Posts tagged ‘monopoly’

Public vs. Private Privacy Threats

I am always fascinated by folks who fear private power but support continuing increases in public / government power.  For me there is no contest - public power is far more threatening.  This is not because I necesarily trust private corporations like Goldman Sachs or Exxon or Google more than I do public officials.  Its because I have much more avenues of redress to escape the clutches of private companies and/or to enforce accountability on them.  I trust the incentives faced by private actors and the accountability mechanisms in the marketplace far more than I trust those that apply to government.

Here is a good example.  First, Kevin Drum laments the end of privacy because Google has proposed a more intrusive privacy policy.  I am not particularly happy about the changes, but at the end of the day, I am comforted by two things.  One:  I can stop using Google services.  Sure, I use them a lot now, but I don't have to.  After all, I used to be a customer or user of AOL, Compuserve, the Source, Earthlink, and Netscape and managed to move on from those guys.  Second:  At the end of the day, the worst they are tying to do to me is sell me stuff.  You mean, instead of being bombarded by irrelevant ads I will be bombarded by slightly more relevant ads?  Short of attempts of outright fraud like identity theft, the legal uses of this data are limited.

Kevin Drum, who consistently has more faith in the state than in private actors, actually gets at the real problem in passing (my emphasis added)

And yet…I'm just not there yet. It's bad enough that Google can build up a massive and—if we're honest, slightly scary—profile of my activities, but it will be a lot worse when Google and Facebook and Procter & Gamble all get together to merge these profiles into a single uber-database and then sell it off for a fee to anyone with a product to hawk. Or any government agency that thinks this kind of information might be pretty handy.

The last part is key.  Because the worst P&G will do is try to sell you some Charmin.  The government, however, can throw you and jail and take all your property.  Time and again I see people complaining about private power, but at its core their argument really depends on the power of the state to inspire fear.  Michael Moore criticizes private enterprise in Capitalism:  A Love Story, but most of his vignettes actually boil down to private individuals manipulating state power.  In true free market capitalism, his negative examples couldn't occur.  Crony capitalism isn't a problem of private enterprise, its a problem of the increasingly powerful state.  Ditto with Google:  Sure I don't like having my data get sold to marketers, and at some point I may leave Google over it.  But the point is that I can leave Google .... try leaving your government-enforced monopoly utility provider.  Or go find an alternative to the DMV.

A great example of this contrast comes to us from Hawaii:

There may be some trouble brewing in paradise, thanks to a seemingly draconian law currently under consideration in Hawaii's state legislature. If passed, H.B. 2288 would require all ISPs within the state to track and store information on their customers, including details on every website they visit, as well as their own names and addresses. The measure, introduced on Friday, also calls for this information to be recorded on each customer's digital file and stored for a full two years. Perhaps most troubling is the fact that the bill includes virtually no restrictions on how ISPs can use (read: "sell") this information, nor does it specify whether law enforcement authorities would need a court order to obtain a user's dossier from an ISP. And, because it applies to any firm that "provides access to the Internet," the law could conceivably be expanded to include not just service providers, but internet cafes, hotels or other businesses.

Americans fed up with Google's nosiness can simply switch email providers.  But if they live in Hawaii, they will have no escape from the government's intrusiveness.

Crony Capitalism? Blame the Progressives

That is the purposely inflammatory title of my article this week at, finding the roots of crony capitalism not in capitalism itself, but in progressive legislation.  An excerpt:

The core of capitalism has nothing to do with, and is in fact inherently corrupted by, the exercise of state power.  At its heart, capitalism is one simple proposition -- free exchange between individuals based on mutual self-interest.  There is no room in this definition for subsidies or special government preferences or bailouts.  The meat and potatoes activities of crony capitalism are corruptions rather than features of free markets.  Where state power to intervene in economic activity does not exist, neither does cronyism.

Believe it or not, the Occupy movement reminds me of nothing so much as 1832.  Flash back to that year, and you will find Federal officials with almost no power to help or hinder commerce... with one exception: the Second Bank of the United States, a powerful quasi-public institution that used its monopoly on government deposits as a source of funds for private lending.  The bank was accused of using its immense reserves of government cash to influence elections, enrich the favored, and lend based on political rather than economic formulae (any of this sound familiar?).  Andrew Jackson and his supporters, the raucous occupiers of their day, came into office campaigning against the fraud and cronyism at the Bank.

Jackson, much like the current OWS folks, was a strange blend of sometimes frontier anarchist and sometimes tyrannical authoritarian.  But in the case of the Second Bank, the OWS movement could well learn from Jackson.  He didn't propose new and greater powers for government officials to help check abuses of the existing powers -- he proposed to kill the Bank entirely.  Eliminate the source of power, and men can no longer tap it for their own enrichment.

Unfortunately, the progressive Left which makes up most of the OWS movement has taken exactly the opposite approach over the last century or so, expanding government powers and economic institutions (such that today the scope of the second bank seems quaintly limited) and thus the opportunity for cronyism.   In fact, most of the interventions that make crony capitalism possible are facilitated and enabled by the very progressive legislation that the progressive Left and the OWS protesters tend to favor.  Consider some examples...

The Teacher Salary Myth -- Are Teacher Underpaid?

My new column in Forbes addresses a topic I wrote about over 6 years ago, and got a ton of feedback on.

The problem with salaries for government workers like teachers is that, in a monopoly (particularly one enforced by law), the usual checks and balances on compensation simply don’t exist.  Let’s say a private school gives its teachers a big raise, and has to raise its tuitions to pay for those higher salaries.  Parents are then left with a choice as to whether to accept the higher tuitions, or to look elsewhere.  If they accept the higher fees, then great — the teachers make more money which is justified by the fact that their customers percieve them to be offering higher value.  If they do not accept the higher tuition, the school withers and either changes its practices or goes out of business.

But what happens when the state overpays for teachers (or any government employee)?  Generally, the govenrment simply demands more taxes.  Sure, voters can push back, but seldom do they win in a game dominated by concentrated benefits but dispersed costs.  On a per capita basis, teachers always have more to fight for than taxpayers, and are so well-organized they often are one of the dominant powers in electing officials in states like California.  This leads to the financially unhealthy situation of a teachers’ union negotiating across the table from officials who owe their office to the teachers’ union.

We might expect this actually to lead to inflated rather than parsimonious wages.  To see if this is true, we have a couple of different sources of data within the Bureau of Labor Statistics (BLS) to help us.

Click through to see the numbers, which tell the story pretty clearly

Cost Savings In Wisconsin

This was a pretty amazing article on cost savings experienced already by one school district in Wisconsin after the collective bargaining agreement with government unions was voided.

Of course, there have already been substantial cost-savings as more sane work rules have been put in place and employees have to pay a larger (but still trivial) share of their pension and health care premiums.

But I thought this bit of self-dealing by the unions was pretty amazing and is the type of thing that did not make the news back in the whole Wisconsin brouhaha

"The monetary part of it is not the entire issue," says Arnoldussen, a political independent who won a spot on the board in a nonpartisan election. Indeed, some of the most important improvements in Kaukauna's outlook are because of the new limits on collective bargaining.

In the past, Kaukauna's agreement with the teachers union required the school district to purchase health insurance coverage from something called WEA Trust -- a company created by the Wisconsin teachers union. "It was in the collective bargaining agreement that we could only negotiate with them," says Arnoldussen. "Well, you know what happens when you can only negotiate with one vendor." This year, WEA Trust told Kaukauna that it would face a significant increase in premiums.

Now, the collective bargaining agreement is gone, and the school district is free to shop around for coverage. And all of a sudden, WEA Trust has changed its position. "With these changes, the schools could go out for bids, and lo and behold, WEA Trust said, 'We can match the lowest bid,'" says Republican state Rep. Jim Steineke, who represents the area and supports the Walker changes. At least for the moment, Kaukauna is staying with WEA Trust, but saving substantial amounts of money.

This strikes me as an amazing example of self-dealing.  The union requires that their health care insurer get a monopoly, and then extract monopoly rents from the relationship.  You can be sure the union rank and file never saw a dime of these health care profits, which likely flowed to just a few union leaders plus the politicians who helped make it possible.

Bruce at Q&O has more

Standard disclaimer: I have no particular beef with unions per se, whose ability to organize workers is protected under the First Amendment's right to assembly.  My problems related to unions are

  1. Government rules that tilt the balance of power in negotiation to unions, require that all employees (in certain non-right-to-work states) join unions or at least pay dues, etc.
  2. Public unions are a different animal than private sector unions and I have turned pretty strongly against these.  The problem in public sector unions is that there is no adversary -- ie the politicians nominally negotiating with unions are often on the same side as the unions and cut horrible sweetheart deals that screw taxpayers.  Until we find a way to really represent taxpayers in public sector union negotiations as well as shareholders are represented in private sector negotiations, I tend to favor limits on public sector collective bargaining.

Lack of Imagination

One of the things I struggle with in arguing for ending the government schools monopoly is a lack of imagination.  In most people's lifetimes, there has never been a robust network of private school options to fit all needs and budgets, so folks assume that that such choices can't exist -- that there is some structural failure of capitalism that would prevent these choices from existing rather than structural government factors that have prevented them from existing.

Don Boudreaux has a nice analogy that helps make the logic of school choice clearer.

Public Employee Compensation Packages

I am with Megan McArdle in confirming that the non-pay portions of the typical public employee compensation package is at least as important, and as potentially expensive, as the money itself.  In particular, two aspects of many public employee compensation packages would be intolerable in my service business:

  • Inability to fire anyone in any reasonable amount of time
  • Work rules and job classifications

From time to time I hire seemingly qualified people who are awful with customers.  They yell at customers, or are surly and impatient with them, or ruin their camping stay with nit-picky nagging on minor campground rules issues.  In my company, these people quickly become non-employees.  In the public sector they become... 30 year DMV veterans.  Only in a world of government monopoly services can bad performance or low productivity be tolerated, mainly because the customer has no other option.  In my world, the customer has near-infinite other options.  And don't even get me started on liability -- when liability laws have been restructured so that I am nearly infinitely liable for the actions of my least responsible employee, I have to be ruthless about culling bad performance.

The same is true of work rules.  Forget productivity for a moment.  Just in terms of customer service, every one of my employees has to be able to solve customer problems.  I can't automatically assume customers will approach the firewood-seller employee for firewood.  All my employees need to be able to sell firewood, or empty a trash can when it needs emptying, or clean a bathroom if the regular cleaner is sick, or whatever.

For those who really believe state workers in Wisconsin are underpaid, I would ask this question:  Which of you business people out there would hire the average Wisconsin state worker for their current salary, benefits package, lifetime employment, work rules, grievance process, etc?  If they are so underpaid, I would assume they would get snapped up, right?  Sure.

Bonus advice to young people:  Think long and hard before you take that government job right out of college.  It may offer lifetime employment, but the flip side is that you may need it.  Here is what I mean:

When people leave college, they generally don't have a very good idea how to work in an organization, how to work under authority, how to manage people, how to achieve goals in the context of an organization's goals, etc.   You may think you understand these things from group projects at school or internships, but you don't.  I certainly didn't.

The public and private sector have organizations that work very differently, with different kinds of goals and performance expectations.  Decision-making processes are also very different, as are criteria for individual success within the organization.  Attitudes about risk, an in particular the adherence to process vs. getting results, are entirely different.

I am trying hard to be as non-judgmental in these comparisons as I can for this particular post.  I know good people in government service, and have hired a few good people out of government.  But the culture and incentives they work within are foreign to those of us who work in the private world, and many of the things we might ascribe to bad people in government are really due to those bad incentives.

It is a fact you should understand that many private employers consider a prospective employee to have been "ruined" by years of government work, particularly in their formative years.  This is simply a fact you will need to deal with (it could well be the reverse is true of government hiring, but I have no experience with it).  That is why, for the question I asked above about hiring Wisconsin government workers, the answer for many employers would be "no" irregardless of pay.

The Man Who Saved the Whales

My new Forbes column is up, and discusses two of the most vilified men in history.  One ended (at least for a while) the blight of government enforced monopoly in industry.  The other saved the whales.

Nobody Likes Having Competitors, but Only the State Can Ban Them

Private companies often come running to the government to protect themselves from competition.  Sometimes they are successful, and get government licensing and certification requirements that help create barriers to entry that protect incumbents  (if incumbents are lucky, they will actually get to control the licensing and certification board and testing process).

But whether or note private companies have the political muscle to get this kind of protection, the government almost always protects itself whenever it embarks on any sort of quasi-commercial enterprise.  The ban on first class mail delivery competition is one example (as an aside, when email began making an end run around this ban, the USPS actually made a [fortunately failed] play to be the monopoly email provider).  In Denver, there was a story a while back that after they built a new toll road, they added traffic lights and lowered the speed limit on a parallel free road to drive more people to the toll road.

Carpe Diem brings another example:

"When the old arena for the Orlando Magic opened 21 years ago, it was common for Parramore neighborhood residents who lived nearby to charge Magic fans and concert-goers to park on their property. But five weeks ago, the Orlando City Council approved standards that will likely keep most Parramore homeowners from profiting on parking near the Orlando Magic's new $480 million Amway Center (pictured above).

Among other things, property owners must pay a $275 application fee and provide a business tax receipt. Lots must have an attendant, signs, proper lighting and a paved, gravel or grass surface free of potholes or ruts. City officials also recommend hiring security. Even when all those requirements are met, temporary parking lots are allowed only during an event expected to draw at least 5,000 attendees. So far, five applications have been approved, but all are for large properties such as churches, not homeowners.

The city, meanwhile, has doubled its event-parking rate to $20 at the two garages closest to the Amway Center; elsewhere, event parking at city garages and lots is $10."

The last sentence explains the first two. They are trying to charge an above market price for parking, so must constrain supply to avoid being undercut.

You Want to Know Why Medical Care Is So Expensive?

You Want to Know Why Medical Care Is So Expensive?  Because the government has passed numerous laws to help medical practitioners enforce their monopoly on numerous medical services.

Today I encountered an egregious example.  1-800-Contacts will not ship my contact lens order.  Seeing that my 1-year prescription was about to run out (but still valid for another week, it expires on the 18th), I ordered a bunch of boxes of my daily lenses to see me through some more months.  The retailer called my eye doctor, who confirmed that the prescription was still valid but that the doctor would only allow me to buy one box because he wanted me to return for an exam soon.  They confirmed this by email:

Thank you for choosing 1-800 CONTACTS. While we were verifying your prescription, your eye care provider informed us that your prescription will be expiring soon. Unfortunately, this means that we are unable to ship your order....

But then we get to the real point

Also, if you would like assistance scheduling a new exam, we can help! We have a network of doctors with convenient locations and hours....


The Doctor Network Team at 1-800 CONTACTS

So the email is not even from the customer service department.  It is from their doctor network.  Its clear the requirement is all about pumping up the eye doctor business.

I remember a Dilbert cartoon (or maybe it was the Far Side) where one copier repairman was pointing into a copier and telling the other that he should "set this dial for when he wanted to return."  We all have suspected something like this exists in copiers, but for all the dark humor, it really exists in the medical profession.

Why should the government force me to pay the doctor for as many visits as the doctor wants just to be able to purchase contact lenses?  One could argue this is for eye health or some happy BS like that, but we don't require everyone to visit the eye doctor at the doctor's pleasure, just people with bad vision who have daily wear contacts.  There is not, to my knowledge, any correlation between glaucoma and contact lens wearing, so why do I face such a government mandate while someone with 20/20 vision does not?

Further, why can't I self medicate on contact lens selection?  I know people who have been raised to be submissive sheep deferring to the almighty medical degree gasp at such a suggestion, but why not?  Because I have problems with both near and far sightedness, my choice of contact lens strength is a tradeoff anyway.  If I can see well long distance, I can't read anything without reading glasses.  Back off a bit on the far vision, allowing a little blurriness in one eye, and I can read in an emergency without my glasses.  I chose my own lens strength, and my doctor then wrote a prescription for it.  Why can't I just do this on my own, say with a trial kit of lenses from the manufacturer.  (for those who think it might be a size issue, there are only about 3 sizes in this type of lens, and they are far enough apart that once a size is selected, they are likely that size forever).  It's fine if people want to do this under a doctor's supervision, and I would certainly get into the doctor every two or three years, but why must the government mandate I go in more frequently, at the doctor's pleasure, not mine?

This kind of thing exists ad infinitum in the medical profession, with government mandates helping to protect over-educated professionals from lower-cost competition.  Why do I have to go to a dentist's office to get my teeth cleaned?  Why do I need someone with 12 years of medical training to put three stitches in my knee?  Why do I need a fully trained doctor to take me through the basics of a routine physical?  Why does Viagra require a prescription -- I mean, doesn't the doctor just take my word there is a problem, or is there actually a doctor out there who sends in hot nurses to prove whether I have an erectile problem?  OK, I might not begrudge that particular doctor visit.

Three Quarters of A Million Americans Arrested For Marijuana Possession in 2008

In the US last year, 754,224 people were arrested for possession (not dealing or production) of marijuana.  By the logic of US drug laws, all of these folks are better off with an arrest record and possible incarceration that they are from the nominal negative effects of smoking marijuana (FBI report here, via Radley Balko).  These numbers are just insane.  And while the report only gives race numbers for total drug arrests rather than for just marijuana offenses, a hugely disproportionate number are black (over 1/3 of arrests).

And speaking of equal protection, the arrest numbers for gambling are eye-opening (table 43).  75% of all people arrested for gambling last year in the US were black, including 90% of the arrests of those under 18 for this offense.  It seems it is A-OK for whites to play poker at home for money (I'm guilty) or to bet in Super Bowl pools (guilty again) or to clad themselves in polyester and head to the casino boat, but blacks who choose to compete with the state gambling/lottery monopoly will get arrested.  As an aside, I have always laughed at the government piously suing tobacco companies for targeting minorities with their advertising and then using the same techniques themselves to target minorities for their lottery sales.

That Great Public Service

Via Cafe Hayek:

American Postal Workers Union president William Burrus complains that "It is deeply troubling that Journal editors advocate ending the Postal Service's exclusive right to sort and deliver mail.  The Postal Service must remain a public service if we are to honor our nation's commitment to serve every American community "“ large or small, rich or poor, urban or rural "“ at affordable, uniform rates"

My family has  a ranch that is absolutely in the middle of nowhere in Wyoming - it is 30 minutes by dirt road from a town of 2,000.  The USPS delivers mail to a box 3 miles away from the ranch, and does it 3 days a week.  The USPS will not deliver overnight mail.   UPS delivers 6 days a week right to our door, including overnight mail.

The word "uniform" is the key -- what the USPS government protected monopoly buys us is a massive cross-subsidy, where city dwellers subsidize rural communities, Alaska, and Hawaii.   Further, because the USPS knows that these subsidized routes are cost black holes, they tend to cut back on service to try to save money.  The result is that no one is served well, as is often the case when a large cross-subsidy exists -- cities pay more for their mail, and everyone gets worse service.

Explain the Correlation...

I am confused as to why a preference for overpriced organic foods and a preference for government monopoly control of health care are necessarily correlated at the 1.0 level.  But apparently they are.  Maybe its a common desire to overpay for basic necessities?

Newspapers and Government

I don't have time right now to editorialize in depth, but I found many of the links in this Reason piece on newspaper bailout proposals to be really creepy.  Nothing could be worse for the First Amendment than making news organizations dependent on government largess.   This bit from the Nation is not only totally misguided, but it demonstrates an utter lack of understanding of history, to the point of demonstrating contempt for hist0rical accuracy:

Only government can implement policies and subsidies to provide an institutional framework for quality journalism. [...]

Fortunately, the rude calculus that says government intervention equals government control is inaccurate and does not reflect our past or present, or what enlightened policies and subsidies could entail.

Our founders never thought that freedom of the press would belong only to those who could afford a press. They would have been horrified at the notion that journalism should be regarded as the private preserve of the Rupert Murdochs and John Malones. The founders would not have entertained, let alone accepted, the current equation that seems to say that if rich people determine there is no good money to be made in the news, then society cannot have news.

I find the arguments that such intervention is needed because publishing is too expensive and effectively excludes all but the largest players to be hilarious in the Internet age.  The real problem of newspapers is in fact that it has become so cheap to publish, and competition is rampant.  The problem papers are struggling with is not monopoly, but just the opposite -- that their historic monopoly is gone.   (Take yours truly, for example.  With a $10 a month hosting fee and some of my free time, I have a circulation of almost 5,000 per day).

This appears to me to be yet another veiled attempt by current incumbents to use the government to give them a boost against competition.  Murdoch's empire is utterly assailable -- all you have to do is a better job.   The only thing that makes a business position unassailable is government protection or political advantage aimed at selected players.

Which reminds me of an interesting story.  Ben Franklin  (you know, one of those founders that the Nation refers to as horrified by domination of journalism by moneyed interests) is pretty famous for being among the country's first postmasters.  Before the Revolution, he was postmaster of Philadelphia and later one of the lead postmasters for all the colonies.  We all read in school how he did all kinds of innovative things, because Franklin was a freaking smart guy**.

What you may not know is why he sought out the postmaster job.  Ben Franklin was a printer, and a large source of income for him was running a periodical in Philadelphia  (the names changed over time but among them were the Philadelphia Gazette).  At the time, there were no wire services  (and no wires!)  News came via mail.  Franklin actively sought the postmaster job as a way to get special, privileged access to the mail, which he monitized via his publications.   He had fresher news, and he used the mails to deliver his own publication to customers for free  (a right competitors were not granted)  In a strategy that he did not invent (it was fairly common at the time, and in fact he took the Philadelphia job from his main journalistic competitor who had pursued the same strategy) the surest route to success in the newspaper business was to secure an advantaged position via the government, specifically in a postmaster role.

I am perfectly happy not to go back to this model.

** Postscript:  Franklin seldom gets credit in popular literature for the real areas he contributed to science.  Everyone knows the kite in the thunderstorm story, but I always thought this kind of made him look like a goof, rather than a real scientist.  But Franklin did some real theoretical science, for example by describing what was really going on in a Leyden jar, and substantially advancing how scientists thought about electrical charge and capacitance.

More Auto Bailout Thoughts

I don't think I have ever gotten as much mail from as many different readers as I have received on the auto bailout.  Readers seem fairly unified in their outrage and horror at the prospect.

Via insty:

Nancy Pelosi calls the deal a barber shop, where everybody will take a haircut.

There is already an available process for operating companies that cannot meet their obligations where all the parties take a haircut:  Its called chapter 11.  We have about a zillion man-years of experience with it, in companies great and small.  And it does not take idiotic Senators flashing billions of our tax money to mediate it.

The auto industry is tremendously magnetic for wannabee technocrats in Congress, in large part because in perhaps no other industry is there a bigger gap between what the average American wants to buy and what the country's intelligentsia things they should buy.

But US automakers are failing because they have not been very responsive to customers; they have grown fat and complacent, feeling protected by their monopoly power position; they have consistently failed over decades-long periods to make tough decisions vis-a-vis labor and costs; and they have refused to make real prioritization decisions (GM brand strategy is a good example).  It is therefore hilarious that Congress thinks it can do better, because wouldn't these same traits be high on the list of failings of the Federal Government itself?

And this is funny, if you have not seen it yet.

Re-Evaluating Home Ownership

Mark Perry has had a series of posts of late presenting the hypothesis that high rates of home ownership in the US may be detrimental as it reduces labor mobility.  The argument goes that homeowners have a harder time moving for new jobs than renters do.

impedes the economy's readjustment by tying people down. From a social
point of view, it's beneficial that homeownership encourages commitment
to a given town or city. But, from an economic point of view, it's good
for people to be able to leave places where there's less work and move
to places where there's more. Homeowners are much less likely to move
than renters, especially during a downturn, when they aren't willing
(or can't afford) to sell at market prices. As a result, they often
stay in towns even after the jobs leave. And reluctance to move not
only keeps unemployment high in struggling areas but makes it hard for
businesses elsewhere to attract the workers they need to grow.

The argument makes sense on its surface, but I am having a bit of trouble buying into it (though I will admit that as an American, I am steeped in decades of home-ownership-boosterism, so I may not be approaching the problem without bias).

On the plus side, the selling a home and buying a new one certainly has more costs than switching apartments, particularly if you add in a moving premium for home owners who can accumulate a lot more stuff than apartment dwellers and the switching costs due to emotional attachment to the current house.  Also, on its face, the argument is similar to criticisms of the economy of the antebellum south, where too much capital was invested in land and assets tied to the land.

However, I see a couple of problems with it.  First, its hard to find an increase in structural unemployment rates in the past decades to correlate to the increase in home ownership.  Second, the costs to change homes has been falling of late as the government-protected Realtor monopoly is finally being broken by technology and commission rates are falling.  Third, my sense is (though I can't dig up the data) that the average time in a home is dropping, meaning homes flip owners more frequently, again indicating a decreasing barrier to moving.

I would, however, be willing to accept that in a high home ownership regime, falling home prices and lengthening for-sale times could exacerbate an economic downturn by slowing mobility and thereby slowing the correction.  I would have argued in the past that this was offset by home equity as a savings tool and a source of cash in difficult times, but that could be different this time around as mortgage policies have tightened, drying up the ability to convert equity to emergency cash.

Just Reward

John McCain put his name to the campaign finance bill that, in effect, allows only the media, not other private citizens, unlimited free speech in the run-up to the election.  So I think it is hilarious that the media seems to be lined up against McCain in the next election. 

There is nothing in any law book that says the media has to be unbiased.  In fact, today's notion of an unbiased media is a relatively new concept.  Most newspapers of the 19thy century had a clear political orientation, something that is still the case to some extent in Britain today.  It was absurd to give such a limited group a monopoly on political speech close to an election.  I have opposed this law from day 1, but I do find it funny that McCain himself maybe its first victim. 

Government Schools

I thought this was a very illuminating bit from Obama on education:

TAPPER: But"¦proponents of school choice say that the best way to
change the status quo is to give parents, inner-city parents a choice.
Why not?

OBAMA: Well, the problem is, is that, you know, although it might
benefit some kids at the top, what you're going to do is leave a lot of
kids at the bottom. We don't have enough slots for every child to go
into a parochial school or a private school. And what you would see is
a huge drain of resources out of the public schools.

So what I've said is let's foster competition within the public
school system. Let's make sure that charter schools are up and running.
Let's make sure that kids who are in failing schools, in local school
districts, have an option to go to schools that are doing well.

But what I don't want to do is to see a diminished commitment to the
public schools to the point where all we have are the hardest-to-teach
kids with the least involved parents with the most disabilities in the
public schools. That's going to make things worse, and we're going to
lose the commitment to public schools that I think have been so
important to building this country.

Some responses:

  • I love it when my opponents make my argument for me.  One strong argument for school choice is that public schools put a governor on 80% of the kids' educations, forcing them to learn at the pace of the slowest students.  But Obama basically says this.  He acknowledges in paragraph three that most of the kids would take the private option (and the only reason they would do so is that they perceive it to be better) leaving only the "hardest-to-teach
    kids with the least involved parents with the most disabilities in the
    public schools."  I'm sorry Mrs. Smith, I know you want more for your kids, but we've decided that they should not have a better education than that demanded by the least involved parents.
  • If his fear in  paragraph #3 comes true, isn't that consistent with a leftish market failure model?  And if so, why wouldn't it be entirely appropriate for the government to focus only on this small segment not served by private schools?  Isn't that what the government does in, say, housing or transportation, providing services only to a small percentage of the market?
  • Obama parrots the "there are not enough private schools" objection.  Duh.  Of course there is not currently 20 million student-slots of excess private school capacity just waiting for school choice.  But capacity will increase over time if school choice is in place.  Or, if the capacity does not appear, then what's the problem for Obama?  Everyone will just stay in government schools.
  • The class warfare here is both tiresome and misplaced.  Most school voucher plans have explicitly focused on the poorest families and worst schools as a starting point
  • The statement that kids leaving public schools with vouchers would be costly is just wrong, at least from a monetary point of view.  I don't know of any voucher program where students are offered a voucher as large as the average per-pupil spending of that school district.  So, in fact, each student leaving public schools is a new financial gain, subtracting a $6,000 voucher but removing at the same time an $8,000 cost.
  • Finally, note the political mastery here.  Take the question of how many kids would leave government schools for private schools under a full school competition system.  Obama wants to be on both sides of this assumption, sometimes assuming the number is small (when discussing benefits) and then assuming the number is large (when discussing costs).  Obama is a master because he makes this switch back and forth from sentence to sentence.  First, the  number leaving public schools is low, since choice would just benefit "some kids" (Bad old rich ones at that) and leave our "a lot of kids."  He again in the next sentence implies the number switching must be low, because there are not many private school spots.  One sentence later, though, the number switching is high, since it would be a "huge drain of resources."  And then, in the third paragraph, the number switching is very high, since all that are left in public schools are a small core of the "hardest-to-teach kids."

Also note what was strategically left out of his answer:

  • "Even if school choice worked, I could never support it because my party depends too much on the teachers unions in this election."
  • "Just when I have a good chance to be the leader of this government, do you really think I want to abandon the government monopoly on the indoctrination of children and the power that brings to the government?"

My Addiction to Health and Prosperity

Kevin Drum titles a post on providing government incentives for high MPG cars "Ending the Addiction,"  by which I presume he means addiction to gasoline.   I really struggle with the point of view on life that describes consumer affinity for enormously value-producing technologies to be an "addiction."  One could equally well refer to our preference for good health or prosperity to be an "addiction," particularly when fossil fuels have played such a central role in fueling the industrial revolution and the prosperity which it has brought.  With the current jump in oil prices tied so closely to growing wealth in China, never has the tie between fossil fuel use and prosperity been more obvious.

Drum advocates for what he calls a "progressive" proposal:

For cars, the most effective thing would be a "feebate": In the
showroom, less-efficient models would have a corresponding fee, while
the more-efficient ones would get a rebate paid for by the fees. That
way when choosing what model you want you would pay attention to fuel
savings over its whole life, not just the first year or two. It turns
out that the automakers can actually make more money this way because
they will want to get their cars from the fee zone into the rebate zone
by putting in more technology. The technology has a higher profit
margin than the rest of the vehicle.

I will say that this is probably less bad than other "progressive" proposals I have heard, but the logic here is based on consumer ineptness.  Higher gas prices, which drive higher lifecycle costs, are presumably providing exactly this incentive without any government program.  The problem, it seems, is that progressives don't think very much of the common people they wish to defend.  Just as the justification for Social Security is that the average person can't be trusted to make good decisions about their retirement savings so we elites will do it for them, this seems to be the logic here, but even more patronizing.   Here is the best bit which really demonstrates the point I am making:

Here's a further suggestion: require stickers to list the estimated cost of fuel consumption over a five year period.

Basically this calculation is total estimated miles per year divided by mpg times estimated gas prices times five. A simple piece of math with four numbers that can be completed on a calculator in 10 seconds or by hand in less than 30 seconds.  Mr. Drum, a big supporter of our current monopoly government school system, apparently does not think that people educated in this system can do this math for themselves.  Could it be clearer that "progressivism" is really about disdain for the common man and a belief that elites should make even the smallest decisions for them?

Something Else I didn't Know

Something I didn't know:  Arizona has a State Board of Homeopathic Examiners.   Seriously?  Do we also have a state board for horoscope writers?  For witch doctors?  For water diviners?  Doesn't the Flat Earth society need some supervision?

How do you have a board of scientific examiners for a discipline that has no science behind it.  A key part of homeopathy is the repetitive dilution of active ingredients to make "medicines."  In fact, homeopathy advocates claim that more diluted mixtures are more potent.  Here is an example, via Wikipedia:

Hahnemann advocated 30C dilutions for most purposes (that is, dilution by a factor of 1060).[73] A popular homeopathic treatment for the flu is a 200C [1 in 10400] dilution of duck liver, marketed under the name Oscillococcinum. Comparing these levels of dilution to Avogadro's number, one liter of a 12C homeopathic remedy created from diluting 1 liter of 1 molar solution
contains on average only about 0.602 molecules of the original
substance per liter of the 12C remedy. Similarly, the chance of a
single molecule of the original substance remaining in a liter of 15C
remedy dose is about one in 1.7 million, and about one in 1.7 trillion
trillion trillion (1036) for a 30C solution.

So what does the Homeopathic board do, look at the products sold for $100 by homeopaths and say, yep, that's pure water, it must be a valid homeopathic brew?

According to our governor here in Arizona, the Homepathic examiners are not doing their job.  What does that mean?  Did some homeopath actually sell a product that had a measurable amount of the active ingredient?  Anyway, the two comments so far on the Republic article sort of sum the whole debate up:

Commenter 1:  The number of people injured by homeopathic treatments is a tiny
fraction of the number of people killed and injured by regular
allopathic physicians and prescription drugs. The allopathic community
doesn't like the competition, though, so they create a crisis.

Commenter 2:The number of people helped by homeopathic treatments remains zero, so
the cost/benefit ration is infinitely higher than that of allopathy.  It's true that the allopathic medicine industry doesn't like
competition, but that doesn't change the fact that homeopathy is
nothing more than faith healing.

A couple of notes, just so I am not misunderstood:

  1. I am sympathetic with the desire not to load oneself up with drugs as much as many doctors seem to prescribe.  I have been prescribed antibiotics about 10 times in the last 20 years and have actually taken them once.  That being said, all those drugs and medical procedures have a real utility in aggregate.  To some extent homeopaths are, like vaccination avoiders, free riders on the medical care provided everyone else.  Go try your diluted duck liver in a plague-ravaged Middle Age city and see how far it gets you.  Go back 100 years and see how many of your children you can save from early death with homeopathy.
  2. I am very sympathetic to those who are frustrated that the current medical profession provides only one type of care without competition.  I have argued this same thing many times.  Its absurd, for example, that we have to go to a person with 8 years of medical education to get a few stitches put in.  Why can't someone with far less expensive education set up an emergency practice without an MD to dress and sew up simple wounds?  Think how much this would clear out the typical ER.  But we can't, because the government colludes with doctors to protect their medical monopoly and their single preferred (read intensive and expensive) style of care.

The Statist Trap

I thought this comment was kind of interesting for what it reveals:

And to some degree, doctors are the property of the state. It
is impossible to have medical education without significant state
subsidization, and although I don't know the specifics of every single
country in Africa, that's a safe generalization to make.

For instance, here in the US, your medical education is
heavily subsidized by the state. Probably on the order of 100k/student.
Resident training programs also receive about 100k/resident from
government entitlement programs.

I haven't a clue whether or not there is a net subsidy of medical education in this country, but assume it to be true.  This is the statist trap in a nutshell.  Statists insist that the government should subsidize (or, in more extreme cases, entirely fund) public education.  But once you have attended these government schools, which one virtually has to do because of the steps the government takes to maintain its education monopoly, you then become the property of the state because the statists claim "well, you took our money for your education..."

Unvarnished Technocracy

The New York Times editorial board had one of the most jaw-dropping pieces I have read in a long time.  In it, they are absolutely unapologetic in saying that they think the government can spend your money better than you can -- and the larger the government take, the happier we all will be.

The munificence of American corporate titans warms the heart, sort of.
The Chronicle of Philanthropy reports that the top 50 donors gave $7.3
billion to charity last year "” about $150 million per head....

Yet we'd be so much happier about all the good things America's
moneyed elite pay for if the government made needed public investments

The flip side of American private largess is the stinginess of
the public sector. Philanthropic contributions in the United States "”
about $300 billion in 2006 "” probably exceed those of any other
country. By contrast, America's tax take is nearly the lowest in the
industrial world.

Oh my God, does anyone actually believe that Congress does a better job spending your money than you do?  Apparently they do:

Critics of government spending argue that America's private sector does
a better job making socially necessary investments. But it doesn't.
Public spending is allocated democratically among competing demands.
Rich benefactors can spend on anything they want, and they tend to
spend on projects close to their hearts.

LOLOLOL.  Has anyone looked at the last highway bill?  How many tens of thousands of politically motivated earmarks were there?   

Philanthropic contributions are usually tax-free. They directly reduce
the government's ability to engage in public spending. Perhaps the
government should demand a role in charities' allocation of resources
in exchange for the tax deduction. Or maybe the deduction should go
altogether. Experts estimate that tax breaks motivate 25 percent to 30
percent of contributions.

At the end of the day, this is not about a better prioritization process for spending -- this is about the NY Times getting a bigger say for itself in said spending.  They know that Warren Buffet couldn't give a rat's behind what the NY Times thinks about how he spends his money, but Congressmen trying to get reelected do care.  The NY Times wields a lot of political, but little private, influence, so they want to see as much spending as possible shift to political hands where the Times wields clout.

Postscript: Boy, here is some quality journalism:

Federal, state and local tax collections amount to just more than 25.5
percent of the nation's economic output. The Finnish government
collects 48.8 percent. As a result, the United States spends less on
social programs than virtually every other rich industrial country,
according to the Organization for Economic Cooperation and Development.
The Finnish government probably has money to build children's health

"Probably has money?"  What does that mean?  Do they have government-funded children's health clinics or not?  The Times couldn't work up enough energy to fact-check that?  And by the way, who, other than the NY Times, declared that the best marginal use of additional public funds is for children's health clinics?

Postscript #2: Many of the very rich have been funding schools that are competitive with government-monopoly schools.  In this and many other cases, wealthy people fund programs that work better and cheaper than government alternatives.  I am sure that not only would the feds be happy to have this money to spend themselves (on some fat earmarks for key donors, most likely) but they would additionally be thrilled to get rid of the competition.

Update:  I must be going senile.  I missed the most obvious logical fallacy of all.  The NY Times says that our democratic government is the best possible mechanism for allocating funds.  But doesn't that also mean its the best possible mechanism for setting spending levels?  How can it complain that our democratic government is doing a bad job in setting total spending levels but does a great job in allocating that spending?

Get Your Laws off My Body

For a while now, I have been fascinated by the contrast between the Left's position on abortion and its position on universal health care. 

In the abortion debate, the Left was careful to try to establish a broader principal than just support for abortion.  Their position was (and still is) that the government should not interfere in a woman's decision-making about her own body.  Cool.  That's a general principal that any libertarian could love  (Note that there are many libertarians who accept this principal but argue that abortion is the one exception to it if one considers the fetus an independent life.)  The National Organization for Women have cleverly embodied this general principal in the T-Shirt below:

So now we come to universal health care.  And most every leftish plan has the government paying all of our health care bills.  Well I can absolutely assure you now, both via common sense and observance of practices in European countries with socialized medicine, that a couple of things follow from universal coverage:

  1. The government will be the final decision maker for what care each person will or will not get, how procedures will be performed, and what drugs will be authorized.  If they did not take on these decisions, the system would simply implode financially.  The government cannot afford to pay the bills while allowing individuals to still make their own choices about their care.
  2. The government will have a strong financial incentive to change people's individual lifestyles.  What they eat, how they exercise, their sexual practices, etc. all have a great influence on future health care costs.  Already, we see countries like Britain starting to meddle in these lifestyle choices in the name of reducing health costs.  It is why I have termed the health care Trojan horse for fascism.

I don't think even universal coverage supporters would refute these two points except to say maybe "yes, the government will do those things but we promise to be gentle."   Here is Jon Edwards:

"I'm mandating healthcare for every man woman and child in America and that's the only way to have real universal healthcare."

"Evertime you go into contact with the helathcare system or the govenment you will be signed up."

During a press avail following the event Edwards reiterated his mandate:

"Basically every time they come into contact with either the healthcare
system or the government, whether it's payment of taxes, school, going
to the library, whatever it is they will be signed up."

When asked by a reporter if an individual decided they didn't want healthcare Edwards quickly responded, "You don't get that choice."

So given that, how does the left hold universal coverage in their head at the same time as they argue that "a woman should make decisions for her own body"?  How can the NOW website sell "Keep your laws off my body" T-shirts while promoting universal coverage laws on their home page?  How do you reconcile "pro-choice" with Edward's "you don't get that choice."

I am really interested in someone taking a shot at this.  And don't tell me that the difference is that in universal coverage, the argument is just over what the government will and won't pay for.  I agree not having the government pay for something is not the same as banning it when there are plenty of private alternatives.  But in the systems being advocated by Democratic candidates like Edwards, there will be no "other system" -- the government will be the monopoly provider, or at least the monopoly rules-setter.  It will be what the government wants to give you or nothing.  And there won't even necessarily be another country to which one can run away to get her procedure, because America is that country today where victims of socialist medicine escape to get needed and timely care.

More Anti-Consumer Regulation

We seem to be getting these stories in batches lately (others here and here) but leave it to the EU to trump even San Francisco in anti-consumer stupidity:

Microsoft lost its appeal of a European antitrust order Monday
that obliges the technology giant to share communications code with
rivals, sell a copy of Windows without Media Player and pay a $613
million fine - the largest ever by EU regulators.

The EU
Court of First Instance ruled against Microsoft on both parts of the
case, saying the European Commission was correct in concluding that
Microsoft was guilty of monopoly abuse in trying to use its power over
desktop computers to muscle into server software.

It also said regulators had clearly demonstrated that selling media software with Windows had damaged rivals.

court observes that it is beyond dispute that in consequence of the
tying consumers are unable to acquire the Windows operating system
without simultaneously acquiring Windows Media Player," it said.

that regard, the court considers that neither the fact that Microsoft
does not charge a separate price for Windows Media Player nor the fact
that consumers are not obliged to use that Media Player is irrelevant."

Yes, you are reading it correctly.  Microsoft is being penalized for giving the consumer too much value by bundling in additional features and programs for free into its OS.  And just to make sure that you understand that this has nothing to do with the consumer, but is purely a complaint of large competitors that can't keep up, they make it clear that they want the bundling stopped even if it does not change the price of the OS one penny (pfennig or whatever the Euro equivalent is).  They want the product stripped down and are deliberately trying to reduce its value to customers.

Gwynnie at Maggie's Farm has a funny comment, saying, "Microsoft is guilty of succeeding while American."

Great Moments in Monopolies

True monopolies, which are extraordinarily rare in the private sector but all too common when the government uses it coercive power, lose any incentive to provide good customer service.  Via Adam Schaeffer at Cato, here are your government monopoly schools at work:

In Montgomery County, beloved third-grade teacher Soon-Ja Kim was
bounced on the word of one reviewer despite an outpouring of support
from parents who knew what great work she had done with their
children.  I can't say it better than it's reported:

But a panel of eight teachers and eight principals
charged with reviewing Kim's performance gave little weight to the
parent letters when they considered her future in a closed-door
meeting, according to panel members.

Doug Prouty, vice president of the Montgomery County
Education Association and co-chairman of the panel, said in an
interview that the strong parental support for Kim was considered only
a "secondary data source."

The good test scores of Kim's students, he said, were also secondary.
The primary sources for the decisions, he said, were the judgments of
Principal Elaine Chang, a consulting teacher assigned to evaluate Kim
and the panel members themselves that Kim was ineffective in the
classroom and hurting her students' progress.

"That's a bunch of hooey," said Elyse Summers, one of the multitude
of pro-Kim parents. "Our children went to Mrs. Kim's class every day,
came home and are performing extremely well."

"We take parent feedback, both good and bad, about teachers very
seriously," Edwards replied. But the Montgomery schools spokesman added
that "the final decision about the effectiveness of teachers must come
down to those with the professional expertise."

So, it does not matter if you are a great teacher who gets good results, if you don't kiss the principal's ass enough, you are gone.  This is not to say that private employers can't be equally silly.  However, in the private sector, if a company is stupid enough to fire a good employee for petty political reasons, its competitors will snap that person up.  If it happens enough, company 2 will quickly begin to outcompete company 1.  When the government maintains a forced monopoly on schools, there are no such feedback mechanisms to force improvement, except maybe parental feedback, and you see how much that achieves in this case.

Anti-Trust is Anti-Consumer

This is part 158 or so of a series of posts on how anti-trust law is often portrayed as being pro-consumer, but whose effect in practice is usually just to politically powerful competitors rather than consumers.

I have written a couple of posts on the National Association of Broadcasters hypocritical opposition to the Sirius-XM satellite merger. Radley Balko takes on this same topic:

So when XM and Sirius announced a highly-publicized merger this
year, everything changed for the NAB. Clearly, the two startups it so
feared for so long were floundering. And with no other licensed
satellite providers around, the NAB's position on the merger became
clear: What's bad for satellite is good for the NAB. So the NAB would
oppose an XM-Sirius alliance.

Problem is, the only colorable
argument against the merger is that it would create a monopoly for
satellite radio. XM and Sirius cleverly (and probably accurately)
headed that objection off by noting that satellite radio competes with
a variety of technologies for the listener's ear. This put the NAB in
an awkward position. The lobby would have to argue that despite its
15-year effort to derail satellite radio, satellite radio was not a
competitor. Of course, the harder the NAB fights and the more money the
NAB spends to promote this message, the clearer it becomes that the NAB
fears the competition posed by an XM-Sirius alliance. In effect, the
more the NAB fights the merger, the more it undermines its own argument
against it.

But the NAB has a lot of clout, since it controls most of the media.  Here, for example, is the Boston Globe whoring for the NAB without mentioning that their parent company is a member of the NAB.