North Korea lifts restrictions on markets…

With the devastating starvation the North Korean people have suffered the government may have finally realized that categorical command-and-control economic planning has been a massive failure.  With this realization, the North Korean government has apparently opened its markets in hopes doing so will curb its food crisis and prevent North Korean citizens from starving.

From the Washington Post:

SEOUL — Bowing to reality, the North Korean government has lifted all restrictions on private markets — a last-resort option for a leadership desperate to prevent its people from starving.

In recent weeks, according to North Korea observers and defector groups with sources in the country, Kim Jong Il’s government admitted its inability to solve the current food shortage and encouraged its people to rely on private markets for the purchase of goods. Though the policy reversal will not alter daily patterns — North Koreans have depended on such markets for more than 15 years — the latest order from Pyongyang abandons a key pillar of a central, planned economy.

Read the rest.

The Price is Right

hayekKurt Bouwhuis, Mackinac Center Intern

I was reading through The Road To Serfdom by F.A. Hayek last night, and stumbled across a fantastic passage:  “In a competitive society the prices we have to pay for a thing, the rate at which we can get one thing for another, depend on the quantities of other things of which by taking one, we deprive the other members of society.   This price is not determined by the conscious will of anybody.  And if one way of achieving our ends proves too expensive for us, we are free to try other ways.  The obstacles in our path are not due to someone’s disapproving of our ends but to the fact that the same means are also wanted elsewhere.  In a directed economy, where the authority watches over the ends pursued, it is certain that it would use its power to assist some ends and to prevent the realization of others.”

Sarcasm??? I Hope So….

penguinKurt Bouwhuis, Mackinac Center Intern

“We’ve heard a lot of whining over the last few months that the “cost” of coming climate change legislation will kill jobs, destroy industry, kick puppy dogs, sicken orphans … basically the same old barge filled with scary warnings that have been used since time immemorial about every major piece of environmental legislation (if history is any judge of the efficacy of these warnings, we could pass new climate change bills from today until the end of time and not destroy the economy).” – Eric B. – Michigan Liberal

If climate change bills don’t hinder the economy – why not abolish pollution of any kind all together?  Surely, making it illegal to pollute will make production much less costly.

This logic is faulty and here’s why: If environmentally friendly solutions make production so much easier, why are profit seeking individuals not capitalizing on the new opportunities.  Additionally, I find it hard to believe that restricting individuals from conducting voluntarily transactions is some how going to make people better off.

Lastly, it would be difficult to measure all the effects of any one piece of legislation.  If wind turbines are made mandatory, and GDP goes up by .1%, we cannot say that the wind turbines caused the .1% increase.  Each and every year, thousands of new laws are passed, all of which affect the actions of millions of individuals that some call “the economy.”

Time for Reflection: “The Unity of the People”

by Mario Rizzo at ThinkMarkets

After most presidential elections in recent years there is talk of uniting the country, somehow overcoming differences and working for the betterment of the nation. This is a dangerous idea if it is taken seriously.

In a (classical) liberal society with a minimal state this ideal is a real and benign possibility. This is because in such a society government restricts its activities to those that benefit each and all. Although people naturally differ in their priorities — the goals for their lives, how they wish to allocate their incomes, how they conceive of happiness, and their personal moral codes — they do have one interest in common. This is the preservation and enhancement of a system of voluntary social cooperation.

Social cooperation is the great means by which each of us can attain, or strive to attain, our diverse individual goals. We do this by helping other people attain their individual goals through exchange. So a system of social cooperation does not eradicate individual differences. It does not seek to unite people in a single hierarchy of purposes to better the nation. It certainly does not require people to agree on what “betterment” means.

A system of social cooperation is an abstract and complex order that is maintained by a framework of rules. These are the ones familiar to classical liberals: mainly, property, contract and protection of the individual’s physical integrity. (Classical liberals do have disagreements about the need for rules outlawing anticompetitive behavior and for policies dealing with external effects and public goods. But even here the implicit theory is the benefit of each and all.)

Social cooperation in a liberal order is not limited to market exchanges but finds manifestation in all of the voluntary institutions of civil society including those of the nuclear or extended family. Many of these have the character of reciprocity even if the agents are not conscious of it. For example, friends may each gratuitously offer moral support to the other in times of need. But if one friend continually refused to reciprocate the relationship would end.

The statist-liberal insistence on agreement at the level of national purposes is destructive of freedom because it moves beyond the realm in which people have common economic or moral goals. The idea of national purpose does not rest on pre-existing common values and goals but on the political suppression of individual differences.

To illustrate: Do we, as a Nation, “think” that We ought to save more? Or that We ought to increase public borrowing for economic stimulus? Do We believe that government (taxpayers’) resources ought to be injected into failing American automobile manufacturers? Should more money go, instead, to save homeowners from foreclosures? Should more money be sent to save starving children in Africa?

The simple answer is: The questions are senseless. We all don’t have the same priorities. The idea of a Nation’s priorities among these options is a fiction designed to give the impression that the political system expresses some inner national character or some rational assessment of alternatives. Moreover, no one can seriously claim that there is some objective morality that will enable us to order uniquely these alternatives in a way that commands our assent. Once we leave the realm of those relatively few rules that sustain social cooperation – those that benefit each and all – we enter a world in which political priorities are set by special interests motivated by their partiality and avidity. In this world what counts is the political manipulation of the hapless guy.

Intrade Better at Predicting the Future Than Experts?

Kurt Bouwhuis, Mackinac Center Intern

This clip demonstrates that perhaps a crowd of “uneducated” people will be better at predicting futures than the experts.  Intrade, a website which hosts a slue of future markets, has had impressive results.  Intrade hosts future markets which are valued between $0.00 and $1.00.  $0.00 = 0% while $1.00 = 100%.  Users of this website use real money and invest in futures ranging from politics to the predictions of the stock market.  An example of a market follows: A market for Barrack Obama to win the presidency was recently on the website.  If he were valued at $0.80, that means that the aggregation of people believe Obama has an 80% chance to win the election.  This would leave McCain at 20%.  Lets say I invest 100 shares in McCain.  If he ends up winning (which we now know is false), I would profit $0.80 per share.  It’s a neet utility that seems to have some useful applications.  Check it out!