Successful Businessmen Cannot Hide, Politicians Can…

An interesting find is brought up over at a blog called Bacon’s Rebellion:

“Eric “Young Gun” Cantor, the Republican House Majority Leader from Henrico County, seemed older and out-gunned Wednesday when new Republican members in the GOP-controlled House voted 233-198 to kill an alternative engine for the new F-35 strike fighter that even the Pentagon didn’t want.

More than half of the new Congressmen voted against the engine that the House’s older leadership, represented by Cantor and House Speaker John Boehner of Ohio, worked desperately to keep in the federal budget.

Their reason? Pure pork. The alternative engines would be built jointly by Rolls Royce, which has its North American headquarters in Virginia, and in Ohio where partner General Electric has big manufacturing plants. The House decided to drop the alternative and go with the main supplier, Pratt & Whitney, thus saving $450 million.”

So obviously Republicans like Bacon’s Rebellion look at this as an instance when the old harden Republican politicians vote for pork and the new saviors vote against it. Whether these new Congressmen continue their votes against pork is still to be seen. What the important lesson here to take away is how a politician like Eric Cantor can vote for pork and write a book about deficit reduction at the same time.

The best fake limited government politician will convince the general populous that they are for limited government, while voting for bills that will give money out to special interests that will continue to help fund their campaigns. This may be a hard concept for the reader of this blog to grasp because the very fact that you are reading this does not make you apart of the general populous.

So how does this differ on the free market with businessmen? First, think about the places you visit on a weekly basis and do you know what policies the business owner gives speeches on in his free time? No. Would you want to know? Maybe. But the truth is it doesn’t matter.

When you go and visit a place of business, you go to purchase something. You are only satisfied if the business owner meets your demands. For example, if you go to the grocery store looking for the best cut of steak then you will only be satisfied if you find what you are looking for. In Economic terms, if the producer supplies the demands of the consumer.

So how can a politician as a producer of policies satisfy the demands of the consumer? If a business man says “come to my grocery store and you will find the best filet cut in town” and upon arrival you realize it is chuck roast at best you will stop going there. But for some reason in politics Eric Cantor can say “I am a deficit reducer” and vote for an increase at the same time with little to no repercussion.

So I ask the reader this question. Free market or government coercion? Which of the two satisfy the demands of the consumer the best? If it is the free market then how can we apply that to government?

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Published in: on February 18, 2011 at 9:20 pm  Comments (2)  
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The Myth of Running Out of Oil

Update: When looking back at the passage Mr. Beck calls it “an indisputable fact.” So now I do not feel so bad bashing him on this one. Consider it disputed.

Many pundits (including Glenn Beck which I bashed slightly in the past post) state that “face it, one day we are going to run out of oil.”

Wrong.

Maybe it is a semantic issue but I hear it a lot and the semantics over the words liberty, liberal, freedom, and even anarchy started off the same way.

Let me start with, we will never run out of oil.

Okay, so thanks to the modern media both conservative and liberal (uh, I mean Progressive), we have people in a frantic believe that one day the world will run out of oil.

The reason why we will never run out of oil is because there will always be at least one barrel left. Think of it in a different context. Copper.

It was once predicted that we were going to run out of Copper by the year 1993. Go down to Home Depot or Lowes and pick you out some Copper pipes for your house. Wait, that isn’t a good idea. First, it is really expensive. Second, it makes your water taste funny. But wait, it is 2009 and we still have copper.

Well when the original prediction was made, it was made with current production. That means it does not include innovation. Yes, the same innovation that brought us iPods, Computers, the Internet, Planes, and well everything. How could they forget?

Now it could be argued that we could innovate but then we would still run out. Except one thing: supply and demand.

It is time for a lesson on a commodity say diamonds (you can insert gold, copper, iron, zinc, anything that had value). Let’s say there is 1,000 diamonds in the world now. If the number doubles, what happens to the price? If you guessed goes down, you were correct. If the number goes down, what happens to the price? If you guessed goes up, you were correct.

So then what happened when the supply of oil shrinks: people innovate away from it because it becomes too expensive. Then at some point the oil will not be worth as much because it is no longer needed. How much does a gallon of whale oil for a 19th century lamp go for these days?

Oh, you do not care? Yeah, exactly. At one point, we thought we were going to run out of whales to get oil just like we think we are going to run out of reserves to pull oil out of. We innovated so that whale oil was no longer needed in such vast quantities. Now, yes I know, whales are currently being hunted today.

But let’s remember if the people at the time were right, there would be no whales to hunt today.

So it is semantics? Kind of. Is someone like Glenn Beck and I saying the same thing? Kind of. We both understand that the only way out of this problem is innovation. Is he saying we will run out so we better find something else and I am saying the price will rise so we better find someone out? Yes.

But accepting the doomsday rhetoric brought to you by the left is not the way to do it.

World, do not panic, we will innovate.

~PCCapitalist

Published in: on September 9, 2009 at 11:26 pm  Comments (2)  
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Glenn Beck on Tipping

Disclaimer: Glenn Beck  has done a lot for the right wing and has done even more at making sure Mr. Barack Obama is in check everyday. But when someone makes a stupid claim you must keep them in check even if they are your friends. I am currently reading his “Inconvenient Book” and a few things have upset me.

Chapter 13 Gratuities: I’ve Reached My Tipping Point is the title of the chapter and rightfully so. This chapter is full of what is a short rant on tipping in America. Mr. Beck is stressed that tipping has now become apart of a social stigma and that it is a must do. This must do then, supposedly, requires those who receive the tips to slack off. Mr. Beck wants to pay for what he gets: the food.

This is why he is wrong…

Tipping is Capitalism and making a statement like “Business owners, let’s make a deal: You pay your staff, and I’ll pay for the food,” shows a complete misunderstanding of Mr. Beck’s views of a) business and b) economics.

Now tell me, why is it that one works for a service in where they make less than minimum wage? It is simple, because of tips.

What happens if you remove tipping from the equation? Well, believe it or not Glenn, the business owners will have to raise their prices in order to get employees.  In other words, customers will now be paying an automatic 18% more whether they want to or not. Just like businessmen cannot just throw some imaginary windfall profits to the exploited worker as Marx would say, businessmen cannot remove tipping and charge the same prices.

So what does tipping do? Tipping not only allows the customer to have a say on whether service is good or bad but it also signals to the business owner who should be fired and who should be kept with accurate counting. Without tipping, how could you tell? By the number of complaints maybe but the right to tip does not remove the right to complain also.

So where has Mr. Beck’s idea(s) on this been employed? Europe.

When visiting Italy, most will find that a 18% service charge will be included along with sometimes another fee all the way at the bottom of the menu. And believe it or not but the service was both slow and horrible.

Now tell me, if you are out with friends and everyone leaves a nice tip for a nice waiter then what is the problem? If you are out with friends and everyone leaves a nice tip for a bad waiter then the problem is not the “tipping mechanism,” the problem is your friends.

It sounds like Glenn Beck has been having dinner with socialists too long and needs to find a way to stand up and say he is not tipping because the service was bad. It seems odd that he can stand up to Obama and many other politicians on every issue under the sun, but  he can not stand up to his friends when it was clear the service was bad?

~PCCapitalist

Published in: on September 8, 2009 at 11:32 pm  Comments (5)  
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Unemployment: Who is really to blame?


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As soon as newly elected Democratic majority took over Congress in 2007, they aimed their scope at setting a new minimum wage. Unfortunately, while the Senators and Representatives were patting each other on the backs for passing the first bill that raised the minimum wage in nearly a decade, they forgot to consult any economics textbook.

Now with the United States deep in a lengthy recession and high unemployment continuing to rise, the latest installment of $7.25 an hour (from the original $5.15) that is on the horizon will undoubtedly put an enormous pressure upon already struggling businesses everywhere. And the result could be the most devastating round of “stagflation” since the presidency of Jimmy Carter.

On July 24th the government will force the business community to pay their employees for more than the market rate. But those businesses, already struggling just to keep their doors open, will not magically receive new revenue to pay those employees.

Instead, they will keep only their best employees and lay the others off. So while, the American people were told that the minimum wage bill was passed to help the low-skilled workers, it is in actually those very workers who would be hurt.

Now instead of more workers receiving higher wages, there will be more workers receiving no wages at all.  So much for government planning.

As unemployment rises, of course, more pressures are put upon the government to extend unemployment benefits. And more unemployment benefits add more government debt to an already bankrupt country.

And it is not just the federal minimum wage that Americans have to worry about, but also the state minimum wage laws. Many states raised their own minimum wage laws with the passing of this federal bill, exacerbating an already dire situation.

For example, states with more than a two-dollar increase in their minimum wage from 2006 to today had higher unemployment than those who had less than a one-dollar increase.

Over that time, states like California, Colorado, Michigan and Ohio, which have had a more than two-dollar an hour increase from their minimum wages, had their unemployment rates increase 6.1, 3, 6, and 4.8 per cent respectively.

On the other hand during this time, states like Alaska, Arkansas, Connecticut, and Maine, which had a less than one-dollar increase in their minimum wage, saw their unemployment rates increase only 1.5, 1.3, 3.5, and 3.3 percent.

Admittedly since the United States fell into a recession over that time, it is understandable to see higher than normal levels of unemployment. But it is clear that new restrictive minimum wage laws additionally fueled higher unemployment.

Simply put, minimum wage law causes a shortage of jobs and a surplus of labor. Both of which spell disaster for individual workers, as well as the economy as a whole.

So once the latest installment of minimum wage is fully in place, Americans will see more unemployment, a deepening recession, and a massive increase in unemployment benefits in coming months. This policy will make the economic recovery more difficult and the opportunity for the average Joe much smaller.

Luckily, for the Congressional Democrats and many state legislators who passed this law in 2007, the recession has taken the rap for the current rates of unemployment. This smoke and mirror has allowed the Democrats on the hill to shirk responsibility for the current crisis.

But once the American people see another spike in unemployment after the July minimum wage increase, these politicians who hurt the business community will have nowhere to hide, which seems only fair since so many of their victims will have nowhere to work.

Justin Williams is a Contributing Editor of ALG News Bureau

Published in: on June 17, 2009 at 12:03 pm  Leave a Comment  
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The “Traction” Fallacy by William Anderson

Today’s article of the day comes from Campaign for Liberty:

In his recent book, The Return of Depression Economics, Paul Krugman makes a rather amazing claim when he says that almost any problem in the U.S. economy can be “solved” simply by printing money. Elsewhere in his semi-weekly column in the New York Times and in his blog, Krugman has called for “a credible commitment to fairly high inflation” as a means of economic recovery.

Now, in the country where I live, one generally does not need the government to “commit” itself to inflation. Indeed, governments will do that all on their own and don’t even need approval from economists and especially Krugman.

But while it might seem that calling for inflation is absurd on its face, I believe that I should try to explain the economic strategy that is behind the call for more inflation. The term Krugman and others have used is “traction,” but instead of being an appropriate analogy, I would say that this is a “strategy” to run the economy off the road altogether and impoverish much of the United States.

If I am going to use such harsh language, however, I need to be sure that I can explain why Krugman and others have used that analogy, and why they believe it will work. It won’t, of course, but nonetheless I should be able to explain why on both counts.

I live in a place that receives a lot of snow each winter, and our house is halfway up a steep hill. We used to have a rear-wheel-drive van and in order to be able to make it to our driveway when the snow was falling, I had to gain speed just before we hit the hill, or the van would slide back.

Because not everyone here expertly drives in snow, once in a while someone goes off the road or is stuck in a snow bank. One way to help that person to drive out is to throw dirt or ashes under the tires in order to give the vehicle traction. After throwing down the material, people then push the car from behind. Once the car has some forward momentum, it usually can get out of the snow on its own.

Likewise, Krugman and others like him (too many like him, as far as I am concerned) believe that the problem with the economy today is that people just are not spending enough money, and in their reluctance to spend, they have created a “liquidity trap.” Since the Keynesian construct of the “liquidity trap” has it being a self-perpetuating problem, the only way to steer the economy out of its present “snow bank” is to have an outside force — the government — give it a push or throw money under the wheels (instead of ashes) and then watch the economy take off again.

In the case of the present downturn, creating new bank reserves will not provide much of a push since new money cannot be created if banks are not making loans, and a period of economic uncertainty is not going to result in a surge of new lending. Thus, if the economy is to be given “traction,” the only way is for government to spend in a way that floods the economy with new money, forcing up prices through inflation. People will face the hard choice of holding onto their money and watching its value deteriorate, or spending in and enabling the economy to “take off.”

As people continue to spend, the spending sends signals to producers to make more goods, and then the economy is off to the races. And all it takes is a friendly shove from the government along with a blizzard of new dollars.

If the economy really were a circular flow and if there were such a thing as a “liquidity trap,” and the economy worked just as Keynesians claim, then perhaps such a strategy would make sense. (I am not endorsing inflation, but rather am giving Krugman and others their argument in an imaginary economy.)

However, as I have pointed out before, the economy is not a circular flow mechanism. It is not some sort of perpetual motion mechanism. It is an entity with real fundamentals, a real structure of production, and these are things that matter. If an economy were simply a blot into which people throw whatever they wish and out pops what we see today, that would be one thing; but it is quite another when capital matters, when the relationship of factors of production to each other and to consumer good matters.

In the Krugman/Keynesian view, production is an automatic thing. In fact, it does not even matter who or what entity is producing something. In Krugman’s world, a government-owned and operated economy will operate just as well as one based on private property and maybe even better, since governments are legally permitted to print money.

However, if ours is a world scarcity, a world in which prices tell us something about the demand for and the relative scarcity of all goods, be they producers’ goods, consumer goods, or our labor, then throwing a big pile of money into the mix will not give an economy “traction” any more than pushing the car further into a snowy ditch will enable it to pull out. In fact, a burst of inflation (or, better, a government “commitment” to debasing our money) only will further the malinvestments that now plague our political economy.

My sense is that the powers that be will listen to the Krugmans of the academic and political world instead of listening to people like Ron Paul. After all, they are the ones with the honors, they are the ones who populate the “elite” economics departments, and they are the ones who are laying out real-live “plans of action” by which the political classes can make it look as though they are doing something. Those of us who advocate the government stepping back and not “helping people” are seen as reactionaries and worse.

But even if Paul Krugman is popular and has his face on the cover of Newsweek, that does not mean he is correct. His argument that inflation will give the economy “traction” is clever and might even resonate with the political classes and the media, but even though his is a cunning argument, nonetheless it still makes no sense. An economy is not a blob, it is not a “circle of life,” and it is not even something that needs “traction.” Our economy is something that has been badly damaged precisely because of all of these clever policies of inflation and malinvestment that have benefited the political classes, and the only way that it can get any real traction is for the political classes to go back to ribbon cuttings and hanging out at the bars in the Beltway and stop trying to fix things.

Published in: on June 2, 2009 at 6:41 pm  Leave a Comment  
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Book Review: The Baseball Economist by J.C. Bradbury

The book The Baseball Economist by J.C. Bradbury takes America’s pastime and mixes together with both economics and statistical analysis. Baseball, in general, is more of a statistical game than most other sports. This is not to say that the whole book is full of numbers. Bradbury asks many different questions through each chapter, as each could be completely separate from the others. He asks questions like why are there no left handed catchers to is pitching coach Leo Mazzone that good?

Each chapter makes the reader think of baseball very differently. Bradbury even tackles the tough spot of steriods and baseball and makes a very good argument on why we shouldn’t care. His strongest argument is that many times players use other techniques that are artificial to increase their strength. One example is the Tommy John Surgery that pitchers go under when they get injuried. These pitchers usually come back throwing even harder than they did before.

Another strong point in the book is Bradbury’s analysis of what is the best statistisic is telling how well a player will do. Baseball is both an individual sport and a team sport and it is very hard to isolate the two as each can influence each others stats. For example, pitchers could have low earned run averages because of good defensive players on his team. I have always wondered why people were more concerned with certain states over others.

The negatives of this book is that some of the stuff is dated. Bradbury is writting this book after it seemed 99 times out of 100 the rich team wins, while more recently it seems that this has changed some. The other negative is the book doesn’t do much for people who are not deep into baseball. Personally, I love baseball and I would study it if I could. Many people who were looking for more broad strokes may not quite enjoy the book as others. Possible topics they could have been looking for would be like why are concessions so expensive or how much does homefield advantage help?

Overall this is a great read for anyone who loves statistics or who loves baseball and economic.

7.5/10

~PCCapitalist

Published in: on June 1, 2009 at 12:59 pm  Comments (1)  
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Economics in Many Lessons: Health care’s simple economics by Donald J. Boudreaux

One of the cherished beliefs of many Americans today is that health care can be improved only through a collective effort. As a television talking head expressed it recently, “We all have to pull together to improve health care in this country.”

Nonsense.

Each of us has it within our power to improve our own health care.

I can improve my and my family’s health care in numerous ways, all of which are within my power. I can prepare more healthful meals; do more exercise; drink less alcohol; go to bed earlier. I can also, say, drive a less-expensive car or buy fewer consumer electronics and, with the money I save, purchase more exercise equipment, better health insurance or more visits to my doctor.

What’s true for me is true for every American. Even the poorest American is far from living at a subsistence level. That person, too, has the individual power to improve his or her health care by doing many of the sorts of things that I can do.

Of course, no one, not even Bill Gates, can achieve “perfect” health — if by that is meant 100 percent assurance of being free from aches, pains and the risk of dying before, say, the age of 80. And it’s true that the wealthier an individual is, the greater is that person’s scope to improve his or her health care.

But it’s not true that health-care improvements require a collective effort.

In fact, steps taken to collectivize health-care provision have only made it more difficult for individuals to improve their own health care.

Collective efforts — which, in practice, mean “imposed by government command” — typically allow each of us to free-ride off of each other’s resources. And when I get to spend your money and you get to spend mine, it’s a sure bet that that money will be spent wastefully.

Consider Medicaid and Medicare — huge socialized health-care programs. Funded with tax dollars, these programs allow the millions of Americans covered by them to consume medical services without paying the full cost of those services. The predictable result is that these services are over-consumed. (more…)

Published in: on May 7, 2009 at 6:37 pm  Leave a Comment  
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Law vs. moral values by Walter Williams

Today’s article of the day is from the Washington Times:

A civilized society’s first line of defense is not the law, police and courts but customs, traditions and moral values.

Behavioral norms, mostly transmitted by example, word-of-mouth and religious teachings, represent a body of wisdom distilled over the ages through experience and trial and error. They include important thou-shalt-nots such as shalt not murder, shalt not steal, shalt not lie and cheat, but they also include all those courtesies one might call ladylike and gentlemanly conduct. The failure to fully transmit values and traditions to subsequent generations represents one of the failings of the so-called greatest generation.

Behavior accepted as the norm today would have been seen as despicable in yesteryear. There are television debt-relief advertisements that promise to help debtors to pay back just half of what they owe. Foul language is spoken by children in front of and sometimes to teachers and other adults. When I was a youngster, it was unthinkable to use foul language to an adult; it would have meant a smack across the face. Back then, parents and teachers didn’t have child-raising “experts” to tell them that timeout is a means of discipline. Baby showers are held for unwed mothers. In yesteryear, such an acceptance of illegitimacy would have been unthinkable.

For men to sit while a woman or elderly person stood on a crowded bus or trolley car once was unthinkable. It was common decency for a man to give up his seat. Today, some cities require public conveyances to set aside seats posted “Senior Citizen Seating.” Laws have replaced common decency.

Years ago, a young lady who allowed a guy to have his hand in her rear pocket as they strolled down the street would have been seen as loose. Children addressing adults by first names was unacceptable.

You might be tempted to charge, “Williams, you’re a prude!” I’d ask you whether high rates of illegitimacy make a positive contribution to a civilized society. If not, how would you propose that illegitimacy be controlled? In years past, it was controlled through social sanctions, including disgrace and shunning.

Is foul language to or in the presence of teachers conducive to an atmosphere of discipline and respect necessary for effective education? If not, how would you control it? Years ago, simply sassing a teacher would have meant a trip to the vice principal’s office for an attitude adjustment administered with a paddle.

Years ago, the lowest of lowdown men would not say the kind of things often said to or in front of women today. Gentlemanly behavior protected women from coarse behavior. Today, we expect sexual-harassment laws to restrain behavior.

During the 1940s, my family lived in North Philadelphia’s Richard Allen housing project. Many families didn’t lock doors until late at night, if ever. No one ever thought of installing bars on the windows.

Hot, humid summer nights found many people sleeping outside on balconies or lawn chairs. Starting in the ’60s and ’70s, doing the same in some neighborhoods would have been tantamount to committing suicide.

Keep in mind that the 1940s and ’50s were a time of gross racial discrimination, high black poverty and few opportunities compared with today. The fact that black neighborhoods were far more civilized at that time should give pause to the excuses that blame today’s pathology on poverty and discrimination.

Policemen and laws can never replace customs, traditions and moral values as the means for regulating human behavior. At best, the police and criminal justice system are the last desperate line of defense for a civilized society. Our increased reliance on laws to regulate behavior is a measure of how uncivilized we’ve become.

Walter E. Williams is a professor of economics at George Mason University.

Published in: on May 5, 2009 at 6:36 pm  Leave a Comment  
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Supply and Demand: Starbucks

Many have complained that Starbucks is way too expensive for coffee. At the same time, Starbucks has become one of the most sucessful businesses in the world. Now though with the current financial situation, people are cutting back thus demanding less or substituting other alternatives like McDonald’s McCafe. This from the Wall Street Journal:

“Starbucks Corp. Chief Executive Howard Schultz said the coffee giant is ready to fight back against rivals’ claims that the company’s coffee drinks are expensive and the notion it is losing share to cheaper coffee makers.

As it reported a 77% drop in quarterly profit, the company on Wednesday also said it will adjust its pricing in some markets, raising prices of some of the more complicated drinks, while lowering those on basic drinks. For example, Starbucks will offer a “grande” size iced coffee for less than $2, shaving as much as 45 cents off the price, depending on the market.

The moves come as Starbucks is struggling to attract and retain consumers in a recession. Starbucks said U.S. comparable-store sales fell 8% in its latest quarter as traffic fell 5%, and average transaction totals fell 3%.”

This is how competitive markets adjust prices to be the most efficient. The rest is here.

~PCCapitalist

Published in: on May 5, 2009 at 12:12 pm  Comments (10)  
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How Public Choice Economists are different…

This is somewhat of a following up from my previous post “How are Libertarians different?” Like libertarianism people often throwaway the explanations of Public Choice Economics when it is offered to them. Public Choice Economics is often offered to people as “looking at politicians as rational self-interest people.” The next phase is that people look at you and kind of go “duh.” It is much deeper in that. They also study institutions and the incentives politicians face.

Often times when you talk to Conservatives and Liberal (even some libertarians) the most important thing is getting the right person elected to office. What they end up doing is getting new people elected and fighting the fake Liberals and Conservatives who are already in place. Since they are usually unsuccessful with dethroning the fake Liberals and Conservatives, they often do this over a long time horizon and it becomes a neverending cycle.

What the Public Choice challenge is, is how can you arrange the incentives so that any President good or bad will not completely disrupt the system. Other Public Choice Economists come to the conclusion is that you can in fact never get the incentive structures changed. Further more there are other Public Choice Economists believe that a competitive system which prevents an identity from becoming a monopoly on force.

This may be hard to imagine without an example. If you think about the current political system we are faced with. The politicians that get elected are going to be the people who find the best ways to spread the costs and concentrate the benefits. This means pleasing special interests. They will also be the best at making political deals and saying things without saying anything at all. We all know this because we see it every election cycle. What we want is the straight talking, dudley do the right thing politician. The problem is that the incentive structure favors those who do the opposite.

Electing saints is what most regular people do, while Public Choice is more concerned with having institutions that protect us even if we elect a devil.

~PCCapitalist