Voice For Liberty

Tag: Free markets

  • AFP Kansas event features Malkin, satirist O’Rourke

    This Wednesday April 28 Americans for Prosperity-Kansas is holding its annual “Day at the Capitol” event in Topeka. This year’s event features nationally-known speakers, as AFP-Kansas State Director Derrick Sontag explained in an email conversation:

    “We’re excited to have Michelle Malkin, P.J. O’Rourke, and many other great speakers join us for our annual Day at the Capitol. This is a year in which it is especially important for our grassroots activists to take time out of their busy schedules to make the trip to Topeka and advocate for a more limited and responsive government. One that doesn’t place the state legislature’s spending problems on the backs of taxpayers by increasing taxes. Activists will receive updates on the prominent federal issues of the day, along with hearing from legislators and experts concerning our state budget and the multitude of tax increase proposals before the Kansas Legislature.”

    Besides Malkin and O’Rourke, AFP Foundation President Tim Phillips and Vice President of Policy Phil Kerpen will speak. The event will end with a rally on the Statehouse steps.

    Registration for the event is $20 and may be done accomplished online by clicking on kscapitolday.eventbrite.com. More information about the event is there, too.

    A free bus trip from Wichita is available. Contact John Todd at john@johntodd.net or 316-312-7335, or Susan Estes, AFP Field Director at sestes@afphq.org or 316-681-4415 to reserve a spot on the bus.

  • Primer on Mises and Austrian economics published

    If you’ve heard of Ludwig von Mises and wondered why his ideas are important to freedom, here’s a chance to easily and quickly gain understanding of this important thinker and the field of Austrian economics.

    Or if you’ve not heard of or read about Mises and Austrian economics, here’s your chance. The Institute for Economic Affairs, a free-market think-tank based in London, has just published a short book titled Ludwig von Mises — A Primer. The author is Eamonn Butler.

    Butler explains why Mises is important: “Ludwig von Mises was one of the greatest economists and political scientists of the twentieth century. He revolutionised the understanding of money, inflation and recessions; comprehensively refuted the arguments for socialism; and provided a devastating critique of the methodologies of mainstream economics. His contributions to the Austrian School laid the intellectual groundwork for thinkers such as F. A. Hayek, Murray Rothbard and Israel Kirzner.”

    The book’s summary gives several points that show why Mises and his ideas are important:

    • The market system is much more efficient at allocating resources than political elections, where people get the opportunity to vote only every few years and have to choose between packages of disparate policies. Every penny spent by consumers, in countless daily transactions, acts like a vote in a continual ballot, determining how much of each and every good should be produced and drawing production to where it is most urgently required.
    • Free markets have no natural tendency to monopoly or monopoly prices; on the contrary, they have a powerful tendency towards diversity and differentiation, which bid quality up and prices down. Few cartels and monopolies would ever have come into being had it not been for government and the efforts of those with political power to stifle competition. Monopoly would be at its zenith under socialism, where all production is in state hands.
    • Policies that are intended to “improve” the market economy may in fact strangle it. Intervention may lead to unwelcome side effects that are then wrongly used to justify further interference, which in turn creates new problems, and so on. Eventually, although the economy still looks capitalist, it ends up being completely controlled by the authorities.
    • The belief that state institutions can improve on the market by taking what it does and somehow doing it better is a dangerous conceit. In the absence of the profit motive, there is no obvious way of measuring the success of public agencies in delivering their objectives. Incentives for entrepreneurship are weak, and managers are likely to become risk-averse and bureaucratic.

    One of the greatest contributions of Mises was explaining that under socialism, the lack of prices and profits lead mean there is no efficient way of allocating resources. Without markets, he said, economic calculation is impossible.

    The book may be purchased or downloaded on this page.

  • Will the real robber barons please stand up?

    By Helen Cochran.

    At the April 13th meeting of the Wichita City Council a request from downtown developer Real Development will be made for an additional $2.2 million taxpayer subsidy for its condo project Exchange Place, located at Douglas and Market. With two weeks to go before this public hearing there is still time for council members to read The Myth of the Robber Barons by Burton Folsom. Folsom’s easy-to-read 134-page narrative lays out the case for entrepreneurship in America and can be read in one evening. It’s a history lesson worth reading by all.

    Folsom highlights two kinds of business developers: “political entrepreneurs” and ‘market entrepreneurs.” And while Folsom focuses on the larger-than-life entrepreneurs of the nineteenth and early twentieth century, the lessons gleaned have far reaching implications and relevance, even on a local level.

    According to Folsom, “political entrepreneurs” are those that seek government/taxpayer subsidy, public private partnerships, protective tariffs, special privileges, etc. Folsom makes a sound case that economic development fueled by political intervention invariably fails and undermines the very ideology it purports to serve.

    On the other hand “market entrepreneurs” are those that obtain their successes by producing a product that is better and of more value to the consumer, unbridled by the government controls and restrictions that come with subsidy. No one can argue that it is the market entrepreneurs that create the wealth in this country.

    Despite the anti-business rhetoric spewed by most historians and reinforced in school curriculums across this country, Folsom offers concrete evidence that the likes of Commodore Vanderbilt, John D Rockefeller, Andrew Mellon, the Scrantons of Pennsylvania, James J. Hill, and Charles Schwab should be revered because of the consumer benefits achieved when free markets are allowed to flourish without government involvement. Folsom contrasts these successes with failure-after-failure of those in the same respective industries that received government subsidy. Government cannot do it better and most certainly cannot do it cheaper.

    In Wichita, Real Development is one of several downtown “political entrepreneurs.” What was originally a $27.8 million project with an approved $9.3 million subsidy from the City of Wichita is now a $51.5 million project seeking an additional $2.2 million subsidy from the City. Real Development boasts that with approved additional City subsidy they will be able to qualify for a $30 million loan from the U.S. Department of Housing and Urban Development — a government guaranteed loan. This “guarantee” is none other than you and me. Our taxpayer dollars are lost if this project fails.

    According to Goody Clancy, the City’s downtown development consultant, there is a market for downtown development in Wichita. Specifically, Goody Clancy consultants found that downtown Wichita demand for residences is 1,000 units over the next five years.

    If such a market truly exists where are the market entrepreneurs and why are they not clamoring to develop? Why are local banks not willing to loan these political entrepreneurs money without a government guarantee? Michael Elzufon, one of the principals of Real Development, states this is a “low risk deal.” Yes, it’s a low risk deal for Elfuzon but I suggest it is a very high-risk deal for the taxpayer.

    The Wichita City Council, as with as many city councils nationwide, continues to insist that economic development in downtown Wichita requires government subsidy. Fear mongering becomes a tactic used when justifying subsidies offered to private enterprise to locate or expand here: “Everyone else is offering them” or “If we don’t subsidize, Company X will go elsewhere or relocate” or “Without subsidy this won’t happen.” Millions of taxpayer dollars have been invested in the name of economic development or downtown revitalization and when projects fail, millions more are spent in an attempt to salvage the project.

    Development succeeds when market entrepreneurs perceive a need and are willing to risk their own capital for success. Anything short of that has historically failed.

    The Myth of the Robber Barons is a must read for anyone interested in the writing on the wall but especially for those with the power to commit taxpayer money to projects that are better left to market entrepreneurs.

  • Health care about to get worse

    A good summary of the problems with American health care, and of what the future holds is from Competitive Enterprise Institute‘s Gregory Conko. In his piece Health Care Crisis About to Get a Whole Lot Worse he writes:

    Most of the problems in America’s health care system — high and rising prices, lack of consistent and reliable access for millions, rampant cost shifting, and an inability to distinguish between effective and ineffective services or between high and low quality, to name just a few — stem not from some supposed market failure, but primarily from existing government interventions in the market for health care and health insurance.

    One of the government interventions that leads to market dysfunction is the reliance on employers to provide health insurance for so many Americans. This happened because of government policy, not by accident. As a result, workers have little choice in their coverage, and some feel tied to their present jobs just for the insurance.

    Americans — some anyway — complain that health insurers will collect premiums for years, and then not pay when the covered become sick. There’s also not a vigorous market for health insurance for individuals, partly because the employer market swamps out efforts to sell to individuals or families.

    Contrast this situation with the market for automobile insurance. This is a product that is regulated, to be sure, but much more lightly than health insurance. It’s something that no employers purchase for their workers and their private cars. Instead, drivers have to seek out and purchase their own policies.

    And what is the result? There’s a thriving and competitive market for auto insurance. The pitchmen for two large companies — the quirky lizard and the exuberant Flo — are well known to television viewers. Auto insurance companies innovate to see who can produce products that meet the needs of consumers.

    Do auto insurance companies fail to pay claims, as it is alleged health insurance companies do? If an auto insurance company developed a reputation for not paying, customers would quickly and easily leave that company for others. That is a credible threat, as there is a competitive market for auto insurance. Those who feel they have been wronged by a health insurance company often have no alternative to turn to — there is no credible threat of taking one’s business to another company.

    One of the things that President Obama’s health care reform is designed to do is to create a marketplace for health insurance. But we don’t need more government regulation to accomplish that. Such government-sponsored effort is likely to fail. Less government intervention and less regulation, like in the market for auto insurance, would produce a result better for consumers.

  • Tea party leaders analysis released

    The Sam Adams Alliance, an organization that supports free market principles, has released a study that examines tea party leaders, their thoughts, and their motivations. It found that many tea party leaders are new to political activism, and having experienced empowerment, are ready to move to the next step of activism. “This is their time to act,” the report concludes.

    While it is often thought that the tea party movement might blossom into a third party, that wasn’t the sentiment of those surveyed: “A striking 85.7 percent said ‘No’ when asked if they were in favor of moving in the direction of a Third Party.” Eric O’Keefe, Chairman of the Sam Adams Alliance, wrote in his letter introducing the analysis: “We found a deep distrust of current political leaders and both political parties, but strong understanding that practical considerations argue against a third party.”

    Political party affiliation was largely Republican: “61.7 percent Republican, 27.7 percent Independent, and 10.6 percent Tea Party.”

    Social issues were not important to the respondents. Instead, fiscal and economic issues are the focus: “91.7 percent said ‘budget’ is “very important, followed by the ‘economy’ at 85.4 percent, and ‘defense’ at 79.6 percent.”

    The tea party leaders are relatively new to politics: “46.9% were uninvolved or rarely involved with politics prior to 2009.” Also: “Tea Party activists are for the most part new to this role. They are neither practiced nor polished in activism; but having experienced a taste of the empowerment that comes with action, they feel more than ever that this is their time to act.”

    But tea party leaders are self-aware and want to advance the movement: “They are also motivated to take this to the next level — and are actively preparing for a phase two.”

    Read the report and learn more about the Sam Adams Alliance at Activist Insights. A direct link to the report is The Early Adopters.

  • Kansas historic preservation tax credits should not be expanded

    Testimony to be delivered to the Kansas House Taxation Committee.

    The Kansas historic preservation tax credit system should not be expanded beyond its current limit.

    We must recognize that a tax credit is an appropriation of Kansans’ money made through the tax system. If the legislature is not comfortable with writing a developer a check for over $1,000,000 — as in the case with one Wichita developer — it should not make a roundabout contribution through the tax system that has the same economic impact on the state’s finances.

    While I would not recommend writing checks to developers, this practice would be more efficient than the current system of subsidy through the tax system. Last month the Legislative Division of Post Audit (audit 10PA03.1) found that the system is not efficient: “Our review showed that, on average, when Historic Preservation Credits were transferred to generate money for a project, they only generated 85 cents for the project for every dollar of potential tax revenue the State gave up.”

    Furthermore, the Department of Revenue has not been tracking the tax credits accurately, significantly under-reporting the cost of the program to the legislature. The audit found that “Finding problems like these in a relatively small sample raises questions about the integrity of the Department’s tax credit information.”

    The confusing nature of tax credits leads citizens to believe that they have no cost to the state. A leader of an economic development group in Wichita recently asked questions of me that lead me to conclude that he did not understand the economic effect of tax credits.

    The program often ends up being welfare for the wealthy. In Wichita the tax credits have been used to renovate a building with condos selling for $300,000 to $950,000. A current case would have a developer in Wichita receive over $1,000,000 for rehabbing apartments that will rent for $1,000 to $2,000. Perhaps $3 million to $4 million will go to the developer of a hotel in downtown Wichita.

    We should recognize that living or working in a historic building is a premium amenity that one chooses, just like one might choose granite countertops in their kitchen. We shouldn’t expect others to pay for these voluntary choices.

    In Wichita, many of the projects where historic preservation tax credits are sought are already receiving other forms of subsidy, such as TIF financing and property tax abatements.

    Some have said that the tax credits put people to work on projects. I would suggest that when Kansans keep their own money — instead of subsidizing wealthy developers — they spend or invest it in ways that they feel best advances their position in life. This too is economic activity that creates jobs.

    I have more material about this issue at my website “Voice For Liberty in Wichita” at WichitaLiberty.org. Along the top, click on “Search” and search for historic tax credits for more information. Or, please contact me by email or telephone and I will send you articles.

  • Detroit, corporate welfare and Wichita’s future

    The following op-ed from Americans for Prosperity Foundation’s Alan Cobb appeared in today’s Wichita Eagle (the unedited version is below).

    I agree with Cobb. Wichita definitely has a problem with its economic development strategies. Instead of low taxes that will benefit everyone, the Wichita city council and Wichita city hall bureaucrats insist on dishing out subsidies to companies nearly every week. I’ve shared my ideas with the council in testimony like Wichita universal tax exemption could propel growth and articles like Wichita’s economic development strategy: rent seeking.

    Still, there are some council members who, along with Mayor Carl Brewer and some city staff, feel city the doesn’t have enough “tools in the toolbox” for shoveling incentives on companies for economic development purposes.

    Recently The Eagle printed an article by Molly McMillin, a well-respected aviation and business reporter.

    The question asked throughout the article is one that Wichita leaders and citizens have been asking for some time: What can we do to prevent Wichita from falling into the hole that is Detroit?

    A simple answer is to continue throwing money and other goodies to keep the aviation companies. A better answer is we need to get rid of the notion that our elected officials and others have so much forethought to know what will or won’t be successful in 20 or 50 years. They don’t.

    Detroit became the modern tragedy it is, not just because of global competition, poor products or poor management at the Big Three. Other sectors of the Michigan economy weren’t there to pick up the slack, when the auto industry floundered. Michigan put too much focus on the auto industry, to the detriment of the overall business and economic climate.

    While state and local government poured incentives into the Big Three’s trough, the marginal costs of doing business for everyone else crept up.

    It‘s the classic example of the seen vs. the unseen. We see the new factory Pontiac builds. We don’t see the businesses that reduce their size, close or just move. The irony is we will still see the Pontiac factory after it is closed and boarded up.

    For each tax dollar given to the auto industry, one is taken one away from entrepreneurs trying to create the next GM, Ford, Google or Apple. This may not be too bad the first time or the second time, but over years and decades, the results can be significant. The “next big thing” will be created in a state with a better tax and regulatory climate.

    Cessna, Spirit, Boeing, Learjet and Beechcraft are all great companies that produce great products known throughout the world. Kansans and Wichitans are rightly proud.

    Who can predict with any certainty they’ll be in Wichita or even in business in 10 or 30 years? I hope so, and I think they will, but I am not willing to bet Wichita’s future on it.

    We shouldn’t give other individual companies state or local funded goodies, either.

    Lower the tax rates for everyone. After all, the tax breaks and other prizes handed out are recognition that the cost of doing business in a particular are is too high.

    The Kansas Division of Legislative Post Audit last year reported we spent billions of dollars in “economic development” with literally nothing to show for it. Our lawmakers aren’t very good at picking winners and losers.

    When Wichita’s aircraft leaders were asked about Detroit, there was a golden opportunity to ask other business leaders in Kansas and Wichita that same question.

    It is just as likely and maybe more so, that they will determine if Wichita goes the way of Detroit — or does not.

  • Importance of economic freedom explained in Wichita

    Yesterday Robert Lawson appeared in Wichita to deliver a lecture titled “Economic Freedom and the Wealth and Health of Nations.” The lecture explained how Lawson and his colleagues calculate the annual “Economic Freedom of the World” index, which ranks most of the countries of the world in how the “policies and institutions of countries are supportive of economic freedom.” The conclusion is that economic freedom is a vital component of well-being, income, health, and both personal and political freedom.

    Robert LawsonRobert Lawson

    The Economic Freedom of the World annual report is available in its entirety at FreeTheWorld.com.

    Lawson started his lecture by noting two methods of organizing an economy. There’s the way of Adam Smith, in which liberty, private property, and free trade are paramount, and government is to have a limited role. The other way is that of Karl Marx, where society would be planned and controlled by a central authority according to a national strategy.

    Lawson said he became interested in measuring freedom as a way to investigate the truth of the claims of Smith and Marx. By collecting data about economic freedom, we could learn more about which system — economic freedom or planned economies — works best.

    Lawson defined economic freedom as consisting of free markets, private property and personal choice; freedom to trade both within a country and foreign trade; freedom to enter markets; and security of property and the rule of law. He said that there is a role for government in this system to protect property rights and provide basic infrastructure, but the role of government is limited.

    Measuring economic freedom is complex and multidimensional. Data comes from 141 countries using 42 components that are grouped into five broad areas: size of government, including expenditures, taxes, and enterprises; legal structure and security of property rights; access to sound money; freedom to trade internationally; and regulation of credit, labor, and business. Ratings are on a scale from zero to ten, with ten representing the most freedom.

    Some of the components of the ranking are based on objective data, while some are subjective, perhaps from a survey. Lawson said that the report and book detail the methodology used in creating the index.

    The result is that Hong Kong ranks as most economically free country. Singapore is second, which Lawson said poses a problem. Singapore is economically free, but it is not politically liberal in terms of civil liberties. There is a strong positive relationship between political freedom and economic freedom, but there are exceptions like Singapore.

    The United States ranks sixth. Sweden is ranked fortieth, which is still in the upper quartile of countries. Lawson said that while Sweden has a reputation as a welfare state, the U.S. and Sweden are not all that different. Taxes in Sweden are about 50 perfect higher than ours, and Sweden has many more labor regulations, but otherwise the countries are similar.

    The big differences in the world, Lawson said, are between countries like the U.S. and countries like Venezuela and Zimbabwe.

    China is ranked eighty-second, below the midpoint. Lawson said that China is a problem to rank, having Shanghai which is relatively free, and then outer provinces which are still tightly controlled and repressive.

    Russia ranks eighty-third, right below China. Some of the former Soviet republics like Estonia are doing well, but the Ukraine has made little progress towards freedom.

    India ranks eighty-sixth. It is not an economically free county, but is more free now than in the past, Lawson said.

    To show how economic freedom impacts the lives of people, Lawson used a series of charts that showed the impact of economic freedom on various measures.

    Economic freedom is very important in determining the incomes of people. The countries in the highest-ranking quartile of the economic freedom index have a per-capita income of $32,443. For countries in the lowest quartile the income is only $3,802. Economic growth rates are higher in the freer countries, too, although the difference is not as great as with income.

    Lawson said that a frequent criticism of free economies is income inequality. He showed a chart presenting the share of income earned by the poorest ten percent in each country, grouped by quartile. There is very little difference between the groups. “It doesn’t really matter what kind of economic system you have — free market or not — it does not correlate in any way with income inequality. It’s simply not true that market economies, in general, are more unequal.”

    A follow-up, Lawson said, is that if you are poor, where do you want to be? The answer is in the economically free countries. The per-capita income of the poorest ten percent in the least economically free countries is $896, while in the most economically free it is $9,105.

    Life expectancy is also positively correlated with economic freedom, ranging from 59.40 years in the least-free countries to 79.12 in the most-free countries.

    Is there a relationship between economic systems and the environment? Lawson showed a chart showing that the free countries do better in a measure of environmental performance.

    Lawson said that political rights and civil liberties are also strongly associated with economic freedom, the example of Singapore notwithstanding. India is another exception, being a fairly liberal democracy but ranking low in economic freedom.

    Speaking about the United States, Lawson said that the numbers are likely to go down in the future. While the U.S. ranks above the world average, its measurement of freedom has been declining since 2000. At the same time, the rest of the world is on an upward trend. “It’s no longer accurate to say the United States is among the very top tier in the economic freedom index,” Lawson said, adding that he blames George Bush for this. The decline is partly due to the increasing size of government, but the largest cause of the decline is in the area of property rights. This area is measured largely by surveys asking people how they feel about property rights in America. The perception, Lawson, said, is that the security of property rights are on the decline.

    A question from the audience asked about reliance on foreign aid. Lawson replied that the economic freedom index methodology doesn’t include foreign aid. But there has been research done using the index and foreign aid, which concluded that countries get more foreign aid when they do worse on the index. Furthermore, after receiving more foreign aid, countries do worse in the index.

    A question about the cost of living in countries was answered by the use of purchasing power parity.

    Responding to a question about deficits, Lawson said that the size of government deficits doesn’t enter into the index calculations. The amount of government spending is part of the index, however. Lawson said that Milton Friedman argued that it wasn’t very important to freedom whether the government runs deficits. The size of government spending is important, Friedman said, with the method of financing the spending much less important.

    A question revealed that health care doesn’t play a part in the index calculations, as the composition of spending is not a factor. If the U.S. government decides to spend more on health care, its rating will probably decline, as government spending is in the index.

    A question asked how it can be that China and India are growing very rapidly, but still rank low in the index. Lawson answered that it’s the change or increase in the index that has been important for these two countries. There has been great change in both countries. “It takes only a tiny bit of relaxation to see a flourishing of growth in both China and India.” He added that both countries need to continue their reforms in order to maintain their rates of economic growth.

    Lawson added that regulation, not taxation, is the biggest threat to prosperity and economic freedom in America.

    Lawson’s lecture was sponsored by the Gilder Lehrman Institute of American History and underwritten by The Fred C. and Mary R. Koch Foundation.

  • United States Government customer service: think twice

    United States Postal Service: We CareUnited States Postal Service: We Care

    For those who argue that we should turn over more activity — such as health care — to the federal government, take a close look at a government monopoly that’s been around for a long time.

    The United States Postal Service has a monopoly on the delivery of first class mail. As an example of its level of service, consider my bank statement. When it hadn’t arrived by its usual time, I called the bank. The bank assured me it had been mailed.

    Today the statement arrived in a plastic bag explaining that it had been damaged during processing. I can understand that happening once in a while. Machines are not perfect, and sometimes improving their reliability can be very expensive when compared to the benefit received.

    So what was the delay caused by the malfunctioning machine? One day? Two or three days?

    The piece was postmarked February 2. It arrived on February 22. The delay — realizing that mail delivery is not guaranteed — is around 18 days.

    How does a piece of mail being damaged in a machine cause it to be delivered nearly three weeks late? And it’s not bulk or junk mail — my bank statement is first class mail.

    It’s lack of competition. What motivation does the United States Postal Service have to do a better job?

    Think about this as we consider moving activity from the private sector to government.

    A related story from a friend of mine is Postal service?