Bootleggers & Baptists: XL- Joe Rogan: Team Spotify v. The Medical Establishment

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Veteran stand-up comedian, mixed-martial arts commentator, and podcaster; Joe Rogan has come under fire for promoting COVID-19 misinformation. Business Insider lists six examples of Rogan proliferating misinformation about COVID-19 within the past two years. Arguably the proverbial “straw-that-broke-the-camel’s-back” was last month (episode # 1757)when Rogan had a controversial virologist, Dr. Robert Malone, on as a guest. Prompting 270 medical experts to send an open letter to Spotify to address the inaccurate information disseminated through Rogan’s podcast. The letter expressed: “Spotify has a responsibility to mitigate the spread of misinformation on its platform, though the company presently has no misinformation policy..”.

However, is this statement even true? Do platforms have a responsibility (legally or morally) to moderate and suppress factually incorrect content? Even though Spotify is a Swedish-based company, this rhetoric parallels the talking points of the Section 230 debate in the United States. Section 230, in most instances, shields service providers from liability for the media generated by content producers. This amendment of the Communications Act of 1934 (230 falls under the Communications Decency Act of 1996). Section 230 states :

‘….‘(c) PROTECTION FOR ‘GOOD SAMARITAN’ BLOCKING AND SCREENING OF OFFENSIVE MATERIAL.— ‘‘(1) TREATMENT OF PUBLISHER OR SPEAKER.—No provider or user of an interactive computer service shall be treated as the publisher or speaker of any information provided by another information content provider. ‘‘(2) CIVIL LIABILITY.—No provider or user of an interactive computer service shall be held liable on account of— ‘‘(A) any action voluntarily taken in good faith to restrict access to or availability of material that the provider or user considers to be obscene, lewd, lascivious, filthy, excessively violent, harassing, or otherwise objectionable, whether or not such material is constitutionally protected; or ‘‘(B) any action taken to enable or make available to information content providers or others the technical means to restrict access to material described in paragraph (1)….” (p.84).

This subsection of Section 230 could easily extend to streaming services. Spotify exercises no editorial discretion and merely provides the tools to content creators to distribute music and podcasts. ****Ethically, there are free speech concerns regarding social pressure to moderate and censor content. While the First Amendment only protects citizens from government censorship, it is evident that Spotify is not troubled by the content produced on Joe Rogan’s podcast. If Spotify takes any action, it would be due to public scrutiny.


The outcry for Spotify to address the JRE podcast’s proliferation of misinformation may not have manifested in a formal policy proposal, but there are still individuals that stand to benefit. Making the JRE controversy a perfect scenario for a Bootleggers and Baptist (1983) coalition dynamic. One subset of the coalition acting as the public face presented the moral argument for Spotify acting against Joe Rogan. Quietly, lurking in the background, are the callous beneficiaries hoping their ulterior motives are not recognized. 

The Baptists in this scenario are the experts that drafted the open letter to Spotify and other notable public health professionals that have vocally expressed condemnation of Rogan’s commentary on the pandemic. One of these renowned crusaders is Dr. Katrine Wallace of the University of Illinois, who catastrophically describes Rogan as “a menace to public health,” particularly for espousing anti-vaccine rhetoric”. Whether or not you find this statement hyperbolic or false, it still conveys an ethical concern for the influence of Rogan’s podcast influence on public health. Therefore, making Wallace and like-minded professionals Baptists. Although, there is the potential that Wallace is a Dual-Role Actor, simultaneously being concerned about public health and seeing an opportunity to raise her public profile. After all, she is a blogger.

There are two categories of Bootleggers that operate as silent beneficiaries in this scenario. The first group is the other Podcasters that distribute their content through Spotify. If the JRE podcast becomes removed from Spotify or suffers other forms of sanctions, that would mean less competition for Tim Ferriss. The second category of Bootleggers would be the medical establishment. Not to treat this faction as an amorphous blob, considering it is a collective consortium of various people, organizations, and businesses, it would be nearly impossible to identify all the potential players in the subset of the anti-JRE coalition. The vast networks of the medical establishment are so pervasive it has even been referred to as the Medical-Industrial Complex, paralleling the concept of the Military-Industrial Complex.

There are a lot of individuals that stand to profit from keeping the status quo intact. Any professional possessing heterodox perspectives stand potentially disrupt the current public consensus resulting in fewer profits for pharmaceutical companies and other appurtenant facets of the industry. Over the past couple of years, there has been an ongoing assault on expert consensus. In a world of “alternative facts, the gap has continued to widen between popular opinion and professional consensus. Few things can be threatening as a credentialed professional who holds positions that go against the grain of the establishment. These individuals appeal to a public that is disillusioned and skeptical of expertise. The medical establishment aimed to reclaim its throne by targeting influential voices that have contrary views. In the hopes that people will stop patronizing herbalists and reading articles written by Robert Malone. When persuasion is ineffective, censorship becomes the preferred mechanism. 


The problem remains of how do we distinguish fact from fiction? Is it Dr. Malone or the medical establishment that is being dishonest? The average American citizen lacks the knowledge, time, and resources to effectively qualify the claims of either faction in the COVID debate. This situation parallels the phenomenon of rational ignorance examined in Public Choice Theory; deference to experts and public figures is cost-effective to the average layman. No need to read dozens of medical journals filled with opaque jargon. When there are have several sets of experts with competing opinions whom do you listen to? It is possible to find an expert in any field that can confirm our priors.

One brilliant suggestion comes from UCF professor and scholar Enrique Guerra-Pujol, who suggests we should utilize prediction markets to assess the veracity of conspiracy theories. In any decision-making process, we are grappling with the fact that no one can have all the information. As stated in the Hayekian Knowledge Problem; information is naturally dispersed, meaning effective top-down decision-making is impossible. If we could hypothetically remedy this by creating an incentive-based mechanism that can aggregate all perspectives on a given topic we will have a better (not perfect) outcome. By including the vaccine skeptics rather than excluding them, they become part of the validation process. When we look at range-voting in jury trials it becomes quite apparent that even including erroneous perspectives does not drastically impact the overall outcome.

Perhaps instead of capitulating to public pressure to remove all of Joe Rogan’s “COVID episodes, Spotify could run a user poll or a modified prediction market (to avoid the ire of SEC and CFTC) to get the listener feedback on the veracity of the content of these episodes. Instead of removing the episodes, if deemed to be inaccurate, Spotify should merely place disclaimers.

****Correction- The 230 immunity argument does not hold up for two reasons:

  1. Spotify does exercise editorial discretion.
  2. Spotify may satisfy the legal definition of a publisher.

More on Torres v. JAI

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In a previous blog entry, I did mentioned that the Arizona Supreme Court made the right call on Torres v. JAI (2021). The case regarding the assignment of liability when bars over-serve customers. The AZ Supreme Court ruling is only valid because the decision conforms to previous case precedence. For example, in the logic of Patterson v. Thunder Pass (2007), the court waved liability the bar made a notable effort to ensure that the inebriated patron arrived home safely.

However, Torres may adhere to the contemporary reasoning of the state court, which is only a natural corollary of a distributing trend in adjudication beginning in the early 1980s. The modern jurisprudence in Arizona addressing over-serving liability dates to Ontiveros v. Borak (1983). Ontiveros marks a distinct departure from  Common Law immunity:

“….At common law a liquor vendor was not in any way liable to an intoxicated customer who injured himself because of his condition, nor was he responsible for injuries to innocent third parties resulting from his inebriated patron’s negligent acts. (King, 1966,p.252)…”

The position before Ontiveros upheld by the Arizona courts affirmed the traditional Common Law interpretation. As evident in Pratt V. Daly (1940), were “… it was recognized both within and without Arizona that Pratt v. Daly had approved and adopted the common law rule of nonliability..” (para 9). Ontiveros effectively gutted the Common Law logic of protecting tavern owners from undue liability instances of over-serving intoxicated patrons. Although, the verdict in Ontiveros is easy to accept on purely rationalistic grounds; because the bar served the patron 30 beers!

A law professor at the University of Central Florida.,  F.E. Guerra-Pujol, brought it to my attention that we need the legal doctrine of proximate cause. In the absence of clearly defined limits on assessing liability, the chain of liability could stretch out infinitely. Unfortunately, unjustly assigning blame to distant actors in the “alcohol supply chain”. Under this logic, Torres might conflict with the proximate cause doctrine. After all, once the customer arrives home safely, why would the bar still hold any responsibility? In Torres, the intoxicated customer caused the accident after arriving at his residence. It may be fair to suggest that there was enough distance between the events to absolve JAI of liability from the stance of this doctrine. But this does not consider existing state statutes and previous in-state case law.

Thier’s Law Applied to Human Capital

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This blog entry was inspired by feedback from Enrique at the Prior Probability blog.

If Gresham’s Law applies to retain human capital in the job market, is it possible that Thier’s law (p.9) could also be applicable in certain contexts? On money, when legal tender laws forcing vendors to accept both forms of money at nominal value, economic agents will choose to transact with the higher valued currency. Presenting an axiom that is the opposite of Gresham’s Law, “ Good money drives out bad money”. Typically in the arena of monetary economics, the divide between advocates of Gresham’s Law and Thier’s Law is a sharply delineated dichotomy. Most proponents of one will not defend the possibility that the principle could apply to the circulation of money.

However, in terms of the circulation of human capital these concepts are not necessarily opposed. Employee retention is the byproduct of several highly qualitative attributes that are generally specific to a certain firm. In corporate vernacular, the term “culture” is thrown around so frequently that it has become a buzzword deeply embedded in the American psyche. Companies such as Google, go to great lengths to demonstrate that they have a flexible, open, and innovative corporate culture. The veracity of the claims is ultimately judged by the perceptions of the individual employees. One employee may adore working at Google, while their colleague completely despises the company’s ethos. Making the ebbs-and-flows of human capital even more complex. Employee retention at the individual level is based upon a multitude of various factors. The aggregated collection of the opinions of all the individual employees regarding their work-life satisfaction tends to paint a fuller picture. If while perusing Glassdoor, you happen to see a company with eighty-five two-star ratings, chances are this is not the petty slander of a few disgruntled employees. This is why oftentimes companies will periodically send out surveys to their employees in an attempt to measure overall morale throughout their organization.

Putting aside the highly individualized variable of career satisfaction metrics for an entire firm, if there is a pattern of talented employees leaving, there is a retention problem. Sometimes this may be isolated to a specific department even if the firm as a whole has no issues keeping competent and productive workers. Certain companies and even job roles select for specific attributes that may not be conducive to attracting skilled and reliable labor. Some industries are notorious for high turnover rates, one salient example being the hospitality industry. I remember a few years back, being in between jobs, so I briefly worked at a call-center. For me, this was an income stream until I found something else, for many of the people in my training class it was a lifelong career path. This path was a volatile one. Staying only a few months at one company and then abruptly quitting, generally with no notice. Upon receiving a new job offer, I gave my supervisor my two-week notice and he was astonished by the fact I even bothered to take this step. After only six months, only five people (including myself) out of the twenty-five in my training class remained. Industries and job roles with high turnover may be more willing to retain employees with fewer skills or with a poor performance history, due to the outflow of higher-skilled employees. Perfectly mirror the effect described in Thier’s lawinstead of money, the commodity that is flowing out of the firms is quality human capital.

The question becomes how can these opposed ideas transpire concurrently in the same labor market or even the same company. The answer to this question is predicated upon a “rules of the game” type logic. Each company and each interior department within a firm operate as governing bodies directing the task of workers. Meaning both varying capacity function as “ruler-makers” within the company. Think of corporate policy as being analogous to the federal government, while the department formulated rules are similar to state law. Clearly, in most cases, corporate policy supersedes department policies. If these rules are too onerous or unjust there is little a qualified and skilled employee could other than leave. Either accept and abide by the rules set forth or resign. Resignation being a clear withdrawal of consent on the part of the employee. One relevant example of this is companies still drug testing for marijuana in states where it is legal. Granted, it is an organization’s prerogative to make employees refraining from drug use a contingency of employment. However, if enough high-caliber job candidates take to smoking cannabis they may be in a bit of a quandary. A few years back the FBI ran into this problem due to their “drug-free” employment policy.

If the rules governing the management of a firm are too oppressive, people with options are going to find another job opportunity. What the company is left with are those who lack the skills, ambition, and conscientiousness required for productivity. The employer is left with the staff that clings to their jobs for dear-life as odds are they do not carry too much value on the job market. Much how department policies such as catering to senior and skilled workers can impose an effect similar to Gresham’s Law the opposite is also true. If you create rules that disincentives tenure and self-development, odds are you will lose a lot of great workers. The kind of workers that can be a game-changer in managing strategic customers. As we have observed with the call-center example, frequently due to the oppressive rules, low pay, and dismal work environment people with potential tend to leave these positions. Leaving you with the unskilled and the desperate who are locked-in to the role due to their circumstances. Keeping this dynamic in mind, it is a wonder why people expect quality service whenever they call tech support.

Privatization of Defense- Central Government. The Transaction Costs Reducer.

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Hat Tip to the Marginal Revolution Blog and the Prior Probability blog for referring me to the referenced article.

The privatization of defense services could hypothetically reduce the occurrence of military conflicts. This is achieved by realigning the incentives to engage in warfare by making the costs more evident to the taxpayer. The direct costs of war are generally obscured due to a lack of clarity of how tax dollars are allocated. Operating as a form of indirect fiscal illusion. Either by design or by the context of the broad and imprecise nature of public expenditures. If a would-be taxpayer could not transfer or distribute the costs of war to the collective contributions of the tax base, frivolous objectives such as “spreading” democracy would be off the table. Military action would shift from being offensive or even preemptive to being purely defensive. Whether defense services should be provided by the local neighborhood watch or a private corporation is another matter.

There is some historical evidence suggesting that eliminating a mechanism for distributing the costs of violent conflicts makes them less apt to transpire. Per a recent paper written by Rosolino  Candela, and Vincent Geloso the French settlers of the  Bay of Fundy had virtually no violent conflicts with the Mi’kmaq tribe. Why?  The European settlers of the 18th century known as, Acaridans, had to directly bare the costs of violent conflicts. Since they received little institutional or financial support from the mother country. Having adopted informal decision-making procedures, living along aside the Mi’kmaq, they lived in a state of near-anarchy (Candelaa & Geloso, 2020, p.3-4). Providing some credence to the inference that a strong central government operates as a mechanism for reducing the transaction costs of armed conflicts. Skewing the incentives of constituents to be more lackadaisical towards the costs of unnecessary military campaigns. Often reducing transaction costs is viewed as being a positive economic development in this case it is not. The evolution of the robust warfare state in the U.S. has amounted to profligate spending, a treacherously hazardous foreign policy, the growth of government, and ample opportunities for rent-seeking.

The Acadians received virtually no support from the homeland. Outside of a “symbolic” tax that was only sporadically collected by officials, they were primarily left to their own devices (Candelaa & Geloso, 2020, p.3). Leaving the settlers able to only rely on local militias to provide the defense of the colony. Leaving the “…costs of using violence would be concentrated on the beneficiaries themselves and could not be passed on to wider groups..” (Candelaa & Geloso, 2020, p.10). Through the colonists and the natives having to fully bare the costs of violent conflict, this was one of several factors that prevented the development of interest groups (Candelaa & Geloso, 2020, p.16). Stifling the potential for wartime profiteering by removing the incentives to fabricate needless conflicts for the sake of drumming up business.

While there may be contextual characteristics that do not apply to modern times. It should be noted that a highly centralized government does have an impact on the frequency of war. Through disbursing the costs across a large number of taxpayers, the true costs of military intervention are obscured. Hence why for the Acadians, the lack of financial and military support from the motherland shifted incentives away from violent forms of conflict resolution. Making it plausible to surmise that having a centralized government is what makes war so easy to initiate. It acts as the middle-man connecting constituents with service providers (the military). Alone, a centralized government reduces the costs of coordinating complex military campaigns.  Never mind the fact that it collectively distributes the costs of the capital required for military conflicts. To truly demonstrate this point, consider the highly extravagant cost of a private citizen purchasing a tank or a submarine. Individually most people could not afford to purchase the instruments of sophisticated warfare. Combing the fact that a central government obscures the direct costs of war and provides the institutions that make the coordination efforts of armed conflict more efficient, it shouldn’t be a mystery why the size and scope of military conflicts have now become global. Providing some firm insights as to why the Acadians preferred the bargaining table to the sword in resolving conflicts with the Mi’kmaq.

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.





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.