Tuesday, February 28, 2017

VIDEO Uber CEO Gets Into Heated Argument With One of His Drivers

Uber driver Fawzi Kamel and Uber boss Travis Kalanick raged at each other in San Francisco, after the driver claimed he was hurting for money because the company kept changing its business model and charging less and less for rides.

“I lost money — $7,000 — because of you,” Kamel — whose dashboard camera caught the encounter — told Kalanick after he brought him to his destination on Feb. 5. “I’m bankrupt because of you.”

“Bulls—,” Kalanick retorted.

When Kamel tried to explain why lower fares have led to him making less money, Kalanick reacted angrily, telling Kamel that his problems are his own fault.

“You know what. Some people don’t like to take responsibility for their own s—,” Kalanick fumed, before slamming the door. “They blame everything in their life on someone else.”

 RW note: Kalanick's argument is correct here, although he didn't put it in the most diplomatic fashion. I'm sure he would like to charge $100 per ride but the market just won't support that.

Kamel is making the same error the Pope recently made in thinking it is corporations that set prices rather than the market.

(via NyPo)

This is the Kind of Economic Advice Trump Would Be Getting....

...if he had appointed Larry Kudlow to head the Council of Economic Advisers:

But instead, Trump has surrounded himself with crony yes men who support his crazed interventionist policy ideas that will suffocate the economy.


Minimum Wage Massacre: Wendy's Unleashes 1,000 Robots To Counter Higher Labor Costs

By Tyler Durden

In yet another awkwardly rational response to government intervention in deciding what's "fair", the blowback from minimum wage demanding fast food workers has struck again. Wendy's plans to install self-ordering kiosks in 1,000 of its stores - 16% of its locations nationwide.

"Last year was tough — 5 percent wage inflation," said Bob Wright, Wendy's chief operating officer, during his presentation to investors and analysts last week. He added that the company expects wages to rise 4 percent in 2017. "But the real question is what are we doing about it?"
Wright noted that over the past two years, Wendy's has figured out how to eliminate 31 hours of labor per week from its restaurants and is now working to use technology, such as kiosks, to increase efficiency.

Wendy's chief information officer, David Trimm, said the kiosks are intended to appeal to younger customers and reduce labor costs. Kiosks also allow customers of the fast food giant to circumvent long lines during peak dining hours while increasing kitchen production.

As Dispatch.com reports, the Dublin-based burger giant started offering kiosks last year, and demand for the technology has been high from both customers and franchise owners.

"There is a huge amount of pull from (franchisees) in order to get them," David Trimm, Wendy's chief information officer, said last week during the company's investors' day.

"With the demand we are seeing ... we can absolutely see our way to having 1,000 or more restaurants live with kiosks by the end of the year."
 A typical store would get three kiosks for about $15,000. Trimm estimated the payback on those machines would be less than two years, thanks to labor savings and increased sales. Customers still could order at the counter.

Kiosks are where the industry is headed, but Wendy's is ahead of the curve, said Darren Tristano, vice president with Technomic, a food-service research and consulting firm.

"They are looking to improve their automation and their labor costs, and this is a good way to do it," he said.
Who could have seen that coming? As we noted previously, minimum wage laws - while advertised under the banner of social justice - do not live up to the claims made by those who tout them. They do not lift low wage earners to a so-called “social minimum”. Indeed, minimum wage laws — imposed at the levels employed in Europe — push a considerable number of people into unemployment. And, unless those newly unemployed qualify for government assistance (read: welfare), they will sink below, or further below, the social minimum.

The above originally appeared at ZeroHedge.

Capitalism, Marxism and Black Americans

Richard Ebeling emails:

Dear Bob,

An article of mine on, “Capitalism, Marxism and Black Americans,” was recently posted on the “Capitalism Magazine” website.

One of the most successful Marxist political tricks was to assert that workers were not free under capitalism, because the “bourgeois” freedoms of the press, of speech, of religion, or association were illusionary freedoms that hid from view the actual “wage slavery” of exploitation under private enterprise. Only under socialist common ownership of the means of production could workers and mankind have “true” freedom.

One of the more recent versions of this is that African-Americans are not really free in America, because in spite of formal civil liberties, the private businessman uses his control over the workplace to racially discriminate against black people. Only government intervention and control can assure “real” freedom and justice for minority groups such as the African-American community.

Like the Marxian method of submerging every individual into membership of a collectivist mass of either capitalist exploiter or worker wage-slave, so this newer variation on the Marxist theme reduces every individual human being into racial tribes of “white privileged” and “black abused.”

And in both cases, the villain institution is “capitalism.” But the competitive, free market system is fundamentally an economic system that compels people, over time, to ask only one question: what’s the color of your money, not your skin pigmentation?

Any businessman who allows his racial prejudices to rule his hiring and firing decisions runs the risk of forgoing the employment of qualified and trainable employees who will be potentially hired by market rivals more concerned with profit-margins and market share.

Thus, the competitive market penalizes business hiring decisions that do not ask one question: how might I produce to make the better product at the lowest price, in the face of rivals who are attempting to obtain the same consumer business as myself?

What explains much of the economic misfortune and failed opportunities for betterment in society for minority groups, including still too many in the black community? The answer can be found in the interventionist-welfare state, with its policies of minimum wage laws pricing the unskilled out of the labor market, regulatory rules and restrictions that hampers those living on modest incomes from starting their own businesses or being hired by others who cannot easily afford the initial interventionist costs of hiring those with limited employment experience, and a welfare system that fosters redistributive dependency and makes difficult an escape to a market-based life of self-responsibility.

Tragically, these types of barriers and obstacles to a real, functioning, free market capitalist system is what harms many in society, including those in the black community.  


CLASH: Tucker Carlson vs. Bill Nye the Science Guy on Climate Change

One point not touched on by Carlson is that climate change may not be all bad.

Nye even provides the claim that grapes are being grown in areas that otherwise wouldn't be suitable for grape growing if it wasn't for a warmer climate. Isn't this a positive?

As for people on coastlines that are supposedly threatened, they obviously don't think the threat is a great enough concern or they would move.

Nye says in the clip that he is providing economic analysis but he is ignoring fundamental exchange and valuation analysis---all to bring state coercion into the picture.


Four Reasons a Crackdown on Illegal Immigrants Could Disrupt the U.S. Labor Market

Eric Morathj writes for The Wall Street Journal:

The Trump administration’s push to crack down on illegal immigration and deport undocumented workers living in the U.S. could have significant ramifications for the labor market.

Here are four reasons why.

About 5% of the Workforce Is Undocumented

There were eight million undocumented immigrants working or looking for work in the U.S. in 2014, the most recent data available from the Pew Research Center. The figure, about 5% of the civilian workforce, exceeds the number of jobs added by U.S. employers the past three years...

Deportation of millions of those workers could lead to labor shortages and weaker economic growth. Some economists say deportations would cut already low unemployment among legal residents and push up incomes, especially in low-wage sectors. (Though not necessarily. Employers could opt to automate or cut back production.)...

Undocumented Immigrants Are Younger and More Likely to Work

Among all illegal immigrants, a significantly higher share work than in the U.S. population as whole. The difference largely reflects that 92% of undocumented workers are between 18 and 64, while just 60% of the U.S.-born population is.

An aging population limiting labor-force expansion is a significant factor economists point to when explaining why economic growth has been mired at a very modest 2% rate since the recession ended in 2009. Unemployment is at historically low levels, but the share of Americans in the labor force is also near a 40-year low.

The growth in immigrants, legal and illegal, from 2006 through 2015, offset population losses for native-born Americans ages 25 to 54, the prime ages for working.

Employers have turned to legal and illegal immigrants to help counter the trend of an aging native-born population...

Undocumented Workers Are Concentrated in Certain Industries

In theory, the 7.6 million people who were unemployed but seeking work last month could step into jobs vacated by illegal immigrants. But that would largely be at farms, meat-processing plants, restaurants and construction sites.

A shortage of labor could push up wages paid in those sectors. It could also increase the cost of groceries and meals out.

More than 1 in 6 agriculture-industry workers in 2014 were undocumented workers, compared with about 1 in 20 workers overall, Pew said. In the construction industry, 13% of workers were undocumented. And 9% of workers in the leisure and hospitality industry, which includes restaurants, were illegal immigrants....

It’s Not Just Border States That Are Affected

The states potentially most affected are widely spread.

More than 10% of workers in Nevada, a state with among the highest concentration of hospitality jobs, were illegal immigrants in 2014, according to Pew. Border states of California, Texas and Arizona were also among the top five states for share of undocumented immigrants in the labor force.

But more northern states with dense urban areas—New Jersey, Maryland and New York—were also above the national average.

RW note: A serious crackdown on undocumented will mean higher prices, and fewer products and services available. I fully expect that under such circumstances marginally profitable hotels and restraunts will end up closing. Farm food will sky rocket in price.

Monday, February 27, 2017

More Trump Military Spending On Top of His Just Announced $54 Billion Budget Increase

President Donald Trump's 2018 budget includes a remarkable increase in military spending of 10%, but there is more. Trump wants another $30 billion in military spending immediately.


IMF's Rato Sentenced to Jail; Berkeley Hall of Fame MBA Grad

Rato in happier days.

Former International Monetary Fund chief Rodrigo Rato was handed a jail sentence of four years and six months for misusing funds when he was the boss of two Spanish banks, reports Busines Live.

Spain’s National Court, which deals with corruption and financial crime cases, said he had been found guilty of embezzlement when he headed up Caja Madrid and Bankia,

Rato, who is also a former Spanish economy minister, remains at liberty pending a possible appeal.

Rato after sentencing.

Rato was economy minister and deputy prime minister in the conservative government of Jose Maria Aznar from 1996 to 2004, before going on to head up the IMF until 2007.

He received an MBA from the University of California, Berkeley, Haas School of Business, in 1974 and is listed by the Univerity as a Haas Hall of Fame grad.


Trump's Militaristic and Police State Budget

There will be no net cut in spending in the U.S. government budget proposed by President Donald Trump.

It will be all about shifts to military and police state spending.

Tump's first budget proposal will look to increase defense and security spending by $54 billion and cut roughly the same amount from non-defense programs, the White House said this morning. The increase would be an increase of 10% in military/national security spending.

"This budget will be a public safety and national security budget," Trump said at a bipartisan gathering of US governors at the White House.

Few details were provided on how the cuts will be made, but a Trump administration official told CNN that all $54 million will be cut in fiscal year 2018. Multiple officials have also made clear over the last 48 hours that the Environmental Protection Agency and foreign aid will be cut significantly under the new plan.

The budget, one OMB official said, expects "the rest of the world to step up in some of the programs this country has been so generous in funding" over the years.

Foreign aid makes up roughly 1% of the federal budget.


Sunstein Seriously Injured as Car Plows Into Him; Block Sends Him a Note on Highway Safety

Cass Sunstein was seriously injured when he was hit by a car while walking on a snowy night in Concord, Massachusetts.

He suffered a concussion and four broken bones in his back. He wrote about the accident in his regular Bloomberg column and went on to call for "a little help from Washington" to launch a highway-safety revolution.

I asked Dr. Walter Block to respond to the column, below is his open letter to Sunstein:
Dear Prof. Sunstein:

You quite properly inveigh against the management of the U.S. highway system. It reliably kills some 30,000 to 40,000 people per year, for more than the last few decades. This institution is entirely, wholly in the hands of government. Do you ever think of any free enterprise alternatives? You do not.

Perhaps, then, you might benefit from doing just that. If you are at all interested in doing so, let me know, and I'll send you a free copy of this book, where I explore how laissez faire capitalism, coupled with private property rights, might well drastically reduce this horrid death toll on our highways. As an added benefit, this institution will also radically decrease traffic congestion:

Block, Walter E. 2009. The Privatization of Roads and Highways: Human and Economic Factors; Auburn, AL: The Mises Institute
Yours truly,

Walter E. Block, Ph.D.
Harold E. Wirth Eminent Scholar Endowed Chair and Professor of Economics
Joseph A. Butt, S.J. College of Business                
Loyola University New Orleans

A Lefty Economist Attempts to Support the Lefty Economic Arguments of the Pope

Following my post, The Pope's Problem with Basic Economics, Tony Annett, Climate Change and Sustainable Development Advisor, Earth Institute, Columbia University, responded with a series of tweets.

Among them were these.

But my post was about economics, it wasn't about libertarianism. I never used the word libertarian in my post. Libertarianism is not economics at all, it is a political philosophy.

I quoted F.A. Hayek and Murray Rothbard in my post. Hayek was a key driver in the formation of Mont Pelerin Society. But the Society was founded in 1947, Rothbard was only 21 at the time and had nothing to do with the founding. In fact, at the time, he probably was unfamiliar with the name Hayek---and probably couldn't have found Mont Pelerin on a map.

There was also this:
I followed up the above Annett tweet with this:
He responded using an appeal to authority argument (himself being the authority).
But aside from being a sloppy way to argue, when you use it against Hayek you lose.

Hayek lectured at the London School of Economics, debated Keynes face-to-face, predicted the 1929 stock market and downturn, has a book that is ranked #1 in international economics more than 70 years after publication:

He also taught at the University of Chicago, has numerous biographies written about him,  was appointed a member of the Order of the Companions of Honour by Queen Elizabeth II, received the US Presidential Medal of Freedom.  In 2011, his article "The Use of Knowledge in Society" was selected as one of the top 20 articles published in The American Economic Review during its first 100 years. And he was awarded the Nobel Prize in economics.

Claiming authority, by stating "an Econ PhD with almost 2 decades experience," against Hayek is about the same as claiming Twiggy would win a hypermammiferous contest against Pamela Anderson.


Sunday, February 26, 2017

Anxiety Grows in Florida’s Farm Fields: Soaring Strawberry and Tomato Prices Ahead

The Washington Post reports:
As President Trump moves to turn the full force of the federal government toward deporting undocumented immigrants, a newfound fear of the future has already cast a pall over the tomato farms and strawberry fields in the largely undocumented migrant communities east of Tampa....

Any day could be when deportations ramp up; that, to them, seemed certain. No one knew when or where. And so the community here is in a state of suspension. Children have stopped playing in parks and the streets and businesses have grown quieter, as many have receded into the background, where they feel safe.

“It’s all gringos here,” said Maria Pimentel, owner of the community staple Taqueria El Sol, who said she had never heard so much English in her restaurant in her life. Business had plummeted, she said, because her Spanish-speaking customers were “scared to come out of their house.”...

“We look at it like this: The country can either import its workforce or import its food,” said Dale Moore, executive director of policy for the Farm Bureau, which lobbies for easing restrictions to get foreign workers for agriculture.

“We’ve been fighting for this for years, but immigration has a different flavor with Donald Trump,” Moore said.

Growers here rejected Trump’s notion that farmworkers were competing with American workers, and hoped he would see more nuance to the issue.

“You can actually make a good living — $15, $20 an hour if you’re good at this — but the truth is Americans don’t want to do this work,” said one prominent Florida farmer, who spoke on the condition of anonymity because he feared Trump’s administration would target him for speaking out....

[Lourdes Villanueva, director of programs for the Redlands Christian Migrant Association] handed out a stack of documents that asked parents to name an emergency contact who would have authority to take custody of their children in case they were sent back to Mexico.

“No matter what, we should be prepared,” Villanueva said.
From Florida to California expect prices of products and services provided with the help of the undocumented to soar if Trump is successful in deporting most of them.

Also see: Fear on the Streets of San Francisco: Trump Deportation Policy


Hey Trump, Why Drugs Should Be Legalized

An interview with Harry Browne when he ran for President on the Libertarian Party ticket.

Saturday, February 25, 2017

Fear on the Streets of San Francisco: Trump Deportation Policy

Snippets from some random conversations I have had over the last couple of days in San Francisco:

A Mexican-American man, who tells me his family tree in California traces back to when California was part of Mexico, says that he now always makes sure he leaves the house with ID, even if it is just to walk his dog.


A Mexican-American lady tells me that friends of hers that are undocumented are preparing power of attorney papers for control of their bank accounts and other assets and handing them over to lawyers, just in case they get deported.


An orchard owner tells me that most orchard work is done by the undocumented and that if Trump is successful in deporting them, orchard grown food prices will soar.


A Walter Block Assignment for His Students: Read Wenzel on the Pope

Prof. Walter Block emails:

Dear Bob:

I am sending this very insightful short essay of yours on the pope and economics to my class this semester on Economics and Religion, where we discuss several papal encyclicals.

Wenzel, Robert. 2017. “The Pope's Problem with Basic Economics.” February 24; http://www.economicpolicyjournal.com/2017/02/the-popes-problem-with-basic-economics.html

Walter E. Block, Ph.D.
Harold E. Wirth Eminent Scholar Endowed Chair and Professor of Economics
Joseph A. Butt, S.J. College of Business                   
Loyola University New Orleans

Krugman is Right on This: No Way is Trump Going to Be Able to Pull This Off

Employment in the coal industry has been on a secular decline in the United States since the 1920s. Coal employment peaked in 1923. Machinery has replaced the majority of manual workers in the sector.

The Environmental Protection Agency didn't even come on the scene until 1970 by way of a Nixon executive order.

Office workers in the coal industry started to be counted as coal workers in 1973 by the Department of Labor that's why you see the bump up in the number employed in the coal industry that year, in charts.


Another Open Letter to Trump

Pres. Donald J. Trump
White House

Mr. Trump:

You said at today’s CPAC meeting that “we’re going to make trade deals.  But we’re going to do one on one – one on one – and if they misbehave, we terminate the deal.”*

By “we” you mean you.  By “misbehave,” you mean act in ways that you find objectionable (which surely includes offering to sell goods to Americans at especially low prices).  And by “terminate the deal” you mean use threats of coercion to prevent Americans from buying as many imports as Americans would otherwise choose to buy.

Now I do support the idea of one-on-one trade deals, but I have a radically different proposal for implementing them – namely, that you mind your own business and let each of us Americans make whatever trade deals each of us likes, one-on-one, with whichever suppliers each of us chooses to deal with.

I am far better positioned than you are, sir, to determine if deals offered to me by foreign sellers are good for me or not.  Such offers that I judge will harm me I will reject and such offers that I judge will help me I will accept.  I neither need nor want your help in screening such offers, for what your ‘help’ means in practice is that you will frequently prevent me from buying and selling in ways that I judge to be best for me and my family.  Your ‘help’ will hurt me.  And what is true for me is true for most other Americans.

So mind your own damn business and let the rest of us mind ours.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030

The above originally appeared at Cafe Hayek.

Friday, February 24, 2017

Trump to Name Apologist for the Republican Establishment Welfare State to Head the Council of Economic Advisers

Kevin Hassett, an economist at the American Enterprise Institute, will be named chairman of the White House Council of Economic Advisers, Politico is reporting

Hassett is mostly known for co-authoring the embarrassing book, Dow 36,000, forecasting the Dow reaching 36,000 just months before the dot-com bubble burst. In other words, he is clueless about the business cycle.

This did not stop him from getting presidential advisory gigs.

He was John McCain's chief economic adviser in the 2000 presidential primaries and an economic adviser to the campaigns of George W. Bush in the 2004 presidential election and McCain in the presidential election of 2008. He was among Mitt Romney's economic advisers for the 2012 presidential campaign. He also was an economist at the Federal Reserve.

Consider him a government apologist and technocrat, who will dress up his welfafe-state policy advocacy while wearing conservative sheep's clothes. 

In 2013, he testified before the Joint Economic Committee of Congress, arguing for a variety of policies to assist the long-term unemployed, including direct hiring of the unemployed into government jobs, work-sharing programs, wage subsidies, and privatized training programs. 

Expect him to support whatever Trump wants, regardless if it makes economic sense or not. 


Sources: MarketWatchPoliticoWikipediaThe Washington Post

Why a Trump Tariff Could Cause an Invasion of Mexicans into the United States

By Benjamin Powell

When word got out in January 1848 that gold had been discovered at Sutter’s Mill in Coloma, California, near Sacramento, it triggered the famous California Gold Rush, which in a few short years brought some 300,000 fortune seekers to the territory, whose population at the time was just 155,000, most of them Native Americans.

President Trump’s threat to impose a tariff on Mexican imports to pay for the border wall he’s proposed could have a similar stampede effect: causing more, not fewer, illegal immigrants to rush to the United States. It will take years to build a border wall; it will take little more than talk to trigger a potential border-wall rush.

If ever there was a policy proposal that could produce a result that’s the opposite of what’s intended, this is it.

The reason is simple: A 20 percent tariff on Mexican imports would be a disaster for the Mexican economy, destroying jobs and driving many of the jobless to seek work—legally or illegally—in the United States.

Mexico currently sends more than 80 percent of its exports to the United States: cars, auto parts, machinery, electrical equipment, medical instruments, oil, and fresh and processed fruits and vegetables, among other goods. In all, Mexico exported more than $316 billion in goods and services to the United States in 2015, the Office of the U.S. Trade Representative reported.

A 20 percent tariff would crush some of these industries.

The United States would suffer, too. Mexico is our third-largest trading partner, importing more than $267 billion in U.S. goods and services in 2015. Even if Mexico does not reciprocate with tariffs of its own, the United States would also be hurt. Just not as much as Mexico, since U.S. exports to Mexico account for only about 13 percent of total U.S. exports—not 80 percent.

The threatened 20 percent tariff is huge. By comparison, the simple average tariff rate on Mexican goods was around 4 percent prior to implementation of the North American Free Trade Agreement (NAFTA); it has declined to about 0.5 percent today.

Since the recent great recession, the Mexican economy has expanded at an average rate of 3.2 percent per year. The U.S. economy, by comparison, has grown an average of 2.1 percent per year.
The growing Mexican economy increased job opportunities, pushing the unemployment rate down to 3.4 percent in December 2016. It also triggered a period of reverse migration, as tens of thousands of Mexicans living in the United States returned home.

Since 2009, in fact, the number of Mexicans returning home exceeded the number of Mexicans entering the United States by approximately 140,000, according to the Pew Research Center.
A 20 percent tariff would put the brakes on Mexico’s expansion and likely reverse the migratory trend, as Mexicans, both legally and illegally, seek economic opportunities in the United States.
Contrary to what some in the White House seem to be suggesting, the threatened tariff would not be paid exclusively by Mexicans. It would be paid by Mexican exporters, American consumers and businesses, and the purchasers of U.S. exports containing components made in Mexico.
The United States will be more prosperous if it has neither a physical wall impeding the movement of people nor an artificial wall—in the form of a tariff—impeding the flow of goods.

If President Trump follows through on his promise to finance the building of a Mexican border wall with tariffs, it will not only make U.S. citizens poorer, it will also fail to achieve his stated goals.
U.S. citizens will still end up partially paying for the wall and the flow of immigrants trying to enter the United States illegally—a flow his wall is intended to impede—will likely increase.

Benjamin Powell is a Senior Fellow at the Independent Institute, Director of the Free Market Institute at Texas Tech University. He Independent Institute books include The Economics of Immigration: Market-Based Approaches, Social Science, and Public PolicyHousing America: Building out of Crisis, and Making Poor Nations Rich.

The above originally appeared at the Independent Institute.

The Pope's Problem with Basic Economics

Pope Francis has a problem with basic economics. Specifically, it appears he understands not even the most rudimentary concepts of economics. I doubt he could draw a supply and demand curve.

But yet it appears he has opinions about "proper" salaries and worker "exploitation." His spoken opinions give away that he does not understand the economic basics.

In a homily on Thursday, he lashed out at businessmen who "don’t pay...employees proper salaries...[and] exploit people..." Some reports say that he called such businessmen "greedy."

And in a serious slap for a Pope, he also said, "If such a person is a Catholic, it is better to be an atheist.”

It is difficult to see how the Pope is doing anything here other than sowing discord among brothers.

The book of Exodus, something the Pope should be familiar, with says:
There are six things that the LORD strongly dislikes, seven that are an abomination to him: haughty eyes, a lying tongue, and hands that shed innocent blood, a heart that devises wicked plans, feet that make haste to run to evil, a false witness who breathes out lies, and one who sows discord among brothers.
I could argue a few of these apply to the Pope given his comments, but sowing discord is the most obvious.

When he attacks businessmen who offer prices and wages in the market, he is creating discord between businessmen and consumers and workers.

Is this justified discord? The economist Murray Rothbard has explained the nature of prices:
In fact, pricing on the market is not an act of will by sellers. Businessmen do not determine their selling prices on the basis of whether they feel greedy or 'responsible' that morning. The entire apparatus of economic theory, built up over centuries, is devoted to demonstrating a great truth: that prices are set only by the demand of purchasers (how much of a good or service purchasers will buy at any given price), and by the supply or stock of the good...

The general public, media pundits, politicians, and even some businessmen, seem to have a mechanistic, cost-plus model of 'just' pricing in their heads. It is all right, they concede, for each businessman to pay his costs of production and then add on some 'reasonable' markup; but any price beyond that is morally condemned as excessive 'greed.' But cost of production has no direct influence on price; prices are only determined by supply and demand.
The Nobel-winning economist F.A. Hayek has discussed the "true function of the price mechanism" as a signal for how economic actors should adjust their behavior:
The marvel is that in a case like that of a scarcity of one raw material, without an order being issued, without more than perhaps a handful of people knowing the cause, tens of thousands of people whose identity could not be ascertained by months of investigation, are made to use the material or its products more sparingly; i.e., they move in the right direction. This is enough of a marvel even if, in a constantly changing world, not all will hit it off so perfectly that their profit rates will always be maintained at the same constant or "normal" level.
The Pope seems to have no understanding of this important role played by prices or how they are determined on the market and so he lashes out creating the discord where none should emerge.

He is preaching in a manner that is music in the den of totalitarians and creating a great economic sin.

As Rothbard has written:
It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a 'dismal science.' But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.
When it comes to economics, the Pope's views reflect the uninformed views of most of the masses. He is one among billions. Catholics and atheists should give him no special attention on this topic.


Thursday, February 23, 2017

Success and Persistence

Meghan Markle, a star of the television drama “Suits” who is now dating Prince Harry, didn't always have a royal life.

According to the New York Post, she told this story of her early days in Hollywood:
This epic day happened where the locks [on her Ford Explorer] stopped opening with the key. And the clicker wouldn’t open the front doors and I couldn’t afford to fix this car and this was how I got from one audition to the other,. So what I would start to do is literally go to these auditions, park at the back of the parking lot and I would open my trunk … and crawl into the back of my car to the front seat to drive off to my next audition. This, by the way, went on for five months.
Lesson of the Day: Don't let obstacles get in your way. Not even locked doors.


BREAKING Donald Trump Has Repealed Obamacare!

This is a very interesting take from political operative Dick Morris.

He reports that President Trump has ordered that the IRS not enforce the individual mandate and that Trump has changed the rules for health insurance coverage so that insurance companies can offer insurance plans that are much more flexible than what was the case under Obamacare.

In other words, a lot of the coercion of Obamacare has been eliminated by Trump already through the backdoor.

Congress can dillydally all it wants with "repeal and replace,' in fact, the more delay the better if Morris is correct in his analysis.

Here is how FiveThirtyEight reported the Trump executive order on Obamacare when Trump signed it on his first day in office:
As promised, on his first day in office, President Donald Trump took steps to undo the Affordable Care Act, former President Obama’s signature health care law. In one of his first executive orders, Trump pushed the secretary of Health and Human Services (HHS) and other federal agencies to begin weakening the law. The meaning of the executive order is both subtle and bold; on the one hand, it does very little because it doesn’t grant the administration any powers that it didn’t already have. On the other hand, it signals to the public that change is coming and lets employees at HHS know that they’d better be part of that change.

Section 2 of the order instructs the secretary of HHS to “exercise all authority and discretion available to them to waive, defer, grant exemptions from, or delay” parts of the law that would place a fiscal burden on states, individuals or health-care providers. Most of the provisions in the ACA can’t just be changed by HHS or the president; they require action from Congress or a lengthy period involving public comment. Which is why it’s reasonable to assume this line is targeted at the things HHS can change, like the individual mandate. The individual mandate, which requires most people to have health insurance or face a tax penalty, has always been the most contentious part of the law...

The Affordable Care Act also mandates that insurance plans cover a set of services without charging for them (beyond monthly insurance premiums), but it’s up to HHS to lay out the specifics. For example, that part of the ACA that requires contraceptives be provided to insured women free of co-pays or deductibles? That’s not written in the law; it was part of how the law was interpreted by the Obama administration...

There are other important signals in the short executive order. It says HHS should “encourage the development of a free and open market in interstate commerce” and “provide greater flexibility to States,” suggesting that Trump will push HHS to grant more flexibility to states in how they implement the law.

It was no secret before Trump signed the executive order that he wanted the Affordable Care Act repealed, and all of these changes were possible before it was signed. But now Trump has made his intentions clear, with one of his first acts as president: The Department of Health and Human Services, “to the maximum extent permitted by law,” should get to dismantling.
NOTE: With the massive subsidies still intact, I wouldn't call the healthcare problem "solved" the way Morris does but the non-enforcement of the individual mandate, and the allowance of health insurance companies to sell catastrophic insurance without absurd Obamacare coverage appendages, has for all practical purposes resulted in Trump stabbing Obamacare with a dagger to the heart.


Wednesday, February 22, 2017

COMING SOON Your Own Personal Cargo-Carrying Servant Robot

I love free market creativity.


A Harvard Economist Reacts: "You have got to be kidding me"

Greg Mankiw, Harvard econ professor and the world's greatest living econ textbook hustler, reacts to the news that Trump wants to manipulate trade data:

You have got to be kidding me

If I did not know the source, I might have thought that this report was from The Onion:
The Trump administration is considering changing how U.S. trade deficits are calculated, a move that would make the deficit look larger on paper, the Wall Street Journal reported.  
People involved in the discussions told the Journal that the leading idea is to count “re-exports” — goods that are imported to the U.S., and then exported to a third country unchanged — as imports, but not exports.
The change would inflate the trade deficit number, an important figure in trade negotiations and policy.

Libertarian Smacks Down Tucker Carlson On Immigration

Tucker Carlson is the toughest guy on television to go up against in debate. He is very sharp and very skilled at using the television debate platform.

But when you have the facts and debate from a free market perspective, you can even knock Carlson off his game.

Alex Nowrasteh did just that against Carlson that in a debate on immigration.

Carlson had to resort to ass-backward libertarianism and the faulty argument that illegals don't pay for public services.

More on immigration here.


U.S. Existing Home Sales Rise to 10-Year High

U.S. existing home sales surged to a 10-year high in January, despite higher prices.

The National Association of Realtors reports that existing home sales jumped 3.3 percent to a seasonally adjusted annual rate of 5.69 million units last month. This is the highest level since February 2007.

At the same time, in January, the median house price increased 7.1 percent from a year ago to $228,900.

This is typical activity in the boom phase of the Fed created boom-bust business cycle.

The data flies in the face of Austrian-lites who expected a crash of the economy immediately after the 25 basis point hike in Fed-controlled interest rates in December 2015.

As I am reporting in the EPJ Daily Alert, things may be changing but, as of now, we remain in the bull phase of the business cycle.


Shadow CIA Group Warns the End of the Eurozone May Be Near; Including a Collapse of the Currency

Stratfor, referred to by Barron's as "The Shadow CIA," is out with a video clip providing insight into its concerns that the end may be near for the Eurozone and that the euro may collapse.


Another Currency in the Procees of Being Destroyed By Hyeprinflation

Prof. Steve H. Hanke, Co-Director of The Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Business Enterprise, in a new study provides some data on the collapse of the South Sudan pound.

One chart from the study shows the decline in the pound on black markets versus the U.S. dollar:

The inflation rate trended between 200% and 400% on an annualized basis over the year 2016. The last data point, December 2016, showed price inflation at 390%

Note: Technically, Hanke does not classify South Sudan as experiencing hyperinflation:
 [T]he monthly rate only exceeded 50 percent on two days: February 15, 2016 and February 16, 2016. South Sudan failed to ever sustain a monthly inflation rate above 50 percent for 30 consecutive days over the study period. In consequence, South Sudan did not, contrary to many reports in the financial press, experience hyperinflation.
Note 2: There is no reliable information on how much new money has been added to the money supply by the South Sudan central bank in recent years, however, when you see price inflation like this, there is no doubt the bank is pumping out money as if it were popcorn at a 24-hour circus.


Tuesday, February 21, 2017

Trump as Scam Artist

A Don Boudreaux letter to the Wall Street Journal:
You describe Trump’s proposed scheme to artificially inflate U.S. trade-deficit figures as an attempt to “deceive” (“A Trump Statistical Trade Trick,” Feb. 21).  Exactly.  Counting goods shipped to other countries through the U.S. as U.S. imports but not as U.S. exports is simply fraudulent.

If the Trump administration gets away with this swindle, don’t be surprised to see it used for other purposes – especially, to further Trump’s goal of stoking Americans’ fears of immigrants.  The same logic that allegedly justifies what you correctly call “single-entry trade bookkeeping” would justify counting all non-Americans who come to the U.S. – even those who come only to visit – as ‘immigrants arriving in the U.S.,’ yet none who return to their home countries counted as ‘immigrants leaving the U.S.’  If this method of measuring immigration flows sounds Orwellian, it is – but it is no more so than is Trump’s proposed new method for measuring trade flows.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA  22030
The above originally appeared at Cafe Hayek

RW note: Trump is nothing but a major league street hustler and he will try to get away with whatever he can to achieve whatever his goals are. In this case to bizarrely further justify limiting trade.

Ebeling, Boudreaux and Hornberger: Smashing Basic Economic Myths

Richard Ebeling emails:

Dear Bob,

I participated in the February 21, 2017 “Libertarian Angle,” podcast sponsored by the Future of Freedom Foundation, with the Foundation’s president, Jacob G. Hornberger, on the topic: “Minimum Wage and Free Trade,” joined by our guest, Dr. Donald Boudreaux, professor of economics at George Mason University.

One of the most persistent and harmful fallacies is the belief that worker’s wages can simply be raised by government fiat by passing a minimum wage law making it illegal to hire anyone below a certain amount per hour. Rather than helping the unskilled and inexperienced to improve their economic position, minimum wage laws price out of the market many of those whose value-added from the employer’s perspective is less than the wage governments command the employer to pay.

Thus, many of those most in need of on-the-job training and workplace experience, so they may become more skilled and valuable in the future to earn a higher market-based wage, are left potentially permanently unemployed. They are prevented from moving up that ladder of success over time because the minimum wage keeps them from getting their feet on the bottom rung to start an upward climb to a higher salary down the road.

The other great fallacy is the misplaced belief that government protectionism against imported goods “saves” or “creates” jobs, and improves the economic well being of the citizens as a whole in the country putting up trade barriers against the importation and sale of foreign goods.

All such trade barriers succeed in doing is raising the prices and narrowing the choices of goods available to the consumers in the country practicing trade protectionism. It undermines the cost-efficiencies and productivity of a wider, global specialization in worldwide system of division of labor, with the result that the standard of living in the protectionist country either declines, or at a minimum improves far less than could be case under freedom of trade. The beneficiaries are those protected industries and sectors of the protectionist country that do not have to face the competitive offerings of their foreign rivals, at the expense of the other members of the consuming public in that society.

Also emphasized by all three of us in the discussion is that whether it is minimum wage laws or barriers to trade, both entail a common feature: The denial of individual liberty and freedom of choice by the citizens in the country practicing these interventionist policies. The government arrogantly and presumptuously claims the authority to tell people with whom they may enter into mutually agreeable trades, whether it is a wage contract for employment or the buying and selling of desired goods in the marketplace.

And, thus, governments impose forms of economic tyranny on the people living under such political paternalism and special interest privilege.



Harvard Educated Economist Clueless About the Fundamentals of Economics (Robot Edition)

Jeffrey Sachs attended Harvard College, where he received his bachelor of arts summa cum laude in 1976. He went on to receive his MA and Ph.D. in economics from Harvard.

He now teaches at Columbia University.

Despite his educational pedigree, the man is clueless when it comes to fundamentals of economics.

In a short youtube, he blurts out more economic fallacies than John Maynard Keynes was able to make in an entire book.

Sachs appears to understand that robots make the economy more productive but he doesn't seem to understand that this results in more product* available for all, including the masses. He babbles on about the mythical "problem of inequality." If the product tide is rising for everyone, who cares if it rises a bit more for those who are responsible for the tide to be increasing in the first place?

Sachs somehow doesn't get this. In the video, he states that "income is shifting from workers to capital (he means capitalists)." But it is not a shift in absolute income, everyone's income (that is, access to more product) occurs, though proportionality it could very well be a greater gain for the capitalists who have created the product increase by investing in robots. This is not a shift in a static amount of income, it is an increase income for all.

But because Sachs doesn't get that it is a gain for all, he proposes all kinds of government interventions that fix a problem of shifting income that doesn't exist---and in the process advocates policies that create a less incentivized economy that will produce less product.

He states in the video that we need an economy that "shares benefits." By this, he means taking income from those who have expanded the array of products through capital investment and giving some of that income to those who have not made such investments. He specifically suggests that the young should be given such a payout. He proposes that:
Every young person is given a certain amount of basically financial assets or capital.  It's like saying everyone can have at least one robot so that as the robots get better and better in the future everyone is sharing in the benefits of an expanding economy.
Again, who says that everyone isn't gaining product in an economy that experiences broad-based gains in robotic productivity? But, further, who says everyone has equally ability in the handling of capital or robot investment? This is an absurd notion. In a free market, capital tends to move toward those who are most capable of employing it efficiently. To take capital away from efficient allocators and spread it around to everyone in an economy is the equivalent of taking medical equipment and spreading a little bit around to everyone in the economy for "medical equipment equality": "Hey you, here's a CAT scan machine, and you, kid, here's a LGO-Fistula Proctology Probe." This is insanity.

Robots don't cause a "distribution problem." If robots only made products for the rich then the masses would still have their old jobs before robots were introduced. But this isn't the case. Robots also make products for the mass market creating more product for all including the masses, which would benefit those who shift to new jobs because of the robots---and there are always jobs, see: Forget Robots, I Need a ManServant.

There is no need for crazed micro-management of the robot world by the robot-looking Jeffrey Sachs. His policies, if enacted, would only make the economy less productive. His view needs to be replaced with a robot that says, "Leave it to the free market."


* I am using the term product to mean both product and service for brevity's sake.

Monday, February 20, 2017

Karl Marx’s Misconceptions About Man and Markets

Richard Ebeling emails:

Dear Bob,

I have a new article on the website of the Future of Freedom Foundation on, “Economic Ideas: Karl Marx’s Misconceptions About Man and Markets.”

One of Karl Marx’s greatest appeals for many over the last 150 years has been the idea of remaking man into something better than how we find him, in a new society of socialism and communism that revolution and the “right side of history” will give us.

At the core of this vision and hope is the accusation that individualism, self-interest and a social system based on private property alienates man from himself, from others, and from the world around him. Why? Because under capitalism man is not “free.” But what is freedom for Marx?

It turns out that man is a slave to his circumstances whenever he has to do something he dislikes or does not want to do. If you are cutting down a tree for the pure joy of the physical exercise or if you are sharing the evening with others for the shear pleasure of discussing Marxian philosophy, then you are free. You are free to do only the things you like as an end in itself.

But if you have to cut down the tree because if you do not you will not have the means to build a cabin for shelter, or if you associate with others for some mutual production activity because if you do not you will have no food to eat or clothes to wear, then you are not free; you are a slave of doing things as a means to an end, rather than a playful pure act of pleasure and happiness.

In addition, the free man no longer thinks or acts, Marx’s insists, in terms of his own self-interested wants and desires. The “new man” of post-capitalist society will be singularly other-oriented, a true altruist focusing on the good and betterment of the collectivist society that supersedes the “oppression” of profit-pursuing money making of the capitalist system.

Marx conjures up an alternative universe totally disconnected from reality; indeed, his entire critique of man, markets and societal morality is a flight from reality. The human, individual “self” with his own mind, his own purposes, dreams, goals and potentials will be washed away within the amorphous and imaginary societal collective.

Marx’s vision of man and the society of the future is not a liberation of mankind, but a nightmarish destruction of real, flesh and blood, thinking and acting individual human beings within a totalitarian system of mind and body control by the “people’s state” to come.



Will Trump End Up Manipulating Price Inflation Numbers?

Although there are elements among Trump fanboys that believe President Trump will fight the Fed, all indications are that Trump is actually an advocate of the Fed as an activist interest rate manipulator.

In May of last year, Trump told George Stephanopoulos of ABC News that he is a "low interest rate guy, " doubling down on what he told CNBC a few days earlier.

This year, speaking at the annual meeting of the World Economic Forum in Davos, Anthony Scaramucci, who has since been named Assistant to President Donald Trump, said US policymakers must be “careful” about the rising dollar, taking a direct stab at the Federal Reserve.

“The Fed has to be independent and we have to be careful about the rising currency”, Scaramucci said.

The Trump administration thinking, of course, is that raising interest rates will make the dollar stronger.

And Trump, himself, in January, just days before taking office,  told The Wall Street Journal that the dollar was "too strong."

The problem with Trump's low-interest rate position, or at least one problem of many, is that price inflation is now starting to bump up against the Fed's "target" price inflation rate of 2.0%.

The Consumer Price Index has been, on a seasonally annualized basis, above 2.0% for the last two months.

And although the Fed gives greater consideration to other inflation measures, the trend with all of them has been clear since the end of the oil price collapse: higher. It appears likely that it is only a matter of time before all measures are above 2.0%. At that point, based on Fed thinking, they will want to be more aggressive in their interest rate hikes.

This brings about the question of whether the Trump administration would manipulate the inflation indexes to justify its low-interest rate advocacy.

They are already moving in that direction with other macroeconomic data.

There are reports that the Trump administration may have the Labor Department switch the reporting of the headline unemployment number from the current U3 data point to the U5. Based on this move, the U.S. unemployment rate would jump on a headline basis to 5.7% from 4.7% overnight--justifying a looser Fed interest rates policy in the eyes of the Trump administration.

More concerning is a new report out by The Wall Street Journal that says that the Trump administration is considering changing the way it calculates U.S. trade deficits, a very edgy (read: dishonest) shift that would make the country’s trade gap appear larger than it has in past years.

The leading idea under consideration, according to the Journal, would exclude from U.S. exports any goods first imported into the country, such as cars, and then transferred to a third country like Canada or Mexico unchanged.

This approach would inflate trade deficit numbers because it would typically count goods as imports when they come into the country but not count the same goods when they go back out.

The Journal continues:
A larger trade deficit would give the Trump administration ammunition in arguing that trade deals need to be renegotiated, and might help boost political support for imposing tariffs.

Career government employees objected last week when they were asked to prepare data using the new methodology, according to the people familiar with the discussions. These employees at the U.S. Trade Representative’s office complied with the instructions, but included their views as to why they believe the new calculation wasn’t accurate.

One person familiar with the discussions said the employees were told the new calculations were to be presented to members of Congress.

The effect of such a change would be particularly stark on data involving countries that have free trade deals with the U.S., this person said—and in some cases the new methodology could even change a trade surplus into a trade deficit.
Which raises the question: Should we classify the Trump administration as activist data manipulators yet?

With these early activist data steps by them, it is a necessity that price inflation data be monitored closely for any changes in methodology. There are no indications that Trump officials have demanded any changes at the Bureau of Labor Statistics in price inflation indexes yet, but if price inflation continues to accelerate, as I expect it will, one wonders what surprise the Trump team will have in methods for determining price inflation indexes.