Quality and Free Markets

Quality.  It’s a hugely subjective measurement. Some may argue there are universally accepted standards for what’s considered to be “good” quality vs. “poor” (eg. your local FDA bootlicker).  I would argue that Beauty is in the eye of the Beholder.

Many people mistake Price for Quality.  In a Free Market, Price only indicates the intersection of Supply and Demand.  If there’s a shortage of Supply and relatively stable or even increasing Demand, you very well could see prices for low-Quality junk go higher and higher.  The reverse is also true in that high-Quality goods may be in ample supply and thus prices drop.  (eg. computers, memory, and processors over the last 30 years.)

The reason I bring these up is because Socialists will, without exception, argue there is only one acceptable standard for Quality.  In fact, their aim is to eliminate choice altogether.  A Socialist State cannot allow for product differentiation because that opens the door for Disparity.

The head scratcher in all this is that Socialists want you to believe their agenda will give everyone the best fruits the Free Market has to offer.  Suddenly, everyone will have palatial mansions, Ferraris, and grass fed Wagu filet mignon every night.

This can’t be further from the truth.  Throughout history and even today in countries like Venezuela, Socialists and central planners cannot even supply basic needs like food, water, or even toilet paper.  

And let’s not forget the fact that not everyone wants or needs the same Quality of goods or services.  My needs may be very different from yours.  We have 7 children in our home.  Do you think for one minute your transportation needs are the same as mine?  Or size of home?  Or meal planning?  Or healthcare needs?

What about your own needs over time?  Will your needs change over the next 10, 20 or even 40 years?  My wife and I are big fans of Ikea and Walmart mostly because they provide LOW-COST options for our family.  It’s understood that everything we buy from them is pretty much disposable.  Furniture, electronics, food items, sundries, clothing — we have zero expectation of holding on to these things after all of our children have grown and moved out of the house.  But these things are very much in demand in our household for the time being.  The Free Market gives us the power to weigh our needs, wants, and preferences against our own personal Demand curves throughout time.  

The Socialist State will tell you what you need when you need it.  

You have children with Gluten or Dye Allergies?  LOL!  You think the Socialists care?  

You want organic, non-GMO produce for your salad?  The Socialist has no salad for you this month.  

You like energy-efficient, hybrid cars to ‘save’ the environment?  Socialists can’t even deliver the rubber for making tires.

Make no mistake about it.  When Socialists proclaim equality and fairness for all, they are talking about the lowest, common denominator of quality with no other options allowed.

Anyone Want to Fly United?

Gotta capture this one for the books. This week started off with a viral video clip of Dr. David Dao’s violent removal from Flight 3411 because, though the flight was NOT overbooked, 4 airline employees needed the seats to get to Louisville for other flight duties. So after an unsuccessful attempt at offering up to $1000 per passenger to voluntarily deplane, flight attendants arbitrarily picked 4 people, including Dao and his wife, to be ejected from their ticketed seats.

You probably know the rest. Dao refused. Airport Security / Chicago PD was called. They grabbed him, apparently clocked him in the mouth, and dragged him off the plane.  He’s now believed to have lost 2 front teeth and suffered a broken nose and concussion.

Not helping the situation has been United Continental Holdings’ Chief Executive Officer Oscar Munoz. In his first 2 responses to the PR crisis, he’s gone from behaving like a cold, legalese-spouting robot to even blaming Dao for being “disruptive and belligerent”. At the time of this writing, Munoz has made several additional attempts at apologizing in public and also to Dao directly. He’s announced that all passengers on Flight 3411 will be reimbursed for the flight. And United has promised never to call the police on its passengers again.

All that you probably knew. What I wanted to capture here was the surprising reaction I’ve been seeing from friends and total strangers on social media to the situation. But to start, I’ll summarize my personal take on it.

When you make a purchase from a business to provide a service, you are entering into an agreement. In fact, by accepting payment, the business is creating a POSITIVE RIGHT for me. (See my previous post on the differences between Positive and Negative Rights for more details.) There’s no need to have a formal, notarized contract ratified to legitimize our agreement. I give you some money. You promised to deliver a service. It used to be that we did things on a handshake because our word was our bond.

An agreement can have several conditions included in the exchange – some are explicit, others are implicit. For example, if I order a pizza to be delivered and it shows up next week, technically the business met the WHAT part of our agreement, but they certainly failed to meet the HOW or WHEN.

When it comes to the airline industry, it’s a hot mess. As consumers, we’ve grown so accustomed to receiving appalling service, getting molested and robbed by TSA agents, enduring abysmal on-time service level agreements, and begrudgingly stomaching an overall customer satisfaction rating that rivals most used car lot interactions.

So how shall we think about the events of this week? Well for starters, let’s look at the fact that city police were called to intervene on behalf of a business when no laws were being broken. Judge Andrew Napolitano said:

“By dislodging this passenger against his will, United violated its contractual obligation. … [Dao] bought the ticket, he passed the TSA, he was in his seat, he has every right to stay there.”

The Judge went on to say “If the reason for their call is not a crime, [CPD] should leave. … They have no right using violence to resolve a civil a dispute. … If the passenger is politely or reasonably sitting there, waiting for the flight to take off, he’s not committing a crime, he’s not engaged in violence, he’s not doing anything that justifies police force.”

Couldn’t agree with the Judge more. For those that are defending the authoritarians and touting the “Romans 13 / always obey the man with the badge” line of thinking, consider the dangerously slippery slope this creates. What’s to stop business owners from calling the police if you complain that you didn’t get the food you ordered at your favorite restaurant? They can now call the cops to just have you punched and dragged out? What about when you put money down to have a builder create your dream home? During your final walk through, you notice they used the nickel faucets instead of the copper that you had ordered. Cops will be called to force you at gunpoint to take delivery?

Again, these are civil matters. Not criminal. That’s exactly why the Judge states police have no business intervening. And these are obviously extremes, but in today’s crazy times, I’ve learned never to say “never”. Once the precedence is set, the door only swings open wider. Pandora’s box never closes.

Then you have the ad hominem attacks on Dr. Dao’s character. I haven’t seen any of my friends specifically justify UAL / CPD’s actions because of it, but they’ve felt the need to regurgitate the ‘background’ juicy details that have surfaced by digging into Dao’s past. So let’s think about this. Did the CPD know anything about his past when they assaulted him? Did UAL? Of course not. So anyone that’s actually taking even a second’s notice of anything that has to do with Dao’s character is basically playing a game of Statist Russian Roulette.

Put another way, when your moral evaluation of an attack hinges on whether the victim’s history warranted an arbitrary, unrelated, random (almost karmic) dispensation of justice today, then your argument is contrary to the ‘sanctity of the Rule of Law’ most of you also spout from the other side of your mouths. You can’t have both. You can’t support the “follow the rules” mantra and at the same time say “well regardless, he deserved it because he’s a jerk”.

Lastly, there’s the matter of the fine print. I’ve read over and over that the “fine print” on our tickets basically signs away all of our civil rights, constitutional protections, our first born, and part of our 401ks for the privilege of being stuffed into a can and shipped like cattle. (It’s very similar to the case of the Social Contract I often hear about whenever I protest the government stealing from us through taxation or waging wars we don’t support.) To this all I say, “is this fine print set in stone? We, as consumers, can’t demand more for our business? Are we completely powerless and simply have to take it?”

And yet again, the FREE MARKET is the solution to all of the airline industry’s problems. Why do we have such horrible service? It is not because of the lack of government intervention. It is directly CAUSED by government preventing competition from entering the US air carrier marketplace.

Marc Scribner of the Competitive Enterprise Institute notes that domestic airlines are protected against foreign airlines that want to fly domestic routes in the U.S.:

Since the Air Commerce Act of 1926, federal law has imposed ownership and control restrictions on U.S.-flag airlines. These restrictions were tightened under the Civil Aeronautics Act of 1938. Under current law, the maximum foreign ownership and control share of U.S.-flag airlines is 25 percent (see 49 U.S.C. § 40102(a)(15)(c) for the relevant definition of “citizen of the United States”). This is why Richard Branson only held 25 percent of Virgin America prior to its sale to Alaska Airlines. The rest was owned by a New York hedge fund.

The Air Commerce Act of 1926 also prohibited cabotage (see 49 U.S.C. § 41703 and 19 C.F.R. § 122.165), whereby foreign airlines service U.S. domestic routes. There are extremely narrow emergency exceptions to this broad ban on foreign airline competition along U.S. routes and these typically are only granted when a remote domestic route in the Pacific loses all U.S.-flag carrier service—which has occurred in Guam, for instance.

Have you ever flown Virgin America or Emirates Airlines? I’ve flown VA. Still waiting for the chance to fly EA. I can tell you that VA was one of the most pleasant flying experiences I’ve ever had. And I wasn’t flying 1st Class or Business. Just regular coach.  (I’ve heard that Emirates is the stuff of legend.)  Competition in the marketplace forces businesses to offer better service, more reliable departure/arrival SLAs, friendlier staff, and competitive pricing. Take away the competition (i.e. Cronyism) and you reduce incentives for businesses to improve. They get lazy. They get complacent. And they aren’t as eager to keep your loyalty.

It will be interesting to see what changes take place at United and the US airline industry in the next few months and years coming out of this debacle. The cynic in me thinks the public will lose interest in less than a month and Dr. Dao’s violation will become a distant memory in the Hall of Memes. The realist in me believes opportunistic politicians will see this as their clarion call to further regulate which keeps out competitors from entering the marketplace. I hope for our sake that sanity will prevail and the public will keep the pressure on businesses like United to change. I also hope we embrace competition and freedom rather than control and regulation to energize the airline industry.

A quick thought on the additional benefits of the Free Market 

Any reputable economist will tell you that the cure for racism, sexism, and religious xenophobia is not regulation or more government but the Free Market.  When I buy a digital song or a car or a pair of jeans or a TV or a house or some chimichangas, I am unknowingly supporting millions of people from all walks of life and geography — men, women, old, young, black, white, Asian, Hispanic, gay, straight, Christian, Muslim, Jews, atheist​, and even poor and rich.

The Free Market doesn’t care who or what you are. It only cares what value you can bring to the table.  To produce anything, all of the components, parts, assembly, raw materials, financing, transport, warehousing, marketing, sales, and management come together, usually without central planning, without the need for coercion, and without any extra incentives other than individuals seeking out their own self interests. And yet, in the midst of the selfish anarchy of Free Will and Voluntary Association, every day people put aside all of the things that divide us and are able to work together on the majority of the things that unite us.


#Embraceliberty #MiltonFriedman #Rothbard #Hamsandwich #Thepencil #Adamsmith #Invisiblehand

Free Markets Are a Prerequisite for Art and Charity

Catching up on some of the news this week.  Aside from the hilarious, abysmal failure of Obamacare Lite (aka the American Health Care Act (AHCA), the budget has been getting a lot of publicity.  I realize some of my readers are not number crunchers, so for this post, I’ll refrain from digging into those details of the budget plan and focus more on the qualitative aspects.  (No promises for future posts. 😉 )  

Center Stage with the liberal Left this week is PBS, the National Endowment for the Arts, and Meals on Wheels.  From some of the memes and posts you’ve been reading, undoubtedly you know that Humanity as a whole is about to descend into a Dark Age.  Elderly veterans will be callously left to starve.  Our great-grandchildren will have to read about Art and Educational Programming in history books because without Government support, there will be none.

That is if our great-grandchildren are actually reading.  And reading history books.  

Maybe they’ll learn about it on YouTube.  (Wait, isn’t that art?  I digress.)  

Without digging into numbers as promised, I’ll simply mention that the Left loves to point out these programs are tiny budget considerations compared to, say, Social Security or Medicare or the Military policing the world (all of which I’m also in favor of slashing).  But if I’m bleeding trillions of dollars a year, spending money we don’t have and borrowing more, then yeah, I’m looking for every opportunity to save a buck.  Guess that makes me heartless and greedy.

Think about the government slush fund created to support the broad and nebulous space known as Art.  Is all Art good and worthy of our combined, financial support?  To those that defend the NEA and PBS, does it matter where the money goes, just as long as it is labeled as “Art”?  I’ve been around musicians, graphic artists, videographers, photographers, sculptors, painters, poets, dancers, writers, and actors for most of my life.  I can tell you without hesitation that Artists are some of the most critical people I know.  They love to rip into other artists calling them Hacks, Attention Whores, Corporate Shills, Sell Outs and Wannabes.  If they’re being honest, they will even admit Nickelback isn’t as good as Buddy Guy.

For over half a century, our tax dollars have been taken from us for a committee to decide which Art should be supported.  So, let’s say you’re an artist/entrepreneur trying to open a small local gallery in Chicago.  You don’t have a large staff, and you’re barely able to keep your doors open.  You then learn that the Art Institute of Chicago received, yet again, another $20,000 grant from the NEA, despite the fact that they have a budget of tens of millions of dollars and support from corporate and private philanthropists from all over the world.  In fact, in their 2016 Financial Statements, the Art Institute of Chicago declared they had over $70 million in Net Contributions Receivable. (Sorry, numbers, I know.)  

Is this acceptable to you artists and supporters of Art?  In economics, we call these Rent Seekers.  Basically, those that are rewarded are not necessarily the best, the purest, or even the most popular.  The reward goes to those that can successfully navigate the system.  If you’ve got lots of money already and can hire dedicated staff to apply for grants and government funding, chances are you will reap the rewards.  

This is also one of the reasons why you can easily find countless examples on the web of questionable spending of public funds in the name of “Art” — things like almost a half million dollars for medieval smells museums and $100k for Shakespear without Words.  

Then there’s Meals on Wheels, as mentioned above.  Their funding is also on the proverbial chopping block.  Or so that’s what we’ve been led to believe from the headlines and memes.  In fact, less than 3% of their operating budget comes from federal grants.  

Again, numbers.

But what is the solution then?  Without Government stealing from everyone, creating slush funds with zero accountability, and rewarding organizations and artists with the means and knowledge to navigate the grant writing maze game?  

The Free Market, of course.  

Take, for example, this blurb from the NEA’s own website.  

Capture

So now, the NEA is an investment vehicle?  If $9 of private investment for the arts is voluntarily given by individuals and organizations, why do we need to steal the last dollar of $10?  Can’t those $9 be used to create catalysts for communities, productive jobs, net adds to GDP, and revitalize communities?  Or is there something magical about that federal $1 bill.  (#fungibility) 

Just can’t seem to get away from numbers, can I?  

The Free Market encourages individuals to support Art in all of its glorious shapes and sizes based on our preferences.  In fact, more people voluntarily support the arts, despite the theft that government practices.  If they had more disposal income to allocate, support for the arts would grow even further.  George F Will wrote in the Washington Post

Americans’ voluntary contributions to arts organizations (“arts/culture/humanities” institutions reaped $17 billion in 2015) dwarf the NEA’s subventions, which would be replaced if those who actually use the organizations — many of them supported by state and local government arts councils — were as enthusiastic about them as they claim to be. The idea that the arts will wither away if the NEA goes away is risible.

A bit dated, but still relevant, the Heritage Foundation wrote that the NEA actually discourages charitable gifts to the Arts.  

But where’s the assurance that people would freely fill the void if the government safety blanket is removed?  Look no further than Meals on Wheels.  When the news was announced that the proposed budget cuts might impact 3% of their existing budget, those silly fools John and Jane Q. Public donated 50 TIMES their normal rate and 5 TIMES as many volunteers stepped forward to get their hands dirty and work at Meals On Wheels.  

How is that possible without the threats of government coercion?  Why would anyone voluntarily support the things that matter to them without the use of force?

It’s a mystery, to be sure, what makes people act so irrationally.  

But let me add one other consideration to this topic which I had alluded to in my post title.  Milton Freedman wrote in his book “Free to Choose” that voluntary exchange is a necessary condition for both prosperity and freedom.  It’s not a guarantee of prosperity and freedom.  But is a necessary prerequisite.  

I’ll add my own variation of Milton’s idea to say that in order for the Arts and Charity to not only survive but to thrive, voluntary exchange or Free Markets are a necessary prerequisite.  If arts and charity were supported more and more by coerced, government participation rather than individual choice, eventually Government will determine what are acceptable forms of art and what causes are worthy of “charitable” support.  As I pointed out above, most likely this road leads to successful Rent Seekers and the Politically Connected grabbing up all of the attention and resources.

Imagine if Trump’s administration was given the reigns to decide not only which forms of art and charity are worthy of support but also if he could decide which forms are ALLOWED.  What if Obama was given that amount of power?  Or John McCain or Hillary or Chad Kroeger of Nickelback?  The Free Market is the single greatest protector of the Arts and Charity because individuals can decide which of the countless choices available should be rewarded with our support, both financially and otherwise.  

The government should not be in the business of deciding which forms of Art and Charity are acceptable or not.


An Evening With Bastiat

Yesterday, my wife and I attended a lecture hosted by the Charlotte chapter of the Bastiat Society.  I was thrilled to learn there was a local chapter in Charlotte and even more excited to learn there was a free lecture being given on Capitalism.  Those who don’t know, Claude Frédéric Bastiat was a 19th century French economist who wrote revolutionary, pro-liberty works such as The Law.  This book was responsible for my first step into the philosophy of Liberty.  If you haven’t read it, download a free copy of it here on audio or pdf at Mises.org.  

Seriously, it’s like 50 tiny pages and will take you less than half an hour.  Go learn something.  

The speaker for the evening was Clemson University Professor of Economics Dr. Bradley Hobbs.  He was very entertaining and informative, engaged the audience well, and gave a lot of excellent, historical and contemporary data about the benefits of Capitalism, why Socialists and the Left seem to be gaining popularity, particularly among the young and senior-aged cohorts, and gave some perspective on many of the common debates often heard on social and traditional media around the evils of Capitalism.  Dr. Hobbs will be sharing some of his presentation notes and references with us soon, so I hope to pass them on when I get them.  

One interesting exchange took place between me and an older, self-proclaimed Crony Capitalist (I’m 90% sure he doesn’t know what that means.  Pretty sure he thinks because he’s an entrepreneur and aged, that makes him one.)  Anyway, the exchange went something like this:

CC:  The problem with Capitalism is that people aren’t concerned about all these larger, global issues.  They’re selfish and only want to think about themselves.  They don’t think about what’s best for society.  That’s just human nature.

Me:  And so you are making an argument that because Human Beings are selfish and short-sighted, we should put Human Beings in charge of determining what’s best for everyone to deal with these issues?  Milton Friedman once asked “Who are these angels that are going to come down and organize society?  Where do we find them?”  

He didn’t like me tone, I guess, because that got him going.  

Somehow, we got to the topic of Public Safety and Motorcycle Helmet Laws.

CC:  Someone has to take responsibility for protecting us and keeping us safe.  The government enforces things like motorcycle helmet laws. . . .

Me:  So if I want to ride my motorcycle without a helmet, breaking the law, and I get into a crash, who is the victim?  

CC: Society is when my money has to take care of your family and loved ones because of your selfishness.  

Me:  So you are protecting Me from Myself [on behalf of my family]?

CC:  Yes because when you’re in the hospital and don’t have the money for emergency care, my money is going to pay for your care. 

Me: No, I do not want any of your money.  

CC:  You will someday.  When you’re laid up and have nowhere to turn.

It’s like a broken record, but I have this same exchange almost everywhere I go (physically and virtually) to talk about Free Markets, Choice, and Liberty.  I even had a similar exchange with a co-worker the other day.  The idea that elected officials, people who were slick enough to convince 50.1% of the voting population to put them into power, know what is best for the hundreds of millions of people in our country is beyond my tiny brain to comprehend.  

Invariably, Statists proclaim that the reason why Free Markets and Liberty fails is because people can’t be trusted.  Thus, People need to be placed​ in charge of everyone.  They also arrogantly claim responsibility and authority over my own free will to make choices about my life.  Because somehow they know what’s best for me.  

Updated edit – The organizer of the Charlotte chapter said I should lead one of the next lectures.  Hmmmm. . . .