Thursday, May 30, 2013

How Bleak Is the Future?

     Concern about the future isn't new.  Concern about the
future isn't a bad thing.  Those who aren't concerned have no
reason to act to build a better future.  If we don't act now to
build a better future, the future will indeed be bleak.

     When a hungry person sits down at the table, it is a bit
late to start planting wheat.  When you head for the store it is
also a little late to start thinking about opening a mine to dig ore
to make an auto.

     Meeting our future needs requires beginning production
long in advance.  Future production depends on creating and
sustaining an environment that allows production.

     In my younger days worry about the future of the USA
revolved around nuclear bombs, the Soviet Union, and war.  A
few far sighted individuals were concerned about loss of liberty,
declining production, and economic collapse.  These individuals
were taken about as seriously as those who worried about cold
during last summer's heat wave.

     Those who worried about the cold were right.  It came. 
Those who during the 1950s worried about economic collapse of
the then infant welfare state have now found a large following. 
Yet, millions still ridicule that concern.

     One of the headlines today was that New York Times
resident ignoramus, Paul Krugman, claimed that all we need to
revive our dying economy is two more years of government
spending.  Bad old ideas die hard.

     Warnings about the future lose credibility when the
disaster doesn't soon strike.  Productivity in the US continued to
grow for half a century after the 1950s faded into history.  Most
concluded that concern about economic collapse was nothing
more than Chicken Little worrying.  Most people laughed at the
warnings about the housing bubble, until the bubble burst in
their faces.

     The US survived the depression of the 1930s, economic
stagnation of the 1970s, and numerous recessions in between. 
Why should the current economic collapse be any different? 
Just because an individual survives three bouts of pneumonia
doesn't mean he will survive the fourth.  He is likely to be older,
weaker, and less able to survive.

     The same is true of our economy.  Our economy isn't a
thing.  It is the product of hard working, skilled people planning
for the future, and having the freedom to execute the plans. 
This is where today is far different from the 1930s, 1950s, 1970s
or any other time in  the history of the USA.

     Hard work is falling out of style.  Government interferes
with planning and production in ways that were only feared in
the 1950s.  The official unemployment rate is under 8 percent
only because government doesn't count the millions who want
jobs but have given up looking.

     The work force, as counted by government, has shrunk
by millions.  No matter how government twists the numbers
those missing workers don't have jobs.  A private statistician
included the "discouraged workers" as unemployed.  He
calculated the real unemployment rate as 23 percent.

     After the economic disaster of the 1930s, government
backed off a bit.  The private sector rebuilt production.  It could
happen again.  The question we face today is, Do the voters of
our welfare-warfare state have the will to force government to
back off?

     The big difference between now and 1945 is that in 1945
the wave of unsustainable entitlement spending we face today
was still far in the future.  It hadn't even been fully set in
motion.

     Today informed thinking people, even most of the
politicians, know that the status quo isn't sustainable.  Informed
people are divided into two groups.  Some believe we can cut
spending and roll back government intrusions on liberty and
voluntary cooperation enough to avoid disaster.

     The rest are preparing for the disaster they believe is
inevitable.  Unless we find a way to drastically shrink
government and its runaway spending, the pessimists will win, if
you can call that winning.  Even they don't want the prize.

aldmccallum@gmail.com
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Copyright 2013
Albert D. McCallum

Wednesday, May 22, 2013

The Roads to Accountability

      Last time we considered the importance of accountability. 
What is accountability?

     We all seek to increase our satisfaction.  At the most
basic level, satisfaction is the only thing we seek.  All other
goals are secondary.  We judge everything by how much we
expect it will contribute to our satisfaction.

     When we seek to hold others accountable, we seek to
maximize their contributions to our satisfaction.  Others treat us
the same way.  This sounds rather exploitative.  And, it can be.

     One way to hold others accountable is to threaten to hurt
them if they fail to serve us.  Those others may decide to serve
rather than suffer the consequences of failing to serve.  No one
holds the persons who make the threats accountable.  The name
for this is slavery.

     Many see more and more government as the way to
achieve accountability.  Supposedly government can force or
bribe others to properly serve us.  Before government can do this
it must first know how each of us wants to be served, and how
much each is willing to pay for each service.  Government must
also be willing to force others to serve the desires of each of us.

     This is impossible.  The most government can do is
attempt to force some to do what some others want them to do. 
The result is that mainly government tries to force individuals to
do what bureaucrats and politicians want done.  The goal is to
produce more satisfaction for the bureaucrats and politicians who
rule us.

     Even if government sincerely tried to give us what we
want, it couldn't.  Government threats intended to increase
accountability invariably have unintended consequences that
make mattes worse, or at least achieve nothing.

     The Michigan legislature passed a law that gives money
to school districts that accept outside students.  This may or may
not be a good idea.  The merit of the law isn't the point.  To get
the money some schools implemented plans to accept from one
to six outside students. The servant out smarted the master.  This
is only one small example.

     All work is directed at the production of consumer goods
and services.  Thus, all work is to serve consumers.  Real
accountability allows the consumers to hold producers
accountable.  The only effective way we have found to achieve
this accountability is for consumers to be able to refuse to accept
and pay for goods and services that don't meet their standards.

     When we do this the producers who best serve consumers
sell and prosper.  Those, who don't well serve consumers must
either do better of face bankruptcy.  Rather than letting
government decide what is good for us and how to deliver it,
each consumer chooses for himself.

     Not all must choose the same options.  One may prefer
low price.  Another wants quality.  Some prefer convenience. 
Perhaps some are greatly influenced by the color of the box. 
Various sellers will seek to better serve all of these interests to
attract paying customers.

     Employees of government enterprises mainly serve
bureaucrats and politicians who make rules and sign pay checks. 
The taxpayers who pay the bills, but don't sign the paychecks,
can only appeal to the bureaucrats and politicians.  This is a
pathetic substitute for being able to refuse to buy from the
failing service provider.  There is no effective substitute for
consumer sovereignty in a free marketplace.  Only king customer
can enforce real accountability.

     As we wander deeper into the swamps of government
imposed accountability, prices are going to go up and quality
will go down.  Supply will diminish.  As we approach the end of
this journey, everyone will be living in conditions that will make
North Korea and the former Soviet Union look good.  Anyone
who votes to expand government, or even to prevent government
from shrinking, is voting for this dismal end.

aldmccallum@gmail.com
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Copyright 2013
Albert D. McCallum

Wednesday, May 15, 2013

How Can We Achieve Accountability?

     In a world of isolated individuals, accountability is
simple.  Each individual would be accountable to himself. 
Anyone who goofed off or messed up would be the only one to
suffer the consequences.  It would be up to him to clean up his
act or continue suffering the consequences.  No one else would
suffer.

     Once individuals start interacting we grow concerned
about accountability.  The actions of each affect others.  The
consequences of an individual's actions may be beneficial or
detrimental to others, sometimes both.  There is a reason why
someone invented the "term mixed blessing."

     The more interactions we have, the more people we need
to hold accountable.  Also, more people need to hold us
accountable.  In our complex trading society we are served by
millions and, in turn, serve millions.  Those millions are spread
around the world.

     Butchers, bakers, and candle stick makers have been
joined by auto makers in Japan, shirt makers in China, fruit
growers in Chili, oil producers in Saudi Arabia, steel makers in
Italy, service reps in India, and legions of others who serve us. 
How can we hold all of these accountable while they hold us
accountable?

     If you could count all of the people who serve you the
count would reach millions.  How many individuals are involved
in providing a loaf of bread?  To name only a few: tractor
operators, truck drivers, millers, yeast makers, bakers, and clerks. 
All of these, and many more, couldn't do their part in making a
loaf of bread without the assistance of the thousands who make
farm implements, bread mixers, bread slicers, farm chemicals,
fertilizer, trucks, trains, highways, warehouses, and numerous
other essentials.

     How many people did it take to build the roads and
railroads from the farm to the store?  How many people did it
take to educate and train all those in the supply chain?

     It may seem that some don't serve millions.  Most people
with productive jobs do.  What about a check out clerk?  Does
she serve only her customers?  Many of those customers serve
millions.  Those who serve the servant, also serve those the
servant serves.  Try reading that sentence out loud fast 10 times
without messing up.

     With our busy lives and 24 hour days, How much time
can each of us devote to holding each person making our bread
accountable?  We need time left over to hold the vegetable
growers, microwave makers, auto makers, television makers,
barbers, and a host of others accountable.

     There are 84,600 seconds in a day.  If we tried to devote
one second to holding each person who serves us accountable,
the day would be gone before we even made a good start on our
list.  Faced with the daunting task, many simply give up.  They
say let government do it.  They might as well say, "Let the
accountability fairy do it."

     There is no way even millions of government bureaucrats
can identify, leave alone manage, the billions of people who
serve billions of people.  Yet, unless we are willing to allow
those billions to each serve only himself at the expense of those
who depend on the service, we must have a way to hold our
servants accountable.

     The way must be easy, almost effortless, compared to the
magnitude of the task.  It must be something we can and  will
do.  If we all leave the task to someone else, no one will be
doing it.  There will be no accountability.  Everyone will be free
to serve only himself at the expense of those he is supposed to
serve.

     If we delegate the task to government, we have solved
nothing.  Such delegation only replaces one problem with
another.  The question then becomes, Who will hold those in
government accountable?  You may have noticed that we are
failing miserably in holding government accountable.

     Next time: some roads to accountability.

aldmccallum@gmail.com
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Copyright 2013
Albert D. McCallum

Thursday, May 9, 2013

Fished to Death

     Many ocean fisheries are being fished to death.  This
destruction isn't the product of ignorance, or even
shortsightedness, of the fishermen.  They know what they are
doing and do it anyway.  The over fishing makes perfect sense
under the rules that prevail.

     The fishers earn more income by catching more fish now. 
If some fishers limit their catch, others will catch more.  The
result is that income is shifted from those who limit fishing to
those who don't.  Those who limit fishing do nothing to increase
fish for future catches.  Thus, each fisher is better off catching
as many fish as possible, as soon as possible.

     The only way to preserve the fish is to change the rules
of the game.  If someone owns and controls the fish, he will
have the incentive to limit fishing now in order to catch more
fish later.

     Private owners gain by preserving resources for future
production.  That which is "owned" by everyone is in reality
owned by no one.  Each tries to grab a larger share before the
resource is gone.  The US publicly "owned" buffalo heard was
hunted to near extinction.  Private ownership of some of the
remnant saved the buffalo.

     This column is about something far more important than
preserving fish and buffalo.  It is about preserving all of the
resources, natural and man made, upon which our survival
depends.

     The productivity boom of the industrial revolution sprung
from secure private ownership.  Entrepreneurs and investors
gained by preserving and enhancing the productive resources. 
Consumers reaped the benefits of increased productivity.

     Imagine a world where everything is owned by everyone. 
It would be like the ocean fisheries.  Most people would seek to
grab as much as they could before someone else grabbed it. 
Most, even all, might realize that they were destroying their
future.

     Each would be powerless to protect the future.  Thus,
they might as well eat, drink and be merry while they still could. 
Starving and suffering now wouldn't prevent starving and
suffering in the future.  The only hope would be to alter the
rules and establish private ownership that rewarded conservation
and productivity.

     Brick by brick we are dismantling the private ownership
that is the foundation of our prosperity.  In name at least, private
ownership is hanging on.  Ownership is the ability to control the
thing owned.  How much control do businesses and other owners
now have over what they supposedly own?

     Endless laws and regulations force "owners" to allow
others to gain benefits from the property the so-called owners
"own."  The "owners" discover that attempts to preserve their
property and its productivity are useless.  The benefits go to
someone else.  The "owner" is better off consuming his property
before someone else does.  The resources essential to future
production are consumed, like the fish in the oceans.

     Even worse, government seizes much wealth and tosses it
into the public ownership bowl.  It is up for grabs.  This grab
bowl contained only about 6 percent of what was produced in
1900.  The grab bowl now sucks up 40 percent or so of what we
produce.

     Everyone might as well grab as much as they can.  If
they don't someone else will grab it.  It won't be saved to
produce for the future.  Again, like the fish in the oceans, it will
be gone.

     Expecting individuals to refrain from dipping into the
grab bowl is unrealistic.  So long as the grab bowl is there, it
makes perfect sense to grab as much as you can.

     Government's solution is to raise taxes and increase
borrowing to fill the grab bowl.  This isn't a solution. 
Eventually government will toss everything into the grab bowl. 
There will be nothing left to use in production to replenish the
grab bowl.  The only way to avoid the disastrous end  is to
change the rules.  We must end the grab bowl and return to
secure private ownership of our resources.  Otherwise, we will
fish ourselves to death.

aldmccallum@gmail.com
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Copyright 2013
Albert D. McCallum

Wednesday, May 1, 2013

How Good Can Charter Schools Be?

     Charter schools are still controversial.  Some supposedly
fail to provide quality education while others do very well.  The
methods used to evaluate charter schools, and all other schools,
are suspect.  The evaluations consist mainly of bureaucrats
giving tests and calculating scores.

     Suppose we used this method to evaluate grocery stores. 
The stores that received low scores would be forced to close
their doors.  Stores would then focus on how to get good test
scores from bureaucrats, rather than focusing on serving and
pleasing customers.  Under such a  system we should expect that
good stores would often be forced to close while many mediocre
and poor ones remained open for business.

     We use a much better system to evaluate grocery stores
and all other free market businesses.  The customers served by
the grocery stores evaluate the stores.  Each customer either
gives a thumbs up by continuing to buy from the store, or gives
a thumbs down by spending his money elsewhere.

     Stores that poorly serve their customers fail and go out of
business.  Those that well serve their customers thrive and
expand.  A few stores which are great at serving and pleasing
customers expand and serve across the nation and even around
the world.

     Some people object to large businesses.  When there is
freedom in the marketplace the only way a business can grow
large is by pleasing many customers.  Government regulated and
dominated businesses expand by pleasing politicians and
bureaucrats who can never know enough to tell if the business is
well serving its customers.  The politicians and bureaucrats will
always be much more concerned about how much a business
serves them, than about how much it serves its customers.

     I don't doubt that some charter schools serve their
customers better than others do.  It is unbelievable that some
wouldn't be better than others.  This doesn't make charter
schools unique.  Some district schools do a much better job than
others.

     Every kind of enterprise known has its failures.  Many
grocery stores, barber shops, repair shops, bus companies, auto
makers, etc. have failed to well serve their customers.  With free
competition in the marketplace, customers give failures a thumbs
down and vote them off the island.

     One of the biggest problems in achieving quality
education is that, until recently, customers had almost no
opportunities to vote failing government schools off the island. 
The more the schools failed, the more money government tossed
to them   This sounds a lot like rewarding failure.  When we
preserve and reward failure, we should expect more failure.

     Improving charter schools, and all other schools, requires
less government control, not more.  Charter schools have been so
limited that most have waiting lists.  Why would a school work
and spend to improve service when it can fill all of its seats
without improving?  What kind of service would we get from
grocery stores if the stores already had more customers than they
could serve?

     There should be no limit on the number or size of charter
schools, including cyber schools.  Anyone, not just a few
colleges, should be allowed to start a charter school.  In other
words charter schools shouldn't need to have charters.  Unless
charters are available to all, charters are government granted
privileges that limit competition.  Limiting competition limits the
motivation to provide better service.

     Adam Smith published "An Inquiry Into the Nature and 
Causes of the Wealth of Nations" in 1776.  In it he documented
how the nation whose government interferes least with the
economy produces the most wealth.

     One of the biggest parts of a nation's wealth is the
knowledge and skills of its citizens.  A corollary to Smith's
conclusion is, the nation whose government interferes least with
education will produce the greatest wealth of knowledge and
skills.  Charter schools will improve education only if they result
in less government control of education.

aldmccallum@gmail.com
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Copyright 2013
Albert D. McCallum