How Smart We Are

Beware People in Black Robes

The aged care industry in New Zealand had laboured under government price controls for many years.  Our "socialism without doctrines" has led us down the track of the government funding rest home care for the elderly.  Once upon a time it was incumbent upon each family to ensure reasonable care could be afforded for aging parents and grandparents.  But gradually the state has subsidised and paid more and more of the care of the elderly.  Smug New Zealanders patted themselves on the back and said to one another, "What a wonderful system we have here in 'godz own'."  

Baby boomers are now entering the demographic cohort of the "aged".  Large numbers are needing care.  There is a burgeoning aged care industry, with large corporates building swanky retirement and rest-care facilities.  But the industry has been effectively price controlled.  The presence of a state subsidy for rest home care functions as a price control in the market.  Therefore, the market is inefficient.  Price signals are grossly distorted.

Recently the government was (indirectly) hit with a court case.  A rest-home carer took her employer (and implicitly, the state) to court on the grounds of pay equity.

Economic Ignorance

National Embarrassment

The current leader of the Labour Party in New Zealand, Andrew Little appears to be more than a few sandwiches short of a picnic.  His career before becoming a professional politician consisted of being a union manager.  His commercial experience is, to put it kindly, somewhat limited.  But he is steeped in the ideology of class warfare--workers versus the capitalists and that sort of thing.

We find ourselves embarrassed by the apparent ignorance of the man.  He often shows that he has little clue about how three quarters of the rest of the population think, live, and act.  For Andy, it's all about class warfare: the oppressed proletariat versus the capitalist pigs.

He is at present promoting a bill in Parliament, the Healthy Homes Guarantees Bill.  This would require landlords to ensure that all rental homes are warm and dry, and that each home must have a heating source.  When it was pointed out to Andy that this would inevitably mean that rents would go up, Andy fiercely denied that would be the case, unless the respective landlords were rapacious and greedy.

One cannot miss the slime of class warfare oozing forth.

Uber in New Zealand

Mr Plod and The Free Market

Human interaction in the marketplace is a fascinating study.  At the point of exchange, where a buyer and seller exchange property, all kinds of evil can be present: deceit, fraud, dissembling, theft, passing off, price gouging, refusal to pay--the list goes on.  Given our common propensity to rape and pillage, how could a universal behaviour such as buying and selling ever be kept relatively honest?

The statist answer is--no prize for guessing--the state's rules and regulations, restrictions and permits will keep the market place fair and honest.  The libertarian's answer is a transparent marketplace itself keeps the participants honest.

The libertarian belief in the regulating and moderating power of the marketplace really turns around human prudence and freely available information. Exploiters and bad-faith traders become known and exposed. No-one except fools want to deal with them. Both buyer and seller have a duty of care to themselves.  Market information about participants--good and bad--means that bad traders are driven out; good (that is, ethical) traders become more prosperous.  There are sanctions available in a free market, but they are largely by means of claims in a civil court.  If one "rips off" another, they are liable to civil action where the court may order redress and restitution. 

Between the two poles of statism and libertarianism, the market manages to trundle along.  Every so often there is a paradigm shift which shakes up all the participants in a particular industry.  Right now, one example is the taxi industry versus Uber.  The interplay between the transactors and the marketplace and the authorities is fascinating--and predictable.  Rodney Hide tells us how it is playing out in New Zealand: