http://www.cbc.ca/news/canada/story/2012/03/27/federal-budget-anxiety.html
A Good start...
Wednesday, March 28, 2012
Friday, March 16, 2012
The NL Fishery
I can't say I'm an expert in the fishery, but I see a lot of problems. Most are based on economic fallacies. First of all, there are all kinds of government regulation. One regulation ensures that the only people catching fish are so-called owner-operators. The logic is that this allows everyone to have a piece of the action and doesn't allow a large corporation to come in and get a "bigger piece of the pie". Problem is individual fishermen may not be as efficient as a large organization. Everyone pays for inefficiency, as prices go way up because of it. In a free market, what should happen is the more efficient processes ought to be used. This will increase profit, which will attract new investment. The new investment will attempt to undercut the price to share in the profit. This battle to offer the lowest price in order to gain more market share results in lower prices to consumers.
One of the big fallacies is to believe that if someone loses a job, they are permanently unemployed. But what ought to happen is that some people are laid off, but they move into other areas of the economy. So before it might have taken 1000 fisherman to meet the quotas, but now it takes only 500. Instead of seeing this as 500 people becoming unemployed, it's better to see them as transitioning into other areas of the economy. But where will they go?
Back to the consumer. Because the price of fish has dropped, consumers are saving money. Imagine it used to cost $9 a pound for fish, but now it costs $5 per pound and imagine the average Newfoundlander buys 20 pounds a year. That's a savings of $80 per year per Newfoundlander. They can now spend this money on other things. Maybe more visits to the restaurant, or on hockey games, or downtown, etc. The unemployed people will move in to fill those roles.
Why is this better? Quite simply, in the first example, with government regulation, there are 1000 people working in the fishery, and the average Newfoundlander's money has a certain value. By increasing the efficiency of the fishery, the average Newfoundlander's life improves because he can afford things he couldn't before, with the money he saves on buying fish. If nothing changes, the Newfoundlander remains the same, but if the free market is allowed to operate, the average Newfoundlander has more money in his pocket to spend and his quality of life increases.
The free market would work like this for every area. So many things we commonly buy are subject to tariffs, taxes, subsidies, price control, and quotas. This makes everyone poorer while helping out a few people here or there. Some countries dropped their heavy regulation of milk output. This resulted in milk that cost half as much for the same quality. If a person buys a carton of milk each week and the price goes from $4 to $2, that person will save $100 per year. I'm just giving individual products, but if this happened for all products and services, prices would continue to drop and people could use their productive output for better purposes.
One of the big fallacies is to believe that if someone loses a job, they are permanently unemployed. But what ought to happen is that some people are laid off, but they move into other areas of the economy. So before it might have taken 1000 fisherman to meet the quotas, but now it takes only 500. Instead of seeing this as 500 people becoming unemployed, it's better to see them as transitioning into other areas of the economy. But where will they go?
Back to the consumer. Because the price of fish has dropped, consumers are saving money. Imagine it used to cost $9 a pound for fish, but now it costs $5 per pound and imagine the average Newfoundlander buys 20 pounds a year. That's a savings of $80 per year per Newfoundlander. They can now spend this money on other things. Maybe more visits to the restaurant, or on hockey games, or downtown, etc. The unemployed people will move in to fill those roles.
Why is this better? Quite simply, in the first example, with government regulation, there are 1000 people working in the fishery, and the average Newfoundlander's money has a certain value. By increasing the efficiency of the fishery, the average Newfoundlander's life improves because he can afford things he couldn't before, with the money he saves on buying fish. If nothing changes, the Newfoundlander remains the same, but if the free market is allowed to operate, the average Newfoundlander has more money in his pocket to spend and his quality of life increases.
The free market would work like this for every area. So many things we commonly buy are subject to tariffs, taxes, subsidies, price control, and quotas. This makes everyone poorer while helping out a few people here or there. Some countries dropped their heavy regulation of milk output. This resulted in milk that cost half as much for the same quality. If a person buys a carton of milk each week and the price goes from $4 to $2, that person will save $100 per year. I'm just giving individual products, but if this happened for all products and services, prices would continue to drop and people could use their productive output for better purposes.
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