Health Care Consumers Know Something Government Planners Don’t

by John Goodman

MANY, MANY YEARS AGO, the Nobel Prize-winning economist Kenneth Arrow wrote an article about asymmetry of information in medical care (your doctor knows more than you do). Since then, countless textbook authors, op-ed writers, and policy wonks have seized on Arrow’s observation to argue that a free market will not work in health care. Ergo, we need a regulated, institutionalized, bureaucratized market—like what we have in the United States and almost everywhere else.

The problem with this line of reasoning is that it commits what logicians call the fallacy of the excluded middle. The unstated, and therefore unexamined, minor premise is: Regulated markets can solve the problem, or at least do better than free markets. As it turns out, this minor premise is difficult, if not impossible, to defend.

Medical Tourism Reveals the Power of Market Competition

What brings all this to mind is medical tourism. In the international marketplace, a booming, bustling, vibrant, completely free market for medical care is emerging. Indeed, the words “free market” do not do it justice. It’s as close to laissez faire capitalism as anything Adam Smith might have hoped for.

And guess what? In this market, patients are getting information about price, quality, you name it—the very information no one can get back home. The reason: Since almost all medical tourists pay with their own money, providers compete based on price and quality. By contrast, providers back home do not compete based on anything.

Here’s what’s happening: Estimates vary, but as many as half a million Americans travel outside the United States for health care every year, and the number is growing by leaps and bounds. Amazingly, 70,000 British patients (who are supposed to be getting health care for free!) will leave the United Kingdom this year for health care abroad. These patients are going to such places as India, Thailand, and Singapore, as well as countries south of our border. Americans are finding package prices (that may include airfare and hotel rooms) that are one-third, one-fourth, or even one-fifth of what they would pay in the United States.

Virtually every major U.S. insurer is actively studying how to enter this international market.

Despite lower cost, the quality of health care abroad can be high. For example:

  • Foreign doctors are often board certified in the United States.
  • About 140 hospitals abroad are accredited by the Joint Commission International (an arm of the organization that accredits American hospitals participating in Medicare), and that number will double in the next few years.
  • Some foreign hospitals are owned, managed, or affiliated with prestigious American universities or health care systems such as the Cleveland Clinic and Johns Hopkins International.
  • The best foreign hospitals not only post quality data (e.g., their case-adjusted mortality rates) but also compare their rates to those at the best U.S. hospitals.
  • There are even medical travel bureaus that help patients find high quality care to meet their needs.

In general, quality is not a medical problem; it is a political problem. Host countries must be willing to allow facilities that cater to foreigners to operate and to provide a level of care to which most local citizens do not have access.

Health care economist Uwe Reinhardt has said: Medical tourism “has the potential of doing to the U.S. health care system what the Japanese auto industry did to American carmakers.”

Here is my prediction: Long before the last American hospital closes its doors, the industry will undergo radical change. Already there are centers of excellence around the country gearing up to (you guessed it!) compete on price and quality.

Debunking Socialized Medicine

As medical tourism reveals the power of consumer choice, new information helps debunk three persistent myths that have been used to build the case for a thoroughly socialized health care system such as that in Canada.

The Myth of Low Administrative Costs. In a series of articles in medical journals, David Himmelstein and his wife Steffie Woolhandler, both associate professors at Harvard Medical School, claim that the administrative costs of Canada’s government-run health care system are much lower than those of the U.S. system. Himmelstein and Woolhandler argue that by adopting a similar system, the United States could insure its uninsured through the administrative savings alone.

However, Himmelstein and Woolhandler count the cost of private insurance premium collection (e.g., advertising, agents’ fees), but they ignore the cost of tax collection to pay for public insurance.

Economic studies show the social cost of collecting taxes is very high. Using the most conservative of these estimates, Benjamin Zycher, a fellow at the Manhattan Institute, has shown that the excess burden of a universal Medicare program would be twice as high as the administrative costs of universal private coverage.

The Myth of High Quality. Himmelstein and Woolhandler say that Canadian life expectancy is two years longer than ours, implying that the health care systems of the two countries have something to do with that result. Yet doctors don’t control overeating, overdrinking, etc. Where doctors do make a difference, the comparison does not favor Canada. In a National Bureau of Economic Research study, David and June O’Neill draw on a large U.S./Canadian patient survey to show that:

  • The percent of middle-aged Canadian women who have never had a mammogram is double the U.S. rate.
  • The percent of Canadian women who have never had a pap smear is triple the U.S. rate.
  • More than eight in 10 Canadian men have never had a PSA test, compared with less than half of U.S. men.
  • More than nine in 10 Canadians have never had a colonoscopy, compared with seven in 10 in the United States.

These differences in screening may explain why U.S. cancer patients do better than their Canadian counterparts. For example:

  • The mortality rate for breast cancer is 25 percent higher in Canada.
  • The mortality rate for prostate cancer is 18 percent higher in Canada.
  • The mortality rate for colorectal cancer among Canadian men and women is about 13 percent higher than in the United States.

Amazingly, there are quite a few people in both countries who are not being treated for conditions that clearly require a doctor’s attention. However:

  • Among senior citizens, the fraction of Canadians with asthma, hypertension, and diabetes who are not getting care is twice the rate in the United States.
  • The fraction of Canadian seniors with coronary heart disease who are not being treated is nearly three times the U.S. rate.

Apparently, putting everyone in Medicare (i.e., creating a universal system like Canada’s) leads to worse results than having only some people in Medicare (i.e., having a mixed public/private system).

The Myth of Equal Access. The most common argument for national health insurance is that it will give rich and poor alike the same access to health care. Surprisingly, there is no evidence of that outcome. Indeed, national health insurance in Canada may have created more inequality than otherwise would have existed. (Similar results have been reported for Britain.) The O’Neills’ study shows that:

  • Both in Canada and in the United States, health outcomes correlate with income; low-income people are more likely to be in poor health and less likely to be in good health than those with higher incomes.
  • However, there is apparently more inequality in Canada; among the non-elderly white population of both countries, low-income Canadians are 22 percent more likely to be in poor health than their American counterparts.

Conclusion

Globalized medicine means that socialized systems like Canada’s must face competition in an international market. Unless Canada wants to make it illegal for its citizens to travel and pay for medical services abroad, Canadian health care will have to change. And when it does, Canadians will get healthier. The good news for all health care consumers is that global competition gives them choices—in spite of the best efforts of health care bureaucrats to design one-size-fits-all plans.


Mr. Goodman, called the “father of health savings accounts” by the Wall Street Journal, is president and founder of the National Center for Policy Analysis. This article is adapted from material previously published at John Goodman Health Blog (www.john-goodman-blog.com).

School Reform That Can Work

by Frederick M. Hess and Thomas Gift

YEAR IN AND YEAR OUT, education reform shows an earnest tendency to paint by numbers. Those seeking to improve schools latch onto the familiar litany of “best practices” and hot new instructional techniques, asserting that if only administrators identified and implemented the right set of prescriptions, successful reform would cascade through every level of the system. Yet for 40 years, this approach has delivered few lasting results. Perhaps it’s time we sought another track.

In October 2007, the American Enterprise Institute hosted a research conference devoted to “entrepreneurial” reformers who believe that real, sustainable change may require the emergence of new providers able to create and deliver educational services in more effective ways. Such reformers have traditionally been stifled by a morass of regulations, contracts, and a compliance-driven education culture. But some have found ways to break through, and the results are encouraging.

Steve Pines of the Education Industry Association reports that over 26,000 educational ventures are up and running in the United States. Many operate in established niches such as tutoring or textbook sales; other now-familiar operations such as the Knowledge Is Power Program and Teach For America either run schools or recruit teachers; and many others are tackling issues of instructional literacy, professional development, and information technology. To get a better sense of what these ventures are accomplishing, it’s worth taking a brief look at three: Blackboard, SMARTHINKING, and New Leaders for New Schools. The point is not to hail these particular efforts but rather to illustrate what is possible when smart, creative thinkers are given space to experiment with new ideas.

Blackboard, a for-profit firm, was founded in 1997 by Michael Chasen and Matthew Pittinsky. It has become the world’s leading provider of educational software, applications, and services. Its signature technology, the Blackboard Learning System, is a computer-based learning program that provides virtual access to classroom activities such as homework assignments, labs, and tests. With the click of a mouse, students can obtain academic feedback, communicate with their teachers, and collaborate with peers.

Now used by over 12 million students in 46 states, Blackboard has been integrated into the curriculum by some of the nation’s most tech-savvy schools, including nine of the top ten high schools as ranked by Newsweek. The New York Times has referred to Blackboard as a “disruptive technology … with the power to change how established institutions operate.” The Washington Post has called it “a high-tech star … that is doing more to change the way teaching and learning is done in America than any policies of the federal government.”

SMARTHINKING, another for-profit company, was established in 1999 and has rapidly grown into a leading provider of online tutoring. Students can log onto the company’s Web site 24 hours a day, seven days a week, and chat in real time with experts in writing, Spanish, mathematics, chemistry, physics, biology, economics, business, accounting, and statistics. By combining the convenience of at-home learning with the effectiveness of expert instruction, SMARTHINKING shows how modern technology makes it possible to personalize learning for students of every age and ability level.

To date, SMARTHINKING has delivered nearly 1 million tutoring sessions to students enrolled in over 1,000 academic institutions. In a survey of almost 1,500 users, 93 percent of students said they would recommend SMARTHINKING to a friend; 73 percent said it had improved their academic performance; and 92 percent said they would use the service again. In 2007, the company won the prestigious Codie Award (given annually by the Software and Information Industry Association) for the “Best Instructional Solution for Students at Home,” which recognizes “the educational technology solution that best extends traditional learning into the home.”

New Leaders for New Schools (NLNS), a nonprofit firm, was launched in 2000 to recruit a new population of urban principals and provide a chance for mission-driven leaders to transform inner-city schools. Selecting “hybrid” candidates from within and outside education, NLNS trains passionate individuals to lead some of the most difficult schools in the country. All New Leaders undergo an intensive six-week boot camp prior to assuming their jobs, and then continue with professional development and mentoring throughout their tenures as principals.

Currently, over 300 New Leaders run schools in cities such as Los Angeles, Chicago, New York City, Washington, D.C., and Baltimore. From 2003 to 2005, 75 percent of schools led by NLNS principals for at least two consecutive years made significant progress and, on average, outdistanced their local peers. The Alliance for Excellent Education has praised NLNS for demonstrating “innovative leadership that has successfully improved American high schools,” and Fast Company magazine has identified it as one of the “top 20 groups that are changing the world.”

The lesson here is not necessarily that policymakers or educators should jump on the Blackboard, SMARTHINKING, or NLNS bandwagons. The broader message is that entrepreneurial ventures hold great promise for education reform. While obvious uncertainties remain, preliminary successes suggest that entrepreneurship may have the power to fundamentally retool 21st-century American education.


Mr. Hess is the director of education policy studies at the American Enterprise Institute and the editor of Educational Entrepreneurship (Harvard Education Press, 2006). Mr. Gift is a research assistant in education policy studies at the American Enterprise Institute. This article is reprinted from The American magazine © 2007 The American.

Media Should Report Facts—Not Just Opinion Polls—About Free Trade

by Terry Miller

A RECENT ARTICLE IN the Wall Street Journal reports: “By a nearly two-to-one margin, Republican voters believe free trade is bad for the U.S. economy, a shift in opinion that mirrors Democratic views and suggests trade deals could face high hurdles under a new president.” It also says that “six in 10 Republicans in the poll agreed with a statement that free trade has been bad for the U.S.”

While such polling may be useful in stoking Washington’s highly charged political debate on free trade, news outlets have a responsibility to report the facts along with people’s opinions. As a matter of fact, free trade is good for the U.S. economy: It improves growth, helps more people than it hurts, and produces benefits that flow to all segments of society.

Why Free Trade Is Good

The role of free trade in shaping America as the world’s dominant economic power is undeniable. Trade liberalization promotes the efficient use of resources—shifting labor and capital from less competitive industries to those with greater economic potential. Free trade bolsters investment, innovation, productivity, long-term economic growth, and job creation. Free trade has also raised living standards by providing access to a wider variety of goods at lower prices. In fact, free trade has contributed an additional $10,000 per year of purchasing power to the typical American household of four.

It’s true that not all firms exposed to the rigor of international competition are able to adapt or even survive, leading to some U.S. job losses. However, the number of workers hurt by foreign competition is a relatively small share of the total number of workers displaced each year in the normal operation of America’s dynamic economy. In fact, improvements in technology and productivity play a far greater role in restructuring the U.S. labor force than free trade.

With annual growth rates of 3.2 percent from 2003 to 2005 and 3.3 percent in 2006, the U.S. economy is expanding fast enough to create new opportunities for those adversely affected by increased international competition. The U.S. economy is operating at full employment and creating new jobs to replace those that are lost for any reason. The most recent jobs report revealed that more than 8 million jobs have been created since August 2003, with 110,000 jobs created in September alone. September was the 49th consecutive month for job growth, setting a record for the longest uninterrupted expansion of the U.S. labor market. In addition, exports increased by nearly 15 percent over the 12 months ending in July, which reduced the trade deficit by more than $8 billion.

Why Facts Are Important

Demagogues and tyrants around the world—not just a few politicians here in the United States—make a living out of convincing people that the sky is falling. The essence of statesmanship in a democratic society is just the opposite: helping people understand the facts and proposing real solutions to real problems.

Presidents Bill Clinton and George W. Bush have both been staunch supporters of free trade, looking—as perhaps a President can best do—at the totality of the U.S. economy and the costs and benefits of trade for our population as a whole. Members of Congress, on the other hand, are more susceptible to the pressures of special interests. In the trade debate, concentrated interests representing the relatively few people hurt by free trade often outweigh the larger but more diffuse masses who benefit from lower prices and greater choice in an open economy.

Stories that report only people’s opinions—without reference to the underlying facts—can distort the public’s understanding of what is really happening in an economy, even to the point of becoming self-fulfilling prophecies. It is even worse when polls are carelessly designed or reported.

The Journal/NBC News poll asked respondents to choose between two statements: (1) Foreign trade has been good for the U.S. economy, because demand for U.S. products abroad has resulted in economic growth and jobs for Americans here at home and provided more choices for consumers; and (2) Foreign trade has been bad for the U.S. economy, because imports from abroad have reduced demand for American-made goods, cost jobs here at home, and produced potentially unsafe products. Thirty-two percent chose the first statement, while 59 percent picked the second. Presenting these statements as mutually exclusive interpretations of reality is highly misleading. In fact, both statements contain elements of truth. But, on balance, free trade yields far greater benefits than costs when considering the economy as a whole.

Conclusion

Including a factual context along with an opinion poll helps readers to understand not only what people are thinking, but also the extent to which their thinking corresponds to reality. As Paul Gigot, editor of the Wall Street Journal, wrote in the 2007 Index of Economic Freedom, co-published with The Heritage Foundation: “There are no permanent victories in politics or economics, which is one reason that this Index exists to chronicle annual progress or regression.” Gigot adds that experts have a responsibility “to remind forgetful politicians of the benefits of economic freedom.” That responsibility extends to educating the voters who elect those politicians.


Mr. Miller is Director of the Center for International Trade and Economics at The Heritage Foundation.

Checking Nonsense in the News: Economics in 18 Short Letters to the Editor

by Donald J. Boudreaux

As readers of the blog Cafe Hayek know well, Don Boudreaux knows how to write a pithy letter to the editor. Don’s letters provide both a measure of what’s wrong with economic reporting today, and a source of eminent common sense. Following is a selection of the letters he has written to various news outlets over the past year. —Ed.

 

Planning Doesn’t Work—Still!

 
Here’s the scariest line I’ve read in ages: “The era of laissez-faire happiness might be coming to an end. Some prominent economists and psychologists are looking into ways to measure happiness to draw it into the public policy realm” (“All They Are Saying Is Give Happiness a Chance,” November 12).

Several decades ago, many economists—enamored of their increasing ability to describe statistically existing patterns of production—fancied that a new age was dawning in which government would improve the lot of ordinary people by substituting its own production and distribution “plans” for the results of the market. These fancies proved to be dangerous fantasies. We would all be much better off—happier, even!—if this new generation of planners are laughed out of the public arena before their power grows to be as large as their gargantuan arrogance. —Sent November 12, 2007, to the New York Times

 

Cleaned by Capitalism

 
You again call upon government to force us Americans to reduce our emissions of CO2 (“Green and right,” November 2). And like nearly everyone else demanding further regulation of markets in the name of environmental protection, you overlook the fact that the very markets that you want to restrain save millions of lives annually by making people’s living environments cleaner.

For evidence, read Margo Thorning’s essay that appears today just inches from your own editorial. In “Ending energy poverty,” Ms. Thorning reports that “About 1.3 million people—mostly women and children—die prematurely every year because of exposure to indoor air pollution from burning biomass for fuel.” These deaths happen routinely in developing countries because people there have so little access to electrification, internal-combustion engines, and mass-produced consumer goods that they must burn biomass in their homes. So in developed countries—whose denizens enjoy ready access to electric heating, home delivery of fuel oil, and other life-saving wonders—the capitalism that people loudly fear might raise global temperatures a few degrees over the next several decades silently yet effectively saves thousands of lives each and every day. —Sent November 2, 2007, to the Baltimore Sun

 

Alternative Minimum Tax: Just Fix It

 
There’s widespread agreement that the alternative minimum tax—because it is not indexed to inflation—is mistakenly raising the taxes of millions of Americans (“House Democrats Propose Tax Overhaul,” October 25). Happily, there’s also widespread agreement that this mistake should be corrected.

So, given that the current operation of the AMT is a mistake, why do Rep. Charles Rangel and so many others talk of the need to “pay for” fixing the AMT? A merchant who mistakenly overcharges customers is obliged to refund the money and stop overcharging, period. This obligation kicks in whether or not the merchant devises some way of replacing the revenue that he loses by correcting his mistake. —Sent October 26, 2007, to the New York Times

 

Plenty of Taxing and Spending Going On

 
Forget that Uncle Sam today rakes in tax revenues that are, in inflation-adjusted dollars, 25 percent larger than those that he took in 2001—thus making a mockery of your claim that Washington’s tax take today is “meager” (“The Dearth of Taxes,” October 22). And forget that the Wall Street Journal today reports that Congress has increased corporate welfare for the current fiscal year by nearly ten percent, to $100 billion.

When pleading for higher taxes, at least keep your story straight. In your editorial you simultaneously blame government’s alleged lack of funds for bringing many U.S. corporations “to the brink” AND you dismiss the recent growth in tax revenues as being due to “spectacular increase in corporate profits.” Such inconsistency taxes your readers’ credulity. —Sent October 23, 2007, to the New York Times

 

Exports Are Costs: Imports Are Benefits

 
You’re correct that free trade likely would create more opportunities for workers in Illinois to produce goods for export (“How free trade boosts Illinois,” Editorial, Aug. 25). Never forget, though, that the ultimate benefit of trade lies not in what people must sacrifice—not in the creation of opportunities to produce output for others—but in the greater quantity, quality and variety of goods and services that free trade makes possible for ordinary people to consume. Free trade’s bountiful harvest is not its exports; it is its imports. —Published September 2, 2007, by the Chicago Tribune

 

Imports Are the Point of Trade

 
Peter Navarro’s Aug. 13 letter to the editor accuses the 1,000-plus economists (including yours truly) who signed the petition opposing trade sanctions against China of overlooking Beijing’s beggar-thy-neighbor policies. Not so. Save for the counterfeiting of Western goods, every offense that Mr. Navarro accuses China of committing against Americans benefits Americans. If Beijing truly is, for example, subsidizing Chinese producers, the resulting lower prices are a gain to American consumers no less than if the lower prices stemmed from a technological breakthrough in China.

By failing to see that imports, rather than exports, are the ultimate goal of trade, it is Mr. Navarro who spreads beggar-thy-neighbor fallacies. —Published August 21, 2007, by the Wall Street Journal

 

Government Can’t Mute Competition

 
Reviewer Daniel Gross should have asked harder questions about Robert Frank’s argument that higher taxes on “the rich” will moderate individuals’ quest for status (“Thy Neighbor’s Stash,” August 5). Monetary wealth and the material goodies it buys are hardly the only source of status. Consider, for example, Prof. Frank’s faculty position at Cornell University. He earned this position in large part through his hard work. By his own thesis, then, he inadvertently caused other scholars to work unnecessarily hard in their quest to win high status Ivy-League appointments—a quest that for the vast majority of us is futile.

Higher taxes on the rich will do nothing to create more Ivy League faculty positions, more mansions with stunning views of the Pacific ocean, a greater number of the world’s most beautiful women or most eligible bachelors, or most of the other things that confer and signal high status for those who possess them. Frankly, it is naive to suppose that muting competition in markets will mute humans’ competition for status. —Sent August 17, 2007, to the New York Times Book Review

 

Subsidies Can’t Make People Responsible

 
With the creativity of a drunk sailor, Mayor Bloomberg proposes that poor people be paid to care for themselves—given cash rewards to do things such as stay in school, go to the dentist, and hold steady jobs (“… And Paying the Poor,” June 20).

Your criticisms of his plan are on target.

I ask the Mayor if in running his private business he would seriously consider hiring anyone so unmindful of his or her future that that person would go through the motions of self-responsibility only if bribed to do so? Surely the answer is no.

Paying someone to play-act at self-responsibility no more creates a self-responsible person than paying someone to play-act as a lawyer creates a skilled attorney. —Sent June 20, 2007, to the New York Post

 

Economic Growth Requires Change

 
The moral of your report on the decline of family weavers in India is that globalization and modernization are suspect because they eliminate many ancient, home-based occupations (“An Ancient Indian Craft Left in Tatters,” June 6). And your quotations from out-of-work sari weavers are indeed moving.

Nowhere in this report, however, do you interview those Indians who now can buy machine-made saris at lower prices—thus improving their standard of living by enabling them to purchase other goods whose production creates new jobs for many Indians who would otherwise remain mired in poverty. Yes, India has a long way to go. But the notion that most Indians’ lives would be better if that economy were frozen in its past ways is foolish. —Sent June 2007 to the Washington Post

 

Jobs in a Market Economy Aren’t Fixed

 
Dale Powers argues that the hiring of foreign skilled workers “wastes” the brainpower of Americans (“Don’t waste U.S. brainpower by hiring foreign workers for coveted jobs,” June 4). Mr. Powers’ brainpower as an aerospace engineer might be awesome, but it’s weak in economics.

The number and kinds of jobs in a market economy aren’t fixed. They expand and change as entrepreneurs seek to use all available talent as productively as possible. Consider the microchip—which, after all, is a substitute for lots of human brainpower. If Mr. Powers’ argument were correct, the advent of this device would have cast millions of smart, educated Americans into low-skilled jobs. Instead, of course, the microchip has created for talented Americans countless high-wage jobs whose existence was inconceivable thirty years ago. —Sent June 4, 2007, to USA Today

 

Investment Is Investment

 
Economic growth requires market-driven investment, and investment requires savings. So the editorial “The GDP” (Editorial, Saturday) was right to argue that a fall in Americans’ savings rate threatens to reduce the U.S. economy’s growth rate.

But why do you often lament the U.S. trade deficit? The larger is this deficit, the greater are the amounts that foreigners invest in America. And the more that foreigners invest in America, the higher is the U.S. economy’s growth rate. Research and development in the United States funded with dollars from South Korea is just as productive as the same R&D would be were it funded with dollars from South Carolina.

If Americans truly are saving virtually nothing, we should be especially pleased that foreigners so willingly save and invest on our shores. —Published May 7, 2007, by the Washington Times

 

If Rents Can Be Created, They Will Be Sought

 
Drummond Drew writes that “We need to find a way to get money out of politics” (Letters, April 26). He mistakenly supposes that carts push horses. Money is in politics only because politicians confiscate and control so much of our money. The only way to free politics from the influence of money is to free our money from the influence of politics. —Sent April 26, 2007, to USA Today

 

Reaping Rewards from Human Capital


Today you insinuated that oil retailers who sell a particular inventory of gasoline at a price higher than they expected to receive when they first purchased that inventory are misbehaving. You’re mistaken.

You attended Fordham University in the 1950s, investing in yourself in the hopes of earning a good living. Surely your real income today is much higher than you, when you were in college, expected it to be. Are you misbehaving by accepting from CBS a salary that is higher than you once anticipated? Of course not. But just as it is legitimate for you to reap benefits from increases in the market value of the asset that you invested in (namely, yourself), it is legitimate for oil companies to reap benefits from increases in the market value of whatever assets they invest in. —Sent April 23, 2007, to Charles Osgood

 

Nothing Fair about Protecting Some from Competition

 
Sen. Charles Schumer and Rep. Jim McDermott want trade agreements that are “fair” (Letters, March 21)—by which they mean trade agreements that protect American workers from having to compete very hard against foreign workers.

I wonder if Messrs. Schumer and McDermott regard Xerox, IBM, Apple, Dell, and Hewlett- Packard to have been “unfair” traders. By making copiers, personal computers, and desktop printers so incredibly inexpensive, these firms destroyed countless jobs for office-pool typists. An American worker simply cannot compete with these machines. Would we have been well served had government restricted our ability to purchase these machines? If not, why suppose that we will be well served if government restricts our ability to purchase goods and services produced by workers whose wages are now lower than ours? —Sent March 21, 2007, to the New York Times

 

“Women’s Work” Counts, Too

 
In his generally admirable essay on income inequality, Andrew Hacker discounts the significance of the 23 percent rise in median family incomes between 1982 and 2004 by saying that “this growth was almost entirely the result of the presence of additional earners, with more wives turning to full-time work” (“The Rich and Everyone Else, May 25, 2006).

True. But to the extent that women were released from housework by the greater availability of electrical appliances and better prepared foods, these gains in median household earnings represent real improvements for ordinary Americans. After all, housework—although uncompensated—has genuine and considerable value. Because much of the housework that in the past was done by “non-working” women is now done by appliances, supermarkets, and the like, the typical American household today still receives the value of housework plus the additional income women earn by working outside of the home. —Sent February 20, 2007, to the New York Review of Books

 

Addicted to Spending

 
Even if Sebastian Mallaby is right that government programs—such as efforts to retrain workers—are justified as the price to pay to weaken political resistance to freer trade, he’s wrong to argue that these programs must be funded by higher taxes (“Matching Free Trade With Taxes,” Feb. 19).

Uncle Sam today takes from Americans’ pockets more than $2.5 trillion per year. In real dollar terms, this sum is 50 percent higher than what Bill Clinton’s government took during its first year in office and 25 percent higher than what George W. Bush’s government took during its first year. Surely, Uncle Sam already has on hand more than sufficient funds to pay for whatever programs are needed to mute opposition to trade. —Sent February 19, 2007, to the Washington Post

 

I Might Have Added That They Are Also Cowards

 
David Brooks vividly explains that today’s politicians, who are often sensible in private, camouflage themselves in public: they routinely endorse policies they really don’t believe in (“Private Virtue, Public Vice,” column, Feb. 8).

Then he strangely concludes: “In private, we have a decent leadership class. In public, it’s rotten.”

People who are wise and steadfast only in private—only when they suffer no risks for sticking to their principles—are neither decent nor leaders. They are opportunists, poseurs and rogues. —Published February 11, 2007, by the New York Times

 

What Galileo Must Have Felt

 
Attempting to discredit free trade, Sen. Byron Dorgan resorts to tired rhetorical tricks (Letters, Jan. 18). For example, he complains about the loss of manufacturing jobs. In fact, though, most of these job losses are due to automation that increases workers’ productivity. As economies advance, the loss of manufacturing jobs is no more surprising or regrettable than was our loss over the past few centuries of agricultural jobs or our earlier loss of hunter-gatherer jobs.

Sen. Dorgan calls free-traders “blind.” It is much closer to the truth to call protectionists antediluvian. —Published January 18, 2007, by the Wall Street Journal

 

What Is Seen and What Is Not Seen

 
As you report, Uncle Sam “blames Beijing’s currency practices for contributing to the United States’ bloated trade deficit with China” (“IMF Chief: Global Economy Threats Easing,” Jan. 16). But as my colleague Tyler Cowen explained in his New York Times column, a higher valued Chinese yuan would have little, if any, effect on the size of this trade deficit.

The reason is that Chinese manufacturers specialize in assembly: they buy component parts from other Asian countries and then assemble these parts into finished products for export.

By lowering Chinese producers’ costs of acquiring key inputs, a higher-valued yuan would reduce their costs of production—and thus do little to raise the prices that American consumers pay for goods made in China. —Sent January 16, 2007, to the New York Post

 


Mr. Boudreaux is Chairman of the Department of Economics at George Mason University in Fairfax, Virginia, and a blogger at www.cafehayek.com. The letters published here, with permission, were previously published at www.cafehayek.com. Mr. Boudreaux is the author of Globalization, published this month by Greenwood Press, and a frequent contributor to the Wall Street Journal, Investor’s Business Daily, Regulation, Reason, Ideas on Liberty, and the Washington Times.

Show-Me Institute Shows ’Em How to Get the Facts

by Eric Dixon

JOURNALISTIC ACCURACY IS INVALUABLE—and its value is nonpartisan. Anybody who values truth, oversight, and accountability for those who hold the public’s trust is well-served by the presence of objective, data-driven reporting in the mainstream media, no matter their political leanings. The Heritage Foundation has been holding a series of Computer-Aided Research and Reporting (CARR) boot camps for years to provide Washington, D.C., journalists with the essential statistical skills they need. In October, the Show-Me Institute, a free market think tank based in Missouri, brought Heritage’s CARR program to the Midwest.

The impulse to support analytical, fact-based journalism led Mark Tapscott to start the CARR program with The Heritage Foundation’s Center for Media and Public Policy in 1999. From the start, Tapscott, who is now the editorial page editor for the Washington Examiner, worked closely with Bill Beach, director of Heritage’s Center for Data Analysis, to ensure the program would be about number crunching rather than ideology. As he wrote on his “Copy Desk” blog almost two years ago, “There is no ‘conservative way’ or ‘liberal way’ to teach journalists how to use an Excel spreadsheet to analyze a county government’s budget. Either you know how to use Excel or you don’t. So I am eager to recruit statistical experts from throughout the think tank community because so many of them have skills that are desperately needed by journalists and bloggers.”

In recent years, this inclusiveness has led to the involvement of Greg Elin, chief data architect for the Sunlight Foundation, an organization dedicated to government transparency and open records. Although Elin would undoubtedly find himself on the opposing side of policy discussions he might have with Heritage staffers, his enthusiastic presence at the CARR boot camps demonstrates how a dedication to objectivity and data transcends personal political inclinations. Tapscott, Beach, and Elin were also joined in the Missouri CARR seminars by Robert Bluey, who now heads up the Center for Media and Public Policy at Heritage.

The CARR boot camps were brought into Missouri by Jason Hannasch, vice president of the Show-Me Institute. He met Mark Tapscott in 2006 at a Washington, D.C., networking event sponsored by the State Policy Network, and decided then that CARR would be an extraordinarily valuable opportunity for Missouri journalists. Not only would it help impart essential computer-based reporting skills to members of Missouri’s fourth estate, but it would also demonstrate the Show-Me Institute’s commitment to objective analysis. Hannasch sent me, the Show-Me Institute’s editor, to attend one of the D.C.-based CARR boot camps at the National Press Club in July, to take a look at the program in person and decide whether it was feasible to host a version in Missouri.

Although nailing down a firm date with the D.C.-based instructors was relatively easy, the real trick was finding a way to reach out to Missouri journalists, to get them involved, and to find locations and equipment suitable for the workshops. This is where Don Hicks, president of the Missouri Broadcasters Association, worked his magic. He earned a huge amount of gratitude not only for organizing publicity for the program among Missouri’s broadcast journalists but also for finding space and facilities at the University of Missouri–Kansas City and the University of Missouri–St. Louis—and both schools were unfailingly generous hosts. Hicks also attended both daylong sessions, along with David Stokes, a privatization policy analyst with the Show-Me Institute, and myself.

Not only is CARR incredibly valuable—for younger newcomers to journalism and old hands alike—but, in a way, bringing this program to Missouri is like bringing it home. The textbook given out during the training sessions was written by Brant Houston of the University of Missouri–Columbia, who is also the acting executive director of Investigative Editors and Reporters, Inc. His book provides those who attended the workshop with a detailed reminder of the techniques they learned—how to use computers in researching articles, analyzing databases and spreadsheets, checking claims of fact, and using statistical methods appropriately.

Journalists who’ve recently finished their schooling aren’t always prepared for the role computers will play in their investigative reporting efforts, and those who have already had long careers as reporters or editors don’t often have a chance to keep up with the cutting edge of technology. Mark Tapscott’s portion of the program focused on how to use basic spreadsheet tools to turn a collection of numbers into meaningful information. He not only provided practical, hands-on training, but also spurred participants to think about data—how it can be interpreted in different ways, and when each of those ways might be useful to a journalist.

Bill Beach provided a more in-depth look at the use and misuse of statistics. Numbers can be displayed in many ways, many of which are misleading. He demonstrated how slight changes in the presentation of data can change the way it’s interpreted, and highlighted some fundamental rules for creating accurate tables, graphs, and figures. Beach also took participants on a tour of some of the most useful places on the Internet for finding data. Most of it is just sitting there, waiting for somebody to analyze it—but you have to know how to find it first.

One of the most dynamic aspects of CARR training is Greg Elin’s presentation of all the new and varied ways the Internet allows information to be gathered and used in ways unimaginable only a few years earlier. Online technology is changing so rapidly, and spawning so many new applications that build and feed off of each other, that Elin was able to use concrete, hands-on examples of technology that was brand new only the week before. As journalists see the news-gathering models of the 20th century gradually give way to a world of plentiful, almost instantaneous information, it’s critical that they have the tools to sift through all the detritus in useful, innovative ways.

Everybody involved in the Missouri CARR seminars found them to be unqualified successes. According to Don Hicks, “It was the best news seminar that we’ve ever offered, in the 13 years that I’ve been with the association, in terms of usable information for the participants. I can’t say enough good things about it. It was great.” And Hicks, along with the Show-Me Institute, hopes to continue bringing CARR to Missouri well into the future.


Mr. Dixon is editor at the Show-Me Institute. He has also been an editor for U.S. Term Limits, Liberty magazine, and the Idaho Press-Tribune.

Making Direct Mail Work for You

by Ann C. Fitzgerald

HERE’s A CONVERSATION I’ve had many times with nonprofit organizations:

Organization: We tried direct mail, and it didn’t work.

Me: What did you do?

Organization: We rented a list and mailed a letter.

Me: Did you receive any responses?

Organization: Yes, but we lost money.

Me: That’s to be expected when you mail to prospective donors. What did you do after that?

Organization: Nothing. The board was worried about losing money, so we didn’t mail anything else.

In most cases, the group’s executive director convinced the board of directors to invest some money in direct mail—and for good reasons. The organization may have recognized that it needed a broader donor base to increase income. Or it came to understand the challenges of securing grants from the limited number of foundations that support free market causes. Or it was convinced that more individual donors would give it greater visibility and influence with policymakers.

In each case, their reasoning was correct. Direct mail is a cost-efficient and effective way to identify a large number of prospective donors for an organization’s cause. If managed correctly, direct mail will help you increase revenue, cultivate long-term relationships with donors, identify sources of prospective major gifts, raise awareness about your cause, and promote your organization in the region.

Direct mail also involves a serious commitment of any nonprofit organization’s time and resources. It requires planning, preparation, and follow-through. It also necessitates that the organization’s staff and board of directors have a complete financial picture and clear expectations for the program so that short-term losses are put in perspective with long-term gains.

Here are seven ideas to make direct mail work for your organization.

Get the legal stuff out of the way. Most states require charitable organizations to register before soliciting contributions. If your organization is not registered and is reported to the state’s attorney general (by someone receiving your prospecting letter, for example), you could be subject to significant fines.

If you mail in only one state, the registration process is fairly easy and inexpensive. If your organization solicits contributions in numerous states, your first step should be to visit www.multistatefiling.org/index.html to access the Unified Registration Statement (URS). The National Association of State Charities Officials and the National Association of Attorneys General have collaborated to simplify state compliance by consolidating the information and data requirements for nonprofit registrations. The URS doesn’t cover all the states, but it is a good place to start.

Get educated about direct mail. How many times have you heard people say: “I never read direct mail. It goes right in the trash,” or “I don’t like those long letters. I want one to two pages max”? My recommendation is not to follow random advice from people with no expertise in the direct mail business. Many aspects of direct mail may seem counterintuitive, but that doesn’t mean that the tactics don’t work. Indeed, nonprofit direct response fundraising accounts for more than $220 billion in individual contributions, so talk to the experts and follow their guidelines. Also, consider reading up on the subject of direct mail. Mal Warwick’s How to Write Successful Fundraising Letters and Benjamin Hart’s Fund Your Cause with Direct Mail are both great resources.

Create a plan with a budget. Review or create your organization’s three-to-five-year strategic plan and examine your current sources of income (e.g. foundations, corporations, and individuals). Then develop a comprehensive budget for the costs of direct mail, including a copywriter to draft the letter, list-rental fees, mailing house services to print and mail the letters, and postage. Many smaller nonprofits conduct “high dollar” direct mail programs for which they mail their letters first class to very targeted lists and ask the prospective donor for a gift of $100 or more.

What numbers should you use to estimate the cost of direct mail? Most groups budget about $1.50 to $2.00 per letter, so if you rent a list of 5,000 names, you can see that the up-front investment is significant. In addition, a good response rate for high-dollar direct mail is considered to be 1 percent to 1.5 percent, so a mailing of 5,000 may only result in 50 to 75 gifts.

However, these 50 to 75 donors now become the basis for your “house file.” You should plan to mail to these donors several times throughout the year. As committed members and supporters of your cause, they will respond in greater numbers to your appeals and help cover some of the expenses.

Sell the idea to your board. It will take time—often 18 to 24 months—to recoup your investment in direct mail. Therefore, it is important to fully apprise your board of directors about the costs and expected results. That way, no one will be disappointed by a response of 1 percent from a mailing.

Consider your message. Successful direct mail programs are those in which donors receive consistent communication. You will be well prepared for this if you already have experience in communicating regularly with donors or contacts through mailings such as newsletters. It is also worthwhile to spend time developing a strong case for support that addresses why your organization is unique and why your work is important. When it comes to preparing an actual direct mail letter, you will need to identify a problem you are trying to solve, your solution to the problem and strategy for solving it, and the benefits to the contributor if he or she supports you.

Be sure to remember the “nuts and bolts.” As you embark on a direct mail program, you are going to engage a small army of people to take your message to a wide audience and generate donors to your cause. Ask other organizations for recommendations on consultants, copywriters, mailing house services, and list brokers. Learn what you can do yourself or with existing staff and what should be handled by someone else.

In addition, make sure you have a system to capture relevant contact and gift information for each donor. This can be a sophisticated contact management program or a simple Excel or Access database.

“We got some new donors! Now what?” Hopefully, you will not have to ask this question, because you created a plan for donor relations before starting your direct mail program. This means you are able to prepare and mail an appropriate, personal thank-you letter, with an accurate IRS receipt, within 24 to 48 hours of receiving a gift. Also, you are prepared to track the results of each mailing, including cost, response, income, and average gift. Finally, you have a plan in place to communicate with your new donors regularly over the course of the year, both through additional fundraising appeals and through relationship-building mailings such as newsletters.

In making a financial contribution to your organization, donors become stakeholders in your success. Their continued involvement will be more assured if you treat them as partners in your mission and cultivate long-term relationships with them. Direct mail plays an important part in the cultivation process, but reaching out to your donors through telephone calls and visits is also important.

Finally, remember that your organization is not the first one that has grappled with the decision to embark on a direct mail campaign. Tap into the movement and ask other organizations for their recommendations, suggestions, and ideas. Their experience may offer just what you need to make your own direct mail campaign work.


Ms. Fitzgerald is President of A.C. Fitzgerald & Associates LLC. A.C. Fitzgerald & Associates (www.acfitzgerald.com) is a national consulting firm providing business solutions for nonprofit organizations.

 
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