Not magic or miracles

On the Carpe Diem blog, Mark Perry contrasts opposing views on Uber to illustrate different views on the market and government.

Then Perry writes:

Progressives seem to trust the heavy hand of government force more than they trust the invisible hand of market, they have more faith in regulated monopolies/cartels (e.g. Big Taxi, public schools) than market competition (Uber, charter schools), and in general favor government solutions and government force over market solutions and voluntary exchange. Or put differently, progressives don’t believe in the magic or miracle of the marketplace…

Markets don’t work because of magic or miracles.

Markets work because of communication, prices, competition and trial-and-error.

What amazes me is how few people see that.

As a consumer, choosing between competing products beats trying to change the rules so that the one provider does it the way you like.

Sometimes you can’t even anticipate how a business can change its product to suit you and you simply have to stumble upon the value through trial-and-error.

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Game changer?

I agree with this article in American Thinker by Lloyd Marcus. He thinks Trump is providing a refreshing challenge to the “iron-fist, out-of-control bullying tactics” used by the left and the media to control their politically-correct message.

The left and media have grown too cozy in framing news items to fit their desired message to get the results they want or to make the news themselves.

In this case, from the incessant drumbeat about what Trump said of McCain’s war hero status, they seemed to hope to at least get an apology (better yet if it’s on their show) that is all too common from spineless politicians who play not to lose. Or, maybe it could derail Trump’s presidential hopes.

I couldn’t help but think that Matt Lauer had hopes that he could broker an apology to put a feather in his cap when he got on the phone with Trump yesterday morning on the Today show.

I must say, I enjoyed watching Trump give a holier-than-thou Matt Lauer a hard time for how his show had represented his comments about John McCain and refused to roll over to the bully.

Do I support Trump?

No. I think he needs help formulating and articulating his ideas — especially from some good free market economists. His DIY view on immigration, for example, is sophomoric.

He and Warren Buffett have demonstrated to me that good business results don’t necessarily make for good economic though. Though, to give them both credit, they’ve likely been so busy building fortunes to have given it a lot of thought. But, I figured they’d be smart enough to know that. Yet, both seem at ease in their own ignorance when it comes to such matters.

But, Trump seems to be resonating. There are many like me and Lloyd who appreciate what appears to be his authenticity and backbone.

Perhaps Trump will demonstrate to others that this can stand up against the phony, focus-group-tested, offend-no-one facades other politicians use to get your vote.

Made me laugh

In the Wall Street Journal, William McGurn wrote about how the Democratic Party is oddly at odds with revolutionary innovations like Uber.

This made me laugh:

Perhaps even more important, innovation by its nature challenges the inner-Elizabeth Warren in so much of today’s Democratic Party. However open Democrats may be to revolutionary new definitions of marriage, the thought that there might be some nonsexual for-profit contracts between consenting adults keeps progressives up at night.

Trump and McCain

If I were Trump I would say, What I meant to say is that someone’s war hero status should not be an excuse for allowing them to be a milquetoast career politician. 

McCain, as a skilled career politician, is milking it and using it to deflect from the issues. Give me a break. If I were him I would say, I could give a rat’s ass what hair ball thinks of my war service.

Tax Zing

A local afternoon radio talk show host this afternoon pointed out that the local paper has applied for and received an extension of property tax abatement for its state-of-the-art, architectural masterpiece of a production facility.

The editorial board of the same paper often writes about how the wealthy and corporations should pay their fair share of taxes.

He said, that’s fine if you want the property tax abatement. Who wouldn’t? But, I don’t want to see you writing about how others should pay their fair share when you don’t.

Yep.

Blame Disorder

Flipping thru radio stations yesterday and I heard a caller on a radio show say something like (paraphrasing from memory):

Did you know capitalism would have failed long ago if it wasn’t for marketing and credit? Marketing gets people to want things they can’t afford and credit allows them to buy those things.

Set aside the fact that capitalism has resulted in the highest standard of living ever on this planet and assume the caller is correct.

I wondered, why doesn’t this guy blame people for making irresponsible choices? Nobody forces people to buy things they can’t afford.

Public v Private is not meaningful

Scott Sumner thinks a Paul Krugman piece from 2009 where Krugman wonders why people think ‘public’ enterprises like the post office and DMV are viewed as ‘something bad’ is the most eyebrow-raising post he has ever seen Krugman write.

Krugman points out that his experience with the DMV or post office has generally been positive and no worse than dealing with the cable company.

Sumner gives several examples where public enterprises result in long wait times and grumpy employees.

I think this is one of the most interesting and most important debates, but I also think that both Krugman and Sumner are missing key things.

I wrote about it in 2013 in this post: Bottom-up vs. Top-down.

I don’t believe ‘public v private’ is all that meaningful of a comparison. I can think of plenty of private companies that have provided me horrific customer service and plenty of public groups that have done well.

My post explains why I think the real distinguishing characteristic is whether the system is bottom-up or top-down.

Capitalism and Metcalfe’s Law

Metcalfe’s Law is the idea that the value of a computer network increases at a rate exponentially higher than the number of connected users on the network.

For example, a network of 10 connected users will be 4 times as valuable as a network with 5 users.

I believe there’s a key reason for this: luck. As the number of users increase, so do the odds that someone on the network will have something valuable to contribute for the others.

This why markets work, too.

Well before the internet, the price network connected people and encouraged them to do things of value for each other. The more people connected through the price network, the more valuable that network becomes.

If your trade network has 10 people in it, you won’t get much.  Expand that network to hundreds of millions and you get useful things like grocery stores filled to the brim with food, TVs packed with thousands of channels of programming, phones that take pictures and keep you in constant contact with your friends and families, movies to fill movie theaters with 24 screens, satellites that talk to your smart phone so you can find the closest Subway to get something to eat.

Freedom works

The Wall Street Journal Weekend Interview quotes from Arthur Brooks’ book, The Conservative Heart:

Capitalism has saved a couple of billion people and we have treated this miracle like a state secret.

The key point Brook’s makes in the interview is that free markets is the best way to help the have-nots and Republicans/conservatives should be stressing that. Further, we should all know Adam Smith what he wrote in the Wealth of Nations and Theory of Moral Sentiments.

I agree.

It amazes me how far I got into life before discovering how free markets works for everyone. It wasn’t taught to me. I had to figure it on my own.

Free markets get knocked because of greed, but those doing the knocking don’t realize that greed exists with or without a free market. Greed exists in every form of social order. Government doesn’t minimize greed, it makes it worse by aiding cronysim by creating a gray market in authority.

I agree with Brooks. Conservatives should be looking for ways to articulate that freedom and free markets have better outcomes for everyone.

And, if you don’t support free markets because you haven’t taken the time to consider how they benefit everyone or you won’t let yourself see past the propagandized smearing of capitalism, then you really aren’t interested in helping the people that you claim you want to help. You are ‘the man’ holding them down.

Happy 4th of July! Affordable Care Act Makes Care Less Affordable!

The first sentence from this morning’s big news story says it all (emphasis added):

Health insurance companies around the country are seeking rate increases of 20 to 40 percent or more, saying their new customers under the Affordable Care Act turned out to be sicker than expected.

If we haven’t learned by now that government programs usually result in the opposite of the goals (often stated in their titles), then we deserve what we get.

Government sought to make home ownership more affordable. That didn’t end well. The price of homes were driven up before the bubble burst.

Government keeps trying to make college education more affordable. It’s no coincidence that college tuition rates have climbed consistently faster than the rate of inflation.

A good question to ponder is, why does this happen? Perhaps if more people understood the answer we could get past it.

The simple answer is that these programs increase demand for services (intended consequence) while, often, also constricting supply (unintended consequence), which increases the price.

The market is an amazing thing. It can do amazing things if we let it.

Check out any part of your life that has not needed a government program to make it more affordable or available. You have some amazing things. Shoes, tablets, food, restaurants, printers, phones, boob jobs…none of these needed government to make affordable and available to anyone. The key question is why do we think we need government to make some things affordable and available with some things, but not others?  What’s the difference between shoes and health care that makes government’s involvement so necessary?