I, Smartphone

Nobody knows how to make a smartphone. 
Heck, for that matter, nobody knows how to make a pencil. 

Despite all that, smartphones and pencils get made.  No one tries to plan the entire process, and if an individual or group tried to enforce a plan, the process would come to a halt. 

Enjoy!

 

A Modest Proposal to end long gasoline lines

Because of Hurricane Sandy, many New Yorkers and New Jerseyites are having to wait in long, long lines for gasoline. 

If your license plate has an odd number, you can only purchase gasoline on odd numbered calendar days.  Ditto for even.  Anyone thinking about this for more than two minutes can see that it's nothing but "Performance Art" from government.  Demand is demand, regardless of which arbitrary day the demand is called for.  People with time to do so are waiting in line to buy gas whether they really need it or not.  Sheesh....

Here's the biggest obstacle.  New York and New Jersey both have "anti-gouging" laws.  If there's a disaster of some sort, merchants can only increase prices by 10%, unless they can prove that an even higher markup is required to turn a minimal profit.  That should make it more fair for everyone, right? 

But because of infrastructure problems, there's not enough fuel coming into New York and New Jersey.  The world that those old prices were based upon doesn't exist any more.  Every load of dinosaur juice coming into NY/NJ is worth 3 times its former value.  People are purchasing tanks of gas that they don't need, siphoning it from their cars into 5-gallon cans, and selling it for 3-4 times what they paid for it (which is exactly what its worth, BTW.)   They're illegally selling generators on Craigslist.  This Republican idiot is hauling 65 New Jersey business owners into court for "price gouging" - i.e., selling things for what they're worth. 

So how is the government determining the best use for this fuel?  Odd day/Even day purchasing. 

That's bullshit. 

According to Russ Roberts' book "The Price Of Everything", here's the best way to restore fuel supplies to NY/NJ. 

Let merchants sell gasoline for whatever price they want.  If you really need gasoline, you'll buy it.  If you just wanted gasoline for running out for lunch or road trips, or because you're paranoid, you won't buy it.  This is the only reason that Texans and Floridians and Californians have gasoline today.  The price is allowed to fluctuate, all day every day, based on demand. 

But that's not fair.....

Bullshit.  This is why you can buy lettuce in the wintertime.  It's why there are always shoes for sale at the mall, and you don't have to wait in line for them the way they did in Commie Eastern Europe.  It's why the U.S. has a higher standard of living than Cuba.  Companies are waiting in line to sell us lettuce and shoes, at whatever price we're willing to pay, and not vice-versa. 

But how would this help lower fuel prices???

Someone might make a fortune selling gasoline for $20.00 per gallon for a few days.  If other gas stations see this guy cleaning up on gasoline, they will move heaven and earth to re-open their stores.  They'll risk life and limb to serve you.   A couple of days later, gasoline would probably be selling for $16.00 per gallon.  More and more businesses would want in on it.  Gasoline would drop to $12.00 per gallon.  And on and on, until there were enough people selling gasoline to get it down to the ridiculously high prices that NY/NJ residents were already willing to pay before the hurricane.  Competition doesn't cure everything, but it's way ahead of whatever solution is in 2nd place. 

But how much hassle would YOU go through to sell gasoline today, in NY/NJ for only 10% more than it sold for before the hurricane? 

You might just stay home and watch "Dancing With The Stars" and wait on someone else to clean up the mess.  (That's what's going on now, BTW.)   

Here's something from an old post I wrote about Russ Roberts' "The Price Of Everything".  The book deals with a Big Box store that was marking up generators and flashlights after an emergency, BTW. 

Do you every wonder why the shelves in our supermarkets are full? Ever wonder why countries afflicted with the blessings of communism had supermarket shelves that were mostly empty? Ever wonder why we don't have to wait in long lines for gasoline, or endure rationing like we did in the early 1970's? Ever wonder why the minimum wage in Cuba is somewhere near $14.00 (PER MONTH !!) ??


Do you want to know how to ensure that more people will die during a famine? Legislate artificially low prices. Want to keep people from delivering water to drought stricken areas? Put anti-gouging laws into place.

Do you ever wonder why we can simply go out and buy our basic necessities?

It's because our (somewhat) Free Market Economy allows prices to go up when there's a shortage, and decline when there's a glut. We don't have an idiotic Flashlight Czar (yet), setting flashlight prices all over the country based on hours of darkness, hurricanes, or electrical problems. People can charge whatever they want to for flashlights. Therefore, when you really, really need see in the dark, somebody out there is probably willing to sell you a flashlight.

So, according to Professor Roberts, not only was the Big Store doing the right thing economically when it doubled its prices after the hurricane, it was doing the right thing logically, socially, and morally.

Yeah, Chris Christie can put anti-gouging laws into place, and this will help guarantee that merchants won't be able to rip off people who want to purchase a generator.  It also guarantees that there won't be any generators on the shelves. 

Which store selling power generators would you want to shop in?  The one that has 'em, or the one that doesn't? 

Is it remotely possible that shortages are caused by price controls?

Don Boudreaux has read an article in the New York Holy Times, an article that speculates that maybe, perhaps, possibly, there is a potential theoretical smidgen of a chance that Bolivia's shortages are caused by price controls. You know, kinda like our current high minority unemployment rate is caused by price controls. Here's what Boudreaux wrote to the Times....

Regarding your report on the chronic shortages of consumer goods in Venezuela (“With Venezuelan Cupboards Bare, Some Blame Price Controls,” April 21): of course these shortages are caused by price controls. By preventing prices from telling the truth about underlying conditions of supply and demand, such controls spread economic lies. Producers and consumers are thus misled into acting destructively rather than productively.


Price controls, though, are only the most ham-fisted maneuver used by politicians to distort prices in order to mislead the public about market realities. Another favorite ploy is to condemn and threaten “speculators.” Consider Chavez himself. He irresponsibly increases the supply of the Venezuelan bolivar and then, when the inevitable inflation begins, combines overt price controls with a bellicose vow to punish what he sneeringly calls “bourgeoisie speculation.”

Such blame-shifting is very near a constant with politicians.

It’s worth noting that, although the President of the United States hasn’t the power of Generalisimo Chavez, Pres. Obama’s attacks on speculators are just as politically opportunistic and economically ignorant – and potentially as destructive – as are any such attacks issued by Latin American dictators.

Sincerely,

Donald J. Boudreaux
Professor of Economics
George Mason University
Fairfax, VA 22030

Ouch.  And his attempt at reducing the price of healthcare hasn't even kicked in yet. 

The Obamabanana poster came from The People's Cube.    The George Mason University coffee mug shwon below was a gift from Dr. Ralph. 

A Theoretical Question, Part 2

Here are my thoughts on The Theoretical Question in the previous post.... and if you want to see more comments, I cross-posted it on Reddit, where it has kept my hit counter whirring nicely.

Let me begin with a story from a George Mason University economics professor named Russell Roberts:

"After Hurricane Isabel hit Washington D.C. in September 2003, one of my students whose husband was a contractor told me how disgusted her husband had been with the high prices people were charging for generators. Surely a contractor would want a backup energy supply, I said. Surely he had paid the high price. No, she explained, he already had a backup and had been considering buying a second backup. But at double the regular price, he passed. Someone else got that generator and I got a richer understanding of higher prices."

That encounter with a student was the genesis of Roberts' latest book, "The Price of Everything". The book begins with a hurricane. One store leaves prices alone and sells out. The other store doubles prices, which automatically acts as a rationing mechanism, but there's a near riot at the checkout line. Some university students stage a protest a few weeks later, but then....well, I hope you'll read the book.

It's not the best-written book I've ever read, but when I finished it I immediately turned back to page one and plowed through it again.

Do you every wonder why the shelves in our supermarkets are full? Ever wonder why countries afflicted with the blessings of communism had supermarket shelves that were mostly empty? Ever wonder why we don't have to wait in long lines for gasoline, or endure rationing like we did in the early 1970's? Ever wonder why the minimum wage in Cuba is somewhere near $14.00 (PER MONTH !!) ??

Do you want to know how to ensure that more people will die during a famine? Legislate artificially low prices. Want to keep people from delivering water to drought stricken areas? Put anti-gouging laws into place.

Do you ever wonder why we can simply go out and buy our basic necessities?

It's because our (somewhat) Free Market Economy allows prices to go up when there's a shortage, and decline when there's a glut. We don't have an idiotic Flashlight Czar (yet), setting flashlight prices all over the country based on hours of darkness, hurricanes, or electrical problems. People can charge whatever they want to for flashlights. Therefore, when you really, really need see in the dark, somebody out there is probably willing to sell you a flashlight.

So, according to Professor Roberts, not only was the Big Store doing the right thing economically when it doubled its prices after the hurricane, it was doing the right thing logically, socially, and morally.

Once again, the book is called The Price of Everything: A Parable of Possibility and Prosperity, by Russell Roberts.

Professor Roberts also blogs at Cafe Hayek, which I wish was read daily by everyone eligible to vote.

A Theoretical Question

A hurricane hits the Gulf Coast. Supply chains are disrupted, and will likely remain that way for days.
The Home Depot store in the hardest-hit area doesn't raise its prices immediately before or after the hurricane. Their shelves are quickly emptied.
Let's say that another retailer called "Big Box", located next door to Home Depot, doubles The Price Of Everything in their store. They still have many of the items (like flashlights, batteries, diesel generators, etc.) that are in high demand after a hurricane. Big Box keeps the high prices in place until the replenishment system returns to normal.

People are outraged. Shortly after the storm, customers arrange a protest.

With which store should the customers be angry?

After you've had time to think about it, click here for more info on the origin of the question....