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Ice Cream, Hurricanes & 'Price Gouging'

8/29/2017

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​I have a weakness for ice cream.  Years ago regional favorite Blue Bell put out the most divine flavor to grace my palette; Caramel Sundae Crunch; vanilla ice cream swirled with caramel and chocolate-covered crushed-up bits of ice cream cones … it was the BOMB!

And then it was gone.  The little creamery in Brenham just ... stopped ... making it.  I considered special ordering it, but I drew the line at paying something like 10X what I did in the store.  I didn’t value it THAT much.

Fast-forward to this year.  I decided to give Blue Bell’s Sea Salt Caramel a try.  I love caramel, but marrying sugars and salts doesn’t do it for me.  I’m glad I took the dive though, because that’s some good stuff. 

And now IT has disappeared.  I haven’t been able to find it at any nearby grocery store for the last few weeks.  You'd think I'd have learned my lesson and stocked up like Elaine Benes hoarding sponges on “Seinfeld.”  But no, I didn't. 

Alas, if I had, you can bet there would have been a premium put on every bite, for both my daughters AND me.  Who knows when, or IF Blue Bell would ever make it again??  It would have been my version of a fine wine that you break open only on a special occasion.  Its scarcity has increased its value.

Now imagine it’s YOUR favorite food, and you did have the foresight to stock up in anticipation of such a possible shortage.  But instead of consuming it, you rely on selling it to make a living.  That's the dilemma vendors of water, gasoline, batteries and the like face when a hurricane like Harvey is heading their way.  They don't know when their next supply shipments are coming, or IF they’re coming.  They don't even know if their place of business will still be standing post-landfall.
 
Keep this in mind when demagogues start screaming about price gouging. These vendors are humans just like us, humans with strong enough nerve to risk a LOT to supply us with everything we want AND need.  And now, just like the rest of us, they’re facing what is hopefully just a temporary disruption of an important part of their life.  They don’t raise prices to screw consumers, but rather to defend their livelihood.
 
Or take for instance the guy who was filmed selling bottles of water out of the back of his truck in the parking lot of a WalMart in Houston as Harvey was bearing down.  The man filming the video berates him, presuming to know what he and his family needs, telling him he “should be ashamed of himself.” 
 
But why?  No one is forced to buy from him.  If someone values the water enough, they’ll pay for it, no coercion involved.  So what if he marks it up more than usual??  The whole episode invariably ends up being pro-consumer: either no one will buy the water and he’ll be forced to drop his price, or people will scoop all of it up, thereby luring in other suppliers who’ll offer a lower price in order to gain the business.  Some of my students seemed to know this on the first night of class last night.
 
Buyers and sellers, acting independently, will always bring about a result that is satisfactory to all parties.  We shouldn’t allow our emotions, our sense of envy or insecurity, or presumptuousness of others’ business, to demonize someone making a profit, especially when it’s fleeting and short-term.  The only individuals who profit from such intellectual and emotional gullibility are politicians, from BOTH major parties, wanting to look heroic.  The worst of them are only too happy to hook up some more dependents to the State.
 
In the meantime, HEB does more to endear itself to Texans by sending caravans of food, supplies, etc. to my hometown of Victoria, and other communities in the area hardest hit by Harvey.  As the mosque burning earlier in the year demonstrated, the free market of charity is as effective as any government action at helping people truly in need.
 
Especially here in the great Lone Star State. 
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‘Do It For The Children’: Freedom Of Choice In Schools (Final Cut)

8/11/2017

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​I was pleasantly surprised earlier this year when I learned that my oldest daughter would have a choice of magnet schools here in San Antonio: health careers near the medical center, business at Holmes, science & engineering at Jay, communications at Taft and construction at Warren.   
 
Also around this time, Betsy DeVos was girding for a contentious confirmation battle over her appointment as Secretary of Education.  She faced hostile opposition both from senate democrats still sore about the presidential election, and from teachers unions and ‘public school’ advocates who oppose what Mrs. DeVos has pushed for years; more freedom of choice & parental control in K-12 education.
 
The Department of Education arguably shouldn’t even exist in the first place.  It is a prime example of those “powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people” as per the 10th amendment.  If the only thing Secretary DeVos ever did was fold that department, she would be a success.  Short of that, promoting more school choice is a close second.
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From t-ball to cheerleading, music lessons to gymnastics, my girls have run the gamut of extracurricular activities.  They’ve been as far away as the Y.M.C.A. downtown, or as nearby as baseball fields in Westover Hills.  Distance has never mattered as much as the organization with whom we signed up.    
 
Why can’t we have the same choice with their schools?  Because at least here in Texas, where you pay property tax for your primary residence determines the public schools for your children. 
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This issue didn’t appear on my radar until I took Dr. John Merrifield’s urban & regional economics course at UTSA.  He has spilled a lot of ink on this topic, including a few books, most notably perhaps 2001’s “The School Choice Wars”.  Having just become a father at the time only heightened my interest. 
 
We do have some semblance of choice here.  In addition to the magnet schools, children can literally be ‘grandfathered’ in to the NISD if their grandparents live here and provide "significant after-school care".  One of my daughter’s friends was able to go to the same elementary school because that’s where her mother taught.  Transfers are possible for a handful of other reasons, but “are generally denied due to lack of space”.  
 
If parents were allowed however, to use a proportionate amount of public revenue earmarked for education, they could send their kids to any school they choose, assuming it meets a minimum level of state-approved criteria (mastering certain levels of basic subjects by a certain grades).  Beyond that, the schools would be free to specialize however they see fit: art schools for musicians, painters & actors; schools that cater to kids who like to build things; culinary schools when Easy-Bake Ovens will no longer do; technology schools for computer geeks.  The possibilities are limitless. 
 
These schools would be free to set their own tuition: more than, less than or equal to the amount allotted to each child by the state.  But those prices would be unlikely to stay put.  For example, if a particular metro area turned out to have a higher concentration of young would-be engineers than schools to serve them, the price of tuition would in all likelihood rise … in the short term.  Parents might have to decide whether or not they value those schools enough to make up the difference.  As Dr. Merrifield reiterated to me recently, that’s one reason the current system is flawed; it lacks such price signals. 
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One point I stress in my classes is that suppliers react differently to prices than demanders do.  We’re all demanders, and thus familiar with that angle: price goes up, we buy less.  However, only a handful of us are suppliers (excluding the labor we supply when we go to work), and thus not wholly in-tune with how they react.
 
Those higher prices would emit a signal of opportunity for enterprising entrepreneurs.  To enter the market competitively, they’d have to charge lower tuition, offer more for the same price, or some combination of both.   To stay competitive, the existing schools might expand.  They also might extend financial assistance to those excelling students of lesser means.  What could be better for a school’s reputation than educating the best & brightest?
 
More choices, lower prices, better quality … what’s not for a consumer to like?? 
 
All this assumes of course, a light, basic regulatory touch.  Otherwise, innovation would be dulled, disincentives would arise, current market participants would become entrenched, etc.  In other words, a wet blanket thrown on progress. 
 
Alas, as it stands now the only price signal that exists in grammar school education is … real estate??
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We’re all familiar with good sides of town, and not-so-good sides of town.  The latter tend to be run-down, more susceptible to crime, gangs, etc.  Perhaps not surprisingly, that negatively impacts property values, and in turn minimizes property tax collections.
 
According to the Texas Education Agency, about 50% of public school funding derives from property taxes (roughly 10% comes from Uncle Sam, while around 40% comes from the Lone Star).  It hardly seems fair that a child’s education, the ultimate example of equality of opportunity, should be restricted  by a socioeconomic situation not of his/her making. 
 
The state legislature tried to remedy this a generation ago by passing what is commonly known as ‘Robin Hood’, whereby a school district that has “wealth per student that exceeds” a certain level subsequently has that excess “recaptured” and redirected to property-poor districts.


And a generation later, public school funding in Texas is still an issue.
 
Perhaps an alternative to property taxes could be a county or metro-area sales tax, a rate that would apply to ALL areas of town & the local economy uniformly.  This would be a most efficient way to pull the funds.  No more artificial inflation of property values.  One less inefficiency in the rental market.  A lesser tendency to build arguably exorbitant facilities tied as much to property wealth as student outcomes. 
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The Texas constitution states that the legislature “shall … make suitable provision for the support and maintenance of an efficient system of public free schools,”  so some traditional ‘public’ schools would remain.  Some parents may prefer the convenience of the nearby school.  Some may simply not be able to get a bead on what it is their child has a particular knack for.
 
It also states that “a general diffusion of knowledge” is “essential to the preservation of the liberties and rights of the people.”  Education has spillover benefits.  The knowledge & skills a student attains benefit the general public when employed on the push toward greater progress & prosperity. 
 
No one is more vested, or has a greater interest in this venture than we the parents.  My daughters are my best opportunity to make a positive impact on society.  Their mother & I are as integral to their education as anyone or anything.  It should be an option for us to fund their education with some portion of the taxes we pay, at whichever school we see fit.    
 
A market of millions of parents can’t be wrong.

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‘Do It For The Children’: Freedom Of Choice In Schools (Director's Cut)

8/7/2017

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I was pleasantly surprised earlier this year when I learned that, upon entering high school, my oldest daughter would have a choice of magnet schools here in San Antonio: Northside Health Careers near the medical center, Business Careers at Oliver Wendell Holmes HS, Science & Engineering at John Jay HS, Communication Arts at William Howard Taft HS and Construction Careers at Earl Warren HS.  Ever since she & her sisters were born, their mother & I have always kept our eyes open for any & all options available to us regarding their education. 
 
Also around this time, philanthropist & activist Betsy DeVos was girding for a contentious confirmation battle over her appointment as President Donald Trump’s education secretary.  She faced hostile opposition both from senate democrats still quite sore about the president’s electoral defeat of their nominee, Hillary Clinton, and from teachers unions and ‘public school’ advocates who oppose what Mrs. DeVos has pushed for years; more freedom of choice & parental control in K-12 education.
 
Let’s dispense with something first & foremost; the federal department of education arguably should not exist in the first place.  Nowhere in the U.S. Constitution is “education” or “school” mentioned.  It is one of the best examples of those “powers … reserved to the States respectively, or to the people” as per the 10th amendment.  If the only thing Secretary DeVos ever achieved while in office was to carry out Kentucky congressman Thomas Massie’s bill to abolish the DoE, she would rightly be hailed as a most successful public servant.  Short of that, promoting more school choice is a close second.
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From swim lessons, to t-ball, to cheerleading, to music lessons, to gymnastics … you name it, my girls have done it, with multiple organizations, some as far as 10-15 miles away from home.  We even chose as our pediatrician a doctor whose office was further away than that.  Not only has her replacement upon retirement been just as pleasant, but now she’s just a couple miles from the house. 
 
We personally would be lucky if doctors were ‘assigned’ to us the same way public schools are; place of residence.  But why should it be that way?  Why can’t we pick from a variety of schools like we do extracurricular activities?  Because at least here in Texas, where you pay property tax for your primary residence determines the public schools for your children.  That might be the only thing I like less about my great home state than the climate.
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This mystery didn’t occur to me until I took Dr. John Merrifield’s urban & regional economics course at UTSA.  He has spilled a lot of ink on the topic of school choice, including a few books, most notably perhaps 2001’s “The School Choice Wars”.  The fact that my first daughter was a toddler and her first sister was on the way at the same time only served to heighten my interest. 
 
We do have some semblance of choice here, exemplified in part by the aforementioned magnet schools.  Children can also literally be ‘grandfathered’ in to our district if their grandparents live within its borders and provide "significant after-school care".  One of my oldest daughter’s friends back in elementary school went there because that’s where her mother taught.  Transfers are possible for a handful of other reasons, but “are generally denied due to lack of space”.  
 
If parents were allowed however, to use as their initial round of funding, a proportionate amount of public revenue earmarked for that specific purpose, they could send their kids to any school they chose, assuming it meets a minimum level of state-approved criteria (children should be able to master a certain level of math by a certain grade, reading comprehension by a certain grade, knowledge of history, etc.)  Beyond that, the schools would be free to specialize however they AND the market sees fit.
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At an early age her mother & I noticed that our second-born liked putting things together.  Nowadays she has taken an interest in cooking & baking.  Our third daughter is somewhat athletically-inclined, while our fourth is kinda artsy.  Our oldest daughter is musically inclined, playing the baritone in high school band while taking piano lessons on the side. 

Those are just a few specialties around which schools could focus.  Maybe some of the places we patronize(d) would expand or merge their operations to include general schooling.  Some already provide after-school care.  The possibilities are limited only by our imagination, and that of enterprising entrepreneurs. 
 
Such schools would be free to set tuition at whatever level they deem appropriate: more than, less than or equal to the amount of the vouchers (NOT the dirty word demagogues make it out to be) allotted to each child.  But those prices would be unlikely to stay put.  For example, if a particular metro area turned out to have a higher concentration of young would-be engineers than schools to serve them, the price of tuition would in all likelihood rise to find a new market equilibrium.  Parents would have to decide whether or not they value those schools enough to make up the difference.  As Dr. Merrifield reiterated to me recently, that’s one reason the current system is flawed; a lack of price signals.  The subsequent shift in the balance of the market would be temporary, setting off an adjustment.
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As I’ve alluded to before regarding recent changes in the bee population, prices are not just the cost it takes for us to buy something.  There is a plethora of information wrapped up in the price of a good: the supply & demand of/for a good, cost of inputs, the availability of substitutes, preference for a particular good, etc.
 
One point I stress in my classes, THROUGHOUT the semester, is that suppliers react differently to prices than demanders do.  Since the entire population plays the part of a demander almost daily, we’re all familiar with that angle.  However, only a handful of us are suppliers (excluding the labor we supply when we go to work), and thus not wholly in-tune with how they react. 
 
Those aforementioned higher tuition prices would emit a signal; an opportunity for profit (another word soiled by irresponsible linguistic manipulators).  That would likely lure others to open up such schools.  In order to be competitive, the new market entrants would charge lower tuition, offer more for the same price, or some combination of both. 
 
To stay competitive, the existing schools might expand.  They also might extend financial assistance in the form of grants or scholarships to those excelling students of lesser means.  What could be better for a school’s reputation than educating the best & brightest?
 
In any event, what used to be a producer surplus would turn into a consumer surplus, as the market would be cleansed of inefficient/ineffective operators, all the while benefitting parents & children. 
 
All this assumes of course, a light regulatory touch.  As in nearly all markets, the more a public bureaucracy grows, the more innovation is dulled.  Disincentives arise.  The more standards are augmented, or altered, the more likely current market participants become entrenched at the expense of prospective new entrants (see the current debate over licensing).  All these would constitute a wet blanket that suppresses the price signals that fuel progress. 
 
Alas, as it stands now the only price signal that exists in grammar school education is … real estate??
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Even growing up in modestly-sized Victoria, TX (population 50,000), I learned there are good sides of town, and not-so-good sides of town.  The latter tend to be run-down, more susceptible to crime, illicit drug-related activity, gangs, etc.  Perhaps not surprisingly, that negatively impacts property values, and in turn suppresses property tax collections.
 
According to the Texas Education Agency, about 50% of public school funding derives from property taxes (roughly 10% comes from Uncle Sam, while around 40% comes from the Lone Star).  That hardly seems fair to those children born & raised in such property-poor settings.  Children’s education is the ultimate example of equality of opportunity, and it shouldn’t be restricted by a socioeconomic situation that was not of their making. 
 
A generation ago, after a couple of efforts by the legislature to remedy the situation were rejected by the state Supreme Court, the court eventually blessed what is commonly known as ‘Robin Hood’ (technically referred to as Chapter 41 Wealth Equalization).  A school district that has “wealth per student that exceeds” a certain level subsequently has that excess “recaptured” and redirected to property-poor districts.


And a generation later, public school funding in Texas is still an issue.
 
To make up the local component of funding for public education, perhaps an alternative to property taxes could be a county or metro-area sales tax that would be inclusive of ALL areas of town & the local economy.  This would be the most efficient, direct way to pull the funds.  No more artificial inflation of property values & taxes for childless homeowners and seniors on fixed incomes.  It would remove an inefficiency from the rental market.  It might also curtail the construction of arguably exorbitant facilities that are as tied to property wealth as they are to student outcomes.
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The Texas constitution states that “a general diffusion of knowledge” is “essential to the preservation of the liberties and rights of the people,” a point few would dispute.  Education is a prime example of a positive externality; the knowledge, skills & general human capital a student attains benefits society as a whole when employed on the push toward greater prosperity. 
 
The constitution also states that the state legislature “shall … make suitable provision for the support and maintenance of an efficient system of public free schools.”  Some number of traditional ‘public’ schools would remain where an education could be attained for the face value of the individual vouchers.  Moreover, some parents may prefer the convenience of the nearby school.  Some may simply not be able to get a bead on what it is their child has a particular knack for.
 
At the end of the day, no one is more vested, or has a greater interest in a child’s well-being & enlightenment than his/her parents.  My daughters are my best opportunity to have a positive impact on society.  Their mother & I are as integral to their upbringing & education as anyone or anything else.  Still, it should be an option for us to fund their education with some portion of the taxes we pay, at whichever school we see fit.  Every parent should have that option.   
 
A market of millions of parents can’t be wrong.

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    I have worked in accounting for 25 years.  I have taught economics to local college students since 2014.  I am sending 4 wonderful daughters out into the world.  I stay involved in local politics via InfuseSA, and have run for city council in 2021 and 2023.  To see where my mind is at, check me out at RealClearMarkets, Mises Wire, The American Spectator, the Foundation for Economic Education, and the San Antonio Express-News, among other.

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