Posted tagged ‘Crony Capitalism’

Must Reads For The Week 4/6/19

April 9, 2019

“The coordination of men’s activities through central planning or through voluntary cooperation are roads going in very different directions, the first to serfdom and poverty, the second to freedom and plenty.” – F. A. Hayek

 

Capitalism (aka) Self-Ownership Is The Only Moral Economic System, by Gary Galles, at mises.org. Private property rights and voluntary exchange are the foundation of free market capitalism. Property rights means you own what you produce. Voluntary exchange means each individual can exchange what he produces for what another individual produces under the terms which they mutually agree, with no intervention from third parties  Excerpt from the article:

“As Ludwig von Mises explained it, private property is the basis for “joint action and cooperation in which each participant sees the other partner’s success as a means for the attainment of his own,” in sharp contrast to any “us versus them” zero- or negative-sum view of social interaction which treats someone’s gains as others’ losses. In capitalism (which is actually inconsistent with the government created or enabled crony capitalism we see all around us), even those who would be tyrants, if given the opportunity, must focus their efforts on providing willing service to others to induce their voluntary cooperation. In contrast, the drive for power that animates these Democrat Presidential hopefuls who condemn a capitalism they plainly don’t comprehend would increasingly turn others into their unwilling servants.

The Socialist Fantasy, by John Stossel, at townhall.com. Socialism is government ownership of the means of production. But what do you call a system where government, although allowing property rights, controls what you can do with what you produce through rules, regulations and confiscation via taxation? Crony capitalism or crony socialism. We do not have free market capitalism in the US right now. We have a hampered market. But Government central planners don’t have to own the means of production to wreck an economy. All they have to do is increase their interference, and eventually a country’s standard of living starts to decrease. Even though government intervention isn’t the definition of socialism, government intervention is the road which leads to”serfdom and poverty”.

How Countries Fall Into The Welfare Trap, by Antony P. Mueller, at mises.org. Excerpt from the article:

“People like the welfare state because they suppose that it comes at no costs and provides many benefits. If people knew how much the present consumption of social benefits entails less prosperity in the future, the population would have a critical attitude towards the welfare state and politicians would have a harder time selling their fraud. Just as a society that ranks security over liberty loses both, a society that attributes a higher value to social benefits than to wealth creation ends up with neither wealth nor benefits.”

Liberalism’s Last Stand – Brexit, by Tom Luongo, at tomluongo.me.    Brexit is a modern-day version of the American Revolution. Only this time it is the British people who don’t want to take orders from the bureaucrats in the European Union. Adding another layer of bureaucratic intervention on top of what exists already in the British government was a bridge too far. The people have spoken. But the bureaucrats in Brussels don’t want to give up their power. Just like King George didn’t want to give up his power over the colonies. Excerpt from the article:

“Now with the European Union facing a populist uprising across the continent they have reached the turning point with Brexit. And the conundrum is enormous.”

“Brexit is the single most important political event of this century……So, paying close attention to it is important. That’s why it has so divided people. It represents an existential threat to the inevitability of modern liberalism. The European Union is the symbol of that inevitability. Because once that inevitability is breached the EU will begin to unravel before our eyes.”

Electoral College: Why We Must Decentralize Democracy, by Ryan McMaken, at mises.org. The articles above show us why we need the Electoral College. Power needs to be taken away from government and dispersed to the individual. Politicians and bureaucrats always want more power. The history of the 20th century shows what happens when power is centralized. Stalin, Hitler, Mao, Pol Pot, Castro! Oh that’s right….it can’t happen here. The left is afraid of Trump abusing power just as the right was afraid of Obama abusing power. Shouldn’t both sides agree that the government has too much power if an abuse of power by the person holding the seat could harm them.

The Recycling Movement Fails, by Michael Shedlock, at lewrockwell.com.  After decades of being guilt tripped into recycling, we are finding out that it is too costly.

Goodbye To The Internet: Interference By Governments Is Already Here, at zerohedge.com. Excerpt from the article:

“Government regulation combined with corporate social media self-censorship means that the user of the service will not know what he or she is missing because it will not be there. And once the freedom to share information without restraint is gone it will never return. On balance, free speech is intrinsically far more important than any satisfaction that might come from government intrusion to make the internet less an enabler of violence. If history teaches us anything, it is that the diminishing of one basic right will rapidly lead to the loss of others and there is no freedom more fundamental than the ability to say or write whatever one chooses, wherever and whenever one seeks to do so.

3 Reasons Why Facebook’s Zuckerberg Wants More Government Regulation, by Ryan McMaken, at mises.org. The three reasons are 1) Regulations will give Facebook more monopoly power. 2) Zuckerberg and Facebook will help write the new rules. 3) Regulations will limit Facebook’s legal exposure. Big business wants government regulation because regulations make it more difficult for start-up companies to succeed. When a business gets big, it no longer supports competition. It seeks monopoly power. Which can only be granted by Big Government.

The Air Bag Body Count Upticks – And Will Again, by Eric Peters, at ericpetersautos.com. Government central planners work for their own self interest. Excerpt from the article:

“There are hundreds of thousands of cars in circulation with air bags Uncle knows are defective; knows have killed and so – great leap of logic – are probably going to kill again.”

“Yet Uncle does not hurl a fatwa granting permission for the people who were forced by Uncle to buy these air bags to even temporarily disable them until they can be replaced with new air bags that may also kill them, but which at least aren’t known to be defective.”

“But remember when VW was forced to park vast fleets of perfectly safe – and clean – diesel-powered cars (the entire 2016 model year run) on account of “cheating” on EPA emissions certification tests. These cars never hurt anyone – or even the environment – but Uncle went ballistic. Because he’d been hurt.

States Sue Trump Administration Over Changes To Michelle Obama’s School Lunch Standards, by Jana J. Pruet, at theblaze.com. Why didn’t they sue when Michelle Obama interfered with school lunch standards in the first place?

The Latest Scheme To Turn Gun Owners Into Criminals, at zerohedge.com. The gun grabbers never give up.

Resisting Born-Alive Bill, Democrats Are Desperate To Hide Truth About Abortion, by Georgi Boorman, at thefederalist.com. If a blob of tissue is born alive, is it still considered a blob of tissue or is it a baby? Here is the best line from the article. “Legal abortion is fundamentally a mother’s entitlement to kill her child….They actually believe that abortion is the right to a dead baby.”

Doctors Are Now Giving Hormone Treatments To Children As young As 8 Who ‘Identify’ As Transgender, by Sara Taylor, at theblaze.com. What about the oath…First do no harm! This is child abuse. An 8 year old doesn’t have the mental capacity to understand what transgender even means.

Ex-Senate Employee Pleads Guilty to Theft Of Personal Data, at seattletimes.com. Petty tyrants use intimidation to get what they want.

Jury Rejects Harry Reid’s Lawsuit Against Fitness Band Maker He Blamed For Injuries, at cbsnews.com. Is anyone surprised that Harry Reid would sue for damages?

Actual Putin Puppets: Moscow Pitting Climate Activists Against American Energy Industry, at zerohedge.com. The USSR backed the peace movement during the cold war. Putin is a former KGB agent. Therefore the Russian government backed the anti-fracking movement. I’m shocked! Russian collusion?

Mueller’s Record Of Framing Innocent People To Protect The Guilty, at zerohedge.com. This article tells of the abuses of power by unelected bureaucrats (deep state). This is an eye opening article.

With Mueller Hopes Gone, So Goes Progressive Unity, by Victor Davis Hanson, at amgretness.com. Victor Davis Hanson sums up the Mueller investigation. Great read.

 

SATIRICAL HEADLINES

Venezuela Praised For Achieving World’s First Zero-Hour Work Week, at babylonbee.com.

Alexandria Ocasio-Cortez’s Economics Degree Recalled, at babylonbee.com.

Jussie Smollett Receives Prestigious NAACP Award For His Work Creating Jobs For Nigerian-Americans, at babylonbee.com.

Unsure What ‘Heartbeat’ Is, Hollywood Actors Come Out Against Heartbeat Bill Just To Be Safe, at babylonbee.com.

Man Arrested While Attempting To Smuggle Dhick-Fil-A Sandwich Into San Antonio Airport, at babylonbee.com.

Moved By Sight Of Homeless Man Asking For Food, Local Christian Prays Light Would Turn Green, at babylonbee.com.

Trump: ‘Any Shooting Actually Inspired By Me would Have Left Thousands Dead, at theonion.com.

 

CARTOONS

From theburningplatform (more classics here)

Political Cartoons by Michael Ramirez

Political Cartoons by Gary Varvel

 

Political Cartoons by Tom Stiglich

Political Cartoons by Michael Ramirez

Political Cartoons by Chip Bok

Political Cartoons by Gary Varvel

Political Cartoons by Pat Cross

 

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Must Reads For The Week 12/23/17

December 23, 2017

States Partner to Sue Massachusetts, California Over Costly Livestock Bans, at reason.com. Should States have the right to ban the sale of veal, eggs and pork that comes from animals confined to small cages? The real question is; should each individual consumer be allowed to keep his right to make this decision for himself? Or shall the force of the State take this decision away from him?

American, United, And Delta Airlines Should Compete Instead Of Crying To Uncle Sam For Help, at carpediemblog. As we have said many times, When businesses are just starting they love competition. But when these same businesses gain a sizable share of a market, they now use their energy to keep new competitors out of the market. The only entity with the power to keep competitors out, is the Federal Government. So big corporations lobby individuals in government to pass laws making it harder for startups to enter the market. This is crony capitalism. It is not free market capitalism.

Whirlpool Has Washington In A Spin Cycle, by George Will, at sltrib.com. Another example of crony capitalists lobbying government to take out their competition. In this case American companies like Whirlpool want to keep out competition from abroad by getting Government to impose “tariff-rate-quotas”. Of course the consumer suffers the consequences of these government policies through higher priced goods.

‘Equal Pay Day’ This Year Was April 4th – The Next ‘Equal Occupational Fatality Day’ Will Be On May 30th, 2028, by Mark J. Perry, at carpediemb.og. Men work in more dangerous occupations than women. Men had 4,803 occupational deaths in 2016. Women had 387 occupational deaths in 2016. Is that fair? Of course it is. Because men work in more dangerous professions than women. It is also fair that men make more money over all because they choose to work in higher paying professions than the professions in which women choose to work.

Consumers Are Smarter Than Bureaucrats, by Lee Friday, at mises.org. Government agencies have consumers best interest as their top priority….. Yeah, right!!!! Canada’s ‘Competition Bureau’ is suing Hudson Bay Company because of deceptive price practices for the last four years. This is an example of a law suit looking for a victim. Why do I say that? Because as the article says, “The regular prices of the sleep sets were so inflated above what the market would bear that sales at the regular prices were virtually non-existent…” How could have this ever gone to court? No business can get away with ‘price gouging’. Why?  Because as prices rise, less will be sold. And in this case nothing was being sold.

Have We Reached NFL, by Charles Hugh Smith, at oftwominds.com. It is not just because of the politicization of NFL that people aren’t watching the NFL.

DON’T TRUST PEOPLE WITH POWER

DOJ Opens Probe Into Bundy Prosecutors Who Hid Evidence, at zerohedge.com. The break down of the rule of law starts with Government. This is another example of law breaking by our government betters. If these abuses of power keep happening, the credibility of law enforcement will continue to crumble. Shining light on corruption is the only way to get our out of control government agencies under control. In the long run this is a good thing.

FBI Edits To Clinton Exoneration Go Far Beyond what Was Previously Known; Comey, McCabe, Strzok Implicated, at zerohedge.com. Another example of the break down of the rule of law. The FBI fixed the investigation into Hillary Clinton’s email investigation. Individuals in higher level positions of every government agency are political. They are not unbiased public servants. Their bias is toward protecting the status quo of big government. Which means their incentivized to “finesse” the law to help their own people on the one hand, and bring down the people who want to shrink the size and scope of government on the other.

Congress To Investigate Obama Efforts To Thwart a DEA Investigation Of Hezbollah Drug Trafficking, at zerohedge.com. Do establishment insiders not understand why we are loosing trust in government institutions. Politics is why the plug was pulled on this investigation. Political incentives are more powerful than doing what is right.

Nikki Haley vs. Hillary Clinton

Lets compare our last two Secretaries of State.

Nikki Haley flips the bird to the UN in this speech before they voted on condemning the U.S.  decision to move its embassy to Jerusalem, stating that Jerusalem was the capital of Israel.

Hillary Clinton condemns anti-Islam video. The date of this speech is September 13, 2012. Do you remember what happened on September 11, 2012?

Must Reads For The Week 10/14/17

October 15, 2017

ECON MUST READS

Our Crazy-Making, Profiteering Education Career Maze, by Charles Hugh Smith, at oftwoinds.com. CHS lists 7 things that you would do if you wanted an education system that fails. He calls our current education system a “career maze”. By design, a maze is difficult to get out of. The question is; who does our education system benefit? The students? No! The beneficiaries are the receivers of the borrowed money.

Excerpt from the article: “Clearly, it would be enormously beneficial to teach the skills needed to learn on one’s own and adapt successfully to changing circumstances. The current system is a hierarchy of credentialing that enriches those dispensing and funding the credentialing…………When the student graduates after borrowing a fortune and discovers their diploma has low value in the marketplace or is in a field they’ve found they loathe, then suggest the “solution” is to borrow another fortune and invest more years in obtaining another credential.”

The answer is always the same. Do more of what got you in the mess in the first place.

How Higher Education Became A Obscenely Profitable Racket That Enriches The Few At The Expense Of The Many (Student Debt Serfs), by Charles Hugh Smith, at oftwoinds.com. Another article by CHS concerning our education system. He offers great analysis. Excerpt from the article: “Student loan lenders are skimming tens of billions in profits guaranteed by the taxpayers…….The number of employees in central system offices has increased six-fold since 1987, and the number of administrators in them by a factor of more than 34…..While the higher-ed status quo is failing the students, it’s enriching itself immensely Assistant deans of student loans and thousands of other administrators who be managed to do without a generation ago are racking in huge salaries and fat benefits/pensions.

Financialization And The Destruction Of The Real Economy, by Charles Hugh Smith, at oftwominds.com. What happens when government leaders regulate a free market economy so much it becomes a crony capitalist (or crony socialist) economy, and the central bank (our Federal Reserve) prints (counterfeits) money? The real economy starts to consume it’s own seed corn (capital). Whoever has access to the printed money first is stealing the production of the people who don’t have access to the printed money (that would be you and me). The economy gets hollowed out similar to what termites do to wood. Termites eat the joists in a floor and the studs in a wall from the inside out so all that remains is the veneer of stability, but no interior strength.

Excerpt from the article: “Strip an economy of capital, productive incentives, talent and yes, ethics and what are we left with? An economy spiraling toward an inevitable collapse…….like a Yellowstone forest fire. The deadwood of bad debt, extreme leverage, zombie companies and all the other fallen branches of financialization pile up. But the central banks no longer allow any creative destruction of umpayable debt and mis-allocated capital; Every brush fire is instantly suppressed with more stimulus, more liquidity ad lower interest rates. As a result the deadwood sapping the real economy of productivity and innovation is allowed to pile higher. The only possible output of this suppression is an economy piled high with explosive risk. Eventually Nature supplies a lightning strike, ad resulting conflagration consumes the entire economy.”

More Spending Does Not Drive More Employment, by Per Bylund, at mises.org. Excerpt from the article: “There is no escaping the fact that production precedes consumption in a very real and fundamental sense: that entrepreneurs endeavor in production before they know that they will be able to sell the goods produced. Spending is a possible outcome of entrepreneurial production, but not the other way around. The former does not employ people, but the latter does…..What drives the economy is not demand or spending, but entrepreneurship and production. In other words, entrepreneurs bear the uncertainty of their enterprise. They anticipate that consumers will value their goods and, based on this, estimate the price. That price, in turn, determines what costs and entrepreneur can reasonably expect to cove in production, which means the entrepreneur’s actual choice is for the cost structure in production – the price is an anticipation of consumer value.”

What does this mean? Production is the creation of wealth. The more you produce the more wealthy you become. Spending on the other hand, is the consumption of what has been produced. It is the destruction of wealth. This is true even though we know the reason we produce is so we can consume. We either consume what we produce, in the present, or we save what we produce for consumption in the future. We also use what we save for future production. It is like saving a portion of the corn we produce so we can plant it in the future in order to produce more corn. Production has to stay ahead of consumption or we start eating our seed corn (capital consumption).

The Myth Of Infrastructure Spending, by Ryan McMaken, at mises.org. Does infrastructure spending stimulate economic growth and create jobs? On the surface it seems logical that they do. Deeper analysis shows us a different picture. Excerpt from the article: “….it is assumed that government infrastructure programs were all necessarily “proven winners” for the metaphorical construct known as “the economy……But infrastructure spending is not some one-time thing that blesses the nation with new wonderful things that everyone can use indefinitely. It is often a commitment to simply spend much more money in the future. So, you’d better be sure you’re buying exactly what you need……. Building a new bridge or a new road brings totally unproven or hypothetical benefits, especially….. in less industrially dense areas. What’s worse, the promoters of such spending do not take into account the opportunity cost of the spending. After all, this sort of spending requires that the money must first be removed from the pockets of taxpayers. It is assumed that this is justified because it creates “stimulus.” It creates new jobs in building highways, and makes roads everyone can use. But what would the taxpayer and the worker have done in the absence of that spending?”

“……Borrowing immense sums to spend on infrastructure that doesn’t boost productivity actually cripples an economy by channeling scarce capital and tax revenues into projects that only boost spending for a few years at best, while the costs of borrowing the money pile up for decades to come……If a new highway is needed in Peoria, let the Peorians pay for it, either with a toll road or local taxes. If the benefits of infrastructure spending is so abundantly obvious, then it will pay off for every metro area that builds a new road. The great benefit of federal spending on infrastructure, however, is that the new spending can be forced on the taxpayers with much less political effort than would be required to obtain a new local tax.”

Paul Krugman Destruction Worshiper, at ecoomicpolicyjournal.com. It is hard to believe that economists could think that destruction of things which still have years of service left is some how stimulative to an economy. Have they never heard of the ‘broken window fallacy’? Or are they too smart to understand something so basic? Excerpt from the article: “ Ludwig von Mises once allegedly tried to encourage his students to speak up more freely in class by saying: “Don’t be afraid to speak up. Remember, whatever you say about the subject and however wrong it might be, the same thing has already been said by some eminent economist.”

 

CARTOONS

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Drifting Towards Fascism

September 20, 2016

man drifting in a boat

First let’s define Fascism so we can begin at the same starting point. Fascism is an economic system where the state doesn’t own the means of production, but the state makes the rules that producers and consumers have to follow. There is a bureaucratic layer between businesses and politicians which plans the economy. It is crony capitalism on steroids.

Fascism places politicians and bureaucrats as the ultimate rulers aka decision makers. The individual has no rights or liberty except what the rulers say they have. Order comes from the state, (top down) not from the individual, (spontaneous order).

I saw a great chart (below) showing America’s drift toward Fascism, in an article titled, The Road To Fascism In Just Two Charts, at bawerk.net. I have always thought economic systems fit on a line where at one end no government exists, and at the opposite end there is total government control. Where an economic system is placed on this line depends on how much government intervention exists, or put another way, how little governmental intervention exists.

WHAT IS AN ECONOMY? WHAT IS SOCIAL FREEDOM?

An economy is what results when each individual is free to decide what to produce, consume, exchange and save in a world of scarce resources which have alternative uses. Simply put, you own what you’ve produced or what you’ve received in exchange for your production. It is your property and you have a right to do with it what you wish.

Production is the creation of wealth. Consumption is the destruction of wealth. Exchange is the increase of wealth as both parties place a higher value on what they received than what they’ve given up. Saving is the preference of consumption at some point in the future to consumption in the present. Savings is the basis for capital formation. Capital formation is what increases productivity. Increased productivity is the creation of larger amounts of wealth.

Each individuals decision on what and how much he will produce, consume, exchange and save according to what he  subjectively values in a world of scarcity is the essence of freedom.

In order to have economic freedom you have to have social freedom and in order to have social freedom you have to have economic freedom. In other words, economic freedom and social freedom are different sides of the same coin. Individuals are free to act. Each individual is responsible for the consequences of his actions if they bring harm to others or himself.

I have a quote by F. A. Hayek at the top of my web site. It is my favorite quote because it sums up the choice individuals have faced since the beginning of time:

F. A. HAYEK: “THE COORDINATION OF MENS ACTIVITIES THROUGH CENTRAL PLANNING OR THROUGH VOLUNTARY COOPERATION ARE ROADS GOING IN VERY DIFFERENT DIRECTIONS, THE FIRST TO SERFDOM AND POVERTY THE SECOND TO FREEDOM AND PLENTY.

Let’s take a look at the chart and see what it reveals.

true-political-axis

Zero Government intervention into the economy starts at the bottom left of the chart and moves upward and to the right as Government intervention starts to increase. Zero Social Freedom starts at the top right of the chart and moves downward and to the left as the level of Social Freedom starts to increase.

Communism, socialism, fascism and democratic socialism are on the top right of this chart. They are economic and political systems that strangle individual liberty. Their very nature means intervention into, or control of, what is produced, consumed, exchanged and saved.

Anarcho capitalism, free market capitalism, classical liberalism and our America constitutional founding are on  the lower left of the chart. They are economic and political systems that strangle Government and allow individuals the freedom to produce, consume, exchange, and save as they see fit.

What exists today is the middle ground of crony capitalism, crony socialism and other forms of government interventionism. This is the utopian middle ground that elites think mixes the best parts of both ends of the chart. They know that free market capitalism produces great amounts of wealth as seen by our standard of living. But the elites don’t like the way the wealth is “distributed” and want to use the force of government to make this distribution  “fairer” according to their idea of “fair”.

The elites attempt to redistribute wealth differently than it would exist in the free market, creates incentives that ultimately decreases the wealth that is being produced. It divides us into groups that can be pitted against each other by political opportunists.

These statements by Ludwig von Mises tell us all we need to know about the above chart:

The issue is always the same: the government or the market. There is no third solution.”

The middle-of-the-road policy is not an economic system that can last. It is a method for the realization of socialism by installments.”

Anti capitalistic policies sabotage the operation of the capitalist system of the market economy. The failure of interventionism does not demonstrate the necessity of adopting socialism. It merely exposes the futility of interventionism. All those evils which the self-styled “progressives” interpret as evidence of the failure off capitalism are the outcome of their allegedly beneficial interference with the market.”

CONCLUSION

We are in the chaotic middle. Our choice is to move towards freedom and free markets. It is going to take a lot of time and effort to educate enough people in order to tip the scales toward freedom. Is the cost too high? It’s your decision.

 

Related ArticleCapitalism vs. Crony Capitalism, at austrianaddict.com.

Related ArticleSocialism Sounds Great, at austrianaddict.com.

Related ArticleWhat Creates Wealth? Freedom, at austrtianaddict.com.

Related ArticleWe Can’t Recreate The Garden Of Eden, at austrianaddict.com.

 

Reaction To EpiPens Increased Price, Reveals Our Economic Ignorance.

September 1, 2016

SAINT LOUIS, UNITED STATES - AUGUST 25, 2016: Two EpiPen auto-injectors used for treatment of allergic reactions.

The angst over the recent price increase of the product EpiPen, reveals our economic ignorance. This economic ignorance in and of itself wouldn’t be a problem in a free market capitalist system. Unfortunately we live in a crony capitalist economic system, where more and more economic decisions are being made through the political process. Businesses are being forced to obey interventionist laws passed by Congress, on the one hand, and cave in to political shaming by ignorant consumers and politicians on the other.

When this point is reached, companies are incentivized to put their resources toward lobbying Congress to pass laws that favor these incumbent businesses. They also donate money to politicians and political parties which is like paying protection money to the mob.

All of these resources could have been used to satisfy consumer demand. But these companies have decided that these resources can best serve their interest if they are invested in lobbying government. This is not how free market capitalism works. This is how crony capitalism works.

The EpiPen kerfuffle is an example of how our economic ignorance has allowed politicians to place the blame for the price increase on Mylan, the producer of EpiPen. The blame should be placed on the very politicians who are doing the finger-pointing. Government intervention into the healthcare market over the last 75 years, culminating in The Affordable Care Act (aka. Obamacare), is what has caused prices to skyrocket. Let’s take a look.

ECONOMICS 101

EpiPen is a product that delivers a life saving dose of epinephrine to individuals who have severe allergic reactions to food, insect stings, and medicines. Lets look at the economic reality of how EpiPen magically appears to perform its life saving task.

As much as people want to think that healthcare is a right, they are literally dead wrong. Healthcare in general and EpiPen in particular, is an economic good. This means it is subject to the first rule of economics which is scarcity.  EpiPen just doesn’t appear out of thin air as if we lived in the Garden of Eden. In the real world, someone has to produce this product, and you don’t have a right to take what a person produces.

The people who produce this product have to be compensated for the cost of production plus a profit. If they can’t make a profit, they would cut their losses and stop producing the product. This is why prices are so important in a free market economy. Prices send information through the production process. Government intervention increases the cost of production, which in turn sends false information through the pricing system.

CENTRALLY PLANNED HEALTHCARE

The Healthcare system was one of the most regulated industries before the Affordable Care Act (aka Obamacare) was passed six years ago. There is no true price discovery in our current healthcare system. This means information about which healthcare goods and services should be produced and in what quantity they should be produced doesn’t exist.

When third-party pays, whether it’s an insurance company or Government, prices are distorted. If you add the fact that insurance companies have to abide by the rules set by Government it is worse. Take a quick glance at this article, EpiPen Price: What To Know, at webmd.com, to see how much Government intervention there is in the healthcare system. Government intervention is essentially an attempt at price-fixing. Price fixing distorts the information sent through the market.

Government has created the monopoly position that Mylan holds with EpiPen. Government regulations have made it more difficult for competitors to enter the market and produce an EpiPen like product. Scan this short article, Why The EpiPen Has A Monopoly (Hint It Is Not Runaway Capitalism), at thelibertarianrepublic.com, to see how Government planners created the monopoly position for Mylan that allows the price to soar.

Supply and demand chart drawn on a blackboard.

SUPPLY AND DEMAND RULE THE DAY. EVEN IN A HAMPERED MARKET.

At a lower price more is demanded and less is produced. At a higher price more is produced and less is demanded. This is the law of supply and demand.

Government had artificially lowered the price, that people were paying for EpiPen, through Insurance mandates and Government subsidies. Because of the artificially low price, demand increased. When Auvi-Q, one of the other two producers of automatic injection devices for epinephrine, was taken off the market by regulators in October of 2015, overall supply was reduced. What happens when demand is increasing and supply is decreasing? The price has to go up to ration the scarce resource. Is this a good thing? It is neither good nor bad. It is just the reality of prices. Prices discovered through free markets not only coordinate supply and demand. Free market prices also reveal the scarcity that exists. But free market prices don’t create the scarcity.

Let’s look at the price of oil to understand what would happen if there were free markets in the healthcare system. When the price of oil was around $120 dollars a barrel, there was talk of oil going to $200 a barrel. But what happened. People started using less, demand started to decrease. At these higher prices fracking became economically viable. The supply of oil started to increase. Frackers started to find more productive methods of extracting oil from the ground. As supply increased and demand decreased the price of oil started to decrease. Because of these more productive methods, fracking wells could keep supplying oil at lower and lower prices. Because supply remains high and demand has just marginally increased, the price has remained low.

Even though Obama’s EPA took government land off-line for fracking, that didn’t keep fracking from happening on privately owned land. The free market pricing system worked to supply more oil to the market at a lower price. Bureaucrats in Government didn’t do this, free markets did. What does this have to do with the price of EpiPen?

In a free market the rise in the price of EpiPen would do two things. People would start using less. And companies would start supplying more. The price would eventually go down.

Because of Government intervention their won’t be new suppliers even at the higher price. They are being restricted from entry into the market by Government rules. Supply won’t increase like supply increased in the oil sector.

If Government and insurance companies subsidize the purchase of EpiPen, and Mylan gets bullied into lowering prices, their will be no true price discovery. False information about production and consumption will be sent through the hampered market. Their will be over consumption and under production of EpiPen. The more the planners plan the more their plans will not work.

CONCLUSION

Central planners, and people who vote for central planning, think that whatever is decreed, will happen. Unfortunately for them economic laws are more powerful than central planners mandates. Unless more companies are allowed to supply EpiPens, the artificially created shortage will continue. If the price is artificially kept below what it would be in a free market, demand will remain high. High demand and short supply means EpiPen will have to be rationed by bureaucrats in Government instead of by prices in a free market. Look at the waiting lines in Venezuela if you want to see what rationing by Government looks like.

The answer? Get rid of Government regulations and let free market prices work. Until people gain understanding about free markets, they will continue to get fooled by slick politicians, and we will remain in this political quagmire.

 

Related ArticleThe Economics of Healthcare vs. The Right to Healthcare, at austrianaddict.com.

Related ArticleLets Look At Government Run Healthcare, at austrianaddict.com.

Related ArticleThe Reality Of Obamacare, at austrianaddict.com.

Related ArticleGruber Tells The Truth About Obamacare, at austrianaddict.com.

Wind And Solar Energy Is Diluted And Intermittent. Which Means Higher Cost

October 26, 2015

Politicians and bureaucrats mask the real cost of producing energy from wind and solar when they;  1) “invest” your tax dollars in wind and solar companies. 2) give tax payer guaranteed loans to these companies. 3) use your tax dollars to subsidize the purchase of this energy.

On the flip side of the coin, they artificially drive up the costs of producing energy from coal, oil, and nuclear through regulations and taxes.

CAN WE RELY ON WIND AND SOLAR ENERGY? by Prager University.

Excerpt from video, “In the entire world there is not one real or proposed independent free standing solar of wind power plant. All of them require backup. And guess what that backup is? Fossil Fuels.”

LOW COST RELIABLE ENERGY FUELS ECONOMIC PROSPERITY.

An economy becomes wealthier when it can produce more while using fewer scarce resources, time, labor and capital. Economies are fueled by energy. If Government continues to force us to use higher cost energy (read here) to power our economy, we are going to be less wealthy and prosperous. The green jobs that are being brought into existence by Government force, aren’t as productive as the jobs that will be lost when the fossil fuel energy sector is forced to shrink. Put another way, these green jobs wouldn’t exist in a free market because the free market always chooses the most productive activities. Less productive activities go away. The cost of these non productive activities will fall on the entrepreneur who made the miscalculation. He will be incentivized to cut his losses sooner rather then later. The incentives in our crony capitalist green energy industry are different. Since the tax payer pays the cost of the failure (read here), the losses will be allowed to go on longer. Resources, time, labor and capital will be wasted as well as tax payer dollars.

When will we quit putting our faith in politicians and bureaucrats when their policies constantly fail to produce their hoped for results. Our current crony capitalist system that weds Government and business isn’t free market capitalism. Our politicians want you to think it’s free market capitalism because they need a straw man to demonize. Once demonized, the only “solution” is more Government intervention. And the outcome of government intervention is the destruction of wealth; because scarce resources are not being allocated to their most productive uses according to consumer demand.

We have to rediscover the truth that moving toward free market capitalism and away from government intervention is the only cure for our economic problems. Free market capitalism has lifted billions of people out of poverty and is the only process that can keep us from stagnating and/or sliding backwards.

Related ArticleUnelected EPA Driving Up The Cost Of Food And Energy, at austrianaddict.com.

Related ArticleFree Market Fracking Trumps Government Solutions When It Comes To Producing Energy, at austrianaddict.com.

Related VideoThe Story of Electricity, 2 minute video by, instituteforenergyresearch.org.

Must Reads For The Week 10/23/15

October 24, 2015

A Challenge To The GOP From Bernie Sanders: Put Up Our Shut Up On Capitalism, by Dan Mitchell, at freedomandprosperity.org. Sanders is correct for wanting reporters to ask Republicans: ‘are you a capitalist’. Socialism is government ownership of the means of production. Sanders and Hillary don’t want socialism. They want government intervention, redistribution and crony socialism. Capitalism is private ownership of the means of production. Republicans candidates think they want capitalism. But what they propose is varying degrees of government intervention, redistribution, and crony capitalism. It’s going to take decades of elections to replace politicians who have this mindset with people who understand free markets and liberty. Inch by inch.

Sanders, Trump, and John Maynard Keynes, by Hunter Lewis, mises.org. Sanders thinks our current Keynesian crony capitalist system is capitalism. Trump thinks our current Keynesian crony capitalist system is socialism. Their cure is more government intervention in different ways. Sanders wants redistribution of wealth, and Trump wants a mercantilist attitude about trade.

Donald Trump’s Contempt For The Free Market, at economicpolicyjournal.com. Trump wants to stop Ford from building an auto plant in Mexico by putting a tariff on the goods Ford will bring in from Mexico. Government regulations and taxes incentivized Ford to move the plant. So instead of using more Government force to create different incentives, why not get rid of the regulations and taxes that produced the original incentives?

My Letter To The NY Times re: My Advice To The ECB And The Fed, by Patrick Barron, at patrickbarronblog.blogspot.com. Excerpt from the article. “If the Fed wishes to prevent financial crises, it only needs to stop initiating them. The Fed’s hubris that it can fathom the proper interest rate for our vast and complex economy must rank among the greatest fallacies of all time. The Fed sees the world through the completely discredited Keynesian lens which posits that aggregate demand–what the rest of us know simply as spending–is the path to prosperity. Anyone who believes this nonsense need ask himself why he has not liquidated his own savings on frivolous consumption…

Global Stocks Soar On Surprise China Rate Cut, by David Gaffen, at reuters.com. Is anyone shocked that global stock markets soared when China’s central bank cut interest rates and the European central bank said they will increase the size of its quantitative easing (electronically printing counterfeit money) program? How strong is the world economy when the central banks of China, Europe, and the U.S. have to lower interest rates and print money to keep it afloat?

The Cronies: Half Of All Export-Import Bank Benefits Go To 10 Companies, at economicpolicyjournal.com. The Exim Bank, backed by your tax dollars, finances transactions so foreign customers can buy from American companies. These are transactions that private banks wouldn’t make because of the commercial and political risks inherent in these deals. It’s easier to be risky when it isn’t your money. By the way, does this seem like a money laundering scheme?

A Tax I Can Support, by Per Byland, at mises.org. This just might work. Unfortunately politicians would never pass it.

Justin Trudeau Elected Canada’s Prime Minister; Young Liberal Star Compared To Obama, at mercurynews.com. How could this happen? Were Canadian citizens not aware of what has been going on South of their border over the last seven years? Oh wait! What about this article? Obama Campaign Team Hands Canada Over To Lib-Left, at canacafreepress.com.

Is The New Higher Seattle Minimum Wage Destroying Restaurant Jobs In Seattle? at economicpolicyjournal.com. The answer is yes. Because the law of supply and demand states: Less is demanded at a higher price. This includes labor.

Actors In Los Angeles File Lawsuit Against Actors’ Equity Over Wage Hike, at latimes.com. I guess a minimum wage increase is only cool when it doesn’t affect you.

Michigan Governor Signs Bills Reforming Civil Asset Forfeiture, theoaklandpress.com. Some good news for liberty.

Rhonda Rousey Shuts Down Feminist.

There’s a difference between merit and value. You don’t get payed for how hard you work. You get paid for the value you produce. Who works harder; a man with a shovel digging a ditch, or a man on a backhoe digging a ditch? It doesn’t matter. The real question is; who produces the most value?