A consensus is emerging among advocates of personal freedom and economic literacy that the Healthy, Hunger-Free Kids Act, passed in 2010 with the support of Michelle Obama, is a typical failure of the nanny state.
Reason’s Robby Soave writes, “Like so many other clumsy government attempts to make people healthier by forbidding the consumption of things they like, the initiative is a costly failure.”
But I’d rather imagine the first lady is conducting a sophisticated empirical test of economic theory. All she needs are a few more interventions to correct the “unintended consequences” of the 2010 law, and we’ll be swimming in data.
As Ludwig von Mises explained in “Middle-of-the-Road Policy Leads to Socialism,” each round of intervention into voluntary exchange leads to consequences the interventionists find undesirable. Over and over, the officials are confronted with a choice: undo the initial intervention or initiate the next round of laws and regulations in an attempt to undo the effects of the previous round. Rinse, lather, repeat.
Testifying before the House Subcommittee on Early Childhood, Elementary, and Secondary Education, school administrator John S. Payne from Hartford City, Indiana, told Congress about some of the supposedly unintended consequences in evidence at his area’s public schools.
“Perhaps the most colorful example in my district is that students have been caught bringing — and even selling — salt, pepper, and sugar in school to add taste to perceived bland and tasteless cafeteria food.”
“This ‘contraband’ economy,” says Payne, “is just one example of many that reinforce the call for flexibility” on the part of local government officials.
While laissez-faire liberals may call for the scrapping of government-managed school lunches altogether, and federalists might join Payne in advocating the efficacy of decentralized, local authority over dietary central planning from Washington, DC, those who care more about economic science than nutrition or freedom should look forward to the next several rounds of loophole-closing, ratcheting coercion, and other adjustments needed to isolate students from their remaining lunchtime alternatives.
Currently, according to Payne, some of the parents in his district are signing their children out in the middle of the school day and taking them out for a quick fast-food meal. Those without the option of escape simply choose to eat less during the day. “Whole-grain items and most of the broccoli end up in the trash,” Payne told the subcommittee.
While exit and abstention are of some interest to economic theorists, the real intellectual treat is in seeing what happens when an isolated and otherwise powerless community is reduced to black markets and barter.
In “The Economic Organisation of a POW Camp” in the November 1945 issue of Economica, former prisoner of war R.A. Radford described the economic laboratory of German prison camps:
POW camp provides a living example of a simple economy which might be used as an alternative to the Robinson Crusoe economy beloved by the text-books, and its simplicity renders the demonstration of certain economic hypotheses both amusing and instructive.
In Radford’s camp, everyone received the same rations from both the prison and the Red Cross. Some prisoners also received private parcels, but these were less reliable. At first, barter exchange among the prisoners made them all subjectively better off: the lactose-intolerant smoker will feel richer from trading his tinned milk for the nonsmoker’s cigarettes.
While those who weren’t hooked on tobacco were at first happy to trade their extra smokes for more appealing products, over time, “cigarettes rose from the status of a normal commodity to that of currency.”
This means that all goods could be exchanged directly for cigarettes. There was no longer any need to find another prisoner who both (1) had a surplus of exactly what you needed and (2) wanted just what you had in excess. Everything took on a “price” in cigarettes, eventually listed on “an Exchange and Mart notice board in every bungalow, where under the headings ‘name,’ ‘room number,’ ‘wanted’ and ‘offered’ sales and wants were advertised.”
The public and semi-permanent records of transactions led to cigarette prices being well known and thus tending to equality throughout the camp, although there were always opportunities for an astute trader to make a profit from arbitrage.
Cigarettes were the best money in the context of a POW camp. A good commodity money is valuable, countable, and fungible — divisible in such a way that it retains proportional value. A half an ounce of gold, for example, is worth about half the value of a full ounce of gold. Cutting a diamond in half is not only difficult; it could render two smaller stones whose combined value is far lower than the one you began with.
Cigarettes are somewhere in between gold and diamonds: a single cigarette isn’t as easily divisible, but a half carton probably trades for half the value of a full carton. And the cigarette itself plays the same role with its tobacco contents as coinage does with precious metals: it establishes a countable unit that makes trade more convenient and prices easier to establish and track. And in a POW camp, where the supply is limited and relatively predictable, price inflation isn’t a problem.
Today’s Hartford City schools have not yet developed the economic sophistication of Radford’s German stalag. Students smuggle in packets of salt, pepper, and sugar, and trade them directly for consumption. But if a few more rounds of intervention can reduce students’ lunch options, we can expect to see a new medium of exchange emerge. I’m betting on salt, which already has a long history as commodity money throughout the ancient world.
But if the nanny-state nutritionists are forced to back off and allow either more flexibility or more freedom, we will lose an excellent opportunity to study the evolution of basic monetary economics in a controlled setting.
B.K. Marcus is managing editor of the Freeman.