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Governor Stevens and I

January 29, 2014 in Economics

By Robert Higgs

Isaac_Stevens_-_Brady-Handy

When Governor Isaac Stevens went around Puget Sound in the mid-1850s making treaties with the Indian tribes to clear the way for an anticipated influx of whites, he found again and again that asking for the tribal chief got him nowhere. The Indians would look around and shrug their shoulders. They had no chiefs. Like many North American Indian tribes, they made communal decisions by consensus, with at most a special influence being exerted by one or two respected elder males.

But Stevens, hellbent on following the treaty-making protocol established among Western nations, plowed ahead, finding someone on each occasion to treat as the chief who would put his X on the treaty to make it official. To make matters worse, the negotiations took place via interpreters who employed the Chinook Jargon, a trade language used by the local Indians to communicate (roughly) with one another, a language with only a few hundred words, a language obviously incapable of facilitating Stevens’s rather delicate negotiations. What the hell: the treaties were written in English, “signed” by some Indian or another, and treated as sufficient by the whites who sought to keep the Indians out of the way as they took over the area and exploited its natural resources.

More than a hundred years later, these phony-baloney treaties became the basis for federal court cases decided in what is known as the Boldt decision, after the judge who handed it down in 1974. In the aftermath of this decision, all hell broke loose because the Indians, who had been catching less than 10 percent of the salmon in Washington waters, were now given a right to harvest half of the salmon. The white fishers went ape.

In the sequel, state and federal regulators attempted to get control of the situation and keep the melee from becoming violent, and in the process I was retained as an economic consultant, first by Washington state and later by the federal Pacific Fishery Management Council, to assist in the process. Fisheries consulting occupied me in one way or another from the mid-1970s to the early 1980s and again in the early 1990s, when I worked for an industry association in connection with federal regulation of the Bering Sea pollock fishery. (For a while, the famous economist Arnold Harberger was part of our team.) Thus is established the connection between Isaac Stevens and me. Ain’t history fascinating!

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Source: MISES INSTITUTE

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To solve the free-rider problem, end monopoly unionization

January 29, 2014 in Economics

By Gary Galles

Mandatory union dues are again at issue. On the heels of contentious “right to work” disputes, the Supreme Court heard arguments challenging an Illinois mandate requiring home healthcare workers to pay representation fees to a union they did not want. Harris v. Quinn could even challenge the Court’s 1977 Aboud precedent upholding mandatory union dues for public sector workers.

The union and allies reiterate the claim, accepted in Aboud, that “union security” rules are needed to prevent workers from unfairly opting out of paying for union services. But that claim is seriously flawed.

“Union security” rules are clear violations of workers’ liberty, particularly their freedom to not be forced to associate with certain groups, which unions ironically steamroll in the name of freedom of association. So unions defend coercion to impose employment terms violating government’s primary role–protecting individual rights—with a “free- rider” argument.

Labor laws have made unions exclusive representatives for groups of workers. Therefore, unions assert that that every worker must be forced to pay for their representation, or they will be able to “free ride” on those services. That is, workers’ rights must be abrogated to prevent non-members’ unethical behavior.

But free-riding on unions is not the fundamental problem. Mandatory exclusive representation–monopoly unions (so obviously monopolies that pro-union legislation exempted unions from antitrust laws, or they would have been illegal)—imposed to the detriment of those not in the majority is the fundamental problem.

Given majority approval in a certification election, all affected workers are required to submit to union representation and pay the union’s price for it. Those terms are imposed not only on workers who voted for the union, but for those who supported another union, those who preferred remaining union-free and those who did not vote (including those hired after the union is certified, who never get an effective chance to vote). Workers and employers are prohibited from negotiating their own arrangements, including labor-management cooperation not controlled by the union and “yellow-dog” agreements requiring abstention from union involvement (which, before labor laws eliminated such rights, the Supreme Court called “part of the constitutional rights of personal liberty and private property”).

The supposed “free-riding” workers are those who would refuse union representation, but are not allowed to. They are harmed by the imposition, revealed by their unwillingness to pay the “price” for those services. They are not free-riding on the union. They are “forced riders,” required to abide by, and pay for, violations of …read more

Source: MISES INSTITUTE

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More Bank Runs Coming

January 29, 2014 in Economics

By David Howden

Northern_Rock_Queue

After last week´s decision by HSBC to halt its policy of not honoring large withdrawal requests by depositors comes news of the Russian bank “My Bank” implementing its own run-protection measure.

“My Bank”, one of Russia´s top 200 lenders by assets, has introduced “a complete ban on cash withdrawals until next week.” In my discussion of HSBC´s similar policy here, I note that limiting redemption requests has been a measure to help fractional-reserve banks remain solvent since, well, the advent of fractional-reserve banking.

Today there is almost no place to hide. Since all banks are guaranteed by their central banks or deposit insurance agencies, they are all motivated to participate in creating liquidity against their deposit base. Since no bank will go bankrupt provided that the central bank honors its guarantee to support it, one might ask why banks (like HSBC or My Bank) are turning to alternative measures to ensure their own liquidity.

In Deep Freeze, Philipp Bagus and I discussed a practical problem that sheds light on these recent private initiatives limiting deposit redemption: the size of the problem (not enough good quality assets to cover the deposit liabilities of banks) is at least an order of magnitude larger than the ability of the central bank or government to fix. In Iceland´s case, there were almost no foreign exchange reserves available to guarantee deposit accounts held by Icelandic bank subsidiaries in faraway lands.

Even printing just the amount of money needed to honor the liabilities of the domestic deposit accounts is not only economically damaging (as Iceland saw) but also politically difficult to implement – who wants to live with the inflationary hangover caused by the amount of new money the central bank would have to create to make the banking system whole again? I don´t see anyone lining up to move to Zimbabwe, after all.

Maybe the recent private policies to guarantee their liquidity are a sign by banks that the size of the problem is bigger than the solution put in place to date. Deposit insurance might stop a run for so long, but sooner or later even it can run out of funds.

(This post originally published at Mises Canada.)

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Source: MISES INSTITUTE

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Hazlitt Explains Minimum Wage Laws

January 29, 2014 in Economics

By Mises Updates

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From Economics in One Lesson

By Henry Hazlitt

We have already seen some of the harmful results of arbitrary governmental efforts to raise the price of favored commodities. The same sort of harmful results follow efforts to raise wages through minimum wage laws. This ought not to be surprising; for a wage is, in fact, a price. It is unfortunate for clarity of economic thinking that the price of labor’s services should have received an entirely different name from other prices. This has prevented most people from recognizing that the same principles govern both.

Thinking has become so emotional and so politically biased on the subject of wages that in most discussions of them the plainest principles are ignored. People who would be among the first to deny that prosperity could be brought about by artificially boosting prices, people who would be among the first to point out that minimum price laws might be most harmful to the very industries they were designed to help, will nevertheless advocate minimum wage laws, and denounce opponents of them, without misgivings.

Yet it ought to be clear that a minimum wage law is, at best, a limited weapon for combating the evil of low wages, and that the possible good to be achieved by such a law can exceed the possible harm only in proportion as its aims are modest. The more ambitious such a law is, the

larger the number of workers it attempts to cover, and the more it attempts to raise their wages, the more likely are its harmful effects to exceed its good effects.

The first thing that happens, for example, when a law is passed that no one shall be paid less than $30 for a forty-hour week is that no one who is not worth $30 a week to an employer will be employed at all. You cannot make a man worth a given amount by making it illegal for anyone to offer him anything less. You merely deprive him of the right to earn the amount that his abilities and situation would permit him to earn, while you deprive the community even of the moderate services that he is capable of rendering. In brief, for a low wage you substitute unemployment. You do harm all around, with no comparable compensation.

The only exception to this occurs when a group of workers is receiving a wage actually below its market worth. This …read more

Source: MISES INSTITUTE

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Yes, it snows in Auburn…

January 29, 2014 in Economics

By Jeff Deist

Jan. 2014 snow

A little:

 

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Source: MISES INSTITUTE

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Sen. Paul Appears on CBS This Morning- January 29, 2014

January 29, 2014 in Politics & Elections

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Source: RAND PAUL

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Sen. Rand Paul and Wolf Blitzer Discuss President's State of the Union Address – January 28, 2014

January 29, 2014 in Politics & Elections

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Source: RAND PAUL

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Sen. Rand Paul and Bret Baier Discuss President's State of the Union Address – January 28, 2014

January 29, 2014 in Politics & Elections

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Source: RAND PAUL

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Obama Keeps Showing Why He's Impeachable

January 29, 2014 in Economics

By Nat Hentoff

Nat Hentoff

The very core of what makes America different from all other nations is our Constitution’s separation of powers.

Here is James Madison in Federalist Paper No. 51: “In order to lay a due foundation for that separate and distinct exercise of the different powers of government, which to a certain extent is admitted on all hands to be essential to the preservation of liberty, it is evident that each department should have a will of its own; and consequently should be so constituted that the members of each should have as little agency as possible in the appointment of the members of the others.”

He went even further: “It is of great importance in a republic not only to guard the society against the oppression of its rulers, but to guard one part of the society against the injustice of the other part.”

But here comes our commander-in-chief, who customarily tosses the separation of powers into the nearest wastepaper basket. Dig this recent headline from bizpac.com, which summed up Barack Obama’s approach to passing legislation in 2014: “ ‘I’ve got a pen and I’ve got a phone’: Obama says he’ll run right over Congress this year” (Michael Dorstewitz, Jan. 15).

Now Obama has been publicly glorifying the extent of his seemingly boundless executive powers, as Justin Snow reported for Metro Weekly:

“With a portrait of George Washington looking down at him, Obama told reporters gathered in the Cabinet Room of the White House” — referring to his all-powerful “pen and phone” — that he is ready to bypass Congress if necessary to get things done (“Obama’s executive order problem,” Justin Snow, Metro Weekly, Jan. 17).

Obama discussed taking “executive actions and administrative actions that move the ball forward in helping to make sure our kids are getting the best education possible and making sure that our businesses are getting the kind of support and help they need to grow and advance to make sure that people are getting the skills that they need to get those jobs that our businesses are creating.”

Should any of you ever get the chance to be in Obama’s royal presence, make sure to bow properly.

Meanwhile, that declaration reveals what can continue to happen for the rest of his reign unless a due process impeachment procedure soon becomes possible.

How can the impeachment process happen? We The People must be heard resoundingly, because — as James Madison and Thomas Jefferson warned …read more

Source: OP-EDS

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Pork in the Farm Bill

January 29, 2014 in Economics

By Michael D. Tanner

Michael D. Tanner

It’s been overshadowed by the hoopla surrounding the State of the Union, but we have finally had an outbreak of bipartisanship in Washington. Of course, bipartisanship means, as it usually does, that Democrats and Republicans have teamed up to mug taxpayers: An agreement has finally been reached on a new farm bill.

The farm bill will cost taxpayers about $950 billion over the next ten years. Lawmakers are calling this a $23 billion cut. But as Veronique de Rugy and my colleague Chris Edwards have pointed out, this is a cut only in the Washington sense of spending less than previously predicted. In reality, it represents an inflation-adjusted $258 billion increase over the ten-year cost of the last farm bill, in 2008. That’s a whopping 37 percent jump in real spending!

In a bipartisan development, Democrats and Republicans team up, again, to mug taxpayers.”

The largest part of this spending is not for farm programs but for food stamps. The bill provides approximately $756 billion in funding for the Supplemental Nutrition Assistance Program (SNAP) through 2023. The media will certainly point out that this is roughly an $8 billion cut in such spending over ten years, but that represents just 1 percent of the program’s funding. Virtually all of the savings comes from eliminating the so-called LIHEAP loophole, under which some 17 states were able to leverage token (often as little as $1) fuel-assistance payments into higher food-stamp benefits. Any serious attempt to reform the program by, say, reinstating work requirements was dropped. Is it any wonder that the Department of Agriculture reports that a record 20 percent of American households now receive food stamps?

No doubt conservatives will complain about the food-stamp spending, but whatever one thinks about our ever-growing safety net, there is simply no excuse for the farm portion of the bill, which is pure corporate welfare.

After all, while no one would deny that farming can be a difficult and sometimes precarious way of life, farmers generally are not suffering. In 2013 the average farm household had an income of $104,525. In 2011, the most recent year a direct comparison is available, farm-household incomes were 25 percent higher than the average for all U.S. households, and this gap has only increased since. Moreover, much farm aid goes not to small family farms but to giant agri-business. Among the biggest recipients of farm subsidies …read more

Source: OP-EDS