economics

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Land Un-Grab?

Tuesday, May 13th, 2014

When I took up the Cliven Bundy story, just before Bundy spewed his racist farragoes, I concentrated not on him, but on the broader issue: too much federal government ownership of real property in “the tiny state of Nevada” and elsewhere.

Since then an expert has weighed in on my side: Terry Anderson of the Property and Environment Research Center.

Sorta.Barbed Wire Fences in Grazing Lands - a technological way to establish private property on the range

I supported privatization of grazing lands. But I mentioned that forest land should “at least be ‘state-ized,’” that is, transferred to the states. And that, it turns out, is what the current crop of Sagebrush rebels want for grazing land.

But there’s a downside to such a transfer. Grazing fees would likely go up.

Anderson titles his piece “Careful What You Ask For.”

And that cuts both ways. The environmentalists who want to centralize even more control in Washington, D.C., think that booting out privately owned ungulates would accrue benefits to the ecosystems. They are wrong, Anderson explains:

But “no moo” may mean fewer tweets, clucks, and bugles from wildlife. As private ranchers demonstrate, good land management can control noxious weeds, improve water quality, sequester more carbon, and generate more wildlife habitat.

Yes, “cattle grazing has improved the ecosystem.”

Anderson prefers privatization.

But that remains politically unlikely. The Cato Institute’s Randal O’Toole suggests a compromise: fiduciary trusts, where the feds retain land title. Centuries of common law bolster the idea, says O’Toole, who assures us, under this form of oversight, “trustees preserve and protect the value of the resources they manage, keep them productive, and disclose the full costs and benefits of their management.”

Both of these alternates are better than current government mismanagement and overkill.

This is Common Sense. I’m Paul Jacob.

Bigots Hate Competition

Monday, May 12th, 2014

Apparently, economics is hard. But some things are pretty straightforward.

For example, both parties to a trade gain: it’s called “mutual benefit through exchange.”

Another basic principle? Employers hire labor expecting productivity. Businesses don’t hire workers who can’t produce enough to more than cover their wages — and managers fire workers when they prove they aren’t productive enough.

And yet another? Competition for trade increases the quality of products, reduces price, or both and tends to equalize prices for goods of the same quality.Gary Becker: 1930-2014

An appreciation of late economist Gary Becker on reason.com shows the consequence of the latter principle in a perhaps unexpected area: discrimination.

A company that pays someone less than they are worth encourages worker flight, “jumping ship.” Companies that refuse to hire qualified women or minorities when they could underbid similarly productive workers (demanding higher wages) could find themselves out-competed by less discriminatory businesses. Indeed, studies suggest they could find themselves less profitable and even out of existence.

Nobel Laureate Gary Becker saw this, and realized that free markets impose a check upon bigotry. Regulations that limit competition in industry also stifle gender workforce participation and increase inequality. “[C]ountries such as Japan that have avoided deregulation, shareholder capitalism, and open markets,” summarizes Elizabeth Nolan Brown, “tend to lag in both productivity and workplace gender equality.”

There are many good reasons to favor free markets. They not only make us wealthier, they discourage prejudicial behavior. Competition punishes bad behavior even while it emphasizes win-win scenarios.

This is Common Sense. I’m Paul Jacob.

The Zero Effect

Friday, September 13th, 2013

The idea of hiking the legal minimum wage just doesn’t go away, alas.

The usual thought experiment those with common sense use to elicit a modicum of sagacity in the minimum wage advocates’ addled synapses runs like this: You say you want a higher minimum wage, say $9 per hour. Why not $49 — or $490.00?

Every sensible person knows that wouldn’t work; you can’t simply force all wages up without dire consequences in lost jobs, businesses. But it’s a way to impart some sense of why prices are what they are, how supply and demand work.

But there’s another tactic: Make the counter-offer. “I want to help low-skilled workers find jobs. Set the minimum wage to $0!” Then ask:

Would people work for zero dollars?

Would all wages fall to nothing?

You’ll get a few absurd answers, but the logic should sink in, eventually: High-wage jobs are there not due to Santa Claus employers, but because of worker productivity.

With no minimum wage, there would be more low-wage jobs available, sure. And some of the jobs at the current minimum may indeed go down in pay, but there would be a lot more employment.

And no 5¢ an hour jobs for the same reason no one but interns today work for zero dollars. It wouldn’t be worth it, wouldn’t even cover the costs of getting to work. Folks do have other options: Keep looking; sponge off relatives; beg, borrow, steal; scrounge. Sell things on eBay.

That’s why now people reject some jobs.

Let others protest low wages. The rest of us should protest low productivity.

And a lack of common sense.

This is Common Sense. I’m Paul Jacob.

Protesting Gravity

Monday, September 9th, 2013

The continuing, ramped-up protests of low wages at low-end service jobs, like McDonalds and (to some extent) Walmart, put many of us in a bind. On the one hand, a decent person wants others to be happy in their work, and paid well. On the other, a wise person wants those others to face reality.

It does no good to protest the law of gravity, or blame nature for your limited skill set. We work with what we have, apply our intelligence and industry from our baseline situations. We adapt.

How?

Produce more of what someone else is willing to pay for. That’s how (some) other people earn more than $7.50 an hour. Or $17.50 an hour. Or $175.00 an hour. McDonalds doesn’t pay high wages. But there are many companies that do. Even in the restaurant biz there are better-paid burger-flippers — those burgers are priced higher (and taste better, and are served in posher places) thus allowing the purveyors of said hamburgers to afford the higher wages.

What do protestors really expect? If their wages go up, either their employers fire some workers and switch to automation (thus cutting costs) or up go the prices.

But if prices rise, who buys the burgers that pay for McDonalds’ workers’ wages? I’ll buy a McDonalds burger for a buck, or a premium burger for five bucks. But jack up the prices, and I go elsewhere.

Protesting low wages? Might as well protest gravity.

Or, since the economy’s in such a slump that folks would rather gripe than look for more productive jobs — which are, after all, unnaturally scarce — protest Obama.

This is Common Sense. I’m Paul Jacob.

Impossible, They Say

Monday, March 11th, 2013

Modern economics takes a long, circuitous route to the old wisdom of classical political economy: Laissez faire is best.

This ideal of free markets was pretty clearly established by Adam Smith, J.B. Say, David Ricardo, and others long ago. Frédéric Bastiat explained it best in layman’s terms.

But modern economic theory, with lots of math I don’t pretend to follow, often backs it up, too. Sure, sure: Much of modern theory sort of assumes unlimited government as the alternative to “market failure.” But the more you look (and look critically) at that theory — and increasing numbers of economists are doing just that — the more the case for government involvement falls flat.

This struck me as I was reading economist Garett Jones:

There’s an old story about a mathematician asking Paul Samuelson for one idea in economics that was simultaneously true and not obvious. Samuelson’s answer [was the Law of Comparative Advantage].  Today, I’ve got another: The Chamley-Judd Redistribution Impossibility Theorem.

Chamley and Judd separately came to the same discovery: In the long run, capital taxes are far more distorting tha[n] most economists had thought, so distorting that the optimal tax rate on capital is zero.  If you’ve got a fixed tax bill it’s better to have the workers pay it.

Jones goes on:

Under standard, pretty flexible assumptions, it’s impossible to tax capitalists, give the money to workers, and raise the total long-run income of workers.

Not, hard, not inefficient, not socially wasteful, not immoral: Impossible. 

Hard as policy wonks and their patrons, the politicians, may try, any redistribution from the owners of capital to workers will make workers worse off.

Jones discusses some of the niceties of the theory.

But I confess: to me it’s all déjà vu. Or, to conjure up another French term, laissez faire all over again.

This is Common Sense. I’m Paul Jacob.

Video: How Minimum Wage Laws Cause Unemployment

Saturday, February 16th, 2013

Thanks to the president, it’s the meme of the moment. Take it up a notch. With an understanding of the economics involved.

Demands and Supply

Friday, November 9th, 2012

A storm hits the east coast. Some homes are washed away. Others burn down. Millions lose power. Gasoline supplies are massively disrupted, even as mass transit is unusable for days.

Obviously, post-Hurricane Sandy, emergency measures are called for. It’s crucial, for instance, that the disrupted and reduced supplies of gasoline be gotten into the tanks of vehicles as inefficiently as possible, and by causing motorists to waste as much of their precious time as possible. Who but rational and well-informed persons could disagree?

To achieve this goal, rationing and laws against “price gouging” — in New Jersey, defined as adding more than ten percent to prices under normal conditions of supply and demand — come to the rescue! So Governor Chris Christie assures gas station owners that his government will “impose the strictest penalties on profiteers who . . . seek to capitalize on the misfortune of others in the midst of a crisis. . . .”

After all, what’s the alternative?

Well, it’s this: Let fuel prices rise to the height required to induce motorists who least urgently demand gas to give way to those who most urgently demand it. This would

  • shrink or prevent round-the-block gas lines;
  • encourage shipment of gas to those areas where prices have risen the highest, i.e., where gasoline is scarcest;
  • allow people to get back on their feet as quickly as possible by following their own best judgment in the face of local circumstances best known to themselves.

What do you call this strategy? Getting out of the way. Or laissez faire — but there’s nothing foreign about it. It used to be the American way.

This is Common Sense. I’m Paul Jacob.