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Free Markets Archive

Monday

4

June 2012

3

COMMENTS

Obama Continues Cynical Campaign of Division, Trots Out Unequal Gender Pay Myth

Written by , Posted in Economics & the Economy, Free Markets, The Courts, Criminal Justice & Tort

In a cynical, dishonest and divisive effort to boost his flailing campaign and distract from the latest jobs report reflecting his dismal economic record, President Obama is trumping the Paycheck Fairness Act (or as I like to call it, the Trial Lawyer Payout Enhancement Act), a new onerous regulatory regime which will benefit trial lawyers at the expense of businesses and the economy, and which is based on the discredited premise that women earn less than men for equal work.

The administration propaganda machine is now offering e-cards that you can send to annoy your friends and remind everyone you know that America is still an awful, sexist country. Here is an example:

Notice the fundamental dishonesty here. A “typical 25-year-old woman” is not the same as “a typical 25-year-old man.” Women are more risk-averse, make different career choices, work different hours and value different rewards. So why should they be expected to earn the same?

Individuals draw paychecks, not identity groups, and it is their individual choices which determine what that pay check is. Men, for instance, work in more dangerous jobs and, according to the Bureau of Labor Statistics, in 2010 (the most recent year for which data is available) were 12 times more likely to die from work-related injuries than women. Should we also create a new government agency to randomly kill enough female workers each year until this grisly inequality is eliminated? The BLS American Time Use Survey also reveals that men work more hours, even when only looking at those with full-time jobs, averaging 8.2 hours per workday for men compared to 7.8 for women.

When actually looking at the facts, it is rather ridiculous to look just at average pay for full-time men and women and conclude that any difference is necessarily the result of discrimination, as the feminists do whenever they trot out the context-less “pay gap.” Even the White House has in the past acknowledged these facts by observing that men choose to work in higher paying fields than women (many of which are higher paying because they are deadly, as evidenced above).

In fact, when comparing apples to apples, women often come out ahead:

When you compare apples to apples, the so-called wage gap disappears. Young, childless, single urban women earn 8 percent more than their male counterparts. Women who have never had a child earn 113 percent of what men earn. Unmarried college-educated males between the ages of 40 and 64 earn nearly 15 percent less than their female counterparts.

The Paycheck Fairness Act, in other words, is based on a faulty premise. Men earn more on average because they choose, on average, to work in riskier jobs, work longer hours, and are also more likely to negotiate salaries and ask for raises. That’s not discrimination; It’s individuals making free choices in a free society. This is not jut my own conclusion, but also that of Obama’s own Deparment of Labor:

“This study leads to the unambiguous conclusion that the differences in the compensation of men and women are the result of a multitude of factors and that the raw wage gap should not be used as the basis to justify corrective action. Indeed, there may be nothing to correct. The differences in raw wages may be almost entirely the result of the individual choices being made by both male and female workers.”

Unfortunately, the faulty premise behind the Paycheck Fairness Act is not its only problem.  Aside from being unnecessary, the law would have significant negative consequences if enacted. The Wall Street Journal explains:

The law automatically lists women as plaintiffs in class actions when lawyers sue employers, thereby requiring female employees to opt-out of litigation with which they don’t agree. Businesses would be treated as guilty until shown to be innocent, having to prove in court that their pay practices aren’t the result of workplace bias. The legislation contains no caps on damage awards, allowing plaintiffs to claim unlimited punitive damages even in cases of unintentional discrimination.

The bill is also a first step toward federal pay mandates. It requires the Equal Employment Opportunity Commission to collect data from employers about how they compensate on the basis of sex, race and national origin. Government rarely collects data merely to put it in a vault. These numbers will form the basis of class-action suits and will invite regulators to issue federal compensation guidelines.

This is a bad law to treat a non-existent problem. Worse, it is being advanced solely for the purpose of further dividing Americans in order to elevate President Obama’s reelection campaign. Because he has no record worth running on, the President will continue dredging up every myth, fable and scare-story imaginable in order to hit on every perceived identity grievance in existence.

Tuesday

1

May 2012

6

COMMENTS

Everyone is Wrong on Student Loans

Written by , Posted in Big Government, Education, Free Markets

In an otherwise decent speech where he called out the Democrats’ political gamesmanship, Speaker Boehner said that, “Nobody wants to see student loan interest rates go up.” It’s certainly true that the entire political class is united on continuing to subsidize borrowing for higher education, but last time I checked there are more people in existence than just politicians. I, for one, want to see student loan interest rates go up.

I have nothing against student loans, the students who borrow them, or the general idea of borrowing money to receive an education that is expected to provide greater future value than the costs. But the reality is that many today are borrowing more than they can afford and which isn’t justified by the value added.

The federal government is the biggest supplier of student loans, accounting for 90% of all borrowing in the 2010-2011 academic year. Because they are heavily subsidized, student loan interest rates are lower than would otherwise be offered by the market, which means students are taking out more and bigger loans than they otherwise would. This is the intended effect of the policy, but is it a good one?

One result has been skyrocketing tuition costs, as colleges simply raise tuition rates to capture any increases in government financial aid. As the below chart from Dr. Mark J. Perry shows, college tuition growth has considerably outpaced medical care and home prices over the last 30 years.

While the costs of obtaining a degree have ballooned, their value has plummeted. As degrees become increasingly common, their usefulness in signaling diminishes. Degree-holders just aren’t as special anymore, and having a degree no longer conveys the same kind of information to potential employers as it used to.

Meanwhile, the actual educational benefit of obtaining a degree are also decreasing. Colleges are increasingly failing to teach the most basic knowledge and skills, opting instead for obscure courses focusing on identity politics and which have little to no practical value in the real world.

All the trends point toward a massive higher-ed bubble, and with an ever growing number not paying off their loans it’s likely to blow up in taxpayers’ faces.

What exactly the necessary steps are to reverse these trends, I do not know. Part of it is political, and involves removing federal distortions from the lending market. But part of it is cultural. Many see college attendance not as a time to take in as much knowledge as possible, but a rite of social passage that requires doing in excess all manner of social activities. It would be a good start if society – whether it be parents, teachers, politicians or popular culture – stops mindlessly repeating the trope that everyone must go to college. Universities were not designed for everyone, and not everyone will benefit meaningfully from the experience. Some would be better off in trade school, others in the work force gaining an extra 4 years of experience on their peers, while some are simply ready to strike out on their own. But whatever it takes to resolve the issue, this is a major problem that is only going to become increasingly salient for both society and the political class.

Tuesday

3

April 2012

0

COMMENTS

Free Market Capitalism Breaks Out in New York, NYT Can't Figure Out Who to Blame

Written by , Posted in Economics & the Economy, Free Markets, Media Bias

In one of the odder stories I’ve seen in sometime, the New York Times describes competition among local pizza shop owners as if it’s reporting from the front lines of Afghanistan. In essence, new competition has forced prices at local pizza shops down from $1.50 to $.75. Wonderful, right? How great for the consumers!

But the article describes the “amped-up war of commerce” in the starkest of terms, warning that “escalation seems imminent,” as if the missiles might fly at any moment. They even note that both sides accuse the other of “unprovoked” price slashing, implying that it’s a negative thing that can only occur after some sort of initial affront. Not once does the piece object to this absurd characterization by offering the point of view of the consumer. Price cutting is not an action that must be “provoked,” it is a simple consequence of our competitive system where businesses fight to attract customers. Nor do we need the New York Times to delve into the he said/he said to determine who is the “true aggressor.”

There is no aggressor; there are merely multiple suppliers rushing to serve the same customers as cheaply and efficiently as possible. Perhaps if the New York Times understood the concept they wouldn’t be losing so many of theirs.

Monday

12

March 2012

0

COMMENTS

Obama Wants Government in Charge of Internet Privacy

Written by , Posted in Big Government, Free Markets

The Obama administration recently announced an effort to regulate internet privacy. The plan, labeled a “consumer privacy bill of rights” and ostensibly voluntary, seeks to put federal bureaucrats in charge of enforcing the privacy standards of internet companies such as Google and Facebook.

Using his go-to rhetoric when looking to expand government powers, the President said that Americans “can’t wait any longer for clear rules of the road that ensure their personal information is safe online,” and pledged to act with or without Congressional action. The President seems to think that all of society does nothing but sit around and “wait” for him to devise a solution to every problem. His latest attempt at playing savior thus represents yet another in a long line of government overreaches into the private sector.

In touting his initiative, the President observes that, “For businesses to succeed online, consumers must feel secure.” Does the President really imagine that internet businesses would have no interest in succeeding without his heavy hand to direct them? Or does he merely think that his extensive expertise at growing a business makes him better qualified than the successful entrepreneurs who have pioneered the internet? Oh right, he has no such expertise.

At the heart of the proposal is the apparent belief that consumers are helpless without government oversight, but the exact opposite is true. Without any direction from government, there already exist numerous tools  for protecting privacy on the internet. When individuals and businesses in a free society see a problem, they devise solutions all on their own without government direction, such as browser addons to track the trackers and anonymous web proxies, to name a couple.

Internet users certainly have good reason to distrust internet giants Google or Facebook when it comes to their privacy, but no one is forced to user their services. And while there is certainly room to improve upon existing tools and choices, a centralized privacy regime will hinder, rather than help, the process.

If the President gets his way, internet companies will be subject to FTC oversight on privacy, and will face harsh penalties for noncompliance. Although the program is initially being billed as voluntary, it’s only a matter of time before it becomes mandatory. This proposal is merely an early step toward putting the government in charge of setting the rules for internet commerce. Such a centralized approach will necessarily inhibit creativity by forcing everyone into a single system. Consumers will be robbed of the innovations that would have likely emerged under a more decentralized, competitive environment.

The internet moves at fast pace, one which government is incapable of matching. Federal regulations are cumbersome and inflexible, and by the time rules for today’s technology are developed, tomorrow’s innovations will have rendered them obsolete.

Internet privacy is important. It’s just far too important to leave up to government bureaucrats.

Friday

9

March 2012

0

COMMENTS

Google Fined for Being Too Useful

Written by , Posted in Free Markets

In the world of big government, providing something of use to consumers is to be frowned upon:

Google has been ordered to pay a fine and damages to a French mapping company after a court ruled that the search giant was guilty of unfair competition and “undercutting competitors” by making its Google Maps program free.

According to Agence France Presse (AFP), Bottin Cartographes, a French mapping company that provides essentially the same service as Google Maps for a fee – brought a suit claiming that Google was “abusing” its dominant position by making its service free.

Google’s strategy is, apparently, to undercut competitors by “temporarily swallowing the full cost until it gains control of the market,” AFP reported.

A Paris-based commercial court agreed with Bottin Cartographes and ordered Google to pay 500,000 euro (£415,000) damages to Bottin Cartographes, as well as a fine of 15,000 euro (£12,500).

“We proved the illegality of Google’s strategy to remove its competitors,” said Jean-David Scemmama, Bottin Cartographes’ lawyer. “The court recognised the unfair and abusive character of the methods used and allocated Bottin Cartographes all it claimed.”

This sort of thing is hardly unique to France. The US as very similar, and similarly stupid, laws on the books. But this case really puts the lie to advocates of protectionist policies who claim they are for the consumer. They are not. They are for shafting the consumer.

Look at the language they use and how deceptive is. They mask their protectionist, anti-consumer agenda under the rhetoric of competition. But this has nothing to do with competition. If you assume their logic to be true (which is unwarranted, as there as been zero indication that Google ever intends to charge for Google Maps), there will still always be competitive pressure. So long as another firm can enter the market at any time to offer a competing service, Google will have to offer market competitive prices. The only way to perpetually keep out competition is either to use the force of government, or to perpetually price below market – in other words, by keeping it free. How in the world is the latter possibly a bad thing for consumers, the economy or society?

Thursday

8

March 2012

0

COMMENTS

A Tale of Two (Demolished) Cities

Written by , Posted in Free Markets

This video by Economic Freedom highlights the work done to rebuild Joplin, Missouri after it was hit by an EF5 tornado last May.

Economics professor Daniel J. Smith says in the video:

I think one of the key factors in the recovery process in Joplin, from the tornado, is that the government officials allowed the community to start rebuilding itself. I think Joplin is a great example of the power of people—free people—coming together and both using profit motive, in the businesses, using religious reasons for faith-based organizations, and just concern for your fellow man, in the community-based organizations, to rebuild a disaster stricken community.

Now contrast that with this news report from 2007, over 2 years after Katrina hit:

There are many reasons for the slow pace of rebuilding, including antagonism between state and federal officials, and the difficulty some local leaders have had deciding exactly what to rebuild and where and how. New Orleans, in particular, released a detailed rebuilding plan only in October, and City Hall often appears understaffed and overwhelmed.

But increasingly, critics are pointing to flaws in the process the Federal Emergency Management Agency uses to pay for repairs under the “public assistance” program.

Intricate, inflexible and open-ended, the process seems to value perfect paperwork over speedy resolutions, local officials here say, and requires endless haggling over every acoustic ceiling tile and paper-towel dispenser.

“The staggering amount of time and effort and cost associated with this is just phenomenal,” said Robert W. Becker, the chief executive of City Park, which is about one and a half times the size of Central Park in New York City. “We could have made so much more progress if we had a different process.” In the meantime, Mr. Becker has been working out of a trailer.

The scale of the disasters are much different, but I think there are informative comparisons to be made. Nevertheless, I’ll let you draw your own conclusions.

Thursday

2

February 2012

1

COMMENTS

Indiana Joins Ranks of Free States

Written by , Posted in Free Markets, Labor Unions

It’s rather remarkable that the US still has states, more than half even, where people are forced into association with others against their will – and even required to fork over money for the privilege, money which is then used to support politicians peddling big government policies. Yet that is precisely what happens under forced unionization regimes. Indiana is now joining the ranks of the enlightened and has become a right-to-work state, putting an end to this corrupt racket.

Freedom to associate, or not associate, at one’s pleasure is an important end in itself, but it also comes with economic benefit. States with right-to-work laws are much better off than states without. Right-to-work states have lower unemployment, for instance. But most importantly, they have more freedom.

Still, an astonishing 27 states continue to support indentured servitude through forced unionization.

The fight continues.

Monday

30

January 2012

0

COMMENTS

Lasting Economies Are Not Built

Written by , Posted in Economics & the Economy, Free Markets

During his State of the Union speech, President Obama expressed his desire for an “economy built to last,” an oxymoron emblematic of the President’s embrace of Keynesianism and other failed economic philosophies. Simply put, strong economies are not built; they emerge.

To be built implies that there be a builder. Naturally, Obama envisions himself in this role. But it doesn’t matter who the builder is, they will necessarily be incapable of processing all the information required for managing something so complex as a national economy. No individual or group of individuals can succeed in such a task.

Rather than being built, strong economies emerge through the aggregate actions of free individuals advancing their interests, and works best within a system of basic political and legal infrastructure designed to foster economic liberty. In contrast to Obama’s vision for an activist government picking and choosing industries to support, high tax rates and political motivated government spending, this infrastructure limits itself to neutral provision of legal services, property rights and free trade.

This is, in other words, the typical battle between freedom and collectivism. In his State of the Union Speech, President Obama reaffirmed his support for the side of collectivism, economic stagnation, and misery, rather than for freedom and prosperity.

Saturday

21

January 2012

0

COMMENTS

Democrats Bring Back the Oil Demagoguery

Written by , Posted in Economics & the Economy, Free Markets

The latest in a long line of stupid leftwing policies targeting the oil industry:

Six House Democrats, led by Rep. Dennis Kucinich (D-Ohio), want to set up a “Reasonable Profits Board” to control gas profits.

The Democrats, worried about higher gas prices, want to set up a board that would apply a “windfall profit tax” as high as 100 percent on the sale of oil and gas, according to their legislation. The bill provides no specific guidance for how the board would determine what constitutes a reasonable profit.

Of course it doesn’t, because there is no definition they can use that isn’t arbitrary. The only definition for “reasonable profits” that makes any sense is the very one which they reject: whatever the market can bear.

This is nothing but price controls by another name, yet the consequences would be just as disastrous. Moreover, it’s curious the Democrats single out an industry that is not even close to having highest profit margins. One can only conclude that their position is not based on the application of any sort of principle, but rather that of political expediency. This is demagogic red meat for election season, plain and simple.

P.S. The oil industry already typically pays more in taxes than it earns in after-tax profits. Where’s the “Reasonable Thievery Board” to limit such government theft of the private sector to “reasonable” levels?

Wednesday

14

December 2011

3

COMMENTS

Amazon Target of Weird Nostalgic Attack

Written by , Posted in Free Markets

Attacks on big business are commonplace. Providing a valuable good or service is, apparently, cause for derision and hatred. The latest example is the completely unhinged reaction to a fairly innocuous Amazon promotion that involved using an application to capture the prices of goods in other stores:

An Amazon.com promotion, which offered customers a discount if they let Amazon know the prices of items for sale in traditional shops, has provoked widespread anger, drawing a rebuke from a senator and seeing it compared to Dr Seuss’s Christmas-stealing Grinch.

The deal, which ran on Saturday, gave customers a 5% discount (up to $5) off Amazon.com’s price on up to three products if they used the retailer’s price check app while shopping in physical stores. Although books were not included – the eligible categories were DVDs, electronics, toys, music and sporting goods – the promotion prompted a furious response from beleaguered independent bookshops and from the American Booksellers Association, as well as from senator Olympia Snowe, who called it “an attack on Main Street businesses [and] anti-competitive behaviour that could shutter the doors of America’s small businesses”.

“Small businesses are fighting everyday to compete with giant retailers, such as Amazon, and incentivising consumers to spy on local shops is a bridge too far,” said Snowe, a Republican and member of the Senate Committee on Small Business and Entrepreneurship, in a statement.

What a ridiculous overreaction. How in the world can this be construed as “anti-competitive”? Olympia Snowe, like a lot of statists who don’t really believe in free markets, conflates being better for being anti-competitive. Being successful is not anti-competitive, it’s just winning the competition.

But how is this different in substance than the very common practice of price-matching? Most major retailers will do it, and they require you to show the price of the good in the other store before they will match it. How is this even “spying” at all? Prices are not hidden; they are public information.

This is a creative use of technology on Amazon’s part to bring greater efficiency to the market. The more pricing information available to participants, the better decisions they will ultimately make. This is not anti-competitive; it is hyper-competitive.

I also don’t understand the weird fetishism for businesses presumed to be uncompetitive. What is the purpose of rhetorically protecting businesses that are losing to a stronger, more innovative competitor? It’s not to protect the consumer, whose collective choices are being fought against. It’s not to protect the economy, which thrives on creative destruction and the triumph of better business models over less efficient ones. It strikes me as little more than a sort of nostalgia, or belief that the world must remain the same as it is in whatever period of time the person found most desirable. In that sense, such anti-free market sentiment is the true form conservatism, and those who believe in a dynamic market place are the real advocates for progress and change.