Did modern monetary theory elect Trump?

Modern monetary theory (MMT) argues that the federal government, as the sole issuer of legal tender, can issue virtually limitless amounts of new money to fund itself. The years 2020-2024 in the USA provided an unambiguous test of this theory.

Did modern monetary theory elect Donald Trump? | Hill Times | Phillip Magness and Alexander William Salter:

November 19, 2024 - "[M]odern monetary theory is a fringe school of economic thought arguing that the federal government, as the sole issuer of legal tender, can issue virtually limitless amounts of new money to fund itself. Bucking thousands of years of evidence that such reckless policies lead to currency devaluation, advocates shirk all blame when inflation occurs, insisting instead that prices increased due to 'corporate greed' and 'price gouging.' Perhaps some of that sounds familiar....

"The Biden-Harris administration began its term assuming it could 'run the economy hot' while also avoiding inflation. They added another multi-trillion-dollar stimulus to Trump-era COVID relief spending, believing they could escape the repercussions of its price tag..... On the fiscal side, extravagant spending greatly increased government indebtedness. On the monetary side, running the printing press to keep interest rates low flooded financial markets with liquidity. The predictable result was too much money chasing too few goods — the classic recipe for dollar depreciation, better known as inflation.

"When the first signs of an inflationary spiral appeared in summer 2021, the White House responded with an official stance of denialism. Price level increases were only 'transitory,' they assured us, adopting a talking point from modern monetary theory theorist Stephanie Kelton. 

"As the problem lingered ... the White House doubled down on fringe theories, such as blaming 'corporate greed' instead of its own spending habits. As recently as July 2024, Council of Economic Advisors chair Jared Bernstein adopted the modern monetary theory-aligned inflation narrative of economist Isabella Weber, who contends that producers made an 'implicit agreement' to exploit a price shock during the pandemic and extract profits from the public.... Kamala Harris attempted to turn this conspiratorial reasoning into policy by proposing price controls at the grocery store — a scheme rejected by most economists, but championed by Weber, Kelton and other modern monetary theory advocates.... 

"Modern monetary theory fooled Washington’s elite because its message was seductive: If there’s any slack in the economy and the government prints and spends in its own currency, policymakers don’t need to worry about price hikes. The years 2020-2024 provided an unambiguous test of this theory. The answer: It’s bunk. 

"Consumer price inflation peaked at 9 percent during the summer of 2022. Central bankers were late to the game to tighten, even adopting the modern monetary theory talking point about “transitory” inflation for a brief but critical moment in early 2021. Elected Democrats scrambled to minimize the role their profligacy had played in forcibly raising the cost of living, culminating in Harris’s grocery store price control proposal as the centerpiece of her economic platform....

"Fed officials should have predicted the consequences of keeping money growth above economic growth for so long. President Biden and Vice President Kamala Harris should have recognized that continued fiscal follies would pressure the Fed to embrace money mischief, and that price controls simply made the administration look economically illiterate and out of touch. This rhetoric began as a convenient political argument for stimulus spending, then morphed into an act of self-deception on the part of the Harris campaign.

"As election day exit polling revealed, the electorate repudiated the modern monetary theory narrative. Americans are fed up with over-credentialed experts inventing new reasons to ignore basic economics. The laptop class has only itself to blame for elevating these fringe theories, thereby facilitating Trump’s electoral comeback."

Read more: https://thehill.com/opinion/finance/4996296-modern-monetary-theory-inflation/ 

Modern Monetary Theory explained | Economics Understood | April 25, 2021:

Rockefeller Int'l CEO says Canada breaking down

Economics writer Ruchir Sharma, chair of Rockefeller International, classes Canada among the "nations that not too long ago were billed as star performers but are now breaking down." 

Chair of Rockefeller International says Canada a leader in ‘breakdown nations’ | Western Standard | Jen Hodgson:

May 9, 2024 - "Chair of Rockefeller International Ruchir Sharma has observed Canada to be leading the way in once great economies that are 'now breaking down.' The head of the institution that 'served the Rockefeller family and institutional investors for generations' singled Canada out for its rapidly declining GDP, the inability for the nation’s young people to buy homes and its lagging in technological advancements. 

Ruchir Sharma, 2012. Photo by Zj007ny. 

CC BY SA 3.0, Wikimedia Commons.

"In an article headlined A warning from the breakdown nations ... published in the Financial Times ... Sharma argues there are lessons to be learned for 'current stars' on the world stage like the US and India from countries that once had thriving economies but since have shrunk.... Sharma lists the examples of these 'breakdown nations' and advises they 'carry a lesson' — 'growth is hard, sustaining it even harder, so the stars of today are not necessarily the stars of tomorrow.'

“'It is worth looking at nations that not too long ago were billed as star performers but are now breaking down,' writes Sharma. 'Led by Canada, Chile, Germany, South Africa and Thailand. All are among the world’s 50 largest economies and, so far this decade, have suffered both a sharp decline in real per capita income growth, and a fall in their share of global gross domestic product.'

“'Take Canada first,' Sharma writes, recalling how Canada was once 'widely admired for how it weathered the global financial crisis of 2008' but the nation 'missed the boat when the world moved on, driven by big tech instead of commodities.'

"Sharma notes Canada’s per capita GDP has been declining each year since 2020 by 0.4%, ... worse than any developed country in the top 50. He further attributed any new investment
and job growth [to] 'being driven mainly by the government.' 

"'Private-sector action is confined largely to the property market, which does little for productivity and prosperity. Many young people can’t afford to buy in one of the world’s most expensive housing markets,' writes Sharma. 'Pressed to name a digital success, Canadians cite Shopify — but the online store is the only tech name among the country’s 10 largest companies, and its shares are trading at half their 2021 peak'....

"The takeaway is to be wary of 'hidden traps (that) line the path of development and can spring on nations. Any country can find itself stuck — until it finds the leadership and vision to chart a way out,' he concludes. 'For current stars, the message is a warning: don’t take growth for granted.'”

Read more: https://www.westernstandard.news/news/chair-of-rockefeller-international-says-canada-a-leader-in-breakdown-nations/54448
Sharma's article (paywalled): https://www.ft.com/content/ee51d83e-0037-4130-a4f9-656aa7c4ca97

Economic Vandalism | Pierre Poilievre | June 11, 2024:
[Note: This video is political propaganda, and selectively presents only facts that fit its narrative. But (in its first 14 minutes, up until the campaign commercial at the end) it is the best presentation and explanation of those facts that I can remember seeing. - GD] , 

Carbon taxes are a perversion of market theory

Carbon taxes are a perversion of free-market economic theory | Financial Post | Terence Corcoran:

November 3, 2023 - "Canada would not be embroiled in a political carbon tax crisis today were it not for the background endorsement of economists who argue that a carbon tax is a principled market mechanism that can be used to correct a 'market failure' such as climate change. In the words of a now-famous 2019 statement signed by 45 market-oriented economists, including former U.S. Federal Reserve chairs Alan Greenspan and Paul Volcker, a carbon tax is a sound market-based solution to a global problem. 'By correcting a well-known market failure, a carbon tax will send a powerful price signal that harnesses the invisible hand of the marketplace to steer economic actors towards a low-carbon future.' Since 2019, the statement has been signed by more than 3,600 economic thinkers and is described by the Climate Leadership Council as 'The largest public statement of economists in history'....

"The 'invisible hand' mentioned in the economic statement gives the impression that a carbon tax is aligned with the ideas that enlightenment economist Adam Smith and others — from liberals to neo-liberals to libertarians — have championed over government control and planning. The economists’ endorsement of invisible hand principles in the context of a carbon tax is, at minimum, misleading. The imposition of a carbon price by government — such as Canada’s $170 a tonne target — is nothing but a government price-fixing scheme. 

"In a market economy, prices are not the starting line for economic activity nor are they the means to control supply and demand as implied by proponents of carbon taxation. Prices are the end point of economic activity. In a market economy prices are the product of supply and demand based on the multitude of individual and corporate choices that lead to final transaction prices. The dynamic of supply and demand determines price, a process that takes place outside the knowledge and thought processes of the economic actors. 

“'Every money price of a good on the market, is determined by the supply and demand schedules of the individual buyers and sellers, and their action tends to establish a uniform equilibrium price on the market at the point of intersection.' So wrote the late Murray N. Rothbard in Man, Economy and State: A Treatise on Economic Principles. Another giant of free-market economics, Friedrich Hayek, described the invisible hand process in his 1946 essay “The Use of Knowledge in Society.” In a market economy, no one person or power determines pricing. 

It is more than a metaphor to describe the price system as a kind of machinery for registering change, or a system of telecommunications which enables individual producers to watch merely the movement of a few pointers, as an engineer might watch the hands of a few dials, in order to adjust their activities to changes of which they may never know more than is reflected in the price movement.

"Using tax power to set a price to force a market movement stands the economic system on its head and gets the process backwards. With carbon taxation, the state is imposing a visible hand in an extreme and unprecedented way. For one thing, no participant in a market economy driven by the invisible hand would or could raise prices so as to ultimately reduce demand to zero.... 

"The idea that high and rising carbon prices can be used to remove carbon from the economy runs up against the fact that carbon-based fossil fuels are currently part of the foundation for most economic activity. They are essential today, to the point where industry and consumers cannot do without them. They are, as economists say, price inelastic. A doubling or even a quadrupling via taxation will not end demand for fossil fuels without killing economic activity. According to the 3,600 economist backers of carbon taxation, this little problem can be overcome by returning all the revenue from the carbon taxes to taxpayers 'to maximize the fairness and political viability of a rising carbon tax.' The Trudeau Liberal plan for Canada follows that advice.

"There is nothing invisible about carbon taxes. They are a perversion of free-market economic theory. We should bite the visible hand and axe the tax."

Read more: https://financialpost.com/opinion/carbon-taxes-perversion-free-market-economic-theory

Carbon tax making life unaffordable for Canadians: Sask. premier | Power & Politics | CBC News | March 28, 2024:

Is the free market just a Big Myth?

Is the free market just a myth dreamed up and propagandized by big business and libertarian economists?

The Big Myth Is Full of Recycled Anti-Capitalist Cheap Shots | Reason - Phillip W. Magness:

February 25, 2023 - "New academic 'histories' now appear on a near-monthly basis, each blaming a variety of social ills on the conspiratorial machinations around a single idea: the free market. Almost everything in this genre follows the same formula. When the American electorate fails to embrace the political priorities of an Ivy League humanities department, these disheartened authors cast about for a blameworthy culprit. They settle on 'market fundamentalism' or 'neoliberalism.' The explanation then takes a paranoid turn, declaring the targeted theories a 'manufactured myth' arising from the 'inventions' of 20th century business interests.... All eventually settle on a mundane conspiracy of business interests and libertarian economists, who allegedly derailed America from its progressive path by convincing people that markets work better than government at solving problems.

"At some 550 pages, The Big Myth: How American Business Taught Us To Loathe Government and Love the Free Market is among the most loquacious entrants into this crowded literature. Harvard University's Naomi Oreskes and California Institute of Technology historian Erik Conway lay out their conspiracy theory with formulaic precision, but their book is atypical in one significant way. While most of the other works in the anti-neoliberalism genre manage at least to excavate some interesting archival findings about libertarian economists (before badly misinterpreting them), this book is remarkably light on original content.... A reader ... will be left wondering why this same story needed yet another repackaged recitation....

"The Big Myth is structured in sequential vignettes about various themes and figures such as Ludwig von Mises, Leonard Read, Friedrich Hayek, Rose Wilder Lane, and Milton Friedman, all of whom are portrayed as either willing propagandists for big business or hapless dupes of the same. The authors expend almost no effort on understanding the arguments of the thinkers they set out to debunk.

"A revealing example appears in the book's treatment of Leonard Read's 1958 essay "I, Pencil." Read's story is a fairly straightforward allegory for Adam Smith's famous concept of the "invisible hand," showing how complex social coordination arises from routine economic exchanges and signals in the absence of a centralized design. To Oreskes and Conway, however, the metaphor is literally the hand of God working from above to ensure the market system provides. As they put it, 'God made the marketplace and the marketplace made the pencil; ergo God made the pencil'....

"Interpretive peculiarities continue in their treatment of Ludwig von Mises' Socialism. After initially acknowledging that the book was written in German in 1922, Oreskes and Conway soon drift into anachronism by insinuating that it was intended as a critique of President Franklin Roosevelt. ("Mises's use of the term socialism was misleading," they contend, "because no credible American political leader in 1944 was advocating central planning.") They augment this ascription of prophecy with a sleight of hand, replacing the revolutionary Marxists of Mises' original commentaries with the comparatively benign Norman Thomas as their own preferred avatar of socialism. Like other texts in the anti-neoliberalism genre, The Big Myth removes 20th century free market authors from their historical context by hand-waving the Soviet Union out of existence and proceeding as if socialism means nothing more than a narrow swath of modern Scandinavian social democracies.

"Such errors are frequently paired with another recurring theme: the authors' fundamental inability to approach their opponents with anything remotely resembling intellectual charity. The book is filled with gratuitous swipes, many of them comically ahistorical. This usually means either a false accusation of racism or a disparaging attack on a target's qualifications. Mises receives both types of abuse. After dubbing him an 'absolutist who sympathized with fascism,' Oreskes and Conway launch into an extended attack on the Austrian economist's migration to the United States in 1940. In their telling, Mises ... struggled to find a respectable academic job until 'dark money' funders created a succession of positions for him at New York University..... Meanwhile, Mises' academic work in the United States gained higher honors than either Oreskes or Conway has ever achieved.... 

"They casually brand Milton Friedman a 'racist extremist' and defender of segregation, but not for any actual defense of segregation. The authors simply disagree with his argument that markets were more effective tools for bringing about integration than government edicts.....

"They accuse Friedrich Hayek of eschewing 'the essence of scholarship,' which 'is to look past the immediacies of time and place,' while themselves constantly processing history through their modern partisan commitments. They accuse free market economists of venturing outside their scientific expertise while offering their own decidedly nonexpert opinions on everything from economic inequality to COVID-19.

"The authors' discussion of the latter subject, which closes the book, is unintentionally comedic. Oreskes and Conway use the pandemic to contrast U.S. 'market failure' with the alleged success of 'countries that mounted a strong, coordinated response,' China foremost among them. As their book went to press, China's centralized 'zero-COVID' regime was collapsing into the same unfettered disease spread that Oreskes and Conway ascribe to free markets. But readers should not expect any self-interrogation from this pair."

Read more: https://reason.com/2023/02/25/the-big-myth-is-full-of-recycled-anti-capitalist-cheap-shots/

Economist's unrefuted case against lockdowns

Economist Douglas Allen, author of a 2020 report calling lockdowns one of Canada's greatest public policy failures, argues that it is important to keep making the case against them for the historical record.

Professor Douglas Allen still refuting lockdowns | Western Standard - Lee Harding:

January 29, 2022 - "Two years ago, Simon Fraser University economics professor Douglas Allen published an academic paper condemning pandemic lockdowns as doing more harm than good. 'An examination of over 80 COVID-19 studies reveals that many relied on assumptions that were false, and which tended to over-estimate the benefits and underestimate the costs of lockdown,' Allen wrote in April of 2021. 'The cost/benefit ratio of lockdowns in Canada, in terms of life-years saved, is between 3.6–282. That is, it is possible that lockdown will go down as one of the greatest peacetime policy failures in Canada’s history.'

"In an interview with Western Standard, Allen said his suspicions were already aroused a full year prior.... 'When the lockdowns first cane, ... I thought to myself, maybe I've misunderstood, we must be facing something that's three times worse than smallpox in the 17th century. I just thought I'd completely missed the seriousness of the virus,” Allen recalls. 'Almost immediately, I started doing my own research on this sort of stuff.... 

There was a group of economists in in UCLA, that by the end of the summer of 2020, had done such phenomenal work that really showed, I thought, that the lock downs were useless, that the virus was moving through populations exactly the same way, regardless of what the culture, the civilization, what governments were doing. And then I thought, ‘Okay, well, now it's over, right? There's no way we'll go back to lockdown in the fall.’ And of course we did.

"Allen said he got involved in a lawsuit to stop the lockdowns that was unsuccessful. 'I wrote a report that, when the lawsuit went nowhere, for nothing better to do, I posted it on my Facebook, I only have six friends on Facebook, but somebody shared it. I posted it on a Monday. And by Thursday, it went viral. And it was nonstop after that' Two journals asked him to publish reports, which Allen claims have been downloaded a “record” 70,000 times. 

"The question remains why a paper so sought by the public was almost completely ignored by the media. 'The mainstream media was part of the message, right? Whether they were literally in bed with the state or not, they went along with the beginning. Again, you're telling people certain things, and then you find out they're not true, you can either admit that you made a mistake, or you can just carry on with that narrative,' Allen explains. 'I personally don't believe in big conspiracies, I just think it was in every person's interest'....

Here you are, you're a politician. By the end of April of 2020, there had been a loss of wealth in the country by a third the stock market value just crashed, you had destroyed a third of the wealth of the country. Oops. And you're going to admit that? Not a chance, right? What you're going to do is say, ‘Well, we thought it would be two weeks to bend the curve, it obviously wasn't. We're going to have to go for another two weeks and another two weeks, and you're just hoping and praying that this thing goes away. And you can declare victory....

"The very infectious, but less lethal Omicron provided the way out of lockdowns, Allen says, but the damage to the economy and the lives that this took cannot be restored.

> When you're unemployed, your income goes down your diet, quality of diet goes down, your anxiety levels go up, your mental health goes down, all these things contribute to a shorter life. In the United States, for the first year of the pandemic, lost life years, due to just the unemployment part, is about 800,000 lives. If you convert the unemployment into lost lives. My impression is each category of costs swamps the benefits of lockdown..... 

Lost GDP. Certainly, that's important. But my goodness, that's just the starting of things. There has to be a full accounting of what you might even call the loss of livelihood, or the loss of living....  The deaths of despair, the overdoses, the suicides, and all these sorts of things have to be accounted for..... Deaths caused by lost cancer appointments or other health appointments, those sorts of things, the complete failure of the healthcare system has to be accounted for.”

Read more: https://www.westernstandard.news/news/professor-douglas-allen-still-refuting-lockdowns/article_7d2f5c52-9ffc-11ed-b4fe-9b385fc66a03.html

Read study: https://www.sfu.ca/~allen/LockdownReport.pdf

How is social order possible?

On Hayek’s “Kinds of Order in Society,” Part I | American Institute for Economic Research - Donald J. Boudreaux: 

December 6, 2021 - "F.A. Hayek wrote several books and articles that are justly famous.... But because Hayek’s professional life spanned more than 60 years – from the mid-1920s until the late 1980s – the corpus of his work is enormous, with most of it being relatively obscure.... But my very favorite of Hayek’s many superb but lesser-known works is his paper that first appeared in the Winter 1964 issue of New Individualist Review: “Kinds of Order in Society.” This paper is a work of genius. A great deal of confusion about society, and about government’s role in it would be swept away were this paper’s core message more widely understood....

"Among the assumptions at the foundation of this article is that we human beings extend our ability to achieve our goals by cooperating with each other. And the greater is the number of individuals with whom we cooperate, the greater is the number of goals that we can successfully pursue. This fact explains the omnipresence of human cooperation. Such cooperation began eons ago in small hunting and gathering bands in which each individual personally knew those with whom he or she cooperated. Today, this cooperation literally spans the globe and occurs among billions of people, nearly all of whom are strangers to each other.

"When the cooperation is only among individuals who know each other personally – that is, only among a very small number of persons – it’s easy for each person to comprehend the nature of the cooperative arrangement.... But cooperation on such a small scale doesn’t allow individuals to achieve as much as each can achieve by including in the cooperative effort more individuals. The inclusion of more individuals brings to the cooperative effort not only additional muscle power but, far more importantly, additional and more diverse brain power – that is, more human creativity. The inclusion of more individuals also encourages greater specialization, which in turn results in each task being done more expertly, more uniformly, and faster.

"The human mind, however, isn’t evolved to be able to know more than a few hundred individuals. If we cooperated only with individuals we know, the span of our cooperation would remain extremely narrow.... Fortunately, our inability to personally know more than a handful of fellow human beings is offset by our instinct to adopt and follow rules. By following rules we can, and do, increase the number of individuals with whom we cooperate beyond the number that we personally know.

Source: Utopia, You Are Standing in It!

"An example is trade, which has at its base this rule: Each person is entitled only to what other people voluntarily give to him or her. No one gets to take other people’s stuff without their permission. Under this rule, if Jones wants some item, say an axe, owned by Smith, Jones understands that he can get this axe only by persuading Smith to give it to him. And especially if Smith is a stranger to Jones, the most obvious way for Jones to persuade Smith to give him the axe is for Jones to agree to give some other item ... to Smith in exchange.... Trade allows each of us to tap into the unique talents, interests, and endowments of our trading partners, be they neighbors across the street or strangers across the ocean. And trade is possible because its most basic rule is easily understood by every human being regardless of cultural background.

"Trade is not the only activity made possible by our rule-following instincts. Without sophisticated rule-following behavior, life in groups larger than the small band would be impossible. Think of yourself in a big city. You know not to practice playing your trumpet or your drums at midnight, and you know that other people follow a similar rule, which enables you – and others – to rely on being able to sleep each night. You know that when you come with your filled grocery cart upon a queue at the supermarket checkout lane, you take your place at the back of that line – and you’re content to do so because you know that other people will follow the same rule. You know that you aren’t allowed, without invitation, to enter premises belonging to other people. You know what green lights and red lights mean to motorists. You know that even though the restaurant serves you food before you pay for it, that you must pay for it when you’re done dining.

"Because humans are rule-following creatures, you thrive amongst strangers. By following the rules that prevail in a society, not only are harmful and disruptive encounters kept to a minimum, each individual – by knowing that countless strangers will follow the same rules that he or she follows – is able to plan courses of action in ways that would be impossible if rules didn’t exist.

"Our rule-following behavior gives rise to ever-more complex – and ever-more productive – patterns of cooperative interaction. These patterns are not only not designed by anyone, they could not possibly be so designed. Furthermore, these patterns cannot be directly observed and understood in the same way that our hunting and gathering ancestors could directly observe and ‘fully’ understand their simple cooperative endeavors. And yet, because we today still have the same brains as did our hunting and gathering ancestors, we are unable, without real intellectual effort, to perceive – and much less to make sense of – the complex patterns of social cooperation in which each of us participates daily.

"In “Kinds of Order in Society,” Hayek identified two categorically different kinds of orders – 'spontaneous orders' and 'organizations' – that are both common and useful to humans. Each of us is part of both kinds of orders. Yet we instinctively suppose that only one kind of these orders – namely, organizations – is possible. As I’ll explain in my next column, our instinct of interpreting all order as being the consequence of conscious organization is the root of much mischief."

Read more: https://www.aier.org/article/on-hayeks-kinds-of-order-in-society-part-i/

Also read: On Hayek’s “Kinds of Order in Society,” Part II

This work is licensed under a Creative Commons Attribution 4.0 International License.

The two kinds of social order

On Hayek’s “Kinds of Order in Society,” Part II | American Institute for Economic Research - Donald J. Boudreaux:

December 15, 2021 - "I concluded my previous column by blaming much policy mischief on the human instinct (perhaps a better word is 'habit') of interpreting all social order – including economic order – as being the consequence of conscious organization. This conclusion reflects the fact that my worldview is influenced so heavily by the work of F.A. Hayek, not least his relatively obscure 1964 New Individualist Review article, 'Kinds of Order in Society.' In this remarkable essay, Hayek identified two kinds of social orders, 'organizations' and 'spontaneous orders.' [stress added]. These orders differ from each other categorically.

"Organizations are consciously designed arrangements of human beings, each with an assigned task or set of tasks. Each organization is meant by its designer, or designers, to achieve a particular goal. An example is a hunting party arranged and carried out by our hunting-and-gathering ancestors. Another example of an organization, one familiar to us today, is a restaurant.... The crucial fact is that the restaurant, like the prehistoric hunting party, is consciously organized to pursue a particular goal in a particular manner.... And so the actions of every person in an organization can and will be judged by how well those actions contribute to the achievement of the organization’s goals.... 

"Spontaneous orders, like organizations, are highly useful to individuals. But unlike organizations, spontaneous orders are not designed and created. They emerge as unintended consequences of the actions of persons, each of whom is pursuing his or her own individual goals with no awareness that those actions will give rise to a larger order. While a spontaneous order assists each individual in the pursuit of his or her goals, such an order, unlike an organization, itself has no goal towards which it aims. And because a spontaneous order as such has no goals, the actions of the individuals whose choices give rise to the spontaneous order cannot be judged by how well or poorly they promote the goal of the spontaneous order – for, again, the spontaneous order has no goals.

"The most obvious example of a useful spontaneous order is language. Language is clearly (to use a phrase much-favored by Hayek) the result of human action but not of human design. Languages emerged from human beings attempting to communicate with each other. Yet no one consciously decided what specific words and sounds refer to, or mean, in any language.... Being undesigned, it follows that language was not designed to serve any purpose or to achieve some particular goal.... And yet language does indeed enable each of us as individuals to better pursue our own goals. The shopper uses language to explain to the store clerk just what items he wishes to buy, and the store clerk, at the end of her work day, uses language to inform the cab driver of her destination. But the shopper and the store clerk, by using the same language, are not together acting to achieve some higher goal. Further, it would be mistaken to describe language as having among its goals the service of the shopper and of the store clerk.

"Another example of a spontaneous order is the global market. No one designed today’s division of labor – with some of us working as plumbers, others of us as web designers, yet others of us as butchers, brewers, bakers, or baseball players. And no one designed the indescribably complex pattern of exchange relationships that enable each of us to enjoy the fabulous prosperity that each of us enjoys. And yet these phenomena are real. They are the result of human action but not of human design. The market, like language, provides enormous assistance to each of us as we each pursue our own individual goals. But the market, also like language, has no overarching goal toward which it aims.

Source: Ryan Miller blog

"The human mind, alas, is much less comfortable with spontaneous order than with organization. Individuals interacting with each other in ways that no one planned seems, to many people, to be obviously inferior to individuals interacting with each other according to a plan. Just look at successful corporations; they’re planned to fulfill a particular goal. Likewise, when a government is in a desperate shooting war against other governments, it takes control of the economy and directs it according to a plan designed to defeat the dreaded enemy. Surely – the reasoning goes – the economy would produce much better results if it, too, were always run according to a plan rather than left to drift aimlessly with no intended direction.

"Since the publication in 1776 of Adam Smith’s Inquiry Into the Nature and Causes of the Wealth of Nations, economists have made a compelling case that the material results of competitive market processes will be far superior to those produced by government interventions designed to bring about particular, concrete outcomes. But although Hayek agreed with this conclusion, in his criticisms of government planning he often emphasized a different point – namely, that insofar as economic arrangements are planned by government, each individual is conscripted to serve ends that are not of his or her choosing.

"A beautiful feature of spontaneous orders is that they maximize the scope of each individual to choose – and to pursue with much hope of success – his or her own unique goals without having to agree with the goals chosen by others or to have to sacrifice his or her goals to the goals of other people. Also, in a spontaneous order no individual is thwarted in the pursuit of his or her goals simply because these goals are inconsistent with some overarching plan.

"We humans often use homeowners’ associations, firms, and other organizations to improve our prospects of achieving particular goals. But the undeniable usefulness of organizations in certain circumstances should not be mistaken as evidence that organizations are superior to spontaneous orders. Each of these two kinds of order in society has its proper place. And just as it would be foolish to expect, say, a business firm that produces automobiles to emerge spontaneously without someone intending to create such a firm and plan its operation, it is foolish to expect that the economy as a whole can be successfully planned and operated as if it were a business firm or a military unit.

"There are, to repeat, two kinds of order in society. It’s time we stopped glorifying and overestimating one, and ignoring the reality, or discounting the marvels, of the other." 

Donald J. Boudreaux is a senior fellow with American Institute for Economic Research and with the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center at George Mason University; a Mercatus Center Board Member; and a professor of economics and former economics-department chair at George Mason University. He writes a blog called Cafe Hayek and a regular column on economics for the Pittsburgh Tribune-Review. Boudreaux earned a PhD in economics from Auburn University and a law degree from the University of Virginia.

Read more: https://www.aier.org/article/on-hayeks-kinds-of-order-in-society-part-ii/

Also read: On Hayek’s “Kinds of Order in Society,” Part I

This work is licensed under a Creative Commons Attribution 4.0 International License.

Lockdown one of Canada's greatest policy failures, suggests economist

Economist: Lockdowns ‘Greatest Peacetime Policy Failure’ in Canada’s History | Foundation for Economic Education - Jon Miltimore: 

April 26, 2021 - "Canadian economist Douglas Ward Allen, the Burnaby Mountain Professor of Economics at Simon Fraser University, suggests the ineffectiveness of lockdowns may stem primarily from voluntary changes in behavior.

"'Lockdown jurisdictions were not able to prevent noncompliance, and non-lockdown jurisdictions benefited from voluntary changes in behavior that mimicked lockdowns,' writes Allen. 'The limited effectiveness of lockdowns explains why, after one year, the unconditional cumulative deaths per million, and the pattern of daily deaths per million, is not negatively correlated with the stringency of lockdown across countries.'

"Allen’s thesis would help explain the abundance of data that show lockdowns and other restrictions have been, at best, largely ineffective at reducing the spread of COVID-19. His study does not stop there, however.

"While much of Allen’s paper analyzes the literature to show that studies over-estimated the benefits of COVID-19 lockdowns, he also considers the cost of the lockdowns. In order to do this, he relies on the estimate from George Mason University economist Bryan Caplan regarding the quality of life lost due to lockdowns.

"Caplan frames this problem by asking, 'Suppose you could either live a year of life in the COVID era, or X months under normal conditions. What’s the value of X?' Caplan argues 10 months seems like a conservative estimate. Another way to think of this is that people would be willing to sacrifice 2 months of life to avoid a year of lockdowns. This estimate seems reasonable, due to the violence, job loss, business failure, and substance dependencies fostered by lockdowns. If a year of lockdowns means losing an equivalent of 2 months of life per person, multiplying that 2 months over the entire population of Canada (37.7 million people) gives a cost of 6.3 million years of life lost.

"If COVID-19 lockdowns made the death rate 10 percent lower, that would be equivalent to 22,333 years of life saved. Compared to the loss of 6.3 million years, this trade-off hardly seems worth it. Even if the frightening projections of the Imperial College of London had turned out to be correct — and Allen painstakingly shows they were not — the number of years saved from lockdowns would be 1,735,580, which is still significantly below the 6.3 million years of life lost.

"As more countries and states open and do not suffer the consequences lockdown proponents predicted, the empirical data will become increasingly difficult to ignore — especially as the adverse effects of lockdowns become more clear. For example, FEE’s Brad Polumbo recently reported on new CDC data that show 87,000 people died from drug overdoses from October 2019 to September 2020, a 30 percent increase from the same period the preceding year.... As more data are made available giving a complete picture of the effects of lockdowns, a long-established truth about tradeoffs observed by Nobel Prize-winning economist Ronald Coase is becoming apparent.

It would clearly be desirable if the only actions performed were those in which what was gained was worth more than what was lost,” wrote Coase. “But in choosing between social arrangements within the context of which individual decisions are made, we have to bear in mind that a change in the existing system which will lead to an improvement in some decisions may well lead to a worsening of others.

"To be sure, Allen’s research will not be the final word on lockdowns. But if his data are correct it will be difficult to disagree with his verdict on how history will judge government lockdowns. '[It] is possible that lockdowns will go down as one of the greatest peacetime policy failures in Canada’s history,' he writes."

Read more: https://fee.org/articles/economist-lockdowns-greatest-peacetime-policy-failure-in-canada-s-history/

Read study here: http://www.sfu.ca/~allen/LockdownReport.pdf

The economic ideas behind the 'Great Reset'

Terence Corcoran: The murky rise of Klaus Schwab's stakeholder 'capitalism' and the WEF's Davos corporate plan | Financial Post:

January 22, 2021 - "For several years now the World Economic Forum [WEF], host of the annual corporate celebrity bash known as the Davos Summit, has been a driving global force behind a move to overthrow market capitalism and profit-maximizing corporations and replace them with a new economic model called 'stakeholder capitalism'.... In the words of Klaus Schwab, the 82-year-old German economist who founded the WEF in 1973, the existing corporate enterprise model, the shareholder version that has dominated much of the world’s economic progress over the past century, needs to be replaced. 'We need a change of mindset, moving from short-term to long-term thinking, moving from shareholder capitalism to stakeholder responsibility. Environmental, social and good governance have to be a measured part of corporate and governmental accountability.'

"With the U.S. government now under Democratic Party control, a reformation of capitalism appears to be underway. 'It’s way past time we put an end to the era of shareholder capitalism,' said Joe Biden when he outlined his platform last July.... An army of academics, consultants, executives and politicians is already on board the stakeholder movement....

"Schwab claims to have invented the stakeholder concept as a replacement for the shareholder version of corporate purpose most often associated with Nobel economist Milton Friedman. But in fact Schwab’s stakeholderism ... has a long and messy history.... Ending shareholder capitalism by merging private enterprise with government power is not a new idea....  In the United States, the idea ... reached a peak of sorts in the 1970s when Ralph Nader ... proposed a U.S. federal charter of major U.S. corporations 'whereby a government gives the corporate entity existence and that entity, in return, agrees to serve the public interest'.... Nader’s call for a U.S. government 'federal charter' for corporations was revived in 2018 by Massachusetts Sen. Elizabeth Warren. She proposed an Accountable Capitalism Act that would force American corporations with more than $1 billion in annual revenue to obtain a federal charter.... Corporate directors would be obligated to consider the interests of all corporate stakeholders, 'including employees, customers, shareholders, and the communities in which the company operates'....

"University of Calgary economist Randall Morck, editor of A History of Corporate Governance Around the World, sets the origins of legalized stakeholderism in Germany and the passage of the National Socialist government’s Shareholder Law of 1937. The law, writes Morck, 'freed corporate managers and directors of their specific fiduciary duty to shareholders and substituted a general duty to all stakeholders.' A paper in the 1938 issue of The American Economic Review described the new German corporate model as an application of the leading ideas of the German government at the time. The objectives of the law included 'protection of the interests of the public, employee and company by granting the state broad powers of intervention.' All forms of economic activity must observe the principle of 'public welfare before individual gain.' Beyond Germany, during the early years of the 20th century, many theorists and corporate executives embraced stakeholderism....

"The current effort to 'put an end to the era of shareholder capitalism,' as Biden said, aims to undo the free-market foundations of shareholder capitalism.... 'We must move on from neoliberalism in the post-COVID era,' says Schwab. We need to abandon the 'sacred cows,' such as 'free-market fundamentalism,' ...'start to build institutional platforms for public-private co-operation.' In his new book ... Schwab lists the four key power sectors that would sit at the corporate governance table: governments, civil society, corporations, and such international organizations as the United Nations. In that model, shareholders are likely to end up standing in line behind stakeholders — and stateholders.

"Shareholders are already taking a back seat. Corporate managers today fund the arts, finance political parties, give to charities, declare their climate-change activism and set up multimillion-dollar foundations that sponsor radical environmentalism. Supporters of the stakeholder movement include major institutional investors, accounting organizations, agencies and giant consultancies seeking to cash in on the corporate need for advice.... Canada’s top government-based pension plans, from the Canada Pension Plan Investment Board to the Ontario Teachers’ Pension Plan — the country’s largest shareholders — are now backing the stakeholder movement....

"Overhanging the stakeholder juggernaut is the total absence of any method to measure the performance of stakeholder governance. Randall Morck at the University of Calgary argues that loading multiple social and political responsibilities ... on to corporate executives and boards would likely lead to gross distortions in corporate decision-making at the expense of shareholders. 'Presented with a multitude of objectives, the decision-maker ends up focusing on none. Thus, with no way to keep score, stakeholder theory leaves top corporate managers unaccountable for their actions'....

"Two Harvard law professors — Lucian Bebchuk and Roberto Tallarita — recently described what they refer to as 'The Illusory Promise of Stakeholder Governance.' Stakeholderism, they conclude, 'would insulate corporate leaders from shareholder pressures and make them less accountable.” Even more bluntly, Bebchuk and Tallarita argue that the rise in support for stakeholderism among corporate leaders and their advisors 'is motivated, at least in part, by a desire to obtain insulation from hedge fund activists and institutional investors. In other words, they seek to advance managerialism by putting it in stakeholder’s clothing.' The result would be detrimental to shareholders and the economy. It would also, they add, undermine the achievement of stakeholder objectives. 'For those interested in addressing corporate externalities and protecting corporate stakeholders, embracing stakeholderism would be counterproductive.'

"Scholarship on the purpose of corporations dates back centuries, but the current prevalence of 'stakeholder capitalism' theory in law, economics and politics is an affront to fundamental principles. How can they call it 'capitalism' when the result would be the destruction of capitalism as we know it? Call it what it is: Stateholderism. That seems to be the plan."

Read more: https://financialpost.com/opinion/terence-corcoran-the-murky-rise-of-stakeholder-capitalism

Walter E. Williams (1936-2020)

 'I Just Do My Own Thing': Walter Williams, RIP | Reason - Nick Gillespie:

December 2, 2020 - "I'm saddened to write of the death of libertarian economist Walter E. Williams. He passed away Wednesday morning at the age of 84, less than a day after teaching a class at George Mason University, where he worked for 40 years and helped transform his department into a highly respected center of free market scholars. A popular syndicated columnist whose work appeared in over a hundred newspapers on a weekly basis, he was a long-time contributor to Reason and served as an emeritus trustee of Reason Foundation....

"Born in Philadelphia in 1936, Williams grew up as a neighbor to Bill Cosby in the city's racially segregated housing projects and was drafted into the peacetime Army during the Cold War. A self-described 'crazy-ass man who insisted on talking about liberty in America' long before he was a public intellectual, the racist violence and abuse he suffered at the hands of police, military officers, and other authorities informed much of his work. In his powerful, evocative 2010 memoir, Up From the Projects, he recounts the time when, as a cab driver in the City of Brotherly Love, he was ordered out of his cab by a white officer, beaten up, and then charged with disorderly conduct."

Read more: https://reason.com/2020/12/02/i-just-do-my-own-thing-walter-williams-rip/

Walter Williams, RIP | Cato@Liberty - David Boaz:

"After early stints as a cab driver, a soldier in Korea, and a probation officer, Walter focused on education and got a Ph.D. in economics from UCLA in 1972. From 1973 to 1980 he taught at Temple University in Philadelphia before moving to George Mason University for the rest of his career.

"In 1982 he published a book of original research and provocative ideas, The State Against Blacks, which Don Boudreaux describes in today’s Wall Street Journal as 'an eloquent, data‐​rich broadside against occupational licensing, taxicab regulations, labor‐​union privileges and other fine‐​sounding government measures that inflict disproportionate harm on blacks by restricting the employment options and by driving up the costs of goods and services'. His work in these areas and his outgoing, engaging, effective style of communications brought him broader public attention. He appeared in Milton Friedman’s PBS series “Free to Choose” in 1980. He became a frequent guest host on the Rush Limbaugh Show.... 

"In 1989 the Cato Institute and Praeger published Walter’s book South Africa’s War against Capitalism. In it he showed, with detailed economic and historical analysis, that ... 'South Africa’s apartheid is not the corollary of free‐​market or capitalist forces. Apartheid is the result of anticapitalistic or socialistic efforts to subvert the operation of market (capitalistic) forces.'"

Read more: https://www.cato.org/blog/walter-williams-rip

In Memoriam: Walter E. Williams, 1936-2020 | Forbes - Art Carden: 

December 3, 2020 - "Williams’s work and commentary was informed by a deep understanding of how free people in free markets find ways to help one another. Howard Baetjer explains the 'Invisible Hand Principle' in his short book Economics and Free Markets. He quotes Williams, who said 'In a free market, you get more for yourself by serving your fellow man. You don’t have to care about him! Just serve him.'

"We get, as Adam Smith explained, what we want by helping other people get what they want. Importantly, this requires us to respect their right to say 'no.' Free markets rest on a profound respect for others’ dignity. A free market is possible and productive when we recognize that other people are not merely means to our ends, created to serve us or created to live as we want them to. If we want to secure their cooperation, we have to give them what they want rather than what we think is best for them. Few people understood this better than Walter Williams."

Read more: https://www.forbes.com/sites/artcarden/2020/12/03/in-memoriam-walter-e-williams-1936-2020/?sh=5fbe44b18fe4

Chinese gov't shuts down pro-market thinktank

China’s Crackdown on Dissent Claims Free-Market Think Tank - Bloomberg - Matthew Campbell & Peter Martin:

August 27, 2019 - "One of China’s most prominent independent think tanks will cease operations after years of attempts by government officials to silence it. The Unirule Institute of Economics, which advocated free-market economic theories and is well known in U.S. academic circles, has decided to shut down after district officials in Beijing declared that it was operating without authorization, the organization said in a statement dated Aug. 26. Although Unirule said it intends to fight the government determinations, it will nonetheless halt its activities and stop updating its website apart from notices relevant to the winding-down process.

"The end of Unirule closes down one of the last venues for open debate on economic issues in China. Founded in the early 1990s by a pair of celebrated Chinese economists, Mao Yushi and Sheng Hong, Unirule once enjoyed a broad following in business and political circles, producing widely read analyses of government policies and financial issues. But that changed dramatically under President Xi Jinping, who has implemented a broad crackdown on dissent since taking power in 2012.

"The banning decisions 'seriously violate Article 35 of the Constitution of the People’s Republic of China,' which guarantees freedom of speech, Unirule said in its statement. The measures, it said, 'infringe on the general constitutional rights of all citizens and organizations'.... China’s State Council Information Office did not immediately respond to a request for comment on Unirule’s statement.

"Unirule’s fate signals that the space for uncensored discussion in China is narrowing even further as Xi navigates a trade war with the U.S. and continuing protests in Hong Kong. While Mao and Sheng mostly confined their advocacy to economics, not politics, both have frequently criticized China’s failure to rein in state-owned companies, arguing that only a vibrant private sector can deliver prosperity....

"Jude Blanchette, Freeman Chair of China Studies at the Center for Strategic International Studies, said ... the government declaration that Unirule Institute was operating without authorization ... 'raises profound questions about the direction of China’s political development. Without independent voices offering alternative viewpoints, how can China’s leaders make effective decisions?'"

"Before this week’s decision, Unirule had endured years of official and unofficial efforts to halt or circumscribe its activities. Its website and social media channels were blocked from access within mainland China in 2017, shortly before the institute was forced to move from its longtime Beijing office. It was later evicted again, by a landlord so eager to bar access to Unirule’s premises that some of its staff found themselves briefly welded inside. Sheng, meanwhile, was barred from leaving the country in 2018 on the grounds that he was a threat to national security."

Read more: https://www.bloomberg.com/news/articles/2019-08-27/china-s-crackdown-on-dissent-claims-free-market-think-tank

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Adam Smith on tariffs and trade restrictions

from The Timeless Wisdom of Adam Smith - Foundation for Economic Education - Richard M. Ebeling:

December 17, 2016 - "Adam Smith’s central contribution to economic understanding was surely his demonstration that under an institutional arrangement of individual liberty, property rights, and voluntary exchange the self-interested conduct of market participants could be shown to be consistent with a general betterment of the human condition.

"The emergence of a social system of division of labor makes men interdependent for the necessities, amenities and luxuries of life. But in the free, competitive market order every individual can only access what others in society can supply him with by offering them something in exchange that they value more highly than what is being asked from them in trade.

"Thus ... as if by an 'invisible hand' each individual is guided to apply his knowledge, ability and talents in ways that serve the trading desires of others as the means of fulfilling his own self-interested goals and purposes. Furthermore, not only is the need for government regulation and control of economic affairs shown to be unnecessary for societal improvement, Smith went on to argue that such government intervention was detrimental.... Smith explained in The Wealth of Nations (1776):

“To give the monopoly of the home-market to the produce of domestic industry, in any particular art or manufacture, is in some measure to direct private people in what manner they ought to employ their capitals, and must, in almost all cases, be either a useless or a hurtful regulation. If the produce of domestic can be bought there as cheap as that of foreign industry, the regulation is evidently useless. If it cannot, it must generally be hurtful.

“It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy.... What is prudence in the conduct of every private family can scarce be folly in that of a great kingdom. If a foreign country can supply us with a commodity cheaper than we ourselves can make it, better to buy it of them with some part of the produce of our own industry, employed in a way in which we have some advantage..... It is certainly not employed to the greatest advantage when it is directed towards an object which it can buy cheaper than it can make it....

"Smith was scathing in his criticisms of manufacturers, merchants and agricultural special interests who wished to maintain or gain market share and greater profits from restricting the free flow of goods and services between countries through government action.... Said Smith:

Commerce, which ought naturally to be, among nations, as among individuals, a bond of union and friendship, has become the most fertile source of discord and animosity. The capricious ambition of kings and ministers has not, during the present and the preceding century, been more fatal to the repose of Europe, than the impertinent jealousy of merchants and manufacturers.

The violence and injustice of the rulers of mankind is an ancient evil, for which I am afraid, the nature of human affairs can scarce admit of remedy. But the mean rapacity, the monopolizing spirit of merchants and manufacturers, who neither are, nor ought to be, the rulers of mankind, though it cannot perhaps be corrected, may very easily be prevented from disturbing the tranquility of any body but themselves.

"Smith warned of the 'interested sophistry' of those desiring anti-competitive interventions and protections in the private sector through the political power of governments by creating false notions that trade is a zero-sum game in which if one side wins the other side must have lost, or that imports and a trade deficit are inherently harmful to the material well-being of a nation. These distortions and errors had to be refuted so it would be better understood that, 'In every country it always is and must be in the interest of the great body of the people to buy whatever they want of those who sell it cheapest.'"

Read more: https://fee.org/articles/the-timeless-wisdom-of-adam-smith/
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Evil Kochs fund free economics/ethics textbook

Koch Brothers Pushing Garbage Libertarian “Textbook” On Poor Schools - The Ring of Fire Network - Faron Cousins:

March 2, 2019 - "Ethics, economy and entrepreneurship is the name of a textbook that ... I’ve never heard of ...  which is not accredited. There’s no bibliography, there’s no footnotes, there’s no sources listed in any of it, but this is a textbook nonetheless that is being pushed on poor school districts, particularly right now in Arizona by the Koch brothers and their affiliated networks. And here’s the thing about this textbook. It is filled with lies and libertarian economic principles, which also happened to be lies by the way. Um, this book is being given out to ... school districts for high school students for free. And here’s how this little scam works....

"In several areas of Arizona, the Koch brothers starting in 2009 began lobbying to cut funding for their school districts. And the Koch brothers somehow prevailed. People hopped on board and said, hell yeah, we don’t need money for schools. So then you end up with cash strapped schools that can’t afford textbooks. So then the Koch brothers and their networks and their little members ... came forward and said, we’ve got a free textbook for you, use this and you won’t have to spend any money....

"This book ... is pure nonsense. It’s pure insanity. And it is funded by groups associated with the Koch brothers. And they laid the framework in the state of Arizona to force this textbook on to students. And this is what the Koch brothers have been trying to do all over the country, not just in high schools, but also at colleges. Koch brothers have been buying up influence at colleges, school boards all across the country to push their braindead libertarian principles. Libertarianism, much like communism doesn’t work in practice, just like trickle down economics....

"We have seen what corporations do when left to their own devices with no regulation whatsoever ... disaster for American consumers. Yet that is what the Koch brothers want every one of us to engage in. And the poorer you are, the more likely they think you are to buy into their backwards libertarian principles that everybody is just a millionaire waiting to happen. All you gotta do is start a small business. Oh, and by the way, while you’re [at it], kill the federal government too."

Read more: https://trofire.com/2019/03/02/koch-brothers-pushing-garbage-libertarian-textbook-on-poor-schools/
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Canada's cannabis regulations lead to shortages

Expect no quick end to Canada-wide cannabis shortages, producers warn | CTV News - Aly Thomson, Canadian Press:

November 14, 2018 - "The supply shortages that have plagued many provinces in the first month of legal cannabis will likely persist for years, industry insiders say.

"Provinces including British Columbia, Alberta, Manitoba, Saskatchewan, Quebec, Nova Scotia and New Brunswick have all reported varying degrees of shortages. New Brunswick was forced to temporarily close more than half its stores, while the Quebec Cannabis Corporation has reduced its store opening hours to four days a week. Labrador's only legal cannabis store said it was forced to temporarily close after being without any product for nearly two weeks.

"Khurram Malik, CEO of the Toronto-based cannabis company Biome Grow Inc., said the lack of supply is due in part to the tough regulations imposed by Health Canada on the country's 132 licensed producers, and the time required by companies to develop a quality and compliant product. He said the federal department also took too long to approve licences....

"'The rules here are so difficult to grow cannabis -- quite frankly more difficult than anywhere else in the world -- that if you're a new licence holder and you've never done this before, it's going to take you a year, year-and-a-half, or two years to get any decent, consistent quality product out the door in any predictable volumes,' said Malik, adding it's much easier and cheaper to grow in jurisdictions such as California....

"Malik said he suspects some companies did stockpile cannabis leading up to Oct. 17, but logistics such as packaging and shipping have held up distribution as producers navigate the red tape of a brand new sector....

"Health Canada said it has taken steps to improve the licensing and capacity of producers.... The department declined a request for an interview. But a statement from spokeswoman Tammy Jarbeau acknowledged that product shortages would likely continue 'in the months ahead'....

"Brenda and Trevor Tobin, the mother-and-son owners of Labrador City's High North, said ... [t]he shop sold all of its cannabis in the first three hours on legalization day, and in the weeks following, products dried up for almost two weeks.... Brenda Tobin said ... that has prompted some of her customers to buy cannabis illegally."

"'A lot of them have said, "Well I guess it's back to the black market",' said Tobin. 'We hate to hear that, but I'm assuming if they want their product, they're going to get it one way or the other.'"

Read more: https://www.ctvnews.ca/canada/expect-no-quick-end-to-canada-wide-cannabis-shortages-producers-warn-1.4177015
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Does economics explain high CEO salaries? Yes

Are CEOs Paid Too Much? - Foundation for Economic Education - Robert P. Murphy:

October 1, 2006 - "So what if CEOs earn more money than most other workers? In a free market (and below we deal with the complication that in today’s world there is no truly free market), the price of labor corresponds to its marginal product. That is, competition ensures that workers are paid according to how much additional revenue they bring in to their employer. The fact that some types of labor command thousands of times more market value is no more surprising or outrageous than the fact that some goods in the marketplace (such as a house) have a price hundreds of thousands of times higher than the prices of other goods (such as a pack of gum).

"But what of ... corporate leaders actually failing their way to riches?... When a company brings in a new executive ... to turn the company around ... it is entirely possible that the plan will fail — and the executive knows this as well as anyone else.... [T]he assembly-line worker doesn’t want his contract contingent on the overall profitability of the company; he wants to be paid — and to get his pension and other benefits should he retire or quit — whether or not the company’s stock does well. If it’s acceptable for the assembly-line workers, why not for the CEO too?

"Yet ... CEOs and other executives do get paid according to how well the company does. In addition to a base salary, these executives are often paid in stock options [i.e.] the right to purchase shares of stock at a specific price, called the strike price.... [I]f the actual market price of the stock [falls] lower than the strike price, the option is worthless ... options are valuable [only] in proportion to the difference between the strike and actual prices.

"We must accept that in the modern economy, with billions of potential consumers worldwide, certain individuals have extraordinary earning power on the open market.... These people aren’t qualified for just CEO spots, and they’re well aware of the social stigma against big business. If the compensation packages are as high as they are, it’s because that’s what firms need to offer to attract and retain these highly skilled individuals....

"If ... management collectively frittered away $10 million per year in unjustifiable expenses, the total shares of the corporation would be valued around $200 million less than they otherwise would be, assuming an efficient stock market and an interest rate of 5 percent.... Such a corporation would then be a prime target for the much reviled corporate raider. The raider would institute a 'hostile takeover,' in which he bought up a controlling share in the corporation (by offering far more than the current price per share to the stockholders) and then used his power to fire or straighten out the inefficient managers. After cleaning house the corporation’s dividends and/or stock price would rise accordingly, netting the raider a profit.

"Unfortunately ... the above relies on the assumption of a free market in corporate takeovers, and that is decidedly lacking. In the present legal and cultural environment, so-called corporate raiders are even more despised than golden-parachuting CEOs. Regulations severely restrict so-called hostile takeovers, and hence hamper the ability of shareholders to restrain their managers....

"The market’s other checks on inefficient management are stifled as well. After all, ... there was always a sure-fire way to keep corporate officers in line: any firm that wasted too much money on fancy offices and executive perks would be vulnerable to its competitors.... But as with hostile takeovers, so too with new entrants to industry: Government regulation muffles this threat and thus allows entrenched businesses a margin of profligacy that they otherwise would not enjoy.

"Many people (especially young students) new to the ideas of laissez faire believe that big business opposes government meddling, but this is naïve and contradicted by the history of actual legislation. Ironically, the profitability of big business can actually be enhanced when the government regulates an industry, because the big firms can more easily handle the fixed costs of filling out paperwork ... and so on.... In this environment, would-be competitors face additional hurdles if they want to challenge the large incumbents, and thus the latter may indeed get away with lavish expenditures that would be short-lived in a truly free market."

Read more: https://fee.org/articles/are-ceos-paid-too-much/
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See also: Does economics explain high CEO salaries? No

Does economics explain high CEO salaries? No

Corporate “Compensation” | Liberty Unbound - Wayland Hunter:

September 10, 2018 - "On September 9, CBS announced that its CEO, Les Moonves was out the door. The cause was a second round of accusations of sexual misdeeds.... But what struck me about the CBS report on his ouster was this:

A financial exit package for Moonves will be withheld pending the results of an ongoing investigation into the allegations against him. Moonves was eligible for as much as $180 million if fired without cause, according to an employment contract he signed in May 2017. Recent reports indicated a potential payout in the range of $100 million.

"One hundred million dollars? One hundred eighty million dollars? This is something that libertarian theory should go to work on. How can a corporation possibly assume that anyone this side of Thomas Alva Edison is worth that amount of money? And remember, in this case the skill that is being rewarded in this egregious manner is simply that of throwing darts at demographics and guessing which TV shows will turn out to be popular. How many other people could do that just as well? To put it in another way: could you get somebody just as good with an exit package of $99 million? How about $99 thousand?

"In every walk of elite life we see this ridiculous inflation of compensation. Even colleges and universities imagine that they can’t get anybody good if they don’t pay at least a million a year, and maybe ten million. And look at the outcome. In every walk of elite life we see seamless mediocrity, or worse

"My own suspicion is that there’s a cartelization at work. These people stick together, raising their salaries by insisting that they won’t get paid less than the last one that got hired someplace. But that’s not enough to explain it. The corporate hiring committees — and the boards of directors, and the big investors — need to say what the hell is going on. Is this class solidarity gone wild? The class being the 'made men' of the corporate world, whose pride demands that every goon in the mob gets as much grease as he possibly can....

"Please don’t tell me that in a capitalist system, people are paid according to their financial value to the enterprise that employs them. Do you think that with anyone but Les Moonves at the helm, CBS would be $180 million poorer? And wait — that’s the amount of money he was going to get if ... they wanted to get rid of him. It wasn’t his ordinary compensation. I don’t know what that is. The article I cited says $70 million a year as 'take home,' but what about the income that dropped into his portfolio?

"No. Explanations that are economic in the narrow sense won’t work. There’s something more going on, something that can only be explained by a libertarian sociology — or maybe a libertarian pathology."

Read more: http://www.libertyunbound.com/node/1891'
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See also: Does economics explain high CEO Salaries? Yes

The book Justin Amash wants Trump to read

On Twitter, Justin Amash offered Trump a free book. Here’s what the president would learn if he read it - Erin Dunne, Beltway Confidential, Washington Examiner:

August 29, 2018 - "On Tuesday, Trump tweeted, 'I smile at Senators and others talking about how good free trade is for the U.S. What they don’t say is that we lose Jobs and over 800 Billion Dollars a year on really dumb Trade Deals… and the same countries Tariff us to death. These lawmakers are just fine with this!'

"In response, Rep. Justin Amash, R-Mich., offered Trump a free copy of an economics book. That book, Economics in One Lesson, by Henry Hazlitt, is ... not very long but chock-full of excellent advice explained simply. I agree with Amash; the president, if he ever took a break from Twitter, would do well to read it.

"The one lesson the book’s title touts is deceptively simple: 'The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all other groups'.... Actions have consequences both in the short and long-term and for groups beyond those directly implicated....

"Even if Trump didn’t get beyond that first introduction, that simple lesson might give him pause before engaging in all out-trade wars with just about every country he can think of. But should the president be inclined to read more than two sentences, he might do well to open to the chapter on tariffs, given his apparently fondness for them.

"That chapter outlines, first in the words of Adam Smith, the inherent benefit of free trade. Quoting Smith, Hazlitt explains, 'In every country it always is and must be the interest of the great body of the people to buy whatever they want of those who sell it cheapest.' Free international trade makes the production, trade and distribution of those goods possible to the benefit of all.

"But tariffs cut into all of that benefit by making goods more expensive. Sure, a tariff might protect a specific industry and specific jobs, but it does not help the economy overall. Because consumers have to pay more for one product, they necessarily have to spend less elsewhere. As explained in that chapter, 'In order that one industry might grow or come into existence, a hundred other industries would have to shrink. In order that 50,000 persons might be employed in [one] industry, 50,000 fewer people would be employed elsewhere.'

"In short, Trump is wrong; the U.S. is not losing jobs or money by engaging in free trade. On the contrary, free trade is making all products cheaper, creating new opportunities and boosting overall efficiency. Tariffs only restructure the economy and reduce real wages and wealth, because they cause efficiency and production to decline as materials and products become more expensive. In the end, that will hurt everyone, even the industries that the tariffs propose to protect....

"Trump would do well to take a walk over to Amash’s office and take him up on the offer of a free book [or] if Trump is too busy to walk over, there is also a free PDF copy of this very book available online from the Foundation for Economic Education. Happy reading!"

Read more: https://www.washingtonexaminer.com/opinion/on-twitter-justin-amash-offered-trump-a-free-book-heres-what-the-president-would-learn-if-he-read-it#!
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The Scotsman who discovered spontaneous order

Adam Ferguson and the Spontaneous Order of Society - Foundation for Economic Education - Richard M. Ebeling:

November 26, 2016 - "One of the most cherished misunderstandings, if not delusions, of the social engineer – the individual who would presume to attempt to remake society through conscious and planned design – is the confident belief that he (and those like him) can ever know enough to successfully remold mankind and human institutions. An appreciation of how limited is our individual knowledge and abilities to ... make a 'better world' through government regulation, control and central planning has been slow in fully developing ... [but] was a central hallmark of several of the members of the Scottish Enlightenment.

"A leading figure in this Scottish movement was Adam Ferguson (1723-1816), who for several years held a chair in Moral Philosophy at the University of Edinburgh.... Ferguson is best known for his 1767 work, An Essay on the History of Civil Society ... [which] contains some of the clearest analyses of social institutions and their emergence and evolution as the spontaneous development of the interactions of multitudes of people over many generations, the results of which are unpredictable, yet often superior to any attempt to actually guide or direct social processes through time.

"Ferguson believed that the origin and nature of man in society had to be derived from historical investigation.... [M]an may be a willing, volitional and acting individual, but he is born into society in the form of families and clans, which then took on more complex and extended forms of human relationship and association over extended time. The formal institutions of society concerning rights and law emerged out of this more primitive human order precisely to delineate private property ownership and impose restraints on abusive political authority.

"Thus, Ferguson argued, society was not created by design to provide safety and security, but, instead, freedom and rights emerged and evolved out of more primitive forms of tribal and collective association as responses to considered injustices and abusive power....

“Like the winds, that come we know not whence, and blow whithersoever they list, the forms of society are derived from an obscure and distant origin; they arise long before the date of philosophy, from the instincts, not from the speculations of man.... Every step and every movement of the multitude, even in what is termed enlightened ages, are made with equal blindness to the future; and nations stumble upon establishments [institutions], which are indeed the result of human action, but not the execution of any human design....

"Ferguson was insistent that however much we may now see and appreciate the logic and the benefits that have arisen through the evolution of society’s institutions to protect rights, secure property, enforce justice, and maintain the peace that fosters the environment that makes liberty and prosperity possible, the multitudes of human actions and interactions that brought this about were done by individuals giving no thought to how their specific goal-oriented activities would generate the complex order of modern society....

"Ronald Hamowy, an expert on Adam Ferguson who wrote his dissertation on Ferguson and his conception of spontaneous order under the supervision of F.A. Hayek  ... emphasized that Ferguson’s greatest concerns with commercial society came not from the development of the market order, itself, but from the intruding and intervening hand of government into the competitive system....

'In matters of particular profession, industry, and trade,’ wrote Ferguson, ‘the experienced practitioner is the master . . . When the refined politician would lend an active hand, he only multiples interruptions and grounds of complaint’....

"[T]o try to impose ... centrally engineered designs on society limits its potentials and possibilities to what a handful of finite and limited human minds can anticipate and imagine. Far better for all to have the individual liberty, and to respect the freedom of others, to use their knowledge as they see fit in the pursuit of their own personal happiness, so all may reap the benefits that come from the interactions of multitudes of minds the full outcomes of which that no one can successfully comprehend."

Read more: https://fee.org/articles/adam-ferguson-and-the-spontaneous-order-of-society/

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US opioid deaths rise as gov'ts cut prescriptions

The Lethal Success of Pain Pill Restrictions - Jacob Sullum, Reason Hit and Run:

May 9, 2016 - "In a speech on Monday, Attorney General Jeff Sessions said the Justice Department is striving to 'bring down' both 'opioid prescriptions' and 'overdose deaths.' A study published the following day suggests those two goals may be at odds with each other, highlighting the potentially perverse consequences of trying to stop people from getting the drugs they want.

"Columbia University epidemiologist David Fink and his colleagues systematically reviewed research on the impact of prescription drug monitoring programs (PDMPs), which all 50 states have established.... Fink et al. say the evidence that PDMPs reduce deaths involving prescription opioids is 'largely insufficient,' adding that 'implementation of PDMPs may have unintended negative outcomes — namely, increased rates of heroin-related overdose'....

"The picture looks worse when you take into account deaths involving illegally produced drugs, which now account for a large majority of opioid-related fatalities.... To the extent that PDMPs succeed in making pain pills harder to obtain, they encourage nonmedical users to seek black-market substitutes. 'Changes to either the supply or cost of prescription opioids after a PDMP is instituted,' Fink et al. observe, 'might reasonably drive opioid-dependent persons to substitute their preferred prescription opioid with heroin or nonpharmaceutical fentanyl'....

"If the aim is preventing drug-related deaths, this shift is counterproductive, to say the least. Because their purity and potency are inconsistent and unpredictable, illegally produced opioids are much more dangerous than pain pills.

"A report published last month by the health care consulting firm IQVIA shows that the total volume of opioids prescribed in the United States fell by 29 percent between 2011 and 2017, from 240 billion to 171 billion morphine milligram equivalents. According to data from the U.S. Centers for Disease Control and Prevention (CDC), deaths involving pain pills nevertheless rose by 24 percent from 2011 to 2016, while total deaths involving opioids rose by 85 percent.

"That trend includes a 252 percent increase in heroin-related deaths and an astonishing 628 percent increase in deaths involving the opioid category that consists mainly of fentanyl and its analogues. Final CDC figures for 2017 are not available yet, but the provisional numbers indicate there will be more increases....

"Since the current strategy is manifestly not working, drug warriors are, as usual, redoubling their efforts. The Drug Enforcement Administration, which sets annual quotas for opioid production, reduced the limit by 25 percent in 2017 and 20 percent this year."

Read more: http://reason.com/archives/2018/05/09/the-lethal-success-of-pain-pill-restrict