The Real World of Economics

 

Jagmeet Singh and the NDP organized a boycott of Loblaw’s supermarkets for the month of May, in protest over high prices and “corporate greed.” 

This made little sense on many levels, and much sense on none. 

Why Loblaw’s? Its profits were lower than those of some other chains.

Then the Conservatives uncovered the fact that Singh’s brother was a lobbyist for a competitor.

The standard evidence of Loblaw’s price gouging was that prices on comparable products were lower at Dollarama. 

But if so, why boycott? Just buy at Dollarama.

And attributing the rise in prices to “corporate greed” is anthropomorphising a corporation. Can an abstract concept or mechanism feel greed? This, from the side of the aisle adamant that corporations are not persons.

As for greed from individuals, the free market is our protection against it. Raise your prices, and your competitor takes your business. Greed bankrupts you. The places where greed has free rein, and where we need to worry about it, are those not held in check by competition: government bureaucracies, the professions. In sum, the Liberal and NDP constituencies. Making this talk of “corporate greed” look like cynical misdirection.

In other news, the Red Lobster chain has just gone under. At the same time, complaints are rising at the high cost of fast food. “Ordinary people just can’t afford to eat out any more.” Wendy’s is in trouble for trying to introduce “variable pricing,” lowering the price of their meals at slower times of the day. Apparently there is something unfair about this. Everyone should always pay the same price. And again we hear this all framed as a fight against “corporate greed.” 

No doubt the rising cost of ingredients is a part of this. In Canada, the carbon tax is also forcing up the cost of everything. But the same thing is happening in the US; and the rising cost of ingredients should hit home cooking as much as restaurant dining.

The real story is that the fast food chains, and midrange restaurants, are being priced out of their market by the rise in the minimum wage. Anyone could have seen that coming. We are, as a result,  by and large going to lose the convenient option of grabbing a quick meal on the go. Main streets and malls everywhere, already emptying out due to the move of consumers to shopping online, are going to lose their last potential tenants and revenue stream, restaurants. And huge numbers of workers, especially young people on their way up, are going to lose their jobs and their future.

As always, hardest hit will be the poor. The children of the well-off can go to university or community college and be qualified for jobs immediately on graduation. But those who cannot afford higher education enter the market with no skills. They must learn on the job and work their way up. They need these low-paying entry-level jobs. Now what? A life on welfare?

Are there any honest souls on the left?

 Or do they really just not understand economics?

A Window on the Leftist Mindset

 

Adam Smith's ungraved marker.

A long communication from a left-listing acquaintance gives insight into gauche thinking.

He writes: “I lead safaris in Kenya. There, I do not walk about in major centres alone. White privilege is seen around the world.” 

His evidence here for white privilege is exactly the evidence used to prove black discrimination in America. In America, it is supposed to be white privilege that whites can walk the streets without being stopped or harassed. Yet the need for whites to be careful when walking around in Kenya, or Harlem, is, equally, white privilege. 

This illustrates that “white privilege” is simply assumed. It is non-falsifiable.

Our correspondent then points out that we have actually known for a long time about the unmarked gravesites near residential schools that have recently been probed by radar. To his mind, the scandal is that “individual graves and the person buried has been disrespected and families not treated justly.”

But not treated justly by whom?

Whom do we usually consider responsible for marking and tending graves? In the first instance, the family. Why in this case are they not held responsible, but instead seen as victims?

If no family can be located, or the family is too poor, then it is the government’s responsibility. But this ordinarily means the local government, and certainly would have in the 19th or early 20th century. “The city where the person has died pays for the funeral, and will employ a local funeral home to manage the burial.” (talkdeath.com) 

These gravesites are on Indian reserves. The local government is the band council—indeed, they claim more than municipal sovereignty. So why are they the victims here? Why have they not tended their gravesites?

This illustrates the problem aboriginal people face; it is the same problem we saw in MP Qaqqaq’s recent farewell speech. It is learned dependency. What other Canadians do for themselves as a matter of course, aboriginal people have come to expect a distant government to do for them. This is never an efficient system: this is the way you create a permanent underclass; or a Third World nation. The chronic poverty and despair on reserves is the result.

Which brings us to our correspondent’s description of the Conservative Party: it “has a fundamental principle that small government and lower taxes is the best way forward and the private sector will use their wealth to the benefit of society.”

Which thought he dismisses out of hand. Why would they?

His description is at least partially true: Adam Smith’s “invisible hand” argues that, in a free market, even though everyone is pursuing their self-interest, the actions of all participants will tend towards the general benefit. Goods and services will be as abundant and as cheap as possible. In this sense, each individual participant is using their “wealth,” such as it is, to the benefit of society. 

If Bob, or someone else, finds Smith’s reasoning here flawed, they need to address it; not dismiss it out of hand.

But the simpler calculation, for liberals (currently often, as here, called “conservatives”), is simply that each of us has a better idea of our own needs than some distant government official, however well-intentioned. Therefore, it is less efficient and more expensive to transfer your property to him, and then let him look after us. Even assuming that no government officials take any salaries or have any self- or class interest.

If one is poor enough, granted, one may personally benefit financially. Money is taken from the relatively rich, and given to you. But this is selfish; it is at the cost of the general good.

And the example of the Indians (used here as the correct legal term) suggests where this leads. 

Cheap Public Transit

China is becoming the frontier of capitalism. Here's a great idea for really cheap public transit in the downtowns of cities, and it is all done by private business. Why not?

Minimum Wage

The idea of raising the minimum wage seems to me plainly a bad idea; like thinking you can catch your own tail, or pull yourself up by your bootstraps. Am I missing something?

If anyone is working for below the proposed minimum wage now, that means he or she is relatively content to provide that service for that money; and the employer is relatively content to pay that money for that service. Raise the wage, and you upset this equation. The worker is probably going to be happier, should the job continue, but it is entirely possible that the employer is not prepared to value that service that highly. Result: someone who had a job before, and was relatively content, now has no job. Someone who was getting some service before, and was relatively content, now is no longer getting that service. Two people are less happy, perhaps desperately so.

People who advocate raising the minimum wage sometimes say it will not hurt the economy, because, after all, it will put more money in the pockets of workers. They will spend it, and the whole economy will benefit. Even if there are some jobs lost, this will make up for it.

I can't see how that math adds up. You cannot create new money out of thin air. Central banks have been known to try it. But if there is no growth in real value of the products and services generated, printing more currency only causes inflation in prices. The paper, in itself, is worthless. The denomination is just a number.

THe difference ain't going to come out of "profits." The free market makes pretty sure profits are at a minimum already. Reduce the profits in one business, or industry, and investment just flows to an area in which profits are higher. Business closes, or is not begun.

So if you up wages for some people, that money comes out of somebody else's pocket. If it adds to the money these workers are able to spend, it also, to an identical amount, reduces the amount of money the next guy has to spend. It cannot boost the economy as a whole. Even if it produces no job losses, raising the minimum wage raises the condition of some producers on the backs of some consumers. This is most likely to be poorer consumers, who are most sensitive to price rises.

Cutting out jobs at the lowest rung also throws more people on to public assistance; people who might prefer to work and to support themselves. Making their condition worse, while costing us all more. The new bottom rung of the ladder is above their reach. Moreover, there is a reason why we commonly use that image of a ladder, with rungs. If you never get on the first rung, all the higher rungs are also beyond your reach. The poor can never get ahead. Let them get their foot on at the bottom, and they may.

And again, no minimum wage law can be enforced beyond Canada's borders. Make sure that no Canadian's labour can be got for less than, say, ten dollars an hour, when a Chinese worker can be got for one dollar an hour, and where are all the new factories going to be built? Where are all the services going to be sourced? Instead of improving the lot of the Canadian poor, you are shovelling money off to China.

Granted, you are probably thereby improving the lot of the Chinese poor. And thqat is a good thing. But racial discrimination is not: Canadians ought to be given an equal chance at those jobs, if they want them.

Darwinian Economics

An old joke describes a camper who awoke to see his friend frantically putting on his running shoes as an angry bear approached their campsite. “Why bother?” he asked. “Don’t you know there’s no way you’ll be able to outrun that bear?” “I don’t have to outrun him”, the friend responded, “I just need to outrun you.”

Economist Robert Frank offers a useful corrective to pure free market economics. The pure free market theory is based on the notion that, if everyone simply pursues their self-interest, the result, by Smith's “invisible hand,” will be good for everyone. Looking instead at Darwin's theory of evolution, Frank pointss out that this is usually, but not always, so. Sometimes what works for survival of the individual does not work out for survival of the species. The Irish elk grew antlers up to 3.65 metres wide. This was very useful when competing with other Irish elk in the annual mating competition. It was an advantage for the individual. It was a hindrance when passing therough forested areas, allowing the elk to be trapped by predators. It was against the best intererests of the Irish elk as a species. Granted, the obstructing powerr of the antlers was also a disadvantage to the individual; but the mating advantage of the large antlers more than couinterbalanced this, while doing nothing of advantage for the species.

The Irish elk became extinct 7,700 years ago. In truth, biologists are not sure why it became extinct, but bear with me and accept that it could have been this odd antlerian arms race, for the sake of argument.

For it illustrates something that can surely happen in economics as well, letting the individual good diverge from the common good. Hockey players, if left freee to choose, will almost alsways opt to play without a halmet. It improves their field of vision and gives them a competitive advantage. But they almost all prefer a rule requiring halmets. The problem is, they do not want to get their brains bashed out, but so long as anyone else is not wearing a halmet, they feel they must not to compete.

You can see, then, why regulation of the pure free market may well sometimes be in eveyone's best interests.

Citizens! Awake!

Here is a cause that is near and dear to my heart. I cannot meaningfully sign their petition, but if you live in Ontario, Canada, please do consider signing it.

http://www.naturalmilk.org/

It is about allowing the legal sale of raw milk and raw milk products in Ontario. There are a number of issues here: the free market, the right of an individual to choose for himself, the right to work (as a farmer). And, as a practical matter, the right to the hobby of cheesemaking, which falls for some of us under the heading of the pursuit of happiness.

You just can't make decent cheese with pasteurized, homogenized milk, and preventing the public from acquiring it enforces a cheese monopoly.