Minor Thoughts from me to you

Archives for Defending Capitalism (page 1 / 1)

Pure Genius: How Dean Kamen's Invention Could Bring Clean Water To Millions

Pure Genius: How Dean Kamen's Invention Could Bring Clean Water To Millions →

Popular Science published an exciting, inspiring article about Dean Kamen's water purifier. (Kamen is the inventor of the Segway, among many other items.) The purifier requires minuscule energy to operate and works reliably in remote, undeveloped places. This makes it well suited to improve health by providing the world's poorest people with a reliable source of clean water.

As I was reading the article, this particular section jumped out at me.

“ ‘Dean,’ he says to me, ‘if we can make the water, why can’t we do other things too?’ ” Providing clean water could be the cornerstone of what’s known as a bottom-of-the-pyramid strategy for developing markets. By providing the poorest people in the world with new technologies, services, and opportunities, a company can help lift them out of poverty and transform them into viable customers. Hence, the Ekocenter concept took shape as a companion to the water purifier, at least in some markets.

Coca-Cola launched the first Ekocenter in Heidelberg, South Africa in August 2013. A slingshot attached to the faucets provides clean water. Courtesy Coca Cola “We believe Coca-Cola’s business can only be as healthy as the community it is part of, so the well-being of the community is important to our long-term strategy,” says Derk Hendriksen, the general manager of the Ekocenter program. Notably, the company won’t directly profit from the program; each “downtown in a box” will operate as a standalone business run by a local entrepreneur, typically a woman, selected and trained by Coke. (That the soda giant enjoys an image boost in the process goes without saying.)

I love Derk Hendriksen's quote. It's a direct refutation of the idea that businesses must be regulated because—absent regulation—they'll sacrifice the health and safety of their customers for short-term profit. That fallacious idea is crazy making.

Every successful business wants their customers to be as healthy and happy as possible. Repeat customers are the best customers. There's simply no long-term profit in killing off or driving away your customer base.

Selling Reservations Democratizes the Dining Experience

Selling Reservations Democratizes the Dining Experience →

Tyler Cowen, writing for the New York Times.

When restaurants don't charge for reservations, they tend to hold back tables for regular customers, celebrities, very attractive people and the politically and socially well connected. You might be dying to go to that restaurant for a special birthday or anniversary, but you'll simply be unable to get in. Money is ultimately a more egalitarian force than privilege, as everyone’s greenbacks are worth the same.

This applies to far more than just restaurant reservations, of course. All scarce goods must be rationed. That rationing can be done by connections or cash. I'd prefer that it'd be done by cash, putting everyone on an even field of play. (Those without cash can earn it, raise it, or be given it. Connections are much harder to come by.)

Is Income Inequality Unfair?

Is Income Inequality Unfair? →

From Scott Rasmussen, at Real Clear Politics:

For most Americans, the context is very important. If a CEO gets a huge paycheck after his company received a government bailout, that’s a problem. People who get rich through corporate welfare schemes are seen as suspect. On the other hand, 86 percent believe it’s fair for people who create very successful companies to get very rich.

In other words, it’s not just the income; it’s whether the reward matched the effort. People don’t think it’s a problem that Steve Jobs got rich. After all, he created Apple Computer and the iPad generation. But there was massive outrage about the bonuses paid to AIG executives after that company was propped up by the federal government.

Income inequality isn't unjust unless the income was ill gotten gains. Our goal as a society shouldn't be to stamp out income inequality. It should be to stamp out crony capitalism that allows people to get rich through connections instead of requiring them to get rich through innovation that makes the rest of us richer.

Herbert Hoover: Father of the New Deal

Herbert Hoover: Father of the New Deal →

Steven Horwitz published a Cato Briefing Paper on Herbert Hoover, our President who was the exact opposite of a laissez faire non-interventionist.

Politicians and pundits portray Herbert Hoover as a defender of laissez faire governance whose dogmatic commitment to small government led him to stand by and do nothing while the economy collapsed in the wake of the stock market crash in 1929. In fact, Hoover had long been a critic of laissez faire. As president, he doubled federal spending in real terms in four years. He also used government to prop up wages, restricted immigration, signed the Smoot-Hawley tariff, raised taxes, and created the Reconstruction Finance Corporation—all interventionist measures and not laissez faire. Unlike many Democrats today, President Franklin D. Roosevelt's advisers knew that Hoover had started the New Deal. One of them wrote, "When we all burst into Washington ... we found every essential idea [of the New Deal] enacted in the 100-day Congress in the Hoover administration itself."

Quotation of the Day…

Quotation of the Day… →

I love this. From Don Boudreaux.

… is from page 162 of Tom Bethell’s 1998 volume, The Noblest Triumph (original emphasis):

The great blessing of private property, then, is that people can benefit from their own industry and insulate themselves from the negative effects of others’ actions. It is like a set of invisible mirrors that surround individuals, households or firms, reflecting back on them the consequences of their acts. The industrious will reap the benefits of their industry, the frugal the consequences of their frugality; the improvident and the profligate likewise. They receive their due, which is to say they experience justice as a matter of routine. Private property institutionalizes justice.

Moving Beyond Free-Market Minimalism

Moving Beyond Free-Market Minimalism →

The Foundation for Economic Education has an informative article out, regarding what's necessary for a "free market" to function. After I read it, I realized that it explains what I couldn't, regarding how and why markets and competition work.

In a free market, “Scrooge-like behavior” is certainly permissible as long as it doesn’t initiate violence or fraud. But where do the high quality, low price, and innovation we associate with the free market come from? Well, as most economists will tell you, much of it comes from the fear of competition. If you cut corners and charge consistently high prices, even though you may be within your rights to do so, many free-market advocates would rightly point out that free entry and hungry entrepreneurs will tend to keep you in line. That’s important, but it’s not the whole story; not by a long shot.

Honesty and fair play, trust and reciprocity, are principles that FEE has always upheld as crucial parts of the “foundation of economics.” They go far beyond the indispensable but bare minimum of private ownership of property, free trade, and individual self-seeking—or what one might call “free-market minimalism.”

... A chapter called “Murder, Reciprocity, and Trust” in Paul Seabright’s excellent book The Company of Strangers, proposes that we divide society into “calculators” and “reciprocators.” A pure calculator is the economic-man caricature who is ready to act opportunistically (with guile) at any moment. A reciprocator is someone who is going to repay what is done to her, good or bad, no matter what. If someone cheats a reciprocator, she’ll go to the ends of the earth to make him pay; if someone does her a favor, she’s going to return it, even at great inconvenience to herself. A reciprocator keeps her promises.

Seabright argues that even pure calculators would have to pretend to be reciprocators at least sometimes lest everyone, including other pure calculators, shun her. It’s people with a norm of reciprocity, an internalized rule to give tit-for-tat even when you don’t have to, who are critical to the free market.

Note also, however, that if B reciprocates and repays A, A must have first trusted that B would indeed repay her. Trust means here that A is willing to make herself vulnerable to B’s opportunistically not keeping his promise. Trust is the flip side of reciprocity.

But if A is too trusting, calculators will take advantage of her, which gives A an incentive to be a calculator at least part of the time. That’s why Seabright argues that in the real world people have an incentive to find the right balance between opportunism and trust/reciprocity.

... The free market is a great engine of discovery and development because the people in it have the opportunity and the willingness to take chances. Bringing many strangers together who have diverse knowledge, skills, and tastes—which we find markets doing around the world—presents the opportunity. Being willing to trust people we don’t know—new employers, suppliers, coworkers, customers, neighbors, and friends—enables us to take advantage of those opportunities.

Of course, sometimes trusting someone who turns out to be untrustworthy hurts us. But even those unpleasant experiences teach us something: we learn the circumstances under which people are trustworthy or not. That’s valuable knowledge we would never have learned if we were unwilling to trust in the first place.

If we are unwilling to trust when the opportunity arises, if we are mere economizing calculators, we shouldn’t expect the free market nor any other system to develop the complex division of knowledge and labor necessary to achieve real prosperity. The greatness of the free market, however, is that, more than any other system that we know, it enables us to learn and to grow, even as it allows us to flourish.

Consumption and the Myths of Inequality

Consumption and the Myths of Inequality →

Kevin Hassett Aparna Mathur, writing in the Wall Street Journal.

Today we hear that the gains from economic growth accrue to the highest-income earners while the standard of living of the poor and middle America stagnates and the gap between the richest and the poorest grows ever wider. That portrait of the country is wrong.

In the first place, studies that measure income inequality largely focus on pretax incomes while ignoring the transfer payments and spending from unemployment insurance, food stamps, Medicaid and other safety-net programs. Politicians who rest their demands for more redistribution on studies of income inequality but leave out the existing safety net are putting their thumb on the scale.

... From 2000 to 2010, consumption has climbed 14% for individuals in the bottom fifth of households, 6% for individuals in the middle fifth, and 14.3% for individuals in the top fifth when we account for changes in U.S. population and the size of households. This despite the dire economy at the end of the decade.

The data suggest the following picture. Over time, Americans have constructed a vast safety net that has adequately served the poor and helped them—as well as the middle class—to maintain significant consumption growth despite the apparent stagnation of cash incomes. The notion that a society that has accomplished such a feat is rigged or fundamentally unjust is ludicrous.

Pew Research calls it a ‘hollowing out of the middle class,’ but 150 Americans moved up for every 100 who moved down between 1971 and 2011

Pew Research calls it a ‘hollowing out of the middle class,’ but 150 Americans moved up for every 100 who moved down between 1971 and 2011 →

Far from being gloomy, perhaps there’s a positive story here. A story that over the last forty years there has been significant movement by income category among American adults, as would be expected in a dynamic economy, with movement going in both directions. But on net, the changing income dynamics have been positive overall, with about 150 Americans moving up for every 100 Americans who moved down.

There seems to be a lot of effort expended to paint the last 40 years as a period of bleakness and despair. That's not really that true. For a lot of people, it has been a period of upward mobility.

Don't Fear the Rich

Who should you fear more, rich people or your local government bureaucrats? That's an easy question. You should fear the nice lady down at Village Hall. She has far more control over your life than any member of the upper class.

Walter Williams states it beautifully.

Warren Buffett and Bill Gates, with about $60 billion in assets each, are America's richest men. With all that money, what can they force us to do? Can they take our house to make room so that another person can build an auto dealership or a casino parking lot? Can they force us to pay money into the government-run retirement Ponzi scheme called Social Security? Can Buffett and Gates force us to bus our children to schools out of our neighborhood in the name of diversity? Unless they are granted power by politicians, rich people have little power to force us to do anything.

A GS-9, or a lowly municipal clerk, has far more life-and-death power over us. It's they to whom we must turn to for permission to build a house, ply a trade, open a restaurant and myriad other activities. It's government people, not rich people, who have the power to coerce and make our lives miserable. Coercive power goes a long way toward explaining political corruption.

I don't fear the rich. I fear a President and Congress who think they know how to run my life better than I do. I fear state and local governments that have the power to fine and imprison me if I don't live by their prejudices. I fear the government.

Do you?

The Blessings of Used Book Sellers

It seems that some people get annoyed when used book sellers visit library book sales.

Book dealers armed with handheld ISBN scanners are threatening to take over the used book sales run by volunteer fundraising groups for the Madison Public Library system, Morris said.

The scanners tell them how many copies of a title are in circulation and what it generally sells for -- powerful information to have if your aim is to find cheaply priced books that can be sold online for much more than you paid.

"You see them just literally hunched over ... shelves of books," Morris said, blocking book lovers like him from perusing the titles and maybe picking up a bargain they actually intend to read.

Thomas Boykoff, president of the board of directors for the Central Library Friends group, and Margaret Rentmeesters, who manages the book store at the library, acknowledge that the book dealers have become more common at book sales over the last two or three years.

But profit sometimes motivates unpleasant behavior.

"They sort of claim an area," Boykoff said, "Some of them just don't give a damn."

How horrible! How, how ... profit-driven! How evil! Or is it?

I love reading, but I just don't have time to get out to library book sales. While I wish I could, the timing just never quite works out.

Thankfully, there are people out there willing to trade their time for my money. They'll pore over the stacks, weeding through the books that no one wants, to find the books that someone wants. Then they'll list these books on Amazon.com, Half.com, Alibris, Deal Oz, AbeBooks, Powell's Books or other similiar sites. I can browse the online sites, find what I want, and have it delivered directly to my door.

These book sellers are no nuisance. They're a blessing and I'm grateful for them.