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.