As I (unfortunately) no longer am a member of Loyola University's Economics Club, I have had to move on to another blog.  I started a new blog that relates to my current position as a math teacher in the Bronx with Teach for America.  If you're wondering where my thoughts lie after Loyola, please check out

http://classcontext.blogdrive.com

When I happen to write about matters relating somewhat to economics I'll cross-post. 

 For all you new economics club members, I hope you make this blog (or make a new one) fulfill the potential it has.  If you would like to be an author or take charge of the Economics Club blog, contact me.  I still hold proprietorship over it and would like to transfer it to whomever has the desire.   

Good Luck, I will see you soon.

Jamie

The TWU acceded today to mounting pressure and went back to work and the negotiating table.  "In the end, cooler heads prevailed," Mayor Michael Bloomberg said. "We passed the test with flying colors. We did what we had to do to keep the city running, and running safely."  Thankfully, I won't need to beg fellow teachers for rides to and from school tomorrow.

   The range of such gratitude should not extend much farther than that.  The city of New York missed a prime opportunity to overhaul a corrupt transit and political regime.  Pataki and Bloomberg failed in their test as trustees of the public that Reagan passed with truly flying colors some 20 years ago when he fired striking air-traffic controllers.  Although Reagan fell short of privatizing, at least he took the first step.  In contrast, New York officials succumb to an inertia of special interests that will only push taxes, fares, and political illegitimacy to levels further beyond the pale. 

   Unless we want to smother a critical New York infrastructure in corruption a la francaise, the public transit monopoly must end.  We can begin by legalizing all forms of private competition.  Auction off subway lines to the highest bidder.  Those firms that can put such resources to the best use, will be those wiling to pay the highest price for them.  The subways won't become a den of repression but one of opportunity.  Transport will grow more efficient, as we arrive at our destination sooner for a lower price. 

   Privatized subways are feasible.  They were primarily built and operated by private entrepreneurs.  Despite heavy government regulation, private subways flourished to serve many diverse communities and commercial centers.  

   That is until Leviathan took over in 1940.  Communist trade unions, led by transit chief Mike Quill, unified the lines under public control to allegedly earn economies of scale among other benefits.  The government promised that if they controlled the transit system in New York, fares would never rise, the system would be "self-sustaining," meaning no tax dollars would be implicated, and riders would no longer be exploited by "greedy profiteers."  Furthermore, the unionists claimed that transportation was too valuable of a resource to be entrusted to "animal spirits."  They argued that public ownership would ensure no market fluctuations would ever block the arteries of the heart of American commerce (read: no strikes).

   The public transit regime broke each of these shallow promises.  Fares increased by thousands of a percent (in real terms), subsidizing taxes were imposed, and unions were gluttoned with absurd pensions that saddle MTA with an unfunded pension liability totalling $1 billion presently.  This is not to mention the three strikes (1966, 1980, 2005) that have cost the city billions of dollars in foregone income (with much of this cost borne regressively).  Gregory Beseiger shows that straphangers react to such state ineptitude by voting with their feet: "Subway ridership has declined by some 50 percent in the last half century, even though the city's population has remained about the same (7.4 million by the 1940 census compared to 7.3 million in the last census)." 

   If only Otis Redding was a New Yorker, because a change needs to come.  At the very least we should look mimic the models for transit privatization that continue to yield rewards in London, San Diego, and Denver.  The latter two cities have contracted out 35% of their bus routes successfully.  Ted Balaker reports that competitive contracting has reduced operating costs from 20 to 51 percent, with savings of about 35 percent being the norm.  A recent Transportation Research Board survey in California testifies to these benefits: approximately 80 percent of transit managers who chose contracting say they would stick with it a second time when asked if they had to do it all over again.    

   Perhaps the best analogy for New York, however, is London.  The "Square Mile" outsources their transit system which, according to Baruch professor E.S. Savas, has almost halved costs in the first decade of contracting.  Although unfortunately not fully privatized, city officials design routes and set fares, and invite potential operators to submit a requisite fixed annual subsidy to serve a number of routes on a three- to five-year basis.  The holder of such rights keeps whatever profits accrued from the difference between their operating expenses and the fixed price financed by the government.  This system creates incentives for the contractees to improve the services they provide straphangers or else lose their individual and institutional patrons.  Moreover, since the operators would be owners,  commuters  never need to worry about strikes. 

   New York would do well to follow London's lead.  To apply Kuhn's theory of "paradigm shifts," the incremental shift towards privatization constitutes the most realistic expectation of regime change.  Government licensure should not be considered the ultimate plateau, but a navigational lock lifting cities like New York from the muck of tyranny to the high waters of liberty.  The steady rise in privatization ought to continue until New Yorkers receive the services they deserve: an urban transportation system governed exclusively within the parameters of consent. 

 Under the auspices of  the Alaska Gasline Port Authority, David Boies filed suit against ExxonMobil and BP Monday afternoon alleging "collusive" business practices.  The same man that insiduously attacked Microsoft for lowering prices and providing superior products and services now has the gall to further mire American industry in another anti-competitive three-ring circus.  Boies claims that ExxonMobil and BP have colluded to "warehouse" natural gas from Alaska to drive consumer desperation and prices up.  The port authority wants to ship the resources from the North Slope oil field and argue that Exxon and BP opted to instead build a pipeline through Canada allegedly in order to choke the flow of the already expensive "translucent gold." 

   This apparent outcry on consumers behalf, however, amounts to nothing more than politics as usual.  Mr. Boies' cabal relies on the preposterous assumption that they have greater insight into the resource delivery business than the professionals.  Exxon and BP have far more at stake in heating the homes of Americans over the winter than bureaucrats looking to ride the latest crest of publicity.  BP spokesman David MacDowell was quite correct in asserting that, "no one else is as motivated as the resource owners to build the lowest cost, most efficient transportation system possible."   

   The delivery of natural gas from the North Slope of Alaska to the Midwest has been an extremely complex and expensive undertaking.  BP and Exxon have invested millions of dollars in the project to efficiently provide Americans with natural gas.  If it happens that they held imprudent expectations about the best way to serve consumers, they will be held accountable through a diminished profit margin and market share.  It their expectations bear fruit, the oil companies will reap the rewards of their risky investment.  Clearly Exxon and BP hold a vested interest in the long-run supply of natural gas to the United States.  Employees have their jobs on the line.  The same cannot be said for Boies and the port authority. 

   Regardless of future labor allocations, it's safe to bet on the greed of private industry to supply the resources in demand, not the cursory benevolence of the anointed statists.  That very greed condemned by fiddling politicians brought us the automobiles, medicines, and tax base we have today.  Such progress won't stop with gas.  This begs the obvious question: what have Boies and his confrere done for us ever? 

This story caught my attention...

Well my new blog, Austrian Addiction, has been getting a few replies in reference to the Taco Bell debate, which I know Jamie is a fan of and might want to check out my latests post (feel free to comment). In addition Nick told me that Jamie still hasn't seen the light in regards to positive obligations. On this regard I suggest "Egalitarianism as a Revolt Against Nature."

Jamie's probably happy about this one. Taco Bell has been fending off the political tactics of the Immokalee Migrant Worker Coalition for some time now. The CIW has been trying to wage boycotts and launch smear campaigns alleging Taco Bell's responsibility in regards to low farmworker wages in South Florida. Free market commentary has been done by myself (here and here) and Art Carden on the matter yet our insights have fallen on deaf ears apparently. This Miami Herald breif tells the update.

   Having lived off campus for the past three years with as much as 4 roommates at a time, I've noticed an element of such a lifestyle relevant to the work of Austrian economists.  The management of the household strays not far from the management of an economy.  Both require acknowledgement of the pure logic of choice and a system in which the knowledge of the relevant facts are spread among many people, with prices coordinating the separate actions of different people in the same way as subjective values help the individual to coordinate the parts of his plan.  On the other hand, the collectivization of the tastes and preferences of even 3 people, much less millions, presents an onus unfit for any central organ to hold. 
   To understand why the Austrian logic relates equally well to national and domicile planning, it's best to first understand the problems implicit in the former approach to the economy. In a socialist approach to an entire society, rational calculations in economic matters are impossible.  Critical comparative tools of scarcity, relative preference, and opportunity cost cannot guide the allocation of resources due to the lack of a common denominator.  The central planning authority does not have the needed information nor can he process such information if made available to compare the costs and benefits of his decisions.
    A laissez faire system, where individuals freely pursue their own interests, provides this calculating device in the form of market prices.  As Mises writes, money prices alone make it possible to bring costs which originate through the expenditure of various goods and different qualities of labor to a common denominator so they may be compared with prices which were realized or which can be realized on the market.  Consequently, we can use prices to gauge the probable effects of past and future actions.  The lack of market prices engenders severe crises in economic allocation as the socialist planner cannot know in concentrated form the dispersed bits of incomplete and often contradictory knowledge of how to best use resources.  Given the inherent diversity of knowledge spread across the range of circumstance, only a dynamic market system can convey to individuals knowledge that enables them to dovetail their plans with others and the perpetual changes in the incidences of time and place.      
   A similar calculation problem, although less daunting, plagues the attempt to centrally plan the allocation of resources within a collegiate residence, especially in regard to grocery purchases.  For example, my roommates and I pooled our money and collectively bought food every two weeks for the first three months we lived together.  It seemed like a terrific idea that would simplify our time at the supermarket and implicitly unite us as a household.  Each individual would pay an equal amount and receive an equal return.  At least this is how it was supposed to work in theory.
   In three months of such practice, however, the three of us unwittingly experienced firsthand--a microcosm of the essentially similar experience of 20th Century USSR citizens--the chaos of socialism that FA Hayek dedicated ample scholarship to expose.  Problems arose from the qualitative and quantitative divergence of our tastes for food consumption.  I like to buy simple and cheap products that can be prepared quickly and consumed in high quantities.  My roommate Jaime, on the other hand, enjoys cooking relatively more elaborate meals with a cornucopia of more expensive vegetables.  My other roomate Brad hated the seafood products Jaime and I favored and liked to order food from restaurants more frequently than we desired (the end of the post explains why Brad's referred to in past tense) . 
   Thus, when we bought our stock of groceries for the next two weeks I wanted spend the money on tuna and peanut butter, Jaime wanted to spend it on fresh mushrooms and crawfish tails, and Brad wanted to spend the money on gatorade and potato chips.  Obviously, tradeoffs that could have been made via our individual ordinal valuations and purchases could not be made as efficiently with a collective approach.  Every dollar spent on one product desired by one individual caused one less dollar spent on another product desired by another individual.  Uneccessary conflict and contempt arose as we all went to the grocery store and argued over what to purchase.
   Moreover, the greatest amount of friction occurred when only one or two of us went to the supermarket to spend our pool of money.  Without the input of all three, the smaller shopping contingent allocated far more funds to the products they preferred, being insulated from the actual costs and benefits derived from each individual valuation.  For example, Jaime and I spent Brad's share of money on seafood items when he wasn't present, thereby, neglecting his interests.  Our collective calcuations inevitably held flaws that precluded a rational allocation of groceries.  When such calculations were limited to smaller groups, or in other words, when we centralized knowledge and power to make decisions, the outcome for all those outside of that central group deteriorated.     
   This deterioration is precisely what occurs on a grander scale of socialism.  The central planners of nations and their favored interest groups sacrifice the interests of the body of consumers--those who the legislators are supposedly working on behalf of--to appease their own values.  The socialist rulers use the economy not to create conditions of equality and optimal resource stewardship but to shift the bundle of consumption and production in the economy in their favor at the expense of everyone else.  Every dollar taxed or inflated away from the citizens that is spent on career-prolonging pork by politicians is one less dollar that citizens could have put to their most highly valued use.  This situation is fundamentally the same to my experience buying catfish with Brad's money when he wasn't there. 
   Consumption brought forth further complications.  The communal ownership of the food created undesirable incentives that exemplified the tragedy of the commons.  Although we were all good friends, the lack of property rights discriminating among due food consumption thwarted our intended benevolence.  The tragedy of the commons struck hard as each of us had an incentive to eat as much and as quickly as possible or lose that food to the next person in the kitchen.  The greater the share one consumed, the more bang they received for their buck.  For poor college students, this incentive shouldn't be discounted.  I vividly remember how angry I was at finding all of the deli meat gone after a week in which I ate only one sandwich.  After the next shopping trip I made sure to eat as many sandwiches as possible, as did my roommates.  Within 2 days we ate 2 weeks worth of sandwiches.  This overconsumption and subsequent underconsumption was unfortunately not limited to sandwiches.       
   Not surprisingly, our collective approach to grocery shopping failed spectacularly.  The system of central decision-making and communal ownership did not reflect our individual preferences and incentives.  We needed to disperse the right to make decisions and bear responsibility for such actions.  Otherwise, the wilderness of socialism would have further mired our household in chaos much like the woods of destitution and waste that plagues citizens in centrally planned economies.  

As a side note, Brad ended up moving out of the house before the lease expired largely due to the enmity fomented by the treachery of our collective approach.  This transfer of conflict from resource allocation to groups of people is also not exclusive to the roommate experience.                     

In a recent survey of Americans, “Seventy percent of respondents said they were completely or somewhat satisfied with their physical health and 66 percent said the same about their physical appearance.” This is despite some 60% of Americans allegedly being overweight or obese. Taking both sets of figures as given, at least 30% of Americans (assuming the minimum overlap) are overweight/obese and nonetheless reasonably happy with their health.

Hmm. Could it be that some people simply consider the gains from heavy eating and non-active leisure time worth the costs? Could it be that some people actually prefer their current situation, all things considered? Surely that’s at least a possibility. But the usual suspects immediately assume false consciousness. The rest of the article positively oozes paternalism:

“I wonder if Americans walk around and see other people who are overweight and not physically active and that’s becoming an accepted norm,” [Bill Howland, director of research at IHRSA] says. “That’s alarming if that is in fact happening.”

Still, Americans do know exercise is good for them, results indicated. Eighty-seven percent of those polled said they believe exercise plays a major role in health.
“There’s a big disconnect,” says Howland.

“We’ve got to get the behavior to match the beliefs,” he says.

Cedric Bryant, chief exercise physiologist for the American Council on Exercise, a nonprofit fitness group in San Diego, says getting Americans moving is clearly easier said than done.

“We’re just passively sitting back and letting this inactive lifestyle become the accepted way,” he says.

If people just didn’t understand the health consequences of their choices, that would be cause for some concern – and possibly a justification for providing people with better information. But the figures here, on the contrary, indicate that people understand the situation. As Howland’s last statement implies, he is not content with making sure people have the approved beliefs – they must also display the approved behavior. The health-gestapo just can’t stand the notion that some people willingly accept health risks in return for other compensating gains.

[Guest post by Glen Whitman. Cross-posted on my own blog, Agoraphilia.]

For anyone interested in the study of Austrian Economics, see http://forum.austrianeconomics.org/index.php? Sign up and join the discussion, share in the building of ideas and the journey towards truth.

   I've found great irony in the fact that my favorite Hollywood actor is now my favorite American politician.  As much as I despise all politicians, Arnold Swarzenegger happens to be one that I mind far less than others.  Many consider him a novelty both behind the camera and behind his desk in Sacramento.  He's supposed to be too inexperienced, too insulated from the dynamics of government, and too much of a meathead to make any changes for the betterment of Californians. 
   Anyone making these allegations has obviously not seen the movie Predator.  In one of his finest big-screen performances, Swarzenegger leads a group of special forces soldiers in a South American jungle in battle against a virtually invisible and seemingly unstoppable enemy.  The group soon finds out that they're being hunted by the Predator, a creature from a different world.  The interesting angle here is that all of man's war technology fails and Arnold is forced to resort back to his basic hunting instincts to defeat his alien foe.  Only after Swarzenegger starts sticking his wits to the Predator does the balance of power shift back to the humans.  Arnold ends up winning the battle by using the Predator's own hunting techniques--making himself invisible, setting traps, etc.--and beating the adversary at his own game.