Working Well

 I Pandora  No Responses »
Apr 152011
 

Is capitalism evil? Many today think it is, or at least believe it is more likely to cause harm than good.

Despite the incredible evidence surrounding us in the West in general and the United States in particular, many who have benefited greatly from capitalism still decry it. Theodore Malloch attempts to show that idea for the deceit that it is.

He’s not the clearest in debate, nor the strongest in argument, but you cannot deny that his argument carries weight. But what is his argument?

Michael Novak, writing in the foreward of Theodore Malloch’s book Doing Virtuous Business, claims that it was Adam Smith who asked the most important revolutionary question. Not “What is the cause of poverty?” which could have only showed how to create more poverty, but “What is the nature and cause of the wealth of nations?” This question showed the path to create wealth, not for Adam Smith, but for billions of people across the world.

In the intervening years much has been lost about the connection between doing what is right and doing what is profitable. Ayn Rand began with Nietzsche and ended in cold, heartless, and frankly mindless pursuit of gain for gains’ sake. Rand has supplanted Smith as the prime purveyor of the principles of capitalism, and this is a travesty because one cannot get human worth from Rand. Neither can one get human worth from Smith, but Adam Smith knew that there was more to profit than making money, and more to business than making profit.

Theodore Malloch, in Doing Virtuous Business, attempts to bring to life the original thoughts and ideals of Adam Smith, expanding with his own idea of Spiritual Capital, to point the way for those who wish to pursue business while maintaining their humanity. While I felt most of the book fell rather flat, the argument itself stood well. Reading the first two chapters, the last two chapters, and the appendices, which catalog businesses started and run well with goals beyond the bottom line or the shareholders, will provide as good an argument as you’ll get from reading the rest of the book. But the book is a rather short one, so reading the whole thing doesn’t put one too far behind.

All in all I do recommend this book, not to those who think capitalism is evil and need convincing otherwise, but to those who know it cannot be inherently evil but are batted about by those who do.

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Unchecked Free Market Problems

 America, economy, Free Market  No Responses »
Jan 252010
 

Unrestricted free market

Gary A writes article on the investing opinion site SeekingAlpha.com claiming that while limited government sounds good, it’s not a reasonable policy if the goal is market stability:

I support the free market but unlike them I don’t trust the free market. I don’t think that having just capitalists in charge of the free market can possibly keep it free very long. Capitalists cannot police themselves. Every game has rules. Try playing baseball without umpires. Try playing tennis without line judges. There are even rules when racing at the Indianapolis 500.

I agree with him, to an extent:

I agree that having capitalists in charge of capitalism can and has caused many a problem. Having Marxists in charge of a market causes even more.

The issue is that there is no suitable force acting upon the individuals that make up a government capable of restraining their choices actions.

And the more levels of government that are constructed to check and balance any system of man only lead to more levels of waste and corruption as they, in turn, fall to the very same forces.

The brilliance of the original American system was that it pitted this thirst for power against itself by building three branches of government with competing but not overlapping responsibilities.

This system worked well enough, for in that inherent tension there was stability left for those under it.

As the government’s greatest enemy was itself, instead of the people, the people were free to go about their ways.

As the government power alignment adjusted, mainly beginning with Lincoln’s power consolidation in the Civil war the forces of government were aligned and now could seek to take power, not from each other, but from the populace.

So is it a perfect system? No. Is it better than the alternatives? It depends on how you define better. I would say it is, with better being that state where there is least government intrusion into my affairs and then only so much as is necessary to prevent me from infringing unjustly on another’s affairs.

Of course, then you get into what is just and unjust.

The whole problem is that unless you accept a sovereign moral force who/which defines morality for us unsovereign beings, there is really no way to define right except through might.

Those in power get to define morality apart from that sovereign moral entity. And without an acceptance of a sovereign moral entity there is no legitimate basis for a universal and effective set of ethics to guide the behaviors of individuals, groups, corporations, societies, or nations.

Yes, I believe it all boils down to whether or not you subscribe to the idea there is a higher power who will judge you for your actions and your intentions and the results.

Net Neutrality: Taken For Fools

 Free Market, Government, I Pandora  1 Response »
Oct 282009
 

I, Pandora has had a mixed history on Network Neutrality.

Network what?

Network Neutrality is one response to fears that infrastructure and service companies, such as AT&T, Verizon, and Comcast, spell doom for the freedom of the internet as they inevitably begin controlling access to content, enhancing access to content they own, control, or partner with, and limiting access to content they deem contrary to their best interest.

The majority of Network Neutrality supporters want the FCC to step in and set rules requiring the infrastructure/service companies provide equal access to all content and forbidding them from interfering in any way with the freedom of the internet.

Sounds good, right?

As with any other debate, you have to get to the deeper issues. And this debate is rife with deeper issues.

When I first heard of Network Neutrality I was gung-ho for it. I did not understand the goals at the heart of this push.

“Don’t be hasty, master Hobbit!”

There was a reason liberal Democrat leaders were more for this program than Republicans and conservatives. Liberals dream of more regulation and control and private and free systems. The freer the system the stronger the urge to a liberal to regulate it.

My confusion over Network Neutrality did not continue long. I supported it in March of 2007, and by August of that year I wrote about the inherent conflict between government regulation and innovation.

Government regulation is the enemy of innovation.

In the arguments over Net Neutrality, I feel for the plebes. I don’t want my traffic throttled any more than it already is by the ISP. But is it the government’s responsibility to control this? And if we allow the government to say who can access the internet and at what speed, where is our moral authority when the government wants to say who can’t access the internet?

Perhaps I am more libertarian than I like to think myself to be.

Later I quoted Rep. John Sununu (R – New Hampshire) regarding the slippery slope of wishing for government interference:

If the Internet has taught us anything, it’s that it’s pretty presumptuous to predict what the future will be. We should be very, very cautious about imposing regulations based on what we think competitors will do in the future and how we think consumers will respond based on what we think competitors will do.

Gee, that sounds familiar.

Oh, yea. Attorney General Eric Holder, in a 60 minutes spot on healthcare and specifically Medicare and Medicaid’s extremely high levels of fraud made perhaps the most blind statement regarding human nature I’ve ever heard from a lawman:

People didn’t think that something as well-intentioned as Medicare and Medicaid would necessarily attract um… fraudsters.

People not thinking. Not considering the implications of what they want.

Just because it’s well intentioned doesn’t mean it’s right and good and free of the failings that so plague us mortals.

Are Verizon, AT&T, and Comcast completely good in their actions so far regarding the internet? No.

Comcast has been slapped once for purposely throttling connections to certain types of content during peak times load times.

But is the government the solution?

In my article regarding regulation versus innovation I make it clear that while there is a place for regulation, that regulation is best applied to the government itself, limiting it’s ability to tamper with our system of free enterprise.

There is a question I’d ask of anybody regarding this issue. If Thomas Edison were alive today which entity would be the greatest enemy of his innovation: Government or Business?

Sonia Ericson, writing in TechNewsWorld today provides a meaningful and realistic and proven alternative to network neutrality: private control.

ICANN is currently the organization closest to being “in control” of the internet.

It’s a private organization which controls the distribution and changes to the domain names which make the internet navigable.

(A)sking the FCC to “protect” the Internet means inviting government oversight, which injects more politics — not less — into the operation of the Net.

Sonia then talks about someone I’ve met:

Ashwin Navin, cofounder of BitTorrent, also says he doesn’t support government regulation of the Net, even though his name appears on an OIC letter. He says he’d rather see Internet service providers come up with a self-regulatory plan based on a pledge to keep the Net open and the creation of a third body to arbitrate. Indeed, Navin says that his own company’s scuffle with Comcast was ultimately solved without formal rules after a netizen noticed that Comcast was degrading service and brought the matter to the public’s attention.

“The problem is disclosure,” Navin says. “Consumers need to know if the ISP, which is the most invisible layer in the stack, is responsible for an improved or degraded experience for any of the services they use.”

Geek Out Alert!

In my days working for Fry’s Electronics, Ashwin’s step-dad hired us to build and repair his wireless network. He introduced me to Horchata and I watched the Blue Angels practice over his backyard. Ashwin and his brother came by once while I was there and I basked in the presence of those gods of the internet, the business minds behind BitTorrent.

But Ashwin has a point. A good point. A point I may elaborate on further in the future.

Suffice to say that information is the grease for the wheels of the free market and capitalism. And the internet, above all else in the history of markets, has enabled the dissemination of information more efficiently and the finding and gauging of information more easily.

Why do we trust the government to act in our best interest when it comes to such a powerful information force as the internet? The government has no competitors to blow the whistle on it’s misdeeds. The government self-interest lies in a dearth of information.

Trust the government and be taken for a fool. I’ll not be joining you in your foolishness.

Walmart And The Healthy Free Market

 Culture, economy, Free Market, Government, Health, Unions  4 Responses »
Jun 122009
 

In case you had trouble guessing: I like businesses.

If there weren’t business there wouldn’t be internet, iphones, cars, bicycles, buildings, tents, sleeping bags, fresh produce in the middle of winter, heat and A/C, in cars too, hospitals, medication, surgery…

You get the picture.

We’ve had government since the beginning of time, and it hasn’t done a thing directly to benefit or develop beneficent products and services (except nuclear energy and other war-related items).

We’ve also had businesses since the first person decided he’d rather spread and grow his wealth instead of laboring over the same rows in the same farm for his own families sustenance.

Chipotle is an excellent example of a good business.

Our wealth allows us to pay premium price for food raised and prepared in a reasonably environmentally conscious and sustainable manner.

And it tastes good, too.

Walmart is not too different from Chipotle.

The monstrous store chain that’s easy to hate until we need cheap razer blades and jeans and socks and hand towels and garbage can liners. Then everybody loves it.

Except the unions, who are never going to love Walmart until it caves to their regressive and stiflingly stupid and anti free market strong man tactics and effects.

I pray Walmart never does, and for good reason.

When Walmart enters an area, consumers win as the often cheaper prices at Walmart “encourage” the other stores to moderate their own prices.

The prices are not always better, but they are better enough of the time and for enough products to justify the crowds you normally find at these supercenters.

Does Walmart Save You Money? (read the comments, many people report savings in the $1000′s each year while others disagree with their perception of the business practices)

But enough about prices already, Walmart benefits your health!

Huh?

Indeed, studies are showing that people living near a Walmart or “club store” (Costco, Sam’s Club, etc) are lighter on average.

But don’t all the fat and ugly people shop at Walmart? No, it’s just the ugly people and me.

In an article published in Forbes Magazine, Art Carden, an Professor of Economics at Rhodes College in Memphis TN, reports on studies showing that the increased buying power people experience when benefiting from the Walmart effect has a direct and close correlation to the health of those people.

There are several reasons this may be, and the why or how is always a bit murkier than fact of correlation, but all of the possibilities enjoy sound economic sense.

Those benefiting most from the Walmart affect are…

…women, the poor, African-Americans and people who live in urban areas.

The arguments as to why and how and many, as I noted earlier, and some may find them difficult. Read it a few times if necessary.

Our evidence is indirect, but we think it shows that price changes can have subtle and sometimes hard-to-detect consequences. Any change in price results in two phenomena. The first is the substitution effect: a change in consumption mix due to a change in relative prices. If a bag of salad is $2 and a bag of potato chips is $1, then the price of salad in terms of chips is two bags and the price of a bag of chips is half a bag of salad. If a Wal-Mart opens and reduces the price of salad to $1 a bag and the price of chips to 75 cents a bag, the “salad price” of chips has risen (from 1TK2 bag to 3TK4 bag) and the “chip price” of salad has fallen from 2 bags to 4TK3 bags. In short, salad has become cheaper relative to chips.

This argument is based on basic price comparison. If the salad cost 2 times what chips cost before Walmart,  Jack and Jill are more likely to buy the salad now because it only costs 1.3 times more than the chips now.

Then there is the income effect:

If Wal-Mart sells food at lower prices–even if our incomes don’t change–every dollar can buy more. Therefore, we’re richer.

The crux of their findings is that people, when given a choice and a suitable price range, will purchase healthier foods.

Our data suggest that we buy healthier food when our purchasing power increases. There is a small increase in consumption of fruit and vegetables in places where Wal-Mart does a lot of business and a decrease–or smaller increase–in fatty food consumption relative to places where Wal-Mart doesn’t do business. That is, people might consume more fatty foods, but consumption of those unhealthy goods increases more slowly than it does for the rest of the population.

There are other facts, findings, and arguments in the article. I urge you to read the whole thing: Wal-Mart’s Weight Effect.

The point is, don’t be too quick to denigrate or disparage the current state of our free martket system.

It’s not always pretty, and it’s easy to find fault.

However, compared with any other system out there, capitalism and the free market are the best at providing escalating levels of service and product to the most people most equitably and with the least amount of downside.

It’s been proven time and again, yet we in America now are dangerously close to forgetting completely, if we haven’t already.

The free market and capitalism isn’t about the blind, mindless pursuit of money at all costs, that’s anarchy.

Free markets and capitalism are about working in tandem with those around us to maximize our return by providing the best service or product to others. It’s a mutually beneficial system.

And we’re in danger of throwing it away.

Government-Run Business, Epic Fail

 America, economy, Free Market, Government, Politics  3 Responses »
May 222009
 

As I’ve said before, several times, government involvement and control of business is a recipe for failure, disaster, loss, pain, hurt, evilness, etc.

In the Wall Street Journal, John Steele Gordon:

In 1913, for instance, thinking it was being overcharged by the steel companies for armor plate for warships, the federal government decided to build its own plant. It estimated that a plant with a 10,000-ton annual capacity could produce armor plate for only 70% of what the steel companies charged.

When the plant was finally finished, however — three years after World War I had ended — it was millions over budget and able to produce armor plate only at twice what the steel companies charged. It produced one batch and then shut down, never to reopen.

But epic failures on the Government’s part aren’t relegated to such ancient history.

Medicare is a prime example of government-run medical care:

Last year the Government Accountability Office estimated that no less than one-third of all Medicare disbursements for durable medical equipment, such as wheelchairs and hospital beds, were improper or fraudulent. Medicare was so lax in its oversight that it was approving orthopedic shoes for amputees.

And such failures through the history of government are not aberrations, they’re inherent to the system. John Gordon argues there are at least seven reasons government failure is the rule and not the exception when it comes to running things:

  1. Governments are run by politicians, not businessmen
  2. Politicians need headlines
  3. Governments use other people’s money
  4. Government does not tolerate competition
  5. Government enterprises are almost always monopolies
  6. Government is regulated by government

John Gordon ends his argument admitting that Capitalism isn’t necessarily pretty or perfect:

Indeed, to paraphrase Winston Churchill’s famous description of democracy, it’s the worst economic system except for all the others. But the inescapable fact is that only the profit motive and competition keep enterprises lean, efficient, innovative and customer-oriented.

In other words, Government hurts and harms. Damage and destruction are in it’s nature. Why else is government the best at war?

And private enterprise is the best there is at alleviating suffering and maximizing wealth to the most people most effectively and efficiently.

Read John Gordon’s whole article.

22 Million Ways To Support SCHIP

 Children, Taxes  2 Responses »
Oct 242007
 

Bush may have vetoed SCHIP, but you can still help children (even children from wealthy families) recieve government health care. At the same time, you will be paving the way for the rest of us to get it too sometime soon.

All you have to do is… smoke!

Sin taxes are an unreliable and temporary source of income. “Sin” comodities (cigarettes, alcohol, etc.) aren’t necessary for survival so when taxes increase, demand, and thus revenue, decrease.

It is political suicide to put massive government expansions like SCHIP on the government doll immediately, so politicians use sin taxes knowing that, when funds run short, they will shift the burden over to more permanent sources of income.

UAW Gets $35 Billion In Pocket Change

 Uncategorized  1 Response »
Oct 032007
 

UAW’s strike against GM didn’t last long, but it caught the nation’s attention. That may not be a good thing, though, because now the nation knows that union health benefits are unsustainable in today’s economy and UAW bosses were given $35 billion in pocket change for assuming responsibility for retiree health care.

A key detail: payouts to the 300,000 retired members won’t begin until 2010 and GM will still have to make contributions if the original $35 billion proves insufficient.

But the union cannot be serious about taking on this responsibility. Throughout history union bosses have proven themselves adept at passing responsibility from themselves to others. And nothing has changed.

The Wall Street Journal reported that the UAW took the $35 billion only on condition that GM help lobby for a national health care plan. Chaching! Why didn’t I think of that? I wouldn’t blink at managing $35 billion so long as a national health care plan is implemented in the next four years. Even if I embezzled it all, I wouldn’t have time to spend it all before Hillary popped in her national plan.

First, this arrangement gives UAW all the more reason to put Hillary in office.

Second, what will become of the $35 billion “band aid” once the union throws its retiree members to the one-size-fits-all government meat grinder? Certainly not the feds and certainly not back to GM!

I’ll leave you to imagine the rest.

The Fed’s Role In Maintaining Wall Street Stability

 Uncategorized  No Responses »
Sep 172007
 

CNBC’s Mad Money host Jim Cramer went off on the Fed a few weeks ago over its actions in response to the market uncertainty and spike in interest rates coming off the bust of the sub-prime loan market (loans to customers with bad credit ratings.). The clip is very entertaining. Cramer’s solution is cut the discount rate/open the discount window (from what I gather, and I could be wrong, the feds offer short-term loans to banks trying to cover gaps in their money supply and Cramer is saying the interest rates on these loans should be cut to make it easier on these banks.).I believe a number of problems exist with this proposed solution, though. First, banks and investors assumed the risks by extending loans to these people with bad credit. Therefore, the Fed has not responsibility to bail them out.

Further, the Fed’s job is to maintain the long-term stability of the market by managing inflation. When they make decisions today, they are not trying to affect today’s market. Rather, they primarily try to affect the market two to three years from now. Therefore, for the Fed to take action today to affect today’s market is to sell out the long-term stability of the market.

Most moves to solve the problems, including some already taken, will include an influx of cash into the market. This influx, while maybe allaying some fears and propping up the market today, will increase inflation over the next year or more.

Further, investors have a short-term memory. A Fed bailout will alleve many risk-takers of having to bear the consequences of their lending habits. With Wall Street’s already short memory, lenders will soon be out assuming more high-risk loans.

The resilience of the stock market is, in large part, a result of the risk takers of society being free to work their magic. Soon, many who hit the bottom in the past month will be back on the street again. This is, in part, the beauty of a free market. It is also the bane.

It is not the Fed’s job to take the fall for Wall Street as lenders jump onto another passing train. The Fed should not intervene.

See “The Fed’s Alibi” for more commentary on the subject.

Ethanol Intoxication

 Uncategorized  8 Responses »
Aug 112007
 

Matthew’s Note: Please welcome I, Pandora’s newest author, Paul. He has a brief bio on the about page, and the link there will show you all his posts as he continues to contribute here on I, Pandora. Here’s Paul’s first post:

As I was making one of our annual trips with my family across Kansas, I noticed something startling. Now when driving across Kansas, generally anything different is good. However, as I reflected upon this change I realized that maybe it wasn’t for the better. What is that change?

Instead of the usual wheat I had seen for the past ten years trekking across what may be the flattest and most boring state in the Union, I saw fields and fields of corn!

This was not limited to a couple fields here and there; nearly the entire state was covered in corn. Why the change? Well the short answer is government ethanol subsidies and mandates.

In the past several years most of our politicians, president Bush included, have argued that America is “dependent” on foreign oil and must seek alternative fuel sources. And instead of letting the market and individuals decide whether it is cost efficient and necessary to develop new fuel sources, the federal government has offered enormous subsidies (billions of dollars) for researching how to develop and produce ethanol to supplement, and ideally replace, crude oil.

They have also begun to mandate that gasoline sold in the U. S. must have a certain percentage of ethanol added to it.

Now what does this have to do with corn in Kansas? Well, in case you didn’t know, the main ingredient in the production of ethanol is corn. As lucrative government contracts and subsidies are offered, companies are chomping at the bit to try their hand at developing and producing ethanol. To do this, they need to buy corn. Lots of it. For anyone who knows nothing about economics, the price of a good is determined by two things: how large the supply of the good is and how large the demand of the good is. The higher the demand for the good is, the higher the price will be.

With the huge demand for corn generated by the new ethanol companies, the price has skyrocketed and is at its highest point in over a decade. As you can guess, if the relative price of corn to wheat doubles, farmers will stop growing wheat and start growing corn instead because they can make a much larger profit. Hence the fields of corn in Kansas instead of fields of wheat.

So why care that farmers are switching from wheat to corn? Well there are a number of results that directly affect you.

First, the price of corn has increased by quite a bit. This means that when you walk into your local grocery store instead of being able to buy five or six ears of corn for a dollar, you have to pay two or three dollars instead. So, people won’t have quite as much corn as they had before.

Second, corn is used to feed livestock (cattle, hogs, chickens, etc.). So as corn prices rise, the cost of feed also rises. This means that chicken and dairy farmers have to pay more money to feed their animals. They then raise the price of their products to cover this additional cost. So this explains, in part, the increasing prices for milk, cheese, eggs, beef, chicken, etc.

Third, this is the part that involves the switch from wheat to corn. Now that more corn is being grown, we can expect the price to decrease or stay the same depending on how much demand continues to increase. However, we have less wheat. That means the price of wheat will increase. What is made out of wheat? Bread, bagels, pie crusts, pasta, pancakes, muffins, cupcakes, biscuits, crackers, pretzels, buns, and anything else made with flour. These will all increase in price when their main ingredient increases in price.

“Why are we using food to fuel our cars?” This question has been bandied about by critics, economists, and others in relation to ethanol. Why indeed? Would it not make more sense to use something that cannot be put to another valuable use, such as crude oil? If you think about it, the ethanol subsidies are funded by our tax dollars. So in effect, we are paying billions of dollars to increase the price of our groceries.

When Environmental Causes Collide

 Uncategorized  1 Response »
Aug 112007
 

When environmental projects are mutually exclusive, the environment has no ability to tell us which of the two it favors. How then should we decide which of the two to take?

To date, environmental organizations have been fighting to get their policies implemented. Now that they have a sufficient foothold, the infighting begins.

Here’s just one example.

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