Thursday, September 07, 2006

Testimonty to DOT on Hawaiian Airline Petition

****Docket number for this case is OST-2006-25612. ****

I ask that the DOT rule in favor of the HAL petition on the basis that this department must reaffirm the institution of property rights. HAL owns its planes and hires its employees without subsidy from the ASG, and it has the right to charge what it wants for its investment into the capital and labor that makes aviation to a remote location like American Samoa possible.

This is the foundation of free enterprise: The expectation of a company to reap the full rewards for the property that they build over time and despite risk drives people to venture into the unknown. Without this motivation, people would not have invented computers, air conditioners, washers/dryers, and all the other countless inventions that have saved us from the backbreaking labor of the past.

However, Governor Togiola’s executive order only serves to reinforce the idea that government can and should dictate the price mechanism of the free market. That if only enough constituents disagree or feel injured from the market price that government through democracy could vote the market price down. In my opinion, this is no different from a dictator ordering prices down upon whim.

We know what is really causing high airfares. US Cabotage laws that prohibit foreign competition, ASG excise taxes on fuel and overtime payments to ASG Customs and Immigration officials.

Instead of focusing its efforts on these issues, the local government thinks that attacking a private company with baseless rhetoric such as “predatory profits” and “highway robbery” is the best course of action. If the rule of law is not applied in American Samoa, then it will be wild-wild-west style politics that determines who gets to do what and at what price and that the only way to do business in AS is to buy some politician a fautasi boat for his district [in reference to McDonalds of AS buying a fautasi boat for the Governor's traditional district, Sua ma Vaifanua -- not included in original testimony].

NOTE: The U.S. federal government's Department of Transportation has a PDF of the above testimony over here while the DOT's profile of this testimony is here.


At 2:34 AM , Blogger Stuart K. Hayashi said...

Hey Taligraph!

At your request, Tali, I now will play the devil's advocate.

You write: "This is the foundation of free enterprise: The expectation of a company to reap the full rewards for the property that they build over time and despite risk drives people to venture into the unknown. Without this motivation, people would not have invented computers, air conditioners, washers/dryers, and all the other countless inventions that have saved us from the backbreaking labor of the past."

A statist could cite dozens of historical examples to contradict what you said.

Jonas Salk developed the first practical polio vaccine. It saved millions of lives. He never patented it, and the organization that financed his research contractually forbade anybody from patenting it. Yet that saved more lives than did Nolan Bushnell seeking profit as he founded Atari.

Jonas Salk saved millions of lives with this breakthrough and never made a penny from it. He didn't even keep the proceeds from a bestselling book about it.

Howard Florey and Ernst Chain were the men who led the way in the use of penicillin as an antibiotic. They didn't make a penny from this. They saved millions more lives than did Hugh Hefner seeking a profit with Playboy and, yes, even the executives of Hawaiian Airlines seeking a profit.

You talk about computers. Everybody believes the Internet was invented by a government agency -- ARPA -- and not private entrepreneurs. Was ENIAC invented by entrrepreneurs? No.

The World Wide Web, as we know it today, was created by Tim Berners-Lee at the not-for-profit, highly tax-funded organization CERN. Berners-Lee could have profited from the Web, but he didn't.

One of the first men to draw up plans for a computer was Charles Babbage. It was his revolutionary know-how that paved the way for computers. Did he seek to profit from this? No.

How do you know that the inventor of the washer or dryer was motivated by profit? Can you name him?

The only example you named in which the invention was created by a known profit-seeker was air-conditioning. Willis Carrier is credited with inventing air-conditioning. He did patent the process and became a millionaire from it.

Suffice to say that many a statist could turn your very statement against you. Many inventors of many important inventions did not seek out profits -- not Jonas Salk when he developed the polio vaccine, not Howard Florey or Ernst Chain when the pioneered with antibiotics (which Merck now makes a fortune off of), not the U.S. Defense Department when it proposed the creation of ARPAnet, and not Tim Berners-Lee when he created the World Wide Web.

If profit motive is the primary motivator for all of the great technological innovations that have improved the world and lengthened the average lifespan, then how the hell do you explain the actions of a Howard Florey or Jonas Salk?

The statist will tell you that you, me, and every businessman should try to follow Jonas Salk's example. The world would have better medicines, they would say, if there were more scientists who developed cures for disease and then distributed these cures freely so that more people will have access to them. Most Americans would agree with that.

And the statist could point out to you dozens of inventions we use today whose inventors sought profit but ended up dying poor.

The television was invented by Philo T. Farnsworth, but the TV didn't make him rich.

It was Col. Edwin Drake who proved that Pennsylvania had enough oil to fuel the America's industrial expansion in the late 1800s. He died poor.

The true inventor of Coca-Cola made no more than $500 from his invention. It was the huckster businessman who bought the beverage's formula for him cheaply that got rich off this beverage.

And let's go back to computers. Do you know who designed the operating system that all of our computers run on today? I mean the operating system beneath Windows -- what you and I call "DOS." Do you think Bill Gates and Microsoft developed it? It was Microsoft that got rich off of it, after all.

But nobody at Microsoft was the innovator who first discovered the principles that would make DOS workable.

Actually, the inventor of the DOS operating system is usually identified as Gary Kildall. He invented an operating system called CP/M. When IBM tried to buy CP/M, he turned IBM down.

So then IBM decided to get an operating system from Microsoft. So you know what everybody accuses Microsoft of doing? Microsoft bought an operating system from Seattle Computer called QDOS, and QDOS was an outright plagiarism of copyrighted CP/M. Basically, Microsoft bought an illegal copy of CP/M.

Then, instead of selling the illegal copy of CP/M to IBM, Microsoft decided to *license* that copy to IBM and every maker of IBM PC clones. And they changed the name of that illegal copy from QDOS to MS-DOS.

That is the story many of computer history afficianados will tell you.

If profits are a reward for being a great innovator who creates something new that improves the world, then many statists will ask you why the market system did not reward Philo Farnsworth, Col. Drake, Coca-Cola's true inventor, or especially Gary Kildall?

The statist will reply to you that, under free enterprise, the men who get rich are not innovators like Gary Kildall, but the Bill Gateses who screw them.

They can explain this way that the profit motive is not what gives us these innovations; it is the greed of Bill Gates that screwed the true innovator out of his fortune.

And it is a greed not unlike Bill Gates's that drives Hawaiian Airlines when it charges American Samoans such an emotionally distressing high price.

In debates in front of intellectual laymen, the economist is no match for the business historian.

In short, the statist can whip your argument by citing all of these examples and saying that every great technological innovation came, not from profit-seeking, but from altruism and self-sacrifice for mankind.

Then he will say that the world would be a better place if the law forced Hawaiian Airlines to be more unselfish like Jonas Salk was.

And lots and lots of Americans in every U.S. territory and every U.S. state will applaud that.

To tell you the truth, I have my own rebuttal to every one of the arguments I made above.

The statists who play the "Gary Kildall" card are not entirely fair. Nor are those who cite Jonas Salk and Howard Florey as examples of how the best things in life have nothing to do with the profit motive.

But what do you think?

At 2:37 AM , Blogger Stuart K. Hayashi said...

I should add that I am very much impressed with your latest output -- the output after my last post about the Honolulu Advertiser covering the HAL price-gouging story.

I look forward to seeing what you have in store for the U.H.-Manoa student newspaper. :-D

At 2:43 AM , Blogger Stuart K. Hayashi said...

It would be very interesting to see these posts on your MySpace blog. Lots of people on MySpace post insightful comments, and they can't get away with posting cowardly advertisements in your Comments section the way they can on this Blogger domain.


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