Category: free trade & free markets

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free trade & free markets too much government

Equal Bailouts?

A new Pew Report tells us that Americans think that the rich got the biggest benefits — government handouts — after the collapse of financial markets in 2008. That’s my perception, too.

The banker class — including, perhaps focusing on, financial intermediaries on Wall Street — sure made out like the proverbial banditti, many of whom had their fortunes handed back to them after they lost billions and billions in 2008 and 2009.

Other programs bailed out Big Auto, to the advantage of stockholders and managers and union workers, but not to the discernible advantage of consumers or creditors or the bulk of non-union workers.

And yet, consider the extent to which government intervention in the labor market — including tax breaks, mortgage re-deals, and extended unemployment insurance — “helped” middle class and lower middle class workers and families. These programs had huge consequences, leading hordes to forego (hard-to-find) paid work for (comparatively easy-to-find) paid inactivity.

Americans are split on the lesson to be drawn from what they perceive as “scant signs of recovery” and government’s apparent lack of interest in “helping the poor”:

Although Americans were worried about the economic system, they remain starkly divided over federal regulations to control it. Nearly half thought that government regulation of markets did not go far enough, while almost as many said government regulation had already gone too far.

I’m in the latter camp. Government as Big Brother Bailout for businesses and families and individuals seems to just scuttle the necessary reshuffle our economy needs.

We don’t need more of the wrong response. We need less.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets too much government

The Zero Effect

The idea of hiking the legal minimum wage just doesn’t go away, alas.

The usual thought experiment those with common sense use to elicit a modicum of sagacity in the minimum wage advocates’ addled synapses runs like this: You say you want a higher minimum wage, say $9 per hour. Why not $49 — or $490.00?

Every sensible person knows that wouldn’t work; you can’t simply force all wages up without dire consequences in lost jobs, businesses. But it’s a way to impart some sense of why prices are what they are, how supply and demand work.

But there’s another tactic: Make the counter-offer. “I want to help low-skilled workers find jobs. Set the minimum wage to $0!” Then ask:

Would people work for zero dollars?

Would all wages fall to nothing?

You’ll get a few absurd answers, but the logic should sink in, eventually: High-wage jobs are there not due to Santa Claus employers, but because of worker productivity.

With no minimum wage, there would be more low-wage jobs available, sure. And some of the jobs at the current minimum may indeed go down in pay, but there would be a lot more employment.

And no 5¢ an hour jobs for the same reason no one but interns today work for zero dollars. It wouldn’t be worth it, wouldn’t even cover the costs of getting to work. Folks do have other options: Keep looking; sponge off relatives; beg, borrow, steal; scrounge. Sell things on eBay.

That’s why now people reject some jobs.

Let others protest low wages. The rest of us should protest low productivity.

And a lack of common sense.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets too much government

Saving You from Low Prices

Would you be upset if you had to pay “too little” for a limo ride?

Me neither.

Nevertheless, the Hillsborough County Public Transportation Commission requires limo drivers to charge a minimum of $50 per ride, no matter how brief the ride may be. In 2001, Florida lawmakers foolishly empowered the Tampa-area Commission to set minimum fares. These began at $40 for limo rides, then rose to $50.

The purpose is to protect established firms from competition. “That’s why taxi companies love it — because it protects taxi companies,” says Justin Pearson, executive director of the Florida chapter of the Institute for Justice, the valiant libertarian law firm. “Large taxi and limousine companies have divvied up customers.”

Dave Shaw, president of West Florida Livery Associate, admits that taxi and limo companies backed the $50 minimum. That way, “there wouldn’t be any issues where limousines were charging the same amount as taxi cabs.” Of course, the mere desire to see certain prices prevail, low or high, does not imply any entitlement to see those prices imposed by force.

The Institute for Justice has sued on behalf of limousine business owner Thomas Halsnik and two limo customers. IJ argues that the Commission’s mandatory minimum violates the right of customers to bargain and the right of owners to make a living. “The government shouldn’t make it a crime for businesses to give customers a good deal merely to protect politically powerful insiders from competition.”

Exactly. The government shouldn’t force us to pay more so the politically powerful can be unfairly protected from competition and enriched. But it too often does.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets too much government

Protesting Gravity

The continuing, ramped-up protests of low wages at low-end service jobs, like McDonalds and (to some extent) Walmart, put many of us in a bind. On the one hand, a decent person wants others to be happy in their work, and paid well. On the other, a wise person wants those others to face reality.

It does no good to protest the law of gravity, or blame nature for your limited skill set. We work with what we have, apply our intelligence and industry from our baseline situations. We adapt.

How?

Produce more of what someone else is willing to pay for. That’s how (some) other people earn more than $7.50 an hour. Or $17.50 an hour. Or $175.00 an hour. McDonalds doesn’t pay high wages. But there are many companies that do. Even in the restaurant biz there are better-paid burger-flippers — those burgers are priced higher (and taste better, and are served in posher places) thus allowing the purveyors of said hamburgers to afford the higher wages.

What do protestors really expect? If their wages go up, either their employers fire some workers and switch to automation (thus cutting costs) or up go the prices.

But if prices rise, who buys the burgers that pay for McDonalds’ workers’ wages? I’ll buy a McDonalds burger for a buck, or a premium burger for five bucks. But jack up the prices, and I go elsewhere.

Protesting low wages? Might as well protest gravity.

Or, since the economy’s in such a slump that folks would rather gripe than look for more productive jobs — which are, after all, unnaturally scarce — protest Obama.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets too much government

Heap Bad Medicine

Could medical insurance — insurance for “health care” — itself act like a drug?

Are we addicts?

Third-party (“insurance”) payments sure are super-convenient. But their convenience comes at a cost: insurance (and other third-party payers) that remunerate doctors and hospitals directly is what’s driving much of the price inflation in this sector.

Automobile insurance policies overwhelmingly pay the insured, not the mechanics, and we have no automobile repair crisis.

This was related with utmost clarity by Jeffrey A. Singer in his recent Wall Street Journal commentary “The Man Who Was Treated for $17,000 Less.” A patient got an astoundingly better price for a surgery by simply setting aside his insurance program and paying in cash. Singer explains why:

  1. “Hospitals and other providers make their ‘list’ prices as high as possible when negotiating contracts with health plans and Medicare regulators. No one is ever expected to pay the list price.”
  2. “[M]ost people these days don’t have health ‘insurance.’ They have prepaid health plans. They pay premiums to take advantage of a pre-negotiated fee schedule arranged for and administered by a third party.”
  3. “It is the third-party payment system that interferes with true price competition, so ‘market clearing prices’ can’t develop.”

Singer reminds us that specialty services like Lasik eye surgery, which tend not to be covered by insurance policies, have improved in quality and gone down in price.

Alas, as he laments, the United States is “headed in the exact opposite direction” from a real, cost-reducing solution. To a nation addicted to third-party payers in medicine, Obamacare is nothing more than upping the dose of the same old drug.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets too much government

Work, Shirk, or Bug Out?

Which is better: helping the working poor through regulations on business, mandating employee benefits, and cushy hire-and-fire terms . . . or through higher unemployment benefits, assistance to families, or other direct aid?

Both yield unfortunate consequences.

Italy’s employment policies protect workers, on paper. Whatever the ostensible worker salary is in the country, the mandated benefits cost the employer more than twice as much.

This proved a problem for businessman Fabrizio Pedroni, whose factory near Medona hasn’t made a profit in five years. He blames high taxes, heavy regulatory burden, and low worker productivity. So, while his employees were off on holiday, he packed up his factory and shipped it to Poland.

Actually, the tail end of his move was stymied, for a while, by a hasty union blockade. Pedroni cited this as evidence for his need to bug out in secret. Had he announced the plan, the government would have just taken the property for the benefit of his employees. “I had three options — either close, move the factory, as many other businesses have done, or shoot myself in the head.”

Meanwhile, a new Cato study shows that in 16 of our United States, a “combination of food stamps, temporary cash grants, WIC, and housing assistance is worth a pre-tax value more than $30,000” to families that qualify. For some, it’s much easier to live well unemployed than employed.

No wonder unemployment persists. And economic recovery is so slow.

In both cases, programs to help everyday folks hurt them in the long run, undermining productivity, increasing dependence, and scuttling the source of progress: business enterprise.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets ideological culture

A Briefing for the President

Say we have evidence that entrepreneurs can build roads, railroads, and other means of transport even without government-spewed largesse and macro-mismanagement.

Would President Obama tell us?

Considering the man’s wonted denigration of individual achievement, probably not. Why should mere track records put a damper on his lust to conclude that social cooperation as such, especially as shoved and molded by government, somehow renders individual achievement less pivotal or praiseworthy? “You didn’t build that,” not all by your little lonesome, the Discourager-in-Chief says of anyone too proud of personal accomplishment; government’s always been there to help, however hinderingly.

Turns out, though, that as historians Larry Shweikart and Burton Folsom detail in a recent article, we do “build that,” even roads, when allowed to. Nothing about getting from here to there is intrinsically gotta-be-made-by-government.

The authors observe that auto makers put cars in “almost every garage” long before the 1956 Highways Act. They “began building roads privately long before [governments] got involved.” Businessmen also helped build the first transcontinental highway in 1913.

Before the Civil War, railroads were built and financed privately. When government decided to push for transcontinental railroads, the only continent-spanning railroad to be consistently profitable was the only one not scooping federal stimulo-funding: James J. Hill’s Great Northern.

What about, earlier, Robert Fulton’s steamboat? Was the steamboat able to ride the rivers even before subsidies for canals?

Must airports be government-owned?

Read the whole thing.

You too, Mr. President. It is, after all, a brief brief. But if you are looking for longer accounts, complete with footnotes and citations of primary documents, they are available, too.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets

Pot, Kettle; Walmart, The Nation

Writing about Walmart is like reading The Nation: neither is as much fun as shopping at Walmart.

At Walmart I get good deals. In The Nation I get skewed analysis. Just look at the old progressive rag’s online “petition” to Walmart:

While Walmart rakes in annual profits of more than one billion dollars, the average hourly wage of a Walmart sales associate . . . is just $8.81. That translates to an annual salary . . . far below the federal poverty level for a family of four.

On top of being unjust, Walmart’s low wages come at a high price for American taxpayers: a recent report revealed that, because the retail giant’s employees are forced to utilize government benefits to supplement their meager income, a single Walmart Supercenter could cost taxpayers from $900,000 to $1.7 million per year.

Typical: there’s so much left out.

What would Walmart workers’ wages be if Walmart hadn’t employed them? More? Not plausible. Walmart’s mom-and-pop competition typically pay lower wages.

Net effect: Walmart lifts workers out of poverty.

Whose responsibility is it to feed “a family of four”? The employer of one family member? No. The parents in the family, who might be morally compelled to develop more lucrative skills or a plan for abstinence. (Of course, many Walmart workers are single, or have spouses or parents who work as well.)

Recently, a Walmart bigwig got a bit testy and sent out an email noting that The Nation has been paying its interns a monthly stipend of $150 per week, far below the minimum wage.

Normally I’d defend The Nation’s (and the nation’s) internship policies. But for now let’s just chuckle.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets national politics & policies

Forced to Innovate

Not everything new is wonderful.

When a company improves its operations, it seeks to do so in a way that decreases costs or produces features customers want enough to pay for. It works to ensure that the benefits of adopting new procedures outweigh the costs.

At least, this is what profitable companies do when free to act in accordance with their reason for being.

Government regulations clash with this, however. One of the “we have to pass the bill so that you can find out what is in it” provisions of Obamacare, for example, forces medical practitioners to convert to electronic record-keeping — even if they think the burden unjustified.

A businessman may be wrong about whether to try a new way — and, if he does adopt an innovation, about how fast or thoroughly to adopt it. If he’s wrong, he’s free to change his mind as evidence comes in. But, in medicine, government edict replaces entrepreneurial judgment.

Mandates and prohibitions are already rife in the medical industry; Obamacare makes a bad situation worse. “In today’s health care system,” writes blogger Rituparna Basu, “a doctor’s judgment as to whether it makes sense to adopt a new technology for his practice is deemed irrelevant. The government is the one calling the shots, and jeopardizing doctors’ practices in the process.”

A sound diagnosis.

The prognosis might not be so negative, however. While governments tend to prescribe uniform, one-size-fits-all “cures,” ongoing advances in genetics point the other direction, to individualizing medical practice, finding specific causes of illnesses, and developing genetics-informed, patient-specific cures.

But it’s just possible that individually focused medicine would be enhanced by a healthy dose of individual freedom.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets

Tweet, Tweet, Zoom

Recently, Peter Thiel, a very interesting mover and shaker in today’s most vibrant markets, criticized the upshot of today’s technology: “We wanted flying cars, instead we got 140 characters.” That’s a slam at Twitter, a free service that somehow makes enough to stay afloat.

The lack of flying cars, though: Is that a problem?

Joshua Gans thinks we should ask ourselves whether we really want flying cars. You know, in our heart of hearts. After all, kids want to be Superman.

Markets only deliver the possible.

And much of what they deliver we hadn’t thought of before: iPods/iPhones/iPads weren’t really dreamed about much, outside of Dick Tracy/Star Trek fandom.

As for Twitter, Gans says it’s “a new communications protocol and more than just social media,” which makes it “more than merely trivial.” I’m sure he’s right. But I still keep kicking myself: whose time is worth so little that it’s worth complaining about free stuff?

Thiel’s focus is on technology, not markets — but it is the market that brings us stuff. Free markets are not “free” as in no price, they are free as in being unencumbered by busybody regulators, prohibitionists, and thieves. Such markets strike me as amazingly effective at providing a wide range of goods to the rich and the poor and everyone in-between. Hobbled, subsidized markets, on the other hand, exhibit Tweetable perversities — and usually serve the rich better than the poor.

Still, a lot of folks complain about what markets have to offer. I don’t get that, either. Hey, I reject most offers. So can they.

I say we stick to complaining about offers we can’t refuse.

This is Common Sense. I’m Paul Jacob.