Free Markets – Page 45 – artdiamondblog.com

The Market Solution to Email Spam

A COMPANY called Goodmail Systems thinks it has come up with a potential (and partial) solution to the problem of spam and fraud on the Internet. According to Goodmail, market forces are the answer, rather than the kinds of ineffective regulations that have so far failed to solve the problems.
. . .
What shocks me most about the opposition to Goodmail is that people who claim to believe in the free and open Internet, with its welcome attitude to innovation, want to shut down an idea. That’s wrong.
If people like those little stamps that mark their mail as safe and wanted or as commercial transactions, then let the customers have them. And let other companies compete with Goodmail to offer better and less expensive service.
Goodmail isn’t good because it’s new, but neither is it bad because it’s new. If it’s a good model, it will succeed and improve over time. If it’s a bad model, it will fail. Why not let the customers decide?

For the full commentary, see:
ESTHER DYSON. “You’ve Got Goodmail. The New York Times (Fri., March 17, 2006): A23.

Contrasting Planners with Searchers in Economic Development

Source of book image: http://www.amazon.com/gp/product/1594200378/sr=8-1/qid=1143511279/ref=pd_bbs_1/102-0403843-7507349?%5Fencoding=UTF8

A professor at New York University and a senior fellow at the Center for Global Development, Easterly spent most of his career as an economist at the World Bank. He had to leave that job after publishing his iconoclastic 2001 book, “The Elusive Quest for Growth,” which skillfully combined a history of economists’ growth theories with a devastating empirical analysis of the failure of international efforts to spur third world development. The book’s theme was “incentives matter.”
In “The White Man’s Burden,” Easterly turns from incentives to the subtler problems of knowledge. If we truly want to help the poor, rather than just congratulate ourselves for generosity, he argues, we rich Westerners have to give up our grand ambitions. Piecemeal problem-solving has the best chance of success.
He contrasts the traditional “Planner” approach of most aid projects with the “Searcher” approach that works so well in the markets and democracies of the West. Searchers treat problem-solving as an incremental discovery process, relying on competition and feedback to figure out what works.
. . .
“The White Man’s Burden” does not match “The Elusive Quest for Growth” as a tour de force. Easterly is doing something harder here: not merely cataloging past failures but trying to suggest a more promising approach. Unfortunately, his alternative is still underdeveloped, devolving at times into slogans.
After all, Searchers plan, too. The question is not whether to plan, but who makes the plans, how they are changed and where feedback comes from. “The White Man’s Burden” underplays the essential role of competition, not only in markets but between political jurisdictions.

For the full review, see:
VIRGINIA POSTREL. “The Poverty Puzzle.” The New York Times, Section 7 (Sun., March 19, 2006): 12.
For Easterly’s latest book, see:
Easterly, William. The White Man’s Burden: Why the West’s Efforts to Aid the Rest Have Done So Much Ill and So Little Good. The Penguin Press, 2006. 436 pp. $27.95.

The Case Against Privatizing the Post Office

The free market can be defended with a variety of plausible philosophical arguments. But most people care more about what "works" than what is "right." So in the constant struggle between free markets and the government, it may be useful to maintain the government’s monopoly in delivering first class mail. That way when someone suggests a new intervention by the government, the free marketer can refute them with two persuasive words: "post office."

When it comes to first-class mail, the U.S. still does things the old-fashioned way, with one Postal Service. Not so in places like New Zealand and Sweden, which have opened their mail systems to private companies. The latest is Britain, where the Royal Mail lost its 350-year monopoly on delivery. At least 14 companies are now competing to sort and transport mail. British regulators believe competition will be good for the mail system. Japan is soon to follow. With the recent rise in U.S. stamp prices, expect more calls for privatization here too.

Source:

Lyric Wallwork Winik. "Intelligence Report; Is the Mailman Endangered?" Parade (Sun., March 19, 2006): 25.

Fascism’s “Most Notable Achievement Was that It Survived as Long as it Did”

Source of image of book cover: Amazon.com.

Some experts on National Socialism have concluded that its economy was not as efficient as usually believed. According to a recent expert, facism also was not a very efficient economic system (in spite of its oft-mentioned reputation for the trains running on time):

(p. B36) Yet for all the personality cult, the regime’s most notable achievement, as Mr. Bosworth sees it, was that it survived as long as it did. Virtually irrespective of where it set its sights — culture, science, economics, let alone the military — its performance persistently fell short of its discredited Liberal predecessor’s.

Note: in the review, “liberal” refers to 19th-century liberals. E.g.:

(p. B36) Like their 19th-century peers from Belgium to Romania, Italian Liberals yearned for a common flag, parliament, economy, identity, even empire. To a point, the truths held to be self-evident north of the Alps worked in Italy, too. But the transition to constitutional government was a work in progress, where progress needed all the help it could get.
By 1914, it was clear that it would take more than a constitutional monarchy, a railroad, a gold-based currency and African colonies to overcome the limits imposed by geography, culture and history. Eager to play with the big powers, Italians were not only poor, illiterate and economically underdeveloped, they were also allergic to any state, modern or otherwise. This would include dictatorship.

For the full review, see:
DAVID SCHOENBAUM. “Books of The Times | ‘Mussolini’s Italy’; Where Fascism Was Stylish and Vicious, if Ineffectual.” The New York Times (Fri., March 3, 2006): B36.

The book is:
R. J. B. Bosworth. MUSSOLINI’S ITALY: Life Under the Fascist Dictatorship, 1915-1945. Penguin Press, 2006. Illustrated. 692 pages. $35. ISBN: 1594200785

R.J.B. Bosworth. Source of image: NYT book review quoted and cited above.

Occupational Licensing Does More Harm Than Good

Source of book cover image: http://www.upjohninst.org/publications/titles/lo.html

(p. C3) It is well known that doctors, dentists, and lawyers must be licensed to practice their professions. But what about occupational therapists, manicurists and barbers? How about fortune tellers, massage therapists, shampoo assistants, librarians, beekeepers, electrologists and movie projector operators? These are just a sampling of the hundreds of occupations that require a license in at least some states or counties.

In a new book, “Licensing Occupations: Ensuring Quality or Restricting Competition?” (Upjohn Institute, 2006), Morris M. Kleiner, an economist at the University of Minnesota, questions whether occupational licensing has gone too far. He provides much evidence that the balance of occupational licensing has shifted away from protecting consumers and toward limiting the supply of workers in various professions. A result is that services provided by licensed workers are more expensive than necessary and that quality is not noticeably affected.
. . .
Several studies have examined the effect of license requirements on performance in occupations like dentists and teachers. In one study, Professor Kleiner and a colleague, Robert T. Kudrle, found that stricter state licensing requirements for dentists did not noticeably affect the dental health of 464 Air Force recruits. Other studies have found at best weak evidence that students in classes taught by licensed teachers performed better than those taught by unlicensed teachers.
Summarizing the literature, Professor Kleiner concludes, “there is little to show that occupational regulation has a major effect on the quality of service received by consumers.”
At the same time, the hurdles imposed by occupational licensing reduce the supply of workers in many regulated professions, which drives up wages in those jobs and the price of services. Dentists, for example, were found to earn and charge 11 percent more in states with the most restrictive licensing requirements. While tough licensing standards may help higher-income consumers avoid low-quality providers, it also appears to prevent lower-income consumers from gaining access to some services.

For the full commentary, see:
Krueger, Alan B. “Economic Scene; Do You Need a License to Earn a Living? You Might Be Surprised at the Answer.” The New York Times (Thurs., March 2, 2006): C3.
(Note: ellipsis added.)

You want more evidence? OK, here’s more evidence:

(p. A20) BISMARCK, N.D., Oct. 10 (AP) – The State of North Dakota is exploring whether people who sell items on eBay for others must get standrd auctioneers’ licenses, a process that includes taking instruction in talking real fast.

To get a license in the stare, aplicants must pay a $35 fee, obtain a $5,000 bond and undergo training at one of eight approved auction schools, where the curriculum includes rapid-fie speaking, breathing control and reading hand gestures.
“I don’t think it offers any additional protection for the consumer,” said Mark Nichols, who runs a small consignment store in Crosby. “It just creates a lot of red tape for the business, as well as having to put out a lot of money.”

For the full story, see:
“North Dakota Weighs Auction License for Some eBay Sellers.” The New York Times (Tues., Oct. 11, 2005): A20.

For Kleiner’s book, see:
Morris M. Kleiner. Licensing Occupations: Ensuring Quality or Restricting Competition? Upjohn Institute, 2006.

The Centrally Planned Economy: “Why doesn’t Wuhan have heating?”

Li Qiao tries to stay warm in unheated apartment in Wuhan. Source of image: online version of WSJ article cited below.

(p. B1) WUHAN, China — As a winter wind howled through this central Chinese city, university lecturer Li Qiao settled down in his two-bedroom apartment for what should have been a cozy evening of reading. Around his apartment were signs of China’s new prosperity: a color television, refrigerator, washing machine and air conditioner. The only thing missing: heating.
Even though winter temperatures in Wuhan dip into the 30s with occasional snow, virtually none of the city’s homes are heated. “The cold is cutting into my bones,” lamented Mr. Li, who was bundled up in a down coat and a quilt, with an electric heater blowing warm air toward him. “Why doesn’t Wuhan have heating?”
Mr. Li isn’t the only one asking. Heating systems are one of the last areas that remain under China’s former centrally planned economy, with government regulators still setting the thermostat for homes, classrooms and offices across the country. Under the policy, which dates back to Mao Zedong in the 1950s, the government provides heat in the northern half of China, and, to save money, it provides no heat in the southern half. As a result, northerners often wilt in steaming apartments, while those in southern provinces shiver through the winter.
With no heat, even residents of modern cities like Shanghai spend much of the winter trying to get warm.
. . .
(p. B2) Mr. Li, the university teacher, and his wife ward off the cold air that seeps into their apartment at the university with an electrical heater, a hot-air fan and a wall unit air-conditioner that also blows out heat. At night, they wriggle into long underwear before piling under two sets of thick quilts. Although he has a three-hour lunch break, Mr. Li seldom goes back to his apartment, opting instead to hole up in his heated office.
His students aren’t so lucky. Classrooms aren’t heated, so they listen to his lectures swathed in down jackets, caps and gloves. Some students even carry hot-water bottles to keep their hands warm and cushions to place on the icy chairs.

For the full story, see:
Cui Rong. “China’s Winter of Discontent; Mao-Era Policy Provides Heat Up North but None in South; Shivering Citizens Are Fed Up.” The Wall Street Journal (Tues., March 14, 2006): B1 & B2.

Source of graphic: online version of WSJ article cited above.

Ethanol Serves Agricultural Lobby

The U.S. imposes a 54-cent-a-gallon tariff on Brazilian ethanol, to discourage competition with domestic ethanol, which receives a 54-cent subsidy from taxpayers. The European Union just slapped new duties on Pakistani ethanol.

This should lay bare the fraud that what’s going here has anything to do with energy security. It has only to do with the agricultural lobby masquerading its interests behind foolish and misleading rhetoric about energy security.

Take the pressure for flex-fuel mandates, requiring auto companies to build cars capable of running on 85% ethanol. Unmodified cars can already burn fuel comprised 10% of ethanol. If we were honestly keen on diversifying supply and squeezing out imported oil, we’d throw open our dense coastal markets to ethanol producers in Brazil, India, Pakistan, Nigeria and Thailand, displacing perhaps 10 billion gallons of current gasoline use without any vehicle modification or taxpayer subsidy at all.

For the full story, see:

HOLMAN W. JENKINS, JR. "BUSINESS WORLD; What’s Wrong with Free Trade in Biofuels?" The Wall Street Journal (Weds., February 22, 2006): A15.

Paternalistic FDA Violates Patients’ Freedom to Choose

The notion that the FDA should “err on the side of safety” sounds like a tautology but is an affront to patients with incurable or poorly treatable diseases: For them, there is no safety in the status quo, and we only damage them further with paternalistic public policy that prevents individuals from exercising their own judgment about risks and benefits. If the FDA must err, it should be on the side of patients’ freedom to choose.

For the full commentary, see:
HENRY I. MILLER. “Paternalism Costs Lives.” The Wall Street Journal (Thurs., March 2, 2006): A14.

EU Free Market Undermined by National Protectionism

BRUSSELS — After French and Dutch voters killed the EU constitution last year, its framers fretted that Europe couldn’t function without their bloated document. That was always laughable. But driven by economic insecurity, those failed referendums, particularly in France, ended up calling into question the very foundation of the EU, a common and free market.
It didn’t take politicians long to take this message to heart. In recent weeks, the idea and reality of a single European market has come under threat. From France to Spain, from Luxembourg to Italy and even newcomer Poland, economic nationalism is gaining strength, evoking memories that the European project was created expressly to bury. Neelie Kroes, the EU’s competition commissioner, told me that these developments “risk taking Europe into a 1930s-style downward spiral of tit-for-tat protectionism.” This sensible Dutchwoman is not prone to hyperbole, and hardly alone in voicing the concern.
This winter, France made 11 sectors, from data security to (bizarrely) casinos, off limits to foreign buyers. And together with Luxembourg, Paris opposed a mooted merger between the world’s biggest steel companies, Mittal and Arcelor. (The protectionist furies so far haven’t managed to sink Mittal’s hostile bid.)
Prime Minister José Louis Rodríguez Zapatero also wants to keep the energy sector in Spanish hands. When Germany’s E.On moved to trump a rival Spanish bid from Gas Natural for the utility Endesa, Mr. Zapatero gave the regulator wider powers to block the takeover.
The most audacious national block was yet to come. Two weeks ago, France stepped in to stop Italy’s Enel from acquiring Suez by forcing through a shotgun wedding between the publicly owned Suez and state-owned Gaz de France. This tie-up epitomized Prime Minister Dominique de Villepin’s notion of “economic patriotism.” The Italians saw only economic protectionism, which the country’s central bank governor, Mario Draghi, said was “doomed to failure.” But Rome can’t easily claim the moral high ground, having shielded its banking sector for more than a decade.
The single market isn’t doing well on other fronts either. Last month, the European Parliament, with lawmakers following orders from their capitals, emasculated legislation that would have freed up the EU’s services market. A free market for services, by some estimates, would have added 0.7% to Europe’s GDP and created some 600,000 jobs.

For the full commentary, see:
DANIEL SCHWAMMENTHAL. “Common Market? Think Again!” The Wall Street Journal (Mon., March 13, 2006): A19.

In Canada: Dog Health Care Better than Human Health Care?

VANCOUVER, British Columbia, Feb. 23 – The Cambie Surgery Center, Canada’s most prominent private hospital, may be considered a rogue enterprise.
Accepting money from patients for operations they would otherwise receive free of charge in a public hospital is technically prohibited in this country, even in cases where patients would wait months or even years before receiving treatment.
But no one is about to arrest Dr. Brian Day, who is president and medical director of the center, or any of the 120 doctors who work there. Public hospitals are sending him growing numbers of patients they are too busy to treat, and his center is advertising that patients do not have to wait to replace their aching knees.
The country’s publicly financed health insurance system — frequently described as the third rail of its political system and a core value of its national identity — is gradually breaking down. Private clinics are opening around the country by an estimated one a week, and private insurance companies are about to find a gold mine.
Dr. Day, for instance, is planning to open more private hospitals, first in Toronto and Ottawa, then in Montreal, Calgary and Edmonton. Ontario provincial officials are already threatening stiff fines. Dr. Day says he is eager to see them in court.
”We’ve taken the position that the law is illegal,” Dr. Day, 59, says. ”This is a country in which dogs can get a hip replacement in under a week and in which humans can wait two to three years.”
. . .
The median wait time between a referral by a family doctor and an appointment with a specialist has increased to 8.3 weeks last year from 3.7 weeks in 1993, according to a recent study by The Fraser Institute, a conservative research group. Meanwhile the median wait between an appointment with a specialist and treatment has increased to 9.4 weeks from 5.6 weeks over the same period.
Average wait times between referral by a family doctor and treatment range from 5.5 weeks for oncology to 40 weeks for orthopedic surgery, according to the study.

For the full article, see:
CLIFFORD KRAUSS. ” Canada’s Private Clinics Surge as Public System Falters.” The New York Times (Tuesday, February 28, 2006): A3.

Tom Friedman’s The World is Flat, is Worth the Wait

Source of the graphic is page 1 of: MICHAEL O’CONNOR. “Library may help turn borrowers into buyers.” Omaha World-Herald (Saturday, March 4, 2006): 1 & 2.
If you live in Omaha, and want to check out a copy of Thomas Friedman’s pro-trade and globalization best-seller The World is Flat, it looks as though you’re going to have to wait awhile. While you’re waiting, you may want to read his earlier, and in some ways better, The Lexus and the Olive Tree. It is better in its discussion of the importance of Schumpeterian creative destruction, and better in terms of the coherence and flow of the argument.
See:
Friedman, Thomas L. The Lexus and the Olive Tree. New York: Anchor Books, 2000. [ISBN # 0-385-49934-5]
Friedman, Thomas L. The World Is Flat: A Brief History of the Twenty-First Century. New York: Farrar, Straus and Giroux, 2005.