Dental Lobby Has Sharp Fangs

     More bad news in Arizona.
     One area of the U.S. economy that has long been almost completely corporativized (regulated by the government) is dental services. Dental services in the U.S. are monopolized by an organization called the American Dental Association, which has been successful in having licensing laws passed in all the state legislatures. These laws have had the effect of restricting supply of dental services, thus boosting price.
     Recently, some legislators tried to introduce a bill to the Arizona state legislature that would have permitted dental therapists to offer some services that presently only dentists are legally allowed to offer. Their position was that the high price of dental services results in many people being unable to afford them and that the licensing of dental therapists would alleviate this problem.
     Unfortunately, the House Appropriations Committee of Reference voted 8-1 against the bill. The sole yea voter was Nancy Barto (R-Phoenix). Aside from Regina Cobb (R-Kingman), who is actually a dentist, the names of the other nay voters are unknown.
   

Caution When Boldness is Required

     The new Pinal County sheriff and county attorney are said to be "cautious" about the use of RICO funds collected by the county. While campaigning for the job, Sheriff Lamb had criticized the former sheriff's handling of the funds, which is believed to have been a factor in Lamb's victory over the former sheriff's chosen successor.
     If that's so, then it seems to me that Sheriff Lamb could afford to be a little less cautious and a little more righteous.
     RICO laws have been a scandalous infringement of Americans' property rights ever since they were first cooked up in 1970 as a tactic in the misguided War on Drugs which has been a useless and expensive policy that has been a factor in our increasing national impoverishment.
     Under the RICO laws, property may be seized by law enforcement officials if either they or an informant alleges that the owner violated a law. Nothing has to be proven in a court of law; an allegation or a suspicion is sufficient legal grounds for a RICO seizure. Since most people would agree that having your property seized is a form of punishment, it follows that RICO sanctions punishment without trial. Surely, this is a very serious regression in the quality of our justice system.
     In the interests of justice, such laws ought to be repealed, or at least not enforced.

The Only Fair Safe Space is a Private Safe Space

     Arizona has come up in the news and not in a good way. Well, what else do I blog about except bad news?
     I choose to critique the article in Reason Magazine as they usually have the best analyses and to find a flaw in a Reason writer's argument would be quite a rare thing. This time, however, I think something more needs to be said.
     A bill, HB 2120, has been introduced in the Arizona House of Representatives by Republican (are there any other kind in Arizona?) representatives Thorpe and Finchem (who I voted for). By the terms of the bill, "courses, classes, events, or activities" that
1. promote the overthrow of the U.S. government
2. promote division, resentment, or social justice toward a race, gender, religion, political affiliation
    social class, or other class of people
3. are designed primarily for pupils of a particular ethnic group
4. advocate solidarity or isolation based on ethnicity, race, gender, religion, or social class
5. violate state or federal civil rights laws
6. negatively target specific nationalities or countries
are to be prohibited in school districts and community colleges and universities subject to the authority of the state (of Arizona).
   
     The author of the Reason article opined that

". . . allowing authorities to legislate what is and what isn't acceptable speech on campus—especially public campuses which are required to respect the First Amendment—is a terrible idea and inevitably comes back to harm whichever party the speech restrictions were designed to protect. The authors of HB-2120 might think they're taking a stand against P.C. culture run amok, but all they're really doing is legitimizing the concept of hiding from challenging ideas rather than confronting them." 

     In other words, schools and universities are supposed to be arenas where competing ideas are debated, and may the best idea win! Perhaps that is what people have in mind when they assert that the state should not have control over educational content:

"The Arizona school boards association said it opposes Thorpe’s bill because the state should not have control over school content. 'It should be up to each district what kind of curriculum should be approved,' said spokeswoman Heidi Vega."

    I don't really have a dog in this fight. The two sides each have their own idea about what should happen (what content should be taught) on public property (the schools). My position is that it's impossible to decide fairly how public property should be used.
     The concept of ownership gives one a solid basis for deciding questions of how to resolve conflict over scarce resources. Ownership entails the following property rights: enjoyment, occupation, possession, rental, sale or other form of alienation, use, or even destruction of a property, and the right to exclude others from the exercise of aforesaid rights.
     All property, including "public" property, belongs to the persons who determine who gets to exercise the property rights. The theory of public property in a democracy entails the idea that public property will be used in a way determined by the majority of the voters. But what if two powerful political factions disagree about how certain public property is to be used? Then the goal of the concept of ownership---to resolve conflicts over scarce resources---is defeated. And indeed, that's what we're witnessing in the fight over what content should be taught in Arizona public schools.
     I think everyone has the right to advocate whatever ideas or theories they believe in, no matter how mistaken I think they are. However, people should not have the right to steal other peoples' money (taxation) and then use that money to erect facilities where their ideas and theories will be propounded at taxpayer expense.
     Therefore, the only just solution to the problem of what content will be taught in schools is that the schools be privatized. One can't complain about what people do on their own property!

Corporate Welfare in Casa Grande

    Lucid motors is planning to build a new electric car manufacturing plant in Casa Grande.

"The future of Casa Grande looks brighter now with Lucid developing 500 acres near Thornton and Peters roads, according to Casa Grande Mayor Bob Jackson. He sees the company’s arrival as a catalyst that will propel Casa Grande into being a leader in technology and advanced manufacturing. There will not be any delays in this development on behalf of the city, Jackson promised, as he expressed a desire to speedily move the project forward."

     I'm so glad to hear the the municpal government won't stand in the way of honest and potentially lucrative economic development. Governments don't always behave rationally or morally.

"Pinal County offered performance-based incentives to attract Lucid to build in Arizona."

     Now, why does Pinal County have to pay Lucid to bu ild a factory in Casa Grande? Is there something wrong with Pinal County that companies have to be paid to build factories here?

"County Manager Greg Stanley said he could not discuss what types of incentives were offered, except to say they were tied to Lucid pledging to create a certain number of jobs."

     Ok, so jobs will be created. All other things being equal, that's a good thing, I think.

The county will be assembling and buying the land, parts of it owned by Saint Holdings LLC, then selling it to Lucid."

     Now, why doesn't Lucid just buy or lease it themselves? Why does the county have to get involved in the deal?

"There is only one problem with the deal — the taxpayers of Arizona are expected to pay for the purchase of the land and contribute a significant amount of money to help it get the factory built and operational. When and if everything goes as planned, the factory is expected to create 2,000 jobs in an area where many are unemployed or underemployed."

 "The land itself will cost $31.8 million. Financing the purchase over 30 years will add another $41.6 million, but Pinal County spokesperson Joe Pyritz says the plan is to lease the land after it is purchased (presumably to Lucid Motors, although the county is not allowed to say so for the record) and then sell it at the end of 5 years. That arrangement would cap the total cost of the deal at $35 million. The sale price is expected to equal the total outlay made by the county for principal and interest."

"However, first someone has to actually buy the land. County supervisors will meet in January to consider how to do that. The leading proposal is to finance the purchase by raising property taxes or imposing a countywide sales tax surcharge. Pyritz says if the supervisors decide on a tax increase, the new tax would only cover the land deal and would end once the tax funding reimburses the county for the purchase cost."

     Oh-oh. Governments don't have any money of their own. The only way they can get money is by taxation. It's their only business plan!

 "Lucid Motors will be eligible for up to $46.5 million in various subsidies offered by the state through the Arizona Commerce Authority over the next five years. Those subsidies will be coupled with certain performance targets" 

"Susan Marie, spokeswoman for the Arizona Commerce Authority is quick to point out that the total amount is far less than the $335 million in tax credits promised to Faraday Future or the $1.3 billion in similar credits promised to Tesla Motors by the state of Nevada."

     Oh-oh. If we don't hurry up and jump on this deal, some other state (or some other county) will steal it away from us! Taxpayers in other locales aren't as dull as I am, probably.
     However, there are always two sides to every story. Could it be possible that paying Lucid to build a factory in Casa Grande with state and county taxpayers' money has a downside?
     First of all, let's sum up the upside. Cui bono? Lucid shareholders will certainly gain from this deal. Lucid management and workers will become employed, which is nothing but an upside for them. The county increases its tax base. No downside for them. Casa Grande businesses may or may not benefit, depending on where and how the Lucid employees spend their money. For sure, the economy will grow, there would logically be an effect on property prices (more taxes for the county), but it's impossible to predict who specifically will benefit and to what degree.
     On the other hand, it's doubtful, for example, that residents of areas far removed from Casa Grande (as many parts of Pinal County are) would benefit much, if at all.
     The downside of what should otherwise be a win-win situation is that taxpayers, both in Pinal County in particular and Arizona in general, will be forced to subsidize the establishment of the Lucid plant.

     "The project involves a significant amount of corporate welfare. Besides the Pinal land deal, Lucid Motors will attempt to collect up to $46.5 million over the next five years in various subsidies offered by the state through the Arizona Commerce Authority."

"The five Pinal County supervisors will discuss the possible land purchase and how it will be funded on January 4 at their regular meeting in Florence. The goal is to a produce a resolution of intent for the agreement, to be voted on no later than January 19."

"'The supervisors will likely consider either a property- or sales-tax hike to pay for the land,' Pyritz says. If they decide on a tax increase, he says, the new tax would only cover the land deal and would end once the tax funding reimburses the county for the purchase cost."

"'We won't make or lose money' on the deal, Pyritz says."

     No, the county will make money, in the long run, if tax revenues increase. And by the way, is the county planning to reimburse the taxpayers for their interest-free loan to the county and Lucid after the five years are up? Nothing has been said about that! Could it be that the county will end up keeping the money? Could it be the tax will remain in place, even after the deal with Lucid has been settled?

Summary:
The new factory will create 2,000 new jobs, which means the economy will grow.
    1. But capital extracted from state and county taxpayers will mean decreased purchases of the products of other producers.
    2. The jobs created will be in Casa Grande. Benefits for Western Pinal residents and property owners? Probably, some (we can't be sure who) will be net gainers. For other parts of the county? Doubtful.
     3. Economic stimulus created by the participation of government constitutes malinvestment (defined as investment that would not have occurred in a free market) and all other things being equal, has to be liquidated in the long run. If government wants to do something to improve the economy, they can remove legal barriers to development by repealing laws that discourage business.
     4. No mention is made of paying back taxpayers for their interest-free loan to the county (and indirectly to Lucid) or of abolishing the tax after the loan to Lucid is repaid.

     Government/business alliances are not a just way to foster development. If Lucid can't obtain the necessary funds to build their factory by consensual means, that is a good indicator that it shouldn't be built.
     The involvement of the county as an economic actor is troubling. Governments, if they serve any purpose at all, are meant to provide a very limited range of functions. A government is not a business and can't be run like one. Financing economic development is for capitalists and entrepreneurs, not county supervisors who have no capital except what they can squeeze out of the taxpayer.
   

Minimum wage raised in Arizona

Last November, the voters of Arizona, in all their wisdom, voted to raise the minimum wage from $8.05 to $10.00 in January and to $12.00 per hour by 2020.
Below, I recapitulate various arguments pro-minimum wage and either refute them or ask a question that may be hard for the proponent to answer.

1. The minimum wage will help the poorest wage earners to earn a living.

     All other factors held constant, a worker's remuneration is determined by demand for his or her labor service (including its level of productivity) and supply of the type of labor service he or she provides. Additionally, demand for a specific type of labor depends on the amount of capital available to be invested in that particular economic sector (production = labor + capital + land [resources]). If a worker decides that he or she will not work for less than an amount greater than the market determines for labor in a particular sector, that minimum-wage laborer will tend to be unemployed.
     And if the price of an entire market segment's product increases, demand will decrease. This means that the marginally profitable producers will no longer be able to make profits and will no longer be viable on the market. Hence, the jobs of workers at these marginal producers will disappear. This is a short-run effect.
     There may be some producers that continue to produce at reduced profitability. However, as capital wears out, new investment will be competing with other investments for ROI. If enactment of the minimum wage has made the sector in question less profitable, and the ROI less attractive, then investment may not be available (and all other factors held constant, definitely won't be available) for replacing worn-out physical capital, and the producers will become non-viable over time and minimum wage jobs will disappear gradually (long-run effect).
     Finally, if the cost of implementation of automation doesn't prevent a competitive ROI, minimum wage jobs may disappear, even though production continues.
     Bottom line: not only will minimum wage not help anyone to earn a living, it will actually reduce employment.
   
2. Minimum wage legislation will help the poorest wage earners and although it may result in higher prices, will not result in less employment if demand in the market is inelastic.

     But, if demand is inelastic, why have producers not already raised prices?

3. Raising the minimum wage may reduce turnover in labor costs, and therefore result in small or no increase in prices of the product.

     If offering more wages could reduce costs on the whole, why would producers not already have done so?

4. Minimum wage workers are such a small proportion of a producer's costs that the increase is too small to make any difference.

     There is no such thing as "too small to make any difference." It's often observed that smaller producers with smaller profit margins will feel the effects in the short term and minimum wage hikes will equal "get big or get out."
     Can big business survive minimum wage hikes more easily than small business? Can their economies of scale provide a profit margin that enables them to stay afloat in spite of the minimum wage? Perhaps, but they're already charging as little as they possibly can to avoid losing market share to competitors. And if they could've charged more, they already would've done so. So there shouldn't be a lot of room to maneuver as far as prices go.
     And when investment becomes necessary to replace capital used in conducting business, profitability (ROI) will be a factor in determining whether or not capital maintenance costs can be covered. Depending on what other economic factors are at work, consumers may change their demand schedules, but the bottom line is that the minimum wage causes the economy to shrink and some marginal producers, not necessarily only small ones and not necessarily only ones directly affected by the minimum wage, must go out of business.

5. Empirical studies have shown that minimum wage legislation either doesn't cause or causes only insignificant unemployment.

     And there are empirical studies that suggest the opposite. My problem is with "empirical studies" per se.
     Constructing a general law on the basis of specific data is a logical error. Even from the point of view of creating a testable hypothesis in the "social sciences," I fail to see the usefulness of "empirical studies," as there is no way to scientifically test unique historical data.

6. Think of it this way: You’re running a McDonald’s selling 1,000 hamburgers a day. You make, say, 75 cents on each Big Mac costing $3.99. Will you raise its price by a nickel to $4.04 in order to make up for an increase in the minimum wage? That would be silly, because $4.04 is not an attractive number, and you’d lose too many sales as a consequence. Rather, you’d be satisfied with a lower profit margin on a Big Mac of 70 cents. But you notice that the Big Mac Meal is selling for $5.69; that gives you the opportunity to raise its price to the next attractive number of $5.75 in order to make up for the increased cost of labor. Will the demand for Big Mac Meals decline? It is doubtful that customers will even notice that tiny increase in price. 

     Customers may or may not notice the price increase, but not noticing a price increase doesn't prevent their money from not being able to buy as much as before the minimum wage hike. Bottom line: fewer Big Macs will be purchased therefore fewer will be produced and sold = unemployment. What if customers change their demand schedules and are willing to re-allocate money from other expense categories to Big Macs? According to Paul Krugman and other economists, this shouldn't be possible, because if they'd been willing to pay more, they already would've been charged more. But let's suppose that everyone's demand schedule changed abruptly and magically and everyone was now willing to pay a nickel more. The money that is re-allocated to Big Macs has to come out of some other expenditure category, meaning that some other economic sector will experience less business and therefore require less labor. Unemployment rears its head again in whack-a-mole fashion.
     What the minimum wage does is make the entire economy less efficient, i.e., more input to produce the same output. Another word for that is impoverishment. 

7. Decently paid workers tend to do a better job.

     "Decently-paid" and "better" are subjective preferences and so are inarguable. However, it should be noted that the relevant opinion with regards to "decently-paid" is the opinion of the worker who accepts or rejects a job. Of course, workers would always like to be paid more for their labor, just as employers would always like to pay less. The actual price of labor however, is determined by the market, not by the worker or the employer. If a worker accepts a job at a certain rate of pay, that constitutes objective evidence (a demonstrated preference) as to the worker's evaluation of pay and other working conditions. As to what constitutes adequate job performance, the only relevant opinion is that of the employer who continues to employ a worker, which action constitutes objective evidence (a demonstrated preference) of his evaluation of the worker's performance. 

8. Those against raising the minimum wage often argue that it will hurt young people the most and that they “need the experience” of working at the minimum wage. But notice that the youth unemployment rate in Germany is 7.8 percent, and in Switzerland, it is 8.5 percent. In contrast, youth unemployment is 15.5 percent in the U.S., even though the U.S.’s minimum wage (using Purchasing Power Parities exchange rates) is below that of these Germany’s and Switzerland’s $10 and $9.20 an hour respectively. In other words, both have higher minimum wages, but much lower youth unemployment rates. Their overall unemployment rate  is also lower: 4.5 percent and 3.4 percent, respectively. The minimum wage makes no difference on unemployment.

     The minimum wage is not the only or even overriding factor that affects the economics of employment. Both Germany and Switzerland, for example, are experiencing a labor shortage. Under such circumstances, one would expect unemployment to be less and the cost of labor to be higher, which would mean that a higher minimum wage might cause little or no unemployment (if a minimum wage is set low relative to the market wage, it has no economic effect). The relevant question is what would Swiss and German youth unemployment look like without a minimum wage? Unless the minimum wage is lower than the value of labor, it's probably causing unemployment.

9. Paying someone less than a living wage is immoral, and businesses that can't survive without doing so shouldn't be in business.

     I don't know what moral principle is involved in the paying of wages, but forcing a particular version of morality on the citizenry should not be a function of government. 
     Furthermore, the proponent of a minimum wage law wants to use the power of the state to prevent consensual exchanges (of labor for money), which is unjust.

"The Minimum Wage"

To make a horse drink
It is foolish to try;
It’s fully as hard
To make customers buy:

So, when prices are raised
By law or decree,
That sales will fall off
Is as sure as can be;

And if minimum wages
By commission are set
Above what the worker
Would naturally get,

Those worth the money
Alone will be hired,
While the lowest-grade labor
Will surely be fired,

And the jobless will sit
And wonder all day
Just what they have gained
From the high legal pay.

~Wilford King

Pros and cons of Arizona City incorporation and my comments

From a document called "Municipal Incorporation in Arizona" prepared by the League of Arizona Cities and Towns, under the section entitled "Pros and Cons of Incorporation:"

The "Pros:"

"1. Incorporation establishes a city or town government through which a community can express itself, address its problems and supply necessary services to the area. The community can exercise self-determination with regard to the nature and level of local services."

However, incorporation isn't the only method by which services can be supplied.

"2. Municipal government is more responsive to the people living within the community. The members of the city and town council are closer to the people and, as a result, react more quickly to the community's requests."

Rapid response to their requests is a service the people will have to pay extra for.

"3. A city or town government will receive substantial amounts of state revenues which do not flow to an unincorporated community."

Fine, but what's the bottom line? Will the taxpayers end up being net winners or net losers?

"4. An incorporated city or town has additional powers not found in an unincorporated community. An unincorporated community is under the jurisdiction of the county and, as a result, does not have much control over the level of services provided to the residents. The county must provide services as uniformly as possible throughout the unincorporated areas of the county. On the other hand, a city or town council has the authority to intensify services within the community."

But again, "intensified" services come with a price tag.

5. An incorporated city or town is able to plan for the future growth of the community by adopting planning and zoning regulations which will provide for controlled land use. This regulation protects the community against undesirable land use patterns."

It's been suggested that an Arizona City government might somehow try to control or eliminate rental housing as a means to protect property values. Are Arizona City property owners really willing to give up their right to rent their property in exchange for the uncertain possibility of a higher future value? From a purely practical point of view, seems like pie in the sky. From a property rights point of view, injustice.

"In addition, incorporated cities and towns may adopt building, plumbing, mechanical and electrical codes in the interest of public health, safety and welfare."

If codes are necessary, are the Pinal County codes already in place somehow insufficient?

"6. A separate city or town preserves the unity and pride of a particular community and maintains local individuality."

Don't see that the lack of a municipal bureaucracy hinders anyone from preserving the unity and pride or maintaining local individuality of unincorporated Arizona City. 

"7. As a governmental unit, the city or town can better represent its citizens in transactions with the county, the State and Federal governments."

I would think citizens had best be represented by a lawyer in transactions with the county, state, and federal governments. A lawyer can  be hired to solve specific problems. A municipal bureaucracy just hangs around drawing salaries even if there aren't any "transactions."

 "In addition, local government may be used as a vehicle for positive progress in the community."

 Any "progress" achieved by a government must necessarily be seen in the light of the fact that government doesn't have any resources of its own. All it can do is confiscate resources from some people and re-distribute them to others.

"8. Municipalities may be the instrumentality for providing numerous utility services such as water, sewer, garbage and trash collection, gas and electrical service if the council decides to enter into these operations."

Why would the residents of Arizona City want to change their present utility providers?

The "Cons:"

"1. Incorporation is unnecessary because the particular needs of the community are limited in scope. The residents of the community may prefer to organize a special district to meet these limited needs. For example, the community may create a rural fire district to satisfy the necessity for fire protection, or a special district may be formed to fulfill other particular needs such as sewer service. As a result, the special district approach may be more appropriate if the residents of an area want to incorporate only to provide one specific service. However, a special district is not a substitute for incorporation, and the residents of a community should be careful in creating more than one in the same area. The creation of a number of special districts for one area leads to unnecessary levels of government if the area is incorporated at some later date."

Can't "special districts" (or incorporations) be un-created? If not, why not?

 "2. The separate incorporation of an area which is economically and physically part of a larger community will produce what is known as a 'rump' incorporation. This situation can produce an incorporated city or town with inadequate resources or physical facilities necessary to meet its needs. This is particularly true if the character of the community is predominantly residential. A 'residential community' may discover after incorporation that its tax base can only maintain a minimal level of public service. In this case, it might be to the community's advantage to be annexed into an existing city or town

In which case, the community's property owners will a) be taxed more than the value of the services they receive, b) be taxed exactly as much as the value of the services they receive, or c) be taxed less than the value of the services they receive. I think b) is highly unlikely and a) highly likely. In any case, creating a municipal bureaucracy to provide services is analogous to buying health insurance to pay for all medical expenses: the added costs of a middle man makes the price go up.

 or remain unincorporated."

Hear, hear.

"3. The community is too small in either land area or population to serve as an efficient and effective unit of government. It may be difficult, if not impossible, in extremely small areas to provide for an adequate level of services. It may be more advantageous for an area of this nature to receive services from the county."

Not applicable to Arizona City.

 "4. The incorporation of a small area which is an integral part of a larger metropolitan area will create a costly duplication of local services. This situation can lead to a lack of coordinated and orderly urban growth as well as a lower level of such vital services as police, fire, water and sanitation."

N/A

 "5. The area possesses certain rural or farm characteristics which it wishes to retain, and incorporation is an undesirable step towards urbanization."

 N/A

"6. The most common argument against incorporation is that it will increase taxes. Every incorporated city and town has imposed some additional taxation, most often a local sales tax."

At the very least, the creation of a municipality puts taxes on the table.