Category: free trade & free markets

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free trade & free markets too much government

The Housing Boom’s Inflated “Wisdom”

Watch how the received wisdom gets worded: “A sustained rebound in home prices is considered critical to getting the economy back on track.”

That’s from a Washington Post business report on falling home prices. Its passive voice construction covers up who holds the opinion.

The sentence could have been written differently: “Many politicians, policy wonks, and industry shills believe that only a sustained rebound in housing prices can put the economy get back on track.” But that would have helped the reader see the special interests behind the statement.

We need housing prices high and rising again . . . to fulfill the plans of the very people who set up the house of cards that just came down.

Harvard economist Jeffrey Miron’s reaction is worth quoting in full: “No, no, a thousand times no!

Housing prices are falling because they soared to ridiculous levels during the bubble. Any policy that attempts to keep prices high — or, equivalently, that attempts to prevent foreclosures or juice housing construction — is fighting a crucial market adjustment to past distortions.

The housing boom mania — fed by multiple government subsidies and massive financial intervention coupled with cheap money from the Federal Reserve — served some people at the expense of the public at large. Progress doesn’t depend on it. Real progress depends on rejecting such nonsense.

By the way, other things equal, inexpensive housing is good for us. The whole “rising prices” mania defeats the alleged rationale for mortgage subsidies in the first place.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets too much government

The Latest Mixed-Economy Mix

Mix special interests, politicians-on-the-make, and expanding bureaucracies and what do you get? E15 gasohol.

Matthew Wald of the New York Times’s “green” blog reports that government ethanol mandates and subsidies make it harder to sell gas efficiently. Converting gas tanks to accommodate the new 15 percent ethyl alcohol/gas blend, E15, could mean shortages of gas for customers with cars that can’t use it. Moreover, ethanol can damage some engines and gas pumps.

A slew of engine manufacturer associations have sued the EPA to block approval of E15. On the other side of the special-interest coin, it’s worth noting that it was the ethanol industry that pushed for E15 approval in the first place.

The approval by itself wouldn’t mean much if buyers and sellers weren’t being forced to use ethanol. New fuel products have been introduced by market participants in the past; with E15, producers and resellers could offer — and consumers buy — the fuel that makes the most economic and technological sense. Instead, the current innovation is an artifact of government policy. You can be sure that the problems caused by imposing ethanol will trigger other political “solutions” that worsen market disruptions, triggering even worse “solutions,” and so forth.

Our “mixed economy” isn’t generally efficient, like free markets tend to be. In a mixed economy, the political winners win big; the rest of us lose.

It’s a mixed bag. The headier mix resulting from freedom? Far better.

This is Common Sense. I’m Paul Jacob.

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folly free trade & free markets national politics & policies too much government

Madison’s Angels to the Rescue?

Something called “behavioral economics” has arisen in recent decades, testing and probing many of the assumptions-cum-postulates of basic microeconomics. Researchers have discovered that human beings are prone to biases, cognitive errors, and a whole bevy of choice glitches. We are not perfectly rational.

Shocking, I know.

Some people draw an odd moral from this: Since people are such fools, they require the help of government to regulate them from utter folly and ruin.

Economist David Henderson quotes one of his Facebook friends, TV creative director John Papola, as supplying the “most succinct criticism” of this tack: “Why in the world do behavioral economists who study our flaws and irrational quirks advocate centralized power in the hands of a small group of flawed overlords? If people are irrational, so are government regulators, only they have corrupting monopoly power.”

You’ve seen this kind of argument before, in political theory. James Madison famously noted that

If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary.

Just so: Were we entirely rational, no regulation would be necessary — no laws would. But, given universal human limitations, the regulators themselves require regulation, and a (non-existent) supply of non-biased, error-resistant rationality, to boot.

Forget vast reams of regulations and huge teams of bureaucrats. Instead, perfect the basic rule of law, regulating markets by a well-conceived basic set of rules.

And expect some imperfection.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets

Big Box, Big Apple

Whether to let a business open up should not hinge on opinion polls. But a recent survey of New Yorkers does underscore the absurdity of banning Wal-Mart from the Big Apple.

If you’re used to seeing a Wal-Mart every 30 miles, you may be surprised to learn that there’s not a single Wal-Mart in New York’s five boroughs. Unions have marshaled political clout to keep the company out. Now, with the store again trying to gain a foothold in the area, “community” activist Pat Boone complains that “We need good paying jobs, not minimum wage jobs.” Wal-Mart pays more than minimum wage. But ask yourself: Is no pay for no work really better than a reasonable entry-level wage that sustains some folks’ homes and hearths?

And who is the “we” that this “community” activist speaks of? The unemployed workers who would flock to the job-application lines if Wal-Mart came to town? The 71 percent of New Yorkers who, according to Douglas Schoen’s survey of 1000 New Yorkers, would cram the store’s aisles?

Too often, political power caters to interest groups eager to force others to conform to their own way of thinking. Markets, by contrast, are all about offering a value and then letting people decide for themselves whether they want to pay for it.

So let Wal-Mart open up, New York. Let honest, hard-working people get the best deals for food and supplies.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets

Tire Trade War, Tiring

Political folly comes around, again and again, like a puncture in a rapidly deflating tire as you drive down the freeway. The end is never good.

President Obama and congressional Democrats pushed a tariff hike on China-made tires, up to 35 percent — and the WTO okayed it. They excuse their action because they wish to “retaliate” against China for its alleged monetary “manipulations” — manipulations that bear remarkable resemblance to our own Federal Reserve’s policies, by the way — which they say cause our current trade imbalance.

And, like non-economists everywhere, these buffoons judge the trade deficit a horrible thing. The fact that U.S. consumer’s get great benefit from lower-priced goods coming from China, and can — as a result of less expensive, Chinese-made tires – afford to replace their tires more often, thereby saving lives and health-care costs, doesn’t appear in politicians’ protectionist arguments.

It’s the economy that’s making our representatives stupid, of course. Blaming foreign competition is an easy out, when times get tough. It helps you avoid blaming your own country’s regulations, taxes, and (ahem) monetary policy.

This blame game is nothing new. The Smoot-Hawley Tariff was pushed through early in the Great Depression, and it made a lot of sense to . . . politicians.

But the the trade wars the infamous tariff engendered became a major factor in making the Great Depression so Great.

Our politicians, reviving tired old policies — regarding tires, no less — merely make matters worse. Greatly worse.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets general freedom national politics & policies too much government

Commerce, Compulsion and the Constitution

Every once in a while a judge attends to the Constitution, and freedom lovers cheer wildly as if this were very strange, even wondrous. I guess it is, considered in light of the sweep of human history.

Should the Democrats’ “health care reform” package kick in fully, it would compel people to purchase medical insurance by punishing abstainers with a steep, extra tax. So hurray for Judge Henry Hudson of the federal district court in Richmond, according to whose recent decision the Commerce Clause of the Constitution does not empower Congress to point a gun to our heads and force us to buy health insurance.

If the Constitution could be honestly read that way, it would mean that the Founding Fathers had fought to replace British tyranny with an even worse home-grown one. But no, no Founder thought that giving the federal government power to smooth trade relations among the states equaled authorization for universal, compulsory purchase of books, booze, bobby pins — or whatever Congress-Approved “health care” delivery system some future central planners might concoct. Nor does it.

We’re not out of danger yet, obviously. There are many more battles to come, many other provisions of “Obamacare” that have yet to be challenged and quashed in courts or in Congress. But in any tough job, you need to accomplish the first step.

Judge Hudson’s common-sense conclusion sounds like a great first step to me.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets national politics & policies

Neutrality or Tragedy?

Everybody likes freebies. New York renters often seek apartments advertised with “utilities included.” Why? So they can run their air conditioners 24/7.

Similarly, a lot of people are pushing for something called “Net neutrality.” We must guarantee a “free and open Internet,” they say.

Sounds good. After all, “free” is a good deal, if you can get it. But “free” comes at a cost. “Not having to pay for it” can become “paying through the nose” pretty quickly.

Here’s the problem: The rise of VoIP, streaming video and audio, and similar broadband luxuries has strained the Internet. Regulating the Net for “neutrality” prevents price and quality-of-service discrimination by owners of the Net’s infrastructure.

Might as well require all landlords to provide all utilities “free” . . . distributing the costs of extra usage via basic rent charges. That would be “Apartment neutrality.”

It would also be a big waste, and not just of electricity.

When suppliers of goods aren’t allowed to price and move product to their advantage, we get something  like the “tragedy of the commons.” The term comes from the medieval commons, a field that all villagers could use. They were, historically, overgrazed. Devastated. Hence the need to divvy up the fields into private plots, allowing trade to increase wealth, to the benefit of all.

U.S. regulators, tackling Net neutrality this month, should be wary of laying waste to the Net in the name of “openness.” Never confuse “free” of price with freedom itself.

This is Common Sense. I’m Paul Jacob.

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free trade & free markets national politics & policies too much government

Gore’s Gas-Based Admission

Al Gore gives the impression of someone never willing to acknowledge error if said error happens to be self-serving.

This impression is wrong.

If I have ever suggested that Gore never admits self-serving mistakes, I hereby rescind and repudiate that suggestion. He appears more than willing to retire a dishonest assertion . . . so long as he has another dishonest assertion to replace it with.

Ed Morrissey tells the tale at Hot Air, opining that Al Gore’s revised opinion about the virtue of government subsidies for corn-based ethanol seems just a little too convenient.

Gore now acknowledges that the energy-conversion ratios of first-generation ethanol “are at best very small,” and that corn subsidies probably bid up food prices. He even admits that he pushed for the funding to help farmers in states like Tennessee and Iowa. So it came to pass that taxpayers paid billions, in part to help Gore run for president.

Wait, there’s more.

Having recanted his support for “first-generation” ethanol, Gore now wants to use wood and grass to make ethanol. A new and better way, n’est-ce pas? No. There’s this small detail: Grass etc.-based ethanol is even more inefficient than corn-based ethanol.

Why top a bad blunder at taxpayer expense with an even worse blunder at taxpayer expense? Could this have anything to do with Al Gore’s investment in Abengoa Bioenergy, a firm begging for government subsidies for second-generation ethanol?

This is Common Sense. I’m Paul Jacob.

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free trade & free markets too much government

Chimp-o-nomics

Government is almost defined by one kind of business it runs: The last-use-of-force business, such as police and courts and military. Since we don’t pay for these services in fees, contracts, and sales — we’re taxed, instead — we don’t usually call them “businesses.”

But governments have gotten involved in a lot of other more business-like businesses: Roads, libraries, mass transit, waterworks, garbage collection, etc. Of course, government being government, it supports most such enterprises largely with taxes, not fees for services rendered.

Yet there are exceptions.

Take Jackson, Michigan. It runs a number of swimming pools, and charges for usage. The pools lose money. Which taxpayers subsidize. Typical. But Jackson also runs a putt-putt golf course. And it makes money at that business.

All to the good? A government business that actually comes out in the black — what a deal!

Well, Bill Chrysan, proprietor of Putterz Golf & Games in nearby Ypsilanti, doesn’t think so. He notes that the government golf course doesn’t pay property taxes and has its maintenance done at taxpayer expense. With advantages like this, it’s hard to compete against — and it hardly pays its way like other businesses.

For that and other reasons, this one putt-putt course provides no model. Governments shouldn’t run businesses, says James Hohman of the Mackinac Center for Public Policy, for the “[s]ame reason that chimps shouldn’t drive. Just because some can do it doesn’t mean that it should be encouraged.”

This is Common Sense. I’m Paul Jacob.

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free trade & free markets ideological culture national politics & policies video

Video of the Week: Quantitative Easing Explained

Earlier this week I did a short Q&A about the latest in monetary policy: quantitative easing. This video goes into much more detail. And is pretty funny:

For an extended, non-animated explanation of QE, try a helpful article by monetary economist Leland Yeager: “The Fed’s Easy Money.”