Category: Business and Society

Hurricane Katrina passed over New Orleans and the rest of the Gulf coast earlier today, and reports of “price gouging” are already coming in.

In Alabama, when the governor declares a state of emergency, it triggers a legal barrier to “unconscionable pricing.” That is (arbitrarily?) determined by the government to be a raise of 25% or more above the “normal” price.

Raising prices for scarce commodities during an emergency situation smacks of opportunism at best. So it seems on the face of it like an open and shut case in favor of state intervention.

But a greater understanding of how markets work and the price mechanism make the case somewhat more complex. An examination of the practical effects of price controls and limits shows the unintended consequences of such laws.

David M. Brown wrote a provocatively titled piece, “Price Gouging Saves Lives,” for Mises.org following Hurricane Charley in 2004. The thrust of the argument is essentially that to limit the prices vendors can charge is to reduce the incentive for vendors to go through the hardship and risk of transporting commodities to the afflicted areas.

If someone can sell gas for the “normal price” in both northern Louisiana and in New Orleans, why would that person take on the added expense of moving gas in to a disaster area? Brown writes:

If we expect customers to be able to get what they need in an emergency, when demand zooms vendors must be allowed and encouraged to increase their prices. Supplies are then more likely to be sustained, and the people who most urgently need a particular good will more likely be able to get it. That is especially important during an emergency. Price gouging saves lives.

Brown’s entire piece is worth reading. The ability to charge more for goods ensures that those goods will find their way into the “state of emergency.” Those interested in looking for a biblical precedent for situational pricing could look to Joseph’s actions during the famine in Genesis 41 (with the added caveats that biblical narrative does not equal imperative, that Joseph was technically acting in the interests of the government [i.e. Pharaoh], and that his actions fulfilled a specific purpose within God’s redemptive history. In other words, biblical precedent doesn’t necessarily create an ethical norm).

Blog author: mvandermaas
posted by on Thursday, August 25, 2005
Aah, the good old days!

In case you haven’t noticed, the price of gasoline has been going up lately. And, with all the predictability of the swallows returning to Capistrano, the cry has gone up from certain quarters of society for the government to do something about the situation. Unfortunately for consumers in paradise, the State of Hawaii has decided to respond to that demand by instituting price caps on gasoline.

The price caps, which will be instituted on September 1, are the result of a process that began with the passage of Act 77, which was enacted in June of 2002. Implementation of the act was delayed, however, in order for enough time to pass for a more comprehensive study of Hawaii’s gasoline market to be undertaken. One might ask whether it might have been better to do that before passing price control legislation, but I suppose we should be thankful that the legislature required this inquiry at all.
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Blog author: jballor
posted by on Thursday, August 25, 2005

A commentary from the Tax Foundation looks at government subsidies for the construction of a new stadium for MLB’s Washington Nationals. Analyst Eric A. Miller writes, “Funding a new stadium in the District may be good politics, but it is bad public policy. Major League Baseball will be laughing all the way to the bank while D.C. residents will find that they get much less than they were promised — and paid for.”

HT: Townhall.com

Blog author: jballor
posted by on Wednesday, August 24, 2005

I was wondering how long it would take for this to happen. The acceptability of Google’s politics and public persona could only insulate it from the requisite corporate suspicion for only so long.

In today’s New York Times, Gary Rivlin writes of growing distrust of Google: “instead of embracing Google as one of their own, many in Silicon Valley are skittish about its size and power. They fret that the very strengths that made Google a search-engine phenomenon are distancing it from the entrepreneurial culture that produced it – and even transforming it into a threat.”

How much of the “grousing” is merely bad sportsmanship? More than a bit, I think. After all, “Just as Microsoft has been seen over the years as an aggressive, deep-pocketed competitor for talent, Internet start-ups in Silicon Valley complain that virtually every time they try to recruit a well-regarded computer programmer, that person is already contemplating an offer from Google.”

When Google beats you at something, the proper response would be to raise your game. This would spur innovation. But instead, the Google’s competitors seem more interested in complaining rather than competing:

“Google is doing more damage to innovation in the Valley right now than Microsoft ever did,” said Reid Hoffman, the founder of two Internet ventures, including LinkedIn, a business networking Web site popular among Silicon Valley’s digerati. “It’s largely that they’re hiring up so many talented people, and the fact they’re working on so many different things. It’s harder for start-ups to do interesting stuff right now.”

Sour grapes, anyone?

Blog author: mvandermaas
posted by on Friday, August 19, 2005

Remember that the next time you hear someone sing the praises of single-payer, government run health care programs. Canada’s system is often cited as an ideal model for the United States to emulate. The problem with that, however, is simple: if the US adopts a Canadian style system, where will Canadians go for their health care?

Canada’s National Health Service: The Sick Man of the Great White North

Recognizing their failure to provide timely treatment through the national system, some provincial governments are sending backlogged patients to the United States rather than encouraging Canada’s private sector to pick up the slack.

Demand exceeded supply in 1999 and 2000 for 1,200 Ontario cancer patients who were forced to wait an unacceptably long time for treatment. Providers on both sides of the border acted. Cancer Care Ontario (CCO) and Princess Margaret Hospital in Ontario offered patients the option of receiving radiation therapy at Roswell Park Cancer Institute of Buffalo. “This short-term measure is helping us to ensure that everyone receives treatment within a medically acceptable period,” Ken Shumak, CCO’s president, said at the time.

Pamela Germain, vice president for managed care and outreach at Roswell Park, notes that some patients had waited 14 weeks postsurgery, with eight weeks being the satisfactory outer limit. “We negotiated case rates for breast cancer and prostate cancer and cleared up a backlog of 1,110 patients in two years,” says Germain. Hospitals in Detroit and Cleveland also picked up the slack until provinces purchased new equipment and hired health care professionals to run it.

Canada’s system may be the gold standard for government-run health care, but only if you’re looking for a system that can’t provide essential medical services in a timely manner.
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Today’s Wall Street Journal (subscription required) brings a reminder that Liberation Theology (or more accurately, Marxism) is alive and well in Central America. A Canadian firm has set up shop in Sipicapa, Guatemala, constructing a gold mine that is currently employing around 1,300 local residents and providing a much needed economic boost for the area:

The Glamis gold mine has already given an economic lift to this town and more so to neighboring San Miguel Ixtahuacán. Glamis took ownership of the project in an acquisition. Company officials say they have since spent $11 million buying property from willing sellers at an average of $4,500 per acre.

Of almost 2,400 workers employed in constructing the mine as of last month, 1,300 are locals. A foreman tells me that some of the unskilled workers he has hired are now operating million dollar machinery and with overtime and benefits pulling down over $1,000 per month. Two of those are 20-something women, whose other options for employment around here are close to zilch. The mine has a 24-hour medical clinic and two ambulances. It says that, drawing from its experience in Honduras, it expects about half of those who use the medical facilities over time to be neither employees nor their families. Glamis is also sponsoring a nonprofit foundation teaching business skills.

When construction is finished and operations commence, employment will drop to around 350 jobs. Tim Miller, Glamis’s vice president for Central America, says that the company hopes to rotate some of the jobs so that as many families as possible can benefit. When the mine is exhausted, the company has committed to restoring the land and donating it for commercial use.

Sounds like a pretty good deal for an impoverished community. Unfortunately, the local church doesn’t see it that way, and has allied with wealthy environmentalists to vociferously object to the project:

Opposition is led by a bearded Italian living at the parish of St. Bartholomew and known to the locals as “Padre” Roberto. But as I found out after an hour in the rectory garden with him and his political sidekick, a local collaborator called Juan Tema, the “padre” is not a priest. Nor is he a religious brother or a seminarian. Rather he is a layman who carries out “administrative” duties for the parish.

One of those duties appears to be preaching the gospel according to Che. Fidel Castro did a lot for Cuba, he tells me and what he’d like for this town is to close off the roads and produce everything here, “like the [Mexican] Zapatistas did.” When I point out that he has a Nike hat, an Adidas jacket and Spalding footwear he avoids the point, smiles and adds, “and an Italian heart.” Roberto seems to be on a revolutionary adventure from the ordinariness of Italy and this is his playground. He doesn’t think that the mine can be stopped. “But it’s like a cancer,” he says, “and the idea is to keep it from spreading.”

This is twisted, reprehensible thinking. These men of the church claim to be protectors of the poor, but the only thing they are protecting the poor from is the opportunity to rise out of poverty. Economic growth, far from being a “cancer,” is actually the cure for the social ills associated with extreme poverty. Jesus said that “the poor will always be with you;” but that wasn’t intended to be an instruction to His church to oppose the means by which the poor rise from poverty.

Rev. Robert A. Sirico addressed the re-emergence of leftism and Liberation Theology in a 2003 commentary:

The simple truth is that redistribution, centralization of power, expropriation of wealth and the like, will not raise the standards of living. Only market economics, more secure property rights, freer trade, and sounder currencies, can do that. What’s more, measures like disempowering owners of factories and farms, erecting protectionism in the name of combating globalism, and handing out more subsidies to people who vote in a leftist direction, none of this creates wealth. Quite the opposite. It increases dependency and poverty. No economy has ever grown through statism.

Blog author: jballor
posted by on Thursday, August 18, 2005

News from Los Angeles:

Two homeless men were attacked with baseball bats and one of them critically injured, allegedly by teens inspired by videos of homeless people brawling that have sold hundreds of thousands of copies over the Internet.

The alleged attackers told officers they had recently seen the DVD “Bumfights” and wanted to do some “bum bashing” of their own, police Officer Jason Lee said.

I examine the intersection between the market, technology, and violence in this recent commentary. In an earlier draft of the piece, I named Bumfights.com in particular as one of the sites that “profit from setting up taped fights between homeless people or other vulnerable populations.”

Pope Benedict’s highly publicized trip to Germany for this week’s World Youth Day stands as an opportunity for the event to, in the words of Kishore Jayabalan, engage “serious theological and intellectual work.” The pope’s homecoming means, “If there is a place to show how the Christian faith shaped Europe and formed heroic persons even in its darkest hours, this is it.”

Read the full text of this commentary.

…You might be a Member of Congress:

Members of Congress want to establish a new government-backed venture capital program…

OK, but what’s the catch?

…to replace one that’s being phased out because of sizable losses.

I wonder if they’ve considered whether the Government should even be involved in the venture capital business in the first place?

Hat Tip: Don Luskin

A promising brief recognizing the critical role of civil society in Nigeria, and especially that the Christian church, from Ecumenical News International:

Nigerian president urges African churches: Play part in governance

Abuja (ENI). Nigerian President, Olusegun Obasanjo has urged African church leaders to become key players in the process of achieving good governance in the continent.

“The Church must be a critical partner in the on-going efforts at strengthening the structures of democratic governance, and bringing about sustained development in an environment of justice, equity, and fairness,” Obasanjo told leaders at a meeting of the Nairobi-based All Africa Conference of Churches.