Why Don’t Entrepreneurs Outsmart the Business Cycle?

A common argument against Austrian theory, writes Brian Stanley, is that entrepreneurs are too smart to be fooled by Fed intervention. The argument claims that entrepreneurs recognize the Fed actions and ignore the Fed by proceeding as if the interest rates were where they would be if they were set by the free market and not by Fed intervention. If this contention is true, the business cycle theory is wrong in its conclusions about what causes the boom and bust cycle. In fact, it isn’t possible to determine what the natural rate should be. Small businesses particularly can’t be expected to recognize and react to Fed intervention, and there is no evidence that even large, sophisticated businesses can perform any relevant and meaningfully accurate calculations and forecasts.

The Pot-Pushing “Terrorists” Under Your Bed

Faced with mounting public criticism over the Justice Department’s decision to shutter several locally authorized California medical marijuana dispensaries, Drug Czar John Walters recently traveled to Northern California to oversee police efforts to eradicate clandestine marijuana crops growing on public lands, and to label California’s pot farmers as “terrorists.” According to a published report, writes Paul Armentano, the Czar proclaimed, “[T]he people who plant and tend [these marijuana] gardens are terrorists who wouldn’t hesitate to help other terrorists get into the country with the aim of causing mass casualties.” While Walters’s hyperbolic statement was no doubt meant to piggyback on recent terrorism fears fueled by US Homeland Security Chief Michael Chertoff, the allegation nonetheless reeks of desperation and dishonesty.

Why is Catching a Baseball Taxable Income?

As soon as 21-year-old Matt Murphy snagged the valuable piece of sports history Tuesday night, his souvenir became taxable income in the eyes of the Internal Revenue Service, according to experts.

“It’s an expensive catch,” said John Barrie, a tax lawyer with Bryan Cave LLP in New York who grew up watching the Giants play at Candlestick Park. “Once he took possession of the ball and it was his ball, it was income to him based on its value as of yesterday,”

Government Regulation Goes Bananas

This year banana producers in China suffered a disastrous loss, writes Dean Peng. Banana prices plummeted in Canton and Hainan, the two tropical provinces that provide almost all the domestic bananas. Tons of ripe bananas rotted in their plantations. Almost all planters lost money; some went bankrupt. It soon became clear that the real cause for the fall in banana prices was overproduction. Bananas had been selling well in recent years, and many new producers moved to Hainan to open new plantations. The result was a serious over-supply. Thus arose calls for new regulations. For many people, the only reasonable resolution to imperfections in the market is more government regulation. In fact, the only problem with the market results from regulation against information sharing between producers.

The Bureaucrat and the Movie Theater

I saw two movies this week, each anti-government in its own way: Harry Potter and the Order of the Phoenix, and the Simpsons. The Harry Potter movie was more sophisticated and provided a wonderful look at the nature of bureaucracy, with the Ministry of Magic, driven by the usual fear and ignorance, taking over Hogwarts and wrecking the place with rules and regulations. It was a thrill to see the kids fight back and see the bureaucrats humiliated. A similar situation occurs in the Simpsons, with government plotting egregious actions against citizens and botching it at every step.

Austrians in Barron’s

Without invoking the name, the Journal leader did more to educate the American public about Austrian economic theory than anything published in recent years. To most readers, Hayek probably means Salma, but to adherents of the Austrian school, Friedrich von Hayek and his professor, Ludwig von Mises, are the most prominent figures.

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