This is interview #2 in JohnsonForAmerica.com’s “Important Voices” series, where we talk with key figures, such as elected officials, candidates, authors, commentators, and media personalities, about the issues of the day. A new interview is released every Monday and every Thursday, so check back often!
Our guest for today’s Important Voices interview is Dr. Mark Thornton. Dr. Thornton is an American economist of the Austrian School of Economics. He received his B.S. from St. Bonaventure University in 1982, and his Ph.D. from Auburn University in 1989. Dr. Thornton has taught economics at both Auburn University and Columbus State University, and is now a senior fellow and resident faculty member at the Ludwig von Mises Institute. He is currently the book review editor for the Quarterly Journal of Austrian Economics. Dr. Thornton wrote the book, The Economics Of Prohibition, and has been described by Advocates for Self Government as “one of America’s experts on the economics of illegal drugs.”
Josiah Schmidt: Thanks for joining us, Dr. Thornton! Please, explain to our readers what the Austrian school of economics is, and why Austrian economics is so relevant in this day and age.
Mark Thornton: The Austrian school of economics is the oldest, smallest, and fastest growing school of economics. Austrian economics began in 1871 with Carl Menger who began his Principles of Economics with the observation that all things are subject to the law of cause and effect. Austrian economics follows Menger in order to produce a realistic approach to economic theory and analysis. Austrian economics is based on the timeless and universal laws of economics and this provides us with understanding of economic events and policies. In contrast, “mainstream” economists focus on building mathematical models and statistical testing where assumptions, constraints, and condition need not be realistic.
Josiah Schmidt: What is the fundamental flaw in the Keynesian understanding of economics?
Mark Thornton: The fundamental flaw of Keynesian economics is its focus on aggregate economic categories, like consumption, investment, and government spending. They model the economy like a machine. As a result, they do not know how the economy works or what causes problems in the economy. If a problem is detected, the nearly universal solution is more government spending.
Josiah Schmidt: One of your most well-known books, The Economics of Prohibition, talks about how prohibition has the exact opposite effects of what is intended. One of these unintended effects, in the context of drug prohibition, is that it makes the drug trade more lucrative. Can you explain to our readers why this is?
Mark Thornton: By making a product illegal and to impose penalties on the violators of the prohibition increases the risk and cost of doing business. Some producers drop out and the ones that remain charge higher prices. Its similar to adding a heavy tax or creating a government monopoly, but not as straightforward.
Josiah Schmidt: How does prohibition make drugs more dangerous?
Mark Thornton: Prohibitions eliminate elements of competition like advertising which provides information to consumers and competition between producers. It eliminates the normal process of resolving disputes so that people often settle disputes with violence. Prohibition also raises the potency of drugs because the fixed costs of prohibition pushes producers to distribute the highest potency products because these are the easiest to conceal in transit. Marijuana is often said to be a gateway drug to more dangerous drugs, but the reality is that prohibition creates dangerous drugs and more strict enforcement and penalties push people to more potent and dangerous drugs.
Josiah Schmidt: In what ways does prohibition breed corruption and organized crime?
Mark Thornton: Prohibitions (drugs, prostitution, gambling, etc.) are the source of organized crime and a leading cause of corruption. One way to lower the costs of prohibition on the supply side is to organize distribution into a territorial monopoly and that is what organized crime is. Once organized, bribery and corruption can be used to defend your monopoly against threats from law enforcement as well as potential competitors.
Josiah Schmidt: Does the drug prohibition threaten our national security?
Mark Thornton: Yes, prohibition does threaten our national security. All the political hotspots around the globe (Lebanon, Iran, Afghanistan, Mexico, Columbia, Bolivia) are involved in the illegal drug trade. It creates and even helps fund terrorists.
Josiah Schmidt: Does having a federal drug prohibition help “strengthen family values” in any way?
Mark Thornton: I can’t think of any. Certainly there is a strong sense that it weakens family values by attempting to take the problems of drug abuse out of the family and normal legal processes and place it into the hands of a prohibition bureaucracy.
Josiah Schmidt: How could we realistically go about repealing the drug prohibition?
Mark Thornton: People suffer from fear and ignorance. Drug prohibition is the leading cause of crime and violence and makes all of us less safe. Change can only be brought about by changing people’s minds and by having better informed generations rise up against prohibition.
Josiah Schmidt: By the way, could you explain to us your famous “Skyscraper Index”?
Mark Thornton: When someone builds a record high skyscraper it is an indicator of economic crisis. This happens because of easy money policies followed by the central bank such as the Federal Reserve. Low interest rates make firms more profitable and raise stock prices. Everyone is a genius and investors become giddy and take on more risk. At the height of all this folly, particularly in real estate, is when such record-setting skyscrapers are built. The Dubai Tower set the record in the summer of 2007 and I was able to send out the crisis signal on Mises.org in August of 2007 right before the crisis began. The full explanation is in “Skyscrapers and Business Cycles” which was published in the Spring of 2005 in the Quarterly Journal of Austrian Economics.
Josiah Schmidt: So, how did you come to hold such a liberty-oriented philosophy?
Josiah Schmidt: Will you be coming out with any new books, any time soon?
Mark Thornton: We will have a special issue of the Quarterly Journal of Austrian Economics on America’s Second Great Depression that is very exciting and many other very interesting projects and research on Mises.org.
Josiah Schmidt: Sounds great! Anything else you’d like to say to our readers?
Mark Thornton: Thank you and good luck.
Josiah Schmidt: Thanks, and all the best to you as well.