Tuesday, December 11, 2012

Free market's lessons go untaught and unlearned  -- particularly in CA

Advocates for bigger government – which is just about everyone these days, it seems – believe that government is the most efficient and humane provider of goods and services. It's such a bizarre way of viewing the world, but lessons about the wonders of the free market apparently aren't taught anywhere anymore.

The presidential election and ongoing debates in the California Legislature illustrate this frightening phenomenon. Voters chose a president who has an undying faith in the power of government, and even the Republican candidate failed to clearly explain his most-obvious advantage – why free enterprise is superior to government coercion.

I don't like to toss around pejoratives such as "socialist," but what do you call a state Legislature where the dominant faction seethes with hostility toward private firms and does little more than hatch plans to create new government programs?  This in spite of the fact that, wherever we look, government fails.

The Sacramento Bee recently published an instructive article about how a federal wildlife agency is gaining contracts for pest-control services of the type that private-sector companies already provide.

One of the basics of government is that it should not assume tasks that private companies already are doing, but now that government is seemingly unlimited, no one seems to care about that idea anymore.

In the Agriculture Department's Wildlife Services program, many of the costs are off the books – i.e., unfunded pension and overhead costs, which makes it seem as if the agency is more cost competitive than it really is. Essentially, taxpayers are footing the bill for something that should be paid for by those who need to contract for such services. And the government is putting private firms out of business.

But the most instructive aspect of this story is how poorly the agency provides pest-control services. It is notorious for its ham-fisted approach to pest management, including killing of endangered species and a culture in which such deaths are concealed by workers. The agency has simply ignored calls for reform by members of Congress and activist groups.

"[Concern] is directed at an agency called Wildlife Services, which is already under scrutiny for its lethal control of predators and other animals in the rural West," the Bee reported. "A ... series earlier this year found the agency targets wildlife in ways that have killed thousands of nontarget animals, including family pets, and can trigger unintended, negative ecological consequences."

If a private company operated in such a way, there would be accountability – legal efforts to control its practices, lawsuits by people whose family pets were killed due to the company's irresponsibility, and criminal prosecutions for violations of environmental laws.

But the government doesn't have to live up to the same laws that apply to the rest of us. Instead of having to cease and desist, Wildlife Services goes along its merry way, expanding more deeply into an activity the private market already is handling in a better and less-costly way.

As the article pointed out, the federal agency operates in virtual secrecy, which is another hallmark of government endeavors. Here is the Bee again: "'It's been such an uphill struggle,' said Erick Wolf, CEO of a California firm called Innolytics, which developed a form of birth control for Canada geese and pigeons with help from Wildlife Services' scientists in Colorado. ...'All they want to do is shoot, trap and poison,' said Wolf. 'They don't want to consider anything else.'"

Government does not have a bottom line so its incentives are different. Government agencies often are protected from meaningful oversight. This is why a federal wildlife agency can wreak havoc on wildlife and why governments often are the biggest polluters.

These days I even hear people argue that government is the best way to provide services because there is no profit motive. That reflects an almost unbelievable level of economic ignorance, but it is a point officials make as they try to use government's power of eminent domain against private water companies, for instance.

Businesses need to earn a profit, but the prices of their products are determined by competition, which relentlessly drives down costs and increases efficiencies as the less-able providers go out of business.

There is no place to offload private costs onto the public in a free market, even though some businesses despicably lobby the government for special privileges and bailouts.

If the advocates for government efficiency were right, then the Soviet Union – where thousands of unneeded tractors rusted in vacant lots as the public waited in line for toilet paper – would have been the most successful economy on the globe. We would all be happily driving Trabants rather than Toyotas, Fords and Volkswagens.



Out-innovate the state

Even in the face of high taxes, borrowing and debt, the history of modernity gives us every reason to be optimistic. Economic growth and the rise in living standards since around 1780 has been immense. In Britain, not even accounting for improvements in the quality and choice of consumer products, the average person is 1500% wealthier than their ancestor in 1780. Crucially, this progress has been the result of sustained innovation, increasing the productivity of existing processes and products, and displacing the markets for old goods with newer and better substitutes in a process of creative destruction. Perhaps more importantly however, innovation is also able to displace government provision and restriction of certain goods.

As I pointed out yesterday, innovation trumps all. It was able to make Britain one of the most prosperous nations even despite its high taxes and protectionist mercantilism back in 1780. Even on a theoretical level, the unlimited powers of human ingenuity and imagination will always be able to find a way around existing physical circumstances. Right now, it continues to undermine existing policies, forcing progressive change, with the effects of the internet still being felt.

For example, massive online communities like Fitocracy provide the incentives to exercise and keep fit. As they grow in popularity and effectiveness, they may undermine the case for government anti-obesity interventions. Similarly, sites like Amazon and eBay have their own internal arbitration and regulation mechanisms for when things go wrong, reducing the role for external governmental regulators. Even education, which has experienced little in the way of productivity increases for centuries, can now be disseminated via free online courses like memrise to people across the world, without the need for expensive state grants to both universities and students.

Even in extreme circumstances, innovation is able to markedly increase living standards while undermining coercive monopolies. For example across Africa, the diffusion of mobile phones has allowed money to be transmitted directly to the intended recipients, circumventing corrupt officials and local elites who were otherwise able to confiscate physical cash as it changed hands or traveled.

Apart from the effects of the internet, emerging technologies like additive manufacturing (3D-printing) promise to totally undermine patenting and copyrighting of physical objects. As it becomes cheaper, the need for production lines will become increasingly irrelevant, allowing producers in the home and in business to create products that are the exact likenesses of otherwise costly brands (much like . Perhaps design will experience the same constant creative destruction as in the fashion industry, where only trademarks are protected. Ingenuity has even been able to circumvent bans on research, for example with recent breakthroughs in extracting stem cells from blood reopening potential avenues for future life-saving medical innovations.

The exciting list of innovations is endless, and should give libertarians and others hope for the future. But we need to keep defending creative destruction from those who favour envy and redistribution, as well as acting upon our words. While there is a role for rhetoric, proving the effectiveness of market exchange and innovation by being the entrepreneur is also vital. Thankfully, some have been urging this revolution onwards. Douglas Carswell's new book, The End of Politics and Birth of iDemocracy, for example, reads as a manifesto for citizens freeing themselves of state-imposed hierarchy through sheer ingenuity. So long as our capacity for progress is celebrated, then we will be able to out-innovate the state.



The Liberal Mind

John C. Goodman

Have you ever noticed that people who worry about inequality seem to be focused only on certain kinds of inequality? When they obsess about the income and wealth of the top 1%, they seem to be bothered by only some of those at the top, and not others.

For example, have you ever seen Robert Reich or Paul Krugman or any like-minded complainer bemoan the huge salaries of professional athletes? What about the stratospheric incomes of rock stars? Or movie idols? Or super models?

Even more puzzling, when is the last time you saw any of them assailing worthless heirs? I would guess that a large share of mega gifts to Barack Obama's presidential campaign came from "trust fund babies." These are people who are living (and living well) off the assets created by some deceased capitalist. All too many of the heirs spend a good part of their lives giving personal and foundation money to…well…to promote socialism.

Shouldn't there be a Hall of Shame (and maybe an annual award for the most shameless) to draw attention to the activities of those who use the fruits of capitalism to try to destroy it?

Something else is odd about the sociology of the anti-inequality crowd. They seem to be unfazed by inequality created by government.

Take the recent Powerball outcome. At $588 million, it was the largest lottery prize in history ? to be shared by two ticketholders. In essence, hundreds of millions of dollars are being transferred from mostly low-income families in order to create a few super rich individuals. As I wrote previously:
I can't think of any single act of government that creates more inequality than the lottery — at least per dollar raised and spent. Think about it. Thousands of (mostly below-average income) people buy tickets and, after the drawing, one of them becomes immensely wealthy…

I can't think of anything in the private sector that even begins to compare to this reverse Robin Hood redistribution from the poor to the rich and the nouveau riche. And remember, in order to pull it off, government first has to establish a monopoly, keeping private competitors (who would at least raise the poor bettor's expected return) out of the market.
Then there is the entire structure of elderly entitlements. They mainly take from people who have less and give to people who have more. Social Security, for example, is funded by a regressive tax on wages and is distributed to the population group that has the lowest poverty rate of all. It's not just Warren Buffett who is on the receiving end. In general, the greater your lifetime income, the larger your monthly benefit. Medicare is also funded by a regressive tax on wages. Although the benefits are supposed to be uniform, in reality the zip codes where the largest Social Security checks are cashed are the places that spend the most on health care for the elderly.

Think about that last finding for a moment. Throughout the country, families who are struggling to get by and who cannot afford to buy their own health insurance are paying 15% of their income to fund hip and knee replacements for our true leisure class, so they can get back out on the golf course.

I suspect you could put a 50% tax on all the professional athlete income above $1 million and it wouldn't change the outcome of a single football game. Similarly, I think you could really sock it to Hollywood and even the idle rich without too much economic harm.

But when Paul Krugman writes about the top 1%, this is not who he has in mind. He is complaining about the incomes of people who run large companies. He wants their tax rate to be 91%!

I think Ayn Rand may have been right. The left is populated by people who are not especially bothered by those who become wealthy by virtue of birth or luck or good fortune. They do not even seem to be bothered by the winner-take-all feature of professional sports that confers millions of dollars on some athletes while those who were almost as good languish in near poverty. No, who they obsess about are the creators, the builders, the entrepreneurs.

They don't hate the wealthy who don't deserve their wealth. They hate the wealthy who do deserve it.

Postscript: an exception to what I have just written is Joe Nocera, an economics writer for The New York Times. Last Saturday, he wrote:
[L]otteries may well be the single most insidious way that state governments raise money. Many of the people who buy lottery tickets are poor; lotteries are essentially a form of regressive taxation. The odds against winning a big jackpot are astronomical — far worse than the odds at an Atlantic City slot machine. The get-rich-quick marketing — by government, let's not forget — is offensive.




UK: MPs call for drugs decriminalization system:  "The government is being urged by MPs to closely consider a system of drugs de-criminalisation pioneered in Portugal. The Home Affairs Committee said it was impressed with the approach to cutting drug use where people found with small amounts are not always prosecuted. It also asks ministers to monitor the effects of cannabis legalisation in other parts of the world. The Home Office rejected its call for a Royal Commission on UK drugs policy, saying that was 'not necessary.'"

Belarus: Lukashenko introduces forced employment:  "Belarus' authoritarian president, Alexander Lukashenko, has decided to stem an exodus of qualified workers to Russia, starting by banning those who work in wood-processing industries from quitting. Critics have compared the measure to serfdom and warned that it would only deepen the former Soviet republic's economic troubles and fuel protests against Lukashenko."

Higher Medicare age means lower quality of life:  "It’s almost impossible to believe: With the private-sector economy struggling and politicians worried about government spending, the biggest proposal on the table is raising the Medicare age to 67. That would take far more out of household budgets than it would save in government spending -- and the savings would be short-lived. What’s more, it would impose terrible hardships on lots of people. Why do the truly terrible ideas always seem to become the really Big Ideas?"

How US economic warfare provoked Japan’s attack on Pearl Harbor:  "Many people are misled by formalities. They assume, for example, that the United States went to war against Germany and Japan only after its declarations of war against these nations in December 1941. In truth, the United States had been at war for a long time before making these declarations."

Pearl Harbor: Roosevelt knew:  "Today is the seventy-first anniversary of the Japanese attack on Pearl Harbor, an act that brought us into World War II, pushed a reluctant America onto the world stage, and ushered in the age of empire. The official history of that event is that it was a 'sneak attack' precipitated by war-crazed Japanese militarists, and that the totally unprepared Americans -- kept from arming themselves by evil 'isolationists' in Congress and the Republican party -- were caught completely by surprise. There is, however, one big problem with this official history: it’s a lie."

There is a  new  lot of postings by Chris Brand just up -- on his usual vastly "incorrect" themes of race, genes, IQ etc.



List of backup or "mirror" sites here or  here -- for when blogspot is "down" or failing to  update.  Email me  here (Hotmail address). My Home Pages are here (Academic) or  here (Pictorial) or  here  (Personal)


The Big Lie of the late 20th century was that Nazism was Rightist.  It was in fact typical of the Leftism of its day.  It was only to the Right of  Stalin's Communism.  The very word "Nazi" is a German abbreviation for "National Socialist" (Nationalsozialist) and the full name of Hitler's political party (translated) was "The National Socialist German Workers' Party" (In German: Nationalsozialistische Deutsche Arbeiterpartei)


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