Fundamental Astuteness

The Essence of Astuteness: Non-Partisan Intellectual Honesty

Archive for the ‘Economics’ Category

Great Quotes: Ludwig Von Mises

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The aforementioned individual was a widely acclaimed economist and political philsopher of his time. Born in 1881 in what is now Liviv, Ukraine, he became a great leader in the classical liberal movement and in advancing the Austrian School of Economic though (libertarianism and extremely laissez faire economics, respectively). Justifying his opinion that government ought not to be in the business of protecting people from their own foolishness, he opined in his great book Human Action, as follows:
Opium and morphine are certainly dangerous and habit forming drugs. But once a principle is admitted that it is the duty of government to protect the individual against his own foolishness, no serious objections can be advanced against further encroachments. A good case could be made out in favor of the prohibition of alcohol and nicotine. And why limit the government’s benevolent providence to the protection of the individual’s body only? Is not the harm a man can inflict on his mind and soul even more disastrous than bodily evils? Why not prevent him from reading bad books and seeing bad plays, from looking at bad paintings and statues and from hearing bad music?

The passage struck a chord with for the same reason it did for the great skeptic and libertarian Michael Shermer, who said of the passage that it  “…resonated with me because his analogue from the physical to the ideological is so effective in conveying the central message of freedom and liberty[.]”

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“Essential” government handouts

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My advocacy of abolishing government charity like welfare and international food aid has been quietly growing over the last few years. Authors like John Stossel and Fredric Bastiet have caused me to criticize government action on such matteres, prefering instead that the government content itself to national defense and basic matters of public peace.

My reasoning here is multifacted, ranging from  philosophical meditations on government theory to practical cause and effect studies that issue a rebuke to those who have endless faith in government policy to fix problems that are better and traditionally left to the volunatary action of private individuals.

Following up on that note, its interesting to note that in spite of what action-hungary politicians are likely to tell you, it may be that foreign aid, whether cash or commodity (food, etc) is not all that “essential” or “critical” so solving whatever “crisis” happens to be at hand. An observation by the Council on Foreign Relations seems particularly provoking to those who subscribe to this view:

“With the plight of the hungry so acute, the calls for additional food aid have grown. So far this year, the World Food Program spent $650 million—compared with the $400 million spent during the same period in 2007 to buy roughly the same amount of food (BusinessWeek). But some experts point out that the aid system keeps people hungry in the long run even as it feeds them in the short term. Alec van Gelder and Caroline Boin of the International Policy Network, a development think tank based in London, argue that aid has actually depressed development (Business Daily) in Africa. They note “70 [percent] of Africans who live off the land have falling incomes and life expectancy, while Asian countries that got little or no aid have prospered.”

Interesting point. African countries recieve lots of aid and fail. Asian countries recieved little or none and succeed. But politicians argue that such programs are essential anyway.

Written by Astuteness

January 21, 2009 at 8:50 pm

On Obama and Taxes

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My good friend Will Simpson over at Will’s Perspective wrote a fantastic article on Obama’s tax plans (note the plural) this morning. The excerpt below will lead you to his post:

A preface on tax cuts:  Congress writes them, not the president.  Anyone want to take a  wager on how likely Democrats in Congress are to cut taxes for anyone?  Major Garrett of FoxNews is beginning to refer to potential problems for John McCain from an unlikely issue: taxes.  Apparently, the American people are beginning to believe the propoganda from the Obama campaign about taxes, while factcheck.org is criticizing McCain claims and the new, post-partisan, positive Obama campaign perpetually calls McCain the “sleaziest, most dishonest campaign in American history.”  Yes, those are the words repeatedly used.

Here’s the facts:

1) Obama’s on his third tax plan….(continue reading here)

Written by Astuteness

September 17, 2008 at 12:42 pm

Congress’ April fools joke on the Oil Executives

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Yesterday, congress grilled the 5 top oil executives, hoping they would explain why energy prices are so high, and why consumer appreciation is so low.

During the hearings, the usual attitudes were prevalent: Greedy business people exploit the middle class for their own profit, and government needs to do something about it. Congressman Emanuel Cleaver reminded the nation’s top 5 oil executives that “The anger level is rising significantly.” edward-markey.jpgRepresentative Edward Markey of Massachusetts stated that: “On April Fool’s Day, the biggest joke of all is being played on American families by Big Oil,”

Here is the real story behind April Fools that congress doesn’t know: That the government had more to do with creating the energy problem than they do with solving it. Why? Because the government, insisting on protecting the environment based on the flimsy evidence from the global warming movement, taxes gas per gallon. It was $.32 a gallon last time I checked. That raises the cost of gas by so much for all of us. If the government would stop taxing gasoline, gas would be about $2.80 a gallon. That would be a good start.

On top of that, the government keeps oil companies off limits to the multi-billion barrel oil reserve in Alaska and 85% of our coastal drilling opportunities, again in the name of protecting the environment. So instead we have to buy oil from overseas: mid-east-oil-001.jpgCanada, Saudi Arabia, Iraq, etc, just to name a few. That drives up costs even more, since we have to pay for not just the cost of drilling the oil, but also for the shipping from around the world as it reaches our ports. If the government would allow us to drill our own oil more, that would lower our prices here at the pump. That’s because a basic law of economics states that the more you have of a thing, the less it costs. Take shoes, for example: People in this country used to be hard pressed to afford a good pair of shoes. They were hard to make and very expensive. Yet, as the production of shoes streamlined, they became more plentiful, and thus, cheaper overall.

The idea of production brings me to another aspect of April Fools folly–Refineries. It is reported that since the late 1970’s, the Federal Government has not let a single new refinery be built in the United States. That means that as ours wear out, we must have more and more of our fuel refined elsewhere. In foreign countries (So much for democrats promises to keep jobs in the United States) To cover the costs of shipping to the foreign country and back, prices at the pump must be raised. Surely with all the digital technology, we could find ways to vastly improve our refining process by using updated computers and sensors to make the process more precise and efficient. But the politicians won’t let us do it. So the people scream louder, and the politicians point the finger more at the Executives, reminding everyone of the “record profit” that the oil companies made last year.

Which brings me to one last point: We in America need a new attitude on rich people. The media, along with select classes of politicians, portray the American CEO as a greedy, conniving, impostor who seizes and exploits poor people’s resources for his own benefit. But this characterization is improper for two reasons:

First, businesses depend on us for our voluntary cooperation. They can’t use force. Only government can. For a business to succeed, the people must be willing to buy his products at the price he asks. It is only when the people do this that the CEO can succeed. Thus, any success a business has depends on the consumer. If the consumer caused the company to succeed, and to make evil profits, then what logical role does the federal government play in causing them to “not succeed”?

Secondly, we need rich people. They provide employment for all kinds of folks. Yet that was only possible by letting them make a profit so that they could have money left over to hire us. For providing jobs to untold millions, don’t CEO’s deserve to be highly compensated? Why should companies be investigated and punished if the people voluntarily decide to buy their wares? No one is forcing people to buy gas or oil, so neither should the government use force in return, whether it be in new regulation, taxes, or price ceilings.

CEO pay could be ‘worse’. George Mason University Economist Walter Williams put it well:

“When Jack Welch became General Electric’s CEO in 1981, the company was worth about $14 billion. Through hiring and firing, buying and selling decisions, Welch turned the company around and when he retired 20 years later, GE was worth nearly $500 billion. What’s a CEO worth for such an achievement? If Welch was paid a measly one-half of a percent of GE’s increase in value, his total compensation would have come to nearly $2.5 billion, instead of the few hundred million that he actually received.” 

oil-well-01.jpgIf government would get out of the way, let us drill our own oil, and refine our own fuel, costs could be cut, (since we wouldn’t have to pay for the shipping from foreign countries) and jobs would be created (since we would be doing our own drilling and refining). With the increased supply of fuel in the market, prices could be reduced. But I bet it won’t happen soon.

Why?

Because government bureaucrats know best.

Especially on April Fools Day.

Written by Astuteness

April 3, 2008 at 11:00 am

Texas: 15th on the World economic scale

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I’m a firm believer in Texas. I believe it is the greatest Victoria Texas scanstate in the Union and in the whole world. Minnesota comes in a distant second.

A quick look at the this wikipedia page supports a loyal view of Texas’ greatness. Despite the critics of wikipedia’s credibility, this page is very credible. I checked out the report on which the article was based, and found things to be in order in that regard.

One of the neat things we find out is that Texas is 2nd place in the United States when it comes to GDP totals, and 15th in the world overall. The chart numbers were sort of complicated, so I’ll come up with my own scoring system to put it in perspective:

As mentioned above, Texas is 2nd overall in the United States, with a score of 989.443. California is first, with a score of 1822.117, about twice (or, to be exact, 1.84155) that of Texas.

If Texas could increase its economy by 80%, it could surpass California. texas_state_capitol.jpgIf Texas could quadruple the size of its economy (reaching a score of 3957.772), it would take third place overall in the world, including the United States. If at that point Texas were to leave the Union, then the United States would not longer be the world’s leading economy. All of this, of course, assumes that Texas’ economy would grow while the rest of the world’s remained stagnant, which is not possible. Other economies would continue to grow, so it is unlikely that the above possibilities would occur.

Nevertheless, Texas should set goals. It should strive to continue to advance on the world economic charts overall by finding ways to cut government spending, lowering taxes, and finding ways to cut needless, cost inflating regulation. The next milestone on the charts toward economic glory is to surpass Mexico. This is quite possible, since Mexico’s economy is only 6% larger than Texas.

Long Live Texas. texas-flag-big.jpg

Written by Astuteness

March 2, 2008 at 5:05 pm

Scholarly Skepticism on Stimulus Senselessness, part 1: Causality

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MoneyAs the economy’s signs of turbulence worsened at the turn of the year, Politicians were quick to react. Not all the reactions were unified, but react they did. Almost everyone was quick to promise “swift” or decisive” “action”. I think I even heard democrats briefly mention that taxes might need to be cut. Too bad Republicans didn’t harp on that idea more.  

Nevertheless, both sides of the aisle quickly agreed that money needed to be injected into the economy. Even democrats agreed to this. If politicians can agree that more money in the economy makes it grow, I wonder why anyone would oppose a tax cut. Indeed, how is it possible that democrats and some republicans can vote for higher taxes, while at the same time indirectly admitting that more money in the economy is better by voting to put money into the economy through a stimulus package? Astuteness, anyone? 

It amazes me that politicians are rushing to give back to American’s their hard earned taxpayer dollars; yet, these same politicians don’t seem to be the least embarrassed that they took the money from Americans in the first place.  

Although more money in the economy by virtue of lower taxes is good, the government’s decision to stimulate the economy with (up to) $1200 handouts is based on…well, imagination. And that’s about it. Historically, logically, and economically, the stimulus package is a joke on political economics. I’ve read and thought quite a bit on the issue, and the foremost arguments are provided below.   

Causality—Does a reduction in consumer spending necessarily cause a recession? 

Central to the justification for passing the stimulus package was the despair over the drop in consumer spending. Politicians would have us believe that because we average people spend less, then the economy goes down because business aren’t making as much money. If businesses aren’t making as much money, then they can’t afford to hire as many employees. Then employment drops. When employment drops, more people apply for government benefits. That drains the government coffers…and the vicious cycle goes on.  

Problem is, we don’t know if the drop in consumer spending was the cause of the vicious cycle. At least once historically, this has not been the case, as explained by Alan Reynolds, Senior Fellow at the Cato Institute and author of the book Income and Wealth. He explained January article titled “Bush’s Stimulus Flop” that:  

“The economy was in recession from March 2001 to November 2001, but consumer spending fell in only the first and last of those months, plus September. Real consumption last November was still 3% higher than a year before — not much below the post-1960 average increase of 3.6%” 

So we don’t know if a drop in consumer spending causes the economy to drop. But the politicians tell us that more consumer spending is the answer anyway. Which brings us to another question…

Next on Fundamental Astuteness: Scholarly Skepticism on Stimulus Senselessness, part 2—Will the money be spent on consuming?

To be continued…

Written by Astuteness

February 20, 2008 at 3:50 pm