Saturday, May 28, 2016

Governor Christie Signs Pro-Taxpayer Atlantic City Reform Legislation

Trenton, NJ – After 73 days of partisan obstruction by the State Assembly Speaker on behalf of his public union bosses, Governor Chris Christie signed pro-taxpayer Atlantic City reform bills within one day of their final legislative passage.

The new laws — S-1711/A-2569 (Sweeney, O’Toole, Sarlo/Prieto, McKeon, Mazzeo, Caputo), the Atlantic City “Municipal Stabilization and Recovery Act,” and S-1715/A-2570 (Sweeney, Whelan/Prieto, Mazzeo, Caputo), to help Atlantic City compensate for a decline in property assessments — include all provisions that the governor requested in the beginning of negotiations with legislative leaders.

“These new laws will ultimately accomplish my mission to reform Atlantic City’s overblown municipal government, and in turn protect local and state taxpayers from being perpetually abused by the special political interests who admit to owning this city’s elected officials,” Governor Christie said. “We all agree that Atlantic City’s government has not demonstrated the competence to properly manage the people’s money without state guidance and oversight, and as I’ve said all along they will not be getting any more blank checks from state taxpayers as the legislature had proposed last summer. This legislation means no more business as usual. It embraces my demand that Atlantic City immediately account for every dollar it receives and spends, and triggers a series of strict conditions and rigorous requirements the city must meet immediately.”

Today’s action requires Atlantic City to demonstrate fiscal responsibility immediately and to develop a comprehensive, sustainable recovery plan, including a balanced budget, over the next 150 days. If the Commissioner of the Department of Community Affairs ultimately determines an intervention is necessary, this reform law will, as the Governor has consistently insisted upon, provide his administration all of the requisite tools to effectuate meaningful change in Atlantic City’s finances.

“For Atlantic City officials, the final countdown starts today,” the Governor said. “They now have 150 days to develop and implement fiscally responsible reforms and finally meet the obligations of every other municipal government in our state. They know that if they fail to change their tendencies of wasteful spending and mismanagement, my administration will be empowered to immediately step in and do the job for them.”

The main reform provisions include:

No more grants; no more free money.  The Governor is agreeing only to a secured bridge loan for the next six months, under terms and conditions set by the Commissioner of the Department of Community Affairs, the repayment of which must be factored into the recovery plan to be developed by the city;
The preparation of a detailed, five-year recovery plan, which includes a balanced budget for 2017 and identifies the specific actions undertaken by the city government to put its fiscal house in order, beginning immediately;
Atlantic City’s recovery plan must also include:

o    How it will cut its excessive, wasteful spending and increase its revenues;

o    How it will make on time payments in full to the school district;

o    How it will make on time payments in full to Atlantic County;

o    How it will repay the secured state loan;

o    How it will repay debts owed to the state for pension and health coverage; and

o    How it will make good on all other debts and obligations that are outstanding to bondholders, tax appeal judgment holders, and other creditors.

The Commissioner of the Department of Community Affairs is empowered under this bill to determine whether the city government’s proposed recovery plan is likely to achieve financial stability for Atlantic City and if he determines that the plan will fall short of this goal, the state will intervene and manage the city with all of the tools necessary to turn this troubled city around; and
To ensure that Atlantic City’s government maintains fiscal discipline as the cloud of this longstanding financial crisis lifts, if the Commissioner approves its recovery plan, he has the authority to determine at any time that state intervention is necessary if Atlantic City fails to strictly comply with its plan or if circumstances indicate that the plan is no longer likely to achieve financial stability.

Friday, May 27, 2016

Donald Trump's Energy Plan

Delivered by Donald Trump on May 26,2016 at The Williston Basin Petroleum Conference in Bismarck, ND.


Below is a transcript of the remarks as prepared for delivery.

I’m delighted to be in North Dakota, a state at the forefront of a new energy revolution.

Oil and natural gas production is up significantly in the last decade. Our oil imports have been cut in half.

But all this occurred in spite of massive new bureaucratic and political barriers.

President Obama has done everything he can to get in the way of American energy. He’s made life much more difficult for North Dakota, as costly regulation makes it harder and harder to turn a profit.

If Hillary Clinton is in charge, things will get much worse. She will shut down energy production across this country.

Millions of jobs, and trillions of dollars of wealth, will be destroyed as a result.

That is why our choice this November is so crucial.

Here’s what it comes down to.

Wealth versus poverty.

North Dakota shows how energy exploration creates shared prosperity. Better schools. More funding for infrastructure. Higher wages. Lower unemployment.

Things we’ve been missing.

It’s a choice between sharing in this great energy wealth, or sharing in the poverty promised by Hillary Clinton.

You don’t have to take my word for it. Just listen to Hillary Clinton’s own words. She has declared war on the American worker.

Here is what Hillary Clinton said earlier this year: “We are going to put a lot of coal miners and coal companies out of work.”

She wants to shut down the coal mines.

And if Crooked Hillary can shut down the mines, she can shut down your business too.

Let me tell you how President Obama Undermined Our Middle Class

President Obama’s stated intent is to eliminate oil and natural gas production in America.

His policy is death by a thousand cuts through an onslaught of regulations.

The Environmental Protection Agency’s use of totalitarian tactics forces energy operators in North Dakota into paying unprecedented multi-billion dollar fines before a penalty is even confirmed.

Government misconduct goes on and on:

The Department of Justice filed a lawsuit against seven North Dakota oil companies for the deaths of 28 birds while the Administration fast-tracked wind projects that kill more than 1 million birds a year.
The U.S Fish and Wildlife Service abuses the Endangered Species Act to restrict oil and gas exploration.
Adding to the pain, President Obama now proposes a $10-per-barrel tax on American-produced oil in the middle of a downturn.

At the same time President Obama lifts economic sanctions on Iran, he imposes economic sanctions on America. He has allowed this country to hit the lowest oil rig count since 1999, producing thousands of layoffs.
America’s incredible energy potential remains untapped. It is a totally self-inflicted wound.

Under my presidency, we will accomplish complete American energy independence.

Imagine a world in which our foes, and the oil cartels, can no longer use energy as a weapon.

But President Obama has done everything he can to keep us dependent on others. Let me list some of the good energy projects he killed.

He rejected the Keystone XL Pipeline despite the fact that:


It would create and support more than 42,000 jobs.
His own State Department concluded that it would be the safest pipeline ever built in the United States.
And it would have no significant impact on the environment.
Yet, even as he rejected this America-Canada pipeline, he made a deal that allows Iran to transport more oil through its pipeline that would have ever flowed through Keystone –with no environmental review.

President Obama has done everything he can to kill the coal industry. Here are a few of President Obama’s decrees:


Regulations that shut down hundreds of coal-fired power plants and block the construction of new ones.


A prohibition against coal production on federal land.

Draconian climate rules that, unless stopped, would effectively bypass Congress to impose job-killing cap-and-trade.

President Obama has aggressively blocked the production of oil & natural gas:


He’s taken a huge percentage of the Alaska National Petroleum Reserve off the table
Oil and natural gas production on federal lands is down 10%.
87% of available land in the Outer Continental Shelf has been put off limits.
Atlantic Lease sales were closed down too – despite the fact that they would create 280,000 jobs and $23.5 billion in economic activity.
President Obama entered the United States into the Paris Climate Accords – unilaterally, and without the permission of Congress. This agreement gives foreign bureaucrats control over how much energy we use right here in America.
These actions have denied millions of Americans access to the energy wealth sitting under our feet.

This is your treasure, and you – the American People – are entitled to share in the riches.

President Obama’s anti-energy orders have also weakened our security, by keeping us reliant on foreign sources of energy.

Every dollar of energy we don’t explore here, is a dollar of energy that makes someone else rich over there.

If President Obama wanted to weaken America he couldn’t have done a better job.

As bad as President Obama is, Hillary Clinton will be worse.

She will escalate the war against American energy, and unleash the EPA to control every aspect of our lives.
She declared that “we’ve got to move away from coal and all the other fossil fuels,” locking away trillions in American wealth.
In March, Hillary Clinton said: “by the time we get through all of my conditions, I do not think there will be many places in America where fracking will continue to take place.” Keep in mind, shale energy production could add 2 million jobs in 7 years.

Yet, while Hillary Clinton doesn’t want American energy, she is strongly in favor of foreign energy. Here is what she told China as Secretary of State:

“American experts and Chinese experts will work to develop China’s natural gas resources. Imagine what it would mean for China if China unleashed its own natural gas resources so you are not dependent on foreign oil.”
Hillary Clinton has her priorities wrong. But we are going to turn all of that around.


A Trump Administration will develop an America First energy plan. Here is how this plan will make America Wealthy Again:

American energy dominance will be declared a strategic economic and foreign policy goal of the United States.
America has 1.5 times as much oil as the combined proven resources of all OPEC countries; we have more Natural Gas than Russia, Iran, Qatar and Saudi Arabia Combined; we have three times more coal than Russia. Our total untapped oil and gas reserves on federal lands equal an estimated $50 trillion.
We will become, and stay, totally independent of any need to import energy from the OPEC cartel or any nations hostile to our interests.
At the same time, we will work with our Gulf allies to develop a positive energy relationship as part of our anti-terrorism strategy.
We will use the revenues from energy production to rebuild our roads, schools, bridges and public infrastructure. Cheaper energy will also boost American agriculture.
We will get the bureaucracy out of the way of innovation, so we can pursue all forms of energy. This includes renewable energies and the technologies of the future. It includes nuclear, wind and solar energy – but not to the exclusion of other energy. The government should not pick winners and losers. Instead, it should remove obstacles to exploration. Any market has ups and downs, but lifting these draconian barriers will ensure that we are no longer at the mercy of global markets.

A Trump Administration will focus on real environmental challenges, not phony ones:

We will reject Hillary Clinton’s poverty-expansion agenda that enriches her friends and makes everyone else poor.
We’ll solve real environmental problems in our communities like the need for clean and safe drinking water. President Obama actually tried to cut the funding for our drinking water infrastructure – even as he pushed to increase funding for his EPA bureaucrats.
American workers will be the ones building this new infrastructure.

Here is my 100-day action plan:

We’re going to rescind all the job-destroying Obama executive actions including the Climate Action Plan and the Waters of the U.S. rule.
We’re going to save the coal industry and other industries threatened by Hillary Clinton’s extremist agenda.
I’m going to ask Trans Canada to renew its permit application for the Keystone Pipeline.
We’re going to lift moratoriums on energy production in federal areas
We’re going to revoke policies that impose unwarranted restrictions on new drilling technologies. These technologies create millions of jobs with a smaller footprint than ever before.
We’re going to cancel the Paris Climate Agreement and stop all payments of U.S. tax dollars to U.N. global warming programs.
Any regulation that is outdated, unnecessary, bad for workers, or contrary to the national interest will be scrapped. We will also eliminate duplication, provide regulatory certainty, and trust local officials and local residents.
Any future regulation will go through a simple test: is this regulation good for the American worker? If it doesn’t pass this test, the rule will not be approved.
Policy decisions will be public and transparent. They won’t be made on Hillary’s private email account.

We’re going to do all this while taking proper regard for rational environmental concerns. We are going to conserve our beautiful natural habitats, reserves and resources.

In a Trump Administration, political activists with extreme agendas will no longer write the rules. Instead, we will work with conservationists whose only agenda is protecting nature.

From an environmental standpoint, my priorities are very simple: clean air and clean water.

My America First energy plan will do for the American People what Hillary Clinton will never do: create real jobs and real wage growth.

According to the Institute for Energy Research, lifting the restrictions on American energy will create a flood of new jobs:

Almost a $700 billion increase in annual economic output over the next 30 years.
More than a $30 billion increase in annual wages over the next 7 years.
Over the next four decades, more than $20 trillion in additional economic activity and $6 trillion in new tax revenue.

The oil and natural gas industry supports 10 million high-paying Americans jobs and can create another 400,000 new jobs per year. This exploration will also create a resurgence in American manufacturing -- dramatically reducing both our trade deficit and our budget deficit.

Compare this future to Hillary Clinton’s Venezuela-style politics of poverty.

If you think about it, not one idea Hillary Clinton has will actually create a single net job or create a single new dollar to put in workers’ pockets.

In fact, every idea Hillary has will make jobs disappear.

Hillary Clinton’s agenda is job destruction. My agenda is job creation.

She wants to tax and regulate our workers to the point of extinction.

She wants terrible trade deals, like NAFTA, signed by her husband, that will empty out our manufacturing.

During her time as Secretary of State, she surrendered to China – allowing them to steal hundreds of billions of dollars in our intellectual property.

She let them devalue their currency and add more than a trillion dollars to our trade deficit.

Then there was Libya.

Secretary Clinton’s reckless Libya invasion handed the country over to ISIS, which now controls the oil.

The Middle East that Clinton inherited was far less dangerous than the Middle East she left us with today.

Her reckless decisions in Iraq, Libya, Iran, Egypt and Syria have made the Middle East more unstable than ever before.

The Hillary Clinton foreign policy legacy is chaos.

Hillary Clinton also wants totally open borders in America, which would further plunge our workers into poverty.

Hillary’s open borders agenda means a young single mom living in poverty would have to compete for a job or a raise against millions of lower-wage workers rushing into the country, but she doesn’t care.

My agenda will be accomplished through a series of reforms that put America First:

Energy reform that creates trillions in new wealth.
Immigration reform that protects our borders and defends our workers.
Tax reform that brings millions of new jobs to America.
Regulation reform that eliminates stupid rules that send our jobs overseas.
Welfare reform that requires employers to recruit from the unemployment office – not the immigration office.
Trade reform that brings back our manufacturing jobs and stands up to countries that cheat.
There is one more thing we must do to make America wealthy again: we have to make our communities safe again.

Violent crime is rising in major cities across the country. This is unacceptable. Every parent has the right to raise their kids in safety.

When we put political correctness before justice, we hurt those who have the least. It undermines their schools, slashes the value of their homes, and drives away their jobs.

Crime is a stealth tax on the poor.

To those living in fear, I say: help is coming. A Trump Administration will return law and order to America. Security is not something that should only be enjoyed by the rich and powerful.

By the way, I was endorsed by the National Rifle Association, and we are not going to let Hillary Clinton abolish the 2nd amendment, either.

My reform agenda is going to bring wealth and security to the poorest communities in this country.

What does Hillary have to offer the poor but more of the same?

In Chicago, for instance, one-fourth of young Hispanics and one-third of young African-Americans are unemployed.

My message today to all the people trapped in poverty is this: politicians like Hillary Clinton have failed you.

They have used you.

You need something new. I am the only who will deliver it.

We are going to put America back to work.

We are going to put people before government.

We are going to rebuild our inner cities.

We are going to make you and your family safe, secure and prosperous.

The choice in November is a choice between a Clinton Agenda that puts Donors First – or a new agenda that puts America First.

It is a choice between a Clinton government of, by and for the powerful – or a return to government of, by and for the people.

It is a choice between certain decline, or a revival of America’s promise.

The people in charge of our government say things can’t change.

I am here to tell you that things have to change.

They want you to keep trusting the same people who’ve betrayed you.

I am here to tell you that if you keep supporting those who’ve let you down, then you will keep getting let down for the rest of your life.

I am prepared to kick the special interests out of Washington, D.C. and to hand their seat of power over to you.

It’s about time.

Together, we will put the American people first again.

We will make our communities wealthy again.

We will make our cities safe again.

We will make our country strong again.

Ladies and Gentlemen: We will make America Great Again.

Friday, May 20, 2016

The Meaning of Competition

There are signs of increasing awareness among economists that what they have been discussing in recent years under the name of "competition" is not the same thing as what is thus called in ordinary language.
But, although there have been some valiant attempts to bring discussion back to earth and to direct attention to the problems of real life, notably by J.M. Clark and F. Machlup,1 the general view seems still to regard the conception of competition currently employed by economists as the significant one and to treat that of the businessman as an abuse.
It appears to be generally held that the so-called theory of "perfect competition" provides the appropriate model for judging the effectiveness of competition in real life and that, to the extent that real competition differs from that model, it is undesirable and even harmful. For this attitude there seems to me to exist very little justification. I shall attempt to show that what the theory of perfect competition discusses has little claim to be called "competition" at all, and that its conclusions are of little use as guides to policy.
The reason for this seems to me to be that this theory throughout assumes that state of affairs already to exist which, according to the truer view of the older theory, the process of competition tends to bring about (or to approximate) and that, if the state of affairs assumed by the theory of perfect competition ever existed, it would not only deprive of their scope all the activities which the verb "to compete" describes but would make them virtually impossible.
If all this affected only the use of the word "competition," it would not matter a great deal. But it seems almost as if economists by this peculiar use of language were deceiving themselves into the belief that, in discussing "competition," they are saying something about the nature and significance of the process by which the state of affairs is brought about which they merely assume to exist. In fact, this moving force of economic life is left almost altogether undiscussed.
I do not wish to discuss here at any length the reasons which have led the theory of competition into this curious state. As I have suggested elsewhere in this volume,2 the tautological method which is appropriate and indispensable for the analysis of individual action seems in this instance to have been illegitimately extended to problems in which we have to deal with a social process in which the decisions of many individuals influence one another and necessarily succeed one another in time.
The economic calculus (or the Pure Logic of Choice) which deals with the first kind of problem consist of an apparatus of classification of possible human attitudes and provides us with a technique for describing the interrelations of the different parts of a single plan. Its conclusions are implicit in its assumptions: the desires and the knowledge of the facts, which are assumed to be simultaneously present to a single mind, determine a unique solution. The relations discussed in this type of analysis are logical relations, concerned solely with the conclusions which follow for the mind of the planning individual from the given premises.
When we deal, however, with a situation in which a number of persons are attempting to work out their separate plans, we can no longer assume that the data are the same for all the planning minds.
The problem becomes one of how the "data" of the different individuals on which they base their plans are adjusted to the objective facts of their environment (which includes the actions of the other people).
Although in the solution of this type of problem we still must make use of our technique for rapidly working out the implications of a given set of data, we have now to deal not only with several separate sets of data of the different persons but also — and this is even more important — with a process which necessarily involves continuous changes in the data for the different individuals. As I have suggested before, the causal factor enters here in the form of the acquisition of new knowledge by the different individuals or of changes in their data brought about by the contacts between them.
The relevance of this for my present problem will appear when it is recalled that the modern theory of competition deals almost exclusively with a state of what is called "competitive equilibrium" in which it is assumed that the data for the different individuals are fully adjusted to each other, while the problem which requires explanation is the nature of the process by which the data are thus adjusted.
In other words, the description of competitive equilibrium does not even attempt to say that, if we find such and such conditions, such and such consequences will follow, but confines itself to defining conditions in which its conclusions are already implicitly contained and which may conceivably exist but of which it does not tell us how they can ever be brought about.
Or, to anticipate our main conclusion in a brief statement, competition is by its nature a dynamic process whose essential characteristics are assumed away by the assumptions underlying static analysis.

That the modern theory of competitive equilibrium assumes the situation to exist which a true explanation ought to account for as the effect of the competitive process is best shown by examining the familiar list of conditions found in any modern textbook. Most of these conditions, incidentally, not only underlie the analysis of "perfect" competition but are equally assumed in the discussion of the various "imperfect" or "monopolistic" markets, which throughout assume certain unrealistic "perfections."3 For our immediate purpose, however, the theory of perfect competition will be the most instructive case to examine.
While different authors may state the list of essential conditions of perfect competition differently, the following is probably more than sufficiently comprehensive for our purpose, because, as we shall see, those conditions are not really independent of each other. According to the generally accepted view, perfect competition presupposes:
  1. A homogeneous commodity offered and demanded by a large number of relatively small sellers or buyers, none of whom expects to exercise by his action a perceptible influence on price.
  2. Free entry into the market and absence of other restraints on the movement of prices and resources.
  3. Complete knowledge of the relevant factors on the part of all participants in the market.
We shall not ask at this stage precisely for what these conditions are required or what is implied if they are assumed to be given. But we must inquire a little further about their meaning, and in this respect it is the third condition which is the critical and obscure one.
The standard can evidently not be perfect knowledge of everything affecting the market on the part of every person taking part in it. I shall here not go into the familiar paradox of the paralyzing effect really perfect knowledge and foresight would have on all action.4 It will be obvious also that nothing is solved when we assume everybody to know everything and that the real problem is rather how it can be brought about that as much of the available knowledge as possible is used.
This raises for a competitive society the question, not how we can "find" the people who know best, but rather what institutional arrangements are necessary in order that the unknown persons who have knowledge specially suited to a particular task are most likely to be attracted to that task. But we must inquire a little further what sort of knowledge it is that is supposed to be in possession of the parties of the market.
If we consider the market for some kind of finished consumption goods and start with the position of its producers or sellers, we shall find, first, that they are assumed to know the lowest cost at which the commodity can be produced. Yet this knowledge, which is assumed to be given to begin with, is one of the main points where it is only through the process of competition that the facts will be discovered.
This appears to me one of the most important of the points where the starting point of the theory of competitive equilibrium assumes away the main task which only the process of competition can solve.
The position is somewhat similar with respect to the second point on which the producers are assumed to be fully informed: the wishes and desires of the consumers, including the kinds of goods and services which they demand and the prices they are willing to pay. These cannot properly be regarded as given facts but ought rather to be regarded as problems to be solved by the process of competition.
The same situation exists on the side of the consumers or buyers. Again the knowledge they are supposed to possess in a state of competitive equilibrium cannot be legitimately assumed to be at their command before the process of competition starts. Their knowledge of the alternatives before them is the result of what happens on the market, of such activities as advertising, etc.; and the whole organization of the market serves mainly the need of spreading the information on which the buyer is to act.
The peculiar nature of the assumptions from which the theory of competitive equilibrium starts stands out very clearly if we ask which of the activities that are commonly designated by the verb "to compete" would still be possible if those conditions were all satisfied.
Perhaps it is worth recalling that, according to Dr. Johnson, competition is "the action of endeavouring to gain what another endeavours to gain at the same time."
Now, how many of the devices adopted in ordinary life to that end would still be open to a seller in a market in which so-called "perfect competition" prevails? I believe that the answer is exactly none.
Advertising, undercutting, and improving ("differentiating") the goods or services produced are all excluded by definition — "perfect" competition means indeed the absence of all competitive activities.
Especially remarkable in this connection is the explicit and complete exclusion from the theory of perfect competition of all personal relationships existing between the parties5 In actual life the fact that our inadequate knowledge of the available commodities or services is made up for by our experience with the persons or firms supplying them — that competition is in a large measure competition for reputation or good will — is one of the most important facts which enables us to solve our daily problems.
"In actual life the fact that our inadequate knowledge of the available commodities or services is made up for by our experience with the persons or firms supplying them — that competition is in a large measure competition for reputation or good will — is one of the most important facts which enables us to solve our daily problems."
The function of competition is here precisely to teach us who will serve us well: which grocer or travel agency, which department store or hotel, which doctor or solicitor, we can expect to provide the most satisfactory solution for whatever particular personal problem we may have to face.
Evidently in all these fields competition may be very intense, just because the services of the different persons or firms will never be exactly alike, and it will be owing to this competition that we are in a position to be served as well as we are.
The reasons competition in this field is described as imperfect have indeed nothing to do with the competitive character of the activities of these people; it lies in the nature of the commodities or services themselves. If no two doctors are perfectly alike, this does not mean that the competition between them is less intense but merely that any degree of competition between them will not produce exactly those results which it would if their services were exactly alike.
This is not a purely verbal point. The talk about the defects or competition when we are in fact talking about the necessary difference between commodities and services conceals a very real confusion and leads on occasion to absurd conclusions.
While on a first glance the assumption concerning the perfect knowledge possessed by the parties may seem the most startling and artificial of all those on which the theory of perfect competition is based, it may in fact be no more than a consequence of, and in part even justified by, another of the presuppositions on which it is founded.
If, indeed, we start by assuming that a large number of people are producing the same commodity and command the same objective facilities and opportunities for doing so, then indeed it might be made plausible (although this has, to my knowledge, never been attempted) that they will in time all be led to know most of the facts relevant for judging the market of that commodity. Not only will each producer by his experience learn the same facts as every other but also he will thus come to know what his fellows know and in consequence the elasticity of the demand for his own product.
The condition where different manufacturers produce the identical product under identical conditions is in fact the most favorable for producing that state of knowledge among them which perfect competition requires. Perhaps this means no more than that the commodities can be identical in the sense in which it is alone relevant for our understanding human action only if people hold the same views about them, although it should also be possible to state a set of physical conditions which is favorable to all those who are concerned with a set of closely interrelated activities learning the facts relevant for their decisions.
However that be, it will be clear that the facts will not always be as favorable to this result as they are when many people are at least in a position to produce the same article. The conception of the economic system as divisible into distinct markets for separate commodities is after all very largely the product of the imagination of the economist and certainly is not the rule in the field of manufacture and of personal services, to which the discussion about competition so largely refers.
In fact, it need hardly be said, no products of two producers are ever exactly alike, even if it were only because, as they leave his plant, they must be at different places. These differences are part of the facts which create our economic problem, and it is little help to answer it on the assumption that they are absent.
The belief in the advantages of perfect competition frequently leads enthusiasts even to argue that a more advantageous use of resources would be achieved if the existing variety of products were reduced bycompulsory standardization.
Now, there is undoubtedly much to be said in many fields for assisting standardization by agreed recommendations or standards which are to apply unless different requirements are explicitly stipulated in contracts. But this is something very different from the demands of those who believe that the variety of people's tastes should be disregarded and the constant experimentation with improvements should be suppressed in order to obtain the advantages of perfect competition.
It would clearly not be an improvement to build all houses exactly alike in order to create a perfect market for houses, and the same is true of most other fields where differences between the individual products prevent competition from ever being perfect.

We shall probably learn more about the nature and significance of the competitive process if for a while we forget about the artificial assumptions underlying the theory of perfect competition and ask whether competition would be any less important if, for example, no two commodities were ever exactly alike.
If it were not for the difficulty of the analysis of such a situation, it would be well worthwhile to consider in some detail the case where the different commodities could not be readily classed into distinct groups, but where we had to deal with a continuous range of close substitutes, every unit somewhat different from the other but without any marked break in the continuous range. The result of the analysis of competition in such a situation might in many respects be more relevant to the conditions of real life than those of the analysis of competition in a single industry producing a homogeneous commodity sharply differentiated from all others.
Or, if the case where no two commodities are exactly alike be thought to be too extreme, we might at least turn to the case where no two producers produce exactly the same commodity, as is the rule not only with all personal services but also in the markets of many manufactured commodities, such as the markets for books or musical instruments. For our present purpose I need not attempt anything like a complete analysis of such kinds of markets but shall merely ask what would be the role of competition in them.
Although the result would, of course, within fairly wide margins be indeterminate, the market would still bring about a set of prices at which each commodity sold just cheap enough to outbid its potential close substitutes — and this in itself is no small thing when we consider the insurmountable difficulties of discovering even such a system of prices by any other method except that of trial and error in the market, with the individual participants gradually learning the relevant circumstances.
It is true, of course, that in such a market correspondence between prices and marginal costs is to be expected only to the degree that elasticities of demand for the individual commodities approach the conditions assumed by the theory of perfect competition or that elasticities of substitution between the different commodities approach infinity.
But the point is that in this case this standard of perfection as something desirable or to be aimed at is wholly irrelevant. The basis of comparison, on the grounds of which the achievement of competition ought to be judged, cannot be a situation which is different from the objective facts and which cannot be brought about by any known means. It ought to be the situation as it would exist if competition were prevented from operating. Not the approach to an unachievable and meaningless ideal but the improvement upon the conditions that would exist without competition should be the test.
In such a situation how would conditions differ if competition were "free" in the traditional sense from those which would exist if, for example, only people licensed by authority were allowed to produce particular things, or prices were fixed by authority, or both? Clearly there would be not only no likelihood that the different things would be produced by those who knew best how to do it and therefore could do it at lowest cost but also no likelihood that all those things would be produced at all which, if the consumers had the choice, they would like best.
There would be little relationship between actual prices and the lowest cost at which somebody would be able to produce these commodities; indeed, the alternatives between which both producers and consumers would be in a position to choose, their data, would be altogether different from what they would be under competition.
The real problem in all this is not whether we will get given commodities or services at given marginal costs but mainly by what commodities and services the needs of the people can be most cheaply satisfied. The solution of the economic problem of society is in this respect always a voyage of exploration into the unknown, an attempt to discover new ways of doing things better than they have been done before. This must always remain so as long as there are any economic problems to be solved at all, because all economic problems are created by unforeseen changes which require adaptation.
Only what we have not foreseen and provided for requires new decisions. If no such adaptations were required, if at any moment we knew that all change had stopped and things would forever go on exactly as they are now, there would be no more questions of the use of resources to be solved.
A person who possesses the exclusive knowledge or skill which enables him to reduce the cost of production of a commodity by 50 per cent still renders an enormous service to society if he enters its production and reduces its price by only 25 per cent — not only through that price reduction but also through his additional saving of cost.
But it is only through competition that we can assume that these possible savings of cost will be achieved. Even if in each instance prices were only just low enough to keep out producers which do not enjoy these or other equivalent advantages, so that each commodity were produced as cheaply as possible, though many may be sold at prices considerably above costs, this would probably be a result which could not be achieved by any other method than that of letting competition operate.

That in conditions of real life the position even of any two producers is hardly ever the same is due to facts which the theory of perfect competition eliminates by its concentration on a long-term equilibrium which in an ever-changing world can never be reached. At any given moment the equipment of a particular firm is always largely determined by historical accident, and the problem is that it should make the best use of the given equipment (including the acquired capacities of the members of its staff) and not what it should do if it were given unlimited time to adjust itself to constant conditions.
For the problem of the best use of the given durable but exhaustible resources the long-term equilibrium price with which a theory discussing "perfect" competition must be concerned is not only not relevant; the conclusions concerning policy to which preoccupation with this model leads are highly misleading and even dangerous.
The idea that under "perfect" competition prices should be equal to long-run costs often leads to the approval of such antisocial practices as the demand for an "orderly competition" which will secure a fair return on capital and for the destruction of excess capacity. Enthusiasm for perfect competition in theory and the support of monopoly in practice are indeed surprisingly often found to live together.
This is, however, only one of the many points on which the neglect of the time element makes the theoretical picture of perfect competition so entirely remote from all that is relevant to an understanding of the process of competition. If we think of it, as we ought to, as a succession of events, it becomes even more obvious that in real life there will at any moment be as a rule only one producer who can manufacture a given article at the lowest cost and who may in fact sell below the cost of his next successful competitor, but who, while still trying to extend his market, will often be overtaken by somebody else, who in turn will be prevented from capturing the whole market by yet another, and so on.
Such a market would clearly never be in a state of perfect competition, yet competition in it might not only be as intense as possible but would also be the essential factor in bringing about the fact that the article in question is supplied at any moment to the consumer as cheaply as this can be done by any known method.
When we compare an "imperfect" market like this with a relatively "perfect" market as that of, say, grain, we shall now be in a better position to bring out the distinction which has been underlying this whole discussion — the distinction between the underlying objective facts of a situation which cannot be altered by human activity and the nature of the competitive activities by which men adjust themselves to the situation.
Where, as in the latter case, we have a highly organized market of a fully standardized commodity produced by many producers, there is little need or scope for competitive activities because the situation is such that the conditions which these activities might bring about are already satisfied to begin with. The best ways of producing the commodity, its character and uses, are most of the time known to nearly the same degree to all members of the market.
The knowledge of any important change spreads so rapidly and the adaptation to it is so soon effected that we usually simply disregard what happens during these short transition periods and confine ourselves to comparing the two states of near- equilibrium which exist before and after them.
But it is during this short and neglected interval that the forces of competition operate and become visible, and it is the events during this interval which we must study if we are to "explain" the equilibrium which follows it.
It is only in a market where adaptation is slow compared with the rate of change that the process of competition is in continuous operation. And though the reason why adaptation is slow may be that competition is weak, e.g., because there are special obstacles to entry into the trade or because of some other factors of the character of natural monopolies, slow adaptation does by no means necessarily mean weak competition.
When the variety of near-substitutes is great and rapidly changing, where it takes a long time to find out about the relative merits of the available alternatives, or where the need for a whole class of goods or services occurs only discontinuously at irregular intervals, the adjustment must be slow even if competition is strong and active.
The confusion between the objective facts of the situation and the character of the human responses to it tends to conceal from us the important fact that competition is the more important the more complex or "imperfect" are the objective conditions in which it has to operate. Indeed, far from competition being beneficial only when it is "perfect," I am inclined to argue that the need for competition is nowhere greater than in fields in which the nature of the commodities or services makes it impossible that it ever should create a perfect market in the theoretical sense. The inevitable actual imperfections of competition are as little an argument against competition as the difficulties of achieving a perfect solution of any other task are an argument against attempting to solve it at all, or as little as imperfect health is an argument against health.
In conditions where we can never have many people offering the same homogeneous product or service, because of the ever-changing character of our needs and our knowledge, or of the infinite variety of human skills and capacities, the ideal state cannot be one requiring an identical character of large numbers of such products and services.
The economic problem is a problem of making the best use of what resources we have, and not one of what we should do if the situation were different from what it actually is. There is no sense in talking of a use of resources "as if" a perfect market existed, if this means that the resources would have to be different from what they are, or in discussing what somebody with perfect knowledge would do if our task must be to make the best use of the knowledge the existing people have.

The argument in favor of competition does not rest on the conditions that would exist if it were perfect. Although, where the objective facts would make it possible for competition to approach perfection, this would also secure the most effective use of resources, and, although there is therefore every case for removing human obstacles to competition, this does not mean that competition does not also bring about as effective a use of resources as can be brought about by any known means where in the nature of the case it must be imperfect.
Even where free entry will secure no more than that at any one moment all the goods and services for which there would be an effective demand if they were available are in fact produced at the least current6 expenditure of resources at which, in the given historical situation, they can be produced, even though the price the consumer is made to pay for them is considerably higher and only just below the cost of the next best way in which his need could be satisfied — this, I submit, is more than we can expect from any other known system.
The decisive point is still the elementary one that it is most unlikely that, without artificial obstacles which government activity either creates or can remove, any commodity or service will for any length of time be available only at a price at which outsiders could expect a more than normal profit if they entered the field.
The practical lesson of all this, I think, is that we should worry much less about whether competition in a given case is perfect and worry much more whether there is competition at all. What our theoretical models of separate industries conceal is that in practice a much bigger gulf divides competition from no competition than perfect from imperfect competition.
Yet the current tendency in discussion is to be intolerant about the imperfections and to be silent about the prevention of competition. We can probably still learn more about the real significance of competition by studying the results which regularly occur where competition is deliberately suppressed than by concentrating on the shortcomings of actual competition compared with an ideal which is irrelevant for the given facts.
I say advisedly "where competition is deliberately suppressed" and not merely "where it is absent," because its main effects are usually operating, even if more slowly, so long as it is not outright suppressed with the assistance or the tolerance of the state.
The evils which experience has shown to be the regular consequence of a suppression of competition are on a different plane from those which the imperfections of competition may cause. Much more serious than the fact that prices may not correspond to marginal cost is the fact that, with an entrenched monopoly, costs are likely to be much higher than is necessary.
A monopoly based on superior efficiency, on the other hand, does comparatively little harm so long as it is assured that it will disappear as soon as anyone else becomes more efficient in providing satisfaction to the consumers.
In conclusion I want for a moment to go back to the point from which I started and restate the most important conclusion in a more general form.
Competition is essentially a process of the formation of opinion: by spreading information, it creates that unity and coherence of the economic system which we presuppose when we think of it as one market. It creates the views people have about what is best and cheapest, and it is because of it that people know at least as much about possibilities and opportunities as they in fact do.
It is thus a process which involves a continuous change in the data and whose significance must therefore be completely missed by any theory which treats these data as constant.
  • 1.  J.M. Clark, "Toward a Concept of Workable Competition," American Economic Review, Vol. XXX (June, 1940); F. Machlup, "Competition, Pliopoly, and Profit," Economica, Vol. IX (new ser.; February and May, 1942).
  • 2..See the second and fourth chapters.
  • 3.Particularly the assumptions that at all times a uniform price must rule for a given commodity throughout the market and that sellers know the shape of the demand curve.
  • 4.See O. Morgenstern, "Vollkommene Voraussicht und wirtschaftliches Gleichgewicht," Zeitschrift für Nationalökonomie, Vol. VI (1935).
  • 5.Cf. G.J. Stigler, The Theory of Price (1946), p. 24: "Economic relationships are never perfectly competitive if they involve any personal relationships between economic units" (see also ibid., p. 226).
  • 6."Current" cost in this connection excludes all true bygones but includes, of course, "user cost."

Thursday, May 19, 2016

Money Inflation and Price Inflation

By Murray N. Rothbard

In the last few months, the Reagan administration seems to have achieved the culmination of its "economic miracle" of the last several years: while the money supply has skyrocketed upward in double digits, the consumer price index has remained virtually flat. Money cheap and abundant, stock and bond markets booming, and yet prices remaining stable: what could be better than that? Has the President, by inducing Americans to feel good and stand tall, really managed to repeal economic law? Has soft soap been able to erase the need for "root-canal" economics?

In the first place, we have heard that song before. During every boom period, statesmen, economists, and financial writers manage to find reasons for proclaiming that now, this time, we are living in a new age where old-fashioned economic law has been nullified and cast into the dust bin of history. The 1920s is a particularly instructive decade, because then we had expanding money and credit, and a stock and bond market boom, while prices remained constant. As a result, all the experts as well as the politicians announced that we were living in a brand "new era," in which new tools available to government had eliminated inflations and depressions.

What were these marvelous new tools? As Bernard M. Baruch explained in an optimistic interview in the spring of 1929, they were (a) expanded cooperation between government and business; and (b) the Federal Reserve Act, "which gave us coordinated control of our financial resources and ... a unified banking system." And, as a result, the country was brimming with "self-confidence." But, also as a result of these tools, there came 1929 and the Great Depression. Unfortunately both of these mechanisms are with us today in aggravated form. And great self confidence, which persisted in the market and among the public into 1931, didn't help one whit when the fundamental realities took over.

But the problem is not simply history. There are very good reasons why monetary inflation cannot bring endless prosperity. In the first place, even if there were no price inflation, monetary inflation is a bad proposition. For monetary inflation is counterfeiting, plain and simple. As in counterfeiting, the creation of new money simply diverts resources from producers, who have gotten their money honestly, to the early recipients of the new money—to the counterfeiters, and to those on whom they spend their money.

Counterfeiting is a method of taxation and redistribution—from producers to counterfeiters and to those early in the chain when counterfeiters spend their money and the money gets respent. Even if prices do not increase, this does not alleviate the coercive shift in income and wealth that takes place. As a matter of fact, some economists have interpreted price inflation as a desperate method by which the public, suffering from monetary inflation, tries to recoup its command of economic resources by raising prices at least as fast, if not faster, than the government prints new money.

Secondly, if new money is created via bank loans to business, as much of it is, the money inevitably distorts the pattern of productive investments. The fundamental insight of the "Austrian," or Misesian, theory of the business cycle is that monetary inflation via loans to business causes over-investment in capital goods, especially in such areas as construction, long-term investments, machine tools, and industrial commodities. On the other hand, there is a relative underinvestment in consumer goods industries. And since stock prices and real estate prices are titles to capital goods, there tends as well to be an excessive boom. It is not necessary for consumer prices to go up, and therefore to register as price inflation. And this is precisely what happened in the 1920s, fooling economists and financiers unfamiliar with Austrian analysis, and lulling them into the belief that no great crash or recession would be possible. The rest is history. So, the fact that prices have remained stable recently does not mean that we will not reap the whirlwind of recession and crash.

But why didn't prices rise in the 1920s? Because the enormous increase in productivity and the supply of goods offset the increase of money. This offset did not, however, prevent a crash from developing, even though it did avert price inflation. Our good fortune, unfortunately, is not due to increased productivity. Productivity growth has been minimal since the 1970s, and real income and the standard of living have barely increased since that time.

The offsets to price inflation in the 1980s have been very different. At first, during the Reagan administration, a severe depression developed in 1981 and continued into 1983, of course dragging down the price inflation rate. Recovery was slow at first, and in the last few years, three special factors have held down price inflation. An enormous balance of trade deficit of $150 billion was eagerly financed by foreign investors in American dollars, which kept the dollar unprecedentedly high, and therefore import prices low, despite the huge deficit.

Secondly, and unusually, a flood of cash dollars stayed overseas, in hyperinflating countries of Asia and Latin America, to serve as underground money in place of the increasingly worthless domestic currency. And thirdly, the well-known collapse of the OPEC cartel at last brought down oil and petroleum product prices to free-market levels. But all of these offsets are obviously one-shot, and are rapidly coming to an end. In fact, the dollar has already declined in value, compared to foreign currencies, by about 30 percent since last September.

We are left with the fourth offset to price inflation, the increased willingness by the public to hold money rather than spend it, as the public has become convinced that the Reagan administration has discovered the secrets to an economic miracle in which prices will never rise again. But the public has not been deeply convinced of this, because real interest rates (interest rates in money terms minus the inflation rate) are at the highest level in its history. And interest rates are strongly affected by people's expectations of future price inflation; the higher the expectation, the higher the interest rate.

We may therefore expect a resumption of price inflation before long, and, as the public begins to wake up to the humbug nature of the "economic miracle," we may expect that inflation to accelerate.

The above originally appeared at Mises.org and published on September 1 1986.

Wednesday, May 18, 2016

DONALD J. TRUMP RELEASES LIST OF POTENTIAL UNITED STATES SUPREME COURT JUSTICES

Trump Press Release

(New York, NY) May 18, 2016 - Today Donald J. Trump released the much-anticipated list of people he would consider as potential replacements for Justice Scalia at the United States Supreme Court. This list was compiled, first and foremost, based on constitutional principles, with input from highly respected conservatives and Republican Party leadership.

Mr. Trump stated, “Justice Scalia was a remarkable person and a brilliant Supreme Court Justice. His career was defined by his reverence for the Constitution and his legacy of protecting Americans’ most cherished freedoms. He was a Justice who did not believe in legislating from the bench and he is a person whom I held in the highest regard and will always greatly respect his intelligence and conviction to uphold the Constitution of our country. The following list of potential Supreme Court justices is representative of the kind of constitutional principles I value and, as President, I plan to use this list as a guide to nominate our next United States Supreme Court Justices.”

Steven CollotonSteven Colloton of Iowa is a judge of the U.S. Court of Appeals for the Eighth Circuit, a position he has held since President George W. Bush appointed him in 2003. Judge Colloton has a résumé that also includes distinguished service as the U.S. Attorney for the Southern District of Iowa, a Special Assistant to the Attorney General in the Justice Department’s Office of Legal Counsel, and a lecturer of law at the University of Iowa. He received his law degree from Yale, and he clerked for Chief Justice William Rehnquist. Judge Colloton is an Iowa native.

Allison EidAllison Eid of Colorado is an associate justice of the Colorado Supreme Court. Colorado Governor Bill Owens appointed her to the seat in 2006; she was later retained for a full term by the voters (with 75% of voters favoring retention). Prior to her judicial service, Justice Eid served as Colorado’s solicitor general and as a law professor at the University of Colorado. Justice Eid attended the University of Chicago Law School, and she clerked for Justice Clarence Thomas.

Raymond GruenderRaymond Gruender of Missouri has been a judge of the U.S. Court of Appeals for the Eighth Circuit since his 2004 appointment by President George W. Bush. Judge Gruender, who sits in St. Louis, Missouri, has extensive prosecutorial experience, culminating with his time as the U.S. Attorney for the Eastern District of Missouri. Judge Gruender received a law degree and an M.B.A. from Washington University in St. Louis.

Thomas HardimanThomas Hardiman of Pennsylvania has been a judge of the U.S. Court of Appeals for the Third Circuit since 2007. Prior to serving as a circuit judge, he served as a judge of the U.S. District Court for the Western District of Pennsylvania since 2003. Before his judicial service, Judge Hardiman worked in private practice in Washington, D.C. and Pittsburgh. Judge Hardiman was the first in his family to attend college, graduating from Notre Dame.

Raymond KethledgeRaymond Kethledge of Michigan has been a judge of the U.S. Court of Appeals for the Sixth Circuit since 2008. Before his judicial service, Judge Kethledge served as judiciary counsel to Michigan Senator Spencer Abraham, worked as a partner in two law firms, and worked as an in-house counsel for the Ford Motor Company. Judge Kethledge obtained his law degree from the University of Michigan and clerked for Justice Anthony Kennedy.

Joan LarsenJoan Larsen of Michigan is an Associate Justice of the Michigan Supreme Court. Justice Larsen was a professor at the University of Michigan School of Law from 1998 until her appointment to the bench. In 2002, she temporarily left academia to work as an Assistant Attorney General in the Justice Department’s Office of Legal Counsel. Justice Larsen received her law degree from Northwestern and clerked for Justice Antonin Scalia.

Thomas LeeThomas Lee of Utah has been an Associate Justice of the Utah Supreme Court since 2010. Beginning in 1997, he served on the faculty of Brigham Young University Law School, where he still teaches in an adjunct capacity. Justice Lee was Deputy Assistant Attorney General in the Justice Department’s Civil Division from 2004 to 2005. Justice Lee attended the University of Chicago Law School, and he clerked for Justice Clarence Thomas. Justice Lee is also the son of former U.S. Solicitor General Rex Lee and the brother of current U.S. Senator Mike Lee.

William PryorWilliam H. Pryor, Jr. of Alabama is a judge of the U.S. Court of Appeals for the Eleventh Circuit. He has served on the court since 2004. Judge Pryor became the Alabama Attorney General in 1997 upon Jeff Sessions’s election to the U.S. Senate. Judge Pryor was then elected in his own right in 1998 and reelected in 2002. In 2013, Judge Pryor was confirmed to a term on the United States Sentencing Commission. Judge Pryor received his law degree from Tulane, and he clerked for Judge John Minor Wisdom of the U.S. Court of Appeals for the Fifth Circuit.

David StrasDavid Stras of Minnesota has been an Associate Justice of the Minnesota Supreme Court since 2010. After his initial appointment, he was elected to a six-year term in 2012. Prior to his judicial service, Judge Stras worked as a legal academic at the University of Minnesota Law School. In his time there, he wrote extensively about the function and structure of the judiciary. Justice Stras received his law degree and an M.B.A. from the University of Kansas. He clerked for Justice Clarence Thomas.

Diane SykesDiane Sykes of Wisconsin has served as a judge of the U.S. Court of Appeals for the Seventh Circuit since 2004. Prior to her federal appointment, Judge Sykes had been a Justice of the Wisconsin Supreme Court since 1999 and a Wisconsin trial court judge of both civil and criminal matters before that. Judge Sykes received her law degree from Marquette.

Don WillettDon Willett of Texas has been a Justice of the Texas Supreme Court since 2005. He was initially appointed by Governor Rick Perry and has been reelected by the voters twice. Prior to his judicial service, Judge Willett worked as a senior fellow at the Texas Public Policy Foundation, as an advisor in George W. Bush’s gubernatorial and presidential administrations, as Deputy Assistant Attorney General in the Justice Department’s Office of Legal Policy, and as a Deputy Attorney General under then-Texas Attorney General Greg Abbott. Justice Willett received his law degree and a master’s degree from Duke.

Monday, May 9, 2016

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DONALD J. TRUMP ANNOUNCES GOVERNOR CHRIS CHRISTIE WILL SERVE AS TRANSITION TEAM CHAIRMAN

(New York, NY) May 9, 2016 – Today Donald J. Trump announced Governor Chris Christie (R-NJ) will serve as Transition Team Chairman. Mr. Trump is the presumptive Presidential nominee for the Republican Party and continues to take critical steps to gear up for the general election against potential Democratic nominee Hillary Clinton, or whoever.

Mr. Trump stated, “Governor Christie is an extremely knowledgeable and loyal person with the tools and resources to put together an unparalleled Transition Team, one that will be prepared to take over the White House when we win in November. I am grateful to Governor Christie for his contributions to this movement.”

Governor Chris Christie will serve as Transition Team Chairman, overseeing an extensive team of professionals preparing to take over the White House, and all that entails, in the fall. Governor Christie has been a loyal supporter and confidant to Mr. Trump and the campaign. He has been entrusted to oversee this important task with the goal to implement this team in an official capacity in November.

Governor Christie said, “I am honored by the confidence being placed in me by Mr. Trump and look forward to putting together a first rate team to assemble an administration to help best serve the President-elect and the nation.”

Mr. Trump has begun shifting towards a general election strategy and implementing an infrastructure capable of securing a victory including making key hires, building a finance operation to benefit the Republican Party and unifying the party by working with several Republican leaders now voicing their support for Mr. Trump and his candidacy.