Voice For Liberty

Tag: Free markets

  • Regulatory uncertainty weakens Kansas’ economy

    In this article, Karl Peterjohn states that the professional staff at the Kansas Department of Health and Environment approved the permit for a new coal-burning electricity plant in Kansas, but the agency’s Secretary, Rod Bremby, overruled that staff. It seems as though he and Governor Kathleen Sebelius were trying to stake new political ground in America. Why they would want to do this is not clear to me and many other Kansans. China builds a new plant like the one proposed for Kansas every seven to ten days. India builds many, and so do some other countries. Since it’s not called global warming for nothing, it doesn’t matter where these plants are built. They all affect the global atmosphere, as far as carbon dioxide is concerned, in precisely the same way. So two Kansas politicians, cheered on by a few newspaper editorial writers, place the Kansas economy at great risk for what benefit? Perhaps in a few years, on a hot summer day when little wind is blowing, the chillers at the Wichita Eagle building on East Douglas will slow to a crawl, the editorialists’ computers switch to battery back up power with only a few minutes left to finish the day’s work, and no electricity is available to run the printing presses or the servers hosting the Eagle’s web site. But at least we in Kansas spewed only 0.01% as much carbon into the atmosphere as did the new Chinese coal plants.

    Regulatory Uncertainty Weakens Kansas’ Economy
    By Karl Peterjohn, Kansas Taxpayers Network, www.kansastaxpayers.com

    The regulatory uncertainty created by Kansas Department of Health and Environment (KDHE) Secretary Ron Bremby’s decision to deny a permit to Sunflower Electric’s proposed power plant places the Kansas economy at risk and should be obvious to everyone. Sadly, this everyone does not include the Wichita Eagle’s editorial board’s February 27th editorial.

    Electric utilities are already highly regulated by the state as well as federal rules and edicts. Sunflower Electric’s proposed coal fired electrical power plant expansion had been through numerous permits and regulatory requirements. The professional staff at KDHE had recommended approval based upon the criteria elected officials had placed in Kansas law.

    Secretary Bremby decided that he would add new criteria that no federal or state elected officials had approved. Kansas became the first state to declare that carbon dioxide emissions are pollutants. That became his basis for denying a construction permit.

    The Wichita Eagle was correct in pointing out that Bremby’s ruling was a first. Bremby’s edict was not only a first in Kansas, it was a first for the entire nation. Bremby’s decision became national news as Kansas became the only state where carbon dioxide emissions became a pollutant. Elected officials did not make this decision but a single bureaucrat, who last year filed for bankruptcy, and who ignored his professional staff in making his ruling. The rule of law has been replaced in Kansas in this important case by the rule of a bureaucrat.

    Carbon dioxide is emitted by people, our cars, our machines, and even in our fireplaces. Since Mr. Bremby decided to make carbon dioxide a pollutant by regulatory edict, any and all other firms that emit carbon dioxide are now at regulatory risk. If carbon dioxide is a “pollutant,” let’s have our elected officials be the ones who change the law.

    Will the Sunflower precedent be extended to non-utilities, like new or existing ethanol plants, that also emit CO2? Will this edict be placed on existing coal-fired power plants? Will this occur quickly or slowly? To large and small firms equally, or not? This is regulatory uncertainty. This is obvious to everyone who has run a business and met a payroll.

    This also demonstrates how far we have moved in Kansas away from a free market system to one where the state controls the economy. When Mr. Bremby’s boss, Governor Sebelius, outlined her support for a smaller expansion of Sunflower, the state control of this economic decision making process was clear. This is state control that economists have warned against.

    Nobel Laureate economist Milton Friedman warned over a quarter century ago, “Wherever the state undertakes to control in detail the economic activities of its citizens, wherever, that is, detailed central economic planning reigns, there ordinary citizens are in political fetters, have a low standard of living, and have little power to control their own destiny.” This type of government control is an excellent reason why the average income of Kansans lags well below the national average as well as our state’s overall economic growth.

    This is a reason why the risk, uncertainty, and the probability of a lack of profits drives business expansions and entrepreneurs away from locating in a state where the rule of law has been replaced by unpredictable and delayed edicts from arbitrary bureaucrats.

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

    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, as 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.

    Markets — that is, consumers — do exert powerful forces on businesses. If a restaurant like McDonald’s serves food that makes people ill, which do you think the restaurant management fears most: a government fine, or the negative publicity? Even small local restaurants live and die by word of mouth. 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 Mr. 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 to eat it. 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. Or, if people are smoking but you can’t detect it, I would image that the danger to health from breathing secondhand smoke is either nonexistent or very small.

    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, 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.

    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 Mr. Claycomb stated in another Wichita Eagle article, will “tick off everybody.” Who benefits from a law that does that?

    Other articles on this topic:

    Property Rights Should Control Kansas Smoking Decisions

    Testimony Opposing Kansas Smoking Ban

  • Property rights should control Kansas smoking decisions

    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.

    Not everyone agrees with this simple truth. Some ask why is there no right to clean air when there is the right to smoke. The answer is that both breathing clean air and smoking are rights that people may enjoy, as they wish, on their own property. When on the property of others, you may enjoy the rights that the property owner has decided on.

    It’s not like the supposed right to breathe clean air while dining or drinking on someone else’s property is being violated surreptitiously. Most people can quickly sense upon entering a bar or restaurant whether people are smoking. If people are smoking, and patrons decide to stay, we can only conclude that they made the choice to stay. The owners of bars and restaurants do not have the power to force people to stay and breathe smoke.

    Employees may make the same decision. There are plenty of smoke-free places for people to work if they don’t want to be around smoke.

    Some think that if they leave a restaurant or bar because it is smoky, then they have lost their “right” to be in that establishment. But no one has an absolute right to be on someone else’s private property, much less to be on that property under conditions that they — instead of the property owner — dictate.

    Property rights, then, are the way to solve disputes over smoking vs. clean air in a way that respects freedom and liberty. Under property rights, bar and restaurant owners will decide to allow or prohibit smoking as they best see fit, to meet the needs of their current customers, or the customers they want to attract.

    A property rights-based system is greatly preferable to government mandate. Without property rights, decision are made for spurious reasons. For example, debate often includes statements such as “I’m a non-smoker and I think that …” or “I’m a smoker and …” These statements presuppose that the personal habits or preferences of the speaker make their argument persuasive.

    Decision-making based on personal characteristics, preferences, or group-membership happens often in politics. Lack of respect for property rights allows decisions to be made by people other than the owners of the property. In the case of a smoking ban, the decision can severely harm the value of property like bars or restaurants that caters to smokers. This matters little to smoking ban supporters, but as we have seen, they have little respect for private property.

    By respecting property rights, we can have both smoking and non-smoking establishments. Property owners will decide what is in their own and their customers’ interests. Both groups, smokers and nonsmokers, can have what they want. With a government mandate or majority rule, one group wins at the expense of the rights of many others.

  • I, Pencil: A Most Important Story

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

    From the afterword to I, Pencil by Milton Friedman:

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

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

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

  • The miracle and morality of the market

    The Miracle and Morality of the Market
    Richard M. Ebeling

    Click here to read the article.

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

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

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

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

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

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

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

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

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

  • The law vs. markets

    One of the criticisms of raising the minimum wage is that it is Congress substituting its judgment for the market’s in determining pay. While Congress can force an employer to pay an employee a minimum amount, it can’t force the employer to keep the employee.

    In a similar fashion, the Mississippi Attorney General has forced an insurance company to pay for damage its policies didn’t cover. He used a court of law to do that. What the court can’t do, however, is force the insurance company to keep writing policies in Mississippi.

    State Farm, the nation’s largest home insurer, announced this week that it would no longer be writing new homeowner or commercial policies in Mississippi. Magnolia Staters wondering whom to thank for their rising insurance bills, assuming they can get insurance at all, should direct their catcalls at Attorney General Jim Hood. … State Farm will now be paying at least tens of millions of dollars in claims that it never factored into its risk premiums, and it has reasonably chosen not to make itself vulnerable again to Mr. Hood’s extortion. … State Farm joins Allstate, which last year also stopped writing policies along Mississippi’s coast. Together, the two insurers make up 40.5% of the Mississippi market. Homeowners looking for coverage will now have fewer companies to choose from, with higher premiums the likely result. If the rest of the industry follows suit and also exits Mississippi, consumers could have no choice at all.

    — From “Steal Magnolia,” February 16, 2006 Wall Street Journal

  • Market forces and teacher (mis)-education

    From Dan Mitchell: “In a system governed by market forces, teacher pay would be based on how well students learn, not how many superfluous degrees teachers accumulate:”

    …scores of studies show no ties between graduate studies and teacher effectiveness. Even among researchers who see some value in some master’s programs, many urge dramatic reforms and an end to automatic stipends. “If we pay for credentials, teachers have an incentive to seek and schools have an incentive to provide easy credentials,” said Arthur Levine, a researcher who once headed Columbia University’s Teachers College. “If, on the other hand, we only pay for performance, teachers have an incentive to seek and schools have an incentive to provide excellent training.” …A roundup published in 2003 by The Economic Journal, a publication of the international Royal Economic Society, unearthed 170 relevant studies. Of those, 15 concluded that master’s programs helped teachers, nine found they hurt them, and 146 found no effect. One of the largest such studies began a decade ago, when the Texas Education Agency and the University of Texas at Dallas began offering researchers continuing access to millions of student records. That effort, a part of the Texas Schools Project, has found no correlation between master’s degrees and student achievement. “They’re worthless. Case closed. Next question,” said Eric Hanushek, a senior project researcher who also works at Stanford University. …school districts have long paid premiums for teachers with master’s degrees. And the premiums have led to a large increase in the share of American teachers with the degrees, from 26 percent in 1960 to 56 percent in 1995. In much of the nation, salary premiums for master’s degrees exceed $5,000 a year… that money could make a tangible impact elsewhere, buying student laptops, tutoring sessions, field trips or additional courses. …”America has 3.2 million teachers who together make up the nation’s most powerful political lobby, and more than half of them hold master’s degrees. They’ll fight for that money,” said Kate Walsh, president of the National Council on Teacher Quality, a Washington-based nonprofit that funds and reviews education research. “The universities will fight, too,” she said. “Master’s programs are cash cows. Schools charge thousands a year in tuition for programs that cost little to run. Ever wonder why ed schools don’t publicize this research?”

    — Dallas Morning News

  • On praising Milton Friedman

    Writing from New Orleans, Louisiana

    The recent passing of Milton Friedman, a personal hero of mine, was marked by praise and admiration for him from almost all sources.

    At the end of chapter 2 of his important book Capitalism and Freedom, Dr. Friedman lists some things that the U.S. government currently does that can’t be justified in terms of the principles of limited government and individual liberty and freedom. These are:

    1. Parity price support programs for agriculture. I believe he means farm subsidies here.
    2. Tariffs on imports or restrictions on imports …
    3. Government control of output, such as through the farm program …
    4. Rent control … or more general price and wage controls …
    5. Legal minimum wage rates …
    6. Detailed regulation of industries …
    7. … the control of radio and television by the Federal Communications Commission.
    8. Present social security programs, especially the old-age and retirement programs compelling people in effect (a) to spend a specified fraction of their income on the purchase of retirement annuity, (b) the buy the annuity from a publicly operated enterprise.
    9. Licensure provisions in various cities and states which restrict particular enterprise or occupations to people who have a license …
    10. So-called “public housing” and the host of other subsidy programs directed at fostering residential construction
    11. Conscription to man the military services in peacetime …
    12. National parks …
    13. The legal prohibition on the carrying of mail for profit.
    14. Publicy owned and operated toll roads …

    This list is far from comprehensive. To this list we must add Dr. Friedman’s support of school choice through vouchers, something that is very unpopular in Kansas.

    We should remember that Dr. Friedman wrote this book in 1962, before the tremendous expansion of government from the Great Society programs right up through the compassionate conservatism (and tremendously fast-growing federal spending) of George W. Bush.

    I wonder how many of the newspaper reporters and editorial writers praising Milton Friedman, not to mention politicians, knew of his strong belief in and advocacy of a very limited government. Would they still praise him? Would they be willing to take his advice?

  • Sugarcane not so sweet

    Writing from near Thibodeaux, Louisiana

    Driving though the sugarcane fields of southern Louisiana during harvest, it is impossible not to dwell upon the politics behind it all. Those politics being the sugar subsidy and the benefits it brings to these farmers, and the cost of it to the rest of us.

    Sugar in the United States costs from two to three times what it does elsewhere, even in Canada and Mexico. It is purely the government, through the sugar subsidy, that causes sugar to cost more in our country. There is no other explanation for this difference. The goal of the sugar subsidy is to keep the price of sugar in America high, for the benefit of the sugar farmer.

    While helping farmers may seem like a noble goal, consider how that help is given. First, money is transferred from the American taxpayer to the sugarcane farmer. From a liberty-based frame of reference, this is intolerable.

    Second, the effect of the subsidy is that Americans pay much more for sugar and sugar-containing foods than we would if the sugar subsidy was not in place. Sugar substitutes, such as corn sweeteners, are likely more expensive than they would be if not for high-priced sugar.

    Then, consider the effect of expensive sugar in America. George Will reported in 2004 this about candy-making jobs in Chicago: “In 1970, employment by the city’s candy manufacturers was 15,000. Today it is under 8,000, and falling.” Brachs moved to Mexico. Lifesavers moved to Canada. There, sugar can be bought at the world price.

    This is almost always the effect of subsidies: a small number of people benefit greatly, while the rest of us pay just a little more. We may not even notice that little bit, but these little bits do have large cumulative effects on the economy. Some people are devastated by these cumulative effects, like the American candy workers who lost their jobs due to expensive sugar.

    The effect on our political system is corrosive. The subsidy payments (or equivalent tax breaks for special industries) are so valuable that the recipients will expend great effort to secure them. The result is scandal and corruption.

    Here in Kansas we receive large farm subsidy payments each year. The first congressional district of Kansas, represented by Jerry Moran, for the years 1994 to 2004, received $6,225,124,802 in subsidy payments. That placed this district in second place amongst all congressional districts, trailing the at large district of North Dakota by about $3 million, and representing 4.3% of all farm subsidy payments. It is little wonder that Rep. Moran won re-election in 2006 with 79% of the vote.

    For the same time period the fourth district on Kansas, represented by Todd Tiahrt, received $697,262,571 in farm subsidies, even though only 0.5% of the workers in his district work in agriculture. These subsidies represent large transfers of wealth from taxpayers at large to a relatively small number of farmers.

    What would happen if farm subsidies were eliminated?

    It is likely — in fact, almost certain — that farmers will have to change. The Louisiana sugarcane grower will have to become more efficient in order to match the world price for sugar, or change and grow something else. Same for subsidized farmers in Kansas. It is likely that the market prices for some farm products might increase. At the same time, tax payments to farmers will drop to zero, so we will save in taxes.

    We would be much better off if we eliminated these payments and let markets decide the prices of farm commodities. Instead of government bureaucrats deciding how much of what will be grown, consumers will let farmers know what to grow through the prices they are willing to pay for farm products.