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What House of Cards Gets (Very) Wrong

in Economic Liberty, Liberator Online, News You Can Use, Taxes, Trade & Tarrifs by Alice Salles Comments are off

What House of Cards Gets (Very) Wrong

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Sandy Ikeda, a professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism, wrote about why everyone’s favorite TV show is wrong on its portrayal of an economic crisis. In his article for the Foundation for Economic Education, Ikeda argues that, while House of Cards is a major hit among political animals, whether they are progressive, conservative, or libertarian, its portrayal of welfare policies and shortages is extremely unrealistically.

Gas CrisisIn the third season of House of Cards, ficticious president Frank Underwood proposed a major policy program known as “America Works,” a policy that intended to “create” millions of jobs. Despite the superhuman goals tied to the policy, the real-world consequences of such endeavor were never even questioned, leaving a lot to the imagination.

But as Americans binge-watch season four, Ikeda points out to another faulty portrayal of public policy and its consequences. This time around, the show’s writers failed to grasp what a gas crisis actually looks like.

During the fourth season, the show introduces the audience to Underwood’s America, where an ongoing oil crisis threatens Underwood’s popularity among voters. The audience is told to believe that gas prices have soared, nearing the $7 a gallon mark. Yet any “astute first-year econ student” will tell you that this is very unlikely, at least in a country in which price controls haven’t been enacted—yet.

According to Ikeda, if buyers and sellers are free to adjust prices, gas stations all selling gas for $7 a gallon is a fabrication. “In the absence of price controls,” Ikeda writes, “the quantity demanded and supplied will tend to be equal.” That means that markets won’t have any unexpected inventory accumulation, since most of the oil will be sold, but it will also suffer no shortages, since consumers who are scared by the high prices will simply walk away, empty-handed.

To Ikeda, the scenes depicting long lines of angry drivers waiting at gas stations while these same stations are shown running out of gas are completely unlikely to occur in a real world scenario.

Ikeda adds that, the only thing that could actually cause America to experience something similar is the implementation of a price ceiling, making it illegal for gas stations to sell gas above a certain price.

In the 1970s, the Organization of the Petroleum Exporting Countries (OPEC) flexed their monopolistic muscle by pushing oil prices up dramatically. The long lines and rationing in America that followed OPEC’s actions weren’t caused by the artificial price increase. Instead, price control policies that affected gasoline and diesel fuel prices led to the consequences often tied to what we now call the “oil crisis.” Many ignore the fact that President Richard Nixon had imposed wage and price controls on the American economy prior to the incident, and what followed was chronic shortage everywhere, not only at the pump.

While Underwood’s line about the government having “all the men with guns” may be of great inspiration to liberty advocates everywhere, the show’s ignorant remarks on economics may disappoint some viewers.

Why didn’t Netflix use an economic consultant?

“House of Cards” Is Alive and Real in Maryland

in Liberator Online by James W. Harris Comments are off

(From the Intellectual Ammunition section in Volume 19, No. 6 of the Liberator Online. Subscribe here!)

And you thought Netflix’s “House of Cards” was just Frank Underwood - House of Cardsfiction. Reports the Washington Post:

“A few weeks before Season 2 of ‘House of Cards’ debuted online, the show’s production company sent Maryland Gov. Martin O’Malley a letter with this warning: Give us millions more dollars in tax credits, or we will ‘break down our stage, sets and offices and set up in another state.’

“A similar letter went to the speaker of the House of Delegates, Michael E. Busch (D-Anne Arundel), whose wife, Cynthia, briefly appeared in an episode of the Netflix series about an unscrupulous politician — played by Kevin Spacey — who manipulates, threatens and kills to achieve revenge and power.”

Wow! You’ve got to wonder if Frank Underwood himself co-signed those letters.

But then the non-fiction bad guys struck back — with an Underwood-style threat to seize the company’s property if they stopped filming.

No kidding. The Maryland House of Delegates quickly drew up and passed legislation requiring the state to use eminent domain to buy or condemn property owned by a film company that has claimed more than $10 million in state tax credits — if said company stops filming. (Wonder if they had anyone specific in mind?)

Cato’s David Boaz sums it up just right: “It’s hard to imagine a better example of rent-seeking, crony capitalism, and conspiracy between the rich, the famous, and the powerful against the unorganized taxpayers. A perfect House of Cards story.”

Unfortunately, zillion-dollar tax money handouts to wealthy film companies are common practice in most states. All in the interest of creating jobs and stimulating the economy, of course.

In case anyone wants to know, the Tax Foundation reports that film tax incentives “are a net loss to states, and there are plenty of studies demonstrating this” and “every independent study has found that film tax credits lose revenue.”

Not that politicians care. Hey, it’s not their money.