The Wombat's View on Economics

Get Rich Quick?

2010-03-08T21:58:00.002-05:00

I've been wondering lately why it is assumed that someone who comes up with a good idea or invents the "next great thing", no matter how small, is somehow entitled to get rich from it. This theme seems to run through all the debates I've had with others about "intellectual property" (IP), even if it's not articulated as such. Pro-IP folks vehemently defend the inventor's "right" to profit from his or her idea, claiming that someone else using another person's idea to make a profit is somehow "stealing" from the original inventor.

Inventors and innovators are definitely important for human progress, as without them technology would stagnate, and we wouldn't have many of the amazing devices and technologies we have today. But does creating something new really entitle you to a profit windfall? As a capitalist pig, I certainly believe that everyone has the right to exchange goods and services with others to make a profit, but why should inventors and innovators be given special treatment?

Many Pro-IP folks would probably say that if we didn't reward inventors handsomely we'd never have any new inventions, but I think that's hogwash. If nothing else, it ignores the fact that good ideas and useful inventions generate lots of profits for lots of people over long periods of time...not just at first or only for the inventor. Thus, it's silly to think that no one would ever invent anything if they couldn't be assured of getting rich from it within a short period of time. A good idea can make one rich without monopoly protection, maybe just not as quickly.

But I think there's something much more human that makes most people think that the market (or government or society or whatever) should make inventors rich. I'll call it the "It Could Be Me!" (ICBM, lol) principle. See, coming up with a great idea or a new useful gadget represents to most people the simplest, quickest way to "strike it rich." Potentially anyone can have a sudden flash of insight that leads to the next great thing and make a bundle...and it could be me! It's a way to make a bunch of money and live the life you've always wanted without saving and investing more of your earnings than you spend, being a real entrepreneur and starting your own business, or showing a ton of initiative and ambition and working your way up the ladder.

It's the everyman dream of success. It's hope that I could be the next one to get rich by hatching the plans for a better mousetrap. So if we got rid of patents, copyrights, and other IP monopoly protection, we would destroy the hopes of millions of people hanging onto that glimmer of hope...the hope that It Could Be Me! Who could possibly be so callous as to want to dash all those hopes and dreams?

The 2010 Census

2010-02-10T09:55:00.002-05:00

I recently received an email (from my mom) warning me about possible scams associated with the upcoming 2010 federal census. Apparently there is a chance that some people will attempt to pose as census workers and try to get financial information from you so they can steal your identity. Maybe so, but that's not the reason for this post.

What stood out to me in the warning email was the following, seemingly innocent statement:

...more than 140,000 U.S. Census workers will count every person in the United States and will gather information about every person living at each address including name, age, gender, race, and other relevant data. (Emphasis added)

What do they mean by "relevant data", and why is any of the information mentioned at all relevant to the federal government?

According to the U.S. Constitution (remember that?), the census is only used to determine the number of representatives in the House for each state, as per the 14th amendment. Once upon a time it was used to determine taxes paid by each state, but that was superseded by the 16th amendment, which arrogated to Congress the power to levy income taxes with no regard to population whatsoever. The census is supposed to be a survey of the geographical dispersion of residents within the United States...that's all.

So why would it be at all necessary for the federal government to know the age, gender, race, or even the first name of every person living in your house? Is there going to be a new law mandating representation based on the relative ethnic composition of each state? Will there have to be so many black, hispanic, or Asian representatives based on the census? Are we going to ensure there is appropriate age and gender representation, ensuring that Generation X is as well-represented as the Baby Boomers, or that there is a geographically proportionate number of female and male representatives? How about names? Do we need an apportionment of representatives based on the first letter of each first name? Will I be represented by the Letter R in my district? Obviously this is all patently ludicrous (though I wouldn't be shocked if some form of race- or gender-related representative apportionment legislation made it onto the House floor), so why do they care?

I have to confess a tinge of paranoia when it comes to government gathering information on its subjects (as if you couldn't tell). I can't help but wonder what they're going to do with that information, particularly since it has nothing at all to do with apportionment of representatives. All they need for that is a simple headcount. I imagine most people probably think it's no big deal. After all, they're just statistics. But statistics in the hands of government can be a powerful weapon against freedom, and therein lies my concern. How many more entitlement programs will we see based on the census results? How much more redistribution of wealth will ensue? How many excuses will be found within those statistics for future expansions of government power over our lives?

Thinking back about the original email warning me about impostors fishing for information about me, I'm dismayed that most people are more concerned about the possibility that their fellow man may attempt to do them harm than they are about the activities of their government. It speaks volumes about the attitude of most people toward government...trusting their government over their fellow man. As I've said before, I'm a lot less worried about what free people might do than what an overbearing government is almost certain to do. In either case, regardless of who comes to my door claiming to be a census worker, the only answer they'll get from me is, "2."

Is the Value of Everything Measurable?

2009-01-02T11:47:00.002-05:00

A common complaint about Wal-Mart, Best Buy, Home Depot, and other "big box" retailers is that they drive smaller retailers out of business. When this happens, it is opined, something "intangible" or of immeasurable value is lost. Among the things lost may be involvement by the business in the community, personalized, polite, or friendly service, and the sense of satisfaction that comes from supporting a small business. While it's true that small businesses often provide intangible benefits such as these, many would argue that since their value can't be measured in terms of dollars they are typically under-valued by most consumers and are therefore unable to stand against the onslaught of low prices from big box retailers. Interestingly enough, the value of such intangibles can be measured in dollars, although perhaps not directly.

Economically speaking, the value of any item or service can only be measured subjectively, in terms of what an individual is willing to give up in order to attain the item or service. For instance, if a buyer is willing to give a seller $15 for a particular item, this shows that the buyer values the item more than whatever else he could have bought for $15. Thinking in terms of money, therefore, provides a convenient way of measuring subjective value, but it's not always obvious. Consumers may be willing to give up other things that they don't immediately associate with money in order to attain some item or some intangible "good" such as personalized customer service. They may, for instance, be willing to drive further, accept a more limited selection, or have to arrange their schedule to visit a store during business hours. All of these things represent a cost, and no matter how you slice it they always impact our ability to exchange productivity (earnings, i.e. money) for goods and services.

So what bearing does this have on the overwhelming success of big box retailers and the demise of mom-and-pop boutiques? Well, it simply means that in many cases the majority of consumers place less value on such intangibles as customer service or a sense of community than they do on the other things they could buy with the money they saved by going to a big box retailer. Smaller stores that are unable to compete with the larger retailers on prices will often find themselves out of business. This will undoubtedly mean short-term hardship for those business owners and their families, and it may mean the loss of shopping options for those consumers who place more value on intangibles.

There is no more "democratic" system than the free market. Consumers vote with their dollars every moment of every day, rather than just once every few years. And unlike political elections, the businesses elected by consumers that fail to meet the electorate's demands will be thrown out of office in short order as consumers withhold their votes/dollars. Any attempt to "level the playing field" in favor of small businesses flies in the face of majority rule and simply substitutes the preferences of a relative few for those of the vast majority.

But also unlike a political election, those of us who wish to vote for small businesses by exchanging a little more of our productivity for things the majority under-values are free to do so. We need not be relegated to big box retail stores if we don't want to be. So long as the market remains free, those options will remain available to us.

What Can a Tampon Teach us About Markets?

2009-01-01T20:45:00.002-05:00

I was watching television with some friends recently, and during a commercial for some new model of panty liner a friend asked if anyone else was "disturbed by the amount of research being put into creating new feminine hygiene products. After all, how many different types of tampons and panty liners does the world really need?"

Like most things other people say, it got me thinking. Why IS there so much research going into feminine hygiene products, or indeed any other personal care product? Walk down the personal care aisle of any grocery store, and you'll see an amazing variety of products in every category. Whether it's toothbrushes, hair gel, antiperspirant, shampoo, facial cleanser, or hand lotion, consumers have a plethora of choices.

I think the primary reason for this vast array of variety is regulation, or rather, the lack thereof. These industries are incredibly vibrant because they're largely unregulated. Unlike heavily regulated industries there are very few barriers to entry for a small company that wants to make toothbrushes, toothpaste, or mouthwash. Putting a new brand of hair gel or conditioner on the shelf doesn't require expending resources meeting cumbersome safety rules. The products are safe because consumers wouldn't buy them if they weren't. There's incredible variety because it's simpler for smaller companies to compete. The playing field is level because no one company is hampered any more or less than another by the heavy hand of government. Greater competition means more innovation and research as companies search for ways to stay ahead of their competitors. This is why there are so many different brands and styles of panty liners on grocery store shelves.

Of course, this condition is not at all unique to personal care products. In any un- (or at least less-) regulated industry there will always be more research, greater innovation, higher quality, and lower prices. Witness the computer hardware industry, for instance, or the television industry. These are almost entirely unregulated, and so they are incredibly vibrant. Computer hardware gets faster, better, and cheaper every day, and televisions get larger, cheaper, and have better picture quality all the time. There is no reason the same would not be true of any industry that currently suffers from government oversight. Whether it's health care, education, banking, or otherwise, freeing resources for innovation by reducing government regulation will always result in better, safer, less expensive products and services.

We're all Marxists now!

2008-10-09T09:18:00.003-04:00

The fifth plank of the Communist Manifesto reads:

Centralization of credit in the hands of the State, by means of a national bank with State capital and an exclusive monopoly.

For those of you unfamiliar with the Manifesto, it outlines a plan to overthrow the Bourgeois and bring about the full "blessings" of Communism. The 10 planks are the conditions that must exist before a transition to Communism is possible. So far, we've already met planks 2 (A heavy progressive or graduated income tax) and 10 (Free education for all children in public schools), and were brought closer to 4 (Confiscation of the property of all emigrants and rebels) with the passage of The Patriot Act and various other abominations under the Bush administration. The impending purchase of ownership stakes by the Treasury Department in private U.S. banks gets us closer to plank number 5.

WASHINGTON - The Bush administration is considering taking ownership stakes in certain U.S. banks as an option for dealing with a severe global credit crisis.

An administration official, who spoke on condition of anonymity because no decision has been made, said the $700 billion rescue package passed by Congress last week allows the Treasury Department to inject fresh capital into financial institutions and get ownership shares in return.

Democracy is a Big Fat Failure

2008-10-08T12:58:00.003-04:00

I'm one of those people who gives his Congresscritters hell about everything. I email them and call their offices anytime a piece of crap legislation comes down the pipe, and I often get their canned responses telling me they're going to do this or that, regardless of what I say. The recent bailout bill was no exception. I emailed both Senators and my Congressman about that steaming pile of destructive garbage several times, and I called their offices and had protracted discussions with their lackeys about it. Without exception, each of them told me that public opposition had been overwhelming, quoting numbers of calls and emails received in ratios anywhere from 25:1 to 300:1 against the bailout. I was encouraged that the public had finally mobilized and made clear its wishes to our representatives in Congress, and I thought that such indisputable public outcry might mean the bailout bill would meet an appropriate end as bedding in some kid's hamster cage. Unfortunately, my optimism was unfounded, and Congress took us further down the road to economic ruin by passing the $700 billion bailout. What a great day for democracy, huh?

I now know, beyond any doubt, that representative democracy is a complete and total sham. In one stroke, Congress has shown complete and utter contempt for those they are elected to serve. By voting against the wishes of the public they have illustrated that they don't give a damn what we think, and that they believe we're all far too stupid to know what's good for us. It's not that I had any great faith in democracy to begin with, but this just puts the final nail in the coffin.

So what happened? Put simply, members of Congress do not have your interests at heart when they go to vote on a piece of legislation. There are a few exceptions, but by and large they are all working to further their own agendas and pet projects. In some cases, their intentions are good, but because government really has no way of knowing whether or not it's doing the right thing (because it neither profits nor suffers loss as a result of its actions), the policies undertaken are nearly always disastrous.

Really, it's not even a problem with the people in government. On the one hand, they're just people like you and me...no smarter than us, no less fallible, no more immune to the trappings of vice and greed...yet they are somehow expected to be immune to normal human failings simply because they've been elected. Even the most noble-minded individuals, once elected to seats of power, are soon swallowed up by the machinery of bureaucracy...the plethora of perverse incentives, the focus on procedure over outcomes, the complete lack of meaningful feedback, the near total insulation from the possibility of being replaced during the next election. Then of course there are the malevolent, power-hungry, career politicians, who will do or say anything to get elected, then focus completely on their own enrichment at the expense of taxpayers. Either way, we (the public) lose.

It can be no other way. These flaws are built into the machinery of government, and as romantic an idea of a Constitution that limits the power of government may be, it is obviously powerless to constrain the desires of Leviathan. Those who seek power will use it to gain more power. Those who can get away with doing whatever they damn well please despite the wishes of those who elected them will do so without fear of retribution. It is a grave error to believe otherwise.

How, then, can we expect government to protect us, to work toward the betterment of society, or to make anything better? The fact is that we can't, and we shouldn't. Government can defend us no better than we can defend ourselves. Government can provide for us no better than we can provide for ourselves. Government can do nothing good for society when it institutionalizes all the worst things of that society...violence, fraud, coercion, theft, you name it. Government is the manifestation of all these things, and as if that weren't enough, it wields the power of force to bend us all to its will.

I'm done. I refuse to participate any longer. I won't get out of bed any earlier on November 4th than on any other day. I will still grudgingly pay my taxes simply because my refusal to do so would impose costs on others who don't share my views. This great democratic experiment has been a colossal failure, and I only hope that someday others wake up to this reality and decide not to participate anymore as well.

Couldn't Have Said It Better Myself

2008-09-02T18:46:00.002-04:00

A recent book review on Mises.org sparked a debate on the legitimacy of the State. Various posters commented on everything from the establishment of government to the workability of anarchy. One post in particular stood out so much that I felt it bore repeating.

"According to the Declaration of Independence, if the government is not serving your best interests, you are entitled to overthrow it. Given the costs of overthrowing any government, it is apparent why most people prefer paying their taxes and taking their chances with the depredations and destructions heaped on them.

Nevertheless, history is also replete with cases where governments were violently overthrown and the rulers liquidated when oppression became so severe that opposing became more palatable to remaining in subjugation. I have confidence that America will suffer the same fate since we see the sign posts on the same road that all nations have traveled.

Empires rise and fall, but human nature never changes. Every generation starts fresh and repeats the same mistakes because people cannot believe that they are like their ancestors. And so all the world cycles through the phases of civilization and destruction. Alas, we are caught in the decline."

This reminds me to keep a few things in perspective: First is that there will always be those who seek power. Likewise, there will always be those who believe that someone must be in charge of everything. And finally, that ideas change the world.

I don't know if it will happen in my lifetime, but eventually the masses will tire of the incremental destruction of liberty, the constant theft of our earnings, and the endless lip service paid by politicians to the principles Americans once embraced, and they will take action to end it. Until then, I will remain a champion of freedom within my own sphere of influence, and I will take heart in knowing that one day the cycle will start again. Perhaps next time they'll get it right.

Non-Coercive Environmentalism

2008-07-30T13:14:00.003-04:00

Now, this is the way it should be...partnerships between businesses and environmental groups, instead of heavy-handed, destructive government edicts.

Think of what a "market" is comprised...individuals and businesses exchanging value for value. Each player participates in the exchange because they both believe they will be better off for it. This is exactly the same principle that is at work here. Businesses exchange what environmentalists value for what businesses value. In the end, both are better off than they were before. Environmental groups make progress toward their goals, while businesses receive the "green" seal of approval and improve their reputation with consumers. It's win-win...value is created for both parties.

On the other hand, government edicts destroy value by forcing businesses to exchange something of more value to the business, for something of lower value. Businesses expend resources reducing pollution, with nothing to show for it. As if that weren't enough, the cost of enforcing the edicts takes money from the hands of consumers that could be put toward more environment-friendly products. It's a lose-lose. As in nearly every other case, government inaction has been a good thing. It has allowed the market to respond by creating value, which is what markets are good at.

The holdouts who claim that environmental groups are "compromising too much" will forever be unable to come to grips with this reality. Markets are all about compromise. Any time you spend money on something you compromise whatever else may have been bought with those funds. By giving up one thing, you have gained something of greater value. The Sierra Club may not have gotten its hearts' desire of a complete ban on pollution of any kind, but rather than spending resources lobbying for this or that legislation, perhaps fruitlessly, they have actually accomplished something through compromise. Let's hope they keep it up.

Isn't MORE Recycling the Whole Point?

2008-07-09T08:00:00.002-04:00

Yes, ladies and gentlemen, it's a crime to recycle in some major U.S. cities. Or it soon will be. With the market prices for recycled goods actually reaching a level that makes recycling profitable, bands of entrepreneurs have rushed onto the scene to make a buck by "stealing" recyclable materials from trash cans. A few major cities are cracking down on these trash thieves, in a bid to ensure that recycling remains a government monopoly.

"California lawmakers are also considering legislation that would make large-scale, anonymous recycling more difficult by forcing scrap and paper recyclers to require picture identification for anyone bringing in more than $50 worth of cans, bottles or newspapers and to pay such individuals with checks rather than cash."

So, let me get this straight...state and city governments supposedly want people to recycle, right? Most people believe that recycling is a good thing, which is not untrue. The problem with recycling to date has been that it wasn't profitable, so the only way it could be sustained was if it was subsidized by taxes. Now, suddenly it's profitable to recycle, so more people are doing it. You would think this is a good thing, right?

Well, the government obviously doesn't think so, and neither do their monopoly contract holders. Why not? You might think that a waste collection company could care less, and may even be thrilled that private individuals are doing a portion of their work for them. After all, refuse theft means less they have to pick up and less they have to dump into a landfill. It would save space, time, and money. So why would they condemn the practice and lobby for laws prohibiting it? Because it threatens their monopoly on recycling...plain and simple. If private recycling becomes a profitable enterprise, the subsidized government bureaucracy loses its raison d'etre, since its only reason to exist is to provide a service that supposedly couldn't or wouldn't be provided by a free market.

Now, I certainly am not one to advocate theft, and you could make the argument that refuse left by the curb to be picked up by a collection company belongs to either the producer (the resident disposing of the refuse) or the company. And, of course, stealing newspapers out of the rack in order to recycle them would rightly be considered theft...except that we're talking about "free" newspapers.

"The free weekly The East Bay Express, which covers Oakland, Berkeley and other Bay Area cities, hired an ex-police detective to stake out thieves and began retrofitting curbside newspaper racks to make them theft-resistant because thousands of fresh copies go missing some weeks.

"We don't want to be spending all our energy printing papers that people take directly to the recyclers," said Hal Brody, the paper's president.

Mike Costello, vice president of circulation at the free San Francisco daily, The Examiner, has taken to doing stakeouts of his own." (emphasis added)

These newspapers are probably free because they're paid for by advertisers, so the argument could definitely be made that the recyclers are stealing from the advertisers themselves. However, the fact that they're being stolen specifically for recycling would seem to indicate that they're more valuable as recycled material than as actual newspapers, which should probably inspire the advertisers to rethink that particular marketing choice.

But why should a homeowner care who takes possession of his or her trash once they place it next to the curb for pick-up?

"Every Wednesday night, Bruce Johnson dutifully puts his garbage and recycling on the curb for pickup, and every week he fumes as small trucks idle in front of his home and strangers dig through his bins stealing trash they aim to turn into treasure."

In most cases, residents don't pay for their trash pick-up directly. Rather, it's paid for via taxes or homeowners' dues. The same is often true of recycling (although in some rural areas homeowners must actually pay to have recyclables picked up separately). One would think that if someone was willing to pick up a portion of a homeowners' garbage for free it would spur competition among waste collection companies for contracts. This is, of course, precisely what the government monopolists don't want.

So here we are, at a point where one can actually turn an honest profit while "saving the planet", but rather than embracing the benefits that this newfound profitably would bring in a free market, bureaucracy is fighting it tooth and nail, as it threatens its very existence. Surely we all see the irony herein. Government wants you to recycle, but only so long as you use government to do it. All else is verboten. Honestly, were I a homeowner who witnessed my garbage being ransacked for recyclables I would probably feel more inclined to sort the recyclable items into a separate container to speed up the process of undermining the government monopoly on recycling, thereby doing my part to save the planet by encouraging the free recycling market to flourish.

Rants on Corporate Culture - Treatment of Rule Breakers

2008-07-08T13:34:00.003-04:00

Let's face it...unless I strike out on my own and start my own business, I'll probably always be a corporate employee. It's just the nature of my job. What I do isn't cheap, and lots of resources are required to attract and keep people like me. So, the best pay, benefits, and growth opportunity for DBAs can generally be had only in a larger corporate environment. I accept this willingly, particularly since my understanding of economics and free exchange provide me with the appropriate perspective to be able to appreciate the benefits that working for larger corporations provides. This is my bed, and I'm happy to lie in it.

Every now and then, though, some things about corporate life get under my skin. The one recent example is something I'll call "Group Remediation". It occurs when one person makes a mistake or abuses some privilege, but rather than discipline that particular person for his or her infraction, the corporate mindset inevitably requires that EVERYONE be trained, counseled, or otherwise made to suffer for it. It's as if, unless something is done quickly, the irresponsible person will infect everyone around him or her with some vile disease, and so we must ALL be inoculated immediately with mandatory group training sessions, policy awareness surveys, and other such corporate vaccines.

It would be one thing if we were talking about a new policy, in which case it makes sense that human resources (HR) would want to make everyone aware of it. Too often, though, it is a knee-jerk reaction to the violation of an existing policy. They call it "proactive prevention", but it's really just a spreading around of punishment, although any HR department member will deny that this is the case even unto their deathbed.

So whence does this mindset originate, and what are the effects thereof? I suspect that the origin of the mindset has something to do with the general tendency to ignore individual responsibility, for which bureaucracy is well-known. Rather than view a policy infraction as a lapse in individual judgment, it is seen as some sort of systemic problem, and must be treated as such. That is not to say systemic problems don't exist, but these are typically a case of twisted incentives directing individual behavior, such as the way a system of government inevitably rewards departmental failure.

The effect of Group Remediation is to alert individuals in no way associated with the infraction that someone in their midst is a rule-breaker. The identity of the irresponsible person is almost never revealed, leaving the responsible individuals to wonder who has caused them all to suffer through this particular instance of corporate hell. The rule-breaker, however, has the pleasure of knowing he or she has cost coworkers time that could have otherwise been spent productively, and wondering who knows it was them. Perhaps this is exactly the point...to drive home the consequences of individual actions by dragging everyone around the individual through the mud, hoping that doing so will spur responsible individuals to "police their own". What a shitty way to treat people.

New Tax Aims to Soak Greedy Oil Companies

2008-02-28T09:11:00.002-05:00

House OKs $18B in taxes on Big Oil - USA Today

Hooray! Now those greedy oil companies, who have made record profits by gouging consumers at the pump over the past couple of years will finally have to give something back to the people!

Give me a break. This is yet another example of government idiots talking out of both sides of their mouths. On the one hand, they're shrieking about all the families who have been hurt by high prices for gasoline and heating oil. However, if you can figure out a way this bill won't raise prices even further I'd love to hear it. What are they smoking?

For once, I actually agree with a Republican:

"It punishes the oil and gas industry. This is wrongheaded. It will result in higher prices at the gasoline pump. It's spiteful and wrong," said Rep. Jim McCrery, R-La.

More Consequences of Ethanol Subsidies

2008-02-22T13:35:00.003-05:00

This article, in Newsweek, talks about the pressure being placed on water supplies in the midwest due to increased corn growing, for use in the production of ethanol. While this is indeed a boon for corn growers, it can't last forever, and not just because the money runs out. The water is running out as well.

By now we all know that using ethanol as a replacement or additive for gasoline is a losing proposition. Ethanol requires more energy to produce than you get back when you burn it, which means it costs more money to produce than it can be sold for. In a free market, such a product would have limited uses, but thanks to the environmentalist lobby, along with a great deal of misinformation about the benefits of ethanol versus its cost, the public is stuck with it. The only way to make such a product feasible is to use taxpayer dollars to subsidize its production, which the federal government does with glee, and which grants to corn farmers a windfall of potential profit.

The unintended consequences of the subsidy are many. First, the price for corn has skyrocketed, as mentioned in the article. This applies primarily to feed corns, which aren't consumed by humans directly, but which are used to feed cattle and other livestock. With more of the feed corn going toward the production of ethanol, there is less left for feed, meaning that food prices will increase as well. Also, since feed corn is suddenly more profitable than other types of corn, farmland that was previously used to grow human-consumable corn has been re-allocated to the growth of feed corn, so the prices of corn products directly consumed by humans will increase. In fact, the effects have been so far-reaching that in Mexico the price of corn tortillas, formerly an affordable staple food item, has more than doubled. The tequila industry has suffered as well, as former tequila producers torch hundreds of acres of yucca fields in preparation for planting ethanol corn.

Now, we throw in the fact that the additional growing in the midwest is threatening the region's water supplies. In a free market, an increase in the demand for water would be countered by an increase in its price, which would in turn act to discourage its profligate use. In areas where water is a public utility, however, its price is usually fixed, regulated, or subsidized, effectively preventing the natural equalization between supply and demand. Likewise, if the water is obtained by some other means, such as diversion of streams or rivers, or by pumping directly from a lake or reservoir, any or all of which may be "public property", there is little incentive for farmers to curb their water use, as there is no additional cost for using ever more water. Instead, other users of the streams, rivers, and lakes bear the costs of overuse of the water supplies...a classic example of the tragedy of the commons.

Ethanol is all hype and no substance. It has its uses, but that of a general gasoline replacement is not one of them. The continued subsidization of its production will continue to have far-reaching consequences, and the majority of the costs will be born by taxpayers, and by those in society who can least afford it in the form of increased food prices. How does the environmentalist conscience square with foisting the costs of its preferences upon those with the least ability to pay, and how long will we continue to perpetuate the ethanol scam?

I Want to be a Consumer

2008-01-21T15:32:00.001-05:00

The following poem, by Patrick Barrington, was published in April, 1934, a couple of years before John Maynard Keynes published his General Theory of Money and Credit, which forever changed mainstream economic thought. In over-simplified terms, Keynes' underlying premise was that the primary cause of recession was "underconsumption". The theory was that production follows consumption, so if consumers decide to save more of their money rather than spend it, the result is overproduction and wasted resources. So all the government needs to do to prevent a recession is to get more money into the hands of consumers so they can spend, spend, spend, and thereby save the economy!

It is true that production and consumption cannot exist without one another, but Austrian economists understand that wealth is built on the accumulation of capital, which is a direct result of savings. The more money is saved (or invested), the more capital there is to lend, thereby lowering interest rates. This serves as an indicator to entrepreneurs of what is known as "time preference", which simply means that consumers (in the aggregate) have shown a preference for spending more money later rather than less money now. This alerts the entrepreneur (or established firm) that the time is ripe to undertake larger projects that will yield higher profits in the future, when consumers will once again be ready to spend the money they have saved.

I Want to be a Consumer

"And what do you mean to be?"
The kind old Bishop said
As he took the boy on his ample knee
And patted his curly head.
"We should all of us choose a calling
To help Society's plan;
Then what to you mean to be, my boy,
When you grow to be a man?"

"I want to be a Consumer,"
The bright-haired lad replied
As he gazed into the Bishop's face
In innocence open-eyed.
"I've never had aims of a selfish sort,
For that, as I know, is wrong.
I want to be a Consumer, Sir,
And help the world along."

"I want to be a Consumer
And work both night and day,
For that is the thing that's needed most,
I've heard Economists say,
I won't just be a Producer,
Like Bobby and James and John;
I want to be a Consumer, Sir,
And help the nation on."

"But what do you want to be?"
The Bishop said again,
"For we all of us have to work," said he,
"As must, I think, be plain.
Are you thinking of studying medicine
Or taking a Bar exam?"
"Why, no!" the bright-haired lad replied
As he helped himself to jam.

"I want to be a Consumer
And live in a useful way;
For that is the thing that is needed most,
I've heard Economists say.
There are too many people working
And too many things are made.
I want to be a Consumer, Sir,
And help to further trade."

"I want to be a Consumer
And do my duty well;
For that is the thing that is needed most,
I've heard Economists tell.
I've made up my mind," the lad was heard,
As he lit a cigar, to say;
"I want to be a Consumer, Sir,
And I want to begin today."

The poem's brilliance is that it illustrates how ludicrous the concept of "underconsumption" really is. Carried to its logical conclusion, it would stand to reason that all we really need is for government to print money as fast as possible, so that people can spend it as fast as possible, thereby stimulating production like never before! It makes one wonder why they don't just go ahead and run the printing press 24/7.

What Can We Really Predict?

2008-01-15T11:23:00.000-05:00

My sister sent me the following list of predictions, made by some very notable figures. It certainly makes one question the feasibility of all the doom-and-gloom predictions used in defense of the State these days...global warming and peak oil come readily to mind.

"Man will never reach the moon regardless of all future scientific advances."

-- Dr. Lee DeForest, "Father of Radio & Grandfather of Television."

"The bomb will never go off. I speak as an expert in explosives."

- - Admiral William Leahy, US Atomic Bomb Project

"There is no likelihood man can ever tap the power of the atom."

-- Robert Millikan, Nobel Prize in Physics, 1923

"Computers in the future may weigh no more than 1.5 tons."

-- Popular Mechanics, forecasting the relentless march of science, 1949

"I think there is a world market for maybe five computers "

-- Thomas Watson, chairman of IBM, 1943

"I have traveled the length and breadth of this country and talked with the best people, and I can assure you that data processing is a fad that won't last out the year."

-- The editor in charge of business books for Prentice Hall, 1957

"But what .. is it good for?"

-- Engineer at the Advanced Computing Systems Division of IBM, 1968, commenting on the microchip.

"640K ought to be enough for anybody."

-- Bill Gates, 1981

" This 'telephone' has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us."

-- Western Union internal memo, 1876.

"The wireless music box has no imaginable commercial value. Who would pay for a message sent to nobody in particular?"

-- David Sarnoff's associates, in response to his urgings for investment in the radio in the 1920s.

"The concept is interesting and well-formed, but in order to earn better than a 'C,' the idea must be feasible."

-- A Yale University management professor in response to Fred Smith's paper proposing reliable overnight delivery service. (Smith went on to found Federal Express Corp.)

"I'm just glad it'll be Clark Gable who's falling on his face and not Gary Cooper,"

-- Gary Cooper on his decision not to take the leading role in "Gone With The Wind."

"A cookie store is a bad idea. Besides, the market research reports say America likes crispy cookies, not soft and chewy cookies like you make."

-- Response to Debbi Fields' idea of starting Mrs. Fields' Cookies.

"We don't like their sound, and guitar music is on the way out."

-- Decca Recording Co. rejecting the Beatles, 1962.

"Heavier-than-air flying machines are impossible."

-- Lord Kelvin, president, Royal Society, 1895.

"If I had thought about it, I wouldn't have done the experiment. The literature was full of examples that said you can't do this."

- - Spencer Silver on the work that led to the unique adhesives for 3-M "Post-It" Notepads.

"Drill for oil? You mean drill into the ground to try and find oil? You're crazy."

-- Drillers who Edwin L. Drake tried to enlist in his project to drill for oil in 1859.

"Stocks have reached what looks like a permanently high plateau."

- - Irving Fisher, Professor of Economics, Yale University, 1929.

"Airplanes are interesting toys but of no military value."

-- Marechal Ferdinand Foch, Professor of Strategy, Ecole Superieure de Guerre, France.

"Everything that can be invented has been invented."

-- Charles H. Duell, Commissioner, US Office of Patents, 1899.

"The super computer is technologically impossible. It would take all of the water that flows over Niagara Falls to cool the heat generated by the number of vacuum tubes required."

-- Professor of Electrical Engineering, New York University

"I don't know what use any one could find for a machine that would make copies of documents. It certainly couldn't be a feasible business by itself."

-- the head of IBM, refusing to back the idea, forcing the inventor to found Xerox.

"Louis Pasteur's theory of germs is ridiculous fiction."

-- Pierre Pachet, Professor of Physiology at Toulouse, 1872

"The abdomen, the chest, and the brain will forever be shut from the intrusion of the wise and humane surgeon."

-- Sir John Eric Ericksen, British surgeon, appointed Surgeon-Extraordinary to Queen Victoria 1873.

And last but not least...

"There is no reason anyone would want a computer in their home."

-- Ken Olson, president, chairman and founder of Digital Equipment Corp., 1977

Capitalism vs. the Free Market

2008-01-02T11:47:00.000-05:00

I've posted here an article, written by one of my fellow commentators on one of my favorite economics/politics blogs, that beautifully illustrates the differences between the American economy (known by many as "crony capitalism") and a free market. I'm shamelessly thieving this piece because it's so well-written. Enjoy.

Viva Co-operation!
Or, why 20th century ideological discourse missed the point.
By David Chaplin

During the 20th century, the term ‘capitalism’ became a crude synonym for the ‘free market’, even by enthusiastic proponents of liberty and free choice. This is a pity, because the term was originally coined by Karl Marx as a pejorative. Rightly so, but not for the reasons he would have had in mind.

Capitalism and free markets are not the same thing.

The fundamental characteristic of a free market is that participants are free to engage in transactions willingly, without coercion or impediment by the State, and without the interference of any other parties who are not involved in or affected by that transaction. Capitalism is something different (except when it suits any individual capitalist to present himself as a free market proponent): where Capital, as one of the factors of production, engages the legal and coercive powers of the State to advance its particular interests at the expense of any other factor of production, or at the expense of consumers. Or where it engages with the State to capture tax revenues(1) .That’s Capitalism, and it is in ideological terms no different to the labourist Marxist prescription, which seeks to advance the narrow interests of Labour at the expense of the other factors of production, for example landowners or investors.

This crucial distinction is rather subtle, not at all obvious to either the Left or the Right – thus both sides of the bipolar debate have happily come to conflate free markets with capitalism. This is probably because most capitalists rhetorically endorse the broad principles of the free market, having recognised that their earnings and profit generation are at root dependent on the willingness of consumers to buy their products ( which I suppose puts them one step closer to enlightenment than socialists). However, it is a rare capitalist who will pass up an opportunity to boost his earnings through rent-seeking (2) , whether through protectionist tariffs, or restrictions on imports, or monopoly licensing, and this tendency is utterly at odds with the very idea of a free market.

The United States of America is widely regarded as the poster-child of Capitalism, and this is popularly equated to it being the prime example of the Free Market - by its detractors and supporters alike. However, like many others, the US is not a free market. Its tax code, body of Law, and the very way its political system is structured, is characterised by a thickly entangled complex of regulations, interventions, restrictions, and other forms of government interference, each strand calculated to protect and entrench the narrow interests of one or another special interest grouping – thousands, millions of them. Many of which, incidentally, are fundamentally incompatible with one another, generating wasted costs while mutually negating the very benefits they are aimed to secure. Thus, America may indeed be the home of modern Capitalism, but it is hardly more than an insult to the pure concept of the free market. Granted, the American market might be relatively free, and arguably freer than those in many other countries, but ‘free market’ is no longer its defining characteristic – how could it be with a Federal government share of GDP of some one-third?

In short, Capitalism in practice makes no distinction between profits gleaned from rent-seeking and those earned from the productive exchange of value, and it actively develops political institutions which entrench that vice. The Free Market, properly constituted, has no room for rent-seeking at all and naturally disincentivises it. The misunderstanding of this distinction is the central flaw which invalidates the broad socialist thesis: By and large, all of the Western social ills the Left has blamed on the ‘unfettered’ free market ever since Marx, arose out of the rent-seeking behaviour that inevitably follows Capitalists getting into bed with the State.

It’s not competition, it’s co-operation.

There is another, deeper, misconception associated with the free market. This is partly due to the way elementary (neoclassical) economics is taught in schools and universities, and Capitalists simply love it: the Doctrine of the Virtue of Competition. Companies everywhere regard their mission as some sort of sports match against their perceived competitors, some treating it as all-out war. (And some even extend the concept of competition to their trading partners, customer or supplier alike, regarding them as opponents to be beaten down as much as possible, stopping just short of the deal-breaker). The free market is defined by competition, they say, it’s dog eat dog out there, you gotta be the toughest, the biggest, meanest, leanest fighting machines to get your slice of the pie, ‘cos if you don’t, somebody else will steal your lunch. And that’s Good! Equally, and citing more or less the same words, communists and other pink-tinted ideologues bemoan the implicit violence in this view of competition , regarding it as a sad loss of compassionate human values, once again erroneously conflating the ugly elements of capitalistic rent-seeking with the purity of the free market.

Both sides of this view of competition missed the point completely. This misconception arguably does more to entrench economic illiteracy across the spectrum than any other factor, (except perhaps the undead labour theory of value which I won’t go into here). And it makes companies, CEOs and entrepreneurs everywhere lose their way in optimising the performance of their enterprises in their quest to generate value in the hands of their customers where none existed before. Furthermore, it has, in Western, capitalist economies, given rise to the most absurd forms of legislative State intervention to somehow enforce competition through the barrel of a subpoena, backed by the threat of jail or other violence against person and property. Whatever that is, it is not a free market.

Granted, competition in a free market does indeed have a structural role in assuring the productive and allocative efficiency of a market. But it is a subtle and indirect form of competition, completely unlike a sporting match, or a war, where the competitors square off and battle it out directly until a winner emerges and the losers fade behind a cloud of disgrace. Let me let you in on a little secret: The defining characteristic of a free market is not competition, but co-operation. All economic activity, however or wherever it takes place, is defined by the fact that each participant in any given transaction does so willingly, because each expects to gain from having done the transaction. Absent the jackboot force of compulsion from the State or any other party with guns, any party to a transaction is free to choose not to do it if he believes he’ll be worse off for having done it. That’s freedom. You do the same every time you pick up an item in the supermarket and then put it back on the shelf because you have better things to buy with your earnings. In a free market, the interaction between any buyer and seller, in every transaction, represents a friendly, voluntary, mutually-beneficial act of co-operation, with millions upon millions of them every single day making up an economy that accumulates wealth among its participants, each gaining in direct proportion to the value he places in the hands of others. That’s a free market, and it works.

The competition in the free market economy is of an indirect, second-order nature, a residue. If I and my customer are co-operating between ourselves to mutual benefit, that means other suppliers in the same line as I am have lost the opportunity to sell him something similar to what I am selling him. But I need never meet this competitor directly, still less fight with him. That’s neither a war nor a sports match. If I rip my customer off by charging him too much or by supplying shoddy goods, he is more likely to do business with someone else next time. The customer chooses where he gets the best value, and its up to me to offer better value than what others do. Modern corporates and CEOs would do well to remember this: If your mission is focussed on beating your competitors at all costs, what does this say about the importance of your customers? Focus your attention on your customer, your partner in co-operation, keep him happy with your product, service and pricing. And likewise, keep your supplier happy with his co-operative relationship with you. Do this, and everything else falls into place naturally.

Strange bedfellows.

We have seen that the ideological debate that characterised the 20th century, simplistically polarised into capitalism vs communism, free market vs socialism, or simply Left and Right, was based on several economic misconceptions. Indeed, the simplistic bipolar nature of the debate led to some very strange bedfellows: Conservatives on the right, who by and large supported economic freedom, also tended to support the regulation of private moral choices through State force, and of course censorious suppression of dissent. And yet on the Left, those who favoured State intervention in markets also tended to support personal liberties, free moral choices, and free speech ( But only in so far as they didn’t get to actually run a country, when the tune inevitably changes to despotism overnight). It is ironic that either side of this polarity contained half of the Libertarian prescription, strapped to a fundamentally incompatible other half. It seems hardly more than an accident of history that Libertarianism found itself popularly lumped in with the conservative Right. This despite Murray Rothbard’s brief attempt to align the Libertarian movement with the New Left of the 60s. It seems this failed because it proved too difficult to get the Left to understand economic fundamentals and see Marx’s Big Mistake for what it was.

Conclusion – what a waste of ink.

That observation aside, there is rich irony in the observation that the ideology of the Left, while full of the rhetoric of mutual co-operation, egalitarianism, freedom, and compassion for the less fortunate, required nothing less than totalitarian coercion, and the wholesale removal of freedom from all citizens, to advance its aims, simply because the ideology required human beings to behave in fundamentally non-human ways, and of course, it has failed fairly rapidly in every known case.

Likewise, on the ‘right’, the mainstream capitalist ideology of the West based its ideological case on the rhetoric of competition and self-sufficiency, both of which narrow values are completely at odds with the co-operation and mutual benefit that characterises free market trade. Indeed, co-operation and mutual benefit are the defining features of reciprocal altruism, itself deeply embedded in human society: it comprises the very essence of what it means to be human. And yet, behind the rhetoric of ‘life, liberty and the pursuit of happiness’, or ‘freedom and democracy’, the capitalist State has stealthily and relentlessly increased its activity in regulating and constraining just about all areas of human activity and individual choice. Regrettably, this capitalist despotism takes longer to fail than socialist despotism, because within its framework, there is a larger scope for citizens to engage in free, voluntary economic activity among themselves, and this permits them to build value, which blunts their outrage, even as their State confiscates some of that value to fund the perpetuation and entrenchment of its coercive powers.

Thus it was that the polarised 20th century debate between left and right turned out to be a colossal waste of breath – the real issue wasn’t collectivism vs individualism, or communism vs capitalism, or even workers vs bosses. It was always State vs liberty, coercion vs free choice. Barring a few marginalised visionaries who kept the spark of classical liberalism (3) alive, hardly anyone in the 20th century even noticed.

(1) Consider Halliburton, whose core competency is hoovering up tax dollars. That company could not exist without the State as its primary customer.

(2)‘Rent-seeking’: the use of political power or force to capture value from other people without yielding value in return. Not to be confused with mutually-agreed hiring of property between the owner and the user.

(3) ‘Classical liberalism’ as distinct from ‘liberalism’. The distinction is important, because the term ‘liberal’ had been hijacked by the Left by the 1960s, by which time it had come to label the mildly pink part of the ideological spectrum. This forced the successors to the classical liberal tradition find another name – libertarian

"Legal" Immigration

2007-12-28T11:48:00.000-05:00

This is the continuation, or expansion, of this small item, that I posted on another 'blog. In that post, I asked what benefit is provided by the legal immigration process to those of us already living in the good old US of A. I'd like to examine the question a bit further to see what fallacies underly the belief that immigration must be a formal process.

When you enter a doctor's office, there is typically a diploma (or several) hanging on the office wall. If you take your car to a reputable auto repair shop you will often see a certificate from ASE or some other certifying body. When I interviewed with my current employer I presented my credentials as a Microsoft Certified Database Administrator (MCDBA). All of these documents indicate that the bearer has completed some sort of training or testing to verify that they are qualified to provide a particular service. Even though in some cases these certificates are required by law (which is a discussion for another time) they nonetheless add value to their services in the form of consumer confidence, and most people are willing to pay a bit more for the services of a certified provider versus one who is uncertified.

What if, however, you entered your doctor's office or auto repair shop and saw, not a certification, but the provider's birth certificate? Likewise, what if I had simply provided my prospective employer with a copy of my birth certificate, rather than my MCDBA certification? Would this document have indicated a single thing about the ability to perform the service offered? What about a work visa, passport, or green card? Do these documents add any value for consumers of our services? No, of course not. Why, then, is there the presumption that they are necessary for an individual to live and work in a particular country?

Do any of these documents serve to reassure us that the holder will be a productive member of the community? Do they, in fact, say anything useful about the possessor at all? If you have racist or nationalist tendencies, then perhaps they do, but I can think of no other reason these documents should hold any weight whatsoever.

Many who oppose illegal immigration do so simply because the rest of us are already saddled with a myriad of stifling rules, taxes, and regulations, and so everyone else who desires to come to this country must abide by those same laws. This completely ignores the question of the validity of those laws to begin with. However, rather than call for the abolition of taxpayer-funded entitlements, most people prefer instead to rail against the "flood of illegals" that are supposedly "draining our economy." They fail to realize that these "free" services may be part of what attracts immigrants to the US in the first place, though one wonders how an immigrant without a valid government ID would go about obtaining government services.

These people are correct in one regard...the taxes and endless entitlement programs are indeed a drain on the economy, as are the rules and regulations. Exactly how they affect the economy is a subject for another post, but the fact is that the government programs should be the target of public ire...not illegal immigrants.

Doing the Right Thing

2007-10-10T13:22:00.001-04:00

A strange thing happened to me yesterday...

I had taken my wife's car to our local Honda dealership on Monday, as the check engine light had come on and it was running poorly. A few hours later, the service adviser called me to tell me what the problem was and how much it would cost to fix it. It wasn't cheap. Also, they didn't have the part, so it would be overnighted to them and they would fix it the next day. The following day I received another call. The part had been replaced, but it hadn't entirely fixed the problem. There was another part that was needed, and again, it had to be overnighted. It also increased the total repair charge by about 65%.

This put us in a bit of a bind. The money wasn't really an issue, but having the car out of commission for two days created transportation problems for us. My wife needs her car to get to work, and since part of her job is coaching a soccer team she has a lot of stuff to carry around. She also has to be able to get from work to the soccer field and all that good stuff.

So, while I'm still on the phone with the service adviser, wondering how we're going to resolve our transportation problem, he offers to reduce the overall service bill by 10%. I didn't ask him to. Nobody told him he had to. He just offered. How weird is that?

Then, as I was expressing my gratitude for this generous gesture, I told him that we would need to come get some items out of the car and casually mentioned our transportation problem. I certainly didn't expect him to do anything about it. I was just communicating that I hoped we wouldn't run into any other setbacks in the repairs. You won't believe what happened then.

The service adviser offers to provide me a rental car for the duration of the repairs...free of charge! I was blown away. This was not the typical car dealership treatment. This was above and beyond, as far as I was concerned. I actually thought about declining the rental car offer, but we really did need the transportation, so that afternoon we headed to the dealership, picked up the items we needed from the car, and waited about 15 minutes for the rental car to arrive.

So what's the point of this anecdote...the moral of the story, if you will?

I've often heard the argument that in order for a truly free market to work properly, it requires that people do the right thing. However, as Adam Smith and loads of economists since him (and a few before as well) agree, the exact opposite is true. In a free market people do the right thing because it's in their best interest to do so. To quote Adam Smith directly:

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own neccessities but of their advantages.

The service adviser at the dealership didn't offer to reduce my bill out of the kindness of his heart. He didn't call Enterprise Rent-A-Car because my need was great. No government official told him he had to bend over backwards to make sure my life was disrupted as little as possible while my car was being repaired. He did these things because he knows that I own an older vehicle that will likely require more repairs in the future, and if he treats me right in this instance I won't hesitate to bring it back to his dealership the next time it's in need of service.

The free market provides a framework wherein individuals, acting in their own self-interest, do the right thing without really meaning to. Business owners treat their customers fairly and with respect in the hopes that they will come back and do business with them later. The very survival of any business depends on it...or at least it would were it allowed to work. More often than not, however, government skews the incentives provided by the free market to "do the right thing." Heavy-handed government regulations replace incentives to "go above and beyond" in order to keep customers happy with a more costly incentive to merely comply with regulations to keep bureaucrats happy. Subsidies replace incentives to be efficient and reduce costs with more lucrative incentives to keep costs stagnant and push for even greater subsidies.

On the other side of the coin, a lot of people get hung up on motivation. They think people should be altruistic, and feel that if someone does something good for you just because they want your money it somehow invalidates the act. I say, "Who cares?!" When the levees (built by government) in New Orleans failed, and thousands of people were left homeless or worse, Wal-Mart had hundreds of trucks filled with supplies standing by to help the victims of government failure get on with their lives. But many people thought Wal-Mart shouldn't be allowed to help, since they were "only doing it to improve their image." Those evil bastards! How dare they try to help for the wrong reasons! I'm betting, though, that the people whose homes had just been washed away were probably more than happy to accept Wal-Mart's help, and didn't care in the least about their motivation.

DO NOT BAIL OUT SUBPRIME MORTGAGE HOLDERS!!!

2007-08-31T10:34:00.000-04:00

President Bush intends to outline a plan to assist those who will soon suffer hardship by their choice to live beyond their means.

Here is the email I sent to my senators and representative in Congress on this issue:

DO NOT BAIL OUT SUBPRIME MORTGAGE HOLDERS!

If he hasn't already, President Bush plans to urge Congress to pass legislation to provide assistance to subprime mortgage holders. This message is to urge you to VOTE AGAINST ANY SUCH LEGISLATION.

As a homeowner and standard mortgage holder I have made conscious, responsible choices regarding my finances. Like most people I have at times overextended myself in the past, but I have NEVER expected anyone else to pay my bills or bear the cost for my mistakes. President Bush's proposal will do just that. It will lay the cost of others' mistakes at the feet of responsible individuals like myself and the millions of other Americans who have worked hard to keep their finances in order, live within their means, and have good credit as a result.

You may be inclined to blame banks or "predatory lending practices" for this problem, but this would be placing undue blame on those institutions that merely operate at the whim of the Federal Reserve (FED). By guaranteeing every loan, no matter how risky or unsound, the FED has encouraged irresponsible lending and created the very "crisis" we now face. Spending the money earned by taxpayers to assist those who face hardship as a result of this policy will make us all victims of the FED. Bailing out those who have made poor choices will only encourage more poor choices, and it will render meaningless the hard work put in by the rest of us. By mitigating the consequences of irresponsible behavior, further and more egregious irresponsible behavior will be encouraged.

DO NOT use my tax dollars to support this effort.

Sincerely,

Ron Jennings

Truly, this does suck for the people who have entered into these high-risk mortgages, but I believe that in any transaction there is equal responsibility on both sides. This means that the borrower has a responsibility to understand what he/she/they are getting into and what the consequences of insolvency may be. Some believe that subprime mortgage holders have been duped into overextending themselves, and it is certainly possible that the lender used some fancy language or persuasive arguments to close the deal on a risky loan. But how is this any different than say, buying a used car? Though smarmy and slimy, used car salesman can be awfully persuasive...but you still don't buy the car without driving it, and if you do there's no one to blame but yourself. Until fairly recently (perhaps 10-15 years) a prospective borrower hired a lawyer to at least review the mortgage paperwork, much like a prospective used car buyer might hire a mechanic to check out a car they were thinking about buying. That practice has fallen out of favor somewhat as mortgage companies have started "cutting out the middleman" and providing their own closing agents. Again, it is the responsibility of the borrower to ensure that he/she/they are protected. To do otherwise opens oneself to undue risk.

On the other side of the transaction...while I certainly don't hold smarmy lenders harmless in this instance, the lending of funds to sub-prime borrowers holds a great deal of risk. This risk is mitigated to a great extent by the Federal Reserve's backing of every loan. The FED creates credit (money out of thin air) for banks to lend in an effort to stimulate consumption. This brings with it a great deal of hidden cost, in addition to inflation. In a free banking environment (absent the Federal Reserve) banks would be much more risk averse, as the cost of a defaulted loan would depend on the bank's ability to liquidate the asset tied to the loan. Banks wouldn't put themselves at risk of losing millions of dollars loaned to unsound borrowers. The elimination of the FED and a return to free banking would do much to stabilize the mortgage market and prevent "crises" such as these.

The "Threat" of Wal-Mart

2007-08-17T14:04:00.000-04:00

All over America, communities are fighting the blight of the ubiquitous Wal-Mart Super Store. These heroic Wal-Mart fighters are champions of the little guy, protectors of the Mom and Pop business, and defenders of historical integrity...or so they believe. While many of them may mean well, there is nevertheless a great deal of contradiction in the beliefs held by those who oppose Wal-Mart and other "big box retailers". Viewed from a distance, their efforts may seem noble, but close inspection reveals a more insidious line of reasoning.

People love to hate Wal-Mart for a variety of reasons, but there are a few standards that come out nearly every time a Wal-Mart "threatens" a geographical area with its presence. Many decry Wal-Mart's low wages and lack of employee benefits. Others hate that Wal-Mart drives smaller, less competitive businesses out of the market. Some dislike the fact that a Wal-Mart often attracts numerous other businesses to its locations, thereby contributing to "sprawl". On an emotional level these things all certainly seem deplorable, but when considered rationally these arguments all break down. One simple question puts them all into perspective: How many people, in a given geographical area, are harmed when a Wal-Mart opens up, and how many people in that area benefit from it.

The people who may be harmed tend to be obvious. Local businesses who face competition from Wal-Mart may indeed be forced to close their doors as consumers exercise their preference for lower prices and greater convenience by shopping at Wal-Mart. This does, indeed, bring temporary hardship to the owners and employees of those businesses. Some may argue that all the members of a community are harmed when a local business closes, but I fail to see how that could be true. Some may bemoan the loss of a local establishment, and friends and families of the affected business owners may feel some grief, but again this is a temporary condition, and it shouldn't render anyone incapable of ever obtaining another job or finding some other productive means of making a living.

Others who may be "harmed" are those who prefer to (and can afford to) shop at local businesses rather than at big box stores. This is not so much harm as inconvenience, and the fact remains that if there are enough people who refuse to shop at big box stores then boutique shops should have no fear of losing revenue.

The number of people harmed when local businesses close due to competition from Wal-Mart may number in the tens or possibly even 100s. These are the "victims" that Wal-Mart haters claim to be protecting. What is rarely considered, however, are the thousands who benefit when a Wal-Mart comes to their town. Poor families benefit greatly from reduced grocery bills, clothing costs, and household item costs. In addition, Wal-Mart brings valuable jobs to any area in which it's located. But often this fact is turned completely on its head and used as an argument against the store, as outsiders claim that the wages paid and benefits provided are too low. It must be kept in mind, though, that the people who apply for and accept jobs at Wal-Mart don't quit higher-paying jobs with benefits in order to take a lower-paying job with no benefits. They work at Wal-Mart because it offers a better alternative than what they would have otherwise had.

In the end, those who oppose Wal-Mart are simply attempting to impose their own preferences on others, without consideration for the costs of doing so. They attach inflated importance to "historical preservation" or apply some arbitrary standard of what wages and benefits Wal-Mart should offer their employees, with no regard to poor families who must bear the costs for those preferences by being forced to pay higher prices. Competition is the nature of Capitalism. It is what causes quality to constantly improve and prices to continue to fall. It raises the standard of living for everyone, and in absolute terms the poor benefit the most. To stand against it under the pretense of protecting a few people from temporary hardship isn't noble or heroic, but harmful and elitist.

Libertarianism is a utopian ideology?

2007-07-19T14:11:00.000-04:00

Here's a good quote from paper I just finished reading:

The free market is not a panacea. It does not eliminate old age, and it won't guarantee you a date for Saturday night. Private enterprise is fully capable of awful screwups. Both theory and practice indicate that its screwups are less pervasive and more easily corrected than those of government enterprises.

It's from an article on externalities, written by Gene Callahan.

Libertarianism, particularly in its support of the free market, is not at all utopian. We realize that there is no perfect answer to the problems facing society. We just understand and accept that private solutions always work better than government coercion.

Let's Talk About Freedom of Speech

2007-07-11T09:51:00.000-04:00

In March, 2004, Elizabeth Book was arrested for going topless in protest of a Daytona Beach, Florida, law prohibiting women from exposing their breasts in public. On appeal, a Florida appeals court ruled that Book had a right to bare her breasts because she did so in protest. While many would consider this a victory for 1st amendment rights, I feel that it's disingenuous, and that it further muddles the issue of what, exactly, "freedom of speech" really means.

There are two things at issue here. First, the ruling reinforces the belief that only certain kinds of speech are protected by the 1st amendment. Because Book bared her breasts in protest her actions were permissible. Had she done it just for fun or to even out her tan, she would have remained guilty of violating the law. Again, this brings up two questions: First, is speech only protected under The Constitution if it's done in protest or meets some other arbitrary and necessarily subjective set of conditions, or is all speech protected? Second, is any activity protected so long as it meets that same set of conditions? As one commenter to the afore-linked-to article so aptly put it, "So then in Florida car jacking someone in protest of a law making car jacking illegal is exercising their rights?" By this logic anything is permissible so long as it's done for the right reasons.

The second issue is one of property rights, and there are a couple of facets to this as well. First, and most obvious, is that Elizabeth Book's breasts are her property, as are all of her body parts. As such, in a society that respects the right to private property she would have the right to do with them as she pleases, so long as she's not violating someone else's rights in the process. Unfortunately, American society largely does NOT respect the right to private property, so others are able to dictate what Elizabeth is and is not allowed to do with her breasts.

The other facet of property rights in this case deals with the question of on whose property Book bared her breasts and whether or not its owner would have permitted her to do so. Again, in a society that respects private property, the owner would be free to dictate what types of activities were and were not permissible on his or her property. The problem is that Book wasn't on private property when she removed her shirt...she was on "public" property, which is property owned by everyone or, more appropriately, by no one.

The institution of public property confuses a plethora of issues that should be relatively simple. In the case of freedom of speech the existence of public property necessarily creates controversy over who is allowed to say what, why, and where. On private property the owner decides, making the issue a non-issue. On public property the "public" (often in the form of a jury or ballot initiative), or a government official (in this case, a judge) decides what is and isn't acceptable behavior, so the decision must be left to the arbitrary whims of the majority, the persuasive powers of a litigator, or the subjective valuation of a bureaucrat. With all of these voices subject to persuasion by the whims and fancies of the day, the concept of "free speech" can never be truly defined. It is only through the institution of private property, from which stem all other individual rights, can freedom of speech be put into its proper context.

As previously stated, Elizabeth Book (and indeed all humans) is the owner of her body and all its parts. If she chooses to expose it to the elements that is her right, and she violated no one else's rights by doing so. Not a single person was forced to view her nudity, as by a simple turn of the head or the aversion of his or her gaze any and everyone could have avoided looking at Elizabeth's breasts. She is, however, bound by the responsibility to not violate the property rights of any other person in doing so. This means that she cannot expose her body in a manner inconsistent with the wishes of the owner of whatever property on which she happens to be at the time. If she doesn't want to abide by the property owner's wishes she is free to find some other piece of property whose owner is amenable to her nakedness.

Indeed, the city ordinance prohibiting women from exposing their breasts in Daytona Beach could be considered a violation of the property rights of business owners in the area. It is entirely possible that the businesses who choose to operate in the area do so in anticipation of attracting a particular type of clientele, and prohibiting certain activities may actually hinder their ability to do so, thus costing those businesses to lose potential profits. For those of you who would argue that decency is more important than profit, I challenge you to define "decency" in any objective manner.

By the same token, a ruling stating that any woman MUST be allowed to expose her breasts on public property violates the property rights of those businesses who wish to attract the type of customers who may find nudity offensive. Herein lies one of the problems with the concept of public ownership of streets and roadways. Behavior may be protected in public streets that is harmful to the owners of adjacent private properties, but it must be allowed because the law says so.

The 1st amendment was a valiant attempt to protect Americans from a government that would at times desire to suppress dissent by curbing free expression. As glad as I am that it exists, I take umbrage to its being trotted out to defend any activity that violates the rights of private property owners. The classic example of yelling "Fire!" in a movie theater is a perfect illustration. The yeller has clearly violated the property rights of the theater owner (by costing profits and possibly physical damage to the theater) as well as the rights of all the patrons who paid to see the movie, but many a lawyer would argue that his right to yell "Fire!" is protected by the 1st amendment. Elizabeth Book's right to bare her breasts shouldn't have been protected under the 1st amendment, but rather by a basic right to private property, not only Elizabeth's right to ownership of her body, but also the rights of private "real estate" owners to use their property as they see fit.

Morality and the Market Economy

2007-05-21T13:49:00.000-04:00

For all of you out there who still think that I (along with all other Libertarians) am a soulless, ethically challenged corporate shill because I support a truly free market, I present the hereto linked article: Plunder or Enterprise: The World's Choice, by Thomas E Woods

It clearly illustrates the exact reasons for which I support the market economy...not because I think businesses are all great and wonderful, but because the free market is a framework that encourages morality and ethical behavior while punishing the opposite. I encourage you to read the whole thing, but there are a few passages that I think are particularly poignant:

One of the market's virtues, and the reason it enables so much peaceful interaction and cooperation among such a great variety of peoples, is that it demands of its participants only that they observe a relatively few basic principles, among them honesty, the sanctity of contracts, and respect for private property.

By observing (and enforcing) these few simple rules, a very strong ethical and moral system is created...one that fosters peaceful exchange and concern for the well-being of others:

The market all but compels people to be other-regarding, but not by means of intimidation, threats, and propaganda, as in socialist and statist systems. It employs the perfectly normal, morally acceptable desire to improve one's material conditions and station in life, both of which can grow under capitalism only by directing one's efforts to the production of a good or service that improves the well-being of his fellow man.

The author also addresses various objections to the market by its critics. For instance,

It takes little imagination to surmise how critics of the market would respond to such a claim [that the market itself encourages moral behavior.] Doesn't the market encourage greed, rivalry, and discord? Does it not urge people to think only of themselves, accumulating wealth with no thought to any other concern?

And responds...

That human beings seek their own well-being and that of those close to them is not an especially provocative discovery. What is important is that this universal aspect of human nature persists no matter what economic system is in place; it merely expresses itself in different forms. For all their saccharine rhetoric, for example, communist apparatchiks were not known for their disinterested commitment to the common good. They, too, sought to improve their own well-being — except they lived in a system in which all such improvements came at the expense of their fellow human beings, rather than, as in a market economy, as a reward for serving them.

The author goes on to challenge several criticisms of the market economy, each time responding with what I feel is an excellent illustration of some of the best reasons to support the free market.

Please Help Me Understand

2007-05-11T12:29:00.000-04:00

I need some help. I'm having a difficult time understanding something, and I'd like your input on the subject...

In general, there is a great deal more distrust of the market than of government. Many people put a lot more faith in government to solve problems and provide for us than in the free market.

Why is this? If you are one who has little or no faith in the market and instead trust the government to protect and provide for us, please tell me why.

I'm not baiting anyone for the purpose of blasting them, I just really want to get a handle on that side of this argument. That said, here are some lead-in questions and observations:

Corporations are made up of people. Government is also made up of people. Both are subject to the same human shortcomings, desires, vices, etc. What makes one more or less trustworthy than the other?
If your answer to the first question was something like, "Corporations are motivated by profits, and profits are evil." Then my question is, "What, then, motivates government?" Are the individuals in government somehow motivated by some higher or more legitimate cause? Are they somehow less corruptible than the individuals who make up a corporation?

My bet is that this is not likely. Politicians have to be motivated by something, and I'd stake my left nut on the bet that they're motivated by power. Now, it could be that they only desire power so they can "do good things", but it's power nonetheless, and being human means that they are corruptible...just as much so as the individuals who run corporations. In fact, they may be more susceptible than corporate shills simply because they stand to suffer little or no loss for their mistakes or outright corruption. At best, they receive a slap on the wrist for their wrongdoings. In a free market setting, however, there are numerous mechanisms to ensure that the costs of corporate corruption are born by those who are corrupt...until government interferes to shift those costs to taxpayers, of course.
Finally, if we don't trust the individuals in government any more than the individuals in corporations why do we keep putting government in charge of more and more of our money, freedom, and personal affairs?

Let the enlightenment begin!

TV - "Educator" of the Masses

2007-05-03T16:05:00.000-04:00

I get irritated with television a lot. Of course, I'm not the only one. With all the different programming on television anymore, probably every viewer gets irritated with it at some point. My beef, though, isn't with the boring programming, inane "reality" shows, or sex and violence (in fact, I'm all for those latter two). What I specifically object to is the "message" that most television programming seems to tend toward, particularly with regard to economics, history, or government.

Now, as a free market advocate, I realize that it is not my place to determine what others watch or don't watch. I'm not advocating that any particular programming be taken off the air or censored for any reason (even if it just plain sucks). So, this post is basically just me bitching about something that irks me. (Enough of a disclaimer for you, Kathy? ;)

My wife and I watch Law and Order: SVU a lot. We like the drama of the show, the cases are usually interesting, and Mariska Hargitay is totally hot, so there are lots of good reasons to like it. Too often, though, the point the writers seem to be trying to make about politics, society, or whatever, bugs the crap outta me.

One recent episode in particular set me off on a tirade...

A convicted pedophile was being charged with the rape and murder of a young girl, to which he confessed. He claimed, though, that he had been successful in resisting his urges until he started receiving emails from a porn site featuring photos of 18-year-old women doctored to appear many years younger. The web site's owner was then indicted as a responsible party in the crime by virtue of his marketing to known pedophiles via email. The pedophile claimed to have attempted to unsubscribe from the site's mailing list to no avail, and the repeated emails wore him down to the point where he could no longer resist the urge to take advantage of young girls. The site's owner was found guilty as an accessory to the rape and murder of the pedophile's victim.

Now, I agree that the practice of marketing child pornography (or virtual pornography in this case, since the photos were of legal-age women) to known pedophiles may be deplorable, but I don't believe it constitutes a crime. At worst, the site's owner was guilty of fraud because the pedophile's email address was not removed from their mailing list when requested. Even so, there were plenty of other measures the pedophile himself could have taken to make the emails stop. There is a lot of spam-blocking software out there, and most ISPs and email programs allow the user to create a list of blocked addresses. Failing that, he could have just as easily changed his email address altogether. Had he wanted to resist, the tools were available for him to do so.

The owner of the website may indeed be among the world's biggest assholes, but again, being an asshole isn't a crime. Noone's rights were violated by his marketing tactics, so the commission of the crime against the young girl was the responsibility of the pedophile, regardless of any outside influence.

Yes, I know we're talking about fiction here. It's just television. It's not real. Still, people believe a lot of what they see on TV, and I doubt that many people took a minute to think about how the outcome of the case on Law and Order fit into their own system of beliefs. More than likely their response was purely emotional...agreeing that the filthy evil porn-monger should go to jail for feeding on the weakness of his fellow man...feeling that the real victim was the pedophile, who just couldn't help himself.

Again, I'm in no way advocating censorship. The First Amendment protects the porn-monger equally to the Law and Order writers and all our various news media outlets. It falls to each of us to question how what we see on TV fits into our own system of beliefs, rather than allowing ourselves to be swayed by an emotional response presented as entertainment.

Copy Wars

2007-05-03T14:03:00.000-04:00

So somebody has finally cracked the code needed to remove copy protection from all high-definition (HD) DVDs, and in a move that's been described by some as "liberating" they've posted it all over the 'net. Download junkies can now freely copy and redistribute any HD-DVD they like, and no one would be the wiser. Hardly surprising is that the HD-DVD Consortium has declared this a criminal act, and more than one website has removed the code from message boards and blog posts.

Digg.com, however, has chosen to allow the code to remain on its website in a dubious effort to fight a "way for big business to gouge individuals." ABCNews calls the decision "irresponsible" and even "craven", saying that Digg's founder should have stood up to his customers and protect the Consortium's trade secrets. I believe, though, that they've missed the point entirely.

The ABCNews article talks about patents, the First Amendment, and the value of information, but I think it's all really a lot simpler than that. When you, as a consumer, purchase a CD, DVD, book, magazine, newspaper, or any other type of media, you enter into a voluntary contract with the media's publisher which states that by purchasing the item you agree not to copy its contents for redistribution. If you then copy and redistribute the contents in a manner that violates the contract you've committed a crime...a breach of contract. That's it...period.

On another note, I have no opinion on what Kevin Rose should have done about the content that was posted on his website, but trotting out the First Amendment as an attempt to protect oneself from retribution for wrongdoing is crap. The First Amendment doesn't allow you to say whatever you want to say with impunity. Words can constitute a crime just as easily as actions can, and the person(s) who broke the copy protection code committed a breach of contract by doing so. The fact that they then turned around and shouted it to the world doesn't absolve them from the crime or bestow upon them some magical protection from recourse by those from whom they have stolen.

Talk About Your Dubious Distinction...

2006-10-30T13:00:00.000-05:00

We have a new winner in the Most Dangerous City in the U.S. competition! Yes, St. Louis, Missouri tops the charts this year, boasting an increase in violent crimes that outpaced other cities in the Midwest. Sorry, Steve...

Here's what I found most interesting about the article:

St. Louis has been spending millions of dollars on urban renewal even as the crime rate climbs.

Funny how so many buy into the notion that if we just give people in urban areas more free stuff (nicer homes, trendier businesses, etc.) they will be compelled to turn from their wicked ways and stop killing each other. Interesting how it never occurs to lawmakers that it might work the other way around...that violent crime is what causes urban areas to deteriorate into slums.

The fact is, successful businesses are one of the factors that bring prosperity to any area. But it's tough to run a business when you have to be constantly worried about being robbed or shot. Consequently, businesses don't stick around long in crime-ridden areas. Reduce crime first, and voluntary urban renewal will follow.

So...how do we reduce crime in urban areas? The first step would be to call off the War on Drugs...but that's another post.

Who Dispenses Justice [in a Libertarian Society]?

2006-08-28T12:40:00.000-04:00

Recently my wife and I went on vacation with some friends, and one day a discussion about Libertarianism ensued...as such discussions are wont to do. During this discussion a question was put to me, which was: "If I stand just off your property and yell obscenities day and night, who dispenses justice?"

Now as it happened on this particular day I had decided that I should do my best to consume what alcohol was left in the rental unit, since we only had a day or two before we had to check out. I have no idea how much I had imbibed by the time the discussion began, but it was definitely enough to impair my ability to effectively answer the question as presented...at least to my satisfaction. So, lest my friends think they "got me" on that point, here is the response I would have given, had I had full use of my faculties at the time. ;)

First, the question as worded seems to assume that Libertarianism = Anarchism. Admittedly, this is a comparison which many Libertarians would find agreeable, depending on the individual's view of the legitimate role of the State. Since I happened to be reading Rothbard at the time, I found the question very poignant, as he arguably felt that the State is an entity that can and should be dispensed with whenever possible...which pretty much means "always".

The bottom line, however, is that there must be some system to arbitrate disputes between individuals or groups and in some way punish violations of rights by one against another. This system can take many forms beside the currently accepted form of State-administered justice, with all its waste, corruption, and perverse incentives. In For a New Liberty, for instance, Rothbard outlines a system of private arbitration that is completely separate and independent of the State, and it is indeed compelling.

A more important question, though, is what exactly constitutes "justice" in this case...or rather, what is the injustice that must be put aright? Am I being harmed by the obscenity-yeller, and if so in what way? From a Libertarian standpoint, I am only being harmed if the aggressor is somehow violating one or more of my rights. More specifically, since all individual rights in one way or another are a product of property rights, is the yeller somehow violating my right to private property? I think, yes.

If we go back even further into the origins of property rights, to Locke, all right to property stems from an individual's ability to be productive. This ability grants the individual exclusive rights to dispose of the fruits of his or her productivity in the manner he or she sees fit. Someone standing at the edge of my property yelling obscenities could very well have a negative impact on my ability to be productive. If the yelling is incessant, persisting day and night, I probably won't be able to sleep. This would certainly affect my ability to be effective at my job, possibly causing me to lose some income and resulting in financial harm.

There are other ways I could be harmed as well. I could become ill from lack of sleep, or I could fall asleep at the wheel of my car, thereby harming me physically. In the end, though, both of these impact my ability to produce, and we're back at Locke's viewpoint. By the same token, the yelling would probably affect my ability to use my property as I see fit, as I may not be able to spend time outside my home in my yard without being yelled at.

So, even if we don't consider the possibility of various types of "psychological harm" that might be done to me, there are still several ways that I could be harmed by this aggressor. Any of these would be cause for dispensation of justice by whatever system happens to be in place at the time. Next time, I'll make sure I'm sober before starting an argument.

It's Official...Government Sucks!

2006-07-05T16:34:00.002-04:00

If you're in doubt as to how pervasive government is in our everyday lives, just ask any resident of New Jersey. Their state government is gridlocked about how to close a $4.5 billion "budget gap", so the whole state has ground to a screeching halt, including state parks, beaches, and even the casinos in Atlantic City.

Now I ask you, would a private casino ever close its doors if it wasn't forced to? (Yes, Atlantic City casinos are private, but they're not allowed to operate unless the government hawks are there to ensure the state gets its cut.) Would a private park close its gates over the State's indecision? Would a private police force have to work for free just because the State can't get its shit together? No...absolutely not.

On the other hand, increasing taxes is not the right answer either. The "lawmakers" are correct that such a sales tax increase would impose additional costs on families, but has any one of them suggested that they cut anything out of the budget? I doubt it.

The answer is to take a hard look at the "services" the State provides at taxpayers' expense and eliminate those that could be provided better and cheaper by private firms, without a bunch of stupid interruptions...which would include pretty much all of them.

Are Consumers to Blame?

2006-05-19T10:02:00.000-04:00

During a recent discussion with a friend about immigration, I made the argument that prices on some goods and services would be higher if it weren't for the availability of cheap labor provided by illegal immigrants. My friend responded with skepticism because she doesn't believe the cost savings on labor are necessarily being passed on to consumers. This belief is pretty common, and those of us who are believers in the invisible hand of the free market would argue that competition among businesses provides an incentive for passing those savings on to their customers, as he who offers the best service at the lowest price should be the most successful. Still, this doesn't mean that some businesses don't continue to save money on labor (or other factors of production), charge the same prices, and pocket the difference. But how can a business that does so stay in business if the potential exists that his rivals will underprice him, thereby taking away his customers?

I think I have an idea of at least one factor that contributes to that ability significantly...irresponsible consumerism.

My friend cited landscaping and painting as her example, as there are services for which she's contracted with local businesses in the past. She said that it's been her experience that bids for the same job from different businesses seem to come in "all over the place." Business A may bid $1000 for a painting job, while business B may bid $3000 for the same work. Why the difference?

There could be many reasons. Business A may not do as good a job as B, or B may be in higher demand than A. Maybe B uses only certified, bonded laborers, whereas A hires day labor. Regardless of the reasons for the disparity, it is the consumer's responsibility to ensure that he or she is getting the best value. This is why my friend gets at least 3 bids for any job, putting her among the responsible ones. There are plenty of people, though, who simply take the first bid they get. Since prices are ultimately determined by what people are willing to pay for a particular good or service, this could certainly contribute to rising prices.

In addition to shopping around, further responsible action may be required, such as asking Business B why his bid is so much higher than his rival's. This gives notice to B that he must compete with A for your money, providing him with incentive to either lower his price or convince you that his work is worth the additional cost. By the same token, calling A to find out how he's able to charge so much less than B would provide information that could help make an informed decision. Of course, A, B, or both could simply respond by talking smack about the other, which would be telling in itself.

Too often, people are unwilling to put in the legwork necessary to make an informed purchase decision, and in the event that it leads to a bad experience the typical response is to shift the cost of the poor choice onto someone else. Whether the cost is shifted to the manufacturer or service provider in the form of a lawsuit, or widely distributed to taxpayers and consumers in the form of increased regulation resulting in higher prices, we all pay extra for the bad choices made by some. Government intervention in the form of regulation, the Consumer Product Safety Commission (CPSC), and the Food and Drug Administration (FDA) only serve to exacerbate the problem by making it unnecessary for consumers to act responsibly. Such paternalistic tendencies affect all areas of our lives, undermining personal responsibility every step of the way.

Absolutely Unbelievable...

2006-05-18T12:50:00.000-04:00

Forget about defining marriage, the city council of one Missouri town has taken it upon itself to define what a "family" is and is not. Further, it presumes to dictate who may live with whom, and under what circumstances.

The current ordinance prohibits more than three people from living together unless they are related by "blood, marriage or adoption."

This is unmitigated gall in the extreme. I don't even know what else to say. I know I should explain exactly why I feel that way about it, but right now I'm too disgusted.

Yet Another Post on U.S. Auto Makers

2006-05-12T08:46:00.000-04:00

In the Soviet Union, there were frequent problems with production for its own sake, and the problem was often made worse because it was hard to monitor the managers in every industry -- the old joke is that an order for 1000 pounds of nails was just as likely to result in one 1000-pound nail as it was to result in 1000 pounds of "normal-sized" nails.

But getting back on topic:

Saying that the Detroit auto builders employ more workers per car built is just another way of saying they're less efficient. It's hard to believe that anyone thinks this should be a badge of honor.

There's an old story about an economist visiting the Soviet Union in the 60s. He is taken on a tour of a new dam project East of Moscow, and he observes that the workers are using shovels to prepare a foundation while various bulldozers and earth-movers sit idly by. "Why are the workers using shovels instead of heavy equipment?" he asked.

"Well, we can employ many more workers if they dig by hand," responded his tourguide.

To which the economist said: "Well, if the goal is to employ as many workers as possible, why not dig with teaspoons instead of shovels?"

A healthy business, industry, or even economy, does not function to provide employment. Employment is a side effect of a healthy, growing economy. The purpose of an economy is to produce goods and services that consumers will want to buy. One service provided is labor. But labor is only valuable when it is willingly bought by those who demand it. Employment for its own sake makes no more sense than production for its own sake (think of the 1000 pound nail).

More U.S. Auto Maker Frenzy

2006-05-11T16:28:00.000-04:00

Okay first off, the name of the group referenced in this article (the Level Field Institute) kills me. There’s no such thing as a “level playing field” in a free market. Businesses that are good at serving their customers will be successful, while those that aren’t will fail. “Leveling the field” usually means hindering a successful business for the benefit of one (or a group) that is less competent. Hobbling the fastest runners so the slower ones have a chance to win hardly results in a moral contest.

The group’s central argument is the fact that U.S. auto manufacturers employ more workers that foreign auto makers.

"The truth is, U.S. automakers still employ eight out of every 10 autoworkers — four times more than all the automakers from Japan, Korea and Europe combined."

…to which I say, “so what?” Lots of businesses employ more workers than lots of other businesses. The comparison is silly, especially since domestic auto makers are talking about more plant closings in the near future. Are they suggesting that the foreign auto makers’ plants in the U.S. should be shut down and their workers divvied up between Ford, GM, and Chrysler plants?

"I'm surprised that with the Big Three meeting with President Bush next week to talk about their survival, few people seem to care," [Jim] Doyle said. "I don't think people appreciate the difference in the scale and quality of the jobs at stake..."

No, of course they don’t...nor should they. Consumers care about the quality and price of the vehicles being produced. They will support the jobs they value most highly by spending their money…and condemn those of lesser value by not spending it. The fact that U.S. auto manufacturers are unable to compete in any market, domestic or global, means that consumers have chosen them for extinction unless they get their shit together. I’ve said it before...the giant, uncompetitive American auto makers must be allowed to fail, so that the workers they employ can find jobs in areas more highly valued by consumers.

There is a bright spot in the article, though…

"Detroit's ability to shape important government policies, such as fuel-economy and air-pollution rules, will be much diminished, and the likelihood of federal aid for research and development will be reduced," Patel wrote in a recent research note.

We can only hope.

Christ...now they're taking our jobs AND our houses!

2006-05-11T15:47:00.000-04:00

The methodology used in this study is a bit silly, but the numbers are still interesting. I am a little confused, though. If illegal immigrants (most of which are hispanic) are supposedly depressing wages and lowering the standard of living everywhere they go, how is it that they're able to buy houses? Surely they're taking homes away from hard-working Americans!

Protecting our Borders

2006-05-10T12:14:00.000-04:00

Boy, am I glad we have people like Sheriff Arpaio, to protect our borders from those no-account, blood-sucking, wage-depressing, culture-diluting, non-English-speaking illegals! What ever would we do without these fine individuals to protect us from paying less for thousands of products and services? The ability to sleep better at night, knowing our borders are safe is well worth the extra money we’re forced to spend! What a load of crap.

Beyond the nonsense about “protecting our borders”, there’s something in this article that most people will probably miss:

The immigrants had been on their way to build a dairy farm
in this town about an hour southwest of Phoenix.

So, now there’s a dairy farm that probably won’t be built. If it is built, it will have to be done by American workers, so it will cost more to build. The extra expense could cause the dairy farmer to rethink his plans entirely, possibly deciding not to build the farm at all, or he could decide to build it in a more cheap-labor-friendly location. Even if the farmer does choose to go ahead and build the farm using American workers, there will be less money left in his pocket to spend on other things, such as equipment for the farm or food for his family. He will probably be forced to hire fewer workers, or pay lower wages to those he does hire, in order to recover the building costs. Should he decide to build the farm elsewhere, fewer jobs will be created in the original location, and local businesses will lose the benefit of those additional customers. Because of Sheriff Arpaio’s zeal to keep out the undesirable element, many people (besides just the illegals) will be worse off.

Mankiw on Trade and Outsourcing

2006-05-08T10:11:00.000-04:00

Two years ago Greg Mankiw got a lot of heat for publicly suggesting that (gasp!) outsourcing jobs to India could be an example of creative destruction, noting that it's better if we don't try to hang onto jobs that the U.S. no longer holds a comparative advantage in.

He finally sets the record straight in this post. If you neither believe that free trade makes everyone better off in the long run, nor that free movement of labor does, than that's a failure of we, the economists, to educate the public. But if you believe in free trade for goods but not of labor (or like some real geniuses, the other way around), then you're just a stubborn person in denial.

Why do things cost so much?

2006-05-06T16:44:00.000-04:00

This question was asked of me by my sister some time ago. In a similar vein, a friend recently lamented the fact that the final price of most products on the market don't faithfully reflect the costs of their production. The point of this post is to show how the workings of the price system answer the first question, while examining the relevance of the price vs. cost argument.

First, let's talk about labor. Labor is everything. Nearly 100% of the cost to produce any given service or product is traceable back to the labor employed to create every item used in its creation. In order to understand the full impact of this fact, one must look beyond the manufactured goods used to create a product and realize that those items began as crude resources buried in, laying on, or growing out of the ground. The resources themselves have no inherent cost, nor by the same token any inherent value. They are given value through the labor used to harvest them and make them into useful things. Therefore, it is impossible to determine the cost of any item without considering the labor used to produce each of its parts from crude resources, and the cost of such labor is determined by relative scarcity, along with the level of effort required to harvest those resources. No one person, committee, or government bureaucracy is able to determine what the cost of labor "should be", as it's relative to the difficulty of the labor being performed, the demand for the final product on the market, and the number of laborers with the necessary skills to perform the work. (This is one reason those who lament the transition in America to a mostly "service-based economy" need to calm down, but I'll save that discussion for another post.) And so the cost of labor, as with the cost of the final product or service, is determined by supply and demand.

The law of supply and demand is really a simplified way of explaining the very complex process that is the "price system". Prices do more than just generate revenue and profit for entrepreneurs and corporations. They are also a "yardstick" that helps show market actors (entrepreneurs and investors) where to invest their time and dollars for the greatest return. If the price of an item is high in relation to its cost of production, the market actors will invest in the production of said item in order to receive a profit. As more actors invest in the production of the same or similar items, competition forces them to adjust their prices in order to maintain their share of the market. If the cost of production remains constant, lower prices will mean less profit, so cheaper ways of producing the item(s) will have to be devised. In this way prices and profits constantly adjust to meet the changing conditions of the market.

Now, suppose the government stepped in and mandated a price control, saying that businesses were only allowed to make a certain amount of profit so that prices more accurately reflected the costs of production. Since profits would be the same across the board, the lure of investors to potential profit would be reduced, if not outright eliminated, meaning fewer dollars invested in new products or services. Additionally, competition between firms producing similar goods would be pointless. Since no one has the opportunity to make more profit than any other, why bother competing for consumer dollars? Probably the most intense effect would be the elimination of any incentive to find cheaper, better ways to produce anything, meaning that prices would remain high, while quality would stagnate or decline.

A friend told me the other day that his father paid $700 for a VCR when they first came out in the early '80's. Nowadays, a 4-head, hi-fidelity VCR with wireless remote can be had for under $50. Had government decided at the time that $700 was a ridiculous price to pay for a VCR and passed a profit cap on the product that limited its price to say, $300, 20 years later we'd still be paying $300 for a grainy picture and mono sound...complete with a wired remote. Unless, of course, the workers producing VCRs were unionized, at which point we'd probably be paying $1000...but I digress.

I'm a giant slacker.

2006-05-06T15:26:00.000-04:00

Okay, so it's been over a month since I posted anything to the wombat blog. I know...I suck. I have no real excuses, other than to say that for a while I've been wondering what the point in posting really is. There are so many blogs out there that it's not terribly likely anyone will run across mine, and even if they do will my ramblings really give anyone food for thought?

Maybe...maybe not. But I guess that's not really the point after all. The point is that ideas are where change begins. Most likely anyone that runs across my blog, whether they agree with me or not, will agree that there is something wrong with the world we live in, and most of them will probably not be sure what exactly it is that's wrong. For a long time, I was one of those people.

Now though, I have a much better understanding of the role that freedom (or lack thereof) and economics play in shaping society. So hopefully I have some things to say that will give others something to think about and reach their own conclusions. In the process my own conclusions and understanding will be tested, shaped, and solidified. So, even if nobody reads my spouting off about this or that, someone still benefits in the process...and that's the whole point.

"...[C]ars are a lot less expensive than people."

2006-04-05T15:30:00.000-04:00

I know...it's been a while since I posted to the wombat 'blog. I've kinda started to feel lately that the things happening all around us to erode our liberty and steal our wealth have gotten so ridiculous that I just don't know how to respond. I guess, though, that these are the times when it becomes that much more important that I DO respond, even if it doesn't seem to do much good in the short term.

So...on with the show!

Let's start in Massachusetts...

BOSTON, April 4 -- The Massachusetts legislature approved a bill Tuesday that would require all residents to purchase health insurance or face legal penalties, which would make this the first state to tackle the problem of incomplete medical coverage by treating patients the same way it does cars. (the rest of the story)

Now...let me go on record as being of the firm opinion that this is a phenomenally bad idea. Why? Lots of reasons:

First, it totally ignores (or is perhaps oblivious to or in denial of) the price-increasing effect "health insurance" has had on health care to begin with. By hiding costs from patients, health insurance eliminates any incentive to shop for health care services based on price. When was the last time you saw a price list in a doctor's office? If a visit to the doctor only costs you a $20 co-pay, you might not think twice about making an appointment for a child with a sniffle. If, on the other hand, you had to fork over $120 of your hard-earned cash to see a doctor for something minor, you might give it a day or two to see if the sniffle gets better before running to the doctor for some professional reassurance of your parenting skills.

And what about those who can't afford health insurance? Don't worry, the Taxachusetts legislature thought of that too, and they'll happily subsidize coverage for anyone whose income falls below the national poverty level. Can't afford to spend your own money on health insurance? Fine, we'll spend everyone else's money on it for you. In all fairness, this really isn't much different from what happens now across the country. Federal law prohibits hospitals from refusing to treat emergencies based on an individual's inability to pay, but someone has to pay. Often taxpayers foot the bill for such treatment.

Those without health insurance will be subject to fines until they sign up for a policy. Likewise, businesses who do not provide health insurance for their employees may be fined for each employee who is uninsured. So what about those who don't want to carry health insurance? (I assure you, such people do exist) Well, they no longer have any say in the matter...either get health insurance, or pay up.

Say, that gives me a great idea! I'm going to start my own health insurance company for people in Massachusetts who don't want health insurance. The premiums will be less than the fine for not having insurance, but you'll only be able to visit doctors that are "in network". Little will the Massachusetts muckety-mucks know that the only doctor in the network is a Hoodoo witch woman who lives on a raft in the Louisiana bayou. I could make a couple hundred bucks, easy!

In all relative seriousness, the unmitigated gall with which these idiots proclaim their victory is even more astounding than the bill itself. The comparison between health insurance and automobile insurance has been made by Libertarian economists for years, but Governor Mitch Romney drove the point home with this gem:

"We insist that everybody who drives a car has insurance," Romney said in an interview. "And cars are a lot less expensive than people."

Priceless.

Even better was the proclamation by Uwe Reinhardt, professor of economics at Princeton, that

"Massachusetts is the first state in America to reach full adulthood," said Reinhardt, noting that the new measure is a move toward personal responsibility. "The rest of America is still in adolescence."

Personal responsibility? How is forcing someone to do something they should be doing for themselves anyway a "move toward personal responsibility"? Personal responsibility would mean giving individuals the choice of whether they wish to carry health coverage or not. Personal responsibility would mean that the individual decides how much to pay for health care and where. Quite simply, it would mean a return to free market health care. Some of these yahoos, though, think that's exactly what they're doing. The piece goes on to say:

The same message might provide a political boost to Romney, who is considering a presidential run in 2008. By proving he can work with Democrats, and find a health-care solution that relies on the private sector, Romney can portray himself as an executive who can work across the aisle in harshly partisan times.

I fail to see any way that this solution "relies on the private sector". Rather, it hogties the private sector into doing its bidding...into providing health insurance for those who may otherwise present too much risk; into accepting arbitrary government-specified rates for their services; into paying fines for refusing to provide services they may not be able to afford to provide.

This is typical reactionary government. I really shouldn't be surprised. Health insurance has thus far played a significant role in the rising costs of health care, and this bill simply adds fuel to that fire. Health care costs will continue to rise at an accelerated rate, and the march toward socialized medicine will proceed. House Speaker Salvatore F. DiMasi said, "We did something to solve the problem." Indeed they did, but it's the wrong something.

The Stupid Leading the Blind

2006-03-10T14:47:00.000-05:00

More ham-fisted bureacratization of education...

CHICAGO - Most high school students eagerly await the day they pass driver's education class. But 16-year-old Mayra Ramirez is indifferent about it.

Ramirez is blind, yet she and dozens of other visually impaired sophomores in Chicago schools are required to pass a written rules-of-the-road exam in order to graduate _ a rule they say takes time away from subjects they might actually use. (Full Story)

I honestly don't know what to say. This is right up there with the requirement for braille instructions on drive-up ATMs.

Cherries...The New Gateway Drug?

2006-03-02T19:07:00.000-05:00

From DownsizeDC.org...

The Food and Drug Administration (FDA) is threatening cherry growers with fines and legal action for daring to publicize peer-reviewed scientific studies demonstrating the health benefits of cherries. According to the FDA's warped view of the world this makes cherries drugs that must undergo FDA testing before public statements can be made about their benefits.

This is stupidity on steroids. Though we must hasten to add that the safety of using steroids to make bureaucratic stupidity even more stupid has not yet been evaluated by the FDA.

Um...er...okay. So will all that talk on various commercials for oatmeal and breakfast cereals, claiming that they'll lower your cholesterol, help you lose weight, or make your bowel movements more regular suddenly come under scrutiny of the FDA as well? I guess the Quaker folks oughta start doing some lab testing and drawing up the thousands of pages of test results required by the FDA to get oatmeal approved for sale OTC. Don't want that stuff falling into the wrong hands.

Sheesh.

Only the Best Possible Care?

2006-02-21T12:53:00.000-05:00

During a recent discussion about health insurance, a friend told me that "whatever the most effective treatment is, that's the only option that should be available."

I disagree with this sentiment for two reasons:

1) It's impossible to implement and maintain, and

2) It's not something we as health care consumers actually want.

The reasoning for the first argument is pretty obvious. How could you possibly control the number of treatment options for any given condition? You could try making any form of treatment other than the approved option illegal, but that's not likely to stop doctors from performing them. Besides, we've all seen the horrendous outcome of outlawing things people want (prohibition, the War on Drugs, and gun control laws all come to mind).

There are a couple of reasons, though, why we wouldn't want there to be only one option...no matter how good it is. The first of these is price. It's likely to be high. A monopoly granted on only one form of treatment, or one product, or one service won't necessarily cause the price of that thing to increase immediately, but it will prevent it from decreasing as it normally would with the introduction of new technologies and more efficient processes. Sure, many companies may try to find ways to provide the same thing at a lower cost, but their efforts would be subject to scrutiny by whatever government agency oversees their particular market. This would add cost to the final product and delay its time to market, thereby reducing the incentive to innovate.

Also, by limiting consumer choice to only one option, many consumers would be priced out of the treatment they need. For instance, if a law were passed that said only the largest television with the best possible picture could be sold to consumers, many people would go without TVs, as not everyone would be able to afford the biggest and best. Since, however, there are myriad television choices available to consumers at varying prices, nearly every household in the United States has more than one television. An increase in consumer health care choices will, through competition, cause prices to decrease and quality to increase.

Radiology: Marketing Out of Control?

2006-02-21T11:22:00.000-05:00

You've seen the commercials, particularly during the Olympics this year, hawking state of the art medical imaging equipment. They feature doctors crowded around computer monitors, looking at spinning 3D models of bones or internal organs. It's all very high tech, cool-looking, expensive stuff...but is it useful?

I learned today that, for the most part, it isn't.

According to the radiology doctors at National Imaging Associates (a radiology services company), the 3D models provide little or no additional useful diagnostic information than the typical segmented images already produced by medical imaging equipment. In reality, all the 3D software is doing is taking those segments and stacking them atop one another to form a 3D image. It looks cool on the screen, but it can hide details that would be easily seen on the flat segmented images. Besides...it's really freakin' expensive.

From a marketing standpoint, though, the software is worth its weight in gold. Not only does it help sell imaging equipment (the usefulness of which is undeniable), it also gives care providers some additional whiz-bang functionality that they can use to attract patients. It may even boost patient confidence in the quality of treatment they receive.

In the end, however, the utility of the equipment becomes largely irrelevant when considered within the framework of our current health care and insurance system. If care providers spend millions on fancy software and equipment, the resultant increase in the cost of care will be hidden from consumers by health insurance, since the costs will be paid out of the pool of funds taken in by the insurance company through premiums, rather than by the individuals receiving treatment.

And herein lies one of the greatest reasons for increasing health care costs. When was the last time your doctor gave you an option between two or more forms of treatment, citing differences in cost as a possible determining factor in your decision? It's probably never happened to anyone who has health insurance. Even when there are several treatment options of similar effectiveness that vary in cost, doctors and patients typically choose the "best" and usually the most expensive treatment...often without hesitation. If patients were paying the bill directly, they would take more time to weigh their options, and fancy but mostly useless software and equipment would be weeded out of the market.

Bad Law, New Twist

2006-02-01T16:29:00.000-05:00

When did it become okay for politicians to tell a store what it must sell? It's bad enough that they can tell retailers what they can't sell, but this is a new one on me.

Why Steve doesn't get worked up

2006-01-29T20:47:00.000-05:00

I think Steve's a little bit mistaken. Steve would get worked up if he were me
right now.

What Steve didn't mention in his post is that he has the benefit of having gone through this phase already. He was once like me...excited, passionate, and sometimes obnoxious about Libertarian principles and economics (even before he knew he was a Libertarian), but over the years I've seen his political and economic views mature at a more rapid pace than my own. So even though I know the things Steve pointed out about people's beliefs, I still haven't accepted them as given, so they still frustrate me to no end.

This is not to say that Steve isn't still passionate, because he most certainly is. But it's not that incensed, immature, honeymoon fervor that I'm still learning to bring into constructive focus. And though he's resisted my efforts to get him to coach me on various principles and issues for fear of unduly influencing my opinion, his counsel, when he has chosen to give it, has been valuable.

So...all butt kissing aside, I've had a chance to reflect on the claim Steve mentioned about discrimination at the motorcycle campground and come up with what I think is a more constructive response. Say we assume the campground opens its gates to anyone, regardless of what they drive or ride, but it continues to be frequented by motorcyclists. Would non-motorcyclists who would rather not associate with a "bunch of rowdy bikers" and therefore choose to stay at another campground be engaging in discriminatory behavior? Absolutely...and they would be well within their right of freedom of association to do so. So why the double standard?

Why Ron gets so worked up

2006-01-28T18:00:00.000-05:00

So Ron asked me if I understand why he gets so worked up around his coworkers...

My answer is a qualified "no."

I sympathize, but if I were Ron I wouldn't get so worked up when I hear what Bastiat called "economic sophisms" from my coworkers. There are a couple of reasons:

1) People believe all kinds of things that don't jive with any kind of empirical analysis; this is often the result of availability bias or representative bias.

2) Most people's beliefs don't fit into any larger, coherent (or consistent) moral philosophy. Their beliefs about politics, philosophy, and economics are purely context-dependent. They will invoke the first amendment to fight censorship when they agree with the speaker and conveniently forget about the amendment's full implication when it comes to speech they despise.

Okay, I guess that can be frustrating. But it's to be expected. Most people have higher priorities than forming an internally consistent political or moral philosophy. As my colleague Bryan Caplan has repeatedly pointed out: they're being rational, in the economic sense of the word. There's little cost to holding inconsistent beliefs about politics or economics. Maybe if you thought about it, you'd experience some cognitive dissonance. Maybe if someone like Ron comes along, you might, maybe, be made uncomfortable when he points out contradictions in your views. But maybe not. Human beings have a great capacity for dissembling and compartmentalizing.

So this means that when someone objects to, of all things, a campground for motorcyclists only, on the grounds that it's discriminatory, she thinks this is a valid point. The libertarian contrarian responds that *of course* it's discriminatory, and so is a health club that only admits women, or a golf league that requires a handicap of less than six to join. The notion that discrimination is universally bad is a heuristic, i.e. a mental shortcut. In some cases, it's correct: sometimes discrimination is a bad thing. Jim Crowe is a good example of that. But the heuristic fails where free association is concerned. Rather than merely assert: "it's private property, they can do whatever they want," it may be better to present a puzzle, to bring the contradiction into the light: Is discrimination ever acceptable? Doesn't forbidding all discrimination essentially abolish free association? Many free associations rely on the ability to include (and therefore exclude) people based on all kinds of criteria. People, though, only seem to get very upset when a business discriminates, when they have criteria for who they will do business with. That's kind of strange, because no one seems to hold customers to the same standard, and the distinction between buyer and seller is very fuzzy in economics. More later on buyers, sellers, and the nature of money.

Libertarians are all about big business?...It just ain't so!

2006-01-26T13:47:00.000-05:00

Libertarians are an oft-misunderstood group. Many of the principles upon which Libertarianism is based are counter-intuitive, and they typically require a much more rational approach to various problems than many people are willing or able to take. Consequently, a lot of the things Libertarians believe are usually misunderstood by the masses, and these things are made worse by media misrepresentation of Libertarian ideals. I hope to shed some light on some of these misconceptions in upcoming posts, and to start the ball rolling I've decided to address the Libertarian perspective on business, particularly with regard to government involvement therein.

Many non-Libertarians believe that Libertarians are champions of big business. They believe that our vision of Utopia is an America ruled by giant corporations and international conglomerates. This is a grave misconception.

Libertarians are not corporate shills, ready to jump to the defense of the likes of Microsoft, Wal-Mart, or Starbucks at every turn. True, we do often end up defending such corporations on various principles, but it's not due to some notion that businesses (large or small) are altruistic institutions that have only the best interests of the public at heart. We neither believe nor expect them to be such.

Libertarians do believe, however, in the Free Market, which absent government involvement treats all businesses equally regardless of size. In a free market, businesses answer to consumers, who maintain absolute sovereignty over business by virtue of their buying or refraining from buying any given product. The size of a business is only relevant in its ability to serve consumers. In some industries, larger businesses are better able to serve consumers due to economies of scale, while other industries serve consumers best through smaller institutions.

Libertarians oppose legislation that would hamper business, whether through regulation, taxation, antitrust, etc. This is typically what fosters the "corporate shill" image often portrayed of Libertarianism. However, the other side of the coin is often omitted by non-Libertarian commentary, and that is the fact that we also oppose legislation that seeks to "help" business. This means we oppose government largesse toward companies who would otherwise fail. We oppose tax cuts that favor large businesses over smaller ones. We oppose payroll taxes, minimum wage laws, and other mandatory costs that make it more difficult for smaller businesses to compete. In short, we oppose any government intervention, whether negative or positive, in the market.

When government becomes involved in the market, the natural result is that some businesses or industries are favored over others. As long as government has power in the market, businesses will be able to buy that power. Large, favored businesses will benefit, while smaller, less well-connected businesses will suffer. This is the root of all the flap over campaign finance. If government didn't have market power to sell, would campaign financing really be an issue? But that's another discussion.

This is not to say that the federal government has no role whatsoever in the market. It simply means that the government's role is judicial, rather than legislative. Contract agreements must still be enforced. Theft and fraud must still be punished.

The Libertarian philosophy is deeply rooted in the belief that unhampered free markets are the best way to improve the quality of life of everyone involved. Many people find it difficult to reconcile this viewpoint with the perception of business as it is today. They see most businesses as being willing to do whatever it takes to make a profit, including cheating consumers or even endangering consumers' or employees' lives. It is important to understand, however, that the free market does not reward such behavior. As long as consumers have the right to choose the products they buy or do not buy, they alone will determine the success or failure of any business. Government intervention only serves to hamstring this process, allowing unscrupulous or inefficient businesses to survive despite consumer preference to the contrary.

More on Sweatshops

2005-12-16T22:00:00.000-05:00

I received some feedback on an earlier post...the one about sweatshops, suggesting that I find a case study to investigate. So I started Googling, searching the Web for some Western "exploiter" to defend. In the midst of my research I happened upon this piece from AWorldConnected.org.

So I read it, and felt at once inspired, and deflated.

This is the kind of material I want to learn to write. This article's treatment of its topic was excellent, IMHO. Please read it when you have a few minutes. It's worth it.

Patriot Act Extension Defeated in the Senate!

2005-12-16T14:57:00.000-05:00

In a close (52-47) vote, the Senate today rejected the extension of several major provisions of the Patriot Act. These provisions are set to expire on December 31st.

While this doesn't make the Patriot Act go away completely, it's definitely a step in the right direction. There are still a lot of loopholes to close, and hopefully the momentum will carry through to the sunset of this travesty.

Here's the full story.

Incidentally, John Sununu is quoting Ben Franklin here:

"Those that would give up essential liberties in pursuit in a little temporary
security deserve neither liberty nor security," said Sen. John Sununu, R-N.H.

Another great quote:

"I don't want to hear again from the attorney general or anyone on this floor
that this government has shown it can be trusted to use the power we give it
with restraint and care," said Feingold, the only senator to vote against the
Patriot Act in 2001.

And finally, from the warmongers:

If the Patriot Act provisions expire, Republicans say they will place the blame
on Democrats in next year's midterm elections. "In the war on terror, we cannot
afford to be without these vital tools for a single moment," White House press
secretary Scott McClellan said. "The time for Democrats to stop standing in the
way has come."

Housing prices influenced by zoning regulation?

2005-12-13T10:35:00.000-05:00

Movning this discussion to the 'blog, from email...

Interesting article about how rising home costs in the area are due more to
zoning restrictions than market forces.

http://www.washtimes.com/business/20051212-121002-6605r.htm

I don't know if it will show up for everyone, but it cracked me up that
on the same page as an article pointing out the ill effects of gov't
regulation there's an advertisement for StandUpForSteel.com...an
organization that favors government intervention.

Response from Steve:

The problem is that the zoning restrictions aren't anything new. They surely are
a big reason why home prices trend upward and almost never downward (supply
cannot rise fast enough or simply enough to keep pace with demand), but it
doesn't explain why demand has risen so much, so fast. If I had to give an
answer to that, I'd suggest it has something to do with how increases in the
money supply come into circulation through the banking system, and make for
easier and cheaper credit markets.

My response to Steve's response:

> ...it has something to do with how increases in the money supply come into
circulation through the banking system, and make for easier and cheaper credit
markets.

There was a nod given (however slight) to cheaper credit
markets, although it clearly doesn't address the issue
head-on.

"What many economists have been proclaiming as a "bubble"
in Washington and other high-cost areas can be mostly explained by the
restrictions on development, combined with a rush to homeownership by renters
taking advantage of low interest rates, [Mark Vitner, senior economist at
Wachovia Securities] said." (emphasis added)

In this light the term
"housing bubble" is almost a misnomer. If anything, there is a "credit
bubble" that affects not only housing, but also automobile sales, credit card
debt, basically anything that relies on cheap credit. At least with a house one
has some form of equity so long as the loan is of the conventional
variety. Those who have bought their homes using "alternative" (i.e.
adustable rate and interest-only) mortgages, relying on the assumption that they
will be able to offset the outstanding loan balance by selling within a few
years at a profit, are the ones who will suffer as housing prices start to level
off.

Were interest rates set by the market, rather than by a
misquided central planning authority, they would naturally rise to balance
supply with demand. Home prices would be much more consistent, more
accurately reflecting the costs of development and the desirability of
individual locations. Furthermore, the lack of a federal guarantee of repayment
on bad debt would cause lenders to be much more selective of prospective
borrowers, thereby placing more of the responsibility of ownership on the
borrower than on taxpayers.

Continued from here in the Comments section...

The Morality of Profit by Exploitation of Circumstance

2005-11-09T23:44:00.000-05:00

We hear every day of American corporations setting up factories in foreign countries, cashing in on the cheap labor available in the poorer parts of the world. It is said that these companies are exploiting the people hired by these "sweatshops"...That the companies profit at the expense of these workers, who have no other opportunities, and are therefore "forced" to work in factories where conditions are poor by American standards.

To those who cry out that this is wrong or immoral, I ask this question: Is it immoral to offer someone a better opportunity than what they already have available?

Interestingly enough, I have asked this question of a few people, and I'm usually told that the comparative level of opportunity offered is irrelevant when workplace conditions are poor. I must admit that this logic escapes me.

If I offer someone a job, as an alternative to starvation, prostitution, or outright theft, and they choose to accept it voluntarily, haven't I just made that person's life better? How is it moral to say that I shouldn't offer the opportunity unless it conforms to some arbitrary standard? Shouldn't it be up to the individual to decide by his or her own standards?

Better Alternatives

If I set up a factory in Bangladesh to make t-shirts, I have to attract labor. In order to do so, I have to offer a better comparative opportunity for potential workers. This means I will have to pay more or provide better benefits than other businesses in the region. In many cases, it may simply be enough to offer the job at any amount of pay...if the alternative is no job at all. Even if the work is dangerous or the conditions hazardous, the individuals who accept the jobs are making a choice between alternatives. If they choose to work in my factory, it is simply because I offer the better alternative.

I've often heard the argument that the workers in this situation "have no choice", and so it's wrong for me to take advantage of that. The truth is that they do have a choice. It may not be a good choice, but it's a choice nonetheless. If the choice is between having a job and starving to death, how am I in the wrong by offering them the opportunity to not starve to death?

What if the machinery in my factory is cheap, defective, or poorly maintained, and therefore dangerous? What if someone loses a hand, or worse? Regardless of whether or not I'm held accountable by law for the injury or death of a worker, there will still be consequences. Some workers may decide that the risk of working in my factory is not worth the pay and quit. The ones that remain may demand more pay. Productivity may suffer because the workers are more cautious around the machines and work more slowly in the name of safety. Word of my dangerous factory will undoubtedly spread, discouraging applicants and reducing the available labor pool. In any case, the costs of the worker's injury or death will almost certainly exceed whatever I may have saved by purchasing shoddy machinery. Most likely, I'll have to invest in newer, safer machinery. Even if I don't do so, however, I may still attract workers who feel that my factory offers a better alternative. An individual could certainly decide that the potential of losing a hand is better than certain starvation, and they should be allowed to make that choice.

Wouldn't Regulations Help?

American companies choose to set up factories in foreign countries for various reasons, but the main reason is to reduce production costs by making use of inexpensive labor. Many who feel that the laborers are being exploited call for government regulation of overseas expansion, primarily with regard to workplace conditions and wages. They want to elevate the conditions of foreign labor employed by American companies to an "American" standard. The problem with doing this is that it increases the cost of foreign labor to the point that it nullifies the incentive to use it in the first place, thus denying foreign laborers the opportunities they so desperately need.

After all, we Americans were only able to advance ourselves to our current standard by taking risks. Consider the puritan settlers who first colonized the New World. Most of them were farmers and tradesmen, many of them poorly educated. Additionally, sea travel in 1620 was horribly treacherous. They took a grave risk setting sail for an unknown land, but the choice represented an opportunity to better their situations. Should they have been allowed to go? Shouldn't some human rights activist group, concerned for the separatists' well-being, stepped up and petitioned King James to prohibit the voyage of the Mayflower because they believed the risk to be too great? Was it immoral to allow them to choose to take such a risk?

In my view, what is immoral is to impose one's own standards upon another, rather than allowing the other to make his own choice. Freedom means being allowed to choose one's own destiny, even if the path is hazardous or the choices dangerous.

The Debate over Corporate "Social Responsibility"

2005-10-14T15:15:00.000-04:00

Read Rethinking the Social Responsibility of Business, from Reason Magazine. It's only a few pages long, and it's well worth it. Then, read my comments about it.

My comments:

First of all, I very much enjoyed this piece, and I hope the debate continues.

Second, I have a great deal of respect for all three of these gentlemen. I know that I have benefitted, at one time or another, from each of their contributions to the Market and our society.

Regarding the debate itself, it strengthens Adam Smith's point regarding the benefits to society realized by those enterprising individuals, working in their own self-interest. Realize, of course, that "self-interest" does not merely mean "profit". In fact, John Mackey states a number of times that the (self-imposed) responsibility of Whole Foods is to "...provide value for all [its] stakeholders." I think this is a key point that is implied, but not fully explored in the debate.

"Value" is highly subjective. What is of some measure of value to one person may be of greater or lesser value to another. There is no objective measure of value where individuals are involved. It is the freedom to determine what is of value to each of us that I believe is at the core of Capitalism, and the attempt to arbitrarily determine value that is its undoing.

Entrepeneurs are free to organize their businesses according to what they determine is of value to them. To some, this will mean maximizing profit. To others it will mean engaging in corporate philanthropy. The same holds true for all stakeholders within the business, regardless of their role in the organization. Stockholders will judge the worthiness of their investment based on their own subjective standards. Again, some may be concerned only with maximizing their returns, while others wish to support organizations that embrace a similar set of principles to their own. Should a business fail to meet this set of standards, the stock will be sold, or changes will be mandated by shareholder referendum. By the same token, employees and customers will make their own determinations of value and choose their involvement with the business accordingly.

What it is important to realize, is that no matter what a business sets as its goals it is still subject to the laws of the market. Its survival will still be determined by consumer preference. Its prices will still be influenced by the laws of supply and demand. Whether profits are a means to a socially beneficial end or vice versa is in my view irrelevant.

Wal-Mart vs. Bureaucracy

2005-09-28T11:56:00.000-04:00

In this editorial, Sheldon Richman, of the Foundation for Economic Education, points out that bureaucracy (government) is unable to successfully provide services that can (and should) be provided by the free market simply because it is devoid of the natural feedback that the market provides...that of profit-and-loss.

In addition to this lack of performance accountability, there are other factors regarding the nature of bureaucracy that contribute to its failure. The one that strikes me as the most baffling is this:

Bureaucracy rewards failure.

Hurricane Katrina, and the resulting disaster provide an excellent example of this phenomenon. Among the various things government failed to do either in preparation for, or in response to Katrina, the most obvious was the failure to maintain the levees protecting New Orleans from flooding. The levees have been in disrepair for years, and the Army Corps of Engineers diverted tons of money from levee maintenance to other projects.

Still, the result of this failure will undoubtedly be to throw more money at the body responsible for it. Those who failed to protect New Orleans from flooding will see a salary increase next year. The power and influence of the agency that failed will grow. Taxpayers will have more of their earnings garnished to fund a continuing debacle. And this is true of any government activity.

Failed government projects do not get cancelled. They don't go away with budget cuts. They get bigger. They get fatter. Their very failure is their success. There is not a single government program that is working to make itself obsolete. The perverse incentives created by this mechanism should be obvious.

But what if government hadn't been put in charge of protecting New Orleans from flooding in the first place? What if government was powerless to protect anyone or any place from flooding? Would the need for flood protection simply vanish? No...not at all. Where, then, would flood protection come from? Quite simply, it would come from those who have a vested interest in protecting their property from flooding.

In New Orleans there are a great number of businesses, homeowners, and industries that would obviously benefit from flood protection. Oil companies, for instance, have a vested interest in protecting refineries located near seaports from being destroyed. Business owners working together to prevent loss have a much greater incentive for ensuring that efficient, effective protections were erected and consistently maintained. Government has no such incentive.

A Word in Defense of "Illegal" Immigration

2005-09-16T16:36:00.000-04:00

A few days ago, I was once again involved in a conversation in which I was the guy with the unpopular opinion. Go figure, right?

Someone made a comment about illegal immigrant workers, specifically those who migrate to Maryland during crab season to pick the meat from crabs for packaging, and how they bring their culture with them, and what a travesty this is. Many around the group agreed, and the commentor went on to say that in the areas where the migrant crab-pickers live, one can find more and more Mexican foods, imports, etc., and that they oughta damn-well learn English if they're gonna come here, earn their money, then head back to Mexico to live like kings.

My response to this (in my own inimitable fashion) was, "But I don't wanna pick crabs."

Simple, yes, but enough to light the bonfire of indignation. I was then told that they shouldn't be allowed to come over here, "getting all the benefits we get", if they're not even willing to learn English.

Again I stoked the flames by asking, "What are they getting that they aren't earning?"

I never got a clear answer to that question, but it did prompt a good deal of flapping and flailing. Then from the other end of the table came the statement, "It's fine if they want to do that, but they could certainly do it legally!"

I have to admit I was stunned. "Dumbfounded" might be a better word, actually. My face must have looked like a constipated Carol Channing, cuz at that point everyone got up from the table.

So why is everyone so bent about illegal immigrants? Why do we need to close our borders to people who are really only interested in making a living? Hell, Americans could learn a lot from the average Mexican work ethic. Maybe that's what pisses Americans off...they make us look like a bunch of lazy hypocrites. My money's on that one.

And what difference does it make whether they do it legally or illegally? "Legal" just means they've jumped through a bunch of hoops, dreamt up by some bureaucrat just to make it more difficult for immigrants to come earn a decent living. Sure, it means they then have to pay taxes, but it means a lot more cost to taxpayers and consumers, as well.

Putting aside the question of whether or not ANY of us should be paying taxes in the first place, I contend that it's actually better for us if illegal immigrants remain illegal.

"Blasphemy," you say! Well, here's why...

First, illegal immigrants are less of a drain on the "system" than taxpaying Americans. They're ineligible for public services (welfare, unemployment, etc.) because they're not citizens, so they're not using services they're not paying for. There are far more individuals living on someone else's dime amongst our own citizenry than amongst illegal immigrants.

Second, they're cheaper to employ because they're illegal. Employers aren't required to provide health insurance, pay payroll taxes, or make social security payments for illegal workers. They're also not bound by minimum wage laws. Granted, they're flying under the radar, but so what? This all results in lower prices for American consumers.

Third, much of the money they earn is spent here in the U.S. As noted above, the immigrants' presence creates a market for goods that otherwise wouldn't exist, benefitting businesses in areas where immigrants work. It works out all around.

If all illegal immigrants suddenly became "legal", the increased costs to taxpayers would indeed be noticeable. Suddenly they would be subject to all the same destructive rules that apply to the rest of us. If you really think about it, the protests start to sound like jealous whining, because in a way they're more free than the rest of us.

Why is anyone surprised?

2005-09-16T15:56:00.000-04:00

This piece, in the Washington Post, reports on misspending of funds by the Army Corps of Engineers on non-flood-related projects in Louisiana. It's one of thousands of similar pieces that decry the failure of the federal government to do whatever in the wake of or in preparation for an event such as hurricane Katrina.

Yet nearly every single piece that I've read, rather than suggesting that we stop putting the federal government in charge of saving us from the disaster of the day, all call for MORE government involvement, greater funding, or more oversight by some lot of boobs from amongst the lot of boobs that boobed it all up in the first place!

I don't get it! Why is it that when the fed fails at something the automatic response is to give them more stuff to screw up? Or to give so-and-so more money to continue screwing it up in more expensive ways? Haven't we figured out yet that trusting the federal government to accomplish anything is like using a billy club for brain surgery? Make the club bigger or plate it with gold, and you'll still only succeed in making guacamole of the patient.

In our daily lives, when an attempt to solve a problem fails, we typically try something new. Yet when government fails, the response is to do more of the same thing. It defies logic. Which is probably why it continues to be so popular.

Are we all entitled to a boat?

2005-09-12T10:30:00.000-04:00

A recent op-ed piece by Eugene Robinson, of The Washington Post, entitled No Longer Invisible, contains this excerpt in response to the Katrina disaster:

No one can claim that the post-Reagan orthodoxy of low taxes and
small government, which does wonders for the extremely rich, also inevitably
does wonders for the extremely poor.

What was that about a rising tide lifting all boats? What if you don't have aboat?

I have two issues with this. The first is that the "...orthodoxy of low taxes and small government" is a figment of the imagination. The GOP talks a good game when it comes to reducing taxes and the size of government, but somehow government seems to get larger and larger and spend more and more money every year. The federal government is not "small" by any stretch of the imagination. There is nary an aspect of our daily lives in which government doesn't have its grubby fingers.

The second is the implicit message that government should supply boats for those who don't have them. It shouldn't. Individuals should be left alone to make their own "boats". Certainly there are those who are incapable of doing so or who have fallen on hard times, in which case reaching out to another individual or private charity is perfectly acceptable. The more we rely on government, however, the more powerless we become to help ourselves.

Donations for victims of Katrina

2005-09-01T11:24:00.000-04:00

Guys,

I received this email today from a company whose software I've used in the past. They're a small company that creates web editing software. It arrived just as I was trying to figure out to which charity I wanted to donate to help the victims of hurricane Katrina. This is a difficult decision to make because it's hard to know for sure exactly how your money is being used when you donate to a charity. Some honestly put the funds toward legitimate uses to help others, and some do not. It's often hard to tell which is which.

At least with this approach, you can know that you're sending items that can really only be used for one purpose. It's not likely that a group would solicit donations of razors and toothpaste in order to fill their own medicine cabinets...especially at a time like this. I also support this effort because I can be reasonably certain that this is not a charity that receives public funds, putting it exactly where it belongs...in the realm of people helping people.

I plan to pack a big box full of stuff to send to these folks, and I hope that you'll consider doing the same. You may not choose to send your donation to CoffeeCup, but if you do donate, I urge you to do some research and find a charity that will put your donation to the use for which you intend it.

Here's the email I received:

Hello,
As many of you know CoffeeCup Software is a socially active company. In the past our users have raised over 1 million dollars for September 11th efforts and over $50,000 dollars for vistims of the Asian Tsunami.
Hurricane Katrina has given us a different challenge. We have accessed the situation and have found a way we can all help. Since CoffeeCup Software is located in Corpus Christi, Texas (a couple of hours south of Houston), we are calling upon anyone who receives this e-mail to send 'Goods' to our office. This will directly help the thousands upon thousands of American refugees that will be entering Houston, Beaumont, and througout Texas within the next days and weeks.
Our office will collect what you send and will drive these items by cargo truck to the refugees where they are located. Over 25,000 people will arrive at the Houston Astrodome tonight and we expect many waves of refugees over the next month. We will collect items for the next 60 days and will make trips once a week or more as needed.
Currently many Charitable organizations are overwhelmed and we want to make sure the Families and Children will be given what they really need without wait. Send as much as you wish, we have plenty of storage.
Some items we believe they need are:
Diapers, Baby Wipes, Infant Care Items
Personal Care Items (soap, razors, shaving cream, toothpaste, hygeine items) Clothing (socks, underwear, shirts, shoes, pants, shirts) Long Distance Calling Cards, Batteries, FM Radios, Walkie-Talkies Toys (coloring books, crayons, puzzles, any activity toy) and more....
Our
Address is:
CoffeeCup Software
c/o Hurricane Aid
226 South Tancahua
Street
Corpus Christi, Texas 78401

You can also order things online at places like Amazon.com, WalMart.com, Target.com, and others and have them sent directly to our offices as well.
Please do not send food, water, or money. This will be handled by Organized Charities. Send what you would personally want if you were placed in a very uncomfortbale position for a very
long time with little or no money (use your best judgement). We will be documenting our efforts by Web Cam and Pictures and these will be posted on our Website soon.
If you would like to Donate money you can do that
here:
http://www.houstonredcross.org/ or http://national.unitedway.org/
"We make a
living by what we get, we make a life by what we give."
- Sir Winston
Churchill

Thank you so very much again,
Nick Longo
CEO
CoffeeCup Software, Inc.
-------------
www.coffeecup.com

High gas prices a boon to consumers!

2005-08-31T15:28:00.000-04:00

Yeah, we all bitch about the price of gas these days, but this article, written by Jay Hancock, of The Baltimore Sun, illustrates some of the positive effects of high oil prices. The examples cited show that progress in the petroleum industry, spurred by the promise of high returns from $60/barrel oil, will lead to lower oil and gas prices in the future, along with reduced oil consumption and an increase in alternative fuel use.

Adam Smith might have his hand on the gas pump

Jay Hancock

August 21, 2005
BLOODY SHAME about those high oil and gas prices.
They're causing billions of dollars to be invested in petroleum production, which will increase supply. They're discouraging unnecessary driving, encouraging use of public transit and fuel-efficient cars and cueing industry to cut fuel costs, which will decrease demand.
And they're triggering billions more to be invested in new technologies such as solar power and hybrid engines, which will offer alternatives.
I hate to say it, but if this keeps up we might avoid a 1970s-style energy crisis, with its shortages, gas lines, severe recession and petroleum prices a third higher than they are now, adjusted for inflation. We might even set the stage for a new era of low oil prices, like we had in the 1980s and 1990s, or at least new stability.
Can't Congress do something about $2.60-a-gallon gas?
Check out the damage caused by exorbitant oil prices, as reported by news outlets across the globe.
In Libya, which has some of the biggest untapped crude reserves in the world, lifted sanctions and the prospect of getting $60 or more for a barrel is helping induce Chevron, Marathon and numerous others to open millions of acres for drilling.
Exploration is also creating jobs and expanding supply in Russia, Angola, China, Algeria, Britain, India, Canada, Azerbaijan, Nigeria, Poland, Malaysia, New Zealand and Trinidad and Tobago, reports Oil & Gas Investor.
The profit signal sent by $60 oil is so strong that last month the number of exploratory rigs around the world hit its highest level since 1986, says Baker Hughes, the petro services company.
Where are the energy czars and price controls to stop all this when you need them?
Capital projects are booming in the equipment and "downstream" sectors, too. Companies in South Korea, China, Singapore and the United States are addressing a drilling-rig shortage by building new hardware.
Chevron is expanding its Pascagoula, Miss., refinery by a fourth. Kinder Morgan and Sempra want to spend $3 billion on a pipeline bringing natural gas from the Rockies to the Midwest and East. Texas-based Valero and ConocoPhillips are spending billions to improve their ability to process sour crude, which is cheaper than sweet and will help bring down prices.
Thai Oil is spending $1 billion on new output capacity. Brazil just announced plans to increase processing capacity by 20 percent. China and India have doubled refining capacity in recent years.
In short, high prices have spurred the global petroleum industry to make up for decades of miserable investment and operating with rickety equipment. We're finally investing in the future and ensuring our ability to produce energy for our children.
Darn it. I hate it when that happens.
As rising oil prices make alternatives look attractive, we're also getting the strongest incentives in two decades to reduce our petro addiction and take the next step.
Public transit use seems to be rising. Ridership on the MARC commuter rail system is up 13 percent since 2003 despite ridiculous breakdowns and delays, The Sun reported last week. Public transit ridership also seems to be up mildly in places from Washington to St. Louis to Los Angeles, according to various newspaper reports.
Sales are soaring for "hybrid" vehicles that run on gas and electricity. Toyota doubled production of its Prius hybrid this year. Ford has a hybrid SUV. GM has a hybrid truck and says it could produce a fuel-cell car that runs on hydrogen by 2020.
Florida-based FPL Group is building up to 750 megawatts' worth of wind-powered electricity generation this year - nearly half the capacity of Constellation Energy's Calvert Cliffs nuclear facility. Frederick-based BP Solar, a division of BP PLC, is expanding again after downsizing in 2003, the Frederick News-Post reported a few months ago.
Weirder and wilder stuff is on the way. Venture capitalists, the people who brought you Silicon Valley and the computer revolution, have gotten interested in energy. One of the partners at Baltimore's New Enterprise Associates is a Nobel Prize winner searching the globe for alternative-energy investments.
Gee, that doesn't sound so bad, actually. Maybe higher prices are part of an invisible hand creating economic order, as described by Adam Smith. Maybe $60 oil is beaming signals across the economy that will boost supply, cut demand and eventually lower prices, as described by Friedrich Hayek. Maybe we didn't need the energy bill Congress just passed.
Maybe, in a free market, the solution to $60 oil is - $60 oil.

Pretty easy to see that imposing price caps, subsidizing oil refining, imposing higher pump taxes, and various other government hammers typically used to keep prices down will undermine all of these efforts.

Public Education...More of the same

2005-08-29T16:31:00.000-04:00

In a recent op-ed piece for the New York Times, editor Bob Herbert bemoans the state of public education in America. Rather than suggesting that we try something different, however, Bob suggests that we throw more money into and draft stricter standards for this failed endeavor.

This is simply naive. Public education sucks. It has always sucked. It always will suck. Specifying higher standards and recruiting better teachers does nothing to address the inherent flaws in the system. They're band-aids at best, counterproductive at worst.

I present to you these questions for research and/or reflection:

1. On what premise is the assumption based that everyone is entitled to a free education, and does that premise fit within a framework of personal liberty and individual responsibility?

2. Is it possible for government-controlled education to be anything but a tool for the indoctrination of "good citizens", subservient to the will of the State, taught to revere those in power? If so, how?

3. What would be the effect of the abolition of publicly funded education and a return to private education? Assuming, of course, that taxes used to fund public schools would remain in taxpayer pockets, rather than being redirected to other dubious endeavors.

Michelin - Class Act, or PR Hounds?

2005-08-25T16:23:00.000-04:00

You guys all remember the debacle with the US Grand Prix, right? Well, Michelin is giving a full refund to everyone who bought a reserved seat ticket.

I think it's a pretty cool thing to do.

Others may think it's just a PR stunt or that Michelin should refund ticket prices because the mess was their fault.

I say, what difference does it make?

What do you think?

"Victory" for migrant farm workers?

2005-06-21T22:31:00.000-04:00

A friend and I recently had a discussion about a boycott of Taco Bell restaurants that was staged by several workers' rights groups in protest of the plight of migrant farm workers...specifically, farm workers who pick tomatoes for a number of growers in southern Florida. The boycott was over the wages the workers were paid and the conditions under which they worked. The workers' rights groups believed that refusing to patronize Taco Bell would force the company to pay higher wages and improve the conditions of "virtual slavery" on the farms.

This article from the NPR website, reports that the boycott has done just that. An agreement has been reached with Yum Brands, Inc. (Taco Bell's parent company) that stipulates higher wages and better working conditions for migrant workers. Many who read the article will indeed consider it a great victory for the workers, but how many will consider the effects beyond the immediate and obvious? Is this agreement an all-around good thing? I, for one don't believe so...simply because the money to pay the higher wages has to come from somewhere.

Under the agreement, Taco Bell can buy tomatoes "only from growers who pay farm workers almost double the current going wages...without raising prices at its restaurants." This presents a number of problems to Yum Brands, Inc.

First, paying more for tomatoes without raising prices at the restaurants means less profit. The typical response to this is probably something along the lines of, "So what? They could stand to make less profit. They make enough already!" In fact, the article sites an increase in profits at Taco Bell restaurants, apparently in an effort to enforce this line of thought. The problem is that less profit means lower stock prices, which means less money invested in the company, which puts us right back where we started. The "extra profit" has just been eaten up by reduced investment. Still, there are several other ways the higher tomato prices could be compensated for.

Maybe they could just put fewer tomatoes on the food, thereby reducing the amount of tomatoes needed and bringing the overall costs back to where they were previously. It might work, but there is yet another unseen effect to this plan as well. Fewer tomatoes needed means fewer tomatoes purchased from the very growers who are overpaying their workers. As a result, the grower must lay off workers or cut benefits to maintain a profit margin.

Perhaps some of the "corporate fat cats" that run the company could just take a pay cut. But why should they? They're being paid what the company has agreed to pay them in return for their services. Furthermore, their salaries are determined largely by market forces and the success of the company (as reflected by profit/loss, and therefore stock prices), much as the workers' wages were.

Another option would be for Yum Brands to increase prices at other restaurants it owns in order to make up the difference for Taco Bell's overpriced tomatoes. In this case, consumers bear the cost of the workers' increased wages. Unless, of course, consumers decide to eat elsewhere as a result of the higher prices...putting us back at square one.

Labor, like any resource used in any industry, is part of the cost of production. It is subject to the laws of supply and demand just like any material good or consumer product. Forcing an employer to pay more for labor than the market will bear invariably increases costs for everyone, often costing jobs as well.

As for the abuse of workers the article speaks of, there is a question that needs to be answered...Did the workers agree voluntarily to work under those conditions? Since the word "migrant" is used instead of "immigrant", one must assume that the workers are illegals, and so there is probably no binding employment contract between the workers and the growers. In my own opinion, there should be no such thing as "illegal aliens". Our borders should be open to anyone who seeks gainful employment and a better way of life. I therefore feel that there should always been a written employment contract executed by both parties, thus removing any ambiguity about the nature of employment or any claims made by either party. The growers are able to get away without it because the workers are not American citizens.

I also don't believe that any company should be required to provide worker's compensation in the event of an on-the-job injury, unless it is a term of the employment contract between employer and employee. Risk should be assumed voluntarily, along with the responsibility for the consequences of such risk.

In What is Seen, and What is Not Seen Frederic Bastiat writes of the consequences of failing to look beyond the immediate visible effects of any action and examine the unseen damage that action may cause. This agreement may bring about slightly better conditions for the workers in the short run, but others within the organization, consumers, and quite probably the workers themselves will bear the cost.

Self-Defense is a Basic Right

2005-06-09T15:41:00.000-04:00

This article, from The Cape Times, in South Africa, describes a device that can be worn by women as a deterrent to rape. The device is inserted into the vagina and attaches to the assailant's penis with microscopic hooks. It can then only be removed with medical assistance. This may help identify rapists so they can be prosecuted (unless, of course, the attacker is willing to emasculate himself in order to avoid prosecution). It also contains any ejaculate, thereby protecting the victim from pregnancy or sexually transmitted diseases that may result from rape. Seems like a perfectly reasonable, effective method to help reduce one of the most heinous, intrusive acts that can be committed by a human being upon another.

Still, there are those who may condemn its use, as evidenced by this passage:

Lisa Vetten, of the Centre for the Study of Violence and Reconciliation (CSVR)
says: "It is like we are going back to the days where women were forced to wear
chastity belts. It is a terrifying thought that women are being made to adapt to
rape by wearing these devices. We should rather focus our energy on changing
men's mindsets and behaviour towards women."

I agree...It is terrifying that women must go to such measures to protect themselves from rape. The fact remains, however, that merely focusing energy on "changing men's mindsets...towards women" is a losing proposition. Yes, progress can be made toward changing attitudes about gender, race, religion, whatever, but human nature is in many ways unchangeable. There will always be a violent element in any society, and relying on a change of attitude to quell the violent side of human nature is naive.

Changing behavior, on the other hand, is much more straightforward. Without doubt, the most effective deterrent to any undesirable act has and will always be to increase the negative consequences of such an act. The risk of having one's penis bitten of by an anti-rape device would probably be high on any rapist's list of reasons to NOT indulge his vice. Especially since it would be impossible to tell if the potential victim is wearing the thing.

By way of example, in October, 1966, Orlando police began a program to train women in the use of firearms. As a result, the number of rapes dropped from 34 incidents per 100,000 inhabitants in 1966, to 4 incidents per 100,000 inhabitants in 1967, with no drop in rape incidents at all in surrounding areas[1]. Clearly, allowing individuals to defend themselves makes would-be assailants think twice before attacking an individual who may be packing a gun...or in this case, a potentially emasculating penis-biter. Should it matter that the rapist's reasons for not committing rape were purely born out of self-preservation? In my opinion, it definitely does not matter.

Oh, and Lisa Vetten is either an idiot or is grossly misinformed. Chastity belts were primarily used by husbands to prevent their wives from cheating on them while they were away on some crusade. They were extremely uncomfortable, and would probably never be worn voluntarily by any woman...unless she was into that sort of thing.

1. Healing Our World, by Dr. Mary Ruwart. Ch. 16. Text can be found here.

Shocker! U.S. Auto Makers in Trouble!!!

2005-06-08T16:30:00.000-04:00

Hiroshi Okuda, chairman of Toyota Corp. is considering hiking prices on vehicles sold in the U.S. in an effort to help out Ford and GM.

Here's the article from MSNBC.com.

My favorite quote: "General Motors Corp. and Ford Motor Co. are symbols of U.S. industry, and if they were to crumble it could fan nationalistic sentiment."

"Symbols of U.S. industry" indeed. I'm ashamed that our symbols of industry are incompetent, inefficient behemoths that couldn't build an efficient, reliable, affordable vehicle if their lives depended on it, have been propped up time and again by taxpayers because they're incapable of forming an efficient business model, and use the power of government intervention in the market to maintain their incumbency. They all should have gone down in flames years ago, and we should all be driving Tuckers and Hondas. Yet another perfect example of how consumers, taxpayers, and laborers take it up the 'chute as a result of government involvement in the economy.

Labor unions create their own issues by using government to force businesses to pay higher wages or provide more benefits than what the market would otherwise bear. This drives up production costs, thereby driving up prices and causing a decrease in overall sales. The cycle ends with plants closing and the very laborers who fought for higher wages in the first place out on the streets.

Artificially low interest rates and the profligate availability of credit have helped create a market for overpriced, extra large, gas-guzzling SUVs. That market is slowing down as gas prices and interest rates rise, and GM and Ford will be hard pressed to recover the billions they've invested in it.

Their failure (or in this case, the lack thereof) now stands to increase prices for vehicles from foreign manufacturers, leaving consumers with a choice between cheap, unreliable domestic cars and expensive, reliable foreign cars. Interesting how it's come full circle.

Honk if you hate stupid people...

2005-06-02T09:45:00.000-04:00

Ran across this nicely written article on MensNewsDaily.com.

Socialism...The Price of Idiot Proofing America

Never visited the site before, but this article (and the ad on the left, featuring some very nice cleavage) have piqued my interest...so to speak.

The Golden Days of VOIP

2005-05-27T23:13:00.000-04:00

I suppose it was only a matter of time before legislators turned their attention to yet another achievement of unfettered ingenuity...VOIP communications. Without the watchful oversight of technologically challenged busybodies, VOIP may just turn into a highly profitable, efficient, customer-pleasing free-for-all...and we just can't have that.

http://www.iht.com/articles/2005/05/25/business/netphone.php

We'll see how long it takes them to start turning the screws here in the US. While it lasts, though, it's still fun to tell the phone companies to take a flying leap.

New Addition to the Family

2005-05-26T09:45:00.000-04:00

This afternoon, I'll be picking up a shiny new Yamaha FJR1300. It's been over 6 months since I gave my deposit for this motorcycle to the dealership, and now that the day has actually arrived the anticipation is killin' me!

Needless to say, I'm getting nothing done at work.

Socialized Health Care

2005-05-25T13:51:00.000-04:00

Yeah, I know it's been a long time. I've been a busy guy.

Some interesting reading about nationalized (socialized) health care...

From the Foundation for Economic Education:
http://www.fee.org/vnews.php?nid=5730

From Physicians for a National Health Program (PNHP):
http://www.pnhp.org/facts/key_features_of_singlepayer.php

From the Pacific Research Institute:
http://www.pacificresearch.org/press/clip/2005/clip-03-20-05.html

I have to say that I absolutely disagree with everything on the PNHP page. The FEE article does a pretty good job of giving a point-by-point rebuttal, so I won't go on a rant at this moment. ;-)

What kills me about this is that socialized health care has never succeeded in providing timely, effective treatment to all patients. Since this is what it's apparently supposed to provide, it amazes me that people still think it's the right answer even though it's been proven ineffective (and often detrimental to overall health) time and time again.

Spring Equinox

2005-03-21T10:53:00.000-05:00

Just want to wish a Blessed Ostara to all my pagan friends!

I stayed up late last night to try and balance an egg on end, but it wasn't cooperating so I scrambled it. Next year maybe it won't be so friggin' contrary! :)

Immigration and Xenophobia

2005-03-17T14:53:00.000-05:00

In an article on the Foundation for Economic Education website, Thomas Lehman presents arguments in favor of open immigration. I don't have a whole lot to add to the article, but I thought the rest of you may find it interesting.

There are a few things about the article that I really like. First is the way he poses the question of immigration to a society whose very foundation is one of open immigration and wonders why we're so closed to it now. The article was written in 1995, so the terrorism concern wasn't nearly what it is now; however, I don't believe the tone of the article would change much even if it were one of the issues considered...which leads me to the second thing I really like about the article.

He points out that the domestic element is of greater concern than the foreign element in terms of loss of our freedom and economic superiority, which is true for so many of the problems we face today. After years of creating terrorists abroad, the state has turned its focus inward to protect us from those terrorists. We find our borders more closed today than ever, and anyone who goes in or out is automatically presumed a terrorist until proven otherwise. The fact that our foreign policy has created this threat in the first place is completely and utterly lost on those in positions of power. Thus grows the power of the state, reaching into every aspect of our lives more every day.

Likewise, the fact that so many are up in arms about the migration of IT jobs to foreign consulting firms is testament to how unwilling we are to understand our own role in creating an environment where such cost-cutting measures are necessary. I had to laugh when Kerry promised to "close the tax loophole" that businesses supposedly exploit in order to reduce costs.

In so many ways, we've been digging ourselves into a hole for 200 years...one from which escape seems difficult, if not impossible. I'm always amazed how the answer to this is typically to keep digging, hoping we'll find the way out further down. Sometimes we dig sideways for a while, but anytime the going gets tough in that direction we turn our efforts once again downward. The solutions to these issues are simple in concept, but difficult and often painful in implementation. Will we ever be willing to endure the hardships that may come with undoing all the damage we've done to ourselves?

Crying in my beer

2005-03-14T11:12:00.000-05:00

Got a bit of rotten news on Saturday. Turns out that the shiny new motorcycle I ordered from Yamaha won't be coming in until May. Originally, they were supposed to start delivering them this month, but since I ordered a model with ABS, it's gonna take a couple more months.

Boo Hoo...

On the bright side...it gives me more time to get my garage ready for the new arrival. Who's up for descending on my garage with saws, hammers, drills, and other implements of destruction to get the thing cleaned out, insulated, and drywalled...followed by consumption of much beer and barbeque?

Just when I was getting warmed up...

2005-03-09T21:02:00.000-05:00

So now, blogs are under attack by the FEC. A recent posting on the Free Market News Network website outlines action being taken by the Federal Elections Commission to regulate and censor internet activity.

Voice your opinion by visiting DownSizeDC.org, and sending a letter to your representatives.

New links on the Wombat blog...

2005-03-08T23:46:00.000-05:00

Hey, Wombat fans...

I've added some new links to my blog, beneath my profile on the left side.

Particularly of note is the link to the Baghdad Burning blog. If you really want to get an idea of how Iraqis feel about Americans stomping around in their country, you MUST check out this blog. It's written by an Iraqi girl living in Baghdad, and it's an eye opener. Also, check out some of the blog links on her page...they're just as enlightening.

Now if you'll excuse me I must get back to looking for a DBA job in New Zealand...

The whole patent thing...

2005-03-08T22:46:00.000-05:00

In a recent post on the Ludwig von Mises Institute website, Stephan Kinsella analyzes the US patent system and whether its supposed benefits outweigh its costs. Patent advocates have long held that the patent system encourages innovation by restricting the reuse of ideas, thereby forcing inventors an entrepeneurs to innovate.

I have a few questions about this...

1. Does innovation really need to be encouraged by artificial means? If there were no restrictions on using someone else's ideas to make a buck would we be stuck in the dark ages because no one ever invented anything new?

2. Is it valid for a company or individual to file suit against someone else on the basis of the possible but unquantifiable loss of potential sales that may occur due to patent infringement? Does that mean that outselling a competitor in a given market merely by providing a superior product is somehow unfair?

3. Would Microsoft Windows be more stable and secure if other companies could create a similar product without fear of litigation?

The topic of intellectual property in particular is hotly debated these days, and I'm interested in hearing what others have to say about it.

Insurance...and the ten-minute victory

2005-03-05T18:30:00.000-05:00

I have this friend. We'll call him Mike...cuz his name happens to be Mike. Most of you know Mike...but for those that don't, Mike is an interesting character. His life experience has rendered him just a little bit cynical, so that invariably determines his position in our debates. He's one of the friends I was talking about in my first post, so you'll hear a lot about Mike. Maybe he won't like me callin' him out like that, but so what...it's my blog.

Anyway...Mike made a comment the other day that the whole "threat of lawsuit" thing sometimes works out in our (the consumer's) favor. He went on to relate how his son was recently in a car accident (he's okay...no serious injuries), and his insurance company called a few days ago, offering him money. They told Mike they were sending him a certain amount to cover his son's medical bills, and an additional sum of equal amount to cover "hardship and suffering"...or something like that.

Now...being the evil Capitalist that I am, I didn't see how this worked out in anyone's favor. Even Mike acknowledged that the extra money was merely a buy-off to help prevent the possibility of litigation effort to procure further payment for "hardship and suffering", which could potentially amount to a much higher sum. I pointed out that this sort of activity was just another line item that would push insurance rates even higher.

Mike's answer was that his rates were going to go up anyway, so why shouldn't he get some of his money back? After all, it was his money in the first place. He considered it a victory...albeit a small one.

Here's where I made my mistake in the debate. I asked Mike why his rates were going to go up. This had the effect of sparking Mike's usual response about business in general, which punches my Free Market button every time. His answer was, "...because they're greedy f***ers." (my own censoring added for the benefit those who may not appreciate our urban vernacular)

Now...I don't deny that many of the people who run insurance companies (or any other company, for that matter) are greedy f***ers. I'm sure it's true of many of them. The point that I (and I'm sure many other laissez-faire types) have been trying to make about this is that it wouldn't matter if every single last business owner in the world was a greedy f***er...The fact remains that a free market doesn't reward purely greedy behavior.

The factors that go into setting a price for a particular service or product are many and varied, but one thing is consistent...it's never arbitrary or based solely on greed. An insurance company won't simply raise prices "because they can". To do so would risk pricing above what consumers are willing to pay, thereby driving customers to do business with its competitors. (At this point, Mike would probably invoke the danger of the ominous specter of collusion, but that's another post)

I'm intrigued by the overall attitude of the general public that business owners are greedy, heartless, and conniving. I've realized that it's basically an emotional outburst, and that this is what makes it so difficult to undo. The question is, who is to blame for this unreasonable position? Have we (consumers) done this to ourselves because we're unwilling to take responsibility for the decisions we make about the products we buy or services we pay for? Is it government's fault for demonizing some business owners in order to protect others? Is it the fault of business itself for being opportunistic and selling people whatever they'll buy?

Comments, please...

A little bit about me and my intentions...

2005-03-03T18:15:00.000-05:00

For the past year or so, I've been doing a lot more thinking than I did before. I used to be the type who was proud of not giving a shit about anything that went on outside my little sphere of existence. I saw my ambivalence as an asset...something that allowed me to float through life with nary a care or concern. Some of that attitude took a shot in the arm when I got married and realized that I was committing to being cognizant of the needs of another person, but my political, economic, and social views remained enshrined in blissful ignorance. That all changed over the summer of 2004...when I did the first bit of serious reading I've done in a very long time. I devoted several months to reading Ayn Rand's seminal work, Atlas Shrugged.

Yeah, yeah...I hear a lot of you out there groaning. You're thinking I've become one of them. I've gone over to the dark side of Capitalist exploitation of the down-trodden masses. Whatever your view of Ayn Rand or her philosophy happens to be, there is one thing that I learned from this book that I believe every person should know and understand...and that is that in order to live any kind of life at all we all have to think for ourselves. The only real choice you have in anything is the choice of whether to think or not think, and all too often we choose not to think but to react emotionally and irrationally. Thus began the formation of what some of my friends are calling "The New Ron"...and not always in a complimentary fashion. I've also realized that I'm a Libertarian at heart.

My best friend, Steve, has been of a Libertarian mindset for almost as long as I've known him, though I wasn't fully aware of what that meant until fairly recently. We'd had discussions about society, economics, and politics over the years, but through it all he remained carefully non-evangelistic because he finds those type of people annoying. So now I'm annoying. I bug the hell outta my friends constantly about all things political and economic. That's what's so great about having friends, though...they keep talking to you even after you've gotten on their last nerve.

I'm not sure any of them know how valuable they are to my learning process, though. The discussions we have force me to think...and I'm grateful for that. Interesting thing, eh?...how before I didn't want to think and now I look forward to every opportunity to do so. I also have to thank my wife, Alli, for putting up with the new me and being willing to discuss these things as well. Without her support, there really wouldn't be any point in this anyway.

Which brings me to the purpose of this blog. This is primarily an outlet for the unfinished discussions I have with my friends. I'm not very skilled at debate, so it's often difficult for me to get my point across effectively in the heat of discussion. Later, it's much easier to reflect on the conversation and figure out how I could have made my point. It also gives me time to consider the alternative viewpoint presented by the person with whom I had the discussion and determine whether or not I agree and why.

The problem is that by the time I figure all this out it's too late. The conversation is over, and I'm usually lying awake in bed or something. I don't want to call up my friends to rekindle a discussion in the middle of the night or while I'm sitting on the toilet. Better to post it here and let them read it if they wish. This way I get to say what I wish I had said before, and everyone is happy.

So here it is...The Wombat's View on Economics (and random other things). Enjoy, and please post comments whenever you can.

Thanks!
~Ron