Category: Free Market

Why Business Succeeds

George Noga

Business succeeds because its risks, rewards and incentives are aligned with human nature.

 

Why Business Succeeds

By: George Noga – June 28, 2020

           This post is a companion to the one last week entitled “Why Government Fails“. If you missed it, go to our website www.mllg.us. In that post, we revealed seven reasons why government fails. This week we explain why business succeeds.

          Business succeeds because it excels at aligning risks, rewards and incentives with human nature – unchanged since men walked on two feet. The imperative to make a profit creates urgency, focuses attention and summons great exertion because success confers wealth and status while failure has immediate and unpleasant consequences. As a result, business attracts motivated, hard working, talented, non risk-averse people whose bias favors action over inertia. Business closely aligns personal incentives with the goals of the business such that they nearly are one and the same.

           Business is based on markets, in which knowledge flows from the bottom up and confers valuable information about consumer choices and preferences along with prices. All transactions are voluntary, non-coercive and mutually beneficial; that explains why both parties to a market-based transaction always say “thank you“.

          In business, one solitary person can literally improve the daily lives of billions of people as did Bill Gates, Steve Jobs, Sam Walton and Walt Disney to name a few. One driven entrepreneur can change the whole world. Moreover, businesses are able to tightly manage world-wide trillion dollar enterprises and prevent most waste, fraud, abuse and corruption through strong governance and independent audits.

Why Government Fails While Business Succeeds

       At all its levels, always and everywhere, government fails for many reasons; foremost among them is that its risks, rewards and incentives are misaligned with, and often even diametrically opposed to, human nature. Politicians and bureaucrats respond to incentives that reward them even when they are contrary to the public interest.

         Government is top down, command and control and coercive; it ignores consumer preferences. Rather than forming mutually beneficial relationships, it creates winners and losers. It divides people by race, age, income and gender.

        Government brings us TSA, Madoff, USPS, failed public schools, OSHA, Medicaid, IRS and public sector unions. People are fleeing as fast as they can from dysfunctional states like Illinois, New York, Connecticut, California and New Jersey and from cities such as Baltimore, Newark, Cleveland, Detroit and Chicago.

        Government failure is systemic, structural and incapable of reform; nonetheless,  some government is necessary because it is preferable to anarchy. The only possible remedy is to reduce its overall size and scope to the absolute minimum.

Our next post is on July 4th and celebrates Independence Day.
More Liberty Less Government  –  mllg@mllg.us  –  www.mllg.us

Government Accountability is an Oxymoron  

George Noga

The most powerful force on earth is a consumer armed with a free choice.   

Government Accountability is an Oxymoron  

By: George Noga – December 1, 2019  

  

Since founding the school choice movement in Florida 25 years ago, I have debated many apologists for government schools. Invariably, their go-to argument is that private voucher schools are “unaccountable“. When everything else fails, they trot out this moldy canard. It’s time for me, once and for all, to demolish this fairy tale.  

    

            Everyone wants accountability for the products and services they consume. In free markets businesses compete to provide accountability for quality, safety and value. There is no such thing as an unaccountable free market. The most potent force on this planet is a consumer armed with a free choice; or, as Von Mises so eloquently put it, “Markets are a daily plebiscite in which every penny confers the right to vote“.  

    

          Markets deliver safety, quality and value in many ways. Foremost is branding, by which companies stake their reputation on products. When you vacation at Disney or buy an Apple computer, the reputations of the companies are on the line. Markets also deliver quality and value through franchising. If you eat at Wendy’s, you know what to expect. There also are third party rating firms like Consumer Reports, Good Housekeeping, Underwriter’s Laboratories and BBB. Lastly, social media confer enormous power on consumers; a few terrible reviews can sink nearly any business.  

    

          Markets are accountable from the bottom up, with consumers exercising control directly. Government accountability is an oxymoron; to the limited extent it may exist, it is from the top down. Consumers can exercise limited control through the political process only once every four years. With government accountability, voters select candidates with positions on numerous issues; with markets, consumers make a choice about one specific good or service. In many jurisdictions accountability is impossible due to political domination by interest groups and voting blocks. With government schools there is no branding, franchising, independent rating agencies or social media.  

    

        Contrast market accountability (Uber) with government regulated taxis. With Uber, consumers get location, name, photo, driver rating, fare and arrival time. They get a spotless car, pay via credit card and rate the driver. With taxis you get none of the above; you get an unkempt driver with poor English who drives aggressively. The taxi has a musty odor, blares obscene music and costs triple Uber; complaints are futile. Which is more accountable, the market (Uber) or government (taxis)?  

    

           An independent review of Providence, RI schools with 25,000 students found peeling lead paint, brown water, leaking sewage, rats, frigid temperature, classroom chaos, bullying, no discipline and rampant violence. Only 5% of students were at grade level. Unions protect failed teachers and principals, who at worst are placed in rubber rooms with full salary and benefits. Government blamed lack of funding even though spending was $18,000 per student – 50% above the national average. Not one person ever has been held accountable and these horrors have been going on for decades.   

    

         In sharp contrast, Providence charter and voucher schools are successful. Instead of expanding charters and vouchers, government and unions want to impose more regulations on them in the name of – you guessed it – accountability. They are trying to turn charters and vouchers into the same veritable hell holes parents are fleeing.  

  

         Lack of accountability in government is endemic just like waste, fraud and abuse. The only way to reduce these evils is to slash government spending; there is absolutely no other way.  We can increase accountability and simultaneously reduce cost, waste, fraud and abuse by giving every parent a 100% school voucher.   

  

        The next time you hear that voucher schools are unaccountable, remember Uber, taxis and rubber rooms. Remember that free markets always are accountable and that government accountability is an oxymoron. Above all, remember the Providence schools; how much of that kind of accountability do you want for your children?  

Medicare for all? Next, we take on the Canadian national health care system.   

 

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More Liberty Less Government –  mllg@mllg.us  –  www.mllg.us 

 

The Politics of Harvey, Irma and Maria

George Noga
“Blow, winds, and crack your cheeks! Rage! blow! You cataracts and hurricanes, spout till you have drenched our steeples, drowned the cocks!”  (King Lear)
The Politics of Harvey, Irma and Maria
By: George Noga – November 26, 2017
      The lines above are from King Lear’s famous diatribe against the storm. The once mighty Lear, now powerless, urges nature to bring on another apocalypse. The storm symbolizes Lear’s state of mind. Shakespeare’s words could easily have been spoken by politicians following Harvey, Irma and Maria, ranting about climate change, price gouging and, in Puerto Rico, blaming others for their lack of preparedness.
     Harvey was the first major (cat 3) hurricane to make US landfall since Wilma in 2005, the longest hurricane-free period ever. Irma was the only major hurricane to hit Florida in 12 years, toppling a 165-year record. What happened next was as predictable as it was pathetic. There were climate change diatribes worthy of King Lear about how 12 hurricane-free years somehow proves hurricanes are more (not less) frequent.
       Meanwhile, a 2017 peer-reviewed study (D’Aleo, Wallace, Idso) found man-made adjustments to temperature readings account for all reported warming in the past 75 years. The study’s authors said when numerous adjustments are made, it is reasonable to expect some to have the effect of increasing warming and some of decreasing warming. Instead, nearly all adjustments increased warming; i.e. the data underpinning global warming are based entirely on human adjustments – not on actual data!
       EPA Administrator Pruitt and Energy Secretary Perry have suggested red-blue team exercises (used by military and intelligence services) to expose vulnerabilities in climate science. Climate alarmists went ballistic, arguing it would be a dangerous attempt to elevate minority opinions and to undercut the legitimacy, objectivity and transparency of existing climate science. Why would legitimate scientists be afraid to debate any issue? They should welcome debate. Newton is spinning in his grave.
       Politicians also mimicked King Lear in castigating price gouging. Florida Senator Nelson and AG Bondi were the best Lear impersonators. Bondi vowed to prosecute and to shame gougers and established a hotline for reporting violations. They are economically illiterate; economists universally agree price gouging is beneficial.
       Americans understand prices for the same product fluctuate in different conditions. Hotel rooms in a college town cost more during a big game. Americans openly flaunt anti-scalping laws. A poor ghetto kid risking scarce capital to broker tickets should be honored, not incarcerated. We readily accept Uber’s surge pricing and viscerally grasp it is beneficial. Government engages in price gouging at, inter alia, airports, toll roads, turnpike rest stops and sporting venues – Nelson and Bondi take note.
      Prices in free markets convey accurate, truthful and useful information about the value of a good or service; government prices are lies; consider the following:
  •    Market prices are determined by voluntary cooperation among people. Government prices are coercive and based on the naked police power of the state. Markets enforce themselves; government prices must be enforced by men with guns.
  •   Market prices alleviate shortages by directing resources to where they are most needed; government prices (rent control) lead to rationing and create shortages.
  •   Market prices are logical, non-political, foster civility and encourage honest behavior. Government prices are illogical, political and strain the social fabric by criminalizing laudable and honest behavior. Government prices create black markets, incentives for illegal behavior and breed disrespect for the law as in Venezuela.
  •   Market prices result in more supplies being available during a crisis, storing extra goods beforehand and conservation. Government prices create shortages, rationing and empty shelves. Market prices are better for victims of natural disasters.
       Why should a hurricane somehow be different than a football game when it comes to the price of a hotel room? Market prices are truthful; government prices are lies. In what kind of society would you prefer to live – one based on voluntary cooperation of people in markets or one based on government lies enforced by men with guns?
Our next post describes the four gifts of Christmas