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Archive for September, 2013


Resolving the budgetary impass

The House of Representatives, dominated by Republicans, has sent a bill to the Senate which funds the government with the exception of Obamacare. Of course, the Senate, dominated by Democrats, cannot abide this House bill. A reasonable result can be obtained. What should happen is that the Senate should strip out the exception for Obamacare and send its bill to a Conference Committee. In that Committee, both Republicans and Democrats should compromise. Republicans should give up on the idea of defunding Obamacare and Democrats should give up on special deals for special interest groups. That is, there should be no special deals for Congressional staff, certain businesses, and unions. Instead, everyone should be treated the same and that should be the law of the land. If there is a delay in enforcement for certain businesses, then there should be a delay for all, businesses and individuals. This is the middle ground and it is not so hard to find it.


Milk prices to $6 or $8 per gallon?

Are retail milk prices going to go to $6 or $8 per gallon if the Congress doesn’t act in the next few days? The answer is a big, fat “NO.” It seems that if there is not a new farm bill, then government starts buying milk at some inflated figure as the result of some archaic price parity formula from the late 1940s. If this is so, the government will very quickly own all the milk. Do you think that they might sell some at a lower price? Alternatively, they could flush it down the sewers. By the way, these price parity computations make no sense whatsoever because of technological change in this industry.

Let’s hope that the government gets completely out of the milk regulation/subsidy business. It would be a great relief. First of all, low-priced milk from foreign producers is currently restricted by quotas. Second, there are some really great substitutes for milk: almond “milk” and soy “milk”. So even if the supply curve shifts to the left as subsidies are eliminated, the demand curve for milk is not insensitive to price changes. Prices would not change much.


Regulating Food Carts

The Institute for Justice has taken an anti-property rights position in fighting against food cart/truck regulation. The reason that this is so discouraging is that Institute for Justice is usually on the side of the angels such as in its defense of monks producing caskets in Louisiana. The list can go on and on. In general, the Institute for Justice works to protect people from government regulations that line the pockets of politicians while restricting the ability of business people to earn livings and consumers to the widest possible range of choice. How does regulation accomplish all this? Regulations usually protect a certain trade association and concentrates economic power from which the political class derives donations and possibly even bribes. The rationale is that the public is being protected from the evils of black people who braid the hair of other black people without the imprimatur of the government apparatus. The Institute of Justice attempts to save us from this sort of regulation. Bless their hearts for doing so. Unfortunately, they have recently taken a wrong turn.

Food cart/truck regulation is a different kettle of fish. City streets are the property of the City. One would think that the property rights position would be that the owner of the property(i.e., the City) should be able to control its use. Suppose that one would assert that food carts/trucks should be able to locate wherever their owners want within the confines of a shopping center. This is preposterous, but this is exactly what the Institute for Justice is asserting for City property.

What economic problem emerges if the Institute for Justice wins this case? The answer is the tragedy of the commons. If everyone can use a resource as much as they want, then the resource will be overused and its value will be destroyed.

Why do Cities want to regulate food carts/trucks? The answer is quite simple. Cities are in business with brick and mortar restaurants. The linkage is through the property tax. The property tax is a tax on property value. Property value, in turn, is the present value of the residual income from property. So the residual income from brick and mortar restaurants is shared by property owners and the City.

Why do restauranteurs want food carts/trucks regulated. This is obvious, isn’t it. They fear the competition when the competition does not have to pay the rents otherwise necessary to obtain proximity to the points in the city that generate restaurant traffic. These rents are the device that rations the quantity and placement of restaurants.