CEI: Federal Regulations Cost $1.9 Trillion Annually

CEI: Federal Regulations Cost $1.9 Trillion Annually

05/10/2018Tho Bishop

A recent report from the Competitive Enterprise Institute highlights the cost of America's regulatory state.

According to CEI:

The estimate for regulatory compliance and economic effects of federal intervention is $1.9 trillion annually for purposes of comparison with federal spending and other economic metrics. This estimate was compiled using available federal government data and reports, in context with contemporary studies.

Putting that number into perspective:

The estimated burden of regulation is equivalent to nearly half the level of federal spending, expected to be $4.1 trillion in 2018.

If it were a country, U.S. regulation would be the world’s eighth-largest economy, ranking behind India and ahead of Italy

The regulatory hidden tax is equivalent to federal individual and corporate income tax receipts combined, which total an estimated $1.884 trillion in 2017 ($1.587 trillion in individual income tax revenues; and $297 billion in corporate income tax revenues).

This significant drain on America's productive sector exists in spite of the fact that deregulation has been one of the bright spots of the Trump Administration. So far the Administration has been able to maintain its objective of repealing two rules for every new one written and the number of pages in the 2017 Federal Registry was down dramatically from the previous Federal regimes. 

Still, the full costs of Federal regulation are truly impossible to calculate because beyond the compliance costs imposed on current businesses are those companies that do not exist due to America's regulatory environment. As Per Bylund noted while discussing his book Seen, the Unseen, and The Unrealized: How Regulations Affect Our Everyday Lives:

Regulations make it costlier to act — and therefore some actions are no longer profitable when they would have been otherwise. So, for those businesses that lack political influence and aren’t the most effective, a regulation may decide whether there is a business or not. At the same time, businesses that survive the regulation might benefit from a protected situation because the regulation raises barriers to entry. This is why, for instance, it is rational for Walmart to support a high minimum wage — it will hurt Walmart’s competitors more than it hurts Walmart.

The real losers are common people who, as consumers, do not get the valuable goods and services they otherwise would have, and, as producers, cannot find the jobs they otherwise would. The winners are the incumbents, at least short-term, and — as always — the political class.

 

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Does an "Inflationary Problem" Exist?

8 hours agoRobert Aro

How does one respond when a friend, colleague, professor, or one of the most decorated economists on the planet, claim they don’t foresee and inflationary problem? Janet Yellen, US Treasury Secretary claims, as reported by Reuters:

I don't think there's going to be an inflationary problem. But if there is the Fed will be counted on to address them.

Henry Hazlitt dedicated an entire book on inflation, opening with the sentence:

No subject is so much discussed today — or so little understood — as inflation.

That was nearly 60 years ago! Going back to Mises, it was addressed, yet ignored for over a century!

The problem starts with trying to gauge your interlocutor's understanding of “inflation.” There’s the commonly accepted idea of inflation being a general “increase in prices,” but inflation originally signified the act of increasing the supply of money and credit, then during the last century this became less widely used. Now, the act of increasing the money supply by even several trillions of dollars a year is considered routine policy; what was once dubbed inflation is now called stimulus.

Should they remain fixated on the idea that inflation means price increases measured by the CPI, steer them in the direction of illustrating various problems with inflation calculations. These problems have been cited for several generations and even in my recent article Inflation: The Art of Moving Goal Posts. By understanding how inflation data is compiled, what’s omitted, what’s included, and the immeasurability of the idea itself helps cast doubt on the mainstream narrative.

But if inflation calculations are inherently flawed, are there other ways to convey that society already has an “inflationary problem” at hand?

Looking at median sales prices of homes in America, we see prices have steadily risen, save for the previous recession where prices declined. Interesting how housing prices have sharply increased during this recession; we can only speculate as to how much this is caused through central bank intervention.

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You can also point to continual all-time highs in the stock market, the rise of crypto currencies, and the burgeoning NFT market, all occurring when our future has never looked so uncertain, in the face of the money supply, national debt, and stimulus reaching unheard of levels.

Unfortunately, the unaffordability of life through increase in asset prices and associated debt level don’t matter much to inflationists. It’s the general price increase in necessities such as gasoline and toilet paper which matters most.

Should all else fail, and the inflationary problem remains unnoticed, try pointing to a country like Venezuela, noting how their money supply has risen on an upward trajectory. It’s unlikely anyone could deny that “maybe,” the cause of their hyperinflation and currency collapse was a result of a dramatic explosion to their money supply, M2 now standing at 1 Quadrillion VEF! (The chart below is in millions).

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Strange days indeed. And the task of discussing problems with inflation persists. Often difficult to prove until it’s too late, two different definitions of inflation create complexity and having assets excluded from already faulty inflation calculations doesn’t help. Being told by experts that inflation isn’t yet a problem makes the public’s understanding of the topic difficult to grasp. All the while, the commonly accepted method of national default is by way of printing a currency into oblivion, suffering the consequences of default through hyperinflation.

While dinner table economic talk may work with those whom you keep close company, not many of those who desire a free market appear to keep company with those deciding the narrative for the entire planet. What can be said to someone like Yellen or the Fed who gets paid to seemingly ignore the basic history and principles of inflation? Unfortunately, if it won’t come from you, then we can only hope Congress will do the right thing…

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Two Invisible Hands: Politics vs. the State

05/11/2021Nicholas Baum

In 1759, economist and philosopher Adam Smith wrote one of the greatest descriptions of the free market ever produced. Writing about a market economy based on voluntary exchange, Smith likened the process of self-minded producers catering to the consumers’ interests as a process managed by an invisible hand. He states, “Every individual … intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”

This quote, perhaps the most famous passage from his book The Theory of Moral Sentiments, reveals both the morality and simplicity in which a free economy operates. We, as individuals, are not guided by some altruistic vision for the betterment of others, but rather the fulfillment of our interests and gains. Yet in the free market, pursuing our own self-interest makes all of society better off.

This is because in order to get what we want, we must voluntarily trade. The only way voluntary trade can happen is if each individual likes what the other has more than what they have. Therefore, in the process of obtaining what we want and enjoy, we enable someone else to also obtain what they want and enjoy. Otherwise, the trade wouldn’t happen in the first place, and we wouldn’t be benefiting others.

In a bigger picture, this means that we work jobs, sell products, and own businesses not for the sake of our customers or bosses, but for our own individual interests. Yet in the process of obtaining the money to further our own interests, we contribute a good or service that can benefit many others; whether that be working at a restaurant, owning a store, or running a lemonade stand, we contribute to a larger, common good. Through voluntary exchange, the prerequisite for furthering our own desires is by fulfilling others’.

The invisible hand of the free market, fueled by voluntary exchange, translates the intricate and subjective interests of ourselves into benefitting the interests of others and, when compounded, ultimately caters to the common interest.

Yet, there exists another invisible hand, in the realm of politics; one also predicated on voluntary exchange, yet moving opposite to the motion of the free market’s invisible hand. Understanding it is crucial to deciding just how far we should replace economic activity with political and bureaucratic control.

The Invisible Hand of Politics

Outside of the political process, self-interested individuals exchange and thereby benefit others in the pursuit of their own goals. Yet in the political process, politicians elected on the basis of representing the “general interest” ultimately must cater to much more specific causes. Economist Milton Friedman writes in his coauthored book Free to Choose, “There is, as it were, an invisible hand in politics that operates in precisely the opposite direction to Adam Smith's invisible hand. Individuals who intend only to promote the general interest are led by the invisible political hand to promote a special interest that they had no intention to promote.”

This is mainly due to the expansive role that the government has usurped over the years, writing and enforcing detailed legislation that directly threatens a small sum of citizens while negligibly affecting the rest. When the state has such a capability of writing specific laws, laws that greatly concern only a few number of individuals, those individuals will be incentivized to lobby government for favorable decisions.

Take Friedman’s example of the US’s policies regarding coastal traffic, which is greatly restricted to American flagships. He estimates the costs of such legislation to be, in 1980 costs, around $600 million a year, yet divided among the populace, costs the average taxpayer just $3 a year. His conclusion:

“Which of us will vote against a candidate for Congress because he imposed that cost on us? How many of us will deem it worth spending money to defeat such measures?”

The ones who will deem it worth spending money on such policies are the ones mostly affected by the legislation, that is, the 40,000 individuals actively involved in the industry, who have much more to win or lose than $3. Indeed, Friedman confirms, “they spend money lavishly for lobbying and political contributions.”

Thus, almost always, the activists and lobbyists that guide the activity of elected officials represent not the common interest, but the special interests that are much more financially contingent on their decisions. Company executives seek to limit foreign competition, farmers seek price floors on their products, and public sector unions seek to protect state monopolies. The incredible costs of these policies are widely dispersed among the people, and so the outcome of Congress doesn’t reflect the general interest, but the special interest that has the most to lose.

Market or State

Between these two invisible hands comes a choice: which one do we want to promote more? Should we promote a free market, where individuals voluntarily exchange and benefit a more general interest? Or should we want to expand the domain of politics, letting more aspects of the economy be dictated by special interests?

Hopefully, the answer is clear. In the market economy, producers will always have greater incentives to work in the people’s interests than do politicians. This is because producers can only obtain money through voluntary exchange, and so they must produce what the consumers want.

Similarly, we may think that politicians have a great incentive to work in our interests. We elect them, and so we think they work in the general interest of their constituents. Yet ultimately, the issues they are most pressed about don’t concern the majority of their constituents, but rather select interest groups that have much more to lose. Such groups are the reason why much of the issues politicians vote on concern special interests. The votes and money from these groups are why they support them.

Furthermore, as we expand either the domain of the free market or the grasp of government, either of the invisible hands become stronger. For example, if we were to privatize the postal service, this means that the agency, although assumed to be self-interested, would have greater incentive to cater to the interests of the people than if it were in government hands. This greater efficiency would put more pressure on politicians to actually work in the general interest.

Alternatively, if the state was expansive, intervening in the economy at will and catering to different interest groups, the more producers will pull away from the free market invisible hand, and lean more towards political handouts. And as the state expands in its role, the more companies will be compelled to look for government assistance, thus extremifying the political invisible hand. This phenomenon is known as crony capitalism.

The choice is ours over which invisible hand to favor, the market’s or the state’s. Will we judge the intentions behind them, or focus on the outcomes? As we build towards a freer society, the choice couldn’t be any more clear.

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Thanks to Covid Stimulus, Employers Can’t Find Workers. Montana’s Governor Is Having None of It

05/07/2021Alice Salles

Montana governor Greg Gianforte has had enough of President Joe Biden’s covid relief bills. Instead of paying people to stay unemployed, he’s giving them a bonus for finding work.

After scrapping what he called the “impractical government mandates” imposed by former governor Steve Bullock in 2020, businesses in his state were still struggling.

We got rid of hours of operation, capacity limits. We got rid of our statewide mask mandate. We put lawsuit protection in place for businesses and nonprofits. And now, as we have opened up, employers can't find workers. It's across all industries. Restaurants are having to shut down for days because they can't find cooks or wait staff.

Addressing the media, Gianforte said that because the federal government extended unemployment benefits due to the pandemic, people have incentives to stay home. In order to change that scenario and get Montanans back to work, he drew out a new plan.

We made the decision to opt out of the federal supplemental unemployment benefits, and replace it with a back-to-work bonus.

Now, he is offering anyone who gets off unemployment benefits and finds a job a $1,200 bonus.

This is going to help employers. And, honestly, there's dignity in the work. And there's also satisfaction in being self-sufficient. We made that decision yesterday. And we're just getting a phenomenal response from our business community.

Isn’t that something! Who would have thought that forcefully locking down the country’s economy and then showering the unemployed with taxpayer-backed “free” money would produce anything but chaos.

While Gianforte's plan isn't ideal considering that government-backed incentives to get people back to work are unnecessary in a truly free market, his reasoning is correct. When you subsidize something, you always get more of it.

They Never Learn Their Lesson

In 2013, well into President Barack Obama’s second term, Congress extended long-term unemployment benefits. But the extension ended as 2014 rolled in. What we saw happen was a significant drop in unemployment rate.

As Mises associate scholar Randall G. Holcombe explains in this article, when the government pays people to remain unemployed, what we get in return is more unemployment.

The long-term unemployment rate skyrocketed during the recession because we paid people to be unemployed longer.

Needless to say, this lesson was lost on our overlords. Thankfully for the people of Montana, their governor isn’t waiting for a total economic collapse to revert course.

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Decentralization and Political Satisfaction

05/07/2021Kyle Ward

As the State grows larger and more centralized, combat in the political arena will grow more desperate and extreme because there is more to be won and lost in each conflict. The States are trapped in an unhealthy relationship that deteriorates more each day. Rioting and looting have become acceptable responses to injustices both perceived and real. The Capital is walled off and surrounded by military personnel. As dire as the situation is, the solution is both obvious and simple: a breakup. The Mises Institute features numerous articles and podcasts on the ethical and philosophical arguments supporting radical decentralization. This article supplements those arguments with an analysis of the 2016 Presidential election to show that local elections lead to happier citizens.

One caveat for this analysis: it ignores the impact of the Electoral College. The debate over that institution is important, but not for the point being made here. Instead, this analysis assumes that the winner of the popular vote wins the election. It will then show how local elections result in far better outcomes than national ones. The election data comes from MITs Election Data and Science Lab and 2016 was chosen because it is the last year for which precinct-level totals are available.

In the 2016 election, Hillary Clinton won the popular vote with roughly 66 million votes; however, this constituted only 47% of the total votes cast. Even had Hillary won the election based on the popular vote, most Americans would have been unhappy with the result. In Texas, 52% of voters cast their ballot for Trump while 58% of New Yorkers chose Clinton. If Texas and New York were able to elect separate leaders, a majority of voters would be represented by the person they voted for. Fewer would feel disenfranchised.

The margins improve further as you zoom in to individual counties and precincts. The chart below shows how voter happiness (defined by your candidate winning) increases at smaller geographies. When looking at the precinct level, an impressive 64% of voters voted for the candidate who won in their precinct. That is almost 24 million additional voters that would be able to live under a representative they selected.

ward

Source: Data compiled by author from MIT Election Data and Science Lab

This improvement in outcomes exists because human beings tend to join communities that align with their preferences and ideals (all else equal). This effect would strengthen if radical decentralization were to occur. As local governments wrest more power from central authorities, the variety among communities would increase. Voting with your feet would be cheaper when you only need to move between town or counties, and low-income individuals and families would be able to exercise this power to great effect along with everyone else.

This self-sorting would also lead to more peaceful communities. Eventually, Texans might care as little about New Yorkers’ thoughts on abortion as they do those of Cambodians. Austin could set policies independent of the rest of Texas. New York could implement a universal basic income. With more local control, the need to fight over national policy would no longer exist.

In 2016, we saw extreme emotional displays, marches, and rallies from Democrats after Hillary lost the election. In 2020, we saw the same from Trump supporters. Every four years, roughly half the country finds itself on the losing side of an election against an opponent they increasingly cannot relate to or even understand. As the State grows, so do the stakes. If our goal is a peaceful resolution, we must dismantle this locus of power. To control your own destiny, you must first give up the desire to control others.

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Charlie Munger's Oddly Desperate Attack on Bitcoin

05/06/2021Connor Mortell

Recently, Berkshire Hathaway vice chairman Charlie Munger spoke vehemently against bitcoin and other cryptocurrency, claiming, “I don’t welcome a currency that’s so useful to kidnappers and extortionists and so forth, nor do I like just shuffling out of your extra billions of billions of dollars to somebody who just invented a new financial product out of thin air.” This sentence, right off the bat, both summarizes his issues with cryptocurrency and contains the major flaws that make his criticisms wrong.

First and foremost is the obvious hypocrisy of the first half of that claim. The US dollar is almost equally useful to kidnappers and extortionists. “Satoshi Nakamoto” created bitcoin only as recently as 2009, and last I checked, kidnapping and extortion existed long before that. Arguments can be made on either side about bitcoin’s actual privacy. Realistically, the fact that it operates on an open source ledger makes it significantly less private than many believe it to be, especially when compared to other more privacy-targeted cryptocurrencies—most popularly monero. However, bitcoin not being as private as is sometimes assumed in and of itself does not inherently discredit Munger’s point, because it is still true that bitcoin can be and is used it in an increasingly private manner. He is correct that it is used by criminals. But while it is true that bitcoin’s privacy shortcomings don’t inherently discredit his claims, it is also true that bitcoin's use by criminals does not inherently prove that it is worth condemning on those grounds. This is because it is just as common—if not overwhelmingly more common—for criminals to operate in cash. Munger is missing the vital lesson that Hazlitt so famously taught us: “The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy.” If Munger were to have his wish come true and the success of bitcoin failed because it was too useful to kidnappers and extortionists, he would be correct in that the immediate effect would be that kidnappers and extortionists would have to cease using cryptocurrency. But what is step two in that process? It is not that kidnapping and extortion would simply end. They would continue just as they always have, operating in cash. The only difference would be that now all the decentralizing benefits of crypto currency to the average person would also disappear.

Next, comes the simple but vital point that there is no greater kidnapper or extortionist than the federal government. I don’t have to explain to a Mises Wire reader that taxation is in and of itself extortion. As for kidnapping, the American criminal justice system holds almost 2.3 million people in prison. Of those imprisoned, 46.4 percent of inmates are in for largely victimless drug offenses. While many in agreement with the status quo can perform the necessary mental gymnastics to justify this, we can also turn to Rothbard’s For a New Liberty:

The distinctive feature of libertarians is that they coolly and uncompromisingly apply the general moral law to people acting in their roles as members of the State apparatus. Libertarians make no exceptions. For centuries, the State (or more strictly, individuals acting in their roles as “members of the government”) has cloaked its criminal activity in high sounding rhetoric…. In fact, if you wish to know how libertarians regard the State and any of its acts, simply think of the State as a criminal band, and all of the libertarian attitudes will logically fall into place.

The state as a criminal band raises two important issues with Munger’s point: first is that if he is to oppose a currency that is useful to extorters and kidnappers, then he must vehemently oppose the currency that is completely controlled and designed to benefit the largest of all violent criminal organizations. Next is that if Munger is correct to claim that bitcoin is useful to the criminals he named, then, reductio ad absurdum, it must also be true that it is useful also to those committing the victimless crimes that make up such a staggering amount of the US prison system. So even if Munger is correct in claiming this, it is not a foregone conclusion that the tradeoff is less aggressive and violent acts.

Additionally, Munger claimed that “nor do I like just shuffling out of your extra billions of billions of dollars to somebody who just invented a new financial product out of thin air.” But if anyone is to be considered the enemy based on such a sentence, it is not the average bitcoiner mining in his basement. It is the Federal Reserve. Munger is completely correct to find issue with the creation of wealth out of a new financial product being created out of thin air. To understand this we can turn to Richard Cantillon; for brevity’s sake, I’ll only quote the abstract of chapter 7 of An Essay on Economic Theory:

When there is an increase in the quantity of money, prices will increase depending on how the new money holders decide to spend their money. The price changes will also be affected by such things as regulations on trade and the perishability of the products that are traded. In other words the simple quantity theory of money is naïve in proposing that a doubling of the quantity of money would double all prices equally. Changes in the quantity of money will change relative prices and have real effects on the economy, a phenomenon now known as the Cantillon Effects.

Simply put, when there is an increase in the money supply, those who benefit most are those who first have access to it, as the money slowly loses value each step of the way as the effects of the inflationary policies hit. Presently, the banks are the first recipients of the new money, and the consumers are the ones who have value stolen. Munger is not completely wrong to point to bitcoin in its own way as a tool for such an effect. The major difference between the Federal Reserve and bitcoin is that for the first time in modern history, cryptocurrency offers these Cantillon effects in favor of the common man and at the expense of elites such as Munger, which I suspect is one of the most pressing reasons he is truly against cryptocurrency.

But the last piece that Munger gets mostly wrong is that he misunderstands his role. As George Selgin said in Less Than Zero “Economists should not smuggle ethical judgments into what purports to be a discussion of positive requirements for an efficient use of resources.” Bitcoin is a technology. Money in and of itself is a technology. It is true that these technologies may be used in negative ways. But it is also true that they may be used in positive ways. Cryptocurrency is an empty vessel, and for Munger to describe it as “disgusting and contrary to the interests of civilization” is for him to misunderstand his place as an economist.

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Joe Biden, Stock Market Hero

05/06/2021Robert Aro

The CNN headline news article says it all:

Biden at 100 days: Hottest stock market since JFK

Sounds like quite the accomplishment! As reported, the S&P 500 is up a whopping 8.6% since Biden took office, the largest gain since 1961. This was much larger than Biden’s predecessor, who only managed to see a 5% gain in his first 100 days in office.

CNN went as far as quoting Randy Frederick, vice president of trading and derivatives at Charles Schwab, who said:

There is a belief out there, that is absolutely incorrect, that markets do better under Republicans. It's completely wrong.

The article goes on say that Wall Street approves of Biden’s attempt to “corral the Covid-19 crisis and stimulate the economy,” and that:

the historic gains at the start of the Biden era add to a sense of optimism about America's economic recovery… 

A chart is provided showing how great the returns under Democrats have been versus Republicans, who more often than not find themselves in a stock market slump when taking office.

stocks

This is a great example where stats or data are used to convey something which sounds interesting as a headline, but once you start to look deeper for substance, you find very little. 

The only thing more misleading than celebrating gains in a stock market index, is when this gain is attributed to a President, Democrat or Republican. One of the best cases of this is Venezuela, where in 2019 the Forbes headline read:

The Caracas Stock Market Index is up nearly 200,000%.

Of course, the article notes, against the US Dollar, the enormous gain amounts to a loss of 94% in the year; the lesson being, we can’t always use percentage gains in stock markets as a barometer of success.

True, under Biden’s first 100 days, the market has performed well. We should ask questions, such as: What does the gain in the stock market mean, and what was the cost society paid for this?

As for the gain, it helps illustrate the often-cited separation between Wall Street and Main Street. The same CNN article notes that in 1932, under FDR and during the Great Depression, the stock market saw a gain of 104.4%. This big win should mean FDR was a successful President, or the nation was better off for the various government interventions and socialist schemes enacted during his presidency. Perhaps the divide between the stock market and the real economy has existed for longer than we realize…

And the cost? CNBC weighs in:

Congress already had appropriated more than $3 trillion in stimulus and the Federal Reserve had relaxed policy to the loosest point in the central bank’s history. All told, more than $5.3 trillion has been spent on Covid-related relief efforts, and the Fed’s bond purchases have nearly doubled its balance sheet to just shy of $8 trillion.

It seems, many trillions of dollars in stimulus efforts plus easy money policies can do wonders for the stock market, assuming the stock market is influenced by central bank action such as trillion-dollar bond buying and artificially low rates.

While big gains are great for executive compensation, corporate buybacks, money managers and those heavily invested in the stock market, we don’t hear about the millions who lost their job due to forced closures, or those on a fixed income who struggle with the perpetual loss of purchasing power of their dollars. We live in a society that borrows heavily against its future so that a select few can live in the now, calling stimulus today what will be debt tomorrow; a debt which can never be repaid. But this seldom makes headlines. It’s much more of a difficult story to cover and not as upbeat as an 8.6% stock market win for the new President.

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The State Is Not Us

05/06/2021Connor Mortell

This definition is used by many historians of the state, and by many within the field of political science. Rothbard, however, employees this definition to delve deeply into a better understanding of how the state affects human freedom.

In doing so, Rothbard opens with an equally important concept: what the state is not. People everywhere have many misconceptions of the state as a charitable organization. Rothbard takes painstaking steps to disabuse the reader of this perception. One of his most important points is addressing that the state is not a representative organization, or as he puts it,

We must, therefore, emphasize that “we” are not the government; the government is not “us.” The government does not in any accurate sense “represent” the majority of the people. But, even if it did, even if 70 percent of the people decided to murder the remaining 30 percent, this would still be murder and would not be voluntary suicide on the part of the slaughtered minority. No organicist metaphor, no irrelevant bromide that “we are all part of one another,” must be permitted to obscure this basic fact.

Especially throughout the twentieth century, when prodemocracy sentiments were at an all time high and the belief that the government was in fact representing us, most importantly, needed to be dismantled. Unfortunately, one step of this is removed and that is in the scenario we’ve seen so present this last year. While many still believe that the government does represent us and has our best interest at heart and this needs to be discredited, it is also true that the average person seems not to simply view the government as “us” but rather as a truly separate entity that is not “us” but rather somehow greater than us and knows better than we. As a result we see the worst of both worlds, where the person takes just enough of Rothbard’s lesson to believe that the state is not directly us, but not enough to recognize that these people who are not us are no better than we are and in many ways are worse. This is most glaringly apparent through the coronavirus activity of the last year. We went from two weeks to slow the spread, to people claiming it was just being hyped up for the election, to we just need the vaccine, to we just need herd immunity, to who knows what. But to ensure I don’t specifically target one group of people taking the government at their word, I’ll also state that in the other biggest issue of this past year it has been just as prevalent on the other side, as we’ve seen members of the Right defend police brutality under claims that victims should have just obeyed better, as an unwitting defense of a belief that the government is in fact an entity that knows what is best for us somehow better than we do. This belief that they know better, whether about covid, security, or any number of other issues, seems to view them as a separate entity than us, but in so believing, people believe that this separate entity has more understanding and knowledge than we do—this needs to be disillusioned just as much as the fact that they are not us.

Author, crypto expert, and instructor Vin Armani describes this willingness to believe just about anything as long as it comes from someone perceived to know better as “the dim age.” He explains it referring to Arthur C. Clarke’s third law, which states that “[a]ny sufficiently advanced technology is indistinguishable from magic.” “The dim age” refers to many things, but one of the large points Armani references is that because the technology we see in day-to-day life has reached such a level that the average person can’t understand it, people have to turn to the experts to know what is science and what is fictional magic.

This sounds quite plausible as one reads it or listens to Vin Armani explain it, however it runs contrary to the Austrian understanding of the division of labor and leads us to wonder how we can square that circle. Leonard E. Read’s "I, Pencil" demonstrates the beauty of division of labor at its absolute best. Read claims that “I’ll bet there isn’t a person on earth who knows how to make even so simple a thing as a pencil.” Read explains that for even a pencil to be made, a tree must be grown and harvested. To make the tools to grow and harvest the tree, ore must be mined, steel must be made, and then steel must be refined. Hemp must be grown. The wood must be shipped. The wood then must be shaped. As well it must be painted. The paint must be made. Capital accumulation must occur to create the pencil factory where the wood will arrive. The so-called lead must be created, as it is not just lead but rather graphite, which must be mined, manipulated, and shipped. A piece of metal must be formed and attached to attach the eraser, which in and of itself is a whole product to be made. Then, when all is said and done, a simple pencil is made. This division of labor is what allows our society to be possible. Without it we wouldn’t be able to manage technology as simple as a pencil, let alone something as incredibly advanced as a smartphone. So how do we receive the benefits of the mass division of labor we see in society without having to rely on the word of an expert—or worse yet, the word of the state?

The answer to this is also found in "I, Pencil." It is here that Read explains the vital point that is missing

There is a fact still more astounding: the absence of a mastermind, of anyone dictating or forcibly directing these countless actions which bring me into being. No trace of such a person can be found. Instead we find the Invisible Hand at work.

When we as individuals see the division of labor perform the beautiful task demonstrated in "I, Pencil," we must recognize that we are in fact not experts. As a result, we must lean on the experts for some understanding in almost all things. However, it is equally important to remember that no expert is a mastermind and thus is only looking at a tiny percentage of the picture. So while we must remind the world that we are not the government, we must also remind the world that they are not masterminds; even their best experts only understand part of the picture. So keep pushing Rothbard’s message, but don’t ever forget his other message “Libertarians make no exceptions, no double standard, for government.” They are not masterminds, just one piece of a massive machine of division of labor.

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Will Special Interests Allow America’s "Longest War" to Finally End?

05/04/2021Ron Paul

Even if “won,” endless wars like our 20 year assault on Afghanistan would not benefit our actual national interest in the slightest. So why do these wars continue endlessly? Because they are so profitable to powerful and well-connected special interests. In fact, the worst news possible for the Beltway military contractor/think tank complex would be that the United States actually won a war. That would signal the end of the welfare-for-the-rich gravy train.

In contrast to the end of declared wars, like World War II when the entire country rejoiced at the return home of soldiers where they belonged, an end to any of Washington’s global military deployments would result in wailing and gnashing of the teeth among the military-industrial complex which gets rich from other people’s misery and sacrifice.

Would a single American feel less safe if we brought home our thousands of troops currently bombing and shooting at Africans?

As Orwell famously said, “the war is not meant to be won, it is meant to be continuous.” Nowhere is this more true than among those whose living depends on the US military machine constantly bombing people overseas.

How many Americans, if asked, could answer the question, “why have we been bombing Afghanistan for an entire generation?” The Taliban never attacked the United States and Osama bin Laden, who temporarily called Afghanistan his home, is long dead and gone. The longest war in US history has dragged on because … it has just dragged on.

So why did we stay? As neocons like Max Boot tell it, we are still bombing and killing Afghans so that Afghan girls can go to school. It’s a pretty flimsy and cynical explanation. My guess is that if asked, most Afghan girls would prefer to not have their country bombed.

Indeed, war has made the Beltway bomb factories and think tanks rich. As Brown University’s Cost of War Project has detailed, the US has wasted $2.26 trillion on a generation of war on Afghanistan. Much of this money has been spent, according to the US government’s own Special Inspector General for Afghanistan Reconstruction, on useless “nation-building” exercises that have built nothing at all. Gold-plated roads to nowhere. Aircraft that cannot perform their intended functions but that have enriched contractors and lobbyists.

President Biden has announced that the US military would be out of Afghanistan by the 20th anniversary of the attacks of 9/11. But as always, the devil is in the details. It appears that US special forces, CIA paramilitaries, and the private contractors who have taken an increasing role in fighting Washington’s wars, will remain in-country. Bombing Afghans so that Max Boot and his neocons can pat themselves on the back.

But the fact is this: Afghanistan was a disaster for the United States. Only the corrupt benefitted from this 20 year highway robbery. Will we learn a lesson from wasting trillions and killing hundreds of thousands? It is not likely. But there will be an accounting. The piper will be paid. Printing mountains of money to pay the corrupt war profiteers will soon leave the working and middle classes in dire straits. It is up to non-interventionists like us to explain to them exactly who has robbed them of their future.

Reprinted with permission.

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Cops Beat Up an Old Lady and Then Laughed about It. Where Were the "Good Cops"?

05/04/2021Ryan McMaken

Last month, I mentioned the case of Karen Garner, a seventy-three-year-old, eighty-pound woman with dementia who was beaten by police for “resisting” arrest in June 2020. At the time, Garner was allegedly guilty of almost stealing thirteen dollars' worth of merchandise at Walmart after apparently forgetting to pay. When confronted by store workers, Garner attempted to pay but was thrown out of the store by Walmart staff.

Garner, who was apparently confused at the time of arrest, was soon confronted by Loveland, Colorado, police officer Austin Hopp while Garner slowly walked home. Within seconds—with the help of fellow officer Daria Jalali—Hopp threw the elderly, disabled woman to the ground, breaking her arm, and dislocated her shoulder.

The officers then threw Garner in a jail cell, denying her any medical treatment, for six hours.

But the story doesn’t end there.

Lest anyone think these officers made a well-meaning error in judgment or were unaware of Garner’s injuries, we can turn to video recorded at the Loveland Police Department facility following Garner’s arrest.

Shortly after Garner’s arrest, while Garner sat ten feet away in agony in her jail cell, officers Hopp, Jalali, and police staffer Tyler Blackett proceeded to review the body cam video from Garner’s arrest.

During this period of fun and revelry—captured on the station’s video cameras, and surely occurring “on the clock”—Hopp joked about dislocating Garner’s arm and declared, “I love it!” when he heard “the pop” that was apparently audible when Hopp wrenched Garner’s arm from its socket.

Hopp, Jalali, and Blackett proceeded to enjoy several minutes of hilarity as Hopp delighted in his torture of Garner and as Jalali and Blackett giggled and looked on.

Hopp and Jalali then when on to “fist bump” to congratulate themselves for Garner’s arrest.

Clearly, Hopp, Jalali, and Blackett were quite comfortable with amusing themselves with the suffering of others, and did not appear at all concerned that they might be disciplined for refusing medical attention to a woman in their custody who was clearly known to at least one of the officers to be injured. The dislocated shoulder, of course, was in addition to Garner’s bloodied face, which had earlier been observed and commented upon by police personnel in the body cam video itself.

And it seems the officers had little reason to suspect there might be any repercussions for their sadistic and unprofessional behavior. Although these officers’ little video party took place right in the middle of the police station, and right under the nose of supervisor Philip Metzler—who can be seen walking by Hopp and Jalali as they discussed the arrest—the Loveland Police department completely ignored the incident. The video suggests no other officers questioned this behavior or regarded it as untoward in any way. Certainly, Jalali and Hopp were not going to report on each other. We now know they were in a sexual relationship at the time of Garner's arrest

It was only eight months later, when Garner’s attorney sued the Loveland Police Department, that the department was forced to acknowledge the video, the arrest, and its officers’ behavior. But even now, the department is hard at work sweeping the matter under the rug. The three officers most closely involved with the incident—Hopp, Jalali, and Blackett—were all allowed to resign rather than be fired. This presumably will allow these officers to retain their pension benefits and pursue work as police officers in other departments.

The chief himself has offered no sign that he will accept any responsibility for what is apparently considered acceptable behavior in his department.

Bizarrely, in the midst of all this, the arresting officers still have their defenders. For example, last week, when some Loveland residents turned out to protest, some heavily armed locals turned out to shout at protestors who were allegedly guilty of insufficiently “backing the blue.”

Of course, the taxpayers already "back the blue" every day. The police budget is well funded to the tune of approximately $25 million per year in the small, virtually crime-free suburban town of Loveland. The idea that taxpayers—taxpayers like Karen Garner—ought to be harangued for a lack of police support should boggle the mind. For generations, Loveland police officers have been well paid to police a peaceful town where rarely does any officer deal with anything resembling a gangland slaying. Countless Loveland officers retire with generous benefits. Loveland citizens have financially backed the blue to the hilt for decades.

Two Important Reforms

The Loveland case also illustrates the need for other reforms we've discussed here at mises.org in the past. The first needed reform is abolishing police unions—and all public sector unions, for that matter. It is likely that a central reason the police department has avoided any real disciplinary action against Hopp et al. is because it is known the police union would provide legal services to the police officers and would fight tooth and nail to keep these officers in their positions. Police unions are one of the primary institutions most responsible for keeping abusive police officers on the payroll.

Second, legal immunity for police must be ended. Fortunately, in Colorado, this is already the case, and police can be found personally liable for up to $25,000 for abusive behavior. However, this new legislation did not take effect until after Garner's arrest. 

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The Fed Finally Gets Some Tough Questions. And Fails to Answer Them.

05/04/2021Robert Aro

On Wednesday, Federal Reserve Chair Jerome Powell showed how simple questions do not always get simple answers. When speaking to the media after the latest Federal Open Market Committee (FOMC) meeting, some difficult questions were asked. So much so, Powell had to repeat one question to himself, asking:

When will the economy be able to stand on its own feet?

He immediately followed with:

I'm not sure what the exact nature of that question is.

FOX News correspondent Edward Lawrence elaborated, asking when the Fed would lower the number of treasuries it buys, and when the economy would function “without having that support from the monetary side.” 

Powell found ways to avoid answering the idea of a nation which stands without central bank supports, but he did refer to various “tests” the Fed will do in order to make decisions like shrinking the balance sheet, explaining:

we've articulated our test for that, as you know, and that is just we'll continue asset purchases at this pace until we see substantial further progress.

He went on to say that prior to making any decisions, such as buying fewer treasuries, they will give the public a lot of notice beforehand.

There was also a question related to the Fed’s influence in the housing market:

the housing market is strong, prices are up. And yet, the Fed is buying $40 billion per month in mortgage related assets. Why is that, and are those purchases playing a role at all in pushing up prices?

Despite amassing nearly $2.2 trillion of mortgage-backed securities (MBS), Powell defended the central bank on the grounds that:

I mean, we started buying MBS because the mortgage-backed security market was really experiencing severe dysfunction, and we've sort of articulated, you know, what our exit path is from that. It's not meant to provide direct assistance to the housing market.

To be clear, the “severe dysfunction” occurred over a decade ago, when the Fed entered the MBS market. As for the public knowing the exit path or not providing assistance to the housing market, both ideas are highly debatable, to say the least. But even more puzzling is when Powell says that during the current COVID crisis:

We bought MBS, too. Again, not intention to send help to the housing market, which was really not a problem this time at all.

Strange, the Fed would commit to buying $40 billion a month of MBS when, according to the Chair, there were no problems in the market. He concludes that purchases will go to zero over time, but the “time is not yet.”

The final question asked was in regards to market intervention:

if you get out of the markets, there aren't enough buyers for all of the Treasury debt? And so, rates would have to go way up. Bottom line question is what do we get for $120 billion a month that we couldn't get for less?

Powell never explained what exactly “we get for $120 billion” a month, but assured us the Fed was looking to reach its goals, and this was part of its plan. However, he did comment on purchases, saying:

But if we bought less, you know, no. I mean, I think the effect is proportional to the amount we buy… And we articulated the, you know, the test for withdrawing that accommodation. And we think, you know. So, we're waiting to see those tests to be fulfilled, both for asset purchases and for lift off of rates. And, you know, when the tests are fulfilled, we'll go ahead as, you know, we've done this before.

Between various tests to determine policy, vague responses, and a general avoidance of answering questions directly, not much was offered other than providing perpetual liquidity injections under accommodative monetary conditions. It was refreshing to see the mainstream media ask more questions about the plan ahead; we can only hope the mainstream economic community will do the same.

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