Net Zero
Argentina with emissions policy we can all get behind...
“...the spontaneous interplay of the actions of individuals may produce something which is not the deliberate object of their actions but an organism in which every part performs a necessary function for the continuance of the whole, without any human mind having devised it.”
~ (Friedrich A. Hayek, “The Trend of Economic Thinking,” Inaugural lecture delivered at the London School of Economics, March 1, 1933)
Joel Bowman, with today’s Note From the End of the World: Houston, Texas...
Finally, here’s a Net Zero policy we can get behind! More on the latest from Argentina below... but first, what curious urban jungle is this?
We are always impressed by the Lone Star State. Even to an antipodean wanderer, everything here seems bigger. The locals are BIG on football... BIG on SUVs... BIG on shopping malls and meal portions and belt sizes...
...and big on friendly gestures, southern hospitality, and good ol’ fashioned manners, too. In many ways, Texas is a kind of supersized America. Except, as locals are quick to assure you, when it comes to the size of government.
Texas is one of just nine states in the union (along with Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Washington and Wyoming) which levies no state income tax. It also has comparatively little state sales tax and, arguably, fewer persnickety rules and regulations than many of its northern, “Yankee” cousins.
Spontaneous Order
As a fascinating example of its laissez-faire attitude, the city of Houston gets by almost entirely without a formal zoning code. Yes, you read that right. Now, how on earth does a city of 2.5 million people (getting on close to 7 million, including the metro area) function without a clearly defined, mandatory, state-enforced land use code?
Few readers of these pages will be surprised to discover the magic ingredients: Market-based incentives and voluntary cooperation.
Here’s how CB Richard Ellis, the world's largest commercial real estate services firm, describes H-Town’s peculiar absence of zoning, from their Investment Research Quarterly publication...
Houston is well known as the only major U.S. city with no formal zoning code. Such a seeming lack of order is difficult to grasp by those unfamiliar with the area. The absence of a comprehensive land use code conjures up images of a disjointed landscape where oil derricks sit next to mansions and auto-salvage yards abut churches. To some degree these anomalies exist, yet for the most part, Houston is like any other large North American city.
What is unique about Houston is that the separation of land uses is impelled by economic forces rather than mandatory zoning. While it is theoretically possible for a petrochemical refinery to locate next to a housing development, it is unlikely that profit-maximizing real-estate developers will allow this to happen. Developers employ widespread private covenants and deed restrictions, which serve a comparable role as zoning.
Private agreements between consenting parties... Who would have thought such an outrageous proposition might actually work? And yet...here we sit, in a city buzzing with millions of people, all more or less going along to get along.
In many ways, it’s this haphazard, organic system – something economist Friedrich A. Hayek might have recognized as “spontaneous order” – that lends the city its charm. That it can pursue such an arrangement while sustaining some of the fastest growth rates, both economically and population-wise, of any major city in the US is hardly a coincidence. And it holds true statewide, too.
With an annual GDP of $2.4 trillion, the state of Texas boasts the eighth largest economy in the world, right between France (at 7th, with $2.8 trillion) and Russia (9th, with $2.3 trillion). And this it does with a population of just 30 million people (France and Russia have 65 million and 144 million, respectively).
To those who know and embrace it, freedom from state interference is a feature, not a bug. Which brings us back to our regular beat here...
Free markets, free minds and free people
As dear readers well know, we’ve lately been following along with what we’ve dubbed – with delicate understatement – The Greatest Political Experiment of Our Time.
The story so far, in case you’re just joining us...
After enduring three-quarters of a century of central planning, monetarist shenanigans and other state-sponsored, collectivist nonsense, the good people of Argentina finally voted last year to cut their parasitic government down to size.
This they did by electing a candidate so lacking in ambiguity that he brought an actual chainsaw to his political rallies. Subtle, no?
Javier Milei, the man with the motosierra, has since been on something of a libertarian rampage, slashing the size of the state, outlawing money printing to fund state boondoggles and lassoing runaway inflation, which had reached the highest levels in the world when he took office (in mid-December).
He achieved this rare feat by balancing the books (delivering the first 6 months of state fiscal surpluses in living memory) and, in his own words, “not spending more than the state collects.”
Rocket surgery, right?
As you can imagine, the “political caste,” as Sr. Milei refers to the cabal of self-serving elites with their snouts in the public trough, has been none-too-impressed by the new president’s anarchistic antics. And yet, the public has rallied behind him, with three-quarters of the population supporting his political and economic reforms. (Less than 25% of those polled say they want a return to the previous, socialist mess... no prizes for guessing where these respondents draw their paychecks...)
Needless to say, it’s been quite the ride so far... and if we’re right, it’s only just getting going. So, where are we now?
Net Zero Emissions
The latest news from down on the Pampas is that Milei’s administration has managed to achieve a rare “zero emissions” monetary phenomenon. That is, the kind of phenomenon Austrian School econo-nerds (like Milei himself) can rally behind.
In short, the Argentine government has quashed what economists call the “endogenous increase” in money supply, as generated by the central bank’s (BCRA) massive accrued liabilities. Here’s free market economist and director of consulting firm Econométrica, Ramiro Castiñeira, writing in the Argentine publication Infobae (translated):
Since 2011 the economy has not grown, which implies that it is the longest recession in all of Argentine history (12 years, three entire presidencies). But in the same period the Expanded Monetary Base multiplied by 116. The overflowing supply of pesos that the BCRA poured into a stagnant economy during that time was directly transformed into inflation.
During the last presidency of Alberto Fernández in particular, the expanded monetary base multiplied by 11.6 by issuing and expanding the amount of primary money by the equivalent of 32% of GDP.
And here’s what such a reckless expansion in the monetary supply looks like... expressed as inflation. (Note how the rate really began to take off after 2020, when Alberto Fernández used the pandemic as a convenient pretext to crank up the printing presses):
Readers will no doubt recall Milton Friedman’s famous quote:
“Inflation is always and everywhere a monetary phenomenon.”
By adhering to a strict “zero tolerance” policy on budget deficits, and slashing public spending by a whopping 30%, Milei has managed within just six months to bring the nation’s balance sheet back into surplus. As Sr. Castiñeira notes, this implies that, “for the first time in 16 years the State is financed only with taxes, without resorting to the emission of debt or primary money.”
The result? Balanced books, collapsing inflation, and a Net Zero policy we can all get behind.
Stay tuned for more Notes From the End of the World...
Cheers,
Joel Bowman
P.S. For reasons that ought to be obvious, governments around the world (and their toadies in the mainstream press) are keen to see the Argentine experiment in liberty fall flat on its face.
Why?
Because if people wake up and realize they can get along just fine without their parasitic overlords in congress/parliament, they might just make good on their so-far empty promise… and actually throw the bums out!
In the meantime, we’ll continue to bring you updates in these Notes From the End of the World.
A big thanks to our dear Notes members for your ongoing support. If you’re reading these pages and find our work valuable, please feel free to join our growing community in spreading the word.
Free markets… free minds… and free people.
That man Hayek sure knew what He was talking about!
thanks Joel, you anarchial antipodean!