Black Market: An Apologism
Written by Jaimine Blesav Bezboznik.
Mr. White is [commonly] preferred by many because without him it is impossible to “regulate” the cosmetic aspirations of wheatish-skinned people. By any psychological cost, wheatishsts are unable to think beyond white color. Since ages, a [colorless?] society is sociologically conditioned to thoughtlessly pay “colorful obeisance” to [only] white color because without it who will “enlighten” the society or inject so-called equitable “fairness”? The society has understood or is intimidated to understand THAT only white color can add joy to all the “other” colors. With this proforma, wheatishsts jump to the conclusion that “other” colors do not matter in comparison to the white color because “only” white color is intrinsically, axiomatically, heuristically and constitutionally omnipresent, omniscient and omnipotent.
Homo Economicus always convey us that there is also an exceptional side to any colorful story. Since Mr. White is legitimized to exclusively enjoy monopoly over all other colors, Mr. Black and Mr. Grey find it brutally awkward when they are un-allowed, unnoticed and un-enticed to participate in the colorful decision-making processes. Now, other colors are impudently singing the songs of “only’ white colors. Mr. Black and Mr. Grey are mocked by all other colors because they are deviants in this colorful society. Other colors fail to realize with their real eyes that Mr. White is also made up of colorful clay and it is realistically not above THE race. The crux is now that how positive this Mr. White is, when it cannot even produce a tooth-pick in his entire life but pokes its sordid nose in taxing other colors who can also furnish more better and efficient output to the “art” of life? Here, the crux is also who decides for whom and how. If expropriation is an elixir to equalize all the colors, when already Mr. White is especially reserved for it at the expense of others, then how sane it is not to perorate that Mr. Black and Mr. Grey cannot be allowed to do alternate for some colors that are subconsciously bearing the infinite injustice due to pseudo-colorful policies of Mr. White on painting and sketching?
Whenever price controls have been tried, there always seems to develop a black market. However, some argue that price controls can work very well for a modest period of time in a national emergency and give WWII as an example. Although there was a black market, very few Americans participated in it, and the effect was positive as a result of the patriotism that was so keenly felt by most Americans at that time. Further, capital punishment has rarely worked to prevent any illegal activity. In London, pickpockets were publicly hung while other pickpockets fleeced the crowd watching the hanging ostensibly to dissuade people from pickpocketing.
“The coordination of mens activities through central planning or through voluntary cooperation is roads going in very different directions, the first to serfdom and poverty the second to freedom and plenty.” – F A Hayek
Less will be sold at a higher price than a lower price. The first part of the law of supply and demand makes perfect sense: do you cut back on the amount of a good or service purchased if the price gets too high? The second part of this law, more is supplied at a higher price than a lower price, also makes perfect sense; ask yourself: would you supply more labor at your normal wage or double your wage if asked to work overtime. The reality of supply and demand is always in play, even if Government tries to circumvent this economic law.
In this article, The Boom In Smuggling To Avoid Cigarette Taxes, by Jonathan Berr, at cbsnews.com, even though the State of NY has tried to raise the price of cigarettes, through taxes, to a level that would discourage the demand for cigarettes, it hasn’t worked, because the second part of the law, more will be supplied at a higher price, is also at work. As long as there is a demand for cigarettes, suppliers will fill that demand as long as the cost of supplying the product is lower than the price they receive in exchange, even if cigarettes are smuggled in via a black market. People will buy on the black market if they decide the cost of getting caught plus the lower price of the cigarettes is less than the higher price of the legal cigarettes. The sellers of the black market cigarettes could probably sell at a much lower price, but they have to factor in the cost of getting caught into the prices they are charging.
Think: Raising taxes on income does not stop you from working, right?
Supply and demand sets the black market price just as it sets the price in a free market hampered by taxes and regulation.
“Markets are never perfect because human beings are limited in their abilities; proposing state fixes to alleged problems that individuals cannot solve freely seems to forget that the state is also made up of humans; and perhaps not the best ones. (Bureaucrats are not disinterested angels, and the worst might get to the top.)” – Francisco Capella
Government can’t stop activities that people want to engage in like prostitution or drug use. The American government couldn’t stop the use or production of alcohol, during the prohibition era. Eventually, the 21st amendment had to be passed repealing the 18th amendment which prohibited the use of alcohol. At some point, the question has to be asked, is the cost of prohibition greater than the cost of allowing people to freely engage in the prohibited activity? In the case of the Government trying to discourage an activity by raising the price through taxation, the point is reached where the price gets high enough that the black market supplies a portion of the product, and in the case of cigarette sales in NY, over half.
“Taxing away what other people have earned, in order to finance one’s own moral adventures via social programs, is often depicted as a humanitarian endeavor, while allowing others the same freedom and dignity as oneself, so that they can make their own choices with their own earnings is considered pandering to greed. Greed for power is no less dangerous than greed for money, and has historically shed far more blood in the process.” – Thomas Sowell
Economic forces are always trying to correct Government interventions into the market. The apoplithorismosphobic Fed created tech, housing, and present financial bubbles, the failed Obamacare roll out, fracking, failed green energy companies like Solyndra, and cigarette smuggling in NY are all examples of economic forces thwarting central planners plans. As long as the means needed to supply mans limitless ends are scarce, economic forces will reign over Government attempts to create abundance by decree.
“Anti-capitalistic policies sabotage the operation of the capitalist system of the market economy. The failure of interventionism does not demonstrate the necessity of adopting socialism. It merely exposes the futility of interventionism. All those evils which the self-styled “progressives” interpret as evidence of the failure off capitalism are the outcome of their allegedly beneficial interference with the market.” – Ludwig von Mises
An article titled The Underground Economy in One Page by Danny G. LeRoy at Mises Institute succinctly elaborates the central content of this article:
It is not something subterranean. It is neither a physical structure nor a place. The pejorative term “underground economy” is used to describe the activities of buying and selling that occur beyond the purview of authorities. Typically the goods or services that are exchanged include, among others, drugs, sex, electronics, software, movies, music, and building-construction services. Markets are processes involving the interplay of buyers and sellers.
When the role of government is restricted to protecting persons and private property against aggression and theft, market processes transpire without impediment. Consumption opportunities are maximized as entrepreneurs deploy resources to produce goods and services in view of profitably satisfying the myriad wants of consumers.
When governments interfere with market processes by way of taxes, regulations, and prohibitions, they go beyond protecting individuals and private property from aggression and theft. Government-granted monopoly privilege in the form of compulsory producer cartels or patents does not protect property rights; they invade them.
The aim of government interventionism is to control the productive and consumptive behavior of individuals. In other words, central authorities want to influence what you do with your body and the things that you own, ostensibly for your own good. This puts that enforcing government interventionism in a difficult position, particularly with respect to the prohibition of marijuana, hash, or cocaine and services like sexual gratification. By making the production, marketing, and consumption of these goods and services illegal, enforcement agencies are required to divert resources from the protection of person and property toward surveying, capturing, fining, or arresting willing consumers, purveyors, or marketers. They are trying to halt market processes — the interplay of willing buyers and sellers. Not only is this enforcement activity very costly; it is also not very effective.
“A society that puts equality- in the sense of equality of outcome- ahead of freedom will end up with neither equality nor freedom. The use of force to achieve equality will destroy freedom, and the force introduced for good purposes, will end up in the hands of people who use it to promote their own interests.” – Milton Friedmann
In fact, evidence suggests that prohibiting drugs and prostitution is counterproductive. When something becomes illegal, consumer demand does not vanish. Instead, consumers seek alternative, more costly and risky, means of satisfying their wants. Prices are higher than they would be otherwise, and product diversity, quality, and quantity demanded are lower.
In view of suppressed demand and the potential to earn large profits, individuals with a knack for averting authorities direct their energy and resources to satisfy this demand. The illegality of the activity enables the intermediaries to ask higher prices of consumers and to bid down prices paid to growers of hemp, coca, and opium poppies. It gives rise to drug cartels, prostitution rings, and violence associated with the protection of “their” territories.
“The black market was a way of getting around government controls. It was a way of enabling the free market to work. It was a way of opening up, enabling people.” – Milton Friedman
The government’s “war on drugs” has been both a tremendous triumph and an abysmal failure. Drug warriors have been very successful. We have all seen media images of police stings involving massive amounts of money, drugs, and firearms. However, this has had no impact in local markets. Illegal drugs are available just about everywhere and at prices that have fallen in real terms over time. The amount of pot that could be bought for $10 at a local high school in 1980, for example, is likely the same quantity that could be obtained for $10 today. Prohibition advocates can point to some positive effects. The quantity demanded of soft drugs such as marijuana and hash is likely lower than it would be otherwise. The same can be said of prostitution. But it is hard to believe that the desired effects are anywhere large enough to justify the human cost of their prohibition in terms of lives lost and lives destroyed
Price controls did not work even for Nazi Germany, rigidly enforced and highly elaborated. According to Hermann Göring, controlling people’s wages and prices – people’s work – is not enough; people’s lives must be controlled as well. They tried both and failed. The Soviet Union was an example of a mature and long-lived total wage and price control policy in operation. And yet, prices for goods, services and wages covertly increased, and a huge black market swelled up. Controls lead to distortions in the market system.
Prices inform buyers and sellers of the relative scarcities of all products and encourage them to restore supply and demand. But manipulated prices distort these “signals” and create shortages. Black markets emerge to meet the demand of customers. Firms, that would be profitable otherwise will be pushed out of production or not enter it at all; other firms, that would be unprofitable, survive; impairing rational investment. This encourages calls for more government intervention.
Jaimine is an autodidactic professor based in Mumbai and “voluntarily” proselyting Keynesian students into Rothbardian thinking. Follow him at: https://twitter.com/meritocratic