A Name to Unite “Libertarians”?

As usual twitter hijinks has lead to an debate about confusion in libertarian circles. Nothing new to see here. The confusion comes in part from the fact that many “libertarians” have different names they like to go by. For example, I prefer to be known as a Libertarian. But I know others who like: Anarcho-Capitalist, Voluntaryist, Anarchist,..etc. The whole concept of naming your political affiliation is nothing new because everyone does it. The central question of this post is to figure if finding a common name for “Libertarians” would actually unite us or do we need to look deeper at our principles to unite us rather just a name.

Different Names for the Same thing

So I don’t  know the saying exactly, sue me. My example on twitter was this: If you call a flower, a “shit plant” it doesn’t change the fact that its a flower. On the other hand, if you call a piece of shit, a “flower” it doesn’t change the fact that its a piece of shit. With that being said, Do I think a common name could help unite us?  Maybe. Here is why I think it could: One of my twitter friends, suggested the name #Anarchasm. Which I thought was a pretty good one. I think a common name would better in terms of marketing. It would help cohesiveness among all libertarians. I think the arguments against are much stronger. Re-branding is something that collectivists do. Just because you rename your movement doesn’t necessarily translate into success. Also if you look at libertarian party which I do support in elections, they are a mess. The party markets itself wrong because it tries to equate itself as the middle of Democrats and Republicans. The reality is that libertarians are outsiders. We don’t believe in any government or any political parties. I would argue that each individual is a political party of one because individual rights are the only ones that matter.

Principles are too Important to be ignored

The most important aspect of this debate is whether the name we choose to go by, actually represents our common beliefs. If libertarians are to be successful in changing society to be more like our voluntary system then we need present the same goals and arguments. On twitter, its likely you will see debates about politics. Typically when multiple Libertarians get into a debate with a statist, they will disagree with the statist. However, some of them will disagree with each other, which doesn’t help the argument they are making. We have to follow our principles of voluntary exchange and voluntary action in marketing our beliefs. If we don’t follow our principles then we are no different than the statists. Don’t get me wrong: open debate about ideas is a good thing. However, debate in private, don’t present debate to the people whom you are trying to convert voluntarily. They will be LESS likely to join if they see we can’t even agree with each other.

What principles should we all have? 

I think its obvious that all we believe in capitalism as main economic engine. I think we all believe that the government is always evil. We all known that taxation is theft. We all believe that communism and socialism don’t work. Its important to note also, that principles are not just right and wrong. Principles of libertarians are merely guidelines for living your life. Your own morality is responsible for actual judgement what is right and wrong. If we all follow the same guidelines, then individual rights will flourish, and nobody will do wrong because as the Non-Aggression Principle states that you can’t deny or break anyone else’s rights. The individual rights are clearly defined by the Bill of Rights. However, its not a comprehensive list. Individuals have unlimited rights there is nothing that government or other individuals can take away legally.

The Debate will Continue: 

This blog post serves as an opinion of a debate that needs to take place within the libertarian circle. It is my firm belief that as libertarians we need to unite based on principles in order to successful launch our society of individualism. If we don’t, and if we try to re-brand under name with still fractured goals and arguments, we will fall into the collectivist mindset.

Keep pushing for liberty, keep debating, keep your mind focused on the goal of libertarianism which is total freedom. Drive the narrative, don’t let it drive you.

#Speakout

Thanks for reading. Comments and Criticism is appreciated and welcomed.

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Part 2: Monetary policy and Trump’s Tariff debacle

Before you start reading this post you should go to part 1 if you aren’t familiar with supply/demand curve and “dead weight loss”. 

In the first part of this post, I will be discussing Trump’s tariff debacle. It is a little misleading but enacting tariffs can only end in a debacle. In today’s world, we have globalization and free trade around the world. The world is much too interconnected to put protectionists policies in place is like moving backwards. I want to re-highlight these points even though I mentioned them in my other tariffs post here.  In the second part of this post, I will go over one or maybe two common monetary policies utilized by the Federal Reserve (Central Bank). The policies will be in relation to tariffs because they have to do with the actual money supply. I won’t go too far into detail, lets get right to Trump.

Globalization and Free Trade are the New Norm:

If you haven’t read the tariff post linked above then here is a brief recap about globalization and free trade. Globalization is spread of goods, people and cultures all over the world. In today’s world, if you look at how the internet let’s people access information instantly, and how you can literally go anywhere by plane, boat or car. This is globalization. The exchanging of information with people from all over world, it has us more interconnected than anytime in human history!

This connection has lead multiple free trade agreements. There are many more pending. My point is that Trump cannot possibly ignore this. Trump’s problem is, as I see it, he is thinking like the US is his business. So in order to get his business (USA) ahead he wants to cut off the competitors by pricing them out. However, there is a YUGE problem! The problem is that consumer markets are now worldwide. The USA has a population of only 320 million out of 7 billion people in the world! Clearly, the US is lucrative market but its not the only one!

Protectionism: Moving the Economy backwards:

This is painfully simple to explain. The US used to be a protectionist economy from its birth in 1776 to about 1913. The federal government collect the majority of its income from tariffs on imports and exports. In 1913, the federal income tax  started raking in more than tariffs. It has ever since. After the world wars, the world started to rapidly globalize. The US lead the way. Now the US is in a tedious position with countries like China chopping at the bit to take first place. The point is that if the US wants to go back to pre-1913, before we were considered the world’s number one economy then we should enact tariffs. Speaking of China, that brings me to my next point.

Trump will eventually lose the trade war with China:

Recently I was able to acquire membership to the Wall Street Journal. (I got connections, kidding) I came across an article that caught my eye. Let me preface it with this: Trump has already approved 50 billion dollars worth of tariffs on Chinese goods. Now Trump is threatening to raise it to 100 billion dollars worth. The Chinese have responded that they will fight back if he does it. Here is the link to the article, its called Trump Weighs Tariffs on $100 Billion More of Chinese Goods by Bob Davis. (I believe they allow a few free reads if you haven’t gotten a subscription) Davis goes into detail about the possible effects of the tariffs. He also writes about Trump’s possible plans to protect industries like agriculture. I would encourage everyone to read since it gives a decent background on the situation.

My point here is that Trump cannot win against China. The Chinese hold a ton of our debt. In other words, they buy American dollar backed government bonds. (China also cheats on its exchange rate by basing it off these debt bonds) China holds leverage because of the holding of American debt and they import more to us than we export to them. Trump will lose because China doesn’t need US goods. The US is more dependent on China. Now you can how monetary policy plays a role in the contexts of tariffs and the economy.

Exchange Rate

One of the most important aspects that any government can control is the exchange rate. The exchange rate or currency exchange rate is the value of one currency in relation to another. For example: 1 US dollar is equal to .81 Euro. Currency exchanges can done in every currency. One of the ways that the exchange rate help with Trump’s trade war is through making our money more valuable or less valuable. Unfortunately, its a great tactic because it can backfire. In a circumstance, where Trump decides to have the US Treasury take money out of the money supply or circulation. A common used is called deflation. Which refers to increase of purchasing power of money.  This usually helps everyone because less money is worth more. However, in regard to China, it would probably strengthen the Chinese position.

make the dollar worth less, it would help devalue the debt held by the Chinese. Trump would simply tell the US Treasury to print more money. However, the drawback is that it would cost more to pay back debt. It would also decrease the buying power affecting nearly everyone except the super rich. Its also called Inflation which is my next topic.

Inflation

Inflation is often seen as a bad word. Its often used to describe the fall of prices and purchasing power. There is some controversy about how its calculating using CPI or Consumer Price Index, which is explained here. Now the important thing about inflation is that it can have serious consequences.  One consequence I mentioned was decreased purchasing power. Purchasing power is very important especially everyday people like me and you. Many of my anti-minimum wage arguments on center on this exact principle. Having money be worth less means that you have work harder to make more to buy less. For example, inflation might bring your regular grocery bill from 100 dollars  a week to 150 dollars a week even if the prices of food remain about the same. The reason is because each dollar may lose 10 cents in value. (The math is a little complex)

What does inflation mean for Trump’s trade war? There is good and bad news. The good news is that Trump could try to deflate the value of the Chinese held US debt. The consequences would be as mentioned above. This method would disallow the Chinese to sell off the debt without losing value. The bad news is that even if the Chinese are forced to keep it, America would have a harder time paying it back. Trump also has to be careful not to print too much money.  The problems that arise can be dangerous for the domestic economy. Money circulation works in a supply and demand curve. If the value of money is too high or too valuable than one can print more bills to help lower it. This is rarely a problem, except when considering exchange rates, imports and exports. If the value of money is too low than one could take money of the supply to help increase its value. So really its a supply/ value curve.

To conclude: Trump’s Trade War is not easily winnable. He obviously has some tools to work with. I also read recently that he is rethinking the Transpacific Trade partnership or TPP. I think its interesting because if the countries currently in the agreement allow Trump re-join and set the rules for trade than it will the US control over trade especially in regard to China. The TPP is a trade agreement that actually just regulates trade in certain industries. Trump withdrew because of global warming clauses and “unfair” regulations.

I can write more on TPP soon because I find it interesting. Also a Syrian Bombing post is coming soon.

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Part 1: Economics 101: Supply and Demand are Essential

I talk about politics and history on my blog quite a bit. These are my absolute favorite topics. I have in past posts talked about economics but it tends to be boring. One of my goals when starting this blog was to educate. So in this post, I intend to educate about some economic policies that relatively misunderstood by the general population. I won’t jump into the hardest concept first because in economics similar to math and science you have to understand the basics. First I want to talk about supply and demand. I know that I have talked about it before. Then I want to move into monetary policy. I might even touch on tariffs which I explained here. It occurred to me that President Trump’s recent tariffs have confused many people. You may or may not realize that tariffs can have very serious effects on our economy. They can also affect how other countries treat us. More on these topics later.

Supply and Demand: How it works?

main-qimg-7143dd32730266a174d9a0ffe02b2f3a-c

You might be familiar with a chart that looks like this. (Above) The way to read the chart is simple. First, you have to recognize a basic principle in economics that I call “push and pull”. Its very similar to Issac Newton’s “For every action there is a reaction” because for each transaction or movement of money or just action there is a reaction that also involves a transaction or movement of money.  Therefore if we look at the orange line labeled as supply and the purple line labeled as demand, you can see horizontal axis is labeled Quantity (increasing from left to right). The vertical axis is labeled Price which is increasing from up to down.

To put it simply:

As the supply goes up, the demand goes down. (Price and Quantity go up as well)

As the demand goes up, the supply goes down. (Price and Quantity go down as well)

This chart is the basis for literally everything in economics. Nearly everything can be put into terms of supply and demand. I will give a simple example of how supply and demand works:

Let’s say you own a winery in Napa Valley, California. Let’s say you have two main competitors that are approximately the same size winery as you. All three wineries make similar profits, have similar expenses and locations.

The going-market value for a 750ml bottle of wine is 25 dollars.

Your company price: 27 dollars, Competitor A: 27 dollars, Competitor B: 27 dollars

So right now every company is above value meaning that supply is meeting demand. Every company is able to charge more because of a high demand. Now Let’s say there is a massive drought. Shortage of grapes. Now you and your competitors can’t make as much wine. What do you think happens to the price?

Your company price: 30 dollars, Competitor A: 31 dollars, Competitor B: 32.

If you said that the price will increase because the supply has been depressed while the demand remained the same then you would be correct. Now let’s say the drought is over but a study comes out that says wine is bad for mental health. Suddenly everyone stops buying wine. What happens to your prices?

Your company price: 23 dollars, Competitor A: 20, Competitor B: 23 dollars.

If you said prices will decrease because of the drop in demand and the excess supply of wine then you would be correct. This is a very simplistic example and obviously running a winery is more complicated than I presented. I think that the concept is clear. For every action there is a reaction. For every push there is a pull.

I hope you got supply and demand down pat, because we are going to use it to help explain why President Trump’s tariffs are not as great as they sound. If you want to check out my post on tariffs then click here. In this next section, I will be focusing specifically on the economics.

The “Dead-weight” Tariffs– Tariffs in the context of supply and demand.

If you went to read my tariff post then you’ll have some idea what I’m about to explain here. For the purpose of this section, I’m going to assume you just learned about supply and demand. Let me explain that tariffs are a tax on an import or export (In this case President Trump is putting tariffs on imports) Tariffs actually used to be the US government’s biggest source of income up until the turn of the 20th century. The US approved an (16th) amendment to constitution that made income tax the primary source of government income. Now a days, tariffs only make up about 1-2 percent of income for the government.

An import is a good or product that is shipped or brought into the country. An export is a good or product that is shipped out or sold outside of the country. It’s good to know these terms. Let’s take a look at another chart, this represents tariffs on the supply and demand curve:

taxes

It may look confusing but it’s actually really simple. Keep in mind that as the supply goes up, the demand goes down. (Price and Quantity go up as well) Also as the demand goes up, the supply goes down. (Price and Quantity go down as well) Now if we at look chart let’s take the green line into account first. The green line is labeled “Supplier’s share of tax”. In order to explain the green line, I will give a brief example:

So let’s say there is a Steel Maker company and a Railroad Tie company. The Steel Company makes the steel that is needed for the Railroad Tie company. There is also a third foreign steel company located in China. So pre-tariff on the import of steel, the cost of steel for the Railroad company is .50 cents per pound from the foreign steel company. The Steel Maker company located in America has a price of .60 cents per pound. The green line represents that .50 cents that the Railroad company currently buys it steel at.

Now lets look at the red line labeled Customer’s share of tax. Back to our example: President Trump has imposed a 15 cent per pound tariff on imported Steel from China. (Not real, just made it up)  How does this affect our three companies? First let me give one key detail: Railroad company sells rail ties for 25 dollars per tie. So here is the breakdown of before and after the tariff

Company:                    Pre-Tariff Price              Post Tariff Price              Net Change

Railroad company Ties      25 dollars                       30 dollars                   5 dollars

USA Steel Company:           .60 cents                         .60 cents                      No change

China Foreign Steel Co.     .50 cents                          .65 cents                     15 cents

What happened? Well the Railroad company rose it price by 5 dollars. They also switch suppliers since they don’t want to pay more than they have to for steel.  Now refer back to the chart. The distance from the green to red line is known as “dead-weight”. In the chart, the blue triangle in the middle represents the dead-weight. Remember that “customer value” represents the demand side. Also that the green and red lines both represent supply both before and after the tariff is applied. The term dead weight refers the money lost due to the tariff. The Railroad company had to pass its extra cost of 10 cents to its customers. The reason?  The tariff made the foreign steel more expensive, however the American made steel did not get any cheaper so therefore the Railroad company had to pass that 10 cent per pound difference to the customer.  Of course, depending on the well-being of the company it could have also led to job-cuts or reduction assets.

Conclusion:

To recap: Tariffs create dead-weight whereby the tax increases the cheaper foreign competitor above the already more expensive domestic price. The unnatural increase creates a dead-weight because instead of natural competition, the tariff forces  a company to spend more without getting any benefits.

I’m end it here because they will be a part 2. In Part 2 we will finish up with a discussion of President Trump’s policies and the impact it will have with China. Then I will continue to explain some monetary economics that are important to understand.

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NYC MTA: Transportation Off the Rails

New York City is home to nearly 8.6 million people. The largest city in the United States. If you have ever been to NYC then maybe you have experience the wonder that is the subway. As a lifetime New Yorker, I can say that the subways are horrendous. Its dirty, slow, frustrating, stressful, and many more colorful words. I’ve only been living in NYC for 3 years, my experience has been that subways are getting worse. I’ve talked to other people who have lived here for longer and say that in the past 4 or 5 years they have seen a dramatic drop-off in subway service. I want to say that I’m no expert in transportation or subway systems. However, the problems with MTA start with the management and go all way down to the actual rails themselves.

In this post, I will offer up a solution to the problems occurring with the subway system. I will also offer a possible solution to the management of the MTA, particularly its budgeting and structure. I don’t have a fancy name for my plan or anything. I’ve also never put into words on a screen or paper. So here goes nothing:

For reference, I will be using the MTA’s own budget calculations. (Click here) These the official numbers of the operational budget. Other than that, I have to assume a few things because its hard to know without a survey of actual repairs how much its going to cost. I want to start with the physical repairs that I would have done.

The replacement of all lines with brand new track:

The most obvious change I would make is the replacement of all current track with a new modern track system. Now I have no idea of the costs or even the type of system best suited. However, I believe that updating the tracks that were technologically superior in the year 1900 is an important step to improvement. I also realize that this is the most costly and ambitious portion of my plan.

The new tracks would eliminate the delays cause by signal failures, derailments, and power losses. It is purely an infrastructure project because it keeps the mechanical malfunctions to a minimum.  As for a time frame, my thinking takes into consideration the impact of taking subways off-line, the budget restrictions, and the ability to get it done within the time constraints. There are 25 subway lines. I would take two lines that would cause the least stress on the system if taken offline. Imagine 2 lines go offline, the company or companies putting in the track would have a maximum of 2 years to get the job done. Now I could be wrong about the time frame to get it done however, adjustments can be made. In my theoretical situation, it would be a 13 year project approximately. I’ll be honest, they can take off my 5 line first, no problem with me.

This leads to a problem, of course. The problem being how will the people that get stranded by their subway line being re-done get around? Its not simple but the city recently bought new buses. So those older buses will be pressed into service to replace the subway line. I would have the buses follow the schedule and locations as the subway did. The times would have to be adjusted for travel distance. Its only temporary and its better than nothing.

Budgeting the Repairs: 

We have to assume that the repairs and track replacement is going to be very expensive. I want to say its probably going to cost over a billion dollars. However, I think there is some reasonable ways to raise that money without bankrupting: New York State, New York City, Citizens.  The MTA had a total operating revenue of 8,608 million dollars in 2016. The MTA had total operating expenses of 9,238 million dollars in 2016. If you do some quick maths that means a deficit of 630 million dollars. Obviously, its going to be impossible to completely fund this ambitious plan without creating more debt. But consider that by 2021, the MTA will have 1,955 million dollars of deficit by 2021. (Page 16) The MTA is already going under. Here are 4 steps to help fix some of problems.

Replacement Funds/Repairs: “Adopt a Subway”

The MTA currently spends 1,618 million dollars on the repairs, maintenance and related supplies. (Page 16) We have to assume that a new track replacement will add double or triple the amount. So we have options. We could raise taxes or steal money from other programs. But I feel that the best solution is a combination of charity and advertisement. Lets begin with advertisement. My idea is that each of the 25 lines of subways would auctioned off for baseline amount. Ideally the total amount would equal the approximate cost of the replacement. Let’s say that for a company OR person to adopt a subway, they have to donate a minimum of 20 million dollars. What do they get for that 20 million? They would get exclusive advertisements in subway cars. Exclusive meaning that no other company would be allow to advertise unless they allow it. They would get naming rights. They would get corporate perks for employees who ride the subway. For example, if let’s say Citi Bank wanted to adopt the 7 line, they might bid 40 million because of other bidders. The 7 line would be re-named The Citi Bank 7 Line.

I said that people could also adopt a subway line. That is called charity because they willingly giving their money for the improvement of society. It would work differently in that advertisements would be sold traditionally by MTA standards. However, that person would have the subway line named after them. It would work the same way in an auction, with a minimum donation. I believe this is the most viable and least intrusive form of raising money to pay for my expensive track replacement.

One last thing to note would be that the company or person would have the option to either re-up each year or opt-out. Now if they opt-out then it would be put up for auction again.

Transition from Public to Half Public/Private MTA

The MTA has been a victim, similar to social security of being stolen from by government. The MTA is a New York State owned, federally funded operation. The Governor has more say than the Mayor of NYC. Which leads to a lot of political infighting, given that both are democrats. One of my solutions involves changing the structure of the MTA. The budget problems will be somewhat alleviated with the continuation of the “adopt a subway” initiative. However, we have to go further. On page 16, the total labor expenses for 2018 was 9,238 million dollars. This means that employees are costing MTA a lot of money. In any business, the employees will be the costliest item. However, we don’t want cut employees just make them more productive.

The MTA has a board of trustees which has a CEO. I would take this board of trustees and make it a non-profit government contractor. The mid level management and lower level employees would remain public. Eventually, the new profits from a more efficient and cost effective subway system would help create a trust that would pay the board. The trust would essentially invest the money to the point where it could maintain itself. Once the trust can payout the salaries and benefits to the board, it would be cut off from the MTA profits.

As for the public employees, I wouldn’t change too much. The only change that might occur would be less need for maintenance because the system won’t need as intense care. This could mean a switch from full time maintenance into temporary. However, heavy use will mean the need for maintenance will still be quite strong.

Metrocard Fares

Depending on the “adopt a subway” success, the fares would stay at the $2.75 mark until significant progress is made. I would say that its fair to increase prices. In my personal view if a train typically takes an hour to get from point A to point B for 2.75, then if that same train took 30 minutes, I would be more than okay with an increase. The fare revenue for 2016 was 6,050 million dollars. I think the first increase would come in about year 7 of the project. Here is a chart of the increases and the revenue gained:

Year:   Fare:   Increase:   Revenue added:

7           4.25       1.50        263,550 million dollars

10         5.00        0.75       131,775 million dollars

13          8.00      3.00       527,100 million dollars

*All figures are in dollars and cents, its a 13 year project*

These figures are based numbers of ridership (1.757 billion) from 2016 and a fare of 2.75 at the base. The fares would increase by an overall of 5.25 dollars. I think this is more than fair given that a new modern track subway would increase efficiency and effectiveness. I think that benefits to businesses would be substantial. The amount of tardiness due to bad transit is ridiculous. I can’t tell you how many times I’ve been late due to a subway problem. I’m sure other New Yorkers have similar horror stories.

“Adopt A Station” – Give back to your community!

To piggy back on my previous idea of “adopt a subway”, I would also install the same thing for subway stations. Again if you have ever experienced a subway station, you know its just rats, homeless people and piss. Its horrible. Now stations would relatively cheaper. The money would be split into two purposes, paying the workers who clean and operate the booth. The second portion would go towards the MTA’s overall budget. If a company adopts a station, they would get exclusive advertisement rights, naming rights and some input on renovation design (If work is needed to be done). Of course, this is all optional and some MTA advertising money would be used to push a “give back to your community” twist.

Conclusion: 

I believe that my 13 year track replacement in combination with my “adopt a subway” and “adopt a station” initiatives would revitalize the MTA and the subway system. It would forever change how the subway is run. I think that separating the management (Board) from the public sector would help because politics gets very messy. I think the increase profits from the investment in the new track could actually make the MTA break even. With some help from companies and generous individuals it might even have surplus. The surplus (if it happens) would be used to improve the train cars, upgrade them.

I think that most New Yorkers are tired of the politics that keep the MTA from doing its job in running an effective and efficient subway system is the driving force behind my idea. You would have to be delusional to not see the problems with the current system. If you like my plan or if you have improvements I could make then feel free to let me know. If enough people get behind it, I would think sharing with the necessary people to start getting into action.

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Lesson on Economics: Protectionist vs. Free Trade

I know. I know. I know what your probably saying to yourself. “Not another economics lesson, you nerd!” “Haven’t you already covered everything economics?” Thank you, I am a nerd and also yes I’m thorough in my coverage of topics. I promise I’ll try to not to drone on for 2000 words this time. I need to explain something that President Trump has recently brought up as a potential policy. I don’t think people really understand how import and export tariffs work.

On the surface, in simplest terms a tariff doesn’t sound like a bad thing. A tariff is a tax on a imported or exported good. A tariff can increase of the price of a foreign good to make the domestic goods more “competitive”. Now I put that quotes because the reality is quite different. I think most people would say that there seems to be nothing wrong that. History would even agree that tariffs are a commonly used tool by governments to help guide trading between nations. Here is the problem.

Tariffs are antiquated. The US government used tariffs from its inception thanks to Alexander Hamilton’s brilliant mind to about 1913. After 1913 and in the 105 years since tariffs have fallen out of favor as economic tool. This isn’t to say that no country uses them but the US government only takes about 1-2 percent of its income from tariffs today. Before 1913, the tariff brought in nearly 90 percent of the governments income at its peak.

Economists agree that tariffs hurt an economy. I’ll get to why after I explain that globalization and free trade have changed the world economy. Globalization is the free movement of people, cultural and products. The world is more accessible than ever, with cheap flights to almost anywhere in the world. The internet has an untold wealth of information that was never available til about 25 years ago. We live in a world where everyone is connected. There are multiple free trade agreements between countries that allow a flow of goods and services between them. Free Trade encourages competition in the market. It allows every participant country’s economy to benefit.

Meanwhile, Protectionist economies or countries that use tariffs extensively are actually hinder. The simple explanation through some graphs and pictures. E-tariffntrade2

This graph is basically a supply and demand curve with some with other lines. (Charts reads likes this: As supply goes up, Demand goes down OR As demand goes up, supply goes down). The bold line is the price of goods before the tariff on imports, its label WS. The line above that labeled WS+ Tariff is price of imports after the tariff.  The implication is obvious: A tariff will increase price of an imported good. Here is another chart to show the impact of this:

taxes

This particular chart shows the “Dead weight” or loss of value. This chart reads like this: As quantity goes up, the price goes down.  You can see the supplier has to pay the tariff and therefore it increase the cost to the customer. The loss of value is where the maker increases the price of their product to cover the cost of the tariff. The money is lost because the supplier has to either stick with that supplier or go to another one which obvious wasn’t cheaper before the tariff.

Here’s an example:

Before Tariff:

Company A: Product cost: 25 dollars

Foreign Supplier 1: Material cost: 5 dollars

Domestic Supplier 2 Material cost: 13 dollars

After Tariff:

Company A: Product cost: $25+ $10 tariff = $35

Foreign Supplier 1: Material Cost: $5 + $10 tariff = 15 dollars

Domestic Supplier 2: Material Cost: 13 dollars (No added Tariff)

You can see the dead weight  or loss value. The tariff raises the price of the foreign competitor’s material cost artificially. The extra 10 dollars that it cost to buy from that foreign supplier is lost. This is because the domestic supplier’s cost is 13 dollars compared to the foreign supplier’s 5 dollars before tax. The loss of value is 8 dollars. Therefore the Company A has to raise it prices because its cost have increased.

I’ll put a picture in the preview that help explain even more. (Credit to marketbusinessnews.com)

My conclusion is basically that protectionist policies don’t benefit an economy in the long run. The government is once again interfering in the market where it doesn’t need to be. As usual, the best solution to fix the problem with tariffs is to not have any. We have to take the government out of the market that includes all varies regulations that just raise prices and don’t involve health and safety.

President Trump should tread carefully because the long term implications will be worse than the short term benefits. I think that because of globalization, free trade is the new way to do business. Although the US has historically been a protectionist country, the future is going the exact opposite way. The world economy has undergone globalization and free trade is the new normal.

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Relevant articles on Tariffs,  Historical Tariffs, Economics Part 1, Part 2, Part 3

Tragedy of the Commons: Problem with Collective Policies

Have you ever heard of Tragedy of the Commons? Sound familiar? Tragedy of commons is typically associated with fishing. If fisherman go out to a popular fishing spot and catch fish at a rate that is more than fish reproduce, then that would be a tragedy of commons. Garrett Hardin came up with theory originally and applied it to biology or nature. There are many examples, but the basic principle is that demand overwhelms supply.  Just in case you fell asleep in Economics 101 or you happen to be Bernie Sanders then here is a little reminder of how supply and demand work:

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I want to talk about tragedy of the commons in the terms of political policies and platforms. It’s a topic that is hotly contested among Libertarians and conservatives. On the other hand, Liberals tend to completely ignore it. Its this ignorance of the tragedy of commons that might explain why collectivist policies that liberals tend to advocate are just really bad. Liberals and even Conservatives both tend to argue for MORE government regulation in the face of a tragedy of the commons issue. (I’ll try to keep it relatively brief, one or two examples, I have a lot to say)

Let’s take on healthcare for example, is a tragedy of the commons. Liberals advocate for a universal healthcare system. This system would in theory depend on the taxpayer (theft) money to help cover the costs of healthcare. However, this policy would extremely expensive due to the increased costs to private health providers. Also the service given by providers would be slower due to a heavy volume and probably less staff. Healthcare is a complex issue but a tragedy of commons exists in both the taxation for it and the availability of quick medical care by providers. For example, in Canada, they have universal healthcare and experience longer wait times, sometimes for very important life saving procedures. In some cases they come to the US for faster care.

In short, universal healthcare is a collectivist policy pushed by liberals that creates many tragedy of the commons. Unfortunately the conservatives are not much better backing single payer with a government agency running the show. Less tragedy of the commons here, but still not the best option. The solution for a tragedy of the commons is deregulation in most cases, concerning government policies. In nature, like the fishing spot, the solution would be to have fisherman stop fishing in that particular spot until there were sufficient fish. I want to clarify what I mean by collectivist. Collectivist is a term usually meaning something is done in or by a group.

My second example is one of the hottest issues because of a vote coming up, Net Neutrality. Naturally my position is repeal because Net Neutrality isn’t consumer protections, its just dealing with bandwidth and if companies can block or censor stuff. From what I’ve read the new rules after repeal will be that the companies will have to report whatever they throttle, block, censor to the FCC who will make it public. I also see no problem with Netflix and Amazon and Hulu having to pay more for bandwidth. They use a lot of it, its only fair. Naturally that will be passed to the customer. However, the good news of repeal is that companies will offer different packages specifically geared toward streaming services. Unlike now, where you get all one price and it might be good or bad.

The tragedy of the commons in Net Neutrality stems from the issue of bandwidth. There is only so much bandwidth that these companies can generate without losing money. Its interesting because if you look at bandwidth in a vacuum, it really highlights the problem. Watch: Let’s say Comcast and Verizon both offer 300 mbps of bandwidth under current Net Neutrality for an average price of 150 dollars. (Making up random numbers here). Let’s repeal those rules and see how prices and amount of bandwidth change. Under Net Neutrality, both companies would have similar prices and the max amount of bandwidth would be at 300, but of course you can pay less to get less. The problem with this is that the companies aren’t really competing. There’s very little variation because the going rate for bandwidth is 150 dollars for 300 mpbs. Everyone can gets to use that bandwidth to watch Netflix and play fortnite as much as they want. The companies might be struggling to keep all this bandwidth up with only 150 dollars per customer because their own business costs are going up.

If we repeal Net Neutrality, now Comcast charges $100 for 200 mpbs,  $200 for 300 mpbs and lets say $300 for 400 mpbs. Unheard of right? Well, Verizon charges $75 for 150 mpbs, $150 for 250 mpbs, $275 for 300 mpbs, $350 for 420 mpbs. Now you can see the competition as each company tries attract more customers. They may even offer a lower bandwidth but you get extreme streaming capabilities for an extra 100 bucks. Either way, the competition will naturally drive down prices. When supply goes up, demand goes down. In order to create demand you need to supply, but you also need to create an interest in your product and attractiveness or marketing.

The solution to the tragedy of the commons for nearly every aspect of Net Neutrality is deregulation. Let the consumers decide which companies will succeed and fail. Another positive aspect of net neutrality being repealed is that it will allow startups and other smaller companies to get into the market of internet.

I believe that through my two examples I have shown why some collectivists policies are broken due to the tragedy of the commons. I believe that the solution to tragedy of the commons is deregulation which means getting government out of our lives. This solution is the basis for the whole libertarian philosophy. If society is a tragedy of the commons then as libertarians we are for the deregulation and privatization of pretty much everything. Everything is harder in a large group. Its similar to when you ask your friends where they want to eat. Everyone has different opinion. Or when you ask your friends when they want to go out. Everyone is busy and has no time. Collectivism requires group-think and group decision making. Its not the most effective. Tragedy of the commons also tends to tread on the rights of the individual.

The rights of individual are the most important aspect in a free society. As Thomas Jefferson once wrote:

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness”

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What do you mean no Helicopters and McNukes?

In usual fashion I have come across some inspiring material to write my own article on. I’ve been thinking recently about what the ends of a libertarian party or movement would or should be. In this blog I consider the means of getting there. I’m always pushing steps toward a libertarian society. These steps seem to never make any progress. I have always viewed the libertarian society as an idealist notion. I think to some degree its true. On the other hand, I feel like its entirely possible that a libertarian society is achievable. The problems are numerous and the solutions are few. One main problem and probably the biggest one is the lack of education of outsiders on the libertarian values and beliefs. People tend to misinterpret or misunderstand what libertarians stand for and what we want to achieve.

I’ve recently said on social media that I believe I’m in the minority of libertarians that believe that achieving the ultimate goal of a libertarian society will come instantly once it happens. I feel that many libertarians, anarchists, anarcho-capitalists think that once we overthrow the current government then we can just easily transition to that libertarian society that we all agree is the goal. I don’t believe its so easy or fast. I think there is a number of factors to consider about means and ends of libertarianism.

The first and foremost is that the way to change the government is to vote for politicians who hold the same beliefs, values and morals as libertarians.  We can all agree politicians of this caliber don’t exist right now with the exception of Rand Paul, maybe. After voting for Gary Johnson in two consecutive elections I have realized that we are going too big. (Nothing wrong with him, just a walking meme.) We need to find libertarian congresspeople. I know of 3 libertarian leaning congresspeople, Rand Paul, Thomas Massie, and Justin Amash. Once we can turn the Congress into a majority of libertarians then we can work on the white house.

The second factor is education like I mentioned before. A lot of people have misconceptions of libertarians. Even I used to subscribe to these common myths. For example: Libertarians are both Republican and Democrat because they support a little of each. It might be true that we hold similar positions but we are actually against both parties. The two main parties are a snake with two heads. They don’t care about you. They care about their interests and their money! We need to educate the masses on libertarianism. The essential thing is liberty and freedom. The government shouldn’t play much if any role in our everyday lives. The government doesn’t need to over regulate and get involved in everything we do. The government doesn’t need to tax our hard earned income. For over 100 years, the US government collected no income tax. Who will build the roads? Private corporations that need to ship things by truck. Businesses that need to drive around. My point is that if we can educate people then eventually will lead to more people accepting and more importantly voting for libertarians.

The third factor of the means is simply cohesive-ness among libertarians. We have to unify our ideas. I know we all agree on certain things. But we have to compromise on other things. Example: Abortion. One of the hottest button issues because there is no stasis for argument. Pro Life or Pro Choice? For me, I’m torn between both because choice is guaranteed by the 14th amendment. Yet I’m also catholic so I can’t possibly support the killing of something that is alive. My position is Pro-Adoption. It gives a choice and saves the life of the baby. Also there are many parents out there who can’t have kids. My point here is that a compromise takes a little bit from each side and makes palatable to everyone. Compromise is something that our country was founded on. I strongly believe we should get back to that.

The forth factor is concerning the ends. I find it hilarious but helicopters and McNukes are a standard must have in any libertarian society. But lets all be honest its a little far fetched. I do believe that no taxes, open carry (guns), NAP and very small government are possible to have. I think we all have to be realistic about the ends. The ultimate goal is for everybody to live their life without the interference from government. But I think we miss the point that libertarian is also one of the most charitable types of societies. Its not fake charity like socialism and communism. In a libertarian society, you would give to the poor, give to the sick and give to government if you felt like it was worth it. Thats the wonderful thing about it, its your choice to give your money or not. Government is ineffective at helping people. But there is a million examples of where everyday people throw their support at something and get it done without government.

My conclusion is that we need to educate, vote, come together and be realistic about our ultimate goal of a libertarian society.  We can do it all once too. My inspiration was an article that basically said no more Libertarian party but we need a movement. In order to achieve a movement, we have to educate people on the benefits of joining this movement. We have to vote in politicians who reflect our positions. Its not going to be easy. The steps towards a libertarian society will be methodical. All I hope is that I see this libertarian society come to fruition before my time is up. I’m still young so I got hope.

Just remember kids, Taxation is Theft.

Thanks For Reading!