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Free Market

The problem with modern America

If you follow the news coverage of this election cycle you will think that the most important issue that the voters care about is Donald Trump’s vs Bill Clinton’s affairs and sexual misconduct. In reality, this is all noise that has zero chance of affecting the lives of citizens. We have a legal system where crimes such as sexual assault and rape are supposed to be tried, where people can be convicted by juries of their peers after adversarial trial but the media focus on trying these crimes instead of the courts because they get good ratings and divert people’s attention from the real issue.

The real issue that affects America is the lack of free market in many fields that leaves people victims of monopolies that prey on them. In this post, I will touch on some of these areas and show why the lack of free market is hurting our country.

Trade

Many people on both the left and the right argue that our current trade deficit is caused by our trade agreements and blame the decline in manufacturing jobs on free trade. Trade is not the reason for this decline but it is the factor that exposed the weakness in the American industrial field which is the high cost caused by the taxes, regulations and labor laws that are enforced by the different levels of government. The cost of the government policies prevents the free flow of labor and capital to many industries such as clothing, furniture, and electronics because it is very hard to compete with cheaper imports coming from countries that don’t have the same tax, regulatory and labor burden. There is the wrong way to handle this issue by going into protectionism which will shield our industries from global competition while raising the cost of consumer goods and making all of us poorer. The right way is for the government to realize that it needs to free the American business from these burdens and dramatically reduce taxes and regulations burden and ease the laws protecting labor unions and restricting the flow of labor to the most productive use.

Many Trump supporters point to the foreign governments’ unfair trade practices such as currency manipulation and dumping of cheap products. I think that we should respond to such practices but not before we make sure that our government does everything it can to remove the obstacles facing our industries.Read More »The problem with modern America

Government Regulations: Costs and Dangers

A government regulation is a set of rules written by some executive branch agency to organize a certain economic activity. They start when the legislature passes a law to organize some economic activity and as part of that law, it creates a new executive agency or tasks existing agency to create the rules that people and businesses have to follow to comply with that law. The agency then maintains these rules, updates them as it sees fit and enforces them through either financial penalties or prosecution for violation.

Federal Government regulations are violating the Constitution because the Congress is delegating lawmaking to the executive branch. The Constitution has a clear separation of power between the three branches and it doesn’t give the power to any of the branches to delegate its powers to another branch. Not only does Congress delegates its power to write law regarding a certain area, but also it effectively loses that power. Once created, the regulatory agencies can write as many regulations as they want and Congress can only repeal a regulation by passing a bill, but given that the President still has the veto power the Congress can repeal a regulation only if it has a two-thirds majority support for that repeal. This effectively eliminates the power of Congress in every area regulated by an executive agency. According to the information on the federal register, which maintains all the federal rules, Congress had  only disapproved one rule since 1996.

Read More »Government Regulations: Costs and Dangers

Individual vs. Group

As Ludwig von Mises explained in his masterpiece book Human Action, the economy consists of individuals performing actions based on their individual preferences and engage in market exchanges “catallactics” with other individuals. People act to satisfy their needs and the needs of other citizens involved. For example, an employee performs his job to meet the goals set by his employer and to earn compensation. We can understand what happens in the market through analyzing the actions people make and the needs they satisfy. For example, when an entrepreneur starts a business that provides a product or a service that meet a certain need, people who value this need will buy this product or service to meet that need and while doing that they satisfy the entrepreneur’s need to have a successful business. If that business doesn’t satisfy enough customers to generate a profit, the entrepreneur will have to either adapt his business to the market or go out of business freeing his time and resources to work on something else.

Many politicians rely on a different standard in the analysis. They explain everything as a conflict between two groups of people:

  • Karl Marx and his followers explain everything through a class struggle between the workers and the business owners, proletariat vs. bourgeois.
  • Progressives in the United States explain everything in terms of business exploiting customers and the need for government to protect the customers.
  • Race activists explain everything in terms of whites exploiting other races.

Of course, there are business owners that abuse their workers, businesses that cheat their customers and white people who discriminate against minority people. But there are also many business owners that treat their workers very well, many businesses that do everything they can to serve their customers and many people who don’t consider race at all in their actions.

Read More »Individual vs. Group