Typical...

How about actually being a business person??

 

Thought of the Day

Scenario 1: After spending several years as a volunteer in very poor areas of former Soviet countries, a dentist is struck at how many do not have access to toothpaste because it is too expensive and because people are not aware of its benefits. Out of compassion, he starts a company to produce and sell toothpaste for a low price. Because of this, there is a huge decrease in the incidence of cavities in these countries. He also advertises his product often to promote the use of toothpaste and almost everyone becomes a customer.

Scenario 2: A very greedy, evil man decides he wants to become rich. He sees an opportunity in the market. In the former Soviet Union, he sees very few people using toothpaste. He decides to manufacture and sell toothpaste, but because there is some competition, he offers the lowest price to maximize market share and sales. He often thinks to himself how much he hates the people in the country in general. To get the seal of approval from the Dentistry association, he meets all the safety standards.

In both scenarios, the price of the toothpaste, the number of customers, and the advertisements are identical. In effect, both produce the same results. The population is just as well off in both cases. This is why capitalism is a good system. It does not depend on the morality or goodness of the people involved. In scenario 2, if the entrepreneur produced low-quality toothpaste or harmful toothpaste, he would not get the seal of approval. If the price was too high, he wouldn’t get customers. Capitalism means all people must provide for others. Unfortunately most people do not see this. They say to have good economics, people must be morally good. This is only true of authoritarian regimes. Another common criticism of businesspeople is they are “greedy”. But again, as the example above shows, this is irrelevant. That’s why capitalism is superior to other systems.

Sometimes I wish I was a Liberal!

As a libertarian, we have to give tough answers to tough questions. You realize that 99% of the people you talk to are not on the same wavelength and will summarily dismiss your ideas. Explanations cannot be given in quick sound bites, and even a well thought-out response is routinely accused of being heartless or unworkable. You are accepted by neither conservatives nor liberals. It’s a true uphill battle.

On the other hand, liberals have easy answers. The solution to any given problem lies in simply restating a question as an answer. It’s like a child talking to Santa Claus. He can just ask for whatever he wants. Any questions as to how it happens is answered with “magic”. The kid is satisfied. Asking a libertarian is more like a child asking a parent for something. The parent reminds the child of trade-offs, expenses, limits. The child might be asked to sacrifice, and sometimes after some calculation the child decides the sacrifice is too much.

The “magic” for liberals is the government. The government in the liberal mind is similar to Santa. There are no trade-offs, no expenses, nothing to consider except for the fact that you want something. For example:

Problem: People want education, education is too expensive.

Solution: Government should provide free education because education is a right.

Problem: Healthcare is really terrible. Wait times are extremely long, there are too few doctors, drugs are too expensive, etc.

Solution: Hire more doctors, spend more money.

Problem: Parents find daycare expensive

Solution: Government will pay for it instead!

Problem: I have a pet project that no one wants to pay for.

Solution: We’ll tax people and give you some of the money!

Problem: We want 35 hour workweeks, 5 weeks vacation, a living wage, and plenty of other perks!

Solution: Government will make those all mandatory!

The list goes on and on and you can surely imagine thousands of similar circumstances. It’s an easy Problem-Solution way of thinking. The problem with this thinking is it’s not real. It assumes an omnipotent government that creates laws of the universe, rather than seeing the government as simply one factor in an overall set of factors which can have either positive or negative influences. Trade-offs are rarely considered, and several fallacies are employed, especially the seen vs. the unseen fallacy.

Liberals have solutions which can be spray-painted on placards and chanted at a rally. A libertarian enjoys no such luxury. Going back to the Santa Claus analogy, liberals sit on Santa’s lap and ask for all the stuff they want and Santa, a god-like figure, simply grants them. The libertarian attempts to explain to these children that although what they want *sounds*good, there are other factors they must consider. A person asks for a puppy and the liberal simply says “Sure!” A person asks a libertarian and the response is more like “Well, you must walk the dog every day, you must feed him, clean him, take care of him. You can’t always go on vacation, and you must pay all the expenses. Is it still worth it?” Which one do you think fits on a placard.

Liberals have bought into the idea that far from being a necessary evil, the government is the main actor in an economy. Businesses are pesky toys of the rich, but serve little utility. All good emanates from the government. All action of consequence is a government action. In Newfoundland, this is the dominate view. On open line radio shows, almost invariably the caller will present a problem with the inevitable solution that the government must do something. The absolute dependence on the government is sometimes so shocking it borders on comical, if not sad.

One person wrote into a newspaper about her brother who recently took his own life. After admitting that she thought about contacting him to see how he was, she decided against it. But who did she end up blaming? The government of course. It was the government’s fault there weren’t more people looking after veterans.

This attitude is extremely common. For instance, instead of bemoaning how bad of a son or daughter they are for not providing for their elderly parent, people will get all up in arms about how the government doesn’t have enough retirement homes. Instead of working harder to make more money so one spouse can stay at home, citizens complain there are not enough daycares or daycare employees. This whole attitude removes personal responsibility and thrusts it upon a nameless, faceless entity and is very damaging to society.

I know libertarianism is right, but sometimes it would just be simpler to have easy answers like liberals.

economics vs. freedom

Some people argue in favor of coercion on the basis that it is effective. But that's an immoral an untenable position. I don't really have a whole lot to say here. But we must first understand human rights. Freedom is one such right. So to say we will arbitrarily restrict someone's freedom because that's "better for the economy" is placing expediency above morality. Then humans are nothing more than cogs in the wheel.

You do not have the right to anyone else's money except your own. Stealing it is immoral. That should be a pretty basic fact.

Are Changing Tables in Restaurants a Human Right Now?

Yes, any whim a person has should be turned into a law, enforced by police and military. This is the modern-day thinking process. You want something, demand a law that makes it happen. Of course, there can be no negative consequences to such laws! What stories like this should say instead are: “There should be a law making it mandatory for restaurants to have a changing room for children, even if that means the price of a meal in large places will increase by an average of 10% and the price in a small restaurant will go up by 20% to cover this new cost. I’m okay with reducing millions of people’s quality of life to have my whim of a change room realized. Also, I refuse to entertain the idea of being limited to choosing restaurants which cater to my specific needs of which there are many. Instead, all places, whether they are targeting families or not, must follow my orders!”

At least this would be honest. But instead of this, those demanding such things imagine their orders will have nothing but beneficial results. It would be as logical as saying “I demand that every restaurant I enter gives me a free appetizer! This is a basic human right!” and then expecting prices not to increase or there to be any negative side effects.

Would places which clearly do not cater to children be required to follow this law? What about downtown restaurants which are open late at night for downtown people? What about tiny small-business restaurants with a single small bathroom? Are they required to add a huge extension onto the tiny restaurant that will accommodate a change area?

One response to such questions is that the legislators should take those things into consideration or make precise laws that will meet the needs of the citizens or some other such pie-in-the-sky declarations. As we all know however, laws are almost never precise. They paint broad brushes.

The proper response to such a request is for businesses to provide changing tables in order to attract customers. Similar to this is many restaurants already offer free meals to kids if accompanied by parents. And many currently offer changing tables and many other services.

Another thing concerned people can do is form groups which ask for such things and say they will boycott anyone who fails to comply. That’s fine. Everything is voluntary. But to force a business to take on an expense which they do not believe is in their or their customers’ best interest is simply authoritarianism.

 

 

 

 

 

 

 

Evil vs. Good Companies

Some people seem to think of everything in terms of good vs. evil when it comes to companies.

The reasoning goes something like this: some companies are evil and therefore mistreat employees, pay them too little, provide poor working conditions, etc. while other companies are run by morally upright owners and managers who genuinely care for their employees and treat them well. Our goal is to promote the idea of morally good managers, whether this means by protesting or by legislation.

Most Christians I talk to see this as the most effective way to improve the lot of the average worker – activism or possibly legislation. But usually the argument breaks down when specifics are introduced. In reality, the morality of the owners and managers has little, if anything, to do with working conditions.

Ultimately this goes back to the fallacy that owners have all the power: they arbitrarily decide salaries, benefits, hours, etc. and the employee is at his or her whim. The only hope the poor employee has to improve his or her situation is through unionism and government involvement.

Intuitively, Christians usually recognize the dangers of unionism and government involvement, but only in the extreme. Nearly none is willing to go so far as to advocate a truly free market. Ironically while they bash socialism, their underlying philosophy is, in fact, based on it. At the same time they barely understand free market theories, much less advocate them.

Because of this, I’ll often hear some sort of middle of the road compromise on any particular economic issue. Something like “I know that productivity is a factor in people’s salary, but I still think there should be basic laws about minimum wage, working conditions, vacation, pension, etc.”

How to Respond:

Number one: It’s very difficult to pull people away from their desire to be an authority. People tend to address problems directly, instead of setting up frameworks under which others can find their own solutions. They see the solution of leaving it to the free market as total chaos, producing uncertain results, which will potentially result in great suffering.

Number two: If the person is open to ideas, which is rare, explain that the laws of economics are in many ways the same as physical laws because people are similar in many ways and respond to stimuli and incentives. In other words, the market will set an equilibrium due to the forces of supply and demand, and personal incentives and motivation. Tampering with this can create a situation which appears better, but will inevitably have unintended consequences, which in every case yet analysed is deleterious overall.

Why the Appeal for Moral Managers is the Wrong Approach

Although tempting because of the way the human mind works, appealing to have more morally upright managers is ultimately useless. Logic and examples prove this point.

Let’s start with some examples:

1.       L.A. Clippers Basketball team owner Donald Sterling was an apparently very racist billionaire. Yet despite his racism, he paid black basketball players millions of dollars to throw around a ball. Even the most loving person on Earth wouldn’t have done more than this. The fact is Sterling had no control over how much he paid his players. Had he decided to act out his racism and pay them $5 per hour, he clearly would not have a team at all. His moral character was in fact unknown until it was exposed, meaning there was no way to derive his morality from what he paid.

2.       McDonalds pays very low wages, with a large percentage of workers making minimum wage. On the other hand, Exxon-Mobil pays really high salaries, many making 5, 10 or 20 times the minimum wage. It is also well beyond the minimum requirements for survival or even a decent life. Does anyone believe this is because McDonalds is run by immoral people while Exxon is run by exemplary and moral citizens?

3.       Even within particular organizations, salaries vary widely. To believe managers are just arbitrarily deciding who gets more and who gets less is rather silly. People obviously know salaries vary for other reasons.

What these examples prove is that a company does not arbitrarily decide wages. If this were so, every company everywhere would pay the minimum possible wage. So what determines wages? The main thing is:

Productivity

Productivity is the value an employee brings to a company. As a simple example, an employee who produces 5 shirts per hour that sell for $2 each, is producing an overall value of $10 per hour. Expenses have to be factored in. But in theory, the absolute maximum this employee could ever be paid is $10 per hour. Any more than this, the company would lose money for every hour this person worked. Demanding the employer be more moral will do nothing to raise this worker’s wage. According to recent studies, about 85% of wages are due to productivity or the value an employee brings to a company, and 15% comes from negotiation. This differs greatly from the traditional view that 90% of wages are just the whim of the employer, and the other 10% comes from the employee’s negotiation skills.

Productivity is determined by a number of factors. One is capital investment. An employee with heavy machinery can be much more productive than one with just a shovel. If a business environment is stable, with good laws, companies will want to do business there and are willing to invest. If it’s an area where equipment and other capital can be randomly confiscated, companies are not willing to invest much. Another factor in determining productivity is employee education and skills. In a low-skill, low-education area, employees are not as productive. They cannot operate equipment or perform complex operations. There is a greater supply of such workers, so they do not have a strong competitive advantage.

There are other factors as well.

Something else to keep in mind is that demand for labour is unlimited. Anybody would love to have several servants to clean their house, make the bed, walk the dog, etc. but usually people just can’t afford it. In order to gain a worker, we must pay more than they can get elsewhere. The reason I mention this is because of the false perception that in some areas, in some industries, companies are free to pay workers any amount whatsoever. This is never the case. Workers always have other options. So when spoiled American and Canadian brats protest a “sweatshop” in Asia and successfully shut it down, it’s not as though the former workers now have well-paid jobs. Instead they are forced to accept their next-best option which in many cases might be difficult physical labour in the sun for 12 hours per day, 6 days per week. If protests shut this new outdoor job down as well, the workers would seek other opportunities. Reducing opportunities is not the answer, but this is the ultimate result of minimum wages, working condition legislation, and any other law that increases the cost of labour above the equilibrium point.

In order to accept the theory I have laid out, we need accept only one thing: people pursue what they believe is their best option. Sure, maybe we can find examples of people who hurt themselves for absolutely no reason and do what they feel is worst for themselves without justification, but they are rare to say the least.

The bottom line is that employers do not determine wages. Wages are determined by market forces. Organizations can interfere in the free workings of the market, but only for an overall worse outcome. There is no free lunch and people must be suspicious when someone comes along claiming a government decree with fix a problem without consequence.