Why Do Businesses Hire?

     Hiring employees is vital to our prosperity.  If everyone
worked for himself, larger enterprises would be impossible.
Millions of independent workers could never come close to
duplicating the efficiency and productivity our large enterprises
achieve.

     Prosperity requires that many individuals work under the
direction and control of a single commander.  There are two
ways of assembling workers -- voluntary cooperation and
slavery.  The western world long ago rejected slavery for good
reasons.  This leaves only voluntary employment as a foundation
for prosperity.  It is important that we understand how
employment works for the good of all.

     Some things appear complex.  One might marvel at the
complexity of a brick mansion.  The mansion is thousands of
simple bricks placed one at a time.  To understand the building
of the mansion we must understand the simple placement of
thousands of individual bricks.  The same is true of most
complexities.

     Hiring of a large work force may seem complex.  That
work force is brought together by hiring one person at a time.
The reasons for hiring each of those workers are few and simple.

     Free market businesses hire employees for one reason --
to produce something.  The reason for  producing something is
also simple.  The business hopes to increase the value of the
resources it buys by producing something of greater value.

     If the product of the business is more valuable than the
resources consumed, the business can sell the product for more
than it cost.  This is how businesses earn profits.  Customers are
the final judges of the value of the product.

     A business expects that each employee will produce net
value for the employer.  The business that doesn't expect the
employee to produce net value doesn't hire.

     Employees who have no concern about their productivity
or the business's profits are very foolish.  Some employees brag
about how little they have to do to keep their jobs.  Such
employees are doubly foolish.  Their continued employment
depends on the employer not discovering how worthless the
employees are, or the employer being forced to keep the
employees.

     It is only common sense that an employer will be far
more concerned about keeping an employee who produces
$150,000 of net value than one who produces $10 of net value.
The higher an employee's wages rise, the lower his job security.
He becomes less valuable to his employer.  Demanding higher
wages and more job security is trying to run in two directions at
the same time.

     The employee who produces $150,000 of net value for
his employer and is paid only $50,000 may not be pleased.  The
employee can demand more and quit if he doesn't get it.
Chances are the employer will pay more to keep the valuable
employee.  An employee who is worth only $10 to his employer
isn't likely to get anything by demanding it.

     If the employer won't pay the valuable employee more,
that isn't likely to be much of a problem for the employee.  If he
is worth $150,000 to his employer, chances are he will be worth
a lot to another employer.  Productive, valuable workers don't
remain unemployed long in free markets.

     Voluntary employment works to everyone's advantage.
The employer has to raise the pay of his valuable employees to
keep them.  Employers bid wages up to the maximum they can
pay and still earn enough profit to attract investment.

     Employees who want higher pay have only one option.
They must seek ways to produce more value.  They may do this
by finding an employer that will provide the facilities and
environment to enable them to be more productive.  Or, they can
increase their productivity through developing new skills or
improving old ones.

     Voluntary, free market employment pushes everyone to
be more productive.  Increased productivity is the engine that
powers increases in our standard of living.

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

How Can We Save?

     A few weeks ago I considered, What Is Money?  Money
isn't wealth.  It is at best a sort of claim check we can exchange
for real, usable wealth.  If all goes well and someone produces
real wealth we may be able to exchange our money for real
wealth.

     Saving money isn't the same thing as saving real wealth.
How can we save real wealth?

     Consider someone saving for retirement.  He might store
real wealth such as food, clothing, televisions, autos, etc.  This
kind of savings is real but it has its drawbacks.   The saved
goods may deteriorate or become obsolete.  At a minimum the
saver must bear the cost of storage.  The one thing certain is that
the saving will reduce the saver's total consumption while
spreading the consumption over time.

     To consider another way to save we will look back to a
simpler world.  A farmer wants to save.  Instead of devoting all
of his efforts to producing crops and animals to consume in the
near future he spends time clearing new land and building a
barn.

     Such effort does nothing to increase immediate
consumption.  In the future the farmer will be able to produce
and consume more through use of the barn and the cleared land.
The barn and the cleared land are real savings, real wealth.

     Thus, we see the only two ways to save.  We can
produce and store goods, or we can invest our efforts in
beginning the production of future consumer goods.

     Burying tomato cans of paper money in the back yard
isn't real savings.  That money will have value in the future only
if someone who then wants the money produces something the
money can buy.

     So long as the money remains buried it provides nothing
for the saver.  Burying the money will benefit all spenders of
money.  By taking the money out of circulation the saver
increases the purchasing power of all money that remains in
circulation.   The total money supply still in circulation will buy
as much as the previous larger supply of circulating money.
Each unit of money will buy a little more than before.

     The farmer who put his savings into cleared land and a
barn faces a problem if he wants to retire.  The land and barn
will produce something only if someone continues to use them.
This isn't an insurmountable problem   When he retires, the
farmer might sell the land and barn to someone else who will
continue producing with them.  The farmer can use the money
from the sale to buy goods to consume during retirement.

     As a practical matter most of us don't want to put our
savings into something we have to use and maintain ourselves
for productive purposes.  Besides, the savings of one person
often will not be enough to build a very elaborate productive
facility such as a factory or railroad.

     This problem is easily solved too.  We can put our
savings into ownership of small interests in productive facilities.
This is what investors do when they buy stock in a business.

     Another option is to lend our savings to others for the
building of productive facilities.  The loans don't have to be
direct.  We can deposit the money in a bank and let it make the
loans.

     If the bank lends the money to consumers for purchase of
consumer goods, there is no real savings.  The overall effect is
the same as if we spent the money on our own consumption.
Nothing is invested in future production.  All we get is the
borrower's promise that he will produce something in the future
and repay the loan.  If the borrower fails to produce, the loan
will not be repaid.

     The problem we face today is that much of our attempted
savings is being borrowed by government and spent, either
directly or indirectly, on consumption.  Such "savings" produce
nothing for future consumption.  They are only an illusion of
saving.  Thus, government borrowing and spending has the
potential to put us all in the poorhouse for lack of investment in
future production.

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Copyright 2012
Albert D. McCallum
18440 29-1/2 Mile Road
Springport, Michigan 49284
Column for May 21, 2012

The Paradox of Competition

     It may seem that sports should be the domain of pure
competition.  Yet, professional sports leagues and even colleges
stifle competition in pursuit of mediocre teams.  Professional
sports limit competition for players with drafts and salary caps.
Colleges severely limit the rewards paid to athletes.  Also, the
colleges limit the number of players that may be rewarded with
scholarships.

     The goal is to force all teams into the realm of
mediocrity.  The ideal is believed to be to have all teams as
equal as possible.  This goal is often stated as being parity.
When all teams are equal, all are mediocre.  None excel.

     Consider what would happen with full competition.  The
more successful teams could attract the best players, managers
and coaches.   They would become even more successful.  The
weaker teams would grow even weaker.  In professional sports
the weaker teams would fail.  Soon the excellent teams would be
running out of opponents.  It would be a hollow victory to have
the greatest team on Earth if it was also the only team on Earth.

     Reducing all teams to mediocrity allows all teams to
entertain their fans with some victories.  Every team has a
chance to win a championship occasionally.   For professional
sports, full competition can be a disaster.  For practical purposes
major college sports are professional except in name.  The goal
of the schools is to collect the most dollars possible.

     What would happen if we sought the same parity for
businesses?  Imagine that there are 100 widget manufactures.
Some make better widgets than others.  Some make widgets
more efficiently than others.  With free competition the better
widget makers will sell more and more widgets while the weaker
widget makers will sell fewer widgets.

     The weaker widget makers will fall by the wayside
leaving only a few of the best to make all of the widgets.
Suppose that someone decides that this is a bad result.  They
want to achieve parity among all widget makers so that all can
stay in business.

     The parity seekers pass laws limiting the quality of
widgets to a level all can achieve.  They take earnings from the
best widget makers and give them to the worst.  What happens if
the program succeeds?  All the widget makers and their
employees continue doing what they did.  No one loses his job
or business.  The parity seekers were completely successful.  A
byproduct of that success is institutionalized mediocrity and
inefficiency in widget making.

     Part of the price of that mediocrity is widget consumers
must settle for inferior and more costly widgets.  The extra
money they spend on inferior widgets limits their purchase and
use of other things.  Everyone is poorer because of the
mediocrity created to save the weak widget makers.

     The consumers may not complain.  With no one making
better and less costly widgets, the consumers may not realize
that they are being ripped off to benefit inferior widget makers.
It is vital to the sustaining of mediocrity that all excellence be
wiped out.  Good examples are dangerous to the health of
mediocrity.

     Unlike in the sports world, the excellent widget makers
don't need the weak ones.  Neither do the consumers.   The
excellent widget makers can expand production to efficiently
supply all of the needed widgets.

     Laws and subsidies that keep weak producers going
always push us deeper into the world of mediocrity and waste.
Instead of pursuing universal mediocrity, we should encourage
and reward excellence.  This the only way to sustain and
increase our standard of living.

     Nowhere is mediocrity more institutionalized than in
government schools.  The government school system has
perfected the rewarding and sustaining of the weak and
inefficient.  Until we encourage and reward excellence while
letting the inefficient and poor producers fall by the wayside,
schools will continue to wallow in the abyss of mediocrity, or
worse.

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

Using Other People

     Many people have a rather quaint view of human
relationships.  In that view kind and considerate individuals
engage in self sacrifice to help others.  The most sacrificial get
the most stars after their names.  How does this measure up to
reality?

     Real people seek to increase their satisfaction.  Facing a
choice they always choose the option they believe will yield the
most satisfaction.  They may willingly choose to sacrifice wealth
and time.  They don't voluntarily sacrifice satisfaction.

     Everyone is greedy about satisfaction.  Thus, it is
pointless to brand some as greedy and others as not.  So, how
will this all work out?  In pursuit of satisfaction everyone needs
many things from others.  We all use others to get those things.

     Employers need workers.  The employer would prefer
that those workers work for nothing.  The workers need some
wealth.  Most employees would prefer to get that wealth without
working.  Neither is likely to achieve the ideal.

     When everyone enjoys the liberty to freely choose or
reject offers by others, the workers and employers compromise.
The worker consents to being used by the employer.  The
employer consents to being used by the workers.

     As long as each believes that the compensation for being
used is worth more than the detriment from being used, the
arrangement works well for both.  Many may miss the point that
the worker and the employer are each using the other in pursuit
of satisfaction.  Both are greedy.

     All voluntary interactions, including social relationships,
work the same way.  Consider a date.  Each party seeks to use
the other to gain some satisfaction.  Each hopes that the benefit
from using the other will be more than the burden of being used
by the other.

     In complete liberty no one can use another without the
consent of the one used.  Everyone can say "No" and make it
stick.  Thus, individuals generally pay rent for the use of other
people.  Every individual is free to refuse to accept rent he
considers inadequate compensation for the use.

     The rent may be money, a back rub, or anything else that
the recipient considers to be of value.  All interactions are
voluntary.  Each person seeks to increase his rental value to
others so that in return he can collect higher rent.

     A big problem rears its ugly head if some individuals can
use others without the consent of the ones being used.  First, the
one used is denied the option of refusing.  Second, the one used
isn't compensated for the use.  Such one-sided use can be
accomplished only through stealth, deceit and threats of force.

     The user either tricks the one used, or threatens "Do it
my way, or I will hurt you."  The results are exploitation, strife
and instability.  Any society where a substantial percent of the
members use others without their consent, and without
compensation, is headed for big trouble.  When everyone tries to
live from the forced, uncompensated use of others, the society
faces collapse.

     In our society only government can legally force the
uncompensated use of others.  Those who want to use others
must hitch a ride on the government bus.  They are doing it big
time.  Welfare payments, business subsidies, government paid
medical expenses, and government funded subsidies of any other
kind all are based on the recipient using others without their
voluntary consent.

     The users and their enablers in government are no less
greedy than anyone else.  It isn't their greed that makes them a
threat to our survival.  Their ability to make use of threats and
force to use others is the foundation of the problem.

     We can't fix the unfixable.  The only hope is to
substantially reduce the power of those in government to forcibly
use others.  No one should be subject to being used by others
without his consent.  Government can't help anyone without
using others.

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

How About Home-Restauranting?

     Once upon a time long, long ago most people cooked and
ate at home.  Then someone invented restaurants.  Cooks
prepared food and people ate at the restaurant.   Still "home
cooking" set the standard restaurants tried to achieve.

     Home cooks didn't measure their success by how well
they measured up to restaurant standards.  Those cooks didn't
claim to be engaged in home restauranting.  Like it or not,
restaurant cooks must compete with home cooking.  They
haven't been able to stigmatize "home cooking" as second rate or
evil.  Neither have they managed to make home cooking illegal.

     We are a long way from calling eating at home "home
restauranting."  Restaurant eating isn't mandatory even for
children.  Parents don't go to jail for their children not attending
restaurant.

     Also, once upon a time, long, long ago home teaching
was the standard.  Then both adults and children ventured out to
meet with teachers and learn outside the home.  That learning
place came to be called a school.

     Schools obviously had better public relation flacks than
did restaurants.  Instead of being willing to supplement home
teaching and learning, schools sold the idea that learning outside
the school was impossible.  Anyone who didn't feed their mind
at schools would mentally starve to death.

     The word "school" that described a place, grew to be
synonymous with teaching and learning.  "School" evolved into
a verb.  What used to be teaching and learning became
schooling.  Children were schooled.

     Home teaching and learning were demeaned rather than
praised as the standard of excellence.  In Michigan the Amish of
decades ago fought a long battle to save the right to teach their
children at home.  They won.  In doing so they kept open the
door for all parents who wanted to practice home teaching.  How
many home teachers realize how much they owe those Amish?

     By the time of the rebirth of home teaching, people were
so indoctrinated by the almighty school that they accepted the
idea that teaching and learning at home were schooling.  The
home teachers accepted second fiddle to their detractors and
adversaries.  This is the equivalent of Post Cereal calling eating
breakfast "Kelloging."

      Educating children is a parental responsibility with which
schools may assist.  Today it is commonly believed that
educating children is a government responsibility with which
parents may interfere.

     The evidence strongly suggests that "home teaching," like
"home cooking," is the superior brand.  At a minimum home
teaching isn't inferior.  I'm sure that if you search long enough
and hard enough you will find some parents who do a terrible
job of teaching their children.

     You need not search long to find government schools that
do horrible jobs of teaching students.  Merely look about and
follow the news.  If we should throw away a whole barrel
because of some bad apples, the government school barrel, not
the home teaching barrel, should be the first one dumped.

     Imagine the reaction if restaurant cooks asserted that only
they know how to feed children.  The professional cooks
demand that you drop your children off at the restaurant.  The
cooks claim you should butt out because you couldn't even
understand the magic the professional cooks will work.  Imagine
if MacDonalds was mandatory.

     So-called professional educators have been making that
claim for as long as I can remember.  The claim doesn't even
pass the smell test.  For one thing, millions of parents are
smarter and better educated than the average professional
educator.  Even most of the rest of parents aren't stupid.

     Anyone who spends 13 or more years in supervised learning
and knows nothing about teaching and education shouldn't get a
diploma.  My father taught school to earn money to go to
teachers college and get a teacher's certificate.  I wonder how
much he learned in college about teaching.

     Home educators should stand tall and proud.  And, they
should call themselves what they are, educators, learning
coaches, even teachers, anything but "home schoolers."

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

Can We Export Our Way to Prosperity?

     Imagine a farmer destroying 10 percent of his crops after
harvest.  We produce to consume.  The farmer gets nothing to
consume from the crops he destroys.  He wastes effort
destroying the crops.  This costs even more of his leisure time
and other resources.

     The farmer would be better off if he planted 10 percent
less.  He wouldn't have wasted his time and other resources
producing the extra crops.

     If the farmer gave away 10 percent of his crops, he
would be in the same boat. The recipients of the gifts would be
better off.  The farmer's loss would be their gain.

     Consider another farmer.  His neighbors give him goods
equivalent to 10 percent of his harvest.  He has goods to
consume that cost him nothing.   It doesn't require advanced
math to figure out which farmer is better off and has the higher
standard of living.  The farmer who imported and didn't export
was far better off than the one who only exported.

     For some reason common sense tends to vanish when we
substitute the word "nation" for "farmer."  Keep in mind, nations
don't export and import.  All actions are by individuals.
Individuals in one country may import from or export to
individuals in another nation.  We can add up all of the imports
or exports to calculate the net imports or exports by people of a
nation.

     The individual or nation whose exports exceed its imports
ends up poorer.   From the point of view of the exporter, exports
are a waste.  Imports are beneficial.  We can't export our way to
prosperity.

     If exports are a waste, Why are many people so fond of
them?  Some individuals do benefit from exports.  Suppose we
make automobiles, load them on ships and dump the autos in the
ocean.  To the exporter those dumped autos are no more of a
waste than they would be if we exported them to someone who
gave us nothing in return.

     The workers who make the autos gain paychecks.  Their
efforts are wasted.  No one gets to consume anything they
produced.  Those workers might better have dug holes and filled
them up.  At least this wouldn't have wasted the materials and
equipment used to make the autos.

     Why would anyone pay workers to make something and
destroy it, or to make nothing?  Making autos and destroying
them is no different from other make work jobs.  Union
featherbedding, government subsidies, banning of efficient ways
to produce, all make work and paychecks without adding to
consumable production.  This wasteful work continues mainly
because many people fail to recognize the waste.

     If exports are a total waste, Should we end all exports?
Exports are a total waste only if we get nothing in return.  The
only gains from exports are the things we get in exchange for
the exports.  The reason we call exports and imports trade is
because we are trading.

     Why trade one thing for another?  Trade happens because
each party to the trade values what he gets more than he values
what he gives up.

     Why doesn't each party produce for himself and skip the
trade?  Another way to state this question is, Why don't you
produce everything you consume?  The answer is obvious.  How
much would you have if you had to produce everything you
consumed?

     Consider an example.  Individuals in Michigan may grow
apples and trade them to people in Indiana for eggs.  If egg
production in Indiana is more efficient than in Michigan, and if
the opposite is true of apple production, both parties gain.  If
they don't both gain, the trade will end.

     Neither state exports jobs.  Jobs making one product
replace jobs making the other product.  Some workers have to
change jobs.  Those job changes are the price we pay for
increasing our standard of living.  If we keep all of the old,
inefficient jobs, our standard of living will never increase.  It
isn't coincidence that along our road to prosperity workers have
endlessly lost jobs and found new ones.

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

What Should Government Do?

     Whenever people see, or imagine, an unsolved problem
the cry goes out for government to solve it.  Is government the
only problem solver on Earth?  Can government even solve any
problem without creating at least two more?

     If government is the only problem solver we are stuck in
a world where only force and violence can solve problems.
Force and threat of force are the only things government adds to
any situation.  Government's only special tool it "Do it my way,
or I will hurt you."  If this is the only way to solve problems,
we live in a bleak world that can only grow bleaker.

     Don't despair.  A quick look around reveals there is
another way to solve problems.  Look at what free people
voluntarily cooperating with each other have done.  They
produce food, provide education, provide medical services, build
parks, aid the poor, clean up messes, provide protection to
themselves and others, and an endless array of other things.
They even produce arms and fight wars.

     The only thing free and peaceful people can't do it
initiate force against peaceful people.  The only solutions denied
to free and peaceful people are those solutions that require the
use of aggression.  Governments demand and attempt to enforce
a monopoly on the use of aggressive force.  If we want to
legally take a peaceful person's wealth or force him to change
his lifestyle, we must turn to government.

     The defining characteristic of libertarians is the rejection
of the initiation of force against peaceful people.  The perfect
libertarian will never initiate force against peaceful people, or
support such use of force.  Most libertarians fall short of that
mark.  Some come close.

     We don't need to look to the libertarian philosophy to
find severe limits on what government should do, or attempt to
do.  Pragmatism also offers limits.

     We all seek to maximize our satisfaction.  A problem is
anything that interferes  with our satisfaction.  Solving a problem
involves altering conditions so that we will be more satisfied.

     Of course, one person can gain satisfaction by imposing
dissatisfaction on others.  Civilized people reject this option, at
least to some extent.  The extent to which we reject the
exploitation of others to gain our own satisfaction measures how
civilized we are.

     Unless we substantially refrain from exploiting others for
our own advantage, we will decline into a dog eat dog world of
strife and poverty.  If we are to have peace and prosperity, we
must severely limit the resort to "Do it my way, or I will hurt
you."

     With these points in mind, What should government do?
We should not turn first to "Do it my way, or I will hurt you."
At most this nuclear option should be reserved for serious
problems that defy peaceful solutions.

     Next we should consider, Might peaceful people acting in
voluntary cooperation be able to solve the problem?  Unless we
find that the private, voluntary option won't work, we shouldn't
even consider turning to "Do it my way, or I will hurt you."

     As an example, we have never shown that private,
peaceful education doesn't work.  Experience screams that it
works better than "Do it my way, or I will hurt you" government
schools.  We turned to government for education without good
reason.  Look what that choice brought us.

     The  final test should be,  Is there significant reason to
believe the government option will work?  It is pointless and
destructive to pursue a "solution" that won't work, no matter
how serious the problem.  The war on drugs is a classic
illustration of this principle.  It has failed miserably, created
more serious problems, and wasted billions of dollars of
resources.

     In summary: Don't turn to government; 1) Unless the
problem is serious, 2) Peaceful solutions don't exist, and 3)
There is a reasonable chance the government solution will work.
How many of our laws can pass this test?

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