Quotulatiousness

July 14, 2014

When unions took over the public sector

Filed under: Bureaucracy, Business, Economics, Government, USA — Tags: , , , , — Nicholas Russon @ 09:09

Dmitri Melhorn says the union movement is missing an opportunity to be more relevant in the private sector, because public sector unions don’t help poorer workers (because public sector union members are middle class professionals, not working class):

Progressive hostility to [Harris v. Quinn], however, is shortsighted. Harris and decisions like it have the potential to revitalize progressive politics by restoring the relevance and political potency that labor held in the early-to-mid-20th century. The great labor leaders of that era — AFL-CIO President George Meany, President Franklin D. Roosevelt, and the like — agreed with the majority in Harris: it was both impractical and inadvisable to afford public employees compulsory collective bargaining rights.

Roosevelt said that collective bargaining and public workers’ right to strike would be “unthinkable and intolerable.” Meany said it would be “impossible.” In the view of these leaders, civil service laws from the Progressive Era of the 1890s to 1920s had made government jobs good and safe. Labor and progressives, therefore, needed to focus on blue-collar workers’ need to fight collectively for basic safety, dignity and living wages. Through this focus, the United States saw historic gains in the well-being of workers and the country’s middle class.

That labor heyday lasted through the 1950s, but starting in the late 1960s labor lost ground. Public-sector unions grew rapidly, but private-sector unions shrank. By 2012, public-sector workers had union membership rates more than five times higher than rates among private-sector workers.

Essentially, the public-sector unions sucked up all the oxygen. Talented labor organizers opted to work with government workers: their members were relatively prosperous and well connected, so they were easy and lucrative to organize. As explained in Jake Rosenfeld’s book What Unions No Longer Do from earlier this year, this shift to public-sector unions meant that unions no longer fought primarily for the working poor. Instead, much of their muscle was devoted to improving the status of middle-class professionals.

June 25, 2014

Mexico’s champion crony capitalist

Filed under: Americas, Economics, Government — Tags: , , , — Nicholas Russon @ 08:31

I don’t read the various financial magazines’ regular fanboi coverage of multi-billionaires, so I wasn’t all that aware of the fabulous wealth of Mexico’s Carlos Slim. Slim is one of the richest men in the world, but he doesn’t owe his success to technical innovation or outstanding business skills … he owns the Mexican telephone market thanks to a sweetheart “privatization” deal he got from his good friend in the Presidential palace back in 1990. In other words, his fortune largely derives from his ability to skim off vast profits from a captive customer base. Steve Sailer rounds up some interesting snippets about Slim, including a bit from French economist and current media darling Thomas Piketty:

Andres Oppenheimer wrote for PBS:

    Mexico in the early nineties was similar to American capitalism in the late 1870s. Azcarraga, Slim, and Hernandez were not much different from railroad and steel magnate Andrew Carnegie or oil trader John D. Rockefeller. Like the American “Robber Barons” of their time, the Mexico Twelve were making a fortune from their close partnership with the government. And to their immense relief, Mexico was not contemplating anything like the 1890 Sherman Anti-Trust Act, which had broken up U.S. monopolies through forced sell-offs.

In return, Salinas demanded at a private dinner party on February 23, 1993 that Slim and Mexico’s other 29 oligarchs donate $25 million each to the ruling party’s campaign war chest, a total of $750 million. Oppenheimer notes:

    Telecommunications magnate Slim … supported the motion, adding only that he wished the funds had been collected privately, rather than at a dinner, because publicity over the banquet could “turn into a political scandal.”

Now, you might think that there is something unseemly about a regular contender for the title of World’s Richest Man making his fortune off the relatively small Mexican economy. We’re constantly told that Mexicans have to be allowed to flock to America to escape starvation in their own land. Yet one well-connected monopolist is permitted to pile up an enormous trove by charging exorbitant fees for the lifeblood of any economy, communications.

A 2006 article in the New York Times pointed out:

    The Organization for Economic Cooperation and Development, an association of wealthy countries based in Paris, reports that Mexicans pay some of the highest phone rates in the world, with calls costing 50 percent more than the group’s average. Forbes reported that the average monthly phone bill for a small business in Mexico is $132, compared with $60 in the United States.

Slim epitomizes the toll taken on the Mexican economy by monopolists:

    As a result, said Mr. Ortiz of the Bank of Mexico, economic growth is one percentage point less than it could be with real competition. There are not enough jobs to keep workers from migrating to the United States …

Piketty, however, is offended by how Slim

    … is often described in the Western press as one who owes his great wealth to monopoly rents obtained through (implicitly corrupt) government favors…

(Slim, himself, has been proactive about improving his press coverage: in 2008 he financially bailed out the New York Times and is now the newspaper of record’s second-biggest owner. Not surprisingly, Slim, who profits lavishly off long distance calls between illegal immigrants in America and their loved ones in Mexico, doesn’t get mentioned much in the Times’ vociferous denunciations of immigration skeptics.)

Piketty, in his inimitable prose style, explains that criticizing Slim is a mistake, if not downright racist:

    Rather than indulge in constructing a moral hierarchy of wealth, which in practice often amounts to an exercise in Western ethnocentrism, I think it is more useful to try to understand the general laws that govern the dynamics of wealth—leaving individuals aside and thinking instead about modes of regulation, and in particular taxation, that apply equally to everyone, regardless of nationality.

In other words, rather than the citizens of Mexico using the rule of law to break up Slim’s monopoly, as Americans did with Rockefeller’s, the important thing is for readers of Capital to take global control.

What could possibly go wrong in Piketty’s planetary empire?

June 2, 2014

Amazon, Barnes & Noble, Random Penguin and other publishing Monopoly players

Filed under: Business — Tags: , , , , — Nicholas Russon @ 07:32

A quite contrarian take on the upheavals in the publishing world by Hugh Howey:

A similar game is being played in the book industry today, as it has been played in many other industries. Here at BEA, I’m hearing a lot about monopolies. (And monopsonies, for those who prefer to quibble semantically rather than understand what is meant and forge ahead in productive conversation.) Practically everyone here at the book expo believes that Amazon has gotten too big, that they wield a disproportionate amount of power, and that they must be reigned in or defeated.

I am told, without exaggeration and in all seriousness, that Amazon wants to “crush their competition.” I hear that they want to “put everyone else out of business.” Two things are true, both of which make these statements ridiculous: The first is that Amazon most certainly doesn’t want all of their competitors to go out of business, because then they’d be the only game in town and the government would have no choice but to break them up. The second is that of course they are acting as if they want to put their competitors out of business. That’s how you improve your business practices. You try to out-do your competition.

Unless … you don’t understand at all what it means to compete. Which I think explains the righteous indignation. But I’ll get to that in a minute.

[...]

Ironically, the biggest losers in this shift have been yesterday’s villains. The massive brick and mortar discounters — who once were blamed for literature’s downfall, who sold “loss leaders,” who roughed up publishers in negotiations — have become the bulwark behind which all legacy hopes now hunker. Little explored is the possibility that Amazon is helping independent bookstores by clearing out these former predators.

When it comes to discounting and selection, B&N can’t compete with Amazon. When it comes to book browsing, Amazon can’t compete with curated independent bookstores. If you line the three sales models up from small indie stores to big discounters to Amazon, you’ll see that neighbors compete with and harm one another. Concurrent with the shuttering of Borders and the shrinking of B&N, we are also seeing a rise of indie shops. Coincidence? Or are we heading toward a future where Amazon and indie bookstores coexist because they provide two very different shopping experiences and fulfill quite separate needs?

Best estimates give Amazon roughly half of the book market. With the shutter of Borders, B&N now has a more disproportionate control of brick and mortar shelfspace than Amazon does of online book sales. This is especially powerful as the rest of the smaller bookstores have less leverage for bargaining with publishers. Who is the monopoly?

June 1, 2014

In the Progressive Era, “big business led the struggle for the federal regulation of the economy”

Filed under: Business, Government, History, USA — Tags: , , , , — Nicholas Russon @ 11:00

Timothy Carney says we should know much more about socialist historian Gabriel Kolko and his careful debunking of the “Teddy Roosevelt as trust-buster” myth:

Every American knows the fable of the Progressive Era and that “trust buster” Teddy Roosevelt wielding the big stick of federal power to battle the greedy corporations. We would be better off if more people knew the work of the man who dismantled this myth: historian Gabriel Kolko, who died this month at age 81.

Kolko was a self-described socialist and a Harvard-educated historian, but he had little use for the liberal political establishment’s pious regard for the Progressive Era of 1900 to 1916. And he was never credulous enough to believe that government intervention in the economy was generally in the public interest.

For today’s politics, Kolko’s most important book was The Triumph of Conservatism, published in 1967. His thesis: “The dominant fact of American political life” in the Progressive Period “was that big business led the struggle for the federal regulation of the economy.”

The standard history of the Progressive Period — which painted Teddy and the Feds as the scourge of Big Business — relied too much on the public rhetoric of TR and his cohorts. Kolko dug deeper to show how Big Business truly felt about Big Government, and how the Progressives truly felt about Big Business.

Many corporate titans in the early 20th Century, buying into the pervasive hubris of the day, believed that a state-managed economy was the inevitable end of a rational society — the conclusion of what Standard Oil’s top lobbyist Samuel Dodd called the “march of civilization.” Competition, in their eyes, was destructive redundancy.

[...]

Liberal scholar William Galston at the Brookings Institution explains the economics at play. “Corporations have sizeable cash flows and access to credit markets, which gives them a cushion against adversity and added costs,” he wrote in 2013, explaining why the big guys often welcome regulation. “[S]mall businesses often operate much closer to the margin and are acutely sensitive to policies that threaten to drive up costs.” Also, “CEOs can hire experts to help them cope with added regulatory burdens and can spread the costs over a large workforce.”

Kolko’s research smashed the favorite tales of the Progressive myth. When Upton Sinclair wrote The Jungle, which included descriptions of rancid meat-packing plants, Roosevelt saw Sinclair as personally despicable, but a useful asset in his quest to impose federal meat inspection. Sinclair opposed Roosevelt’s regulation, and Kolko relates that “the big packers were warm friends of regulation, especially when it primarily affected their innumerable small competitors.”

By “conservatism,” Kolko meant “stability,” and preservation of the status quo. This is often the aim of corporate giants. It is consistently the consequence of federal action. And it is reliably the enemy of entrepreneurship, economic growth and free choice.

May 27, 2014

QotD: What capitalism should do now

Filed under: Business, Economics, Quotations — Tags: , , , , — Nicholas Russon @ 07:13

Just as democracy can be corrupted by repressive populism, so can capitalism be perverted by “rent-seeking” — when people seek to gain more than the goods and services they produce are worth to others.

Sometimes they use political influence to sustain monopolies or to prevent new entrants and innovators from competing for custom. Sometimes they use governments to provide subsidies from taxpayers, or to prohibit cheaper imports.

Sometimes they do deals with governments that provide taxpayer funds to cushion losses derived from incompetence or recklessness. These forms of crony capitalism detract from capitalism’s real benefits and achievements.

What capitalism should now do is to free itself from these rent-seeking perversions and spread its benefits as widely as possible.

It should act against anti-competitive practices to give people instead the power of free choices between competing goods and services. It should spread ownership of capital and investment as widely as possible through such things as personal pensions and individual savings accounts.

It should lower the barriers to entry so that everyone can aspire to start up a business to bring goods and services to others. It should seek a tax system that rewards success rather than punishing it.

Capitalism should become inclusive, making it as easy and as attractive as possible for as many as possible to set aside some part of present consumption in order to invest some of their resources and their time in providing goods and services that others will want. It should become true capitalism.

Dr. Madsen Pirie, contributing to “Viewpoints: What should capitalism do?”, BBC News, 2014-05-26.

May 16, 2014

The built-in confusion about net neutrality

Filed under: Business, Government, History, Technology, USA — Tags: , , , — Nicholas Russon @ 12:33

While I’ve been following the net neutrality debate, I was still unconvinced that either side had the answers. In a post from 2008, ESR helps to explain why I was confused:

Let it be clear from the outset that the telcos are putting their case for being allowed to do these things with breathtaking hypocrisy. They honk about how awful it is that regulation keeps them from setting their own terms, blithely ignoring the fact that their last-mile monopoly is entirely a creature of regulation. In effect, Theodore Vail and the old Bell System bribed the Feds to steal the last mile out from under the public’s nose between 1878 and 1920; the wireline telcos have been squatting on that unnatural monopoly ever since as if they actually had some legitimate property right to it.

But the telcos’ crimes aren’t merely historical. They have repeatedly bargained for the right to exclude competitors from their networks on the grounds that if the regulators would let them do that, they’d be able to generate enough capital to deploy broadband everywhere. That promise has been repeatedly, egregiously broken. Instead, they’ve creamed off that monopoly rent as profit or used it to cross-subsidize competition in businesses with higher rates of return. (Oh, and of course, to bribe legislators and buy regulators.)

Mistake #1 for libertarians to avoid is falling for the telcos’ “we’re pro-free market” bullshit. They’re anything but; what they really want is a politically sheltered monopoly in which they have captured the regulators and created business conditions that fetter everyone but them.

OK, so if the telcos are such villainous scum, the pro-network-neutrality activists must be the heroes of this story, right?

Unfortunately, no.

Your typical network-neutrality activist is a good-government left-liberal who is instinctively hostile to market-based approaches. These people think, rather, that if they can somehow come up with the right regulatory formula, they can jawbone the government into making the telcos play nice. They’re ideologically incapable of questioning the assumption that bandwidth is a scarce “public good” that has to be regulated. They don’t get it that complicated regulations favor the incumbent who can afford to darken the sky with lawyers, and they really don’t get it about outright regulatory capture, a game at which the telcos are past masters.

[...]

In short, the “network neutrality” crowd is mainly composed of well-meaning fools blinded by their own statism, and consequently serving mainly as useful idiots for the telcos’ program of ever-more labyrinthine and manipulable regulation. If I were a telco executive, I’d be on my knees every night thanking my god(s) for this “opposition”. Mistake #2 for any libertarian to avoid is backing these clowns.

In the comments, he summarizes “the history of the Bell System’s theft of the last mile”.

May 2, 2014

Calling BS on the Beer Store ad campaign

Filed under: Business, Cancon — Tags: , , , , — Nicholas Russon @ 08:09

Michael Pinkus takes a short pause from his usual wine reviews (and decrying the LCBO for their stone-age approach to selling wine) to throw some scorn at the foreign-owned multinational oligopoly that runs our beer retail business in Ontario:

Not sure which [of the two TV ads] I object to more, the lies of the first or the total misrepresentation of variety store owners in the second. The biggest lie to me in #1 is the implication of impeccable customer service: the visual of a beer store employee (Glenn Howard) showing a customer to her beer selection (can woman not find the beer they are bringing home to their man on their own? Is that another implication here?) or is he giving a recommendation of what beer to serve? Either way it’s a complete falsehood: I have been to plenty of Beer Stores in my day and NO ONE HAS EVER ‘showed me’ to the beer I was looking for, in fact, Beer Store employees are some of the surliest bunch in the customer service world, second only to LCBO and Home Depot staff for the most un-helpful in retail.

Ad #2 makes variety store owners look complacent in the act of minors buying alcohol in their stores, the only thing the Beer Store did not do was put an ethnic minority behind the counter (that should be your first clue that the Beer Store is out of touch with corner stores) … But seriously what a load of absolute garbage that ad is. I was thinking that a good acronym for the Beer Store is “The B.S.” which is exactly what they are peddling to the public with their ads and “beer facts” campaign … hopefully you see right through it: all they are trying to do is protect their bottom line through the guise of social responsibility. Heck the LCBO has been using that excuse for years and look at the monopoly they’ve built.

When it comes to the illegal sale of booze to minors, no one is protected more than the liquor store employees of this province. First, both LCBO and Beer Store employees are protected by unions, so if they were to sell to minors that employee would continue to keep their job. A sting by reporter David Menzies for SunMedia proved that not only can minors get alcohol at the LCBO but nothing befell the employees who sold to that minor.

On the other hand, a variety / corner store would face harsh penalties, stiff fines and I am sure the loss of their license to sell booze and quite possibly lose their store, their livelihood, everything they’ve worked for – not to mention the civil lawsuit that might be a consequence of their actions. Most variety store owners are hardworking, law abiding people who work long hours in their own stores, and usually rely on their family members to help out. They aren’t about to give up their way to make a living to sell a couple extra bottles of Blue to 15-year-old Joey Ripkin. Now, I’m not saying there aren’t any rotten eggs in the basket, but you’ve had LCBO workers sell booze out the back door of stores and warehouses and clerks sell to friends – there’s always someone who takes advantage of the system, but to paint them all with this absurd brush is clearly ridiculous. The BS the Beer Store is pushing is practically see-through.

The loss of one’s business and livelihood is a bigger price to pay than the slap on the wrist a Beer / LCBO store employee would see.

May 1, 2014

Rethinking Canadian broadcast regulation

Filed under: Bureaucracy, Business, Cancon, Media — Tags: , , , , , — Nicholas Russon @ 07:27

On Google+, Michael Geist posted a few thoughts on hitting the reset button in Canadian broadcast regulation:

The Broadcasting Act is a complex statute that lists more than twenty broadcasting policy goals. Yet for decades, Canadian policy has largely boiled down to a single objective: Maximizing the benefits from the broadcasting system for creators, broadcasters, and broadcast distributors such as cable and satellite companies.

Consumers were nowhere to be found in that objective and it showed. Creators benefited from Canadian content requirements and financial contributions that guaranteed the creation of Canadian broadcast content. Broadcasters flourished in a market that permitted simultaneous substitution (thereby enabling big profits from licensing U.S. content) and that kept U.S. giants such as HBO, ESPN, and MTV out of the market for years in favour of Canadian alternatives. Cable and satellite companies became dominant media companies by requiring consumers to purchase large packages filled with channels they did not want in order to access the few they did.

As I mentioned in a conversation last night, the Canadian market for broadcast, telecommunications, and internet providers has been carefully managed by the government to minimize the whole messy “competition” thing and ensure quasi-monopoly conditions in various regions across the country. The regulators prefer a small number of players in the market: it makes it easier to do the “regulation” thing when you can fit all the regulated players around a small table, and it also provides post-civil service career opportunities for former regulators. Having a larger number of competing organizations makes the regulation game much more difficult and reduces the revolving door opportunities for former regulators.

March 30, 2014

In which Tim Worstall admits that Karl Marx was right

Filed under: Business, Economics, Law — Tags: , , , , — Nicholas Russon @ 10:37

Well, right in this particular analysis, anyway:

Which is where we can bring Karl Marx into the discussion. Wrong as he was on many points he was at times a perceptive analyst. And he noted that what determined the wages of the workers wasn’t some calculation of a “fair wage”, nor some true value of their production (although he had much to say on both points), but in a market economy the wages that were paid were a reflection of what other people were willing to pay for access to that labour.

If, for example, there were a large number of unemployed (that “reserve army of the unemployed”) then a capitalist didn’t have to raise the wages of his workers however far productivity grew. If anyone tried to capture a bit more of the value being created, say through a strike or other activity, then the capitalist could simply fire them and bring in some of those unemployed. No profits needed to be shared with the workers. However, when we get to a situation of full employment then the dynamic changes. It’s not possible to simply hire and fire to keep wages low. For the other capitalists are competing for access to that labour that makes those profits. The higher profits go the higher all capitalists will be willing to bid up wages to continue making some profit at all.

The obverse of this is if the employers collude in order to artificially suppress the wages of the workers which is why that case involving Apple, Google and so on is going to trial. That’s monopoly capitalism that is and we really don’t like it at all.

But in this case with Yahoo trying to challenge Google’s YouTube, it will be the workers who benefit. For the two companies are vying with each other for access to the content being made and thus the profits that can be made. Of whatever revenue can be made a larger portion will go to the producers of the content and a smaller one to the owners of the platforms. Which is excellent, this is exactly what we want to happen.

State occupational licensing is out of control

Filed under: Bureaucracy, Business, Politics, USA — Tags: , , , — Nicholas Russon @ 08:58

Ramesh Ponnuru discusses some examples of ridiculous state occupational license requirements:

Melanie Armstrong wanted to be an African hair braider, practicing a skill passed down from generation to generation. In Tupelo, Mississippi, where she lived, government licensing rules meant she had to take 300 hours of course work to start her salon: 300 hours, she notes, “none of which covered hair braiding.”

In testimony before a U.S. House subcommittee on Wednesday, Armstrong explained that her “ultimate goal” was to teach others how to braid. Getting the needed licenses to do that would have taken 3,200 hours. None of them taught students how to braid hair, either. That’s more hours than it would have taken her to get licenses to become a firefighter, emergency medical technician, hunting instructor, ambulance driver or real estate appraiser. It’s longer than it would have taken her to get licenses for all those things combined.

The subcommittee — led by New Yorkers Richard Hanna, a Republican, and Grace Meng, a Democrat — was considering the excesses of state occupational licensing. More and more jobs fall under these regulations. In the 1950s, according to one study, only about one in 20 jobs required a license. By 2006, about 29 percent did.

While Armstrong helped get her state to scale back the requirements for hair braiders, the trend is toward more stringent regulation. Patti Morrow, who runs an organization fighting licensing for interior designers, says, “These bills come back year after year like zombies.”

February 12, 2014

The Beer Store’s pre-emptive strike against a competitive market in Ontario

Filed under: Business, Cancon, Government, Law — Tags: , , , , — Nicholas Russon @ 11:22

Yesterday I got a robo-call from someone representing The Beer Store (what used to be known as the Brewer’s Retail … for my American readers, think of your local DMV crossed with a Cold War-era Soviet department store). The call was to alert me to the possibility that the Ontario government might do something to destroy the worker’s paradise we live in today and allow the total anarchy of private sales of beer, wine, and liquor. I was invited to take part in some sort of “town hall” meeting where all the interested parties would be represented … if you consider only those who are afraid of this change being introduced as being all of the interested parties.

As we all know, the Ontario government isn’t comfortable with the idea of letting go of their own vast-profit-generating booze sales machine (the LCBO), and I doubt that the current Premier and her party are actually going to break the foreign-owned oligopoly that currently controls the sale of beer in the province. In spite of that, the Beer Store and their “stakeholders” are mounting a rather hysterical counter-offensive to preserve the current status quo. As Colby Cosh points out, their success or failure will probably hinge on keeping Ontarians innocent of how a non-monopolized market works in other jurisdictions … particularly in Alberta:

It is encouraging to see so much ridicule being flung at the Beer Store’s “study” defending its role in the Soviet-flavoured Ontario liquor retailing system. The effectiveness of the Beer Store’s white paper depends on its Ontario audience knowing no practical details of freer retail schemes, particularly Alberta’s: yet, by an amusing paradox, the ur-source for the report appears to be Alberta. No one was willing to attach his name to the report itself, but it comes with a foreword by the Parkland Institute’s Greg Flanagan, who deems it a “valuable contribution”—one that, on an unrelated note, makes heavy use of Flanagan’s own past polemics against liquor privatization. What a terrible shame nobody took credit for this excellent document!

What Colby is missing is that Ontario is a unique, precious snowflake of a province, whose residents are unable to handle this so-called “freedom of choice”. Our loving government is protecting our vulnerable, weak-willed selves from the evils of a callous, uncaring, exploitative sector of the economy that ruthlessly wants to sell us more of their intoxicating poisons at lower prices. This is why we must stand firm against “free markets” and rally our shrinking moral forces!

He even admits that the destruction of Alberta’s proud, noble, and much-loved liquor monopoly has brought untold misery and ruin to literally tens, possibly even hundreds, of Albertans:

The effect of liquor-retail privatization in Alberta was to put liquor stores in many small towns that did not have them before and on darn near every block in the big cities. Most, by design, are small stores with large markups. Before privatization you had a handful of stores in the entire province, all offering strongly regulated uniform prices. But you might have to travel a long way to get the advantage of these prices; you might have to leave work early to show up before closing, particularly if you intended to load up for a weekend or a party; and you might have to stand in a queue when you arrived. (Ah, memories.) And if you didn’t compute your needs accurately and you ran out of booze at the wrong moment, you were out of luck.

After privatization, there are stores everywhere, open all the time, on every day but Christmas; and you might be charged an extra buck on a 12-pack. Go on: ask 10 Albertans who are old enough to remember the old system if they would like to go back. I’ve actually performed this exercise, and I usually get ten “hell no”s. But if you make your sample a hundred, you will certainly find a person or two in one of two categories: (1) socialists nostalgic for the days when ALCB employees were duly organized, and could shut down all liquor sales in the province by striking; (2) geriatric grouches who really don’t enjoy alcohol and don’t like its ready availability and what’s with those goddamn kids these days with the reefer and the XBox and the hey hey hey.

See? He even admits that prices went up! Proof that market failure is smeared all over Alberta! And queues are a good thing: they allow you to meet your neighbours and have long, pleasant conversations about all kinds of things! Albertans have been wantonly deprived of this wonderful balm of human contact and interaction!

No, Ontarians are not ready — and may never be ready — for the additional burden of free choice and wider selections at lower prices. We must set our hearts and minds to work against this tradition-destroying innovation and keep our booze prices high and variety minimal!

December 11, 2013

Canada Post to phase out home delivery

Filed under: Cancon, Humour, Politics — Tags: , , , — Nicholas Russon @ 16:10

I haven’t had home delivery of my mail for the last few decades, but for folks downtown it’s going to be an unwelcome change. The decision forced itself on the crown corporation through the arcane workings of economic reality: it just costs too much money to deliver to those millions of homes (a tweet I forgot to save said it cost over $200 per year for home delivery and just over $100 for communal mailboxes). The news is not going down well with at least one member of the official opposition, as Colby Cosh pointed out in a series of tweets:

November 15, 2013

Corporations and social responsibility

Filed under: Business, Government, Law — Tags: , , , , , — Nicholas Russon @ 14:17

In this week’s Goldberg File email, Jonah Goldberg talks about the notion that corporations should operate with an eye to “social responsibility”:

Milton Friedman was famously opposed to the whole idea of “corporate social responsibility.” His argument was that corporations have a single obligation: to maximize profits for shareholders. When CEOs spend money on gitchy-goo feel-good projects, they are exceeding their authority and wandering outside the lines of their job description. I’ve always been very sympathetic to this view. If you asked me to invest $10,000 dollars in your startup company and then I found out you spent $5,000 of it to sponsor a program to teach prison-gang members to settle their disagreements by acting out scenes from Little Women, I’d be pretty pissed. That’s not why I gave you the money. And it’s pretty shabby of you to buy fame and praise for your generosity while spending someone else’s money. Indeed, it’s not much less selfish than blowing it on a three-day bender with the mayor of Toronto.

There are lots of different takes on this argument and, because this is my “news”letter, I choose not to deal with most of them. My problem with the profit-maximizing-über-alles creed for Big Business is that it offers no principled or moral reason for Big Business to stay out of Uncle Sam’s bed. If the federal government can make it rain Benjamins for any business willing to twerk for its amusement, why should GE or Big Pharma or the insurance companies demur?

Of course, some businessmen understand the risks of getting in bed with the government. But, since there’s lots of money to be made, there will always be other businessmen perfectly happy to put on the French-maid uniform and bark like a dog.

Even Adam Smith said, “people of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” That’s true. What’s even more true is that when government officials and business leaders sit down to talk, the inevitable result is a new “public-private partnership” that uses government force to limit competition from non-whorish corporations. Railroad magnates lobbied for the Interstate Commerce Commission. AT&T asked the government to make them a monopoly in the name of “efficiency” so they could clear the field of competition. Andrew Carnegie wanted government control of the steel industry so he could rely on Uncle Sam to guarantee his profit margins. GE loves Obama’s green-energy stuff, because without the inherent subsidies and regulations, it couldn’t make money off of its green tech.

I have no problem with contractors doing work for the government. It’s better that the guys building roads and bridges work for the private sector. But when big businesses agree to make the country less free, the market less competitive, Americans less prosperous, and the state more powerful just to make a few more bucks for their shareholders, it makes me think that Milton Friedman was wrong. We need a free-market version of corporate social responsibility. We need to equip businessmen with an ethical code that tells them there’s a principled reason not to get in bed with the government. They’d still be free to violate that principle, of course, but if they did, I hope they’d have the good sense not to come running to us to complain that the government has asked them to eat a bowl of dogsh**t.

November 13, 2013

The NFL “closed shop”

Filed under: Business, Football, Law, Liberty — Tags: , , , , — Nicholas Russon @ 10:35

In Reason, S.M. Oliva discusses how the NFL’s exemption from normal labour regulations makes it difficult to assess the rights and wrongs in the Miami Dolphins “bullying” situation:

Many libertarians see nothing wrong with the NFL’s labor system. Even in a pure free market, employers and unions could enter into “closed shop” agreements like the NFL’s CBA. But as we all know, professional sports hardly exist in a free market. The NFLPA itself holds a government-sanctioned monopoly over all current and future NFL players. Indeed, Martin was not even a union member when the NFLPA signed the current CBA in 2011.

More importantly, in a free market any closed shop would face competition from new entrants seeking to exploit the incumbent’s labor restrictions. There’s little risk of that with the NFL given that most of its infrastructure is subsidized by government. This includes not just stadiums built with billions in taxpayer financing, but also player development, as most NFL players are the product of college football programs subsidized by state-run universities.

There’s also the perverse incentives created by federal antitrust law. The collective bargaining process creates an exemption from antitrust law. Without that exemption, most NFL labor policies, such as the draft, would be deemed illegal. Now, that’s hardly a libertarian outcome. But consider the NFL’s position. The more rules and restrictions they can stuff into the CBA, the lower the risk of future antitrust lawsuits. Thus, the exemption encourages the NFL (and the NFLPA) to centralize as much of its labor policy as possible.

That means there’s little motive to experiment with more flexible labor policies. Individual teams can’t offer employee incentives or enforce discipline in any way that conflicts with the CBA. When there are workplace disputes like the Dolphins situation, the bureaucracy acts not to “protect” employees, but to ensure nothing disturbs the government-granted authority of the league and its monopoly labor union.

October 18, 2013

QotD: The hidden problem with regulating prescription drug prices

Filed under: Cancon, Economics, Government, Health, Quotations — Tags: , , , , , — Nicholas Russon @ 00:01

[W]hen negotiating with other governments, pharmaceutical companies operate at a severe disadvantage, not because the governments’ buying power is so vast (the national health-care systems of Canada and many European countries cover fewer people than Aetna), but because the people you’re negotiating with can change the rules under which your product gets sold. At any point they can say, like Lord Vader, “I am altering the deal. Pray that I do not alter it any further.”

But if Canada started paying more, that wouldn’t mean we’d pay less. Drug companies are charging what they think we will pay. The result of Canadians and Europeans paying less is not that we pay more for drugs; it’s that fewer drugs get developed. To the extent that they are harming us, it is in hindering the development of cures or better treatments that we are missing, and don’t even know about.

Unfortunately, this is a classic case of Bastiat’s dilemma. It is easy for each country’s government to see the high prices that people are paying and intervene to lower them. It is hard for each country’s government, much less its citizens, to envision the new medical treatments that they might get if they paid more for drugs. So their incentives are heavily skewed toward controlling the price here and now, even if that means losing future cures.

Drug development is essentially a giant international collective-action problem. The U.S. has kept it from being a total disaster because we don’t have good centralized control of our insurance market, and our political system is pretty disorganized and easy to lobby. If that changes — and maybe we just changed it! — we’ll knock down the prices of drugs to near the marginal cost using government fiat, and I expect that innovation in this sector will grind to a halt. Stuff will still be coming out of academic labs, but no one is going to take those promising targets and turn them into actual drugs.

Megan McArdle, “U.S. Consumers Foot the Bill for Cheap Drugs in Europe and Canada”, Bloomberg, 2013-10-14

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