Posted tagged ‘Price Coordination’

Ohio Issue 3: A Taxi Cartel For Marijuana! Why Not An Uber Marijuana Market?

October 22, 2015

Just as Uber is taking transportation into the modern era by breaking up the old government sanctioned taxi cartel system (read- ‘Car Wars’ Return Of The Jitneys: Uber vs. The Taxi Cartel). We in Ohio are about to set up a stone age cartel system for marijuana if issue 3 is passed.  Don’t let anyone tell you that issue 3 legalizes marijuana in the State of Ohio. It does not. It creates a monopoly for 10 specific groups to grow marijuana, while it restricts the amount that everybody else can possess or grow. Here is what Issue 3 says (read ballot issue 3 here).

WHAT ISSUE 3 WILL DO

1) “Create exclusive rights for 10 self-designated landowners (click here for list of owners) to grow, cultivate, and extract marijuana.”

2) “One additional growth facility may be allowed in four years if existing facilities can’t meet consumer demand.”

3) “Allow approximately 1100 retail establishments to sell recreational marijuana if they get a license.” You have to get a license to sell.

4) “Create a special tax rate limited to 15% on gross revenue of the growth facilities…..and a special tax rate limited to 5% on gross revenue of each licensed marijuana retail store.” Don’t you wish you could set your tax rate that can’t be raised?

5) “Create a new state government agency called the marijuana control commission to regulate the industry comprised of seven Ohio residents appointed by the Governor.” Will this board be susceptible to lobbying or bribery?

6) “Limit the ability of the legislature and local governments from regulating the manufacture, sale, distribution, and use of marijuana and marijuana products.” Local governments have no say in any of this.

7) “Allow each person, 21 years of age or older, to grow, cultivate, use, possess, and share up to 8 ounces of usable home-grown marijuana plus 4 flowering marijuana plants if the person holds a valid state license. Allow each person 21 years of age and older, to purchase, possess, transport, use, and share up to 1 ounce of marijuana for recreational use.” You have to have a license to grow your personal plants. The amount you can possess is limited. And you can’t sell any of it you can only share it.

8) “Authorize medical use for a person who has a certified debilitating medical condition.

A MARIJUANA TAXI CARTEL! WHY NOT AN UBER MARKET?

Issue 3 doesn’t legalize marijuana. If it did, there would be no restrictions on the amount each individual could possess for any reason. Issue 3 gives out 10 marijuana medallions to certain individuals to supply marijuana. It excludes everybody else. An Uber market would allow every individual to grow, possess and sell marijuana if they choose.

The 10 cartel owners are either economically ignorant or they are relying on the economic ignorance of the voters when they put in the provision that one additional growth facility can be allowed in four years if existing facilities can’t meet consumer demand.

How is the cartel going to figure out demand? Why would it take 4 years to figure out demand? In a free market, individuals will demand less and supply more at a high price, and will demand more and supply less at a lower price. So in a free market, demand is constantly being discovered, not by any individual or group of individuals, but by every individual making decisions on consumption and production at the present price.

Who sets the price in the cartel marijuana system? The 10 growers will set the price in the cartel system because they don’t have any competition from other potential suppliers who can’t get a marijuana medallion. This is why the taxi cartel prices were so high. Government limited the supply of taxi medallions, which artificially drove up the price of a cab ride. The price was shown to be too high once Uber started supplying rides. These 10 individuals have set up the same type of cartel system that the taxi industry has enjoyed for decades.

WHAT ABOUT ISSUE 2?

Instead of lobbying and paying (bribing) legislators to gain a monopoly position, these 10 groups have decided to use the ballot initiative process of amending the constitution to benefit themselves by restricting access to the marijuana market. It’s crony capitalism through the ballot initiative process.

Issue 2 tries to stop people from using this process to benefit themselves. Here is what issue 2 says (read ballot issue 2 here).

1) “Prohibit any petitioner from using the Ohio constitution to grant a monopoly, oligopoly, or cartel for their exclusive financial benefit or to establish a preferential tax status.”

2) “Prohibit any petitioner from using the Ohio constitution to grant a commercial interest, right, or license that is not available to similarly situated persons or nonpublic entities.

What will issue 2 do? Very simply, the cartel that the people are trying to set up if issue 3 is passed, is prohibited. In other words, you can’t use the Ohio constitution to set up a crony capitalist enterprise. You must do it the old fashioned way, lobbying and bribing politicians.

HOW SHOULD YOU VOTE?

If you are inclined to vote yes on issue 3 because you believe it legalizes marijuana, then you should also vote for issue 2 because it will allow anyone to enter the market for growing marijuana. I think you should vote for issue 2 and against issue 3. Then either lobby the legislators to legalize marijuana, or bring a clean ballot issue in the next election that simply allows individuals to grow, use and sell marijuana. An Uber type marijuana market will spontaneously organize itself, and the out dated cartel system will go away. If you pass issue 3 and not 2, you will be fighting the marijuana cartel at some point in the future just like Uber fights the taxi cartel today.

 

 

 

 

Must Reads For The Week 5/9/15

May 8, 2015
The pen is mightier than the sword...

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

ECONOMIC LESSONS ABOUT PRICE FLOORS AND CEILINGS

NYC Mayor: Lets Bomb New York City With Rent Controls, at economicpolicyjournal.com. Rent control is a price ceiling. When the price of rent is not allowed to go above what the price would be under normal market conditions, an artificial shortage is created. Less is supplied at a lower price than a higher price, and more is demanded at the lower price than a higher price, creating a shortage of housing and a surplus of renters. It’s simple supply and demand.

Robert Reich: Economic Malpractice On The Minimum Wage, by Mark J. Perry, at carpediemblog. A minimum wage law is a price floor that a wage can’t go below. Watch the difference between the explanation about the minimum wage from Robert Reich, and the explanation by the Kahn Academy. Robert Reich is trying to fool people who are economically ignorant. When a wage is set at a rate higher than what that labor produces, the demand for that labor will decrease, creating unemployment. Less labor will be demanded at a higher rate than a lower rate, and more labor will be supplied at a higher rate than a lower rate, creating a surplus of labor or a job shortage.

Meet The Hotel Robot That Will Battle Minimum Wage Hikes, at economicpolicyjournal.com. When a wage is set higher than what the labor produces, the labor will go away. Automation is one way this will happen. Robert Reich forgot to mention this as well as some other salient points.

Free market prices coordinate supply of and demand for scarce goods and services. Government price controls, like minimum wage laws and rent control laws, are interventions that are factored into the economic law of supply and demand. Government force can’t do away with the economic reality of scarcity, it can only distort the coordination process.

MORE GOVERNMENT INTERVENTION

Ripple Labs Faces Fines From FinCEN, at payments.com. Ripple Labs is the first virtual currency exchanger to be fined by the Financial Crimes Enforcement Network. The Government wants to keep its monopoly on money creation via the Federal Reserve, by making virtual currency providers comply with anti-money laundering laws. This is curious because the US Treasury and the Federal Reserve are running the biggest money laundering operation in the history of the world.

Obamacare Killer? Global Spending On Cancer Drugs Surges To $100 Billion, at economicpolicyjournal.com. Obamacare has taken over decision-making from what was left of a free market system in the healthcare system. Coordination of supply and demand through prices barely exists. Lobbying Government for protection and favors through Government decision-making is no way to run an industry, just ask the former USSR.

The Mysterious Source Of Surging Demand For GM Cars, Revealed, at zerohedge.com. The first trick to increase sales was channel stuffing. The second was subprime car loans. Now the Government has increased its purchases from Government Motors. Maybe it does pay to get into bed with the Government! They bailed GM out. They subsidised purchases of the Chevy Volt. Now they are buying cars, (for whom, I don’t know).

Government Using Subprime Mortgages To Pump Housing Recovery, Tax Payer Will Pay Again, at zerohedge.com. This didn’t end well last time, did it?

MISCELLANEOUS

Meet Three Kids Alive Today Thanks To 3D Printing, by Ashley Welch, at cbsnews.com. We are only scratching the surface of what can be done with 3D printing.

Creative Destruction: Newspaper Ad Revenue Continues Free Fall, by Mark J. Perry, at carpediemblog. The market (decisions by individuals), picks the most productive goods and services. I predict the print media will, at some point, ask for a Government bailout.

CNN Anchor, Chris Cuomo, Ignorant About The Constitution And Hate Speech, by Robby Soave, at reason.com. And Chris Cuomo has a law degree from Fordham University? He must have missed the class when they talked about the first amendment!

Hello Al Gore: Low Sun Spot Cycle Could Mean Another ‘Little Ice Age’, by Chriss Street, at americanthinker.com. Who would have ever thought that the sun is the most important factor when it comes to the earths temperature.

CARTOONS THAT MAKE YOU THINK

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https://i2.wp.com/media.cagle.com/205/2015/04/30/163369_600.jpg

https://i1.wp.com/i.imgur.com/G3PgdMW.jpg

 

It’s Basketball Tourney Time, Lets Talk Ticket Scalping.

March 20, 2014

Once again it’s time for March Madness. We can learn a lot about how the free market works by walking around arena’s that are hosting games.  Ticket scalpers and ticket buyers are involved in voluntary exchanges which are the heart of a free market. I wrote this post below about ticket scalping last year and I’m going to post it again.

TICKET SCALPING: THE TRUE FREE MARKET IN ACTION

I’m going to the Ohio High School Basketball Tournament this weekend not and not just to watch the games. I like to observe the economic principles at play in the free market for tickets, (aka scalping) that takes place outside of the arena, it is a real education. This video explains whats going on.

Most of the people who participate in the free market of ticket scalping, have no understanding of the economic principles they are demonstrating by their actions. Supply and demand, subjective value, and the allocation of scarce resources through the price system, are just a few of the principles being demonstrated. Order is created out of seeming chaos by buyers and sellers voluntarily making decisions on the price that ultimately leads to an exchange. The scalper is a broker who ultimately brings the buyer and the seller together, in the same way a realtor brings the buyer and seller of a house together. I’ve seen scalpers make a good profit selling tickets when LeBron James was playing in the state tournament because demand was high and the supply of good seats was low. I’ve also been at a final four at the Louisiana Super Dome where scalpers were selling tickets for a dollar, minutes before the game, trying to get what they could before the tickets would became worthless just minutes after the game started. The one thing I’ve noticed in both situations, the buyer and the seller never make the exchange of a ticket, for money, unless both parties agree on the price.  If the same two individuals came together and tried to make the exchange earlier or later than when the exchange actually took place, the subjective valuations of each party would have been different, and an exchange would not have taken place, at that price. If you get a chance to go to an NCAA tournament game, walk around the arena for a while and watch basic economic principles being demonstrated in the secondary ticket market.

Entrepreneurship Can Be A Stinky Business

September 19, 2013

I stumbled across this commercial for a product that I thought couldn’t be real, but the product and the company really exist. As much as we talk about the consumer reigning supreme in the market, the entrepreneur is the one who takes a chance on a new idea, product, or service, for which  there is no consumer demand. The entrepreneur takes a risk, a leap of faith in his ability to come up with an idea he thinks consumers will want. If he is wrong and consumers won’t support the product, or activity, in large enough numbers to make a profit, he suffers the loss, and the scarce resources used to produce the unwanted product, are freed up to be used in more productive activities. The entrepreneur is essentially trying to supply his own demand (production comes before consumption). Watch the commercial for a product called Poo-Pourri. I thought it was funny, but I might be a little touched.

The marketing is pretty good because nobody wants to take the dreaded away dump. This commercial asks and answers the question, “So how do you make the world believe your poop doesn’t stink, or in fact that you never poop at all? Poo-Pourri- the before you go toilet spray.”

If Poo Pourri produces a paltry profit that can’t support the price of production, they have another option, in our crony capitalist system, to overcome their failure under voluntary exchange in the free market. They can lobby the Government and try to get them to mandate that all public restrooms have a supply of Poo-Pourri, because second-hand stink is not just offensive, studies have shown it can cause headaches, nausea, watery eyes, asthmatic reactions, dizziness, and other reactions too numerous to name. If the Government will not grant them their demand, that Government create a limitless demand for their product, they always have an option of sue. There has to be some obscure rule under the purview of OSHA, the EPA, HHS, or the CDC, that is being violated by businesses who are shirking their responsibility to protect the public from second-hand stink.

Fortunately, in our current crony capitalist system, there is enough freedom left for entrepreneurs to take a risk and supply a demand that doesn’t yet exist. Growth happens on the frontiers of the economy where risk is a way of life, not in the old status quo businesses that are just trying to protect their current position of supplying an already existing demand. Government intervening in the economy won’t make it grow, one reason is because it is risk averse and will always prop up the status quo big businesses (remember too big to fail). and the other reason can be summed up in a quote by Robert Bradley Jr., “When Government tries to pick winners and losers, it typically picks losers. Why? Because the Free Market Consumers pick winners to leave the losers for Government.” 

It is not possible for Government to manage an economy because the amount of information it would need to make decisions doesn’t exist in a single place or at a particular time. This information is also constantly changing day-to-day which makes it exponentially impossible to know this widely dispersed information. Prices arrived at by individuals voluntarily cooperating and competing in a free market is the only way this amount of constantly changing information can be utilized as optimally as possibly. Prices coordinate economic activity.

RELATED ARTICLEToo Big To Fail GM vs. Too Small To Save Hostess, at austrianaddict.com.

RELATED ARTICLEMilton Friedman on Market Failure vs. Government Failure. Which Has A Higher Cost, at austrianaddict.com.

RELATED ARTICLEWhy Do People Think The Government Is The Economy, at austrianaddict.com