Browsed by
Category: Economics

The World’s Poorest People Are Getting Richer Faster Than Anyone Else – Article by Alexander Hammond

The World’s Poorest People Are Getting Richer Faster Than Anyone Else – Article by Alexander Hammond

The New Renaissance Hat
Alexander Hammond
October 29, 2017
******************************

Last Tuesday marked the 25th anniversary of the United Nations’ International Day for the Eradication of Poverty. The date intentionally coincides with the 30th anniversary of the Call to Action, which saw the French anti-poverty campaigner Father Joseph Wresinski ask the international community, in front of 100,000 Parisians, to “strive to eradicate extreme poverty”.

To mark the occasion, Antonio Guterres, the United Nations Secretary-General, was featured in a short video assessing the current state of world poverty. Despite noting such issues as unemployment, inequality, and conflict continuing in some regions, Guterres correctly observed that since 1990 the world has made “remarkable progress in eradicating poverty.”

While it is valuable to acknowledge that problems remain, it is important to reflect on just how far we’ve come.

Alleviating Poverty Fast

The speed of poverty alleviation in the last 25 years has been historically unprecedented. Not only is the proportion of people in poverty at a record low, but, in spite of adding 2 billion to the planet’s population, the overall number of people living in extreme poverty has fallen, too.

As Johan Norberg writes in his book Progress, “If you had to choose a society to live in but did not know what your social or economic position would be, you would probably choose the society with the lowest proportion (not the lowest numbers) of poor, because this is the best judgement of the life of an average citizen.” Well, in 1820, 94 percent of the world’s population lived in extreme poverty (less than $1.90 per day adjusted for purchasing power). In 1990 this figure was 34.8 percent, and in 2015, just 9.6 percent.

In the last quarter century, more than 1.25 billion people escaped extreme poverty – that equates to over 138,000 people (i.e., 38,000 more than the Parisian crowd that greeted Father Wresinski in 1987) being lifted out of poverty every day. If it takes you five minutes to read this article, another 480 people will have escaped the shackles of extreme of poverty by the time you finish. Progress is awesome. In 1820, only 60 million people didn’t live in extreme poverty. In 2015, 6.6 billion did not.

Now let’s consider those people who are still trapped in extreme poverty. The Oxford University scholar Max Roser’s website, Our World in Data, used World Bank databases to estimate that in 2013, there were 746 million people living in extreme poverty. Of these people, slightly more than 380 million resided in Africa, with Nigeria being home to largest number (86 million). Meanwhile, 327 million of those in extreme poverty lived in Asia, with India having the largest proportion by far (218 million). China had 25 million. The remaining 35 million lived in South America (19 million), North America (13 million), Oceania (2.5 million) and Europe (0.7 million.)

Put differently, of those who live in extreme poverty, over 40 percent resided in just two nations: India and Nigeria.

The Poorest of the Poor

Since its economic liberalization reforms in 1991, India’s average income has increased by 7.5 percent per year. That means that average income has more than tripled over the last quarter century. As wealth increased, the poverty rate in India declined by almost 24 percent. But most significantly, for the Dalits – the poorest and lowest caste in Indian society – the poverty rate during this period declined even faster, by 31 percent. That means that in the nation that has by far the largest number of people in extreme poverty, it is the people at the very bottom of the social strata who are getting richer faster.

A similar trend can be seen in Nigeria. Since the new millennium, gross domestic income per capita has increased by over 800 percent, from $270 to over $2,450. There is much work to be done, but this level of progress shows that even in the poorest countries, the speed of economic growth is encouraging.

In order to help the poorest, consider the impact free-market capitalism has had in the last 200 years in alleviating extreme poverty. The Industrial Revolution turned the once-impoverished western countries into abundant societies. The new age of globalization, which started around 1980, saw the developing world enter the global economy and resulted in the largest escape from poverty ever recorded. That is something that the late Father Wresinski would have been eager to celebrate.

Alexander C. R. Hammond is the Research Assistant for HumanProgress.org, a project of the Cato Institute’s Center for Global Liberty and Prosperity. He writes about economic freedom, globalization, and human well-being.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author. Read the original article.

Why Robots Won’t Cause Mass Unemployment – Article by Jonathan Newman

Why Robots Won’t Cause Mass Unemployment – Article by Jonathan Newman

The New Renaissance Hat
Jonathan Newman
August 5, 2017
******************************

I made a small note in a previous article about how we shouldn’t worry about technology that displaces human workers:

The lamenters don’t seem to understand that increased productivity in one industry frees up resources and laborers for other industries, and, since increased productivity means increased real wages, demand for goods and services will increase as well. They seem to have a nonsensical apocalyptic view of a fully automated future with piles and piles of valuable goods everywhere, but nobody can enjoy them because nobody has a job. I invite the worriers to check out simple supply and demand analysis and Say’s Law.

Say’s Law of markets is a particularly potent antidote to worries about automation, displaced workers, and the so-called “economic singularity.” Jean-Baptiste Say explained how over-production is never a problem for a market economy. This is because all acts of production result in the producer having an increased ability to purchase other goods. In other words, supplying goods on the market allows you to demand goods on the market.

Say’s Law, Rightly Understood

J.B. Say’s Law is often inappropriately summarized as “supply creates its own demand,” a product of Keynes having “badly vulgarized and distorted the law.”

Professor Bylund has recently set the record straight regarding the various summaries and interpretations of Say’s Law.

Bylund lists the proper definitions:

Say’s Law:

  • Production precedes consumption.
  • Demand is constituted by supply.
  • One’s demand for products in the market is limited by one’s supply.
  • Production is undertaken to facilitate consumption.
  • Your supply to satisfy the wants of others makes up your demand for for others’ production.
  • There can be no general over-production (glut) in the market.

NOT Say’s Law:

  • Production creates its own demand.
  • Aggregate supply is (always) equal to aggregate demand.
  • The economy is always at full employment.
  • Production cannot exceed consumption for any good.

Say’s Law should allay the fears of robots taking everybody’s jobs. Producers will only employ more automated (read: capital-intensive) production techniques if such an arrangement is more productive and profitable than a more labor-intensive technique. As revealed by Say’s Law, this means that the more productive producers have an increased ability to purchase more goods on the market. There will never be “piles and piles of valuable goods” laying around with no one to enjoy them.

Will All the Income Slide to the Top?

The robophobic are also worried about income inequality — all the greedy capitalists will take advantage of the increased productivity of the automated techniques and fire all of their employees. Unemployment will rise as we run out of jobs for humans to do, they say.

This fear is unreasonable for three reasons. First of all, how could these greedy capitalists make all their money without a large mass of consumers to purchase their products? If the majority of people are without incomes because of automation, then the majority of people won’t be able to help line the pockets of the greedy capitalists.

Second, there will always be jobs because there will always be scarcity. Human wants are unlimited, diverse, and ever-changing, yet the resources we need to satisfy our desires are limited. The production of any good requires labor and entrepreneurship, so humans will never become unnecessary.

Finally, Say’s Law implies that the profitability of producing all other goods will increase after a technological advancement in the production of one good. Real wages can increase because the greedy robot-using capitalists now have increased demands for all other goods. I hope the following scenario makes this clear.

The Case of the Robot Fairy

This simple scenario shows why the increased productivity of a new, more capital-intensive technique makes everybody better off in the end.

Consider an island of three people: Joe, Mark, and Patrick. The three of them produce coconuts and berries. They prefer a varied diet, but they have their own comparative advantages and preferences over the two goods.

Patrick prefers a stable supply of coconuts and berries every week, and so he worked out a deal with Joe such that Joe would pay him a certain wage in coconuts and berries every week in exchange for Patrick helping Joe gather coconuts. If they have a productive week, Joe gets to keep the extra coconuts and perhaps trade some of the extra coconuts for berries with Mark. If they have a less than productive week, then Patrick still receives his certain wage and Joe has to suffer.

On average, Joe and Patrick produce 50 coconuts/week. In exchange for his labor, Patrick gets 10 coconuts and 5 quarts of berries every week from Joe.

Mark produces the berries on his own. He produces about 30 quarts of berries every week. Joe and Mark usually trade 20 coconuts for 15 quarts of berries. Joe needs some of those berries to pay Patrick, but some are for himself because he also likes to consume berries.

In sum, and for an average week, Joe and Patrick produce 50 coconuts and Mark produces 30 quarts of berries. Joe ends up with 20 coconuts and 10 quarts of berries, Patrick ends up with 10 coconuts and 5 quarts of berries, and Mark ends up with 20 coconuts and 15 quarts of berries.

Production Trade Consumption
Joe 50 Coconuts (C) Give 20C for 15B 20C + 10B
Patrick n/a 10C + 5B (wage)
Mark 30 qts. Berries (B) Give 15B for 20C 20C + 15B

The Robot Fairy Visits

One night, the robot fairy visits the island and endows Joe with a Patrick 9000, a robot that totally displaces Patrick from his job, plus some. With the robot, Joe can now produce 100 coconuts per week without the human Patrick.

What is Patrick to do? Well, he considers two options: (1) Now that the island has plenty of coconuts, he could go work for Mark and pick berries under a similar arrangement he had with Joe; or (2) Patrick could head to the beach and start catching some fish, hoping that Joe and Mark will trade with him.

While these options weren’t Patrick’s top choices before the robot fairy visited, now they are great options precisely because Joe’s productivity has increased. Joe’s increased productivity doesn’t just mean that he is richer in terms of coconuts, but his demands for berries and new goods like fish increase as well (Say’s Law), meaning the profitability of producing all other goods that Joe likes also increases!

Option 1

If Patrick chooses option 1 and goes to work for Mark, then both berry and coconut production totals will increase. Assuming berry production doesn’t increase as much as coconut production, the price of a coconut in terms of berries will decrease (Joe’s marginal utility for coconuts will also be very low), meaning Mark can purchase many more coconuts than before.

Suppose Patrick adds 15 quarts of berries per week to Mark’s production. Joe and Mark could agree to trade 40 coconuts for 20 quarts of berries, so Joe ends up with 60 coconuts and 20 quarts of berries. Mark can pay Patrick up to 19 coconuts and 9 quarts of berries and still be better off compared to before Joe got his Patrick 9000 (though Patrick’s marginal productivity would warrant something like 12 coconuts and 9 quarts of berries or 18 coconuts and 6 quarts of berries or some combination between those — no matter what, everybody is better off).

Production Trade Consumption
Joe 100C Give 40C for 20B 60C + 20B
Patrick 45B n/a 16C + 7B (wage)
Mark Give 20B for 40C 24C + 18B

Option 2

If Mark decides to reject Patrick’s offer to work for him, then Patrick can choose option 2, catching fish. It involves more uncertainty than what Patrick is used to, but he anticipates that the extra food will be worth it.

Suppose that Patrick can produce just 5 fish per week. Joe, who is practically swimming in coconuts pays Patrick 20 coconuts for 1 fish. Mark, who is excited about more diversity in his diet and even prefers fish to his own berries, pays Patrick 10 quarts of berries for 2 fish. Joe and Mark also trade some coconuts and berries.

In the end, Patrick gets 20 coconuts, 10 quarts of berries, and 2 fish per week. Joe gets 50 coconuts, 15 quarts of berries, and 1 fish per week. Mark gets 30 coconuts, 5 quarts of berries, and 2 fish per week. Everybody prefers their new diet.

Production Trade Consumption
Joe 100C Give 50C for 15B + 1F 50C + 15B + 1F
Patrick 5 fish (F) Give 2F for 20C + 10B 20C + 10B + 2F
Mark 30B Give 25B for 30C + 1F 30C + 5B + 2F

Conclusion

The new technology forced Patrick to find a new way to sustain himself. These new jobs were necessarily second-best (at most) to working for Joe in the pre-robot days, or else Patrick would have pursued them earlier. But just because they were suboptimal pre-robot does not mean that they are suboptimal post-robot. The island’s economy was dramatically changed by the robot, such that total production (and therefore consumption) could increase for everybody. Joe’s increased productivity translated into better deals for everybody.

Of course, one extremely unrealistic aspect of this robot fairy story is the robot fairy. Robot fairies do not exist, unfortunately. New technologies must be wrangled into existence by human labor and natural resources, with the help of capital goods, which also must be produced using labor and natural resources. Also, new machines have to be maintained, replaced, refueled, and rejiggered, all of which require human labor. Thus, we have made this scenario difficult for ourselves by assuming away all of the labor that would be required to produce and maintain the Patrick 9000. Even so, we see that the whole economy, including the human Patrick, benefits as a result of the new robot.

This scenario highlights three important points:

(1) Production must precede consumption, even for goods you don’t produce (Say’s Law). For Mark to consume coconuts or fish, he has to supply berries on the market. For Joe to consume berries or fish, he has to supply coconuts on the market. Patrick produced fish so that he could also enjoy coconuts and berries.

(2) Isolation wasn’t an option for Patrick. Because of the Law of Association (a topic not discussed here, but important nonetheless), there is always a way for Patrick to participate in a division of labor and benefit as a result, even after being displaced by the robot.

(3) Jobs will never run out because human wants will never run out. Even if our three island inhabitants had all of the coconuts and berries they could eat before the robot fairy visited, Patrick was able to supply additional want satisfaction with a brand new good, the fish. In the real world, new technologies often pave the way for brand new, totally unrelated goods to emerge and for whole economies to flourish. Hans Rosling famously made the case that the advent of the washing machine allowed women and their families to emerge from poverty:

And what’s the magic with them? My mother explained the magic with this machine the very, very first day. She said, “Now Hans, we have loaded the laundry. The machine will make the work. And now we can go to the library.” Because this is the magic: you load the laundry, and what do you get out of the machine? You get books out of the machines, children’s books. And mother got time to read for me. She loved this. I got the “ABC’s” — this is where I started my career as a professor, when my mother had time to read for me. And she also got books for herself. She managed to study English and learn that as a foreign language. And she read so many novels, so many different novels here. And we really, we really loved this machine.

And what we said, my mother and me, “Thank you industrialization. Thank you steel mill. Thank you power station. And thank you chemical processing industry that gave us time to read books.”

Similarly, the Patrick 9000, a coconut-producing robot, made fish production profitable. Indeed, when we look at the industrial revolution and the computer revolution, we do not just see an increase in the production of existing goods. We see existing goods increasing in quantity and quality; we see brand new consumption goods and totally new industries emerging, providing huge opportunities for employment and future advances in everybody’s standard of living.

Jonathan Newman is Assistant Professor of Economics and Finance at Bryan College. He earned his PhD at Auburn University and is a Mises Institute Fellow. He can be contacted here.

Must Everything Be Made of Corn? – Article by Jeffrey A. Tucker

Must Everything Be Made of Corn? – Article by Jeffrey A. Tucker

The New Renaissance Hat
Jeffrey A. Tucker
July 27, 2017
******************************

This article was originally published by the Foundation for Economic Education on November 28, 2016.

I’ve finished Thanksgiving leftovers and I’m digging into a store-bought blueberry pie, because few people have time to make such a pie from scratch. Crust should be made from flour and lard (which comes from pig), in my view, but when you buy from the store, the crust is almost always made from “shortening” which is a vegetable product.

Meaning: corn.

Then there is the pie filling. Usually at home, you would use sugar from cane to sweeten the berries. But when you buy from the store, the berries are sweetened from a syrup made also from  corn.

So here you have two ingredients in the making of this pie that are radically dissimilar: sugar cane and a pig. Hard to think of anything in common between the two. They have both been displaced as ingredients by one thing: corn.

Once you realize this – that the crust and the berries are living within the same core food group of corn – your mind stops playing tricks on you. There is a sense in which the whole thing, despite all looks and extraneous flavors, is a corn pie.

Suddenly, you can taste exactly that.

Now, it is time for the after dinner drink, perhaps a Margarita sweetened with lime juice. You look at the ingredients of that juice bottle.

Corn again! You are going to drink corn.

So you go for a chocolate but then take a look at the wrapper: corn!

So you decide to go for a drive in your gasoline-powered car. What’s in the tank? Thanks to the mandated additive of ethanol, there is corn here too.

By the time you get to the movie theater and consider popcorn, you remember that you had corn in your crust, corn in your berries, corn in your cocktail, and corn in your gas tank. Who needs corn popped in corn oil covered with butter-flavored corn?

So, instead of popcorn, and since most candy consists of different shapes of corn, you decide to settle for just a soda.

What’s in it? High-fructose corn syrup!

It’s too much! You feel like you’re trapped in a Twilight Zone episode: like your night is going to end in one of those cornfield chase scenes you see in horror movies.

Why does the whole of American life sometimes seem to be taken over by corn?

To be sure, corn is a miracle food. But is it really so miraculous that everything we use should be made out of it?

The Politics of Corn

Only if the market brings about this result. But it’s not the market speaking. It’s a deeply distorted market. The power of the corn lobby is legendary. And mixed with that is the power of the sugar lobby, which keeps out imported sugar that would sell for half as much as we pay at the store, thereby incentivizing producers to seek out a substitute in corn, which turns out to make us fatter, thereby panicking do-gooders who try to ban products and limit consumption, so that our bad health will stop driving up health-insurance rates.

Remarkably, all of this has happened only since the 1970s, before which there was no such thing as high-fructose corn syrup, to say nothing of corn-based gasoline. It’s one intervention piled on top of another one.

Foreign peoples find all of this mystifying. Indeed it is, until you look more deeply and see just how important the corn states are in winning elections. It turns out that the main and most valuable products generated by all this strange corn-based activity are political careers.

It’s for this reason that we have corn coming out of our ears.

Christmas Corn

Don’t despair: we’ve got Christmas to look forward to, with corn-candied apples, corn-sweetened eggnog, ham from corn-fed pigs glazed with corn, perhaps a roast from a corn-fed cow, and that old favorite, mulled cider on the stove filling the house with the traditional and evocative smell of corn.

After you have decorated your tree with strings of popcorn and candy canes made with corn syrup, don’t forget to forget to leave Santa cookies, baked with corn oil and corn sugar, because, as everyone knows, nothing says the holidays – or any day! – like corn.

Jeffrey Tucker is Director of Content for the Foundation for Economic Education. He is also Chief Liberty Officer and founder of Liberty.me, Distinguished Honorary Member of Mises Brazil, research fellow at the Acton Institute, policy adviser of the Heartland Institute, founder of the CryptoCurrency Conference, member of the editorial board of the Molinari Review, an advisor to the blockchain application builder Factom, and author of five books. He has written 150 introductions to books and many thousands of articles appearing in the scholarly and popular press.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author. Read the original article.

When Academia Turns into Fight Club – Article by Steven Horwitz

When Academia Turns into Fight Club – Article by Steven Horwitz

The New Renaissance Hat
Steven Horwitz
July 14, 2017
******************************

What do academics do for excitement over the summer, you ask? This summer many of us have been engaged in a furious debate over the new book Democracy in Chains by Duke historian Nancy MacLean.

Libertarian and conservative scholars from a variety of disciplines have raised a number of criticisms about MacLean’s sources and her accuracy about historical facts that call into question the “evidence” she has to show that economist James Buchanan and public choice theory, if not libertarianism more generally, are all tools of racist oligarchs like the Koch Brothers.

Rather than rehash all of the particular criticisms, I want to focus on the controversy that has developed over the criticisms themselves. It’s important to understand that the libertarian critics of MacLean have carefully compared passages in her book with her cited sources and showed how she has misread and quoted selectively from them, often leading her to attribute to people the exact opposite of the argument they actually held. These criticisms have been posted publicly on blogs and websites. These are not just vague accusations. They are detailed examples of poor scholarship.

But the fascinating part has been her response. And her lack thereof.

Everyone Is under Attack

MacLean has offered no substantive response to the detailed criticisms. She had one exchange with Russ Roberts over her treatment of Tyler Cowen, but even there she did not respond to the substance of Russ’s concerns. Other than that, nothing.

What she did do, however, was put up a long Facebook post that reads like a combination conspiracy theory tract and call to action for progressive activists. The short version is that she claimed she was under “attack” from a conspiracy of “Koch operatives” who were paid hacks out to destroy her book and her reputation and silence her. She claimed, then retracted when she found out it couldn’t be done, that the Kochs had bought Google results to put the critics at the top of searches. She encouraged her supporters to game the Amazon reviews by posting positive reviews and down-voting the “fake” Koch reviews.

She has continued this narrative of being “under attack” in various interviews, and most recently in a story in Inside Higher Ed, where fellow progressives echo this language.

This notion of being “attacked” is particularly fascinating to me. Let’s be clear what she means: people who know a lot about Buchanan, public choice theory, and libertarianism have taken issue with her scholarship and have patiently and carefully documented the places where she has made errors of fact or interpretation, or mangled and misused source materials and quotes. That is all that they have done.

None of this was coordinated nor was it part of a conspiracy from the Koch brothers. It was scholars doing what scholars do when they are confronted with bad scholarly work, especially when it touches on issues we know well.

None of these critics, and I am among them, have called for physical violence against her. None have contacted her employer. None have called her publisher or Amazon to have the book taken down. Contrary to her claim, the only silence in this whole episode is her own refusal to respond to legitimate scholarly criticism. We don’t want to silence her – we eagerly await her response.

So where is this language of “attack” coming from? Here is where I think the political right bears some responsibility for the current situation. And to the degree libertarians have cast their lot with “the right,” we are seen as guilty by association. Call it blowback if you will.

In the last year or two, progressive intellectuals and academics have been threatened with violence and had their employers contacted, not to mention threats made from politicians, on the basis of public statements they’ve made. Yes, some of those statements were deplorable, but that is no excuse for threatening people’s physical safety or their jobs. These are real attacks, not intellectual criticisms.

We should also not forget the anti-intellectual “Professor Watch List” put up by TurningPoint USA, which gave left-leaning faculty more reason to imagine coordinated and conspiratorial attacks.

And yes, all of this was not done by conservative or libertarian intellectuals, but they were done by activists associated with “the right,” and that is all that progressives need to find the intellectuals guilty by association.

It probably also matters, though less so, that many conservative and libertarian students have referred to themselves as “under attack” in college classrooms. In my 30 years of teaching experience, what they call “under attack” is far more often than not simply having their views strongly challenged and being expected to defend them. In other words, exactly what MacLean is experiencing.

This is not being “attacked.” It is what college classrooms and scholarly conversation are all about.

Unfortunately, the real attacks on left-wing faculty (and yes, there have been ones on right-wing ones too) have provided MacLean’s defenders with a convenient word to use to blur the difference between legitimate, but forceful, scholarly criticism, and threats of violence or silencing.

Always Take the High Road

Conservative critics of higher education should take this to heart. When you whip people into a frenzy over the crazy things that a small number of faculty say on Twitter, or because of legitimate concerns about the treatment of a small number of conservative speakers, the whipped up folks are going to do things you wish they wouldn’t. And that’s going to lead to blowback.

As a libertarian academic who frequently speaks at public events on other campuses, I do have low-level concerns about my safety. And if I were a progressive academic, I’d have similar fears given the way some of them have been treated, especially by politicians. Calling the intellectual criticisms of her book a coordinated conspiracy heads MacLean into Alex Jones territory, but given the current climate, it shouldn’t surprise us that she and her supporters feel “under attack.”

But notice the result: a book that smears libertarian and conservative ideas on the basis of shoddy scholarship gets attention because the author claims she’s under attack when she is called out in careful detail by other scholars. The real attacks on left-leaning faculty enable her to claim victimhood by association while using guilt by association to blame the conservative and libertarian intellectuals who are criticizing her work.

Once we head down the road, whether caused by the left, right, or libertarians, of turning intellectual disagreements into threats of violence, or threats to employment, or anything of that sort, the social losses are huge. Indeed, once both threats to people’s safety and employment and sharp intellectual disagreement become “attacks,” we will lose our ability to recognize the moral and intellectual difference between the two, and our disgust at the threats will weaken. And to the degree that the left largely dominates the intellectual world, conservatives and libertarians will be the biggest losers when academia turns into Fight Club.

So what to do? First, call off the dogs. Conservatives and libertarians need to consistently take the high road, as many of the intellectuals have tried to do in response to MacLean’s book. The hard part is getting right-wing media, both traditional and social media, to do the same. Those of us who care about intellectual standards have to publicly call out our own when they whip up anti-intellectual and anti-higher education frenzies.

Second, implore our left-wing friends of integrity to do the same. The most important thing that can happen to end this arms race is for scholars of integrity on the left to call out people like MacLean, both for their shoddy scholarship and their hyperbolic use of the language of conspiracy and attack. A strongly critical review of her book by a historian or economist of the center or left would go a long way to addressing the specific concerns it raises and could set a necessary example for others.

In the meantime, those of us critical of MacLean will continue to document her errors and press publicly for a response. And we’ll do so with the most proper of scholarly etiquette. I implore those sympathetic to our cause to be on their best behavior on social media as well. She and her supporters need no more ammunition.

Steven Horwitz is the Schnatter Distinguished Professor of Free Enterprise in the Department of Economics at Ball State University, where he also is a Fellow at the John H. Schnatter Institute for Entrepreneurship and Free Enterprise. He is the author of Hayek’s Modern Family: Classical Liberalism and the Evolution of Social Institutions and is a Distinguished Fellow at the Foundation for Economic Education (FEE) and a member of the FEE Faculty Network.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author. Read the original article.

The White-Owned-Restaurant Outrage Is Wildly Misplaced – Article by Liz Wolfe

The White-Owned-Restaurant Outrage Is Wildly Misplaced – Article by Liz Wolfe

The New Renaissance Hat
Liz Wolfe
******************************

The latest political correctness outcry is a series of “white-owned appropriative restaurants” in Portland. While there are legitimate grievances to be made against white people who mock other cultures and then use them to profit once they become trendy, tirades like this list don’t level the economic playing field. More often than not, they breed resentment as political-correctness fights tend to back people into their respective partisan corners.

I read all the articles listed on the first page of the list –I should educate myself about hardships other people face while I remain immune. I’ll give credit where it’s due: many of these articles center around the idea that systemic disadvantage creates poverty, and many people of color don’t have the same financial resources to open restaurants that their white counterparts have. It follows, then, that white people get to profit from rich cultural traditions while the people who have claim to that origin don’t. I see how that feels viscerally unfair.

But are white entrepreneurs really the culprits here, or is it a larger system of historic disadvantage that has created these differences in wealth? Which system should we rebel against?

Appropriating Tortillas and Hip-Hop

Portland’s Kooks Burritos food truck, one of the restaurants listed, recently closed their doors for good, presumably as a result of all the hate they’d been getting. In a profile by the Willamette Week, founders describe being entranced by the tortillas they had on a trip to Mexico. This inspired them to ask local ladies about the ingredients, but they would only reveal part of the recipe, not the techniques, leading the two Kooks founders to peek into windows of nearby restaurants attempting to learn the art of tortilla-making. Two white women spying on resistant Mexican cooks to open a trendy food truck sparked outrage.

There’s a tough balance between co-opting traditions and voluntarily sharing customs. Perhaps the owners of Kooks Burrito erred too far on the side of co-opting, as they attempted to steal recipes from locals instead of engaging in voluntary exchange. But demonizing them is yet another foolish battle that won’t right the wrongs of the past or teach fruitful lessons to white restaurant owners.

Cultural sharing isn’t something to be intrinsically discouraged. Appropriation, as a concept, often seems logically inconsistent. When an American university fraternity tried to throw a theme party with a play on the song “Bad and Boujee,” administrators objected, citing “cultural appropriation” as the problem. But which culture are we talking about? Which people are being subjugated and what is the true origin? “Latin, French, Marxist, Urban hip-hop?” suggested Catherine Rampell at The Washington Post. In other words, is any iteration apart from the true origin an offensive act?

I doubt it. When we wade down the slippery slope of condemning people for well-intentioned practices, we often create enemies and become a culture where people are brutally shamed for their missteps, never learning from their mistakes.

How does this work when practices like yoga come under fire? Is yoga a less heinous thing to take part in because the origin is often explained more thoroughly? Perhaps yoga classes in US-based ashrams should continue to exist, but what about my less-conscious local YMCA? And still, who should make these judgment calls?

Using these Opportunities for Good

There seems to be a lot of gray area, and I doubt attempts to exercise more control over the individual would create good outcomes. Generally speaking, let’s reserve use of authority and force for the direst situations in which people are directly harming one another.

A hardline reaction either way is misguided. The truth likely lies somewhere in the middle – marginalized groups have been historically disadvantaged, and that disadvantage often remains for many decades. But cultural appropriation isn’t necessarily bad, nor is it as easily defined, as social-justice advocates might hope. It’s through cultural sharing, in its many forms, that people are able to make a living, spread knowledge of a particular topic, and advance current practices.

If a white business owner is spreading popularity of Burmese food, for example, and creating more demand for it, could that be a good thing for hopeful Burmese immigrants intent on entering the industry?

I went to a white-owned Burmese restaurant in Thailand where the owners had pamphlets on current events – namely the ethnic cleansing that has gripped much of the country. Although my appetite was reduced, exposure to Burmese culture made me more invested in Burmese current events. Now, headlines stick out to me. I remind traveler friends that they should be conscious of where their tourism money goes, as much of it unintentionally ends up lining the pockets of corrupt government officials.

White ownership isn’t the problem in Portland. Instead, it’s a complex web of systemic disadvantage, fear of ignorance on the part of proprietors, and worries that hard-working immigrants will be shoved out of the market. Those are more than worth fixing, but filing this cleanly under the “cultural appropriation” label doesn’t give proper weight to the many sides of this important issue.

Let’s stop condemning the wrong practices.

Author’s Note: I reached out to the creators of the “white-owned restaurants” spreadsheet with several questions. They said, “We can answer questions off the record to further your own understanding, but we are uncomfortable providing a statement due to the news media’s tendency to offer racist counterpoints in the name of ‘fairness.’ Let us know if that is agreeable.”

Liz Wolfe

Liz Wolfe is managing editor of Young Voices. You can follow her on Twitter: @lizzywol.

 

This article was originally published on FEE.org and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author. Read the original article.

The Evidence Weighs in Favor of Immigration – Article by Luis Pablo de la Horra

The Evidence Weighs in Favor of Immigration – Article by Luis Pablo de la Horra

The New Renaissance HatLuis Pablo de la Horra
******************************

In a previous article, I analyzed the economics of immigration from a theoretical perspective. I concluded that economic theory clearly supports immigration-friendly policies since they benefit all parties involved. In this article, I will examine the empirical evidence on the effects of immigration on host countries and immigrants themselves.

Effects on Employment, Wages, and Public Finances

High immigration rates are often associated with rises in unemployment. The logic behind this (flawed) reasoning is straightforward: if an economy can only absorb a fixed number of jobs and the labor force increases, the unemployment rate will inevitably rise. What’s wrong about this statement? Simple: the economy is not a zero-sum game.

In other words, the number of jobs available increases as the economy grows. After World War II, the US labor force increased dramatically due to immigration and the massive entry of women into the labor market. It moved from 60 million in 1950 to around 150 million workers in 2007. And yet, the unemployment rate in 2007 was as low as 4.6 percent, near full employment.

In a survey paper on the economic effects of immigration, published in 2011, Sari Pekkala Kerr and William R. Kerr concluded that the long-term impact of immigration on employment is negligible. In their own words,

The large majority of studies suggest that immigration does not exert significant effects on native labor market outcomes. Even large, sudden inflows of immigrants were not found to reduce native wages or employment significantly.

As suggested by the research conducted by Giovanni Peri, professor of Economics at UC Davis, immigration has positive effects on productivity since it expands the productive capacity of the economy, which in turn results in higher wages in the long run. Nonetheless, there are certain disagreements on how immigration affects native, low-skilled workers (mainly high school dropouts).

Different studies point at a wage decline between 0 (no effects at all) and 7 percent for this segment of population. Even when assuming the worst-case scenario of a 7 percent decline (which does not consider the investment in capital undertaken by companies to compensate for a decline in the capital-labor ratio), low-skilled immigration has net positive economic effects for host societies, allowing native workers to perform more productive jobs and increasing the specialization of the economy.

One of the most popular arguments against immigration is the issue of welfare benefits. Immigrants are believed to pose a burden on the host economy. Their net fiscal impact (defined as taxes paid by immigrants minus public services and benefits received) is thought to be overwhelmingly negative when compared with the fiscal impact of natives. Yet the evidence does not support this idea. As pointed out by Kerr and Kerr,

It is very clear that the net social impact of an immigrant over his or her lifetime depends substantially and in predictable ways on the immigrants’ age at arrival, education, reason for migration, and similar […] The estimated net fiscal impact of migrants also varies substantially across studies, but the overall magnitudes relative to the GDP remain modest […] The more credible analyses typically find small fiscal effects.

Therefore, there are no good reasons to impose tough restrictions on labor mobility in the name of fiscal sustainability.

The Place Premium: How to Reduce Poverty by Lowering Immigration Barriers

Wage differentials among countries can be explained by drawing on the concept of Place Premium, that is, the increase in earnings that a worker automatically experiences when moving to a high-productivity country. This increase is due to several factors: differences in capital stock, infrastructure, proximity to other high-productivity workers, etc.

The Place Premium of potential immigrants moving to the US has been estimated for a few countries. A Haitian worker that were to relocate to the US would see her PP-adjusted earnings automatically rise by 700% when compared to the same worker in Haiti performing an equivalent job (or a job that requires the same skills and education). Similarly, a worker from Guatemala or Nicaragua would more than triple her earnings, while a Filipino would increase her purchasing power by 3.5 times. In other words, relaxing barriers and letting more immigrants into higher-productivity countries seems to be one of the most effective ways to improve the life of millions of people worldwide.

All in all, the economic benefits of immigration seem obvious for both host countries and immigrants. The data shows that restrictive immigration policies have adverse effects on host economies and prevent would-be immigrants from increasing their income by migrating to higher-productivity countries. Thus, the path to take is clear: we should gradually reduce immigration barriers so that more and more people can take advantage of the benefits of capitalism.

Luis Pablo de la Horra is a Spanish finance graduate from Vlerick Business School.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

Economic Theory Really Is Pro-Immigration – Article by Luis Pablo de la Horra

Economic Theory Really Is Pro-Immigration – Article by Luis Pablo de la Horra

The New Renaissance HatLuis Pablo de la Horra
******************************

In his now-classic work The Myth of the Rational Voter, Bryan Caplan identifies four systematic biases about economics held by the average citizen: make-work bias (an inclination to overestimate the disadvantages of temporary job destruction due to productivity increases), anti-market bias (a tendency to overlook the benefits of the market as a coordination mechanism), pessimistic bias (an inclination to underestimate the present and future performance of the economy), and anti-foreign bias (a tendency to underestimate the economic benefits of interaction with foreigners).

Widespread biases on economics are far from being harmless. Wrong ideas held by voters usually lead to catastrophic policies due to the inherent nature of the democratic process. In other words, in most cases, politicians undertake those policies that they deem popular among voters in order to get reelected. If those policies beget pernicious consequences for the economy, harmless beliefs turn into lower living standards for all.

Of those four biases, the most potentially harmful is the anti-foreign bias. This inclination to underestimate the benefits of economic cooperation with foreigners manifests itself politically in two main ways: protectionism and anti-immigration policies. Despite the recent surge of protectionism in some developed countries, free trade is now the rule rather than the exception in most parts of the world. However, when it comes to immigration, only a few steps have been taken worldwide over the last few decades in a direction of liberalization (even though the consensus about the benefits of more open borders in the economics profession is probably as strong as the consensus around free trade).

As I will show in this series of two articles [see the second article here], anti-immigration policies reduce the well-being of both potential immigrants and host societies, as shown by economic theory and empirical evidence. Or, to put it differently: even a partial liberalization of immigration restrictions would, in the long-term, contribute to improving the standards of living globally.

Economic Theory Supports Immigration-Friendly Policies

The economic case against less restrictive immigration policies rests on shaky pillars. The most common anti-immigration arguments are related to the supposedly negative effects that immigration has on the host country’s labor market, and, more specifically, its impact on employment and wages. According to advocates of immigration restrictions, immigrants do not only take natives’ jobs, but also have a depressive effect on wages.

However, economic theory does not support these assertions. First, the economy is not a zero-sum game: the numbers of jobs available is not finite. As pointed out by Alex Tabarrok (here and here), immigrants are not only producers but also consumers, which implies that an increase in demand triggered by the expansion of the immigrant population goes hand in hand with an increase in total employment. Also – and contrary to conventional wisdom – not only highly-qualified immigrants create positive externalities on host economies. Low-skilled immigrants tend to take lower-productivity jobs (as they often either lack higher education or do not speak the language), allowing the native-born to access higher-productivity jobs (assuming free trade and a flexible labor market).

All said above can be also applied to wages. All else equal, the law of supply and demand says that an increase in the supply of labor would inevitably cause lower wages. However, more immigrants also mean a higher demand for goods and services, which in turn results in a higher demand for labor, preventing a generalized decrease in salaries. Even in those cases when wages in a particular sector are temporarily pushed down, lower wages lead to lower costs for companies, which usually results in lower prices for consumers due to the process of competition.

Immigration-friendly policies can also help tackle the demographic problem that many developed countries have been experiencing over the last years. For instance, the progressive demographic ageing of the American population is already having an impact on the US Social Security system. According to the Population Reference Bureau, the number of Americans over 65 years old will have moved from 15% in 2014 to 24% of the population by 2060. As a result,  the worker-to-beneficiary ratio will decrease by 32%, from 3.4 in 1990 to 2.3 in 2030. This problem could be mitigated by adopting a more flexible immigration policy that increases the working population, reversing the trend that will otherwise end up with significant spending cuts in Social Security benefits.

Benefits for the Sending Countries and Immigrants

The discussion so far has focused on the benefits of immigration for receptor countries. How do the sending countries and immigrants benefit from the migratory phenomenon? Immigrants usually transfer part of their income to their countries of origin with the aim of economically supporting their families and friends. These so-called remittances are flows of capital from developed to developing countries which assist in the economic development of sending countries.

The main beneficiaries of eliminating barriers to labor mobility would be, no doubt, immigrants themselves. This is due to the concept of Place Premium. This concept, first introduced by Michael Clemens, Claudio E. Montenegro, and Lant Pritchettin in a 2008 paper, refers to the automatic increase in earnings (PPP adjusted) that a worker experiences by moving from a low-productivity country to a high-productivity country, without increasing the worker’s human capital. The factors behind this phenomenon are multiple: differences in capital accumulation, quality of infrastructures, technology, proximity to high-productive workers, different legal frameworks, etc. The empirical evidence (which will be dealt with in the second and final article of this series) shows that wage differences among countries due to Place Premium are immense. The corollary is simple: more open borders would bring about a substantial reduction in poverty levels across the world.

Potential Gains from Reducing Global Migration Barriers

What would happen if migration barriers were partially or totally eliminated on a global scale? In his paper Economics and Immigration: Trillion-Dollar Bills on the Sidewalk, Michael Clemens, senior fellow at the Center for Global Development, reviews the academic literature on the topic. If all barriers to labor mobility were to be removed, world GDP would increase in the range of 50% to 150%.

Even partial liberalizations would bring about considerable gains. For instance, a reform that allowed 7% of the population to emigrate to higher-productivity countries would result in an efficiency gain of 10% of world GDP. To put this into perspective, if all remaining trade barriers were eliminated, world GDP would grow by just 2% or 3%. As shown, the impact of relaxing migration barriers on the world economy would be extremely positive, especially for the poorest segments of population.

The theoretical analysis above clearly supports the adoption of more immigration-friendly policies as a way of increasing economic growth and improving the welfare of millions and millions of people, including those in receptor countries. However, economic theory needs to be supported by facts. In my next article, I will provide empirical evidence in support of eliminating barriers to immigration.

Luis Pablo de la Horra is a Spanish finance graduate from Vlerick Business School.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

What the Atlanta Highway Collapse Signals about American Infrastructure – Article by Lili Carneglia

What the Atlanta Highway Collapse Signals about American Infrastructure – Article by Lili Carneglia

The New Renaissance Hat
Lili Carneglia
******************************

Atlanta is already known for having some of the worst traffic in the world, and the recent collapse along a major interstate will only make congestion worse. On March 30, in the middle of rush hour traffic, a fire began under the I-85 Northbound that quickly erupted into a massive blaze, eventually causing a section of the bridge to collapse.

Less than 24 hours later, with the rubble still smoldering, the US Department of Transportation announced a $10 million award to begin emergency repairs. Despite the quick response from the DOT, it will take millions more dollars before I-85 can resume carrying 400,000 vehicles daily.

With the nation’s Highway Trust Fund rapidly approaching insolvency, the I-85 collapse and the subsequent Atlanta traffic chaos exemplify the overwhelming cost and inefficiency of public infrastructure in America.

Why So Expensive?

In the United States, transit projects are chronically expensive and time-consuming. The country’s outdated method of allowing most highways to fall under federal care, and cumbersome regulatory obstacles, is part of the reason that we continue to lag behind when it comes to international standards. Regulatory burdens also contribute to other countries’ outranking the US when it comes to securing construction permits, making new projects and maintenance even more complicated.

Policy relics of the Obama administration weigh particularly heavy on this type of progress. Specifically, Executive Order 13502, which encourages labor agreements for federal construction projects. Because these agreements require union labor, this E.O. severely limits the number of firms that can accept a federal contract, since only 13.9 percent of the construction workforce is unionized. Additionally, many researchers have found that this practice is estimated to increase the costs of projects anywhere from 13-18 percent.

As the small fraction of construction firms that benefit from this order continue to lobby for similar policies that land them more federal projects at the expense of taxpayers and industry innovation, we can expect the cost of infrastructure projects to continuously rise.

This issue is nothing new, with politicians from both sides of the aisle eager to point fingers and  offer their own solutions. President Trump is no exception. He has made a repeated pledge to invest $1 trillion in the nation’s infrastructure. While the Trump administration has announced that those plans will be revealed later in the year, the details, including the amount of federal funding available for the project, remain a mystery. In part due to this opacity, most people remain skeptical of promises, released alongside a proposed budget, that would cut DOT spending by 13 percent.

However, even if the Trump administration were to pump $1 trillion of pure federal funds into infrastructure projects, it would do little to fix the country’s severely broken system. The best chance of improving America’s infrastructure lies in removing the red tape standing in the way of private firms when it comes to federal projects – or better yet, ending the government monopoly on transit altogether.

Corporate Welfare

One of the most promising international trends in infrastructure development involves moving away from public transportation and towards private transit systems. The Organisation for Economic Co-operation and Development (OECD) reports that in many countries, private investment in infrastructure is on the rise as government investment declines due to “constraints on public finance and recognized limitations on the public sector’s effectiveness in managing projects.” The US should take note of the global trend.

Transitioning to privatization is quickly becoming a necessity in the face of rapidly-expanding maintenance costs and Trump budget cuts. Even without the option of public funding, privatization offers massive benefits for taxpayers.

Some of the biggest users of public roads, like logistics companies, create billions more dollars in transportation expenses than the average car-owner. However, road costs are passed on to taxpayers en masse, subsidizing companies that use public roads the most. The current system effectively results in corporate welfare. Private toll roads help mitigate the unfair cost burden and appropriately account for maintenance.

American infrastructure is on the brink of complete disaster. While the I-85 collapse was an unpredictable event, prior to last month, the road was not even listed among the 56,000 structurally deficient bridges in the country. Infrastructure expenses will continue to drain federal and state budgets until public funds can no longer keep up. Sudden highway collapses are a disquieting reminder of what is at stake if we fail to change the way the US approaches transportation.

Lili Carneglia is a student at the University of Alabama where she is getting a joint bachelor’s and master’s degree in Economics. She is a Young Voices advocate.

This article was originally published on FEE.org. Read the original article.

My Childhood as a Renegade Entrepreneur – Article by Derek Magill

My Childhood as a Renegade Entrepreneur – Article by Derek Magill

The New Renaissance HatDerek Magill
******************************

For most of my life I wanted to be a businessman.

As early as preschool, I would insist on wearing only business attire to class every day. And by business attire, I mean I’d put on one of my father’s button-down shirts and tuck it in with a ridiculously oversized pair of slacks that my brother had worn.

When I got older this interest began to manifest itself in ways that caused conflict in class.

The Young Entrepreneur
In 4th grade, I made a little business out of reselling Livestrong wristbands after class. I made about $150 with this side business before the school told me I needed to stop. My classmates were disappointed because I was the only reliable source when it came to getting bands. Plus, I had recently started purchasing Freedom Bands, which were available in far more colors than the Livestrong yellow. Needless to say, my customers were always satisfied.

In 6th grade, I loaned a friend money for a cookie but insisted on there being a 25 cent interest fee tacked onto each day he failed to repay. It took him two weeks and he paid the amount he owed, plus interest, without complaint.

The school found out and my parents received a call home.

What I always found interesting was that there was never any sort of explanation offered as to why my behavior was “bad.” It was just simply against the rules.

My classmates loved my attempts at offering services, but there was always the ever-present, and often unseen, force of teachers and school administrators hovering nearby waiting to stop our transactions.

High School Antics
As the associated student body president, I was required to work in the student store. I developed a practice of accepting tips in the form of the spare change students didn’t want to carry around.

I had a jar on the counter, like any food establishment might, and I would casually suggest students leave their change after a purchase. This was an innocent, voluntary donation in which I’d make a little bit of money every day.

But of course, my teacher found out and her response was a swift write-up. Again, I was not told why my actions were wrong.

It’s Only Fair If Everyone Profits
One day, the administration decided to host a club fundraising festival where each club was allowed to sell one item purchased from a grocery store at lunch in order to raise funds for its club—the only time they ever broke the cafeteria monopoly.

I left campus to purchase 150 burgers from Wendy’s for $1 each. I then sold them for $5 per burger on campus, and gave away a free Arizona Iced tea with the burger, which undercut the two other vendors selling Arizona Iced tea.

We eclipsed the rest of the fundraising group that day by over 200 percent and the school accused us of cheating and being greedy.

They confiscated most of the funds and distributed it among the other students to make it more “fair.”

At last the truth had come out in full. It had taken almost eighteen years but I had the answer they had never given me before: my teachers hated the free market.

The administrators regarded commerce as dirty. They didn’t see the value I created for students who wanted something better than cafeteria food for lunch. They saw value that had been acquired at the expense of others.

As I look back now with more knowledge and experience, I’ve come to the conclusion that this experience was both beautiful and saddening.

As children, we are born capitalists. We have no deep philosophies or moralities but we organize ourselves naturally around mutual exchange because we recognize quickly that life gets better if we do.

We trade cards, toys, our lunches, and other things we value for the things our friends value and rarely do we have trouble working out disputes. We don’t do it because we care consciously about free markets — we don’t even know the concept. Nor do we need to. Markets don’t require everyone to know their importance consciously. They just require people to be left alone.

It takes a lot of schooling to kill these natural inclinations towards freedom. Teachers and administrators stop these interactions on the playground, and in the classroom they teach material that distorts and obfuscates the truth. The process of schooling is the process of taking our innate tendencies towards liberty and destroying them.

As my friend Isaac Morehouse wrote in a comment when I shared this story on Facebook:

Is it any wonder why Ayn Rand is making such a resurgence among high school students?

Derek Magill is a college dropout, marketer, business strategist and career expert. He is currently the Director of Marketing at Praxis and has consulted with companies such as Voice & Exit, the Foundation for Economic Education, Glockstore, Colliers International, Daily Caller, and Undertech.

Derek is the author of How to Get Any Job You Want.

This article was originally published on FEE.org. Read the original article.

The Federal Reserve Is, and Always Has Been, Politicized – Article by Ron Paul

The Federal Reserve Is, and Always Has Been, Politicized – Article by Ron Paul

The New Renaissance HatRon Paul
******************************

Audit the Fed recently took a step closer to becoming law when it was favorably reported by the House Committee on Oversight and Government Reform. This means the House could vote on the bill at any time. The bill passed by voice vote without any objections, although Fed defenders did launch hysterical attacks on the bill during the debate as well as at a hearing on the bill the previous week.

One representative claimed that auditing the Fed would result in rising interest rates, a stock market crash, a decline in the dollar’s value, and a complete loss of confidence in the US economy. Those who understand economics know that all of this is actually what awaits America unless we change our monetary policy. Passing the audit bill is the vital first step in that process, since an audit can provide Congress a road map to changing the fiat currency system.

Another charge leveled by the Fed’s defenders is that subjecting the Fed to an audit would make the Fed subject to political pressure. There are two problems with this argument. First, nothing in the audit bill gives Congress or the president any new authority to interfere in the Federal Reserve’s operations. Second, and most importantly, the Federal Reserve has a long history of giving in to presidential pressure for an “accommodative” monetary policy.

The most notorious example of Fed chairmen tailoring monetary policy to fit the demands of a president is Nixon-era Federal Reserve Chair Arthur Burns. Burns and Nixon may be an extreme example — after all no other president was caught on tape joking with the Fed chair about Fed independence, but every president has tried to influence the Fed with varying degrees of success. For instance, Lyndon Johnson summoned the Fed chair to the White House to berate him for not tailoring monetary policy to support Johnson’s guns-and-butter policies.

Federal Reserve chairmen have also used their power to shape presidential economic policy. According to Maestro, Bob Woodward’s biography of Alan Greenspan, Bill Clinton once told Al Gore that Greenspan was a “man we can deal with,” while Treasury Secretary Lloyd Bentsen claimed the Clinton administration and Greenspan’s Fed had a “gentleman’s agreement” regarding the Fed’s support for the administration’s economic policies.

The Federal Reserve has also worked to influence the legislative branch. In the 1970s, the Fed organized a campaign by major banks and financial institutions to defeat a prior audit bill. The banks and other institutions who worked to keep the Fed’s operations a secret are not only under the Fed’s regulatory jurisdiction, but are some of the major beneficiaries of the current monetary system.

There can be no doubt that, as the audit bill advances through the legislative process, the Fed and its allies will ramp up both public and behind-the-scenes efforts to kill the bill. Can anyone dismiss the possibility that Janet Yellen will attempt to “persuade” Donald Trump to drop his support for Audit the Fed in exchange for an “accommodative” monetary policy that supports the administration’s proposed spending on overseas militarism and domestic infrastructure?

While auditing the Fed is supported by the vast majority of Americans, it is opposed by powerful members of the financial elite and the deep state. Therefore, those of us seeking to change our national monetary policy must redouble our efforts to force Congress to put America on a path to liberty, peace, and prosperity by auditing, then ending, the Fed.

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission from the Ron Paul Institute for Peace and Prosperity.