Category Archives: Economics

Private Roads

I often hear arguments from skeptics of capitalism about roads being a “natural” monopoly, so I decided to write up a fictional account of how a private road system might function. Needless to say, this is just one potential scenario that markets might create. It is impossible to say what arrangement entrepreneurs would actually organize.
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The lesson that we should draw from the results of the Telecommunications Act of 1996 is that efforts to partially privatize the industry are likely to retain those elements of regulations that benefit concentrated interests in business most.

If this point is not immediately evident to you, I highly recommend you read “The Question of the Cable Monopoly

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Yet another communist "utopia"

Check out these Satellite photos of North Korean prison camps.

Then read this: Death, terror in N. Korea gulag.

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Microsofts and standards compliance…

Here is a quote from an email I sent out on the Brazos Valley Web Design listserv regarding Microsoft’s lack of compliance with the W3C standards:

I think that it’s helpful to realize that Microsoft’s browser is in effect a de-facto standard, which by overwhelming user preference is preferred over the W3C-compliant Mozilla. If you think of MS as the U.S. and W3C as the U.N., it’s easy to see that the “consensus” of a bunch of undemocratic, oppressive regimes is not any more valid that the individual judgment of the freest, richest nation on earth. The analogy is better than you might imagine, since both the US and MS are being derided precisely because of their virtues (freedom and successful products) by nations/companies that are failures precisely because of their flaws (tyranny/bad products.)

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Filed under Economics, Listserv

The Antitrust Racket

Check out this blog from initium:

In 1977, Congress passed the Hart-Scott-Rodino Act, a law intended to make life easier for FTC and Antitrust Division officials in deciding which mergers to prosecute and stop. Under HSR, all mergers worth at least a certain value (approximately $50 million under the current law) must be reported to the government prior to consummation. This “pre-merger notification” grants the government a waiting period to decide whether they wish to act against the merger. In most cases, the waiting period is terminated early, and no official action is taken. In a handful of cases-less than 2%-the FTC or Antitrust Division will seek conditions to allow the merger or attempt to stop it outright. Such official action generally results in a “consent agreement,” where the merging companies agree to surrender a portion of their assets to a third-party chosen by the government.

Every Hart-Scott-Rodino “notification” must be accompanied by a filing fee. For mergers valued at less than $100 million, the fee is $45,000; for mergers of more than $500 million, the price is $280,000. The fee is non-refundable, and the monies collected from said fees are what finance the $330-plus million of the FTC and Antitrust Division budgets not financed by direct appropriation.

In other words, the government is forcing businesses to pay for the very antitrust enforcement that is targeted directly against their interests. This is a classic racketeering scheme. A business is forced to pay protection money to a thug who could turn against them at any time.

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Marxism

Interesting article on Marxism at the Economist.

Here is the conclusion:

Anti-globalism has been aptly described as a secular religion. So is Marxism: a creed complete with prophet, sacred texts and the promise of a heaven shrouded in mystery. Marx was not a scientist, as he claimed. He founded a faith. The economic and political systems he inspired are dead or dying. But his religion is a broad church, and lives on.

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Economic Freedom and Prosperity

For my econometrics class, I am comparing the relationship between economic freedom and prosperity, and I just got my first regression results for 2001 for 155 nations. The results are very preliminary, but the evidence is clear: there is an extremely high correlation between economic freedom and prosperity, explaining over 73% of the variation in wealth. This means that 73% of the difference between the wealth of nations is explained by the economic policies of their government, with only 27% accounting for differences in natural resources, location, climate, culture, other nations, etc.

This fact alone is not very surprising (unless you’re a socialist, in which case you’re probably ignoring these results), but it is interesting to see which specific factors affect per capita GDP the most. Not surprisingly, property rights and the fiscal burden (taxes) of government have the greatest effect, and significantly monetary policy (inflation) -which shows that (as Lenin said) the best way to destroy capitalism is to go after the currency. Factors which (to my surprise) do not affect prosperity individually are foreign investment and regulation – which may not be true if these variables are significant jointly -I’m not sure yet.

After my analysis of economic factors is complete, I am going to see what effect non-economic factors such as political freedom, government welfare, and population control have on prosperity.

(Note: while the black market correlation is highest, this is more a result of government regulation than a cause, which is why I don’t consider it a factor. Data comes from the 2001 CIA Factbook and 2001 Heritage Inst. Economic Freedom Index. The 2001 data was used because 2002 GDP’s are not available for all nations yet.)

Here is the regression output:

Model 3: OLS estimates using the 155 observations 1-155
Dependent variable: indGDP

VARIABLE COEFFICIENT STDERROR T STAT 2Prob(t>|T|)
           
const 20723.3 2201.61 9.413 <0.00001 ***
Trade -1186.36 434.009 -2.733 0.007042 ***
FiscalBu 1538.63 467.05 3.294 0.001238 ***
Governme 1003.78 583.324 1.721 0.087407 *
Monetary -627.609 326.967 -1.919 0.056873 *
BK -793.975 646.082 -1.229 0.221083  
Wagesand 1420.41 650.191 2.185 0.030513 **
Property -2108.96 663.036 -3.181 0.001794 ***
BlackMar -2899.29 522.668 -5.547 <0.00001 ***

Mean of dependent variable = 8854.32
Standard deviation of dep. var. = 9169.89
Sum of squared residuals = 3.43936e+009
Standard error of residuals = 4853.58
Unadjusted R-squared = 0.7344
Adjusted R-squared = 0.719847
F-statistic (8, 146) = 50.4624 (p-value < 0.00001)
Durbin-Watson statistic = 2.13614
First-order autocorrelation coeff. = -0.0694149

Excluding the constant, p-value was highest for variable 11 (BK)
(Variables are explained here: htp://www.heritage.org/research/features/index/2002/chapters/chap5.html)

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