Category Archives: Austrian economics

Trash Talk

Given Oconee County’s proximity to Athens we often can’t help but be aware of the political landscape within the People’s Republic of Athens. The powers that be in Athens are exploring the possibility of re-municipalizing trash service because a handful of residents have complained about “too many trucks on their street” because multiple providers are permitted to serves within the city. Apparently if the market does not provide a service deemed essential, then that is proof of “market failure.” Likewise, if the market provides too much of a service deemed essential, that too is “market failure.” Heads I win, tails you lose. 

The justification to proceed down this path adheres to the socialist doctrine of better societal outcomes through the increased efficiency of a monopoly provider. Apparently competition is wasteful and inefficient. Perhaps. But putting political lackeys with zero experience, unlimited budgets and little to no oversight in charge is not exactly a recipe for optimal outcomes either. The efficiency argument is not satisfied until a complete takeover by the government of all business. In other words, state run monopolies are a-ok because enlightened omniscient angels run them. Of course the trust busters come out of the woodwork the second two firms try to merge for purposes of efficiency gains through consolidation of resources.  

Sure, government run services can appear to “work” because they are propped up with tax money taken at gunpoint (fail to pay your taxes and you’ll see how quickly the guns come out). The extent to which they are subsidized is directly proportional to their operational losses. Losses represent massive inefficiencies insofar as they have taken resources of a higher value and transformed them into products of a lower value. We want profits – profits mean lower valued inputs were transformed into something regarded as more valuable.

Efficiency is a measure of how many resources are needed to meet some particular end. There are many paths to reach some end but since none of us are omniscient there is no way to know a priori which is the shortest (most efficient) path. It is an iterative process. We start with assumptions and use the profit/loss test to give us feedback. Profit means you’re headed in the right direction; losses the opposite. The desire to make more money drives us toward seeking out efficiency gains. The part people (i.e. busybodies who know nothing of how an industry operates) object to is the time component. It takes time for many individual firms to experiment and sort out what works best, with the successful firms thriving and the inefficient firms going out of business. It doesn’t happen overnight, but it does eventually happen.

Maybe that will happen with the trash pickup and in a few years (or months) there will be far fewer providers. Or maybe not. Maybe, just maybe, the present arrangement is the most efficient. Maybe some carriers compete on price while others compete on service. I can understand why it might seem more efficient to have fewer providers, but when has a government backed monopoly ever been regarded as the most efficient arrangement (i.e. performing so well it did not require subsidies through taxes). I’ll wait. 

Monopolies have no incentive to improve and become more efficient. But even a company that dominates a sector at least tangentially has some incentives to provide the best service they can as they know a new company could arise and gain market share. But a government backed monopoly? That is the worst of all worlds since that provider knows it is ILLEGAL for anyone to compete with them. They can literally sit back and provide the worst service possible and they’ll still receive the same income stream. 

Government run systems incorporate the human instinct toward laziness and magnify it’s vice-like qualities because self-interest can’t be rewarded via work but rather only through social ladder climbing in the state apparatus (not what you do, but who you know). The free market, in contrast, takes that same human inclination toward laziness and transforms it into a virtue. The desire to do more work with less energy is the definition of seeking greater efficiency. This drive flourishes only because self-interest is rewarded and not outlawed. This drive toward greater efficiency and profit benefits both the producer and the consumer. 

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.” Adam Smith

iMonopoly?

This past May the U.S. Supreme Court ruled 5-4 against Apple on the question of whether a group of iPhone users could file an antitrust lawsuit against Apple arising from their contention that Apple’s App Store constitutes a monopoly and thus has harmed consumers. Their primary argument is that Apple’s 30% fee on every app store sale constitutes a “tax.” Consumers are “harmed” because most developers simply pass that additional cost onto the consumer. So apparently if some entity is construed to hold a monopoly market position and imposes a “tax”, that is a bad thing. But if the government does precisely the same thing that is just a-ok. On the precedent of this ruling it should now be possible to overturn the taxing authority of every level of government! But I won’t hold my breath.

In point of fact, Apple does not hold a monopoly position in the market. To suggest so quickly leads to absurd wrongheaded conclusions such as Ford is a monopoly because only they can sell Ford cars or that Robert Di Niro is a monopolist because he is the only one that can star as Robert Di Niro in a movie. The obvious rejoinder to such claims would be that “well that’s silly, there are other manufacturers of cars and other actors, so the consumer can simply substitute the good if they find the supply too constrained or the price too high.” Exactly. Last time I checked Apple does not have the only “App Store” in town. Google has their equivalent and there are number of other independent “Android” app stores as well. But even if Apple did have the only App store platform they would still not be in a monopoly position. Anything that can be done in mobile apps can be done through a desktop or web interface.But even if that were not true, Apple would still not be a monopolist. Why? Because no company in a free market can become a monopoly (other than governments themselves which exert their monopoly provision of certain market goods (security, courts, roads, regulation) through coercive violence). Just as Ford competes with other automakers to sell cars, they are also competing with every other market entrant. Everyone is vying for the consumer’s dollar and so everyone is competing against everyone.Apple competes against pet stores, Ford competes against Apple, pet stores compete against shoe sellers, and so on. 

Every consumer, no matter how wealthy, has a limited supply of funds. When they use those funds they economize them, that is, they rank those things they desire in order of importance and spend their money on the most important items first (food, shelter) and then work their way down the list until at some point they only have enough for one more thing. The next entrant on that list lost out to the one just before, so in that sense they were competing with them head to head. So the App Store could lose out to someone who chose to go to the movies or to buy their dog a treat, or it could be vice versa. If the consumer has a choice (even if a difficult one) then there is no monopoly power. If you hate big oil you can choose to go electric.If you hate all cell phone carriers you can choose to not have a cell phone. It may be a difficult choice that imposes other costs on you, but you are free to do so. No one will throw you in a cage if you don’t sign up for cell service. But they will if you don’t pay your taxes.

In the broader context though this case was rather amusing. That a company can be sued for providing to the consumer this thing that literally didn’t even exist 15 years ago demonstrates an utter lack of comprehension by the public at large of the benefits bestowed on them by the market economy aka capitalism. You should rejoice that there are so many greedy SOB’s seeking to take your money and giving you in return the most incredible, standard of living enhancing tools in human history… things you could not create yourself if you had a hundred years to figure it out. Very sad. Many people agree. 

Amazon welfare?

Tucker Carlson, the sometimes libertarian leaning Fox News pundit, is either a masterful troll or eminently confused about what the word “free” in the phrase “free markets” means. Last week he started pinch-hitting for Team Bernie when he joined Bernard in lamenting the “indefensible scam” of Amazon “offloading” payroll costs onto the taxpayer.

According to Carlson “many” Amazon employees are on welfare. This is the modus operandi of all who entreat the state to take action against some perceived societal ill. This unqualified, uncorroborated assertion is all the pretext needed to initiate action. How many is “many”? Well even according to Snopes this assertion is on flimsy ground. It is based on a mere estimate of the number of Amazon workers in just one state (Ohio) and indeed that number hardly qualifies as many – 11.8%. I suppose 600 or so workers in one auditorium would look like “many,” but within the context of the entire workforce (even assuming it extrapolates to all states) 1 in 10 is hardly “many”.

Carlson doesn’t really suggest a solution to the problem, leaving the mechanics of that process up to Bernie (100% tax on Amazon for any welfare used by employees – I guess the $15 billion in taxes Amazon paid last year isn’t quite enough to cover their “fair share” of welfare). One is left with the assumption that Carlson, like Sanders, would like to see some sort of government action to fix this “problem.” Carlson claims although conservatives are all for free markets, this market is not at all free. According to Carlson it is a monopoly (and we all know monopolies are bad – except when that monopoly is the government itself) that achieved its status via government regulation. That may be true, however that is a pretty bold claim given that Carlson provided no evidence for it. I’m unaware of any government regulations that Amazon or Walmart could have used to their benefit, although I would not be at all surprised if that were true to some extent. Retail just doesn’t happen to be one of those more highly regulated and monopolized industries such as pharmaceuticals, banking, or healthcare (where government regulations create artificial barriers to entry thereby diminishing competition and thus reducing supply which in turn drives prices skyward).

What both Sanders and Carlson miss in their missives is that the solution is not more government regulations to fix the consequences of prior government regulations. The solution is to remove government from the equation. If companies are benefiting from government regulations or subsidies, then eliminate them. If companies are able to pay lower wages to some employees because said employees are also being paid a wage by government (through welfare) then eliminate the welfare. You can’t hand out a bunch of free money to people and then expect that to not factor at all into their determination of the wage they will be wiling to accept. If you need $20/hour to get by and the government is paying you the equivalent of $10/hour in food, healthcare and housing welfare, then all things equal you are going to be much more willing to accept a $10/hour job.

As an employer myself I’ll let you in on a little secret. Employers don’t set wages. You do. Or rather groups of you do. Maybe you want $30/hour but if everyone in your working-skillset-peer group will work for $20 then why pay you $30/hour if there are hundreds of others more than happy to work for $20/hour with the same skillset as you. I’m sorry if you are a single mom raising 3 kids and working an entry level job but that is not your employer’s fault and your employer has no obligation to pay you more because you need it when there is a long line of single teenagers with the same skillset as you willing to work for a lot less. It is extremely disingenuous to lambaste a company for not paying its workers enough merely because you found one example of an unlucky individual who can’t get by on a salary that is more that enough for thousands of others.

Being mad at Amazon or Walmart for hiring people in a welfare-backed society is like being mad at them for using roads to deliver products or the postal service to send mail. Here’s a novel concept: if you want to eliminate free-riding effects for services stop paying for things with taxes (which socialize costs in a way that will always benefit some to the detriment of others) and bill only when services are actually used.

 

Fallacies

Just as the warm, moist air of late summer engenders the destructive fury of hurricanes, so too do these storms bear the perennial fruit of economic ignorance. Like clockwork the talking heads either eagerly forecast economic prosperity or decry the mendacity of the evil price “gouger.” Or both. The former is the classic example of the broken window fallacy, which like a case of herpes, will never be fully expunged from humanity’s collective consciousness. The error lies in focusing on seen benefits while ignoring unseen harm. We are implored to consider the benefits of jobs that will be created as we set about rebuilding lost homes, towns, and infrastructure. But this economic activity is not enhanced; rather merely diverted. All the money spent on rebuilding would have, absent the hurricanes, been spent on other goods and services. It is those markets and industries that will in turn see economic decline as fewer people spend in those areas. Even if argued that the rebuilding funds come exclusively from the savings coffers of insurance carriers therefore it wasn’t going to be used anytime soon, that still does not change the economic dynamics. A huge influx of “new” cash competing for a fixed amount of supplies does nothing but cause prices to rise for everyone else (e.g. building supplies will be in higher demand therefore all users of such supplies nationwide will experience higher prices). These higher prices mean, again, fewer dollars to spend on other goods. The only sense in which one could argue that net economic activity increases is if we assign no value to leisure. Certainly if one works 12 hours a day rather than 8 to both rebuild what was lost and maintain what one still has, then output is indeed greater. But is that the world we want to live in, where we sacrifice leisure in the name of economic output? Why we don’t need a destructive storm to achieve that, just pass a law enforcing a 16 hour work day and we could double GDP overnight! Destruction is not the path to an economic free lunch. Everything has a trade-off. The only path to prosperity is through savings, capital accumulation, and investment of that capital toward avenues that make production more efficient (i.e. cheaper).

The price gouger fulfills a valuable economic role, namely the rationing of constrained supplies in direct correlation to need. The feedback is immediate and perfect. There is no need for the imprecision of someone overseeing how much has Person A bought in such and such time period if rationing is imposed by pubic or private diktat. This issue is not so much of a fallacy since people do generally understand principle that if supply goes down prices will go up. Rather, it is more of an issue of emotion; each person’s barometer of what a “fair” increase amounts to varies. The fallacy is in believing that someone charging an “unfair” amount deserves to be thrown in a cage. As much as people would like to redefine words, “victim” does not describe someone who paid more than they would have preferred. So, no victim, no crime and thus any laws against price “gouging” are themselves victimizing when those with a true need find nothing but empty shelves. Trading willfully unobserved harms for spurious benefits leaves us all vulnerable.

“Mr. Gorbachev, give us this wall”

Throughout Trump’s campaign he repeatedly promised that “we” would build a wall and that Mexico would pay for it. The details of that boast were conveniently omitted. But class is now in session and the homework is due, so at long last we have been made privy to his “secret” method of getting Mexico to pay for this wall: tariffs. Trump plans on imposing a 20% tariff on imported Mexican goods coming into the US. The proceeds are earmarked for paying for said wall. There’s just one problem with this little scheme of course: it won’t work, or at least not the way Trump imagines. In other words, as with all government actions, there will be unintended consequences. One of the central tenants of economics is that incentives matter. Closing a door just means now the window doesn’t look so bad. Like rats from a sinking ship, there are numerous routes to avoid the tariff. To offset the tariff Mexican exporters may raise prices, which of course means US buyers will shoulder the cost (although magically increases in minimum wage never incline one to increase prices). But higher prices mean US buyers may then opt to forego the purchase or to seek alternative goods; the net effect being no tariff earned and decreased sales for the Mexican company employing, you know, Mexicans (homework assignment: what effect might increased Mexican unemployment have on the demand to enter the US looking for work?). Or if the Mexican company decides to absorb the cost then that means they’ll either have to cut costs by potentially scaling back their work force or slowing the rate of hiring – all of which puts more Mexicans out of work (again see homework assignment above). The more you turn up your stereo to drown out your neighbor’s music, the more he does likewise in a perpetual game of one-upmanship until you both go deaf.

The immigration “problem” is one of positive feedback. Actions designed to decrease an effect actually make it grow. The irony here is that Trump of all people doesn’t see the problem. He is quite fond of blaming China for harming the US economy and putting people out of work by flooding the US market with cheap goods. However, he fails to see the US has been doing the exact same thing to Latin America for decades. That area of the world is less developed and so depends much more on agriculture production to support its economy. Any factors (such as cheap imports) in that agricultural market will have an outsize effect in that region. The US has a long history (since the depression) of agriculture subsidies to US farmers. Subsidies lower the cost of US agricultural products, allowing US farmer to export heavily into the Latin American market where local farmers can’t compete. That darn NAFTA! Yes, NAFTA enabled cheap imports in both directions. These imports had the obvious effect of putting them out of work whereupon they are left with little choice but to move to where there is a demand for low skilled labor – the US.

The inconvenient truth is that the solution to most of the immigration “problem” is to simply end all agricultural subsidies. But no, we’d rather scratch our heads as to why so many keep coming here, shrug our shoulders, and then set about building a wall to keep “them” out. Farm subsidies have become such a political lighting rod in this country that it is actually easier to subsidize foreign farmers (the US sends subsidies to Brazilian cotton farmers!) than to scale back subsidies to our own farmers.

If Trump really wants to stem the tide of Mexicans entering the US he needs to make Mexico great again – great enough that their economy becomes a magnet to all expatriates, drawing them home to where the jobs are. Perhaps Carrier should build that Mexican plant after all.

A Kontradiction

A recent Washington Post article purports to bail Paul Krugman (New York Times columnist and Nobel-winning “economist” aka water boy for Hillary Clinton and the DNC) out of a glaringly breathtaking contradiction. Krugman’s 180° flip involves his sudden hawkish attitude toward budget deficits whereas when it looked as though Clinton’s coronation was imminent last fall it was “spend baby spend” time. A one Matt O’Brien with the Post now tries to rescue Krugman from his own Kontradiction (def. Kontradiction: the fairly regular phenomenon whereby Paul Krugman supports the exact opposite of something he previously wrote while himself remaining unaware of his own hypocrisy). For a complete takedown of Krugman on this issue listen to ContraKrugman.

The core of O’Brian’s defense of Krugman’s reasoning is that at a Federal Funds rate of 0.25% government borrowing exerts no upward pressure on interest rates (because the private sector is not borrowing). But at a rate of 0.50% now magically the reverse happens; more, not fewer, businesses are interested in borrowing at a higher rate (?) and so government borrowing will exert upward pressure on rates and crowd out private borrowing. So because rates are today a hairs-breadth higher than last fall a flip on deficit policy is warranted. The special pleading is strong with this one. His argument only works if you carve out this nonsensical exception to the normal laws of supply and demand. Government borrowing at any interest rate will crowd out the private sector and cause rates to rise. This doesn’t magically change the closer one gets to a rate of zero.

However, that is not the most inane contention in O’Brian’s article. He states:

“If businesses won’t borrow even when interest rates are zero, the government can do so without having to worry that it’s using money the private sector wants.”

Let’s just tick off everything wrong with this statement. Businesses are still borrowing; to suggest otherwise is dishonest to put it mildly. Second, the Federal Funds rate (0%) is reserved exclusively for interbank overnight loans at the Federal Reserve. So no, businesses were not stupidly passing up 0% rate loans. Lastly, government borrowing would impact money the private sector is competing for even if somehow the government was the only borrower. Borrowing equals taxation. Although one-half of the borrowing equation is voluntary, the other unseen half (repayment) is not. This is a classic case of Bastiat’s “seen and unseen”. Every dollar someone lends to the government is one dollar less they have to spend elsewhere. It shifts spending from those industries otherwise favored by individuals and toward those favored by government. Although the individual lending favors investment, their investment dollar is still directed to government ventures rather than private ones. Whether you agree or disagree with how the funds are redirected is irrelevant, the fact of the matter is it occurs, therefore the private sector is impacted. The next unseen effect is loan repayment. Government bonds, and the interest they earn, can only be paid back by either (a) increased borrowing or (b) increased taxes. To the extent more of (a) occurs than (b) debt will skyrocket into a death spiral. This is our present situation. But if (b) is used to return funds then obviously all we have done is shift the tax burden from the present into the future. Future taxpayers must then support themselves and us.

I agree with 2017 Krugman. Deficits do matter. Deficits are an immoral act of violence. Deficits are the product of borrowing and borrowing is political cowardice. It takes no courage to give your constituents gifts that their grandchildren will have to repay. Government debt is even more morally repugnant than taxation. At least with taxation the present generation must bear the burden of the policies it puts in place. If the burden becomes too great, then democratic methods (in theory) will push for a change in policy. But borrowing unfairly shifts our burden onto a generation that never had a voice in the decision. Borrowing breaks the democracy feedback loop and permits unlimited dumping of the costs of current policy onto the future. There is so much concern over how our actions today affect the climate for future generations but ironically no concern whatsoever how our spending today will impact the standard of living for future generations who are forced to repay our profligacy. But I suppose Krugman would find no Kontradiction there.

In Defense of the Gouger

There was a recent disruption in the supply of gasoline to Georgia due to a ruptured pipeline. The resulting shortage was the predictable result not of the constrained supply but rather busybody price controls imposed by the Governor. The universal support by the public for the Governor’s actions betrays a breathtaking ignorance of basic economics. The law of supply and demand cares not one whit for your desire to maintain a constant supply of a good while forcing its price down.

Not only should “gouging” be “legal,” but in fact welcomed. Gouging ensures a supply of a good even when supplies are constrained. For example, gouging of event tickets ensures that you can get a ticket at a moment’s notice. Although the price is high would you prefer high price and ticket vs. no ticket? Rising prices due to increased demand is the market-natural rationing system. If prices stay low, then no one cuts back and the good is quickly consumed. High prices incentivize conservation so a given supply last longer and is available to those that desperately have a need of it. Hypocritically the state blocks private business from such practice but happily engages in it on a regular basis in the PeachPass toll lanes of I-85. I have personally seen prices go from 7¢ to over $11 for the same stretch. Of course this is a good thing, and the state knows it, so it is rather disingenuous for them to block it in other arenas.

The most common objection is what of the station that raises their prices during the day on the mere rumor of a disruption? They’ve already paid for the gas in the tanks in the ground – how can they possibly justify reaping these windfall gains? Easy. The higher price (and profit) ensures the station itself can buy more from their supplier at the soon to be higher prices. If the gas in the ground cost 25 and is sold for 30, then the station takes from those sales 25 and buys the same amount again. But if they are not allowed to raise prices and it soon will cost 100 to refill the station’s tanks, then they can only buy 1/3 of what is needed and so will run out that much faster each time. If they can charge 120, they can take 100 and fully replenish the tanks ensuring a steady supply.

A tertiary benefit of high prices is as economic alarm. It signals too society that resources are more urgently needed where prices are high. People then swoop in to access that higher profit potential and so the supply immediately begins to swell and prices fall. So even when such “gouging” occurs it will not last long as the market corrects itself naturally. No need for men with guns running around threatening people.

The usual objection here is that people can’t afford the higher prices. Please. No one is going to be filing bankruptcy because they spent extra on gas for a week or so. The above average amounts are no more than typical monthly discretionary spending (movies, eating out, etc.) The prospect of possibly foregoing a few luxuries doesn’t seem like the sort of essential human right that rises to a compelling state interest. Indeed, state intervention only makes matters worse – when it comes to economics, there’s no free lunch.

Can Buy Me Love

There is something eerily similar to the behavior of politicians competing for votes and that of divorced parents competing for the love of a child. There are two strategies deployed in this endeavor. Tear your competitor down with insults or build yourself up through gifts. With either approach there is little daylight between Democrats and Republicans. With Trump’s recent speech directed at working women we see that the difference between Democrats and Republicans is in degree, not kind. Both are quite willing to violate the rights of the individual upon the altar of compulsory collectivism, because you know, feelings. Trump promises six weeks of paid leave for working women. Clinton promises twelve weeks of paid leave for anyone caring for someone. Why so stingy though? It’s not their money after all. Why not promise a year of paid leave? Or two, or ten? Oh, that’s right, because of course we all know there are thresholds of cost that no business could bear. Let’s be reasonable after all. So in the pursuit of reasonableness our wise overlords-to-be dial back the burden-meter until some, but not all, business could manage to survive. Since only 12% of companies currently provide paid family leave we can draw the reasonable conclusion that this is a fairly expensive benefit. Were it not expensive then naturally every business would provide it (duh). And what adjective describes somebody that can afford really expensive things? That’s right: wealthy! So what kind of sorting might we expect to see if a large expense is imposed on large and small businesses alike? That’s right – smaller businesses will shut down leaving only the larger wealthy ones behind. Likewise the (artificial, government imposed) barrier to entry for new competitors will be so high that none will pass. I can almost understand Trump proposing this. As a large business owner it confers a competitive edge to his corporate interests. But the Democrats, those supposed champions of the “working men and women” leading the charge against the evil one percenters, they are in fact giving those ultra-uber rich businesses the greatest benefit imaginable: eliminating sources of competition. The irony is I’m sure Bernie would have supported a similar mandate while remaining blind to the fact he’s helping the very businesses he decries.

Such mandates further the goal of augmenting dependency on the state by slowly dissolving agency of the individual. The state views the employee as being too weak and stupid to make the best decision for themselves. If an employee would prefer more pay and less leave time, that’s not allowed. If an employee would prefer a higher wage in exchange for flexible working hours, that’s not allowed. If an employee would prefer having a job at lower wages vs. having no job at all, that’s not allowed. Mandated paid family or maternity leave is no different than a mandated minimum wage (i.e. price fixing). All benefits boil down to a monetary cost. If you mandate paid leave (the seen benefit), then you’re going to have to pay for it by subtracting from somewhere else (the unseen loss). That could be the rollback of non-mandated benefits, smaller bonuses and raises, or fewer workers hired. The last is most insidious as it leads to increasing unemployment despite no one losing their job. It further increases the work-load (and stress) on existing employees. When that happens many would gladly trade a lower wage for a smaller workload and less stress – but – that’s not allowed because children can’t make those sorts of decisions. Only the parents – the state – are wise and responsible enough to make those kind of decisions. Thank you wise and omniscient Dear Leader.

 

Capital Day

Labor Day, according to the US Department of Labor is “dedicated to the social and economic achievements of American workers” and as a “national tribute to the contributions workers have made to the strength, prosperity, and well-being of our country.” While true, there is a major missing component in this tribute: capital. Show me a worker laboring without any contributions from capital and I’ll show you naked primitives feeding off berries and dead carcasses. Every advance in the standard of living is built on a foundation of both labor and the deferred consumption (capital creation) that permits the creation of tools to augment laboring efforts. Holidays should be deployed to remind the populace of that which normally escapes public notice. This is exactly why we need a “Capital Day”. Although capital surrounds us, it is too often ignored, like the air we breathe, and like air, our society would be dead without it.

The fact that most of you are now probably scratching your heads and wondering what possible role capital has played is all the more reason to have such a holiday. Yes, workers perform the labor needed to drive the engine of commerce, but they do not do so in a vacuum. Who paid for the building that they work in? The equipment and tools they use? Their wages? No one asks these questions. It is somehow assumed these are exogenous resources simply laying about waiting to be donned by the heroic laborer.

No, they are not manna from heaven. The capitalist provides them by virtue of having deferred consumption and thus saving resources. That savings (capital) allows them to pay others to build the tools needed to enhance the capacity and efficiency of the worker in their role as laborer. The machinist creates multiple cars in a day using tools, the material handler moves tons of goods with a forklift, the office worker performs millions of operations a day with their computer, and so on. And when done performing those tasks the workers are paid long before the revenue generated from their labor returns to the capitalist – paying someone for their service so far in advance of revenue generated from that activity necessitates that money, capital, be saved and available. Without capital every newly hired worker would have to wait weeks or months before receiving their first paycheck.

The market capitalist (as opposed to the cronyist political capitalist who partners with government in order to gain advantage) risks all. For every success, dozens more fail and lose everything. Capitalists are not mere fat cats earning a living off the sweat of the laborer – no, they play an important and vital role just as the laborer does. They provide and coordinate the resources needed by laborer to actually labor. It is a partnership, but one where one partner is honored, while the other is at best perplexingly ignored or at worst, reviled. Let us never forget the importance of both, here’s to Capital Day!

Stepping Up to the Plate?

Slow internet. No words invoke greater apoplexy in modern man than these. Oconee County, being largely rural, has suffered through its share of less than ideal Internet connectivity over the last decade. So it is little wonder that county officials recently engaged representatives of Corning Optical Communications to discuss the possibility of wiring the entire county for fiber optic Internet access. As a resident myself, nothing would please me more. However, as an ethically consistent human being, I cannot opt to ignore a little thing like theft even when that theft might benefit me personally.

Inroads to high speed Internet have been slow not because of capriciousness but rather due to simple economics. Investments are made only if the prospect of a meaningful return is sufficient to compensate for the risk involved. What would you say if someone asked you to invest your retirement savings into a project that might yield a payback of less than 1% after 75 years? If you’re unwilling to make such a poor investment, then who can blame the telecoms for reaching the same conclusion. Capital intensive projects like running underground cables for miles and miles only to serve a handful of customers just don’t make economic sense unless those customers are willing to pay hundreds of dollars a month. And since nobody is willing to pay that, it doesn’t happen. Local governments don’t help either as various right-of-way statutes heap unnecessary costs on the process (see OCGA §46-5-1(a) and 48-5-423).

In the meeting, according to the Oconee Enterprise, Administrative Officer Jeff Benko observed that, “…in areas where the private sector has not stepped up to the plate, there’s an opportunity for the government to intervene.” In other words, where my parents have not stepped up to the plate by buying me a Ferrari, there’s an opportunity for my bank-robbing uncle to buy one on my behalf. “Stepping up to the plate” is the economic equivalent of providing something at a false cost because no one is wiling to pay its true cost.

This project was estimated to run about $1400/home served. If everyone voluntarily wrote a $1400 check that would be grand. It would be true democracy, marketplace democracy, in action. Consumers vote their preference every time they open their wallet. But we live with a political democracy as well, so as long as 51 out of 100 people want something, then it’s perfectly acceptable to reach into their neighbor’s wallet and take what is needed. Some might suggest paying for it with bonds is ethically sound as someone is voluntarily lending money to the county. But that logic is specious insofar as the bond must eventually be repaid and the only way to do so is with taxes and as we all know, taxes are theft. Indeed bonds are even more cowardly as they shift the repayment burden onto future taxpayers who have no voice in what is decided today.

Repeat after me: just because it is something I want, that does not make it is ok to use political means to force others to provide it for me.