John Deere workers need to be careful to stay competitive.

The striking workers at John Deere just rejected the second contract proposal offered by the company. The workers need to be careful to not put John Deere in the position of being not competitive in world markets.

About 40% of John Deere’s revenues come from outside the U.S.  If the company is not competitive internationally it will see a dramatic decline in revenues, profits… and jobs.  Many people today push us to “buy American”.   That sounds good and patriotic, but if other countries do the same we will all be poorer.

International free trade, just like free trade among the states in the U.S., has two sides:  In the long run, it makes everyone better off, but in the short run disrupts the lives of many.  The best policy is to have a safety net that helps those who lose their jobs transition to new jobs, while allowing free trade to help improve the income and wealth of people around the world.

Price gouging can be a good thing.

Sometimes, price gouging can be a good thing.  If there is a sudden surge in demand for something, say face masks or hand sanitizer, is it better to keep prices low and encourage hoarding that can result in complete outages, or is it better to let prices go up as the market demand allows to discourage hoarding and encourage rapid increases in production?  Why would businesses pay for overtime, or expedited shipping, or other higher costs to quickly increase supplies if they are not allowed to increase prices?  There are certainly extreme situations where price gouging would be considered by most people to be immoral.  (For example, it would clearly be immoral to charge $1,000 for a glass of water to a person dying of thirst when you have plenty of it.)  But there are many other situations where allowing prices to go up significantly and quickly helps to make vital products available for important purposes to more people more quickly.  Private efforts to keep prices low and to prevent hoarding in an emergency are to be commended, but be careful before you call for laws or regulations to prevent price gouging.

Bootleggers and Baptists – strange bedfellows.

During the time of alcohol prohibition, bootleggers and baptists were both opposed to repeal of the Eighteenth Amendment.  It’s an example of how, “politics makes strange bedfellows.”  Even though the two groups seemed to have completely opposite views about drinking alcohol, they both opposed the repeal of prohibition: The baptists for moral reasons, the bootleggers for financial reasons.

I read the report in The Des Moines Register about how scared the Iowa medical marijuana dispensaries are about losing money once the legalization of recreational marijuana in Illinois begins next January 1st.  (see link below)  It makes me wonder if Iowa might face a similar situation in the future. The governor and many other politicians oppose efforts to legalize the recreational use of marijuana for moral reasons.  I wonder if Iowa’s legal medical marijuana producers and sellers will oppose efforts to legalize recreational marijuana for financial reasons?

Link to Register report:   https://www.desmoinesregister.com/story/news/2019/07/09/marijuana-illinois-law-recreational-use-iowa-cannabis-department-of-public-safety-division-narcotics/1573867001/

Need to wean energy producers off of government support.

There has been a recent outpouring of letters to the editor and paid advertising in The Des Moines Register thanking President Trump for the EPA’s decision to allow E15 (gasoline with 15% ethanol) to be used year round.  Many go on complain about the hardship waivers being granted to small refineries that exempt them from being forced to add ethanol to their gasoline under the Renewal Fuel Standard (RFS).  They say the exemptions are costing corn farmers and ethanol producers billions of dollars and are undermining growth of the ethanol industry.

Since 2006, the RFS has required petroleum refiniries to add more and more ethanol to gasoline.  (For 2019 the requirement is over 19 billion gallons.)  Investment in and growth of the ethanol industry (and related corn purchases) have been greatly dependent on this use of government force.  After 13 years, the industry has billions of dollars invested in over 200 production facilities, revenues of over $16 billion per year.  Any yet, not only can it not wean itself off of government assistance, it continues to press government for more and more support.

Public Choice Theory tells us what to expect when government and special interests create an artificial market using government force.   As investment and revenues reach billions of dollars, vested interests easily justify spending millions of dollars lobbying Congress to make sure the support continues.  At the same time, each taxpayer pays such a relatively small amount that it is very difficult to raise money to lobby in opposition to these government programs.

But we must do what we can, so now is the time to urge Presidential candidates as well as elected representatives to work toward ending government subsidies and special support for all forms of energy.

Be careful about providing charity to the developing world.

It is true that in many cases, our providing of charity to the developing world undercuts the development of local providers. When we provide food, it undercuts local farmers. When we provide shoes, it undercuts local shoe sellers. When we provide eye glasses, it under cuts local eye glass sellers. We must be very mindful about the unintended consequences of our charity. Yes, we need to provide temporary, life-saving disaster help, but we must be very careful about what we provide beyond that.

Related Register article:

http://www.desmoinesregister.com/story/opinion/readers/2017/07/24/doctor-should-shift-model-charity-health-care-development/492348001/

Increasing the minimum wage is the wrong answer.

The idea of raising the minimum wage – in Polk County, Iowa, or anywhere, is an emotional issue.  Wouldn’t it be nice if everyone earned a “living wage”?  On the logical side, just remember that raising the minimum wage will result in more people not being able to find work – especially the least skilled workers.  Also know that it will put upward pressure on prices that will further raise the cost of living – which will put more political pressure to further raise the minimum wage.  Increasing the Earned Income Tax Credit (EITC) is a better idea.  It is paid for by all income tax payers and targets those who have real need, without putting further upward pressure on prices.

Why do taxpayers pay for bird flu?

According to a report in the Des Moines Register today, 10/26/2015, the last bird flu outbreak cost taxpayers $1 billion.  (See link below.)   The payments to chicken and egg producers included the cost of the birds that were destroyed, the cleanup, and “indemnity payments” to cover their losses.

I understand that we citizens, through our government, need to prohibit diseased meat from entering our food supply.  I don’t understand why producers are not insured against such a foreseeable risk.  If we have a law that prohibits diseased meat from being sold, and if we do not provide producers with a taxpayer paid bailout, then producers will do one (or more) of three things:  they will reduce their own risk by splitting large flocks into smaller, geographically separated flocks; they will buy insurance to cover the risk; or they will take the financial risk of loss upon themselves.

To the extent that taxpayers bail out producers, they will not take the necessary steps to manage and reduce their own risks.  We need to give notice to producers that they will not be bailed out in the future.

Link to Register article: http://www.desmoinesregister.com/story/money/agriculture/2015/10/25/bird-flu-when-return/74334080/

No need to be energy independent.

In a letter to the Des Moines Register today, 6/24/2015, Jacob Hession advocated for American energy independence and for the renewable energy Production Tax Credit.

We need to be energy independent just like we need to be food independent, clothing independent, pharmaceutical independent, electronics independent… – that is, we don’t need to be independent.

World-wide free market capitalism is a wonderful thing. It gives us a more varied and consistent supply of pretty much everything we need or want. If there is a shortage of anything anywhere around the world, there are people in other parts of the world who will rush to supply what is needed.  Shortages mostly occur where trade is restricted and protected.

Any call for for a certain type of “independence” or “security” is usually cover for special interests who will benefit if we protect them from competition or give them special benefits.

What we really need to do is end special protections and subsidies for all forms of energy.  Free market capitalism has done more to provide for the security and dependability of the supply all types of products than any scheme devised by government.

LInk to Register article: http://www.desmoinesregister.com/story/opinion/readers/2015/06/24/renewable-energy-hession/29196411/

Obama correct on Cuba policy.

President Obama should be commended for opening up diplomatic relations with Cuba.  It is clear that the 50 year old policy of embargo and isolation has not worked to end the communist dictatorship.  Yes, Raul Castro will try to use this change in U.S. policy to his advantage.  If only for practical reasons, the embargo should end and relations should be normalized.  As President Obama paraphrased, “The definition of insanity is doing the same thing over and over again and expecting different results.”  We need to do something different.

There are also important philosophical reasons why relations with Cuba should be normalized: people who act honestly and peacefully should not be prevented in their actions by the force of government.  Voluntary free trade, including tourism, is the best way to foster good will and build better friendships.  Allowing Cubans to interact more and more with U.S. citizens will ultimately change the opinions of the masses of Cubans. Hopefully, it will lead to a peaceful overthrow of the dictatorial regime similar to that of the U.S.S.R. and of East Germany.

Bitcoin – no historically proven value is a problem

Bitcoins (BTC) have relatively high value for the same reason that tulips had high value in the 1600s.  All things have exactly as much value as the good and services that people are willing to exchange for them.  Today, (9/14/2014) 1 BTCs can be exchanged for about $475.  The USD and BTC have one thing in common: Neither is backed by any commodity with historically proven value.  The USD is no longer backed by gold and BTC has never been backed by any physical commodity.   The U.S. Dollar does have one thing that BTC does not have: acceptance by the U.S. government for payment of debts owed to the government.   As long as the federal government taxes people, and as long as the federal government accepts  the USD in payment of taxes, then the USD will have that value.  The same is not true for BTC.   Unfortunately, in our current economy, I must hold a certain amount of USD in order live a reasonable life. But, most of my assets are held in the form of stock in businesses.

I believe that the future value of BTC will be about the same as tulip bulbs.  It would make sense to me to have and to own a cruuency that was backed by, for example, a specific number of shares of an S&P500 index fund, or by a total stock market index fund.  That kind of money would actually represent ownership in both physical and intangible assets that produce products and services that have historically been valued by many people.

Kurt Johnson, Urbandale, IA