Category Archives: Monopolies

Obama Using “Net Neutrality” to Obscure Federal Take-Over of Internet

fiber-optic-cable“The government will fuck the Internet up.”

So says Mark Cuban. Truer words were never spoken. Allowing the federal government to treat the Internet as a public utility, as President Obama is calling for, under the guise of “net neutrality,” is an abysmally bad idea.

To be clear, “net neutrality” and public utility regulation are two different but equally bad ideas. It appears Obama is using the former in a cynical bid to trick the electorate into accepting the latter. Neither is needed and both are undesirable.

“NET NEUTRALITY”

Net neutrality is the idea that, having paid for Internet service, consumers should have unfettered access to all content. It would prevent a whole host of business model experiments that Internet Service Providers (ISPs) might otherwise try:

  • Selling tiered data plans like cell phone companies do.
  • Developing their own content and then delivering that content at higher speeds than they deliver a competitor’s content.
  • Creating different “lanes” of Internet traffic and charging higher prices to content providers or users for access to the “fast lanes.”
  • Preferring certain content providers to others, likely depending on who pays.
  • Blocking users from using certain online content that takes up too much bandwidth and slows down the network for other customers.

I see none of this as frightening. We pay different rates based on the size and weight of the mail we send. We pay different rates for concert seats, cell phone plans, Netflix memberships, cable subscriptions and a whole host of other services.

The sun still rises.

What consumers who demand heavy content at low cost really want is to have other users overpay for light content while suffering the slow buffering speeds caused by the heavey users. As Casey Given, writing for Rare, observes:

Even if the FCC’s worst fears come to fruition and ISPs start charging cell phone-style “plans” for different levels of Internet access, online access would only become cheaper for low data users. As it is today, a grandmother who logs online once a day pays just as much as the tech-savvy teenager next door who regularly downloads gigabytes of data. As such, she is subsidizing his usage and could instead be paying a cheaper rate if her ISP offered varying plans.

In any case, ISPs own their technology and infrastructure. They invested in that property with the aim of making a profit. The idea that the public has some sort of claim against the property of ISPs reflects a sense of entitlement I cannot endorse. Rights are things we get to do—not things we get to have at others’ expense.

It is where we stand on this principle in the hard cases that defines us.

In addition to heavy content users, the other main beneficiaries of net neutrality are Internet giants like Facebook, Google and Netflix. These companies do not want to be charged by ISPs for the heavy traffic their users generate while slowing down buffering speeds for everyone else.

But is there any reason we should prefer the profit of big content providers over the profit of ISPs? Is there some principle that says Netflix should be allowed to earn whatever profit the market permits—but not the ISPs who deliver its content to consumers?

As Doug Mataconis wrote for TLP back in 2010:

It’s Comcast’s network, [it] should have the right to decide how it’s used and to take action to protect its property and its other customers.

PUBLIC UTILITY REGULATION

Obama’s plan to regulate the Internet is not the same as net neutrality. His plan is to treat it as a public utility, the “most draconian” level of regulation that could apply. It would require ISPs to provide universal service, i.e., “wire up every house.”

It would also allow them to charge the rates necessary to recoup that expenditure at a profit. In fact, public utility regulations allow the type of tiered pricing net neutrality advocates want to prevent:

What some critics of the Commission’s recent proposal may not realize is that even if the FCC agrees to impose the price, non-discrimination, and other forms of common carrier regulation on ISPs, Title II reclassification, would not necessarily ban paid prioritization. As former enforcement director at the Federal Trade Commission, David Balto, has pointed out, the title only prohibits “unjust and unreasonable” differences in services. Carriers regulated under Title II still “may offer different pricing (including volume and term discounts) … so long as they are ‘generally available to similarly situated customers.’”

In plain English, all this means that if some websites, like Netflix, want “faster lanes” on broadband networks, the providers of those networks can charge extra for that service even under Title II, so long as they stand ready to offer the same service to all similarly situated comers.

So Obama’s proposal presents a solution that does not fit the purported problem—which may not even exist.

In June 2006, there were two or more broadband providers in 92 percent of the nation’s zip codes, and four or more providers in 87 percent. A June 2014 study found at least two providers (wireline and wireless) for virtually all of the U.S., and at least two providers (cable and telephone) in nearly three quarters. Nick Gillespie reports at Time Magazine that 80% of households have at least two providers capable of delivering the Internet at 10Mbps or faster.

This access has been achieved even as prices have gone down:

President Obama’s call this week to regulate the Internet as a public utility is like pushing to replace the engine of a car that runs perfectly well. The U.S. data sector — including wired and wireless broadband — is the envy of the world, administering a powerful boost to consumer welfare, generating high-paying jobs and encouraging tens of billions of dollars in corporate investment. Indeed, the prices of data-related goods and services have dropped by almost 20 percent since 2007.

So what is really going on? Does Obama really think the future of the Internet requires the government to sort out squabbles between Netflix and Comast?

I doubt it.

Maybe it is intended to deliver to big donors. Maybe it is about the 16.1% tax on interstate revenues that would be paid by broadband consumers. Or maybe it is something more sinister. As Christopher Bowen wrote last week:

The problem with the government regulating the internet is that … when they get to determine the rules, the consequences turn sinister.

*     *     *

What about communications of interest to the government, such as anything with heavy encryption? Or Tor?

The government has a direct interest in controlling that kind of traffic—hello, Wikileaks/Edward Snowden/any other whistleblower—and if anyone thinks the federal government will look the other way on these things, they are naive.

This isn’t just a possibility, it’s the reality of current legislation on the books, as Chris Byrne pointed out in 2006. Every single packet, every communication, every image, would be captured and stored—by law—if common carrier became the letter of the law in regards to internet traffic, without a warrant, and it would take just a rubber stamp to get a warrant that would be used to punish anyone the government pleases…

REGULATION HURTS INVESTMENT IN INFRASTRUCTURE

For years, federal agencies themselves have resisted calls for regulation, on the states basis that forcing ISPs to treat content neutrally was not necessary, would impede the development of infrastructure, and would have an adverse effect on consumer welfare.

That is because developing the technology to respond to demands for bandwidth requires heavy investment. In fact, in 2013, telecom and cable companies topped the list of industries investing in the U.S., to the tune of $46 billion in investment.

Regulation cuts into the profits that encourage that level of investment.

This Cato Institute podcast, for example, covers the fact that Google Fiber does not provide Title II (public utility) services precisely to avoid the onerous regulations that come along with such endeavor. Another stark reminder of this basic fact came in the wake of the President’s message. On November 12, 2014, AT&T announced it would delay installing high-speed fiber-optic Internet infrastructure in 100 U.S. cities until the rules were clarified.

Perhaps this is why the American people oppose regulation. A November 2014 survey by Rasumussen Reports found that 61% oppose federal regulation of the Internet. Only 19% want more regulation than we already have. What is more, seventy-six percent like the quality of their Internet access.

Only 5% have complaints.

At best this is a solution in search of a problem. At worst, this is a Jonathan Gruber style misinformation campaign, designed to lull the public into complacency as the federal government assumes control of the Internet.

This time, let’s not fall for it.

Image via BandwithPlace.com

Sarah Baker is a libertarian, attorney and writer. She lives in Montana with her daughter and a house full of pets.

Net Neutrality… Obama… Cruz… How About Oliver?

Today, Barack Obama(D) has announced that he will pretend to support net neutrality:

 

 

In response, Ted Cruz (RPDGC*), has announced that Net Neutrality is the work of the devil:

 

 

The idea that either Democrats OR Republicans actually support net neutrality is a joke.

The Democrats have (and still do) very strongly supported big media and big communications, who are largely anti neutrality. it’s only when net neutrality obviously became a big issue among young liberals (who were largely unmotivated to turn out this midterm election) that they have pretended to support it.

The Dems could have made it a campaign issue, except then they wouldn’t have had the huge media and communications industry money for the elections, that they needed to avoid getting spanked even worse than they did.

If Obama had actually supported net neutrality, he wouldn’t have appointed an anti neutrality industry stooge as FCC chair… but again, if he did that, the Dems would have lost that sweet sweet big media money.

On the other hand, the Republicans are largely anti “big media” and anti “big communications”, and only became anti-neutrality when the Democrats decided to take it as an issue.

What is Net Neutrality?

Frankly, any libertarian should support net neutrality as a principle (government regulation is another matter).

Net neutrality as a principle, is simple. All legitimate traffic should be treated equally, no matter the source or destination. No internet service provider should filter, censor, or slow down traffic from their competitors, their critics, or because of politics or national origin; or for any reason other than technical requirements for safe, efficient, and reliable network operation.

It’s how the internet has always been run, up until recently, without any government action necessary. There’s a famous quote: “The internet interprets censorship as damage and routes around it”. Any internet service provider that censored, filtered, or slowed down traffic from anyone (for anything other than technical reasons) was routed around, and cut out of the net, by its peers. It was a great example of independent action and peer enforcement working in the marketplace.

Unfortunately, this is no longer the case.

Why is it an issue now?

Large media and communications companies like Comcast and Verizon have been deliberately and artificially blocking or slowing down traffic to and from their critics and competitors.

Of course, getting government involved does generally make things worse. In fact, it already did in this case, since the government has been involved from the beginning, and it was largely government action that created the current problem.

In a rational and unbiased competitive environment, consumers would have a reasonable choice of internet service providers, and any ISP that chose to censor or limit access, would lose customers, and either correct themselves or go out of business.

Unfortunately, we don’t have anything like a free and competitive market in internet access. Government regulation and favoritism has created huge monopolies (or at best duopolies, and no, wireless access is not realistic and reasonable competition given the distorted market and cost structures there either) in internet access.

We’ve reached a point where the telecommunications monopolies that government created and support, are in fact deliberately applying anticompetitive, unfair (and in some cases already unlawful) restraint against their critics and competitors.

Since they are government supported monopolies, the market is not allowed to correct the undesirable private action.

This means that, unfortunately, government action IS required… and even if it were not required, it’s inevitable, because politics is politics, and this is now an “Issue”.

So what do we do about the problem?

Please note, I don’t trust either Democrats OR Republicans on the issue in general, and I don’t trust either, or the FCC to regulate neutrality at all. Cruz does have at least one valid concern, in that the history of government regulation of almost every industry, but particularly technology, is mainly a long record of suppressing innovation and other negative unintended consequences.

The ideal solution is to end the government created internet access monopolies that most Americans live under, and allow free and open market competition to correct the problem.

Without government limitations on competition in actual high speed, high quality internet access; competition will increase, prices will fall, and any provider that filters or slows legitimate traffic will lose all their customers and go out of business.

This isn’t just a prediction or libertarian idealism talking by the way. It’s been proved out in Korea, Japan… even in the UK. Everywhere that internet access competition has been allowed to flourish, everything has improved (conversely, in the U.S. where we have deliberately increased the power and scope of these monopolies, we have the worst internet access of any technologically advanced nation).

Unfortunately, that isn’t going to happen.

The next best thing, is to mandate net neutrality in the least intrusive, least stupid way possible, and to react intelligently (and rapidly) to changes in technology and its uses, to avoid regulatory distortion and suppression of innovation.

Unfortunately, that isn’t likely to happen either…

That said, it’s remotely possible for us get closer to that, quicker, than we can to disassembling the thousands of federal, state, and local regulations, which have created these monopolies, and made the barriers to entry for competition impossibly high.

Of course neither Democrats nor Republicans support or plan to do that.

The whole thing is a spiraling charlie fox of disingenuous cynical idiocy.

Personally, I say forget Obama, forget Cruz, and listen to Oliver (or if you don’t care for Oliver, or can’t watch a video, there The Oatmeal):

 

 

*Reactionary Populist Disingenuous Grandstanding Cynic… not the Republican party, just Cruz

Edited to add a few paragraphs clarifying what net neutrality was, and why it’s currently an issue

I am a cynically romantic optimistic pessimist. I am neither liberal, nor conservative. I am a (somewhat disgruntled) muscular minarchist… something like a constructive anarchist.

Basically what that means, is that I believe, all things being equal, responsible adults should be able to do whatever the hell they want to do, so long as nobody’s getting hurt, who isn’t paying extra

Tesla Whines About Protectionist Legislation for Auto Dealers While Using Government Largesse to Compete

Last week, I wrote about rent seeking auto dealers lobbying for protection from competition with manufacturers utilizing direct-to-consumer sales models. I mentioned direct-to-consumer manufacturer Tesla by name, and suggested such legislation would prevent consumers from enjoying the savings that might otherwise be realized from Tesla’s efforts to “eliminate the middle-man.”

I should have taken the opportunity to address Tesla’s own abundant receipt of government largesse.

And to be clear, “government” largesse is always paid for by the taxpayers.

In a piece entitled “If Tesla Would Stop Selling Cars, We’d All Save Some Money,” Forbes contributor Patrick Michaels details all the ways Tesla benefits from government handouts. Michaels concludes that taxpayers shell out $10,000 for every car Tesla sells.

Michaels starts with a claim that purchasers of Tesla vehicles receive a $7500 “taxback bonus that every buyer gets and every taxpayer pays.” Since the tax credit appears to be non-refundable, I would not count it as a cost to other taxpayers, as Michaels does.

But the federal tax credit is only the tip of the crony capitalist iceberg for Tesla.

There are also generous state subsidies paid by taxpayers to the wealthy people who buy Tesla’s expensive vehicles. Purchasers in Illinois, for example, can receive a $4,000 rebate from that state’s “Alternate Fuels Fund,” a $3,000 rebate to offset the cost of electric charging stations, and reduced registration fees. California likewise offers a long list of rebates and subsidies to buyers of electric vehicles.

One of the hidden costs to consumers comes in the form of the increased price tag on cars sold by manufacturers who do not qualify for California’s mandated emissions credits, which they instead have to buy from Tesla, allowing it to earn a profit despite selling cars at a massive loss. As Michaels explains:

Tesla didn’t generate a profit by selling sexy cars, but rather by selling sleazy emissions “credits,” mandated by the state of California’s electric vehicle requirements. The competition, like Honda, doesn’t have a mass market plug-in to meet the mandate and therefore must buy the credits from Tesla, the only company that does. The bill for last quarter was $68 million. Absent this shakedown of potential car buyers, Tesla would have lost $57 million, or $11,400 per car. As the company sold 5,000 cars in the quarter, though, $13,600 per car was paid by other manufacturers, who are going to pass at least some of that cost on to buyers of their products. Folks in the new car market are likely paying a bit more than simply the direct tax subsidy.

Slate’s Scott Woolley details another way in which Tesla has cost taxpayers money. In 2009, Tesla received a $465 million Department of Energy loan that allowed it to weather a financial maelstrom. Unlike Solyndra (and Abound Solar and Fisker Automotive and The Vehicle Production Group LLC), Tesla managed to repay the loan in 2013. According to Michaels, it did so by reporting its first ever quarterly profit (earned from the sale of the emissions credits), which sent its stock soaring and enabled it to borrow $150 million from Goldman Sachs, and then issuing a billion in new stock and long-term debt.

But Tesla paid the U.S. taxpayers back at a rate far below what venture capitalists would have earned on the same loan. As an example, Tesla’s CEO Elon Musk also made a loan to Tesla. Musk got a 10% interest rate and options to convert the debt to stock, which he did, resulting in a 3,500% rate of return on his investment.

In contrast, the U.S. taxpayer received a 2.6% rate of return.

In other words, in our crony capitalist system, taxpayers take the loss on bad loans like the one to Solyndra, but do not enjoy commensurate reward on good loans like the one to Tesla.

But there is still more. Tesla cannot keep earning emissions credits, which allow it to earn a profit despite selling its cars at a loss, unless it can keep selling those cars. Josh Harkinson, writing for Mother Jones, writes that:

Its first-quarter profit, a modest $11 million, hinged on the $68 million it earned selling clean-air credits under a California program that requires automakers to either produce a given number of zero-emission vehicles or satisfy the mandate in some other way. For the second quarter, Tesla announced a $26 million profit (based on one method of accounting), but again the profit hinged on $51 million in ZEV credits; by year’s end, these credit sales could net Tesla a whopping $250 million.

Tesla’s ability to continue selling the cars that earn the credits is in question. The market for $80,000 cars has a limited number of buyers. Tesla must expand its customer base with a more affordable product.

One way to achieve that would be to cut the vehicle’s range. But subsidies, credits and fuel savings notwithstanding, consumers have little taste for lower ranges—even at a much lower price. Another way for Tesla to lower the cost of its vehicles is to cut the cost of its batteries without sacrificing the range. As Harkinson observes:

That, however, may again depend on massive subsidies—in this case funding to battery researchers and manufacturers by the governments of Japan and China. Over the past five years, Japan’s New Energy and Industrial Technology Development Organization, a public-private partnership founded in 1980, has pumped roughly $400 million into developing advanced battery technologies. Tesla’s Panasonic cells also might be pricier if not for subsidies the company received to expand its battery plants in Kasai and Osaka.

When Republican Gov. Rick Snyder signed the bill reaffirming Michigan’s protectionist legislation for traditional automobile franchise dealers, auto blog Jalopnik reported GM’s position as follows:

“Competition is always healthy,” GM spokeswoman Heather Rosenker tells Jalopnik. “But it needs to be on a level playing field.”

In the context of the substantial aid Tesla receives from federal, state and foreign governments, it is easier to have some sympathy for the plight of traditional manufacturers—and their dealers.

Ultimately, that sympathy shines a spotlight on the problems created when government starts “tinkering” in the market. Inevitably, that initial, well-intentioned tinkering necessitates ever more intrusive secondary tinkering aimed at remediating the unintended side effects of its initial foray into the market.

Consider health care. Inflation in the cost of U.S. health care began to outpace the general rate of inflation when the government began subsidizing health care costs. Nobel laureate economist Milton Friedman has estimated that real per capita health spending is twice what it would be in the absence of third party payments, and that Medicare and Medicaid are responsible for 43% of that increase. The remaining portion can be blamed in large part on the third party payments from mandated employer health care coverage, further separating patients from the cost of their care and eliminating the market forces that would otherwise keep costs down. Add to the foregoing the government-enforced monopolies on health care education, leading to 22% fewer medical schools in the United States now than one hundred years ago, despite a 300% increase in population, and attendant provider shortage. All that well-intentioned tinkering created a whole host of ugly, unintended side effects, necessitating more tinkering. The federal government responded with the Affordable Care Act and its accompanying thousands of pages of new regulations.

Everywhere the pattern repeats. The cost of higher education outpaces general inflation precisely because the government wants to help people pay for it. The unintended side effect is increasing numbers of graduates with useless degrees and few job prospects, necessitating further tinkering in the form of loan relief, jobs programs and minimum wage hikes. The Federal Reserve suppresses interest rates to artificial lows in the well-intended effort to speed recovery from the bust of the dot-com bubble. The unintended (in this case, it may actually have been intended, at least by Paul Krugman) side effect is a new bubble in housing. When that bubble bursts, the government must step in to bail people and banks out of their bad investments, create new bureaucracies and new regulations making it harder for people to qualify for loans (in contrast to previous tinkering designed to make it easier).

Lather, rinse, repeat.

I am not a radical free-marketer because I dislike poor people or have a special love for corporations. I am a radical free marketer because I know no amount of tinkering ever produces results as beneficial as what the market produces, naturally and efficiently, all on its own.

Sarah Baker is a libertarian, attorney and writer. She lives in Montana with her daughter and a house full of pets.

Atlas Shrugged Part II in Theaters This Weekend

Atlas Shrugged Part II is opening this weekend. Want to check it out? Follow this link to find a theater near you.

And now, the official Atlas Shrugged Part II trailer:

Accountability, responsibility, risk, metrics, unions, markets… What about education?

As has been discussed here recently, Chicago teachers are striking, even though they already make an average salary nearly double that of the average Chicago family, and are being offered a 16% raise over four years.

I dunno about you, but as a free market partcipant in our economy today, that sounds like a pretty good deal.

Well, first thing is they’re asking for a 30% raise over four years… but that’s really just a negotiating point, and one they don’t expect to get. If it were just about the raise, I’d guess they’d take the 16%.

It’s not.

It’s not really about the money; it’s that the teachers new contract attempts, in even the tiniest way, to add some accountability and performance measures to the teachers contracts.

… and the teachers unions can’t give even a millimeter on this issue. Not one millimeter, not ever. Because if they do, their rigid seniority system collapses, and they lose power.

Here’s a fun fact: a lot of younger teachers don’t mind the idea of performance standards, and they actually LIKE the idea of merit pay, performance bonueses etc… It’s not a foreign idea for them, because all their friends who live in the real world market economy have that sort of thing.

Recently, in Idaho, the commissioner of education managed to get teacher tenure eliminated, and performance based bonuses (note, not performance based salaries or hiring or firing, just bonuses) passed as commission regulations, and then when they were challenged in lawsuits, via statute approved by public referendum.

In response, the teachers unions sponsored an unsuccessful attempt to have the commissioner (who is now serving as one of the two lead advisors on education to the Romney campaign) recalled. So unsuccessful in fact the numbers indicate basically no-one voted for the recall but teachers and their immediate families.

This year, they managed to get enough signatures together to get a repeal effort on the merit pay rules on the ballot as a referendum; polling on which indicates it will fail miserably. Meanwhile, the teachers unions are both suing to prevent the policies from being implemented AND SIMULTANEOUSLY suing to force the department of education to distribute the bonus money, but on a seniority basis.

Trying to have their cake and eat it too.

I don’t understand how much more clear it could be that this has nothing to do with the wellbeing of our children, or about good teachers; it’s about protecting union rules, and union rule…

BUT, there are certainly good, well meaning people, who really do believe that we shouldn’t put performance standards on teachers… That it’s somehow “unfair” or impossible, or just not a good idea etc…

“You can’t hold teachers accountable for the performance of their students, there’s too much they can’t control. Their home lives, their parents, poverty… Good teachers could be penalized simply for having bad students). It’s not fair”

Common refrain from teachers, and from those who support their position in this… After all you wouldn’t want to be evaluated on someone elses efforts and abilities right?

Well… I am. Most likely you are too.

In the free market, we are held accountable for other people performance and decisions etc… all the time.

As an individual contributor, my performance is measured not only by my own efforts, abilities, and success; but that of my group, my manager, and my company as a whole.

As a manager, I am held entirely accountable for someone elses performance. I have tools to motivate them, help them perform better etc… But still, I have to deal with the performance that other people give me. I have to have the skill to use that performance in the best possible way.

“But you can fire your low performing employees”.

Really?

Ever worked in corporate America? Or had a real job of any kind?

So long as my employees meet bare minimum standards, and don’t actually commit a crime (or violate major HR policies), I’m not getting rid of my low performers. It’s up to me, to make them meet the standards I need for my group to be successful.

In sales, you are held accountable for other people actions, decisions, and performance as well. You don’t get to control your customers decisions, and how much they buy from you is dependent more on their performance than yours.

Yes, a skilled salesperson with a good support team will sell more than an unskilled one; and that’s as it should be… but its still entirely dependent on someone elses performance and decisions. A good sales guy can’t get a customer who doesn’t have the money for the product, to buy the product… or at least not more than once.

Good sales managers understand this. They set account and territory sales expectations based on a reasonable evaluation of the possible performance of those accounts. If they don’t then they won’t get any decent sales people to work for them, and they’ll constantly churn sales people making these accounts and territories perform even worse.

What matters in evaluating your ability as a salesperson isn’t your absolute sales, it’s your performance in comparison to other sales people with a similar situation. IF you perform well, then good managers will put you on difficult accounts that have the potential to perform better, and reward you if you make them perform up to potential.

At least if you have a decent management team.

At that point you’re at the mercy of having a good boss, who understands that relative performance is a better judge of your capability than absolute performance…

Just like teachers need to be.

Holding teachers accountable, doesn’t mean that all teachers should be held to arbitrary and universal standards. Teachers that teach all “remedial” students can’t be held to the same standard of performance as those who teach all honors students…

And NO-ONE IS SUGGESTING ANYTHING LIKE THAT.

Or at least no-one serious, with credibility, who should be listened to.

Calling for “standardized testing and accountability” isn’t calling for teachers to make poor students perform at the level of honors students. It’s calling for teachers of all levels of students to perform no worse than average against other teachers of similar levels of students; and to measure improvement in those students over time, compared to other teachers of the same level of students.

How is that unreasonable?

Only those with the irrational… even stupid… belief that teaching is some kind of special “calling” performed only by special people who must be protected from the market forces that the rest of us must cope with; could possibly justify that sort of thinking, with any kind of intellectual honesty.

They generally apply the same sort of thinking to artists, who must be protected from the horrible taste of the masses etc…

Yeah… If we did that, then teachers would be at the mercy of having competent managers, who knew how to evaluate performance.

Just like the rest of us.

In fact… The only time I ever see a serious proposal that teachers should be evaluated by absolute and arbitrary standards… It’s coming from lefties or teachers; because they are trying to “avoid bias” or “avoid subjectivity” etc… etc… etc…

Holding teachers accountable also means holding administrators and school systems accountable. It means making them participate in the market that the rest of us are forced to.

If you have a poorly managed school, good teachers won’t go there.

IF good teachers won’t go there, then good students won’t go there… IF they’re given the option that is…

Oh… wait a second… Hey… that might just be…

And of course, if we allowed that, then the unions would lose…

Oh… hey, that might just be…

Ya think maybe…

Teaching is a job, just like any other. It’s a job that has more benefits than most. These days, it’s even a job that pays more than most. It’s a job that has a lot more security than most. It’s a job that has more garbage and BS and heartbreak than most. It’s a job that’s harder than most. It’s a job that’s a lot more important than most…

Great teachers can do more to help children be successful than anything other than great parents…

But it’s still a job.

Teachers aren’t superheroes, they aren’t artists, they are workers… just like the rest of us.

Teachers don’t need to be protected from the real world, they need to be a part of it, and accountable to it… just like the rest of us.

Maybe if they were, there would be a lot more good teachers, and a lot less bad ones.

Maybe if they our were, our children would be a lot better off.

I am a cynically romantic optimistic pessimist. I am neither liberal, nor conservative. I am a (somewhat disgruntled) muscular minarchist… something like a constructive anarchist.

Basically what that means, is that I believe, all things being equal, responsible adults should be able to do whatever the hell they want to do, so long as nobody’s getting hurt, who isn’t paying extra

Book Review: Slackernomics, by Dale Franks

Those of you that have been around the libertarian blogosphere for any length of time will recognize the name Dale Franks. His main writing gig is over at QandO, where he spends the bulk of his time writing about the economy. In addition, he’s a bit of a gunblogger, and runs a separate blog for motorcycles.

At one point a few years ago I had noticed a link to a book Dale has written called Slackernomics: Basic Economics for People Who Think Economics is Boring. Given that I’m not the type who thinks economics is boring, but had enjoyed his blogging, I wanted to get a chance to read it. At that time, the book was only available in print at a price above $20. It took a spot on my “buy when I get around to it list”, and sat there for quite some time, but I never pulled the trigger. Then, more recently, it became avaiable for the Kindle at only $2.99 — I no longer had an excuse not to buy it. So onto the Kindle it went, and after several long months of sitting there taking up space, I’ve finally gotten around to reading it.

Slackernomics is a primer on basic economic theory that, as the title suggests, is written for people who think economics is boring. It’s written in a convivial tone, and the illustrative examples that Dale uses reminds one more of Freakonomics than of Adam Smith. Don’t let that fool you, though — the book is not a “sideshow” like Freakonomics — it gets to the heart of the matter. I liken it to be similar to Henry Hazlitt’s “Economics in one Lesson”, but written for people who may not be interested in the more formal writing style of Hazlitt. In addition, having been written many decades after Hazlitt’s book, it’s obviously much more up to date.

The book covers everything from price theory, minimum wage & rent control to monetary theory and the business cycle, Keynesianism, taxes / deficit spending, savings & investment, and economic statistics. He continues with a great defense of free trade and a bit of entrance into politics (touching a tad on public choice theory). In all, for being a relatively short book, he hits all the major notes that anyone looking for an introduction to economic thought would need to learn.

But the big question, for readers of this blog, is whether it’s worth it to buy. “Am I going to learn anything new?” And I can honestly say that despite the fact that I read economic books & blogs for leisure, and that I’ve blogged a fair bit about economics myself, I learned some new things from Slackernomics. Dale’s fourth chapter, unwinding the mess of the myriad of economic reports and statistics he’s constantly posting on Twitter, Google+, and at QandO, was wonderful. I’ve looked at many of these reports merely reading analysts *reaction* to the numbers (Higher jobless claims? How unexpected!), but rarely understood which group (public or private) was putting out certain reports nor how they all fit together. For me, a layman who is conversant on a lot of economic theory but not as perhaps on the technical reports, I have never seen an explanation of the reports that come out each week and each month as simple and readable as that chapter. That was more than worth it for my $2.99.

So my recommendation is simple: at $2.99, if you have a Kindle (or a device with a Kindle app), it’s hard to pass it up. You’re almost assured to get your money’s worth from the book. Even further, if you know someone in high school or college that may not have received good schooling in economics (which is, unfortunately, most of them), and who isn’t exactly about to tackle The Wealth of Nations, find a way to get them a copy of Slackernomics. Dale’s writing style will keep them interested.

All in all, it’s a book that lives up to its title, and goes well beyond.

If The Gov’t Doesn’t Pick Up The Trash, It’s Rat-Infested Black Plague For Us All

It seems that Radley Balko has gone playing whack-the-left again, this time smacking around John Cole of Balloon Juice for an overreacting tirade against people who are overzealously overreacting. It seems that Fountain Hills, AZ had competitive trash pickup, and the city council wanted to bid out trash pickup as a single-provider city service instead. The people of Fountain Hills reacted like a bunch of 1950’s anti-communists, calling it socialism and likening it to Obamacare. John Cole and his comment section went ape-shit, in the original post and follow-ups here and here.

Quite a few commenters suggested that if we don’t have municipal trash collection, we’ll look like third-world countries where people just bury, burn, or leave their trash out on their property to rot. Strangely, I hadn’t heard a single report of uncollected trash in Fountain Hills leading to this change. Even more fun, one commenter proved the old adage that everything that’s not compulsory shall be prohibited:

Actually, oddly I agree that cities shouldn’t have uniform trash pickup, if only because I think we should move towards having zero waste as individuals. (Reusable bags for food, no consumer goods, and composting.)

I couldn’t have drawn up a caricature this flat if I’d had a projector to trace it with on my wall.

So why am I wading into this morass? Because I’ve actually lived this. One of the features of competitive services is that if they don’t live up to my guidelines, they don’t get my business.

When I first moved to Georgia, I lived in unincorporated Cobb County, where there was no monopoly muni provider of trash pickup*. There were about 3 or 4 competing services. I ended up choosing one, and despite repeatedly saying they’d deliver a trash can, they neither did so nor did they haul away my trash. Now, I don’t think they’re a bad company. I think they just had a few repeated screwups. As we all know, occasionally government has screwups, like raiding the wrong address for drugs, or putting 8-year-olds on TSA no-fly lists. Unlike government poor service, though, I had, and took advantage of, the right to fire them. When my needs weren’t being met, I had an alternative.

The problems didn’t quite end there, of course. I then received a bill for “set-up fees” for the account, despite the fact that they’d never provided services. Rather than face collections, I paid the bill up front, and then sent an email to their customer service demanding it be refunded. They quickly and cordially acceded to my request, with no hassle whatsoever.

You can just ask the same Radley Balko how easy it is to get money he’s owed from the government, even when he’s done everything right and hounded them repeatedly for an explanation.

Municipal trash service isn’t really the hill to die on for a libertarian. It’s one of those services that straddles the line of public good vs. private market. Our HOA actually debated whether to consolidate to a single provider, as some of the families in the neighborhood were concerned about large trucks coming through on multiple days rather than a single day. It didn’t happen (at least during the 2 years I’d lived there), but I understand the argument and even as a libertarian I wouldn’t have moved out of the neighborhood over such a small issue. The best-run competitively-bid single-provider service can probably achieve economies of scale and efficiency that a competitive market (in this case) cannot — which of course isn’t to say that local governments always provide the best-run single-provider system. But it’s ridiculous for those opposing a competitive system to suggest that it doesn’t work, or that there aren’t actual benefits to customer service in a competitive system.
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Stossel On Government Schools

From his blog at Fox Business Network, John Stossel has this on government schools:

It’s absurd that powerful Americans consider it normal that they must move their residence or manipulate politicians to get their kids into a good school No one has do that to buy an iphone, or a good restaurant meal In every business besides education, successful producers expand. When more people started liking McDonalds – there were no lines around the block, because McDonalds expanded to meet demand.

What exactly is Stossel talking about? Yet another corrupt Obama administration official.

While many Chicago parents took formal routes to land their children in the best schools, the well-connected also sought help through a shadowy appeals system created in recent years under former schools chief Arne Duncan.

Whispers have long swirled that some children get spots in the city’s premier schools based on whom their parents know. But a list maintained over several years in Duncan’s office and obtained by the Tribune lends further evidence to those charges. Duncan is now secretary of education under President Barack Obama.

The log is a compilation of politicians and influential business people who interceded on behalf of children during Duncan’s tenure. It includes 25 aldermen, Mayor Richard Daley’s office, House Speaker Michael Madigan, his daughter Illinois Attorney General Lisa Madigan, former White House social secretary Desiree Rogers and former U.S. Sen. Carol Moseley Braun.

Non-connected parents, such as those who sought spots for their special-needs child or who were new to the city, also appear on the log. But the politically connected make up about three-quarters of those making requests in the documents obtained by the Tribune.

The American education system can be best described as “all children are equal but some are more equal than others”. This is because of the way we have structured government schools. While most of these special requests were rejected by Duncan, the fact that Chicago’s ruling elite could even make these special requests is troubling. Expect Chicago-style school admission policies to spread nationwide as Obama completes what his predecessor started when he likely nationalizes the education system this year. America’s health care system will be heading on this track soon.

If we had school choice via vouchers, parents could decide where their children are educated, not government bureaucrats. Good schools will expand to take in more children while bad schools will improve in order to stay in business.

Until your state gets a real school choice program, if you are able to, get your children out of government schools. Put them in a private school or better yet, homeschool them yourself. Ever since government involvement increased in education, students have been dumbed down and our nation has become less free. Teacher’s unions continue to demand pay raises and obscene benefits without being held accountable for student performance.

If our country is to regain its freedom, the government education monopoly must be broken.

I’m one of the original co-founders of The Liberty Papers all the way back in 2005. Since then, I wound up doing this blogging thing professionally. Now I’m running the site now. You can find my other work at IJ Review.com and Rare. You can also find me over at the R Street Institute.

A Bit of Unexpected Wisdom from a Friend

You might have heard the old saying “The best measure of a mans intelligence and wisdom, is how closely he agrees with you on any given subject”…

Well, by that measure, Kommander is a damn genius (from a thread discussing Obamas abandonment of manned space flight):

The problem with exploring and colonizing space, as opposed to exploring and colonizing the “New World”; is that there is, right now, little commercial benefit for doing so.

Remember that the first colonists to the Americas were not doing it “For Science!” but “For Money!” Until there is money to be made in space it will continue to be dominated by various governmental agencies.

Spaceship One and the space tourism are a good start, be we need more. The future of the space program does not lie with governments, but with commercial interests who will be willing to take risks where governments are not.

Indeed. I’ll take Branson and Rutan over Bolden and Garver in a split second.

Just let me know when I can sign up for the trip to freehold… or anywhere… or nowhere and back for that matter (when it costs less than a nice used car anyway).

I am a cynically romantic optimistic pessimist. I am neither liberal, nor conservative. I am a (somewhat disgruntled) muscular minarchist… something like a constructive anarchist.

Basically what that means, is that I believe, all things being equal, responsible adults should be able to do whatever the hell they want to do, so long as nobody’s getting hurt, who isn’t paying extra

Quote Of The Day

From the Mises Econ Blog, regarding Obama’s two most recent FTC nominees:

For those keeping score, with Brill and Ramirez the FTC will now consist of two law firm partners specializing in antitrust, one former state assistant attorney general for antitrust, a law professor who specialized in antitrust, and a former staff lawyer for the Senate’s antitrust subcommittee. If that’s not diversity, I don’t know what is.

I wonder what the FTC will place their focus on under this administration?

Our Exalted Fearless Leader Almost Gets It

Obama is not a dumb man. He understands that government provisioning generally produces a worse service than private organizations which are dependent on people choosing to patronize them.

Here he is pointing out that while Fedex is required by law to charge higher prices than the Post Office for equivalent services, it is the Post Office which struggles and requires constant taxpayer bailout.

Like Amtrak, USPS, Fannie Mae and Freddie Mac, any publicly funded insurance company will struggle to contain costs as it encourages overconsumption.

I’ve long argued that the real reason that medical care is so expensive is that the government limits supply and subsidizes demand.

The Obama administration, in choosing to ignore the limits on supply placed by government, is embarking on a program that is doomed to fail to meet any of the publicly stated goals.

It’s too bad that Mr Obama is unwilling to follow the evidence to its inevitable, logical conclusion.

I am an anarcho-capitalist living just west of Boston Massachussetts. I am married, have two children, and am trying to start my own computer consulting company.

Public Schools and the Public Option

Imagine a private school where students sat in a math class for weeks misbehaving and learning nothing. Imagine that school gets on TV news because the administrators suspended the young lady who blew the whistle by taking a cell phone video and giving it to her mom who confronted them. Do you think that school would have enough students to start the next school year?

Well, this happened at a public high school in the SF Bay Area:

A freshman at Clayton Valley High School in Concord, California says that’s just what she had to endure in algebra as her classmates went wild.

“People smoking marijuana in the classroom. They smoke cigarettes.” Arielle said. “There was one kid who peed in a bottle and threw it across the room.”

Clayton Valley High School is a public high school, and I have no doubt that it will open with just as many students next year as it did this year. When parents pay for an education, they absolutely will not tolerate a school run like Clayton Valley HS. When the state provides an education for free, a vast majority of parents will generally take what they can get and call it good enough. They might picket and protest for improvement, but they won’t take their kids out of the school.

What does this have to do with health care? The public option being created as part of “ObamaCare” is rather similar to public schools, in that it is designed to undercut private health insurance on the basis of price:

The Lewin Group crunched the numbers through their health care model and found that premiums for the public option plan would be 30 to 40 percent lower than private plans.

A price difference of that magnitude would lead employers to throw their employees into the ObamaCare option:

Overall, the Lewin Group estimates that if Medicare reimbursement rates are imposed, the number of Americans with private health insurance would decline by almost 120 million, leaving only 50 million Americans in the private insurance market.

That would leave approximately 15% of the population in non-government health care, just slightly more than the percentage of students that go to private school. At that point, ObamaCare will have similar monopoly power to the public schools. I expect abuses and incompetence similar to that captured by Arielle Moore at Clayton Valley High when the public option achieves its monopoly power. The scary difference is that instead of not learning algebra, the people who have to suffer that abuse and incompetence will be missing out on life-saving medical treatments.

A human life is too important to waste on government health care.

Update: John Calfee compares ObamaCare to Fannie Mae and Freddie Mac in the WSJ. Yet another sterling example of how we don’t want our health care managed.

Education Is Not One-Size-Fits-All

Kevin Drum recounts a tale of a specific charter school that has had excellent results. He unwittingly makes a good argument for school choice:

In a nutshell, this story explains pretty well why I like charter schools [snip] So I say: fine. If there are some parents who want their kids to go to schools like this, let ‘em.

It makes sense to try out different kinds of schools for different kinds of kids and different kinds of neighborhoods. With a few obvious caveats, I’m all for it. But let’s not pretend that any particular one of these charters is necessarily the model for everyone else on the basis of 18 cherry-picked graduates. It ain’t so.

Well, given that he was marginally quoting someone else’s strawman, I’ll let his aside about pretending that any one of these is “necessarily the model for everyone else”. As far as I can tell, most libertarians and most advocates of vouchers don’t think that there’s a one-size-fits-all model.

And Kevin Drum, from these comments, doesn’t seem to think that there’s a one-size-fits-all model.

But the education bureaucracy seems to want to put everyone into a one-size-fits-all model.

Most reasonable collectivists I know are honestly more concerned with making education work than making it uniform. To some extent, they view things as charter schools as laboratories to test new educational methods, which can then be integrated into “regular” public schools. But they forget that there’s an enormous entrenched bureaucracy that is adamantly opposed to doing anything outside of what is best for the unions.

I agree with Kevin Drum that it makes sense to try out different kinds of schools for different kinds of kids and different kinds of neighborhoods. But where I suspect we disagree is in the assumption that the educational bureaucracy will EVER allow charter schools to do this in any meaningful way. They have too much stake in controlling the debate, and charter schools allow the debate to slip out of their grasp.

The only way to fix education is to offer real choice. Allow parents the ability to make the choice where to send their kids on a real widespread basis, not limited by geography or a tiny number of charter schools with far too many applicants for slots. And the only realistic way that I can see to achieve real choice, given the landscape as it currently sits, is through vouchers.

Education is not one-size-fits-all. We need to stop pretending that we can make it so*.
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Obama’s Policy to Fight Mexican Drug Cartels is Doomed to Fail

The Obama administration, rather than dealing with the root cause of the violence along the Mexican border, has decided to adopt a policy to deal with the symptoms. The problem is that this policy will neither alleviate the symptoms nor come close to treating the problem.

WASHINGTON – The Obama administration promised Tuesday to help Mexico fight its drug war by cutting off the cartels’ supply of guns and profits, while resisting the Texas governor’s call for a troop surge at the border to ward off spillover violence.

Let’s assume for a moment that Obama’s policy to prevent Mexico bound firearms from leaving the U.S. 100% successful. Given the fact that the drug cartels can acquire firearms from other sources (such as corrupt Mexican government agents with access to firearms among other sources) the only difference would be that the firearms are no longer coming from the U.S.

The Obama administration correctly identifies that the drug cartels are so powerful because of the profitability of the illicit drug trade. It’s this ability to make enormous profits, particularly in an impoverished country as Mexico, that attracts players into the business and makes corruption on the part of government officials almost irresistible. Unfortunately, though the Obama administration has identified the profitability of the drug trade as the source of the drug cartels’ power, there is clearly a profound misunderstanding of the way basic economics work (as if the bailouts, handouts, and myriad of other government programs were not proof enough).

The steps announced by Homeland Security Secretary Janet Napolitano – 450 federal agents shifted to border duty, supplied with dogs trained to detect both drugs and cash, and scanners to check vehicles and railcars heading into Mexico – amount to a subtle but important shift:

The blockade of contraband will now be a two-way effort. The fence begun under the Bush administration will be completed, to deter smugglers of drugs and workers. But the new emphasis will be on disrupting the southbound flow of profits and weapons that fuel the cartels.

At his televised news conference Tuesday, President Barack Obama said that for now, it’s more important to disrupt the cartels’ access to profits and weapons than to fortify the border with soldiers.

“That’s what makes them so dangerous,” he said. “The steps that we’ve taken are designed to make sure that the border communities in the United States are protected and you’re not seeing a spillover of violence. … If the steps that we’ve taken do not get the job done, then we will do more.”

So what’s wrong with this approach? The basic economic law of supply and demand tells us that whenever a product is in high demand (drugs in this case) and the supply is lower (in this case by successful drug interdiction by the U.S. governemnt), those who supply the given demand stand to profit more NOT LESS! Whether Obama’s policy results in a decrease in the supply of drugs of 1% or 99%, those drugs which do make it to the end customer will pay even more to get them.

I would even go as far as to say that the Mexican drug cartels would cheer this policy. Sure, the cartels might have more difficulty moving their product into the U.S. and their profit and firearms out of the U.S. but for the most clever smugglers, these enhanced drug interdiction efforts would filter out the competition! (And we know how black market operators hate competition).

On some level, I do believe that even the political class understand this but somewhere, there is a disconnect. Just yesterday in her visit to Mexico, Secretary of State Hillary Clinton admitted that the war on (some) drugs over the past 30+ years “has not worked.”

“Our insatiable demand for illegal drugs fuels the drug trade.”

And now the disconnect:

“Our inability to prevent weapons from being illegally smuggled across the border to arm these criminals causes the deaths of police officers, soldiers and civilians…”

Mrs. Clinton apparently recognizes how the war on (some) drugs has been an abject failure fails to realize that the Chosen One’s policies will do little to reverse this trend. If she truly wants to do something productive, something has to be done about what she (correctly) describes as this “insatiable demand” for these drugs. She seems to understand that the “Just say No” campaign didn’t work but does she and others within the Obama administration really believe that more drug hysteria PSA’s will do anything to curb this demand?

Given how the Obama administration has decided to deal with the drug war related violence along the border, I’m not optimistic. If spending billions of dollars annually on this insane war on (some) drugs which has contributed to leading the world in the number of people in prison (imprisoning 1 out of every 100 adults; more than half of the U.S. prison population is there because of drug related offenses) has failed to curb the demand, then perhaps it’s time to try a different approach.

Nothing short of legalizing the drug trade will stop the violence, so why does the politicos, law enforcement, and government bureaucrats at almost every level continue the same “get tough” policy which clearly has not worked? The only conclusion I can come to: they must be high.

Note To Orrin Hatch — 13-0 May Be A Travesty, But It’s Not Congress’ Business

Orrin Hatch is undoubtedly merely responding to his constituents’ demands with this nonsense. The Utah Utes finished 13-0 last season, with notable wins over Michigan, Oregon State, ranked teams TCU and BYU, and a BCS bowl defeat of Alabama. It’s a pretty impressive resume. They were the only undefeated team in Div I-A (FBS). But they’re not the Champion. Florida, who finished 13-1 (with their sole loss being to Mississippi) is the Champion.

I understand the complaint. If a mid-major team like Utah can have the season they’ve had, beat the teams they beat, and still fall behind a one-loss school from a “major” conference, then no mid-major will ever be crowned Champion. Granted, Florida may have been the best team in college football (as the Patriots were the best team in the NFL in ’07-8 despite not winning Super Bowl XLII), but I don’t think the system for determining a Champion is very fair.

It’s not a system I like. It’s also not a system that Orrin Hatch likes, but he’s sticking the full power of the federal government into the debate:

Sen. Orrin Hatch, R-Utah, may be a skinny guy with a high voice. But he’s angrily setting out to tackle the biggest powers in college football, vowing to pound them until they reform the Bowl Championship Series.

He called them out Wednesday, as he and Sen. Herb Kohl, D-Wisc. — respectively the top Republican and Democrat on a Judiciary subcommittee on antitrust — released a list of topics that panel plans to consider this year.

A bit buried on Page 4 of an eight-page list, amid somewhat sleep-inducing reading on oil and railroad antitrust, is a nifty paragraph about the BCS.

“The BCS system leaves nearly half of all the teams in college football at a competitive disadvantage when it comes to qualifying for the millions of dollars paid out every year,” their joint statement says.

Then it drops its first unexpected bomb: “The subcommittee will hold hearings to investigate these issues.”

That is followed by a second: “Sen. Hatch will introduce legislation to rectify this situation.”

I realize that Congress believes it has purview over everything that occurs within our borders, but if their “fixes” for other problems are anywhere near as effective as this one will be, I’m not sure anyone will want to watch college football afterwards. I really wish they’d waste their time ruining something else, because I quite enjoy spending fall Saturdays watching one of the few worthwhile sports left.

An Economy Is Not About Jobs

One of the bizarre fallacies propounded by President Obama, the Congressional leadership, and their intellectual enablers such as Paul Krugman, is the notion that society should be organized to give people jobs, and that if the supply of jobs is insufficient to meet the demand, the government should step in and create an additional supply through economic policies.

Walter Block, restating an argument made famous by Frederic Bastiat, points out that nothing could be farther from the truth.

The purpose of an economy is to align production of goods with demand, so that people have their desires to consume goods satisfied.  Dr Block points out that if we lived in a society where 30% of the population dug holes that were filled in by the other 30%, with the remaining 40% laboring to supply food, clothing, shelter and tools for the hole-diggers and hole-fillers, we would be far poorer than if that 60% were redirected to other forms of labor that produced things useful to the other 40%.

This becomes obvious when you consider a thought experiment.  If you ask people to choose between having a job, and having the enough food, clothing, shelter etc, they will choose the latter in a heart-beat.  People work primarily so that they can produce what they need in order to be comfortable, either by making the stuff they want to use directly, or making stuff that they intend to trade to other people for the stuff they want to use themselves.

Much of the proposed stimulus project is makework that is little better than hole-digging and hole-filling in.  Absent the stimulus spending, the people who will be employed under the stimulus project would have to find tasks to busy themselves with that produced goods and services that people were willing to pay for.  Instead of working to identify what unmet needs were most urgent and in the greatest demand, now they will coast, “earning” a paycheck, while working on either less profitable tasks, or even unprofitable ones, where the resources they consume are greater than the product they produce.

No doubt that some people would read the above paragraph and say, “Aha! But what if they can’t find anything to do?  What if they can’t find anyone willing to hire them, don’t know how to subsistence farm, etc!  What, Mr Free-Market Anarchist, should they just hurry up and die – making sure that they starve to death out of sight?”

At first, this seems like a powerful argument, until one considers what percentage of the population is actually unemployable?  I would expect that they number no more than 5% of adults, perhaps 25 % of the entire population adding in the elderly and young children.  And, these people are probably unemployable even under a government make-work project.  Even if there was a massive shortage of workers, they would be unemployed and dependent on charity.  Rather, most of the people employed under any job-generation scheme will be able-bodied.

Nor will the able-bodied be unable to find work.  We humans live in a universe of scarcity.  We always have unmet needs, we want more shelter, better food, better cars, better streets, better entertainment etc.  Many of these needs are not met not because humanity lacks the raw materials or the land needed to realize these needs, but because there aren’t enough people around to satisfy them.

The only way to find out which of these unmet needs are th emost urgent is via the price system.  People will pay more for labor that is needed to satisfy more urgent demands and less for labor that satisfies less urgent demands.  The higher wages will act as a signal to the unemployed who can do the job to start doing the job.

The temporary unemployment that accompanies recessions occurs becasue the price system requires the passage of time to reach an approximate equilibrium.  Essentially, in a recession, people who were producing things that were not in heavy demand stop that undesired production and spend some finite period of time looking for othe rthings to do.  Simmilarly prospective employers need time to figure out where the shortages are, or to identify opportunities to start expanding production again.

By attempting to sabotage this feedback system, the proponents of the stimulus plan are setting the stage for long-term stagflation at best, and a future crash at worst.  Not only are they shifting the problem of what to do with the unemployed into the future, they are encouraging, though false price signals, people to abandon productive pursuits in favor of the make-work projects being promoted by the state.  If, for example, the state promotes the construction of dams, then people who otherwise would have chosen to become farmers or mechanical engineers or home builders will instead gravitate to civil engineering.  They will then form a political group which strives to keep the emergency programs going indefinitely, much as farmers continue to agitate for the price supports borne from the “emergency” of the Great Depression, of the California Prison Guards’ Union agitates against the repeal of anti-drug laws.  This would be bad enough if government official were to attempt, in good faith, to guess what the unmet needs in greatest demand were.  When one considers the inevitable corruption and rent-seeking that accompany the establishment of such emergency programs, the true scope of the danger to the economy presented by the stimulus project becomes clear.

Barack Obama has been in office less than a month.  The early signs are that he will prove to be a bigger disaster than George Bush.

I am an anarcho-capitalist living just west of Boston Massachussetts. I am married, have two children, and am trying to start my own computer consulting company.

Microsoft Attacked By EU For Same Practices That Apple/Linux Use

Back in the day, antitrust regulators decided that including a browser with an operating system was an unfair competitive measure. But to this day, they’ve only ever enforced this against Microsoft, and the EU is still pushing:

European antitrust regulators have told Microsoft Corp. that the company’s practice of including its Internet browser with its popular Windows operating system violates European competition law, Microsoft said Friday.

The Redmond, Wash.-based software giant (MSFT) said that it’s been presented with a statement of objections informing it that related remedies put in place by U.S. courts when Microsoft settled an antitrust case in this country in 2002 are not adequate for Europe, though a “final determination” hasn’t been made on the matter.

I’ve never really used Apple’s computers much, but I’m pretty sure you can’t buy an Apple PC without Safari pre-installed. I’ve installed a number of Linux distributions (Red Hat, Debian, ubuntu, and even a 50MB distro called DamnSmallLinux), and every single one of them has been bundled with a browser. Microsoft has argued that a browser is a critical part of an operating system, and thus — even though it sucks — it makes perfect sense for them to distribute IE with Windows.

In fact, it’s so pervasive, that I’ve never seen an OS that comes without a browser pre-installed. Is the EU going to go after each of OS distributors next? I didn’t think so.

Hat Tip: QandO

Why Nationalization Damages Liberty and Prosperity

Many progressives are looking forward to increased government oversight over the auto industry. They see this as a chance to influence the types of vehicles that are produced and to dictate that production be turned to socially beneficial uses, including the manufacture of green cars that auto manufacturers are not manufacturing. These vehicles are not manufactured presently because car manufacturers see bigger profits in continuing to produce SUV’s and more cheaply built sedans. Viewing this judgment as short-sighted, progressives are overjoyed at the prospect of including non-monetary considerations such as ecology or social needs in deciding what to produce. We who oppose the nationalization are viewed either as being too stupid to recognize the benefits of introducing considerations other than profits to production decisions, or as being wed to outdated economic theories or to be apologists for fat-cat capitalists.

This is incorrect. Rather, the progressives who support nationalization are being very short-sighted and are threatening to return society back to feudalism and are threatening to destroy the development of new technologies, technologies that will be vital to improving our standard of living while reducing the amount of pollution and natural resources needed to maintain such comfort. This not hyperbole but rather simple fact.

The problem, which has plagued all fascist and socialist economies throughout history, is that nationalization destroys the ability of the economy to rationally allocate capital goods and invest in the future. It is this incapability that is behind the phenomenon where communist countries seem to become mired in the past with stagnant technology, bare shelves in shops and factories that routinely fail to meet production quotas. » Read more

I am an anarcho-capitalist living just west of Boston Massachussetts. I am married, have two children, and am trying to start my own computer consulting company.

Third Party Debate

The City Club of Cleveland extended an invitation to the top six presidential candidates*. Of the six candidates, Libertarian Party candidate Bob Barr, Constitution Party candidate Chuck Baldwin, and independent candidate Ralph Nader participated; Democrat Barack Obama, Republican John McCain, and Green Party candidate Cynthia McKinney were no-shows.

Unlike the debates we have already seen in this cycle, the candidates in this debate actually debated the issues!

*The candidates who could theoretically receive the requisite electoral vote to win the presidency

Is Free Market Medicine Heartless?le

Recently I had an interesting conversation with someone who leveled the following accusation:

“You libertarians don’t care if people die from lack of medicine, or if someone can’t afford a doctor.  Libertarianism is the freedom to die from a cold while the doctor who could treat you is doing a checkup for a rich guy who has nothing wrong with him.
You guys are so wrapped up in hating the government that you don’t see the good it can do.”

This is a frequent charge leveled against those who oppose some government intervention.  The assumption contained within the accusation is that if someone opposes the state performing some task, then one is in effect opposing anybody performing that task. There are two possible ways that this accusation could be correct:

1) The task can only be done by the state.  Regardless of our desires to see the task done, it won’t happen without state action. Therefore by opposing state action we are opposing any action that could attain that goal.

2) The task could be done by others, but we believe that it shouldn’t be done at all.

While I am sure one could find the occasional libertarian who is opposed to the broad mass of the people having access to good medical care, this is not true of the vast majority of libertarians.  Unsurprisingly like non-libertarians, most libertarians are fans of good health.  So clearly the second statement is not correct and we are left with the first one as the accusation.

But, is this correct?  Is the state the only entity capable of accomplishing this goal?  It’s actually trivial to demonstrate that the state can’t assure people the highest quality of medical care.  But can it do a better job than other organizations?  The answer is that it can do a “better” job, but at a cost that will wreck the economy.

Why Involve the State?

The notion that the state is required to ensure that people have access to medical care is, itself, predicated on several assumptions:

1) It is bad when someone is allowed to die or goes unhealed when the means to save his or her life or health is available.

2) People who cannot afford to hire a doctor or purchase medicines will go untreated.

3) People are unwilling to voluntarily support others who are unable to pay for their own care.

4) Only the state can amass the funds needed to ensure that all are treated, since it can extract more money than people are willing to give up.

Can the state do it all?

Unfortunately, while these assumptions at first seem reasonable, item number 4 is problematic in ways that supporters of state provisioning ignore at their own peril.  The first is that while state action can alleviate scarcity of medical care, it cannot eliminate it entirely.  Consider Paul Newman.  Paul Newman was a wealthy man.  He had a personal doctor who was well paid.  This doctor probably had no more than 50 patients under his care.  Can state action provide a doctor for every 50 people?  In the United States alone, this would require training 1,000 doctors for every doctor practicing today.  There would be more doctors than the combined population of plumbers, farmers, factory workers and shopkeepers.  Such an action, would take millions of workers out of working in other trades, trades where they paid taxes and put them in the position of consuming taxes.

Clearly this is untenable, at some point, the administrators of any system of providing medical care have to say “no more” and to stop providing additional care that may be technically possible, but economically unfeasible.

Thus we see that even a government-administered program will have to accommodate scarce resources, permitting people to suffer who otherwise could be treated.

Is the state the one who does a better job?

Even if the state can’t treat everyone, can it still do a better job than every other conceivable organization?  To answer this question, we need to examine how medical care is provided on a free market.

Free market provisioning – simple

The simplest way that a person gets medical care in a free market is by waiting until he or she gets sick.  The sick person then goes to a store and purchases the medicines he or she needs or visits a doctor, paying for these services out of their cash balance.  Of course, if the person lacks the money to pay the doctor or the medicine owner, the illness won’t be treated.

The prices under such a scenario are set as follows.  Doctors and medicine makers charge whatever the market will bear.  If they set their prices too high, they won’t be paid at all.  Furthermore if their profits are sufficiently high, they will attract competition, more people choosing to become doctors.  These additional providers will compete for customers, charging whatever the market will bear for their services as well.  Eventually, an equilibrium will be reached where the supply of doctors is sufficient to supply all the patients who are willing to pay them sufficiently well for treatment.

Free market provisioning – Insurance

Illness is a stochastic process that visits people randomly.  The rates of illness in a large population are, however, predictable to a reasonable degree of accuracy.  This makes it quite possible for insurance companies to provide health insurance; people pay a monthly or annual fee for coverage, and the insurance company pays for their illnesses.  People who get very sick benefit because the cost of care exceeds the premiums they pay to the insurance company.  The insurance company profits because the premiums they charge exceed the costs of the treatments they pay for.  The people who don’t get sick may lose money, but should they get sick in the future, they are in a position to become benefactors.

The introduction of medical insurance, of course, results in higher prices in the short term as people who previously could not afford treatment are now able to afford treatment.  However, as in the previous simple scenario, the rise in prices would attract even more people to become providers.

Free market provisioning – Charity

Under the previous two methods, there is still a class of people who seek treatment who don’t get it: people who cannot afford insurance.  The plight of this group will not go unnoticed; some segment of their neighbors will be moved by their plight, and will want to help.  These neighbors make a gift of money, their services, or their non-money property to the needy, either by paying for services directly, giving gifts to the needy, or by giving gifts to organizations, known as charities, that distribute the gifts to the needy.

The supply of charitable gifts is dictated by how much the gift givers are willing to give in return for the psychic benefit they get for giving gifts.  These people choose how much they will give, and to whom based on what they are a) able to spend, b) how ‘deserving’ they feel the benefactor to be, c) the predicted effect of the gift.

These benefactors are thus examining the need of the beneficiaries, the resources available to donate to the problem and how effectively those resources will solve the problem in choosing how much money to give.  Again, initially the action of charities will increase the demand for medical services and bid up prices.  Again, these higher prices will attract more providers to provide services, until once again prices have stabilized at a level where the number of providers is constant.

Deviation from Free Market – Medical Licensing

The free market provisioning of medical care assumes that anyone who wishes can hang a shingle form their door and go into business as a doctor.  It provides severe downward pressure on prices: any time doctors in a particular branch of medicine start making sufficient amounts of money to make the training profitable, it attracts more people to take up the profession.

The medical industry has reacted to this downward pressure by calling for the state to restrict the pool of practicing doctors.  This eliminates downward pressure on prices. If the number of doctors is restricted, then the bidding war as patients fight for the few available slots will result in prices rising dramatically.  The more entry is restricted by these laws the more dramatic this phenomenon is.

Deviation from the Free Market – Subsidies

Earlier, we showed how charitable contributions tend to push prices higher.  This phenomenon becomes more dramatic once medical licensing is in place.  To understand this phenomenon, we must examine how prices are set at a free market.  Imagine an economy where A, B, C and D are interested in visiting a doctor.  This doctor can see 2 patients per day.

The prices they are willing to pay to see a doctor are:

Actor Willing to Pay
A $110.00
B $ 80.00
C $ 60.00
D $ 50.00

To maximize his profits, the doctor must fill up his schedule.  If he posts a price of less than or equal to $80.00 per visit, he can fill his schedule with paying patients.  Thus, we can expect that the doctor will charge $80.00.

Now let us examine what happens if some entity offers a $50.00 subsidy for patients wanting to visit the doctor but can’t afford it.  Now the demand schedule looks like this:

Actor Out of pocket + Subsidy = Payment to Doctor
A $110.00 $0.00 $110.00
B $ 80.00 $0.00 $80.00
C $ 60.00 $50.00 $110.00
D $ 50.00 $50.00 $100.00

At this point the doctor finds himself deluged with patients.  Eventually, he finds himself wanting new equipment, or to hire more staff, and so he experiments with raising his price.  He raises his prices to $90.00, then to $100.00 or more.  When his prices reach $110.00, once again he is maximizing his income.  Any higher, and he will have empty slots in his schedule and lose business.  The effect of the subsidy, in the presence of significant barriers to entry for new providers is to increase prices.  The higher the subsidy, the more people it is offered to, the more dramatic this effect is.

If one looks at all the asset bubbles in recent history, all the sectors of the economy where prices are climbing faster than the rate of inflation, one finds generous government subsidies coupled with significant barriers to entry for new providers.

Of course, patient B, having been able to afford a doctor in previous days now finds himself out in the cold.  He is not offered a subsidy, but cannot afford to see a doctor.  Unless he is very aware of economics, he will ask the subsidizer to include him in the subsidy as well.  This expansion in subsidy will result in still higher prices, creating another wave of people who no longer can hire a doctor.  The people in this wave then lobby for the expansion of the subsidy to include them.  If the cycle continues long enough, nobody will be able to afford the subsidy.

Deviation from the Free Market – Monopoly Customer

Another option is to establish a monopoly that takes over all payment to doctors.  This monopoly can avoid the phenomenon of competing consumers bidding up prices by taking over all payment decisions.  It sets a price, and a doctor who attempts to charge above the price is simply not paid.  This authority then sets prices according to its whim.   The entity can offer doctors below market wages, resulting in patients flooding the system.  Or, it can establish above market prices, leading to it having to outlay huge amounts of money.

The latter becomes a significant problem.  The monopoly must somehow acquire (or create) the money needed to pay for all these treatments.

However, unless this entity can increase the supply of doctors, it cannot expand medical care.  Unless more doctors are permitted to go into practice, the number of patients that can be treated remains the same as under the Free Market + Medical Licensing.

This problem can be easily solved, by having the monopoly guarantee all doctors above market wages, as follows:

In the scenario above, every day four patients sought medical treatment.  The single doctor was only able to treat two.  So the monopoly arranges to pay two doctors $80.00 per visit, resulting in a greater capacity than exists under Free Market + Medical Licensing.  At this point, the monopoly is obligated to pay $320.00 per day to treat all four patients.  The total number of dollars people were prepared to part with for medical care was $110 + $80 + $60 + $50 or $300.00 total.   Thus, the monopoly has to extract $20.00 from someone to pay for the extra medical care, diverting that money from other, more highly desired ends from some actor somewhere in the economy.

The State

The state is well positioned to act as such a monopoly.  It can, though taxes, extract as many resources as the economy can supply in order to maintain the monopoly payments. Just as the state could, if its officers desire, land men on the moon, something that no organization depending on making a profit or voluntary donations will be able to do in the foreseeable future, the state could ensure that everyone gets reasonably good medical care.  However, this will come at significant cost.  The resources commandeered to pay these above market wages will necessarily impoverish the public.  In our scenario above, we had the state demanding that one or more people be forced to give $20.00 more than they would have liked to to cover the medical care of all actors.  This is money that would otherwise go to satisfying other consumer demands, such as food, better housing, beer or factories.

Additionally, the use of taxation to acquire the money needed generally means that patients pay $0.00 out of pocket.  This means that there is no cost (other than the lost time and inconvenience) for visiting the doctor.  This results in a massive spike in demand as people rush to visit the doctor more often.  Again, absent the lifting of the restriction on the number of practicing doctors, such a system will be plagued by long wait times and rationing via queues.

This power is also the state’s Achilles heel.  Unlike a charity that depends on voluntary donations, the state does not have to do a good job to get money.  Even if the state spends the money in a lousy, inefficient manner, the money will continue to flow into its coffers; people are denied the choice to withhold their money from the state.  Furthermore, for a government official, challenging inefficiency or generating efficient ideas requires effort.  The worse the problem being confronted the more effort the official must exert. Such efforts are often psychically unpleasant.  Thus a significant number of officials will find the disutility associated with the effort to do better will far outweigh any possible personal benefit they accrue.  Again, we see this phenomenon demonstrated in countless government offices.  for example a significant portion of Medicare funding is consumed by fraudulent charges.  Government officials turn a blind eye to the fraud since they run no risk of being bankrupt by excessive claims.  As an aside, the proponents of state provisioning of medical services love to cite the low administrative costs of Medicare as a good thing, whereas it is precisely the skimping on administrative oversight which causes the overbillers to be able to perpetrate their fraud with impunity indefinitely.

It is not surprising that numerous studies analyzing private (dependent on payments or voluntary donations) ventures with public ones (funded by force) performing similar tasks found that, on average, the private ventures delivered the same service at only 75% of the cost.

The importance of innovation

Having found that government provisioning of medical care is no panacea in the present, we should look at what is really required to make health care better for more people.

What is the engine driving improvements in medical care?  In the end, it is the desire of doctors to do a better job, whether from professional pride or from a desire for more revenue.  In a free market, an innovation requires only a doctor and a patient agreeing to try it out.  In an environment where the state pays for medical care, the doctor or patient must convince the state to permit the test being tried.  For very innovative ideas, especially ones that are likely to trigger an episode of creative destruction, where whole branches of the field will be rendered obsolete or redundant, it is possible that the state will refuse to permit the innovation to take place.

Medical treatments that are available to the poorest among us today were not available to kings two centuries ago.  Two centuries ago no economy could have afforded to extend even the pitiful medical care that kings received to the entire population.  It is only through innovation, the discovery of new and cheaper ways of doing thing, that the care afforded by the wealthy can become available to the basic population.

Let us see how this works in a free market.  Let us consider some case where a doctor invents a new procedure that allows him to treat a condition at one-tenth the cost of the current treatment in vogue.  Of course, he starts providing this treatment, and pocketing the massive profits that accrue to him as a result.  The news of his procedure gets out.  Other doctors also adopt the practice.  Initially all who adopt the practice make unusually high profits.  These high profits attract additional providers to try to treat people with this procedure.

As the number of providers treating patients increase, the market-clearing price starts to fall.  New providers offer lower and lower prices in an attempt to fill their schedules.  This process continues until the profits to be earned by treating patients with the new treatment is too low to attract additional providers.  The result is that many more people are having their condition treated than were before.

Any regimen that slows or short circuits this process of innovation has the effect of denying the poor access to future medical care.

The important thing is that state regulation does hamper innovation.  It can do no other.  The result, present state regulation is harmful to future patients, and past regulation is harmful to patients in the present.

Must We Lean on the State?

From the above analysis we can come to several conclusions:

1) It is impossible to make high quality medical care available to the most number of people while restrictive medical licensure laws make it difficult for new people to enter the medical profession.
2) While government action can expand the amount of care available today, it does so at an expense of less medical care in the future.
3) The government will either have to ration care, or heavily tax people to accomplish the goal of expanding medical care to more people in the short term.
4) The function performed by the state can be done more cost effectively by charities funded by donations.

Thus we see that the earlier assumption 4, that only the state can amass the needed resources, is not correct.

Additionally, we can question the applicability of assumption 3, given that most governments that provide medical care or subsidize it are representative ones, where the population picks the lawmakers.  Obviously, since government provisioning on health care is voted into law by representatives selected in popular elections, it is safe to say that a sizeable portion of the population are willing to donate money to care for those who are unable to afford care.

We can clearly see that the state is neither the only organization that can provide medical care, nor is it very efficient in doing so.

Conclusions

We can see that far from being heartless, the supporter of free markets is really attempting to make medical care cheaper and more widely available, and that the advocate of government involvement is inevitably arguing for a system that is inefficient,  not innovative and that in the long term will do a poor job of extending quality care to the poor who cannot afford it today.  While in the short term, the state can commandeer impressive resources and make massive strides towards acheiving some goal, in the long term such actions can be very detrimental.

I am an anarcho-capitalist living just west of Boston Massachussetts. I am married, have two children, and am trying to start my own computer consulting company.
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