Power & Market

George Floyd and Generalized Justice

3 hours agoJeff Deist

Minneapolis police officer Derek Chauvin was tried for the crime of second-degree unintentional murder under Minnesota law. The essential questions of fact for the jury were whether Chauvin actually caused George Floyd's death, and whether he did so while committing a felony offense with force. Quoted below is the relevant Minnesota criminal statute:

609.19 MURDER IN THE SECOND DEGREE. 

Subd. 2.Unintentional murders.

Whoever does either of the following is guilty of unintentional murder in the second degree and may be sentenced to imprisonment for not more than 40 years:

(1) causes the death of a human being, without intent to effect the death of any person, while committing or attempting to commit a felony offense other than criminal sexual conduct in the first or second degree with force or violence or a drive-by shooting; or

(2) causes the death of a human being without intent to effect the death of any person, while intentionally inflicting or attempting to inflict bodily harm upon the victim, when the perpetrator is restrained under an order for protection and the victim is a person designated to receive protection under the order. As used in this clause, "order for protection" includes an order for protection issued under chapter 518B; a harassment restraining order issued under section 609.748; a court order setting conditions of pretrial release or conditions of a criminal sentence or juvenile court disposition; a restraining order issued in a marriage dissolution action; and any order issued by a court of another state or of the United States that is similar to any of these orders.

The media's insatiable drive to portray Floyd's death as proof of a deeply racist society was both decidedly wrong and enormously harmful. Public statements outrageously made before the verdict by the Minneapolis mayor, several members of Congress, and even President Joe Biden fall into the same category. Was the verdict just, given the facts, or was the jury influenced by the threat of a conflagration across American cities had they acquitted? We may never know. But we do know the one thing that might actually have produced some good—a sober examination into Minneapolis police practices—was utterly subsumed by atavistic journalists hell bent on turning a local story into a national one. That story tells us more about their perceptions and biases than it does about racism in America.

In stark contrast, the trial of abortionist Kermit Gosnell in Philadelphia received scant national media coverage. That was a "local matter." It's not hard to understand why. Narratives rule our lives, and they have little to do with justice.

As usual, Americans were watching at least two different movies. One features a beleaguered police officer dealing with a recalcitrant suspect who was resisting arrest. The suspect had titanic levels of the opioid fentanyl in his system, perhaps enough to kill him. And he was no choir boy, having participated in a gang robbery of a pregnant woman at gunpoint. So even if the cop went too far and it's unfortunate the perp died, it wasn't murder—and Floyd probably was a rotten criminal anyway.

The highlight reel playing across town, however, shows a different tale. A bigoted cop jammed his knee into the neck of a handcuffed black man, killing him with impunity in a gross display of everything wrong with racist American justice. White supremacist America still can't come to terms with equality, and thus we still have indiscriminate police killings of unarmed black men.

Both of these narratives rely on generalized or cosmic justice rather than specifics on the ground. Chauvin was not tried for racism, slavery, Jim Crow, or some vague notion of America's racial sins. America was not on trial, white people were not on trial. Spinning the story into a broader general narrative to fuel race obsession was hardly designed to alleviate racial problems. It was designed to inflame them.

Justice is specific, not general. It is individual, not cosmic. In its best form, however imperfect, it is localized, temporal, dispassionate, and rooted in particularized restitution rather than punishment. It is impartial, hence Lady Justice's blindfold. All of this used to be broadly understood as basic and essential to a liberal justice system. Injustice happens to people, in terms of their physical bodies and property—not to groups or society. Even Rawls, no libertarian, differentiated between what he saw as justice for institutions and justice for particular justice relating to particular individual actions.

But justice requires some sense of shared understanding among people, some recognition of agreed-upon values. What are those values in America today? What will replace Christian notions of morality and justice in secular America? The Left's answer is egalitarianism, aggressively managed by the state. The Right's answer is AWOL. The better answer is social cooperation through markets and civil society, coupled with a common law system of evolving harms and remedies. Mises said, "The notion of justice makes sense only when referring to a definite system of norms which in itself is assumed to be uncontested and safe against any criticism." Justice, unlike economics, requires normative prescriptions to produce more cooperation and less harm. Yet our political and media class seems determined to destroy any sense of commonality or even objective reality.

There is no social justice, racial justice, or justice for historical deeds. The hard fact for race-obsessed progressives is this: egalitarianism is incompatible with justice precisely because it requires unequal treatment and a slippery slope of generalized context for specific injuries. Applying group identity in the courtroom will lead to disastrous consequences for America, and one wonders whether those consequences are actually the goal of our sick politicians and journalists.

Image source:
Jo Zimny via Flickr
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Don’t Blame the J&J Vaccine Pause for a Loss in Public Trust

04/20/2021Alice Salles

The US task force and vaccines are poised to suffer a loss in public confidence. Most people blame the pausing of distribution of the Johnson & Johnson covid-19 vaccine. But the public trust was inevitably going to falter regardless.

Instead of falling for the establishment narrative that points the finger at the J&J mishap, consider the root of the issue. That is the public-private nexus at the center of the country’s antivirus campaign, particularly Dr. Anthony Fauci himself and other well-connected big businesses.

Corporations amiable to government have long been the key to carrying out grand visions of the state. Justin Raimondo warned in 2013 of the dangers of pretending that these collaborations aren’t to the detriment of us all.

Giant multinational corporations, and their economic satellites, in alliance with governments and the big banks, are in the process of extending their influence on a global scale: they dream of a world central bank, global planning, and an international welfare state, with American troops policing the world to guarantee their profit margins.

Any crisis can become the health of the state, as Robert Higgs famously showed. It is precisely in times of crisis that the well-connected benefit from state measures. 

This arrangement of government and select private powers inescapably raises reasonable suspicion that corruption is afoot, or at the very least a conflict of interests. The fact there are basically now only two major vaccines in the game only exemplifies this reality further. 

Now that the J&J vaccine pause has hit everyone’s newsfeed, is that event in itself to blame for any dip in the public trust of vaccines or the experts? Blood clots in a half dozen women out of millions of people vaccinated with the J&J version was all it took?

Perhaps there’s something else going on that would cause people to doubt the covid regime’s legitimacy.

Is it not reasonable to wonder if allergy expert Fauci gains anything by this newly heightened scrutiny against J&J?

Big Money, Crony Shots 

The J&J covid-19 vaccine is the only option available in the US not produced using the novel mRNA technology. It was pulled from the US vaccination program after the Centers for Disease Control and Prevention (CDC) and the Food and Drug Administration (FDA) raised concerns regarding rare instances of blood clots. The move was defended by none other than Fauci, who stated that the blood clots patients experienced post J&J vaccination had “strong similarities” with the blood clots reported by European patients post–AstraZeneca vaccination. And that, he said, should concern Americans. But when asked if people should be hesitant to take the Moderna or Pfizer shots, he insisted the mRNA vaccines were safe.

“The question that is often asked, does this have anything to do with the other vaccines, the mRNAs, from Moderna and from Pfizer? You know, absolutely not. Only 6.85 million of those were J&J. The rest were Moderna and Pfizer, and there's no negative or adverse or red flag signal coming from any of those vaccines, which is very good news. In other words, they are very safe.”

While journalist Alex Berenson would probably disagree with Fauci’s claim given the numbers of adverse reactions provided by the CDC reportedly show that you are more likely to die after getting a covid vaccine than a flu vaccine, the fact the health czar is reluctant to even recognize the reports provided by the CDC is telling. 

Fauci is the director of the National Institute for Allergy and Infectious Disease (NIAID), a branch of the National Institutes of Health (NIH) federal agency, and has occupied the same position since 1984. In a NIAID entry from March 2020 that has since been deleted, the agency stated that its researchers had begun working on the clinical trial for Moderna’s covid-19 vaccine. In addition, it stated that the project was being funded by NIAID and that NIAID scientists were developing the serum at Moderna. 

Fauci was even quoted in the post, saying that “finding a safe and effective vaccine to prevent infection with SARS-CoV-2 is an urgent public health priority.”

J&J’s vaccine is produced by the firm’s Janssen Pharmaceuticals and funded by the J&J group in addition to grants from the US government’s Biomedical Advanced Research and Development Authority, a US Department of Health and Human Services agency. Moderna’s vaccine, however, appears to have been produced with funding allocated by the federal government under the command of an agency run by Fauci himself. 

But what about Pfizer?

Following the Johnson & Johnson vaccine news, European officials rushed to increase the number of orders from Pfizer’s BioNTech-produced covid-19 vaccine. 

While not incriminating, one of the CDC’s top donors (yes, the country’s national public health agency takes private donations!) has directly invested in BioNTech. As a matter of fact, this same donor is portrayed by the legacy media as a friend and trusty ally of NIAID and Fauci. His name is Bill Gates. 

Did Gates directly fund Pfizer’s BioNTech-produced vaccines? We don’t know. Did he invest big money in BioNTech just months before the coronavirus pandemic broke out? Yes. Does his charitable foundation have a partnership with NIH (Fauci’s long-term employer) that involves the rollout of vaccines abroad? Yes. Did Gates openly favor the mRNA vaccine produced by the German lab, going as far as betting it would be the leader in the market? He sure did. Could this combination of factors lead one to guess that, perhaps, the US government as well as Fauci, would be happy to reward Gates by trying to boost the vaccine’s appeal? Why not? 

As the US marches through 2021 forcing us all to bear the costs of this seemingly never-ending covid-19 debacle, Americans remain impoverished. In the meantime, the legacy media urges us to celebrate the ones benefiting from the panic all the while ignoring the real story behind the J&J debacle.

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Now You Can Join the Fed's Community Advisory Council

04/20/2021Robert Aro

There could be a real opportunity to get on “the inside” of the Federal Reserve. Last Monday it was announced:

Federal Reserve Board accepting applications for its Community Advisory Council

Known as the CAC, the Advisory Council:

advises the Board on issues affecting consumers and communities and complements two of the Board's other advisory councils whose members represent depository institutions—the Federal Advisory Council and the Community Depository Institutions Advisory Council.

Think of the CAC as an advisory board which advises the (Federal Reserve’s) board… which helps to advise other boards. The CAC meets in Washington, DC to:

provide a range of perspectives on the economic circumstances and financial services needs of consumers and communities, with a particular focus on the concerns of low- and moderate-income consumers and communities.

Looking back at the last CAC meeting minutes on October 1, 2020 provides an idea of the scope of economic questions the board asks itself:

To what extent are Council members seeing the effects of COVID-19 on small businesses in their communities?

Are permanent closures threatening the entrepreneurial ecosystems of their communities?

What tools or policies can help mitigate these effects?

The minutes seem quite long, having many stats, various ideas and even anecdotal evidence. For the questions above they mention difficulties lower income communities, women, and minorities are all facing, as well as the usage of Paycheck Protection Program (PPP) loans. They even mention:

Another round of PPP is critical to helping save these smaller businesses…

Speaking of which, the PPP weekly report noted that as of April 11, 2021, the $755 billion to date has been approved, as seen below:

aro

This is the liquidity facility which provides forgivable loans. It will continue to be of interest as to how this will end, considering only $64 billion is listed on the Fed’s balance sheet, or just under 10% of all forgivable loans. Whether the loans will be paid or forgiven remains to be seen…

Recommendations, such as “another round of PPP” are the type of work the CAC is encouraged to put forward to the Federal Reserve. Of all the questions the CAC was asked, nothing regarding the sustainability of programs such as the PPP, debt or money supply concerns, the economic impact nor morality of nearly $1 trillion in forgivable loans was ever mentioned.

Unfortunately, billions of dollars are at stake here, requiring “experts” in various fields to recommend how to distribute these dollars; no economic calculations necessary. Perhaps that’s why the application calls for qualifications such as:

knowledge of fields such as affordable housing, community and economic development, employment and labor, financial services and technology, small business, and asset and wealth building, with a particular focus on the concerns of low- and moderate-income consumers and communities. Candidates do not have to be experts on all topics related to consumer financial services or community development...

Applications due by June 11. Should you win the position as CAC member you’ll be able to meet in Washington, on a semi-annual basis, normally for a two-day meeting. If you think you have what it takes to best plan communities across the country, then feel free to apply and good luck.

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At the Fed, It's "A Tale of Two Diversities"

04/20/2021Robert Aro

We often hear of this word “diversity.” In 2021, it seems this word is more important than ever when electing cabinet positions, bureaucratic appointments, or other facets of organizational structures throughout the country. Merriam-Webster defines diversity as:

the condition of having or being composed of differing elements : VARIETY

The ironic thing about diversity is it appears to create two “divergent” paths in which it can be obtained. Just last week, the Brookings Institution appeared to inadvertently fall into a “diversity trap” of sorts, when it published the article, "Diversity within the Federal Reserve System." It begins with:

A growing chorus has called on the Fed to diversify its ranks at all levels to reflect better the heterogeneity of the United States. So far most of these efforts speak to the diversity of the Fed’s principals, namely, the members of the Fed’s Board of Governors and the presidents of the twelve Federal Reserve Banks. 

This is the first, more common usage of diversity. The goal is to ensure a variety of races, genders, or other minority groups are represented. True to definition, by having various physical features, variety could be achieved. Brookings looked at the directors of the Federal Reserve banks as they are the ones responsible for choosing the president of the twelve banks across the country.

To little surprise:

We find a staggering homogeneity among them, with only recent signs of diversification. They are overwhelmingly white, overwhelmingly male, and overwhelmingly drawn from the business communities within their districts, with little participation from minorities, women …

They mention other areas of the economy such as “labor, nonprofits, the academy” with the routine push for diversity requiring more minority representation, based on physical features of the candidates.

To provide better context to the reader, as an author and a black male, I understand “diversity” from my own life experiences; however, it is important we don’t fall into such a diversity trap. While having more people of color, females, or even transgendered would bring a different physical look to the Fed, there remains the unseen and overlooked area of diversity, i.e., “intellectual diversity.” This form of diversity appears to have been ignored entirely, supplanted for aesthetic traits.

Last year, I wrote several articles about Judy Shelton, including "Why the MSM Hates Judy Shelton." While her potential appointment was the responsibility of Congress, one could suggest she may not have gotten nominated to the Fed board because she is a woman. However, studying her history such as questioning the manipulation of interest rates by the Fed, and other such ideas which go against the current mainstream economic dogma, one could argue her rejection by Congress could largely be attributed to her economic views of the free market.

While a racial/gender diverse Federal Reserve might mark a lot of societal checkboxes, and even be inspirational for those in marginalized groups, we should focus on intellectual diversity and how much it appears to be lacking in the Federal Reserve system. Whether the Fed is run by all white males or a mix of males, females and a multitude of races means absolutely nothing as long as the ideas of liberty, freedom, and Austrian economics are excluded from diversity inclusion.

We must ask ourselves: Would you feel better if your oppressor was the same race and gender identification as you? We are told diversity at the Fed is an issue that should be addressed, but it’s superficial, meant to appease popular opinion under the guise that forced inclusion matters. Nowhere are we discussing the diversity of opinions, economic understanding, or beliefs in a free society. Until a high-ranking Fed official speaks out against the Fed proposing ways to wind down its power, it doesn’t really matter who sits atop the Fed’s ivory tower, and diversity is nothing but a ruse.

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The Left Understands Taxation Is Theft, That's Why They Support It

04/16/2021Peter St. Onge

On March 18, Joe Wiesenthal of Bloomberg Markets had MMT economist Stephanie Kelton on the show. If you’re not familiar with MMT, they think governments should print more money because deficits aren’t a big deal. At one point in the show, Wiesenthal asked, “If we don’t need to worry about deficits, why do we have taxes?” Kelton’s response was illuminating.

Now, the traditional excuse for taxes is, paraphrasing Oliver Wendell Holmes, that they are the “price of civilization.” Skeptics point out that historically societies with very low taxes were often far more civilized—think the Dutch Golden AgeIslamic Golden AgeVictorian England, the pejoratively named “Gilded Age” in American history—that thirty-year golden age when almost everything useful was invented. And yet throughout that latter period federal receipts were one-fifth what they are today.

Why so much civilization? Because much of what governments do today was done by charities or businesses competing for customer dollars instead of seizing their budgets in taxes. When doctors, firefighters, and schools have to satisfy customers, things get quite civilized.

Still, even if we accept a “night-watchman state” argument for, say, national defense or salaries for Supreme Court justices, it gets tricky if government can simply print up the fresh money to pay for all that civilization.

Kelton’s answer? Taxes would still be needed, because they make us poor. And because they can punish people she doesn’t like.

Specifically, Kelton likes that taxes “remove dollars from our hands, so we can’t spend them,” leaving more purchasing power for the government. So taxes make the people poor, and that’s a selling point to her, presumably because she thinks governments are really good at lifting people out of poverty. Anybody who’s spent time in America’s inner cities, where government money is pretty much the only money, might disagree.

Ah, but it’s not just about spending our money more wisely than we ever could. Kelton adds two secondary reasons she loves taxes: to punish particular people by redistributing their money, and to punish people for doing things she doesn’t like. Such as failing to buy energy-efficient appliances (no, really). In other words, social engineering with carrots for your friends, sticks for your not-so-friends.

I should add that libertarians completely agree with Kelton here—taxes are indeed for spreading poverty and for punishing people you don’t like. That’s why libertarians, being kind and generous, oppose taxes.

Meanwhile, it’s nice to know we all agree that taxes have nothing to do with civilization; they are for destroying with a side of discriminatory punishment.

Image source:
Flickr | Images Money | https://www.flickr.com/photos/59937401@N07/5856708903
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Does the FOMC Even Believe What It's Saying?

04/15/2021Robert Aro

The latest Federal Open Market Committee (FOMC) meeting minutes shows a series of questionable ideas. Other than the people in the closed door meeting, it’s difficult to know whether they believe what they discuss, or just go through the motions, attempting to stave off economic collapse for as long as possible.

With just a few quotes, the direction the Fed/US Government is taking us becomes clear:

Alongside the rise in U.S. yields, broad U.S. equity price indexes increased moderately, with the largest gains in cyclically sensitive sectors.

GDP also looks to be on the rise:

The information available at the time of the March 16–17 meeting suggested that U.S. real gross domestic product (GDP) was expanding in the first quarter of 2021…

In the first quarter of 2021:

Consumer spending appeared to be increasing in the first quarter at a pace considerably faster, on balance, than in the fourth quarter of last year.

But not only is spending on the rise:

In addition, the personal saving rate jumped to an even higher level in January, and ongoing gains in labor earnings along with further fiscal support pointed to additional increases in accumulated household savings.

Per inflation calculations:

Real PCE expanded strongly in January after declining over the preceding two months, with spending likely boosted by federal stimulus payments sent out in early January.

Yields, GDP, the stock market, spending, savings, inflation, on the rise; overall debt levels, the money supply, and the Fed’s balance sheet are also on the rise. But we should pay attention to federal stimulus payments as well as central bank accommodation, which, you guessed it, are on the rise.

It’s strange that for all the central bank and government inflationary schemes, the Fed will still make claims such as:

Improved U.S. economic growth prospects and optimism about the eventual lifting of social-distancing and related restrictions globally were major drivers of asset prices abroad, spurring sizable increases in sovereign yields in advanced foreign economies.

For some peculiar reason it seems to be everything except the increase in money supply, debt levels, and currency debasement as the cause for asset prices abroad.

Naturally, other central banks reacted to this:

In response to rising yields, the Reserve Bank of Australia increased its bond purchases, and the European Central Bank indicated it would increase the pace of its bond purchases going forward.

It’s not just in America. The same interventions are being played out the world over under the guise of economic policy aimed to help the economy, or worse, achieve arbitrary employment and inflation targets. The notion that governments and central banks can spend to prosperity is highly regarded as economic dogma.

Of all the people in the meeting, with the years of experience and credentials between them, surely at least one of them would question the sustainability of an economy where everything rises due to central banks and government increasing the money supply, while simultaneously taking on debt, for no clear purpose other than obtaining stimulated economic effects.

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The Fed Does 60 Minutes ... Again

04/15/2021Robert Aro

Almost one year ago today, Federal Reserve Chair Jerome Powell appeared on 60 Minutes explaining to the world that as a Central Bank, they have the ability to “create money digitally.” Sadly, it seems the only change since then has been the size of Fed’s balance sheet. Over the weekend, Powell reunited with 60 Minutes where he shared his views and developments of the economy in the face of COVID.

Powell said many contentious claims in the interview. Calling the CARES Act “heroic” is one example. Another:

Congress, in effect, replaced people's income, kept incomes, kept them in their homes, kept them solvent, kept their lives together…

He discussed the usual fare such as the importance of maximum employment, inflation targets, the Fed’s work on the digital dollar, and vaccinations, of which Powell said he received two doses already. By far, the most interesting was when the question of the 2% inflation target came up:

SCOTT PELLEY: Getting back to your inflation target, why 2%? Why is that the magic number?

In a previous article, I wrote about the Origins of the 2% Inflation Target, how it came about arbitrarily then popularized across the world. Unfortunately, it’s a goal made with absolutely no merit or basis. Nonetheless, everyone is entitled to their opinion. Here is the one given by one of the most powerful men in the world:

JEROME POWELL: Two percent is what central banks around the world came to, you know, over the last really 40 years. It is the standard that all banks target. And you may really be asking, "Why not zero?" And the reason is that interest rates--every interest rate-- includes an estimate of future inflation. So if you're lending money, you're going to get paid for future inflation. You're also going to have a real return. And if inflation were to be zero rather than 2%, then interest rates would be 2% lower, by definition. And what that would mean is that central banks, including the Fed, we have much less room to cut rates and support the economy-- when the economy turns down.

He notes 2% is the standard, and “all banks” target 2%, but doesn’t explain why... Powell quickly changes the question to “why not zero?” then answers his own question by claiming “every interest rate includes an estimate of future inflation,” of course, purposely vague, given inflation isn’t identified. There are other concerns, such as how the Fed sets its interest rates to account for future inflation, what causes said inflation, why not 3% inflation, etc., to make a list of the follow-up questions Scott Pelley should have inquired.

After a few more explanations, Powell settles on the idea that a 2% inflation rate influences interest rates, which should be somewhat high so interest rates can be cut in the future, “when the economy turns down.”

Unfortunately, the problem with this type of interview is that it doesn’t get to the heart of the matter. When asked about why 2% inflation, there was no follow up to challenge Powell. Other than trying to explain the 2% target, very little was said that didn’t echo Powell’s normal stance when addressing the public.

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The Benefits of Being Politically Correct

04/13/2021Lipton Matthews

Stories depicting the savagery of cancel culture are becoming increasingly popular. As expected, many invoke political correctness as the genesis of this development. But rather than looking for simple explanations, we must ponder why people conform to politically correct opinions. In truth, conformity has a biological basis. Humans are social creatures who thrive on intimate connections. Hence conforming to social conventions by expressing politically correct assumptions is one way to signal membership in a community. As such, conformity protects people from the emotional scars of rejection.

Indeed, conforming to social norms like respecting property rights and being polite yields favorable results. Without a doubt, positive conformity is crucial to the success of our species. Yet retrograde conformity, indicated by the fame of ideas like white privilege and systemic racism, can foster destructive results. Preventing the growth of retrograde conformity is challenging, because the success of an idea is not hinged on intellectual rigor.

Like biological organisms, an idea's receptivity is linked to its capacity to increase social fitness. People imitate each other, so ideas are reproduced mimetically. Therefore, the prosperity of an idea is driven by conformity bias. As a result, heterodox ideas even if they are rigorous cannot compete with mainstream views. Moreover, researcher Robert Henderson points out that the ability of socially accepted beliefs to increase social bonds explains the appeal of cancel culture: “Cancel culture strengthens social bonds…. People enjoy uniting around a common purpose. They derive satisfaction from coming together against a perpetrator. They enjoy the solidarity it provides.”

Further, sanctions are created to stifle controversial claims and are reinforced by institutional protectionism. When journals and newspapers retract articles for failing to affirm orthodox beliefs, this is emblematic of institutional protectionism. Unfortunately, such actors may think that they are acting morally by shielding the public from offensive views. Similarly, like conforming, we are biologically predisposed to acting morally. So, gatekeepers may contend that allowing the free flow of ideas could act as an incentive for their appropriation by rogue actors.

However, this contention is misguided. In the absence of a robust market for debate, society suffers from intellectual stagnation and citizens are forced to substitute rhetoric for evidence. For instance, if researchers could study racial differences without backlash, we would be in a better position to cater to the diverse needs of the population. This sentiment was articulated in a 2002 paper published in the Journal of the National Medical Association: “There is good evidence to show that therapeutic substitution of drugs within the same class places minority patients at greater risk. This is because effectiveness and toxicity can vary among racial and ethnic groups.”

Another reason for the success of politically correct beliefs is that they confer psychological benefits. By promoting the rightness of mainstream narratives, elites can present themselves as morally superior and cement their influence in society. Economist Jennifer Roback refers to this phenomenon as “psychic rent-seeking.” Because of the social rewards derived from institutional protectionism, elites are unlikely to tolerate intellectual innovations, since they can undermine institutional authority.

But the cure for political correctness is to be found in a free market for ideas. Economic historian Joel Mokyr rightly contends that the free market for ideas led to the discoveries nurtured by the Enlightenment: “European political fragmentation created the environment in which dissident and heterodox opinions could be put forward with increasing impunity. Had a single, centralized government been in charge of defending the status quo, many of the new ideas that eventually led to the Enlightenment would have either been suppressed or possibly never even proposed.” Only a free market for ideas can solve the problem of political correctness and prevent its pernicious effects.

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Is Price Gouging a Problem?

Is price gouging wrong? For many, this practice does not exactly seem to be ethical. So, there is a moral angle here which suggests that raising prices of goods such as toilet paper and bottled water when a hurricane cuts off supply—and forces the market into a shortage—is not the most humane practice.

The economic angle, which is more important for policymaking, views price gouging as a regular supply-side response to a shock. The economics around this practice suggests that price gouging is not only reasonable, but it also serves many crucial economic purposes.

Why Price Ceilings Are Illogical

In free and competitive markets, prices are signals. If you have ever laid eyes upon the supply and demand graph found in Econ 101 textbooks, you understand what I speak of. Consumers demand goods based on price. Suppliers produce them after being encouraged or discouraged by the same. When governments step in and cap prices during emergencies, this signaling property of market prices under this free market mechanism is heavily distorted. Consequently, people lose the incentive to ration resources when they need to be rationed the most.

When governments jump in to “remedy” shortages during crises by enacting anti-price-gouging laws, they create unintended consequences such as hoarding. If I am a consumer who learns that a pack of twelve rolls of toilet paper has been capped at eight dollars in a situation where an unhindered equilibrium price could easily be twenty dollars for each such pack, I have every reason to rush to stores and buy many more rolls than I could use in a month, assuming my digestive system remains agreeable. What would happen if all consumers in my area made similar runs to stores? I hope this question drives the point closer to home.

You guessed correctly. Now local shelves are being emptied even faster of toilet paper rolls, and the shortage that could have been managed and mitigated has been aggravated! If toilet paper rolls are indeed 20 dollars a pack in a “disaster” market without a government-imposed cap, people will ration their stocks more judiciously and buy only what they need. Stores will be able to serve more people, thus alleviating the problems caused by the shortage.

People will spend 20 dollars on a roll only if they need it, rather than panic buying an unscientific quantity at capped prices. In trying to help disaster-struck populations, the government leaves them worse off by implementing anti-price-gouging rules.

Policymakers also need to understand that nothing is stopping a handful of people who get to the stores first from buying out the entire stock and selling them to the unfortunate majority at prices much higher than what these consumers would have paid in an unfettered local market. Since these individual “profiteers” can easily find a way to price gouge despite formal price caps, it is much better to let stores distribute essential items at a competitive equilibrium through formal channels, even if it is at a higher equilibrium price.

Supply-Side Arguments

A description of consumer responses to the capping of prices ensured by anti-price-gouging laws does not complete the picture. We must consider the supply side of production and supply during crises such as hurricanes to fully understand why price gouging is a natural, legitimate, and beneficial economic adjustment. When prices rise, producers are motivated to produce more. This increase in production, if you recall, can be observed by moving up along the supply curve.

What happens when the price of an essential item is capped in a region that needs that item much more than others? If a production manager learns of this situation, she has no economic incentive to increase the supply of that much-needed good to that particular region. Without a legal intervention that imposes a price ceiling, higher prices would naturally motivate suppliers to supply more, thus easing shortages in desperate regions.

Prior Research and Empirical Evidence

The scope and length of this article limit my ability to guide readers through a quantitative process of measuring the harm caused by legislation against price gouging. However, I would like to defer to research published by academics with a much deeper knowledge of economics and policy than I can claim to have.

Montgomery, Baron, and Weisskopf noted in a paper published in 2007 in the Journal of Competition Law and Economics that, in cases that were thought to be the product of deliberate attempts to engage in price gouging, it was actually the case that  “price increases were due to the normal operation of supply and demand and not market manipulation.”  The authors were evaluating the aftermath of hurricanes Katrina and Rita in drawing conclusions regarding anti-price-gouging laws.

An analysis of the two-month period of price increases following Rita and Katrina revealed to Montgomery, Baron, and Weisskopf the economic benefits that were realized from a lack of anti-price-gouging laws at the time in 2005. The economic damages in presence of these laws, the authors estimated, would have been between $1.5 billion and $1.9 billion.

Of course, the morality of increasing prices during floods, hurricanes, or other emergencies can still be questioned, but when governments target price gouging, morality is not the backbone of their legislation. Since economic well-being is the intended target of these anti-price-gouging laws, the best way for these laws to accomplish their goals is to stop existing. We can keep debating whether said price manipulations are the right thing to do, but at least we can have these debates without the discomfort of cutting our paper towel rolls in half (or into thirds in some cases) to fulfill our toilet paper needs.

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From Christianity to Black Power, Rothbard Offers a Unique View

04/08/2021Lipton Matthews

Judged by the sheer quality and volume of his intellectual output, Murray Rothbard was a genius. Though we reflect on the ingenuity of his peculiar intellect—we must never forget that Rothbard was the master of defying stereotypes. Unfortunately, many assume that libertarians are hostile to Christianity, but it was Rothbard who admitted that “[t]he greatest and most creative minds in the history of mankind have been deeply and profoundly religious, most of them Christian.” Rothbard also informed readers that the Spanish Scholastics made a pivotal contribution to economics.

Christianity

Rothbard in several articles and books refuted the uncharitable characterization of late Scholasticism as intellectually barren. In his article “New Light on the Prehistory of the Austrian School,” Rothbard asserts that we owe religious thinkers a debt of gratitude for laying the foundations of modern economics. Despite popular belief, late medieval thinkers and not Adam Smith offered the first systematic justification for modern economic theories. Rothbard writes of the Scholastics: “It was the sixteenth-century Spanish Scholastics who developed the purely subjective and profree-market theory of value. Thus, Luis Saravia de la Calle denied any role to cost in the determination of price; instead, the market price, which is the just price, is determined by the forces of supply and demand, which in turn are the result of the common estimation of consumers on the market. Saravia wrote that 'excluding all deceit and malice, the just price of a thing is the price which it commonly fetches at the time and place of the deal.'”

Notably, the Spanish Scholastics were remarkably sophisticated in applying supply and demand analysis to money. Rothbard writes of the Dominican Martín de Azpilcueta Navarro: “Citing previous Scholastics, Azpilcueta declared that “money is worth more where it is scarce than where it is abundant…. Because “all merchandise becomes dearer when it is in great demand and short supply, and that money, in so far as it may be sold, bartered, or exchanged by some other form of contract, is merchandise and therefore also becomes dearer when it is in great demand and short supply.”

This analysis is illuminating because Azpilcueta provided relevant examples: “We see by experience in France, where money is scarcer than in Spain, bread, wine, cloth, and labour are worth much less. And even in Spain, in times when money was scarcer, saleable goods and labour were given for very much less than after the discovery of the Indies, which flooded the country with gold and silver. The reason for this is that money is worth more where and when it is scarce than where and when it is abundant.”

The Black Power Movement

Rothbard was such an objective analyst that he could even appreciate the political aspirations of the Black Power movement. Unlike many on the right, he noted that “the goals and means of civil rights were statist and Liberal to the core.” Rothbard argued that the failure of civil rights to change the hearts of men resulted in an awakening among black activists, who recognized that they could not force racists to tolerate their demands. As a result, instead of lobbying for integration, these leaders thought that it would be prudent for blacks to create communities free of white control, and Rothbard supported them in this regard in a popular essay: “The Negroes began to turn, and turn swiftly, from the old Liberal ideal of compulsory integration to another tradition that had previously lingered, underground and un-respectable, at the core of the Negro community. This was the idea of black nationalism, an idea that had always appealed, not to the educated and articulate Negroes, but to the poorest inhabitants of the ghetto. The black nationalist idea came to the fore in the 1920s with the phenomenally popular Marcus Garvey.”

Rothbard felt that the circumstances of the 1960s justified black separatism: “For a time many conservatives were enthusiastic about black nationalism…. The conservatives were overjoyed with the nationalist and Muslim emphasis on Negro self-help, thrift, dignity, and pride, in contrast to the old ideals of coerced integration from above. But there is one thing that the conservative proponents of black nationalism overlooked: self-help, pride, thrift, Negro businesses, etc. are all well and fine. But they cannot hope to flourish within the context of the black reality in America: permanent oppression by the white 'power structure.' None of these good and libertarian things can be achieved without first and foremost, getting the white-run U.S. and local and state governments off the backs of the Negro people.”

Nationalism and National Liberation

Although libertarians frequently condemn nationalism, Rothbard held that in some cases nationalism can result in the liberation of oppressed groups. As he contends in a 1966 essay: “There are two contrasting types of nationalism: a desire to liberate an oppressed nation from the chains imposed by another nation (a movement for 'national liberation'); as against a desire to aggress against other nations and impose one's own national domination upon them…. One is a libertarian form of nationalism, the other an invasive, profoundly anti-libertarian form. A Negro nationalist movement in present-day America is a movement for national liberation; any white insistence on thwarting such a movement is an example of white imperialism. Such are the qualitative differences within the concept of nationalism.”

In his radicalism, Rothbard posited that black Americans were a colonialized people and needed to be free from the clutches of the state. Specifically, urban renewal activists and school administrators are singled out for criticism in his controversial piece on black power. Rothbard details the negative effects of urban renewal on black communities: “All good Liberals, not so long ago, used to admire urban renewal as a means of helping the poor and bringing esthetics to the city. Now, radicals and some conservatives are beginning to agree (in another burgeoning form of 'Left-Right' coalition) that urban renewal is really a vast subsidy to the real estate interests at the expense, not only of the taxpayer which was always evident, but also of the poor themselves, who are summarily kicked out of their homes by the urban renewal bulldozer, and forced elsewhere, redoubling the slums there. If they try to move into the new urban renewal housing, they find that there is far less space available, and at much higher rents than they were paying before. And so, more and more people are coming to recognize 'urban renewal' is really 'Negro removal'—for urban renewal has been concentrated in the Negro ghetto areas.”

He is equally critical of administrators: “The compulsory attendance laws force all of the youth of the country, regardless of their talents or inclinations into this vast prison-system, and the teachers and administrators are their guards and wardens. The oppression lies much the heaviest in the urban Negro areas, where so many children are not inclined toward schooling and where racism as well as hatred for working-class mores are given full rein by the school staff, armed with the power of compulsory education to force their charges to stay in school. No wonder that Negro youth are embittered by their enforced stay in the system.”

So, Rothbard continues to confound even in death. For example, the average person who has not read his publications would assume that he had no interest in Christian philosophers. And as expected people under the spell of liberal delusions believe that he was a racist without assessing his ideas. However, Rothbard was a giant among men and an exceptionally articulate defender of black sovereignty.

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