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

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

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?

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?

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?

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

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

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

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!

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

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!

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?

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

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"

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

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

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?

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?

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

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!

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.