, and value (or usefulness) of the output produced. Prosperous places—those with high levels of income and wealth—become that way by producing large quantities of valuable goods and services.

One difference between this castaway analogy and our daily economic lives, however, is that we might anticipate the castaways sharing the fruits of their labor, for example, splitting the fish caught that day. In a large and advanced economy it no longer works this way. Instead, each of us gets paid in dollars, or money income, for what we produce at our jobs. We then go to stores and exchange that money for the goods and services produced by others at their jobs.

The amount of income we earn is determined by both the prices people are willing to pay us for what we are producing and how many units of it we can produce. For individuals, states, and nations, income is determined by the value of output. A worker with a backhoe will be more productive than a worker with a shovel and will earn more as a result. An entrepreneur producing apple pies will be more prosperous than one producing mud pies because people place a higher value on apple pies (and thus are willing to pay more for them).

This logic leads to one obvious, and simple, litmus test that can be used to decide if a suggested new policy or law is good, or bad, for the Mississippi economy—does it increase, or decrease, the net amount or value of output (of goods and services) produced in the state. Regulations, such as those adopted in some European nations for example, which restrict the workweek to 35 hours clearly result in reduced output, and reduced standards of living as a result. For a tax-funded government program, this principle must be applied by looking at the net change in output—that is, one must properly account for the reduced output caused by the taxes or other resources necessary to fund the policy.

One of Adam Smith’s insights in his previously mentioned 1776 book, An Inquiry into the Nature and Causes of the Wealth of Nations, is that labor productivity, the main determinant of wage rates, is increased through specialization and the division of labor. When labor is divided into specific tasks, like workers in an assembly-line, they can produce more as a group than could have been produced individually. The same holds true when individuals specialize across different occupations and industries.

However, according to Smith, our ability to specialize, thereby increasing our productivity and enhancing our wages, depends on the size or ‘extent’ of the market to which we sell. When consumer markets are larger in size, smaller specialized stores can survive that could not have survived in a smaller marketplace. Oxford’s population, for example, is able to support two general purpose pet stores, each carrying a broad line of products. In a place like Jackson, however, a dozen or more such stores can flourish, with a greater extent of specialization, some focusing on saltwater fish, while others may focus on birds and other reptiles. Increasing the size of the markets to which Mississippi’s goods and services sell could increase wealth by allowing Mississippians to specialize more specifically in areas where they do best.

Population growth in metropolitan areas would be one way of increasing market size. But another way to increase market size is to enact policy reform that better enables the businesses in Mississippi to sell and compete in larger national and global marketplaces and expand their customer base. To compete in these markets Mississippi businesses need to be on a level playing field with their competitors. Mississippi’s taxes and regulations are a competitive disadvantage to firms located in the state. The higher prices Mississippi businesses must charge for their products greatly limits the markets in which they can compete. If these tax and regulatory costs could be reduced through policy reform, firms could offer more competitive pricing, increasing their market shares and the extent of their markets. This would allow both the businesses themselves, and their workers, to become more specialized and earn higher incomes as a result.

In addition to specialization and the division of labor, capital investment also increases labor productivity. Higher levels of education (more ‘human capital’) and better machinery, buildings, and tools to work with (more ‘physical capital’) can help our citizens produce more output and generate more income. Recent capital investments in the auto industry provide a good example of this. Modern robotics and automation allow workers to position, spin, and move the parts they are assembling much more easily and quickly. With this new capital equipment workers are more productive and earn higher wages as a result.

But new factories, better machinery, and equipment are expensive. They require large investments in assets and property. In Mississippi, taxes (such as property taxes on capital equipment), regulations, and lawsuits decrease the return from capital investment and thereby lower the inflow of capital into the state. And Mississippi has among the highest property taxes in the nation on a representative manufacturing facility’s equipment and machinery. This results in Mississippi’s workers being less productive—and earning less as a result.

The income a state produces from its output depends not only on how much is produced (which can be expanded through specialization, division of labor, and capital investment), but also on the price per unit, or value, of the goods and services produced. A company trying to sell mud pies will generate less income than one producing apple pies. Income can be increased not only by increasing labor productivity, but also by raising the value per unit—or ‘value added’—of Mississippi labor.

However, the answer to the question of which specific uses of Mississippi’s resources create the most value, and thus income, is not obvious. In fact, the answer is so complex that it is not something any one person or group of people knows, not even a group of expert economic planners. It is an answer that must be discovered by individuals in the private sector through the decentralized process of entrepreneurship, a process of private trial and error. This is the topic of our next section.

Before moving on, however, let us complete our discussion of the process of wealth creation started above. As we pointed out, in a real-world economy things work a bit differently than in the castaway example because we must first earn income by producing goods and services. Only then do we use that income to acquire the goods and services produced by others. The ability to turn our income into prosperity and wealth through exchange is the second important part of this process.

As consumers, we turn income into wealth through the acquisition of goods and services like food, clothing, shelter, and recreation. In our shopping, we search out and negotiate with potential sellers from around the globe. We spend time and effort on this search because maximizing the value we get from our limited budgets makes us wealthier. Finding a product we want to buy at a lower price increases our wealth because we now have more money to spend on other things.

This is the reason why restrictions on the ability of citizens to freely engage in trade with people from other geographic areas through tariffs, quotas, taxes, and other restrictions, destroy wealth. Individuals cannot generate as much value and happiness from their limited incomes. Not only are there fewer options to select among, but also the taxes and regulations make things more costly for us to purchase, reducing our ability to stretch our budgets and turn our income into wealth. This is one reason to avoid adopting policies that interfere with, tax, or restrict Internet purchases.

Our well-being is the result of both production and exchange. Becoming more prosperous can be accomplished by increasing the amount of wealth created in the state through: (1) increasing in the quantity, quality, and value of goods and services the state’s citizens produce, and (2) increasing the number and value of the voluntary exchanges the state’s citizens make, both with other Mississippians and with people from around the world.

Policy reform that lowers taxes and regulations can help achieve these goals because it results in: (1) increased specialization of labor and increased capital investment—increasing labor productivity and wages; (2) increased ability of residents and businesses to buy and sell with individuals from across the state, nation, and globe; and (3) more private sector entrepreneurship that allows the decentralized decisions of workers and business owners—rather than government planning—to help search out and identify the ever-changing bundle of goods and services that creates the most value and income for Mississippi.

This is an excerpt from Why Capitalism Works by Russell S. Sobel and J. Brandon Bolen. It was published in Promoting Prosperity in Mississippi.

While everyone has a general idea of what economists mean by the term ‘capitalism’ it is important that we now define it more precisely. Fundamentally, capitalism is an economic system founded on the private ownership of the productive assets within an economy. These include land, labor (including your person), and all other tangible property (e.g., cars, houses, factories, etc.) as well as intangible property (e.g., radio waves, intellectual property, etc.). Individuals are free to make decisions regarding the use of their property, with the sole constraint that they do not infringe upon the property rights of others.

The freedom of action given to private owners under a system of capitalism is why the index that ranks states and countries is called the ‘economic freedom’ index. Economic freedom is synonymous with capitalism. More specifically, the key ingredients of economic freedom and capitalism are:

• personal choice and accountability for damages to others,
• voluntary exchange, with unregulated prices negotiated by buyers and sellers,
• freedom to become an entrepreneur and compete with existing businesses, and
• protection of persons and property from physical aggression, theft, lawsuits, or confiscation by others, including the government.

The concept of capitalism is deeply rooted in the notions of individual liberty and freedom that underlie our country’s founding and are reflected in the Declaration of Independence and U.S. Constitution. Economic freedoms are based in the same philosophies that support political and civil liberties (like the freedom of speech and the freedom to elect representatives). Individuals have a right to decide how they will use their assets and talents. On the other hand, they do not have a right to the time, talents, and resources of others.

Because private property rights, and their protection, are critical to economic progress, it is worthwhile to be more specific about private property rights. Private property rights entail three economic aspects: (1) control rights – the right to do with your property as you wish, even to exclude others from using it, so long as you do not use your property to infringe on the property rights of someone else; (2) cash flow rights – the right to the income earned from the property or its use (i.e. being the ‘residual claimant,’ which is also critical for enabling the property to be used as collateral for loans); and, (3) transferability rights – the right to sell or divest of your property under the terms and conditions you see fit.

A government policy that weakens any one of these components of property rights weakens property rights in general. Taxes, for example, restrict the cash flow rights associated with property and so weaken private property rights on that dimension. Regulations, on the other hand, restrict how owners may use their property, infringing on control rights, and weakening private property rights on that dimension. Outright takings, or other forms of outright expropriation, by removing the property from an owner’s possession (such as eminent domain, especially when allowing the state to remove the property from an owner’s possession and transfer it to another private owner) actually weaken property rights on all of the dimensions considered above, making property a ‘contingent right’ (contingent on the state’s arbitrary will) rather than an ‘absolute right’ guaranteed and protected by law.

In order to nurture capitalism, government must do some things but refrain from doing others. Governments promote capitalism by establishing a legal structure that provides for the even-handed enforcement of contracts and the protection of individuals and their property from aggressors seeking to use violence, coercion, and fraud to seize things that do not belong to them. However, governments must refrain from actions that weaken private property rights or interfere with personal choice, voluntary exchange, and the freedom of individuals and businesses to compete. When these government actions are substituted for personal choice, economic freedom is reduced. When government protects people and their property, enforces contracts in an unbiased manner, and provides a limited set of ‘public goods’ like roads, flood control, and other major public works projects, but leaves the rest to the private market, they support the institutions of capitalism and the resultant prosperity it creates.

This is an excerpt from The Sources of Economic Growth by Russell S. Sobel and J. Brandon Bolen. It was published in Promoting Prosperity in Mississippi.

New policies restricting capitalism are often enacted because they ‘sound like good ideas.’ Unfortunately, these policies frequently have unintended consequences that work against the very goals they were intended to achieve.

The minimum wage is a good case in point. While many people are in favor of the minimum wage law, they support it because they think it helps low income families. The published scientific evidence, however, rejects this view and instead concludes that the minimum wage actually makes the intended beneficiaries worse off. So, for the same reason—the goal of helping those in need—economists are generally opposed to minimum wage legislation. This position can only be reached by examining all of the other indirect changes that happen as a result of a minimum wage, such as less worker training, fewer employee benefits, and most importantly fewer jobs and higher unemployment for low-skilled workers.

Again, it is important to remember that economics is a science, not a political position. We care little about the publicly stated intent or goal of the policy, and rather evaluate policy based on published research that examines real-world evidence. Good intentions are not enough to guarantee good outcomes. A few more examples will help to illustrate this important point.

The employment provisions of the Americans with Disabilities Act (ADA) were passed with the intention of lowering barriers to employment for disabled persons. The legislation prohibits discrimination based on disability status and further requires employers to make reasonable accommodations for employees with disabilities. Has the ADA lived up to its stated intent? Has it expanded employment among the disabled?

Thomas DeLeire, a public policy professor at the University of Chicago, wrote his Ph.D. dissertation on the employment effects of the ADA legislation when he was in graduate school at Stanford University. His research shows that the ADA has actually harmed the employment opportunities for disabled Americans. By increasing the cost of hiring disabled workers and making it harder to fire them, this legislation has resulted in a reduction in employment among disabled individuals. Prior to the ADA, 60 out of every 100 disabled men were able to find jobs. After the ADA went into effect, however, employment fell to less than 50 per 100 disabled men. After adjusting for other factors, DeLeire concludes that 80 percent of this decline was caused by the bad incentives created by the ADA. While the entire purpose of this legislation was to increase the employment opportunities for the disabled, the data simply do not support this view. Instead, the ADA seems to have made it more difficult and costly for employers to hire disabled workers, resulting in reduced job opportunities for disabled people. If the goal is to expand employment opportunities for disabled Americans, the research suggests that the ADA is not the answer.

Environmental policy often has the most devastating examples of unintended consequences. Under the Endangered Species Act, for example, large areas around the nesting grounds of the red-cockaded woodpecker can be declared ‘protected habitats,’ which then imposes stringent restrictions on the surrounding property owners. When the Federal Fish and Wildlife Service put Boiling Springs Lakes, North Carolina on notice that active nests were beginning to form near the town, it unleashed a frenzy of action on the part of the residents, but not of the type you might expect. Foreseeing the potential future restrictions on their property use, landowners swarmed the city hall to apply for lot-clearing permits. After removing the trees, the land would no longer be in danger of being declared an environmentally protected habitat because no future nests could form on the property.

Similar incidents have occurred throughout the range of this bird, and the total habitable nesting area for this species in the United States has fallen dramatically as a result of the poor incentive structure created by the law. The red-cockaded woodpecker has lost a significant portion of its habitat, moving it closer to extinction because of the unintended consequences of the Endangered Species Act.

As these examples illustrate, policy designed with even the best intentions can create unintended consequences that work against the original goal of the policy. The concept of unintended consequences vividly illustrates why having an economic ‘captain’ can often produce more harm for an economy than not having one.

One additional problem with government regulations is that there is no profit and loss-type system to eliminate bad policies throughout time. In the end, some policies just do not live up to their stated goals, or do so but at too high of a cost. West Virginia, for example, imposed a maximum eight hour operating restriction on taxi drivers. The law was intended to reduce driver fatigue and accidents involving taxis. Policy makers, however, overlooked the unintended consequences resulting from changing the incentives faced by cab drivers. With fewer hours to drive in a day, cab drivers started driving at faster speeds and took fewer breaks. Not only did the law result in a significant reduction in the number of cabs operating in the state, which led to more driving while intoxicated incidents, but it exacerbated the very problem it was designed to reduce. Even though there are fewer cabs on the road due to the law, the total number of accidents committed by cab drivers has increased in West Virginia since the regulation has been passed. Despite this information being widely-known, state policy makers in West Virginia do not ‘have the time to get the law off the books’ due to having to deal with too many other, more pressing, current issues. Simply put, government lawmakers just do not have the time to go back and look into the effectiveness of all laws from the past, nor the time to introduce the legislation to repeal them.

This highlights the need for Mississippi to reform its regulatory review process. Quite simply if a regulation adopted in Mississippi cannot prove, with data, that it is accomplishing its stated goal in a cost effective manner within some period of time, say five years, it should be repealed. Regulations, and other policies, should have to fight to stay in place based on scientific evidence regarding the costs and benefits they create.

This is an excerpt from Why Capitalism Works by Russell S. Sobel and J. Brandon Bolen. It was published in Promoting Prosperity in Mississippi.

Arizona is the closest model to a free market education setting in the United States. Today they have five private school choice programs serving nearly 70,000 students. That number is likely to increase in the coming years after the legislature expanded the state’s ESA to universal (but capped) eligibility over a several year phase-in period. They also have more than 15 percent of public school students attending a charter school.

Arizona has over 600 charter schools with more than 200 charters opening since 2010 alone. Yet at the same time 100 charter schools were also closed.30 Remarkably, most of these failing schools have not being closed by the state, but rather by parents. If parents believe their child is not getting a great educa- tion, they are voting with their feet. Those schools that closed lasted, on average, just four years and had an average of 62 students their final year. Parents in Arizona enjoy school choice, and they are able to make immediate decisions about their child’s future. If a school is not performing at a level they believe it should, they do not have to wait for it to improve. They can simply move on.

And the charter schools in Arizona, with light regulations, are now competing with the most highly regarded district schools in the country. The 2015 National Assessment of Educational Progress (NAEP) scores show charter students in Arizona are nearly even with Massachusetts and ahead of New Hampshire, Minnesota, and New Jersey, which are states that spend among the most in the country per student.

At the same time, students in traditional district schools have experienced similar gains. In fact, Arizona led the nation in growth on the NAEP science test from 2009 to 2015. While Arizona has spent two decades providing families access to public and pri-vate school choice, all students have seen a benefit.

It turns out, when parents are given the opportunity to choose the best school for their children, children in both schools of choice and traditional district schools do better.

In a small way, Mississippi has seen the market effects of a school choice program. The 3-D School in Petal, MS is a specialty school that provides comprehensive dyslexia therapy services for students. Many of the families receive either the Dyslexia Scholarship or Special Needs ESA to help cover the cost of tu- ition. Because very few schools offer the services they provide, some families travel up to four hours per day roundtrip for their children to attend the school. The school has now opened a second location on the Gulf Coast due to this demand created by the school offering a high quality product and the scholarship programs that make the school more affordable for families.

Transportation Network Companies (TNCs), like Uber and Lyft, entered the mainstream transportation services market in 2012 and 2013.

TNCs use smartphones to connect passengers with drivers and manage the exchange, reducing the transaction cost in multiple ways, thereby vastly expanding the potential market for transportation services. The emergence of TNCs motivated taxi special interest groups around the United States to try to use local governmental authority to protect their industry from this new competition. In response, Uber and Lyft lobbied state legislators to preempt local regulation of TNCs.

Mississippi enacted HB 1381 into law in 2016, creating a statewide regulatory standard for TNCs and preempting municipalities from enacting their own taxes, licenses, and regulations on TNC operations. This overruled Jackson, Mississippi, which had just passed an ordinance licensing and regulating TNCs, and other cities which had disallowed operations.

Taxi regulations are commonly enacted at the municipal level and are quite literally the textbook definition of how anticompetitive regulations harm customers. They are a perfect example of local policy historically creating barriers to entry (through limits on taxicab licenses), price controls (through maximum and minimum legal fares), and mandated business practices (requiring specific costly equipment and service standards). Because the transportation service industry is rife with regulatory capture that violates generality and free exchange, starting from a blank slate is the only way that policymakers can hope to enact appropriate reform.

The largest problem facing transportation service markets is the anonymity between the driver and passenger. This anonymity in the past has created a public safety problem due to drivers extorting higher fares from passengers or else using the seclusion of a taxi ride to assault them. Similarly, though less emphasized, drivers are at the mercy of criminally-minded passengers, with the result that taxi drivers face the highest on-the-job murder rate for any profession in the U.S.

Laws created in the interest of public safety are an appropriate function of local government. However, many times special interest groups use the guise of public safety to argue for regulations that protect them from competition. For example, although mandating that taxicabs have bulletproof partitions between the driver and passenger would protect the driver from thieves, they are a costly piece of equipment that can create a barrier to entry for entrepreneurs. Furthermore, many other taxi regulations have explicitly limited entry by new drivers or companies, as well as creating price controls and business practice mandates that have nothing to do with public safety. In short, there are many clear violations of the principles of generality and free exchange.

Because most taxi regulations violate generality and free exchange, there is good reason to believe that municipal-level TNC regulations would have the same effect. Thus, Mississippi appears to have acted correctly in preempting local regulation of TNCs. In fact, the argument could be made that Mississippi did not go far enough and should have preempted local regulation of taxis and limousines as well, following Michigan’s example.

This is an excerpt from Local Governments Run Amok? A Guide for State Officials Considering Local Preemption by Michael D. Farren and Adam A. Milsap. It was published in Promoting Prosperity in Mississippi.