Thursday, November 29, 2012

The U.S. is the OPEC of Sugar-OSEC

Don Boudreaux calls out Florida congressman Tom Rooney (R-FL) for arguing both for and against free trade.

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Monday, November 26, 2012

Are We Better Off With GM Still Alive?

Depends on who "we" is. 

From the perspective of a benevolent dictator that is responsible for maximizing the happiness of all citizens the answer is fairly obvious: no.

If I am someone concerned with the happiness of manufacturing employees and am ok with establishing anti-market, anti-competitive, and extremely inefficient policies, then the answer is less obvious: I don't know, depends on what you can do for me.

A friend recently pointed out the upside of the GM bailout. "...instead of getting rid of tons of their employees when technology revolutionized manufacturing, they actually helped them."  The term "they" in this context refers to the architects of TARP, a program initially aimed at financial institutions but was expanded to include GM and perhaps other companies.  

A basic economics course hammers home to students the importance of acknowledging that society faces tradeoffs whenever a decision is made concerning economic policy.  What was the tradeoff with the GM bailout?  

Gains: GM workers benefited.  Their pensions, healthcare, salaries, etc were maintained.  Also, the country didn't have to worry about selling off GM brands to other companies in order to keep beloved brands alive.  You could also argue (though most economists won't) that it's great to keep low-level manufacturing jobs in the United States (it's not).  

Losses: First, we want technological advancement in this country, and in the world.  Even if it means displacement of workers with low tech skills.  Those that lose in this situation can be re-trained, their skills upgraded, etc.  The fact that this process may seem difficult should not lead to the conviction that production processes should never be improved through better use of technology, instead it should serve as an indictment of the lack of the U.S. education system's ability to adapt to needs.  The loss in this situation is that those low-end manufacturing jobs are SUPPOSED to be lost.  Every healthy economy sheds low-end jobs as new technologies emerge the same way that organisms shed deteriorated or damaged cells while replacing them with new and healthy ones.  Propping these jobs up only disguises the need for a more flexible work force and education system.  Further, it disguises the great disservice unions do when protecting their members from market forces.  You can only do it for a little while, eventually someone will have to pay.  In the GM bailout case, it is the taxpayer, which leads to the next loss.

TARP and the GM bailout made it clear that middle class taxpayers located in and around Detroit and that belonged to a union were more important to policymakers than those located elsewhere.  The bailout amounted to a transfer of wealth from taxpayers in the general U.S. to taxpayers working for the UAW union.  Lest you feel sorry for the UAW employees, GM reported that the average wage paid to an employee in 2006 was around $40.00/hr when you include overtime, wage premiums, vacation, and holiday pay.  That wage rate, full time, amounts to around $76,000 per year, which is high enough to put one squarely in the upper-middle class.  

"But", you say, "it acted as a stimulus!!!"  Fine.  It stimulated Detroit and kept GM cars in production.  This argument is tough to make.  First, it assumes that the money that will have to be taken from the taxpayers elsewhere in the country (don't forget, when you spend money, you have to actually collect it at some point) would not have been spent as productively as the government spent it by giving it to a failed automobile manufacturer.  Also, it assumes that the public will be better off having not purchased other cars available for consumption such as Hondas, Toyotas, Nissans, Chevys, and Fords etc.  This is clearly not the case.  The public would probably be better served to, in fact, buy non-GM vehicles.  You may disagree, but at the minimum, it's a wash.  And if one argues that it is better to buy American than foreign vehicles, then I'll save the haranguing you deserve for another post.

Lastly, why would the government want to establish the following precedent: private companies that demonstrate an inability to generate profits will be purchased by the government and have their non-profitable good or service subsidized by the American taxpayer?  They shouldn't want to.  Unless, their motives are incompatible with the principles of free-enterprise.

Wednesday, November 14, 2012

Can China Destroy Their Own Growth Prospects

I don't know...but that won't stop them from trying.

Recently, China's government has banned large-scale shipping freighters from entering Chinese waters.  Bad idea, for so many reasons.  HT to Don Boudreaux.  Article Here.

Sunday, November 11, 2012

Foodstamps Surge By Most In One Year

Zerohedge points out that the delay in foodstamp recipients may have been politically motivated.  In other news, the world exists.

Article Here

Friday, November 09, 2012

The Best Article on Health Care Ever

The article linked to below is the best article on health care ever written, according to some.

John Cochrane's article.

HT: Don Boudreaux of GMU.

Saturday, November 03, 2012

Paul Krugman Is Wrong

It's kind of cute, but pretty soon you realize that kitten wants to bite you...and you want it to stop hissing.

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Friday, November 02, 2012

Vulgar Keynesianism and Its Flaws

It's a disservice to Keynes to call today's proponents of a particular brand of economics as "Keynesian."  Basically, it's a synonym for un-thorough, wrong, silly, naive, etc.

The article below is wonderful.  Bottom line: natural disasters do not make us better off in terms of real wealth or quality of life or standard of living.  They may improve some random economic aggregate like spending, but this is not an improvement over where we were pre-disaster.  There is no silver-lining, in economic terms, of natural disasters.  If there were, perhaps we should just run around destroying everything we can in order to rebuild it. If you think that's a good idea, then you might be a vulgar Keynesian.

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Thursday, November 01, 2012

"How Can You Vote for Him!!??" Just Relax.

 Boudreaux lays out some good common sense on politicians.  My favorite part:
In this earlier post, I discussed some of the flaws in the Romney and Obama  economic “plans.” I put the word in quotes here and in that earlier post because they are not really plans. They’re marketing brochures. They’re romance to make you think that if either one is elected in the next four years, everything will be wonderful–low prices, lots of jobs, and a pony for everyone. Or two ponies.

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Why It's OK to Let AHCA Die--We Can Do Better...Easily

John Cochrane, via Don Boudreaux with a hat tip to Tyler Cowen, explains why it isn't silly to trust in the private sector for solutions to health care problems.  He also explains why we should not confuse social charity for the homeless, mentally ill, etc with practical solutions to health care insurance problems.  See link below.

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