Interfering with the free market

Sebastian points out the Washington Post reported yesterday:

A binational task force on U.S.-Mexico border issues will call Friday on the Obama administration and Congress to reinstate an expired ban on assault weapons and for Mexico to overhaul its frontier police and customs agencies to mirror the U.S. Department of Homeland Security.

I just have to shake my head. These people just don’t get it.

First off by announcing this they just further cemented the fact that “assault weapons” of the type banned in 1994 will become even more common in the U.S. The sales and backlog had almost returned to normal and now this is going to create a fresh round of buying. If it hadn’t happened already the current administration, with their promises (so far unfulfilled) to ban “assault weapons” ensured they can never be banned. Why? Because in D.C. v. Heller the court decided the types of firearms protected are those “common use”. See pages 2, 55, and 58 of the decision.

The types of guns in highest demand just after Obama was elected were those most likely to be banned. There are now many millions of those guns in the hands of ordinary people and there will be hundreds of thousands more before the politicians could ever get something through congress. And then the inevitable court challenge will almost have to conclude that the guns are in “common use” and therefore cannot be banned. Not only is Obama the greatest gun salesman this country has ever known but he also may have driven the last “coffin nail” into the pointless “assault weapon” bans making them forever a dead issue–except for repeal of the existing ones in the various states after the Second Amendment is incorporated in the Chicago Gun Case.

And the Brady Campaign endorsed Obama for President. How’s that working out for you guys?

My second point is really the main issue. The problem is most people don’t really understand the big picture. Mexico is being destroyed by the same type of stupidity. People are trying to interfere with the free market and this can’t really be done. The free market can be pushed in different directions but it can’t really be fully suppresed.

There is a large market for guns and recreational drugs. Governments can’t really “ban” them. They can only raise the price. The price increase may include the risk of spending time in jail but the government passing a law making them illegal does not remove their existence from the planet or even the political jurisdiction of the government. When the price goes up it increases the profits. When the profit potential goes up more people are willing to risk going to jail in the process of getting a share of that profit. In the case of recreational drugs the profit is so great the people profiting from the drug trade has, essentially, brought down the Mexican government. I believe the only way order can be restored in Mexico is for recreational drugs to be made legal in both the U.S. and Mexico.

But people just don’t get it. Somehow they believe something that mostly works on the scale of an individual home when you remove medicines from the reach of small children can work at the larger scale of an entire continent or even the planet. It doesn’t and it can’t. You can only increase the price.

Our country learned this in the 1920s with prohibition and we now raise the price on the dangerous recreational drug ethanol via a tax rather than attempting a ban. If the governments of the U.S. and Mexico really wanted to solve the problem that is bringing down the Mexican government and resulting in the deaths of thousands in the “drug wars” they could turn the drug trade into a huge source of tax revenue. Instead of spending billions on trying to raise the price via jail terms and attempted “interdiction” they could raise the price via a tax and bring in billions of dollars.

But I don’t have any hope of a sudden attack of rationality striking people. Unjustified and demonstrably false faith in the power of government to successfully interfere with the free market has existed for hundreds of years and it’s not going away anytime soon. Expecting people to be rational is irrational.

3 thoughts on “Interfering with the free market

  1. “we now raise the price on the dangerous recreational drug ethanol”

    Ethanol is a drug now? I thought it was a substitute for gasoline.

    What are people in Washington state doing with ethanol to turn it into a drug? I just can’t imagine…

  2. Actually, I’ve been giving a lot of thought to this “raise the price” issue but more as it pertains to public transportation and gasoline prices.

    The best way to get rid of something is to raise the price beyond what most people can pay. If gasoline were to go up to $20 or $30 a gallon, you’d see far fewer cars on the highway. (I suspect this will eventually happen but I think $10 is more in our future because that will push a lot of places who don’t want public transportation into providing it. It will also limit sprawl.)

    If (particular types of) guns are banned, prices for existing guns will go up. If transfers are banned, eventually the prices will go down. Most people are not equipped to manufacture “assault” rifles in their house so comparisons to Prohibition are not quite accurate.

    I dunno. It’s interesting to think about, that’s for sure.

    Also, “When the price goes up it increases the profits.” Not necessarily. It really depends on the cost of the underlying goods. Pretend you sell bras and panties at the Seattle Swap Meet. You pay $1 for a pair of panties. You sell them for $2, and you make $1 profit. Your supplier raises the price to $1.25 but the most you can sell them for is $2 so you are now making only $.75 for each pair sold.

    Point is: Price increases at the wholesale level (the supplier) don’t also mean a profit increase on the retail end. The retail price may stay the same. The retailer ends up biting the bullet.

    The profits actually increase on the retailer end when the wholesaler is forced to sell cheap. Imagine the wholesaler has to get rid of his product so he marks it down to $.50 cents per unit. The retailer knows that they can get $2 a unit so now they make $1.50 on each sale. The retailer will buy more from the supplier knowing that the profit is going to be higher.

    The USA needs to legalize marijuana. It’s time to tax it too. You can’t beat a homegrown product (which is why the Prohibition didn’t work either).

  3. Ethanol is a fuel burned in internal combustion engines as a substitute for petroleum. It is also the active ingredient in beer, wine, whiskey, etc. Ever hear of “corn squeezings”?

    Guns are manufactured in caves with hammers, hacksaws, and files. I don’t think it is that much different than the Prohibition model. You are correct it is a little more difficult but it’s also true that guns are durable goods and both the 300 million guns in circulation and black market manufacturing capacity make any efforts to reduce the supply much more difficult than reducing the supply of alcohol.

    I’d rather not get into the gasoline, cars, public transportation issue. I don’t have the time and it’s not really on topic. But this shouldn’t be taken that I think you are correct.

    You may be correct in that I made some errors in the economics. But I don’t think the errors are gross enough to change the conclusions. If you disagree with that then elaborate some and I’ll take a closer look.

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