We Depend on Two "I"s

     Few people claim we don't have more today than our
ancestors had in 1900.  Some may argue that we are no better
off.  That is a value judgment that most people reject.  That we
have more, much more, is an observable fact beyond serious
dispute.

     We have more of all goods -- more cars, more carrots,
more housing, more entertainment, more everything.  We have
more per capita than most of our ancestors even dreamed
possible.

     Why do we have more?  The answer is so simple and
obvious that it is almost embarrassing to even ask the question. 
We have more because we produce more.  The first law of
consumption is, we can't consume that which wasn't produced.

     If we had the same jobs and produced in the same ways
people did in 1900, we would have the same things our
ancestors had in 1900.  The average person wouldn't be able to
consume more than did the average person in 1900.   Also, we
would have none of the new things invented and discovered
since 1900 -- no airplanes, no micro waves, no televisions, no
computers.

     The key to understanding our prosperity is to understand
why the average worker today produces more than the average
worker did in 1900.  We can immediately eliminate working
harder and longer.  Most work today is less strenuous than in
1900 and we work far fewer hours.

     We can also quickly and easily dismiss the claim that
somehow unions brought us prosperity.  Unions don't increase
productivity.  It should be obvious that strikes and union work
rules decrease productivity per worker.

     If the only change since 1900 was the rise of unions, the
average person today would have to settle for consuming less
than the average person did in 1900.  With lowered production,
lower consumption would be the only option.

     Unions might cause a redistribution of production.  One
worker's gain would be someone else's loss.   It is as impossible
for unions to increase average consumption as it is for a pie
cutter to cut the pie in a way that will give everyone a bigger
piece.

     Why then do we produce more today?  This answer is
also simple though under appreciated.  Two "I"s are the
foundation of our prosperity -- innovation and investment. 
Without new ways of producing and more and better machines
and tools, we would still produce and consume as our ancestors
did in 1900.  We would be no better off.

     Invention and innovation require imagination and the
opportunity to pursue a dream.  Stifling regulations that require
bureaucratic approval for every action kill creativity and
innovation.  We are well down the road to strangling the
innovators with red tape.

     If today's bureaucracy had been in place in 1900 we
would have a small fraction of what we have today.  Still, the
politicians and bureaucrats would demand thanks for what little
progress we made in spite of them.

     Without investment new ideas mean nothing.  It takes
investment to put ideas to work.  Inventing a great new way to
make tires means nothing without the resources to build facilities
to put the idea to work.

     Investment requires savings.  To build for future
production someone must work now without producing anything
for immediate consumption.  It doesn't matter who saves. 
Someone must save and invest in future production, if we are to
avoid returning to hand to mouth existence.

     A dollar saved and invested by a  poor person is just as
useful as a dollar saved and invested by a rich person.  On the
other hand, a dollar reduction in savings by a rich person is just
as detrimental as a dollar reduction in savings by a poor person.

     In either case the saver isn't the big loser.  Everyone
loses when net savings decrease.  Everyone wins when net
savings increase.  The pool of savings is what fuels our
prosperity.

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Copyright 2012
Albert D. McCallum
18440 29-1/2 Mile Road
Springport, Michigan 49284

Another World

    It seemed like a normal morning.  I didn't notice anything
unusual happening, like falling through a looking glass.  It
wasn't until I checked out the Internet that I realized something
was terribly wrong.

     First I found an article about a magic solution for the
problem of local governments that have unfunded pension
liabilities.  Translated into English "unfunded pension liabilities"
mean they have promised to pay pensions and don't have the
money to pay them with.

     The Michigan legislature is considering a new law to
solve that problem.  The law would allow local governments to
borrow money to pay off their obligations to the pension funds. 
Then the local governments won't owe anything to the pension
funds.  Why didn't I think of that?

     When the bonds are due perhaps the governments can
borrow from the pension funds to pay off the bonds.  Someone
needs to make a study, at the taxpayers' expense of course, to
see how many times this debt must chase it tail around the circle
before the debt, like the gingham dog and the calico cat, just
disappears.  Pay attention to this one.  If it works for
government it might work to eliminate your debt too.

     Or, maybe not.  Perhaps only those with the god like
power of politicians can make it work.  It was the next article I
found that drove home the reality that I had slipped into some
kind of parallel universe where up is down, black is white, and
debt is wealth.

     The master magician, the Obama guy, discovered a magic
solution to food shortages caused by the drought.  He wants the
government to buy food and give it away.  Perhaps this solution
came from his magic Teleprompter.  I can all but see Obama
staring into his Teleprompter chanting "Teleprompter on the
wall, tell me I'm the fairest president of them all."

     Perhaps Obama is extending the principles of Keynesian
economics.  In the gospel according to Keynes there is a
multiplier effect.  When government spends a dollar it magically
creates more than a dollar's worth of wealth.

     If this really works, we should give every dollar we have
to government.  Spending and respending those dollars would
soon produce so much wealth it would crush us.  That crushed
by wealth problem still needs a bit of work.

     In the world where I used to live the studies show that
the multiplier effect is real. Unfortunately the multiplier turns out
to be less than one.  When government spends a dollar wealth
shrinks to something less than a dollar, perhaps fifty cents.

     Perhaps the mistake has been applying the multiplier to
money instead of food.  Maybe every chicken government buys
will turn into two chickens.

     In fairness to Obama he wasn't promising more food.  He
wanted farm votes and sought them by proposing to have the
government buy more food. That might push up food prices and
temporarily benefit some farmers.

     Before promising to raise food prices Obama might be
well advised to count the number of voters who buy and eat
food and compare that number with the number of farmers.  Oh,
wait, I missed something.  Obama is most likely counting on the
votes of the people who get the free food.

     In a world where less than half the work force actually
produces something we can consume, the free food vote could
be enough.  Back on the other side of the looking glass where I
used to live, a couple of people would have asked, How much
food can government buy and give away before there is no food
left?

     Of course, politicians are far too busy with important
things to waste their time on such silly questions.  They don't
even have time to ponder, How many medical services can we
give away before there are no medical services to give away?

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Copyright 2012
Albert D. McCallum
18440 29-1/2 Mile Road
Springport, Michigan 49284

Medical Reality

     Providing medical services has been a hot political issue
for decades.  The issue isn't about to go away.  A big part of the
problem is that many, if not most, people are a long distance call
removed from reality.

     Government can't possibly do what politicians promise
and what most people want and expect.  This would be true even
if those in government were all knowing, well intentioned,
perfect, uncorrupted individuals.  We will get far less from the
self serving, semi competent (at best), cronyism that is inevitable
when individuals get to spend other people's money.

     First consider some realities that most people prefer not
to think about.  People are suffering and dying for the lack of
medical services.  No matter what we do, people will continue
suffering and dying for lack of medical services.  It is humanly
impossible to prevent all people from suffering and dying from
lack of medical services.  Those who claim we can have
unlimited medical services are either deluded or deliberate liars.

     If everyone on earth spent all of their time providing
medical services, some would still go without services that could
reduce suffering or prolong their lives.  Of course, if everyone
spent all of his time providing medical services, the lack of
medical services would soon cease to be a problem.  Everyone
would soon starve to death.

     The only options we have in the real world are to decide
how much medical service to provide and how to provide the
services.  How we provide the services will have a big impact
on how much service we can provide.

     Twenty-five percent or more of medical expense is
already devoted to paper work.  More government means more
paper work.  In turn this means less to spend on actual medical
services.  Less than one-third of welfare spending goes to poor
people.  The US Postal Service is going bankrupt.

     It is foolish to expect that government will be better and
more efficient providing medical services.  In the end
government provided medical services will mean less service
doled out by corrupt politicians and bureaucrats.

     We have limited capacity to  produce all of the things we
want.  Trade offs are inevitable.  More medical services mean
less of something else.  How many people are willing to increase
the availability of medical services by giving up everything
beyond the minimum of food, clothing and shelter essential for
survival?

     People risk their lives to enjoy driving, skiing, swimming,
biking and a zillion other things.  Giving up all, or even many,
of these things to live a little longer is a deal that just about
everyone has rejected.  What is the point in living long if you
have nothing to live for?

     The only answer is to work out a balance and produce
the things we want the most.  For each individual that balance
will be different.  "One size fits all" will be wrong for just about
everyone.

     Some people don't want organ transplants.  Should they
be forced to sacrifice what they want to pay for organ
transplants for others?

     If we leave people free to choose how much to spend on
medical services, everyone can 0pursue his most important goals,
be they providing medical services or something else.  This
freedom includes the right to choose how much to spend on
medical services for others.

     Even in the overtaxed, statist environment in which we
live, individuals contribute many millions of dollars to provide
medical services for others.  With lower taxes and the
recognition that government isn't going to do it, people would
contribute much more.

     The road to government control of medical services may
seem to work for a while.  In the end it will mean national
bankruptcy and few medical services for anyone.  Medical
services aren't priority one for starving people.

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Copyright 2012
Albert D. McCallum
18440 29-1/2 Mile Road
Springport, Michigan 49284

What Do Businesses Want?

      To understand what people do we must first understand
what they want.  Of course, at the most basic level everyone
wants the same thing.  That universal desire is for the thing we
call happiness or satisfaction.

     Our secondary wants are the things we believe will bring
us satisfaction.  These wants very greatly from individual to
individual.  The main reason for venturing into business is the
quest for wealth.  There are other motivators such as
independence and the thrill of power.  Wealth contributes to
both.

     People in business seek wealth.  Some aren't all that
fussy about how they get it.  People in business aren't
necessarily more ethical or more moral than those in
government.  The business environment rewards different
behavior than does the government environment.  Thus, people
in business behave differently than those in government.

     For most of us businesses serve one purpose.  They
provide a means for workers to increase their production of
consumer goods.  The reason for production is consumption. 
Businesses benefit us by increasing our supply of consumer
goods well beyond what we could produce if we all worked
alone.

     Businesses don't care about consumers' consumption,
unless the consumption benefits the business.  Indirectly
consumption is vital to businesses, whether they like it or not. 
Without customers buying to consume, business are out of
business, and broke.

     In free markets customers hold a business accountable by
either buying from it or refusing to buy from it.  Businesses
must have customers.  The businesses may not be terribly fussy
how they get customers or whom they hurt in the process.  As
long as the business must serve and please customers to keep
them, the customers are the kings.  In free markets businesses
can't exploit.  They must serve and please customers to prosper.

     Thus, big businesses are a natural enemy of free markets. 
Big businesses get in bed with government.  The two serve each
other.  The businesses provide support to politicians.  The
politicians grant favors to the favored businesses.  The biggest
favor government grants is to expand businesses' markets by
limiting the markets of the competition.

     Naturally this process favors the powerful.  The big
businesses grow while the weaker competitors shrivel and die, or
never get off the launching pad.  Consumers lose.

     There are many ways government provides captive
customers and otherwise expands the market for the products of
businesses.  Granting outright monopolies (such as utility
franchises), limiting the numbers of taxicab licenses, and
imposing tariffs, are some of the most obvious ways.

     Every law or regulation that limits production or restricts
competition expands the market for some businesses at the
expense of others.  Of course, the victim businesses are usually
the small, weak ones without political clout.

     New and small businesses are likely to see merit in
competition.  It is the main way the new or small business gets
its foot in the market door.  Once a business gains a large
market share, competition is more of a threat than a benefit. 
Restricting competition can allow an old, over sized, inefficient
business to continue to prosper and grow.  Those, allegedly "too
big to fail" businesses grew to their size and condition because
of government protection from competition.

     When big businesses and government get together they
strip the consumers of their kingship and reduce them to
exploited servants of government and businesses.  Only in free
markets is the consumer the king that holds the producers and
employers accountable.

     As the government-business complex grows we slide ever
deeper into serfdom.  Businesses are by no means blameless. 
"Do it my way or I will hurt you" government is the senior
partner that makes the exploitation possible.

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Copyright 2012
Albert D. McCallum
18440 29-1/2 Mile Road
Springport, Michigan 49284

Satisfaction Not Guaranteed

     We face endless choices.  Sausage or bacon for breakfast. 
White bread or rye.  Spend now or save for a vacation or
retirement.  Go to college, or go to work.  Go bowling, or go to
a movie.  Why do we choose one option instead another?

     Individuals always choose the options they believe will
be the most satisfying.  One may expect more satisfaction from
giving than from spending.  He will choose to give.  The
individual who expects more satisfaction from sleeping than
from going to work will skip work.  Perhaps when making the
choice he didn't consider that skipping work also meant no
paycheck.

     Often our choices don't turn out as we expected. 
Satisfaction isn't guaranteed.  When making choices all we can
do is give it our best shot.  The more we know about the likely
consequences of our choices, the more likely we will be able to
choose the most satisfying options.

     The more distant the satisfaction we seek, the greater the
risk that we will not achieve it.  Planning and saving for
retirement is a bigger gamble than planning and saving for a
vacation next summer.

     When choosing between immediate satisfaction and
distant satisfaction some people usually lean toward the
immediate satisfaction.  Others are likely to choose the more
distant satisfaction.  The ultimate pursuit of delayed satisfaction
is sacrificing immediate satisfaction for anticipated satisfaction in
the hereafter.

     Sometimes others make choices that baffle us.  They
appear to make choices that will certainly lead to less
satisfaction rather than more.  The explanations for these
puzzling choices are quite simple.  One possibility is that what
the chooser finds satisfying is very different from what we find
satisfying.  The other possibility is that the chooser has either
more or less understanding of the consequences than we do.

     The difficult question is, Why do some people appear to
choose distant satisfaction rather than immediate satisfaction? 
Why does one person choose the delayed satisfaction from going
to work while another opts from the immediate satisfaction from
skipping work?

     Instead of asking why individuals sacrifice immediate
satisfaction to pursue delayed satisfaction we should first ask,
Does the person who chooses to go to work sacrifice present
satisfaction?  Clearly, the worker sacrifices the increased
satisfaction he could have gained by sleeping late and spending
the rest of the day fishing.  Has he merely traded these
immediate satisfactions for the more distant satisfaction from the
things his paycheck will buy?

     The answer is "No."  The worker has also gained present
satisfaction from the anticipation of the things his paycheck will
buy.   The immediate satisfaction from anticipation and other
aspects of his choosing to work outweighs the immediate
satisfaction sacrificed by going to work.  Some of those other
immediate satisfactions from going to work might include
avoidance of guilt about skipping work and avoidance of worry
about how to pay future bills.

     Thus, when we choose distant satisfaction over immediate
satisfaction, we aren't really sacrificing immediate satisfaction. 
We are only substituting one immediate satisfaction for another.

     Individuals who seem always to be short sighted and
choose the immediate satisfaction simply don't gain as much
satisfaction from anticipating future satisfaction as does the
seeming more farsighted person.  To change this condition the
"short sighted" individuals need to increase their ability to gain
present satisfaction from the anticipation of future satisfaction.

     One example of this involves the common problem of
losing weight.  The anticipated immediate satisfaction from
eating now has a way of overpowering the present immediate
satisfaction from anticipating weighing less in the more distant
future.

     To overcome the urge to eat, the individual needs to
focus on gaining immediate satisfaction from anticipating the
future satisfaction from weighing less.  Dwell on visualizing a
thinner future and focus on the satisfactions it will bring.

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Copyright 2012
Albert D. McCallum
18440 29-1/2 Mile Road
Springport, Michigan 49284