Purge in the Public Square

In battling with college administrators, leftist ideologues, and raucous protesters, one thing has become abundantly evident: there is, unequivocally, a fascination with quelling uncomfortable or disagreeable speech. It is not exclusive to what has been dubbed “hate speech,” nor is it exclusive to offensive remarks wholly. It is ever-prevalent in all facets; from the banalities of common ideology to the wretchedness of unabashed racism. With this, the left takes it upon itself to clear the public square of debate and dialogue of any kind, allowing the demons of the far-right (and, to be fair, the far left) to fester underground while still equating them with said commonly-held ideology. Of this action, I find it counterproductive.

I find it thoroughly counterproductive because it has become time for a purge. Following the inauguration of a President who maintains a spotty, at best, record on tolerance and inclusion, and a Presidential campaign (on both sides) championed by demagoguery, my party – our party – the Republican Party – has been tainted. We have normalized the harboring of racists who hide behind the façade of “nationalism,” we have allowed misogyny, xenophobia, and homophobia a platform by the Alt-right, and we have tolerated, for far too long, antipathy towards the poor and working classes. It must stop. For us to see a true rebirth in intellectual conservatism, where the family, rather than the government, is the most important institution in society, and where the people, not the power-brokers, decide where their own money goes, it must stop. I am for a big tent – one of all peoples – yet the inclusion of these people is dangerous and counterproductive. We have a duty to our principles and our ideology to champion conservative policy rather than crass provincialism. Every time Alex Jones is entertained by President Trump, every time gay people are likened to pedophiles, every time Republicans refuse a chance to denounce white nationalism, our party, and our nation, is disgraced. It is, indeed, time for a purge.

Which is why I call on the left to, for the good of our country and our political system, stop shouting down disagreeable speech. Let us hear the voices of every racist, of every sexist, of every xenophobe and classist. Let us shine a light on the vermin. Let us clear our civic space of hatred. It is only when we call the dregs of our society to the public square, and when we illuminate their true beliefs and values, can we accost and absterge. I do maintain that civility can eclipse hatred and that reason will ultimately win. It is this belief that guided William F. Buckley as our party saw its first cleanse and it is this belief that will guide us again. Truth, liberty, and discourse will ultimately triumph, if given the chance. All I ask is that we stop coercion, we stop shouting, and we start deliberating. The miscreants of the far-right will be purged, and we will again be the party of Lincoln, Reagan, and Buckley. A party based in principal, harboring no scum, is what is best for both the Republican Party and the United States of America. It is, indeed, time for a purge.

The Greatest Monopoly of All

There is an unlimited want for goods and services. Indeed, this is part of the definition of economics, that the dismal science is the study of how individuals allocate scarce resources to resolve infinite wants, but just because a good or service is not supplied on the market does not mean that it is outside of the purview of economics or that the demand for said good or service does not obey all the traditional laws of economics. While the decision making process is often different in the political and economic sphere owing to a change in incentives, the praxeological laws of human action still apply no matter where the individual is acting.

One good that does not exist in the private sector and is usually not studied much from the point of view of mainstream (read: Keynesian) economists is the market for leadership or governance, even though governance is certainly a vital service without which there would be great difficulty in organizing human interaction. For the most part, there is very little competition in the market for leadership; it is the most monopolized market on the planet. While it may be argued that there are 196 different firms offering the service of governance, that is that there are 196 countries (depending on how lenient one is with sovereignty), the truth is that the fact that most of these are nation states makes it remarkably difficult to simply move if one finds their particular governance firm to be doing a poor job, although some do move, and within a given geographic area there is only one leadership firm to choose from (I will continue to use the terms governance and leadership interchangeably throughout the article, although I know that the words do mean two different things).

Certainly some countries are further broken down into provinces, states, or cantons, which allows some competition between the aliquot parts, but the states are still a monopoly within their state boundaries. One may move from California to Texas, but one is still in the United States, which limits the ability of one to shop around for different codes of law, so to speak. Simply put, by all conceivable metrics a country is monopoly within its geographic borders.

What is the point in defining countries as monopolies? It is to argue that whatever arguments are created to castigate monopolies on the market may also be equally applied to governments; in fact, these arguments are made all the stronger by the fact that competition in the market for governance is often rigorously outlawed by the monopoly firm. The arguments against monopolies are that they can provide an inferior good at a much higher price, that they have little to no incentive to respond to consumer complaints or demand, and that they prevent others from entering the market and satisfying consumer demands more adequately by erecting barriers to entry. This is undoubtedly true of governments. Taking the United States as an example, they provide an inferior good at a higher price in the form of only 30 cents going to those in need for every dollar of aid compared to 70 cents of every dollar going to those in need through private charity, they are immune to consumer complaints considering that congressional approval hovers at 15%, and they erect barriers to entry by preventing people from forming their own governments within the United States. I could list countless other examples, but suffice it to say that this is problematic considering that governance is the one service that enables us to have all other services. Without a system of property rights, there can be no economy, and one of the major purposes of a system of governance is to protect such rights; a monopoly firm does a poor job of it by all accounts.

One of the major complaints against capitalism is that it produces monopolies or oligopolies that harm consumer welfare. While it is not true that monopolies do not form under free market capitalism, since businesses cannot force you to buy their products at the end of a gun, governments can and do force you to pay for their services with legions of tax collectors and policemen ready to enforce the tax code, with violence if necessary.

Just to digress for a moment on the issue of free market monopolies not existing, I mean monopolies not merely in the sense of having a large market share, but in the negative sense of being a coercive monopoly that can prevent others from entering the market. All examples of a monopoly rising on the market are either from a grant of government privilege, which is certainly not a free market, or an example of an amazing entrepreneur who is aiding consumer welfare instead of hindering it, and not examples of predatory price fixing or any other anti-competitive method; antitrust laws are simply ineffective at aiding consumers and most likely only make them worse off.

Returning to the subject of governments, it is clear that they are coercive monopolies in the negative sense. Since competition is forbidden, they have absolutely no incentive to serve their consumers. Democracy and the ability to vote is not much of an incentive to aid their consumers, since reelection rates are around 90%, meaning that it is rather unlikely that any given congressman or senator will lose their job, and even if they do, they would only lose it to another a person who will be a member of the government, there is no way of voting out the entire system or switching to a different one. Allow me to illustrate with a market based example. Imagine there were two car manufacturers, A and B, but they are both owned by C, so that while they compete, they are in fact sending all their revenue to the same person at the end of the day. If one wishes to switch from A to B or vice versa, they are still using the same firm at the end of the day, and government is no different.

If competition is vitally important in oil and electronics, two of many areas where antitrust laws have been used to breakup “anti-competitive” firms, then it must be equally important in the field of lawmaking and governance, since without a good system of property rights and legal protection, there would not exist the proper circumstances to drill for oil or design electronics, yet almost no one today, and certainly no one in government, discusses the need for rigorous and real competition in governance. Almost everyone agrees that having elections is better than having a tyrant rule autocratically, since that is at least some competition of ideas, but the idea is never taken much further than that. Removing barriers to entry in the market for governance would be a great boon to not only liberty but also prosperity, by allowing people with different philosophies of law to live under different codes of law through a market mechanism that adequately protects the property rights of all involved.

One imperfect example of this would be the Italian city-states which were decentralized cities that competed with each other for taxpaying citizens; most of medieval Europe was like this, but Italy was one of the more decentralized regions at the time. It was this competition that caused Italy, with Florence being one remarkable example, to be the birthplace of the renaissance by offering a more attractive system of governance than her peers, in part due to tax breaks. This competition in government caused city-states to compete for taxpayers and thus offer the best government they could provide instead of being a monopoly service that could mulct the taxpayers for as much as they were worth since they had nowhere else to go. Moreover,  this competition bankrolled the renaissance and lifted Europe out of the middle ages into a new period of relative wealth (Cohn 457-85). To build a free and prosperous society, it is necessary that governments be allowed to compete on an open market for law.

Sources:

Armentano, Dominick T. Antitrust: The Case for Repeal. Auburn, Ala.: Mises, 1999. Print.

Cohn, Samuel. “After the Black Death: Labour Legislation and Attitudes towards Labour in Late-medieval Western Europe.” Economic History Review 60, no. 3 (2007): 457-85.

Gass, Nick. “GOP Congress Earns Low Marks from Public.” Politico.com. Politico, 12 Aug. 2015. Web. 5 Aug. 2016.

Mahtesian, Charles. “2012 Reelection Rate: 90 Percent.” Politico.com. POLITICO, 13 Dec. 12. Web. 05 Aug. 2016.

Mcgee, John S. “Predatory Price Cutting: The Standard Oil (N. J.) Case.” The Journal of Law and Economics 1 (1958): 137-69. Umich.edu. University of Michigan. Web. 5 Aug. 2016.

Ruwart, Mary. “How Effective Is Government Welfare Compared to Private Charity? – The Advocates for Self-Government.” Theadvocates.org. The Advocates for Self Government, 25 June 2013. Web. 05 Aug. 2016.

Can Politics Be Solved by Politics?

With the election fast approaching, one is pressed by the question of which candidate to vote for. Unfortunately, every option appearing on the ballot is, at best, wary of liberty and at worst completely disdainful of the concept upon which the nation was built. This puts libertarians such as myself into a bit of a moral quandary, since either choice would leave me with a more restricted economy and society than if no one were elected at all and the United State simply continued on with the laws already in place. Of course, no candidate for office is ever going to be a true friend of freedom or a real liberal in the classical sense, but this cycle makes determining the least bad option more of a hazy guess than concrete knowledge of which candidate would do more for the cause of liberty. It is enough to give one conniptions.

This struggle to define which candidate would do the most to advance libertarian, or at least not authoritarian, ideals can disillusion one with politics altogether, but perhaps this is not in and of itself a negative outcome. “We must free ourselves from the prison of public education and politics,” Epicurus writes in his Vatican Sayings, and it might be worthwhile to seriously consider his advice. While I would not consider myself an Epicurean, and have in fact written about the great danger implied by such thinking, this particular saying rings true for those of us who are devoted to the cause of libertarianism.

The key to securing the blessings of liberty do not lie in sending this man or that woman to Washington but in freeing oneself entirely from the shackles of the political superstructure, which is no easy task, but technological advances render it more possible with every passing day. Already new currencies exist that allow one to bypass both current drug laws and taxes involved in traditional commercial exchanges. Uber and Airbnb punched a hole in both the taxi monopoly and regulations on hotels and hospitality. I will not say that I am an optimist; I fully believe that more of our liberties will be taken away both economically and socially before things to start improve, but I will say that technological advances can and do outpace the regulatory ability of the state, allowing entrepreneurs to crowd in on government monopoly services, providing a better product at a lower price.

It is not enough to rely on a charismatic face to lead us to the promised land, for there will be no Moses to break the shackles of the state and demand that Washington let his people go, nor will plagues descend upon the Capitol and the White House as signs of deific indignation at the restriction of natural rights. If we are to see liberty in our time, it will come in dribs and drabs, a piecemeal production of personal freedoms arising from the interplay of market forces for the goods and services that the government either cannot provide or provides at too high a price and too low a quality. It will not be a politician or even politicians that return our rights to us, instead we will have to take them back ourselves, not with bullets or with ballots, but with freely produced goods and services that make the government obsolete. While I would hope that education and evangelization of the message of libertarianism stirs people to faster action, I will not bet on that tactic, since great masses of people seem to move away from liberty every election cycle and spurn the ideals of freedom whenever they hear it. If liberty is to be successful, it is less likely to be done by books or campaigns, but instead will come from an offering of goods and services, by creating a market for liberty to compete against the state.

Now, the state will certainly dislike this, and may try to crack down as it has done and is doing on Uber and other disruptive forces, but the bureaucracy is slow even when motivated, so by the time the regulations have caught up with the inventions, new inventions will have arisen. The ineluctable fact is that all the government has ever done is grow, sometimes slowly, sometimes quickly, but always larger, always siphoning away more of the people’s resources, always putting more friction on the economy and more restraints on exercises of the will. No politician can reverse this, not even when their rhetoric soars on the wings of classical liberal ideals. The purpose of the state as originally established by the framers may have been to protect the inalienable rights of life, liberty, and the pursuit of happiness (read: property), but it has been so far perverted from that purpose by successive generations of political actors that it can never again be anything but an ever aggrandizing parasite feeding upon the productive processes of the market and its participants. The state is, as Frederic Bastiat stated, “the great fiction, through which everybody endeavors to live at the expense of everybody else.” Given that the state has that purpose, it may be nothing more than a colossal waste of time to endeavor to turn the state into anything other than a band of looters and thieves.

Why should we put our hopes in politicians and those who wish to take political power when they have never shown themselves to be even indifferent towards securing freedom? Our efforts would be better spent either trying to influence others to lean towards liberty through rhetoric and education, which might not be entirely useful, or in trying to abscond from the state altogether through the market process. Bitcoin has done without a single vote what free bankers and others opposed to the current monetary order had not done in the one hundred and three years that the Federal Reserve has been in existence. Uber completely bypassed city councils and ended the taxi monopoly with dollars not with ballots.

Special interests are too entrenched to ever do away with their privileges, and the beneficiaries of the market are too dispersed to agitate for free markets and an end to cronyism. Simply put, the political process encourages the growth of the state because special interests are better able to organize and capture the one body in charge of making decisions whereas no interest can ever capture the market what with its thousands of points of entry and lack of a ruler. We cannot expect to vote our way to freedom, for there is too much for politicians to lose by acquiescing to the tiny minority that espouses a true belief in libertarianism. Even if there were to be a groundswell in classical liberal belief, and a true believer in limited government were to be elected to office, there is no reason to believe that he or she would actually limit the scope of government, considering that our government has not contracted much if at all since its founding, with the trend being drastically in the opposite direction. Instead, if we are to decentralize power, it must come from decentralized action, from the interplay of millions of men and women on the market responding to each other’s needs in a way that bypasses the labyrinthine leviathan. In short, we cannot rely on politics itself to solve the problems endemic to politics, we must forge the solutions ourselves. We must truly free ourselves of those prisons described by Epicurus more than two thousand years ago.

What Should a New Conservative Movement Look Like?

Following the nomination of Donald Trump as the Republican candidate for President of the United States and the rebuke of conservative leaders like Speaker Paul Ryan, Senator Marco Rubio, Governor Nikki Haley, and Senator Ted Cruz, the conservative movement is on life support. Fighting the stigmas of selfishness, bigotry, misogyny, and racism has been an everyday and every-election struggle for the conservative movement since the late 1960’s, and any progress gained on those fronts, however marginal, has been reset by the candidacy and success of a man whose comments on women are atrocious, implications about a Latino judge racist, and policy prescriptions (namely the sweeping ban on Muslim immigration) xenophobic. The proposition posed to the 60% of the Republican Party who did not vote for Trump, the conservative activists who left the Party in name but not in ideology, and millennial Republicans who will inherit the anemic movement as the alt-right ages and is purged from the voting books, is whether we pull the plug on the current movement and start anew with fresh leaders, fresh ideas, and a fresh coalition, or we resurrect and modernize the old coalition, entrusting leaders like Paul Ryan & Marco Rubio who articulate conservative values like few other, but already saw defeat from the authoritarian Trump movement.

What should a new conservative movement look like should we choose to start over? We must begin with ideas that attack the negative perceptions of the old movement. We must articulate how the free market has and will raise people out of poverty and increase the standard of living for everyone, not just the rich. We must articulate how a focus on a choice in education will yield better opportunities for children living in poverty-stricken neighborhoods, creating futures that would’ve otherwise not been realized. We must articulate how the second amendment will save lives, black lives and white lives alike, when not encumbered. We must be compassionate in our policies, yet dispassionate in our analysis. To us, both intentions and results must matter. The message needs to be organized, consistent, and liberty-focused.

As the Democrats continue to sprint to the left and the Alt-right steers to an authoritarian-right position, the only message not being espoused is a message of liberty. An opportunity arises to solidify a new coalition – one of moderates and liberty-minded people – that combines groups of people like classical liberals, those who are fiscal conservatives and social liberals/libertarians who have been left out of two-party system in the 20th and 21st centuries, and “Rational Right,” the conservatives who have appeal outside of factions of the far right. The majority of the current independent voting bloc is made up of these groups and that proportion should rise as the dominating faction of the two major parties leave them behind in a search for extremism. The aforementioned coalition can only be formed if the conservative movement begins to care about optics. Voters do not want to be attached to a movement or a party that appears backwards or discriminatory or selfish. The left has done a masterful job as painting conservatives as such by using conservative policies against us and lying about our intentions. A new conservative movement must be more disciplined on message if we want to be successful.

Our message should be one of unity, liberty, and decentralization. But, the area where conservatives could make the most headway with coalition-building is in anti-poverty measures. Championing school choice to increase educational opportunities for poor and predominately minority children and families directly attacks the view of conservatives as only caring about the rich and the white. Changing welfare into a non-specific based stipend disseminated only on necessity and only available temporarily empowers the poor to make their own decisions with the aid given to them instead of piecemeal grants with arbitrary restrictions attached, while simultaneously fighting one of the main causes of poverty, out of wedlock birth, by making teenage pregnancy livable but uncomfortable. Cutting the payroll tax rather than increasing the minimum wage to increase incomes of the poor without taking away job prospects. Mandatory saving and the transitioning into of Social Security into private plans allows the older generations to make their own decisions with their own money, rather than the government voodoo which will bankrupt a program many millions of Americans rely on.

Because of the success of the left in labeling conservatives, and the validation of that caricature by Donald Trump, the way to reclaim and rebuild the conservative movement is by a message with explicit, benevolent intentions coupled with a pro-liberty, pro-growth, but most importantly anti-poverty platform. The voting bloc for such a message exists as does the successful track record of conservative policies and a laundry-list of failed liberal policies in the cities most plagued by poverty. We must capture hearts and maintain minds all while rejecting the bromides and slander of the left. We have the message, we have the policies, and all we need is new generation of leaders. Success of a new conservative movement in the wake of Mr. Trump is imperative for the future of a nation based on free markets, free minds, and free people. It’s time to pull the plug and start anew so that conservative and constitutional principles will continue to live on. Let the rebuilding begin.

The Truth About the Norwegian Police

I’ve recently come across a video published by ATTN – an educational media outlet – that claims that “Norway’s police training puts America’s to shame.” ATTN attempts to make the case for a Norwegian style police force in the United States. Without any prior knowledge of Norwegian policing, the video seemed fairly persuasive. However, the minute-long video didn’t have nearly enough time to accurately compare the two police systems.

The video starts off by outlining the difference between the two countries’ police forces. In order to become a police officer in Norway, citizens must participate in 3 years of training. Upon completion, officers must continue to train every year in order to maintain their participation in the police force.

In addition to extensive training, the Norwegian police are almost entirely unarmed. An officer must obtain special permission to carry a firearm, and even when such permission is granted, most firearms are locked in boxes which are stored in the patrol cars. ATTN argues that as a result of this policy “not a single person has been killed by the police since 2006.”

The video then compares Norway to the United States where officers only train for an average of 19 weeks. ATTN claims that most of the training is focused on learning how to fire guns instead of de-escalating situations. As a result, 1 out of 13 gun deaths In the United States are caused by the police, and police favorability is at its lowest point in 22 years.

This seems cut and dry. Norwegian police have longer training, they don’t carry guns, and they kill less people. On the other hand, American police have shorter training, they’re armed, and they kill more people. But one minute of a few cherry-picked pieces of information isn’t enough to make a strong case.

For starters, the comparison between Norway and the United States is challenging considering the difference in police structure. The Norwegian Police Service is highly centralized. There is only one police organization, compared to the United States which has a highly decentralized police system. The United States has federal, state, county, and municipal law enforcement agencies, all of which function semi-autonomously.

Structure aside, ATTN is being highly misleading when comparing police shootings between the two countries. If police don’t carry guns, it’s inevitable that police shootings will be extremely rare. Far from being a measure of success, the lack of police shootings in Norway may be a natural consequence of the fact that there are very few guns for police to shoot in the first place.

Yet the disparity between the countries’ police shootings can also be attributed to the difference in crime rates. In general, even after adjusting for population size, the United States has far higher rates of crime than Norway across the board.

According to data collected by the United Nations Office of Drugs and Crime, the United States’ murder rate is over 8 times greater than that of Norway’s. Excluding suicides, the United States’ homicide rate is 7 times greater than Norway’s. Rape is also far more common in the United States. There are 90 times more rapes in the United States than there are in Norway. After adjusting for population differences, the Unites States’ rape rate is still 43 percent higher than that of Norway.

Disparities in crime do not necessarily support the idea that one police force is better than the other. It simply demonstrates that the police in either country have to deal with completely different rates of violent crime.

One stark difference between the two countries is the rate at which police officers are killed during the line of duty. Although very few people have been killed by police, very few Norwegian police officers have been killed by civilians. Only 10 police officers have been killed in the line of duty since the Second World War. To put this in perspective for you, just in the last decade, nearly 550 police officers have been killed in the United States. There is a far greater chance that officers in the United States will be killed than officers in Norway.

There are also other factors that can measure the effectiveness of police forces that were not included in ATTN’s video. One method is measuring the time it takes police to respond to crime. According to American Police Beat, police response time averages around 10 minutes in the United States. In Norway, the average police response time is more than double that of the United States at 23 minutes. Because the police are unarmed, officers must take extra time arming themselves before responding to more violent crimes. This is problematic considering that the more severe a situation is, the longer it may take law enforcement to respond. It can take up to 40 minutes for armed police in Norway to respond to help. This is why almost 90 percent of Americans view their police officers as efficient compared to only 70 percent of Norwegians.

The downside to Norwegian policing was perfectly on display in 2011 when a lone gunman entered a Norwegian summer camp and killed 80 people. A security guard was stationed at the camp but was unarmed and one of the first victims. The police were notified just minutes after the attack began. However, because of the lack of basic resources like helicopters, it took police about an hour to respond to the shooting.

ATTN also emphasized that Norway’s police training is superior because of its extensive nature. Each law enforcement officer is required to maintain at least 40 hours of yearly training. Yet as of 2012, 44 percent of police officers lacked the minimum requirement needed for certification. This may be evidence that the amount of training required to continue being a police officer in Norway is actually an undue burden on law enforcement.

Put simply, trying to compare the two countries without first adjusting for variables is a disingenuous way of evaluating the effectiveness of either countries’ police. Though there is much to like about Norway’s police force, there is certainly much to be desired.

What’s Wrong with Subsidies?

We have already explored the troubles involved in setting up systems of tariffs, so let us now turn our attention to another form of industry support, namely subsidies. The argument in favor of subsidies is that certain industries are vital in the American (or any other) economy but not necessarily profitable on their own, or at least, not profitable enough, with one example of this being the farm industry, which receives around $20 billion in subsidies a year. Farms are subsidized because if the prices of crops fall too low, then farmers would be run out business and the ability of the American economy to feed itself would be in jeopardy.

However, the interesting thing about farm subsidies is that they are not put in place to keep agricultural prices low, and thus to make them more affordable to American consumers, but rather, they used to buy up surplus crops if the price goes too low, meaning that American tax dollars are being used to restrict the supply and thus increase the price of American agricultural products, enriching farmers at the expense of everyone else, another case of broken windows. Of course, the natural counter is that America must be able to feed itself and so it is important that farmers are well compensated for their work, but America is a net exporter of food, meaning that we currently sell a lot more food than we buy, so the prices would have to drop quite severely for us not to be able to feed itself, and that is, of course, granting the assumption that we must have autarky in agricultural, which is a debatable assertion in and of itself. One last note about farm subsidies themselves, and then I will move on to subsidies in general. Farm subsidies, by and large, are not going to small mom and pop farms, but are going to Monsanto and Con Agra, multibillion dollar industries who do not need to be assisted on the public dime.

Now, what is problematic about subsidies in general? The problem is that they are just another case of broken windows, but in a slightly different way. With a subsidy, money is taken from the taxpayer and then given to a business, either to lower their costs, that is, increasing their revenue, or to entice businesses to open that otherwise would not have existed. Prima facie, this seems like a win for the economy, since businesses are now more profitable and can run when they previously would have closed or are opening when they would have stayed mere ideas in the heads of entrepreneurs. However, there is no choice in an economy that occurs without tradeoffs. The choice to subsidize one industry or business means that this money must come from somewhere else, and this money comes from taxation or inflation, the same with all other revenue. Let us confine our examination to taxation due to length constraints. If money is taken via taxation, it is being removed from already existing businesses or, more accurately, the employees and shareholders of already existing businesses. What this means is that businesses that exist and are profitable are being used to prop up and create businesses that would not have been profitable without the subsidy. Essentially, money is being shuffled from its most efficient use to less efficient uses, with money being removed along the way to pay for the government bureaucrats who run the offices that dole out the subsidies. Ex ante, this necessarily reduces social welfare because money is being removed from its most productive and valued uses and given to uses that are valued by the political class. Under a system of subsidies, instead of rewarding those entrepreneurs who can most ably serve the consumer, those who are the most adept at lobbying the government for fund are rewarded, which is a different skill set entirely.

There is only so much wealth in a society at any given time, and while this amount of wealth can be increased through productive processes, simply taking money from Peter to pay Paul is not going to increase the economic output of a society, since resources on a free market are allocated to their most efficient uses due to the structure of the price system. Taking money from a productive enterprise and giving it to a non-productive enterprise, which is what subsidies do, lessens the total wealth in society because money is now being spent in the pursuit of less valued outputs. Society faces a tradeoff. If the choice is between having a watch factory and a car factory, one cannot see which factory the consumers wanted and then subsidize the other to get both, one will simply have a crippled watch factory and a dependent car factory instead of two healthy factories.

Allow me to illustrate with an example. Suppose we have an economy where a factory produces about 1000 computers per annum, and each computer sells for $100 of profit, giving them a total profit of $100,000 per annum, which they use to buy new parts for computers, expanding their business by 100 computers a year (we are also supposing that it costs $1000 to make a computer and they sell for $1100). In this case, the economy grows by 10% per year. Now let us suppose that a well-meaning but economically illiterate congress passes a law that taxes the computer factory 20% of profits to give to a shoe factory. Now, the shoe factory has $20,000 in taxpayer money, while the computer factory has $80,000 in profit instead of $100,000, so they can only expand production by 8% instead of 10%. Whatever the shoe company gained had to come from money that was already in circulation somewhere else in the economy, which is a loss to those who preferred the previously existing pattern of production.

The argument that subsidies should be used to lower prices runs into a similar problem. Since the subsidy represents a given sum of money being taken from taxpayers and given to a producer, the only way in which subsidies can lower prices is that the price is paid partly in tax and partly in purchase. In other words, the way that the price is lowered is that part of the price of the subsidized good is paid before even buying the good in the form of a tax used to prop up the producer of the good or service, and the rest is the lower price which is seen but does not exist in reality, since the price is not actually lower at all. Subsidies cannot create wealth at all, they can all alter the way in which wealth exists by giving it from those who are producing to those who demand a handout from the government.

One final problem with subsidies is that if the business was actually profitable and productive on the free market, the good or service would already be produced by those entrepreneurs who have seen the unfulfilled need on the market and rushed to satisfy it. If an investor hears a proposal for a business and then turns it down, or the would-be entrepreneur cannot get a loan, then and only then would he turn to the government, meaning that the businesses and industries getting subsidies are not those that would be the most productive on the free market, but would be those goods where either demand does not exist or where the business model is so unprofitable that no investor would put up his or her money for the project or no bank would loan money to the potential entrepreneur. Essentially, the taxpayer would be paying to prop up a business that would soon be in the red without government support and would not produce goods that satisfy a need that the market actually has. For these reasons among many others, subsidies should and must be opposed.

The Minimum Wage, a Critique

To begin, I’d like to explain what the minimum wage is. The minimum wage is the lower limit of what employees can sell their labor for, or the lower limit of the price employers to pay to buy labor; they both mean the same thing. When lower limits are imposed on the market, they create what are known as price floors. They create disequilibrium in the market, and create a surplus of unbought goods. Price floors have been damaging every time they have been tried, most notably when they were tried on agricultural products during the Great Depression (Sowell). In short, minimum wage laws are price floors, and carry all the negative aspects of them. They spur unemployment, worsen poverty, and are immoral.

Who Earns the Minimum Wage?

Before discussing the data on minimum wage, I’d like to briefly summarize the 2014 report on minimum wage workers’ characteristics by the Bureau of Labor Statistics. 56% of minimum wage workers are between the ages of 16-24, with 28.8% of those workers being teenagers. 65.3% of minimum wage workers are part time, and 23.7% are non white. Most importantly, only 3.9% of hourly wage earners made the minimum wage, or 1.3 million workers, with 2.99 million workers making at or below the minimum wage. 18.4% of minimum wage workers had a bachelor’s’ degree or higher, 34% had only a high school diploma, and 12.2% did not have a high school diploma, with the rest having a high school diploma and some college. As regards marital status, 65.8% of minimum wage workers have no spouse, and only 22% have a spouse who is present. Unless I missed it, the data does not discuss how many have dependents in this report (Haugen).

Point 1: Minimum wage laws contribute to higher unemployment Continue reading The Minimum Wage, a Critique

Tariffs and Broken Windows

I had originally written this piece for my own blog, which has since been shuttered in the move to this new shiny blog. This is the first in a two part series on tariffs and subsidies, of which the second part never got written. It will be written soon.

I will begin with tariffs, which are the more readily denounced of the two, but there are figures out there, such as everyone’s favorite businessman and presidential candidate, Donald Trump, who call loudly and passionately for tariffs on foreign made goods, such as those made in China or Mexico. The arguments in favor of tariffs are often rather simplistic, hinging on the natural inclinations of citizens to support domestic goods, producers, and, most importantly, workers. The theory goes that tariffs need to be put in place to protect domestic industry from overly competitive foreign goods that would put American producers out of business, and so the tariffs put a tax on foreign goods so that domestic producers can compete. Well, this seems like a good idea on paper. Foreign goods now cost more than domestic goods and consumers will patronize those same domestic firms, employing Americans and keeping the economy strong by ensuring that American industry can compete.

What’s the problem here? The issue is that it ignores opportunity costs, or what the French economist Frederic Bastiat called the broken window fallacy, or that which is seen and that which is unseen. The broken window fallacy is described by Bastiat in a parable wherein there is a baker who has his window broken by vandals, and then must spend some amount, say $100, going to a glazier and having his window repaired. So, the townspeople, when they see this, remark to themselves that this breakage of the window has been good for the economy because it means that the baker had to spend $100 repairing his window, but that is only what they see. What they do not seen is that this $100 spent on the glazier could have been spent on any number of things, such as a new suit from the tailor, or a new pair of shoes from a cordwainer. Thus, instead of being able to get this new good, he must instead spend money on repairing a broken window, so the overall economy is worse off because money had to be spent on fixing economic damage rather than pursuing new production.

This is the same thing that happens with tariffs, since the money that went to paying the tax on the foreign good, or on paying the higher cost of the domestic good cannot be spent pursuing other economic ends, and so consumers are now worse off, and only the domestic workers in the industry effected by the tariff are better off, because their goods are now competitive. To illustrate, let us say that there is a tariff on computers. If, in a purely free market, domestic computers cost $500 and foreign computers cost $400, then consumers will buy the foreign computers at the cheaper cost and be able to use the extra $100 on whatever other goods they desire, and thus will be better off, since they have a computer and $100 worth of additional goods. Then, the computer industry comes along and demands a tariff, since they cannot compete with the foreign produces, so, the government levies a $100 tariff on foreign computers to bring the price of both up to $500, which means that domestic producers can compete. Consumers now must spend $500 on computers, leaving them with $100 fewer dollars to spend on other goods, so they are clearly worse off because of this tariff. Foreign producers are worse off, since they cannot sell their goods. Domestic and foreign producers in industries not impacted by the tariff are worse off as well because consumers now have less money to spend on those goods. The only people who are better off due to tariffs are the domestic producers in the industry effected by the tariff, since their goods are now competitive. So, in the process of levying a tariff to support American jobs, all Americans not employed in the tariff impacted industry are worse off, even though the whole purpose of the tariff was to benefit American jobs. Money that was being diverted to the industries benefitting from the tariff comes from the consumers, so those Americans now have less real income, and American producers in other industries will see their income diminished because consumers have less income to spend on their goods, so these businesses are now worse off as well because of the tariff. Tariffs in no way make the American economy stronger, and in fact can only harm it because it takes money from more efficient producers of goods and gives it to less efficient producers, make literally everyone worse off except for those lucky enough to be in the domestic industry impacted by the tariff. What we see from the tariff is that domestic producers in the industry effected by the tariff are now better off, but what is unseen is the diminished income of consumers and the lower incomes of all other businesses, foreign and domestic, but just because this impact is not readily seen, does not mean it is not there, for it most certainly is.

Another argument for tariffs is the infant industries arguments, which is, as the name implies, a line of thinking that states that new industries need to be supported by tariffs because they are too new to be able to effective compete against the already established foreign industries. The industry is given a tariff until they can get on their feet and then the tariff is supposed to be removed and competition can resume its natural course. Many people are sympathetic to this line of thinking because it is temporary, and because it is encouraging domestic production. On the surface, this seems much less objectionable, because it is not permanent and because it is not giving favors to well established businesses and industries.

However, the same argument applies here, and a new one comes up as well. Simply put, nascent industries do not have the political capital to be able to get tariffs, whereas more established firms do have the political capital to get tariffs, so they are more likely to get tariffs than industries that supposedly need it. This argument against infant industries is effective because it shows that these infant industries cannot actually lobby for tariffs, so any infant industries would be suspect. Moreover, as Ludwig von Mises noted, these tariffs are also harmful economically because resources are being funneled from where they would have otherwise gone without the tariff, that is, not into these infant industries and instead going to wherever the market would have allocated those resources, to these new industries, which is not the most efficient use for them, since the government had to step in and change prices through the use of tariffs to support the new industries. Economic welfare is being reduced because the labor, land, and capital that went to secure the creation of these infant industries, which are only profitable through the tariff, and was not used to satisfy the most urgent wants of the consumer. For these reasons, tariffs must be opposed at all time and wherever possible. They cannot increase economic welfare because they are diverting resources from where they would have gone in a free market, which is, at least ex ante, their most efficient use, and is instead being funneled into an industry that is not efficient or in high enough demand to warrant its creation.