The origin and role of money in the economy is one of the most important lessons we need to learn. A lack of proper understanding often leads to public policies that have disastrous consequences such as hyperinflation or just inflation period.
Money, as Adam Smith put it, is a "medium of exchange". Economists Thomas Sowell and Alan Greenspan both pointed out that even sea shells were used as a form of money. Mr. Sowell explains in his book, Basic Economics, how cigarettes from Red Cross packages were used as money among prisoners in P.O.W camps during World War II. He notes that the least popular brand of cigarettes circulated as money, while the most popular were smoked.
But what makes money, money? First, people with whom you want to trade with have to want to accept it. "Want" being the key word here. If there is ever a mass consensus that the US dollar, for example, is useless, there is little government can do to force people to accept it. That will be especially true on the international market and with foreign governments who hold the Dollar as reserves.
Any form of money has to be tied to what people consider valuable. For Europeans, it was gold; for Samoans, it was the ie toga. Gold, as Mr. Greenspan puts it, has both artistic and functional uses. The ie toga represents honor, history and pride to the Samoan.
The other aspect of money is that it is limited. If there is more gold coins or paper bills or ie togas floating around than there are goods and services in the economy, prices will go up.
The point I want to make is money is whatever most people find valuable and will accept as payment for their property; is limited in supply and ideally represents the amount of products and services being demanded and supplied in an economy.
When we ignore the nature, origin and role of money in an economy is when we start getting into some serious trouble.
Tuesday, October 14, 2008
Monday, March 24, 2008
Thank You Asian Businesses
If every business in American Samoa were Samoan owned, do you know what we would think when any store closed its doors? Most of us would rightly conclude that the enterprise just wasn't any good. It either was in the wrong market, didn't satisfy its customers, couldn't control or account for its costs, couldn't collect on its 'aitalafu', couldn't keep and nurture an effective and educated workforce, or any combination of these and other factors that hurt their bottom line.
But Jim Brittle's letter to the editor, "Facing Reality", asks us to ignore these fundamentals and encourages us to blame business failure simply on Asian businesses.
The fact that competitors in our somewhat free market are of a different race trumps all other considerations as to why a Samoan store owner can or cannot keep his doors open? Mr. Brittle does point to greed, corruption and consumer preference for lower prices (surprise, surprise) as well, but he doesn't explain those points in further detail.
There is no other conclusion one can make from his letter other than that Samoan businesses are failing because of Asian immigrants, and that's it. That sort of reasoning relies on racial phobia, and it is not only an insult to our Asian brothers and sisters but it does a complete disservice to the Samoan community as well.
Samoans can make it in this world. We don't need to be sheltered from competition; we need to learn from the competition. For that, I thank the Asian business community.
But Jim Brittle's letter to the editor, "Facing Reality", asks us to ignore these fundamentals and encourages us to blame business failure simply on Asian businesses.
The fact that competitors in our somewhat free market are of a different race trumps all other considerations as to why a Samoan store owner can or cannot keep his doors open? Mr. Brittle does point to greed, corruption and consumer preference for lower prices (surprise, surprise) as well, but he doesn't explain those points in further detail.
There is no other conclusion one can make from his letter other than that Samoan businesses are failing because of Asian immigrants, and that's it. That sort of reasoning relies on racial phobia, and it is not only an insult to our Asian brothers and sisters but it does a complete disservice to the Samoan community as well.
Samoans can make it in this world. We don't need to be sheltered from competition; we need to learn from the competition. For that, I thank the Asian business community.
Friday, March 14, 2008
Individual vs. the Collective
Savaii P. Amitoelau's guest editorial titled "Faasamoa and Democracy" explains in detail why the Senate's ban on campaign signs wouldn't last a day in court. Sometimes I wonder if our esteemed leaders in the Fono have even read our constitutions, which they swore to uphold and protect. Nevertheless, his editorial touched on a subject that rightly concerns a lot of us, and that is the conflict between individualism and the Samoan culture.
Contrary to popular belief, individualism is not about valuing the individual above everything else. It's not about glorifying or putting the individual before everybody in the world. Individualism is not a question of value; it is a matter of an objective right. You, as an individual, exist and have natural rights that derive from your existence.
Society, on the other hand, doesn't exist in the sense that it's an actual observable object. There is no person by the name of "Society" with whom you or I can talk to. Society has no head, no heart, no blood flowing through the veins.
What people are referring to when they talk about society are different organizations of individuals such as families, villages, churches, schools, businesses, football teams, rugby teams, volleyball teams, etc. "Society" is thus a term that encompasses organizations of individuals. So without the individual, there is no society.
Individuals come together to form these organizations because they get value out of doing so. One finds love, support and guidance in a caring family. In church, a believer joins others in song, praise, worship and prayer. Individuals work together in pursuit of making money in business. In charities, individuals find value in helping other individuals.
When we talk about the eroding of the fa'asamoa or society or our culture, we're talking about the institutions that make them up. If a family doesn't care about their children, if a church bickers more than it worships, if a business incurs losses rather than makes a profit, "society" suffers, our culture erodes.
And what incentive do our institutions have to improve if the attitude is that individuals owe allegiance to them regardless of how crummy the family is, how dysfunctional the church is, or how dissatisfying a business' service or product may be?
Would Coca-Cola be what it is today if the individual did not have the right to choose Pepsi instead? Would the Nintendo Wii be so innovative if it didn't have the Sony Play Station or Microsoft Xbox on its heels? We can find plenty of these comparisons in a free society where individual rights are recognized and protected.
I see individual freedom and rights as the essential building blocks to society. It is more than obligation and duty that most individuals are part of the fa'asamoa; rather, it's the love, pride, tradition, heritage, support, communal relationships and value that we get from it. In my opinion, that is what made our fa'asamoa last so long, and it can only make it stronger.
Contrary to popular belief, individualism is not about valuing the individual above everything else. It's not about glorifying or putting the individual before everybody in the world. Individualism is not a question of value; it is a matter of an objective right. You, as an individual, exist and have natural rights that derive from your existence.
Society, on the other hand, doesn't exist in the sense that it's an actual observable object. There is no person by the name of "Society" with whom you or I can talk to. Society has no head, no heart, no blood flowing through the veins.
What people are referring to when they talk about society are different organizations of individuals such as families, villages, churches, schools, businesses, football teams, rugby teams, volleyball teams, etc. "Society" is thus a term that encompasses organizations of individuals. So without the individual, there is no society.
Individuals come together to form these organizations because they get value out of doing so. One finds love, support and guidance in a caring family. In church, a believer joins others in song, praise, worship and prayer. Individuals work together in pursuit of making money in business. In charities, individuals find value in helping other individuals.
When we talk about the eroding of the fa'asamoa or society or our culture, we're talking about the institutions that make them up. If a family doesn't care about their children, if a church bickers more than it worships, if a business incurs losses rather than makes a profit, "society" suffers, our culture erodes.
And what incentive do our institutions have to improve if the attitude is that individuals owe allegiance to them regardless of how crummy the family is, how dysfunctional the church is, or how dissatisfying a business' service or product may be?
Would Coca-Cola be what it is today if the individual did not have the right to choose Pepsi instead? Would the Nintendo Wii be so innovative if it didn't have the Sony Play Station or Microsoft Xbox on its heels? We can find plenty of these comparisons in a free society where individual rights are recognized and protected.
I see individual freedom and rights as the essential building blocks to society. It is more than obligation and duty that most individuals are part of the fa'asamoa; rather, it's the love, pride, tradition, heritage, support, communal relationships and value that we get from it. In my opinion, that is what made our fa'asamoa last so long, and it can only make it stronger.
Saturday, March 01, 2008
FCC Petition
If it is Larry Fuss' intention to prevent fraud (as in false advertising by cell phone companies) or to obtain remedy for injury suffered due to fraud, then I agree with him. The proper role of government is to enforce contracts, and as a colleague of mine pointed out, fraud is a premeditated breach of contract. But Mr. Fuss' petition is not about addressing fraud; it is about forcing cell phone companies to apply their domestic long distance rates to American Samoa , which is not the proper role of government.
The only reasons that Mr. Fuss offers up as justification for all of this are that American Samoa is now part of NANP and that the FCC has succeeded in mandating domestic rates on landlines. I would think a lot of factors came into play as to why the FCC left cell phone companies out from their original mandate on domestic rates and as to why cell phone companies are willing to apply their domestic rates to Puerto Rico, Guam and the US Virgin Islands but not to American Samoa.
Are the markets more profitable in those territories compared to our own? Is it because we don't have fiber optic cable? Is it because communication through satellite is cost prohibitive? How do wireless transaction costs compare to landlines? Is it more expensive? Has ASTCA invested in the necessary infrastructure to support the integration of cell phone companies' domestic rate schedule? Are these questions even significant? I'm no telecommunications expert, but I'm inclined to believe that the free market is in the best position to answer these kind of questions.
Mr. Fuss did an excellent job of ripping into my hyperbole where I exaggerated the need for the FCC to investigate radio advertising in American Samoa. I'll take his word that "the cost per listener on radio stations in American Samoa is much lower than that charged on the mainland", although I wished he provided us with some figures or references. The point I was trying to make was that it's pretty much in the "left field" that this kind of stuff is even brought up for discussion in the first place.
Why should businesses have to justify their costs to some bureaucrat in the FCC or to the public before they can price their property?
The only reasons that Mr. Fuss offers up as justification for all of this are that American Samoa is now part of NANP and that the FCC has succeeded in mandating domestic rates on landlines. I would think a lot of factors came into play as to why the FCC left cell phone companies out from their original mandate on domestic rates and as to why cell phone companies are willing to apply their domestic rates to Puerto Rico, Guam and the US Virgin Islands but not to American Samoa.
Are the markets more profitable in those territories compared to our own? Is it because we don't have fiber optic cable? Is it because communication through satellite is cost prohibitive? How do wireless transaction costs compare to landlines? Is it more expensive? Has ASTCA invested in the necessary infrastructure to support the integration of cell phone companies' domestic rate schedule? Are these questions even significant? I'm no telecommunications expert, but I'm inclined to believe that the free market is in the best position to answer these kind of questions.
Mr. Fuss did an excellent job of ripping into my hyperbole where I exaggerated the need for the FCC to investigate radio advertising in American Samoa. I'll take his word that "the cost per listener on radio stations in American Samoa is much lower than that charged on the mainland", although I wished he provided us with some figures or references. The point I was trying to make was that it's pretty much in the "left field" that this kind of stuff is even brought up for discussion in the first place.
Why should businesses have to justify their costs to some bureaucrat in the FCC or to the public before they can price their property?
Monday, February 25, 2008
Opposition to FCC Petition
( Below is my written testimony to the FCC concerning a petition submitted by South Seas Broadcasting Inc. to mandate that cell phone companies apply their domestic long distance rates to American Samoa.)
I'm not going to pretend that I'm a telecommunications expert, but I believe a few basic assumptions apply to market prices of cell phone calls to our territory. I assume the market is open to anyone to provide services. I also assume that one makes the most money by having the largest consumer base as possible. If my assumptions are wrong, please explain to me why.
Competition and the profit motive drive prices down, so why do we have this FCC petition to force cell phone companies to apply domestic rates to our territory?
Is it because we're Americans too? Is that the standard for setting prices? Your ethnicity, race, or nationality?
Is it because cell phone companies and their stockholders are "greedy"? When I think of that word, I imagine savage cavemen with clubs drooling at the mouths over piles of cash. Or fat men slobbering and chomping down on a chicken drumstick laughing all the way to the bank.
Instead, what you're likely to see at cell phone companies are professional men and women working hard and being accountable to their customers. They are fathers, mothers, members of the community. Their stockholders are also likely to be hard working people putting in their life savings through 401k's to earn the highest returns possible for retirement. The word "greedy", however, wipes that all away.
Who knows, maybe our oft-raided ASG Retirement Fund is invested in these companies? Surely, our retirees want the most profitable return as possible on their - I'm sorry - the Fono's money.
Or is it just perhaps that our markets are different?
I got an idea. An ad rate at KABC-AM in Los Angeles is $1083 for a 30- second spot. Pretty expensive, yeah? But consider this: the population in L.A. is close to 10 million people (2006 est.). That's 0.0001083 cents per potential customer. Let's say radio advertising in American Samoa goes for $100 for a 30-second spot. Pretty cheap compared to L.A.? But for 60,000 potential customers, that's 0.00166667 per potential customer. That's 15 times more than what they're charging in the mainland. That's price-gouging!
If anything, the FCC should look into the pricing practices of radio stations in American Samoa. And why stop there? We're a democracy where the majority rules. Anything and everything is up for a vote. Individual rights don't exist, and you definitely don't have the right to price your property as you see fit.
If the FCC doesn't uphold individual rights then perhaps its license should be revoked.
I'm not going to pretend that I'm a telecommunications expert, but I believe a few basic assumptions apply to market prices of cell phone calls to our territory. I assume the market is open to anyone to provide services. I also assume that one makes the most money by having the largest consumer base as possible. If my assumptions are wrong, please explain to me why.
Competition and the profit motive drive prices down, so why do we have this FCC petition to force cell phone companies to apply domestic rates to our territory?
Is it because we're Americans too? Is that the standard for setting prices? Your ethnicity, race, or nationality?
Is it because cell phone companies and their stockholders are "greedy"? When I think of that word, I imagine savage cavemen with clubs drooling at the mouths over piles of cash. Or fat men slobbering and chomping down on a chicken drumstick laughing all the way to the bank.
Instead, what you're likely to see at cell phone companies are professional men and women working hard and being accountable to their customers. They are fathers, mothers, members of the community. Their stockholders are also likely to be hard working people putting in their life savings through 401k's to earn the highest returns possible for retirement. The word "greedy", however, wipes that all away.
Who knows, maybe our oft-raided ASG Retirement Fund is invested in these companies? Surely, our retirees want the most profitable return as possible on their - I'm sorry - the Fono's money.
Or is it just perhaps that our markets are different?
I got an idea. An ad rate at KABC-AM in Los Angeles is $1083 for a 30- second spot. Pretty expensive, yeah? But consider this: the population in L.A. is close to 10 million people (2006 est.). That's 0.0001083 cents per potential customer. Let's say radio advertising in American Samoa goes for $100 for a 30-second spot. Pretty cheap compared to L.A.? But for 60,000 potential customers, that's 0.00166667 per potential customer. That's 15 times more than what they're charging in the mainland. That's price-gouging!
If anything, the FCC should look into the pricing practices of radio stations in American Samoa. And why stop there? We're a democracy where the majority rules. Anything and everything is up for a vote. Individual rights don't exist, and you definitely don't have the right to price your property as you see fit.
If the FCC doesn't uphold individual rights then perhaps its license should be revoked.
Tuesday, December 11, 2007
Economics in 8 1/2 Minutes
This video is entitled "This Is John Galt Speaking..., Pt. 10,", alluding to a speech given by the character John Galt in the novel Atlas Shrugged.
This video is made by "XCowboy2," a.k.a., Richard Gleaves.
You can learn more about economic principles from this video than you can in many college economics classes.
This video is made by "XCowboy2," a.k.a., Richard Gleaves.
You can learn more about economic principles from this video than you can in many college economics classes.
Saturday, December 01, 2007
Evil is the Root of Evil
I grew up hearing that “money is the root of all evil.” If only there were no dollar signs, people wouldn’t murder, wouldn’t steal, wouldn’t commit fraud and wouldn’t cheat their way to success. What a lie! If anything, money has made these things easier to do as it has with everyday activities in the marketplace. Whether we have money or not, a stealer will steal and a murderer will murder.
If the notion that money is evil was simply an innocent mistake on the part of its adherents than that “sin” could be forgivable. However, it appears some push this baseless slogan as a way of disarming people of ownership over their property, over their money. What better way to take what you have not earned than to make those who have earned it feel guilty about owning it in the first place.
You have not stolen anything in the private sector as long as the market is open to anyone who can offer a lower price or better quality. If someone says you charge too much, then please tell that person to open up a shop and show us how to charge a lower price.
Defend your keep that you have earned through an honest day of hard work. To feel guilty for a sin that you have not committed is the greatest evil of them all.
If the notion that money is evil was simply an innocent mistake on the part of its adherents than that “sin” could be forgivable. However, it appears some push this baseless slogan as a way of disarming people of ownership over their property, over their money. What better way to take what you have not earned than to make those who have earned it feel guilty about owning it in the first place.
You have not stolen anything in the private sector as long as the market is open to anyone who can offer a lower price or better quality. If someone says you charge too much, then please tell that person to open up a shop and show us how to charge a lower price.
Defend your keep that you have earned through an honest day of hard work. To feel guilty for a sin that you have not committed is the greatest evil of them all.
Friday, September 21, 2007
Goodbye Apathy
In The Matrix, Morpheus advised, "Free your mind."
One way to do that is to read an excellent book like this one.
Here is a video made by Casey Smith.
Aside from the satire about scholarships, the film doesn't have much in the way of political-economic commentary. However, it points the viewer toward something full of insight about society.
One way to do that is to read an excellent book like this one.
Here is a video made by Casey Smith.
Aside from the satire about scholarships, the film doesn't have much in the way of political-economic commentary. However, it points the viewer toward something full of insight about society.
Friday, February 02, 2007
My One Complaint About 'Atlas Shrugged'
Stuart K. Hayashi
Note: Another version of this previously appeared in The Fiftieth Star. See here. --S.H.
February 2, 2007, marks 102 years to the day of Ayn Rand's birth. That day of the month is of particular importance in American culture because, every February 2, if a politician crawls out of his hole and sees his shadow, we will have 60 more years of the welfare state.
As for Miss Rand's magnum opus, I enjoyed every syllable on each of the 1,087 pages of the paperback edition I read. The prose sparked vivid images that made me feel as if I were gazing upon an exquisite painting.
I was so enthralled by the grandeur of it all that I was quite sad to see it eventually come to an end.
And so I have only one complaint about Atlas Shrugged:
It was too short.
Note: Another version of this previously appeared in The Fiftieth Star. See here. --S.H.
February 2, 2007, marks 102 years to the day of Ayn Rand's birth. That day of the month is of particular importance in American culture because, every February 2, if a politician crawls out of his hole and sees his shadow, we will have 60 more years of the welfare state.
As for Miss Rand's magnum opus, I enjoyed every syllable on each of the 1,087 pages of the paperback edition I read. The prose sparked vivid images that made me feel as if I were gazing upon an exquisite painting.
I was so enthralled by the grandeur of it all that I was quite sad to see it eventually come to an end.
And so I have only one complaint about Atlas Shrugged:
It was too short.
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.
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.
Saturday, March 18, 2006
Economies of Scale
If you own a business that sells lemonade, you may charge $10 for one cup. Ten dollars, yeah right! Yet you may want to charge that much if you only had one customer, because you need $10 to pay for the lemons, the water, the pitcher, the spoons, the cups and the overhead. Luckily, a lot of people like lemonade that you can spread your costs on more than one consumer.
You understand that although you have the right to charge $10 for each cup of lemonade you make, you can make more money selling 100 cups for $1 a cup than one cup for $10. Plus, if you could get away with selling a cup of lemonade for $10 than I might just open a stand to undercut your ridiculous price. This is how the profit-motive and open competition set real, fair and moral prices in the marketplace.
What if there is a lemon celebration held one month out of the year? Obviously, you would expect to have more customers for that month, but you know that after the celebration, it will be business as usual. The rise in demand is only temporary, so instead of wasting money on buying more pitchers and spoons and opening more stands, it’s better to just raise the price. The last thing you want to do is buy more capital that you will not use after interest in lemons goes away. Unused capital just adds to the overhead.
But what if interest in lemons continues beyond that one month out of the year? Now you have the potential to sell more than 100 cups. By analyzing the market enough, you find that you can sell 1000 cups for $0.50 (50 cents) a cup. So you figure you can only produce a 1000 cups of lemonade by buying more pitchers and spoons and opening more stands. You make more money selling 1000 cups for $0.50 each than 100 cups for $1 each.
This proven economic model explains a couple of things for us. Peak times, like summertime for air travel or hurricane seasons for batteries, are only temporary rises in demand in those markets. Businesses know their markets enough to know when demand is temporary and when it is not. Like with the lemonade owner, businesses are not stupid to buy more capital in an attempt to meet a demand that will just disappear in no time.
Therefore, a higher demand in the short-run raises prices while a higher demand in the long-run lowers prices when there is an economies of scale, which is the lowering of average costs over more units sold.
Economies of scale also explains why Hawaiian Airlines charges different prices between different ports. There are more people traveling between Honolulu and California than there are between Honolulu and American Samoa. Thus, HAL profits more from its lower priced tickets to California than its higher priced tickets to American Samoa.
Yet HAL needs a competitor. But after deregulation of the US airline industry, spoiled American companies have not been able to adapt to life without welfare support. American Samoa is going to need a foreign competitor servicing its people, but we’re going to need a declaration of independence from US cabotage laws and the Jones Act that prohibit such competition.
Where is Togiola, Faleomavaega and Moliga on the Jones Act? If they can’t get us an exemption, then we should lay the blame for the high prices of our roundtrip tickets where it belongs -- at the feet of big government.
You understand that although you have the right to charge $10 for each cup of lemonade you make, you can make more money selling 100 cups for $1 a cup than one cup for $10. Plus, if you could get away with selling a cup of lemonade for $10 than I might just open a stand to undercut your ridiculous price. This is how the profit-motive and open competition set real, fair and moral prices in the marketplace.
What if there is a lemon celebration held one month out of the year? Obviously, you would expect to have more customers for that month, but you know that after the celebration, it will be business as usual. The rise in demand is only temporary, so instead of wasting money on buying more pitchers and spoons and opening more stands, it’s better to just raise the price. The last thing you want to do is buy more capital that you will not use after interest in lemons goes away. Unused capital just adds to the overhead.
But what if interest in lemons continues beyond that one month out of the year? Now you have the potential to sell more than 100 cups. By analyzing the market enough, you find that you can sell 1000 cups for $0.50 (50 cents) a cup. So you figure you can only produce a 1000 cups of lemonade by buying more pitchers and spoons and opening more stands. You make more money selling 1000 cups for $0.50 each than 100 cups for $1 each.
This proven economic model explains a couple of things for us. Peak times, like summertime for air travel or hurricane seasons for batteries, are only temporary rises in demand in those markets. Businesses know their markets enough to know when demand is temporary and when it is not. Like with the lemonade owner, businesses are not stupid to buy more capital in an attempt to meet a demand that will just disappear in no time.
Therefore, a higher demand in the short-run raises prices while a higher demand in the long-run lowers prices when there is an economies of scale, which is the lowering of average costs over more units sold.
Economies of scale also explains why Hawaiian Airlines charges different prices between different ports. There are more people traveling between Honolulu and California than there are between Honolulu and American Samoa. Thus, HAL profits more from its lower priced tickets to California than its higher priced tickets to American Samoa.
Yet HAL needs a competitor. But after deregulation of the US airline industry, spoiled American companies have not been able to adapt to life without welfare support. American Samoa is going to need a foreign competitor servicing its people, but we’re going to need a declaration of independence from US cabotage laws and the Jones Act that prohibit such competition.
Where is Togiola, Faleomavaega and Moliga on the Jones Act? If they can’t get us an exemption, then we should lay the blame for the high prices of our roundtrip tickets where it belongs -- at the feet of big government.
Saturday, January 07, 2006
Blue Sky: the Sacrificial Lamb
I admit that my last letter (BYE BYE BLUE SKY) was overtly sarcastic, but everyone concerned should rest assured that the target of my sarcasm was not Blue Sky Corporation but the ASG. Thanks to Nancy (MISSED THE POINT) for helping to clarify, but I think it’s necessary to state more directly the essence of my last letter.
The $10 million LBJ loan puts Blue Sky at precarious odds with public sentiment. Public employees’ retirement checks are at stake. In the minds of many people, Blue Sky is not only an “enemy” of ASTCA, but also of LBJ and retirees. And all Blue Sky wants to do is make an honest buck servicing telecommunication consumers.
Government intervention, elaborate schemes and their plotters have gone too far this time around.
ASTCA has to beat $10 million plus 8% interest out of Blue Sky. ASTCA can do so in one of two ways: the moral way or the immoral way.
First, the moral way: Through its own efforts, ingenuity, creativity, productivity, efficiency and reliability lower its own costs and provide superior customer service, cooler products and lower prices.
The immoral way: Whine for federal and local funds and taxes to pay for their costs, borrow tax money from other government programs, use tax money to advertise, and/or lobby the ASG to do something about Blue Sky Corporation.
And the ASG has options: price controls, quotas, and meaningless regulations and licensing requirements. I wouldn’t be surprised if they’re sharpening their pens right this moment. I’m afraid ASTCA will settle for immorality.
My sincere hope is that Blue Sky Corporation continues to do what it does best. I hope they feel no qualms about lowering their prices or providing cooler cell phones or better customer service than ASTCA. I hope they maximize profits so that others would want to compete as well.
My sincere hope is that this whole redistribution scheme blows up in the government’s face. The ASG could have found money for LBJ by selling its government-owned boat (MV Sili for $4 million), selling the Governor’s airplane (Sega’ula for $500,000), not donating our $200,000 for Katrina relief efforts, selling its shares in the Rainmaker Hotel, recalling all its questionable DBAS loans, selling the jungle of a golf course, privatizing all public parks, and resisting increases in Fono allowances.
Instead of making its own sacrifices, the ASG decided to sacrifice Blue Sky.
The $10 million LBJ loan puts Blue Sky at precarious odds with public sentiment. Public employees’ retirement checks are at stake. In the minds of many people, Blue Sky is not only an “enemy” of ASTCA, but also of LBJ and retirees. And all Blue Sky wants to do is make an honest buck servicing telecommunication consumers.
Government intervention, elaborate schemes and their plotters have gone too far this time around.
ASTCA has to beat $10 million plus 8% interest out of Blue Sky. ASTCA can do so in one of two ways: the moral way or the immoral way.
First, the moral way: Through its own efforts, ingenuity, creativity, productivity, efficiency and reliability lower its own costs and provide superior customer service, cooler products and lower prices.
The immoral way: Whine for federal and local funds and taxes to pay for their costs, borrow tax money from other government programs, use tax money to advertise, and/or lobby the ASG to do something about Blue Sky Corporation.
And the ASG has options: price controls, quotas, and meaningless regulations and licensing requirements. I wouldn’t be surprised if they’re sharpening their pens right this moment. I’m afraid ASTCA will settle for immorality.
My sincere hope is that Blue Sky Corporation continues to do what it does best. I hope they feel no qualms about lowering their prices or providing cooler cell phones or better customer service than ASTCA. I hope they maximize profits so that others would want to compete as well.
My sincere hope is that this whole redistribution scheme blows up in the government’s face. The ASG could have found money for LBJ by selling its government-owned boat (MV Sili for $4 million), selling the Governor’s airplane (Sega’ula for $500,000), not donating our $200,000 for Katrina relief efforts, selling its shares in the Rainmaker Hotel, recalling all its questionable DBAS loans, selling the jungle of a golf course, privatizing all public parks, and resisting increases in Fono allowances.
Instead of making its own sacrifices, the ASG decided to sacrifice Blue Sky.
Friday, December 30, 2005
Bye Bye Blue Sky
Dear Blue Sky,
Thank you for your great service to the people of American Samoa with your cool cell phones, competitive prices and neat promotions. But I like to save the ASG, Governor Togiola and the Fono the trouble and ask you to cease and desist with your operations. To tell you the truth, we don’t want you anymore.
See, with you around, the danger of the ASTCA not repaying the $10 million LBJ loan is great. We do not want to pay for the actual costs of healthcare individually. We want our telecommunication consumers and retirees to pay for it in our elaborate redistribution scheme. American taxpayers are starting to refuse to pick up the tab this time around and are actually demanding accountability. They’re horrible, cruel and mean for doing so, and so it’s time to steal from somebody else.
Living life without being personally financially responsible for the costs of healthcare has been good to us. We don’t have to watch our weight, exercise and eat healthy to avoid such health problems that plague our society today. What is responsibility anyway? Plus, we can't ever imagine giving up spending money on alcohol, cigarettes, SUVs, and other luxuries and pass-time favorites before paying for healthcare ourselves.
Yeah, and we really don’t want to pool our money together because some say we’re just too stupid to account for it on our own. We can’t learn by trial and error, and market incentives and economic principles don’t apply in our territory. Some people also suggest charity, but who really does that? Our politicians don’t do it, but they sure are pretty generous with other people’s money.
No one really cares to help his or her neighbor voluntarily and everyone should be spared from the embarrassment of asking for a helping hand. Hell, we even made it illegal to stand alongside the road and ask for money.
Nope, people should be forced to give because their property doesn’t belong to them. You have no right to your property. It belongs to the good of society and to the will of the majority.
If it wasn’t for that damn constitution, we could vote your competitive business off our island tomorrow. As a result, we’re going to have to work around it.
If you start to lower prices to attract more customers away from your government competitor, we will pass a law to set fair market prices for you and your customers. If that doesn’t work, and consumers still freely choose your company over the government, we will vote in a quota system and limit the number of cell phones you can sell. If you’re still around, we’ll bury you underneath a 1000 pages worth of regulations and complicate your life with ridiculous licensing requirements.
We just can’t thank you enough for being silent on this issue, Blue Sky. It’s easy to sacrifice the lamb when it’s not squealing to stay alive.
Thank you for your great service to the people of American Samoa with your cool cell phones, competitive prices and neat promotions. But I like to save the ASG, Governor Togiola and the Fono the trouble and ask you to cease and desist with your operations. To tell you the truth, we don’t want you anymore.
See, with you around, the danger of the ASTCA not repaying the $10 million LBJ loan is great. We do not want to pay for the actual costs of healthcare individually. We want our telecommunication consumers and retirees to pay for it in our elaborate redistribution scheme. American taxpayers are starting to refuse to pick up the tab this time around and are actually demanding accountability. They’re horrible, cruel and mean for doing so, and so it’s time to steal from somebody else.
Living life without being personally financially responsible for the costs of healthcare has been good to us. We don’t have to watch our weight, exercise and eat healthy to avoid such health problems that plague our society today. What is responsibility anyway? Plus, we can't ever imagine giving up spending money on alcohol, cigarettes, SUVs, and other luxuries and pass-time favorites before paying for healthcare ourselves.
Yeah, and we really don’t want to pool our money together because some say we’re just too stupid to account for it on our own. We can’t learn by trial and error, and market incentives and economic principles don’t apply in our territory. Some people also suggest charity, but who really does that? Our politicians don’t do it, but they sure are pretty generous with other people’s money.
No one really cares to help his or her neighbor voluntarily and everyone should be spared from the embarrassment of asking for a helping hand. Hell, we even made it illegal to stand alongside the road and ask for money.
Nope, people should be forced to give because their property doesn’t belong to them. You have no right to your property. It belongs to the good of society and to the will of the majority.
If it wasn’t for that damn constitution, we could vote your competitive business off our island tomorrow. As a result, we’re going to have to work around it.
If you start to lower prices to attract more customers away from your government competitor, we will pass a law to set fair market prices for you and your customers. If that doesn’t work, and consumers still freely choose your company over the government, we will vote in a quota system and limit the number of cell phones you can sell. If you’re still around, we’ll bury you underneath a 1000 pages worth of regulations and complicate your life with ridiculous licensing requirements.
We just can’t thank you enough for being silent on this issue, Blue Sky. It’s easy to sacrifice the lamb when it’s not squealing to stay alive.
Sunday, July 17, 2005
Public Employees Profit And So Does The Governor
Officials in the ASG have been spitting out a lot of rhetoric about the evils of profit and money. It’s very typical of politicians to take the moral high ground when it comes to this subject. However, we should always question their integrity whenever they criminalize moneymaking activities.
Togiola says we need a government airline because “airlines are only looking for profit and gain.” So our governor is implying that neither he nor public employees look out for profit and gain, and so travel services are better off in their hands rather than in those of greedy entrepreneurs.
But what does it mean to profit? Profit is the money one makes after paying for his costs. A businessperson profits after he makes enough money to pay his employees, rent, utilities and other expenses. How about public employees and the governor, do they profit in a similar fashion?
It turns out that they do! Public employees and the governor do not work for free nor do they break even. They need to make more money than it costs them to pay for breakfast, drive to work, catch the bus, eat lunch and all the other expenses they incur to complete their work day. What they make in excess of their daily costs is their profit!
And if public employees were not trying to increase their profits, then why do they keep asking for pay raises?
Profit entices entrepreneurs to do things at the lowest cost available. The lower their costs, the higher their profits. Non-profit and government agencies do not have the incentive of lowering costs because they can always raise taxes and do not face competition. Accountability is not sought unless someone kicks them in the butt (FBI, DOI, GAO, etc.).
It is not common for the spirit of charity to be lost on profit seeking individuals. Many successful people and organizations find value in giving away their money to causes they care about. In his book, The Enterprise of Education, James Tooley notes, “The ‘cost per achievement point’ in the private unaided schools (in India) is less than half that in the government schools (in India).” He also goes on to say, “Impressively, the great majority of the (private unaided) schools offer significant number of free places – up to 20 percent – for the poorest students, allocated on the basis claims of need checked informally in the community.”
For-profit schools doing better than public schools and even providing free seats for the poorest of poor. Wow. I bet you won't hear that from a politician.
Togiola should put the blame for the lack of airline competition where it belongs: the Jones Act (Merchant Marine Act of 1920). This federal law prohibits foreign carriers from operating between two U.S. ports, and that is why Hawaiian Airlines is our sole provider. But considering our racism and anti-immigration stance, perhaps foreign airlines shouldn’t even bother with blessing us with their for-profit business.
Togiola says we need a government airline because “airlines are only looking for profit and gain.” So our governor is implying that neither he nor public employees look out for profit and gain, and so travel services are better off in their hands rather than in those of greedy entrepreneurs.
But what does it mean to profit? Profit is the money one makes after paying for his costs. A businessperson profits after he makes enough money to pay his employees, rent, utilities and other expenses. How about public employees and the governor, do they profit in a similar fashion?
It turns out that they do! Public employees and the governor do not work for free nor do they break even. They need to make more money than it costs them to pay for breakfast, drive to work, catch the bus, eat lunch and all the other expenses they incur to complete their work day. What they make in excess of their daily costs is their profit!
And if public employees were not trying to increase their profits, then why do they keep asking for pay raises?
Profit entices entrepreneurs to do things at the lowest cost available. The lower their costs, the higher their profits. Non-profit and government agencies do not have the incentive of lowering costs because they can always raise taxes and do not face competition. Accountability is not sought unless someone kicks them in the butt (FBI, DOI, GAO, etc.).
It is not common for the spirit of charity to be lost on profit seeking individuals. Many successful people and organizations find value in giving away their money to causes they care about. In his book, The Enterprise of Education, James Tooley notes, “The ‘cost per achievement point’ in the private unaided schools (in India) is less than half that in the government schools (in India).” He also goes on to say, “Impressively, the great majority of the (private unaided) schools offer significant number of free places – up to 20 percent – for the poorest students, allocated on the basis claims of need checked informally in the community.”
For-profit schools doing better than public schools and even providing free seats for the poorest of poor. Wow. I bet you won't hear that from a politician.
Togiola should put the blame for the lack of airline competition where it belongs: the Jones Act (Merchant Marine Act of 1920). This federal law prohibits foreign carriers from operating between two U.S. ports, and that is why Hawaiian Airlines is our sole provider. But considering our racism and anti-immigration stance, perhaps foreign airlines shouldn’t even bother with blessing us with their for-profit business.
Saturday, July 09, 2005
Minimum Wage Scam
After employee representatives Bridget Martin and Jeff Turkus advocated a living wage during the minimum wage hearings, one must ask whose interest they are really looking after. It is very tempting to believe that such a law is in our best interest, and that we should honor these two men for being our heroes in shining armor.
Between 1996 and 2002, 82 cities and counties in the United States enacted living-wage laws. Such wages ranged from $7.00 to more than $13.00 an hour. Economist Jeffrey M. Perloff stated, " Consequently, these laws may lower the quantity of labor demanded for the employees of covered firms because uncovered firms (including businesses from nearby cities) can hire labor at lower wages."
Competition between different communities is exactly why the U.S. Congress imposed the federal minimum wage. Representatives from several states would loathe the fact that other states would have lower wages for the same type of work. Thus, a high-wage state would lose jobs to low-wage states. The late Murray Rothbard, an economist with Ludwig von Mises Institute, noted, “During the 1966 Congressional battle over a higher federal minimum wage, the late Senator Jacob Javits freely admitted that one of his main reasons for supporting the bill was to cripple the southern competitors of New York textile firms.”
Another economist, a Nobel laureate, the late Gunnar Myrdal, stated in his book, An American Dilemma, that the 1930’s minimum wage law had hurt African Americans the most. Since blacks were willing to work in conditions and for pay not favorable to most whites, employers ignored their racism and prejudice to employ black workers. As soon as the government forced wages up, employers had no incentive to ignore their bias. We should thank the government for encouraging discrimination with its intervention into the marketplace.
It seems clear to me that Mr. Martin and Mr. Turkus are looking after their own interests and not ours. We would be accused of the same if we tried to impose our minimum wage laws on countries with whom we compete. Do we care about their poor? Hell no. What we care about is that their low wages may take our jobs away from us one day. Using the same logic, is Mr. Martin and Mr. Turkus trying to get us to raise our wages so that less jobs would migrate from the mainland and Hawaii to American Samoa?
Who’s being immoral here?
Jobs don’t create themselves. Workers don’t create their own jobs either. Entrepreneurs, who organize everything, put up the capital and take the risk, create jobs. StarKist creates jobs. McDonalds creates jobs. Local and foreign businesses create jobs. Employee representatives and politicians do not.
The most moral way to set wages is through negotiation between employees (unions) and employers without state interference.
Between 1996 and 2002, 82 cities and counties in the United States enacted living-wage laws. Such wages ranged from $7.00 to more than $13.00 an hour. Economist Jeffrey M. Perloff stated, " Consequently, these laws may lower the quantity of labor demanded for the employees of covered firms because uncovered firms (including businesses from nearby cities) can hire labor at lower wages."
Competition between different communities is exactly why the U.S. Congress imposed the federal minimum wage. Representatives from several states would loathe the fact that other states would have lower wages for the same type of work. Thus, a high-wage state would lose jobs to low-wage states. The late Murray Rothbard, an economist with Ludwig von Mises Institute, noted, “During the 1966 Congressional battle over a higher federal minimum wage, the late Senator Jacob Javits freely admitted that one of his main reasons for supporting the bill was to cripple the southern competitors of New York textile firms.”
Another economist, a Nobel laureate, the late Gunnar Myrdal, stated in his book, An American Dilemma, that the 1930’s minimum wage law had hurt African Americans the most. Since blacks were willing to work in conditions and for pay not favorable to most whites, employers ignored their racism and prejudice to employ black workers. As soon as the government forced wages up, employers had no incentive to ignore their bias. We should thank the government for encouraging discrimination with its intervention into the marketplace.
It seems clear to me that Mr. Martin and Mr. Turkus are looking after their own interests and not ours. We would be accused of the same if we tried to impose our minimum wage laws on countries with whom we compete. Do we care about their poor? Hell no. What we care about is that their low wages may take our jobs away from us one day. Using the same logic, is Mr. Martin and Mr. Turkus trying to get us to raise our wages so that less jobs would migrate from the mainland and Hawaii to American Samoa?
Who’s being immoral here?
Jobs don’t create themselves. Workers don’t create their own jobs either. Entrepreneurs, who organize everything, put up the capital and take the risk, create jobs. StarKist creates jobs. McDonalds creates jobs. Local and foreign businesses create jobs. Employee representatives and politicians do not.
The most moral way to set wages is through negotiation between employees (unions) and employers without state interference.
Monday, July 04, 2005
Celebrating One's Independence Day
Today, on July 4, 2005, many will be celebrating the birth of a country. Today, I ask that you celebrate the birth of the recognition and protection of the individual. Countries come and go, empires rise and fall, but on July 4, 1776, our forefathers enshrined individual rights in the Declaration of Independence. On July 4, 1776, government was instituted among Men, not above Men.
Tonight, pop off a firework in honor of yourself. If anyone asks why you are so self-serving, just say, “I ask not what my country can do for me, but I ask what I can do to take care of myself and my love ones so that the rest of country doesn’t have to.” Now that’s real independence.
Go out and enjoy it, celebrate it, be unashamed of it and fight to protect it.
Happy Birthday good old U.S. of A.
Tonight, pop off a firework in honor of yourself. If anyone asks why you are so self-serving, just say, “I ask not what my country can do for me, but I ask what I can do to take care of myself and my love ones so that the rest of country doesn’t have to.” Now that’s real independence.
Go out and enjoy it, celebrate it, be unashamed of it and fight to protect it.
Happy Birthday good old U.S. of A.
Monday, April 11, 2005
Hard Times
I’ve experienced one of the hardest times of my life a few days ago when I was talking to my brother about less employment opportunities in American Samoa due to increasing foreign competition. He is finding that it is becoming harder to find jobs in the restaurant industry seeing that immigrants are taking more of them up and foreign establishments are becoming increasingly competitive. It was hard for me to tell him that his pain and his struggle are necessary for him and our island country to become better.
I tried to use an analogy to explain to him why I believe that statement to be the truth. In American Samoa, not too many people know how to fish anymore or they don’t depend on fishing as much as in the past. Fishing was considered an expertise, and families and villages had tufuga in this capacity as well. Though our tufuga were not employed in the modern sense of the term, their value and worth to the community were continually chipped away by local grocery stores and imports. Some abandoned the practice all together.
As sad as this may seem, the implications of this so-called tragedy have improved our lives over the years. Even though families could have relied on members to provide fish free, they continued to find it more convenient to buy fish at retail stores. We rather give up money to buy fish than go fish on our own. We save our families time to do more important, more productive things. If we had passed laws banning imports or the sale of fish at stores, then obviously we would have more fishermen today and fewer teachers, cops, governors and the like.
It’s hard for people to do this, but we have to apply this logic to every job out there. If imports or foreigners find a way to provide products and services more cheaply, effectively and efficiently, then this saves Samoans time and money to improve in other areas. This is where protectionists come in and say, “We don’t have no resources or any more room to advance.” I’m glad these protectionists where not around when Thomas Edison invented the light bulb. I’m glad these protectionists where not around when someone invented silicon out of useless sand. I’m glad these protectionists were not around to whisper their rhetoric into the ears of our many great achievers; we may have less of them today.
Politicians love to use slogans such as, “The sky’s the limit,” or, “You can achieve anything you put your mind to,” all the while paying lip service to those truths. I believe in my brother and my Samoan people to do better and become better, and that was the only thing that was not hard for me to tell him.
I tried to use an analogy to explain to him why I believe that statement to be the truth. In American Samoa, not too many people know how to fish anymore or they don’t depend on fishing as much as in the past. Fishing was considered an expertise, and families and villages had tufuga in this capacity as well. Though our tufuga were not employed in the modern sense of the term, their value and worth to the community were continually chipped away by local grocery stores and imports. Some abandoned the practice all together.
As sad as this may seem, the implications of this so-called tragedy have improved our lives over the years. Even though families could have relied on members to provide fish free, they continued to find it more convenient to buy fish at retail stores. We rather give up money to buy fish than go fish on our own. We save our families time to do more important, more productive things. If we had passed laws banning imports or the sale of fish at stores, then obviously we would have more fishermen today and fewer teachers, cops, governors and the like.
It’s hard for people to do this, but we have to apply this logic to every job out there. If imports or foreigners find a way to provide products and services more cheaply, effectively and efficiently, then this saves Samoans time and money to improve in other areas. This is where protectionists come in and say, “We don’t have no resources or any more room to advance.” I’m glad these protectionists where not around when Thomas Edison invented the light bulb. I’m glad these protectionists where not around when someone invented silicon out of useless sand. I’m glad these protectionists were not around to whisper their rhetoric into the ears of our many great achievers; we may have less of them today.
Politicians love to use slogans such as, “The sky’s the limit,” or, “You can achieve anything you put your mind to,” all the while paying lip service to those truths. I believe in my brother and my Samoan people to do better and become better, and that was the only thing that was not hard for me to tell him.
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