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The ‘good old days’ are now: Home appliances today are cheaper and more energy efficient than ever before
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I haven’t done any price comparisons lately of the time cost of goods today versus periods in the past, so here’s one for the summer season on the cost of room air conditioners — today vs. 1973 (updated from this 2013 CD post).
In 1973, the 8,000 BTU room air conditioner pictured above was advertised in the Sears Spring/Summer catalog at a price of $216.75. At the average hourly wage in 1973 of $4.15, the average American would have had to work more than a week — 52.2 hours or 6.5 eight-hour days — to earn enough pre-tax income to purchase the room air conditioner from Sears.
Fast forward 40 years to 2015. The Kenmore 8,000 BTU room air conditioner pictured below is available today for $219.99, so the retail price at Sears has barely changed in more than 40 years, even though the overall CPI has increased 5.4 times since 1973, and the average hourly wage has increased 5.1 times. At the current average hourly wage of $21.01, the work time necessary to purchase today’s Sears 8,000 BTU room air conditioner is only 10.4 hours, or a little more than a day of work.
MP: Measured in what is ultimately most important — our time — the cost of a standard room air conditioner at Sears has fallen by more than 80% over the last 40 years, bringing the cost of what was likely a high-priced luxury item in 1973 down to a price that is affordable by even low-income Americans today. If room air conditioners had increased in price since 1973 at the rate of inflation, today they would cost almost $1,200, more than five times the actual cost today of only $220, and would still be a luxury item not easily affordable by the lower- and middle-class Americans.
But it gets even better, because today’s appliances are so much more energy-efficient than in the past, generating additional savings for consumers today from the lower operating costs of appliances like air conditioners. In the 32 year period between 1981 and 2013, the energy efficiency of room air conditioners increased by more than 46% — and the energy efficiency of other household appliances increased even more — as high as a 217% increase in the energy efficiency of refrigerators.
Bottom Line: Today’s affordable and energy-efficient household appliances like room air conditioners are part of the “miracle of manufacturing,” which continues to deliver cheaper and better goods to American consumers year after year, which translates into a higher standard of living for all Americans, especially for lower and middle-income households. If we wanted to identify a “golden era” of prosperity for middle-class America based on the affordability of common household appliances like room air conditioners, today’s consumers are many times better off than the consumers of any past decade, including the 1950s that Paul Krugman and others wax so nostalgic about. The significant reduction in the cost of purchasing and operating common household appliances like room air conditioners help us understand that the “good old days” are now!
And it’s not just air conditioners that have gotten cheaper over time. The chart below shows that household spending on “life’s basics” – food, clothing and shelter – has steadily declined over time as a share of after-tax personal income, from more than 50% in the 1930s and 1940s, to more than 40% for most of the 1970s when it took more than a week of work to buy the air conditioner featured above, to only about 32% in recent years. The gradual increase in our standard of living thanks to the falling prices (measured in both inflation-adjusted dollars and in the “time cost”) of appliances, food, clothing, cars and household appliances is an under-appreciated and under-reported benefit of the “miracle and magic of the marketplace.” As Larry Kudlow always reminds us “Free market capitalism is the best path to prosperity.”
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1. Chart of the Day I (above). Despite all of the hand-wringing and angst about China’s currency recent devaluation, almost every major currency in the world including the pound (-7%), euro (-18%), Canadian dollar (-20%), yen (-21%) and peso _24%) have been “devalued” more against the US dollar over the last year than the Chinese yuan (only -4%). As Swift Economics sums it up nicely on Twitter today, “Amazing how China’s currency management is “manipulation” while other central banks [including the US] carry out “monetary policy.”
2. Here are 10 Reasons to Love the Strong Dollar including: 1) it makes imports cheaper for consumers and businesses, 2) it makes oil cheaper, 3) it makes foreign travel cheaper and a lot more.
3. Map of the Day (above), if country size were determined by stock market capitalization. Interestingly, Russia ranks No. 1 in the world for land area and China is the third largest country by size, while Japan ranks No. 62 (data here) – compare those rankings for geographic size to those countries’ rankings for stock market value.
4. Venn Diagram of the Day (above). Political hypocrisy on the gender wage gap – Obama, Hillary, and Sanders, etc.: “Do As I Say, Not as I Do.”
5. Uber Update. It expects its business in India to surpass the size of its business in the US soon as it prepares now to expand into rural parts of the country. Source.
6. Chart of the Day II (above). The percentage change in the stock price of Medallion Financial Corporation (NASDAQ: TAXI), a specialty finance company that originates, acquires, and services loans that finance taxicab medallions, was tracking the S&P 500 pretty closely between 2005 and 2012. But starting in 2013, Medallion’s stock has suffered as its main customer base — traditional taxi owners — has been increasingly challenged by ride-sharing services like Uber, causing taxi medallions to lose value as the once unchallenged Big Taxi Cartel crumbles. From a peak of $15.71 per share in November 2013, Medallion started getting “Uber’d” and its stock price has fallen by 45% to $8.64, while the S&P 500 increased 15% during that period. Over a longer period of time, the S&P 500 stocks have gained 70% in value over the last ten years, while Medallion’s stock price had dropped 27.5%.
7. Creative Destruction/The Netflix Effect. The cord-cutting trend intensifies:
The largest swindle big business ever played on the American people — forcing us to pay huge cable bills for dozens of channels we never watch — is slowly coming apart. Even with an ever-increasing population, the pay TV industry (cable and satellite) lost a net 566,000 subscribers last quarter. When you add in Q1, that’s a total of 887,000 lost customers in just six short months.
There is just no question that customers are getting tech savvy and budget savvy. The result is a growing wave of cord-cutters (last quarter was the second biggest drop in pay TV customers in history) as people discover the beauty of streaming on budget-conscious services like Netflix and Amazon, that charge around $10 a month.
8. Chart of the Day III (above). For the sixth straight month, and by the widest margin yet, Americans spent more in July at “Food services and drinking places” ($52.278 billion) than at traditional grocery stores ($50.497 billion), according to data released this morning by the Census Bureau.
9. Recent Victories for Due Process: a) University of Tennessee student wrongfully expelled for rape triumphs in court, b) UC-San Diego failed to provide fair investigation for student accused of sexual assault, according to a recent court ruling, and c) Landmark case shines light on real campus rape ‘epidemic’: equating regret with rape.
10. Did the EPA Intentionally Poison the Animas River To Secure SuperFund Money? That’s the speculation, based on a letter to the editor that was published in the Silverton (CO) Standard newspaper a week before the EPA was responsible for spilling a million gallons of toxic waste into the Animas River last week. Retired geologist Dave Taylor predicted in his letter (“EPA plan is really a ‘Superfund blitzkrieg’“) that EPA officials would intentionally pollute the Animas River to secure Superfund money, see reports here and here. In a related post, Steve Goddard writes: “Barack Obama’s EPA just generated the worst toxic spill in US history. Not a peep of outrage from green groups, Democrats or the White House. If Exxon or any other private company did this, greens would be screaming bloody murder.” That inspired the bonus Venn diagram below:
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Q: Does a tax or higher price lower demand or not?
A: Sen. Bernie Sanders apparently can’t decide. He must think the answer is Yes when he proposes a $20 per ton carbon tax (along with Sen. Barbara Boxer) to make carbon activities more expensive, which will reduce their use and push producers and consumers toward lower-carbon energy alternatives. In economic terms, Sen. Sanders correctly understands that the demand curve for carbon-intensive activities slopes downward, and a $20 per ton carbon tax will reduce the amount of carbon-intensive activities (see diagram above).
But when it comes to the issue of the minimum wage, Sen. Sanders apparently does a flip-flop and thinks the answer to the question is No. That is, Sen. Sanders proposes raising the federal minimum wage from $7.25 to $15 an hour, and apparently doesn’t think that a $7.75 an hour “tax” on employers hiring workers with limited experience will make “labor activities” more expensive, reducing employer demand for workers and push employers toward lower-cost labor alternatives like automation, robotics, and other labor-saving technologies (see diagram above). In economic terms, Sen. Sanders must not believe that the demand curve for low- and un-skilled labor slopes downward, implying that he doesn’t think that jobs will be destroyed from a 107% increase in the minimum wage.
The Venn diagram above was inspired by Ron Paul’s article “Does Bernie Sanders think that economic law will bend to his will?” — here’s a slice:
So Bernie does understand supply and demand. He understands that if he pushes up the price of “carbon-intensive activities,” it will force companies to find other alternatives. Sanders gets it! He shouldn’t be making such a proposal, but he gets it!
Unfortunately, Sanders’ respect for supply & demand is very selective. He wants it to exist for the “carbon tax,” but he wants supply and demand to disappear when it comes to the minimum wage. Bernie champions the imposition of a $15 an hour minimum wage on employers. He sells this to his supporters as help from the government. In his mind, it’s the job of the government to “give America a raise,” or whatever slogan he uses.
But if Sanders forces an arbitrary $15 an hour minimum wage, won’t that make “labor activities” more expensive? Won’t that force employers to find other alternatives? Yes, of course it will!
What about the alternatives? What will employers look to do as a result of this disastrous law? Well, the minimum wage provides a major incentive for employers to automate as much as they can. Fast-food companies like McDonald’s are already rolling out kiosks that customers can use to place their orders.
Sanders’ proposal harms the very people that he’s purportedly trying to help! Does he believe that supply and demand will work for the “carbon tax,” but will not work for the minimum wage?
MP: I think the answer to that last question is definitely “Yes.”
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There are a lot of news reports today about China depreciating its currency by 2% (which strengthens the US dollar and makes Chinese goods now less expensive, like a “2% off everything sale”), and it didn’t take long for Donald Trump to tell CNN that this would be “devastating” for the United States:
“They’re just destroying us,” the billionaire businessman, a long-time critic of China’s currency policy, said in a CNN interview. “They keep devaluing their currency until they get it right. They’re doing a big cut in the yuan, and that’s going to be devastating for us.”
This might be a good time to recycle a 2011 article of mine in The American titled “Why We Should Thank the Chinese Currency Manipulators,” and an updated version of that article appears below:
Let me break from the consensus (and from Donald Trump) that China’s currency policy is harmful to U.S. firms and workers and present an alternative position: The ‘manipulation’ of China’s currency is actually to the distinct advantage of millions of American consumers and thousands of U.S. businesses buying products made in China, and benefits the US economy overall. Let me explain:
In the best of all possible worlds for the United States, China would use its labor, capital and resources to manufacture consumer goods like clothing, footwear, furniture, electronics, toys and appliances and send $250 billion worth of those products to U.S. consumers for free every year as a gift or a form of foreign aid to the American people. In addition, the Chinese would produce and send to America another $250 billion worth of capital goods, raw materials, parts, industrial supplies and materials, automotive parts, machinery, and natural resources at no charge, as a gift to American manufacturers and other businesses every year. (Note: That’s roughly the amount of goods the U.S. will purchase from China this year.)
Can there really be any argument that such an arrangement, where America would receive $500 billion worth of free goods every year from China, would be to the unquestionable economic advantage of the United States? Unfortunately, that extreme form of Chinese generosity is not realistic, so here’s a possible second-best outcome:
Instead of sending us $500 billion worth of goods annually for free, China offers an attractive alternative. It agrees to send us $625 billion worth of consumer and industrial goods every year, but agrees to sell us those manufactured goods at a substantial 20 percent discount for only $500 billion. In that case, the amount of foreign aid will be less than the $500 billion in the first example, but will still be significant—a $125 billion gift every year from the Chinese people to the American people.
How will China generate this $125 billion in annual foreign aid to the United States? One way is to keep its currency undervalued to bring about the 20 percent discount on its products coming to America. Which then raises the question: If China is willing to undervalue its currency, and in the process provide approximately $125 billion of foreign aid annually to American consumers and businesses, what’s the problem? Why should we complain?
And that is my main point: that the “manipulation” of China’s currency is actually to the distinct advantage of millions of American consumers (especially low-income Americans) and U.S. businesses buying products and inputs made in China. Those two groups certainly aren’t complaining about low-priced Chinese products, and in fact would be made worse off if China were forced to revalue its currency and in the process make its products more expensive for Americans.
So if neither American consumers nor U.S. import-buying businesses would benefit from a stronger yuan and a reduction in China’s “foreign aid” to America, who would really benefit? The same group that always benefits from protectionist, mercantilist trade policies: domestic producers who compete against foreign rivals in China and elsewhere.
We know from economic theory and empirical evidence that protectionist tariffs produce benefits for domestic producers, but also higher costs for domestic consumers. Unfortunately, the costs to consumers from protectionism are greater than the benefits to producers, resulting in a net economic loss for the country and a reduction in its standard of living. Likewise, forcing China to appreciate its currency would be equivalent to a protectionist tariff on Chinese goods and would make American consumers, import-buying companies, and the country as a whole worse off.
So when you hear China’s alleged currency manipulation discussed in the media and by presidential candidates like Donald Trump, keep the following in mind:
1. China’s currency manipulation is a form of foreign aid, and to the direct advantage of millions of U.S. consumers, especially low-income groups, and to the direct advantage of thousands of American companies buying inputs from China.
2. Forcing China to revalue its currency would benefit some American manufacturers competing with China, but would significantly harm those American consumers and businesses currently buying undervalued imports. On net, there would be more harm to American consumers than benefits to American manufacturers, which would reduce our overall standard of living.
3. Like other forms of mercantilism and protectionism, forcing or pressuring China to appreciate its currency would favor certain domestic producers over millions of consumers and import-buying companies, but would make the United States worse off, not better off.
4. Finally, instead of complaining, we should be thankful for China’s foreign aid to Americans through an undervalued yuan and overvalued dollar, and for the undervalued goods that collectively save American consumers and companies billions of dollars every year.
Bottom Line: If you wouldn’t object to China sending products to the United States for free, then on what basis would you object to currency “manipulation” that allows you to purchase undervalued Chinese imports at a huge discount and great bargain?
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Every day I walk by the Mayflower Hotel on Connecticut Avenue in Washington, D.C. and see the same thing: About a dozen or more taxis lined up on the street waiting in a long line, as shown in the photo above. This strikes me as being extremely inefficient, and something you would never see in a ride-sharing Uber world – you would never see 12 UberX cars sitting around idly waiting by a hotel. In a dynamic Uber world, the available drivers respond to demand, and are possibly directed by Uber to areas where there are a lot of passengers. And when demand is really high, surge pricing goes into effect to attract even more drivers to areas of high demand. But when there are always a dozen taxis sitting around idly at The Mayflower (and probably lots of other DC hotels), that just seems like an outdated form of transportation inefficiency, an inefficient excess supply, a failure to balance supply and demand, and something that would never happen in a ride-sharing world of much greater transportation efficiency.
The long taxi queue might be understandable if there were some well-attended event at a hotel like The Mayflower where it was known in advance that taxi demand would be high. But the taxi queue at The Mayflower happens daily and just doesn’t seem efficient to constantly have a dozen idle cars and a dozen idle drivers waiting around for long periods of time… I suppose the hotel likes having a dozen taxis constantly queueing up so that its customers don’t have to wait to get a taxi, but that’s only because the existing Big Taxi model can’t efficiently allocate taxis around the city to where they are needed the most at any point in time. And another part of the puzzle: Why are these taxi drivers willing to queue up for so long waiting idly at The Mayflower instead of driving around and picking up passengers on the street?
Trivia Bonus: Queueing (used above) is the only common word in the English language with five consecutive vowels.
Update: Below is a picture from today at about 12:30 p.m. showing ten taxis lines up at The Mayflower, which goes all the way to the intersection and must be the maximum number. Yesterday was relatively mild (temperature in the 70s) and so some of the drivers had their cars turned off and were standing outside. Today is warmer (mid-80s and humid) so all the drivers are sitting inside their cars with their engines and A/C running, another source of waste and inefficiency.
Minimum wage effect? January to June job losses for Seattle area restaurants (-1,300) largest since Great Recession
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In June of last year, the Seattle city council passed a $15 minimum wage law to be phased in over time, with the first increase to $11 an hour taking effect on April 1, 2015. What effect will the eventual 58% increase in labor costs have on small businesses, including area restaurants? It’s too soon to tell for sure, but there is already some evidence that the recent minimum wage hike to $11 an hour, along with the pending increase of an additional $4 an hour by 2017 for some businesses, has started having a negative effect on restaurant jobs in the Seattle area.
The chart below shows that the Emerald City MSA started experiencing a decline in restaurant employment around the first of the year (when the state minimum wage increased to $9.47 per hour, the highest state minimum wage in the country), and the 1,300 job loss between January and June is the largest decline over that period since 2009 during the Great Recession (data here). The loss of 1,000 restaurant jobs in May following the minimum wage increase in April was the largest one month job decline since a 1,300 drop in January 2009, again during the Great Recession. In contrast to the January-June loss of restaurant jobs in the Seattle area: a) restaurant employment nationally increased by 130,700 jobs (and by 1.2%) during that same period (data here), b) overall employment in the Seattle MSA increased 1.2% and by 21,800 jobs (data here) and c) non-Seattle MSA restaurant employment in Washington state increased 3.2% and by 2,800 jobs (data here).
Perhaps Seattle’s restaurant employment will recover, or perhaps it will continue to suffer from the upcoming full 58% increase in labor costs for the city’s restaurants that will be phased in during the coming years – time will tell. What we know for sure is that there are now 1,300 Seattle area restaurant workers who were employed in January who are no longer employed today, so it looks like the Seattle minimum wage hike is getting off to a pretty bad start.
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Here are some excerpts below from a very thoughtful essay that appeared in today’s Inside Higher Ed written by Lee Burdette Williams, who was formerly Vice President for Student Affairs and Dean of Students at Wheaton College, and Dean of Students at the University of Connecticut. In her essay “The Dean of Sexual Assault” Ms. Williams documents how she went from being “Dean of Students” for several decades to being forced into the role of “Dean of Sexual Assault” in recent years because of misguided pressure from the Office of Civil Rights and the Obama administration as part of their hysterical campaign against the alleged campus rape culture, to eventually resigning as Dean of Students and becoming a “Dean of None.” The excerpt below starts with the period in 2011 when “the world started to change” for Ms. Williams and many other college administrators (emphasis added):
The community in which I did my work was breached by those on the outside who understood very little of what my day-to-day work entailed. In 2011, the Department of Education’s Office for Civil Rights sent a Dear Colleague letter clarifying its expectations for how we were to handle sexual assault.
I read the letter, nodding at some parts and shaking my head at others. It felt like a group of well-intended but misinformed interlopers had shown up to tell me how to do a job I had done for years. Absent any input from people in jobs like mine, this group of lawyers and policy specialists created a blueprint for an already existing structure, disregarding the years of effort undertaken to build it. We needed some renovation. They were requiring a gut rehab.
Why did this happen? There were institutions that had not treated their students well, and quite possibly there were some incompetent people at the helm of those institutions’ efforts. But many of my counterparts and I had been doing the hard work of managing these cases for years and knew a lot about what worked well and what needed changing. Didn’t our judgment, our input, count for anything?
For weeks, I pored over the various documents available online — letters of agreement and results of investigations that the Office of Civil Rights made public. I was disturbed by the ways some institutions had ignored longstanding harassment and tolerated truly unsafe conditions. I believed they were in the minority, but the existence of any undermined confidence in us all. I made my peace with that, and with renewed determination to do this important work well, helped my campus examine and improve our policies, our outreach, our educational efforts.
I started talking more openly with parents during orientation, encouraged our college to hire a skilled Title IX coordinator without other time-consuming responsibilities, successfully applied for a grant from the Department of Justice to enhance our efforts. In short, I did everything I could to do my job well and help my campus support the students in my care. I even stopped griping about the Dear Colleague letter and tried to see it as it was probably intended: a rebuke to some, a reminder to all of the importance of our work and the students for whom we are responsible.
But clouds continued to gather on the horizon. For reasons that baffled us all, OCR released a list of colleges and universities under investigation for alleged Title IX complaints, despite the fact that these institutions had not yet been found to be in violation of anything. It was merely a list of institutions in the OCR queue to be investigated for what at least one student believed was a failure of the institution to meet its Title IX obligations related to sexual harassment.
The fact that these were either open investigations or had not even been fully shared with the institution didn’t matter. Colleges and universities were pilloried in the press, their administrators accused of “covering up” something that they themselves had perhaps not even fully investigated yet. The reasons for releasing this list were unclear, but the damage was indisputable. The presumption of our role — student advocates — changed, and we were now presumed to be standing in the way of student safety and accountability, two things our profession holds dear.
Then the Obama administration began a well-meaning but relatively shallow campaign to hold institutions accountable, and momentum built. Everyone was talking about sexual assault on campus — an outcome any dean of students would have been grateful for in the past. But the lines had been drawn, and somehow we ended up as targets of enmity instead of comrades in this important battle.
Media coverage, some by the best newspapers and magazines in the country, was constant, each reporter looking for an example from a campus to use as the lead-in to the story. Blogs and other online posts and comments became an increasingly powerful mode of “discussion,” which devolved into accusations of incompetence and cover-ups by allegedly self-interested colleges and universities.
Meanwhile, on our campuses, sexual assaults were still happening, and we were still responding to them as capably as we could. I still stood at the door, trying to protect a process that served all of my students in a way I could still call “educational,” because that was what I was — an educator — but the outside groups demanding access, explanation and redress had grown, dwarfing the community I was charged with protecting.
In the space of a year, it felt like my work had gone from being appropriately scrutinized by the members of my community who knew me and cared about our students and who had every right to expect me to answer to them, to being the object of uninformed opinions expressed by people who couldn’t have found my campus on a map.
In addition to the lawyers of OCR and DOJ, my counterparts across the country and I had to worry that each decision we made in a sexual misconduct matter would be made public, mostly by social media, vilified by clueless pundits, turned into slick justifications by “advocates,” would attract the attention of one of the high-powered lawyers making the rounds of cable TV talk shows and press conferences, and become the incident that would end our careers, or at the very least, sully our reputations. Federal laws and our own deeply rooted professional guidelines prohibited us from fighting back publicly, even if we wanted to. We remained silent while the battle raged around us.
But I found myself thinking, I didn’t sign on for this. Unlike professional athletes or musical performers or reality TV stars, people who become deans of students are not usually interested in the spotlight. Our work goes on behind closed doors where the hearts of students are laid bare and need to be repaired, or in campus forums where our students get to question our decisions and we can defend them, or change them. These things happen in the context of community, and that is what provides meaning and validity. That is how change, and improvement, occur.
And now our work is the subject of bloggers and activists who are so driven by agendas that they cannot consider an alternative viewpoint. Our efforts to serve our campuses are being pushed aside by the cottage industry of “consultants” and lawyers who prey on the fear of presidents and boards, worried that their institution will be the next one featured in The New York Times.
Did we need to be challenged about sexual assault response? Yes, and we were, and we worked hard to improve.
Did we need to be better as a profession? Yes. I have never believed I had it all figured out, and don’t know any other deans of students who would make that claim. But when swept up in a tidal wave of uncivil and often uninformed opinion offering, unfounded accusations, questionable Title IX complaints and spurious litigation, it is hard to do anything other than keep from drowning.
Eventually, I found myself thinking of a new variation on my title. I had become, I realized, the Dean of Sexual Assault. Every case became an all-out crisis, and the cases were coming more frequently as awareness grew. Some cases were clearly appropriate uses of the process, while others were not, but it didn’t matter. I had little time to do the other parts of a job that has many other parts. I was consumed by situations involving two or three or four students and had hardly any time left for the rest of those on my campus who needed and deserved my attention.
Very little has been written about or by those of us who work on the front lines of this issue, and when something is written, like Rolling Stone’s travesty of journalism last November, we are often portrayed as unfeeling idiots who care about nothing: not our students, not our institutions, not the law. Of course, the reverse is true: we care about each, and nothing trumps the affection we feel for our students. That affection is what made me so proud, so honored, to have a title that made clear to everyone what my first priority was, every single day I went to work.
It’s a title I no longer have. When I realized I didn’t want to be Dean of Sexual Assault, I decided to step away from a profession and identity I had treasured. When it became clear to me that being Dean of All Students was no longer possible without the constant threat of litigation, media coverage and Internet trolls, I thought it best to be dean of none. I hope there are others in this noble work who can weather this storm and emerge on the other side of the tumult. I won’t be among them, but I understand their anguish, and I wish them well.
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In 1991 Nobel economist Milton Friedman (pictured above giving a talk at AEI, exact year unknown) was interviewed by Emmy Award-winning drug reporter Randy Paige on “America’s Drug Forum,” a national public affairs talk show that appeared on public television stations. In the interview, Milton Friedman discussed in detail his views on America’s War on Drugs, legalization of drugs, the role of government in a free society, and his pessimistic view of America’s future if we continue moving in the direction of socialism. Videos of the entire 30-minute interview appears below in three parts, and here is the transcript of the interview.
Here are some of my favorite parts of the interview (emphasis added):
1. Paige: Let us deal first with the issue of legalization of drugs. How do you see America changing for the better under that system?
Friedman: I see America with half the number of prisons, half the number of prisoners, ten thousand fewer homicides a year, inner cities in which there’s a chance for these poor people to live without being afraid for their lives, citizens who might be respectable who are now addicts not being subject to becoming criminals in order to get their drug, being able to get drugs for which they’re sure of the quality. You know, the same thing happened under prohibition of alcohol as is happening now.
Under prohibition of alcohol, deaths from alcohol poisoning, from poisoning by things that were mixed in with the bootleg alcohol, went up sharply. Similarly, under drug prohibition, deaths from overdose, from adulterations, from adulterated substances have gone up.
2. Paige: For us to understand the real root of those beliefs, how about if we just talk a minute about free market economic perspective, and how you see the proper role of government in its dealings with the individual.
Friedman: The proper role of government is exactly what John Stuart Mill Said in the middle of the 19th century in “On Liberty.” The proper role of government is to prevent other people from harming an individual. Government, he said, never has any right to interfere with an individual for that individual’s own good.
The case for prohibiting drugs is exactly as strong and as weak as the case for prohibiting people from overeating. We all know that overeating causes more deaths than drugs do. If it’s in principle OK for the government to say you must not consume drugs because they’ll do you harm, why isn’t it all right to say you must not eat too much because you’ll do harm? Why isn’t it all right to say you must not try to go in for skydiving because you’re likely to die? Why isn’t it all right to say, “Oh, skiing, that’s no good, that’s a very dangerous sport, you’ll hurt yourself”? Where do you draw the line?
3. Paige: Is it not true that the entire discussion here, the entire drug problem is an economic problem to…
Friedman: No, it’s not an economic problem at all, it’s a moral problem.
Paige: In what way?
Friedman: I’m an economist, but the economics problem is strictly tertiary. It’s a moral problem. It’s a problem of the harm which the government is doing.
I have estimated statistically that the prohibition of drugs produces, on the average, ten thousand homicides a year. It’s a moral problem that the government is going around killing ten thousand people. It’s a moral problem that the government is making into criminals people, who may be doing something you and I don’t approve of, but who are doing something that hurts nobody else. Most of the arrests for drugs are for possession by casual users.
Now here’s somebody who wants to smoke a marijuana cigarette. If he’s caught, he goes to jail. Now is that moral? Is that proper? I think it’s absolutely disgraceful that our government, supposed to be our government, should be in the position of converting people who are not harming others into criminals, of destroying their lives, putting them in jail. That’s the issue to me. The economic issue comes in only for explaining why it has those effects. But the economic reasons are not the reasons.
Of course, we’re wasting money on it. Ten, twenty, thirty billion dollars a year, but that’s trivial. We’re wasting that much money in many other ways, such as buying crops that ought never to be produced.
4. Paige: There are many who would look at the economics–how the economics of the drug business is affecting America’s major inner cities, for example.
Friedman: Of course it is, and it is because it’s prohibited. See, if you look at the drug war from a purely economic point of view, the role of the government is to protect the drug cartel. That’s literally true.
Paige: Is it doing a good job of it?
Friedman: Excellent. What do I mean by that? In an ordinary free market–let’s take potatoes, beef, anything you want–there are thousands of importers and exporters. Anybody can go into the business. But it’s very hard for a small person to go into the drug importing business because our interdiction efforts essentially make it enormously costly. So, the only people who can survive in that business are these large Medellin cartel kind of people who have enough money so they can have fleets of airplanes, so they can have sophisticated methods, and so on.
In addition to which, by keeping goods out and by arresting, let’s say, local marijuana growers, the government keeps the price of these products high. What more could a monopolist want? He’s got a government who makes it very hard for all his competitors and who keeps the price of his products high. It’s absolutely heaven.
Legalization is a way to stop–in our forum as citizens– a government from using our power to engage in the immoral behavior of killing people, taking lives away from people in the U.S., in Colombia and elsewhere, which we have no business doing.
5. Paige: So, you see the role of government right now as being just as deadly as if Uncle Sam were to take a gun to somebody’s head.
Friedman: That’s what he’s doing, of course. Right now Uncle Sam is not only taking a gun to somebody’s head, he’s taking his property without due process of law. The drug enforcers are expropriating property, in many cases of innocent people on whom they don’t have a real warrant. That’s a terrible way to run what’s supposed to be a free country.
6. Paige: What scares you the most about the notion of drugs being legal?
Friedman: Nothing scares me about the notion of drugs being legal.
Friedman: What scares me is the notion of continuing on the path we’re on now, which will destroy our free society, making it an uncivilized place. There’s only one way you can really enforce the drug laws currently. The only way to do that is to adopt the policies of Saudi Arabia, Singapore, which some other countries adopt, in which a drug addict is subject to capital punishment or, at the very least, having his hand chopped off. If we were willing to have penalties like that–but would that be a society you’d want to live in?
7. Paige: Last question. You have grandchildren.
Friedman: Absolutely. I have a two-year-old granddaughter named Becca.
Paige: When you look at Becca, what do you see for her and for her future?
Friedman: That depends entirely upon what you and your fellow citizens do to our country. If you and your fellow citizens continue on moving more and more in the direction of socialism, not only inspired through your drug prohibition, but through your socialization of schools, the socialization of medicine, the regulation of industry, I see for my granddaughter the equivalent of Soviet communism three years ago.
Part I (below). Milton Friedman interview on “America’s Drug Forum” (1991)
Part 2 (below). Milton Friedman interview on “America’s Drug Forum” (1991)
Part 3 (below). Milton Friedman interview on “America’s Drug Forum” (1991)