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Are Teacher Unions Our Most Destructive Lawful Organizations? January 31, 2008

Posted by federalist in Education, Government Regulation, Unions.
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Labor unions are often justified as analogs to corporations. Whereas corporations concentrate capital to produce profit for shareholders, unions concentrate labor to produce benefits for their members. But profit and labor benefits are not necessarily analogous. Under the constraints of our current regulatory regime profit is an absolute good. Are unions, as currently allowed, net producers of anything good?

For-profit corporations selfishly seek to maximize the profits of their shareholders. But our government does not allow them to profit through anticompetitive or destructive practices. Under these conditions shareholders benefit from profits, but every market participant also potentially benefits because the very fact that a corporation is earning a profit indicates that it is providing useful goods and services at competitive prices. Profit-seeking in this regime is thus absolutely constructive behavior.

Unions likewise exist to selfishly maximize the benefits of their “shareholders” (members). But is that a net social good? In a theoretical framework selfish actors may all be equally virtuous. However the reality of our regulatory regime for organized labor has turned unions into nothing more than rent-seeking organizations. I.e., unions exist only to exploit regulatory advantages at the expense of others. They do not produce anything good for anyone other than their members. This is not unjustifiable per se — after all, corporations explicitly exist only to produce profit for their shareholders. The fact that profit in a free market has positive externalities is ancillary to their purpose. Thus we can’t fault unions for acting selfishly anymore than we can fault individuals or corporations for acting selfishly. The problem is that our government has accorded unions unilateral privileges to capture rents. In contrast to corporations, whose destructive tendencies (e.g., abusive monopolies or cartels) are restrained by regulation, government has turned organized labor law into a license to engage in destructive behavior. As a result destructive behavior is all we get from unions.

We must disabuse ourselves of the notion that legally-advantaged unions have any redeeming characteristics. A union in theory should enjoy the same rights as a corporation. I.e., it should be allowed to act collectively on behalf of its members. However, it should not be allowed to secure and abuse a position of monopoly power.

The unions we face today are always monopolies or cartels. None seems more privileged than public school teacher unions. Consider these characteristics: (more…)

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When $70 Billion isn’t enough January 26, 2008

Posted by federalist in Economic Policy.
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Is Bill Gates discovering that even a charitable fund of $70 billion can’t put a dent in a world of government interference?  We don’t need a “revision” of capitalism to improve the lot of poor countries.  We could start with a more faithful implementation of capitalism: One in which developed countries do not erect tariffs against the export goods of poor countries, and one in which the foreign policy of developed countries does not prop up political regimes that obstruct market forces.  The last thing we need is more government meddling with incentives and policies that inevitably derail the beneficent forces of capitalism.

Government Stimulus January 25, 2008

Posted by federalist in Taxation.
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Our government has all the moral authority of a gang of bandits.  They produce nothing, yet every year they storm into the estates of the productive and take whatever they see fit.  Their authority stems not from just principles but rather from their numbers and the coercive force they wield.

Imagine you build up a productive estate for yourself and your family.  Every year the bandits come and tax you whatever amount they want.  If you protest, they point out that this is only fair — after all, brigandry is hard work, and they protect you from other bandits!  But that’s not all: A lot of the gangsters are sick, elderly, or lazy, and it would be inhumane for you to not share your abundance with those.  Furthermore, you’re welcome to join the mob, where you will have a voice just like every other bandit.  And after they’ve tallied up the plunder they give a little bit back to you and call it your “fair share” of your estate.  Heck, some people get back more than is taken from them.  So you see, it is all perfectly legitimate.

One year they notice the plunder getting a little light.  Their leaders begin to passionately address this shortfall.  They sit around your table, eating your food, and talking of ways to employ your assets to “stimulate” further production for them to plunder.  Your initial optimism wanes as you realize that they have no intention of taking less from you.  Instead they promise to take even more from you next year, and in the meantime they will borrow against that, add it to this year’s plunder, and somehow decide that this constitutes a “rebate.”

But don’t worry, this is all perfectly sound.  After all, some of that rebate might make its way back to you!

Department of Unintended Consequences — Part VI January 24, 2008

Posted by federalist in Government Regulation.
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Alex Tabarrok addresses the “law” of unintended consequences, and references a great article by Dubner and Levitt that summarizes three salient examples.

Grammar: Me, Myself and I January 14, 2008

Posted by federalist in Language.
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Abuse of reflexive pronouns has gotten out of control.  Collin Levy explains better than I myself could:  Read and heed.