This is the acronym for

market in allocation of risk regarding the inherent uncertainty of future quantities of supply and demand of a well-known black oleaginous substance that is currently an important part of everyone’s life

Would anybody be able to say that speculation in such a market is responsible for the higher gas prices at the pump? Unfortunately, the answer could be yes. When the idea of betting on a future event comes to mind one thinks of boxing matches that end up being rigged as a consequence of the betting. But the price of oil is not a boxing match. It’s a global phenomena that is too hard to rig by any one entity.

Economic growth relies on successes but also on failures. As Schumpeter said you can’t have creation without destruction. Now these simple sentences can easily be misinterpreted. Destruction doesn’t mean going around breaking windows and nobody ought to cheer in the presence of someone else’s failure. Saying that growing comes with some pain means just that, it’s a description on how society evolves. However, public opinion does not really care about descriptive statements. Conventional wishful thinking demands that there be no failures, ever; especially for large firms. The present should extend into the future ad infinitum, stable, sustainable, happy, for everyone.

Of course, everyone is out to resist and not fail. Society will explore uncountable solutions: mergers, loans, insurances, hedged risks, etc…When a firm finally fails it’s a good bet that almost everything was tried. So why is talk of Great Depression on everyone’s mind these days? Wouldn’t a regular depression do just fine? Should Jefferson have said “Every generation needs a new recession”? It is quite possible that recessions will become more and more mild and far in between, who knows, but one thing is for sure: it’s not by abolishing failure by law that you get rid of bad economic times.

Economical correctness (adjectivally, economically correct; both forms are abbreviated to EC) is a term used to describe language, ideas, policies, or behavior seen as seeking to minimize offense to spontaneous orders in society, voluntary exchanges, markets, and private enterprise.

An example when we should appeal to economical correctness is in the presence of “taxist behavior” or “taxist harassment”. Hayek distinguishes between “cosmos” and “taxis”, cosmos being spontaneous order from human action but not human design, while taxis is man-made order from the engineeristic point-of-view.

Members of congress especially should be required to go through taxist harassment training so as to curb their regulatory fervor and the facility with which they often launch into crass stereotyping of market forces (that’s so not EC…).

True or False?

1. When confronting a complex crisis it’s a good idea to cool down first and then find a private place to discuss the problem.

2. Calming your simmering regulatory impulse with a glass of whiskey or two is a good idea.

3. Outbursts of rational planification are good for releasing tension from the body.

4. Learning breathing techniques can diffuse a situation where a regulatory bomb is about to be passed into law.

5. It’s human nature to respond to voter’s demands with regulations.

6. Feeling out of control when overwhelmed with the legislatory impulse is a normal response.

7. Growing up in a seemingly disorganized and chaotic society , where it looks like nobody is in control, means you’re more apt to have control-issues as a legislator.

8. Regulatory impulses are normal, healthy, even useful human emotions that only become dangerous when they’re allowed to be pursued in the halls of power.

9. Humor should never be used when an overly regulatory piece of legislation is about to occur.

10. When your controlling impulses affect your bills, constituencies and lobbies, and you feel an overwhelming desire to regulate at the smallest transgressions, it’s time to seek regulatory-impulse management help.

Browsing on the site of the US Department of Housing and Urban Development I couldn’t help being astonished by this sentence:

Since the Spring of 1999, HUD has been actively involved in combating predatory lending through research, regulation, consumer education and enforcement actions against lenders, appraisers, real estate brokers, and other companies and individuals that have victimized homebuyers. Read HUD-Treasury Joint Report on predatory lending.

Since 1999??? How did we get into this sub-prime mess then?? Why aren’t we talking about regulator-failure rather than market-failure? Could it be that the mess is in fact a result of the over-regulation by our esteemed department? The number of rights that are listed under “borrower’s rights” makes me think that instead of “predatory lending” we should start worrying about “predatory borrowing”….

I’ve always argued and debated on the side of the proposition that the OPEC cartel cannot possibly manipulate the price of oil. First, raising prices does not mean raising profits, because consumption wanes. Second, there are enough non-OPEC producers and overall producers of energy that any concerted effort on the part of OPEC would be inevitably offset. Yet last week I briefly caved in after reading some opinion somewhere, and started conceding that maybe in the short-medium range the OPEC cartel could indeed raise the price of oil, maybe not in pursuit of profits but instead to get a foreign policy advantage. However, just like a manipulated price, such thought did not last more than a week in my head and was steadily eroded away. So now I’m back to what I’ve always thought. No way.

I go to the eye-doctor. He says my eyes are red and it looks like I have some allergies. He says there is this great new product that lasts 24 hours etc…I should try it. He gives me a small sample to take home, together with a prescription. I try the sample a few times and it does help, although my eyes feel a bit dry as a consequence. Well, I decide why not, I should fill the prescription. The pharmacist gives me a small bottle: 2.5 mL of olopatadine hydrochloride ophtalmic solution (0.2%), otherwise known as Pataday. Price? 104 US Dollars!! (28 USD with insurance). Wow! I pay the 28 dollars, but I’m shocked. Who do I complain to? The doctor? The pharmacist? The insurance company? There’s nothing really I could do to express my disapproval. So I took the eye-drops home and I decided I won’t used them. It’s my form of civil disobedience. I’d rather scratch my eyes a few times rather then get used to overpriced drops in my eyes with these “common side-effects”: blurred vision, burning, or stinging, change in taste, dryness of the eye, eye pain, feeling that something is in your eye, head congestion, headache, itching, redness in the eye, runny nose, sore throat, tearing, weakness. (And who knows what other unintended effects…).

That is the indisputable conclusion one must draw from this must-read review by Cato’s Johan Norberg. If there’s any justice in this world N. Klein deserves at a minimum to be sued for libel by Friedman’s relatives, and, if found guilty, to be condemned to watching all 10 of the famous “Free To Choose” PBS episodes.

I’ve been having some cynical thoughts lately and not knowing what to do with them, I’ll just post them here.

This is a great discussion about the brave new idea of “creative capitalism” (where’s the destruction?). My take on corporate responsability is that firms want to look good so as to avoid being persecuted by government regulations. It’s a form of voluntary self-punishment in anticipation for worse things to come.

Second ugly thought. Government likes public education because it’s a form of thought control, but not for the kids, for the parents. In fact, it’s well-observed that kids will say almost anything that comes through their minds and will also repeat almost everything they hear uttered at home.

In this previous post I went over the good kind of “division of labor”, the spontaneous kind that arises from the free market. But there’s more. “Division of labor” is not the same as “specialization”: it also implies a repartition of tasks, i.e. it entails new and innovative coordination mechanisms. The break-down and fragmentation of production steps requires systems of re-aggregation: firms, organizations, Coasean deals, market solutions, etc…So in the end “division of labor” could safely be replaced by the term “multiplication of labor”.