Tuesday, July 29, 2014

Are Price Gougers Evil?

Column for week of July 21, 2014

     The label "price gouger" is often hung on those who
suddenly raise prices.  Politicians threaten price gougers.  There
is a strong myth that prices should be limited to about the cost
of production.  The person who charges more is seen as evil.

     Buyers' willingness to purchase, not cost of production,
limits prices.  All sellers can do is refuse to sell until offered
prices they want.  It matters not that it costs the producer $1,000
to make a chair.  If no one will pay more than $100, the chair
remains unsold until the producer drops the price.  I have heard
very little vilification of buyers who refuse to pay the producer's
cost of production.

     Buyers just don't care when producers lose money.  Yet,
if a producer manages to sell for $1,000 chairs that cost only
$100, the chair buyers are likely to be incensed.  If the chair
wasn't worth $1,000 to the buyer, Why did he pay $1,000?

     The mere fact that something has a price means it is in
short supply.  If there is enough for everyone the price will be
zero.  If you doubt that, try selling bags of air.

     Most things are in short supply.  If the prices fell to zero
the entire supply would be quickly claimed by someone. 
Everyone would be staring at empty shelves.  For most things
the price need not fall to zero to empty the shelves.  Suppose
that all stores cut their prices by 90 percent.  What would be left
after a few days?

     This happens with various video games and toys.  The
shelves are always empty, except briefly after new shipments.  If
sellers raised prices, demand would drop.  The item would
always be available for those willing to pay higher prices.

     There isn't such a thing as intrinsic value.  Value is
purely an opinion.  Each of us have our own opinions about
value.   These opinions vary greatly and endlessly change.

     When supply equals demand there is just enough
available for each person who wants to buy.  To achieve that
balance prices must adjust so supply will just meet the demand
of those who value the item enough to pay the price.  Higher or
lower prices will cause surpluses or shortages.

     Sellers usually seek to find prices that balance supply and
demand.  If the price is too low, buyers who don't value the item
enough to pay more still buy.  Soon even buyers who value the
item more are unable to buy because nothing is left.

     When supply suddenly decreases, or demand increases,
the price must rise to keep supply and demand in balance. 
Supply limits the number of purchases possible.  Some potential
buyers will be disappointed.  The only question is which ones?

     Consider gasoline.  If supply drops and the price doesn't
change, people who place a low value on gasoline will buy until
the supply is gone.  Then no one buys.

     If gasoline price rises from $2.00 to $10, only those who
value gasoline more than $10 a gallon will buy.  Those who
would have bought 20 gallons may now only buy three. 
Gasoline remains available for those who value it more than $10
a gallon.  Instead of the scarce gasoline being used for trips to
the video store and ball games it is available for emergencies
and driving to work.

     The so-called price gouger acts on the spot to insure that
consumption is limited to its most valuable purposes.  Long
before the government showed up with ration books and threats
to control consumption, the gasoline would be gone.

     In addition, higher prices for gasoline provide both
incentive and resources for suppliers to increase supply.  If the
price remained at $2.00, supplies would disappear and there
would be little incentive to incur higher costs to replenish them.

     Those who drastically increase prices in the face of
sudden changes in supply or demand aren't gouging anyone. 
They sell only to willing buyers.  They also provide valuable
services by allocating the product to those who value it most.

aldmccallum@gmail.com
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Copyright 2014
Albert D. McCallum

Thursday, July 17, 2014

Trust Government?

Column for week of July 14, 2014

     For nearly 20 years I have written about the scams
offered by that great fraudster we call government.  Most people
are more likely to get mad than to listen when alerted to
government scams.  I find it mildly encouraging that a recent
poll found that 75 percent don't trust government.

     The first step to undoing a fraudster is exposing him. 
Why is it so hard to convince people that government is mostly
a fraud?   It is the same reason that it is difficult to convince a
four year old that Santa Clause is a myth.  Both desperately
want to believe their Santa will deliver.

     I'm not optimistic that 75 percent really have discovered
the truth about government.  I fear that they merely don't trust
the hucksters currently running the scam.  Many probably
believe that all we need do is elect the right people and
government will forever spew out endless goodies for everyone.

     Let's briefly consider the basic reasons why government
always has been and always will be a lying fraudster.   All
people have the same desire to increase their satisfaction. 
Individuals in business and other private endeavors may have
just as much desire to rip you off as do those in government. 
They want to increase their satisfaction as much as does anyone
else.

     Free people in the private sector don't have to cooperate
with any particular individual.  We all choose to interact with
those we believe will provide us the most satisfaction.  If a free
market business wants customers, it must please those customers
more than someone else does.

     Free market businesses can't force customers to buy. 
Neither can they burn down the competition.  Government can
and does.  If government wants to cancel your insurance and
force you to buy its policy, it can and will.

     Government can also take down the competitors of
private businesses.  That is why businesses hire so many
lobbyists.  A few years ago government was promoting car
pooling and ride sharing.  Government provided car pool parking
lots still dot the landscape.

     Now cities across the land are criminalizing ride sharing.  
Why?   The cities are protecting taxicabs from competition. 
Cities are also criminalizing food trucks to protect restaurants
from competition.  The list of recipients of government
protection is all but endless.  It may be even longer than the list
of direct ripoffs by government.

     That which distinguishes government from all private
ventures is that government uses force and threats to coerce
people to do its will.  The will of those in government is always
to increase their own satisfaction.  Only government, and those
empowered by government can lawfully use force and violence
to commit aggression against others.  Only government and its
friends are free to say "Do it my way, or I will hurt you." 
Government's fatal flaw is there are too many opportunities for
exploitation.

     All government needs to do to keep its power is convince
voters that it really will deliver the goodies.  Those voters will
suspend disbelief and buy the government lies.  They will even
shout and scream at those who call attention to the government
lies.  They don't like to hear that government is like a Santa
Claus who robs banks 364 days a year to pay for one night of
giving.

     Perhaps some day a majority will accept reality and give
up their cherished belief in a benevolent and caring government. 
I am not under the illusion that the day has arrived, or is even
close.  Millions of voters still need to have their noses repeatedly
rubbed in government's endless failures before there can be a
true awakening.

     The worst lie is that government fails because the wrong
people are running it.  This lures voters to the candidates who
promise to find the right people and fix government.  There will
be no hope until voters accept that government has unfixable
inherent defects.  Drastically shrinking fraudster government is
the only solution.

aldmccallum@gmail.com
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Copyright 2014
Albert D. McCallum

Thursday, July 10, 2014

What Is a Good Choice for Iraq?

Column for week of July 7, 2014

     We endlessly make choices.  Choosing is so common
individuals choose without even being conscious of the fact they
are choosing.  When one choice is obviously better than another
it is easy to choose.  The close calls are the ones we ponder the
most.  In such difficult choices it may be just as well to flip a
coin.  There is little chance prolonged deliberation will yield
better results.

     We don't have a guarantee that one of the available
choices will be a good one.  Perhaps the best option will only be
the lesser of two evils.  Lamenting the lack of a desirable option
accomplishes nothing.  Choosing something that isn't on the
menu doesn't work.

     Suppose an individual has two options to reach his
destination.  He can walk or ride.  It would be pointless for him
to say "I reject both options,  I'll flap my arms and fly."  That
choice would be a choice not to go to the destination.

     The same principles that apply to individuals' private
choices also apply to choices made by individuals in
government.  One big difference is that government choices are
likely to affect many more people.

     After the US took down the government of Iraq it chose
to create a stable democracy in Iraq.  A quick check of the menu
would have revealed that stable democracy wasn't an available
entrée.

     Many insist that should be the universal entrée to be
served to every nation.  They believe that with democracy on
every table peace, prosperity and tranquility will be universal.

     Democracy can be served only in the right kind of
dinning room.  The Middle East and North Africa have a
shortage of dinning rooms hospitable to democracy.  For
democracy to grow in any region the people must be basically
peaceful.  They must be inclined to work together and peaceably
deal with their differences.

     The harsh environment of the Middle East has produced
harsh, violent people.  Their instincts are to resolve
disagreements with force and violence.  In this environment
there are only two options on the government menu.

     One dish is thugacracy where a thuggish strongman rules
with force, violence and fear.  For a time such a government
may keep a frightened population somewhat peaceful.  The other
option is endless strife and civil war until a thug takes over.

     US intervention in the Middle East was doomed from the
start.  Toppling strongmen, such as Saddam Hussein, is easy
when you have the bomb and boots.  Toppling the strongman
doesn't add any new items to the menu.

     For a time the US took over the role of strongman.  The
US sheltered government in Iraq didn't achieve the level of
strongman before the US left.  And, it failed to make the jump
after the US left.  This is not surprising.  Rather than grooming
the Iraq government to be a thugacracy, the US ordered stable
democracy which wasn't on the menu, and still isn't.

     In the absence of a thugacracy Iraqis dined on the only
other dish available, strife and civil war.  The US going back
into Iraq won't change the menu.  It will only allow the US to
play strongman for a day until it leaves again.  Unless the US
grooms a new thug to take over, the strife will resume after the
US leaves again.

     Ordering a stable democracy in the Iraq dinning room is
as futile as flapping your arms and trying to fly.  It isn't on the
menu, and won't be until there is a major change in the people
of Iraq.  Only the people of Iraq can change the menu.  Outside
interference can only disrupt.

     Neither choice available for Iraq will be particularly
pleasant for Iraqis.  The most pleasant option for the US is to
stay out of the mess it helped create.  It will be futile, and
painful, for the US to continue insisting on serving a dish that
isn't on the Iraq menu.

aldmccallum@gmail.com
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Copyright 2014
Albert D. McCallum

Thursday, July 3, 2014

Between Iraq and a Hard Place

Column for week of June 23, 2014

     Last week I promised a follow up column on federalism. 
So much for the best laid plans of mice and men.  Iraq is the hot
topic of the day.  Some people are surprised by the outbreak of
more war in Iraq.  They shouldn't be.

     Prior to World War I the Ottoman Empire ruled most of
the Middle East.  World War I finished the Ottoman Empire. 
Outsiders carved up the Middle East.  The British got a big
hunk, including what is now called Iraq.

     The British created Iraq as a convenient administrative
district.  That district included tribes that didn't get along well
with each other.  Britain chose minority Sunni Muslims to rule
Iraq under the thumb of the British.  Choosing a minority to rule
served Britain's purposes.  Needing British support, the minority
government wasn't likely to get too frisky.

     The Sunnis ruled and abused everyone in Iraq until the
US, with British help, toppled Saddam Hussein.  Without the
domination of a ruthless strong man, the factions in Iraq
predictably had at it.  The US military kept the civil war in Iraq
down to a low roar.  It was fully predictable what would happen
when the US military left.  The only question was how soon
would Iraq explode.

     In fact the strife in Iraq was fully predictable the minute
the US took down the government of Iraq.  The US wasn't going
to stay forever.  The various factions in Iraq weren't going to
hate each other any less because of a few years of US
domination.  Outsiders would still stand ready to support their
favorites in Iraq.

     Civil war was inevitable.  It was also unlikely that the
artificial, US sponsored government could survive on its own.

     The war mongers blame Obama for the mess in Iraq.  He
withdrew the US military.  Never mind that he merely executed
the withdrawal mapped out by the Bush administration.  Besides,
staying in Iraq forever was never a viable option.  You may
recall that most people in the US were fed up with the Iraq war,

     The war mongers demand the return of the US military to
Iraq.  We have been there twice.  The British were in Iraq for a
quarter century.  None of this has made the factions in Iraq love,
respect or even tolerate each other.  Who is so stoned as to
believe another round of butt kicking by the US will somehow
magically stabilize Iraq?

     The US wasted many lives and much wealth on its
doomed and pointless venture in Iraq.  Wasting more lives and
more wealth won't recover our losses.  It will only add to them.

     Certain factions in the US brand the insurgents in Iraq as
terrorists.  This is little more than a cheap attempt to stir
passions for a US return to Iraq.  All wars are terrifying.  Does
this make anyone who goes to war a terrorist?

     During the invasion of Iraq the US military unleashed a
bomb and missile attack on Iraq to terrorize Iraq into a quick
surrender.  Did this make the US military terrorists?

     Terrorists don't have the power to win a war.  They hope
to gain advantage by instilling fear.  The military success of the
insurgents puts the lie to the claim they are mere terrorists.  The
real concern of some is that the insurgents will use military force
to take down the Iraq government.  And, they might.

     Given the history of enmity and strife in the Middle East,
it is unlikely a new government in Iraq will be significantly
worse or better than the other Middle East governments.  As for
oil, whoever controls the oil will be eager, even desperate, to sell
it.  The US could develop its own oil if a certain president didn't
stand in the way.

     Nothing justifies the US jumping back into a Middle East
civil war.  There are few benefits from jumping into any civil
war.  This is especially true when the civil war involves
religious factions.

aldmccallum@gmail.com
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Copyright 2014
Albert D. McCallum

Is Federalism Important?

Column for week of June 30, 2014

     In a recent column I explored the history of federalism in
the US.  The US started as a federation of sovereign states
created by the states.  The states delegated a few powers to the
federal government.  That federal government grew into a
national government that rules the states as mere administrative
districts of the nation.

     Now individual states can chart their own courses only if
the national government lets them.  Federalism was stood on its
head and beaten to death.  Does it matter?  Should we care?

     Those who want the national government to force
uniformity onto the entire nation cheer the death of federalism. 
Uniformity in itself has no virtue.  Who wants to be uniformly
sick or broke?

     Considering the wasteful inefficiency, incompetence, and
corruption of government, What are the chances of the national
government imposing uniform goodness on the nation?  It hasn't
happened yet in the entire history of the world.  History screams
that government imposed uniformity is mostly exploitation of
the weak by the powerful.  That is just as true in a democracy as
in a dictatorship.

     Not everyone wants to live under the same rules.  Why
should everyone have the same rules shoved down their throats
by "do it my way or I will hurt you" government?  We should
also keep in mind that people in government seek first to serve
their own interests, not the interests of voters and taxpayers.

     There is an even greater problem.  It is impossible for
anyone to know in advance which choices will work out best. 
When everyone is forced to follow the same plan, we have
nothing for comparison.  We can only speculate about whether
another plan would work better.

     A robust federalism would allow the various states to
experiment with different laws, or lack of laws.  It would be a
matter of survival for all states to copy the successful ones. 
People would be drawn from the unsuccessful states to the
successful ones.

     It has been happening for years.  To the great annoyance
of some, the national government hasn't fully exercised its power
to force total uniformity.

     Many are annoyed that the national government hasn't
undertaken to enforce marijuana prohibition in Colorado.  Under
the Supreme Court's interpretation of the Constitution the
national government has the power to prosecute anyone in
Colorado who uses marijuana.

     So far the national government has settled for harassing
marijuana businesses in Colorado.  It keeps them from using
bank accounts and threatens to seize property they use.

     However legal marijuana plays out in Colorado, it will be
a learning experience for everyone.  There are bound to be some
growing pains in legalizing marijuana.  It is far better to test the
methods in a few states and let the rest learn and avoid the
beginner's mistakes.

     Sometimes it is desirable to have uniform laws
nationwide.  Traffic laws and commercial law are examples.  We
achieved general uniformity in these areas without the
involvement of the national government.  The states considered
what others were doing.  They got together and adopted
uniformity.  If individual states come up with new ideas they are
still free to experiment.

     Once the national government sets a standard, it is nearly
impossible to deviate from it, no matter how bad it is.  We are
seeing this play out in government schools.

     Independent, sovereign states in a federation, provide the
opportunity to avoid some of the worst aspects of government. 
The bottom line is that competition provides the only true
accountability.  Each provider of goods and services should have
to compete with other providers of goods and services.

     True federalism provides a means for compelling
governments to compete with each other.  That competition can
hold governments accountable the same way it holds businesses
accountable.

aldmccallum@gmail.com
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Albert D. McCallum

Sunday, June 22, 2014

The Death of Federalism

Column for week of June 16, 2014

     The government in D.C. is commonly called "the federal
government."  We have federal laws, federal buildings and
federal courts.  What is federal about them, other than the
names?

     A federation is an association of independent entities.  In
the beginning this described "These United States."  And, in the
beginning the USA was referred to as "These United States."

     On separation from Britain each colony became an
independent nation.  These sovereign nations formed a federation
and assigned it certain tasks.  This federation was to serve its
sovereign member nation.  The 13 sovereign states were not
ruled by the federal government they created.

     The original federation proved unsatisfactory to some. 
The U. S. Constitution created a new federation.  Each of the 13
sovereign states voted to join the new federation.

     The constitution creating the new federation clearly stated
that the federal government had only the few powers named in
the Constitution.  All other powers were reserved to the
sovereign states and the people.  This was a true federation.  The
federal government was to serve the states, not rule them.

     Contrast this with state governments, such as Michigan. 
No one I know calls Michigan a federation of counties. 
Counties didn't get together and form the state.  State
government created the counties to serve the purposes of state
government.  Counties have only the powers and privileges
granted by the state.  The counties are essentially administrative
districts of the state.

     Today the states have lost their sovereignty and are now
mere administrative districts of the no longer federal government
in D.C.  We now have a national government ruling the states.

     Any powers and privileges retained by the states are no
more than gifts from the all powerful national government.  The
national government hasn't yet seized control of all functions
once reserved to the sovereign states.  The national government
has only seized the powers the D.C. politicians find most
beneficial to themselves.

     How and when were the sovereign states turned into mere
servants of the federal government they created?   The when part
is easy.  The last vestige of federalism died November 9, 1942. 
That was the day the Supreme Court issued its ruling in Wickard
v. Filburn, 317 U.S. 111.

     Federalism was under siege from its beginning.  The
politicians have always wanted more power.  Wars provide the
greatest opportunities to grab power.  Federalism suffered its
first great losses during the Civil War.  World War I further
expanded the power of the still federal government.  Federalism
was already on the endangered species list before November 9,
1942.

     The subject mater in the Wickard case was quite minor,
11.9 acres of wheat harvested by Ohio farmer Roscoe C. Filburn. 
The government in D.C. had taken unto itself the power to tell
farmers how many acres of wheat they could grow.  That power
supposedly sprang from the Constitutional power to regulate
commerce among the states.

     There was one small fly in the ointment.  Filburn's wheat
never left his farm.  Filburn claimed his wheat had nothing to do
with interstate commerce.  A unanimous Supreme Court ruled
otherwise.

     The court found that if farmer Filburn hadn't grown the
wheat he might have bought wheat to feed his chickens.  Thus,
Filburn's growing of the wheat might have affected interstate
commerce.  That was good enough for the court.

     Under this rational I defy anyone to name even one
action or inaction that might not affect interstate commerce and
thus be subject control by the national government.  Federalism
is dead.  The now national government (call it the nats, not the
feds) is free to usurp any power it wishes from the now
subservient states.

     Occasionally the Supreme Court issues an opinion
inconsistent with Wickard.  There is nothing unusual about the
court issuing inconsistent decisions.  The Court still recognizes
Wickard as the law of the land.  Federalism is still dead.

     Next time:  Why does federalism matter?

aldmccallum@gmail.com
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Copyright 2014
Albert D. McCallum

Thursday, June 19, 2014

Why Is Government Inefficient?

Column for week of June 9, 2014

     Government is generally believed to be inefficient.  It
pays $600 for a screwdriver anyone else can buy for $10.  It
pays many employees far more than does the private sector. 
Also, those employees are rarely over worked.

     I had some personal experience with this a few decades
ago.  I fought boredom in my own ways.  I drew many house
plans.  The department where I worked didn't do houses.  Within
a year I resorted to the ultimate boredom fighter.  I quit.

     People are not inherently inefficient.  Most people seek to
achieve their goals in the  most efficient way possible.  In other
words, get what you want with as little effort as possible.  It has
been said "Laziness is the mother of invention."  There is
nothing wrong with finding an easier way to do something.

     Finding easier ways is the foundation of our prosperity. 
If we still did everything in the old inefficient ways of a mere
hundred years ago we would have but a small fraction of what
we have today.

     In the private sector people prosper by finding efficient
ways to serve others.  The more efficiently we serve others, the
more we get for the time spent serving them.  Making a pair of
shoes in one hour is more profitable than spending two hours
making the shoes.  When earning your living producing for
willing customers, efficiency is vital to your prosperity.

     It is hard to imagine that the inherent nature to be
efficient dies when the individual crosses the line into the
government sector.  So, why are those on the government side so
inefficient?  Not only do they produce inefficiently, much of
their effort is invested in producing things not worth making.

     People are motivated to efficiently produce the things that
benefit them.  Imagine a person who spends his entire day
making paper airplanes he doesn't want and no one will buy. 
What motivation does he have to be efficient?

     It doesn't matter whether he produces 100 great airplanes
or one really bad one.  His goal isn't to improve his efficiency of
production.  His goal is only to make his day as pleasant as
possible.

     Of course, everyone's goal is to make their days as
pleasant as possible.  The individual who is paid more for
producing more can gain satisfaction from efficient production. 
The individual who gains nothing from efficient production has
no reason to be efficient.

     It is the government environment that sucks the
efficiency out of its inhabitants.  Actually it doesn't suck out the
efficiency, it redirects it.  Instead of rewarding efficient
production, government rewards efficient manipulators.  Those
best at manipulating the bosses, the rules, and the voters are
rewarded with higher pay and more power.  As manipulators
their efficiency is second to none.

     Even if government employees want to be efficient, they
usually have no way to measure their efficiency.   Sure, they can
measure the number or new rules they produce or enforce, the
number of reports they write, and the number of accounts they
audit.

     The only way to measure the value of a product is to see
what a willing customer will pay for it.  Most of what
government produces isn't sold to willing customers.  It is paid
for by less than willing taxpayers who seldom even know what
they are paying for.

     It is inevitable that government will always be inefficient
at producing what taxpayers want because the taxpayers aren't in
control.  Taxpayers usually aren't in a position to reward
efficient behavior and punish inefficient behavior.  Government
will be efficient only at producing what politicians, bureaucrats,
and their powerful accomplices want.

     Government always has been and always will be a
conspiracy of the powerful exploiting the weak.  The only
defense the weak have is to keep government as small and weak
as possible.  Powerful government is the most destructive force
on earth.

aldmccallum@gmail.com
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Albert D. McCallum