In this episode, I explore the following questions: What are claimed market failures? Do they exist? Can government intervention correct them? Is there such thing as government failure? It's important to ask these questions to determine whether or not market failure or government failure are the bigger problem in society. Much of this has do with the differences between Mainline Economics (my preference) and Mainstream Economics.
This enters controversial territory in economics and politics by discussing the myths of "market failure." Supposed market failures usually include problems with markets because of asymmetric information (occupational licensing and healthcare), monopolies (utilities and EpiPen), and externalities (pollutants) that can theoretically be corrected by government intervention.
However, I make the case that these issues in markets are generated by government intervention, not unhampered markets, and the introduction of government intrusion to attempt to correct these potential issues only expand government and make the problem worse.
Moreover, there are no free-market government solutions, which is why toxic pollutants should be dealt with by letting markets sufficiently price them or alternatively, though not recommended, by regulation. Policy solutions such as a carbon tax indirectly price externalities and the price will always be wrong because of the "knowledge problem" taught by economist Friedrich Hayek and the poor modeling that's done by so-called experts (see William Easterly's book The Tyranny of Experts). In general, the institutional structure of an economy should be supported by the government through upholding contracts, protecting people, and providing very few public goods.
Instead of resorting to government intervention to solve supposed market failures, we should first understand that the government is likely the problem and Let People Prosper by promoting institutions with strong private property rights and fewer barriers to entry and exit markets.
State of the U.S. Economy Including Strong Growth & Rising Compensation and Costly Tariffs & Budget Deficits: LPP EP 24
In this episode, I discuss the state of the U.S. economy, including the markets, rising compensation for Americans, Federal Reserve leaves target federal funds rate unchanged in the range of 1.75-2%, and costly federal budget deficits of nearly $1 trillion that will be a drag on economic growth unless government spending is reined in along with the cost of tax hikes from tariffs.
There is a clear path to more economic growth, job creation, and resulting prosperity: capitalism without government barriers to opportunity.
In other words, the federal government should uphold contracts through a justice system, provide a national defense, and deal with international commerce, but really not much more than that.
Let people prosper by letting them satisfy their desires within institutions of civil society that are the backbone of America's strength. Unfortunately, too many of those institutions are hindered because of excessive government intervention at every level.
Let's learn more about what we can do together.
In this episode, I give an overview of today's report by the U.S. Bureau of Economic Analysis that shows the U.S. economy expanded at a 4.1 percent annualized rate in Q2 2018, which is the fastest pace in four years.
Relief of taxes and regulations has been a big part of that, but making those tax cuts permanent, reducing government spending, and relieving trade uncertainty would help sustain faster economic growth.
Hurricane Harvey brought devastation of catastrophic proportion. Reports note more than 80 deaths and around $150 billion in economic destruction. As someone raised in South Houston and with family and friends directly affected, it’s heart wrenching to see such damage.
Potentially adding to people’s pain was the possibility of scam contractors and price gouging. Scam contractors, also known as “storm chasers,” shouldn’t be allowed to prey on vulnerable people with fake promises of home repair or cheap cars.
What about the concept of price gouging? Is there a price that takes advantage of people who need resources for their livelihood in the wake of natural disasters? Answers to these questions are often not clear cut, as determining that a price is gouging the consumer could harm those that need the good.
Defined statutorily in Texas as “selling or leasing fuel, food, medicine or another necessity at an exorbitant or excessive price,” price gouging laws may help control consumers’ costs, but they can also have the adverse effect of deterring an increase in supply.
Low price mandates may make items more affordable, but are useless if items aren’t available. Elevated prices, on the other hand, attract more supply, preventing long-term shortages and ultimately driving the price back down.
Additionally, price controls can lead to hoarding, resulting in even fewer people getting supplies, potentially setting up costly price gouging in the black market. Allowing prices to rise discourages hoarding of supplies and encourages more rationed use of goods.
To put it simply, higher prices send signals to suppliers of where and how much to supply and to consumers of how much to purchase. Without these signals, the devastation from natural disasters will likely be much worse.
These principles could clearly be seen in the days following Hurricane Harvey. The storm shutdown roughly 25 percent of the nation’s refining capacity and transportation routes were blocked for days from flood waters. Fear of running out of gas naturally increased demand. Spooked consumers dashed to their nearest gas station to fill their tanks and other containers.
Gas prices jumped in Houston from an average of $2.10 per gallon to $2.50 within days after the storm, according to gasbuddy.com. But there were reports of some stations charging as much as $20 per gallon, and many stations there and statewide had no gas. The average price remained near $2.50 per gallon for a while, as it tends to track gas futures prices that soared after the storm, and most stations soon had gas available.
Gas markets work with higher prices sending signals to suppliers of where and how much to supply gas and to consumers of how much gas to purchase. Without these signals, the devastation from natural disasters will likely be much worse.
What if stations can sufficiently raise gas prices? Consumers use that information to ration purchases of gas to just what’s necessary, instead of hoarding it in multiple gallon containers statewide. Other suppliers use this information to dedicate more gas to that area now that they can cover increased costs of transportation, labor, and risk, which has been the case as refineries come back online.
Frivolous allegations of price gouging laws at the time, with 127 retailers eventually receiving notices of alleged violations after the storm, could distort market prices and deter charity thereby hurting those most the law is trying to help.
Let us be cautious about claiming negotiations of individuals in the marketplace are wrong so that Texans affected by this tragic event and statewide will have sufficient resources to recover and prosper now and in the future.
This commentary was originally featured in The Hill on January 4, 2018.
As 2018 begins, there’s chatter about what Congress will do after passing the Tax Cuts and Jobs Act. The Trump administration signaled a new bipartisan approach on infrastructure, a sentiment shared by Senate leadership. The House, however, seems poised to reform welfare through budget reconciliation.
Static analyses of the recently passed tax bill fail to capture the dynamic effects of increased economic activity and job creation that tax cuts generate. Regardless, fewer taxes will still go into the federal coffer, leading to larger deficits unless met with spending cuts. The biggest spending obstacles Americans face are the rising cost of healthcare and the rapidly escalating cost of Social Security and Medicare.
Although the tax bill appropriately repealed ObamaCare’s individual mandate, onerous federal health insurance regulations still remain, leaving patients and consumers again with double-digit premium increases, on average, next year.
Furthermore, the national debt is quickly approaching $21 trillion, or closer to $110 trillion including unfunded liabilities of Medicare and Social Security. In this environment, Congress’ 2018 priority must be to reduce government spending that’s contributing to higher costs of living, subpar healthcare system, and fewer Americans flourishing.
Congress will have to address the continuing resolution that funds the federal government in January. It should enact real reform that bends the cost-curve of Medicare and Social Security.
Sadly, some want to use this opportunity to bail out health insurance companies and create new reinsurance programs that pilfer tax dollars while further diminishing the quality of healthcare.
Members should outright reject these bail outs. They must also resist the temptation to bust the budget caps or adopt a standard that for every dollar increase in defense there is a dollar increase in non-defense discretionary spending.
The Texas legislature recently provided a good example as it successfully adopted fiscally conservative budgets. Doing so means Texans pay lower taxes while still funding essential services, allowing the state to have an economic environment conducive to creating 25 percent of all new jobs nationwide since 2007.
The Texas model is a proven recipe that should be emulated in D.C. Congress should take a page out of the Texas playbook by using budget reconciliation to finally make good on the promise to fully repeal ObamaCare and curtail spending to empower people with more choices on how to satisfy their desires.
Welfare reform is also critical for empowering impoverished communities and providing a pathway to prosperity. This can and should be done through strengthening families and promoting the dignity of work. But the groundwork has simply not been laid, as far too often people rely on the government as the head of the household and choose to live on welfare instead of working.
Regardless, the Trump administration and Congress should carefully consider ‘bipartisan’ notions for a new $1 trillion infrastructure bill, which could serve as a remix of President Obama’s failed stimulus approach. Also, it should reconsider a new $1 trillion food and farm welfare bill without significant reforms to both the food stamp program and agriculture subsidies.
What’s needed is an agenda that unifies and empowers Americans by diminishing the power of Washington. Fully repealing ObamaCare, reforming Medicare and Social Security, enacting welfare reform, and cutting discretionary spending can achieve this agenda. It cannot come from increasing government spending and giving D.C. more control over our lives.
The administration and Congress have greatly boosted prosperity in America through regulatory and tax reforms, but they must now lay out the next steps of their vision that puts the American people first and the interests of the Washington cartel last.
The Texas School Finance Summit was recently hosed by the Texas Public Policy Foundation, Texans for Education Opportunity, EdChoice and Reason Foundation.
The purpose of the event included the following: To provide students with a 21st century education, Texas needs to modernize its broken school finance system. As the state’s school finance commission prepares to convene, now is the time to begin looking forward to the future of education funding in Texas.
Here are links to a video of each panel with a list of panelists:
AUSTIN – Today, the Texas Public Policy Foundation announced that Dr. Vance Ginn will serve as the director of the newly created Center for Economic Prosperity.
“Dr. Vance Ginn is one of the brightest economic minds in Texas,” said Dr. Kevin Roberts, executive vice president of TPPF. “This transition will give him an even larger platform from which to advocate for prosperity, liberty, and flourishing in Texas and beyond.”
A former university lecturer, Dr. Ginn’s passion for teaching carries through in his work today as he seeks to help Texans understand the real-life ways government policies affect them.
“It’s an honor to direct the Foundation’s new Center for Economic Prosperity,” said Dr. Ginn. “I am committed to conducting research based on free market economic principles and examining ways economic liberty can help individuals achieve their unique goals and dreams. I’m blessed to work with such intelligent and caring individuals here at the Texas Public Policy Foundation and look forward to contributing to our continued success in helping individuals and families prosper.”
Dr. Ginn is a first generation college graduate, eventually earning his Ph.D. in economics from Texas Tech University, and has published papers in academic journals.
Bill Peacock, who formally directed the Center for Economic Freedom, is now vice president of research for TPPF.
This press release can be found online here. The Center's research can be found here.
For more information or to request an interview with Dr. Ginn, please contact Alicia Pierce at email@example.com or 512-472-2700.
Kevin Roberts, Ph.D., is executive vice president of the Texas Public Policy Foundation.
Vance Ginn, Ph.D., is director of the Center for Economic Prosperity and Senior Economist at the Texas Public Policy Foundation.
Bill Peacock is vice president of research of the Texas Public Policy Foundation.
TheTexas Public Policy Foundation is a non-profit free-market research institute based in Austin. The Texas Public Policy Foundation aims to advance a societal framework that effectively fosters human flourishing based upon cooperation and mutually beneficial exchange of ideas and speech.
Facebook page: www.Facebook.com/TexasPublicPolicyFoundation
Twitter feed: www.Twitter.com/TPPF
Vance Ginn, Ph.D.