Voice For Liberty

Tag: Free markets

  • An inept Kansas smoking analogy

    From last March.

    In today’s Wichita Eagle, Wichita busybody Charlie Claycomb makes another inept analogy in an attempt to press his anti-smoking agenda statewide.

    A while back he tried to compare a smoking section in a restaurant with a urinating section in a swimming pool. This is ridiculous to the extreme, as I show in the post It’s not the same as pee in the swimming pool.

    Now in today’s letter in the Eagle, Claycomb says that although the United States Constitution gives us the right to bear arms, since that right is heavily regulated, government has license to regulate smoking, as smoking isn’t mentioned at all in the Constitution.

    Here’s why this is another ridiculous analogy (without conceding whether the regulations on arms are justified or effective): A person in, say, a bar that’s carrying a gun can’t be detected as you enter the bar. You just can’t tell upon entering an establishment whether someone has a concealed gun and intends to cause harm to patrons. This is the case even if there’s a law prohibiting carrying guns into bars, and even if the bar has a “no guns” sign.

    But you sure can tell if people are smoking.

    Smoking ban supporters might argue that since there may be smoking in some establishments, my rights are being infringed since I can’t patronize those places without exposing myself to harmful smoke.

    That’s true, except about rights being violated. There’s definitely no right in the Constitution to be able to go everywhere you want on your own terms.

    “Mankind are greater gainers by suffering each other to live as seems good to themselves, than by compelling each to live as seems good to the rest.” — John Stuart Mill

    “Whenever we depart from voluntary cooperation and try to do good by using force, the bad moral value of force triumphs over good intentions.” — Milton Friedman

  • It’s not the same as pee in the swimming pool

    A repeat of a column from 2008. Mark McCormick no longer writes for the Wichita Eagle. Recently that newspaper concluded that because Wichita’s smoking ban caused no economic harm, it was a good thing to do. Let’s hope this regulatory zeal doesn’t spread to other areas.

    In a column in the February 27, 2008 Wichita Eagle (“Smoking ban issue not one to negotiate”), columnist Mark McCormick quotes Charlie Claycomb, co-chair of Tobacco Free Wichita, equating a smoking section in a restaurant with “a urinating section in a swimming pool.”

    This is a ridiculous comparison. A person can’t tell upon entering a swimming pool if someone has urinated in it. But people can easily tell upon entering a restaurant or bar if people are smoking.

    Besides this, Mr. McCormick’s article seeks to explain how markets aren’t able to solve the smoking problem, and that there is no negotiating room, no middle ground. There must be a smoking ban, he concludes.

    As way of argument, McCormick claims, I think, that restaurants prepare food in sanitary kitchens only because of government regulation, not because of markets. We see, however, that food is still being prepared in unsanitary kitchens, and food recalls, even in meat processing plants where government inspectors are present every day, still manage to happen. So government regulation itself is not a failsafe measure.

    Despite the doubts of nanny-state regulators, markets — that is, consumers — exert powerful forces on businesses. If a restaurant serves food that makes people ill, which do you think the restaurant management fears most: a government fine, or the negative publicity? Restaurants live and die by their reputation. Those that serve poor quality food or food that makes people ill will suffer losses, not as much from government regulation as from the workings of markets.

    But I will grant that McCormick does have a small point here. Just by looking at food, you probably can’t tell if it’s going to make you ill. Someone’s probably going to need to get sick before the word gets out.

    But you easily can tell if someone’s smoking in the bar or restaurant you just entered.

    The problem with a smoking ban written into law — rather than reliance on markets and individual choice — is that everyone has to live by the same rules. Living by the same rules is good when the purpose is to keep people and their property safe from harm, as is the case with laws against theft and murder. But it’s different when we pass laws intended to keep people safe from harms that they themselves can easily avoid, just by staying out of those places where people are smoking.

    For the people who value being in the smoky place more than they dislike the negative effects of the smoke, they can make that decision. McCormick and Claycomb want to deny people that choice.

    This is not a middle-ground position. It is a position that respects the individual. It lets each person have what they individually prefer, rather than having a majority — no matter how lop-sided — make the same decision for everyone. Especially when that decision, as Claycomb stated in another Wichita Eagle article, will “tick off everybody.” Who benefits from a law that does that?

  • ‘Economic Freedom and the Wealth and Health of Nations’ lecture to be in Wichita

    Do you know where the United States ranks on the global index of economic freedom? (Hint: It wouldn’t get a medal.) The answer is in the latest edition of the Economic Freedom of the World report.

    Dr. Robert Lawson of Auburn University is co-author of this popular and widely cited report. It evaluates 141 nations and jurisdictions using a combination of economic factors and then creates a ranking from most- to least-economically free. (For an executive summary of the most recent report, visit Economic Freedom of the World 2009 Annual Report.)

    Dr. Lawson will be the guest lecturer at a public forum in Wichita on February 25 at 6:00 pm at the Hyatt Regency Hotel. His presentation, “Economic Freedom and the Wealth and Health of Nations,” is sponsored by the Gilder Lehrman Institute of American History and underwritten by The Fred C. and Mary R. Koch Foundation.

    Because meeting space at the Hyatt is limited, the lecture sponsors ask that those interested in attending please RSVP by email to RSVP@kochind.com.

  • Government spending does not create prosperity

    In his op-ed Don’t buy canard about spending, Alan Cobb of Americans for Prosperity writes about the illusion that government spending creates economic growth.

    It’s an important topic, as we’ve just been through nearly a year of Obama stimulus spending, and people are wondering if the effort has paid off. Locally in Kansas, spending advocates argue that reducing Kansas state spending will cause economic growth to suffer. Even more locally in Wichita, city council members and city hall bureaucrats argue that government is responsible for managing economic development in Wichita, some going so far to proclaim that free people and free markets have failed and can’t be trusted.

    In yesterday’s Wichita Eagle, Wichita businessman Fred Berry takes issue with Cobb, and this disagreement provides a useful illustration of the difference between government and private action.

    Cobb wrote this: “If I take $20,000 from my neighbor and hire a gardener, the economy certainly hasn’t grown by $20,000. It’s simply been a shift of money.” Cobb is illustrating the effect of government spending.

    Berry wrote: “But let me use Cobb’s example in a different way. Suppose he and his neighbor decided to share a gardener, because neither needed one full time. Because Cobb’s garden was twice as large as his neighbor’s, he agreed to pay two-thirds of the cost.”

    What’s the difference between the two examples? It’s simple: Cobb is illustrating a government-coerced transaction, while Berry uses a voluntary transaction.

    There’s a world of difference between the two. Voluntary transactions are the way that wealth and prosperity are generated. These transactions happen because both parties believe they will be better off if the transaction takes place.

    This leads to what John Stossel has termed the “weird double thank you moment” when people engage in voluntary trade: One party says “thank you,” and so does the other. This happens at the grocery store and nearly everywhere people are making voluntary exchanges that benefit both parties.

    But when you pay your taxes, do you say “thank you?”

    Milton Friedman has written and lectured extensively on the topic of free markets. Here’s an example from his monumental work Capitalism and Freedom:

    Fundamentally, there are only two ways of co-ordinating the economic activities of millions. One is central direction involving the use of coercion — the technique of the army and of the modern totalitarian state. The other is voluntary co-operation of individuals — the technique of the market place.

    The possibility of co-ordination through voluntary co-operation rests on the elementary — yet frequently denied — proposition that both parties to an economic transaction benefit from it, provided the transaction is bi-laterally voluntary and informed.

    Exchange can therefore bring about co-ordination without coercion. A working model of a society organized through voluntary exchange is a free private enterprise exchange economy — what we have been calling competitive capitalism.

    It’s surprising to me that a businessman — here I specifically do not use the word “capitalist” — like Fred Berry would fail to recognize the distinction between free markets and government coercion. I guess I should not be surprised, as Berry made large campaign contributions to the Wichita school bond campaign in 2008, and the public schools are definitely unfriendly to capitalism. In addition, he has made contributions to enemies of capitalism like Wichita Mayor Carl Brewer and city council member Janet Miller.

    For more explanation of how free markets work from Milton Friedman, view the video below.

  • Don’t buy canard about spending

    By Alan Cobb

    “Canard” is a funny word.

    It keeps popping into my head anytime I read another self-anointed do-gooder who claims that government spending leads to economic growth.

    “Canard” means a false report — and we’ve got lots and lots of them about these claims.

    If I take $20,000 from my neighbor and hire a gardener, the economy certainly hasn’t grown by $20,000. It’s simply been a shift of money. Rearranging the furniture in your living room doesn’t increase the number of easy chairs or TVs.

    That’s what happens when your taxes pay for someone else’s salary, build a government building or pave a road.

    We value good roads and good government. But that doesn’t mean those things cause economic growth. Arguments otherwise are either deceitful or horribly misinformed.

    Many say that we don’t need to do anything but spend more government money and — voila — a land of milk and honey.

    Given the Kansas highway lobby’s assertions, Kansas should do nothing but build roads and the Sunflower State will become the promised land.

    Oh, if it were so.

    As Margaret Thatcher said, big government doesn’t work because eventually you run out of other people’s money.

    There’s also something never discussed by those wanting to line their pockets with what used to be in your pocket. The money doesn’t drop from the sky and it isn’t in your grandmother’s basement. It’s our money, and we taxpayers might do something more productive with it — though that is never measured. The citizens of Kansas might spend the billions the road lobby wants to spend on more roads (in a slow-growing state with great roads already) on something else, like starting new businesses, which would lead to growth.

    The multipliers used by those pushing the canard, cooked up in a fantasy lab, make it look even better. Multiply the $20,000 gardener salary by three — sprinkled with fairy dust — and all of the sudden the transfer of $20,000 magically becomes $60,000. So anything is justified. Want $3 million in economic growth? Just raise taxes by $1 million. You don’t need Billy Mays to sell this stuff.

    Add up all the multiplier studies and poof! Kansas’ economy is the size of Texas’.

    In a recent Wall Street Journal commentary, a Stanford University economics professor dismissed this notion and said the government-spending multipliers are actually negative. Outlays by the government crowd out private spending and require future taxes.

    Measuring the economic value of shorter commutes and fewer car repairs, accidents and fatalities is doable, but never done. Similarly measurable are the benefits of an educated populace, but the benefit is not the sum of teachers’ salaries plus the cost of the bricks in a school addition. Taking the input (tax dollars) and applying a castle-in-the-sky multiplier is not magical; it’s wrong.

    Saying the Pizza Hut that moved from downtown to the new bypass outside town is “growth” is equally wrong — and dishonest. But that’s what we hear from those pushing the canard that government spending is growth.

    There’s that word again.

  • At Wichita city council, does the field tilt?

    At the January 12 meeting of the Wichita City Council, several citizens and one council member addressed the “unlevel playing field” and its implications for development in downtown Wichita.

    Speaking about the unlevel playing field, council member Janet Miller said: “My own philosophy on that would say that really, incentives are often used to actually level the paying field.” Referring to downtown Wichita, she said that there may be conditions that make development more costly, or there may be other conditions that make development more difficult.

    Miller didn’t name specific factors, but often land assembly issues are mentioned as an impediment to developing in downtown Wichita. A parcel may be owned by many parties, the story goes, and it can be difficult and expensive to contact all parties and come to agreement with them.

    But land assembly is not an issue with the proposed hotel in WaterWalk. There is no doubt as to land ownership. It’s just one party, and one who is willing to lease it for $1 per year.

  • In Wichita, Free Market Economics 101 to be held

    On Monday, the Wichita Chapter of Americans For Prosperity is holding an informative meeting to learn more about free market economics and its application.

    The program is:

    A trade exercise
    A private property exercise
    Group discussions of
    “I, Pencil” by Leonard Reed
    “The Law” by Frederic Bastiat
    The Platinum Triangle Redevelopment Project
    “Seven Principles of Sound Public Policy” By Lawrence Reed

    A group discussion and question answering period will follow.

    This event is on Monday, November 30, 2009, from 7:00 pm to 9:30 pm. The location is:

    Belford Electric Inc. Meeting Room
    800 East Third Street
    Wichita, Kansas

    This is at the corner of Mead St. and Third St. North in Old Town. Click here for a Google map.

    The meeting room is limited to 24 participants. Please RSVP to John Todd at john@johntodd.net, 316-312-7335 or Susan Estes at sestes@afphq.org, 316-269-4170.

  • Wichita MAPC meeting mix of policy, politically correct

    At yesterday’s meeting of the Wichita Metropolitan Area Planning Commission, a mix of politics and policy resulted in protection of a Wichita non-profit’s market, but at the loss of convenience to Wichitans.

    The issue is about 65 red clothing recycling bins operated by American Recyclers of Tulsa. These bins are in violation of Wichita city code, which states that bins like these — called curbside recycling — can’t be used for the recycling of clothing. They may be used for the recycling of other items.

    The firm’s attorney, Bob Kaplan, had asked that the Wichita ordinance be revised to remove the prohibition on accepting clothing. Overland Park allows curbside collection of clothing under certain conditions, and after approval of a site plan.

    In his testimony, Kaplan said that there are two reasons why there is opposition to the recycling bins. One is the proliferation of the bins. There are about 65 in Wichita. The second — and perhaps the primary reason — is that sometimes the bins become full and items are left outside the bins. Other people dump all sorts of trash and junk near the bins. But about one million pounds of clothing is picked up in the course of a year.

    Kaplan said that every box is visited by the recycling company once a day, seven days a week. All items left at the bins are picked up, even if they are not items that should have been left there. Also, the company quickly responds to calls if a problem is reported.

    The operator of a Wichita recycling center spoke to answer questions about his operation. The relevance of his testimony was not clear, but several members of the MAPC were interested in details of the operation of the recycling center, such as its hours of operation, and has it considered opening other locations in Wichita.

    Representatives of Goodwill Industries spoke, and it was at this time that the crux of this issue became clear: Since the introduction of the red bins, Goodwill has seen a drop in the volume of clothing items coming to its stores. He said that the prohibition on curbside recycling of clothing protects the standard of living in our community by preventing blight. He welcomed American Recyclers to come to Wichita and open a business in a building, as does Goodwill.

    MAPC member David Dennis asked questions regarding the number and locations of the Goodwill stores, the amount of investment, jobs, and wages. But the most important question Dennis asked was this: Where do the proceeds go — charity, or profit?

    John Todd, citizen, said that the applicant’s proposal offer choice to the consumer. Competition is good for business, and the consumer wins where there is choice and competition.

    Kaplan agreed, saying “competition is not a relevant factor” in the decision the MAPC has to make.

    A question by MAPC board member Mitch Mitchell highlighted the point that it is not the boxes themselves that are illegal. It is that they are used for the recycling of clothing that makes them in violation of Wichita city code.

    A motion was made and seconded that would have left the Wichita ordinance as it presently exists, meaning that the red bins would still be illegal. A substitute motion offered by Mitchell would have accepted Kaplan’s offer to work with city staff to include the provisions of the Overland Park ordinance so that there could be curbside recycling of clothing.

    City legal staff interjected that what was being asked — directing staff to initiate an amendment to the zoning code — was beyond the authority of individual applicants, but the commission could, still, ask for this.

    But no second to Mitchell’s was forthcoming, so the motion died. The original motion passed with only Mitchell voting against it.

    After the meeting, Kaplan would not comment of the future plans of his client. The red bins are likely to be removed, he said, to comply with the decision.

    Analysis

    The prohibition of curbside recycling of clothing is a curious anomaly in the city code. The type of bins in question are allowed for the recycling of other goods. I spoke with MAPC member Mitchell, and he said that no one in the city’s planning department can tell him why the prohibition on clothing was placed in the ordinance.

    The most troubling aspect of the MAPC’s consideration of this item is the nature of the questions asked by several board members. These questions were obviously designed to show that a non-profit organization like Goodwill Industries is superior to a profit-making business. This presumption that non-profits are more virtuous and desirable because of the absence of the profit motive is common, but unfounded. It’s an example of the bias — considered to be the politically correct stance in some quarters — against profit and business.

    This is especially troubling in the case of David Dennis, who, according to his biography, has worked for non-profit government institutions (primarily the military and Wichita public schools) for most of his career.

    The ability to earn a profit means that an organization is providing goods or services that are valued by people, and if the organization is able to stay in business, it means it is doing this efficiently. Profit is evidence that capital is being used effectively.

    Additionally, profit is the source of the ability to pay taxes. That allows institutions like the military and public schools to operate and institutions like Goodwill to exist without paying many of the taxes that businesses must pay.

    Would the members of the MAPC have been willing to ask for a change of city code if the red bins were operated by a charity? We don’t know, but making the type of policy decisions that were made today is not within the scope of the MAPC’s responsibility. Mitchell said it is difficult to work on these types of issues without considering and making policy.

    As it stands, Wichitans are about to be deprived of a convenient way to recycle clothing. The Wichita city council should consider revising city code to allow curbside recycling of clothing.

    An earlier report from KWCH is Red Bins Violate City Code. Its reporting on yesterday’s meeting is at Red Bins Illegal and Must Go.

  • ‘Political capitalism’ explained in Wichita

    In Wichita this Monday, Robert L. Bradley, Jr. explained the state of capitalism in America today, using his experience working in a high-level position at the failed energy conglomerate Enron as a backdrop.

    Bradley asked: What happened to business prudence? What has happened to capitalism? The answer is that what we have today is not free market capitalism. Rather, it’s a very different type of capitalism: political capitalism.

    A common question today is has capitalism failed? Problems are automatically blamed on greed, self-interest, and profit maximization — in other words capitalism.

    Historically, robber barons have been condemned as examples of capitalism out of control. But many “robber barons” such as Rockefeller made money through voluntary transactions with their customers, Some, however, lived off special government favor such as tariffs. That’s political capitalism.

    Then during the Great Depression capitalism was blamed again. At that time, however, the Federal Reserve Bank was already in control, and this era saw the rise of other forms of government interventionism.

    Today our problems are commonly blamed on self-interest and capitalism rather than government.

    What is real capitalism vs. American-style political capitalism — the mixed economy where government intervenes heavily in business and the economy?

    Enron is still the premier example of political capitalism. But not many knew the full extent of Enron’s activities, or they though it was okay: “Enron was everyone’s favorite company.”

    But the company that everyone thought was the best turned out to be the worst.

    Bradley said the moral of Enron is deeper. There was a systemic failure surrounding Enron. All the gatekeepers — regulators, auditors, legal counsel, the business press, credit rating agencies, business professors — all failed at the same time.

    Many critics said that Enron refutes all that is good about free markets. Bradley quoted one business ethics professor: “The Enron value set was an extreme laissez faire ideology of absolutely free unregulated markets.”

    Bradley disagrees with this assessment, however. Enron was all about Ken Lay, “a master political capitalist.” Lay was a PhD. economist with a lot of Washington experience. His business model for Enron was regulatory change. If Enron could direct the change, it could gain the “first mover” advantage.

    Bradlet quoted a definition of political capitalism as “The utilization of political outlets to obtain conditions of stability, predictability, and security to allow corporations to make reasonable profits over the long run.”

    Socialists, he said, believe that when there is private property, its owners will be in bed with politicians in order to gain special favors.

    Enron’s profit centers had to do with regulatory change. Enron was the first major United States company to proclaim that the climate was in crisis and that government intervention was needed to reduce greenhouse gases.

    But it was a self-interested position. Enron rescued the domestic wind power industry by purchasing a company in that industry, and getting a mandate from the Texas legislature for renewable power mandate.

    Today, the Obama energy plan has a lot to do with Enron’s public policy thrust.

    Enron also gamed regulatory systems. By manipulating accounting rules, Enron could show accounting profits where there were no true economic profits.

    In the tax department, Enron used boutique accounting and legal firms to find niches in the tax code that could be exploited.

    The lesson is that these regulations may not be providing investors useful information and protection, although there may be an illusion created. A corporate report from the 1930s of just three pages gave investors more useful information, and held the firm more accountable, than did Enron’s last corporate report of 56 pages. The lesson, Bradley said, is “simple rules for a complex world.”

    So how did someone like Ken Lay get to the top of the business world? How did he fool everyone and bring down all the gatekeepers with him? Bradley said the government side of the mixed economy was the factor that created an environment that could be exploited.

    The lesson is that the rise and fall of Enron discredits the mixed economy and political capitalism.

    A question was asked: What should we do? Bradley said we should support public policies that are market-oriented, instead of supporting government intervention. But given the mixed economy, we need to watch out for artificial incentives.

    Afterwards, I asked Bradley about government intervention at a local level, such as in Wichita. Specifically, what about TIF districts and tax abatements? Are these examples of political capitalism? Bradley said yes, these are. A side effect is that a tax abatement does leave money in the private sector instead of the government public sector. But a special favor means an artificial stimulus that encourages malinvestment.

    I asked if we need more regulation to protect us, or is our current regulatory regime sufficient? Bradley mentioned that in the Bernie Madoff scandal, the defrauded investors are as mad, or more mad at the Securities and Exchange Commission, that they are at Madoff himself. Many figured that the SEC, with its thousands of regulators, had done their homework for them, and that Madoff’s company was safe. This represents a major unintended consequence of regulation.

    Much more information about this topic can be found at Bradley’s website Political Capitalism. His recent book is Capitalism at Work: Business, Government and Energy.