Economy Archives - Page 152 of 170

Survey: CEOs say Florida second best state for business

May 22, 2014/in Economy, News, Policy, Regulation/by Dr. Rich Swier

In the 10th annual Chief Executive Magazine survey of CEOs concerning their views of the best and worst states for business, over 500 CEOs across the U.S. responded. Business leaders were asked to grade states with which they were familiar on a variety of measures that CEOs themselves have said are critical. These include the tax and regulatory regime, the quality of the workforce and the quality of the living environment. For example, a state’s attitude toward business is viewed as a critical component of its tax and regulatory regime, while employees’ attitude toward management is considered a crucial factor in the perceived quality of a region’s workforce. Public education and health are also important factors in the living environment, as are such things as cost of living and affordable housing.

For a larger view click on the graphic.

Texas continues its 10-year historical position as the best state overall; but Florida, which ranks No. 2, is edging up and even overtaking Texas in its quality of living environment. “We’ve learned from Texas how to tell our story better and it helps that we’ve cut taxes 25 times—about $400 million,” Florida Governor Rick Scott told Chief Executive. Scott points to what he calls the Jim Collins “flywheel effect” where momentum is generated as more big name companies invest in his state. “When companies like Hertz, Amazon, Deutsche Bank and Verizon add jobs here, it causes more people to look at us. Business is comfortable that we’ll keep the tax base low and improve our workforce.”

Tennessee edged out North Carolina to take third place with North and South Carolina respectively capturing 4th and 5th place. Indiana, Arizona and Nevada finished 6th through 8th, respectively. Having jumped 31 positions from 40th in 2010 to No. 9 this year, Louisiana is the Cinderella state of Chief Executive’s ranking, proving that a concerted effort to transform old habits and policies can truly pay off. Wisconsin comes close with a meteoric thrust from 41st five years ago to 14th in 2014. Having survived a bitter recall last year, Wisconsin Governor Scott Walker recently signed Senate Bill 1, legislation that provides $504 million in tax relief over the next two years to state taxpayers. The bill reduces income- and property-tax rates, as well as eliminates income-tax rates for manufacturers, making the Badger state even more competitive.

Likewise, Ohio has seen dramatic improvement due, in part, to an energetic governor in former congressman John Kasich, who, like Walker, pushed a vigorous turnaround. During his tenure, Ohio became the No. 5 job creator in the nation and No. 1 in the Midwest. Unemployment is now 6.5 percent, the lowest in Ohio since June of 2008. Likewise, Ohio has gone from an $8 billion deficit to a $1.5 billion surplus over the same period.

California, New York and Illinois continue to rank among the worst three states in 2014, with virtually no change from previous years. California has gained breathing space since Governor Jerry Brown took office and is credited with a budget surplus. But despite the return of fiscal discipline, it has exchanged acute problems for merely chronic ones. It is a state that continues high personal income tax rates and regulates with a very heavy hand. Its top, marginal tax rate of 33 percent is the third-highest tax rate in the industrialized world, behind only Denmark and France. This situation creates a bias against savings, slows economic growth and harms competitiveness.

For Equality — Against Privilege: Reclaiming a lost ideal by Sheldon Richman

May 21, 2014/in Culture War, Economy, News/by Foundation for Economic Education (FEE)

This TGIF originally ran July 7, 2006.

The freedom philosophy can be boiled down to two phrases: for equality, against privilege.

Intuitively, this should sound uncontroversial. We just finished celebrating the Fourth of July, which commemorates the Declaration of Independence. Thomas Jefferson’s elegant statement of the freedom philosophy proclaims: We hold these truths to be self-evident, that all men are created equal. But since then the idea of equality has acquired many meanings that either work against the freedom philosophy or give it weak support. So how can it be a pillar of liberty?

As Auburn University philosopher Roderick T. Long wrote in The Freeman (“Liberty: The Other Equality”), notions such as equality under the law and equality of freedom fall short as libertarian ideals. After all, we could be equal under unlibertarian law (everyone gets drafted) or we could all have an equally small area of freedom (everyone may do whatever he wants between noon and three on alternate Wednesdays). That would be equality of a sort but not liberty.

Economic Equality

The objections to economic equality are well known. Since in the free market unequal incomes are to be expected as a result of variations in talent, ambition, energy, health, luck, perception of consumer preferences, and so on, economic equality could be attempted (but not achieved) only through monstrous and continuing aggression by government officers. Something approaching equal poverty might be achieved (the political elite would no doubt be more equal than others), but equality at a decent level of prosperity is beyond the State’s ability, as Cuba and North Korea illustrate.

This would seem to leave little content for Jefferson’s ringing phrase. But Long shows that this is not the case. There is a significant sense of equality that gets short shrift in political philosophy, most likely because it is the libertarian sense. We do our cause an injustice by neglecting it.

The best-known formulation of this sense is from John Locke, Jefferson’s inspiration for the Declaration. Long writes:

Locke defines a state . . . of equality as one wherein all the power and jurisdiction is reciprocal, no one having more than another, there being nothing more evident than that creatures of the same species and rank, promiscuously born to all the same advantages of nature, and the use of the same faculties, should also be equal one amongst another, without subordination or subjection. . . . [Emphasis added.]

In short, by the equality of men Locke and Jefferson meant not that all men are or ought to be equal in material advantages, but that all men (today it would be all persons, regardless of gender) are equal in authority. To subject an unconsenting person to one’s own will is to treat that person as one’s subordinate — illegitimately so, if we are all naturally equal.

Locke reinforced his thought thus:

[B]eing all equal and independent, no one ought to harm another in his life, health, liberty or possessions. . . . And, being furnished with like faculties, sharing all in one community of nature, there cannot be supposed any such subordination among us that may authorise us to destroy one another, as if we were made for one another’s uses, as the inferior ranks of creatures are for ours.

Long goes on to say that this Lockean equality (it can also be found in earlier writers, such as the Levellers, a group of English laissez-faire radicals) provides a powerful underpinning for the freedom philosophy:

The upshot of libertarian equality, equality in authority, is that government can possess no rights that its subjects lack–unless they freely surrender such rights by “deputation, commission, and free consent.” Since I have no right over anyone else’s person or property, I cannot delegate to government a right over anyone else’s person or property. . . . Libertarian equality . . . involves not merely equality before those who administer the law, but equality with them. Government must be restrained within the moral bounds applicable to private citizens. If I may not take your property without your consent, neither may the state.

Frederic Bastiat made the same argument in his great work The Law.

Anti-Privilege

Opposition to privilege is simply the corollary of libertarian equality. If all are equal in authority, then no one may live at the expense of others without their consent. The word privilege is often used equivocally, but it has its roots in the idea of legal favoritism. It is composed of privus, meaning single, and lex or lege, meaning law. Thus a privilege is a government act that (forcibly) bestows favors on one person, or the few.

Historically, government’s primary function has been to exploit the industrious–anyone who works and trades in the market–for the sake of the political class, which prefers collecting subsidies to earning wages or profits. (This original class analysis was formulated by the laissez-faire theorists Charles Comte and Charles Dunoyer, students of the economist J. B. Say, in the first half of the nineteenth century). The privileges take the form of tariffs, licenses, monopolies, land grants, [patents], and other subsidies. These enable favored interests to increase their incomes beyond what the market would provide, either by forcibly extracting wealth from producers or by barring them from competitively serving consumers. The name for this privilege-based system is mercantilism, and in many ways it lives on today even in market-oriented economies, which is why they are often called mixed economies.

The privilege part of the mix is a rank injustice against all honest industrious people and a violation of the principle of equal authority that animated so many early Americans.

Champions of liberty have a constant challenge in finding fresh and compelling ways to teach their philosophy to people with different perspectives. I have a hunch there is an audience looking for a philosophy that embraces equality of authority and opposes privilege.

ABOUT SHELDON RICHMAN

Sheldon Richman is the former editor of The Freeman and TheFreemanOnline.org, and a contributor to The Concise Encyclopedia of Economics. He is the author of Separating School and State: How to Liberate America’s Families.

Do Markets Promote Immoral Behavior? by Fred E. Foldvary

May 20, 2014/in Culture War, Economy, News, Politics/by Foundation for Economic Education (FEE)

Pure markets enhance good behavior, because in such arrangements, voluntary acts are rewarded and involuntary acts are punished. A pure market, as we define it, consists only of voluntary human action. That’s because a truly free market includes governance structures that penalize coercive harm, and such pure markets do not impose any restrictions or costs on honest and peaceful human activity.

Critics of markets think otherwise. They point to slave markets or a market for stolen goods as examples of market immorality.

More recently, Professor Dr. Armin Falk (University of Bonn) and Professor Dr. Nora Szech (University of Bamberg) conducted experiments in which people were offered a choice between receiving 10 euros versus letting a laboratory mouse get killed. If a subject decided to save a mouse, the experimenters bought the animal, according to the study authors writing in the journal Science.

But in the experimental market with buyers and sellers, more people were willing to accept the killing of a mouse than when individuals were simply offered an isolated choice. Therefore, the researchers concluded, markets erode moral values. Guilt is shared with other traders who are also involved in transactions that kill mice. If a person refused a transaction to save a mouse, somebody else would step in, so the mouse would be killed anyway.

Do Falk and Szech’s analysis prove that markets erode morals?

Pure Markets or Coercion-Infected Bazaars

The term “market” can refer to any bazaar or system of transactions, and also to pure free markets in which action is voluntary. Thus the buying and selling of slaves falls outside a voluntary market, but it is a bazaar or trade “market” in the sense that it includes buying and selling. When discussing the morality or failures of “markets,” we need to distinguish between voluntary transactions and those that involve coercive harm. Hence I will use the term “bazaar” to refer to trade that may involve coercion, while using “market” to mean a nexus of trade free of coercion.

In his paper “Is Economics Independent of Ethics?” economist Jack High examined the term “market economy,” in contrast to “government activity.” The market, writes High, “is defined as a system of voluntary exchange.” A deep understanding of the concept of the pure market requires an analysis of the meaning of the term “voluntary.” It will not do to simply state that “voluntary” means “not coercive,” since “coercive” is equivalent to the term “not voluntary.”

“Voluntary” action implies an ethical rule by which some acts are morally permitted and other acts, the involuntary ones, are prohibited. To have a universal meaning of voluntary action, and thus of the market, this moral standard must itself be universally applicable to humanity. This universal ethic is the expression of natural moral law, based on human nature rather than any cultural practice or personal viewpoint.

The Universal Ethic

John Locke (1690) described the moral “law of nature” or natural moral law as being derived from two premises: biological independence and human equality. Independence is the biological fact that human beings think and feel as individuals. Equality is the proposition that there is nothing in human biology that entitles one set of human beings to be masters over another set which are slaves.

A unique universal ethic can be derived from these Lockean premises. The universal ethic has three basic rules:

1. Acts that have welcomed benefits are good.

2. Acts that coercively harm others, by initiating an invasion, are evil.

3. All other acts are neutral.

The term “harm” is distinguished from a mere offense. In an offense, the distress is due solely to the beliefs and values of the person affected. In contrast, coercive harm involves an invasion, an unwelcome penetration into the legitimate domain of the victim. So if a person is offended by what someone says, this is due to his beliefs and values; this act is not coercively harmful, and is designated as morally neutral by the universal ethic.

The universal ethic also provides a meaning for moral rights and liberty. A moral right to X means that the negation of X is morally evil. For example, a person has a moral right to possess a car because the negation of that possession, i.e., theft, is morally evil. Since the universal ethic is the expression of natural moral law, the moral rights based on that ethic can be called “natural rights.” Society has complete liberty when its laws are based solely on the universal ethic, with legal rights congruent with natural rights.

The pure market is inherently ethical because the same universal ethic that provides the meaning of “market” is also the natural-law ethic used to judge policy and human action. Involuntary action is both evil and outside the market. There are slave bazaars, but there cannot be a free market in buying and selling slaves, because slavery is involuntary and, thus, evil.

Although the pure market is ethical in excluding evil acts, it is a separate issue whether a free marketenhances or hinders ethical behavior by minimizing evil action. Since the governance of a pure market penalizes acts that coercively harm others, the ideal governance of a free society will have optimal penalties for wrongful acts.

By deterring coercive acts, rehabilitating criminals, and providing restitution for victims, the free society steers human action toward those acts that are good or neutral. Adam Smith, who popularized the concept of the invisible hand of the market, also wrote in his book, The Theory of Moral Sentiments, that people have a natural fellow-feeling or sympathy for others. Social entrepreneurs can promote sympathy for communities and benevolent causes, which promotes morally good behavior.

Relative to today’s interventionist economies, the free market promotes good behavior by avoiding the imposition of costs and restrictions. In today’s world, even when good acts are not prohibited, they are impeded with costs such as taxes, licenses, and permit requirements. Even when an organization is tax exempt, it must today fill out forms and report on its activities. The free market promotes good behavior more than today’s interventionist economy by avoiding barriers that make goodness more costly.

Critics of markets claim that when people search for the cheapest goods, moral concern takes a back seat. But in a truly free market, the products offered are produced by moral means, by a process that does not involve coercive harm. Therefore searching for the lowest-cost goods is not evil. Only when goods are produced by immoral means, such as with slave labor, is the product morally tainted, but that, by definition, could not occur within a voluntary market.

Of Mice and Men

Unfortunately, some behavioral economists—those who conduct experiments on human behavior—leap to incorrect conclusions about markets because they use the term “market” for any system of transactions—even those involving non-voluntary aspects.

Recall that in the Falk and Szech experiments cited above, subjects were offered a choice between receiving money versus letting a laboratory mouse get killed. If a subject decided to save a mouse, the experimenters bought the animal and allowed it to live. In the experimental bazaar, however, more people were willing to accept the killing of a mouse than when individuals were simply offered an isolated choice. The researchers concluded that markets erode moral values as guilt is shared with other traders who are also involved in transactions that kill mice. If a person refused a transaction to save a mouse, somebody else would step in, so the mouse would be killed anyway.

The first trouble is that no conclusion about markets and morals can be derived without first analyzing the morality of the particular act, killing a mouse. There is no consensus among ethicists on the issue of mouse (animal) rights, but with respect to the issue of how markets affect moral behavior, we can analyze two possibilities: First, if killing a mouse is not evil, then accepting a choice that kills a mouse is not promoting evil behavior. Second, if the non-utilitarian killing of a mouse (i.e., killing for reasons other than for food, useful materials, or self-defense) is indeed evil, then it is prohibited by the laws of the market and is thus penalized, which minimizes such acts and avoids eroding moral values.

Another problem with the Falk and Szech approach is that the study turns on the condition that people violate their own “individual moral standards,” which to some individuals may, indeed, include mouse killing. I have tried above to show that, in order for an ethic to be universal, it must satisfy certain criteria. Individual moral standards are not morals per se, but rather personal values. Violation of these would be offenses. It may be interesting to some that markets—even pure ones—tend to make people overlook offenses, due to the distance the transactional nature of the arrangement creates between the actor and the original evil, or due to the perceived amorality of fellow actors in the bazaar. For example, “If I don’t buy or sell, someone else will” can creep into a market actor’s rationale. But this rationale has no bearing on a universal moral ethic, which would proscribe harmful actions ex ante—that is, before they infect the market.

In other words, concern about the tendency of market forces to reinforce perceived evils confuses the body and its symptoms with the pathology. The blood stream can carry a pathogen around to various part of one’s body, for example, hastening disease. That doesn’t mean that the bloodstream is somehow evil or undesirable by extension. It’s simply that the pathogen must be eliminated.

Evils of Intervention

Another (perhaps more familiar) approach is to blame markets for outcomes that are actually the result of state intervention rather than voluntary action. Even economists have made a cottage industry out of blaming the market for problems such as recessions and unemployment. These critics fail to distinguish between today’s mixed economies (bazaars replete with governmental interventions) and an arrangement that is much closer to a pure market. Any outcome, however, such as an economic crisis or depression, has to be analyzed sufficiently to determine whether the causes are the interventions or the markets.

Failure to appreciate the concept of a pure market is on display in the article “Markets Erode Morals, Let People Do Horrible Things: Study” by Mark Gongloff in the Huffington Post. The author states, “The devastating collapses of the dot-com and housing bubbles in recent years have finally led us to start questioning the value of unfettered markets.”

If markets are unfettered, the Federal Reserve does not exist, there are no income and sales taxes; no asset forfeitures; no government subsidies; no federal regulatory agencies such as the SEC, FDA, FHA, and Fannie Mae; and no state and local interventions. The author presumes, with no analysis, that the housing bubble was caused by the market. There is good reason to conclude that massive monetary and fiscal subsidies to real estate—intervention—were primary causes of the crash of 2008, and that the cheap credit provided by money expansions skewed interest rates away from their natural rates, promoting previous bubbles. In these cases, the evils of those impure markets were the consequences of interventions whose intentions may arguably have been good.

The purpose of economic theory is to enable people to understand the implicit economic reality beneath superficial appearances. Critics of free markets observe the superficial appearances of the bazaar without delving into the ethical foundations of the free market and the economic causes of outcomes such as the boom-bust cycle. The ethical and economic reality is that markets are inherently ethical, and they promote ethical behavior.

ABOUT FRED E. FOLDVARY

Fred Foldvary teaches economics at San Jose State University.

EDITORS NOTE: The featured image is courtesy of FEE and Shutterstock.

Make It Rain: A hot new game gives players mixed messages about markets and cronyism by Thomas Bogle

May 20, 2014/in Culture War, Economy, News/by Foundation for Economic Education (FEE)

I recently returned from a school-related trip to Atlanta to discover that a new mobile app had claimed my students’ attention.

“Check it out, Mr. Bogle! I’m making it rain!”

They were excited to show me this new game, knowing full well that I would turn it into a lesson in economics.

And I have to admit that my opinion of this game is mixed. On one hand, the Public Choice analysis of our current economic system as presented in the game is not too far from reality and it would be a great starting point for many classroom discussions.

On the other hand, this is what the company’s website says the game is about:

Make It Rain isn’t just a game. It’s a satire about wealth obsession and what it takes to become obscenely rich. Players manipulate business, political, and financial institutions to generate incredible fortunes. It’s striking a nerve in political discussions of wealth inequality and political corruption in the U.S.

If you have not seen it, “Make It Rain: The Love of Money” is played on a mobile device by swiping your finger across a stack of bills as though you are throwing them out one at a time. The faster you swipe, the more money you make. But don’t just work harder, work smarter! You can increase the value of each swipe by investing in different categories. You might invest in various business ventures such as paper routes and lemonade stands. If that isn’t sufficient, you can also make financial investments into savings accounts and stocks. There is even an option for a bitcoin investment account.

Those traditional routes to wealth creation may seem all well and good, but if you want to get really rich—I mean “one percenter” rich—you will need to start investing in your political cronies. Yes, there is an entire section for political investments, where you can hire lobbyists, form a super PAC, and even start building voting machines. The more “investments” you make, the greater your wealth-earning potential. That part sounds like an engaging way to discuss Public Choice analysis.

As you make business investments (which become progressively more “evil” the higher you advance), your ability to make money is still limited by your finger-swiping speed. However, both your financial investments and your political investments are passive income and require no effort on your part. That’s where the game’s message becomes mixed.

To add an element of risk to the game, The FBI might put you under investigation, whether you engage in illegal activities or not. The outcome of the investigation is determined by the spin of a wheel, not the facts of the manner in which you have played the game. Rule of law be damned! Besides, even if you lose the case, you can always bribe the judge.

Did I mention that the only way to bribe a judge is by using a special card, available only as an in-app purchase? Yes, the profitability of this game in the real world is actually determined by your willingness to spend real money to bribe a fake judge in order to keep your fake money.

Should I even be surprised that my students have already found a way to cheat in a game about cheating?

But don’t worry; if you do lose your shirt to a corrupt judge, you can always double your current cash holding by simply reading a news article. Click on that button in the game and you will be redirected to the website of The New York Times to read “For the Love of Money” by Sam Polk. In other words, a game structured entirely around you making as much money as possible, by whatever means possible, is now going to reward you with even more money for reading an article that tries to convince you that the pursuit of money is an illness and an addiction. How ironic.

So it seems that the underlying message of the game is that the very pursuit of money itself is evil. When the game is opened, a variety of biblical sayings decrying wealth are often splashed across the screen. The creators of the game seem oblivious to the fact that self-interested business and financial investments that create wealth in a free-market economy do so because they improve the quality of life of real people, including those who often seem far removed from the activity in question. The money that is made is simply a response to the value creation that precedes it.

The despicable aspect of money is not that it is made, but that it can be transferred—at the barrel of a an agent’s gun if necessary—through backroom political deals. That is not the fault of money. It is the result of creating political institutions that wield the sword and are willing to sell that power to the highest bidder. But good luck finding anything about that in this game.

Young people, the world around you is a beautiful and fascinating place, thanks in large part to the entrepreneurs and innovators who develop new products and services—even mobile games with a political agenda. Please do not let the cynicism of others tear down your enthusiasm for making the world a better place. Improve the lives of those around you. Allow them to express their gratitude by returning the favor. The money you use is simply a means to those ends, not the end itself.

Instead of a focus on “making it rain,” I encourage you to try and make a difference. You just might be surprised at how the market responds, especially when political investments are taken off the table.

ABOUT THOMAS BOGLE

Thomas Bogle teaches business-related courses to high school students in Tempe, Arizona. He and his wife also operate The Ice Box, a mobile shaved ice vending business (well, they will once the city gets out of their way) and he blogs at www.thingstoact.wordpress.com.

The Great Inversion: Technology like Bitcoin flips the logic of collective action by Carl Oberg

May 19, 2014/in Budget and Finance, Economy, News, Regulation/by Foundation for Economic Education (FEE)

The political logic of “concentrated benefits and diffuse costs” has been with us since day one of democracy. But it was only recently explained effectively by great economists like the Nobel Prize-winning James Buchanan and Mancur Olson.

It works like this: A special interest group such as the sugar lobby wants money in the form of subsidies, tax breaks, scientific study funding, or anything else of value to them. Let’s say the package they want is worth $100 million. The benefit is concentrated with that company or industry doing the lobbying at $100 million.

How much will this cost the American taxpayer? $100 million is the partially right answer. Of course, as individuals we react to the impact of this corruption not as a $100 million tax, but rather as a 32-cent tax. ($100 million divided by 310 million Americans) The costs are diffused over every taxpayer, lessening its impact and making it more politically palatable to any individual voter.

Are you willing to protest for $0.32? Will you hit the barricades for $0.32? Will you use your precious income-earning time to get back that $0.32? They’ve already won, because almost no one is willing to lose time or sleep over this—if they even know any individual instance is occurring.

And so the “logic” of Public Choice Problems is for spending to increase—seemingly forever—on pet projects and special interests until a crisis is reached and the system has to be reset.

But something interesting happens when you start talking about diffuse systems like the internet and bitcoin—something that hasn’t yet been fully examined. This public-choice logic gets turned on its head. The systems not only survive, but thrive. Let’s look at bitcoin as an example.

The government sees bitcoin as a threat to its monopoly on money and the power to create federal reserve notes whenever it wants. The federal government jealously guards this power because it allows the government to pay for anything it desires while passing on the true costs of the money printing to the citizenry through inflation. Increased spending (concentrated benefits) and diffuse costs (inflation which lowers the value of savings) are hallmarks of the current federal monopoly on money.

But as the feds fight against bitcoin and other crypto-currencies, they will find the tables turned: The beneficiaries of these diffuse systems are legion, and spread far and wide. But the costs of fighting technological advancement and increased monetary freedom are laid squarely at the feet of the government. Investigations, new laws, prosecutions, new snooping technologies all cost significant time and resources. And the government has just begun to go after crypto-currencies.

The closure of the first Silk Road site and the arrest of BitInstant CEO Charlie Shrem are just the beginning. Meanwhile, the benefits of a robust, changing and growing crypto-currency community and ecosystem are constantly spreading to more and more people. The government can stop places like Silk Road and others, but more will pop back up, considering the relatively low setup costs and its value diffuse throughout a larger user community.

The internet as a whole functions in the same way. Attempts to constrain the internet, like SOPA, incur huge costs for the lawmakers who attempt to get them passed. Meanwhile, technology has developed to the point where even if the government was able to constrain or suppress the internet, other networks outside of their control could easily pop up. The darknet already exists, is being actively used by individuals interested in privacy and could be expanded to address outside infringement of the regular Web.

This is a development which turns the very logic of political action on its head. Thanks to technology and the distributed nature of networks, we are no longer beholden to the political process, majoritarian rule, and the so-called “fair” tax and fiat money regime. The more of the economy we move to the net, the safer we will be and the more distributed power becomes.

ABOUT CARL OBERG

Carl Oberg is the Chief Operating Officer of the Foundation for Economic Education.

Time for the States to Take Back Their Land from the Feds

May 18, 2014/in Economy, News, Policy, Regulation/by Alan Caruba

According to a 2012 report by the Federal Research Service, “The federal government owns roughly 635-640 million acres, 28% of the 2.27 billion acres of land in the United States.

Four agencies administer 609 million acres of this land: the Forest Service (USFS) in the Department of Agriculture, and the National Park Service (NPS), Bureau of Land Management (BLM), and Fish and Wildlife Service (FWS), all in the Department of the Interior (DOI). Most of these lands are in the West and Alaska. In addition, the Department of Defense administers 19 million acres in military bases, training ranges, and more. Numerous other agencies administer the remaining federal acreage.”

I suspect it may come as a surprise to many people that the federal government owns just over a quarter of the nation’s landmass and, other than land set aside for military bases and naval ports that may seem excessive. It is.

The drama that ensured when the Bureau of Land Management lay siege to the Nevada Bundy ranch over unpaid grazing fees called into attention the fact that the BLM oversees, according to a recent article in the National Review, “the largest piece of leasable real estate in the American West—245 million acres, an area bigger than the mid-Atlantic states and New England combined. The BLM is its landlord.”

In theory one can apply for a license or lease “to make productive use of this land” noted Travis Kavulla in his article, “Public-Land Colonialism.” In practice “The National Environmental Policy Act of 1969 requires an excruciatingly complex process before even mundane land-use decisions can be made.” It is a regulatory nightmare for anyone who might want to create a mine to access coal or valuable minerals or extract oil or natural gas.

The process is subject to government policies, spoken or unspoken, to restrict access. A current case involves actions by the Environmental Protection Agency to stop the creation of the Pebble Mine project in Alaska even before a permit is requested. A May 12 Wall Street Journal editorial noted that “The EPA’s inspector general’s office last week announced it will investigate the agency’s February decision to commence a preemptive veto of the Pebble Mine project, a job-rich proposal to develop America’s largest U.S. copper and gold mine in southwest Alaska.”

The Obama administration has been devoted to stopping all kinds of projects that might generate jobs and revenue from projects like the Pebble Mine. Its opposition to the building of the Keystone XL pipeline is the best known example, but the EPA’s “war on coal” has closed many mines in addition to coal-fired plants needed to provide electricity.

The EPA is requesting jurisdiction over all public and private streams in the nation and this has been called “the largest land grab in the history of the world.” So it is not just public lands that are affected, but private lands as well.

In an article on World Net Daily, Alana Cook pointed out that “The proposed rule tinkers with the definition of ‘navigable’ waters which was the central point of litigation in a battle between the Supreme Court and the EPA regarding the Clean Water Act.” The proposal would “allow the EPA in conjunction with the Bureau of Land Management, the Department of Energy and the Army (Corps of Engineers) to dictate on a never-before-seen scale everything from grazing rights, food production, animal health and the use of energy on private lands.”

This is, simply stated, Communism in which the government owns all the land.

As Craig Rucker, Executive Director of the Committee for a Constructive Tomorrow (CFACT) points out, “There is no engine on Earth as powerful at creating prosperity and improving the condition of both man and nature than free markets. There can be no free market without the right to property.” He warns that “Property rights are under siege.”

One of the BLM’s reasons cited for its actions against the Bundy ranch involved “endangered animals” and Rucker said, “Take away a person’s right to choose how to use their land and in effect you’ve seized that land.” The attack on private land ownership is led by the United Nations Agenda 21.

The government’s control over public lands and its grasp for control of the use of all private lands reflects the Marxist agenda of the Obama administration. It is so manifest that, in mid-April, officials from nine states got together in Salt Lake City to discuss ways to retake control of poorly managed federal lands.

There are federal laws that have been on the books a very long time that are intended to protect private property from the actions we have seen by the BLM and the EPA. One is the Federal Land Policy and Management Act of 1976, so this issue has been around awhile, but what is generally unknown is how vast federal control is.

In his National Review article, Kavulla noted that “In Montana, one county that is a traditional center of natural gas production has a whopping 53 percent of its subsurface minerals controlled by the BLM. Proposed resource management plans (RPM) in Montana “more than quadruple the land off-limits to ‘surface occupancy’ which makes oil and gas drilling virtually impossible. Only about one million acres of a ten million acre federal estate would be open to drilling activities under standard leasing conditions.”

America is under attack from within by federal government agencies that are striving to deny access to the greatest energy reserves in the world and to control the lives of ranchers and farmers whose work feed the rest of us.

It is time for the states to take back their land from the federal government and to oversee its use for the development of the economy, the security of the nation, and the protection of private property, the keystone of capitalism.

It’s a Very Complex World

May 18, 2014/in Economy, Energy, Environment, News, Policy/by Alan Caruba

In the 1980s I devoted a lot of effort to debunking a torrent of Green lies about pesticides and herbicides. This was before the Greens latched onto “global warming” which has since become “climate change” and the subject of a recent White House report filled with dire predictions of planetary doom and disaster.

Nobody died from using pesticides or herbicides in the 1980s or since unless they drank it straight from the bottle. When I talked with farmers they would frequently say “Do you think I would put this stuff on the crops my family eats if I thought it would harm them?” The Greens have always attacked anything that would increase crop growth by limiting the real harm of weeds or the predation of insect species. These days genetically modified seeds are a target for environmentalists though studies have amply demonstrated their crops are safe to eat.

Less food means less people and that has always been a major goal of the people leading the nation’s and the world’s major environmental organizations. The same formula applies to denying energy to people worldwide.

As for pesticides, we all use them to keep our homes and workplaces free of insects that are the key vectors for all manner of diseases. In a world before their invention, millions died from mosquito-borne diseases such as Yellow Fever, Dengue Fever, Encephalitis, West Nile virus and Malaria. Millions still die from malaria and these diseases because one of the most effective pesticides ever invented was DDT and it was banned because of the lies Rachel Carson told in her iconic, environmental book, “Silent Spring.”

The world is a very complex place and it is essential to have a fundamental understanding of how it works. One of the best new books on this subject is Robert Bryce’s “Smaller Faster Lighter Denser Cheaper” ($27.99, Public Affairs). What Bryce doesn’t know about energy is probably not worth knowing and, happily, he has authored several books on the subject. His latest provides wonderful and useful insights to the world we share today with seven billion other human beings.

Bryce quotes Edward Abbey, “one of the patron saints of American environmentalism” who, in 1971, said, “We humans swarm over the planet like a plague of locusts, multiplying and devouring. There is no justice, sense or decency in this mindless global breeding spree, this obscene anthropoid fecundity, this industrialized mass production of babies and bodies, ever more bodies and babies.”

This is the kind of thinking that is the hidden justification for genocides. Not surprisingly the leaders of the Nazi regime were all dedicated environmentalists. At the heart of much that passes for environmentalism is an attack on the energy sources that enhance or lives and agricultural practices that feed us.

It’s not by accident that environmental groups all trumpet the same doomsday lies at the same time. Their leaders get together to coordinate their efforts and the current one is aimed at what they call “de-growth”, the reduction of economic growth by any means.

With President Obama blathering about “climate change” threats, it should not surprise anyone to conclude that the horrible economic conditions he has imposed on our nation was not an accident, nor that he focuses on thwarting the provision of energy, the most vital component of economic growth.

“The prescriptions put forward by the degrowth crowd,” says Bryce, “are familiar. Nuclear energy is bad. Genetically modified foods are bad. Coal isn’t just bad, it’s awful. Oil is bad. Natural gas—and the process often used to produce it, hydraulic fracturing is bad.” And it is no surprise that the Environmental Protection Agency—the most anti-growth governmental agency—has just announced steps to require the disclosure of chemicals used in hydraulic fracturing, a technology that has been in use for more than a half century and one that has unlocked access to vast reserves of natural gas and oil.

It is essential to understand who the enemy is and it is groups like the Sierra Club, Greenpeace, Friends of the Earth, and the Worldwatch Institute, to name just a few.

The next time some environmental spokesman is busy spreading fear, Bryce says it is necessary to keep in mind that “Their outlook rejects innovation and modern forms of energy. It rejects business and capitalism. We must move past the climate of fear to one of optimism. We must move past fear of technology to an understanding that technology isn’t the problem; it’s the solution.”

Access to early 20th century books of historically significant valuation and mortgage risk now available

May 17, 2014/in Economy, News/by Edward Pinto

American Enterprise Institute’s International Center on Housing Risk has assembled of a bibliography of historically significant valuation and mortgage risk books and documents from the first half of the 20th century.

The oldest book (1903) is Richard Hurd’s Principles of City Land Values. This book is widely considered to be the first United States’ treatise on city (non-farm) land values. A few of his insights are noted below.

This bibliography is dedicated to Professor Richard Ely (“Under all, the land”), University of Wisconsin (1854-1943), the father of land economics and real estate studies as academic disciplines. Many of the authors listed in this bibliography were his students and colleagues.

To receive access to PDF copies of the historical valuation and mortgage risk documents bolded and underlined below, please contact Emily Rapp at emily.rapp@aei.org. Emily will share a Dropbox folder titled “Appraisal Theory History”, which will grant access to the requested documents. Non-bolded/underlined items are not in the public domain; they may still be in print or vintage copies may be available for purchase over the Internet.

1903, Hurd, Principles of City Land Values—this seminal work that is widely considered to be the first treatise on city (non-farm) land values. After 110 years, Hurd’s annunciated principles still inform property valuation theory and practice today: Below are listed a few of these principles:

o While intrinsic value is correctly derived by capitalizing ground rent, exchange value may differ widely from it.

o Value in urban land, as in agricultural land, is the result of economic or ground rent capitalized.

o In cities, economic rent is based on the superiority of location only, the sole function of urban land being to furnish area on which to erect buildings.

Since value depends on economic rent, and rent on location, and location on convenience, and convenience on nearness, the intermediate steps may be eliminated and say that value depends on nearness.

o Land prices on the outskirts are lower as area increases as the square of the distance from any given point.

o General financial and economic conditions enter so largely into exchange values, that values are at times not based on income, or supply and demand, but represent simply a condition of the public mind.

o If a new utility does not arise, exchange prices may advance and recede, while intrinsic values do not change.

o If a new utility arrives, both exchange prices and intrinsic values will alter their levels.

1913, Bernard, Some Principles and Problems of Real Estate Valuation,—ONLY AVAILABLE FOR DISTRIUBTION WITHIN UNITED STATES
1923, Spilker, The Real Estate Business as a Profession, the book covers real estate appraisal, planning and zoning, common and statutory law, subdivision development and ethics (among numerous related topics). It was utilized the text as a part of the curriculum for the real estate certificate and degree program offered by the University of Cincinnati at the time.
1927, National Association of Real Estate Boards (now the National Association of Realtors), Real Estate Appraising Chapters 1-10—the Appraisal Institute’s The Appraisal of Real Estate (now in its 14^th edition) traces its linage back to this book collected and organized by Arthur Mertzke, director of education.
1928, McMichael, City Growth Essentials, a great treatise on the development of cities by one of the leading writers and publishers of valuation and appraisal books starting in 1920 to the 1960s.
1931, 1937, 1944, 1951, McMichael’s Appraising Manual, given its many fully revised editions, McMichael’s allows one to trace changes in appraisal methodology from the 1920s to the 1950s. Original editions are sometimes available over the Internet.
1932 Gries and Ford, The President’s Conference on Home Building and Homeownership–contains much historical detail about home ownership and mortgage conditions in the early 1930s.
1933, Hoyt, One Hundred Years of Land Values in Chicago, still in print
1934, Alger, Alger Commission Report—report by commissioner appointed by the Governor of New York to investigate the causes of the collapse of both the private mortgage backed bond market and private mortgage insurance industry. Report provides specific recommendations which were central to the state regulatory structure which accompanied the 1957 rebirth of the private mortgage insurance industry.
1936, FHA How to have the home you want—FHA’s first consumer brochure. Contains these quotes:

o “To many people, ‘Mortgage’ became just another word for trouble—an epitaph on the tombstone of their aspirations for home ownership.”

o “Provide a straight, broad highway to debt-free ownership.”

1936 April, FHA Underwriting Manual; 1936 November, FHA, Underwriting Manual; 1938 February, FHA Underwriting Manual—When FHA was established in 1934, five experts in the field of collateral and mortgage risk formed the core of its underwriting and economics staff. These men created a combined mortgage risk and collateral matrix that incorporated Frederick Babcock’s concept of “warranted value” for the purpose of lending, which set out a through the cycle valuation methodology. Germany’s Mortgage Lending Value concept was independently developed 60 years later; however it bears strong similarities to Babcock’s warranted value concept as articulated in the 1938 FHA Underwriting Manual.

o Frederick Babcock, chief underwriter and the author of:

§ 1924 – The Appraisal of Real Estate

§ 1932 – The Valuation of Real Estate

o Ernest Fisher, chief economist and the author of:

§ 1923 – Principles of Real Estate Practice

§ 1939 – The Structure and Growth of Residential Neighborhoods in American Cities (1939) with Homer Hoyt

o Homer Hoyt, chief housing economist and the author of:

§ 1933 – 100 Years of Land Values in Chicago

§ 1939 – The Structure and Growth of Residential Neighborhoods in American Cities (1939) with Ernest Fisher

§ 1939 – Principles of Urban Real Estate with Weimer (1939)

o Richard Ratcliff, economist and author of:

§ 1949 – Urban Land Economics

o Arthur Weimar, economist and author of:

§ 1939 – Principles of Urban Real Estate with Hoyt (1939)

1939, Hoyt, FHA Structure and Growth of Residential Neighborhoods,
1939, Weimar and Hoyt, Principles of Urban Real Estate—available on JSTOR, click here to register for a free MyJSTOR account
1941, Schmutz, The Appraisal Process
1942, 1953, May, The Valuation of Residential Real Estate, an excellent work on this topic.
1949, McMichael’s, How to Finance Real Estate
1951, American Institute of Real Estate Appraisers, The Appraisal of Real Estate. First edition of the Appraisal Institute’s The Appraisal of Real Estate (now in its 14^thedition).
1956, 1974, Wendt, Real Estate Appraisal, contains an excellent overview of appraisal theory and appraisal practices during the middle 0ne-third of the 20^th century.
1963, McFarland, FHA Experience with Mortgage Foreclosure and Property Acquisition

We are working to provide access to these two books and , if successful, will update this bibliography accordingly.

1932, Babcock, The Valuation of Real Estate, considered to be the most significant appraisal book since Hurd’s in 1903. In it Babcock develops his concept of warranted value. Ernest Fisher helped Babcock with this second book as both were at the University of Michigan in the early 1930s.
1933, Kniskern, Real Estate Appraisal and Valuation

The Supreme Court Helps the EPA Shut Off Electricity in America

May 17, 2014/in Courts & Law, Economy, Energy, Environment, News, Science/by Alan Caruba

April 2014 seems to be the month in which the Supreme Court devotes itself to decisions that have no basis in real science and can do maximum damage to the economy. Invariably, the cases are brought against the Environmental Protection Agency and are decided in its favor.

In April 2007, the Court decided that carbon dioxide, the second most essential gas for all life on the planet was “a pollutant”, the definition the EPA had applied to it in order to regulate it. Now comes word that the Court had concluded that the EPA may regulate power-plant emissions that blow across state lines as per a 2011 regulation, the Cross-State Air Pollution Rule. Not content having put nearly 150 or more coal-fired power plants out of commission, the Court’s rule now gives them the authority to do the same thing to about a thousand power plants in the eastern and western regions of the U.S. that will have to adopt new pollution controls or reduce operations.

In effect, the Court has just agreed to a regulation that represents a major increase in the cost of electricity in 28 states deemed to be polluting the air in those around them. The EPA’s claims that this will save lives they attribute to the alleged pollution is as bogus as all the rest of their claims, the purpose of which is to undermine the nation’s economy in every way it can.

James M. Taylor, the Heartland Institute’s Senior Fellow for Environmental Policy said of Tuesday’s decision that “It is a shame that the U.S. Supreme Court continues to empower EPA to issue nonsensical interpretations of statutes with the primary goal of amassing more money and power.”

Every day the press is filled with reports of environmental groups suing to ensure that no new providers of electricity can be built. The Environmental Protection Agency has instituted all manner of regulations intended to shut down coal-fired plants and they are based on the total lie that carbon dioxide and other “greenhouse gases” are causing the Earth to warm. The science cited is entirely without merit and the Earth is cooling, not warming, and has been for the past seventeen years.

As winters grow colder, it is putting a tremendous demand on the nation’s electrical grid. In a recent commentary, Steve Gorham, the author of “The Mad, Mad, Mad World of Climatism: Mankind and Climate Change Mania”, quoted Philip Moeller, Commissioner of the Federal Energy Regulatory Commission, “the experience of this past winter indicates that the power grid is now already at the limit.”

“EPA policies,” said Gorham, “such as the Mercury and Air Toxics rule and the Section 316 Cooling Water Rule, are forcing the closure of many coal-fired plants, which provided 39 percent of U.S. electricity last year. American Electric Power, a provider of about ten percent of the electricity to eastern states, will close almost one quarter of the firm’s coal-fired generating plants in the next fourteen months. Eighty-nine percent (89%) of the power scheduled for closure was needed to meet electricity demand in January. Not all of this capacity has replacement plans.”

Before Obama was elected, coal-fired plants provided fifty percent (50%) of the nation’s electricity.

What is the Obama administration’s response to this? It is pouring billions into the wind and solar energy sector that provides barely one percent of all the electricity used in the nation and can never begin to replace traditional plants.

In an April 25 letter from the American Energy Alliance, joined by thirty other organizations, to the House Ways and Means Committee, opposition to the Wind Production Tax Credit was expressed: “The PTC has been a failure for taxpayers and ratepayers. In exchange for tens of billions of dollars in handouts to wind producers, the states with the highest wind production have seen their electricity rates increase nearly five times faster than the national average. In fact, states with at least 7 percent wind power have seen their electricity rates increase at an average of 17.4 percent over the last 5 years compared to an increase of only 3.5 percent for the U.S. as a whole” Why, indeed, are taxpayers being required to sustain providers of wind power that would not be able to stay in business otherwise?
In addition to the fact that you cannot manufacture anything without the use of electricity, a deliberate effort is being made to ensure that vast sections of the nation will not be able to receive electricity to warm homes and businesses in the winter and cool them in the summer. Simply put, people will die for lack of the warmth and coolness needed, not from the phony pollution the EPA cites.

This is the heart of an environmental agenda that views the human population as “a cancer” that needs to be vastly reduced. This agenda is directed from the United Nations and its Intergovernmental Panel on Climate Change that falsely claims that humans have a vast impact on the climate. They do not. Human activity barely, if at all, affects the climate. What does? The Sun! Add in factors that include the Earth’s oceans and volcanic activity, and it should be obvious that everyone is being targeted for extinction.

In an article, “The EPA’s Science Problem”, Arnold Ahlert, noted in early April that “In a stunning admission, Environmental Protection Agency administrator Gina McCarthy revealed to House Science, Space and Technology Committee chairman Lamar Smith (R-TX) that the agency neither possesses, nor can produce, all the scientific data used to justify the rules and regulations they have imposed on Americans via the Clean Air Act. In short, science has been trumped by the radical environmental agenda.”

The Obama administration has done everything in its power to restrict and slow down access and use of America’s huge energy reserves, enough to ensure all the electrical power we will need for hundreds of years to come. The same policy applies to transportation’s petroleum needs. Oil and gas production on federal lands is down 40% compared to ten years ago.

According to the Institute for Energy Research notes that “North America has enough oil to fuel every passenger car in the U.S. for 430 years, enough natural gas to provide the U.S. with electricity for 575 years, and enough coal to provide electricity for about 500 years.” And that’s based on known reserves. They are, however, of little use if the Obama administration continues its efforts to restrict access to them.

In an August 2013 Washington Times commentary, Ben Wolfgang warned that the EPA, the Energy Department, and other agencies’ “working group” quietly raised “their estimated social coast of carbon from $21 per ton of emissions to $35 per ton”, noting that “The dramatic increase greatly alters cost-benefit analyses offered by the EPA when floating rules, allowing the agency to claim that billions of dollars will be saved over a period of decades as a result of proposed limits on power plant emissions, tougher fuel economy standards and other steps.”

The “social cost” is a complete invention, a fiction without any basis in fact. It is a device to further restrict access and use of all fuel sources.

Americans had better wake up to the fact that their government—the Obama administration—is doing everything in its power to cut off the provision of electrical power and access to transportation fuel that it can. And the Democrats in Congress, particularly Harry Reid the Senate Majority Leader, is doing everything to advance this agenda by blocking any legislation generated in the House to counter this agenda.

In November, the midterm elections offer an opportunity to elect enough Republicans to secure control of the Senate and increase its strength in the House.

Let me end with the good news. Despite what the enemies of energy are doing, the energy sector—coal, oil, and natural gas—in the decade ahead is going to grow, going to generate many new jobs, and is going to help dig us out of the huge government debt that too much borrowing and spending has generated.

The Real State of the Economy — Not Obama’s Lies

May 17, 2014/in Economy, News, Policy, Politics, Regulation, Waste, Fraud and Abuse/by Alan Caruba

My Father was a Certified Public Accountant and so is my older brother, now comfortably retired in Florida. I tell you this because I would be hard-pressed to balance my checkbook.

Even so, you do not have to be smart with numbers to know that the real state of the U.S. economy is pathetic these days. You can thank Barack Obama for that because, dear reader, he is utterly clueless regarding America’s economy; how it works, and what it needs to work.

Peter Ferrara, a Senior Fellow at The Heartland Institute specializing on entitlement and budget policy and a contributor to Forbes magazine, is one of the people to whom I go to understand the economy.

In a May 2 edition, in an article titled “What Obama’s Growth Recession Is Stealing From Your Wallet”, Ferrara wrote “Restoring that booming economic growth and prosperity (of past decades) is the core of solving all of our nation’s problems, not income or wealth redistribution, or addressing ‘inequality.’ But President Obama is not on the path of restoration. The latest report on real GDP growth estimates this year’s first quarter at a pitiful 0.01%. This is in the 6th year of Obama’s Presidency.”

The Heritage Foundation’s chief economist, Stephen Moore, writing on May 1st in the National Review, asked, “What happens to an economy when you do just about everything wrong?” Here’s his list:

Say you spend $830 billion on a stimulus stuffed with make-work government-jobs programs and programs to pay people to buy new cars,
you borrow $6 trillion,
you launch a government-run healthcare system that incentivizes businesses not to hire more workers,
you raise tax rates on the businesses that hire workers and on the investors that invest in the businesses that hire workers,
you print $3 trillion of paper money,
you shut down an entire industry (coal), and try to regulate and restrain the one industry that actually is booming (oil and gas).

“We made all of these imbecilic moves,” wrote Moore, “and the wonder of it all is that the U.S. economy is growing at all. It is a tribute to the indestructible Energizer Bunny that is the entrepreneurial U.S. economy that it keeps going and going even with all the obstacles.” I want to argue with his use of “we”, but enough Americans elected Obama twice to justify it.

The Associated Press, much like most of the mainstream press, paused from protecting Obama in a May 2nd article that began “Despite the unemployment rate plummeting, more than 92 million Americans remain out of the labor force.”

As Harvard Ph.D., Jerome R. Corsi, a World Net Daily senior staff reporter, noted the same day as the AP article, “The Bureau of Labor Statistics (BLS) announcement that unemployment has dropped from 6.7 percent in March to 6.3 in April was partly attributed to some 800,000 workers dropping out of the labor force last month, reducing the labor participation rate to 62.8 percent, a new low for the Obama administration.”

When people stop looking for work, they are not counted as “unemployed.” Dr. Corsi put the actual unemployment rate in April at 12.3 percent! The numbers you read about from the BLS are “virtually meaningless.” They should just drop the “L” from their acronym.

As the Wall Street Journal opined on May 3rd, “The Americans who left the workforce include older workers who retired before they wanted to, millions who have taken disability, and others who simply don’t find the job openings to be worth the cost of giving up public benefits.”

You don’t have to be an economist to know the truth that has finally sunk into the minds of millions of Americans, many of whom are unemployed or know someone who is. Obama has driven the economy into the toilet. He has foisted trillions of debt on future generations. In order to vote for “the first black President of America”, what those voters and the rest of us got was a man with no experience running so much as a sidewalk lemonade stand.

I think those voters will want a change in November when the midterm elections are held. Between now and then, I want the Republican Party to spend a little less time on the Benghazi scandal and a lot more time telling voters their plans to revive the economy because, in the end, that is the single most important issue facing all of us.

Extenders For The Millionaire’s Club

May 17, 2014/in Economy, News, Policy, Regulation, Taxes/by Cynthia Canevaro

“The people are responsible for the character of their Congress. If that body be ignorant, reckless and corrupt, it is because the people tolerate ignorance, recklessness and corruption.” – James Garfield

Wall Street Journal columnist and former presidential speechwriter Peggy Noonan writes in the June issue of Readers Digest that, “Someday history will write of our era, and the biggest scandal will be the thing we accepted in our leaders; chronic and endemic selfishness. History will be hard on us for that.”

Nowhere is this chronic selfishness more pervasive than in our legislative processes on Capitol Hill. Peter Schweizer writes in his groundbreaking book Extortion that:

“Politics in modern America has become a lucrative business, an industry that has less to do with policy and more to do with accessing money and favors. Bills and regulations are often introduced, not to affect policy change, but as vehicles for shaking down people for money and favors.”

And what’s the favorite vehicle for shaking people down? Why the income tax code of course; all 73,954 pages specially written by Washington’s finest lobbyists, many of whom previously served as staffers on Capitol Hill.

Don Corleone said in the movie, The Godfather, “Make me an offer I can’t refuse”. Today’s legislative equivalent of Corleone’s veiled threat has become tax extenders.

Unlike permanent legislation, tax extenders must be renewed every few years or new taxes go into effect, or the taxes that were temporarily halted under the extender are reinstated.

And make no mistake; the process of renewing tax extenders is all about filling Member’s campaign coffers. And who fills those coffers? Businesses and individuals affected by or who have an interest in the tax law (extender) up for renewal.

Schweizer provided a sickening example of how the Chairman of the Committee on Ways and Means raised hundreds of thousands of dollars for his campaign coffers during the 2012 election cycle while overseeing that year’s tax extenders that were up for renewal.

This is the same Committee that has yet to act on the FairTax® plan.

According to Schweizer, after announcing hearings on the extenders up for renewal, “ten nervous senior executives at General Electric made donations to Camp on March 19totaling $16,000. Those executives had an enormous amount of money at stake in the tax extenders drama. They had become masters of sorts over the years in turning profits but largely avoiding taxes, thanks to a favorable and complicated tax code.”

He went on. “But Camp’s most lucrative play was targeting corporate PACs. From the beginning of March to the date of the hearings to vet which extenders might stay and which might go, he collected 120 checks totaling $230,000 from corporate or trade association PACs, the vast majority of which had money at stake in the tax extender debate.

The money came from the National Federation of Independent Business, the National Association of Home Builders, Walmart, General Motors, General Electric, Associated Builders and Contractors, Johnson and Johnson and more.”

Very neat, very tidy and it’s all legal.

After all, Congress wrote the laws.

In 2013, this same Committee announced with great fanfare the initiation of a bi-partisan plan for fundamental tax reform. Public comment was requested, a multi-city roadshow was orchestrated and public hearings were held.

In early 2014, the D.C. media all but announced that fundamental tax reform would not see the light of day in 2014. The Committee then began to focus on…. You guessed it…. Tax extenders. In 2014, there are 55 tax extenders up for renewal, and surprise, surprise, 2014 is an election year.

Is it any wonder that Congress is the new millionaires club?

Our Founding Fathers never envisioned a Congress where, in order to affect the legislative process, businesses and individual citizens have to operate like game pieces on a Monopoly board or risk being punished by the totalitarian enforcement arm of the IRS and other government agencies.

Agencies now literally weaponized with assault rifles and sub-machine guns. As former Microsoft chief operating officer Robert Herbold told Schweizer, “You’re crazy if you don’t play along. They will go after you.”

Our nation deserves a tax code focused on her people and her nation – not one that is punitive and frightening, and fills the campaign coffers of the new millionaires club.

If you agree and have not read Peter Schweizer’s book, Extortion, please pick up this blockbuster expose. We have made it easy.

Simply click here and donate $35 or more, forward your emailed donation confirmation and your preferred mailing address to campaigns@fairtax.org, and we will send you a hardback copy of Extortion. It’s that simple.

Obamacare’s Health Insurance Tax Could Cost Up to 286,000 Jobs

May 16, 2014/in Economy, Must Read, News, Regulation, Taxes/by Sean Hackbarth

As I’ve written previously, small businesses should brace for big health plan premium increases. Some are already seeing this happen. Rod Winter, a Wisconsin business owner told the Wall Street Journal:

Our 440-employee business just received its initial premium from United Healthcare for our July 1 renewal. The renewal premium represents a 29% increase over the current premium. UHC indicated that our premiums are going up 11% to bring our deductibles and out of pocket maximums in line with the provisions of the ACA. In other words, without the ACA, our premiums would be going up approximately 18%, not 29%.

New research finds that the added costs of one of Obamacare’s taxes will be brutal on employment.

The National Federation of Independent Business’ Research Foundation estimates that the Health Insurance Tax (HIT)

will result in a reduction in private sector employment of 152,000 to 286,000 jobs by 2023, with 57 percent of the job losses coming from small businesses.

This will amount to a reduction of U.S. real output (sales) by between $20 billion to $33 billion during the same time frame.

The chart above breaks out how individual states will be affected.

The HIT, which went into effect on January 1, 2014, levies a tax on health plans sold on the fully-insured market. Eighty-eight percent of it is made up of small businesses. Revenue from the tax will rise by 41% in 2015 and reach $14.3 billion in 2018.

“Small businesses are crucial to rebuilding an economy that allows all Americans to prosper,” Katie Mahoney, Executive Director of Health Policy at the U.S. Chamber said. “We need to work to find ways to ensure small businesses and their employees have the tools to build on their current success, not hinder future growth.”

The HIT tax simply adds to their burdens, as Fox Business’ Gabrielle Karol reports:

“When employers are faced with double-digit rate increases, to add a few additional percentage points to the renewal just makes that health insurance less affordable and makes it less likely for them to recruit additional employees to provide better services,” says Tom Harte, president of the National Association of Health Underwriters.

“Just yesterday, I was sitting with a non-profit organization in New Hampshire whose rate increase was over 18% from the prior year, and embedded within that was the HIT. For that non-profit organization to instead be faced with a 15% increase versus 18% would have certainly helped them to deliver more services and provide for additional compensation for their employees,” adds Harte.

The Stop the HIT Coalition released a new tool that will help small businesses and their employees calculate how much the tax will cost them. It will also help them contact their Member of Congress to strengthen the bipartisan support for repealing this harmful tax.

The Cold Hard Facts about Wealth Redistribution

May 15, 2014/in Culture War, Economy, News, Policy, Politics, Taxes/by J.B. Williams

The Democrat sales pitch goes something like this… People should not have the freedom to earn unlimited wealth while others are struggling just to survive. Government should take from those who earn too much and redistribute to people in need. This is the right and duty of government.

Despite being a Marxist philosophy which flies in the face of our Constitution and Bill of Rights, not to mention the concepts of freedom and liberty, the pitch is designed to appeal to the hearts and minds of decent people honorably concerned about the welfare of others less fortunate. In America circa 2014, the message seems to be widely accepted despite the obvious assault on freedom and liberty which quite naturally follows.

For decades, Democrats have claimed to care about the poor, the black community and the under-achiever. They have been redistributing billions in other people’s earnings, allegedly to these and many other disadvantaged groups, not only in America but all over the world, and they have been handsomely rewarded in every election since.

However, the cold hard facts on what democratic wealth redistribution is really all about are entirely inescapable. The facts do not support the sales pitch and the people who should be most angry about that are those who were the alleged beneficiaries, those who voted for this mess.

According to the World Bank the U.S. average per capita income as of 2012 was $53,101, placing 6th in the world for the highest personal income per capita.
According to IRS data, 97.8% of all Federal Income taxes are collected from the top 50% of income earners in America. The other 50% are obviously Democrats.

Keep these numbers in mind as we look at how the federal government is redistributing those earnings via current tax code and welfare systems…

If you are fortunate enough to live in one of the top ten welfare states in the nation today, here are estimated the average annual collective welfare benefits packages for each state, per recipient… showing annual benefits per recipient, voting trends and percentage of increase in benefits since 1995. (Data was taken from a recent audited CATO Institute Report)

(Provided by CATO Institute Report)

Now, let’s not only compare these numbers to the U.S. average per capita income stated above, but also the bottom ten welfare states in the country as of today, based on the same criteria.

(Note the anomalies in Illinois and Maine…Why has Illinois and Maine been targeted?)

Depending upon where you live, it may not pay to work anymore. But how you vote certainly can have personal financial benefits for those who wish to not work.

As demonstrated in the above charts, there is indeed a massive redistribution of wealth taking place in America today. Clearly, a massive shift in welfare benefits has been taking place over the past several years, reducing welfare benefits in right-leaning states and paid out in heavily democrat voting states.

Is race really a factor?

Heavily black populated areas like Illinois and the Deep South have all experienced huge cuts in welfare benefits over the last few years. Welfare funds are being taken from black communities and sent only to heavily democratic voting areas of the country, as seen in the charts above. So no, race is not a determining factor in wealth redistribution, or at least not as it is presented by those redistributing the wealth of American taxpayers.

Is unemployment rate a factor?

Of the top ten highest unemployment states in the country, only four are in the top welfare states and four are in the bottom welfare states. So again, the answer is no.

Is poverty the determining factor?

No… of the top twenty states with the highest poverty rates today, six are in the bottom ten welfare states which have seen their welfare benefits taken away over the last several years. Only one of the states in the top ten welfare states is in the top twenty poverty states.

How about labor union influence?

Eight of the ten states at the bottom for wealth redistribution benefits are Right to Work states… the exceptions being Illinois and Maine, both unionized labor states. All of the top ten wealth redistribution states are forced unionization states. So it appears that the influence of labor unions may be a factor.

What is the overwhelming determining factor though?

With a couple isolated cases, ALL states receiving increases in welfare benefits at the top of the wealth redistribution food chain are heavily democrat voting states.

All but two of the bottom ten welfare states are heavily republican voting states.

Quite clearly, states with heavy democrat voting populations are the biggest recipients of wealth redistribution and it has nothing to do with poverty, race or unemployment.

It has everything to do with politics, wealth being taken from right-leaning states, even those with heavy black, poor and/or unemployed populations – and given to left-leaning beneficiaries, all at the expense of the top taxpayers in the country, most of whom vote Republican.

So, which are the wealthiest states in America?

The answer is, the same ten states also receiving the lion’s share of wealth redistribution from Uncle Sam, taken directly from republican states and given directly to democrat states. The numbers are verified and the numbers don’t lie.

Are democrats taking from white people and giving to black people? NO…

Are they taking from the rich and giving to the poor? NO…

Are they collecting from the employed to give to the unemployed? NO…

Are they taking from anti-union states and giving to pro-union states? YES…

But most of all, they are taking earned wealth from republican leaning states and giving it to democrat leaning states.

That’s how democratic socialist wealth redistribution works in the real world. The money is taken from political foes and given to friends. END OF STORY!

Sources

[1] Per Capita Income by State

[2] Per Capita Income by Country

[3] Annual Welfare Benefits by State

The Big-Box Effect: How superstores create unsung benefits for Main Street by Max Borders

May 14, 2014/in Budget and Finance, Economy, News, Policy/by Foundation for Economic Education (FEE)

Asheville, North Carolina, is beautiful. Mountains, like the topography in Tolkien, surround an architectural mix for a townscape of 80,000. Design forays from different generations trap the ghosts of literary figures like Tom Wolfe and Carl Sandburg. Yet Asheville does not turn its back upon either its hippies or its hillbillies.

Find a drum circle downtown or people fly-fishing in nearby Blue Ridge streams. There is the cobbled Wall Street thoroughfare and a nice-but-useless roundabout. Investors have renovated early twentieth-century buildings like the Grove Arcade and have welcomed specialty shops that satisfy the tastes of denizens and visitors alike—most of whom can afford driftwood rocking chairs or hand-crafted dolls. Appalachian art infuses earthy mountain-man culture with a touch of fairytale femininity; it resists frills and embraces form in a magical realism that is as much McCarthy as Marquez.

Asheville also proves Marx wrong. Capitalism does not alienate the hand-blown glassmaker from her product; it rather keeps her busy serving a new generation of patrons with refined tastes. These bourgeois bohemians find value in the place where salon sensibilities and folk arts intersect.

And yet Asheville has a Walmart and a Target.

These big boxes are neither central nor obtrusive, but they are there. “People don’t realize how much big-box stores negatively impact the social, economic and environmental fabric of communities,” says Heather Rayburn of the Mountain Voices Alliance, a local anti-development group. Do they? We often hear that big boxes hurt mom and pop shops and ruin communities. This narrative has become a part of contemporary American lore. Is the big box what’s wrong with America?

Seeing Like a State

Another tack against the big box comes from Salon, in “Walmart: An Economic Cancer on Our Cities.” The idea here is to use dubious statistical artifacts to prove nebulous points about how Walmart contributes to problems of sprawl and depressed wages.

Charles Montgomery writes:

The question was simple: What is the production yield for every acre of land? On a farm, the answer might be in pounds of tomatoes. In the city, it’s about tax revenues and jobs.

To explain, Minicozzi offered me his classic urban accounting smackdown, using two competing properties: On the one side is a downtown building his firm rescued—a six-story steel-framed 1923 classic once owned by JCPenney and converted into shops, offices, and condos. On the other side is a Walmart on the edge of town. The old Penney’s building sits on less than a quarter of an acre, while the Walmart and its parking lots occupy thirty-four acres. Adding up the property and sales tax paid on each piece of land, Minicozzi found that the Walmart contributed only $50,800 to the city in retail and property taxes for each acre it used, but the JCPenney building contributed a whopping $330,000 per acre in property tax alone. In other words, the city got more than seven times the return for every acre on downtown investments than it did when it broke new ground out on the city limits.

When Minicozzi looked at job density, the difference was even more vivid: the small businesses that occupied the old Penney’s building employed fourteen people, which doesn’t seem like many until you realize that this is actually seventy-four jobs per acre, compared with the fewer than six jobs per acre created on a sprawling Walmart site. (This is particularly dire given that on top of reducing jobs density in its host cities, Walmart depresses average wages as well.)

For enthusiasts of urban hyperplanning, this may seem like a “smackdown.” But let’s take a closer look.

First, how are tax revenue and jobs relevantly like agricultural yields? It depends on whom you ask: Tax revenues are things that town planners value. Jobs are things that unemployed people value. And tomatoes are things that consumers value. These are all very different constituencies with different values. And the ways in which they are different are important.

For example, why would we ever assume tax revenue is valuable in and of itself? If it goes to some crony or bureaucrat, the boondoggle might very well be less valuable than what those resources would have bought in the productive sector.

Second, why is the relevant calculation here for Minicozzi and Montgomery anything “per acre”—much less taxes and jobs per acre? Such an accounting artifact is only important if we’re trying to argue that high density is automatically a good thing and low density is bad. But that’s at least part of what’s at issue here. So this is nothing more than a circular argument packaged as “urban accounting.” I’ll pass over the fact that all of Asheville’s pro-density policies have contributed to making it the third most expensive place to live in North Carolina. So if you’re measuring unaffordability per acre, Asheville’s near the top.

Now, it’s no secret that big boxes are able to negotiate all sorts of tax deals with local municipalities. I have no idea whether this is the case in Asheville, but it might be. In any case, cities make the rules, so we shouldn’t be so quick to blame big boxes for getting favorable tax treatment—even if we’d like to rid the world of cronyism. But let’s assume for the sake of discussion that the town fathers are angels—that is, they aren’t abusing eminent domain or awarding big boxes crony deals.

A statistical artifact like “tax revenue per acre” is pretty disingenuous when one considers a couple of factors: First, the old Penney’s building is a tall building downtown. So it’s not going to take up a lot of acreage (it goes up, not out), and it’s going to collect a lot in property taxes because it’s downtown (where property values are higher, often artificially so due to “smart growth” policies). Of course it’s going to bring in more property taxes per acre than less dense outlying areas where property values are lower due to land values. In almost every natural system in the universe, from galaxies to ecosystems to cities, scaling laws apply. That means dense at the center, less dense at the periphery.

Of course, in this supposed smackdown story, the shopper is left out. It turns out many people like to shop at big boxes. It’s cheap, convenient, and you can find parking. That is, instead of workers per acre, there are more inexpensive products per acre. And while some people are willing to feed the meter and fight the parking problems that “walkable city” policies create, it’s nice to be able quickly to park and shop. Indeed, if we were to shift the relevant urban accounting criteria, we might find Minicozzi’s fetish losing some of its juju. How about other measures: Time spent looking for parking per shopping trip? Money spent on parking per shopping trip? Relative cost per comparable shopping item?

Big-Box Effect

In any case, the wider argument goes that big boxes destroy mom and pop businesses and undermine community. But I would argue precisely the opposite. Big boxes unleash forces that allow more diverse businesses and communities to form and flourish. Call it the “big-box effect.”

The big-box effect is perhaps an offshoot of—or corollary to—what futurist writer Chris Anderson calls the “long tail.” Thanks, then, to Anderson and Pareto. (I’ll proceed to exploit their insights, sprinkling in a little Adam Smith and David Ricardo, too.) The idea is that a lot of interesting and unique goods and services—rarer ones in smaller markets—will be provided along the “tail” of a distribution curve, especially with Internet product aggregation.

First, the big-box effect begins in the big butt of the distribution curve. Products are cheap and abundant here due to economies of scale and reduced stocking and distribution costs. Think of a customer walking into a big box. She can expect to save thanks to the lower prices that flow from these models. When she shops here, she has resources that she would not have had if she’d bought her shaving cream and laundry basket from mom and pop—she has more discretionary income. Often, she takes this extra income to the boutique thoroughfares downtown. Here, a natural clustering of “long-tail” goods and services—prized for their relative uniqueness—has emerged, co-evolving right along with the big box. Big boxes are thus a necessary part of the new life of Main Street boutiques.

Mom and Pop

What of mom and pop stores? It’s not that they all went out of business—although some probably did. It’s that they changed. Mom and pop specialized. Indeed, through time, mom and pop have continued to specialize. It’s simply a myth that these small businesses have gone away. Instead they have adapted to more discriminating tastes and changed to cater to the preferences of people with more discretionary income. What is remarkable about the big-box effect is not that big-box stores devour everything in their paths, forcing us to buy from a faceless corporation in a monoculture of mediocrity. It is, rather, that they conveniently centralize the mundane and the mass-produced on the outskirts of town.

Now, if you long to buy your shaving cream and laundry baskets from a shop on Main Street, there is little I can say to change your mind about big-box stores. If I’m downtown, I would personally rather find Counter Culture Coffee and gluten-free desserts served by surly college kids with tattoos and piercings. Aesthetic sensibilities notwithstanding, big-box stores are like giant vacuum cleaners of vapid products and services, despite their footprints. And, paradoxically, they leave lots cool stuff in their wakes. If the vapid can be centralized and gotten more cheaply on the edges of American towns, it means more interesting, unique, and artsy stuff can now be acquired on Main Street. If I can buy shaving cream for $0.99 instead of $1.89 (and tube socks, Tonka trucks, pet food, and a garden hose during the same stop), I am more likely to have money left over for an objet d’art for our family mantelpiece.

Is it really such a bad thing that mom and pop have been pushed by economies of scale into boutique businesses? I think of it as a great benefit of the market. Walmart simply cannot compete when it comes to trilobite sculptures, gourmet coffee, and Swedish massages. Turns out, like in living ecosystems, economic ecosystems include “few large, many small” creatures in a diverse array.

Expensive Tube Socks

So the question for big-box antagonists becomes: Do we really need small, inefficient, and expensive shops to supply us with high-priced tube socks and soap? How vibrant is a “community” where such items are being hocked? And do we really want to say goodbye to all the pottery and scones? Thanks to big boxes, charming downtown areas are evolving into gorgeous window-shopping and restaurant-hopping districts. In the meantime, everyone knows where to get the bare necessities. So while your aesthetic sensibilities might be offended by the big box, perhaps it’s time to admit these stores have an important function. It turns out big boxes exist for a reason: People actually value them.

The big-box effect has happened all over the world, enabling many communities to renew their town centers. In fact, people who are able to reduce their day-to-day shopping costs now have more money to spend on finer things—like roadside produce grown by local farmers. No good-ole-boy can do Mach III razors. And no big box can do homegrown tomatoes and Silver Queen corn.

Up from Poverty

Long-tail benefits are all well and good. But I should at least touch on another positive big-box effect. This one was summed up tidily in 2006 by conscious capitalist Michael Strong, author of Be the Solution:

Between 1990 and 2002 more than 174 million people escaped poverty in China, about 1.2 million per month. With an estimated $23 billion in Chinese exports in 2005 (out of a total of $713 billion in manufacturing exports), Wal-Mart might well be single-handedly responsible for bringing about 38,000 people out of poverty in China each month, about 460,000 per year.

There are estimates that 70 percent of Wal-Mart’s products are made in China. One writer vividly suggests that “One way to think of Wal-Mart is as a vast pipeline that gives non-U.S. companies direct access to the American market.” Even without considering the $263 billion in consumer savings that Wal-Mart provides for low-income Americans, or the millions lifted out of poverty by Wal-Mart in other developing nations, it is unlikely that there is any single organization on the planet that alleviates poverty so effectively for so many people. Moreover, insofar as China’s rapid manufacturing growth has been associated with a decline in its status as a global arms dealer, Wal-Mart has also done more than its share in contributing to global peace.

Eat your heart out, Jeffrey Sachs. We won’t hold our collective breath waiting for Sam Walton’s posthumous Nobel Prize. But it would be nice if big boxes got a little more credit. If big boxes enable the emergence of specialized, town-specific economies and even help people in the developing world emerge from poverty, why is there so much hostility toward them?

People dislike big winners for various reasons. But in Walmart’s case, critics have painted the picture of a Goliath among a million helpless Davids. I think this underdog theory does some work, but I don’t think it explains all the animus. Could it be that big boxes offend the aesthetic sensibilities of elites?

Big-Box Shoppers

Big boxes are places where America’s unwashed masses (ordinary people) come to shop. Maybe those who don’t want big boxes in their communities just don’t want the real faces of America in their neighborhoods. They want to live in a bubble of sterility and education only they can afford. They imagine that, with enough political will, all of America can be downtown Asheville, with high-priced organic foods and hemp toilet paper. Their wealth leads them to dream of a mom and pop utopia across the country—the United States of Greenwich.

But living in that illusion means moving the poor out of their neighborhoods. It means purging one’s community of crass capitalism, dually trucks, and NASCAR T-shirts. Strange that those who talk of social justice can seem so blind to the needs of the working poor around them. The issue is complicated, of course. Given the size and success of big boxes, it’s natural for labor unions, urban planners, and special interest groups to target them. But the fact is, few in the anti-big-box group are willing to acknowledge that they are helping rich people purge their communities of undesirables. An unholy coalition between rich elites and anti-corporate activists thus impedes the benefits of the big-box effect, to the detriment of the poorest people in their communities.

Conclusion

To hear some of the critics, whole sectors of the charm economy have been ruined. As we have explained, however, this isn’t nearly the case. Evidence suggests that although small businesses have been forced to specialize and adapt, they represent the bulk of the U.S. economy. According to a 2007 U.S. Department of Commerce report, small businesses:

Employ about half of all private sector employees.
Pay nearly 45 percent of total U.S. private payroll.
Have generated 60 to 80 percent of net new jobs annually over the last decade.
Create more than half of non-farm private gross domestic product (GDP).

Assuming similar data today, we can’t know which businesses are delightful storefront shops and which are auto body shops. But we can point to anecdotal evidence that demonstrates the emergence of specialty shopping in districts once occupied by general stores. And we can certainly conclude that mom and pop businesses continue to survive and thrive in modern America. In a positive-sum economy, there is room for market entrants, large and small. Indeed, if I’m right, we can’t have the 80 without the 20.

Max Borders

ABOUT MAX BORDERS

Max Borders is the editor of The Freeman and director of content for FEE. He is also co-founder of the event experience Voice & Exit and author of Superwealth: Why we should stop worrying about the gap between rich and poor.

EDITORS NOTE: The featured image is courtesy of FEE and Shutterstock.

Micro Loses a Legend: A note on the passing and legacy of Gary S. Becker (1930–2014)

May 13, 2014/in Economy, News/by Foundation for Economic Education (FEE)

The past year has been marked by the passing of a number of postwar pioneers of modern microeconomics. Now Gary Becker has expired at the age of 83. Becker had been in poor health recently, yet he remained active in his research.

Becker was born in 1930 and studied economics as a student of Milton Friedman at the University of Chicago. His dissertation was a pioneering work on the economics of discrimination. Becker was a socialist in his youth, but his education as an economist quickly changed him into a classical liberal. He excelled as a Chicago school economist. In fact, Friedman would later remark that Becker was his best student.

Becker initially taught at Columbia University, where his students included Walter Block, but he ultimately moved to the University of Chicago.

Hardly any other modern economist influenced his peers more than Becker, and this was no small feat. He entered the economics profession at a time when nearly all economists favored heavy government involvement in markets. Furthermore, most economists emphasized macroeconomics over microeconomics. Becker did more than almost anyone to reassert the primacy of microeconomics; he also expanded its scope.

Microeconomic analysis was, for the most part, confined to analysis of conventional markets where goods are bought for money. Austrian economists (e.g., Ludwig von Mises, Carl Menger, and Lionel Robbins) had already pointed out that economic reasoning applies to all circumstances where people respond to scarcity. However, Becker followed up on the work of Robbins by applying Chicago price theory to unconventional markets.

No economist besides Gordon Tullock embraced controversial issues more enthusiastically. Thanks to Becker, Chicago microeconomics became known for groundbreaking research on the economics of crime, the economics of the family and marriage, the rotten-kid theorem, organ markets, and “rational addiction.” Becker student Laurence Iannacconne founded the study of the economics of religion.

The core of Becker’s economics is his theory of the allocation of time. According to Becker, since time is scarce, we allocate it between work for pay, family, sports, religion, and—perhaps among many other things—criminal activities.

Becker’s approach brought badly needed economic analysis to areas of human life that only sociologists were analyzing. Perhaps the single most important result of applying economic reasoning to sociological issues was to show how individual rationality often applies to situations where many people quickly assume irrationality. Thanks to Becker, many economists are more skeptical of the War on Drugs and of restrictions on the sale of human organs. Becker was also a steadfast critic of minimum wage laws and of the fair trade movement. Becker’s criticisms of government intervention were not limited to academic writings. He authored many op-eds in Business Week and cofounded the Becker-Posner Blog.

Becker achieved recognition with the 1967 John Bates Clark Medal, the 1992 Nobel Prize in economics, and the 2004 Presidential Medal of Freedom.

Becker was in many ways a pragmatist. He thought that political competition could limit government waste and might make the public sector somewhat efficient. Becker also considered replacing the War on Drugs with taxes. In one of his final works, he suggested that taxing legal drugs might discourage the use of drugs more so than criminalizing drugs had done.

Gary Becker was a prolific and audacious economist. He had as much influence on modern microeconomics as his mentor and friend Milton Friedman had on modern macroeconomics. He will be sorely missed.