Monday, February 8, 2016

Bernie Sanders and the Fraud of Democratic Socialism

By Dom Armentano

With his recent strong showing in the Iowa caucus, Senator Bernie Sanders now deserves to have his policy ideas examined seriously by admirers and critics alike.

Sanders has policy positions on dozens of important issues but two stand out: One, Sanders is a self-described “democratic socialist” and two, he has argued repeatedly that the rich don’t pay their fair share of taxes. Presumably, in a Sanders Administration, there would be more “socialism” and higher taxes on the “rich”.

What is democratic socialism? From my training in economics, socialists believe that free-market capitalism is a failed system and that it should be replaced by government ownership of the means of production. This means that all important decisions concerning the production of output and the direction of investment should be made by the State. The “democracy” part of the definition implies that democratic institutions such as a constitution and elections would be preserved.

Does Bernie Sanders really believe that democratic socialism makes sense? Probably not, for a number of reasons. First, many economists accept that socialism fails in both theory and practice; it is not a coherent economic system. It fails in theory because if all of the “means of production” are nationalized, there would be no intelligent way for government planners to decide which factor combinations are the cheapest or which outputs and investments would tend to maximize consumer welfare. The economy would literally be at sea without a rudder.

To see why this is so, we must understand that under free-market capitalism, prices and profit incentives guide resources into uses that consumers prefer relative to alternatives. But in socialism, where the crucial factors of production (such as capital and land) are owned by the State, there are no meaningful price signals or profit and loss incentives to ensure that scarce resources are used efficiently and not wasted. And this so-called economic calculation problem is not made any easier by arguing that the government would be “democratic” or that it’s intentions are to help the poor.

Second, socialism (or near socialism) in practice has been an economic disaster wherever it’s been seriously tried. Most of the socialist experiments (Cuba, 1960-2016) have ended up confiscating wealth, wasting capital, destroying incentives, and impoverishing the great bulk of the population. And don’t believe for a minute that it’s a lack of democracy that has doomed socialism or the so-called Cuban experiment. No way. It’s the rejection of private property, of the free market price system, and of open competition between business organizations that have made socialism unworkable.

Sanders is NOT a democratic socialist (although why he insists on that label is troubling) but is, instead, a “social democrat.” Social democrats or progressives accept (grudgingly) the basic institutions of capitalism (the price system, stock markets, etc.) but want numerous social programs for the unemployed and poor and want increased regulation of large corporations and banks. Fine, but notice that there is nothing terribly radical about any of those ideas; they have been around for decades. Hillary and Bernie may quibble loudly about health care reform but it’s a debate well within the progressive mainstream of the Democratic party.

The Sanders view that the rich should pay their “fair share” of taxes might inspire a more radical agenda if we just could determine what Bernie means by “fair share.” (I suspect it simply means more taxes.) According to 2013 IRS data, individuals with adjusted gross income (AGI) of $250,000 or more filled just 2.4% of all tax returns yet they paid 48.9 % of all taxes; their average tax rate was 25.6%. By contrast, people with incomes of $50,000 or less paid just 6.2% of all taxes and their average tax rate was just 4.2%. Since the average federal tax rate on the “rich” is already 6 times the average tax rate on the (relatively) poor, one wonders what theory of fairness Bernie Sanders has in mind.

The Democratic Party’s leading candidates for president both have embraced progressivism with a bear hug. Should we be shocked? Probably not. After all, is this any more shocking than the substantial support that likely Republican voters show for the bombastic Donald Trump? The fact remains that we may need intelligent debates and a general election in November, 2016, to sort some of this nonsense out.

Dr. Armentano is professor emeritus in economics at the University of Hartford and the author of Antitrust and Monopoly(Independent Institute, 1998) and Antitrust: The Case for Repeal (Mises Institute, 1999). He lives in Vero Beach, Florida.

The above originally appeared at and is reprinted with permission of the author.

Sunday, February 7, 2016

How Mark Brady Turns Socialists into Misesians

Mark Brady teaches both Principles of Macroeconomics and Principles of Microeconomics and the occasional upper-division class at San Jose State University. He also teaches Economics at De Anza College, Cupertino. He has taught economics for many years in schools, colleges and universities in Britain, Ireland, and California.

I am honored to be a part of Mark's quarterly supper discussion group that meets in Berkeley, California. (We are meeting tonight.)

I just became aware of the below youtube recording of a talk he delivered in October 2011. The official title of the talk, "How Mises Turns Socialists Into Libertarians," is Mark's much more modest title than the one I have given to the talk in the above post title.

One note: In the talk Mark mentions, From Marx to Mises: Post Capitalist Society and the Challenge of Ecomic Calculation by David Ramsay Steele, which may not be entirely clear until well into the talk.

Be Afraid, Very Afraid: Millennials Heed the Siren Call of Socialism

By Joel Kotkin

he biggest story this election season is not Donald Trump or the fortunes of the two winners in Iowa, the unattractive tag team of Ted Cruz and Hillary Clinton. For all their attempts to seem current and contemporary, these candidates – and Trump as well – represent older, more established elements in American life, such as evangelicals, nativists and, in Hillary’s case, the ranks of middle-age women, seniors and public-sector unions.

The biggest and most important development has been the massive support among the new generation of voters for Vermont Sen. Bernie Sanders and his open embrace of socialism. In Iowa’s Democratic caucuses, which ended with Clinton and Sanders in a virtual tie, young people opted for Sanders at an almost inconceivable rate of 84-14. In 2008, Barack Obama won this segment, claiming only a 57 percent majority.

So we are seeing the embrace of an openly socialist septuagenarian by a generation that, within a decade, will dominate our electorate and outnumber baby boomers as soon as 2020. That should put more conventional politicians, and business, on notice. Whether you are a Republican, a free-marketer or, even a Democratic-leaning crony capitalist, be afraid – be very afraid.

Read the rest here,

How I Am About to Save Uber $20 Million

By this open letter:

Dear Travis Kalanick,

The absolutely worst text I want to see from an Uber driver when I am on the sidewalk in the  middle of a block where there are four lanes of traffic in front of me is:
Hi, This is your Uber driver I am directly across the street from you.
I have a workaround for this that I use most of the time. I go to the nearest street named alley (There are plenty in SF) and call for a car to that location. The car picks me up there, None of this, "Hey, I am across the street, let's see you dodge traffic." for me.

But I suspect most people have not thought of the workaround.

I recently struck up a conversation with an attractive gal in the North Beach section of San Francisco It turned out she was a senior player in high tech company but she had not yet figured out my workaround, She had called for an Uber at the corner where Kearney, Columbus, and Pacific streets intersect in quite a mad fashion.  She was on Kearney and gave a Kearney address for her pick up, The Uber driver showed up on the Columbus part of the intersection---on the complete opposite side of Columbus. That's a dart across 6 lanes of traffic, with cars coming at you from 5 different directions.

I recently sat at a restaurant on Market St. I was watching the street scene outside. It turned into a double-header Uber dodge traffic game. A couple on my side of the street, called for an Uber, The driver showed up on the opposite side, With luggage in tow, they dodged the four lanes of Market St. traffic to get to their Uber. Just minutes later, a couple, also with luggage, called for an Uber on the other side of the street, That Uber car showed up on my side of the street. The Uber dodge traffic game occurred in reverse.

One of these days someone is going to get hit playing this Uber dodge the traffic game and end up with severe injuries or maybe even get killed,

In this day and age, when one of these accidents occurs, some slick lawyer is going to sue Uber for not properly training drivers to the fact that the Uber pick-up service should not be turned into a passenger dodge traffic event. It will cost you $20 million.

I would recommend that you train your drivers to show up on the same side of the street that your passengers are requesting pick-ups from.


Robert "In the alley" Wenzel
Editor & Publisher

How Trump Blew It Last Night on the Eminent Domain Question

Last night during the Republican presidential debate, Jeb Bush of the Bush crime family, attacked Trump for using eminent domain in Atlantic City.

Of course, eminent domain is evil and Trump should not be given a pass for using it but Jeb should be the last person to be charging someone for using eminent domain. His brother, George W., who he is using in spots to campaign for him, acquired most of his wealth when the City of Arlington, Texas  grabbed through eminent domain homes, so that Bush could build a new baseball stadium for the Texas Rangers and an accompanying parking lot, a team then-owned by a group where George W. was the general manager and key partner.

Trump should have it Jeb over the head with that and he never would have recovered.

The story on one of the cases (there were other properties involved) was first reported by Texas reporter Robert Brice in May 1997, late in Bush’s first term as governor of Texas:
In April of 1991, the Rangers shepherded through the Legislature a bill [that] would create the Arlington Sports Facilities Development Authority, a quasi-governmental entity endowed with the power of eminent domain. Shortly after the bill was signed into law by former Governor Ann Richards, three parcels of land located near the stadium, nearly thirteen acres in all, were condemned by the ASFDA. The land was owned by … the heirs of television magnate Curtis Mathes.Among court documents is an unsigned Rangers memo by a team representative, discussing the history of the Mathes tracts. The representative notes that in his first contact with the Mathes family concerning the land, on November 6, 1990, “I was not well received.” The memo goes on to say that the ASFDA’s appraiser assigned the land a value of $3.16 per square foot, for a total value of $1.515 million. “An offer was made by the Authority at this price. This offer was rejected & the Sellers countered with $2,835,000.00 for all three tracts, i.e.: $5.31 p.s.f.” In mid-December, the ASFDA offered the Mathes heirs just $817,220 for the three tracts, far below even what the ASFDA’s first appraiser had suggested. The Mathes family refused to sell, and the ASFDA seized the land through eminent domain.
Glenn Sodd, a Corsicana attorney who represents the Mathes family, says he has found little evidence that Bush was directly involved in the decisions to condemn the property for the stadium. But he adds, “What happened to my folks was pretty audacious. It was the first time in Texas history that the power of eminent domain has been used to assist a private organization like a baseball team.”
[In May 1996], a Tarrant County jury found that the sports authority’s offer of $817,220 for the Mathes property was too low, and it awarded the Mathes heirs $4.98 million, plus accumulated interest. For the past year, the city of Arlington and the Rangers have been arguing over who will pay the tab.
Bush sold his interest in the Rangers in 1998 for $14.9 million. He had invested a total of $606,302.27 [in 1989] and was one of two managing partners.


Ron Paul: Socialism and War Will Not Prevail

Saturday, February 6, 2016

Zimbabwe to Declare Emergency Over Food Shortages

Zimbabwe’s government plans to declare a national emergency over food shortages as the United Nations warned the situation is worsening at an “alarming” pace and price-spikes for basic commodities are looming.

“We are going to announce to the world the hunger we’re facing,” Vice President Emmerson Mnangagwa told lawmakers in the capital, Harare, on Thursday. “We have drought in this country and it is a pending disaster,” he said. President Robert Mugabe will make the announcement in days, he said.

About 1.5 million of Zimbabwe’s 12 million people currently need emergency food assistance, and that number may triple this year, said Social Welfare Minister Prisca Mupfumira on Feb. 1.

“The situation is deteriorating at an alarming rate," Eddie Rowe, an official with the UN’s World Food Program, said in Harare on Feb. 2.

When you see the word "shortages," you know there are price controls.

Zimbabwe is a perfect example of a country where central planning is on steroids, There needs to be a Zimbabwean Economic Miracle, similar to the German Economic Miracle that followed after World War 2.


(via Bloomberg)

What Class Do You Belong To? The most silent of class signals

William Hanson informs in the Daily Mail:
Perhaps one of the most silent of class signals is whether a person (male or female) wears brown shoes in London and big cities on a Monday to Thursday. Fridays and weekends are permissible for brown in town, however.
This stems back to the era when men would travel to their country pile from working in the city on Fridays. Brown shoes are for country wear; black for cities. If you were wearing brown shoes in London on a Saturday it was presumably as you had travelled in from the country.
This rule is less followed these days but the top tier still known.

Comments on Comments

Here is my latest edition of comments, on comments left by readers.

LukeFebruary 6, 2016 at 1:09 AM Fall in Number of Oil Rigs Drilling in US Escalates Sure they will. We might be overshooting to the downside a bit, but once oil moves up, these rigs can be turned right back on. I would be very surprised to see $60-$70+ oil anytime soon.
And so you completely ignore the possibility that oil could be dragged up with a general increase in price inflation.
Dave SchumanFebruary 6, 2016 at 12:51 AM Unemployment Rate At Lowest Level Since February 2008I find the labour participation rate to be much more informative. And by any standard it is abysmal in U.S terms. Some of the other commenters mentioned part time jobs which has also been symptomatic of this so called recovery. I've started to lose faith in many of Wenzels predictions and or economic articles. The man's creds for free market's are untouchable but I don't think he takes enough factors into his analysis to form a solid opinion of markets, his sole argument seems to be money supply, which I find good but lacking in depth and explaining why the globe is deflating in many sectors despite massive monetary stimulus, or money creation.
Where do you guys come up with this stuff? Do you ever look at the data?

First, the participation rate has started to climb.

Second, I have put up multiple posts explaining why the participation rate has been low:

SEE:  Understanding the Labor Participation Rate and Does Lower Labor Force Participation Mean the 5% US Unemployment Rate is a Phony Number?

There is a shift in employment following the end of the boom phase of the business cycle, which increases unemployment, but that is it  for general unemployment. Do you even have a theory as to why employment markets supposedly don't clear? Do you not believe in supply and demand? Let's hear it.

You really are just babbling, here is a chart of your so-called part-time recovery, part-time employment is collapsing:

Hating the Fed, without really understanding what is going on in the economy makes you look like some kind of true believer rather than a scientist.

As for my focus on money supply, Austrian School Business Cycle Theory is a theory about money supply. Would you rather I spew out incorrect facts about the economy, the way you do, to justify your true-believer nonsense position on the economy?

Further, my view of the economy has been much more complex than your simple charge that "I only look at money supply." In December 2008, after forecasting the crash, I wrote:
 The desire to hold larger cash balances (as indicated by the growth in M1)in many ways has the same impact as a decrease in the money supply would have. A general deflation of prices occurs, which ultimately results in a lower overall price level. So what does this have to do with ABCT and the consumption-savings ratio. It means that if there is a strong demand to hold cash balances, which puts downward pressure on all prices, even if some consumer prices are falling, the consumption-savings ratio can still be readjusting in favor of consumption versus capital.

Go that? After forecasting the crisis in real time, I warned, (within 2 months!) that despite  increasing money supply, you could see downward pressure on prices.

So in other words. your comment:
 I've started to lose faith in many of Wenzels predictions and or economic articles. The man's creds for free market's are untouchable but I don't think he takes enough factors into his analysis to form a solid opinion of markets, his sole argument seems to be money supply, which I find good but lacking in depth and explaining why the globe is deflating in many sectors despite massive monetary stimulus, or money creation.
is a complete failure to understand the complexity of my argument. But, hey, go ahead hate the Fed, we need need simple haters of the Fed also.
Chris BarceloFebruary 5, 2016 at 7:47 PMDon't employers only lay off employees once they realize they had made a malinvestment in labor and mis-anticipated consumer demand and purchasing power? What about the argument that this is a lagging indicator? I understand the money supply issue but the data seems quite terrible aside from jobs? You're no fool Wenzel, and you've demonstrated this with your on point analytics and fundamental understanding of the business cycle. How could you better help us to understand your position here?
What data looks terrible? There is a downturn in the energy sector and weakness in the export-related manufacturing sector.  Most fascinating, despite weakness in the export-related manufacturing sector  The Bureau of Labor Statistics report on Friday showed that manufacturing companies added 29,000 workers in January to reach a seven-year high of 12.4 million. .

It wasn’t just a few sectors that increased employment. Of 79 manufacturing industries, 64% were adding workers. Sectors as diverse as food manufacturing, fabricated metals, auto making and chemicals were hiring.

Not only were factories hiring, they were working their employees longer shifts. Average weekly hours rose a tick to 40.7 hours in January, which is significant because the manufacturing workweek is considered to be one of the best leading indicators for the health of the economy as a whole

Factories were also paying their workers more in January. Average hourly pay rose 0.3% or 8 cents to $25.61 an hour. Weekly pay rose by $5.81 to $1,042.33 a week.

Unemployment starts to climb at the start of a recession. Here's data going back to 1948. The shaded areas are periods of recession. 

Don't listen to goofy comments under posts or elsewhere that don't look at the data or from true-believers who hate the Fed but don't understand how the economy works or why the Fed should be hated.
David BrubeckFebruary 5, 2016 at 1:14 PMPlease comment on Peter Schiff's point that part time jobs (encouraged by Obamacare) are being counted at full time jobs so these numbers are not comparable to before Obamacare.
What theory exactly would cause people only to be able to find part time jobs? Markets clear. If people want full time jobs, they would find them.

Average weekly hours worked has been climbing since the end of the recession.

RatFinkFebruary 5, 2016 at 11:52 AMUnemployment down, which means the stock market should go up...err go down. Almost 200 points down today thus far...yes good times are here. Wenzel, do you recomend people should steer a car foward [sic] while staring at the rear view, because hey...the coast looks clear looking at my rear view.
I have a full discussion in the EPJ Daily Alert as to where the selling pressure in the stock market is coming from. Why don't you spend a couple of bucks and troll me there. I respond to all ALERT questions.

Steve MarinoFebruary 4, 2016 at 1:10 PM The Growing Number of Metro Areas With Unemployment Under 3%I will take the inverted yield curve over "employment" metrics, simply because market metrics are more reliable than political ones. Market statistics such as credit spreads, commodity prices do not reflect a boom. GDP, unemployment, cpi are potemkin statistics and are not to be trusted.

The yield curve is not inverted.  Please look at data before you make comments.

Also see above, I explained in 2008 why despite a recovery we could see downward pressure on prices.

Rick La GreideFebruary 3, 2016 at 8:33 PM The Growing Number of Metro Areas With Unemployment Under 3%You do not think that number of people employed part time and in temp jobs has any bearing on this?
No, please see above. 

RatFinkFebruary 3, 2016 at 12:56 PM Top Bankster After Chemotherapy: I'm Fine, The Economy is FineSo this puts you an Lloyd in the same boat. Economy is no head [sic]to the stock market.
So I should just post the opposite of whatever the banksters say, even when they might be correct? Sounds like a hell of an idea for a blog, why don't you start one? 

RatFinkFebruary 2, 2016 at 12:58 PMOf course no need to test negative rates, right Wenzel? Not when we...err you predict galloping inflation and boom this year. They should be testing for 5% fed funds rate to slow down this economy.
I have not predicted galloping inflation. My forecast is a jump to 3% price inflation as measured by government indexes, which the Fed will ignore, then followed by 5% inflation which the Fed will then attempt unsuccessfully to "battle," which will lead to even higher inflation.

As for your smart remark about testing a 5% fed funds rate to slow the economy. There is no necessary connection between the price inflation rate and the phase of the business cycle the economy is in. You are talking pure Keynesian crap. RatFink consider yourself exposed.


Hey Janet, You Can Stop the Printing Presses Now: Super Bowl Ticket Sold for $27,983

Super Bowl ticket prices  are at an all-time high.

The information below includes current prices, comparison to previous years and geographical stats about where fans are traveling from.

The Cheapest Ticket Available for Super Bowl 50 is $2,500

The Average Ticket Price Sold for Super Bowl 50 is: $4,827

• Average for Super Bowl XLIX in Glendale (2/1/15 Patriots-Seahawks): $4,222

• Average for Super Bowl XLVIII in New York (2/2/14 Seahawks-Broncos): $2,516

Tickets for Super Bowl 50 have sold for in the range of $1,222 to $27,983

• The least expensive ticket was $1,222 for a seat in Upper Sideline.

• The most expensive ticket was $27,983 on the Lower Prime Club

(via NBC Bay Area)