Tag Archive for: free market

San Francisco Cries Uncle on Seven-Year Boycott of Red States

When San Francisco decided to boycott the country’s red states, they were hoping it would have an economic impact. Trouble is, it did. Just not on conservatives. For seven years, the city has stubbornly clung to its travel bans and contracting blackouts for states with sane policies on life and gender — only to find out that the side paying the biggest price is their own.

In the latest sign that Republicans are winning the woke wars, city officials are quietly trying to walk back their petty payback of conservative states who’ve passed laws protecting the unborn, election integrity, girls’ sports, and privacy. At a city meeting February 13, leaders poured over a new report about the effects of the boycott policy, known as 12X, from the last several years. In a damning assessment, San Francisco’s City Administrator’s Office (CAO) said it was “not able to find concrete evidence suggesting 12X has influenced other states’ economies, or LGBTQ, reproductive, or voting rights.”

On the contrary, the authors wrote, “12X has created [an] additional administrative burden for City staff and vendors and unintended consequences for San Francisco citizens. … Few, if any other jurisdictions implement travel or contracting bans as expensive as the City’s.”

By refusing to outsource or partner with red states, San Francisco’s contracting costs went through the roof — up 10-20% just over the past few years. “It’s an ineffective policy that complicates the business of San Francisco government,” Supervisor Rafael Mandelmanm insisted, “and makes it very likely that we pay more than we should for goods and services.”

In a state where residents are already running for the exits, the last thing cities should be doing is giving people another excuse to leave. And a 20% surcharge for San Francisco’s intolerance is just one in a long line of absurdities. Since COVID, the moving vans have been in a perpetual, one-way convoy out of California, as 508,903 people called it quits on the state with sky-high costs, crime, taxes, and regulation.

This latest revelation, that even the city’s cultural retaliation is a failure, will only push more locals to the brink. A whopping 30 states are on San Francisco’s official blacklist now (up from eight in 2016), making it virtually impossible for the city to conduct national business. If the idea was to create a “compelling deterrent to states considering [conservative] policies,” COA admitted, it failed. In the game of chicken between deep-blue California and the rest of America, San Francisco is blinking. More than one official has said they’re moving to either strike the seven-year-old policy or, at the very least, repeal the most onerous parts of it.

That’s a major coup in California where the radical dogma is thicker than smog. But then, this isn’t the first time the forces of wokeness have been backed into an embarrassing corner. Ever since 2016, when North Carolina became ground zero in the bathroom wars, Democrats have been eating crow. One of the Left’s biggest lies — which they repeat to this day — is that passing pro-family laws will cost states billions of dollars in business. The opposite is almost always true.

For all of the Left’s hyperventilating, the aftermath of the H.B. 2 debate was nothing like the Chicken Littles predicted. North Carolina’s tourism numbers broke records; its population grew faster than any state in the union; and the state’s GDP was even higher than the national average. The booming economic climate even caught Forbes’s attention, who ranked the Tar Heels the second best state for doing business that year, a title it won the next three: 20172018, and 2019. Suddenly, the tough talk about retaliation from corporations and other organizations was being exposed for what it was: empty threats from big-mouthed bullies.

Bruce SpringsteenPearl JamNick Jonas, and Demi Lovato and other musicians did their typical chest-thumping, pulling out of tour stops in places like Raleigh over their insistence that men be allowed into girls’ restrooms — but at the end of the day, the financial damage was small enough to be considered a “rounding error.” Experts crunched the numbers and found that “concerts, conventions, and sports” don’t actually bring much to the table in terms of state revenue. “Let’s suppose you buy some tickets, and you pay $100 per ticket,” John Connaughton, a professor of economics, explained. “Well, $80, $90 of that ticket gets on the bus and leaves with the performer the next day. Or later that night.”

College sports promised more of the same when the fight over girls’ sports and kids’ gender transitions broke out a few years later. “The NCAA threatened states over anti-transgender bills,” the big print of The Washington Post read. “But the games went on.” All of the tough talk proved toothless when so many states passed conservative legislation that NCAA had nowhere left to go. Suddenly, tournaments that weren’t supposed to be awarded to places like Arkansas, Alabama, and Tennessee got the news that they would still be hosts after all.

“I guess the NCAA boycott of Florida is over after two weeks,” state Rep. Chris Latvala tweeted. Turns out, the tug of the Left may be strong, but so is the $730 million in revenue from the Southeastern Conference. Conservative influence as red states, Texas Governor Greg Abbott (R) pointed out, is bigger than we think. “Will they even be able to have sports events anymore in the United States [if they boycott us]? I don’t think so.”

And who could forget Hollywood, who, after Alabama and Georgia passed their strongest pro-life laws in 2019, vowed to take their filmmaking elsewhere? It was all very theatrical when Netflix, Disney, WarnerMedia, and Sony Pictures started shaking their fists at red states and making hollow threats about canceling productions. For most conservatives, it was a familiar scene. After all, the entertainment industry had been using the same script since North Carolina, when celebrities climbed on their moral high horses to browbeat voters who believe in biological gender.

They would be reevaluating their projects, Disney’s Bob Iger promised at the time. “We are watching it very carefully,” he reassured his allies. In the end, most CEOs’ posturing amounted to nothing. Even when California tried to dangle new tax breaks over producers — “Move your film to a state with a better appreciation for killing babies!” they seemed to say — the modest incentives were still offset by the state’s suffocating regulations and higher costs. Deep down, even Hollywood understood: they stand to punish themselves more than the locations they theatened to leave.

“It speaks to the unsustainability of the Left’s wokeness,” Family Research Council President Tony Perkins told The Washington Stand. “They’re painting themselves in a corner.”

He’s right. Ultimately, these stunts hurt the social extremists more than they’ll ever scare conservatives, especially in this refuse-to-be-intimidated era sponsored by governors Brian Kemp (R-Ga.) and Ron DeSantis (R-Fla.).

FRC Action Vice President Brent Keilen agreed. “The move by San Francisco is the latest example that, despite receiving a lot of attention from the media, boycotts of pro-family and pro-life states don’t have much of an impact.”

In today’s climate, even San Francisco’s giants of liberalism are coming to the realization: the biggest losers of the culture wars will always be the bullies.

AUTHOR

Suzanne Bowdey

Suzanne Bowdey serves as editorial director and senior writer at The Washington Stand.

EDITORS NOTE: This Washington Stand column is republished with permission. ©All rights reserved.


The Washington Stand is Family Research Council’s outlet for news and commentary from a biblical worldview. The Washington Stand is based in Washington, D.C. and is published by FRC, whose mission is to advance faith, family, and freedom in public policy and the culture from a biblical worldview. We invite you to stand with us by partnering with FRC.

Radical K-12 Reform: Pay Homeschoolers

Governments should focus on funding effective education.


What if we just cut through the morass of programs and take all the money being provided at the federal and state level and put it into individual student endowment accounts?

The late 1970s in the United States was a time of surprising deregulation. It was the beginning of the end for the telephone monopolies. Those inside the regulated industries, and the regulatory agencies, warned of doom and disaster if competition were allowed. The doomsayers were wrong. The free market provided solutions that were impossible to forecast. Competition and the profit motive brought out the best that humans can create.

Communications solutions today are employing far more people than the old phone monopolies, and are delivering services never dreamed of in that era. The forecasts of disastrous unemployment and system collapse if the phone monopolies were opened to competition were totally and completely wrong.

K-12 is the phone monopoly of our time.

This seems like the best time in years to truly reform K-12. However, the focus seems to be on charter schools, leaving behind thousands of students in poorly performing districts, and most proposed solutions leave out homeschooling.

The fundamental problem is the lack of competition. There is a simple way to introduce it.

Individualised investment

Instead of pouring money into the local school monopolies, the solution is to simply endow individual students. Open the door to the free market in a meaningful way.

We should create an individual educational endowment fund for each K-12 student. Student endowment funds would pay out annually for students who achieved minimum grade level knowledge, including to the parents of homeschooled students. The determination of minimum achievement would be through testing, with the tests also from free market providers.

Providers for students who did poorly would not be paid, leaving twice the annual amount available next year to educators who could catch them up. Seriously underperforming students would accrue several years of catch-up funding, providing extra incentive for the type of personalised attention that would benefit them. Military veteran servicemen and women teaching small groups of students, developing personal relationships, can change lost kids into enthusiastic young adults.

Opening educational services to the free market will allow for practical job-related instruction and college level courses to be included as providers fight for market share.

Competition among educational providers will make full use of technology, will provide useful training for actual jobs, and will deliver far more education for the same money. Gamification will keep students involved in ways that existing K-12 material can’t touch.

Instead of leaving dropouts to fend for themselves, the funds should remain on deposit indefinitely, allowing those who get their act together after some time in the adult world to get an education.

Modelling the idea will show that existing school structures and transportation fleets will be used, more than with charter schools. Most school systems will continue as they are, but a new element of potential competition will focus their efforts.

Essential pruning

A major early effect might be defunding some inner-city school systems, with the carry-over of endowment funds providing an incentive to corporate providers. These districts are a disgrace, but there is almost no way to change them now. Defunding poor performance in a way that will bring new providers could work.

The new providers will be renting space and transportation for their offerings in most cases from existing school districts. Just as with telecom deregulation, it will take several years to see the full impact, but requiring minimum accomplishment for payout will protect students and taxpayers as solutions evolve.

Homeschooling pods will explode, but those kids will still participate on local sports teams, and transportation to practice (and back) will also be rented from existing fleets by their parents.

Special needs students would still have extra funding, but at an individual student level.

Let’s end the monopoly. Let’s open the door to competition.

Unleash technology, but pay only for results.

Homeschoolers would be an unstoppable force for reform if a realistic plan to pay them existed. The endowment idea would do it.

Stark contrast

I was radicalised on this issue by an experience with a black tow truck driver. When I was in the Army during the era of the draft, my platoon had a bunch of black guys from inner-city Detroit. Our off-duty pastime in Germany with no English language TV was reading paperback novels. They were traded over and over, and it was common to see everyone on his bunk with his head propped up reading. The black guys read effortlessly.

Recently I needed a tow, and a black tow truck driver did a good job hooking me up and handling his equipment. He was a solid guy, the same type as the guys I knew in the Army. As we rode to the destination, he said he had graduated from one of the big inner city high schools.

When we got to the destination, he asked me to help him do the paperwork, and as we worked through it, I discovered that he could hardly read. This is ridiculous. These schools are a disgrace. Here is a guy who will probably never be able to read effortlessly because of terrible, crappy inner-city schools he was stuck in.

The black guys in my platoon from inner city Detroit went to schools that didn’t have unions in the 1950s and 1960s. School management was adequate at that time to produce acceptable results. They became the Motown generation that led to ending segregation and providing great music that I still enjoy.

Preference falsification among Democrat voters on K-12 has created a situation where explosive change can occur. The Overton Window can suddenly shift. K-12 seems to be that issue.

What is needed is a practical method. Endowment Accounts provide that method.

There is no way to fix the current K-12 situation beyond radical demonopolising. I can see a future where school infrastructure is owned by large competitive providers in much the same way Verizon, AT&T, T-Mobile, etc. operate today, fighting for market share by providing educational services that work and that kids and parents want.

This is a great opportunity to apply technology and dramatically improve the way we educate our children.

AUTHOR

Richard Illyes is a retired electronic designer and programmer in rural Texas south of Houston. He is an active pilot and flight instructor and flies off a grass strip at his place outside Alvin, where… More by Richard Illyes

EDITORS NOTE: This MercatorNet column is republished with permission. ©All rights reserved.

INDEPENDENCE DAY TRUTH: Equal People Are Not Free and Free People Are Not Equal

“Human beings are born with different capacities. If they are free, they are not equal. And if they are equal, they are not free.” ― Aleksandr Solzhenitsyn

“I look to a day when people will not be judged by the color of their skin, but by the content of their character.” – Dr. Martin Luther King, Jr., from the “I have a dream” speech in Washington, D.C.


Today we are hearing about equality, equity, along with the big lies of “Wokeism.” These words are Marxist false flags that force, via government mandate, the elevation of one group over another group for political purposes.

MAKING PEOPLE EQUAL

The goal of Marxism is to make everyone equal as humans, as workers and as a people. The problem is when this is put into practice the individual is replaced by the state. As the powers of the government increase the freedoms of the individual shrink or disappear completely.

History tells us repeatedly that as government grows the individual shrinks. Just look at the former Soviet Union to understand what is now happening in America.

QUESTION:  Will Independence Day 2021 go down in history as the day we the people lost our freedom?

In The Revolution Betrayed Leon Trotsky wrote:

The old principle: who does not work shall not eat, has been replaced with a new one: who does not obey shall not eat. Exactly how many Bolsheviks have been expelled, arrested, exiled, exterminated, since 1923, when the era of Bonapartism opened, we shall find out when we go through the archives of Stalin’s political police. How many of them remain in the underground will become known when the shipwreck of the bureaucracy begins.

The people are replaced by government bureaucrats. The laws change from defending individual liberties to taking away the individual and replace the people with crushing state mandates, take the Covid pandemic as a recent example.

Covid shifted power from the individual to that state overnight. The pandemic was used by bureaucrats to take away individual freedom to assemble and replaced it with lockdowns and social distancing.

Covid took away the rights of business to remain open and prosper. It took away individual livelihoods and replace it with government hand outs.

Rev. William J. H. Boetcker spoke of the “Seven National Crimes.”

  • I don’t think.
  • I don’t know.
  • I don’t care.
  • I am too busy.
  • I live well enough alone.
  • I have no time to read and find out.
  • I am not interested.

These seven crimes are the fundamental laws of Wokeism writ large. When we stop thinking, understanding, caring and find ourselves alone, bored and uninformed then our freedom is lost!

A FREE PEOPLE ARE NOT EQUAL

In a truly free society people are never equal. They are different and do things differently throughout their lives. From birth people are influenced by both nature and nurture. No two people are exactly the same when born. The same is true about people who have different life experiences. Even biological twins do not have the same life experiences.

It is fundamental that society understand that it must create opportunities that encourage and use these natural inequalities for the good of all.

The following sentiments were created by the Rev. William J. H. Boetcker, who lectured around the United States about industrial relations at the turn of the twentieth century. They are all the truth.

  • You cannot bring prosperity by discouraging thrift.
  • You cannot help small men by tearing down big men.
  • You cannot strengthen the weak by weakening the strong.
  • You cannot lift the wage earner by pulling down the wage payer.
  • You cannot help the poor man by destroying the rich.
  • You cannot keep out of trouble by spending more than your income.
  • You cannot further brotherhood of men by inciting class hatred.
  • You cannot establish security on borrowed money.
  • You cannot build character and courage by taking away man’s initiative and independence.
  • You cannot help men permanently by doing for them what they could and should do for themselves.

There are those who are hell bent on tearing down big men, weakening the strong, destroying the rich, inciting class hatred and taking away man’s initiative and independence.

The founding fathers understood this and that is why they wrote the Declaration of Independence and U.S. Constitution.

CONCLUSION

QUESTION: How many American patriots have been expelled, arrested, exiled, exterminated, since the 2020 election?

As we Americans approach Independence Day 2021, let us reflect on our freedoms and defend our liberties. If we fail to do so then American, as we have known it, will cease to exist as One Nation Under God and become one nation under big government.

Is this what we want for our children and grandchildren?

I think not.

Have a blessed July 4th.

©Dr. Rich Swier. All rights reserved.

RELATED TWEET:

It Wasn’t Broke, so they Shouldn’t Have Fixed It

The United States of America used to be a nation where things got done.  No matter what the challenge, everything from natural disasters to overcoming negative civic and political issues, the normal inclination was to start over and get it right.  If something was working just fine, usually common sense dictated it was to be left alone, at least until a superior method of operation was developed.

Take the United States of America for example.  She was founded upon superior values and principles.  Some of which included the supreme right of sovereign individuals to live according to their own God or self-directed path.  For the first time in human history, the United states was comprised of a set of economic principles and personal liberties that obliterated the worldwide concepts of government domination, or an equally abusive caste system.  Those dominated by cradle to grave government or a monarchy simply existed from day to day and were under the strain of not having enough to eat. That was only one of many problems people suffered with no way out.

Venezuela is a nation that at one time was fairly prosperous and the citizenry usually had more than enough to eat.  But in more recent years, cruel communist dictators with no respect toward individual rights have enacted brutal economic, property, religious, healthcare, agricultural, education and media controls brought that onetime prosperous to a screeching halt.  In fact, Venezuela has not only been halted, but in actuality, she is hurtling backwards.  People have been rioting in the streets, seeking the last vestiges of food supplies to raid do to abusive government induced starvation.

Venezuela is a perfect text book case of what the United States should not be doing.

America the beautiful has been generally blessed with a system of market based economic principles that favored equal opportunity for those willing to work for it.  Unfortunately, in more recent decades, the already difficult job of creating opportunities and benefiting for your labor has been hampered by brutal government intrusions via regulations. So now they make it impossible for America to win on the world economic stage.

Either purposely or through sheer ignorance, America’s course of direction has steadily drifted from a free market economy based upon reward for effort, into punishment for trying.  At every turn, small business owners are treated by government like they are criminals for simply attempting to be successful.  Many local and state governments throughout the union are horrendously hard on small business owners.  They often enact unfairly high taxes or fees on everything from waste baskets, to needed equipment.

Even the big boys are being choked out of the American economy.  Eaton Corporation of Cleveland recently announced a world headquarters more to Ireland.  Carrier, the giant air conditioning manufacturer will soon leave business friendly Indiana and move to Mexico.  The reason being, the highest corporate tax rate on earth and regulations that are much to oppressive.

The government goal of forcing equal results through redistribution of wealth and artificial increases in the minimum wage will continue to cause reductions in the number of entry level jobs.  Unfortunately, those are most needed by both teenagers just starting out and lower skilled older adults.  These efforts to fix what was not broken help drastically affected America.  She evolved from being the world’s manufacturing floor and most innovative economy into an increasingly undesirable place to conduct business activities.

As a result of fixing what was not broken, America is now broken financially, morally, economically, militarily, educationally and racially.  She can only be truly repaired now, by a concerted effort reestablish the enormously successful principles the Founding Fathers enacted long ago. They include a firm recognition of the unalienable God given rights of Life, Liberty, and the Pursuit of Happiness and or Property.  There also has to be an immediate working plan to reduce the enormous economic and Constitution violating federal government.

For the good of the future of our republic and to truly fix America, now that she has been broken, the importance of real education must not be overlooked.  What is taught to one generation dictates what direction the nation takes in the next.  Our current broken state can be fixed with a genuine return to high quality education, critical thinking, and true American history.

Last but not least, America’s first president George Washington along with the majority of the Founding Fathers had an unyielding faith in the God who shed his grace upon the United States.  They left warnings of the negative consequences we are witnessing today, if our republic turned away from the ways of God.  However, I firmly believe that if America (We the People) wisely seeks God’s forgiveness and repent of her wayward ways, she will once again be the glorious shining city on a hill nation under God, Indivisible with Liberty and Justice for all.

RELATED ARTICLE: How Washington Politicians Wasted Billions Trying to ‘Invest in Our Future’

The Myth of Scandinavian Socialism by Corey Iacono

Bernie Sanders has single-handedly brought the term “democratic socialism” into the contemporary American political lexicon and shaken millions of Millennials out of their apathy towards politics. Even if he does not win the Democratic nomination, his impact on American politics will be evident for years to come.

Sanders has convinced a great number of people that things have been going very badly for the great majority of people in the United States, for a very long time. His solution? America must embrace “democratic socialism,” a socioeconomic system that seemingly works very well in the Scandinavian countries, like Sweden, which are, by some measures, better off than the United States.

Democratic socialism purports to combine majority rule with state control of the means of production. However, the Scandinavian countries are not good examples of democratic socialism in action because they aren’t socialist.

In the Scandinavian countries, like all other developed nations, the means of production are primarily owned by private individuals, not the community or the government, and resources are allocated to their respective uses by the market, not government or community planning.

While it is true that the Scandinavian countries provide things like a generous social safety net and universal healthcare, an extensive welfare state is not the same thing as socialism. What Sanders and his supporters confuse as socialism is actually social democracy, a system in which the government aims to promote the public welfare through heavy taxation and spending, within the framework of a capitalist economy. This is what the Scandinavians practice.

In response to Americans frequently referring to his country as socialist, the prime minister of Denmark recently remarked in a lecture at Harvard’s Kennedy School of Government,

I know that some people in the US associate the Nordic model with some sort of socialism. Therefore I would like to make one thing clear. Denmark is far from a socialist planned economy. Denmark is a market economy.

The Scandinavians embrace a brand of free-market capitalism that exists in conjunction with a large welfare state, known as the “Nordic Model,” which includes many policies that democratic socialists would likely abhor.

For example, democratic socialists are generally opponents of global capitalism and free trade, but the Scandinavian countries have fully embraced these things. The Economist magazine describes the Scandinavian countries as “stout free-traders who resist the temptation to intervene even to protect iconic companies.” Perhaps this is why Denmark, Norway, and Sweden rank among the most globalized countries in the entire world. These countries all also rank in the top 10 easiest countries to do business in.

How do supporters of Bernie Sanders feel about the minimum wage? You will find no such government-imposed floors on labor in Sweden, Norway, or Denmark. Instead, minimum wages are decided by collective-bargaining agreements between unions and employers; they typically vary on an occupational or industrial basis. Union-imposed wages lock out the least skilled and do their own damage to an economy, but such a decentralized system is still arguably a much better way of doing things than having the central government set a one-size fits all wage policy that covers every occupation nationwide.

In a move that would be considered radically pro-capitalist by young Americans who #FeelTheBern, Sweden adopted a universal school choice system in the 1990s that is nearly identical to the system proposed by libertarian economist Milton Friedman his 1955 essay, “The Role of Government in Education.”

In practice, the Swedish system involves local governments allowing families to use public funds, in the form of vouchers, to finance their child’s education at a private school, including schools run by the dreaded for-profit corporation.

Far from being a failure, as the socialists thought it would be, Sweden’s reforms were a considerable success. According to a study published by the Institute for the Study of Labor, the expansion of private schooling and competition brought about by the Swedish free-market educational reforms “improved average educational performance both at the end of compulsory school and in the long run in terms of high school grades, university attendance, and years of schooling.”

Overall, it is clear that the Scandinavian countries are not in fact archetypes of successful democratic socialism. Sanders has convinced a great deal of people that socialism is something it is not, and he has used the Scandinavian countries to prove its efficacy, while ignoring the many ways they deviate, sometimes dramatically, from what Sanders himself advocates.

Corey IaconoCorey Iacono

Corey Iacono is a student at the University of Rhode Island majoring in pharmaceutical science and minoring in economics.

Regulators Are Not Heroes by Adam C. Smith & Stewart Dompe

Amazon is suing thousands of “fake” reviewers, who, for a fee, have posted positive reviews for various products. These pseudo reviews violate the spirit — and possibly the functionality — of Amazon’s largely self-governed rating system. Customers rely on reviews to guide their own choices, and a wave of sponsored reviews can mislead them into choosing inferior products.

A similar theme plays out in George Akerlof and Robert Shiller’s newest behavioral economics-cum-self-help book, Phishing for Phools. The authors, both Nobel laureates, claim that an unregulated market leads to massive amounts of manipulation and deception. Just how much remains unspecified, but the general thrust of the argument is that regulatory heroes are needed to rein in villainous dealers.

Heroic Regulators?

It is no surprise then that the authors favor heroic efforts of an older progressive sort, such as the works of Alice Lakey or her modern-day counterpart Elizabeth Warren. Their work, respectively, led to the establishment of the Food and Drug Administration and the Consumer Financial Protection Bureau. These progressives are seen as heroic for taking “action not selfishly but for the public good.” The trouble with such heroes, however, is that they invariably focus not on educating consumers so that they may make better choices but on corralling the cat herd of bureaucrats and politicians into ever-expanding spheres of regulation.

While it is true that consumer regulation can provide focal points that help buyers and sellers interact — in fact, Amazon appealed to just that in its lawsuit — this truth nevertheless misses the pivotal point (and an awkward one for Akerlof and Shiller) that it is Amazon that is working to resolve the problem, not government regulators.

Make no mistake. Akerlof’s classic paper on the quality of goods in a world of imperfect information clearly outlines a problem that markets must address, but it is a problem for both consumers and the market platforms on which they participate. Those platforms have a natural incentive to promote the information consumers need in order to make more informed decisions. The incentives faced by regulators are less well aligned with consumers’ interests. (But advocates of regulation rarely ask what incentives drive government regulators.)

There is another aspect of Akerlof’s model that is telling in this regard: in equilibrium, the so-called “lemons market” should unravel as more and more consumers become frustrated with ever-decreasing levels of quality. Thus, the market platform should topple over. The trouble with this theoretical outcome is that it again fails to account for the empirical observation that it is markets that are solving market problems.

Akerlof’s co-recipient of the 2001 Nobel Prize, Michael Spence, would have no trouble with this observation. Spence noted that it is far more interesting to compare the outcomes in the market to what is possible in a world of incomplete information, not to what is found where no imperfection exists by assumption. Spence explained in his Nobel address that when facing a world of imperfect information, the asymmetry between buyer and seller “cannot be simply removed by a wave of the pen.”

Compared to What?

Even when we acknowledge that individuals may be limited in their analytical and decision-making capabilities, we must ask ourselves, “Compared to what?” As noted elsewhere in these pages, every flaw in consumers is worse in voters. Furthermore, the immediate call for greater government regulation ignores the ongoing knowledge problem: acquiring information is limited by the abilities of normal people (after all, we can’t all be heroes). Knowing which transactions to avoid is valuable information, but that knowledge must first be discovered to be shared. If this information is not readily attainable, then it is unclear how regulators will know what market processes to target, much less how to improve on them.

And if the information does exist, then there is an opportunity for entrepreneurial action to gather this information and sell it to consumers. Put another way, market failures that cause individuals to make poor decisions are themselves profit opportunities for entrepreneurs to help people make better decisions.

In a world of uncertainty, ensuring quality can be a powerful competitive advantage. Amazon wants you, the customer, to use its search and recommendation system to buy new products, products that you cannot physically touch and inspect. The review system is one method of overcoming this informational asymmetry. When the integrity of the review system is challenged, Amazon is faced with the prospect of a lower volume of transactions and therefore lower profits.

Private Heroes

This is why Amazon is acting to curtail its rogue members. Retailers can only justify high prices when they can guarantee quality. Amazon’s feedback system constitutes a significant informational subsidy to its users, and the company is willing to create this information (or have it created by users) because it leads to a higher volume of trade and the accompanying consumer benefits that Amazon brings to book readers worldwide.

What Akerlof and Shiller miss is that creating and maintaining a viable platform for trade opportunities is enormously expensive. Having customers exit the door to never return — or perhaps write negative Yelp reviews — causes instability to the market that can be fatal if left unattended.

Rather than focusing on the failure of consumers, the original sin of our humanity, we should instead notice how information entrepreneurs are enabling us to make better choices. The information revolution led by these innovators has changed the world with the costs of distribution lower than ever.These may not be the welfarist heroes of Akerlof and Shiller’s fantasy world but market troubleshooters of the one we actually occupy.

Public-spirited regulators may be the heroes we want, but they are not the heroes we need.

Adam C. Smith

Adam C. Smith

Adam C. Smith is an assistant professor of economics and director of the Center for Free Market Studies at Johnson & Wales University. He is also a visiting scholar with the Regulatory Studies Center at George Washington University and coauthor of the forthcoming Bootleggers and Baptists: How Economic Forces and Moral Persuasion Interact to Shape Regulatory Politics.

Stewart Dompe

Stewart Dompe

Stewart Dompe is an instructor of economics at Johnson & Wales University. He has published articles in Econ Journal Watch and is a contributor to Homer Economicus: Using The Simpsons to Teach Economics.

‘Capitalism’ Is the Wrong Word by Steven Horwitz

We Shouldn’t Use a Term Coined by the System’s Enemies!

Wouldn’t it be nice if we could simply invent new terms to replace the words that seem to cause more heat than light? For example, I have written before of my qualms about using the word capitalism to describe the free-market economy. The word was coined by capitalism’s enemies to describe the system that they rejected.

Red Plenty, a marvelous book by Francis Spufford, offers an important perspective on our discussion of terms. The book is a must-read for fans of free markets. It combines elements from the actual history of the use of mathematics to try to plan the Soviet economy, fictional dialogue and some fictional characters, and Spufford’s excellent understanding of the economics of capitalism and socialism to create an incredibly readable account of the attempt to engineer a world of abundance in the former Soviet Union.

In the senior seminar I teach, we recently read a section of the book that deals with how the Soviet planning process actually worked. That section got me thinking about the terms capitalism and socialism again. The term capitalism suggests a system built around capital and its interests, while the word socialism suggests one built around society and its interests. Notice how these connotations beg some questions from the start.

Is it really true, for example, that capitalism is centered around capital and its interests? Is it really capitalists who benefit the most from capitalism? And on the other side: have existing socialist economies ever served the interests of society as a whole? Could socialism, in theory, do so? Do both of these names make assumptions about each of the two types of economies that reflect the biases of capitalism’s critics and socialism’s defenders?

Of course, capital does play a crucial role in capitalism. The private ownership of capital (the means of production) is a defining characteristic of a free-market economy, especially in comparison to socialism. And the ability to engage in economic calculation provided by the money prices of the market is crucial for the owners of capital to know how best to deploy it. So in those senses, capitalism is about capital.

But notice that nowhere in the previous paragraph is it claimed that the primary beneficiaries of capitalism are the capitalists! What is missing is an answer to the question of why the capitalists continually have to figure out how best to deploy their capital. The answer is because they are constantly trying to provide what consumers want using the least valuable resources possible.

Sure, the capitalists reap profits by doing so. But those profits result from the mutually beneficial exchanges capitalists have with consumers.

The main beneficiaries from capitalism are not the capitalists, but all of us in our role as consumers. Competition among the owners of private capital is all about responding to consumers’ wants. And consumers benefit from this arrangement through more, better, and cheaper goods. If we want a name for the free-market economy that indicates who its primary beneficiaries are, we should reappropriate the term consumerism.

But “consumerism” is only half of the story. It’s easy enough to show through the standard arguments that socialism doesn’t work for the benefit of society as a whole. We know from the socialist-calculation debate that eliminating the market altogether in favor of planning can’t work. But what about all of those countries, like the Soviet Union, that claimed to be planning their economies?

As we see in Red Plenty, the truth was that central planning served as a kind of myth around which economic activity could be oriented. Everyone acted as if there were a plan, but the actual way resources got allocated and shuffled around was much more complicated. In Red Plenty, we meet two characters who help us see this.

First is Cherkuskin, the middleman who trades on relationships and friendships to help producers get the goods they need to meet their centrally planned targets. Cherkuskin is the personification of what Ayn Rand called “the aristocracy of pull.” His power comes from whom he knows and what he can get them to do for you. When producers don’t have enough to fulfill their quotas because of the inability of the plan to allocate rationally or to respond to unexpected change, the Cherkuskins come into play and move resources around to help them — and to profit handsomely in the process. Underneath “the plan” was the black market that did a great deal to ensure that Soviet-style economies were minimally functional.

The other character is Maksim Maksimovich Mokhov, a high-ranking bureaucrat in the planning agency. Faced with the news of the destruction of a crucial machine, Mokhov has to figure out how to rebalance the plan given that one factory will either need a new machine or fail to produce the output that other factories need. Spufford gives us terrific imagery of Mokhov sliding around on his wheeled chair, abacus in hand, going from file to file using technology primitive by even the 1962 standard of that chapter of the book, attempting to reallocate resources with the flick of an eraser and the scratch of a pencil.

Both Cherkuskin and Mokhov are, functionally, substitutes for what the price system does under capitalism, and inferior substitutes at that.

But what’s most interesting is that neither of them cares one whit about the consumer. Cherkuskin is all about making sure that producers get what they need to fulfill the plan, never pausing to consider what the costs were for consumers. Mokhov describes consumers as a “shortage sink” because they are the end of the line, and if they don’t get what they want, no one else relies on them for further output. It was more important to balance out production than to worry if consumers got exactly what they needed.

What Spufford so nicely illustrates here is how real-world socialism, and not capitalism, put the needs of “capital” first and the wants of consumers last. In a world where producing more stuff, regardless of its value, was the path to plenty, ensuring that production continued according to the plan and that producers got what they needed were the central tasks. And the black market middlemen like Cherkuskin could make a real ruble or two doing so.

But unlike the profits of market capitalists, Cherkuskin’s rubles came at the expense of the consumer rather than reflecting mutual benefit. A system where consumers are just the folks who are expected to absorb the errors of the plan is hardly one geared to the interests of society as a whole. And a system where capital is ultimately the servant of consumers is misleadingly named if we call it capitalism.

It’s a difficult battle to get people to change the names they’ve long used for free markets and (supposedly) planned economies. Even if we don’t win that battle, it’s still important for us to point out how the terms capitalism and socialism really do give a false impression of how markets and planning work. If we want to know who really benefits from markets, a quick look around the abundance that is the typical American household will answer that question quite clearly.

Steven HorwitzSteven Horwitz

Steven Horwitz is the Charles A. Dana Professor of Economics at St. Lawrence University and the author of Hayek’s Modern Family: Classical Liberalism and the Evolution of Social Institutions.

He is a member of the FEE Faculty Network.

Bernie Sanders and the Fixed Pie Fallacy by Chelsea German

“The rich are getting richer and the poor are getting poorer.” Senator Bernie Sanders first said those words in 1974 and has been repeating them ever since.

Senator Sanders is not alone in his belief. Three out of four Americans agree with the statement, “Today it’s really true that the rich just get richer while the poor get poorer.”

Senator Sanders is half right: the rich are getting richer. However, his assertion that the poor are becoming poorer is incorrect. The poor are becoming richer as well.

Economist Gary Burtless of the Brookings Institute showed that between 1979 and 2010, the real (inflation-adjusted) after-tax income of the top 1% of U.S. income-earners grew by an impressive 202%.

He also showed that the real after-tax income of the bottom fifth of income-earners grew by 49%. All groups made real income gains. While the rich are making gains at a faster pace, both the rich and the poor are in fact becoming richer.

label

In addition to these measurable real income gains, decreases in prices have given the poor increased purchasing power, helping to raise living standards for the worst off in society. As a result of falling prices such as for groceries and material goods, along with gains in real income, Americans have more income left after basic expenses.

Technology has also become cheaper, improving our lives in unexpected ways. For example, consider the spread of cell phones. There was a time when only the wealthiest Americans could afford one. Today, over 98% of Americans have a cellular subscription, and the rise of smart phones has made these devices more useful than ever.

Unfortunately, progress has been uneven. In those areas of the economy where competition is hobbled, such as education, housing, and healthcare, prices continue to increase.

Still, the percentage of the population classified as living in relative poverty has decreased over time. Why then do three quarters of Americans, including Senator Sanders, believe that the poor are “getting poorer?”

A simple logical error underlies Sanders’ belief. If we assume that wealth is a fixed pie, then the more slices the rich get, the fewer are left over for the poor. In other words, people can only better themselves at the expense of others. In the world of the fixed pie, if we observe the rich becoming richer, then it must be because other people are becoming poorer.

Fortunately, in the real world, the pie is not fixed. US GDP is growing, and it’s growing faster than the population.

Poverty remains a pressing issue, but Senator Sanders is incorrect when he says that the poor are becoming poorer. In the words of HumanProgress.org advisory board member Professor Deirdre McCloskey,

The rich got richer, true. But millions more have gas heating, cars, smallpox vaccinations, indoor plumbing, cheap travelrights for womenlower child mortalityadequate nutrition, taller bodies, doubled life expectancyschooling for their kids, newspapers, a vote, a shot at university, and respect.

This post first appeared at HumanProgress.org.

Chelsea German

Chelsea German

Chelsea German works at the Cato Institute as a Researcher and Managing Editor of HumanProgress.org.

Four Fallacies that Fracktivists Use to Scare You

To make intelligent decisions about the future of energy, we need to think big-picture—to look carefully at the benefits and costs to human life of every course of action. Unfortunately, in today’s energy debate we are taught, with politically incorrect forms of energy such as fossil fuels, to only look at the negative picture—often highly exaggerated or taken out of context.

How do we identify and counter this cultural bias against fossil fuels? That’s the topic of my latest Forbes column:

There are at least four common fallacies used to discourage big-picture thinking and breed opposition to fossil fuels. These are things to be on the lookout for when you follow the cultural debate; they are everywhere, and all four are used to attack what might be the most important technology of our generation: shale energy aka “fracking.”

The largest fossil fuel controversy today, besides the broader climate change issue, is fracking—shorthand for hydraulic fracturing—one of several key technologies for getting oil and gas out of dense shale rock, resources that exist in enormous quantities but had previously been inaccessible at low cost.

Fracking has gotten attention, not primarily because of the productivity revolution it has created, but because of concerns about groundwater contamination. The leading source of this view is celebrity filmmaker Josh Fox’s Gasland (so-called) documentaries on HBO. Looking at how these movies have affected public opinion is an instructive exercise.

Bernie Sanders Is Wrong: Trade Is Awesome for the Poor and for America by Corey Iacono

Sen. Bernie Sanders, the Democratic presidential hopeful, is no fan of free trade. In an interview with Vox, Sanders’ made his anti-trade position clear: “Unfettered free trade has been a disaster for the American people.”

He also noted that he voted against all the free trade agreements that were proposed during his time in Congress and that if elected President he would “radically transform trade policies” in favor of protectionism.

Sanders and his ilk accuse their intellectual opponents of promoting “trickle-down economics,” but that is precisely what he is advocating when it comes to trade. The argument for protectionism ultimately relies on the belief that protecting domestic corporations from foreign competition and keeping consumer prices high will somehow benefit society as whole.

However, the real effect of protectionism is to increase monopoly and consequently reduce overall economic welfare. In fact, according to a paper by economists at the Federal Reserve Bank of Minneapolis, “Government policies…such as tariffs and other forms of protection are an important source of monopoly” that lead to “significant welfare losses.”

In contrast to Sanders’ assertion that the expansion of free trade has been a disaster for the American people, there is a near unanimous consensus among economists that the opposite is true.

An IGM Poll of dozens of the most renowned academic economists found that, weighted for each respondent’s confidence in their answer, 96 percent of economists agreed, “Freer trade improves productive efficiency and offers consumers better choices, and in the long run these gains are much larger than any effects on employment.”

When the vast majority of economists of all sorts of ideological stripes agree that free trade is a good thing, maybe, just maybe, they’re onto something.

In fact, they surely are. Using four different methods, economists at the Petersen Institute for International Economics estimated the economic benefits from the expansion of technology that facilitates international trade (such as container ships), as well as the removal of government imposed barriers to international trade (such as tariffs). Since the end of World War II, they generated “an increase in US income of roughly $1 trillion a year,” which translates into an increase in “annual income of about $10,000 per household.”

This result is mostly driven by the fact that foreign businesses produce many goods which are used in the production process at a lower cost than their domestic competitors. Access to these low-cost foreign inputs allows American businesses to decrease their production costs and consequently increase their total output, making the nation as a whole much wealthier than it otherwise would have been.

Moreover, contrary to common conjecture, the benefits of international trade haven’t simply accrued to the wealthy alone. Low and middle income individuals tend to spend a greater share of their income on cheap imported consumer goods than those with higher incomes. As a result, international trade tends to benefit these income groups more so than the wealthy.

Indeed, according to the President’s Council of Economic Advisers, middle income consumers have about 29 percent greater purchasing power as a result of international trade.

In other words, middle income consumers can buy 29 percent more goods and services as a result of the access to low-cost imports from foreign countries.

Low income consumers see even greater gains with 62 percent higher purchasing power as a result of trade. In contrast, the top 10 percent of income earners only saw an increase in purchasing power of 3 percent as a result of trade.

On top of that, international trade has provided benefits by bringing new and innovative products to American consumers.

According seminal research by Christian Broda of the University of Chicago and David E. Weinstein of Colombia University, the variety of imported goods increased three-fold from 1972 to 2001. The value to American consumers of this import induced expanded product variety is estimated to be equivalent to 2.6 percent of national income, about $450 billion as of 2014. That’s not exactly small change.

The spread of free trade has also made considerable contributions to environmental protection, gender equality, and global poverty reduction. As a result of the spread of clean technology facilitated by freer trade, “every 1 percent increase in income as a result of trade liberalization (the removal of government imposed barriers to trade), pollution concentrations fall by 1 percent,” according to the Council of Economic Advisers.

The CEA also has found that “industries with larger tariff declines saw greater reductions in the [gender] wage gap,” suggesting that facilitating foreign competition through trade liberalization reduces the ability of employers to discriminate against women.

In regards to global poverty reduction, research has shown that in response to US import tariff cuts, developing countries, such as Vietnam, export more to the US, leading to higher incomes and less poverty.

Despite the large gains from trade America has already reaped, there is still room for improvement (contrary to Sen. Sanders’ accusations of “unfettered” free trade). The PIIE economists estimate that further trade liberalization would increase “US household income between $4,000 and $5,300 annually,” leading the them to conclude that, “in the future as in the past, free trade can significantly raise income — and quality of life — in the United States.”

Ultimately, the conclusion that most economists seem to reach is that, from being a disaster, the expansion of free trade has been a tremendous success, and that further trade liberalization would most likely make Americans, and the rest of the world, considerably better off.

Don’t let fear-mongering about foreigners and China scare you: free trade benefits everyone, especially the poor, while protectionism benefits only the politically powerful.

Corey Iacono

Corey Iacono is a student at the University of Rhode Island majoring in pharmaceutical science and minoring in economics.

VIDEO: Why Wouldn’t You Save a Drowning Child? by Matt Zwolinski

Would you lose $500 to save a drowning child? We explore a thought experiment that just may save someone’s life.

Imagine you’re walking to work in the morning down a quiet rural road to the side of the road there’s a pond and pass by every day. Only today, something is different. Today you see a small child in that pond.

He is alone, he’s flailing his arms, and if you don’t act quickly it looks like he is going to drown. Luckily, the pond is shallow. You can wade in, grab the child, and bring him to safety without putting yourself in any danger at all.

Unluckily, you’re wearing a very expensive set of clothes, and there just isn’t enough time to take them off. So even though saving the child is perfectly safe, it is going to cost you at least $500 to replace your suit and shoes. There’s no one else around, so the decision is yours alone to make.

Do you wade in, save the child, and ruin your expensive clothes? Or do you decide that $500 just too high a price to pay for the life of someone you don’t even know and walk on by.

If you’re like most people, the answer is obvious. Of course you save the child. Anyone that would would let us small child die just to keep their nice clothes from getting wet would be a moral monster. As peter singer, the philosopher who originated this drowning child thought experiment argued, if you had the power to prevent something really bad from happening to someone else just by suffering something merely slightly bad yourself, then “taking the hit” is the right thing to do.

Now of course most of us will never come across a drowning child on her way to work but all of us do find ourselves living in a world where over six million children die each year from preventable causes. And while none of us have the power to help all of those children, almost all of us have the power to help some of them. By donating a small amount of money much less than $500 to an effective charity through a site like GiveWell.org, you could literally save someone’s life. But that brings up another question.

How do we make sure aid efforts do the most good and the least harm?

Matt Zwolinski
Matt Zwolinski

Matt Zwolinski is an Associate Professor of Philosophy at the University of San Diego. He is also a co-director of USD’s Institute for Law and Philosophy, a member of the editorial board of Business Ethics Quarterly, and a blogger for Bleeding Heart Libertarians.

When Judges Quit Protecting Liberty by David S. D’Amato

How do we decide if a government action is legitimate?

When courts are asked to determine whether a government action has violated an individual’s rights, they apply one of several different “standards of review” or “levels of scrutiny,” ranging from “strict scrutiny” (reserved for a very narrow category of cases) to “rational basis scrutiny.”

Rational basis tests erect the lowest possible legal hurdles for the government, yet they are applied in cases that implicate some of our most important liberties, such as the right to earn a living, simply because they were not listed by name in the Bill of Rights.

For example, a law requiring an expensive permit to arrange flowers will only merit a rational basis review. And while rational basis review is a test for constitutionality, it doesn’t have anything to do with the Constitution or its history.

As Timothy Sandefur pointed out in the Cato Unbound issue on judicial activism, such rational basis tests have “no foundation whatsoever in the Constitution of the United States.” Rather, they were simply made up, fashioned by judges out of whole cloth during a period when courts were increasingly willing to defer to legislators and bureaucrats and their arbitrary and needless interference with private enterprise.

Rational basis review amounts to carte blanche for petty tyrants in legislatures, city councils, and regulatory agencies. Since the New Deal, courts have refused to give any real constitutional protection to the basic right to choose your profession and earn an honest living.

The 1934 Supreme Court decision in Nebbia v. New York is an important episode in the creeping evolution of rational basis. Leo Nebbia, a grocer, was convicted of the heinous crime of selling milk at a price that was too low, according to the bullies at New York’s “Milk Control Board.”

Writing for the Court, Justice Owen Roberts declared that as long as a law has “a reasonable relation to a proper legislative purpose,” the courts have no authority to strike it down.

Though he admitted that “the reasonableness of each regulation depends upon the relevant facts,” Roberts still maintained that, once a law is enacted, “every possible presumption is in favor of its validity.” If a “policy may reasonably be deemed to promote public welfare,” judicial review is basically over.

As a practical matter, this strange, circular reasoning means that a legislative body determines for itself whether its bills are constitutional. Merely by passing the law, the legislature settles the question and obliges the courts to accept any explanation offered for it. Such a theory eviscerates meaningful judicial review and leaves the individual defenseless, without any legal recourse against the nearly omnipotent modern state. And, since the Nebbia decision, the courts have only become more deferential.

Conservatives mistakenly associate judicial “activism” with the progressive left, but the New Deal-era progressive judges were actually the architects of the judicial “deference” that reigns today. Traditional common law protections were discarded in favor of expedience: the desire to get out of government’s way as it systematically planned, monitored, and regulated society as it saw fit.

The liberalism of the previous century was likewise treated with an arrogant and imperious contempt. Quaint notions of individual liberty and inviolable natural rights gave way to the irresistible march of modernity and “scientific” progress, shepherded by their natural steward, the state.

Rational basis tests invert legitimate due process. The burden of proof should be on the government to prove that a law or regulation serves the general welfare. The government should have to factually demonstrate the connection between the law and public health and safety, not merely assert that one mightexist.

But, instead, judges have decided that person challenging a law must confront and rebut every possible argument and hypothetical that the government (or judge) might conjure up in support of its law.

The rational basis test demands that a victim of government overreach prove the impossible, refuting an infinite universe of possible scenarios and rationales that could justify the law. Forget the actual empirical facts — rational basis has no time for such distractions.

On the contrary, the test requires judges to help the government by inventing counterfactual stories that could have justified the law. Even if the law has nothing to do with community health or safety, even if it is openly protectionist, it must be upheld if any flight of fancy could justify it.

Thus, the rational basis “test” is no test at all. It is a hollow, perfunctory gesture as the court abandons its duty of judicial review and leaves the hapless individual at the mercy of capricious government officials and special interests.

The right to choose your occupation is as fundamental a liberty as the right to speak, an indispensable aspect of self-ownership and self-determination. The freedom to make important, personal decisions about your career and your property is the bedrock of peaceful cooperation and civil society. In any society even moderately committed to freedom and legitimate due process, the rational basis test would be inconceivable. The presumption of liberty, like the presumption of innocence, would be the individual’s default position under the law.

Sadly, judges have abandoned their posts, doing the bidding of arbitrary governments and politically powerful economic interests who use the law to prevent competition. To fulfill the Constitution’s guarantee of due process, and to restore our lost liberties, we must scrap the rational basis excuse.

David S.  D'Amato

David S. D’Amato

David S. D’Amato is an attorney and independent scholar whose writing has appeared at the Institute of Economic Affairs, the Future of Freedom Foundation, the Centre for Policy Studies, and the Institute for Ethics and Emerging Technologies.

Environmental Doom-mongering and the Myth of Vanishing Resources by Chelsea German

Media outlets ranging from Newsweek and Time, to National Geographic and even the Weather Channel, all recently ran articles on the so-called “Overshoot Day,” which is defined by its official website as the day of the year

When humanity’s annual demand for the goods and services that our land and seas can provide — fruits and vegetables, meat, fish, wood, cotton for clothing, and carbon dioxide absorption — exceeds what Earth’s ecosystems can renew in a year.

This year, the world allegedly reached the Overshoot Day on August 13th. Overshoot Day’s proponents claim that, having used up our ecological “budget” for the year and entered into “deficit spending,” all consumption after August 13th is unsustainable.

Let’s look at the data concerning resources that, according to Overshoot Day’s definition, we are consuming unsustainably. (We’ll leave aside carbon dioxide absorption — as that issue is more complex — and focus on all the other resources).

Fruits and vegetables

Since millions of people rose from extreme poverty and starvation over the past few decades, the world is consuming more fruits and vegetables than before. We are also producing more fruits and vegetables per person than before. That is, partly, because of increasing yields, which allow us to extract more food from less land. Consider vegetable yields:

Meat and fish

As people in developing countries grow richer, they consume more protein (i.e., meat). The supply of meat and fish per person is rising to meet the increased demand, just as with fruits and vegetables. Overall dietary supply adequacy is, therefore, increasing.

Wood

It is true that the world is losing forest area, but there is cause for optimism. The United States has more forest area today than it did in 1990.

As Ronald Bailey says in his new book The End of Doom, “In fact, except in the cases of India and Brazil, globally the forests of the world have increased by about 2 percent since 1990.”

As the people of India and Brazil grow wealthier and as new forest-sparing technologies spread, those countries will likely follow suit. To quote Jesse H. Ausubel:

Fortunately, the twentieth century witnessed the start of a “Great Restoration” of the world’s forests. Efficient farmers and foresters are learning to spare forestland by growing more food and fiber in ever-smaller areas. Meanwhile, increased use of metals, plastics, and electricity has eased the need for timber. And recycling has cut the amount of virgin wood pulped into paper.

Although the size and wealth of the human population has shot up, the area of farm and forestland that must be dedicated to feed, heat, and house this population is shrinking. Slowly, trees can return to the liberated land.

Cotton

Cotton yields are also increasing — as is the case with so many other crops. Not only does this mean that we will not “run out” of cotton (as the Overshoot Day proponents might have you believe), but it also means consumers can buy cheaper clothing.

Please consider the graph below, showing U.S. cotton yields rising and cotton prices falling.

While it is true that humankind is consuming more, innovations such as GMOs and synthetic fertilizers are also allowing us to produce more. Predictions of natural resource depletion are not new.

Consider the famous bet between the environmentalist Paul Ehrlich and economist Julian Simon: Ehrlich bet that the prices of five essential metals would rise as the metals became scarcer, exhausted by the needs of a growing population. Simon bet that human ingenuity would rise to the challenge of growing demand, and that the metals would decrease in price over time. Simon and human ingenuity won in the end. (Later, the prices of many metals and minerals did increase, as rapidly developing countries drove up demand, but those prices are starting to come back down again).

To date, humankind has never exhausted a single natural resource. To learn more about why predictions of doom are often exaggerated, consider watching Cato’s recent book forum, The End of Doom.

A version of this post first appeared at Cato.org.

Chelsea German

Chelsea German

Chelsea German works at the Cato Institute as a Researcher and Managing Editor of HumanProgress.org.

RELATED ARTICLE: EPA’s Hightest Paid Employee, “Climate Change Expert,” Sentenced to 32 Months for Fraud, Says Lying Was a ‘Rush’

Who Will Protect Us from Tainted Food Trucks? by B.K. Marcus

My Haitian babysitter told me to get into the car, an old sedan with peeling paint, driven by a stranger. She’d hailed it, like a cab, and it pulled over for us, like a cab, but it didn’t look like a cab.

“I thought you said we were taking a taxi,” I said.

“This is a taxi.” She pushed me into the back seat.

“It doesn’t look like a taxi,” I whispered.

“Real taxis don’t come into this neighborhood,” she said. “This is a gypsy.”

I thought she was describing the ethnicity of the driver. Only later, listening to radio news reports about city police campaigns against gypsy cab drivers did I understand that my babysitter had dragged me into a mobile version of the black market.

That brief ride through a 1970s New York City ghetto was my only time in a gypsy cab: a bewildered little boy forced into the car of a man I didn’t know. It felt dangerous in a way that even hitchhiking in the Middle East when I was a teenager did not.

So why do I use Uber and Lyft without hesitation? Why do I prefer gray-market ride sharing with unlicensed strangers to hailing a municipally sanctioned taxi?

At this point, my confidence is based on past experience: the dozens of Uber drivers I’ve had were far more pleasant than the hundreds of cab drivers I’ve ridden with. But even my very first time with Uber, I got in without hesitation.

Peer-to-peer apps have made reputation markets real and robust — at least in certain corners of the service economy. Uber drivers have far greater incentive to make me happy than any cab driver ever has. More than their tip depends on it: the rating I give them can affect their future earnings.

Cab companies could have adopted reputation apps years ago as a way to outdo their competitors. But they weren’t worried about competition. City licensing often creates a protective cartel for current cabbies. That’s why Uber and Lyft became so popular so fast: the market — meaning everyone looking for a ride — wanted what the cab industry felt no need to offer us.

Will food trucks be the next service to escape the archaic model of licensing and regulation?

“Illegal Food Trucks Worry Health Officials,” reports the Herald-Sun of Durham, North Carolina. “Unlicensed food trucks operating illegally in Durham have health officials concerned that customers could end up getting sick.”

One such official, Chris Salter, told the paper that people selling food from the back of SUVs have posed food-poisoning risks to the public for years: “Did they slaughter a chicken in their backyard and cut it up on a piece of plywood? You just don’t know.”

The solution Salter proposes, of course, is stricter policing and greater regulation. After all, if cops and bureaucrats don’t protect the public, who will?

To the generation that reads newspapers and waits in line for taxis, the argument makes sense: when you eat in a restaurant, you may not know for sure that the food is safe, but the restaurant isn’t going anywhere; even without a health inspector’s oversight, restaurant owners have an incentive to protect their reputations. It’s not hard to spread the word that you got sick eating at Big Joe’s on the corner of 1st and Main. It’s a lot less helpful to say you ate a bad fajita out of the back of a faded green RAV4 in the abandoned parking lot.

When I used to take city cabs, the seats were filthy, the driving was reckless, and the drivers ranged from sullen to rude. But I felt relatively safe. I knew I could always write down the cabby’s name and medallion number. In theory, at least, I could report him and maybe someone would wag a finger at him. That seemed better than nothing.

Licensed food trucks offer a similar assurance: “Salter’s advice to the public is to look for the health grade card at food trucks if they’re unsure whether it’s operating legally. Since 2012, food trucks have been required to display the same cards as restaurants.”

Again, even without the health inspection required to get a permit and a health grade card, food truck owners don’t want to risk customers’ health for fear of losing their permits or having to display a lackluster “health grade” on their cards.

Government licensing acts as a sort of hampered reputation market. The food SUVs have no such incentives.

As in the case of cabbies versus Uber drivers, the legitimate food truck owners are on the side of the government officials: “Many of those owners are upset because the illegal trucks skirt regulation fees and cut into their business.”

Food trucks in Durham may not yet operate as a cartel — the way they are beginning to do in New York City, for example, where the number of food-truck licenses has been frozen for years — but the complaint is typical of the established players in a protected industry: upstarts with lower costs are threatening our profit margin!

But suppose you’re a foodie with fear of salmonella. Would you rather rely on an 11-month-old government report card or just check your food-truck app to see what your fellow foodies have to say? What sort of insurance does the owner carry — what third-party assurance is available? How’s their guacamole?

Don’t like this truck’s rating? The app will guide you to the next nearest truck serving similar fare.

Salter told the Herald-Sun, “We’re not trying to keep anybody from making a living. We’re trying to be fair and to protect the public.” So why is he offering 20th-century advice to consumers in the 21st century? Might he have any interests at stake other than public safety?

No doubt health officials would counter that the sharing economy is an option only for the privileged. It’s not like everyone has a smart phone, right? Right?

Many of the illegal vendors speak only Spanish, Salter told the Herald-Sun. And “many of them can’t read, so even if we pass out documents, they can’t read them.”

So who buys questionable chicken out of the back of an SUV operated by illiterate, Spanish-speaking strangers when Durham has so many government-approved food trucks with English-speaking staff?

Might those who choose to do so be similar to those who hailed gypsy cabs in the New York City of my youth?

“Real taxis don’t come into this neighborhood,” my babysitter had told me. I didn’t need to ask why. I didn’t want to be in that area either. But folks in the bad neighborhoods still needed rides, and they were willing to pay for them. There was extra risk involved for both parties, and the drivers couldn’t make the kind of money that licensed taxi drivers made, but driving a gypsy cab was better than their next-best option, so supply and demand met in illegal exchanges that benefitted both parties.

It’s safe to assume something similar is going on at the back of some of Durham’s SUVs.

These are most likely working people on the margins of the economy who don’t have the time or the money to seek a quick lunch elsewhere. If they’re buying their food from obviously unlicensed and uninspected vendors, that suggests that the higher-scale food trucks aren’t coming to their neighborhood — or that they charge considerably more than the illegal food.

The health officials aren’t protecting these people. At best, they are limiting their options. Worse, they could be driving economic exchanges further underground, where neither the government nor the market can effectively regulate safety.

Salter implies that vendor noncompliance is the result of ignorance, but it’s more likely buyers and sellers who don’t feel especially well protected by the legal system are taking measured risks to improve each other’s lives.

And I bet plenty of them do have smart phones. What they need now isn’t more ardent government oversight; it’s more reliable reputation markets. If there isn’t already an app for that, there soon will be.

B.K. Marcus

B.K. Marcus is managing editor of the Freeman.

Does “I, Pencil” Need a Pro-Government Update? by George C. Leef

In a book I recently read, Complexity and the Art of Public Policy by David Colander and Roland Kupers, I was surprised to find a chapter entitled “I Pencil Revisited.” Yes, they meant Leonard Read’s famous essay showing how market prices and competition work to coordinate production in a way that no single person, however powerful or intelligent, possibly could.

The authors aren’t exactly hostile to Read’s message but say that it leaves out something important — the role of government.

They write,

For me to be produced, someone had to protect the property rights upon which the market is based, someone had to guarantee that the contracts between individuals would be enforced, and someone had to be on the lookout for lead, for the safety of machines, and similar problems, which if not addressed might well lead to a society to undermine the institutional structure that produced me.

And, again writing through the voice of a pencil, Colander and Kupers say,

The reason I, Pencil downplayed government’s role is that he was afraid its inclusion would lead some people to expand the role of government to solve the inevitable problems that come about in coordinating production.

I believe that they are mistaken on that. The reason why Leonard Read focused exclusively on the remarkable story of voluntary market cooperation and did not expand the piece to discuss the proper role of government was that he figured most people already had some understanding of the need to protect property, enforce contracts, and settle disputes.

What very few people had any comprehension of was the way individuals all across the globe are brought into cooperation by the market for pencils.

Going into the role of government in the essay would have been like Mozart adding a few extra movements to his Jupiter Symphony.

Here is why the authors make this argument. They don’t like what they call the “market fundamentalism” of Leonard Read, former FEE president Don Boudreaux, and others (like me) who argue that the people of any society will be the most productive, happiest, and best able to deal with the problems they see if the government is kept only to the functions of protecting the rights of life, liberty, and property.

Instead of laissez-faire, Colander and Kupers favor what they call “laissez-faire activism.”

In short, they want us to believe that there is an ideal middle ground between unsophisticated “market fundamentalism” and top-down government planning and control of the economy. The latter, they understand, is bad because such authority will squelch innovation and competition, but the former supposedly doesn’t do enough to allow people to realize their “collective goals.” Here is a crucial passage:

What simplistic or fundamentalist free market advocates sometimes miss is that a complex system works only if individuals self-regulate, by which we mean that they do not push their freedom too far, and that they make reasonable compromises about benefiting themselves and benefiting society.

Of course, the common law framework that thinkers in the Adam Smith, Frederic Bastiat, Leonard Read line advocated does put limits on individual action. Rights and the sphere of legitimate action are clearly established, and to the extent that people have collective goals, they are free to pursue them voluntarily. But Colander and Kupers think government can and should do just a bit more.

One of their ideas is that government should adopt policies that will “nudge” people to do what they “really want to do,” but can’t sufficiently discipline themselves to do. They extol the book Nudge by Cass Sunstein and Richard Thaler, which purports to show how government can “encourage” people to act in preferable ways, without dictating behavior to them.

But why can’t we rely entirely on voluntary efforts by concerned individuals and organizations to do that encouraging? Churches, for example, have been encouraging people to behave better for millennia; Alcoholics Anonymous has been helping people recover from alcohol abuse since 1935; parents have been “nudging” children to make wiser decisions since time immemorial. Why look to government policy?

Sometimes, the reason why people seem to need “nudging” is that current government policy encourages undesirable behavior. Few Americans save much these days, for instance. But instead of trying to “nudge” them to save more, why not change the tax laws that discourage thrift? Going back towards “laissez-faire fundamentalism” would solve or ameliorate many of our problems.

Moreover, Colander and Kupers ignore the great and, I maintain, insuperable problem of keeping government interference within bounds. If the state has the authority to “nudge” people, what keeps politicians from ratcheting up the power if it doesn’t work? Nudging turns into pushing, then shoving. Interest groups will importune politicians with arguments for policies they favor, crafting them as merely helping “the people” to realize the social goals they “really” favor.

They way democratic politics tends to be captured by interest groups is the big message of Public Choice theory, but Colander and Kupers never think to explain how they’d prevent their “laissez-faire activism” from turning into plain old activism.

After reading Complexity and the Art of Public Policy, I fail to see how government can improve upon capitalism combined with the host of voluntary organizations that spring up in a free society. I, Pencil does not need to be revisited.

George C. Leef

George Leef is the former book review editor of The Freeman. He is director of research at the John W. Pope Center for Higher Education Policy.