Letters to the Editor: November 17, 2004

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Letters to the Editor: November 17, 2004

Free Market in Energy?

Hi Ari,

You said, "Right now, people who are willing to pay more for alternative sources of energy are perfectly free to do so and try to persuade others to do so."

People did persuade others to do so, by default anyway. There is a provision to opt out, so your taxation against one's will point is largely mute, isn't it?

Your stated desire to see renewable energy sources at an affordable rate by 2010 or 2015 is much more likely to come true now that we'll actually be working on this aggressively. Xcel has apparently had a problem acknowledging the cost-effectiveness of wind power in the past. As I understand it, they tried to reject a proposal for a wind power plant which won purely on cost.

At any rate, I hope you are satisfied overall with the results of the votes.

Best regards,

-- Randy Ellingson, November 6, 2004

Ari Armstrong replies: No, the majority of voters did not use "persuasion" by passing Amendment 37 -- they used political force. There's nothing voluntary about it. Sure, I'd like to see more renewable energy -- but primarily I'd like to see a free market in energy. I believe that will eventually result in more renewable energy (by the way, nuclear energy is a form of renewable energy), but that's a secondary concern. It is not the government's role to force companies to take alleged cost-saving moves. If government force actually reduces costs in some given situation, it is merely by accident. Practically every use of government force pushes costs higher, and that is bound to be the result of Amendment 37. Xcel has made some voluntary effort to use wind energy. But it is simply fallacious reasoning to assume that, because one renewable-energy program was successful (if indeed that's the case), therefore other such programs are economically viable. My understanding is that wind is more "cost-effective" relative only to the most expensive uses of coal and natural gas; thus, an expansion of "baseline" coal and gas use might make more economic sense. Also, various locations differ in wind and solar availability and distance from energy centers, and such things dramatically impact cost. The bottom line is that companies operating on the free market (which is not what we have today) are much more likely to make economically prudent decisions than are government planners or masses of ignorant voters. Socialism doesn't work, and the energy industry is not somehow exempt from that basic truth.

Comment on Global Capitalism

I can't resist making some comments about your article on Bernstein and Global Capitalism.

I am a strong believer in Capitalism and the benefits of competition as a generator of prosperity, but I agree with many of Marx's criticisms. Capitalism is basically a power struggle, and all accumulations of power foster abuses. The history of modern capitalism includes abuses of worker safety in numerous industries from black lung in coal mining, to leaking pipes in nuclear reactors, to the chemical explosion at Bhopal, to airline maintenance violations, to OSHA violations in factories. Abuses of political influence include price supports, tariffs, special tax breaks, use of the State Militia to attack Colorado mine strikers, and using eminent domain to seize private property for new Walmarts.

Unbridled capitalism tends toward monopolies and oligopolies, as exemplified by Standard Oil, General Motors, OPEC and the tobacco companies. They all promoted price fixing and low quality, and none cared much about the customer's benefit until they were broken up or faced with competition from forces beyond their control, like Japanese cars or alternative energy. I hardly have space to mention sweatshops, and worker abuses like firing people after 29 years before they qualify for a pension. Capitalism produces great benefits for consumers when fenced in by government regulations that enforce safety, honest accounting, and competition.

A comment about Hong Kong. I visited Hong Kong in 1974 and 1990. Capitalism is very unrestrained in Hong Kong, but there is one major welfare benefit. About half the population lives in subsidized public housing with long waiting lists, because land is so expensive. Kowloon and the New Territories are full of 20-story public housing apartment buildings.

A few words about Microsoft. Bill Gates pales in comparison with Hitler or Stalin, but Microsoft is a federally convicted illegal monopoly that admitted to "cutting off the air supply" of competitors like Netscape. As a result, people are stuck with using expensive defective Windows software, with security problems that have resulted in looted bank accounts from stolen passwords, and rogue networks of hijacked robot computers that are used to send spam and spread trojan worms.

There is a great struggle for freedom in the computer industry that you are probably unaware of. Some programmers got fed up with proprietary software that they could not fix. There is a growing movement toward free/open software. You may have to pay for it, but you get the source code and you are free to fix it and improve it. Microsoft's main competitor now is Linux, which is low-cost and very secure. Any vulnerabilities are fixed immediately by an army of volunteers around the world. Half of all internet servers now run on open software such as Linux and the Apache web server. Microsoft can't buy, bankrupt or intimidate products that are supported by a movement of volunteers. The latest corporate tactic is to patent simple techniques, and then sue software companies for patent infringement and royalties. Large corporations do cross-licensing of patents to protect themselves.

A few comments about how people are being oppressed by software. In particular, the Recording Industry Association (RIAA) and Motion Picture Association (MPAA) are trying to seize control of our computers. They got Congress to create the Digital Millennium Copyright Act (DCMA), which makes it illegal to defeat copyright protection mechanisms, even for legal purposes like constitutional fair use, journalistic criticism and copying CDs/DVDs that were legally purchased. They want to embed Digital Rights Management(DRM) software and hardware in our computers to control what media we play or are allowed to copy.

Here are a few of the results. A 15-year-old Norwegian boy figured out how to decrypt DVDs, so he could play his purchased DVDs on his Linux computer. Microsoft has paid for a license to play DVDs, but no one purchased this expensive license for Linux. When the boy released his software on the internet, the MPAA pressured the Norwegian government into holding two trials for economic crimes against the state for piracy. The boy was ultimately acquitted. Software companies have threatened to sue computer science professors who do research on security, and who want to publish security vulnerabilities in existing software products. Some people are unable to copy home videos of weddings that are downloaded to computers, because their home video does not include a Digital Rights license issued by a member of the MPAA, such as Sony. There is a free software project called Linux radio, which uses Digital Signal Processing algorithms to replace electronic circuits with software. You could install a cheap radio/TV tuner card in your computer, and scan or receive the content of many channels at once. The RIAA is trying to outlaw this as piracy. They want to include Digital Rights bits in digital radio streams that would block us from copying radio signals for use in our home or car, to prevent possible piracy. The RIAA and MPAA cannot abide the freedom of people to control their computers through open software.

I track a lot of this stuff because I am a software engineer for a large corporation. Feel free to break this up if you want to publish any of it. I just had to comment.

Philip Sagstetter, Highlands Ranch, November 11, 2004

Ari Armstrong replies: Your comments are so filled with myths and misunderstandings that I'm tempted to answer merely, "Go read some economics!"

But I will briefly respond point by point. My brief replies are, of course, not the final answer, but they indicate the nature of the answer. If you want more complete answers, go read some economics! There's Mises, Reisman, and Friedman, the public choice school has a book out about monopolies, and Bernstein is publishing a book next year about capitalism.

1. Does capitalism harm workers? Several points are relevant here. First, production, especially of manufactured goods, is inherently dangerous. Driving a car is inherently dangerous. Living is inherently dangerous. Is there any economic system that can guarantee workers will never be injured? Of course not. But if you want a guarantee that as many people as possible will be injured, starved, and murdered, institute socialism. The socialist regimes of the 20th Century slaughtered well over 100 million people. Capitalism means the protection of individual rights by the rule of law. It is only natural that, as industries progress and society becomes wealthier, people will learn more about safety and will be able to afford more safety. The law properly protects people against gross negligence. And the market provides insurance to cover emergencies.

2. Is it true that "unbridled capitalism tends toward monopolies and oligopolies?" No, it's not. It is in fact state force that tends toward monopolies. Name all the monopolies that exist, and they're all produced by the state. Rail, first-class mail, taxis, etc. As David Friedman explains in his works (it's a general point, but Friedman explains it well), firms in any given industry will tend to expand to take advantage of economies of scale. Notably, it is precisely diseconomies of scale that inherently limit the growth of individual firms. The historical examples you mention are in fact not examples capitalistic abuses, and your claims have been widely debunked. For starters, Alan Greenspan has a nice article about antitrust laws in Capitalism: The Unknown Ideal.

3. Do businesses sometimes try to use government force? Of course that's a problem! And that is the very antithesis of capitalism. The argument, "statism is bad, therefore capitalism is bad," is faulty.

4. About the computer industry, Dave Kopel has a book out called Antitrust After Microsoft. The government properly prevents people from stealing. However, if the government passes laws to protect certain businesses then that's an illegitimate use of government force and contrary to the principles of capitalism.

It is true that your letter, Philip, is influenced by the ideas of Karl Marx, yet it is also true that the ideas of Karl Marx are almost completely wrong.

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