Category Archives: Big government is the problem

Never Forget

“We will never forget.” This sentiment is nearly universally applied in remembrance of the September 11 anniversary. But what does it mean? Since most do not personally know someone who perished, it is doubtful it is intended to memorialize a particular individual. Rather, it is intended as a warning to those that attacked us, “I will never forget how you hurt us; you will pay for what you have done.” It is a passive-aggressive remembrance. But when a bee stings someone perhaps it is more fruitful to try understanding why they got stung than to wage war against the hive. Yes, the bee stung me and that rightfully makes me angry, but, perhaps my buddy should not have thrown that rock at the hive five minutes earlier. Maybe, just maybe, that had something to do with it. Sometimes we pay the price for the misdeeds of others. It is not fair. It is not right. We can’t change the past. But we can change the future by learning from the past.

Instead of being led by the nose, we need to start asking the questions we’re not supposed to ask. If the 9-11 assailants did what they did because they hate us for our freedom, then why have there not been attacks on every “free” western democracy for the past two hundred years? For some reason the history books seem to be silent on jihad-style attacks in the 1920’s or 1870’s. I wonder why. It is odd that the “modern” notion of Islamic extremist only developed post 1950’s. Let’s not forget that the US and UK governments played a hand in the 1953 Iranian coup d’état that saw the democratically elected Mosaddegh ousted in favor of a puppet dictator (the Shah). Let’s not forget that the Middle East was arbitrarily carved up by European powers in the wake of World War I and II. Let’s not forget Israel was created in 1948 by the UN by forcible removal of people from their homes. There is no single cause to this mess, but, that is the nature of an abusive relationship. A multitude of transgressions, large and small, will after many years culminate in a response. An abused spouse may long endure abuse until finally one day they strike back, violently. Such events do not occur in a vacuum.

To be clear, this is not “blaming America,” unless you subscribe to the fallacy that America is its government. Consider: my neighbor repeatedly tosses his dog’s poop over his fence into another neighborhood despite their protestations to cease such behavior. Then one day those neighbors toss a grenade back which also results in my house being damaged. I’m going to darn well blame them both! My neighbor’s actions precipitated this response. Stating that my neighbor played a hand in those events does not mean I’m disloyal to my neighborhood and blaming my neighborhood. A member of the group is not the group itself. Repeat after me: blaming our government is not blaming America. That is the lesson we should never forget: the actions of those we elect have consequences.

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.

Hooked on FERPA

There is no guarantee in government more assured than a bill doing the exact opposite of what its name implies. The “Affordable” Care Act – need I say more? An early vintage of this phenomenon is the Family Educational Rights and Privacy Act, otherwise known as FERPA amongst college students and their parents. This law, enacted over 40 years ago, purports to protect the privacy of a student’s education records. But, rather than protecting privacy it simply affirms what was already true: that parents, or whoever is paying the bill, could see the results of the product they are paying for, namely any and all records related to their student. Any educational institution denying such access wouldn’t last long as no one would go there. It’s like passing an act guaranteeing the right to eat a meal you paid for. Legislative accomplishment is often measured in answering questions no one was asking.

But rather than protecting privacy, FERPA seeks to undermine it by (a) taking away the rights of the person paying for the education by virtue of the student’s age and (b) carving out a host of exceptions to that privacy for a number of state actors and various “officials” that the student or the parent may very well wish to restrict access to. But they no longer have that right. They had to give it up in order to retain that which they already had.

As both my wife and I attended a “private” college we had no prior experience with FERPA. During the orientation day for the public university where our eldest son is attending we and (based on the laughter in the room) many other parents first learned of the head popping idiocy of this “law.” The school took great pains to underscore the reality that unless our child gave us specific written consent to access their “educational records” we would not even be permitted to pay their housing and tuition bill because disclosure of the amounts owed was an illegal sharing of a student’s educational records. Brilliant. So time to crank up the paperwork machine as 99% of parents “encourage” their student to fill out the permission paperwork just so they can pay their bill. I guess it never occurred to our wise overlords that perhaps it might be more efficient to make the default option the one that the vast majority requires.

I say we had no prior experience with this act because private colleges typically do not receive funding from the Department of Education. However most public universities do. So in that sense FERPA is “voluntary” – all the school has to do is opt out of such funding. But that’s about as likely as a shopaholic cutting up their credit cards. These schools are hooked on this federal money and will do anything the Feds “ask.” If the prospect is losing millions in DOE funding or making students and parents jump through absurd hoops or be grossly inconvenienced, they’ll choose the latter every time. If you make a deal with the Devil, then you play by his rules.

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?

Being a Jerk at Work is a Human Right, Says Labor Board

The National Labor Relations Board (NLRB) recently told T-Mobile that its policy against workplace incivility is illegal. Nope, say the bureaucrats: workers have a right to be surly on the company dime.

The Huffington Post crowed about the ruling in a recent post. The article’s title, “Your Employer Can’t Force You To Be Happy,” betrays a fundamental misunderstanding of the meaning of “force.” The only one employing force in this situation is the NLRB. The only victim of force is T-Mobile. If T-Mobile refuses to comply with the administrative law judge’s order, eventually men with guns would come and haul its executives off to jail.

You Keep Using that Word

For the record, neither T-Mobile nor any employer uses men with guns to compel people to continue working for them. The confusion here stems from a flawed colloquial use of the word “force.” The situation called life requires that we eat, which in turn requires that we work to earn an income to acquire food. That darn Mother Nature forcing us to work! By the same token, if your attitude puts you in a situation where you can’t easily find another job, then that makes your employer the bad guy. Apparently anything asked in pursuit of maintaining that job is a use of force against you.

These are not monstrous expectations.

The employer-employee relationship should be an entirely voluntary one. To the extent that is untrue today is almost universally to the detriment of the employer. Employer rights (that is, the natural right to form mutually agreeable contracts) are severely restricted by an avalanche of labor laws, rules, and regulations.

Rules run the gamut from merely annoying (pay frequency standards) to debilitating (lawsuit risks when firing someone for performance reasons because they happen to be a member of a “protected class”). Somewhere in between is the difficult task of setting even basic conduct standards for employee behavior because of the intractable minefield that is the National Labor Relations Act.

The NRLA guarantees to all employees (irrespective of union membership status) certain “rights,” chief among these being the right to engage in any and all behavior that is conducive toward forming or joining a union. Anything that could remotely be construed to restrict this right is verboten and can earn the employer the label of “criminal”.

Even a rule as simple as stipulating that company resources can only be used for company business is disallowed on the grounds that employees have a right to use company resources to communicate with each other about working conditions. Apparently suggesting employees communicate after hours and using their own e-mail accounts or photocopiers is simply too much of a burden. I mean, who has access to phone service or printers at their house these days?

Government has given an official imprimatur to poor customer service.

The recent NRLB ruling similarly struck down several provisions of T-Mobile’s employee handbook that it viewed as being too restrictive with respect to employees’ organizational rights. Among these included a rule “prohibiting employees from arguing with co-workers, subordinates, or supervisors; failing to treat others with respect; or failing to demonstrate appropriate teamwork” as well as requiring employees to “maintain a positive work environment by communicating in a manner that is conducive to effective working relationships with internal and external customers, clients, co-workers, and management.”

These are not monstrous expectations. People actually want to work in places where management discourages acting like a jerk.

The head-splitting logic employed by the NLRB “judge” is as follows. If an employee is unhappy about work conditions, he or she has the right to externalize that unhappiness to co-workers and customers.

The Right to Treat Customers Poorly?

Being “forced” to cover up unhappiness, in this view, would be tantamount to disallowing their right to free expression of their anxiety over work conditions. This raises the question: what if the employee woke up on the wrong side of the bed? This has nothing to do with working conditions. Surely that is not a protected activity. How are we to differentiate the two?

Government has given an official imprimatur to poor customer service. In a way it makes sense. Government workers are infamous for their ill tempers (think the DMV). But if bureaucrats are able to propagate their own sullen attitudes toward work and service throughout the private sector, they won’t look so bad in comparison.

There is an old workplace humor poster that stated, “Sometimes the best solution to morale problems is just to fire all of the unhappy people.” Let’s start with the scowling faces in government before they make us all as miserable as they are.


Greg Morin

Greg Morin holds a PhD in chemistry from the University of Notre Dame and maintains a personal blog at gregmorin.com .

This article was originally published on FEE.org. Read the original article.

Crocodile Tears

We often hear that that manufacturing is dying in the US because of unfair overseas competition. US manufacturers are either going out of business or shifting operations overseas. However global competition plays a role across all industries, not just manufacturing. Something else is at play. US tax policy singles out manufacturing (actually nearly any business dealing in tangible goods) with unfair rules designed to extract more tax relative to a service-oriented business with the same income albeit while claiming the same tax rate. As the owner of a small US manufacturing firm, I have sadly gained firsthand knowledge of the severe disadvantage one must contend with if they have the audacity to try and make or sell goods in the United States.

The signs of this are not immediately apparent since the nominal tax rate for all corporations (non-pass through) is 35%. The trick though is in the sleight of hand where the focus is on the tax rate while it is the definition of profit that is critical. The common definition of profit is any money remaining after subtracting all expenses from revenue. And we all know what an expenses is, right? Anything you spend in furtherance of the goal of obtaining said revenue. Well unfortunately it’s not that simple, at least as far as the IRS is concerned. In business there are both overhead expenses and capital expenses. Capital expenses are not immediately deducted against revenue but rather depreciated over many years. So if you buy a $100k piece of equipment you don’t deduct the $100k, you deduct maybe $10k that year and for the next 9 years. There may be legitimate business reasons to view the numbers that way for accounting purposes however beyond a certain minimal size a business may not use the cash method (which does not employ depreciation) for tax computation but instead must employ the accrual method which invariably yields a higher figure by shifting more future income into the present. This puts such businesses (primarily manufacturing which is a equipment intensive industry) at a severe disadvantage insofar as the part spent but not deducted accrues tax. But it gets worse. Manufacturing maintains inventory and the inventory is treated as a capital expenses as well therefore none of it can be deducted until sold. And even when sold it is not taxed at lower capital gain rates but at higher regular income rates. The IRS knows the game of “heads I win, tails you lose” quite well.

Ironically it is a rapidly growing business that is most susceptible to such tax harm as most if not all the profits are invested back into the company in order to grow the inventory to keep up with increasing sales. So if you make a $1 million but use it to buy $1 million in inventory you owe $350k in taxes even though you don’t have $350k on hand. Oops. So you either have to borrow it, incurring even greater costs, deliberately slow your rate of growth, or just go out of business. But wait, it gets even worse. If you do so well that your sales exceeds $1 million the IRS redefines expense once again (Section 263a) and says a certain percentage of your payroll, rent, utilities, insurance, etc that is indirectly associated with producing the inventory must also now be capitalized into the value of the inventory. This shifts even more money from the expense column to the profit column. So based on pure available cash flow you may have made $350k but based on IRS capitalization requirements they say you made $1million. So the entire $350k you made is sent to the IRS on your phantom $1 million income and you end the year with nothing.

Only manufacturing is subject to these absurd redefinitions of expense and profit. Service industries have no inventory and nearly no equipment so their profit more or less equals their cash flow. Farming gets a million loopholes to avoid these issues. The rules governing profit/income are far more germane to ones tax bill then the tax rate itself. If we want manufacturing to flourish in this country again perhaps we should stop punishing those who try to engage in it while crying crocodile tears about how US manufacturers are fleeing this country.

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.”

Party Time

The American political party duopoly is a curious thing. Every other modern democratically run state has multiple political parties that freely compete for votes in order to establish their representative share of the people’s voice within the government. But that’s not the case in America; here we have two parties that share total control of the state apparatus on a semi-regular seesawing 8-year cycle. The curious thing is that no one questions why this would be? Is it that in other countries there are four, five, or six different more nuanced mixtures of political opinion but somehow when you cross the American border human minds undergo a transformation that imparts upon them the capacity to only hold allegiance to one of two political mindsets?

As you might have guessed there is no magic involved at all. Wherever you find constrained or limited options you will find government pulling the strings from behind black cloth. Political parties are not institutions established by the constitution. Indeed they are not necessary at all for our government to operate. Political parties are private institutions, businesses really, and are the product of the natural tendency of people with similar views to work together for common cause. That is all perfectly fine. The problem occurred over time. Whenever one party gained control, they would pass laws (erect barriers) making it that much harder for opposing parties to gain access to the ballot box. If your opponents can’t get their name on the ballot that tends to increase the likelihood you will remain in office.

Simultaneously they made the process of their campaigning that much easier by passing laws (providing assistance) that authorized the government to use public resources to assist with internal party business (i.e. nominating primaries) thereby supporting the illusion that party business is really state business. That is to say, these private businesses (Democrat Party™ and Republican Party™) have the cojones to get the public to pay for their private primary elections that ultimately are entirely pointless, as it is the party delegates that decide the nominee, not the voter. This process is merely an insidious trick to dupe the people into feeling as though they have a voice in the process so that they come to view the primary process as party of “democracy” when it is nothing more than a privately run, and publicly paid for, straw poll. This process has gone on so long that most people are unaware of the distinction and simply view the “primaries” as part of the normal political process of electing someone to office. They are not. They are private events held in public, paid for by that public, masquerading as democracy in action.

These political parties care not one wit about your vote or what you think. Because they are both private organizations they can ultimately pick whomever they want to be the nominee. They prefer to have the blessing of the voters upon their anointed candidate in order to give the people the illusion of choice. People are more easily controlled if they feel like they have some control of their life – if they feel like they have a choice, even the illusion of choice, they will accept a result even if they do not agree with it.

Duopoly control is further assured since most elections do not require the winner obtain a majority of the vote if by some miracle a third candidate appears on the ballot. This rules out runoff elections, which afford voters the ability to rank their choices. The deck is then further stacked against the third party candidate as people make a pragmatic rather than a principled choice to ensure the “most evil” candidate does not win

Political parties have co-opted the authority of government in order to ensure their continued stranglehold on power in this country. This is not democracy. This is not freedom. False choice is not real choice. We laugh at countries with only one name on the ballot and yet somehow only two names on the ballot seems perfectly reasonable. If you truly believe in democracy then you must demand the people be free to choose from all options. Every flavor of ballot access laws should be repealed, campaigning on the ballot (D or R next to the name) should be banned, all winners must have a majority decided through instant runoff style elections, and the Democrat and Republican parties should either have private nominating conventions or pay for their own public elections.

Waterworld

By now many of you are likely aware of the contaminated water fiasco in Flint, Michigan that has apparently resulted in 77 cases of Legionnaire’s disease (and 10 deaths). It is indeed a tragedy of shattered trust. It is also darkly humorous to witness the acolytes of Statism (i.e. the faith that The State can protect us from all harms and correct all wrongs) are apoplectically flummoxed as to how such a thing could happen: “But, but, the state is supposed to protect us from the depredations of cost cutting profiteers!” The state is supposedly there to protect the weakest among us – so how ironic that those most harmed by this incident is the predominantly poor population of Flint. How could such a thing have happened? The problem is structural. Private ownership weeds out failure; public ownership protects it.

Now one might argue that since there are thousands of municipal water systems across the country that operate without any problems this is simply a fluke, an outlier and is not indicative of any sort of problem with government run water systems. That is a dangerous premise. It’s like arguing that one doesn’t need a seat belt because they’ve never been in an accident. The problem is not that random groups of people do not know how to provide clean water. The problem is that humans are imperfect and eventually a perfect storm of errors will accumulate until a calamity results. This can happen in both public and private entities. It is the response to the calamitous event that distinguishes public from private entities.

First, private entities already have a natural incentive to prevent such events from occurring because the owners and the insurers are financially on the hook for problems. Problems are costly to fix and often results in expensive lawsuits, so prevention is the best medicine. Public entities have no such negative feedback. No one is financially liable. Everybody plays a part in creating the mess, but no one is actually responsible. Worst case someone might lose their job or the town is fined by the EPA (that is, ironically the taxpayers – the customers so harmed – end up being financially on the hook!) Oh well. Losing your job is not nearly the disincentive to preventing harm as would be losing hundreds of thousands if not millions of your own dollars.

Secondly, if something does still occur despite best efforts to prevent it, private entities have a natural incentive to fix it quickly as possible in order to contain the potential financial damage. It is the very greed that so many on the left decry that actually aligns the incentives of the owners with those of the customer. Keeping your customers happy, safe, and healthy is beneficial to the bottom line – otherwise you get sued or lose customers. But as we have seen in the Flint case, the response of the ruling class is more akin to a Three Stooges skit, with each part of that system poking the other one in the blame game – all too busy fighting with each other in order to avoid responsibility than focused on actually fixing the problem.

Lastly, no matter what happens, the public system remains in place. The public can’t “fire” them, they can’t choose another provider. They have no choice but to continue buying a product from a provider that has proven to be unreliable. No is allowed to come in and compete with them (that would be illegal). In many cases you can’t even legally dig your own well – you are obligated to buy from the local utility. With a private system one has options. You can put in your own well. A competitor could come in and “steal” customers – or perhaps the old company is sued into bankruptcy and completely new ownership takes over.

In closing I would ask you to imagine the following: Imagine that the standard in this country was that all water was provided by private entities. Now imagine that the same thing that happened in Flint happened but with a private provider. Would there not be an instant outcry and demand that the government take these systems over, or that they must be regulated for safety? Now realize that the reality today is the exact opposite. And what do we hear? Cries to “privatize” our water systems in order to allow market forces to naturally regulate the delivery safe water? No, instead we get self-righteous politicians (Clinton et.al.) trying to frame this event as some sort of partisan one-ups-man ship that endeavors to prove that the only reason this happened is evil Republicans hate “poor black people”. Well I guess they must hate themselves since it was their own city council (composed of Democrats) who signed off on the plan that ultimately led to the problem.

The closing irony here is that despite long being accused of selfishness and greed, it is the private market that has come (quickly) to the rescue in Flint. Walmart, Coca-Cola, and others have provided (for free) bottled water to the residents.  Why are they doing this? Perhaps they genuinely want to help. Or perhaps they see it as a grand PR opportunity to earn some loyal customers. Even if the latter it doesn’t matter – if “greed” compels people to help their fellow man, then I say bring on the greed!

Market Failure is not an option, it’s not even possible

Proponents of state intervention in markets (managed markets) unfailingly assert the legitimacy of their stance by pointing to “market failure.” Yes, yes, they admit, markets are great at delivering goods and services to people, but, sometimes they inexplicably fail and this consequently requires men with guns (the state) to “fix” them. To put it simply, market failure is a myth. There is a failure however, not of the market, but of their own ability to comprehend the complexities of a natural system whose chaos is brought to order through feedback.

Appeals for regulation by some central authority are predicated on the ideal of “fairness” in ensuring that all who use some resource pay for such use. In other words, if one perceives even the possibility of “free riding” with regard to some economic good then this is all the excuse needed to bring in men with guns to ensure all pay their “fair share.” Free riding is the quintessential example of market failure. Now, as they say, time to bust that myth.

Now rather than choose an example that would be quite easily dismantled as embodying free rider potential (roads, courts, police, fire protection, etc.) I shall choose what is perceived as the most difficult of all: the environment. For this example we shall use the ever-popular environmental whipping boy, carbon dioxide. The output of CO2, it is said, does not factor in the costs of the damage wrought by this “pollutant.” That is, the externality is not internalized in the cost of the product. In fact the truth is exactly the opposite. To see this let’s consider an economy of two actors, Y & Z. Y produces product y and Z produces z and they trade with each other. Now let’s imagine Y can increase his output if he dumps his waste onto Z’s property. Y can now produce more of y, but Z must now devote time and resources to cleaning up the mess (or perhaps it makes him tired or ill) and thus the output of z declines. Y can now only obtain that smaller fraction of z output when trading. Obtaining less for the same cost is equivalent to a greater cost for the same amount. In other words the apparently externalized cost that Y foisted on Z must necessarily be internalized back to Y by virtue of how his actions affect other actors in the economy. No regulation is needed; it is inherent to the system that for every action there is an equal and complementary reaction.

So now extending this metaphorical example to the real world let us assume for the sake of argument that all the doomsayer prophesies of the climate alarmists are true. Is it not obvious that all these bad consequences would negatively impact economic productivity? So all things being equal, if one sells a barrel of oil for $50 that $50 will now only buy the equivalent of say $40 worth of goods (that is, $40 of goods will cost $50, a de facto market “tax” that precisely mirrors the level of damage as reflected in the decreased output). If the damage predicted by the alarmists is real, then it can’t not have this negative effect. In other words, if everything becomes more expensive because there is less of it, then necessarily less will be consumed, including energy derived from CO2. If the damage is real, this natural negative feedback loop will self-correct the problem as profit seeking people strive to innovate their way to greater production. If the damage is not real, then no correction was necessary.

Ironically, carbon taxes, long touted as a “market” approach to solving this issue would do nothing whatsoever. Energy consumption is relatively inelastic and thus higher prices (taxes) for energy would force prices down in other sectors to compensate. Indeed carbon taxes are already touted as revenue neutral (through lower taxes elsewhere or rebates). The only thing that one might superficially assume could work would be a flat consumption tax on all goods. But even if you could impose a 50% sales tax on the entire economy it would ultimately have no effect on consumption at all. If the money is simply removed from the economy, then deflation takes over and all prices drop. That is, output has not declined, only the money supply. The same amount of goods still trade but with fewer dollars. But, if instead the government spends the money, other than productive losses due to government waste, the supply and demand for goods, including energy still won’t change. With natural market feedback the external cost is internalized as reduced supply; with an artificial system (taxes) supply is unaffected, only the identities of those doing the demanding changes.

The market system needs no overseer or committee to function. It is not “targeted”, the entire economy would be affected as if with a fever until the profit motive drives the innovators and entrepreneurs to shed the burden of the internalized costs of decreased output. To say that markets suffer failure is the intellectual equivalent of denouncing a fever as a failure of the immune system.