Freedomnomics: Why the Free Market Works and Other Half-Baked Theories Don't by John R. Lott Jr Page B

more government regulations. Since the market seems to be failing, the government is asked to step in and make things “fair.” But government intervention often only succeeds in making things worse. From campaign finance laws to rules for gaining a professional license, government regulation tends to hinder free competition. This often reflects the unique incentives that the government itself has. For example, because government-run firms frequently are more interested in market share than profits, they are more likely than private firms to engage in predatory pricing.
    Crime is another subject where this book will draw some unconventional conclusions. Criminals have something in common with everyone else—they make decisions based on incentives. Analyzing these incentives gives us a good indication of what policies will work in fighting crime. This approach helps to explain one of the great riddles that bedevil criminologists—what caused the dramatic fall in crime rates in the 1990s? The answer lies in a mix of policies—the more frequent use of the death penalty, higher arrest rates, and the spread of concealed-carry laws. Perhaps more surprising are the policies that didn’t work—gun control bills and “broken windows” policing methods had negligible effects, while the adoption of certain kinds of affirmative action programs in police departments actually had a detrimental effect. What’s more, contrary to a well-publicized argument in Freakonomics , legalized abortion was not the single biggest factor in reducing crime in the 1990s. Instead, this book will demonstrate that by increasing the number of out-of-wedlock births, abortion significantly increased crime.

Incentives in Academia: a Personal Experience
    I have been amazed by the constant resistance in academia to the idea that free market policies make people wealthier. If we look at the incentives of academics, we find that there’s an understandable reason for their viewpoint: much of the funding for universities—even for private schools—comes from the government. Academics often find the amount of their funding directly tied to the size of government. If an academic—especially at a state university—were to advocate small-government policies such as tax cuts, he’d be read the riot act. Faculty and administrators feel directly threatened by such policies, fearing they will lead to reductions in other government programs, including funding of universities.
    Toward the beginning of my academic career, when I was briefly affiliated with Montana State University in Bozeman, I saw firsthand the conflict of interest between academics’ private interests and the best public policy. My wife—also a new Ph.D. in economics—and I had managed to find jobs in the same place. Soon after we moved to Bozeman in May 1986, Constitutional Initiative 27, which would have abolished property taxes in Montana, was put on the ballot. The vote was set for November, but the measure immediately elicited all kinds of horror stories in the press claiming that, if approved, the initiative would virtually eliminate Montana’s state and local government. The state superintendent of public schools warned that it would force the closure of all the state’s elementary schools. The governor and other top state officials resorted to similar jeremiads, releasing reams of statistics and twisting the data to support totally false claims such as the contention that Montana already was the lowest taxed state in the nation. In light of the barrage of criticism, most people, including myself, assumed the initiative would go nowhere.
    But the facts were quite different from the fantastic declarations of public officials. The elimination of the property tax in 1984 would have left state and local government treasuries with at least $2 billion to spend—23.7 percent of personal income in the state. Thirty-five
other states did quite well spending even less than that ratio. In