Posted tagged ‘Knowledge and Decisions’

‘CAR WARS’ Return Of The Jitneys

July 20, 2015

UBER vs. THE TAXI CARTEL

The battle between upstart competitor Uber and the monopoly held by the taxi cartel isn’t anything new. Around 1915, owner operated taxi services called ‘jitneys’, fought this battle against the government created rail transportation monopoly. The rise of Uber and their battle with the taxi cartel reminded me of something I read in Thomas Sowell’s book Knowledge and Decisions, published in 1980. (Everyone should read this book.) In the chapter, Trends in Economics, Dr. Sowell talks about “forcibly changing costs” through government regulation. Here are his words. Does this sounds eerily similar to what Uber is doing?

“The history of American transportation, from municipal bus and street lines to railroads and airlines is a history of government – imposed cross-subsidies. Initially, municipal transit was privately owned by a number of firms operating streetcars along various routes. The creation of city-wide franchises – monopolies – was usually accompanied by fixed fares, regardless of distance traveled or transfers required. “

“When a price is simply made higher by government fiat…it conveys a false picture of the “society”, thereby causing potential consumers to forego the product even though others are perfectly willing to supply it for a price that they are willing to pay.”

“Like most price discriminators, municipal transit was vulnerable to competitors who chose to serve the overcharged segment of their customers. Around 1914-1915, the mass production of the automobile led to the rise of owner-operated bus and taxi services costing five cents and therefore called “jitneys” the current slang for nickles:”

“The jitneys were owner-operated vehicles which essentially provided a competitive market in urban transportation with the usual characteristics of rapid entry and exit, quick adaptation to changes in demand, and, in particular, excellent adaptation to peak load demands. Some 60 percent of the jitneymen were part-time operators, many of whom simply carried passengers for nickel on trips between home and work. Consequently, cities were crisscrossed with an infinity of home-to-work routes every rush hour.

The jitneys were put down in every American city to protect the street railways and, in particular, to perpetuate the cross-subsidization of the street railways city-wide fare structures. As a result, the public moved to automobiles as private rather than common carriers…”

“The rush-hour traffic congestion caused by thousands of people going to work separately in individual automobiles has been denounced by social critics as “irrational” and explained by some mysterious psychological attraction of Americans to automobiles. It is, however, a perfectly rational response to the incentives and constraints conveyed. The actual costs and benefits of automobile-sharing are forcibly prevented from being conveyed by prices. As in other areas, claims of public irrationality are a prelude to arguments for a government-imposed “solution” to the “problem”. As in other areas, it is precisely the government’s use of force to prevent the accurate transmission of knowledge through prices that leads to the suboptimal systemic results which are articulated as irrational intentional results of a personified “society”.”

“…maintenance of incumbent transportation entities, often implies the maintenance of incumbent technologies ie., subsidized obsolescence, resisting the phasing out of existing modes of operation, as competing modes arise…..competing modes with technological or organizational advantages are either penalized or prohibited (as in the case of the jitneys), to preserve incumbent organizations and technology.”

MONOPOLIES CAN’T EXIST WITHOUT GOVERNMENT SANCTION

Uber is the modern-day version of the jitneys from 100 years ago. The taxi cartel is the protected “incumbent transportation entity”. The street rail system couldn’t foresee a competitor until a new technology, the automobile, came into existence, just as the taxi cartel couldn’t foresee a competitor until a ride sharing app came into existence. Government created monopolies look to government for help in stifling competition. When a business begins to expand because they win a larger share of the market, its efforts turn away from serving customers and toward protecting their market position. They lobby government to pass regulations making it more difficult, if not illegal, for competitors to enter the market. The combination of big business and big government is toxic to the economy and consumers.

FREE MARKETS OR CENTRAL PLANNING

In this article, Once A Sure Bet, Taxi Medallions Becoming Unsellable, there is a video of a Chicago taxi driver complaining about Uber drivers not having to jump through all the government hoops that taxi drivers have to jump through to be licensed to drive people around. He doesn’t realize that he is actually making the case against government intervention into the taxi industry. Starting with the price of the taxi medallion and going through all the other costly regulations is an indictment of government, not Uber.

This article, Major Trouble For Uber In California, is an example of governments trying to regulate Uber, at the cost of the consumer. Politicians and bureaucrats don’t understand that a free market creates the incentive for businesses to provide great service, or the consumer has an option of going to a competitor. Under a government created monopoly system the business has no incentive to provide great service for the consumer, because there are no competitors, (Think DMV) read this article, Uber vs Big Taxi: Time To Resolve Driver Complaints – Seconds/Days vs. Years.

The consumer pays a higher price because the supply of cabs is limited to the amount of medallions issued by the government. In a free market supply and demand coordinates the number of cab  drivers and passengers at a particular price. Allowing the price to change, allows supply and demand to be continually coordinated according to the changing values of demanders and suppliers.

HOW UBER WORKS

 

The ride sharing Genie is out of the proverbial bottle. Governments can’t stop it. With how quickly technology changes, don’t be surprised if something different comes along that will challenge Uber as the most cost effective way of transporting people from one place to another. Can you say, “Beam me up Scottie”?

 

Related ArticleAre People Smarter Today Compared To People 100 Years Ago?, at austrianaddict.com.

Are People Smarter Today Compared To People 100 Years Ago?

December 3, 2014

The Thinker Statue by the French Sculptor Rodin - stock photo

I asked myself this question, “are people smarter today compared to people 100 years ago”, after reading an article titled, Dumb And  Dumber – Scientific Proof  That People Are Getting ‘Stupider’, at zerohede.com. In the article, the writer makes the assertion that people are getting ‘stupider’ {then humorously asks, is ‘stupider’ even a word}. The article states that there is now scientific evidence that this is so. SAT reading and verbal scores have been going down for decades, are examples cited as evidence to support the theory. The article also posts a 1912 eighth grade exam from  Bullitt County Schools in Kentucky. Try to answer some of these questions, you will be humbled.

DEFINE STUPID AND SMART

The question: are people getting stupider, needs to a few qualifying questions asked before we can answer it. 1) What are the standards used for comparing the intelligence of people who lived 100 years ago to people alive today? 2) Who decides what constitutes being smart and being stupid? 3) Does reciting  facts from memory, like a contestant on Jeopardy, show higher intelligence than being able to take facts and logically reason your way from point A, to a conclusion at point Z? 4) Does being smart in your chosen field magically make you smart in other fields? These are just a few questions we need to think about before we make a pronouncement about intelligence or lack of intelligence.

DIFFERENT ERAS REQUIRED DIFFERENT KNOWLEDGE

People today need to know less about some things and more about other things than the people who lived 100 years ago. If you look at the eight grade test in the article linked to above, you will find questions about spelling, arithmetic, grammar, geography, physiology, civil government, and history that not many of us could answer today. However the answers to these questions are just a click on the computer, or a swipe on a cell phone away from getting answered in today’s world. The knowledge that people had to memorize back then is now stored on a computer chip and is able to be called up at a moments notice. Think of the times you have been with people and someone asks a question that no one can answer until someone uses their cell phone to look it up. The ability to write these posts would be exponentially more time-consuming if it wasn’t for computers. The ability to use spelling and grammar checks makes writing so much easier (some times these tools can’t even save me from spelling and grammar mistakes). Think about a sports writer decades ago pounding out his story on a typewriter: talk about having to get it right on the first take. Calculators have made complex math problems easy for dummies like me. You don’t have to know how to read a map today because you have GPS on your phone with the hot British female voice telling you, “in 200 feet turn right”.

The advance in the standard of living since the industrial revolution brought about a situation where more and more people didn’t have to know how to produce food, clothing, shelter, etc in order to win their battle against the planet for their survival. People began to specialize in producing these things more efficiently which freed up time and labor to be used to produce new products and services that were created by entrepreneurs who speculated, but were not assured, that markets existed for these new products and services. Through this trial and error process of becoming more productive, we can safely say that the over all amount of knowledge in society is obviously expanding, while at the same time we can say that an individual needs less over all knowledge to survive. The process of production has become so specialized that an individual can be a welder at a John Deere plant and literally trade his labor for food, instead of knowing how to actually produce food.

THOMAS SOWELLS TAKE

Thomas Sowell writes about what we are talking about in his book, Knowledge And Decisions ( one the best books I have ever read),  was inspired by F.A Hayeks essay, The Use Of Knowledge In Society.

Dr. Sowell writes in Knowledge and Decisions (which was written in 1980), “The growing complexity of science, technology, and organization does not imply either a growing knowledge or a growing need for knowledge in the general population. On the contrary, the increasingly complex processes tend to lead to increasingly simple and easily understood products. The genius of mass production is precisely in its making more products more accessible, both economically and intellectually to more people.”

Think of how much more true this is thirty-four years after Dr. Sowell wrote this. Things we use in our everyday life weren’t around in 1980.

More from Dr. Sowell. “…Matthew Brady required far more knowledge of photographic processes to take pictures with his cumbersome equipment during the Civil War than a modern photographer requires to operate his automated cameras…..The printing press performs daily communications miracles beyond the ability of an army of the most highly trained and dedicated scribes of the Middle Ages….An ordinary individual can easily arrange travel across thousands of miles through cities he has never seen by tapping the knowledge of travel agents and/or the American Automobile Association.”

Photographic equipment? The printing press? Travel agents? Seriously. We take pictures with cell phones. We have the internet and inkjet printers. We don’t call Triple A to make travel arrangements, we call Triple A if we need a tow.

THE ONE AREA IN WHICH WE ARE CERTAINLY DUMBER

If you haven’t seen the eighth grade exam from 1912 in the Dumb and Dumber article above you should go look at it. The civil government and history part of the eighth grade exam is where we have become woefully ignorant. Unfortunately these two areas are the most important areas we as individuals need to be smart about if we want to have continued prosperity. Being smart in these areas would have kept us vigilant about the incremental taking of individual freedom by people in Government that has happened over the last 50 plus years. Two questions from the civil government part of the exam prove my assertion. How many adults, let alone eighth graders today, could get these two questions right. 1) Name three rights given Congress by the Constitution and two rights denied Congress,  and 2) Define the following forms of Government: Democracy, Limited Monarchy, Absolute Monarchy, Republic. Give examples of each.

These questions aren’t even asked today. The first question, “name three rights given congress by the constitution…and two rights denied congress”, speaks volumes about what was understood about the constitution in 1912 that isn’t even taught in schools today. The fact that congressional powers are limited is stated in the question. Today most people think congress has unlimited power to make any law individuals in congress wish to make. Most people today think the President has unlimited power to decree what he wishes. But I bet most eight graders in 1912 knew that the President had limited powers.

CONCLUSION

The amount of over all knowledge has expanded exponentially over the last 100 years, while at the same time the amount of knowledge an individual needs to survive is less, and also the kind of knowledge each individual needs to survive is different.

The real question is not; are we smarter today than 100 years ago,? The real question is; are we smart enough to understand that the process that produced today’s standard of living stretches far back in time? Free individuals cooperating in free markets produced the standard of living we enjoy today. Central planning by Governments didn’t produce it, in fact, it has hampered our advance. The passage of time has separated us from the founding principles of our country.  If we aren’t smart enough to understand this, we will continually allow democratically elected tyrants to incrementally crush our individual freedom under the heel of their central plans.

Related ArticleWe’re All Born In The Middle Of The Story, by austrianaddict.com.

Related ArticleJuly 4th, Declaring Independence From Tyranny, by austrianaddict.com.

Related ArticleSpontaneous Order = Free Markets, by austrianaddict.com.

 

 

 

The “Equal Pay Day” Canard

April 9, 2014

Thomas Sowell

I have read Thomas Sowell’s analysis concerning this topic since I stumbled upon his writings in 1995. I thought he had driven as stake through the heart of  “the gender pay gap” myth. I wasn’t going to post anything about this topic, but reading and listening to the news this week has changed my mind. Since I couldn’t possibly cover this topic as authoritatively or as eloquently as Thomas Sowell, I’m not even going to try. I’m going to let him do it in his own words.

QUOTE FROM THOMAS SOWELL’S ‘KNOWLEDGE AND DECISIONS’

Here is an excerpt from my favorite book, Knowledge and Decision, which Dr. Sowell wrote in 1980:

“With women the key variable is marriage. Even before “affirmative action” quotas, women in their thirties who worked continuously since high school earned slightly more than men in their thirties who worked continuously since high school. In the academic world, where many discrimination charges have been filed under affirmative action, female academics earned slightly more than male academics when neither were married  – again even before “affirmative action” – and unmarried female Ph.D.’s who received their degrees in the 1930’s and 1940’s became full professors in the 1950’s to a slightly greater extent than did unmarried male Ph.D’s of the same vintage. In short, the male-female differences in incomes and occupations are largely differences between married women and all other persons….the clear-cut income parity (or better) among women who never married suggests once again that systemic variables have more to do with the statistics than the intentional decisions at the work place at which the statistics were collected.”

He wrote this in 1980 so it’s safe to say that the gender pay gap canard was used as a political bludgeon for many years prior to 1980.

THOMAS SOWELL ON FIRING LINE

Dr Sowell is discussing the gender pay gap issue in this video from 1981.

Click, Firing Line – Thomas Sowell  w/ William Buckley Jr. 1981, to watch the whole show.

 THOMAS SOWELL ARTICLE “THE REAL WAR ON WOMEN”

Here is an article by Thomas Sowell titled, The Real ‘War On Women’. It was written in 2012, and covers the same gender pay gap fallacy. Here are some excerpts form the article.

“The old — and repeatedly discredited — game of citing women’s incomes as some percentage of men’s incomes is being played once again, as part of the “war on women” theme.”

“When you compare women and men in the same occupations with the same skills, education, hours of work, and many other factors that go into determining pay, the differences in incomes shrink to the vanishing point — and, in some cases, the women earn more than comparable men.”

“But why let mere facts spoil the emotional rhetoric or the political ploys to drum up hysteria and collect votes?”

THOMAS SOWELL ON ‘UNCOMMON KNOWLEDGE

Here is a video of Thomas Sowell in 2008 on,Uncommon Knowledge, with Peter Robinson, talking about Gender Bias and Income Equality.

QUOTE FROM THOMAS SOWELL’S ‘ECONOMIC FACTS AND FALLACIES’

In Economic Facts And Fallacies, Chapter 3 titled, Male-Female Facts And Fallacies, covers gender pay gap and much more. Here is an excerpt form the chapter.

“Even when women and men earn the same incomes in the same occupations, differences in the distribution of the sexes among different occupations lead to differences in their average incomes.

“In principle it does not matter whether the attorney is male or female but, in practice, with women more often than men carrying the burden of domestic responsibilities for children and the care of the home, careers that involve much unpredictable night and weekend work are less attractive to women. Having it all – a career and a family and an upscale lifestyle- is fine but doing it all is often harder for a woman, given the usual division of domestic responsibilities between the sexes and the inevitable differences in childbearing.”

“Moreover since men are never pregnant, women are disadvantaged in such work by the physical limitations of pregnancy, which can be work limitations as well in obs that require long, irregular and unpredictable hours,….”

Related ArticleThe New, Old, Buzz Words, “Income Inequality”, at austrianaddict.com.

Related ArticleIncome Inequality II: Increase The Minimum Wage, at austrianaddict.com.