Everything. Funny how easy it is to lose sight of that. This video by Caleb Brown shows you in less than three minutes just how much one couple put on the line — so that you can enjoy fine coffee and wine. Too few people appreciate that aspect of capitalism.
By the way, this video is part of a contest. The winner is decided by traffic. So if you like what you see, spread it around far and wide.
Posted in Economics, The Market Process
Tagged alexandria, austin bragg, business, caleb brown, coffee, entrepreneurs, entrepreneurship, small business, small businesses, virginia, wine
Congress has used the financial crisis as an excuse to regulate what it calls “predatory lending.” As so often happens, its new regulations have had unintended consequences.
A bank in South Dakota, in order to comply with the new rules, is charging 79.9 percent interest for one of its low-limit credit cards. The pre-regulation rate was 9.9 percent.
The Credit Card Accountability, Responsibility and Disclosure Act of 2009 makes it illegal to charge annual fees greater than a quarter of a card’s limit. For small-balance cards, the allowable fees are tiny now. That leaves banks with three options:
-1. Lose money. The Wall Street Journal correctly notes that “Banks can’t be expected to give money away, even if Congress is in the habit of doing just that.” So this option is unlikely.
-2. Stop offering low-limit cards. This will hurt people who need them, such as people with low incomes, people with bad credit records, and young people who are trying to establish a credit record.
-3. Charge higher interest rates to make up for the money lost in fees. This is exactly what is happening here with the 79.9 percent rate for a $250-limit card.
If the bank calculated correctly, the 79.9 percent rate will be roughly a wash compared to the earlier high-fee, low-rate policy. But different customers will be paying. The people who incur a lot of interest-rate charges are usually the people who can’t afford them. And they’ll be paying a lot more than they were before the CCARD Act.
People who can afford to pay their balances on time often don’t pay little or no interest interest anyway. The 79.9 percent rate doesn’t really affect them. And now their annual fees have gone way down. The CCARD Act is, completely unintentionally, a wealth transfer from poor people to richer people. Congress is actively hurting the very people it intended to help.
Comments Off on Regulation of the Day 93: Predatory Lending
Posted in Economics, Regulation of the Day, The Market Process
Tagged ccard, ccard act, congress, credit, credit cards, financial crisis, financial regulations, interest, interest rates, predatory lending, regulation, Regulation of the Day, unintended consequences, usury
The Code of Federal Regulations contains a regulation on how to cite the Code of Federal Regulations. It reads as follows:
The Code of Federal Regulations may be cited by title and section, and the short form “CFR” may be used for “Code of Federal Regulations.” For example, “1 CFR 10.2” refers to title 1, Code of Federal Regulations, part 10, section 2.
See for yourself at 1 CFR 8.9.
Standard citation formats are extremely useful. That would be why, even without regulation’s guiding hand, the private sector evolved the Chicago and MLA styles, among others.
Yet another example of spontaneous order at its finest.
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Posted in Economics, Regulation of the Day, The Market Process
Tagged cfr, chicago manual of style, chicago style, citation formats, citations, code of federal regulations, mla style, regulation, Regulation of the Day
Wayne Crews and I have an article in today’s American Spectator about the antitrust crusade against Intel. Our key points:
-An FTC picking winners and losers is not capitalism. It is crony capitalism.
-Chips in “Wintel” desktop computers increasingly constitute just one subset of a vast semiconductor market. Only a small fraction of the chips in non-PC devices are Intel’s — and these devices are where the future lies.
-Regulators’ charges against Intel have changed over the years, but their verdict always remains the same: guilty. Suspicious.
-We’d be better off prosecuting the DOJ and the FTC for colluding against free enterprise.
Comments Off on Antitrust as Corporate Welfare for Aggrieved Competitors
Posted in Antitrust, Economics, Publications, regulation, Technology, The Market Process
Tagged amd, Antitrust, antitrust crusade, capitalism, competition, computer chips, computers, corporate welfare, crony capitalism, doj, ftc, intel, nvidia, Public Choice, rent seeking
FCC regulators want to provide wider and cheaper broadband access by subsidizing it, raising taxes, and forcing network owners to share their network infrastructure with competitors.
A few things the FCC should consider:
-Subsidies don’t make broadband access any less expensive. They just change who pays for it. In this case, that would be anybody with a phone. Which probably includes you. The great economist Ludwig von Mises observed that “A government can no more determine prices than a goose can lay hen’s eggs.”*
-The tax would make owning a phone more expensive. And when something becomes more expensive, people consume less of it. With tax-exempt technologies like Skype and Google Voice now available, people can switch away from a taxed phone to something cheaper more easily than ever. The more people who do that, the less revenue the phone tax would generate, defeating its very purpose.
-If a company has to share its network infrastructure with its competitors, it loses the incentive to maintain and improve that network. Why invest millions of dollars if it will help your competition just as much as yourself? Quality suffers. So does innovation. In the long run, it is innovation, not FCC intervention, that will make broadband affordable and accessible for everyone. The long-run view is just as important as the short-run view here.
-Land-based networks are expensive to build in rural areas. The cost per customer is huge compared to denser urban areas. Fortunately, that isn’t as much of a problem for wireless technologies. The FCC seems hellbent on the land-based networks since wireless networks aren’t yet advanced enough for mass-market broadband service. But they will be soon enough. And every dollar spent on old-fashioned wired networks is a dollar unavailable for improving wireless service. An unintended consequence of FCC intervention would be slower innovation.
*Ludwig von Mises, Human Action, 4th ed., (Irvington-on-Hudson New York: Foundation for Economic Education, 1996 [1949], p. 397.
Comments Off on Making Broadband Accessible: Innovation, Not Intervention
Posted in Economics, Price and Wage Controls, regulation, Taxation, Technology, The Market Process
Tagged broadband, broadband networks, fcc, fcc regulators, infrastructure socialism, innovation, intervention, ludwig von mises, mises, subsidies, taxes, universal access
If you sell poultry or livestock, it’s a good idea to weigh them first. Makes it easier for buyer and seller to agree on a fair price.
For some reason, seven sections of the Code of Federal Regulations (see here, here, here, here, here, here, and here) deal with the use and maintenance of the scales used to weigh the animals, the people operating them, proper procedure, and finally, weighing the animals again.
Is this really a federal matter? If so, what isn’t?
Some of the consequences of increasing government’s role in health care are easy to predict. One is that cutting costs requires cutting the amount of care. That means rationing. People judged not deserving of care would be denied it.
Another is that if government uses its increased bargaining power to lower drug prices, there will be less money for R&D. That means less innovation. That could well mean the end of increasing life expectancies.
Some people see these consequences and oppose more government in health care (I refuse to call President Obama and Congress’ proposal a reform; that word implies improvement). Others see those same consequences as reasons for supporting proposed legislation.
Today’s issue of OpinionJournal’s Political Diary (requires paid subscription) shows that Robert Reich, who supports government-run health care, realizes its effects on rationing and innovation, supports it anyway, and said so in a public speech at UC Berkeley in 2007.
Mr. Reich told the Berkeley youngsters: “You — particularly you young people, particularly you young healthy people — you’re going to have to pay more. And by the way, if you’re very old, we’re not going to give you all that technology and all those drugs for the last couple of years of your life to keep you maybe going for another couple of months. It’s too expensive . . . so we’re going to let you die'”
Reich goes on:
“I’m going to use the bargaining leverage of the federal government in terms of Medicare, Medicaid — we already have a lot of bargaining leverage — to force drug companies and insurance companies and medical suppliers to reduce their costs. What that means, less innovation and that means less new products and less new drugs on the market which means you are probably not going to live much longer than your parents.”
Whether you support more government in health care or not is up to you. But it is not disputable that those consequences exist. They should be factored into your opinion. Supporters of proposed legislation should acknowledge the effects of their ideas. Instead, they usually run away from them.
Kudos to Robert Reich for the intellectual honesty he displayed in his speech. More, please.
Posted in Argumentation, Economics, Health Care, Philosophy, Political Animals, The Market Process
Tagged Health Care, public option, rationing, robert reich, universal care
Over at the Washington Examiner‘s Opinion Zone, I give nanotechnology a Schumpeterian treatment. In the long run, a competitive, cut-throat market process driven by innovation is better for consumers than if government were to fund and direct research:
A nanotech firm that lives mostly off of government grants lives a sheltered, more docile existence. It doesn’t need to come up with new products that save peoples’ lives, or make them better. They just have to be good at getting grants.
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Posted in Economics, Technology, The Market Process
Over at the American Spectator, I take a look at a necessary evil that lurks deep in the fine print of most of our cell phone contracts.
Comments Off on In Defense of Early Termination Fees
Posted in Economics, Publications, The Market Process
P.J. O’Rourke has an interesting review of Taylor Clark’s Starbucked, an anti-corporate biography of the coffee chain. O’Rourke paints a kindly portrait of the author as a young groupthink anti-corporatist who, in writing his book, came to realize some of the limits of his dogma:
“I never came to like “Starbucked.” But I grew very fond of its writer. Most books about social and business phenomena give the reader something to think about. This book gave the author something to think about… I experienced the pleasure a teacher must feel when he watches a kid with promise outgrowing the vagaries and muddles of immaturity (and the jitters of too many coffee-fueled all-nighters) and coming into his own as a young man of learning, reason and sense.”
Comments Off on Coffee and Corporations
Posted in Certainty, Economics, Philosophy, The Market Process, The Partisan Mind
Inertia Wins! 