The Market Test

Last night I was at a bar at the beach that featured "Mensday Wednesday," a night where men drink free from 10-12. I'm always very wary about "free stuff," because there is always a catch. Last night was no different, and I'll list what these draw backs were:

1) Men did drink free, but not just any beverage. In fact, only one drink was "free," the house "lager," which I'm pretty sure was poured from a keg of Milwaukee's Best. It was disgusting.

2) Guys were given ~5 oz. dixie cups with which to drink from. Now, this wouldn't be too much of an issue if it wasn't for the fact that the keg was behind the bar, and you had to wait for the bartender to get you a refill. And since most guys had the "free" mentality, tips were not forthcoming, thus the bartender had very little incentive to give you snappy service. The lines were notorious.

3) The keg ran out at 11:19 PM and was not refilled. So, really, it was "Mensday Wednesday" for 1 hour and 19 minutes.

Needless to say, I refused to stand in a ridiculous line for a 5 oz. portion of horse spit beer. Pabst Blue Ribbons were $2, and I was happy. I will not go back to this bar on a Wednesday, and I think many other people feel the same. The market has spoken.

So, I argue that "free stuff" actually has costs, though not monetary, that are much greater than a dollar price. Last night there was little drinking taking place, and neither the bar tenders nor the customers were very happy (which was the total opposite of what everybody wanted before they went out). Sure, some people saved a few dollars, but I'd be willing to bet that on net, most everybody suffered psychic losses.

Reminds me of "free admission" at Chuck E. Cheese. Sure, it's free, and even the games are cheap, but the quality of service is poor, games are poorly kept, and there's a gang member at every quarter slot. I'd go there if the price were higher.

Graduation

So, I graduate from college in a little over a week with my B.A. in Economics and minor in math. Alas, I must rename my blog, lest I mislead serious readers into thinking I'm a know-nothing college kid (because now I'm a know-nothing graduate). What should I rename the 'ol blog?

I'm remembering a South Park episode, where Eric Cartman describes his experiences at theme parks... and amongst his recollection he says something about, "cantankerous kinks" or something to that effect.

Hmmm. This blog is about cantankerous kinks, isn't it?

The search continues.

Update: Cartman doesn't talk about cantankerous kinks but instead "rare Kartankulas plinks!" I found the transcript on the net (not the video because my computer is far too slow to watch it). I thought the part where Cartman talks about lines was so great that I'm uploading the transcript of that part here, as follows:

Cartman: Oh, but I'm not buying the park to get people to come.

Mr Foon: You... you're not?

Cartman: No no no! I'm buying it to keep people out! [Chris and Frank look at each other] Don't you see? Forever it has been my dream to have my very own theme park, so that I could be alone in it, all day, every day. I love theme parks. [zoom in] But the lines! Everywhere you go, people, crowds, [shot of people waiting to enter "The Mine Shaft"] The rides are great, but... [a shot of crowds on Main Street] All the lines, lines, LINES! [shot of people waiting to enter a ghost ride, another shot of a kids' mine shaft ride; another of Cartman pissed off, eyes squeezed shut, with waiting times floating past him] If there's one thing I hate, [a shot of two lines of people entering his head] all the lines, lines, lines, LINES!! [opens his eyes, and a moment later...] And then there get to be so many people [his eyes roll around independently of each other] that they make FastPass. [a shot of people in a FastPass line] So then there's lines for FastPass. [zoom out to show Cartman in line for a FastPass] You stand in line to get a ticket to stand in line later. Then there's lines for the bathrooms [two lines for the Waterworks Restrooms], lines for the drinks [Astro Food line], lines for cantakuras [Seussian characters play strange instruments for the people in line] and rare Kartankulas Plinks! [a vendor sells them - they are a fruit treat shaped like strawberries] ...And, so you see, this park is for me. Nobody else will be allowed in it. [Emphasis added]

Teacher's Unions and Unemployment

I read a very profound statement in Man, Economy, and State today that, although known to any worthwhile economist, is almost vaguely or not even treated at all in high school and college econ principles texts. I'm on Rothbard's chapter on monopoly. The passage (pp.707-708) is as follows:

"[When] [t]he union has thus achieved a restrictionist wage rate... a sacrifice has been made... there are now fewer workers hired... What happens to them? These discharged workers are the main losers in this procedure. Since the union represents the remaining workers, it does not have to concern itself, as the monopolist would, with the fate of these workers. At best, [the unemployed workers] must shift... to some other-nonunionized- industry. The trouble is, however, that the workers are less suited to the new industry. Their having been in the now unionized industry implies that their DMVP in that industry was higher than in the industry to which they must shift; consequently, their wage rate is now lower."

But this next part is what I find amazing, that I've never read in any formal textbook (but is so elementary). Rothbard continues:

"Moreover, their entry into the other industry depresses the wage rates of the workers already there. Consequently, at best, a union can achieve a higher, restrictionist wage rate for its members only at the expense of lowering the wage rates of all other workers in the economy." [Emphasis added]

I do believe there exists economic laws irrespective of time and place. In this case, an increase in supply will decrease the equilibrium price- in this case, the price of labor, or the wage rate. So not only do labor unions use the heavy hand of the government to force employers into negotiations (and more importantly, settlements), but also these entities decrease everybody else's standard of living in the form of decreased wages by the reallocation of previously employed workers.

Let us not think that unionization in this and other countries is such a small proportion of the labor force, either; this analysis applies in full to occupations and industries that require intense licensing (e.g., medical services) and that outright prohibit competition (e.g., public utilities, public schooling).

Some people might object that public schooling is subject to the constraints of competition via private schools. This is untrue for many reasons, but principally, two: 1) Private schools are subject to many, if not all, of the same requirements concerning curriculum and facilities; they can scarcely operate outside of the realm of what the state legislature will let them. 2) Education is compulsory; kids can't choose whether to go or not. Consumer choice is the backbone of competition: By eliminating a vast array of choices available to children and young adults, be it the workforce or some other way to spend their initial 18 years of life, compulsory education has eliminated a large part of what constitutes competition. Thus, even if argument (1) is granted, the fact that kids have to attend school means that both public and private schools don't have to try nearly as hard to maintain a level of quality and price that would impel ordinarily free children to attend.

It's as if all adults were forced to buy magazines of a certain type. Before such a mandate was enforced, magazines had to compete amongst the thousands of other products that you would have ordinarily bought with your money (not just other magazines). But it's worse than this where schooling is concerned, because on top of eliminating substitute products to spend your tuition money on, the educational establishment is cartelized and monopolized to hell and back. You have the worst of both worlds in the case of schooling, because at least in the magazine example wider profit margins would encourage entrepreneurs to enter the forced magazine industry. Where schooling is concerned, that's not a viable option. To modify our magazine example, adults are forced to buy the kind of magazines that are cartelized and will blow any of its competitors to smithereens with brute force. Now imagine the kind of quality of magazines you'd expect to read.

Back to my original point, this monopolization of sorts not only dis-employs the workers in the original industry but also decreases the wages of everybody else as those workers find work elsewhere. Multiply that by the amount of licensing and paperwork it takes to work in any given occupation, and it's no wonder why U6 unemployment is at 16.9 % (and why we have to use 6 different measures in the first place ;) )

Accounting Tricks

Would somebody mind explaining to me how people who live off taxes pay taxes? The two concepts are mutually exclusive: you're either a net tax consumer or a net tax payer.

I know, he has book sales, blaze blaze, but I'm speaking of a larger "phenomenon" where we think in terms of every laborer/property owner/etc. paying taxes. This is simply false, as one must fall into the category of net consumer or net payer of taxes relative to all the 'benefits' received from the guvamint.

Saying that public officials, like the vice president or the mayor, or college professors or the city garbage guy all pay taxes is ridiculous, because they all derive their incomes from taxation. The "paying out of taxes" at the end of the day is an accounting maneuver, nothing more.

Think of it like this: A man sticks you up in a dark alley for whatever is in your pockets. You scream and plead with him that you need that money for rent and dinner, but he doesn't listen, and insists that you throw your wallet into his bag. He assures you, "Hey, now, I'm in this just as much as you are," as he throws his own wallet into his bag. He then walks off with the bag.

I feel better, don't you?

The Economics of Credit Reports

I stumbled upon a Mises.org video originally aired on CNN that pits J.H. Hubert against some "consumer advocate." Hubert argues that credit checks for potential employees are, by common sense, indicative of a given employee's work reliability, that is, a lower score should be positively correlated with more work absences, tardies, etc. as compared to a person with a higher credit score. I like the argument because it is intuitively appealing. The "consumer advocate," however, maintains that there are no statistical studies proving that this correlation necessarily holds, and so employers shouldn't be allowed to discriminate on the basis of a FICO score.

Riiight. Empiricists sound really dumb sometimes.

But, I went through 3/4 of the video and didn't hear the most basic argument from an economics standpoint come up, that is, that if the demand for laborers with lower credit scores fall, then the demand for laborers with higher credit scores must by de facto increase, establishing a wage differential between the two classes. If, as our "consumer advocate" maintains, there really is no difference between work reliability and overall performance between the two classes, then there are profits to be made by "daring" entrepreneurs willing to hire from the lower-scoring group. These profits would be noticed by other entrepreneurs, and over time, the demand for lower-scoring laborers would increase which will, by default, decrease the demand for higher-scoring laborers, eliminating any wage differential between the two groups.

Thus, our "consumer advocate's" argument is shown to be a paper tiger, because there's really nothing to worry about.

Unless we assume that employers are stupid and can't recognize profit opportunities. But if this is true, why doesn't our "consumer advocate" become a hiring manager somewhere, making the big bucks by hiring people with poor credit?

Frankly, I like the argument that, "It's my business, my job that I'm looking to give to somebody else, and it's nobody else's damn business who I hire for it."

Sin Escolaridad Más

I went to the library today and checked out two books in spanish, those being La Casa en Mango Street and Che Guevara Habla a la Juventud. Ever since late August of '09, I've been learning the spanish language. I used Rosetta Stone for 5 months, and since January I've been reading spanish books with a spanish dictionary nearby. I can read most simple things and understand it spoken to me, but speaking it is another story. Hence why I'm going to Costa Rica for 3 months on May 19th, and the rest is history.

Anyway, La Casa en Mango Street is a book that I was assigned when I was in Spanish III in high school. I remember the very day I was assigned the book, and how I stared blankly at its pages with not an ounce of hope in my soul that I'd get through it. I defeated myself, in a way, for I didn't read the book (nor pass the class). I didn't give a damn, frankly.

But now, in a span of 8 months, I can read this book! I flip through the pages with almost ease, sounding out the beautiful letters aloud as if I were painting a Rembrandt. I'm absolutely amazed at the results that I (or anybody) can achieve when I actually want to do something. Foreign tongues used to scare the bajezzas out of me, but I'm very much looking forward to learning both french and german come next August. It has little to do with IQ and everything to do with the will to learn.

What does this have to do with political economy or economics?

Compulsory schooling is a sham. I graduated believing that the professors were supposed to teach me something, that more schooling and more training and more formal education were my vectors to success. This is so incredibly and emphatically untrue that I pity all those graduating seniors going on to Harvard and Yale and the like. You know, the kind of people that look at a recession and say, "Hope I'm not out of the job..." Because now, I can look at a recession and say, "I don't feel like participating in this. I can always create my own job, anyway." Compulsory schooling, by its very definition, cannot teach you this skill because you aren't allowed to choose among the skills and talents you're best at and further develop.

From my 18+ year experience in school, and my substitute teaching experience, and my sister's experiences, and all the tutoring I've done during college, I've realized that compulsory schooling sucks the drive and the need to learn, to better oneself, out of most people. These students are so damn reliant on the professor to hand them knowledge that they don't even realize they were born with their own faculties. Compulsory schooling is worse than inefficient and futile;

it's immoral.

Entrepreneurial Idea?

I was thinking tonight about items that have big prices but can be shared among consumers. For example, computer programs such as Microsoft Office or the language learning program Rosetta Stone, are both on the expensive side as far as single consumers go, especially if neither products will bring with them monetary remuneration.

But, perhaps, a Craig's List of sorts could be set up for isolated consumers wanting to go in with other consumers on such products? For instance, I want Rosetta Stone French and RS German, and I'm sure another consumer SOMEWHERE in the world wants to do the same, and the RS software can be used twice. Not only would this 'sharing' cut the $600 price in half, but also both me and the other customer would be less willing to rip an illegal copy off the internet. Thus, both consumers and producers are made better off.

Of course, how many consumable goods can be duplicated in such a way as computer programs? I can only think of things like Photoshop, Office, and Rosetta Stone. The products have to be duplicable. I think.

Either way, this idea does set up an information exchange, which is essential to markets. I think it would work, though it would not necessarily bring in big profit margins to the host of the exchange. Would some products be made so incredibly accessible to previously isolated consumers that product prices would rise substantially? No telling, but I like the idea.

Hmmmm.

More on Strawberries and Such

Back to our Strawberry producers here, it's obvious that because the strawberry farmers were destroying their crops, they made entrepreneurial errors. That is, the decision to continue producing strawberries that was made before the growing season was wrong. Obviously, these producers should have invested less time/labor/capital/other resources in the production of strawberries than otherwise. If the strawberry farmers could go back in time, they would correct for this error, and reduce the amount of factors that went into the production of their crops.

But they can't go back in time. They look to the future with their presently owned resources and products, and make decisions based upon future prospects. Destroying some of their surplus crop raises the per unit price of strawberries, enabling them to produce more than otherwise in the future.

I think that's what our strawberry critics forget: production is future oriented. Producers can't look at the past and base their production decisions off of this alone. What the critics are asking strawberry farmers to do is to compound the errors already made in production. Assuming that strawberry farmers could go back in time, it's as if the critics are asking them not to, to instead produce so many strawberries as to reduce their profit margins and hence their incentives and abilities to continue with production in the future, and ultimately to serve the demand of consumers in the market.

In other news, William Easterly's The White Man's Burden was a fantastic read about the follies of foreign aid, about how local, on-the-ground strategies that attack small problems related to poverty and squalor are often much more effective than grand utopian schemes of eliminating an entire feature of poverty (say, hunger or AIDS) in one fell swoop. I feel as though I understand the IMF, World Bank, etc. much better than I did a month ago. Without giving them much justice, I would have to say they're mostly 'bureaucratic clap-traps:' Big talk without the strategies to make for effective walk.

But, I've been told that I have a bad case of confirmation bias.