New York is in the process of teaching us an important lesson in economics and history. It’s a cautionary tale, as they say, and I’ll lay out some of it’s basic structure with a few recent incidents from the news in the Empire State.
I recently wrote about an ex-Marine who is being prosecuted for an incident in which he killed a homeless man in the course of protecting a subway train full of passengers from the man’s dangerous and erratic behavior.
Also, a couple weeks ago, you may have heard about a woman arrested in Queens for changing the locks on a house she inherited from her deceased parents. Squatters had taken over the property and she wanted them out. For this, she is now being prosecuted.
That’s kind of unsettling, but in addition there’s the lawfare. A couple examples: New York’s attorney general Letitia James is in the process of using her power to crush an organization called VDARE for speaking in ways she disapproves of (VDARE objects to unrestricted immigration, especially from non-white countries).
VDARE is located in West Virginia, but is incorporated in New York (the attorney filing their papers pro bono happened to live there at the time).
That lone fact gives her standing to target and harass the organization, making them expend huge resources attempting to defend themselves. So why not simply re-incorporate in a less hostile state? Well, they tried that, and get this: You can’t unless the state of New York lets you.
Then there’s Trump. He’s today’s poster-child for lawfare being used against a political opponent. It’s happening in several jurisdictions. In the New York version, Trump is accused of inflating the value of real estate assets he owns in the process of obtaining loans.
The accusation is childish. As if enormous banks are in the habit of just taking the word of an applicant as to what collateral is worth.
The loans were paid back in full. Nobody was harmed. Even still, Trump has been found guilty and is ordered to pay hundreds of millions of dollars in penalties.
The state of New York might even seize his buildings. The decision is being appealed, but if Trump loses, he won’t even be allowed to do business in the state of New York — and of course he will have been legally robbed of an enormous sum of money.
Famous “Shark Tank” investor Kevin O’Leary remarked on the incident, “I would never invest in New York now. And I’m not the only person saying that.”
New York is demonstrating an economic concept called “regime uncertainty” that I first heard about from reading the great economic historian Robert Higgs.
The Great Depression in America was greatly exacerbated because businesses were reluctant to invest in a political climate where they were uncertain whether the government was going to let them operate in peace.
Why would somebody put their capital at risk in an environment where the law was likely to seize or tax or regulate your business out of existence? Normal market risks are bad enough without worrying that you are going to be robbed by your own government.
A society prospers and is peaceful when the law protects the citizenry. When the law is weaponized against the citizenry, chaos and impoverishment result.
So thanks for the wonderful economic lesson, New York!
Now quit it please, before you destroy yourselves — and perhaps us all along with you.
Naturally,
Adam
This also becomes an issue for new entrants into an established industry. My own experience with the commercial drone industry is a fantastic illustration playing out in real time. Drones have been sharing the airspace with crewed (don't call it "maned") aviation since the dawn of powered controlled flight. In fact, the Wright Brothers were interlopers into the space taken up by kites, balloons and toys, not the other way around. The military has been using uncrewed remotely operated drones for decades (in fact the term "drone" comes from the remote controlled targets used for training anti-aircraft gunners).
The FAA wasn't ready for commercial drones. Even though the RC model community had been mounting cameras to their aircraft since the 1960s, and photographers have been using balloons, kites and even long poles to capture aerial photographs, the rise of the quadcopter caught them completely off guard. To them, the invention of the small quadcopter was a black swan event.
So what's a regulator to do? Shut it down, that's what. Basically killed the small but growing industry including the leader at the time, 3D Robotics. That opened the door to a small Chinese company called DJI, but that's another tale. Sometime around 2010, the FAA banned quadcopters from the US airspace while they developed regulations. For the next 5 years anyone flying a drone for money or as part of their job was committing a crime (with certain exceptions and exemptions that required a lawyer to walk up through the channels). Then in 2016 the administration rolled out 14 CFR part 107, the framework for commercial UAV (unmanned, later unCREWed aerial vehicles). Generally a fairly soft set of requirements and testing that didn't actually require a pilot know how to fly a quadcopter. It did set some hard rules around weight restrictions, registration requirements and defined what a small UAV is, exactly. Five years of work, good job fellas. But then they started micromanaging pilot activity, reacting to events, locking down airspace and rolling out new regulations like the poorly thought out Remote ID system.
Anyway, without getting too long, the industry is not healthy in the US. Between the FAA and now the rest of the DC regime calling for banning of DJI drones because of their "ties" to the CCP, money is drying up, companies are giving up and lobbyists are in charge. If you're building UAVs for military or surveillance use, you're golden. But if you have a product that isn't of interest to government users, forget it. There's far too much risk of arbitrary decisions by the regulators.