Market musings

I was celebrating my grandparents' 50th wedding anniversary with a stint in Vancouver, Canada, and a cruise of the Alaskan coastline.

As I am prone to do when in cities, I walked around downtown Vancouver every night I was there. I was astonished at how many homeless people lived there. Every time I turned a corner it seemed like I saw a couple more homeless people. I have been to NYC and Chicago and I noticed homeless people there, but nothing nearly on the scale of this phenomenon in British Columbia. Austin has a significant homeless population as well, but even our numbers were dwarfed. Some cities become havens for homeless people, who move from city to city, exploring the various agencies that will feed and clothe them. Then I found a clue:



If you can't make it out, the title on the door reads "The Ministry of Employment and Economic Assistance." Vancouver seems just as interested in Orwellian terms as is our own government, with our own latest hits including the PATRIOT Act and the No Child Left Behind Act of 2001. I also thought the anteroom looked like something out of Kafka's parable, Vor dem Gesetz.

It would be a mistake to assume that I oppose the results of government assistance organizations. I do question, however, that assumption that the government is doing the best job of helping homeless people out, and if in fact it is not hurting job opportunities for individuals. These sorts of bureaucratic organizations are stopgaps at best, and there are only so many stopgaps that a government can afford (even when it's taxing its taxpayers through the eyes).

Lew Rockwell wrote a nice article about the first month of liberty, a thirty-day transition to a free market economy. Check it out here.

I am gearing up for graduate courses which start Wednesday. I won't be taking any Modern European courses, but I have purchased a few books on the Weimar Republic at a professor's recommendation. We all know that this welfare state crumbled under the weight of the oppressive Treaty of Versailles; but it should be interesting to explore some of the other economic areas as well. I just bought von Mises' Human Action, Socialism, and The Anti-Capitalist Mentality, so it should be nice to read them in conjunction.

I might be more active on the blog as school gets going and the gears get turning; frankly I'm suprised I managed to post after a 10 day vacation . . . from vacation. I'm taking a course on Demonology and Witchcraft (seriously, and I just started reading the Harry Potter series), so hopefully you'll pick up some musings on that as well.

The Human Side of Austrian Economics

Jim Fedako has a great post Forgotten at the Door on the Mises blog. He does a great job explaining the importance of recognizing individuals the way Austrian economists and libertarians do. For all the statist's talk about helping people, he is only helping one imagined group and hurting everyone else. As Ron Paul explains, we need not be concerned with women's rights, gay rights, or minority rights. There should only be individual rights for real individuals, not collective rights for imagined groups.

In addition to writing for Mises.org, Jim Fedako has an excellent blog of his own, Anti-Positivist. I have taken the liberty of adding it to the links list.

Exploitation of the Majority

I saw this article on the Mises Institute's blog:
Why Government Can't Make Decisions Rationally by Ben O'Neill

O'Neill does a great job of explaining why government decisions are always biased in the favor of small groups, particularly when it comes to cutting spending. Since every government action involves using tax revenues for things that benefits the population in non-uniform ways, every government action is really a redistribution of wealth. Since taxes are collected from almost everyone and most government programs primarily affect a much smaller group, the people on whom the program will have the greatest effect is that smaller group. As O'Neill points out, these people will be far more vocal about decisions concerning the program, and the government will give their views disproportionate consideration.

This mechanism explains the myriad of government programs that are of little advantage to most of the population. This is what is really going on with all the "special interests" that politicians always talk about. Since programs that take from the many and give to the few are allowed (even if forbidden by the Constitution), it is only rational for every small group to use their disproportionate influence to profit from the political system.

The proper functions of government such as national defense and police protection primarily benefit the entire populous. Even these cases, however, every change to expenditure or allocation will disproportionately affect some group(s), and they will be disproportionately vocal about these changes. Opening or closing a military base has a greater effect on the area immediately around the base than on the nation at large. When considering a proposal to decrease the size of a police force, the effect on the police officers will be given disproportionate weight over the issues of public safety and cost.

This over-representation of all small groups does have an advantage: it helps prevent the exploitation of minorities. The problem, of course, is that it has pulled us too far in the other direction, to the point that the majority is exploited though a plethora of government programs that redistribute wealth. The Constitution is supposed to protect us from both extremes, but the parts that limit the government are usually ignored. This is the logical outcome of allowing any latitude in the interpretation of the Constitution. The state makes decisions that increase the power and authority of the state. The three-branch system helps restrain this, but the President will nominate and the Senate will confirm judges who will deliver rulings that are advantageous to the Executive and Legislative branches. In-fighting slows the process down, but the direction of the drift remains the same, toward statism. The only way to stop or reverse this trend is for the population to use every election to insist that the Constitution be strictly upheld.

Profit

For what profit is it to a man if he gains the whole world, and loses his own soul?
- Matthew 16:26, NKJV

I haven't seen Micheal Moore's latest film, SiCKO, but I have paid a great deal of attention to Moore's promotion of his video, whether it's his mini-war with CNN's Wolf Blitzer and Dr. Sanjay Gupta, or his discussion with Keith Olbermann of MSNBC's Countdown program. I have enjoyed how much he's drawn attention to some of the dangers of the health care system in the United States. He's done us all a favor in putting the conversation back in daily rotation, but he hasn't gone so far as to make that discussion an honest one.

Moore's proposal is that, given the corrupt nature of the health insurance system in the United States, we should move to a tax-funded, single-payer health care system provided by the government. A universal health care system is necessary for providing treatment for all Americans, including those who either cannot afford health insurance or those who do not purchase it (I met one of the latter the other day).

Moore continually talks about how health insurance companies are profit-driven organizations who care little for the well-being of the consumer or the solvency of his or her personal finances. Solvency is the ability of an individual or organization to effectively pay for debts. The filmmaker points to the number of people who have gone bankrupt paying for medical care through health insurance companies.

While there are a number of issues to address with the health care system, I want to focus on the increasingly popular idea that profit is bad for the consumer. Profit, when restricted to the financial meaning, simply means the money a corporation or individual has left over after a financial engagement, when everything is taken care of, including debts like salaries and other financial expenses. Health insurance providers, like any other corporation, seek to turn a profit as they try to meet the needs for people. For Moore, this is bad.

But are profits really bad? Any economist will answer in the negative. Business types believe that profit is not only the ultimate reason behind why something is done, but the motivation for doing the best job possible. I suggest that this is precisely the case.

Profits themselves are vulnerable either to taxation or choice. The government of a municipality, state, or nation may tax income and thus, profits are diminished. Profits are also damaged by people seeking business elsewhere. Seems simple enough.

I will get to a point, by the way. Please put up with the economic discussion.

But the idea of profit can also be harmed in the same way. Our governments can provide services, using our taxes, in an apparent non-profit sort of way. But the most evil way of destroying the virtue of profit is to eliminate choice.

This is part of the reason why the health care system is flawed. Because our government says that employers must provide benefits like health care, dental care, maternity leave, etc., employers are forced to use part of a company's income to meet insurance premiums. Employers often make decisions for the whole of the company as well. Because the choice of providing insurance has been written into law, the employer has no choice to make but take sizable portions of income and fund health care. In turn, this negatively affects the employee, who now has no choice in which insurance company to use, or whether health care insurance is desirable in the first place.

By eliminating all of these choices, people lose the money they would otherwise receive in the form of salary or wage income. They could use their money at their discretion to buy alternative policies or not buy a policy at all. It's up to the individual. And these individuals can proceed to make more choices in which competing insurance companies are affected, which in turn try to make better choices in terms of providing insurance. Did I mention that people have more money?

Profits are undercut when choices are made for people by levels of bureaucracy. So the problem, Michael, is not really profit, but those that make decisions for other people. The concept of profit drives innovation.

I mentioned that I was discussing profit in the economic sense, but the verse I quoted helps us understand that profit is much more than some financial black ink. Stephen considers Christianity to be a form of hedonism, not like John Piper's Christian Hedonism particularly, but a hedonism in the sense that the investments and abstinences of Christianity lead to the salvation of the soul. Jesus isn't using "profit" as the "p-word" that Moore discuss, but a way of understanding what salvation is. It does profit the Christian to place faith in Jesus, to search the Scriptures, and live in the community of the Church.

There are other things I'd like to say on economics as I increasingly think about that particular science, although I think I shall leave that for later.