The 'Crowding Out' of Personal Responsibility

It's early Monday morning: you wake up to the government approved messages coming out of your clock radio as you pour milk from your government approved dairy farm and their government-approved cows into your government approved cereal made with subsidized grains that the government insists is good for you. When you leave the house to get in your government-approved vehicle and after buckling your compulsory seat belt you're no more than a quarter mile away from home before you see the literal signs of government interference in your life. Posters with instructions dictating what you can do and even where you can go. You pass a crosswalk by a tax-funded compulsory education facility where there is a government employee shouting commands about when to proceed.

Before you can even get to work in the morning the government has interfered with every single decision you have made. So what, then, is left to be decided by yourself? virtually nothing. The silver lining, however, is since you do not make these decisions how can you possibly be responsible for their outcomes? It's not your fault that you're not as successful as you wanted to be; not your fault that you're not as good of a parent or a son as perhaps you should be.

The all-encompassing influence of government regulations has eroded personal responsibility and with it, accountability. How can you be accountable for your own actions if you're not responsible for your own decisions. This way of thinking not only leads to apathy and dissociation but also breeds resentment: it stands to reason that the natural extension of you not being responsible for your failures is that others must not be responsible for their successes. It should be no surprise that we see flip flops and sweatpants donned by those who shuffle their way to coach while sticking their nose up at those in first class seats. So too it should be no surprise that when there is a tragedy those who are affected do not attempt to rise up and overcome it but instead hang their heads as victims and hold out open palms waiting for handouts from that which controls their lives: the government. 

 

has-the-time-come for a quantum revolution in economics? no.

David Orrell's suggestion that the laws of economics somehow no longer apply in the modern world is based on some very pie-in-the-sky type thinking. The Pakistani mathematician Asghar Qadir had similar thoughts before him. In his 1978 paper Quantum Economics, Asghar proposes that classic economic theory is essentially too simple to properly represent the modern economy. According to classic economic models, we can predict that a rise in cost will lead to a reduction in demand, and therefore sales. But, says Asghar, "consumer behavior depends on infinitely many factors and that the consumer is not aware of any preference until the matter is brought up." While this would certainly make for a great philosophical conversation, it is not really helpful in making predictions. It is true that certain individuals may not behave in ways that economists would consider 'rational', however these are the exception and should not define the rule.

Orrell correctly points to examples of the failures of mainstream economics: "while reported happiness levels seem to have peaked some time back in the 1960s. The financial crisis didn’t make many people happy, except some bankers." But fails to identify the root of the problem. Economics is not, as he suggests, due for an update. Instead, economists and, more importantly, policy-makers worldwide need a refresher in classic economic theory. Perhaps they should each be given copies of work's by greats such as Ludwig von Mises, Friedrich Hayek, Murray N Rothbard, maybe even some Milton Friedman.

The mainstream largely supports a more modern view of economics that largely draws on Keynesian principals. However, time and time again we see evidence of flaws in the Keynesian model - flaws that do not exist in Austrian economics. The greatest of these flaws is the necessity of central banks and their manipulation of, effectively, the value of our currency. Keynesians believe that expansionary monetary policy will lead to an increase in GDP via an increase in loan-able funds. Yet there are piles of evidence suggesting that this manipulation by the Federal Reserve and other government entities has been the cause of nearly every recession in recent history. This increase in lending creates an unsustainable bubble of growth, that eventually leads to supply outweighing demand. However, the economy is like a living thing - it tries to return to a state of homeostasis and in doing so causes the market corrections which collapse the bubble, and lead to a recession.


Orell, David (2018). "Economics is Quantum". Aeon.co.
Qadir, Asghar (1978). "Quantum Economics". Pakistan Economic and Social Review.
 

Privatize Border Patrol

 Every year the federal government spends millions of dollars to enforce America’s national borders. Yet despite this, illegal immigration and border violence is nearly as big of a problem as it ever has been. In an effort to suppress these border issues, politicians often choose to simply throw more money at the problem rather than investigating why the current policies and funds are not enough. A possible solution to the lack of accountability is to allow private corporations to compete for the job of border security.
 We rely on competition to ensure the best products and services are available in our daily lives and the same concept could easily apply to border security. The nation’s current border patrol already relies on private corporations for the equipment they use in the field, so it would only be a small step to having the private corporations control the entire infrastructure.  The benefits of this would be enormous. Offering a contract to protect our nation’s border for some given time period to the lowest bidder would ultimately mean lower costs for better service. The city of Oro Valley, Arizona proved this in 1975.  Oro Valley paid a private company 35,000 dollars a year in exchange for services normally thought to be the responsibility of the state including fire-fighting and policing. The arrangement was an enormous success, burglary rates dropped from 14 a month to under 1 a month and city officials retained policy control. However, in 1977 the state of Arizona began to question the legality of this arrangement and the company eventually backed out. This put the burden back on the city and their costs skyrocketed. “By 1982 the police budget in Oro Valley was $241,000 when [the private company] had done the job for $35,000” (Elliott)
 Those who argue against privatizing border security might suggest that entrusting our nation’s borders to private companies might open the borders to corruption or that there might be a conflict of interest for a company which does business on both sides of the border. However, these issues would actually be more likely in the current border patrol than if a private company was competing for the job. With the current infrastructure, the border patrol is a monopoly which means even if they aren’t doing as well of a job as they could be they are still guaranteed the job. If border security was privatized the security force has to do their job well or else they risk losing the security contract as well as harming their reputation.
 Reputation is a stronger market force than most realize. A company entrusted with securing a nation’s borders is likely to also be involved in other markets which may not even necessarily be related to defense. If this company was to, for example, betray the nation it was supposed to secure, it would ruin that company’s reputation leading to a massive loss of business on anything associated with that company forever.
 Privatizing the border patrol would be beneficial for the whole economy. The main affect will be eliminating some of government’s wasteful spending which ultimately means more money in tax payer’s pockets. The less money the government steals from citizens, the more money said citizens will have to spend on goods and services that are consistent with their needs and preferences. This means that not only would privatization create border patrol jobs but it would create jobs in other markets simultaneously.
 Privatized police forces are already in use, even in the United States. Many of our nation’s shopping centers, neighborhoods, sporting events, and concerts, among many other things, are kept safe by a private security force at a much lower cost than if police were to do the job. It would not be farfetched to say that the same concepts would apply to privatizing border security.

References: Elliott, Nicholas. “The Growth of Privatized Policing” the Freeman, volume 41, issue 2 (February 1991).  http://www.thefreemanonline.org/columns/the-growth-of-privatized-policing/#

The recent news of a "global bacon shortage" has stirred some pork lovers into a bit of a panic. As CBS news reports,

"Britain's National Pig Association, "the voice of the British pig industry," warned recently that a global shortage of bacon and pork "is now unavoidable" because of shrinking herds. The trade group reported Thursday that annual pig production for Europe's main pig producers fell across the board between 2011 and 2012, a trend that "is being mirrored around the world." The group tied the decline to increased feed costs, an effect of poor harvests for corn and soybeans."

This is simple economics. If the price of an input (feed) of a good is rising, it should be expected that production of that good will decrease and the price of that good will increase. This may lead to a temporary shortage, but that's not reason to panic as the market always has a way of correcting itself: As the price of feed rises, the amount of feed purchased by pig farmers will decrease which means the amount of pigs they will be able to produce will decrease. this will create a temporary shortage as demand of pork outweighs production. over time the market will correct for this by raising the price of pork which will increase pig farmers profits making them more willing and able to buy more feed so they can produce more pork until an equilibrium price is reached where amount of pork pig farmers are willing/able to produce and sell at price X = amount of pork consumers are willing/able to consume at price X.

Trade Pt. I

I would like to begin this blog with a simple discussion about the benefits of trade:

In a closed economy, where there is no trade, a market reaches an equilibrium when a market price is established through domestic competition such that the amount of goods or services demanded by consumers is equal to the amount of goods or services produced. When countries act only to their abilities, focusing production on that which they are best at producing, and engage in free trade, consumers world wide benefit. When trade occurs, a country's economy will see an increase in supply which would be impossible without trade. This increase in supply pushes the market towards a new equilibrium at a lower price.
The benefits of free trade can be easily seen through a simple example:
Consider the production schedules of two theoretical countries producing guns and butter.
Before trade, each country would produce C quantity of guns and butter resulting in a world total of 35 guns and 26 units of butter. When the countries specialize and engage in trade they produce quantity E of guns and butter resulting in a world total of 40 guns and 36 butter!
In country X the opportunity cost of 1 gun is 1/2 butter. In country Y the opportunity cost of 1 gun is 1.44 butter. This means that country X is willing and able to trade 1 gun for at least 1/2 butter and country Y is willing and able to trade at most 1.44 butter for 1 gun. This means that country X will trade 1 gun to country Y in exchange for an amount of butter between .5 and 1.44; more butter than country X would be able to produce with the resources used to create 1 gun.
So as you can see, free trade = more of a good available at a lower price.


Unfortunately there are few real life examples of truly free trade. While an economy as a whole benefits from free trade, individual firms sometimes do not. Economists look at this as a good thing; as a market functioning properly by weeding out inefficient producers. However, politicians too often look to protect domestic producers via tariffs and quotas.
I will discuss more about tariffs and quotas in a future posting...