Category Archives: regulation

governance

Short-term Stimulus with Long-term Benefits

Please pardon my absence.  (I didn’t know that I had a few regular readers.)  I have been waiting to see the new administration’s true colors.  Although it is still too early to know them, I am beginning to once again feel compelled to sow my little seeds of thought.  So here is one:

What should the government do to help the economy?

First of all, do not save the companies that crashed full speed into this mess.  They did that despite glaringly obvious signs that trouble lay ahead.  Instead of being careful, short sighted business leaders and investors obsesivly followed unsustainable economic incentives.  If we keep them around to lead after the economy recovers, then they will do the same thing out of habit.

While we are getting rid of those bums, re-invigorate the economy in the short-term by investing in projects that have long-term benefits.  Besides investing in sustainable home-made energy sources and transpertaion networks to do that, also fund education.  Give students or their parents vouchers that will fund the hiring of more teachers.  Give shcools vouchers for hiring construction workers to improve their buildings.  Save the commercial publishing industry, (and access to their low-cost content), by sponsoring a nation-wide marketing campaign that targets the audience of every publication.  Have it encourage American’s to value education, hygiene, and courteousness.  Employ graduates by sponsoring research and developement of technologies that are more efficient.  Then give the results to domestic employers.  Investment in these kinds of economic fields will yield short-term stimulus while providing long-term benefits.

The culture of American business and the irresponsible consumerism it fostered are what caused most of our economic and environmental problems.  The business environment encourages corporate gluttony.  And its leaders are familiar with only that system.  A fresh start is needed.  It is time to dismiss the old corporate guards to find new employment.  They should consider learning a new skill; a sustainable business skill.

In the meantime, our government must take charge.  Only the government has the resources and authority to correct the economy.  It can begin doing that by using short-term economic stimulous money to invest in labor-intensive endevours that provide long-term benefits.  While that is putting money back into the hands of wage earners, the government can reform market regulations.  A network that employs the most talented professionals can be created to develop a system of sustainable economic incentives.  Irresponsible business leaders, by their own hands, have given us this opportunity to replace them and their unsustainable ways.

Bryant Arms

Are Industry Bailouts Legal?

Aren’t the bailouts of industries by the US government a form of subsidies?  I thought those were supposed to be phased out according to international trade agreements.  Doesn’t the World Trade Organization, the North American Free Trade Agreement, and similar trade agreements with the United States threaten sanctions against member countries that introduce new subsidies to protect domestic industries?

The bailouts of the American auto industry and the American financial industry obviously help American businesses compete agianst foriegn businesses.  What will prevent those treaty members from suing for damages or sanctions as a result of the market warping subsidies given by the US government to American businesses?

Free Markets Need Rules?

It may seem to be a contradiction to describe something as free when it is bound by rules.  That is the case with free markets.  They exist only when specific rules are obeyed.  The banning of anti-competitive behavior exemplifies those rules.  When those rules are broken a free market becomes something else.

When left to their own devices, free markets self destruct. To understand why, focus your attention on how resources are redistributed in free markets.  Then a way to save free markets from themselves can be conceived.

Successful free market participants are rewarded with more resources than their competitors for their efforts.  (A buyer gets something that another buyer can not afford to buy.  And a seller makes a sale instead of another seller.)  The most successful competitors get extra resources.  Ideally these extra resources are used to increase supplies of whatever they offer.  This is supposed to happen until the price of these supplies become too low for less efficient competitors to stay in business.  This can conceivably lead to a monopoly.

That situation would be ideal if it does not afford the winner an opportunity to change the market’s rules and artificially inflate their advantage.  A monopoly’s, (or cartel’s), influence over the market’s rules is proportional to their share of the market.  The rules inevitably are changed to favor established sellers and become anti-competitive.  That violates free market rules.  A manipulated market is not free.

Free markets are worth preserving.  They bring as many sellers together with as many consumers as practicably possible.  Free markets most dependably give consumers what they demand until rules that protect established sellers happens.  Then the free market is subverted and becomes something else.  Rules defining free markets also need to help preserve them.

It is too bad that what makes free markets so desirable also gives successful participants an incentive to become domineering.  An equally impartial dis-incentive is needed for balance.  It is obvious that this dis-incentive needs to punish participants that begin to dominate a free market.

A free market rule that imposes a progressive tax on the value of market share can provide a plain and impartial method to preserve the market’s competition and innovation.  It can also provide an equitable source of government funding.  The tax could be scaled so that it diminishes the incentive of established market participants to gain market share until they have around 33% of market share.  Then that incentive can be completely canceled out.

The target of 33% can be optimized to maximize tax revenue.  Potential revenue for this kind of tax is only limited by the health and growth of the market.  That gives regulators a strong incentive to do what is really best for the market.