Recent lack of activity

For those of you who are somewhat regular readers, you may have noticed a significant decline in the frequency of my posts. Allow me to explain: thought my efforts of studying monopolies, I've encountered a point in which I am seeking to understand why it is a general perception among economists that monopolies are harmful to the consumer and the market in general, using mathematical, not theoretical, reasoning.

More specifically, I've spent over 20 hours researching the idea of the perfect market model, exploring its intricacies and questioning every assumption (why does the marginal revenue have to equal the marginal cost, why is the demand line flat in contrast to being a downward slope, why is the marginal cost curve also the supply curve, why would a firm want to enter if it only makes zero economic profit in the long term, how is it possible to make profit in the short term). Contrary to popular belief, my knowledge of actual economic functioning was severely limited, and, as such, it has taken me a great while (and a great deal of aid from the folks over at Yahoo! Answers) for me to begin to understand the neoclassical Austrian economic theory that seems to be permeating our society today.

That being said, I am hoping to be able to be finished sometime this week, so expect an abundant post focusing on the topic.

On a personal note to Lauren: I'll lend you the book as soon as I can; I really need it right now!

Antitrust: The Case for Repeal

I just received the long-awaited Antitrust: The Case for Repeal today in the mail. It's only about 112 pages long, so I'll be providing a detailed analysis of the works as soon as I am done. The book will also serve as to facilitate some of our discussions on here pertaining to capitalism, modern economic principles, and, of course, the theory/theories of antitrust and its role in the consumer, business, and industrial society.

Stay tuned!

St. Pete Times Editorial Response: Mexico City Abortion

After reading an article published by the St. Petersburg Times, expounding on the recent vote in Mexico City (a predominantly Roman Catholic region, as with the rest of Latin America) to legalize abortion in the first 12 weeks, this is the (brief) response that I sent to the editorial board:

A step in the right direction

Mexico City's decision to legalize abortion should be commended by the United States as well as the international community. Coming only a few days after the U.S. Supreme Court decision to uphold the Partial-Birth Abortion Ban Act, the ultimate test of individual freedom and autonomy will be when the case reaches the Supreme Court in Mexico. Let us hope that the Mexican government will embrace the principles of privacy, individual will, and protection against the collectivist tendencies that permeate through the mostly Catholic region.

I'll try to provide a more detailed analysis of the history of abortion constitutionality, both in United States and Latin America, as soon as I can.

[Update]

I received the following response in the comments section:

"That is also happening in many European countries that are also traditionally very conservative on such issues, it's a world wide trend, although in Europe it's more due to secularization than anything else."

Actually, from what it seems, in contrast to the major European nations, Mexico is fairly far behind in legalizing abortion, even to the most minimal extent.

In England, abortion has been available up to 24 weeks since 1967; in Denmark, it has been legal until the 12th week ever since 1973; in Italy, abortion though the 12th week has been legal since 1978 (was backed by a popular referendum in 1981); in Spain, though the regulations are substantially stringent, it has been legal to get abortion until the 12th week since 1985.

Either way look at this however, Mexico City should still be applauded for taking a step in the right (err, or is it left) direction.

Abortion Comment Answered

In response to my post focusing on the latest move of the U.S. Supreme Court to uphold the Partial-Birth Abortion Ban Act as constitutional, I received the following response from an anonymous commenter:

"just to clarify, from what I understand about this article, you're simply saying that the Supreme Court's desicion against abortion was made in order to keep them out of hot water by trying not to upset the majority of the U.S. population and was not influenced by the constitutionality... However, what happens when nothing about a topic is included in the constitution; how would they decide the outcome? right now, we are facing a new millineum, and it's accompanied by a new culture and overall new views on many different things, including the never ending arguement over what exactly is moral... The Supreme Court's interpretation of a subject like abortion obviously must change according to the time era, seeing as something that may seem unconstitutional a couple decades ago may seem constitutional now, and vica versa (like slavery)... And seeing as for the second time in a row the Supreme Court upheld its desicion regarding the banning of partial birth abortions (the first time being with different justices), it is obvious that they do not find it to be moral, but overall and most importantly, they do not find it to be constitutional..."

I'll go though this comment, point by point, offering my opinion and analysis of the issues that were raised and that need to be addressed.

"you're simply saying that the Supreme Court's desicion against abortion was made in order to keep them out of hot water by trying not to upset the majority of the U.S. population and was not influenced by the constitutionality"

Not at all; the premise of my argument lies in the principal that the role of the United States Supreme Court is not to interpret collective morality nor to uphold the will of the majority. The Framers, predominantly Madison and Jefferson, were very clear about the role of the judiciary in our constitutional republic. I was directly responding to Steve Kennedy, who contended that the ruling is justified as it has a support of the popular majority of this country.

"what happens when nothing about a topic is included in the constitution; how would they decide the outcome?"

The correct answer to this question would require several pages of discourse, so, let's focus on the issue of abortion, as that is our topic of discussion. Though the Framers certainly did not make any Constitutional provisions pertaining to abortion, the debate over abortion lies within the question of whether its prohibition would violate the citizens' right to privacy through the Due Process clause, enumerated in the 14th amendment, which is in the Constitution.

"right now, we are facing a new millineum, and it's accompanied by a new culture and overall new views on many different things, including the never ending arguement over what exactly is moral... The Supreme Court's interpretation of a subject like abortion obviously must change according to the time era..."

As the U.S. Supreme Court Justice George Southerland proclaimed, "A provision of the Constitution...does not mean one thing at one time and an entirely different thing at another time." Though constitutional perception by justices in cases as Plessy v. Ferguson surely reflected the views of the contemporary era, there is such a thing as an "incompetent judge." Am I stating that the current judiciary is incapable of carrying out their impartial duty of providing a check against the encroachment of the majority and the legislative/executive power? Perhaps so. By "incompetent," however, I mean one that does not utilize the process of textualism in interpreting constitutional law. In the words of Clint Bolick, "textualists start with the plain meaning of the text, but if it is ambiguous, they will consult the structure, purpose, and history of the provision." It seems to me that several of the current justices are endeavoring in what some call legal realism, essentially dictating laws from the bench. After all, how can it be justified to argue, as the majority of the court did, that "The Act’s failure to allow the banned procedure’s use where ” ‘necessary, in appropriate medical judgment, for preservation of the [mother’s] health,’ ” Ayotte v. Planned Parenthood of Northern New Eng., 546 U. S. 320, 327-328, does not have the effect of imposing an unconstitutional burden on the abortion right."?

"And seeing as for the second time in a row the Supreme Court upheld its desicion regarding the banning of partial birth abortions (the first time being with different justices), it is obvious that they do not find it to be moral, but overall and most importantly, they do not find it to be constitutional..."

I am a little bit curious as to which cases you're referring to. The only other case that specifically dealt with partial abortions and that included a different lineup of judges was in April of 2000 ( Stenberg vs. Carhart), when the U.S. Supreme Court struck down a Nebraskan law that prohibited the procedure.

Hopefully this will serve as a medium for facilitating further debate. Thanks for your input!

St. Pete Times Editorial Response: Abortion

On April 24th, 2007, Steve Kennedy from Safety Harbor made the following submission to the St. Petersburg Times:

In abortion ruling, our system worked

Let's see. Conservatives twice vote a president into office, and the majority rules.The president then appoints conservative judges to the U.S. Supreme Court, reflecting the views of the majority. The court's decision on the abortion issue happens to coincide with the views of those in the majority, and the majority's views are reinforced. It seems with this court, "moral concerns" are a consideration to the law where in recent previous courts they were not.

At this time, the majority of voters, men and women, are against abortion and outnumber those who are for it. It all started at the ballot box. So the country does not go backward just because you don't agree with the decision. It goes forward and our system of representation is maintained.

My response to the editorial board:

The role of the United States Supreme Court never was, isn't, and never should be to interpret cultural and contemporary morality. Furthermore, the judicial review was created to protect the rights of citizens against the very thing you seem to be advocating--popular will. As James Madison himself has quoted, "Wherever the real power in Government lies, there is the danger of oppression. In our Governments the real power lies in the majority of the Community, and the invasion of private rights is chiefly to be apprehended, not from acts of Government contrary to the sense of constituents, but from acts in Government is the mere instrument of the major number of its constituents."

As discussed by Clint Bollick, the Litigation Director at Institute for Justice, the Brown v. Board of Education decision "invalidated scores of laws reflecting passionately held social views, overturned well-established precedent, and cast America into upheaval." The United States of America is not, and should not be, for that matter, a pure democracy. It is a constitutional republic, one where oppression of the minority by the majority is checked and balanced by an impartial entity--the Supreme Court. The role of justices is not to interpret morality, it is to apply the constitutional criterion, one that not even a majority can overturn.

Future Revealed

I thought that I'd quickly run over as to which topics readers can expect to be covered in the next few weeks:

1. Capitalism & Judicial History (coming soon)
2. Affirmative action: judicial, rational, and practical failure.
3. Continuation of our antitrust series (first post concerned the definition of a monopoly)
4. Amtrak: A failure
5. Presidential candidate analysis

Though I am hoping to adhere to this outline, if you have any suggestions, feel free to leave a comment!

Monopolies: Definition Discourse

Because a great portion of my posts focus on the idea of monopolies in a free-market environment, perhaps it is time that we embark on a brief discourse of the issue. This will be the first of the many posts that will follow, providing a critical analysis of the idea of corporate efficiency and coerciveness.

First, as always, let us be clear on what a "monopoly" is. From my personal experience, it has been everything from "a business that can do anything it wants to" to "business that's the best in whatever business they do." For the purposes of objectivity, let us define monopoly as a single seller in a given field. Keep in mind that this definition does not take into account (1) how the monopoly came to be about, (2) the extent of powers and advantages that it has over its competitors, and (3) the venue for obtaining the advantages gained in point #2.

Rockefeller's Standard Oil refined 90% of America's oil in 1899--it was a monopoly. Though not adhering to the aforementioned definition, it can be persuasively argued that 90% did, indeed, constitute a monopolization of the market. Microsoft Corporation's operating system is said to run on 95% of the modern computer systems--as with Rockefeller, Microsoft is considered a monopoly in the modern business context. The United States Postal System, however, has exclusive rights to sell first and third class mail without any threat of private competition--it too is a monopoly, though many, especially the advocates of monopolies constituting the demons of modern society, certainly don't see it as so. Finally, Amtrak, the federally-owned railroad company that has never made a profit in its 32 year old history is certainly a monopoly.

Because of the diversity of businesses and corporations constituting as monopolies, we must assume an objective evaluation to determine whether the "monopoly" is "evil," or, as Nathaniel Branden, author of Question of Monopolies, published in the Intellectual Ammunition Department of The Objectivist Newsletter in June of 1062, put it, whether it has "exclusive control of a given field of production which is closed to and exempt from competition, so that those controlling the field are able to set arbitrary production policies and charge arbitrary pries, independent of the market, immune from the law of supply and demand." Theodore Roosevelt took a similar approach when he distinguished between "good trusts", or, the ones that helped the people, and "bad" trusts, the one that exploited the public (The Northern Securities Company was one of such trusts. It controlled Northern Pacific Railway, Great Northern Railway, Chicago, Burlington and Quincy Railroad and was subsequently dissolved).

Thus, let us look to Mr. Lawrence W. Reed, a scholar at the Mackinac Center for Public Policy. According to Reed, "When governments, by one method and to one degree or another, limit competition by means described above, the result is a coercive monopoly for producers who benefit from the limitation of competition." In contrast, the "efficiency" monopoly is one that gets its "high market share not because of any government grant of exclusive privilege, subsidy, special tax treatment, or the like, but because it simply does the best job."

Thus, we can conclude that a monopoly can be either (a) a coercive monopoly or (b) an efficiency monopoly. The USPS is a coercive monopoly--it has exclusive rights to sell and deliver 1st and 3rd class mail not because of its ability to do so at the lowest price, but because the United States government has granted exclusive privileges to the corporation, hampering private corporations from competing and ultimately lowering prices. As my analysis of the USPS found earlier on this blog indicates, because of the government benefits, USPS lacks accountability, is victim to arbitrary price shifts, and is a burden on the U.S. revenue. An efficient monopoly, in contrast, is one that has reached its dominant position on the market through its efficiency and ability to lower the means of production. Walmart is one such monopoly, it has achieved its market position because of its ability to provide the lowest prices, driving the competitors out of business.

Before moving onto our next article, covering (1) the kinds of benefits coercive monopolies are granted and (2) a general outline of the checks provided by free-market economy in impeding the growth of an abusive monopoly, it is crucial that we have a succinct understanding of what a "monopoly" truly means.

Until then, let me know if you have any questions!

Chinese Act: Analysis

While at the YLP (Youth Leadership of Pinellas program) retreat, my friend Andrew N. and I embarked on a debate of whether it is in America's best national interest to impose a 27% tariff on all Chinese products. The China Act of (formally known as the Currency Harmonization Initiative through Neutralizing Action Act of 2005; title HR 321 for reference purposes), was reintroduced in the United States House of Representatives on January 9th, 2007, contending that the U.S. Secretary of Treasury must ensure that "additional tariffs be imposed on products of that country on the basis of the rate of manipulation by that country."

Present data indicates that 8.3 yuan is equal to one U.S. dollar, an exchange rate that has existed for decade, leading "some U.S. lawmakers and manufacturers [to] argue that [the practice] vastly undervalues the currency, [letting ]Chinese companies undercut U.S. rivals. " The American business community and protectionist supporters are additionally concerned about the subsidies that the Chinese government provides to Chinese corporations. According to Franklin L. Lavin, Undersecretary of Commerce for International Trade, the practice "gives Chinese exporters an unfair advantage in the U.S. market."

The idea of any sort of government involvement in corporate regulation deserves but most severe condemnation. In that aspect, I myself am critical of the Chinese government subsidizing domestic corporations. In retrospect, however, the system only corroborates an economic argument that shall (hopefully) one day permeate the international community: harmful and coercive monopolies can only be formed through government intervention. At the same time, however, U.S. doesn't have exactly a clean record either. As argued by Hua Min, head of the World Economy Research Institute at Fudan University in Shanghai, "United States just a few years ago was found to be giving illegal tax rebates to companies such as Boeing and Microsoft."

With subsidies aside, let us look to the resulting implications of a successfully passage of the Chinese Act. Before doing so, however, we need to be clear on the intent of of the legislation's author, Representative Phil English. Rather than giving our own corporations a competitive edge in the market, English argues that "It puts pressure on them [China] to move and it comes at a time where they seem to be digging in their heels." Essentially, the policy is meant to temporarily symbolic, rather than imposing any sort of a long-term protectionist mindset on the global economy. That is, until the Chinese reevaluate the alleged undervalue of their currency. With this information in mind, let us now move onto an analysis of the economic impacts of the legislation.

According to Myron Brilliant, vice president for Asia at the U.S. Chamber of Commerce, "Tariffs being imposed on foreign goods does negatively impact consumers; it limits their choices and raises their prices." The idea of tariffs imposing negative economic externalities, including those cited by Brilliant, is effectively explained in one of my other entries specifically focusing on the topic of tariffs (Import tariffs: Decline of reason). Because several of the stores that American citizens are accustomed to (Wal-Mart, Home Depot, and Best Buy come to mind), it is likely that we'll see a decline in the general availability of low-cost goods, as even now, individuals as Gao Junjie, a manager at the Shandong Chenming Paper Holdings, are condemning Washington. Because the 27% tax increase will act as a deterrent to Chinese products, we'll begin to see a decline in the general availability of low-cost Chinese goods.

On the other hand, however, in the words of Alan Greenspan, the Federal Reserve Chairman, "The broad tariff on Chinese goods that has recently been proposed, should it be implemented, would significantly lower U.S. imports from China but would comparably raise U.S. imports from other low-cost sources of supply." Because the demand for low-cost products would not decrease, we'd be faced with the reality of having to purchase products from other low-cost areas, including Taiwan and Indonesia. It seems then, that the the argument of "dumping" foreign, low-cost products into the American domestic market fails dismally at this level.

What then, one might ask, should be done to rectify this global, economic strife?

First, the Chinese government needs to stop arguing that the subsidies it provides to private corporations are "temporary assistance that the government provides state-owned companies to ease their transition toward capitalism." State-based assistance to private economy is a perversion of any ideal even remotely associated with capitalism, as it is only through government intervention in the economy that coercive monopolies can be created.

Second, arguably, the United States is right in asserting that the yuan should not be regulated by the Chinese government. Because several economic analysts have argued that the price of yuan is severely undervalued in contrast to its real value in a free-market economy, it is clear that the supply and demand business model needs to be applied in this situation. In fact, because the yuan is so undervalued, the Chinese government, who purchases the great majority of our treasury bonds, is able to increase our deficit through reduced interest rates.

The Chinese economic structure, however, is largely dependent on exports, rather than domestic demand. Because of this reality, the process of instituting tariffs as an economic deterrent is alarming, as it would have a detrimental impact on the Chinese economy. And while this may, in retrospect, achieve the the protectionist goals, the use of tariffs is a risk that may ultimately negatively effect the consumers in the short term, and would defeat the purpose of the legislation (to call for "fair" competition practices) in the long term.

So how can the U.S. achieve their goals without violating the very same principles that we're so adamantly fighting for? We have several options before us:

1. The U.S. needs to work towards deficit reduction by curbing finances to fruitless efforts (i.e. the Iraq war)
2. The U.S. ought to facilitate diplomatic debate as to encourage China to pursue a gradual elimination of its state regulation of both the foreign and domestic economic practices. The recent passage of a comprehensive legislation increasing property rights of foreign investors is a clear step toward this direction.
3. As argued by Fred Bergsten, a Director for the Institute for International Economics, "the first step...is that we go to the (International Monetary Fund), which has very clear rules against currency manipulation. If that itself doesn't work, then I would go to the World Trade Organization and file a case that China is violating two or three different obligations that are there, which would require them to move their exchange rate and, if not, face trade retaliation." I agree with Bergsten in that international pressure may be a tangible option in forcing China to migrate to the free market model. As China is currently one of the top 5 nations with the highest voting power in IMF, political deterrent seems a more viable alternative to tariffs (e.g. decreasing its voting percentage.) Indisputably, however, an all comprehensive tariff should not be discounted off the table. Rather, let's leave it as last line of defense.
   

References:

http://news.com.com/On+challenging+China+with+a+tariff/2008-1082_3-5746354.html
http://www.imf.org/external/np/sec/memdir/members.htm#total
http://www.appletreeblog.com/?p=1647
http://www.foxnews.com/story/0,2933,161160,00.html
http://www.washingtonpost.com/wp-dyn/content/article/2007/04/02/AR2007040201496.html
http://www.chinadaily.com.cn/english/doc/2005-06/24/content_454322.htm

Ethical Obama

An interesting article outlining Barrack Obama and the "ethical mishaps" of his campaign...

Virginia Tech Shootings

I give my sincere and genuine condolences to the victims and their families of today's shooting at Virginia Tech.

More information can be found here.

St. Pete Times Editorial Response

I just finished reading this editorial on the St. Pete Times web page:

Where's the racism?

You got to be kidding me. State Rep. Don Brown's e-mail was racist? Since when is telling the truth racism? (The e-mail said, "Don't forget to pay your taxes - 12-million illegal aliens are depending on you!")

Illegal immigrants in this country are a drain on our social system. Many work under the table and pay no taxes to begin with. Of those who file (using illegally obtained Social Security numbers) many often pay virtually nothing anyway.

Their kids get free education. They get free medical care in our emergency rooms. Yet they broke dozens of our laws to be here. So explain to me again how that e-mail could have been racist?

Vilmar Tavares, Spring Hill

My response that I sent to the editorial board:

In his letter, Vilmar Tavares from Spring Hill contended that illegal immigrants in this country are a drain on our social system. I beg to differ.

According to the National Research Council of the National Academy of Sciences (NRC), "immigrants indirectly raise the incomes of U.S.-born workers by at least $10 billion each year just by paying taxes and increasing the general productivity of the economy." Furthermore, a "typical immigrant family pays about $80,000 more in taxes than all of its members together will ever receive in local, state, and federal benefits."

Because immigrants are still human beings, they have basic needs. These needs are reflected in shopping for food, clothing, and other products (another reason to institute a sales tax, as to increase the potential revenue.)

Furthermore, let us remember that under Clinton's Personal Responsibility and Work Opportunity and Reconciliation Act, it is much more difficult to actually receive welfare benefits.

Finally, "Yet they broke dozens of our laws to be here" can be applied to George Washington, Thomas Jefferson, John Adams, and James Madison.

Yes, I do agree that this nation needs a comprehensive immigration reform, as several hospitals, especially those in California, have been closed because of immigration influx. It is crucial, however, that we stop perpetuating the negative stigma surrounding the immigrants in this nation.

Great Debate 2007

On Tuesday, April 24th, my friend Derrick and I will be competing in the Great Debate, an annual debate competition sponsored by the Clearwater Bar Association and held at the Pinellas County Court House in Clearwater. The panel usually consists of three lawyers, with the option of advancing into a final round, to be held on Monday, April 30th.

The resolution for this year is as follows:

RESOLVED: The Florida Department of Education's mandate that school administrators should actively search information posted by students on MySpace, Facebook, and other social networking sites on the Internet for use as evidence in students' disciplinary proceedings is an impermissible invasion of privacy.

I've already written both the affirmative and the negative case (teams are assigned sides once we arrive), though they will not be available here until after the 30th (that is, assuming we advance into the final round.) In the meantime, I am looking for some opinions on the issue from the readers.

Import Tariffs: Decline of Reason

The use of economic tariffs has been widely prevalent in the United States history. With the Hamilton Tariff (named after the first Secretary of Treasury under the new U.S. Constitution, Alexander Hamilton) becoming the first tariff legislation to be passed by the U.S. Congress, raising tariff rates between 5% and 10% relative to the appropriate product, the passage would create a precedent for what would become perhaps the greatest injustice in the realm of fundamental economic principles. Today, we’ll examine the common arguments of those supporting economic tariffs, with a subsequent rebuttal of each individual argument.

Let us begin by defining “import tariffs.”

According to the American Heritage Dictionary, tariff is “A list or system of duties imposed by a government on imported or exported goods.”

Essentially, when a product to be sold on a domestic market (in the United States, for example), is actually being manufactured in a foreign country (China, Taiwan, Puerto Rico, etc.), the domestic country would levy a tax on the import, effectively raising the price of the imported product. Why would anyone do this? The common arguments are:

1. Because foreign corporations can usually take advantage of a cheap labor force (the stereotypical “Mexican” worker, for example), it is unfair to the domestic corporations that have to compete with these businesses.

2. If foreign corporations were to enter our markets, the unemployment rate would skyrocket, as all of the domestic corporations would be driven out of business (given that the foreign corporations would have lower prices).

3. Import tariffs are a significant source of national revenue, providing our government with the resources needed to appropriately provide for basic social services as education, transportation, and mail delivery.

4. By protecting our domestic economy, we seek to create a sense of national unity.

5. In a time of war, tariffs can be used as a retaliation method against another country (referred to as the trade war).

Because a time of war creates unforeseen circumstances and fundamental changes in the national economic order (institution of draft, ensuring citizen safety, increased manufacture of weapons and transportation utilities for the military, etc.), let us focus on the use of tariffs in a time of relative peace. Thus, cross off argument #5 off the list.

Now that we know what tariff imports are and why anyone would want to have them, let us consider each of the individual arguments suggested by protectionist advocates.

Unemployment rate would increase

Many tariff proponents argue that the failure to institute tariffs would have negative implications on our domestic unemployment rates. The core idea of this logic seems sound at its surface;

If a foreign corporation that can produce goods more cheaply comes into the United States, the domestic corporation that produces the same product, but sells it at a higher price, given that it lacks the advantages of its foreign competitor, would eventually start to lose revenue, resulting in a loss of jobs.

Sounds pretty reasonable, no? Unfortunately, it truly is only on the surface that this theory has any valid standing in the sphere of economic validity.

Let’s consider the following example. In the year 2020, the two most sought-after products by the U.S. consumers are TVs and computers. Because the federal government becomes alarmed at the prospect of those in the TV industry losing their job to a foreign competitor, however, Congress levies an import tariff on all Samsung and Sony TVs, raising their price by $300.

Because the price went up, consumers are faced with two choices: Either they can keep buying the same number of TVs, but, because of its higher price (tariffs = limited competition = higher prices; economics 101), he now cannot afford to buy a new computer OR they can decide to invest in the new computer system, but, correlatively, not buy a TV. Either way we look at this, someone will be losing their job.

How does this work in practice? Consider the following example. In the year 2000, President George W. Bush raised tariffs on imported steel goods between 8 and 30 percent (a politically-motivated reason, though the argument was that this will protect the steel industry and the domestic workers). According to a report issued by the Mackinac Center for Public Policy, “For every job saved by this measure, 8 will be lost.”

At first, one would ask: how could something like this happen?

Well, according to Adam Romney, a junior at Emory University, the tariffs caused U.S. grain exports to decrease because "high tariffs scare off freighters from which they normally unload 42 percent of U.S. steel imports. Once emptied, those same boats usually haul away 62 percent of U.S. grain exports. With fewer ships available to be loaded, grain overflows from silos and sits in storage on barges." The argument is simple: the same foreign tankers that bring us steel then take the agricultural products we produce. The problem is….higher import prices = fewer ships come to pick up our own products.

Again, remember: For every job saved by this measure, 8 will be lost. It is much easier for a newspaper headline to say: “Hundreds lose jobs because of foreign competition moving into the steel industry” than saying “thousands lose jobs because of increased prices in a given scope of domestic products.”

Tariffs can greatly improve domestic economy

Because the federal government is now collecting taxes for foreign imports, it can be easily argued that the domestic economy would skyrocket. Experience, however, shows otherwise:

As contended by the National Center For Policy Analysis, the “1994 tariffs cost the U.S. economy 32.3 billion dollars or $170,000 for every job saved.” Because of the 2000 steel imports, the U.S. national income was reduced by between 0.5 to 1.4 billion dollars. In 1984 U.S. consumers paid $42,000 annually for each textile job that was preserved by import quotas, a sum that greatly exceeded the average earnings of a textile worker.

Though a government is collecting taxes, we need to remember that tariffs result in price increase of DOMESTIC products, leading to decreased purchase trends of other sought-after goods (as in our TVs and computer example).

Tariffs are a source of national unity

Perhaps the weakest argument put forth by protectionist fundamentalists. In 1828, the U.S. Congress passed the Tariff of 1828, otherwise known as the Tariff of Abominations. Created with the purpose of protecting northern American industries from the competing European companies, the passage received wide criticism from John C. Calhoun, later to become the United States President. Because the tariff increased price of goods produced by southern corporations, in conjunction with making it more difficult to obtain revenue from the sale of raw materials, Calhoun published the infamous South Carolina Exposition and Protest. Four years later, in 1832, in what became known as the Nullification Crisis, South Carolina declared that the tariff is unconstitutional and will cease to follow it.

Many modern scholars argue that this was one of the several factors leading to the disarray that eventually erupted into one of the bloodiest conflicts in the United States history: the Civil War.

Now, maybe it’s just me, but the death of 620,000 soldiers really just doesn’t convey the whole idea of “national unity” for me.

It is unfair to the domestic corporations

The idea of “fairness” is irrelevant in this discussion. The principles of a free-market competition are as follows: Companies compete for consumers. To do this, they offer discounts, special offers, and ultimately lower prices. Whoever can do this the most efficiently gets the most consumers, the most profit, and can thus stay in business. The consumers benefit because of the lower prices and those who can’t keep up go out of business. Saying that it is “unfair” to the domestic corporations goes along the same line of reasoning as saying that it is unfair for professional babysitting services that charge $50 an hour to allow teenagers who charge $20 an hour to babysit.

If a domestic corporation is put of business because of competition, this is an inevitable, and a healthy result of the free-market economy. Plus, the idea of lower prices for consumers certainly does not seem “unfair” to me.

Conclusion

So let’s see. We’ve proved that tariffs do not, in fact, provide valuable revenue to our federal government, do not protect ‘domestic workers” (and even so, at the price of losing jobs in other fields combined with costs ranging into hundreds of thousands of dollars needed to save them), oftentimes result in civil disarray, not unity, and certainly do not constitute “unfair” to domestic corporations. In fact, they effectively propagate the one and only economic system worth of any serious consideration: capitalism.

Reference:

http://economics.about.com/cs/taxpolicy/a/tariffs.htm

Drawing the line on where we stand: Analysis

As we look forward to the April issue of the Palmetto & Pine newspaper, perhaps we ought to take a little time to analyze, assess, and critique the March-issue content. More specifically, the editorial "Drawing the line on where we stand," published by Amy Ch. (full name omitted due to privacy concerns)

The format of this analysis is simple. I'll list and embolden a quote from the article, with my own analysis following.

"As individuals' morals change, so do the moral values shared among a culture or other community."
The idea of individual morality is referred to as moral relativism/subjectivism. In its core is the idea of morality being regional (i.e. one cannot make a global classification of something as right and wrong, rather, "right" and "wrong" are relative to the society/culture that we're discussing), in contrast to constituting universal. Proponents of this theory often point to the wide discrepancy among what is considered socially-appropriate behavior in a multitude of nations within our global community. Surely, civic expectations in Saudi Arabia are different than those of the United States. While the United States citizens bask in the glory of our First Amendment, Chinese citizens are seldom awarded the same level of constitutional protections.

Indeed, the idea of moral relativism has permeated throughout our society, causing an alarming up stir in the world community. This article is a clear corroboration of what I am talking about. Allow me to quote:

"Members of Congress have taken the step of criticizing various IT companies for their international policies. This includes Google and Microsoft, for what they call 'bowing to Beijing' and 'putting profits before American principles of free speech'."

The article is a reference to American companies and corporations as Google, Microsoft, and Yahoo entering the Chinese marketplace, which significantly curbs what many Americans would consider inalienable rights. Keyword searches as "freedom" and "revolution," are filtered, in the people's own interest of course, as argued by the Chinese government.

Critics of the theory, on the other hand, effectively argue and urge for an acceptance for a global code of ethics and rights interpretations. In other words, regardless of whether you're in the United States or a warring tribal region in the Africa Union, killing is a moral violation, independent of its social acceptance. Indisputably, this has and still does cause conflict, especially within regions that continue to allege that the rights to "life, liberty, and the pursuit of happiness" are purely western innovations that cannot be forced onto other nations. It is ironic, however, that the very same nations that contend such contentions are the very same ones accused of mass genocide against their own citizens. (Sudan comes to mind) Oxymoron, anyone?

Going back to the article, Amy seems to be a moral subjectivist. Nothing wrong with that, though it seems as if she is under the assumption that morals change. A key distinction needs to be made: Do the morals change or does our perception of what morals really are change? In fact, the editorial subtitle is the perfect example of what I am trying to convey:

"America needs to define morals and not waver when it comes down to it."

The idea of "defining morals" seems absurd to me. It is the same excuse that countries such as Saudi Arabia, Sudan, and even the Third Reich have used and still use to endorse systematic elimination of the nation's own citizens. America cannot define morals as it sees fit, just as Sudan cannot do so.

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"...the American people need to define their morals and create a public opinion that can be tolerated by all who live here. A free country means the right to choose to do right of wrong...and to create individualistic principles to live by, opinions and preferences."
So, let me get this straight. We're supposed to be a nation that wants to promote "individualistic principles," but yet we need to "define morals and create a public opinion"? Since when has public opinion been associated with morality? In the early 1800s, the public opinion was that slavery was a benign institution. In the early 1900s, the general public consensus was that Chinese immigrants should be barred from crossing the U.S. borders.

A key and fundamental argument that Amy is failing to address is that a collective public opinion does not justify the morality of an action. The "American people" do not have the right to define wanton morals at their own whim. The plethora of the Gallup and USA polling surveys are useless in this debate: we need to be looking at the moral implications of homosexual marriages, not determine our policy based on consensus.

In conclusion, the message that the editorial sends across is questionable at its best. First, we're urged to embrace our democratic principles, and then, a paragraph later, we somehow have a duty to "define morals." Is it even possible to define morals? Does majority consensus justify morality? The article fails to address either inquiry.

Palmetto & Pine: USPS Editorial

The following is an editorial that I've just sent to the Palmetto & Pine staff for review. Hopefully it'll be appearing in the last issue, to be published near the of this month. Criticism is welcome, as always!

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In the name of public good disaster

Imagine a business that doesn’t have to pay for its vehicle registrations, does not need to apply for building permits, does not have to adhere to zoning regulations, can purchase fuel tax exempts, has the power of eminent domain (the ability to take private land and convert it for “public” use), and is immune from paying parking tickets for the company vehicles. Despite these benefits, however, in the year 2000, it lost over $200 million. A year later, it was $1.7 billion, and in 2002, it was $676 million. It does not take a genius to figure out that such a business would not last long in a free-market society. Let us further imagine, however, that it is, in fact, illegal for the company to declare bankruptcy.

At first, this is a seemingly-absurd scenario. After all, how in the world can a business just gain the power to not apply for building permits and to not adhere to local zoning regulations? And even more importantly, you can’t just say a business can’t go bankrupt, can you? The truth is, the United States federal government certainly seems to think that you can. In fact, the “business” described above is none other than the USPS, or, more commonly known, the post office. Yup, that’s right. The post office, a government-based monopoly, has all of the aforementioned benefits. It has a granted monopoly (meaning nobody, even those who could do it at cheaper prices, can enter into competition) over its first-class letters (basically everything except over-night deliveries and parcels). And yet, according to the United States Code, “no small post office shall be closed solely for operating at a deficit.” In a nutshell, the American taxpayers are paying for a business with absolutely no accountability (If FedEx doesn’t get you the letter, it will go out of business. If USPS doesn’t, well…it’s illegal for it to go bankrupt) and one that actually operates at a deficit. And you thought that the Iraq war was the only source of our $8 trillion debt?

The principles of a free-market society are simple. Companies compete for consumers. To do this, they offer discounts, special offers, and ultimately lower prices. Whoever can do this the most efficiently gets the most consumers, the most profit, and can thus stay in business. The consumers benefit because of the lower prices and those who can’t keep up go out of business. In 1844, Lysander Spooner founded the American Letter Mail Company to directly compete with the U.S. Postal System. You’d figure, competition = lower prices for consumers, right? Well, you’d be right, except the federal government sued Spooner to the point that the legal and court fees hampered his ability to actually go ahead and keep the business afloat. Seven years into the lawsuit (originally, the government was enraged at the very idea that a private company would even consider delivering mail, and thus filed a lawsuit against Spooner), in 1851, Congress made competition with the USPS and charging lower prices illegal.

What is the solution to this historically-permeating problem? Answer: hand the mail business over to private companies. If we follow the basic principles of economics, the competition that will ensue will result in lower prices (helping the consumers) and will provide a new degree of accountability (if the companies are “evil,” as many would argue, they’ll quickly go out of business if the people don’t trust them).

So much for the idea of government regulation of the economy being in the best interest of the public good.