Beware of comparisons

A friendly conversation with a friend of mine ended with me noticing a problem with so much information we get today. Economics is about efficiently allocating scare resources(all resources are scare) which have alternative uses. Meaning lets get what we need where me MOST need it as quickly and as cheaply as we can....

However understand that efficiency is different in different places. Let me explain by explain: My friend was arguing for America to use more cheap uses of power such as solar and wind. He cited that in Europe they have a couple places where wind is used to power large portions of cities. I have not looked up to concur this is the situation but even if it is, it can have zero relevance to our situation here in America.

Just as different parts of our country are powered differently (water in Vegas, Coal in the South, Oil in the NE) so is the rest of the world based on different resources. Europe can claim that Americans are inefficient at agriculture because they in Europe produce more food per acre than we do in America. But we can argue that our farmers produce more per farmer than they do in Europe. Each continent is both efficient in different ways. Europe has less land available for use and thus it is more efficient to spend more time on each acre getting all that you can out of the available land. WHile in America it makes since for the farmer to fly by rocks and not worry as much about weeds since we have so much land that can be used. Thus the efficiencies are far different.

Third world countries get more work done with a given amount of capital because they use the capital more than we do in America. But that is because in a rich nation like America we have more capital to use and our labor is far more expensive. Let me explain. In America it makes sense for a truck driver to drive his trailor to a location and let it sit until morning to be unloaded by workers who arrive for their "morining" shift. He can attach his truck to another trailor and continue on. In a third world country they would have workers waiting for trucks to arrive and immediately unload them. Why the difference? America has more access to capital than third-world countries and third-world countries have cheaper labor costs as compared to America. So while the trailor sits idle till morning in America, poor nations have to get in unloaded quickly to then be used very soon after.

The point it that different nations have different situations. It makes sense that Europe would have more public transportation and use less oil and gasoline than in America because they have far less land but have 100,000,000 more people than America does. So the population is more dense and thus they can spread out the costs to far more people when they ride public transportation. We in America have to drive more because there are not enough people in Knoxville and Crossville to have a train of some sort connecting the two cities. Thus we drive. Furthermore our roads and highways, while built really well are high speed roads and have lots of hills. IE: drive from Crossville to Knoxville. If I'm making that trip I want to be in a SUV for protection purposes not some environmentally friendly 50 miles to the gallon car that many in Europe can use. And lastly if we do not have the English Channel to generate wind but have tons of coal, it makes sense for us to use coal and let europeans use more wind energy than us. Our efficiencies are based on available resources.

Our efficiencies are different based on our circumstances and resources. So when you hear professors, teachers, media, politicians, or even parents talk about "well in Europe they do this and its good why are we behind?" Its often that we are not behind... its that those individuals are behind on their understanding of economics and geography differences.

Why I'm a libertarian

It is very easy for me to be a libertarian but was very hard for me to become one. There are a wide range of Liberals and Conservatives. There are people that will refer to themselves as conservative because their Baptists. And therefore they are against Gay Marriage and Abortion. Very few other issues matter. Now they will come out and protest when people try to take "under God" out of our pledge. They will come out when bills to allow more evolution to be taught are being considered. There are also many intelligent conservatives that follow issues and are wise.

There is also a wide range of liberals. Some liberals are liberals because they are anti-Christian and want to be against anything Christian Conservatives are for. They believe in equal rights for all people and make up the fact that these rights exist in our Constitution although no rights are given to us in our Constitution. Some are liberals because they, in a simplistic way support helping the poor. So if someone says "program to help poor people" they go running and support it regardless of the unintended consequences. Then there are some educated liberals that have studied and have come to the conclusion that capitalism helps the rich but does not help the poor. They truly want a just society and they feel that America is not a superior nation and we have flaws and government needs to fix those flaws.

But there are very few if any self-proclaimed libertarians that are not very smart and educated on the ideas. This is because it is hard to become a libertarian. It requires a different way to look at the world and an understanding that there are costs and benefits and the policy that needs to be taken is the best when taking into consideration both costs and benefits. This is far more complex way of thinking but one that never contradicts itself. Thus it is hard to become a libertarian but not hard remaining one. One of these new ways of viewing issues is through "opportunity costs".

A common simple and quite frankly normal human being would not object to spending 20 Billion dollars on Aids research. And I understand this. I would never be against this myself... until I became a libertarian. When I wised up I realized I was wrong. A libertarian knows that there are costs and benefits to any and everything. Let me explain what I mean:

I am against spending 20 Billion dollars on Aids research because that is 20 billion dollars that could be spent in a more valuable area such as CANCER research. Now before mentioning that many would have called me heartless because I just said I was against Aids research. But when you understanding that the opportunity costs of something is whatever you give up in order to pursue something then you understand that 20 billion spent there is 20 billion not spent researching something that affects far more people.

This is why I am against governments running programs. Not because I believe government is evil. But a free market allocates resources (including money) to the most valuable uses. Since there is more money to be made in curing or improving cancer conditions, more and most money will be spent on Cancer research if left to the free market. This guarantees the most people's lives to benefited.

And that principal is why I have become a libertarian.

Just a little mental relief

Today it is common to hear individuals complain about gas prices. And who blames them? Gas prices are high. For the record one of the main things holding back the decline of gas prices is the regulation on drilling for oil. With demand rising around the world, supply needs to also rise and even at a slight quicker rate so that speculators are not as worried about international conflicts that could hurt the supply of gas.

But this column is not about lowering gas prices but more so about trying to bring some calmness of mind. I hope that it is some relief to know that gas prices rising is mostly due to a rise in demand. Profit margins are not much higher if any higher for oil companies than they are for other areas of commerce. A rise in demand world wide can be most impactful on gas prices. Our allowing free trade with foreign countries such as China and India has allowed us to save lots of money when buying their products. If these products were made in America they would cost far more and thus we would have less money to spend in other ares of our lives.

This saving of money has not only benefited us but it has also benefited India and China in their ever growing economies. Due to that, those two countries have continued to add to their infrastructure and technology. This has allowed hundreds of millions of people to begin driving. This has led to a large increase in the demand for oil around the country and thus the higher prices.

So just remember the lower prices we pay for foreign goods has allowed us to save money that we can then spend on gas. I know this might be of little comfort to most of you. But that is only because we have never lived in a society that does not allow free trade. We have no idea what the prices of goods would be if we could only buy goods made in America. But rest assure, those prices would be far higher than the higher gas prices we are paying now.

Tenure

My apologies... this blog is not allowing me to split the post up into paragraphs for some reason!! School Principals do not have tenure because the governing bodies of our education system, and common sense individuals, deem our schools to be too important to be left in the hands of an individual who has no fear of losing their job due to poor performance. Why do we not view the individual classroom the same way??? Most people view issues from idealistic viewpoints and not from economic perspectives. Most think of economics as money and businesses. But in reality economics is about decisions that are made based upon cost/benefit analysis. I had a discussion with a lovely new friend of mine recently about tenure laws. We agreed nearly on every point. But how I come to my conclusions might have been slightly different from her ways of coming to an opinion. I view issues from an economics perspective. If you were to tell me that a teacher who has no fear of losing their job will work as hard as a teacher who does fear losing their job than you are telling me that teachers are the most holy individuals in society and quite frankly are the most holy individuals ever. Let me explain: If you told a drug company that they would stay in business and receive the same money whether they created new helpful drugs for our medical care or not do you think that drug company would be motivated to work as hard? Most would say NO. Its the desire for profit and competition of the free market that motivates these companies to create new things for us. These companies create medicines that improve, sustain, and most importantly save lives. But the drug company does not think of it from that perspective but from the perspective of "lets make a lot of money!" The motivation behind drug companies are profits and the need to survive in the marketplace. This is why America still creates the most new drugs. We still have a profit motive in our healthcare system. Why do we have a holier than thou view of teachers in that we believe they ALL will perform their job because they want to do great things and are motivated to help people. Its proof in cities that have "rubber rooms" to house teachers who are harmful to the education experience that this is not the case. Many teachers, protected by tenure laws have become so bad that administrations have placed them in these separate buildings performing paper work and have hired new teachers to replace them because that is cheaper than fighting the unions in court over firing a bad teacher. How pathetic! Would most teachers still work just as hard if they knew they would have a job whether they did a supered job or not? For some reason union leaders say yes. And yet there is ample proof that is not the case in many cities with the before mentioned problems. Want another example?: As a principal what teachers are hardest to find. If you said math and science go to the front of the room you are correct. Do you know why? Its because they are the hardest subjects to get a degree in. But wait... if teachers are all motivated to help students, would they not want to help them in two of the most important and under staffed fields? The answer is NO. Since pay is no more for those tougher fields, more teachers have chosen to pursue the easier subjects to earn a degree in. You see many things motivate teachers. I believe we have teachers that are great and would be great regardless. But there are many out there who are not like that. Tenure will only save a very few good teachers who might not get to keep their jobs because they have personality complications with the administration. And that sucks when good teachers are let go due to this. But the amount of good teachers let go due to that is far exceeded by the number of teachers who no longer work as hard when they are not motivated to survive as the private sector is. thus since the cons outweigh the pros... I choose to be against tenure and favor its replacement with another benefits for teachers: Merit pay being one. Pay your best teachers more. Pay the teachers of the harder subjects more so there will be no shortage of some teachers and a surplus of others. In the end these issues are not to be viewed from a teachers perspective but from the students perspective because that is what education is suppose to be about anyways. And I never hear those in favor of tenure talk about the ramifications upon students from those laws. And nor can I blame them. Unions are suppose to be about their clients. But the education of our children should never be viewed from the perspective of the union but of the students involved. P.S. Refer to some of my older education blogs about the overall education system