All of our elected representatives in Washington, including the President, swear a sacred oath to “uphold the Constitution of the United States.” Yet in the wake of the on-going NSA snooping scandal, one wonders whether any of them have ever bothered to read that founding document.

Amendment #4 of the U.S. Constitution states, in part, that “the right of the people to be secure in their persons, houses, papers and effects, against unreasonable searches and seizures, shall not be violated and no Warrants shall issue, but upon probable cause…and particularly describing the place to be searched and the persons or things to be seized.”

Some liberals, conservatives and even some “libertarians” are in disagreement over whether the NSA collection of domestic telephone and email data is, in fact, unreasonable. I assert that it isunreasonable precisely because we now know that the NSA has gone far beyond its Patriot Act or FISA (Foreign Intelligence Surveillance Act, 1978) authorization. Revelations to come will make this conclusion even clearer.

These laws allow the collection of intelligence information between “foreign powers or agents of foreign powers” in the U.S. and elsewhere. Yet even with the gathering and use of foreign intelligence, these laws prescribe certain legal procedures that must be followed to ensure that NSA spying serves a legitimate and legal purpose. On the other hand, the dragnet collection and storage of general domestic data such as phone records and email information (“metadata”) on U.S. citizens, either by the NSA, the FBI or any governmental intelligence agency, has never been specifically authorized by any law (although some secret FISA court may have signed off on such an outrage). Individuals under suspicion can be “searched” electronically but only with “probable cause” and then only with the issuance of a warrant specific to the place or person to be searched. None of this, I assert, has been followed in the recent disclosures about NSA spying.

Thus it appears that the NSA has been involved in an activity (apparently approved by the Department of Justice and the President) in likely violation of the 4^th Amendment of the Constitution. The ACLU will test this theory with its legal suit that challenges the constitutionality of this broad based domestic data collection program.

The retort to all of this, of course, is that the threat of terrorism can justify almost anything that the government chooses to do in the name of “national security.” Nonsense. This theory has almost zero legal credibility. Our history contains a fair number of examples of government over-reach during alleged “emergencies” (President Truman’s attempted nationalization of the steel industry during the Korean War, for example) that have been sternly rebuffed by the Supreme Court as blatantly unconstitutional. And the reason should be obvious: Constitutional protection for individual rights is even more necessary when times are precarious than when they are not. After all, what are we fighting this alleged war on terror to preserve?

Which of course gets to the larger question of whether our government’s alleged war on terror and the preservation of individual rights under the Constitution are in any way compatible in the long run. There is a solid historical reason why the Founding Fathers, especially George Washington, argued that the U.S. must steer clear of any “foreign entanglements.” They knew based on the imperial British and Spanish experience, that foreign military interventionism must lead to an overall increase in governmental power and, thus, endanger the very liberties that the Constitution was created to protect. They also knew that interventionism abroad must invite retaliation and even repression at home and that “civil society” would always be endangered by expanding militarism.

The government surveillance infrastructure put into place after 9/11 can now capture almost every electronic communication (personal, financial, medical) between almost everyone on the planet. This development is unprecedented in human history and is an absolute litmus test for those who believe that a government with absolute power (over information) must eventually be corrupted. We are getting perilously close to the point where we must decide as a society whether adopting a technology for facilitating the U.S. mission as the world’s policeman is somehow more important than personal privacy, individual liberty, and perhaps even the Constitution itself.

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Recently by Dom Armentano: Fed Tweet to Savers and Investors: DropDead

I assert that the most intelligent reality show on TV is the History Channel’s Pawn Stars. It’s a capitalistic feast for a free market junkie like me.

The basics of the show are fairly straightforward: Rick Harrison and several family members own a pawn shop in Las Vegas. In each episode various people enter the establishment and attempt to sell (or pawn) some item of personal property and obtain the highest price. The items can range from, say, an old German-made toy from the 19th century to a smashed-up 1990′s helicopter that would need a total (and expensive) renovation in order to fly again. And Rick, of course, must evaluate each prospective transaction and decide whether he’s interested in buying and at what price.

Rick’s many years of experience in the business world allow him to understand the basic "market value" of most of the items he evaluates. Frequently, however, when an item offered for sale is historical and/or outside his area of expertise and could be a seriously expensive mistake if purchased (or not purchased), he calls in a specialist to do a professional evaluation concerning authenticity and possible monetary value. Is it really a Winchester rifle from the post-Civil War period? How do you tell? When was it made? Is the stock original? How rare is a rifle in this condition? What are the current market conditions for such an item? And since these expert evaluations are made for many diverse products (documents, paintings, pinball machines), viewers (like me) often learn amazing and interesting bits of cultural history from a show concerned primarily with money.

All sorts of important capitalistic principles and values are on display during Rick’s process of discovery and negotiation: First and foremost, of course, is the profit motive– with no apologizes–and the constant concern about avoiding financial mistakes (by paying too much) and losing money. But if you are paying attention, viewers also get to see the importance of other economic principles such as time preference, the division of labor, the nature of subjective value, the inherent risk with any investment decision (in restoration, for example) and especially the inherent risk and uncertainty of reselling a final product into future market conditions.

Rick Harrison makes it precisely clear that he, and he alone as owner, is assuming all of the risk in these transactions. After all, the seller is getting Rick’s money now, in the present, the moment Rick hands over the cash. Done deal. But Rick can only get his money back and get his profit, presumably, at some uncertain time in the future when the item is to be resold. But will there actually be a profit in the future? Who knows? Who can know? This point about inherent risk and uncertainty, and about the crucial role played by the entrepreneur in all of this, is constantly highlighted and it is wonderful to see it actualized so expertly in the context of a popular reality show.

This may be a stretch but what Pawn Stars does in entertainment video is similar to what Atlas Shrugged does in fiction: it takes important philosophical principles and actualizes them with colorful characters in real world settings. It’s a most effective teaching tool because viewers (and readers in the case of Atlas) watch someone actually "doing" the principles and they "learn" while caught up in the drama; it’s not just some boring lecture.

I dare say that most students could probably learn more about the market process from watching Pawn Stars than they could from taking most college economics courses, especially at certain Ivy League schools. And they wouldn’t get any of that Keynesian bad stuff that they would have to unlearn.

Dom Armentano is Professor Emeritus at the University of Hartford (CT) and the author of Antitrust and Monopoly (Independent Institute, 1998) and Antitrust: The Case for Repeal (Mises Institute, 1999). He has published articles, op/eds and reviews in The New York Times, Wall Street Journal, London Financial Times, Financial Post, Hartford Courant, National Review, Antitrust Bulletin and many other journals.

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Recently by Dom Armentano: The Feds Close a School

Can you identify the one major economic issue that was all but ignored by both major parties (but not by Ron Paul) in the recent presidential election? I can…and it's not the so-called "fiscal cliff" problem currently being debated in Washington. It's the Federal Reserve's crazy monetary policy of repeated "quantitative easing" and extremely low interest rates.

Both President Obama and Governor Romney had several heated debates about taxes, government spending, deficits and government debt. They did not agree on almost anything but at least they recognized that these macro-economic fiscal policies were important in any serious analysis of unemployment and slow economic growth. Yet amazingly, both candidates steered miles clear of any serious criticism of the Fed's monetary policy over the last decade and especially since the recession of 2008. Politicians in both parties, apparently, have decided that the public should best remain blissfully ignorant of the unintended consequences of the Fed's "easy money" policy and it's corollary, near-zero interest rates for savers and investors.

Let's be absolutely clear. Federal Reserve monetary policy over the last decade has been entirely unprecedented in our economic history. There has never been a 10-year period where the central bank of the U.S. has expanded the money supply so enormously and never ever a 5 year period (2008-2012) where the Fed has kept interest rates at near-zero in real terms. (Real interest rates are nominal market rates minus the rate of inflation). And Fed Chairman Ben Bernanke's testimony before Congress and the recently released minutes of the last Fed Board of Governors meeting make it crystal clear that these unprecedented policies will be continued into the foreseeable future.

So what has the Fed been actually doing? Simply put, when the Fed purchases government securities in the open market it puts "new" money into the banking system and into the economy generally. This increase in the supply of money depresses market interest rates and normally tends to increase the value of financial assets like stocks and bonds, at least in the short run. Chairman Bernanke has justified a continuation of such policies by arguing that the current economic expansion is so fragile that business investment and the housing recovery can only be sustained by super-low interest rates.

Nonsense. The banks are already loaded with enough "excess reserves" on their balance sheets ($1.5 trillion at last count) to finance any legitimate economic recovery if only there were appropriate incentives to make profitable loans and investments. In addition, any further continuation of low interest rates will only fuel the sort of rampant price inflation and non-sustainable mal-investments (in housing and construction) that we all saw come crashing down in 2008. Why would we want to repeat that again? Finally, since there is no evidence that the Fed's policies actually work, why continue them? Memo to the Fed: Allow interest rates to adjust to free market levels.

Actually the most important reason that the Fed is keeping interest rates artificially low (a reason that Chairman Bernanke dare not share publicly) is that the Federal Government itself would likely go broke attempting to finance its massive annual borrowing and refunding of debt if interest rates were sharply higher. Those who assert that the Federal Government could never default on its debt obligations should explain how the government could possibly rollover old debt or fund massive new annual deficits if interest rates were, say, 7% or higher. Ironically, perhaps, sharply higher interest rates would curb government deficit spending faster than all of the hot air "negotiations" coming out of Washington these days.

Let's face it: The current Federal Reserve policy of quantitative easing props up the value of government securities and subsidizes U.S. borrowing and it does this at the expense of working and retired people who will continue to earn next to nothing on their bank savings accounts and CDs. This policy is inefficient and immoral and it should end. In addition, some economists believe (with good reason) that the U.S. Treasuries market has now become the biggest asset bubble in financial history. If and when it crashes, it will make the so-called "fiscal cliff" problem look like a walk in the park.

Dom Armentano is Professor Emeritus at the University of Hartford (CT) and the author of Antitrust and Monopoly (Independent Institute, 1998) and Antitrust: The Case for Repeal (Mises Institute, 1999). He has published articles, op/eds and reviews in The New York Times, Wall Street Journal, London Financial Times, Financial Post, Hartford Courant, National Review, Antitrust Bulletin and many other journals.

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In the early morning hours of April 2, federal agents of the Drug Enforcement Agency (DEA) and the IRS, in full battle gear, swept down on 1600 Broadway in Oakland, CA and did the unthinkable: they closed a school. When the Feds left later that same day (under the protection of the local Oakland Police Department), they carted away several office computers, file cabinets, and dozens of marijuana plants.

Oaksterdam University had been operating legally in Oakland since 2007. The brainchild of entrepreneur Richard Lee, Oaksterdam was a trade school of sorts whose part-time professional faculty provided educational services that detailed the science, law, and commercial opportunities associated with cannabis (marijuana). Over 15,000 students had paid tuition for such services over the years and the thriving university community had contributed mightily to the revival of downtown Oakland.

Let’s be clear. Oaksterdam was NOT a drug or marijuana dispensary (there are several licensed dispensaries in Oakland) and never sold cannabis. The pot plants that the DEA hauled away were being grown and displayed solely for educational purposes related directly to the curriculum. The instructors who taught at Oaksterdam were engaged in a legitimate educational activity with students who paid tuition for those services. Nonetheless, the IRS and DEA agents came in with guns (and yet to be undisclosed federal warrants) and the school, for all practical purposes, has now been shuttered. Where is the ACLU?

The raid at Oaksterdam (and the simultaneous raid by the IRS at Richard Lee’s private residence where records and bank accounts were seized) was not totally unexpected. Indeed, the federal authorities over the past several months have displayed an increasing hostility to the public’s growing acceptance of the availability of medical marijuana and to the commerce associated with supplying it to patients.

Despite the fact that medical marijuana is legal in 16 states, the DEA has recently seized or threatened to seize the assets of hundreds of landlords in California who rent facilities for the dispensing of medical marijuana. Richard Lee, the owner of Oaksterdam, and an outspoken advocate and financial "angel" for marijuana law reform in California, is simply the latest victim of an overall federal pushback to silence the growing movement to rationalize cannabis consumption in the U. S.

The chilling effect of federal harassment is already working. Lee, who was already under the gun with a 2010 IRS audit for alleged improper business deductions, has now severed his relationship with Oaksterdam and has publicly stated that he is "stepping back" from several cannabis related activities. And as the fear of asset seizure closes dozens of cannabis dispensaries in California, the reform mood clearly has turned gloomy.

Several important legal questions beg to be answered. First, since California had long ago legalized the "cultivation and possession" of cannabis for medical purposes (Prop. 215, 1996), under what authority can the Feds threaten local licensed medical dispensaries that are operating consistent with the intent of state law? Secondly, why hasn’t California’s attorney general Kamala Harris brought immediate suit against the Feds to halt the asset seizures and general harassment of local businessmen?

Finally, in the case of Oaksterdam University, why don’t private schools, licensed by the city, have the right to exist (without federal interference) and determine their own curriculum and display native plants as part of a legitimate educational experience? And if they don’t have these basic rights, what sort of country do we really live in?

Dom Armentano is Professor Emeritus at the University of Hartford (CT) and the author of Antitrust and Monopoly (Independent Institute, 1998) and Antitrust: The Case for Repeal (Mises Institute, 1999). He has published articles, op/eds and reviews in The New York Times, Wall Street Journal, London Financial Times, Financial Post, Hartford Courant, National Review, Antitrust Bulletin and many other journals.

The Best of Dom Armentano

Think gasoline
prices are historically high? Think that there is no competition
in the petroleum industry? Think that the oil companies earn a "monopoly"profit
selling gasoline? Well think again.

When Ronald
Regan took office in January of 1981, gasoline sold for approximately
$1.40/gallon. Prices fluctuated up and down over the next 20 years
but gasoline prices were still roughly $1.40 when George W. Bush
was elected in 2000. After 2001, gasoline prices increased steadily
and hit almost $4.20 in the summer of 2008; then prices fell back
dramatically to around $1.75 in early 2009. Since then gasoline
prices have risen to $4.00/gallon in April, 2012.

Is this pricing
pattern over the last 30 years necessarily indicative of monopoly
power, price gouging, or a total lack of competition in the oil
industry? Hardly. Indeed, when we overlay gasoline prices with the
price of crude oil over these very same years, there is almost a
perfect fit. And since domestic oil refiners don’t control the international
crude oil market, and since crude is the major (67%) cost component
in gasoline refining, gasoline prices likely reflect the true costs
(including the risk costs of supply interruptions) of producing
and delivering refined product to consumers.

Federal and
state taxes also play a role in gasoline pricing. When consumers
purchase gasoline at the pump, they automatically pay a federal
excise tax of 18.4 cents/gallon and an average state sales tax of
27.2 cents/gallon(far higher in California) for a grand total of
45.6 cents/gallon on average. Thus excise taxes alone account for
almost 12% of gasoline prices at retail. On the other hand, the
industry-wide gross profit margin for selling gasoline is 2.5% or
roughly 10 cents/gallon while Exxon-Mobil, the largest domestic
oil refiner, earns about 3 cents per gallon from all of its refined
products sold in the U.S.

Critics charge
that oil companies are "greedy"and "charge what the
traffic will bear." The fact remains that all market participants
are greedy (consumers as well as sellers) and that all sellers,
depending upon their competition, charge what the traffic will bear.
Yet despite oil company self-interest (I would say because of it),
the price of a gallon of gasoline is still roughly equal to the
price of some bottled waters and, indeed, far cheaper than most
premium brands like Evian ($7.49/gallon). Gee, I guess water companies
must be greedier than oil companies.

Still another
way of demonstrating that gasoline prices are not monopoly prices
is to adjust gasoline prices for the general rate of inflation over
time. After all, if gas prices simply reflect a decline in the value
of the (dollar) currency, it would be wrong to conclude that prices
are higher simply because of so-called monopoly.

When we adjust
gasoline prices for inflation (in 1979 dollars), a gallon of gasoline
cost roughly $1.20 in 1981, declined to 60 cents in 1999, rose to
$1.40 in 2007 and is approximately $1.38 today. Thus in real price
terms — that is nominal prices minus the rate of inflation — a gallon
of gasoline that you bought yesterday at the local station is only
marginally more expensive than it was when Ronald Regan became President.
That’s monopoly power?

Critics would
have you believe that the oil industry is not purely competitive
because the bulk of the production is accomplished by 6 super major
oil companies (even though there are 143 domestic oil companies).
The first charge is bogus since pure competition is an intellectual
fiction and exists in absolutely NO industrial situations. The second
contention is true but irrelevant to an understanding of how large
firms actually compete.

Oil companies,
like all large industrial firms in legally open markets, engage
in a vigorous competitive process where they must perform efficiently
for stockholders and sell an improved product to willing buyers
every day…else they lose market share to a rival. This process of
rivalry is an explicit manifestation of Adam Smith’s "invisible
hand"and is alive and well in oil refining. Critics that really
want to understand monopoly power had best turn their attention
from the phony issue of oil industry "concentration"to
the real monopoly problem: the government-run OPEC cartel that nationalizes
crude oil resources, controls crude oil production, and keeps costs
high.

Consumers don’t
like paying higher gasoline prices; we can certainly sympathize
with that. But economic history teaches that the oil industry has
always been workably competitive and that market prices tend to
reflect market costs in the long run with a modest rate of return
for suppliers. The problem, as usual, is government. The best that
public policy can do is to remove legal or regulatory barriers that
restrict production (fracking, drilling, pipeline and exploration
delays) or abandon policies that artificially inflate industry costs
including taxes and the risk-costs of new or expanded wars.

April
19, 2012

Dom
Armentano is Professor Emeritus at the University of Hartford (CT)
and the author of Antitrust
and Monopoly
(Independent Institute, 1998) and Antitrust:
The Case for Repeal
(Mises Institute, 1999). He has published articles, op/eds and reviews
in The New
York Times, Wall Street Journal, London Financial Times, Financial
Post, Hartford Courant, National Review, Antitrust Bulletin
and many other journals.

The
Best of Dom Armentano

With at least
12 compulsory years in public schools, one would think that most
of the twenty-something Wall Street protesters would have some understanding
of capitalism, its actual history, and its accomplishments. Well,
maybe not. One can only wonder what passes for economic education
these days.

So what is
capitalism? Free market capitalism is based on the individual
right to own and freely trade property. It permits owners of property
(land, labor, capital, etc.) to enter (or exit) any contract on
mutually agreeable terms. It gives entrepreneurs the freedom to
start any business (without government permission) and to borrow
money and develop products for consumers. It permits land owners
to rent (or sell) their property for any peaceful purpose. It gives
adult workers the liberty to lease their services to any business
at any agreeable wage and to terminate that agreement at will; employers
would have the same right.

Capitalism
allows firms to compete (and cooperate) with other firms; it allows
firms to succeed and reinvest their profits; it allows firms to
make losses and fail and go out of business. It allows consumers
to choose any product or service (drugs and prostitution would both
be legal) and allows parents to educate their children in any manner
and for any length of time that they decide is appropriate.

Under capitalism,
there would be no government bailouts; no Federal Reserve; no Fannie
Mae or Freddy Mac; no state restrictions on competition (so-called
antitrust laws); no tax-supported schools and no government supported
monopolies of any kind. Crony capitalism, after all, is not real
capitalism.

As should be
apparent, a capitalistic economic system is grounded on individual
liberty. When and if individual rights are violated under capitalism
(theft, harmful pollution, contract defaults, protesters breaking
store windows) it would be legitimate to prosecute and punish rights-violaters
(criminals) under the rule of law.

Now what exactly
are the Wall Street protesters protesting? A few are legitimately
protesting the special privileges and economic distortions associated
with crony capitalism. Fine. Most, however, are confusing crony
capitalism with real capitalism. For example, they think corporations
are too "powerful" or they are upset about the dearth
of jobs (and blame the free market), or they want incomes more evenly
"distributed" or, more generally, they want more government
control of the marketplace.

Let’s take
these one at a time.

Corporations
such as Apple and Wal-Mart and Allstate are all large organizations
that compete in an open market with other businesses (large and
small) for the favor of consumers. Their overall success depends
not on any government grant of "power" but solely on their
internal efficiency and their ability to convince consumers to purchase
their products and services every hour of every day; if they fail,
they get smaller, and their employees and investors suffer.

Do the protesters
object to growth and success based on efficiency and consumer choice?
Would they restrict that choice or hamper that efficiency to keep
firms small? And if small is more expensive, why is this good?

Protesters
also say that they are concerned about the fact that the jobless
rate is stuck at 9%? But whose fault is that? In all previous post
WW2 recessions the economy has always recovered and the U.S. job
market has always expanded. There are two exceptions: the 1930′s
and the last three years. Interestingly, these are the only
recessions where Keynesian economic policies were used by the federal
government in an attempt to "stimulate" the economy and
bailout ailing corporations and financial institutions. I think
that there is a lesson here if only the protesters would pay attention.

On the matter
of income distribution, let’s be clear: Incomes are not "distributed"
but are earned when owners of land, labor, or capital sell or rent
their property. The distribution is unequal because the original
endowment (talent, inheritance, etc.) is always unequal and because
free market prices and wage rates are different for different products
and services.

Consumers place
a higher value on Lady Gaga’s services than they do on my services
and, thus, her income is far higher than mine. Under capitalism,
Lady Gaga (certainly a member of the 1% club) is entitled by right
to keep what she earns in free trade…or give it away if she chooses.
By what right would protesters advocate that government confiscate
some of that income and "distribute" it to people who
didn’t earn it? Sounds like theft and not "social justice"
to me.

Notice that
the general theme accepted by most of the protesters is that government
power is always necessary to correct the free market choices that
consumers and businessmen make every day. I say: Get some historical
perspective. Nations have tried those sort of regimes for centuries
and they have proven both illiberal and inefficient. Real capitalism,
is the newest and freest and most productive economic system ever
tried and we must salvage, not wreck, what’s left of it. Perhaps
a field trip to Greece (or Cuba) for the Wall Street protesters
is in order.

November
19, 2011

Dom
Armentano is Professor Emeritus at the University of Hartford (CT)
and the author of Antitrust
and Monopoly
(Independent Institute, 1998) and Antitrust:
The Case for Repeal
(Mises Institute, 1999). He has published articles, op/eds and reviews
in The New
York Times, Wall Street Journal, London Financial Times, Financial
Post, Hartford Courant, National Review, Antitrust Bulletin
and many other journals.

The
Best of Dom Armentano

President Obama’s
highly touted $300 billion "jobs" bill is a non-starter.
It is unlikely to get through the Republican House of Representatives
and even if it did, it would not create viable private sector jobs.
After three years of sluggish economic growth and meager private
sector jobs growth, politicians in Washington D.C. still insist
on playing smoke and mirrors with the American people.

Can government
spending create jobs? Governments can certainly create jobs in the
public sector; they do it all the time and Obama’s bill will do
more of it. Governments can hire school teachers, social workers,
and millions of other bureaucrats to administer its thousands of
programs and regulations. Importantly, however, the funds for these
jobs must be provided by either taxation or by borrowing from the
private sector. Thus as almost all economists recognize, public
sector employment comes (in some real sense) at the expense of opportunities
for private sector employment.

To see why
this is so, assume that $1million dollars is raised by taxation
to, say, fund new staffing at the Environmental Protection Agency.
No debate; public sector jobs get created. But note that the very
same $1million cannot be spent by taxpayers on new washing machines
or trips to Las Vegas or newspaper subscriptions. Thus for every
job created by government spending there must be a tradeoff of jobs
NOT created (or maintained) in the private sector of the economy.
In economics, there is no free lunch.

Private sector
jobs, on the other hand, are created in an entirely different manner;
if they are sustainable, they are self-financing. Private employees
are hired with the expectation that their wages will be paid by
the additional revenue or value that they generate for the employer.
Individuals that work for washing machine retailers or for a travel
agency or for a newspaper must generate a stream of benefits for
the company that compensates for the wages they are paid (or they
will be fired). In short, private firms can hire workers — that
is create jobs — if and only if it is profitable for them to do
so.

It is now easy
to understand why the Bush and Obama stimulus programs of the past
did not create jobs and why the current bill, if enacted, will also
fail . First, government programs that loan taxpayer money to private
firms with poor profit expectations (like Solyndra) are recipes
for disaster. The $528 million that was wasted on Solyndra could
have been spent by consumers supporting local retailers and their
employees. Instead it was pure crony capitalism with money and jobs
down the drain.

Second, almost
all of the funding for so-called public works programs in the Obama
jobs bill is temporary. Even if the taxpayer money is paid to private
firms to, say, pave roads or repair bridges, the money is short
term and provides no long-run sustainable jobs. When government
funding runs out so do the jobs.

Finally, as
we have already explained, federal government spending for health-care
professionals or for infrastructure improvements must come from
either taxation or borrowing (or reductions in other government
programs ) and that means that new public sector employment must
come at the expense of older public service jobs and/or private
sector jobs not created. Thus the notion that government spending
can engineer a net increase in employment is dangerous political
nonsense.

Private firms
create sustainable jobs when management and employees generate profitable
benefits for their consumers. Absent the expectation of profit,
no firm will hire anyone to do anything; would you? Running a profitable
business is already difficult enough (due to competition and changing
consumer tastes) but it becomes even more difficult when taxes,
regulations, and health care costs create strong disincentives to
start a business or hire additional employees.

America doesn’t
need another political jobs bill but it does need a dramatic change
in public policy. We need sound money and a balanced (and far lower)
budget; we need a moratorium on any new taxes and business regulation;
and we need the Supreme Court to step up and declare Obamacare unconstitutional.

Americans have
always survived and prospered despite corrupt political management.
We will again if we can get our public affairs in order.

September
21, 2011

Dom
Armentano is Professor Emeritus at the University of Hartford (CT)
and the author of Antitrust
and Monopoly
(Independent Institute, 1998) and Antitrust:
The Case for Repeal
(Mises Institute, 1999). He has published articles, op/eds and reviews
in The New
York Times, Wall Street Journal, London Financial Times, Financial
Post, Hartford Courant, National Review, Antitrust Bulletin
and many other journals.

The
Best of Dom Armentano

It is now beyond
dispute that the Keynesian policies of the Obama Administration
have not brought about a sustainable economic recovery. Massive
stimulus spending (with money borrowed from China) and unprecedented
increases in the money supply by the Federal Reserve (to hold interest
rates near zero) have not revived private investment or the U.S.
job market. We are likely headed back to recession and recriminations
for our economic problems abound.

Free market
economists correctly blame government interventionism for the current
mess. Funny money from the Fed, deficit spending, and bailouts cannot
promote prosperity; never have, never will. Liberals argue, however,
that these very same policies just weren't aggressive enough (!)
and that what really failed was leadership in Washington. If only
we had a decisive leader like Franklin D. Roosevelt, we are told.
After all, didn't FDR's leadership restore confidence during the
1930s and didn't his policies help end the Great Depression?

Well not exactly.
FDR inherited serious economic problems but the policies of the
New Deal did not fix the Hoover mistakes or promote prosperity.
The problems began early. The Democratic platform of 1932 pledged
to cut government spending by 25%; yet FDR and the Democratic congress
proceeded to expand government spending and unbalance the federal
budget. Federal spending went from $4.6 billion in 1933 to $8.2
billion in 1936 to $9.1billion in 1939, an increase of almost 50%
in 6 years. Much of this spending was financed by borrowing money.
In 1939, for example, the federal budget deficit was $2.8 billion
or roughly 30% of total federal spending.

But didnu2018t
all this government spending promote job growth in the private sector?
Not really. Although, the economy expanded modestly between 1933
and 1939, the unemployment rate stayed stubbornly high. The unemployment
rate was 24.9% in 1933 when FDR became president but it was still
17.2% in 1939, or almost double today's rate. In short, the New
Deal did NOT solve the massive unemployment problem of the 1930's.

But why not?
One answer is that contrary to the myth that FDR promoted confidence,
the exact opposite is true. Much like the current Obama Administration,
the private business community during the 1930's did not trust FDR
and the D.C. politicians and simply would not make business investment
(in both labor and capital) that would have improved productivity
and employment. As just one indicator of that lack of confidence,
gross private domestic investment which had reached $16.7 billion
in 1929 was only $9.5 billion in 1939.

Examples of
government-created uncertainty in the 1930s abound. For example,
prior to the New Deal, gold was money and gold certificates and
banknotes were fully convertible into gold at par. Yet in one amazing
and unprecedented governmental stroke, private gold holdings were
confiscated and gold clauses in private contacts nullified, all
with Supreme Court approval. In addition, the Congress in 1933 created
the National Industrial Recovery Act and the Agricultural Adjustment
Act; the former mandated and legitimized business cartels (under
a complex web of code authorities) while the latter extended federal
regulation to U. S. farm outputs and prices. Both programs were
complicated command-and-control failures and both were eventually
declared unconstitutional in 1935. Finally, corporate taxes were
increased; federal minimum wage legislation passed; unionization
was promoted (through the Wagner Act); and Social Security began
with funds provided by taxes on employers and workers. And we have
only scratched the surface.

This is not
the place to debate the particular merits of these programs. All
that is maintained here is that almost every New Deal program was
"new" and untried and costly, and created vast private
market uncertainty. The fact remains that private business would
not hire or invest while the currency was being debased; or while
the rules of the game were constantly changing; or while the rules
were explicitly anti-business.

In order to
get the future right we must strive to get history right. Unfortunately
the Obama Administration and the Federal Reserve have learned almost
nothing from the policy failures of the Great Depression.

August
19, 2011

Dom
Armentano is Professor Emeritus at the University of Hartford (CT)
and the author of Antitrust
and Monopoly
(Independent Institute, 1998) and Antitrust:
The Case for Repeal
(Mises Institute, 1999). He has published articles, op/eds and reviews
in The New
York Times, Wall Street Journal, London Financial Times, Financial
Post, Hartford Courant, National Review, Antitrust Bulletin
and many other journals.

The
Best of Dom Armentano

The recent
mid-term elections were a citizen referendum for reductions in the
size and scope of the federal government. But can federal spending
and the budget deficit actually be reduced substantially without
sending gross domestic product (GDP) into a tailspin and increasing
unemployment to extraordinary levels?

Liberals and
economists with Keynesian sympathies have always argued that substantial
reductions in federal spending when economic activity is weak (like
now) would be disastrous. Really? Let’s see what actually happened
the last time the Congress actually reduced government spending
in any meaningful way.

The period
1945-1950 is (almost) a scientific test of the Keynesian hypothesis.
Despite repeated warnings by most mainstream economists that cutting
government spending at the conclusion of WW 2 would bring back the
Great Depression, the Congress dramatically lowered government spending
between 1945 and 1950. Federal government expenditures fell from
$106.9 billion in 1945 to $44.8 billion in 1950. Defense spending
took the biggest hit falling from $93.7 billion in 1945 to just
24.2 billion in 1950. In just 5 years, government spending (as a
% of GDP) fell from 45% in 1945 to just 15% in 1950 and the annual
federal budget deficit fell from $53.7 billion in 1945 to only $1.3
billion in 1950.

But what happened
to overall economic output and unemployment? Despite the massive
economic transitions from wartime to domestic production, GDP actually
increased (confounding all of the Keynesians) from $223 billion
in 1945 to $244.2 billion in 1947 and then to $293.8 billion by
1950. And despite millions of returning servicemen and women, the
unemployment rate averaged a very low 4.5% between 1945 and 1950.
Economic disaster? Hardly.

History, of
course, never repeats itself exactly and 2010 is not 1945. But one
thing is clear: Cutting back federal government spending and annual
deficits in the immediate post-World War 2 period did not hamper
the economy; far from it. Indeed, as government spending and wartime
price controls receded, the private market economy expanded strongly
and unemployment stayed reasonably low. The Keynesians, dead wrong
in theory, were also dead wrong in practice as well.

December
4, 2010

Dom
Armentano [send him mail]
is Professor Emeritus at the University of Hartford (CT) and the
author of Antitrust
and Monopoly
(Independent Institute, 1998) and Antitrust:
The Case for Repeal
(Mises Institute, 1999). He has published articles, op/eds and reviews
in The New
York Times, Wall Street Journal, London Financial Times, Financial
Post, Hartford Courant, National Review, Antitrust Bulletin
and many other journals.

The
Best of Dom Armentano

There seems to be a near consensus among admirers of Austrian economics that the U.S. economy is doomed. They write of a “double dip” recession and depression, further and substantial declines in housing prices and, almost paradoxically, of an accelerating price inflation that will destroy the U.S. dollar. Buy gold and silver (even at nominally high prices) they urge because things are likely to get very, very bad.

Well now, I say we step back and take a deep breath.

No one admires the elegant theories of Austrian economics more than this writer. I have written early and often on this website about the Federal Reserve—induced boom/bust cycle and how the Fed’s money expansion and low interest policy would ultimately end in economic disaster. And given the massive federal spending and borrowing, I’ve even raised serious questions about whether the U.S. government can avoid bankruptcy. I’ll put my radical credentials up against anyone.

It can be readily admitted that the U.S. economy is not in great shape and that current economic policy is counter-productive, BUT the question going forward is: Are things likely to get crushingly worse?

Let’s be specific (which few doomsayers want to do). Will official unemployment rates rise to, say, 20% or even higher? (I know, I know, official unemployment rates are misleading.) Will housing prices nationally decline another, say, 25%? And will the excess liquidity piling up in the financial system (and in corporate treasuries) be borrowed, spent, and invested, and lead inevitably to a destructive price inflation? And will all of this double and triple precious metal prices?

And WHEN will all of this occur? Is Armageddon 2 or 3 years away, or will it likely happen 10 or 15 years down the road? Timing, after all, is almost everything. This writer is old enough to remember several previous severe recessions where the very same clarion calls of impending doom were made repeatedly. Take, for example, the late 1970′s and early 1980′s, with gas lines caused by price controls, with both rates of inflation and interest rates at double-digit levels, and with many clever pundits predicting runaway inflation, the return of the near stone age and $5000 per ounce gold. Certainly the “end” was near then, too. Yet the U.S. economy survived and eventually expanded and investing in gold in 1982 — and holding while waiting for the inevitable collapse — would have been a remarkably poor investment strategy.

As for the current economy, things could get worse, even dramatically worse, but I’ll go out on a limb and “predict” that there will be slight marginal improvements in overall economic health as we move ahead in the next, say, 18 months.

After all, as admirers of Austrian theory we know that recessions necessarily correct the malinvestments of the boom and make way for more rational and sustainable investments. In this recession, massive price declines and foreclosures in real estate, both residential and commercial, have done the job that they were intended to do: they have brought actual “supply” more closely into coordination with real “demand.” Entrepreneurial opportunities now abound and the improvement in personal and commercial balance sheets and the increase in real savings set the stage for some economic improvement.

More profitable business opportunities might also arise out of several positive changes in public policy. For example, there are reasonable expectations to believe that the 2010 November elections will stall severely the Obama economic agenda including, perhaps, the repeal of the so-called Bush tax cuts. Further, most of the Fed monetary mischief may be over for the near term: their “pushing on a string” credit expansion has just about run its course. Finally, although it’s a longer shot, the Supreme Court may well toss the bulk of Obama-care into the “unconstitutional” trash can…where it clearly belongs.

Will things be booming in 2012? I doubt it. But I don’t think that we will be eating berries or baking our own bread (unless we want to) or paying $100 for a quart of milk (or 6-pack of beer). One caveat. If the Middle East blows up, all bets are off.

Dom Armentano [send him mail] is Professor Emeritus at the University of Hartford (CT) and the author of Antitrust and Monopoly (Independent Institute, 1998) and Antitrust: The Case for Repeal (Mises Institute, 1999). He has published articles, op/eds and reviews in The New York Times, Wall Street Journal, London Financial Times, Financial Post, Hartford Courant, National Review, Antitrust Bulletin and many other journals.

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The attorney generals in several states (including Florida where I live) are mounting a constitutional attack on Obama Care. The focus of that attack is the claim that the Commerce Clause in the Constitution cannot be stretched to mandate that individuals be required to purchase health insurance.

Article 1, Section 8, of the U.S. Constitution reads that "the Congress shall have power…to regulate commerce…among the several states") and appears to provide broad regulatory powers to the federal government. Yet many Republicans, libertarians, and Tea Party advocates hold that the Founders intended a "free enterprise" system here with only a very limited role for government regulation.

In actual fact governmental regulation of business — including health and safety regulation — has always existed in the U.S. Even during the Colonial period, hundreds of laws regulating "commerce" hampered strict free trade. That trend accelerated in the late 19th Century (Interstate Commerce Commission and the Sherman Antitrust Act) and expanded immensely during World War 1.

Some wartime economic regulation was abandoned in the 1920′s but regulation grew exponentially during the New Deal and World War 2. Today, many hundreds of industries face many thousands of rules and regulations propagated by many dozens of governmental agencies concerning just about anything. (The amount of cheese that goes into a "cheese pizza" is regulated.) The massive Obama Care legislation (2,400 pages) that is being court challenged is only the latest example in a long regulatory trend line.

Historically, the bulk of the court challenges have failed and government regulation is almost always sustained. No one put the principle that the government can regulate almost anything better than the Supreme Court in Nebbia v. New York (1934).

Leo Nebbia was a grocer who sold two quarts of milk for 18 cents and threw in a loaf of bread for free. But the New York state Milk Control Board argued (correctly) that the transaction violated their price controls on milk (minimum price for milk: 9 cents) and was, therefore, a crime. Nebbia appealed but the New York Court of Appeals agreed and so did Justice Roberts writing for the Supreme Court:

"…a state is free to adopt whatever economic policy may reasonably be deemed to promote public welfare, and to enforce that policy by legislation adapted to its purpose. The courts are without authority…to override it."

Importantly, the term "reasonably" in the above does not mean that regulation must, in fact, actually be reasonable or have any real rational basis. All it has come to mean is that a legislature thinks or intends that the regulation will promote the public interest (whatever than might mean), regardless of any economic theory or facts to the contrary. Thus, almost anything can become constitutional when neither rational theory nor substantive facts are legally determining.

The best (worst) example that not much has changed is the Supreme Court’s recent "reasoning" in Gonzales v. Raich (2005). Here the defendants had grown marijuana for their own consumption but the Court affirmed (6—3) that their activity "affected" interstate commerce (consistent with Wickard v. Filburn [1942]) and could be prohibited under the federal Controlled Substances Act. If you don’t like the regulation, the Court suggested, get the votes and change the law.

Although most constitutional challenges fail, there are a few instances where the courts have struck down (state) government regulation. Most of these occurred prior to the New Deal era when the courts took seriously the admonition (Article 1, Section 10) that "no state shall {impair} the obligation of contracts…" This principle allowed the courts to void some state laws that attempted to fix maximum hours of work or set minimum wages.

At the federal level, a traditionally conservative Supreme Court in 1935 struck down both the National Industrial Recovery Act (NRA) and the Agricultural Adjustment Act (AAA), dealing a major blow to Roosevelt’s original New Deal program.

The NRA had authorized government/business cartels throughout the economy; that clearly exceeded the Congressional authority. And the AAA was illegal because (and only because) the Congress placed a tax on food processors for the benefit of farmers. (The government Farm Program was re-legislated without the offending processor tax and became perfectly constitutional.)

And recently in U.S. v. Lopez (1995), the Court accepted a slightly narrow reading of the commerce clause when it stuck down a regulation which forbade gun possession in close proximity to schools. These cases, however, are clearly the exception to the general rule that almost all regulation is "legal."

To find the mandates in Obama Care illegal and, indeed, to roll back the bulk of economic regulation on business, would require a radical rethinking of the intent and meaning of the Commerce Clause.

Such a rethinking should start by noting that the original intent of the commerce clause was likely an attempt to prevent the individual states from placing taxes and duties on interstate commerce, which had been their habit prior to the Constitution.

Moreover, the expression "to regulate" can mean "to make regular" and was an attempt by the Founders to normalize trade between consumers and businesses in different states, surely NOT an attempt to have Congress "command and control" the economy. Yet few sitting jurists (Supreme Court Justice Clarence Thomas may be the exception) appear willing to rethink and challenge precedent in this important area of the law.

Finally, the Congress and the courts would have to come to grips with a massive amount of empirical evidence that demonstrates that most economic regulation (including health-care regulation) is costly and counter-productive and actually harms consumers.

Is Obama Care constitutional or is it, instead, an egregious overreach of federal power, an economic boondoggle, and a violation of individual rights? Let’s see if the Supreme Court is ready to think and rule outside the box.

Dom Armentano [send him mail] is Professor Emeritus at the University of Hartford (CT) and the author of Antitrust and Monopoly (Independent Institute, 1998) and Antitrust: The Case for Repeal (Mises Institute, 1999). He has published articles, op/eds and reviews in The New York Times, Wall Street Journal, London Financial Times, Financial Post, Hartford Courant, National Review, Antitrust Bulletin and many other journals.

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It’s all the current fashion to dump on "capitalism."

It was the greedy free market, supposedly, that created both the housing bubble and the housing bust and led, inevitably, to the "great recession." Capitalism, according to most liberal pundits (and even Alan Greenspan in a bad mood), is an inherently risky and unstable system that requires government regulation to correct its flaws and moderate its excesses.

Let me dissent sharply from that conventional wisdom and argue that what talking heads are calling "capitalism" is actually "crony capitalism" and that it is crony capitalism that is responsible for most of our current economic difficulties.

A genuine capitalist economy assumes that each adult individual and business is free to buy and sell anything that they own and then keep the rewards (or suffer the losses) of enterprise. The only legitimate role for government (the political system) is to protect property rights, that is, to enforce contracts and prohibit theft and fraud.

So under capitalism, there would be no price controls on milk or mandates to purchase health insurance; BUT polluters who spill crude oil or corporate bandits like Bernie Madoff who commit blatant frauds would be prosecuted to the full extent of the law.

Crony capitalism, by contrast, assumes a far, far larger role for government in the economy. In this system, government employs various regulations, taxes, and subsidies to encourage or discourage specific economic activity that the political system considers desirable. For example, in crony capitalism, farm prices and outputs could be regulated; selected companies could get TARP money for commercial research projects; states could regulate liability and health insurance companies; and Freddy Mac and Fannie Mae could both exist to subsidize the real estate market.

And most importantly, in crony capitalism private firms that are considered "too big to fail" could be bailed out by government; and a central bank (the Federal Reserve) would exist to “print money” (unrelated to any gold reserve) and regulate the supply of credit in the economy.

It is hard to argue that the current economic malaise was in any way produced by anything resembling pure capitalism. But it is fairly easy to conclude that interventionism, i.e., private markets that were propped up with fraud and funny money was, in fact, the culprit.

First, the Federal Reserve kept interest rates too low for too long (2001—2006) and pumped excess money and credit into the economy. Second, numerous quasi-governmental agencies (Freddie and Fanny) encouraged excessive mortgage lending and home ownership out of all relationship to sound financial practices.

Third, much of the under-capitalized and over-leveraged banking industry collapsed when (federal) credit dried up and housing prices turned downward. And fourth, the federal government taxpayer and international lenders (mostly China) funded the trillion-dollar government "stimulus" plan and the bailout of inefficient business organizations (Chrysler, GM, AIG, etc.) that should have been allowed to go belly-up.

This is free market capitalism? Hardly.

Yet the political class, always absolving itself of all blame, would have you believe that capitalist greed caused the recession and that political regulators need more power. Not so. What we actually require are constraints on monetary growth, more competitive markets, balanced budgets and less output-restricting regulation. But first and foremost, before we spend and regulate further, we require an informed media and an enlightened public that can distinguish real capitalism from phony, crony capitalism.

Dom Armentano [send him mail] is Professor Emeritus at the University of Hartford (CT) and the author of Antitrust and Monopoly (Independent Institute, 1998) and Antitrust: The Case for Repeal (Mises Institute, 1999). He has published articles, op/eds and reviews in The New York Times, Wall Street Journal, London Financial Times, Financial Post, Hartford Courant, National Review, Antitrust Bulletin and many other journals.

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It’s hard to defend Mark McGwire. For years he took steroids and denied that he did. He even refused to come clean before an investigating Congressional Committee. And his recent admission of steroid use during his playing days was prompted by his signing-on as a St. Louis Cardinal batting coach for the 2010 baseball season. Convenient, right?

Mark McGwire is clearly no role model for the kids and will more than likely never see Cooperstown.

That said, is McGwire’s admitted use of "performance enhancing drugs" as black-and-white an issue as almost all of the esteemed baseball pundits seem to think? I say, no.

First, Major League Baseball (MLB) did not have an explicit prevention and treatment program for drugs until well after Mark McGwire retired in 2001. (Some drug testing began in 2003 but a comprehensive program was only agreed to in 2006). Thus, using certain growth hormones and steroids in the 1990′s may not have been either criminal or a violation of any baseball contract.

Second, Mark McGwire was a prodigious home run hitter well before he used any chemical help. A first-round draft choice in 1984, McGwire hit an amazing 49 home runs in his rookie season of 1987(still a record) and was selected as the American League MLB rookie of the year. So, even before he bulked up on chemicals, Mark McGwire put up some very big numbers.

Third, the beginning of McGwire’s serious drug use (1993) coincides with injuries that kept him on the sidelines for almost 2 years. McGwire appeared in only 27 games in 1993 and 47 games in 1994 with a total of only 18 home runs. By 1995 he was healthy enough to appear in 104 games and hit 39 home runs, still well short of his drug-free rookie year.

Finally, although certain anabolic drugs may enhance athletic performance, so do hundreds of other factors. Some of those factors are natural (keen eyesight, quick reflexes) but most are the result of specific individual choices concerning diet, training, or equipment.

Natural physical gifts are important but it is not obvious (absent specific rules) that lifting weights, learning to read the spin of a curve ball, or taking certain chemicals should warrant automatic condemnation. Some players take drugs and their performance does not improve. Some players train hard and have trouble hitting .250. What’s the substantive difference, if any?

Babe Ruth was certainly a natural talent, the very best of his era. He might have been even better with a stronger work ethic and less boozing. Mark McGwire and Barry Bonds were solid ballplayers before steroids and both were far more productive after steroids. So what? What’s all of the fuss really about?

I don’t think that the fuss is really about the long-term health effects of steroid use (the evidence is ambiguous) or about setting bad examples for the kiddies (their favorite rap singers and movie stars take care of that).

Baseball pundits say that it’s about the "competitive integrity" of the game, whatever that means. If it means that all players and teams in any given year must follow the same rules, I certainly agree. But if it means that rules can never change or that players then and players now ought to be compared on some sort of a "level playing field" well, then, forget about it. That’s just flat out impossible.

Nonetheless, I think that the bulk of the concern about steroid use in baseball is all about the idiocy of attempting to compare the "statistics" of players from different eras.

The pundits and keepers of the sacred baseball flame are concerned that the performance numbers of, say, Babe Ruth or Ted Williams, could be somehow diminished by a comparison with the drug-enhanced production of a Mark McGwire or a Barry Bonds in the record books. I say nonsense to that concern and comparison.

Changing circumstances in baseball (strike zone, fence distances, height of the pitchers mound, etc.) make statistical comparisons over time almost meaningless. Babe Ruth and Ted Williams were two of the best of their era; McGwire and Barry Bonds, with some chemical help, may be two of the best in ours. Nothing done recently diminishes or demeans anything done in the past as long as we understand that the circumstances were different.

Spring training approaches. Those of us who love the physicality and ballet of baseball should forget about steroids and non-comparable statistics and just enjoy the game.

Dom Armentano [send him mail] is Professor Emeritus at the University of Hartford (CT) and the author of Antitrust and Monopoly (Independent Institute, 1998) and Antitrust: The Case for Repeal (Mises Institute, 1999). He has published articles, op/eds and reviews in The New York Times, Wall Street Journal, London Financial Times, Financial Post, Hartford Courant, National Review, Antitrust Bulletin and many other journals.

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But was Wilson’s outburst really inappropriate? Hardly. The fact remains that President Obama WAS lying about illegal alien insurance coverage in the House health care (draft) bills then under consideration, and he was doing it before a complicit and lazy national media that NEVER would have caught the falsehood or held him accountable for it. I say Joe Wilson performed a national service and that we need more, far more, of such outbursts.

Those of us who love liberty and decry the advancement of government in almost every area of life are far too courteous and deferential toward our ideological enemies. We almost never say “You Lie” in public policy debates even though our public policy opponents explicitly lie all of the time. Instead, our decision to follow the rules on decorum makes us complicit in a process that almost always produces unfavorable outcomes.

Think about it. The statist political agenda, if implemented, would logically lead to total control of the economy and to a far lower standard of living for us and our children; yet somehow we are expected to treat statist theft demands with honest and reasoned debate under the rules. We often pretend that statist positions are simply “mistaken” and that they actually can be persuaded from their ultimate mission by some fact-based argument or clever journal article citation. Given recent public policy events (bailouts, stimulus bills), however, that belief seems extremely nave.

The health-care debate proves the rule. What stalled the health-care juggernaut in its tracks, at least for the moment? Was it carefully researched position papers and/or op/eds by well-intentioned libertarians (me included)? Hardly. It was, instead, demonstrable and passionate outrage by ordinary citizens at town hall meetings across this country who shouted down speakers and said, in effect, “You Lie.” It was the noise, not the reason, that made the politicians finally pay attention.

Now I’m NOT saying that reasoned argument doesn’t matter; far from it. But I AM saying that though NECESSARY, it is not a SUFFICIENT condition for the reversal of our legislative fortunes; for if it were, we would have won the battle long ago. Right? So here’s my salute of appreciation for those willing to physically and vocally put their beliefs on the line in a public forum. You guys make a difference.

What’s next? Well, the list of public officials that could be confronted with shouts of “You Lie!!” is almost endless. When we see Fed Chairman Bernanke’s lips moving, we can be almost sure that he is not telling the truth. Bernanke, you lie. Ditto Hillary Clinton and Bill Gates on the wars in Iraq and Afghanistan. And, of course, Barney Frank and Chris Dodd could well be the poster boys for public fibbing. Gentlemen, you have made lying an art form.

For those of us less inclined to yell out, we need thousands of “You Lie!!” sweat shirts that can be worn to all health-care town hall meetings and to all tea parties. That simple message will then confront the politicians (and the press) with their own mendacity and will say, in effect: when we see your lips moving, we know that you are probably not telling us the truth.

Dom Armentano [send him mail] is Professor Emeritus at the University of Hartford (CT) and the author of Antitrust and Monopoly (Independent Institute, 1998) and Antitrust: The Case for Repeal (Mises Institute, 1999). He has published articles, op/eds and reviews in The New York Times, Wall Street Journal, London Financial Times, Financial Post, Hartford Courant, National Review, Antitrust Bulletin and many other journals.

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Florida Power and Light, which serves adjacent geographic areas (and could serve Vero Beach) charges rates that are dramatically lower than Vero Beach Utilities. For example, FPL’s current total price including tax is $114.06 per 1,000 kwh while Vero Electric charges County customers $180.69 per 1,000 kwh, an incredible 58% more. Thus someone with an electric bill from the Vero Beach Utility monopoly for, say, $400 per month would pay only $253 to FPL for the very same product.

In antitrust law, that dollar price difference between the monopoly price and the competitive price is termed the monopoly “overcharge.” And if it is multiplied by the quantity of electricity consumed by the more than 34,000 thousand current customers of Vero Utilities, the total wealth loss to local residents over the years is seen to be truly staggering.

Normally in a private antitrust case involving monopoly, the injured plaintiffs would be able to sue the monopoly and attempt to collect three times the overcharge (“treble damages”) in a recovery.

Government sanctioned monopolies, however, are usually treated differently. Most are either exempt from antitrust law or, in the case of a private firm such as FPL, they are rate regulated by a regulatory commission (Public Service Commission) so that their prices reflect the cost of providing the service and allow a reasonable rate of return on investment.

Vero Beach Utilities, however, appears to have the best of all possible worlds…for itself and the City (which rakes off a 7% “profit” from the revenues). First, potential competitors cannot enter its market territory by law; second, it is apparently exempt from antitrust law and any threat of treble damages; and finally, its rates are NOT regulated by any state regulatory commission to ensure that they are “fair and reasonable.”

Most of this economic nonsense started back in 1978 when several State and Federal agencies sued to stop a referendum-authorized City of Vero Beach sale of its electric utility to FPL. Then in 1981 a notorious “territorial agreement” was crafted to divide up the electric grid between the City and FPL. (If this “division of market” agreement were done by private firms, it would be a per se violation of antitrust law.) Finally, in 1983, the Florida State legislature removed (“deregulation”!) the bulk of the Public Service Commission’s regulation of Vero’s electric monopoly, including rates.

Since then, customers of the City’s electric utility (61% of whom live outside the city and can’t even vote on these matters) have been simply at the mercy of whatever service and price structure the utility determines is appropriate. As one could predict, this has proven to be a recipe for massive inefficiency and price gouging.

There are several ways to reform fundamentally the current situation. One way is to simply require that the City of Vero Beach sell its utility operations to any willing buyer. A second alternative would be to end the territorial monopoly and simply allow customers to switch to a competitor. This latter proposal would create “competition” between electricity providers and would tend over time to lead to lower rates generally.

In addition, in order to encourage non-traditional suppliers of electric power, any and all supply restrictions on the production and sale of electricity should be removed. With legally open markets and a strong potential for competition, electric rates should decline to more fair and reasonable levels.

A version of this op/ed appeared in Scripps Treasure Coast Newspapers.

Dom Armentano [send him mail] is Professor Emeritus at the University of Hartford (CT) and the author of Antitrust and Monopoly (Independent Institute, 1998) and Antitrust: The Case for Repeal (Mises Institute, 1999). He has published articles, op/eds and reviews in The New York Times, Wall Street Journal, London Financial Times, Financial Post, Hartford Courant, National Review, Antitrust Bulletin and many other journals.

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The sad tale of the 47 million uninsured is, perhaps, the most emotionally persuasive argument put forth for national health care reform. But is the alleged number of uninsured reasonably accurate? Or is it, instead, a purposely misleading statistic designed to advance a specific reform agenda?

The 47 million uninsured number is generated by an annual U.S. Census Bureau report. However, that report also states that the 47 million uninsured includes roughly 10 million illegal aliens without health insurance. Thus, if we subtract out the illegals, the number of uninsured American citizens without health insurance declines by more than 20%…to roughly 37 million.

But is it accurate to assume that even 37 million Americans cannot afford health insurance? Absolutely NOT. Even Hillary Clinton during her presidential campaign once admitted that 25% of the uninsured could afford health insurance but chose not to purchase it. The Census Bureau reports that there are roughly 17 million people who make more than $50,000 per year and who, for whatever reason, decide not to carry health insurance.

$22     $20

In short, with two reasonable adjustments, the number of Americans who cannot afford health insurance has been reduced from 47 million to approximately 20 million.

But is the 20 million figure itself reasonably accurate? Probably not. Individuals moving between jobs lose their (employer provided) health insurance and when they do the Census Bureau counts them as "uninsured." Technically true. Yet during normal times, roughly half of these individuals will have re-acquired (in about 4 months) health insurance coverage with a new employer.

Finally, there are millions of adult Americans and children who have (nearly free) access to medical care benefits through Medicaid and other government programs who don’t really need the direct cost of "insurance" and who don’t carry any.

$15     $10

Thus, with reasonable adjustments, there are in fact less than 10 million individuals who are so-called "chronically uninsured." (The Kaiser Family Foundation says the number could be as low as 8 million). These are individuals who have been unemployed for over 2 years and/or people from households that are too poor to afford non-employer health insurance premiums and who, for whatever reason, have limited access to taxpayer-supported health services.

So let’s grant that there are between 8 to 10 million Americans (total population: 307 million) who cannot afford health insurance and that this situation may require a marginal public policy adjustment. (Most states mandate expensive benefit coverage; curtailing those mandates would lower the cost of health insurance.) But whether that situation requires some massive, Washington D.C. health care reform — with new regulations and mandates on health care providers, insurance companies, and drug manufacturers — is entirely problematic.

Politicians and interest groups, eager to remake your medical world over to their liking, would do well to respect the Hippocratic oath administered to physicians: “First, do no harm.”

Dom Armentano [send him mail] is Professor Emeritus at the University of Hartford (CT) and the author of Antitrust and Monopoly (Independent Institute, 1998) and Antitrust: The Case for Repeal (Mises Institute, 1999). He has published articles, op/eds and reviews in The New York Times, Wall Street Journal, London Financial Times, Financial Post, Hartford Courant, National Review, Antitrust Bulletin and many other journals.

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In the current economic downturn, “bailouts” to financial firms (AIG, Citi Bank) and industrial corporations (GM, Chrysler) are the nuttiest of the current crop of government policies and they promise to inflict the most lasting damage on taxpayers, consumers, and on the economy as a whole. Regardless of their intent, they are a serious economic mistake because they cut to the very heart of the capitalist process.

To see why this is so, it must be noted that the search for profit and the avoidance of loss is the essence of the capitalist process. In a market economy, individuals and firms have incentives to discover products and services that consumers want and then produce them at the lowest cost. Profits become a signal of success and a reward for serving consumers efficiently. Contrariwise, when losses appear, they signal failure and inflict a penalty on firms for producing poor products or having bloated costs of production.

Firms that make profits can command additional resources (land, labor, capital) and expand production. Investors who took the risks of production are rewarded. On the other hand, firms that make losses must release resources (land, labor, capital) and ought to curtail production; their investors are penalized. This, then, is the capitalistic process whereby consumers get the products and services they want produced efficiently.

Since market information is never perfect and since production is always future oriented, the capitalistic process is “messy” and is never in any equilibrium; this reality must be accepted. What cannot be accepted is market fraud (especially in accounting for profit and loss) and deceptive practices; these serve to undermine the integrity of the entire process and must be carefully policed. (Think Bernie Madoff.) Nonetheless, the capitalistic process of profit and loss (with fraud protection) just described has worked with more personal freedom and more beneficial results than any other economic system in history.

The recent and on-going government bailouts (begun under President Bush and continued under President Obama) are antithetical to the capitalistic process. First, they weaken both the information and incentives necessary for efficient production. Second, they delay tough decisions by management in a whole variety of areas such as product design, employment, dealer and store closings, future investments, and even bankruptcy. Finally, profitable firms in an industry are put at a competitive disadvantage because of the subsidies to the losers; this is both unfair and inefficient. All of these perverse incentives work to prolong and deepen recessions, not shorten them.

In addition, what governments fund they (naturally) wish to control. So bailouts often come with strings and conditions concerning future business operations (salaries, plant closings, etc.). The assumption here is that the Treasury or the Congress (think Barney Frank) can craft a better plan for any future corporate recovery than can the market or a bankruptcy court. But this assumption is unwarranted and has no support in either theory or empirical evidence.

The huge credit bubble spawned by the Federal Reserve created expectations about future production and consumption that could not be sustained. That it all came crashing down was inevitable. Recessions (actually economic corrections) end when consumers and business finally readjust their respective “balance sheets” to the new price and profit reality. Bailouts delay and distort this adjustment process and thus make the recovery longer and more difficult.

Dom Armentano [send him mail] is Professor Emeritus at the University of Hartford (CT) and the author of Antitrust and Monopoly (Independent Institute, 1998) and Antitrust: The Case for Repeal (Mises Institute, 1999). He has published articles, op/eds and reviews in The New York Times, Wall Street Journal, London Financial Times, Financial Post, Hartford Courant, National Review, Antitrust Bulletin and many other journals.

Dom Armentano Archives

Although some economists supported the bank and auto bailouts and although many more support a major federal stimulus package, this economist holds that both measures are counter-productive. Both are likely to prolong the economic slump and not shorten it.

This may seem harsh but the ultimate cure for a recession is recession. Economic booms "malinvest" labor and capital and recessions are necessary to "clean out" these malinvestments. Declining prices allow consumers to more easily purchase products (homes, autos) in excess supply; inventories are reduced and supply and demand are brought into balance. And declining profits weed out business organizations and their managers that have invested poorly during the boom; bankruptcy allows resources to flow to more profitable areas of the economy. A sustainable recovery is now possible.

It should be obvious that random bailouts can short-circuit the recovery process by propping up poorly performing companies and slowing resource reallocation. With tens of billions in lost profits, General Motors and Chrysler have demonstrated vast inefficiency; yet taxpayer bailouts will preserve their poor management and high-cost union jobs. Worse, other more efficient automobile suppliers will lose sales to these Detroit’s dinosaurs and may, themselves, require subsidies. It just never ends.

The case for bailing out spendthrift state governments or for additional infrastructure spending is equally flawed. Supporters constantly argue that "since consumers won’t spend, governments must spend (to create more jobs)." And since it’s claimed that there are vast unmet public sector needs, what better time to undertake major road construction or help state governments fund programs such as Medicaid.

Some public policies are wrong in both theory and practice; infrastructure spending and bailing out state governments to shorten recessions are examples. In theory, the money to fund the stimulus will have to come from either massive federal borrowing, substantial tax hikes, or pure money inflation by the Federal Reserve. But none of this can remotely promote recovery in the private sector of the economy. All it will do is substitute some private/public sector jobs in one part of the economy for other private/public sector jobs in another part of the economy.

Public spending on major infrastructure projects to fight recession is especially problematic. (Think "Big Dig" in Boston.) Which programs will be undertaken? In which congressional districts? And where will the labor resources come from? Supporters of public works automatically assume that the current increase in unemployment provides a vast army of workers to fill new jobs. Not so fast.

Unemployed workers with vastly different skill levels are scattered unevenly throughout the economy. It is simply unimaginable that even a tiny percentage of them would have the proper skill requirements or would relocate to the politically determined infrastructure projects. In addition, these projects require extremely long lead times (sometimes many years of permits and planning) and are unlikely to begin soon enough to have any near-term effect.

The experience in the 1930′s is instructive. Even though federal government spending increased from $9.8 billion in 1934 to $14.2 billion in 1940, the unemployment rate in 1940 was still a staggering 14.6%. A 45% increase in New Deal spending in 6 years did not end the Depression.

Contrary to economist Paul Krugman and others, the federal government cannot spend us out of our economic quagmire. The best that the government can do is not make things worse. We don’t need more corporate or state bailouts and we don’t need vast public works programs costing many hundreds of billions. We do need more prudent private and public spending, lower taxes on income and investment, and a responsible monetary policy from the Federal Reserve. And we still need lower prices and bankruptcies to finally correct the mistakes of the boom.

Dom Armentano [send him mail] is Professor Emeritus at the University of Hartford (CT) and the author of Antitrust and Monopoly (Independent Institute, 1998) and Antitrust: The Case for Repeal (Mises Institute, 1999). He has published articles, op/eds and reviews in The New York Times, Wall Street Journal, London Financial Times, Financial Post, Hartford Courant, National Review, Antitrust Bulletin and many other journals.

Dom Armentano Archives

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The National Bureau of Economic Research has officially confirmed what everyone already knew: The U.S. economy has been in recession for many months. The question now is whether anything constructive can be done about it.

Historically there have been two very different public policy responses to a serious economic slowdown. The first — laissez-faire — is to simply allow market prices to adjust to the new economic reality. Since most economic slumps are caused by a decline in demand associated with the bursting of a credit/money bubble, prices tend to adjust downward fairly rapidly. We have seen some of this in the current crisis with real estate, stock and commodity prices (especially crude oil) falling dramatically. This falling price process tends to “clear out” the malinvestments of the credit boom and eventually sets the stage for a sustainable economic recovery.

This price adjustment process, though efficient, is painful. And the larger the initial credit bubble the larger and more painful the collapse. Many thousands of homes go into foreclosure, banks and hedge funds fail, capital goods industries are especially hard hit, and the recession normally lasts between 11 and 14 months. Lower interest rates and modest unemployment benefits tend to ease the economic hardships somewhat. We have had 10 recessions since 1948 and managed to survive them all.

An alternative policy approach, which is being tried this time, is to treat the recession with almost unprecedented doses of government intervention. In this scenario, the Treasury and the Federal Reserve engage in policies aimed at “reflating” the bursting credit bubble. The Fed lowers interest rates dramatically and inflates the money supply by purchasing government and even commercial debt. And the Treasury gets the legal authority to spend upwards of $700 billion to bail out Fannie and Freddie, commercial banks, investment banks, insurance companies, and any other private firms too big to fail.

So far, at least, the results of this approach are not promising.

The final public policy shoe to fall early next year will probably be massive public works programs (infrastructure spending) to create “jobs.” The President-elect Obama economic team and economist Paul Krugman have already gone on record as favoring such a proposal. They also seem to support another, bigger, round of so-called “stimulus” spending by consumers funded by tax rebates.

But will any of this shorten the recession? A decent argument can be made that all of these public policy responses will only make things worse and prolong the slump.

The longest recession in modern times is the one that began in 1929. It lasted a full 43 months and was quickly followed by the 1937 recession that lasted another 13 months. Almost one half of the months between 1929 and 1939 were recessionary. And between 1929 and 1939, the average yearly unemployment rate in the U.S. was a staggering 16.9%.

Though Presidents Hoover and FDR unbalanced the federal budget, created the Reconstruction Finance Corporation (to bail out banks and businesses), enacted the National Industrial Recovery Act, engaged in massive public works projects (WPA), and inflated the money supply sharply after 1934, nothing really worked. After 10 years of political and economic unrest and uncertainty, the unemployment rate was still 17.2% on the eve of our entry into WW2.

Laissez-faire economic ideas (deregulation, tax cuts) are currently out of favor but the fact remains that the Krugman and Keynesian policies of bailouts, deficit financing, and public works have never really worked. They didn’t work in the U. S. in the 1930′s; they didn’t work in the 1990′s in Japan.

They don’t work because they prop up unsustainable investments in the private sector rather than clear the way for new entrepreneurship. And they don’t work because government central planning is hopelessly nave (they even have trouble mailing out rebate checks). Sometimes in economics (as in medicine) doing "nothing" (allowing the system to heal itself) works better than drugs with nasty side effects or bureaucratic attempts at reconstructive surgery.

This originally appeared in the Vero Beach Press Journal.

Dom Armentano [send him mail] is Professor Emeritus at the University of Hartford (CT) and the author of Antitrust and Monopoly (Independent Institute, 1998) and Antitrust: The Case for Repeal (Mises Institute, 1999). He has published articles, op/eds and reviews in The New York Times, Wall Street Journal, London Financial Times, Financial Post, Hartford Courant, National Review, Antitrust Bulletin and many other journals.

Dom Armentano Archives

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When LewRockwell.com published my article, “The Coming Collapse of Oil Prices” back in May, crude oil was selling for roughly $135 per barrel. Almost every oil pundit was then predicting that prices would soar even higher. I strongly suggested, however, that prices would likely fall sharply, probably into the $80 dollar range. Well, since then the price of crude oil has declined sharply and (absent some new Mid-east war) they are likely headed even lower in the weeks and months ahead.

My thesis about the near-term direction of oil prices was that declining world demand (due to near recessions in several national economies) and generous profits associated with oil production would inevitably lead to sharply falling prices. The long 150-year history of oil prices is that short-run increases in price are (almost) ALWAYS followed by just as dramatic reductions in price. This scenario has played out in the late 19th century, during and after World War 1, World War 2, and most dramatically after the price hikes of late 1970′s and early 1990′s. Oil prices first increase sharply, then the tumble.

The only apparent exception to this almost Iron Law of Oil Prices is the period 1933—1941, when real oil prices (adjusted for inflation) increased sharply and stayed uncharacteristically stable for years. Yet the proximate cause of that period of sustained high prices was government regulation, not the free market. During the Great Depression, several oil producing states (led by Texas) placed quotas on oil production (pro-rationing) and the federal government cooperated by initiating tariffs and quotas on imported foreign oil. In short, government regulation subverted normal market forces and politically savvy producers benefited artificially at the expense of consumers. Thus, this episode became the exception that proves the rule.

Current oil market pundits, of course, were convinced that this time around the oil barrel, things would be very different. We were told repeatedly that the world was “running out” of oil; that oil production had “peaked” and future supplies must fall; that we were hopelessly “addicted” to oil (our President and both presidential candidates asserted this); that higher prices would not curb consumption substantially; and that the oil industry was not “competitive” anyway and would simply not allow prices and profits to fall…ever. All of this, of course, was (and is) dangerous nonsense, belied over and over again by economic theory and the facts of history. Yet these notions have now become “conventional wisdom” and policy makers employ them in order to subsidize and regulate energy markets regardless of common sense or cost.

I experienced some of this nonsense first-hand shortly after my op/ed appeared. I’ve written hundreds of op/eds over the years but few sparked more of an email assault than that one. Letters came from here in the U.S. and abroad, from businessmen, teachers, financial analysts, and even from local legislators, instructing me that I was either an idiot, a shill for the oil industry, or likely both. I was told on the best authority that oil prices were going straight to $200 per barrel, and then even higher, and that any talk of lower prices was, well, idiotic. Yet when I challenged one alleged oil expert to a Julian Simon-style wager that oil prices would be lower (in real terms) ten years from now, he never replied. My guess is that he is currently risking his clients’ money, not his own, on the near-term prospect of $250 oil. Good luck.

Could currently falling oil prices increase again? Of course. And one of the new reasons, ironically, might be that the “alternative energy” crowd now requires higher and stable oil prices in order to make energy alternatives economically viable. So I’ll be interested to see whether Nancy Pelosi and Harry Reid (or even Sen. Obama and John McCain) might be willing to support a government "floor” on crude oil prices in order to promote the development of solar and wind energy. Stay tuned.

This originally appeared in the Vero Beach Press Journal.

Dom Armentano [send him mail] is Professor Emeritus at the University of Hartford (CT) and the author of Antitrust and Monopoly (Independent Institute, 1998) and Antitrust: The Case for Repeal (Mises Institute, 1999). He has published articles, op/eds and reviews in The New York Times, Wall Street Journal, London Financial Times, Financial Post, Hartford Courant, National Review, Antitrust Bulletin and many other journals.

Dom Armentano Archives

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Bold economic predictions are dangerous, and I’ve been wrong before, but here goes: Oil prices are about to tumble.

There are several important reasons to believe that crude oil prices of roughly $130/barrel are simply not sustainable. The first is that world-wide economic growth, and hence the demand for crude oil, has slowed markedly due to the credit crunch and the bursting real estate bubble. The second reason is that the Federal Reserve has finally decided to stop lowering interest rates and/or creating credit as if it were the Tooth Fairy; a stronger dollar will mean lower oil prices. Third, the already record high crude oil and gasoline prices have created strong incentives for consumer and business conservation and that has lowered overall demand.

Yet the most fundamental reason to expect prices to fall is that the gap between the price of crude oil and the cost of producing it is just way, way too large to be sustained long-run.

According to the Energy Information Administration, the average cost (in constant dollars) of finding, lifting, and storing onshore domestic and/or foreign oil between 1980 and 2004 has been approximately $20 per barrel; between 2004 and 2006 that average cost rose to approximately $25 per barrel and is slightly higher now. (The cost of producing offshore oil is more than double onshore costs). Yet the price of crude oil has risen to approximately $130 per barrel (doubling in the last year alone) creating large profits for most producers and integrated oil companies.

Marginal suppliers around the world with costs above $30 per barrel but still far below current prices now have overwhelming incentives to uncap wells, engage in secondary and tertiary techniques to recover more oil from existing wells, drill additional wells, and otherwise expand production. (Houston is currently booming with oil production investment as is Brazil). Any serious output expansion will take time but the increasing supply coupled with lower demand will lead inexorably to lower prices; indeed, sharply lower prices.

To be sure, speculators have helped bid up the price of crude oil. Most of the speculation centers around legitimate concerns about “supply disruptions” and some wider war in the Middle East Gulf region. My guess is that roughly 20% of the current price is a supply disruption premium while another 10% is associated with our own debasement of the currency (the dollar) by our own central bank. (This can be proven by comparing oil prices in dollars with oil prices in Euros). When (if) these speculations prove unwarranted, oil prices will decline sharply into (my guess) the $80 per barrel range. But if we get a new war, all bets are off.

Public policy can encourage this bursting bubble scenario. The Democrats want to tax the oil companies or use the antitrust laws against them. Big mistake. More taxes get you LESS oil and “concentration” in the oil industry is not really the problem. The on-going Congressional hearings “investigating” oil prices and profits is a charade and is purely political theater. The very same federal and state governments that complain about high oil prices continue to tax gasoline at a rate (40 cents per gallon) far higher than the profit rate for the oil companies. So much for government concern about consumers.

On the other hand, public policy can and must change to allow energy companies to explore for and develop domestic and offshore supplies of crude oil. Obstacles to expanding and building new oil refineries domestically must be removed, and quickly. Alternative energy sources, if they are cheaper, must be allowed to proceed (including and especially nuclear) but direct subsidies to ALL energy companies (including to oil companies, if any) should end. We need the contributions of wind, solar, etc., but only if and when their real costs and prices are comparable with oil and natural gas. Competitive energy suppliers will work to produce in our interest if we free up the markets and let them.

Dom Armentano [send him mail] is Professor Emeritus at the University of Hartford (CT) and the author of Antitrust and Monopoly (Independent Institute, 1998) and Antitrust: The Case for Repeal (Mises Institute, 1999). He has published articles, op/eds and reviews in The New York Times, Wall Street Journal, London Financial Times, Financial Post, Hartford Courant, National Review, Antitrust Bulletin and many other journals.

Dom Armentano Archives

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Every American, from the top Fortune 500 CEO to the youthful fast-food hamburger flipper, owes his standard of living — the highest in the world — to free market capitalism. It’s capitalism — private property and free markets — that provides the information and the incentive that allows each of us to maximize the value of our economic activity. Yet to hear the (mostly) Democratic presidential candidates tell it, free markets are faulty, unfair, and inherently unstable; indeed, government should constantly regulate markets and ride to the rescue whenever recession threatens.

The overall economic ignorance displayed in this year’s political campaign has been staggering. Instead of calling for balanced budgets, sound money, permanent tax reductions, and less regulation, most of the candidates have called for more inflation and more government intervention.

Hillary Clinton, for example, has said that she personally intends to “manage the economy” not understanding, apparently, that the “economy” is simply a metaphor for the billions of individual decisions made every day that no one person could ever “manage." Recently, all of the Democratic candidates and several of the Republican candidates (and President Bush) have advocated various economic “stimulus” programs (including rebate checks in the mail) not understanding, apparently, that any one-time spending shot (with borrowed money) will fix precisely nothing. (Lower individual and corporate tax rates would be helpful, however.) And finally, several of the candidates want a short-run government moratorium on millions of impending mortgage foreclosures not understanding, apparently, that breaching contractual agreements and postponing the economically inevitable is not necessarily a smart thing.

The most significant area of economic ignorance, of course, is with respect to the Federal Reserve policy. All of the candidates, both Democratic and Republican (excepting Congressman Ron Paul) have applauded the Central Bank’s recent decision to dramatically lower the federal funds target rate to 3.5%; it may even be pushed lower. (The federal funds rate is the rate at which banks lend to other banks). To accomplish this reduction will require massive purchases of government securities by the Federal Reserve Open Market Committee which, in turn, will make mountains of new liquidity available to potential individual and institutional borrowers both here and abroad. .

Now this is a good thing, right? WRONG.

During deep recession with high unemployment and significant idle industrial capacity, some economists (not me) would advocate an aggressive “easy money” policy to jump-start the economy. Be that as it may, that is emphatically NOT the current situation. Additional liquidity from the Federal Reserve now would only serve to prop up tottering malinvestments (mostly in housing and finance) that are themselves the creature of the last Federal Reserve money bubble. Further, additional liquidity will give rise (at the margin) to additional malinvestments that themselves will never be successfully completed due to a dearth of real savings. Were all of the candidates asleep during the “business cycle” lecture in Economics 101?

Further, any new aggressive easy money policy will only further weaken the value of the dollar and eventually lead to more price inflation. In my last op/ed (“Darkening Clouds”) I predicted that the Fed dare not push interest rates much lower since it risked destroying the dollar — the world’s reserve currency — and dollar investments both at home and abroad. Well, I obviously underestimated the recklessness of Federal Reserve Chairman Ben Bernanke and the rest of the gang on the Open Market Committee. To save Wall Street speculators and influential financial institutions (that took absurd risks), the Fed now appears willing to drive the real rate of interest (rates adjusted for inflation) to near zero. Now if that doesn’t deepen and aggravate all of the on-going economic distortions already in place, I don’t know what will.

In conventional terms, the only thing worse than a recession in the U.S. would be world-wide INFLATIONARY recession. Well, the Federal Reserve and the Bush Administration have now set us up for exactly that dismal scenario. As Betty Davis growled in All About Eve: “Fasten your seat belts; it’s going to be a bumpy ride."

Dom Armentano [send him mail] is Professor Emeritus at the University of Hartford (CT) and the author of Antitrust and Monopoly (Independent Institute, 1998) and Antitrust: The Case for Repeal (Mises Institute, 1999). He has published articles, op/eds and reviews in The New York Times, Wall Street Journal, London Financial Times, Financial Post, Hartford Courant, National Review, Antitrust Bulletin and many other journals.

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Presidential election years usually are not recessionary but next year will be an exception. Several economic factors are colliding in an almost perfect storm to markedly slow the general economy and the stock market.

The most important signal flashing recession is, of course, the sub-prime mortgage fiasco. After years of monetary inflation on the part of the Federal Reserve, individuals and families with poor credit were suckered into low-down-payment/low-interest adjustable mortgages that simply cannot be maintained or repaid under current conditions. Their incentive is to sell the property quickly before their equity evaporates and/or the financial institution repossesses it. Yet the massive oversupply of homes and condos for sale has pushed prices down at a record clip and made additional foreclosures even more likely. Next year, unfortunately, will be the Year of the Auction.

The financial institutions have also been punished…well sort of. Various institutions including hedge funds that hold these poorly performing debt obligations have been forced (by accounting rules) to “write down” the value of these assets, take huge paper losses in the bargain, and pull in their financial horns. Thus, any near-term recovery in housing must now fight a record supply availability, falling prices, higher insurance costs and restricted credit…a near-term impossibility in my view.

Moreover, the slowdown in residential and commercial construction will send secondary ripple effects throughout the economy. Laid-off construction workers don’t spend money. Construction and home furnishing suppliers sell less output and make fewer investments. Even local governments will be pinched by declining property-tax assessments and fewer developer fees. Things are likely to get worse before they get any better.

The second major factor indicating a near-term recession is the sky-high price of crude oil and refined product. Pushed upward by world-wide speculative Mid-East war fears and increases in demand (especially from China), increasing energy prices act as an inflationary “tax” on domestic production and consumption throughout the market economy. Higher costs of production will lower profits; higher prices will reduce some consumption. The only good news here is that any substantial economic slowdown in 2008 will eventually moderate the price of oil and other commodity prices as well.

The third factor in the current recession scenario — and the real wild card — is the continuing decline in the value of the dollar in international money markets caused by our Iraq blunder and the Federal Reserve—generated oversupply of dollars. Some economists would argue that a devalued dollar is good for U.S. exports, and thus positive for the economy as a whole. I disagree for three reasons.

First, the bulk of crude oil purchases takes place in dollars; a falling dollar translates into still higher crude oil prices. Second, the U. S. dollar is the major reserve currency of the international monetary system and dollar-paying investments (such as U.S. Treasury bills and bonds) are held in massive amounts by foreign banks and governments. Dollar devaluation makes these investments less attractive and any disinvestment in these areas would sharply drive bond prices down and increase interest rates.

The third reason why dollar devaluation makes recession more likely is that it effectively prevents the Federal Reserve from pushing U.S. interest rates much lower. Any additional Fed easing (inflation) would be seen as a signal of even further future dollar devaluation and even higher dollar prices for oil. Unfortunately, we will not be able to “inflate” our way out of this recession this time. We will simply have to take our lumps and let market forces liquidate the bulk of the malinvestments caused by the unprecedented Greenspan money bubble. This liquidation process will not be pretty but it is necessary to restore a sustainable economic recovery in the years ahead.

Dom Armentano [send him mail] is Professor Emeritus at the University of Hartford (CT) and the author of Antitrust and Monopoly (Independent Institute, 1998) and Antitrust: The Case for Repeal (Mises Institute, 1999). He has published articles, op/eds and reviews in The New York Times, Wall Street Journal, London Financial Times, Financial Post, Hartford Courant, National Review, Antitrust Bulletin and many other journals.

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For those paying
any attention, the recent Republican presidential candidate debate
in New Hampshire was an eye-opener. No, there were no surprise announcements
or gaffs from the so-called front-runners. Romney, Giuliani, and
McCain came off predictable and scripted in their replies to questions;
yawn, yawn. The real fireworks, instead, came from 10-term congressman
Ron Paul who showed up to debate, yes actually debate, U.S. foreign
policy.

Unlike the
other Republican candidates for president, Paul has always opposed
the U.S. war in Iraq. He voted against the war resolution in 2002;
he opposes the "surge" and would withdraw ALL U.S. troops
immediately from the Arabian peninsula. The other candidates giggled
as Representative Paul explained his non-interventionist positions
to debate moderator Chris Wallace. Given the frequent audience cheers
to Paul’s arguments, however, they had best stop giggling and listen
up.

The mainstream
media has pretty much decided that the "Republican" position
on the war is identical to the Bush administration’s position: Iraq
is a part of the war on terror and the U.S. military must "win"
so that Iraq’s various factions can establish a viable democracy.
Now that’s a real cute story, and perhaps all of the Republican
big-whigs really believe it; but in my judgment it is emphatically
NOT what many rank and file conservative Republicans believe at
all. Indeed, my guess is that many rank and file conservatives believe
that nation-building is not an appropriate activity for our government
and military, that "democracy" there is an impossibility,
and that the U.S. occupation in Iraq is a tragic mistake and not
worth one more American life.

We need some
history here. The Eisenhower/Goldwater/Reagan school of Republican
conservatism held that individual liberty was the highest political
goal and that the federal government was generally inept at managing
the economic and social affairs of society. This is why old fashioned
conservatives believed in free enterprise, tax cuts, balanced budgets,
and school vouchers, and why they were skeptical about government
regulation and interventionism, including and especially foreign
military interventionism. Even George W. Bush ran in 2000 on a basically
conservative platform but he abandoned the bulk of that platform
when the looney neo-conservatives hijacked U.S. foreign policy.

Both Eisenhower
and Reagan may have carried a big "stick" but they never
fired many shots, never started a foreign war and never attempted
to invade and "nation build" an occupied Arab country.
Indeed, both were extremely leery of any Middle East military adventure
involving U.S. combat troops. When push came to shove in places
such as Suez or Beirut, both U.S. Presidents decided (correctly)
that a direct long-run military confrontation was ill-advised. After
all, protracted wars meant higher taxes, mountains of red-ink federal
debt, and a larger "military industrial complex" and these
results were impossible to square with basic conservative principles
and a minimalist reading of the Constitution.

Ron Paul’s
chances of becoming President are thin; nonetheless, his candidacy
of ideas is a stark reminder that to be a conservative Republican
is not necessarily to be "pro-war." As our heavily mortgaged
economy slides into recession and as the quagmire in Iraq continues,
Paul’s "peace and freedom" libertarian supporters may
well provide the crucial swing vote in the presidential election
of 2008.

Reprinted
from the Vero Beach Press Journal with permission from the
author.

September
19, 2007

Dom
Armentano [send him mail]
is Professor Emeritus at the University of Hartford (CT) and the
author of Antitrust
and Monopoly
(Independent Institute, 1998) and Antitrust:
The Case for Repeal
(Mises Institute, 1999). He has published articles, op/eds and reviews
in The New
York Times, Wall Street Journal, London Financial Times, Financial
Post, Hartford Courant, National Review, Antitrust Bulletin
and many other journals.

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Homeowners
require affordable property insurance to obtain mortgages and to
protect their investments. Yet in many hurricane-affected states,
especially Florida, property insurance rates have skyrocketed making
coverage all but unaffordable. In addition, some important private
insurance carriers have dropped coverage entirely. And ironically,
most of the recent government attempts to remedy the situation have
been counter-productive.

In January
2007, the Florida legislature, with the full approval of Governor
Charlie Crist, required that Citizens Insurance, the state-owned
company that now insures more than 20% of all property in Florida,
reduce its prices to be more “competitive” with private insurance
rates. Second, the state legislated a “rollback” of private insurance
rates for 2007 on the order of 25% from then current levels. Finally,
the Florida Hurricane Catastrophe Fund (FHCF) was expanded to provide
lower reinsurance rates for private insurance companies that would
allow them to lower premiums for policy holders.

But will these
changes produce the desired results, i.e., more insurance availability
at reasonable prices? Unfortunately, the history of the state regulated
property insurance industry makes this very doubtful.

The U.S. property/casualty
insurance industry is technically “private” but it has been regulated
by various insurance commissions at the state level for almost 100
years. (The McCarran-Ferguson Act of 1945 exempts the industry from
federal regulation including antitrust. Several prominent politicians,
including Governor Crist, want to remove this exemption). Yet to
say that the states “regulate” insurance rates has always been ambiguous.
What actually happens in most states (including Florida) is that
the insurance industry “rate bureaus” collect “loss” experience
information (say on fires) and then suggest “advisory” rates for
member companies. These companies then FILE these advisory rates
(prices) and policy requirements with the various state insurance
commissions under the so-called “file and use” approach. Normally
these industry-determined prices and price changes automatically
go into effect unless directly challenged by the state insurance
regulators. Recently these challenges have become more frequent
and direct price regulation over the companies has expanded.

The problem
with direct government setting of insurance prices (or any prices)
has been known by economists for decades. Setting prices too low
by law will simply lead insurance carriers to withdraw from the
market and exacerbate the availability problem: price controls cause
shortages. It has happened with automobile insurance (e.g., Massachusetts)
and it is currently happening now with homeowner coverage in several
of the hurricane-affected states. Rolling back prices by law is
no long-run solution.

The legislative
changes enacted in Florida are unlikely to achieve their objectives.
First, the price rollbacks and increasing government and judicial
control over the insurance business will create incentives for private
firms to leave the Florida property insurance market. Second, Citizens
Insurance, initially designed as an “insurer of last resort,” will
increasingly become the insurer of “first” resort and do even more
business at the state mandated lower rates. Third, Citizens, which
lost a ton of money charging “high” prices, will lose even more
money charging lower rates; thus the risks for property losses will
be shifted increasingly to homeowners without losses through increasing
surcharges on their policies. Finally, the reinsurance changes are
unlikely to have any major effect on private insurance firms already
bent on leaving the market.

Central planning
and socialism in insurance is simply not working. My recommendation?
DEREGULATE the entire property/casualty insurance market. Remove
all legal barriers to entry including those against so-called “foreign”
companies. End all insurance commission and legislative price fixing
of insurance products. Phase out all governmental regulation of
the insurance policy contracts and require that the courts enforce,
not amend, legitimate contracts between insurance companies and
policy holders. And reject any and all calls to apply federal or
state antitrust law to insurance. In short, move to create a free,
open, competitive, and legally secure market for selling property
insurance.

May
14, 2007

Dom
Armentano [send him mail]
is Professor Emeritus at the University of Hartford (CT) and the
author of Antitrust
and Monopoly
(Independent Institute, 1998) and Antitrust:
The Case for Repeal
(Mises Institute, 1999). He has published articles, op/eds and reviews
in The New
York Times, Wall Street Journal, London Financial Times, Financial
Post, Hartford Courant, National Review, Antitrust Bulletin
and many other journals.

But to be "shocked" by the recent New York Times
revelations is, frankly, to have been fast asleep for the last 50
years. The private activities of thousands upon thousands of Americans
have been shadowed, followed, monitored, and placed under surveillance
since World War 2 and mostly without any judicial oversight whatever.
The bulk of the domestic snooping has been related to alleged issues
of national security and has been accomplished by the FBI and various
military "Intelligence Agencies" such as those maintained
by the Air Force, Navy, Army, and Marines, later subsumed under
the Defense Intelligence Agency (DIA). All of these agencies have
maintained thousands of files on individuals and groups of "interest"
for decades without any seriously raised congressional eyebrows.

The NSA got into snooping big time back in 1967 when they started
collecting information on various groups and individuals associated
with anti-Vietnam War protesting. But the closest parallel to the
recent domestic NSA spying is the World War 2 cable intercept program,
code-named "Operation Shamrock." Shamrock was instituted
during the War to intercept cable transmissions between U.S. citizens
and foreign nationals, companies, embassies, and governments. The
intercepts were accomplished with the willing support of U.S telecommunications
companies such as ITT, RCA, and Western Union and the entire operation
was super secret.

Like many of the activities of the NSA today, the federal congress
in the 1940s, and perhaps even President Truman, were blissfully
ignorant of the existence and scope of the snooping program. But
even more importantly, the domestic and foreign cable transmission
intercepts continued AFTER the War and, indeed, for the next thirty
years in almost complete secrecy. No President until Nixon, apparently,
was even aware of the domestic side of the snooping and no legislation
was ever introduced to legitimize domestic cable surveillance. The
program that never officially existed was terminated (supposedly)
on May 15, 1975.

Who says that agencies of government can’t keep secrets, even from
Presidents. The Operation Shamrock secret was kept in a lock-box
for almost thirty years. If the information is compartmentalized
enough, and if the media is compliant enough, secrets can be kept.

Am I outraged by the recent spying revelations? Of course. There
should be no government monitoring of private communications (telephone,
email, cable, etc.) absent prior approval from a judiciary that
demands the highest proof of a national security "risk."
But am I surprised that agencies like the NSA have, again, illegally
snooped on Americans, this time with a presidential sanction? You
must be kidding.

December
19, 2005

Dom
Armentano [send him mail]
is Professor Emeritus at the University of Hartford (CT) and the
author of Antitrust
and Monopoly
(Independent Institute, 1998) and Antitrust:
The Case for Repeal
(Mises Institute, 1999). He has published articles, op/eds and reviews
in The New
York Times, Wall Street Journal, London Financial Times, Financial
Post, Hartford Courant, National Review, Antitrust Bulletin
and many other journals.

According
to Paul McNulty, the U. S. attorney for the Eastern District of
Virginia, McKinnon (alias SOLO) engaged in the “biggest military
computer hack of all time.” Using several off-the-shelf software
programs, including one called “Remotely Anywhere," McKinnon allegedly
disrupted military and intelligence communications, monitored network
traffic and deleted numerous U. S. Army, CIA, and NASA files causing
an estimated $700,000 in damages. If extradited to the U. S. and
convicted on 22 separate charges, he could spend the next 70 years
in jail.

McKinnon,
an avowed pacifist, does not deny that he hacked U.S. military and
intelligence computer systems over the internet. But through his
attorney he claims that the primary purpose of the hack was to “prove
the existence of UFOs," an existence that the U.S. (and British)
military and intelligence community has continued to steadfastly
deny. And friends of McKinnon reportedly have claimed that he found
“thousands of UFO photos on U.S. intelligence computers.” Whether
any of this is true or will be relevant in the extradition hearing
remains to be seen.

The
larger and more important issue, of course, that goes beyond the
hacking is: Does the U. S. military and intelligence community actually
have evidence that UFOs exist and may well be a threat to the national
security? Although much has been written on this subject, the most
careful and sober treatment of the issue is Richard M. Dolan’s UFOs
and the National Security State (Hampton Roads Publishing,
2002).

Dolan
argues persuasively that select individuals within the U. S. military
and intelligence community, working entirely behind the scenes,
accepted the physical existence of the UFO by at least the late
1940′s. Moreover, given the reality of US airspace penetration by
UFOs and the distinct possibility of mistaking UFOs for a Soviet
air/missile attack, the national security aspects of the subject
was treated with absolute seriousness, as they should have been.
Even as early as September 23, 1947, General Nathan Twining, Commanding
General of Air Material Command, sent a then-secret memorandum to
Brigadier General George Schulgen at the Pentagon which stated that:

“The
reported phenomenon (the flying disc) is something real and not
visionary or fictitious…There are objects the shape of a disc, of
such appreciable size as to appear to be as large as man-made aircraft…The
reported operating characteristics such as extreme rates of climb,
maneuverability (particularly in roll), and action which must be
considered EVASIVE when sighted or contacted by friendly aircraft
and radar, lend belief to the possibility that some of the objects
are controlled either manually, automatically or remotely.”

Evasive?
Could mirages, balloons and ball lightening evade fighter planes
scrambled to pursue “objects the shape of a disc”? Or be tracked
on ground radar at 8,000 mph? Less than a year after the Twining
memo, and after several spectacular sightings, the first Air Force
special project on UFOs (Project Sign) generated a Top Secret “Estimate
of the Situation” which concluded, according to Ed Ruppelt former
head of Project Blue Book, that some UFOs were interplanetary machines.
And when secret US and Russian aircraft programs were ruled out
as the source of the UFO (the Russians and their US counterparts
were hardly field-testing exotic air technology over the Hudson
Valley or the Florida everglades), the military and intelligence
people in charge must have made explicit decisions to move all serious
study of the UFO underground for national security reasons. According
to Dolan, that policy decision was made more than 50 years ago and
despite occasional leaks has continued to the present.

The
above scenario explains much. It explains the many silly Blue Book
“explanations” of cases – such as the seven reported landings
of a huge bright egg-shaped object in Levelland, Texas on November
2, 1957, that stalled automobiles and killed headlights, which Blue
Book officially whitewashed as “ball lightning.” It explains, despite
continual Air Force disclaimers of “nothing to hide," the public
censorship of UFO secrecy critic Major Donald E. Keyhoe on the Armstrong
Circle Theater on January 22, 1958. When Keyhoe departed suddenly
from the TelePrompTer script and said “And now I’m going to reveal
something that has never been disclosed before…” his microphone
was abruptly cut off. The live TV audience saw his lips moving but
his audio had been zapped by the Air Force and CBS under prior agreement.

It
explains the ridiculing and eventual formal muzzling of commercial
airline pilots for reporting UFOs to the press. It explains the
CIA sponsored Robertson Panel’s recommendations (1953, but kept
secret for more than a decade) that the elite media be enlisted
in “training and debunking” programs whose “aim would result in
(a) reduction in public interest in ‘flying saucers’…” And while
the public never did lose interest, the relentless government and
media debunking and ridiculing of the subject – and anyone who took
it seriously – effectively killed off serious scholarly interest
in solving the mystery. UFOs were to be forever associated with
the paranormal and with new age irrationalism and, thus, became
a kind of third rail in formal science and in academia; those who
touched it risked putting their careers in mortal peril. Almost
none did.

Yet
despite the research and disclosure disincentives, cover-ups (like
cartels) always leak and bits and pieces of the government’s actual
concern about UFOs have surfaced over the years. Critics using the
Freedom of Information Act have shaken loose dozens of important
letters, memos and reports relative to UFO reality and secrecy that
belie official explanations and public statements made at the time.
In addition, many supposed government UFO documents, some with spectacular
implications, are in
the process of authentication and release.

Now
whether computer hacker Gary McKinnon actually accessed secret military
UFO files is anyone’s guess. If there is an open trial, perhaps
we will finally find out whether the speculations of Richard Dolan
and others are correct. But don’t hold your breath.

July
7, 2005

Dom
Armentano [send him mail]
is Professor Emeritus at the University of Hartford (CT) and the
author of Antitrust
and Monopoly
(Independent Institute, 1998) and Antitrust:
The Case for Repeal
(Mises Institute, 1999). He has published articles, op/eds and reviews
in The New
York Times, Wall Street Journal, London Financial Times, Financial
Post, Hartford Courant, National Review, Antitrust Bulletin
and many other journals. He has followed the UFO controversy for
more than four decades.

In
WICKARD v. FILBURN (1942), the Supreme Court expanded the original
interpretation of the commerce clause to cover intrastate economic
activity that was said to “affect” interstate commerce. Wickard
grew wheat for his own consumption but the court reasoned that the
wheat locally consumed could, theoretically, have been sold in interstate
commerce; so when Wickard “withdrew” that wheat and consumed it,
output and prices in interstate commerce were affected. Hence the
Feds could regulate locally grown wheat and the legislation that
prescribed that was constitutional.

The
“logic” of WICKARD obliterated two original and important constitutional
principles, namely (1) that the states can regulate their own commerce,
not the Feds and (2) that the federal Constitution embodies only
limited and clearly enumerated powers. WICKARD substantiated the
notion that the Feds could now regulate ANY economic activity (with
little resistance from individuals or the states) since almost ANY
good or service produced and consumed locally could, at least theoretically,
affect interstate commerce. We have all lived in a post-WICKARD
regulatory world ever since.

So
in some sense, the medical marijuana case decided June 6th (GONZALES
v RAICH, ET AL.) in favor of the government (6-3) was an easy slam
dunk. Reich and the other defendants in California grew marijuana
for their own consumption but the majority asserted, following WICKARD,
that such private activity “affected” interstate commerce and, thus,
could be regulated (prohibited) by the federal Controlled Substances
Act (CSA), regardless of California state law which allowed (with
supervision) such activity. If you don’t like the decision, the
majority suggested, get the votes and attempt to change the federal
drug laws.

There
are many problems with the majority opinion written by Justice Stevens.
The most obvious is the continued acceptance of the logic of WICKARD.
As Justice Thomas argues in his brilliant dissent, if growing 6
marijuana plants on your own property for your own consumption is
“economic activity” that can “affect” interstate commerce, then
there is absolutely nothing under the economic sun (including pot
luck dinners) that cannot be regulated by the federal congress.
But, clearly, that was not the intent of the framers of the Constitution.

But
even more fundamentally, the Commerce Clause itself was never meant
by the Founders to be a blank check for “command and control” economic
regulation. Indeed, the economic purpose of Article one Section
8 was almost precisely the opposite of the conventional explanation
accepted by the majority in this case.

The
original intent of the Commerce Clause was to make “normal” or “regular”
commerce between the states; thus it was designed to promote trade
and exchange not restrict it. Further, it was specifically aimed
at preventing the states from enacting impediments to the free flow
of “commerce” such as tariffs, quotas and taxes. And since the explicit
language of the CSA, like all economic regulation, interferes with
the free flow of commerce, it is inherently antithetical to the
original intent of the Commerce Clause. (Whether the law could be
legitimized by reference to the “police powers” of the state is
another matter).

The
commerce clause was never meant to prohibit sick individuals from
consuming plants grown on their own property. Yet to acknowledge
that fact, the Supreme Court majority would have had to rethink
the core principles of individual liberty and the entire legal foundations
of our regulatory society. And that they chose not to do.

June
8, 2005

Dom
Armentano [send him mail]
is professor emeritus in economics at the University of Hartford
and author of Antitrust:
The Case for Repeal
(Mises Institute, 1999). He lives in Vero Beach, Florida.

by D. T. Armentano by D. T. Armentano

I was born in the North End of Hartford (CT) in 1940 and I’ve been a libertarian for as long as I can remember. I never went through any sort of messy political transformation like some others did. I was never a Marxist or a socialist or even a warm and fuzzy liberal. When I first became interested in political economy in my early teens, individual responsibility and mistrust of governmental authority just seemed natural and right to me. They still do.

How did I get started down the libertarian path? Perhaps it was my very negative reaction to being interned in Catholic school for my first 6 educational years. To put the matter bluntly, I hated the entire experience with a passion. I disliked the regimentation, despised the bossy nuns, and resented being strapped on the hands by a smug Father Bannon for talking in class or thinking impure thoughts or whatever the hell I was NOT supposed to be doing at age ten. A shrink might say that I transferred my anger from the authoritative parochial school to the super-authoritative federal government at some point later in life. Maybe so; I really can’t rule that out. (Only kidding).

Or perhaps I got my initial libertarian leanings from my parents, otherwise hard-working, honest, middle-class folks who survived the Depression and the War and who never asked anyone in authority for a handout. Perhaps, but I doubt it. Both my parents were New Deal Democrats who never, never talked intelligent politics in the home and never doubted that government existed to help the little people. My libertarianism was a total mystery to them – still is – so, no, I absolutely did NOT catch the liberty fever from my family.

As best as I can recall, two very different personal experiences may have acted as a catalyst. When I was a young kid looking to earn extra money, I used to do landscape work and move rocks for a next-door neighbor named Jack Harris. Jack was a professional welder by trade, a quiet and precise man, who gave me minimal instructions and then left me free to do the work to the best of my ability. I always admired Jack’s own confident demeanor and his trust in my integrity to do the job well. Jack never watched me and he never gave explicit instructions on how to do things. He simply told me what he wanted and he trusted me to do it.

One day when I went to get paid, Jack's wife said “Hold on. I want to give you a book to read that Jack treasures and that I think that you will enjoy.” And then, of course, she handed me a hardcover of Ayn Rand’s, The Fountainhead. Everything that I had always felt intuitively about life I now found explicitly detailed in Rand’s wonderfully romantic fiction. Jack and I never spoke about the ideas in that book. I’m not even sure that he could have articulated them. But he lived them (from what I could tell) and those ideas and Jack’s real life example made a lasting impression on me.

A second event occurred in early 1958 when I was watching The Armstrong Circle Theater on television. This was a live television broadcast and the subject being debated was the reality of the UFO phenomena. I’d prepared a report on UFOs in a high school science class so I knew something about the subject. The government/Air Force position (then and now) was that there was nothing in the nature of the reports that represented anything extra-ordinary or a threat to national security. The Air Force mantra was that UFOs were balloons or mirages or hoaxes and that no information to the contrary was being withheld. Yea, right.

The “other side” in the debate was represented by Donald E. Keyhoe, who was then the executive director of the National Investigations Committee on Aerial Phenomenon in Washington, D.C. Keyhoe, a feisty retired ex-Marine Major, spoke in support of the reality of the phenomenon and of an Air Force cover-up of inconvenient facts such as 90 degree turns and evasive action when pursued by our jets. At one point in the program Keyhoe suddenly broke away from his prepared remarks, looked at the camera and said: “And now I am going to reveal something that has never been disclosed before…” but his microphone abruptly went dead. The live t.v. audience saw his lips moving (me included) but his audio had been terminated by CBS and the U.S. Air Force under prior agreement. I think that I became a radical libertarian at that very moment.

While still in high school I attended one of the Foundation for Economic Education seminars in Irvington, New York, and still remember Leonard Read lighting his candle in a dark room. (Later I would become a Trustee of that fine organization). When I got into college, a good friend and I formed an Objectivist Study Group and I wrote articles for the college newspaper on Rand and her ideas. I began to argue with my professors about monopoly and unemployment and the proper role of government. I was reading Friedman and Hayek and especially Hazlitt by that time and frequently asking “outrageous” questions in class. There were never any serious answers, of course, only smirks and ridicule. I would often make appointments to meet professors after class to pursue issues, but few ever showed. Indeed, what I remember most about those undergraduate years is the almost complete “liberty blackout” in economics classes.

None of my economics professors seemed interested in free market theory or were even aware that there was another viewpoint aside from religious Keynesianism. No reading list from my undergraduate days EVER had a Friedman or Hayek citation, let alone von Mises or Murray Rothbard. My only brush with classical liberal ideas and libertarianism came in courses on political philosophy, where we explored the ideas of Aristotle, Hobbes, Locke and Mill and took seriously the conflict between liberty and power.

Graduate school (1962–1966) was a slightly better intellectual experience. Graduate classes were smaller and the cadre of students and professors were more committed to serious pursuits. We all hung out together and constantly debated free market theory, the Great Depression, tax policy, the history of child labor and, of course, the Viet Nam War.

Joel Dirlam, an iconoclast industrial organization professor at the University of Connecticut, sparked my early interest in antitrust law, though our policy views could not have been more different. Dirlam was the first professor to send me off to read “original” documents and trial record material in order to really understand what went on at court in antitrust cases. And Bill Snavely, who taught comparative economic systems, formally introduced me to the ideas of Ludwig von Mises and the socialist calculation debate. Later Bill would ask me to contribute a chapter to his book, Theory Of Economic Systems (Merrill, 1969) on that important subject and it became my first important publishing achievement. It was also my first formal introduction to Mises and to Austrianism generally. I was hooked.

I received my Ph.D. in economics from the University of Connecticut in 1966 with a dissertation on the political economy of the brilliant, late 19th century classical liberal, William Graham Sumner. Sumner taught at Yale between 1870 and 1905 and his ideas and his unflinching attitude toward enemies of the free market had a tremendous influence on me. Sumner was a brilliant writer, lecturer, and debater. Moreover, he had a fierce and fiery tongue and never gave an inch to enemies of liberty on either the left or right. He became my first intellectual hero.

Sumner angered Yale’s Republican friends by opposing tariffs and quotas of any kind for any reason. In addition, he strongly opposed the rise of U.S. Imperialism and Empire and wrote and spoke eloquently on why the Spanish/American war was a fatal mistake for American civil society. He opposed any and all welfare programs of government; as he put it bluntly, a drunk was in the gutter where he belonged. Indeed, in almost every area of political economy (save public schools), Sumner anticipated late 20th century libertarian thought at every turn. That he has been forgotten (like his own “forgotten man”) and unappreciated by current academics is a sad commentary on the current teaching of intellectual history.

Since I always had a flair for the dramatic – I was in several plays in grade school and high school – teaching economics at the college level came naturally to me. I fell in love with teaching during my first class as a graduate assistant in 1964. I just loved the performing and the give and take with the student audience. And I loved to put words to paper. I had been writing stories since grammar school (one teacher, the very special Leo Cohen, even made extra time for me so that I could write “my stories”) and I won an award for a short story in high school with the encouragement of my favorite English teacher, Mrs. Kind, who’s spirit and support I remember with great fondness. Thus an academic life seemed ideal for me and for my new wife, Rose LaFont. (We married in 1966, and are still strongly merged; I could not have accomplished what I have without her). Thus we began our long journey into the heart of intellectual darkness!!

I taught full-time at the University of Connecticut in 1966–67 and then went to teach at the private University of Hartford in West Hartford, Connecticut, in the fall of 1967. Before I arrived in Hartford, I published my first article for cash ($75) in a slick trade magazine for the direct mail industry. An editor at the magazine had seen a “letter to the editor” in the Wall Street Journal in which I had argued that a private post office would be more efficient that a government monopoly. He asked me to write a longer historical piece on the subject and it appeared as “Do We Really Need A Post Office?, Reporter of Direct Mail Advertising (March 1967). Seeing my name on an article in print for money had a profound effect on me! I had found my calling.

When I arrived at Hartford, I was immediately handed the Government & Business course (senior level) to teach and had to quickly find a textbook. The standard text at the time was Clair Wilcox’s Public Policies Towards Business (Irwin) then in its umpteenth edition, and I adopted it my first year. As I prepared to teach the antitrust section of the course, however, I discovered a disturbing anti-business bias in the Wilcox text (and other supplementary texts) and the almost complete absence of any historical information about product prices, outputs, and business innovation.

Wilcox et. al. simply assumed that government antitrust policy promoted the “public interest” and that the firms convicted under the Sherman Act had actually raised prices and reduced outputs as standard monopoly theory predicted. Certainly the students who studied the Wilcox text had no way of knowing what actually transpired from an economic perspective in the classic antitrust cases since the author chose not to tell them. At the end of my first year of teaching, I decided to write an antitrust book to fill in the story that Wilcox and other textbook authors had omitted.

The Myths of Antitrust: Economic Theory and Legal Cases (Arlington House, 1972) was an attempt to do a major “revisionist” history of antitrust theory and policy. The State of Connecticut had an excellent law library in Hartford and so I buried myself in legal decisions and trial record material for almost 4 years. (We had no “research assistants” at the time; I did ALL of the research for Myths myself and wrote every word of text. If there are errors or omissions, blame me.) My intention was to discover what actually happened in the classic antitrust cases from an economic perspective. Did the firms abuse consumers and was antitrust a legitimate response to monopolization? Additionally, I wanted to tell the story of the classic antitrust cases in the context of the actual historical development of the industry.

How, for example, did the market concentration in petroleum or tobacco actually arise? Why did firms merge and were there so-called barriers to entry that unfairly kept new competitors out? Absent some historical discussion, the monopoly and price fixing cases made little sense and the actual intent and effect of antitrust regulation remained obscure. Thus, explaining the antitrust decision against Standard Oil of New Jersey (1911) in the context of the history of the petroleum industry would give a unique understanding to my antitrust and monopoly discussion and sharply separate my book from the competitors. And after more than 30 years in print in various editions, I still think that the perspective that I adopted and the analysis that I attempted in that first book holds up reasonably well.

Myths attempted to break several areas of new ground. (I was bold and brash at 32!) It systematically attacked the dominant “structure/conduct/performance” paradigm that dominated industrial organization theory and public policy in the 1960s. Myths presented an alternative quasi-Schumpeterian theory of open market competition to replace the orthodox perfectly competitive model. (Israel Kirzner at NYU would lay out a far more systematic theory of market process in Competition and Entrepreneurship which was published in 1973, a year after Myths appeared.)

Myths exposed the soft underbelly of the “public interest” theory of antitrust by demonstrating that the firms indicted and convicted in the classic monopoly cases had actually been increasing outputs and lowering prices. (Where available, I stuck the prices and industry data right in the text.) And in its most radical chapter on price fixing, Myths argued that even business collusion was a myth since high fixed costs and legally open markets encouraged price cheating and secret discounts to customers. It even showed that the infamous electrical equipment conspiracy of the early 1960′s didn’t really work. Myths concluded that antitrust was a complete public policy hoax, that most cases were brought by private firms against their rivals, and that absent any legitimate rationale, the entire legal framework hurt consumers and should be repealed. So there!

The immediate reaction to my book in the business and academic world was…. underwhelming. Despite some important favorable reviews (especially one by Donald Dewey at Columbia in the Business History Review) book sales were modest and the antitrust intellectual establishment did not come crumbling down or even tremble noticeably. Indeed, most economists and law professors in the 1970′s simply ignored what I had written or called, instead, for more “vigorous” enforcement of antitrust law and even new laws to limit industrial concentration.

There were at least two exceptions. At Chicago and at UCLA, various scholars (such as Yale Brozen and Wesley Liebeler) were reasonably sympathetic to my arguments and published their own important critiques of antitrust policy. The Chicago crowd was always lukewarm, however, since I had attacked the “perfect competition equilibrium ” model and had argued that even prosecuting price fixing was a mistake. But a second group of supporters, the Austrians, led by Murray Rothbard, were very enthusiastic about my work and I was soon drawn into their world in a more systematic way.

My fist formal interaction with the world of Austrian Economics came with an invitation to the South Royalton Conference in 1974. There I met several of the Austrian luminaries for the first time and I was blown away by how seriously the youthful audience took theoretical controversies. At the end of the Conference, I boasted to George Pearson (Koch Industries) that I could organize and chair an equally successful conference at Hartford in the near future if they were so inclined to put up the money. That’s how the Austrian Economics Conference at Hartford came about in the summer of 1975.

What is notable about that event, aside from some path-breaking papers by John Hagel and Walter Grinder, among others, is that F.A. Hayek was in attendance for several days. I remember driving him around Hartford in my small Honda. Sadly, although Hayek had recently been awarded a Nobel Prize in Economics, I could not convince either of Hartford’s two newspapers to send a reporter up for an interview. Such was the dismal intellectual state of the world in 1975!

Murray Rothbard was also at the Hartford Conference and he became an important intellectual influence on my thinking in the 1970s. His Man, Economy And State and Ethics of Liberty were, in my view, two of the most important books ever published while his For A New Liberty was a breakthrough book in popularizing libertarian political economy. Murray was brilliant, funny, supportive, and the fountainhead of the serious libertarian movement. I loved the guy and still miss him terribly to this day. His intellect, spirit, and capacity for work have proven irreplaceable.

A sabbatical leave in the fall of 1977 found my wife and I at the Institute for Humane Studies in Menlo Park, California. It also found us often in San Francisco at the newly created Cato Institute on Montgomery Street. I did several book reviews for Cato’s flagship magazine, Inquiry, (one was the first published review of Robert Bork’s The Antitrust Paradox, then in galley proofs) and I became friendly with its entrepreneurial president, Ed Crane, and Cato’s financial angel, Charles Koch. Crane and Koch and I would work together on several projects including the nationally syndicated public affairs radio program, Byline. I wrote and recorded over 150 Byline shows over the next 7 years on all sorts of public policy issues. The challenge of explaining rent controls or Federal Reserve Policy in 90 seconds on the radio prepared me well for the many dozens of op/eds that I would write in the coming years.

The 1980s found me speaking, writing, chairing conferences, and receiving an occasional award for contributions to free enterprise. Along with fellow economist and friend Gerald Gunderson at Trinity College, I was awarded the Valley Forge Freedoms Foundation Award for “excellence in private enterprise education” in 1980. In the early 1980s I revised and expanded Myths and it was published as Antitrust & Monopoly: Anatomy Of A Policy Failure by a “legitimate” New York publisher, John Wiley and Sons, in 1982. The book is currently published by The Independent Institute in Oakland, California, and has been in print in one form or another for more than 30 years. My thanks to David Theroux.

My controversial positions on antitrust regulation and on the so-called energy crisis led to many radio and t.v. opportunities and frequent invitations for campus talks. I appeared several times on the nationally syndicated PBS television show “Economically Speaking” and did numerous radio shows in Hartford and many other cities. And over the years I gave upwards of 100 professional talks to academic and business audiences on various public policy matters.

In 1982 I conceived and directed a two-week conference (and college credit course) titled “New Directions in Economic Policy." This brought me in contact with such free market superstars as Tom Sowell (who keynoted the conference), Yale Brozen, Walter Williams, Julian Simon and many others. I also stirred up the pot a bit by inviting John Kenneth Galbraith from Harvard, who received cat calls and boos from the students for recommending wage and price controls as a solution to the then ailing U.S. economy!! The New Directions Conference attracted national attention and put the University of Hartford Economics Department on the map for a brief moment.

I wrote several important journal articles in the late 1980s and early 1990s. “Predatory Practices and the Competitive Process” appeared in the Review of Austrian Economics (Fall 1989). In that piece I argued that so-called predatory practices were simply “competitive” practices and ought to be totally immune from antitrust regulation. Several colleagues at the University of Hartford (Hartford is the so-called “insurance city”) got me interested in insurance industry regulation and I published “Antitrust and Insurance: Should the McCarran Act be Repealed?” in the Cato Journal (Winter 1989). The McCarran Act exempts insurance companies from the bulk of antitrust law and I argued that the exemption was economically efficient and ought to be continued. I summarized my criticism of the entire antitrust legal framework in an article titled “Time to Repeal Antitrust Regulation” that appeared in the antitrust establishment’s favorite academic journal, the Antitrust Bulletin (Summer 1990). The article caused a minor stir and elicited a dissenting reply from Appellate Court Judge Douglas Ginsburg. My response, “A Reply to Judge Ginsburg,” appears in the expanded issue of that same journal.

In 1983 I approached David Boaz at the Cato Institute with an idea for a new antitrust book. The plan was to write a smaller, more “popular” account of my antitrust text material while at the same time incorporating some then-current antitrust controversies. The book titled Antitrust Policy: The Case For Repeal was published by Cato in 1984. Thanks, David. (I am now an adjunct scholar at the Cato Institute.)

Years later Lew Rockwell of the Mises Institute approached me and asked me to revise and expand the Cato book with special attention devoted to the then on-going Microsoft antitrust case. With Lew’s generous support, that book was published by the Mises Institute in 1999 as Antitrust Policy: The Case For Repeal, and has had some college adoptions and some modest success.

One of my favorite journal articles was written as a response to an attack on my antitrust theories by Professor Frederick M. Scherer. Professor Scherer, a nationally recognized expert in industrial organization and the author of the most influential textbook in the area, pretended to “review” the 1990 edition of my Antitrust & Monopoly in a new and interesting journal, Critical Review. His review, however, was filled with errors of commission and omission and he distorted my positions at almost every turn. (Our feud goes back to a decade-old Hillsdale College luncheon that was particularly unpleasant; the Critical Review hatchet job was payback, apparently.) There is not sufficient space here to explain all of the problems with Scherer’s analysis of my antitrust positions nor all of the problems associated with Scherer’s own antitrust views. Suffice to say, for those who are interested in such matters, see my “Anti-Antitrust: Ideology or Economics? Reply to Scherer” Critical Review (Volume 6, No.1, 1992) for my definitive thoughts on the Scherer affair.

My scholarly writing was always important but I most enjoyed writing op/ed articles for newspapers. I have been a regular writer of op/eds for over 35 years (I continue to write for the Press Journal in Vero Beach, Florida where I live) and have probably written many hundreds by now. My articles have appeared in publications such as The New York Times (articles on legalized gambling and merger policy), The Wall Street Journal (an article on allowing the air carrier industry to collude on prices), the London Financial Times, the National Post (Canada) and many other newspapers in this country and abroad. While teaching at the University of Hartford, I wrote many op/eds on such topics as the selective service system, banking deregulation, antitrust policy, and the tax system in Connecticut. These appeared regularly in The Hartford Times and, after the Times folded, The Hartford Courant, the oldest continuously published newspaper in America.

I am most proud of a series of articles that appeared in The Hartford Courant just prior to Connecticut’s adoption of a state income tax in the early 1990s. Professor Jack Sullivan, a colleague of mine, and I wrote four detailed critiques of the proposed state income tax and these articles were extremely well received around the state. We had done our homework. We knew that the Connecticut’s state budget process had been out of control for years and that more taxes would not fix it. We knew what happened in other states when a state income tax was adopted: their economic growth rates declined. We knew that state income taxes did not “fix” budget deficits. Indeed, the states with the highest state income taxes had the highest deficits! So here was a once in a lifetime opportunity to actually prevent government from expanding its power if we could only defeat the demonic state income tax.

After the articles were published, I (and others) spoke before a crowd estimated at 25,000 that gathered on the lawn in front of the State capital building in Hartford to protest the imposition of any new state taxes and to demand that the legislature (and the evil Governor Lowell Wicker) control state spending instead. I gave several talks around the state in opposition to the proposed tax and I testified against the adoption of any state income tax at a special legislative hearing on the matter. For months the battle raged, a lopsided intellectual battle really, since we had all of the facts, all of the arguments, and all of the public support, while the other side had only one mantra: We want the money.

AND WE LOST! The General Assembly caved in and rammed the tax down all of our collective throats. The Governor, the state legislative politicians, the state unions, the teachers and other interest groups that live off of the state, threw their support to the state income tax and it became law. John Rowland, Connecticut’s current governor, had pledged to repeal the monstrosity but it still exists and it still steals property.

Losing the income tax battle was emotionally tough for me. Being a libertarian in this society is generally rough enough but this tax defeat bordered on the absurd. For here I had witnessed first-hand the CREATION of government’s most awesome power…the power to tax. I had seen the entire process from start to finish with my own eyes and was terribly disappointed at our inability – despite the evidence and general public support – to short circuit the process and kill the creature born from that process. It brought home a painful message that I really did not want to hear again: We libertarians have a long, long, LONG way to go in terms of real world political change.

I have certainly seen some modest “progress” in the antitrust area (perhaps my writings have helped at the margin) but the tax and spending policies of government at every level (and U.S. foreign policy) are devastatingly irrational and immoral. On my black days it is difficult to see, given the public choice calculus, how those of us who support liberty can make any reasonable progress in these areas in the near future.

A personal footnote on the income tax affair. In the early 1990s I had been thinking of an early retirement from teaching and a move to a warmer climate. When Connecticut adopted its 4.5% state income tax, I decided that they would NOT tax me. I would pack up and leave for a friendlier state without a state income tax and with a Constitutional Amendment that prohibits one. Hullo Florida! So far so good.

Another factor that led to my move from Connecticut was the increasingly difficult teaching atmosphere at the University of Hartford and in higher education generally in the late 1980s and early 1990s. For decades I had been teaching the capstone course in the MBA program, “Business and Society," with great student evaluations. The course explored some business case histories, some regulatory analysis and legal cases, and more and more over time explored the ETHICS of certain business practices and the government's attempt to regulate them. I lectured for roughly half of the course and the graduate students presented cases (which I evaluated) in the second half. My interest in ethical analysis led me to publish “The Ethics of Anticompetitive Practices” in the Mid-Atlantic Journal Of Business (March 1991).

“Business and Society” was probably the most popular course in the MBA program. The students worked hard but they loved the challenges. In the early 1990s, however, a faculty backlash developed concerning my theoretical and ethical approach to teaching this course. Some non-economist faculty members in the Barney School of Business began to object to my free market analysis, to my so-called deregulation “crusade," and to the contrasting natural rights vs. utilitarian perspective that I and my students employed to “analyze” business practices (insider trading, for example) and government regulation. Having increasing “trouble” with “my” students in their classes, they attempted to strip the course from me, from the Department of Economics, and eventually strip it from the MBA program itself.

As some of us know, these curricular “wars” were (in part) insidious manifestations of the silly political correctness nonsense prevalent at the time and were a blatant attempt to dumb down academic standards generally. They were propelled forward in business schools by radical feminists and psycho-babble Management professors at various universities in the late 1980s and early 1990s. Nonetheless, though the process proved acrimonious, I dug in my heels and defended my principles and the efforts to deconstruct “Business & Society” failed. When I finally left the University in 1994, I had taught the course every semester for a total of 27 years, exposing thousands of students to classical liberal theory and public policy. Although I retired from full-time teaching in 1994, I have continued to publish widely. I wrote many articles on the Microsoft antitrust debacle for Investor’s Business Daily, for the Competitive Enterprise Institute, for the Cato Institute, and especially for the Independent Institute. I wrote a “Viewpoint” for The New York TImes (January 19, 1997) titled “Don’t Punish Microsoft For Its Brand of Competition” and my article “Or Broken Trust?” appeared in the May 4, 1998 issue of National Review. At present, I continue to write on antitrust and other many other regulatory matters for journals, newspapers and internet web cites.

I truly enjoyed the process of teaching and this bio-essay would not be complete without mentioning my debt to the excellent students that I had over the years. Their desire to learn inspired me to search for the truth and to communicate it as effectively as I could. The almost daily intellectual interaction with students kept my mind alive. Without them the process of teaching would have been a sterile monologue. Two of my best students were Roy Cordato and his wife, Karen Palacek, who both went on to earn Ph.D.s in Economics and who continue to make continuing contributions to our field of study. (Roy’s critical work on the Coase Theorem is particularly important). Both had planned careers as base fiddle musicians before they took my courses in economics. Talk about unintended consequences!

Finally, let me close by noting my most personal “unintended consequence” of all. My son, Paul Armentano, born in 1972, has worked hard to become a leading national spokesman for the legalization of marijuana in the U.S. Paul, a Policy Analyst at the National Organization for the Reform of the Marijuana Laws in Washington, D. C., has already written hundreds of articles and op/eds on the inefficiency and immorality of state and U.S drug laws. I could not be more proud.

Interestingly, Paul’s libertarianism was never consciously instructed by either me or my wife. We never “lectured” him on the subject nor instructed him to read certain materials; he would have rebelled sharply against all of that, anyway. Instead, we just set good life examples and let him discover the importance of political liberty on his own. (Leonard Read was certainly right on that one). It will now be up to Paul, and like-minded academics and activists, to continue the struggle for liberty and justice against entrenchments of power.

Dom Armentano is professor emeritus in economics at the University of Hartford and author of Antitrust: The Case for Repeal (Mises Institute, 1999). He lives in Vero Beach, Florida.

His most controversial remarks concerned the antitrust regulation
of buying cooperatives on the Web. Consumers and businesses have
been creating internet sites that allow the purchase of large quantities
of products at low prices. Klein, it seems, is worried that such
concentrated buying activity could somehow harm the public interest
and that the trustbusters might need to publish "guidelines"
in this area for both consumers and businesses.

Now let's see if I've got this straight. According to Klein, antitrust
is a legitimate government intervention because it protects consumers
from monopolies that can RAISE prices. And the monopoly problem
is so pervasive that an international authority would be useful,
much like Nafta. But if consumers (buyers) form organizations to
purchase in large enough quantities to drive prices DOWN, then that,
too, is a problem that requires antitrust regulation. Huh??

Robert Bork has long argued that the only legitimate mission of
antitrust is to protect poor dumb consumers from greedy monopolists
that would overcharge them. This has always been a debatable proposition
at best. But now Klein comes along and says that consumers who cooperate
and bargain effectively for lower prices also need some antitrust
regulation (to protect them from themselves, apparently). This proposition
is more than debatable; it's down right screwy. Why would consumers
need the government to regulate a process that creates lower prices
for these very same consumers? And if consumer welfare is the alleged
goal of antitrust, why would government want to inhibit the process?

The answer, of course, is: "It's the power, stupid." Antitrust
is not now nor has it ever been about the public interest or "consumer
protection," as a reading of the classic antitrust cases would
quickly reveal. No, antitrust, plain and simple, has always been
a shakedown racket designed to extort wealth from efficient companies
and consumers and redistribute it to less efficient competitors
and the attorneys that represent them in court. With that in mind,
Klein's obscene consumer-guidelines proposal to an ABA audience
of fellow attorneys finally makes some sense. You see, they didn't
hiss and boo when Klein suggested that consumers be regulated in
their own interest. They smiled and applauded.

Joel Klein's meritless assault on Microsoft and his latest threat
to attack internet consumer cooperatives is further evidence that
antitrust is wildly out of control. This was not supposed to happen.
Back in the 1990's, antitrust reformers gave assurances that antitrust
policy had been "fixed" and that truly stupid cases would
never happen again. But it is the reform movement itself that is
"stupid" and terribly naive, as events have clearly revealed.
If the core problem is political power and special interest, then
the only practical solution to antitrust regulation is to drive
a stake through its heart and repeal the entire system, root and
branch. Are you listening, Governor Bush?

July
24, 2000

D.
T. Armentano is author of Antitrust:
The Case for Repeal (Mises Institute, 1999) and Antitrust
and Monopoly (Independent Institute, 1990).