By Jacob C. Maichel
Economists such as Adam Smith, Friedrich Hayek, and Milton Friedman have proclaimed the pitfalls of central planning, but their message has not been heard with regard to disaster management. One of the most glaring shortcomings can be seen in The Federal Management Agency (FEMA). FEMA is the government organization tasked with coordinating and leading disaster relief efforts. While this sounds good, the relief programs operated by the government are often disasters themselves. We have seen time and time again where the private sector responds more effectively than the government.
One of the first things to point out is the significant waste both monetarily and in relief supplies. After Katrina, we saw case after case of fraud that resulted in over $2 billion in taxpayer money being wasted in false claims. Examples such as a Texas hotel owner collecting $232,000 in bills for phantom victims or 1,100 prisoners receiving more than $10 million in rental and disaster relief highlight taxpayer money being taken from those who needed it. In 2018 we witnessed extreme mismanagement of aid that was intended for the victims of hurricane Maria in Puerto Rico. It was revealed there were government parking lots with food rotting in the boxes, which themselves were covered with rat feces. FEMA 91,000 tons of ice intended for disaster victims to the wrong state! The situation became so hopeless that Puerto Rican officials asked for aid to be exclusively in the form of money and personnel.
Most importantly the free market provides care for victims significantly better than the government does. Louisiana understands this better than most. In 2005 over 1,500 residents tragically perished in hurricane Katrina, many waiting on government alleviation from the flood waters or needed supplies. In 2016 when floods threatened Louisiana it’s people responded much different. Local efforts saved lives far before any government assistance ever arrived. Facebook groups sprang up to coordinate supply deliveries and rescue efforts. The “Cajun Navy” was created by people using private boats to rescue those in their communities. Phone applications with walkie talkie and GPS functions were utilized to help those who were in need.
Not only has FEMA been considerably less successful than private efforts, the organization significantly hampers non government relief assistance. During disasters it is commonplace to see miles of retail truck convoys carrying precious life-saving supplies stopped by FEMA as to not interfere with their government strategies. During Katrina buses belonging to private businesses who were relocating displaced victims were requisitioned and instead used to deliver people to the New Orleans Convention Centre. Many more deaths were caused by this as the convention center lacked many basic needs yet people were continually placed there by FEMA efforts. When left unhindered local businesses actions have been significantly more successful in getting much needed supplies into communities. When hurricane Sandy struck it hit 295 Walmart stores, 250 were open the next day. Local churches and charities are always the first ones of the ground to help the victims of catastrophe and support their communities.
Unfortunately FEMA even negatively impacts local efforts by disincentivizing charitable giving and creating free trade zones. Public aid creates the illusion that there is a diminished need to give to charities who act during disasters. The organizations that provide the most benefit are the same ones that FEMA hurts. Impact on local business should also be considered as well. FEMA creates free trade zones where normal market conditions vanish. Licenses and taxes which protect sellers and buyers are suspended and businesses have less motivation to provide needed goods and services. Business' motivation for helping may involve profit but being able to survive is priceless.
When FEMA leaves an area after a disaster, business’ drive for profit and free markets are largely responsible for rebuilding. Companies will sell raw materials to others begin to rebuild. Private businesses will repair homes and infrastructure while taking payment for this all while hiring displaced workers for these projects. It was in fact for profit app developers and Facebook that created the tools the Cajun Navy used in saving their own communities. Government responsibility in disaster should be to reopen infrastructure that supports trade and to continue securing property rights rather than be the hero that saves us. Historically we have been let down time and time again by FEMA’s efforts whereas the free market left to its own devices has helped communities come together and rise out of devastating situations.
Jacob C. Maichel is a Graduate Assistant at the Gwartney Institute and an MBA student at Ottawa University
Monday, April 29, 2019
Monday, April 22, 2019
Disney's Next Infinity Stone: Fox
by Jacyn Dawes
“With all six stones, I can simply snap my fingers, they would all cease to exist.” Disney made a strong push forward into their growing media empire with its purchase of Fox in March 2019, one of the biggest media mergers to date. This merger gives Disney access to movies and television shows including X-Men, Avatar, and the Simpsons. Some might say that this deal completes Disney’s own set of six stones, like Thanos from their box office hit Avengers: Infinity Wars. With their top six companies acquired including ABC Television Group, ESPN, Pixar, Lucasfilm, Marvel Entertainment, and now Fox. Unfortunately, like the soul stone, acquiring Fox does come with a cost. Blending two completely different corporate cultures may prove more difficult then on paper. Fox has multiple top executives who get paid nearly 20% more then their Disney counterparts. Deciding who will stay and in what position could lead to significant layoffs. Disney will also need to consider this difference in their brands, as Disney focuses on wholesome, family-friendly shows and Fox is willing to dip into the R-rated Deadpool market.
But this cost will only buy Disney competitors time and will eventually cause major impacts on popular streaming networks like Netflix and Hulu, along with other forms of media. With the purchase of Fox, Disney not only has more entertainment to offer but will also have a controlling stake in Hulu. This may mean an end for Hulu as Disney promotes the launch date of their own streaming site in November 2019. Netflix will also take a hit if Disney decides to pull their content. Controlling the market has many levels to it and Disney does not need to buy everyone out.
With their price being nearly half of Netflix, it will certainly help Disney play catch-up in the online streaming arena. Predatory pricing is not uncommon with companies as large as Disney. Walmart, Uber, and Amazon have all been suspected and even charged with predatory pricing. In a country like the United States, the law tries to support the consumer and the undercutting of prices can appear positive on the surface. But this may come back to haunt consumers as Disney knocks out competitors and will have more freedom to raise prices down the road.
To keep the threat at bay, antitrust regulators from around the word have required Disney to release ownership of Fox Sports, a stake in A+E Networks, and added stipulations to National Geographic and Nat Geo Wild channels. It’s not only Hollywood and the United States who were worried about the growing Titan, other countries were responsible for these requirements as well. We have fallen in love with Disney characters, but it is important to look at the effects this will likely have on the entertainment industry. Consumers will have to wait and see what Disney’s Endgame might be.
Andreeva, N. (2018, Oct 8). Disney-Fox TV Exec Structure: Big Titles Galore, Studio Merger Put Off Amid Challenges Blending Corporate Cultures. Retrieved from https://deadline.com/2018/10/disney-fox-deal-tv-executives-analysis-culture-clash-1202473873/
Barnes, B. (2019, Mar 20). Disney Moves from Behemoth to Colossus with Closing of Fox Deal. Retrieved from https://www.nytimes.com/2019/03/20/business/media/walt-disney-21st-century-fox-deal.html
Bradley, B. (2019, Apr 13). Cord Cutting News: Disney Releases Pricing, Release Date, Lineup. Retrieved from https://www.komando.com/happening-now/561404/cord-cutting-news-disney-releases-pricing-release-date-lineup
Market Business News (n.d.). What is Predatory Pricing? Definition and Examples. Retrieved from https://marketbusinessnews.com/financial-glossary/predatory-pricing-definition-meaning/
VanDerWerff, T. (2019, Mar 20). Here’s What Disney Owns After the Massive Disney/Fox Merger. Retrieved from https://www.vox.com/culture/2019/3/20/18273477/disney-fox-merger-deal-details-marvel-x-men
“With all six stones, I can simply snap my fingers, they would all cease to exist.” Disney made a strong push forward into their growing media empire with its purchase of Fox in March 2019, one of the biggest media mergers to date. This merger gives Disney access to movies and television shows including X-Men, Avatar, and the Simpsons. Some might say that this deal completes Disney’s own set of six stones, like Thanos from their box office hit Avengers: Infinity Wars. With their top six companies acquired including ABC Television Group, ESPN, Pixar, Lucasfilm, Marvel Entertainment, and now Fox. Unfortunately, like the soul stone, acquiring Fox does come with a cost. Blending two completely different corporate cultures may prove more difficult then on paper. Fox has multiple top executives who get paid nearly 20% more then their Disney counterparts. Deciding who will stay and in what position could lead to significant layoffs. Disney will also need to consider this difference in their brands, as Disney focuses on wholesome, family-friendly shows and Fox is willing to dip into the R-rated Deadpool market.
But this cost will only buy Disney competitors time and will eventually cause major impacts on popular streaming networks like Netflix and Hulu, along with other forms of media. With the purchase of Fox, Disney not only has more entertainment to offer but will also have a controlling stake in Hulu. This may mean an end for Hulu as Disney promotes the launch date of their own streaming site in November 2019. Netflix will also take a hit if Disney decides to pull their content. Controlling the market has many levels to it and Disney does not need to buy everyone out.
With their price being nearly half of Netflix, it will certainly help Disney play catch-up in the online streaming arena. Predatory pricing is not uncommon with companies as large as Disney. Walmart, Uber, and Amazon have all been suspected and even charged with predatory pricing. In a country like the United States, the law tries to support the consumer and the undercutting of prices can appear positive on the surface. But this may come back to haunt consumers as Disney knocks out competitors and will have more freedom to raise prices down the road.
To keep the threat at bay, antitrust regulators from around the word have required Disney to release ownership of Fox Sports, a stake in A+E Networks, and added stipulations to National Geographic and Nat Geo Wild channels. It’s not only Hollywood and the United States who were worried about the growing Titan, other countries were responsible for these requirements as well. We have fallen in love with Disney characters, but it is important to look at the effects this will likely have on the entertainment industry. Consumers will have to wait and see what Disney’s Endgame might be.
Andreeva, N. (2018, Oct 8). Disney-Fox TV Exec Structure: Big Titles Galore, Studio Merger Put Off Amid Challenges Blending Corporate Cultures. Retrieved from https://deadline.com/2018/10/disney-fox-deal-tv-executives-analysis-culture-clash-1202473873/
Barnes, B. (2019, Mar 20). Disney Moves from Behemoth to Colossus with Closing of Fox Deal. Retrieved from https://www.nytimes.com/2019/03/20/business/media/walt-disney-21st-century-fox-deal.html
Bradley, B. (2019, Apr 13). Cord Cutting News: Disney Releases Pricing, Release Date, Lineup. Retrieved from https://www.komando.com/happening-now/561404/cord-cutting-news-disney-releases-pricing-release-date-lineup
Market Business News (n.d.). What is Predatory Pricing? Definition and Examples. Retrieved from https://marketbusinessnews.com/financial-glossary/predatory-pricing-definition-meaning/
VanDerWerff, T. (2019, Mar 20). Here’s What Disney Owns After the Massive Disney/Fox Merger. Retrieved from https://www.vox.com/culture/2019/3/20/18273477/disney-fox-merger-deal-details-marvel-x-men
Jacyn Dawes is a Graduate Assistant at the Gwartney Institute and an MBA student at Ottawa University
Thursday, April 11, 2019
Are We Morally Permitted to Eat Animals?
by Jacob C. Maichel
The Gwartney Institute just held its most recent “Ottawa Minds and Unwined” and it was the first one I have been able to attend. The speaker for this event was a philosophy professor, Dr. Justin Clarke, and the title of his presentation was “Are we morally permitted to eat animals?” I was excited to hear Dr. Clarke’s take on an interesting topic and it offered a unique and refreshing perspective. I wrote this post based on the speech because I thought it was fantastic!
The speech began by laying a foundation describing assertions from Australian philosopher Peter Singer’s famous 1975 book Animal Liberation: A New Ethics for our Treatment of Animals. This work has become the basis of the modern animal liberation movement’s understanding of humanity's relationship with animals. Once Singer established animals are capable of suffering he takes a very utilitarian approach to minimize said suffering in animals and humans alike. Dr. Clarke outlined 4 premises and 2 conclusions:
Premise 1: All suffering is equal (morally)
Premise 2: Animal experimentation causes unnecessary suffering.
Conclusion 1:Animal experimentation should stop unless we would do the same experiments on humans.
Premise 3: Animal consumption causes unnecessary suffering.
Premise 4: We are morally required to feed ourselves in a way to minimize suffering.
Conclusion 2: We should be vegetarian or vegan.
Once these were explained, Dr. Clarke then began to give evidence to support premise 2 and 3 in particular. For premise 2, he pointed to a number of past and recent experiments that were extremely damaging to animals. Support for premise 3 comes from the atrocities that occur in so-called factory farming, suggesting we should eat in a way that minimizes animal suffering. The needless suffering inherent in meat diets suggests a moral hierarchy of diets:
Least suffering: Vegetarian/Vegan
Omnivore
Most suffering is carnivore
Dr. Clarke then dives farther in giving a in depth ranking of suffering caused by diet which goes;
Most preferable: Vegan
Vegetarian
Pescertarian (fish only)
Principled Omnivore (looks into how the animals are raised, i.e. eats free range)
Plebian Omnivore (does not care where meat comes from)
Least preferable: Carnivore
Veganism surely causes less suffering to animals than a monster carnivorous diet, right? According to Dr. Clarke, that is incorrect! His list would actually go
Most preferable: Principled Omnivore
Vegan
Vegetarian
Pescatarian
Plebian Omnivore
Least Preferable: Carnivore
How can this be true? Dr. Clarke’s point was that we treat vegan and vegetarian diets as if they do not cause suffering, which is false. Evidence of this is shown by analyzing the per 100kg usable protein in pastured cattle production vs grain production. For cattle there are 2.2 deaths per 100kg, compared to 55 deaths for the same amount of protein in grain! Dr. Clarke pointed out the gruesome end these animals suffer in the grain production process.
The victims of grain production are mice which are often discounted by many people but these animals sing to their young and have at least the same capacity for suffering as chickens. Therefore, if it is true that all suffering is equal, principled omnivores cause the least amount of suffering (ahead of vegans!). Does that mean everyone should become a principled omnivore according to Dr. Clarke? No! This is because premise four is not true according to him.
Dr. Clarke himself makes four well drawn conclusions in his fantastic presentation. First is that suffering surely counts, but not equally. Next there are better and worse ways to eat. Third is that we are not morally all required to eat the best way but should be conscious of eating in better ways. Lastly, if all this is correct Dr. Clarke says we can “put down our pitchforks," although for some it may be more difficult than others.
Dr. Clarke’s speech is part of a recurring Gwartney Institute event held at UnWined at Studio 111 which brings in a new speaker the first Thursday every month. The presentations are about 20 minutes in length with questions and optional conversation after. Please join us next time when Professor Jaime Fuentes will be speaking about Bitcoin!
Jacob C. Maichel is a Graduate Assistant at the Gwartney Institute and an MBA student at Ottawa University
The Gwartney Institute just held its most recent “Ottawa Minds and Unwined” and it was the first one I have been able to attend. The speaker for this event was a philosophy professor, Dr. Justin Clarke, and the title of his presentation was “Are we morally permitted to eat animals?” I was excited to hear Dr. Clarke’s take on an interesting topic and it offered a unique and refreshing perspective. I wrote this post based on the speech because I thought it was fantastic!
The speech began by laying a foundation describing assertions from Australian philosopher Peter Singer’s famous 1975 book Animal Liberation: A New Ethics for our Treatment of Animals. This work has become the basis of the modern animal liberation movement’s understanding of humanity's relationship with animals. Once Singer established animals are capable of suffering he takes a very utilitarian approach to minimize said suffering in animals and humans alike. Dr. Clarke outlined 4 premises and 2 conclusions:
Premise 1: All suffering is equal (morally)
Premise 2: Animal experimentation causes unnecessary suffering.
Conclusion 1:Animal experimentation should stop unless we would do the same experiments on humans.
Premise 3: Animal consumption causes unnecessary suffering.
Premise 4: We are morally required to feed ourselves in a way to minimize suffering.
Conclusion 2: We should be vegetarian or vegan.
Once these were explained, Dr. Clarke then began to give evidence to support premise 2 and 3 in particular. For premise 2, he pointed to a number of past and recent experiments that were extremely damaging to animals. Support for premise 3 comes from the atrocities that occur in so-called factory farming, suggesting we should eat in a way that minimizes animal suffering. The needless suffering inherent in meat diets suggests a moral hierarchy of diets:
Least suffering: Vegetarian/Vegan
Omnivore
Most suffering is carnivore
Dr. Clarke then dives farther in giving a in depth ranking of suffering caused by diet which goes;
Most preferable: Vegan
Vegetarian
Pescertarian (fish only)
Principled Omnivore (looks into how the animals are raised, i.e. eats free range)
Plebian Omnivore (does not care where meat comes from)
Least preferable: Carnivore
Veganism surely causes less suffering to animals than a monster carnivorous diet, right? According to Dr. Clarke, that is incorrect! His list would actually go
Most preferable: Principled Omnivore
Vegan
Vegetarian
Pescatarian
Plebian Omnivore
Least Preferable: Carnivore
How can this be true? Dr. Clarke’s point was that we treat vegan and vegetarian diets as if they do not cause suffering, which is false. Evidence of this is shown by analyzing the per 100kg usable protein in pastured cattle production vs grain production. For cattle there are 2.2 deaths per 100kg, compared to 55 deaths for the same amount of protein in grain! Dr. Clarke pointed out the gruesome end these animals suffer in the grain production process.
The victims of grain production are mice which are often discounted by many people but these animals sing to their young and have at least the same capacity for suffering as chickens. Therefore, if it is true that all suffering is equal, principled omnivores cause the least amount of suffering (ahead of vegans!). Does that mean everyone should become a principled omnivore according to Dr. Clarke? No! This is because premise four is not true according to him.
Dr. Clarke himself makes four well drawn conclusions in his fantastic presentation. First is that suffering surely counts, but not equally. Next there are better and worse ways to eat. Third is that we are not morally all required to eat the best way but should be conscious of eating in better ways. Lastly, if all this is correct Dr. Clarke says we can “put down our pitchforks," although for some it may be more difficult than others.
Dr. Clarke’s speech is part of a recurring Gwartney Institute event held at UnWined at Studio 111 which brings in a new speaker the first Thursday every month. The presentations are about 20 minutes in length with questions and optional conversation after. Please join us next time when Professor Jaime Fuentes will be speaking about Bitcoin!
Jacob C. Maichel is a Graduate Assistant at the Gwartney Institute and an MBA student at Ottawa University
Thursday, April 4, 2019
The Importance of Trade to Local Economies
by Levi A. Russell
This post originally appeared in the Ottawa Herald.
In my last column, I made what I think was the best case for “buy local” and economics professor can make. Supporting your local community is a very important part of being a good citizen and a smart risk manager, but are there exceptions? Are there cases in which it might be sensible to support trade from other places? I think there are, and I’ll explain two cases in this column.
The first case is relatively straightforward: you can’t grow coconuts in Kansas. Unless you have a sophisticated network of firms operating in concert under multiple nations’ laws to bring about international trade (or a very strong barn swallow that recently flew south for the winter), you can’t buy coconuts here in Ottawa. The network that brings our soybeans to Japan and their cars back here is responsible for giving us a wide range of products we would not enjoy otherwise.
The second case takes a bit more thought. The production of many goods we enjoy couldn’t happen without investment in large-scale operations that may supply goods for consumers or other businesses over a large area. A simple example will help us get started.
Suppose you want to have pizza for supper. You might have all the ingredients you need at home and likely have an oven that will bake the crust nice and crispy. While this might work well for you, it might be nice if you could get someone else to make the pizza for you. Maybe you’re short on time or didn’t want to pay a lot of money for high-quality cheese at the grocery store. Maybe you’re just not a great pizza chef.
Another option would be to order the pizza from someone else. A pizza restaurant very likely has a large, expensive, specialized oven and a very large refrigerator filled with ingredients. These pieces of equipment allow the restaurant’s employees to efficiently make hundreds of pizzas per day; certainly more than the employees themselves could eat.
This large-scale production is great for all of us who enjoy pizza because it means the owners and employees can specialize in making pizzas and can buy ingredients at a lower cost per pound than the rest of us are able on our weekly trip to the store. The restaurant’s specialization and lower cost means the rest of us can enjoy tasty food on demand.
The comparison between household production and specialized production enabled by investment in fixed assets like commercial pizza ovens helps us understand the second exception to our buy local rule: sometimes the cost of production is too high for local production. Sometimes it’s so high it outweighs the benefits of local commerce I laid out in my last column.
Consider an example from our own backyard, Kalmar Ottawa. Kalmar Ottawa has been in business for over 60 years and has produced over 65,000 “terminal trucks” which are low-speed trucks used to move trailers around at shipping terminals. It is the leading producer of these trucks, which are all manufactured here in Ottawa and sold through dealers around the country.
Given the specialized knowledge and expensive machinery needed to manufacture these trucks, it wouldn’t be sensible to expect a shipping terminal to produce them on their own. It also wouldn’t make sense for there to be dozens of smaller manufacturing facilities all over the country making these trucks. No, we can all benefit when these trucks are made in one larger facility. It minimizes the cost of production and allows all the knowledge needed to be located in one place to maximize efficiency in production.
In addition to the benefits associated with the jobs and other commerce generated by Kalmar Ottawa, we also benefit indirectly from Kalmar Ottawa’s centralized production of their trucks. The coconuts we ship from the tropics get here a little more efficiently and at a little bit lower cost thanks to Kalmar Ottawa’s efficient business model. Whether those coconuts end up in a pina colada or a cream pie, I think we can all appreciate this exception to buying local.
Dr. Levi A. Russell is the Gwartney Institute Professor of Economic Education and Research at Ottawa University
This post originally appeared in the Ottawa Herald.
In my last column, I made what I think was the best case for “buy local” and economics professor can make. Supporting your local community is a very important part of being a good citizen and a smart risk manager, but are there exceptions? Are there cases in which it might be sensible to support trade from other places? I think there are, and I’ll explain two cases in this column.
The first case is relatively straightforward: you can’t grow coconuts in Kansas. Unless you have a sophisticated network of firms operating in concert under multiple nations’ laws to bring about international trade (or a very strong barn swallow that recently flew south for the winter), you can’t buy coconuts here in Ottawa. The network that brings our soybeans to Japan and their cars back here is responsible for giving us a wide range of products we would not enjoy otherwise.
The second case takes a bit more thought. The production of many goods we enjoy couldn’t happen without investment in large-scale operations that may supply goods for consumers or other businesses over a large area. A simple example will help us get started.
Suppose you want to have pizza for supper. You might have all the ingredients you need at home and likely have an oven that will bake the crust nice and crispy. While this might work well for you, it might be nice if you could get someone else to make the pizza for you. Maybe you’re short on time or didn’t want to pay a lot of money for high-quality cheese at the grocery store. Maybe you’re just not a great pizza chef.
Another option would be to order the pizza from someone else. A pizza restaurant very likely has a large, expensive, specialized oven and a very large refrigerator filled with ingredients. These pieces of equipment allow the restaurant’s employees to efficiently make hundreds of pizzas per day; certainly more than the employees themselves could eat.
This large-scale production is great for all of us who enjoy pizza because it means the owners and employees can specialize in making pizzas and can buy ingredients at a lower cost per pound than the rest of us are able on our weekly trip to the store. The restaurant’s specialization and lower cost means the rest of us can enjoy tasty food on demand.
The comparison between household production and specialized production enabled by investment in fixed assets like commercial pizza ovens helps us understand the second exception to our buy local rule: sometimes the cost of production is too high for local production. Sometimes it’s so high it outweighs the benefits of local commerce I laid out in my last column.
Consider an example from our own backyard, Kalmar Ottawa. Kalmar Ottawa has been in business for over 60 years and has produced over 65,000 “terminal trucks” which are low-speed trucks used to move trailers around at shipping terminals. It is the leading producer of these trucks, which are all manufactured here in Ottawa and sold through dealers around the country.
Given the specialized knowledge and expensive machinery needed to manufacture these trucks, it wouldn’t be sensible to expect a shipping terminal to produce them on their own. It also wouldn’t make sense for there to be dozens of smaller manufacturing facilities all over the country making these trucks. No, we can all benefit when these trucks are made in one larger facility. It minimizes the cost of production and allows all the knowledge needed to be located in one place to maximize efficiency in production.
In addition to the benefits associated with the jobs and other commerce generated by Kalmar Ottawa, we also benefit indirectly from Kalmar Ottawa’s centralized production of their trucks. The coconuts we ship from the tropics get here a little more efficiently and at a little bit lower cost thanks to Kalmar Ottawa’s efficient business model. Whether those coconuts end up in a pina colada or a cream pie, I think we can all appreciate this exception to buying local.
Dr. Levi A. Russell is the Gwartney Institute Professor of Economic Education and Research at Ottawa University
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