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Gary Galles

Articles by Gary Galles

There’s Nothing Wrong with Short Selling

29 days ago

The recent GameStop short-squeeze drama has riveted financial markets. Given the historic unpopularity of short sellers (e.g., Holman Jenkins has written that “short-selling is…widely unpopular with everyone who has a stake in seeing stock prices go up”), the resulting heightened invective against them is not a surprise.
Unfortunately, an intensification of this rhetoric could lead to unwarranted broader restrictions on short selling, indicated by the politicians already calling for hearings that could be used to do just that. It would hardly be the first such abuse. For instance, when Joe Biden became vice president, he was replaced in the Senate by Edward Kaufman, whose first legislative initiative, after “a lobbying campaign by financial institutions and other

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California Now Wants to Tax People Who Live in Other States, Too

January 7, 2021

California’s government has become infamous for abusing its citizens, from steep taxation to burdensome regulations to arbitrary covid impositions. But less noticed is how it is also trying to abuse other Americans as well.
As reported in a December 28 Los Angeles Times editorial, the California Department of Tax and Fee Administration (CDTFA), which oversees sales and use tax collections, is trying to retroactively impose sales taxes on out-of-state retailers as far back as 2012.
Prior to 2018’s South Dakota v. Wayfair Supreme Court ruling, states had the power to mandate that companies with a physical presence in their borders collect and remit taxes on sales in the state, even if the products involved came from outside the state. But they could not force

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Why the Marketplace Is Not a Zero-Sum Game

December 26, 2020

Twenty-twenty marks the twenty-fifth anniversary of a book that has had an expanding influence on the public conversation about market competition. Robert Frank and Philip Cook’s 1995 The Winner-Take-All Society argued that there are an increasing number of markets in which small differences in performance give rise to enormous differences in rewards. As John Kenneth Galbraith described it in a review of that book, the consequence is that “the one who wins gets it all.”
Since then, I have seen multiple articles that reflected the winner-take-all, “a few win at the expense of others” rhetoric as an accurate description of competitive markets, sometimes even accepting that its core claim was so well-established that it could be used as a scapegoat for an

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Being Pro-union Means Being Antiworker

November 24, 2020

After becoming the apparent president-elect, Joe Biden clearly promised to unify Americans. However, that promise was in sharp contrast to what his campaign promises would actually achieve.
Granting unions their fondest wishes is clearly part of Biden’s labor policy, as illustrated by his statement that “I am a union man. Period” in his 2019 campaign-opening speech and his website’s opposition to the “war on organizing, collective bargaining, unions, and workers” under the current administration. And International Brotherhood of Electrical Workers (IBEW) president Lonnie Stephenson asserted a Biden administration would advance unity because it would be “a win for all working people.”
The problem is that Biden’s support for unions, particularly the Protecting the

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Talk of “Unity” Is Both Hypocritical and Delusional

November 18, 2020

Grand invocations that “I will unify us” are actually shorthand for “We mean to get our way, regardless of others’ well-being and desire.”
Original Article: “Talk of “Unity” Is Both Hypocritical and Delusional“.

This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.

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What Germany Must Do for a Speedy Recovery
On June 29, the German parliament reacted as parliaments normally do when there is a problem, namely, by allowing the government to spend more. In order to respond to the economic difficulties due to the corona epidemic and the government restrictions, it passed a typical Keynesian stimulus package in order to boost aggregate demand.

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The Idea that Democracy Is the Same as Liberty Is a Weapon in the Hands of Despots

November 7, 2020

As Americans approach a date with their polling places and “get out the vote” campaigns crescendo, there is plenty of rhetoric that all but deifies democracy.
Unfortunately, while democratically determining who will be entrusted with the reins of government may generally represent the best hope to enable governments to change without bloodshed (exemplified by John Adams just going home when he lost the presidency to Thomas Jefferson), democracy is not the defining characteristic of American greatness. Liberty is. Democracy is important only insofar as it serves and defends liberty. For example, if whatever the current majority decided “democratically” were to be law, our Constitution and Bill of Rights, which put some things beyond majority determination, could

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Our Politicians Would Probably Be Better If We Picked Them by Lot

October 11, 2020

Rather than choose among a group of narcissists desperate to become popular by redistributing the income of others, why not choose officeholders by lot for a single term?

This Audio Mises Wire is generously sponsored by Christopher Condon. Narrated by Millian Quinteros.
Original Article: “Our Politicians Would Probably Be Better If We Picked Them by Lot​“.

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Why Fed Bugs Really, Really Hate Gold
Judy Shelton, a Trump nominee to the Fed Board of Governors, may not have coined the excellent term "Fed Bug," but she used it to delicious effect in this 2019 Financial Times interview:
“People call me a goldbug, and I think, well, what does that make them? A Fed bug,” she says.

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The Folly of “Ask What You Can Do for Your Country”

May 26, 2020

Recently, I was reminded of John F. Kennedy’s most famous line, “Ask not what your country can do for you; ask what you can do for your country,” when I heard it among several famous sound bites leading into a radio show segment. It also reminded me that we will hear it more soon, as we are approaching JFK’s May 29 birthday. However, it is worth reconsidering what it means.
Of particular importance is Milton Friedman’s response that “Ask not” was “at odds with the free man’s belief in his own responsibility for his own destiny….[It] implies the government is the master…the citizen, the servant.”
You can see the reason by noting that “Ask not” is completely consistent with what a tyrannical government—the kind that has beset people throughout most of recorded

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How Words Like “Essential” and “Need” Are Abused by Politicians

May 18, 2020

Over the years, one of the most common trump cards used to justify government treating people differently, rather than equally, has been the word need. And when used to override individuals’ ownership of themselves and what they produce, its usage has created confusion rather than clarity. In public discussion, “need” has increasingly morphed into one of its synonyms—essential, as in “essential jobs.” But it still suffers from many of the same analytical problems.
“Need” has the logical disadvantage of lacking a clear meaning. But that is also its biggest political advantage, because careful thinking is the enemy of inappropriate policy. The same is true for government determination of essential jobs.
“Need” implies agreement on what and how extensive the need is.

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Be Thankful for Those Who “Only Do It for the Money”

May 7, 2020

At least since I first read George Orwell’s Politics and the English Language, I have been a student of the use of weasel words. I have joined what he called the “struggle against the abuse of language,” because “Political language…is designed to make lies sound truthful…and to give an appearance of solidity to pure wind.”
I even found the phrase’s origins interesting. As explained by, “It has long been a widespread belief that weasels suck the yolks from bird’s [sic] eggs, leaving only the empty shell. This belief is the basis of the term ‘weasel words’.” And although that idea can be traced to Shakespeare’s mentions of weasels, the phrase’s first known use was in 1900, near the beginning of the Progressive Era, during which even the word

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Why Democracy Doesn’t Give Us What We Want

February 2, 2020

That Americans are in the throes of a crisis in democracy has become a commonplace refrain of late. I have noticed that almost all such commentary treats political democracy, implicitly or explicitly, as the ideal. Yet in truth it is a seriously flawed ideal. In fact, as F. A. Hayek noted years ago,
all the inherited limitations on government power are breaking down before…unlimited democracy…the problem today.
Perhaps the most blatant evidence against the idea that moving toward more democracy is always an improvement is the frequency with which policies and candidates claiming majority support advance coercive measures that take from some to give to others. That is robbery, which violates universal moral and ethical principles, making it less than an ideal.

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Peaceful Market Exchange—Not Politics—Harnesses the Value of Diversity

January 26, 2020

That there are inherent benefits in diversity is a common article of faith in our democratic/populist times. We hear it in and about universities, businesses, politics, entertainment, etc. Typically, though, we hear about it in terms of forcing more diversity on those whose diversity in a particular dimension doesn’t measure up to someone else’s arbitrary standard.
However, high-volume discussions on the topic often proceed as if diversity was the relevant end desired, while all but ignoring whether that diversity expands our joint possibilities or contracts them by increasing social balkanization. And policies that reinforce divisions between groups by imposing disparate treatment do the latter. The zero- or negative-sum views they represent, and the top-down

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“Low” Tax Rates Often Mask Much Larger Tax Burdens

January 12, 2020

Discussions about the incentive effects of taxes can be misleading. The focus is usually on the tax rates imposed. But one’s incentives are not best measured by tax rates, but by how much value created for others (reflected in consumers’ willingness to pay) is retained by the creator, which I refer to as take-home income.
These two variables — tax rates and take-home income — are reciprocal in the sense that the higher the marginal tax rate, the smaller the take-home income relative to the value created. But the latter is a more precise tool, because it reveals how much incentives change as a result of a tax change.
This is a key to supply-side economics, because the higher the existing marginal tax rates, the greater the improvement in incentives with a decrease

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