Posted tagged ‘Voluntary Exchange’

Some Econ Homework

October 6, 2016

Government Medical “Insurance“, by Murray Rothbard, at misesca. This article, written in the 90’s, tells why prices go up when third-party payers step in between demanders and suppliers. Government decrees about health care insurance won’t stop economic forces from trying to correct the intervention by Government. Excerpt from the article: “In economic terms…..the demand curve for physicians and hospitals can rise without limit…..the suppliers can literally create their own demand through  unlimited service. In order to stanch the flow of taxes or subsidies…the government and other third-party insurers have felt obliged to restrict somewhat the flow of goodies: by increasing deductibles, or by putting caps on Medicare payments….this has been met by howls of anguish from medical customers who have come to think of unlimited third-party payments as some sort of divine right, and from physicians and hospitals who charge the government with “socialistic price controls” – for trying to stem its own largesse to the healthcare industry!”

The Market And The State, by Ludwig von Mises, at misesca. Mises tells us the different outcomes when people make voluntarily exchanges in the market vs. what happens when people are forced to make exchanges because of Government intervention into the market. Excerpt from the article: “The total enslavement of all members of society is not a merely accidental attendant phenomenon of the socialist management. It is rather the essential feature of the socialist system, the very effect of any thinkable kind of socialist conduct of business. It is precisely this that the socialist authors had in mind when they stigmatized capitalism as “anarchy of production” and asked for the transfer of all authority and power to “society.” Either a man is free to live according to his own plan or he is forced to submit unconditionally to the plan of the great god state”.

Keynes: The Crackpot Economist Of ZIRP, by Gary North, at misesca. Excerpt from the article: “….the universal phenomenon of the rate of interest  has been explained by Austrian School economics in terms of what Mises called time preference: the discount applied by acting men to future goods and services when compared with the same goods and services in the present…. Until you come to grips with the fact that the economics profession, central bankers, and hedge fund analysts are crackpots, you will not understand the modern economic world. When the marginal efficiency of anything is zero, it is a free good. It is not scarce. it commands no price..”

The Donald Nailed It: “We Are In A Big Fat Ugly Bubble“, at davidstockmanscontracorner.com. Excerpt from the article: “…the utterly unnatural interest rates engineered by the Fed have fueled an egregious inflation of the financial asset prices and that “some very bad things” are going to happen when the Fed’s market rigging operation is finally halted…….after 94 months on the zero bound the Fed has executed the most massive income and wealth transfer in American history. Upwards of $2.5 trillion has been extracted from the hides of main street savers and retirees over the eight year period (@ $300 billion per year). all of that and then some was gifted to the banks and Wall Street speculators….if the Congress were to enact anything remotely similar to the Fed’s savage and relentless attack on savers and wage-earners, they would be on the Receiving end of the torches and pitchforks that would descend on the Imperial City.”

The Great Debt Unwind Beneath The Surface: US Commercial Bankruptcies Soar, by Wolf Richter, at wolfstreet.com. Excerpt from the article: “Bankruptcies – and defaults, which precede them – are indicators of the “credit cycle.” The Fed’s policy of easy credit with record low-interest rates has encouraged businesses to borrow. And borrow they did. In Oct. 2008, as the prior credit bubble was beginning to implode, there were $1.59 trillion commercial and industrial loans outstanding at all US banks. Then the Financial Crisis hit, and loans outstanding plunged, many of them wiped out or restructured in bankruptcies. But then the Fed solved a credit problem with even more credit, and as of July 2016, there were $2.064 trillion of C&I loans outstanding, a 30% jump from the peak of the prior credit bubble that blew up so spectacularly…..Now the hangover is setting in from the Fed’s efforts to solve a debt problem with even more debt, to gain very little economic growth. And there is a leading indicator of big trouble already fermenting in the banks.”

What Makes Mises.org Different, by Ryan McMaken.  Mises.org (About Mises) is the place to go when you want to understand economics. It is your one stop shopping place for all things related to economics. Excerpt from the article: “In a typical month, mises.org receives more than a million page views, which is pretty remarkable for a site where writers regularly talk about things like the “subjective theory of value” and “fractional reserve banking….most of our traffic continues to be people looking for real, genuine economics. they want to gain a better understanding of prices, government intervention in the market, and especially business cycles…..When people look for answers beyond the mainstream, they usually find us.

Stumbling across mises.org  in 2008 is what started me on an intellectual journey that will never end. There are moments when I think it would be better to be blissfully ignorant about economic realities, and listening Hillary’s and Trump’s talk about “the economy” are some of those moments. Their economic pronouncements drive me crazy……. Is ignorance better than insanity?

 

Related ArticleHere Is Some Econ Homework, at austrianaddict.com.

Related ArticleYour economic Homework, at austrianaddict.com.

Walter E. Williams: Is Capitalism Moral? via Prager University

September 15, 2015

It is amazing how Walter E. Williams can put so much information about free market capitalism into this five minute video. The amount of insight per word is off the charts. You are going to want to watch this more than once. Thanks to Prager University for this.

Some excerpts from the video:

“The free market calls for voluntary actions between individuals. There’s no coercion.”

“A free market system can only work if there is limited government. Limited government means you and I decide which businesses survive.”

“In a free market the ambition and voluntary effort of citizens not the government drives the economy. That is, people to the best of their ability shaping their own destiny.”

Related ArticleWalter E. Williams: Voluntary vs Involuntary Exchange, or Seduction vs. Rape, at austrianaddict.com.

Related ArticleWalter E. Williams: The Free Market Is Not Allowed To Work, at austrianaddict.com.

 

Walter E. Williams: Common Sense

August 3, 2015

Walter E. Williams is one of the best at explaining concepts, abstract or other wise, to people who aren’t on his level of knowledge about economics and liberty. Being able to communicate clearly is his great talent. Here is a video I saw at libertypenblog.blogspot.com. It is Dr. Williams at his best.

Excerpts from the video.

“If you tax something your going to get less of it, and if you subsidize it your going to get more of it. What we’ve been doing is subsidizing slovenly behaviour.”

“I often tell people that I am very very happy that I got virtually all of my education before it became fashionable for white people to like black people. So what that meant is that when I got a ‘C, it was an honest to God ‘C’. When I got an ‘A’, it was an honest to God ‘A’. They weren’t practicing Affirmative action and they didn’t give a damn about my self-esteem.

“Americans have lost their love for the American Constitution, and I believe they’re either ignorant or they have contempt for the United States Constitution. Ignorance is curable, but contempt is not.

This short video above is from the video titled Walter E. Williams: Suffer No Fools (click to watch) from the Free To Choose Network.

Related ArticleWalter E. Williams: The Constitution, at austrianaddict.com.

Related ArticleThe Great Walter E. Williams: The State Against Liberty, at austrianaddict.com.

Related Article Walter E. Williams, Voluntary Exchange, or Seduction vs. Rape, at austrianaddict.com.

Individual Liberty Is The Least Contentious Way Of Settling Differences.

April 2, 2015

Is there a perfect system in which human beings interact with no conflict? Since nothing human is perfect the answer is obviously no. But politicians and demagogues have for decades held up the standard of perfection as the straw man to compare any perceived flaw produced by our free market capitalist economic system and our constitutional republic. When results created by individuals voluntarily cooperating don’t meet what our betters deem acceptable, they want to pass laws correcting this perceived injustice, or “fundamentally change” the system.

They are never asked: 1) Why is what they value, better than what results from decisions made by individuals cooperating voluntarily? 2) Does the decision-making process they desire (usually some form central planning) produce more satisfaction for more people than the process of voluntary cooperation by individuals under the rule of law? 3) Who decides what is the better outcome?

INDIVIDUAL LIBERTY vs. GOVERNMENT DECISION MAKING

It is not possible to come up with a single decision that satisfies everyone. It is sometimes difficult for me to decide what flavor of ice cream I want. Many times I am not happy with my decision the second I take the first bite. If picking just one flavor for myself is difficult, how much more difficult would it be for two people to choose one flavor? As more people become involved in deciding one flavor, it becomes exponentially more difficult for people to be pleased with the choice. How many people would be satisfied if one person was chosen to pick a flavor for everybody? What would be the difference if everybody voted, and people had to eat the flavor receiving that most votes?

One person choosing between many flavors for himself is voluntary cooperation in a market between him and the person producing the ice cream. If no one produced the flavor he liked, he could produce it for himself if he thought it was worth his time.

One individual choosing a flavor that everyone is forced to eat is a dictatorship. Even if this person is democratically elected by a majority.

Every person voting on a single flavor, and the flavor receiving the majority of the votes has to be eaten is democracy in action.

Are any of these systems perfect? No. But that’s not the question that should be asked. The question should be: which system would produce the most satisfied individuals, and which system would produce the most contention among individuals? It is obvious that the system that produces the most satisfaction is voluntary cooperation under the rule of law. Unfortunately over the last century we have elected leaders, in both parties, who are taking incremental decisions away from individuals, and making categorical decisions for all of us. They are acting like tyrants, but unfortunately they just reflect the tyrannical attitudes of the people who vote them into power.

We lose more freedom as more laws get passed. When people say “there should be a law for…” they are really saying I want to force what I value on people who don’t agree. Even a law against murder forces a particular value on certain individuals who don’t share that value. Fortunately most people agree that murder is not acceptable behaviour. But what happens when there isn’t an overwhelming majority of people who agree. How do you reconcile each persons values?

PROPERTY RIGHTS AND VOLUNTARY EXCHANGE

Our system was founded on property rights and voluntary exchange (contract). Each person owns himself and what he produces, and no one is allowed to take another persons life, take what he produces, or take what he receives in exchange for what he has produced. If he doesn’t want to make an exchange with another person, that person doesn’t have a right to force him into making the exchange.

This all seems very simple, and it is, until petty tyrants in the form of politicians, bureaucrats, thieves, do gooders, thought police, political correctness advocates, or the average citizen try to steal from, or force their values on, other individuals. The more laws that are passed, the more contention there is between people who would otherwise have no reason to be contentious.

RELIGIOUS FREEDOM RESTORATION ACT

The recent conflict in Indiana between a State version of the federal Religious Freedom Restoration Act, which was signed into law by President Clinton in 1993, and gay rights activists who say this is legalizing discrimination, is an example of what happens when people won’t follow the simple rules of property rights and voluntary exchange.

Under our simple rules, if a gay couple went to a bakery and ask the baker to bake a cake for their gay wedding, and the baker said no, the couple would go to another bakery. Just as a gay person could go to a bakery and ask the baker if he was a christian, and if the baker said yes, he could walk out without purchasing anything. These are simply different sides of the same transaction. In the first the baker refuses to exchange what he produces (his property), with the other person. In the second case the gay person refuses to exchange money (which represents what he produces, aka his property) with the baker. Does it really matter why each person refused the exchange? It only matters when force, especially the monopoly of Government force, is introduced into the equation.

The first amendment of our constitution protects an individual’s freedom of religion, and the supreme court has previously ruled that, racial discrimination in the operation of public accommodations, such as restaurants and lodgings, affects interstate commerce by impeding interstate travel and is prohibited….”  at thefreedictionary.com.

How do you reconcile these competing rules, rights, or laws. The problem with having growing numbers of rules and laws, is that each person, or group, tries to use the force of government to impose their values on other people. It’s a never-ending battle of court cases that creates competing factions that continue to fight because nothing really gets solved. This was the result of the Roe vs. Wade decision. Instead of allowing each State to have its own abortion law, no matter how restrictive or permissive it was, five justices on the court imposed their view of abortion on the whole country. Actually the pro abortion activists brought the Roe case to court because they wanted to impose their view of abortion on the rest of the country. That decision has made the abortion issue more contentious over the years, not less.

If decisions are allowed to be made at the point of decision-making, there is less contention and conflict. Most laws take the decision away from the point where the decision should actually be made. Petty tyrants in or out of government, want to use government force to impose their values on others. Gay activists have come a long way from just wanting people and government out of their bedrooms, or was that just a straw man to get government to force people to accept their values. I don’t care what a person does, as long as they don’t “pick my pocket, break my arm“, or have government do it for them.

CONCLUSION

In a free society you have a right to associate with whom ever you want. When you choose your friends, you are discriminating against those who aren’t your friends. When you choose a wife, you are discriminating against other woman. When you make any choice, you are discriminating.

Since every decision is discriminatory, should government be more involved in individual decision making? Many people think it should. Why are individuals and groups seemingly in constant conflict with each other? Because over the last fifty years, government has taken over many of the decisions that individuals used to be free to make. I hope we are at the point where most of us can agree that Government encroachment into every aspect of our lives has to be rolled back, if our civil society is to survive.

If you want to know my thoughts on gay marriage read, Marriage Laws Don’t Expand Rights They Limit Rights.

Related ArticleMeet 10 Americans Helped By Religious Freedom Bills Like Indiana’s, by Mollie Hemingway, at the federalist.com.

Related ArticleGay Marriage Isn’t About Justice, It’s About Selma Envy, by Hans Fiene, at the federalist.com.

 

 

 

Tiger Drops Out Of Masters + Ticket Prices Fall = Value Is Subjective.

April 7, 2014

File:Tiger Woods Masters 2006.jpg

VALUE IS SUBJECTIVE

This article titled, Masters’ Ticket Prices Drop In Wake Of Tiger”s Absence, by Dan Wetzel, at yahoo.com, shows that value is not objective it is subjective. Value exists in the mind of each individual, it does not exist in an object. I could produce the best mouse trap ever invented for a price of x, but if no one is willing to pay x,  it has no value to anyone other than me. If you offered a sports fan  free tickets to either Saturdays third round at the Masters, or Saturdays Final Four games, he would make the decision based on which event he valued more, not on the monetary value of the tickets.

SUPPLY AND DEMAND

What does the drop in the price of the tickets mean? It doesn’t mean that people don’t value the Masters tournament, it just means that some people value it less when Tiger is not playing. After a bad back forced Tiger to withdraw from a tournament a month ago, demand for Masters tickets started to slow as people began to speculate that he wouldn’t play in this years Masters. Demand really dropped off when he officially withdrew from the Masters. This drop in demand revealed itself as the price for tickets began falling. The law of supply and demand is always in play, and in this case it says; if demand is low and the supply is fixed, the price will fall, and conversely if demand is high and the supply is fixed, the price will rise.

CONSUMER SETS WAGES

When you hear people say “they wouldn’t pay a particular athlete a particular amount of  money”, or “this athlete isn’t worth that much”, they obviously don’t understand subjective value, or supply and demand. The reason Tiger gets paid more than any golfer is because the value he creates is in high demand. There is a high number of people who value what he produces. Put simply, when there is a fixed supply of Tiger Woods, and a high demand for him, his price rises. If there weren’t enough consumers to voluntarily pay for the value they subjectively think Tiger produces for them, he wouldn’t get paid these “outrageous” sums of money. The consumer ultimately sets all prices in the process of production, and this includes the wages or salaries of all workers. So if you think certain professions don’t get payed enough, blame the greedy consumer, and if you think other professions get paid too much, blame the generous consumer.

Related Article – In a previous post, Ticket Scalping; The True Free Market In Action, we talked about voluntary exchanges from the stand point that each person involved in the exchange values what they receive more than what they give up, or no exchange would take place. Value is increased in voluntary exchanges.

Related ArticleSpontaneous Order = Free Market Economy, by austrianaddict.com.

Related ArticleSpontaneous Order Utilizes More Knowledge Than Central Planning Could Ever Hope To Utilize, by austrianaddict.com.

Related ArticleSpontaneous Order More Complex Than Top Down Planning, by austrianaddict.com.

Related ArticleSpontaneous Order Demonstrated By Traffic With No Signals, by austrianaddict.com.

 

Myths About Capitalism

April 4, 2014

Many people think big businesses like free market capitalism. The truth is when big businesses were small they liked free market capitalism, because it allowed them to compete with bigger businesses for a share of the market. Once these businesses get big, they don’t like competition. They want to protect their position in the market, and the only way to do that is to try to get Government to pass regulations that makes it difficult for their competitors to compete. This is crony capitalism.

Free market capitalism rewards people who are good at production. They are rewarded by consumers who vote with their dollars on who provides the best product or service. Crony capitalism rewards people who are good at political games.

Free market capitalism uses scarce resources more efficiently than the waste that occurs in a crony capitalist system. {Solyndra}

Top Three Common Myths Of Capitalism, Video by learnliberty.org.

Here is a quote by Murray Rothbard,

“The market promotes and rewards the skills of production and voluntary cooperation. The Government enterprise promotes the skills of mass coercion and bureaucratic submission…and those who get to the top will be those with the most skill in that particular task.”

Related ArticleWalter E. Williams: Free Market Capitalism Creates A Higher Standard Of Living For Everyone, by austrianaddict.com.

Related ArticleWhy Is Capitalism So Unpopular? by Art Carden at mises.org. Excerpt from the article.

“Under capitalism, the common man does not need an intellectual vanguard or a group of virtuous surrogates to make his decisions for him or to defend him against the rapacity of his fellows. He can do just fine without our help, thank you very much, and would be much obliged if we would go back to our ivory towers and leave him alone.”

Related ArticleDo Capitalists Produce Nothing, by D. W. MacKenzie, at mises.org. Excerpt from the article.

“Capitalists who improve production plans serve the needs of consumers and produce economic progress. This is how the system that we accurately call “free enterprise” actually works. Capitalists who participate in the redistribution of wealth through government policy produce disruptive production plans and economic waste. That is how the system that we accurately call “crony capitalism” works.”

 

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.