Posts tagged Free Markets
Posts tagged Free Markets
We constantly hear that China sells us too much stuff at too low of a price. The story goes, if the Chinese would just raise their prices and sell us less stuff, we would be much better off. After all, by everyone paying higher prices and having less access to goods and services, we would have more money to invest in new businesses and therefore create new jobs
So why then does President Obama want to force China to sell us more stuff! Won’t this destroy jobs? Aren’t we going to be more reliant on China for rare-earth minerals? Haven’t we learned our lesson with oil?
The Obama administration Tuesday intends to escalate its trade offensive against China, a move heavy with political overtones, by pressing the World Trade Organization to force the export giant to ease its stranglehold on rare-earth minerals critical to high-tech manufacturing.
Seriously though, it drives me crazy how the United States government thinks it can tell people what to do. Raise your prices! Sell us less of this! Sell us more of that! It’s like markets can’t function without direct intervention from the President (substitute any politician actually) himself.
Uhg. These kinds of stories make me sick. The story itself is a little old (from July 2010) but the message is very timely.
Mr Norris was 65 years old at the time, and a collector of orchids. He eventually discovered that he was suspected of smuggling the flowers into America, an offense under the Convention on International Trade in Endangered Species….
In March 2004, five months after the [initial] raid, Mr Norris was indicted, handcuffed and thrown into a cell with a suspected murderer and two suspected drug-dealers. When told why he was there, “they thought it hilarious.” One asked: “What do you do with these things? Smoke ’em?” …
[Later] an undercover federal agent had ordered some orchids from him, a few of which arrived without the correct papers. For this, he was charged with making a false statement to a government official, a federal crime punishable by up to five years in prison. Since he had communicated with his suppliers, he was charged with conspiracy, which also carries a potential five-year term.
As his legal bills exploded, Mr Norris reluctantly changed his plea to guilty, though he still protests his innocence. He was sentenced to 17 months in prison. After some time, he was released while his appeal was heard, but then put back inside. His health suffered: he has Parkinson’s disease, which was not helped by the strain of imprisonment. For bringing some prescription sleeping pills into prison, he was put in solitary confinement for 71 days. The prison was so crowded, however, that even in solitary he had two room-mates.
Yesterday morning on NPR, I heard a promo for a story that would air later in the afternoon. A private company named “General Fusion” was using $30 million in venture capital to do what billions in government funding could not - generate energy through nuclear fusion. It naturally piqued my interest. The first paragraph sums it up best:
The world would be a very different place if we could bottle up a bit of the sun here on Earth and tap that abundant and clean energy supply. Governments have spent many billions of dollars to develop that energy source, fusion energy, but it’s still a distant dream. Now a few upstart companies are trying to do it on the cheap. And the ideas are credible enough to attract serious private investment.
This is the power of the free market. Good ideas get funded by investors who feel there is a good chance they will succeed, but also will be profitable (and thus affordable). They don’t waste billions of dollars on theory that will never become a reality, or if it does, will be so outrageously expensive that there will be no practical use for it.
Richard Siemon used to run the fusion program at Los Alamos National Laboratory, which is part of the multibillion-dollar federal research effort. He says radical ideas like this get dreamed up at the big labs, but they get starved for money, which flows mostly to the industrial-sized projects. Sure, he says, those big projects are exploring important physics, “but when they are working on a concept and somebody says, ‘Yeah, but it’s going to cost too much for the customer in the end,’ that’s sort of like a non-issue for a government researcher.”
General Fusion is relying heavily on funding from venture capital firms, which are generally accustomed to quick turnarounds. This project is pioneering the idea that such firms can have the patience to invest in longer-term projects.But private investors are only interested in projects that could become commercially viable power sources. That’s why Siemon is happy to see private investors taking an interest in fusion energy.
Just imagine what would happen if these billions of dollars were available to private investors and inventors who actually care if what they are working on is practical. This waste of money by the government is what Austrian economists call ‘malinvestment’. Malinvestment takes resources (not only money, but other brilliant scientific minds and scientific equipment that could be used to help the private sector work on real world solutions) away from people who have good ideas, thus delaying mind-boggling improvements to our standard of living, and in this case, our environment.
Who knows what kind of world we would be living in (clean, cheap energy which is pollution free) if the markets were allowed to work efficiently.
BTW, Here is an excerpt from another NPR story on nuclear fusion research from July, 2010…
What would you pay for a clean technology that could meet all the world’s energy needs without producing an ounce of carbon dioxide?
On Tuesday morning, governments from around the world are meeting in France to discuss exactly that. On the agenda is ITER — Latin for “the way” — which is a major experiment to harness the power of nuclear fusion.
ITER’s promise of clean, nearly limitless power has won support from politicians. But the experiment’s multibillion-dollar price tag has critics wondering whether it’s really worth the cost.