Liberty or Bust

Government Protections and the Pony Express

A major part of the socialist platform is to protect industries that may not be feasible without government protections. Hell, one of the over 2000 federal government programs is to compensate milk producers for “lost” profits. Farmers get subsidies to “protect” their industry. GM received a very large check and transferred major chunk of ownership to the United States government to “protect” an American industry. It happens all the time. Its sad and crushes true innovation and prevents true wealth creation.
The reason I bring this up is I visited a train park in Scottsdale. A portion of the train park was a museum which dedicated a small portion of their floor space to Samuel Morse, the inventor of Morse Code, a necessary precursor to the telegraph. Prior the invention of the telegraph, mail traversed the country two ways, train or pony express. If the train system did not reach your area, you were forced to use the pony express. Within a week of the country’s first transcontinental telegraph, the pony express filed for bankruptcy. Now, lets imagine federal bureaucrats wanted to protect an American industry. Retrospectively, we know this would have proved an awful idea. The Telegraph led to the telephone, which lead to the internet and all the other wonderful things modern communications offer, like this blog! Bureaucrats could have placed regulations on evil telegraph companies to prevent the destruction of the pony express. Thank god they didn’t. We need to let businesses die as they lose their competitive edge. This allows the reallocation of resources to other more fruitful tasks. Everyone wins in the long run.

who attracts commerce?

Recently, Walmart opened a store in my home town, Maricopa, AZ. I was discussing the recent opening with my wife, more specifically, why it took so long for Walmart to open a store. She mentioned that *they* should have attracted Walmart sooner. Additionally, *they* should attract other stores like Target, Best Buy, etc. I asked her who was *they*. She responded, the city government.  Its this type of thinking that lends itself to large, obtrusive governments at all levels.

While the city may think it attracted Walmart, that is a terrible, shallow description of who attracted Walmart to Maricopa. There is only body that attracted Walmart to Maricopa, the free market. Until recently, it was not worth Walmart’s money to invest in a new building to capture Maricopa’s dollars. Most of Maricopa commutes to the Phoenix Metro area for work, passing at least one Walmart along the way. It was not until recently that Maricopa had a significant enough population to support the volumes necessary to make a Walmart profitable. As Maricopa grows, other stores will come, but not because of the city. Its because of you, the consumer.

Now, there are things a municipality can do to block or encourage businesses to move to Maricopa. Things like zoning requirements, property taxes, and sales taxes all inhibit new business growth. If Maricopa wants more business, we need to reduce and streamline zoning changes, grossly reduce property and sales taxes. To enable this, Maricopa needs to maintain a barebones staff, keeping local regulations to a minimum.  Additionally, Maricopa will attract consumers with the same policies, making it a win-win for everyone.

Government Lies – The Need for Seperation of Econ and State

Mises.org has a great article regarding the lies spread by our own government. It also references what sounds like two great reads.

Nice Introduction to Isabella Paterson

The American Conservative has a nice introduction to Isabella Paterson, Ayn Rand’s source of history, economics, and government. I like the idea of “Separation of Economics and State“

Colleges Suffer due to Poor Decisions

Bloomberg has article discussing the situation surrounding many college campuses today. it goes into how colleges borrowed money to spend on things like new dorms, buildings, as well as rock walls, jacuzzis, and mini kitchenettes in all the dorms in order to attract students to their campuses. Well, with federal loans tougher to come by and private loans all but non-existant, students are no longer willing to pay for those amenities and are choosing cheaper alternatives, like community colleges. Well, those spend-happy colleges are now facing tough financial decisions because their tuition revenue is dropping.

That’s the point of a recession. To weed out those who conduct business poorly. People who spend their own money on college don’t choose it based on the jacuzzi count. Only those who allow others, including the federal government, choose based on that. Federally funded loans and state funded insitutions have shifted the cost of higher education from the student (where it belongs) to tax payers. We gave students money to get an education, and we let them make that decision based on jacuzzi counts.

College isn’t for everyone. It should be expensive. It should only be worth going to college for degrees where higher learning is needed. A four year degree isn’t necessary for political science, public works administration, sociology, and other fluff degrees. Some areas only require a few semesters like book keeping, etc. A good measure of how necessary a degree is how few electives are needed. For example, my electrical engineering degree required 16 hours of electives. My wife’s sociology degree required 64 hours. Which degree offers better marketable skills? Just guess.

This recession is just what higher learning needed, but now we have Mr. Obama offering stimulus money to keep these institutions afloat, the worst thing we can do. Let those schools fail. Force kids to re-evaluate their future goals and methods for attaining those goals.

Economics Debunked: Price Gouging

This is the first of a series of articles to debunk common misconceptions regarding economics. This article is regarding price gouging. It was triggered by this Ars article. The article complains that a cable company is changing the way it wants to sell its products, cable-based internet in this instance. Previously, people could subscribe to Time Warner’s Cable (TWC) internet with no tangible bandwidth limit. This means they could download as much as they want per month. (Side note: most people download very little, only people downloading large quantities of video (10 per month) would come close to these the the proposed limits). Apparently, TWC has decided to charge $30 for a 5GB plan or $55 for a 40GB plan. Nate Anderson is whining that that is unfair for TWC to do. Many of the comments whine that things should be down to prevent this such as government legislation. All of this implies that TWC’s customers deserve unlimited cable downloads for a price below what TWC is willing to sell it for. Well, I think I deserve you to sell me your car for $1. What’s that? You don’t like that? Well, too bad. I deserve it. You say that’s crazy? Of course it is. Its just as crazy as TWC’s customer whining about this.  If you don’t want to pay that price, don’t buy from them. Buy Verizon’s DSL service, DirecTV’s sattelite internet service, one of many dialup services, or no internet at all. Its your choice. Its the beauty of the free market.

Stimulus Package Analogy

I received this in an email today. I don’t usually forward things, but I thought this did a good job teaching what seems to me an obvious point.

Shortly after class, an economics student approached his economics professor and said, “I don’t understand this stimulus bill. Can you explain it to me?”  The professor replied, “I don’t have any time to explain it at my office but if you come over to my house on Saturday and help me with my weekend project, I’ll be glad to explain it to you.” The student agreed. At the agreed upon time, the student showed up at the professor’s house. The professor stated that the weekend project involved his backyard pool. They both went out back to the pool and the professor handed the student a bucket. Demonstrating with his own bucket, the professor said, “First, go over to the deep end and fill your bucket with as much water as you can.” The student did as he was instructed. The professor then continued, “Follow me over to the shallow end and then dump all the water from your bucket into it.” The student was naturally confused but did as he was told. The professor then explained they were going to do this many more times, and began walking back to the deep end of the pool. The confused student asked, “Excuse me, but why are we doing this?” The professor matter-of-factly stated that he was trying to make the shallow end much deeper. The student didn’t think the economics professor was serious but figured that he would find out the real story soon enough. However, after the 6th trip between the shallow end and the deep end, the student began to become worried that his economics professor had gone mad. The student finally replied, “All we’re doing is wasting valuable time and effort on unproductive pursuits. Even worse, when this process is all over, everything will be at the same level it was before, so all you’ll really have accomplished is the destruction of what could have been truly productive action!” The professor put down his bucket and replied with a smile, “Congratulations. You now understand the stimulus bill.”

AZ Budget Cut Recommendations

Arizona spends alot of money. We spend alot of money on education. Legislators are currently talking about cutting education spending to balance the budget. I strongly believe we need to always have a balanced budget. Here is how I recommend cutting educational spending.

Eliminate School Districts

Public Schools are organized like massive corporations. There are many layers of management supported by high profits (often protected by government regulations, but that’s another post).  Teachers report to Principals. Principals report to Superintendents. But, superintendents have assistant superintendents. Everyone has assistants. There is an entire layer of bureaucracy that generates nothing. No teaching, no creation of wealth, just leaching. Don’t believe me? Tell districts they need to cut spending. Do you know what they say? Raise taxes or cut programs, both while whining about Arizona’s future, like Arizona will fall into a state of ruin without their school district’s overhead.

Superintendents make approximately $150-180k/year. Assistant Superintendents make approximately $100k/year. Paradise Valley School District has five assistant superintendents. If we can save $1-2million/yr by eliminating one district, we could save at least $150-300million/year. There are 150 school districts with websites known to the state of Arizona.

We don’t need school districts anymore. There may have been a time when that level of bureaucracy was needed, but not any more.

More on ASU Budget Cuts

Michael Crow has released another statement, whining about ASU’s financial crisis, like its the only one suffering right now. Below is his letter. My comments are sprinkled throughout.

Based on some of the responses I’ve received recently regarding the state budget proposal, I wanted to forward a few key facts to counter the lingering inaccuracies and misperceptions I continue to encounter. The information below provides important clarification related to pending budget concerns and the magnitude of the challenges ASU is facing.

Fiction: The cut to ASU in the proposed legislative budget is a small fraction (between 4 and 12 percent) of the university’s overall budget.
Fact: The actual percentages are 35 percent of the 2009 state General Fund budget that is remaining for the year and when the proposed 2010 cuts are added, it totals 40 percent of the university’s state General Fund appropriation in 2008 on a Full-time Equivalent (either a full-time student or its equivalent of two part-time students) basis.

The percentages quoted by some state legislators are based on a total budget that includes hundreds of millions of dollars in federal research funding as well as bookstore and meal plan purchases and even football ticket sales. ASU’s research enterprise and its ancillary operations from the bookstore to the football team are – and must be – financially self-sufficient and in fact, these activities subsidize a substantial portion of the instructional budget.

FYI: When a professor receives a research grant, ASU gets half of it while the professor gets the other half for spending on research associate pay and other costs associated with the project. So the fiction, is actually a fact. His fact is just reworded. These activities are subsidizing instruction, meaning they need to be included in the budget, making the state legislator’s comments accurate. Sometimes the truth hurts, doesn’t it Mr. Crow?

If ASU were to close its dormitories and bookstore and stop doing federally funded research and stop playing football, the revenue associated with those activities would also end. So, it is a fiction that ASU has other revenue that could begin to replace the loss of state revenue.

State revenue and the tuition paid by students account for 79 percent of ASU’s instructional budget. To make up the loss of state funding, tuition for in-state students would need to be almost doubled to $11,000 a year.

Fiction: The proposed legislative budget won’t really hurt ASU. The university has gotten a lot of new state money in recent years.

Fact: The proposed budget cut would take student funding at ASU back about 20 years, from $8,111 per full-time student (or equivalent) in 2008 to $4,902 for 2010, which is lower than the $5,017 ASU received in 1989. To see the full chart of state funding from 1986-2010, click here <http://asunews.asu.edu/files/GF_per_FTE_history.pdf> .

General Fund per FTE Student (not adjusted for inflation)

1989 2006 2010
$5,017                         $6,334                         $4,902

The primary mechanism the State of Arizona uses to fund its universities is an enrollment growth formula – if your enrollment increases, your state funding increases by a proportional amount.

The State of Arizona has experienced substantial population growth and more qualified students are choosing to attend ASU every year, resulting in an enormous demand for and growth in the university’s enrollment – from 43,000 students in 1989 and 50,000 students in 2000 to 67,000 students today. Enrollment growth funding over the last 20 years has not kept pace with actual enrollment growth. So, most of the “new” money ASU has received in recent years is “catch-up” money, intended to bring Full-time Equivalent student funding back to previous levels.

Can you define qualified? I have seen ASU’s students. Perhaps we should raise the qualifications above “Having a Pulse and Rich Parents”. If we can’t afford 67,000 students, cap enrollment at 43,000. Arizona students unable to get into ASU can attend community college until they value their education enought to work hard and succeed at it. No one is entitled to college education, and most people don’t need it.

Furthermore, the state has no regular capital construction or maintenance budget for its universities. Twice over the last six years ASU has gotten a special appropriation to build badly needed new buildings. These additions are in no way “excess funds” that the university can cut without there being drastic consequences.

If drastic consequences means no more new buildings, I welcome drastic consequences with open arms. Five years of disgraceful spending had to end. It just so happens 2009 is the year.

Fiction: The budget proposals on the table are merely options so no one should be overly concerned about them.

Fact: No other options have been put on the table by the Legislature. Historically in Arizona, legislative budget options often become the actual budget. Even as a starting point, these cuts are so extreme that the ending point could still have dire consequences for ASU. So, there is cause for grave concern.

Fiction: ASU is unwilling to make cuts.

Fact: ASU has already taken more than $37 million in state funding cuts and prepared for further reductions by eliminating a total of 500 staff positions and 200 faculty associate positions. We have disestablished schools and merged academic departments while managing to preserve academic quality.

The university is prepared to take additional cuts but we must be clear about what needs to be done to reach the funding reductions laid out in the proposed legislative budget. These actions could include:

* Laying off thousands more employees.
* Having a massive furlough of all remaining employees for two weeks or longer.
* Increasing tuition and fees.
* Closing academic programs.
* Closing a campus or possibly two.

Don’t close; sell ASU West and ASU East and ASU Downtown.

Fiction: These cuts are no more than short-term pruning or fat-cutting.

Fact: The intended or unintended consequences of these cuts would be to move ASU away from being a research university – which it became 50 years ago by vote of the people of Arizona – back to being a state college without graduate programs or research.

To read the January 25 Arizona Republic editorial supporting these facts, click here <http://president.asu.edu/files/AZ%20Rep%20College%20Budget%20Editorial%20012509.pdf> .

These budget cuts won’t affect federally funded research, as mentioned in the first fact or fiction series. This isn’t rocket science, its political pandering. Must be nice to whine and complain to your boss about your raise. Does anyone else get to do that?

The True Meaning of Corporate Citizenship

Cato has a great article. Here is a great quote:

Today, anti-corporatists want corporations to put some vague notion of altruism ahead of profit, innovation, and investment. That’s terribly shortsighted. Capitalism has proven to be the best way of creating wealth because it trusts that the collective wisdom millions of people voluntarily engaging in millions of mutually-beneficial transactions every day is the best way for an economy to allocate its resources.

Combining mutually-beneficial transactions and the freedom to do so is the only real way to create wealth.  Its our job to spread the good word, to beat back the lies of the idealist utopia-ists.