Power & Market
Following last February's shooting at Marjory Stoneman Douglas High School in Parkland, Florida, some students claimed local government officials were at fault for failing to provide protection to students. The students filed suit, naming six defendants, including the Broward school district and the Broward Sheriff’s Office , as well as school deputy Scot Peterson and campus monitor Andrew Medina.
On Monday, though, a federal judge ruled that the government agencies " had no constitutional duty to protect students who were not in custody."
This latest decision adds to a growing body of case law establishing that government agencies — including police agencies — have no duty to provide protection to citizens in general:
“Neither the Constitution, nor state law, impose a general duty upon police officers or other governmental officials to protect individual persons from harm — even when they know the harm will occur,” said Darren L. Hutchinson, a professor and associate dean at the University of Florida School of Law. “Police can watch someone attack you, refuse to intervene and not violate the Constitution.”
The Supreme Court has repeatedly held that the government has only a duty to protect persons who are “in custody,” he pointed out.
Moreover, even though the state of Florida has compulsory schooling laws, the students themselves are not "in custody":
“Courts have rejected the argument that students are in custody of school officials while they are on campus,” Mr. Hutchinson said. “Custody is narrowly confined to situations where a person loses his or her freedom to move freely and seek assistance on their own — such as prisons, jails, or mental institutions.”
Hutchinson is right.
The US Supreme Court has made it clear that law enforcement agencies are not required to provide protection to the citizens who are forced to pay the police for their "services."
In the cases DeShaney vs. Winnebago and Town of Castle Rock vs. Gonzales, the supreme court has ruled that police agencies are not obligated to provide protection of citizens. In other words, police are well within their rights to pick and choose when to intervene to protect the lives and property of others — even when a threat is apparent.
In both of these court cases, clear and repeated threats were made against the safety of children — but government agencies chose to take no action.
A consideration of these facts does not necessarily lead us to the conclusion that law enforcement agencies are somehow on the hook for every violent act committed by private citizens.
This reality does belie the often-made claim, however, that police agencies deserve the tax money and obedience of local citizens because the agencies "keep us safe."
Nevertheless, we are told there is an agreement here — a "social contract" — between government agencies and the taxpayers and citizens.
And, by the very nature of being a contract, we are meant to believe this is a two-way street. The taxpayers are required to submit to a government monopoly on force, and to pay these agencies taxes.
In return, these government agents will provide services. In the case of police agencies, these services are summed up by the phrase "to protect and serve" — a motto that has in recent decades been adopted by numerous police agencies.
But what happens when those police agencies don't protect and serve? That is, what happens when one party in this alleged social contract doesn't keep up its end of the bargain.
The answer is: very little.
The taxpayers will still have to pay their taxes and submit to police agencies as lawful authority. If the agencies or individual agents are forced to pay as a result of lawsuits, it's the taxpayers who will pay for that too.
Oh sure, the senior leadership positions may change, but the enormous agency budgets will remain, the government agents themselves will continue to collect generous salaries and pensions, and no government will surrender its monopoly on the use of force.
Unsurprisingly, these large fiscal burdens have resulted in anemic economic performance, which helps to explain why middle-class French taxpayers launched nationwide protests in response to a big increase in fuel taxes.
The French President, Emmanuel Macron, capitulated.
But some have suggested that Macron’s problem is that he wasn’t sufficiently bold.
I’m not joking. Led by Thomas Piketty, a few dozen European leftists have issued a Manifesto for bigger government.
We, European citizens, from different backgrounds and countries, are today launching this appeal for the in-depth transformation of the European institutions and policies. This Manifesto contains concrete proposals, in particular a project for a Democratization Treaty and a Budget Project… Our proposals are based on the creation of a Budget for democratization which would be debated and voted by a sovereign European Assembly. …This Budget, if the European Assembly so desires, will be financed by four major European taxes, the tangible markers of this European solidarity. These will apply to the profits of major firms, the top incomes (over 200,000 Euros per annum), the highest wealth owners (over 1 million Euros) and the carbon emissions (with a minimum price of 30 Euros per tonne).
Here are the taxes they propose as part of their plan to expand the burden of government spending.
I’m surprised they didn’t include a tax on financial transactions.
And here’s a video (in French, but with English subtitles) explaining their scheme.
To put it mildly, this plan is absurd. It would impose another layer of governmentand another layer of tax on a continent that already is suffocating because the public sector is too large.
I’m not the only one with concerns.
In a column for Bloomberg, Leonid Bershidsky points out why he is underwhelmed by Piketty’s proposal.
The reforms proposed by Piketty and a group of intellectuals and politicians — notably Pablo Iglesias, leader of Spain’s leftist Podemos party — include the creation of a European Assembly. It would have the power to shape a common budget and impose common taxes…Piketty advocates four measures that would collect a total equivalent to 4 percent of Europe’s GDP… What is being proposed is essentially a return to the fiscal policies of the 1970s, which provoked Astrid Lindgren to write her satirical essay “Pomperipossa in Monismania.” In 1976, the children’s author was confronted with a tax bill of 102 percent of her income. …Hit them with new taxes and watch them flee to the U.S. and Asia. They won’t stay like patriotic Lindgren, whose essay helped to topple the Swedish government in 1976. And no amount of government funding…will repair the damage that envy-based taxation can wreak on economies already finding it hard to innovate.
Let’s not forget, by the way, the many thousands of French households who also have suffered 100 percent-plus tax rates.
But let’s not digress.
Writing for CapX, John Ashmore explains why Piketty’s plan will make Europe’s problems even worse.
…a group of politicians, academics and policy wonks spearheaded by…French economist Thomas Piketty…have put their names to a new Manifesto for the Democratisation of Europe. …For the most part, the manifesto reads like a souped up version of the kind of policies we’ve heard time and again from leftwing politicians. …The details of today’s ‘manifesto’ make Labour’s Marxist Shadow Chancellor John McDonnell look like a moderate centrist. Where Labour advocate putting corporation tax back up to 26 per cent, Piketty and co want it hiked to 37 per cent. And while we Brits spent plenty of the Coalition years discussing whether income tax should be 45p or 50p in the pound, the Manifesto goes all guns blazing for a 65 per cent top rate… these measures are projected to raise 800bn euros, equivalent to four times the current EU budget. …that would be a huge transfer of power, not from the rich from the poor, but from taxpayers to politicians.
Moreover, based on America’s experience during the Reagan years, it’s safe to say that actual tax receipts would fall far, far short of the projection.
But the higher spending would be real, as would the inevitable increase in red ink. And it’s worth noting that the Manifesto proposes to subsidize the debt of bankrupt welfare states. Very much akin to the eurobond scheme, which I pointed out would be like cosigning a loan for an unemployed alcoholic with a gambling addiction.
P.S. During my recent trip to London, I repeatedly warned people that a real Brexit was the only sensible choice because the European Union at some point will fully morph into a transfer union (i.e., a European budget financed by European taxes). It was nice of Piketty to issue a Manifesto that confirms my concerns. Simply stated, the United Kingdom will be much better off in the long run if it escapes.
Originally published at International Liberty
It’s not often that US Government officials are honest when they talk about our foreign policy. The unprovoked 2003 attack on Iraq was called a “liberation.” The 2011 US-led destruction of Libya was a “humanitarian intervention.” And so on.
So, in a way, Secretary of State Mike Pompeo was refreshingly honest last week when, speaking about newly-imposed US sanctions, he told the BBC that the Iranian leadership “has to make a decision that they want their people to eat." It was an honest admission that new US sanctions are designed to starve Iranians unless the Iranian leadership accepts US demands.
His statement also reveals the lengths to which the neocons are willing to go to get their “regime change” in Iran. Just like then-Secretary of State Madeleine Albright said it was “worth it” that half a million Iraqi children died because of our sanctions on that country, Pompeo is letting us know that a few million dead Iranians is also “worth it” if the government in Tehran can be overthrown.
The US Secretary of State has demanded that Iran “act like a normal country” or the US would continue its pressure until Iran’s economy crumbles. How twisted is US foreign policy that Washington considers it “normal” to impose sanctions specifically designed to make life miserable – or worse – for civilians!
Is it normal to threaten millions of people with starvation if their leaders refuse to bow down to US demands? Is the neoconservative obsession with regime change “normal” behavior? Is training and arming al-Qaeda in Syria to overthrow Assad “normal” behavior? If so, then perhaps Washington’s neocons have a point. As Iran is not imposing sanctions, is not invading its neighbors, is not threatening to starve millions of Americans unless Washington is “regime-changed,” perhaps Iran is not acting “normal.”
So what is normal?
The continued Saudi genocide in Yemen does not bother Washington a bit. In fact, Saudi aggression in Yemen is viewed as just another opportunity to strike out at Iran. By making phony claims that Yemen’s Houthis are “Iran-backed,” the US government justifies literally handing the Saudis the bombs to drop on Yemeni school busses while claiming it is fighting Iranian-backed terrorism! Is that “normal”?
Millions of Yemenis face starvation after three years of Saudi attacks have destroyed the economy and a Saudi blockade prohibits aid from reaching the suffering victims, but Secretary Pompeo recently blamed Yemeni starvation on, you guessed it: Iran!
And in a shocking display of cynicism, the US government is reportedly considering listing Yemen’s Houthis as a “terrorist” organization for the “crime” of fighting back against Saudi (and US) aggression. Labeling the Yemeni resistance a “terrorist” organization would effectively “legalize” the ongoing Saudi destruction of Yemen, as it could be justified as just another battle in the “war on terror.” It would also falsely identify the real culprits in the Yemen tragedy as Iran, which is repeatedly and falsely called the “number one sponsor of terrorism” by Pompeo and the rest of the Trump Administration neocons.
So yes, Secretary of State Mike Pompeo told one wicked truth last week. But before he demands that countries like Iran start acting “normal” or face starvation, perhaps he should look in the mirror. Are Pompeo and the neocons “normal”? I don’t think so.
Paul Volcker, the cigar smoking former Chairman of the Federal Reserve Bank, literally and figuratively towers over his successors (he is reportedly 6'7"). Mr. Volcker is the the last Chair under whose tenure American savers could earn a decent rate of interest, the last Chair who demonstrated any meaningful political independence (clashing with presidents Carter and Reagan), the last Chair who really hated inflation, and the last Chair who eschewed the technocratic management of monetary policy. He's the last of the old-guard central bankers who saw monetary policy as a regulator and not a stimulus machine. As bad as he was on gold—as an undersecretary in Nixon's Treasury department he advocated the suspension of gold convertibility— Volcker was a gut-level banker who understood complex markets but also the concerns of average people. He was never a policy wonk with his head in the clouds.
Still active and robust at 91, he's written a new memoir documenting his long tenure at the central bank. If his comments (excerpted from the book) in this recent Bloomberg opinion piece are any indication, it should be a welcome refutation of technocratic monetary policy by his successors—particularly when it comes to the current bizarro-world understanding of inflation and deflation:
More recently, a remarkable consensus has developed among central bankers that there’s a new “red line” for policy: A 2 percent rate of increase in some carefully designed consumer price index is acceptable, even desirable, and at the same time provides a limit.
I puzzle about the rationale. A 2 percent target, or limit, was not in my textbooks years ago. I know of no theoretical justification. It’s difficult to be both a target and a limit at the same time. And a 2 percent inflation rate, successfully maintained, would mean the price level doubles in little more than a generation.
Who else in the world of central banking even mentions inflation these days, other than to tell us it's not a problem? Do any Fed or ECB economists think doubling prices on consumer goods every couple of decades is a good thing? Why do today's policy makers think prices are rising too slowly, a position totally at odds with the public? Volcker points out the absurdity of their thinking:
Yet, as I write, with economic growth rising and the unemployment rate near historic lows, concerns are being voiced that consumer prices are growing too slowly — just because they’re a quarter percent or so below the 2 percent target! Could that be a signal to “ease” monetary policy, or at least to delay restraint, even with the economy at full employment?
Certainly, that would be nonsense. How did central bankers fall into the trap of assigning such weight to tiny changes in a single statistic, with all of its inherent weakness?
Perhaps an increase to 3 percent to provide a slight stimulus if the economy seems too sluggish? And, if 3 percent isn’t enough, why not 4 percent?
I’m not making this up. I read such ideas voiced occasionally by Fed officials or economists at the International Monetary Fund, and more frequently from economics professors. In Japan, it seems to be the new gospel. I have yet to hear, in the midst of a strong economy, that maybe the inflation target should be reduced!
He also provides some very clear thinking about the bogeyman known as deflation. Systemic crises, in the form of deep recessions, are the danger—not falling prices. Of course deep recessions are deflationary, as banks, businesses, and households shed debt and lower consumption. But loose monetary policy, not Volckerian rate hiking, creates the biggest risk of a future systemic crises:
The lesson, to me, is crystal clear. Deflation is a threat posed by a critical breakdown of the financial system. Slow growth and recurrent recessions without systemic financial disturbances, even the big recessions of 1975 and 1982, have not posed such a risk.
The real danger comes from encouraging or inadvertently tolerating rising inflation and its close cousin of extreme speculation and risk taking, in effect standing by while bubbles and excesses threaten financial markets. Ironically, the “easy money,” striving for a “little inflation” as a means of forestalling deflation, could, in the end, be what brings it about.
Mr. Volcker's memoirs hopefully will serve as a much-needed corrective against the inanity of monetary policy today and a warning against the folly of what Nomi Prins calls "financial alchemy," the false belief that central bankers can conjure up prosperity using technical wizardry. Production, productivity increases, profit, and investment are the only way to create a truly prosperous and sustainable economy, and no amount of policy tinkering can change this. Volcker is not an Austrian, but he is someone who understands the threat to America's economic future posed by disconnected central bank policies. Fed officials, current and former, would be well-served to worry less about Donald Trump's tweets and more about their own reputations. As R. Christopher Whalen reminds us in this excellent analysis, "the greatest threat to the central bank’s existence is the tendency of Fed governors and economists to pursue abstract economic theories that make no sense in real world terms and often do more harm than good."
Let's hope Jay Powell reads Mr. Volcker's book.
As Hurricane Florence prepares to ravage the Southeastern United States, social media warriors, and “news” outlets are exclaiming their outrage at the business owners who are raising prices on essential items such as water, food, gasoline, plywood, and even hotel rooms. This “price gouging,” however, is absolutely essential, for people’s lives are at risk due to this storm. When clouded by emotion, increasing the price of these commodities may come across as detrimental, and even malicious. But a sober mind must acknowledge the necessity of price flexibility.
Price Gouging and Basic Economics
We can look at the effects of price gouging from two perspectives: supply and demand.
On the demand side, increasing the price of these goods makes consumers more conscious of their purchases. In other words, this encourages people to live within their means. When a disaster is incoming, such as a hurricane or a blizzard, people will see others at grocery stores stocking up on water and other essentials. They will, however, purchase too much if the price stays the same. Whereas a storm and its immediate aftermath may last for a few days, people will purchase enough to last them for months, resulting in shortages.
By increasing the price of a good, customers are more likely to purchase only what they need to survive. Now, many will say that this just means that the rich will outbid the poor on necessary resources. But this is not the case when one thinks on the margin. In everyday life, the rich don’t outbid the poor on food because the rich do not need all the food in the world. They will only purchase food so long as the perceived benefit acquired is worth more than the money they will have lost if they make the purchase. In other words, price gouging stops the rich from buying all of the water and thus allows the poor to buy water that they may desperately need.
Keeping the Prices the Same Hurts Everyone
Suppose water stayed at the same price throughout a disaster. The receivers of the water will then be the first to show up. But what if the first comers take far more than they need for this disaster? Then there will be nothing left. By increasing prices, store managers are making sure that people only buy what they find to be necessary so that they do not run out of goods. This allows for a greater distribution of essential goods.
On the supply side, price gouging helps increase the quantity. The rich can only outbid the poor if there is a fixed amount of a given resource within the area in which a disaster has occurred. This is far from the case. By increasing prices, the market is signaling to businesses to reallocate resources to the area in need of resources. This has two effects.
First, entrepreneurs who live outside the disaster area see a willingness of consumers to purchase items at a higher price. That means that entrepreneurs will be far more likely to take the risk of traveling to the area to sell the items. This makes the number of goods to rise, allowing for more people to be able to access essential resources.
Second, charities see higher prices and begin initiatives to give resources to those in need. Governments cause shortages by implementing price controls. Charities and entrepreneurs save lives. There is not a fixed amount of goods. The price system readjusts incentive structures to ensure that enough people have what they need to survive a natural disaster.
Price gouging is no different from any other instance of price flexibility. Those who charge a higher price despite popular outrage deserve a medal, for they are saving lives by ensuring people only purchase what they need to survive a disaster. For all of you who will be affected by Hurricane Florence, stay safe and thank a price gouger!
Congratulations to Mises Senior Fellow Peter Klein for being recognized by the Strategic Entrepreneurship Society with its Strategic Entrepreneurship Journal Best Paper Prize for his paper "Opportunity Discovery, Entrepreneurial Action, and Economic Organization."
One of the aspects that makes this award particularly important is that it recognizes the impact of a paper. As such, papers are not eligible until they have been published for five or more years.
The award committee consists of the Editorial Board of the Strategic Entrepreneurship Journal and is supplemented by surveys of leading figures in the field of strategic entrepreneurship conducted by the Co-Editors of the Strategic Entrepreneurship Journal.
This paper is included in Dr. Klein's 2010 book The Capitalist and the Entrepreneur.
Previously I wrote about efforts in the US Congress to pass legislation that would make police officers an even more protected class by allowing federal prosecutors to charge individuals with committing "hate crimes" against them. While that legislation has not yet passed in the Senate and will hopefully die, some police officers have found other ways to use hate crimes legislation to their benefit.
The state of Pennsylvania has a hate crime statute known as "ethnic intimidation," applying to a person committing an offense "with malicious intention toward the race, color, religion or national origin of another individual or group of individuals..." The effect of the statute is to enhance the grading of the actual criminal offense committed by one degree, potentially turning a 1st degree misdemeanor into a 3rd degree felony.
The statute was used against Robbie Sanderson , a 52-year-old black man, who was arrested for stealing around $100 worth of merchandise from a CVS Pharmacy. According to the affidavit filed by the Crafton Borough police, during the arrest, he called the officers "Nazis," "skinheads" and "Gestapo," and told one officer that he would find that officer's wife and have sex with her. Sanderson was charged with "felony ethnic intimidation" and "misdemeanor terroristic threats" for these comments.
Pennsylvania law enforcement has used this statute in a number of cases to punish those who insult them: Sannetta Amoroso, a 43-year-old black woman, was charged with felony ethnic intimidation for saying "I'm going to kill all you white b****es" and "death to all you white b****es" while attempting to report a crime to the McKees Rocks Police. Steven Ray Oller was charged with misdemeanor ethnic intimidation for threatening officers and using a racial slur directed at a Latino officer during an arrest for DUI. Anthony Payne was also charged with misdemeanor ethnic intimidation for calling an officer "Gandhi mother****er" during a welfare check at Payne's home.
All of these charges were later dropped and rightfully so, as the text of the statute states that ethnic intimidation cannot be a standalone offense, but rather applies when another crime is motivated by malicious intention toward race, color, religion, or national origin. The officers in these cases blatantly misapplied the law, but faced no adverse consequences for doing so. This should come as no surprise; despite the assurances of apologists for hate crime legislation that it "only appl[ies] when there is an underlying crime to prosecute," this is clearly not the case in practice.
Furthermore, police apply it for ideological reasons outside of the stated intentions of the law. For example, two teenagers in Baltimore were charged with a hate crime for setting fire to a Trump campaign sign. We are on the slippery slope we were assured wouldn't occur.
What's very strange about the whole issue is that those organizations that claim to hold civil liberties in the highest regard, including the 1st Amendment and due process, are those that tend to be most in favor of such sentencing enhancements. They also tend to deny the utility of harsher prison sentences for reducing most other types of crime; as such, they are either inconsistent in their views about harsher sentencing or view the purpose of hate crimes legislation as purely symbolic. Neither alternative reflects well upon them. What is indisputable, however, is that such legislation gives police officers greater discretion and power over individuals. This is something about which those calling themselves civil libertarians need to think carefully.
Congratulations to Israel Kirzner who received the Distinguished Fellow Award from the History of Economics Society at its 2018 annual meetings held in Chicago this past weekend. The Society confers the honor of “Distinguished Fellow” on “those who have contributed a lifetime of study to the history of economics.” In receiving this honor, Professor Kirzner, one of the most illustrious representatives of the modern Austrian school, joins a roster of eminent economists including Friedrich Hayek, George Stigler, Lionel Robbins, Don Patinkin, and Joseph Dorfman among others. Kirzner’s book The Economic Point of View: An Essay in the History of Economic Thought, which was based on the Ph.D. dissertation he wrote under Ludwig von Mises, remains the best history of the transformation of economics from a study of the causes of material wealth to the science of human action.
Congratulations to Mises Senior Fellow Peter G. Klein for being recognized by Baylor University as an Outstanding Professor for 2017-2018. In particular, Dr. Klein was credited for his scholarship as the W. W. Caruth Chair and Professor of Entrepreneurship, and Senior Research Fellow with the Baugh Center for Entrepreneurship & Free Enterprise.
His works the past year includes:
Stakeholders and Corporate Social Responsibility: An Ownership Perspective: Emerald Insight, February 2018 (coauthors: Nicolai Foss).
"Business Law and the Austrian Theory of the Firm," , Cheltenham: Edward Elgar, December 2017, pp. 325-346 (coauthors: Peter J. Boettke, Todd J. Zywicki, Thomas A. Lambert).
"Uncertainty Types and Transitions in the Entrepreneurial Process," Organization Science, Vol. 28, No. 5, (October 2017), pp. 840-856 (coauthors: Mark D Packard).
"Entrepreneurial Discovery or Creation? In Search of the Middle Ground," Academy of Management Review, Vol. 42, No. 4, (October 2017), pp. 735-737 (coauthors: Nicolai J Foss).
"The Effects of Academic Incubators on University Innovation," Strategic Entrepreneurship Journal, Vol. 11, No. 2, (June 2017), pp. 145-170 (coauthors: Christos Kolympiris).
"Entrepreneurial Traits, Formal Institutions, and the Motivation to Engage in Entrepreneurial Action," (May 2017) (coauthors: Boris Nikolaev, Christopher Boudreaux).
"Organizational Governance Adaptation: Who Is In, Who Is Out, and Who Gets What," Academy of Management Review, (2017) (coauthors: Joseph T Mahoney, Anita M McGahan, Christos Pitelis).
"Uncovering the Hidden Transaction Costs of Market Power: A Property Rights Approach to Strategic Positioning," Managerial and Decision Economics, (2017) (coauthors: Kirsten Foss, Nicolai Foss).
"My Contributions to Entrepreneurship Theory," , London: Routledge, 2017.