The Market Works Just in Time

The recent political controversies over record oil prices have underscored the sad truth that even nominal friends of the market don’t understand how it really works. Because they have only a superficial grasp of this complex “organism” and how it coordinates interactions among billions of Homo sapiens spread across the entire planet, they quickly denounce its operations whenever things depart from the ordinary

Should We Buy Only Locally Grown Produce?

Let’s suppose that people do decide to “buy local” with the goal of saving the world and reducing their carbon footprint. This will increase the demand for locally grown foods, but it will also have an unintended and likely deleterious consequence; it will increase the demand for farm implements and labor. Since the decision to buy locally is essentially the decision to forsake comparative advantage, every unit of agricultural output will be more resource intensive than it would be under specialization, division of labor, and trade.

Price Controls Create Man-Made Disasters

In the wake of the recent flooding in Iowa, the state’s attorney general has announced that Iowa’s rules against price gouging are now in effect. These rules prohibit businesses from “substantially raising the prices for needed goods or services without justification” in the wake of a natural disaster. Enforcing these restrictions will have predictable effects: shortages of needed supplies, long lines, delayed repairs, and, perhaps, increased incivility. Like other forms of price control, price-gouging statutes will hurt precisely the people they are intended to help.

Corporate Taxes Suffocate Growth

The only nations who have a higher corporate tax rate than America are Suriname, Pakistan, Togo, Benin, Republic of Congo, Cameroon, Chad, Libya, and Vietnam. No information was available for The Democratic Republic of Congo, Iraq, North Korea, Montenegro, Serbia, or Sudan. I cannot imagine why. Lower corporate taxes are associated with economic growth. This can be shown a priori and empirically.

“Let the Market Solve the Energy Crisis”

Far less than 10% of the world’s oil reserves are in countries that allow private companies to operate freely. This means that the latter and, through them, consumers, are denied access to far more than 90% of the world’s oil reserves. State-owned companies control more than 65% of the world’s oil reserves — e.g., in Saudi Arabia. As for the 25% left, they are mainly situated in countries such as Iran, Russia, Venezuela, etc., where, because of above-ground political factors, private Western companies have the greatest difficulties working efficiently — as demonstrated by BP’s recent problems in Russia.

Who Really Lives on a Fixed Income?

Contrary to the myth, workers in the private sector have little ability to increase their nominal wages during times of rising prices. But the same cannot be said for the recipients of government checks. Instituted under federal legislation passed in the 1970s, citizens receiving Social Security and Supplemental Security Income get an automatic increase in their checks every December that partially compensates for the rising costs of daily living.

The Non-Issue that Should Be an Issue

Republicans used to talk about reducing the welfare state. I remember when candidate Ronald Reagan in 1980 promised to end the Energy and Education departments. Some Republicans, who themselves have caught the entitlement-spending/social-engineering bug, now propose the creation of a federal department of families. Indeed many Republicans, who once said they were against the welfare state, now brag they are better at running the welfare state than the Democrats.
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