The Austrian School of Economics

Posted by PITHOCRATES - March 3rd, 2014

Economics 101

(Originally published February 27th, 2012)

Because of the Unpredictable Human Element in all Economic Exchanges the Austrian School is more Laissez-Faire

Name some of the great inventions economists gave us.  The computer?  The Internet?  The cell phone?  The car?  The jumbo jet?  Television?  Air conditioning?  The automatic dishwasher?  No.  Amazingly, economists did not invent any of these brilliant inventions.  And economists didn’t predict any of these inventions.  Not a one.  Despite how brilliant they are.  Well, brilliant by their standard.  In their particular field.  For economists really aren’t that smart.  Their ‘expertise’ is in the realm of the social sciences.  The faux sciences where people try to quantify the unquantifiable.  Using mathematical equations to explain and predict human behavior.  Which is what economists do.  Especially Keynesian economists.  Who think they are smarter than people.  And markets.

But there is a school of economic thought that doesn’t believe we can quantify human activity.  The Austrian school.  Where Austrian economics began.  In Vienna.  Where the great Austrian economists gathered.  Carl Menger.  Ludwig von Mises.  And Friedrich Hayek.  To name a few.  Who understood that economics is the sum total of millions of people making individual human decisions.  Human being key.  And why we can’t reduce economics down to a set of mathematical equations.  Because you can’t quantify human behavior.  Contrary to what the Keynesians believe.  Which is why these two schools are at odds with each other.  With people even donning the personas of Keynes and Hayek to engage in economic debate.

Keynesian economics is more mainstream than the Austrian school.  Because it calls for the government to interfere with market forces.  To manipulate them.  To make markets produce different results from those they would have if left alone.  Something governments love to do.  Especially if it calls for taxing and spending.  Which Keynesian economics highly encourage.  To fix market ‘failures’.  And recessions.  By contrast, because of the unpredictable human element in all economic exchanges, the Austrian school is more laissez-faire.  They believe more in the separation of the government from things economic.  Economic exchanges are best left to the invisible hand.  What Adam Smith called the sum total of the millions of human decisions made by millions of people.  Who are maximizing their own economic well being.  And when we do we maximize the economic well being of the economy as a whole.  For the Austrian economist does not believe he or she is smarter than people.  Or markets.  Which is why an economist never gave us any brilliant invention.  Nor did their equations predict any inventor inventing a great invention.  And why economists have day jobs.  For if they were as brilliant and prophetic as they claim to be they could see into the future and know which stocks to buy to get rich so they could give up their day jobs.  When they’re able to do that we should start listening to them.  But not before.

Low Interest Rates cause Malinvestment and Speculation which puts Banks in Danger of Financial Collapse

Keynesian economics really took off with central banking.  And fractional reserve banking.  Monetary tools to control the money supply.  That in the Keynesian world was supposed to end business cycles and recessions as we knew them.  The Austrian school argues that using these monetary tools only distorts the business cycle.  And makes recessions worse.  Here’s how it works.  The central bank lowers interest rates by increasing the money supply (via open market transactions, lowering reserve requirements in fractional reserve banking or by printing money).  Lower interest rates encourage people to borrow money to buy houses, cars, kitchen appliances, home theater systems, etc.  This new economic activity encourages businesses to hire new workers to meet the new demand.  Ergo, recession over.  Simple math, right?  Only there’s a bit of a problem.  Some of our worst recessions have come during the era of Keynesian economics.  Including the worst recession of all time.  The Great Depression.  Which proves the Austrian point that the use of Keynesian policies to end recessions only makes recessions worse.  (Economists debate the causes of the Great Depression to this day.  Understanding the causes is not the point here.  The point is that it happened.  When recessions were supposed to be a thing of the past when using Keynesian policies.)

The problem is that these are not real economic expansions.  They’re artificial ones.  Created by cheap credit.  Which the central bank creates by forcing interest rates below actual market interest rates.  Which causes a whole host of problems.  In particular corrupting the banking system.  Banks offer interest rates to encourage people to save their money for future use (like retirement) instead of spending it in the here and now.  This is where savings (or investment capital) come from.  Banks pay depositors interest on their deposits.  And then loan out this money to others who need investment capital to start businesses.  To expand businesses.  To buy businesses.  Whatever.  They borrow money to invest so they can expand economic activity.  And make more profits.

But investment capital from savings is different from investment capital from an expansion of the money supply.  Because businesses will act as if the trend has shifted from consumption (spending now) to investment (spending later).  So they borrow to expand operations.  All because of the false signal of the artificially low interest rates.  They borrow money.  Over-invest.  And make bad investments.  Even speculate.  What Austrians call malinvestments.  But there was no shift from consumption to investment.  Savings haven’t increased.  In fact, with all those new loans on the books the banks see a shift in the other direction.  Because they have loaned out more money while the savings rate of their depositors did not change.  Which produced on their books a reduction in the net savings rate.  Leaving them more dangerously leveraged than before the credit expansion.  Also, those lower interest rates also decrease the interest rate on savings accounts.  Discouraging people from saving their money.  Which further reduces the savings rate of depositors.  Finally, those lower interest rates reduce the income stream on their loans.  Leaving them even more dangerously leveraged.  Putting them at risk of financial collapse should many of their loans go bad.

Keynesian Economics is more about Power whereas the Austrian School is more about Economics

These artificially low interest rates fuel malinvestment and speculation.  Cheap credit has everyone, flush with borrowed funds, bidding up prices (real estate, construction, machinery, raw material, etc.).  This alters the natural order of things.  The automatic pricing mechanism of the free market.  And reallocates resources to these higher prices.  Away from where the market would have otherwise directed them.  Creating great shortages and high prices in some areas.  And great surpluses of stuff no one wants to buy at any price in other areas.  Sort of like those Soviet stores full of stuff no one wanted to buy while people stood in lines for hours to buy toilet paper and soap.  (But not quite that bad.)  Then comes the day when all those investments don’t produce any returns.  Which leaves these businesses, investors and speculators with a lot of debt with no income stream to pay for it.  They drove up prices.  Created great asset bubbles.  Overbuilt their capacity.  Bought assets at such high prices that they’ll never realize a gain from them.  They know what’s coming next.  And in some darkened office someone pours a glass of scotch and murmurs, “My God, what have we done?”

The central bank may try to delay this day of reckoning.  By keeping interest rates low.  But that only allows asset bubbles to get bigger.  Making the inevitable correction more painful.  But eventually the central bank has to step in and raise interest rates.  Because all of that ‘bidding up of prices’ finally makes its way down to the consumer level.  And sparks off some nasty inflation.  So rates go up.  Credit becomes more expensive.  Often leaving businesses and speculators to try and refinance bad debt at higher rates.  Debt that has no income stream to pay for it.  Either forcing business to cut costs elsewhere.  Or file bankruptcy.  Which ripples through the banking system.  Causing a lot of those highly leveraged banks to fail with them.  Thus making the resulting recession far more painful and more long-lasting than necessary.  Thanks to Keynesian economics.  At least, according to the Austrian school.  And much of the last century of history.

The Austrian school believes the market should determine interest rates.  Not central bankers.  They’re not big fans of fractional reserve banking, either.  Which only empowers central bankers to cause all of their mischief.  Which is why Keynesians don’t like Austrians.  Because Keynesians, and politicians, like that power.  For they believe that they are smarter than the people making economic exchanges.  Smarter than the market.  And they just love having control over all of that money.  Which comes in pretty handy when playing politics.  Which is ultimately the goal of Keynesian economics.  Whereas the Austrian school is more about economics.

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The Austrian School of Economics

Posted by PITHOCRATES - February 27th, 2012

Economics 101

Because of the Unpredictable Human Element in all Economic Exchanges the Austrian School is more Laissez-Faire

Name some of the great inventions economists gave us.  The computer?  The Internet?  The cell phone?  The car?  The jumbo jet?  Television?  Air conditioning?  The automatic dishwasher?  No.  Amazingly, economists did not invent any of these brilliant inventions.  And economists didn’t predict any of these inventions.  Not a one.  Despite how brilliant they are.  Well, brilliant by their standard.  In their particular field.  For economists really aren’t that smart.  Their ‘expertise’ is in the realm of the social sciences.  The faux sciences where people try to quantify the unquantifiable.  Using mathematical equations to explain and predict human behavior.  Which is what economists do.  Especially Keynesian economists.  Who think they are smarter than people.  And markets.

But there is a school of economic thought that doesn’t believe we can quantify human activity.  The Austrian school.  Where Austrian economics began.  In Vienna.  Where the great Austrian economists gathered.  Carl Menger.  Ludwig von Mises.  And Friedrich Hayek.  To name a few.  Who understood that economics is the sum total of millions of people making individual human decisions.  Human being key.  And why we can’t reduce economics down to a set of mathematical equations.  Because you can’t quantify human behavior.  Contrary to what the Keynesians believe.  Which is why these two schools are at odds with each other.  With people even donning the personas of Keynes and Hayek to engage in economic debate.

Keynesian economics is more mainstream than the Austrian school.  Because it calls for the government to interfere with market forces.  To manipulate them.  To make markets produce different results from those they would have if left alone.  Something governments love to do.  Especially if it calls for taxing and spending.  Which Keynesian economics highly encourage.  To fix market ‘failures’.  And recessions.  By contrast, because of the unpredictable human element in all economic exchanges, the Austrian school is more laissez-faire.  They believe more in the separation of the government from things economic.  Economic exchanges are best left to the invisible hand.  What Adam Smith called the sum total of the millions of human decisions made by millions of people.  Who are maximizing their own economic well being.  And when we do we maximize the economic well being of the economy as a whole.  For the Austrian economist does not believe he or she is smarter than people.  Or markets.  Which is why an economist never gave us any brilliant invention.  Nor did their equations predict any inventor inventing a great invention.  And why economists have day jobs.  For if they were as brilliant and prophetic as they claim to be they could see into the future and know which stocks to buy to get rich so they could give up their day jobs.  When they’re able to do that we should start listening to them.  But not before.

Low Interest Rates cause Malinvestment and Speculation which puts Banks in Danger of Financial Collapse

Keynesian economics really took off with central banking.  And fractional reserve banking.  Monetary tools to control the money supply.  That in the Keynesian world was supposed to end business cycles and recessions as we knew them.  The Austrian school argues that using these monetary tools only distorts the business cycle.  And makes recessions worse.  Here’s how it works.  The central bank lowers interest rates by increasing the money supply (via open market transactions, lowering reserve requirements in fractional reserve banking or by printing money).  Lower interest rates encourage people to borrow money to buy houses, cars, kitchen appliances, home theater systems, etc.  This new economic activity encourages businesses to hire new workers to meet the new demand.  Ergo, recession over.  Simple math, right?  Only there’s a bit of a problem.  Some of our worst recessions have come during the era of Keynesian economics.  Including the worst recession of all time.  The Great Depression.  Which proves the Austrian point that the use of Keynesian policies to end recessions only makes recessions worse.  (Economists debate the causes of the Great Depression to this day.  Understanding the causes is not the point here.  The point is that it happened.  When recessions were supposed to be a thing of the past when using Keynesian policies.)

The problem is that these are not real economic expansions.  They’re artificial ones.  Created by cheap credit.  Which the central bank creates by forcing interest rates below actual market interest rates.  Which causes a whole host of problems.  In particular corrupting the banking system.  Banks offer interest rates to encourage people to save their money for future use (like retirement) instead of spending it in the here and now.  This is where savings (or investment capital) come from.  Banks pay depositors interest on their deposits.  And then loan out this money to others who need investment capital to start businesses.  To expand businesses.  To buy businesses.  Whatever.  They borrow money to invest so they can expand economic activity.  And make more profits.

But investment capital from savings is different from investment capital from an expansion of the money supply.  Because businesses will act as if the trend has shifted from consumption (spending now) to investment (spending later).  So they borrow to expand operations.  All because of the false signal of the artificially low interest rates.  They borrow money.  Over-invest.  And make bad investments.  Even speculate.  What Austrians call malinvestments.  But there was no shift from consumption to investment.  Savings haven’t increased.  In fact, with all those new loans on the books the banks see a shift in the other direction.  Because they have loaned out more money while the savings rate of their depositors did not change.  Which produced on their books a reduction in the net savings rate.  Leaving them more dangerously leveraged than before the credit expansion.  Also, those lower interest rates also decrease the interest rate on savings accounts.  Discouraging people from saving their money.  Which further reduces the savings rate of depositors.  Finally, those lower interest rates reduce the income stream on their loans.  Leaving them even more dangerously leveraged.  Putting them at risk of financial collapse should many of their loans go bad.

Keynesian Economics is more about Power whereas the Austrian School is more about Economics

These artificially low interest rates fuel malinvestment and speculation.  Cheap credit has everyone, flush with borrowed funds, bidding up prices (real estate, construction, machinery, raw material, etc.).  This alters the natural order of things.  The automatic pricing mechanism of the free market.  And reallocates resources to these higher prices.  Away from where the market would have otherwise directed them.  Creating great shortages and high prices in some areas.  And great surpluses of stuff no one wants to buy at any price in other areas.  Sort of like those Soviet stores full of stuff no one wanted to buy while people stood in lines for hours to buy toilet paper and soap.  (But not quite that bad.)  Then comes the day when all those investments don’t produce any returns.  Which leaves these businesses, investors and speculators with a lot of debt with no income stream to pay for it.  They drove up prices.  Created great asset bubbles.  Overbuilt their capacity.  Bought assets at such high prices that they’ll never realize a gain from them.  They know what’s coming next.  And in some darkened office someone pours a glass of scotch and murmurs, “My God, what have we done?”

The central bank may try to delay this day of reckoning.  By keeping interest rates low.  But that only allows asset bubbles to get bigger.  Making the inevitable correction more painful.  But eventually the central bank has to step in and raise interest rates.  Because all of that ‘bidding up of prices’ finally makes its way down to the consumer level.  And sparks off some nasty inflation.  So rates go up.  Credit becomes more expensive.  Often leaving businesses and speculators to try and refinance bad debt at higher rates.  Debt that has no income stream to pay for it.  Either forcing business to cut costs elsewhere.  Or file bankruptcy.  Which ripples through the banking system.  Causing a lot of those highly leveraged banks to fail with them.  Thus making the resulting recession far more painful and more long-lasting than necessary.  Thanks to Keynesian economics.  At least, according to the Austrian school.  And much of the last century of history.

The Austrian school believes the market should determine interest rates.  Not central bankers.  They’re not big fans of fractional reserve banking, either.  Which only empowers central bankers to cause all of their mischief.  Which is why Keynesians don’t like Austrians.  Because Keynesians, and politicians, like that power.  For they believe that they are smarter than the people making economic exchanges.  Smarter than the market.  And they just love having control over all of that money.  Which comes in pretty handy when playing politics.  Which is ultimately the goal of Keynesian economics.  Whereas the Austrian school is more about economics.

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FUNDAMENTAL TRUTH #84: “The bigger and more complex government gets the more unintended the consequences.” -Old Pithy

Posted by PITHOCRATES - September 20th, 2011

Filthy, Stinking Hippies never Liked Income Disparity.  Or Real Work.

Say you’re a server at a nice restaurant.  And you’re really good.  People ask to sit in your section.  For your prompt and courteous service.  And they show their appreciation.  With big tips.  And frequent trips to the restaurant.  Good food.  And great service.  It’s what makes a restaurant successful.

Now let’s say the restaurant owners retire and turn over the business to their children.  And let’s say they’re liberal Democrats.  Children of the Sixties.  Hippies.  Filthy, stinking hippies.  And still are.  Though they may bathe more these days.  Anyway, they take over the exploitation of the working class in this bourgeois restaurant.  (They see all business in these terms.)  And they’re going to make some changes.

They never liked the income disparity they saw between the servers.  (Or real work for that matter.)  And they don’t like you.  Because you’re getting more in tips than the other servers.  And that just isn’t fair.  You’re just lucky to get better tables.  As if you won some lottery in life.  It’s only blind, dumb luck that makes you the high earner in the restaurant.  So they’re going to level the playing field.  Make it fair for everyone.  Not just for the rich.  You.  But for everyone.  From now on all tips go into a jar.  And at the end of the day they will divide those tips evenly between all servers.  Everything fair.  And everyone happy.

People don’t Approve of Slavery and Prefer to Keep the Fruits of Their Labor

Or so they would believe.  Because you’re not going to be happy, are you?  I mean, you know why you made more in tips.  You provided exceptional service.  And your reward for your hard work?  A punitive tax.  They’re going to share part of your tips with the less exceptional servers.  So what will you do?

I’m guessing that you’re not going to say, “Vive la revolución.”  And work even harder.  Instead I’m betting that you will be looking for a new job.  At a restaurant that rewards hard work.  And if there are no other food service jobs available?  Because liberal Democrats are in power?  And they’ve killed the economy?  Well, then, you just won’t work as hard.  Because you don’t approve of slavery.  Having the fruits of your labors given to others.

So the new owners, the filthy, stinking hippies, will lose their best server.  And soon will notice a steady decline in the quality of service.  For their servers quickly learn that working harder doesn’t mean any more pay.  So they don’t.  Work harder.  Food sits in the kitchen longer.  By the time they serve it to the customers it’s lukewarm.  They don’t refill drinks.  Customers begin to complain.  Even about the quality of the lukewarm food.  The executive chef quits.  Business drops off.  The business goes into debt.  Losing some $10,000 each month.  And things get so bad under the new owners that not even Robert Irvine could save this restaurant.

The new owners thought their way was going to make a better work environment for their employees.  But the only workers who liked the new policies and stayed were their worst employees.  All the good ones quit.  And those who remained lost their jobs eventually as the business finally went under.  So everyone in the end lost.  Because these hippies thought they knew what was best for everyone.

Accidents Sometimes Happen when Men Control Complex Machines

So bad ideology has unintended consequences.  But complex systems to simplify complex things also have unintended consequences.

The modern jetliner is a complex machine.  They can literally take off, fly and land themselves.  But don’t.  Pilots still take off.  And land.  But the other 99% of the time these aircraft fly themselves.  Pilots input data into the flight computers.  And the computers fly the aircraft.

So pilots don’t fly as much as they used to.  They log a lot of hours in the cockpit.  But they’re not really flying.  They’re operating computers.  Pushing buttons.  Turning dials.  And communicating with air traffic controllers.  They’re not ‘connected’ to the aircraft like in the old days.  Fly-by-wire technology insulates the pilot from the flight controls.  The days of stick and rudder are gone.  When a pilot was one with the aircraft.  Through constant feedback via the senses.  Flying by the seat of the pants.  When a hand on the steering column told a pilot how the plane was flying.  Even while on autopilot.  While having a conversation with a flight attendant standing in the cockpit door.

Back then you needed far more piloting skills than you do today.  Because there were no flight computers.  Like they have today.  That’s why a lot of pilots came out of the military.  Because the military pushed pilots in their training.  Taught them to fly through anything that can happen while flying.  Including recovering from a stall.  Something that just doesn’t typically happen in a modern jetliner these days.

Pilot error has accounted for the majority of accidents.  So removing the pilot from the ‘flying part’ of flying an airplane made sense.  And it would make aviation safer.  And it has.  This is not to criticize pilots.  It just shows that accidents sometimes happen when men control complex machines.  So reducing the amount of time the pilot is in control of the aircraft makes them safer.  That is, as long as the computers have good data.

The Safer You Make Flying by Removing the Pilot from the Flying the less Skilled Pilots Become

And that’s a problem.  Sometimes the computers don’t have good data.  For various reasons.  Such as iced up airspeed sensing pitot probes.  Which has happened a few times.  Giving false airspeed data.  Or sometimes conflicting airspeed data.  There’s more than one probe.  And different flight computers get their airspeed from different probes.  One could show a dangerous high airspeed.  Another can show the actual airspeed.  Giving a pilot a bit of a problem.  Which is compounded if that pilot spent more time inputting data to a computer than flying.  Because when computers get bad data they often disengage.  And the modern pilot will spend most of his or her time trying to reengage it.  Instead of flying the airplane.  As they are trained to do.  Because it’s safer.

A dangerous high airspeed indicates that the plane may be accelerating.  Past its maximum airspeed rating.  Which could make the plane break up in flight.  So a pilot may pull back the engine throttles.  To slow the plane.  To keep it from breaking up in flight.  Of course, if that was an erroneous airspeed, the pilot will only slow the plane down.  And perhaps cause it to stall.  And that has happened, too.

A plane has a ‘stick shaker‘ to warn the pilot of a potential stall.  Normally after you get a stick shake you push the yoke forward to lower the nose and pick up speed.  Of course, if you just got an over-speed warning you might not do this.  And you may interpret that stick-shake as buffeting from the plane just before it breaks up in flight.  So you may raise the nose.  And pull the throttle levers back. To slow the plane down.  And that’s exactly what you will do.  Slow the plane down.  Right into a stall.  Which is flying too slowly to create lift with the wings.  And once the plane stalls it will just fall out of the sky.

There’s a tradeoff in aviation.  The safer you make flying by removing the pilot from the flying the less skilled pilots become.  So when something happens, such as an erroneous airspeed indication, their initial reaction is to fix the computer.  Not fly the airplane.  And planes have fallen out of the sky because of this.  Because even the simple problems don’t have a lot of time to fix.  An old-school pilot who flew B-52s, on the other hand, would probably say something like this.  “Hot damn.  The idiot box is broken.  Now I get to fly this son-a-bitch.”

When Legislation goes Wrong those in Government Simply Say they had Nothing but the Best Intentions

Every time you try to make something too complex.  Or try to change human behavior.  You are going to get unintended consequences.  Always.  Because complex things are complex.  And people are like snowflakes.  No two are alike.  And it is the height of arrogance to believe that you know an individual better than they know themselves.  Or that ‘one size’ fits all when it comes to solutions.

But that’s government.  Complex.  And where the few think for the many.  And decide what’s best for them.  This is a recipe for unintended consequences.  Which is why so much of their legislation goes wrong.  And when it does they simply say they had nothing but the best intentions.

Of course, you see what good intentions can do in a restaurant.  Or in a jetliner at 30,000 feet.

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LESSONS LEARNED #29: “The problem with doing what is best for the common good is that few can agree on what the common good is.” -Old Pithy

Posted by PITHOCRATES - September 2nd, 2010

COYOTE UGLY

We’ve all heard the joke.  What’s coyote ugly?  That’s when you wake up with an extremely ugly person in bed lying on your arm.  After a night of heavy drinking.  You’re fairly certain you had sex.  You’re not 100% sure because you can’t remember anything.  But here the two of you are.  Naked.  The circumstantial evidence is pretty damning.  You want to get out.  Fast.  Instead of waking your lover, you chew your arm off so you can slip away quietly.  Like a coyote will do if caught in a steel-jaw trap.

The lesson here is, of course, to drink in moderation.  For when we drink to excess, we sometimes do things we wouldn’t normally do sober.  But we do.  Drink to excess.  And get drunk.  And, boy, when we do, some of us really do.  Make a real mess of their lives, too.  You see, drunken husbands do not make happy wives.  Or good fathers.  Especially when drunken husbands beat up their wives, spend their paychecks at the corner saloon, have sex with prostitutes and catch syphilis (which they then pass on to their wives and soon to be born children). 

For these reasons, wives have been behind various temperance movements throughout history.  And they have had modest success.  If you ever found yourself in a dry county thirsting for an adult beverage, you can thank these ladies.  But Prohibition?  That’s a different story.  That took Big Government.  The Progressives.  Who thought they knew best what was for the common good.

DO AS I SAY, NOT AS I DO

Wives have suffered unfairly from the affects of alcohol.  But during the 19th century, their power was limited.  They had to rely on grass-roots movements.  And their churches.  Which had moral authority as we were much more religious back then.  Most drunken husbands knew they were behaving poorly.  When sober.  But things changed in the 20th century.  The powers of the government grew.  This power and new sciences (like eugenics) made some believe they could make a better society by passing enlightened laws.  (And make better people in the case of eugenics).

We call it social engineering.  Using the power of the state to change human behavior.  Well, change it for those who are not apparatchiks of the state.  The elite Progressives, including the ladies of high society, still drank.  For it wasn’t illegal to drink adult beverages.  Only to manufacture, sell, or transport them.  So it was the poorer elements of society who felt the impact of Prohibition.  And the immigrants.  Who the social elites blamed for all the drinking woes.  For people in their strata of society didn’t have drinking problems.  So there was no reason to punish them.  The elites.  They weren’t the problem.  It was the poor.  And the immigrants.  They’re the ones government needed to keep from drinking themselves to ruin.

So while the elites still enjoyed their intoxicating beverages in the safety of their mansions and clubs, Al Capone and other bootleggers fought for turf.  For control of the illegal liquor trade.  Shooting each other with Thompson Machine Guns in our public streets.  That’s a .45 caliber round.  It makes big holes.  And shatters bone.  A lot of these rounds were flying through our public streets.  And they hit more than just gangsters.

Prohibition modified some behavior.  But at great cost.  Congress repealed it in 1933.  In part to stem the liquor violence.  And part because the Great Depression was too depressing sober.

JUST SAY NO

I once worked at a small office in a bad part of town.  One day a woman knocked on the door.  She asked if that ‘short guy’ that opens the gates in the morning was around.  I said no.  Then she asked me if I wanted to have a little fun.  I said, “Thank you, but no.”  My secretary had come to the door while I was talking to her.  After I closed the door, she told me that woman just lost a lot of weight.  And that she probably had AIDS.

Women like her were common in the neighborhood.  They sold sex for drug money.  When they weren’t with a John they were getting high.  Men, too.  One time, this 6-foot-plus behemoth in a skirt was walking in the street shouting something incoherent.  Our driver discovered he was a guy.  When he lunged through his open window while turning at the corner.  I don’t know what scared him more.  The assault.  Or the fact that she was a he. 

By the way, that short guy that opens the gates?  He was married.  And had a couple of daughters.  God only knows what he gave his wife.

Drug addiction is not good.  No one’s life ever got better by being addicted to drugs.  None of these people ever planned on drug addiction.  It just happened.  Somehow.  One day you’re just partying with some friends.  Then the next thing you know you’re turning tricks or stealing to support your habit.  If you have money it’s a different story.  Then you can party until you kill yourself.  John Belushi overdosed from a heroin/cocaine cocktail called a speedball.  Chris Farley, too.  It’s unlikely that the speedball was their first high.  They probably started out with something less potent.  Like marijuana.  The entry drug of choice.  Only when that drug loses its charm do people step up to something a little more potent. 

Of course, if you don’t start, chances are you won’t move up to something more potent.  This was the idea behind Nancy Reagan’s anti-drug program.  Stop the kids from starting.  To resist peer pressure.  To just say no.  Her program did modify some behavior.  Kids did use fewer drugs.  But she was Ronald Reagan’s wife.  The Left didn’t like him.  Or her.  So they ridiculed her program as being simplistic.  Discontinued it.  And drug use by kids increased.

GANGSTA’S PARADISE

Like Capone and his fellow bootleggers, the illegal drug trade is controlled by gangs.  And they, too, fight over turf.  But those involved at the street level of the drug trade today are a lot younger.  During the days of Prohibition, kids played with toy guns.  Today, they’re playing with real guns.  Not so much playing but killing each other.  And innocent bystanders.  In drive-by shootings.  Why?  Because drugs get you money.  And money gets you power.  Put all that together and it’s very seductive to kids from broken homes in the hood.  Who have nothing.  And have nothing to lose.  It’s almost romantic.  Fighting.  And dying.  A regular gangster.  Living in a gangster paradise.

Once in, though, it’s hard to get out.  The song Gangsta’s Paradise (by Coolio featuring L.V. from the 1995 Movie Dangerous Minds) laments about that paradise.  “Tell me why are we so blind to see.  That the ones we hurt are you and me.”

You get higher up in the echelon and the violence gets worse.  You can see that on America’s southern border.  And further south.  Kidnappings.  Beheadings.  And other unspeakable things.  Because of the big money in illegal drugs.  Like there was in bootlegging.  Make something illegal that people still want and will buy, and that something becomes a very profitable commodity indeed.

DAMNED IF YOU DO, DAMNED IF YOU DON’T

So what’s the answer?  What is the best course of action for the common good?  We can keep drugs illegal.  And continue to fight the war on drugs.  And watch the violence escalate as people fight to control this illicit trade.  Or we can decriminalize drugs.  Make them easily accessible.  And cheap.  The drug gangs would go the way of the bootlegger gangs.  And the crack/meth whore in the street won’t have to perform as many sexual acts to support her habit.

Alcohol is legal today.  And there are a lot of social costs because of that.  But the majority of people who do drink are not driving under the influence or beating their wives.  Or getting syphilis from a prostitute hanging out at the corner saloon.  Wouldn’t it be the same for drugs?

Kids drink.  Even though they can’t legally buy alcohol.  But the worse thing they can do is kill someone while driving a car.  Or get killed in a car driven by another drunken kid.  Or kill themselves from binge drinking.  Or get pregnant because they got drunk at a party.  Or get infected with a venereal disease because they got drunk at a party and had sex.  These are very bad things.  But they’re not an addiction.  Sure, you can become an alcoholic, but a lot of kids don’t like the taste of the adult beverages they’re consuming.  They’re just doing it for the party buzz.  And vomiting after.  It takes awhile, for some, to get over that hump where those awful tasting beverages don’t taste so awful anymore.  But drugs?  They’re tasteless.  There isn’t a delivery system ‘hump’ to get over.  Which makes the addiction process that much easier.  And where there is only one kind of drunk, there are all sorts of highs.  New and different drugs to explore.  When you get bored with the drug du jour.  So, no.  It probably wouldn’t be the same with alcohol.  It would probably be worse.

THE LESSER OF EVILS

Often the choice comes down to a lesser of evils.  So, to do what is best for the common good, we just need to determine which is the lesser evil.  So which is worse?  The violence from trying to keep something illegal?  Or the social costs of decriminalizing something that is already causing a lot of harm while being illegal?  It comes down to what you, as an individual, think.  And that is, must be, a subjective decision.  And therein lays the problem of choosing what is best for the common good.  It’s an opinion.  Choices aren’t right or wrong.  There’re just different opinions.

And that’s why so few can agree on what is best for the common good.  Different people think different things are better.  And different things are worse.  And, at best, they can agree to disagree.

www.PITHOCRATES.com

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