-Caveat Lector- ------- Forwarded Message Follows ------- Date sent: Fri, 03 Sep 1999 09:35:38 -0500 To: [EMAIL PROTECTED] From: "John C. Goodman" <[EMAIL PROTECTED]> Subject: NCPA Policy Digest 9-3-99 National Center For Policy Analysis DAILY POLICY DIGEST Friday, September 3, 1999 PointCast can automatically load NCPA's Policy Digest summaries on your desktop for easy reading. For information go to http://www.ncpa.org/pointcast.html IN TODAY'S DIGEST o LESS THAN ONE-THIRD OF DETROIT STUDENTS GRADUATE, but teachers are on strike over reforms...INVESTOR'S BUSINESS DAILY o SUITS AGAINST MAKERS OF PRODUCTS USED BY CRIMINALS usually fail, say observers....WALL STREET JOURNAL o LESS THAN 30 PERCENT OF HOBBY FARMS ARE PROFITABLE, but owners have average annual incomes of $57,242, including taxpayer subsidies....HERITAGE FOUNDATION o UNION CONTRACTS WITH PAY HIKES OF 2.7 PERCENT were negotiated in the first half of 1999, as labor seeks higher wages....WALL STREET JOURNAL o SOFTWARE MARKETS ARE COMPETITIVE, says a new study, and Microsoft isn't a monopoly....INDEPENDENT INSTITUTE o CLEVELAND PUBLIC SCHOOLS MADE $118,473 FROM VOUCHERS IN 1997, say analysts, since they received state payments for students in private schools....BUCKEYE INSTITUTE o COMPENSATING BEHAVIOR CAN NULLIFY SAFETY MEASURES, say experts....FORBES IN TODAY'S NEWS DETROIT TEACHERS BALK AT REFORMS On Monday, the day before classes were scheduled to start, public school teachers in Detroit voted to strike. They are incensed by what others describe as moderate reforms initiated by the city's new school board. The city's education system had failed so miserably that the Michigan legislature ousted the city's elected school board last March and empowered Mayor Dennis Archer to appoint a new board. Here's how bad things had gotten: o The graduation rate from Detroit's public schools had sunk to 29.7 percent -- compared to a statewide average of 76 percent. o Detroit students averaged 923 on the SAT -- whereas the Michigan average is 1,122, and the national average is 1,016. o The Detroit Free Press found that one in every seven of the city's teachers calls in sick on any given school day -- forcing the system to spend an extra $40 million a year on substitute teachers. Here are the proposed reforms that have the teachers so upset: o A longer school day and a longer school year. o Changes in rules governing sick days -- which formerly saw the average Detroit teacher taking 10 of the 15 sick days they are allowed in the academic year. o Merit pay which would give teachers up to $3,000 extra per year -- providing their attendance was good, they put in three years of merely satisfactory performance, they improved their own education and acquired national certification. Observers say that the teachers also need a lesson in competition, by initiating a voucher system there. Source: Editorial, "The Lesson From Detroit," Investor's Business Daily, September 3, 1999. For more on Local & State Control of Schools http://www.ncpa.org/pi/edu/edu11.html#b IF GUN SUITS ARE SUCCESSFUL, OTHER TARGETS WILL POP UP So far, 28 cities and counties have filed lawsuits against gun manufacturers. The gun industry is trying to have the suits dismissed because manufacturers have rarely been found liable for what criminals do with their products. Local governments are hoping for a repeat of the states' lucrative legal battle over tobacco. So if gun makers go down to defeat, lawyers are expected to haul manufacturers of other products into court. o The next targets could be manufacturers of sports cars which are capable of attaining unlawful and unsafe speeds, as well as distillers of alcohol who would be blamed for inciting criminal behavior. o Experts say that the gun cases are based on the theory that the product was defective because someone used it to commit wrongful acts -- which would be stretching product liability beyond limits which have been accepted up to this time. o Plaintiffs have sued the makers of air guns, carbon- dioxide cartridges, glue and even slingshots on criminal- misuse grounds -- without much success. o Just weeks ago, the 3rd U.S. Circuit Court of Appeals ruled that fertilizer makers couldn't be blamed for the World Trade Center bombing. Some legal observers find it ironic that mayors of some cities with high crime rates are seeking to avoid their own responsibility for having their police departments maintain law and safety by blaming the instrument instead. "No industry can properly or legally have its own police force," observers Doug Painter, executive director of the National Shooting Sports Foundation. "Like any industry, we must rely on various law enforcement agencies to police and oversee the distribution of our products," he adds. In a January survey, the research firm DecisionQuest found that 66 percent of people opposed the gun suits. Source: Kevin Butler, "Targeting Gun Makers in Court," Investor's Business Daily, September 3, 1999. For more on Liability and Guns http://www.ncpa.org/pi/crime/crime51.html WHO IS DOWN ON THE HOBBY FARM? The 1997 Census of Agriculture says there are 1,911,824 farms in the U.S., of which 685,029 receive federal monies, yielding an average subsidy of $24,233 per farm. Subsidized farmers include some large profitable operations and small hobby farms, according to the 20th Annual Family Farm Report by the U.S. Department of Agriculture's Economic Research Service. o "Large Family Farms" -- farms with gross sales greater than $500,000 -- produce an average household income of about $118,450 per year and have a net worth of $925,782. o These family agribusinesses operate less than 5.5 percent of all farms but account for 46 percent of U.S. agricultural production. o Their average household income is 2.5 times greater than average U.S. households, yet they receive about $14,826 each in federal subsidies. A 1996 Environmental Working Group (EWG) report revealed that the top 100 recipients of federal farm subsidies were then eligible for payments of $200,000 to $600,000 per year. o By contrast "Retirement and Residential/Lifestyle Farms" have average annual incomes of $57,242, including about $984 per year from taxpayers. o Less than 30 percent of these farmers turn a profit -- but they derive the bulk of their income from other sources and operate farms as part of a rural lifestyle. o Such hobby farms account for 54.2 percent of all farms enrolled in the Conservation Reserve Program, which pays farmers not to work their land. Interestingly, the EWG reported that over 18,000 of these lifestyle farmers were full- or part-time officials of the Agriculture Department or its local affiliates, and they received an average of $7,000 per year in taxpayer subsidies. Source: Peter Sperry, "How 'Emergency' Farm Spending Squanders the Surplus," Executive Memorandum No. 621, September 3, 1999, Heritage Foundation, 214 Massachusetts Avenue, N.E., Washington, D.C. 20002, (202) 546-4400. For text http://www.heritage.org/library/execmemo/em621.html For more on Agriculture http://www.ncpa.org/pd/budget/budget-7.html UNIONS REVIVE WAGE ISSUES For the first time in many years, organized labor is focusing much more on economic gains for its members, while also pursuing broader job security goals, labor experts report. Some unions are winning big pay gains -- raising the prospect of wage inflation. Nevertheless, analysts caution that it is still too soon to declare the era of muted wage gains over. o The typical union contract negotiated in the first half of this year called for first-year pay increases averaging 2.7 percent, according to the Bureau of National Affairs -- up from 2.4 percent in the first half of 1998. o The Labor Department says that unit labor costs rose at an annual rate of 4.5 percent in the second quarter of this year. o While this represented the largest such jump in five years, experts cautioned that the number fluctuates significantly from quarter to quarter. o The Teamsters, United Auto Workers, and the International Association of Machinists and Aerospace Workers are among the unions concentrating on wage issues. Cornell University industrial relations professor Harry Katz says that labor has had the most success in industries that are both heavily unionized and are experiencing solid economic performance -- particularly aerospace, autos, steel, trucking and the airlines. Source: Glenn Burkins, "Organized Labor Is Seeking Big Pay Gains," Wall Street Journal, September 3, 1999. For more on Wages http://www.ncpa.org/pd/economy/econ7.html IN OTHER NEWS MICROSOFT IS COMPETITIVE, NOT MONOPOLISTIC The Justice Department's antitrust suit against Microsoft alleges the software company is attempting to monopolize software markets by leveraging its dominance in personal computer operating systems into dominance of other software markets. If Microsoft were able to achieve a monopoly, it would be able to increase its profits by raising prices and/or cutting production. But there is no evidence for the theory, say economists Stan J. Liebowitz and Stephen E. Margolis. In fact, the evidence shows high-technology markets are very competitive, and although one product tends to dominate a market for a time, good products replace bad ones very quickly. For instance, o Surveys of magazine reviews show Microsoft's Excel spreadsheet program surpassed Lotus 1-2-3, and Microsoft Word for Windows overtook WordPerfect, only after each had conclusively proved itself to be the best quality product on the market. o Of the 15 major consumer software categories defined by Dataquest, in the five software categories where Microsoft did not have a product, prices fell by an average of 15 percent from 1985 to 1995, with several periods of price increases. o But in the 10 categories where Microsoft had a product, prices fell by an average of 65 percent. Microsoft dominates software markets, not through the exercise of monopoly power or by leveraging its Windows operating system, but only when it has the best products. o When its products have been inferior, Microsoft has failed -- for example, Microsoft Money has not taken market share from Quicken, which gets the best reviews for personal finance software. o In online services, American On Line (AOL) has grown faster, and it is larger, than Microsoft Network (which consistently scores poorly in reviews). Interestingly, even Microsoft's most widespread product, the Windows operating system, is sold for much less than what economists estimate its monopoly price would be. Source: Stan J. Liebowitz and Stephen E. Margolis, Winners, Losers & Microsoft: Competition and Antitrust in High Technology (Oakland, Ca.: Independent Institute, 1999), Independent Institute, 100 Swan Way, Oakland, Calif. 94621, (510) 632-1366. For Independent Institute text http://www.independent.org/tii/news/lhouse/CurrentLighthouse.html#story_1 For more on Anti-Trust http://www.ncpa.org/pd/law/buslaw/index1a.htm HOW MUCH DO CLEVELAND PUBLIC SCHOOLS MAKE FROM VOUCHERS? In the wake of federal Judge Salomon Oliver Jr.'s decision to halt the Cleveland voucher program, union officials have repeated their familiar claim that vouchers deplete money from public education. Ohio Education Association President Michael Billirakis said the ruling is "good for public education" and that "our primary concern is that vouchers take away [money] from public schools." However, a policy report from the Buckeye Institute shows that publicly-funded vouchers have been a boon to Cleveland's government schools. o The State of Ohio subsidizes city schools based on the number of students enrolled in the district. o Students enrolled in private schools are normally not included in the district's enrollment count; but in the case of the Cleveland voucher program, the State included 1,290 scholarship students in 1997 in Cleveland's public school enrollment count. o Thus, Cleveland public schools are subsidized for students they no longer teach, receiving a net surplus of $118,473 in 1997 because of the voucher program. "Far from being a drain on Cleveland's government schools, vouchers have been a cash cow," said Buckeye Institute President Richard C. Leonardi. Source: "Cleveland Schools Profit from Scholarship Program," Policy Note, August 26, 1999, Buckeye Institute for Public Policy Solutions, 4100 N. High Street, Suite 200, Columbus, Ohio 43214, 614-262-1593. For text http://www.buckeyeinstitute.org/ For more on School Choice & Tax-Funded Vouchers http://www.ncpa.org/pi/edu/edu3.html#a WHY SOME SAFETY MEASURES DON'T WORK The average American implicitly values his own life at about $5 million, say economists, suggesting we might be willing to spend a great deal for safety. However, technologies and regulations designed to reduce risks may be ineffective, achieve a minor effect at a very great cost or even be counterproductive. For example, o "Childproof" caps to prevent accidental poisonings have resulted in no net saving of lives, says Harvard Law School professor W. Kip Viscusi, because parents often leave the hard-to-open caps off and are less vigilant due to a false sense of security, and many young children can open them anyway. o Anti-lock braking systems (ABS) on cars reduce some kinds of accidents, says the National Highway Traffic Safety Administration, but ABS-equipped cars have higher rates of other accidents, resulting in no overall net benefit. o Since 1987, all states have raised the drinking age to 21, but severe drunkenness has gone up, says Indiana University's Ruth C. Engs, and among under-21-year-old college students who drink, 32 percent drink heavily, compared to 24 percent of students 21 years old and above. Although the overall effect of ABS is nil, three out of five new cars have it, adding $500 or more to the car's cost. Since individual driving behavior may determine its effectiveness, ABS may be worth the cost. Safety regulations sometimes save a statistical life for less, but sometimes the costs are enormous -- for example, formaldehyde abatement in the workplace costs over $115 billion per life saved. And sometimes risk-reduction measures increase risks due to compensating behavior. For example, sunblocking lotions reduce exposure to cancer-causing UV radiation. But they can also instill a false sense of security -- encouraging users to spend even more time in the sun. Source: Philip E. Ross, "Safety May Be Hazardous to Your Health," Forbes, September 6, 1999. 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