Free Bazaar Blog

I love that the life is unfair. Every time somebody thinks “that is unfair” and proceeds to correct it, that person has made the world a little bit better. Also what is fair to one is always unfair to another, the other person thinks the same and the cycle of human progress continues. If the life were completely fair to everybody, would we not become lazy, boring and all same?

Awesome Hayek vs. Keynes rap video
http://econstories.tv/home.html

Measure 66/67 effects that can be seen will be small and invisible in short term. Nobody will leave tomorrow. Govt. union employees who pushed for this will keep their jobs for the short term and will be happy. It will look like jobs have been saved.
Effects that cannot be seen: Companies and educated people who will decide not to come to Oregon. New companies that will not be formed. Companies which are on the edge of bankruptcy that will close with tax on Gross revenue rather than profit. People looking for change in career deciding to move outside of state. etc. etc.
Imagine mice on a ship of cheese eating through the cheese. Who wins???

It is not difficult to see what must be the consequences when democracy embarks upon a course of planning which in its execution requires more agreement than in fact exists.... The effect of the people's agreeing that there must be central planning, without agreeing on the ends, will be rather as if a group of people were to commit themselves to take a journey together without agreeing where they want to go; with the result that they may all have to make a journey which most of them do want at all.
Road to Serfdom-F.A. Hayek

Quote of the day:
"Anonymous: "Now, let me get this straight.....We are going to pass a health care plan written by a committee whose chairman says he doesn't understand it, passed by a Congress that hasn't read it but exempts themselves from it, to be signed by a president that also hasn't read it and who smokes, with funding administered by a treasury chief who didn't pay his taxes…all to be overseen by a surgeon general who is obese, and financed by a country that's nearly broke. What could possibly go wrong?"
Via Carpe Diem

Excellent article for those who believe that subprime crisis was a regulation failure. If that was so then why is it that 3/4th of the subprime losses will be at Freddie and Fannie?

The further into this crisis we go, the greater the share of subprime loans and mortgage losses are turning out to be located at Freddie and Fannie. Even one year ago, if you had asked me, I would have told you to expect at least 2/3 of the losses to be at companies like Citi and Bear, with less than 1/3 at Freddie and Fannie. It now looks quite different. Conservatively, 3/4 of taxpayers losses will be at Freddie and Fannie. Perhaps as much as 90 percent of taxpayer losses will be there.

Given the large role of Freddie and Fannie, it makes sense for politicians to create as large a diversion as possible. Hence, the brouhaha over bonuses at bailed-out banks.

Incidentally, the debate over the "public option" in health reform also can be viewed as an exercise in symbolic politics and diversion. The point is to divert attention away from the bankruptcy of Medicare.

Interesting blog post showing that stimulus was worse than useless
National Accounts Show Stimulus Did Not Fuel GDP Growth
Along with the news that real GDP growth improved from -0.7 percent in the second quarter to 3.5 percent in the third quarter, the Bureau of Economic Analysis (BEA) released detailed National Income and Product Account tables yesterday, which received little comment in the press today. These tables make it very clear that the $787 billion stimulus package had virtually nothing to do with the improvement. Of the 4.2 percent improvement, more than half (2.36 percentage points) was due to firms cutting inventories at a less rapid pace, which has nothing to do with the stimulus. (For the details look at BEA’s Table 2 which shows that the contribution of inventory investment increased from -1.42 to .94 which equals 2.36.)

Great article

It is a good thing that other congressmen did not follow Rep. Joe Wilson’s lead. If they yelled out every time President Obama said something untrue about health care, they would quickly find themselves growing hoarse.

By our count, the president made more than 20 inaccurate claims in his speech to Congress. We have excluded several comments that are deeply misleading but not outright false. (For example: Obama pledged not to tap the Medicare trust fund to pay for reform. But there is no money in that “trust fund,” anyway, so the pledge is meaningless.) Even so, we may have missed one or more false statements by the president. Our failure to include one of his comments in the following list should not be taken to constitute an endorsement of its accuracy, let alone wisdom.

Also links to another article on how special interest is being bought off.. One more example of Government pretending to help you, but actually working hand in glove with special interests to screw you.

Marc faber things that there is dome fake upside to the short term due to excessive money printing by the government, but long term we are toast. See this video.

This dilbert cartoon captures my thoughts exactly on what would happen if lobbying was made illegal.

Two things become clear from this:
1) If a politician has some power that is useful to a businessman, he will find ways to bribe the politician.
2) If a politician is willing to be bribed, the politician will find ways to get that money.

We know that politicians will always be willing to be bribed unless of course they belong your favorite party or are angels. Also, I don't think there is any doubt that as long as the politician has power that can help the businessman, no. 1 will be done.

So, the only realistic way of reducing (you can never eliminate) bribes and lobbying to me seems to be to reduce the power of the politician in areas that can benefit a businessman. In other words take the power of economy away from the government and the bribes and lobbying will all but disappear.

It seems Massachusetts already has

Thanks, Quando.

I hate it when as a defender of free markets, people simply assume that I am for corporatism. I am not sure how libertarians of all people can be accused of that. Let us look at Wikipedia page on corporatism. Here is a quote:
"Countries that have corporatist systems typically utilize strong state intervention to direct corporatist policies and to prevent conflict between the groups." How it can be assumed that something needing strong state intervention can be supported by libertarians, is a mystery to me.
Corporatism cannot survive without state's help. Other way to look at it is that the very reason the corporates flock to the government is because of the power of granting privileges that they hold. If we reduce or eliminate that power of the state over the economy, the corporates would be stop lobbying and bribing the state and this would automatically get rid or corporatism or the unholy alliance of corporates and the state. In fact I will claim that pretty nearly all if not all big companies successfully use state to create entry barriers that prevent new competitors from entering and dethroning them. These entry barriers take many different forms, like: Patents rights (see this article , study and online book for detail on why patents are counterproductive and create monopolies), excessive regulations that cost so much that only large companies can afford them (For example see this article) etc.

Also, this article summarizes the libertarian viewpoint on corporatism very well. Some quotes:

"corporate power and the free market are actually antithetical; genuine competition is big business’s worst nightmare. But also, in all too many cases, yes —because although liberty and plutocracy cannot coexist, simultaneous advocacy of both is all too possible."

Corporations tend to fear competition, because competition exerts downward pressure on prices and upward pressure on salaries; moreover, success on the market comes with no guarantee of permanency, depending as it does on outdoing other firms at correctly figuring out how best to satisfy forever-changing consumer preferences, and that kind of vulnerability to loss is no picnic. It is no surprise, then, that throughout U.S. history corporations have been overwhelmingly hostile to the free market.

"One especially useful service that the state can render the corporate elite is cartel enforcement. Price-fixing agreements are unstable on a free market, since while all parties to the agreement have a collective interest in seeing the agreement generally hold, each has an individual interest in breaking the agreement by underselling the other parties in order to win away their customers; and even if the cartel manages to maintain discipline over its own membership, the oligopolistic prices tend to attract new competitors into the market. Hence the advantage to business of state-enforced cartelisation. Often this is done directly, but there are indirect ways too, such as imposing uniform quality standards that relieve firms from having to compete in quality. (And when the quality standards are high, lower-quality but cheaper competitors are priced out of the market.)"

This is an amazing reversal by BBC. Some quotes from the article:

"This headline may come as a bit of a surprise, so too might that fact that the warmest year recorded globally was not in 2008 or 2007, but in 1998.

"But it is true. For the last 11 years we have not observed any increase in global temperatures.

According to research conducted by Professor Don Easterbrook from Western Washington University last November, the oceans and global temperatures are correlated.

Professor Easterbrook says: “The PDO cool mode has replaced the warm mode in the Pacific Ocean, virtually assuring us of about 30 years of global cooling.”

These graphs from Economic Freedom of the World: 2009 Annual Report, speak for themselves.

What It Feels Like To Be A Libertarian?

This essay captures exactly how I feel.

"Imagine spending two decades warning that government policy is leading to a major economic collapse, and then, when the collapse comes, watching the world conclude that markets do not work.

Imagine continually explaining that markets function because they have a built in corrective mechanism; that periodic contractions are necessary to weed out unproductive ventures; that continually loosening credit to avoid such corrections just puts off the day of reckoning and inevitably leads to a larger recession; that this is precisely what the government did during the 1920's that led to the great depression; and then, when the recession hits, seeing it offered as proof of the failure of laissez-faire capitalism. "

Interesting article on evolution and economics in Scientific American by the founder of The Skeptics Society
"As with living organisms and ecosystems, the economy looks designed—so
just as humans naturally deduce the existence of a top-down intelligent
designer, humans also (understandably) infer that a top-down government
designer is needed in nearly every aspect of the economy. But just as
living organisms are shaped from the bottom up by natural selection,
the economy is molded from the bottom up by the invisible hand."
His book Mind of the market is now on my reading list

Are you even surprised?
http://alcourtwatch.blogspot.com/2009/09/drug-dealing-alabama-judges-son...

There is an unstated assumption in lot of thinking about inequality, i.e. there is somehow a fixed pie of wealth, and the rich have an unfair share of the fixed pie. On the other hand, if we assume that there is an expandable amount of wealth for all practical purposes, then the question of the "unfair share" goes away, because you no longer need to fight for share of a fixed pie. So, is there a fixed amount of wealth or not? Let me tell you a story.

In a primitive island, there lives only one tribe, a farming tribe called Xulic. The tribe is ok at farming and lives at a subsistence level. One day a young, intelligent guy named Xilcor figures out that he can make a special plow that will allow the farmers to plow the land, sow the seed and create small channels for irrigation, all at the same time. This will allow each farmer to use less seed and farm a larger parcel of land. There is no problem of additional land, since the island has lot or unused fertile land. In fact the innovation will allow a production increase of 100%, or doubling of production. The only caveat is that the only person who knows how to make the pow is Xilcor. Xilcor tells the farmers that he will make the plow, repair it and sharpen it and keep it in good condition, all for 10% of the output that they produce. The farmers agree, since they still get to keep, 1.8 times their original production. With 500 families in the Xulic tribe, Xilcor gets to earn 50 times a normal farmer, so he becomes very rich in comparison to the tribe. Of course all the farmers are better off too.

So, now comes the quiz, who did Xilcor steal from to become rich? Was there a fixed pie from which Xilcor took more than his fair share?

This is a simple example, but there are a lot of these in the modern world. Apple, Intel, Google etc. a just a few examples of companies who got rich because they provided something valuable, not because they took an "unfair share" of a fixed pie.

A great animated series exploring the meaning behind a lot of political vocabulary and US constitution.
Watch the ones with DVD in the title starting with intro.
http://www.youtube.com/user/ST0PandL00K?view=videos

Good Time magazine interview of Ron Paul. Best Quote "Anti-war Left has left"... which is disappointing.

why do we let politicians increase power on us based only on claimed intentions/promises?

"Concentrated power is not rendered harmless by the good intentions of those who create it." – M. Friedman

"Good intentions will always be pleaded for every assumption of authority... There are men in all ages who mean to govern well... They promise to be good masters, but they mean to be masters. "– D. Webster

Warren Buffet article. Thanks Ishdeep. "government expenditures now running 185 percent of receipts," and we are thinking about huge new programs to add to this debt? As somebody said "Eventually you run out of other people’s money"
http://www.nytimes.com/2009/08/19/opinion/19buffett.html?_r=2&pagewanted...

"We all agree that the system is imploding, we all agree that things are more precarious than perhaps Canadians realize," Doing said in an interview with The Canadian Press."

To be generically against markets would be almost as odd as being generically against conversations between people. . . The freedom to exchange words, or goods, or gifts does not need defensive justification in terms of their favorable but distant effects. . . . The contribution of the market mechanism to economic growth is, of course, important, but this comes only after the direct significance of the freedom to interchange— words, goods, gifts—has been acknowledged. - P 61- Development as freedom: Amartya Sen

When applied to the ultimate ends of [human] action, the terms rational and irrational are inappropriate and meaningless. The ultimate end of action is always the satisfaction of some desires of the acting man. Since nobody is in a position to substitute his own value judgments for those of the acting individual, it is vain to pass judgment on other people's aims and volitions. No man is qualified to declare what would make another man happier or less discontented. The critic either tells us what he believes he would aim at if he were in the place of his fellow; or, in dictatorial arrogance blithely disposing of his fellow's will and aspirations, declares what condition of this other man would better suit himself, the critic. - Mises - Human action

As per this article in WSJ
two-thirds of Americans are now overweight and one-third are obese. Most of the diseases that kill us and account for about 70% of all health-care spending—heart disease, cancer, stroke, diabetes and obesity—are mostly preventable through proper diet, exercise, not smoking, minimal alcohol consumption and other healthy lifestyle choices.

So, if most of the health care cost is due preventable issues, should I pay for bad decisions of others? If we get govt. health care, it looks like that is what we will have to do.

Great video on health care