Category Archives: Economics

Animal’s Daily Hooray for Capitalism News

Actual illustration from the article. Go, capitalism!

Free markets are a wonderful thing – here are a few of the reasons why.  Excerpt:

When the Great Recession hit, late capitalism came back into vogue. Finally, markets and economies were collapsing all around the globe, comrades! And yet…here we are, a decade or so later and capitalism is still doing pretty well. To be sure, it’s nowhere near perfect, but what economic historian (and Reason contributing editor) Deirdre McCloskey calls “the Great Enrichment” proceeds apace, with fewer and fewer people living in what the U.N. calls “extreme poverty.” As everyone except Pope Francis will tell you, that’s because of free-er trade and more (not fewer) markets. As Ronald Bailey has documented, higher levels of economic freedom correlate strongly with longer lives, less disease, better environmental indicators, and even higher rates of life satisfaction.

Communists, socialists, progressives, and critics ranging from Fredric Jameson to Bernie Sanders to Thomas Frank to Naomi Klein to Hans Magnus Enzenberger continue to marvel at and grouse about the ways in which capitalism “absorbs” economic and philosophical challenges, “commodifies” them, and then keeps on truckin’. Capitalism’s genius, it turns out, is a form of repressive tolerance that, as economist Joseph Schumpeter observed, brought more and more stuff to more and more people. “The capitalist achievement,” he wrote, “does not typically consist in providing more silk stockings for queens but in bringing them within reach of factory girls.”

Or, to put it in slightly different terms, capitalism allows more people to express themselves through work and live relatively high on the hog. Which brings to me three examples torn from today’s headlines that show why capitalism persists—and why that’s not a bad thing at all.

Here’s an example for you:  Wal-Mart (or, as it’s known these days, Walmart.)  Some years back, the Old Man had to buy tools, construction stuff and housewares from the old Coast to Coast store in Decorah, Iowa, the nearest town of any size to his old homestead.  He remembers buying a toaster-oven form there for $65, a year or so before the massive Walmart Supercenter opened on the edge of town.

At first, the Old Man didn’t care for the Walmart, thinking (correctly) that it would put some small locally owned stores out of business.  He was a convert when next he needed a toaster-oven, and was able to buy one at Walmart for $25.

Markets, given time, usually get things right.  No person or body of people could ever hope to “manage” the tens of billions of individual daily decisions that make up a national economy; only the people, freely deciding for themselves what they want to do with their money, their time, their talents and abilities, can properly make up an economy.  And that’s the only way an economy should exist -free people making their own decisions freely.

If you disapprove of my choices, then you are free to piss right off, and the same applies in reverse.  That’s the wonder of liberty, True Believers; that’s the wonder of liberty.

Animal’s Daily Blue Flight News

File this under “big surprise:”  People who advocate for statist policies increasingly flee the places where their preferred statist policies are in place.  Excerpt:

According to United Van Lines, the top 10 states people are leaving include the blue states Wisconsin, Ohio, Massachusetts, Connecticut, New York, New Jersey and Illinois. Only three red states made the list; Kentucky, Utah, and Kansas.

The top 10 states people are moving to include the red states Idaho, South Dakota, South Carolina, North Carolina, Alabama, Nevada and Colorado (the last two are purplish states). Only three solidly blue states made the list, Vermont, Oregon and Washington. In 2017, Vermont slipped, with its inbound and outbound moving becoming about equal. Notably, all three of those states used to be much more moderate, only turning blue within the past 25 years or so. Longtime residents in Washington and Oregon regularly rant about Californians taking over their states and turning them blue. People in Vermont complain about Democrats from Massachusetts and New York moving into their state. The bluer those three states become, the fewer people will move there as we’re already seeing with Vermont.

Last week, CBS in San Francisco reported that the number of people leaving the Bay Area reached its highest level in more than a decade. Topping the list of reasons for moving was the high cost of housing. Democrats are more reluctant than Republicans to allow permits for homebuilding, and pile on regulations.

A comment on the linked article expressed the hope that the people leaving those blue states would contemplate why they left and vote accordingly on their arrivals in their new residences.  While that may happen in some cases – California has made life pretty unhappy for anyone to the right of Leon Trotsky, and part of that state’s polarization is due to the departure of right-of-center types – the opposite is more often the case.

I can point to my own Colorado as an example.  Having lived in Colorado for almost thirty years, I can attest to the transformation of that state from a right-of-center state with some strong libertarian influences to a purple state today.  And that purple is increasingly turning blueish; the state went for Her Imperial Majesty Hillary I in 2012, even as many purple states (Michigan and Wisconsin, among others) answered to President Trump’s populist message.

When I first moved to Colorado, I figured I’d probably stay there for the rest of my life.  That was before I saw Alaska.  Hopefully The Last Frontier will stay clear of such nonsense; urban illiberals that try a move there generally don’t seem to last through their cheechako year.  Alaska may remain one of the few good places left.

Goodbye, Blue Monday

Goodbye, Blue Monday!

Thanks once again to Pirate’s Cove and The Other McCain for the Rule Five links!

Moving right along:  Sometimes, you know, the difference between the political Left and the political Right really starts to blur.  Here is one such incidence, in which PJMedia’s Michael Walsh calls for the breakup of the Big Four tech companies by the force of the Imperial government, because, reasons.  Excerpt:

Monopolies themselves aren’t always illegal, or even undesirable. Natural monopolies exist where it makes sense to have one firm achieve the requisite scale to invest and offer services at a reasonable price. But the tradeoff is heavy regulation. Florida Power & Light serves ten million people; its parent company, NextEra Energy, has a market cap of $72 billion. However, pricing and service standards are regulated by people who are fiduciaries for the public.

The Four, by contrast, have managed to preserve their monopoly-like powers without heavy regulation. I describe their power as “monopoly-like,” since, with the possible exception of Apple, they have not used their power to do the one thing that most economists would describe as the whole point of assembling a monopoly, which is to raise prices for consumers.

Nevertheless, the Four’s exploitation of our knee-jerk antipathy to big government has been so effective that it’s led most of us to forget that competition—no less than private property, wage labor, voluntary exchange, and a price system—is one of the indispensable cylinders of the capitalist engine. Their massive size and unchecked power have throttled competitive markets and kept the economy from doing its job—namely, to promote a vibrant middle class.

Not all of us, Mr. Walsh, have a “knee-jerk antipathy towards big government.”  Some of us have a thoughtful, carefully-considered antipathy towards big government, and part and parcel of that antipathy is due to people like you flipping over to the side of more Imperial intrusion at any perceived “wrong” on the part of private enterprise.

If you don’t like Amazon, don’t use it.  If you don’t like iPhones, don’t buy one.  If you don’t like Google, use another search engine.  If you don’t like Microsoft, set up a computer on Linux.  There are alternatives to all of these things that Mr. Walsh decries as the “Big Four,” and what’s more, more will arise.  Nobody had heard of Microsoft before about 1984, and in another thirty years, Microsoft may well have been supplanted by some other software company with products that appeal to more people – you know, in the marketplace.

In the meantime, Mr. Walsh would be well advised, if he wants to continue to claim to advocate for liberty and free markets, to stop calling for Imperial power to shut down private enterprises.  It’s not the role of government to pick winners and losers in the marketplace – it is the place of consumers.  Hands off my free market!

Animal’s Daily Unintended Consequences News

Welcome to the wonderful world of minimum wages!  Excerpt:

Red Robin, a popular burger chain, will cut jobs at all 570 of its locations because, chief financial officer Guy Constant said, “We need … to address the labor [cost] increases we’ve seen.”

To put it differently, Red Robin is cutting these jobs because of bad government policy: namely, hikes in the minimum wage. On January 1, some 18 states — from Maine to Hawaii — increased their minimum wage.

Founded in Seattle but headquartered in Colorado, Red Robin hopes to save some $8 million this year by eliminating bussers from their restaurants. (Bussers, or busboys, clear dirty dishes from tables, set tables, and otherwise assist the wait staff.) According to the New York Post, the company saved some $10 million last year after eliminating “expediters,” who plate food in the kitchen.

The Impact of an Increase in Wages

Despite what many people, including policymakers, would argue, this is an altogether painfully predictable response to increased labor costs. It’s basic economics. The “first law of demand” teaches us that when the price of a good or service increases, people will tend to buy fewer units. Conversely, when the price of a good or service decreases, people will tend to buy more. This idea is usually presented no later than chapter 3 in any econ 101 textbook.

Full disclosure:  I like Red Robin.  I like Red Robin a lot.  I took the family there for a nice family lunch only last Monday.  The food isn’t outstanding but it’s good, always reliably so, the prices aren’t bad, and the service (at least at our local outlet) is always good.

But yes, they want to make money:

Some might say, “Well, why can’t Red Robin just make a smaller profit and stop being greedy?” Consider, however, that pretax profit margins for the restaurant industry typically range between 2 and 6 percent. This means that there isn’t a lot of room for error or cost increases before realizing a loss.

Welcome also to the wonderful world of unintended consequences.

Our own Colorado just had a state-imposed minimum wage hike on January 1st, raising the wage floor from $9.30 to $10.20 an hour.  Note that this state imposition didn’t make a single worker more productive, or gain them additional skills to justify their arbitrary imposure of a higher wage; this forces still more low-skilled and entry-level workers out of the market, resulting in Red Robin (and doubtless many other low-margin businesses) into cutting staff and increasing automation.

Red Robin has already installed little kiosks at each booth and table, enabling diners to quickly and conveniently order appetizers and drinks without waiting for a server.  You can also settle your tab at the kiosk.  This allows wait staff to cover more tables, enabling the restaurant to employ fewer servers in each shift.

Now the bussing staff has paid the price for the arbitrary new wage floor.

The actual minimum wage remains what it has always been – zero.  Labor, like any commodity, is a supply/demand proposition; more to the point, it is an exchange of value.  If an employee does not and can not return value at least equal to their cost of employment, then there will be no employment.  Government-imposed wage floors raise the bar for the employee-side side of that exchange, pricing entry-level and low-skill workers right out of the market.  Examples abound – this is but the latest – but pols and agitators never learn.

Feature or bug?

Animal’s Daily There They Go Again News

Thanks again to The Other McCain for the Rule Five link!

Moving on:  Go on, tell me you’re surprised.

One wonders (as suggested by one of my fellow Glibertarians) if these boneheads think they will be getting some sort of alimony settlement in this “divorce.”   They won’t.  Here’s a hint to the CalExit folks:  Go talk to South Carolina and see how well secession will work for them.  Not only will Californey not get a settlement, in any fair break-up they would be required to pay the Imperial government come kind of compensation for not only the various military bases but also all of the other Imperial lands and installations in the state.

Granted these days there’s no Lincoln who will send the Union Army into California to compel their return; President Trump may well grin and wave good-bye.  Nor is there a General Billy Sherman waiting to “make California howl,” and maybe burn a few of their major cities.

Having just spent a year in loony California, watching the once and former Golden State frantically pursuing Venezuelean economic policies, I’m inclined to grin and wave good-bye myself.

Goodbye, Blue Monday

Goodbye, Blue Monday!

Thanks as always to Pirate’s Cove for the Rule Five links, and to our blogger pal Doug Hagin over at the Daley Gator for Rule Five linkage and the post linkback!

Now that people are learning what the lately-passed GOP tax reform bill actually does, it’s getting more popular.  Big surprise.  Excerpt:

This week, Home Depot (HD), Starbucks (SBUX) and Walt Disney (DIS) announced that they were handing out bonuses or raises — or both — as a direct result of the GOP’s tax cut.

Home Depot is giving hundreds of thousands of hourly employees what it calls “tax reform bonuses” of up to $1,000. Starbucks is lavishing $250 million in pay raises and stock grants on 150,000 workers, also crediting the tax cuts. At Disney, 125,000 workers are getting a $1,000 bonus, and the company is investing another $50 million in employee education programs.

These companies join more than 240 others — many of them household names like Apple (AAPL), Wal-Mart (WMT), AT&T (T), Auto Nation (AN), Boeing (BA), Comcast (CMCSA), Southwest Airlines (LUV) and Verizon (VZ) — that have already done so, putting more money in the pockets of at least 3 million workers.

This string of tax-cut-related good news is just beginning. In February, millions of workers will suddenly see their paychecks get bigger, as the law’s new, lower withholding schedules take effect. And this is to say nothing of the indirect effects of the tax cuts — more investment, faster economic growth, more jobs.

Even before all this, the GOP’s tax bill was growing increasingly popular, according to the New York Times, which found that support jumped from 37% to 46% in one month, with disapproval dropping from 58% to 49%.

Putting more money in people’s pockets is always a good thing, but there’s a key difference in what you’re seeing happen since the tax reform bill was signed into law as opposed to what the Democrats wanted – and it’s important to note that not one Congressional Democrat voted for tax reform.

What you are seeing here is private companies voluntarily putting cash in the hands of their employees, case freed up by the passage of long-overdue corporate tax reform.

What the Democrats wanted was income transfer; using the confiscatory power of government to take money by force from those who have earned it to give it to those who have not.

That’s a fairly huge difference.  Government should not be in the business of picking winners and losers, and government should not be in the business of rescuing people from the consequences of their own poor decisions.  With the passage of this tax reform law, we are taking a step in the right direction to the former, since the tax rate cuts were across the board and not targeted.  The latter?  Well, we’re probably not going to win that one.

Next year will tell the tale.  Dame Nancy Pelosi, speaking from her ocean-view mansion in San Francisco, is talking down the raises and bonuses, calling them “crumbs.”  They may be crumbs to her, but to middle America, a thousand dollars is still pretty substantial cash.  And if the economy explodes in 2018, and it well might, she may find her safe Democratic seat rather lonely.

Animal’s Daily Capitalism 101 News

Like your refrigerator?  Me too.  I keep all kinds of good eatin’ stuff, not to mention beer, in there.  Fridges are damn near indispensable.  And we should thank the free market for that.  Excerpt:

The growing prevalence of refrigerators is partly due to their declining cost and partly due to people’s growing incomes. In 1919, the Frigidaire was the first self-contained refrigerator. It cost $775 (over $11,000 in today’s money). As the average hourly wage in 1919 was just $0.43, it took the average American 1,802 hours of work to afford this luxury appliance. The Frigidaire was a marvel back in its day but had only five cubic feet of storage. As such, it would be classed as a “mini-fridge” today.

Today, the standard Whirlpool French door refrigerator holds 25 cubic feet’s worth of food and drink. It has “fingerprint resistant stainless steel” and costs just $1,529. According to the latest BLS statistics, it would take the average American just 57.5 hours of work to be able to afford this – now common – appliance. (The average wage today is $26.55 per hour.) Even as the price of refrigerators decreased, refrigerator quality increased.

According to government data, 95.5 percent of households have what is classed as a “medium” refrigerator of 15 cubic feet or larger – meaning that the vast majority of people have a refrigerator at least three times the size of the most luxurious version available 100 years ago. The modern refrigerators have more settings, are more reliable and more energy-efficient.

The story of refrigeration is a common one: from a task done by many servants to a luxury good, and to now a common household appliance used by all. This type of progress exists with nearly all household appliances; from ovens to irons, from washing machines to dishwashers, and from air conditioners to water heaters.

As Marian L. Tupy of the Cato Institute previously pointed out, “an ordinary person today lives better than most kings of yesteryear,” thanks to innovation, capitalism and mass production.

You can, of course, apply the same historical example to microwave ovens, cellular phones, televisions, and many more consumer items.  Why?  Innovation, free markets and the profit motive.

Here’s the thing about capitalism – real, free market, non-crony capitalism – it works every time it’s tried.  Why?  Because the very name is a misnomer.  There is no “-ism” in honest capitalism.  There is no underlying philosophy other than liberty; there is no dogma, no set of underlying principles other than leaving people the hell alone.  Capitalism in the pure form is nothing more than millions of people making up their own minds, free of outside pressure, as to how to manage their own talents, skills and resources and when and with whom to engage in voluntary trade.  Capitalism is free people dealing with each other voluntarily in free markets.  In a word:  Liberty.  In the example given above, you see the results.

We need more of this.  Not less.

Goodbye, Blue Monday

Goodbye, Blue Monday!

Thanks to Pirate’s Cove and The Other McCain for the Rule Five links!  With that said…

Tobacco is legal.

Whatever you think of tobacco, it’s legal.  Whatever you think of people’s choices to partake of tobacco, it’s their choice.  (Full disclosure – I enjoy a good cigar at regular intervals.)  And it is those people’s responsibility to accept any consequences of that decision.

Which makes the New York City Council’s attempts to sin-tax tobacco out of existence all the more ridiculous.  John Stossel reports; excerpt:

Politicians want you to spend more for tobacco.

They decided this after anti-smoking crusader Dr. Kurt Ribisl told the Centers for Disease Control, “Higher prices will deter children from smoking.”

A pit of socialist micromanagers called the New York City Council quickly embraced the idea. “It’s also being considered very seriously in a number of jurisdictions in California,” Ribisl told me.

When health totalitarians make suggestions, leftist politicians jump.

Ribisl also told the CDC, “Very cheap (tobacco) products should no longer be available.” So for my YouTube video this week, I asked him, “Why do you get to decide?!”

“No, I’m not deciding,” he insisted. “I’m a person who studies these policies. I’ll let the policymakers decide.”

OK, I sighed, “Why do the politicians get to decide?”

“Cigarettes are the most lethal product ever introduced,” he replied.

That may be true, although few people realize that half the people who smoke do not die from tobacco-related illness.

Fatty foods, swimming pools and cars also kill lots of people. Maybe the health police will raise their prices next.

Note to Mr. Stossel:  Don’t say that too loud.  Some idiot pol will think it’s a good idea.

When the hell did New York become every resident’s nagging granny?  When the hell did it become the responsibility of the New York City Council to protect people from the consequences of their own decisions?

We can always give these idiot pols the benefit of the doubt and assume (yes, I know what that does, but it’s OK, because politicians are already asses) that they are genuinely concerned with the public health.  But the presumption from all levels of government should be that liberty is paramount.

Instead, from New York, we get this stupidity.  Go figure.

Animal’s Daily Tax Reform News

Thanks as always to Pirate’s Cove and The Other McCain for the Rule Five links!

The GOP tax plan is now law, and already the benefits for working folks are piling in, as noted here and here.  Excerpts and my comments follow:

From IVB:   Gee, that was fast. Just one day after the tax bill was finally passed, companies were already scrambling to do things with their money. It’s an impressive list  and, no doubt, not comprehensive:

  • AT&T’s CEO said the company will hand out bonuses of $1,000 to more than 200,000 of its workers in the U.S., thanks to tax reform.
  • Comcast NBCUniversal, not to be outdone, also handed out a special bonus of $1,000 to more than 1,000 employees, thanks to “passage of tax reform and the FCC’s action on broadband.”
  • Boeing’s CEO Dennis Muilenburg said his company will spend $300 million, with $100 million going to charity, $100 million for workforce development (including training and education for Boeing workers), and $100 million for “workplace of the future” infrastructure.
  • Fifth Third Bankcorp said it will give 13,500 employees a bonus and lift the minimum wage to $15 an hour.
  • Wells Fargo also raised its minimum wage to $15 an hour, and said it would donate $400 million to community and nonprofit groups in 2018.

Wait, wait, wait – I thought that the tax rate cuts and tax reforms were only supposed to help the 1% and a few corporate fatcats?  Because it sure looks to me like a lot of just plain folks are getting some nice bonuses and pay raises, and that’s before one iota of the new tax laws take effect.

From RCP:  With President Trump’s signing of the big tax-cut bill, the GOP snatched victory from the jaws of defeat. Suddenly, the political and economic landscapes have changed. The Republican party has turned the tables on the Democrats.

Trump and the GOP are on the side of the growth angels with the passage of powerful tax-cut legislation to boost business investment, wages, and take-home family pay. The Democrats, meanwhile, are left with stale class-warfare slogans about tax cuts for the rich.

Ironically, government unions, with their pension plans heavily invested in equity shares, will benefit hugely from the tax-cut-led stock market boom. They boo the GOP bill while they should be cheering.

But there’s a lot of irony to go around. Unlike the pro-growth, tax-cut party of JFK, today’s left-lurching Democrats root against economic growth, the stock market, and a powerful prosperity at home that lends strength abroad.

This is not a good place for Democrats to be.

No, it’s not a good place for Democrats to be.  If the GOP has any brains – something which is often not clearly in evidence – they’ll play this big in the 2018 election cycle.  Republicans in Congress have been pretty useless the last few election cycles, but if they had to pick one thing to get right, this was a good one.  I haven’t yet taken the time to read the whole bill, but I’ve read a few summaries, and here’s how I would characterize it:

It’s a good start.

Rule Five Bitcoin Friday

I don’t know a lot about Bitcoin, or any other cryptocurrency.  Fortunately my fellow Glibertarian “Richard” has provided a pretty neat primer on the topic.  Excerpt:

There is no such thing as a bitcoin. When someone says “I own a bitcoin,” what they mean is “I know the code or codes that can authorize the transfer of up to one bitcoin.” If you buy a “loaded” physical token for 0.01 bitcoin on eBay, the token contains a code. Neither the token nor the code is “bitcoin,” but the code enables you to transfer amounts adding up to 0.01 bitcoin to other accounts.

Bitcoin’s foundation is a public transaction ledger called the blockchain. Every bitcoin transaction is recorded on the blockchain and anyone can inspect the transaction history going back to the creation of the first block of the chain. Because the blockchain is public, bitcoin transactions are not as anonymous as some people currently in prison had hoped. Every new account is anonymous, but that anonymity will probably be compromised by the first transfer of bitcoin into it because the bitcoins in the source account probably have a history–and there are companies whose business plan is to delve through the blockchain to link accounts to owners and sell the information.

Here’s how the blockchain works: people with codes that control bitcoin create transactions. Transactions can have one or more input accounts and one or more output accounts. Newly created transactions are sent to the cloud of computers running bitcoin protocol clients and added to a list of pending transactions. Anyone can download a bitcoin protocol client and run it on their computer, but running a full “node” takes a lot of disk storage space and Internet bandwidth.

Some of the computers running bitcoin protocol clients are “mining” bitcoin. To mine bitcoin, one selects transactions from the pending list and packs them together into a binary blob called a “block”. The block is then scanned to create a “hash” value. The last digit of a 16 digit credit card number is a hash value calculated from the first 15 digits. This is how web sites can automatically determine if you’ve mistyped a credit card number.

By all means, read the whole thing.

I’m not sure I get the whole thing.  Somewhere in my IRA portfolio there are a few shares of a stock that trades in bitcoin futures, and it’s turned a modest profit for me, but that’s probably as far as I’ll go in dealing with the fiat-iest of fiat currencies.

It’s not at all clear to me how you pay for things with bitcoins, how you obtain them or how you store them.  You can’t put them in a bank account – or can you?  Can I use them to put a tank of gas in my truck?  Can  I buy guns with them?

Supposedly fortunes have been made by those smart enough to buy bitcoins when they sold for pennies apiece, or even a few dollars apiece.  Now the value of a single bitcoin hovers between seven and eleven thousand dollars.  If you had bought a thousand of them for a dollar each, you’d be virtually wealthy now – if you could find a buyer to take those bitcoins in exchange for a more tradable currency.

As a libertarian I love the idea of an untraceable currency that isn’t controlled by any government.  As a child of the pre-Internet era, I can’t quite bring myself to engage fully with a currency that I just don’t understand.

Richard’s article answered a lot of my questions.  But I still have more.  I suppose I’ll keep looking for answers.