Voice For Liberty

Tag: Free markets

  • In Wichita, 300 citizens rally for free markets and limited government

    AFP Defending the American Dream Summit in Wichita 2009-10-10

    Yesterday (January 10, 2009) Americans For Prosperity held a Defending the American Dream Summit in Wichita. After the event I spoke to Alan Cobb, who just stepped down as AFP’s Kansas state director to become AFP’s national director of state operations.

    I asked Cobb how many people attend this event. “We had over 300. It’s the largest event we’ve had.” He added that everyone seemed to love the event.

    I mentioned to Cobb about how the national press portrays the current financial crisis as a failure of capitalism and free markets. In fact, Jonah Goldberg, one of the speakers, said he feels a little weird be at a free market forum with what’s going in in Washington now. Was it a failure of free markets that caused the current crisis?

    “No, of course not. It seems ironic when they talk about the banking industry failing, as it is one of the most regulated industries of all. It was government policies that partly caused at least part of the problem with sub-prime mortgages. It’s a constant theme, and it leads to the New New Deal, which was discussed several times today.”

    I mentioned how lawmakers tell us that they’re often surprised at how little personal communication they receive from citizens in their districts. (They get a lot of communication from lobbyists and interested parties outside their districts.) What does this mean about the impact the average person can have on the legislative process?

    “It means they obviously can have a tremendous impact, when sometimes five or six phone calls is an avalanche.” He went on to remark that people enjoy coming to grassroots meetings like the one today, but they wonder what they can really do, as they believe that politicians never listen to them. But there are many examples, he said, of where the voices of citizen activists have made a difference.

    I asked what are some of the most important local-level grassroots activists can do to advance the cause of liberty and free markets?

    “Two primary things: One is to recruit. Get other people involved, whether it’s in AFP or another free market group. The second is to stay engaged and don’t give up.”

  • Americans for Prosperity — Kansas to hold second Defending the American Dream Summit

    Event to kick off 2009 Kansas Legislative Session

    TOPEKA — The free-market grassroots group Americans for Prosperity-Kansas will hold its second statewide Defending the American Dream Summit in Wichita Saturday, January 10, 2009, just two days prior to the start of the 2009 Kansas Legislature.

    “This event will serve as a kick-off for the new legislative session,” said Americans for Prosperity-Kansas state director Derrick Sontag. “Going into the 2009 Legislature, we see an opportunity to help change the way elected officials seem to view their obligations to taxpayers, and how our state budgets its funds.”

    The event, held at the Beech Activity Center in Wichita, will focus on state spending, tax policy and grassroots activism. Confirmed speakers include National Review Online editor and “Liberal Fascism” author Jonah Goldberg; The Wall Street Journal’s Stephen Moore; author Dr. Gregory Schneider; incoming Kansas House Speaker Mike O’Neal and others, including state senators Susan Wagle (R-Wichita) and Chris Steineger (D-Kansas City). The group will also hear from other elected officials as well as local grassroots activists.

    “We hope to show legislators and elected officials that their constituents will be paying attention to what happens in Topeka during the next few months,” said Sontag. “And we certainly will encourage legislators to focus on reducing spending where appropriate, rather than asking Kansas taxpayers to carry the burden.”

    For more information, call Jen Rezac at 785-354-4237.

    To register to attend the summit, visit defendingthedream.org/KS/.

  • Markets are the best regulators

    Since the start of the current financial crises, we’re told that markets are at fault. The most common diagnosis is that there’s not enough regulation in place, and only a move away from reliance on markets and toward more laws and regulations will save the economy.

    One thing that did happen is that someone misjudged the risk that was present in the mortgage-backed securities that led to the downfall of several investment banks. A recent article in the Wall Street Journal does the best job I’ve seen of explaining how this mistake, made by credit rating agencies, was responsible for this crisis. The article, written by Robert Rosenckanz, is Let’s Write the Rating Agencies Out of Our Law. Here’s a summary, as best as I can produce, of this article:

    Rating agencies can make mistakes.

    Regulatory agencies used these ratings in formulating their regulations. “Most importantly, bond ratings determine — as a matter of law — how much capital regulated institutions need in order to own the bonds.”

    “Since the ratings determine required capital, they have a profound influence on how financial institutions invest their assets — in effect, the regulatory reliance on ratings makes the rating agencies the de facto allocators of capital in our system. And every actor in the financial system has every incentive to group and slice assets in ways that maximize not their fundamental soundness but their rating.”

    “The problem was not the erroneous ratings per se; everyone misgauges risk and ratings agencies are no different. The problem is that these erroneous ratings were incorporated into law. Regulators should not have relied on ratings agencies to asses the risk of bond holdings. Instead, they should have relied on markets.”

    Markets are superior to small groups of people — the credit rating agencies in this case — in making decisions. Because of regulation, however, the financial system was forced to accept and rely on these ratings. That, in turn, led to disaster.

  • In public schools, incentives matter

    Last week (Wichita Public School District’s Path: Not Fruitful) I wrote about an article by Malcolm Gladwell. This article describes a method for evaluating and paying teachers. It’s not based on what public schools do now, which is to reward teachers solely on the basis of longevity and education credentials earned. That’s because we’ve found that these two measures don’t do anything to improve the effectiveness of teachers. “Test scores, graduate degrees, and certifications — as much as they appear related to teaching prowess — turn out to be about as useful in predicting success as having a quarterback throw footballs into a bunch of garbage cans.”

    Instead, Gladwell finds that personal characteristics and behavior of teachers matter highly. These are discovered and evaluated through observation of the teacher in the classroom, as Gladwell reports.

    Teachers, however, resist this type of evaluation. Teachers complain about arbitrary actions by administrators. They fear that they will be fired or disciplined in some way for speaking out or not going along with the system.

    The problem that employees of government have is that without competition provided by markets and the profit and loss system, administrators can be arbitrary in their actions. There’s nothing to prevent them from being so.

    In private enterprise, a firm must earn a profit. If it can’t earn profits, it will fail and go out of business. Private firms earn profits by pleasing customers. They provide products and services that customers value, and they provide them efficiently. To do this, they seek to employ the best people they can. If a firm hires less-qualified employees — say someone’s brother-in-law just because he’s a relative — they will probably not be as profitable. If activities like this go on long enough, the firm will probably go out of business, as it won’t be able to compete against firms with better-qualified employees.

    The public schools, however, don’t have customers in the same way that private firms do. Most customers of a school district like USD 259, the Wichita public school district, don’t have an alternative.

    Furthermore, public schools districts like USD 259 don’t have to earn a profit. Their revenue stream is guaranteed. Their customers are, too. So why should the managers of USD 259 care about the quality of their employees? They can hire anyone they want for any reason. And no matter how qualified and successful a teacher may be, that adds nothing to the “profitability” of USD 259. So what are the motives and incentives in place?

    To learn more about the evaluation system mentioned in Gladwell’s article, see Neither Art nor Accident: A Conversation with Robert Pianta.

  • I, Pencil turns 50!

    The Foundation for Economic Education has a new version of I, Pencil to celebrate its 50th anniversary. Click here to view the announcement and read this short book.

    I’ve written about I, Pencil in the past.

    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 thought to, the story of the pencil illustrates the importance of markets and the impossibility of centralized economic planning.

    The size and scope of government, both at the national and local level, has been growing. Now our country is entering a period where the possibility of even larger and more intrusive government, growing faster than it has been, is very real. Those who love liberty must keep principles like those illuminated in I, Pencil at the forefront of debate.

  • Do We Have Too Little Regulation?

    One of the things we’re being told by the mainstream media is that deregulation is the cause of our current economic crisis. If only Bush hadn’t torn up so many regulations, we wouldn’t be in this trouble. Only adding more regulation will save the economy. Free markets — as if our economy is based on anything like that concept — are also blamed.

    The most recent Cato Policy Report has an article Are We Ailing from Too Much Deregulation? that shows why these beliefs are incorrect.

  • Wichita TIF districts mean central government planning

    As the City of Wichita moves towards more government subsidy and planning instead of entrepreneurship, we should make sure we know what we’re relying on. An article by Steven Greenhut from the July/August issue of The Freeman: Ideas on Liberty provides some useful background and advice.

    The article is here: Central Planning Comes to Main Street. Following are a few excerpts:

    The theory is that the city deserves the new tax dollars because its efforts are improving the supposedly blighted area. But the reality is quite different. Cities don’t often use TIF to fix up blight, but to increase their tax base. Often they engage in what is called “growth capture” — city planners wait until a stable or depressed area is starting to bounce back on its own. They then brand the area “blighted” and use that as an excuse to capture the new values and transfer the gain from the old owners, who held onto the properties during the lean years, to new developers who savor the prospect of getting prime property for far-below-market rates.

    This concept of “growth capture” is what’s happening in Wichita. Assessed valuations of property surrounding the arena have already risen. The area appears on an upward path on its own. Why the need for a TIF district, then?

    “Does the tax abatement method meet with success?” asked Michael LaFaive of the Mackinac Center for Public Policy in a 1999 article. “Not as much as if local officials simply would keep taxes low in the first place. CRC [Citizens Research Council of Michigan] found that economic growth takes place in jurisdictions where taxes are low and which consequently grant fewer abatements.”

    Yes, let’s have low taxes overall, instead of just for favored developers working in politically-favored areas. Or, as John Todd said, think of what could happen if there was a TIF district city-wide.

    Local economic planning, especially the creation of redevelopment project areas, actually slows down neighborhood improvement. Once an area is deemed a redevelopment area, property owners stop investing in their properties because they are not sure that they will ultimately reap the benefit of the investment. They become subjects of the central planners who will make the main decisions that affect the economic vitality of the area.

    This is another important point. Individual projects in the TIF district must be planned in a way that will be able to gain approval of government planners. This happened in Tuesday’s Wichita city council meeting, where the first project in a TIF district known as C.O.R.E was brought before the council for approval. How many developers want to work with city bureaucrats looking over their shoulder?

    There’s much more valuable insight in this article.

  • Walter Block on Economics in One Lesson

    Walter Block talks about Economics in One Lesson, perhaps the most approachable book about economics. And, it’s a free-market, liberty-friendly, Austrian approach. What could be better?

    In this video, Professor Block is interviewed by Jeffrey Tucker at the Ludwig von Mises Institute.

  • The danger of auto industry nationalization

    In consideration for a bailout, Congress and the incoming Obama administration insist that the auto industry present a plan for survival of their companies. That sounds reasonable — until you consider that the auto companies must already be operating on a plan, and that plan isn’t working. How can they be expected to come up with a new plan in just a few weeks?

    Then, any plan will have to undergo the scrutiny of Congress. I, for one, have absolutely no confidence in the ability of Congress to evaluate a plan for the revitalization of the American automobile industry. Although congressional leaders, it seems to me, are quite eager to give it a try.

    That leads to real danger that we face. If Congress and the Obama administration approve a bailout, they’re going to insist on close oversight of the auto companies. In effect, this industry will come under the control of the federal government. And how many people want to buy a car designed and built under those conditions?