Notes Book

Prohibition: Rise and Fall

Authoritarians have a peculiar belief. They believe that if someone indulges in behavior they don't like, that difference of opinion authorizes them to perpetrate various forms of violence and deceit.

This hard-case authoritarian attitude has caused the authoritarians a lot of grief. Of course, the rest of us suffer along with them. It's true parents have to control their children to a certain degree, or the children face substantially reduced chances of survival. Parents intervene in their children's lives because they want them to survive. But children eventually grow up and make their own decisions.

Authoritarians seem to see the rest of us as children who need to be controlled. The reality is that the authoritarians need the rest of us to survive. Somebody's got to do the work, and if you are busy trying to control everyone, you don't have a lot of time for work. Without authoritarian troublemakers, the rest of us could spend more time doing productive things and less time cleaning up authoritarian messes. Without the rest of us, the authoritarians would have to become less authoritarian or they wouldn't survive.

We need leaders who have real authority. Authority derived from wisdom and service. We don't need authoritarian minions of the state who rule using violence and deceit.

We've had a lot of prohibitions here on planet earth. Alcohol, cannabis, ginseng, Christianity. They've all been called criminal in their time. Mostly the prohibitions fail. But soon enough another one comes along.

In the future, if the race survives to become more rational, I imagine prohibition will be regarded as a crime perpetrated by governments on their citizens. Governments as we know them today will be regarded as criminal cartels. When people of the future think of the time when humans assigned high social status to the members of criminal cartels, they might think of those times as a dark age when the follies of a youthful race were in full flower.

Prohibition is in-part an economic phenomenon. It's economics that eventually kills most prohibitions. The rise and fall of the price of the prohibited item tracks the rise and fall of the prohibition. Before a prohibition is initiated, the price is set by undistorted supply and demand.

Then prohibition starts and the price of the prohibited item increases rapidly. The government artificially reduces the supply and the price rises. The price may continue to rise for quite a while, but eventually, free enterprise triumphs and the price of the prohibited item begins to fall.

When the prohibition is first enforced, the police get large amounts of income from seizures of the prohibited item and from seizures of cash and property. And, of course, they feel free to steal whatever else they want from the smugglers. It's hard to mount an effective complaint when you are behind bars.

The price of the prohibited item goes up, so supply goes up trying to meet the demand. The cops have more to seize, so they make more money. But eventually the market gets saturated. There are only a finite number of cops and a growing number of smugglers. The smugglers increase in skill and resources. Eventually the smugglers work themselves out of business. The price of the prohibited item starts to fall.

As the price falls, the amount of income the cops get from enforcement falls, the dangers of enforcement rise, and their enthusiasm suffers. Meanwhile the society has seen a large increase in the general level of violence and deceit. There are battles between smugglers and cops, battles between smugglers and smugglers and battles between cops and cops, and the fundamental battle between cops and citizens. Eventually, the whole criminal enterprise falls apart and the government goes looking for more profitable scams. The price of the prohibited item is again set by free market supply and demand.

One group imposing it's idea of morality on another group through violence and deceit never works. Such enforcement actions inevitably distort the market being regulated to the detriment of general social efficiency, and everybody looses.

Here's a quote from a letter written by the famous John D. Rockefeller, Jr. in 1932.

When Prohibition was introduced, I hoped that it would be widely supported by public opinion and the day would soon come when the evil effects of alcohol would be recognized. I have slowly and reluctantly come to believe that this has not been the result. Instead, drinking has generally increased; the speakeasy has replaced the saloon; a vast army of lawbreakers has appeared; many of our best citizens have openly ignored Prohibition; respect for the law has been greatly lessened; and crime has increased to a level never seen before.

John D. rejected prohibition, but he supported the Federal Reserve Bank. It's too bad that he didn't see the parallels between prohibition and the legal tender laws. Alcohol prohibition gave the government monopoly control over alcohol. Legal tender laws gave the government monopoly control over money. All alcohol was socialized by the government. The government controlled who could own alcohol and who could not.

The government, in effect, also confiscated all the monetary value of gold and silver. All money now belonged to the government. The government declared a war against gold and silver as money which continues to this day, but perhaps it has backed off a little since the days when FDR requisitioned all the gold in the United States.

The money part of the prohibitionist agenda has taken a lot longer to crash than the alcohol part, but no fiat money in history has lasted as much as a century. It would probably be safe to say that most investors realize the dollar has no intrinsic value. What they apparently don't realize is what that means.

It means the dollar provides both high risk and negative return. The value of fiat currencies evaporates slowly at first, then more and more rapidly as the people getting income from the inflation loose sight of the need for restraint. An investment in a fiat currency is at very high risk of loosing capital, and provides smaller and smaller returns. There is no shortage of investments that provide lower risk and greater return than investing in a fiat currency. It's a mystery why more people don't get that, but they finally seem to be catching on in greater and greater numbers.

Drug prohibition is an authoritarian delusion. It gives way too much power to cops and lawyers.

Fiat currency is an authoritarian delusion. It gives way too much power to bankers and accountants.

In a rational society, delusional authoritarian hypocrites would be pitied and avoided, not admired and sought after as they are today. Crime really doesn't pay, and it still doesn't pay even if the perpetrator has the proper paperwork.