The false masters of words

“When I use a word,” Humpty Dumpty said in rather a scornful tone, “it means just what I choose it to mean — neither more nor less.”
“The question is,” said Alice, “whether you can make words mean so many different things.”
“The question is,” said Humpty Dumpty, “which is to be master – – that’s all.”
Alice in Wonderland, Lewis Carroll

We seem to have lots of Humpty Dumptys in politics, their words mean what they choose, not what most people think they mean.

Take the “Freedom Caucus”.  What do they mean?  It certainly doesn’t mean freedom to govern ourselves according to generally accepted rules.  To them it means freedom to do what they damn well please, to hell with whoever else's freedom they tromp on.

Just what are “conservatives” conserving.  It certainly isn’t resources.  It certainly isn’t careful consideration before making any changes.  To too many “conservatives” it means either conserving the power of large corporations or conserving a very narrow view of religion. ironically, the latter don’t hold the former to “you cannot serve both God and Mammon.” - Matthew 6:24.

As I’ve written more times than some of my readers would like, “free market” means, according to the Humpty Dumptys is again, free for the sellers to do as they please.  To them the free market is not providing buyers with all the information they need and is not avoiding externalities such as pollution and worker safety.  These to them are impediments to “free markets”.

“Liberals” misuse words also, but their goals tend to be more friendly to the general populace.  But sometimes their “liberality” works counter to the general welfare or unnecessarily creates opposition to certain desirable goals: like letting people lead the lives they choose.

I think “gay marriage” has lost a lot of otherwise “liberal” votes because many supporters have a different view of marriage.  I’ve always thought this problem should be dealt with by a “granny rule”.  If two grandmothers choose to live together, is it our business whether they sleep in the same bed or in different rooms?  It is “our business” if one of them dies.  Does the survivor have to sell the house to pay the inheritance of the deceased’s children and grandchildren?  To avoid this situation, any group of people who choose to live together should be able to have a civil contract that protects the interests of each member of the group.

Paean to true free market holdouts

As my regular readers know (probably too well) that I object strongly to the misuse of the term “free market”.  Too often it means that corporations should be free to do what they damn well please without pesky regulations like providing buyers with full information or air and water pollution reduction.

Well, there are a few markets where there are many sellers, not enough, but they seem to be holding their own.  These are locally-owned

hardware stores,
barbers and stylists
breweries
liquor stores
coffee shops
restaurants
co-op groceries
book stores (only one locally owned new-book store left in Duluth)

We’ve been doing our best to patronize all of the above, but sometimes one has no choice but to patronize the large corporations

building supplies
computers and other electronics,
cell phone service
drug stores
automobiles (but most dealerships are locally owned)
gasoline (but a few stations are locally owned)

Hm!  I know we need a new political party that represents all the people instead of a bunch of special interests.  Maybe it should be called the True Free Market Party!

Mining and Adam Smith

If you think mining is good for northern Minnesota or anywhere else, read
http://www.nytimes.com/2016/11/19/opinion/appalachias-sacrifice.html.

Also consider what Adam Smith wrote about those who live for profit.  And consider that a true free market has no externalities, like pollution that is not in the cost of a transaction.

Paul Krugman's use of "free marketer"

I'm surprised the economist Paul Krugman is using "free market" as loosely as the so-called "free marketers" do.  "Free market" too often means fewer and fewer sellers doing whatever they please.  A true free market has many buyers and sellers, both buyers and sellers are free to enter and leave the market, both buyers and sellers have all the information they need to make a decision, and all costs are paid for in the transaction.

How many independent pharmacies are there is our cities? You can probably count on one hand the corporate pharmacies.

How many situations like Epipen where the buyers are not really free to leave the market?

As to full information how much do the sellers know about you while fighting with dozens of lobbyists to hide information about their products. GMOs?

Externalities? These "free marketers" don't want the government to regulate worker safety and don't want government to regulate the pollutants from their smokestacks, farms, and mines going downwind or downstream.

Posted at http://www.nytimes.com/2016/09/26/opinion/progressive-family-values.html?comments#permid=19921473

Quote of the day: Coal vs. Solar

"There are now more than twice as many workers in the fast-growing solar power industry than there are coal miners."
- "Coal Industry Wobbles as Market Forces Slug Away", James B. Stewart, New York Times, 2015-08-06

Are the likes of Sen. Mitch McConnell preventing jobs in solar while protecting jobs in coal?  Also, does he think of the lives destroyed by lax safety standards and the contaminated air and water around towns near coal mines.

Of course not!  Adam Smith warned about those who live by profit over 200 years ago.  They deceive and oppress the public.  See "The Invisible Adam Smith".

Where are the great white pines of northern Minnesota?

This is a question to ask mining proponents.  If the large corporations that took out almost all of the large white pines out of Minnesota never bothered to replant the trees, will the large mining corporations bother to restore the areas that they mine?

Government agencies and individual land owners are planting white pines now.  Will government agencies and individual land owners have to clean up after the mines?

Flea markets are the only true free markets, sort of

Many are calling for free markets without any idea of what free markets really are. Free markets are not large corporations unencumbered by government regulation.

Flea markets and farmers' markets are better approximations of true free markets. Why is this?

A flea market has many buyers and sellers, although some sellers might think there are not enough buyers.

Buyers and sellers are free to enter and leave the flea market. Of course, sellers may have to apply for limited space and it will take a bit of time to pack up to leave the flea market.

Buyers and sellers have all the information they need to make a decision to buy or sell. The buyers can pick up the goods and even give them a small test. Sellers accepting only cash generally can assume the bills are good.

There are few externalities from a flea market. There could be lots of trash to be picked up. Some products sold may be defective and injure somebody.

Can you think of any other economic activity that even gets close to the free market standard set by flea markets and farmers' markets?

See also http://en.wikipedia.org/wiki/Free_market

Facts, figures, and finagling

Rep. Chip Cravaack (R-MN8), in his "Week in Review & Look Ahead" for January 13, quotes the National Association of Manufacturers that the Keystone XL pipeline project is "estimated to create 20,000 high-paying manufacturing and construction jobs".

So, what is a "high-paying" job? My wife cynically says anything above minimum wage. For starters, I'll go with $20/hour. At forty hours per week that would be $800/week and $41,600/year. So, 20,000 workers would be paid 832 million dollars. I was often told that the overhead for employees was equal to their salary. We do have to add 6.2 percent payroll tax, health insurance, and liability insurance. Those would easily take us over one billion dollars just for labor for the pipeline. But if "high-paying" really means high-paying, then we're probably talking $40 or more an hour. That means were talking over two billion dollars for labor for the pipeline. But these probably won't be 40-hour weeks, but more likely 60-hour weeks. That gets us to over three billion dollars.

Then we have side effects upon side effects, externalities in economic terminology.

First, all those workers will drive up local costs, making life very expensive for local people. This has already happened in the Dakotas.

Second, the free market proponents of this project should consider the anti-free market components of this project. A true free market has many buyers and sellers, buyers and sellers have all the information they need to make a decision, buyers and sellers are free to enter and leave the market, and there are no externalities – costs to other than the buyers and sellers.

There will essentially be one buyer for the right of way for the pipeline. That buyer will determine which property will be required and will set a price. The property owners of that right of way are not free to leave the market; the buyer and governments have determined that they cannot leave the market. Interestingly, free marketers are very much against government interference with private affairs.

The externalities other than contamination of the aquifers have not really been considered. These include the distortion of local economies mentioned above, farmland taken out of cultivation, air pollution from the large construction project, and cost of security for the pipeline (both for safe operation and against malicious damage).

Another factor not being considered is opportunity cost. An opportunity cost is money spent for one thing that could have given greater gain elsewhere. An opportunity cost is not regularly washing your car and paying more later for rust repair or shorter useful life.

How many solar panels and windmills could these billions buy? How much battery research could these billions buy? How much energy conservation could these billions provide? How much public transportation could these billions provide? Hey, a bus driver may not have a "high-paying" job, but it is a great job with a living wage. I know, I was a bus driver. And every passenger is often one less car on the road.

What is needed, and will rarely ever happen, is a full cost-benefit analysis of projects like these. Rather than look at the benefits for a few, we should look to the benefits and costs to the whole society. Rather than cater to special interests, something many of the writers of the Constitution decried, we need to seek the public good:

"It is a misfortune, inseparable from human affairs, that public measures are rarely investigated with that spirit of moderation which is essential to a just estimate of their real tendency to advance or obstruct the public good; and that this spirit is more apt to be diminished than promoted, by those occasions which require an unusual exercise of it." - Federalist No. 37, James Madison

Externalities - the market component forgotten by "free marketers"

A true free market is defined by many buyers and sellers, complete information to both buyer and seller, freedom of buyers and sellers to enter and leave the market, and no externalities.

In other words, ideal conditions that will never happen on any large scale in any functioning society.

Externalities are something that happen with almost all commercial transactions and are ignored at a society's peril.

I was thinking about externalities as I walked a short distance from where I parked my car to the post office. Rather than park twice, I parked in front of the liquor store and walked to the post office with my package. As I walked I thought about all the proposed post office closings.

Many of these closings will mean that many people will have to drive farther to a post office. The customer travel time is one cost of this change. Second, is the increased fuel usage. Third is a possible longer wait at the post office, more customer time. If we use more fuel, then the cost of gas can go up because of higher demand. If we keep using gasoline, we will need more oil. Because access to oil is considered a "national security issue", trigger-happy politicians would stump for yet another costly war. For want of a post office, a war was lost.

Sure, this is a far-fetched scenario, but a similar lack of looking at the bigger picture permeates our "free market" society. We shouldn't abandon a "market economy" because of its flaws, but we should at least recognize these flaws and their added costs.

Now, how many externalities are there in my driving to buy those heavy wine bottles shipped from Italy?

Fable about a king's palace

A fabulously rich king decided to build a fabulously magnificent palace. He got his privy council to agree because he argued that doing this project would create many jobs for the five years it would take to build it and for the years beyond that to maintain the palace.

For starters, he took by eminent domain 10,000 acres of prime farmland by the river. People said it would reduce the food the country could grow to feed itself. The king replied that the project would create jobs.

He had 10,000 acres of prime forest cut down to supply the lumber for his palace. People said it would decrease wildlife habitat and increase flooding. The king replied that the project would create jobs.

He hired 1,000 workers to build his palace. People said it would decrease the number of workers to build and repair houses. The king replied that these workers would be paid high wages.

He had a million gallons of water per day diverted from the river to supply all the fountains, to water his extensive lawns, and many other uses. People said it would practically dry up the river reducing the water downstream for drinking, washing, and irrigation. The king replied that the project would create jobs.

He built no sewage treatment system to handle the garden runoff or the flushing of 1,000 toilets. He said it would cost too much money. People said sewage would make the river downstream unsuitable for drinking and washing, and irrigation. The king replied that the project would create jobs.

And so it came to pass that many people were hungry because there was insufficient farmland to feed them.

And so it came to pass that many people became homeless as the cost of existing houses skyrocketed because no new house were being built.

And so it came to pass that many people became sick because of the lack of clean drinking water.

And so it came to pass that many people migrated to lands where there was plenty of farmland and clean water.

And so it came to pass that tax revenues dwindled because there were fewer people to pay them.

And so it came to pass that the banks foreclosed on the king's palace because he couldn't pay back all the loans he had taken out to build the palace.

And so it came to pass that after an unusually heavy rain, a mudslide from the former forest buried the partially built palace.

What's the point of this fable? It can't happen here. Oh, but we are a nation populated by people who immigrated from lands that did not have good governance. Will we follow as we lack the foresight to rein in the indulgences of the wealthy as they create short-sighted projects using jobs as a justification without regard to all the other costs?

If you believe in unfettered free markets…

I have some tulip bulbs for you.

If you believe in unfettered free markets, I have some mortgages to sell you. Trust me, they are all low risk.

If you believe in unfettered free markets, I plan to buy the lot next to your house and start a junk yard.

If you believe in unfettered free markets, I plan to buy the lot on the other side of your house and start raising pigs.

You say I can't do these. I can if I pay your neighbors enough for their houses and don't tell them my intent.

You say there are laws against my doing these things in residential neighborhoods. I thought you were for unfettered free markets. These laws are fetters on the free markets. Besides, if I make enough contributions to candidates that see things my way, then they'll change the laws in my favor.

Preposterous, you say. Not at all. It's happening with big corporations selling risky investments without giving you complete information (complete information being a requirement for a free market), putting up unsightly commercial buildings in residential neighborhoods, polluting our air and water, and making exorbitant contributions to candidates, parties, and "right"-minded think tanks.

Externalities and property rights

Although I have three blog ideas the muse seems to have left me. To keep my six loyal fans coming back, here is a letter to the editor of Barron's that I came across when deleting some old emails. I emailed it on January 11, 2000. At that time, I kept paper copies of any my letters that were published. Since I couldn't find a copy of this one, I presume I won't have the Wall Street Journal lawyers knocking on my door.

Thomas Donlan has it backwards when he states that "Externalities exist where there are no property rights." Externalities exist because ofproperty rights. Further, he limits the definition of an externality when he states it is a "displacement of a privately caused cost into a public expense." An externality is a cost imposed on or a benefit given to parties outside of a voluntary transaction.

The standard example he cites of a polluter dumping waste into a lake has two aspects. There is the public aspect of contaminating the fishing and drinking water of many people. There is also the private aspect of decreasing the value of lakefront property. Donlan states that "the power of property rights" gives the owners claims against the polluter. But how will these claims be settled?

Will the polluter be forced to cease operation? That takes away the "property rights" of the polluter. Will the polluter be forced to pay damages to the lakefront property owners? But that goes against one of the tenets of the "private markets" that Donlan extols so often, namely that all transactions are voluntary. If the lakefront property owners were not in the market to sell their property, why should they be forced to enter into transactions to "sell part of their property"?

Oh, if only people would live by the ideal models of Thomas Donlan on the one hand or of Karl Mark on the other, life would be so much simpler!