Sunday, August 14, 2005

Other People’s Property (OPP)

I don’t like the idea of someone else deciding what’s the best use for my property, whether it is my land, money, house or any other type of capital. The funny thing is that politicians don’t like the idea either, when it comes to their own stuff. When it comes to somebody else’s belongings, they don’t hesitate to legislate other people’s property to purposes not intended by the owners.

The ASG use of the Employees Retirement Fund is an obvious example of such abuse. If our government officials were so concerned about saving LBJ, why don’t they loan the semiautonomous entity money from their own personal savings accounts instead of using the people’s money over and over again. Especially since the LBJ Board of Directors testified to the senate that it cannot guarantee repayment of the $10 million loan.

As flagrant as the ASG may be with the retirement fund, what is less obvious is how Rep. Afalava’s price-gouging legislation will be particularly destructive to our property rights and economy. The first principle the people must realize is that government infringement usually starts small. First, they’ll regulate prices during emergencies, and then they’ll eventually find some excuse to regulate prices at their whim. This is just the beginning of price regulation.

Even though the ASG only wants to impose price restrictions during the time of an emergency now, price-gouging legislation will have a negative impact on our economy anyway. First, can you imagine the costs involved with all the frivolous lawsuits that price-gouging legislation would encourage? It likely that businesses would be seen as guilty until proven innocent, having to demonstrate that their prices are “attributable to additional costs incurred in connection with the rental or sale of the commodity” during an emergency. Businesses may end up spending millions of dollars in time and money defending themselves. It’s likely that businesses would opt to settle out of court or plead guilty to avoid such expenses. Is this justice? Would potential investors want to open shop in our territory knowing that such a situation can exist?

The ASG should also consider the costs to our courts to hear future cases resulting from this price-controlling measure. Do I hear higher taxes in the near future?

What is also seemingly lost to the Fono and the governor’s administration is the fact that consumers are not the only ones to experience rising costs. Businesses also face rising costs in an emergency, paying higher gas prices and materials to prepare for the pending storm like everybody else. In order to stay open for business, costs have to be passed on to the customer.

The ASG simply has no legitimate reason for price-gouging control. Here are some facts for legislators to consider: 1) Profit maximization is reached where marginal cost equal marginal revenue. 2) The lower the costs of the product, the more units of the product one can supply. 3) The lower the price, the more people buy. With these three facts in mind, if suppliers can lower their costs, they would lower their price to sell more products to increase their profits. Do you think computer manufacturers lowered their prices because they had such a big caring heart for society? No. They lowered their prices to increase profits.

Higher prices are a result from higher costs whether legislators want to hear the tune of that song or not. It is the profit-seeking initiative that entices suppliers to lower, not raise, prices. Any economist out there willing to refute that?

In the run-up to a pending emergency, if this price-gouging bill were law, people would buy more than they need. Once the disaster hits, stores would be confined by price regulation, but those who bought more than they needed will not be. Black market, anyone? Price-gouging legislation will exacerbate shortages typical of any emergency, hinder the private sector's ability to react efficiently and create a black market.

To what length are we willing to persecute our own people to enforce the ramifications of this price-gouging measure? If the ASG has no faith in the free market, in freedom, then it should come clean with people and just say so.


At 1:03 PM , Blogger Stuart K. Hayashi said...

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Just kidding.

See, one of the prices we pay for having a free market is obnoxious people constantly trying to sell us things. Do you have any tips for using market mechanisms to fend off manipulative salesmen, such as those who go around posting ads in the Comments sections of people's blogs?


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