Tag Archives: economics

A Tale of Two Quakes

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Here is an excellent letter to the editor by Don Boudreaux:

14 January 2010

Editor, Washington Post
1150 15th St., NW
Washington, DC 20071

Dear Editor:

Re “Tens of thousands feared dead” (Jan. 14): The ultimate tragedy in Haiti isn’t the earthquake; it’s that country’s lack of economic freedom.  The earthquake simply but catastrophically revealed the inhuman consequences of this fact.

Registering 7.0 on the Richter scale, the Haitian earthquake killed tens of thousands of people.  But the quake that hit California’s Bay Area in 1989 was also of magnitude 7.0.  It, though, killed only 63 people.

This difference is due chiefly to Americans’ greater wealth.  With one of the freest economies in the world, Americans build stronger homes and buildings, and have better health-care and better search and rescue equipment.  In contrast, burdened by one of the world’s least-free economies, Haitians cannot afford to build sturdy structures.  Nor can they afford the health-care and emergency equipment that we take for granted here in the U.S.

These stark facts should be a lesson for those who insist that human habitats are made more dangerous, and human lives put in greater peril, by freedom of commerce and industry.

Sincerely,
Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA 22030

Prosperity or Plunder?

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Here is a letter I recently sent to the Lansing State Journal:

In a recent editorial, The Lansing State Journal states that the stimulus money is key to the long term recovery of the mid-Michigan economy (“Stimulus funds matter to mid-Michigan,” Nov. 20).

Nonsense.

The majority of the stimulus has been funded through borrowed money.  Every time the government borrows a dollar, there is one less dollar available for the private sector to borrow.  Since the private sector relies on borrowed money for expansion, the stimulus has essentially deprived several businesses of opportunities that would have been viable had the credit been available.

Additionally, forcibly obligating American taxpayers to billions of dollars of debt is no path to long term economic growth.  Especially when a large portion of the borrowed dollars are being shoveled into the bank accounts of special interests who have effectively used government to garner additional revenues at the taxpayer’s expense.

Kurt Bouwhuis

The Ant and the Grasshopper

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Kurt Bouwhuis, Mackinac Center Intern

Here is a letter to the editor that I found to the be entertaining.

 To the editor:

I received this from one of my nieces as an e-mail. The author is unknown. However, I think it speaks volumes about the way our country is headed. Perhaps you would want to share with the readers of the MDN.

THE ANT AND THE GRASSHOPPER

This one is a little different: Two different versions, two different morals!

OLD VERSION: The ant works hard in the withering heat all summer long, building his house and laying up supplies for the winter.

The grasshopper thinks the ant is a fool and laughs and dances and plays the summer away.

Come winter, the ant is warm and well fed.

The grasshopper has no food or shelter, so he dies out in the cold.

MORAL OF THE STORY: Be responsible for yourself.

MODERN VERSION: The ant works hard in the withering heat all summer long , building his house and laying up supplies for the winter.

The grasshopper thinks the ant is a fool and laughs and dances and plays the summer away.

Come winter, the shivering grasshopper calls a press conference and demands to know why the ant should be allowed to be warm and well fed while others are cold and starving.

CBS, NBC, PBS, CNN and ABC show up to provide pictures of the shivering grasshopper next to a video of the ant in his comfortable home with a table filled with food. America is stunned by the sharp contrast.

How can this be, that in a country of such wealth, this poor grasshopper is allowed to suffer so?

Kermit the Frog appears on Oprah with the grasshopper and everybody cries when they sing, “It’s Not Easy Being Green.”

ACORN stages a demonstration in front of the ant ‘s house where the news stations film the group singing, “We shall overcome.” The Rev. Jeremiah Wright then has the group kneel down to pray to God for the grasshopper’s sake.

Nancy Pelosi and Harry Reid exclaim in an interview with Larry King that the ant has gotten rich off the back of the grasshopper, and both call for an immediate tax hike on the ant to make him pay his fair share.

Finally, the EEOC drafts the Economic Equity and Anti-Grasshopper Act retroactive to the beginning of the summer.

The ant is fined for failing to hire a proportionate number of green bugs and, having nothing left to pay his retroactive taxes, his home is confiscated by the Government Green Czar.

The story ends as we see the grasshopper finishing up the last bits of the ant’s food while the government’s house he is in, which just happens to be the ant’s old house, crumbles around him because he doesn’t maintain it.

The ant has disappeared in the snow.

The grasshopper is later found dead in a drug-related incident and the house, now abandoned, is taken over by a gang of spiders who terrorize the once peaceful neighborhood.

    MORAL OF THE STORY: Be careful how you vote in 2012.

    JOHN L. PFENNINGER, MD

    Midland

Thoughts Out of Balance

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Kurt Bouwhuis, Mackinac Center Intern

Here is a letter I recently sent to the New York Times:

In his recent op-ed, Paul Krugman expresses great concern over the growing trade deficit between the U.S. and China (“World Out of Balance,” Nov. 15).  A simple example reveals why such concerns are pointless.

Suppose an American businessman decides to trade with China.  He loads American cargo valued at $200,000 onto his ship and exports it to China.  When the ship arrives in China, he sells all of his goods for $250,000 generating a profit of $50,000.  He then uses all of his proceeds to purchase Chinese cargo valued at $250,000.  He loads the cargo onto his ship and brings it back to the U.S.  The net result of this profitable transaction is a trade deficit of $50,000 for the U.S. 

There is, however, a simple way to convert the $50,000 trade deficit into a trade surplus of $200,000 — sink the returning ship and all of its Chinese cargo in the middle of the ocean before it reaches the U.S. port – the import will be nonexistent and our trade balance will gain all that the oceans have swallowed.

Kurt Bouwhuis

Bought and paid for?

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Kurt Bouwhuis, Mackinac Center Intern

Dustin Anderson, a friend of mine, just submitted an excellent letter to the Midland Daily News:

To the editor:

    In a recent letter Susan Gessford stated, “If you are not bought and paid for by the insurance companies, you will agree with this and fight with me” (The only way, Sept. 29) in referencing the apparent need for single payer health care.

    I do not support single payer health care, so therefore I am bought and paid for by insurance industry? This is news to me. But by this logic it would appear that I am bought and paid for by the agriculture industry as I do not support a single payer meals program. I am bought and paid for by the apparel companies because I do not support a single payer clothing program. I surely must be bought and paid for by the home builders association since I do not support a single payer home program.

    In this debate, let us please stop with the ad hominems. Like any other good or service health care reacts to supply and demand. How is the demand for health care insurance any different?

    Instead what politicians have done is institute policies that have altered the supply and demand structure of this industry and have put into place barriers of entry that disallow people to come in and give care for cheaper (across state lines for example). If we wish to make health care cheaper, further distortions of supply and demand and creating a monopoly (read, further barriers to entry) is not the way toward real reform and cheaper health care.

DUSTIN ANDERSON

How little we know

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Kurt Bouwhuis, Mackinac Center Intern

This is a fantastic piece by the always great Russ Roberts at Cafe Hayek.  It is barely over four pages and is definitely worth the read.

by Russ Roberts on November 12, 2009

in Financial Markets

Here is my take on financial reform at The Economists Voice. Other opinions by Posner, Richardson and Acharya, Hubbard , and Calomiris, here. My piece is very Hayekian as you might guess from the title.

Bryan Caplan on Education

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Kurt Bouwhuis, Mackinac Center Intern

Who should and shouldn’t go to college?

Bryan Caplan: There are two ways to read this question. One is: “Who gets a good financial and/or personal return from college?” My answer: people in the top 25 percent of academic ability who also have the work ethic to actually finish college. The other way to read this is: “For whom is college attendance socially beneficial?” My answer: no more than 5 percent of high-school graduates, because college is mostly what economists call a “signaling game.” Most college courses teach few useful job skills; their main function is to signal to employers that students are smart, hard-working, and conformist. The upshot: Going to college is a lot like standing up at a concert to see better. Selfishly speaking, it works, but from a social point of view, we shouldn’t encourage it.

How much does increasing college-going rates matter to our economy and society?

Caplan: College attendance, in my view, is usually a drain on our economy and society. Encouraging talented people to spend many years in wasteful status contests deprives the economy of millions of man-years of output. If this were really an “investment,” of course, it might be worth it. But I see little connection between the skills that students acquire in college and the skills they’ll need later in life.

Original link here

On the Origins of Money

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Menger

Kurt Bouwhuis, Mackinac Center Intern

Carl Menger, the founder of the Austrian School of economics wrote a very important article in 1892 that explained the origins of money for the first time.  Many believed money was a grand scheme planned out and created by the powerful rulers of empires. 

Menger’s article dispelled this myth by explaining that money was not the result of central planning, but rather, a phenomenon created by the interactions of several people over a long period of time.  Money, in short, was created spontaneously.

Pitfalls of Protectionism

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Here is a letter I recently sent to the Midland Daily News:

In his recent letter, Bill Burk sings praises to buying local (Unions commit to local, November 4). He argues that buying local saves jobs in the community, and is therefore superior to purchasing goods made outside the community.

Although I agree that buying local saves local jobs, there is nothing special about saving a job that is 1 mile away over saving a job that is 20 miles away, or 1000 miles away. Individuals who live 20 miles away or even 1000 miles away purchase goods from Dow Chemical and Dow Corning that employ people Midland. Would Midland, or the world for that matter, be better off if people outside our community shared the views of Mr. Burk? What would happen to the employees of Dow Chemical and Dow Corning if the world decided to buy local?

Additionally, which of the following actions is more benevolent? Purchasing from an inefficient producer who employs individuals enjoying an American standard of living or purchasing from an efficient producer in a developing country who employs individuals who depend on every penny of their income to sustain their own life?

Kurt Bouwhuis

QED: Normal People Like Taxes

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Kurt Bouwhuis, Mackinac Center Intern

Eric Baerren makes an interesting point in this blog post over at MichiganLiberal.

“Normal people would establish as their chief priority to make sure that schools are good and that people can access health care and that the garbage trucks operate according to a reliable schedule. Again, that’s normal people. Abnormal people first and foremost concern themselves with making sure we don’t raise taxes.” – Eric Baerren

Eric is confusing means with ends. All the services listed in the first sentence of the quote are the ends.  Most people agree that these ends are very important.  The desired means, however, vary from person to person.  The people who think more like Eric believe that government is a useful means for achieving the ends.  Those who oppose such means believe that reducing government will bring about the same ends.

The questions is not whether someone is normal or abnormal, but rather, whether or not the desired means to the end are destructive or productive.

btw – By Eric’s criteria, I am an abnormal person with normal person desires.

Spoils Exchange

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Here is a letter I recently sent to the Midland Daily News:

A recent editorial by the Midland Daily News contained the following statement: “[Midland] is also due for a federal grant, stimulus money, to help offset some of the costs of smaller-scale green efforts. It’s all taxpayer dollars, but not all Midland taxpayer dollars. That’s the kind of government assistance we need.” (“Greenbacks for green energy a good trade,” October 21).

Nonsense.

How would residents of Midland feel if an additional tax were levied on them in order to fund a project in Ann Arbor? Is that the sort of government assistance Ann Arbor needs?

Kurt Bouwhuis

Two Cheers for Capitalism?

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Kurt Bouwhuis, Mackinac Center Intern

I attended the Midwest Students for Liberty conference this weekend where I listened to some great lectures.  The last speaker of the conference was Peter Leeson who gave a lecture titled “Two Cheers for Capitalism?”  The following is a couple take aways from his lecture, which is also in a working paper.

1. Unless one prefers poverty, premature death, ignorance, and political oppression to wealth, longevity, knowledge, and freedom, less capitalism deserve no cheers.

2. When people say things like, “It’s still unclear what effect the spread of capitalism throughout the world has had on humanity,” they’re wrong. Similarly, when people say that “markets are important; but we should be restrained in our endorsement of capitalism, as it has harmed as well as helped humanity,” they’re also wrong. Global capitalism’s effect is clear to the point of smacking one in the face: it has made the world unequivocally better off.

Swarms of Poisonous Insects

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Here is a great letter to the editor by Don Boudreaux:

Don
http://www.cafehayek.com/
http://marketcorrection.powerblogs.com/
………………………………….

13 October 2009

Editor, Washington Post
1150 15th St., NW
Washington, DC 20071

Dear Editor:

Reporting on the Obama administration’s enthusiasm for government regulation, you report that “In a move designed as much for symbolism as effect, the new chairman of the Consumer Product Safety Commission dispatched all 100 agency inspectors across the country last month to enforce a law that requires special drains on swimming pools to prevent children from entrapment.  The agency shut down more than 200 pools.  The new regulators display a passion for rules and a belief that government must protect the public from dangers lurking at home and on the job” (“A Vigorous Push From Federal Regulators,” Oct. 13).

Symbolism indeed.

The symbol I’m reminded of is the Declaration of Independence.  Words that Thomas Jefferson used to denounce King George III apply with equal force and justification Mr. Obama: “He has erected a multitude of New Offices, and sent hither swarms of Officers to harass our people and eat out their substance.”

Sincerely,
Donald J. Boudreaux
Chairman, Department of Economics
George Mason University
Fairfax, VA 22030

The Silverdome and Sunk Costs

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Kurt Bouwhuis, Mackinac Center Intern,

This morning, I read an article titled Pontiac opens bidding for Silverdome.  The article primarily focuses on the costs of the facility as well as various people’s opinions of the auction.

The article fails to recognize the economic idea of a sunk cost.  The initial cost to build the stadium as well as the $1.5 million a year maintenance fee are both unrecoverable.  As a result, these costs should be ignored when making decisions about it’s potential future uses.  If the stadium sells for a “low” price, it is not a steal – the price someone offers will be based on the future expectations of the value the stadium as well as the next best alternative use of the bidder’s money.

Hat-tip to James Hohman