Tag: Basic Economics

New Wealth Is Constantly Being Created So Take Advantage Of It

Neoliberals, communists, and socialists focus primarily on wealth distribution. Much of their rhetoric revolves around the top one percent holding a majority of the world’s wealth. In their eyes there is only so much pie to go around and the top one percent have a vast majority of it while everybody else has to fight over scraps. The error of this viewpoint is that wealth isn’t fixed, it’s constantly being created.

I think part of the problem is people often mistake fiat currency for wealth. Fiat currency, as the name implies, indicates nothing more than a number some oligarch commanded to be created. Wealth, on the other hand, is the abundance of valuable resources and material possessions.

Throughout the entire history of our species wealth has continued to increase. As our agricultural knowledge increased food became more plentiful. As our metallurgical knowledge increased tools became more plentiful. As our mining knowledge increased raw materials became more plentiful. Human history is the history of more knowledge leading to more wealth. Today electricity, running water, and a plethora of home appliances are common in first world household. Internet access, automobiles, pocketable computers, 3D printers, and an almost uncountable number of other products that didn’t even exist merely a generation ago are now widely available. Their isn’t a single pie we all eat from, new pies of constantly being baked at an every increasing rate.

If you only believe there is a fixed amount of pie you focus on taking pie from others. This, in my opinion, is one of the biggest flaws in neoliberalism, communism, and socialism. Instead of trying to take pie by seizing the means of production and increasing taxes a more effective strategy is to start baking pies.

This is where agorism shines. Agorists aren’t trying to seize means of production or increase taxes. They’re focused on creating more wealth. Whether via creating more efficient means of production, preventing the State from taking a cut of everybody’s wealth, or simply creating wealth that has been forbidden by the State agorists are focused on creating more for everybody instead of redistributing what is already there.

The fact that more pie is constantly being created should be taken advantage of by everybody. Why relegate yourself to taking what already exists when you can create something better? There’s no reason to limit yourself like that.

You Keep Using That Word: Monopoly Edition

you-keep-using-that-word

Monopoly is one of those words that gets thrown around too loosely. The word monopoly means, “exclusive control by one group of the means of producing or selling a commodity or service.” So monopoly actually defines a condition that only exists under government interventionism. But the word, like so many other words, has been twisted by the State. Today monopoly implies any company that has become extremely large. Case in point, Google:

BRUSSELS — European Union lawmakers have overwhelmingly backed a motion urging antitrust regulators to break up Google. The non-binding resolution approved Thursday by the European Parliament is the strongest public signal yet of Europe’s concern with the growing power of U.S. tech giants. The resolution is a largely symbolic protest vote without immediate impact. But it was approved with a large majority — 384 votes to 174, with 56 abstentions — showing widespread political backing. Andreas Schwab, German conservative lawmaker and co-sponsor of the bill, said it was a political signal to the European Commission, which is tasked with ensuring a level playing field for business across the 28-country bloc. “Monopolies in whatever market have never been useful, neither for consumers nor for the companies,” he said. Google declined to comment.

Google isn’t a monopoly. In fact it’s not even close to being one. Every single product and service it provides is also provided by others. I’m proof of this since I use very few Google products or services. Most of my searching is done using DuckDuckGo. My e-mail is handled by my server sitting in my dwelling. My phone is manufactured by Apple and runs iOS. None of my laptops are Chromebooks.

The only Google services I really utilize are Google Maps and YouTube. I use Google Maps because I find the alternatives provided by Microsoft and Apple lackluster and choose YouTube because it has more content I’m looking for than Vimeo. But in both cases you’ll notice I mentioned competitors that exist.

If you want an actual example of a monopoly look up Ma Systems. Ma Bell was a company that enjoyed a government granted monopoly over telecommunications. But outside of government intervention in the marketplace you’re going to be hard pressed to find an actual monopoly so you may want to stop throwing that word around so willy nilly.

Work Is Replaceable

Technology has created more jobs than it has destroyed yet I’m still subjected daily to the whining of people worried about the jobs. What will happen to people working checkout aisles at convenience stores if everybody uses kiosks? How will employees at McDonald’s afford housing if they’re replaced by kiosks? Where will people working in manufacturing go if 3D printers make their jobs unnecessary? Then you have the people, usually old folks, bitching about the current generation not working as hard. You would think any 20-something working less than 80 hours a week was some kind of lazy bums. And don’t even get me started on the people worried that there won’t be as much work available in the future because of automation.

You’re reading this so I infer that you both have access to a computer and aren’t currently working (even if you’re at work). Two things about these inferences should amaze you. First, you have access to an incredibly complex piece of machinery that has went from non-existent to pervasive throughout society in roughly half of a century. Second, you don’t have to perform hard labor every minute of the day just to survive.

It’s true, automation has replaced a lot of jobs. It’s also true that automation has allowed us to work less than the previous generation and still enjoy a better standard of living. That’s the beauty of automation. Not only does it replace hard labor with easier jobs but it also allows us to generate the same wealth in less time.

I, like you, am not spending every moment of daylight hunting animals or gathering berries. Usually I put in around eight hours five days a week. For those 40 hours a week most of it is spent sitting on my ass in front of a computer. The most strenuous effort I have to put forth most working periods is moving my fingers thousands of times to different keyboard positions so I can properly enter in the correct sequence of characters to convince a computer to do what I would rather not do myself. Programming is much easier than automotive repair, which is what my father does. I also work fewer hours than he does.

In most cases when a job is replaced with automation it reduces the amount of physical effort needed overall. You know the socialist dream of abolishing work? It becomes a little more feasible everyday as we make better use of advancing technology. Human history is actually a lengthy demonstration of this point. This generation is lazier than the previous, the previous generation is lazier than its predecessors, and so on.

This is why I scoff at neophobes and why I roll my eyes when some union leader is bitching about the machines replacing jobs. I don’t want to struggle every waking hour to obtain enough food to eek out a substance living. Fuck everything about that! What I want to do is go home after doing what little work I need and enjoy myself. Machines can create more wealth than I can so let them do it. I’ll enjoy the product of their labor.

Giving Versus Exchanging

“What do you do for a living?” “Me? Oh, I’m a programmer.” “You know computers? Can you help me fix mine?” How many of you have had this exact conversation? Judging by conversations with my computer savvy friends there is a 100% correlation between having computer knowledge and being asked to fix computers. The same applies to having any skill set. When I was working as a mechanic people would ask me to look at their cars when I wasn’t at work. The issue isn’t people asking me to fix their computers or vehicles but the expectation that I will do it for free.

Whenever somebody asks me to fix their computer or vehicles I have a standard response: “Absolutely! Let’s discuss prices.” Usually the person asking seems to be offended by that response. It’s as if they believe my time and knowledge, which they have admitted to wanting, are somehow worthless.

This may be the only time you’ll see my reference Atlas Shrugged. Although it’s dreck any novel that’s 1,000,000,000 pages long is likely to make at least one valid point if for no other reason than by accident. There is a scene where Objectivst Jesus is going to take Dangy on a tour of his holy land. Since he’s the messiah he has no need for worldly possessions or something and needs to borrow a car. When he calls up his disciple to ask to borrow the car a price in gold is negotiated. That scene stuck with me because both characters expected an exchange, not for one to give to the other (in fact Objectivist Jesus then made a quip about “give” being some kind of dirty work in his valley). Thinking back on it I think I understand why the novel is so popular with high school students who have been indoctrinated to “share” (really to give something of theirs up without compensation) for most of their lives. But I digress.

The difference between most people who ask me to fix their computers or vehicles and the scene I just described in Atlas Shrugged is that the former expects me to give while the latter expects an exchange. Giving dictates that somebody who has something should allow other people to have it without expecting any compensation. Exchanging dictates that goods and services have value and therefore are deserving of compensation.

When you ask somebody to borrow or do something for free you’re being hypocritical. First you’re implying you don’t believe the thing you’re requesting has any real value by not offering anything for it while also necessarily implying the thing has value by wanting it.

It’s a bit offensive to have somebody imply my skills are worthless and then ask to benefit from them. That’s not to say I expect everybody to offer me the usual market value of my time. Even a token offering is appreciated. For example, the cost of the time needed to fix a computer is usually higher than the cost of a box of cookies. But I’m still willing to fix a computer for people I know if they offer to bake me some cookies. Usually I’ll turn down the offer (then they’ll insist and bake them anyways) because it’s not about the payment, it’s about the acknowledgement that my skills are worth something to them (a token of appreciation if you will).

The idea behind an exchange is that two people are in possession of something the other wants. Both people feel as though they’ll be better off in the end if they exchange their thing for the other person’s thing. Exchanges are the foundation of markets so in a way markets are a mechanism for people to compliment one another. When you offer to make an exchange you’re complimenting the other person’s effort by saying effort is worth more than something you have.

If you’re one of those people who reflexively asks, “Will you fix my computer,” every time somebody says they make a living off of computers please stop. Instead ask something like, “What would you charge me to fix my computer?” At the very least please don’t get offended when the computer person asks for something in exchange. Their time, like your time, is worth money. Acknowledge that mutual worth.

Advances In Technology Creates New Markets Which Creates New Jobs Which Creates New Wealth

One of the most idiotic claims I hear, usually from members of the labor movement, is that automation is taking American jobs. They get made when I use self-checkout kiosks at the grocery store because they think that mindless machine is eliminating a human worker permanently. Ironically they rant at me as they’re demanding the minimum wage be increased. If anything encourages a business owner to seek a way to automate labor it’s forcing them to pay a laborer more than they make for the company. Another irony is they often post their rants online using a machine that has done more to wipe out manual labor than anything else.

Here’s the thing, when automation obsoletes human labor the people who are displaced aren’t eliminated from the workforce forever. Us humans are adaptable. In fact we wouldn’t be the dominant species on this planet if we weren’t. When our set of skills is obsoleted by automation we can learn new skills. In fact the replacement of human labor by automation has lead to the increase in the number of skills needed and therefore the number of laborers needed. That’s right, technology has actually created more jobs than it has destroyed:

In the 1800s it was the Luddites smashing weaving machines. These days retail staff worry about automatic checkouts. Sooner or later taxi drivers will be fretting over self-driving cars.

The battle between man and machines goes back centuries. Are they taking our jobs? Or are they merely easing our workload?

A study by economists at the consultancy Deloitte seeks to shed new light on the relationship between jobs and the rise of technology by trawling through census data for England and Wales going back to 1871.

Their conclusion is unremittingly cheerful: rather than destroying jobs, technology has been a “great job-creating machine”. Findings by Deloitte such as a fourfold rise in bar staff since the 1950s or a surge in the number of hairdressers this century suggest to the authors that technology has increased spending power, therefore creating new demand and new jobs.

Their study, shortlisted for the Society of Business Economists’ Rybczynski prize, argues that the debate has been skewed towards the job-destroying effects of technological change, which are more easily observed than than its creative aspects.

Computers may have eliminated the need for most secretarial labor but it created the need for hardware developers, programmers, technical support specialists, network engineers, and a ton of other jobs that exist only because computers are now pervasive throughout our society.

Automation is a wonderful thing. It creates more wealth that can be invested in more ventures that employs more people. Librarians well-versed in the Dewey Decimal Classification system may not be in high demand anymore but Google, Microsoft, and DuckDuckGo have employed a lot of people to build, improve, and maintain their search engines. In addition to creating those jobs automation also lead to entirely new markets. Data mining, for example, wouldn’t exist if massive amounts of searchable data didn’t.

3D printing is an emerging technology that stands to replace a lot of human labor in manufacturing. But it also stands to open up markets for improving 3D printer technology, material engineering for 3D printers, engineering goods so they can be more easily manufactured with 3D printers, designing 3D models to print, etc.

Advances in technology creates new markets which creates new jobs which creates new wealth which leads to advances in technology. It’s a beautiful cycle of creation. The people who claim automation eliminates jobs are bloody idiots. Automation creates new jobs.

Ladies and Gentlemen, This is Your Newspaper of Record

The New York Times is considered a newspaper of record. That is to say it’s editorial staff is considered professional and authoritative. Consider that point when you read this story:

Avian flu, which first appeared in the United States in December, has devastated the nation’s turkey and laying hen flocks, though it seems to be abating with the arrival of higher temperatures, as specialists had predicted. But barns still stand idle, as egg and turkey producers weigh the risks that the outbreak will pick up again in the fall.

The U.S.D.A. predicts that egg production this year will be down by roughly 341 million dozen, or about 4 percent from last year, Mr. Shagam said. “We do expect to see prices come down from this high but still be at record highs for the year,” he said.

What does that mean? An average wholesale price of $1.60 to $1.66 for a dozen New York large eggs, which would break the record high of $1.42 a dozen set in 2014.

No run on the grocery store has been apparent, at least not by consumers.

To summarize the article, avian flu has knocked back egg production so prices have increased and since prices have increased consumer demand has gone down. What really gets me about this article isn’t the fact that it’s pointing out the bloody obvious or that it took so many words to do so. No, what really gets me is that the author treats this like some kind of goddamn revelation. Who would have ever though that increasing prices decreases demand? This will change everything!

Considering the New York Times gives Paul Krugman space to write his seemingly unending flow of economic bullshit I’m not surprised its other staff members are equally ignorant of economics. I also understand that we’ve been told by the state that the only way to deal with shortages are price controls coupled with rationing. Allowing markets to shake themselves out has been labeled a pipe dream that evil anarchists say to scare the statists into disobeying their masters. But when staff members at your newspaper of record believe this very basic economic principle is even newsworthy then you really have to shake your head at the sorry state of economic knowledge in this country.

Verboten Drugs are Cheaper Than Ever

When I point out the failure of the war on drugs to stop drug usages a fairly common rebuttal is that the prohibition keeps the costs of drugs high and therefore prevents many people who would be using them from using them. My observations have indicated that claim is bullshit because I know dirt poor people who use cannabis. But now there’s research refuting that claim:

Cocaine, heroin and marijuana have become cheaper and stronger over the past two decades, despite increases in drug seizures by authorities fighting the global illegal drug market, a new study found.

The researchers looked at seven international drug surveillance databases to examine how the purity and price of illegal drugs changed between 1990 and 2009.

In the United States, the average purity of heroin, cocaine and marijuana increased by 60, 11, and 160 percent respectively, between 1990 and 2007, while the prices of these drugs, adjusted for inflation and purity, fell about 80 percent.

How can this be? Those drugs are illegal! Here we see another conflict between political dreams and reality. Political dreamers like to believe legally prohibiting something will make it go away. Reality dictates that people have wants and will seek to fulfill those wants. Creating prohibitions just makes people adjust their behavior in order to fulfill their wants.

For example, the severity of many drugs laws are based on the volume or weight of drugs a person possesses. A small amount of cannabis can net you a fine whereas a large amount can land your ass in prison on charges of intent to distribute. Drug consumers don’t want to end up in prison and drug producers don’t want their customers lock up in prison. To that end drug producers have been busy making a more potent products so their customers can enjoy the same effects in a small package. Instead of risking charges of intent to distribute cannabis users can now face a fine and still have the same potency as before.

Reducing costs makes sense. If you’re a drug producer you want as wide of a customer base as possible. Poorer people are often unable to enjoy more expensive forms of entertainment so they opt for cheaper forms. By making drugs cheaper the producers are able to access the poorer markets and therefore enjoy a larger customer base.

Once again we see markets overcoming state hurdles. The continuous pattern of markets triumphing over statism is why I firmly believe agorism, which utilizes markets, is the most tactic most likely to bring us real freedom.

Markets Have Not Ruined Video Games

According to Lorne Lanning capitalism is destroying the gaming industry. In his eyes the for-profit game development model has lead to a world where creativity is stifled by large developers. The Foundation for Economic Education has a good rebuttal by pointing out that the video game industry wouldn’t even be a thing without markets. I want to take it a step further though.

Lanning believes the solution to capitalism in video gaming is independent developers:

In today’s marketplace, Lanning pointed to the indie victories we’ve witnessed with titles like Octodad or Monument Valley. Yes, it takes money to make money, but it doesn’t have to take tens of millions.

What he doesn’t stop to consider is that independent developers are enjoying a great deal of success thanks, in part, to the major game developers that he seems to despise. There has never been a better time to be an independent game developer. This is because the development tools have become cheaper (often free) and more capable and getting titles in front of customers is dead simple.

Consider Microsoft. As much as I dislike Windows I can’t fault Microsoft for how it treats developers. Over the years it has created excellent development tools, streamlined game development with its DirectX framework, and created a distribution platform that every Xbox and Windows gamer has access to. If I want to release a game for the Xbox Microsoft is very much interested in helping me see my dream come true because it stands to profit from my success. And Microsoft isn’t the only game in town. Valve has given independent developers an amazing distribution platform for PCs with Steam. It has also given game developers a great engine called Source. I haven’t even mentioned Sony, with its PlayStation store, Google with its Play Store, or Apple with development tools and App Stores for both OS X and iOS.

It was only a few years ago when independent developers had to front the expense of developing, advertising, and distributing titles. This often resulted in a hodgepodge of a million online stores, product keys you had to keep track of, and other assorted headaches. Now an independent developer can download excellent, free developer tools and publish the completed title to the Xbox Games Store, the PlayStation Store, Google Play, Steam, and the Apple App Stores. From there users can click a few buttons and have the game downloaded to their system with minimal hassle.

Markets gave rise to today’s large developers. These large developers then created development tools and platforms that helped give rise to independent developers. Someday the independent developers will become large themselves and likely create new tools and platforms to give rise to new independent developers.

Video games have gone from a geeky hobby you got beat up for enjoying to a multi-billion dollar industry. The only reason we have capable gaming hardware, quality development tools, and easy distribution platforms is because developers of old satisfied customer wants enough to acquire the capital necessary to build these things. Had the Nintendo Entertainment System or Sega Genesis flopped it’s possible that video games would still be a niche industry. Dedicated gaming hardware such as consoles and graphics cards would likely be much less capable than they are today. Development tools would probably still be primitive due to the lack of investment in improving them. Distribution would almost certainly still rely on a hodgepodge of disparate websites and produce keys. After all, why would a large developed like Microsoft put any money into the growing the gaming industry if it didn’t stand to profit? How would Valve have acquired the capital necessary to build Steam if Half-Life hadn’t raked in so much money?

I think Lanning’s real objection to today’s gaming industry is that the best selling titles aren’t the titles he enjoys. As somebody who doesn’t enjoy today’s most popular series, such as the titular Call of Duty, I can relate. But the success of those blockbuster series hasn’t hampered the games I enjoy. Series I enjoy, such as MegaMan and Armored Core, have seen releases in recent times. Inafune, one of the creators of the MegaMan series, has even branched out on his own to release a spiritual successor. Igarashi, one of the masterminds behind Castlevania: Symphony of the Night, has also branched out to release a spiritual successor. Capitalism hasn’t destroyed the gaming industry, it has propelled it forward. All of the capital acquired by releasing blockbuster titles has given way to tools that help independent game developers. Hell it’s unlikely Oddworld, Lanning’s most well-known title, would have never seen the light of day if it wasn’t for blockbuster titles from the 8-bit and 16-bit console days creating a major gaming industry.

Why the Government Sucks at Building Roads

A common phrase you’ll hear amongst libertarian circles is “But without government who will build the roads?!” This phrase is a sarcastic remark meant to poke fun at statists who cannot conceive of an alternative to government transportation infrastructure. While statists continue to claim that government is necessary to build and maintain roads, us libertarians are asking why government roads suck so much.

As I mentioned yesterday, Minnesota has a lot of dilapidated bridges. Anybody who drives the roads around here knows that bridges aren’t the only part of our automobile infrastructure that sucks. Some roads are so full of potholes that I feel as though the off-road package on my Ranger is necessary when traveling on the roads. No tax increases or surpluses seem to change anything. What’s the problem?

The problem is incentives. Statists scoff at the idea of private roads but the fact of the matter is private entities that derive profits from roads have an incentive to maintain those roads. Businessed, for example, want to make it as easy as possible for customers to get to them. Organizations that own highways want to provide motorists the best experience possible so they’ll keep coming back. Governments have no such incentives.

The two biggest problem with government roads are monopolization and mandatory payments. In many states the government maintains a near monopoly on road infrastructure. This is done through regulations that make building roads illegal or prohibitively expensive. Regulations usually take the form of outright bans, building permits, property taxes, arbitrary environmental restrictions, etc. Effectively the state declares a monopoly for itself on any notable infrastructure. If people living in a state need access to roads and don’t like what the state has provided they have no alternatives so there is no concern that users will go elsewhere. Even if users stopped using the roads they’re still required to pay for them. Taxes, after all, aren’t voluntary. Using private roads to get around wouldn’t exempt you from paying the state gas tax when you filled up your tank. Property and sales taxes, which are sometimes used in addition to gas taxes to build infrastructure, are also not optional.

When an alternative can’t exist and you have to pay for something regardless there is no incentive for the provider to make you happy. Motorists weren’t able to go to a different provider when the 35W bridge in Minneapolis collapsed due to government negligence because there were no alternatives. Minnesotans also didn’t receive a discount on their taxes as compensation for being unable to utilize the bridge. In fact Minnesotans were expected to pay more. How’s that for an incentive? If the state government neglected more bridges to the point of collapse it could then demand even more tax money.

There are no shortages of entrepreneurs who want to build roads so the idea that nobody will build them if the government doesn’t is preposterous. The real question is what incentive does the state have to provide motorists with quality infrastructure?

What Happens When You Densely Populate a Desert

Things aren’t looking good for California. Not surprisingly for a desert water is in short supply. Unlike most deserts California happens to be very densely populated, which has lead to a major crisis:

Right now the state has only about one year of water supply left in its reservoirs, and our strategic backup supply, groundwater, is rapidly disappearing. California has no contingency plan for a persistent drought like this one (let alone a 20-plus-year mega-drought), except, apparently, staying in emergency mode and praying for rain.

Assuming this estimate is accurate California is in for some very bad times. So what’s to be done? Let’s ask the statist that wrote this article:

Several steps need be taken right now. First, immediate mandatory water rationing should be authorized across all of the state’s water sectors, from domestic and municipal through agricultural and industrial. The Metropolitan Water District of Southern California is already considering water rationing by the summer unless conditions improve. There is no need for the rest of the state to hesitate. The public is ready. A recent Field Poll showed that 94% of Californians surveyed believe that the drought is serious, and that one-third support mandatory rationing.

Second, the implementation of the Sustainable Groundwater Management Act of 2014 should be accelerated. The law requires the formation of numerous, regional groundwater sustainability agencies by 2017. Then each agency must adopt a plan by 2022 and “achieve sustainability” 20 years after that. At that pace, it will be nearly 30 years before we even know what is working. By then, there may be no groundwater left to sustain.

Third, the state needs a task force of thought leaders that starts, right now, brainstorming to lay the groundwork for long-term water management strategies. Although several state task forces have been formed in response to the drought, none is focused on solving the long-term needs of a drought-prone, perennially water-stressed California.

Not surprisingly the statist’s answer is stupid. Rationing, making new agencies, and establishing a task force isn’t going to accomplish jack shit. The problem is that California, at least the southern portion of the state, is a desert. Since the state decided to declare a monopoly on water rights in the region it ignored the very real fact that deserts are not the greatest places to pack a lot of people and agriculture into. Now California is densely populated and a major agricultural state. The only thing surprising about this fiasco is that it didn’t enter a critical level like this sooner.

So I return to the original question, what’s to be done. Fixing this problem isn’t feasible with central planning so the only viable answer is to remove the state from water rights and management and allow the market to do its thing. I would predict doing this would increase the cost of water in California dramatically and therefore encourage people and agriculture to move elsewhere. This is likely the only long-term solution for California’s water shortage but people don’t want to hear it because they prefer the fairytale that statism has been telling them, which is any economic rules can be nullified so long as enough people vote hard enough.