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Unsustainable Pseudo-thinking

Tuesday, August 26th, 2014

One of the fashionable thought-killing words offered by the cliché-recycling movement is “sustainable.”

In the common tongue, as spoken by many, many environmentalists, this term implies that we will run out of all our stuff pretty soon unless everybody on the planet (except maybe Al Gore) is put on a strict low-consumption regimen.

The environmental movement has adopted the color “green,” but “drab-gray” is what comes to mind when I’m told that we must treat economic goods as existing in a fixed quantity, only to be skimpily apportioned (by regulators), never massively expanded (by profit-seeking producers, as they’ve done whenever free to do so).

In fact, as economist and Cafe Hayek blogger Don Boudreaux argues in his article “Unsustainable Platitudes,” market actors tend to swiftly counteract shortages that occur in a market context. When supply of a good slumps for whatever reasons, prices for it rise. Rising prices yield predictable effects. That is, they

  1. nudge customers to economize; and
  2. entice profit-seeking producers and vendors to create more of the good, or
  3. provide good-enough (or better) substitutes for it,
  4. or both.

This is Economics 101, teachable in one lesson.

The Wall Street Journal saw fit to quote Boudreaux, provoking the ire of enviro-cliché aficionado Joshua Holman. He contacted Boudreaux to accuse him of “[emitting] word pollution . . . to block the work of the many activists struggling to save our planet from overuse, exploitation and destruction.” In reply, Boudreaux suggests that reality “cannot be grasped, and it certainly cannot be improved, with slogans.”

Slogans do have their place. They’re just not a sustainable substitute for reasoning.

This is Common Sense. I’m Paul Jacob.

Help Airbnb Win in San Fran

Monday, August 4th, 2014

Whenever companies invent radical new ways of making life easier, there’s a good chance someone will kvetch about how hazardous the new way is and/or how rudely inconvenient for those wedded to old ways.

That’s true when it comes to smartphone apps that helps users buy rides outside the usual regulated-taxi context (as I’ve discussed here and here). It’s also true in the case of Airbnb, whose app connects renters and home owners.

Airbnb and other companies are fighting to reform San Francisco’s restrictive housing laws, which have helped inflict one of the most hellish housing markets in the country. The Fair to Share San Francisco website says that the town’s housing laws are “outdated” — which understates the case, since the strictures weren’t valid to begin with. Regulators prohibit San Francisco residents from subletting their residences for fewer than thirty days.

This makes things tough for an app designed to broker short-term rentals.

Airbnb has also been hassled in New York State, where it has been forced to turn over some data about its users to the attorney general as prelude to turning over even more data about users the AG decides may be breaking the law.

It is indeed unfair to outlaw you from peacefully using your own property as you wish. If you live in the San Francisco area, you can help change Fog City’s smoggy housing laws by signing a petition at the Fair to Share site.

Strike a blow for Common Sense. I’m Paul Jacob.

Original photo by Dave Alter, “Lombard Street San Francisco,” some rights reserved.

Old Rules Gotta Go

Friday, August 1st, 2014

Old hat. Long in the tooth. Creaky as an outhouse door.

These are just some of the expressions that apply to how our cities, states and metro areas are run — by ancient principles that do not serve the common good.

Last weekend I wrote about the ongoing revolution in transit, the peer-to-peer online app services offered by Uber, Lyft and the like. These ride-sharing services allow normal folks to give and receive car rides at great convenience.

They blow mass transit “out of the water” and throw taxi service sideways. Super-convenient, they make it cheap and safe for people to co-operate in new and productive ways.

Art Carden, at EconLog, notes the “social waste” that governments add to the system. While the new app-based services provide true solutions to the high transaction costs of negotiating among many people, governments give us squabbles: “the battle over the rules governing the conditions under which people will be allowed to do certain things is pure social waste,” Carden argues. “The social waste is reflected in the resources consumed in the fight over the rules.”

We’ve gotta have rules, of course. But they needn’t require micromanagement, massive restrictions, or high taxes.

The new era will be run (if allowed) on the basis of convenient co-operation, transaction costs reduced by communications technology.

The old era that still rules the roost runs on clunky old ideas that Carden rightly calls “mercantilism,” the political ideology that Adam Smith argued against . . . in 1776.

Government should undergird free markets, not intrude and dominate by licensing near-monopolies.

This is Common Sense. I’m Paul Jacob.

Google Mugged By Reality?

Tuesday, July 22nd, 2014

Google says health care is unhealthy.

Venture capitalist Vinod Khosla has conducted what he calls a “fireside chat” with Google founders Larry Page and Sergey Brin. In one much-cited passage, Brin observes that although he is excited about making gadgets like glucose-measuring contact lenses, health care, because “so heavily regulated,” is “just a painful business to be in. It’s not necessarily how I want to spend my time. . . . [T]he regulatory burden in the U.S. is so high that I think it would dissuade a lot of entrepreneurs.” Page echoes his colleague.

A blunt, and fair, observation. But it makes one wonder why these super-entrepreneurs have not been more critical (at least so far as their search engine can tell me) of Obamacare, which multiplies mandates and prohibitions in the medical industry by an order of magnitude.

Top Google executives are known to be liberal in their politics, and presumably have been sincere. It seems, though, that reality is not cooperating with any ideological tilt they may yet harbor in favor of government paternalism.

It’s in fields with which a businessman is best acquainted that he is most likely to recognize the value of freedom — at least his own, if not always that of competitors. So perhaps we should hope that Brin, Page and other Google principals try to achieve something great in every industry there is. That way, they can come around to consistent, principled support for freeing markets.

This is Common Sense. I’m Paul Jacob.

Let Us Drive

Thursday, July 17th, 2014

How about letting us drive?

Who’s us? Passengers—taxi-ride buyers. Plus anyone else who participates in the market transactions that take us places.

Many Orlando, Florida cabbies are eager to work with the ride-sharing company that makes the smartphone app Uber. They’re tired of leasing cabs for $129 a day while scrambling for enough price-controlled fares to earn a decent living after paying that steep cost. Uber drivers provide their own car and let the firm’s technology connect them to customers. Uber gets 20 percent of fare revenue.

The politics are mostly hostile to the innovation in places like New York City where markets are mangled by super-high license fees and other regulations. The politics are also tough in Orlando, which has been cracking down on Uber drivers. But the mayor and Uber executives have been talking about a deal under which Uber could operate if it submits to . . . regulation. (Sigh.)

Cab companies in the City Beautiful expect to rapidly lose revenue if innovators like Uber and Lyft get to operate freely. But Orlando taxi drivers expect to gain.

“If you talk to 1,000 drivers,” says one, “950 will tell you they are going to Uber.” Says another: “Let Uber come here. It’s going to be good for the customer and the driver.”

Let them come. Also kill all regulations, including fare caps, that make it harder for cab companies to adapt. Let terms of trade be driven—regulated—by traders. Not by governments.

This is Common Sense. I’m Paul Jacob.

Greek Recipe for Disaster

Thursday, July 10th, 2014

Several years ago, Despina Antypa and her husband worked at a leading newspaper in Athens.

Then came the economic crisis.

The bad news was “just a whisper” at first. But when friends began losing work, she had the foresight and discipline to plan a new career. One unrestricted by language or country — just in case they ever had to leave Greece. She chose pastry, taking classes every weekday for two years, practicing techniques on weekends.

Sure enough, in 2011 the couple lost their own jobs. Despina threw herself into the task of confecting a signature delicacy good enough to sell; some 3,000 trials and errors (“mostly errors”) later, she was satisfied.

Then came the work of developing a website, packaging, selling.

Orders poured in. The labors were paying off. Except that—

The business was killed in its crib by bureaucrats.

The Greek government demanded a lot, including

  • advance taxes equal to “50 percent of estimated profit in the first two years” (money never to be returned were the business to fail);
  • minimum square footage for her shop much greater than necessary; and
  • a separate toilet for walk-in customers (although there would be no walk-in customers).

The arbitrary burdens proved too great. In 2013, her husband got a job offer that meant moving to Brussels. They jumped at the chance. There they forged the new life they could have forged in Greece — had they been allowed to.

It seems that the road to recovery is not helped by hobbling the runners.

This is Common Sense. I’m Paul Jacob.

Central Banks Losing Control

Wednesday, July 9th, 2014

The rapid rise of interest in and use of “virtual currencies” like Bitcoin has been astounding. It probably won’t surprise you to learn what the established masters of the worlds’ monies say: Bitcoin is disruptive!

Heavens.

Bogdan Ulm, writing on Bitcoin Trader, noticed the concern in Ireland:

“Virtual and digital currencies can challenge the sovereignty of states,” says Gareth Murphy, senior Central Bank of Ireland official. At a recent digital money conference in Dublin, he mentioned that rivals are interfering with a bank’s ability to sway the price of credit for the entire economy. Murphy warned that there might be considerable threat to the finances of a country if increasingly more transactions for services and goods fade away from the tax system due to the use of crypto currencies such as Bitcoin.

Now, it’s worth mentioning that there are many economists — from a long tradition — who have denied the necessity of anyone acquiring the ability to “sway the price of credit for the entire economy.”

Separate bids and offers for credit (loaning money with interest) can be seen as signals of competing evaluations in the economy. There are tremendous forces pushing interest rates to align, and when they do (or don’t), their alignment (or lack thereof) sends important additional information to market participants about both the present and the future.

But when anyone (say, a central bank) presumes to corral all interest rates into a “coherent plan,” much of the useful meaning of signals gets lost, or jumbled, and the economy gets (inadvertently?) programmed for boom and bust.

So, when I hear that modern digital currencies could prevent central banks from “doing their business,” I wonder if, perhaps, this is not a good thing.

This is Common Sense. I’m Paul Jacob.