Micro Principles

I started out by viewing the marketplace as a cruel place, where you need intervention by government and lawyers to protect people. But after watching the regulators work, I have come to believe that markets are magical and the best protectors of the consumer. It is my job to explain the beauties of the free market.

I'm a little embarrassed about how long it took me to see the folly of most government intervention. It was probably 15 years before I really woke up to the fact that almost everything government attempts to do, it makes worse.

Stossel even produces a series of educational materials and DVDs to try to educate high school students about micro- and macroeconomics. As I mentioned in class, economists usually agree on the positive economics, but disagree on normative grounds. Not all economists would agree with Stossel's normative judgments, but most would agree that he has a sound understanding of markets and governmental intervention. The below link will take you to the series he ran on 20/20 on Friday October 17. You may be particularly interested in the discussion of the subprime mortgage crisis and the subsequent bailout.

John Stossel's Politically Incorrect Guide to Politics

Monopolistic Competition: Theaters Look Beyond Movies To Fill Seats

by Cyrus Farivar

Listen Now [4 min 14 sec]

Economic Illiteracy
By John Stossel
Wednesday, August 1, 2007

When I speak on college campuses, students often ask what can be done about the "problem" of young people who don't care enough to vote. I always say that I don't see it as much of problem "because most of you don't know anything yet. I'm OK with you not voting!" The students laugh, but I'm not joking.

It wasn't until I was about 40 that I started to believe I had acquired a good sense of what domestic policies might serve people well. (I still have no clue about international affairs.) I only started to think I knew what ought to be done after years of reporting and reading voraciously to absorb arguments from left and right. The idea that most voters vote without having done much of that work is, frankly, scary.

I'm not alone in this concern. An economist at George Mason University, Bryan Caplan, says few people think about their vote or even see any benefit in doing so. His new book, "The Myth of the Rational Voter: Why Democracies Choose Bad Policies", argues that most voters cast their ballot on the basis of irrational biases about economic matters. That's wh so many candidates hostile to free markets, profits, free world trade and immigration get elected. People tend to acquire their wrong opinions about economic policy packaged in worldviews they inherited while growing up. They never test their views against the evidence because that would be unsettling. No one likes having his worldview challenged. So people vote for candidates who make them feel good. They vote irrationally.

Caplan stresses that most voters see no reason to do otherwise because they don't bear the consequences of their choices. This irrationality does not carry over into their personal lives because there they bear the brunt of their own decisions. But when irrationality is free, notes Caplan, people will indulge their biases.

Caplan divides them into three categories: antimarket bias, antiforeign bias, make-work bias and pessimistic bias. Antimarket bias describes people feeling that trade and profit are zero-sum games, that one person's gain is another person's loss. They haven't learned that free exchange is win-win and that in a free market, profit comes from cost-cutting innovation. Antiforeign bias, perhaps a vestige of primitive man, consists of distrusting "them" even though our prosperity increases according to how global the division of labor is. Foreigners don't want to invade us; they want to sell us useful things. Make-work bias is the belief that what makes us rich is jobs, rather than goods, and so anything that eliminates jobs is bad. If that were really true, we could prosper by outlawing all inventions created after 1920. Think of all the jobs that would create! Finally, pessimistic bias is the view that any economic problem is proof of general decline. Lots of people actually think we're poorer than our grandparents were!

As a result of these biases, people often support price controls, foreign-trade barriers and laws against job "outsourcing," and oppose immigration. Most economists are eager to demonstrate that these policies are bad for society, but most people aren't interested in evidence. They're interested in what confirms their worldview and makes them feel good. So they often vote for protectionists, anti-immigration advocates and other opponents of the free market.

Caplan's book isn't calculated to cheer up those of us who favor more market and less democracy. He offers some solutions that aren't likely to be adopted any time soon, such as permitting only the economically literate to vote, or giving them more votes, or eliminating get-out-the-vote campaigns (which serve only to get out the uneducated vote).

More practically, he thinks that "Everyone who knows some economics" should grab every opportunity to teach it. That's what I try to do with my "20/20" segments, television specials and the Stossel in the Classroom program, which brings economic ideas to high-school and college classrooms.

I hope we will create some rational voters in the process.

Valentine's Day increases demand, price of flowers

By Mark Randall

JONESBORO -- Buying flowers for a VALENTINE's sweetheart? Plan on paying a little bit more this year.

A recent crop freeze in California, where much of the nation's cut flowers are grown, has sent prices on some flowers up by as much as 12 to 14 percent.

The good news, though, is that gift-givers won't have to pay more for roses.

California is one of the leading cut flower and rose producing regions in the country, but according to area florists, most of the roses in area stores are grown outside the United States.

"Most roses are from Central and South America," said Bridgette Mills Arnold, owner of Posey Peddler in Jonesboro. "Their climate generally doesn't have a problem."

Arnold said the freeze really hasn't had much impact on her business.

The freeze damaged three-quarters of California's citrus crops but had minimal effect on flowers, which are mostly grown in greenhouses, she said.

Arnold pre-ordered her roses back in December and has standing orders for most of the rest of her flowers all year, which means she will be paying the same price no matter how the market fluctuates.

She said she has been able to hold the line this year on a cost for a dozen roses at $80, she said, despite the demand during the annual lovers' holiday.

VALENTINE's Day is one of the busiest times for cut flowers aside from Mother's Day. According to the Society of American Florists, 180 million roses were produced for VALENTINE's Day in 2006.

Jim Watt, president of the Arkansas Florists Association, said roses typically cost about $10-15 more around VALENTINE's Day because of the high demand.

"They're always higher on VALENTINE's Day," Watts said. "We pay more for them at VALENTINE's Day. Everybody thinks we're getting rich off of VALENTINE's day, but the wholesaler pays more; the jobbers pay more; the importers pay more. It's just a domino.

"I would suspect that there are very few flower shops in Arkansas that are charging what they should be charging for a dozen roses."

Area florists reported keeping prices level despite increases in the costs to ship them. A dozen roses range from about $65-85 a dozen.

"They have stayed about the same," said Henry Cooksey, owner of Cooksey's Flower. "We're paying a little more for freight, though."

Cooksey said while consumers won't see that much of a difference in the prices of roses, he has heard that certain types of filler flowers and tulips will likely drive the cost of less traditional arrangements up in price longer after VALENTINE's Day has passed.

"I have all of my VALENTINE's Day flower order in. So it's not going to affect us during VALENTINE's Day," Cooksey said. "But I have been told that somewhere in the near future it is going to be a problem."

Laura Lamb, owner of St. Pierre's Flowers & Gifts, said she already can't get gladiolus, which aren't a big deal at VALENTINE's Day. However, she uses such filler flowers for other customer requests, such as arrangements for funerals.

"I haven't had too much of a crunch except for glads," Lamb said. "Everything else has been pretty available."

Lamb said a lot of the cut flowers come from out of the country from places like Holland.

Amsterdam is the world's largest flower market where more than a million flowers a minute are sold. Dutch growers take their flowers to market daily. Those flowers are then sold and shipped and are available in shops in the U.S. the next day.

"A lot of the flowers like the lilies and tulips come from Holland," Lamb said.

Watt said some flowers from California like snap dragons and larkspurs have been effected. But, overall, he has not seen any problems with the flowers coming out of California and doubts prices will go up because of the freeze.

"It's scare tactics," Watt said. "We've been getting calls from Miami, and they have plenty of roses. And the tulips, lilies and iris coming out of California -- the quality is excellent."

11/20/09