The Best of Mark Thornton

Previously by Mark Thornton: The Lincoln Movie

Public opinion now favors the outright legalization of marijuana with nearly three-out-of-four adults in favor of legalizing medical marijuana. These numbers should continue to grow, because the polls exhibit a type of u201Cgeneration effect,u201D in that people are not changing their minds as they grow older. Some prominent and diverse figures, such as Joycelyn Elders (Bill Clinton’s Surgeon General) and the Reverend Pat Robertson now openly support the legalization of marijuana.

Ideally, libertarians want to end the war on all drugs, fully and immediately, but in reality that will only happen after necessary initial steps are taken. Colorado and Washington have already taken some steps by legalizing marijuana. Other states will surely follow.

Marijuana, of course, is still illegal everywhere under Federal law. Will the Feds do something about Colorado and Washington? You bet they will. They have already announced their intentions to target large-scale growers and distributors. They claim they will not go after consumers, if only due to a lack of resources. As President Obama said, u201CWe've got bigger fish to fry.u201D

However, don't be too sure that your president is telling you the truth. Candidate Obama said that medical marijuana was a state issue. However, under President Obama, raids committed on medical marijuana dispensaries have occurred at four times the rate as under President Bush. The government has also threatened landlords and banks that deal with medical marijuana dispensaries.

Nullification

The people of Colorado and Washington have effectively nullified US drug laws in their states, with respect to marijuana. Nullification occurs when a state, by legislation or referendum, invalidates a Federal law that it deems unconstitutional or otherwise harmful. Colorado and Washington have sent a powerful message that echoes far beyond the illegal drug market. For a complete treatment of the theory, history, and vital importance of this subject I recommend Thomas E. Woods's book, Nullification: How to Resist Federal Tyranny in the 21st Century.

Moreover, the people of Colorado and Washington are also effectively nullifying an international treaty on drug prohibition. Begun over a century ago, the United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances seeks to enforce and monitor the prohibition of illegal drugs.

In effect, the voters of Colorado and Washington have placed themselves and their states on equal legal footing with both national and international governments. This is important, because, if thanks to nullification, governments have to obtain acceptance, or at least acquiescence from subsidiary governments, rather than just imposing their dictates on them, they are more likely to act in a less threatening and harmful manner.

This is why the Federal government is faced with a difficult choice. It can leave Coloradoans and Washingtonians alone and hope the nullification movement does not spread, or it can try to impose its will by marshalling the police resources necessary to start busting growers, retailers, and even consumers.

The two states are currently facing difficulties with constructing a state-regulated system for marijuana production, distribution, and sales, as well as establishing guidelines for the medical and industrial marijuana industries. This is not surprising, because by nature, governments at all levels do a poor job of organizing anything, especially if it is something new or different.

Part of the states' difficulty is attributable to the Federal government's unwillingness to show its hand. State Representative Matt Shea said that u201CThe constant contradictions coming out of this (Obama) administration lead to a massive amount of uncertainties.u201D All this regulatory uncertainty is clearly bad for the development of legalized marijuana markets.

Sword of the State

Drug prohibition is the u201Csword of the state.u201D The state must be willing to use force against its citizens and it must occasionally demonstrate this willingness by harming, arresting, imprisoning, and even killing its citizens. Prohibition is the perfect instrument because it is typically used against distrusted minorities and poor people. Such groups have little political clout and are naturally lured into participating in illegal markets by the large amounts of money involved.

The war on drugs is literally a street war. Smugglers, drug dealers, and street gangs – who make their money selling drugs – are armed to the teeth with high-powered weapons. The police counter with machine guns, bullet-proof vests and helmets, and even tanks. The collateral damage to innocent people has been enormous.

Peter Andreas argues in Smuggler Nation: How Illicit Trade Made America (2013) that the regulation and policing of illegal markets has been a primary driving force in the creation and growth of the central state apparatus since colonial times: “So even though warfare and welfare are typically viewed as the main drivers of big government, Smuggler Nation highlights another motor: increased government size, presence, and coercive powers via the policing of smuggling” (p. 7).

The war on drugs has led to the militarization of the police, a vast increase in police power, and a prison system with over 2 million prisoners, a significant number of which are imprisoned due to prohibition and smuggling. The war has also led to a significant decrease of our constitutional rights and a substantial increase in what the police, investigators, and the court system can do to limit or infringe on our rights.

Jury Nullification

If the federal government does intervene in Colorado and Washington, then the people can also resort to jury nullification as a legal remedy. Jury nullification occurs when a jury, after hearing a court case, finds a defendant not guilty, even when they believe the defendant actually committed the crime. Jury nullification can occur either when the jury disagrees with the law in question or they believe that it should not be applied in a particular case.

Therefore, people can make a law invalid if juries routinely apply jury nullification to the prosecution of crimes based on that law. Basically, if juries know they have the right to nullify a law, and that if many juries consider the law unwanted, unjust, or unconstitutional, then the law becomes de facto repealed.

There is a great deal of debate over jury nullification. The State would like to see jury nullification prohibited, however, they have thus far been unsuccessful. Short this power, jurors are prevented from learning their rights, in most jurisdictions. The court does this by preventing defense attorneys from discussing nullification with the jury and by giving instructions to juries that only vaguely hint at the possibility of nullification. Judges often bully juries to make their decisions based on the established laws of the state, rather than on whether a true crime has been committed.

In contrast, some legal scholars note that nullification has long been a right of juries. This right is supported by common law and legal precedent. The problem has been that juries are not informed of this right. However, there have been developments that suggest that jury nullification is making a comeback in the battle against big government.

In 2012, New Hampshire passed a law that permits defense attorneys to inform juries of their rights to nullification. This is a good sign, although it is unclear how many juries have become u201Cinformedu201D as a result. Legal expert Timothy Lynch considers the law an improvement, but that it is too weak to be considered a full remedy for the rights of defendants and juries.

J.D. Tuccille has pointed out that there has been a sharp increase in the number of u201Chung juryu201D trials in the United States, and the evidence suggests the increase is the result of de facto jury nullification. If that is the case and people are nullifying laws in large numbers across the country – and are unaware that they have a right to do so – then that is a very good sign. It means that a large and growing number of Americans recognize that their government and certain laws are corrupt and immoral and they are willing to disregard jury instructions from a judge.

If the people of Colorado and Washington wisely use the power of jury nullification to protect otherwise law abiding consumers, growers, and distributors, the Federal government would be stripped of its power in that area. Moreover, such developments would spread the news about the power of jury nullification and we would once again reestablish a powerful antidote to big invasive government.

Mark Thornton [send him mail] is a senior resident fellow at the Ludwig von Mises Institute in Auburn, Alabama, and is the book review editor for the Quarterly Journal of Austrian Economics. He is the author of The Economics of Prohibition, coauthor of Tariffs, Blockades, and Inflation: The Economics of the Civil War, and the editor of The Quotable Mises, The Bastiat Collection, and An Essay on Economic Theory. He has written about government intervention in the movie industries. He has also reviewed Star Wars: The Phantom Menace, and previewed Star Wars: The Attack of the Clones and Star Wars Episode III: Revenge of the Sith. He has also reviewed Bourne Ultimatum.

The Best of Mark Thornton

Previously by Mark Thornton: Why I’m a Raging Optimist

Steven Spielberg's epic movie Lincoln is truly a masterpiece. As an historical drama it portrays Lincoln in the final months of his life and the final months of the Civil War. More than anything, it shows Lincoln attempting — against all odds — to pass the 13th Amendment to the Constitution abolishing slavery.

One striking feature of the movie is that many of the characters look very much like the people they portray. This is particularly true of Day-Lewis (Lincoln), Sally Field (Mary Todd Lincoln), Tommy Lee Jones (Thaddeus Stevens), David Strathairn (William Seward), and Jackie Earle Haley (Confederate Vice President Alexander Stephens).

The acting is tremendous. Daniel Day-Lewis is a genius. The costumes and cinematography are great. This movie is going to receive a bucket full of Oscar nominations and will probably win numerous awards. In terms of stars, awards, ticket sales etc. this movie may even approach the stardom of another movie set in the same historical timeframe, Gone with the Wind.

The movie is a little long at 2 hours and 25 minutes, but it does not seem drag. The ending, where Lincoln is assassinated and dies was unnecessary and at first seemed out of place with the rest of the movie. I was very surprised to learn that the budget of the movie with all the star actors was only $65 million as I was expecting it to cost more than $200 million. It has already earned more than $90 million in the first month as we head into the Holiday and Oscar seasons. The showing I went to was completely sold out, something that happens to me about once a decade.

Despite the great acting, scenery, resemblances, etc. it is most important that readers know that the movie itself is fiction. The story you see is made up. It never happened just as "Scarlett" never slapped "Ashley Wilkes" because Gone with the Wind was an historical fiction.

Historical dramas are almost by necessity fictional, otherwise they would be documentaries and even documentaries can contain fiction and bias. When you are watching, for example, western movies that portray Indians and the US Cavalry, you are not watching what actually happened. You are seeing a fictional, biased account that portrays what the entrepreneur-producer thinks you want to see.

Reality is different. In fact, reality is often very different. The truth is that with respect to sagas like the Indians vs. the US Cavalry, reality was probably closer to F Troop than John Wayne movies like Fort Apache or Horse Soldiers. Officers were often incompetent, soldiers were chronically lazy and corrupt and most Indian tribes were naturally cooperative as long as their property rights were respected.

With Lincoln, of course Abraham Lincoln was president during the American Civil War, Mary Todd Lincoln was the first lady, they had sons, etc. All the supporting cast did exist including all the politicians, cabinet members, generals, etc. The 13th amendment to the Constitution banning slavery did pass, Lincoln was assassinated, and the Union did defeat the Confederacy.

It is also true that Lincoln did work to promote the passage of the 13th amendment. However, as Thomas DiLorenzo has shown, Lincoln worked for the passage of the 13th amendment in 1861 That 13th amendment would have banned the federal government from interfering with states that permitted slavery if it has been ratified. Furthermore, he shows that there is no hard evidence that Lincoln worked for the passage of the 13th amendment in 1865 which prohibited slavery in all states.

As you can see, the real version of events would not have made for a good movie. In fact, the real Lincoln would not make for any kind of pleasant movie. He was a loser politician married to a crazy woman, who unexpectedly found success because the nation splintered into four political parties, handing him the election.

Lincoln was famous for telling people what they wanted to hear. He would often claim to support one position on an issue to one group of people and claim to support the opposite position to another group of people. He was the classic flip-flopper often supporting numerous positions on an issue over his political career. No good material for a movie here.

That is why they were forced to rely on Doris Kearns-Goodwin's book Team of Rivals, and to even use that book selectively as the basis of the movie. Kearns-Goodwin is an admitted plagiarist who has stolen material from three books. I'm not going to buy one of her books to find out what "she wrote," but it would make sense that Spielberg would rely on her. She has made a career out of making the leading scoundrels of American history look very good.

In this case, they had to find not just fiction, but Harry Houdini style fiction. The suffering of the American people, North and South, during Lincoln's time in office was unimaginable. He brought war, death, destruction and suffering to America on a level never seen before or since. Only the freeing of the slaves could wash away his sins, so that is the message of the movie. I believe that they included the assassination and death scenes in order to drive home the "paying for sins" aspect. With their bloodlust, taste for deception, and desire for empire, the Neocons are going to love this movie.

If prefer the truth to fiction then you should order a copy of Thomas DiLorenzo's book The Real Lincoln: A New Look at Abraham Lincoln, His Agenda, and an Unnecessary War. The Lincoln movie is nothing like this book.

Mark Thornton [send him mail] is a senior resident fellow at the Ludwig von Mises Institute in Auburn, Alabama, and is the book review editor for the Quarterly Journal of Austrian Economics. He is the author of The Economics of Prohibition, coauthor of Tariffs, Blockades, and Inflation: The Economics of the Civil War, and the editor of The Quotable Mises, The Bastiat Collection, and An Essay on Economic Theory. He has written about government intervention in the movie industries. He has also reviewed Star Wars: The Phantom Menace, and previewed Star Wars: The Attack of the Clones and Star Wars Episode III: Revenge of the Sith. He has also reviewed Bourne Ultimatum.

The Best of Mark Thornton

Previously by Mark Thornton: Welcome to Needle Park

I have been working at the Ludwig von Mises Institute as a senior fellow for the last ten years. I answer economic questions from students, Mises Institute members, and the media. I also work in all the Institute education and scholarly programs and do research. It is probably the best job in the world.

We have teaching programs that benefit high-school students, homeschool students, college students, graduate students, instructors, and professors, as well as the general public. These programs are effective because they are well crafted, time tested, and the staff is incredibly efficient and frugal in terms of execution.

My job is to lecture and sometimes to serve as master of ceremonies, so each and every one of these events is a real nail-biter for me. They are all so important. However, they always seem to turn out fantastically. The key is that we have the best speakers talking about the most important issues of the day to people, mostly students, who see that learning Austrian economics is vitally important to them.

That was not always the case. When I came to Auburn University to go to graduate school in 1982, I was told that there were probably only eight to ten graduate students interested in Austrian economics in the entire world. One of my professors even told me that there was no longer an Austrian School, there were only a couple of Austrians teaching in universities that offered a PhD, and that the Austrian School was just a fact of history, with no future.

Things were pretty miserable that first year. I entertained thoughts of dropping out and getting a job. Then toward the end of my second semester Professor Roger Garrison invited me into his office. He told me that Lew Rockwell was moving the Ludwig von Mises Institute to Auburn University. He said that Lew was going to publish newsletters, journals, and books and that he was going to invite all the leading Austrian economists to come to Auburn to lecture.

I had never heard of Lew Rockwell or the Mises Institute before that point in time, but I realized right away that things would be better. Next Professor Garrison told me that I would probably receive funding for my studies at Auburn University from the Mises Institute. Given Garrison’s reputation for pulling people’s legs, I naturally started to get suspicious, but he assured me that it was all true.

After leaving his office I was a bit dumbfounded, but I soon realized that I might be as close as I ever would be to an event that might change history. Back then, learning anything about Austrian economics was incredibly difficult, but I was convinced that Austrian economics was the solution to our problems. Having grown up in the 1970s, the list of problems was long.

Nixon had taken us off the gold standard and imposed wage and price controls. Our economy was experiencing high unemployment and high inflation. There had been waiting lines for gasoline. The country was decaying, and we were told that the Soviet Union was the wave of the future. My last two years in college could best be described as an economic depression.

With all that bad experience and with the country at its lowest point, I suddenly found myself magically turned into a raging optimist by Lew Rockwell. I have always sided with the underdog, and this was the biggest underdog situation since David and Goliath. Lew, Mardi, and Pat were stationed in small quarters with nothing to assist them but an electric typewriter and two graduate students to stuff envelopes. It did not appear that the entire Keynesian-socialist state had much to worry about.

Indeed, it’s been nothing but a steep uphill battle. The distance yet to travel seems enormous. There have been difficult times and the state is bigger than ever. However, my optimism has never wavered and has indeed only increased. Austrian economics is a message that the establishment now has to deal with.

We are still the smallest school of economics, but we are the fastest growing. We are one of the oldest schools of economics, but the average age of Austrian economists continues to decrease. We still work on the fringe of the profession, but our work is having an ever-bigger impact in the real world. We have the growth, the youth, and the impact. Much of this success is the result of Lew Rockwell building an institutional foundation for Austrian economics to thrive.

Individual professors can do fine work, but putting together large instructional conferences is beyond their means. Lew has also made it possible to publish or to bring back into publication books that were too radical for other publication outlets. Generally put, the Mises Institute is the hub network through which the Austrian School grows in size and impact. More than 20 other Mises Institute–like organizations have been established in various countries, most of which are modeled after and inspired by Lew’s design.

As an economist, many people ask me where they should invest their money. My response is that if you care about the future, if you care about the free society, then the best place for your money is the Ludwig von Mises Institute. We have had 30 years of growth and increasing impact thanks to Lew, the ideas of Mises and Rothbard, and to you, the members of the Mises Institute.

Frankly, there are few people who could have anticipated this success. I remember talking to fellow graduate students in the 1980s at the Mises University conference. Someone wondered aloud, "How many more years do you think they will hold the Mises University before everyone who wants to has already attended one?" Well, it doesn’t look like we are stopping anytime soon. Last summer we were at full capacity, with four times as many people watching live on the Internet.

Having seen programs like Mises University and the Summer Fellows Program in person, I can tell you that they change people’s lives. Of course these programs instill knowledge, but more importantly attendees gain a better grasp of reality that only Austrian economics can provide. In addition, with the state fouling up everything it touches, creating chaos everywhere, attendees come away from our programs with a newfound optimism and new zeal to learn as much as they can.

As a donor, the Ludwig von Mises Institute has always been my biggest charity. I know it is easy to feel helpless against expanding evils of the state, but I can tell you that knowing that my money is going to the Mises Institute programs has always provided me with a great deal of satisfaction. We share the right ideas, and the history of man has shown that the power of ideas is all that really matters.

Help us take down Goliath. Be David. Donate today.

Mark Thornton [send him mail] is a senior resident fellow at the Ludwig von Mises Institute in Auburn, Alabama, and is the book review editor for the Quarterly Journal of Austrian Economics. He is the author of The Economics of Prohibition, coauthor of Tariffs, Blockades, and Inflation: The Economics of the Civil War, and the editor of The Quotable Mises, The Bastiat Collection, and An Essay on Economic Theory.

The Best of Mark Thornton

An MP3 audio file of this article, narrated by the author, is available for download.

The Panic in Needle Park was a 1971 movie starring Al Pacino, about a heroin addict couple whose life spins out of control. It was set in a New York City park frequented by heroin dealers and heroin addicts. The other well-known "needle park" operated in Zurich, Switzerland, during the 1990s, when authorities experimented with an open park for heroin dealing and consumption.

Military man and drug warrior Joseph Califano and former drug czar William Bennett recently teamed up to write a Wall Street Journal editorial entitled "Do We Really Want a ‘Needle Park’ on American Soil?" The editorial is an attack on the recent report by the Global Commission on Drug Policy, which declares that the US War on Drugs has failed and is ruining civilization around the globe. The commission consists of 19 prominent people with credentials equal to or better than Califano and Bennett’s. It calls for the substitution of legalization and harm-reduction policies for the hopeless war on drugs.

The Califano/Bennett editorial has more holes in it than a heroin addict’s forearm. First, the Pacino movie was about illegal drugs, not legalized drugs. The setting was the early years of Nixon’s war on drugs. Marijuana was getting harder to obtain and heroin and LSD were rising in prominence. The portrayal in the movie is what advocates of legalization, not prohibition, would expect.

In addition, the economy of the time was turning from boom to bust. The movie debuted six weeks after Nixon closed the gold window. Governor Nelson Rockefeller would soon get to work on the infamous Rockefeller drug laws that Murray Rothbard called "the epitome of the belief in treating a social or medical problem with jail and the billy club." These draconian laws required long-term prison sentences for small-time dealers and even drug consumers. They would go down in history as a fiasco. Can’t the drug warriors ever learn?

Conditions at Zurich’s needle park also fail to support the Califano/Bennett opinion. True, the park was a haven for heroin addicts, but that was how the city designed it: a tiny island of legalization without controls or medical and social infrastructure. Naturally, addicts from all over the city, the country, and even other nations gravitated to the park. If I lived in the neighborhood I would have complained too.

However, instead of going the mistaken route of the Rockefeller laws, the Swiss learned from their mistakes. They set up drug consumption rooms that provided a "clean and safe" place for addicts to inject heroin under medical supervision instead of in public view. They also established a needle-exchange program whereby addicts received clean new syringes when they returned their used ones. It should not be surprising that the Swiss have one of the lowest rates of HIV infection among those people who inject drugs – 1/8th the US rate and 1/20th that of Thailand, which maintains a fully draconian antidrug policy.[1]

Califano and Bennett argue that legalization will only increase the use of legalized drugs. That is a fair opinion, but they then leverage this argument to conjure up stories of a massive increase in crime. They say that violent crime will increase because of drug use, and that property crime will increase because more addicts will need more money to feed their habits. This, of course, is ridiculous. Most violent crime is committed by people on alcohol or drugs like crystal meth, which was only recently introduced because of drug prohibition. With legalization, drugs would be affordable even for those with a minimum-wage job. The idea that property crime would increase because of legalization is far-fetched indeed.

Califano and Bennett argue that legalization would increase healthcare costs to taxpayers. They argue that 30 percent of taxpayers’ healthcare costs are attributable to drug abuse, that drug abusers on Medicaid are three times as expensive for taxpayers, and that for every dollar received in alcohol and tobacco taxes, we incur $9 of taxpayer expense. Of course, one can expect that such freeloader programs would experience such results. Free ambulances, free emergency rooms, free doctors, free hospitals, free medication – what would you expect? The secret truth is that government healthcare actually encourages drug abuse.

Furthermore, Califano and Bennett’s article reminds me of the study that found smoking kills 450,000 Americans each year. It gives you the impression that every year the equivalent of the entire population of a city the size of Atlanta just drops dead from smoking-related illness. But in reality, the study was only a "simulation." The simulation was designed to calculate the number of smokers who die each year. Yes, smokers do die younger on average than nonsmokers, but they still live well into their 60s, on average.[2]

Let us take their three claims in order. First, what about that 30 percent of Medicaid dollars going to drug abuse? Well, the bulk of this expense is "attributable" to alcohol and tobacco, rather than to illegal drugs. For a fuller description, let’s draw from Califano’s own webpage, where he states,

Some 30 percent of Medicaid health care dollars are spent to treat the injuries from violence and accidents and the 70 plus diseases caused or aggravated by substance abuse and addiction.

So first he folds in the problems of tobacco and alcohol (which is the biggest cause of drug-related violence and accidents), and then he adds in “the 70 plus diseases caused or aggravated by substance abuse and addiction.” Furthermore, the poor pot smoker who gets hit by a car is part of this “30 percent of Medicaid health care dollars.” I am willing to admit, freely, that illegal drug use does cost the taxpayer a great deal of money on freeloader programs, but this 30 percent figure undermines the credibility of Califano and Bennett.

Next, what about Medicaid spending on drug abusers being three times higher than on non-drug users? Well, again they mix both legal and illegal drugs. They ignore the fact that marijuana use in and of itself does not contribute to higher healthcare costs. In fact, it is emerging as a very cost-effective way of treating various ailments, and it is now recognized as a likely treatment or even cure for certain types of cancer. Second, they ignore the fact that illegal drugs result in relatively more catastrophic incidents, like death from drug overdoses, whereas tobacco and alcohol result in relatively more chronic lingering ailments, like heart disease and lung cancer, which entail large expenses over long periods of time.

Now we go back to Mr. Califano’s webpage for some clarification. It turns out that Medicaid expenditure for drug abuse is not simply three to one here, but between two and three to one.

Medicaid patients with drug and alcohol problems cost $5,000 to $10,000 a year more in healthcare costs than those without such problems [i.e., $5,000].

So, not only do Califano and Bennett blame all health consequences on one aspect of behavior, i.e., drug use (which is scientifically illegitimate), but they also conflate legal and illegal drugs, and they take the top estimates of additional costs and then misreport those inflated numbers.

Finally, there is their claim that every dollar in alcohol and tobacco taxes collected results in nine dollars in government spending on federal healthcare, criminal-justice and social-service costs. I could not find a reference to this fact on the Internet, except in their work.

Admittedly, I have seen a study arguing that smoking results in social costs that are several times the amount of excise-tax revenue collected.[3] However, this study forgot to include the benefits of smoking in its calculations and wrongly considered private costs to the smoker as social costs. When these are taken into account, smoking generates more tax revenue than social costs.[4]

Another study finds that smoking causes absenteeism at work. However, this study just looks at whether an absentee worker was a smoker or nonsmoker. When you include other variables like weight, gender, age, and marital status, the statistical significance disappears.[5]

When you read about research with alarming statistical findings, you are probably reading about biased research funded by the nanny state.

No one wants a needle park in his or her neighborhood, but that is exactly what prohibition brings. Prohibition also brings increased violence and property crime. Legalization would bring commercially produced products that are reasonably priced. Consumers would be able to afford the products and could consume them in the privacy of their own homes. Violence and property crime would decline. Sellers would be required to provide sufficient safety information and would be liable if they sold an inherently deadly product.

I have no doubt that if Califano and Bennett were in charge, they would invoke Rockefeller-style laws or even worse (Bennett once suggested that beheading drug dealers was "morally plausible"). The reality is that limited legalization has been shown to work, and that full legalization is the policy we should be working toward. The recent legislation sponsored by Representatives Barney Frank and Ron Paul is one step in the right direction.

Notes

[1] “Report of the Global Committee on Drug Policy,” June 2011, p. 6.

[2] Robert B. Ekelund Jr. and Richard W. Ault. “The Political Element in Science and Technology: SAMMEC II and the Antismoking Lobby,” Research Conducted for Savarese and Associates (August 1991), pp. 37

[3] See, for example, “The Costs and Benefits of Smoking Restrictions: An Assessment of The Smoke-Free Environment Act of 1993,” Executive Summary.

[4] See, for example, Willard G. Manning, et al., The Costs of Poor Health Habits, Cambridge, MA.; Harvard University Press, 1991; and Pierre Lemieux, “Social Costs of Tabacco: All Smoke, No Fire,” The National Post, January 20, 1999, p. C7.

[5] R. Ault et al., Applied Economics, 1991, vol. 23, issue 4B, pp. 743–54.

Reprinted from Mises.org.

Mark Thornton [send him mail] is a senior resident fellow at the Ludwig von Mises Institute in Auburn, Alabama, and is the book review editor for the Quarterly Journal of Austrian Economics. He is the author of The Economics of Prohibition, coauthor of Tariffs, Blockades, and Inflation: The Economics of the Civil War, and the editor of The Quotable Mises, The Bastiat Collection, and An Essay on Economic Theory.

The Best of Mark Thornton

An MP3 audio file of this article, narrated by the author, is available for download.

Currently, the big show in Washington, DC, centers around raising the debt ceiling. Congress began setting this ceiling in 1917 so that the Treasury could independently issue debt. The debt ceiling is like the limit on your credit card, except the federal government sets the limit on itself. When President Nixon took us off the gold standard in 1971, the national debt was $400 billion. The increase in the national debt last year alone was four times the entire debt in 1971.

Both Democrats and Republicans tell us that not raising the debt ceiling would have a negative – even catastrophic – effect on the American and world economies. They are in agreement on this. The only matter of debate is what concessions are necessary in order to establish a bipartisan majority to pass a bill raising the ceiling. Democrats seem to want larger cuts and tax increases, while Republicans want smaller cuts with no tax increases. The multitrillion-dollar cuts that they are discussing only occur over a ten-year time frame and do not balance the budget, so no one except Ron Paul is really discussing the kinds of budget cutting that would actually help the economy.

What we really need to do is to lower the debt ceiling. If Congress passed legislation that systematically reduced the debt ceiling over time, the economy could be rebuilt on a solid foundation. Entrepreneurs in the productive sectors would realize that an ever-increasing proportion of resources (land, labor, and capital) would be at their disposal, while companies that capitalized on the federal budget would have an ever-declining share of such resources.

Congress would have to cut the pay and benefits of its employees (FDR cut them by 25 percent in the depths of the Great Depression) as well as the number of such employees. Real wage rates would decline, allowing entrepreneurs to hire more employees to produce consumer-valued goods.

Congress would have to cut back on its far-flung regulatory operations, which are in fact one of the biggest drags on the economy due to the burden and uncertainty that Obama and Congress have created in terms of healthcare, financial-market, and environmental regulations. A recent study by the Phoenix Center found that even a small reduction of 5 percent, or $2.8 billion, in the federal regulatory budget would result in about $75 billion in increased private-sector GDP each year and the addition of 1.2 million jobs annually. Eliminating the job of even a single regulator grows the American economy by $6.2 million and creates nearly 100 private-sector jobs annually.

Under a reduced debt ceiling, the federal government would also have to sell off some of its resources. It has tens of thousands of buildings that are no longer in use and tens of thousands of buildings that are significantly underused – about 75,000 buildings in total. It also controls over 400 million acres of land, or over 20 percent of all land outside of Alaska, which is almost wholly owned by the government. There is also the Strategic Petroleum Reserve and many other assets that could be sold off to cover short-term budget shortfalls.

Of course, reducing the debt ceiling would force the government to stop borrowing so much money from credit markets. This would leave significantly more credit available for the private sector. The shortage of capital is one of the most often cited reasons for the failure of the economy to recover.

Lowering the debt ceiling would force federal-government budget cutting on a large scale, and this would free up resources (labor, land, and capital) and force a cutback in the federal government’s regulatory apparatus. This would put Americans back to work producing consumer-valued goods.

Passing an increase in the debt ceiling merely perpetuates the myth that there is any ceiling or control or limit on the government’s ability to waste resources in the short run and its willingness to pass the burden of this squander onto future generations.

Reprinted from Mises.org.

Mark Thornton [send him mail] is an economist who lives in Auburn, Alabama. He is author of The Economics of Prohibition, is a senior fellow with the Ludwig von Mises Institute, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is co-author of Tariffs, Blockades, and Inflation: The Economics of the Civil War and is the editor of The Quotable Mises.

The Best of Mark Thornton

An MP3 audio file of this article, narrated by the author, is available for download.

Suddenly the world is abuzz with talk about legalizing marijuana and other drugs. Political candidates, politicians, former presidents, interest groups, and even the Global Commission on Drug Policy are all calling for drug-policy reform. Given that we are in a worldwide economic and fiscal crisis, why is everyone interested in drug policy? Have we all suddenly regained our senses and realized that prohibition is irrational?

No, the more important reason for the interest in this issue is economic sense. Drug prohibition is a burden on taxpayers. It is a burden on government budgets. It is a burden on the criminal-justice system. It is a burden on the healthcare system. The economic crisis has intensified the pain from all these burdens. Legalization reduces or eliminates all of these burdens. It should be no surprise that alcohol prohibition was repealed at the deepest depths of the Great Depression.

Two Republican presidential candidates, former governor Gary Johnson and Congressman Ron Paul, support legalization. Ron Paul and Barney Frank have introduced legislation that would allow the states to legalize marijuana without federal interference. Former president Jimmy Carter recently published an editorial in the New York Times calling for an end of the global war on drugs, a position he has held since he was president.

The organization LEAP, Law Enforcement Against Prohibition, has recently released a report entitled “Ending the Drug War: A Dream Deferred” on the 40th anniversary of the War on Drugs. They are critical of the war and point out that President Obama is actually making things worse. Finally, and maybe most importantly, the Global Commission on Drug Policy has issued a report that declares the war on drugs a failure and provides recommendations for reform.

The economic crisis is speeding up the realization that the war on drugs has failed and cannot be won. Taxpayers have long been slow to recognize the economic burden of drug prohibition. They have been told for decades that we only need to spend a little more and remove a few more constitutional protections of our rights to win the war against drugs. With decades of broken promises, busted budgets with trillion-dollar holes, and a teetering economy in crisis, more and more people are saying no to the war on drugs.

Drug prohibition is the single biggest burden on the criminal-justice budget. It is also a large burden for more than a dozen budgets within the federal government, and it is a growing burden on state and local budgets. The incarceration of hundreds of thousands of nonviolent drug offenders often leads to the breakup of families and the loss of breadwinners, placing additional burdens on social services.

The criminal-justice system is overwhelmed, and the prisons are filled far beyond capacity. As a result, violent criminals are receiving early release from their sentences. Other measures of crime and violence are also disturbing. Street gangs use the illegal-drug business to finance and expand their activities. It has been estimated that the United States now has nearly 800,000 gang members. Organized crime continues to grow in numbers and sophistication – as well as the level of violence. The Mexican Army has replaced local police along the border in order to restore order and reduce the more than 10,000 prohibition-related murders last year. From Afghanistan to Zimbabwe, the war on drugs is undermining civilization.

People are also realizing that fighting the war on drugs (i.e., prohibition) only makes social problems worse. The number of drug-related emergency-room visits in the United States now exceeds 2 million per year for illegal drugs and nonmedical use of prescription drugs. The progression of drug use from marijuana to cocaine, heroin, and crystal meth is clearly negative for health; and that progression is increasingly and correctly seen to be the result of prohibition, not addiction.

As I demonstrated, the failure of California’s Proposition 19 legalizing marijuana should not be seen as a discouraging sign. Rather, it should be seen as a sign of things to come. All over the world, drug prohibition and its repeal or reform is now a matter of debate. In many areas of the world, the drug war has been rolled back.

Portugal is a good case in point. They were not winning the war; they were losing it. They were also losing the more general war for prosperity. In desperation, they de facto legalized all drugs. The result was not rampant, widespread drug abuse. Drug use and addiction actually declined, as did violence and disease.

Five years later, the number of deaths from street drug overdoses dropped from around 400 to 290 annually, and the number of new HIV cases caused by using dirty needles to inject heroin, cocaine and other illegal substances plummeted from nearly 1,400 in 2000 to about 400 in 2006, according to a report released recently by the Cato Institute, a Washington, DC, libertarian think tank.

Most Americans have been told that Franklin Delano Roosevelt was a great president and one of the most popular presidents of all time. However, most people – even most historians – do not know that the reason for his popularity was the repeal of Prohibition. He won the Democratic nomination for president at the 1932 convention by switching from being a Dry to a Wet (that is, by siding with repeal). The repeal of Prohibition was the most popular plank in the Democratic Party platform, and it was FDR’s number-one issue and campaign promise. He made it his number-one priority when he was in office. (He also cut federal worker pay by 25 percent).

“From Afghanistan to Zimbabwe, the war on drugs is undermining civilization.”

The results from repeal were both immediate and amazing. Taverns, restaurants, breweries, distilleries, and wineries reopened for business. Jobs were suddenly and noticeably available for the first time in years. The unemployment rate plunged from its historic high level of 25 percent. Crime and corruption sank, with the murder rate falling to its pre-Prohibition level in a manner of a few years. For politicians and government employees, repeal meant a new source of tax revenue and an end to budget cuts. Tax revolts, which had sprung up all across the country in opposition to government, sadly faded away. The people rejoiced that "Happy Days Are Here Again."

A similar opportunity lies in our future as the economic crisis continues to widen and worsen. We need to continue to learn and teach the real lessons of prohibition, some of which can be found in this free book. To unmask the true nature of government control and to demonstrate the superiority of individualism within a classical-liberal environment, we must make ending the war on drugs a priority.

Reprinted from Mises.org.

Mark Thornton [send him mail] is an economist who lives in Auburn, Alabama. He is author of The Economics of Prohibition, is a senior fellow with the Ludwig von Mises Institute, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is co-author of Tariffs, Blockades, and Inflation: The Economics of the Civil War and is the editor of The Quotable Mises.

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An MP3 audio file of this article, narrated by the author, is available for download.

Got Milk?

Most Americans think they drink milk on a regular basis. In fact, virtually all these people are consuming pasteurized milk, not milk. Milk in its natural state – raw milk – is consumed by very few Americans, because it is illegal in many states and thoroughly discouraged by federal health organizations, regulators, and the Big Dairy lobby.

Raw milk is prohibited in Canada and Australia, although raw milk and raw-milk products are legal almost everywhere else. In fact, in countries with the best cuisines, such as France, raw milk and raw-milk products are considered the high-quality choice.

No wonder. Raw milk is fresher, better tasting, and more nutritious. It is fresher because only refrigeration is used to prevent spoilage, and you immediately know when it is going bad because of the smell and taste. It has to be produced locally or quickly shipped and consumed.

Raw milk is more nutritious than pasteurized milk. Raw milk has living white blood cells, mammary-gland cells, various bacteria (i.e., probiotics), and several active enzymes, which are all destroyed in pasteurization.

There are some European studies that indicate – although nothing is yet definitive – that raw milk might be useful in reducing allergies, asthma, and eczema. Raw milk is also more likely to come from "pastured" cows, which only eat their natural diet: grass. Therefore, the cows are less likely to have been regularly treated with antibiotics and growth hormones.

While we are on the topic of nutrition, it should be pointed out that even though the protein component of milk is one of the best available, the most nutritious part of milk might be the fat component. Butterfat is naturally beneficial. It also contains the fat-soluble vitamins A, D, E, and K, in which many Americans are deficient. So stop buying skim and low-fat milk.

Raw milk is much better tasting, because it does not have the "dead" taste of pasteurized and ultrapasteurized milk. Some people who don’t like pasteurized milk like the taste of raw milk, and many people who are lactose intolerant can tolerate raw milk. I think raw milk even smells better. If you have never consumed raw milk, get some and a few Oreo cookies to go with it, because you are in for a treat – that is, only if you don’t live in North America and Australia, where raw milk is often illegal and considered dangerous.

Here, pasteurization is imposed by Big Dairy and enforced by the state. Now that the raw-milk movement has started taking off, the state is cracking down on the small dairy producers who are trying to earn a living by bringing the product to market. Law enforcement has even gone so far as destroying milk, much like the keg and still busters of the Prohibition era.

Getting raw milk is difficult. In my case, I had to join a cooperative that arranged for the milk to be shipped in from a state where raw-milk production is still legal. We all meet at a certain date and time at a location off the beaten path to receive and pay for our orders. Other dairies only sell their raw milk and raw-milk products for "nonhuman" consumption. Come on! Chocolate raw milk for nonhuman consumption?

The Food and Drug Administration claims hysterically that raw milk is unsafe to consume, and they make some statements that are clearly untrue. The Center for Disease Control also sees this as an issue that is "black and white." They say raw milk is bad for you, citing four "outbreaks" since 2000. It should be pointed out that pasteurization does not kill off all the illness-causing contaminates, and this has led to a much-larger number of such outbreaks.

With raw milk, the number of people becoming ill is over 100 per year, and 2 people are said to have died after consuming raw milk over the last decade. So there are real risks, just as with any real food, such as spinach, cantaloupe, and hamburger. At-risk populations, such as the sick and elderly, should probably stay away from raw milk. All the raw-milk dealers I know warn customers of the risks of their products, while pasteurized-milk dealers do not.

I’m sure that some of these reported cases of raw-milk illness should be attributed to the fact that raw milk is illegal. Notice that my raw milk has to be shipped halfway across the country! What happens if the refrigeration unit on the delivery truck fails and goes unnoticed for several hours during transit?

Legalizing raw milk would reduce the risks caused by prohibition. It would also further reduce risks over time by bringing competitive forces to bear on them. The increased numbers of raw-milk producers could result in new discoveries for preventing cows from being exposed to disease. As the market expands, other companies might find it profitable to sell testing equipment so that cows or their milk can be tested before going to market. Over time this could become a very large market associated with very little health risk and substantial health benefits.

The most general point is that government authorities should not be making these decisions for us. They should not prohibit something that has been going on for more than 8,000 years of human civilization. There is no public interest here that might justify government intervention at all.

There is, however, a private-interest elephant in our glass of milk – Big Dairy. Raw milk is a competitor, however small, to the big corporate and co-op companies that dominate the milk industry. Big Dairy is a powerful special-interest group that is well funded and well organized to maintain its government subsidies.

In the old days, your milk came from cows that you might even see on your way to work. The dairy farmer would have a relatively small number of cows. The farmer would either milk the cows and process the milk himself or sell it to a small co-op, which would process it and deliver to your door the same morning.

Today, dairy farming is organized on a greater scale. The cows are milked and the milk is sent much longer distances to larger processing facilities. The milk is then distributed, not to your door but to supermarkets and grocery stores. The modern approach is a "more roundabout" production process, in the words of Ludwig von Mises’s teacher Eugen von Böhm-Bawerk. The process is more roundabout and much more productive and efficient. More milk is produced using fewer resources per gallon. Therefore, the modern process produces cheaper milk. However, it takes more time and therefore requires pasteurization to increase the shelf life.

Raw milk would not work like that; it could not work like that. You basically have a limited time between milking and drinking. Raw milk is much better than processed milk, but there is a catch: it is about twice the price and you have to drink it within a few days.

Therefore, we can let the market decide the issue. You can buy expensive raw milk or inexpensive pasteurized milk. The problem is that Big Dairy does not want you to have this choice. They push legislators, regulators, health officials, and law enforcement to prevent people from having the choice.

When Big Dairy answers the question – Got Milk? – the answer is always no.

Reprinted from Mises.org.

Mark Thornton [send him mail] is an economist who lives in Auburn, Alabama. He is author of The Economics of Prohibition, is a senior fellow with the Ludwig von Mises Institute, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is co-author of Tariffs, Blockades, and Inflation: The Economics of the Civil War and is the editor of The Quotable Mises.

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In the forward to the book, the former Chief of the Seattle Police Department makes the important observation that police officers experience criminals and victims of alcohol-related crime and violence on a daily basis, while such marijuana-related violence is almost unheard of.

The "marijuana is safer" message of the book is based on the fact that marijuana consumption is safer and healthier to consume compared to alcohol. It also results in far less violence and crime than alcohol and produces fewer costs on society. They make their case by presenting results from government studies and other scientific research.

In this light, our draconian marijuana laws reduce marijuana and increase alcohol consumption, as basic economics would suggest. Therefore, if we reformed our marijuana laws, consumption patterns would move away from alcohol and we would be safer, healthier, and better off in many respects.

The book does explain all the other reasons why we should legalize marijuana, but they believe their "marijuana is safer" argument will be the most effective political argument. Their strategy is presented in the final section of the book.

As an important prelude to their analysis, the authors show that the demand for intoxicating substances is widespread around the globe. Alcohol and marijuana have been the dominant products dating back to the beginning of human society, about 10,000 years ago. They also point out the various industrial and medical uses of marijuana and that our founding fathers grew and used it for a wide variety of purposes.

A basic introduction to marijuana is provided which is especially important for non-consumers interested in policy reform. What is marijuana? How does it get people "high"? What are its effects? How is it consumed? Why do people smoke it?

The core of their analysis is a comparison of the health effects of marijuana and alcohol. While the consumption of one or two drinks per day has long been associated with better health (even compared to non-drinkers), heavy long-term drinking is clearly bad for your health. It is associated with a wide variety of health problems and is the third leading cause of death in the US. Drinking too much alcohol in a short period of time can even cause sudden death.

Based on a large number of government and scientific studies marijuana is safer to consume than alcohol. In fact, there are very few negative health effects from marijuana. In addition, there are health benefits to marijuana, such as treating glaucoma. It has been shown to both treat and prevent certain diseases and can even kill certain types of cancer cells.

In addition, marijuana helps cancer patients maintain their appetites; it reduces pain and stress, and improves sleeping. These attributes help the body to heal, or at least maintain itself. This is the primary basis for the medical marijuana movement, which seeks to use marijuana to reduce the suffering from incurable diseases and to supplement the treatment of other diseases and aliments.

It is worth restating that even if you did not consume marijuana or alcohol, and even if you were perfectly healthy, you could still be safer with the legalization of marijuana in terms of crime and violence. Alcohol consumption tends to induce violence while marijuana consumption tends to suppress it.

So why was marijuana prohibition instituted in 1937? While other factors clearly played a role, the authors focus on propaganda against marijuana. Interestingly, the propagandists falsely attributed the effects of alcohol — particularly violence — to marijuana consumption. Apparently that was enough to convince state and eventually federal lawmakers.

The authors successfully address the myths of marijuana, but I do have one quibble with the case of higher potency marijuana. They argue that the potency of marijuana is only "slightly higher" than the marijuana of twenty or thirty years ago. However, even their evidence suggests a 66% increase. Data from my book The Economics of Prohibition indicates that the increase over the last thirty-five years could be as high as 1000%.

Even so, I would still maintain that highly potent marijuana is safer than alcohol. We know that the increase in potency is due mainly to marijuana prohibition and that marijuana consumers tend to prefer lower potency marijuana, if it was available. They also consume smaller quantities if it is highly potent. So it is not a major problem in a free market.

This aside, I do believe the authors have successfully made the case that reforming marijuana laws would increase the consumption of marijuana at the expense of alcohol consumption. This would reduce the overall health and social costs from recreational drugs. I also believe that they have developed a potentially successful political strategy.

Support for marijuana prohibition is based largely on ignorance and fear. If you can show the electorate the facts and demonstrate the benefits of reform, then prohibition’s days are numbered. The time is ripe for reform given that alcohol prohibition was undone during America’s First Great Depression.

Some LRC readers will no doubt object to the authors’ tax and regulate alternative to prohibition. Here they follow the alcohol "market" as a model of reform. This approach is unnecessary and potentially harmful to the long-term interests of reform. It socializes the costs of alcohol where a truly free market would focus the costs on those who abuse or misuse alcohol. However, I congratulate the authors on producing a fine book and look forward to debating the finer points of reform as we approach the end of marijuana prohibition.

Mark Thornton [send him mail] is an economist who lives in Auburn, Alabama. He is author of The Economics of Prohibition, is a senior fellow with the Ludwig von Mises Institute, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is co-author of Tariffs, Blockades, and Inflation: The Economics of the Civil War and is the editor of The Quotable Mises.

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If reports of an $8 million buyout are true, it would lend credence to the idea that the show was faltering economically, not journalistically, and that it was not simply that Dobbs wanted to move on to other opportunities.

The declining importance of illegal immigration led to a decline in Dobbs’s audience and thus his importance to CNN. Bill O’Reilly of Fox News (a potential employer of Dobbs) interviewed Dobbs and asked the following question: “On CNN, you did quite well in the ratings when the immigration thing was in the forefront. And CNN actually moved you up from a — what they call the early fringe to 7 o’clock, because your ratings were strong,” O’Reilly said. “Then your ratings leveled, as well as all the ratings for CNN, and began to go down. Just correct me if I’m wrong.” Dobbs did not correct O’Reilly, replying instead that it was his attacks on President Obama that had put him in the dog house at CNN.

In March of 2007 — near the peak of illegal immigrant hysteria — I pointed out that illegal immigration is not the most important problem in America and that reporters like Dobbs should pay more attention to the activities of the Federal Reserve and the Military-Industrial Complex. Migration is naturally balancing as long as government provides no incentives like free education and healthcare.

I also pointed out that the underlying cause of the influx of illegal immigrants (and the popularity of his show) was the housing bubble.

Immigrants, particularly illegal Mexican immigrants, have found good jobs in industries associated with the housing bubble. Large numbers of immigrants work at jobs in the construction, landscaping, and road construction industries. Employment in the construction industry alone is currently nearly two million jobs above trend (7.7 vs. 5.9 million). Of course many of the illegal immigrants are not even counted in such statistics, but just take a look at residential, landscaping, and road construction sites and you are likely to find many non-English speaking immigrants.

I then predicted that when the housing bubble bursts, the demand for labor from illegal immigrants would fall and the flows of new immigrants would slow and that many would even return to Mexico when they failed to find work.

Of course all of this will have to be undone because all bubbles eventually burst to one extent or another and all booms are eventually followed by “corrections” that drive whole economies, regions, and industries into economic slumps. A slump in construction will lead to unemployment and bankruptcies. In terms of immigrants we will likely see many return home, or turn up on government welfare rolls another legacy of the Greenspan Fed.

I took more email heat from that article than anything I have ever published. About half of the emails were from irate fans of Lou Dobbs (can you imagine a fan of Lou Dobbs who was not irate?) while the other half questioned my reasoning about illegal immigration and its possible connection to the housing bubble (many also questioned the existence of the bubble).

Since March of 2007 the clock has been ticking on Lou Dobbs and the importance of illegal immigration. I have continued to track this story and such things as the decline in Mexican remittances (money sent back to Mexico from Mexicans living in the US).

When the housing bubble started to unravel the first trend to emerge was the decline in the number of illegal immigrants coming into the US. According to a study by the National Statistics and Geography Institute there was a 42% drop in Mexican emigration in 2007, a trend that continues to this day. Of course you have to take such studies with a grain or two of salt, but you can confirm such trends just by looking out your window.

There has also been a noticeable decline in the amount of money being sent home to Mexico. When legal and illegal immigrants have a tougher time finding work, their take home pay falls and they have less money to send home. I have been tracking statistics on Mexican remittances which clearly showed that a change in trend was coming. Recently, the Mexican Central Bank announced that remittances had fallen for the first time on record.

As jobs disappeared, so did the immigrant workers and eventually such unemployed workers must consider the option of returning to Mexico even though they prefer living in the US. So far the number returning to Mexico has remained under half a million per year, but if current trends hold we could soon be looking at a net emigration of Mexicans from the US back to Mexico.

Of course there are good reasons for immigrants to want to avoid this solution. They like living in America. They love having the opportunity to work and make money. They want to send money back to their families and they realize that it costs more than $1000 to be smuggled back into the US if they leave. They also realize that no matter how desperate their situation, things are probably worse in Mexico. The plight of these families is highlighted by a new report that money is actually being sent from people in Mexico to their relatives living in the US. These are the people who currently represent the bottom rung of the economic ladder.

I would find it very difficult to be a multimillionaire making money by denigrating people who were so desperately poor. Lou Dobbs was dead wrong about the immigration issue. He thought it would kill the country. It can now be seen as a self-inflicted wound made worse by subsidies and the Fed’s housing bubble. Perhaps we are all better off and Lou can return to his earlier venture of traveling into outer space.

Mark Thornton [send him mail] is an economist who lives in Auburn, Alabama. He is author of The Economics of Prohibition, is a senior fellow with the Ludwig von Mises Institute, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is co-author of Tariffs, Blockades, and Inflation: The Economics of the Civil War and is the editor of The Quotable Mises.

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In the wake of the downfall of the Berlin Wall, the breakup of the Soviet Union, and the emergence of capitalism in China, I was asked to teach the comparative-economic-systems class at Auburn University for the summer term in 1989. My only exposure to the topic had been as an undergraduate student, where my teacher was a Cold War—era professor who concentrated almost exclusively on the Soviet Union. His implicit message was to fear the Soviet Union, which would soon come to smother the American dream.

My assignment came at the last minute, so there would be no reviewing of textbooks and preparations of lectures in advance. I spent the summer term preparing lectures on the fly and staying one chapter ahead of the students. Also, I had to choose a textbook somehow, even though I wasn’t familiar with my options, which meant I didn’t know what political punch line the author would deliver at the end. My unorthodox choice was the recently published A Theory of Socialism and Capitalism by Hans-Hermann Hoppe.

My first exposure to Hans was at a public lecture he delivered to the economics faculty at Auburn University. As I remember, his topic was the theory of public goods. His German accent was particularly thick at this time and he read his manuscript as only Hans can — with precision and authority.

Public-goods theory was, and largely still is, sacred ground for most economists, and at the time it had not been subjected to many Austrian criticisms. I remember being impressed by Hans’s detailed critique, but even more than that, the utter shock and surprise on the faces of the members of the economics departments. When the lecture was completed you could have heard a pin drop. The economics department was largely "free market" and "Austrian friendly," but questioning the validity of public-goods theory was apparently a sort of desecration of Holy Scripture. Afterwards, and for several days, I defended Hans and debated his position. I would win over concession after concession in these debates with my professors, but failed to win a single convert.

The book arrived in the bookstore in time for my class, but it looked nothing like a textbook. In fact, the production values of the book were the worst I had ever seen. Neither of these factors mattered to me, but I do note them here to indicate that the deck was stacked against me the first day I walked into class. Plus the class was completely full of students who had little or no interest in comparative economic systems; they simply needed an elective of some type.

To my great surprise, the class went much better than I had hoped and was one of the most gratifying teaching experiences in my career. Free-market-oriented economics students seemed to revel in the complete and utter devastation of socialism that would follow, but even outright socialist students and more unbiased minds appeared to have a certain respect for the material presented in class. Much of the credit for this success I attribute to A Theory of Socialism and Capitalism, because more than three-quarters of class time relied specifically on the book.

The success of the book in reaching the students rests first on that fact that it is a theoretical, rather than empirical, treatise that provides a clear, unambiguous analytical framework to understand any particular economy that a student might face. Second, the book analyzes and debunks, or rather reconstructs, the two major "exceptions" of mainstream economics — monopoly and public-goods theory — and therefore presents economic theory as a unified whole. Third, the moral and ethical aspects of economics and economic policy are introduced in an integrated and scientific fashion, and fourth, the book provides an understanding of economic and social change. Although this latter point may not have been a primary aim of the author, it sure was handy to answer questions regarding why socialism was imploding — especially given that most other professors on campus were teaching that socialism and redistributionism of all kinds were the panacea for social ills.

In addition to all these positive traits of the book, long-time readers of Professor Hoppe will clearly recognize the consistency of his writings over time. Beginning in the Garden of Eden (so as to highlight the role of scarcity), he proceeds deductively to establish the concepts of property, contract, and aggression, and then to establish the meaning of pure capitalism as a social system based on property and the absence of coercion, while pure socialism is a system based on systemic violence and the absence of property rights.

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Mark Thornton [send him mail] is an economist who lives in Auburn, Alabama. He is author of The Economics of Prohibition, is a senior fellow with the Ludwig von Mises Institute, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is co-author of Tariffs, Blockades, and Inflation: The Economics of the Civil War and is the editor of The Quotable Mises.

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DIGG THIS

Sarah Palin’s statement about enjoying her tour of the patriotic parts of America, Representative Bachmann’s demand for an investigation of un-American activities, and the Bush Administration’s stand that you are either with us or you are with the terrorists naturally remind us all of the McCarthy investigations and the Salem witch hunts. They are all a cause for concern.

Properly defined, however, there is some scope for defending Palin’s political gaffe. Naturally everyone from evangelicals to environmentalists sees themselves as being "pro-American" in some sense. In that we are all trying to do, or hoping for what is best for America whether that is cleaning up the moral sewers or the actual sewers.

So how should "American" be defined?

Well there are a bunch of people who support Barack Obama. These people he affectionately calls "folks." The people that support John McCain are referred to as "friends" by the Republican candidate. The truth is that if the term has any real meaning then neither of these groups has a monopoly on the term American. In fact, if we could generalize, then neither would be called real Americans. Real Americans are neither "friends," nor just plain "folks."

Folks are usually neo-liberals and democratic socialists. They either have no clue about the role of the Constitution, private property, sound money, and free markets, or they just see them as impediments to their fairy book vision of the future. Friends are neo-conservatives and fascists who might talk a good game about the concepts above, but when push comes to shove, the foundation concepts of America are shoved aside in pursuit of empire, greatness, and imposition of "morality."

Foes understand private property, sound money and free markets and their roles as the foundation for society. They believe that government should be strictly limited, that it is inherently evil, and that the rights of the individual should always be superior to the rights of government.

Foes are intellectually and ideologically opposed to both friend and folk. They know that the policies of both groups are impractical and the cause of all chronic social ills. Beyond the practical, they see both groups and their ideologies as unethical and immoral.

You see, there is a distinction to be made here. The meaning of America must be something other that what we want to make of it. No one believes, for example, that America would be America if we turned it into an Islamic state or Israel, or modeled it in the image of a communist dictatorship like Cuba or North Korea.

Therefore, we know that America is about freedom, sure, but there must be something more to it that does not involve "freedom to take over the world" and "freedom to control other peoples’ lives." The meaning of America is, simply put, freedom of individuals to their lives and what they wish to make of themselves. Every other consideration in society should be structured around that point.

The original foes, our founding fathers, understood this and sought to piece together an intellectual and ideological superstructure that would uphold this meaning of America. Then, after exhausting every peaceful and non-violent means of achieving a resolution, they went out and beat the world’s leading military and economic power. Patriotism is when you fight for their meaning of America, that is, fight for other peoples’ rights to self determination. It is not just putting on a uniform, wearing a lapel pin, or paying your taxes.

In terms of blue states and red states, we need not worry about picking a color for foe states at this time because I’m not sure if any would qualify. In fact, with the correct definition of American, Sarah Palin’s tour of patriotic American states would not have taken her to the lower 48, but out into the wilderness of her home state.

The good news is that everyone is invited to joins the foes. You don’t have to change a thing except your politics. You can still live green, sustainable, and leave no carbon footprint or you can save as many sinners as you want, the old-fashioned way (i.e. without the help of government), and you can pray the Bible every day. It is never too late to become an American patriot either. Like our founding fathers we are faced with the menacing specter of the world’s leading military and economic power on American soil and it must be defeated.

Mark Thornton [send him mail] is an economist who lives in Auburn, Alabama. He is author of The Economics of Prohibition, is a senior fellow with the Ludwig von Mises Institute, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is co-author of Tariffs, Blockades, and Inflation: The Economics of the Civil War and is the editor of The Quotable Mises.

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"Great Depression" is a strong term, but what exactly does it mean? Depressions are a normal part of a business cycle that are now often called recessions, downturns, or corrections. They occur in any economy where the financial markets are based on fractional-reserve banking.

Depressions only become "great" when normal to severe depressions are used as excuses for massive increases in government intervention. Murray Rothbard’s America’s Great Depression clearly demonstrates this phenomenon. The three great depressions in the history of the United States are the Progressive Era (1907—1922), the Great Depression (1929—1945), and the Great Stagflation (1970—1982).

The year 2008 marks the beginning of the next recession, correction, or depression. All the statistical indicators are pointing in that direction. All market indicators point in that direction as well. Ask any noneconomist and you will get that same answer. We only have to wait for the folks at the National Bureau of Economic Research to officially confirm what we already know.

The reason for the depression is the bust in the housing market — we all know that too. Austrians reported on the housing bubble throughout the boom. Beginning in early 2003, Frank Shostak, Christopher Meyer, Lew Rockwell, Robert Blumen, Jeff Scot, and others, including this author, were writing and lecturing about the housing bubble. We identified the cause of the bubble as the Federal Reserve and its inevitable consequences of a bust in the housing market and the overall economy.

Homebuilder stocks peaked in mid-2005 and it’s been like watching a train wreck in slow motion ever since. When the overall stock market peaked one year ago we could finally celebrate the beginning of the correction phase of the business cycle even though most of us suspected it would be a severe one. Several mortgage dealers went bankrupt in 2007 and the increased number of foreclosures signaled that the correction was finally under way.

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Mark Thornton [send him mail] is an economist who lives in Auburn, Alabama. He is author of The Economics of Prohibition, is a senior fellow with the Ludwig von Mises Institute, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is co-author of Tariffs, Blockades, and Inflation: The Economics of the Civil War and is the editor of The Quotable Mises.

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The ‘What’s Next’ Series

By many criteria, the Ron Paul campaign has exceeded everyone’s expectations: a $20 million fourth-quarter haul, second- and third-place finishes after an initial field of eleven, and such officially anointed candidates as Rudy Giuliani and Fred Thompson left in the dust. But in the wake of Super Tuesday, what is the campaign’s future? We don’t know, of course, but here are a few possible routes that could be taken.

Sticking with the GOP. For the campaign to continue to raise serious money after New Hampshire (and especially now), the campaign team needed shaking up, even if only for psychological impact, and a new slate of professionals brought in. Professional Republican operatives are essential — they are loathsome and couldn’t care less about the issues, to be sure, but they know how to run a national campaign. The campaign should also bring Trevor Lyman and Vijay Boyapati into the campaign and give them veto power over ads and strategy in order to restore the grassroots approach that made the movement so successful.

An ad comparing Dr. Paul to the other candidates did finally appear in the days before Super Tuesday, but far too late. With a record like Dr. Paul’s to boast of, these ads should have wiped the floor with the other candidates. Running an amateurish ad in New Hampshire about Dr. Paul’s position on health care — health care! — is unforgivable.

When John McCain became the front-runner, it might have been nice to see an ad superimposing "New York Times endorsed" over John McCain’s head, asking: When was the last time you let the New York Times choose your president? And then perhaps a little red meat for registered Republicans: would the New York Times have endorsed Ronald Reagan?

Send a real message to the establishment: vote for the candidate who has refused to play their game. Then tick off major items from Ron Paul’s record, such as these, from the campaign website:

• He voted against the Patriot Act.
• He voted against regulating the Internet.
• He voted against the Iraq war.
• He has never voted to raise taxes.
• He has never voted for an unbalanced budget.
• He has never voted for a federal restriction on gun ownership.
• He has never voted to raise congressional pay.
• He has never taken a government-paid junket.
• He has never voted to increase the power of the executive branch.
• He does not participate in the lucrative congressional pension program.
• He returns a portion of his annual congressional office budget to the U.S. treasury every year.

The key message of the Ron Paul Revolution right now involves the war and the economy. That is where the emphasis should be. The phrase "none of the other candidates" needs to be employed liberally. No other Republican knows the first thing about the monetary system, the housing bubble or its causes, the falling dollar, and so on. Dr. Paul has been sounding the warning on this for years. The people he’s running against probably couldn’t define the federal funds rate if asked; how can they possibly deal with a crisis like this?

In states with open primaries, appeal to the idealism of the youth vote by making public Barack Obama’s awful foreign policy record. Obama is not antiwar. Gee whiz, he gave a speech against the Iraq war before he was in national office. The fact is, he has threatened war with Pakistan, won’t take a nuclear first strike off the table, and offers up the old establishment boilerplate about this being no time to retreat into "isolationism." American troops will stay in 130 countries. The Iraq withdrawal might be complete by 2013, but he can’t promise anything, and he’s voted to fund the war all this time. He also voted to reauthorize the Patriot Act.

This represents "change" how, exactly?

Independent Run. Should Dr. Paul choose to run as an independent, his choice of running mate could significantly energize the campaign and help it draw in still more of the disaffected. Someone with star power and name recognition, a take-no-prisoners stage presence, and a willingness to name names could make a splash. We’ve heard Judge Andrew Napolitano’s name mentioned. Napolitano is senior judicial analyst for the Fox News Channel (but don’t hold that against him; he is a great man). Napolitano has modest name recognition, but he’s written some excellent books, is very knowledgeable, and is a more powerful and energetic speaker than anyone running.

At the very least, it would be interesting to observe the Fox News Channel pretend their own senior judicial analyst doesn’t even exist.

The Paul/Napolitano ticket would need to raise enough money to reach the public via Perot-style infomercials. In those infomercials the two candidates should divide the airtime right down the middle. These points would need emphasizing:

1. First, the phony choice the public is being offered. The establishment is insulting your intelligence with these candidates.
2. The ways the Constitution has been trampled on.
3. The financial crisis facing the country. We do not have the money for a $1 trillion empire that is making us less secure to boot. We do not have the money for the domestic promises we’ve made, much less the new ones all other candidates are making. We face a nearly $60 trillion shortfall! The political class — Democrats and Republicans alike — is destroying the dollar in their efforts to pay for all this extravagance with money we don’t have.
4. The complete inability of the other candidates to deal with this crisis. Their utter ignorance of economics. If this isn’t Dr. Paul’s style, leave it to Judge Napolitano. But this part can’t be ignored.
5. The way out. A sensible, pro-freedom, pro-Constitution vision. Make this as inspiring as possible.
6. Then conclude: What we’ve just shared with you tonight is common sense. And yet you’ve never heard any politician, or any talking head in the media, speak to you like this or give you this kind of information. Why not? Isn’t it about time you supported someone who did?
7. Hold up Ron Paul’s new book The Revolution: A Manifesto, and urge them to read it if they want to know what’s really going on, what they’re not being told, and what we all need to do about it.
8. The media has already decided for you which candidates you’re supposed to vote for. Why not let them know you’ve chosen to think for yourself?

Withdrawal. Finally, Dr. Paul could leave the race altogether, focusing instead on campaigning for House and Senate candidates around the country who are committed to his platform. A minority of his supporters favor this approach.

Final Thoughts

Regardless of what Dr. Paul does, the idea behind the Liberty War Chest is a good one. If 100,000 people donated $500 over the next two years (a mere $20 per month), there would be $50 million in seed money for 2010 congressional races. And the Revolution moves forward.

We’re not sure ourselves which is the best route for Dr. Paul. We do know that we trust his judgment, and that we’ll be right by his side, at his service, no matter what he chooses. We await his orders.

Mark Thornton [send him mail] is an economist who lives in Auburn, Alabama. He is author of The Economics of Prohibition, is a senior fellow with the Ludwig von Mises Institute, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is co-author of Tariffs, Blockades, and Inflation: The Economics of the Civil War and is the editor of The Quotable Mises. Thomas E. Woods, Jr. [view his website; send him mail] is senior fellow in American history at the Ludwig von Mises Institute and the author, most recently, of 33 Questions About American History You’re Not Supposed to Ask. His other books include How the Catholic Church Built Western Civilization (get a free chapter here), The Church and the Market: A Catholic Defense of the Free Economy (first-place winner in the 2006 Templeton Enterprise Awards), and the New York Times bestseller The Politically Incorrect Guide to American History.

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Open Letters

This election cycle the Republican Party is offering up its usual assortment of phonies, not one of whom can name a single thing he would cut from our government’s $2.9 trillion budget. Not one seems to know the first thing about monetary policy. Not one looks at our disaster of a foreign policy and suggests anything but more of the same.

If everyone’s record were an open book, Ron Paul would be eating these guys alive, especially with the reach his fourth-quarter fundraising bonanza gives him.

That John McCain enjoyed a "wide advantage" in New Hampshire among primary voters who opposed the war in Iraq means Ron Paul’s message is not getting out as it should. McCain has said he’d be fine with a 100-year U.S. military occupation of Iraq — a comment that should be repeated over and over again as evidence of how obviously unelectable he is.

There is no sense in trying to dance around Dr. Paul’s opposition to the Iraq war, even in a Republican primary. He doesn’t benefit from the division of the pro-war vote among the other candidates if people don’t realize that he is antiwar. Plenty of military people, even if they might oppose a quick exit, freely admit that the war was a disastrous idea from the start. The two issues that need emphasis now, in fact, are the Iraq war and the sorry state of the economy — and Dr. Paul can show how the two are related.

Dr. Paul’s target demographic is the young voter, and a marketing firm that understands this demographic should be working for him. Dr. Paul needs to be shown speaking dramatically and in front of large crowds in big cities, out in the country, and at Google. The huge crowds, the signs, the cheers, the smiling faces, and the youthful demographic are at least as important as the words spoken. The spontaneous energy of the Ron Paul movement should come through. This has been captured very well in countless YouTubes, so it should be easy for a professional outfit to duplicate. People like to get involved in causes that they think other people are supporting.

To make an impact, the ads should be sixty seconds, not thirty. Those are more expensive, of course, but the effect of a longer, more captivating and informative ad more than compensates for the additional expense. With the longer commercial, it’s possible to stitch in clips from his appearances on the Daily Show, the Tonight Show, or the Colbert Report. Might as well show Jon Stewart saying, "Congressman Ron Paul, you appear to have consistent, principled integrity," followed by his joking aside, "Americans don’t usually go for that" — at which point we see a jovial Dr. Paul laughing.

Ron Paul simply must be differentiated from the rest of the candidates if his campaign cash is going to do him any good and if he is to have a chance to win some surprise victories. Ads that make him seem like just another one of them would be an unthinkable waste of money. And we need to see him talking to the camera — not scripted, of course, but with remarks stitched together from his various campaign appearances.

In open primaries in particular, the correct approach to advertising Ron Paul would not only garner his true share of Republican voters but also increase the turnout of independents and even antiwar Democrats to his side.

A still more confrontational option would involve putting head shots of all the candidates on the screen. Then ask, "Who among these men has never voted to raise taxes?" All faces but Dr. Paul’s disappear. "Who has spoken out against the unconstitutional No Child Left Behind Act?" All faces but Dr. Paul’s disappear. "Who opposed the Patriot Act?" "Who opposed the unconstitutional, costly war in Iraq?"

And for good measure, we might add: "Who gets the most donations from active-duty and retired military personnel?"

And then, perhaps: "In this Republican primary, you have two choices, not five. Another double-talking big spender, or [here shift to Ron Paul speaking to a cheering crowd] the man who’s been called the Thomas Jefferson of our day. For once, we can really make a difference. Ron Paul for President."

For once in their lives, Americans have the opportunity to vote for a truly great man, and can have a president they can actually be proud of for a change. Let’s make sure they know about it.

Mark Thornton [send him mail] is an economist who lives in Auburn, Alabama. He is author of The Economics of Prohibition, is a senior fellow with the Ludwig von Mises Institute, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is co-author of Tariffs, Blockades, and Inflation: The Economics of the Civil War and is the editor of The Quotable Mises. Thomas E. Woods, Jr. [view his website; send him mail] is senior fellow in American history at the Ludwig von Mises Institute and the author, most recently, of 33 Questions About American History You’re Not Supposed to Ask. His other books include How the Catholic Church Built Western Civilization (get a free chapter here), The Church and the Market: A Catholic Defense of the Free Economy (first-place winner in the 2006 Templeton Enterprise Awards), and the New York Times bestseller The Politically Incorrect Guide to American History.

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Hunter Lewis asks a truly vital question in the book Are the Rich Necessary? The answer, of course, is yes. However, most people hate the rich and would love to "stick it to them." Even the rich themselves rarely understand their role in society. Lewis’s approach is to tackle the issue by examining the "rich problem" on a variety of issues by providing both pro and con perspectives.

It might be surprising for many that the "rich question" is the issue on which economics was founded. In 1730, Richard Cantillon first invented economic theory with his model of the isolated estate, where one landlord owned everything. Despite this vast possession, Cantillon noted that the landlord would benefit little if he did not hire workers to make the land productive. Naturally workers would have to be given enough sustenance for their families to survive and if the landlord wanted luxuries he would have to pay them even more. Cantillon then went on to show that the landlord could forego the duties of managing the estate if he leased land to his most capable farmers and used the rents to buy all the goods he desired. With prices and profits at work, the estate would operate as if it was directed by an invisible hand and everyone would be mutually dependent.

Cantillon’s most notable student used the first part of the model (the isolated estate) in his Theory of Moral Sentiments and the second part (the market economy) in the Wealth of Nations. Most of Cantillon’s readers never knew his name because his book was published anonymously more than twenty years after his murder, but Adam Smith mentioned him prominently in the first part of the Wealth of Nations.

Are the Rich Necessary thus brings the age-old lessons into a modern context. Despite his objective approach, Lewis makes clear at every turn that getting rid of the rich would be a disaster for society and that every harm we intend to the rich would only makes us worse off. The first section pits egalitarianism against the vital role the rich play in amassing and managing wealth. Like the landlord who consumes a tiny fraction of the output of his estate, Bill Gates consumes a tiny fraction of his wealth, most of which is tied up employing Microsoft employees who produce software products for our use.

To answer the question of whether the rich are compatible with democracy, Lewis uses Mises’s position that the market is actually much better than democracy in "representing" our choices. Consumers, not producers, ultimately have the final say in markets and are better served than voters. Also, in the market there are both upward and downward mobility and the little guys are regularly sending the rich guys both up and down the economic ladder depending on who better serves them.

The middle section of the book deals with the profit system, inequality, and greed from a variety of perspectives, followed by chapters on government’s role and the role of the central bank (very good). Despite offering opposing points of view on these subjects, the fact that Austrian and libertarian arguments are introduced throughout the book is very refreshing. I’m not sure if your average college student will see the correct answers, but unlike most books, at least they are there to be seen. Speaking of seen and unseen, the pro-rich arguments in this book have much in common with Bastiat’s views on economics (i.e. both the rich and other classes should want each other to prosper so that they themselves prosper).

In the final two chapters Lewis describes four different value systems and then attempts to offer a reconciliation of these systems from his own point of view. I was actually surprised that the author sided with "philanthropism" rather than "reciprocalism" (which would represent Bastiat’s views of laissez faire). Lewis concludes that we must increase the size of the non-profit sector and to do so he suggests that tax credits be given for donations to not-for-profit social service organizations. Happily he does openly recognize all the problems with this approach, including increased government regulation of charities. I would respond that eliminating government taxes and social services would result in both a booming economy and private charity. Maybe we could agree to a temporary tax credit that would expire along with taxes and welfare?

With that aside, the book is refreshing. The more people who read this book the better. It would make a fine book for classes on social issues and would be great for colleges that have college-wide reading requirements which are now dominated by books with socialist points of view. It would be a particularly interesting exercise for students to determine which rich people are the parasites on society and which ones are the pillars of society.

Mark Thornton [send him mail] is an economist who lives in Auburn, Alabama. He is author of The Economics of Prohibition, is a senior fellow with the Ludwig von Mises Institute, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is co-author of Tariffs, Blockades, and Inflation: The Economics of the Civil War and is the editor of The Quotable Mises.

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The latest of three movies about spy/killer Jason Bourne — the Bourne Ultimatum — is the best in the series. There is all the action, chases, fighting, shooting, explosions, and killing, but here we also get the story and it turns out to be a great American story.

Here we have a super patriot kid who goes the limit for Uncle Sam. He is betrayed and hunted down by his own country. In seeking his salvation he ends up converting a couple of people from the bad guy camp. They both sensed that Jason is the good guy and they are working for the bad guys, so they risk their own lives to help him.

I’m seeing the same sort of conversion happening across our country. People are realizing that President Bush and Vice President Cheney represent evil and then they see Ron Paul and a light goes off — the answer is the US Constitution. Bingo! Government by the rule of law, limited government, sound money, and a non-interventionist foreign policy — that is what made America great. These new converts may not necessarily understand the entire message and may have policy disagreements with Ron Paul, but they realize that our country needs an entirely different direction and it’s the direction of Ron Paul.

The specific evil in the life of Jason Bourne is a lawless CIA that uses brainwashing techniques, unlimited secret assassinations, and contract killers to pursue American policy — a good example of the type of thing Ron Paul is fighting against. Ron Paul did support the issuance of letters of Marque and Reprisal against Osama Bin Laden’s gang, but this was the appropriate measure specified in the Constitution to deal with a confessed killer and threat to the country.

The other great thing about the movie is that it shows the CIA as completely inept. It has massive resources, ultra powerful technology, and unlimited power and authority and yet is completely and grossly incompetent in doing its job. This is a theme that Ron Paul has been emphasizing for thirty years. The CIA and other "intelligence" bureaucracies are incompetent, a threat to our liberty and should be done away with as un-American.

Government incompetence with law and order is not a new theme by any means. In books and movies it is almost always a private detective or lawyer that solves the crime, while the government police and prosecutors are hopelessly incompetent. Occasionally police solve the crime, but it’s usually an isolated individual who "goes beyond the call of duty" or is expressly disobeying orders. This is how it works in real life — cops don’t solve crimes, people do.

If you can stand all the violence and killing go see this movie and be ready to boo and laugh at the bad guys and cheer for the good guys.

When it comes to supporting Ron Paul, it is our ultimatum.

Mark Thornton [send him mail] is an economist who lives in Auburn, Alabama. He is author of The Economics of Prohibition, is a senior fellow with the Ludwig von Mises Institute, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is co-author of Tariffs, Blockades, and Inflation: The Economics of the Civil War and is the editor of The Quotable Mises.

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Freakonomics (William Morrow, 2005) by Steven D. Levitt and Stephen J. Dubner has been reviewed several times on Mises.org (1, 2, 3), but there are some important points to add.

Levitt and his coauthor Stephen Dubner have written an interesting and informative book and the title is all too accurate. Readers will be exposed to precious little economics, only the statistical unraveling of a few freaky puzzles. This is not to suggest, as the book does in a number of places, that the material or subject matter is all trivial. The problems of crime and African Americana are among the most vexing ones facing America and other nations around the world.

Austrian economists will quickly notice the methodological flaws of this book. For Levitt and the economics profession in general, science is measurement. Ordinary readers may accept this notion of economic science, especially when it comes to the production of physical, tangible, and seemingly homogeneous goods, but hopefully many will recognize that “measurement” is fraught with problems, especially when it comes to the new world of information technology, the production of culture, and the ever-changing basis of what underlies consumers’ satisfaction — the changing tastes and preferences of people.

The book itself hints at the limitations of quantitative measurement by noting that very small causes can have enormous effects, and the authors even provide a good example of this with the case of a private citizen who non-violently brought the KKK to its knees. It also uses several examples where the data collected to measure various phenomena have been erroneous.

For example, public school teachers cheated on their students’ standardized tests to gain economic rewards and avoid punishments (Levitt caught them by using a computer algorithm — not economics) and he also discovered that the City of Atlanta Police Department underreported crime in order to win the City’s bid for the 1996 Summer Olympics.

However, when it comes to Levitt’s novel suggestion that the dramatic drop in crime during the late 1990s was caused by Row v. Wade, the potential of bad data is dismissed. Based on all the reports I have heard about people not wanting to report crimes to the police and for police to under-report crime, I find this dismissal hard to accept.

For example, many of the hardest-hit areas of New Orleans were considered “cop-free” before Hurricane Katrina hit. Large areas of urban America are controlled by drug gangs and private property owners are responsible for their own security. Levitt can respond that certain types of crime — specifically murder — are almost always reported even in the deepest corners of the urban welfare jungle because bodies have to be disposed of somehow. Indeed, the number of murders per capita has been declining at a noticeable rate in recent years.

The wrinkle in this argument is that the murder rate has taken a statistical nosedive not because of the dramatic decline in the number of attempted murders, but because of a more dramatic decline in the number of successful attempted murders. The big reason for this is that emergency medical services have been improved and are able to respond quicker (e.g., 911) and they can respond with more effective life-sustaining technology, including drugs, life-saving devices and procedures and because ambulances now have direct communication and patient data transmission capabilities with emergency room service providers. In other words, entrepreneurs are reducing the success rate of murderers by introducing new life-saving products. Combine all this with the more widespread knowledge of CPR and knowledge of how to reduce profuse blood loss and the decline in the murder rate is a much less encouraging statistic.

The other reasons behind the reduction in crime are also not encouraging. Levitt finds that more police and more people in prisons are also reasons for lower crime rates. The increase of police and prisoners behind bars make it obvious that we continue to bear a heavy cost of crime. The cost of crime has not been reduced by the state, it has only been spread out a little more evenly over taxpayers and property owners. Levitt also ignores the positive role that gun ownership has in reducing crime.

The true economic content of Freakonomics is largely limited to mere economic catch-phrases like “incentives matter.” This was most glaring to this reviewer in the chapter that discussed the war on drugs and the problem of crack cocaine. What explains the emergence of crack? It turns out — according to the book — that some people just happened to invent crack, it was cheap and it became popular. In other words, just a vague generalization about incentives, entrepreneurship and technological change — no real economic explanation — crack just happened.

Crack cocaine is described as the worse thing to afflict the African American community since slavery, but there is no explanation of what caused it, what made it spread, and what made it take hold in America — the key questions to be answered. Instead the book tells us that street drug dealers are poor and face a high probability of violent death — things that are regularly reported on in the New York Times and other sources. I have shown that the reason for higher potency and more dangerous drugs is stricter prohibition enforcement.

Other trivial facts that we learn in the book include: not everyone pays for bagels on the honor system, people lie about themselves on dating websites, and that some people are phony about their open-mindedness about race-related issues. We also learn that Sumo wrestlers who have already qualified for championship rewards do not perform “as expected” later in tournaments when faced with opponents who have not qualified and face elimination from the tournament.

Another well-known point raised in the book is that professionals will often cheat their clients if the proper incentives and opportunities are present. Most people understand that the incentives of licensed professionals do not necessarily line up with their clients (e.g., real estate agents and doctors). The key question is "why this is the case." It might just be a small misalignment of incentives in the market economy, but it could also be a persistent one that has a big overall economic impact. What is the answer? Levitt does not provide the obvious answer that professional licensing provides a monopoly privilege and a barrier to entry that prevents real competition from reducing price, increasing the quality and diversity of service, and better monitoring of corrupt professional practices.

Ironically, Levitt’s true strength lies not in his much-acclaimed computer algorithms and regression results but in his admitted disinterest and marginal abilities in the mechanical approach of modern mainstream economics (math and stat). These so-called weaknesses are no doubt the key to his creativity and innovative thinking, however misguided, as most graduate programs rely almost entirely on math and statistics to beat all the creativity out of young scholars in order to produce more automatons of economic orthodoxy.

Mark Thornton [send him mail] is an economist who lives in Auburn, Alabama. He is author of The Economics of Prohibition, is a senior fellow with the Ludwig von Mises Institute, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is co-author of Tariffs, Blockades, and Inflation: The Economics of the Civil War and is the editor of The Quotable Mises.

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Everyone is talking about the housing bubble bursting and the problem of subprime mortgages. People in the mainstream media blame unscrupulous lenders and hope the worst is over.

LRC and Mises.org readers were alerted to the housing bubble long before anyone else. Frank Shostak alerted readers in March 2003, Christopher Mayer alerted readers in August 2003, and I reiterated these warning in February and June of 2004.

I recap all the correct Austrian predictions and the attempt of the Fed to cover up the story here.

We can also now say that Austrian economists also predicted the end of the housing bubble. Of course all bubbles come to an end, but Austrians are alert to this fact, while most others are not. Between Frank Shostak’s initial alert of the bubble and the peak in the Housing Sector Stock Index on July 29, 2005 the index increased by almost 200%. Stocks of course are generally a good leading indictor.

My article, Is the Housing Bubble Popping? appeared on LRC on August 8th and it clearly indicated that the housing bubble was showing the first signs of its undoing. Since the peak, the index has fallen by 42% on a split-adjusted basis — losing more than half of its previous gain. In the fall of 2005 there was still plenty of talk about home prices never declining in the mainstream media and still plenty of time to sell your real estate investments with a hefty profit.

In contrast to what you hear on bubble vision (i.e. CNBC), Wall Street and the mainstream media, the housing bubble problem was not caused by unscrupulous lenders. It was caused by the Federal Reserve and its artificial injections of credit. When an abnormal amount of credit comes into the loan market, the interest rate falls and loans are given out to less credit-worthy borrowers. Don’t blame banks and lenders for all the bad investments. It was the Fed’s fault; with some blame going to Freddie Mac and Fannie Mae which are also public-private partnership monsters created by the federal government.

We should also not believe that this is the "beginning of the end" of the housing bubble problem. I would suggest it is safer to view it as only the "end of the beginning." The correction will probably be longer and more painful than most people expect. For example, Alan Levenson, the chief economist at T. Rowe Price, wrote that the housing recession had just about run its course:

"The housing correction appears to be running its course, without having had a significant impact on the broader economy. Given all of the gloom, how is this possible? — a slower pace of new construction — finally appears to be losing steam, secondary impacts have yet to play themselves out full. They may not be as strong as some anticipate, however."

~ T. Rowe Price Report, Summer 2007, p. 17

Levenson is a smart guy and I hope he is right and I am wrong.

And don’t expect a good solution from the Fed. The Bank of Japan tried to save their economy with zero interest rates and the decline in real estate prices in Japan lasted for over 15 years.

Mark Thornton [send him mail] is an economist who lives in Auburn, Alabama. He is author of The Economics of Prohibition, is a senior fellow with the Ludwig von Mises Institute, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is co-author of Tariffs, Blockades, and Inflation: The Economics of the Civil War and is the editor of The Quotable Mises.

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Bomb bomb bomb, bomb bomb Iran
Bomb bomb bomb, bomb bomb Iran
Bomb Iran, take their land, Bomb Iran
They’ve got us in Iraq’ and a’rollin’
Rocketin’ and a’reelin’ Bomb Iran, bomb, bomb, bomb, bomb, Iran

John McCain
He’s insane
Saw bomb Iran, you know he’ll take the chance
Bomb Iran, bomb bomb bomb bomb, He’ll bomb Iran
They’ve got us in Iraq and a’rollin’
Rocketin’ and a’reelin’ Bomb Iran bomb bomb bomb bomb Iran

Tried Mitty too,
Tried Rudy too,
Danced with Freddie too
But I knew they all would too
Bomb Iran, bomb bomb bomb bomb bomb Iran bomb bomb bomb bomb bomb Iran
They’ve got us in Iraq and a’rollin’
Rocketin’ and a’reelin’ Bomb Iran
Bomb, bomb, bomb, bomb Iran

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You want a Ron Paul Revolution
Well you know
We all can act to change the world
Ron says its about the Constitution
Well you know
We all can act to change the world
But when you talk about destruction
Don’t you know you can count me out
Don’t you know it’s gonna be…alright
Don’t you know it’s gonna be…alright
Don’t you know it’s gonna be…alright

He says he’s got a real solution
Well you know
We all love Ron’s plan
You ask me for a contribution
Well you know
We’re all doing all we can
But if you want money for people with minds that hate
All I can tell you is brother you should not wait
Don’t you know it’s gonna be…alright
Don’t you know it’s gonna be…alright
Don’t you know it’s gonna be…alright

Ron fights for the Constitution
Well you know
We all just have to change some heads
He tells us it’s our institution
Well you know
You better have freedom on your minds, he said
But if you go carrying pictures of Ron Paul now
You gonna make it with us anyhow
Don’t you know it’s gonna be…alright
Don’t you know it’s gonna be…alright
Don’t you know it’s gonna be…alright
Alright…alright…alright…alright…alright…alright…alright

• Beatles do "Revolution" on YouTube
• Tabs to Beatles Revolution
• Other LRC "songs" by Mark Thornton

  • I Hate the Taxman
    Mark Thornton rewrites the Beatles.

  • California Dreamin’
    With apologies to the Mommas, the Papas, and the kilowatts. Song by Mark Thornton.

Mark Thornton [send him mail] is an economist who lives in Auburn, Alabama. He is author of The Economics of Prohibition, is a senior fellow with the Ludwig von Mises Institute, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is co-author of Tariffs, Blockades, and Inflation: The Economics of the Civil War and is the editor of The Quotable Mises.

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Being director of security at a rock concert could be a tough job, but it doesn’t qualify you to be president. Neither does being a mayor.

Having a law degree also isn’t a qualification if you are ready, willing and able to violate the law or ignore the Constitution.

Being a soldier and POW also isn’t a qualification for being president, or even for designing military strategies.

Being a person of faith is also not a qualification, especially if you are willing to break with that faith when political "necessity" requires that you do so.

Being pro-life is also not a qualification, especially if you admit to being willing, if not eager, to send additional living, breathing, walking, talking, already graduated from high school lives into harm’s way to be killed unnecessarily.

Declaring your willingness to use torture is also not a qualification for office. It’s merely a sign of desperation, injustice, and a failure to understand that torture has never and will never work to achieve political goals.

Is being willing to go to any length, to do everything possible, or to take extreme measures to achieve political goals a sign of a good candidate? No, it is a sign that the person has no respect for constitutionally limited government, has no notion of the limitations of the office (or of government in general), and is a dangerous extremist.

What are the types of qualifications for the job of President of the United States? What should we ask of the next president?

First of all the candidate should have full respect for the U.S. Constitution, which is the governing document for our society. This respect should be backed up by action. Let us ask how and in which ways the person acted to defend the Constitution. What has the candidate done that would indicate a full understanding of the Constitution and the limits it places on the role of government?

Second, the candidate should have demonstrated a consistent record of being a good steward, particularly with respect to money, taxes, and balancing the budget.

Third, the candidate should have a demonstrated record of understanding the meaning of America as a country where people have rights against which the government has no right to impose.

Finally, America’s "great presidents" have ruled during times of great calamity and massive death. Think of Lincoln, Wilson, and FDR. You can admire these men if you wish, but no sane person really wants to relive such "greatness," so we’d like a "good" president that will keep us out of future wars. What candidate has demonstrated that he would work hard to keep us out of future wars?

Mark Thornton [send him mail] is an economist who lives in Auburn, Alabama. He is author of The Economics of Prohibition, is a senior fellow with the Ludwig von Mises Institute, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is co-author of Tariffs, Blockades, and Inflation: The Economics of the Civil War and is the editor of The Quotable Mises.

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This article was excerpted from a chapter in a forthcoming book, u201CThe Economics of Housing Bubbles,u201D in America’s Housing Crisis: A Case of Government Failure, edited by Benjamin Powell and Randall Holcombe.

There are three basic views of bubbles that are held by economists. The dominant view among modern mainstream economists, including the Chicago school and proponents of Supply-Side economics, is to deny the existence of bubbles and to declare that what is thought to be u201Cbubblesu201D is really the result of u201Crealu201D factors. The second view, which is espoused by Keynesians and by proponents of Behavioral Finance, is that bubbles exist because of psychological factors such as those captured by the phrase u201Cirrational exuberance.u201D The third view is that of the Austrian school, which sees bubbles as consisting of real and psychological changes that are caused by the Fed. This view has the advantages of being able to identify the economic cause of bubbles and directs us to policy choices that would prevent future bubbles.

Until very recently, most people agreed with the majority of economists, that there is no such thing as a housing bubble — housing prices, they said, u201Cnever go down.u201D Although there is much diversity in the mainstream camp, it is well illustrated by two economists from the Federal Reserve Bank of New York who recently examined concerns about the existence of a speculative bubble in the U.S. housing market. While McCarty and Peach did find that a housing bubble could have a severe impact on the economy — if it existed and were to burst — they ultimately concluded that such fears were unfounded:

Our main conclusion is that the most widely cited evidence of a bubble is not persuasive because it fails to account for developments in the housing market over the past decade. In particular, significant declines in nominal mortgage interest rates and demographic forces have supported housing demand, home construction, and home values during this period. (2004, 2)

Furthermore they found u201Cno basis for concernu201D for any severe drop in housing prices. In the past when the U.S. goes into recession or has experienced periods of high nominal interest rates, they found that any price declines have been u201Cmoderateu201D and that significant declines can only happen regionally so that they would not have u201Cdevastating effects on the national economy.u201D

This is essentially the view of Alan Greenspan the former chairman of the Fed and Ben Bernanke the current Chairman. In particular, Greenspan was aware of the possibility of a housing bubble, but he offered many reasons to suggest that it did not exist, and that if one did exist it would not be a major problem. The Chairman is usually so incomprehensible and misleading that I have labeled his testimony before Congress as u201CGreenspamu201D (Thornton 2004a). However, on the topic of the housing bubble he was clear and direct and worth quoting at length.

The ongoing strength in the housing market has raised concerns about the possible emergence of a bubble in home prices. However, the analogy often made to the building and bursting of a stock price bubble is imperfect. First, unlike in the stock market, sales in the real estate market incur substantial transactions costs and, when most homes are sold, the seller must physically move out. Doing so often entails significant financial and emotional costs and is an obvious impediment to stimulating a bubble through speculative trading in homes. Thus, while stock market turnover is more than 100 percent annually, the turnover of home ownership is less than 10 percent annually — scarcely tinder for speculative conflagration. Second, arbitrage opportunities are much more limited in housing markets than in securities markets. A home in Portland, Oregon is not a close substitute for a home in Portland, Maine, and the "national" housing market is better understood as a collection of small, local housing markets. Even if a bubble were to develop in a local market, it would not necessarily have implications for the nation as a whole. (2002)

As the bubble was reaching its peak, Greenspan (2005) did admit that there was some u201Capparent frothu201D in some local housing markets, but overall he found that conditions in the housing market were actually u201Cencouraging.u201D Incredibly, in his first speech after leaving office Greenspan said that the u201Cextraordinary boomu201D in the housing market was over, but that there was no danger and that home prices would not decrease (Bruno 2006). The new Fed chairman, Ben Bernanke (2006b), has admitted to the possibility of u201Cslower growth in house prices,u201D but confidently declared that if this did happen he would just lower interest rates. Bernanke also believed that the mortgage market is more stable than in the past and noted in particular that:

Our examiners tell us that lending standards are generally sound and are not comparable to the standards that contributed to broad problems in the banking industry two decades ago. In particular, real estate appraisal practices have improved. (2006a)

Apparently he overlooked the then booming sub-prime market.

A second view of housing bubbles and bubbles in general is that they do exist, but that they are fundamentally caused by psychological factors. Many people and many important economists subscribe to this view of bubbles, including Keynesian economists and proponents of Behavioral Finance, such as Robert Shiller. From this perspective the business cycle is seen as the ebb and flow of mass consciousness and emotions. Real factors may play a role, but the important causal factors for deviations in the business cycle are psychological. Booms develop because people become confident and then overconfident in the economy. Investors likewise are confident and increase their tolerance for taking risk. Rising profits and asset prices lead to u201Cspeculativeu201D behavior where economic decisions are no longer based on old rules and procedures, but on the bravery instilled by a u201Cnew era.u201D As the investment mania sets in the bubble expands. Then, for whatever reason, people begin to lose faith and new investments are exposed as disappointing. Economic reports and statistics turn sour, and stories of scandal begin to appear in the press. Many investors remain determined that this turn of events is only temporary, but results grow worse, prices continue to fall, and investment projects are postponed, halted or cancelled. The mood of the market is one of gloom or even doom. The economy enters a depression. This psychological camp did predict the housing bubble but their u201Csolutionu201D is to call for a mass array of government programs, regulations, and bailouts — as if the government isn’t already intimately involved in every aspect of housing.

The third view holds that there are changes in both real factors and market psychology during bubbles and that both are driven by the cause of the business cycle — the Fed. This view of bubbles is based on the Austrian business cycle theory (hereafter ABC theory). This is a minority view held by Austrian school economists. According to the ABC theory, if the Fed does follow a loose monetary policy, then a bubble can develop somewhere in the economy, whether it be in tulip bulbs, stocks, or real estate. If the new money is directed toward housing, a bubble will develop in housing. Austrian economists further emphasize that the additional resources allocated to housing are resources that are not available elsewhere in an economy, so that while more resources than normal are allocated to housing construction, fewer resources are available to other areas of the economy such as manufacturing, which will experience higher costs for its inputs such as labor and materials and will produce a proportionately smaller output. It is this mismatching of resources across industries and sectors that has to be resolved — painfully — in the inevitable bust or correction.

Among the Austrians who identified the housing bubble is economist Frank Shostak who defined a bubble as any activity that u201Csprings upu201D from loose monetary policies. u201CIn other words, in the absence of monetary pumping these activities would not emerge.u201D As a result of this pumping, a misallocation of resources develops whereby non-productive activities increase relative to productive activities — something that seems to clearly characterize the U.S. economy since he wrote in early 2003:

The magnitude of the housing price bubble is depicted…in terms of the median price of new houses in relation to the historical trend between 1963 and 1979. In this regard the median price stood at 73% above the trend in December 2002. (2003)

A year later Shostak (2004) warned that there u201Cis a strong likelihood that the U.S. housing market bubble has already reached dangerous dimensions.u201D While early warnings can be a problem for investors in home-building stocks, the problems of predicting the timing and magnitude of bubbles and business cycles affects all forecasters, and Shostak’s warning was primarily for the purpose of judging public policy. In effect he was noting that policymakers have made a mistake that they should correct immediately and not make the situation in the housing market any worse.

Also from the Austrian camp is banker Christopher Meyer, who noted that there is always a bubble in the making in a world of fractional reserve banking and fiat currency, and that housing has often been impacted by bubble conditions in the U.S. and elsewhere. In the summer of 2003 he identified the current housing bubble:

The strong housing market has all the makings of being the next bubble — in particular high leverage and unsustainable price increases. While the larger economy seems to sputter along, the housing market continues to run a hot race. Low interest rates have propelled refinancing, freeing up $100 billion last year alone, according to the Wall Street Journal. Not surprisingly, the low interest rates have increased buying power and supported housing prices. (2003)

Another Austro-banker with his finger on the housing bubble problem was Doug French who also identified the bubble in mid-2003.

Home sales are what fuel this land grab. And, with Alan Greenspan’s foot tromped on the monetary accelerator, low mortgage rates are allowing more people to buy bigger houses. In April, the median price of a new home in Las Vegas rose to just an eyelash below $200,000, a doubling in less than 14 years.

In early 2004 I pointed to the on-going housing bubble to investors and warned that it might not be a good idea to increase your mortgage: u201Cit might not be a good time for you to obtain a home equity loan to invest in hot tech stocks. We are going through a housing bubbleu201D (2004b). I followed this up later that year with a more detailed examination of the housing bubble and found:

Signs of a "new era" in housing are everywhere. Housing construction is taking place at record rates. New records for real estate prices are being set across the country, especially on the east and west coasts. Booming home prices and record low interest rates are allowing homeowners to refinance their mortgages, "extract equity" to increase their spending, and lower their monthly payment! As one loan officer explained to me: "It’s almost too good to be true." In fact, it is too good to be true. (2004c)

The historical fact is that the housing market and the construction of structures has experienced cycles of boom and bust, with prices rising and falling for residential, commercial, industrial, and agricultural real estate. Likewise, occupancy and lease rates, new construction, and the fate of construction firms and land speculators point us to the history of real estate bubbles.

According to the ABC theory, when a central bank makes loans or purchases government bonds from banks it is injecting bank reserves into the economy. Banks now have excess reserves which they can loan, but the existence of excess loanable funds means that banks must reduce the interest rate they charge, reduce the credit quality requirements of borrowers, or both. The result is a greater quantity of borrowing and investing. Lower interest rates also discourage savings because the return from savings is lower. In this manner the Federal Reserve drives the market rate of interest below the natural rate of interest that would have existed in the absence of Federal Reserve intervention.

The graph below depicts the history of the Federal Funds rate, which is the rate that banks can borrow from other banks in order to meet their reserve requirements imposed by the Fed. The Fed u201Ctargetsu201D this short-term rate and injects reserves into this market by purchasing government bonds from banks, thereby freeing up reserves in the banking system. This essentially is the engine of inflation because the Fed simply makes a bookkeeping entry in the bank’s account with the Federal Reserve — modern inflation is essentially an electronic bookkeeping entry system. Under Greenspan the rate was reduced from 6.5% in November of 2000 to 1% in July of 2003. The Federal Funds rate remained at 1% until June of 2004, coinciding with the launching of the final phase of the housing bubble. At this low level, interest rates were actually negative when price inflation is taken into account.

When banks have access to bank reserves from the Fed at low rates they can offer their customers lower rates on loans. The graph below shows the impact of changes in the Federal Funds rate on mortgage rates; increasing during the 1970s and peaking during Volcker’s war on inflation at 18%, and then generally declining throughout the 1980s and 1990s and reaching historical lows during the early 2000s. During the housing bubble interest rates on 30-year conventional mortgages were at their lowest levels ever during the post-gold standard era. When interest rates fall, asset prices and real estate prices tend to rise, and vice versa.

Naturally, lower rates for home mortgages stimulated borrowing for real estate purposes. The chart below shows that the amount of real estate loans at commercial banks first exceeded $1 trillion in November 1994 and then in quick succession exceeded $2 trillion in November of 2002 and $3 trillion in May of 2006. In addition to the Fed, there are other factors that helped direct all this new credit money into real estate. First, in 1997 homeowners were given a $250,000 exemption ($500,000 for couples) for capital gains that resulted from the sale of their house, adding greatly to the tax benefits of home ownership. This tax break could be said to have lit the fuse of the housing bubble. Second, government-sponsored credit corporations such as Fannie Mae and Freddie Mac, who can acquire capital at a subsidized rate because of the implicit assumption that the Federal government will bail them out, began to collateralize home mortgage debt on a grand scale so that lenders could quickly and easily resell the loans they make. These government-sponsored agencies have helped stimulate the flow of credit to riskier borrowers who might not otherwise have access to credit, and have therefore helped to lower the credit standards of lending institutions. The problem with these institutions is so large that even Alan Greenspan has publicly scolded them (Hays 2005). In truth, the original problem lies with Alan, not so much Fannie or Freddie.

The artificially low rates generated by the Fed also have the effect of discouraging people from saving money and encourages them to borrow more for consumption and speculation. The impact of monetary pumping by the Fed has driven down the personal savings rate (as depicted on the graph below) down throughout the 1980s and 1990s, and during the early 2000s it has driven the rate to zero — and even below — which means that on average people are spending more than they earn. Contributing to the problem of the low personal savings rate are the artificially inflated asset and real estate prices which naturally make people feel wealthier and allow them to u201Ccash outu201D equity from their homes when they refinance their home mortgages. During the housing bubble many Americans have used their homes as a kind of giant ATM to withdraw cash from the equity in their homes. Others have used the u201Cmagic checkbooku201D from second mortgages to spend the equity they have in their homes (Lloyd 2006).

At this point one should be wondering — how can borrowing be going up and savings going down? One answer to the question is that America is borrowing money from overseas in the form of the trade deficit, but the main answer is monetary pumping by the Fed. By artificially lowering rates via increases in the money supply the Fed has created a giant gap between borrowing and saving. In the graph below, the U.S. money supply is given from 1959 to 2006 as measured by MZM (money of zero maturity).1 During the period from January 1959 to August 1971 (11.7 years), when Nixon took the U.S. off the gold standard, the money supply grew by 82.2% for an average annual growth rate of 5.26%. Between August of 1971 and 1984 (complete monetary decontrol) (13 years), the money supply increased by 180.4% for an average annual growth rate of 8.25%. Since 1984 (16.6 years), MZM has grown by 390.1%, or an average annual growth rate of 10%. It would seem that all this new money first went into the New York Stock Exchange, then the NASDAQ stock market during the late 1990s, and finally into the housing market since the dot.com bust in 2000.

Since the recession of 2001 the increase in mortgage debt is about equal to the increase in MZM. This one stylized fact probably best illustrates the housing bubble and its cause. Another measure of the housing bubble is the amount of real private residential fixed investment as presented in the graph below. Investment in housing was low during the Great Depression and WWII, but beginning in the mid-1940s investment in housing (adjusted for price inflation) has shown a positive trend, which is based on economic and population growth over that same period. Superimposed on the graph are upper and lower channel lines based on the period from the 1940s to the mid-1990s. This channel allows us to illustrate the normal booms and busts that occurred in the housing market. A dot-and-dash trend line is drawn over the basic trend in housing investment. This shows us that the cycle in housing investment was less severe before we went off the gold standard, more severe on the fiat standard, and even more severe after monetary deregulation in the early 1980s. Most noteworthy is that investment in housing hit a boom high during the dot.com bubble of the late 1990s and then u201Cjumped the tracksu201D during the recession of 2001, when historically it would have retreated back toward recessionary levels. It therefore seems clear that in terms of investment value there has been a housing bubble since at least the recession of 2001. The bubble could also be seen in statistics on housing starts and housing prices.

The policy lesson of the housing bubble, as provided by the ABC theory, is that the Fed is responsible for the housing bubble as well as the normal booms and busts in the economy, and that as long as it retains its authority to set what are in effect price controls on interests rates, such bubbles will periodically appear in the economy. Instead, policy toward housing should be guided by the principles neutrality, laissez faire, and do no harm.2

References

Bernanke, Ben S. 2006a. Speech to the Independent Community Bankers of America National Convention and Techworld, Las Vegas, Nevada, March 8.

Bernanke, Ben S. 2006b. Reflections on the Yield Curve and Monetary Policy.

Remarks before the Economic Club of New York, March 20.

Bruno, Joe B. 2006. Former Fed Chair Says Housing Boom Over. Associated Press, May 19.

Cochran, John P. 2004. Capital, Monetary Calculation, and the Trade Cycle: The Importance of Sound Money. Quarterly Journal of Austrian Economics. 7 (spring): 17—25.

French, Douglas. 2003. u201CThe Land-Price Bubble,u201D LewRockwell.com, June 10.

Greenspan, Alan. 2002. Monetary Policy and the Economic Outlook. Testimony before the Joint Economic Committee of the U.S. Congress, April 17.

Greenspan, Alan. 2005. Mortgage Banking. Speech to the American Bankers Association Annual Convention, Palm Desert, California (via satellite), September 26.

Hays, Kathleen. 2005. Greenspan steps up criticism of Fannie: Fed chief says company and Freddie Mac have exploited their relationship with the Treasury. CNN.com, May 19.

Herbener, Jeffrey M. 2002. After the Age of Inflation: Austrian Proposals for Monetary Reform. Quarterly Journal of Austrian Economics. 5 (winter): 5—19.

Lloyd, Carol. 2006. Home Sweet Cash Cow: How our houses are financing our lives. SFGate.com, March 10.

McCarthy, Jonathan and Richard W. Peach. 2004. Are Home Prices the Next u201CBubbleu201D? FRBNY Economic Policy Review (December): 1—17.

Meyer, Christopher. 2003. The Housing Bubble. The Free Market (August).

Shostak, Frank. 2003. Housing Bubble: Myth or Reality? Mises Daily Article (on line), March 04.

Shostak, Frank. 2004. Who Made the Fannie and Freddie Threat? Mises Daily Article (on line), March 05.

Thornton, Mark. 2004a. Greenspam. LewRockwell.com, February 16.

Thornton, Mark. 2004b. Bull Market? LewRockwell.com, February 9.

Thornton, Mark. 2004c. Housing: Too Good to be True. Mises Daily Article (on line), June 04.

Notes

1. MZM is a relatively new measure of the money supply and one that is close to the Austrian school definition of money, where “money” is immediately redeemable at par. MZM includes currency, demand deposits (checking accounts), traveler’s checks, savings deposits, and deposits in money market mutual funds.

2. For recent statements concerning Austrian recommendations for reform regarding the money and the business cycles see Herbener (2002) and Cochran (2004).

Mark Thornton [send him mail] is an economist who lives in Auburn, Alabama. He is author of The Economics of Prohibition, is a senior fellow with the Ludwig von Mises Institute, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is co-author of Tariffs, Blockades, and Inflation: The Economics of the Civil War and is the editor of The Quotable Mises.

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If you watch Lou Dobbs’s show you would think that illegal immigration is the biggest problem facing America today — worse than government inflation and the Fed, standing armies, the military-industrial complex and Operation Iraqi Freedom, and government spying and suppression of our rights all combined.

Immigration, illegal or otherwise, is not the problem per se. We are, after all, a nation of immigrants, and mostly of the poverty-stricken sort. Dobbs is the son of a failed Texas propane salesman, and was himself a former welfare worker and ambulance-chasing news reporter so it is a little surprising that he would not have more sympathy for these immigrants and look for the real cause of our problems elsewhere.

The only national problem with immigration is government. Because immigrants are relatively poor they tend to pay less in taxes than their use of so-called government services like health care and education, and thus they increase the burden of taxation. We can therefore solve the immigration problem by simply eliminating government programs that provide free services. Note: we would simultaneously solve the problems of education and health care by placing these industries back into the private sector.

One question that doesn’t get addressed by Dobbs or anyone else is the reason for the mad rush of illegal immigration in recent years — why have so many people entered the country illegally? One possibility is the legal system, which has sought to protect the rights of people, particularly immigrants, and thus prevented government bureaucrats from controlling the flow of immigration.

This, however, is at best a partial explanation because it is difficult to imagine government bureaucrats accomplishing anything of note. A dozen or so federal bureaucracies and the mighty US military failed to protect us from the 9/11 attacks. The TSA army of airport security personnel has failed multiple tests to prevent weapons from being brought on airplanes. The FDA has allowed deadly drugs into the market, while preventing useful ones. Meanwhile under its so-called protection the number of food poisonings seems to be increasing alarmingly, while it wages war against the relatively benign and low-cost industries that provide vitamins, supplements, and alternative medical approaches to health care.

Why would we expect the border control and immigration bureaucracies to be any different? Their specialty seems to be giving a hard time to those who seek to legitimately obtain passports, visas, and work permits. Their ability to stop the flow of immigration is especially suspect given that potential immigrants have such a powerful economic interest in moving to the US. The rest of the world has made tremendous progress in recent years by adopting more liberal economic policies, but there is still a tremendous gap between the standards of living between the US and places such as Mexico, South America, Africa, Eastern Europe and Asia.

The question remains: why all the recent immigration? I believe that the answer has a lot to do with the housing bubble in the US. The normal number of housing starts is about one million units per year, but housing starts have exceeded one million every year since the early 1990s. The housing bubble appeared in the wake of the bursting of the technology stock bubble and only began to unravel in 2006. Housing starts have already returned to normal levels, but are soon likely to go below normal levels.

What does this have to do with illegal immigration? Immigrants, particularly illegal Mexican immigrants, have found good jobs in industries associated with the housing bubble. Large numbers of immigrants work at jobs in the construction, landscaping, and road construction industries. Employment in the construction industry alone is currently nearly two million jobs above trend (7.7 vs. 5.9 million). Of course many of the illegal immigrants are not even counted in such statistics, but just take a look at residential, landscaping, and road construction sites and you are likely to find many non-English speaking immigrants.

Therefore immigrants have a powerful economic incentive to move to America — lavish government benefits plus good-paying jobs that are the result of the housing bubble. The boom phase of the business cycle and bubbles naturally misallocate labor from one industry to another, and in the case of the housing bubble it has been to allocate labor to the construction, mortgage and real estate industries with immigrants helping to fill the gaps in the construction industry.

Of course all of this will have to be undone because all bubbles eventually burst to one extent or another and all booms are eventually followed by "corrections" that drive whole economies, regions, and industries into economic slumps. A slump in construction will lead to unemployment and bankruptcies. In terms of immigrants we will likely see many return home, or turn up on government welfare roles — another legacy of the Greenspan Fed.

You don’t have to be a rocket scientist to solve these problems. We need to return to the sound monetary policy of the gold standard, which will help prevent bubbles, and an America where education, health care, and assistance to the needy are in the hands of the private sector, not government bureaucrats.

Mark Thornton [send him mail] is an economist who lives in Auburn, Alabama. He is author of The Economics of Prohibition, is a senior fellow with the Ludwig von Mises Institute, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is co-author of Tariffs, Blockades, and Inflation: The Economics of the Civil War and is the editor of The Quotable Mises.

(One, two, three, four, one two)

Let me tell you how it will be
There’s one for you, nineteen for me
‘Cause I’m the taxman
Yeah, I’m the taxman

Should five percent appear too small
Be thankful I don’t take it all
‘Cause I’m the taxman
Yeah, I’m the taxman

(If you drive a car car) I’ll tax the street
(If you try to sit sit) I’ll tax your seat
(If you get too cold cold) I’ll tax the heat
(If you take a walk walk) I’ll tax your feet

Taxman!

‘Cause I’m the taxman
Yeah, I’m the taxman

Don’t ask me what I want it for
(Ah, ah, Mr. Wilson)
If you don’t want to pay some more
(Ah, ah, Mr. Heath)
‘Cause I’m the taxman
Yeah, I’m the taxman

Now my advise for those who die
(Taxman!)
Declare the pennies on your eyes
(Taxman!)

‘Cause I’m the taxman
Yeah, I’m the taxman

And you’re working for no one, but me
(Taxman!)

Harrison: vocal, lead guitar
Lennon: backing vocal
McCartney: backing vocal, bass, lead guitar
Starr: drums, tambourine, cowbell

"I Hate the Taxman" by Harrison & Thornton (2006)

The revised lyrics change the "voice" of the song from that of an obnoxious tax collector on a power trip to that of a Rothbardian tax protester:

(One, two, three, four, one two)

Let me tell you how it will be
There’s none for you, its all for me
‘Cause I hate the taxman
Yeah, I hate the taxman

Even five percent appears too large
I’m determined to keep it all
‘Cause I hate the taxman
Yeah, I hate the taxman

(If you tax my car car) I’ll take to the streets
(If you tax my sit sit) I’ll kick your seat
(If you tax my heat heat) I’ll knock you cold
(If you tax my feet feet) I’ll kick your @#$%^&*(&^%$#$!!!

Taxman!

‘Cause I hate the taxman
Yeah, I hate the taxman

Don’t ask me what I want it for
(Ah, ah, Mr. Cheney)
So don’t you try to take some more
(Ah, ah, Mr. Bush)
‘Cause I hate the taxman
Yeah, I hate the taxman

Now my advise for those who try
(Taxman!)
I’ll stick these pennies in your eyes
(Taxman!)

‘Cause I hate the taxman
Yeah, I hate the taxman

And you’re working for no one, says me
(Taxman!)

Mark Thornton [send him mail] is an economist who lives in Auburn, Alabama. He is author of The Economics of Prohibition, is a senior fellow with the Ludwig von Mises Institute, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is co-author of Tariffs, Blockades, and Inflation: The Economics of the Civil War and is the editor of The Quotable Mises.

Gold has performed well since we identified the beginning of the bull market in gold and continues to look like a good long-term bet. I suspect that people will make money in gold, gold stocks, and other precious metal investments this year as well. Gold is a volatile investment but only because its value is measured in dollars. It is the dollar that is truly volatile while gold is actually a stabilizing and protective factor for your wealth.

I am often asked the question “how do you buy gold?” Here is my “system” to take advantage of the volatility of gold. First, you must save money to make a purchase. Second, I wait until I have accumulated enough money to buy gold mining stocks (or a precious metal mutual fund) and I also wait for a time when the gold price has been declining and the major financial media are publishing articles on the falling price of gold. Third, when the media starts to turn bullish on gold, I start thinking about selling some of my shares. Next, when the price starts to fall back I call Burt Blumert and use my profits from gold shares to buy some gold bullion or coins. This process can take a couple of years, but you can also go the direct route and buy a nice gold coin at any time. I’ve never sold any coins except during the hysteria of 1979—80 when I sold some of my coin collection. Once you have accumulated a bunch of coins you should start putting some of them in a safety deposit box.

I am not expecting energy stocks to increase by 40% again this year and have sold some shares equal to the profits of 2005. The housing bubble probably ended this summer so it would be a good time to sell your housing (and real estate stocks) which are up more than 50% since I first reported on the housing bubble in June of 2004. The only new investing idea for 2006 is Japan. The Japanese stock market seems to have finally bottomed in 2003 after more than 13 years of decline and it had a bubble-like year in 2005. Japan seems poised for further gains in 2006, but it too is a volatile investment.

Good luck investing in 2006.

Mark Thornton [send him mail] is an economist who lives in Auburn, Alabama. He is author of The Economics of Prohibition, is a senior fellow with the Ludwig von Mises Institute, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is co-author of Tariffs, Blockades, and Inflation: The Economics of the Civil War and is the editor of The Quotable Mises.

So how high (or low) can the price of gold go?

My thesis that I present to you today is that all of the above mentioned forecasts are correct, and they are all incorrect.

The price of gold will go to $430, it will go to $465, and it will go to $470, although we cannot be certain that it will achieve these goals in 2005. I must admit that there is a good chance that the price of gold could continue to soften in 2005 and even to dip back below the $400 level; I also believe that there is a good chance of gold reaching $470 this year.

But will gold reach $500, $600, $750, $1000, or perhaps even $1200 per ounce?

The answer is almost certainly yes.

However, the reason for this affirmative and quite bullish answer also implies that the price of gold will go even higher than $1,200 per ounce. In fact, it implies that gold will exceed $5,000 and $10,000 per ounce.

Discounting any numismatic value for dollars, the ultimate price of gold will be infinity. That’s correct. Those in charge of the printing press will continue to print up dollars until they drive the value of the dollar to zero, making the price of gold infinite in terms of dollars. They will destroy the dollar because they have the power to do so.

You might be thinking that Thornton is crazy or that he is planning on publishing a book along the lines of Dow 36,000, Dow 40,000, and Dow 100,000.

Surely, you would think that the powers that be in Washington, DC had better sense. That they would look at the situation rationally — that they would pull back — why would they ruin the geese that laid the golden egg; that in effect allows them to write bad checks and get away with it to the tune of trillions of "dollars?"

But I am not calling their rationality into question. They will "pull back." They will get together with their monetary buddies from around the world (Britain and Japan, especially, but also the EU, China, Canada, etc.) and sign agreements for the purpose of reestablishing monetary stability and to realign exchange rates. But they will not truly mend their inflationary ways.

What I am bringing to this question is the rationality of the people — you and me — all of us. Eventually "we the people" will realize that they (politicians and their central bankers) have no real plans to stop inflating. This realization means that people will hold fewer dollars and this will fuel the depreciation of the purchasing power of the dollar and a higher dollar price of gold.

The value of the dollar lost 95% of its purchasing power between the founding of the Federal Reserve in 1913 and 2003 as measured by the Consumer Price Index (CPI), but CPI is a flawed measure. It systematically underreports price inflation to help cover up the activities of the Federal Reserve.

Most economists actually think that the CPI overreports inflation, but this is because they are rewarded for coming up with new ways to "adjust" or calculate over time. If an item in the Consumers’ basket rises in price it can be dropped from the calculation, but when consumers turn to cheaper substitutes they get included in the statistical basket. Quality improvements, technological advances, and gains in productivity all need "adjustment" so that inflation can be accurately measured.

This tainted view of the CPI by mainstream economists basically takes the benefits of the market economy and uses them as justifications to underreport the impact of monetary inflation. It’s really a cover-up story. Help the Fed cover up the signs of its nasty practices and you will be well rewarded.

If you didn’t give the Fed credit for all the gains of the market economy in terms of quality improvements, technology, and productivity, we can easily see that the dollar has lost more than 99% of its value.

There is a story that says that if you throw a frog into boiling water it will jump out, but if you place a frog in a pot of warm water and slowly raise the temperature, the frog will allow itself to be cooked and killed. Actually, this is an urban legend. If you throw a frog in a pot of boiling water it will be killed and if you place a frog in warm water it will only stay as long as it is comfortable and jump out long before being cooked. I’m not exactly sure who tested this theory, but I’m quite sure it is correct.

I’m also quite sure that the frog can be seen as analogous to people and inflation. If the economy is thrown into hyperinflation the economy will be "killed" or at least thrown into shock, cardiac arrest, or a coma. If people are exposed to low rates of inflation they can be quite comfortable, at least some of them, like our frog in warm water. However, as the rate of inflation is driven higher, eventually we will jump out. The sooner the better.

The rate of inflation has already risen in recent decades and most of that lost value in the dollar has occurred since the early 1970s when Nixon took the dollar off the Bretton Woods-style gold standard. Since that time, the dollar has lost 80% of its value. Monetary inflation continues apace and some measures of the quantity of money depict even higher rates of monetary inflation.

The case against the long-term health of the dollar:

1. The Federal Government’s debt continues to increase.
2. The Federal Government’s deficit continues to increase.
3. Social Security will not be "fixed."
4. Growing US population of tax eaters (Social Security, employees, retirees, welfare, contractors, NGOs)
5. Rebalancing of world economic power (Euro, Japan, China, India)
6. Holding onto the Empire (Iraq, Afghanistan, etc.)
7. US dollar as reserve currency (China, Japan?)

The case for owning gold:

I’m not going to tell you to sell everything and buy gold bullion — as much as I’d like to. This scenario — the demise of the dollar — could take decades to finally play itself out. Also, gold is a volatile commodity, and even though this is largely because of the government’s erratic inflation policies and warfare tendencies — the price of gold is still volatile in both directions.

Traditional investment advice says to hold 5—10% of your money in gold and other inflation hedges. The danger levels are now much higher than traditional levels and so that percentage should also be increased. If I were Tom Ridge, I’d call this one an orange alert or even a red. Certainly over the next two years we are looking at more borrowing by the federal government, higher prices, a lower dollar, and eventually a recession in the economy.

A friend of mine whose job it is to help promote gold sales tells people to only buy gold with the money that you cannot afford to lose. For most Americans this would be everything they have except the ordinary expense money in their checking account. The really scary thing is that the majority of Americans are net debtors (symptoms of inflation and the bias against savings created by Social Security and the tax code).

I’m never sure about my own predictions and forecasts and am always amazed when they come true. If you want to hedge your bets then only put 50% of your money in gold. Then you are partially covered if gold skyrockets and partially covered if it flounders over the next couple of years. With at least 50% of your assets in inflation hedges like gold, every drop in the dollar will be compensated to an extent by increases in the gold price. Inflation hedges like art and real estate have certain advantages, but they also have disadvantages, so if they are in your portfolio you need to know what those disadvantages are. I am personally invested almost 100% in inflation hedges including gold, collectables, and natural resource companies, such as gold and oil companies. Oil is the hot commodity at the moment.

Despite these dire words I am optimistic about the economy in the long run. I even hold illusions, possibly delusions, that future politicians will see paper fiat money for what it is and make the rational decision to shut down the central bank, recall its paper, renounce its monetary authority, disgorge itself of our gold, and balance its budget at a greatly reduced level.

Even this optimistic scenario, gold investors will still have invested in something as good as money.

This article is based on a talk given at the Mises Institute’s 2005 conference on Austrian Economics and Financial Markets.

Mark Thornton [send him mail] is an economist who lives in Auburn, Alabama. He is author of The Economics of Prohibition, is a senior fellow with the Ludwig von Mises Institute, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is co-author of Tariffs, Blockades, and Inflation: The Economics of the Civil War and is the editor of The Quotable Mises (available soon).

The "cure" for allergies is steroid shots or pills which can work just fine, but they can also be worse than the allergies themselves. The medical profession’s best "defense" against allergies is steroid sprays and daily pills such as Allegra or Claritin. These work fine for minor allergies, but can be virtually powerless against severe allergies. You can also take allergy shots, but these are somewhat expensive and you have to take the shots weekly (they don’t hurt) for years with no guarantee of success or a permanent cure.

Then there is the 3M Company, the old Minnesota Mining and Manufacturing Company that is now most famous for its Post-it notepads. It turns out that their product line (55,000+ products) actually has some great products that are better, cheaper, and more accessible than those offered by the medical establishment. At the very least they help reduce the impact of many common allergies.

Here is where Michael Jackson comes in. You may remember that during his trial that one of the bizarre things he did was to wear a facemask. Many people thought he was trying to hide his face from the media’s cameras or to hide his plastic surgery. Actually, it turns out that he had allergies and he was using the mask to filter pollen from the air he was breathing.

3M 8000 N95 Particulate Respirator

It turns out that you can buy a pollen-quality mask for less than a dollar and they last a long time. I wear them when I work in the yard during the worst of the pollen season. It really works well after you become accustomed to wearing the mask.

The next little invention actually brings together two 3M products with a twenty inch box fan. The first is the Filtrate filter which is designed for forced-air heating and cooling systems in your home. These are much more expensive than typical filters, but I think they are worth it. You will need to buy either a Red (1000-good), Green (1100-better), or Purple (1250-best) model. They are designed to last for three months on average.

You may not have a forced-air system, and even if you did, those systems usually do not operate enough during allergy season — especially spring and fall — to remove enough pollen and mold spores to be of much use. That is why you buy the 20-inch by 20-inch version of the filter and attach it to the box fan.

How do you attach it? Well, you don’t have to be a Southerner to know the answer to that one. You simple lay the box fan down (front side down) and place the filter on the back of the fan with the air-flow direction arrow facing downward and "duct tape" the filter to the fan trying to produce an airtight seal so that as much air gets drawn in though the filter as possible. I’ve dubbed this contraption the 3M/MT.

I keep one of these 3M/MT allergen eliminators in the bedroom area of the house for use at night and one in my office for use during the day. They are lightweight and easy to move around. I change the filter every two months because I leave them running eight to twelve hours a day on low speed. In addition to reducing pollen and mold spores the 3M/MT reduces dust, animal dander, and typical household smells like fried catfish.

Amazing! Who would have thought that Duct Tape could "fix" allergies?

It turns out that just about the only thing that Duct Tape can’t fix is the problems of government intervention.

Mark Thornton [send him mail] is an economist who lives in Auburn, Alabama. He is author of The Economics of Prohibition, is a senior fellow with the Ludwig von Mises Institute, and is the Book Review Editor for the Quarterly Journal of Austrian Economics. He is co-author of Tariffs, Blockades, and Inflation: The Economics of the Civil War and is the editor of The Quotable Mises (available soon).