Voice For Liberty

Tag: Free markets

  • Sedgwick County trash franchising: on the road to economic perdition

    I received this letter to Sedgwick County (Kansas) Commissioner David Unruh “over the transom” and I thought it merited reading by the general public. The author speaks of the “road to economic perdition.” I had to use the dictionary to refresh my memory of the exact meaning of the word “perdition.” While that term seems at first to be a little strong, I believe that trash franchising, like a ban on smoking, is just the first step in the plans of our local government officials. If politicians and newspaper editorialists can convince us that we require the force of government to take care of something as simple as picking up the trash — something that works very well already – it’s an easy jump to the next level of control. So perdition seems appropriate.

    The May 21 Wichita Eagle reported that you and a number of other commissioners want to impose some sort of franchise on trash collection by cities operating in the area where Sedgwick County is responsible for trash disposal with state authorities. The Eagle quotes you as supporting a government franchise monopoly by haulers in specific areas as well as uniform terms for collection of residential refuse.

    Before joining the commission I know that you were a businessman in the car repair business. Since government monopolies and uniformity in service is apparently preferable to free markets and open competition I hope that you will want to extend government into providing uniform monopoly in car repair as well as other private sector businesses. If the county’s goal is ending duplication of services and allegedly “wasteful” competition what basis do you have for only limiting franchising to trash hauling?

    It is very clear to even the most casual consumer that there is significant variations in pricing among the folks repairing automobiles just like there are in the trash hauling business. There is a lack of uniformity in people getting their cars repaired too.

    I must also note that an Unruh repair shop near 13th St. W. and Maize Rd. is only a short distance away from Westlink Auto Service. Having two firms competing for customers is obviously as duplicative and excessive as multiple trash firms going down the same street to collect refuse.

    We have a similar situation nearby where two instances of two separate firms selling groceries are located on adjacent corners at 21st W and Maize Rd. (Walmart and Dillons) as well as Maize Rd. and W. Central (Aldi and Dillons).

    Government monopolies have also a proven track record of performance. There is a name for this when university students study 20th century governments where these types of restrictions are commonplace.

    Look how Wichita water and sewer rates have performed in the last few years and how it now appears likely that the city will be once again raising these rates significantly soon. Municipal power plants that dot many small Kansas towns also have a similar track record of costly performance for the citizens who have to pay the rates.

    The City of Wichita got out of the trash hauling business in the late 1970’s for a reason. Establishing private/public franchise monopolies is a power that should be exercised very cautiously and carefully and has failed in the past. However, if you are going to expand local government’s roles in establishing ways of eliminating duplication of services and wasteful competition, you should fully understand where this road to economic perdition leads.

  • Trash Franchising in Wichita and Sedgwick County

    Currently both Sedgwick County and Wichita are considering trash franchising.

    On the surface, “franchising” sounds like a good thing. It sounds like someone’s opening a new Subway sandwich shop.

    But what trash franchising does is to grant a monopoly to one (or sometimes a few) service providers for specific geographic areas. Under franchising, people living in an area will have either no choice, or perhaps limited choice, in choosing who picks up their trash. Rates will also be set by government.

    The effect of this is that the profit motive for trash haulers is dramatically modified. Under franchising, trash companies have guaranteed customers paying mandated rates. What is the likely effect of this? I refer to Walter E. Williams, who said this: “Here’s Williams’ law: Whenever the profit incentive is missing, the probability that people’s wants can be safely ignored is the greatest.”

    The use of the term “franchising” glosses over the consequences of a government mandate of who customers may choose to do business with. Citizens need a better term that accurately describes what our government is considering. Unfortunately, I am having trouble coming up with such a term, so I am asking you for help.

    So far I have these terms: “mandatory service provider selection,” “choice elimination,” “enforced selection,” and “trash service reduction program.”

    As you see, none of these terms are very artful. So please help me. You may email your suggestions to bob.weeks@gmail.com, or leave them as a comment to this article. Comments may be anonymous.

  • Everything you love you owe to capitalism

    This is an excellent article by Llewellyn H. Rockwell, Jr., president of the Ludwig von Mises Institute. An excerpt:

    I’m convinced that Mises was right: the most important step economists or economic institutions can take is in the direction of public education in economic logic.

    There is another important factor here. The state thrives on an economically ignorant public. This is the only way it can get away with blaming inflation or recession on consumers, or claiming that the government’s fiscal problems are due to our paying too little in taxes. It is economic ignorance that permits the regulatory agencies to claim that they are protecting us as versus denying us choice. It is only by keeping us all in the dark that it can continue to start war after war — violating rights abroad and smashing liberties at home — in the name of spreading freedom.

    There is only one force that can put an end to the successes of the state, and that is an economically and morally informed public. Otherwise, the state can continue to spread its malicious and destructive policies.

    The full article is here: Everything You Love You Owe to Capitalism.

  • Haze surrounds Wichita smoking ban

    Remarks delivered to Wichita City Council, May 6, 2008. Listen here.

    Smoking ban supporters claim that they have the right to go to bowling alleys, bars, and other such places without having to breath secondhand smoke. That’s false. No one has the right to be on someone else’s property on their own terms. The property owner controls those terms. If the bar owner lets the band play too loud (or maybe not loud enough), or the restaurant is too dimly lit, or the floor of the steakhouse covered with discarded peanut shells, do we want to regulate these things too?

    Some have compared a smoking section in a restaurant to a urinating section in a swimming pool. This comparison is ridiculous. You can’t tell upon entering a swimming pool if someone peed in it. You can tell, however, upon entering a bar or restaurant if there is smoking going on.

    Some make the argument that since we regulate businesses for health reasons already, why not regulate smoking? Without agreeing with the need for these regulations, the answer is this: First, these government regulations don’t necessarily accomplish their goal. People still become ill from food, for example. But there is some merit here. Just by entering a restaurant and inspecting the dining room and the menu, you can’t tell if the food is being stored at the proper temperature in the restaurant’s refrigerators. But you can easily tell if there’s smoking going on.

    A system of absolute respect for private property rights is the best way to handle smoking. The owners of bars and restaurants have, and should continue to have, the absolute right to permit or deny smoking on their property. Markets -– that is, people freely making decisions for themselves -– will let property owners know whether they want smoking or clean air.

    The problem with a smoking ban written into law rather than reliance on markets 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. That’s why we have 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.

    This is not a middle-ground position, as there really isn’t a middle ground here. Instead, this 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 someone said, will “tick off everybody.” Who benefits from a law that does that?

  • No Government Trains, Please

    Part of the Wichita Eagle opinion watch series.

    A writer in the April 2, 2008 Wichita Eagle presses the case for passenger train service in Wichita. But there are several problems with the writer’s argument.

    The writer makes this claim: “With Kansas’ vast wind resource, we could power our trains with no fossil fuels.” Yes, there is a lot of wind in Kansas. But it doesn’t blow continuously. What does the writer suggest we power the trains with at those times? Until there is an economically feasible method of storing the electricity generated by wind, we will be reliant on traditional methods of power generation. Wind can only be a supplement.

    The writer admits that high-speed passenger train service will require a lot of public money. That’s okay, he says, as we presently spend a lot on our roads and traffic systems. The government-built and owned roads are frequently criticized, however. The fact that we’ve spent a lot on them — with often unsatisfactory results — is not an argument in favor of more government involvement in transportation systems. There is, in fact, a small movement towards more private highways, and there are persuasive arguments that all roads and highways should be privately owned.

    If there is in fact a demand for high-speed rail travel in Kansas and the United States, let private entrepreneurs, rather than government, lead its development. That’s the best way to have a system that meets the needs of customers, rather than the needs of politicians and government bureaucrats.

    I wonder if the writer remembers that the government does have a track record of owning and operating a railroad. That’s Amtrak, and having mentioned that, I believe no more needs to be said.

  • Are Teachers Paid Fairly?

    Part of the Wichita Eagle Opinion Watch series. Audio is available here.

    The school bond issue in Wichita and those occurring in surrounding districts overlook one crucial necessity: a fair wage for teachers. They are critically underpaid for all levels of education, service and abilities. (From The Wichita Eagle Opinion Line, April 27, 2008)

    This writer is misinformed on several levels.

    First, bond issues such as the one proposed by USD 259, the Wichita, Kansas public school district, are usually reserved for capital expenditures, such as constructing buildings. Ongoing expenses such as salaries are not considered as part of a bond issue. The writer might also remember that in August 2007, the Wichita school district raised property tax rates to pay for an increase in teacher salaries.

    Then, who can determine what constitutes a “fair” wage? I know of no teachers who were forced to accept the jobs they filled. We can only presume that both the teacher and the school voluntarily entered into an agreement, with the wage to be paid as part of that agreement.

    But the issue might be a little more complex. For one thing, most public school teachers work under a collective bargaining agreement which specifies the wages to be paid for teachers, based on their length of experience and educational credentials. There is little or nothing that most teachers can do to escape that pay scale. It works both ways: there are excellent teachers who are underpaid compared to the value they generate through their efforts and skill. At the same time there are poor teachers who are overpaid when compared to good or average teachers.

    Related is the fact that public school teacher wages are not set in a free market by willing participants on both sides. Whenever teachers get a raise, it is inevitable that letter writers and opinion line callers will express outrage at having to pay for a raise in teacher pay. That’s characteristic of coerced transactions: many taxpayers don’t like to see their taxes go up. But that’s usually the only way that public school teacher pay can be raised.

    The public schools, also, have the same problem as does any public agency: they are not able to perform economic calculation to properly evaluate their use of resources. They are not able to calculate profit or loss, so we really don’t know if they use inputs — such as the taxpayer funds used for teacher salaries — wisely.

    Besides, the myth that teachers are underpaid relative to other jobs has been exposed for just that. Jay Greene, in the book Education Myths, reports that based on U.S. Department of Labor data for 2002, accounting for the number of hours worked, school teachers earned about $31 per hour. That is more than architects, economists, biologists, civil engineers, mechanical engineers, and chemists.

  • No Recycling Mandates in Sedgwick County, Please

    Remarks delivered at a public hearing for the Sedgwick County solid waste management plan, April 24, 2008. Sedgwick County, Kansas, home to the City of Wichita, is considering a mandatory household recycling program. Or, perhaps people won’t be forced to recycle, but they will be required to pay for the cost burden that recycling places on communities.

    You may listen to this article in audio form by clicking here.

    The economist Frederich Hayek tells us that the price system communicates all the information we need to know about the relative value of things. The price system allows people who don’t know each other to coordinate their activities in the most effective and efficient way possible. The price system is truly a miracle.

    If you want to see what happens when the price system is not allowed to work, usually because a government attempts to manage prices, just look at the former Soviet Union and other planned economies. The economist Thomas Sowell relates this story:

    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 price system can do its work only when free people trade with each other freely under a system where property rights are respected. Any attempt by governments to manage prices leads to inefficiencies that manifest themselves as shortages, waiting lines, surpluses, and black markets. The emergence of these problems lead to calls for even more government interventionism to fix the very problem the government caused by interfering with the price system. It can be a never-ending cycle.

    How does this apply to recycling in Sedgwick County?

    In some cases the price system tells us that recycling is a beneficial use of resources. About 75% of automobiles are recycled, and used cardboard is often recycled in commercial settings. That’s because the price paid for these recycled items is high enough that, in these contexts, recycling can be profitable. That’s the price system at work. It tells us that the best use of an old car is to recycle it, and the same goes for cardboard boxes at the grocery store.

    A household setting is different. Households usually have to pay to engage in recycling. The prices that recyclers can get for these recycled goods doesn’t cover the cost of collecting them from households, as evidenced by the fact that in Wichita households must pay someone to pick up recyclables. That’s the price system at work again. Its sober assessment is that in the context of households, recycling is a waste of resources. That waste can be tremendous. Orange County, Florida, for example, spends roughly $3 million per year to collect recyclable goods from households, but sells them for only $56,000.

    What about running out of landfill space? If landfill space were truly scarce, the price system would tell us so, because landfill operators — if there is a free market for landfills — could charge high prices for accepting trash. But evidently, they can’t.

    So the price system tells us sometimes recycling is a good use of resources, and sometimes it isn’t.

    A mandatory recycling program or one where people have to pay fees even if they don’t actually recycle their household goods amounts to the government attempting to override the price system. It is attempting to manage the price system through government interventionism. These policies, should Sedgwick County implement them, will cause citizens to suffer the same inefficiencies that all planned economies have demonstrated, if on a smaller scale.

  • Remarks to Wichita City Council, April 1, 2008

    Following are remarks I delivered to the Wichita City Council, asking them to not approve tax increment financing (TIF) for a project in Wichita. The council approved the financing by a vote of six to one. Thank you to council member Paul Gray for his dissenting vote.

    Mr. Mayor and members of the Wichita City Council, I ask you to not approve this TIF financing request, and to cease this practice in the future.

    We need to allow markets to channel capital and investment to where people value it greatest. The profit and loss system provides that guidance.

    By asking for the TIF financing, developers are sending us a signal that without the special tax favor, their project would not be economically feasible. They evidently have judged that it would not be profitable. They must feel that they will not be able to sell or rent at prices that will cover their costs of developing this project.

    This means that proceeding with the project is investing capital somewhere other than its most-valued use. We know that because developers build other things in Wichita without receiving a subsidy, and they are able to earn a profit.

    Now this project may satisfy the political goals of some people who believe that not enough development is happening in their politically-desired part of town. But these people are not spending their own money to accomplish this goal.

    If these developers want to build something in this area, they need to figure out what will appeal to people, what will fill enough of a need, that the project is profitable on its own. That’s how we will know that this investment is wise. They won’t have to appear before governmental bodies seeking approval for their plans. They can just do it.

    That’s market entrepreneurship. It is the way that wealth is created. These developers, instead, are practicing political entrepreneurship, where they seek to please various governmental bodies, rather than satisfying consumers who express their desires through the mechanism of markets.

    This leads to a corrosive environment where nearly every week someone appears before this council requesting special treatment, that favor paid for by the rest of the the community. This is harmful.

    Supporters of TIF explain them in a way that makes it seem as though there is no cost involved in granting the subsidy. But there is. Why would these developers want them, and why would this council not grant them to everyone if there were no cost?

    I propose a pledge that this council could take that will help our community become aware of the cost of these subsidies, and will also alleviate some of the inequity. When the City of Wichita grants special tax treatment, it must reduce its spending by the same amount. By following this simple rule, the City can be reminded of the cost of granting special tax favors, and the rest of us won’t have to pay for them.

  • Private salary supplements to public officials is a problem

    USD 259, the Wichita public school district, outgoing superintendent Winston Brooks has been receiving a supplemental salary paid for by private interests. This salary supplement, supporters say, was necessary to prevent Mr. Brooks from leaving Wichita for somewhere else where he would be paid more.

    One way to look at this salary supplement is that USD 259 received the services of someone whose salary they couldn’t afford. And since the salary supplement was funded by the voluntary action of citizens, how can we object? But there are problems with this type of arrangement.

    If a superintendent of schools depends on the owner of, say, a car dealership to lead a group that pays a significant share of his salary, and then it comes time for the school district to purchase cars, how can we be sure there is no conflict of interest?

    When it comes time for the school district to purchase cars or anything else, do we check to make sure that the selected vendor isn’t a member of, or have a friend on, the committee that provides the superintendent’s supplemental salary? And if so, is the district getting a good deal? Or would too many restrictions prevent the district from getting the best deal on their purchases?

    Another problem is that it may be the case that the superintendent of schools is worthy of a large salary, perhaps much larger than the current salary and supplement. Someone who can effectively manage an organization with thousands of employees and an annual budget of over half a billion dollars is worth a great deal. Someone who can make a positive difference in how well Wichita’s schoolchildren are educated is invaluable.

    This illustrates a problem with government institutions. They do not have the flexibility to respond to events and circumstances in the way private enterprise can. If it was the case that the new incoming superintendent could save tens of millions of dollars while greatly improving student outcomes, that person would be worth a salary of, say, one million dollars or more. But as a practical matter, USD 259 could not pay anyone a salary that large. There would be too much resentment.

    The main problem is that USD 259, like all government school districts, is funded not through voluntary transactions, but through taxation backed up by coercion. When taxpayers are forced to pay for things they don’t agree with, resentment builds.

    Further, because the Wichita public schools raise funds through taxation instead of voluntary transactions taking place in markets, we do not know, and the board of USD 259 certainly does not know, if their expenditures are wise and efficient. This applies to a superintendent’s salary and every other expenditure the school district makes. Absent the test of profitability, or even the test of having to attract customers and revenue through voluntary decisions on the part of consumers, we do not know how efficiently USD 259 manages the resources they have.