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Feb. 23, 2007 - Freedomain Radio - Stefan Molyneux
40:03
656 Milking Citizens - Price Controls and State Power
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Time Text
I make it half past six.
You come at seven. Always trying to keep me hanging round.
You little smart thing.
Girl, you've kept me waiting.
Never contemplating my point of view.
This comes as no surprise.
I'm a fool for I believed your lies.
But now I've seen through your disguise.
Who needs...
Well, I don't need...
Who needs you?
Hey, everybody. Hope you're doing well.
It's Steph. That is the song.
It has been plaguing my brain for weeks, weeks.
So now I must pass it along to you.
Great song off News of the World.
I'm sure you know the band.
So I wanted to chat this afternoon about...
Milk. Yes, you knew that was going to be the next topic, didn't you?
Milk. Le, as the French would say.
And it is something that it's kind of basic to economics, but we've never talked about it.
And so just about basic enough for me to close the mental bear trap hinge of my brain over.
So, let's talk about the staggering, increasing oscillation, yea, to the vibration and destruction of the crystal of civilization, that occurs when the government decides, in its infinite wisdom, to intervene in an economic situation, or what it seems to be a problem.
And let's say that we're talking about a democracy, so there'll be reasons for that as we move forward, and we're talking about a relatively free market situation.
For the sake of this discussion, we'll just have a free market situation as a whole or in general, so that the only thing that's occurring that is interventionist is the topic that we're talking about.
So nice, pristine free market.
Government begins to intervene.
Let's have a look at the results, shall we?
Let's hush ourselves down, look at the swinging sword through the economy and see what a spattered trail it doth leave.
So the price of milk goes up.
Maybe the cows go on strike.
Maybe the French buy all the milk to mix with their wine lakes and mountains and silos of butter.
But the price of milk goes up for some reason.
And naturally, because it's democracy, the parents who like to feed their children milk get all up in arms and upset about this.
And so they write to their congressmen, their politicians, their local grand pujabs, and they say, we do not like this milk going up, and you must do something about it, because you are our elected representatives, and we don't like the gouging that the...
That is going on from the farmers, those dairy bastards.
They're ripping us off for everything they can, and it's just not fair.
And look at my poor starving child getting rickets.
So the politicians, because they don't want to cheese off the parents, decide to get together in a huddle and say, okay, well, we've got to do something about the price of milk.
That's a very, very bad thing.
So we're going to, because they're politicians and not, say, people with brains, they're going to say, let's put a price cap on milk.
So let's just say milk was selling for a buck a litre because we're in 1972 and it's gone up to a buck fifty a litre Then the politicians say, well, cap that damn price at a buck.
Let's put the price back down at a buck and everybody's going to be happy because the parents won't be as upset.
And yeah, maybe the farmers are price gouging or whatever, but I'm sure a situation will soon alleviate itself.
So it'll be a couple of months of maybe the farmers not making as much money as they want.
What's the harm in that?
As soon as the price goes back down to a buck, we'll release the price controls and we can let it float from there on.
Seems like a relatively harmless, brainless?
Harmless situation. So this, of course, is what the politicians go into.
They pass a law which says, as a temporary measure, 10-289, I think it was, is a temporary measure.
We are going to cap the price of milk.
It's illegal to charge more than a dollar a liter for milk.
And lo, the parents are very happy.
And there's no initial huge problem.
There's some irritation and frustration and some people lose some money, but there's no initial...
Massive problem. Why? Because there's already milk in production.
The reason it's in production, of course, is that there is the expectation that it is going to be able to be sold at $1.50, which is, let's assume that the price of the production is $1.25.
There's an expectation that it's going to be sold at $1.50, and that's why it's produced.
If the price was a buck, and if you could only sell it for a buck, and it cost a buck and a quarter to produce, nobody would produce it, right?
If you're sort of sadomasochistic or insane or want to get rid of your family fortune or something, then maybe you'd produce it.
But very few people pay to go to a job they don't like.
So very few people will produce, work very hard, stick in their hands up, cow's teats, not up, around milking the cow's teats, and do that for the sake of having the privilege of paying a quarter to everyone who wants a glass of milk.
That's not how sensible and rational human beings operate in an economic situation anyway.
So when the politicians slap ye old cap on the price of milk, there's no immediate harm.
There's no immediate problem. There's no immediate reallocation of resources or diminishment in the amount of milk that's available to people and so on.
Because you've probably got a couple of weeks at least worth of milk wending its way through the system, right?
So the cows have already been milked and they put it in a big vat in the pasture to pasteurize it.
You know, that's how it works. And they've done all of these things and then it's in the middle of being shipped or it's in the middle of being irradiated with God knows what or it's in the middle of being strained or, I don't know, creams rising and being shifted around and stuff.
I don't want to show off my expertise as a dairy farmer because I really can't.
But there's stuff in the pipe, let's say.
There's stuff in the pipe.
There's milk that has already been produced that's winding its way towards production.
It's on a truck. It's sitting in the back freezer of a convenience store or something.
It's already there. It's already done.
So the fact that farmers are now going to receive, or someone is going to receive less, right?
The whole chain of people gets screwed in this situation.
So, the farmer who's already sold his milk for a buck and a quarter, again, I'm oversimplifying, but I'm sure you get the idea, that's what we do, because otherwise, you know, it gets, um, what's that big word?
Complicated? Something, anyway.
I think you know where we're going. So the farmer who sold it for a buck and a quarter, he's happy because, you know, he's not going to have to absorb the cost of the buck that is going to be charged to the consumer.
The grocery store that paid a buck and a quarter for it that wants to sell it for a buck fifty and now can only sell it for a buck is muendo unhappio because it is going to be out.
And again, I'm oversimplifying, just forgive me for this, but this is what happens when we're driving and bad with math and not a dairy farmer.
Or, actually, no, I like milk.
So... What happens then?
Well, the first people who take the hit is the grocery store.
Now, there is this highly, highly destructive myth that floats around, mostly from leftists, but from other people as well.
And that idea is that at the back of a grocery store, you know, in back there behind the heavy sheeted plastic doors and, you know, beyond the mystery ovens where cometh the cake, there is a big juicy vat of money.
You know, it's just piled up.
There's a big dumpster full of massive dollar bills.
That it's just sort of floating around and people will bathe in it.
They'll rub their bodies on it.
They'll occasionally take a few to go and buy a couple of Ferraris.
But there's this massive vat of money that's floating around.
And if you do a price cap and cause the grocery store to have to sell a couple of thousand bucks of losses in terms of milk, they're not going to throw the milk out.
If you throw the milk out, you lose your buck and a quarter.
Right? So you paid a buck and a quarter.
You're hoping to sell it for a buck fifty.
The price gets capped at a buck.
If you throw the milk out, you've lost a buck and a quarter.
So they're not going to do that. They're going to sell the damn stuff.
Grudgingly and angrily.
But they're going to sell it because the alternative is to lose a buck and a quarter.
Whereas if they sell it at a buck when they paid a buck and a quarter, they're only losing a buck and a quarter.
Sorry, they're only losing a quarter.
Because the consumer will pay them a buck and they paid a buck and a quarter to get the milk.
So they're only losing a quarter plus their time and labor and this and that and the other.
So... This issue that people have in their mind is they sort of say to themselves, huh, okay, well, so the grocery store, yes, if you corner me, I will admit that the grocery store is going to be losing some cashola in this situation, but they can just go into their big dumpster truck full of money and take a couple of grand out, which they've put aside for a rainy day.
No harm, no foul, no problem.
But... What they really don't recognize is that for all but a very few businesses, there's like no money left over at the end of it all.
There's no money left over whatsoever.
There's almost no business that has a vat of money.
Microsoft does, and in high-flying times, Oracle and Sun did, but for the most part, 99.99999% of businesses have nothing sitting in the vault.
And, well, I'll sort of explain that just very, very briefly.
I'm sure you get the general idea.
But a company, if you make...
2%, 3%, 4%, 5%, 6% profit, you're doing very well.
But of course, the profit doesn't go into a big vat, right?
The profit, you have to reinvest in your company, you have to upgrade, you have to pay bonuses to keep really skilled people on your staff, you have to invest, even if you're just investing in stuff to make money until you need it again, you have to keep the money aside for cyclical industries, which, because of the government, almost all industries are, so that in the downtimes, you have some money sitting around.
But basically, business is just a pipe for money.
It's just a pipe for money.
And the money flows to the employees, it flows to the suppliers, it flows to the people who supply the electricity that runs the plant, it supplies a huge amount of it, flies off to the government.
Businesses are a big pass-through mechanism.
They're a stream for money.
They're not a big lagoon where money collects.
Because any business where money collects is going to immediately have lots of people digging away channels to pull away that money because it's obviously a very profitable area, so people are going to leap in and make their money and so on.
So, there is no big vat of money at the grocery store wherein if they get hit with a ten grand problem, even if all other grocery stores are getting hit with a ten grand problem, they've got to do something.
They've got to do something. And what is it that they're going to do?
Well, they're going to do what anyone is going to do in that kind of situation.
They're going to raise prices on other goods to make up for the $10,000 loss per week or per month or whatever that they are incurring through being forced to sell the milk at below profitable prices.
So all that's happening is you're taking a specific grudge, grievance, problem, issue, which is, ooh, milk price too high, and you are diffusing that problem to everything else except milk.
But see, the beautiful thing from the politician's standpoint is that nobody knows.
Nobody knows.
So the pain points that, oh my god, the milk's gone up and I buy, you know, 10 liters a week or whatever because I have like 19 teenage sons or something.
And that milk price has gone up and that's a bad thing.
So then you call the policemen, sorry, you call the politicians who then call the policemen who then tell the owners of the grocery store that if they see a price of $1.50 they'll shoot them or some such effect.
And then the price magically goes down, and everyone thinks, wow, that's great, problem solved.
I knew those bastards didn't have to charge a buck fifty for the milk.
Look, they're still in business, even though they're now only allowed to charge a buck.
You see, it was gouging. Gouging, I tell you.
Which is an economic practice, even more painful than the audio price you have to listen to me singing a Queen song at the beginning of a podcast, Once in a Blue Moon.
So, they don't realize, of course, unless they're economically educated, which is all too rare, they don't realize it has made a damn bit of difference.
There's no big vat of money that the profit has accrued to that the grocery store owner is going to sell one of his Fabergé eggs and do that instead.
And of course, if the bonuses go down and say, oh, well, there's $10,000 less of bonuses per week or per month to the key employees, well, those key employees will then move to some other industry where they can get those bonuses or some other place.
Or, I mean, to some degree, right?
I mean, if you keep lowering someone's salary, at some point they'll leave.
Even if it's like a buck a year, they'll leave, right?
Or a million dollars a year. At some point, they will leave to some other entity or occupation.
So, all that happens is that...
You don't have a single price increase now.
You have a diffuse price increase, which has been spread around other products to make up for the loss that has occurred from the milk.
But immediately, of course, everyone's still happy because the same amount of milk is still wending its way through the system.
The same amount of milk is still winding its way through the system.
It's like if you unplug your hose and you start blowing down the end of it, there's a whole lot of water that's going to come out even though there's no more water going into the hose.
And that's the issue that obscures what is occurring for the voters.
This happens in so many areas, it's ridiculous.
Now, a smart grocery store owner, realizing that the bastard evil consumers are complaining about him gouging and so on, if he has to lose a quarter, I guess lose 50 cents overall, right, because he's losing a quarter of profit.
He's losing 50 cents in terms of what he would have made versus what he's allowed to sell it at.
So, let's just say 50 cents, whatever, right?
So, if he's losing 50 cents on one product and he knows that people are very sensitive to price increases and consider him a gouging evil capitalist bastard, what's he going to do?
Well, he's not for sure he's not going to raise the price of bread by 50 cents, right?
Because it's just going to piss everyone off, right?
So, people are already pissed off to the point where they're going to the government.
So, he's not going to go and raise the price of bread by 50 cents because he knows what the voters are going to do.
They're going to call up the government and then he's going to get hosed on the bread too.
So, what he's going to do is he's going to do two things.
He's going to try and spread out the price in time, and he's going to try and spread out the price in products.
So, he's going to...
I mean, you don't eat a loaf of a piece of bread or a piece of toast with a big chunk of butter in the middle.
At least a few people do. You spread it out, right?
And that's what's going to happen in terms of prices.
He's going to raise the price of everything, like of all...
5,000 of his products by a tenth of a penny each.
That's how he's going to raise his prices.
It's going to go from 5.98 to 5.99.
He's going to get the money back that way.
So the parents haven't gained anything.
I guess the only way you gain anything is that if you only buy milk, if you live only on milk, then you're doing better.
But, of course, that's not the case with anyone except milkman!
So, all that happens is that the money that you think you've saved politically or the price that one good has come down has just been spread out and increased in others.
Now, if he's really smart and if he realizes that consumer groups may be on the lookout and people may be on the lookout for this kind of thing, then all that will happen.
Is that he'll borrow the money to make up for his losses and then pay it back over time and then he can raise his prices later and they'll be a little higher because he's got to pay back the principal and the interest but it won't be immediate.
So it is in the grocery store owners by far his best interest to hide as much as possible the price increases that We'll accrue to the consumers because they've screwed them on the milk, right? I mean, there's no free lunch, right?
You screw me on the milk, I'll have to screw you on other stuff.
I'm just going to hide it.
So economically what happens is that people see the price of something go down, they don't see the price of everything else go up.
Or if they do notice it go up, then it's too diffuse to be valuable for them, right?
So if the price of milk goes up 50 cents, maybe it's worth for you to write a couple of letters.
You know, maybe that costs you, I don't know, like 50 bucks a month or whatever, right?
And so that's a big issue for you, so you'll write a letter.
But if the price of 100 things you buy has gone up a tenth of a penny each...
In perpetuity, or at least until the milk thing is solved, then who are you going to write to?
You're going to write and say, well, the price of my ramen noodles has gone up by 1 20th of a penny, and I consider that to be highway.
I mean, by the time you've sat down to write the letter, you've blown any possible profit you'd get, right?
So this is all that happens, is that the profit gets diffused in other areas and spread out over time if it's particularly egregious.
So nobody's gained anything, right, other than a symptom has been driven underground, right?
So it's like the sound has stopped.
You've stopped being able to hear the sound, but it's still damaging you just in an invisible way.
So it's like if you have a neighbor who's playing heavy rock music and it's really annoying you and you complain...
And he ends up being able to turn his music into a very, very high-pitched frequency that damages your ear even more, but you can't hear it.
This is exactly the solution that politics takes out of the visible or audible and into the highly destructive and cancerous area.
So this is, of course, what violence does.
So nobody gains anything. It's just that the solution to the problem is rendered to be technically invisible but highly pervasive elsewhere.
So that's sort of the first thing that happens.
Now, what happens, which is the next thing?
Well, the next thing, of course, is that the price increase, which everybody knows, right?
This is pretty basic. I'll just spend a second on it.
Ends up, if it's allowed to recur, if it's allowed to just, the price goes up so nobody does anything.
What it does, of course, is it makes profitable the importing of milk.
Milk, to ship it across the seas or to teach the cows to water ski or however they do it, that doesn't really help when it comes to selling it at a buck.
It's too expensive to ship over.
At a buck fifty, well, then it's worth shipping over.
So then people will do that.
Or at $1.50, it may not be valuable to you to have your cows graze on that, or to buy a couple of extra cows and have them graze on that semi-used land that you might be using for turnips next year once the soil has replenished itself.
But at $1.50, maybe you'll buy a couple of cows or breed a couple of cows or whatever and say, yeah, okay, well I'll turn that marginal land or that whatever into stuff that will allow me to produce milk.
At $1.50, people will also invest in substitutes, right?
Soy milk or some other godforsaken tofu drink or something will emerge as a substitute, as will calcium supplements, as will whatever the hell else that people do when they can't get milk.
So there's going to be an enormous number of substitutes and expansion of productivity, of production of milk, and importing of milk, and all this kind of stuff, right?
Which will quickly drive the price back down without driving the price of everything else up.
And of course, the great thing about an increase in the price of something is that people figure out how to cash in on that price increase, right?
So it's $1.50 for milk, so everyone starts importing milk.
It means then that you generate competition that doesn't exactly vanish the moment that the price of milk goes back down.
People have switched to substitutes.
People have expanded their production of milk.
People are importing it. And it's likely that a price increase results in a depressed price even relative to the original price after the increase is dealt with through a number of different factors.
When you open up an import channel to milk, say, then the moment the price goes back down to a buck, you might have optimized your import capacities to the point where you can sell it for 98 cents or 95 cents or whatever.
So a price increase often can, though it doesn't necessarily, result in A lower price because of all the resources that are drawn in to solve the problem and find alternative substitutes and extra production and importing of the good in question.
So it's a good thing in terms of price.
But it does require some economic education and of course some patience.
None of which of course occurs if the price is artificially lowered through state edict.
Of course this goes for the minimum wage as we've talked about before.
Artificially raising the price of anything.
Anyway, we've done this before.
Let's have a look at what happens on the production side when the price goes down or is artificially lowered by the government.
Well, the exact reverse occurs.
What is going to happen is that if you can't sell your milk for a profit...
In the existing system because the price is artificially low, well, the exact opposite occurs when the price is high.
What happens is people will turn their cows into hamburgers, rather, because you can make money off hamburgers, you can't make money off milk.
Right? So, nobody's going to sit there and be a farmer, which is a stinky, godforsaken business to begin with, and do it while paying for the privilege to do it.
Everyone's going to go out of business, lose the farm, so to speak, and inspire God knows how many John Mellencamp songs and Willie Nelson concerts.
So... That is going to be the opposite of what you want, right?
I mean, what would I deal, what the price signals are giving to the market.
So people will kill their cows.
People will sell their cows as carnival rides.
People will train their cows to be pickpockets.
They'll do anything with their cows rather than have those cows actually produce milk, which would be a rather bad thing for them to do.
And also, they may keep their cows producing, but they will export milk.
The milk, right? They've already sold the stuff which is winding its way through the grocery stores.
And also, of course, this means that the price increase goes a little bit more slowly, right?
Because it affects just a few people at the end of the chain and then it works its way backwards.
The initial decrease in price.
So, they don't want to do that.
They don't want to sell their stuff in the market where the price is artificially low, so they'll export it, they'll turn the cows into hamburgers, they'll do other stuff, rather than keep that going.
So what happens, of course, well, the production of milk collapses.
You're selling at a loss, of course, the production of milk.
There's no big vat of money on the farm any more than there is a big vat of money on the...
In the grocery store, the only big vat of money is in the government, right?
And it's in those mercantilist corporations with government protection.
They have a big vat of money, right?
Those copper mining bastards who raped South America for 50 or 100 years.
Those people have money, but that's not the free market, right?
Wherever there's a free market, wherever prices hold sway for real, then there is no big vat of money.
Ooh, switch lanes. Let's give it a shot.
So... The production of milk collapses.
So what happens?
Well, what that means, of course, you get a vicious cycle.
When the production of milk collapses, then the supply of milk goes down at the same time as the price of milk is artificially low.
So when the supply goes down of a good that's in demand, the price goes up even further.
So you're getting a further increase in the upward pressure on prices because the supply is diminishing, but people still want their milk.
At the same time as you have an artificially stimulated demand.
So when the price of milk goes to $1.50, then, of course, people will just find other substitutes if they can't afford it.
They'll drink less milk. They'll do all the kind of stuff that sends a signal to the market that, you know, switch to substitutes, take calcium tablets, that kind of stuff.
But when the price is kept artificially low, then, of course, people still want to drink the same amount of milk.
They don't look for substitutes. They don't do any of that sort of stuff.
They want to keep the same amount of milk consumption.
And this is particularly disastrous, right?
Because you have a stable and high demand at the same time as you have collapsed in the production.
So, what happens? Well, you go to the grocery store, and guess what?
You can't get any milk.
You can't find any milk.
You can buy it for a buck, because the government said you can, but unfortunately, there's none to be bought, right?
This is the Soviet problem, and this is the problem that occurs with all these sorts of issues.
So, there's no milk.
And so now, you're really pissed, right?
Because before, you could afford milk, just not as much of it.
And... Because the price of milk isn't high, the stimulus demand to milk substitutes and alternatives and imports and so on has not been signaled out, right?
So let's say that you've just got to have that milk.
Well, because you sort of wrote to the congressman and said, keep it at a buck, people just kept buying milk.
And they didn't start buying soy milk.
So the soy milk production has not gone up.
Because the demand has not increased.
The price is artificially low.
So you go to the milk store, and not only can you not get the milk, you can't get the soy milk.
Because a lot of people switched to soy milk, and now, finally, they're getting the increase in production demand that is there.
But it takes a long time for, like weeks or months, for increased production to finally end up at the marketplace, right?
You've got to ramp up your industry.
Manufacturing equipment, you've got to increase your supply chain.
It's a big deal, right?
When somebody notices that they need twice the Audis, as I remember when I was buying my car, my first car, when somebody notices that they need twice the amount of Audis, the lag time is about 18 months.
At least it was about 14 to 18 months for me, if I wanted, to get the Tiptronic Audi that I really wanted, so I ended up buying this lovely Volvo instead.
So... You can't get any milk.
Now, before, you could get milk, you just had to consume less of it or go to substitutes.
Now you can't get the milk, and you probably can't get the substitutes either.
So, now you're really hosed, right?
Not only has the price of everything else in the store gone up by a little bit to cover the losses of the milk, but now you can't get the milk at all.
And now you can't get even the substitutes for the milk.
So you've saved nothing.
All you've done is got a little bit of extra milk and paid for more than for the price of it, right?
You've also got to pay for the time to raise the prices of everything else in the store, which is some guy going around with a sticker or whatever, right?
At least it used to be. So you've lost money and now you've lost your milk.
That's the result of your political solution.
And what happens then?
Well, things get even worse.
Because now, because you're a retarded, state-educated voter, you're going to say, well, damn it, now they're just withholding milk, those evil capitalist bastards.
First they were gouging me, and now they don't even give me any milk.
They're just being mean.
They're being stubborn. They're being vengeful.
They're being bastards. So you get on the horn and you go and write to your congressman and you say, look, now I can't get any milk.
What the hell's going on with this country?
I voted for you. I'm a taxpayer.
I should get my goddamn milk.
You bastard congress guy.
Give me my milk. Show me the milk.
We want the milk. And what does he do?
Well, he says, holy shit.
We have got no milk in the country.
Again, I'm oversimplifying, but you get the general idea.
We got no milk in the country.
What are we going to do now? Well, what they have to do is they have to pay the farmers to produce the milk at a buck.
Because if they lift the price controls now, milk's going to be like three bucks, right?
Because it's got to be imported, there's no line set up, and farmers have to move their cows back from hamburger into cow so they can produce milk again.
They may have planted crops where they used to have their cows grazed, so it's not exactly quickly reversible.
So if they take the price controls off now, sure, they'll be milk in a couple of months, but until then, milk's going to be like $3 and still scarce.
And milk at $1.50 got people pissed, milk at $3 is going to have them go ballistic.
So the repealing of the price controls is never considered to be an option.
What they will do is they'll say, okay, well, we'll give you a deal, we'll let you sell milk at $1.25, and they'll say, ah, forget it.
Forget it. I just got hosed by this.
It takes me a long time to recalibrate.
I don't really want to do the milk thing because who's to say the day after you don't take it back to a buck, right?
So people don't really want to do that.
So what are the politicians going to do?
Well, they're going to buy milk from overseas.
They're going to ship it in. It's going to be a government contract.
It's going to be horribly wasteful.
You know the whole story, right?
So that's going to be one thing.
And what happens then? Well, maybe milk will start turning up on the shelves, but your taxes go up.
Oh, can you see the pendulum?
Do you see how the government continues to grow at every stretch of the highway?
It truly is a snowball going down a mountainside.
So the government may buy something from overseas to do the short-term immediate thing, right?
But what's most likely going to happen is that the government is going to subsidize the farmers.
The government is going to pay the farmers to produce the milk.
And why is the government going to do that?
Because taxpayers are economically illiterate.
And it's also not easy to see the hidden effects of economic policies.
So what happens then is that the subsidies go in place.
So the price of milk stays at a buck, but the subsidies go into place.
So the government grabs a whole bunch of money from the taxpayers...
Even those who are, say, Asian or lactose intolerant and don't really like milk.
And it shovels it in massive buckets towards the farmers.
And it has to be more than just the cost of producing the milk because the farmers don't want to do it.
They have to be bribed as well as have an incentive because they don't want to do it.
They've just been bumped right out of the marketplace.
They've just reorganized their whole farms to deal with the lack of profitability in milk.
So now to move them back to milk, it's expensive, much more expensive than it would have been just to let the price stay high.
So, the farmers end up having to be subsidized, right?
So, what happens?
Well, everyone's taxes go up.
But milk begins to appear.
And, of course, milk begins to appear at completely the wrong rate.
At completely and totally the wrong rate.
There's either too much damn milk or there's too little damn milk.
And why? Because price is an exquisitely sensitive mechanism.
In a fully functioning, truly free market, it is a moment-by-moment indication of the demand, aggregate demand for goods and services.
So when you replace this incredibly finely tuned compass, With a big blindfolded oaf saying, that-a-way.
Well, you don't get to go very far.
You don't get to go. You're trying to go through a very difficult pass in snowblown mountains.
You need a compass. You need some guy at the base of the mountain saying, walk that way.
I mean, you're going to get turned around.
You're not going to know where you're going.
So when you replace the exquisitely finely tuned mechanism of price...
With the big, dumb, stupid club of subsidies, then it's like driving while looking in the rearview mirror and being blindfolded for 95% of the time.
Of course you're going to crash. Because people are going to say, okay, well, how much milk should we subsidize the production of?
Well, fuck, I don't know.
I have no clue. How many kids are there?
What are the demographics? And you just make stuff up.
10% more than last year?
Well, who knows? So, whatever is going to be produced, there's going to be too much of it or there's going to be too little of it.
And of course, the moment there's too little of it, people get mad and so there's even more subsidies, even more taxes, even more importing that goes on and all of this kind of mess that occurs.
So, what's happened because people were upset that milk was temporarily expensive?
Well, we don't have to go through the whole thing.
You can always rewind and replay the podcast, but you get the sense that some pretty bad and ugly shit is going on.
And a temporary inconvenience to the consumer, which is increased price, which would have signaled the market to produce more, and thus bring the price back down probably lower than where it was before, has now been turned into a political solution.
And what that means, of course, is that you have a situation...
Where, instead of a temporary inconvenience because of a fluctuation in price, you now have the permanent addiction of farmers to subsidies, of consumers to low prices, and you have massive waste, and you have just an enormous amount of mess, right?
So because farmers are either overproducing or underproducing, and believe you me, they always end up overproducing, because nobody really gets mad about there being too much milk.
But if there's no milk or too little milk, people will get pissed off.
So the government's always hedged their bets and over-subsidized the farmers, which is why you end up with $400 billion of subsidies that go to farmers every damn year in the States and whatever.
And let's not even get into what this does to farming in the third world and how it destroys the middle class and it destroys the self-sufficiency of third world countries, making them reliant on Terrorism and dictators and foreign aid and how much that increases taxes in terms of defense, in terms of the foreign aid spending, in terms of just all that mess.
And of course the lack of trading partners, the lack of efficiencies and the lack of low-priced goods that could be occurring if third world countries could feed themselves to the point where they could develop manufacturing industries like China.
Anyway, it's just a massive, huge and ugly mess.
All around, top to bottom, all considered.
But there's more!
And I'll just keep this very brief so you get the general idea.
But all of the money that's being taxed from people and going into subsidies and all these other kinds of things for the farmers is being drawn away from every other industry.
From every other conceivable industry.
So, where money in the free market might have flowed towards investments in the software industry, now it's being hoovered up by the big vacuum cleaner of government redistribution.
And, of course, the most redistribution that occurs with government is government to government, to itself.
All of this money is being hoovered up.
And what happens then?
Well, of course, my friends, what happens is that people end up having less investment or the economy ends up having less investment in other industries, which means less capital improvements in manufacturing.
It means less innovation in software.
It means less efficiencies in those areas.
And, of course, what that means is that the price of everything else goes up or innovation goes down.
So the iPod never gets invented.
Or if it is invented, it's invented much later.
Or if it's invented at the same time, it's much more expensive.
So all of that innovation, but that's all hidden.
It's all detonated darkly underground.
It's like a nuclear test on Mars.
You just don't even notice it unless you've got the most exquisitely sensitive instruments.
So I just think that if you sort of understand what happens when you start screwing around with the market, and it doesn't matter.
Whether it's communists or it's a command and control economy or any of those sorts of things.
It doesn't matter at all.
Because the fundamental issue is that you're totally screwing up and screwing around with the free market mechanisms.
And what that means, of course, is that the government power, the power that you need to start inflicting, the violence you need to start inflicting on everyone else, because of this market, this sort of wrench or detonation or IED you've taken to the market mechanism,
You instantly and immediately and inevitably have to end up widening the violence that you have to inflict, the money you have to redistribute, the laws you have to pass, and of course...
The consumers get inevitably and exquisitely screwed, and basically because they try to screw others, right?
The wages of sin is death, right?
You reap what you sow.
This is all the result of the pettiness and the vindictiveness of the original consumer, who's like, $1.50 for milk?
That's a ripoff. I'm calling my congressman.
And what happens is they end up destroying their lives.
They end up destroying their children's lives.
They end up destroying the very economy and possibly losing their own job in a truly comic retribution situation.
And all of this stuff is extraordinarily disastrous.
And this is exactly why governments grow.
This is exactly why when you start interfering with one section of the economy, it becomes a game of near-infinite whack-a-mole where the moles end up decapitating you, to stretch the metaphor beyond all sense.
I hope that you're doing well. Feel free to donate.
I would certainly appreciate it. Had another subscriber sign up this morning.
Really do appreciate that.
Send some money my way and I will send an audiobook your way and some other novels too if you like.
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