Thursday, September 7, 2017

Price Gougers are Heroes



The following is my most recent Op-Ed in the September 7th Orlando Sentinel
 
On March 9, 1776 Adam Smith published the most important book on economics ever written.  In The Wealth of Nations Smith wrote, “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.  We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages.”

241 years later, Hurricane Irma churns towards the United States and Florida politicians – by ignoring Adam Smith – are making our lives miserable.

It is, of course, illegal for businesses to “profiteer” by raising the price of water, gasoline, generators, batteries and any number of essential items during a natural disaster.  Lawmakers – often among the most economically illiterate humans you will ever meet – tell us that we can call a special hotline if we spot anyone responding to 150 mph winds by raising prices on all of the things that are selling out because we can’t raise prices.

The folks in Tallahassee tell us price gougers are greedy.  We nod in agreement as we pile water, batteries and toilet paper 20 feet high in our shopping carts with no regard to our fellow citizens staring at empty shelves.

I suppose we are supposed to walk into the grocery stores, see nothing on the shelves, and say, “Gee, I am so grateful that my government did not allow water prices to rise.  Now I can face dehydration knowing they are looking out for my best interests.”

Or….

What if busy-body politicians simply let the free market work the way Smith intended?

Here is what would happen.

First, the category 5 storm heading for our peninsula would cause everyone to scurry like greedy rats out into the market place to stock up on enough supplies to last five years.

Second, upon arriving at the store they would see signs reading:  HURRICANE IRMA SPECIAL:  WATER - $30 (or more) PER CASE.

Then, consumers who care about no one when prices are low are all of a sudden forced to care about everyone because the higher price serves a critical rationing function.  Now the water will be rationed based on our actual demand (and ability to pay), not some panic-induced buying binge that harms other people.    The higher price stems demand and makes sure more people can find water.  They might have to cut back on their cable bill, restaurant spending or phone plan to buy water but so be it. 

Higher prices also signal entrepreneurs to rush supplies to areas impacted by such storms.

Think about it.  If generator prices were allowed to rise you would quickly see people in Georgia, Tennessee, Alabama and surrounding states buying up generators and hauling them to Florida.  Since none of the generator profiteers can possibly know who else is thinking the same way, we would see a relatively large increase in the supply of generators pouring into the state.

Adam Smith’s “invisible hand” would then guarantee that the extra supplies and greater competition would force prices to fall back towards a lower market equilibrium. 

Without the chance to cash in and earn large profits there isn’t the same motivation to bring in live-saving generators or roofing supplies. 

Remember the hurricanes from 2004?  Blue tarps stayed on homes for years because the government of Florida did not allow prices to rise or out of state roofers to make money in our state.

It is also important to note that price gougers (so called) are simply selling their private property at a price they and others agree to.  Private property rights make up the core of what our country is founded on.  If I own something I should have the right to part with it at the price other people are willing to pay.  Voluntary, free exchange is not allowed in places like Venezuela.  It was not allowed in the former Soviet Union.  Instead, governments set prices at “fair” levels and people could not find anything due to the shortages that were created.

So, the next time you see someone on the side of the road selling water or plywood for the new “hurricane price”, stop and say thank you. After all, they are  - whether you know it or not – performing a valuable public service.
 

Tuesday, May 30, 2017

Dear High School baseball parents - please shut up

The following is my recent Op-Ed from The Orlando Sentinel
 
It was with a mixture of bewilderment and nausea that I recently read an article about a controversy at Celebration High School and its 2017 spring baseball season.

According to the sports page of this newspaper, Celebration, after some seasons of struggling with losing seasons in high school baseball got a new coach, and as it turns out, a few new players who were apparently pretty talented.

This talent led to the some of the returning players at Celebration losing playing time, and as far as I know, perhaps starting positions on the team.

This led to immediate parent-complaining and speculation that the coach had engaged in FHSAA policy violations with respect to recruiting of new players.

It then led to an investigation and the resignation of the coach – even though the investigation found that he had not committed any policy violation.

All he did, apparently, was commit the cardinal sin of benching inferior players for superior ones.

I should mention that I am the head baseball coach at Legacy High School.   Legacy has fielded a baseball team for the past two years.  In 2016 we won seven games and lost eighteen.  This year we finished 9-16.  Two losing seasons in a row for this school where most of the players have not played organized baseball since they were twelve.

This season one of our returning players – a senior – was beaten out by a freshman for a starting infield position.

This senior responded to his demotion by showing genuine leadership on and off the field.  He was a calming influence during games when younger players were struggling and he took whatever playing time that came his way in a manner that exemplified dignity, maturity and a selflessness that was admired by everyone on the team.  In short, he acted like an adult.

I was aided by the fact that his parents never said one word about his demotion, reduced playing time or anything else for that matter.  They were always supportive, made no excuses for him and did not allow him to become a “victim” of his coach’s decision.

By contrast, one dad at Celebration was quoted as saying that he was going to take his two boys and go home after the new coach allowed the new players to have more playing time.

How sad.

I can only imagine how this is going to play out for his sons as they go on to college and the “real world”.  I can see it now.  The mean professor gives them a grade they don’t “deserve” so they quit and go home.  The harsh boss denies them a raise or promotion so they quit and go home.  Their heartless wife expects them to help with dirty diapers and they walk away from their duties as husbands and fathers.

I have a suggestion for the parents at Celebration – or any other school – where your precious child has been put on the bench in favor of a better player.

Shut up and deal with it. 

I tell my players every spring that I am not interested in anything their parents think about my lineup card.  The players who put in the most effort, have the best attitudes and are most productive play.  The others play less – and sometimes not at all.

My players are told that playing high school baseball is a privilege, not a right and that they will discover as young men that the world is not fair and that mommy and daddy cannot – and should not – always rush in to save them from that reality.

As a result, our players at Legacy are getting better at baseball and at the long walk towards manhood.

This may not mean that they have a winning record next year, or the year after that.  What it should mean is that when they leave high school they are better prepared to meet the challenges that are going to be in front of them for the rest of their lives.

The time has come to stop coddling our kids by threatening to quit and go home.  Instead we should tell our kids that if they want to be a starter, or get accepted into a great college, or be promoted in their job some day they have to be better than the next best competitor. 

 

Tuesday, March 28, 2017

Would America be better off if we became Norway?



Sorry for the long delay in posting anything.  I have been busy living in denial since last November and have not felt inspired to write much.  Here is my latest Op-Ed from The Orlando Sentinel.


Should America aspire to become Norway?

 According to economists who now study factors that determine human happiness, Norway is now the happiest place in the world.   The 2017 World Happiness Report says so.  It also says that America has fallen to 14th place.

For the past several years, economists have moved into a new realm of economic studies that focus on factors beyond income, wealth, consumer spending and the gross domestic product.    Now, my discipline has shifted to questions surrounding perceptions of mutual trust, shared purpose, generosity and the degree to which nations have good governance.

Somewhere Bernie Sanders is saying, “See, I told you so”. 

But before we all start packing our bags for this perceived Scandinavian utopia, it might be instructive to look a little deeper at what is happening in Norway and whether we could pull off the same model in the United States.

First, it is important for people to also look at Norway’s overall level of economic freedom.

The Heritage Foundation annually ranks countries, based on several criteria, to come up with a list of nations that are free, mostly free, moderately free, mostly unfree and repressed.

For 2017 Norway ranks 25th in the world.  The United States sits at 17th – the lowest ranking in the history of this list.

However, when we look deeper at Norway we find that in the area of protection of private property rights Norway scores far higher than the United States.  Norway also outranks the U.S. in business freedom (the ease of starting a business the amount of regulations faced), government integrity and trade freedom.  

It is somewhat paradoxical that most American see Norway as a quasi-Socialistic state.  Yet, citizens of Norway have more economic freedom than Americans in many key areas that play into the happiness index as well.

When it comes to tax burdens and government spending the United States has more economic freedom than Norway.    The effective tax rate paid by the average American is 26 percent.  In Norway it is 39.1 percent.

Moreover, government spending on the social welfare network is much larger in Norway – and in other Scandinavian nations – than in the United States.

Herein lies the question for Americans:

If Norway is a relatively free nation with few restrictions on trade, low levels of government corruption, fewer eminent domain takings of property and greater business freedom, would it make sense for America to follow Norway’s lead in those areas, while at the same time, raise taxes on the wealthy and provide a larger social welfare network?  Wouldn’t we be happier then?

After all, as I tell my students every semester, Norwegians voted for their tax rates and level of welfare.  This system of high taxes and generous benefits was not imposed on them and they can always leave for Hong Kong, Australia or other freer nations if they feel they are being taxed too much.

Meanwhile, in America we have witnessed more and more crony capitalism, skyrocketing levels of government regulations, takings of property by corporations and sports team owners in direct violation of the “public use” standard for eminent domain and choking occupational licensing procedures that keep poor people from competing with entrenched corporations.   

Yet, there is one rarely mentioned dilemma that we would face if we tried to imitate the Norwegian model.

That is the fact that Norway is a nation of 5 million relatively homogenous people.    It is much easier to have a common view of shared sacrifice, community spirit, mutual purpose and generosity when there is so little cultural asymmetry.     Anthropologically speaking, it would be impossible to pull off what Norway has achieved in a country as politically and culturally diverse as America.   We can barely get two people to agree on a subset of shared values much less 320 million.

Finally, and no less significantly, is the fact that America has a higher crime rate, greater obesity levels and much lower educational achievement than Norway.    Therefore, expanding the social welfare network to model Norway would be far more expensive, and our tax rates much higher.

So, while we have much to admire about our friends across the Atlantic, it might be best to hope that America returns to our higher levels of economic freedom than to ever expect to be as friendly and socially responsible as they are.

 

 

Monday, November 14, 2016

Dear Millennials, It is time to stop crying over Trump


The following is my November 11, 2016 Op-Ed in the Orlando Sentinel


It was with a mixture of amusement and nausea that I observed young Americans throwing a post-election fit in the wake of Donald Trump’s stunning victory in the 2016 election.  It was even more bewildering when I read about college professors all over America postponing exams and cancelling classes to help alleviate the stress and trauma their students were going through.

Give me a break.

I should begin by saying that I voted for the Libertarian – and geographically-challenged –candidate, Gary Johnson.   I also feel compelled, lest Sentinel readers judge me too harshly, that I spent large portions of this fall semester explaining to my students why Donald Trump’s policies on trade, immigration and entitlements made no economic sense whatsoever. 

That said, I want to offer some words to the millions of Millennial voters (and non-voters) who are now crying, stamping their feet and smashing their participation trophies in fits of rage over this outcome.

First, get over yourself.  In case you learned nothing in your public K-12 schools, there is a system in place that Hillary participated in and lost fair and square.  Spare me the complaints about the Electoral College.  Most of you do not even know what it is.  Those of you who do would have been totally fine if Mr. Trump won the popular vote and lost the election.  

Protesting the outcome of a legitimate election  - one where your age group failed to turn out in the same numbers that helped Mr. Obama get elected – is totally fruitless.  Walking out of class, chanting simple slogans about our offensive new president and screaming for a different outcome is like the proverbial locking the barn door after your organic cows have run away.   You lost.  Deal with it and regroup for 2020.

To your professors and teachers who cancelled tests and classes – what bunch of enabling, pathetic examples of adulthood you are.

I would be willing to bet that the day after Adolf Hitler became Chancellor of Germany, students in Germany had to take exams.    The day after Pearl Harbor and September 11th people had to get up and go to work.  In the future, your precious students you are trying to protect will have to function the day after other upsetting or horrific events have taken place.  Letting them go home or cancelling their obligations simply trains them to fall apart and abdicate their roles as students and future workers, spouses or leaders of this nation.

Now to some good advice for the nearly 80 million Americans who are part of the 18-35 year-old demographic.    It is time for you to revolt.    I do not mean burning tires or smashing the windows of the coffee shops you hang out in.  I mean revolution in your thinking and actions about Washington, D.C.

In 2008 young people rose up in staggering numbers to support the Libertarian-leaning Ron Paul.  Eight years later you jumped on the Socialist bandwagon of Bernie Sanders. 

My recommendation is that you combine these two movements into a new Millennial Party that represents intelligent change to American politics and policies.

You have shown us older folks that you are very individualistic when it comes to social issues.  You do not want 50-something year old people like me and others to tell you whom to marry, what to put in your body or what faith (or lack thereof) you should have.  Good for you.  It is none of my business – or anyone’s business what you do to yourself or with another consenting adult.  Keep telling us to mind our business and get out of your lives.

You also shown (at least in 2008) that you are aware of the fact that our economic system of crony capitalism, entitlements and debt will ruin your futures.    Many of you have shown that you are capable of running businesses that practice compassionate capitalism, sustainability, a deference to small and local suppliers, etc. in an attempt to be more socially responsible.  This is beautiful.  Keep it up – because the lobbyists and giant corporations out there are going to keep trying to rig the economy to suppress competition and plunder us for subsidies, bailouts and other anti-free market goals.

You need to organize your economic thoughts around the notion that the same government you do not want in your bedroom should not be in your wallet.   If you fight for your right to your property and your money with the same zeal you fight for gay-marriage and recreational marijuana you will be able to get people elected who will leave you alone.   This will mean social and economic prosperity – and an end to the duopoly of Republican and Democratic tyranny.

So, stop crying and get to work.

 

Monday, September 26, 2016

Trump and Clinton would fail my Economics class

 
 
The following is my September 24, 2016 Op-Ed in The Orlando Sentinel.  Enjoy tonight's debate...
 
As the United States inches closer to one of the most anticipated — and dreaded — elections in our nation's history, we should all be looking at which candidate can promote the most economic growth.
America's last recession ended in June 2009. Since then, the United States has endured the slowest economic recovery since World War II. While median incomes are finally rising, we are still below the earnings achieved before the last recession began. Unemployment is 4.9 percent, but we have the lowest labor-force participation rate in 30 years as millions of Americans have dropped out.
In the 1960 election, John F. Kennedy promised to create 5 percent economic growth. This was an astounding goal, given the three recessions that had occurred during the 1950s. 1n 1962, Kennedy called for a massive cut in corporate and personal income-tax rates. His tax plan passed in early 1964 and the 1960s saw his promise of 5 percent growth come true — all while federal tax revenues doubled.
 
Ronald Reagan pulled off the same results following the stagflation of the 1970s. His two tax cuts pushed the top income-tax rate from 70 percent to 28 percent and, along with his successful continuation of Jimmy Carter's effort to deregulate the economy, led to record economic growth and a near doubling of income-tax revenue.
While Trump should be commended for his recent proposal to lower income-tax rates and fight the growth of costly, and job-killing government regulations, his other ideas are so bad that any gains in economic growth from lower taxes and regulations will be more than offset by the economic costs created by his trade, immigration and social-welfare plans.
 
On trade, he wants to pull out of NAFTA, reject the Trans-Pacific Partnership and impose tariffs of 45 percent and 35 percent on China and Mexico, respectively. As reported recently in The Wall Street Journal, the Peterson Institute ran several models of his trade policies and found that this plan would lead to a recession within three years and as many as 5 million jobs lost.
 
Trump's vision of a border wall and deportation of nearly all unauthorized immigrants would, according to the American Action Forum economists, lead to an increase in the national debt by $400 billion while reducing the gross domestic product by $1 trillion as 11 million consumers and workers were sent packing. This 6.4 percent reduction in the labor force would also fuel inflation in housing and food as labor shortages lead to higher production costs.
Throw in his plan to expand Social Security benefits, and you have a recipe for exploding debt, economic contraction and higher unemployment rates.
 
Hillary — who apparently was not paying attention to her husband's highly productive economic policies from 1994-2000 — also deserves an F in economics.
 
After giving dozens of speeches supporting free trade, she now rejects open markets. Her trade policies are also projected by economists to be recessionary, but not as much as Trump's. She also proposes a massive increase in capital-gains taxes (her husband lowered the tax on investments to 20 percent, down from Reagan's 28 percent); higher marginal income-tax rates; an exit-tax on companies leaving America and more government spending on infrastructure.
 
Higher capital-gains taxes will reduce investments in new businesses or business expansion. Moreover, raising income taxes will not only not yield the revenue she thinks she will get, but it will slow the American economy. She claims the rich do not pay their "fair share" of income taxes, but according to IRS data, the top 5 percent of taxpayers already pay more than 50 percent of the tax burden.
 
America's 35 percent corporate income-tax rate is the highest in the industrialized world. Instead of raising this even more for companies planning to exit, Clinton should follow Ireland's lead and lower this rate so more companies will want to enter the United States.
 
Finally, from Franklin Roosevelt's New Deal through President Obama's 2009 stimulus package of more than $800 billion, we have seen promise after promise that government spending will create a multiplier effect and thus a booming economy. This concept has never produced the results predicted. Every $1 spent by government on a new bridge, for example, is $1 taken from a business or an individual that could have been spent on something else. We can see the new bridge and the jobs created building it. We cannot see the jobs lost from taking this money to begin with.
 
I sincerely hope that whoever wins this November will wise up and change his or her current plans. If the new president doesn't, the next four years will make us long for the slow-growth days of Barack Obama.

Tuesday, August 30, 2016

What my student's are (not) thinking Hillary Clinton's ideas

This week in my classes I handed out a sheet of paper to all 105 of my fall students as they walked into class on day one.   They were asked to indicate whom they would vote for in the 2016 presidential election.  They were given five choices - Hillary, Donald, Gary Johnson, Jill Stein and a write in candidate.  Then, they were asked to identify one specific policy proposal from the candidate of their choice and fully explain why they believed this policy would benefit the United States.
 
First, the result of the poll:
 
Hillary Clinton - 52 votes (49.5%)
Donald Trump - 19 votes (18%)
Gary Johnson - 19 votes (18%)
Jill Stein - 1 vote
 
I was a bit surprised by the number of students who even knew about the Libertarian candidate - and hopefully followers of this blog will find some hope in this result - but what I was really interested in was why they supported the person they picked.
 
Of course, for Donald Trump, all 19 students mentioned kicking illegal immigrants out, or building a wall near Mexico.
 
It was the Hillary crowd that gave these answers.  As always, everything within quotation marks is a real student response, unedited for grammar or spelling. 
 
Here, America, is what young people like about Hillary Clinton...
 
" I believe in gender and race equality so, I believe that Hillary Clinton has been enforcing them."
 
"Taxing the upper class more, because they can afford it and the wealthy can get around taxes."
 
"I don't know any of the policies that Hillary Clinton has proposed, but I do know that she is a Democrat and for me that is a big enough reason to vote for her, if I could."
 
"The reason why I choose her is more about sympathy.  I can't vote here, so I don't pay much attention on either ones."
 
"She is married to Bill Clinton, so if she needs any help, he can help her."
 
"Globalizazion"
 
"A fair tax system would benefit the United States because it would mean equality among the classes. The wealthy, middle class and the poor would pay according to what they are able to. There would be no disagreements among the people."
 
"One policy I agree with is attempting to equals all social classes"
 
"health care policy if you cannot afford it, it provides you with health care, there are a lot of places where people could not afford to be taken care of. Yes this is not so good for the other people that could pay for it, not fair, because they end up paying for it, but that's just how it is."
 
"To be perfectly honest, I'd vote for Gary Johnson, but since that would be a wasted vote since not many people would even pay attention to him, I'd vote for Hillary Clinton instead."
 
"Exit taxes for national companies that have factories out of the U.S. Since there are so many American companies that move to China, for example, or other countries that have cheaper labor, the exit taxes would be a way to charge these companies."
 
"The one policy I mostly agree with that Hillary Clinton proposed is probably - if I'm not wrong - fixing the educational system and make tuitons more affordable and decrease the college debt that many students face right after graduating. It was a not so bad idea making the in state tuiton free for the state residents."
 
"Besides a free energy movement promoting solar, wind and other renewables energy sources, a general assumption that Bill would have direct contact to the source, could improve all policy's set but "free" energy could relieve dependence on foreign energy.
 
_____________
 
I have a lot of work to do....
 

Tuesday, August 23, 2016

Hillary Clinton's "Free" Tuition plan = Horrible economic policy

 
 
The following is my August 15, 2016 column in The Dallas Morning News
________________
 
 
This month I turned in grades for my summer classes. The moment that task was completed I had officially wrapped up 25 years in America's system of higher education.
 
During that quarter-century, I have observed countless proposals from Washington, D.C., to the hallways of my institution to make college education more "accessible" for millions of struggling American families. The latest idea —straight out of the Bernie Sanders-created Democratic platform — has Hillary Clinton proposing "free" college tuition for a large swath of America's middle- and lower-income families.
 
This idea is loaded with several unintended consequences that will make the recipients of this federal gift regret the moment it passed.
 
1. Her plan would create an artificial increase in the demand for college classes at community colleges and public universities. Community colleges, which are open-enrollment institutions, would be inundated with students seeking seats. This would lead to massive shortages, unless states approve huge budget (and tax) increases to fully fund the expansion of buildings and hiring of new faculty that would have to take place.
 
Universities, facing a similar demand push, would simply raise the price of admission, meaning higher grade-point averages, SAT and ACT scores would be used to weed out students who have responded to the allure of free tuition. This greater selectivity would put even more pressure on public universities, which already are facing challenges in having a racially and culturally diverse student population.
 
2. Potentially millions of young people who have no business attending college would waste their time -- and taxpayer dollars -- seeking degrees they will not obtain. It is a simple fact that not everyone is capable of surviving the demands of multitudinous college majors. Free tuition would dupe young people into a sense of belonging, only to find that their work ethic, intelligence and aptitude are not up to the rigors of advanced education.
 
This brings us to another economic fact: Ill-prepared students who rush off to college could have allocated their time and resources to second-best choices such as internships, vocational training or other certification programs to become skilled workers in fields that are already in critically short supply -- and often pay more than college graduates earn. Clinton's plan only exacerbates those shortages in blue-collar trades by decreasing the available supply of candidates for those programs.
 
3. Her program also would lead to downward compression on salaries for students who do obtain college degrees. Simply put, if you have an artificial increase in college and university enrollment, you will have an artificial increase in the number of people who eventually receive degrees. Ask yourself what will happen if, say, the supply of humanities or English majors increases? Of course, salaries will have to fall as surpluses emerge in those professions.
 
Furthermore, possessing a college degree would now be less illustrious in the eyes of many employers (as it already is), and the four-year degree would be less valuable. This would force more students to turn to graduate school -- and more debt since Clinton is not giving that away for free (yet).
 
4. Then there is the problem facing college educators who would now teach millions of educational welfare recipients. We already see a growing trend toward millennial entitlement thinking. If President Clinton gives these folks free tuition, many of them are going to treat college like they do public high school. Does anyone really want America's colleges and universities to be regarded the same way we regard our high schools?
 
Free K-12 education is of the same quality as many other free goods -- poor, at best. Paying for college makes people value their education more.
 
5. Finally, there is the small matter of the United States Constitution. In 1794, James Madison said, "I cannot undertake to lay my finger on that article of the Constitution which granted a right to Congress, of extending on objects of benevolence the money of their constituents."
 
Since Clinton would have to swear to defend the Constitution, I would like to send her my pocket copy, which provides no measure for taking away taxpayer dollars to pay for the education of college kids. Simply put, our Founders recognized that in order to make tuition free for one person, an act of plunder had to be committed on a taxpayer.
 
Which leaves me with my recommendation to parents of college-age kids:
 
Pay for your own creation.