The Incredible Bread Machine

A classic tale of the free market and government interventions:

The Incredible Bread Machine
By R.W. Grant
This is the story of a man whose name
Was a household word: a man whose fame
Burst on the world like an atom bomb;
Smith was his last name; first name Tom.

Now, Smith, an inventor, had specialized
In toys, so people were surprized,
When they found that he instead
Of making toys, was BAKING BREAD!

The way to make bread he'd conceived
Cost less than people could believe!
And not just make it! This device,
Could in addition, wrap and slice!
The price per loaf, one loaf or many,
The miniscule sum of under a penny!

Can you imagine what this meant?
Can you comprehend the consequent?
The first time yet the world well fed,
And all because of Tom Smith's bread.

A citation from the President,
For Smith's amazing bread,
This and other honours too,
Were heaped upon his head!

But isn't it a wonderous thing,
How quickly fame is flown?
Smith, the hero of today,
Tommorow, scarcely known!

Yes, the fickle years passed by,
Smith was a millionaire,
But Smith himself was now forgot,
Though bread was everywhere...
People, asked from where it came,
Would very seldom know.
They would simple eat and ask,
"Was not it always so?"

However, Smith cared not a bit,
For millions ate his bread...
And everything is fine, thought he,
I am rich, and they are fed!

Everything was fine, he though,
He reckoned not with fate.
Note the sequence of events,
Starting on the date,
On which the business tax went up.
Then, to a slight extent,
The price on every loaf rose too:
Up to one full cent!

"What's going on!" the public cried,
"He's guilty of pure plunder!
He has no right to get so rich
on other peoples hunger!"

(A Prize cartoon depicted Smith,
With fat and drooping jowls,
Snatching bread from hungry babes,
indiferrent to their howls!)

Well, since the public does come first,
It could not be denied
That in matters such as this,
The Public must decide!

So Anti-Trust now took a hand,
Of course, it was appalled
At what it found was going on.
The "Bread Trust" it was called.

Now this was getting serious,
So Smith felt that he must
Have a friendly interview
With the men in Anti-Trust.

So hat in hand, he went to them.
They'd surely been misled;
No Rule of Law had he defied.

But then their lawyer said:
"The Rule of Law, in complex times,
Has proved itself deficient.
We much prefer the Rule of Men,
It's vastly more efficient!

Now let me state the present rules,"
The lawyer then went on,
"These very simple guidelines,
You can rely upon:
You're gouging on your prices if
You charge more than the rest.
But it's unfair competition if
You think you can charge less!
"A second point that we would make
To help avoid confusion...
Don't try to charge the same amount,
That would be Collusion!
You must compete. But not too much,
For if you do you see,
Then the market would be yours -
And that's Monopoly!

Price too high?
Or Price too low?
Now, which charge did they make?

Well, they weren't loath to charging both,
With Public Good at stake!

In fact, they went one better!
They charged "Monopoly!"
No muss, no fuss, oh, woe is us!
Egad, they charged ALL THREE!

"Five Years in jail," The Judge then said
"You're lucky it's not worse!
Robber Barrons must be taught,
Society comes first!"

Now bread is baked by government.
And as might be expected,
Everything is well controlled.
The Public well protected.

True, loaves cost a dollar each,
But our leaders do their best!
The selling price is half a cent..
Taxes pay the rest.

Zoning is Theft

Another older article published by The Ludwig von Mises Institute:

Zoning is Theft
by Jim Fedako


Zoning is theft, pure and simple. In his fantastic introduction to the Austrian School, Economics for Real People, Gene Callahan correctly identifies eminent domain as a form of property theft, especially noting the use of government condemnation in order to secure rightfully owned property for commercial development.

It is easy to see government as the crowbar that influence-seekers use to jimmy locks and force private property owners from their land. Here we have the clear picture of Ma and Pa Kettle and clan fighting the law and "progress" armed only with shotguns, corn squeezing, chewing tobacco and shear grit. The flip side to eminent domain, zoning, is not so easily seen. But as Bastiat revealed, the unseen is as important as the seen.

Zoning is typically defined along the lines of a government-regulated system of land-usage imposed in order to ensure orderly development. Zoning is usually a component of the larger conceptual ideal called regional planning. Of course, planned development is really the name of the road toward planned chaos.

Zoning uses all the standard interventionist lines of thought, most notably the concepts of externalities and utility. Those who advocate zoning really believe that acting man does not have the ability to create communities that are functional and prosperous. Without plans and maps drafted and drawn by the local elected elite, developers with knowledge and foresight, and a whole lot of money to gain or lose, would purposively layout communities that are sterile and functionless. Only the marginal vote-getters — those elected — and their appointed allies are omniscient enough to peer into the crystal ball and define the perfect setting for future life and leisure. The rest of us can only marvel at their visions.

Just as the developer can use government to roll over the rights of property owners, property owners — community members — can use government to roll over the rights of developers and fellow property owners.

In Ohio, townships create zoning maps and comprehensive plans that overlay development regulations on top of current properties. Prior to the establishment of zoning regulations, a farmer could simply sell his land to the highest bidder. No one had a voice in the proposed use of the exchanged land. The sale to a new property owner incorporated full development rights, including continued farming, residential and commercial development, or parceling off pieces for home sites. Land was a commodity similar to the crops grown on it. Just as no one had a right to control the final use of the corn and soybeans reaped from the soil, no one had the right to control the next use of the land. Property rights were secure.

Zoning changed everything. The future use of existing farmland will, with the stroke of a pen, be limited in some manner by zoning regulations. The regulations could restrict future land usage to its current use — farming in this instance — or it could restrict land usage to some other form of activity.

The free market has a tool that allows a property owner to align the future use of his property with his vision, the restrictive covenant. A property owner could, for example, create a legacy by selling his land contingent on the development carrying his family name. Should the property owner be too restrictive, the value of his property will fall. He will be exchanging a psychic good, a family legacy, for cash.

Zoning is another matter altogether. Zoning restricts current landowners based on the local power brokers. In the zoning process, someone gets hurt. Had the farmers of a township wanted to keep the area as farmland, they could have signed restrictive covenants guaranteeing crops instead of homes. Property rights, and the laws that purport to protect those rights, allow individuals to act in their own best interest. Zoning, collective decision-making, use the coercive power of government to restrict usage based on the whims of those in power.

The farmer who owns this land now has his potential property rights bounded within a specific range; future use is restricted to residential developments that have no more than one house per acre. The farmer may vote, and may have voted for some of those elected, but he never agreed to the change in proposed land usage. He was robbed, and there is no means for him to restore his rights and land value; they are gone with the stroke of a pen.

I know some of those in the Chicago School will claim that the farmer implicitly agreed to the loss of land-usage rights by being born in the United States, or of naturalized American parents, or by becoming a citizen through oath. By owning property in the United States, the farmer granted majority ownership in his property to those elected and appointed, the omniscient and omnipotent. This is no way to build and run a system of secure property rights, and no way to create a free market. Rothbard is correct when he constructs his political economy on secure rights to property; anything less is the beginning of the Hayek's Road to Serfdom.

Now we have a developer who is trying to satisfy the urgent wants of consumers, his development could include new homes, new stores, new factories, etc. The developer is a keen entrepreneur who sees a chance to turn a profit by creating a development that will be desired, and therefore profitable to him. The developer settles on a residential development and approaches the farmer from above offering to purchase his land, contingent on final zoning approval of course.

You see, the developer has been here before. He knows the ways of the local officials who approve and disapprove zoning changes on whim and fancy — or even the smallest of political pressure. The developer is not going to consummate the deal with the farmer until he knows that his proposed development is a go.

The farmer, old and worn-out, wants to retire and enjoy, along with his wife, his remaining years in leisure and comfort. This is certainly a reasonable request from someone who has worked the dirt in snow, rain, and blistering heat for decades. Who could reasonably question his desire? Commissioners and board members; those omniscient by vote and omnipotent by law.

Remember that the land was designated to be developed at only one home per acre, but the developer does not think he can make a go of it at that yield. Given the market in the area, there is no way for him to turn a profit due to the myriad of other regulatory hoops he will have to jump through in order to get approval for his development. A host of green-eyed bureaucrats see the proposed development as a tax revenue generator. The developer will have to build off-site roads and sewer improvements, donate a park or school site, and give away money to all those governments with their hands out. In addition, regional officials will balk at the proposal since it does not agree with their vision of the future.

So the developer, a Don Quixote at heart, decides to take on the zoning commission by proposing a variance to the zoning code and comprehensive plan. Mr. Developer needs to build one and a half homes per acre, a change that will require months of hearings where he will be badgered and attacked from the zoning commission and community members alike. The commissioners will request petty changes to the development's conceptual plan based on vague building standards that they most likely do not understand. Is stucco created from natural and man-made materials a natural or artificial exterior? Does 50 microns of aluminum create a better look than 49 microns? Should sidewalks be required? How high should the entrance sign stand? Is fire-red a natural color? Is a 30-foot setback sufficient for future property values? The answers depend on which commissioner has the mike at the time.

Residents with property adjoining the development will complain loudly of supposed lost property values, traffic, and crime. In addition, they will attack the developer as evil incarnate bent on destroying the community. But those same voices will lose the rhetoric as soon as the developer offers all adjacent homeowners landscaping allowances. A few thousand in new trees planted in their backyard is enough to forgive any supposed loss in value, additional traffic, and hypothetical break-in.


So the developer now agrees to build roads, upgrade sewer lines, donate parks with equipment, set aside a school site, and improve residential landscape. What is gently termed exaction is really extortion by another name. After zoning comes township trustees meetings and the process begins all over again. More exactions and more regulations, but trustee approval can be had if the developer does the dollar-dance long enough. Had the developer simply slid a rumpled paper bag of twenty's across the table, a law would have been broken. Instead, the process occurs in the sunshine for all to see, and all to agree that more should have been given — or taken.

All agreed, with the exception of the developer and the forgotten farmer. You see, lost in all this is the simple desire of a farmer and his wife to retire and enjoy life, and maybe leave a little for their grandchildren. Every hand looking for a piece of the development pie is not robbing the developer and redistributing supposed unearned profits; those hands are robbing the farmer and his wife of their property value.

The risk of not passing zoning, the exactions, and readily available alternatives for investment are all reductions to the value the farmer could have obtained for his land absent zoning. The loss of value is recognized at the time the developer makes an offer for the land; the theft, on the other hand, occurs in front of the community that the farm family lived in for generations. It shows what damage a little money and power can cause in a community. Zoning is indeed theft.

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Jim Fedako is a former professional cyclist who lives in Lewis Center, OH. jfedako@aol.com. Comment on the blog.

Quotes to Consider

From FreedomWatch:

We (our government) meddle... People don't like to be meddled with. We tell them what to do, what to think, don't run, don't walk. We're in their homes and in their heads, and we haven't the right. We're meddlesome.

~ Joss Whedon's Serenity

From The Future of Freedom Foundation:

Where in the Constitution does it say that Congress may interfere in the internal affairs of a private baseball league or its players? How exactly have these vainglorious congressional publicity hounds come by the idea that their jurisdiction has no limits?
— Robert Higgs, “There's a Time and a Place for a Beanball” [March 3, 2008]

Pension: pay given to a state hireling for treason to his country.
— Samuel Johnson, A Dictionary of the English Language [1755]

Money for Nothing

My latest article published by the Ludwig von Mises Institute (Mises.org).


Money for Nothing

By Jim Fedako
Posted on 11/16/2007
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If you want to expose the absurdity of the state, think governmental accounting. Really, there is no better way to show the impossibility of a government solution to scarcity than by reading the annual audit of any governmental entity.

Goethe considered double-entry bookkeeping — the essence of accounting — to be "one of the finest inventions of the human mind." For without accounting, we lose the ability to calculate, and without the ability to calculate, modern civilization is impossible.

Accounting lets the entrepreneur know whether he earned a profit, utilizing scarce resources in order to produce something of greater value. Accounting also lets the entrepreneur know whether activities he performs are better outsourced, or, conversely, whether he should expand into new orders of production. In essence, accounting directs the entrepreneur toward activities that satisfy the wants of the consumer.[1]

Government accounting is a true oxymoron. We can determine the cost of government, but what about the value produced? What is the product? What is its value? What is the bottom line? Of course, these unanswered questions do not stop government from playing business, pretending to create value and profit for society.

Governmental entities operate under the cash basis of accounting, tracking cash in and cash out. To direct their activities, these entities create budgets that list revenue and expenditures. Accounting then is simply the recording of cash flows against the budget. In this world, the cheered concept of fiscal accountability is the process of reporting how close the entity's final revenue and expenditures matched its approved budget. And nothing more.

This is an important point to note: whenever government officials speak of fiscal accountability, they are only considering approved budget versus actual spending. They are not referring to worthiness of expenditures, only whether or not they spent revenue according to the budget, with no outright theft of money. Oh, sure, the officials will claim that fiscal accountability means that money was spent on productive activities since, as expected, it is assumed by the governmental entity that only productive activities were approved in the budget. Circular reasoning.

With cash accounting, the cost of infrastructure investments — roads, bridges, buildings, etc. — is reported in the year it occurs, though the capital assets continue to have value or usefulness for years. Reporting cash flow misses the complete financial picture of the government entity, leaving this question unanswered: is it in a better financial position than the year before?

To answer that question, the Government Accounting Standards Board issued its Statement 34 in 1999. Annual reports that satisfy this statement supposedly detail the financial health of governmental entities as if these entities were profit-oriented businesses. Reporting is now done on the accrual basis of accounting, and assets are depreciated over their lifetime. This change provides a bottom line: net assets. With a view of either increasing or decreasing assets over liabilities, we can now determine a profit or loss of sorts.

Under this logic, when a governmental entity has more net assets this year than the prior year, it is in a better financial state — it has achieved a profit. Government can now report to its constituents whether or not it was able to take scarce resources and turn them into something of greater value. Socialism, here we come.

But not so fast. Government assets are the product of theft, not the result of satisfying the wants of consumers. A governmental entity with increasing assets is simply stealing more from taxpayers year after year. Ironically, the same holds true for a governmental entity that has decreasing assets. In either situation, more is being thieved, with nothing of value being created.

The implication is that a governmental entity that increases its tax revenue faster than its expenditures is performing a service for its constituents; the entity is achieving a profit for the taxpayers. Conversely, a governmental entity in a deficit cycle is creating a loss for its taxpayers. So, the more a government confiscates, the better off the taxpayers. Does that make sense? Down is up, and up is down. Somewhere, somehow, we ventured down the rabbit hole.

It is as if we are to cheer a government that taxes and builds since increasing assets count as profit, not waste. The public school district that builds a $50 million high school is bettering its financial position. Whether or not the high school produces anything of value is of no consideration. In government accounting, the cost itself is a benefit.[2] Of course, that is not how businesses serve the consumer, but, with government, we are through the looking glass.

The difference between government and business is the chain of taxation versus the dollar vote. The public school district taxes regardless of value produced. Once the bond issue passes the voters, the bill must be paid, to be enforced by the long, strong arm of government. On the other hand, the entrepreneur must face the consumer every day, product in hand, hoping to make a sale. The consumer can as easily bypass as enter his store, based on a whim if he so chooses. The taxpayer? Well, just try to hide.

If government is of the people, and I am one of the people, shouldn't I include changes in the net assets of my local school district in my financial portfolio? Since the local schools are my schools — or so the mantra goes — don't those changes have an impact on my finances? Shouldn't I record changes of district assets in my ledger?

Moreover, shouldn't I be able to sell my shares of the supposed public good and use the resulting proceeds for my benefit? Yes, I should. But, as I learned growing up in Allegheny County in southwestern Pennsylvania, the sign that reads, "Keep out, Property of Allegheny County," does not refer only to those who live outside the county; it means that even the taxpayers of Allegheny County have no right to that property.

The bottom line — increasing government net assets — is not my property; never was; never will be.


Jim Fedako, a homeschooling father of five who lives in Lewis Center, OH, maintains a blog: Anti-Positivist. Send him mail. See his archive. Comment on the blog.

Notes
[1] Of course, accounting has changed as taxation creates financial incentives to beat the taxman by showing as little profit as possible, but that is another article.
[2] During the Cold War, both the US and Soviet governments calculated Soviet GDP to include tractors rusting on the plains of the Ukraine. That the tractors had no real value to the local farmer was not considered. With government, cost is always recorded as value.

Cheering NPR

My latest post the Blog at Mises.org(Mises.org):











I never thought I'd be cheering NPR, but Michelle Norris really makes Sen. Baucus squirm. Sure her economic theory is off, but some of her questions are spot on.

Norris: "Will this stimulus package in the end add to the nation's deficit woes?"

Baucus: "Well ... it's ... um ... My thought is ... It probably will initially, but all economists say we should do this. All ... I'm not saying all, the vast majority of economists say we should do this. We need to give the economy a little bit of a stimulus, a little bit of an increase. This is the advice we were given by economists. This is the advice we were given by business people. It's I think the right thing to do at this point."

The vast majority of economists, or just the Brain Trust? Didn't Rothbard write a book about this? Funny how history repeats itself.

Ok, it's not actually funny -- more like ironic, but you get the point.

Go NPR!

Economic stimulus in search of economic science

Will the proposed economic stimulus packages improve the economy? Will a few hundred dollars in my pocket solve anything?

If you adhere to the long-refuted mush of Keynes, you will answer yes. If, on the other hand, you subscribe to economic truth, you will answer no.

In order to improve the economy, the government needs to: reduce taxes, reduce spending, and get out of the money/credit creation business. Putting a few hundred dollars in every pocket is a game that's been played for centuries. The Roman emperors sought the same end -- placating the masses, though the Romans ran games and festivals instead of simply slipping a few hundred bucks into open hands.

Isn't it ironic that a politician cannot hand over money to voters, yet, during an election year, he can offer the very same bribe in the form of an economic stimulus package.

Economies grow when money is invested in capital goods. A few billion bucks chasing consumer goods that have already been produced leads to more inflation. Yet, come November, the voter will not see the inflation, he will only remember the cash.

If Bush and the rest are serious about stimulating the economy, they need to take the three actions specified above. Will they? Never.

OK, so who will? Ron Paul of course. His platform is based on solid economic science; a platform that will stimulate the economy in perpetuity.

Vote Ron Paul

Central Planning: the shattering mirror

Due to government initiatives and regulations, corn demand is up and, hence, more land is being devoted to corn. Yet, the demand for corn and land is reducing another government intervention -- land conservation. One government program undoes another government program: the definition of chaos.

Take the new unconstitutional¹ federal light bulb standard; incandescent is being phased out in favor of fluorescent. So, the feds reduce energy but introduce more mercury into landfills and the water supply. Clean Water Act anyone? Government at odds with itself.

Decades ago, FA Hayek showed that government, unless checked, necessarily becomes more intrusive and more oppressive, ending in serfdom. Ludwig von Mises showed that government planning necessarily leads to chaos. You can see those truths in the interventions above.

Never, never, did our Founders risk their lives for an intrusive central state that taxes an absurd amount of income, robbing the productive for the sake of the nonproductive. Never, never, did they conceive of a nation where the largest employers are governmental agencies.

Yet, here we stand, a nation where the federal government taxes wages for programs that are nonsensical, and at odds with each other. The examples above prove that central planning is an oxymoron; tax-funded chaos leading toward serfdom.

Everything is not lost. On the horizon is the movement of Liberty; a movement that has once again found a leader: Ron Paul.

Paul is the only candidate who will check government expansion. He is the only candidate who actually believes YOU are capable of running your life. That my friends is the essence of Liberty.

notes:

1. Nowhere in the Constitution is the federal government granted such powers. In fact, the 9th and 10th Amendments forbid the feds from such intrusions into the lives of the people and the several states. Other than Ron Paul, the Constitution is a dead letter in DC.

The Payday Interest Rate Controversy

My latest post the Blog at Mises.org(Mises.org):











I never quite understood the Payday interest rate controversy until today when, like clockwork, I felt the first rumble of my daily, late-afternoon hunger pangs.

In Pavlovian fashon, I hastened over to the vending machine and began depositing change. Then it hit me: I was about to pay almost twice the price for a Payday bar now than I would have had to pay for a Payday bar in two hours. You see, the drugstore on my route home sells the whole suite of vendible goodies, and the drugstore charges a price much lower than the vending machine.

Since originary interest is merely a reflection of "the ever fluctuating ratio between values assigned to want satisfactions in the immediate future and those assigned to want satisfactions in the more distant future," I willingly accept an apparently onerous rate of interest in order to satisfy a passing desire for sugar. Or, I should say that I am forced to accept an onerous interest rate by a vending business that takes full advantage of my current desire. And, amazingly, government and its minions allow this to happen.

Where is my do-gooder advocate? Where is my politician stumping to end unfair Payday interest? Can't these folks remove the vending machines and end this interest rate nonsense?

Yes, that's the solution: legislate in order to stop the voluntary exchange, as if legislation and the strong arm of government can change time preference with the stroke of a pen. Huh!

We are all Prussians now

This excellent article was recently published at LewRockwell.com. A very informative read. -- Jim

We are All Prussians Now
by Charles Featherstone

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On September 12, 2001, while the site of the once-upon-a-World Trade Center was still smoldering, French journalist Jean-Marie Columbani wrote the famous words "we are all Americans now." The attacks on the United States of the previous day had prompted one of "the gravest moments of our own history," and would completely changed the world:

[H]ow can we not feel profound solidarity with those people, [Columbani wrote] that country, the United States, to whom we are so close and to whom we owe our freedom, and therefore our solidarity? How can we not be struck at the same time by this observation: The new century has come a long way.

And it has come quite a bit farther since Columbani’s column was published that Wednesday morning in September. He predicted the marshaling of U.S. anger and military power, but failed to see how poorly that power would be guided and utilized. He predicted that Russia would become Washington’s greatest ally in this war, and that certainly has not happened. In focusing on the madness he believed present in the Arab and Islamic worlds, he was blind to the madness present among all "us" Americans.

It was a nice sentiment, I suppose, this "we are all Americans now." But it wasn’t true then, and it isn’t true now.

An even greater gulf separates the United States of 2008 with the Prussia of the early 1860s – one that makes comparison difficult – but in reading historian Koppel Pinson’s Modern Germany: It’s History and Civilization, I think there is an intriguing parallel between Prussia and the rise to power of Otto von Bismarck and the United States of not just today, but the last few decades. One that is worth paying attention to.

continue reading ...

The Tenth and Servitude

In 1 Samuel, the Bible records the warning of God as spoken through Samuel: And he will take the tenth of your seed, and of your vineyards, and give to his officers, and to his servants. (8:15) He will take the tenth of your flocks: and ye shall be his servants. (8:17)

God was warning Israel about the evils of a king, yet the Israelites persisted. In the end, God allowed them a king, along with the king's requisite taxes -- servitude. Centuries later, the American patriots demanded an end to the king's tax and revolted.

In his book, For Good and Evil: The Impact of Taxes on the Course of History, Charles Adams writes that the tenth is historically considered to be the most a population will grant its rulers for any extended period of time. Anything greater sparks rebellion. However, we currently allow multiples of the tenth to be taken by the DC kings and their state and local minions.

Don't you think its time to rethink our current situation in light of the Bible and the founding ideals of this nation? Don't you think its time to revolt once more?

I believe that it's time, as do many others. The Ron Paul movement is just beginning to gain steam. Add to it the income tax revolt in Massachusetts and the likely one here in Ohio, and we appear to be saying "enough is enough!"

As noted by Adams, prosperity only occurs when a nation reduces taxes and allows free trade. Taxation destroys both the economy and the nation. It's a simply truth, yet, like the Israelites, we have been turning our backs on it. Time to change.

Vote Ron Paul.