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My thoughts on our world

Friday, August 15, 2003

Blackout 'Profiteering' is Good 

They're coming - the stories of profiteering during the blackout of '03 will soon be upon us. They'll tell of the mean and greedy people who tried to reap personal gains at the expense of others.

I heard radio talk show host Sean Hannity advising a caller who had seen a gas station charging double for gas: "get what you need, but then don't ever go back there again". As if the proprietor wasn't doing something very important. On the same radio station, I heard an advisory to conserve energy. Well, what better way to instill a spirit of conservation, than to raise the prise of something? With an increase in demand (for gas or anything), if the price doesn't change to reflect the change in reality (gas is suddenly more rare, and hence more valuable) it will soon be gone.

Where's the incentive?
Without a change in price people aren't forced to think more carefully about how they use something - they're just asked to. Anyone who really needs a commodity in shortage will be willing to pay more. Anyone who can substitute or make due with less will adjust. "Do I really need to take that long drive today?" If gas is expensive, and the answer is "no", then I'm going to conserve gas without the need for a public service announcement. And someone who absolutely needs to get somewhere, will be willing to pay for it.

Anytime there's a drought, we're told to conserve water. Yet the price remains the same. If the price suddenly doubled or tripled, some people would be less likely to water their cars or take 20 minute showers. More importantly, businesses would adjust their use of water, and price their services and products to better-reflect their use of water. It wouldn't be necessary to impose fines for inappropriate uses: watering of lawns etc., because people would treat water differently without being told.

In the case of a blackout, batteries are suddenly more valuable: they keep the radios going, and the flashlights on. They keep people informed when they can't turn on a television. They also have other uses which might be considered less important. The use of power-hungry boom boxes or even toys are important to some people, but if the price of a battery were to triple, I know I would turn down the volume and try to make the batteries last until the lights came back on.

If the prices remained the same, I might run to the store to load-up while I can - forcing others to do without. Loading up on batteries is actually a way for me to reap profit. Though the prices remain the same, the batteries are much more valuable. Suddenly I'm a profiteer. I'm benefitting at the expense of others.

Conclusion: Profiteering forces people to be be more sympathetic to the needs of others.

Saturday, August 09, 2003

It's the 'aggregate desires and needs of people', stupid 

Nothing in particular prompted me to post this - except the occasional, but persistent view that "What's driving this economy is..."

People frequently utter words along these lines. It's not that I think they're wrong. It's that I think it's a misguided statement. It's stated as if it's a good thing. In my view, for an economy to be "good" it needs to serve the needs and desires of consumers.

Suggesting things like, in the wake of 9/11, purchasing airline tickets specifically to help the airlines or the economy is BACKWARDS. If you buy tickets to somewhere you don't really want to go, you're not benefitting from the transaction. If nobody really wants to travel (and perhaps for good reason), then pretending that they do doesn't change reality. Protecting jobs in an industry that doesn't need to be so large is a waste of resources. If people are afraid of flying - irrationally or not - you're not going to force them to fly. Paying people to fly empty jets is UNINTELLIGENT. Jobs that don't fulfill the desires and needs of the public are a waste.

"What's driving this economy is... the housing market."
That may be true, but it's only a good thing if that's what people want - not what they've been convinced to want. Artificially affecting interest rates, or providing tax incentives to make housing more "affordable" is a temporary measure. When twice as many people are able to afford something (and the supply of it doesn't go up) the price will rise. Throw in a lot of zoning regulations, construction regulations, employment regulations, and housing regulations (a.k.a. rent control) and you've got higher (than they otherwise would have been) housing prices. It becomes a wash - at best. More likely you've put some people in a position they're not really ready to handle. Owning a home (or mortgage, rather) is not a guaranteed route to riches. It ultimately took 70 years for Soviet socialism to fall victim to reality (not Reaganism). The housing boom is a yet another willful ignorance of reality that will not last.

"What's driving this economy is... the war."
As if making more enemies is what people desire or need. It may make some people feel more secure or comfortable in the short run, but it's an expensive investment - with FEW dividends, and LOTS of bills. Money spent on the war is money not spent on fulfilling needs. It's money not spent on a new car. It's money not spent on a better education. It's money not spent on < insert your desire or need >.

Sunday, August 03, 2003

Vouchers and Education 

Econlog asked in their July 28 posting Vouchers and Education (for further discussion):
Are parents sufficiently qualified to judge school quality, or would many families be fooled by profit-seeking charlatans?

My Aug 3 posting:
"sufficiently qualified to judge school quality"?

Are they sufficiently qualified to judge the quality of a car engine, or a computer chip?

The neat thing about free markets is that they tend to reward success and punish failure.

"fooled by profit-seeking charlatans"?

As if it's not happening today with tax-hungry charlatans.

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