Many years ago Ludwig von Mises wrote a thin book called A Critique of Interventionism, which argued that government regulation of economic activity invariably causes problems-even from the point of view of the regulators-and thus creates the excuse for more regulation.
The classic case is retail price controls on milk for the purpose of making it more affordable. Of course, if the price ceiling is fixed below the price that consumer demand would have set, consumers will buy more milk, but no new supply will be summoned. Empty store shelves will become common. So now the regulators have a new problem to solve. They may try to solve it by expanding the controls to the wholesale and processing levels, which is Mises’s point.
The current business scandals illustrate the point in a less direct way. When Enron fell, everyone lamented the misfortune of employees whose retirement accounts were heavily invested in Enron stock. The company was criticized for encouraging and even permitting such a risky portfolio. Diversification, of course, is ultimately the investor’s responsibility, but one culprit was left unscathed: the federal government. Some years ago an enlightened Congress passed a bill to encourage “ESOPs,” employee stock-ownership plans under the misguided idea that this would achieve the best of socialism (worker control) in a capitalist context. Under the law, the corporation can lower its taxes by meeting a certain level of employee investment in the company. It can profit a company to heavily promote such investment for 401(k)s. There’s nothing wrong with employee stock ownership as long as the government is neutral about it. But the government was not neutral, creating problems it now seeks to solve with a new round of legislation.
A second illustration concerns stock options. Whatever one thinks of them, there is little doubt they were given a boost a few years ago when Congress passed a law forbidding corporate tax deductions for the portion of executive salaries over $1 million. Suddenly it became cheaper to pay in stock options than in cash. What do you think happened?
Will they ever learn?
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The tragedy of 9/11 constituted a colossal failure of prevailing airport and airline security measures. Think of the destruction wrought by the use of box cutters and a few commercial jets. Is it time to question the government monopoly over safety? Paul Cleveland and Tom Tacker say yes.
How a competitive market for air safety might operate is no mere abstract discussion. Scott McPherson shows we don’t have to look far to find a working model.
The federal government has been telling us how to eat healthily for over 20 years, and we’ve listened. But it also says we’re fatter than ever. What gives? Robert Wright thinks the government got it wrong.
Coming soon to a government showroom near you: Freedom CAR. Step right up and be the first on your block to own this stylish 80-mpg hydrogen-powered pollution-free vehicle. Don’t push. There’ll be enough for everyone. Before this future arrives, Gardner Goldsmith has a few questions.
More than a million people are forcibly committed to “mental hospitals” each year, and such people are sometimes heard to say they are grateful for the coercion. But not every one says thank you. Read Leonard Frank’s firsthand account.
A bumper sticker can say as much as a treatise on political economy. Dale Haywood unpacks the one that says, “People, Not Profits.”
There’s no bigger name in legal philosophy than Ronald Dworkin. No friend of classical liberalism, he sometimes sounds like F.A. Hayek. Norman Barry sorts it out.
The U.S. appellate courts have found a great way to save time and money. Just one small problem: it threatens individual liberty. Richard Fulmer explains.
Bad ideas about political economy persist long after they have been refuted. Why is that so? Nelson Hultberg’s answer will be of interest to advocates of the freedom philosophy.
Here’s what our columnists have cooked up this month: Lawrence Reed wants us to kick the cigarette-tax habit. Doug Bandow writes about his visit to Turkey. Thomas Szasz charts the changing attitude toward psychiatry and mental illness. Burton Folsom debunks another myth about the Great Depression. Donald Boudreaux considers the conditions needed for economic growth. Charles Baird reports on a union setback in Oklahoma. And Roy Cordato, reading that government bureaucracy makes capitalism work, protests, “It Just Ain’t So!”
The book reviews examine volumes on Woodrow Wilson’s foreign-policy legacy, the fight for cryptography, the landmark public-accommodations cases, the new melting pot, the social science of ethics, and the U.S. Constitution.
