“In the first two years of the pandemic, American alcohol rules underwent a fundamental shift. States started enacting emergency orders—and then cementing those orders in legislation—that authorized never-before-seen innovations in alcohol policy, such as letting restaurants and bars deliver booze and sell it to go. But if 2020 and 2021 ushered in new hopes of opening up American alcohol markets, 2022 is the year when protectionism struck back.
In the early months of the pandemic, state governments were reacting in real time to unprecedented circumstances. The new environment included stay-at-home orders, social distancing guidelines, and masking mandates. It no longer became viable for most retail businesses to rely solely on an in-person customer base, as the entire economy shifted over to a delivery-centric model. Restaurants, breweries, wineries, and neighborhood liquor stores all faced an existential business crisis.
States reacted by upending a nearly centurylong consensus on alcohol regulations. Before, it was essentially unheard-of to let a pizzeria throw in a margarita with a delivery order. Then states started issuing emergency orders that allowed it. And practices that had been slightly more common—such as allowing alcohol to be included in grocery store deliveries, which numerous states permitted before COVID-19—spread to an unprecedented number of locales.
Unsurprisingly, these changes proved popular. In states where citizens were polled, strong majorities expressed their support for more types of to-go and delivery booze. Lawmakers can read polls, and a wave of states either extended the reforms or made them permanent.
The results were dramatic. When 2020 began, no place in America had a statewide to-go or delivery alcohol law for restaurants. By the fall of 2021, 29 states had such a law on the books. During that time, another seven states passed laws permitting alcohol delivery from off-premise stores, such as grocery or liquor stores, and eight states passed laws expanding the delivery capabilities of breweries, distilleries, and other alcohol producers.
But in 2022, this explosive rate of reform slowed down. The progress didn’t stop altogether: Nine more states passed to-go or delivery alcohol laws for restaurants, and one more state authorized alcohol delivery from off-premise stores. But the pace of change noticeably declined. Worse yet, several reforms suffered high-profile defeats.”
“The opposition has finally had a chance to get organized. And by the opposition, I mean entrenched economic interests. In Colorado, incumbent liquor store owners felt the proposed ballot initiatives would hurt their bottom lines by allowing other types of stores, like grocery or chain stores, to sell and deliver alcohol. . And in California and elsewhere, alcohol wholesalers have become increasingly aggressive in opposing any direct-to-consumer reforms that would let alcohol makers cut out the middleman and ship products directly to their customers.”
“labor force participation remains stubbornly low, with only 62.3 percent of the civilian population working or actively looking for work—well below pre-pandemic levels. And even before the pandemic, that figure had been steadily declining for years.”
“the largest component of the most recent reduction appears to be older people who took retirement early and/or previous retirees who have not rejoined the work force at the rates they once did. This trend may well reverse itself if the stock market continues to decline and retirement accounts evaporate, but for now it looks like baby boomers turning on, tuning in, and dropping out—however belatedly—are at least as much of a labor force problem as wayward youths.”
“”The process of contracting a worker is often close to ultimatum bargaining,” explained Elwyn Davies (then with the University of Oxford) and Stanford University’s Marcel Fafchamps in a 2016 paper exploring the effects of competition on behavior within the ultimatum game. “The employer specifies a job description and proposes a wage and the worker accepts or rejects.
So if employment is an ultimatum game—where playing along might get workers less than employers, but refusing to play gets everyone zero—what is causing the perception that the terms of employment are no longer worth accepting, even when both parties would benefit?
Positive views of capitalism more generally have slipped since 2019, with 39 percent expressing negative views in an August Gallup poll. Another Gallup poll found an uptick of 3 percentage points in people who say they are “completely dissatisfied” with their jobs, while the number of people who were “completely satisfied” fell 8 points.
The perception that conventional jobs are essentially offering workers a pittance while greedily holding back the bulk of the wealth is common in places like the r/antiwork subreddit, which has 2.3 million members. In fact, there’s at least one discussion of the ultimatum game itself on that subreddit, which pulls some figures on companies’ revenue vs. worker compensation and concludes: “If working for Apple was the ultimatum game, the proposer just got $100. They’re offering you 23 [cents], and they keep $99.77. Deal or no deal?” The relative sizes of these numbers might also explain why simply raising wages hasn’t brought people into the workforce, especially when paired with increased awareness of and dissatisfaction with the gap between CEO pay and worker pay in large corporations.”
“Right now there’s something broken in our economy that is preventing employers and employees from cooperating with each other. The result is that too few deals are being struck and everyone is suffering. The challenge ahead is how to rebuild a sense that the game is fair and everyone is playing in good faith.”
“The free market’s price system, along with competition by sellers for customers and by consumers for good deals, play an essential role in gathering and processing the information about our economy that is dispersed among millions of buyers and sellers. The resulting prices are a measurement of how much people value goods and services.
In a well-functioning competitive market, this argument continues, these critical price “reports” tell us the most advantageous ways to use finished goods and services, intermediate goods, raw materials, and—importantly—human time and talent, and lead entrepreneurs to produce what we want most intensely as efficiently as possible. In economics terms, prices convey information about scarcities and about wealth-creating incremental substitutions.
It’s a mind-blowing system where, as French political scientist Frederic Bastiat reminded us decades ago, although no one plans it, “Paris gets fed daily.”
Enter Samuel Gregg and his wonderful new book, The Next American Economy. Gregg’s case for the free market goes beyond the classic economic argument.
He writes that “the case for free markets involves rooting such an economy in what some of its most influential Founders thought should be America’s political destiny; that is, a modern commercial republic.” He adds that “politically, this ideal embodies the idea of a self-governing state in which the governed are regularly consulted; in which the use of the state power is limited by strong commitments to constitutionalism, the rule of law, and private property rights; and those citizens consciously embrace the specific habits and disciplines needed to sustain such a republic.”
Yes! I like to believe I’m a great advocate for markets, but whenever I omit these last points, I sabotage my own case. For one thing, terms like “competitive markets” give the impression of a heartless process. But the most important aspect of this competitive process is cooperation.”
“No serious free marketer believes that markets are perfect. We aren’t utopians. Unfortunately, perfect markets and perfect competition are often the starting point of economic textbooks. This rosy starting point leads many to conclude that when conditions are less than perfect, the best course of action for a correction is government intervention. It’s wrong.
Not only is government itself imperfect, as anyone can plainly see, but the market is a process to find and fix errors. A market imperfection is an opportunity for entrepreneurs to profit. As Arnold Kling recently wrote, “Markets fail. Use markets.” That’s because, Kling adds, “entrepreneurial innovation and creative destruction tends to solve economic problems, including market failures.”
This isn’t to say that the government plays no role aside from protecting property rights. But it means that faith in government intervention should be tempered with an acknowledgment of government’s own flaws, including a tendency to favor one group of people over another and an inability to adapt when policies fail or circumstances change.
The bottom line is that when we talk about the “free market,” it is a shorthand for a combination of institutions that allow people to cooperate, tolerate one another, live in peace, and flourish. As Gregg reminds us, all these elements are a quintessential part of what President George Washington envisioned for the new nation he led and described as “a great, a respectable & a commercial nation.””
“Sri Lanka’s economy is in free fall. The country doesn’t have enough money to buy essentials: food, medicine, and especially fuel. Buses can’t run, schools can’t open. The economic crisis was years in the making because of mismanagement, but terror attacks in 2019, and later the Covid-19 pandemic, which shriveled Sri Lanka’s tourist economy, pushed it to the brink.
But the domestic political turmoil unfolding in Sri Lanka also links back to the instability across the globe, including the war in Ukraine and all of its consequences.”
“I tend to believe in markets, but I will say that markets for basic necessities like food, these are not markets you want to operate according to cold economic logic. The market for food is not a market where you want to wind up at the end of the sale with no available supply. We can’t have that because we need to have buffers in the system precisely because of events like the ones we’ve seen. And so if that’s physical grain reserves, [or] if it’s governments willing to use what they call virtual reserves, which are basically governments, in a coordinated fashion, intervening in markets to short these futures contracts to drive prices back down.
There are things that can be done. It’s just going to take an investment of resources and, I think, broader awareness of the enlightened self-interest that it does not make the United States any safer and more prosperous to exist in the world where many of our trading partners and many of our strategic partners around the world are facing instability because they can’t feed their populations.”
“America’s current shortage of baby formula is a crisis created, in significant part, by the failures of government policy aimed at protecting domestic companies from foreign competition.
But rather than sweep aside the rules and regulations that have contributed to this mess, the Biden administration and Congress are gearing up to address a problem created by industrial policy with…more industrial policy. We’re now weeks into the crisis, but the best response that our political leaders have been able to muster is an attempt to use public resources to duplicate the market response that would have solved (or at least eased) the mess if it had merely been allowed to operate. The entire saga is a sad and infuriating commentary about the entirely predictable failures of central planning.
Take the White House’s latest idea for addressing the shortage as a perfect example. On Wednesday, President Joe Biden announced plans to send military aircraft to Europe—”Operation Fly Formula,” as the White House is calling it—to bring back formula for American parents.”
“The baby formula shortage isn’t the result of there not being enough planes to transport baby formula from Europe to the U.S.; it’s the result of the federal government making it nearly impossible to transport baby formula from Europe to the U.S.
As Reason’s Elizabeth Nolan Brown explained earlier this week, the Food and Drug Administration’s (FDA) rules that prohibit many baby formulas made in Europe from being imported to the U.S. have nothing to do with health or nutritional safety issues. Often, those brands are banned because they fail to meet the FDA’s labeling requirements.
In addition, the U.S. imposes huge tariffs—technically tariff-rate quotas, which are designed to make it completely unprofitable to import more than a small amount of a certain product—on imported formula. Those tariffs exist for no reason other than to protect domestic formula manufacturers and the American dairy industry that supplies them. As a result, about 98 percent of the formula sold in the United States is produced here as well.”
“Rather than moving to ease those regulations, however, the House of Representatives approved a bill on Wednesday that throws $28 million at the FDA to “boost the part of the workforce focused on formula, as well as FDA inspection staff,” according to CBS News. As if the FDA deserves to be rewarded for its incompetence and over-regulation of baby formula. This crisis demands less from the FDA, not more.”
“When Carlos got pinched by the fuzz, he was holding some hot commodities.
Flaming hot, in fact.
No, that’s not slang. The illegal behavior that landed Carlos (not his real name), a ninth-grade student at a high school in the southern suburbs of Chicago, in the deans’ office on a mid-September morning in 2019 was the illicit sale of chips to one of his fellow students. For the crime, he was summarily sentenced to a one-day suspension from school—and his mother was called to pick him up.
As Karlyn Gorski, a doctoral candidate in sociology at the University of Chicago, relates in a paper recently published in the journal Youth & Society, Carlos is just one small part of a robust black market for snack foods that persists at Hamilton High (not the school’s real name) despite the best efforts by school administrators, security guards, and teachers to stamp it out. The punishment handed out to Carlos for his busted chip-deal was actually a light sentence, Gorski explains, with administrators granting leniency on the grounds that Carlos was a freshman and might not yet understand the school’s zero-tolerance policy for unapproved exercises of snack-related capitalism. Repeat offenders, she writes, faced in-school suspensions—the high school equivalent of solitary confinement.
Gorski spent 112 days observing students and adults at Hamilton during the 2019–2020 school year, though her research was cut short by the school’s closure due to the COVID-19 pandemic. While there, she observed a widespread black market for snack sales. The perpetrators were mere children, but they organized “elaborate strategies to hide sales, build networks of sellers, and develop a verbal shorthand around the market.”
By outlawing the sale of snacks, the school ensured that only outlaws would sell snacks.
Enforcement of the snack-selling ban was robust, with security guards even relying on the use of mounted cameras to identify perpetrators so they could be hauled out of class and reprimanded.”
“Punishing a student for a victimless crime was apparently more important than whatever he might have learned in class that day.”
“treating innocuous behavior as criminal forces students to behave more like criminals in order to continue engaging in the market. Those patterns are the opposite of what schools should be teaching.”
“Far from embarking on a new correct path, Deng was trying to turn back the clock. He wasn’t out to create a new economic system; he sought to restore the planned economy that had existed before the Cultural Revolution. The program he tried to implement after 1978 was based on the “Four Modernisations” Zhou Enlai had introduced in 1963 to revive the countryside after Mao’s disastrous Great Leap Forward. During the Cultural Revolution of 1966 to 1976, the party’s radical elements encouraged renewed collectivization campaigns. Deng sought to reverse those extreme policies, not the planned economy itself.
Deng embraced reforms conservatively, after events on the ground had already made state restrictions obsolete. Upon taking control of the party, he endorsed private ownership of small plots but forbade dividing up collective land to individual households. It was only in 1982, four years after he took power, that households were officially allowed to contract production rights on collective land. He raised the price of grain that farmers compulsorily sold to the state by 20 percent—a substantial concession, but hardly evincing the kind of vision that the title “Great Architect” implies. Indeed, the year after the “great turning point” in April 1979, Deng and the party leadership ordered those who had left the communes to rejoin them.
The planned economy was undermined and subverted from below well before the communes were officially dissolved in 1983. Decollectivization occurred not because of Deng’s vision but because ordinary people, under cover of the Cultural Revolution’s chaos, left the communes. Several years before Mao died in 1976, it had become common for people to strike out on their own in search of economic opportunities. The party’s leadership lamented that the countryside had “gone capitalist,” but it couldn’t reverse that trend. By 1980, half of all production teams in Guizhou province and more than half in Gansu were under household contracts. This system gave farmers secure tenures of collective farmland, which significantly increased both their productivity and health. One cadre in Anhui province likened household contracting, as reported by the historian Frank Dikötter in a 2016 article in The China Quarterly, to “an irresistible wave, spontaneously topping the limits we had placed…it could not be suppressed or turned around.””
“Deng was not changing history; he was swept away by it. As the historian Kate Zhou wrote in her 1996 book How the Farmers Changed China: “When the government lifted restrictions, it did so only in recognition of the fact that the sea of unorganized farmers had already made them irrelevant.” Ordinary people, not Deng Xiaoping, resisted and reformed the planned economy.
To understand how the party’s control of economic activity slipped, one must look to the history of the Cultural Revolution. Mao’s “Great Leap Forward” of 1958–1962 had devolved into a Great Famine, killing tens of millions of people. While they starved, the party ramped up grain exports to fellow socialist countries in order to increase its international prestige.
This forced farmers to circumvent the state’s orders—one had to lie, cheat, steal, smuggle, or trade on the black markets to avoid starvation. Apart from the party’s loyal hacks, only the lucky or enterprising survived. In the early 1960s, even Mao had to acknowledge that the Great Leap Forward had failed. The Central Committee introduced a few paltry safeguards against extreme collectivization. Villagers were thus allowed to cultivate private plots, but only in their free time.
But Mao soon saw this as backsliding, and he launched the Cultural Revolution to secure his hold on the party. Revolutionary committees took control of China. The People’s Liberation Army was ordered onto the streets, and the Soviet-Sino border conflict was used as a pretext to reassert control over the countryside. Private holdings were once more collectivized on a massive scale. But the party tore itself apart in the process; its organization was vitiated by factional infighting.
The Cultural Revolution broke the party’s apparatus of control—it lost much of its capacity to coerce people’s everyday behavior. During the turmoil, people took back some of their lost freedoms. They expanded private lots, left communes, sold produce for private gain, moved to the cities, and even opened underground factories. It is here that we find the true origins of China’s modernization.”
“Villagers established private firms and factories throughout the country. For example, the rate of industrialization in the countryside of Jiangsu province in the early 1970s far exceeded the rate of industrialization there under Deng. And it was these rural industries that fuelled China’s GDP growth. Prosperity came not from the cities or from the state-owned enterprises, but from the countryside. The people who worked in these factories had often left the communes on their own initiative, not on party orders. When Deng became paramount leader in 1978, the silent revolution was already well underway.
Not only were factories established, but markets linked rich and poor provinces. And in the coastal province of Guangdong, traders revived overseas trading links, especially once restrictions were eased in 1972. Deng is said to have begun the process of opening up China, but as early as 1974, the amount of money reaching people in Guangdong from overseas was twice what it had been in 1965. Black markets existed everywhere, and although the state maintained rigid monopolies on several key products, almost everything was sold openly on the markets.”
“Deng recognized that certain changes were inevitable, but his reforms were little more than legalizations of already occurring practices that he was shrewd enough to claim credit for.”