Voice For Liberty in Wichita

Paul Jacob, in a Common Sense commentary writes about David Boaz’s article in the Wall Street Journal (available at the Cato Institute) which describes the effort to obtain a customized Starbucks card with the phrase “laissez-faire” printed on it.

The request was rejected. But the socialist slogan “people not profits” was accepted by Starbucks, as was the United Farm Workers slogan “Si Se Puede.” (”Yes we can,” adopted by Barack Obama’s presidential campaign.)

Here’s what you find if you read Starbuck’s mission statement: “Embrace diversity as an essential component in the way we do business.”

It seems that some political ideas are more “diverse” than others.

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From Dan Mitchell, Center for Freedom & Prosperity http://www.freedomandprosperity.org

John Stossel eviscerates David Brooks, the ostensibly conservative columnist for the New York Times. Brooks has argued for big new government initiatives to boost human capital. Stossel correctly notes, though, that Brooks wants to expand failed government programs when the right approach is to move in the other direction:

David Brooks is a bright guy, so I wonder how he can blame the free market for failing in this way. He continues, “Despite all the incentives, 30 percent of kids drop out of high school and the college graduation rate has been flat for a generation.” Excuse me, but why is that the market’s fault? Government dominates education in America. K-12 education is a coercive, often rigidly unionized government virtual monopoly that fights every attempt to experiment with free-market competition. Brooks writes that Hamiltonians like him “think government should help people get the tools they need to compete.” But when has government ever been good at that? He claims the state can “increase the quality of human capital” by, for example, providing “Quality preschool [to] help young children from … disorganized homes. … ” Really? What is the chance that it would be “quality” preschool if government runs it? Even the acclaimed Head Start has not been shown to have any lasting effect on academic performance. …When I asked Brooks why a government that performed as ineptly as FEMA did after Hurricane Katrina will be better at running preschools, he said, “Some lives are so screwed up, it’s hard to make them worse.” Government coercion almost always makes things worse. It discourages individual effort, and sucks capital away from more productive uses. …America became an economic power despite, not because of, Hamiltonian intervention. Hong Kong and much of East Asia went from abject poverty to affluence in a few decades not because their governments gave people “tools they need to compete” — they didn’t — but because they exercised limited powers.

http://www.townhall.com/columnists/JohnStossel/2007/06/27/big-government_conservatives

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Writing from Davenport, Iowa

A column by economist Walter E. Williams (Why we’re a divided nation) strongly makes the case for more decision making by free markets rather than by the government through the political process.

When decisions are made through free markets, Dr. Williams says, both parties win, because in a free market, parties voluntarily enter into only those transactions that benefit them.

When decisions are made for us by the government, however, it is almost always the case that one party’s gain is someone else’s loss. Therefore, there is conflict. The more decisions made through politics, the more potential for conflict. Coalitions arise in order to try to get more from the government, and the most effective coalitions “are those with a proven record of being the most divisive — those based on race, ethnicity, religion and region.”

The final paragraph of the column is this:

The best thing the president and Congress can do to heal our country is to reduce the impact of government on our lives. Doing so will not only produce a less divided country and greater economic efficiency but bear greater faith and allegiance to the vision of America held by our founders — a country of limited government.”

In an earlier post, I mentioned some columns by Dr. Williams that I thought were important. This column is certainly one of his best, as it very simply, in one short page, shows us a major fault in our current political landscape.

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This is an excellent article that exposes how little some people like Michael Moore think about the systems they consider corrupt and unworkable. It appears that Mr. Moore is so consumed with an anti-market bias that he hasn’t really considered the true causes of the problem with healthcare in America. He isn’t the first person to have problems with an anti-market bias, nor do I suspect he’ll be the last.

Michael Moore Confirms that Government Health Care is Sicko
by Diana M. Ernst, Pacific Reserach Institute

Michael Moore showed up in Sacramento last week to promote his film Sicko. Senator Sheila Kuehl hailed Moore as a prophet of truth to the American people but the filmmaker is so mired in his own health hysterics that he regularly contradicts himself .

He rails against “for-profit” health care, but 85 percent of U.S. hospitals are non-profit, and almost half of privately insured Americans have polices from non-profit health insurers.

Moore referred to the Martin Luther King Jr.-Harbor hospital in Los Angeles, where a patient died of a perforated bowel after lying on the emergency room floor for 45 minutes. Since 2004, the hospital has received more than a dozen state and federal safety citations. Hospital errors included leaving sick patients unattended which resulted in death for three of them, giving patients the wrong medications, and using Taser stun guns to restrain psychiatric patients.

This hospital is not private, however. It is owned by the County of Los Angeles. So much for reliable government care. And the private insurers Moore rails against are currently selling health policies laden with government mandates and regulations.

The Council for Affordable Health Insurance (CAHI) has reported that mandated benefits have increased to the more than 1,800 today. In some states, mandated benefits have raised the cost of individual health insurance by 45 percent. Government solutions that create more government amount to nothing but expensive salt in the wound. Such is Governor Schwarzenegger’s plan to tax hospitals and physicians for mandated health coverage, and such is Senator Kuehl’s government monopoly plan, promoted as a “single payer” system.

We need to help insurers to be more competitive, not scrap them for big-government bureaucracy. Mr. Moore’s foolish preference of abolishing private insurance in favor of government-run, single-payer health care will not create universal care, only a government monopoly. In other words, Moore thinks the government should provide “free” health care that isn’t required to meet any standards.

Mr. Moore also thinks Canada is a good role model, but two years ago the Canadian Supreme Court found that government monopoly health care violates basic human rights. The winning plaintiff in this case, Mr. Zeliotis, needed hip surgery. When he tried to pay privately for his operation rather than wait in the public line (which takes two to four years) the Canadian government stopped him. Mr. Zeliotis argued against government interference with his freedom to choose private medical care. The denial of such a choice prolonged his pain and threatened his safety.

Mr. Moore also likes the single-payer system in Cuba, a one-party communist state. Some 11 million Cubans attend run-down facilities, receive dated prescription drugs, and are even required to bring their own sheets, food and soap to the hospital. Communist Party bosses get better treatment but when it came time for the great dictator Fidel Castro to go under the knife, he flew in a specialist from Spain. To adopt the health-care system of a totalitarian dictatorship like Cuba would be kind of, well, sicko. But government-run health care also presents problems right here at home.

Medicaid was instituted in the 1960s under President Johnson for the poor, but it has grown far beyond its capacity, putting its financial capabilities under great strain. In order to keep costs down, Medicaid underpays physicians, who have increasingly stopped accepting Medicaid beneficiaries as a result. Government restrictions on physicians also make it challenging to get prescription drugs for Medicaid patients.

Mr. Moore’s remedies fail as heath-care reform and do not even amount to effective propaganda. He needs less rhetoric and more direct experience. He should get on a Canadian waiting list for treatment, try the “second” system that serves most Cubans, or follow a Medicaid patient’s struggle to get health care from the government.

Meanwhile, union nurses and hospital employees were among 1,000 people who must have taken sick time to cheer Michael Moore Tuesday. Perhaps Speaker Nuñez and Senator Kuehl will investigate how patient care suffered while their caregivers took to the streets.

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Our economy is so intertwined and interdependent that it is impossible for the government to guide it in any direction without setting off a long chain of consequences. This is another example of the folly of centralized economic planning.

As I’ve written in the past, to determine the true value of ethanol, remove all subsidies for producing it and the corn used to make it, and end the tariff on imported ethanol. Very rapidly the market will tell us just how much a gallon of ethanol is worth.

Dan Mitchell summarizes The Wall Street Journal:

The shine is off corn ethanol, and oh, what a comedown it has been. It was only in January that President Bush was calling for a yet a bijillion more gallons of the wonder-stuff in his State of the Union address, and Iowa’s Chuck Grassley was practically doing the Macarena in his seat. And why shouldn’t Mr. Grassley and fellow ethanol handmaidens have boogied? They’d forced their first mandate through Congress, corn farmers were rolling in dough, billions in taxpayer dollars were spurring dozens of new ethanol plants–and here was the commander-in-chief calling for yet more yellow dollars. All in the name of national security, too! Corn ethanol seemed unstoppable, but a remarkable thing happened on the road from Des Moines. Just as the smart people warned, the government’s decision to play energy market God and forcibly divert huge amounts of corn stocks into ethanol has played havoc with key sectors of the economy. Corn prices have nearly doubled, which means livestock owners can’t afford to feed their animals, and food and drink manufacturers are struggling to buy corn and corn syrup. Environmentalists are sour over new stresses on farmland; international aid groups are moaning that the U.S. is cutting back its charitable food giving, and many of these folks are taking out their anger on Congress. …The hugely influential National Cattlemen’s Beef Association has gone so far as to outline a series of public demands, including an end to any government tax credits (subsidies) for ethanol and an axe to the import tariff on foreign ethanol. Put another way, the cattlemen are so angry that they are demanding free markets and free trade–a first. …The National Turkey Federation estimates its feed costs have gone up nearly $600 million annually and is surely letting loose on members from turkey states such as Minnesota and Missouri. The National Chicken Council, which represents companies that produce, process and market chickens, has been hitting the southern political caucus, putting pressure on senators from big poultry states such as Georgia, Arkansas and Alabama. Chicken giant Tyson’s, the second largest employer in Arkansas (after Wal-Mart), even felt the need to warn about the effect of rising corn prices on its business in its first quarter earnings statement. Food and drink manufacturers, which rely heavily on corn and corn syrup for their products, are also making the Washington rounds. The Grocery Manufacturers Association this week called for Congress to undertake a study before it imposed a bigger ethanol mandate. Soft-drink companies such as Coca-Cola (of Mr. Chambliss’s Georgia) are also up in arms.
http://www.opinionjournal.com/columnists/kstrasselpw/?id=110010094

And summarizing John Stossel:

When everyone in politics jumps on a bandwagon like ethanol, I start to wonder if there’s something wrong with it. And there is. Except for that fact that ethanol comes from corn, nothing you’re told about it is true. …If ethanol’s so good, why does it need government subsidies? Shouldn’t producers be eager to make it, knowing that thrilled consumers will reward them with profits? But consumers won’t reward them, because without subsidies, ethanol would cost much more than gasoline. The claim that using ethanol will save energy is another myth. Studies show that the amount of energy ethanol produces and the amount needed to make it are roughly the same. …even turning all of America’s corn into ethanol would meet only 12 percent of our gasoline demand. …the standard mixture of 90 percent ethanol and 10 percent gasoline pollutes worse than gasoline. …Surely, ethanol must be good for something. And here we finally have a fact. It is good for something — or at least someone: corn farmers and processors of ethanol, such as Archer Daniels Midland, the big food processor known for its savvy at getting subsidies out of the taxpayers. And it’s good for vote-hungry presidential hopefuls. Iowa is a key state in the presidential-nomination sweepstakes.
http://www.townhall.com/columnists/JohnStossel/2007/05/23/the_many_myths_of_ethanol

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I, Pencil is one of the most important and influential writings that explain the necessity for limited government. A simple object that we may not give much throught to, the story of the pencil illustrates the importance of markets, and the impossibility of centralized economic planning.

From the afterword to I, Pencil by Milton Friedman:

Leonard E. Read’s delightful story, “I, Pencil,” has become a classic, and deservedly so. I know of no other piece of literature that so succinctly, persuasively, and effectively illustrates the meaning of both Adam Smith’s invisible hand — the possibility of cooperation without coercion — and Friedrich Hayek’s emphasis on the importance of dispersed knowledge and the role of the price system in communicating information that “will make the individuals do the desirable things without anyone having to tell them what to do.”

Link to a pdf of I, Pencil: http://www.fee.org/pdf/books/I,%20Pencil%202006.pdf

Link to Leonard E. Read reading I, Pencil: http://www.fee.org/events/detail.asp?id=6239

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From an article by Kenneth P. Green on energy policy. It explains why subsidy in any form is bad policy.

First, subsidies breed corruption. They don’t create incentives for honest people that already have a market-worthy product — such people can already sell their goods into the market easily. Rather, subsidies create a fertile garden for rentseekers who are unable to sell their goods competitively in a free-market, and prefer to tap the coercive and redistributionist force of government to lever their uncompetitive good into the market at the public’s expense. Rather than contribute to overall social welfare by giving consumers the best goods at the least cost, or even maximizing the efficient use of people’s taxes, rent-seekers undermine social welfare by foisting inferior or over-priced goods onto the market while taking money from people that could be used for other important purposes. This is a particular problem in countries with relatively weak property rights regimes, and countries with legal institutions insufficient to prevent it.

Full article at http://www.aei.org/publications/filter.all,pubID.26353/pub_detail.asp.

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Thank you to Karl Peterjohn for this excellent, well-researched article.
Urban Renewal: A Flawed Idea That Failed 50 Years Ago
By Karl Peterjohn, Executive Director Kansas Taxpayers Network
EXECUTIVE SUMMARY
1) Urban renewal failed across the United States in the 20th century. The urban renewal efforts from the 20th century that are the foundation for the newly proposed redevelopment [...]

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From Dan Mitchell:

Walter Williams summarizes why the Food and Drug Administration is likely to delay the approval of drugs that benefit people. Simply stated, they adopt a risk-averse strategy to avoid being criticized for allowing a dangerous drug on the market, even though almost all drugs can be dangerous:

…if you’re an FDA official, what are your incentives in terms of whether to approve or disapprove the marketing of a drug that has a tremendous benefit to some patients and poses a health threat to others? Former FDA Commissioner Alexander Schmidt hinted at the answer when he said, “In all our FDA history, we are unable to find a single instance where a Congressional committee investigated the failure of FDA to approve a new drug. But the times when hearings have been held to criticize our approval of a new drug have been so frequent that we have not been able to count them. The message to FDA staff could not be clearer.” There’s little or no cost to the FDA for not approving a drug that might be safe, effective and clinically superior to other drugs for some patients but pose a risk for others. My question to FDA officials is: Should a drug be disapproved whenever it poses a health risk to some people but a benefit to others? To do so would eliminate most drugs, including aspirin, because all drugs pose a health risk to some people.

http://www.townhall.com/columnists/WalterEWilliams/2007/05/30/fda_friend_or_foe

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The Miracle and Morality of the Market
Richard M. Ebeling

Click here to read the article.

In this short article we learn the simple mechanism that makes our economy work so well. Interfering with that mechanism is not only harmful, it is immoral.

Prices convey the information that we need to make our economy work. Here is why:

How are the activities of an increasingly larger group of individuals successfully coordinated, so that all the multitudes of demands and supplies are brought into balance and harmony? The Austrian economist and Nobel Laureate Friedrich Hayek showed how all of the knowledge and information in society can be encapsulated in the price system of the free-market economy. In our roles as both consumers and producers we communicate to one another what we think goods, resources, capital, and labor services are worth to us in their various and competing uses through the prices we are willing to pay for them. These “price signals” serve as the means for all of us to decide and coordinate what we want and are willing to do together with other members of society.

Because of the information conveyed by prices, is not necessary for a government to rule over the economy to cause it to function properly. In fact, government intervention in the economy is harmful, because the market is so complex that it is impossible to guide effectively. Central planning of economic activity will make people poorer, not wealthier. As Thomas Sowell relates: “The last premiere of the Soviet Union, Mikhail Gorbachev, is said to have asked British Prime Minister Margaret Thatcher: How do you see to it that people get food? The answer was that she didn’t. Prices did that. And the British people were better fed than those in the Soviet Union, even though the British have never grown enough food to feed themselves in more than a century. Prices bring them food from other countries.”

The moral dimension of the market refers to how in a free society, people enter into transactions freely, choosing those that they believe will benefit them:

There are none who are only masters and others who are simply servants. In the market society we are all both servants and masters, but without either force or its threat. In our roles as producers — be it as men who hire out our labor for wages, resource owners who rent out or sell our property for a price, or entrepreneurs who direct production for anticipated profits — we serve our fellow men in attempting to make the products and provide the services we think they may be willing and interested in buying from us.

Yet we know there are those who wish to interfere with the working of a free market through various means. All attempts to do this reduce the amount of liberty we are able to experience.

Too many want to dictate how others may make a living, or at what price and under what terms they may peacefully and voluntarily interact with their fellow human beings for purposes of mutual material, cultural, and spiritual betterment.

Often the concept of free markets is viewed as contrary to a moral society. Those who advocate government programs to make us better off are portrayed as noble, virtuous, and smarter than the rest of us. This article shows us that they are not that at all — they are immoral. Why? Almost all these programs forcibly take money from one person and give it to another to whom it does not belong. There is no moral right for anyone or any government to do that, no matter how noble the cause appears.

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The contrast between the statist Hillary Clinton and the libertarian Milton Friedman. Gathered by Thomas D. Kuiper.

The Free Market

“The unfettered free market has been the most radically destructive force in American life in the last generation.”
– First Lady Hillary Clinton on C-Span in 1996 stating her troubles with the free market

“What most people really object to when they object to a free market is that it is so hard for them to shape it to their own will. The market gives people what the people want instead of what other people think they ought to want. At the bottom of many criticisms of the market economy is really lack of belief in freedom itself.”
– Milton Friedman, Wall Street Journal, May 18, 1961

Social Security

“We can’t afford to have that money go to the private sector. The money has to go to the federal government because the federal government will spend that money better than the private sector will spend it.”
– First Lady Hillary Clinton in a disagreement with a Republican congressman

“I have long been a critic of Social Security, basically because I believe that it is not the business of government to tell people what fraction of their incomes they should devote to providing for their own or someone else’s old age.”
– Milton Friedman, WSJ, March 15, 1988

Health Care

“I had a few ideas about health care, and I’ve learned a few lessons since then, but I haven’t given up the goal, and that’s why we kept working step-by-step to insure millions of children through the Children’s Health Insurance Program.”
– First Lady Hillary Clinton at the 2000 Democratic Convention, still wanting socialized medicine in the United States

“It is taken for granted that workers should receive their pay partly in kind, in the form of medical care provided by the employer. How come? Why single out medical care? Surely food is no less essential to life than medical care. Why is it not at least as logical for workers to be required to buy their food at the company store as to be required to buy their medical care at the company store?”
– Milton Friedman writes against Hillary’s health care plan; WSJ, Feb.13, 1993

Government Spending & Taxes

“Other developed countries…are more committed to social stability than we have been, and they tailor their economic policies to maintain it.”
– First Lady Hillary Clinton writes her affinity for Europe’s cradle-to-grave welfare policies

“Cutting government spending and government intrusion in the economy will almost surely involve immediate gain for the many, short-term pain for the few, and long-term gain for all.”
– Milton Friedman, WSJ, June 15, 1995

Free Trade vs. Fair Trade

“Too many people have made too much money.”
– First Lady Hillary Clinton condemns the insurance industry, feeling it’s not fair that certain businesses are making ‘too much money’

“‘Fair’ is in the eye of the beholder; free is the verdict of the market. (The word ‘free’ is used three times in the Declaration of Independence and once in the First Amendment to the Constitution, along with ‘freedom.’ The word ‘fair’ is not used in either of our founding documents.)”
– Milton Friedman, WSJ, Mar. 7, 1996

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This is an excerpt of a speech given by Walter E. Williams on February 6, 2005 at Hillsdale College. The complete speech, titled “The Entrepreneur As American Hero,” can be read here: http://www.hillsdale.edu/imprimis/2005/03/.

At this juncture let me say a few words about the modern push for corporate social responsibility. Do corporations have a social responsibility? Yes, and Nobel Laureate Professor Milton Friedman put it best in 1970 when he said that in a free society “there is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

It is only people, not businesses, who have responsibilities. A CEO is an employee, an employee of shareholders and customers. The failure of the corporate executive community to recognize this, and its willingness to engage in activities unrelated to the pursuit of profits, means national wealth will be lower, product prices will be higher and the return on investment lower.

If we care about people’s wants, rather than beating up on profit-making enterprises, we should pay more attention to government-owned non-profit organizations. A good example are government schools. Many squander resources and produce a shoddy product while administrators, teachers and staff earn higher pay and perks, and customers (taxpayers) are increasingly burdened. Unlike other producers, educationists don’t face the rigors of the profit discipline, and hence they’re not as accountable. Ditto the U.S. Postal Service. It often provides shoddy and surly services, but its managers and workers receive increasingly higher wages while customers pay higher and higher prices. Again, wishes of customers can be safely ignored because there’s no bottom line discipline of profits.

Here’s Williams’ law: Whenever the profit incentive is missing, the probability that people’s wants can be safely ignored is the greatest. If a poll were taken asking people which services they are most satisfied with and which they are most dissatisfied with, for-profit organizations (supermarkets, computer companies and video stores) would dominate the first list while non-profit organizations (schools, offices of motor vehicle registration) would dominate the latter. In a free economy, the pursuit of profits and serving people are one and the same. No one argues that the free enterprise system is perfect, but it’s the closest we’ll come here on Earth.

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The Chamber of Commerce, long a supporter of limited government and low taxes, was part of the coalition backing the Reagan revolution in the 1980s. On the national level, the organization still follows a pro-growth agenda — but thanks to an astonishing political transformation, many chambers of commerce on the state and local level have been abandoning these goals. They’re becoming, in effect, lobbyists for big government.

…

In as many as half the states, state taxpayer organizations, free market think tanks and small business leaders now complain bitterly that, on a wide range of issues, chambers of commerce deploy their financial resources and lobbying clout to expand the taxing, spending and regulatory authorities of government. This behavior, they note, erodes the very pro-growth climate necessary for businesses — at least those not connected at the hip with government — to prosper. Journalist Tim Carney agrees: All too often, he notes in his recent book, “Rip-Off,” “state and local chambers have become corrupted by the lure of big dollar corporate welfare schemes.”

…

“I used to think that public employee unions like the NEA were the main enemy in the struggle for limited government, competition and private sector solutions,” says Mr. Caldera of the Independence Institute. “I was wrong. Our biggest adversary is the special interest business cartel that labels itself ‘the business community’ and its political machine run by chambers and other industry associations.”

From Stephen Moore in the article “Tax Chambers” published in The Wall Street Journal February 10, 2007

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From The Wall Street Journal, January 27, 2007: “Ethanol gets a 51-cent a gallon domestic subsidy, and there’s another 54-cent a gallon tariff applied at the border against imported ethanol. Without those subsidies, hardly anyone would make the stuff, much less buy it — despite recent high oil prices.”

Remove this subsidy and the tariff. Remove the subsidy paid to farmers who grow the corn that is used to make ethanol. Then, the free market will rapidly tell us the true value of ethanol.

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Today there are adults — including educated adults — who explain multimillion-dollar corporate executives’ salaries as being due to “greed.” Think about it: I could become so greedy that I wanted a fortune twice the size of Bill Gates’ — but this greed would not increase my income by one cent. …One of the reasons why central planning sounds so good, but has failed so badly that even socialist and communist governments finally abandoned the idea by the end of the 20th century, is that nobody knows enough to second guess everybody else. Every time oil prices shoot up, there are cries of “greed” and demands by politicians for an investigation of collusion by Big Oil. There have been more than a dozen investigations of oil companies over the years, and none of them has turned up the collusion that is supposed to be responsible for high gas prices. Now that oil prices have dropped big time, does that mean that oil companies have lost their “greed”? Or could it all be supply and demand — a cause and effect explanation that seems to be harder for some people to understand than emotions like “greed”?

– Thomas Sowell

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Mr. Mayor, Members of the City Council:

You may recall that I have spoken to this body in years past expressing my opposition to the AirTran subsidy. At that time we were told that the subsidy was intended to be a short-tem measure. Today, four years after the start of the subsidy, with state funding planned for the next five years, it looks as though it is a permanent fixture.

Supporters of the subsidy have made a variety of claims in its support: that the subsidy and the accompanying Fair Fares program are responsible for $4.8 billion in economic impact, that being a pioneer in subsidizing airlines is equivalent to the role that Kansas played in the years immediately prior to the Civil War, and that we would have a mass exodus of companies leaving Wichita if the subsidy were to end.

I believe there is no doubt that fares are lower than what they would be if not for the subsidy. That points to the subsidy’s true achievement: government-imposed price controls. Its effect is to force many airlines to price their Wichita fares lower than they would otherwise. If it didn’t do that, there would be no reason to continue the subsidy.

Economists tell us — and human behavior confirms — that when the price of any good is held lower than it would be in a free market, the result is a reduction in the quantity supplied.

We see this happening. Earlier this year the Wichita Eagle reported that there are fewer daily flights supplied to and from Wichita, from 56 last year to 42 at the time of the article. It has been explained that the financial woes of Delta and NWA are to blame for this reduction. This is demonstrably false, as NWA recently added a daily flight to Wichita, and both airlines have added (and dropped) flights on many routes while in bankruptcy. Furthermore, even though in bankruptcy, theses airlines still desire to operate as profitably as possible.

Now we learn that the legacy airlines — those established, older airlines that take pride in their comprehensive nationwide networks of routes — are revising their strategies. A Wall Street Journal article from earlier this year (”Major Airlines Fuel a Recovery By Grounding Unprofitable Flights” published on June 5, 2006) tells us that the legacy airlines are beginning to look at the profitability of each route and flight. They are not as interested as they have been in providing flights just for the sake of having a complete nationwide network.

When we couple this change in airline strategy with our local price controls, I believe that we in Wichita are in danger of losing more service from the legacy airlines. If AirTran — a new-generation airline with low labor costs — can’t earn a profit on its Wichita route at the fares it charges, how can the legacy airlines be expected to do so? And if they can’t earn a profit on a flight to or from Wichita, and if they are beginning to scrutinize the profitability of each flight, can we expect them to continue providing service in Wichita?

No government has ever been able to successfully impose price controls without the people suffering harmful consequences. As economist Thomas Sowell wrote in a 2005 column:

Prices are perhaps the most misunderstood thing in economics. Whenever prices are “too high” — whether these are prices of medicines or of gasoline or all sorts of other things — many people think the answer is for the government to force those prices down.

It so happens there is a history of price controls and their consequences in countries around the world, going back literally thousands of years. But most people who advocate price controls are as unaware of, and uninterested in, that history as I was in the law of gravity.

Prices are not just arbitrary numbers plucked out of the air or numbers dependent on whether sellers are “greedy” or not. In the competition of the marketplace, prices are signals that convey underlying realities about relative scarcities and relative costs of production.

Those underlying realities are not changed in the slightest by price controls. You might as well try to deal with someone’s fever by putting the thermometer in cold water to lower the reading.

This is my fear, that someday I will open the newspaper and learn that American, United, Delta, Northwest, or Continental has reduced or even ceased service to and from Wichita. That day, when it becomes difficult to travel to or from Wichita at any price, that is the day we will feel the harm the subsidy causes.

On a personal level, my job as software engineer requires me to make from ten to twenty airline trips each year. Some of the places I travel to — Jackson, Mississippi and Lexington, Kentucky, for example — are not served by AirTran. If I am not able to travel there, no matter what the price, I will either have to find a different job or move from Wichita.

Mr. Mayor and Council Members, I urge you to reconsider your support of the AirTran subsidy. Even though the legislature and governor have agreed to pay for most of the subsidy, I believe the subsidy is not in our long-term interest. We need to let the price system, operating in a free market, do its job in guiding the allocation of scarce resources for both producers and consumers. The result may be more expensive fares. The alternative, which is the very real possibility of greatly reduced service to and from Wichita, is much more harmful.

Other Voice For Liberty in Wichita articles on this topic:

The AirTran Subsidy and its Unseen Effects
As Expected, Price Controls Harm Wichita Travelers
AirTran Subsidy Is Harmful
Wichita City Council Meeting, April 19, 2005
Wichita Eagle Says “AirTran Subsidies Foster Competition”
AirTran Subsidy Remarks
The Downside of Being the Air Cap by Harry R. Clements. This article makes a striking conclusion as to why airfares in Wichita were so high.
Letter to County Commissioners Regarding AirTran Subsidy
Open Letter to Wichita City Council Regarding AirTran Subsidy
Stretching Figures Strains Credibility

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The World Is Flat: A Brief History of the Twenty-first Century
Thomas L. Friedman
Farrar, Straus and Giroux, 2005

This interesting book explains in detail what many people already know: that advances in technology — and in politics to some degree — have made the world a smaller place. Not only have manufacturing jobs been moved overseas, but white-collar jobs such as accountant, computer programmer, radiologist, and many others can be done from anywhere in the world. Even a McDonald’s restaurant is not immune. At a McDonald’s drive-through in Cape Girardeau, Missouri, the person you speak to when ordering is not present in the restaurant you’re visiting. Instead, the person you’re speaking to is in Colorado, a long way from Missouri. But when considering telecommunications India, as a practical matter, is no farther away.

There are some who don’t like this globalization, and they urge the restriction of trade in the name of protecting American jobs. Mr. Friedman believes, however, as I do, in the free-trade theory of competitive advantage developed by David Ricardo. This holds that the wealth of everyone is increased if each nation specializes in that which it possesses comparative advantage, and trades with other nations for other things.

The problem is that the wealth is not spread equally. Some people are hurt when their jobs are outsourced overseas. While the wealth of America and India or China as a whole increases, some people lose. We, both as a nation and as individuals, need to be adaptable and realize that the jobs we trained for in school may not be around forever. Speaking from personal experience, my career as a software engineer is one that is often mentioned as susceptible to outsourcing.

Although the issues dealt with in the book are mostly national and international, there is one in particular that is local. Mr. Friedman lays out the problems with American K-12 education, particularly education in science and math. And while America excels in the teaching of science and engineering at universities and graduate schools, that will start to change as more foreign scientists and engineers stay in their home countries.

This problem with education is a local issue, as that is where the primary control over schools rests. We can either continue with the steady downhill slide of our schools (as compared with the rest of the world), or we can do something to change their course. If you believe that more spending by the state of Kansas will do the job, I hope for the sake of our nation’s children that you are correct. But we have spent more and more on schools only to see them worsen. It is time for Kansas to allow freedom and competition to work in schools.

While increased global competition may worry some, it holds much promise to others. Mr. Friedman traces the complex interaction of many companies, located in many countries, that was necessary to build the Dell notebook computer he recently ordered. This complex supply chain comprises what Mr. Friedman calls “The Dell Theory of Conflict Resolution, the essence of which is that the advent and spread of just-in-time global supply chains in the flat world are an even greater restraint on geopolitical adventurism than the more general rising standard of living that McDonald’s symbolized.” (The reference to McDonald’s is from the “Golden Arches Theory of Conflict Prevention” advanced in his book The Lexus and the Olive Tree, which held that no two countries which both had McDonald’s had gone to war with each other.) As countries become more intertwined, as our livelihoods and investments become dependent on worldwide cooperation, the risk of war declines. That, along with the increased wealth that free trade brings, is good news for everyone.

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Writing from Miami, Florida

Former Wichita City Council member and present Arts Council chairwoman Joan Cole wrote an article titled “City needs dedicated arts funding” that appeared in the March 16, 2006 Wichita Eagle. This article advocates continued and increased government funding for arts in Wichita.

In her article Mrs. Cole mentions a policy that she seems to approve of: “Moreover, for the first time, performance measures and desired outcomes will be used to assess the progress that these organizations demonstrate.” The organizations are the various groups that will receive funding from the City of Wichita.

I do not know how these performance measures are counted, and I don’t know what outcomes are desired. But I do know this: if the government would stop funding arts, there would be no need for government-mandated performance measures, and the outcomes that occur would be precisely what people really want.

Without government funding, organizations that provide culture and art will have to satisfy their customers by providing products that people really want. That is, products that people are willing to pay for themselves, not what people say they want when someone else is paying the bill. With government funding, these organizations don’t have to face the discipline of the market. They can largely ignore what their customers really want. They can provide what they think their customers want, or, as I suspect is the case, what they believe the people of Wichita should want, if only we were as enlightened as we should be.

Without the discipline of the market, these organizations will never know how their customers truly value their product. The safety net of government funding allows them to escape this reality. We have seen this many times in Wichita and Sedgwick County recently, as organizations fail to generate enough revenue to cover their costs, only to be bailed out by the government. Other businesses learn very quickly what their customers really want — that is, what their customers are willing to pay for — or they go out of business. That’s the profit and loss system. It provides all the feedback we need to determine whether an organization is meeting its customers’ desires.

Some say that without government support there wouldn’t be any arts or museums, and that art shouldn’t be subject to the harsh discipline of markets. Personally, I believe there is little doubt that art improves our lives. If we had more art and music, I feel we would have a better city. But asking government commissions to judge what art we should have is not the way to provide it. Instead, let the people tell us, through the mechanism of markets, what art and culture they really want.

It might turn out that what people want is different than from what Arts Council members believe the people should want. Would that be a surprise? Not to me. Then we could disband the Arts Council and let people decide on their own, without government intervention, how to spend their personal arts budgets on what they really value.

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Yup…subsidies for AirTran pick a winner, and the losers. But consider the alternative. 400 dollar flights to anywhere. Do any free marketeers really prefer driving to Tulsa to fly to Austin? Wichita would shrivel up and blow away without economic development incentives. This one is not perfect. And, Delta has a gripe. But check prices ALL OVER THE COUNTRY sometime. Yes the market is changing, in a manner that offers NO benefits for the passengers they so blithely isolate in middle America. By the way, concerning Mr. Weeks’ column in the Eagle today: I admire this man a great deal but he mis-states free market forces just a wee bit when he says “when price is lowered, less is supplied.” Competition lowers prices…thus prices go down as MORE is offered. THAT is the free market at work. One has only to look at the diminishing price of internet subscriptions, computers, watches (I saw one for a quarter today). Lots and lots of availability…ever-dwindling prices. Keep this blog flying. there is much I admire about the libertarian movement…it sure beats the pants-load out of the alternatives today…conservatives who are not conservative, liberals who are just plain

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Writing from Jackson, Mississippi

Currently it is quite fashionable to criticize Wal-Mart as the starting point for everything evil about American business. Critics allege that Wal-Mart earns too much profit, pays its employees too little, doesn’t provide its employees health insurance so they have to rely on the government, it exploits low-paid workers in China, and might even be responsible for avian flu, for all I know.

There is no doubt that Wal-Mart is a powerful force in the economy. The Wall Street Journal on December 3, 2005, wrote “Wal-Mart employs about 1.3 million people, about 1% of the American work force. Its sales, at around $300 billion a year, are equal to 2.5% of U.S. gross domestic product.”

But bigness doesn’t necessarily translate to profitable: “It is not, however, an especially profitable company. Its net profit margins, at about 3.5% of revenue, are broadly in line with the rest of the retail industry. In fiscal 2004, Microsoft made more money than Wal-Mart on just one-eighth of the sales.”

Is Wal-Mart bad for poor people? Writing in The Washington Post on November 28, 2005, Sebastian Mallaby wrote: “Wal-Mart’s critics allege that the retailer is bad for poor Americans. This claim is backward: As Jason Furman of New York University puts it, Wal-Mart is ‘a progressive success story.’ Furman advised John ‘Benedict Arnold’ Kerry in the 2004 campaign and has never received any payment from Wal-Mart; he is no corporate apologist. But he points out that Wal-Mart’s discounting on food alone boosts the welfare of American shoppers by at least $50 billion a year. The savings are possibly five times that much if you count all of Wal-Mart’s products.”

That’s a lot of money saved for consumers. Critics alledge, however, that Wal-Mart suppresses wages. It does, as it turns out. From The Washington Post article again: “Set against these savings for consumers, Wal-Mart’s alleged suppression of wages appears trivial. Arindrajit Dube of the University of California at Berkeley, a leading Wal-Mart critic, has calculated that the firm has caused a $4.7 billion annual loss of wages for workers in the retail sector.” Compare that with the amount that Wal-Mart has saved consumers. “Indeed, Furman points out that the wage suppression is so small that even its “victims” may be better off. Retail workers may take home less pay, but their purchasing power probably still grows thanks to Wal-Mart’s low prices.”

As for health benefits, John Tierney in The New York Times on November 29, 2005 writes: “Wal-Mart is often denounced for getting ‘corporate welfare’ because some of its employees rely on Medicaid for health care and on other government aid. But so do some employees at other companies or at government institutions like public schools. Wal-Mart offers health benefits that are generally comparable to what other retailers offer.”

For those who claim that Wal-Mart receives corporate welfare in any form, I think that readers of this website know my feelings on that. Corporate welfare is wrong.

From The Wall Street Journal again: “But suppose Wal-Mart did look more like the company its detractors would like it to be, with overpaid workers, union work rules, and correspondingly higher prices on goods. It would not only be a less attractive place to shop, and hence a considerably smaller company. It would drive up the cost of living for the millions who shop there, thus hurting those in the bottom half of the income-distribution tables that Wal-Mart’s critics claim to be speaking for. One might expect this fact to trouble the anti-Wal-Mart forces, except that their agenda is very different from what they profess it to be.”

John Tierney of The New York Times again: “It’s easy to understand the motives of some of Wal-Mart’s enemies. Local merchants don’t want to match its prices. Labor leaders know that they’ll lose members and dues if unionized stores suffer. But why would anyone who claims to be fighting for social justice be so determined to take money out of the pockets of the poor?”

Whatever your feelings, Wal-Mart operates in the relatively free marketplace, so it must meet the needs of its customers, or it won’t last very long. From The Wall Street Journal again: “To the extent that mom-and-pop stores are threatened by Wal-Mart, it’s because the same people who supposedly so value their Main Street hardware store find that Wal-Mart’s selection, or prices, or parking lot — something about it — is preferable.”

That’s the free market — people voting with dollars rather than professed feelings — at work.

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