Public Entrepreneurship

Just recently the Champaign County Libertarian Party had the opportunity to have a discussion with Joseph T. Mahoney on his collaborative paper (written with Peter Klein, Anita McGahan, Christos Pitelis) about “The Economic Organization of Public Entreprenership”.

I created a podcast of the discussion in AAC format that is available here (6.2 megs, one and a half hours), as well as a google video version which is viewable below:

Among topics discussed were Arrow's Impossibility Theorem, Coase's Theorem, and how the government's role can be to enhance the wealth of nations as opposed to destroying it through the harnessing of entrepreneurship in the public sphere. Some specific examples are thrown in, as well as how the topic related to local politics in Champaign-Urbana.

Some of the arguments were new to me, some of them being more from a utilitarian-libertarian point of view than a deontological-libertarian view. Also, the paper is based upon a minarchist view of the world--that is to say, it assumes that a government will exist. It is a pragmatist idea of how to improve government that could appeal to both conservatives and liberals I think.

For instance, the typical small-government view is that government inaction is better than government action. However, imagine the following hypothetical. A community is under imminent danger from an objectively demonstrable threat (a natural disaster, the collapse of a bridge, etc.). The private parties that make up this community cannot all agree on a plan to remedy the situation. In this case, the government stepping in doing something would be preferable to doing nothing, as a haphazard solution would be better than total disaster. If the government solution is unpleasant enough, or would take too long to implement, this would stimulate entrepreneurs to come together with a plan for the public good. More often then not this plan is more effective, faster, and more efficient than the government plan, and more appreciated by the public as it doesn't involve increased taxes or regulation.

There are surprisingly many instances of this happening, in light of the bungling done with the bridge collapse in Minnesota and Hurricane Katrina at the hands of the government. Just recently I was forwarded an email on how citizens and businesses built a bridge in Hawaii because the government was unable or unwilling to do it. Not only did it get done faster, but much cheaper than the projected cost. Not only that, the cost did not result in increased taxes or government debt--it was absorbed by the businesses who would benefit from the repaired bridge. The "free rider problem" in this case was averted. There are other examples of course, such as citizens volunteering to sandbag an overflowing river. Their efforts not only save their own property, but help save the property of their neighbors as well.

The only downside I can think of, is that while public entrepreneurship is better than a government solution due to government's use of force, is that it sometimes requires the threat of force. In other words, action is only taken because the government bureaucracy's solution is more feared. This of course is tied into legitimacy of the government's force (see: Arrow's Impossibility Theorem), which may be called into question if the democratic process is absent or easy to manipulate--the paper discusses this issue in some detail.

Overall it was a fascinating topic that I think will gain more traction as people realize that the government isn't very good at creating value or solving things--and we may have to rely on ourselves and our neighbors.

Recharge any battery: save the environment by saving money

People are skeptical when I say economic efficiency means environmental efficiency. They often point out externalities as a counter argument, though if you defend property and individual rights, this problem can be mediated: pollute my land, and I sue you. Outside of the tort system, here's a way you, as an individual and as a consumer, can both save a lot of money and save the environment.

Don't throw away your batteries when they're dead! Any student of chemistry knows that a battery is a reversible chemical reaction. The truth is, many alkaline batteries can be recharged. Now the reason why I use the qualifier most is that some batteries are purposely designed to malfunction when you recharge them, to get you to buy more of course.

What I use is a discontinued Rayovak Recharger, which is a scaled down version of this one. I don't know why they stopped making these, but perhaps they did when people found out they could recharge any alkaline battery, as opposed to just rayovak brand rechargeables. Recently, Rayovak launched a new line of rechargeables, but I have not tested these out to see if these still work.

Ideally, any automatic recharger works (the kind that shut themselves off when they detect a full charge), but be careful testing. You can even do it yourself if you're adventurous. One thing I must point out though is that the chemicals inside the battery can irritate your skin, so if you see any sign of leakage, remove the battery with a thick paper towel and wash your hands. You'll notice a distinctive sour odor when batteries burst, which is another way of telling if they've malfunctioned. If the leakage got onto the charger or electronics, you can either wipe it down immediately or wait until it dries and dust it off. Also, if the battery stays warm a while after you've charged it, that means that the battery shorted and can no longer be used. Also, most batteries have some kind of expiration date on them, and this is a good rule of thumb as to your success in recharging the battery.

Ideally you should be able to recharge the batteries as often as you want until the battery can no longer be recharged. If you want, you can use a permanent marker and add a tally mark each time you recharge your batteries.

Good luck, have fun, and remember, safety first!

Why the recent stock market high wasn't that high to begin with

The pollyannas rejoiced recently when the Dow Jones Industrial Average at last broke 14000 on July 19th 2007. "See!" they thought to themselves, "The economy is doing great! Who are these fools who constantly warn about doom and gloom?". These are also the same permabulls who tend to believe every statistic the government publishes. Here I will show that this new "high" was never high to begin with, and any profits made by tracking the DJI are more akin to a statement issued by the Red Queen from Alice in Wonderland fame:

"Now, here, you see, it takes all the running you can do, to keep in the same place. If you want to get somewhere else, you must run at least twice as fast as that!"

Here I will compare the two previous peaks, the aforementioned from this month (14000), and the peak of the internet bubble: on Jan 14th 2000, the Dow Jones reached 11,723. The reasons why I compare peaks, and don't measure from trough to peak are because of hindsight bias and because I want to compare apples to apples (peak to peak, trough to trough).

I'm not going to use inflation to measure the change in the stock market in real terms, as it would involved a longer discussion about what the "true" inflation is. Instead I will compare the purchasing power of the dollar compared to other currencies. The currencies I have chosen roughly correspond to the G8. I chose gold and silver as traditional currencies and stores of value.

Data from Onanda.com	2000/1/14	2007/7/19	purchasing power drop
British Pound	0.60750	0.48770	19.7%
Canadian Dollar	1.45080	1.04360	28.1%
Euro	0.97530	0.72470	25.7%
Gold	0.0035210	0.0014870	57.8%
Japanese Yen	106.150	121.9560	-14.9%
Russian Ruble	28.670	25.44230	11.3%
Silver	0.19610	0.075990	61.2%

The change in the purchasing power of the dollar compared to other currencies is absolutely astounding. The only currency that the dollar has actually increased its purchasing power against is the Yen, but this is mostly due to the fact that the Japanese have been pusruing a Zero Interest Rate Policy for many years now. For those not familiar with it, basically the Japanese have been "running the printing presses" like crazy to stop deflation, but it hasn't been working quite the way they expected (see Carry Trade).

Get ready for the big surprise: the peak-to-peak increase in the stock market was only 19.4%! As an intellectual exercise, if you had bought Euros or Pounds and put them in a regular savings account, and not invested in anything you would have made more money. If, like presidential candidate Ron Paul, you had put all your money into Gold and gold mining stocks, you would be making out like a bandit.

This is why I'm voting for Ron Paul for this presidential election. The Federal Reserve has been devaluing the currency so much, it's no wonder that the stock market seems to be shooting through the roof! Ron Paul will tame the federal reserve at the very least, and eliminate it entirely if he can.