Professor Mark J. Perry's Blog for Economics and Finance
1. The problem of social organization is how to set up an arrangement under which greed will do the least harm; capitalism is that kind of a system. 2. With some notable exceptions, businessmen favor free enterprise in general but are opposed to it when it comes to themselves. 3. The free man will ask neither what his country can do for him nor what he can do for his country. 4. The case for prohibiting drugs is exactly as strong and as weak as the case for prohibiting people from overeating. 5. If you put the federal government in charge of the Sahara Desert (MP: Or domestic energy resources), in five years there'd be a shortage of sand (MP: Oil, and high oil prices). 6. Only a crisis "” actual or perceived "” produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. ~From "Remembering Milton" by Allen R. Sanderson, who reflects on the contributions of Milton Friedman on the 100th anniversary of his birth in 1912 and the 50th anniversary of the publication of Friedman's classic "Capitalism and Freedom."
"The case for prohibiting drugs is exactly as strong and as weak as the case for prohibiting people from overeating."Are the social costs of drugs equal to the social costs of overeating?And what about the social benefits, including a free high from marijuana second hand smoke?
Also, how many people OD from overeating or kill other people because they're too fat?
The U.S. has an obesity problem. So, there should be a drug problem too?
Benji:a) Japan was going thru a deflationary phase. Inflation was needed, and inflation is a monetary phenomenon.b) Gold standard is for idiots. There is not enough gold in the world to support the World GDP. And enforcing the gold standard would interlink all economies of the world. Not a good thing, as the EU failed experiment shows.c) So? The best tax is a low flat tax with no deductions. The govt should not encourage any sector of the economy but should let the free market decide.d) Yes. And in a free market, no one would actually discriminate. Since profit is the only motive and if they discriminate against black people that have skills, they are giving an advantage to their competitors who can pick up the skilled minority at a cheaper price.e) I don't see why this is any worse than the present progressive income tax.f) It has. Subsidizing anything shields that sector for deadwood removing competition.
Peak: Also, how many people OD from overeating or kill other people because they're too fat?I agree with the second part of your question, but not the first. Let them kill themselves. It is not the govt's job to save people from their own behaviors.
Abir, so, it's OK when people OD from drugs, as long as they don't harm other people, right?
Peak: I don't think it's OK for people to jump off a bridge and die. But when you jump of a bridge, you do so fully knowing the risks. It is not the government's job to prevent you from indulging in risky behaviour.
Abir, that sounds like a contradiction. It's not OK, but it is, as long as the government isn't involved.What about those annoying speed limits imposed by government? Can you say the same thing: "I don't think it's OK for people to drive 100 MPH and die. But when you drive 100 MPH, you do so fully knowing the risks. It is not the government's job to prevent you from indulging in risky behaviour."
the speed limit is ostensibly applied so you cannot harm other people. I never said it was OK for people to die of OD, but it is not the govt's place to stop someone from harming themselves.
No Peak. I am not OK with people indulging in risky behavior that can cause death. However, it is not the government's job to prevent such actions. Speed limits are because if you have an accident, you are putting the lives of others at risk too.
I am also not OK with people indulging in unprotected sex, which is risky in these times of AIDS, but... you get the drift.
Abir says "I am not OK with people indulging in risky behavior that can cause death. However, it is not the government's job to prevent such actions."Whose job is it? The person "indulging in risky behavior that can cause death?"Also, government has to scrape you off the pavement when you kill yourself.
Peak: "Whose job is it? The person "indulging in risky behavior that can cause death?""Yes. And society already pays trash removal fees to local govts.
Whose job is it? The person "indulging in risky behavior that can cause death?"Yes.
Friedman: "businessmen favor free enterprise in general but are opposed to it when it comes to themselves."Definitely true in my industry. As an example, the airline industry funded lobby group Airlines for America is calling for strict limits on energy futures speculation Airline CEO's who have spoken out against speculators include Southwest's Gary Kelly. Southwest has greatly benefitted, of course, from the liquidity which energy speculators provided for the airline's fuel hedgin program.
Friedman: "businessmen favor free enterprise in general but are opposed to it when it comes to themselves."Following deregulation, American Airlines' Bob Crandall exploited the opportunities presented to him. He introduced revenue management, hub-and-spoke route structures, and other tactics not possible during the regulated period. Crandall led American Airlines to the top of the industry. Incredibly, Crandall, still a spokesman for the industry, has in recent years advocated re-regulation of the U.S. airline industry
One of Milton Friedman's main themes that he preached for decades was that macroeconomic fluctuations would be smoothed out and GDP utopia achieved by a rigid and predetermined growth rate in the 'money supply'. A constant 4% annual increase was his magic number. The Fed would be put on cruise control and locked in the back room.He did not (- - - even refused to) recognize that financial markets left to themselves are unstable, and he could not define 'money supply' any better than anyone else. Even Nixon recognized Friedman's limitations and would not put him on the Federal Reserve.His book 'A Monetary History of the USA' is a good history, but very limited as a macroeconomic policy guide. He barely mentions the stimulative effects of going off the gold standard in 1931 (GB) and 1933 (USA). Keynes is infinitely better on all aspects of the causes of and remedies for economic depressions. Let the arrows fly.Friedman's book (and the TV series) "Free to Choose" got (and still gets) hosannas from libertarians; but it is merely a simplistic restatement of the workings of competitive markets and (what he saw as) the evils of government.His students and the right wing may love him but Milton Friedman does not belong on any list of the great economists of any era.
Oh, I'll say it, Peak!Yes, it's fine if people kill themselves by jumping off bridges, in front of trains or Overdosing on heroin. It's all very sad, but "we" have not been able to stop people hurting themselves ever in human history. It's as impossible as making time stand still and it's time do-gooders learn to live with that reality.And, hey, why no love for the alcoholics who drink themselves to death?I don't know if you've noticed, but we already have a drug "problem" and drugs are illegal. Yet, in my tony high school, I knew no fewer than three drug dealers. Now, because of the ridiculous drug war, we also have a violence problem. And the cops are using the drug war as a pretext for seizing assets under civil asset forfeiture.Your drug war is a bigger menace to society than any strung out druggie.
Jet Beagle,I knew that historically producers and companies for whom the commodity was an input railed against the speculators and sometimes, as in the case of onions, managed to get government to ban futures markets. Most of my experience outside of the oil producers has been with the actual traders who execute the hedges for them, so I had no idea that this ignorant thinking persists until you told me a few threads ago. Of course the established players want regulation. There is no better way to reduce competition. You must be thoroughly frustrated, my friend. Like you, I'm always fighting an uphill battle in my industry. When we presented to our regulator an argument for why some of the regulation will severely damage the market, the regulator agreed and said (and I quote) "we don't care".
One of Milton Friedman's main themes that he preached for decades was that macroeconomic fluctuations would be smoothed out and GDP utopia achieved by a rigid and predetermined growth rate in the 'money supply'. A constant 4% annual increase was his magic number. The Fed would be put on cruise control and locked in the back room.Fridman's problem was that he was a moral relativist. He believed in utility as being the sole justification for various policies proposed and implemented by governments. As such he became an enabler of statists who saw nothing wrong with government taking away individual liberty. The sad part was that he was very good on a number of issues but his worst area of competence was monetary policy, which is where the received the most accolades. That said, his superficial treatment of many issues in his series is excellent and I have my kids watch various of the programs that he put together. As long as they are taught of Milton's shortcomings as an economist the program is highly recommended.
Following deregulation, American Airlines' Bob Crandall exploited the opportunities presented to him. He introduced revenue management, hub-and-spoke route structures, and other tactics not possible during the regulated period. Crandall led American Airlines to the top of the industry.But in the end AA still wound up in bankruptcy because it could not deal with competition effectively.
The important thing to remember vis-a-vis any type of prohibition is that regulation cannot eliminate peoples' desires for certain products/services.Prostitution is illegal - people still want and pay for sexual services.Drugs are illegal - people still get high.When booze was illegal - people still drank liquor. Government can't eliminate demands - it can only drive them underground and compound the harm. It's ostrich-like to think otherwise.
"Also, how many people OD from overeating or kill other people because they're too fat?"...How many is to many PT?Police: Obese relative may have crushed boyLA JOYA, Texas (AP) -- A 2-year-old boy who died with a fractured skull might have been accidentally crushed by a morbidly obese relative, authorities say.Investigators believe that the woman fell on the child, who was pronounced dead Tuesday, said Bobby Contreras, Hidalgo County justice of the peace.
"Also, government has to scrape you off the pavement when you kill yourself."...Why should the government have to PT?Litter?Public health nuisance?Passers by with weak stomachs?Unsightly mess?I'm playing devil's advocate here PT and like you I don't think allowing reefer to have free reign is all that good of an idea...Where does it stop?Why not meth, heroin, or LSD?Maybe the use of these drugs in private spaces 'might' have some reasonable arugments supporting it but I've yet to see any for having any drugs in the public spaces...Still if the majority of the citizens want to allow it (via a public referendum), should we continue to fight against it?
"Now, because of the ridiculous drug war, we also have a violence problem." -- MethinksThe origins of federal drug laws were a response to disastrous drug and violence epidemics when virtually every family had access to opiate- and cocaine-based remedies around the end of the 19th century. Drugs were available without penalty. Addiction was rampant, with an estimated 250,000 opiate addicts in the U.S. population of 76 million. -- WSJ"The philosophic argument is that, in a free society, adults should be permitted to do whatever they please, always provided that they are prepared to take the consequences of their own choices and that they cause no direct harm to others. The locus classicus for this point of view is John Stuart Mill's famous essay On Liberty: "The only purpose for which power can be rightfully exercised over any member of the community, against his will, is to prevent harm to others," Mill wrote. "His own good, either physical or moral, is not a sufficient warrant." This radical individualism allows society no part whatever in shaping, determining, or enforcing a moral code: in short, we have nothing in common but our contractual agreement not to interfere with one another as we go about seeking our private pleasures ... Mill came to see the limitations of his own principle as a guide for policy and to deny that all pleasures were of equal significance for human existence. It was better, he said, to be Socrates discontented than a fool satisfied." "The idea that freedom is merely the ability to act upon one's whims is surely very thin and hardly begins to capture the complexities of human existence; a man whose appetite is his law strikes us not as liberated but enslaved. And when such a narrowly conceived freedom is made the touchstone of public policy, a dissolution of society is bound to follow. No culture that makes publicly sanctioned self-indulgence its highest good can long survive: a radical egotism is bound to ensue, in which any limitations upon personal behavior are experienced as infringements of basic rights. Distinctions between the important and the trivial, between the freedom to criticize received ideas and the freedom to take LSD, are precisely the standards that keep societies from barbarism." -- City Journal
"He did not (- - - even refused to) recognize that financial markets left to themselves are unstable ..." -- Ed R.As opposed to the stability imposed as a result of the near countless pages of regulation written over the last five plus decades? Financial markets allocate capital, the freer they are the more efficiently they perform that task. "Stability" is not the goal.
Juandos, yes, fat people are potentially dangerous to some, and yes, government doesn't necessarily have to clean up "road kill."The war on drugs, like the war on tobacco, may have prevented millions of drug addicts.And what about MADD (Mothers Against Drunk Driving):"The death rate from alcohol-related traffic accidents has declined since the 1980s. According to statistics from the National Highway Traffic Safety Administration, alcohol related deaths per year have declined from 26,173 in 1982 to 16,885 in 2005."
Peak,There is zero evidence that addicts were prevented. If they were prevented, at what price?How many tens of thousands of people die every year in your drug war? And, unlike your "fewer addicts" claim, this is an observable fact.How many innocent people's assets were seized by a corrupt government in your drug war?I don't understand what lame argument you're trying to make with MADD. Nobody who is for decriminalizing drugs is against laws criminalizing operating heavy machinery while under the influence. So, if MADD is so successful, wonderful. Let them take on driving while drugged (like that doesn't happen now). It'd be a hell of a lot cheaper.
the standards that keep societies from barbarismNothing barbaric about a gang of cops breaking down somebody's door and starting a gunfight with the occupants, is there?
Well said methinks. Plus, MADD is also a citizens' program. Feel free to prevent drug abuse in your neighborhood and to create a nationwide program. It is, however, stupid to waste jail space and tax dollars on an Occutard smoking pot in his parents' basement.
Ed: Stability is not a promise made by free markets. In fact, I argue, socialism is extremely stable.
Abir, if people like you didn't promote drugs, resources wouldn't be wasted to contain them:DEA History Book, 1970 - 1975 "Prior to the 1960s, Americans did not see drug use as acceptable behavior, nor did they believe that drug use was an inevitable fact of life. Indeed, tolerance of drug use resulted in terrible increases in crime between the 1960s and the early 1990s, and the landscape of America has been altered forever. By the early 1970s, drug use had not yet reached its all-time peak, but the problem was sufficiently serious to warrant a serious response. Consequently, the Drug Enforcement Administration (DEA) was created in 1973 to deal with America's growing drug problem."
Peak: STFU. I do not promote drugs and have never done them in my life. I hate potheads and the hippie culture that condones drug use. However, I do not want my taxpayer money wasted to prevent people from doing what they want to their bodies. The DEA, like most branches of the government, are a bunch of thugs looking to line their own pockets, no matter what movies like Bad Boys may have told you.
Abir, it's naive, and dishonest based on your value judgement, to believe there's no difference between 10 million or 100 million "potheads."
An economy can have a quick and massive creative-destruction process in a mild recession (see early 2000s).Maintaining sustainable growth is optimal growth, because economic boom-bust cycles use resources inefficiently, both in the boom and bust phases.Monetary policy either preempts or reacts to positive and negative shocks to the economy, e.g. Y2K, 9-11, an oil shock, technology shocks, and a financial crisis, to cite some recent examples.
Abir-Thanks for responding, but my commentary is missing!Add on: Friedman believed in taxing pollution. I don't know if Friedman regarded property rights as absolute--for example, if a rancher did not want the Keystone pipeline to cross his land, could he say no? What do you say, Abir? Add on pollution: Do you have the right to pollute my land? If not, can I stop you? And if you own a factory that is polluting my land, can I stop you?
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Peak: Boom and bust cycles are part of the creative destruction process. I believe letting them occur is better than discretionary fiscal policies enacted by the federal government to prevent such cycles, a process that leads only to less freedom.I am sure potheads are diverse. I just don't like people that do drugs. But I don't want the Feds coming after them.
Ben: You should tax pollution as it is an externality. (CO2 is not a pollutant). And I believe pipeline developers should be able to negotiate themselves with landowners for right of way.
Yes, yes, we know. Drug related violence will stop once all drugs are legal. Their will no longer be any cause, related to the use of drugs, for the police to secure warrants that require them to "break down somebody's door". There will be no increase in addiction and society will incur no additional drug related expenses. In fact, society will save money and those innocents, who were simply looking for an escape when they were caught up in the misguided "war on drugs", will go on to lead incredibly productive lives as doctors and accountants. Everyone will accept the consequences of their own actions. Kum-bay-a.Why do all of these arguments have the stench of utopianism? It couldn't possibly be that fullest realization of liberty is dependent upon virtue, as John Adams and others of the founding generation argued. It couldn't possibly be that the societal dissolution brought on by drug use - as in the 19th century when opiates and other drugs were legal - invites the intervention of the state at the expense of our liberty. No, you must be right, none of that could possibly be true.
Among Friedman's achievements are the dismantling of democracy in Chile and rule of the military dictatorship, with concentration camps and torture. Also an economy that totally collapsed, requiring state bail out. It was on to Argentina, Bolivia, and Brazil sending places that were on a decent path straight down the crapper.All of Africa is Milton Friedman land. Russia and the former Soviet states were managed by Chicago Boys. Millions would die.Basically the third world is the world of Milton Friedman. Places that succeeded did so violating his recommendations. Germany, Japan, South Korea. Even the US and Britain. It's such a colossal failure it's amazing anyone still clings to these theories, but it actually makes sense. These policies make the presently rich much more rich, while making the bottom 90% of the population much worse off. When rich people like your policies their accomplices in the media and in politics promote the ideas.Also of course think tanks like AEI which make money serving the interests of wealthy corporations are of course going to promote these things because they are concerned first and foremost with their rich backers, not the majority of people in the world.Read about Friedman's trail of destruction in Klein's "The Shock Doctrine." In fact there's a movie on Youtube.http://www.youtube.com/watch?v=7iW1SHPgUAQ
Wow. Just when I think that liberals cannot be more deluded, here comes Jon with his insanity. Put down that pipe. You need help, bro.
Methinks, marijuana is the only illegal drug that had increased usage in recent years, because of decriminalization. Also:"The consequences of legalization became evident when the Alaska Supreme Court ruled in 1975 that the state could not interfere with an adult's possession of marijuana for personal consumption in the home. The court's ruling became a green light for marijuana use. Although the ruling was limited to persons 19 and over, teens were among those increasingly using marijuana. According to a 1988 University of Alaska study, the state's 12 to 17-year-olds used marijuana at more than twice the national average for their age group. Alaska's residents voted in 1990 to recriminalize possession of marijuana, demonstrating their belief that increased use was too high a price to pay."Moreover:"By 1979, after 11 states decriminalized marijuana and the Carter administration had considered federal decriminalization, marijuana use shot up among teenagers. That year, almost 51 percent of 12th graders reported they used marijuana in the last 12 months. By 1992, with tougher laws and increased attention to the risks of drug abuse, that figure had been reduced to 22 percent, a 57 percent decline."
Again Peak, so what? I am sure even alcohol use has increased. But if people want to destroy their own bodies, let them! Why should I pay for saving their lives? And what right do I have to save their lives if they don't want to live?
Abir-If a single rancher could block the Keystone pipeline---by refusing right-of-way---would you still want to preserve property rights?If I open a factory, and pollutants come onto your property, do you have the right to shut down my factory, or, barring that, proven it from being built in the first place? Does anyone have the right to pollute private property? Why or why not?
One of Milton Friedman's main themes that he preached for decades was that macroeconomic fluctuations would be smoothed out and GDP utopia achieved by a rigid and predetermined growth rate in the 'money supply'. A constant 4% annual increase was his magic number. The Fed would be put on cruise control and locked in the back room. Except that none of this is true. If I open a factory, and pollutants come onto your property, do you have the right to shut down my factory, or, barring that, proven it from being built in the first place? Does anyone have the right to pollute private property? Why or why not? Benji, you probably don't realize this, but you are asking really silly questions that have been answered centuries ago. Nuisance laws, as far as I can tell, aren't a new thing. So there is absolutely nothing contradictory, or anti-free market, in saying that pollutants should be priced.The problem becomes when you try and define things that you can't identify, or quantity, as pollutants, like CO2 etc. If you can't identify that CO2 is even an externality, or quantify the cost it imposes on anyone else, then you can't pretend that it is an economic externality.
All of Africa is Milton Friedman land. Russia and the former Soviet states were managed by Chicago Boys. Millions would die. Wow you're silly! Fridman's problem was that he was a moral relativist. He believed in utility as being the sole justification for various policies proposed and implemented by governments. As such he became an enabler of statists who saw nothing wrong with government taking away individual liberty. Wow, you're even sillier.
Peak, oh Peak, oh come on.Self reported pot use went up when it was decriminalized. REALLY? Almost as shocking as discovering water is wet.Have you ever been a teenager? Do you remember how many teens drank back then? Wanna guess how many do now? Yet, alcohol is legal.Want to get high and marijuana is illegal and hard to get? No problem. Start smoking potpourri or huffing glue. Don't kid yourself. You're not stopping people who are a danger to themselves, you're just pushing them into more dangerous activities in a more dangerous environment.I understand the distaste for drugs. Neither my husband nor I have tried drugs ever. Not any drug. And you and I both know that this makes us extremely rare. We also know that most of the people who have tried drugs tried them for the first time wen they were teenagers....and drugs were illegal. But, when you were a teen, were YOU going to admit that you did drugs?That the majority of the population doesn't understand this is not a reason to keep destructive legislation around. Most of the country would like to outlaw short selling and speculators too and throw Zimmerman in jail tried only in the media by race baters. That's why mob rule is such a bad idea.
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