Solutions To California’s Drought: Government Fines, or Market Prices.

Posted July 24, 2014 by austrianaddict
Categories: Econ. 101, Government and Politics

Tags: , , , , , , , ,

File:2003-09-28 Lawn sprinklers at NCSSM.jpg

California’s water shortage due to the drought is being dealt with in typical interventionist fashion. The Government wouldn’t even consider how the free market deals with scarcity. Murray Rothbard wrote about a water shortage that occurred in 1977 in northern California in this article titled, The Water Shortage, (at economicpolicyjournal.com). Time has passed since this was written but the economic principles are as true today as they were in 1977.

FREE MARKET vs. CENTRAL PLANNING

When Government is the supplier a good, whether it’s water, electricity, or healthcare, the first thing that happens when there is a shortage is they blame the consumer for using too much. When electrical use is high during the summer, suppliers always warn consumers to use less electricity because of the strain on the system. Rolling black outs may come into play if use outstrips the ability to supply enough electricity. I’ve always wondered why producers of electricity are always trying to get consumers to use less of their product, even to the point of giving them energy efficient light bulbs. In the free market, producers use advertising to try to increase demand for their product.

The first rule of economics is scarcity. What we desire is greater than the means available to fulfill this desire. These scarce goods have to be rationed one way or another. If there were no scarcity, there would be no need to economize on any good. Prices ration scarce resources in the free market. Bureaucrats and planning boards ration scarce resources in a centrally planned system.

ROTHBARD EXPLAINS SCARCITY, SHORTAGE, RATIONING

I’m going to let Rothbard take it from here because he is way better than me at explaining scarcity, shortages, rationing, prices, and supply and demand. Her are some excerpts from the 1977 article.

“….northern California, has been suffering from a year-long drought, ……. government must leap in to combat it—not, of course, by creating more water, but by mucking up the distribution of the greater scarcity.”

“…. on the free market, regardless of the stringency of supply, there is never any “shortage”, that is, there is never a condition where a purchaser cannot find supplies available at the market price. On the free market, there is always enough supply available to satisfy demand. The clearing mechanism is fluctuations in price. If, for example, there is an orange blight, and the supply of oranges declines, there is then an increasing scarcity of oranges, and the scarcity, is “rationed” voluntarily to the purchasers by the uncoerced rise in price, a rise sufficient to equalize supply and demand. If, on the other hand, there is an improvement in the orange crop, the supply increases, oranges are relatively less scarce, and the price of oranges falls consumers are induced to purchase the increased supply.”

“Note that all goods and services are scarce, and the progress of the economy consists in rendering them relatively less scarce, so that their prices decline. Of course, some goods can never increase in supply. The supply of Rembrandts, for example, is exceedingly scarce, and can never be increased—barring the arrival of a Perfect Forger. The price of Rembrandts is high, of course, but no one has ever complained about a “Rembrandt shortage.” They have not, because the price of Rembrandts is allowed to fluctuate freely without interference from the iron hand of government.”

“If the water industry were free and competitive, the response to a drought would be very simple: water would rise in price. There would be griping about the increase in water prices, no doubt, but there would be no “shortage”, and no need or call for the usual baggage of patriotic hoopla, calls for conservation, altruistic pleas for sacrifice to the common good, and all the rest. But, of course, the water industry is scarcely free; on the contrary, water is almost everywhere in the U.S. the product and service of a governmental monopoly.”

“When the drought hit northern California, raising the price of water to the full extent would have been unthinkable; accusations would have been hurled of oppressing the poor, of selfishness, and all the rest. The result has been a crazy-quilt patchwork of compulsory water rationing, accompanied by a rash of patrioteering ecological exhortation: “Conserve! Conserve! Don’t water your lawns! Shower with a friend! Don’t flush the toilet!”

“…. local ecologists and statists got into the act. They groused that the over-conservation had induced people not to water their lawns, which led to the “visual pollution” “unsightly” lawns…..”

“…. wouldn’t the poor be hurt by the water district raising its water prices? …No….the poor are not being hurt by the higher price because, being forced to cut their consumption, their total bill has not increased. Thus, a price rise by a private firm is always selfish and oppressive of poor people; but when a monopoly governmental agency increases its price, the poor do not suffer at all, since if they cut their purchases sufficiently in response to the higher price, their total dollar payments will not increase. It is this sort of nonsense that our statists and busybodies are now being reduced to.”

NOTHING HAS CHANGED

In the present drought situation, central planners are trying the same failed responses to the problem, while free market solutions siton the sideline waiting for their chance to prove they are better than these “first string solutions” of the central planners. Remember, there is no solution to scarcity, just a better or worse way of dealing with it.

This article, California City Will Fine Couple $500 For Not Watering Lawn, State Will Fine Them $500 If They Do, by Mary Beth Quirk, at consumerist.com, shows that central planners have not gotten any smarter in 35 years. They are true believers in their central planning religion, and no amount of conflicting incentives or failures will convert them.

The market is always trying to correct perverse incentives created by central planners. It will come up with alternatives to paying the fines, as shown in this article, Spray-Painting Your Grass Green Is One Way To Avoid “Brown Lawn Fees“, by Mary Beth Quick, at consumerist.com. The shame of it is there would have been no need for this lawn spray-painting business in a true free market. It only became viable because of Government planning. The labor, capital, and resources used to keep from getting fined, could have been used in more productive ways satisfying true free market demand. If the price would have been allowed to go up to ration water, each person could have decided how much to use at the higher price, allowing them to use their money for other things than complying with green lawn laws. This is a version of the broken window fallacy, read here, Hurricane Sandy And The Broken Window Fallacy.

Understanding some basic economic principles will give us enough knowledge to confidently argue against the political “solutions” bureaucratic central planners come up with in dealing with the first rule of economics; scarcity.

Related ArticleIncentives Matter, at austrianaddict.com.

Related ArticleThe Reality Of Obamacare, at austrianaddict.com.

Related ArticleMilton Friedman on Market Failure vs. Government Failure. Which Has a Higher Cost? at austrianaddict.com.

 

“What Are They Trying To Hide?”

Posted July 22, 2014 by austrianaddict
Categories: Government and Politics

Tags: , , , , , , , ,

The Russian separatists are blocking access to the crash site of the Malaysian airliner. The President asked, “What are they trying to hide“. I have to agree that blocking access raises suspicion that evidence is either being  hidden or destroyed. The President also said, “We have to  make sure the truth is out and accountability exists”. Once again I agree; truth and accountability should always be a top priority. Read, What Are Russian Separatists Trying To Hide.

WHAT ARE THEY TRYING TO HIDE?

SOUTHERN BORDER

Congressmen and journalists are being denied access to the immigration camps that are springing up as a result of the situation on the southern border. Administrative agencies obviously don’t want whatever is going on inside to be seen, “which begs the question“, quoting the President, “What are they trying to hide ….. We have to make sure the truth is out and accountability exists”. Read, Congressman Denied Entry To Immigrant Camp. What Is Government Hiding...

IRS ABUSE OF POWER

IRS computers mysteriously crashed days after e-mails were requested concerning the IRS’s possible targeting of conservative, tea party, and  liberty groups. Here is what IRS Lois Lerner, who plead the 5th when she was questioned by Congress, said in an e-mail, “I was cautioning folks about email and how we have had several occasions where Congress has asked for emails and there has been an electronic search for responsive emails – so we need to be cautious about what we say in emails“. Quoting the President, “What are they trying to hide …. We have to make sure the truth is out and accountability exists“. Read, Rep Jim Jordan Questions IRS Commissioner on Lois Lerner Investigation.

NIXON’S MYSTERIOUS 18 1/2 MINUTE GAP

President Nixon had to turn over tapes of oval office conversations after they were subpoenaed by a special prosecutor. One of the tapes had an 18 1/2 minute gap that Nixon’s secretary Rose Mary Woods said she erased by mistake. Here is an excerpt from, Nixon Shed No Light On Tape Gap To Grand Jury, ” Nixon stuck to secretary Rose Mary Woods‘ story that she erased it by mistake, and professed anger when learning how much was missing. Although he said he could not remember what was said during the gap...” Here is a quote from Nixon, “Rose had thought it was four minutes, or something like that,” he testified. “Now the counsel have found that it is 18 1/2 minutes, and I practically blew my stack……If you are interested in my view as to what happened, it is very simple. It is that it was an accident.” Quoting President Obama, “What are they trying to hide …. We have to make sure the truth is out and accountability exists“.

Truth and accountability are two things that politicians and bureaucrats avoid at all costs. Having the President demand truth and accountability is like having Hugh Hefner demand abstinence and chastity.

 Related ArticleWhat Is Tyranny? The President Should Know The Definition, at austrianaddict.

 

 

 

 

Must Reads For The Week 7/19/14

Posted July 19, 2014 by austrianaddict
Categories: Must Reads For The Week

Tags: , , , , , , , , , , , ,
The pen is mightier than the sword...

 The pen is mightier than the sword… (Photo credit: mbshane)

Home Depot Starts Selling 3-D Printers In Stores, at economicpolicyjournal.com. This technology will eventually change the way we do things in ways we can’t even imagine.

Amazon Asks Permission From FAA To Test Drone Delivery System, by David Streitfeld, at bits.blogs.nytimes.com. Another idea whose uses we have only scratched the surface of.

The EU’s Accelerating Unpopularity, by Giles Merritt, at econommicpolicyjournal.com. People in European countries don’t like the idea of giving up their sovereignty. Each country in Europe has it’s own unique culture, and these cultural divides go back centuries and will probably never change. The bottom line is, they just don’t like each other. Even socialist countries only like to be told what to do by their socialists central planners not by other socialist central planners.

Reasons To Vote Democrat, by Ty Andros, at economicnoise.com. Unfortunately these can also apply to a majority of elected Republicans. Government will continue to grow and individual freedom will shrink, as long as both parties can get people to look at everything as a battle between the R’s and D’s they both win. The real battle, as it has always been is, can the individual keep his freedom, or will politicians, bureaucrats, and Government agents use their power to take it away. Until individuals understand that the freedom to succeed or fail on their own is their best interest, and voting for R and D promises of goodies and security, are the shackles they may never be able to escape once they put them on.

Mixed-Race Student Sues University, Says It Misled Her To Promote Racial Diversity, by Dominic Lynch, at thecollegefix.com. I saw this at aei-ideas.org. A tyrant is someone in a position of power who makes decision benefiting himself, at the expense of the person he has power over. This is an example of tyranny. I love the fact that this courageous young lady is fighting back. In order for us to beat back tyranny we have to fight it every where it occurs.

Young Boy Takes On City Council … And Wins, by Jordan Richardson, at dailysignal.com. This nine year old boy built a free library in his front yard for Mothers Day, and was ordered to tear it down by city officials in Leawood Kansas. He fought back and the city council approved a temporary measure to allow his free library. I hope he eventually wins. We have to fight back against tyranny at every turn. I saw this at aei-ideas.org.

Senator Harry Reid Says The Southern Border Is Secure, by Oliver Darcy, at theblaze,com. Charles Krauthhammer questioned Senator Reids mental health after this comment. I’m not going to give Ried the mental health pass. This lie shows his contempt for we the people. With all due respect Senator Reid, “don’t piss down my back and tell me it’s raining“.

Nancy Pelosi Lies About Hobby Lobby Decision, Gets Corrected By Megyn Kelly, youtube video, Megyn Kelly does a great job explaining what the Hobby Lobby decision did and did not do. I disagree with her calling  Nancy Pelosi’s statement “misleading Hysteria”, I call it flat-out lying. Pelosi’s comments demonstrate why I loath politicians. With all due respect Mrs. Pelosi, “don’t piss down my back and tell me it’s raining“.

Watch This Optical Illusion. This is what goes on in my brain when I listen to Reid, Pelosi, McConnell, Boehner, or Obama speak.

 

These cartoons are from theburningplatform.com.

150818 600 Border Security cartoons

 

 

 

 

 

 

 

 

 

150782 600 Chelsea Clinton speaking fee cartoons

150764 600 KIDS AND SUMMER cartoons

Gasoline Consumption Is Down: Why?

Posted July 16, 2014 by austrianaddict
Categories: Econ. 201

Tags: , , , , ,

File:Shell station in Rosario.jpg

I’ve always thought robust economic activity could be measured by how much gasoline we use. Our ability to move ourselves, and things, quickly, saves our most scarce resource, time. This allows us to produce more with our time. I liken the consumption of gas in our economy to the consumption of nails for a carpenter. The more nails a carpenter uses signifies he is producing more output, and the higher the output, the wealthier he becomes. The more gas we use signifies we are producing more output, and the higher the output, the wealthier we become. Economies run on energy, and gasoline, which is specific to our transportation needs, is a big percentage of our countries energy supply. Electricity and heat are the other two parts of our energy needs.

Individuals use gasoline for productive activities and for consumption activities. An example of productive activities would be driving to and from work, and all other driving that is work related. Consumption activities would be all driving other than these productive activities. All of our consumption activities are made  possible because of our productive activities, with the exception of consumption financed with debt, a Government transfer from someone’s production via taxes, or counterfeiting money, like the Fed. The monies received through debt, transfer, or counterfeiting, are essentially certificates which allow you to demand what someone else has produced without any corresponding present production, except in the case of debt, which would be paid back with future production.

CHART SHOWS LOWER CONSUMPTION

I say this chart, US Total Gasoline Retail Sales by Refiners (Thousands of Gallons Per Day), at zerohedge.com. It is from the U.S. Energy Information Administration (eia.gov) which was created by congress in the late 70′s. It shows our consumption of gasoline in the last 9 years is way down. Lets look at consumption for the month of April since 2006.

Year           Thousands of Gallons Per Day (April)
2006            61,020.8
2007            57,354.7
2008            56,307.4
2009            51,215.6
2010            46,016.2
2011            41,555.0
2012            29,684.0
2013            28,179.6
2014            20,109.1

REASONS FOR DROP IN CONSUMPTION

That’s 40,000,800 less gallons being consumed in the month of April from 06 to 14, a drop of 66% or 2/3rds. What can account for this drop in consumption since 06. Lets look at some reasons. 1) Gas prices are high which means less will be consumed. 2) Higher unemployment means less work related miles driven. 3) Technology allows us to work at home, and also communicate with people without meeting face to face. 5) Shopping online reduces miles driven. 6) Our population is aging, and older people drive less. 7) Younger people are driving fewer miles. 8) Newer cars get better gas mileage, although this might be off set by a couple of things: A) people are keeping their lower MPG cars longer, and B) Because a molecule of ethanol produces less energy than a molecule of gasoline, mixing ethanol with gasoline lowers fuel efficiency. 9) Compressed natural gas is cheaper than gasoline, but substituting natural gas cars for our current fleet will occur some time in the future, and has no bearing on the present consumption.

Demographics and technology can’t account for the total 66% drop in gasoline consumption. Even if it accounted for half of the 2/3rds drop in gasoline usage, which it can’t, it still shows that Economic activity has slowed and doesn’t look like it is about to pick up any time soon. When the housing bubble, caused by the Feds dual edged sword of low-interest rates and electronically printing counterfeit money, popped in 08, it slowed economic activity. But the biggest drop in gasoline consumption has happened in the last year, at the same time we were being told the economy is improving. I think the drop in gasoline consumption is the canary in the coal mine when it comes to our economy.

WHAT TO LOOK FOR

The law of supply and demand states: less will be demanded at a high price than a low price, and more will be supplied at a high price than a low price. Since the demand is low the price should eventually go down. As the price goes down more will start to be consumed and less will be supplied. As demand rises and supply shrinks, a point will be reached where the price will start to rise. when this happens,  less will be demanded and more will be supplied.

If gasoline usage doesn’t increase significantly at the lower prices, we will know the new normal for our economy is an over all lower standard of living.

Related ArticleWhat Comes First Production Or Consumption, at austrianaddict.com.

Related  ArticleCapital Consumption, aka, Eating Our Seed Corn, at austrianaddict.com.

Related ArticleA Look Over The Horizon At What Lies Ahead If We Continue Down The Central Planning Road, at austrianaddict.com.

Related ArticleIs The Economy Improving? It Depends On How You Define Improving, at austrianaddict.com.

 

 

Must Reads For The Week 7/12/14

Posted July 12, 2014 by austrianaddict
Categories: Must Reads For The Week

Tags: , , , , , , , , , , , , , ,
The pen is mightier than the sword...

 The pen is mightier than the sword… (Photo credit: mbshane)

Border Patrol Agents Contracting Scabies, Agent Who Speaks Out, Given Cease And Desist Order, at benswann.com. The truth about the conditions in these detention centers is what individuals higher up the Government food chain don’t want anyone to find out. “Because I stood up and told the truth they are going to terminate me and I am going to fight it” says Agent Ron Zermeno. ‘He went on to say that his bosses are more worried about their promotions and their bonuses than protecting the country’. No matter what side of this issue you are on, can we all agree that politicians and bureaucrats in Government have made a complete mess of the situation because politics trumps logic and reason.

ER Use Skyrocketing With Obamacare, by Ed Morrissey, at hotair.com. Once again the unintended (or possibly intended) consequences of Government intervention in the free market rear their ugly head. Prices coordinate supply and demand. but when Government policies incentivise demand and constrain supply, well you figure it out.

The New US Tax Form, at zerohedge.com. This is supposed to be a bit of humor,but the question has to be asked: if individuals in the IRS don’t have to comply with the law, why would anyone expect the rest of us to comply with the law? The break down of the rule of law happens incrementally over a long period of time, and then at some point the marginal straw finally breaks the camels back.

Finally A Loss For Socialist Kshama Sawant In Seattle, at economicpolicyjournal.com. Do Uber and Lyft realize this is just an incremental step toward more Gov. control, and not a win for the free market. Here is an excerpt, “There will be no cap on the number of for-hire drivers: We have deregulated a highly regulated monopoly,” Seattle Mayor Ed Murray said. It should be noted, though, that this step is far from a complete free market step. UberX and Lyft will now be part of a new government created cartel, that will limit others from entering the Seattle taxi industry. The city will only issue 200 new taxi licenses over the next four years. Taxi and for-hire drivers will see their licenses “transfer into a property right” on the order of New York’s valuable taxi medallions.” This reminds me of the analogy Walter E. Williams uses, This is like someone who comes into your yard, rips out your tulips and plants roses, and then gets you to argue the merits of tulips vs. roses, instead of you telling him he had no right to rip out your tulips in the first place.

Canada Pulls The Plug On Delayed Keystone XL Pipeline: Will Instead Send Oil To Asia Via A New Pipeline, by Mark J. Perry, at aie-ideas.org. How many jobs did the President sacrificed at the altar of radical environmentalism. These lost jobs are the unseen consequences that are results of every Government intervention. The benefit of the jobs and wealth that would be created out weighs the risk, not a guarantee, just a minimal risk of a possible environmental problem. The environmentalists are not willing to trade-off any amount of risk, no matter how small, for any amount of economic gain, no matter how big.

Yet Another Leak In The Establishment Ship, by Chris Rossini, at economicpolicyjournal.com. This information age brought about by technological innovation that couldn’t have been imagined 15 years ago,  is starting to over take the status quo propaganda outlets of the Government central planning crowd. News papers and TV news have been in decline for years. Now Hollywood’s influence along with the education monopoly are loosing their hold. As the article says, “this is a positive sign for liberty”.

Freedom Summed Up In One Image, at zerohedge.com. When I saw this sign, I thought it was parody from The Onion. This sign shows how people in positions of power will wield it, to try to control everything you do. They are smarter than you!

Leaving Illinois For Texas, by Mark J. Perry, at aei-ideas.org. Another example of unintended consequences of Government intervention. People are leaving States when the cost of regulation and taxes gets too high. People on the margin leave, and the with the next round of regulations the next group of people on the margin will leave, (as long as there is a lower cost place to escape to).

When Steelers Steal, by Christopher Westley, at mises.org. This is our heavy lifting for the day. Bastiat talked about ‘that which is seen, and that which is not seen’. This article shows the history of the steel industry through the lens of unseen consequences. Government intervention doesn’t happen in a vacuum. The affects of the intervention are like the expanding ripples from a rock being tossed into a pond.

A Typical Day For Southwest Airlines, at economicpolicyjournal.com. This is just Southwest Airlines shown on this time lapse video. What do the skies look like if all planes from all airlines were shown? Well here it is, A Day In The Life Of Air Traffic Over The United States.

45 Perfectly Timed Photographs, at induldged.com. These are outstanding. I saw this at angryid.wordpress.com.

perfectly-times-photos-37

Observations From The Margin

Posted July 8, 2014 by austrianaddict
Categories: Observations From The Margin

Tags: , , , , , , , , , , ,

 

Observation Tower

Observation  (Photo credit: mooglet)

-The President is asking for $2 billion to fight the recent surge in illegals crossing the Southern border. Why would anyone trust this administration in regards to enforcing immigration laws? When Arizona tried to enforce Federal laws, the President had his justice department sue to stop them.

-The flood of illegal crossings reminds me of Fast and Furious only in reverse. In Fast and Furious, Government ATF agents told legal gun dealers to illegally sell guns to Mexican drug cartels, for the purpose of blaming the violence in Mexico on American guns crossing the border. This would give the anti-second amendment administration leverage to push for more gun control. Their plans were ruined when Border Patrol agent Brian Terry was killed with one of the weapons supplied by the ATF,s operation. With the current Southern border crisis, illegals are sending their young children across the border because they were told by international and local media, and family members in the U.S. that our Government was issuing immigration “permisos” (free passes) upon arrival. Of course our Government publicised this. The administration will use the flood of illegal immigrants as a crisis to try to get their immigration agenda passed into law. This administration would only enforce the parts of any new immigration law that they want enforced, and would ignore what they don’t like.

-Should these children be sent back to their families in their home countries? Yes: The precedent was set in the Elian Gonzalez case during the Clinton administration. Elian Gonzalez’s mother drowned when she tried to get her son to the U.S.. The INS placed Elian with parental relatives in Miami. He was taken away at gun point when courts ruled that his father, not his relatives, could petition for asylum {a temporary refuge granted political offenders}. Many made the argument that he would be better off with his father in the communist utopia of Cuba, than he would be with his relatives in the U.S., so I would assume, for the sake of consistency, these same people would use the same reasoning concerning these children.

-Every administrations tries to get outcomes they desire. If they can’t get it through legislation, or if legislation is passed that they don’t like, they take it to court. It they don’t get the result they want in court, they use executive power to either change the law, or they just don’t enforce the laws they are legally mandated to enforce.

-Here is why the IRS scandal is worse than Nixon and Watergate. The Nixon scandal was political dirty tricks between two political parties. The present IRS scandal is a case of Government bureaucrats using their power to intimidate individuals who wanted to “peacefully assemble and petition the Government for a redress of grievances”, as stated in the 1st Amendment of the Constitution. The IRS violated the constitutional rights of individuals.

-The IRS recently agreed to pay a $50,000 in damages to NOM for leaking  donors names to rival groups. Who do you think will pay this fine? Tax payers of course, because the IRS is funded by us. So let me see if I got this right. A portion of the taxes paid by the tax payers who sued the IRS, is going toward the fine that the IRS owes to these very same tax payers. That kind of punishment has no chance of constraining future abuses of power.  The individuals in the IRS who broke the law should go to jail, because that is the only constraint for curtailing future IRS abuses. Why do you think the IRS bureaucrats were so cocky when they testified in front of congress? They know nothing is going to happen to them. The rule of law doesn’t apply to our bureaucratic betters. If this bureaucratic lawlessness continues, we won’t comply with their edicts, and it won’t be pretty.

- All of the recent push backs in the Supreme Court against the Obama administration are all actions taken by regular citizens. Non of these actions are results of the Republican establishment having any stones. This progressive Marxist ideology can only be defeated by a bottom up transformation by citizens understanding that individual  freedom is the cure for the problems created by years of  intervention through Government central planners of both parties.

 

 

 

Must Reads For The Week 7/5/14

Posted July 4, 2014 by austrianaddict
Categories: Must Reads For The Week

Tags: , , , , ,

Lets celebrate Independence Day.

This is Stars and Stripes Forever by Chet Atkins.

Ray Charles singing America The Beautiful.

Martina McBride singing God Bless America.

Let’s Think.

-Read Thomas Sowell’s recent article, America’s Birthday.

-Happy Fourth Of July: Fifth Of US Population Doesn’t Believe In American Dream, by Hannah Osborne, at ibtimes.co.uk.

 

Let’s Laugh.

 


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