Does "Income" Have Any Meaning?

You say to me, "Please hold this apple for thirty seconds and return it to me." I then take the apple, and return it to you. Did you just make "income"?

Then you say to me, "Please hold this 25-cent apple for thirty seconds, and then return either the apple or 25 cents to me." I take the apple and return 25 cents to you. Now did you just make "income"?

If you answered the first question with a "yes", then please explain how you just became richer by shuffling an apple across a table and back.

If you answered the first question with a "no" and the second question with a "yes", then please explain how replacing your property with something of equal value has made you richer.

Obviously, there is something very wrong with the idea of "income".

Point #1: What About Expenses?

Let's say you give me an apple in exchange for my tomato. What is your income? A) The "market value" of the tomato? Or B) The extra gain in your pleasure derived from trading up from an apple to a tomato?

If you answer (A), then if you pay $1000 for a box of apples and sell them at a loss for $900, your "income" is nevertheless $900. You just got $900 richer! Would you care to pay taxes on this $900?

Now let's say you spent your last four years in school, paying tuition. You graduated and now have a job. What is your income from this job? What you see in your paycheck? Or, should your "true" income reflect the cost of your tuition? And the several years of forgone income when you went to school instead of having a job? Aren't those expenses similar to the $1000 you paid for the apples?

Let's say that your job happens to pay $100K per year, and that you would not have accepted less than $75K for this job. That is, the job is "worth" $75 to you. Wouldn't your gross income therefore be $25K? Isn't that $25K similar to your gain in trading up from an apple to a tomato?

So, when we see that someone has an income of, say, $500K, what does that really mean? If we don't know how much was invested to get that $500K, how much was forgone to get that $500K, and what your "trade up" gain (i.e., your marginal utility) was to get that $500K...then we really don't know what your income is.

Point #2: Exchange results in "income" in both directions

You sell me an apple for 25 cents. You gained 25 cents and I gained an apple. Your income is 25 cents and my income is an apple. Of course, you are not really 25 cents richer -- and that's because you had to surrender an apple. And I am not richer by an apple -- because I had to surrender 25 cents. But yet, we are both richer because if either one of us did not gain, then the exchange would not have taken place. By how much are we richer? You are richer by the 25 cents less the value of that apple. And I am richer by how much I value that apple less 25 cents. And it is very very difficult to calculate those amounts.

But the main point here is that that "income" accrues to both parties. But that is rarely recognized. To say nothing, of course, of actually calculating what those two incomes actually are.

Point #3: "Income" is a pejorative term for "adding value".

You sell apples for 25 cents each. Your customers place a value on these apples of at least 25 cents each. (If they valued each apple at less than 25 cents, they would be pretty stupid to buy any.) But many customers undoubtedly place a higher value on the apples. Some of your customers (but you don't know which ones) would pay 35 cents and are getting a 10 cent discount.

That is, you are making all of your customers better off by selling those apples. Some are made a little better off, and some are made a lot better off. But they all, via a simple exchange, now posses greater value. If you sold four apples, you just increased value by one dollar. And if your four customers secretly would have paid 50 cents for each apple, then you just (unwittingly) increased value by two dollars.

So, why must people say that others "make money" instead of "create value"? Isn't the point of the transaction to create value? My guess is that envy drives people to tear down those who are productive -- and demonize them by casting them as criminals who are undeserving of their wealth.

The crime is "income" and the penalty is "redistribution". They're both meaningless terms that are part of the lexicon of leftist/statist propaganda -- and this malignant ignorance has been threaded into the popular culture so successfully that it is universally accepted as a mass virtue, to the detriment of almost everyone.

Is It OK To Confiscate Jewish Assets?

Regarding Europeans complicit in The Holocaust:

The Hungarian government used the assets seized from Jews to extend its pension system and reduce inflation.

And how is this different from seizing assets of people making more than X dollars for government purposes? Are we supposed to feel revulsion at the confiscation of Jewish assets, but feel that it is proper to take the assets of affluent (i.e., productive) people? Why?

Also: Given that Jews tend to be among the most affluent people, and tend to pay higher than average taxes, could it be that the American tax system is in violation of "disparate impact" laws?

Are "Bailouts" and "Economic Stimuli" Effective?

Of course not.

Unless you define "effective" as the compulsory transfer of property from a productive person to another who has not earned it.

And, unless you define "effective" as reducing overall wealth; e.g., "The economic stimulus has was effective in making people poor."

Let's examine a simple case where there are only three people in the world; you, me, and a politician. And let's say that you grow potatoes, I do nothing, and the politician does politics. One day, the politician declares that the economy of our three-person society will be better off with a "stimulus" comprised of you giving me a large bag of potatoes. The idea, according to the politician, is that I will spend my new wealth -- which will "stimulate" the economy.

OK, I then spend my new wealth on...well, your potatoes -- because that's the only thing to buy in our world. We can obviously simplify this process by declaring that some of what you produce must be given to me. This makes me richer and you poorer, with a net effect of zero. Unless, of course, you grow tired of wasting your effort to produce things for ungrateful people who choose to not work, and you cut back on potato growing. In that case, the net effect of the "stimulus" is negative. That is, I am richer -- but you grow more poor than I have grown rich.

But the politician might say that if I was loaned a few potatoes, as in a "bailout", I would then have the energy to create a potato-mashing machine that would make everyone better off. However, if my machine would make you better off, then you would voluntarily lend me potatoes so that I could make my machine. The fact that the politician is forcing you to give me potatoes ought to set off alarms about the viability of my machine plans.

The real world is obviously more complex that this example, but the principles are the same:

1. The net economic effect of taxation (i.e., forcibly transferring things from the productive to the unproductive) is, at best, zero -- and is probably negative.

2. The morality of the above point is summed up in a word called "stealing". Or, if you resist the theft, you can add the terms, "aggravated harassment", "menacing", and "assault".

3. Back to economics, encouraging people to buy things makes others worse off. If the "economic stimulus" money is used by the unproductive to buy things, then there will be fewer things for the productive to enjoy. The only way to increase affluence is though abundance, and the only way to increase abundance is through production. And if the recipients of "stimulus money" are not producing, then there will be no increase in wealth.

Now, one might say, "Hold on fella, poor people need the money!"

Misleading as that assertion is, it is also unrelated to the stated purpose of a stimulus. You can try using the "poor people" argument to defend taxes, but that is not the same as a "stimulus" argument. And so are other irrelevant arguments, like taxation to correct for externalities. Whatever the merits of those arguments, they are nevertheless unrelated to a general "economic recovery" by way of taxation.

Why, you might ask, does not the citizenry therefore reject the demands of stimuli and bailouts? Because the appeal of utopia is too attractive to decline.

Does Welfare Stimulate The Economy?

It sure does, if you ask Congress and The President:

Deal Struck to Send Checks to Taxpayers

Most single taxpayers would get $600 and most two-wage households would get at least $1,200. The deal includes an additional amount of $300 per child. A total of 116 million taxpayers will receive checks of some size.

Why only $600? Imagine what $6,000 government checks would do.

Does anyone know what the disturbing phrase "stimulate the economy" actually means, anyway?

President Bush, saying the deal would give the economy a shot in the arm, urged quick passage.

"Our economy is structurally sound, but it is dealing with short-term disruptions in the housing market and the impact of higher energy prices," Bush said. "These challenges are slowing growth."

What, exactly, is he talking about? "Shot in the arm?" "Short-term disruptions in the housing market?" What is a "market disruption"?

Well, it appears that:

A) We might or might not have a "financial crisis", at least on paper.

B) If one group of people takes property from a second group of people, then apparently everyone benefits.

"This is a middle-class initiative to strengthen the middle class and those who aspire to be in the middle class," said Pelosi. She said the relief was targeted to "those who need the money and will spend the money."

Just make sure that the money stays out of the hands of people who do NOT need the money...

Is Wealth Acquired by Accident?

Is Wealth Acquired by Luck?

It is an accident that you just happened to be born to parents with the means to provide for you. And it is also by luck that you happened to be born in a country that permits you to get a decent job. And it is also your luck that you were not born in the 15th Century. And, for that matter, it was also a winning gamble that you were not born with a debilitating birth defect.

Further, you are lucky to have inherited characteristics that have enabled you to become wealthy -- whether it's a superior physical ability or a high IQ. And, perhaps your parents used those lucky genetic traits to accumulate wealth to pass to you in the form of an inheritance.

And it could be pure luck that enables you to have the patience and diligence to perform difficult, tiresome, and tedious work -- the sort of work that might make you wealthy.

But...you are, by definition, who you are. You are no more lucky that you were born rich than you are lucky that you weren't born a cockroach. There was never any chance that you would have been born a cockroach, and there was never any chance that you would have been born anything than what you are. If you were born as someone different, then "you" would not be "you".

So, what does all this mean? What are the implications? What is the "therefore..."?

Would it therefore be correct to say that "the implication is that wealth is not really earned, and should therefore be distributed to those who are less well-off?"

If the answer is "yes, my wealth is unearned and should be given to others", then you should give all your money to cockroaches. And maybe you should give your money to plants and bacteria as well.

Or, if you prefer to give to your own species (and why would you?), then your every last "lucky" penny could be transferred to the unlucky poor around the world. You would then be brought down to their absolute poverty, and they would not notice any change in their living standards. Ten million dollars is enough to give a penny to one billion poor people.

In the end, we would have one billion and one poor people.

Unless, of course, all the lucky people in the rich countries were forced to turn over everything they have to the folks in Burundi and Malawi. That way, everyone in the world can be unlucky. Problem solved.

Is the "Collapse" of Housing Prices a Good Thing?

Sure is.

If you think that lower gas prices, lower tuition prices, lower insurance premiums, etc. are a good idea, then why wouldn't lower house prices also be good? Because maybe you have a house to sell? Well, someone else has your house to buy, so that's good for that someone else.

Or perhaps it would be "good for the economy" if, say, food prices doubled because it would mean better times for supermarkets and food shippers?

Why didn't the "collapse" of the price of memory chips, and for that matter, almost all technologies, prove ruinous for the economy?

What is an "economy" anyway?

Ideally, housing prices should drop to nothing. Just as the price of everything should drop to nothing in an ideal world of unlimited abundance. Unfortunately, though, they won't -- so, if you own a house, you'll always be able to sell it for something.

And, probably for much more that what you originally paid -- notwithstanding "collapsing prices" hysteria.

Are Slavery Reparations a Smart Idea?

Are slavery reparations a smart idea?

No.

1. Some people (who happened to white) enslaved others (who happened to be black). How does this lead to, generations later, other people (who happen to be black) having a claim on the money of other people (who happen to be white)?

2. Having a claim on someone's money is the same as having a claim on the work they did to produce value. That is, reparations are also slavery. Therefore, legitimizing reparations is identical to legitimizing slavery. But if slavery is legitimized, then by what basis can anyone claim a right to the slavery known as "reparations" -- other than "you have something, so I'm taking it"?

For argument's sake, let's accept the fiction that white people's wealth (including white people who recently migrated to the USA) is somehow related to the slavery of black people many generations ago -- and that black people (even if they do not have American ancestry) have a claim on all white people:

3. If blacks have a claim on whites, then it's a safe assumption that Jews have a claim on Germans. But blacks also have a claim on (white) American Jews. So, would it be efficient to simply bypass the Jews and have Germans pay American blacks directly? Or do Jews have a bigger claim on Germans than blacks have on Jews? How does one calculate this?

4. Care to sort out the Balkans to figure out who owes what to whom?

5. Exactly how does one calculate the amount to be turned over, even in relatively clear cases? It would require the rewriting of history to estimate, among many possible outcomes, what would have happened if slavery had not occurred. Would American blacks otherwise be affluent? Or would there be no American blacks, as their ancestors would have been left in Africa?

And now, let's assume that we do have the ability to develop alternative outcomes, had slavery not happened:

6. The American enslavement of blacks, as we learned above, was not unique. Throughout history, each group had its turn to enslave (and murder) people in other groups. At which point do we rewrite history? At the start of American slavery? Or when man began to walk upright? Or in 1970? The selection of a start date changes everything, as the enslaved of yesterday might have been the slave owners on the day before.

Conclusion: Any group, any injustice, and any date can be selected to justify a claim of some people on others. If you go in with your mind made up that people in some category should take things from people in a different category, then it is a simple matter to choose your favorite history to justify anything.

Can Tax Cuts be Harmful?

Can Tax Cuts be Harmful?

Perhaps so.

In yesterday's Wall Street Journal, "Pete" du Pont points out that lower tax rates increase tax revenues. (The Heritage Foundation keeps a more permanent thesis on low taxes = more revenue here.)

So, let's accept this premise: Lower tax rates encourage production, which then raises incomes, which then increases government revenue. Win, win, win, win, win.

But what will the government do with this extra revenue? They will spend it. And they will spend it on either government employees or some other part of the parasitic sector: Expanded government agencies, new entitlements, idiotic programs, etc., etc., etc. And that will tend to shift people from productive work to the parasitic dole. Instead of being productive, they will be net consumers of resources.

Now, doesn't that bring us to a disturbing paradox; i.e., lowering taxes might actually expand the stagnating welfare state.

Does that mean that raising taxes might sometimes be beneficial precisely because it reduces government revenue?

Of course, there's some point where raising taxes, to say, 100% reduces revenue and productivity. But can a 1% tax increase be beneficial if it lowers government spending?

I don't know -- and apparently neither Pete nor The Heritage Foundation cared to look into this.

Should Cities Ban Jewish-Made Products?

Should Cities Ban Jewish-Made Products?

For that matter, should they ban black-made, female-made, homosexual-made, etc. products?

Well, why not? At least one city has no problem with banning Chinese products:

Florida city proposes ban on goods from China

Mr Mazziotti said: "I don't think people have the slightest idea how much is from China. I remind people every day. Pick up that label and see where it's made. You might surprise yourself.

"Palm Bay is not going to change the world but this raises public awareness."We are losing out on this war of economics. It's free trade for them but not for us."

His idea had received considerable support from Palm Bay's largely blue collar, 107,000-strong population, said Mr Mazziotti.His hope that other parts of America will follow suit may be fulfilled.

I don't think people have the slightest idea how much is made by Jews...

Can Slavery Be A Good Thing?

Yes it can.

In fact, when slavery is beneficial, it goes by the term "taxes." Of course, all taxes are harmful in some way, but they might be the best option in certain cases, such as with the provision of public goods like defense, pollution control devices, etc. In theory, private armies and police forces might be a pretty good idea, but we don't know for sure -- as empirical evidence is lacking.

Regardless, taxes are still slavery. How so? Well, it's easier to see in a barter system. Say that your job is trading apples. And whenever you trade two apples for other items, a bully comes along and forces you (with threats of violence) to give one apple to him without getting anything in exchange. Now, the bully can eat the apple or give it to someone else, but regardless, he forced you to produce an apple and hand it over. He forced you to work for his benefit. That is slavery.

If it happens that he gives your apple to someone who is not as affluent as you, then you are a slave who is indirectly working for a less-affluent master. And yet, this bothers relatively few people. In fact, the tangible benefits of slavery are often subordinate to the high morality of this sort of slavery. Redistributing apples is considered a valuable end in itself.

Which makes on wonder: Why does anyone object to slavery?

Once again, the answer has nothing to do with "freedom" or "rights" or any similar lofty abstraction. Instead, it once again comes down to envy. Slavery is considered bad if the slave masters are more affluent than the slaves -- but slavery is considered highly moral when the slave masters are less affluent than the slaves.

To summarize: Slavery can be a good thing under some circumstances -- and there will be no objection if it feeds into envy as well. Which, among other things, explains why modern-day slavery (taxation) is as popular as it is.

What is The Difference Between Buyers and Sellers?

Almost none.

To illustrate, consider barter: If I give you a potato in exchange for an orange, then who is the buyer and who is the seller? Now, if I gave you a potato in exchange for a slip of paper (or a credit card number) promising an orange next week, then, in the strictest sense, I am the seller and you are the buyer because I gave you a potato in exchange for an IOU; i.e., in exchange for money.

So, this simple example shows that there are two minor differences between sellers and buyers:

1. If a potato is exchanged for an IOU then it is "sold" by me and "bought" by you -- even though this could also be thought of as bartering the potato for an IOU, or bartering for money.

2. The terms "bought" and "sold" help define the direction of the good (and its reverse; the direction of the money).

(As an aside, this also related to gambling. If we exchange the potato and the orange today, we are betting that the relative value each item will not increase tomorrow.)

In the popular culture, however, buying and selling usually have false definitions. Instead of one being seen as the mirror of the other, the buyer is usually a selfless and relatively powerless consumer battling against a "greedy" seller who can dictate terms at will.

In fact, there are three categories of buyer to seller arrangements:

1. Many-to-One. This refers to many individual buyers trading with a handful of sellers. Generally, this includes consumers trading with airlines, insurance companies, banks, pharmaceutical companies, auto dealers, etc., etc., etc. In the popular culture, this category is often thought of as the only buyer/seller relationship.

2. One-to-Many. This is where many sellers trade with a few buyers. The best examples are companies that derive most of their sales from very few customers, such as Proctor & Gamble with Wal-Mart, franchisees and and franchisers, ComAir with Delta Airlines, Tyson Chicken and McDonald's, etc.

3. Many-to-Many: Lots of sellers and lots of buyers. eBay is probably the best example, although real estate and used cars are also fairly good examples.

4. One-to-One. This is where two separate entities work almost exclusively with each other. It's not common, but labor unions come to mind. Companies buy labor from a single union local, and the union local sells labor to that single company (although its influence is usually industry-wide).

For some reason, popular sympathies are neutral in Examples (2) and (3) -- but lean heavily towards the buyer in Example (1) and the seller in Example (4).

For example, in (1), consumer boycotts against specific companies are often considered appropriate, but company boycotts against specific consumers are never considered appropriate -- and are in fact illegal. The only exception to this, when the rules are actually reversed, is where the seller has a total monopoly; i.e., the seller is the government. In that case, boycotts against the seller are extremely illegal (just ask the IRS) and boycotts against individual buyers are the law ("affirmative action" is a good example of a single-seller government might boycott whites, males, etc. once a quota is reached).

Objectively, though, the differences that exist between any traders are related to market conditions (e.g., scarcity, preferences, alternatives, etc.) and have nothing to do with who the "buyer" and who the "seller" is. But when politicians speak to the "many", they use the language that the "many" understand; i.e., the speak to those in Example (1), where there are a lot of people in the "many", and nothing unites them better than inciting them against a common enemy -- and an "enemy" that is very easy to identify.

How Do Labor Unions Work? What Benefits do They Bring?

Labor unions exist to gain above-market benefits by eliminating competition through coercion. Without unions, any employer who is unsatisfied with employee demands can simply hire replacement workers who are willing to work for less.

Union coercion can either be through formal laws ("closed shops", "prevailing wage laws", etc.) or through informal intimidation (pickets, violence against "scabs", threats to shut down other businesses, etc.) -- but coercion is nevertheless necessary because there are many people who are very willing to work for much less than union wages.

The monopoly-power status of unions enables them to compel employers to pay their members more than they would have otherwise. That is, there's a transfer of wealth from the employers to the employees. This makes for good populist rhetoric, but no one outside the union benefits -- and many people are harmed. Specifically, unions do not create affluence; affluence can only be created by abundance -- and unions do not create abundance. In fact, the reduction in competition reduces abundance and therefore makes everyone outside the union worse off.

Relatively speaking, even union members derive little benefit from unions. This is because unions "re-divide" the wealth pie without making it bigger, and most of our affluent living standards come from the size of the pie, and not how the pieces are distributed. For example, the luxuries that we (including union members) take for granted were all generated outside of unions; in fact, union work rules interfere with such progress. Specifically, central heating, air-conditioning, electricity, plumbing, cell phones, medicines, computers, etc., etc., etc. are the products of innovation and individual initiative, and not of unionized labor forces. And the areas which are union-dominated, such as American-made automobiles, have lower quality than the innovative non-union competition.

Internationally, the recent rise in living standards in countries such as Korea, China, and Singapore was created by free trade -- which is one of the main things that unions try to stop.

But their public-relations is generally very effective. They portray themselves as fighting for the every-man, but the every-man has benefited mostly by the absence of unions, and not their grabbing of a bigger piece of the pie.

Is "Equal Pay" a Good Idea?

No, it is a terrible idea.

"Equal Pay" goes by other names, such as "Comparable Worth", and is intended to remedy the dubious claim that men earn more than women. And in the interest of understanding why it is such a bad idea from an economic perspective, we'll ignore several other issues:

1. It has not been shown that, when all other variables are held constant, women make less than men.

2. The phrasing "equal pay" is loaded; opposition to it implies that you are opposed to equal rights.

3. It is a tribal concept, designed to instill resentment against the male "tribe". Otherwise, it would be called "More Pay", as opposed to the envy-laden "Equal Pay".

4. Enforcement would require new armies of bureaucrats to police the private affairs of others.

So, let's assume that, on average, women really do earn less than same-age, same-skilled, same-experienced, and same-educated men -- and are also equally productive at identical jobs with the same employer under identical conditions -- and that this can be ascertained by objective and politically-neutral parties without any interest in the outcome.

Note, by the way, the phrase "on average" in that sentence. That implies that, on balance, women earn less than men -- which means that there are times when women might make more than men. So, in order to ignore the idea of men also being entitled to "equal pay", then we need to further assume that women universally make less than men under the above conditions. That is, assume that the highest-paid woman never makes more than the lowest-paid man.

One would think that under these conditions, it would be prudent to investigate why women make less than men before passing legislation to "fix" the problem. Or, perhaps it is simpler to just assume the most inflammatory reason and make that the basis of your legislation. In this case, that assumption would be, "Men discriminate against women."

OK, there are two situations where women might be discriminated against:

1. Women are less valuable/productive/skilled than men for some jobs, and this is reflected in their pay.

2. Women are NOT less valuable than men, but employers gratuitously pay male employees more for some reason.

By the process of elimination, Item #1 seems much more plausible. Alternative #2 appears rather unfounded, and would be illustrated by an employer paying everyone $100, and then declaring, "To hell with the bottom line. I'm going to give each male employee an extra $50 simply because they're male." Or, it's the equivalent of an auto salesman telling a male customer, "The price of the car is $20K, but since you're a guy, I'll hand over $2K of my profits, and sell it to you for $18K."

Or, it would require a mass conspiracy among every employer to "underpay" women with the understanding that no other employers will attempt to offer them more; all employers agree to ignore the temptation of higher profits for the sake of underpaying women.

And so, we are left with Item #1, which implies that employers are "guilty" of paying men and women what they are worth -- and that the solution is to force them to pay women more than what they are worth. This is where commerce ends and welfare begins. And it is where employers will follow the laws of supply and demand: If the price of labor is forced higher than its equilibrium, then the quantity demanded will decline. In other words, "equal pay" would result in female unemployment.

There are only two ways to avoid this resulting female unemployment:

1. Employers can ignore the spirit of the law by cutting back elsewhere; e.g., women's benefits, a comfortable working environment, etc.

2. Another layer of legislation can be added that would require employers to not only pay women the government-approved rate, but also compel them to hire women. That is, we could have a government-directed workplace, where employers are told who to hire and how much to pay them. This would result in a decline in affluence and personal freedom for everyone, male and female -- and is a little too close to fascism for, we would hope, most people to be comfortable with.

"Equal Pay" is a bad solution to a problem that does not exist.

How Can We Get More Banks in Poor Neighborhoods?

A new report by the National Community Reinvestment Coalition finds that most of the largest metropolitan areas of the United States have markedly lower numbers of bank branches in working class and minority communities than in the upper class and white neighborhoods.

Setting aside the curious vernacular ("working class" and "minority"), the NCRC is concerned that there are neighborhoods without enough banks, and is proposing that existing banks be forced to open branches in undesirable locations by way of the Federal Reserve Board's "Community Reinvestment Act".

But instead of using force, here are two more palatable ways of bringing more banks to these neighborhoods:

- The NCRC, instead of lobbying for government controls, can open a bank themselves.

- The NCRC can explore reasons why banks, and many other merchants, are reluctant to locate in these neighborhoods. Or, maybe the NCRC can just ask themselves: According to the U.S. Census Bureau, the NCRC chose to locate in census tract 1303 (West Roxbury, MA) that is 92.5% white.

Of course, there can be many reasons why there might be fewer banks in these neighborhooods. Perhaps the residents prefer to do their banking in other neighborhoods -- like where they work. Or perhaps there are regulations, like usury laws, that make banking unprofitable in these areas. Or perhaps these areas are better served by pawn shops and check-cashing stores than they are by "traditional" banking services.

And this is ignoring the fact that these neighborhoods have many banks. Go to Yahoo Maps, pick the poorest area you can think of, and then "browse by category", "community services", "banks". Look at the South Side of Chicago, and you will find over 300 banks. Apparently, 300 is not enough. What is enough? Probably no number is enough, as that would give the NCRC nothing to do.

And, apparently, it would give celebrity politicians one less lobbying group to please, as well.

Why Do Physicians Make So Much Money?

For that matter, why does anyone make as much as they make?

For starters, here are some things that, in isolation, do not affect what people make:

Effort and Hard Work

Painting your house with a toothbrush requires lots of effort, but any painter who proposes such a method will not make much money.

Skills

Good musicians, artists, and jugglers are highly-skilled; most need day jobs.

High Costs

You cannot simply "pass costs onto the customer"; most often, high costs will ruin your business.

Greed

Setting aside the ambiguous definition of this term, the desire for money does not make one rich (though it would be nice if it could).

***

Compensation for services is based on:

- Value created for others

- Opportunity costs

- The scarcity of the service

- The demand for the service

- The seller's competition

1. Value Added

How much value is added during brain surgery? How can you tell? How much value is added during a check-up? Which would you rather do without: A) A check-up for five years, or ) Water for two days? Should water cost more than a doctor's visit? A physician can save your life, but most often, you see a physician for routine advice for relatively minor problems. Regardless, whether or not you are a physician, if you don't add value, then you will make no money. (At least, you won't make it honestly.)

2. Opportunity Costs

This is just what you are forgoing when you see the doctor. If you only pay an insurance co-payment, then the opportunity cost of seeing a specialist is perhaps a meal for two at a low-end restaurant. But without insurance, you might prefer to spend some of that medical money on other things; maybe you would wait a little longer for that mysterious pain to go away, or for that chronic inflammation to settle down -- and you would certainly be more inclined to think twice about that "follow-up visit in two weeks". But since most people have insurance, they are inclined to see physicians more often than they otherwise would -- and do not pay much attention to what the doctor is charging.

3. Scarcity

Only a certified physician (and not nurses, psychologists, pharmacists, etc.) can prescribe medication and treat patients; this limits the number of practitioners who can offer medical services. And the total number of physicians is controlled by state medical boards (by limiting the number of medical schools and their enrollment), which also drives the supply of doctors down.

4. Demand

All people get sick, and they all want to get better. The demand for medicine is very inelastic.

5. Sellers Competition

Doctors rarely compete on price because the prices are set for them by insurance companies and government programs like Medicare and Medicaid. And besides, there is no incentive to compete, as the above factors (value adding, low opportunity costs, scarcity, and extra demand) give them a steady supply of customers.

Once the above five items are accounted for, their hard work, skills, and ambition might -- on the margin -- make a difference between being affluent and being very affluent.

In summary, it appears that physicians are affluent because of a combination of natural conditions (they are highly skilled and ambitious people who provide value-added services for a highly demanded product) and artificial restrictions created by the government (insurance schemes and medical school quotas). In order to determine how much of their wealth is generated by natural conditions, the artificial restrictions would need to be removed -- and that is not about to happen.

How Can We Fix The Ostrich-Meat Crisis?

The year: 2020.

The crisis: A growing taste for ostrich meat has produced a crisis.

The problem was discovered when an astute journalist realized that there wasn't enough ostrich meat being produced to feed everyone. Soon, the populace became distraught and their elected representatives promised to fix the problem.

One candidate for office proposed a universal insurance scheme. "It is unacceptable there are people who cannot afford ostrich meat. I therefore demand universal taxpayer-funded ostrich-meat insurance to make ostrich meat available to everyone! And everyone would get the finest cuts, too!"

Another candidate felt that there were "Two Americas: One that ate ostrich meat, and one that did not." He said that if those who ate ostrich meat simply ate less, then there would be enough left over for everyone else.

And yet another "policy-wonk" candidate noted that "As Americans are eating more and more ostrich meat, our nation is spending more than ever on ostrich meat! This is wrong!"

In the universities, professors debated the merits of different ostrich-meat plans: Should it be declared free for all? Should a voucher program be instituted? Should employers supplement employee benefits with free ostrich meat? Should we adopt the Swedish Ostrich Model?

It was the most perplexing problem: Many people wanted ostrich meat, but it was too expensive!

Soon Congress consulted the ultimate experts on ostrich-meat production, The American Ostrich Meat Association (AOMA), which said that the solutions were A) Ostrich-meat consumers should have more government money to spend on ostrich meat, and B) No changes should be made to the number of ostrich farmers, and C) More government money was needed to pay for university grants to study the problem. The professors really liked Item C.

Limited supply and heavy demand resulted in a perplexed nation. Surely, there must be some way to end this quagmire.

Indeed, the nation was in crisis. And yet simultaneously, no one and everyone had a solution.

Is Immigration Harmful?

This is like asking, "Are more births harmful?"

And that's because the answer is: It depends on who is being born.

If you know beforehand that a rapist will be born (yes, rapists were babies too at one time), then in that case, you might say, "It will be harmful if this person is born."

Similarly, if you know that a potential immigrant is a rapist, then you might say, "Perhaps this person should not be let in."

The main point, so far, is that how one arrives here, through birth or immigration, is irrelevant. So, immigrants can be a welcome addition -- or not. They can be better than natives: Is there anyone who would not "trade in" one thousand American prison inmates in exchange for one thousand random people from Japan? Or, immigrants can be worse than natives -- flight schools were recently a good source of such people.

Of course, one difference between immigrants and births is that it is considered immoral to sterilize a parent if there's a good chance that they would give birth to a criminal. But it is acceptable to have immigration quotas. The thinking is: Citizens have an absolute right to procreate, even if they are psychopaths -- but foreigners do not have a right to establish residence wherever they choose, even when they are "model citizens" and pay their own way.

All that said, immigrants build things, make things, and provide services for us. And not just by being day laborers, but also by being software designers, pharmaceutical researchers, architects, etc. In general, it's a good idea to have lots of immigration.

But there are three decent arguments against immigration:

1. Immigrants might take advantage of our generous welfare system and make us poorer.

2. Their lifestyles might conflict with ours, and too many immigrants (whatever that number is) from different cultures might prolong the time required for their assimilation. (This problem might be overstated, though, as a March 2007 study shows that "Hispanics" assimilate like other groups, and are in fact more patriotic than some "native" groups.)

3. Immigrants might include people who might willfully harm others.

So, there is a two-part solution:

1. Encourage productive people to immigrate (and honor their foreign professional certifications), and

2. Prevent bad people and too many "different cultured" people from immigrating.

All of which leaves us with minimizing opposing errors: Increasing #1 raises the risks associated with #2, and reducing #2 increases the risks associated with not having #1.

How can this be accomplished? Country quotas and background checks are a start, but are clearly not perfect. But is there any evidence that the government even understands the issues?

Does Government Debt Matter?

No.

For all the talk about the government "debt" and "deficits", it is questionable that most people understand these terms. Normally, the "family" analogy is used; i.e., "You wouldn't want your family to be in debt!"

That's a pretty meaningless analogy, as most people would want their families to be in debt under some circumstances, like:

- Buying a house.

- Paying for a college education.

- Borrowing money at 3% and investing it at 7%.

The relevant factor to consider is: What are the alternatives to the government going into debt? In fact, the government has two alternatives, just as any family has:

A) Make the purchase up front, without borrowing.

B) Do not make the purchase at all.

Oddly, when discussing government debt, Alternative (B) never seems to be considered. Instead, the answer is always "raise taxes instead of borrowing". But what does it matter whether taxes are raised to buy something today or to pay off a long-term loan? Neglecting the effect of interest rates, why is it better to empty your bank account to go to the casino instead of emptying your bank account to pay back a gambling loan?

The obvious solution is, "Don't go to the casino to start with." But, if you must go, then borrowing actually makes more sense if you can get a cheap loan -- like the government can with the tax-exempt bonds that it issues.

Put another way, when you are taxed, you are losing your principal and 5% interest that your money would have otherwise earned in the bank. But when the government borrows, then you get to keep your 5% interest at the bank, and pay only 3% interest to the bondholders as they slowly deplete your principal. Of course, if you are paying taxes on your 5% bank interest, then it probably doesn't matter whether the government "borrows" or "takes".

Or, maybe, the government should not be taking your money in any form to begin with.

Must Democracies Stagnate?

Yes, because of political favors granted to reduce competition.

Specifically:

1. Business groups, to maximize profits, demand that the government prohibit competition -- domestic (with restrictive licenses) and foreign (with tariffs).

2. The politicians in government are then pressured to grant these favors, at the risk of not being re-elected.

3. With competition lessened by the government, innovation drops, supplies become artificially low, and we pay high prices.

4. But since each political favor to a business interest costs us pennies, we don't care. No one will petition Congress to save a few cents, on say, sugar -- especially when sugar companies have pressured Congress to maintain quotas that have brought them millions of dollars.

5. However, when all the favors to the many business groups are summed, it costs us a lot.

6. But to stop these favors, each of these hundreds (or thousands?) of laws must be defeated one-by-one. Given the constraints of Point #4, above, this will not happen.

Here's an example:

Recently, President Bush went to Brazil to discuss the substitution of gasoline with sugar-based ethanol. This would make Americans less reliant on foreign oil suppliers, and would reduce the cost of transportation. But although Brazilian farmers were willing to sell cheap ethanol to Americans, Bush indicated that he would not permit the imports without a punitive tariff -- the reason being to "protect" American farmers who are already making corn-based ethanol. But what alternative did Bush have? To anger the farmers, and ruin the chances that his party would win elections?

So, who's the bad guy here:

The politicians, for abusing their power by taking from everyone to give to a privileged few? (But what other choice do the politicians have, if they want to be re-elected?)

Or...

The businesses, for pressuring the government to abuse their power? (But since when is it a crime to support whomever you please in a democratic election? Don't individual citizens do that all the time when their senator fails to "bring home the bacon" from Washington?)

Are both the bad guys? Or is everyone just an honest victim doing their best within a system that will only reward someone else if they fail to follow their incentives?

Who Pays Taxes: The Buyer or The Seller? The Employer or The Employee?

One or the other, sometimes both, sometimes none.

Here's a simple example: Say that you buy apples for 20 cents each, and sell them for 25 cents. Then, a 2-cent sales tax is applied. Two different things can then happen:

A) You can charge 27 cents per apple: 25 cents and a 2-cent tax.

B) Buyers might refuse to spend more than 25 cents per apple, so you lower the price to 23 cents, charge a 2-cent tax, and collect a total of 25 cents.

Depending on the buyers' willingness to buy apples at a high price, your willingness to sell them at a low price, and competition among apple sellers and buyers, the final price (including the tax) can be anywhere between 25 cents and 27 cents.

Here's where the real harm comes in: For whatever reasons (say, bad weather), you now need to pay 24 cents for apples, and must therefore charge 25 cents to make a profit. Now, let's say that people will pay a maximum of 25 cents, tax or no tax.

Question: Who will now pay the 2-cent tax?

You're already making as slim a profit as possible, so you have to "pass the tax along" to the buyers. But the buyers don't think apples are worth 26 cents. So: No deal. The apples go unsold, even though you are willing to sell them and people are willing to buy them at a mutually agreed-upon 25 cents.

So...who pays the tax? Regardless of what the law says about who will pay the tax, it will be paid sometimes by the seller, sometimes by the buyer, sometimes by the buyer and the seller, and sometimes -- when businesses are ruined -- by no one.