EPA Regulations as a Job Creator and Other Pixie Dust Fairy Tales

The Last of the Ford Ranger Pickup Trucks –Sort Of

The last Ford Ranger, a smaller compact pickup truck, was produced in the US for the US market December, 2011. However, the Ford Ranger is still being build, completely redesigned, but only available in foreign markets.

“It has only been a month since the last Ranger rolled off the assembly line at a closing Minnesota plant, but the repercussions are still rolling through Ford.”

“At least twice during the big auto show in Detroit, Ford executives were called upon to defend their decision to kill the Ranger in the U.S. and Canada. Part of the reason the issue resurfaced is the same executives' buoyant predictions that a redesigned Ford Ranger for the rest of the world is going to be a great success.”

“But Mark Fields, Ford's president of the Americas, says the same vehicle can't succeed in the USA. Too close in size to the Ford F-Series. A shrinking market of small-pickup buyers, only 2% of the market.”(1)

Below is a link to the entire article which includes a photo of the redesigned Ford Ranger pickup being sold overseas:

http://content.usatoday.com/communities/driveon/post/2012/01/ford-execs-defend-decision-to-kill-ranger-pickup-in-usa/1

Notes:

(1)    Ford execs defend killing Ranger pickup in USA, Usatoday, 01/13/2012, Chris Woodyard.

Obama Recess Appointments: No Recess, No Problem!

"Remember those terrible days of the Imperial Presidency, when George W. Bush made several "recess appointments" to overcome Senate opposition? Well, Czar George II never did attempt what President Obama did yesterday in making recess appointments when Congress isn't even on recess.

Eager to pick a fight with Congress as part of his re-election campaign, Mr. Obama did the Constitutional equivalent of sticking a thumb in its eye and hitting below the belt. He installed Richard Cordray as the first chief of the Consumer Financial Protection Bureau and named three new members to the National Labor Relations Board. He did so even though the Senate was in pro forma session after the new Congress convened this week.

A President has the power to make a recess appointment, and we've supported Mr. Obama's right to do so. The Constitutional catch is that Congress must be in recess." - Contempt for Congress, Editoral, Wall Street Journal, 01/05/2012

Link to complete essay appears below:

http://online.wsj.com/article/SB10001424052970203471004577140770647994692.html?mod=rss_opinion_main

“Winning” by Debbie Wasserman Schultz

Dog Houses, Fallacies, and Elizabeth Warren

“Nobody in this country got rich on his own. Nobody. You built a factory out there good for you, but I want to be clear, you moved your goods to market on the roads the rest of us paid for. You hired workers the rest of us paid to educate. You were safe in your factory because the police forces and the fire forces the rest of us paid for….because of the work the rest of us did”. - Elizabeth Warren 09/2011



Warren’s statement is incorrect and the root fallacy of the argument is worthy of investigation. Let us first visit Robert Higgs:

　

“….some views expressed by Elizabeth Warren and certain politicos of a previous era to the effect that the government has every right to take at least a big chunk of your earnings and, in some expressions, even your entire earnings for purposes the rulers stipulate.

Nearly ten years ago, the great political philosopher Anthony de Jasay wrote a charming little essay related to this matter called “Your Dog Owns Your House.” There, he spells out some of the ways in which such sweeping claims—by your dog or the rulers—are incoherent, absurd, and indefensible, and he sketches how to think more sensibly about the issue.” Why Your Dog Doesn’t Own Your Entire House, and the Government Doesn’t, Either. - Robert Higgs (1)

Higgs points us to Anthony de Jasay’s essay Your Dog Owns Your House:

“How soon, in reading the above [de Jasay basically states the essence of Warren‘s basic argument (as stated above)], did you spot the underlying, crucial fallacy? Its course is a mixture of the plausible and the preposterous, and any reader who gets a little lost in the backing and filling between such opposites has an excuse of sorts for being bemused. However, clearing away the muddle is fairly straightforward provided we refuse to be impressed by verbiage, but stick doggedly to common sense, hard as that may sometimes be to do in the face of the massive browbeating that seeks to enthrone the verbiage.

There is a minor and a major point to recognize. The minor point is that the "framework" is not a person, natural or legal, to whom a debt can be owed, "institutions" do not act, "society" has no mind, no will, and makes no contributions. Only persons do these things. Imputing responsibility and credit for accumulated wealth, current production and well-being to entities that have no mind and no will is nonsense. It is a variant of the notorious fallacy of composition.

Once this is understood, we can move on to the major point. All contributions of others to the building of your house have been paid for at each link in the chain of production. All current contributions to its maintenance and security are likewise being paid for. Value has been and is being given for value received, even though the "value" is not always money and goods, but may sometimes be affection, loyalty or the discharge of duty. In the exchange relation, a giver is also a recipient, and of course vice versa.” (2)

But what about “…marginal productivity and imputation theory undermines the sort of facile claims made by Elizabeth Warren…”? Here Higgs send us to production and exchange:

　

“Production as Indirect Exchange

In our discussion of the Neoclassical theory of pure exchange, we claimed that in order for a household to demand goods, it must obtain purchasing power by the sale of its endowments of goods. Let us now assume that instead of being endowed with "goods", households possess "factors" which provide "factor services" -- such as labor, capital, land and, perhaps, entrepreneurship.

The initial problem with this for a theory of exchange is that factor services are not demanded by other consumers: capital, land, labor, etc. offer no utility reward by themselves and thus are not "demanded" by other consumers. Imagine placing a land-owner and a laborer together: the laborer demands corn, the land-owner demands shoes. What do they offer in return? The land-owner offers land (which gives no utility and thus is not demanded by the laborer) and the laborer offers labor (which the land-owner has no use for). It seems, then, that when people are endowed with factors, they simply cannot trade with each other.

The problem this poses for the Neoclassical theory of value is immediately evident. Neoclassical theory claims that the value of an object depends on its scarcity. An object is scarce if more of it is desired by consumers than is available in the economy. However, on first approximation to a production economy, we encounter the apparent paradox that nothing seems scarce! Factors are limited in availability, that is true, but as they yield no utility, they are not desired by consumers. In contrast, produced outputs yield utility and thus are desired by consumers, but they are not limited in availability (if an output is in short supply, more can always be produced). Thus, it seems as if neither factors nor outputs are "scarce": what is limited in availability is not desired, what is desired is not limited in availability.

So how do we get out of this dilemma? The answer is quite simple: production. The basic principle is that "[t]he demand for commodities is indirectly a demand for factors of production." (G. Cassel, 1918: p.90). Someone may demand shoes, but, in order to do so, they are effectively demanding the labor of a shoe-maker and the capital services of his shoe-making tools. Therefore, via production, commodity demands translate into factor demands. Equivalently, factors are demanded solely because of the commodities they produce. In other words, factors are demanded not for their intrinsic worthiness to the other consumers, but rather because they can be converted to consumable goods via production, and it is these utility-yielding goods which are desired by consumers.

　

To use the felicitous phrase made famous by J. Trout Rader, production is indirect exchange. Our earlier landowner and laborer can exchange their land and labor "indirectly" with each other via the production technology which converts those factors first into corn and shoes. As L�on Walras suggests, one can "abstract from entrepreneurs and simply consider the productive services as being, in a certain sense, exchanged directly for one another instead of being exchanged first against products and then against production services." (Walras, 1874: p.225).

　

With the exchange problem resolved in this way, the implications for value theory are immediately evident: what is desired (outputs) bears down on something that is limited in availability (factors). Production is the intermediary element: it translates consumers' desires for goods into a desire for factors. But this is only half the story. The other half is that the limited availability of factors makes outputs limited in availability. Thus, production solves both sides of the problem: factors now have value because more of them are desired than are available; outputs have value because they have now become limited in supply.

"Prices are paid for the factors of production in accordance with the general principle of scarcity, because it is necessary to restrict demand for them in such wise that it can be met with the available supplies. The costs of production of a commodity are, from this standpoint, simply an expression of the scarcity of those factors of production required to make it."
(G. Cassel, 1918: p.168).
　
This idea is so important that we ought to baptize it and restate it as follows:

Neoclassical Principle of Value in Production:
(1) Factors have a price because the goods they produce are demanded by consumers. If a factor produces goods which are not demanded, then that factor will have no price, no matter how rare that factor is.
(2) Produced goods have a price because the factors which go into their production are limited in availability. If the factors which produce a good are infinitely abundant, the resulting good will not have a price no matter how desired that it is.” (3)
　
　
Now returning to Higgs:

“Set aside for the moment the not-inconsiderable difficulty that if each has a just claim on everything you earn, all together they have a claim on a large multiple of everything you earn. For present purposes, however, let’s forget about Fido and lump all of the others together, again à la Warren and Co., as the “government,” whose contribution to your earnings is essential and therefore warrants a claim on everything you earn.

Even with this generous concession, a major difficulty remains: absent your effort, your earnings would also have been zero, notwithstanding the government’s contribution of all the infrastructure and protective services emphasized by Warren and others. No work, no product, no earnings. And you did, after all, do the work.

The error here is an old one in economics. It once plagued economists in their attempts to explain the distribution of the social product between suppliers of the various factors of production—land, labor, capital, and so forth, depending on the precise specification of factors. The puzzle was finally solved, more or less, by something known as the marginal productivity theory of distribution.

The operative word is marginal. Here, as in so many other places where erroneous economic reasoning crops up, the mistake comes from all-or-nothing thinking. In our case, no dog, no house; no fire department, no earnings; no police force, no earnings; and so forth, including, please recall, no work, no earnings. To make headway one must recognize that many inputs of services contribute jointly to the production of a good or service. But it is absurd to suppose that because each of them is essential—in the sense that if it were completely withdrawn, no product would be produced—each of them has a valid claim to the entire output.

The marginal productivity theory of distribution maintains that if each factor supplier is paid the value of the marginal product of the factor service provided, each will be rewarded in accordance with a coherent concept of the extent to which his factor supply accounts for the output, and together the rewards received by all factor suppliers will add up to exactly the amount of the output produced by the joint efforts of all. (This theory work perfectly only under the assumption of a particular production technology, known as constant returns to scale, but that difficulty does not invalidate completely the basic idea the theory expresses, especially in regard to marginal productivity as the key concept.)

　

This sort of explanation is known in economics as imputation theory. Among other things, it explains why factor values depend on (are “imputed” from) consumer valuations of final outputs, not vice versa, as the classical labor theory of value and other theories maintain.

In any event, an understanding of marginal productivity and imputation theory undermines the sort of facile claims made by Elizabeth Warren, leading politicos associated with the New Deal, and all too many others, both inside and outside the political apparatus. Of course, if the rulers can’t claim that they deserve everything you’ve earned by using this sort of bogus reasoning, they’ll surely come up with another equally bogus reason for doing what all rulers and their stooges seek to do—to plunder you to the fullest feasible extent."(4)

　

　

　

Notes:

(1) Why Your Dog Doesn’t Own Your Entire House, and the Government Doesn’t, Either. - Robert Higgs, 01/06/2012

http://blog.independent.org/2012/01/06/why-your-dog-doesnt-own-your-entire-house-and-the-government-doesnt-either/

(2) Your Dog Owns Your House - Anthony de Jasay, 04/22/2002

http://www.econlib.org/library/Columns/Jasaydog.html


(3) http://homepage.newschool.edu/~het/essays/margrev/walrex.htm#production

(4) Why Your Dog Doesn’t Own Your Entire House, and the Government Doesn’t, Either. - Robert Higgs, 01/06/2012

　

　

　

　

　

　

　

DEBT LIMIT - A GUIDE TO AMERICAN FEDERAL DEBT MADE EASY.

Solyndra Comes in Many Forms

The Solyndra boondoggle/bamboozle and its many associated headlines, essays written, and discussions there of, appears to many readers as special interests and crony capitalism through politico enablers specifically in the alternative energy business. Stated alternatively, the boondoggle is specific to alternative energy.

Solyndra is merely a public choice theory poster child example, not specific to alternative energy, rather a single example regarding the more general concept that: notional propositions are put forth as fact, the notional proposition being special interest associated, and the entire exercise resulting in crony capitalism enabled by politicos through the use of taxpayer dollars.

That is to say, Solyndra comes in many forms. A most excellent example of the “many forms” appeared in an essay entitled Solyndra on Rails, The Wall Street Journal, 01/05/2012. The essay, a Wall Street Journal editorial, pieces together the high speed rail proposition of linking San Francisco and Los Angeles to the Solyndra example. (1)

Both Solyndra [alternative energy, specifically solar] and high speed rail [passenger rail in non-high density population masses and passenger rail when consumer revealed preference is for anything but being a rail passenger] are notional propositions. That is, in both cases the proposition is merely notional with no supporting empirical evidence that the proposition is economical. However, the economy of the proposition is supplanted by notion of the proposition.

Note: notional propositions are but forth as fact, argued by verbal virtuosity, uses a debate stratagem of denying its opponents legitimacy, with the notional proposition merely based “on the way things ought to be”, ending with the notional proposition being no more than painting the world in one’s own self image.

In the California high speed rail case the initial cost has ballooned (as with many notional propositions):

“California Governor Jerry Brown has a big dream about a very expensive train—$98.5 billion to be precise, running from San Francisco to Los Angeles. Neither the ballooning cost of building it, nor growing public opposition, nor a string of negative expert assessments have cooled the Governor's ardor. So that leaves the California legislature to derail this boondoggle.” (2)


In a world of low debt and many taxpayer dollars available, the notional proposition of a high speed train may well have been pushed through by politico enablers. However, the current case is high debt and few taxpayer dollars available. Hence with few dollars available the notion has ran into evidence:


“The case for the bullet train was iffy from the start and is now beyond salvation. A withering report this week from a state-appointed panel ought to drive the last nail in. The California High-Speed Rail Peer Review Group, asked to judge the project, declared it "not financially feasible." It said the rail route's first leg, in the Central Valley between Merced and Bakersfield, would be especially noneconomic. And it asked the legislature not to approve Governor Brown's plans to issue the first $2.7 billion batch of bonds this month to start construction on the 520-mile network.

The panel blew up just about every assumption offered about California's answer to the French TGV. The current cost estimate, already triple what was sold to voters in 2008, will likely come in even higher. Federal, much less private, financing won't be forthcoming. Projections for passenger traffic and revenues are unrealistic. The state auditor, the inspector general, California's watchdog Legislative Analyst's Office, the U.S. House Transportation Committee, among others, arrived at similar conclusions.” (3)

The crown jewel of this editorial/essay lies in the vision of the anointed. That given the evidence that the notional proposition is not feasible, the politico enabler, determined to follow through with painting the world in one’s own self image, is undeterred in using taxpayer dollars that most assuredly will complete the vision of the special interests and become profit for the associated crony capitalist:

“Governor Brown won't hear of such fiscal realities. His spokesman said the peer review study "does not appear to add any arguments that are new or compelling enough to suggest a change in course." “ (4)


Notes:

(1) Solyndra on Rails, The Wall Street Journal, 01/05/2012

http://online.wsj.com/article/SB10001424052970203471004577141082857692506.html

http://www.trainorders.com/discussion/read.php?4,2652714,2653247

(2) ibid

(3) ibid

(4) ibid