and the
Citizens Economic Research Foundation

Beacon Hill Institute responds to hatchet job column



The Beacon Hill Institute
Suffolk University
8 Ashburton Place
Boston, MA 02108

July 23, 2004

The Boston Herald
One Herald Square
PO Box 2096
Boston, MA 02106

To the Editor:

In his column of July 23rd (“Beacon Hill Institute really is in the dark”), Thomas Keane, Jr. makes a number of false allegations about the Beacon Hill Institute and its work. Mr. Keane made no effort to contact us before publishing his piece, nor, apparently, did he avail himself of information readily available to him through our website or printed material. As a result, he undermines his own credibility and that of the Herald by publishing an error-ridden and highly distorted commentary on our work. A point-by-point rebuttal follows:

Keane: Some of BHI’s work is barely disguised ideology,” as evidenced by a 1994 report describing a proposed graduated income tax as taking the “’slippery road to serfdom.’” 
BHI: That phrase comes from Nobel laureate Friedrich Hayek’s acclaimed book, The Road to Serfdom, in which Hayek writes about the threat to democracy posed by income-leveling government policies. Apparently, the Herald, which cited our work in several editorials, and the voters, who turned down the graduated income tax by an overwhelming majority, shared Hayek’s view of this threat. 

Keane: “[BHI] argued in 2002 that eliminating the state income tax would create 300,000 to 500,000 jobs.”
BHI: We never made any such claim. The claim comes from others, who, acting on their own, “extrapolated” it from our work. I disavowed attempts to connect us with the claim in comments reported by The Worcester Telegram & Gazette on October 20, 2002. 

Keane: A questionnaire BHI used to survey Cape opinion on a proposed wind farm was “obviously designed to provoke a negative response” in part by “comparing the wind turbines to the size of the Statue of Liberty.” 
BHI: The questionnaire was designed and administered to the specifications of an independent survey research firm and crafted to be as neutral as possible in soliciting responses from tourists and homeowners. As for the comparison with the Statue of Liberty, the wind turbines would be 417 feet tall. The Statue of Liberty is 305 feet tall. Unsurprisingly, the comparison is frequently used in discussions of the proposed wind farm. It was, in fact, used by the Herald in a March 10, 2004 article, “Wind farm fans, foes air views,” which discussed “concerns with the size and scope of the project, which will feature windmills taller than the Statue of Liberty.” 

Keane: The margin of error in BHI’s survey “could effectively undermine” the finding that the wind farm would reduce tourism and that homeowners expected a decline in property values.
BHI: This claim is incorrect, as we pointed out weeks ago in comments posted at Keane’s error arises because, in misunderstanding the binomial distribution, he seems to think that the maximum margin of error in the survey, which is +/-4.38, applies to all responses to the survey. But that margin of error is applicable only when the proportions are near 50% (as in, “Of the two leading presidential candidates, which do you prefer?”). With respect to the survey issues he addresses – lost tourism and reduced property values resulting from the wind farm – different margins of error apply. For example, our survey found that 3.2% of tourists would spend less time on Cape Cod if the windmill project were undertaken. This is not a small number; it represents over 60,000 visitors per year. The reduction in spending associated with this volume of reduced visits would be large. The margin of error applicable to this case is +/-1.50%: We can be 95% confident that the true proportion of tourists who would reduce their length of stay on Cape Cod is in the interval 1.7% to 4.7%. 

Keane: BHI based its cost-benefit analysis on findings from its survey that the wind farm would reduce tourism and property values. BHI’s analysis of the wind project was flawed because it “gave too little credence” to the benefits of cleaner air. 
BHI: The assertion that we based our cost-benefit analysis on survey findings with regard to tourism or property values is blatantly false. Neither figured at all into that analysis, as our report makes clear. As for giving “too little” credence to cleaner air, that’s his unsupported opinion. We determined that the project would confer $744 million in benefits, of which $108 million would be due to cleaner air, basing our estimate on published research by the Harvard School of Public Health. 

Keane: Our “conclusions about educational reform are belied by consistent improvements in MCAS scores.”
BHI: MCAS scores have improved. But that doesn’t affect our finding that such improvement, as has occurred, is unrelated to increases in state spending. Most research and the state’s own arguments in the recent Hancock case support this finding. Our data show that the principal reason why MCAS scores have risen is the fact that seniors must now pass the test in order to graduate.

Keane: “On March 30, [BHI] released a study claiming the net benefits from the convention would be $121.6 million. A week later, it released another study saying the net loss would be $12.8 million… BHI had forgotten to include costs – such as disruptions to traffic – in its analysis. Yet the revised version was equally flawed, with ‘costs’ (such as the cancellation of a planned Tall Ships visit) wildly inflated.”
BHI: As part of our ongoing analysis of the economic impacts of both the Democratic and Republican National Conventions, we have chosen to update our analysis as new information about the conventions are revealed by convention organizers and authorities. The Boston area road closings were announced after our March 30th analysis was released. We therefore released an updated analysis on April 13th, which included new information that indicated a net loss of $12.8 million. We released further updates in May and in June following announcements of additional closings and new security spending. According to its organizers, the Tall Ships visit would have brought hundreds of thousands of visitors to Boston, as compared to the 35,000 the convention will attract. 

Keane: BHI based its conclusion that the convention would help only 11 percent of Boston businesses on “a survey of 100 businesses near the FleetCenter.” This is a mistake because, “The impact of the convention extends throughout the entire metro area.” 
BHI: As detailed in our press release, “our survey included businesses in the North End, the Haymarket and Faneuil Hall district, South Station, Back Bay, Beacon Hill and the South End.”

Keane: BHI said that if the voters cut the income tax to 5.0% in 2000, there would be no program cuts even if a recession ensued.
BHI: In 2000, we said that the state could weather a hypothetical 2003 recession without cutting services (See our FaxSheet “Economic Answers to Question 4”). At that time, we didn’t know that the state would have to weather a national recession, impelled by a dot-com bust and a terror attack in 2001. At any rate, with the economic recovery now under way, the state is in a position to reduce the tax to 5% without further service cuts.

Keane: “Last year BHI claimed people choose to live in communities that tax their residents the least.”
BHI: Our 2003 report (also available on our website) on taxes and community voting patterns explicitly acknowledges that people might move from a low-tax community to a high-tax community because of the better services provided by the latter. The premise of the article is that voters choose the communities that best suit their own preferences, not that voters generally prefer either lower or higher taxes.

In conclusion, columnist Thomas Keane has penned a distorted and inaccurate account of BHI research. The Herald has a duty to its readers – and to BHI – to investigate the accusations made in this column and, on finding that the accusations are wrong, publish a correction of the record.


David G. Tuerck
Executive Director
Chairman and Professor of Economics
Beacon Hill Institute at Suffolk University

Thomas Keane, Jr. 
Howie Carr
Pat Purcell 
David J. Sargent, President, Suffolk University
Kenneth Greenberg, Dean, College of Arts and Sciences, Suffolk University

Also see:

The Thomas Keane Affair:
In Boston, It's Also the Polemics of Personal Destruction

The Beacon Hill Institute
July 27, 2004


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