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Economics

Some time ago airlines would price their tickets in whatever manner they priced their tickets.  We would buy them through travel agents or, if we were daring, but them from the airline directly.  Over time, and with emerging technology, we became good at finding deals.  I still remember my dad calling from Minnesota on a Tuesday, telling me he was coming to Seattle that Thursday.  See, Northwest would blowout sale their empty planes to certain destinations.

Downside?  No lead time.  Upside?  Retired teachers with nothing to do get to see family often and cheap.

Then we discovered “aggregaters”.  These were the engines on line that would allow you to shop all the airlines at once.  You know, trevlocity, orbitz, expedia, whatever.  And the airlines, and is, LOVED it.  It not only made it easier to shop, but by posting price, airlines were forced to compete ’cause whenever people have a choice to fly from Dallas to Fargo with all things being equal, they choose, wait for it, the lowest price.

So, right after WE figured that out so did the airlines.  In response to the demand for cheaper and cheaper seats, they had to find ways to bring the TICKET price down but still make the profit margin they were used to.  See, it turns out that orphans and grandmothers don’t invest their trust funds in mutual funds that buy companies that don’t turn a profit.  I know I know, the greed surrounding orphans and grandmothers is gross, immense and very ugly, but alas, that is the nature of orphans and grandmothers.  Anyway, so the airline decoupled the price of a person and the price of a piece of luggage.  Now the ticket prices for their seats would be lower and we would buy those cheaper tickets.

Nothing else changed.

The total cost, over time, of flying remained the same, only now it was two line items, not one.  Wanna fly from St. Louis to Bangor?  $375.00 please.  Or, if you want, I can split that up and charge you $340.00 for the ticket and $35.00 for the two bags.  No change, just accounting.

Annoying?  Perhaps, if you’re less enlightened.  Or, if you’re like me you try not to pack things that you can buy at your destination.  Diapers, formula, flip flops…whatever.  Or, you learn to pack better.  Or, you ship your luggage, it might actually be cheaper.  Or, just maybe, you accept the fact that the price of luggage is really the price of admission and just deal with it.  Where I really hate this is when I’m behind the guy that wastes 40 minutes trying to shuffle items from one bag to another to get under the 50 lb limit.  Anyway, enough.

The point?

The point is that lawmakers actually think they can make things better.  Baggage fees a pain in the neck?  Make ’em illegal:

WASHINGTON One of the most loathed aspects of holiday air travel – paying to check bags – is at the center of a growing debate that does not look to be resolved soon. Travelers who could otherwise be spending $50 on an extra gift must instead use it to buy their Samsonite a round-trip ticket in the bowels of an airplane. The anger over increasing fees has gained the attention of Washington, pitting some members of Congress against the airline industry.
U.S. Rep. Larry Kissell joined other federal lawmakers last week to press airlines to scale back their baggage fees. Kissell, a Democrat who represents Charlotte and Concord, proposed legislation that would allow travelers to check one free bag on each flight. U.S. Sen. Mary Landrieu, D-La., introduced a similar bill in the Senate. To date, no Republicans support either bill.
All fine and dandy, I guess.  But I wonder if these lawmakers are aware that flying people from Kissimmii to Detroit [why ANYone would fly from Florida to De’troilet is beyond me] costs real money and that by making it illegal to charge real money for one thing means that it raise the price of the other legal thing.

If congress wants to choose higher airline tickets over free baggage, that’s fine.  I guess.  I just wonder why congress feels that decision is up to them?

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Got a bunch of baseball cards in the attic?  Beanie Babies maybe?  How about some old CD’s?

Now, say ya wanna sell ’em.  Everyone knows that if you start the bidding to high you won’t get any takers.  Bring the price down and you can sell almost anything.

Simple:  More expensive, fewer people buy.  Less expensive, more people buy.

Which makes this so mind boggling:

Eight states will ring in the New Year with a higher minimum wage, under state laws that require wage floors to keep apace with inflation. San Francisco, one of the few cities that sets its own minimum wage above the federal level, is also raising wages for the lowest-paid workers in the new year. It will become the first big city in the country to require companies to pay their workers more than $10 an hour.

The minimum wage increases in Arizona, Colorado, Florida, Montana, Ohio, Oregon, Vermont and Washington will be 28 cents to 37 cents an hour, according to the National Employment Law Project. That is an extra $582 to $770 a year for a full-time minimum wage worker, and resets these states’ minimum wages to $7.64 to $9.04 an hour.

At that higher end is Washington State, which will become the first state in the nation to set its minimum wage above $9 an hour. For reference, the federal wage floor for most workers is $7.25 an hour.

I get it, I do.  No one’s time should be worth so little.  However, by forcing businesses to pay more for labor than they otherwise should, they will buy less labor.  And lastly, should an individual be free to bargain for the value of his time?

 

A free and open market will settle on the demand for goods or services.  As the government adds requirements to that market, the price will change and adjust to accommodate the new cost of that good or service.  For example, if you wanna house, one can be built for you at such and such a cost.  However, when the requirement, however reasonable, that the house have plumbing is added, the cost of that house is going to go up.

I’m not claiming that we allow houses to be built without plumbing.  I’m simply stating that when we DO make that requirement, we price homes above what some segment of the population can afford.

This is true of all things.  And school lunch is no exception:

It’s lunchtime at Van Nuys High School and students stream into the cafeteria to check out the day’s fare: black bean burgers, tostada salad, fresh pears and other items on a new healthful menu introduced this year by the Los Angeles Unified School District.

But Iraides Renteria and Mayra Gutierrez don’t even bother to line up. Iraides said the school food previously made her throw up, and Mayra calls it “nasty, rotty stuff.”

And why is the school cafeteria serving lunch that students don’t wanna eat?

Earlier this year, the district got rid of chocolate and strawberry milk, chicken nuggets, corn dogs, nachos and other food high in fat, sugar and sodium. Instead, district chefs concocted such healthful alternatives as vegetarian curries and tamales, quinoa salads and pad Thai noodles.

The district, government, tried to regulate the market.  No longer could schools sell food that kids wanted to eat, rather, the school was forced to sell food that the regulators decided was fit for the kids.  Now, do I think that fresh pears and pad Thai is better for you than corn dogs and nachos?  Hell yeah!  In fact, I’ve eaten many many more portions of pears and pad Thai than corn dogs and nachos in the last, what, 20 years.  I fact, I can’t remember the last time I had a corn dog.

Point is, independent of the fact that mandating healthy food is good or not, when the regulation is applied, the market shifts.  It adjusts.

Many of the meals are being rejected en masse. Participation in the school lunch program has dropped by thousands of students. Principals report massive waste, with unopened milk cartons and uneaten entrees being thrown away. Students are ditching lunch, and some say they’re suffering from headaches, stomach pains and even anemia.

Waste.  And unhealthy behavior.

But do you know what ELSE happened?

At many campuses, an underground market for chips, candy, fast-food burgers and other taboo fare is thriving.

The market adjusted and is now providing the very thing the regulations were meant to diminish.

The lesson?

The market will win.

 

 

 

In the same way that the Left characterizes climate skeptics as loons, educational reformers as child haters and minimum wage advocates as haters of the poor, the Left characterizes free-market capitalists as greedy bastards.  Any support shown for a system that rewards the successful is immediately attacked as shilling for the rich.

Wanna reduce taxes on corporations because corporations will move to where there are lower taxes?  You support corporate welfare.  Wanna create laws that allow businesses to hire, and then fire, the most qualified and least productive?  Then you don’t care about the poor and disenfranchised.

With all the tribalism in today’s politics you can’t get the concept through the noise.  You’re unable to penetrate the distinction between “my side” and “your side”.  It’s more important to win than it is to create a viable path forward.  I see this often in corporate America.  I see competing managers championing their idea to the detriment of the team.  I feel I’m witnessing the same thing here in our politicians.  It’s more important to “win the debate” than to actually be right.

Because of this, because the Left vilifies all those who want to create a system that rewards the producers while removing the ability to destroy value from the ineffective managers, we will never be able to have a reasonable debate that typically successful people are reasonable people who, as it turns out, love other people:

The donor whose $350 million gift will be critical in building Cornell University’s new high-tech graduate school on Roosevelt Island is Atlantic Philanthropies, whose founder, Charles F. Feeney, is a Cornell alumnus who made billions of dollars through the Duty Free Shoppers Group.

Mr. Feeney, 80, has spent much of the last three decades giving away his fortune, with large gifts to universities all over the world and an unusual degree of anonymity. Cornell officials revealed in 2007 that he had given some $600 million to the university over the years, yet nothing on its Ithaca campus — where he graduated from the School of Hotel Management in 1956 — bears Mr. Feeney’s name.

The $350 million gift, the largest in the university’s history, was announced on Friday, but the donor was not named. Officials at Atlantic Philanthropies confirmed on Monday evening that it was Mr. Feeney, a native of Elizabeth, N.J., who is known for his frugality — he flies coach, owns neither a home nor a car, and wears a $15 watch — as well as his philanthropic generosity, particularly to medical research.

It turns out that capital, in the hands of the skilled, produces significant value to all the world.  And, as a reward, the capitalist acquires significant wealth as well.  And then, in the end, he often gives that wealth away.  As if to say, “I have come, I have made a difference and now it is time for me to give it all back.”

 

I often remark on the powerful effect of incentives.  Lately it’s been with creating an incentive to cross a busy freeway.  My point being that the government can cause perverse incentives.

In the past I’ve mentioned that unemployment benefits create the same condition.  By the nature of paying someone not to work, you create an incentive NOT to work.  At lest on some level.  Further, if the benefit is large enough, the individual is going to create an internal value proposition and will only return to work when that value proposition reaches an inflection point that benefits him.  In other words, no one is going to work for 40 hours for $320 when he can not work for 40 hours and make $335.

For evidence, I wanna share this editorialHat Tip Dan Mitchell

Last year the demand for our construction services, to our delight, was as they say “going through the roof” to a point where were turning down more work than we were accepting. Frustrated that we could not be available to the potential new clients that were calling on us, and simultaneously excited that this was happening to our company, since unemployment had broken the double digits marker. I decided we would grow, work to sign up as much as 40% more in total contracts, and hire up to 12 additional full time employees. Basically take advantage of our good fortune and get a small portion of our community back to work.

The plan was initiated, the additional contracts were signed up and then we set out to hire the employees. Little did I know that attempting to hire the employees needed, which I had thought to be the easiest part, would turn out to be a nightmare if not impossible. I’m sure that reading this you will be almost as surprised as I was directly experiencing it.

My experience: Before 2009 if our company advertised for an open position, on average we would get 20 to 30 applications, interview six to eight of the applicants, and hire one or two, based on the quality and potential of the candidates. This process has been deteriorating dramatically since 2009 and now at the end of 2011 it has completely hit bottom. Of all the applications that we have received this year, when asked why they were seeking a job with us, one out of three answered: my unemployment is running out and I have to go back to work. Earlier this year after I hired two new full-time employees, went through our company’s orientation process, fitted them with our work clothing and booked them to start within a week, they both quit. One called ahead of the start date to apologize but wanted to inform us he would not be coming in because the government had just extended unemployment benefits again. The second one just did not show on his first day and when I called him he said he couldn’t come in now because unemployment had been extended and he was making almost as much as we were planning to start him out with. If this is not frustrating enough to those of us that provide jobs and pay taxes let me give you my last two attempts this year. Both times we advertised in various media at great expense. The first time only seven applicants came in, I set up personal interviews with two for potential hiring, neither of them even showed up. The second time with six applicants, I set up interviews with four, one called in to cancel the interview, one did not even show up, two actually came in, though one was late. To summarize (in case you missed the math) of the last six people that I called for interviews for potential full-time employment only two came with one being late. It is more than frustrating, it’s perverted.

If we are going to insist on providing unemployment benefits, at least reform the process so that the individual has to report to an office, perform community service when waiting for responses and allow for better monitoring.

For ever we’ve heard the anti-free market crown complain that corporations exploit the workers of the world by moving production to heap labor.  Right?  We exploit the villager that has experienced bone crushing poverty for generations by providing a job that allows them to own their own house.  The first of their family EVER.

All of this in the name of profits and corporate greed.

Well guess what happens when the market begins to correct and the worm turns:

One of the things that’s showing up in Christmas stockings this year: higher prices, courtesy of China.

After decades as America’s go-to destination for low-cost consumer goods, China is undergoing a profound shift. Rapid economic development and a smaller supply of young migrant workers are pushing up labor costs. Tack on rising raw-materials prices, driven largely by Chinese demand, and a strengthening currency, and China-made goods aren’t the bargains they used to be.

Last month’s prices for Chinese imports were up 3.9% from a year earlier, the Labor Department said Wednesday, matching October’s gain, the largest year-to-year monthly rise since 2008.

Wednesday’s report showed that prices were up sharply for many kinds of goods for which China is the dominant supplier.

China accounts for about 80% of U.S. shoe imports; imported-footwear prices in November were up 6.1% from a year earlier. It accounts for about 60% of furniture imports; imported-furniture prices also were up 6.1%. About 80% of U.S. luggage imports come from China; prices in the category that includes luggage and similar goods rose 8.3% in November.

Those higher costs are one reason that U.S consumer prices have risen this year, despite the weak economy.

For all the complaining that has gone on concerning off shoring, people have been silent regarding the prices.  Maybe now, as prices begin to rise, people will begin to understand the benefits.

This is what happens when we impose tariffs on imported goods.  While the intent is to promote domestic business, the result is a trade war that punishes both domestic consumers as well as domestic business.  Not only does the tariff artificially raise the cost of goods for no reason, but it also forces foreign nations to impose tariffs in return:

BEIJING — China will levy anti-dumping and anti-subsidy duties on certain US vehicle imports, the commerce ministry said Wednesday, a move likely to fuel tensions between the world’s two biggest economies.

The tariffs will be applied for two years to passenger cars and sports utility vehicles with engine capacities of 2.5 litres or more and will take effect Thursday, the ministry said in a statement.

The decision will affect vehicles produced by General Motors, Chrysler Group, BMW Manufacturing, Mercedes-Benz US International, American Honda Motor and Ford Motor.

Hopefully both sides will step away and increase free trade; tariff free.