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Oklahoma: The Economic Storm – Article by David J. Hebert

Oklahoma: The Economic Storm – Article by David J. Hebert

The New Renaissance Hat
David J. Hebert
May 25, 2013
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A tornado ravaged Oklahoma last week, destroying hundreds of homes, killing dozens, and injuring hundreds more. Unfortunately, it looks like the citizens of Oklahoma are about to be ravaged by another storm brought on by the Oklahoma Attorney General, Scott Pruitt.

According to ABC News, Mr. Pruitt and his staff began “aggressively combing the region for fraud just hours after the tornado … and immediately [found] businesses violating the law. ”

What laws were the businesses accused of violating?  Anti-price-gouging laws. Using powers granted by the Emergency Price Stabilization Act, Mr. Pruitt is hoping to help the people of Oklahoma by preventing businesses from profiting off of the suffering of the townspeople, many of whom just lost their homes. He goes so far as to say, “[the townspeople] never anticipate or expect that someone would take advantage of them right now, but this situation is what criminals prey upon. ”

While Mr. Pruitt no doubt intends to help the local citizens, his misunderstanding of the workings of the price mechanism will lead only to folly and the prolonged suffering of the very people that he is trying to help. What he is effectively arguing for is a price ceiling on basic commodities, such as water (which is reportedly being sold for $40 per case today as opposed to only $3-$4 just a few weeks ago).

This has very predictable results: a shortage.

When prices are held below their market value, the effect is that there will be a large number of people who are willing to purchase water at that price but very few sellers willing to sell the water at that price. This means that people will compete on non-price margins to acquire water, that is, they will queue, sometimes for hours on end. The time that they spend waiting in line, however, is a deadweight cost as it is value that is forgone but is not captured by anyone. So now, instead of contributing towards the reconstruction of the town, the people are stuck waiting in line for water.

The beauty of the price mechanism is what it accomplishes in situations like this, assuming, of course, officials allow it to function properly. In this situation, demand in Oklahoma rises and producers, seeing an opportunity to profit, reroute trucks/planes to Oklahoma, thus increasing the quantity of water supplied in the area that needs it most.

Absent the rise in price, we would have to rely on the benevolence of these companies to help the people in need (and assume that they knew what the people of Oklahoma wanted to begin with).

This isn’t in and of itself terrible. Obviously companies DO send extra water to places that experience disasters, and the Red Cross DOES send volunteers and such. But notice that nothing in the preceding analysis precludes this benevolence. Why rely merely on benevolence when we can also rely on self-interest? If the goal is to help people get clean drinking water, it stands to reason that we ought to incentivize producers as many ways as possible, be they other-regarding, self-regarding or both.

David Hebert is a Ph.D. Fellow at the Mercatus Center at George Mason University.

This article was originally published by The Foundation for Economic Education.

More of Everything for Everyone – Article by Bradley Doucet

More of Everything for Everyone – Article by Bradley Doucet

The New Renaissance Hat
Bradley Doucet
July 4, 2012
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At any given time, I like to be reading one fiction and one non-fiction book. Rarely, though, do my choices dovetail as serendipitously as they did just recently when I was reading Abundance: The Future Is Better Than You Think (2012) by Peter H. Diamandis and Steven Kotler alongside The Diamond Age (1995) by Neal Stephenson. The former is a look at the world-changing technologies coming down the pipe in a variety of fields that promise a brighter future for all of humanity. The latter is a story set in such a future, where diamonds are cheaper than glass.If Stephenson’s world of inexpensive diamonds sounds farfetched to you, consider the entirely factual tale that Diamandis and Kotler use to kick off their book. Once upon a time, you see, aluminum was the world’s most precious metal. As late as the 1800s, aluminum utensils were reserved for the most honoured guests at royal banquets, the other guests having to make do with mere gold utensils. But in fact, aluminum is the third most abundant element in the Earth’s crust, behind oxygen and silicon. It makes up 8.3 percent of the mass of the planet. But it is never found in nature as a pure metal, and early procedures for separating it out of the claylike material called bauxite were prohibitively expensive. Modern procedures have made it so ubiquitous and cheap that we wrap our food in it and then discard it without so much as a second thought.

The moral of the story is that scarcity is often contextual. Technology, as the authors explain, is a “resource-liberating mechanism.” And the technologies being developed right now have the power to liberate enough resources to feed, clothe, educate, and free the world.

The Future Looks Bright

Peter Diamandis is the Chairman and CEO of the X PRIZE Foundation, best known for the $10-million Ansari X PRIZE that launched the private spaceflight industry. He conceived of the project back in 1993 after reading Charles Lindbergh’s The Spirit of St-Louis (1954) and learning about the $25,000 prize funded by Raymond Orteig that spurred Lindbergh to make the first ever non-stop flight from New York to Paris in 1927. Diamandis also holds degrees in molecular biology and aerospace engineering from MIT and a medical degree from Harvard.

Diamandis and his co-author, best-selling writer and journalist Steven Kotler, do not attempt to paper over the plight of the world’s poor, who still lack adequate clean water, food, energy, health care, and education. Still, there has been significant progress “at the bottom” in the past four decades. “During that stretch, the developing world has seen longer life expectancies, lower infant mortality rates, better access to information, communication, education, potential avenues out of poverty, quality health care, political freedoms, economic freedoms, sexual freedoms, human rights, and saved time.”

It is technology that has improved the lot of many of the world’s poor, and in Abundance, we get a quick tour of dozens of the latest exponential technologies that are poised to make serious dents in humanity’s remaining scarcity problems. There is the Lifesaver water purification system, the jerry can version of which can produce 25,000 litres of safe drinking water, enough for a family of four for three years, for only half a cent a day. There is aeroponic vertical farming—essentially a skyscraper filled with suspended plants on every floor being fed through a nutrient-rich mist—which requires 80 percent less land, 90 percent less water, and 100 percent fewer pesticides than current farming practices. There are advances that promise to make solar power more affordable and easier to store, which is going to be huge given that “[t]here is more energy in the sunlight that strikes the Earth’s surface in an hour than all the fossil energy consumed in one year.”

Stephenson’s The Diamond Age actually gets a mention in the chapter on education thanks to its depiction of what experts in artificial intelligence (AI) refer to as a “lifelong learning companion,” which has a central role to play in the novel. The Khan Academy has already shaken things up with its 2,000+ free online educational videos and two million visitors a month as of the summer of 2011. But things will be shaken up again soon enough by these AI tutors that “track learning over the course of one’s lifetime, both insuring a mastery-level education and making exquisitely personalized recommendations about what exactly a student should learn next.” With mobile telephony already sweeping the developing world and with smartphones getting cheaper and more powerful with each passing year, it won’t be long before there’s an AI tutor in every pocket.

Abundance, Freedom, and the Ultimate Resource

To sum up, in the world of the future, although there will be more humans on the planet, each one of us will be far wealthier on average than we are today. We will have more water, more food, more energy, more education, more health care, and make less of an impact on the natural environment to boot. And the healthy, educated, well-fed inhabitants of the world of tomorrow will be freer as well, no longer kept down by force of arms and blight of ignorance. We’ve already had a glimpse of what mobile phones and information technology can accomplish in last year’s Arab Spring, regardless of whether or not Egypt has made the most of the opportunity.

Not that we should be complacent, though. There are no guarantees, and any number of factors could derail us from the path we’re on. But there are powerful forces pushing us in a positive direction. The X PRIZE Foundation is doing its best to spur innovation with various prizes modelled after its initial success. Technophilanthropists like Bill Gates are also doing their part. And then there are the poor themselves, the bottom billions who are becoming the rising billions. As Diamandis and Kotler write, echoing the late Julian Simon, author of The Ultimate Resource:

[T]he greatest tool we have for tackling our grand challenges is the human mind. The information and communications revolution now underway is rapidly spreading across the planet. Over the next eight years, three billion new individuals will be coming online, joining the global conversation, and contributing to the global economy. Their ideas—ideas we’ve never before had access to—will result in new discoveries, products, and inventions that will benefit us all.

I still have a hundred pages or so to go in The Diamond Age, so I don’t know how that story turns out. But in the real world, all signs point to technology-fuelled increases in abundance and freedom in the poorest regions of the planet over the next couple of decades. Abundance encourages us to do everything we can to help those technologies develop and spread, to the benefit of the entire human race.

Bradley Doucet is Le Quebecois Libré‘s English Editor. A writer living in Montreal, he has studied philosophy and economics, and is currently completing a novel on the pursuit of happiness. He also writes for The New Individualist, an Objectivist magazine published by The Atlas Society, and sings.
Illiberal Belief #11: The Environment Is Steadily Deteriorating – Article by Bradley Doucet

Illiberal Belief #11: The Environment Is Steadily Deteriorating – Article by Bradley Doucet

The New Renaissance Hat
Bradley Doucet
May 13, 2012
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There are plenty of potential sources of concern when it comes to the environment. We are polluting the air we breathe and the water we drink; we are depleting the oceans of fish; we are punching holes in the ozone layer; we are warming the climate to dangerous levels—and all of these problems, we are given to believe, are only getting worse.

Taken together, these worries, along with the ones discussed in more detail above, make up what Danish statistician Bjorn Lomborg referred to as The Litany in his controversial(1) 2001 book, The Skeptical Environmentalist. Lomborg plumbs the available data and the environmentalists’ arguments on each of these issues and discovers, to his surprise, that things are not as bad as they are made out to be. Like forest cover, air and water quality are generally improving in the developed world, and have been for decades. The ozone problem had a fairly simple and affordable solution which has been implemented. As for the climate issue, even setting aside the serious uncertainties contained in computer models, it will be much easier for us to adapt to future warming than to try, largely in vain, to prevent it. Our trillions of dollars, Lomborg emphasizes, would be far better spent dealing with more pressing problems like poverty in the developing world—and, he adds, helping the world’s poor climb out of poverty would have the additional benefit of allowing them the relative luxury of caring about and improving the state of their forests and the quality of their air.

We need not choose between improving the environment and alleviating world poverty, for the two categories of problems stem from the same kinds of causes. It is inadequately secure property rights and protectionist trade policies that keep the world’s poor from improving their lot; it is the absence of adequate property rights that threatens the ocean’s fisheries; it is irrational government policies that give polluters the right to pollute and forbid those whose property is polluted from seeking damages; it is government subsidies that lead to the wasteful use of water and other resources. We don’t often hear it in the media, but the solution to global poverty and to the environmental problems that do exist is one and the same: greater economic freedom.

1. Readers who are curious about this controversy are invited to visit www.greenspirit.com to see the debate between Lomborg and Scientific American, and decide for themselves which party is trying to clarify the issues and which is trying to muddy the waters.

Bradley Doucet is Le Quebecois Libré‘s English Editor. A writer living in Montreal, he has studied philosophy and economics, and is currently completing a novel on the pursuit of happiness. He also writes for The New Individualist, an Objectivist magazine published by The Atlas Society, and sings.