Tag Archives: Monopoly

Commentary

How government forces private firms out of business with predatory pricing

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This article on Fox News’ Forum is by John Lott. He explains the threat of predatory pricing as it relates to Obama’s health care plan.

First, Lott explains the stated goal of Obama’s plan:

President Obama is selling government health insurance to the American people as the way to save money.  That government health insurance will merely provide competition to keep private insurance companies from gouging their customers.

But here is the problem with a parallel system run by the government:

There are a couple of problems with Obama’s argument.  Government is just not known for its cost effectiveness or quality.  And the way for government enterprises to survive is with massive taxpayer subsidies and charging customers prices below the firm’s actual costs, driving more efficient private firms out of business.  These subsidies mean that when government enterprises “win” they do so by driving more efficient private firms out of business.

Here is an an example of how it works with USPS vs Fedex:

The U.S. Postal Service would often increase its first-class mail rate, where it had a monopoly, to raise money to subsidize its overnight delivery service where it faced stiff competition.  For example, it raised first-class mail to thirty-three cents in January 1999 and simultaneously reduced the price of domestic overnight express mail from $15.00 to $13.70, even though it was already losing money at the $15.00 rate. The price, which was lowered in response to increasingly successful competition in overnight delivery from FedEx and UPS Overnight, remained below $15.00 for the next seven years.  Clearly the Postal Service was not able to drive its competitors out of business with this maneuver, in part because its on-time delivery record and quality was poorer.

The Postal Service lost money on its overnight deliveries despite advantages that FedEx and UPS could only dream of.  The Postal Service is exempt from paying state sales, property and income taxes.  And it uses some of the most expensive real estate in the country — rent-free. The competition that Obama advocates between government and private insurance companies isn’t going to be any fairer.

The government can run huge deficits, effectively transferring money from the productive private sector into their parallel public competitor, with the end goal being complete control of consumer purchases. Obama intends to run private companies out of business so that you have only one place where you can go to purchase health care: OBAMA. And you will do anything he tells you in order to get that health care.

It’s all about controlling your behavior by taking your money and then restricting your access to services. The end goal is that everyone will have equal life outcomes regardless of how hard they work, and how risky and/or immoral their lifestyle. Democrats do not trust you to keep the money you earn, and to spend your money on the things that you want. They think government knows best.

In his book “Freedomnomics”, Lott has even more examples of predatory pricing. I recommend that book, especially for the chapter on abortion and crime. Pro-lifers will find the book very useful. It’s important for people to understand that the more involved government gets in the free market, the less liberty we have as consumers.

News

Walter Williams evaluates American academic performance

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The article is here in Townhall.com. The left is always complaining that they need more money to raise test scores, and that schools are underfunded. But is more money the answer?

Excerpt:

The teaching establishment and politicians have hoodwinked taxpayers into believing that more money is needed to improve education. The Washington, D.C., school budget is about the nation’s costliest, spending about $15,000 per pupil. Its student/teacher ratio, at 15.2 to 1, is lower than the nation’s average. Yet student achievement is just about the lowest in the nation. What’s so callous about the Washington situation is about 1,700 children in kindergarten through 12th grade receive the $7,500 annual scholarships in order to escape rotten D.C. public schools, and four times as many apply for the scholarships, yet Congress, beholden to the education establishment, will end funding the school voucher program.

Teacher’s unions are not interested in being paid to perform, they want to be paid regardless of whether they perform. That is why they oppose voucher programs, which give parents a choice. If parents can choose, then schools that insist on retaining teachers who can’t teach will finally come under pressure to fire those teachers and find some better ones. More money thrown into the fire is not the answer.

Williams continues:

Any long-term solution to our education problems requires the decentralization that can come from competition. Centralization has been massive. In 1930, there were 119,000 school districts across the U.S; today, there are less than 15,000. Control has moved from local communities to the school district, to the state, and to the federal government. Public education has become a highly centralized government-backed monopoly and we shouldn’t be surprised by the results. It’s a no-brainer that the areas of our lives with the greatest innovation, tailoring of services to individual wants and falling prices are the areas where there is ruthless competition such as computers, food, telephone and clothing industries, and delivery companies such as UPS, Federal Express and electronic bill payments that have begun to undermine the postal monopoly in first-class mail.

Here is an article from the extremely left-wing Los Angeles Times that explains what it takes for a school to succeed. A school needs stay away from unions and educational bureaucrats, and stick with the basics: math, reading, writing and discipline. Let’s take a look at an Oakland school that serves the poorest, underprivileged minorities, but still manages to deliver the goods.

What kind of teachers teach in the American Indian Public Charter schools?

“We are looking for hard working people who believe in free market capitalism. . . . Multicultural specialists, ultra liberal zealots and college-tainted oppression liberators need not apply.”

Good start. But are they “progressive”?

That, it turns out, is just the beginning of the ways in which American Indian Public Charter and its two sibling schools spit in the eye of mainstream education. These small, no-frills, independent public schools in the hardscrabble flats of Oakland sometimes seem like creations of television’s “Colbert Report.” They mock liberal orthodoxy with such zeal that it can seem like a parody.

Well, surely they must embrace teacher’s unions?

School administrators take pride in their record of frequently firing teachers they consider to be underperforming. Unions are embraced with the same warmth accorded “self-esteem experts, panhandlers, drug dealers and those snapping turtles who refuse to put forth their best effort,” to quote the school’s website.

But what about the need for compassion, tolerance and empathy?

Conservatives, including columnist George Will, adore the American Indian schools, which they see as models of a “new paternalism” that could close the gap between the haves and have-nots in American education. Not surprisingly, many Bay Area liberals have a hard time embracing an educational philosophy that proudly proclaims that it “does not preach or subscribe to the demagoguery of tolerance.”

The LA Times article shows that conservative, anti-union schools work for the poorest children. But there are challenges that are blocking the expansion of charter schools, such as “hostile state legislatures and arbitrary caps”, according to the Heritage Foundation.

Their article cites Rep. Buck McKeon (R-CA) as follows:

These caps are often the consequence of legislative trade-off – representing political deal-making designed to appease special interests who prefer the status quo rather than reasoned education policy. As a result of the caps, children across the country now languish on daunting wait lists, just waiting to enroll in the public school of their choice, simply because it happens to operate as a charter. An estimated 365,000 students are on charter school wait lists today. That’s enough students to fully enroll 1,100 new averaged-size charter schools.

As I discussed before, there are almost no males involved in education in the classroom, which means that the classrooms will emphasize compassion, tolerance, equal outcomes, non-judgmentalism and self-esteem. Competition and excellence are definitely out. In order for Americans to continue to have the same level of prosperity, we need to focus on academic excellence, not secular-leftist indoctrination.

Commentary

A brief introduction to the blind faith religion of Marxism

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The American Thinker has this post up explaining the blind faith of Marxism. (H/T Douglas Groothuis)

Marx thought that value was proportional to the labor spent in creating a product:

Marx claimed that all products contain value that is directly proportional to the amount of labor embodied within them. He was wrong. All the rest of Marxism is based entirely on this mistaken and falsifiable premise.

That’s clearly wrong. The price of products varies depending on supply and demand!

Marx thought that the free market would create monopolies:

Marxists claim that the operations of markets have a natural tendency to spawn monopolies. They call this “monopoly capitalism.” In reality, markets have a natural tendency to break up and undermine monopolies. Almost all monopolies under capitalism are those set up by governments stifling and interfering in the operations of markets.

That’s clearly wrong. Government regulation is needed to insulate monopolies from competition. And in capitalism, capitalists agree that government should take an active role in destroying monopolies and fostering competition, in order to give consumers choices. When consumers can choose, producers have to add value and reduce prices. Socialism, on the other hand, allows consumers one choice: the state-run firm.

Marx had no idea what incentives and laws were needed in order to foster conditions in which entrepreneurs would want to create wealth:

Marxists and socialists in general care a lot about the distribution of material wealth. But they have no idea how to bring about the creation of the material wealth that they wish to redistribute. They just assume it all gets produced all by itself. That is why people in communist regimes starve.

Wrong again!

Marx believed that capitalism was bad for workers.

Marxists claim that workers are oppressed in capitalist societies. Workers in communist societies always try to sneak out into capitalist societies. No one in South Korea is trying to sneak into North Korea. The Berlin Wall was not built to keep West Germans from sneaking into East Germany’s collective farms. Cubans in Florida do not steal boats to seek asylum in Cuban collective farms.

Why is it bad to encourage people to take risks, start their own companies and hire workers? Isn’t it better for for workers to have a choice of employer, so that they can leave if their working conditions or remuneration are unacceptable? How do people leave their employer in Marxism? Oh yeah – by firing squad or by jumping the wall.

But what about companies? Aren’t they all owned by greedy, colluding capitalists?

Marxists claim that capitalists do not work and that workers do not own capital. That is why they comprise “social classes.” But nearly all capitalists work, often in work days with very long hours. Meanwhile, a huge portion of capital is held by workers themselves through their pension funds and other institutional investment intermediaries.

…Marxists claim that businesses are owned by a small closed clique of capitalists. Actually, most businesses are “public,” meaning they are owned by shareholders and anyone at all can be a shareholder in them.

But isn’t capitalism opposed to democracy?

Marxists claim that capitalism cannot be democratic. But every single democratic society on earth is predominantly capitalist. Not a single communist regime was ever democratic. Communists take power via military coups and military conquest, not via elections.

But isn’t violence used against people in order to preserve capitalism?

Marxists claim that capitalists use violence to protect their perquisites and privileges. In truth, Marxists in power use violence to protect their perquisites and privileges. They use violence to suppress opposition wherever they manage to seize power, including violence against opposition groups of workers. It is conservatively estimated that 100 million people were killed by Marxism and by Marxists in the twentieth century.

But aren’t workers less well off in capitalist economies?

Marxists think that only things matter in economics, meaning tangible products, and so services do not. They believe that big products are more important than small products, big industries being more important than small industries. They also believe that consumer goods are superfluous and should not be produced much. All those ideas are why the quality of life and the standard of living are so miserable under communist regimes. In wealthy countries, small- and medium-size enterprises are the main engines for producing wealth.

But aren’t people poorer and less free in capitalist economies?

Marxists claim that under Marxism everyone receives according to his needs and contributes according to his capabilities. In reality, under Marxism everyone receives according to whatever the entrenched party apparatchiks decide their needs are, usually sub-sustenance levels of consumption, and the same people decide what are your abilities, generally assumed to be your ability to work endlessly at whatever you are told to do without getting paid much. To put this differently, in the absence of positive incentives, no one is capable of doing anything and everyone’s needs are infinite.

But isn’t a centrally-planned economy with fixed prices better than a free market capitalist economy?

Marxists think that “experts” can tell what needs to be produced. They cannot. That is why Marxist experts produce starvation. In some cases Marxist starvation has produced cannibalism. There is not a single Marxist scholar or expert on earth who could produce a pencil by himself.

But letting people earn money based on what they do leads to lower productivity, right?

Marxists believe that economic incentives do not matter. That is why they think there is no need to pay people more for working hard or exerting effort. It is enough to appeal to their “class interests.” That is why people starve under communism.

But in a Marxist economy, everyone is equal, right?

Marxists pretend to be in favor of the working class collectively owning all property. In reality Marxists always steal the property of members of the working class and turn it over to well-paid party apparatchiks.

But in capitalist economies, when two parties freely agree to exchange items of value for money, one of them is oppressing the other, right?

Marxists believe that in every voluntary transaction, one side wins and the other loses, and so it is impossible for two sides to profit from it. That is why they think you should be told what to buy and how much you should pay for it.

But capitalists go all around the world imposing their free market ideology through military force, right?

Marxists claim that capitalist countries engage in imperialism. But since World War II the largest empires of imperialist conquest were those headed by Marxist regimes.

Marxists believe that there are no real conflicts of interest between the workers living in different countries and speaking different languages or coming from different cultures. That is without a doubt the very stupidest idea of all coming from Marxism. In any case, that is why Marxism is generally spread only via military conquest.

This article is one to e-mail to all your friends who voted for the Marxist Obama. Obama’s Marxism was well known to everyone who took the time to read his books, and to read about his past actions and policies. Now we are going to be governed by someone who knows less about economics than Al Gore knows about climate science.

Maybe one day Obama will release his grades, so we can finally find out which of them is smarter.