Thursday, October 05, 2006

MARKET CONDITIONS, NOT MARKET PLAYERS, MATTER

I wonder what George Washington would think of today's politicians. Or better yet, what Thomas Jefferson or John Adams or Ben Franklin would think of our government. I hope these great white men do rest in peace, but I sure would like to know what they would think about today's politicians not adhering to our Founding Fathers' ideas of limited government and individual rights to life, liberty and property. And if they were alive, I love the opportunity to personally thank them for giving birth to the United States of America.

Anyways, having the government investigate every cranny and nook of the airline business and conduct a cost analysis to justify prices is a tried and failed policy of the American regulatory regime from before the 70's. It's a tried and failed policy of Communism.

The idea behind regulatory agencies was to protect consumers against some supposed monopolistic behavior of industries like telecommunication and the airlines. The problem was that the regulators operated in the following fashion: They would take all of the factors that affected prices today to justify prices for tomorrow and the day after until the agency came out with their new calculations. This process is likened to solely looking into the rear view mirror to drive the economy forward. Many important factors change on a dime, which could then render once certain forecasts inaccurate, useless or even harmful.

Another problem with regulatory agencies is that once the "well-meaning" politicians have moved on with their lives and on to other interests, businesses affected by the regulators would still be there. Businesses will then have every reason to influence the government department to change the rules in their favor. Consumers then suffer from rules that limit competition that protect the now vested interests of these regulatory agencies.

One way a monopoly arises is when it's cost prohibitive for competitors to enter the market. Yet as long as the monopoly makes a profit, the industry will always entice people to lower the costs that prevent them from competing and obtaining some of that market share. But having the government step in, bash the virtue of profit maximization and trample all over their property rights could only discourage investors and would-be competitors from even making the effort.

People give market players too much credit for being able to dictate prices in the marketplace. If demand for flights ceased to exist tomorrow, it doesn't matter what HAL's costs are, they're not going to get a penny from us consumers. For the same reason, if demand is high and people continue to find the money to pay, it doesn't matter what HAL's costs are, they going to charge as much as the demand curve says to charge.

It's market conditions that dictate prices. A market condition our politicians can change is supply. We can increase supply with foreign airlines, whose lower labor costs due to automation and outsourcing can be passed on to us in the form of lower airfares. Yet we have a congressman who says that the international designation is nonnegotiable and a governor who focuses our territory's resources on attacking a private company for over two years instead of fighting US Cabotage laws.

I want lower airfares, but never at the expense of property rights. I believe that what goes around comes around, and I don't want to see businesses use the government to trample on our property rights later on because they see how we're doing it to HAL today. I believe property rights to be a pillar of freedom, and freedom in the marketplace will always work as long as government is limited to protecting our individual rights and enforcing contracts.

3 Comments:

At 3:27 PM , Blogger Stuart K. Hayashi said...

Hey Talimander!

At your request, I shall play devil's advocate.

You write: "I believe property rights to be a pillar of freedom..."

Most people will reply as President Franklin D. Roosevelt did: "A starving man is not free."

A starving man is free to do what? Starve to death?

You continue, that "freedom in the marketplace will always work as long as government is limited to protecting our individual rights and enforcing contracts."

Does this mean that a filthy landlord has the right to evict an elderly woman from her apartment, tossing her out on the street, where she will die from staying out in the cold too long?

Do you believe that the right to private property and contracts means that pharmaceutical companies should get away with gouging the elderly by charging them exuberant prices for the drugs they need to survive?

And let's dispense with the "they're just recouping costs" rhetoric. Aren't you aware of how large their markup is? The companies could recoup all of their costs and still make a decent profit without the markup being as high as it is.

What is you reply?

 
At 8:35 PM , Blogger Talifaitasi Satele said...

your assumption is that i want the elderly woman tossed out of her apartment. rather, i want her to have the most choices possible. i know that best environment that can provide the most houses or the best drugs in the world at the lowest price possible is where people can pursue and compete for what they value the most. people may value giving away houses for free or charging low prices for drugs, or they may value getting the most money out of venture. whether it's charity or profit making, value motivates people to do what they do. but forcing people to do something takes value away from them. force therefore destroys both charity and profit because it takes the value out of it. i guess you can say if a law was passed to force you to do what you already enjoying doing then there may seem to be no harm. but there's always varying degrees of how much you like doing things. for example, some say they like paying taxes. give them the chance to voluntarily raise their own taxes to pay the government and none of them come forward. so some may initially agree with force as long as they don't disagree with it's level of intensity and its purpose. so i firmly believe that force will evenly unmotivate a whole population from acheiving the intents of the law. you know that a filthy landlord can't toss an old lady without abiding by terms of contracts and as walmart has proven, you profit more with cheaper prices that attract the most customers. so freedom in the marketplace prove the incentives to draw up contracts and set prices that can get the most customers. profits are therefore necessary.

 
At 2:17 PM , Blogger Stuart K. Hayashi said...

yo yo Tallyho,

Thank you for replying!!! That's very exciting. :-D

At your request, I will issue a rebuttal as a government-regulation supremacist would.

You write that "people may value giving away houses for free or charging low prices for drugs, or they may value getting the most money out of venture."

That is the part where the government supremacist smugly says, "Hahahaahahah!!! People do the latter. Since when has anybody done the former? Nobody gives houses away for free, because we all know that, left to their own devices, most people are too selfish. And that is precisely why we need the government to step in and insure economic social justice. It is precisely because people don't value giving away housing at affordable rates, that we need price controls to ensure justice."

You write that "forcing people to do something takes value away from them. force therefore destroys both charity and profit because it takes the value out of it."

Dude, tons and tons of people will disagree with that.

How many times have you heard somebody say, "When I was a little kid, I hated it when my parents forced me to [blank: learn the piano, eat my vegetables, go to school, etc.]. I never would have voluntarily done it on my own without being forced to. But now that I'm older and wiser, I'm grateful to my parents for having forced this upon me against my immature judgment."

Sometimes the government does have to act like a parent to remedy the poor judgment of supposed adults. The government acts like a parent, for instance, when a robber misbehaves. Robbery is misbehaving. If adults always had good enough judgment to govern themselves, we wouldn't need the government to apprehend robbers.

And price-gouging is yet another kind of robbery and misbehavior that so-called adults engage in. When sombebody is dying of thirst, you are taking advantage of him by charging him such an exorbitant price. The high price you're charging him isn't merely for some water; it is for his life. Therefore, when you price-gouge the poor for commodities that they need in order to survive, you indeed are putting a gun to their heads and threatening their lives.

We're not pacifists here. I trust you're not a pacifist. Sometimes violence is justified. It's justified to defend an innocent person from a rapist or robber. Likewise, it's justified to defend the life of a potentially fatally dehydrated man when a price-gouger refuses to save this man's life if that man doesn't cough up a ridiculous sum of money.

You write that "there's always varying degrees of how much you like doing things. for example, some say they like paying taxes. give them the chance to voluntarily raise their own taxes to pay the government and none of them come forward."

But one can reply that there is a group of people asking that their taxes not be reduced -- and they ask it on the condition that everybody with a level of wealth comparable to them pitch in in paying the higher taxes so that there are no free riders.

I am referring to Warren Buffett, Bill Gates and his father, and the many other members of Millionaires for the Estate Tax. They wish to preserve the very tax that affects them -- the death tax. But it's a cop-out to say, "Oh, if they like it so much, they can just consensually give their own fortunes away without other millionaires being taxed."

Wrong-o! Just the members of Millionaires for the Estate Tax paying their share isn't enough. What we need is for all people with a comparable net worth to pitch in by giving up that much money. And if they're too chickenshit to do it of their own free will, why shouldn't society take their money by force? If somebody doesn't want to Give Back to the Community, then Public Service should kick some sense into him.

If some punk kid is acting like a brat, we applaud it when his parent uses a belt to knock some sense into him. So why shouldn't the government do the same to spoiled-brat multimillionaires that are too selfish to give their money to needier people?

You write, "you know that a filthy landlord can't toss an old lady without abiding by terms of contracts and as walmart has proven, you profit more with cheaper prices that attract the most customers."

Most people would say that Wal-Mart has absolutely not proven that. Wal-Mart is rich because General Eletric and the other corporate media have manufactuctured the consent of Middle America, brainwashing people into believing in the "American Dream" scam and into falsely believing that they consent to living under our materialistic commercialism.

Just because somebody says he "consents to capitalism," it doesn't automatically make it so any more than Patty Hearst consented to the "coercive persuasion" of the Symbionese Liberation Army that kidnapped her. It doesn't make it any more so when the victims of Mao's re-education camp say they have learned to consent to communism.

Likewise, America is one giant re-education camp in which Rupert Murdoch and Michael Eisner have used their corporate media conglomerates to coercively persuade people against their will to refrain from rising up and violently overthrowing the exploitative bastards that run Wal-Mart.

People, left to their natural state, would not necessarily want to buy Wal-Mart's garbage. How do you know that they have not been brainwashed into doing it against their consent? If a wife-beater can brainwash his wife into claiming that she "consents" to his beatings, why can't we suppose that maybe the multinational corporations are using a similar manipulative tactic?

And this is the part where many, many, many University of Hawaii professors would laugh at the suggestion that landlords would have to honor contracts under laissez faire. The UH professor would reply that landlords were never legally required to stick to contracts during the Industrial Revolution. He would say that it was only the tenant who was at the mercy of the landlord, and that the contract was only legally enforced if landlord wanted to invoke it against the tenant.

The UH professor would also add that, even today, people are cheated by contract law because contracts are so full of esoteric fine print that no normal adult has the time to read all of their print. Why, you even sign an online contract when getting a free Microsoft Hotmail account. Do you read all that legalese?

When you finally have a contractual dispute with the big Internet company, the Legalese of the contract you signed can only be invoked against you. Unless you happen to be a corporate lawyer yourself -- in which case, you are part of the multinational corporations' greedy exploitative cabal -- I highly doubt you will be able to invoke the Microsoft-authored contract against Microsoft in a court of law. A normal, sane adult doesn't even understand all that Legalese.

What do you think?

Keep up the excellent debate, Tali-Mon! :-D

 

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