Posts tagged ‘monopoly’

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.

Homeownership
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
clinics.

"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:
Tskyl2

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.

"The
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.

"In
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.

Another Leftish Howler on Government Health Care

From Kevin Drum, who I consider one of the smarter folks on the left (but not this time):

A few days ago, during an email exchange with a
friend, I mentioned that I don't usually tout cost savings as a big
argument in favor of universal healthcare. It's true that a national
healthcare plan would almost certainly save money compared to our
current Rube Goldberg system, but I suspect the savings would be
modest. Rather, the real advantages of national healthcare are related
to things like access (getting everyone covered), efficiency (cutting down on useless -- or even deliberately counterproductive -- administrative bureaucracies), choice
(allowing people to choose and keep a family doctor instead of being
jerked around everytime their employer decides to switch health
providers), and social justice (providing decent, hassle-free healthcare for the poor).

Name one industry the government has taken over in a monopolistic fashion and subsequently increased efficiency or individual choice?  Anyone?  Buehler?  In fact, I am not sure I can name one government program that even provides the poor with decent, hassle-free services. 

Lets take the most ubiquitous government monopoly, that on K-12 education. 

  • Efficiency?  My kid's for-profit secular private school has a administrator to student ratio of at least 1:15.  How many assistant principals does your public school have?  Many public schools are approaching 1 administrator for every 1 teacher.
  • Choice?  That's a laugh.  The government and its unions fight choice in education tooth and nail.  In fact, in the context of education, Drum and others have effectively argued that choice is the enemy of his last point, social justice, so it is absurd to argue that government monopolistic health care will optimize both.  Yes, people may be frustrated their insurance company does not cover X procedure, but this will only get worse when the government is making the choices for us.  Oh, and by the way, about the evils of those employers running our health plans?  They do so only because of WWII wage controls and decades of federal tax policy that have provided them strong incentive to do so. 
  • Decent, hassle-free service?  Ask a concerned black family in an inner-city school how good their kid's government-provided education is.  In fact, I will bet that most inner city parents get healthcare of better quality today despite the admittedly Rube Goldberg system we have (courtesy of years of silly government interventions) than the quality of education they receive from the government education monopoly.  After all, most of them walk out of the hospital today with their life, while many of their kids are walking out of worthless government schools with no life.

As to the claim that national health care would "almost certainly save money," that is hard to argue with for this reason:  The government, once in charge of health care choices, can simply start denying procedures and care ("rationing").  This is in fact how costs are managed in most socialist medical systems.  So while this statement is technically true, it would be very hard for anyone to really believe that for the same quality and quantity of care, the government could do it cheaper.

Statements I Never Expected to Read

"Arizona Republic gave an unqualified endorsement of school choice today"

From Adam Shaeffer at Cato.  The AZ Republic editorial is here.  It is really rare to see a local paper break with the established monopoly education interests.  However, before we get too excited, I will observe that the Arizona school choice plan discussed falls pretty short of full school choice, but it is a step in the right direction.

Depressing Fact of the Day

I would like to say that I am surprised, but:

An academic survey
study conducted in 1990 compared how much Americans and Russians
understood about the way markets work. It found no significant
difference. Americans understood free markets no better than a nation
of people with virtually no personal experience of them. That's
sobering. And since the heaviest academic emphasis of the last fifteen
years has been on elementary mathematics and reading, there is little
reason to believe that we have improved our grasp of economics in the
interim.

This is a funny but probably true observation:

it would be institutionally suicidal for a monopoly school system to do
a good job of teaching market economics. The very fact that we continue
to have a monopoly school system is retroactive proof that market
economics has not been well taught. Monopolies, after all, tend to be
frowned on by the economically savvy.

Its All Monopoly Money

A lot of bad legislation has been passed to protect consumers from the "scourge" of monopoly.  The most common fear is that some company will lock up the market and then start raising prices.  This never happens in real life, because entry in most markets is far easier than most people imagine, particularly in modern America where there are so many accumulations of capital looking for a way to be spent.  In fact, the only time such price-gouging monopolies are ever sustainable is when they are backed by the coercive power of government.

The milk market, for decades one of the most egregious examples of government price-fixing for the benefit of producers over consumers, provides us with a perfect example of this phenomena:  A cartel charging too high of prices that is taken on by a maverick price-cutting outsider, who was on a path to success until the feds slapped him down.

In the summer of 2003, shoppers in Southern California began getting a break on the price of milk.

A
maverick dairyman named Hein Hettinga started bottling his own milk and
selling it for as much as 20 cents a gallon less than the competition,
exercising his right to work outside the rigid system that has
controlled U.S. milk production for almost 70 years. Soon the effects
were rippling through the state, helping to hold down retail prices at
supermarkets and warehouse stores.

That was when a coalition of giant milk companies and dairies, along
with their congressional allies, decided to crush Hettinga's
initiative. For three years, the milk lobby spent millions of dollars
on lobbying and campaign contributions and made deals with lawmakers,
including incoming Senate Majority Leader Harry M. Reid (D-Nev.).

Last
March, Congress passed a law reshaping the Western milk market and
essentially ending Hettinga's experiment -- all without a single
congressional hearing.

The most hilarious (or disgusting, depending on my mood) part is listening to the statements of other milk producers complaining about the new competition and price-cutting, something the rest of us in business face as a matter of routine, but from which the privileged few in the dairy business are shielded:

Hettinga's operation was "damaging to the marketplace," said Elvin
Hollon, director of economic analysis for Dairy Farmers of America.
"Nobody ever envisioned there would be such large handlers" outside the
pool.

"So," Hollon said, "the regulations had to change."

and this:

In an interview later, Nunes called the milk legislation a victory for
"every dairy farmer in America except those who were gaming the
system." He added, "People out there were making millions of dollars a
year off the backs of America's dairy farmers . . . that was a wrong
that was finally righted.

That last paragraph is so brazen you may not even get it ... he is referring to competitors that are charging lower prices.  They are "making millions of dollars off the backs of America's dairy farmers" the same way the Honda Civic made millions of dollars off the back of the Yugo.  Under the new law passed by the dairy industry's cronies, Hettinga can still operate like he has been, as long as he pays $400,000 each year to his competitors to make up for the fact that he is out-competing them.

I will say I probably would like this guy -- he is able to look on the bright side:

"I still think this is a great country," Hettinga said. "In Mexico, they would have just shot me."

Yeah, we're much better here.  The government only rapes rather than kills you.

Ethics of Frequent Flier Programs

Am I the only one who gets ethical qualms about frequent flier programs?  If your job was to buy supplies for the company you work for, and a printer company offered to give you and your family a Hawaiian vacation if only you would have your company buy their printers instead of the competition's, could we all agree that would be a kickback or bribe?  And that it would be, if not illegal, certainly unethical?

So why don't the same rules apply to airline travel?  When buying an airline flight for business, you are acting as a purchasing agent for your company.  And the airlines, in the form of frequent flier miles, are offering you [not the company] something of value to steer your corporate purchasing decisions to their product.  Frequent flier miles are a blatant kickback.  Informal poll:  How many of you have purchased flights that are a worse deal for your company but a better deal for your frequent flier account?

A further rant: OK, if you are not turned off by that rant, here is a related one about Visa cards that give out frequent flier miles.  As mentioned earlier, these are hugely profitable for credit card companies, so much so that they create much of the value in modern airlines.  Credit card companies, perhaps the only stable monopoly I have seen in my lifetime, have perfected the art of forcing retailers to subsidize their credit card users. 

Now, a fairly rational person would expect that a cash transaction is cheaper than doing one on credit.  However, due to the very strong position of MC and Visa processors, credit card customers actually get a lower price than cash customers.  Here is why:  Credit card companies have taken to giving their users a rebate on their purchases, either in cash or frequent flier miles or some other compensation.  These rebates are funded by charging higher interchange fees to merchants (basically a percentage of credit card transactions cleared).  The magic occurs because merchants, in their processing agreements, are generally banned from giving discounts to customers for using cash.  As a result, the higher credit card interchange fees are spread among all customers, cash or credit card, equally.   The result is that credit card customers pay lower net prices than cash customers, when the rebates are factored in.

Though our trade association tries to seek government action of some sort, I am neither confident that this will help or philosophically inclined to ask for such help.  Right now, I am working within the association to try to build support for some sort of one day boycott against accepting credit cards as a starting point to trying to build up some group negotiating power vs. the credit card processors.

In Case You Thought Anti-Trust Was About Consumers, Part 2

In this post I said:

I could spend all day discussing the follies of anti-trust law.  But
one of the memes that still seems to hang on is that anti-trust was
designed as a form of consumer protection, with the government
protecting consumers from the monopoly power of consolidated
enterprises.

I am not enough of a business historian to comment on whether
anti-trust has ever been used for consumer protection, but it is clear
that it is not any more.  That has been one very expensive lesson we
can all learn from the Microsoft anti-trust cases, both in the US and
Europe.

Here is further proof.  NicSand, who used to have 2/3 of the retail channel for sandpaper locked up with exclusive deals, is complaining that 3M has usurped them and has taken their market share.   NicSand enjoyed monopoly margins for years, finally faced long-overdue price competition from 3M, and lost a lot of the business.  So they sued for anti-trust.

Between 1997 and 2000, 3M entered into contracts to supply automotive sandpaper
to Advanced Auto, Autozone, CSK and KMart and did so at prices ranging from 10%
to 30% over NicSand's costs. But nothing about this sequence of events suggests
an antitrust violation. As to the market share that 3M garnered over these
years, "it takes one to know one" is hardly an accredited hallmark of antitrust
liability"”particularly when NicSand's apparent solution to this problem is not
to encourage the entry of other suppliers to this lopsided market but to
preserve its 67% market share. As to 3M's discounting, NicSand of course has no
right"”under the antitrust laws no less"”to preserve 40"“50% margins on a product
that (so far as the allegations are concerned) does not take any ingenuity to
make. One can fairly doubt the size of NicSand's and 3M's R&D departments
for automotive sandpaper.

Unable to argue that 3M's discounting amounted to anything but legitimate (and
apparently long-overdue) competition, NicSand focuses on the fact that 3M
entered into exclusive contracts with the four large retailers that switched
from NicSand to 3M. Yet according to NicSand's amended complaint, the retailers
made exclusivity one of the preconditions for doing business with a new
supplier. The complaint says that the large retailers (1) choose to carry just
one brand of automotive sandpaper for sale to consumers, (2) re-negotiate these
one-brand contracts just once a year, (3) require a new supplier to purchase the
retailer's existing supply of automotive sandpaper, (4) require a new supplier
to provide racks and other display equipment, (5) require a new supplier to
produce a full line of automotive sandpaper and (6) require a new supplier to
provide a discount on the retailer's first order. NicSand of course complied
with these requirements in obtaining the supply business it held in 1997, and 3M
complied with them in winning some of that business away. If retailers have made
supplier exclusivity a barrier to entry, one cannot bring an antitrust claim
against another supplier for complying with that precondition. Put another way,
NicSand did not sue 3M insisting that it had a right to share shelf space; it
sued 3M because it wanted that shelf space all to itself"”just as it had it in
1997. This is precisely the kind of all-for-one-and-all-for-one competitor claim
that the antitrust laws do not protect.

Anti-trust is not about the consumer.  It is about one company trying to use the government to sit on its competitors.

Update: Oh, and in case you thought liscencing of professionals was about consumers rather than protecting incumbent competitors, example number 439,126:

If you've spent as much time on farms as I have, you may imagine that
floating horse teeth has something to do with a backup of equine urine. It
actually refers to the time-honored practice of filing horses' teeth to prevent
them from getting uncomfortably long. At the behest of veterinarians (who
else?), the state of Minnesota is trying to limit
the service to veterinarians, and the Institute for Justice (who else?) is challenging
the protectionist regulations in state court.

Should you balk at going to veterinary school just so you can file horse
teeth for a living (a technique veterinary schools don't even teach), Minnesota
will give you a pass if you 1) have more than 10 years of experience or 2) pass
an exam given by the Dallas-based International Association of Equine Dentistry.
"To qualify to take the IAED's test," I.J. notes, "you must float the teeth of
250 horses under the supervision of an existing IAED member. Not only are there
no IAED members in Minnesota, it is illegal to float without a license. So, to
abide by the law in Minnesota, you must break it."

In Case You Thought Anti-Trust Was About Consumers

I could spend all day discussing the follies of anti-trust law.  But one of the memes that still seems to hang on is that anti-trust was designed as a form of consumer protection, with the government protecting consumers from the monopoly power of consolidated enterprises.

I am not enough of a business historian to comment on whether anti-trust has ever been used for consumer protection, but it is clear that it is not any more.  That has been one very expensive lesson we can all learn from the Microsoft anti-trust cases, both in the US and Europe. 

If you remember the US cases, Sun, Netscape, Oracle and other Microsoft competitors, having failed to best Microsoft in the marketplace, went running to the FTC to get them to sit on Microsoft for them.  And they were successful, with a series of high-profile settlements.  Nowhere was there even a hint that these cases were about the consumer -- in fact, the settlement demanded was to remove functionality and free add-on components from the Windows OS, making it less attractive to consumers.

We can see this again in the recent decision by an EU court, which seems very happy to use anti-trust law to step on an American competitor in favor of local companies (my emphasis added).

Microsoft was fined $357 million, on top of the record $613 million
fine it paid in the original order. It also faces new penalties of
$3.82 million a day beginning July 31....

The commission has said that it is concerned about Vista's Internet
search capabilities and method of managing digital rights. Regulators
also are worried about the implications for competitors of a new
technology for saving documents that is similar to the Portable
Document Format developed by Adobe Systems Inc.

Microsoft's chief crime is not doing enough to help competitors compete against them:

The fines announced Wednesday come after the EU told Microsoft to
supply "complete and accurate technical specifications" to developers,
so they could make software for servers that help computers running
Windows, printers and other devices on a network talk to each other. It
accused Microsoft of using its monopoly position with Windows to elbow
into the server software market.

Kroes said Microsoft's earlier efforts had not come even close to a readable manual developers could use.

Again, settlements are taking the form of defeaturing the product consumers get:

Smith said Microsoft had suggested various ways it could offer Vista in
Europe, to address concerns about XPS. One option is to ship Vista
without it, while another is to include ways for PC makers or others to
either remove certain XPS utilities or make them invisible.

And, by the way, this certainly gives one a lot of confidence in the due process the courts in Europe are going to give you as an American:

"In some ways, these fines are only partially about complying with the
... prior case, and half about sending a message to Microsoft that the
European Commission is not going away,"

You get that?  It sounds like a mafioso beating someone up because they didn't show him enough respect.

By the way, I am frustrated with Microsoft and their pricing as well.  Rather than run to the government, though, I have employed this and this and this.

More Reasons to Fear the Patriot Act

There have been any number of stories about how provisions of the Patriot Act are used more routinely to proecute drug cases than to pursue, you know, terrorists.  Note, however, this provision in the Patriot Act that has nothing to do with national security (via Overlawyered).

Quietly slipped into the reauthorization of the Patriot Act:
first-time-ever authority for the Justice Department to engage in
wiretapping and bugging of private premises for purposes of going after
antitrust violators.

Given the fact the the feds regularly prosecute companies with large market shares for A) raising prices (i.e. monopoly pricing); for B) lowering prices (i.e. predatory pricing); and for C) keeping prices the same (ie price fixing), this becomes an open mandate to listen into any private conversation at any company with a non-trivial market share.  Have fun at your next staff meeting over there at Microsoft or Exxon. 

From the Incredible Bread Machine by G.W. Grant:

"Now let me state the present rules,"
The lawyer then went on,


"These very simple guidelines,
You can rely upon:
You're gouging on your prices if
You charge more than the rest.
But it's unfair competition if
You think you can charge less!
"A second point that we would make
To help avoid confusion...
Don't try to charge the same amount,
That would be Collusion!
You must compete. But not too much,
For if you do you see,
Then the market would be yours -
And that's Monopoly!

Coyote Blog NCAA Bracket Challenge

Note: This post sticky through 3/16.  Look below for newest posts.

As promised, we are proud to announce the first annual Coyote Blog NCAA Bracket Challenge.  Yes, I know that many of you are bracketed out, but for those of you who are self-employed and don't have an office pool to join or who just can't get enough of turning in brackets, this pool is offered as my public service.  In particular, I invite bloggers who are experiencing post-Weblog-Award depression to reignite the spirit of online competition.  I mean, why should NZ Bear have the monopoly on ranking bloggers? 

I don't know if we will get 1 or 100 entries, but all are welcome, so send the link to friends as well.  There is no charge to join in and I have chosen a service with the absolutely least intrusive log-in (name, email, password only) and no spam.  The only thing I ask is that, since my kids are participating, try to keep the team names and board chat fairly clean.

To join, go to http://www.pickhoops.com/Coyote and sign up, then enter your bracket.

Scoring is as follows:

Round 1 correct picks:  2 points
Round 2:  4
Round 3:  6
Round 4:  8
Round 5:  10
Round 6:  20

In honor of the Blogfaddah, we have added the special "Army of Davids" bonus scoring:  If you correctly pick the underdog in any round (ie, the team with the higher number seed) to win, then you receive bonus points for that correct pick equal to the difference in the two team's seeds.  So don't be afraid to go for the long-shots!

OK, so what about the prizes?  Well, fame and recognition on this weblog should be enough, but, for those who enjoy recreation, my company will give the winner a choice of 3 nights free camping at one of the public campgrounds we run, or a half-day jet ski rental at Lake Havasu, or a half-day boat rental at Burney Falls State Park in California, Blue Mesa Reservoir in Colorado, or Patagonia Lake in Arizona.

Disclaimer: I sincerely hope that there is something about this purely recreational activity that violates the ridiculous gambling laws we have in this country, because I feel the need to protest them at every turn.  For example, can any politician explain to me why gambling in many Midwestern states is moral on a boat but immoral and therefore illegal on dry land next to the boat?

Update:  We already had a number of entries in the first hour this was up, so it looks like it is going to be a lot of fun.  Go ahead, sign up, it just takes a few minutes.  You don't have to know that much about basketball -- last year our family's tournament was won by an 11-year-old girl.