Zohran Mamdani and State-Run Supermarkets

Zohran Mamdani, the Democratic Mayoral candidate of NYC, wants to establish state-run grocery stores that are designed to save customers’ money by eliminating the profit motive (https://foodtank.com/news/2025/06/city-owned-grocery-stores-a-bold-fix-for-food-insecurity/). Socialists see eliminating the profit motive as a virtue of their various policies and programs, but it is precisely those profits and losses that are necessary for increasing the affordability of goods and services. Walter E. Williams (2008) argues that rather than being exploitative, “profits are incentives for firms to satisfy customers, find least-cost production methods and move resources from low-valued to high-valued uses” (p. 90). Since Zohran Mamdani’s state-run grocery stores will not react to the signals given by profits and losses, they have no incentive to reduce costs or offer higher quality services than their competitors. Ludwig von Mises (1944) points out that if state-run enterprises are not making profits, then they are probably losing money, which means taxpayers will have to make up the difference. Mises writes: “When the government tries to eliminate or to mitigate this dependence [on profits] by covering the losses of its plants and shops… The means for covering the losses must be raised by the imposition of taxes” (p. 70). State-run grocery stores will not save money for New Yorkers overall; they will pay low prices at the cash register—assuming the artificially low prices do not lead to shortages or rationing—but then pay more in taxes to subsidize an inferior product.

References

Ludwig von Mises (1944). Omnipotent Government: The Rise of the Total State and Total War. Liberty Fund.

Walter E. Williams (2008). Liberty vs. The Tyranny of Socialism: Controversial Essays. Hoover Press.

How to Increase Real Wages

Why is a construction worker in a developed nation paid higher real wages than a construction worker in an underdeveloped nation? Why don’t the governments of poorer nations simply declare a $20 minimum wage to lift all their workers out of poverty? Henry Hazlitt argues that the primary reason why some workers are paid more than others, even though they work in the same industry, is because those who are paid more tend to produce more. One man or woman driving a giant truck or bulldozer can move more earth than a hundred people using pickaxes and carrying earth on their backs. If we want workers in underdeveloped nations to have a higher quality life, their labor needs to be made more productive through greater capital investment, technological innovation, or better education and training. Hazlitt states that “We cannot in the long run pay labor as a whole more than it produces. The best way to raise wages, therefore, is to raise marginal labor productivity…Real wages come out of production, not out of government decrees” (p. 139).

Reference

Henry Hazlitt (1988). Economics in One Lesson: The Shortest and Surest Way to Understand Basic Economics. Crown Currency.

Walter E. Williams and Ibram X. Kendi on Welfare Hypocrisy

Conservatives have long criticized welfare programs for being counterproductive. By providing unconditional handouts to the poor, the government encourages people to remain poor by removing their incentive to develop their human capital. Professor Ibram X. Kendi notes that those who take this position are hypocritical for remaining silent when it comes to government handouts for the middle and upper classes. Conservative politicians will blame social problems in the Black American community on government handouts, but at the same time who will say nothing “about rich White people who depended on the welfare of inheritances, tax cuts, government contracts, hookups, and bailouts…the New Deal, the GI Bill, subsidized suburbs, and exclusive White networks” (p. 154).

Libertarian-minded individuals have consistently agreed with Kendi’s critique. If government handouts are detrimental to the poor, then there is no reason why handouts to corporations would be any less deleterious. The economist Walter E. Williams, who was no ally of the political Left or anti-capitalist ideologies, likewise criticized Republicans who support corporate subsidies but oppose federal welfare schemes or student loan forgiveness on the grounds that such policies are too expensive or are immoral because they force one person to pay for the livelihood of another who did not earn it. If Republicans extended their critiques of the welfare state to include the tens of billions of dollars the federal government gives in corporate subsidies, then the nation might actually reduce federal spending. When Republicans were trying to reform welfare in the 1990s, Williams stated: “How can you possibly talk about slamming the handout door on a poor, lazy, good-for-nothing welfare recipient while at the same time sponsoring handouts for members of America’s Fortune 500?...Republicans would be on far greater moral...footing if their version of welfare reform included government corporate handouts” (p. 56-57) 

References

Ibram X. Kendi (2019). How to be an Antiracist. One World.

Walter E. Williams (1999). More Liberty Means Less Government: Our Founders Knew This Well. Hoover Institution Press.

Zohran Mamdani Seizing the Means of Production

Videos have surfaced of New York City mayoral candidate Zohran Mamdani claiming that the end goal for socialists like him is to have the government seize and control the means of production. It is easy to believe that our basic needs could more easily be met if we lived in a socialist society where the government controlled all the factories and natural resources, and there would be no more greedy businesspeople exploiting workers and consumers. The government could then create a scientific plan to equitably distribute resources to meet everyone’s needs. This fantasy fails both in theory and in practice. The economist Ludwig von Mises suggests that such a socialist system is bound to fail because without prices, profits, and losses, there is no rational means of allocating scarce resources to meet the most urgent needs. There are millions of ways that workers, factories, and natural resources can be utilized to make consumer goods. In a market economy, all these factors of production are privately-owned, and they are bought and sold at prices that fluctuate according to supply and demand. Entrepreneurs, hoping to earn a profit by fulfilling the needs of consumers, use these prices to calculate the most efficient production methods and shutter enterprises that do not serve consumers at the cheapest cost.

Mises writes that if the government owns all these factors of production and they are simply distributed according to a government plan, then “there would be neither discernible profits nor discernible losses. Where there is no calculation, there is no means of getting an answer to the question whether the projects planned or carried out were those best fitted to satisfy the most urgent needs” (p. 25). The result is economic chaos.

This is not just a theoretical argument. Socialist economists Nikolai Shmelev and Vladimir Popov witnessed the economic calculation problem with their own eyes in the Soviet Union, where the government-planned economy created constant shortages, surpluses, production inefficiencies, and a much poorer quality of life compared to other developed nations. Shmelev and Popov write that for the Soviet Union, shortages and surpluses were “an everyday reality, a governing law. The absolute majority of goods is either in short supply or in surplus… the needed product is almost never present in the needed region in the needed amount” (p. 89). The government planners were unable to predict all the complexity of allocating resources and setting prices, and the people paid dearly for it.

Program evaluators who call for abolishing free markets and replacing them with a system of governance in which the state controls the means of production should be wary of how their ideology put into practice would exacerbate the suffering they desire to alleviate.

References

Ludwig von Mises (1944). Bureaucracy. Liberty Fund, Inc.

Nikolai Shmelev & Vladimir Popov (1989). The Turning Point: Revitalizing the Soviet Economy. Doubleday.

What does it mean to put “People Before Profits”?

A colleague of mine posted on social media that we need more government intervention to put “people before profits.” I think people make such proclamations because they do not understand that striving for profits or minimizing losses actually does benefit the average person. The economist Walter E. Williams argues that profits and losses in general benefit society by forcing businesses to efficiently meet the needs of consumers. Businesses that produce what consumers desire make profits, while those that do not are shut down. Williams also notes that profits incentivize businesses to streamline their production to more efficiently use resources: “If producers waste input, their production costs will be higher and they’ll charge prices higher than what consumers are willing to pay. Therefore, the company will make losses...and go out of business” (p. 5). It is the non-profit and government sectors that are most likely to waste resources and fail to serve their customers. Just ask the university students complaining about skyrocketing student loan debt and their inability to find work after graduation.

Reference

Walter E. Williams (1999). More Liberty Means Less Government: Our Founders Knew This Well. Hoover Institution Press Publication. 

Program Evaluation and the Affordable Housing Crisis

Some time ago I saw a San Francisco politician on social media complaining that there is not enough affordable housing for his constituents. His proposed solution was for the government to subsidize the construction of affordable housing units. The assumption underlying this legislation is that high housing costs are a failure of the free market, and politicians must intervene on behalf of the common good. Many economists argue, however, that government interventions to create more affordable housing are trying to correct a problem that was created by government intervention in the first place. Housing costs rise when there are a lot of people bidding for a limited amount of housing. If the supply of housing increases to meet the demand, housing costs will go down. Various government interventions may be responsible for slowing the construction of new housing. The economist Thomas Sowell notes that prior to the 1970s, housing in the San Francisco area and California in general was rather affordable. Sowell states that “the decade of the 1970s marked the beginning of severe government restrictions on the building of houses and apartments. That same decade marked the meteoric rise of housing prices” (p. 28). Government interventions such as “open space laws...zoning laws, environmental laws, historic preservation laws, and others” were implemented with good intentions, but they had the effect of restricting the supply of housing and increasing rents (p. 29).

Program designers and evaluators are tempted to blame social problems on the unregulated market and assume that the solution is to be found in government spending. It is my opinion that program evaluators who are interested in understanding the root causes of a social problem should first consider whether government is the source of the problem, not the solution.

Reference

Thomas Sowell (2011). Economic Facts and Fallacies (2nd edition). Basic Books.

Banning Automation to Save Jobs

I saw an interesting video demonstrating how a company builds concrete homes using a giant 3D printer. This process sounds like a great way to reduce the cost of housing by building houses more quickly and cheaply. One of the commenters on the video, however, lamented that this technology would lead to unemployment in the construction industry, and this in turn would harm the economy. The Hungarian author Marcel Kadosa argues that such a worldview is based on the fallacy of “…treating labor itself as the goal rather than its outcome…” (p. 128). Tools were created to meet our needs using the least amount of labor possible. Our material quality of life is better today than it was 200 years ago in no small part because of the continuous development of labor-saving technology. We could easily create jobs by banning the use of bulldozers and forcing construct workers to dig with their bare hands, but that would make society poorer by diverting resources away from more productive tasks. Kadosa observes that “Industry is valuable not because it provides jobs, but because it supplies us with the things we need. That those engaged in this socially beneficial work make a living from it is merely a consequence of their activity” (p. 122).

Reference

Marcel Kadosa (1925). The Tariff Superstition: Why Protectionism Always Fails—and Who Really Pays the Price. Praxeum.

Do Foreign Investments Impoverish a Nation?

Some people in the United States are concerned that foreigners have invested too much money into the US. Because we import more goods than we export, foreigners get excess dollars and then use those dollars to buy our wealth from under us. This makes us in debt to foreigners, and a nation as powerful as the United States should never be in debt to foreign nations. The economist Thomas Sowell disagrees with this reasoning and argues that foreign investment is a good thing both for the United States and foreign investors. He writes that “Despite fears in some countries that foreign investors would carry off much of their national wealth…there is probably no country in history from which foreigners have carried away more vast amounts of wealth than the United States” (p. 509). If it were true that foreign investment robs Americans of their wealth, then “Americans ought to be some of the poorest people in the world” (p. 509). And yet Americans are some of the richest people in the world. The United States has received massive foreign investments for generations, which means we have been indebted for foreigners for generations. The reason why America continues to grow in spite of being in debt to foreign investors is because both sides benefit when these economic transactions takes place. If both sides did not benefit then they would not agree to it. Foreign investors are confident they will get a return on their investment, and American entrepreneurs are confident they can pay the investors back while still earning profits for themselves. This economic activity creates productive jobs and produces better goods and services to improve the average citizen’s material quality of life.

Reference

Thomas Sowell (2014). Basic Economics: A Common Sense Guide to the Economy (5th edition). Basic Books.

Can you have too much income equality?

Income inequality has become one of the primary concerns of program evaluators who wish to participate in creating a more equitable society, but is it possible to have too much income equality? The Soviet Union provides an interesting case study. Socialist economists Nikolai Shmelev and Vladimir Popov observed that the Soviet Union in the 1980s had much more income equality than did the United States. This is because prices and wages were determined by government officials rather than the profit and loss system of the market. Even though the Soviet Union had more equality than the United States, they were far worse off than the average American in material terms. By removing the possibility of being rewarded for harder work or greater efficiency, the quality and quantity of goods and services were abysmal. Shmelev and Popov state that Soviet price controls and leveling wages “…created a welfare mentality” where workers knew they could never get rich but also that they would always have employment (p. 177). This government mandated equality “suppresses any incentive to work, causes shake-ups, lack of discipline, and a parasitic certainty of a guaranteed income that does not depend on one’s actual contribution to the job…” (p. 187). I personally would rather be unequal and prosperous than be poor and equal.

Reference

Nikolai Shmelev & Vladimir Popov (1989). The Turning Point: Revitalizing the Soviet Economy. Doubleday.

Tax Rates vs. Tax Revenues

Some people take it for granted that if a state or federal government is lacking in tax revenues, then it can simply raise taxes on the rich to gather additional revenue. This assumes that those who have their taxes raised will simply go about doing what they were doing before without changing their behavior. Thomas Sowell calls this the “chess piece fallacy.” If taxes are too punitive, those who pay them may be incentivized to move elsewhere, leaving the government with less than what it started with. In one example, Sowell observes that the state of Maryland tried to raise tax revenues “by increasing the tax rate on people whose incomes were a million dollars a year or more. But, by the time the new tax rate took effect in 2008, the number of such people living in Maryland had declined from nearly 8,000 to fewer than 6,000. The tax revenues... actually fell instead by more than $200 million” (p. 51). Just because a tax-rate increases does not necessarily mean there will be an increase in tax revenues. Understanding these sorts of trade-offs may be relevant to the field of program evaluation. What good are government social programs if they lead to expanding budgets that chase away their tax base? If the goal of program evaluation is to improve social programs to serve the “common good,” then evaluators must acknowledge that even if an evaluation shows that social program participants are better off than a comparison group, that in no way confirms that they would be better off if no program had existed in the first place.

References

Thomas Sowell (2023). Social Justice Fallacies. Basic Books.

China’s Population Control

Environmental extremists have for years called on governments enact policies to reduce the growth of the human population to prevent the complete exhaustion of scarce resources and a declining quality of life for the average person. Contrary to what the environmentalists have predicted, resources are becoming more abundant and quality of life for the average person across the globe has been improving. Thankfully their recommendations for population control were not taken seriously in the United States or Europe. Unfortunately, China took the warnings of these environmentalists seriously and destroyed many lives in the process. China’s one-child policy—which lasted from 1979 to 2015—was designed to reduce the Chinese population by punishing women who gave birth to more than one child. They implemented this policy under the false belief that an increasing population would drain China’s scarce resources. Chelsea Follett from the Cato Institute describes the human rights abuses of the Chinese government in some detail. The one-child policy was enforced through the termination of pregnancies, massive fines, mandated pregnancy tests, forced international adoption, and robbing and destroying private property. Local government officials were penalized for not maintaining the one-child quota and were rewarded bonuses for sterilizing women. Follett describes the scale of the sterilization campaigns, stating that between 1979 and 2015, the Chinese government had “over 300 million Chinese women fitted with intrauterine devices modified to be irremovable without survey, over 100 million sterilizations, and over 300 million abortions. Many of these procedures were coerced” (p. 1). In 2017, the UN estimated that “18.3 percent of Chinese women aged 15-49 had been permanently sterilized” (p. 9).

Reference

Chelsea Follett (2020). Neo-Malthusianism and Coercive Population Control in China and India. Cato Institute, Policy Analysis, No. 897. Retrieved from: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3660007

Shouldn’t Environmentalists Be Happy About High Oil Prices?

Why do politicians who want to fight climate change by reducing our consumption of oil get angry when the price of oil increases? They condemn the oil companies for price-gouging and threaten to tax away their profits unless they reduce their prices. If your goal, however, is to get people to use less oil, the best thing greedy oil corporations can do is to price-gouge the citizens. As Thomas Sowell states, “There is perhaps no more basic or more obvious principle of economics than the fact that people tend to buy more at a lower price and less at a higher price” (p. 28). If oil prices skyrocket, then people consume less oil and seek cheaper forms of alternative energy. Yet politicians take the logically inconsistent position of wanting people to use less oil but also claim to want to lower its price. I wonder if this inconsistency is intentional; politicians do everything in their power to make fossil fuels more expensive, and then earn votes from the working-class by blaming big business. 

Reference

Thomas Sowell (2014). Basic Economics: A Common Sense Guide to the Economy (5th edition). Basic Books.

The Problem with Anti-Price Gouging Laws

Many people on both ends of the political spectrum would agree that price controls on goods and services during normal times are a bad idea. If prices are not allowed to fluctuate according to supply and demand, businesses that are just scraping by will no longer find it profitable to sell at the artificially low price, thus reducing the supply of the regulated product or service. The artificially low prices also increase the demand for the product, which creates a shortage. Price controls under emergency conditions, or “anti-price gouging laws,” are seen as an exception to this economic principle. What could be more immoral and exploitative than allowing greedy business men and women to profiteer off people suffering from a disaster? The economist Walter E. Williams disagrees with this moral stance, arguing that anti-price gouging laws do nothing to help disaster victims and are just as harmful as price controls under any other circumstances. Williams observes that since the tendency is for people to hoard scarce supplies during a disaster—leaving some people with too much of a product and others with none at all—allowing prices to rise freely during an emergency is beneficial for two reasons: first, customers are forced to economize on scarce resources, which leaves more available for everyone else, and second, the higher prices encourage businesses to divert more resources to the disaster area for profit. Williams concludes that “Anti-price gouging laws disrupt these two very important functions of the marketplace and enhance and prolong a disaster.” 

Reference

Walter E. Williams (2020). “It’s not gouging; it’s the free market”. NWF Daily News. Retrieved from: https://www.nwfdailynews.com/story/opinion/columns/2020/04/05/walter-e-williams-its-not-gouging-its-free-market/1404506007/

Why Do Labor Unions Support Minimum Wage Laws?

Labor unions strongly advocate for minimum wage laws, which may seem unusual because few union workers earn minimum wage salaries. One could argue that labor unions advocate for higher minimum wages because they care for the rights of the entire working class, but Thomas Sowell has a more cynical view about their motives, arguing that labor unions support minimum wage laws instead to protect their own jobs from competition. Sowell notes that since many products can be made with a mixture of both low and high skilled labor, “experienced unionized workers are competing for employment against younger, inexperienced, and less skilled workers, whose pay is likely to be at or near the minimum wage. The higher the minimum wage goes, the more the unskilled and inexperienced workers are likely to be displaced by more experienced and higher skilled unionized workers” (p. 110). When program developers and evaluators examine the root causes of problems like youth unemployment, they should consider whether government policy is partly responsible for making young workers too expensive to hire.

Reference

Thomas Sowell (2011). The Thomas Sowell Reader. Basic Books.

The Root Cause of Big Money in Politics

Many are upset that wealthy people like Elon Musk and other special interest groups are making large political campaign contributions. Some believe that money and greed harm the democratic process and that we should get money out of politics. The question we should be asking is why do so many special interest groups spend millions of dollars on political campaigns in the first place? Is it because these special interests care deeply about defending individual liberty and the ideals of the US Constitution? The economist Walter E. Williams responds that “A much better explanation for the millions going to the campaign coffers of Washington politicians lies in the awesome growth of government control over business, property, employment and other areas of our lives... The greater their power to grant favors, the greater the value of being able to influence Congress...” (p. 96-97). If we are worried about politicians granting privileges at the expense of other Americans, then we should consider curbing the government’s power to grant those privileges.

Reference

Walter E. Williams (2008). Liberty vs. the Tyranny of Socialism: Controversial Essays. Hoover Institution Press.

Exploitation by Multinational Corporations

Multinational corporations are often accused of exploiting workers in developing countries by providing them meager wages and sweatshop working conditions. Does the United States have a moral obligation to restrict imports from developing nations to discourage this exploitation? I personally believe that all workers should be treated with dignity and respect by their employers, but trying to eliminate so-called sweatshops in the name of helping foreign workers may end up making them worse off. Douglas Irwin argues that the problem for workers in developing nations is not the existence of sweatshops, but rather “the lack of good alternative employment opportunities” (p. 246). If a person voluntarily works in what we believe are exploitative conditions, it is because that job is better than the alternatives. The last thing we want to do is to make someone worse off in the name of fighting a moral crusade against exploitation. Irwin describes what a Cambodian immigrant told him about sweatshop labor: “In comparison to the hot, humid conditions of agricultural work, where you stand exposed to the sun in muddy fields and have to rip leeches off your legs every few hours, a factory is one of the few places in Cambodia where a person doesn’t sweat so much” (p. 246).

Reference

Douglas A. Irwin (2020). Free Trade Under Fire (5th Edition). Princeton University Press.

The Welfare State and Inflation

Investopedia.com defines “inflation” as “a gradual loss of purchasing power that is reflected in a broad rise in prices for goods and services over time” (https://www.investopedia.com/terms/i/inflation.asp). When prices rise, some are quick to blame the increase on greedy corporations, who seek to maximize profit at the expense of the working consumer. Others blame the increase in prices on the government increasing the money supply by spending more than it confiscates. Henry Hazlitt argues that although it is true that many factors can cause the prices of individual commodities to fluctuate, when most or all prices rise together (but not necessarily at the same rate), the likely culprit is the government spending more money than it brings in via taxation. Hazlitt states: “When the welfare state spends recklessly, runs chronic deficits, expands credit, and prints more money, prices begin to soar...A rise of nearly all prices or of most prices out of tens of thousands, indicates the operation of a common cause...Prices do not rise today because businessmen have suddenly become greedier than they were yesterday.” (p. 29-31).  When program and policy evaluators try to identify the “root causes” of an affordability crisis associated with rising prices, they should ask whether the deficit spending to fund the programs they are evaluating may be contributing to the problem.

Reference

Henry Hazlitt, (1969). Man vs. The Welfare State, Ludwig von Mises Institute, p. 29-31.

Fears of Monopoly in a Relatively Free Market

There are few things that scare Americans more than the idea of a business monopoly. If a business is too large and competitors are too few, the successful business can raise prices as high as it wants to exploit the consumer. The rich monopolist gets richer, and the American workers become poorer. The economist Ludwig von Mises argues that the fear of monopoly in a free market is exaggerated for the following reasons. First, if a company were to raise prices because they are the only provider of a good or service in a given region, “that would stimulate the formation of rival firms whose competition would break the monopoly and restore prices and profits to the general rate (p. 64). Second, there are very few commodities on planet Earth that cannot be substituted with some other commodity. If a company has a monopoly on the production of steel, people can use alternatives such as aluminum. This requires a monopolist to keep prices down so as not to encourage the use of substitute commodities. Third, even if a monopoly is formed, it cannot raise prices ad infinitum because at some point the price would be so high that demand would drop to where they would make less profit than if they had charged lower prices (p. 66).  Due to these constraints on big business in a market economy, many economists argue that if a monopoly does form, it is not the result of a free market, but it is the result of government intervention that protects certain companies or industries from competition.

Reference

Ludwig von Mises, (1962). Liberalism: The Classical Tradition, Liberty Fund Inc. p. 64-66.

If Tariffs Are Bad, Then Why Does China Have Them?

Dr. Victor Davis Hanson posted a video in which he asked the viewer “If tariffs are so destructive to a nation’s economy, then why are countries with high tariffs like China booming economically?” My question to Dr. Hanson is “if trade barriers are so beneficial, why did countries like China and India experience rapid economic growth after they significantly reduced their trade barriers?” The economist Douglas Irwin writes that during the reign of Chairman Mao Zedong, China was almost completely closed off from international trade until 1979. They had a centrally-planned economy and they reduced their reliance on imports by producing most everything themselves. While this policy built up their manufacturing capacity, the Chinese people remained in poverty, having a per capita income on the level of Burma and Mozambique in the 1980s. When Deng Xiaoping rose to power in China, the country slowly began to decentralize its economy, increase trade, and allow foreign investment. China’s rapid growth is correlated with a decrease in their trade barriers. Irwin states that “In 1992, the weighted average tariff on manufactured goods [in China] was over 45 percent. Since China joined the WTO in 2001, the country’s average tariff has fallen to less than 7%” (p. 217). China has achieved its most significant per capita GDP growth since the 2000s. Of course, not all of China’s success is due to more open trade, but it was “a vital component of its broader reforms and [has] played a critical role in its economic success” (p. 218).

Reference

Douglas A. Irwin, (2020). Free Trade Under Fire (5th edition). Princeton University Press. pg. 217-218.