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Newest research associate shows freedom’s future in good hands

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It’s been said that liberty is only one generation away from dying, and that is why Institute President Keli’i Akina was so pleased this past Monday to have as the guest on his “Hawaii Together” program Jensen Ahokovi.

Ahokovi is a recent graduate of ‘Iolani School, a current economics student at the University of Hawaii and the youngest research associate at the Grassroot Institute of Hawaii. His debut article for the institute appeared in Honolulu Civil Beat in late September, and elaborated on a favorite phrase of institute founder Richard “Dick” Rowland: “The bigger government gets, the smaller you get.”

Asked how he became interested in economics, Ahokovi said it was during his junior year when he discovered Milton Friedman on YouTube.

“Until then I had not had that free market-oriented perspective on economics,” he said. “I watched his “Free to Choose” series [and] that jumpstarted my interest and my passion for classical liberal or free market economics.”

Akina said it warmed his heart to see someone so young expressing sound economic policy ideas so well.

“We have the luxury at a think tank like the Grassroot Institute of being able to come up with ideal answers for the problems we face,” Akina said, “But unless we have a generation of young people that [is] going to go forth and actually make the difference and make their voices heard, very little will happen.”

Watch the entire interview by clicking on the button below.

9-27-21 Jensen Ahokoviwith Keli‘i Akina on “Hawaii Together”

Keli‘i Akina: Aloha, everyone, and welcome to “Hawaii Together” on the ThinkTech Hawaii broadcast network. I’m your host and the president of Grassroot Institute. Did you know that it’s now the 20th anniversary celebration of the Grassroot Institute in Hawaii?

It was founded by Richard O. Rowland. What a tremendous man. He was a good friend and mentor of mine, and I was so pleased that he asked me to join the organization. Dick loved to say, “The bigger the government gets, the smaller you get.” If you ever spent time with him, you’d know that he was a curmudgeon of great wisdom about liberty.

It’s also been said that liberty is only one generation away from dying, and that means we’ve got to keep alive the spirit of liberty, especially in the youngest generation. That’s why today, I’m so glad to be here with you, with somebody who represents the continuation of principles of freedom and liberty, as well as accountable government.

The remarkable thing is that he is so young. I think he’s probably one of the youngest associates we have on our team of young people at the Grassroot Institute. I’d like you to meet him today because his work has come to the attention of much of the public recently in some of the things he’s written, and I’ll tell you a little bit about that later on.

But please welcome to the program Jensen Ahokovi, a research associate at the Grassroot Institute and a university student as well. Jensen, welcome aboard today.

Jensen Ahokovi: Thank you so much for having me. It’s an honor.

Akina: Well, we’re so glad that you’re with us today. I was saying to the audience that you are one of the youngest associates at the Grassroot Institute, and we’re quite astounded at the attention your work has received recently, especially in a piece you wrote for the Civil Beat. Would you tell us a little bit about your background? You’ve actually finished high school just last year, and you’re currently a university student?

Ahokovi: Yes, yes. I’m Jensen Ahokovi. I recently graduated from ‘Iolani School, and now, I find myself over at the Grassroot Institute. I think I am the youngest person on board. It feels a little different not being around people my age. But everyone’s awesome, and it’s really such an honor and a pleasure to be a part of the team.

At the moment, I also do some work with the Institute for Youth and Policy in San Francisco. I’m an economic policy lead over there. Over there, I lead a team of policy analysts in conducting economic policy research, and, as you mentioned, Keli‘i, I’m an economics student at the University of Hawai‘i at Mānoa.

Akina: Jensen, how did you get an interest in economics, particularly the kind of economics that promotes economic freedom or the free market? You went to high school, and I’m sure you learned a little bit about economics there. Tell us what gave you the interest in the approach that you’re taking today.

Ahokovi: I would say it was around freshman year, I developed my general interest in economics. Freshman and sophomore year were about the years when Trump was the talk of the town. I was interested in a lot of political and social issues.

Naturally, once you get enveloped in those issues, you’re going to have to eventually address the economic side of things. Once that occurred — understanding general economics, talking about taxes, talking about government spending, the basics — led to me discovering some Milton Friedman lectures on YouTube the summer of my junior year. It was really up until then that I had not had that free market-oriented perspective on economics. It wasn’t until I watched lectures from Friedman; I watched his “Free to Choose” series that jumpstarted my interest and my passion for classical liberal or free market economics.

Akina: Well, Jensen, your story warms my heart because a little while before you, when I was a student at Northwestern University studying economics, there was a professor in the South Side of Chicago at the University of Chicago, and he was Milton Friedman. I realized that he was teaching something very different down there than was being taught at my university. I made it a point to go down, take the L train and visit the University of Chicago.

Milton Friedman has had a tremendous influence on my view as well of the way that we should be doing economics and not having the heavy hand of government involved so much, which takes me to the quote from Dick Rowland that you gave in your piece that is written for the Civil Beat, that the bigger the government gets, the smaller the individual gets.

What struck you about that quote, and what did you mean by including it in your piece?

Ahokovi: Well, I think Dick’s quote, along with many other sentiments that have been expressed, like Milton Friedman and other notable free market advocates; it’s really that as government bureaucracy grows, the power and the voice of the individual tend to diminish. This isn’t only the case in, say, Hawaii, but it’s also the case across the United States and even across the world. That is really just a good way to engage, let’s say, the layman, right, into understanding why we advocate for the market, why we advocate for limited government.

Akina: Now, a lot of people think that the government exists to actually create the markets or to protect the markets or to manage the markets. For example, as you know, one of our biggest industries in Hawaii is tourism. A  great many people believe that the key to the future of tourism is that the government should manage it. Do you see any problems in this kind of thinking?

Ahokovi: Yes, absolutely. One of the things that we’ve understood when it comes to market economics, and this has really been expanded upon by really historical and foundational works in economics that go all the way back to, say, Leonard Read’s story of I, Pencil or the economist, Friedrich Hayek’s, story of “The Road to Serfdom” and the problems with centralization.

The problem with this line of thinking is that there’s only so much information that a governing authority can have over something as volatile and as large as a market, or even an industry, like tourism, you mentioned.

The way the market operates is that it operates in a fashion of spontaneity, and it’s the accumulation of millions of microcosms of millions of different interactions of consumers, producers, sellers and buyers. It’s these interactions that lead to certain outcomes. It’s often the case that these interactions lead to the most efficient and the best outcomes given the current conditions.

The problem with the line of reasoning that you propose is that there’s no possible way that a central authority can understand the millions of interactions that go on and somehow produce a better outcome.

Like I mentioned, there’s Leonard Read’s story of I, Pencil, and this is a really good analogy as to how complex the market environment is. It’s that you take a simple thing, like a pencil, and you have an eraser, you have the lead, you have the wood. But to get the wood, you need a lumberjack, assuming that technology isn’t as advanced as it is nowadays. But we understand what production is, getting somebody to chop a tree down.

You have an eraser that requires rubber. You have a metal casing to encase that eraser, but if you expand the story of the pencil out, you need people to chop the wood down. Then you need people to take the wood to the mill. You need people to mine the metal. You need people to get the lead.

Once you understand a pencil, what you realize is that there are millions of people that come together to create a pencil. To say that a government needs to manage an industry, such as tourism or any sort of industry, would be to take the tasks required of a pencil and magnify that by an order of millions.

Akina: As Adam Smith might put it, there is an invisible hand at work in the economy, and that when government gets out of the way of that hand and allows the free market to operate as it was designed to operate, we have a wonderful coming together of supply and demand. We produce outcomes that we, otherwise, we can’t have. Not to belabor this point, living in Hawaii, we don’t hear that story very often.

Living in Hawaii, you must hear almost daily people saying we need government. We need government in order to build roads. We need government in order to provide hospitals.

During, for example, the COVID coronavirus crisis that we’re going through right now, we need government in order to get us out of this crisis; we need the government to intervene, and so forth. You really have a lot of people in Hawaii who are big fans of a very big and centrally controlled government. What is your response to that?

Ahokovi: Well, I think, intuitively, we, all, as locals, can somewhat agree that the state government has not done its job, and it hasn’t done its job for quite a while. Really, in my everyday experience, it takes but one pothole on the road to remind me of the inefficiency of government management. I will just implore people to look into a lot of these issues and to just go beyond the dichotomy of government versus market, because it’s not as simple as people and the media tend to put it.

I think, for example, you brought up hospitals. The idea that we need government to expand hospital facilities, to expand healthcare facilities, is fundamentally reversed. It’s counterintuitive because we need to look at the shortages that are going on right now, and we need to determine the root of that. What is the root of these shortages?

It seems to me that the root of these shortages is government, right? It’s counterintuitive to say that, to fix the solution that is caused by government, you need more government, when we have regulations, like, say, Certificate of Need laws that say that you can only expand healthcare facilities only if there is a demonstrated community need for them.

These CON laws, for short, they’re implemented under the guise that CON laws need to be there to prevent price inflation, when in reality, the implementation of CON laws leads to price inflation and, consequently, hospital shortages that we’re seeing right now when all of these extra facilities are in extremely high demand because of the COVID-19 pandemic.

Akina: One of the problems with CON laws that you mentioned is that it actually reduces the very supply of medical services and medical facilities that supposedly they’re designed to increase. 

What do you think about the fact that in order to get a certificate of need, in order to be approved for the building of a new hospital or a new medical facility, the applicant has to go through a process of coming before a board on which his competitors sit — … the owners of other hospitals and other medical facilities — and that the government requires this process here in Hawaii?

Ahokovi: The problem with what you just said is actually not a problem that is simply unique to CON laws, but it’s actually often the case that this problem translates to almost every single trade barrier or entry barrier that we see in the market. With a lot of these government regulations, they have perverse incentives built into them that make the reduction of competition even worse than it could be, had the regulation just been there by itself.

And you pointed out — right? — one of the very problems with CON laws is that it has the incentive for competitors who are a part of this board that needs to approve the passage of healthcare facility expansion [that] perhaps they don’t necessarily want competition, right? We know competition always drives prices down. When you bring in competition, you lose significant market share to that new entry to the market.

Of course, it’s the case that big business has infiltrated the market in such a way in cahoots with big government to maintain their market share. Like I said, this isn’t the case with just CON laws. This is the case with things, like minimum wages. This is the case with things, like the Jones Act, right?

When you have things, like minimum wages, people think that we need a minimum wage to keep a livable wage up, but when in reality, the largest voices behind minimum wages are big corporations, because they know that their competitors, who want to enter the market, cannot sustain minimum wages like they can, because they already have significant market share and significant capital to absorb such a regulation.

Akina: Well, Jensen, you raise a very important concept, and that is competition in the marketplace. Wen we come back from a brief break, I’m going to ask you about that idea of competition and the free market. There are a lot of people who don’t like that at all. I’d like to hear what your thoughts are about that.

This has just been a fascinating conversation with a young man, Jensen Ahokovi, who is now a research associate at the Grassroot Institute.want to ask you to come back and hear the rest of what Jensen has to say. This is Keli‘i Akina on the ThinkTech Hawaii program, “Hawaii Together.” Don’t go away. We will be right back in a minute.

[Intermission]

Akina: Welcome back to “Hawaii Together” on the ThinkTech Hawaii broadcast network. We’re going to continue a fascinating conversation with Jensen Ahokovi, a research associate at the Grassroot Institute.

We’ve been talking with Jensen about how the market works versus the way the government, when intervening in the market with central control, actually makes things less efficient altogether.

Jensen, in many circles here in Hawaii, it’s not popular to talk about the free market. Many people say that that’s about greed for wealthy corporations and invoke the film, “Wall Street,” in which the protagonist, Gordon Gecko, claims that greed is good.

What are your thoughts about this? Is this a fair characterization of the free market, and do you think we need more or less of that here in Hawaii?

Ahokovi: I think, for example, greed is good. It’s, like you said, one of those tools and those buzzwords that people use to disregard history, to disregard the current status of the world. When we talk about, say, the disregard for the free market nowadays, what I see to be common, and this is actually pretty evident in the comment section of my article that I released this past week, and it’s that there is a common equivocation of the free market with private industry. And this is a very important distinction to make.

Just because private firms exist does not mean that a free market exists. When people point to many problems today, I can guarantee that 99% of those problems do not derive from a free market, but they derive from big government and big government’s collusion with big business. This is really the important distinction that needs to be made whenever we talk about free market economics. That people are really placing their blame on the very thing that we, as free market advocates, blame.

There is significant common ground to be had there, but it derives from a fundamental misunderstanding of where all of these problems in society today come from. There’s a number of examples that we can touch on, but for brevity, I’ll hand it back over to you, Keli‘i.

Akina: Well, you know that the big government is the culprit then, as you’ve described it, in terms of interfering with the free market and also big government in colluding with private industry in interference with the free market.

Let’s pause for a moment and just talk about just how big government is. You made some comparisons in your argument between Hawaii’s government and governments in other states. One of the things you pointed out is that, here in Hawaii, one in five workers works for the state government. I wasn’t clear whether that was for state and/or federal government, but in any case, it’s a large percentage.

Maybe you can clarify that. Tell us, what are the implications of having such a high workforce working for the government?

Ahokovi: Absolutely. Now, when it comes to the one in five number, that includes local, state and federal employees. The important distinction to make here is that that federal number of employees adjusts for service members in the military. That’s an important adjustment that we need to make when it comes to the statistic, because it’s pretty clear how if you include military service members, it unnecessarily inflates the real number of government employees.

Just for clarification, it does include federal workers, as well as state and local, but it does not include active-duty service members.

Now, to your second point about the implications of such a high percentage of the workforce belonging to the government, there are two notable effects. One of them is what we would call the crowding-out effect. The crowding-out effect is exactly what the name suggests, that there is a crowding out of the market when it comes to employment between the private sector and the public sector.

That is, when you have the government employing large sections of the workforce, you essentially have less people available for employment with the private sector. We can think about this intuitively: The more government hires, the less the private sector can hire.

The second outcome that we can see is that there would actually be a reduction in productivity. The reason being is that, depending on where the government allocates resources, specifically employment, that has an implication when it comes to how productive we want our economy to be.

Think of a factory owner who wants to switch to renewable energy. Well, in most cases, and this is reflected in reality as well, if you want to make the switch to renewable energy, the trade-off you often have to make is productivity.

If this factory owner wishes to allocate more resources — say, allocate more employees, allocate more capital towards renewable energy — the trade-off that has to be made is in productivity. This analogy can be reflected in the actual real-life renewable energy industry, when the government and other corporations want to switch to these greener forms of energy, but, ultimately, we have to sacrifice a lot of other things, notably productivity.

Akina: Jensen, you, no doubt, know of many people who have left Hawaii because of the cost of living. When we do surveys at the Grassroot Institute on the cost of living, we discover that the number one, most-mentioned item is the cost of housing, both the ownership of housing, as well as the ability simply to rent a place to live. We’re losing our population in a very rapid way, with one of the highest rates of exodus from our state across the nation.

Now, to solve this problem, we’re deeply concerned at the Grassroot Institute about increasing the supply of housing available for people so that they can have it and they can actually afford it, and that the cost of housing can come down. You’ve done some research and study in the area of housing planning. What are your perspectives on this?

Ahokovi: That is definitely, I would say, the most pressing issue when it comes to especially people of my generation, who wish to live here as they enter the workforce as they enter adulthood. My take on housing is no different from my take on various economic issues, and that is we need less government and we need more markets.

Let’s take housing, for example, like you said. One of the things we know that provides a burden on the cost of housing is land-use regulation and zoning. The empirical literature surrounding zoning and other land-use regulations is clear, that there is a strong, positive correlation between the high cost of housing, and zoning and land-use regulation.

Think about it this way: If you look at the top 10 most expensive cities in the United States and you also look at the top 10 most heavily regulated cities in the United States, as measured by, what we call, the Wharton Residential Land Use Index that measures the burdens of regulations in certain cities, those top 10 cities are found as the top 10 most heavily regulated cities in America. We could go on.

A notable person to refer to here would be Harvard economist Edward Glaeser. He’s done some groundbreaking research in housing market regulations associated with the cost of housing.

Although Hawaii is also a unique case because we are an island state; naturally, land is scarce. We’re naturally going to see higher prices reflected because of that scarcity of land. My position would just be that recognizing that we do have this scarcity of land, this makes it even more important that we recognize the role that government needs to take in stepping back and allowing the market to expand supply, to reduce costs and those, among other things.

Akina: As you know, the median price of a home has hit $1 million or more on the island of Oahu. You mentioned that the government needs to do less, particularly in terms of regulation, than to do more about that problem. What do you see as the most practical pathway forward to us being able to bring down the cost of housing for the average person in Hawaii?

Ahokovi: The thing with a lot of these issues is that the most practical way forward is most certainly not practical, compared to the other solutions. I think the most practical way forward is with grassroot effort, as the name of the Grassroot Institute goes. There needs to be a significant upheaval, say, of the status quo by people in my generation, because my generation is the generation that is going to be the most affected by issues, like the cost of housing in Hawaii.

If we can get our legislators to understand the problem that we face and how they play a role in that problem, then I am hopeful we will see some significant change. 

But as far as most practical goals, I really feel that the most practical solution would be to ignite some fire in the passions and in the hearts of the young people, who, like you mentioned, are already moving away, who are already going to the mainland, because they see better economic opportunities and, like you said, cheaper housing.

Akina: Jensen, you’ve just warmed my heart by talking about what your generation can do to make the difference. We have the luxury at a think tank like the Grassroot Institute of being able to come up with ideal answers for the problems we face, but unless we have a generation of young people that are going to go forth and actually make the difference and make their voices heard, very little will happen.

We’ve got about 20 seconds left, Jensen. Any last words you have for our audience before we say goodbye?

Ahokovi: If there’s a chance that you’re interested in learning economics, Milton Friedman and other great free market advocates are freely available on YouTube. If you want a good dosage of free market economics, check out the “Free To Choose” series.

Akina: Outstanding. My guest today has been Jensen Ahokovi, a research associate at the Grassroot Institute, a university student at UH Manoa and somebody whom I think you’ll be hearing a lot more from in the years to come.

Until next time, I’m Keli‘i Akina on ThinkTech Hawaii’s “Hawaii Together.” Stay tuned, and stay alert. Aloha.

 

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