Competitive Enterprise Institute

Get Rid of Trade Barriers, Licenses, Permits, Regulations

22 December 2021
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From Competitive Enterprise Institute

October’s inflation reading was the highest since the recession of 1991. November’s is the highest since the 1982 recession, at an annualized 6.8 percent. The reason inflation is usually highest during recessions is because governments attempt to restart growth through a combination of monetary and fiscal policy. It is troubling that today’s inflation is happening while the economy is growing and unemployment is low.

In fact, the misery index is now in double digits, which rarely happens outside of recessions. The misery index is the inflation rate plus the unemployment rate—economist Arthur Okun came up with it as an easy-to-use statistic for President Lyndon Johnson’s benefit, and it remained a key statistic throughout the stagflationary 1970s. It may be time to dust it off again.

While unemployment is a very low 4.2 percent, when combined with 6.8 percent inflation, the misery index currently stands at 11. For context, its all-time high was 21.9 in June 1980. It was below 5 for a good chunk of the 1950s, and was at 5.3 in April 2015.

Inflation happens when the money supply grows faster than the supply of goods and services, as I explained earlier. In today’s case, the COVID-19 pandemic shut down large swathes of the economy for an extended period. Even if the money supply had remained stable, the supply of goods and services temporarily went down. The effects are still being felt in today’s supply chain problems.

But economic fundamentals remained healthy. There was no financial crisis or popped housing bubble. People hunkered down for a while, and are in the process of coming back. This is why COVID-era growth has bounced back in close tandem with increased vaccination rates and decreased caseloads. When people feel safe to open back up, they do—and nothing is stopping them except for bad public policy.

Both Congress and President Biden responded to a different type of recession with the same tools. The result is high inflation during a period of growth. The solution is to spend less and get money supply growth back in sync with growth in goods and services. Instead, Congress continues to spend at a record rate, with more likely on the way. The Fed has indicated that it will taper back monetary growth, but not until next year.

Policy makers are unlikely to do the right thing on the money side. But they can help the goods and services side by removing trade barriers, getting rid of unneeded occupational licenses, speeding up years-long permit processes, repealing the shipping cost-raising Jones Act, liberalizing trucking regulations, and other deregulatory measures. These would spark growth while helping to tame inflation—and without adding to the deficit.

Julian Simon Award

25 September 2020
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 “The world’s problem is not too many people but lack of political and economic freedom.” Julian Simon

Each year since 2001, Competitive Enterprise Institute pays tribute to free-market economist, professor, and consummate optimist Julian Simon by presenting the Julian L. Simon Memorial Award to an individual whose work supports Simon’s vision of mankind as the ultimate resource. This year, CEI  to honors Dr. Steven Horwitz, Director of the Institute for the Study of Political Economy and Distinguished Professor of Free Enterprise at Ball State University, as the 2020 Julian L. Simon Memorial Award Winner.

Professor Steven Horwitz extends Simon’s legacy with an exemplary teaching career and thorough empirical investigation of labor saving innovations in the modern economy.

Julian L. Simon (1932-1998) was a free-market economist and business professor known for his optimism about the future of mankind. His groundbreaking research built the case for how human ingenuity would allow the environment to support the world’s increasing population over the long-term, demonstrating human beings are an asset to the planet, not a liability.

Simon authored the 1981 classic, The Ultimate Resource, which debunked eco-doomsayers’ predictions that modern civilization is unsustainable. Over the years, he argued that humans are living longer, that people are better fed and healthier, that resources are becoming ever more abundant, and that environmental quality is improving.

Ban Could Harm Public Health

19 October 2019
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Competitive Enterprise Institute Senior Fellow Michelle Minton warned that an e-cigarette ban will mean a terrible outcome for public health with few gains to show for it:

“Regulation of e-cigarettes should be based on science, not fear-mongering or fake news. Evidence shows e-cigarettes are vastly safer than smoking and highly effective at helping smokers quit a habit that kills nearly half a million Americans each year. E-cigarettes have the potential to save millions of lives but not if we destroy what makes them attractive.

“Banning flavors won’t prevent youth vaping but will drive adults back to smoking or into the black market. The rise in death and disease that will follow such a ban will, no doubt, be blamed on e-cigarettes and used to lobby for even greater restrictions. But the blame will belong to special interests spending billions to spread lies, the news media that spreads misinformation, and the lawmakers who base regulations on fear instead of facts.”