To demand fairness, dignity, and respect...

In a Huffington Post piece US Secretary of Labor Hilda Solis praised Ohio voters for overturning a recent law, which would have restricted collective bargaining rights for some public sector employees.

After months of advocacy and organizing, the people of Ohio have defeated a law that would have silenced the middle class and curtailed the collective bargaining rights of thousands of teachers, firefighters and police officers. Ohio has made it clear: these dedicated public servants still need a seat at the table to demand fairness, dignity and respect.

This statement begs the question: Who are the majority of Ohio voters trying to protect their public servants from? Well, from the employers who are treating teachers, firefighters, and police officers unfairly and without respect. And who are these horrible employers? The state and local governments in Ohio and their agencies, clearly.

Secretary Solis makes the case that state and local governments in Ohio are pretty lousy organizations to work for who treat their employees unfairly and without respect. But Ohio isn't alone. The vociferous protest against a similar law in Wisconsin earlier this spring suggest that residents in Wisconsin feel similarly about their government.

Why do we want to give greater power to governments who treat their own employees unfairly and without respect, give them more of our money, and entrust them with the care and support of the less fortunate among us?

A free market would have saved his life

Mohamed Bouazizi was described as an unemployed 26-year-old university graduate who lived in Sidi Bouzid, Tunisia. On December 17, 2010 he snapped. He grabbed a gun and sprayed a barrage of bullets on a gathering organized by his government representative--no, wait! That's not his story. Let's see... he snapped - bought a gun, went to his university, emptied a magazine in a classroom full of students and then turned the gun on himself... hm... doesn't sound right, either.

Maybe this is it: Mohamed snapped - he left his family and joined the Al Qaeda Organization in the Islamic Maghreb. On December 17 he put on a suicide vest and walked into the crowded city center of Sidi Bouzid...

Mohamed Bouazizi is dead now.

Mohamed is indeed dead, but his story isn't either of these. Mohamed's story is different and, unfortunately, already forgotten. It goes like this:

Mohamed Bouazizi was 26-year-old university graduate. He grew up in a white stuccoed house, on a dirt road near the edge of Sidi Bouzid. [1] After finishing college he couldn't find a job in his field of study. But he was unemployed only in the sense that John Jacob Astor was unemployed when he was roaming the woods of Northern Michigan.

This Mohamed, not unlike John Jacob Astor, was a trader - he sold fruits and vegetables from a cart in his hometown. He took initiative, put his own capital at risk, exerted effort humbly (he was, after all, a college graduate selling produce on the street) to earn a meager living. Thus he supported his family. Mohamed provided fresh food to the people of his town and by competing with the other sellers he helped keep prices low for all consumers.

Just because nobody in Tunisia offered Mohamed Bouazizi a job, he did not jump on a boat to immigrate to Italy or France, as many of his countrymen did. Nor did he spend his days idly at the town's coffee shops or tea houses lamenting his plight. He didn't join Al Qaeda, much less strap on a suicide vest. He became an entrepreneur.

"Mohamed hoped most to buy his own van," said his sister, Samia Bouazizi, 19. "But he wanted it for work, not for himself." [1]

On December 17 the authorities approached Mohamed, told him he did not have the right to sell vegetables because he did not have a permit, and confiscated his inventory. Mohamed snapped - he got some gasoline, poured it over himself, and set himself ablaze in the main city street. He died from his burns two weeks later.

Mohamed Bouazizi's self-immolation has sparked nation-wide protests in Tunisia with police murdering dozens of protesters, and the unrest has forced the president Ben Ali to flee the country. The political turmoil is now the lead story.

But this simple fact remains: if Tunisian police had left alone Mohamed Bouazizi to sell his fruits and vegetables he isn't likely to have set himself on fire. Perhaps one day he would have earned and saved enough to buy a beat-up old van. With that old van he would have been able to bring more fruits and vegetables from farther away, providing greater variety, and possibly lower prices, to the people of Sidi Bouzid. He may have even made a little more money for himself and his family. Then maybe he could have bought a newer van, and then another. And as the little business grew, he may have needed to hire a couple of sales people to work his fruit stalls. And then he may have needed someone to keep track of the books, and hired a young Tunisian with an accounting degree, and then maybe somebody with a marketing, and then with operations degrees... And maybe then he would have hired an architect, and a builder, and borrowed money from a bank to build a refrigerated warehouse on the outskirts of town. The architect would have made some money, and so would have the builder, and the bank, and all of their employees... And so it goes.

Laissez-fiare, in plain English, means simply "let Mohamed sell his produce." That's the free market. If you think it sounds like a fantasy, read John Jacob Astor's story. For the alternative, read the news from Tunisia.

Independent Institute Names Winners of 2010 Templeton Fellowships Essay Contest

OAKLAND, Calif., September 27, 2010—The Independent Institute announces the winners of its 2010 Sir John M. Templeton Fellowships Essay Contest!

First Prize in the junior faculty division for untenured college teachers went to Evgeniy Gentchev for his essay, “Making the Case: Effectively Advocating an Old Idea in Modern Times.” An associate professor of strategy and international business at Northwood University in Cedar Hill, Texas, Mr. Gentchev is also a contributing author of In Defense of Capitalism and co-editor of When We Are Free.

Click here to read to full press release.

Click here to read the winning essays.

Keynes vs Hayek - EduMocuDocu Music Video

This video was created by John Papola and Russ Roberts. Visit them at http://econstories.tv

$3.5 trillion over the next decade

For a fuller discussion of the problem of high health care costs, read my analysis on Scribed (link below):



With the election of Republican Senator Scott Brown in Massachusetts and the continuous public focus on the economy, the present health care reform effort in Congress appears stalled. Whatever happens to it, it is worth considering how much it would have cost to provide coverage under the current cost structure to the 15% of the US population, which is currently uninsured.

Much of the media latched onto the talking points of “budget neutral” and “deficit reducing over 10 years.” But these are nebulous concepts, at best. Whether something is budget neutral simply depends on how much redistribution happens through the government. The better question is how much will it cost. So here are a few simple, back-of-the-napkins calculations based on data provided by the Kaiser Family Foundation, The Congressional Budget Office, and The Congressional Research Service. Most of the data is from 2007 since the period of 2006-2008 is the time frame for which there is the most complete research and information. Ten or twenty percent adjustments of these figures don’t substantially alter the final result.

So covering the uninsured under the present cost structure would look something like this:

Private insurance covered a total of 172 million non-elderly Americans for approximately $900 billion. If we assume the 45 million currently uninsured are added to the rosters of private insurers, that’s an increase of 26% in customers for the insurance companies. (It doesn’t matter whether people are forced to pay directly the cost of health premiums, or do so through taxes, or subsidies.) Assuming costs are proportionate, annual health care spending will increase by 26% of $900 billion or by $234 billion.

The Congressional Budget Office forecasts that by 2019, health care costs would double. Proportionately, this means that the $234 billion per year will grow to $468 billion per year over the next decade. Assuming a linear increase, the average annual cost over the next decade would be $351 billion per year. Thus it will cost $3.5 trillion over the next 10 years to cover the people who are presently uninsured.

This calculation is clearly an oversimplification, but the assumptions made or ignored affect the cost estimates both positively and negatively. For example, some of the money that is currently spent by the uninsured out of pocket will no longer be spent out of pocket but through the insurance program. So the net increase in costs may be less than the $234 billion estimate. On the other hand, as people gain health insurance coverage, they tend to consume more health services, which will result in an overall increase in the consumption of health services, thus growing the dollar amount beyond the $234 estimate. Furthermore, the simplified estimate above ignores any adverse selection effects – the notion that the people who currently don’t have health coverage, on balance, require more health services than the ones who are covered.

Even if my simple estimate overstates the costs by a factor of two, and it doesn’t cost $3.5 trillion over the next decade but only half as much, the implication is clear – without dealing with the high and rising costs of health services, it will be very difficult to have broader coverage and to avoid the economic disaster caused by unsustainable health care expense levels.

Health care costs in the US - why so high?

If the US health care industry were its own economy, it would be large enough to have a seat at the G8 table. It provides the most expensive health care in the world, though not necessarily the best, and it’s not accessible to millions. It is becoming a large and unsustainable burden on Americans and on the US economy. Both conservatives and liberals have enough reasons to demand a significant reform in the way the system operates but current reform efforts are largely misdirected.

The real cause of high and rising health care costs is either misidentified or ignored by lawmakers. Artificial villains are designated (malpractice lawyers, health insurers), which further detracts the public discourse, policy analysis, and political decisions from focusing on and removing the true drivers of costs. I recently researched and wrote an analysis of US health care costs, which concludes that the key underlying problem in our health care system is the inefficiency of doctors and hospitals.

Click on the "View my documents on Scribd" link below to read or download my analysis. The link takes you to Scribd, which hosts the paper.

Government logic

The US House of Representatives has passed two bills that affect auto dealers, reports Automotive News today.

The Dealer Arbitration Bill is described as giving the 2,150 auto dealers whose franchises were canceled by GM and Chrysler more favorable terms in the arbitration of their disputes with the automakers. So the government decides to interfere in this business dispute not by establishing a mechanism for impartial resolution, not in support of its own to companies involved in it (GM and Chrysler), but by tilting the field against them and in favor of the dealers.

The second bill is the 1,279-page financial regulation legislation, which would create the Consumer Financial Protection Agency. Its intent is to protect consumers from making bad financial decision by regulating the sources of financing, such as mortgages, credit cards, etc. Given that the second largest financial transaction for most Americans is the purchase of an automobile, and that dealers are the biggest targets of consumer complaints about financing, one could expect the new law to regulate dealer financing as well. Not so--the bill excludes dealers-assisted financing from this regulation.


If your politics lean to the left, you're likely to accept the first bill but be appalled at the omission in the second. If your politics lean right, you would likely disprove of both. If you're an auto dealer...

Also today Automotive News reports that all of Toyota's North American factories are running over time to keep up with demand. Hm... if you're an auto dealer you might just want to get a Toyota franchise.