MCViewPoint

Opinion from a Libertarian ViewPoint

Posts Tagged ‘Free Market’

What Are ‘Essential Services’? – LewRockwell

Posted by M. C. on April 3, 2020

As Mr. Read pointed out, even the production of a “simple” pencil is beyond the capabilities of one person or one firm to plan and implement. It requires an incredibly complex market coordination of land, labor, and capital. A pencil requires graphite and iron miners, trucks, rubber for the tires for the trucks, rubber plantations, workers at the rubber plantations, paint producers, lumberjacks, sawmills, employees for the operation of the sawmills and for all the associated factories, tool manufactures to make the tools used in the various associated industries, and maintenance personnel to keep all the facilities running.

https://www.lewrockwell.com/2020/04/david-hathaway/what-are-essential-services/

By

Arizona Governor Doug Ducey recently issued an Executive Order requiring residents to “stay home.” The Governor said that only businesses providing “essential services” could remain open. When hit with a barrage of questions, he told Arizonans to not worry because “grocery stores and pharmacies” would remain open and their employees would be allowed to leave their homes and go to work. As I considered what an “essential service” is in the free market, I was reminded of Leonard Read’s brilliant essay “I, Pencil.”

As Mr. Read pointed out, even the production of a “simple” pencil is beyond the capabilities of one person or one firm to plan and implement. It requires an incredibly complex market coordination of land, labor, and capital. A pencil requires graphite and iron miners, trucks, rubber for the tires for the trucks, rubber plantations, workers at the rubber plantations, paint producers, lumberjacks, sawmills, employees for the operation of the sawmills and for all the associated factories, tool manufactures to make the tools used in the various associated industries, and maintenance personnel to keep all the facilities running. There is also a myriad of ancillary industries that produce and provide a huge number of items used in the various businesses that produce components in the higher orders of production to make the pencil; things like ink, paper, clothing for the workers, and oil pumping and refinery equipment to keep fuel flowing to all the associated vehicles and industries. The interconnected web of cooperating firms and individuals is almost infinite.

If producing a pencil is complicated and requires the complex coordination and invisible hand of the free market that is well beyond the planning capabilities of any person or any firm, we can only imagine the exponential level of complexity needed to keep a Wal-Mart store open. If a Wal-Mart store is considered to be providing an “essential service” and is allowed to stay open in a “stay at home” state, how can it possibly do so without the invisible market cooperation of an unfathomable number of actors, each being influenced individually by price signals?

Can a Wal-Mart store stay open without wholesalers and producers? Can the producers stay in business without other producers of sub-components? Can the sub-components be produced without raw material producers? Can meat make it to a Wal-Mart store if the rancher and farmer have to stay home and can’t drive around to various properties and check on water and feed sources for his animals? Can the farmer take care of his farm if his tractor is broken and needs maintenance from the mechanic? Has the mechanic been deemed essential? Does the farmer or the mechanic need a special waiver from the Governor? What about the roving livestock wranglers, fruit pickers, well and pump maintenance workers that are needed by the farmer or rancher on irregular schedules?

What if the farmer or the truck driver has broken his glasses? Can he go to his eye doctor? If the eye doctor can stay open, can the glasses producer go to work to make the glasses for the truck driver or the farmer? If the farmer’s cell phone breaks and he can’t communicate with the meat buyer or feed producer, will the cell phone store be designated an “essential service” and remain open to sell him a new one? Can billboard companies operate so that the public can know which facilities are open and providing services in the midst of the closure order? Can graphics designers produce the signs for the billboard companies? Can newspaper employees drive to work and drive around town to take pictures so that the public stays informed? Are the banks an essential service to provide physical cash to those that want it and need it?

Can a Wal-Mart store arrange for its garbage and waste to be hauled off? What about the contractor that keeps the freezers and refrigerators running at Wal-Mart – is he essential? What about the producer and supplier that provides refrigerant to the freezer maintenance contractor – is he essential? I was told by a police officer that people would be pulled over and told to go home if they weren’t on their way to buy groceries. I don’t know what the charge would be if the driver refused to go home since the legislature hasn’t defined a law that is being broken. Current political actions definitely run contrary to the trite John Adams quote, “We are a government of laws not of men.”

Besides Mr. Read’s great essay, this situation brings to mind Henry Hazlitt’s little book “Economics in One Lesson;” the “one lesson” being that politicians will cause harm when they make mandates because they can only consider the effects on a small part of the overall economy. There will be broad ramifications and unintended consequences throughout the economy whenever an activity is expanded or restricted through political action. In short, central planning can never work because it can never consider the full interrelation of all aspects of the economy. Central planners can only consider specific hoped-for outcomes on limited segments of the economy when making decisions.

I don’t see how this magical candy-land enabled by court intellectuals and run by executive branch authoritarians is going to be managed through central planning.  Next thing, prices will go up, gouging will be alleged and more central planning will “be needed to control prices.” We are also all being told to “work at home.”  Wow, what a deal. We will stay home and produce nothing except for internet data shooting back and forth and all the stuff will magically get produced and the shelves will get stocked.  Why didn’t we think of this sooner? “Essential services.” What a nifty idea. Let’s all take a vacation, or better yet, retire. The government has got this under control.

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From “I, Pencil” to “I, Smartphone”: The Moral Limits of ...

 

 

 

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Coronacrisis and Leviathan | Mises Institute

Posted by M. C. on March 14, 2020

First, we can expect that government controls on travel and assembly will tighten.

The second likely long-term effect is ideological. Already we’re seeing the meme that the crisis has been caused (or at least exacerbated) by “neoliberalism”—that thanks to pervasive (?) libertarian ideology public health agencies were “hollowed out” and thus unable to respond in force:

Of course, we know that in the US the CDC initially prevented private labs from testing or developing new tests without FDA approval. More generally, public (and private) health in the US, as in most countries, operates within a tangled web of federal, state, and local regulations, subsidies, restrictions, and other controls.

https://mises.org/power-market/coronacrisis-and-leviathan?utm_source=Mises+Institute+Subscriptions&utm_campaign=2a2bbe83dc-EMAIL_CAMPAIGN_9_21_2018_9_59_COPY_01&utm_medium=email&utm_term=0_8b52b2e1c0-2a2bbe83dc-228343965

Peter G. Klein

In his magisterial Crisis and Leviathan, Robert Higgs shows that the growth of government in the twentieth century can largely be explained by patterns of crisis and response. These crises can be real (World Wars I and II, the Great Depression, stagflation) or imagined (inequality, the various isms). In either case new government programs, agencies, and policies are established, purportedly as temporary responses to the perceived emergency. But, as Higgs shows with rich historical detail, most of the temporary measures become permanent—either explicitly or in a revised form based on the original.

As I summarized Higgs’s thesis in an earlier paper:

Higgs (1987) noted that the expanded role taken on by the state during the New Deal period remained largely in place once the crisis passed, leading to a “ratchet effect” in which government agencies expand to exploit perceived short-term opportunities, but fail to retreat once circumstances change. Higgs (1987) suggests that government officials (regulators, courts, and elected officials), as well as private agents (such as business executives, farmers, and labor unions) developed capabilities in economic and social planning during crisis periods and that, due to indivisibilities and high transaction costs, tend to possess excess capacity in periods between crises. To leverage this capacity, they looked for ways to keep these “temporary” measures in place. Indeed, many New Deal agencies were thinly disguised versions of World War I agencies that had remained dormant throughout the 1920s—the War Industries Board became the National Recovery Administration, the War Finance Corporation became the Reconstruction Finance Corporation, the War Labor Board became the National Labor Relations Board, and so on. In many cases the charters for the New Deal agencies were mostly copied verbatim from World War I predecessors. Higgs’ (1987) ratchet effect illustrates that excess capacity in organizational capabilities isn’t necessary leveraged as soon as it is created, leading to smooth, continuous organizational growth, but may remain dormant until the right economic, legal, or political circumstances arise, leading to sudden, discontinuous jumps in organizational size or scope.

How will leviathan expand—temporarily and then permanently via the ratchet effect—in response to COVID-19? It’s too early to make any definite predictions, but we can make educated guesses based on experience and our knowledge of how governments work.

First, we can expect that government controls on travel and assembly will tighten. Whether via legislative approval, unilateral executive action, or judicial decree, the principle that governments must control movement and gatherings of people to prevent the spread of disease has been clearly established (or reestablished). As we know from Higgs’s work, the additional capabilities in this area acquired by the Centers for Disease Control and Prevention (CDC) and other agencies will likely be retained and put to use long after the crisis has abated. And further government intervention in the biomedical and healthcare sectors is virtually guaranteed.

The second likely long-term effect is ideological. Already we’re seeing the meme that the crisis has been caused (or at least exacerbated) by “neoliberalism”—that thanks to pervasive (?) libertarian ideology public health agencies were “hollowed out” and thus unable to respond in force:

Of course, we know that in the US the CDC initially prevented private labs from testing or developing new tests without FDA approval. More generally, public (and private) health in the US, as in most countries, operates within a tangled web of federal, state, and local regulations, subsidies, restrictions, and other controls.

It is impossible to know how a free market medical system would handle something like corona. But we will be told that there are no free market enthusiasts during a pandemic (and that, at best, those of us who favor property rights, markets, and prices should embrace “state capacity libertarianism”). The case for markets will have to be made, as Mises would say, ever more boldly.

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PPT - RUSSIAN ECONOMY PowerPoint Presentation - ID:1666640

 

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Bernie And Elizabeth’s Politics Of Envy – An INDEPENDENT Mind

Posted by M. C. on February 24, 2020

Politicians tap into envy for political ends. Politicians manipulate people to support policies which feed their primitive desire to strike down the rich and successful. This is why envy politics can be so destructive to society—it divides us rather than brings us together; it tears us down.

It makes you question their motives especially when you examine the record of capitalism and free markets. It has only been in the past 200 of the 100,000 years or so of human history that we have escaped mass poverty. If you think about it, poverty has been the natural condition of mankind since we evolved large brains and opposing thumbs.

The magic that happened was what we call capitalism or the free market system: individual liberty, private property, free markets, free trade, capital, entrepreneurship, and tolerance. These forces literally rocketed us into prosperity.

https://anindependentmind.com/2019/11/05/bernie-and-elizabeths-politics-of-envy/#more-979

Bernie Sanders and Elizabeth Warren are angry critics of free markets and rich people. They paint a bleak picture of America as a population of downtrodden, defeated people subjugated by billionaires and capitalism. The record is just the opposite, so one wonders why they and their supporters have this view of our world. The answer is that their anger is driven by envy and a desire to deprive successful people of the fruits of their success, a thing the envious have never achieved. Politicians exploit this primitive emotion for their own political ends which is the power to control us.

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“Envy” is “to wish that you had a quality or possession that another person has”. In psychological terms, it refers to an emotion which “occurs when a person lacks another’s [perceived] superior quality, achievement, or possession and either desires it or wishes that the other lacked it“. All major religions condemn envy (as in one of Christianity’s seven deadly sins).

The Wikipedia article cites envy as a major source of unhappiness (“It begins with the almost frantic sense of emptiness inside oneself…”). It is a powerful human emotion and it has the potential to motivate one to harm those who are the object of one’s envy.

The most interesting aspect of envy is that it changes and diminishes with age as we are more accepting of who we are, except for one thing: money. It was the only envious trait that increased with age.

Politicians tap into envy for political ends. Politicians manipulate people to support policies which feed their primitive desire to strike down the rich and successful. This is why envy politics can be so destructive to society—it divides us rather than brings us together; it tears us down.

The leading Progressive presidential candidates are scrambling over each other to exploit envy. To make sure I was not exaggerating their positions, I just read all of Elizabeth Warren and Bernie Sanders’ policies. Almost every issue they addressed was based on envy.

The core of their Progressive beliefs is that the game is rigged in favor of the rich and biased against workers, women, people of color, veterans, LGBTQ+, native Americans, convicts, immigrants, tenants, homeowners, the poor, students, farmers, the sick, and the aged. I might have missed some interest groups.

The problem, they say, is greedy capitalists whose debt-fueled corporations produce shoddy, overpriced products, and exploit underpaid, overworked, abused, and mistreated workers. These capitalists, a mere 1% of the population, have a stranglehold on Washington and use their political power to grab 99% of the wealth and squeeze the other 99% of honest hardworking people who futilely struggle against this corrupt system. Capitalists, they say, don’t want you to make a decent living, get an education, receive good medical care, have good housing, have economic security in your old age, or live in a clean environment.

Their solution is that the government, through a vast river of social programs funded by taxing the rich, can cure these problems and create a just, fair economic and political system (which, obviously, isn’t capitalism). As a corollary, they wish to confiscate and redistribute the wealth of the corrupt and disgusting “ultra-rich”.

If you doubt my summation of their programs and policies, go to Bernie and Elizabeth’s web sites and see for yourself.

Here is a snippet from Bernie’s website:

For too long, these greedy corporate CEOs have rigged the tax code, killed market competition, and crushed the lives and power of workers and communities across America. Year after year we’ve seen wages slashed and thousands of workers laid off, all while the richest corporate CEOs pay themselves huge bonuses.

These people hate capitalism, entrepreneurs, successful corporations, and rich (i.e., successful) people. Every one of their policies assumes an evil strawman (capitalism, billionaires, corporations) and imposes draconian rules to control this “corrupt” behavior.

Everything they say about capitalism is wrong. Perhaps you might think this is an arrogant, absurd thing to say, but their analysis of society, the economy, and capitalism is based on falsehoods, statistical manipulation, incorrect historical analysis, and theories that have been proven wrong throughout mankind’s history. Their Progressive policies will destroy our dynamic economy and condemn us to stagnation and poverty.

It makes you question their motives especially when you examine the record of capitalism and free markets. It has only been in the past 200 of the 100,000 years or so of human history that we have escaped mass poverty. If you think about it, poverty has been the natural condition of mankind since we evolved large brains and opposing thumbs.

The magic that happened was what we call capitalism or the free market system: individual liberty, private property, free markets, free trade, capital, entrepreneurship, and tolerance. These forces literally rocketed us into prosperity.

It is a myth that poverty is caused by capitalism, billionaires, and corporations. They are the fount of progress. Wealth is created by entrepreneurs like Steve Jobs who start enterprises that succeed in the marketplace. Jobs didn’t become a billionaire because he forced us to buy iPhones.

It is also a myth that progress is confined to the 1%. The belief that inequality is the cause of poverty is a myth. The whole concept of inequality in a free market society is irrelevant. Everyone in a capitalist society has benefited, even those at the bottom. There would be nothing more destructive to our economic well-being than eliminating billionaires: those who have become successful by meeting the needs of consumers and who have accumulated capital that feeds growth, innovation, and well-being.

Progressive politicians would have you believe that they have the wisdom, knowledge, and ability to govern us and radically change society for the good. All they ask is the power to do that. They assume that we in the private sector are fallible human beings, more prone to error than success. Yet somehow, we are fallible but they aren’t. You would have to be a college professor to believe that.

Here are some things to ponder. There has never been a regime with the powers as vast as those demanded by our Progressive politicians that has eliminated poverty and “inequality”. There has never been a regime with the powers as vast as those demanded by our Progressive politicians that has not degenerated into some form of economic malaise or totalitarianism.

It is important to see Progressive politicians like Bernie and Elizabeth for what they are: angry, envious people. Theirs is a story repeated often in history to the detriment of mankind: a messianic utopian vision that can only be accomplished by the coercive power of government. The more power they have, the less freedom and prosperity we have. If you don’t believe that then it would be hypocritical to not crush your smart phone.

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Another EV Exemption – EPautos – Libertarian Car Talk

Posted by M. C. on February 18, 2020

Interestingly, the proposed exemption would include electric cars manufactured by car companies that also build non-electric cars – a legislative nudge clearly meant  to “encourage” them to build more electric cars since they’d be able to sell them directly, too.

Which will also nudge these manufacturers in the direction of closing their dealerships and – eventually – selling only EVs.

They are very difficult to sell on a level playing field.

So the field must be tilted – in the direction of the EV.

https://www.ericpetersautos.com/2020/02/15/another-ev-exemption/

By eric

It’s apparently not enough to pay people to buy EVs – using other people’s money. EVs must be given additional artificial advantages – so that they may “compete” even more unfairly with non-electriccars.

Because, of course, they can’t compete on the merits.

The state of Colorado – which is becoming very much like the state of California, due to all the Californians who’ve fled California but brought California ideas with them to places like Colorado – is pushing to grant EVs an exemption from state law requiring new cars be sold through new car dealerships.

Such laws have been in force for decades and are favored by new car dealers – who don’t want to have to compete directly with the manufacturers, including the brands they sell themselves. A Ford dealership, for example, doesn’t want you to be able to buy a new Ford from Ford.

These must-buy-at-a-dealer laws are obnoxious, but granting an exemption just for electric cars is even more so.

If the exemption is granted, it would give EV manufacturers like Tesla an enormous advantage over other car manufacturers – who would still be required by law to sell their cars through a dealer network, with all the costs that involves.

Which would make it harder for them to sell non-electric cars.

Clearly – if you believe in the idea of a free market – every car maker ought to be free to sell its cars however it likes. Or rather, however buyers like. If people are willing to purchase directly from a manufacturer – and by doing so, pay less for it – why should they be prohibited by law from making the transaction?

The argument is that people need the assistance of dealership sales staff to help them figure out what to buy, to deal with the transaction itself – and to “prep” the car prior to delivery (i.e., remove the plastic from the seats and so on).

But people are allowed – loathsome term but an accurate term – to buy practically everything else online, from electronics to food to furniture.

Why should cars be any different?

Well, because of state laws – like the one which is still in force in Colorado – which forbid new cars to be sold this way.

 

Unless they’re electric cars.

Interestingly, the proposed exemption would include electric cars manufactured by car companies that also build non-electric cars – a legislative nudge clearly meant  to “encourage” them to build more electric cars since they’d be able to sell them directly, too.

Which will also nudge these manufacturers in the direction of closing their dealerships and – eventually – selling only EVs.

Consider it the Harrison Begeroning of non-electric cars. Like the eponymous character in Kurt Vonnegut’s short story, non-electric cars are too good. Electric cars can’t compete with them on any level except virtue-signaling and brief bursts of speed – paid for by long waits to recharge. They are very difficult to sell on a level playing field.

So the field must be tilted – in the direction of the EV.

First, by regulations that serve as de facto EV manufacturing requirements. The big one being “fleet average” miles-per-gallon minimums that force a car company that builds popular models like trucks and SUVs that don’t meet the minimums to build EVs – which use no gas – to up their “fleet average” numbers, in order to avoid fines for not meeting the MPG minimums.

Second by outright EV manufacturing quotas – a legal requirement that a certain percentage of every car company’s model lineup be electric or else they’re not allowed (that word, again) to sell any cars at all.

California has just such a requirement.

Third, pay people to buy electric cars – using other people’s money.

But even that hasn’t been enough – because electric cars are still not good enough to overcome what’s bad enough about them. In Colorado, only 25,000 EVs are put-putting (and waiting). This is less than 1 percent of all the cars registered in the state.

Enter the new exemption.

“I really feel like we needed to have parity for all EV manufacturers,” says Colorado State Senator Chris Hansen, one of the exemption’s main advocates.

He means an advantage for all EVs – at the expense of all non-EVs, which will cost comparatively more under this scheme because what you pay for one at the dealership will necessarily – by law – include the cost of the dealership. The building, the staff – the taxes – recouped in part by what the dealer earns by selling the cars.

Direct-selling of EVs eliminates all those costs, artificially reducing the cost of the EV – at the expense of non-EVs, which become more expensive to sell, in order to make up for the money not being made selling EVs through the dealership.

It’s just another means by which people who don’t want an electric car are being forced to pay for someone else’s electric car.   

With the end goal being that you won’t be able to buy anything other than an electric car – directly or otherwise.

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IHTM - The Chevy Volt’s shocking sales: Only 281 electric ...

Chevy Volt – Obama Poster Car

 

 

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Ayn Rand’s Greatest Mistake – LewRockwell

Posted by M. C. on December 28, 2019

As I finally began to realize, business people, Rand’s heroic figures notwithstanding, generally aren’t the champions of laizze-faire and free market voluntary exchange many libertarians tend to assume. Often, quite the contrary. Assuming otherwise was Ayn Rand’s greatest mistake.

Merchants using government to stifle the competition etc. is nearly as old as government itself. Like this “seven or eight hundred years’” effort to stifle competition from rural textile production and early trading for example – – –

https://www.lewrockwell.com/2019/12/l-reichard-white/ayn-rands-greatest-mistake/

By

It was those heady early days of the Libertarian Movement. Icons like David Nolan, Murray Rothbard and James Libertarian Burns still walked the earth — and L. Neil Smith was just getting up a head of steam.

That’s when I got my first clue to Ayn Rand’s greatest mistake, though, as often happens, I failed to understand it at the time. It came as Larry Moser and I gave a talk to the Las Vegas Junior Chamber of Commerce (the “JCs“).

We presented two libertarian issues; heroin decriminalization to demonstrate civil liberties and voluntary exchange in free markets to demonstrate economic freedom. Since JCs are business folks, we figured we’d get static on decriminalization, but if we addressed the free-trade issues last, we would leave them happy.

Sure enough, immediately after the decriminalization presentation one JC stood up and in no uncertain terms told us we were crazy to propose such a thing. Before we could answer, another JC said, “Sit down Bob. They’re right.”

There was a murmur of assent from the rest of the thirty or so, presumably conservative, business folks in the audience.

Larry and I looked at each other amazed. We figured we were over the hump.

After our free market presentation, however, there was dead silence. We felt a chill. Someone murmured something like “You can’t have that sort of thing going on.” Another murmur of assent. What was going on here?

My second clue came a few years later at the Colorado LP Presedential Nominating Convention just outside Denver where Bill Huncher was squaring off against Ed Clark. It came in a story related to me by a libertarian, let’s call him “Jim,” running for office in Colorado.

Jim had managed to get an appointment with Adolph Coors Jr., purportedly a libertarian sympathizer himself. During small-talk, Coors expressed admiration and support for the Libertarian Party and its “bold pro-freedom platform” about which he proved himself well informed. However when Jim asked for a campaign contribution, Mr. Coors declined.

If you were elected, you’d eliminate the ICC (Interstate Commerce Commission) wouldn’t you?” he asked. Jim responded that, in accordance with the LP Platform, indeed he would.

Mr. Coors explained that because of a regulatory technicality, Coors trucking subsidiaries didn’t have to “dead-head” and could bring their trucks back loaded, something ICC didn’t permit other trucking companies to do at the time.

ICC literally defined a truck returning full as “illegal competition” with the railroads. Coors Jr. forth-rightly told Jim that elimination of the ICC would thus weaken Coors’ competitive advantage and so he couldn’t justify supporting Libertarian candidates.

And another clue: In the late 1970s, developers in Lake Tahoe wanted to build a hotel/casino they were calling “The Park Tahoe,” but an environmental organization calling itself approximately “The Society to Preserve Lake Tahoe” (SPLT) blocked them every step of the way.

The main movers and shakers behind SPLT weren’t, however, environmentalists; they were Harrah’s, Harvey’s, Barney’s, Sahara Tahoe, and the other hotel/casino operators already established in the Stateline-South Shore area. Had all these casino organizations suddenly become environmentally conscious?

Shortly after the grand opening of Park Tahoe — which later became Caesar’s Tahoe — a local rancher applied for permits to build yet another hotel/casino across the street. Would you care to guess the identity of the newest environmentally conscious member of SPLT who zealously led the fight against this newest environmental hazard?

Park Tahoe of course!

As I finally began to realize, business people, Rand’s heroic figures notwithstanding, generally aren’t the champions of laizze-faire and free market voluntary exchange many libertarians tend to assume. Often, quite the contrary. Assuming otherwise was Ayn Rand’s greatest mistake.

Merchants using government to stifle the competition etc. is nearly as old as government itself. Like this “seven or eight hundred years’” effort to stifle competition from rural textile production and early trading for example – – –

“(h) The countryside was cut out of trade in the Middle Ages.
+
‘Up to and during the course of the fifteenth century the towns were the sole centers of commerce and industry to such an extent that none of it was allowed to escape into the open country’ (Pirenne, _Economic and Social History_, p.169). ‘The struggle against rural trading and against rural handicrafts lasted at least seven or eight hundred years’ (Heckscher, _Mercantilism_, 1935, Vol. I, p. 129). ‘The severity of these measures increased with the growth of ‘democratic government‘ . . . . ‘All through the fourteenth century regular armed expeditions were sent out against all the villages in the neighborhood and looms or fulling-vats [in which cloth was dyed] were broken or carried away.’ (Pirenne, op.cit., p. 211).” -Karl Polanyi, The Great Transformation. (Boston: Beacon Press 1957), p. 277

You have to admit a century of loom-stealing and fulling-vat smashing shows persistence and dedication. And notice the connection to ‘democratic government.’

Seminal Austrian-school economist Ludwig von Mises completely understood the broader context of vested economic interests using government for their own ends, which of course, has been quite thoroughly perfected today – – –

The consumers do not care about the investments made with regard to past market conditions and do not bother about the vested interests of entrepreneurs, capitalists, land-owners, and workers… It is precisely the fact that the market does not respect vested interests that makes the people concerned ask for government interference. –Ludwig von Mises, Human Action

So, when vested interests ask for government interference — to protect themselves from markets and competition — they have to do it in cahoots with politicians.

To make this work, they regularly disguise the interference as “regulation.” They pretend “regulation” is to protect us “consumers” from businesses instead of the other way around.

You can catch a surprising glimpse of just how remarkably successful vested interests are at using politicians to get their disguised and bogus protective “regulation” here:

UNCOMMON SENSE: What government regulation is REALLY used for

HERE for updates, additions, comments, and corrections.

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How Government-Guaranteed Student Loans Killed the American Dream for Millions – Foundation for Economic Education

Posted by M. C. on December 4, 2019

The government’s backing of student loans has caused the price of higher education to artificially rise; the demand would not be so high if college were not a financially viable option for some.

He is talking about Fed (“government”) money.

https://fee.org/articles/how-government-guaranteed-student-loans-killed-the-american-dream-for-millions/

n Basic Economics, Thomas Sowell wrote that prices are what tie together the vast network of economic activity among people who are too vastly scattered to know each other. Prices are the regulators of the free market. An object’s value in the free market is not how much it costs to produce, but rather how much a consumer is willing to pay for it.

Loans are a crucial component of the free market because they allow consumers to borrow large sums of money they normally would not have access to, which are later paid back in installments with interest. If the borrower fails to pay back the loan, the lender can repossess the physical item the loan purchased, such as a house or car.

Student loans are different. Education is abstract; if they’re not paid back, then there is little recourse for the lender. There is no physical object that can be seized. Student loans did not exist in their present form until the federal government passed the Higher Education Act of 1965, which had taxpayers guaranteeing loans made by private lenders to students. While the program might have had good intentions, it has had unforeseen harmful consequences.

The Problem with Government-Backed Student Loans

Millennials are the most educated generation in American history, but many college graduates have tens of thousands of dollars in debt to go along with their degrees. Young Americans had it drilled into their heads during high school (if not earlier) that their best shot—perhaps their only shot—at achieving success in life was to have a college diploma.

This fueled demand for the higher education business, where existing universities and colleges expanded their academic programs in the arts and humanities to suit students not interested in math and sciences, and it also led to many private universities popping up to meet the demands of students who either could not afford the tuition or could not meet the admission criteria of the existing colleges. In 1980, there were 3,231 higher education institutions in the United States. By 2016, that number increased by more than one-third to 4,360.

Secured financing of student loans resulted in a surge of students applying for college. This increase in demand was, in turn, met with an increase in price because university administrators would charge more if people were willing to pay it, just as any other business would (though to be fair, student loans do require more administration staff for processing).  According to Forbes, the average price of tuition has increased eight times faster than wages since the 1980s. In 2018, the Federal Reserve estimated that there is currently $1.5 trillion in unpaid student debt. The Institute for College Access and Success estimates that in 2017, 65 percent of recent bachelor’s degree graduates have student loans, and the average is $28,650 per borrower.

The government’s backing of student loans has caused the price of higher education to artificially rise; the demand would not be so high if college were not a financially viable option for some. Young people have been led to believe that a diploma is the ticket to the American dream, but that’s not the case for many Americans.

Financially, it makes no sense to take out a $165,000 loan for a master’s degree that leads to a job where the average annual salary is $38,000—yet thousands of young people are making this choice. Only when they graduate do they understand the reality of their situation as they live paycheck-to-paycheck and find it next-to-impossible to save for a home, retirement, or even a rainy-day fund…

How to Fix the Problem

There are two key steps to addressing the student loan crisis. First, there needs to be a major cultural shift away from the belief that college is a one-size-fits-all requirement for success. We are beginning to see this as many young Americans start to realize they can attend a trade school for a fraction of what it would cost for a four-year college and that they can get in-demand jobs with high salaries.

Second, parents and school systems should stress economic literacy so that young people better understand the concepts of resources, scarcity, and prices. We also need to teach our youth about personal finances, interest, and budgeting so they understand that borrowing a large amount of money that only generates a small level of income is not a sound investment.

Finally, the current system of student loan financing needs to be reformed. Schools should not be given a blank check, and the government-guaranteed loans should only cover a partial amount of tuition. Schools should also be responsible for directly lending a portion of student loans so that it’s in their financial interest to make sure graduates enter the job market with the skills and requirements needed to get a well-paying job. If a student fails to pay back their loan, then the college or university should also share in the taxpayer’s loss. Only when the demand for higher education decreases will we witness a decrease in its cost.

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PG&E’s Failures Show the Dangers of Government-Imposed Utility Monopolies | Mises Wire

Posted by M. C. on November 9, 2019

When a company screws up so horribly, letting down literally millions of its customers and moreover promising to continue doing so for another decade (!), the obvious question is: Why don’t they go out of business? Why doesn’t a competitor grab their market share?

The answer, of course, is that the California government forbids PG&E’s customers from switching to a competitor.

If we see the benefits of competition in trivial goods like soda and cereal, we should all the more so insist on competition for essentials like electricity and drinking water.

https://mises.org/wire/pges-failures-show-dangers-government-imposed-utility-monopolies?utm_source=Mises+Institute+Subscriptions&utm_campaign=91ad2769b8-EMAIL_CAMPAIGN_9_21_2018_9_59_COPY_01&utm_medium=email&utm_term=0_8b52b2e1c0-91ad2769b8-228343965

Although the roughly two million affected residents of Northern California are recovering from the rolling blackouts imposed by utility PG&E, the company has warned that these “fire safety outages” may be periodically required for another decade. Naturally, California Governor Gavin Newsom decried the debacle as yet another example of “greed and neglect.” Yet as IER analyst Jordan McGillis explained in a previous article, the episode actually showcases the dangers of a government-imposed monopoly in electricity provision. In this article, I’ll elaborate on McGillis’ insights and show why the conventional economic rationale for government regulation of electric utilities is fundamentally flawed.

PG&E’s Rolling Blackouts Not a Free-Market Outcome

When a company screws up so horribly, letting down literally millions of its customers and moreover promising to continue doing so for another decade (!), the obvious question is: Why don’t they go out of business? Why doesn’t a competitor grab their market share?

The answer, of course, is that the California government forbids PG&E’s customers from switching to a competitor. Let me quote directly from McGillis who gets to the heart of the matter:

PG&E does not function as would a company in a competitive marketplace. As a regulated monopoly, it has been granted status as the sole provider of electricity to a swath of the state stretching more than 500 miles from Eureka, north of the Bay Area, to Bakersfield, in the San Joaquin Valley. The company operates in tandem with the California Public Utilities Commission (CPUC), a panel of regulators appointed by the governor. Unlike in a competitive marketplace, PG&E does not need to compete for customers by offering more value dollar-for-dollar than other companies. Instead PG&E is guaranteed a rate of return on its investments and establishes with the CPUC the corresponding rates that customers will pay.

So we’ve solved the most immediate puzzle: The reason PG&E can get away with such outrageous mismanagement and shoddy customer service, is that the California government literally guarantees them their business. It is illegal for another company to try to entice PG&E’s disgruntled customers to switch their patronage.

Companies in an Open Market Love Periods of “High Demand”

Although the outrageous episode of PG&E is fresh in our minds, this is nothing unusual. Every summer, it is commonplace for utilities to urge their customers to “conserve power” by keeping their air conditioners at an uncomfortable setting, and they often impose rolling blackouts or “brownouts” in order to maintain the integrity of the grid.

Notice that you never see this type of behavior from genuinely private sector companies? Even though people greatly increase their consumption of beer and hot dogs during July, you never see Budweiser or Oscar Mayer imposing temporary outages on their customers.

On the contrary, companies in an open market love it when the public suddenly wants to buy more of their product or service. It’s only in the realm of government-regulated utilities (or services directly provided by a government agency) where the customers are viewed as annoying nuisances, who need to be scolded to stop consuming so much.

Different Incentives, Different Results

Any adult American reading my article surely can agree—regardless of your politics—that I am speaking the truth. To repeat, you simply do not see private companies in (relatively) open markets operating the way PG&E and other “public utilities” do. So the mismanagement and shoddy service of PG&E can’t possibly be the fault merely of corporate greed and neglect. Rather, the difference is due to the institutional structure and incentives that the government sets up…

Conclusion

The PG&E debacle showcases the flaws of government-regulated monopolies. This is not an isolated incident, but is typical of the entire model. Yes, there are practical reasons that free and open competition might not work as smoothly with services requiring large infrastructure spending, but these complications pale in comparison to the dangers of having government outlaw competition. If we see the benefits of competition in trivial goods like soda and cereal, we should all the more so insist on competition for essentials like electricity and drinking water.

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12 Truth Bombs from Milton Friedman – Foundation for Economic Education

Posted by M. C. on October 22, 2019

https://fee.org/articles/12-truth-bombs-from-milton-friedman/

Jon Miltimore

12 Truth Bombs

The Economist has described Friedman as “a giant among economists” and “the most influential economist of the second half of the 20th century.” Here are 12 things he said to serve as food for thought:

1. “Underlying most arguments against the free market is a lack of belief in freedom itself.” – >Capitalism and Freedom (2002)

2. “I’m in favor of legalizing drugs. According to my values system, if people want to kill themselves, they have every right to do so. Most of the harm that comes from drugs is because they are illegal.” – As quoted in ‪If Ignorance Is Bliss, Why Aren’t There More Happy People? (2009)

3. “With some notable exceptions, businessmen favor free enterprise in general but are opposed to it when it comes to themselves.” –Lecture “The Suicidal Impulse of the Business Community” (1983)

4. “It’s a moral problem that the government is making into criminals people, who may be doing something you and I don’t approve of, but who are doing something that hurts nobody else.” – America’s Drug Forum interview (1991)

5. “One of the great mistakes is to judge policies and programs by their intentions rather than their results.” – Interview with Richard Heffner on The Open Mind (Dec. 7, 1975)

6. “You must distinguish sharply between being pro-free enterprise and being pro-business.” – Big Business, Big Government (1978)

7. “The society that puts equality before freedom will end up with neither. The society that puts freedom before equality will end up with a great measure of both.” – From “Created Equal,” an episode of the PBS Free to Choose television series (1980)

8. “Governments never learn; only people learn.” – As quoted in The Cynic’s Lexicon: A Dictionary Of Amoral Advice‎ (1984)

9. “We have to recognize that we must not hope for a Utopia that is unattainable. I would like to see a great deal less government activity than we have now, but I do not believe that we can have a situation in which we don’t need government at all.” – As quoted in The Times Herald, Norristown, Pennsylvania (Dec. 1, 1978)

10. “The great virtue of a free market system is that it does not care what color people are; it does not care what their religion is; it only cares whether they can produce something you want to buy. It is the most effective system we have discovered to enable people who hate one another to deal with one another and help one another.” – “Why Government Is the Problem” (February 1, 1993), p. 19

11. “The case for prohibiting drugs is exactly as strong and as weak as the case for prohibiting people from overeating. We all know that overeating causes more deaths than drugs do.” – America’s Drug Forum interview (1991)

12. “There are four ways in which you can spend money. You can spend your own money on yourself. When you do that, why then you really watch out what you’re doing, and you try to get the most for your money. Then you can spend your own money on somebody else. For example, I buy a birthday present for someone. Well, then I’m not so careful about the content of the present, but I’m very careful about the cost. Then, I can spend somebody else’s money on myself. And if I spend somebody else’s money on myself, then I’m sure going to have a good lunch! Finally, I can spend somebody else’s money on somebody else. And if I spend somebody else’s money on somebody else, I’m not concerned about how much it is, and I’m not concerned about what I get. And that’s government. And that’s close to 40 percent of our national income.” – Fox News interview (May 2004)…

 

 

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In Defense of Price Gouging – LewRockwell

Posted by M. C. on September 10, 2019

https://www.lewrockwell.com/2019/09/laurence-m-vance/in-defense-of-price-gouging-2/

By

As a resident of Florida, I was naturally concerned about how the state would be impacted by Hurricane Dorian. But now that the storm has passed, I am still concerned about something that happened in Florida after Governor Ron DeSantis declared a state of emergency on Wednesday, August 28, for several counties in the hurricane’s path.

But first note that according to Florida Statutes, Title XXXIII, “REGULATION OF TRADE, COMMERCE, INVESTMENTS, AND SOLICITATIONS,” Chapter 501, “CONSUMER PROTECTION,” Section 160, “Rental or sale of essential commodities during a declared state of emergency; prohibition against unconscionable prices”:

(1) As used in this section:
(a) “Commodity” means any goods, services, materials, merchandise, supplies, equipment, resources, or other article of commerce, and includes, without limitation, food, water, ice, chemicals, petroleum products, and lumber necessary for consumption or use as a direct result of the emergency.  (b) It is prima facie evidence that a price is unconscionable if:

1. The amount charged represents a gross disparity between the price of the commodity or rental or lease of any dwelling unit or self-storage facility that is the subject of the offer or transaction and the average price at which that commodity or dwelling unit or self-storage facility was rented, leased, sold, or offered for rent or sale in the usual course of business during the 30 days immediately prior to a declaration of a state of emergency, unless the increase in the amount charged is attributable to additional costs incurred in connection with the rental or sale of the commodity or rental or lease of any dwelling unit or self-storage facility, or regional, national, or international market trends; or
2. The amount charged grossly exceeds the average price at which the same or similar commodity was readily obtainable in the trade area during the 30 days immediately prior to a declaration of a state of emergency, unless the increase in the amount charged is attributable to additional costs incurred in connection with the rental or sale of the commodity or rental or lease of any dwelling unit or self-storage facility, or regional, national, or international market trends.
(2) Upon a declaration of a state of emergency by the Governor, it is unlawful and a violation of s. 501.204 for a person or her or his agent or employee to rent or sell or offer to rent or sell at an unconscionable price within the area for which the state of emergency is declared, any essential commodity including, but not limited to, supplies, services, provisions, or equipment that is necessary for consumption or use as a direct result of the emergency. This prohibition is effective not to exceed 60 days under the initial declared state of emergency as defined in s. 252.36(2) and shall be renewed by statement in any subsequent renewals of the declared state of emergency by the Governor.

What happened in Florida was that Attorney General Ashley Moody activated the state’s “price gouging hotline” so residents could report businesses violating the state’s price gouging law if they charged “too much” for lodging or goods during the period of the state of emergency. Business caught charging elevated prices for goods, could face “civil penalties of $1,000 per violation and up to a total of $25,000 for multiple violations committed in a single 24-hour period.”

The Attorney General’s office says that more than 2,000 cases of price gouging were reported. Typical commodities involved are water and gasoline.

Now, there are many economic arguments in defense of price gouging:

  • Higher prices help prevent a handful of consumers from hoarding the majority of supplies.
  • Higher prices create incentives for suppliers of goods to help to restore people’s lives.
  • Higher prices encourage conservation among end users.
  • High prices can bring much-needed supplies into a disaster zone.
  • Higher prices send a signal to market actors that something is scarce and that profits are available to those who produce or sell that something.
  • Higher prices set off an economic chain reaction that ultimately remedies the shortages that led to the price gouging in the first place.
  • Higher prices tell suppliers what their customers want most.

You can read articles here, here, here, and here. I have even written this.

This, of course, doesn’t mean that it is just, right, moral, or ethical to raise prices on essential goods and services during the time before a hurricane hits. It just means that it should not be against the law. If you don’t like the price of a gallon of gas at your local gas station during the time that a hurricane is approaching, then you can choose to not only not purchase your gas there, but also to never patronize that particular gas station again. What you should not have the option of doing is calling a price gouging hotline and having the state fine the business and force it to lower its prices.

Economic considerations aside, there is an important philosophical reason why I write in defense of price gouging…

The ability of a business to raise or lower its prices on a particular good or on all the goods it sells is one of the essential things that distinguishes a free market from government central planning. The reason why a business raises or lowers its prices is absolutely irrelevant.

Free and unfettered interaction between producers and consumers, buyers and sellers, lessors and lessees, owners and renters, and businesses and customers is always to be preferred to government intervention.

Once it is accepted that the government has the authority, knowledge, and competence to establish arbitrary price ceilings during the onset or aftermath of a natural disaster, no reasonable or logical argument can be made against the government’s setting prices during ordinary times.

Price-gouging laws are an assault on private property, free exchange, freedom of contract, free enterprise, free markets, and a free society.

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Stop Hating on Self-Checkouts – Foundation for Economic Education

Posted by M. C. on August 22, 2019

https://fee.org/articles/in-praise-of-self-checkouts/

Tyler Curtis

If you’ve been to the grocery store lately, then you’ve probably had to make this choice: regular cashier or self-checkout? For many shoppers, the choice often depends on which option has a line, how many items they have in their basket, and sometimes they’ll just choose whichever lane is closest. Others, however, hate self-checkouts with a visceral passion. Not only do they refuse to use the machines, they don’t want self-checkouts to exist at all.

This attitude is woefully misguided. While there is nothing wrong with preferring to engage with a human cashier, a fair number of shoppers enjoy the benefits self-checkouts have to offer. Indeed, there is much about self-checkouts to praise.

Why All the Fuss?

Though most shoppers who tacitly boycott self-checkouts do so with respect, patiently waiting in line for a human cashier, there is a vocal minority who would like nothing more than to take a Louisville slugger to the dastardly appliances.

One such malcontent is Kaitlyn Tiffany, a Vox writer who presumably would have felt comfortable with mobs destroying power-looms in 19th century England. In an article bluntly entitled, “Wouldn’t it be better if self-checkout just died?” Tiffany laid out precisely why she believes retail stores ought to eliminate the machines.

Her first objection is a simple one: self-checkouts are annoying. And admittedly, that’s hard to argue with. Those who’ve been scolded for placing an “unexpected item in the bagging area” will understand. “Seemingly everyone hates them,” writes Tiffany.

As someone who worked as a self-checkout attendant for three years, I can confidently say that Tiffany’s generalization is way off base. Not only are self-checkouts not universally loathed, there are a large number of shoppers who actually prefer them over a human cashier.

To the self-checkout haters, this is ludicrous. “Why would I want to scan and bag my own groceries?” they ask with haughty indignation. Well, there are a number of reasons.

First, no one is going to treat your items with as much care as you do. One does not have to be a cynic to understand that there are reckless cashiers who will bruise your fruit or smash your bread. You can also bag your groceries in whichever way you prefer. For those worried about breaking their eggs, or mixing that leaky package of meat with the vegetables, being able to bag your own groceries is nothing to scoff at. Self-service often means better service.

Second, using the self-checkout is frequently the fastest option, at least for those who feel comfortable with the technology (no unexpected items in the bagging area!). Even its relative unpopularity with other customers is a bonus for those who like them; after all, if fewer people want to use the self-checkout, the chance of there being a line is diminished…

The great thing about the free market is that it doesn’t force everyone into one-size-fits-all products. Sadly, there are many who see this as a bug rather than a feature. Market skeptics like Kaitlyn Tiffany observe shoppers scanning their own groceries and see nothing but capitalist trickery. But for those who value having more choices, the only complaint can be: I wish this had been available sooner!

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