The Free Market

One of Franklin Roosevelt's many schemes to "save capitalism from itself" in the 1930s was the creation of the Federal National Mortgage Association, known today as Fannie Mae. Created in 1938 as part of the Reconstruction Finance Corporation, Fannie Mae's original mandate was to purchase Federal Housing Administration loans.

Everyone complains about bad service. From the airlines to telecommunications, we hear of the increasing number of consumer complaints. Diane Brady, a writer for Business Week, believes that she has the answer to why some of us might believe service is bad. Last year, she informed BW's readers that, once again, capitalism is running amok and now needs the hand of government more than ever to force businesses to properly serve their customers. "Why Service Stinks" told of unfairness abounding as firms go overboard to keep "good" customers and do everything they can to get rid of "bad" ones.

The Free Market 19, no. 10 (October 2001)

By the standards of the Left, Adolf Hitler would have been deemed a "great statesman," had he died before he started the war (or if he had won it). That's because the left tends to measure greatness by the amount of land and number of people under one man's thumb. By that standard, Hitler was a great socialist-which is precisely what he and his part aspired to become.

One of many pastimes of government bureaucrats is forcing foreign banks to cough up tax information on US citizens. This is a disaster for the cause of privacy, the right of contract, and freedom itself. If the campaign, which has been going on for years, finally succeeds, it will mean the end of bank privacy for Americans. It will also devastate foreign economies that see a comparative advantage in offering secure banking to people from around the world.

British economist A.C. Pigou was instrumental in developing the theory of externalities. The theory examines cases where some of the costs or benefits of activities "spill over" onto third parties. When it is a cost that is imposed on third parties, it is called a negative externality. When third parties benefit from an activity in which they are not directly involved, the benefit is called a positive externality. The study of such situations, a part of welfare economics, has been an active area of research since Pigou's efforts early in the twentieth century.

Widespread panic set in this summer when the party of King Simeon II won a majority in Bulgaria's recent elections. There were ominous warnings about this being the first East European state to take a step toward restoring monarchical figures to power. So many people associate democracy with freedom and monarchy with tyranny that any attempt to revisit pre-democratic systems of government is regarded as evil.

On May 29, the commencement exercises at Estero High School in Fort Myers, Florida, took place without eighteen-year-old honor student Lindsay Brown. The reason? A school official saw a kitchen knife with a five-inch blade on the floor of her car in the school parking lot and reported it to the local sheriff. Lindsay was suspended for five days, arrested on a felony charge, and spent part of May 21 in jail. Miss Brown, who accidentally left the knife in the car while moving some belongings over the previous weekend, is one of the more recent victims of the "zero-tolerance" policies most public schools have adopted toward prohibited items.

One thing that has achieved Holy Writ with economists and politicians is the Consumer Price Index, or the CPI. Each month, people from Alan Greenspan to traders at the New York Stock Exchange to the economist in the Economics 101 prison await the latest announcement from the US Department of Labor that tells us the change in "consumer prices" from the previous month.

Back when I was an undergrad, I got an A in Economics 101, and a formal request for me to major in economics. The course was both easy and straightforward, and I was under the impression that a solid knowledge of how the economy worked was soon to be in my grasp.

Then I stumbled onto a copy of Henry Hazlitt's The Failure of the New Economics, and I got a real shock.

As the nation's equity markets crumbled, the question that inevitably arose was "When will stock prices stop falling?" And there was always some willing economist, journalist, politician, or other self-appointed pundit ready to take the bait.

In 1957, a businessman and radio personality named Robert LeFevre (1911-1986) founded a very special institution in Colorado Springs, Colorado. In his private studies, he had discovered the libertarian intellectual tradition. He noted the dire need for an institution that would educate people from all walks of life in the philosophy of freedom. He took it upon himself and named it the Freedom School, later changing the name to Rampart College before it shut down in 1968. Afterward, he carried on his work in South Carolina under the patronage of business giant Roger Milliken.

Facing a crisis, their primary concern is political survival; to admit their culpability and liability would be committing political suicide. Therefore, they rant and rave, always pointing toward the producers of energy. It is they who heartlessly, scandalously, viciously, and immorally conspire to create energy shortages in order to reap exorbitant profits.

It is sad that, even though Keynesian economics has been discredited time and again, we still hear the pundits declare that consumers cause recessions- and prosperity- simply by choosing to spend or not to spend. The "heroic consumer" who spends and spends in the face of adversity needs to be put to rest.

Part of the reason seat belt laws and speed limits bother me is that they extend a tentacle of government into automobile safety issues-- yet another place it does not belong. Not only are such laws immoral, but they set a precedent for even more intrusive regulations. Next thing I know, the Food and Drink Police will be snatching candy bars from my hand and replacing them with rice cakes.

While some taxes are worse than others, there is no good tax. All taxes distort production, depress economic growth, and punish producers and consumers. It's also true that different kinds of taxes affect production and punish people in different ways.

There are no good American history textbooks on the market. I've looked. We non-leftists have to settle for the least bad one we can find. A number of my friends told me a year ago that Tindall and Shi's America: A Narrative History was the least bad. So, I've used it this semester for my survey course covering the period from Reconstruction to the present.

A combination of factors has elevated the Federal Reserve and its chairman to mythical status amongst the corporate and media elite.

Next to government debt in terms of liquidity is the swollen market for residential mortgages. As author Charles Morris observed in his book, Money, Greed, and Risk, "Measured by volume, the second most important American financial instrument over the past half century, by a wide margin, has been the lowly residential mortgage.

The problem of "payola" has been much in the headlines recently. And yet, little has been done to isolate and unravel the complex legal, moral, and economic issues involved.