Price Gouging: A Life-Saving Market Mechanism

Price Gouging: A Life-Saving Market Mechanism

09/13/2018TJ Roberts

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!

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Name, Image, and Likeness

09/22/2021Connor Mortell

It’s the best time of the year: college football season. However, this is a particularly unique college football season because this year, for the first time ever, players will be able to be paid for their name, image, and likeness. This is the culmination of a long raging debate over whether or not college football players should be paid for the work they do. Arguments for paying players claim that they rake in cash for their schools, they give their schools valuable exposure, playing for the team is hard work, sports detract from studies, athletes need spending money, and the potential for injury compensation is a must. However, while these are initially convincing, upon further examination they are somewhat lacking. It is true that these athletes provide valuable exposure for their schools, but it is equally true that the universities provide valuable exposure for the athletes. However, the strongest critique that comes from those opposed to paying players is that these players are already receiving scholarships and are thus already being paid. The belief is that none of these arguments for paying players are in dispute because players are already being paid. For this reason, while we describe the argument as whether or not we pay players, the real debate is whether or not we pay players enough in the form of scholarships. This is what makes this college football season so exciting for economists, as this question can finally be addressed.

Because we as Austrians understand that value is subjective, we therefore also understand that we cannot say whether or not a scholarship is the appropriate amount to pay a college athlete. The answer to that has to come from the market process of economic calculation. Each player who takes the action to play football in exchange for a scholarship demonstrates that he values the scholarship and perhaps the potential future offered there more than he values the time spent and effort exerted playing football. In an unhampered market, as these decisions are made at different levels by different individuals; we see economic calculation take place and we see prices that we expect as market rates begin to form. As Ludwig von Mises explains in Socialism: An Economic and Sociological Analysis,

Every man who, in the course of economic activity, chooses between the satisfaction of two needs, only one of which can be satisfied, makes judgments of value. Such judgments concern firstly and directly the satisfactions themselves; it is only from these that they are reflected back upon goods.

In order for us to understand the values appropriate for college football players, we must allow for calculation so that we can see these judgments reflected back upon the players. However, a flaw has always existed for calculation in the world of college athletes. Mises goes on to explain that for calculation to exist, units must exist—prices must exist. Scholarships serve that purpose for us here. However, scholarships have a distinct ceiling of being able to offer at most the price of attending the university. Calculation has never been able to occur at a higher price point than that of tuition. Until now, the best of college football players have received these scholarships; however, it is entirely possible that they could find an incredibly higher value on an unhampered market. For the first time in the history of college sports, we will finally be able to run this experiment, as the ceiling of scholarships is finally gone.

However, the fact that athletes may be compensated for their name, image, and likeness still leaves one wanting in terms of calculation, as it only allows one form of competing on the market above the price of tuition, and that is in sales based on your fame. However, a lineman may not end up having the same demand for commercial appearances as a quarterback, despite the fact that it's possible a quarterback may only be so successful because he has such an exceptionally talented offensive line. Thus only certain members of the community may contribute to the new calculation that is taking place. For that reason, I will conclude with a few options that would allow for more effective economic calculation to allow us to understand better how much any given athlete brings to a school. First and foremost, it’d be helpful if schools were allowed to directly pay players and thus enter the competition themselves. This would lead to the school being allowed to calculate and we’d see the most direct valuations of what the player brings to the school. Additionally, if the National Football League did not require experience playing in college to enter the draft—as several other sports allow—we would see even more competition in the marketplace. Most importantly, this suggestion would allow us to evaluate the degrees, exposure, and potential that the schools offer the players, because right now every player is forced to receive this exposure and pursue a degree, whether they want it or not. Each of these suggestions has its own ethical arguments for and against it, but from a perspective of economics, this is the only way to better answer the question of how much athletes deserve to be paid. If we want to honestly understand this question, we must listen to what Florida state representative Chip LaMarca, said while running the bill to allow compensating players in Florida, “You either allow someone to enter the free market, or you don’t. I don’t think you put training wheels on them.”

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On Powell’s Plate

09/20/2021Robert Aro

This Wednesday concludes September’s Federal Open Market Committee (FOMC) meeting. It couldn’t come at a more tremulous time for Chair Powell and the Board of Governors. As of Monday, the Dow saw massive sell off, news headlines over China’s Evergrande facing bankruptcy continued, DC is facing another debt ceiling debate and COVID continues to dominate. As for the Fed, they too have been coming under scrutiny. A CNBC headline reads:

After years of being ‘squeaky clean,’ the Federal Reserve is surrounded by controversy.

And another titled:

Fed Chief Powell, other officials owned securities central bank bought during Covid pandemic.

Those were last week's headlines as the story only recently broke. To their credit, CNBC is asking novel questions like:

Should the Fed have banned officials from holding, buying and selling the same assets the Fed itself was buying last year when it dramatically widened the types of assets it would purchase in response to the pandemic?

The security trading involved key members, such as Powell, who held municipal bonds from around $1.25 to $2.5 million. Other Fed Presidents were also named in the press. Perhaps top ranking decision members at the Fed should not be able to own the same securities they were buying through America’s central bank? It would at least remove the optics of having a conflict of interest or acting in a way that is against the public's interest.

To be clear, as far as the public is aware, no member of the Fed violated any laws. But one should always remember there is a difference between law and ethics.

Adding to Chair Powell’s agenda is what appears to be a growing divide amongst the Board of Governors over the timing of the Fed’s tapering strategy. Per CNBC:

By Goldman Sachs’ count, six officials who have spoken publicly on the issue of tapering asset purchases are for it and six are against.

Having a split board on something as large as asset purchases doesn’t make his job any easier. The voting results and minutes will reveal if they managed to work out their differences during their closed door meetings this week. And what of inflation? Do they still believe we’re living in a transitory period?

With uncertainty over Powell’s term as chair, which expires in a few months, the last quarter of 2021 promises to make for interesting news stories. As to what Biden might do, a former chief economist of the National Economic Council provided a solution:

The administration is understandably going to wait and see how the Fed handles the taper and what the markets do. That could be the determining factor in whether he’s reappointed.

An interesting feature of the Fed becomes captured: For the entity entrusted to manage the nation’s unemployment and rate of inflation, it seems we’re always concerned as to how the market, namely stock, bond and real-estate reacts to every move the Fed makes. While not in their job description, the Fed has, for a very long time, been the de facto market savior.

Should Biden, or his advisors, use market performance to judge the merits of Powell’s tenure, as the article suggests, then Powell would be confronted with another moral dilemma. Trading securities as Fed chair has already pushed ethical boundaries. But having one’s job security tied to stock market performance, when you have legal authority to increase the money supply at will, creates another set of challenges. One can only hope those in charge use more than the market’s response as a barometer of Powell’s achievement... but it must be reiterated: one can only hope.

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Do Monarchies Have Higher Rates of Economic Growth?

09/20/2021Lipton Matthews

In its June edition, Cato Unbound published a feature discussing the pros and cons of constitutional monarchies. Quite surprisingly, mainstream academics are expressing a renewed interest in studying monarchies. Originally, arguing for the utility of monarchies was the reserve of libertarian intellectuals like Hans-Hermann Hoppe and Erik Kuehnelt von Leddhin. Nevertheless, during the past ten years, we have been fed a welter of empirical studies articulating the superiority of constitutional monarchies relative to democracies.

Following this trajectory, the scholars hosted by the Cato Institute proposed decisive arguments favoring their respective positions. Launching the debate lead essayist Vincent Geloso marshals a powerful justification for retaining constitutional monarchies where they already exist: “By investing in symbolism to reach high levels of popularity, ceremonial monarchs could be generating higher levels of trust…In so doing, they may be allowing a stronger civil society that can act as a substitute for government and as a check on the democratic tendencies to over-legislate and over-regulate.”

That monarchies cultivate social capital by serving as a symbol of political unity is an appreciated observation. Geloso is cognizant of monarchical virtues, however, other parties in the debate appear unimpressed. In his presentation “Monarchy: Cause of Prosperity or Consequence?” Rok Spruk submits that the survival of constitutional monarchies is a consequence of long-run economic growth. Spruk rubbishes the argument that monarchies motivate prosperity by asserting that the success of monarchies is a result of economic progress. For Spruk, economic prosperity is linked to the longevity of monarchical rule.

He claims that monarchies collapsed in European countries where the economy was underperforming. Spruk introduces an interesting counterpoint, but the story chronicled by history is more complicated. Thinkers like Alexis de Tocqueville, Erik Kuehnelt von Leddhin, and Ted Gurr have demonstrated that rising affluence can provide fertile ground for revolutions. Economic sluggishness may infuriate the working classes, but usually, revolts are orchestrated by socially ambitious intellectuals, as James Billington points out in his riveting tome Fire in the Minds of Men.

Primarily, revolts reflect the insecurities of thought leaders who demand greater prestige. Because revolutions do occur in prosperous times, one must be skeptical of the thesis that European monarchies imploded in the twentieth century due to an inability to record high growth rates. Neither is there a direct link between economic stagnation and political turmoil. In the Caribbean, there are many countries with sub-par growth rates and high levels of income inequality, yet their governments are indeed stable with Haiti being the outlier.

Similarly, Spruk’s contention that affluent European countries only retained the monarchical rule because of economics warrants scrutiny: “The wealthier European countries remained monarchies in the twenty-first century not necessarily because constitutional monarchies intrinsically develop better safeguards against arbitrary executive power but precisely they were able to achieve high levels of per capita income prior to major shocks like World Wars I and II.”

Spruk in his working paper on which the article is based cites the constitutional monarchy of Portugal as evidence for his theory. Though it seems odd to compare Portugal to constitutional monarchies like Britain and Sweden. Portugal functioned as an absolute monarchy for most of its royal history and unlike Sweden, Britain, and Denmark, she never experienced an age of free market reforms on a similar scale.

By the nineteenth century the Portuguese Empire was perceived as decrepit and lacking in modern sensibilities. Institutionally, Portugal was never in the league of the monarchies that survived hostile shocks of the twentieth century. It would be instructive to test the quality of Portugal’s monarchy comparing her to her peers. Spruk’s objection to the preservation of constitutional monarchies is a welcomed challenge for thinkers aiming to elucidate the merits of monarchical rule.

Admittedly, Spruk’s argument is one of the better objections to preserving constitutional monarchies, but on average, it seems that the evidence favors monarchies. Collins C. Ngwakwe and Mokoko P. Sebola in “Republics and Monarchies: A Differential Analysis of Economic Growth Link,” opine that though there is an insignificant relationship between regime type and growth “the mean GDP is slightly higher for monarchies than in republic countries”. Their conclusion is indeed striking: “Similarly, the variance statistic (a measure of instability) is lower for constitutional monarchies and higher for republics, indicating that constitutional monarchies appear more stable than republic countries.”

Additionally, Garmann (2017) supplements the literature by statistically proving that monarchies are associated with significantly better institutions. Though monarchies evidently possess some advantages, the evidence furnished in this piece is not to suggest that we should revert to monarchical rule, but rather indicate that the merits of studying alternatives to democracy.

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The Makings of a Fed Chair

09/17/2021Robert Aro

The speculation of whether Biden will reappoint Powell has been gaining media attention, as Powell’s term expires in February of next year. A few peculiarities stand out, as reported by the New York Times when they asked:

Should he reappoint Jerome Powell to lead the Federal Reserve when Mr. Powell’s term ends early next year, or select a replacement who is more fully aligned with the Democratic policy agenda?

But what about Fed independence?

We’ve long been told the Fed acts independently, ensuring the President and his cabinet does not control the nation’s fiscal and monetary policies. This reads as though the Fed should properly align itself to carry out the bidding of the ruling party.

It gets stranger! Earlier this week, two Democrat Senators, John Dodd and Barney Frank urged Biden to reappoint Powell for a second term. Reuters reports that the Senators believe:

Powell's approach to monetary policy - downplaying the risk of inflation in favor of encouraging stronger employment gains - would help Biden achieve his broader economic goals.

Any notion of appointing a Fed chair to help Biden achieve his goals flies in the face of Fed independence and raises alarms as to the state of monetary policy in America. The exact quote, as written in The Hill, sounds more bizarre. When referring to Powell, the Senators wrote:

His denial that excessive inflation is either imminent or inevitable given current Fed policy comes from a Trump appointee (as chair, although not initially as a governor) not previously known as a liberal and/or a subscriber to the “deficits don’t matter” school. 

Powell, who apparently downplayed the increase in prices, really impressed the Senators. They effectively approve of the Fed misleading the public, and clearly… debt doesn’t matter.

The Senators followed with:

Immediately, for moderate Democrats, Powell offers both a much bigger shield against conservative accusations of fiscal irresponsibility than the same actions coming from a newly appointed liberal. 

Providing three additional reasons why Powell makes for a good chair:

First, these were not major attacks on the legislation, and nothing in Powell’s performance contradicts his assertion that he supports the basic framework we put in place.

The Fed chair is supposed to be responsible for monetary policy. This should have nothing to do with any framework the ruling political party has in place.

Second… it is wholly implausible that Powell would initiate controversial deregulatory steps while he continues to focus on the economy.

This only becomes admirable if one is of the mindset that deregulation is bad or that it would cause too much of a headache if politicians were forced to go through any deregulation proceedings. The Senators concluded that:

Finally, as to climate change: Nothing a Fed led by a liberal Biden replacement could do on its own would be nearly as important in dealing with this issue as the substantive provisions in the legislative package that the reappointment of Powell would facilitate.

While somewhat childish, they’re argument is that it’s better for a Republican to tackle climate change through the Federal Reserve than a Democrat.

Again, it just seems all so strange. An unapologetic endorsement for Powell comes not on the basis of virtue, economic acumen, or any past accomplishment; rather, his ability to make the party, for all intents and purposes, look good while playing by their rules.

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Rational Markets, Irrational Politics

“Government is that great fiction, through which everybody seeks to live at the expense of everyone else.”

~ Frederic Bastiat

If everyone was irrational all of the time we would be in big trouble. You’d never know when someone was suddenly going to swerve off the road for no apparent reason and drive into a building, or start babbling to you in tongues over the phone when all you wanted to do was order a pizza.

(I will define, for our purposes, rational as: having and acting upon beliefs that are in accordance with reality.)1

That being said – people are irrational enough of the time, that behavioral economists are never done telling us that they are not suitable for a market economy and need regulations to “nudge” them in the right direction. They illustrate the point with examples such as the fact that if you want to motivate someone to run you are better off giving them $105 dollars a week and fining them $15 a day every day they don’t run, than rewarding them with $15 a day every day they do run — even though these things essentially amount to the same thing. So, naturally, we need policymakers to save us from ourselves and make us do the right thing. The irony of this position is that it presupposes that people are rational enough to respond to the incentives the behavioral economists want to mete out to them. Meanwhile, entrepreneurs have been going more to devise apps that interphase with human psychology and help them adopt better habits than governments ever have! After all, it was the market that gave us Fitbit, mindfulness apps, nicotine gum, calendar apps with built-in alarms to make sure we don’t forget appointments; the list goes on and is ever increasing.

The Market Rewards Rationality

Meanwhile, for the main part, the market defends us against the consequences of the irrationality of others.  If someone was irrational at all times in all respects, they could not meet the demands of life or sustain themselves, therefore they would either be dead, under the care of others, in a mental institution, or in prison. So, while no one is rational all the time, most people are apparently at least rational enough of the time to exist within a society.

The great thing about the market is, as far as we are concerned, others only need to be rational upon the basis we deal with them. My mechanic might be a raving lunatic who drives his wife up the wall (no pun intended) with his crazy theories about the flat earth and interdimensional big foot people when he is at home, but so long as he is rational when it comes to the operations of fixing my car, it need not be any concern of mine. The pizza delivery guy could have views on race that most people find abhorrent, and I would never even know so long as he delivered it on time! The architect hired to design a bridge for a new highway might be a fanatical communist who thinks all property should be publicly owned, but as long as he is rational enough to follow the laws of physics when it comes to the blueprints, the bridge won’t be built upside down and will not collapse under the weight of the vehicles crossing over it. No one is remunerated on the market for doing irrational things, for example, bringing Squid Waffles to market. No one is interested in buying or eating Squid Waffles. Therefore, they don’t exist.

Political Institutions, Unlike Markets, Reward Irrationality

Now, need I point out, that none of this is the case when it comes to the alternative to the market, which is the political process. All of a sudden everyone’s crazy, irrational views that were none of my business become very real problems to me, because they are going to entre the voting booth and try and model a society that is fashioned based upon them. Someone might even lobby for a government subsidy to open up the first ever Squid Waffles diner! Sound crazy? Well how come the government both subsidizes and taxes tobacco at the same time? This is seemingly “irrational” but it makes sense when you understand that one lobbying block wants tobacco farmers to remain in business, and another wants people to smoke less.

While people’s performance on the market is tied to their rationality, ie., the fact that their views conform to reality and therefore they can deliver the desired results, there is no such failsafe at the ballot box. In fact, as the public choice theorists have been pointing out to us, it’s rational for voters to be ignorant about abstract topics like economics, political science, sociology, statecraft and basically anything necessary to cast a good vote, because learning the facts is time consuming and costly with very few payoffs.2

Typically, when you go into the world with irrational views that affect your day-to-day life you will be met with negative consequences. If you have irrational views about eating, you will get sick; if you have irrational views about how to treat your spouse, you will have unpleasant arguments or even a divorce; if you have irrational views about how to run a business, you will soon go bankrupt. In other words – reality provides a corrective against irrational views, or at least tries to!

The dirty secret about government is that replacing the market with its “democratic” control – be it public institutions or regulations – ends up removing this corrective mechanism and encouraging irrational behavior. No one wants to suffer the negative consequences of their own irrational behavior, whether it be an illness resulting from not having taken care of their health, or having a child they can’t support, or setting up a business to sell a line of products for which there is no demand. But democracy is inherently a system where people can make bad decisions and then vote to expropriate the consequences of those decisions to everyone else via the tax system. Those people who conform to reality by building products and providing services that meet the real needs of other people will essentially be punished for good behavior when the tax man comes around to expropriate their gains to pay for rent seekers and vagrants. This creates a tendency towards more costly, irrational behavior and less beneficial, rational behavior in society relative to what there would be on a free market. Over the long term, everyone will be disadvantaged on the whole, including those who seemingly profit from exporting the negative economic consequences of their actions to the body politic because the society they live in will be far less prosperous.

  • 1. I note that some economists, following Ludwig von Mises, take the position that people are always rational. What they mean by that is that all human behavior is goal-directed behavior and that when someone makes a choice they are choosing what they think will make them achieve that goal. (Mises: “A historian can say... In invading Poland Hitler and the Nazis made a mistake... All that another man can say about it is: I would have made a different choice.” – Theory and History) In my view that is a very specialized usage of the world rational, so I am going with the more commonly used understanding of the term. 
  • 2. See, for example, Caplan, B. (2007) “The Myth of the Rational Voter.”
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The Paradox of Anti-Utilitarianism

Most libertarians reject the utilitarianism as a moral philosophy because it would seem to grant people the right to initiate force upon one another (via the state) so long as the cause is thought to promote happiness.1 The paradox is that, while a free society does not aim at the maximization of happiness, only in a free society is the maximization of happiness possible.

Some things are obviously detrimental to overall happiness. If people in a free society choose, for example, to smoke, it is obvious that this is less utilitarian than to feed the world's poor with the cost of the carton of cigarettes - especially if the smoker has got to the point (which many do) where they no longer even enjoy smoking but just do it because they are addicted to it. If people in a free society pursue diets that lead to chronic illness later, all we can say is: “I would choose differently.”

Nonetheless, whatever one might do to regulate or stop any such “non-utilitarian” decisions would no doubt result in more misery over the long term. Take for example Prohibition in America which greatly expanded the power of the mafia. Or consider the War on Drugs which – in addition to being waged at incredible expense – has separated fathers from children and left people to rot for the crime of smoking a plant, while bringing cartels of gangsters to South America. Regulating non-utilitarian behaviors always bears a high price tag to the taxpayer which would no doubt create more happiness if it was allocated by the consumer to buying those things that they at least believe will maximize their pleasure.

In addition, when it comes to freeing the world’s poor of poverty, the massive economic growth created by the conditions of freedom far outpace the money thought to be “wasted” by truly consistent utilitarians on the caprices of the consumer. It may seem, on the face of it, “unutilitarian” that we “allow” the poor of the world to live on less than $1.90 a day while billionaires heat their outdoor swimming pools. Can’t we just tax the rich and send it to Africa? We can leave aside the point that when this has been tried the funds have invariably been wasted by dictators and central planners. Those who actually take the time to understand the market process, and how poverty has actually been eliminated in all those nations where it has, can look to the horizon and understand that it is in fact the assets of the wealthy which are destroying poverty and maximizing utility. All those billions are invested in the factories, machines and technological research which are pulling those nations which have moved from command economies to market economies out of poverty as we speak. Redistribute the money to the poor and they’ll soon be poor again, all the while destroying their employment prospects through lost wealth that could have been invested in wealth-creating industries and technology.

Allow the market to allocate resources to their most profitable ends (according to supply and demand) and companies will rush to world’s poorest nations to take advantage of cheap labor and develop sustainable infrastructure which will bring them out of poverty for good. In Bangladesh, the number of extremely poor fell from 44 to 26 million, and poverty in Cambodia has been cut in half. We see this trend all across the world. To the extent developing countries free their markets poverty falls - while those countries that hold onto autocratic control of the economy remain impoverished.

The paradox of libertarian opposition to utilitarianism is that when we resist the temptation to regulate people into pursuing happiness for a quick fix, over the long term, the market maximizes utility.

Recommended for Further Reading:

  • 1. Most notable exceptions being David Friedman, and then Mises, Hazlitt and Hume who were “rule” utilitarians, which is slightly different.
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The Opportunity Cost of Political Correctness

09/16/2021Lipton Matthews

Political correctness is the hottest topic of the season, but few pause to ponder its costs. Exposing the idiocy of political correctness manifested by the venom of cancel culture offers short-term enjoyment without bestowing intellectual insight. Readers may celebrate the trenchant critiques of identity politics penned by James Lindsay and other thinkers, and yet fail to recognize that if political correctness had not succeeded in infesting powerful institutions astute thinkers would be compelled to produce illuminating works relevant to their academic interests.

Instead of assailing the ills of political correctness, James Lindsay for instance, could be writing on mathematical theories. Of note is that in an interview with this author, Michael Rectenwald admitted that identity politics distracts scholars from pursuing more worthwhile projects. Explored from an economic angle political correctness is a classic case of the broken windows fallacy. When entertained by erudite rebukes of political correctness, readers earnestly consume their witty retorts, though remaining incapable of recognizing the unseen costs of not delivering superior literature.

There is no comparison between ridiculing cancel culture and articulating elegant theories in mathematics and philosophy. When academics compose articles excoriating the inanity of cancel culture this is time not spent exploring new frontiers in research. Ultimately, the deadweight costs of critiquing political correctness impose a negative externality on society because fewer resources are expended on communicating complex ideas to the public.

Although, readers think that the intellectual enemies of political correctness are advocating their plight – they are demonstrating false consciousness. Some intellectuals may genuinely oppose political correctness, yet many leverage the hysteria of cancel culture to rebrand themselves as dissident academics. Cancel culture is propped up by thinkers on the right because it creates a platform for some to advertise themselves as underdogs fighting the establishment.

By projecting this image of the underdog, they appear relatable to ordinary people who are inspired to endorse their platforms. Unfortunately, the average Joe is not a partner in a cerebral clash of ideas, but rather a connoisseur of cheap gimmicks. Intellectuals are aware that denouncing the evils of cancel culture, wokeness, and identity politics is becoming stale, however, attacking these villains is profitable. One can easily make a name for himself by “Owning the Left.”

Undoubtedly, rebuking Robin Diangelo is a more profitable venture for the enterprising intellectual than fashioning a new sociological theory. Hence contemporary intellectuals thrive on entertainment since ordinary people willingly reward sensational output. Therefore, cancel culture will remain a permanent fixture in Western societies because it is a lucrative business for intellectuals on the right and the left.

Right-wingers consistently rehash the horrors of cancel culture to expand their platforms and leftists employ it to reinvent themselves as diversity consultants and anti-racism professionals by arguing that the existence of cancel culture indicates that institutions require remodelling to foster equality and cultural awareness. For leftists, cancelling public figures is evidence that society is plagued by institutional racism. Even if the reasons for cancel culture are fallacious the fact that someone was cancelled is sufficient justification for the assertion that racism permeates society.

The quest for power and status also explains why leftists lobby social media entities to deplatform controversial users. By exaggerating the sins of their opponents, they manipulate others into perceiving their deeds as virtuous. And unfortunately for consumers social media companies waste time exploring hate speech policies, instead of working to enhance the user experience. However, mainstream intellectuals are not the only people benefiting from the puritanical ethos of contemporary culture. Publications, irrespective of ideology, use such stories to elicit traction from readers by articulating the details to suit narrow agendas.

But despite enjoying critiques penned by intellectuals, ordinary Joes are failing to capitalize on political correctness and could become more delusional in the process. The truth is that cancel culture is a problem in some quarters, but it is being weaponized by the left and right for financial gains. As such, they should limit consumption of this narrative since in the long term they are only wasting valuable time.

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Does the Fed Control Wages?

09/16/2021Robert Aro

Could it be said that the Federal Reserve controls wages the same way they control the prices of goods and services? According to a CNBC article on Thursday, it seems the answer is “yes.”

A less than stellar August jobs report showed:

Average hourly earnings jumped 0.6% for the month, about double what Wall Street had been expecting, and the increase from a year ago stood at a robust 4.3%, up from a 4% rise a month ago.

Strangely, these stats make news headlines when it's fair to say the general public has no appetite to hear “average hourly earnings” increased by 0.6% for the month. These headlines provide little context and the general public has no idea where these figures come from, how they were calculated, nor what they mean.

The Fed also keeps various data about wages, such as the Average Hourly Earnings of All Employees, Total Private data set, with the average hourly earnings being $30.80 per hour. Consider geographic locations like New York City, Green Bay, or Honolulu, then think about how many different types of jobs are in existence. Whether a barista, construction worker, teacher, doctor, nurse, engineer, or president of a bank, one should question the usefulness of arriving at an average wage for an entire nation. 

Nonetheless, statisticians and the Fed claim they have a way to calculate this.

The problem is how it is applied for planning purposes. According to the article:

Some voices on Wall Street expect the wage and inflation numbers to start resonating with Fed officials.

Like inflation data, it becomes concerning when wages rise too fast, requiring the Fed’s intervention in order to correct.

During Powell’s Jackson Hole address, he did say:

But if wage increases were to move materially and persistently above the levels of productivity gains and inflation, businesses would likely pass those increases on to customers, a process that could become the sort of "wage–price spiral" seen at times in the past.

While the Fed has long believed in a Deflationary Spiral, we can add a Wage-Price Spiral on the list of economic threats the Fed should monitor.

Despite not telling readers how the Fed can control wages, or elaborating on the notion of a wage-spiral, CNBC is quick to assure readers that the Fed will look at:

 …potential pressures that could trigger a wage-price spiral, which economists consider “bad” inflation.

They attempt to add further depth of analysis by quoting the Chief Economist from Moody’s Analytics who tells us: “Powell and the Fed will be content with allowing wages to rise for now.” Concluding:

But so far, they’d say the wage growth they’re observing is more a feature than a bug.

It all seems somewhat haphazardly contrived, as if these economic slogans are being made up with no firm backing or theory behind them. Calculating the average wage is problematic. Add the idea that wages could rise too much or too fast, it would trigger prices to increase, causing the wrong type of inflation; the bad as opposed to the good inflation. These are all various steps in what amounts to a very big leap of faith. The only thing worse is the conclusion that, for now, the Fed is monitoring the situation.

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The Pandemic War Analogy: Turning Natural Disaster into Violent Civil Conflict

The main reason we are seemingly so accepting of lockdowns and vaccine mandates is that we have been conditioned to view a pandemic or an epidemic as a war being waged on our society. 

In wartime we naturally expect civil liberties to be suspended. Likewise, the reasoning goes, during a pandemic we need to act in a unified way under some central command to fight this viral existential threat. Individual rights and freedoms must be curtailed for the sake of the greater good. 

But that’s a false analogy. A pandemic is not a war. It’s a natural disaster. (Granted, SARS-CoV-2 may not be so “natural,” but still, the virus is not an “enemy” waging a war on us.) 

A natural disaster doesn’t intend to subjugate cities and countryside, take natural resources and wealth, rape women, or enslave men. The virus doesn’t intend any of this. It has no intentions whatsoever. Heck, it is not even alive.

The only similarity between a war and a pandemic, then, is that oftentimes many lives are lost in both cases. I say “oftentimes” because it is actually not the case that lives are always lost during war, even if the war itself is lost. The enemy may be so powerful as to take over the country without a shot being fired. In fact, war rarely aims to kill citizens for the sake of killing. Deaths are usually the consequence of one state trying to control another. Once control is achieved, the killing usually stops. 

But not so with the virus. So far as we know, it just kills individuals mindlessly. It has neither the intention nor the capability of taking over the country or subjugating the people. Therefore, it is not a threat to the common good, only to many individual goods.

And that’s a major difference. It’s for the sake of the common good that, in wartime, we accept the sacrifice of the individual good. And, particularly if it’s a “just war,” the sacrifice is actually embraced by the individual. The hero may regret leaving behind wife and children but he is propelled to move to the front by the greater attraction of safeguarding the greater good.

Granted, human nature being what it is, wars are rarely just and individuals are rarely heroes, so the sacrifice often involves forced conscription. But still, we can have a sense of how things are supposed to be in time of a “good” war when all citizens are “good” and ready to enlist.

But a pandemic is clearly not like war. It does not bring forth the same motivations of heroic self-sacrifice and reactions of solidarity that a just war brings. If a heroic action takes place during a pandemic (and clearly such action does take place from the ranks of frontline workers) it is a self-sacrifice aimed at saving the lives of particular individuals and is therefore indistinguishable from peacetime heroic action, as when a person jumps into a torrent to save a drowning baby. It is motivated by the love of neighbor, not love of country (i.e., common good love), precisely because it is not the country nor its common good that is under threat.

This is particularly true of this covid pandemic which attacks individuals with such discrimination, generally sparing the young and healthy while slamming the old or those with metabolic or immune vulnerabilities. But discriminate destruction is, in fact, typical of natural disasters: It is the Gulf Coast, Florida, and the Eastern Seaboard that are the target of the hurricane while the earthquake shakes California; Vesuvius was fatal for Pompeii, but hardly for the rest of Campania or for Naples; the flood affects those living on the plain, not the mountain dwellers; etc. It is not the common good that is undermined by the disaster, but only many individual material properties and many individual lives. War, on the other hand, aims at controlling the whole land.

That’s why lockdowns and vaccine mandates are so wrong. They are a kind of collective action that would be justified in wartime but is applied in actual peacetime. 

And it’s easy to see the difference in effect: when the state mobilizes factories to build weapons to defend from the invasion, the good that results benefits everyone, since the threat itself is collective. But when the state shuts down restaurants and churches allegedly to save hospitals, while the Zoomocracy thrives, it has pitted one part of the nation against another, thus manufacturing winners and losers from within its own people.

And likewise with these horrendous vaccine mandates that overtly do violence to the unvaccinated who are plainly innocent of any wrongdoing. By coercing vaccination on one group to “protect” another group from the virus, state mandates treat some people as human shields for the benefit of others. Yet all are within the same commonwealth!

Our preconditioned way of thinking about pandemics in martial terms may unfortunately turn into reality. The virus may eventually recede but many common goods may not survive the response to the pandemic.

After it was announced that the administration would decree a nationwide vaccine mandate that could affect 100 million people, the Babylon Bee immediately put up a headline “Joe Biden Announces Civil War.” 

It wasn’t fake news. Unfortunately it was not satire either.

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Ethics and Compulsory Covid-19 Shots

09/10/2021David Gordon

Julie Ponesse, a philosophy professor specializing in ethics who until recently taught at the University of Western Ontario in Canada, has a moving video in which she protests the requirement at her university that she get a covid-19 vaccination in order to continue teaching. She points out that it is her absolute right to decide what substances are injected into her body, and that this should settle the question of whether the requirement is legitimate. In this case, there is also a supplementary argument to be considered. The evidence does not show the vaccine works, and there is reason to believe it has harmful effects. At the end of the video, she breaks down in tears over the prospect of being unable able to continue her twenty-one years of teaching. She was in fact fired.

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