Want a crash course in economics? Give Econ4U a try.

No I'm not being paid to shill for them and yes the site is quite educational.

Cato@Liberty shows you the difference between free-market, laissez- faire capitalism and corporatism:

The seemingly arcane difference between laissez-faire and corporatism is one of the most important in today’s public policy debates. Laissez-faire means the equality of all before the law, with the state neither helping nor hindering any market actor. Corporatism means offering special favors to those who’ve already succeeded. (Just for starters: “Too big to fail” is corporatism.)

If only this distinction were more clearly understood by lawmakers, journalists, and the general public. Too often all of these groups just use the vague word “capitalism,” which seems mostly intended to split the difference — or to obscure it. But laissez-faire and corporatism are directly opposed to one another, and if more people on the left understood this, they might be far more sympathetic to free markets. Even, perhaps, while keeping a healthy mistrust of corporations.

Here we have a very interesting and informative article about free-markets and the economy by Matt Kibbe of the Freedom Works Foundation written for Reason Magazine:

A

s for Paulson’s desired role to become economic czar and CEO of the American economy, I recommend Hayek’s famous essay, "The Use of Knowledge in Society." Hayek says it best. “If we possess all the relevant information, if we can start out from a given system of preferences, and if we command complete knowledge of available means, the problem which remains is purely one of logic...This, however, is emphatically not the economic problem which society faces...The reason for this is that the 'data' from which the economic calculus starts are never for the whole society 'given' to a single mind which could work out the implications and can never be so given.” This is the same argument both Mises and Hayek used to dismantle the idea that socialist systems could supplant price discovery through the market process with really well-meaning, smart bureaucrats. By now, virtually everyone realizes that a full-on socialist economy brings only human misery to people, particularly to workers who don’t have access to the special favor of the political elite.

Or is that really understood? Listening to Wall Street types and their friends (from both political parties) in office, you would think that free market capitalism is fundamentally broken. Many are downright hysterical in their predictions of gloom and doom. I had read about the phenomenon, but now I actually understand what a “panic on Wall Street” really is. But it is very difficult, in the current legislative panic, to discern fact from fiction. One popular example is the assertion that capital for small businesses is “seizing up.” People I trust have told me this.

Many more people with a vested interest have asserted this. The most popular example widely used in the past few days is the claim that Sonic Drive-Ins were being denied, despite credit worthiness, needed business capital by GE Capital. Even the McCain campaign uses this talking point. It is, inconveniently, an urban myth, just like the guy that had both kidneys stolen and wakes up in an icy bathtub. According to a press statement by the company released on Monday, “GE is just one of many lenders who finance Sonic franchisees and, in fact, many franchisees maintain access to other diversified sources of financing. Furthermore, Sonic has not received any notification from GE Capital, either directly or indirectly, that it will stop financing new loans to Sonic franchisees.”

This is not to say that the economy is not in serious trouble, that capital flows are not being disrupted, or that access to credit is not a problem. The point is that the government is proposing to redistribute $700 billion dollars. That’s more than the annual GDP of Australia. With that much money on the table, expect disinformation to permeate the public debate. Some of that misinformation is intentional, but most is not. As a good Hayekian, I understand that knowledge is dispersed throughout the economy, and that good information only emerges if the discovery process is allowed to function. To put it another way, the only thing I know certainly is that I don’t know everything.

This is not an ivory-tower, think-tank point. It seems to me, during times of economic crisis, that there is an obligation to first do no harm. Should we rush to pass legislation written by tired, 25-year-old legislative staffers in the middle of the night in offices littered with Domino’s boxes and empty vente Starbucks cups? What are the inevitable unintended consequences? My biggest fear is that the plan will do far more harm than good, even in the short run, by propping up poorly performing banks at the expense of well-run institutions ready and able to come in and clean up the mess. And, yes, as Warren Buffet could tell you, they hope to make a healthy profit doing it.

We are talking about legislation that will fundamentally alter the face of American capitalism for at least a generation. Allowing investment banks to go to the government for a $700 billion line of credit is akin to inviting a vampire into the house. If you live, you certainly won’t be the same person when you wake up the next morning.

Assuming that all of the short-term problems are real, and assuming that we are headed into real economic hardship, what should we do? What would Mises do? A quote from Hayek’s Fatal Conceit is instructive: "The curious task of economics is to demonstrate to men how little they know about what they imagine they can design." (Hat Tip to economist Peter Boettke). Paulson’s audacious power grab has tainted the whole debate, crowding out a more rational conversation about how to remove real barriers to better-functioning markets. Especially after last night's dispiriting Senate vote, and the coming second round in the House of Representatives, that conversation is less likely to happen than ever.

I have to say, with my limited knowledge of economics, it seems to me that Mr. Kibbe knows what he's talking about.

This financial crisis isn't a failure of laissez-faire, free-market capitalism but a failure of corporatism.

From the group’s press release:

Thousand Oaks, CA — A national caucus of Republican activists has urged GOP legislators to stand firm against the “Paulson Bailout” of a corrupt financial regulatory system. “This proposal is a government takeover of the entire U.S. economy,” says Republican Liberty Caucus Chairman William Westmiller, “whose only purpose is to rescue those who made risky bets on bad mortgages.”

The Caucus [www.RLC.org] opposes any taxpayer payoff to rescue those who made bad investments in any sector of the economy. “The problem is not a lack of government control,” says Westmiller, “but rather the decades of market distortions imposed by Congress through subsidies, mandates, guarantees, andconstraints on free-enterprise mortgage offerings.”

The Paulson proposal grants the Secretary of the Treasury total control over all mortgage-related financial instruments, nearly a trillion-dollars in discretionary funds, and the power to nationalize or deputize every financial institution in the nation. “This isn’t a rescue plan,” says Westmiller, “it is an economic police state.”

(Special thanks to United Liberty for the story.)

Another gem from Cato@Liberty:

The New York Times takes note of the brewing tax revolt in Massachusetts, where a grassroots group has put an initiative on the ballot to repeal the state income tax. The Times headline (on paper) reads, “On Massachusetts Ballot, a Tax Repeal That Worries Leaders.” Why does a newspaper that purports to be a check on government so often present questions from the government’s point of view? Did they once publish headlines like “On Washington Mall, a Peace March That Worries Leaders” or “In Massachusetts, a Civil Rights Crusade That Worries Leaders”? I doubt it.

And I should in fact congratulate reporter Pam Belluck for writing

It would save the average taxpayer about $3,600 a year. Annual revenue from the tax is about $12.5 billion, roughly 45 percent of the state’s budget of about $28 billion.

Too often, as we’ve noted before here on Cato@Liberty, the mainstream media use the formulation “the proposed cut would cost the government millions of dollars.” At least this time Belluck started with the taxpayer.

Read more here and here.

From the Line is Here:

Really, you don’t say? Economic advantages and disadvantages that are applied through government regulation can lead to ethnic unrest? Wealth redistribution along ethnic lines makes people testy and prone to take out their frustrations on other ethnic groups?

That is just amazing!

In all honesty, it is nice to see a study that highlights this, although anyone who pays attention to African and Balkan politics and conflicts would have been able to tell you this without a study

.

More here.

From the Western Standard:

One of the biggest confusions in the current mess is the claim that it is the result of greed. The problem with that explanation is that greed is always a feature of human interaction. It always has been. Why, all of a sudden, has greed produced so much harm? And why only in one sector of the economy? After all, isn't there plenty of greed elsewhere? Firms are indeed profit seekers. And they will seek after profit where the institutional incentives are such that profit is available. In a free market, firms profit by providing the goods that consumers want at prices they are willing to pay. (My friends, don't stop reading there even if you disagree - now you know how I feel when you claim this mess is a failure of free markets - at least finish this paragraph.) However, regulations and policies and even the rhetoric of powerful political actors can change the incentives to profit. Regulations can make it harder for firms to minimize their risk by requiring that they make loans to marginal borrowers. Government institutions can encourage banks to take on extra risk by offering an implicit government guarantee if those risks fail. Policies can direct self-interest into activities that only serve corporate profits, not the public.

Many of you have rightly criticized the ethanol mandate, which made it profitable for corn growers to switch from growing corn for food to corn for fuel, leading to higher food prices worldwide. What's interesting is that you rightly blamed the policy and did not blame greed and the profit motive! The current financial mess is precisely analogous.

More here.
(via the fine folks at The Line is Here)

The financial crisis that we're dealing with was caused by the government and their stooges.
This is why we are where we are today.


*

* video embed updated 10/02/2008

*In no way, shape, or form does the Professor Politico Show endorse any of the presidential candidates (only because we haven't found one to endorse yet) or their views.

The bailouts of banks, mortgage lenders, and insurance companies by the federal government will now cost American tax-payers about a half-trillion dollars. This according to Neil Cavuto of Fox News. But, according to Congressman Ron Paul, it could be considerably more.Congressman Paul rightfully points out that the best course of action by the federal government should have been no course of action at all.
Watch the video for more.

It seems to me that some people still haven't realized that people will move away from higher tax hellholes, moving out to the suburbs or even, in some instances, out of the State completely.

From TaxProf Blog:

A California activist is trying to gather the 694,354 signatures needed to place a tax initiative on the ballot that would:

• Impose a new 35% income surtax (in addition to federal taxes and the existing 10.3% top state rate) -- 17.5% (on all of the taxpayer's income) when income exceeds $150,000 (single)/$250,000 (joint), and an additional 17.5% (again, on all of the taxpayer's income) when income exceeds $350,000 (single)/$500,000 (joint).
• Impose a one-time 55% wealth tax on assets exceeding $20 million held by a California resident or held in California by nonresident.
• Impose an exit tax of between 36.5% to 54.3% on both income and unrealized appreciation in asset values over $5 million when a resident dies or leaves California

And speaking of Oil prices.

From ScrappleFace:

When the U.S. Supreme Court reconvenes on the first Monday in October, the nine Justices may consider whether the Constitutional preamble clause “secure the Blessings of Liberty to ourselves and our Posterity” guarantees an individual right to drill for oil.

More here.

Here's a question for all you folks out on the tubes: If you own a piece of property, do you have the right to drill for oil on your property, or for that matter do anything you please with that property? If so, why?

Angry Renter is a grass roots campaign created by Freedom Works to oppose the corporate welfare that's being handed out to bail out mortgage companies that made bad or stupid decisions.


From the Angry Renter website:

You know a web site is making a difference when the Wall Street Journal publishes a hit piece on the front page!

We don't find it particularly shocking that a grassroots group working for limited government would launch a grassroots petition opposing a government housing bailout...but hey, we're not in the newspaper business.

We're not sure how a reporter can call this effort "fake" or "astro-turf" when we've put our name on every page and when over 48,000 real people have voluntarily visited and signed the petition.

FreedomWorks was founded back in 1984 and we're headquartered in Washington, D.C. We're based in D.C. because we fight for taxpayers and Washington, D.C. is where they pass the laws and spend trillions of your tax dollars every year. We are a non-profit organization chaired by former House Majority Leader Dick Armey with over 20 staffers across the country. Like every non-profit organization, from Sierra Club to the AARP, we respect the privacy of our donors and do not disclose them.

More here.

And From the Wall Street Journal:

AngryRenter.com looks a bit like a digital ransom note, with irregular fonts, exclamation points and big red arrows -- all emphasizing prudent renters' outrage over a proposed government bailout for irresponsible homeowners.

"It seems like America's renters may NEVER be able to afford a home," AngryRenter.com laments. The Web site urges like-minded tenants to let Congress feel their fury by signing an online petition. "We are millions of renters standing up for our rights!"

Angry they may be, but the people behind AngryRenter.com are certainly not renters. Though it purports to be a spontaneous uprising, AngryRenter.com is actually a product of an inside-the-Beltway conservative advocacy organization led by Dick Armey, the former House majority leader, and publishing magnate Steve Forbes, a fellow Republican. It's a fake grass-roots effort -- what politicos call an AstroTurf campaign -- that provides a window into the sleight-of-hand ways of Washington.

More here.

New York is trying to collect taxes from online merchants, even if they have no physical presence in the state and Amazon is suing, claiming the law is unconstitutional.

From the New York Times:

Amazon filed a complaint in State Supreme Court in Manhattan objecting to the law, which was approved as part of the $122 billion state budget that Gov. David A. Paterson signed last week. The law is expected to raise about $50 million.

The issue is not whether people should pay tax when they buy goods from out-of-state sellers like Amazon. For decades, the state has required them to pay sales or use tax.

The question is whether the vendors must collect that tax on behalf of the state. Generally, only those companies that have a physical presence — like an office or store — in the state where the purchase is made are required to collect the tax.

The new law is based on a novel definition of what constitutes a presence in the state: It includes any Web site based in the state that earns a referral fee for sending customers to an online retailer. Amazon has hundreds of thousands of affiliates — from big publishers to tiny blogs — that feature links to its products. The state law says that thousands of those have given an address in New York State, although the addresses have not been verified.

Shouldn't the state where the business was located have the most legitimate claim on sales taxes from transactions that took place with that business. I'm just sayin'.

More here and here.

Here's an interesting story on the the current state of space law over at Transterrestrial Musings.

It mostly deals with space regulation and ITAR (International Traffic in Arms Regulations).

A very interesting article that points out what happens when government gets involved where it shouldn't.

Is it really all that bad to allow the free market to work it's "magic" when it comes to organ donation?

I guess to most people it is, but, I'm not the only person who thinks it could be a good idea. Stephen J. Dubner thinks it may be a good idea, too.

From the Freakonomics blog @ NYTimes.com:

Here is an oversimplification of a complex problem:

1. Thanks to the miracles of modern medicine, a sick or dying human being can receive a transplanted organ from another human being.

2. Some of those organs must inevitably come from cadavers: i.e., you can’t give your heart to someone else and still live. But some transplanted organs can come from living people. Chief among them is the kidney: we are born with two but can live with one.

3. As the science has improved, there has been a huge increase in demand for transplantable organs. But the supply has not kept up with demand. The kidney waiting list gets longer every year, and every year more people die while still on the waiting list. The supply of kidneys from both cadavers and living donors is insufficient.

More here.

In the video below, Dan Mitchell of the Cato Institute explains how tax competition is spreading around the globe and working to lower taxes and create prosperity. And how politicians are fighting against it.







*This is a new regular segment here at the show. Stay tuned every week for more.

From D. T. Armentano @ the Future of Freedom Foundation:

I have been teaching economics at the university level for twenty-five years. Easily the most often-asked questions relate to monopolies. The questions are often put in the following form: "In an economy free of governmental regulation, wouldn't a firm or group of firms obtain a monopoly over some vital resource or product? And won't the monopoly then exercise its power by raising prices?"

The issues most often revolve around the oil industry and the famous Standard Oil Company antitrust case. The history of Standard Oil, students frequently tell me, proves that monopolies exist in free markets — and that they do raise prices arbitrarily — and that this is precisely why we need antitrust laws.

Are monopolies truly an inherent problem in a free market? And do we need antitrust laws to combat them?

The clearest definition of monopoly is one seller, with the law prohibiting competitors from entering the market. Local telephone and cable-television companies are examples — they are usually provided a monopoly by their local governmental officials — that is, they are made the only provider of the service in a certain locale — and competition is prohibited by the local governing body. Obviously, this is not a monopoly arising in a free market since it is the government not the market that is dictating the number of suppliers. The best way to get competition in these types of activities is to remove the legal restrictions on market entry — which, by the way, is happening in some cable-television markets, which has resulted in a decrease in prices.

More here.

From BusinessWeek:

Call it an attempt to lock the barn door before the next group of horses escapes. Even as criticism has mounted that the Bush Administration has moved too slowly to stem the slide in housing and credit markets, Treasury Secretary Henry Paulson on Mar. 13 announced a series of recommendations intended to prevent a recurrence of the lapses and errors that led to the meltdown in the first place.

"As we continue to address the current market stress, we must also examine the appropriate policy responses," Paulson said in a speech at the National Press Club in Washington. But he also sounded a note of caution aimed at heading off calls for more radical regulatory changes emanating from Congress, consumer groups, and others critical of the financial industry.

More here.

From CNBC:

Federal Reserve Chairman Ben Bernanke should resign and the Fed should be abolished as a way to boost the falling dollar and speed up the recovery of the U.S. economy, investor Jim Rogers, CEO of Rogers Holdings, told CNBC Europe Wednesday.

Asked what he would do if he were in Bernanke's shoes, Rogers, who slammed the Fed for pouring liquidity in the system and accepting mortgage-backed securities as guarantees, said: "I would abolish the Federal Reserve and I would resign."

More here.

From HomeGuide123:

The worst housing slump since the Great Depression is prompting all sorts of new bailout plans. Fed Chairman Ben Bernanke is encouraging banks to forgive portions of mortgage debt, the Democrats want to use billions in federal money (actually, it's taxpayer money) to buy up bad loans and the Bush Administration is preparing to dump bank losses on the shoulders of taxpayers.

In reality what the Democrats and Republicans are doing is exactly the same thing: They're using welfare (either social or corporate) to drop the burden of these bad loans on the shoulders of the middle class.

More info here.