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6 Steps Toward a More Sane Economic Policy

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Tags Taxes and SpendingMoney and BankingPolitical Theory

03/03/2017

As the Trump administration takes shape, it may be helpful to remind ourselves of some of the steps that can be taken in the direction of economic policy that better allows private citizens to be free and flourish. Given his expressed views, there's no reason to believe he plans to radically re-orient the federal government in the direction of freedom and free markets. However, any one of these steps below — even partially implemented — would be a step in the right direction. 

One: Eliminate all federal cabinet level agencies related to regulating economic life.

Of the current cabinet level bureaus, the following should be eliminated immediately, including all departments within these bureaus, such as OSHA (within the Department of Labor) and the EPA (customarily accorded cabinet rank):

  1. Agriculture
  2. Commerce
  3. Labor
  4. Energy
  5. Education
  6. Housing and Urban Development
  7. Transportation

The above seven agencies spent $667 billion in 2010, representing 23% of all federal spending.

Two: Eliminate the central bank — the Fed — and scrap legal tender laws.

Of course, a free market must include freedom of its participants to use whatever medium of exchange — money — that it chooses. Money is part and parcel of the market economy. It arises naturally to break the limits of a barter economy, also known as direct exchange. Commodity money becomes indirect exchange, whereby market participants trade for the most widely accepted commodity rather than trade directly to satisfy their ultimate goals. There is no need for the state to dictate what may be used for indirect exchange. Market participants themselves are in the best position to determine which commodity makes the best money.

Furthermore, central bank produced and controlled money has allowed government to act like a common counterfeiter, producing money out of thin air to fund its own spending programs and/or reward its supporters, all at the expense of society as a whole. It is much easier to fund wars and welfare out of printed money than taxes, or borrowing from real savings. The steady erosion of money's purchasing power hits retirees the hardest, diminishing their ability to plan for a retirement of comfort and dignity. Furthermore, the Austrian theory of the business cycle places fiat money expansion as the root cause of the boom/bust cycle that misallocates and eventually destroys capital.

Three: Eliminate government licensing of occupations and products.

The best regulator of quality in products and services remains the marketplace. Government agencies protect the status quo, erecting unnecessary barriers to cheaper, affordable alternative services. There is no objective standard for determining service quality. This is a judgment of market participants themselves. In a free market unscrupulous and incompetent practitioners are weeded out by competition and ordinary commercial and tort law.

Four: Eliminate standing in court of third parties.

Environmental groups and other anti-business, anti-development groups file suits to stop projects over which they are not parties. These third parties do not own affected property, and cannot show that they are suffering real harm — as opposed to hypothetical or psychological harm such as the loss of scenic views. In the case of "scenic views," for example, such groups are always at liberty to solicit funds from their members to buy and set aside what they consider special, scenic areas. Like licensing of occupations under the banner of consumer protection, there is no objective standard of what is and is not a scenic view or special area. Only consumers themselves, acting in in the marketplace, can decide such things. Environmental groups cannot assume to have a superior, or more insightful position outside the market, because there is no standard for determining such things as beauty. These are subjective evaluations which change constantly. If you think this is not the case, just study the rural cemetery movement of the nineteenth century in which the world's best landscape architects were hired to design cemeteries where families would spend many hours each weekend among their ancestors.

Five: Restrict recipients of monetary damages for violations of commercial law, torts, and other harms.

Only the parties to a dispute who have standing in court as suffering real damages should be compensated financially for violations of the common law, and these compensations should go entirely to the parties involved, not third party whistleblowers and/or their attorneys. Current friend-of-the-court rules allow meddling by third parties who can delay business projects almost indefinitely or drive up costs until the projects are abandoned. Those who suffer are the project developers, of course, plus all the unseen employees who never became employees and all the projects' happy customers who never became happy customers.

Six: End all subsidies.

If a business cannot produce a profit acceptable to its investors, then the investors should close it down and invest their scarce capital in a business whose product is more highly desired. Businesses that produce losses are prima facie evidence that capital is being consumed rather than accumulated. Private investors will close down such businesses or lose all their capital. Government subsidies plunder existing capital in order to prop up those businesses that are consuming it. But subsidies do not stop capital deccumulation.Typically high profile businesses, those with large union workforces, or those politically connected are the recipients of capital provided by common, working people. In other words, subsidies are theft.

Patrick Barron is a private consultant to the banking industry. He has taught an introductory course in Austrian economics for several years at the University of Iowa. He has also taught at the Graduate School of Banking at the University of Wisconsin for over twenty-five years, and has delivered many presentations at the European Parliament.

Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
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