DO NOT BAIL OUT SUBPRIME MORTGAGE HOLDERS!!!

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

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?

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

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

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

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:

1. 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?
   
   
2. 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.
   
   
3. 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

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

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...

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]?

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!

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?

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...

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

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

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!

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

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

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?

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.

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.