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August 2004
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September 2004

Debunking Labor Unions

This post at Mises Institute's blog, titled Do Capitalists Have Superior Bargaining Power?, explains very clearly why enterpreneurs don't have superior bargaining power over workers. Competition among enterpreneurs ensures that they have to pay to the worker according to his/her marginal productivity. Labor unions mostly harm the workers by forcing the wages above the market rates and thus pricing out some of the workers out of their jobs. This causes wages to fall for non-unionized workers. Less productive workers and highly efficient workers get the same wages and results in mediocrity because of unionized bargaining.

Of democracy and Individual Rights

I had a long discussion over email with one of my readers. The conversation was ticked off my post suggesting that India should open up FDI in retail sector. He is living in the US but preaches virtues of Indian culture and warns Indian people against getting suckered into Western materialism. Therefore, he does not want to allow foriegn investors as they can cheat poor, uneducated Indians. All he wanted to have was a honest public debate about whether FDI is good or bad for India and he wanted people to decide. How democratic?

Although innocent, his attitude was really dangerous. Not only he was a hypocrite, he was not really talking about democracy. What he wanted to have was a debate on whether FDI should be allowed or not. He was not ready to let individual (foriegn) financers and those who wanted to raise capital to decided in each individual case of FDI. He wanted to have discussion over one single macro-decision regarding FDI for the whole country.

Imagine, if before somebody wanted to get married, we ask for having a nation-wide debate on whether marriage is good or not. Not individual instance of that particular marriage but marriage in general. People against marriage will cite domestic violence, dowry, population growth, exploitation of women and so many other problems. Those for marriage will talk about stability that comes with family, atmosphere of love, financial benefits and so on.

But is it the right debate to have? Each marriage is separate and is a matter between two individuals. Macro decision on whether marriage is in general good or bad is potentially a assault on individual freedom.

Another important thing to realize is that such a macro-level debate in general always bring into it a historical context. Karl Marx popularized this with his "scientific" historical analysis of production relations. Instead of developing a criteria to decide whether a particular case of employment is beneficial or harmful to that particular laborer he posited that, in general, employer always exploits the worker by extracting the surplus. Thus, profit is in general itself exploitation of labourers. No need to analyze and discuss individual employement contract and relationship.

Feminists also posited that marriage itself is exploitation of women. No need to analyze actual marital relations. Just state that historically women has always been at the receiving end and hence marriage always mean exploitation of women.

Politicians and elites love this kind of decision making as it gives them power over us, the mere mortals. Individual rights leave no place for elites as each individual decision is specific and private. Elites can claim their "special" place if individual private decisions are collated into one big decision for all.


Arm teachers to protect kids from terrorists

Dave Kopel, in a very well researched article, argues for arming teachers so that incidents, such as that happened in Beslan, Russia do not happen again elsewhere.

After teachers and workers in schools were armed in Israel and Thailand, attacks on schools either ceased or decreased significantly. Apart from helping to counter terrorists who attack kids in school, firearm ownership will act as a preventive measure against terrorism. Terrorists will avoid schools because of the knowledge that adults there will be armed.

Govt. cannot be everywhere and protect us everytime. Removing constrains on firearm ownership in general will go a long way in eradicating terrorism.


Indian consumers are getting a bad bargain

T N Ninan tries to answer "Why do Indians have to pay more?"
We like to tell ourselves that India has become a much more open market than it used to be in the bad old days; import licences have all but disappeared, tariff levels have come down to reasonable levels, and domestic production and supply restrictions too have all but gone.

However, in retail prices of items such as laptops, cars or even electric fans cannot be explained by high taxes, import tariffs and so on. Many of the problems the author mentions can be explained by our still closed retail sector. Indian consumers do not see price-bargains or end-of-the season discount sales, or return priviledges that common in other countries.

See, Supermarkets - good value, on how supermarkets drive down the costs, and increase our choices. They also rank near the top in the 'Best Workplaces' survey.

Maybe it's time to welcome companies like WalMart in India.
I say, bring on the retail revolution! Remove all the restriction on retail businesses including those related to FDI.

For critics of supermarket chains, such as Wal-Mart, I would refer to an excellent post, titled Productivity vs Distribution, by Arnold Kling.


Blogosphere is an example of Spontaneous Order

Rishon Rishon has a great post comparing blogosphere with the Big Media. He points out that the power of distributed processing unleashed by blogosphere not only allows wider coverage but, most importantly, avoides the centralized decision making regarding what things to cover.

I think Blogosphere is a very good example of Spontaneous Order that F A Hayek popularized. Spontaneous Order emerges from bottom up and is not a result of top-down human design.


Investing - Don't get fooled by Free Cash Flow

The Motley Fool , once again, proves that it is the best site for investor eduction. Today's article, titled Free Cash Flow Illusions, by Rich Smith, explains how calculating free cash flow using easily available financial information (such as from Yahoo! Finance) can be misleading. Calculating free cash flow requires understanding of company's operations (cash flow from operations) and also company's capital requirements (minus capital expenditures). The article illustrates this point with an example of the Blockbuster. Blockbuster considers acquistion of rental library as capital expenditure (as per its earnings release). However, Yahoo! finance site, eventhough technically correct, does not take this into account. This can result in serious miscalculation on the part of the investor. Read the whole article carefully!