LOS ANGELES—Ken Button points out that the giant legacy carriers that stumbled through the first decades of deregulation are finally covering their operating costs and are better positioned to confront future economic storms. But the slew of mergers that have made this possible have also opened the door to anti-competitive behavior that could undermine consumers’ gains. The answer: Allow lean and hungry foreign carriers to compete directly in the U.S. domestic airline market.

Also in this issue:

Melissa Stevens, executive director of the Milken Institute’s Center for Strategic Philanthropy, outlines a plan for leveraging philanthropic dollars to manage risk in the development of life-saving drugs. “The idea is to mix and match three types of investors—market investors, pharmaceutical companies, and venture philanthropists—all of whom are stakeholders in developing new treatments.”

Larry Fisher, a former New York Times business reporter, examines California’s flirtation with seawater desalination, a technology long dismissed as somewhere between “iffy and Hail Mary… There’s no question that desalination plants are costly and have some impact on the environment,” he writes, “but that has been true of every water supply project since the Roman aqueducts.”

Sutirtha Bagchi of Villanova University and Jan Svejnar of Columbia University ask whether the extraordinary rise in extreme wealth in recent decades stimulates or undermines economic growth. “Billionaires who make their money through hard work, innovation (or, for that matter, luck) don’t have much impact on average productivity,” they conclude. “But those who make their money through political connections tend to reduce productivity because they typically prosper by virtue of monopoly power that distorts resource allocation”—and perhaps more important, “they have a strong interest in using their influence to retard innovation by potential competitors.”

Bob Looney, an economist at the Naval Postgraduate School in California, takes a hard look at Ethiopia’s ballyhooed economic miracle. “Ethiopia’s government credits its impressive growth to the adoption of the ‘developmental state’ model of the East Asian tigers,” he writes. “This, on its face, is suspect since development economists have long been skeptical that an East Asian strategy could be sustained in the teeth of ethnic heterogeneity, widespread corruption and rent-seeking, and woefully deficient governance.”

Gene Steuerle, an economist at the Urban Institute in Washington, explains how long-dead policymakers haunt the federal budget. “Ever less is invested in our future, even as programs designed decades ago balloon in size and lose focus on the problems they were intended to solve,” he writes. “It has significantly weakened recent presidents and congresses, and it will completely hobble future ones unless we collectively confront the fiscal legacy that locks us into decline.”

Eren Inci, an economist at Sabanci University in Istanbul, examines the consequences of free street parking on the quality of urban life. Free is not free, he points out: “One way or another, someone always pays, often indirectly, in the form of higher prices for something else. Moreover, the enormous amounts of land and structures needed for parking almost guarantees that mispricing parking spaces will undermine economic efficiency.”

In an excerpt from his new book, The Rise and Fall of American Growth, contrarian economist Robert Gordon argues that technology won’t save us from stagnation. And in his latest analysis, Brookings Institution demographer Bill Frey documents the startling reality that emigration from Asia has eclipsed the more controversial emigration from Latin America.

Find the latest Milken Institute Review here: http://www.milkeninstitute.org/publications/view/765