Category Archives: Regulation

Faith Healing

The current outrage-du-jour over the skyrocketing price of EpiPens is a perfect example of the effectiveness of a societal indoctrination that leaves us blind to the parasitic ills wrought by the state. The credulous media reports with much indignation and finger wagging over yet another example of an evil profiteering corporation charging outrageous sums for a life-sustaining drug. Clearly this fits with the media’s preconceived narrative that capitalism is bad and we need government to right such wrongs. Case closed. No need to scratch the surface and investigate the cause and effect of this phenomenon. Even those media outlets that do ask the right question and get the right answer are still somehow blind to the necessary solution. They recognize that prices are high because of a lack of competition (a result of patents), third party payment distortions, and cronyist-driven increased demand (fueled by FDA mandates). Even the likes of the Journal of the American Medical Association have admitted as much in a recent article.

“The most important factor that allows manufacturers to set high drug prices is market exclusivity, protected by monopoly rights awarded upon Food and Drug Administration approval and by patents. “

But the universal answer to solve these woes? More of the same: state intervention. If we can’t even imagine a world without state-driven influences in the market then there is only one option that remains – more state intervention. The state is entirely responsible for the current quagmire that is our health care system, but hey, maybe more regulations can fix the problem the first, second, and third set of regulations caused. As they say, if all you have is a hammer, then every problem looks like a nail.

There is no quick fix. The foundation is built upon the sand of wishes and emotion rather than the stone of the unwavering principle of liberty. To solve the problems in the health care market we must dismantle the framework of rules, laws, and regulations that can do nothing but produce this distorted market.

Step 1: Eliminate the patent system entirely. Without patents competitors can instantly respond to prices that get out of control. Novel inventions have a natural period of protection because of secrecy and first-to-market advantages. The more obvious the invention, the more easily it could be copied. Praising the patent system for rewarding inventors with monopoly pricing while simultaneously pining for the low price of generics is the height of cognitive dissonance.

Step 2: End the FDA’s monopoly privilege of being the ONLY agency allowed to review the safety and efficacy of drugs. If the FDA is going to take years to approve a drug or device (resulting in countless needless deaths and higher costs) then perhaps it is time to let competitors help them out.

Step 3: The FDA and its competitors should be financially responsible for their mistakes just like any other company. Presently the FDA bears zero responsibility if they approve a flawed drug. If there existed in any other sector of the economy such a lack of competition and accountability we would be outraged. Yet somehow this state of affairs exists with the FDA and no one bats an eye. Most curious.

It’s almost like society has been brainwashed into the credulous narrative that those in government are not mere mortals but rather angels who are immune to normal human foibles. This blind faith in the supremacy and righteousness of the state has closed our eyes to the truth no less than medieval faith in the Church blinded men to the truth of heliocentrism. Time to question that faith. Our very lives depend on it.

On Brexit

The recent vote to “Brexit” the European Union in Great Britain has provided an opportunity to cast light on the hypocrisy of one side and the irony of the other. The “leave” (pro-Brexit) camp taps into the natural human disdain of involuntary control. From willful toddlers to headstrong teenagers to entrepreneurs – no one likes being told what to do. This instinct is normal and natural. The problem occurs when one conflates ones own sovereignty with the sovereignty of the “my”, e.g. my town, my city, my state, my country. People erroneously view this “regional sovereignty” through the lens of a primitive territorial instinct that says everything I can see is “mine”. This territoriality or regionalism is hypocritical at its best and downright evil at its worst. Regionalism purports to trump the sovereignty of the individual by placing the interests of the collective above those of the individual. In short, the many tell the few what they may or may not do. Now, were these constraints restricted to bans on murder, theft, and rape there would be no complaints. But it does not stop there. The regional collective (city, county, district, state, nation, or treaty union) dictates rules over every minutiae of life.

Every nation-state that seeks independence is guilty of the deepest hypocrisy, as they invariably see no problem leveling the same type of control on their own smaller political sub-units. So yes, seek independence, but be prepared to give it as well (cough, Northern Ireland, cough, cough).

The stay (pro-EU) camp is actually host to two types of irony. The first is the credulous acceptance that a large bureaucratic body is needed to achieve an end (free trade) that could also be achieved were each member state to simply do nothing to interfere with the free movement of goods. Which is easier: employ a thousand men to drain the lake you are sitting in so that you might be dry, or, simply get out of the lake?

The second irony pertains to their secondary goal – human unity. The Centralizers (anywhere) believe they are an enlightened sort whose high-minded goals of inclusiveness, equality, and community stand in opposition to backwards notions of nationalism or individualism. This conceit leaves them blind to the fact that centralization is itself inimical to their desired goals.

Forcing people together into larger autarkic unions strengthens those unions in a way that leaves them more capable of waging war (indeed, Turkey shot down a Russian jet last year knowing full well the EU would back it up in a potential Turkish-Russian conflict). Numerous, small groups are too weak to do this. Their interdependence through trade guarantees peace; the hand and the arm need each other, it would be folly for one to destroy the other. Counter intuitively; the freest individual is likewise the most dependent individual. No man is an island, as they say. We rely on our fellow man, through trade, to provide all that we need. Large trade unions like the EU or NAFTA are superfluous. Trade is the lifeblood of human civilization and existed long before such pan-national agreements. Indeed these agreements, rather than “freeing” trade instead manage it – to the benefit of the political and economic elites within each territory. They transform former explicit trade barriers into new regulations. These regulations stifle trade and growth by extinguishing the entrepreneurial flame before it has a chance to flourish. The EU has 109 regulations governing pillows; Europe is in economic decline. Coincidence?

Centralization foments a unique kind of conflict. Not allowing or creating barriers to leaving the union can do nothing but foster resentment. In the past (and present) it has lead to wars. Fortunately today in the case of Brexit it has only risen to the level of schoolyard insults. Heaping ultimatums or derision on the party attempting to leave (as many in the EU are now doing to Britain) smacks of the sour grapes hurled by a jilted partner when a romantic relationship ends: “hey baby, you’re nothing without me!”

Decentralization of authority achieves the goals of peace, prosperity, and equality because it depends on trade. Two people that but for ideological or religious reasons would never have cause to interact are more than willing to ignore those differences and engage in the “just business” of trade. Once a trade relationship is established, a human relationship will soon follow. Trade humanizes the foreigner, stripping away their “other group” title leaving behind only the person. Trade then has the power to expand both our wealth in things and in each other.

The path to uniting humanity is more, not fewer, groups. We should be promoting the break up of states, not their mergers. If all countries could dispense with this Trumpian siege mentality that implies a country can’t be “great” unless it is also autarkic, the world could achieve the peaceful utopia that the one-world centralizers dream of. Spontaneous order works in Nature. We are a part of Nature. It will work for us as well if we can make the right choice to the only question that matters: shall our relationships be governed by force or choice?

Mixed Signals

Recycling as a concept is not a bad idea. It is in the execution where things go awry. A logical leap fallacy occurs when assuming that because the recycling of materials A-D makes sense it must mean also that the recycling of materials E-Z makes sense.

Generally speaking the recycling of metals and glass make economic sense because reuse involves less effort than production. Due to the chemical nature of plastics it is practically impossible to recycle them for their original application. And the whole notion of recycling paper to “save a tree” makes about as much sense as not eating tortillas in order to “save corn.” If paper weren’t being used, then tree farmers would not plant trees. Contrary to popular mythology paper does not come from old growth forests – it comes from tree farms. In fact an argument can be made that virgin paper is actually better for the environment than recycled paper. Trees remove carbon from the atmosphere. Recycling of paper just tosses that same carbon back and forth like pitcher to catcher; virgin paper use creates a steady withdrawal of carbon from the atmosphere.

How do we know when recycling is “good” vs just “feel good”? If money is offered or it’s something best not released into the environment are two key indicators. Sometimes those two things coincide as in the case of lead acid batteries. Recycling these batteries creates a “double-whammy” effect: you make money and protect the environment! Who could object to that? The EPA apparently. Read on.

Last year our company had to replace the lead-acid batteries in our corporate power back up system. We had to unload over a thousand pounds worth of them and I was not keen on just dumping them in the trash. Fortuitously enough I was able to locate a company not far from us in Watkinsville that would not only take them off our hands but also cut us a check for them. This provided an incentive for me to stockpile my own used lead-acid batteries at home. After about a year or so and a hundred pounds later I was ready to divest myself of these batteries. Unfortunately that local recycler was out of business. No problem I thought, there is a county recycling station not far on Highway 15. So I drove on over only to discover for some bizarre reason they are not open Tuesday or Thursday, and my luck being what it was, it was Thursday. Artificially constrained hours of operation accompanied by a gate for an open-air facility is truly puzzling. Are they afraid someone is going to steal the recyclables? Wouldn’t that be a good thing? Artificially constrained access encourages people to not even bother if they have to make a special trip vs simply taking care of it when most convenient.

However, it turns out the closure did not matter as they don’t accept lead-acid batteries. Ok, so does my curbside garbage service take them in their recycling? Nope. Ok, surely the county dump takes them! Everything ultimately ends up in the dump, right? It’s the trash bin of last resort. So I drove to the Oconee county dump only to be told, no, they can’t accept lead-acid batteries due to EPA restrictions. So, let me get this straight, the EPA, the organization charged with ensuring the environment is protected from harm has set up regulations that prohibit a DUMP from accepting a known environmentally harmful agent (lead) but then provides no alternative to the those trying to properly unburden themselves of this material? EPA “protection” creates a perverse incentive to improperly dispose of it in the general trash. The agent at the dump then suggested I try the local Autozone. Ultimately this is where I took them and they were all too happy to take them off my hands.

So in conclusion, a non-governmental entity, enticed by market forces, helped me do the right thing, whereas when I tried to do the right thing, government (local and federal) thwarted nearly every attempt to do so and actually incentivized me to do the wrong thing. The first rule of behavior modification is provide an easy, not obstructed, path toward the desired end.

Honey I Shrunk the Seat!

Senator Chuck Schumer (D-NY) recently introduced an amendment to an FAA reauthorization bill that would have required the FAA to set minimum values for how narrow and close commercial airline seats may be. Fortunately, this amendment was rejected last week.  While those of us who have flown in recent years (and experienced firsthand the “Honey I Shrunk the Airplane Seat” phenomena) can all certainly sympathize with the goals of such legislation, it would nevertheless be a gross violation of the rights of the airlines to dictate how they may or may not utilize equipment THAT THEY OWN. Of course there already exists an ever-expanding regulatory framework that strangles other businesses similarly. So how is this any different? It’s not. And that’s what is so scary – it was rejected not on principal but rather because it was visible. Visible government intrusions send the wrong vibe to a supposedly freedom loving populace. But invisible intrusions go on every day and are of course perfectly fine. If the death penalty were required to take place in public it would be ended immediately; but when done behind closed doors the public in general couldn’t care less.

Such reflexive urges to regulate by those “in charge” of our lives are a predictable outcome of their glaring ignorance of basic economics. It is the usual story: government engages in Practice A which stealthily causes Harm B and so our great benefactors must now step in to save us from the very harm they caused in the first place. For example, the federal government, through its puppet the Federal Reserve, is constantly inflating the US dollar. This steadily erodes the value of said dollar until after many years the drips of annual inflation have carved a canyon of lost value. There are two ways to respond to this declining value: raise prices, or, maintain prices while reducing quantity/quality. For example, boxes of cereal now contain 15% less than they did only a few years ago but are marketed at the same price point. It is a surreptitious form of inflation that consumers don’t immediately recognize but is just as injurious to their buying power as is rising prices.

Competition has become so fierce that a game of chicken has ensued where no one wants to be the first to raise nominal prices. This has occurred with airlines as well. Although ticket prices may have risen or fluctuated with fuel prices, such prices are, all things equal, less than they otherwise would have been had seat sizes not shrunk. Getting 10-15% more seats on a plane means lower average cost for each flyer. It is simply a natural response to the incentives created by government interference in the economy (Fed money printing). Eventually seat sizes will decline to a level where ridership will drop off. At that point the industry will know they can go no lower. But that is how the market works; the feedback of profit and loss tells businesses if they are doing good or doing poorly. Top down regulations subvert that process and prevent the voice of the consumer from being heard.

Actually, progressives like Schumer should appreciate the spectrum of market prices engendered by this seating freedom. It incentivizes those who value comfort over money to pay ever-increasing prices for the larger seats. These higher prices can be used to subsidize other ticket classes thereby expanding fare access through lower prices or halting the size decline. By allowing consumers to vote with their dollars the market delivers what consumers, in aggregate, are willing to accept. While any single consumer may disagree with where that point is, it should no more be the right of a minority of consumers to dictate to all what they should be able to buy any more than a minority of busybody senators should be able to dictate to a nation how they may live their lives.

Policy by Prediction

Science is supposed to be the domain of testable (and thus falsifiable) claims the evidence for which is a body of empirical studies that have stood the scrutiny of reproducibility. With the advent of computers that method of science seems to be growing increasingly passé. Why, we don’t need to bother actually doing the grunt work of experimentation, we can just sit back, press a button and let a computer model tell us the results. Of course the fault lies not in our machines but in ourselves (with apologies to the Bard). Computers are but tools that make some of that grunt work easier. But computer models are not so infallible that their output should solely be relied upon. They are imperfect not due to some failing of the technology but rather because they can only do what we tell them, and we humans are far from perfect or omniscient.

The flaw in computer models is two-fold: assumptions and unknowns. Assumptions are made about the contributions of certain factors and those assumptions are often wrong or even if close to being right can still introduces tremendous variability in outcomes from small differences in input. Unknown unknowns are an even greater contributor to the phenomenon known as “garbage in – garbage out” of modeling. We can’t account for the contribution of something we don’t even know exists.

Models are supposed to be part of an iterative process where you do the actual experiment, compare the results to your model’s output and then modify your model. To test the model you then change some of the variables and see how well it holds up in comparison to “real world” results. But, as soon as a new variable is introduced or a new unknown comes into play, then the model’s usefulness must be called into question.

Now by this point you might think I’m going to delve into an indictment of the climate models poor record of prediction but actually I’d actually like to talk about nuts. Or rather how we should all expect the price of nuts along with a host of other crops (pistachios, almonds, soybeans, tobacco, peanuts, cotton, lettuce, alfalfa, tomatoes, watermelon and bell peppers) to increase in price in the coming years due to the EPA banning a pesticide known as flubendiamide.  EPA determined that flubendiamide could break down in the environment and potentially cause harm to a few aquatic species. Ok, sounds like some dangerous stuff, fair enough. But, it turns out this alleged harm is not based on empirical studies but is rather based on computer models that attempt to predict toxicology – “predictive toxicology” they call it. BayerCropScience, the manufacturer of flubendiamide, went on record stating that such models “exaggerate environmental risk.”  Well imagine that, a computer model overstates the likelihood of a deleterious outcome in order to justify governmental intrusion into the market. Although science cannot be manipulated to service political interests, models surely can – click, click, here comes the desired result.

This ultimately is the true danger of such models. It is one thing if scientists want to put all their faith in such models, the worst that can happen is that eventually someone is made to look the fool when actual empirical studies prove them wrong. However it is far more dangerous if the cart is pushing the public policy horse by having bureaucrats and our supposed intellectual superiors run our lives and then justify their actions by pointing at selectively funded model-based “research” that can be tweaked to magically provide an outcome that conforms with the policy prescriptions desired. All that is needed to shut down debate is to claim “it’s science” and that it is “settled.”

Market Failure: Revenge of the Commons?

If you missed last week’s article be sure to read it here, however, a synopsis of the article’s thesis is that “market failure” is impossible. Markets are closed systems and as such anything internal to the system affects the entire system. A market can no more “fail” than a pot of water exposed to a flame will fail to boil. Apropos the pot of water example: if a pot of water does not boil after 5-seconds of exposure to a lighter we do not say “ah-ha, physics has failed, here is proof that flames cannot boil water!” No, we realize that if sufficient heat is applied, it will boil (thermodynamics) but that the process takes time (kinetics). Failure of something to occur instantly or even within our own lifetime does not equate to “failure”. Markets regulate themselves; perhaps not as fast as some would like, but it occurs nevertheless. As the saying goes: you can have it fast, cheap, or good: pick any two. With state regulation of the market you only get one: fast, at the expense of it being both expensive (inefficient) and poor (ineffective). Natural market regulation is both good (effective) and cheap (efficient), but tends to be slow, which many find frustrating. This gradual process thus provides a framework of excuses for state intervention to speed things up. These people fail to see the thermodynamic forest for the kinetically slow-growing trees.

At first glance it might appear the pot example is not illustrative of a closed market system. The pot is exposed to the surrounding air, which can transfer the heat away. So we must clearly demarcate the borders of the system under discussion; let us say the pot and flame are in an insulated box. Everything outside is irrelevant to what occurs in the box.

So, we define the market as that system containing everything that is (apparently) part of the market. However, the counterargument here would be that things outside of the market system, unlike the pot and flame, do effect what is in the system. That is, the “commons” outside of the market (into which things may be dumped or extracted) apparently play a role. To the extent such commons are artificial in nature (“public” spaces) and thus through state coercion the market’s efforts to allocate and economize those resources via private property are frustrated, we cannot say then that any abuse of such spaces is a market failure. The state itself is setting up the very situation that opens them up to abuse. The state is not part of the market. The market is peaceful voluntary trade where both parties “win”; the state is violent involuntary trade where one side wins and one side loses.

However, there are natural common areas (the oceans and the sky) that are not amenable to conventional private property demarcations (e.g. fences) – although technology is slowly changing that reality. These would appear to be areas outside of the closed market (private) systems and thus immune to feedback from the market even though the market may benefit from them. For markets separated by a commons but connected through other means, the feedback occurs at the border with the commons and this information is transmitted via the other connection just as though they directly bordered each other.

But, let us consider the more difficult example of two isolated markets, not in communication, separated by a commons. We will consider the ocean (although the sky works equally well). Imagine that you live on the coast and fish for a living. Far across the ocean another settlement pollutes the water. Eventually that pollution reaches your shore and affects your fishing productivity. You have no idea where it is coming from (non-point source pollution), all you know is that it is a new cost you did not have before. Since you do not know the source you only have once choice: to clean up/remove the pollution at the bordering point to where you customarily fish.

Is the fact that you have to devote resources to cleaning this up a market failure? No. Why not? Well imagine that if instead of it being some far away people polluting the water it was some natural event (volcano, mudslide, etc.). Your actions would be no different (cleaning the water) yet you would not say the market has failed just because Nature foisted additional hurdles at you. If the effect is the same, the cause is irrelevant if you have no way of knowing or influencing the cause.

Now lets say you do find out who is polluting and ask them to stop but they refuse. You do not trade with them so feedback cannot occur that way. You now have two choices that prompt me to pose this question: Is it morally justified to attack and kill them until they submit to your will if continuing to remove the pollution yourself may also solve the problem? One option involves the ending of human life; the other option is a mere inconvenience. Which would you choose? If you answer yes to the former then I suggest you reflect on how the state has warped your sense of reality such that it is considered morally acceptable to initiate violent actions against others in order to resolve non-violent conflict. Now consider that all state actions rest on a bedrock of threatening violence against those that will not bend to its will, no matter how trivial the concern. History does not judge kindly those who initiate aggression to force others to do their bidding

Under the Hood

One of the apparently more innovative techniques automakers have applied to saving fuel is a concept borrowed from the electric or hybrid vehicle: automatic start/stop. The concept is fairly simple, turn off the engine when the car is stopped (i.e. at a stop sign or traffic light) and instantly turn the engine back on when the driver initiates their intent to commence motion (releasing foot from the break or depressing the clutch). Depending on the traffic patterns one encounters, fuel savings can be as low as a mere 0.5% all the way up to 10%. Truly this would seem to be getting something for nothing!

But as with any government mandated arbitrary standard there are unintended costs and consequences.  For example, prior efficiency decrees have compelled automakers to make their cars lighter – but lowering mass makes a car less crash worthy. To compensate as much as possible it became necessary to beef up the A, B, and C pillars (the front, middle and rear attachment points of the lower portion of the car to the roof) so passengers aren’t squashed in a rollover. That is, these pillars are now much wider and thus much more readily obscure objects behind them at a distance. Don’t believe me? Hold out your thumb at arms length and place it in front of a car 50 feet away; now unfurl all 5 fingers and block it with your hand. Completely disappeared now hasn’t it? Those of us who drove cars from the ‘80s or earlier are well aware of this slow change. Unfortunately anyone younger just assumes it’s totally normal to have a 6-8 inch A pillar blocking one’s view of oncoming traffic as they try to merge. Such actively growing blind spots have ironically led to more accidents, injuries, associated health care costs, repair costs, higher insurance rates and in some cases even death. But hey, what is human life worth when weighed against the “environment”?

In other words, there are costs associated with everything. If it were up to the individual to decide for him or herself how much more safety risk they are willing take relative to increased fuel economy that would be one thing. However it is quite a different story when the choice is taken away and there is only one option allowed for all. That is what government is: the removal of choice. Bureaucrats decide on the “best” route and make all other options illegal. The same removal of choice is now happening with these automatic start/stop systems. Starting with model year 2016 they are becoming more and more prevalent. Why is this? Because of government fuel economy standards like CAFE (or it’s European equivalent) mandate FLEET wide averages. Therefore the ability by the automaker to extract even a few small percent increase in fuel efficiency multiplied by a fleet of thousands or millions of vehicles helps them meet those standards and avoid possibly millions of dollars in fines. The problem, however, is that the cost of meeting those standards is shifted to the consumer. Such systems require larger, beefier starters and batteries – which cost more. Due to more frequent use these components will wear out sooner – which costs more. Ironically the greater the fuel savings, the more the engine will be damaged. Engines are most vulnerable at start up due to lack of oil. The longer it sits off the more the oil drains back down. Obviously an engine that has to be replaced or rebuilt on a more frequent basis is going to be a significant cost to the owner.

In other words, there is no free lunch. Even something seen (fuel savings) has an unseen cost (wear and tear and repairs). Fortunately, for now, we are permitted the ability to override and turn these systems off (although it must be done manually with every cold engine start). But there is no doubt that in order to eke out another 0.1% of CAFÉ fuel savings, automakers will soon remove the option to disable this feature. Then again perhaps it doesn’t really matter as soon enough the government will outlaw human drivers and we’ll all be passengers in self-driving cars within 30 years – cars that some are already discussing whether or not the automated “brain” behind it should sacrifice its passengers if it determines more deaths would result by protecting its occupants. Unintended costs indeed.

Backdoors

Computer programmers use the term “backdoor” to describe covert methods the programmer can use to bypass the normal user interface in order to more expeditiously accomplish certain tasks. Normally the motivation behind installing such devices are not sinister; their purpose is to assist in debugging or to clean up other messes. The apparatus of the state has similar backdoors, although the motivation there is usually not so pure. These backdoors are set by legislators but only become apparent to those who possesses a perspicacious view of the state. For example, the way government is supposed to work (at least according to Schoolhouse Rock) is that bills are introduced in Congress, voted on, and then sent to the President to sign into law. If the people don’t like the laws they can vote for new Congressmen or appeal to the Supreme Court to overturn the law on constitutional grounds.

That system does still exists, but government power rarely originates that way. The vast majority of power comes from the backdoor: administrative “law”. Regulations promulgated by the EPA, DOE, IRS, etc. do not come from Congress. They are written, proposed, and approved by career bureaucrats who are as much a part of Washington as the marble buildings. The politicians enter, ride the coaster and then exit, but the bureaucrats, like the coaster operator, remain. Although bureaucrats can’t introduce extensive reforms, they can implement piecemeal changes that ultimately have the same effect. Can’t ban fossil fuels? That’s ok, just require (via regulation) anything that directly or indirectly uses such energy must use less of it. The amount is ratcheted down ever so “reasonably” every few years until fewer and fewer can clear the regulatory hurdle. If the outrageous costs for compliant goods don’t decrease usage, then the constrained supply from manufacturers exiting the market will.

It is the same tactic the left uses to chip away at the 2nd amendment and the right at abortion ‘rights’. If you aren’t allowed to close the gate the only alternative is to erect a series of hurdles and obstacles that make the journey more burdensome. Any performance (not safety) based regulations are a fascistic interference of the state in the functioning of private markets: “sure you own your business, but we’ll tell you when, where, and how to operate it.” I don’t know whether to laugh or cry: educated adults actually come together in the belief that their personal views on how much water it takes to flush a turd down the drain or how many gallons of water are sufficient to de-soil underwear is a compelling interest of the state. But if the state does not appease Mother Gaia, then who will? Faux environmentalism has become the state religion in the 21st century. One is not worthy to pass into the Temple of Political Piety unless they have shown the proper level of obsequiousness before the altar of “sustainability.”

And what has this wrought us? Gas cans that don’t pour, toilets that don’t flush, showers that dribble water, light bulbs that either cost a days pay or require a hazmat unit if they break, and hot water that isn’t – we are moving backwards as a society.  Like the frog in the slowly boiling water the process occurs incrementally enough that the “way it used to be” is lost down the generational memory hole. Younger people today simply assume the way thing are today are the way they have always been. They assume appliances don’t work well because of poor design rather than the imposition of strangling regulations by the state.

Now it is true that many of the products I cited have seen improvements. Some are almost as good as the original product. However that was not without a cost. Consumers played the role of unwitting beta-testers for subpar equipment. Once the bugs were finally worked out there is then an ongoing cost to all who purchase this more “efficient” equipment either upfront or in time loss. But hey as long as the planet will be 0.00001 °C cooler in a hundred years it’s all worth it right?

Since government’s role in society is apparently to “fix” things, then in order for it to justify its continuing existence it must seek out new problems and new victims, to boldly re-fix those things it just fixed last week. Those in government seem to believe we live in an artificial Matrix-esque reality where passing laws is the equivalent of writing computer code than can magically make cars go from 25 mpg to 45 mpg overnight or dishwashers switch from using 6.5 gallons to 5 gallons and soon to a mere 3.1 gallons.  To see how awful that will be, fill your sink with 3 gallons of water and now wash all your dishes by hand with just that water. Yeah, yuck.

So perhaps someday we’ll regale our grandchildren with wild tales of machines that used to wash dishes for us. And as they stare at us in wonderment, we will begin the tedious task of washing the dinnerware by hand – just as our great-grandparents did – except we’ll only be permitted the use of cold water. Hot water is way too damaging to the environment, what with all the energy it uses. Ah, yes, progress.

Free Market Gun Control?

In the wake of the horrific Oregon shooting a few weeks ago each side in the pro-gun/anti-gun debate engaged in a kind of holiday-esque ritual: unbox one’s standard talking points, adorn social media and the press with said arguments for a week or two, and then when the furor has died down quietly pack them back up for the next gun-related incident. The problem with the standard talking points is that although they may resonate with the owner, they do little to sway the opinion of the opposing side. They have become stale and useless.

Government prohibitions of market transactions do nothing to eliminate those transactions. Prohibition raises their costs and consequently the profit potential. This induces more, not fewer, people to ply that trade. Decentralized markets are the most efficient means of delivering to people the goods and services they want. People do not want themselves or anyone else to die a violent death. Let’s see if the market can provide this good. Since it is the left’s position that our government has been ineffective at stopping gun violence and it is the right’s position that the government has no business stopping gun violence, then let’s just pretend for a moment there is no government at all. How could this problem be solved absent any sort of bully running around threatening and intimidating people? Insurance. Yes, that’s right, insurance. Insurance companies are in the business of providing financial protection for unforeseen events. Consequently insurance companies are in the business of mitigating risk. If someone owns (or rents) a home they will, if they are smart, carry a liability policy. This protects the policy owner from financial ruin if they are found guilty of causing some sort of harm to another. In order to minimize such claims involving guns each insurance agency could impose their own (varying) set of regulations on gun ownership for their policyholders. Depending on the level of policy owner regulation some insurers would see more losses related to gun incidents and some fewer. Those that had fewer would find their policies and regulations being copied. The market would soon converge on the most efficient and set of regulations that allow people to own guns while still preventing gun related incidents.

A decentralized system is superior to any one-size-fits-all top down approach because it is self-regulating through an alignment of incentives. In other words it is a “carrot” and not a “stick” approach. Gun owners don’t want to be sued into poverty if despite their best efforts something unexpected happens. Insurers prefer fewer claims over more, so they will make sure their policy owners do indeed make good on those best efforts.

Would this system have prevented Sandy Hook or the Oregon shooting? Maybe, maybe not. Since both shooters got their guns from relatives perhaps those relatives would not have be able to afford the higher premiums (due to other risk factors), or perhaps they would have been compelled to have kept the guns better secured, or perhaps other policy rules would have given them second thoughts about allowing others to access to their guns. We can’t know for certain what might have happened, but the point is that there are at least several possible barriers under this system. Not a single “sensible” new law would have imposed the tiniest of impediment had they been in place prior to those incidents.

So at this point the obvious question might be, “We have insurance today, why don’t insurance companies enact these sort of regulations today?” That is actually such a good question that rather than speculate I called my insurance agent at State Farm and asked him. The reason is simple: gun related incidents not involving an actual criminal (i.e. criminals shooting other criminals) are so few in number they can’t actuarially determine the risk level for them. It’s like trying to calculate the risk of blindness caused by a snowflake injury.

Despite media hype to the contrary, these events, as horrific as they are, are so few and far between that we each have a better chance of being struck by lightning than becoming a shooting victim. Other inanimate objects controlled or used by humans cause far more harm than guns each year (cars, pools, trampolines, etc.)  and yet there is no call to ban those things. Quite odd. Insurance acts as a guide to mitigating risk. Risky things are expensive to insure (be that poor drivers or unguarded pools) and so that tends to minimize those things.

Rather than lamenting violence in this country we should be astounded that in a country with over 300 million guns the murder rate is a mere 4.7 per 100,000 per year.  That is lower than 110 other countries with more stringent gun control or outright bans. We should always strive to do better but since there seems to be no correlation between murder rates and gun control then perhaps the answer is not more gun control but rather to follow the market’s lead and see what works and copy that. Laws shackle us from trying alternative approaches and limit choice. Only the free choice of millions in the market can guide us to the best solution.

* Answers to some obvious objections:

Question: “Well what if someone just chooses to get a policy that doesn’t cover guns or they just don’t get insurance, i.e. they simply take the risk that all will be fine?”

Answer: They are of course free to do so, however, the complete lack of any protection means those they have harmed (or their agents) as a result of their negligence are without any limitation whatsoever permitted to take all that they possess in the world, up to and including their life. In other words there is no limitation of liability if you don’t have insurance or have insufficient coverage. That is a pretty big motivator for 99.9999% of all people to have the peace of mind of being protected by insurance coverage.

Question: “Well what if it is just some homicidal loner who buys a gun and is planning on dying, so they don’t care about insurance or liability?

Answer: Liability laws would need to be eliminated so that one could sue the person that sold them the gun and likewise the person that sold that person the gun, all the way up to the manufacturer of the gun. This would ensure that each person in the chain has an incentive to exercise some level of due diligence to ensure whoever they are selling the gun to represents little risk and is qualified to operate it.

Question: “But wouldn’t that just put gun manufacturers out of business if they got sued every time someone got shot?”

Answer: No, because gun manufacturers would perform whatever actions their insurer said they must do in order to remain protected under their own insurance. As long as they do what the insurer says (i.e. voluntary regulation), they are protected from any such claims. Likewise each person down the chain of sale then has an incentive to be protected by insurance and thus to have their actions regulated by their own insurer. The end result is the final seller then has the greatest incentive to ask for certification of the buyer from some other independent certifying body that has “okayed” the buyer for the seller. That certifying agency takes on the risk and you can be certain they will investigate the heck of the background of each person applying for certification. The certifying agency has their own insurance and their insurer will drive the level of due diligence they must engage in order to approve or deny gun buying permits.

Question: “So gun buyers would be in some sort of database and if they did not possess the purchasing permit they would not be able to buy a gun?”

Answer: Yes and no. Those that want to prove to the world they are low risk and not crazy would voluntarily do so. Once they have their seal of approval they could purchase whatever firearms they wanted and remain protected by insurance. But, being a free system, if someone does not want insurance they can buy guns from others who also don’t want to be part of the system – and this would all be legal. There would be no “black market” per se of people without permits buying guns. There would simply be a small market of some people doing this but the inherent risk of selling to someone like that would be so great it would make the cost of the guns so high this alone would act as a natural barrier to most. Most crazed loners are not financially well off. But given the enormous downsides very few would engage in this sort of activity. Basically the same people that are criminals today and can’t legally buy guns would remain similarly verboten under this system. But the point of gun control has never been to stop criminals from getting guns – everyone knows mere laws won’t stop that. The point has always been to minimize accidental shootings or the mentally unbalanced from obtaining weapons and this approach would accomplish this in an entirely voluntary approach. It would also foster an environment of fewer accidents since today anyone can buy a gun without any training at all. Under this approach one would have to demonstrate competency. We demonstrate competency to drive a car with a license, so why not demonstrate competency to handle a gun with a license? I’d rather have a private system doing this rather than a one size fits all government approach that is immune to improvements from new information.

Zombieland

There is a type of parasite known as “zombie” parasites. They alter the brain chemistry of their host and cause them to engage in behavior that they would normally never undertake. Naturally these behaviors benefit the parasite at the expense of the host. For example the Nematomorph hairworm targets grasshoppers and will compel them to dive directly into bodies of water – an apparent suicide. To someone unaware of the parasitical influence this behavior would be truly baffling. Humankind will also engage in similarly baffling behavior due to the influence of its parasite: the state. Likewise, to those unaware of the state’s infection of society, human behavior can be sometimes baffling. For example, just this week there was much moral outrage over the revelation that a Martin Shkreli (owner of Turing Pharmaceuticals) purchased the rights to manufacturer the drug pyrimethamine (brand name Daraprim) and promptly raised the price from $13.50 to $750 per pill. How can this be?! This is horrible; obviously this is an example of “market failure” that must be remedied by state intervention to ensure such greedy bastards can’t get away with such imprudent behavior. Oh, there is greed in play here, but it is not entirely of Shkreli’s doing, he has a good friend helping him out: the state. Acting like a zombie parasite injecting poison into its victim’s brain, the state distorts natural market incentives to such a degree that we are left with nothing but head-scratching outcomes such as this.

The first clue that the state is involved in this mess was the phrase “bought the rights” peppered throughout every new report on this matter. How does one buy the right to make something? Any reasonably competent organic chemist could look at the structure of that drug and figure out how to make it.* What is preventing someone from doing that and eschewing the need to buy the “rights” to make it? The state. Acting under the auspices of the patent office and the FDA the state creates an artificial monopoly barrier for the production of goods as well as their importation into this country. In essence the state acts as the hired goons of Company A that holds a patent or a licenses to produce Drug B. If anyone else tries to produce or import Drug B, those hired goons will take them down. Don’t believe me? Here are the facts: The FDA bans the importation of this drug (for example, a company in India currently makes it for 10¢ a pill) – so Shkreli is safe from that sort of competition. And because he has bought the “right” to make it in the US, that means no one else can make it unless they go through an onerous and expensive FDA approval process. And he didn’t just buy the rights for a song, no, he spent $55 million to acquire those “rights.” So from a strictly economic standpoint the price increase makes sense. The value of a capital acquisition is driven by the price its products can command on the market. Clearly under a monopoly situation (only made possible by the state) it can command a very high price indeed. Absent such monopoly rights, the recipe for the production of that drug would have had some value but certainly no where near $55 million worth.

When the pundits and critics blame the “free” market for this sort of ridiculous outcome I am left to ponder what an odd definition they must have for the word “free”. Does “free” mean to be influenced and controlled by an implicitly violent cartel of bureaucrats that restricts, regulates, licenses, subsidizes, and outlaws in favor of the few at the expense of the many? If so, then I’d like less freedom please. Like the unfortunate grasshopper most of society is willfully ignorant of the parasitical influence in our midst and so, like the grasshopper, we blindly leap into the abyss.

* please see this page for a discussion of the inevitable “but without IP no one will innovate” objection