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How Wind Power Froze Texas

How Wind Power Froze Texas

In the wake of February’s tragic power outages in Texas, during which 4.5 million households suffered service interruptions, partisans on both sides have been quick to interpret the events as confirmation of their preferred energy policies. With news images of helicopters deicing frozen turbines, conservatives lambasted Texas’s increasing reliance on wind power as the villain in the story. Trying to temper this knee-jerk reaction, Reason.com columnist Ron Bailey argued that “[m]ost of the shortfall in electric power generation during the current cold snap is the result of natural gas and...

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Can Libertarians Oppose Short Selling?

Can Libertarians Oppose Short Selling?

Amid the controversy over GameStop, many cynics argued that something sinister was clearly afoot because the hedge funds had shorted 138 percent of the outstanding shares. In this article I’ll review that particular claim, as well as another seemingly dubious practice, so-called naked short selling. My conclusion is that shorting more than the total outstanding shares isn’t perverse or fraudulent, whereas naked short selling—depending on the context—might be. A Review of Short Selling Before diving into the specific variants, let me first explain the basics of short selling and why it can be...

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F.A. Hayek’s Conception of Private, Fiat Money

F.A. Hayek’s Conception of Private, Fiat Money

The most famous Austrian economist is 1974 Nobel laureate Friedrich Hayek. Because of his moderate views excusing state interventions in various circumstances, hardcore Rothbardians tend to regard Hayek as less than pure in many areas. However, one area where Hayek is certainly more radical (though perhaps not correct!) than even Murray Rothbard is monetary institutions, as detailed in his fascinating (1978) pamphlet The Denationalisation of Money. When it comes to the free market's handling of money, the typical Austrian argument is over fractional reserve banking (FRB). Some think FRB is...

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A Rebuke of ‘Modern Monetary Theory’

A Rebuke of ‘Modern Monetary Theory’

[Review of Stephanie Kelton, The Deficit Myth: Modern Monetary Theory and the Birth of the People's Economy (New York: PublicAffairs, 2020).] I’ve got good news and bad news. The good news is that Stephanie Kelton—economics professor at Stony Brook and advisor to the 2016 Bernie Sanders campaign—has written a book on modern monetary theory (MMT) that is very readable and will strike many readers as persuasive and clever. The bad news is that Stephanie Kelton has written a book on MMT that is very readable and will strike many readers as persuasive and clever. To illustrate the flavor of the...

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The Fed’s Massive Injection of ‘Liquidity’ Also Benefits Uncle Sam

The Fed’s Massive Injection of ‘Liquidity’ Also Benefits Uncle Sam

There’s a lot to be said regarding the Fed’s surprise announcements—including its Sunday surprise of $700 billion in renewed QE and the complete elimination of all reserve requirements for banks—but here let me just focus on one element: the tendency for Fed officials and all the pundits to treat injections of “liquidity” as if they don’t count as much when distorting the economy. I’ve seen some analysts literally call the Fed’s repo operations “free” as opposed to fiscal policy, which they agree actually costs something. These distinctions are phony. The Fed’s $1.5 trillion was a “handout”...

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The Theory and Brief History of Money and Banking

The Theory and Brief History of Money and Banking

The ultimate purpose of this booklet is to give the reader a solid grasp of how money works in today’s world. Yet before diving into the particulars of central banks, repo markets, and LIBOR—all topics that will be covered in future chapters—we should first provide a general framework giving the basic theory or “economic logic” of money and banking. In short: why do we have money in the first place? Where does it come from, and what determines its form (livestock, metal ingots, coins, paper notes, electronic ledger entries, etc.)? What qualities make for a good money? What role do banks...

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“Rules of Origin” Show Why Trade Agreements Aren’t Free Trade

“Rules of Origin” Show Why Trade Agreements Aren’t Free Trade

Ludwig von Mises famously argued that people must choose between outright socialism and unfettered capitalism, because there is no coherent “middle ground” between the two. The allegedly reasonable compromise of a highly interventionist state — where the authorities retain nominal private property but issue edicts regulating how legal owners may use their property — is unstable. Mises argued that one round of interventionism invites consequences that are even worse than the original problem, leading to yet more interventionism. During the debates over Obamacare, I pointed out just how...

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Understanding Elizabeth Warren’s Radical Wealth Tax

Understanding Elizabeth Warren’s Radical Wealth Tax

Democratic presidential candidate Elizabeth Warren has had a long-standing call for a 2% wealth tax on any individuals with a net worth exceeding $50 million, and a 3% tax on wealth exceeding $1 billion. Yet when pressed on how to pay for her “Medicare for All” plan, Warren upped the ante to a 6% wealth tax for those fortunes exceeding $1 billion. (As I noted at the time of the announcement: If Warren doubles her wealth tax during the campaign, imagine how fast it will rise if she’s actually elected.) Naturally, many conservative and libertarian analysts recoiled from such an economically...

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