Free Markets – Page 14 – artdiamondblog.com

Refuting Claims of Bread Adulteration

(p. 67) . . . : The Nature of Bread, Honestly and Dishonestly Made, by Joseph Manning, M.D., . . . reported that it was common for bakers to add bean meal, chalk, white lead, slaked lime, and bone ash to every loaf they made.

These assertions are routinely reported as fact, even though it was demonstrated pretty conclusively over seventy years ago by Frederick A. Filby, in his classic work Food Adulteration (1934), that the claims could not possibly be true. Filby took the interesting and obvious step of baking loaves of bread using the accused adulterants in the manner and proportions described. In every case but one the bread was either as hard as (p. 68) concrete or failed to set at all, and nearly all the loaves smelled or tasted disgusting. Several needed more baking time than conventional loaves and so were actually more expensive to produce. Not one of the adulterated loaves was edible.

Source:
Bryson, Bill. At Home: A Short History of Private Life. New York: Doubleday, 2010.
(Note: ellipses added; italics in original.)

Bricks-and-Mortar Restaurants Use Police (Instead of Better Food) to Beat Food Trucks

“Kim Ima and Kenny Lao parked their food trucks on Front Street in Dumbo.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. D4) FOOD trucks, those rolling symbols of New York City’s infatuation with haute casual food, are suddenly being chased from Midtown Manhattan. In the last 10 days, the Treats Truck, which has sold cookies and brownies for four years during lunchtime at West 45th Street near Avenue of the Americas, has been told by police officers that it is no longer welcome there, nor at its late-afternoon 38th Street and Fifth Avenue location. The Rickshaw Dumpling truck, a presence for three years at West 45th Street near the Treats Truck, has been shooed away as well.

The police “have told us they no longer want food trucks in Midtown,” said Kim Ima, the owner of the Treats Truck, a pioneer of the city’s new-wave food-truck movement, who began cultivating customers on West 45th Street in 2007.
. . .
Mr. Lao and other food-truck operators said they suspect that the police are responding to complaints by brick-and-mortar businesses that resent competition. Such was the case last year, when store merchants on the Upper East Side complained about Patty’s Taco Truck, which sold tortas, tacos de lengua and cemitas on Lexington Avenue. The truck was towed several times and the operator arrested, prompting the Street Vendor Project, an advocate for vendors based at the Urban Justice Center, to file the lawsuit that resulted in Judge Wright’s ruling, which said food is merchandise that can be regulated.

For the full story, see:
GLENN COLLINS. “Food Trucks Shooed From Midtown.” The New York Times (Weds., June 29, 2011): D4.
(Note: ellipsis added.)
(Note: the online version of the story is dated June 28, 2011.)

“For the First 40 Years of Indian Independence, Entrepreneurs . . . Were Looked Down Upon”

(p. 8) Saurabh Srivastava, co-founder of the National Association of Software and Service Companies in India, explained that for the first 40 years of Indian independence, entrepreneurs here were looked down upon. India had lost confidence in its ability to compete, so it opted for protectionism. But when the ’90s rolled around, and India’s government was almost bankrupt, India’s technology industry was able to get the government to open up the economy, in part by citing the example of America and Silicon Valley. India has flourished ever since.

“America,” said Srivastava, “was the one who said to us: ‘You have to go for meritocracy. You don’t have to produce everything yourselves. Go for free trade and open markets.’ This has been the American national anthem, and we pushed our government to tune in to it. And just when they’re beginning to learn how to hum it, you’re changing the anthem. … Our industry was the one pushing our government to open our markets for American imports, 100 percent foreign ownership of companies and tough copyright laws when it wasn’t fashionable.”

If America turns away from these values, he added, the socialist/protectionists among India’s bureaucrats will use it to slow down any further opening of the Indian markets to U.S. exporters.

For the full commentary, see:
THOMAS L. FRIEDMAN. “It’s Morning in India.” The New York Times, Week in Review Section (Sun., October 31, 2010): 8.
(Note: the online version of the story is dated October 30, 2010.)

“If We Actually Want to Change Anything–Dedicate Our Lives to It–We Need to Make Money Doing It”

“The underground market seeks to encourage food entrepreneurship by helping young vendors avoid the costs — including for health permits and liability insurance — required by legitimate farmers’ markets. Neil Davidson prepared part of a Hawaiian breakfast dish for a customer.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A1) SAN FRANCISCO — . . .
. . .
At midnight, the smell of stir-fried pork bellies was wafting through the Mission district. There was live music, liquor, bouncers, a disco ball — and a line waiting to sample hundreds of delicacies made mostly on location, among them bacon-wrapped mochi (a Japanese rice paste) and ice cream made from red beets, Guinness and chocolate cake.
In a sense it is civil disobedience on a paper plate.
The underground market seeks to encourage food entrepreneurship by helping young vendors avoid roughly $1,000 a year in fees — including those for health permits and liability insurance — required by legitimate farmers markets. Here, where the food rave — call it a crave — was born, the market organizers sidestep city health inspections by operating as a private club, requiring that participants become “members” (free) and sign a disclaimer noting that food might not be prepared in a space that has been inspected.
. . .
(p. A12) Where psychedelic drugs famously transported another self-conscious San Francisco generation, the rebel act of choice by Valerie Luu, 23, a first-generation Vietnamese chef, is deep-frying string cheese in a cast-iron pan.
“When I was their age I was doing drugs and going to rock shows,” said Novella Carpenter, an urban farmer and author who recently got into a spat with the City of Oakland for selling chard and other produce at a pop-up farm stand without a permit. “That’s not their culture,” she continued. “Their culture is food — incredible yummy-tasting food.”
. . .
The underground market here, which also has a less chic daytime component, was started by Iso Rabins, 30, the founder of ForageSF, a company that began with foraging walks and dinners featuring dishes like wild nettle soup with crème fraiche.
He started in 2009 from a private home after observing that many friends could not afford to sell at farmers markets, which requires business and product liability insurance (around $250), space rental ($40 to $55 a day), yearly member fees (around $110), and a health and safety permit (about $500). The use of commercial kitchens would cost an additional $45 to $75 an hour, Mr. Rabins noted, and making jam can take eight hours or more. “The small-batch economics just don’t work,” he said.
The goal is to be an incubator for culinary start-ups, and be a profit-making venture. Vendors pay $50 to reserve a cooking space and return 10 percent of sales over $500 to ForageSF. “The feeling in the food community is that if you’re making money, it’s not something you’re passionate about,” Mr. Rabins said. “But if we actually want to change anything — dedicate our lives to it — we need to make money doing it,” he said.
Amateur cooks around the country are pushing to have the right to sell unlicensed goods directly to consumers. So-called “cottage food” laws that allow products considered nonhazardous, like pies and cookies, exist in 18 states, with five more considering similar legislation.

For the full story, see:
PATRICIA LEIGH BROWN. “They Gather Secretly at Night, and Then They (Shhh!) Eat.” The New York Times (Weds., April 15, 2011): A1 & A12.
(Note: ellipses added.)
(Note: the online version of the story is dated April 14, 2011.)

Estonia Re-Elects “Government that Continued to Embrace Laissez-Faire Capitalism”

(p. A5) MOSCOW — Early results in Estonia’s parliamentary election on Sunday showed the ruling coalition headed for a victory, in a remarkable show of support for a government that has imposed harsh austerity measures to lift the country out of recession.
. . .
The vote reflects approval for a government that continued to embrace laissez-faire capitalism during the painful months after the global downturn. After Estonia’s economy shrank nearly 15 percent, the state reduced its budget by the equivalent of 9 percent of gross domestic product. Demand fell steeply, and unemployment crept up, early in 2010, to 19.8 percent.
But in contrast to their neighbors in Latvia, where economic troubles led to riots and the government’s collapse, Estonians stoically absorbed the suffering. These sacrifices allowed Estonia to join the euro zone in January, a move its leaders hailed as a sign that the country was on its way to achieving Western European standards of living. Meanwhile, the economy has been projected to grow by 4 percent this year, and unemployment has dropped to around 10 percent, according to the Estonian Unemployment Insurance Fund.

For the full story, see:
ELLEN BARRY. “After Cuts, Voters Back Ruling Bloc in Estonia.” The New York Times (Mon., March 7, 2011): A5.
(Note: ellipsis added.)
(Note: the online version of the article is dated March 6, 2011.)

Koch Does Not Run with the Antelope

If you were standing amongst a herd of antelope when a dangerous predator arrived, you would not see the antelope defending themselves against the predator. What you would see would be their white rear ends disappearing in the distance.
Last July in Wichita I heard some executives from Koch Industries talking about Market-Based Management. A couple of them mentioned Koch’s stands in defense of the free market. As a result of these efforts, Koch Industries has become the target of many agencies of the government and of groups opposed to the free market. Once or twice I heard an executive say something like: ‘it would have been a lot easier if we had just painted our butts white and run with the antelope.’
Schumpeter thought that those in business would not defend the fortress of capitalism (CSD, p. 142). And the evidence suggests that Schumpeter was mainly right. But we can hope that there are enough exceptions, in unpretentious places like Wichita, to keep the fortress standing.

(p.A15) Years of tremendous overspending by federal, state and local governments have brought us face-to-face with an economic crisis. Federal spending will total at least $3.8 trillion this year–double what it was 10 years ago. And unlike in 2001, when there was a small federal surplus, this year’s projected budget deficit is more than $1.6 trillion.

Several trillions more in debt have been accumulated by state and local governments. States are looking at a combined total of more than $130 billion in budget shortfalls this year. Next year, they will be in even worse shape as most so-called stimulus payments end.
For many years, I, my family and our company have contributed to a variety of intellectual and political causes working to solve these problems. Because of our activism, we’ve been vilified by various groups. Despite this criticism, we’re determined to keep contributing and standing up for those politicians, like Wisconsin Gov. Scott Walker, who are taking these challenges seriously.

For the full commentary, see:
CHARLES G. KOCH. “Why Koch Industries Is Speaking Out; Crony capitalism and bloated government prevent entrepreneurs from producing the products and services that make people’s lives better.” The Wall Street Journal (Tues., MARCH 1, 2011): A15.

Koch’s book is:
Koch, Charles G. The Science of Success: How Market-Based Management Built the World’s Largest Private Company. Hoboken, NJ: Wiley & Sons, Inc., 2007.

The Story of Spielberg’s “World-Changing Movies” Deserves “a Detailed, Impassioned and Insightful Telling”

(p. 20) . . . , LaPorte combines tabloid celebrity worship with an older oddity: the incongruous fact that a free market also produces resentment, especially when a competitor like Spielberg demonstrates leadership, superior achievement and undeniable success. He’s one of the few filmmakers still committed to exploring the human condition — and in popular terms. This is what sets him apart and makes him admired, envied and even inscrutable to those who think only in craven terms of business and royalty.

. . .
So it’s a tabloid book. We can only hope it doesn’t become the historical record. LaPorte undermines her research with a headachy repetition of anonymous informants (“one insider,” “one former executive,” “one source”). She concludes that “inherent in all of it was hubris.” But a story this significant, about world-changing movies, doesn’t need homilies. It needs a detailed, impassioned and insightful telling, one that would help us better appreciate a frequently misunderstood, underinterpreted pop artist whose work connects with the public, defines the complexities of human experience and dwarfs most of contemporary Hollywood’s output. DreamWorks calls for a sensitive sociologist — a Tom Wolfe or a Norman Mailer or a Pauline Kael — who can discern the deep, divided heart of Hollywood.

For the full review, see:
ARMOND WHITE. “The Big Picture.” The New York Times Book Review (Sun., July 11, 2010): 20.
(Note: ellipses added.)
(Note: the online version of the review is dated July 9, 2010.)

The book White credibly pans is:
LaPorte, Nicole. The Men Who Would Be King; an Almost Epic Tale of Moguls, Movies, and a Company Called Dreamworks. New York: Houghton Mifflin Harcourt, 2010.

Insider Training Increases the Efficiency of Markets

(p. W2) As argued forcefully by Henry Manne in his 1966 book “Insider Trading and the Stock Market,” prohibitions on insider trading prevent asset prices from adjusting in this way. Mr. Manne, dean emeritus at George Mason University School of Law, pointed out that when insiders trade on their nonpublic, nonproprietary information, they cause asset prices to reflect that information sooner than otherwise and therefore prompt other market participants to make better decisions.

This achievement can have ramifications beyond a few percentage-point increases in productivity growth.
According to Mr. Manne, corporate scandals such as Enron and Global Crossing would occur much less frequently and impose fewer costs if the government didn’t prohibit insider trading. As Mr. Manne said a few years ago in a radio interview, “I don’t think the scandals would ever have erupted if we had allowed insider trading because there would be plenty of people in those companies who would know exactly what was going on, and who couldn’t resist the temptation to get rich by trading on the information, and the stock market would have reflected those problems months and months earlier than they did under this cockamamie regulatory system we have.”
Another potential benefit of lifting the ban on insider trading is explained by Harvard University economist Jeffrey Miron: “In a world with no ban, small investors might fear to trade individual stocks and would face a greater incentive to diversify; that is also a good thing.”

For the full commentary, see:
DONALD J. BOUDREAUX. “Learning to Love Insider Trading; Here’s a hot tip: Want to keep companies honest, make the markets work more efficiently and encourage investors to diversify? Let insiders buy and sell, argues Donald J. Boudreaux.” The Wall Street Journal (Sat., OCTOBER 24, 2009): W1-W2.

The book mentioned is:
Manne, Henry. Insider Trading and the Stock Market. New York: The Free Press, 1966.

Informal Sector Responded Quicker to Quake than Established Companies

“In Port-au-Prince . . . , Haitian vendors peddled small bags of coal.” Source of caption and photo: online version of the NYT article quoted and cited below.

(p. A10) PORT-AU-PRINCE, Haiti — The price of candles in the teeming La Saline market here has climbed 60 percent since last week’s earthquake. A box of matches is up 50 percent. A package of Perdue Chicken Franks has gone up 30 percent.
. . .
Haiti’s huge informal sector reacted faster to the quake than did established companies and banks. Outdoor markets like La Saline are already filled with goods from the countryside, including salt, cornmeal, fruits like mangoes and used clothing from the United States.
. . .
“People want candles because they have no electricity or fuel for their generators,” said Manouchka Wendiwou, 21, a vendor in La Saline who raised her candle prices by 60 percent and made no apology for charging what the market would bear.

For the full story, see:

SIMON ROMERO. “Economy in Shock Struggles to Restart.” The New York Times (Fri., January 22, 2010): A10.
(Note: ellipses added.)
(Note: the online version of the article is dated January 21, 2010.)

More Economic Freedom in World (But Not in U.S.)

Source of table: online version of the WSJ article quoted and cited below.

(p. A15) Riots in Greece and France! An IMF bailout for Ireland! The Euro under threat! A new government in London! Tea parties in America! Is it the end of capitalism? Many were predicting just that last year.

The 2011 Index of Economic Freedom, released today by the Heritage Foundation and The Wall Street Journal, tells a different story. The Index records countries’ commitment to the free enterprise/capitalist system by measuring 10 categories of economic freedom: fiscal soundness and openness to trade and investment, government size, business and labor regulation, property rights, corruption, monetary stability and financial competition.
The good news this year? One hundred and seventeen countries, mainly developing and emerging market economies, improved their scores, and the average level of economic freedom around the world improved by about a third of a point on the Index’s 0 to 100 scale.
. . .
For the U.S. and the U.K., the Index of Economic Freedom confirms what those countries’ voters already knew, that there is an urgent need for real change. The U.S. dropped to ninth place in the 2011 Index from eighth (its lowest economic freedom score in a decade), and the UK fell all the way to 16th place from 11th.

For the full commentary, see:
TERRY MILLER. “The U.S. Loses Ground on Economic Freedom.” The Wall Street Journal (Weds., JANUARY 12, 2011): A15.
(Note: ellipsis added.)
(Note: the last sentence quoted above is the slightly more informative print version rather than the slightly less informative online version.)

Trade Stats Count iPhone as Chinese Export, Despite Only 3.6% of iPhone Costs from China

Source of graph: online version of the WSJ article quoted and cited below.

(p. B1) . . . two academic researchers estimate that Apple Inc.’s iPhone–one of the best-selling U.S. technology products–actually added $1.9 billion to the U.S. trade deficit with China last year.

How is this possible? The researchers say traditional ways of measuring global trade produce the number but fail to reflect the complexities of global commerce where the design, manufacturing and assembly of products often involve several countries.
“A distorted picture” is the result, they say, one that exaggerates trade imbalances between nations.
Trade statistics in both countries consider the iPhone a Chinese export to the U.S., even though it is entirely designed and owned by a U.S. company, and is made largely of parts produced in several Asian and European countries. China’s contribution is the last step–assembling and shipping the phones.
So the entire $178.96 estimated wholesale cost of the shipped phone is credited to China, even though the value of the work performed by the Chinese workers at Hon Hai Precision Industry Co. accounts for just 3.6%, or $6.50, of the total, the researchers calculated in a report published this month.

For the full story, see:
ANDREW BATSON. “Not Really ‘Made in China’; The iPhone’s Complex Supply Chain Highlights Problems With Trade Statistics.” The Wall Street Journal (Thurs., December 16, 2010): B1 & B2.
(Note: ellipsis added.)
(Note: the online version of the article is dated DECEMBER 15, 2010nd that were not in the print version.)

The research report breaking down iPhone costs by country is:

Xing, Yuqing, and Neal Detert. “How the Iphone Widens the United States Trade Deficit with the People’s Republic of China.” ADBI Working Paper Series, no. 257, December 2010.