Bootleggers and Baptists- Part III: Holy Rollers and The Beer Industry Take On Pot Legalization in The Bay State.

 

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Introduction:

 

The 2016 election cycle in the United States was one for the ages. It had all the markings of poetic drama or a sardonic comedy. Either way, it was a surreal slice of political theater. Many journals and political analysts’ predictions were defied by the electoral results. This upset left half of the country in jubilation and half reeling in horror. The quirks of the 2016 election was also a result of many of the state-level ballot questions. A historic five states having ballot initiatives to legalize recreational marijuana.  Ironically, four out of the five states pasted the measure. Naturally, this was not met without some resistance from special interest groups. The shared opposition to marijuana legalization has made for some strange bedfellows in the political arena.

 

Even in deep blue Massachusetts (my home state), there were fierce opponents of legalization. As well as some peculiar alliances. One fine example was the Archdiocese of Boston and the Beer Distributors PAC. Two unlikely forces working to squash ballot question 4. Their efforts were futile as the measure passed by a margin of 53 % of the collective votes. This crusading duo seems like a bit of a stretch in terms of having any common goals.  After all, this was the election cycle in which America elected a reality-television star as president. If we invoke the wisdom of public choice economist Bruce Yandle we start to see there is nothing odd about the partnership of the local leadership in the Catholic church and beer distributors.

 

Bruce Yandle formulated the concept of Bootleggers and Baptists while he was on the Council on Wage and Price Stability.  These observations were summarized in his 1983 paper. To Yandle’s astonishment, many industry lobbyists opposed deregulation. Due to this fact, these restrictions helped reduced competition by increasing the cost of operations. In many situations, you will have seemingly opposite factions joining together to champion regulation. The segment that does so out of moral concerns, the Baptists. Those who seek to benefit economically from the regulation of decreasing competition, the Bootleggers. Hence, why the church and beer industry forming a united front against Cannabis isn’t so outlandish after all.

 

 

Our Bootleggers and Baptists:

Bootleggers: Beer Distributors Political Action Committee

Baptists:  Archdiocese of Boston

 

Parameters of Recreational Marijuana in Massachusetts:

Ballot question 4 passed by a slim majority back in November of 2016.  The legislation was effectively signed into law on December 30th, 2016 by Governor Charlie Baker. Passed with a dizzying array of ordinances governing the sale of Cannabis. There the standard parameters of age requirements.  Not operating a motor vehicle while under the influence. Prohibitions on the possession of marijuana-related products within the vacuity of a school zone or substance abuse rehab facility. Requiring specific licensing to sell or produce marijuana products. Regulations regarding purity and proper labeling. Limitations on the amount of marijuana that can be possessed 1 oz in your possession in public no more than 10 oz in a private residence. The establishment of the Cannabis Advisory Board. A 10.75 % excise tax applied to the sale of recreational marijuana. Rest assured the state has broadly defined earmarks for allocating these tax dollars.

Thereafter, money in the fund shall be expended for (i) public and behavioral health including but not limited to, …. substance use prevention and treatment  …. ; (ii) public safety; (iii) municipal police training; (iv) the Prevention and Wellness Trust Fund established in section…; and (v) programming for restorative justice, jail diversion…

 

If the contours of the state regulations weren’t enough local municipalities have the option to implement local ordinances. Needless to say, marijuana sales in Massachusetts are highly regulated which is to be expected from the Bay State. Also, this demonstrates that this abolition of prohibition would be far from a lawless affair.

 

The Baptists:

The  Archdiocese of Boston back in late October of 2016 provide an $850,000 donation to the opposition campaign against Ballot question 4. At the time it was the second-largest donation accounting for approximately 30 % of total funding. This gesture was quite generous when you consider that “archdiocese lost $20.5 million in operating income between 2014 and 2015″. In the eyes of the Archdiocese, this investment was worth the cost. Cardinal Sean O’Malley expressed his concerns about legalization from a public safety perspective. Invoking the “gateway” hypothesis how this could potentially compound the opioid epidemic. O’Malley stated back in 2016 “..  thinking how do we get people to back away from these addictive drugs, rather than making it more attractive and accessible..”. He even urged local religious leaders outside of the Catholic church to take a stand against legalizing Marijuana.

The Catholic church of Boston does not benefit economically from their opposition. If anything they are willing to incur a loss to support this cause. Superficially it is a laudable goal. It is admirable to voice concern for the youth and the health of the community. Whether or not it is scientifically or socially misguided is another issue. It is difficult to find another incentive outside of moral concern that would drive the church to fund this cause.

 

The Bootleggers:

 

Companies that market, produce, distribute, sell, and market alcohol have a lot to lose from marijuana legalization. Not really.  This is a misconception. Per a 2019 study, the states with the longest history of legal Marijuana have not seen an impact in sales. While beer sales are down, distilled spirits have seen an increase in sales. However, back in 2016, this data wasn’t so clear. The urge to engage in rent-seeking advocacy proved too strong for the Beer Distributors PAC. Alcohol before Marijuana had little competition in the arena of legal recreational intoxicants. The natural inclination is to fear for your bottom line. This results in the knee-jerk reaction of joining the holy rollers in advocating against Pot. The moral guise of concern for public safety provides the ideal smokescreen for the representatives in alcohol-related industries to hide behind.

 

It was well documented that the Boston Beer Company (maker of Sam Adams beer) voiced concerns about legalization. Spirits conglomerate Brown-Forman (Jack Daniels, Woodford Reserve) expressed concern about recreational Cannabis back in 2014.  The Beer Distributors PAC in 2016 contributed $25,000.00 to the Campaign for a Safe and Healthy Massachusetts. Not the exorbitant amount that the Archdiocese of Boston donated. It is still a sizable contribution to the anti-pot coffers.  Ranking the association the third-highest contributor. It is quite transparent that an association of beer distributors are not truly concerned about public safety. Rather seeking protection from legal Marijuana chewing into their profits. Rational? From a cursory assessment of the incentives to keep pot illegal, yes! Prohibition would work as protection from the marijuana industry without having to engage in product innovation.

 

Conclusion:

 

It would be reasonable to question why single out this specific instance of opposition to the legalization of Marijuana back in the 2016 election cycle?  After all,  alcohol-related trade associations were one of the factions that helped snuff out Proposition 205 in Arizona. For one, this would be an example were the invested interests did lose.  Then again, on the other side of there were probably pro-pot investors funding the legalization campaign. However, back in the early 1980s Massachusetts was home to one of the pioneering faces of the craft beer revolution, Sam Adams. The irony is that the Boston Beer Company may not have ever existed if President Jimmy Carter hadn’t signed  H.R. 1337 into effect. Lifting the prohibition on home brewing. It would be reasonable to speculate that the big brewers of the day (Miller, Pabst, Anheuser-Busch, etc.) felt threatened by this loosening of restrictions. Fast forward nearly 40 years later and the past beneficiaries of deregulation want protection from the new wave of innovators.

 

It would appear that the tides may be turning in the other direction. Many alcohol producers are starting to embrace the legal Cannabis market. Even the Boston Beer Company who back in 2016 exhibited irrational trepidation of facing the prospect of legal Pot is joining the party. Last August the CEO expressed interest in developing a Cannabis-infused product. It appears as if some breweries have already beat them to the punch. Craft beer veterans such as the Flying Dog Brewery and Lagunitas have already made inroads in this new niche market. As a homebrewer and craft beer aficionado this was a possibility I was toying with back in  2012 (conceptually, due to the legal status). Seeing the lack of foresight and vision in the complaints of the rent-seekers, perplexed me.  Legalization would have presented the golden opportunity to experiment with infused-beer. If done correctly it could be a gold mine. Then again, I suppose the Hashish Porter was ahead of its time.

 

 

 

Machiavelli in the Office-Part VII: Lady Luck

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Machiavelli’s wisdom is often overshadowed by is reputation.  A reputation that is synonymous with ambition and a wanton disregard for higher moral standards.  It is reasonable to question to what extent this image was true. The royal monarchs of old-world Europe were known to give lips service to the lofty visions of Aristotelian virtue.  In reality, quite often fell short of this ideal. Typically veering more toward the vices of greed, lust, ambition, and other excesses. From this perspective, it would appear as if Machiavelli merely pays the price for his honesty and pragmatism. It could be argued that he may even be more moral for his candor. Then again who wants someone exposing all of the trade secrets? It should also be noted that many of the debauchery prone rulers post-1532 who spoke of higher virtue may have very well taken a page out of old Nick’s book.

 

Machiavelli taught us about things far deeper than how to maintain an iron fist rule over a principality.  He was intimately aware of the shortcomings of human nature and intricately weaved these insights into the greater corpus of his brand of political philosophy. Hence why it is almost a crime to narrow his observations to the maintenance of the autocratic rule that characterized the Florentine royal court. He guides the patient and prudent reader that transcends the scope of political power. Machiavelli’s  The Prince is truly multidisciplinary and timeless. Expounding upon questions as broad as those of human psychology, diplomacy, opportunity costs, effective communication, and resource utilization.  So why not apply these lessons to the modern-day workspace? Hence why I have embarked upon this ongoing series.

 

Today’s topic of analysis is luck. Yes, the enigmatic variable of chance.  As much as skill and effort do play a role in success, there are circumstances that we cannot control.  The marginal effect of luck was not lost on Machiavelli. Especially considering he saw the advantage in managing newly acquired territories on virtue rather than on a happenstance shift in vicissitudes (Machiavelli, 1532, P. 22. Transl. Mansfield 1985) [1]. While it is unwise to rely on luck alone it cannot be left out of the equation. As luck accounts for all of the factors that are outside of the domain of our control. Through acknowledging the power of chance and uncertainty we can humble ourselves. Not fall prey to the hubris that can blindside us from success. Luck is a double-edged sword. When lady fortunate smiles upon us everything is wonderful. As soon as that smile sours and forms a grimacing scowl dark days are on the horizon. The variance of chance serves as limitation and such be considered in any decision.

 

The Prince certainly exhausts the point that fortunate alone cannot ensure success. Chance is too unstable to provide any clear and substantive results.  Luck and fortune are imperative in any enterprise that involves risk. It might be wise to preface that it best to take on calculated risk versus running into the situation blind. Machiavelli understood this well. However, he also acknowledges that you do need to take some risks. That with no risk there is no reward. That lady luck tends to smile down upon the young rather than the old. Why? Because as we age we become more risk-averse. Without risk, there isn’t a reward. Creating a razor-thin balancing act between the risk-to-reward ratio. Providing us with the insurmountable task of finding the golden mean. While lady luck does favor the young, keep in mind the young tend to make more mistakes. They may incur large victories on rare occasions, but they also experience a lot of losses.  Those losses provide the framework for our wisdom as we get older.

 

I conclude, thus, that when fortune varies and men remain obstinate in their modes, men are happy while they are in accord, and as they come into discord, unhappy. I
judge this indeed, that it is better to be impetuous than cautious because fortune is a woman; and it is necessary if one wants to hold her down, to beat her and strike her
down. And one sees that she lets herself be won more by the impetuous than by those who proceed coldly. And so always, like a woman, she is the friend of the young, because
they are less cautious, more ferocious, and command her with more audacity.

(Machiavelli, 1532, P. 101. Transl. Mansfield 1985) [2].

 

Regardless of the contingencies of luck, when lady fortunate smiles we must be ready to act.  In all honesty,  pushing aside the flowery language and the rape metaphor (which I do not endorse), he is telling us to recognize opportunities when they present themselves. Any time fortune turns in our direction it is a rare gift. The opportune time to exercise our virtue or skill to foster sustained success. Your boss assigns you to attend an industry convention. It sounds like an inconvenience, but you have been given a great opportunity. You have been presented with the chance to network. If you are presently dissatisfied with your job, you have your opportunity to scout out your next employer.  If you are a hiring manager you have just interviewed a perceptive and bright job candidate that exhibits leadership qualities. Do not let the age of this recent college graduate fool you. With some guidance to polish the soft skills, this individual could be your future protege. Lady luck has just thrown you a bone. You need to take her up on this gift. It requires your skill to recognize what is right in front of you. If not, it will pass you by. Because luck is fickle and fleeting.

 

 

Machiavelli’s wisdom is often overshadowed by is reputation.  A reputation that is synonymous with ambition and a wanton disregard for higher moral standards.  It is reasonable to question to what extent this image was true. The royal monarchs of old-world Europe were known to give lip service to the lofty visions of Aristotelian virtue.  In reality, quite often fell short of this ideal. Typically veering more toward the vices of greed, lust, ambition, and other excesses. From this perspective, it would appear as if Machiavelli merely pays the price for his honesty and pragmatism. It could be argued that he may even be more moral for his candor. Then again who wants someone exposing all of the trade secrets? It should also be noted that many of the debauchery prone rulers post-1532 who spoke of higher virtue may have very well taken a page out of old Nick’s book.

 

Machiavelli taught us about things far deeper than how to maintain an iron fist rule over a principality.  He was intimately aware of the shortcomings of human nature and intricately weaved these insights into the greater corpus of his brand of political philosophy. Hence why it is almost a crime to narrow his observations to the maintenance of the autocratic rule that characterized the Florentine royal court. He guides the patient and prudent reader that transcends the scope of political power. Machiavelli’s  The Prince is truly multidisciplinary and timeless. Expounding upon questions as broad as those of human psychology, diplomacy, opportunity costs, effective communication, and resource utilization.  So why not apply these lessons to the modern-day workspace? Hence why I have embarked upon this ongoing series.

 

Today’s topic of analysis is luck. Yes, the enigmatic variable of chance.  As much as skill and effort do play a role in success, there are circumstances that we cannot control.  The marginal effect of luck was not lost on Machiavelli. Especially considering he saw the advantage in managing newly acquired territories on virtue rather than on a happenstance shift in vicissitudes (Machiavelli, 1532, P. 22. Transl. Mansfield 1985) [1]. While it is unwise to rely on luck alone it cannot be left out of the equation. As luck accounts for all of the factors that are outside of the domain of our control. Through acknowledging the power of chance and uncertainty we can humble ourselves. Not fall prey to the hubris that can blindside us from success. Luck is a double-edged sword. When lady fortunate smiles upon us everything is wonderful. As soon as that smile sours and forms a grimacing scowl dark days are on the horizon. The variance of chance serves as limitation and such be considered in any decision.

 

The Prince certainly exhausts the point that fortunate alone cannot ensure success. Chance is too unstable to provide any clear and substantive results.  Luck and fortune are imperative in any enterprise that involves risk. It might be wise to preface that it best to take on calculated risk versus running into the situation blind. Machiavelli understood this well. However, he also acknowledges that you do need to take some risks. That with no risk there is no reward. That lady luck tends to smile down upon the young rather than the old. Why? Because as we age we become more risk-averse. Without risk, there isn’t a reward. Creating a razor-thin balancing act between the risk-to-reward ratio. Providing us with the insurmountable task of finding the golden mean. While lady luck does favor the young, keep in mind the young tend to make more mistakes. They may incur large victories on rare occasions, but they also experience a lot of losses.  Those losses provide the framework for our wisdom as we get older.

 

I conclude, thus, that when fortune varies and men remain obstinate in their modes, men are happy while they are in accord, and as they come into discord, unhappy. I
judge this indeed, that it is better to be impetuous than cautious because fortune is a woman; and it is necessary if one wants to hold her down, to beat her and strike her
down. And one sees that she lets herself be won more by the impetuous than by those who proceed coldly. And so always, like a woman, she is the friend of the young, because
they are less cautious, more ferocious, and command her with more audacity.

(Machiavelli, 1532, P. 101. Transl. Mansfield 1985) [2].

 

Regardless of the contingencies of luck, when lady fortunate smiles we must be ready to act.  In all honesty,  pushing aside the flowery language and the rape metaphor (which I do not endorse), he is telling us to recognize opportunities when they present themselves. Any time fortune turns in our direction it is a rare gift. The opportune time to exercise our virtue or skill to foster sustained success. Your boss assigns you to attend an industry convention. It sounds like an inconvenience, but you have been given a great opportunity. You have been presented with the chance to network. If you are presently dissatisfied with your job, you have your opportunity to scout out your next employer.  If you are a hiring manager you have just interviewed a perceptive and bright job candidate that exhibits leadership qualities. Do not let the age of this recent college graduate fool you. With some guidance to polish the soft skills, this individual could be your future protege. Lady luck has just thrown you a bone. You need to take her up on this gift. It requires your skill to recognize what is right in front of you. If not, it will pass you by. Because luck is fickle and fleeting.

Bootleggers and Baptists Part II- Netflix is One of the Winners of COVID-19

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As it has now approached Memorial Day weekend many localities are either starting to loosen or lift their shelter-in-place orders. Even in regulation heavy Massachusetts beaches have been reopened in commemoration of the holiday. The beaches were reopened with specified safety restrictions [1]. Even though states are starting to slowly reopen it is hard to say whether or not we are out of the woods. There is still the potential of a second wave resurgence in COVID-19 cases.

The economic turmoil that has been spurred by state-mandated shelter-in-place orders has been well documented. Approximately 38.6 million American workers have applied for unemployment benefits within the past couple of months [2]. Per the National Bureau of Labor Statics unemployment rate increased to 14.7% in April [3]. The recent surge in high profile companies filing for bankruptcy could be seen as another oblique consequence of COVID-19 lockdowns [4]. Painting a very bleak economic picture for the United States.

 

Despite the financial carnage caused by government-mandated shelter-in-place orders some businesses are thriving. Certain sectors such as cleaning and delivery services have experienced relative success in light of the pandemic [5]. It could even be fair to argue that some businesses have prospered due to the virus-related restrictions. Reminding us that there the unseen beneficiaries of many regulatory proposals. Even those implemented in the name of public health and safety.  Regulation cuts both ways. It may benefit some while being a detriment for others.

This odd phenomenon is punctuated by economic Bruce Yandle’s concept of Baptists and Bootleggers. The formation of coalitions with seemingly opposing factions coming together for a common goal (Munger, 2020, P.513) [6]. The Baptists being individuals who support the regulation on moral grounds such as public safety or common decency. The bootleggers are proponents of such measures due to the financial benefits they stand to gain. The example Yandle uses is the prohibition of alcohol sales on Sundays (Yandle, 1983, P.2) [7]. This regulation satisfies the moral concerns of the Baptists. The Bootleggers effectively have no competition on Sundays.

Yandle came to this counterintuitive realization while serving on Council on Wage and Price Stability back in the 1970s. Yandle was surprised to find out that many industry lobbyists opposed deregulation (Yandle, 1983, p.2) [8]. To a certain extent, there is a demand for regulation (Yandle, 1983, p.3) [9]. Commodifying the legislative process due to the benefit of reducing competition. Smaller companies may not have the resources to adapt to the new regulations effectively making continued operation illegal. Effectively putting them out of business. Creating barriers to entry without even requiring an antitrust exemption such as those allotted to agricultural collectives and Major League Baseball.

 

The Baptists of the shelter-in-place orders would have to be healthcare professionals. Coast to coast doctors and nurses on the frontlines have expressed their concerns about the spread of the virus. Back in March, an Arizona doctor started a petition urging the state to impose a statewide lockdown order [10]. Motived by the laudable goal of stifling the spread of the disease or in the vernacular of epidemiologists “flattening the curve”. Certainly well-intentioned from the standpoint of point of public health. Especially considering the death count from COVID-19 in the United States is presently estimated at 73,639 [11]. One unfortunate side-effect that good intentions have not accounted for was the “temporary” suspension of civil liberties. Such as the freedom of mobility and property rights issues (F.E. Guerra-Pujol, 2020, P.2-4) [12]. That is a separate issue.

 

Some states have loosened lockdown orders and have even allowed for dine-in services [13]. However, many healthcare professionals are slow to even reconvene business due to concern about the spread of COVID-19 [14]. Many health care professionals have urged states to reopen slowly to veer away from a secondary spike in cases [15]. Clearly demonstrating lingering worries for the spread of COVID-19. Also, strongly demonstrating a moral dimension of lockdown orders. These appeals for cautious relinquishment of restrictions has been framed in the context of harm reduction. Have been centered around the moral imperative of saving lives. Providing the moral smokescreen for anyone with products or services that will increase in demand due to the lockdown.

 

One of the quiet beneficiaries of shelter-in-place orders has been streaming services, particularly Netflix. Any company with a business model that requires little interaction with customers has the advantage. Entertainment venues such as movie theaters, restaurants, bars, clubs, etc. were closed due to government decree. Effectively narrowing the array of entertainment options to activities that involve minimal social interaction. The top contenders being social media, television, and video games. Netflix was already an established fixture in television streaming services. As well as one of the earliest entrants to the market. Over the past couple of years. television viewers swapping out cable boxes for stream services has secured Netflix’s foothold on the market [16]. Even though  Netflix has not openly petitioned for any “lockdown” legislation they are clearly the Bootleggers in this situation.

 

The spike in Netflix subscriptions within the past couple of months is clearly correlated with the shelter-in-place orders nationwide.  Back in April the company reported a 28 % increase in revenue [17]. The rabid success of Nexflix exclusive content such as the docuseries Tiger King is undeniable. This documentary mini-series become a cultural phenomenon. Solidifying itself as a distraction from the uncertainty we face in a COVID-19 impacted America. While such programming may serve as an entertaining diversion it also has helped Netflix excel and emerge as the dominant form of entertainment.  It certainly helps to have a captive audience with a limited number of alternatives when faced with various restrictions. Per consumer surveys, Netflix has been voted the most reliable streaming service [18]. Regardless of the conditions of the pandemic is merely another feather in their entrepreneurial hat.

 

This is not an indictment of the success of companies that have prospered in the COVID-19 economy. Rather an observation of how the regulatory sword slices both ways. The “quiet beneficiaries” such as Netflix may not have openly called for shelter-in-place orders, but they without a doubt have seen increases in revenue due to such laws.  In part, this surge in business has been facilitated by the Baptists in the health care industry.  Putting pressure on state governments to shut down all nonessential businesses. Creating clear winners and losers in the COVID-19 economy.  Some companies are thriving will others are dying.

Extrapolating the lessons from Richard Cantillon concerning the non-neutrality of money is very much applicable to regulation.  Much like how increasing the money supply impacts factor other than nominal prices (Thornton, 2006, p.6) [19]. Regulation isn’t regulated to the narrow window of the issue that it is intended to solve. It can possess loopholes that can be exploited. By design can create unintended anticompetitive features. Demonstrating the non-neutrality of regulations. They have downstream consequences that often are overlooked by the Baptists and are well known to the Bootleggers.

 

 

 

 

Machiavelli in the Office – Part VI- Don’t Hire Mercenaries

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Machiavelli could easily be considered one of the most misinterpreted thinkers in political philosophy. His name has become synonymous deceit and other vices of public office. This marred image of Machiavelli has sullied his reputation as a philosopher for centuries. Despite Machiavelli’s image problem, his insights extend well beyond the provincial mode of retaining tyrannical authority. He expounded upon immutable truths about human nature. Truths that need to be acknowledged anytime you are navigating any kind of social hierarchy. Whether naturally developed or systematically contrived.

 

By Machiavelli conveying these truths in his works of political philosophy, he distinguishes himself on a deeper level than a mere political theorist. Rather, he transcends that restrictive title. Embarks upon detailing the more convoluted and perplexing realm of human nature. His observations at times even veer into the territory of practical advice.  Hence why the application of his work isn’t just limited to the sly trickery that characterized the Florentine royal court back in the 16th century.

 

In terms of applying  Machiavelli’s lessons to the workplace, this insight is a unique one. That requires some abstract thinking to foresee the application but conceptually is similar enough that it works. This is about hiring managers utilizing contracted employees from employment agencies. This is colloquially known as “using temps” or temporary employees. Some individuals may question what hiring temps over fully company employees has to do with mercenaries. Hiring mercenaries is something that Machiavelli advises all shrewd rulers to avoid doing so.

And by experience one sees that only princes and armed republics make very great progress; nothing but harm ever comes from mercenary arms. And a republic armed with its arms is brought to obey one of its citizens with more …. (Machiavelli, 1532, P.50. Trans. Mansfield 1985) [1].

 

And because with these examples, I have come into Italy, which has been governed
for many years by mercenary arms, I want to discourse on them more deeply, so that, when their origin and progress have been seen, one can correct them better. (Machiavelli, 1532, P.52. Trans. Mansfield 1985) [2].

 

Let him, then, who wants to be unable to win make use of these arms, since they are much more dangerous than mercenary arms. For with these, ruin is accomplished; they are all united, all resolved to obey someone else. But mercenary arms, when they have won, need more time and greater opportunity to hurt you since they are not one whole body and have been found and paid for by you. (Machiavelli, 1532, P.55. Trans. Mansfield 1985) [3].

 

All three quotes from The Prince exemplifies the perils of hiring soldiers. At the end of the day, the soldier of fortunate only has his eyes set on fortune. There isn’t any sense of pride, heritage, community, kinship, or other forms of social cohesion bonding them to the kingdom they have been paid to defend. Even if native-born soldiers are receiving a salary and other benefits (in the modern era; health insurance, education) they still have a bond to the country they defend. They joined the military out of nationalist or patriotic convictions.  There is more of an emotional and philosophical bond to there defense of the homeland. Money can motivate people to do unfathomable things. To truly and consciously commit to taking a bullet for a cause is an act based upon strong convictions. This is the kind of loyalty that cannot be bought. Some historians have even speculated about the folly of England utilizing Hessian mercenaries in the Revolutionary War. Ultimately, providing some credence to the assertions of Machiavelli.

 

Temporary workers hired from an employment agency provide similar issues. From my observations, temps tend to be fired for much more frivolous reasons than full employees. If you are hired directly, in most instances, your boss will understand if you are having car trouble. If you are a temp you could very well be fired over the incident. If you were directly hired by the company you would be subject to the rules listed in the “employee handbook”.Such document details policies that provide specific parameters for proper conduct. Meaning you can be three times versus once before you are terminated. Temps are technically considered employees of the employment agency. So they are not insulated by these measures. Paralleling the premise of being paid to be a foreign soldier.

 

The pretense of lacking stability and lack of uniform policies for temps skews incentives away from productivity. We all know that “temp-to-hire” arrangements are an exercise in carrot dangling. Your manager doesn’t ever treat you like part of the team. What is the point in killing yourself for a company that will never outright hire you? It presents a problem of mutual investment. The employer doesn’t feel invested in the temporary employee. The temporary employee does not feel invested in the company.  Creating a disconnection that is a very similar dynamic to that of mercenaries. A lack of connection and commitment does not yield good results.

 

 

 

Bootleggers & Baptists- Part I- Gun Control Act of 1968

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Introduction:

 

There is a tendency to assume that regulation is implemented for the betterment of society. Consumer protection measures and other regulations are seen as necessary for the common good. Safety laws typically require amendments to product design which would result in costly alterations. Ironically, there are some unlikely beneficiaries of safety regulations.

As economist Bruce Yandle came to find out while working as for the Federal Trade Commission.  To his surprise, many industry representatives actually were on board with these regulations. They were even concerned that that government agencies would abolish these laws. Yandle found this to be quite counter-intuitive many safety regulations impede efficiency (Yandle, 1983, p.2) [1]. The true benefit of such restrictions was the reduction in competition (Yandle, 1983, p.2) [2]. Larger corporations would be able to financially withstand the new safety requirements.  For smaller companies, these restrictions operate as a barrier to entry. Regulations can put severe hardships on small businesses that have a cartelization effect [3]. Eliminating competition without even violating the Sherman Antitrust or the Clayton Act.

These consequences are the byproduct of what Dr. Yandle has dubbed the Bootleggers and Baptists effect.  It is the phenomenon in public policy where improbable coalitions are formed to achieve the same goal. This analogy is drawn from Baptists wanting to prohibit liquor sales on Sundays for moral reasons. The bootleggers in tandem supporting this restriction due the eliminating the competition of legitimately licensed bars and liquor stores (Yandle, 1983, P. 2-3) [4]. Bootleggers are able to advocate for their own self-interest under the aegis of the moral concerns of the Baptists. Forming a dynamic where moral concerns provide cover for those who can enrich themselves. As the Bootleggers are criminals and laws are not a deterrent for them. A law banning liquor sales on Sundays will deter law-abiding alcohol vendors. Leading to us to question who the true beneficiaries are of any zealously petitioned regulation.

 

This essay will be the first installment of a continuous series of real-life applications of this theory. Considering the wide breadth of practical examples there will be many essays to come. The first essay will be dedicated to the impact of the 1968 Gun Control act.

 

Who are the Baptists and who are the Bootleggers:

Baptists: Gun control Baptists

Bootleggers: Domestic gun manufacturers

 

Parameters of the 1968 Gun Control Act: 

This specific piece of gun control legislation was popularly believed to be in direct reaction to the civil unrest of the turbulent 1960s. Political press mounted after the assassinations of high profile political figures. Including president John F. Kennedy and  civil rights activist Martin Luther King Jr [5]. The fervor to pass gun control laws only was compounded by a series of inner-city riots that occurred throughout the course of the decade [6]. Some commentators have even hinted towards gun control measures in the 1960’s being racial bias [7]. More extreme civil rights advocates such as the Black Panthers were well known for regularly carrying semi-automatic rifles.

 

Slain public figures and the raucous carnage of urban riots superficially like an appropriate context for restrictions on gun ownership. After all, the outcry for gun control laws came out of concern for the safety of the public. However, was this 1968 law evenly applied to all gun makers and vendors? Not exactly. The legislation tended to skew in favor of domestic gun manufactures. Dating back to the late-1950’s domestic gun companies in New England’s “gun valley” expressed to local politicians concerns over foreign competition (Newhard, 2015, P.2) [8]. Blatantly exposing the desire stifle competition from foreign producers. Much of the gun control rhetoric of the 1960s was pointed at imported guns. The emphasis that Lee Harvey used an Italian mail-order purchased rifle to kill JFK (Newhard, 2015, P.4) [12]. Complaints of “surging” numbers of cheap guns being imported into the United States. Blurring the line between genuine concern for public safety and protectionism.

 

Beyond the salient nature of the protectionist proclivities of U.S. gun makers, there is also some evidence that the legislation was disproportionately angled at foreign gun producers. It can be argued that there were some asymmetries the parameters of enforcement in the 1968 bill. Restrictions were established for vendor licensing, mail-order arms purchases, and the sale and transportation of imported weapons (p.4-8) [9]. Heavier licensing fees were directed at mail-order gun vendors (Newhard, 2015, P.2) [10]. Many may argue that placing such restrictions on mail-order sales were worth the price of keeping firearms out of the hands of children. Such a stance ignores the implicit benefit of domestic producers. Mail-order prior to the internet was the main avenue for obtaining European rifles and pistols. Making more difficult to purchase anything from Beretta but guns from Ruger could easily still be bought brick and mortar.

 

It can be speculated that shortly after the bill was signed that there may have been deliberate delays on the approvals of gun importation licenses. The bill was signed into effect in October 1968  and gun dealers had a deadline of December 15th (Newhard, 2015, P.5)[11]. Anyone versed in economic-behavioral patterns or just plain common sense could foresee the litany of vendors racing to get their licenses prior to the law passing. Despite the upsurge in requests for licenses, government officials dragged their heels when it came to approving them. It was suggested at the time to be a means of preventing a “flood of foreign handguns” into the country prior to the enactment of the new law. This circuitous form of bureaucratic activism did more to hurt small firearms dealers than did promote public safety.  Small-time foreign gun dealers found it easier to stop selling guns than continue to comply with the new laws (Newhard, 2015, P.4) [13].

 

Final Thoughts on the Dynamics of this B&B Dynamic:

This example is a classic example of ignoring the incentives of invested interests.  I would argue that this is a defining feature of most Baptists and Bootleggers relationships. On one side you have the advocates compelled by moral convictions. Who unwittingly provides the veiling moral cover for the self-interested bootleggers. If the bootleggers ever directly advocated for the policies that benefited them without the moral smokescreen they would be derided by the average voter.  Doing so under the guise of the common good the story changes.

The example of the 1968 Gun Control Act touches upon a point made by Bruce Yandle back in 1983, there is a demand for regulation. There is an economic dimension to the supply and demand of regulation produced by the government. When there is a profound increase in market competition many major companies favor regulation. Yandle cites technological changes, demographic changes, significant changes in factor costs, and new information as being factors swaying the demand for regulation (Yandle, 1983, p.3-4) [14]. Often there are anti-competitive consequences of imposing new safety regulations. Time and money are required to adapt business practices to the contingencies of compliance. This will often be devasting to small businesses.

 

 

 

 

 

 

Machiavelli in the Office – Part V: Respect Property and Privileges

 

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Machiavelli’s remains one of the most insightful and misinterpreted philosophers of the Pre-Enlightenment era. His observations have been grossly distorted to the point that his very name inspires fear of treachery and callous calculations. Few people in human history have ever been honored with having their name made into an adjective. However, this honor for Machiavelli is muted by the fact that it carries a negative connotation. Leading to his legacy as a writer and thinker to be forever stained.

 

Machiavelli’s legacy is marred by misconceptions is typical for writers who are either seldom read or read in the proper context. I would tend to agree with Machiavelli scholar Harvey Mansfield that the latter is very much applicable to his work [1]. Machiavelli was immoral or amoral as he is typically painted by popular perception. Rather he departed from the classical understanding of morality.  Favoring pragmatic uses of force and deception versus appealing to divine directives. These same godly decrees most likely were given lip service by the pre-renaissance ruler. However, once they interfered with the interests of the royal court were quickly dispensed with. Leading one to surmise that maybe Machiavelli wasn’t any less moral, but rather was more forthright.

 

All because he has been misrepresented over the centuries does not mean we cannot draw valid lessons from him. He provides some great reflections upon general aspects of human nature that extends beyond the blood-soaked halls of the 16th-century Florentine royal court. Lessons that can be applied to just about any social structure including the work environment.

 

In Niccolo Machiavelli’s book The Prince, he mentions several times that a rule needs to respect the property of his subjects. This lesson can be modified for a manager in an office environment by supplanting property with workplace privileges. An example would be allowing your employees the ability to work remotely a few days a week. Keep in mind this example may be more applicable in the pre-COVID-19 world. It will work for this essay. Naturally, if you receive a directive from upper management to suspend this privilege with little justification their will be some backlash.  The brewing undercurrent of frustration and resentment will dampen morale.  The consequence of backlash is referenced multiple times in The Prince.

 

Machiavelli cautions to be cautious when levying taxes upon your subject because unjust and burdensome taxation could fuel discord (Machiavelli, 1532, P. 68 & 72, Transl. Mansfield, 1985) [2]. Predating the whole “taxation is theft” mantra. However, he does more directly call out the vice of not respecting property rights among rulers.

 

What makes him hated above all, as  I said, is to be a rapacious usurper of the property and women of his subjects. From these, he must abstain, and whenever one does not take away either property or honor from the generality of men….  (Machiavelli, 1532, P. 68 & 72, Transl. Mansfield, 1985)  [3].

 

In other words, it might be wise if you have any leverage to debate this policy change with upper management. Otherwise, you will have some disgruntled employees on your hands. Unfortunately, in some instances, managers need reminders to keep their hands off of the property of their subordinates. It could be as minor as using Karen’s bottle of hand sanitizer when she on vacation without her permission.  It could even as severe as taking claiming to Henry’s commission on a sale behind his back. Both situations demonstrate a boss disrespecting the property of their employees. While the scene with the hand sanitizer is little more of minor faux pas, taking someone else’s commission is stealing out of their pocket.  Aside from the moral consideration of theft, how are you going to gain the respect of your staff if you are willing to blatantly steal from them?  You are lucky if you can retain staff at that point never mind have them respect you.

 

Unfortunately, I have to say don’t fraternize with the spouses and romantic partners of your employees. Not that they are property. Slavery has been abolished, therefore people cannot be property.  There is no better way to sow resentment than to cross that line. It is a folly that will not only sully your reputation as a leader but will cause unnecessary friction.  Also, it is completely a superfluous action. There is never a good reason to venture into that territory.  No one leadership using reason would ever think that such conduct is permissible. You are not a member of congress. You are not in the oval office. There is no reason to ever go there.

My Mind Has Been Bought and Sold By The Ghost of David Koch

 

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To the perceptive reader, it is conspicuous that the title of the essay is a sarcastic quip. This is not intended to be a diatribe against a man who is no longer able to defend himself due to his passing last summer. Rather this is a pointed argument against those who fixated on the invested interests in the Libertarian movement. This critique isn’t just relegated to the Libertarian movement but, any ideologue that promotes laissez-faire economic policies. The core assumption being that such convictions can only be perpetuated by the motive of avarice. If you have faith in markets over government institutions you have either been bribed or manipulated by the wealthy businessmen that fund pro-market think-tanks. Such misconceptions are commonly echoed throughout American culture. Along with a litany of other anti-market biases plaguing the collective consciousness of the average citizen.

 

Advocates of free markets are not chess pieces or hand-puppets of the Koch brothers. The irony is that rarely do those who express skepticism of markets address the motives of those sowing anti-market bias. Making me wonder if they entranced under the spell of a community activist or a power hungry bureaucrat. Much like affluent businessmen the government administrators respond to incentives. I hardly doubt anyone chooses to head a government department or ascend to the upper ranks of union leadership for truly altruistic purposes. Odds are benevolence isn’t guiding them but power and money. Generally the same motives ascribed to successful entrepreneurs and investors. Why is the bureaucrat and the union leader automatically perceived as having purer intentions than the businessman? When both the upper tiers of the public and private sectors have the same incentives for advancement. The only difference is that the public sector is funded by tax dollars.  This realization makes me wonder who is the one with the genuinely dogmatic views of markets? Unwavering faith in unions and government only being oriented towards “inherent good” is the definition dogmatic. Especially when you dismiss their salient agendas.

 

The myth of the grand network of Koch brother bribed academic institutions is on many grounds erroneous. For one, most establishments of higher learning lean left politically. The left-wing bias on college campuses is well documented. Only 9 % of surveyed faulty identified as being conservative [1]. It is certainly disingenuous to pretend there is some crazy right-wing/Libertarian conspiracy spearheaded by the Koch brothers. In stark contrast to popular perception, George Mason was pro-market prior to receiving any Koch money. It should be noted that it is public knowledge that the Koch brothers donate to George Mason and its affiliated research institute the  Mercatus center. A GMU faculty member wrote an opinion piece a few years back indicating that the donor relationship was “driven” by the economics department [2]. The circumstances behind the donor relationship may be unique to this one school, there are litany of other organizations and schools that the brothers donate to. The very fact that the dynamics of this relationship veer away from what is popularly believed  is imperative to understand. The notion of greedy billionaires are paying off professors to proliferate the theories of Hayek and Tullock evaporates in light of the truth.

 

Many of academic watchdogs shrieking in outrage over a pro-capitalist presence in higher education needs to realize/acknowledge they have their own donors as well. There are think tanks that range from advocating for comprehensive ideologues to  single local issues. In other words, you have invested interest backing just about any political philosophy in existence. The odds that your cherished belief system is free of the influence of wealth donors is not only naive but inaccurate. If supporting a certain set of beliefs will not increase their bottom line it will aggrandize the donor in other ways (more political influence or power). At the very least money being a core motive is easy to understand intellectually and morally. The lust of for power is much more unsettling.

 

Surprise, surprise! Left-leaning think tanks have their own high profile mega donors.  Few people (who operate on reason) are pontificating upon the conspiratorial machinations of these donors. This alone demonstrates a giant gulf in academic bias. If we have right-wing donors it is a crisis. If we have left-wing donors no alarms are raised. Which could lead one to believe such complaints are more partisan  than  a genuine concern for academic bias. Beyond the sheer hypocrisy, it may be usefully to examine the donations received by left-wing research institutes. For instance, the left-leaning Brookings Institute in 2019 received over 1 million dollars in donations from the Bill & Melinda Gates Foundation (Brookings Institute, 2019, P. 45) [3]. In 2018, the Gates Foundations provided over 2 million dollars in donations to Brookings Institute (Brookings Institute, 2018, P. 45) [4]. One could spend an innumerable amount of time collecting data linking the Gates foundation to a litany of various left-leaning institutions. It would only serve the same function of  connecting the dots in a disjointed attempt to fabricate a conspiracy.

 

Regardless of your political propensities it is very likely there is a donor with deep pockets funding the cause. Even the populous right has their big time financial backers  The Trump administration owes a great debt to the Mercer family in my humble opinion.  Making the observation that the vast majority of Libertarian-leaning institutions is funded by the Koch brothers is aimless. It is merely reaching around in the dark in a last ditch effort to diminish the credibility of organizations such as the Mercatus center.This attempt is not only is a partisan assault it is futile. Most fact checking websites find the research and articles published by Mercatus to be factual [5]. Does their ideological orientation really matter if they are publishing valid research? This leads me to believe contriving the narrative that the Koch brothers are pulling the strings on autonomous organizations is merely a desperate ploy to obscure facts that poke holes in anti-market rhetoric.

 

The arrogance displayed when such opponents claim that market orientated types of ordinary means have been “brain-washed”  is  awe inspiring. Most of these self-proclaimed “free thinkers” possess ideas that clearly did not originate from their own critical thinking. Sounds more like they are parroting the bombastic and hyperbolic talking points of labor unions, left-wing think tanks, community organizers, and liberal politicians. These folks are not re-inventing the wheel, but rather are regurgitating the agenda of invested interests. Interestingly enough what they claim those who are  right-of-center are doing. In order to avoid a circular argument, I will not continue to direct such claims at those are skeptical and hostile towards free-market capitalism. In contrast, I will state that the diffusion of ideas is not an isolated process. Ideas are generated the accumulation of information presented through mediums of communication. We typically file it away mentally as being either being valid or invalid. From this we tend to form our worldview.

 

To assume that you are a free thinker and that the opinions and observations of others exerts no influence on your views is a delusion. At best, is a twisted and fractured  piecemeal assembled form of relativism not fitting into a comprehensive philosophy. At worst, you are a devotee to a specific political philosophy, but are too blind to see this. The self-perception of being a “free thinker” is so compelling you are willing not ignore that you do belong to a tribe. For example, if you agree with 85 % of the Democratic party’s platform, you are a democrat. Anything else is an appeal to the bias of wanting to believe that you are more unique and individualistic than you truly are. Hence, my frustration with individuals who shelter themselves under the label of  being an Independent. Are you truly independent? If all candidates and positions on one side of the fence are completely abominable and the other half of the divide is completely reasonable. Guess what… you are not an Independent.  I would expect someone who is truly political independent to have more diversity in the policies they support.

 

The free thinker illusion provides a sense of sanctimony to anyone who wants to claim Libertarians and Conservatives are merely puppets of big business. One point that they tend to over look is that they anti-market types have donors with deep pockets. Also that their point of view has been carefully crafted by intellectuals on their side of the divide.  Considering I am not a billionaire I must be mistaken or hoodwinked by these greedy interests. It isn’t that I have been inspired by F.A. Hayek, Gordon Tullock, Ludwig von Mises, etc. It was my gullibility that allowed me to be manipulated and then  unwittingly become the mouthpiece for ideas that keep big corporations afloat. Maybe if I see the light I will see that error of my ways.

A Numeric Argument for Jury Nullification

 

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This essay will present something of a heterodox argument for jury nullification. It will not rely on Constitutional, Common law, or case precedence. Nor will it rest on a philosophical refutation of enforcing unjust laws. It will be based upon a specified contingency under which the impact of juror bias has a negligible impact on the verdict. The scenario in which this premise is applicable is limited to a provincial window of conditions. Some crafted by circumstances and others shaped by state law.  In the demonstrated hypothetical example, whether the juror excuses themselves from the case due to bias or motions to not indicate the suspect (even when a probable cause has been established).

 

As the previous paragraph has hinted, the contingency is specific to grand jury proceedings. The function of a grand jury is not determining guilt but rather based upon witness testimony if there is a strong likelihood that a crime has been committed. The job of the jury is to make a probably case determination based upon the evidence. Essentially, the jury helps the state ascertain if there is enough evidence to pursue charges. When you have been called to serve on a grand jury you are not reviewing just one case. Typically, you convene weekly and review a multitude of various cases throughout a couple of months. Differentiating this process from that of a criminal trial. Due to the variety of potential cases a juror will decide on, the judge tends to be more lenient in the jury selection process. Being biased towards drug cases for, for example, is not automatic grounds for disqualification for jury duty. Rather you are requested by the judge to excuse yourself from that specific case. Then rejoin your fellow jurors on the next case.  Making grand jury hearings quite a bit different than a criminal trial.

 

In the state of Arizona, grand jurors are read the daily admonitions at the beginning of each session.  The admonitions are essentially a reading of state statue 16A A.R.S. Rules Crim.Proc., Rule 12.2:

 

Rule 12.2. Grounds to Disqualify a Grand Juror

A grand juror is disqualified from serving in any particular matter if the juror is:
(a) a witness in the matter;
(b) interested directly or indirectly in the matter under investigation;
(c) related within the fourth degree by either consanguinity or affinity to a person under investigation, a victim, or a witness; or
(d) biased or prejudiced in favor of either the State or a person under investigation. [1].

 

This statue is a means of preventing juror bias influence the probable cause ruling. I particularly take issue with part (D). I believe that part D only is applicable if the individual is prejudiced towards the interest of the state. From purely a mathematical standpoint, it does matter if I excuse myself or motion to not indicate the subject under investigation. Both operate in favor of the suspect.

 

 

Example:

 

Grand Jury Ruling:

 

Crime : Possession of Marijuana (Class 6 felony in Arizona) [2]. Possession of Drug Paraphernalia (plastic baggie containing Marijuana)(Class 6 felony in Arizona) [3].

 

 

Scenario #1: True Bill- 15/1 ( One juror opted to vote against indictment. Did so on grounds of the Marijuana laws in Arizona being unjust. In other words, they actively engaged in juror nullification.)

 

Scenario #2– True Bill- 15/0. (One juror opted to be excused  from the hearing due to their beliefs about Marijuana use).

 

 

 

Does either action truly influence the results of the ruling?  No.  This should be self-evident to anyone with even the most rudimentary math skills! If it does not skew the results of the ruling from a mathematical standpoint, why would this be problematic? Voting against indictment and excusing yourself has the same numeric impact. It is similar to what people were saying back in the 2016 presidential election. ” Don’t vote third-party, because you are throwing away your vote.”  or ” If you vote third-party that is just another vote for Trump/ Hillary (depending on which side of the fence you were on). It is a similar principle from a numeric standpoint. Ideologically the consequences are quite different (disclaimer: I am third-party voter).

 

 

The fact that Rule 12.2 explicitly disqualifies those biased towards the suspect is absurd.  As demonstrated above, the numbers do not change. Excusing myself from the hearing is due to bias has the same numeric impact as opting to drop the charges. It could be argued that excusing yourself from the case isn’t doing the right thing, but is rather a legally enforced formality. To the best of my knowledge, no one else in the state of Arizona has commented on this paradox. I am surprised by this due to the simplistic nature of this observation. Nevertheless, what is the point of refraining from engaging in juror nullification if it will have the same outcome as excusing ourselves from the case?

 

 

Complying with the part D clause of Rule 12.2 is the epitome of mindless legal positivism. It does not take into consideration the actual results of the juror’s self-removal from the hearing. It functions as a codified deterrent from engaging in jury nullification.  A practice that has been long defended morally and in common law. It also has historical precedence for combating unjust laws. Such as the Fugitive Slave Act of  1850. I would suggest that it is fair to wanting down-vote levying two felony charges against someone for possessing 1 gram of pot. Above all, a victimless crime.

 

 

Please keep in mind the contingency of this argument is self-limiting. It only applies to the specific conditions cultivated by the unique conditions of grand jury hearings and Arizona state law. Please note that this observation of compliance with part D of Rule 12.2 is only applicable to bias in favor of the suspect. The numeric impact has the opposite effect if the juror is biased in favor of the state. I cannot justify such actions on the grounds of the numeric argument.

 

 

Contingencies for the Numeric Grand Jury Paradox:

 

  1. Only applicable to Grand Jury hearings.

 

2.Only applicable to Arizona state law or similar statues having specific conditions for       juror disqualification.

 

  1. This theory is only applicable to clause D of Rule 12.2. Maybe applied conditionally.

 

  1. It is only applicable clause D if the juror in question is biased in favor of suspect.

 

  1. The bias towards the suspect is only applicable to the paradox if it is on moral grounds.  Only if the juror either takes issue with the law or how the law is being applied to the suspect.

 

 

 

Cantillon Effect- Income Re-Distribution in Reverse

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The economic havoc wreaked by the COVID-19 outbreak has been felt not only across the United States but all over the world.  The government-sanctioned shelter-in-place orders and other restrictions have brought various sectors of the U.S. economy to a standstill. Presenting a profoundly compelling dilemma. Do we cripple our economy to flatten curve or do we impose few restrictions and allow this highly communicable disease to spread rapidly? The proposition on hand appears to be a lose-lose scenario. However, which is the greater of the two evils is a difficult question to answer. Although not surprisingly, the answer seems to split down partisan lines.

 

One method of temporarily easing concerns of the ailing economy has taken the form of the form of an economic stimulus bill. A stimulus bill of mammoth portions. An unprecedented amount of trillions of dollars have been allocated for the CARES Act relief bill [1]. There is a strong constitutional argument that can be made for providing just compensation for those who have lost their jobs due to the Corona Virus pandemic. Legal experts such as professor F.E. Guerra-Pujol of the University of Central Florida make such arguments. Invoking the Talkings Clause of the Fifth Amendment of the U.S. Constitution to provide a rationale for just compensation for those forced into unemployment by government mandate (Guerra-Pujol, 2020) [2].

 

Unfortunately,  the CARES Act does not exercise the restraint of professor Guerra-Pujol’s wage restoration approach. Rather a direct monthly allocation of  $1,200.00 plus an additional $500.00 for each dependent child for those making under $150,000.00 (the cutoff for joint filers) annually [3]. This is regardless of employment status. Making such efforts a departure from a property rights argument for government assistance.

 

The question becomes why would the government provide money to people who are still working? It seems a little counterintuitive. It based upon one of the chief assumptions of Keynesian economics. If the economy is going to weather inhospitable conditions we need economic activity. The solution is we need to stimulate aggregate demand or consumer demand for goods throughout the economy. The government sends everyone a check with the hope that they will go out and spend it. Spurring economic activity. Trump administration’s stimulus bill in many ways mirrors the stimulus policies of the Obama presidency. Maybe Nixon wasn’t kidding when he famously declared ” We are all Keynesians now” back in 1971[4]. I am not going to refute the efficacy of such policies in this essay.

 

Rather make a relatively obscure observation.  It is quite common for major spending bills to funded by monetary expansion rather than tax-dollars [5].  The reason for resorting to circuitous means of funding remains an open question. The wisdom imparted in public choice theory may shed some light on this question. The concept of fiscal illusion comes to mind. Defined as “… “the notion that systematic misperception of key fiscal parameters may significantly distort fiscal choices by the electorate..” ( SANANDAJI &  WALLACE, 2011, P.1) [6]. In other words, if the voting public experience the expense of raising taxes to fund the stimulus bill it would face visceral scrutiny. Funding through printing more money buries the direct cost of the policy. The average taxpayer does pay for the stimulus, just indirectly.  They pay for it in higher prices and reduced purchasing power of the currency. Nothing in this world is truly free.

 

It should be noted that the introduction of new money is not neutral. It does impact other factors in the economy other than prices.  An observation made by both David Hume and Richard Cantillon back in the 18th century (Humphrey, 1974, P.4) [7]. Beyond that new more is seldomly introduced into the economy evenly.  It is ironic that most advocates of income inequality frequently overlook this premise. Generally, because individuals with such ideological proclivities tend to favor the programs being funded by the new money. If you look a little deeper into the situation it becomes apparent that the uneven distribution of money creates inequalities. Those who have access to the new money prior to prices rising enjoy the benefit without the burden of the decreased purchasing power.  Those who receive the new money later on. Once prices have caught up with inflation have the implicit tax of decreased purchasing power. This occurrence is known as the Cantillon Effect.

 

This observation was first noted in the work of Irish-French economist Richard Cantillon. In his book An Essay on Economic Theory, he expounds upon how those who are closest to the mining industry benefit for the introduction of new precious metals into the economy.

All this increased expenditures on meat, wine, wool, etc., necessarily reduces the share of the other inhabitants in the state who do not participate at first in the wealth of the mines in question. The bargaining process of the market, with the demand for meat, wine, wool, etc., being stronger than usual, will not fail to increase their prices. These high prices will encourage farmers to employ more land to produce the following year, and these same farmers will profit from the increased prices and will increase their expenditure on their families like the others. Those who will suffer from these higher prices and increased consumption will be, first of all, the property owners, during the term of their leases, then their domestic servants and all the workmen or fixed-wage earners who support their families on a salary. They all must diminish their expenditures in proportion to the new consumption, which will compel a large number of them to emigrate and to seek a living elsewhere. The property owners will dismiss many of them, and the rest will demand a wage increase in order to live as before.  (Cantillon, 1755, Tranl. Saucier. Ed. Thoroton, 2010,P. 149) [8].

 

This passage exemplifies the principle behind the Cantillon Effect. Those closest to the new wealth receive the new money first. They benefit from the lag between the introduction of the new gold and the purgatorial period before the increase in the quantity of gold is reflected in prices. If the money was truly neutral we would not witness such effects. The introduction of new money truly does have “… real consequences … production, consumption, and distribution of income…”  (Thornton, 2006, P.6) [9]. If this wasn’t the case we would see prices rise evenly and such disparities would not be of any concern.

 

Since Cantillon’s day, the means of distributing has changed. After all, we are presently on a fiat currency system. It is important to remember that either a precise metal standard or command currency is susceptible to this effect [10]. Obviously, it is easier to manipulate a fiat concern in a manner that increases the aptitude of Cantillon Effects. Clearly, banks and mines were the institutional mechanisms for circulating currency back in the 18th century. In an era of centralized banking and MMT, one needs to look no further than the U.S. Bureau of Engraving and Printing. The modern substitute for the gold mines of our forefathers. In the days of a hard money standard, the gold mines were the point of entry for new money.

Similar to the gold mines, who gets the money first is geographically contingent. Naturally, banks situated near Federal Reserve locations would first receive the money. It is important to remember while the Federal Reserve does not print the money it does exert control on the size of the money supply [11]. There are 12 locations throughout the United States. Boston, New York, Philadelphia, Cleveland, Richmond, Atlanta, Chicago, St. Louis, Minneapolis, Kansas City, Dallas, and San Francisco [12]. Definitely favoring anterior and affluent east coast. As well as interior major cities such as Dallas and Chicago which have well known financial districts. The surrounding institutions in these areas may get wind of freshly printed money and the knowledge to spend the money prior to the purgatorial lull before inflation starts impacting prices. Typically, those working in such circles are white-collar workers. Affluent and well educated.

 

Please notice that they opt to not establish any of their offices in Mississippi. Arguably one of the poorest states in the country [13]. This is why it important to not look at economic policies superficially nor ignore their downstream consequences. Many proponents of government welfare may even applaud the idea of printing more money to fund various programs. Often those who these programs intend to help may merely be disadvantaged by the higher prices caused by inflation. Those with institutional connections are ahead of the curve and spend the debased currency. While they have their true savings tied up in the real estate, stocks, and precious metals.  Making them less marred by the effects of inflation. While poorer people tend to have their savings (if any) in a savings account. Completely dominated in the fiat. I don’t begrudge those who are successful. Cantillon Effects are examples of inequality based on government meddling. Rather than the byproduct of skill, savvy entrepreneurship, or adding economic value to society. Those who benefit certainly benefit at the expense of others. They do not benefit on their own merits.

John Locke- Quantity Theory of Money

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One of the age-old questions in the field of economics is whether or not money is neutral.  In other words, the introduction of new money into the economy only has a nominal impact [1]. It only raises prices and does not impact variables on employment or output (Cecchetti, P.1) [2]. The lack of influence of an increase in the amount of money on the aggregate economy is a core assumption of the Quantity Theory of Money.  An economic theory that was exposited by no other than John Locke. Locke is renowned for his moral philosophy and political theory often is overlooked in terms of his early contributions to economics.

 

In a broad application, the theory simply entails that the quantity of money is the key factor in the “changes in purchasing power” (Humphery, 1974, P.1) [3]. The theory stipulates that introducing new money will decrease the value of the currency resulting in higher prices (Humphery, 1974, P.1) [4]. This observation pertaining to alterations in purchasing power is generally widely accepted.

M= Stock of Money

P= Price Level (Humphery, 1974, P. 1) [5].

 

Locke explicitly detailed back in 1691 that the Price Level (P) is “always proportional” to the stock of money (M) (Humphery. 1974, P.4) [6].  Locke’s assumption the effects of introducing new money may have considered its impact on prices. However, it also assumes even that the changes in prices throughout the economy would be uniform. It is reasonable to question whether this assumption falls into the same folly that many other economic models suffer from. That is the gulf between theory and actual application. Wouldn’t it be possible for some actors in the economy to have access to the new money prior to the rise in prices?  Shouldn’t be also be considered that how the money is distributed could only magnify such potential effects? Whether due to the mechanism of distribution or institutional advantages.

….The mistake of this plausible way of Reasoning will be easily discovered, when we consider that the measure of the value of money, in proportion to anything purchasable by it, is the quantity of the ready Money we have, in comparison with the quantity of that thing and its Vent; or which amounts to the same thing, The price of any commodity rises or falls, by the proportion of the number of Buyers and Sellers; This rule holds Universally in all Things that are to be bought and Sold, bateing now and then an extravagant Phancy of some particular Person, which never amounts to so considerable a part of Trade as to make anything in the account worthy to be thought an exceprion to this Rule.  (Locke, 1691, P. 16) [7].

 

Locke may have been a brilliant thinker and the grandfather of liberalism, that does not make him above reproach.  The likes of David Hume and Richard Cantillon expressed disagreements with the assumptions of Locke.  Hume’s postulations are so similar to those of Cantillon that some have levied accusations of plagiarism (Bilo, 2015, P.4) [8]. I will provide no further commentary on that claim. Both Hume and Cantillon did not see the role of money in the economy as being neutral. It can be argued that this is not a realistic view of the function of money. Cantillon suggests that the point of injection of new money and the velocity of circulation plays a role in its impact (Thorton, 2006, P.4) [9]. A point that is clearly neglected in Locke’s account of the role of newly introduced currency. If money was neutral how additional quantities are introduced would not matter.

 

Both Hume and Cantillon noticed other factors that clearly demonstrated the nonneutral nature of money. Which include the following:

(1) the lag of money wages behind prices which temporarily reduces real wages, thereby encouraging increased demand for labor ; (2) the stimulus to output occasioned by inflation-induced reductions in real debt burdens which shift real income from unproductive creditor-rentiers to the productive debtor- entrepreneurs ; (3) so-called “forced-saving” effects, i.e., changes in the fraction of the economy’s resources diverted from consumption into capital formation owing to price-induced redistributions of income among socio-economic classes having different propensities to save and invest; and (4) the stimulus to investment spending imparted by a temporary reduction in the loan rate of interest below the profit rate on real capital. (Humphery. 1974, P.4) [10].

 

All of the listed observations are clearly distortions caused by the unequal distribution of new money throughout the economy. Those who have access to the new money first reap the advantage of the lower prices. As the reverberations of the new money have not echoed throughout the economy. In other words, prices have not increased to reflect the depreciation in the value of the currency. If the new money is introduced through highly centralized institutions this discrepancy will be quite salient. Versus being more evenly distributed. Those with early access to the new money will spend it prior to the rise in prices.  Such consequences being indicative of Cantillon’s eponymous theory the Cantillon Effect.

 

It is possible that Locke may have potentially oversimplified the more intricate impact that introducing more money has on the economy.  However, empirical research has not always yield findings congenial to Cantillon’s finding (Wagner & Daley, 2004, P. 8) [11]. Veteran economists Richard Wagner and Steven Daley suggest that “…comparative statics of monetary or macro aggregates.. “are inappropriate for studying Cantillon Effects. Rather we should focus on the “… structural composition of economic activity..” (Wagner & Daley, 2004. P.17) [12]. Despite my paucity of economic credentials, I would wholeheartedly agree. Locke’s Quantity Theory of Money lacks an acknowledgment of how money is circulated. If new money is distributed unevenly the adverse ramifications of inflation will be felt differently.

 

 

 

 

 

Social Media – A Virtual Cave

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The topic of reality is one that has been highly discussed in the discipline of philosophy. From the extensive discourse has generated a litany of postulations pertaining to the nature of reality. A natural corollary of examining reality is the extent to which our perception of reality is a delusion. How do we know what we believe to be real is truly real?  This is a daunting question that humans have been grappling with since the days of  Greek antiquity. No other than the philosopher Plato. Plato provides a firm demonstration of the illusory nature of reality in The Allegory of the Cave [1].

 

In a nutshell, The Allegory of the Cave details a group of people held captive since infancy in a cave. The only visual stimulus they have “shadow puppets”. Produced by the fire-light silhouetted hand gestures of their captors. The prisoners only know the forms of our world through these two-dimensional figures projected on the cave wall. As we all know from our own experience with shadows they lack texture and detail. Only provide a general outline of the for of an object. One day, one of the prisoners breaks free from their shackles and decides to leave the cave. That prisoner was in for a shock.

Blinded by the blaring sunlight the prisoner’s eyes adjust to the lighting of the external environment. Then realizes the true vibrancy of the world outside of the cave. The prisoner comes to the realization that the “shadow puppets” projected on the cave walls were only a caricature of the true objects. For example, a shadow puppet of a tree does not convey all of the veins in the leaves or the crevices and grooves in the bark.  Upon this monumental discovery, the prisoner comes back to the cave to announce his new findings to his captive peers. Unfortunately, they were not receptive to this new perspective of the world. The looked at him as if he was crazy. Defended the validity of perceiving the world as depicted on the cave walls. They continued to intently watch the motions of the shadow puppets on the cave wall.

 

The Allegory of the Cave demonstrates some important points about human perception. Clearly, the shadows simulating the animals on the cave walls are not an accurate representation of their actual forms. We can believe that we know the true form of the depicted animals, however, due to our faulty perception, we do not have an accurate account of their essence. The prisoners believe that they were seeing a dog, however, it was merely the shadows being formed by their captors. By referring to the shadows as a dog does not mean they truly comprehend the essence of a dog. What a dog truly is. It is possible to gain knowledge through perception. However, there is a gulf between our perception and truth [2]. Meaning there is a giant gap between true knowledge and illusion.

 

Illusion tends to be a problem that has continuously plagued humans in the pursuit of truth. On a biological level, we are susceptible to optical illusions.  This is a by-product of evolutionary adaptions that help facilitate easier navigation of our environment. The human mind has a limited capacity for sensory input, therefore our eyes are designed to operate on preassumptions.  Hence, why we tend to enjoy looking at the Impressionist paintings of Claude Monet. We are reading into the painting with our perceptual assumptions. His painting is comprised of a myriad of loose, formless, and broad brush strokes. Anyone of us would swear up-and-down that we see a sailboat or a springtime picnic. In reality, our brain is imposing that form on the sensory input. Such misconceptions are innocent in terms of visual aesthetics. In areas where moral considerations are more pressing, this can be dangerous.

 

Throughout Machiavelli’s flagship book The Prince there are multiple references to perception being more important than reality. He clearly asserts that appearing to be righteous takes primacy over actually being so (Machiavelli, 1532, Transl. Mansfield, 1985, P. 62) [3]. This sentiment is quite often reflected throughout modern society. The idiomatic statement “fake it until you make it” a perennial favorite of every aspiring salesman. Above all, this reflects a dishonest mentality and a facade that cannot indefinitely be maintained. Due to our strong proclivity towards a plethora of biases, we will continue to trust those exuberating confidence over people who are competent. At least until charade starts to unravel. Needless to say, we are wired to fall into the trap of faulty perception. If we are easily tricked by smoke-and-mirrors it is reasonable to question the validity of our perception.

 

While Plato may have used The Allegory of the Cave as an abstract model it still has countless potential for real-world applications. One of the best examples is social media. I really could not even fabricate a better example of a metaphorical cave. The emergence of the occupation of social media influencer has only compounded the extent to which reality is distorted. Even for the average social media consumer you only get a brief glimpse of their life. Often it only details vacations, happy hours, good times with friends, and rarely displays hardship. This brief snapshot of your friend’s life is somewhat illusory. It only illustrations only a fraction of the story. It does not detail the mundanity of day to day life or family disputes.  As people we all have struggles. What those struggles are and their magnitude is what varies. No one has a perfect life. Therefore, I would suggest stop looking at the exploits of your Facebook “friends” with envy. Realize that odds are their life isn’t much better than yours.  In fact, theirs could be worse. Hence, why they are putting up an impenetrable front.

 

In the instance of social media influencers, this effect is only compounded. They are frequently paid to promote a service or product through the channels of social media platforms. There is nothing inherently wrong with that. I am a proponent of capitalism after all. It should be noted that many of these influencers are also paid to embellish upon their lifestyle. Make it seem as if they have more freedom, wealth, and sex appeal than what they actually possess. Ultimately, a great lifestyle is the best selling point for a product or brand. Regardless of the truth of the matter. This contrived lifestyle does not convey the actual truth of the influencer’s lifestyle. You do not see the behind the scenes pressures of appeasing a brand’s aggressive marketing department. Nor do you see the pitfalls of fame. Fame brings a level of Scrutiny that few mild-mannered people can adequately weather. This was the same point that Adam Smith illuminated in his book Theory of Moral Sentiments. The trapping of fame often comes with profound drawbacks. The lavish life portrayed by the kings and queens of  Snapchat does not include the bad and the ugly aspects of their lives.

Price Gouging Laws in the Era of COVID-19-Redux

 

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To all my regular readers I apologize. I know I have already written two blog entries about the subject of price gouging laws.

 

However, I just recently completed a comprehensive essay focusing on the present concerns of price gouging. The topic is still very much relevant considering the strain the COVID-19 pandemic has put on the supply chain as a whole.

 

My latest essay was picked up by the American Freedom Institute. Link to my essay.

Machiavelli in the Office – Part IV: The Folly of Neutrality

 

 

 

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Machiavelli was arguably one of the most dynamic minds of the Renaissance era. Some scholars argue that was the first pragmatic philosopher. Lending his contextual morality to thinkers such as Friedrich Nietzsche and Ayn Rand. The righteousness for its very sake can prove to be an impediment. Even stray us away from the greater good. This for any ruler would be to protect and defend their principality/kingdom. Being the first pioneer to venture into the dark waters of practical utilitarianism has made Machiavelli a symbol of moral impropriety.  Forever staining his legacy as an intellectual and writer. To such an extent some are bold enough to claim that he was not even a philosopher.

 

The pragmatically-minded Niccolo Machiavelli provided some deeply profound insights into the study of politics. However, many of these insights are quite transcendent and shed light on the inner mechanics of human nature. Applying to more than the grisly and hallowed halls of the 16th-century Florentine royal court. Realizations that can be applied to better survive the duplicity of the boardroom or sales floor.

 

As in any work environment, disagreements are invariable. They are bound to happen regardless of workplace dynamics. The defining difference between successfully navigating such situations and being trapped in a spider’s web of drama is simple.  Do not be neutral! I would also innovate upon Machiavelli’s point by including do not play both sides of the conflict. Remaining neutral or being a “double-agent” has several adverse effects. All will damage your reputation at work. It will make you appear to be dishonest, disloyal, indecisive, weak, and disconnected.  None of these attributes will convey any leadership potential or valuable soft-skills. Rather it makes you look pretty foul professionally.

 

A prince is also esteemed when he is a true friend and a true enemy, that is when without any hesitation he discloses himself in support of someone against another. This course is always more useful than to remain neutral, because if two powers close to you come to grips, either they are of such quality that if one wins, you have to fear the winner, or not. In either of these two cases, it will always be more useful to you to disclose yourself and to wage open war; for in the first case if you do not disclose yourself, you will always be the prey of whoever wins, to the pleasure and satisfaction of the one who was defeated, and you have no reason, nor anything, to defend you or give you refuge. For whoever wins does not want suspect friends who may not help him in adversity; whoever loses does not give you refuge, since you did not want to share his fortune with arms in hand. (Machiavelli, 1532, P.89. Transl. Mansfield. 1985) [1].

 

Staying neutral or switching sides above all damages trust.  As conveyed in the wise words of Machiavelli. If there are ongoing issues between a co-worker you are friends with and another co-worker. Your work pal is expecting you to stick up for them and have their side of the conflict. Anything else will damage your relationship. Granted, we are only talking about one co-worker, but the image is everything. If you appear as disloyal, dishonest, or fake word will spread. Typically you will not be the wiser. The true irony being many of the individuals proliferating gossip about you being fake are the same people that fall into this very same trap.

 

If you are neutral in an inter-department conflict the negative consequences are only magnified. If others cannot rely on you for support, how can you expect them to do the same? That is precisely Machiavelli’s point. Beyond appearing to be fake, you are burning bridges. People who may have been willing to help you through various conflicts or issues will be less inclined to. Like anything else in life, reciprocity is key. That doesn’t matter if it is a key ally being attacked by hostile forces or a dispute over the delegation of responsibilities at work.  We all make cognitive assessments about our relationships. Everyone whether consciously or subconsciously is keeping a proverbial scoreboard. Similar premise to a bank account, if you don’t contribute anything the well will eventually run dry. It is best to bring what you can to the table. Whether or not you intend to protect a true friendship or solidify an alliance is another story.

 

To expect the benefits of a relationship regardless of its nature, without out reciprocating anything beneficial is presumptive. Very well could put you on the road to creating a new adversary. Machiavelli, the dark philosopher himself, recognized this. He understood to achieve anything you need the assistance of others. We are not marooned on a  desert island like Robinson Crusoe. If you appear to be disloyal or to manipulative, you will eventually hit a brick wall. Leaders need the support of their subordinates. If you are under leadership you need the support of your leader and peers. Marring these ties with being the office gossip or being too timid to declare sides, is only a detriment to yourself. Wanting to keep the peace in the office is a laudable goal. However, it is far too idealistic and not within reach. If a dispute is unavoidable, you need to pick aside. The consequences of not doing so are much more profound than those of staying neutral. Having only enemies in the office is a lonely and treacherous road.

Hayekian Triangle -Part I

Sourced from The Mises Circle Blog. Page 39 Prices and Production.

 

Introduction:

 

The Hayekian Triangle is a visual representation of the stages of production. Many professional Austrian economists refer to it as a pedological device for explaining the Austrian Business Cycle Theory (Block & Barnett, 2006, P.2) [1]. Above all, it is something of an outlier in the Austrian School of Economics. Due to the methodological rejection of the Neo-Classical approach, graphs and equations are rarely ever used. Despite this methodological consideration, the Haykeian Triangle is viewed by many as being imperative in understanding “boom-bust” business cycles. Even though some prominent Austrian economists such as Walter Block have expressed their grievances with this depiction of ABCT.

 

The triangle was first introduced by Nobel Laureate F.A. Hayek in his 1931 book Prices and Production (revised in 1935). Presenting the variable of time on the Y-axis and output of consumer goods on the X-axis.  Forming a right triangle. Per Hayek’s own explanation:

…. means of production is expressed by the horizontal projection of the hypotenuse, while the vertical dimension, measured in arbitrary periods from the top to the bottom, expresses the progress of time,  so that the inclination of the line representing the amount of original means of production used means that these original means of production are expended continuously during the whole process of production. The bottom of the triangle represents the value of the current output of consumers’ goods. The area of the triangle thus shows the totality of the successive stages through which the several units of original means of production pass before they become ripe for consumption.  (Hayek, 1931, P.39-40) [2]

 

The triangle diagrams the relationship between time and productive output. It measures this relationship from the harvesting and producing higher-order goods (those in earlier stages of production. All the way to the final phases of production such as packaging. Hayek’s diagram also details the amount of capital deployed into production per a specific stage. Per his observations, all variables unencumbered by manipulation, more money is spent in the earlier stages of production (Hayek, 1931, P.53) [3]. The amount tends to decrease in the later stages. Much of the variance in resource allocation throughout the stages of production mirrors consumer demand.

 

Understanding consumption patterns is key to production. As acting individuals, we can either save, invest, or spend money.  The entrepreneur who is managing the production of consumer goods will cater it patterns of buying behavior (Hayek. 1931. P.50) [4]. If consumers are saving more and spending less demand will go down. Consequentially, savings are not necessarily detrimental. Despite the Keynesian consensus that drop-in aggregate demand will bring the economy to grinding stop. Commonly known as the Paradox of Thrift. When consumers start saving they become more future ordinated as Dr. Roger Garrison would put it. They put off present consumption today for future consumption. This can include investment. Investment differentiates itself from consumer consumption by aiding production potential. An increase in investment now can help producers acquire capital to expand production capacity later (Hayek, 1931, P.60, 88) [5].

 

One fact that cannot be overstated is how the loanable funds market parallels production. When demand is low prices are low and vice versa. It is important to remember that all sectors of the economy are interconnected. Under normal conditions, interest rate fluctuations, supply-and-demand drives the rate. Much how consumer prices do the same. If consumer demand is low prices will reflect demand. The same goes for acquiring a loan. When consumer demand is low production hits a lull. However, consequentially the going interest rates will be low as well. Making it an ideal time to get a loan to upgrade old and worn-out equipment. As more business people acquire loans the interest rate will naturally increase. It is no more different than any other segment of the economy. Just a different product.

 

Because consumers are not ravenous demand new products, more money is spent on starting production. Hence, the greater expenditures in the earlier stages. There isn’t any immediate need to have completed products. Once consumer demand starts to increase more business owners will be acquiring loans to increase production. Driving the interest rate upward. Then as the interest rate increases, fewer entrepreneurs will be taking out loans. This will impact demand on the loanable funds market. Once the price for consumer goods increases there will be a decline in demand for products and services.  Bringing us right back to where we started. Lower interest rates, prices, and product demand. This cycle is cylindrical and self-regulating. Per popular consensus of Austrian economists will result in economic growth.

 

The problem becomes that often policymakers seek to interfere with this process. This circles back to the Paradox of Thrift. When consumer confidence is down, lowering interest rates operate as a form of stimulus. Whether they are lowered to out of genuine concern for the economy or callous political opportunism is irrelevant. It is still an erroneous course of action. Artificially decreasing the interest rate will lead to malinvestment (Hayek, 1931, P.58) [6]. Entrepreneurs borrow money for projects that would not be profitable to undertake with higher interest rates (Hayek, 1931, P. 86) [7]. They will invest more money into the earlier stages of production when consumer demands reflect more emphasis on the later stages. Also, they will be bold enough to undertake entrepreneurial ventures that require long production times.

 

The mechanism by which institutions such as the Federal Reserve lowers interest rates is important to note. They engage in credit creation by injecting more currency into the money supply. In other words, they get the printing presses up and running. Trading purchasing power for liquidity. This will result in higher prices for consumers. This is known as inflation. Prices will continue to rise until the institution manipulating the interest rate finds the rate of inflation to be exorbitant. Subsequently decides to lower the interest rate (Hayek, 1931, P. 90) [8].  Alternately, the rate of inflation becomes so hight that people stop using U.S. fiat currency altogether (Murph, 2015, P.253) [9]. That is an extreme example, reserved for the most extreme cases of hyperinflation.  Unfortunately, the bubble has burst and the fall out is just beginning.  All the ventures started under the low-interest rates are now insolvent and cannot be completed (Hayek, 1931, P. 92).  Unless the borrower is able to complete the project at a loss. Resulting in mark failures and economic depressions.  Assumably worsening economic conditions than if the interest rate had remained unmanipulated.

 

In part II: we will examine the innovations made to the Haykeian Triangle by Dr. Roger Garrison. He attempted to revise the triangle, making it easier to be applied in a Neo-Classical context.

 

 

 

 

Hume v.s. Kant- Thoughts on the Act of Suicide

 

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The act of suicide most likely has been around since the dawn of human history. The reasons that an individual chooses to take their own life run the gamut. Suicide much like other decisions has a litany of moral considerations. It should be noted that many religions actually have prescriptions explicitly against the act. Any steadfast contrarian would question whether suicide can be ethically justified. Some thinkers would even be so bold to address whether or not we have the right to commit suicide.

 

Two marquee names of the 18th century European Enlightenment were bold enough to expound this morbid topic. Although, both came to very different conclusions about ethical considerations of suicide. German philosopher Immanuel Kant viewed suicide to be unquestionably immoral. In contrast, Scottish thinker David Hume struggled to find the immortality within the act. Both taking on diametrically opposing views.

 

Kant not only found it impossible to rationalize the act of suicide. He expresses the utmost censure for those who dared to commit such an atrocity. Kant believes since we were created by God we belong to him. Operating on the understanding that our life is not ours to dispose of on our whim. However, Kant took it one step further by equating the victim of suicide to the level of a lowly beast.

Man can only dispose of things; beasts are things in this sense; but man is not a thing, not a beast. If he disposes of himself, he treats his value as that of a beast. He who so behaves, who has no respect for human behavior, makes a thing of himself.”[1].

Unrelentingly harsh.  Certainly, a severe assessment to make. Especially considering most people plagued by suicidal thoughts are generally psychologically tormented. Kant’s thinking is notorious for being complex and nuanced, but he was quite rigid in the realm of morality. The topic of suicide is no exception.  From Kant’s perspective, if you killed yourself you would no longer be able to engage in moral acts. This highest duty to our self, due to all other duties being contingent upon being able to be moral [2]. If an individual dies of natural causes he did not choose this path. If an individual dies in combat defending his country this is a valiant act of bravery. From Kant’s perspective, the soldier sacrificed his life to spare his fellow countrymen from such a fate. In contrast to selfishly taking one’s life. May alleviate the victim of suicide, but does not help society in any way. It could be argued that suicide inflicts more harm on society making it immoral.

Kant’s perception of those who have committed society is quite brutal. The opposing views of David Hume provide more clemency towards suicide victims. Rather than morally browbeating them. David Hume expressed his views on suicide in the 1755 essay Of Suicide expressing some of the logical fallacies implied in arguments against suicide.  Hume suggests that God allows us to control other aspects of nature, for example harnessing and collecting natural resources. So why would suicide be the one exception (Hume, 1775, p. 3) [3][4]. Beyond that point :

…. divine order’ is meant simply that which occurs according to God’s consent, then God appears to consent to all our actions (since an omnipotent God can presumably intervene in our acts at any point) and no distinction exists between those of our actions to which God consents and those to which He does not. If God has placed us upon the Earth like a “sentinel,” then our choice to leave this post and take our lives occurs as much with his cooperation as with any other actions we perform [5].

 

Hume has addressed the theological concerns of suicide.  But what about the duty to ourselves and others?  The way Hume saw it, you do not harm society by taking your life. You only “.. cease to do good..” (Hume, 1755, p.8) [6]. Almost perceiving the act without any further context is morally neutral. Considering how drastic the act of suicide is this is kind of a far-fetched notion.  Odds are whatever moral contributions we have to offer society are minuscule. It is absurd to stay alive to provide a mere “frivolous advantage” to the public (Hume, 1755, p.8) [7]. Hume also argues that suicide isn’t necessarily an abdication of duty to ourselves.  If affiliated with sickness and other ailments synonymous with advanced age, what is the point of living? To a certain extent, you are existing to endure more misery (Hume 1755, P.8-9) [8]. With such health conditions, you could only prove to be a detriment to others. This could result in more mental anguish.  Making staying alive merely for its own sake fruitless.

 

To conclude, I see some profound problems with both perspectives.  Kant is far too judgmental and rigid concerning suicide. The last thing you should ever do is deride someone for having suicidal proclivities. Chances are it will only exacerbate the problem rather than persuade them to not commit suicide. Also, suppose the scenario where you and your child are held at gunpoint. You are told by the assailant “either take this gun and shot yourself or I am killing your kid”. It may be debatable if this scenario would constitute suicide. If we argue it does, clearly killing yourself would be more moral than continuing to live. While there is a clear distinction between right and wrong, Kant’s moral absolutism can prove to be problematic.

On the other hand, David Hume is far too flippant about the subject as a whole. There are profound consequences that result from committing suicide. I am a fierce defender of individuality. But suicide impacts people other than yourself. The impact is not isolated to you and you only. Friends and family of the victim will be devasted by the unexpected turn of events. People at work depended on the victim. Believing that suicide is morally neutral is a fallacy. I would advise against codifying the moral considerations of suicide in law. End of life decisions should be left to the individual. Especially if they are suffering from a terminal illness. Making something legally accessible doesn’t make it right. Many states have annulled anachronistic laws prohibiting adultery. That does not excuse the moral failings of adultery. However, to humiliate and denigrate those with suicidal thoughts is also wrong. Downright cruel!

Looking For Contributors

 

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Just letting everyone know that I am presently looking for contributors. Anyone interested in contributed content please contact me at peterclark7979@gmail.com  or respond in the comments section.

 

The criteria for submissions is relatively loose.  There are not any ideological prerequisites. In other words, you don’t have to agree with my views.

 

The only parameters are articles focused around: economics, philosophy, politics, logic, law, and social commentary.

 

Disclaimer: No conspiracy theories, please!!

 

 

Machiavelli In the Office-Part III: This Isn’t a Popularity Contest

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The principles detailed in Machiavelli’s flagship mirror-for-prices book The Prince are quite versatile. Concepts that can be applied anywhere from the bedroom to the boardroom. Ideas that possess utility beyond the treacherous halls of the 1500’s-era Florentine courts. They may very well be useful to you in your daily life. May even be able to help you navigate the minefield of climbing the corporate ladder.

 

In the third installment of this series, we will examine one of the most well-known quotes from The Prince.

It is better to be feared than loved when either is to be dispensed with. (Machiavelli, 1532. Transl. Mansfield 1985) [1].

 

The meaning quote appears to be quite linear. Many variations of this concept have circulated throughout history and popular culture. This premise was first captured in print by Machiavelli. Presents a pragmatic truth that is applicable anywhere. From the schoolyard to the prison yard. It even has its utility on the sales floor. All because you enter adulthood doesn’t mean that “bullies” become a thing of the past. Unfortunately, individuals looking to victimize others is all too real of a problem in the workplace.  Whether you are in management or are an entry-level employee you need to be to cope with this aspect of work. There will always be people looking to undermine and tear you down. Outside of the emotional stress, it can cause, it also can be detrimental to your career. Sometimes rumors can take on a life of their own, you wouldn’t a damaged reputation to sully any opportunities for advancement.

 

To some extent this advice from Machiavelli is counterintuitive. Growing up we were always told, “you get more flies with honey than vinegar”. There is some truth in that to a degree. Like with most things in this world, kindness is not exempt from the Law of Diminishing Returns. If you are too kind, those with a proclivity for predation will see a potential target. Not to mention, another point shrewd point that was made by Machiavelli. People are fickle. You can be exorbitantly kind and friendly to them one day. The next they will be stabbing you in the back. Trying to be everyone’s friend may be a luxury you can’t afford if you are serious about your career.

 

Often excessive kindness is viewed as a weakness. If due to dynamics within the work culture you are not well-liked, kindness will only be a noose around your neck. Even pretending to appear kind will be too much of a liability. You will have to cultivate a tough exterior. One that conveys you will put up with any nonsense. Sure everyone will appreciate you bringing in donuts for about 15-minutes. Then less than an hour later you are back to being the office doormat. The weak link that can be used and abused. More domineering and aggressive co-workers will recognize this and will try to test you. Give them a run for their money. Let them know you are not intimidated!  The shock of that alone will have them reeling. Underneath it all, they are weak people. They are lazy people. In order to make themselves appear productive, they need to degrade others. This is nothing more than grade A sophistry. Nothing of substance. Just tawdry and cheap tricks. Do not let these prime examples of dishonesty, banality, and mediocrity get to you. If they were more capable they wouldn’t need to stoop to such lowly tactics to discredit others. Gently push back, they will not expect it. Their reaction will be priceless.

 

Crafting a resilient facade and be able to defend yourself from the office “bully” does have its limitations. While you don’t want to seem like a pushover, without constraint aggression can backfire. Even the master of statecraft and subterfuge understood that if you become known for superfluous acts of cruelty you will become hated (Machiavelli, 1532. Transl. Mansfield 1985, p.72) [2]. This would defeat the whole purpose of making yourself appear intimidating. Once you cross certain lines, your co-workers will relish taking you down. Not due to perceived weakness, but due to your actions appearing to be unjust. Per unwritten and unspoke social conventions, there are certain norms that are to never be violated. Defending yourself from the predator by becoming the predator is rarely ethically justifiable. Machiavelli acknowledged this indirectly. The informal restraints of excessive cruelty are other people. Whether codified in formal law or in informal normative values. If others sense injustice in your actions, they will put you in your place.

 

That is one of many examples of why labling Machievlli as “amoral” is a misnomer. There was a loose moral code implied in The Prince. A general message of pragmaticism above all. If you fail to protect and effectively rule your principality, you have failed as a ruler. While this brand of philosophical thought is not grounded in the grandiose conception of idyllic morality, doesn’t mean it is devoid of morality. Pragmaticism may seem cold and mechanical there are natural constraints. If as a ruler you implement a grotesquely inhumane policy, public outcry and the threat of rebellion will swiftly prove as a check on your power. The same applies in terms of inspiring cautious respect among your co-workers. Act in a manner that will persuade people to not take advantage of you. However, the perception of your co-workers also operates as a restraint on how menacing you can be.

Defending Price Gouging

 

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Introduction:

 

Prevailing conventional wisdom dictates that price gouging is immoral. During times of crisis to even contemplating raising prices is considered to be morally dissent.  Especially in times of need, such as a pandemic of highly communicable disease. The act of price gouge tends to be a natural corollary of the most basic economic principles.  Enacting price gouging laws is an attempt to circumvent resolute economic laws. Typically, in the name of “fairness”. Viewing it from the perceptive of pricing equality ignores the inner mechanics of market pricing. To interrupt this process generally leads to less than optimal results. In every regard, price gouging laws are merely price controls with a different name.

 

Various varieties of price controls have their ill effects well documented. One prime example being rent control measures.  Which historically have shown to contribute to housing shortages and deteriorating conditions of impacted housing units (Bennett & DiLorenzo, 1985 P.69-71) [1]. Typically, most people just look at the immediate impact of the policy. Which is it “stabilizes” housing prices. However, the downstream effects of housing shortages and landlords losing any incentive to regularly maintain their properties are not acknowledged. Price gouging laws yield similar effects.

 

Price gouging does perform necessary functions within the market. Operate as an informal safeguard against supply shortages of essential commodities. Most people are concerned with the here and now. The emotional vitriol of feeling ripped-off or the vendor having leverage supersedes economic reasoning. Per the research of economist  Michael Munger, back in 1996 during Hurricane Fran, crowds appalled the arrest of several North Carolina price gouging vendors. These enterprising young men were selling ice at $8.00 per bag.  Despite the jubilation of the crowd over their arrest, the potential patron still lined up intent on purchase $8.00 bags of ice (Munger, 2007) [2]. Clearly demonstrating a disconnect between consumer perception and consumer behavior. If this price was truly inordinate no one would be lining up to buy ice.

 

For the rest of this essay will be dedicated to defending the actions of these aspiring entrepreneurs. As well as all other vendors who engage in the practice of price gouging. Price gouging has several critical functions in managing the market supply of essential goods. It discourages hoarding.  It provides differential compensation to vendors and employees in times of crisis. Finally, it encourages the production of essential goods.

 

Price Gouging Discourages Hoarding:

Has anyone attempted to purchase toilet paper lately? Anyone who has walked down the paper products aisle (toilet paper, paper towels) has noticed an extreme scarcity of commonly available products. Making me question whether or not COVID-19 is truly a respiratory virus or another incarnation of cholera. My poor attempt at humor aside. It is evident that people are conspicuously stockpiling toilet paper. Toilet paper is a shelf-stable product that is relatively low in cost, making an ideal item for hoarding.

The means by which price gouging operates as a deterrent from an item being hoarded is simple. If the price is higher people will be less apt to purchase excessive amounts of the good [3]. This function becomes more imperative as inventory for essential items starts to dwindle [4]. This premise is clearly compatible with the Law of Supply and Demand. If there a large spike in the demand for a specific item the market price will reflect this accordingly. If there is a law in place holding retailers to maintain the pre-crisis price of toilet paper shortages are inevitable. Naturally lower prices will encourage more consumption regardless of the scarcity of the item. Causing decreased availably and even shortages  ( Lee, 2015, P.13) [5]. Higher prices are the natural consequence of an influx in demand. The higher prices serve as a means of regulating supply.

While advocates of keeping prices fair have good intentions, they are typically ill-informed. Price gouging is not a perfect mechanism, it does disadvantage the poor. The question becomes is it better to have expensive toilet paper or no toilet paper. Most people would agree that expensive toilet paper is preferred. Some would suggest keeping the prices on par with pre-pandemic pricing and just impose purchasing limits. A vendor implemented purchasing limit is not full-proof. Is minimum wage enough of an incentive to encourage employees to enforce such company enacted policies? I would surmise not. Government sanctioned price controls would create supply shortages. This presents a similar situation to the rent control example presented previously.

 

Compensating Differential to the Vendors:

 

All because we are in the midst of a national emergency doesn’t mean that incentives fall by the wayside. If anything incentives become more important, especially if vendors are facing substantial risks by providing goods and services. To quote Adam Smith:

It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. (Smith, 1776, P.25) [6].

 

The message behind this excerpt from The Wealth of Nations is quite clear. No one sells goods or services for the sake of charity. Most vendors are attempting to make a profit. Prices fluctuate with market demand. However, in instances where there is bodily harm for providing the same goods and services, it is reasonable to expect to pay more. As previously mentioned this isn’t charity. The consumer is simply transferring the risk to the vendor. By expecting them to endure the risks inherent in a natural disaster or outbreak of deadly disease. Through braving such dangers I believe a compensating differential is justifiable. Which essential is additional compensation for offsetting undesirable aspects of a specific job, such as bodily harm [7]. Vendors also take on other risks as well. In the instance of a natural disaster, there are additional logistical considerations. Such as damaged infrastructure and lack of utilities (electricity, running water, etc). Beyond that vendors also take on legal risks. Potential fines for violating shelter-in-place orders (Giberson, 2011, P.6) [8].

 

The additional profits for enduring risk are what will incentivize entrepreneurs to continue to provide goods and services. It is a fact that is rarely brought up in a debate concerning the morality of price gouging. Even if you find the decision of business owners to raise prices to be distasteful, consider their employees. Business owners are going to have to pay their employees more to weather such dangerous conditions. If you still believe that price gouging is spurred by greed, remember that most business owners have employees. The hourly employees enduring such conditions need adequate compensation.

 

Price Gouging Encouraging Production:

 

Higher prices not only encourage entrepreneurs to endure more risks but also stimulates production. The incentives of increased profits persuade actors throughout the supply chain. If the price of hand sanitizer goes up exponentially this may persuade companies to divert production. Such as distillery switching from producing liquor to hand sanitizer [9]. If demand for hand sanitizer outpaces that of vodka it would be shrewd to reallocate resources in the direction of market demand. These adjustments in production are swayed by the potential for higher margins.

 

Market prices are the explicit quantification of information. They operate as a signal to the consumer as well as the producer. As was mentioned previously high prices convey short supply to the consumer. Hence why price gouging guards against hoarding. In a Hayekian sense, we are contending with imperfect market information (Zwolinski, 2008, P.16) [10]. If we do not have direct knowledge of the supply of toilet paper or hand sanitizer, what is going to entice us to produce it? The high prices direct production towards essential goods. Craft distilleries are now transitioning to producing hand sanitizer due to the high prices [11]. The high prices are a direct result of the high demand. The high prices convey the toll that overall demand has taken on the supply (Zwolinski, 2008, P.17) [12]. Pricing operating as a signaling mechanism operates as an indicator of how resources are to be best allocated. Government intervening on moral grounds can only cause more issues. The asymmetry in market information makes it impossible for a top-down solution to make pricing more equitable.

 

Conclusion:

 

Despite the conventional view of price gouging, it does play a vital role in managing the supply of essential goods in times of emergency. It stifles hoarding. It provides just compensation to vendors for assuming the risk and other logistical hardships in crisis conditions. It operates as a signaling model for resource allocation.  Spirited repudiations of the practice are well-intentioned but misguided. No one likes to feel ripped off. No one likes to see people who are disadvantaged suffer. However, there are justifiable reasons for the sharp increase in prices.

The jubilation of the crowd after the gentlemen selling ice (back in 1996) were arrested is understandable. Much like the advocating for fair pricing, this reaction is based upon faulty assumptions. Typically is indicative of anti-market bias.  Which is defined as “a tendency to underestimate the economic benefits of the market mechanism” [13]. Anti-market bias explains the amount of class envy and undue contempt aimed at the wealthy. This is also the narrative that fuels a lot of the irrational and debunkable claims about labor unions. Certain regulations and even specific forms of taxation. It is easy to be outraged by higher prices. It takes more effort to attempt to understand why prices are so steep.

 

 

 

 

 

 

 

Arizona Doesn’t Have Any Price Gouging Laws?!

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Amid the COVID-19 pandemic, many have witnessed an economic phenomenon that is synonymous with times crisis. That is the practice known as price gouging. This practice has the proclivity to ignite a universal cascade of outrage and indignation. Superficially such a reaction seems understandable. Considering by definition it is a sharp increase in the price of a good that is in high demand [1]. On the surface, it would seem morally base to take advantage of an emergency situation such as a hurricane. The general consensus would extend to the outbreak of an emergent pathogen such as COVID-19.

 

There is a general consensus on pricing gouging is morally objectionable. However, there isn’t much agreement on what constitutes price gouging. Approximately two-thirds of all states have some sort of price gouging law on the books [2]. It appears as if most states have a different interpretation of what price gouging entails. For instance, the state of Alabama provides clear and concise guidelines for defining price gouging :

Ala. Code §§ 8-31-1 thru 8-31-6

Prohibits “unconscionable prices” for sale or rental of any commodities or rental facilities during a declared state of emergency. A price is prima facie “unconscionable” if it exceeds 25% of the average price during the last 30 days immediately prior to the declared emergency and that increase is not attributable to reasonable costs. [3]

 

In contrast, the state of Texas provides a vague description of what is considered price gouging. Per Texas state law: “exorbitant or excessive” prices in connection with sale or lease of necessities during a declared disaster” would be illegal [4]. What defines “exorbitant” prices? I would not suggest that there should be federal standardization of price gouging laws. That should be left up to the states. At the very least be clear about the parameters defining the criminal act. Too much ambiguity can make enforcement problematic.

I currently reside in the state of Arizona. Arizona does not presently have any price gouging laws enacted. It is speculated that the reason being is that natural disasters are a rare occurrence [5]. Being a mountainous and landlocked state we are insulated from tornadoes and hurricanes. We have the good fortune of not experiencing the seismic activity that afflicts California. The prospect of a natural emergence putting a strain on the supply of essential goods is relatively foreign to Arizona. The one exception being the event of the 2003  Kinder Morgan pipeline burst. Which resulted in fuel shortages [6]. The significant increase in fuel prices passed along to the consumer was viewed as exorbitant [7]. Many residents at the time viewed it as vendors supplying fuel were engaging in some form of price gouging.

Seventeen years later some are now calling for corrective action to price gouging in Arizona[8]. Many vendors have been reacting to the COVID-19 outbreak with higher retail prices on essential goods. These higher prices are due to an increase in demand and the stockpiling of commodities such as toilet paper.

Personally, I am very incredulous when it comes to price gouging laws from an economic standpoint. Being a proponent of states rights’, Arizona can in my view pass price gouging laws. As states should cater their laws to what best suits their economy and culture providing it does not violate the Constitutional. Due to such measures not being pertinent in Arizona prior to COVID-19 is why such laws did not previously exist. I do know of at least one person who has referred to Arizona as “backward” for not having such laws in place. This is a misguided opinion.

As I mentioned earlier Arizona is relatively isolated from circumstances that would make price gouging more prevalent. This isn’t like hurricane-prone Florida or South Carolina not having price gouging laws in place. There is also the implied assumption that more laws and regulations are a net good for society. States and municipalities with fewer laws are unevolved. A law that is  either pointless, ineffective, or unjust is not universally positive due to the fact is merely another constraint.

 

I grew up in New England where there are still a litany of archaic laws and ordinances still on the books. What is colloquially known as “blue laws”. Laws that are no longer culturally or economically relevant. Frequently prohibit actions that most likely victimless crimes. While some history buffs find these laws quaint and harmless, I disagree. Even if these laws are never enforced, philosophically I oppose them. What is the purpose of laws? Depending on your answer to that question, it will shape your perception of what laws are just and reasonable. I feel that most blue laws only reinforce my rejection of legal positivism. The law should not determine what right, but it should protect what’s right. This perspective is codified in our Bill of Rights. Nowhere did I see any guarantee of economic equity or immunity from making bad decisions. The Bill of Rights were  established on the grounds of natural rights. Suppose to government decree and guarantee of positive rights.

 

In my next blog post, I will discuss why price gouging laws are economically illiterate. If lawmakers here in Arizona are persuaded by public outrage, I can only hope that they are reasonable. Provide firm guidelines that define what constitutes price gouging. That they opt for justifiable limitations. Unlike, Connecticut which cites any increase in prices during a  time of an emergency as illegal [9].