The Cato Institute

Happy Valentine’s Day from the Cato Institute!

If your libertarian love cares more about free markets than flowers, share these valentines with them to say “We go together like liberty and freedom.” ❤️

It’s not just love that the wall can’t stop! The wall simply won’t work.

What better pairing could there be? In the libertarian view, voluntary agreement is the gold standard of ALL human relationships, not just romantic ones.

Keeping that paramour of yours a secret? Not from the NSA! Go ahead and hide behind that heart; there won’t be much privacy for you.

Fear and mass surveillance are a constitutionally toxic political cocktail.

…unlike the federal budget.

Unfortunately, budget deficits are only getting bigger under President Trump.

The federal budget deficit was $779 billion in fiscal year 2018.

Here’s why federal debt is damaging…

Cryptocurrencies and blockchain technologies, like Bitcoin, are revolutionizing the way we think about government currency monopolies, transferring money across the globe, maintaining financial privacy and security, and verifying ownership of money or potentially everything.

Married 68 years, free market economists Rose and Milton Friedman (recipient of the 1976 Nobel Prize for Economic Science) were not just skilled economists who cared about kids, they were a charming couple who will long be remembered.

Markets Empower Women

Market-driven technological and scientific innovations heighten women’s material standard of living, promote individual empowerment, reduce sexism and other forms of collective prejudice, and foster cultural change…

Over the last 200 years, economic progress has helped to bring about both dramatically better standards of living and the extension of individual dignity to women in the developed world. Today the same story of market-driven empowerment is repeating itself in developing countries.

Competitive markets empower women in at least two interrelated ways. First, market-driven technological and scientific innovations disproportionately benefit women. Timesaving household devices, for example, help women in particular because they typically perform the majority of housework. Healthcare advances reduce maternal and infant mortality rates, allowing for smaller family sizes and expansion of women’s life options. Second, labor market participation offers women economic independence and increased bargaining power in society. Factory work, despite its poor reputation, has proven particularly important in that regard.

In these ways, markets heighten women’s material standard of living and foster cultural change. Markets promote individual empowerment, reducing sexism and other forms of collective prejudice.

Women’s empowerment in many developing countries is in its early phases, but the right policies can set women everywhere on a path toward the same prosperity and freedom enjoyed by women in today’s advanced countries.

Learn more…

Humanity is Experiencing Superabundance

Every additional human being born appears to make resources proportionally more plentiful for all of us on Earth…

A new Cato Institute study that relies on 37 years worth of data for 50 foundational commodities covering energy, food, materials, and metals to develop a new framework to measure resource availability finds that, instead of making resources scarcer, population growth has gone hand in hand with greater resource abundance.

The report builds on the famous wager between biologist Paul Ehrlich and economist and former Cato Senior Fellow Julian Simon on the effect of population growth on the Earth’s resources. While Ehrlich warned that population growth could deplete resources and lead to global catastrophe, Simon saw humans as the “ultimate resource” who could innovate their way out of such shortages. The Ehrlich-Simon wager tracked the real price of a basket of five raw materials between 1980 and 1990, finding as Simon hypothesized that all measured commodities decreased in price by an average of 57.6 percent, despite a population increase of 873 million.

Expanding on Simon’s original insight, the new study looks at 50 different commodities and analyzes a longer time period between 1980 and 2017, finding that the real price of the commodities decreased by 36.3%.

The study also introduces a new measure termed “time-price,” the time that an average human must work in order to earn enough money to buy a particular commodity. They find the time-price of their basket of 50 commodities has fallen by 64.%. Put differently, commodities that took 60 minutes of work to buy in 1980 took only 21 minutes of work to purchase in 2017. Should the current trend continue, commodities could become 50 percent cheaper every 26 years.

In addition, the authors develop the concept of price elasticity of population (PEP), which allows them to estimate the effect of population growth on the availability of resources. Over the time period studied the population grew from 4.46 billion to 7.55 billion, a 69.3% increase. The PEP indicates that the time-price of the basket of commodities declined by 0.934% for every 1% of increase in population. Every additional human being born on our planet appears to make resources proportionally more plentiful for the rest of us.

Using the PEP values the authors form the Simon Abundance Framework, which describes progression from decreasing abundance at the one end to increasing abundance at the other end. The authors conclude that humanity is experiencing superabundance with the time-price commodities decreasing at a faster proportional rate than the population is increasing.

Finally, the authors produce the Simon Abundance Index (SAI) that represents the ratio of the change in population over the change in the time-price. Between 1980 and 2017, resource availability increased at a compounded annual growth rate of 4.32%, meaning Earth was 379.6% more abundant in 2017 than it was in 1980.

The time-price of commodities could fall a further 29% over the next 37 years as humanity continues to make resources more plentiful through greater efficiency of use, increased supply, and the development of cheaper substitutes. However, for this trend to continue, market incentives and the price mechanism must endure.

The world is a closed system in the way that a piano is a closed system. The instrument has only 88 notes, but those notes can be played in a nearly infinite variety of ways. The same applies to our planet. The Earth’s atoms may be fixed, but the possible combinations of those atoms are infinite. What matters, then, is not the physical limits of our planet, but human freedom to experiment and reimagine the use of resources that we have.

Learn more…

Cheers to Repeal Day!

The end of Prohibition is worth toasting…

On December 5, 1933, the Twenty-First Amendment to the Constitution was ratified, supposedly ending our nation’s failed experiment with alcohol prohibition.

Prohibition brought with it violence, organized crime, unsafe alcohol practices, and denial of basic civil liberties — and it almost killed the cocktail.

Yet, 85 years later, we continue to feel the lingering effects of Prohibition, both in policy and in culture —  from blue laws, dry counties, and state-run liquor stores to the selection of alcoholic beverages available and the culture surrounding them.

Learn more…

The U.S. Economy Still Hasn’t Fully Recovered from the Great Recession

Ten years after the Great Recession of 2007-2009, U.S. real GDP, productivity, and other aggregate economic indicators remain well below their historical trend levels…

For nearly 250 years, the United States has recovered from enormous economic and political shocks, including the Civil War, two World Wars, the Great Depression, and the high inflation and oil crises of the 1970s. Following each of these events, the U.S. economy returned to its previous economic trend.

In sharp contrast to this historical record of recovery, ten years after the Great Recession of 2007-2009, the U.S. economy shows no sign of recovering as it did following previous downturns — an unprecedented failure.

Learn more…

Ten Reasons the Amazon Subsidies Hurt More Than They Help

Some New York and Virginia workers will be winners from the Amazon deal, but business subsidies are a loser for citizens overall…

Amazon has chosen New York City and Arlington, Virginia, for new corporate headquarters after the cities ponied up more than $2 billion in subsidies to the retail giant.

As with much of government spending, the costs of corporate pork to society are large but diffuse, while the benefits to the recipients are direct and visible.

Workers in the two cities will be winners as labor demand gets boosted, but business subsidies make losers of taxpayers, other businesses and good governance.

Ten Harmful Consequences of Handouts for Amazon

1. Fairness. Subsidies give Amazon an unfair edge other tech firms in New York City and Northern Virginia.
2. Alternatives. New York and Virginia would have generated more durable growth by cutting business taxes across the board by $2 billion. That would have boosted investment by many businesses, and thus created more balanced prosperity.
3. Diversity. Industry clusters such as Silicon Valley are successful not because they have big companies, but because they have a start-up culture that nurtures growth companies with venture capital. Rather than favoring big companies, state and local politicians would better spur growth by reducing tax and regulatory barriers to spawn a diversity of new companies.
   
4. Corruption. Allowing politicians to hand-out business subsidies at their discretion generates corruption because the hand-outs get swapped for campaign cash and outright bribes.
   
5. Bureaucracy. Amazon-style subsidy deals are jobs programs for accountants and lawyers.
   
6. Lobbyists. The high-profile Amazon win will inspire more companies to shake down politicians for subsidies. 
7. Dependency. Just as welfare undermines individual productivity, corporate welfare undermines business productivity. 
8. Bad Decisions. Subsidies induce companies to make bad decisions that backfire.
   
9. Politics. High-profile subsidy deals are politically risky. 
10. Priorities. State and local governments face serious problems that may sink their economies in coming years such as large unfunded pension costs. They should fix those problems rather than trying to micromanage the economy.
    

Rather than subsidizing big businesses, the states should aim to create a diverse business ecosystem — an Amazon, if you will — by cutting taxes and regulations for all types of investment. If states adopt low tax rates and repeal unneeded regulations on zoning, licensing, and other activities, growth will take care of itself.

Learn more…

Happy Thanksgiving from the Cato Institute!

We have so much to be grateful for…

This Thanksgiving, it is worth remembering that, beyond the headlines, things are actually pretty darn good. There is more than enough to be thankful for.

Contemporary Americans live longer, healthier, richer and safer lives than at any other period in history. In fact, an ordinary person today lives better than most kings of yesteryear.

Of the original 102 Pilgrims who arrived in North America aboard the Mayflower in the fall of 1620, only about half survived to celebrate the first Thanksgiving, in November 1621. The rest perished through starvation and lack of shelter. The survivors gave thanks for a plentiful harvest. And good local harvests were vital, for in a world without global commodity markets or effective transport and communications, food shortages often meant starvation.

Today, most Americans are concerned with eating too much rather than too little. In fact, the inflation-adjusted cost of a Thanksgiving dinner has declined for three years in a row and Thanksgiving dinner is now the most affordable that it has been in more than a decade — 26% cheaper to prepare than it was in 1986.

More often than not, we tend to overlook our truly spectacular rise from grinding poverty to previously unimaginable abundance. And so, during this Thanksgiving holiday, let us give thanks for accountable government, market economy and scientific progress that make a king out of each of us.